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Audit Report
OIG-23-021
CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF
PROGRAMS
Audit of Air Carrier Worker Support
Certifications - Corvus Airlines, Inc.
March 27, 2023
Office of Inspector General
Department of the Treasury
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DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
March 27, 2023
MEMORANDUM FOR JACOB LEIBENLUFT
CHIEF RECOVERY OFFICER
FROM:
Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT:
Audit of Air Carrier Worker Support Certifications – Corvus
Airlines, Inc.
Attached is our audit report for the Audit of Air Carrier Worker Support Certifications –
Corvus Airlines, Inc. (Corvus Airlines) (OIG-23-021; dated March 27, 2023).1 Under a
contract monitored by our office, Saggar & Rosenberg, P.C. (S&R), a certified
independent public accounting firm, performed the audit. The objective of this audit
was to assess the accuracy, completeness, and sufficiency of Corvus Airlines’ sworn
financial statement or other data used to certify the wages, salaries, benefits, and
other compensation amounts submitted and approved by the Department of the
Treasury (Treasury) for the Air Carrier Payroll Support Program (PSP1). The scope of
this audit covered the time period from April 1, 2019 through September 30, 2019
and included the certified PSP1 Application, sworn financial statements, tax returns,
and other documentation submitted to Treasury.
In its audit report, S&R found Corvus Airlines reported correct information for each of
the sections reviewed on its PSP1 Application, and in its Permitted Withdrawal
Certification reporting to Treasury in accordance with the Pledge Agreement.2 Corvus
Airlines incurred
of eligible compensation in accordance with the Pledge
Agreement between August 2020 and May 2021, exceeding the amount awarded by
Treasury by
. As such, Corvus Airlines did not over-request PSP1 financial
assistance.
Our contract required that the audit be performed in accordance with generally
accepted government auditing standards. In connection with the contract, we
reviewed S&R’s report and related documentation and inquired of its representatives.
1 Corvus Airlines changed its legal name to Northern Pacific Airways, Inc. on November 16, 2021.
2 The Awardable Amounts section was superseded by Corvus Airlines’ Permitted Withdrawal
Certification reporting requirements stemming from the company sale.
Our review, as differentiated from an audit performed in accordance with generally
accepted government auditing standards, was not intended to enable us to express an
opinion on Corvus Airlines’ compliance with Treasury’s PSP1 policies and procedures.
S&R is responsible for the attached auditor’s report and the conclusions expressed
therein. Our review found no instances in which S&R did not comply, in all material
respects, with generally accepted government auditing standards.
We appreciate the courtesies and cooperation provided to S&R and our staff during
the audit. If you have any questions or require further information, please contact me
at (202) 486-1420, or a member of your staff may contact Lisa DeAngelis, Deputy
Assistant Inspector General for Audit, at (202) 487-8371.
Attachment
cc:
Jason Morrow, Attorney Advisor, Department of the Treasury
Victoria Collin, Chief Compliance and Finance Officer, Department of the
Treasury
Jeff Davis, Partner, Saggar & Rosenberg, P.C.
Contents
Audit Report
Results in Brief ................................................................................................... 2
Background ........................................................................................................ 3
Treasury Disbursement Processes .................................................... 6
PSP1 Interim Audit Report ............................................................... 6
Corvus Airlines, Inc. ....................................................................... 7
Audit Results ...................................................................................................... 8
Permitted Withdrawal Certification Reporting ..................................... 9
Appendix 1: Objective, Scope, and Methodology .................................................. 12
Appendix 2: Corvus Airlines Management Response ............................................. 16
Appendix 3: Report Distribution .......................................................................... 17
Abbreviations
CARES Act
Coronavirus Aid, Relief, and Economic Security Act
Corvus Airlines
Corvus Airlines, Inc.
COVID-19
Coronavirus Disease 2019
DOT
Department of Transportation
GAO
Government Accountability Office
Guidelines
Guidelines and Application Procedures for Payroll Support to Air
Carriers and Contractors
IRS
Internal Revenue Service
OIG
Treasury Office of Inspector General
PSP1
Payroll Support Program, CARES Act
PSP2
Payroll Support Program Extension, Consolidated Appropriations
Act, 2021
PSP3
Payroll Support Program 3, American Rescue Plan Act of 2021
S&R
Saggar & Rosenberg, P.C
SOC
System and Organizational Controls
Treasury
Department of the Treasury
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Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
(OIG-23-021)
1
March 27, 2023
Jacob Leibenluft
Chief Recovery Officer
Department of the Treasury
This report presents the results of our audit of Corvus Airlines
Inc.’s (Corvus Airlines)3 certifications made to the Department of
the Treasury (Treasury) as part of its participation in the Air Carrier
Payroll Support Program (PSP1). This audit was mandated by Title
IV, Subtitle B, Air Carrier Worker Support, of the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act).4 Under the CARES
Act, Treasury was to provide $32 billion in financial assistance to
passenger air carriers, cargo air carriers, and certain contractors to
be exclusively used for the continuation of payment of employee
wages, salaries, and benefits, in response to the economic impact
of the Coronavirus Disease 2019 (COVID-19).5 Furthermore, the
Treasury Office of Inspector General (OIG) is required to audit
certifications made by passenger and cargo air carriers that do not
report salaries and benefits to the Department of Transportation
(DOT) (hereinafter referred to as non-241 air carriers)6 and
contractors.
Under a contract with OIG, Saggar & Rosenberg P.C. (S&R)
conducted this audit. Our audit objective was to assess the
accuracy, completeness, and sufficiency of Corvus Airlines’ sworn
financial statement or other data used to certify the wages,
salaries, benefits, and other compensation amounts submitted and
approved by Treasury, including additional compliance reporting
3 Corvus Airlines changed its legal name to Northern Pacific Airways, Inc. on November 16, 2021.
4 P.L. 116-136 (March 27, 2020).
5 The financial assistance provided under the CARES Act was split between passenger air carriers
($25 billion), cargo air carriers ($4 billion), and contractors ($3 billion).
6 Passenger and cargo air carriers that are not required to report salaries and wages to DOT under
14 CFR, Part 241, “Uniform System of Accounts and Reports for Large Certificated Air Carriers”.
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requirements unique to Corvus Airlines under the PSP17 that were
outlined in the Pledge Agreement8 between Corvus Airlines and
Treasury. The scope of the audit included Corvus Airlines’ original
ownership and new ownership, which received payment from
Treasury. We reviewed documentation including, but not limited to,
certified applications, sworn financial statements, tax returns,
Permitted Withdrawal Certifications, and other documentation
provided to Treasury from March 2020 through May 2021.
To accomplish the objective, we reviewed applicable laws and
regulations; and Treasury’s policies and procedures, including but
not limited to, the Title IV, Subtitle B, Air Carrier Worker Support of
the CARES Act, Guidelines and Application Procedures for Payroll
Support to Air Carriers and Contractors (Guidelines), PSP1
Agreement, and Frequently Asked Questions: Application
Procedures for Payroll Support to Air Carriers and Contractors. We
interviewed key personnel from Corvus Airlines, Treasury, and
contracted consultants engaged by Treasury to evaluate certified
company applications. We conducted our fieldwork from
September 2021 through February 2022. Appendix 1 contains a
more detailed description of our objective, scope, and
methodology.
Results in Brief
In brief, S&R found that Corvus Airlines, a passenger air carrier,
reported correct information for each of the sections reviewed on
its PSP1 Application,9 and in its Permitted Withdrawal Certification
7 Corvus Airlines filed for Chapter 11 bankruptcy on April 5, 2020, two days after the submission of
the PSP1 Application and was later purchased by new ownership via stock acquisition and continued
operations under the same company name. New ownership from Corvus Airlines was required to
deliver a signed certification form called a “Permitted Withdrawal” to Treasury to withdraw funds for
the purpose of continuing the payment of Wages, Salaries, and Benefits to employees in accordance
with the Pledge Agreement between Corvus Airlines and Treasury.
8 Treasury formally agreed to terms with Corvus Airlines’ new ownership on October 16, 2020, in the
form of a “Pledge Agreement” to further protect Treasury’s financial interests in use of PSP1
program funds.
9 The PSP1 Application is comprised of eight sections. Four sections - Financial Institution Information,
Employment Levels, Taxpayer Protection, and Additional Information, were not subject to audit
procedures. Details regarding the sections not reviewed can be found in appendix 1.
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reporting to Treasury in accordance with the Pledge Agreement.10
These PSP1 Application sections are: (1) Applicant Information,
(2) Applicant Type, and (3) Certification. We also found that
Corvus Airlines incurred
of eligible compensation in
accordance with the Pledge Agreement between August 2020 and
May 2021, exceeding the amount awarded by Treasury by
. As such, Corvus Airlines did not over-request PSP1
financial assistance.
As part of our reporting process, we provided Corvus Airlines
management an opportunity to comment on a draft of this report.
Corvus Airlines management stated that it agreed with the audit
results and expressed gratitude for the PSP program and to
Treasury for administering it. The company noted that the program
and Treasury’s efforts kept hundreds of air carrier workers
employed and allowed the company to continue providing air
service to the remote towns of Alaska. Corvus Airlines
management’s response, in its entirety, is included as appendix 2
of this report.
In an oral response, Treasury management stated the draft report
describes work performed by OIG’s contractor to determine
whether the requested awardable amounts complied with
Treasury’s program requirements. The draft report notes the
extensive fieldwork conducted for this review between
September 2021 and February 2022, including interviewing Corvus
Airlines’ management and reviewing a wide range of the
company’s financial records and corporate documents. In relation
to Corvus Airlines, Treasury management noted that OIG’s
contractor found no amounts were overpaid. Treasury management
appreciates the OIG’s work on this engagement and looks forward
to working with the OIG to protect the integrity of the PSP and
CARES Act programs.
Background
Title IV, Subtitle B, of the CARES Act, Air Carrier Worker Support,
requires Treasury to provide financial assistance to air carriers and
10 The Awardable Amounts section was superseded by Corvus Airlines’ Permitted Withdrawal
Certification reporting requirements stemming from the company sale.
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contractors that must exclusively be used for the continuation of
payments of employees’ wages, salaries, and benefits. Financial
assistance is to be provided to:
(1) passenger air carriers, in an aggregate amount up to
$25 billion;
(2) cargo air carriers, in an aggregate amount up to $4 billion;
and
(3) contractors, in an aggregate amount up to $3 billion.
According to the CARES Act, Treasury is required to provide
financial assistance to air carriers that report salaries and benefits
to the DOT (referred to as 241 carriers),11 in an amount equal to
the salaries and benefits reported to DOT for the period
April 1, 2019 through September 30, 2019. For air carriers that do
not report such data to DOT (referred to as non-241 carriers), and
contractors financial assistance is required to be in an amount that
the air carrier or contractor certifies using sworn financial
statements or other appropriate data as the amount of wages,
salaries, benefits, and other compensation paid to employees
during the period of April 1, 2019 through September 30, 2019.
The amounts submitted on the application to Treasury were
considered sworn financial statements. To be eligible for payments,
air carriers and contractors must enter into agreements with
Treasury certifying that they meet certain required assurances,
terms, and conditions.
On March 30, 2020, Treasury posted on its website the
Guidelines, which included the PSP1 Application. The PSP1
Application is comprised of eight sections:
1. Applicant Information ─ (1) applicant name; (2) taxpayer
identification number and address; and (3) contact person’s
name, title, phone number, and email address.
11 14 CFR, Part 241 “Uniform System of Accounts and Reports for Large Certificated Air Carriers”
defines “Air carrier, large certificated” as an air carrier holding a certificate issued under 49 U.S.C
41102, as amended, that: (1) operates aircraft designed to have a maximum passenger capacity of
more than 18,000 pounds; or (2) conducts operations where one or both terminals of a flight stage
are outside the 50 states of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, and the U.S. Virgin Islands. These air carriers are required to report financial information
to DOT. Corvus Airlines is not a Large Certificated Air Carrier.
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2. Applicant Type ─ selection of applicant type whether it is
passenger air carrier, cargo air carrier, or contractor.
Additionally, if the applicant is a contractor, this section would
identify the contractor’s service functions and the name of the
air carrier or airport to which services are provided. Finally, this
section includes affiliate and parent company information.
3. Financial Institution Information ─ (1) the applicant’s account
number and routing number; and (2) the financial institution’s
name, address, and telephone number.
4. Employment Levels ─ applicant’s average number of employees
for 2019 and involuntary reductions after March 1, 2020.
5. Awardable Amounts ─ applicant’s sworn financial statement
consisting of salaries, wages, benefits, and other compensation
for the period April 1, 2019 through September 30, 2019.
6. Taxpayer Protection ─ a table that outlines in detail the
proposed financial instrument to be issued to Treasury.
7. Additional Information ─ the applicant’s verification of
submitting its Internal Revenue Service (IRS) Form 941 –
Employer’s Quarterly Federal Tax Return12 covering the period
April 1, 2019 through September 30, 2019 along with the
PSP1 Application submitted to Treasury.
8. Certification ─ names, titles, and signatures of two certifying
officials13 and the applicant name and application submission
date.
On April 18, 2020, Treasury published a sample PSP1 Agreement
on its website, which provided definitions, terms, and conditions
for participation in PSP1, and required applicants to submit
completed applications by April 27, 2020. After Treasury reviewed
and approved an application, both parties were required to sign the
PSP1 Agreement.
12 IRS Form 941 is a tax form that businesses file quarterly to report income taxes, Social Security
taxes, and Medicare taxes they withheld from employee paychecks.
13 The certifying officials attested under penalty of perjury that the information and certifications
provided in the application and it attachments are true and correct.
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Treasury Disbursement Processes
In an effort to disburse PSP1 payments to passenger air carrier
applicants as quickly as possible and prior to the application
deadline of April 27, 2020, Treasury applied an initial estimated pro
rata rate of 76 percent to the awardable amount because not all
applications had been submitted at the time. After the application
deadline, Treasury determined the total amount requested by all
passenger air carrier applicants was approximately $31.8 billion,
which exceeded the $25 billion available financial assistance.
Because its initial estimated pro rata rate was low, Treasury
calculated an additional 2.2 percent, the top-off amount, for
passenger air carriers making the final pro rata rate 78.2 percent.
Treasury disbursed an initial lump sum payment of one-third of the
awardable amount, followed by four equal subsequent payments to
ensure it provided sufficient and timely financial assistance
corresponding to the applicants’ payroll schedule. In instances
where Treasury needed to perform additional follow-up with
passenger air carriers or needed additional time to approve
applications, Treasury compressed the payment schedule on a case
by case basis. Generally, Treasury disbursed the top-off amounts
for passenger air carriers in September 2020. Treasury officials told
us that if recoupment was necessary for an applicant’s inclusion of
unallowable expenses such as corporate officer compensation and
employer-side payroll taxes in the application, the recoupment
method was dependent on timing. If the need for recoupment was
known prior to the top-off distribution then the recoupment was
offset from the top-off payment. For recoupment amounts not
known until after the top-off payment, Treasury has not made a
decision how those funds will be collected and whether those
funds will be reallocated at a later date.
PSP1 Interim Audit Report
In a prior audit report,14 OIG identified two recurring issues
affecting the payment amounts administered to all PSP1 recipients
for non-241 air carriers and contractors. Specifically, employer-side
payroll taxes and corporate officer compensation were included in
the awardable amounts for some recipients. Treasury management
14 OIG-21-025, Interim Audit Update – Air Carrier and Contractor Certifications for Payroll Support
Program (Interim Audit), March 31, 2021.
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acknowledged that the recipients audited included unallowable
employer-side payroll taxes or corporate officer compensation in
their calculation of the “awardable amount” on their PSP1
applications and agreed to (1) review payments issued under PSP1
to ensure awarded amounts are allowable per the CARES Act and
Treasury guidance; and (2) remedy the incorrect amounts awarded
under PSP1.
Corvus Airlines, Inc.
Headquartered in Anchorage, Alaska, Corvus Airlines is a
passenger air carrier that offers private charter services.
Corvus Airlines submitted the PSP1 Application15 totaling
on April 3, 2020, and filed for bankruptcy on
April 5, 2020. Corvus Airlines notified Treasury on May 10, 2020,
of its proposed reorganization plans pending before the United
States District Court in Delaware, which included marketing the
company to investors that were interested in restarting operations
suspended when Corvus Airlines filed for Chapter 11 bankruptcy
protection. Corvus Airlines initially entered into a PSP1 Agreement
with Treasury on July 22, 2020, and a Bankruptcy Addendum to
the PSP1 Agreement on July 28, 2020, which modified the original
agreement and stipulated additional terms and conditions.
Prior to the distribution of PSP1 funds, Corvus Airlines was
purchased by new ownership via stock acquisition and continued
operations under the same name.16 Under new ownership, Corvus
Airlines certified continued compliance in connection with the
terms and conditions of the original PSP1 Agreement and
Bankruptcy Addendum. Treasury formally agreed to terms with
Corvus Airlines’ new ownership on October 16, 2020, in the form
of a “Pledge Agreement” to further protect Treasury’s financial
interests in use of PSP1 funds. The Pledge Agreement required
Corvus Airlines to establish a deposit account, referred to as a
“Pledged Account”, segregated from other company bank accounts
where Treasury deposited $10,297,313 provided under the PSP1
Agreement attributable to Corvus Airlines only, not its prior
15 Corvus Airlines’ PSP1 Application included financial assistance requests for its affiliates.
16 Corvus Airlines affiliates were not part of the stock acquisition.
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
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affiliates. Corvus Airlines properly established the Pledged Account
in accordance with the Pledge Agreement.
Withdrawals from the Pledged Account were made by Corvus
Airlines for continued payment of salaries, wages, and benefits of
employees in accordance with the PSP1 requirements, and only
allowed upon Treasury's receipt of a signed certification called a
“Permitted Withdrawal”, which replaced the sworn financial
statement information attributable to the original PSP1 Application.
The Pledge Agreement stated that the agreement was to remain in
full force and effect until the later of the termination of the PSP1
Agreement and the complete performance and payment in full of
the secured obligations.
In addition to PSP1, Treasury awarded Corvus Airlines
$10,478,223 under the Payroll Support Program Extension
(PSP2)17 authorized by the Consolidated Appropriations Act, 2021
and $9,773,038 under the Payroll Support Program 3
(PSP3)18 authorized by the American Rescue Plan Act of 2021.
PSP2 and PSP3 were not the subject of this audit.
Audit Results
Corvus Airlines reported correct information for each of the
sections reviewed on its PSP1 Application, and in its Permitted
Withdrawal Certification reporting to Treasury in accordance with
the Pledge Agreement. These PSP1 Application sections are:
(1) Applicant Information, (2) Applicant Type, and (3) Certification.
We compared information provided in each section of the PSP1
Application to supporting documentation, including but not limited
to, bank statements, air carrier certificates, IRS Form 941, and
executive-level business charts. For Permitted Withdrawal
Certification reporting, we compared information such as pay
17 The Consolidated Appropriations Act, 2021 (P.L. 116-260), enacted on December 27, 2020, created
the Airline Worker Support Extension for passenger air carriers and certain contractors. Treasury
referred to this as Payroll Support Program Extension (PSP2).
18 The American Rescue Plan of 2021 (P.L. 117-2), enacted on March 11, 2021, created the Air
Transportation Payroll Support Program Extension authorizing Treasury to provide additional
assistance to passenger air carriers and contractors that received financial assistance under PSP2.
Treasury referred to this as Payroll Support Program 3 (PSP3).
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
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registers and benefit invoices to the Permitted Withdrawal
Certifications and found that Corvus Airlines complied with the
Pledge Agreement and reported correct information to Treasury
from October 2020 through May 2021.19
Permitted Withdrawal Certification Reporting
In order to assess the completeness and accuracy of Corvus
Airlines’ Permitted Withdrawal Certification reporting to the
Treasury pursuant to Section 3(d) of the Pledge Agreement, we
met with Corvus Airlines management to obtain an understanding
of processes and responsibilities for receiving deposits from
Treasury to the Pledged Account, preparation and submission of
Permitted Withdrawal Certificates, and tracking PSP1 eligible
compensation in accordance with the Pledge Agreement. PSP1
funding was deposited to the Pledged Account as shown below in
Table 1.
Table 1. Pledged Account Deposits
Date
Deposit Amount
September 4, 2020
$2,508,963
November 18, 2020
$2,596,116
March 10, 2021
$2,596,117
March 31, 2021
$2,596,117
TOTAL
$10,297,313
Source: Corvus Airlines’ Pledged Account Bank Statements
The first of 14 Permitted Withdrawal Certifications was submitted
to Treasury on October 16, 2020, the same day as the Pledge
Agreement was signed between Corvus Airlines and Treasury. This
Permitted Withdrawal Certification included salaries, wages, and
benefits paid by Corvus Airlines from August through
October 2020, which was not prohibited by the Pledge Agreement.
The remaining 13 Permitted Withdrawal Certifications were
submitted to Treasury between October 29, 2020, and
May 24, 2021. As a result, we reviewed payroll registers and
19 The 14 Permitted Withdrawal Certifications submitted by Corvus Airlines to Treasury, in accordance
with the Pledge Agreement, occurred between October 16, 2020, and May 24, 2021.
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benefit invoices data from August 2020 through May 2021 and
compiled allowable salaries, wages, benefits, and other
compensation paid by Corvus Airlines and compared those
amounts to the 14 Permitted Withdrawal Certifications submitted
to Treasury. The aggregate amount of the 14 Permitted Withdrawal
Certifications totaled $10,297,313, the same amount made
available to Corvus Airlines via Treasury deposits to the Pledged
Account illustrated above in Table 1. We found that the total
amount of eligible salaries, wages, benefits, and other
compensation paid by Corvus Airlines to its employees was
, which exceeded the awarded amount by
as illustrated in detail below in Table 2. As such,
Corvus Airlines did not over-request PSP1 financial assistance.
Table 2. Permitted Withdrawal Compensation Comparison
Source: S&R Calculation of Eligible Compensation
* * * * * *
Month
Permitted
Withdrawal
Certifications
PSP1 Eligible
Compensation
Variance
August 2020
0
September 2020
0
October 2020
November 2020
December 2020
0
January 2021
0
February 2021
March 2021
April 2021
May 2021
TOTAL
$10,297,313
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
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We appreciate the courtesies and cooperation provided to our staff
during the audit. A distribution list for this report is provided as
appendix 3.
Saggar & Rosenberg, P.C. /s/
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
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Appendix 1: Objective, Scope, and Methodology
Our objective was to assess the accuracy, completeness, and
sufficiency of Corvus Airlines Inc.’s (Corvus Airlines) sworn
financial statement or other data used to certify the wages,
salaries, benefits, and other compensation amounts submitted and
approved by the Department of Treasury (Treasury).
The scope of our audit included Corvus Airlines’ original ownership
and new ownership, which received payments from Treasury.20 We
reviewed documentation including the certified applications, sworn
financial statements, tax returns, Permitted Withdrawal
Certifications,21 and other documentation provided to Treasury
from March 2020 through May 2021.
To accomplish this objective, Saggar & Rosenberg (S&R) performed
the following procedures during audit fieldwork conducted
remotely, due to the Coronavirus Disease 2019 (COVID-19)
pandemic from September 2021 through February 2022:
•
Reviewed applicable Federal laws, regulations, and guidance,
including:
o Title IV, Subtitle B, Air Carrier Worker Support, of the
Coronavirus Aid, Relief, and Economic Security Act
(CARES Act);22 and
o 14 CFR, Part 241,23 Uniform System of Accounts and
Reports For Large Certificated Air Carriers,
August 12, 2022.
20 Corvus Airlines filed for Chapter 11 bankruptcy on April 5, 2020, two days after the submission of
the PSP1 Application. Corvus Airlines was later purchased via stock acquisition and continued
operations under the same company name.
21 New ownership from Corvus Airlines was required to deliver a signed certification form to Treasury
to withdraw funds for the purpose of continuing the payment of Wages, Salaries, and Benefits to
employees.
22 P.L. 116-136 (March 27, 2020).
23 14 CFR, Part 241 “Uniform System of Accounts and Reports for Large Certificated Air Carriers”
defines “Air carrier, large certificated” as an air carrier holding a certificate issued under 49 U.S.C
41102, as amended, that: (1) operates aircraft designed to have a maximum passenger capacity of
more than 18,000 pounds; or (2) conducts operations where one or both terminals of a flight stage
are outside the 50 states of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, and the U.S. Virgin Islands. These air carriers are required to report financial information
to the Department of Transportation. Corvus Airlines is not a Large Certificated Air Carrier.
Appendix 1: Objective, Scope, and Methodology
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•
Reviewed Treasury’s policies, procedures, and guidance related
to PSP1:
o Guidelines and Application Procedures for Payroll Support
to Air Carriers and Contractors, which included the PSP1
Application, March 30, 2020;
o PSP1 Agreement;
o Question and Answer: Payroll Support to Air Carriers and
Contractors, (April 2, 2020, April 3, 2020 and
April 20, 2020 versions); and
o Frequently Asked Questions: Application Procedures for
Payroll Support to Air Carriers and Contractors,
April 3, 2020.
•
Performed 100 percent testing for four of the eight sections of
the PSP1 Application, specifically, the Applicant Information,
Applicant Type, Awardable Amounts,24 and Certification
sections with respect to the revised audit scope and objective.
The other four sections were not reviewed because the
Taxpayer Protection section generally applied to 241 air
carriers, with exceptions; the Employment Levels, Financial
Institution Information, and Additional Information sections had
no impact on Treasury’s determination of recipients’ award
amounts.
•
Interviewed key Treasury personnel and contracted consultants
engaged by Treasury to aid in its evaluation of the air carriers’
and the contractors’ certified applications and other data.
•
Interviewed Corvus Airlines representatives responsible for the
preparation and submission of Permitted Withdrawal
Certifications and tracking PSP1 eligible compensation in
accordance with the Pledge Agreement.
•
Reviewed documents to support the Permitted Withdrawal
Certifications. The documentation included company pay
registers, benefit invoices, tax returns, and organizational
hierarchy information.
24 The Awardable Amounts section was superseded by Corvus Airlines’ Permitted Withdrawal
Certification reporting requirements stemming from the company sale.
Appendix 1: Objective, Scope, and Methodology
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•
Reviewed the terms and conditions outlined in the Pledge
Agreement25 between Corvus Airlines and Treasury, dated
October 16, 2020.
•
Reviewed GAO’s Standards for Internal Control in the Federal
Government26 to identify the components of internal control
that are significant to the audit objective. Understanding internal
control within the context of an entity’s internal control
framework can help auditors determine whether internal control
deficiencies exist. We concluded that one of the five internal
control components, Control Activities, as related to Corvus
Airlines’ payroll system, was significant to the audit objective.27
This component states that control activities are the actions
management establishes through policies and procedures to
achieve objectives and respond to risks in the internal control
system, which includes the entity’s information system. To
assess the controls over Corvus Airlines’ payroll system, we
examined Corvus Airlines’ response to a Data Supplier
Questionnaire,28 reviewed a System and Organizational
Controls 1 (SOC 1),29 and interviewed Corvus Airlines’
management responsible for generating and using the data.
Additional details regarding our assessment of the reliability of
the data are reported in the section below.
•
Reviewed GAO’s Assessing Data Reliability30 guidance, which
states that a data reliability determination does not involve
attesting to the overall reliability of the data or database. For
this audit, the audit team has only determined the reliability of
the specific data sources needed to support the findings,
conclusions, or recommendations in the context of the audit
objective. Corvus Airlines prepared the Permitted Withdrawal
Certifications using actual and forecasted payroll estimates from
the company’s payroll system. S&R compared payroll details
25 Treasury formally agreed to terms with Corvus Airlines’ new ownership on October 16, 2020, in the
form of a “Pledge Agreement” to further protect Treasury’s financial interests in use of PSP1 funds.
26 GAO-14-704G (September 2014).
27 The five components of internal control are Control Environment, Risk Assessment, Control
Activities, Information and Communication, and Monitoring.
28 A Data Reliability Assessment is completed to assess the reliability of data originating from a system
to determine if it is reliable for the purposes of the audit. The Data Supplier Questionnaire would be
one of the tools used during the Data Reliability Assessment.
29 SOC 1 report addresses a company’s internal control over financial reporting, which pertains to the
application of checks-and-limits. Essentially, it is the audit of a third-party vendor’s accounting and
financial controls.
30 GAO-20-283G (December 2019).
Appendix 1: Objective, Scope, and Methodology
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
(OIG-23-021)
15
generated from the payroll registers at the individual employee
level, as well as third-party vendor benefit invoices from
August 2020 through May 2021 to the cumulative amount of
Permitted Withdrawal Certifications submitted to Treasury.
To assess data reliability of these sources, we examined Corvus
Airlines’ response to the Data Supplier Questionnaire for the
company’s payroll system, reviewed the SOC 1, and
interviewed Corvus Airlines’ management responsible for
generating and using the data. Based on our assessment, we
determined that the data was sufficiently reliable to support the
findings and conclusions to answer the objective of this audit.
We conducted this performance audit in accordance with generally
accepted government auditing standards. Those standards require
that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our audit objective. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
(OIG-23-021)
16
Appendix 2: Corvus Airlines Management Response
Audit of Air Carrier Worker Support Certifications - Corvus Airlines, Inc.
(OIG-23-021)
17
Appendix 3: Report Distribution
Department of the Treasury
Treasury Secretary
Deputy Secretary
Treasury Audit Liaison
Office of Strategic Planning and Performance Improvement
Office of the Deputy Chief Financial Officer, Risk and Control
Group
Corvus Airlines, Inc.
President
Office of Management and Budget
OIG Budget Examiner
United States Senate
Committee on Homeland Security and Governmental Affairs
Committee on Finance
Committee on Banking, Housing, and Urban Affairs
Committee on Commerce, Science, and Transportation
Committee on Appropriations
Committee on the Budget
United States House of Representatives
Committee on Oversight and Reform
Committee on Financial Services
Committee on the Budget
Committee on Transportation and Infrastructure
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