Audit Report - Oig 25 010 Coronavirus Disease 2019 Pandemic Relief Programs Audit Of Air Carrier
Summary
Department of the Treasury Office of Inspector General Audit Report OIG-25-010, Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc., dated November 19, 2024, with a memorandum from Deborah L. Harker, Assistant Inspector General for Audit, to Jessica Milano, Chief Program Officer. The memorandum states that Saggar & Rosenberg, P.C. performed the audit to assess the accuracy, completeness and sufficiency of Sky Chefs' sworn financial statement used to certify amounts for the Air Carrier Payroll Support Program (PSP1), covering April 1, 2019 through September 30, 2019. It states that S&R found Sky Chefs incorrectly compiled data for the Awardable Amounts section, resulting in an $8,289,472 overstatement that was entirely offset by an understatement of $13,205,863.
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Audit Report
OIG-25-010
CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF
PROGRAMS
Audit of Air Carrier Worker Support
Certifications - Sky Chefs, Inc.
November 19, 2024
Office of Inspector General
Department of the Treasury
This Page Intentionally Left Blank
November 19, 2024
MEMORANDUM FOR JESSICA MILANO
CHIEF PROGRAM OFFICER
FROM: Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT: Audit of Air Carrier Worker Support Certifications – Sky Chefs,
Inc.
Attached is our audit report for the Audit of Air Carrier Worker Support Certification –
Sky Chefs, Inc. (Sky Chefs) (OIG-25-010); dated November 19, 2024. 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 Sky Chefs’ 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). 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 The scope of this 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.
In its audit report, S&R found that Sky Chefs incorrectly compiled data used for the
Awardable Amounts section of the PSP1 Application, resulting in a $8,289,472
overstatement. Specifically, the:
• Inclusion of unsupported benefit amounts, resulted in an overstatement of
; and
• Differences between actual amounts paid and accrual-based financial
information used for benefits, resulted in an overstatement of .
1
P.L. 116–136 (March 27, 2020).
However, the overstatements were entirely offset by an understatement of
$13,205,863:
• Exclusion of salaries and wages for employees on non-aviation related
activities, resulted in an understatement of ; and
• Data errors resulted in an understatement of .
Overall, Sky Chefs understated its requested PSP1 amount by $4,916,391 and did not
over-request PSP1 financial assistance despite partial non-compliance with application
requirements.
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 Sky Chefs’ 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, Audit
Director, at (202) 487-8371.
Attachment
cc: Gregory Till, Chief Operating Officer, Office of Capital Access, Department of
the Treasury
Danielle Christensen, Deputy Chief Program Officer, Office of Capital Access,
Department of the Treasury
Jason Morrow, Senior Counsel, Department of the Treasury
Jeff Davis, Partner, Saggar & Rosenberg, P.C.
Contents
Audit Report
Results in Brief ...................................................................................................2
Background ........................................................................................................3
Treasury Disbursement Processes ....................................................5
PSP1 Interim Audit Report ...............................................................6
Sky Chefs, Inc. ..............................................................................7
Audit Results......................................................................................................8
Finding 1 Sky Chefs Did Not Over-Request PSP1 Financial Assistance Despite
Partial Non-Compliance with Application Requirements. ......................9
Appendices
Appendix 1: Objective, Scope, and Methodology ..................................................12
Appendix 2: Sky Chefs Management Response ....................................................16
Appendix 3: Treasury Management Response ......................................................17
Appendix 4: Report Distribution ..........................................................................20
Abbreviations
CARES Act Coronavirus Aid, Relief, and Economic Security Act
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.
Sky Chefs Sky Chefs, Inc.
SOC 1 System and Organizational Controls
Treasury Department of the Treasury
i
This Page Intentionally Left Blank
November 19, 2024
Jessica Milano
Chief Program Officer
Department of the Treasury
This report presents the results of our audit of Sky Chefs, Inc.’s
(Sky Chefs) 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). 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 (COVID-19). 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.
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 Sky Chefs’ 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,
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 – Sky Chefs, Inc.
(OIG-25-010) 1
tax returns, and other documentation submitted to Treasury on
April 3, 2020. 4
To accomplish the objective, we reviewed applicable laws,
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 Sky Chefs, Treasury, and
contracted consultants engaged by Treasury to evaluate certified
company applications. We conducted our fieldwork from
August 2023 through June 2024. Appendix 1 contains a more
detailed description of our objective, scope, and methodology.
Results in Brief
In brief, S&R found that Sky Chefs, a contractor, reported correct
information for three of the four sections reviewed on its PSP1
Application. 5 These sections are: (1) Applicant Information,
(2) Applicant Type, and (3) Certification. We also found that Sky
Chefs reported incorrect information in the Awardable Amounts
section. The company overstated the amount by $8,289,472 due
to the inclusion of: (1) of unsupported benefit
amounts; and (2) of differences between actual
amounts paid and accrual-based financial information used for
benefits. However, the overstatement was entirely offset due to:
(1) exclusion of salaries and wages for employees on non-aviation
related activities, totaling ; and (2) data compilation
errors for salaries and wages, totaling . Overall, Sky
Chefs understated its requested amount by $4,916,391 and did
not over-request PSP1 financial assistance despite partial
non-compliance with application requirements.
4
Sky Chefs submitted the PSP1 Application and related supporting documentation on April 3, 2020.
Sky Chefs’ application was later merged with two affiliates: (1) Western Aire Chefs, Inc.; and
(2) SCIS Air Security Corporation.
5
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 - Sky Chefs, Inc.
(OIG-25-010) 2
As part of our reporting process, we provided Sky Chefs
management with an opportunity to comment on a draft of this
report. In a written response, Sky Chefs management stated they
do not contest the conclusions set forth in this report. Sky Chefs
management’s response, in its entirety, is included as appendix 2
of this report.
In a written response, Treasury management stated the draft report
describes work performed by OIG’s contractor to determine
whether the recipient’s requested awardable amounts complied
with Treasury’s program requirements. The draft report notes the
extensive fieldwork conducted for this review between
August 2023 and June 2024, including interviewing Sky Chefs’
management and reviewing a wide range of the company’s
financial records and corporate documents. In relation to Sky
Chefs, Treasury management noted that OIG’s contractor found no
amounts were overpaid. Treasury management appreciates the
OIG’s work on this engagement and looks forward to working with
the OIG to protect the integrity of the PSP and other recovery
programs. 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
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 3
to DOT (referred to as 241 air carriers), 6 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
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.
6
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. Sky Chefs is not a Large Certificated Air Carrier.
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 4
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 Return, 7 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 8 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 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
7
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.
8
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 - Sky Chefs, Inc.
(OIG-25-010) 5
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.
PSP1 Interim Audit Report
In a prior audit report, 9 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
9
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 - Sky Chefs, Inc.
(OIG-25-010) 6
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.
Sky Chefs, Inc.
Headquartered in Irving, Texas, Sky Chefs is a contractor that
provides in-flight catering services to commercial airlines.
Sky Chefs’ PSP1 Application was comprised of three United
States-based affiliate companies. The two other affiliates are
(1) Western Aire Chefs, Inc., and (2) SCIS Air Security Corporation,
which are managed and operated by the same management group.
Initially, each company submitted separate PSP1 applications to
Treasury; however, those applications were merged during
Treasury’s application review process. 10 A breakdown of the initial
applications that were approved by Treasury is detailed below in
Table 1.
Table 1. PSP1 Initial Application Requests
Company Initial PSP1 Application
Sky Chefs, Inc.
Western Aire Chefs, Inc.
SCIS Air Security Corporation
TOTAL – Merged Application
Source: Initial PSP1 Applications
After Sky Chefs’ application was merged with its two affiliates, Sky
Chefs accepted the contractor top-off for a total award amount of
10
The PSP1 Application was merged; however, only the Awardable Amounts section included
consolidated data for all three entities. Hereafter, Sky Chefs refers to all three entities.
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 7
$276,490,264, or 90 percent of the company’s requested amount.
Treasury’s disbursements to Sky Chefs were as follows:
• July 30, 2020: $160,631,313
• August 31, 2020: $53,543,771
• March 19, 2021: $62,315,180
In addition to PSP1, Treasury awarded Sky Chefs $93,392,267
under the Payroll Support Program Extension (PSP2) 11 authorized
by the Consolidated Appropriations Act, 2021 and $93,392,267
under the Payroll Support Program 3 (PSP3) 12 authorized by the
American Rescue Plan Act of 2021. PSP2 and PSP3 were not the
subject of this audit.
Audit Results
We found that Sky Chefs 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
general ledger data, company sworn financial statement, IRS
Form 941, executive-level business charts, payroll registers, and
third-party benefit claim data.
We also found that Sky Chefs reported incorrect information in the
Awardable Amounts section. The company overstated the
awardable amount by $8,289,472 due to: (1) inability to provide
sufficient supporting documentation to demonstrate that
of “Benefits” requested amounts were eligible for
PSP1, and (2) differences between actual amounts paid and
accrual-based financial information used for benefits, totaling
11
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).
12
The American Rescue Plan of 2021 (P.L. 117–2), enacted on March 11, 2021, created the Air
Transportation Payroll Support Program Extension authorizing Treasury to provide additional
assistance to passenger air carriers and contractors that received financial assistance under PSP2.
Treasury referred to this as Payroll Support Program 3 (PSP3).
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 8
. However, the overstatement was entirely offset by:
(1) exclusion of salaries and wages for employees on non-aviation
related activities, totaling , and (2) data compilation
errors, totaling . Overall, Sky Chefs understated its
requested amount by $4,916,391 and did not over-request PSP1
financial assistance despite partial non-compliance with application
requirements.
Finding 1 Sky Chefs Did Not Over-Request PSP1 Financial
Assistance Despite Partial Non-Compliance with
Application Requirements
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).”
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.
Sky Chefs incorrectly certified the PSP1 awardable amount by
including a total of $8,289,472 in ineligible expenses. Specifically,
Sky Chefs:
• Was unable to provide sufficient supporting documentation
to demonstrate that of “Benefits” requested
amounts were accurate and eligible for PSP1, as illustrated
in Table 2; and
• Prepared the PSP1 Application using accrual-based financial
information, rather than actual compensation paid for
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 9
benefits, resulting in an overstatement of .
Table 2. Unsupported Benefits Overstatement
Amount Description
• Sky Chefs could not provide supporting documentation
to validate payment of requested amounts for
company-provided meals to employees.
• Sky Chefs could not provide itemized invoices, at the
employee-level, to quantify the amounts associated
with ineligible corporate officer’s medical, dental, and
vision benefits.
Net Overstatement
Source: S&R Calculation of Awardable Amount.
However, the $8,289,472 overstatement was entirely offset by:
(1) exclusion of salaries and wages for employees on non-aviation
related activities, totaling ; and (2) data errors in the
compilation of PSP1 Application amounts for “Salaries and
Wages”, totaling .
Overall, Sky Chefs understated its requested PSP1 amount by
$4,916,391 and did not over-request PSP1 financial assistance
despite partial non-compliance with application requirements.
For “Benefits”, Sky Chefs management stated they used accrued
information from its financial accounting system to estimate the
amounts for company-provided meals, but they could not reference
those estimates to actual company payments. Further, Sky Chefs
management stated they were unable to obtain itemized copies of
third-party benefit invoices to demonstrate the amount of
PSP1-eligibile benefit expenses because the vendor invoices were
not at the employee level. Additionally, Sky Chefs management
stated that differences between the actual amounts paid, and the
application amounts prepared using accrual-based general ledger
data, were due to unintentional oversight.
For “Salaries and Wages”, Sky Chefs management stated they only
requested compensation for aviation employees because
management’s interpretation of the CARES Act was that only
aviation-related employees were eligible for PSP1. Additionally, Sky
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
(OIG-25-010) 10
Chefs management stated the data compilation errors were due to
unintentional oversight.
To remedy the findings listed in the prior OIG audit report, 13
Treasury required PSP2 applicants to recertify their PSP1
awardable amounts. Sky Chefs certified to Treasury under PSP2,
that its PSP1 Application did not include corporate officer
compensation or employer-side payroll taxes. Although Sky Chefs
was unable to provide sufficient documentation to support the
exclusion of corporate officer from “Benefits” requested amounts,
the company did not over-request PSP1 financial assistance
because the actual compensation incurred exceeded the requested
amount.
******
We appreciate the courtesies and cooperation provided to our staff
during the audit. A distribution list for this report is provided as
appendix 4.
Saggar & Rosenberg, P.C. /s/
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 - Sky Chefs, Inc.
(OIG-25-010) 11
Appendix 1: Objective, Scope, and Methodology
Our objective was to assess the accuracy, completeness, and
sufficiency of Sky Chefs, Inc.’s (Sky Chefs) 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 period from April 1, 2019
through September 30, 2019, and included the certified Payroll
Support Program (PSP1) Application, sworn financial statement,
tax returns, and other documentation submitted to Treasury on
April 3, 2020. 14
To accomplish this objective, Saggar & Rosenberg, P.C. (S&R)
performed the following activities during audit fieldwork from
August 2023 through June 2024:
• 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); 15 and
o 14 CFR, Part 241, 16 Uniform System of Accounts and
Reports for Large Certificated Air Carriers,
December 28, 2023.
• Reviewed Treasury’s policies and procedures 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;
o PSP1 Agreement;
14
Sky Chefs submitted the PSP1 Application and related supporting documentation on April 3, 2020.
Sky Chefs’ application was later merged with two affiliates: (1) Western Aire Chefs, Inc.; and
(2) SCIS Air Security Corporation.
15
P.L. 116–136 (March 27, 2020).
16
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. Sky Chefs is not a Large Certificated Air Carrier.
Audit of Air Carrier Worker Support Certifications – Sky Chefs, Inc.
(OIG-25-010) 12
Appendix 1: Objective, Scope, and Methodology
o Question and Answer: Payroll Support to Air Carriers and
Contractors, (April 2, 2020, April 3, 2020 and
April 20, 2020 versions); and
o Frequently Asked Questions: Application Procedures for
Payroll Support to Air Carriers and Contractors,
April 3, 2020.
• Performed 100 percent testing for four of the eight sections of
the PSP1 Application—specifically, the Applicant Information,
Applicant Type, Awardable Amounts, 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 Sky Chefs management responsible for the
completion and submission of the sworn financial statement in
the Awardable Amounts section of the PSP1 Application.
• Reviewed sworn financial statement and documents to support
the requested payroll support amount. The documentation
included, but was not limited to, general ledger data, company
pay registers, benefit claim information, Internal Revenue
Service (IRS) Form 941, Employer’s Quarterly Federal Tax
Return, 17 and organizational hierarchy information.
• Reviewed Government Accountability Office’s (GAO) Standards
for Internal Control in the Federal Government 18 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 Sky Chefs’ payroll system, was
17
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.
18
GAO-14-704G (September 2014).
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
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Appendix 1: Objective, Scope, and Methodology
significant to the audit objective. 19 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
Sky Chefs’ payroll system, we examined Sky Chefs’ response
to Data Supplier Questionnaires, 20 reviewed a System and
Organizational Controls 1 (SOC 1) report, 21 and interviewed Sky
Chefs’ 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 Reliability 22 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. Sky Chefs prepared the PSP1 Application using
payroll and benefit compensation from April 2019 through
September 2019, which included information developed from
Sky Chefs’ payroll and financial accounting systems. We
compared details generated from the payroll registers at the
individual employee level, as well as third-party benefit claim
data 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 reviewed the
Data Supplier Questionnaires for the payroll and financial
accounting systems, reviewed the SOC 1 report for the payroll
system, and interviewed Sky Chefs’ management responsible
for generating and using the data. Based on our assessment, we
determined that the data was sufficiently reliable to support the
findings and conclusions to answer the objective of this audit.
19
The five components of internal control are Control Environment, Risk Assessment, Control
Activities, Information and Communication, and Monitoring.
20
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.
21
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.
22
GAO-20-283G (December 2019).
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
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Appendix 1: Objective, Scope, and Methodology
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 - Sky Chefs, Inc.
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Appendix 3: Treasury Management Response
Audit of Air Carrier Worker Support Certifications – Sky Chefs, Inc.
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Appendix 3: Treasury Management Response
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Appendix 3: Treasury Management Response
Audit of Air Carrier Worker Support Certifications - Sky Chefs, Inc.
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Appendix 4: Report Distribution
Department of the Treasury
Deputy Secretary
Treasury Audit Liaison
Office of Strategic Planning and Performance Improvement
Office of the Deputy Chief Financial Officer, Risk and Control
Group
Sky Chefs, Inc.
Chief Executive Officer
Senior Vice President
Office of Management and Budget
OIG Budget Examiner
United States Senate
Committee on Homeland Security and Governmental Affairs
Committee on Finance
Committee on Banking, Housing, and Urban Affairs
Committee on Commerce, Science, and Transportation
Committee on Appropriations
Committee on the Budget
United States House of Representatives
Committee on Oversight and Accountability
Committee on Financial Services
Committee on the Budget
Committee on Transportation and Infrastructure
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