720-913-5000 auditor@denvergov.org

DENVER – After a close look at two areas of Denver International Airport’s finances, Denver Auditor Timothy M. O’Brien, CPA, found the airport needs to clean up its accounting and grants management, but leaders at the airport are resisting some of the advice from our trained staff to help make improvements.

Auditors looked at the airport’s accounts receivable and at management of two grants, both under the airport’s Division of Finance. The independent Audit Committee heard both audits Thursday morning.

“Financial accountability is essential in an operation as big as Denver’s airport,” Auditor O’Brien said. “And between these two audits, we found examples of significant revenue loss, inefficiency and inconsistent financial reporting.”

In the accounts receivable audit, the team found inherited problems tied to failed financial system implementation, workload imbalances, and high staff turnover. This led to duplicated or inaccurate customer accounts, errors in record keeping, and the loss of more than an estimated $1 million a year in lost interest starting in 2018.

Accounts receivable represent money owed to an organization by customers for goods or services that have been delivered but not yet paid for. In the case of the airport, customers are often airlines and concessionaires paying fees for facility rental, landings, percentage of revenue, or other services.

Auditors found that when a new financial system called Workday was implemented in 2017, errors were transferred over and payments were misapplied. Inconsistencies in account names and missing information from customers explaining what invoices payments were for led to misapplied funds. As a result, staff has had to spend months researching and correcting errors.

Auditors also found the airport stopped charging late fees or interest on overdue payments from customers because officials said Workday does not have the functionality to track the complexities of payment requirements. Before the switch to Workday, the airport brought in more than $1 million a year in revenue from late fees and interest on overdue accounts. This is revenue the airport will continue to miss until overdue invoices are tracked and collected upon.

Staff stated to our team they can’t be sure all outstanding balances are accurate due to the errors in the application of payments over several years.

“For an organization as big as the airport, a million dollars might be easy to miss, but it’s not a small amount of money,” Auditor O’Brien said. “This is why financial accountability is so important to Denver.”

The airport’s Finance Division disagreed with our recommendations to require information from customers describing how payments should be applied to accounts. Management also disagreed with our recommendation to track and charge late fees and interest. The airport’s management says adding the information requirements to all contracts would be too much work, and officials said they can’t track late fees until the implementation of another new financial system is complete. This process could take years.

Auditors also found Finance staff are spending large amounts of time trying to correct accounting mistakes and research errors, keeping them from doing broader strategic and management work.

“This inefficient cycle needs course correction,” Auditor O’Brien said. “I appreciate that the Finance team is putting in every effort, but until they do a staff analysis and fix recurring problems in their financial systems, errors and missed revenue will be a recurring problem.”

In the second audit, the team found evidence the airport’s Finance Division was not following city and federal rules for managing grants. The team examined two grants for capital improvements, which included runway and taxiway work. They found the airport requested reimbursement from the FAA for funds spent before the grant was officially finalized.

Not following grant requirements could result in a loss of funding and in the city being required to pay the money back, a sum that could run into the millions of dollars.

The airport also asked for reimbursement late in every example we reviewed by an average of 50 days. In addition to not complying with rules for submitting reimbursement requests on time, the airport missed out on interest it could have earned if the reimbursements had occurred on time, auditors found.

We made recommendations to help the airport ensure all the money for which it gets reimbursed is correct and that it is following fiscal accountability rules. The airport says it plans to ask for a waiver for one of the rules.

The City and County of Denver owns and operates Denver International Airport as an enterprise fund. The airport it the fifth busiest in the country and generates $26 billion of economic benefit for the Denver metro each year.

“The airport has a huge impact for the entire metro area,” Auditor O’Brien said. “That makes it even more important to make sure all the accounting procedures are buttoned up, before errors add up to significant losses for this public asset.”

While Denver’s airport is highly successful financially — averaging more than $1 billion in revenue the last few years — even successful enterprises should not let process inefficiencies prevent them from maximizing revenue, especially when they are owned by the public and managing public funds.

Read the Audit: Accounts Receivable
Read the Audit: Grants

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