Full text
Audit Report
OIG-23-024
CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF
PROGRAMS
Audit of Air Carrier Worker Support
Certifications - Constant Aviation, LLC
April 21, 2023
Office of Inspector General
Department of the Treasury
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OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
April 21, 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 – Constant
Aviation, LLC
Attached is our audit report for the Audit of Air Carrier Worker Support Certifications -
Constant Aviation, LLC (Constant) (OIG-23-024; dated April 21, 2023). 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 Constant’s 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 Constant incorrectly compiled data used for the
Awardable Amounts section of the PSP1 Application, resulting in a $57,781
overstatement. Specifically, the:
• Inclusion of unallowable corporate officer compensation, resulted in a
overstatement;
• Data errors, resulted in a
understatement; and
• Reporting conservative benefit cost estimates, resulted in a
understatement.
Treasury’s awards to contractors under PSP1 included a 90 percent pro rata
distribution of application amounts. Applying this formula, Constant received a
$52,003 overpayment from Treasury.
Accordingly, S&R recommends that Treasury’s Chief Recovery Officer:
• Seek reimbursement of the $52,003 overpayment for PSP1 financial assistance;
and
• Review Constant’s requested amount for unallowable expenses, under the
Payroll Support Program Extension (PSP2)1 authorized by the Consolidated
Appropriations Act, 2021 and the Payroll Support Program 3 (PSP3)2 authorized
by the American Rescue Plan Act of 2021, and seek reimbursement for the
overpayment, if applicable.
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.
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 Constant’s 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.
1 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).
2 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).
i
Contents
Audit Report
Results in Brief ................................................................................................... 2
Background ........................................................................................................ 5
Treasury Disbursement Processes .................................................... 7
PSP1 Interim Audit Report ............................................................... 8
Constant Aviation, LLC ................................................................... 8
Audit Results ...................................................................................................... 9
Finding 1 Inaccurate Compilation of the PSP1 Application Awardable Amount ... 10
Corporate Officer Compensation .................................................... 10
Understatements to the Awardable Amount on the PSP1 Application . 12
Recommendations ........................................................................ 15
Appendix 1: Objective, Scope, and Methodology .................................................. 17
Appendix 2: Schedule of Monetary Benefits ......................................................... 21
Appendix 3: Constant Management Response ...................................................... 22
Appendix 4: Treasury Management Response ...................................................... 24
Appendix 5: Report Distribution .......................................................................... 27
Abbreviations
CARES Act
Coronavirus Aid, Relief, and Economic Security Act
Constant
Constant Aviation, LLC.
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.
ii
SOC 1
System and Organizational Controls
Treasury
Department of the Treasury
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Audit of Air Carrier Worker Support Certifications – Constant Aviation,
LLC (OIG-23-024)
1
April 21, 2023
Jacob Leibenluft
Chief Recovery Officer
Department of the Treasury
This report presents the results of our audit of Constant Aviation,
LLC’s (Constant) 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).3 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).4 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)5 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 Constant’s sworn
financial statement or other data used to certify the wages,
salaries, benefits, and other compensation amounts submitted and
approved by Treasury for PSP1. The scope of our audit covered the
time period from April 1, 2019 through September 30, 2019 and
included the certified PSP1 Application, sworn financial
3 P.L. 116-136 (March 27, 2020).
4 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).
5 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”.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
2
statements, tax returns, and other documentation submitted to
Treasury on April 3, 2020.6
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 Constant, Treasury, and contracted
consultants engaged by Treasury to evaluate certified company
applications. We conducted our fieldwork from September 2021
through March 2022. Appendix 1 contains a more detailed
description of our objective, scope, and methodology.
Results in Brief
In brief, S&R found that Constant, a contractor, reported correct
information for three of the four sections reviewed on its PSP1
Application.7 These sections are: (1) Applicant Information,
(2) Applicant Type, and (3) Certification. We also found that
Constant incorrectly reported information in the Awardable
Amounts section, resulting in a total overstatement of $57,781.
Specifically, we found (1) the inclusion of corporate officer
compensation, resulting in a
overstatement, (2) data
errors, resulting in a
understatement, and (3) reporting
conservative benefit cost estimates, resulting in a
understatement. Treasury’s awards to contractors under PSP1
included a 90 percent pro rata distribution of application amounts.
Applying this formula, we found that Constant received a $52,003
overpayment from Treasury. As a result, we question the costs
totaling $52,003 and recommend that the Treasury Chief Recovery
Officer seek reimbursement of the $52,003 overpayment to
Constant for PSP1. Additionally, we recommend that Treasury
review Constant’s requested amount for unallowable expenses,
6 Constant submitted the PSP1 Application and related supporting documentation on April 3, 2020.
7 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.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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under the Payroll Support Program Extension (PSP2)8 authorized by
the Consolidated Appropriations Act, 2021 and the Payroll Support
Program 3 (PSP3)9 authorized by the American Rescue Plan Act
of 2021, and seek reimbursement for overpayment, if applicable.
Appendix 2 contains more details on questioned costs.
As part of our reporting process, we provided Constant
management an opportunity to comment on a draft of this report.
While Constant management does not contest the
recommendations in the report, management would like to explain
its position regarding who was and was not a corporate officer of
Constant for the purposes of the PSP1 Application.
Constant management stated that it finds the definition of
corporate officer to be inconsistent on both technical and practical
grounds. Management acknowledged that while the definition does
refer to “vice president”, it further specifies that a vice president
must be “in charge of a principal business unit, division or
function” and that qualifying language acknowledges the possible
existence of vice presidents who were not in charge of a principal
business unit, division, or function. Based on Constant
management’s interpretation of the definition, it presumes those
employees would not fall within the definition of a corporate officer
unless they also performed a policy-making function. Constant
management further stated that an employee’s level of authority,
not title, ought to be what really determines the status as a
corporate officer for PSP purposes.
Under Constant management’s interpretation, many of the
employees identified in the report do not qualify as corporate
officers, despite their titles, since virtually all major decisions at
Constant, and all policy-making authority, lay with its Chief
Executive Officer. Management further stated that while certain
employees received “Vice President” titles for status, recognition,
8 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 as Payroll Support Program Extension (PSP2).
9 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 as Payroll Support Program 3 (PSP3).
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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or external credibility, these individuals were not formally appointed
by Constant’s board of managers, and their titles did not carry any
inherent authority to set company policy or make major decisions
on behalf of Constant. Constant management stated that most of
these employees had no autonomous authority to sign or approve
material contracts, make significant purchases, or make hiring,
firing or compensation decisions.
We disagree with Constant management’s statement that the
employee’s level of authority or policy making capability determines
the status of a corporate officer for PSP1 Application purposes.
Neither the PSP1 Application instructions (referred to as
“Guidelines” in this report) nor the PSP1 Agreement required
corporate officers to set company policy, be appointed by board
members, possess autonomous authority to sign or approve
material contracts, make significant purchases, or make hiring,
firing or compensation decisions. The PSP1 Agreement defines a
corporate officer as, “with respect to the Recipient, its president;
any vice president in charge of a principal business unit, division, or
function (such as sales, administration or finance); any other officer
who performs a policy-making function; or any other person who
performs similar policy making functions for the Recipient.
Executive officers of subsidiaries or parents of the Recipient may
be deemed Corporate Officers of the Recipient if they perform such
policy-making functions for the Recipient”. In the report, we noted
that ten executives that met the definition of corporate officers are
the President; Vice President of Air Services; Vice President of
Sales; Vice President of Aircraft On Ground Lines; Vice President of
Constant Aviation Rotable Exchange; Vice President of Human
Resources; Vice President of Quality, Safety, and Training; and
three Vice Presidents of Operations. Constant management’s
response, in its entirety, is included as appendix 3 of this report.
In a written response, Treasury management concurred with our
recommendations and agreed that any overpayments of PSP funds
should be recouped. Treasury stated it will conduct a review of the
findings, consider any response from the recipient, and seek
recoupment of any amounts that Treasury determines have been
overpaid. Also, Treasury will review awardable amounts requested
under PSP2 and PSP3 and seek recoupment where appropriate.
Treasury management will need to record an estimated completion
date for these actions in the Joint Audit Management Enterprise
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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System (JAMES). Management’s planned corrective actions meet
the intent of our recommendations. Treasury management’s
response, in its entirety, is included as appendix 4 of this report.
Background
Title IV, Subtitle B, of the CARES Act, Air Carrier Worker Support,
requires Treasury to provide financial assistance to air carriers and
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),10 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
10 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. Constant is not a Large Certificated Air Carrier.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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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.
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 banking
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 ─ applicant’s verification of submitting its
Internal Revenue Service (IRS) Form 941 – Employer’s Quarterly
Federal Tax Return11 covering the period April 1, 2019 through
September 30, 2019 along with the PSP1 Application submitted
to Treasury.
11 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.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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8. Certification ─ names, titles, and signatures of two certifying
officials12 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.
Treasury Disbursement Processes
In an effort to disburse PSP1 payments to contractor applicants as
quickly as possible and prior to the application deadline of
April 27, 2020, Treasury applied an initial estimated pro rata rate
of 69.7 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
contractors was approximately $4.1 billion, which exceeded the
$3 billion available financial assistance. Because its initial estimated
pro rata rate was low, Treasury calculated an additional
20.3 percent, the top-off amount, for contractors making the final
pro rata rate 90 percent. Treasury explained that 17 contractors
did not accept the top-off amount; as such, the final awardable
amount for those contractors was 69.7 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
contractors 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
contractors in February 2021. 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
12 The certifying officials attested under penalty of perjury that the information and certifications
provided in the application and its attachments are true and correct.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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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,13 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
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.
Constant Aviation, LLC
Headquartered in Cleveland, Ohio, Constant is a contractor that
provides an array of services for numerous corporate aircrafts,
including maintenance, avionics, engineering, and support.
Constant submitted its PSP1 Application totaling
on
April 3, 2020. Constant received the contractor top-off for a total
award of $30,049,303.19, or 90 percent of the company’s
requested amount. Treasury’s disbursements to Constant were as
follows:
• May 26, 2020 - $7,757,171.97
• June 04, 2020 - $3,878,585.99
• July 07, 2020 - $3,878,585.99
13 OIG-21-025, Interim Audit Update – Air Carrier and Contractor Certifications for Payroll Support
Program (Interim Audit), March 31, 2021.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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• August 06, 2020 - $3,878,585.99
• September 04, 2020 - $3,878,585.98
• February 16, 2021 - $6,777,787.27
In addition to PSP1, Treasury awarded Constant $10,149,987
under PSP2 and $10,149,987 under PSP3. PSP2 and PSP3 were
not the subject of this audit.
Audit Results
We found that Constant reported correct information for three of
the four sections reviewed on its PSP1 Application. These 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
contracts with air carriers, general ledger data, company sworn
financial statements, IRS Form 941, executive-level business
charts, payroll registers, and third-party benefit invoices.
We also found that Constant reported incorrect information in the
Awardable Amounts section. The company included unallowable
corporate officer compensation, resulting in an overstatement
of
. However, the overstatement was partially offset
by data errors and reporting conservative benefit cost estimates
totaling
, resulting in a net overstatement of $57,781.
Table 1 illustrates a monthly breakdown of Constant’s overstated
amounts.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Table 1. Aggregate Overstatement by Month
Month
PSP1 Application
Re-Calculated
Awardable Amount
Variance
April 2019
May 2019
June 2019
July 2019
August 2019
September 2019
TOTAL
$(57,781)
Source: S&R Calculation of Awardable Amount
Since Treasury disbursed PSP1 funds pro rata for contractors
at 90 percent of the requested awardable amount, Constant
received an overpayment of $52,003.
Finding 1
Inaccurate Compilation of the PSP1 Application
Awardable Amount
Corporate Officer Compensation
Both the CARES Act and Treasury’s Guidelines define “employee”
as “an individual, other than a corporate officer, who is employed
by an air carrier or contractor in the United States (including its
territories and possessions).” In addition, the signed
PSP1 Agreement, effective date May 21, 2020, subsequently
defines a corporate officer as, “with respect to the Recipient, its
president; any vice president in charge of a principal business unit,
division, or function (such as sales, administration or finance); any
other officer who performs a policy-making function; or any other
person who performs similar policy making functions for the
Recipient. Executive officers of subsidiaries or parents of the
Recipient may be deemed Corporate Officers of the Recipient if
they perform such policy-making functions for the Recipient.”
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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We identified thirteen Constant executives through discussions
with management and review of Constant’s 2019 organizational
chart. All thirteen of the executives met the definition of a
corporate officer per the PSP1 Agreement. We found that Constant
included unallowable corporate officer compensation paid to ten of
its thirteen corporate officers, resulting in an overstatement of
. The ten executives were the President, Vice President
of Air Services, Vice President of Sales, Vice President of Aircraft
On Ground Lines, Vice President of Constant Aviation Rotable
Exchange, Vice President of Human Resources, Vice President of
Quality, Safety, and Training, and three Vice Presidents of
Operations. However, Constant properly excluded compensation
paid to its Chief Executive Officer and two Chief Financial Officers
that were employed between April 2019 and September 2019.
Table 2 illustrates a monthly breakdown of Constant’s overstated
amounts for corporate officer compensation.
Table 2. Corporate Officer Inclusion
Month
Unallowable Corporate
Officer Compensation in
the PSP1 Application
April 2019
May 2019
June 2019
July 2019
August 2019
September 2019
TOTAL OVERSTATEMENT
Source: S&R Calculation of Awardable Amount
Constant management stated that they had a different
interpretation of a corporate officer based on the definition in the
PSP1 Agreement. In addition, Constant management stated that
they did not consider individuals with a title of “Vice President” of
a particular business line as a corporate officer if they did not have
policy making capabilities.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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Understatements to the Awardable Amount on the PSP1
Application
Treasury’s Guidelines define wages, salaries, benefits, and other
compensation as “remuneration paid by the applicant to its
employees for personal services and includes salaries, wages,
overtime pay, cost-of-living differentials, and other similar
compensation, as distinguished from per diem allowances or
reimbursement for expenses incurred by personnel for the benefit
of the applicant.” In addition, the Guidelines define Awardable
Amounts as “an amount that such contractor certifies, using sworn
financial statements or other appropriate data, as the amount of
wages, salaries, benefits, and other compensation that such
contractor paid its employees during the time period.”
Data Errors for Salaries and Wages and Other Compensation
Constant made a data compilation error during the application
process that ultimately reduced the overall requested amount. We
found that total gross pay from company pay registers exceeded
the amount recorded in the awardable amount table in the PSP1
Application. Specifically, data errors in the PSP1 Application for
June 2019 and September 2019 resulted in an understatement
of
in requested amounts related to wages, salaries, and
other compensation, as shown below in Table 3.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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Table 3. Data Errors
Month
Requested Salaries
and Wages and
Other
Compensation
Actual Salaries and
Wages and Other
Compensation
Understatement
April 2019
-
May 2019
-
June 2019
July 2019
-
August 2019
-
September 2019
TOTAL
Source: S&R Calculation of Awardable Amount
Constant management stated that data compilation errors stemmed
from unintentional oversight during the application process.
Benefit Request Calculations
Constant prepared the “Benefits” section of the Awardable
Amounts table using 401K employer matching contributions,
amounts paid to third-party life insurance providers, and estimated
employee healthcare costs at the employee level that would be
provided under The Consolidated Omnibus Budget Reconciliation
Act14 elections, rather than actual medical benefits paid for
healthcare. However, the actual allowable benefit compensation,
which does not include unallowable corporate officer
compensation, exceeded the amount requested on the PSP1
Application and ultimately reduced the awardable amount related to
benefits, as shown below in Table 4.
14 P.L. 99-272 (April 7, 1986).
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Table 4. Benefit Request Comparison
Month
Requested
Benefits
Allowable
Benefit Costs
Understatement
April 2019
May 2019
June 2019
July 2019
August 2019
September 2019
TOTAL
Source: S&R Calculation of Awardable Amount
Constant management stated that it used the Consolidated
Omnibus Budget Reconciliation Act healthcare benefit estimates as
opposed to actual healthcare payments made on behalf of company
employees to exercise conservatism when preparing the PSP1
Application.
In total, the
overstatement for corporate officer
compensation,
understatement due to data errors, and
understatement due to reporting conservative benefit
cost estimates, resulted in an aggregate overstatement of
$57,781. Since Treasury disbursed PSP1 funds pro rata for
contractors at 90 percent of the requested amount, Constant
received an overpayment of $52,003.
To remedy the findings listed in the prior OIG audit report,15
Treasury required PSP2 applicants to re-certify their PSP1
awardable amounts. Constant certified to Treasury under PSP2,
that its PSP1 Application did not include corporate officer
compensation. Treasury stated it relies on applicants’ certifications
that they did not include unallowable expenses (i.e. corporate
officer compensation and employer-side payroll taxes) and no
further validation checks were performed; as a result, the company
15 OIG-21-025, Interim Audit Update – Air Carrier and Contractor Certifications for Payroll Support
Program (Interim Audit), March 31, 2021.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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likely inappropriately included corporate officer compensation in its
PSP2 and PSP3 financial assistance request.
Recommendations
S&R recommends that Treasury’s Chief Recovery Officer:
1. Seek reimbursement of the $52,003 overpayment of PSP1
financial assistance.
Management Response
Treasury will conduct a review of the findings, consider any
response from the recipient, and seek recoupment of any
amounts that Treasury determines have been overpaid.
OIG Comment
Management’s planned corrective actions meet the intent of our
recommendation. Treasury management will need to record an
estimated completion date for these actions in JAMES.
2. Review Constant’s requested amount for unallowable expenses,
under PSP2 and PSP3, and seek reimbursement for the
overpayment, if applicable.
Management Response
Treasury will review awardable amounts requested under PSP2
and PSP3 and seek recoupment where appropriate.
OIG Comment
Management’s planned corrective actions meet the intent of our
recommendation. Treasury management will need to record an
estimated completion date for these actions in JAMES.
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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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 5.
Saggar & Rosenberg, P.C. /s/
Audit of Air Carrier Worker Support Certifications – Constant Aviation,
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Appendix 1: Objective, Scope, and Methodology
Our objective was to assess the accuracy, completeness, and
sufficiency of Constant Aviation, LLC’s (Constant) 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).
The scope of our audit covered the time period from April 1, 2019
through September 30, 2019 and included the certified Payroll
Support Program (PSP1) Application, sworn financial statements,
tax returns, and other documentation submitted to Treasury on
April 3, 2020.16
To accomplish this objective, Saggar & Rosenberg, P.C. (S&R)
performed the following activities during audit fieldwork conducted
remotely, due to the Coronavirus Disease 2019 (COVID-19)
pandemic from August 2021 through March 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);17 and
o 14 CFR, Part 241,18 Uniform System of Accounts and
Reports for Large Certificated Air Carriers,
August 12, 2022.
•
Reviewed Treasury’s policies, procedures, and guidance related
to PSP1:
o Guidelines and Application Procedures for Payroll Support
to Air Carriers and Contractors (Guidelines), which
included the PSP1 Application, March 30, 2020;
16 Constant submitted the PSP1 Application and related supporting documentation on April 3, 2020.
17 P.L. 116-136 (March 27, 2020).
18 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. Constant is not a Large Certificated Air Carrier.
Appendix 1: Objective, Scope, and Methodology
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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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 including, specifically, the Applicant
Information, Applicant Type, Awardable Amount, and
Certification sections. 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 consultant
personnel engaged by Treasury to aid in its evaluation of the air
carriers’ and the contractors’ certified applications and other
data.
•
Interviewed Constant representatives responsible for the
completion and submission of the sworn financial statements in
the Awardable Amounts section of the PSP1 Application.
•
Reviewed sworn financial statements and documents to support
the requested payroll support amount. The documentation
included general ledger data, company pay registers, benefit
invoices, organizational hierarchy information, and Internal
Revenue Service (IRS) Form 941 – Employer’s Quarterly Federal
Tax Return.19
•
Reviewed Government Accountability Office’s (GAO) Standards
for Internal Control in the Federal Government20 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,
19 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.
20 GAO-14-704G (September 2014).
Appendix 1: Objective, Scope, and Methodology
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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Control Activities, as related to Constant’s payroll system, was
significant to the audit objective.21 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
Constant’s payroll system, we examined Constant’s response to
a Data Supplier Questionnaire,22 reviewed a System and
Organizational Controls 1 (SOC 1),23 and interviewed Constant’s
management responsible for generating and using the data.
Additional details regarding our assessment of the reliability of
the data is reported in the section below.
•
Reviewed GAO’s Assessing Data Reliability24 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. Constant prepared the PSP1 Application using
information from the company payroll system, estimated
healthcare coverage costs, 401K employer match contributions,
and the company portion of life insurance premiums. S&R
compared details generated from the payroll registers at the
individual employee level, as well as third-party vendor benefit
invoices from April 2019 through September 2019 to the
amounts presented in the Awardable Amounts section of the
PSP1 Application.
To assess data reliability of these sources, we examined
Constant’s response to the Data Supplier Questionnaire for the
payroll system, reviewed the payroll provider’s SOC 1, and
interviewed Constant’s management responsible for generating
and using the data. Based on our assessment, we determined
21 The five components of internal control are Control Environment, Risk Assessment, Control
Activities, Information and Communication, and Monitoring.
22 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.
23 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.
24 GAO-20-283G (December 2019).
Appendix 1: Objective, Scope, and Methodology
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
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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 – Constant Aviation,
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Appendix 2: Schedule of Monetary Benefits
According to the Code of Federal Regulations,25 a questioned cost
is a cost that is questioned by the auditor because of an audit
finding:
(a) which resulted from a violation or possible violation of a
statute, regulation, or the terms and conditions of a Federal
award, including for funds used to match Federal funds;
(b) where the costs, at the time of the audit, are not supported
by adequate documentation; or
(c) where the costs incurred appear unreasonable and do not
reflect the actions a prudent person would take in the
circumstances.
Questioned costs are to be recorded in the Department of the
Treasury’s (Treasury) Joint Audit Management Enterprise System.
The amount will also be included in the Office of Inspector General
(OIG) Semiannual Report to Congress. It is Treasury management's
responsibility to report to Congress on the status of the agreed to
recommendations with monetary benefits in accordance with
Section 5(b) of the Inspector General Act of 1978, as amended.
Recommendation
Questioned Costs
Recommendation No. 1
$52,003
The questioned cost represents amounts provided by Treasury
under the Payroll Support Program (PSP1). As discussed in
Finding 1, Constant Aviation, LLC overstated its PSP1 Application
awardable amount to Treasury by $57,781 due to (1) the inclusion
of corporate officer compensation; (2) data errors understatement;
and (3) reporting of conservative benefit cost estimates. However,
since Treasury disbursed PSP1 funds pro rata for contractors at
90 percent of the requested amount, the questioned cost related to
the overstated PSP1 Application is $52,003.
25 2 CFR § 200.84 – Questioned Cost.
Audit of Air Carrier Worker Support Certifications – Constant Aviation,
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Appendix 3: Constant Management Response
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Appendix 4: Treasury Management Response
Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Audit of Air Carrier Worker Support Certifications - Constant Aviation,
LLC (OIG-23-024)
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Audit of Air Carrier Worker Support Certifications – Constant Aviation,
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Appendix 5: 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
Constant Aviation, LLC
Manager
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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