between ASG and the vendors and that the Office of Grants Operations
will review the remaining $74,271 in questioned costs.

OIG comments and analysis. ODP’s comments reflect careful consideration
of both our draft audit report and the written input provided by TOHS before
our December 2006 exit conference. We offer the following additional
comments regarding the questioned cost categories addressed in ODP’s
comments/conclusion:

¢ Ineligible Costs - We accept ODP’s comments regarding the eligibility
($35,521) and ineligibility ($261,627) of equipment and planning and
administration costs we questioned in the finding ($585,803). However,
for the remaining $288,655 (immigration computer system and fiber
optic/intra-network), ODP should determine whether the system is eligible
under FY 2002 SDPP grant guidance that specifically prohibited the use of
grant funds to procure a “general use” computerized system.

e Unallowable Equipment Costs - We accept ODP’s comments regarding
the allowability and unallowability of the equipment costs we questioned
in the finding. However, in those “gray areas” where allowability is still
in question, ODP should provide justification as to why those specific
costs are allowable under applicable grant guidance and OMB criteria.

¢ Unallowable Training Costs — We agree with ODP’s comments with the
exception of those regarding two training workshops on the Fire Grants
Program. Without additional information from ODP, we continue to
believe that these workshops would have been more appropriately funded
by the Assistance to Firefighter Grant Program. Further, ODP should
follow up on those items in the finding that require additional information
and documentation for it to make an allowability determination.

¢ Unallowable Exercise Costs - Based on ODP’s comments and
clarifications provided during the exit conference, we agree with ODP’s
determination that the $12,539 is an allowable cost.

¢ Unallowable Planning and Administration Costs - Based on ODP’s
written response and clarifications provided during the exit conference, we
concur with ODP’s determination that $88,466 of the costs we questioned
is allowable and $1,581 is not. As for the remaining $8,351in questioned
costs, ODP should obtain and review the additional documentation needed
to determine the purpose of the administrative travel.

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Appendix F
Report Distribution

Department of Homeland Security

Secretary

Deputy Secretary

Chief of Staff

General Counsel

Executive Secretariat

Under Secretary, Management
Under Secretary, Preparedness
Chief Financial Officer

Chief Information Officer
Assistant Secretary, Public Affairs
Assistant Secretary, Policy
Assistant Secretary, Legislative and Intergovernmental Affairs
Chief Security Officer

DHS GAO/OIG Liaison

Office of Grants and Training

Assistant Secretary
Director of Grant Operations
OIG Audit Liaison

Office of Management and Budget

Chief, Homeland Security Bureau
DHS OIG Budget Examiner

Congress

Committee on Homeland Security and Governmental Affairs
United States Senate

Committee on Homeland Security
United States House of Representatives

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conditions of the federal award as the criteria to determine whether a
cost is allowable. We question the reasonableness of these purchases,
and thus the allowability of the costs, since 17 of the 18 vehicles
purchased in FY 2003 (FY 2003 SHSGP-I and II) were for general use
vehicles rather than the incident response vehicles needed to respond
to and recover from a terrorist event involving the use of weapons of
mass destruction and chemical, biological, radiological, nuclear, or
explosive weapons.

o Fire department operating supplies and equipment. TOHS charged
$77,719 of the ASG fire department’s operating supplies and

equipment to the grant. Specifically, TOHS purchased 640 units of
F-500 fire suppression agent at a cost of $60,640, and mobile foam
unit hand trailers, nozzles, and other fire fighting equipment at a cost
of $17,079. We question these expenditures because the items
purchased were general use operating supplies and equipment that
should have been a part of the fire department’s operating budget.

e Training. Unallowable training expenditures totaled $30,803 -- $21,108
charged to the FY 2003 SHSGP-I grant and $9,695 charged to FY 2003
SHSGP-II grant.

FY 2003 SHSGP-I. We question $21,108 in travel-related costs associated
with the workshops and training identified below:

o $3,154 for ASG’s Deputy Police Commissioner to attend a Fire Grants
Program meeting and to meet with the Los Angeles Police
Department.

o $2,276 for a TOHS official to attend a Fire Grants workshop and
meetings with the ODP in Honolulu.

o $15,678 for TOHS officials to attend a meeting and technical
assistance in Hawaii on homeland security assessments and strategy
development, and to attend a workshop/exhibition on training and
exercise in Washington, DC.

The budget detail worksheet submitted by ASG and approved by ODP
allowed a training/travel budget of $10,500 to develop training standards
and protocols for emergency responders including meetings with local,
federal, and regional officials. While ASG officials appeared to have met
with local and federal officials, we question the above expenditures
because: (a) the expenditures are not tied directly to the approved budget
detail worksheet, (b) some of the expenditures are associated with a

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We attributed the change in ASG’s domestic preparedness planning
methodology to the establishment of TOHS on May 27, 2002 (Executive
Order 001-2002). The task force does not meet regularly or have any direct
input to the domestic preparedness functions performed by TOHS. Because
of the diverse task force membership and the members’ knowledge of critical
infrastructure and associated risks and vulnerabilities, the task force’s
exclusion from the current homeland security strategy is a substantial
deviation to ODP’s conceptual framework for developing and implementing
preparedness plans within the Territory. Further, the changes in the ASG’s
first responder grant administrative planning and oversight contributed to the
systemic internal control issues associated with the administration of the first
responder grants.

Submitting required reports to ODP. ASG has not complied with the financial
and programmatic reporting requirements identified in 28 CFR § 66.40 (b)(1)
and in the Office of Justice Programs Financial Guide. ODP’s Preparedness
Officer reported on April 25, 2005, that ASG had not provided financial and
programmatic reports to ODP in a timely manner. ODP noted that ASG failed
to submit 19 financial status reports or categorical assistance progress reports.
The timely submission of these reports is required as a condition to receiving
the grants and a key internal control component that assists ODP in its
monitoring of grantee performance. Had reports been submitted as required
and additional ODP oversight provided, ODP may have been able to identify
the following conditions noted during this audit:

¢ ODP limited the FY 2002 SDPP grant award and budget to $715,000.
While ASG only drew down $714,671, it expended $740,116 as of
December 31, 2004, indicating weaknesses in budgetary controls and
program monitoring. Similarly, as of December 31, 2004, ASG expended
only $919,507 of the $1,482,000 FY 2003 SHSGP-I grant and only
$1,225,356 of the $3,926,000 FY 2003 SHSGP-II grant. These unspent
funds could impact achievement of ASG’s homeland security goals.

¢ ASG accounting records supporting expenditures attributable to each grant
program varied significantly from the ODP-approved budget by fund
category.'° The two charts in Appendix B of this report show these
variances, i.e., funding categories budgeted by ASG and approved by ODP
versus actual expenditures reflected in ASG’s accounting records. Those
variances highlight the need for improvement in accounting controls and
ODP oversight. Of particular concern to us was TOHS’s failure to
categorize spending according to ODP approved funding categories.

'© Fund categories include equipment, training, exercises, planning and administration, and critical infrastructure
protection.

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Introduction

In 1998, the Department of Justice, pursuant to Public Law 105-119,
established Office for Domestic Preparedness (ODP)' and made it responsible
for developing and administering a domestic preparedness program that
provided financial assistance to states, U.S. territories, and local governments
for domestic preparedness training and equipment. Public entities such as
police, fire, and emergency medical personnel, commonly referred to as “first
responders”, generally receive this assistance through the state or territory.

Since the program’s inception in 1998 and its transfer to DHS in 2003, ODP
has awarded first responder grants to purchase specialized equipment and to
develop and conduct training courses and exercises so as to enhance first
responders’ capabilities to prevent and respond to incidents of terrorism
involving weapons of mass destruction including chemical, biological,
radiological, nuclear, or explosive weapons. The FY 2002 through FY 2004
first responder grant programs, the purposes of which are described below,
provided financial assistance to each state, U.S. territory, and the District of
Columbia.

e FY 2002 State Domestic Preparedness Program (SDPP): (1) Purchase

specialized equipment to enhance the capability of grant recipients to
respond to incidents of terrorism involving the use of weapons of mass
destruction; (2) purchase equipment designed to protect critical
infrastructure from terrorist attacks; (3) cover costs related to the design,
development, conduct, and evaluation of exercises related to weapons of
mass destruction; and (4) provide funding for administrative costs
associated with the implementation of the domestic preparedness
strategies.

¢ FY 2003 State Homeland Security Grant Program - Part I (SHSGP-I):

(1) Purchase specialized equipment to enhance the capability of grant
recipients to respond to incidents of terrorism involving the use of
chemical, biological, radiological, nuclear, or explosive weapons; (2)
protect critical infrastructure and prevent terrorist incidents; (3) cover
costs related to the design, development, conduct, and evaluation for
chemical, biological, radiological, nuclear, or explosive weapons
exercises; (4) provide funding for the design, development, and conduct of
chemical, biological, radiological, nuclear, or explosive weapons training
programs; and 5) provide funding for costs associated with updating and
implementing grantees’ homeland security strategies.

| ODP is now the Office of Grants and Training within the DHS Preparedness Directorate. For the purposes of this
report, we are using ODP in discussing first responder grant programs.

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Appendix D
Previous Federal Audits

developing a comprehensive fiscal reform plan that would achieve fiscal
accountability and stability. The Governor of American Samoa disagreed
with OIG’s recommendations on April 22, 2005 stating that ASG has already
accomplished fiscal reform and has taken the steps recommended in the audit.
DOI officials concurred with the report and to ensure that revised financial
systems were implemented, the Office of Insular Affairs designated ASG as
“high-risk” grantee in June 2005.

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e Unsupported Costs — We accept ODP’s comments regarding the costs we
questioned. However, ODP should follow up on those items that require
additional information and documentation to ensure that the costs claimed
were adequately supported.

ASG’s Grants Management Practices and Controls Continue to be
Problematic

As reported by other federal agencies, including the Department of Interior
(DOJ) OIG and the Government Accountability Office (GAO), and confirmed.
during this audit, ASG’s grants management system continues to be deficient
and does not adequately ensure that federal first responder grant funds are
expended according to federal grants management regulations and
requirements. Specifically, ASG’s practices and controls do not ensure:

1) successful implementation of strategic plans and achievement of grant
goals and objectives; 2) appropriate expenditure of grants funds; and

3) effective management of ODP grants resources and the promotion of
programmatic and fiscal accountability.

OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, was issued pursuant to the Single Audit Act of 1984 (SAA), as
amended. It requires grant recipients to: 1) maintain internal control over
federal programs; 2) comply with laws, regulations, and the provisions of
contracts or grant agreements; 3) prepare appropriate financial statements,
including schedule of expenditures of federal awards; 4) ensure that the
required audits are properly performed and submitted when due; and 5) follow
up and take corrective actions on audit findings. Title 28,Code of Federal
Regulations (CFR), Part 66 — Uniform Administrative Requirements for
Grants and Cooperative Agreements to States and Local Governments, and
the Office of Justice Programs Financial Guide require grantees and
sub-grantees to comply with ODP grant requirements and standards specified
in the guides.”

As summarized in Appendix D, previous federal audits of ASG have reported
that 1) ASG’s system of financial accounting and reporting was inadequate,
2) significant failures occurred in the operation of computer systems, 3) the
internal control structure had significant weaknesses related to general
accounting and grant administration, and 4) there was a lack of appropriate
management oversight, including a lack of review and approval of financial

7 28 CFR §66.20: Standards for financial management systems and OJP Financial Guide — Part IT, Chapter 3 (Standards
for Financial Management Systems),
28 CER §66.36 — Procurement and OJP Financial Guide — Part III, Chapter 10 (Procurement Under Awards of Federal
Assistance).
28 CFR §66.32 — Equipment; and OJP Financial Guide ~ Part III, Chapter 6 (Property and Equipment).

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The DOI’s Office of Insular Affairs indicated in its letter to the Governor in
June 2005 that ASG’s high-risk designation will not be lifted until ASG has
2 consecutive years of timely, “clean” SAA audit reports.

In addition to ASG-wide financial accountability and grants management
deficiencies, the “program specific” audit of TOHS, covering the period
October 1, 1999, to April 30, 2006, indicates that TOHS’ system of financial
accounting and reporting is inadequate with significant failure in the operation
of internal control structures needed for proper general accounting and grants
administration. The report specifically addresses the following material
deficiencies related to compliance and internal control over compliance:

e Allowable and unallowable activities,

e Financial reporting,

« Cash management,

e Allowable costs and cost principles,

e Administrative requirements,

e Standards for financial management systems,
e Claims for advances and reimbursements,

e Equipment and real property, and

e Retention and access requirements for records.

TOHS comments. TOHS acknowledged the finding on behalf of ASG and
noted that the recent program specific audit of TOHS also reported that ASG’s
financial system managed by the ASG Treasury, lacked adequate grant
management control and practices. TOHS indicated that because of the
deficiencies in ASG’s government-wide system, it had difficulty obtaining
accurate, timely, and reliable reports, but both TOHS and Treasury have made
progress in resolving these deficiencies.

ODP comments. ODP commented that the lack of oversight and accounting
practices at TOHS has been resolved and that all grant expenditures now
require program office approval. TOHS has installed and is now using new
software that tracks expenditures to specific goals and initiatives for each
particular grant year. In addition, ODP commented that internal controls are
now in place and the SAA audit for FY 2005 audit has been conducted and
submitted. The Preparedness Officer commented that ODP is providing, and

Audit of State Homeland Security Grants Awarded to the American Samoa Government
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claimed. In addition, the reports indicate that ASG does not qualify as a low
risk applicant under § __.530 of OMB Circular A-133.°

Informing ODP of material changes to the homeland security strategic plans
and grant program spending. According to 28 CFR, Part 66, and the Office of
Justice Programs Financial Guide, grant recipients are required to submit all
material changes to state strategic plans to ODP. Despite this requirement,
TOHS did not report to ODP its non-use of the Territory Preparedness Task
Force established by the Governor on September 27, 2001 (Executive Order
004-2001).

In FY 2001, and in support of ODP requirements for all grant recipients to
develop needs assessment and a statewide strategic plan, the Governor
established the Territory Preparedness Task Force to:

e Conduct a comprehensive review and analysis of Territory
preparedness,

© Complete a Territory-wide threat and needs assessment,

© Provide a federal funds allocation strategy,

¢ Liaise with federal agencies for technical and funding assistance, and
e Ensure compliance with federal domestic preparedness directives.

Task force membership consisted of key public and private officials, including
the Commissioner for the Department of Public Safety, the Director for the
Territorial Emergency Management Coordinating Office, the Directors for the
Departments of Public Health and Port Administration, and others.

While the purpose of the task force was clearly articulated in the Two year
Domestic Preparedness Strategy (Terrorism) submitted by the Office of
Territorial and International Criminal Intelligence and Drug Enforcement to
ODP in 2001, the roles and responsibilities of the task force were omitted
from the State Homeland Security Strategy American Samoa (2003):
American Samoa 2003 Assessment, submitted by TOHS to ODP in 2005.

° An auditee that 1) has single audits performed on an annual basis; 2) receives an unqualified opinion on the financial
statements and the schedule of expenditures of Federal awards; 3) has no deficiencies in internal control identified as
material weaknesses under the requirements of government auditing standards; and 4) had no audit findings in either of
the preceding 2 years related to material internal control weaknesses, noncompliance with the provisions of laws,
regulations, contracts, or grant agreements, or questioned costs that exceed 5 % of the total federal awards expended
during the year qualifies as a low-risk auditee and is eligible for reduced audit coverage under OMB Circular A-133.

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Appendix E
Major Contributors to this Report

Robert J. Lastrico, Audit Division Director
Nigel Gardner, Auditor
Arona Maiava, Auditor

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Emergency operations center equipment ($25,800). ODP said that this

equipment acquisition could be considered eligible because the equipment
was procured for ASG’s emergency operations center and was used during
several recent disasters.

Audio networking system ($8,221). ODP concurred with the questioned

cost and indicated that the purchase of an audio system was not an
approved expenditure under FY 2002 grant guidance.

¢ Ineligible Costs — Planning and Administration

Of the $13,127 in costs we questioned, ODP concurred that $3,406
expended for gasoline was not eligible under the grant, but that a case
could be made as to the eligibility of the remaining $9,721 in
expenditures.

¢ Unallowable Costs - Equipment

FY 2003 SHSGP-I & FY 2002 SDPP ($410,120). ODP concurred that the
expenditure of $328,670 for general use vehicles was not allowable under
FY 2003 SHSGP-I guidance. ODP also agreed that $81,450 for
equipment budgeted under the FY 2002 SDPP grant but charged to FY
2003 SHSGP-I grant was unallowable.

FY 2003 SHSGP-II ($423,455). ODP indicated that vehicle purchases
totaling $345,736 were approved by ODP and waivers can be found in
ODP’s grant files.

For vehicles purchased with the FY 2003 SHSGP-I and SHSGP-II funds,
ODP stated that the purchase of general use vehicles using the FY 2003
SHSGP-I funds was not allowable because vehicles purchases were
limited to incident response involving the use of weapons of mass
destruction and chemical, biological, radiological, nuclear, or explosive
weapons. Nonetheless, ODP said that it is in the process of obtaining
additional documentation and information from ASG in order to

(1) reconcile a $164,000 invoice variance; (2) determine the circumstances
surrounding a $196,265 unsupported journal entry; and (3) determine the
actual number of vehicles received by ASG.

Regarding the $77,719 expended for the fire department’s operating
supplies, ODP indicated that while this appeared to be supplanting of
funds, the supplies supported a new mission area that enhanced local
chemical, biological, radiological, nuclear, or explosive weapons and
hazardous material capabilities.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 15


We identified $585,803 of ineligible expenditures claimed by ASG against the
grants we reviewed. Specifically, we question $572,676 for equipment and
$13,127 for planning and administration costs because: a) the claimed
amounts did not meet the eligibility criteria stipulated in the grant guidance
provided by ODP, or b) the costs were not eligible based on the basic cost
principles outlined in OMB Circular A-87, Cost Principles for State, Local,
and Indian Tribal Governments, Title 2, Code of Federal Regulations, Part
225.

Based on ODP grant guidance and OMB Circular A-87, the systems and
equipment purchases identified below were subject to the following criteria:

e According to FY 2002 grant guidance, equipment such as general-use
computers and related equipment were ineligible under the program. In
addition, the guidance required that interoperable communication
equipment and systems provide connectivity and interoperability between
local and interagency organizations to coordinate weapons of mass
destruction response operations and that such computer systems be linked
with integrated software packages designed specifically for chemical
and/or biological agent detection and communication purposes.

e FY 2002 and FY 2003 Parts I and II grant guidance specified that grant
funded equipment and systems be consistent with the goals and objectives
outlined in the domestic preparedness strategy.

© OMB Circular A-87 requires that costs charged to federal grants be
allocable to federal awards and conform to any limitations set forth in the
terms and conditions of the federal awards.

Details regarding the ineligible grant expenditures and our rationale for
questioning them are provided below:

e Equipment. Ineligible equipment spending included $288,655 for an
immigration computer system, $250,000 for an all-hazards early warning
broadcast system, and $34,021 for emergency operations center equipment
and an audio networking system.

Immigration computer system. TOHS contracted with a local electronics
vendor to upgrade an ASG immigration computer system and posted the
$250,000 cost of this upgrade to the FY2002 SDPP grant.’ As a part of
this system, the vendor also installed a $38,655 fiber optic/intra-network at
the Tafuna Airport that TOHS charged to the FY 2003 SHSGP-I grant.

2 ASG initially posted $250,000 for the Immigration Office computer system to the FY 2003 Part II grant but later
credited this amount via a journal entry and posted the $250,000 to the FY 2002 grant.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
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Appendix C

Summary of Questionable Costs

2. Recap of ASG’s Unallowable Spending

Critical
Grant Planning and | Infrastructure
Program | Equipment Exercise Training | Administration | Protection Total
FY 2002 $12,539 $0 $0 $0 $12,539
FY 2003
Part -I 410,120 0 21,108 8,351 0 439,579
FY 2003
Part-II 423,455 0 9,695 65,333 0 498,483
FY 2004 0 0 0 24,714 0 24,714
Total $833,575 $12,539 $30,803 $98,398 $0 $975,315
3. Recap of ASG’s Unsupported Spending
Critical
Grant Planning and_ | Infrastructure
Program | Equipment Exercise Training | Administration Protection Total
FY 2002 $0 $3,316 $0 $9,981 $0 $13,297
FY 2003
Part -I 0 0 6,654 0 0 6,654
FY 2003
Part-II 77,728 10,588 30,819 5,462 0 124,597
FY 2004 0 1,423 6,028 0 0 7,451
Total $77,728 $15,327 $43,501 $15,443 $0 $151,999
Combined
Total $1,483,979 $27,866 $74,304 $126,968 $0 | $1,713,117

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Appendix A

Objective, Scope, and Methodology

The objective of the audit was to determine whether the American Samoa
Government (ASG), (1) developed and implemented an appropriate homeland
security strategic plan, and (2) applied sound grants management practices
and controls. The goal of the audit was to identify conditions that could
inhibit ASG from achieving the goals of the grants and recommend solutions
to help ASG better prepare for and respond to acts of terrorism

The scope of the audit included the following four grant programs. These
programs are described in the Background section of this report.

e FY 2002 State Domestic Preparedness Program

e FY 2003 State Homeland Security Grant program - Part I
e FY 2003 State Homeland Security Grant program — Part IT
e FY 2004 Homeland Security Grant Program

We reviewed ASG’s development and implementation of homeland security
strategic plans submitted to ODP in November 2001 and September 2005 and
ASG’s grant management practices and controls related to the use of ODP
grant funds. Also, of the $3.2 million in costs expended and claimed against
the grants as of December 31, 2004, we reviewed grant expenditures of

$2.3 million.

The audit methodology included work at ODP Headquarters, ASG’s Office of
the Treasurer, the Territorial Office of Homeland Security (TOHS), and
various first responder locations. Our audit considered ODP and ASG
policies and procedures, as well as the applicable federal requirements. We
reviewed documentation received from ODP, as well as from the ASG
Treasurer, Attorney General, Office of Territorial and International Criminal
Intelligence and Drug Enforcement, and TOHS. Also, we reviewed and
discussed with responsible officials ASG’s homeland security strategy and its
achievement of homeland security goals and objectives. We also reviewed all
applicable documentation supporting ASG’s management of grant funds. We
reviewed reports from prior audits and worked closely with ODP and ASG
officials.

The audit was performed between March 2005 and August 2006 and was
conducted according to Government Auditing Standards as prescribed by the
Comptroller General of the United States. Although this audit included a
review of costs claimed, we did not perform a financial audit of those costs.
Accordingly, we do not express an opinion on ASG’s financial statements or
the funds claimed in the financial status reports submitted to ODP.

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Results of Audit
ASG Did Not Adequately Develop and Implement Its Strategic Plans

The homeland security strategies forwarded by the Office of Territorial and
International Criminal Intelligence and Drug Enforcement to ODP in
November 2001 [Two Year Domestic Preparedness Strategy (Terrorism)| and
updated by TOHS and forwarded to ODP in September 2005 [State Homeland
Security Strategy American Samoa (2003): American Samoa 2003
Assessment] were fundamentally flawed inasmuch as they failed to identify
shortcomings in immediate equipment and training needs and overall
capabilities of ASG’s first responders. Consequently, these shortcomings
resulted in use of grant funds to acquire equipment that remained in storage or
could not be used adequately in response to a terrorist event.

Grant application guidance established by ODP in FYs 1999, 2000, and 2002
included a provision for prospective grantees to use a needs assessment and
strategic plan as a means of securing grant funding. According to the
guidance:

The Needs Assessment and Statewide Strategy should provide
a comprehensive blueprint for the coordination and
enhancement of response efforts to weapons of mass
destruction terrorism incidents, as well as for the utilization of
Federal, State, and local resources within the State. All
information requested for the completion of the Needs
Assessment is designed for use in the development of the
Statewide Strategy.

In light of the terrorist attacks on New York City and the Pentagon on
September 11, 2001, ODP required applicants to develop a 3-year homeland
security strategic plan that reflected (1) risks and threats; (2) equipment,
training, exercises, and other program needs for first responders; (3) goals and
objectives to enhance capabilities; and (4) an evaluation plan to measure the
accomplishment of the goals and objectives. However, in the updated FY
2003 strategic plan submitted by TOHS to ODP, TOHS stated the updated FY
2003 plan was based on the FY 1999 plan' submitted by the Office of
Territorial and International Criminal Intelligence and Drug Enforcement.

We reviewed the FY 1999 and the updated FY 2003 strategic plans and
determined that TOHS provided ODP a strategic plan that neither sufficiently
identified deficiencies in immediate equipment and training needs and overall

' The FY 1999 plan is the same plan submitted by the Office of Territorial and International Criminal Intelligence and
Drug Enforcement to ODP in Year 2001 [i.e., Two Year Domestic Preparedness Strategy (Terrorism)].

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 4


e FY 2003 State Homeland Security Grant Program - Part IT
(SHSGP-ID: (1) Provide supplemental funding for the program activities

described above for SHSGP-I, and (2) provide funding to mitigate the cost
of enhanced security at critical infrastructure facilities during the period of
hostilities in Iraq and future periods of heightened threat.

e FY 2004 Homeland Security Grant Program (HSGP): Provide funding

for specialized equipment, training, exercises, and planning costs
associated with updating and implementing each state's homeland security
strategy.

As a condition to receiving grants funds, ODP required grantees to develop
homeland security strategic plans that reflected: 1) risks and threats;

2) equipment, training, exercises, and other program needs for first
responders; 3) goals and objectives to enhance capabilities; and 4) an
evaluation plan to measure the accomplishment of the goals and objectives.

In November 2001, ASG provided ODP its 1999 Two Year Domestic
Preparedness Strategy as its guide for prioritizing homeland security spending
during FYs 2002 and 2003. Based on the 3-year strategic required by ODP
after the events of September 11, 2001, ASG provided ODP a FY 2003 plan in
2005.

From 1998 to May 2002, ASG’s Office of Territorial and International
Criminal Intelligence and Drug Enforcement managed the ODP grant
programs. On May 27, 2002, the Governor issued Executive Order 001-2002
establishing the Territorial Office of Homeland Security (TOHS). TOHS’
responsibilities included: 1) reviewing and assessing all homeland security
needs of the territory, 2) implementing the American Samoa homeland
security strategy, and 3) coordinating the territory’s efforts in updating the
strategy. Additionally, the Governor designated TOHS as the State
Administrative Agency for ODP grant administration and oversight.

ODP awarded ASG $12,012,000 in homeland security grants for FYs 2002
through 2004. Appendix B reflects ASG’s budget by fund category for grant
awards made by ODP and the funds expended and claimed by category
through December 31, 2004.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
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¢ Unallowable Costs — Training

FY 2003 SHSGP-1 ($21,108). ODP said that the training expenditures we
questioned were allowable in that ASG can choose who should attend
various meetings and workshops and that the cost of travel to and from
American Samoa is extraordinarily high but allowable.

FY 2003 SHSGP-II ($9,695). ODP indicated that it needs to review the
documents surrounding the $5,228 in travel costs for an ASG official who
traveled to Washington, DC on a travel order approved for the Governor’s
Legal Counsel because the conference did not take place until October
2005. Additionally, ODP: (1) concurred that the $2,385 for rental of a
conference room associated with Cyclone Heta was not allowable,

(2) agreed that the $1,356 we questioned appeared to be a duplicate charge
but required additional review, (3) is considering recouping the $726 in
funds for expenses apparently incurred at a city other than where training
took place.

e Unallowable Costs - Exercises

FY 2002 SDPP ($12,539). ODP said that the travel related costs
questioned for the exercises discussed in the report appear to be allowable,
but questioned the need for three TOHS officials to participate in same
chemical tabletop exercise.

© Unallowable Costs — Planning and Administration

FY 2003 SHSGP-I ($8,351), ODP indicated that it needed to review
additional documentation to determine the purpose of the administrative
travel.

FY 2003 SHSGP-II ($65,333). Of the eight items questioned in the report,
ODP concluded that six items totaling $63,752 were allowable and the
remaining two items totaling $1,581 were not allowable [items e) and h)].

FY 2004 HSGP ($24,714). OPD concluded that these costs appeared
excessive but were otherwise allowable.

e Unsupported Costs

Of the $151,999 in costs we questioned, ODP said that $77,728 in advance
payments to two equipment vendors are the subject of ongoing litigation

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 16


TOHS believes that ASG response agencies need to understand homeland
security theories before developing standard operating procedures and training
to use newly acquired equipment.

TOHS also commented that it appreciated our recommendations to improve
plans and strategies, and that it has already moved to improve its fundamental
capabilities in several programmatic areas. TOHS said that it has
progressively and systematically followed its strategy and will continue to
update its strategic plan as capabilities are achieved. TOHS commented that
its FY 2005 homeland security strategy update and its FY 2006 grant
application show the Territory’s commitment to improving its homeland
security posture.

ODP comments. ODP concurred with the finding and commented that while
TOHS has an approved strategy, it remains non-compliant in many areas and
lacks basic emergency operations plans. As cited in 2005 and 2006
monitoring reports, TOHS has used grant funding for projects other than
planning and has no plans to demonstrate homeland security improvements
resulting from its use of the grant funds. Additionally, the lack of baseline
training continues to plague the Territory resulting in the storage of
technically advanced equipment because of a lack of trained first responders.
ODP commented that homeland security grant program funds cannot be used
to meet baseline-training standards unless a waiver is requested and approved
and that no such waiver has been granted.

OIG comments and analysis. ODP’s comments reinforce our finding and
recommendation that TOHS needs to (a) continue identifying deficiencies in
immediate equipment and training needs and overall capabilities of ASG’s
first responders and (b) develop a comprehensive State Homeland Security
Strategy and Implementation Plan that clearly articulates measurable
homeland security goals, objectives, and implementation milestones -- both of
which will require extensive ODP involvement.

ASG’s Grant Program Expenditures Did Not Comply with Grant
Guidelines

We reviewed the propriety of ASG’s grant expenditures relating to FYs 2002
through 2004 first responder grants and found questionable expenditures
totaling over $1.7 million (see Appendix C for details), We categorized
ASG’s questionable costs as ineligible, unallowable, or unsupported, as
follows:

Ineligible Costs

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 6


e ASG’s incomplete accounting and spending records related to the critical
infrastructure protection funds awarded under the FY 2003 SHSGP-II
grant.

e¢ ASG control over and use of the first responder equipment purchased with
ODP funds.

August 2006 Preparedness Officer’s Update and Auditor
Comments

Preparedness Officer’s Update

Since the completion of our fieldwork, we have stayed in regular contact with
ODP’s Preparedness Officer to monitor ASG’s progress in improving grant
accountability. In mid August 2006, the Preparedness Officer informed us
that much has been accomplished to properly align American Samoa’s
homeland security spending with its needs. The Preparedness Officer offered
the following information to demonstrate the tangible results yielded to date:

1. The Preparedness Officer completed programmatic monitoring in
February 2006 wherein: (a) program expenditures were matched to the
goals and objectives indicated in the 2005 update to the FY 2003 strategic
plan and (b) a random inventory of equipment acquisitions was conducted
with 100 % accountability for the equipment items sampled.

2. The Office of Grant Operations completed financial monitoring in April
2006 and noted minimal discrepancies that already have been corrected.
However, subsequent to our exit conference, the Office of Grant
Operations informed us that the Preparedness Officer’s statement was
erroneous. The purpose of the financial monitoring visit was to review
TOHS records and provide direct on site assistance, guidance,
recommendations, and training based on findings identified during the
visit. During the visit, the Office of Grant Operations continued to follow
up on the issues identified by the Preparedness Officer and on issues
related to TOHS financial reporting, and questioned and undocumented
expenditure items. That office continued to monitor outcomes, but elected
to hold up issuing its report until the OIG finalized this audit. This
decision was made because the financial monitoring report would include
direction for repayment of unauthorized and disallowed expenditures
identified in our report, as well as additional costs identified by the Office
of Grants Operations.

3. The Preparedness Officer indicated that in lieu of the high-risk designation
proposed in January 2006, (a) all TOHS expenditures would require ODP
program office approval prior to draw down, and (b) all planned travel

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 22


DEPARTMENT OF HOMELAND SECURITY

Office of Inspector General

Audit of State Homeland Security Grants
Awarded to the American Samoa
Government

OIG-07-42



expenditures because the equipment and system (1) appeared to be for
general emergency operations center use, (2) were not identified by ASG
as high priority goals and objectives in its homeland security strategy, and
(3) did not provide connectivity and interoperability to coordinate
weapons of mass destruction response operations or provide chemical
and/or biological agent detection capability between local and interagency
organizations.

e Planning and Administration. ASG charged $4,000 for executive
leather chairs; $2,345 for a water purification system; $1,390 for deluxe
package cell phones, and $1,986 for printing under the FY 2002 grant, and
$3,406 for gasoline used by TOHS vehicles under the FY 2003 SHSGP-I
grant. Ineligible planning and administration charges totaled $13,127.

We classified these items as ineligible because the items were not included
in the ASG’s budget detail worksheets/spending budgets approved by
ODP as required under the ODP grant guides for FY 2002 SDPP and

FY 2003 SHSGP-I.

Unallowable Costs

We identified $975,315 in unallowable costs claimed by ASG against the
grants we reviewed. Specifically, we question $833,575 for equipment,
$30,803 for training, $12,539 for exercises, and $98,398 for planning and
administration because the expenditures did not meet the allowability criteria
in ODP’s grant guidance or the basic cost guidelines in OMB Circular A-87.
Unallowable costs are described below:

e Equipment. Unallowable equipment costs totaled $833,575:
$410,120 charged to the FY 2003 SHSGP-I grant and $423,455 charged to
the FY 2003 SHSGP-II grant.

FY 2003 SHSGP-I, ASG claimed $328,670 for vehicles and $81,450 for
equipment approved under the FY 2002 SDPP grant. (Total - $410,120).

o Vehicles purchased. ASG’s budget detail worksheet, approved by —
ODP, provided a budget of $396,000 to purchase eight chemical,
biological, radiological, nuclear, or explosive weapons incident
response vehicles (five cargo/passenger vans and three cargo trucks).
However, a TOHS purchase order supported an order for 10 vehicles
(7 vans and 3 crew cab trucks). While grant charges totaled only

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 9


While the fiber optic/intra-network was included in the ASG’s budget
detail worksheet’ and approved by ODP for FY 2003, it is included here
because it was part of the immigration computer system.

We question this expenditure because the system is a general-use system
used to identify individuals entering and departing America Samoa.
Further, it does not provide interagency coordination regarding weapons
of mass destruction response operations or provide chemical and/or
biological agent detection capability. In addition, this immigration
identification capability was not identified as a goal or objective in ASG’s
homeland security strategy submitted to ODP in fiscal year 2001.

Early warning broadcast system. TOHS provided $250,000 of FY 2004
funding to the U.S. Department of Commerce, National Oceanic and
Atmospheric Administration, National Weather Service (NWS) to acquire
an all-hazards early warning broadcast system. The purpose of the system
was to enhance the emergency communication capability of American
Samoa when a terrorist or natural disaster occurred. During the audit, we
confirmed with ODP that this system was not in ASG’s FY 2004 initial
strategy implementation plan.

The Memorandum of Agreement between the NWS and ASG purports to
treat the funding from ASG as a gift under the agency’s gift acceptance
authority, 15 U.S.C. § 1522. However, other parts of the agreement and
other documents such as a receiving report and a bill for collection belie
the nature of the transaction. The agreement provides that “ASG is
responsible for providing the NWS/PR [Pacific Region] with the required
advanced funding . . . to purchase and install the NWR system

specified. ...” Moreover, according to Department of Commerce
Administrative Order 203-9, the relied upon gift acceptance authority may
only be used if the donation constitutes “a bona fide gift or bequest rather
than a payment in exchange for goods or services (e.g., the donor has not
expressly or impliedly requested some particular Department action which
directly benefits the donor in return for the gift or bequest (i.e., a quid pro
quo))....” The grant funding was unavailable to make a gift to NWS; nor
was it available to purchase goods and services from another Federal
agency, absent specific statutory authority to do so.

Emergency operations center equipment and audio networking system.
TOHS purchased six digital plasma monitors and the audio networking

system for its emergency operations center and charged $25,800 for the
monitors to the FY 2003 SHSGP-II grant and $8,221 for the audio
networking system to the FY 2002 SDPP grant. We question these

3 ODP required budget detail worksheets to identify and describe the equipment to be purchased and the disciplines, i.e.,
first responder agency, that required the equipment.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 8


Appendix C
Summary of Questionable Costs

Summary of ASG Expenditures Reviewed and Questionable Costs (Spending)

Grant ASG Expenditures | Ineligible | Unallowable | Unsupported Costs
Program | Expenditures Reviewed Costs Costs Costs Questioned
FY 2002 $740,116 $577,388 $267,942 $12,539 $13,297 $293,778
FY 2003

Part -I 919,507 643,210 42,061 439,579 6,654 488,294
FY 2003

Part-II 1,225,356 835,783 25,800 498,483 124,597 648,880
FY 2004 313,223 291,949 250,000 24,714 7,451 282,165

Total | $3,198,202 $2,348,330 $585,803 $975,315 $151,999 | $1,713,117

Summary of ASG Expenditures Reviewed by ODP Grant Award and Budget Spending

Critical

Grant Planning and | Infrastructure
Program | Equipment Exercise Training | Administration. Protection Total
FY 2002 $537,796 $17,050 $0 $22,542 $0 $577,388
FY 2003

Part -I 596,799 0 30,262 16,149 0 643,210
FY 2003

Part-II 649,379 24,277 84,346 71,781 0 835,783
FY 2004 250,000 1,423 15,812 24,714 0 291,949

Total | $2,033,974 $42,750 | $130,420 $141,186 $0__| $2,348,330
1. Recap of ASG’s Ineligible Spending
Critical

Grant Planning and | Infrastructure
Program | Equipment Exercise Training | Administration. | Protection Total
FY 2002 $258,221 $0 $0 $9,721 $0_| $267,942
FY 2003

Part -I 38,655 0 0 3,406 0 42,061
FY 2003

Part-II 25,800 0 0 0 0 25,800
FY 2004 250,000 0 0 0 0 250,000

Total $572,676 $0 $0 $13,127 $0 | $585,803

Audit of State Homeland Security Grants Awarded to the American Samoa Government

Page 29



Appendix B
Funding Activities and Expend.

jitures

Funding Activities Budgeted by ASG and Approved by ODP

FY 2003 FY 2003
ODP-Approved Budget by FY 2002 SHSGP SHSGP FY 2004
Fund Category: SDPP Part I Part IL HSGP Totals

Equipment $571,000 $1,040,000 $1,900,000 $3,609,060 | _$ 7,120,061
\Exercise 34,000 260,000 200,000 255,000 749,008
[Training 0 78,000 650,000 1,050,340 1,778,341
\Planning & Administration 110,000 104,000 653,000 861,600 1,728,600
Critical Infra-structure
\Protection 0 0 523,000 0 523,000
Other _* 113,000 0 0 0 $113,001

Totals| $828,000 | $1,482,000 | $3,926,000 | $5,776,000 | $12,012,001

f* ODP awarded $828,000 but initially approved a budget spending plan of only $715,000 pending ASG

updates to its budget spending plan and budget detail worksheets.

Funds Expended and claimed by ASG*

FY 2003 FY 2003
Categories of Expended Funds FY 2002 SHSGP SHSGP FY 2004
SDPP Part I Part I HSGP Totals
\Equipment $550,681 $646,842 $ 752,052 $250,000 $2,199,575}
Exercise 17,050 $0 24,277 1,423 42,751
Training $0 30,262 84,346 15,812) 130,421
Planning. & Administration.
22,542 16,149 T1781 24,714) 141,186
\Personnel 116,036 161,069 168,837 $0 445,942!
\Other ** $33,807 $ 65,185 $118,063 $ 21,274 238,32!
Totals) $740,116 $919,507 | $1,225,356 $313,223] $3,198,202]

* Amounts rounded to whole dollars.

*«* Uncategorized grant expenditures reflected in ASG's "Transaction Listing"

Audit of State Homeland Security Grants Awarded to the American Samoa Government

Page 28


capabilities of ASG’s first responders nor sufficiently identified ways to solve
the homeland security vulnerabilities identified in the plans. For example, the
TOHS identified strategic weaknesses in general terms in its, FY 2003
strategic plan:

Territories must meet minimum standards of preparedness if
they are to effectively address the focus of ODP programs.
This strategy is designed to bridge this gap, however, it is
important to recognize that American Samoa must address the
replacement of antiquated basic emergency response
equipment and update training to effectively benefit from the
latest in emergency response technology and best practices.

Consequently, without a well-defined methodology for identifying and filling
critical gaps in its first responder capabilities, ASG procured equipment that
did not meet immediate needs of the first responders in American Samoa or
ensure ASG’s response to a terrorist event would be effective. For example,
ASG’s 1999 and 2003 strategic plans identified various first responder teams
needed by the Territory but only the hazardous material team, search and
rescue team, and decontamination team had been established. Other teams,
such as special weapons and tactics, bomb squad, technical rescue, heavy
rescue, metropolitan medical response system, public health, civil support,
and terrorism early warning teams had not been established.

While it may not be feasible to establish formal teams covering all of the
disciplines noted above, ASG should strive for a basic cadre of trained first
responders with critical capabilities needed to mitigate acts of terrorism. In
the mean time, ASG’s strategic plan should be a “road map” to enhancing
homeland security capabilities over time rather than a “wish list” of nice to
have equipment and capabilities. The plan should identify attainable goals
and objectives based on immediate risks and vulnerabilities and should have a
methodology to evaluate the accomplishment of specific goals and objectives.
Further, ASG should develop a methodology to assess its achievement of
homeland security goals and objectives. The plan should be a “living
document” that is updated regularly to identify new goals and objectives as
the basic homeland security capabilities are achieved.

TOHS comments. TOHS commented that the original strategy identified
some of the basic needs known at the time, such as providing basic training to
first responders, identifying equipment, and providing higher-level training
when the fundamental training was mastered. TOHS officials also recognized
that fundamental capabilities such as having an accredited police academy, a
fire fighter certification program, and a technical school to teach first
responder the basics are not currently in place within the Territory. As such,

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 5


transactions. Our audit confirmed the following ongoing weaknesses. in ASG’s
adherence to the federal requirements pertinent to first responder grants.

Maintaining internal control over federal programs. ASG did not maintain
appropriate internal controls over first responder grants as required by OMB
Circular A-133 and the Office of Justice Programs Financial Guide. In
particular, ASG did not properly manage or record grant expenditures. TOHS
officials informed us that the ASG Treasury centrally maintained all grant
related accounting systems and financial records for first responder grants
awarded in FYs 2002, 2003, and 2004. We requested and reviewed the first
responder grant expenditure reports and source documentation maintained by
the Treasury and provided to us. Treasury summarized first responder
expenditures by expenditure classification, i.e., personnel, travel, equipment,
supplies, etc.; however, Treasury did not classify costs by funding sources
and/or budget spending account, i.e., exercises, training fund, and planning
and administration, as required by the Office of Justice Programs Financial
Guide. We concluded that the historical costs and financial records generated
by Treasury’s systems did not adequately account for first responder grant
expenditures against ODP approved budget submissions for each of the fiscal
years reviewed. We reviewed the propriety of grant expenditures by manually
examining Treasury supporting documentation for individual expenditure
transactions.

Performing and submitting required audits in a timely manner. ASG did not
comply with the SAA requirement of OMB Circular A-133 because it did not

perform and submit the required audit reports in a timely manner.’ OMB
Circular A-133 requires federal grantees that expend more than $500,000 of
federal grant funds in a fiscal year to have a SAA audit performed of all major
programs and to report the findings to the Federal Audit Clearinghouse. ASG
did not submit the required FYs 2002, 2003, and 2004 SAA audits to the
Federal Audit Clearinghouse until February 28, 2005, August 16, 2005, and
March 14, 2006, respectively. The FY 2005 SAA audit was submitted to the
Federal Audit Clearinghouse on time (June 30, 2006).

The delinquency of the SAA audits and the resolution and implementation of
recommendations contained in these reports contributed to the existence of
long-standing ASG financial management deficiencies. DOI OIG, as late as
September 2005, reported ASG was designated a high-risk grantee status due
to these long-standing deficiencies. Further, the four SAA audits identified
above resulted in qualified opinions related to financial management
deficiencies, reportable material control weaknesses, and questionable costs

5 The SAA audit report for ASG is due 9 months after the end of ASG fiscal year/ period audited (September 30").

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 19


will continue to provide extensive oversight and technical assistance to
TOHS.

ODP acknowledged a duplication of managerial effort within ASG and
commented that homeland security roles and responsibilities are vaguely
defined and have resulted in extensive personnel costs with little yield or
tangible results demonstrated from these personnel efforts.

ODP also commented that TOHS has not completed a needs assessment
although it has been recommended repeatedly by ODP. ODP indicated it did
not know if ASG established or used the Territory Preparedness Task Force,
although grant guidance FYs 2002 and 2003 required the formation of
working/task groups to collectively manage the State Homeland Security
Grant Programs. ODP stated that ASG has failed to comply with this
initiative — instead it has chosen to work solely under the TOHS umbrella.
The ODP agreed with the development of the ASG Task Force and that the
task force submits monthly status reports or allows ODP to participate
remotely via teleconferences.

Finally, ODP commented that with no pass-through funding requirement,
there is a plethora of mismanagement as cited in our report. While ODP
agrees that a high-risk grantee designation may be imminent, there does not
appear to be any tangible benefit from a high-risk designation in light of the
greater oversight currently being given to TOHS by the Office of Grants and
Training.

OIG comments and analysis. We acknowledge the collective effort and
progress made by both TOHS and ODP in resolving the grants management
and accountability issues identified in this finding. Nonetheless, this finding
will remain open for follow up action until we receive supporting
documentation from ODP as to the effectiveness of the corrective actions
taken and planned.

Recommendations

We recommended that the Acting Assistant Secretary, Office of Grants and
Training:

1. Actively partner with TOHS to: (a) identify deficiencies in immediate
equipment and training needs and overall capabilities of ASG’s first
responders; and (b) develop a comprehensive State Homeland Security
Strategy and Implementation Plan that clearly articulates measurable
homeland security goals, objectives, and implementation milestones that
will ensure consistent improvement of ASG’s ability to respond to and
recover from acts of terrorism.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 25


Executive Summary

We audited American Samoa Government’s (ASG’s) management of state
homeland security grants (first responder grants) awarded by the Office for
Domestic Preparedness during fiscal years (FY) 2002, 2003, and 2004. Our
audit objective was to determine whether ASG developed and implemented an
appropriate homeland security strategic plan and grants management practices
and controls. See Appendix A for additional details on the audit’s objective,
scope, and methodology and Appendix B for funding activities and
expenditures.

ASG’s strategic plans were fundamentally flawed inasmuch as they failed to
sufficiently identify deficiencies in immediate equipment and training needs
and overall capabilities of ASG’s first responders or sufficiently identify ways
to solve the homeland security vulnerabilities identified in the plans. In
addition, we identified systemic deficiencies in ASG and Territorial Office of
Homeland Security (TOHS) grants management practices and controls similar
to the audit findings reported by the U.S. Government Accountability Office,
the Department of Interior Office of Inspector General, and by independent
auditors conducting audits under Office of Management and Budget (OMB)
Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations.

We questioned over $1.7 million in costs expended and claimed against the
grants as of December 31, 2004, from our examination of $2.3 million in
costs, and we recommended that the Office for Domestic Preparedness review
and report on the eligibility of the questionable expenditures we identified.
We are also including in this report, four recommendations for the Office of
Grants and Training to consider in improving its oversight of the ASG’s
management of first responder grants.

This final report includes a synopsis of the verbal and written responses
provided by ODP and TOHS together with our comments and analysis of
those responses.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 1


different federal grant program, and (c) the ASG Treasury did not have the
travel expense reports to substantiate the $21,108 in charges to the grant.

FY 2003 SHSGP-II. For reasons similar to those mentioned above, we
question $9,695 as unallowable in training/travel expenditures, including:

a) $5,228 in travel costs for an ASG official who traveled to Washington,
DC on a travel order approved for the Governor’s Legal Counsel,

b) $2,385 in conference room rental costs at a local hotel to debrief ASG
officials on a federally declared disaster, Cyclone Heta,

c) $1,356 in a duplicate charge to the training budget, and

d) $726 in a travel-related advance to an ASG employee for expenses at a
city other than where training took place (Las Vegas, NV versus
Keystone, CO).

e Exercises. We question $12,539 in exercise-related costs because ASG
budgeted, and ODP approved, $9,500 in FY 2002 exercise funding for the
following purposes:

a) $4,300 in travel and related costs for one western Samoan and one
regional representative to attend a tabletop exercise scheduled in
American Samoa in November 2003, and

b) $5,200 for a three member Emergency Response Exercise Design
Team to attend exercise design courses in Hawaii in July 2003.

Rather than expending the FY 2002 SDPP funds for the purposes above,
ASG charged $12,539 for three TOHS officials to participate in a
chemical tabletop exercise in the Commonwealth of Northern Mariana
Islands. We question the $12,539 as an unallowable expenditure because
the travel spending was not approved by ODP and the ASG Treasury did
not have expense reports to substantiate the costs.®

e Planning and Administration. Unallowable planning and administration
expenditures charged to the grants totaled $98,398. We classified these
expenditures as unallowable because they did not comply with ODP grant
guidance.

6 Sections 3.1 to 3.3 of ASG’s Travel and Transportation Policy Manual require all travel expense reports to be approved
by the authorized signatory agent for the applicable department. The Manual also requires that Travel Expense Voucher
forms be used to report travel expenses to the Treasury Travel Office for processing and filing within 30 days after
completion of the travel.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 12


e Training — ASG’s unsupported training expenditures totaled $43,501;
$6,654 associated with the FY 2003 SHSGP-I grant; $30,819 associated
with FY 2003 SHSGP-II grant; and $6,028 associated with the FY 2004
HSGP grant.

e Exercises — Due to a lack of supporting documentation, we could not
verify that $3,316 in FY 2002 SDPP costs, $10,588 in FY 2003 SHSGP-IL
costs, and $1,423 in FY 2004 HSGP costs were proper.

e Planning and Administration — ASG did not support $9,981 in
expenditures charged to the FY 2002 SDPP grant and $5,462 charged to
the FY 2003 SHSGP-II grant.

TOHS comments. TOHS acknowledged the costs we questioned but
believes that with sufficient time and copies of the specific documents we
obtained during the audit, it could justify all disbursements of homeland
security grant funds.

ODP comments. ODP concurred with the majority of costs we questioned in
the report, but said that some fall within a “gray area” of eligibility and
allowability. At the exit conference, ODP provided clarifications and
submitted written explanations as to why some of the costs could be
considered eligible or allowable and indicated that it would require additional
information and time to fully document and respond to other questioned costs.
ODP commented that although ASG can justify some of the purchases, in
some cases, ASG charged these purchases to the wrong grant award year
during which such purchases were not authorized. ODP also provided
comments on the specific items questioned in the report as follows:

e Ineligible Costs - Equipment

Immigration computer system & fiber optic/intra-network ($288,655).
While ODP concurred that these costs were unallowable under FY 2002

grant guidance and agreed that this expenditure should be questioned, it
commented that the lack of immigration and customs computerized
system capability made this purchase a necessity for ASG. However,
ODP added that although ASG included this system as a goal in its
homeland security strategy and in other documentation and reports it
submitted to ODP, it is incumbent that the grantee align procurements in
the strategy with eligible costs under the grant.

Early warning broadcast system ($250,000). ODP concurred with the

questioned cost and said that grantees are prohibited from using federal
grant funds to pay for goods and services provided by a different federal
agency.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 14


Table of Contents/Abbreviations

Executive Summary
Introduction
Results of Audit

ASG Did Not Adequately Develop and Implement its Strategic Plans
ASG’s Grant Program Expenditures Did Not Comply with Grant Guidelines
ASG Grants Management Practices and Controls Continue to be Problematic .
August 2006 Preparedness Officer’s Update and Auditor Comments
Recommendations ve

Appendices

Appendix A: Objective, Scope, and Methodology.
Appendix B Funding Activities and Expenditures
Appendix C: Summary of Questionable Costs...
Appendix D Previous Federal Audits..........
Appendix E: Major Contributors to this Repor

Appendix F: Report Distribution
Abbreviations
ASG American Samoa Government
CFR Code of Federal Regulations
DHS Department of Homeland Security
DOL Department of Interior
FY Fiscal Year
GAO Government Accountability Office
HSGP FY 2004 Homeland Security Grant Program
NWS National Weather Service
ODP Office for Domestic Preparedness
OIG Office of Inspector General
OMB Office of Management and Budget
SDPP FY 2002 State Domestic Preparedness Program
SHSGP FY 2003 State Homeland Security Grant Program (also SHSGP-I and SHSGP-II)
TOHS Territorial Office of Homeland Security

Audit of State Homeland Security Grants Awarded to the American Samoa Government



Additional Information and Copies

To obtain additional copies of this report, call the Office of Inspector General (OIG) at
(202) 254-4100, fax your request to (202) 254-4285, or visit the OIG web site at
www.dhs.gov/oig.

OIG Hotline

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal
or noncriminal misconduct relative to department programs or operations, call the
OIG Hotline at 1-800-323-8603; write to DHS Office of Inspector General/MAIL
STOP 2600, Attention: Office of Investigations - Hotline, 245 Murray Drive, SW,
Building 410, Washington, DC 20528, fax the complaint to (202) 254-4292; or email
DHSOIGHOTLINE @dhs.gov. The OIG seeks to protect the identity of each writer
and caller.



would be halted and only accomplished after pre-approval by the program
office.

4. To accommodate TOHS’ expenditure and draw down of grant funds, the
Preparedness Officer and TOHS have implemented an expenditure batch
approval process wherein a spreadsheet of expenditures is submitted
bi-weekly to the program office for review. The Preparedness Officer
uses the spreadsheet to ensure all expenditures are related to specific goals
and objectives, authorized equipment list, or responder knowledge base.

5. The Preparedness Officer indicated that the Office of Grant Operations
provided on-site financial technical assistance in November 2005. In
addition, biannual strategy implementation reporting technical assistance
was provided in November and December 2005.

6. The Preparedness Officer now conducts weekly conference calls to
discuss current events and assess needs and to bring the emergency
management and homeland security elements of ASG together to foster a
unified approach to expending grant funds.

Auditor Comments

While the above ODP actions are noteworthy, ASG continues to experience
systemic internal control deficiencies that inhibit financial accountability over
homeland security grant funds. Similar to the FY 2003 SAA audit report for
ASG, the single audits for the fiscal periods ended September 30, 2004, and
September 30, 2005, reported that ASG’s system of financial accounting and
reporting is inadequate. The reports indicated that:

e ASG audited financial reports show significant failures in the internal
control structure related to general accounting and grants administration
and that identified controls may not prevent or detect misstatement of
accounting information. For example, the auditors could not verify the
accuracy of the “Due To/From Other Funds — Pooled Cash” account due
to an inability to rely on the internal control system.

e Appropriate management oversight and review and approval of
transactions appeared to be lacking. In that regard, ASG had difficulty
locating documentation, and thus could not provide the auditors adequate
evidentiary matter in support of various recorded transactions. In addition,
the lack of documentation supporting some accounting records resulted in
adjustments to various accounts.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
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Office of Inspector General

U.S. Department of Homeland Security
Washington, DC 20528

axe) Homeland
‘9 Security

Si
ee

70

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2

MAY 0.2 2007

Preface

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was established by
the Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector General
Act of 1978. This is one of a series of audit, inspection, and special reports prepared as part of our
oversight responsibilities to promote economy, effectiveness, and efficiency within the department.

This report presents the results of the audit of homeland security grants awarded to the American
Samoa Government (ASG) during fiscal years 2002, 2003, and 2004. It assesses ASG’s homeland
security strategic plans, and grant spending and management practices and controls. It is based on
interviews with employees and officials of relevant agencies and institutions, direct observations,
and a review of applicable documents.

The recommendations herein have been developed to the best knowledge available to our office, and
have been discussed in draft with those responsible for implementation. It is our hope that this
report will result in more effective, efficient, and economical operations. We express our
appreciation to all of those who contributed to the preparation of this report.

Ss

t
kids L. Skinner

Inspector General


Appendix D

Previous Federal Audits

DOL OIG Report 2002-I-0017, March 2002, Management Challenges for
Insular Area Governments, An Opportunity for Improvement. This report

assessed the management challenges for insular area governments, including
ASG. The report attributed ASG’s long-standing financial management
deficiencies to the lack of adequate audit resolution and implementation of
audit recommendations. The report also indicated that ASG’s 1996 Single
Audit found that: 1) ASG’s system of financial accounting and reporting was
inadequate, 2) there were significant failures in the operation of computer
systems, 3) there were significant weaknesses in the internal control structure
related to general accounting and grant administration, and 4) there was a lack
of appropriate management oversight, including a lack of review and approval
of financial transactions.

The report recommended that ASG improve financial management to meet the
requirements of generally accepted accounting principles, the Insular Areas
Act of 1982, the Single Audit Act of 1984 as amended in 1996, Federal grant
management requirements, and appropriate local laws and regulations.
Specific recommendations included (a) upgrading existing financial
management systems, (b) ensuring that grant managers receive ongoing
training on how to effectively administer federal grants, (c) controlling
procurement and travel expenditures and providing ASG operating entities
with the resources needed to carry out operational responsibilities, and

(d) improving general program operations by providing operating entities
qualified and adequately trained staff, establishing an effective property
accounting system, and establishing a comprehensive audit follow-up system.

GAO Report 05-41, December 17, 2004, American Samoa: Accountability for
Key Federal Grants Needs Improvement. This report attributed grants

management deficiencies to a shortage of professional staff with adequate
professional training thereby limiting financial oversight of federal funds and
delivery of certain services. The report also indicated that ASG had limited
accountability due to lack of required Single Audits and reported instances of
theft and fraud by American Samoa government officials, and that federal
grantors reacted slowly to delinquent single audits. GAO recommended that
the Secretary of Interior” coordinate with other granting federal agencies to
designate ASG as a high-risk grantee at least until it completed all delinquent
single audits and took steps to fully comply with the Single Audit Act.

DOI OIG Report P-IN-AMS-0017-2003, September 2005, American Samoa:
Top Leadership Commitment Needed to Break the Cycle of Fiscal Crisis.

This report assessed ASG’s implementation of a 2001 Reform Plan and
related agreements and echoed the recommendation made by GAO. The
report recommended that the DOI Office of Insular Affairs assist ASG in

"? The DOI, Office of Insular Affairs, has responsibility for coordinating federal policy in American Samoa.

Audit of State Homeland Security Grants Awarded to the American Samoa Government

Page 31


2. Review and report on the eligibility of the $1.7 million in homeland
security grant expenditures questioned in this report and disallow those
costs determined to be ineligible, unallowable, or unsupported.

3. Direct TOHS to establish practices and controls that allow it to account for
grant expenditures by homeland security goal and objective and provide
TOHS with technical assistance to create a financial and grant
accountability system that (a) identifies expenditures applicable to the
appropriate grant year, (b) documents actual expenditures by fund
category based on ODP/Office of Grants and Training-approved budgets,
and (c) maintains the documentation required to appropriately support all
grant expenditures.

4. In light of the “high-risk” grantee designation imposed on ASG by DOI
and the results of the “program specific” audit of TOHS, (a) make greater
use of existing authorities, up to and including designating TOHS as a
“high-risk” grantee, until TOHS strengthens management controls and
practices; (b) monitor TOHS progress in improving grant accountability
and ensure that it provides all first responder grant reporting
documentation required by the grant award; and (c) initiate appropriate
and timely sanctions should TOHS fail to meet agreed-to programmatic
and financial reform goals and milestones.

5. Require that TOHS and the Territorial Emergency Management
Coordinating Office'' partner with the Territory Preparedness Task Force
established by the Governor on September 27, 2001, to develop and
administer the state strategic plan.

"| The Territorial Emergency Management Coordinating Office was established in the Office of the Governor and is
under the supervision and control of the Governor. This office is responsible for preparing and maintaining a current
territorial disaster assistance plan.

Audit of State Homeland Security Grants Awarded to the American Samoa Government
Page 26


$360,670 ($164,405 invoiced by a car dealer and a $196,265
unsupported journal entry to the accounting records“),

(1) ASG receiving reports indicated receipt of only five vehicles,*

(2) only one was outfitted as a chemical, biological, radiological,
nuclear, or explosive weapons incident response vehicle, and (3) other
vehicles identified as weapons of mass destruction/chemical,
biological, radiological, nuclear, or explosive weapons vehicles were
used as general use vehicles and as storage for personal protective
equipment.

Grant guidance for FY 2003 SHSGP-I allowed only for the purchase
of vehicles that were outfitted as chemical, biological, radiological,
nuclear, or explosive weapons incident response vehicles. Because we
could only identify one fully outfitted chemical, biological,
radiological, nuclear, or explosive weapons incident response vehicle,
we question $328,670 of the $360,670 posted to ASG’s accounting
records ($360,670 less $32,000 for one chemical, biological,
radiological, nuclear, or explosive weapons incident response van).

Equipment associated with SDPP. ASG expended $81,450 against
the FY 2003 SHSGP-I grant for equipment approved by ODP under
the FY 2002 SDPP grant. ASG expended the FY 2003 grant funds
because it had exhausted its FY 2002 funds on ineligible acquisitions
such as the immigration computer system. The Office of Justice
Programs financial guide governed the use of grant funds and
prohibited the commingling of funds on either a program-by-program
or project-by-project basis. Further, the guide indicated that funds
specifically budgeted and/or received for one project may not be used
to support another project.

FY 2003 Part-II. ASG charged this grant $423,455, including $345,736
for vehicle purchases and $77,719 for fire department operational
equipment.

o Vehicles purchased. TOHS received ODP approval, purchased, and

received eight additional vehicles at a cost of $345,736. While grant
guidance authorized vehicle purchases, OMB Circular A-87 and the
Office of Justice Programs financial guide both refer to the
“reasonableness” of the purchase and compliance with terms and

“'TOHS and the Office of the Treasurer could not provide an explanation or supporting documentation for the journal
entry and TOHS did not notify ODP about the deviation from the approved ODP budget, the favorable budget variance
of $35,330 ($396,000 - $360,670), or how ASG reprogrammed and spent the residual budget amount.

5 Receiving reports #118 and #121 show that ASG received only five vehicles --two 2004 E-Series commercial vans and
three 2004 E-150 series 7 seat vans. We could not locate the receiving report for the other five vehicles ordered nor did
we physically inventory TOHS’ vehicle fleet.

Audit of State Homeland Security Grants Awarded to the American Samoa Government

Page 10


FY 2003 SHSGP-I — We questioned $8,351 in administrative travel costs
that were not listed on the budget detail worksheet approved by ODP.

FY 2003 SHSGP-II - $65,333 in expenditures including:

a) $44,291 for the purchase of general-use, emergency management
software to be used in the emergency operations center,

b) $9,730 in the consulting costs of a TOHS engineer for services related
to the ASG’s Emergency Operations Center,

c) $4,950 for the purchase of two air conditioners,
d) $3,187 in travel costs to Florida to procure fire trucks,

e) $847 for expenses relating to the Emergency Operations Center grand
opening ceremony,

f) $804 for a payment of a delinquent phone bill,
g) $790 for installing computer software, and
h) $734 for procuring steel rods, flat bars, and pipes.

FY 2004 HSGP - $24,714 in expenditures including $4,275 for technical
consulting services related to the maintenance of the TOHS website, and
$20,439 for National Environmental Policy Act review services related to
the emergency operations center.

Unsupported Costs

We identified $151,999 in costs expended against the grants that were not
adequately supported to ensure that the expenditures were proper. We
questioned these expenditures because: a) the documentation to support the
spending did not meet the criteria stipulated in the grant guidance provided by
ODP, and b) the spending did not meet the basic cost guidelines of OMB
Circular A-87. Unsupported expenditures charged to the ODP grant programs
are described below:

¢ Equipment - ASG made $77,728 in advance payments against the
FY 2003 SHSGP-II grant to two vendors for procurement of equipment
and services. However, accounting records and vendor payment files did
not sufficiently document that ASG received the equipment and/the
services had been performed.

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