CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF PROGRAMS: Audit of Air Carrier Worker Support Certifications – Hyannis Air Service, Inc.
Summary
Treasury’s Office of Inspector General found in audit report OIG-27-001, dated October 1, 2026, that Hyannis Air Service, Inc. overstated its awardable amount under the CARES Act Air Carrier Payroll Support Program (PSP1) by $738,249. The overstatement came from unallowable corporate officers’ compensation, unallowable foreign employees’ benefits and $227 in data compilation errors. Because PSP1 paid passenger air carriers a 78.2-percent pro-rata share of application amounts, the OIG says Hyannis received a $577,311 overpayment, which Treasury reduced from the company’s PSP2 payment on July 31, 2021. The audit also found Hyannis reported 24 involuntary reductions instead of 31, and 761 average 2019 employees instead of 749. It recommends that Treasury review Hyannis’ PSP2 and PSP3 requests for unallowable expenses and seek reimbursement if applicable.
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SENSITIVE BUT
UNCLASSIFIED
(SBU)
asu ry
T r e
U.S.
SBU Cover Sheet
For further information, refer to the
Treasury Security Manual (TD P 15-71) at
http://intranet.treas.gov/security/
TD F 15-05.11 (3/07)
Audit Report
OIG-27-001
CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF
PROGRAMS
Audit of Air Carrier Worker Support
Certifications – Hyannis Air Service, Inc.
October 1, 2026
Office of Inspector General
Department of the Treasury
This Page Intentionally Left Blank
Contents
Audit Report
Results in Brief ...................................................................................................2
Background ........................................................................................................4
Treasury Disbursement Processes ....................................................6
PSP1 Interim Audit Report ...............................................................7
Hyannis Air Service, Inc. .................................................................7
Audit Results ......................................................................................................8
Finding Inaccurate Compilation of the PSP1 Application Awardable Amount ....9
Recommendation.......................................................................... 12
Appendices
Appendix 1: Objective, Scope, and Methodology .................................................. 13
Appendix 2: Hyannis Management Response ....................................................... 17
Appendix 3: Treasury Management Response ...................................................... 19
Appendix 4: Major Contributors to This Report ..................................................... 22
Appendix 5: Report Distribution .......................................................................... 23
Abbreviations
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CEO Chief Executive Officer
CFO Chief Financial Officer
DOT Department of Transportation
Guidelines Guidelines and Application Procedures for Payroll Support to Air
Carriers and Contractors under Division A, Title IV, Subtitle B
of the Coronavirus Aid, Relief, and Economic Security Act
HR Human Resources
Hyannis Hyannis Air Service, Inc.
IRS Internal Revenue Service
JAMES Joint Audit Management Enterprise System
OIG Treasury Office of Inspector General
PSP1 Payroll Support Program, CARES Act
i
PSP2 Payroll Support Program Extension, Consolidated Appropriations
Act, 2021
PSP3 Payroll Support Program 3, American Rescue Plan Act of 2021
SVP Senior Vice President
Treasury Department of the Treasury
VP Vice President
ii
This Page Intentionally Left Blank
October 1, 2026
Jeffrey Stout
Acting Chief Program Officer
Department of the Treasury
This report presents the results of our audit of Hyannis Air Service,
Inc.’s (Hyannis) certification 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). 1 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. 2 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) 3 and
contractors.
Our audit objective was to assess the accuracy, completeness, and
sufficiency of Hyannis’ 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 period from
April 1, 2019, through September 30, 2019, and included the
certified PSP1 Application, sworn financial statement, tax returns,
and other documentation submitted to Treasury on April 2, 2020.
1
P.L. 116–136 (March 27, 2020)
2
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).
3
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 –
Hyannis Air Service, Inc. (OIG-27-001) 1
To accomplish the objective, we reviewed applicable laws,
regulations, and Treasury’s policies and procedures, including but
not limited to, Title IV, Subtitle B, Air Carrier Worker Support of the
CARES Act, Guidelines and Application Procedures for Payroll
Support to Air Carriers and Contractors under Division A, Title IV,
Subtitle B of the Coronavirus Aid, Relief, and Economic Security
Act (Guidelines); PSP1 Agreement; and Frequently Asked
Questions: Application Procedures for Payroll Support to Air
Carriers and Contractors. We interviewed key personnel from
Hyannis, Treasury, and contracted consultants engaged by
Treasury to evaluate certified company applications. We conducted
our fieldwork from September 2020, through April 2022.
Appendix 1 contains a more detailed description of our audit
objective, scope, and methodology.
Results in Brief
We found that Hyannis, a passenger air carrier, reported correct
information for five of the seven sections reviewed on its PSP1
Application. 4 These sections are: (1) Applicant Information,
(2) Applicant Type, (3) Financial Institution Information,
(4) Additional Information, and (5) Certification. We also found that
Hyannis reported incorrect information in the Awardable Amounts
and Employment Levels sections of the PSP1 Application.
Hyannis overstated its awardable amount by $738,249.
Specifically, we found the (1) inclusion of unallowable corporate
officers’ compensation, totaling $ ; (2) inclusion of
unallowable foreign employees’ benefits, totaling $ and
(3) data compilation errors, totaling $227. Treasury’s awards to
passenger air carriers under PSP1 included a 78.2-percent pro-rata
distribution of application amounts. Applying this formula, Hyannis
received a $577,311 overpayment from Treasury. As a result, we
questioned the costs totaling $577,311. We confirmed that
Treasury took corrective action by reducing $577,311 from the
company’s Payroll Support Program Extension (PSP2) 5 payment on
4
The PSP1 Application is comprised of eight sections. One section - Taxpayer Protection, was not
subject to audit procedures because it generally does not apply to non-241 air carriers.
5
P.L. 116–260, The Consolidated Appropriations Act, 2021, 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).
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 2
July 31, 2021. Due to instances of non-compliance with PSP1, we
recommend that Treasury review Hyannis’ requested amount for
unallowable expenses, under the PSP2 authorized by the
Consolidated Appropriations Act, 2021 and the Payroll Support
Program 3 (PSP3) 6 authorized by the American Rescue Plan Act of
2021, and seek reimbursement for overpayment, if applicable.
Furthermore, in the Employment Levels section, Hyannis incorrectly
reported the number of involuntary reductions after
March 1, 2020, and the average number of employees for 2019.
The company reported 24 as the number of involuntary reductions
but should have reported 31. The variance of seven employees
was due to (1) the use of a Human Resources (HR) report ran on
March 31, 2020 that did not capture six employees involuntarily
furloughed from March 31, 2020, through April 2, 2020 (Hyannis’
application submission date); and (2) an unknown system error that
did not capture one employee that was furloughed on
March 27, 2020. Additionally, Hyannis reported 761 employees as
the average number of employees in 2019 but should have
reported 749 employees. The variance of 12 employees was due to
the inclusion of corporate officers. Treasury management stated
that they had no plans to use the information in the involuntary
reductions after March 1, 2020 field. Treasury management also
stated that the information reported in the average number of
employees for 2019 field was used as a validation check and had
no impact on determining the awardable amount. As such, we are
not reporting these discrepancies as findings.
As a part of our reporting process, we provided Hyannis
management with an opportunity to comment on a draft of this
report. In a written response, management acknowledged the
OIG’s treatment of corporate officers in the awardable amount
finding and recognized the differences in Employment Levels noted
in the report. Hyannis management also stated that the PSP2 and
PSP3 agreements outline an audit and records retention period of
three years following the expiration or full use of funds. If Treasury
interprets the agreements to allow for a different audit timeframe
or broader review scope, Hyannis is requesting the opportunity to
6
P.L. 117–2, The American Rescue Plan of 2021, 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 –
Hyannis Air Service, Inc. (OIG-27-001) 3
review relevant contractual provisions to ensure mutual
understanding. Hyannis management’s response, in its entirety, is
included as appendix 2 of this report.
In a written response, Treasury management agreed that any
overpayment of PSP funds should be reimbursed. Management also
stated it 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 System
(JAMES). Management’s planned corrective actions meet the intent
of our recommendation. Treasury management’s response, in its
entirety, is included as appendix 3 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 DOT (referred to as 241 air carriers), 7 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 air carriers), and
contractors, financial assistance is required to be in an amount that
7
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. Hyannis is not a Large Certificated Air Carrier.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 4
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.
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 number of 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 the Treasury.
7. Additional Information ─ applicant’s verification of
submitting its Internal Revenue Service (IRS) Form 941,
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 5
Employer’s Quarterly Federal Tax Return, 8 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
officials 9 and the applicant’s 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
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.
8
IRS Form 941 is a tax form that businesses file quarterly to report income taxes, Social Security
taxes, and Medicare taxes they withheld from employees’ paychecks.
9
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 –
Hyannis Air Service, Inc. (OIG-27-001) 6
PSP1 Interim Audit Report
In a prior audit report, 10 OIG identified two systemic issues
affecting the payment amounts administered to all PSP1 recipients
for non-241 air carriers and contractors. Specifically, some of the
recipients audited included unallowable employer-side payroll taxes
and/or corporate officer compensation in their calculation of the
awardable amounts on their PSP1 applications. Treasury
management acknowledged these issues 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. Based on
our recommendations, in March 2022 Treasury implemented a
PSP1 recertification process whereby recipients had to certify
whether they excluded employer-side payroll taxes and corporate
officer compensation in their calculation of the awardable amounts
on their PSP1 applications. Treasury’s goal was to determine if
overpayments were made to recipients based on inaccurate
information included in PSP1 applications.
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. Any
overpayment was first offset against the approved top-off
payment. If an overpayment remained, or the overpayment was
identified after all PSP1 disbursements were made, and the
recipient was entitled to PSP2 or PSP3 funding, the overpayment
was offset against the PSP2 and/or PSP3 awards prior to issuance.
All remaining PSP1 overpayments not previously collected where
the recipient did not qualify for, or apply for, PSP2 and PSP3
funding, were required to be repaid to Treasury.
Hyannis Air Service, Inc.
Headquartered in Hyannis, Massachusetts, Hyannis is a passenger
air carrier that provides services in the following regions:
(1) Northeast, 2) Montana, and (3) Caribbean.
10
Treasury OIG, Interim Audit Update: Air Carrier and Contractor Certifications for Payroll Support
Program (Interim Audit), OIG-21-025 (March 31, 2021)
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 7
Hyannis submitted its PSP1 Application totaling $ on
April 2, 2020. The company received the passenger air carrier
top-off for a total award of $15,146,061, or 78.2-percent of the
company’s requested amount. Treasury’s disbursements to
Hyannis were as follows:
• April 23, 2020: $4,906,652.47
• June 4, 2020: $2,453,326.23
• July 7, 2020: $2,453,326.23
• August 6, 2020: $2,453,326.23
• September 4, 2020: $2,453,326.24
• October 6, 2020: $426,104.03
In addition to PSP1, Treasury awarded Hyannis $14,025,959 under
PSP2 and $13,082,012 under PSP3. PSP2 and PSP3 were not the
subject of this audit.
Audit Results
Hyannis reported correct information for five of seven sections
reviewed on its PSP1 Application. These sections are: (1) Applicant
Information, (2) Applicant Type, (3) Financial Institution
Information, (4) Additional Information, and (5) Certification. We
compared information provided in each section of the PSP1
Application to supporting documentation, including bank
statements, IRS Form 941, payroll registers, organizational chart,
third-party benefit invoices, and Employee Status Change Form,
among other items.
In the Awardable Amounts section, Hyannis included
(1) unallowable corporate officers, (2) unallowable foreign
employees compensation, and (3) had data compilation errors,
resulting in an overstatement of $738,249. Treasury’s awards to
passenger air carriers under PSP1 included a 78.2-percent
distribution of application amounts. Applying this formula, Hyannis
received $577,311 overpayment from Treasury. We confirmed that
Treasury took corrective action by reducing $577,311 from the
company’s PSP2 payment on July 31, 2021.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 8
Furthermore, in the Employment Levels section, Hyannis incorrectly
reported the number of involuntary reductions after
March 1, 2020, and the average number of employees for 2019.
Treasury management stated that the information reported in the
average number of employees for 2019 field was used as a
validation check and had no impact on determining the awardable
amount. Treasury management also stated that they had no plans
to use the information in the involuntary reductions after
March 1, 2020 field. As such, we are not reporting these
discrepancies as findings.
Finding Inaccurate Compilation of the PSP1 Application
Awardable Amount
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).”
The signed PSP1 Agreement, effective April 20, 2020, defines:
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.
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;
and
awardable amount as amount that such carrier certifies, using
sworn financial statements or other appropriate data, as the
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 9
amount of wages, salaries, benefits, and other compensation
paid by such carrier during the time period.
Hyannis incorrectly certified the PSP1 awardable amount resulting
in an overstatement of $738,249. Specifically, Hyannis included:
• Compensation for nine Senior Vice Presidents (SVP) and Vice
Presidents (VP), totaling $ . The company properly
excluded the salaries and wages for the Chief Executive
Officer (CEO), President, and Chief Financial Officer (CFO).
Also, the company included benefits for all 12 corporate
officers, totaling $ . The overall unallowable corporate
officer compensation totaled $ .
Based on discussions with Hyannis management and a
review of the company’s 2019 organizational chart, we
determined that Hyannis had 12 executives that met the
definition of corporate officer per the PSP1 Agreement. The
corporate officers were the (1) CEO; (2) President; (3) CFO;
(4) SVP of Planning; (5) SVP of Fleet and Technical
Operations; (6) SVP of Business Development and
Distribution; (7) VP of Airport Services; (8) VP of HR; (9) VP
of Marketing; (10) VP of Operations; (11) VP of Corporate
and Airport Affairs; and (12) VP of Finance.
• Employee benefits for three foreign employees, totaling
$ . The company included the August and
September 2019 benefits for a pilot; and the April through
September 2019 benefits for a cross-trained agent and a
captain.
We also found errors between the PSP1 Application amounts and
the actual compensation amounts paid to Hyannis employees,
totaling $227.
Hyannis management explained that they only considered the CEO,
President, and CFO as corporate officers based on their
interpretation of Treasury’s guidance at the time of PSP1
Application submission. Management also stated that while the
company has several VPs that manage departments, the company
did not consider them to be “in charge of a principal business unit
or division [or] perform specific policy making functions.”
Furthermore, management stated that each VP reports directly to
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 10
either the CEO, President, or CFO and would need approval for any
change in corporate policy. Additionally, management explained
that it was an oversight and unintentionally included the three
known corporate officers and three foreign employees in the
benefits calculation. Hyannis management explained that the data
discrepancies were due to mistakes.
Overall, the overstatement for (1) corporate officer compensation
of $ , (2) foreign employee benefits of $ and
(3) data compilation errors of $227, resulted in an aggregate
overstatement of $738,249. Since Treasury disbursed PSP1 funds
pro-rata for passenger air carriers at 78.2-percent of the requested
awardable amount, Hyannis received an overpayment
of $577,311. Table 1 illustrates the aggregate overpayment.
Table 1. Aggregate Overstatement and Pro-Rated Overpayment
Description Amount
PSP1 Application Requested Amount $
Less Corporate Officer Compensation $
Less Unallowable Benefits for Foreign Employees $
Less Data Compilation Errors $(227)
OIG PSP1 Calculated Amount $
Overstatement $738,249
PSP1 Passenger Pro-rata 78.2%
Pro-Rated Overpayment $577,311
Source: OIG Calculation of Awardable Amount
To remedy the findings noted in the prior OIG audit report (see
footnote 11), Treasury required PSP2 applicants to recertify their
PSP1 awardable amounts. On January 12, 2021, Hyannis 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. On
June 3, 2021, we notified Treasury of our preliminary audit finding
that Hyannis included unallowable expenses, resulting in an
overpayment of $577,311. On July 31, 2021, Treasury took
corrective action by reducing the overpayment from the company’s
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 11
PSP2 payment. Due to instances of non-compliance in the PSP1
awardable amount, the company may have potentially included
unallowable expenses in its PSP2 and PSP3 financial assistance
requests.
Recommendation
We recommend that Treasury’s Acting Chief Program Officer:
1. Review Hyannis’ 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.
******
We appreciate the courtesies and cooperation provided to our staff
during the audit. If you wish to discuss the report, you may
contact me at (202) 439-6354 or Christopher Culbreath, Acting
Audit Manager, at (202) 486-1983. Major contributors to this
report are listed in appendix 4. A distribution list for this report is
provided as appendix 5.
/s/
Julie Wong
Acting Deputy Assistant Inspector General for Audit
Audit of Air Carrier Worker Support Certifications –
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Appendix 1: Objective, Scope, and Methodology
Our objective was to assess the accuracy, completeness, and
sufficiency of Hyannis Air Service, Inc.'s (Hyannis) 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 Payroll
Support Program (PSP1).
The scope of our audit covered the period from April 1, 2019,
through September 30, 2019, and included the certified PSP1
Application, sworn financial statement, tax returns, and other
documentation submitted to Treasury on April 2, 2020.
To accomplish this objective, we performed the following activities
during audit fieldwork conducted remotely from September 2020
through April 2022:
• Reviewed applicable laws and regulations, including:
o Title IV, Subtitle B, Air Carrier Worker Support, of the
Coronavirus Aid, Relief, and Economic Security Act
(CARES Act); and
o 14 CFR Part 241, Uniform System of Accounts and
Reports for Large Certificated Air Carriers, amended
May 31, 2024
• Reviewed Treasury’s policies, procedures, and guidelines related
to PSP1:
o Guidelines and Application Procedures for Payroll Support
to Air Carriers and Contractors under Division A, Title IV,
Subtitle B of the Coronavirus Aid, Relief, and Economic
Security Act, 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.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 13
Appendix 1: Objective, Scope, and Methodology
• Performed 100-percent testing for seven of the eight sections
of the PSP1 Application—specifically, the Applicant Information,
Applicant Type, Financial Institution Information, Employment
Levels, Awardable Amounts, Additional Information, and
Certification sections. The Taxpayer Protection section was not
reviewed because it generally does not apply to non-241 air
carriers. According to Treasury, the Employment Levels section
had no impact on Treasury’s determination of recipients’ award
amounts. As such, we are not reporting the discrepancy as a
finding.
• 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 Hyannis representatives responsible for the
completion and submission of the sworn financial statement.
The amounts submitted in the Awardable Amounts section of
the PSP1 Application were considered the sworn financial
statement.
• Reviewed sworn financial statement and documents to support
the requested payroll support amount. The documentation
included, but was not limited to, (1) Internal Revenue Service
(IRS) Form 941, Employer’s Quarterly Federal Tax Return filings;
(2) 2019 organizational chart; (3) April 2020 bank statement;
(4) April 1, 2019, through September 30, 2019, payroll system
reports; (5) involuntary furlough notices; (6) employee status
change forms; (7) voluntary resignation emails; (8) third-party
invoices; (9) PSP1 Application; and (10) PSP1 Agreement.
• Reviewed Government Accountability Office’s Standards for
Internal Control in the Federal Government 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 Hyannis’ payroll system, was
significant to the audit objective. 11 This component states that
control activities are the actions management establishes
11
The five components of internal control are Control Environment, Risk Assessment, Control
Activities, Information and Communication, and Monitoring.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 14
Appendix 1: Objective, Scope, and Methodology
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
Hyannis’ payroll system, we examined Hyannis’ response to
Data Supplier Questionnaire 12 and interviewed Hyannis
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 Government Accountability Office’s Assessing Data
Reliability guidance, which states that 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 needed to support
the findings, conclusions, or recommendations in the context of
the audit objective. Hyannis used information generated from its
payroll system to complete the PSP1 Application. As such, we
compared the payroll information generated from the payroll
system and third-party invoices to the information in the
Employment Levels and Awardable Amounts sections of the
PSP1 Application.
To assess the reliability of Hyannis’ payroll system, we
(1) reviewed Hyannis’ completed Data Supplier Questionnaire;
(2) ensured system generated reports were within the expected
date range; 13 (3) interviewed Hyannis representatives
knowledgeable about the data; and (4) compared system
generated salary and benefits summary report to the detailed
payroll registers. Based on our assessment, we determined that
the data were 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
12
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.
13
The payroll registers, 2019 Benefits Data, and 401K Match Detailed Review had date range
filters from April 2019 through September 2019.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 15
Appendix 1: Objective, Scope, and Methodology
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 16
Appendix 2: Hyannis Management Response
March 19, 2026 pi, 660 Barnstable Road
Hyann i s, Massachusetts 02601
To: Office of the Inspector Gen eral
From: Casey Stone
Subject: Audit of Air Carrier Worker Support Certi fications - Hya n n i s Air Service, I nc. - Appendix 2
H yannis m a inta i n s the p ositio ns p reviou sly communicated in response to the PSPl Interi m Au d it
Report issu ed in M a rc h 2021.
Wit h res pect to the Awa rd a b le Am o unt ca l cul atio n und er PS P 1, H ya nnis ackn owl ed ges Treas u ry's
i nte rpretatio n regard i ng t he tre atm ent of ce rtai n corpo rate off i cers' com pen sation a n d fore i gn
empl oyees' b e n efits. At t h e ti m e of a ppl i cation , H ya nnis made its d ete rm i n at i on s in good faith based
on its u n de rstan d i ng of the d efi n it io n s and gu i d a nce p rovided in the PSPl applicat i o n m ate ria ls.
Specifica lly, th e inc l u s i on of Se n io r Vi ce P residents a n d V i ce P residents was b a sed on our interpretati on
of the term " Corpo rate Officer" as prese nte d in the a ppl icati o n . Our i nte nt was to ens u re complete
an d accurate re porti n g con sistent w ith th e program req u i re ments as und erstoo d at that ti m e .
Upon not ificatio n of Treasury's posit ion, H yan n is fully coop e rated with th e revi ew process. Treasu ry
red uced $577,3 1 1 from our PS P2 payme n t on J u ly 3 1, 2021 to address the identified ove rpayment.
G ive n t h at the adj ustment was m ad e in 2021 a n d that th e re h ave been no subseq u e nt a udit
communi cati on s or additi ona l findi ngs s i nce the second q ua rter of 2022, Hya nnis consid e re d the
m atter resolved a nd closed from an a d m i n i strati ve sta ndpo i nt.
With respect to the E m p loym e nt Levels sectio n vari a n ces i de n ti fi ed in th e re port, Hya n n i s
ac kn owled ges the differen c es noted. As Tre asu ry m a n agem ent i n d i cated, these data po i nts did n ot
i m pact t he award able a m o u nt d ete r m i n ation. Th e discre p a ncies we re u n i ntentio n a l an d proced u ra l in
nature .
H ya nnis remai n s committed to comp lian ce wi th a ll fed e r al program req u i remen t s a n d app rec iates t h e
opportu nity to respo nd to th e a u d it o bservati on s . We will conti nue to coope rate with Treasury s h o u ld
an y further c la rificati o n be requi red .
Res p ectfully,
Casey Sto n e
C h i ef Fi n a n cia l O fficer
H yannis Air Service, I nd . dba Cape Air
Audit of Air Carri er Worker Support Certifi cations
Hyannis A i r Service, Inc. (01G-27-001) 17
Appendix 2: Hyannis Management Response
March 19, 2026
pen.
660 Bar nstable Road
Hyannis, Massachusetts 02601
To: Office of the I ns pector General
From: Casey Stone
Subj ect: Audit of Air carrier Worker Support Certifications - Hyannis Air Service, Inc. -
Recommendation - Management Response
Hyan nis app reci ates Treasury's conti nued oversight of the Payroll Support Programs and re mains fully
committed to tra nspa rency and compliance with all applicable statutory and contractu a l req u i re ments.
With respect to the recommendati on that Treasury review Hya n nis' req u ested a mounts u nder PSP2
a nd PSP3 and seek rei mbursement for any overpaym e nt, if ap pl icabl e, Hyan nis wi ll fully cooperate with
a ny such review and provide sup porting docume ntation as req uested.
At the same time, Hya nnis respectfu l ly notes that Sections 20 a nd 21 of the PSP2 and PSP3 agreements
outline an aud it and records retention period of three yea rs following the expi ration or fu l l use of
fu nds u nde r each respective agreem e nt As PSP2 a nd PSP3 fu nds were fu lly util ized in the th i rd
q ua rter of 2021, Hyannis u nderstands th e a pp l icable audit period for each agreement to exten d
th rough the th i rd q uarter of 2024. Hyannis also understa nds each PSP agreeme nt to constitute a
sepa rate contractua l arra ngemen t, with its own defined terms and con d itions. Our PSP2 a nd PSP3
su b m issi ons were prepa red in accordance with the specific gu i dance a nd defin itions appl icab le to
those progra ms at the tim e of a pplication .
If Treasu ry i nterprets th e agreements to allow for a d ifferent aud it timeframe or b roader revi ew scope,
Hyan nis respectfully requests the o pportunity to review th e relevant contra ctu a l provisi ons and discuss
Treasu ry's i nterpretat ion to e nsu re mutua l understa n d ing.
Hyan nis remai ns co m mitted to m ai ntaini ng comp l ia nce w ith all fede ral requ irements and to e ngagi ng
wit h Treasu ry i n a transpare nt and collaborative ma n ne r, a nd we appreciate the opportu nity to
respond to th is recommendation.
Res pectfu lly,
Casey Stone
Chief Financial Office r
Hya n nis Ai r Se rvice, I nc . dba Cape Ai r
Audit of Air Carri er Worker Support Certifi cations -
Hyannis A i r Service, Inc. (01G-27-001) 18
Appendix 3:
Appendix 3: Treasury
Treasury Management
Management Response
Response
DE PARTMENT OF T H E TREASURY
WASHINGTON, D.C. 20220
May 26, 2026
Julie Wong
Ac ting Deputy As sistant Inspector General for Audit
U.S . Department of the Treasury - Offic e of Inspector General
1 5 00 Pennsylvania Avenue. N.W.
Washington, D .C . 20220
Dear Ms. Wong:
I write regarding the Office of Insp ector General*s (OIG) draft Audit ofAir Carrier Worker
Support Certifi cations Draft Report), reg arding Hyannis Air Service, Inc. (the Recipient), a
recipient of funds under Treasury' s Payroll Supp ort Program (PSP). The U .S. Departm ent ofthe
Treasury (Treasury) appreciates OIG's efforts.
Background on the Payroll Support Program
PSP was part of an effort to provide emergency assistance in response to the unprecedented
challenges pres ented by the COVID- 1 9 public health emergency and had three iterations:
• The Coronavirus Aid, Relief, and Ec onomic Security Act (CARES Act) was enacted on
March 2 7, 2 020, and e stablished the Payroll Support Program (PSP1 ) to provide financial
assistance to America' s passenger air carriers, cargo air carriers, and certain aviation
contractors . Treasury disbursed more than $28 billion to over 600 businesses in PSP 1 ,
directly supporting more than 600,000 Amer ican j obs.
• In December 2020, the C onsolidated Appropriations Act, 202 1 . cr eated the Payroll
Supp ort Program Extension (PS P2) for eligible passenger air carriers and c ertain aviation
contractors. Treasury disbursed over $ 1 5 billion to over 480 passenger air carriers and
con tractor s under PSP2.
• In March 2021 , the Amer ican Rescue Plan Act of 2021 provided an additional $ 1 5 billion
for Treasury to make further payroll support payments to entities that partic ipated in
P SP2 (PS P3). Treasury disbursed over $ 14.5 billion to over 480 passenger air carriers
and contra ctors under PSP3.
The CARES Act set forth two different methodologies for c alculating awardable amounts for the
largest carriers and for smaller air carriers and aviation contractors. For the larges t air carriers,
which received approximat ely 89% of the total PSP ass is tance. P SP 1 amounts were based on
reports the carriers had filed with the U.S. Department ofTransp ortation under 14 C .F .R. part
24 1 . In contrast, the statute required Treasury to provide financial assistance to smaller air
carriers and aviation contract ors in an amount that the applicants certified, using swom financial
statements or other appropriate data, as the amount of wages, salaries, and benefits that they paid
to t h eir employees during the time peri od from April 1 , 20 19, through September 30, 2019.
1
Audit
Audit of
of Air
Air Carrier
Carrier Worker
Worker Support
Support Certifications –
Certifications -
Hyannis
Hyannis Air
Air Service,
Service, Inc.
Inc. (OIG-27-001)
(OIG-27-001) 19
19
Appendix
Appendix 3:
3: Treasury
Treasury Management
Management Response
Response
For awards to the smaller companies, the PSP 1 application and Treasury' s guidelines made clear
that the awardable amounts should not include, inter alia, (1) any employer-side payroll taxes,
which are not paid to employees, and (2) compensation paid to corporate officers and non
employee contractors. Before accepting PSP2 applications , Treasury published additional
guidance further emphasizing that such amounts should not be included in the companies'
awardable amount calculations • In both PSP 1 and PSP2, Treasury required two offici als of each
applicant, including at least one corporate officer, to certify that the information provided in the
application was correct and did not contain any materially false or fraudulent statements.
In April 2020, OIG began a series of audits o f PSP 1 recipients to determine whether they had
properly c alculated their requested awardable amounts. In March 202 1, OIG issued an Interim
Audit Update, notifying Treasury that a number of rec ipients being audited had impermissib ly
included, in their PSP1 applications, employer-side payroll taxes or corporate officer
compensation in the calculation of the awardable amount, which may have resulted in an
overstatement of the amount of PSP 1 funds requested. In response, Treasury promptly took a
series of remedial actions, including requiring that all PSP1 applicants receiving awards on the
basis of self-ce rtification re-certify wheth er their awardable amounts included employer-side
payroll taxes or corporate offic er compensation. Where a company informed Treasury that it had
improperly included those amounts in its application, Treasury either withheld future PSP 1
disbursements or began pursuing debt recoupment. Through this process, Treasury has
success fully recouped more than $ 1 47 million of PSP overpayments.
OIG's Finding
The Draft Report describes the work performed by OIG to determine whether the Recipient' s
requested awardable amount complied with the guidelines provided by Treasury. The Draft
Report notes the extensive fieldwork conducted for this review between September 2020 and
April 2022 to determine the accuracy of the information in the Recipient' s PSP 1 application
submitted to Treasury , including interviewing the Recipient s management and collecting and
revi ewing a wide rang e of the company's financial records and corporate documents.
O IG found that the Recipient overstated its requested awardable amount for PSP 1 due to the
improper inclusio n of unallowable corporate officers' compensation, unall owab le foreign
employees ' benefits, and data compilation errors. However, OIG also found that, as a result of
Treasury s requirem ent that PSP 1 recipients recertify their awardable amounts. Treasury reduced
the Recipient's PSP2 award Therefo re, no additional amounts are owed back to Treasury. OIG
recommends th at Treasury review the requested amounts from the Recipient for PSP2 and PSP3
assistance.
Treasury agrees with OIG that any overpayments of PS P funds should be reimbursed. Treasury
will review awardable amounts requested under PSP2 and PSP3 and seek recoupment where
appropriate.
1 Because awardable amounts in PSP3 were calculated as a percentage of each company's PSP2 award, companies
were not required to calculate awardable amounts for PSP3 .
2
Audit
Audit of
of Air
Air Carrier
Carrier Worker
Worker Support
Support Certifications –
Certifications -
Hyannis
Hyannis Air
Air Service,
Service, Inc.
Inc. (OIG-27-001)
(OIG-27-001) 20
20
Appendix
Appendix 3:
3: Treasury
Treasury Management
Management Response
Response
Again, Treasury appreciates OIG's work on these engagements. We look forward to working
with you to protect the integrity of the PSP and other recovery programs .
Jeffrey Stout
Deputy Chief Program Officer for Small Business
and Community Investment Programs
3
Audit
Audit of
of Air
Air Carrier
Carrier Worker
Worker Support
Support Certifications –
Certifications -
Hyannis
Hyannis Air
Air Service,
Service, Inc.
Inc. (OIG-27-001)
(OIG-27-001) 21
21
Appendix 4: Major Contributors to This Report
Olivia Scott, Acting Director
Christopher Culbreath, Acting Audit Manager
Ernest Galloway III, Auditor
Eduardo Coney, Referencer
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 22
Appendix 5: Report Distribution
Department of the Treasury
Treasury Secretary
Deputy Secretary
Treasury Audit Liaison
Office of Strategy, Planning, and Performance Improvement
Office of the Deputy Chief Financial Officer, Risk and Control
Group
Hyannis Air Service, Inc.
Chief Financial Officer
Vice President of Finance
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 Government Reform
Committee on Financial Services
Committee on the Budget
Committee on Transportation and Infrastructure
Audit of Air Carrier Worker Support Certifications –
Hyannis Air Service, Inc. (OIG-27-001) 23
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