DEPARTMENT OF HOMELAND SECURITY

Office of Inspector General

SEMIANNUAL REPORT TO THE CONGRESS

April 1, 2003 - September 30, 2003
April 1, 2003 – September 30, 2003

DOLLAR IMPACT (in thousands)

Questioned Costs ....................................................................................................................$46,230

Funds Put to Better Use ............................................................................................................$4,124

Management Agreement That Funds Be:

Recovered......................................................................................................................$504

De-obligated ...............................................................................................................$4,124

Funds Recovered (Investigative Recoveries)...............................................................................$213

Funds Recovered (Audit Recoveries).....................................................................................$12,079

Fines and Restitutions...............................................................................................................$1,422

Administrative Cost Savings and Recoveries..............................................................................$791

ACTIVITIES

OIG Reports Issued..........................................................................................................................67

Contract Reports Processed ...............................................................................................................0

Single Audit Reports Processed.......................................................................................................25

Investigations Initiated...................................................................................................................423

Investigations Closed.....................................................................................................................561

Open Investigations .......................................................................................................................480

Investigations Referred for Administrative Action........................................................................173

Investigations Accepted for Prosecution..........................................................................................36

Investigations Declined for Prosecution ............................................................................................7

Arrests..............................................................................................................................................54

Indictments.......................................................................................................................................57

Convictions......................................................................................................................................50

Personnel Actions...............................................................................................................................4

Total Complaints Received .........................................................................................................4,226

Total Hotlines Received..............................................................................................................1,086

Complaints Referred (to programs or other agencies)................................................................2,540

Complaints Closed......................................................................................................................3,435

Office of Inspections

During this six-month reporting period, the Office of Inspections, Evaluations, and Special Reviews initiated 11 

reviews and completed 2 reviews. The Office issued 2 public reports, one of which contained 9 recommendations for 

program improvements and corrective actions.

Statistical Highlights

of OIG Activities
DEPARTMENT OF HOMELAND SECURITY

Office of Inspector General

Washington, DC 20528

October 31, 2003

The Honorable Tom Ridge

Secretary

The U.S. Department of Homeland Security

Washington, DC 20528

Dear Mr. Secretary:

Section 5(b) of the Inspector General Act of 1978, as amended, requires me to submit to you 

by today our semiannual report to the Congress for the period ended September 30, 2003, 

and it requires you to transmit this report to the appropriate congressional committees and 

subcommittees no later than thirty days hence, along with any report of your own related thereto 

that you may wish to draft and append. Enclosed herewith please find our report, the second 

completed since our establishment and the first covering a full six month operating period. 

On an admittedly smaller scale, the Office of Inspector General (OIG), like the Department of 

Homeland Security (DHS) itself, is an amalgam of different offices with different missions, 

traditions, cultures, areas of expertise, and skill sets, with a base of operations in Washington, 

D.C. and field offices throughout the country. Over the last six months, we have met the 

challenge of creating a cohesive, integrated, and fully functional organization to oversee the 

programs and activities of arguably the most important department in the federal government. 

Our inspectors, auditors, and investigators have begun to examine each of DHS’ five directorates, 

as well as its two freestanding components, in detail. To highlight one project of particular 

importance, we are conducting an audit of the department’s first financial statements. With 

regard to financial management issues, it is imperative that sound financial practices and strong 

controls be instituted at the start of the department’s operations, and that progress going forward 

is tracked and measured. 

Recognizing the daunting nature of DHS’ mission and the various constraints under which it 

labors, we have endeavored in each of the reports referenced in the pages that follow to give the 

department due credit for what we believe to be its successes to date. In those instances where 

we believe there is room for improvement, we have made recommendations to that effect. We are 

hopeful that, at least as a general rule, DHS and OIG will agree on our recommendations’ merit 

and that, accordingly, our recommendations will be promptly implemented. 
ii 

As you know and as this report signifi es, the Inspector General has a dual reporting 

responsibility, to the Congress as well as to you. During this reporting period, OIG has provided 

numerous briefi ngs to congressional members and their staffs on completed and ongoing work, 

and members of my senior staff have testifi ed at hearings. We have received numerous requests 

from members to examine various aspects of DHS operations, and we anticipate that such 

requests will increase exponentially as time goes by.

While our workload has steadily increased during this period, we have not been given additional 

resources. Given the complexity of the department’s mission and the fact that it is a major 

contractor and grant dispenser, it is critical that OIG cover the full gamut of DHS programs and 

operations. The fewer resources OIG has to root out waste, fraud, abuse, and mismanagement in 

the department, the greater the potential for such pitfalls.

Another area of concern is that we are encountering some resistance to our efforts to discharge 

our statutory responsibility to be the primary law enforcement entity for investigating criminal 

and non-criminal misconduct on the part of employees, contractors, and grantees. Allegations of 

criminal and serious non-criminal wrongdoing on the part of department employees, contractors, 

and grantees should be promptly reported to OIG so that we can determine for ourselves whether 

the matter is serious enough to warrant our own investigation. And, each employee must be 

free to report such allegations directly to the OIG without being obliged fi rst to report such 

allegations to department managers. Otherwise, the law’s provisions will not be fully enforced, 

and you, the Congress, and the American people will lack the assurance of an independent entity 

outside the management chain that internal wrongdoing is being thoroughly and aggressively 

investigated.

On a positive note, at least one department component has reached out to OIG to request our 

advice on an important matter. We welcome such requests to provide consultative services, 

and we are hopeful that more department managers will make such requests of us. Though our 

resources are limited, responding to department and congressional requests will always be a 

priority. We would especially welcome any request that you might make of us. 

In this the 25th anniversary year of the creation of statutory OIGs, we are pleased to present you 

with this report. We look forward to continuing to work with you and your leadership team to 

make the department as effective, effi cient, and economical as it can be. 

Clark Kent Ervin

Acting Inspector General

with this report. We look forward to continuing to work with you and your leadership team to 

make the department as effective, efficient, and economical as it can be. 

Clark Kent Ervin

Acting Inspector General
iii

Table of Contents

Letter to the Secretary.............................................................................................. i

Executive Summary.................................................................................................1

Department of Homeland Security Profile...............................................................3

Office of Inspector General Profile ..........................................................................4

Summary of Significant Activity by Directorate

• Border and Transportation Security...........................................5

• Bureau of Citizenship and Immigration Services....................17

• Emergency Preparedness and Response ..................................18

• Management.............................................................................34

Other OIG Activities..............................................................................................37

• Oversight of Non-DHS Audits

• Audit Reports Unresolved Over Six Months

Congressional Briefings and Testimony ................................................................38

Legislative and Regulatory Review.......................................................................40

OIG Senior Management .......................................................................................41

Appendices.............................................................................................................44

Index to Reporting Requirements..........................................................................52

Acronyms...............................................................................................................53
iv 
1

Executive Summary

This is the second Semiannual Report to the Congress issued by the Department 

of Homeland Security’s (DHS) Office of Inspector General (OIG) since the 

establishment of the department in January, 2003. It is issued pursuant to the 

provisions of Section 5 of the Inspector General Act of 1978, as amended, and 

covers the period from April 1, 2003, to September 30, 2003. All activities and 

results reported herein fall within this reporting period, unless otherwise noted. 

The report is organized to reflect the organization of the department and OIG.

The OIG has a number of significant accomplishments to report for the last six 

months of Fiscal Year 2003. Of our initial accomplishments, the consolidation of 

the respective operations of and the 456 employee slots from various OIGs that 

had previously overseen the work of whole or partial departments and agencies 

that are now part of DHS into one functioning, cohesive, and DHS focused 

organization was the most challenging. Specifically, we: (1) maximized our 

intellectual capital by staffing projects, where possible, with not only employees 

with pre-existing expertise in a given issue area, but also with employees new to 

the subject matter; (2) co-located the approximately 170 Washington-based OIG 

employees by consolidating our five office locations into one, resulting in an 

estimated savings of more than $300,000 and the creation of an esprit de corps; 

(3) effected a dynamic, interactive relationship with the 191 OIG field offices 

around the country, by means of periodic visits to the field by the Acting Inspector 

General and other senior headquarters managers and from field managers to 

headquarters, as well as by staffing projects, where feasible, with personnel from 

different office locations; and (4) provided such administrative services (i.e., a 

common payroll system, a common electronic mail communication system, and 

personnel, budgeting, procurement, training, and travel related support through a 

contract with an independent service provider) as were needed to effect a seamless 

transition from legacy OIGs to DHS OIG and to facilitate ongoing operations. 

In addition, during this reporting period, we concluded inspections, audits, and 

investigations of our own, as opposed to the first reporting period, when we 

essentially summarized the homeland security related work of the legacy OIGs 

and began to lay out our projected inspection, audit, and investigative program 

for the rest of the fiscal year. Using the compilation of legacy Inspector General 

1

 DHS OIG acquired 21 field offices throughout the country from legacy OIGs. During the reporting period, 

we closed two of those offices and combined their operations with those of a nearby office.
2 

concerns titled “Significant Management Challenges Facing DHS” as a guidepost, 

we initiated inspections, evaluations, reviews, and/or audits relative to all five of 

DHS’ directorates, as well as the two “stand alones,” the U.S. Coast Guard and 

the U.S. Secret Service. 

To be specific, we completed four “management reviews” related to: (1) the 

Transportation Security Administration’s (TSA) baggage screener training 

program; (2) the department’s information technology security program; (3) the 

firefighters assistance program; and (4) the national flood insurance program. We 

issued 72 inspection and audit reports, initiated follow-up action on 233 reports 

issued by other OIGs relating to DHS programs, and processed an additional 25 

reports on DHS programs that were issued by non-DHS OIG auditors. 

Our audits, inspections, and investigations resulted in questioned costs of 

$46,230,246; recoveries, restitutions, fines, funds put to better use, and costs 

savings totaling $18,416,243; and commitments from DHS management to 

recover and de-obligate an additional $4,672,836. Our investigators closed 

561 investigations, indicted and/or arrested 111 people, convicted 50 people, 

and closed 3,435 complaints received through the newly established hotline. 

To further our investigative program, we signed memoranda of understanding 

with the United States Coast Guard, the department’s Office of Civil Rights and 

Civil Liberties, the Bureau of Citizenship and Immigration Services; and the 

Criminal Section of the Department of Justice’s Civil Rights Division. We also 

devoted significant resources to reviewing disaster costs and grant recipients’ 

compliance with applicable laws and regulations. We visited several disaster field 

offices immediately after disasters occurred, and assisted federal managers with 

disaster response operations. We conducted audits of 60 sub-grantees. Finally, we 

continued to support DHS management by serving in an advisory or consultative 

capacity on various task forces, working groups, and councils.
3

Department of

Homeland Security Profile

On November 25, 2002, President Bush signed the Homeland Security Act 

(P.L.107-296), officially creating DHS with the primary mission of protecting 

the American homeland. On January 24, 2003, DHS became operational. 

Formulation of the new department took a major step on March 1 when, 

in accordance with the President’s reorganization plan, 22 agencies and 

approximately 180,000 employees were transferred to the new department. 

By September 30, 2003, all remaining transfers to the new department were 

complete.

The department’s first priority is to protect the nation against further terrorist 

attacks. Component agencies analyze threats and intelligence, guard our borders 

and airports, protect our critical infrastructure, and coordinate the response of our 

nation to emergencies. 

The department has been organized into the following five directorates:

• Border and Transportation Security

• Emergency Preparedness and Response

• Science and Technology

• Information Analysis and Infrastructure Protection 

• Management

Other critical components of DHS include:

• United States Coast Guard

• United States Secret Service 
4 

The Homeland Security Act of 2002 provided for the establishment of an OIG in 

DHS by amendment to the Inspector General Act of 1978 (P.L-95-452). By this 

action, Congress and the administration ensured independent and objective audits, 

inspections, and investigations of the operations of the department.

The Inspector General is appointed by the President, confirmed by the Senate, 

and reports directly to the Secretary of DHS and to the Congress. The Inspector 

General Act ensures the Inspector General’s independence. This unique feature 

enhances the OIG’s ability to pursue fraud, waste, and abuse aggressively and 

to provide objective and credible reports to the Secretary and Congress as to the 

economy, efficiency, and effectiveness of DHS’ programs and operations. 

The OIG is authorized to have 456 full-time employees. The OIG is comprised of 

five functional components, and is based in Washington, D.C. and 19 field offices 

throughout the country.

Department of Homeland Security

Office of Inspector General

Management Team

Office of

Inspector General Profile

Acting Inspector General

Clark Kent Ervin

- - - - - - - - - - - - - - -

Deputy Inspector General

Richard L. Skinner

Executive Assistant

Congressional and Media

Liaison

Tamara Faulkner

Counsel to the IG

Richard N. Reback

Staff Assistants

Assistant

Inspector General

Administrative

Services

Edward Cincinnati

Assistant

Inspector General

Audits

J. Richard Berman

Assistant

Inspector General

Inspections,

Evaluations &

Special Reviews

Robert L. Ashbaugh

Assistant

Inspector General

Investigations

Elizabeth Redman

Assistant

Inspector General

Information

Technology

Frank Deffer
5

Summary of Significant

Activity by Directorate

Border and Transportation Security

Office of Inspections, Evaluations, and Special Reviews

TSA Checked Baggage Screener Training and Certification

 

Newspaper articles reported that Transportation Security Administration (TSA) 

airport baggage screeners were given the answers to the questions prior to taking 

the final examination for certification. Senator Chuck Schumer requested an 

investigation into the allegations. TSA agreed to do so, confirmed that 22 of the 

25 questions on the final examination were the same as those used for daily lesson 

quizzes, concluded that the testing was conducted as prescribed by TSA, and 

found no misconduct on the part of the instructors. 

When the OIG learned of TSA’s conclusions, we initiated our own review. We 

were disturbed to learn that the screeners had, in fact, been given the answers to 

the final examination beforehand and to learn that TSA saw nothing wrong with 

this. Our review confirmed that many of the final examination questions were 

identical or similar to questions that were given to the examinees in practice 

examinations. Furthermore, we found that many of the answers to the questions 

were obvious. Accordingly, there could be no assurance from the testing program 

that the examinees had been trained to identify explosive devices in checked 

baggage. In response to the OIG report, TSA promises to revise its testing 

program. The OIG will monitor this and undertake a complete review of TSA’s 

testing and training programs.

Office of Investigations

Immigration And Customs Enforcement (ICE)

April Fool’s Prank Reveals Flaws in Alien Detention System

The DHS OIG recently concluded an investigation that found that an employee 

whose official duties involved both Citizenship and Immigration Services (CIS) 

and Immigration and Customs Enforcement (ICE) sent an “April Fool’s” e-mail 
6 

message to 16 deportation officers (DOs) and supervisors that resulted in the 

unauthorized release of a detainee. Fortunately, the detainee, who had a prior 

conviction for kidnapping, surrendered himself to ICE DOs two days later without 

incident. This incident was referred to the local United States Attorney’s Office 

for prosecution of the employee who sent the e-mail, but the matter was declined. 

In this case, on April 1, 2003, the employee’s government computer was used 

to send the “April Fool’s” e-mail to 16 ICE DOs and supervisors, advising them 

that a detainee’s U.S. citizenship had been established with a Puerto Rican birth 

certificate, thereby permitting the detainee’s release. At the end of the e-mail, the 

employee wrote, “Now about that bridge I’m selling. April Fools!” Nine minutes 

later, the employee sent a second e-mail that began by saying, “In case you didn’t 

get to the end of my previous message, here’s what really happened today.” In that 

message, the employee reported that the detainee had been ordered deported to the 

Dominican Republic and not released, as the employee had previously reported. 

On April 2, 2003, one of the DOs who received the e-mails failed to see the “April 

Fool’s” reference in the first e-mail and also failed to read the second e-mail 

advising that the first e-mail was intended to be a joke. Consequently, the DO 

signed the internal paperwork that resulted in the detainee’s unauthorized release 

from a local county jail. The DO realized the error on the evening of April 3, 

2003, but did not notify a supervisor until the morning of April 4, 2003. 

Our investigation further revealed that there is no written authority, policy and/or 

procedure for the approval of detainee release documents. Practices were found to 

vary between groups in the same office. 

The OIG recommended that written procedures be created and implemented 

to prevent a recurrence. Specifically, the OIG recommended that ICE DOs 

obtain a copy of the release order before releasing detainees. The OIG further 

recommended that a supervisor’s signature be required on the documentation 

effecting release of detained aliens. On October 27, 2003, Border and 

Transportation Security advised OIG that the employee was placed on paid 

administrative leave April 4 through October 20, 2003, and was subsequently 

suspended without pay from October 20, 2003, through November 19, 2003.
7

Deportation Officers Found Guilty of Civil Rights Violations

As the result of a joint DHS OIG and Department of Justice (DOJ) OIG 

investigation, three Immigration and Naturalization Service (INS) deportation 

officers were found guilty of violating the civil rights of a Mexican national 

resident alien in March 2001 when the INS arrested a group of undocumented 

aliens in Bryan, Texas. During the arrest, an alien suffered a broken neck and a 

severed spinal cord due to mistreatment by the arresting officers. The alien was 

hospitalized and remained hospitalized until he died one year later as a result of 

his injuries. Sentencing for all three officers is scheduled for November 2003. 

OIG Investigates the Use of the Air and Marine Interdiction Coordination Center 

(AMICC) in the Search for Texas State Legislators

The OIG investigated allegations that DHS resources were misused in a search 

for reportedly missing Texas state lawmakers. The scope of the OIG investigation 

was limited to the specific issue involving alleged misuse of DHS assets in 

assisting state law enforcement in locating a reported “missing aircraft.” The 

OIG investigation did not address the actions of the Texas Department of Public 

Safety (DPS) following their request for assistance from AMICC, nor did the OIG 

assess the propriety of AMICC’s existing guidelines relating to the rendering of 

assistance to other law enforcement agencies. DPS officials interviewed by the 

OIG declined to provide any information identifying the person or persons who 

requested that DPS contact AMICC for assistance. DPS officials claimed they 

destroyed all notes, memoranda, or other correspondence related to this incident. 

The alleged destruction of notes by the DPS was referred to the Federal Bureau of 

Investigation (FBI), San Antonio, Texas, for its consideration.

The OIG investigation found that DPS did contact the AMICC and reported that 

they “had a problem,” and “could not find this plane” which contained Texas state 

representatives. The DPS requested DHS assistance in locating the aircraft. The 

OIG investigation concluded the assistance rendered by AMICC was limited to 

about forty minutes of telephone calls made by an AMICC employee to various 

Federal Aviation Administration (FAA) and airport representatives in Texas, and 

a series of conversations with his supervisors. The AMICC personnel involved in 
8 

this incident described this assistance as a typical request from a law enforcement 

agency, which reportedly occurs at least thirty times a day and is in compliance 

with AMICC standard operating procedures. At no time did AMICC launch any 

aircraft or otherwise deploy DHS resources to assist the DPS. 

AMICC’s account of these events was documented on audiotape (and transcript), 

which was reviewed by OIG investigators and found to be consistent with 

the statements of AMICC employees involved in the incident. OIG closed its 

investigation with no finding of criminal wrongdoing by any DHS employee. 

OIG’s Office of Audits has initiated a review of AMICC procedures and authority, 

which is ongoing as of the close of this semi-annual reporting period.

Immigration Inspector Accepts Bribes

On July 9, 2003, the United States Attorney’s Office in the Southern District 

of Texas announced that a former immigration inspector was sentenced to ten 

months imprisonment for bribery, to be followed by two years of supervised 

release. In his plea, the former inspector admitted that while employed by INS he 

accepted $600 in bribes to influence the performance of his official duties. This 

case was investigated jointly by the DHS OIG and the DOJ OIG.

Bribery of Public Official (Update)

The OIG initiated an investigation upon the receipt of information that a person 

offered to bribe an immigration inspector to smuggle illegal aliens into the United 

States. The inspector reported the solicitation and cooperated in an undercover 

operation. The subject paid $500 as partial payment for the inspector to allow 

him to smuggle aliens into the United States, and on June 12, 2002, the subject 

arranged for another driver to smuggle aliens into the United States through the 

inspector’s primary inspection lane at the San Ysidro, California port of entry. 

The driver of the vehicle was subsequently arrested in Mexico before arriving at 

the border. 

On July 30, 2002, the subject attempted to smuggle four undocumented 

immigrants into the United States through the inspector’s primary inspection lane. 
9

The subject and aliens were arrested. The subject, who subsequently admitted 

to working with an alien smuggling ring based in Santa Ana, California, was 

charged with bribery of a public official. On March 24, 2003, he pleaded guilty. 

On June 18, 2003, the subject was sentenced to two years probation, 150 hours of 

community service, and ordered to pay a special assessment of $100.

Supervisory Immigration Inspector Indicted For Selling Documents

On September 16, 2003, a supervisory immigration inspector was indicted by 

a federal grand jury in Tampa, Florida and charged with selling immigration 

documents to illegal aliens. On September 17, 2003, the inspector was arrested 

and OIG agents executed a search warrant on his residence. The inspector was 

denied bond and remains in custody pending judicial action.

ICE Agent’s Alleged Misuse of Treasury Enforcement Communications System

The OIG investigated allegations that an ICE senior special agent misused the 

Treasury Enforcement Communications System (TECS) for personal business. 

Additionally, the agent’s unofficial use of his government-issued travel card was 

investigated.

Former Agent Pleaded to Lewd Acts Upon a Minor (Update)

As reported in our last report, the El Centro, California Police Department 

arrested a Border Patrol agent for lewd and lascivious acts upon a minor. The 

Border Patrol agent resigned subsequent to his arrest. In April 2003, the former 

agent pleaded guilty to the charge and was sentenced on August 7, 2003, to an 

eight-year suspended sentence and four years supervised probation.

Alien Smuggling (Update)

On May 12, 2003, a former senior Border Patrol agent was sentenced to 36 

months incarceration, 36 months supervised probation, and fined $300. The OIG 

determined that the agent and his wife attempted to drive two undocumented 

immigrants across the border at the San Ysidro, California port of entry. The 
10 

agent showed his badge and credentials to the inspecting officer and claimed that 

his passengers were “OK.” 

During his trial, the agent testified that his wife asked him to drive some friends 

into the U.S., and that he did not know the immigrants were illegal aliens. He 

also testified that he did not question the immigrants because his command of 

Spanish was limited. Witnesses testified that the agent was a former Spanish 

instructor for the Border Patrol, and that he had met one of the immigrants in 

Tijuana, Mexico a few days prior to the attempted crossing. He was convicted on 

November 18, 2002. His spouse previously pleaded guilty to alien smuggling and 

was sentenced to 36 months supervised probation.

Theft of Funds by an Enforcement Officer

An OIG investigation disclosed that $1,400 was stolen from an undocumented 

immigrant during her processing by a supervisory detention enforcement 

officer. The officer resigned on August 18, 2002, and was charged with theft 

by a government employee. The former employee subsequently pleaded guilty 

and on April 3, 2003, was sentenced to two years probation, and ordered to pay 

restitution of $1,400 and a $25 special assessment.

Theft of Property By Border Patrol Agent

On June 12, 2003, two Border Patrol agents seized the vehicle of an attempted 

alien smuggler, who eluded capture and fled into Mexico. The OIG investigated 

the subsequent theft of the vehicle. On July 29, 2003, one of the agents was 

indicted, arrested and charged with one count of theft of means of transportation 

by conversion and/or misrepresentation. Judicial action is pending. 

Border Patrol Agent Fails to Declare Prescription Drugs

On August 5, 2003, an off-duty Border Patrol agent came into the United States 

through an Arizona port of entry. A search of the vehicle resulted in the off-duty 

agent’s arrest and a charge for failure to declare. The investigation is ongoing.
11

Conviction for Immigration Document Vending and Money Laundering

In an investigation transferred from DOJ OIG, a foreign national pleaded guilty 

in the Eastern District of New York to document fraud and money laundering. 

A cooperating defendant from another agency identified the defendant as a 

major trafficker in illegal immigration documents. The foreign national made 

claims to prospective buyers that he had a source inside INS assisting in his 

activity. Investigators found bank accounts for the defendant in multiple states 

with historical account activity recording the past transfer of funds in excess of 

$1,000,000. The defendant pleaded guilty to all counts. 

On September 17, 2003, the subject was sentenced to 46 months confinement 

and fined $25,000. The investigation found no evidence to suggest that any DHS 

employees were involved in the scheme. 

Auditor Inspector Defrauds Federal Worker’s Compensation Benefits Program

An OIG investigation disclosed that a former Customs and Border Patrol (CBP) 

inspector, while receiving federal employee disability benefits, falsely reported 

his personal income to the U.S. Department of Labor in order to qualify for the 

benefits. The subject pleaded guilty on May 12, 2003, to two misdemeanor counts 

of making false statements to receive federal disability benefits and was sentenced 

to three years probation, a $10,000 fine, $27,000 in restitution, a $50 special 

assessment, and termination of his disability benefits. 

Impersonation of a Federal Officer (Update)

An OIG covert investigation began after receipt of information that a person was 

impersonating an INS employee. The subject was allegedly offering to expedite 

immigration applications for a fee. Victims paid over $25,000, but never received 

any services. Our investigation determined that the subject was never employed 

by INS. The subject had an extensive criminal history, as well as an outstanding 

arrest warrant for a probation violation. The subject was arrested and indicted and 

charged with impersonation of a federal officer. In a plea agreement, the subject 
12 

was sentenced to 37 months incarceration, one-year supervised probation, and 

ordered to pay $39,110 in restitution and a special assessment fee of $100.

Former Border Patrol Agent Arrested for Grand Theft

On September 12, 2002, a former Border Patrol agent was arrested by the 

California Highway Patrol on multiple counts of grand theft of construction 

equipment. The Highway Patrol requested the OIG’s assistance in obtaining 

background information on the former agent. The investigation determined 

that, during the summer of 2002, the former agent stole numerous construction 

vehicles from a construction site. On March 3, 2003, he pleaded guilty to 19 

counts of grand theft of construction equipment. On July 29, 2003, the former 

agent was sentenced to two years incarceration, assessed $400, and ordered to pay 

$25,981 restitution to the construction company.

Theft of Government Property by Border Patrol Aircraft Mechanic

On July 18, 2003, the United States Attorney’s Office in the Western District 

of Texas, entered into a pretrial diversion agreement with an aircraft mechanic 

employed by the United States Border Patrol. After a joint investigation by the 

OIG and the FBI, the employee admitted to stealing agency aircraft fuel and 

diverting it to his personal use. Also, the employee admitted using a United States 

government gas card to purchase fuel for his personal vehicle. On July 8, 2003, 

the employee submitted a letter of resignation. Based on the pretrial diversion 

agreement, the former employee agreed to perform community service and to 

make restitution. 

Immigration and Customs Enforcement Special Agent Exonerated of Wrongdoing 

The OIG determined that an allegation that an ICE special agent accepted 

bribes was unfounded. However, the investigation did determine that an ICE 

confidential informant was involved in soliciting payments from illegal aliens, 

promising them that an ICE employee who was accepting bribes would stop their 

deportations. When the ICE informant was arrested, he admitted to his part in 
13

the scheme and admitted that the ICE agent was not involved. The informant was 

subsequently deported for his actions. 

Transportation Security Administration

Two TSA Screeners Indicted for Theft 

As the result of a joint investigation with TSA, Miami-Dade, Florida police and 

the OIG, two TSA screeners were indicted by a federal grand jury and charged 

with conspiracy and theft from a CBP secured area. The indictments were the 

result of allegations brought by TSA screeners at the Miami International Airport 

that several TSA screeners were stealing from passenger baggage. The U.S. 

Attorney’s Office agreed to prosecute after an extensive presentation of the case 

by an OIG special agent, despite the low dollar value of the stolen items. Judicial 

action on this case is pending.

TSA Supervisors Fired For Stealing Confiscated Items 

TSA officials contacted the OIG regarding allegations that TSA employees were 

stealing items that had been confiscated from passengers. The allegations were 

substantiated by the use of video surveillance and numerous interviews of TSA 

personnel. As a result of the investigation, an airport screening supervisor and a 

lead security screener were terminated.

TSA Screener Arrested for Theft in Houston

The OIG and the Houston, Texas Police Department Airport Division arrested 

a screener at George Bush Intercontinental Airport, on August 6, 2003. The 

employee was under investigation by the OIG for two different incidents of 

alleged theft from passenger baggage. The screener has been charged with theft 

by a public servant.
14 

Use of Illegal Drugs by TSA Employee

The OIG initiated an investigation based on an allegation received from the Yuma, 

Arizona Police Department of misconduct by a TSA federal security screener 

assigned to the airport. On May 8, 2003, the police conducted a consensual 

search at the screener’s residence, based on the alleged illegal activities 

committed by her boyfriend and by her roommate. During the search, numerous 

drug paraphernalia and illegal narcotics were discovered. The employee 

reported that the items discovered during the search belonged to her boyfriend 

and her roommate, but she admitted that, prior to her employment with TSA, 

she used crack cocaine herself. The boyfriend and the roommate were charged 

with possession of narcotics and paraphernalia. A review of the screener’s 

employment application disclosed that she denied any use of narcotics in the past 

seven years. Additionally, she admitted that she provided false information on her 

TSA employment application to hide her narcotics use. The screener voluntarily 

resigned from her position with TSA.

TSA Employee Cleared of Theft Charges

The OIG received an allegation that a federal security director did not discipline 

a TSA employee for stealing because the director also admitted to stealing in 

the past. The director also allegedly showed favoritism to employees who had 

previously worked with a particular company and was disparate in meting out 

disciplinary action to two supervisors involved in an altercation. The director was 

also accused of covering up drug use by a supervisor. The OIG found no evidence 

to substantiate these allegations and no further action was warranted.

TSA Screener Cleared of Theft

In March 2003, the OIG received an allegation that a TSA screener stole money 

from a passenger departing from the airport in St. Thomas, U.S. Virgin Islands. 

A consensual search revealed that the subject had in his possession an amount 

of money in virtually the same denominations as alleged to have been stolen 

from the passenger. Additional investigative effort by OIG led to the location of 
15

the passenger in the U.S. mainland, who admitted that she had later located the 

allegedly stolen money in her luggage, thereby clearing the screener. 

TSA Employee Cleared of Wrongdoing

The OIG received an allegation that a federal security director engaged in 

nepotism and violated personnel policy by hiring his former supervisor and his 

former supervisor’s son. The OIG investigation determined that the nepotism 

allegation was unfounded. No evidence was found to indicate that the director 

violated any laws by hiring the former supervisor or his son. It was determined 

that the former supervisor was hired as an administrative officer at one airport 

and his son was hired as a screening manager at another airport. The airports are 

more than 100 miles apart, and the former supervisor has no direct supervisory 

authority over his son. 

The investigation disclosed that the complainant likely filed the complaint in 

retaliation for his own pending disciplinary action. On April 18, 2003, TSA 

accepted the complainant’s voluntary resignation in lieu of termination.

Animal And Plant Health Inspection Service (APHIS)

Veteran APHIS Inspector Charged with Theft 

In April 2003, the OIG received allegations that a veteran APHIS Inspection 

Service inspector at the San Juan, Puerto Rico Airport was stealing from packages 

that he was inspecting. OIG, with the assistance of the U.S. Postal Inspection 

Service, used surveillance cameras to observe the inspector removing cash and 

jewelry from a “prepared” package (created by the investigators) and secreting 

these items in a paper bag. The inspector, who was arrested by local authorities 

and charged with theft, resigned his federal employment and pleaded guilty to 

theft.
16 

Office of Information Technology

Final Obstacles Removed To Eliminate Customs Disaster Recovery Material 

Weakness 

Customs and Border Protection, formally known as “U.S. Customs,” has made 

significant progress in resolving the longstanding material weakness regarding 

disaster recovery capability. Specifically, CBP contracted with a vendor to 

provide a facility and support services for restoring its computer operations in 

the event of a disaster. Also, CBP established a detailed process to help ensure 

the recovery of its computer operations. During its first comprehensive disaster 

recovery exercise at the Customs Recovery Facility, CBP successfully restored 

the majority of its major data center computer operations (i.e., mainframe, local 

area network, and UNIX platforms) and established connectivity to selected field 

offices and trade partners.

However, we identified areas where CBP could better ensure the successful 

restoration of its computer operations in the event of a disaster. Specifically, 

we found that the UNIX Recovery Team was not able to initialize the Sol and 

Hercules Oracle databases that reside on UNIX servers. As a result, one missioncritical application did not become operational during the recovery test. Also, 

we found that the incorrect configuration of the firewall denied a trade partner 

access during one of the mainframe connectivity tests. During the disaster 

recovery exercise, CBP used situation reports to track potential problems, issues, 

or concerns. We found that some of the information recorded in the situation 

reports was inconsistently documented or incomplete. In addition, documentation 

and back-up tapes were transported and stored in containers that were not fireresistant. In response to our draft report, customs management concurred with our 

findings and recommendations concerning the November 2002 test. These issues 

were resolved in a subsequent disaster recovery exercise conducted in June 2003. 

(OIG-IT-03-01, September 2003)
17

Bureau of Citizenship and Immigration Services (CIS)

Office of Investigations

Undercover Operation Nets Immigration Document Vendor

A joint investigation by the OIG and the ICE, Office of Internal Affairs, identified 

a person selling immigration documents whose alleged source was an employee 

of CIS. Negotiations and transactions with the person through a confidential 

informant resulted in the undercover purchase of fraudulent immigration 

documents and arrest of the person. Post-arrest examination of the documents 

determined them to be counterfeit and further investigation determined there was 

no CIS employee involved in this case. The defendant entered a guilty plea on 

one count of fraudulent use of visa documents and is awaiting sentencing. 
18 

Emergency Preparedness and Response

Office of Inspections, Evaluations and Special Reviews

Assistance to Firefighters Grant Program

The Assistance to Firefighters Grant (AFG) program is administered by the United 

States Fire Administration (USFA), a component of the Federal Emergency 

Management Agency (FEMA). AFG seeks to identify fire departments that 

lack the basic tools and resources necessary to protect the health and safety of 

firefighting personnel and the public by providing direct financial assistance to 

meet those needs. Although the AFG program is in only its third year, USFA has 

made prudent efforts to determine basic needs to enhance fire service capabilities, 

establish program priorities, and develop specific eligibility and rating criteria. 

Additionally, USFA has informed, solicited, and educated eligible applicants of 

the AFG program, succeeded in achieving a balanced distribution of funding 

through a competitive grant process, and established an application review 

process that is equitable and dynamic. 

However, USFA can enhance the AFG program’s overall effectiveness by: (1) 

requiring greater detail to determine a fire department’s financial need; (2) 

requiring applicants to declare other federal funding sources to avoid potential 

duplication of assistance; (3) promoting mutual aid and regional approaches 

to enhance interoperability; (4) better monitoring grant recipients to ensure 

expectations and responsibilities are met; (5) developing performance measures 

to assess the program’s long-term impact; (6) using needs assessment findings as 

an additional tool to define program priorities and eligibility criteria; (7) clarifying 

the distinction between the Special Fire Prevention and Safety program and the 

Fire Prevention program category of the AFG program; and 8) coordinating other 

first responder grant programs with the AFG program to maximize effectiveness 

of available funding. (ISP-01-03, September 30, 2003)
19

Office of Audits

Sub-grantees

City of Key West, Florida

The city received an award of $9.1 million from the Florida Department of 

Community Affairs for damages caused by Hurricane Irene. The city claim 

included questioned costs of $7.1 million, resulting mainly from charges for 

pre-existing damages. The OIG recommended that the FEMA regional director 

disallow the questioned costs. (DA-25-03, September 5, 2003)

Simi Valley Unified School District, California

The district received an award of $11.4 million from the California Office of 

Emergency Services for debris removal, emergency protective measures, and 

permanent repairs to district facilities as a result of the Northridge earthquake. 

The district’s claim included questioned costs of $2,404,776, consisting of 

ineligible improvement and upgrades, ineligible project costs, unsupported costs, 

and duplicate costs claimed. (DO-18-03, August 15, 2003)

Los Angeles County, California Department of Public Works

The department received an award of $22.7 million from the California Office 

of Emergency Services for damages caused by severe winter storms, mud and 

rock slides and flooding. The department’s claim included questioned costs 

of $2,064,796, consisting of costs outside the scope of approved projects, 

unsupported fringe benefit costs on overtime labor, ineligible force account labor 

and unsupported project costs. (DO-01-03, April 1, 2003)

Harrison County, Mississippi

The county received an award of $5.7 million from the Mississippi Emergency 

Management Agency for damages caused by Hurricane Georges. The county’s 

claim included questioned costs of $1,723,666, consisting of excessive charges 
20 

for tree stumps. Also, $6,000 was mistakenly awarded under a project. The OIG 

recommended that the FEMA regional director disallow the questioned costs and 

recoup the excessive award. (DA-13-03, June 9, 2003)

City of Valley City, North Dakota

The OIG audited the eligibility of public assistance funds awarded to Valley City, 

North Dakota. The city received an award of $1.51 million from the North Dakota 

Division of Emergency Management, a FEMA grantee, for damages caused by 

heavy rain and snow during the disaster period. The audit disclosed that two large 

projects were not eligible for funding under FEMA’s Public Assistance program 

because the work was not required as a result of the major disaster. Specifically, 

the disaster did not cause the damages to the city’s sanitary sewer collection 

lines and the relocation and capacity increase of the city’s sanitary sewer force 

main exceeded pre-disaster design and capacity. The OIG, therefore, questioned 

$1,357,801 in funding that FEMA approved. (DD-05-03, April 29, 2003)

Municipality of Utuado, Puerto Rico

The municipality received an award of $28 million from the Puerto Rico Office 

of Management and Budget for damages caused by Hurricane Georges. The 

municipality’s claim included questioned costs of $862,627, resulting from 

inappropriate contracting practices, incomplete implementation of large and 

small projects, excessive contract charges, and duplicate funding. The OIG 

recommended that the FEMA regional director disallow the questioned costs. 

(DA-15-03, June 30, 2003)

California Department of Forestry and Fire Protection

The department received an award of $65.1 million from the California Office of 

Emergency Services for emergency protective measures performed to save lives 

and protect public health and safety as a result of wild fires. The department’s 

claim included questioned costs of $862,470, consisting of accounting errors, 

excessive force account equipment charges, unsupported costs, and unallowable 

vehicle maintenance costs. (DO-14-03, June 20, 2003)
21

Virgin Islands (V.I.) Government, Department of Public Works

The Department of Public Works (DPW) received an award of $11.4 million for 

the V.I. Office of Management and Budget for damages caused by Hurricane 

Marilyn. The V.I. government did not maintain accurate records on the receipt 

of program funds and did not consistently follow sound contracting procedures. 

Also, the DPW claimed questioned costs of $772,881 resulting from charges that 

were unsupported, unrelated to FEMA projects, or duplicative in nature. The 

OIG recommended that FEMA regional directors instruct the V.I. government to 

comply with financial and contracting requirements and disallow the questioned 

costs. (DA-24-03, August 27, 2003)

Los Angeles County, California Fire Department

The department received an award of $4.2 million from the California Office of 

Emergency Services for damages resulting from wild fires and subsequent damage 

from soil erosion, landslides, flooding, and mudslides. The department’s claim 

included questioned costs of $771,853, consisting of unsupported labor costs, 

ineligible project costs, unsupported equipment costs, duplicate equipment costs, 

and costs covered by another federal agency. (DO-13-03, June 20, 2003)

Los Angeles County, California

The county received an award of $5.1 million from the California Office of 

Emergency Services for damages caused by wild fires and subsequent damages 

from soil erosion, landslides, flooding, and mudslides. The county’s claim 

included questioned costs of $751,627, consisting of overstated fringe benefits, 

excessive labor costs, duplicate labor costs, and overstated equipment costs. (DO04-03, April 16, 2003)

Texas, Division of Emergency Management

The OIG audited $45.03 million in FEMA public assistance funds awarded to 

Texas, Division of Emergency Management. The state received the award for 

pre-staging federal and state fire suppression assets from June 4, 1998, through 
22 

November 3, 1998, in anticipation of extreme fire hazards. The state was able 

to provide only summary documentation to support $40.39 million paid to 

the United States Department of Agriculture Forest Service, which comprised 

89.71 percent of the state’s total claim. Further, the Forest Service was unable to 

provide source documentation to support 76.88 percent of the costs judgmentally 

selected for review. The state’s and Forest Service’s inability to provide source 

documentation severely limited the scope of audit work. Consequently, the 

OIG was unable to achieve its audit objective of determining whether the state 

expended and accounted for FEMA funds according to federal regulations and 

FEMA guidelines.

The state’s claim included questioned costs of $702,834, consisting of duplicate 

costs ($295,372), excessive administrative fees to the Forest Service ($160,905); 

costs incurred outside the eligible time period ($159,493); and, out of scope costs 

billed by the Forest Service ($87,064). Further, the OIG concluded that the state’s 

claim likely included additional ineligible costs that could not be identified. The 

OIG based this conclusion on the results of its limited review of Forest Service 

documentation; the General Accounting Office’s placement of the Forest Service 

on its “high risk” list because of severe weaknesses in accounting and financial 

reporting; and the U.S. Department of Agriculture OIG’s adverse, qualified, or 

disclaimers of opinion on Forest Service financial statements for the years 1991 

through 2001. (DD-12-03, September 5, 2003)

Lake Country Electric Cooperative, Grand Rapids, Minnesota 

The OIG audited public assistance funds awarded to Lake Country Electric 

Cooperative (Lake Country) in Grand Rapids, Minnesota. Lake Country 

received an award of $2.10 million from the Minnesota Division of Emergency 

Management (MDEM), a FEMA grantee, for damages caused by severe 

thunderstorms that occurred in July 1999. The audit disclosed that Lake Country 

did not account for and expend FEMA funds according to federal regulations and 

FEMA guidelines. The OIG questioned $269,660 in funding ($202,245 FEMA 

share), consisting of costs not consistent with established policies ($250,344), 

labor costs not related to the disaster ($8,585), duplicate costs ($6,568), and 

an unapplied credit ($4,163). Further, Lake Country did not follow federal 
23

procurement regulations and FEMA guidelines in contracting for $1,593,498 in 

debris removal and repair work. As a result, fair and open competition did not 

occur, and FEMA had no assurance that contract costs were reasonable. The 

OIG recommended that FEMA disallow $269,660 of questionable costs, and that 

MDEM develop and implement procedures for future disasters to ensure that 

sub-grantees are knowledgeable of and follow federal regulations and FEMA

guidelines related to contracting. (DD-04-03, April 28, 2003)

Memorial Hermann Hospital, Houston, Texas

The OIG audited FEMA public assistance funds awarded to Memorial Hermann 

Hospital, Houston, Texas. At the time of the audit, the hospital had received an 

award of $137.9 million for 99 projects from the Texas Division of Emergency 

Management, a FEMA grantee. The OIG audited three projects totaling $910,544 

for emergency work to repair facilities damaged by Tropical Storm Allison 

that occurred in June 2001. The audit disclosed that the hospital did not follow 

federal procurement regulations to contract for $910,544 in disaster work, and 

that its claim included questioned costs of $22,500 ($16,875 was the FEMA

share). The OIG performed this audit at the request of the hospital to determine 

the adequacy of its record keeping early in the restoration process. During the 

audit, the OIG counseled hospital personnel at length on the provisions of the 

Code of Federal Regulations, Office of Management and Budget Circular A-122, 

and FEMA guidelines regarding federal procurement procedures, record keeping 

requirements, and allowable costs. (DD-11-03, August 6, 2003)

State Grantee

Puerto Rico’s Compliance with Disaster Assistance Program Requirements

The OIG performed an audit to determine whether Puerto Rico’s Office of 

Management and Budget (OMB) accounted for, used, and managed public 

assistance program funds in accordance with federal regulations and FEMA

guidelines. The OIG concluded that the OMB had not developed a staffing 

and budgetary plan for management of FEMA’s public assistance program; 

needs to improve in the financial management areas of grant accounting, 
24 

financial reporting, cash management, and documenting and claiming general 

administrative costs; and, needs to improve in the program management areas 

of processing requests for project changes from sub-grantees, monitoring and 

auditing sub-grantee operations, and reporting on the status of project activities.

The OIG made a number of recommendations for FEMA and OMB to improve 

the administrative, financial, and program management of FEMA public 

assistance projects, including a recommendation to disallow $372,000 of FEMA

funds received by the OMB. 

(DA-20-03, August 20, 2003)

Missouri’s Compliance with Disaster Assistance Program’s Requirements

The OIG reviewed the disaster grants management system and practices of the 

State of Missouri. The objectives of the review were to determine whether the 

state administered the funds according to applicable federal regulations and 

FEMA guidelines. The audit disclosed that the State of Missouri: (1) claimed 

duplicate costs on its hazard mitigation administrative allowances; (2) did 

not prepare adequate or timely administrative plans; (3) arbitrarily allocated 

administrative payroll costs; (4) did not identify cost-share requirements in 

FEMA’s grant agreement with the state; and (5) did not complete validation of 

small projects in a timely manner. The audit report recommended improvements 

to management controls and financial management controls to protect assets and 

prevent errors and fraud, and recommended that FEMA disallow $346,329 in 

questioned costs. (DD-02-03 April 15, 2003)

South Dakota’s Compliance with Disaster Assistance Program Requirements

The OIG reviewed the disaster grants management system and practices of South 

Dakota, Division of Emergency Management (SDDEM). The audit objectives 

were to determine whether SDDEM administered the grant programs according 

to federal regulations and accounted for, reported, and used FEMA program funds 

properly. The audit disclosed that SDDEM did not: (1) formally document and 

evaluate its internal and management control systems; (2) always perform public 

assistance project closeout procedures, prepare quarterly reports, or document the 
25

results of final inspections of large projects; (3) document sub-grantee monitoring 

or require sub-grantees to provide progress reports for ongoing projects; (4) 

update its hazard mitigation plans on time or distribute the most recently approved 

plans to appropriate entities; and (5) obtain sufficient supporting documentation 

before making payments to sub-grantees. The audit report recommended 

improvements to program and financial management controls relevant to 

administering FEMA grants. (DD-06-03, April 30, 2003)

Washington’s Compliance with Disaster Assistance Program Requirements

Washington’s Emergency Management Division (EMD) is the state agency 

responsible for administering federal and state disaster assistance funds for the 

State of Washington. We reviewed the disaster grants management and systems 

and practices of EMD covering nine disasters beginning in 1996, with the last 

declared in 2001, and those programs not closed as of September 30, 2001. The 

audit objectives were to determine whether EMD administered FEMA disaster 

assistance grant programs according to federal regulations and had properly 

accounted for and expended FEMA program funds. The audit focused on systems 

and procedures used by EMD to manage, control, and expend grant funds in 

accordance with applicable laws and regulations. 

In general, the financial, program, and administrative controls established by 

EMD to administer FEMA disaster grants should be improved because a total 

of nine findings were identified. Findings were that the public assistance plan 

contained inadequate procedures; no on-site monitoring of in-progress projects 

was conducted; time extensions were approved 16 months after request; quarterly 

reports did not reconcile with official accounting records; there was late submittal 

of quarterly/final Financial Status Reports and Federal Cash Transaction Reports; 

the state did not meet matching requirements; excess draw downs were made; 

procurement regulations did not support federal requirements; and tracking of 

property was not adequate. (DO-20-03, August 29, 2003)
26 

Arizona’s Compliance with Disaster Assistance Program Requirements

The State of Arizona, Department of Emergency and Military Affairs, Division 

of Emergency Management (ADEM) is the state agency responsible for 

administering federal and state disaster assistance funds. We reviewed the 

disaster grants management and systems and practices of ADEM covering two 

disaster declarations between October 1999 and October 2000, as well as those 

programs not closed as of September 30, 2001. The audit objectives were to 

determine whether ADEM administered FEMA disaster assistance grant programs 

according to federal regulations, and whether ADEM properly accounted for and 

expended FEMA program funds. The audit focused on systems and procedures 

used by ADEM to manage, control, and expend grant funds in accordance with 

applicable laws and regulations. 

In general, the financial, program and administrative controls established by 

ADEM to administer FEMA disaster grants should be improved inasmuch 

as a total of 15 findings were identified, namely, administrative plans did not 

contain all current legislation items; there was no clear procedure for submitting 

administrative plans annually; Individual Family Grant program deadlines for 

grant and administrative activities were exceeded; Section 409 plans were not 

submitted timely; quarterly progress reports were not submitted; ADEM did not 

obtain support for required benefit-cost analysis; ADEM did not require buy-out 

project applicants to sign agreement stating the restrictive covenants for buy-out 

deeds; controls over hazard mitigation advances were not adequate; and there 

were no documentation or internal control procedures to ensure the eligibility of 

all hazard mitigation sub-grantee payments. (DO-03-03, April 15, 2003)

Alaska’s Compliance with Disaster Assistance Program Requirements

The State of Alaska, Department of Military and Veterans Affairs, Division of 

Emergency Services (ADES) is the state agency responsible for administering 

federal and state disaster assistance funds for Alaska. We reviewed the disaster 

grants management and systems and practices of ADES covering one disaster 

declared in 2000, as well as those programs not closed as of September 30, 2001. 

The audit objectives were to determine whether ADES administered FEMA 
27

disaster assistance grant programs according to federal regulations, and whether 

ADES properly accounted for and expended FEMA program funds. The audit 

focused on systems and procedures used by ADES to manage, control, and 

expend grant funds in accordance with applicable laws and regulations. 

In general, the financial, program and administrative controls established by 

ADES to administer FEMA disaster grants should be improved, since a total of 10 

findings were identified. Findings included late submittal of quarterly and final 

Financial Status Reports and Federal Cash Transaction Report; administrative 

plans did not contain all required elements; Section 409 plans were not submitted 

timely; public assistant closeout was not timely; payments to sub-grantees 

were not made in a timely manner; controls over public assistance and hazard 

mitigation advances were not adequate; hazard mitigation applications were 

missing; and, monitoring and reporting procedures were not adequate. (DO-02-03, 

April 15, 2003)

Financial Management

National Flood Insurance Program Management Letter for FEMA’s FY 2002 

Financial Statements

In support of the fiscal year 2002 financial statement audit, KPMG LLP 

performed compliance reviews of FEMA’s National Flood Insurance Program 

(NFIP). These reviews encompassed two contractors and six Write Your Own 

(WYO) companies. The WYO companies sell and service flood insurance 

policies on behalf of FEMA. KPMG performed tests of controls over financial, 

underwriting, and claims activities of WYO companies participating in the NFIP. 

KPMG identified several internal control weaknesses and non-compliance with 

certain NFIP rules and regulations relating to the underwriting of flood insurance 

polices and the claims process. We recommended that FEMA create an action 

plan to ensure that the WYO companies take corrective action and indicate when 

such action will be completed. (A-01-03, June 16, 2003)
28 

Office of Investigations

Cerro Grande, New Mexico Fire Assistance Act Program

On May 4, 2000 the National Park Service initiated a prescribed burn, known as 

the Cerro Grande Prescribed Fire, which exceeded the containment capabilities. 

A presidential disaster was declared for the area in and around Los Alamos, New 

Mexico. Congress enacted the Cerro Grande Fire Assistance Act (CGFAA) to 

compensate fully victims whose claims are not covered by the presidentially 

declared disaster. FEMA was designated to administer the CGFAA. OIG initiated 

an investigation into a $727,490.78 personal property loss claim, which by 

CGFAA guidelines was excessive. OIG determined that the claimant overvalued 

the property that resulted in a $303,502.79 cost savings to the government. 

Nisqually Earthquake

In June of 2001, a presidential disaster was declared following the Nisqually 

Earthquake in Seattle, Washington. A men’s shelter sustained severe damage 

and was declared uninhabitable. The residents of the center were eligible for 

Temporary Housing and Individual Family Grant assistance. Investigation by the 

OIG has determined that 62 people applied for and received FEMA assistance by 

claiming that they were residing at the center when, in fact, they were not. Based 

on these 62 fraudulent claims, FEMA disbursed $146,000. The OIG investigation 

has resulted in a number of criminal actions against claimants filing fraudulent 

applications. During this reporting period, seven people were indicted, seven 

arrested, eight convicted, and seven sentenced, resulting in $2,000 in fines and 

$13,522 in restitution.

California Freeze

In February of 1999, a presidential disaster was declared for California’s Central 

Valley area as a result of a drop in temperature below freezing which caused 

extensive damage to the citrus crop. The citrus workers were entitled to a number 

of FEMA assistance programs based on the loss of income. The OIG identified 

numerous fraudulent individual assistance applications that caused government 
29

funds to be distributed to undeserving claimants. During this reporting period, 

there was one indictment, one arrest, one conviction, and three sentences, 

resulting in $700 in fines and $73,600 in restitution. 

American Philanthropy Association

The FBI reported allegations to the OIG of a fraud against the Emergency Food 

and Shelter (EFS) Program, funded by FEMA and administered by the United 

Way. The Los Angeles Homeless Services Authority (LAHSA), a sub-grantee of 

the United Way, was responsible for distributing some of the EFS funds. LAHSA 

contracted with the American Philanthropy Association (APA) to provide food 

and shelter to the indigent of Los Angeles from 1994 through 1998. The EFS 

program funded the services provided by the APA under the Cold/Wet Weather 

program. 

A review of LAHSA’s files determined that APA received $55,280 in 1997 and 

$51,880 in 1998 in EFS assistance. A joint OIG and FBI investigation determined 

that the president and the shelter manager of APA forged the names of residents 

on the daily log sheets that were then submitted to LAHSA for EFS funding. 

APA’s president and the shelter manager were indicted for false statements and 

applications, and conspiracy. The APA president was convicted at trial during this 

reporting period. A fugitive warrant was issued for the shelter manager who failed 

to appear for trial.

FEMA Contract Fraud

On August 7, 2003, two subjects were indicted for bribery concerning programs 

receiving federal funds and extortion in connection with a FEMA-sponsored 

roofing program, following Hurricanes Marilyn and Bertha in 1998. The 

indictment alleges that the subjects solicited $25,000 in payments from 

construction contractors. It is further alleged that one of the subjects corrupted 

the program by accepting over $65,000 in false payment vouchers from another 

contractor.
30 

FEMA Employee Caught Stealing Government Property

The OIG substantiated allegations that an employee at the FEMA Transportation 

Logistics Center stole numerous items from the warehouse and then pawned 

the stolen items at local pawnshops. Most of the stolen property, valued at 

$1,700, was recovered. The employee was terminated and is awaiting criminal 

prosecution.

Contractor Found Liable For False Claims

FEMA, in conjunction with the Virginia Department of Transportation, paid a 

contractor to repair roads and highways in response to a flood. Subsequently, a 

qui tam (an action brought by a person on behalf of the government and himself) 

was filed alleging that the contractor submitted false invoices for the amounts of 

equipment used on various projects. The OIG substantiated the allegations and 

the contractor was ordered to repay $240,000.

FEMA Employee Found Guilty Of Filing False Travel Claims

A FEMA employee received almost $12,000 in travel reimbursement funds 

after filing four false travel claims. The OIG determined that the employee 

fraudulently claimed to have traveled from her home in Atlanta to New York City 

to assist in the World Trade Center recovery effort, including submitting receipts 

for lodging from a non-existent hotel. The employee was terminated, entered a 

guilty plea in federal court, sentenced to six months home confinement, given one 

year of probation, and ordered to make full restitution.

Altered FEMA Check (Update)

A subject pleaded guilty to altering a FEMA check and is scheduled to appear 

for a pre-trial hearing. This joint investigation by the OIG and the United States 

Secret Service began when the subject applied to FEMA for disaster assistance 

and was approved. The subject received a U.S. Treasury check from FEMA, 

in the amount of $659, which he altered to read as “$9,659.” He subsequently 

cashed the check at a local business. The Federal Reserve Bank determined that 
31

the submitted U.S. Treasury check was altered. The total amount of the U.S. 

Treasury check was debited back to the account of the local business. 

Former Director of Community Food Bank Charged with Embezzlement (Update)

In June 2003, a former director of a community food bank was sentenced in 

Montana state court to 600 months confinement, with 300 months suspended, and 

ordered to make restitution in the amount of $121,018.04, as a result of a joint 

investigation by OIG and the Great Falls, Montana police department. A search 

warrant pertaining to a 30-year old homicide investigation produced evidence 

of FEMA grant fraud. Information developed by the OIG through interviews 

and examination of records led to charges against the director for theft of 

approximately $59,000. On October 4, 2002, the former director pleaded guilty to 

the theft, but sentencing was postponed until after the homicide trial. Evidence in 

the homicide trial was subsequently suppressed and the murder charges dropped.

Pahrump Family Resource Center

The OIG was provided with information about possible fraud against the 

government in association with the Pahrump Family Resource Center (PFRC) in 

Pahrump, Nevada. An investigation determined that FEMA initiated a program 

to provide financial assistance to needy families experiencing financial hardships. 

FEMA asked United Way to administer this program, which subcontracted with 

PFRC to distribute the funds. OIG determined that the director of the PFRC 

embezzled over $100,000 from the organization’s accounts, which included 

FEMA funds. The director was indicted for embezzlement and theft, and pleaded 

guilty. 

New York City Stockbroker Charged with 9/11 Fraud

The FEMA New York 9/11 Fraud Task Force investigated claims made by a 

New York stockbroker for alleged losses to his World Trade Center offices. The 

claims were submitted to FEMA, the American Red Cross, and the Safe Horizons 

Charity. The New York County District Attorney’s office charged the broker with 
32 

two felony counts of grand larceny and one felony count of falsifying business 

records. Prosecution is pending.

False Documents Submitted to Multiple 9/11 Assistance Organizations

The FEMA New York 9/11 Fraud Task Force investigated claims made by a New 

York City resident for alleged damage to his apartment. Further investigation by 

the OIG revealed the same person had submitted identical claims to other 9/11 

charities. The claims were submitted to the American Red Cross, the Children’s 

Aid Society, the German American Solidarity Fund, and the Crime Victims 

Board. The New York County District Attorney’s office sought and obtained an 

indictment charging the resident with four counts of grand larceny. Prosecution is 

pending. 

Daughter Falsifies 9/11 Death of Father - Pays Full Restitution

An investigation by the FEMA New York 9/11 Fraud Task Force identified a 

woman who had filed for and received $20,256 in disaster assistance from the 

FEMA Mortgage and Rental Assistance Program based on the alleged death of her 

father in the 9/11 disasters. Also, it was determined that she received assistance 

from the American Red Cross in the amount of $50,000. The investigation 

determined that her father had died in 1990. Two felony counts of grand larceny, 

one felony count of offering a false statement for filing, one felony count of 

falsifying business records, and one felony count of perjury were brought by the 

New York State Attorney General’s Office. She pleaded guilty, was sentenced to 

one year of incarceration, and has repaid $70,256 in restitution to the defrauded 

programs.

FEMA Program Fraud (Update)

As a result of an OIG investigation, the owner of a company that provided bomb 

detection dogs in support of the 9/11 investigation stood trial in May 2003, for 

defrauding the government of approximately $700,000. On June 20, 2003, 

the contractor was found guilty of 25 counts of wire fraud and two counts of 

submitting false invoices. The contractor’s company sought contracts with FEMA 
33

to provide bomb detection services after the September 11, 2001, terrorist attacks. 

The contractor submitted false invoices, falsified the resumes and certifications 

of both his dogs and their handlers, grossly inflated the amount of training and 

experience of his teams, and deliberately misled government agencies he worked 

for about both his qualifications and experience. On September 9, 2003, a U.S. 

District Judge imposed the maximum 6 1/2 year prison sentence on the contractor. 

He was ordered to serve three years of supervised release after his prison term and 

to pay $708,000 in restitution.
34 

MANAGEMENT

Office of Information Technology

Information Security Program Evaluation, FY 2003

In the short period of time since its establishment, DHS has made some progress 

in establishing a framework for its information systems security program. 

However more needs to be done to ensure the security of DHS’ information 

technology infrastructure and prevent disruptions to mission operations. 

The OIG found that the agency head designated the Chief Information Officer 

(CIO) as the person responsible for the security of information systems within 

DHS. The DHS CIO further designated a Chief Information Security Officer 

(CISO) to develop, implement, and manage the department-wide information 

technology (IT) security program. Both the CIO and the CISO have been in place 

since the inception of DHS in January 2003; however, the information security 

function did not begin its staffing process until March 2003. The CISO selected 

program directors who are responsible for ensuring compliance with key Federal 

Information Security Management Act (FISMA) requirements including: policy, 

compliance, training, incident handling, and critical infrastructure protection 

(CIP). The CISO developed and disseminated information system security 

policies and procedures to DHS employees. Finally, the CISO established an 

Information Systems Security Board, consisting of Information Systems Security 

Managers from each component. The board members help develop DHS 

security policies and procedures, and they are responsible for ensuring that all 

computer systems are operating in accordance with these security policies and 

procedures. The CIO and the CISO are continuing to build on the information 

security framework that they have established over the last six months to ensure 

an effective DHS security program.

The DHS CIO and CISO have made progress in a number of additional areas, 

which will aid DHS in implementing an agency-wide IT security program. 

OIG found that DHS has drafted an Information Security Strategic Plan, which 
35

will be used as a guide for the CISO and program directors to develop fully a 

comprehensive IT security program. Further, security policies and procedures 

were issued covering unclassified and classified systems, an incident response and 

reporting process was implemented, a security awareness training program was 

initiated, and a CIP working group was established to assist DHS in developing 

and maintaining a plan for protecting its critical infrastructure. In addition, DHS 

established an Investment Review Board to provide oversight of all investments. 

The DHS CIO, as a board member, ensures that decisions over IT investments 

support the future DHS architecture and business processes. In further support of 

managing the DHS IT investment portfolio, security costs reported in the Exhibit 

300, Capital Asset Plan and Business Case, have been summarized for Fiscal Year 

(FY) 2004 and will be consolidated for DHS’ FY 2005 budget submission.

The Office of Management and Budget (OMB) requires that Plans of Action 

and Milestones (POA&M) be developed for each program and system that has 

a weakness identified through FISMA reports, General Accounting Office or 

financial system audits, or vulnerability assessments. OIG found that DHS does 

not have a process to ensure that all POA&Ms are developed, implemented, and 

managed for every DHS system. Further, the process currently in place is not 

being followed by all DHS components. DHS has purchased an automated tool, 

which will require the use of the National Institute of Standards and Technology 

self-assessment when performing program and system reviews. This database 

tool is being customized to provide additional information, which has been 

determined to be useful for the monitoring of identified security weaknesses. 

OIG found that all components’ POA&Ms are not maintained in the centralized 

POA&M database because either the component is using its own database or 

the component has not been trained on use of the database tool. In addition, 

POA&Ms for security weaknesses relating to classified systems are not included 

within this database.

While the DHS CIO and CISO have achieved some success in developing the 

DHS IT security program, DHS must rely on its components to follow established 

policies and procedures in order to implement the program. OIG found that 

none of the DHS components has a fully functioning IT security program. Each 

of the components is lacking in one or more of the performance measurement 
36 

areas established by FISMA. CBP and ICE, both of which are part of Border 

and Transportation Security, and the United States Secret Service, have the most 

mature IT security programs. The majority of their systems have been reviewed, 

assessed for risk, and certified and accredited. 

Overall, OIG’s evaluation of DHS’ compliance with FISMA identified key areas 

of security that require management attention. Specifically, OIG found that, 

while 42% of DHS systems have security plans, only 37% of DHS systems 

were certified and accredited, and 39% of systems had been assessed for risk. In 

addition, 21% of DHS systems’ security controls had been tested and evaluated in 

the past year, and only 11% of DHS systems had contingency plans.

Finally, FISMA requires an agency to report any significant deficiency on the 

adequacy and effectiveness of its information security program as a material 

weakness. As such, based on OIG’s evaluation of DHS’ IT security program, OIG 

recommends that the CIO declare information security a material weakness at 

DHS.

Further, to assist the CIO in the development of the DHS security program, OIG 

made several additional recommendations found at the end of OIG’s independent 

evaluation. (OIG-IT-03-02)
37

Other OIG Activities

Oversight of Non-FEMA Audits

We processed 25 audit reports prepared by non-DHS auditors on FEMA programs 

and activities. We continue to monitor the actions taken to implement the 

recommendations in those reports. The 25 reports relate to OMB Circular A-133, 

Audits of States, Local Governments, and Non-Profit Organizations. 

Audit Reports Unresolved Over Six Months

As of this report date, DHS OIG is responsible for monitoring 349 audit reports 

from FEMA and legacy agencies that contain recommendations that have been 

unresolved for more than six months. We are working with DHS management on 

the resolution of those reports.
38 

Congressional Briefings

and Testimony

During this reporting period, the OIG provided numerous briefings to members 

of Congress and congressional staff and regarding ongoing work and projects that 

will be undertaken in the upcoming months. Additionally, OIG staff testified at 

two congressional hearings in September. Their testimony, as well as other OIG 

reports, can be found on the department’s website at www.dhs.gov.

The Assistant Inspector General for Audits (AIGA) testified before the House 

Committee on Government Reform, Subcommittee on Government Efficiency 

and Financial Management, on “Financial Management at the Department of 

Homeland Security.” The AIGA noted in his opening remarks that, in the area 

of financial systems and reporting, DHS must integrate and establish effective 

controls over the financial systems and operations of the incoming components, 

including correcting the weaknesses it has inherited. To meet the challenges, 

DHS must build a unified financial management structure capable of supporting 

both efficient financial statement preparation and reliable and timely financial 

information for managing DHS’ current operations. He also noted that a sound 

grants management program is needed, one that complies with federal statutory 

requirements and includes effective monitoring of and assistance to states and 

other grantees. Further, he notes that early attention by DHS to strong systems 

and controls for acquisition and related business processes will be critical, both 

to ensuring success of the programs and maintaining integrity and accountability. 

The AIGA’s testimony also covered OIG’s comments on HR 2886, the 

Department of Homeland Security Financial Accountability Act, a bill that would 

require the department to undergo an “opinion level” audit, to be carried out by a 

private accounting firm, and would make the department’s chief financial officer 

subject to Senate confirmation.

The Deputy Inspector General (DIG) testified before the Senate Committee on 

Environment and Public Works, Subcommittee on Clean Air, Climate Change, and 

Nuclear Safety, to discuss the work of the OIG in response to the terrorist events 

of September 11, 2001, as well as the OIG’s perspective on the effectiveness 

of FEMA since coming under the umbrella of DHS. The DIG pointed out that 

the 9/11 terrorist attacks and the formation of DHS provided an opportunity to 

reassess the value of certain federal disaster programs and improve coordination 

between once separate agencies. He recommended that Congress consider: (1) 
39

reinstating the Mortgage and Rental Assistance Program, which was eliminated in 

2000; (2) pursuing legislative change that would exempt disaster relief programs 

from federal public benefit classification restrictions, when victims needing aid 

are lawfully present in the United States; and (3) whether the federal government 

should be the insurer of last resort for terrorist-related business losses. The 

DIG further noted that FEMA’s transition into DHS did not adversely affect its 

ability to respond to disasters and emergencies. However, FEMA has many 

problems that need to be addressed and its ability to address them effectively is 

compounded by its merger into DHS. Areas of particular concern include FEMA’s 

financial management, security of FEMA’s IT systems, and grant management. 

Also, although numerous grant programs are now consolidated within DHS, their 

management is divided among various components of the department. 
40 

Legislative and Regulatory

Review

The Inspector General Act requires the Inspector General to review existing and 

proposed legislation and regulations relating to the programs and operations of 

DHS and to make recommendations concerning their impact. This reporting 

period has involved a flurry of regulatory issuances and legislative proposals 

designed to implement DHS operations or to amend departmental responsibilities. 

As a result, the OIG experienced an exceptionally high volume of requests for 

comments and reviews with respect to legislative and regulatory matters, some of 

which are discussed below. 

The OIG prepared written comments on H.R. 2886 (Department of Homeland

Security Financial Accountability Act), introduced in the House of 

Representatives on July 24, 2003 and its companion bill in the Senate, S. 1567. 

HR 2886, among other things, waives the requirement for a financial statement 

audit of DHS until FY 2004. The OIG, however, believes emphatically that 

financial accountability for DHS should not be postponed given its newness, size 

and complexity. Based on input from the OIG and others, the waiver provision 

was dropped. The OIG’s audit of FY 2003 financial statements is well under way.

Another review concerned a proposed regulation to increase fees collected 

from persons filing immigration benefit applications and petitions. The OIG 

questioned the fairness of imposing fees to recover past operating losses (totaling 

approximately $140 million) that could have been alleviated by speedier agency 

action. The OIG urged that the fee increase notice fully inform the public about 

the amount of the fee that was unrelated to current services and projected costs. 

The OIG also questioned the appropriateness of claiming an exemption from the 

usual regulatory notice and comment process.

Additionally, the OIG commented on two departmental directives regarding 

investment review processes for DHS contract and procurement decisions. The 

department proposed creating a strategic sourcing group to establish and monitor 

DHS’ strategy for contracts and procurements. Likewise, a second group was 

proposed to evaluate significant contracts for non-IT purchases. The OIG will be 

an advisor or non-voting member of both review groups. 
41

OIG Senior Management

OIG Headquarters

Department of Homeland Security

Attn: Office of Inspector General

Washington, D.C. 20528

Telephone Number (202) 254-4100 Website: www.dhs.gov

Clark Kent Ervin..................Acting Inspector General

Richard L. Skinner............... Deputy Inspector General

Richard N. Reback............... Counsel to the Inspector General

Richard Berman.................. Assistant Inspector General/Audits

Elizabeth Redman............... .Assistant Inspector General/ 

 Investigations

Robert L. Ashbaugh............ Assistant Inspector General/ Inspections, 

 Evaluations, and Special Reviews

Frank Deffer..................... Assistant Inspector General/Information 

 Technology

Edward F. Cincinnati............ Assistant Inspector General/ 

 Administrative Services

Tamara Faulkner..................Congressional Liaison and Media Affairs

Jennifer Price..................... Executive Assistant to the Inspector General
42 

Atlanta, GA Kansas City, MO

3003 Chamblee-Tucker Rd., Suite 374 901 Locust, Room 470

Atlanta, GA 30341 Kansas City, MO 64106

(770) 220 -5228 / Fax: (770) 220-5259 (816) 329-3880 / Fax: (816) 329-3888

Boston, MA Marlton, NJ

408 Atlantic Avenue, Room 330 5002D Greentree Executive Campus, 

Captain J.F. Williams Federal Building Route#73 and Lincoln Drive

Boston, MA 02110 Marlton, NJ, 08053

(617) 223-8600 / Fax: (617)-223-8651 (856) 968-4907 / Fax: (856)-968-4914

Chicago, IL Miami, FL

55 W. Monroe Street, Suite 1010 3401 SW 160th Ave, Suite 401

Chicago, IL 60603 Miramar, FL 33027

(312) 886-6300 / Fax: (312)-886-6308 (954) 602-1980 / Fax: (954)-602-1033

 

Denton, TX Oakland, CA

3900 Karina Street, Suite 224 1111 Broadway, Suite 1200

Denton, TX 76208 Oakland, CA 94607-4052

(940) 891-8900 / Fax: (940) 891-8948 (510) 627-7007 / Fax: (510) 627-7017

 

El Segundo, CA St. Thomas, VI 

222 N. Sepulveda Blvd, Suite 1680 Nisky Center Suite 210

El Segundo, CA 90245 St Thomas, VI 00802

(310) 665-7300 / Fax: (310)-665-7302 (340) 774-0190 / Fax: (340) 774-0191

Houston, TX San Juan, PR 

5850 San Felipe Road, Suite 300 New San Juan Office Building 

Houston, TX 77057 159 Chardón Avenue, 5th Floor

(713) 706-4611 / Fax: (713)-706-4625 Hato Rey, Puerto Rico 00918

(787) 296-3531 / Fax: (787) 296-3652

Indianapolis, IN Mailing Address: P.O. Box 70105

5915 Lakeside Boulevard San Juan, PR 00936

Indianapolis, IN 46278

(317) 298-1596 / Fax: 317-298-1597

Location of Audit

Field Offices
43

Atlanta, GA McAllen, TX St. Thomas, VI 

3003 Chamblee-Tucker Rd Bentsen Tower Office 550 Veterans Drive, 

Suite 301 1701 W. Business Highway 83, Rm.510 Room 207A

Atlanta, GA 30341 McAllen, TX 78501 St. Thomas, USVI 00802 

(770) 220-5290 / Fax: (770) 220-5288 (956) 618-8151 / Fax: (956) 618-8145 (340) 777-1792 / Fax: (340) 777-1803

Chicago, IL Miami, FL San Juan, PR 

55 W. Monroe Street, Suite 1010 3401 SW 160th Ave, Suite 401 New San Juan Office Building 

Chicago, IL 60603 Miramar, FL 33027 159 Chardón Avenue, 5th Floor

(312) 886-2800/ Fax: (312)-886-2804 (954) 602-1980/Fax: (954) 602-1033 Hato Rey, Puerto Rico 00918

(787) 296-3531 / Fax: (787) 296-3652

Dallas, TX Los Angeles, CA Mailing Address: P.O. Box 70105

3900 Karina Street, Suite 228 222 N. Sepulveda Blvd, Suite 1640 San Juan, PR 00936

Denton, TX 76208 El Segundo, CA 90245

(940) 891-8930 / Fax: (940) 891-8959 (310) 665-7320 / Fax:(310)-665-7309

El Centro, CA Philadelphia, PA Tucson, AZ 

321 South Waterman Avenue 5002B Greentree Exec. Campus, Federal Office Building

Room #108 Route# 73 and Lincoln Drive 10 East Broadway Suite 105

El Centro, CA 92243 Marlton, NJ, 08053 Tucson, AZ 85701

(760) 335-3549 / Fax: (760) 335-3534 (856) 968-6600 / Fax: (856)-968-6610 (520) 670-5243 / Fax: (520) 670-5246

El Paso, TX San Diego, CA

Federal Office Building 701 B Street, Room #560

4050 Rio Bravo Suite 200 San Diego, CA 92101

El Paso, TX 79902 (619) 557-5970 / Fax: (619) 557-6518

(915) 534-6133 / Fax: (915) 534-6146

Houston, TX San Francisco, CA

5850 San Felipe Road, Suite 300 1301 Clay St, Suite 420N

Houston, TX 77057 Oakland, CA 94612-5217

(713) 706-4611 / Fax: (713)-706-4625 (510) 637-4311 / Fax: (510) 637-4327

Location of Investigative

Field Offices
44 

APPENDIX 1: AUDIT REPORTS WITH QUESTIONED COSTS

AND FUNDS PUT TO BETTER USE

QUESTIONED COSTS

Report Category Number Questioned

Costs

Unsupported

Costs

A. Reports pending management decision at the start

 of the reporting period

49 $54,144,983 $29,105,613 

B. Reports issued/processed during the reporting

 period with questioned costs

57 $46,230,246 $7,683,264 

 Total Reports (A+B) 

106 $100,375,229 $36,788,877 

C. Reports for which a management decision was

 made during the reporting period

21 $4,672,836 $1,106,169 

 (1) disallowed costs 21 $4,364,213 $1,336,540 

 (2) accepted costs 3 $308,623 $0 

D. Reports put into appeal status during period 0 $0 $0 

E. Reports pending a management decision at

 the end of the reporting period

84 $90,199,332 $35,682,708 

F. Reports for which no management decision 

 was made within six months of issuance 

39 $50,997,736 $28,249,025 

 Notes and Explanations:

 “Management Decision” occurs when management informs the OIG of its intended action in response to a 

 recommendation and the OIG determines that the proposed action is acceptable.

 “Accepted Cost” is previously questioned cost accepted in a management decision as an allowable cost to a government 

 program. Before acceptance, the OIG must agree with the basis for the management decision.

 In Category C, lines (1) and (2) do not always equal the total on line C since resolution may result in values greater than 

 the original recommendations.

Appendix 1
45

Appendix 2

APPENDIX 2: COMPLIANCE - RESOLUTION OF REPORTS AND RECOMMENDATIONS 

 1. Recommendations in Reports more than 6 months old for which a management decision is still 

pending.

2/28/03 9/30/03

Reports Recommendations Reports Recommendations

53 254 349 1183

 2. Current Inventory

OPEN REPORTS

2/28/03 Current Period 9/30/03

Open Issued Closed Open

139 92 48 416*

ACTIVE RECOMMENDATIONS

2/28/03 Current Period 9/30/03

Open Issued Closed Active

602 258 204 1,388*

 “Open reports” are those containing one or more recommendations for which a management

 decision or final action is pending.

 “Active Recommendations” are recommendations awaiting a management decision or final action.

 “Final Action” is the completion of all management actions--as described in a management

 decision--with respect to audit findings and recommendations.

*The numbers of open reports and active recommendations include reports issued by 

legacy agencies that DHS OIG is now responsible for monitoring and resolving.
46 

APPENDIX 3: MANAGEMENT REPORTS ISSUED 

(In thousands)

Funds

Program Office/Report Subject Report Date Put To 

Number Issued Better Use

1. NFIP Management Letter for F Y 2002 Financial Statements A-01-03 6/03 $0 

2. Network and Penetration Study - FY 2002 Fin. Statements A-02-03 6/03 $0 

 3. A Review of the Assistance to Firefighters Grant Program ISP-01-03 9/03 $0

4. Letter Report to Senator Schumer – TSA Training Practices ISP-02-03 8/03 $0

5. DHS Information Security Program Evaluation, FY 2003 IT-03-02 9/03 $0

 6. Final Obstacles Removed To Eliminate Customs Disaster 

Recovery Material Weakness 

IT-03-01 9/03 $0

Total $0 

Appendix 3
47

APPENDIX 4: FINANCIAL ASSISTANCE 

AUDITS REPORTS ISSUED

Report 

Number

Date

Issued Auditee Questioned Costs Unsupported

Funds

Put To 

Better Use

1 DA-01-03 4/03 Cobb Electric Membership Corporation $174,430 $5,920 $0

2 DA-02-03 4/03 Gold Coast Railroad Museum $255,322 $88,486 $0

3 DA-03-03 4/03 Houston County, GA $22,574 $0 $0

4 DA-04-03 4/03 North Carolina State University 

 Raleigh, NC $5,015 $0 $0

5 DA-05-03 4/03 City of Durham, NC $128,543 $0 $0

6 EMA-06-03 5/03 Review of Emergency Management 

 Performance Grant - ME $358,040 $194,204 $0

7 DA-07-03 4/03 City of Philadelphia, PA $0 $0 $0

8 DA-08-03 4/03 Jefferson Cty. Dept. of Public Works,

 Louisville, KY $8,255 $0 $0

9 DA-09-03 5/03 Nashville-Davidson Cty., TN $0 $0 $0

10 DA-10-03 5/03 New York Emergency Management Office $0 $0 $0

11 DA-11-03 5/03 Beaufort Cty. Board of Educ. $262,564 $72,664 $0

12 DA-12-03 5/03 Manatee Cty. FL $87,076 $0 $0

13 DA-13-03 6/03 Harrison Cty., MS $1,729,666 $0 $0

14 DA-14-03 6/03 Taylor Cty, GA $0 $0 $0

15 DA-15-03 6/03 Municipality of Utuado, PR $776,364 $0 $0

16 DA-16-03 7/03 District of Columbia Department of 

 Public Works $6,408 $0 `$0

17 DA-17-03 7/03 District of Columbia Department of 

 Public Works $60,173 $0 $0

18 DA-18-03 7/03 Hillsborough County, FL $65,630 $29,103 $0

19 DA-19-03 7/03 NC Dept. of Environment & Nat. Res. $60,803 $2,880 $0

20 DA-21-03 8/03 Historic Red Clay Valley Inc., DE $0 $0 $0

21 DA-22-03 8/03 City of Jacksonville, NC $90,837 $0 $0

22 DA-23-03 8/03 Lamar Cty, AL $113,392 $0 $0

23 DA-24-03 8/03 Virgin Island Gov’t., Dept. of Public 

Works $695,593 $610,633 $0

24 DA-25-03 9/03 Key West, FL $5,329,655 $0 $0

25 DA-26-03 9/03 New Jersey State Police $1,238 $0 $0

Appendix 4
48 

26 DA-27-03 9/03 Palm Beach County, FL $21,773 $0 $0

27 DA-28-03 9/03 Gulf Shore, AL $25,868 $0 $0

28 DD-01-03 3/03 Benson County, ND $83,883 $83,883 $0

29 DD-02-03 4/03 Missouri Disaster Assistance Grant $328,348 $0 $0

30 DD-03-03 4/03 Guadalupe-Blanco River Authority 

 Seguin, TX $0 $0 $0

31 DD-04-03 4/03 Lake County Electric Cooperative 

 Grand Rapids, CO $202,245 $0 $0

32 DD-05-03 4/03 Valley City, ND $1,480,354 $0 $0

33 DD-06-03 4/03 South Dakota’s Compliance with 

 DAP’s Requirements $0 $0 $0

34 DD-07-03 5/03 Ohio Adjuntant General Department 0 0 $0

35 DD-08-03 6/03 City of Moore, OK $28,879 $0 $0

36 DD-09-03 6/03 Overpayment to the Minnesota 

 Department of Natural Resources $42,789 $0 $0

37 DD-10-03 7/03 Los Alamos Family Council, Inc. $177,301 $0 $0

38 DD-11-03 8/03 Memorial Hermann Hospital 

 Houston, TX $16,507 $6,703 $0

39 DD-12-03 9/03 Texas Division of Emergency 

 Management $527,126 $0 $0

40 DD-13-03 9/03 Montana’s Compliance with Disaster 

 Assistance $41,518 $0 $0

41 DD-14-03 9/03

Review of Indirect Costs for Fire 

 Suppression Assistance Grants 

 Region VIII 

$4,123,697 $0 $4,123,697

42 DD-15-03 9/03 City of Grand Forks, ND $10,574,893 $1,200,709 $0

43 DD-16-03 9/03 City of Chicago, IL $6,708,820 $516,665 $0

44 DO-01-03 4/03 Los Angeles County Department of 

 Public Works $1,548,597 $1,445,367 $0

45 DO-02-03 4/03 Alaska’s Compliance with DAP’s 

 Requirements $0 $0 $0

46 DO-03-03 4/03 Arizona’s Compliance with DAP’s 

 Requirements $0 $0 $0

47 DO-04-03 4/03 County of Los Angeles, Los Angeles, CA $563,720 $0 $0

48 DO-05-03 4/03 County of Mariposa, Mariposa, CA $38,253 4,548 $0
49

49 DO-06-03 4/03 Arvin-Edison Water Storage District $10,568 $0 $0

50 DO-07-03 5/03 Ventura County Flood Control District $45,736 $0 $0

51 DO-08-03 5/03 Victor Valley Wastewater 

 Reclamation Authority $272,100 $114,171 $0

52 DO-09-03 5/03 Kaiser Foundation Hospital 

 Los Angeles, CA $138,556 $53,546 $0

53 DO-10-03 6/03 Kaiser Foundation Health Plan, Inc. 

 Los Angeles, CA $27,464 $0 $0

54 DO-11-03 6/03 Napa, CA $23,973 $0 $0

55 DO-12-03 6/03 L. A. County Department of Public 

 Works Alhambra, CA $75,189 $75,189 $0

56 DO-13-03 6/03 Los Angeles County Fire Department 

 Los Angeles, CA $578,891 $541,173 $0

57 DO-14-03 6/03 CA Depart. of Forestry/Fire Protection 

 Sacramento, CA $646,853 $44,147 $0

58 DO-15-03 6/03 Milpitas, CA $904 $0 $0

59 DO-16-03 7/03 San Luis Obispo, CA $1,584 $830 $0

60 DO-17-03 8/03 Weaverville, CA $0 $0 $0

61 DO-18-03 8/03 Simom Valley Unified School District 

 Los Angeles, CA $2,164,298 $387,203 $0

62 DO-19-03 8/03 Los Angeles, CA $556,976 $549,095

63 DO-20-03 8/03

Washington’s Compliance with 

 Disaster Assistance Program’s 

 Requirements

$0 $0 $0

64 DO-21-03 9/03 Los Angeles Department of General 

 Services $28,856 $18,661 $0

65 DO-22-03 9/03 California Department of Fish and Games $12,221 $0 $0

Total $ 41,350,318 $ 6,045,780 $4,123,697
50 

APPENDIX 5: SCHEDULE OF AMOUNTS DUE AND RECOVERED

Report

Number

Date

Issued

Amount

Due

Recovered

Costs

1 C-01-03 12/02 Texarkana, AK $0 $1,966,440

2 C-03-03 1/03 City of Colorado Springs, CO $67,962 $0

3 DA-02-03 4/03 Gold Coast Railroad Museum $0 $255,322

4 DA-04-03 11/02 North Carolina State Univ., Raleigh, NC $5,015 $0

5 DA-11-03 5/03 Beaufort County Board of Education $262,564 $0

6 DA-18-03 7/03 Hillsborough County, FL $0 $39,472

7 DD-01-03 3/03 Benson County, ND $83,883 $0

8 DD-02-03 4/03 Audit of Disaster Asst., State of Missouri $28,173 $2,978

9 DD-04-03 4/03 Lake County Electric Cooperative $0 $202,245

10 DD-05-03 4/03 Valley City, ND $0 $1,480,354

11 DD-08-03 6/03 City of Moore, OK $28,879 $0

12 DD-09-03 6/03 Overpmt. to Minn. Dept. of Natural Res. $0 $42,789

13 DD-10-03 7/03 Los Alamos Family Council Inc. $0 $177,301

14 DD-13-03 9/03 Montana’s Compliance with Disaster Asst

 Review of Indirect Costs for Fire. $0 $41,518

15 DD-14-03 9/03 Suppression Assistance Grants $4,123,697

16 DO-05-03 4/03 Mariposa Cty., CA $0 $38,253

17 DO-10-03 6/03 Kaiser Foundation Health Plan, Inc. $27,464 $0

18 E-07-02 11/01 Lynches River Electric Cooperative $0 $99,025

19 E-26-02 9/02 Tampa, FL $0 $6,125

20 E-27-02 9/02 Municipality of Hormigueros, PR $0 $959,864

21 E-30-02 9/02 Wilson, NC $0 $25,868

22 E-01-03 10/02 Wilmington, NC $0 $6,865

23 E-04-03 10/02 Wilmington, NC $0 $60,727

24 E-05-03 11/02 Monroe County, FL $0 $15,940

25 E-06-03 11/02 Monroe County, FL $0 $49,731

26 E-28-02 9/02 Wake Count Raleigh, NC $0 $84,243

27 W-47-99 8/99 California Highway Patrol $0 $869,149

28 W-25-00 5/00 Public Utility District No.1, Everett, WA $0 $452,102

29 W-26-00 5/00 Public Utility District No.1, Everett, WA $0 $146,910

Appendix 5
51

30 W-17-01 4/01 Management of FEMA’s Disaster Grants

 Awarded Under the Stafford Act $0 $912,223

31 W-04-03 12/02 Idaho’s Compliance w/ Disaster Asst. Prg. $0 $14,270

32 W-05-03 12/02 Sacramento, CA $0 $1,655

33 W-06-03 12/02 Sacramento, CA $0 $3,861

Total $503,940 $12,078,927
52 

The specific reporting requirements prescribed in the Inspector General Act of 1978, as amended, are 

listed below with a reference to the pages on which they are addressed.

Requirements Pages

Section 4(a)(2) Review of Legislation and Regulations 41

Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 5-36

Section 5(a)(2) Recommendations with Significant Problems 5-36

Section 5(a)(3) Prior Recommendations Not Yet Implemented 37

Section 5(a)(4) Matters Referred to Prosecutive Authorities Inside Cover 

Section 5(a)(5)& Summary of Instances Where Information N/A

Section 6(b)(2) Was Refused

Section 5(a)(6) Listing of Audit Reports 46-51

Section 5(a)(7) Summary of Significant Audits 5-36

Section 5(a)(8) Reports with Questioned Costs 44,47-49

Section 5(a)(9) Reports Recommending That Funds Be Put 

 To Better Use 46

Section 5(a)(10) Summary of Reports in Which No Management

 Decision Was Made 44-45

Section 5(a)(11) Revised Management Decisions N/A

Section 5(a)(12) Management Decision Disagreements N/A

Index to

Reporting Requirements
53

ADEM Arizona Department of Emergency and Military Affairs, Division of Emergency 

Management

ADES Alaska Department of Military and Veterans Affairs, Division of Emergency Services

AFG Assistance to Firefighters Grant

AIGA Assistant Inspector General for Audits

AMICC Air and Marine Interdiction Coordination Center

APA American Philanthropy Association 

APHIS Animal and Plant Health Inspection Service

CBP Customs and Border Patrol

CGFAA Cerro Grande Fire Assistance Act

CIO Chief Information Officer

CIP Critical Infrastructure Protection

CIS Citizenship and Immigration Services Bureau

CISO Chief Information Security Officer

DHS Department of Homeland Security

DIG Deputy Inspector General

DO Deportation Officer

DOJ Department of Justice

DPS Texas Department of Public Safety

DPW Department of Public Works

EMD Emergency Management Division

EFS Emergency Food and Shelter

FAA Federal Aviation Administration

FBI Federal Bureau of Investigations

FEMA Federal Emergency Management Agency

FISMA Federal Information Security Management Act

ICE Immigration and Customs Enforcement

INS Immigration and Naturalization Service

IG Inspector General

IT Information Technology

LAHSA Los Angeles Homeless Services Authority

MDEM Minnesota Division of Emergency Management

NFIP National Flood Insurance Program

OIG Office of Inspector General

Acronyms
54

OMB Office of Management and Budget

PFRC Pahrump Family Resource Center

POA&M Plans of Action and Milestones

SDDEM South Dakota, Division of Emergency Management

TECS Treasury Enforcement Communications System

TSA Transportation Security Administration

USFA U.S. Fire Administration

VI Virgin Islands

WYO Write Your Own

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 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 Department of Homeland Security, Washington, DC 20528, Attn: 

Office of Inspector General, Investigations Division – Hotline. The OIG seeks to protect the 

identity of each writer and caller.