Office of Internal Audit

ISU Flight Service and University Owned Aircraft

December 12, 2016

Distribution List
Steven Leath, President
Miles Lackey, Chief Financial Officer/Chief of Staff
Pam Elliott Cain, Associate Vice President, Division of Finance
Kate Gregory, Senior Vice President, University Services
Dave Miller, Associate Vice President, Facilities Planning and Management
Dave Hurst, Manager, Flight Service
Board of Regents, State of Iowa
Office of Auditor of State

 ISU Flight Service and University Owned Aircraft
BACKGROUND
Iowa State University (ISU) Flight Service offers air transportation to any airport in the
continental United States served by commercial airlines plus thousands of airports utilized by
general aviation aircraft. Flight Service is located beside the ISU Research Park at the Ames
Municipal Airport and is a fee-for-service unit within Facilities Planning and Management. The
unit employs a Manager, who is on phased retirement and two full-time pilots. Flight Service
operates two planes: a Beechcraft King Air 350, a twin engine turbo propeller with an airconditioned and pressurized cabin that seats up to nine passengers, and a Cirrus SR22, a singleengine four-seat aircraft.
Four university-owned aircraft have been in service since the February 2012 installation of the
current University President: the Piper Warrior, Cirrus SR22, Beechcraft King Air 200, and
Beechcraft King Air 350.
Aircraft
Beechcraft King Air 200
Beechcraft King Air 350
Piper Warrior
Cirrus SR22

Dates Since University President Installation
February 2012 – April 2014
April 2014 – Present
February 2012 – July 2014
July 2014 – Present

The purchase of the King Air 350 was managed by the ISU Foundation. The plane was
purchased in full using unrestricted Athletics Department funds which were held and managed
by the ISU Foundation. The purchase price was $2,875,000 and the title was transferred directly
to ISU. Net proceeds totaling $776,053 from the sale of the university-owned King Air 200 were
credited to the Athletics Department account at the ISU Foundation to offset the costs of the
King Air 350. The combined cost of the King Air 350 recorded in the university’s internal
inventory records is $3,533,429. This includes the cost of the aircraft, escrow fee, upgrades, and
acquisition and legal fees. The Cirrus was purchased for $498,000 by ISU using unrestricted
funds provided by the ISU Foundation and trading in the Piper, which was valued at $28,000.
For the time period of January 2012 through October 2016, the two King Air planes were flown
a total of approximately 348,000 miles. The percentage of flight miles by user is reflected in the
following chart:

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 KING AIR FLIGHT MILES % OF USERS
President's
Office/Greater
University
Fund
28%
Athletics
43%

Administration
6%

Foundation
8%

Flight Services
4%

Academics
11%

For the time period of August 2014 through September 2016, 76 trips on the Cirrus were
identified. The University President was the pilot or a passenger on 72 of those trips. The
business purpose as reported by the University President for 52 of the 72 trips was
proficiency/training or certification in the Cirrus.
Flight Service is a fee-for-service unit and does not depend on external funding to operate. Total
revenues have grown at an average of 17% per year since fiscal year (FY) 2012, while total
expenses have grown at an average of 23% per year over the same period. Salary expenses and
associated benefit costs have remained relatively stable at 30% to 40% of total revenues in each
of the past five fiscal years. Increases to salaries, wages and benefits in FY 2016 reflect the
employment of an additional staff member.
Flight Services Finanacial Summary - Past 5 Years
Beginning Balance

$

Revenues
Contributions from Partners & Billings
Hangar Income
President Leath - Cirrus Use
President's Office - Operational Costs Warrior/Cirrus
Total Revenues
Expenses
Salaries, Wages & Benefits
Travel & Seminars
IT & Telecommunications
Hospitality
Subscriptions
Insurance
Equipment, Supplies, Repairs & Maintenance
Fuel
Miscellaneous & Others
Total Expenses
Balance Year End

$

FY2012

FY2013

FY2014

FY2015

FY2016

20,092

80,047

98,081

67,660

50,953

448,558
5,180
-

515,543
4,500
-

498,240
15,750
10,000

596,624
16,640
1,213
25,000

828,560
8,400
2,263
-

453,738

520,043

523,990

639,477

839,222

175,837
7,003
4,355
5,490
6,126
86,896
86,537
21,540
393,783

180,442
15,404
5,153
6,631
5,150
38,990
126,958
76,299
46,983
502,010

185,645
10,194
2,331
10,206
12,737
38,991
161,870
123,021
9,415
554,411

198,374
5,118
3,609
8,539
43,605
66,554
165,852
149,308
15,225
656,184

310,462
12,916
6,349
18,648
37,737
55,692
226,803
148,949
63,028
880,584

80,047

98,081

67,660

50,953

9,591

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 PURPOSE AND SCOPE
Observations and recommendations from Internal Audit’s review of travel policies and the use of
state equipment were presented to the Board of Regents, State of Iowa (Board) in October 2016.
The Audit/Compliance and Investment Committee of the Board then requested that Internal
Audit perform a more comprehensive audit of Flight Service and the usage of university-owned
aircraft since the installation of the University President in February 2012. Specific objectives
and testing are noted below in detail.
To identify a comprehensive record of flights on university-owned aircraft, Internal Audit
obtained flight records from ISU Flight Service and FlightAware (a flight tracking data
company), analyzed purchasing card data for all Flight Service cardholders, observed pilot logs
for the University President, Flight Service Manager, and the two full-time Flight Service pilots,
reviewed maintenance logs, and scanned fuel logs provided by the Ames Municipal Airport
Fixed Base Operator.
Flight Service did not retain any flight records for the Piper and the maintenance logs were
included with the plane when it was sold. FlightAware was able to provide some flight records
on the Piper during the February 2012 through July 2014 timeframe. Similar to the Piper,
maintenance logs for the King Air 200 went with the aircraft when it was sold. Flight Service
and FlightAware were able to provide flight records for the King Air 200. The maintenance logs
for the Cirrus were provided by Flight Service. Flight Service did not maintain flight records for
the Cirrus. Therefore, the flight records provided by FlightAware were relied upon for the
Cirrus, however, these records may not have identified all flights in the Cirrus and do not
identify passengers. Based on the manner in which the aircraft was flown, FlightAware may not
have been able to track all flights. When an aircraft is flown using instrumentation flight rules,
the aircraft is directed by air traffic control, so FlightAware likely has a record of the flight.
When an aircraft is flown using visualization flight rules, there is no contact with air traffic
control and there may not be a record of the flight available. FlightAware may not have captured
flights in the Cirrus when it was flown using visualization flight rules. The pilot was determined
by reviewing individual pilot logs. Flight Service and FlightAware were able to provide flight
records for the King Air 350. The King Air 350 is mainly flown using instrumentation flight
rules. The flight records for university-owned aircraft were analyzed to understand the
frequency and nature of plane use. The following table summarizes trips billed to each user by
the aircraft flown:
Number of Trips per User Billed by Aircraft
Athletics
President’s Office/Greater University Fund
ISU Foundation
Academics
Other
Total

Cirrus SR22

King Air 200

King Air 350

4

50
41
21
16
50

84
79
24
35
80

134
192
45
51
134

76

178

302

556

72

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

Total

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 Additional work was completed to determine the offices involved in the business decision not to
file an insurance claim regarding the July 2015 hard landing in the Cirrus. Research was
completed to determine if it was necessary to provide any additional insurance disclosures
regarding the University President’s hard landing in August 2014, which was not in a universityowned aircraft.
Interviews were conducted with Flight Service personnel to fully understand the unit’s
operational processes. Policies, procedures, and guidelines, the reservation process, flight
service rate calculations and billing practices, and retention of flight records were all reviewed.

DISCUSSION AND AUDIT RECOMMENDATIONS
1) Flight Record Review
After reviewing Flight Service and FlightAware flight records, pilot logs, maintenance records,
and purchasing card purchases, flights on which the University President was the pilot or a
passenger were identified and a business purpose for the trip was obtained. In total, the business
purpose for 181 trips was obtained.
Trips Per Aircraft with University President
Cirrus SR22
King Air 200
King Air 350
Total

72
44
65
181

Analysis of passenger lists provided by Flight Service for the King Air 200 showed the
University President as the only passenger on 12 of the 44 trips. On another five of the 44 trips
the only passengers were the University President and his spouse. An additional trip included
the University President, his spouse, and other family members. Analysis of the passenger lists
of the King Air 350 showed the University President as the only passenger on nine of the 65
trips. An additional 17 trips included the University President and his spouse as the only
passengers.
For 62 trips that noted the business purpose as donor relations/outreach, donor records
maintained by the ISU Foundation were reviewed. Records varied in detail and for some trips
the records provided details of the actual visit, for others it only included information prepared
for the visit, but no record of the actual visit, and for others it may have only included evidence
the Foundation was aware of the individual being visited. For 38 of the trips, the trip was
confirmed with details of the visit or details prepared in advance of the visit. There were 17 trips
in which the records from the Foundation only provided evidence the Foundation was aware of
the individual, but no records could be provided specific to the trip in question. Of those 17
trips, one trip had an ISU business purpose in addition to the donor relations/outreach
component.

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 There were seven trips in which the ISU Foundation did not have any records. Four of those
trips were identified as sporting events in which the University President would have a business
purpose to attend the event regardless of meetings with donors. The three remaining trips could
not be validated by ISU Foundation records.
Internal Audit obtained additional details for the four trips the University President took to North
Carolina on the Cirrus in which the trips had a combination of university and personal business.
The following details were obtained:
•

March 25–29, 2015 – The University President met with an individual who is
providing assistance in ISU’s efforts to become involved in the Boone and Crockett
Club University Program. The Boone and Crockett Club University Program is
designed to provide science-based knowledge from seasoned wildlife professionals
and educators to college graduates in the wildlife field to better prepare the graduates
for the responsible and wise management of wildlife in the future. Currently there
are four Boone and Crockett Club University Programs: the University of Montana,
Texas A&M University, Oregon State University, and Michigan State University.
The Natural Resource Ecology and Management Department is developing a
proposal for an Iowa State Boone and Crockett Professorship.

•

May 12–17, 2015 – There were multiple contacts with strategic institutional leaders,
specifically, University of North Carolina MBA faculty.

•

July 3–14, 2015 – The University President met with an individual who has been
providing assistance regarding the development and expansion of the ISU Research
Park.

•

August 26–30, 2016 – The University President was scheduled to meet with the
same individual from the July 3–14, 2015 meeting. The meeting was cancelled by
the donor. Internal Audit viewed a written communication exchange between the
donor and the University President noting the meeting was cancelled by the donor on
the date of the scheduled meeting.

In March 2014, the university aircraft stopped in Elmira, NY en route to the NCAA basketball
tournament. During the stop in Elmira, the University President’s brother and sister-in-law
boarded the aircraft. Flight Service scheduled a refueling stop in Elmira in advance of the trip.
A return stop in Elmira would not have been necessary other than to drop off passengers.
Between May 2013 and August 2016, a university-owned aircraft or university resources were
utilized to transport the University President to Rochester, MN seven times. The University
President stated that on three occasions the sole purpose of the trip was a medical appointment,
but the use of Flight Service was necessary for him to return to campus to meet university
obligations. The University President’s employment contract does not address the necessity or
requirement for an annual physical, nor does it address whether any associated travel expenses
would be covered by the university for medical appointments.

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 To identify potential instances in which the University President was flown to the Des Moines
International Airport for the purpose of boarding a commercial flight, the commercial airfare
records for the University President were reviewed and compared to Flight Service and
FlightAware flight records. Internal Audit only identified one instance in February 2016 where
the University President had commercial airfare out of Des Moines booked on the same day
there was a flight in a university-owned aircraft to Des Moines.
On two occasions, in June 2015 and June 2016, a private aircraft was chartered as a result of
delayed or cancelled commercial flights out of Washington, D.C. Through historical flight data,
Internal Audit confirmed that in June 2015, the University President’s commercial flight was
delayed and would have resulted in him missing his connecting flight and in June 2016 the
University President’s commercial flight was canceled. In June 2015 the charter flew the
University President and in June 2016 the charter flew the University President and his son.
Internal Audit confirmed no additional cost was incurred for the additional passenger. The total
cost for these two chartered flights was $25,561.
Two other instances were identified in which a private aircraft was chartered. In July 2014, the
University President and four other passengers were flown to Moline, IL to attend a meeting of
the Cultivation Corridor Board of Directors. In November 2015, the University President and
three passengers were flown to Sioux Falls, SD to attend the ISU Men’s Basketball game against
the University of Colorado. The total amount for these two chartered flights was $9,231.
Also, there were five instances in which an aircraft was rented from Haverkamp Properties
between February 2012 and July 2014. The rental was for university business and the total cost
was $3,192.
Audit Recommendation – The Board should determine which travel expenses, if any, are
appropriate for the University President to be reimbursed for when pursuing medical care. If it is
deemed unallowable, the University President should reimburse the university for expenses paid,
and if deemed allowable the specifics should be added to the University President’s employment
contract to clearly state the expectations of the Board.
The Board should authorize the Executive Director to review other highlighted flights to
determine the appropriateness or reasonableness of the flights and seek additional
reimbursements if the costs are deemed excessive or inappropriate. The Board President and/or
Executive Director should periodically post review each of the University President’s travel to
provide adequate governance oversight.
The Board should also consider developing a policy with guidelines regarding the use of
chartered aircraft.
2) King Air 200 Sale
It was previously reported by Internal Audit that the King Air 200 was transferred to the ISU
Foundation to be sold. In actuality, the aircraft title did not transfer to the ISU Foundation. The
King Air 200 was sold and the net proceeds from the sale were wired directly to the ISU

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 Foundation and were credited to the unrestricted Athletics Department account used to purchase
the King Air 350.
3) Insurance Policies
In July 2015, the Cirrus sustained approximately $14,000 in damages during a hard landing
while being piloted by the University President. The ISU Office of Risk Management was not
notified at the time of the hard landing. If the Office of Risk Management had been informed,
the insurance carrier would have been notified immediately to record the date of the event,
regardless of whether an insurance claim was to be filed. The Office of Risk Management was
also not consulted or involved in the decision to not file an insurance claim regarding the
damages sustained. The business reason provided for not filing the claim was that it was less
expensive to absorb the costs rather than risk insurance premium rates increasing. However,
there was no supporting documentation provided to detail the cost analysis to justify the business
decision.
ISU’s Insurance, Buildings and Property policy states, “all losses or damage to university
property must be reported to the Office of Risk Management.”
Audit Recommendation – The Office of Risk Management should be contacted when university
property is damaged and consulted as part of any analysis as to whether or not an insurance
claim should be filed. Final decisions should be documented along with the calculations of the
business case to support those decisions.
4) Insurance Incident Disclosures
The University President has been insured to fly the Cirrus under successive corporate aircraft
policies since July 2014. ISU switched insurance providers from State National to Catlin for
university aircraft in February 2016, as Catlin offered a lower premium with better coverage.
The pilot history form completed by the University President in February 2015 as part of the
insurance coverage renewal included details of a hard landing in August 2014. Subsequently, the
same form completed again in February 2016 included details of a hard landing in July 2015 but
not the hard landing in August 2014. The underwriter for Catlin reviewed the forms for both
years and confirmed there is no problem with the information provided on these forms and the
carrier would continue to provide aviation insurance for the University President as a pilot if
asked to do so.
5) Cirrus Funding and Usage
The Cirrus is funded completely by an annual charge to the President’s Office, as the Cirrus is
primarily utilized by the University President. For the time period of August 2014 through
September 2016, there were 76 trips identified on the Cirrus. The University President was the
pilot or a passenger on 72 of those trips. The business purpose for 52 of the 72 trips was
proficiency/training or certification in the Cirrus. Internal Audit did not determine the
reasonableness of the number of proficiency/training flights taken.
In FY 2015, the President’s Office was billed using an estimated rate of $250 per flight hour and
an estimate for 100 hours of flight time. In FY 2016 the intention was to bill the President’s

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 Office for all actual fixed and variable costs. A preliminary calculation of costs has been
determined by Flight Service as $21,741, but the billing and transfer of funds has not been
completed. Internal Audit did review the Cirrus-related fixed and variable expenses in the Flight
Service fund account and determined the calculated amount of $21,741 to be reasonable.
The University President personally reimbursed the university at a rate of $125 per flight hour
for Cirrus usage on four separate occasions where there was a combination of business and
personal travel. In total, during FYs 2015–2017, the University President reimbursed $4,637 for
Cirrus usage. The rate of $125 was calculated by Flight Service and was based on the variable
cost of operating the Cirrus. The fixed and variable cost of operating the Cirrus is approximately
$265 per hour. Flight Service was able to provide documentation of the calculated rate.
Audit Recommendation – Flight Service should confirm the calculation of total costs for the
Cirrus and bill the President’s Office accordingly for FY 2016.
6) King Air 350 Billing and Rate Calculation
The King Air 350 is funded by a combination of payments from three partners and additional
mileage charges to the partners and other campus users. The three university partners are Iowa
State Athletics, Office of the President, and ISU Foundation. In total, $336,175 was collected in
partnership fees and $442,307 was collected in mileage charges for the King Air 350 during FY
2016. Individual partnership fees reflect expected use of the King Air 350 in the fiscal year
ahead and are determined by apportioning the projected fixed costs in the Flight Service budget
for the fiscal year ahead among partners. The projected fixed costs for the year ahead is
estimated based on a rolling average of the fixed costs in the previous three years while
partnership fees are apportioned in line with each partner’s three-year rolling average billings for
flight mileage as a percentage of total billings. However, this billing methodology has not been
accurately applied in recent years and Flight Service received a total of $67,098 more than was
owed in partnership fees between FY 2014 and FY 2016.
Beechcraft King Air 350 Funding
Sponsorship Payments
Athletics
President
Foundation
Partner Contributions

$

Mileage Charges
Athletic Department
President's Office
Foundation
All Others
Total Mileage Charges
Maintenance Contributions
Total Funding of King Air 350

FY2014

FY2015

FY2016

140,915
51,998
76,361
269,274

147,452
27,205
79,903
254,560

147,452
108,820
79,903
336,175

113,147
63,314
23,626
28,784
228,870

146,086
122,395
27,250
46,333
342,064

239,674
144,584
20,873
37,176
442,307

$

498,144

596,624

50,078
828,560

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 Partners are charged a rate of $4.52 per nautical mile flown. Meanwhile, university non-partners
are charged a higher rate of $6.00 per nautical mile flown. The partnership and non-partnership
rates approximate the average variable and average total cost of aircraft operations respectively.
Athletics is the principal user of the King Air 350, paying approximately 50% of the total
funding over the past three fiscal years. The President’s Office is the next largest user followed
by the ISU Foundation. A number of other departments utilized the aircraft for various academic
and research activities.
Audit Recommendation – Individual partnership fees should be calculated and announced in a
timely manner to the Facilities Planning and Management’s Accounting Department, which in
turn should ensure billings are processed based on these new amounts semi-annually. A shorter
and more routine billing cycle will aid in more accurate billing and reduce the likelihood of
variances. Billed amounts should be reconciled to total receipts at year-end to ensure Flight
Service has recouped the appropriate funds from all internal customers.
7) Billing Errors
Flight Service has not consistently billed partner and non-partner customers the appropriate
amounts for the usage of university aircraft and multiple errors were identified in the calculation
of customer billings. Billing information was analyzed for the time period of April 2014 through
August 2016. Errors were noted in which Flight Service did not bill for all legs of a trip,
underbilled non-partners, and overbilled partners, resulting in Flight Service not fully recapturing
the cost of all flights.
Audit Recommendation – Flight Service should improve the billing process by reviewing bills
prior to sending to customers to ensure the bills are consistently accurate and based on the rate
schedule of the appropriate customer group (partner vs. non-partner). In situations in which a
customer is charged a rate other than the standard rate per nautical mile, the explanation for the
rate used should be documented and maintained by Flight Service.
8) Flight Records
Flight Service does not maintain a comprehensive log of all flights on the Cirrus. Flight records
are maintained for the King Air 350, but the records lack necessary details, such as business
purpose. There is no record retention policy regarding flight logs. Also, at times, passengers are
listed on legs of flights for billing purposes, but the passengers are not actually on the aircraft. In
one instance a passenger was identified as being on a flight but was not listed on the passenger
list. A comprehensive log of all flights for both university-owned aircraft would document and
substantiate aircraft usage, nature of flights, and support billings, if questioned by stakeholders.
Audit Recommendation – A comprehensive log of all flights should be maintained for both
university-owned aircraft. The flight logs should include the following details: pilot
identification, trip date, trip legs, airport of departure, airport of arrival, departure time, arrival
time, miles flown, business purpose, passengers, total expenses, and any other details deemed
necessary by university management. The passenger lists should accurately reflect individuals
on all legs of flights. A record retention policy should be put into place for the flight records and
the records should be maintained and purged in accordance with the policy.

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 9) University-Owned Aircraft Policy
ISU does not have a policy governing university-owned aircraft usage which should address:
•

Scheduling

•

Minimum aircraft requirements (including charters and donor provided aircraft)

•

Pilot requirements

•

Maintenance requirements

•

Authorized users

•

A statement indicating aircraft may be booked only for the official university business of
authorized faculty and staff

•

A statement addressing transporting of guests and/or family members of authorized
faculty and staff

A well-defined policy may prevent misuse of university-owned aircraft and detail minimum
standards when using charters or donor provided aircraft.
Audit Recommendation – ISU should develop a policy and additional procedures governing the
use of university-owned aircraft. The policy should address, but not be limited to, scheduling,
minimum aircraft requirements (including charters and donor provided aircraft), pilot
requirements, maintenance requirements, authorized users, and the manner in which the aircraft
can be utilized.
10) Taxable Meals for Pilots
Taxable meals for pilots are not being reported by Flight Service. Meals and hotel rooms of the
Flight Service pilots are purchased using ISU purchasing cards. Typically, travel expenses such
as meals and lodging would be paid by the employee and be reimbursed by the university. An
exception was granted in 1999 to allow Flight Service pilots to purchase meals and lodging on
purchasing cards. Internal Revenue Service guidelines require meals paid by the employer,
when no overnight travel is required, to be treated as taxable income to the employee. When
meals are reimbursed through the employee reimbursement system, taxable meals are captured
automatically. There is no mechanism in place to capture taxable meals when purchased with a
purchasing card. A review of six months of purchasing card purchases found 17 meals for $558
on trips with no overnight stay. The majority of transactions were for meals for two pilots and
itemized receipts were not included in the transactional documentation. It may be difficult to
determine if daily meal limits are being exceeded when purchased in this manner.
Audit Recommendation – At a minimum, meals when overnight stays are not required should be
purchased by the individual and reimbursed through the employee reimbursement system so the
meals are reported as taxable. Management should consider whether all meals and lodging
expenses should be reimbursed through the employee reimbursement system. If meals are
purchased using a purchasing card when overnight stay is required, itemized receipts should be
provided as supporting documentation.

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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 SUMMARY
Implementing the audit recommendations described above will improve internal controls within
Flight Service. Due to the accelerated timeline of this audit, management action plans were not
obtained. Internal Audit will contact management to obtain corrective actions and will follow up
as appropriate.

Benjamin Olejnik, Auditor

Matt Dahlsten, Auditor

Ciaran Bowe, Senior Auditor

Della Rhodes, Senior Auditor

Jordan Bates, Audit Manager

Debra A. Johnston, Associate Director of Internal Audit

Todd T. Stewart, Chief Audit Executive

Iowa State University Internal Audit Report – ISU Flight Service and University Owned Aircraft

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