When federal officials approved a $14.5 million taxpayer buyout of a private school near Palm Beach International Airport, they never looked at the controversial appraisal that sealed the deal.

They couldn't have. The appraisal had not yet been finished.

Even when Palm Beach County officials -- stung by criticism of The King's Academy deal -- asked the Federal Aviation Administration to thoroughly examine it, the agency gave it no more than a "cursory" review, an FAA official in Atlanta conceded last week, a day after the agency signed off on the grant.

In fact, the FAA never conducts anything more than a cursory review of appraisals used to dispense hundreds of millions in federal dollars to local airports around the country, despite internal guidelines that spell out in great detail how such audits should be conducted.

The result is a system that encourages federal officials to hand millions of dollars to local airports with limited oversight.

The FAA's lack of oversight, failure to follow guidelines and dependence on self-policing have drawn the wrath of congressional investigators and federal inspectors for some time. Now watchdog groups in Tallahassee and Washington are outraged by the FAA's handling of the Palm Beach International Airport deal and are demanding corrective action.

"This is a Keystone Kops routine going on here," said David Williams, a vice president with Citizens Against Government Waste in Washington. "When the agency itself refuses to audit and refuses to be the watchdog, how are we going to know the real story behind this? There needs to be an inspector general's audit and investigation."

"This is just not a professional way to conduct public business," agreed Florida Tax Watch President Dominic Calabro. "When we keep passing the buck, the buck often slips through the cracks."

The FAA says it is too short-handed to make sure taxpayers' money is not wasted on faulty or misleading appraisals. It relies instead on airport officials to make sure they spend FAA grant money by the rules.

"The burden is on the airport," said Rusty Chapman, the FAA's regional airports manager in Atlanta. "They are using certified appraisers. We don't question their integrity. It's not like we're policemen."

The FAA set aside $270 million last year for noise-abatement grants, part of a $3.3 billion program of aid to airports. About 5 percent that went for land purchases.

Palm Beach County asked the FAA to review its deal to buy The King's Academy last month after an examination of the appraisal by an independent expert for The Palm Beach Post showed the airport's appraiser used unusual methods to pump up the campus' market value by $3 million.

The appraisal supported a $14.5 million purchase price reached in negotiations between the airport and the private school seven months earlier.

The Post reported that the negotiations were handled by Airport Director Bruce Pelly, whose daughters attended the private school. The school's chief negotiator was Herb Kahlert, a longtime associate of Pelly and the former county engineer.

When talks began, the airport was armed only with an appraisal putting the campus' value at $11.5 million. But the academy, armed with a $16.9 million appraisal, would accept nothing less than $14.5 million.

The airport agreed to the price, certain that it could use FAA noise-abatement grants to cover 80 percent of the bill. Airport officials justified the buyout on safety reasons. They said they wanted to get The King's Academy out of the path of the second busiest runway.

Documentation not given

Before conducting the updated appraisal, the airport applied for -- and received -- FAA approval of the grant. The airport did not submit any documentation to explain why it should receive more than the current appraised value of $11.5 million, as required by the FAA when airports pay more than a property's appraised value. It merely said the price -- plus or minus $14 million -- was being negotiated.

It's not unusual for airports to apply for grants before appraisals are complete, FAA spokeswoman Kathleen Bergen said. That doesn't bother FAA officials -- they don't ask to see the appraisals until they're ready to make the final payment.

In its review completed Thursday, the FAA's Orlando office said the later $14.5 million appraisal justified the price the airport had agreed to pay.

The only fault it found was one of rounding: The appraisal technically came to $14.47 million but the airport paid $30,000 more, a nominal amount the FAA viewed as reasonable to assure the buyout.

At no time did the FAA subject the deal to the kind of review outlined in the FAA's own guidelines. The FAA employs no appraisers and did not hire one to conduct the examination sought by Palm Beach County, Bergen said.

"Our staff made a cursory review of the appraisal," she said. "It is the responsibility of the airport sponsor to be in compliance."

Failure to follow its own rules is nothing new for the FAA. In 1994, the Department of Transportation's inspector general found that the FAA's reliance on an airport's word was not enough to ensure that airports followed federal rules.

A 1999 General Accounting Office report to Congress on airports that cater to small planes criticized the FAA for the same thing.

"FAA does not adequately monitor general aviation airports' compliance with federal requirements and does not have the internal controls in place to protect the federal government's investment in the airports from mismanagement, fraud, waste and abuse," the GAO report said.

Even though FAA guidelines call for random audits of appraisals, the agency doesn't do them, said Chapman, the FAA's airport division chief in Atlanta.

The guidelines warn the FAA to scrutinize an appraiser's subjective decisions to detect when an appraiser is padding or deflating values.

Random reviews suggested

The guidelines suggest random reviews, particularly of "complex and high value appraisals." No such review has been conducted of The King's Academy buyout even though it stands among the largest single noise buyouts ever undertaken by PBIA.

The reviews are supposed to take place "as closely as possible to the airport owner's date of approval," the guidelines say. It urges airports to send the appraisals to the FAA promptly so that the FAA review can be performed "prior to negotiations."

Even after the county commission approved The King's Academy buyout in September 2001, the airport did not submit its appraisals to the FAA for review.

The FAA's Orlando office did not receive a copy of the appraisal until December 2001, when a reporter called to ask about it. The office had approved the grant's first phase eight months earlier, in April 2001.

The timing is critical, the guidelines explain, because prompt review lets the airport correct deficiencies before promises are made to the landowner.

In practice, the FAA doesn't look at appraisals until it is time to cut the final check, Chapman said. In The King's Academy case, that will be about two years after the initial grant approval.

Even then the review isn't rigorous, Bergen said.

Chapman described the guidelines as an internal aid. In general, he said, they are not followed.

"We used to be more involved in them than we are now," he said. "We used to have twice as many people, too. Our programs have grown tremendously, and our role has transitioned to more of an oversight role."

Staffing in the Atlanta office has dropped to 63 from 77 in five years, Bergen said.

Budget cuts don't excuse the FAA's failure to assure accountability, said Williams of Citizens Against Government Waste. He wants an investigation.

But no such review is in the offing. County Administrator Bob Weisman accepted the findings of the FAA Orlando's office as a final confirmation that there is nothing wrong with The King's Academy deal. He is moving forward next month with the final stage of the buyout -- the sale of 47 acres of county park land for the academy's new campus.