National Telecommunications 

and Information 

Administration 

Texas Public Safety 

Interoperable 

Communications Grant 

Award No. 2007-GS-H7-0044 

Final Report No. OIG-11-007-A 

November 5, 2010 

FOR PUBLIC RELEASE
 

Office of Audit and Evaluation 

U.S. DEPARTMENT OF COMMERCE 

Office of Inspector General 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington, O.C, 20230 

November 5,2010 

MEMORANDUM FOR:
 

FROM:
 

Lawrence E. Strickling 

Assistant Secretary for 

Communications and Information 

National Telecommunications and 

In formation Administration 

\ 

Ann C. Eilers rrwl 

Principal Assistant Inspector General for 

Audit and Evaluation 

SUBJECT:	 Final Audit Report No, OlG-II-007-A 

Auditee: Texas Department of Public Safety, Division of 

Emergency Management 

PSIC Award No. 2007-GS-H7-0044 

Attached is a copy of our final audit report of the Texas Public Safety Interoperable 

Communications (PSIC) award for your action in accordance with Department Administrative 

Order (DAO) 213-5, Audit Resolution and Follow-up, Our original audit report has been sent to 

the recipient, who has until December 5, 20 10, to submit comments and supporting 

documentation to you, A copy of our final audit report will be posted on the Office of Inspector 

General's (OIG's) website pursuant to section 8L of the Inspector General Act of 1978, as 

amended, 

Under DAO 213-5, you have 60 calendar days from the date of this memorandum to reach a 

decision on the actions you propose to take on each audit finding and recommendation and to 

submit an audit resolution proposal to this office. The format for the proposal is shown in Exhibit 

8 of the DAO, As applicable, your written proposal must include the rational and/or legal basis 

for reinstating any questioned costs in the report and should reference any supporting 

documentation you relied on. Your comments should also address the funds to be put to better 

use cited in the report. Under the DAO, OIG must concur with your proposal before it may be 

issued as a final determination and implemented. The DAO prescribes procedures for handling 

any disagreements this office may have with the audit resolution proposal. Also, please copy us 

when the audit determination letter is sent to the auditee. 

Please direct any questions regarding this report to Jerry McMahan, Assistant Regional Inspector 

General for Audits, at (404) 730-2065 and refer to the final audit report number listed above in 

any related correspondence. 

Attachment 

cc:	 Milton Brown, NTIA Audit Liaison 

Kathy Smith, NTIA Chief Counsel 

Laura M. Pettus, NTIA PSIC Program Manager 

Daniel Meyerson, JD, NTIA Deputy Program Manager 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington. D.C. 20230 

November 5,2010 

Ms. Elizabeth M. Harman 

Assistant Administrator 

Grant Programs Directorate 

Federal Emergency Management Agency 

500 C Street, SW 

Washington, DC 20472-3635 

Dear Ms. Harman: 

Attached is a copy our final audit report (OIG-I I-007-A) regarding Public Safety Interoperable 

Communications (PSIC) grant awarded to the Texas Department of Public Safety, Division of 

Emergency Management (award number 2007-GS-H7-0044) by the National 

Telecommunications and Information Administration (NTlA). 

Our original audit report has been sent to the recipient, who has until December 5, 2010, to 

submit comments and supporting documentation to the Department of Commerce. NTlA will 

conduct the audit resolution and follow-up in accordance with Department Administrative Order 

(DAO) 213-5. A copy of the report will be posted on the Department of Commerce Office of 

Inspector General's website pursuant to section 8L of the Inspector General Act of 1978, as 

amended. 

If you have any questions regarding this report, please call Jerry McMahan, Assistant Regional 

Inspector General for Audits, at (404) 730-2065, and refer to the final audit report number above 

in any related correspondence. 

si1erelY, () 

C>\OVY'- ((t!' f') 

Ann C. Eilers 

Principal Assistant Inspector General for 

Audit and Evaluation 

Attachment 

cc:	 Richard L. Skinner, DHS Inspector General 

David Turner, DHS/FEMA Grant Programs Directorate 

Bradley A. Shefka, DHS Audit Liaison 

Penny McCormack, FEMA Audit Liaison 

Gina Norton, FEMA Audit Liaison 

Mildred Lloyd, DHS/FEMA Grant Programs Directorate Audit Liaison 

Mike Siviy, DHS OIG Grants Management 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington, D.C. 20230 

November 5, 2010 

Janice Bruno 

SAA Administrator 

Texas Department of Public Safety 

Division of Emergency Management 

5805 North Lamar Boulevard 

Austin, TX 78752-01 13 

Dear Ms, Bruno: 

Attached is a copy of final audit report number OIG-II-007-A concerning the Public Safety 

Interoperable Communications (PSIC) grant your agency received from the National 

Telecommunications and Information Administration (award number 2007-GS-H7-0044). 

This letter is notice of your opportunity to review the report and develop a complete response 

that addresses each audit finding and recommendation. If you believe the report is incorrect, or if 

you disagree with any findings or recommendations, it is important that you explain the error or 

your reasons for disagreement and either submit evidence to the Department supporting your 

contentions or reference any such evidence submitted previously, You also should explain how 

each documentary submission supports your position; otherwise, we may be unable to assess the 

information, 

Your response must be postmarked no later than December 5, 2010. There will be no extensions 

to this deadline, and you will have no other opportunity to submit comments, arguments, or 

documentation before the Department makes a decision on the audit findings and 

recommendations, The Department will consider your complete response in determining what 

action to take with respect to our audit. Enclosure I explains administrative dispute procedures 

available to you. 

As you prepare your response, if you have any questions about this report or the process by 

which the Department reaches a final decision, please call Jerry McMahan, Assistant 

Regional Inspector General for Audits, at (404) 730-2065 and refer to final audit report 

number OlG-I 1-007-A. 

Please send your response (including documentary evidence) to 

Lawrence E. Strickling 

Assistant Secretary for Communications and Information 

National Telecommunications and Information Administration 

U,S, Department of Commerce 

1401 Constitution Avenue, N.W. 

Washington, D.C. 20230 
Please send a copy of your response letter only to 

Ms. Elizabeth M. Hannan 

Assistant Administrator 

Grant Programs Directorate 

Federal Emergency Management Agency 

500 C Street, SW 

Washington, DC 20472-3635 

Ann C. Eilers 

Principal Assistant Inspector General for 

Audit and Evaluation 

U.S. Department of Commerce 

1401 Constitution Avenue, N.W., Room 7886B 

Washington, D.C. 20230 

Jerry McMahan, Assistant Regional Inspector General for Audits 

United States Department of Commerce 

Office of Inspector General 

Atlanta Regional Office of Audits 

401 W. Peachtree Street, N.W., Suite 2742 

Atlanta, GA 30308 

After evaluation of your response, the audit action official may provide you with further 

guidance or request clarification. Our final report, along with your response, will be posted on 

OIG's website pursuant to section 8L of the Inspector General Act of 1978, as amended. 

Sincer\y, 

~/)'lM £/~ Ann C. Eilers 

Principal Assistant Inspector General for 

Audit and Evaluation 

Attachments 

cc (w/o attach): Laura M. Pettus, NTIA PSIC Program Manager 

David Turner, DHS/FEMA Grant Programs Directorate 

John Keel, Texas Legislative Auditor 
 Enclosure 1 

Page 1 of 2 

NOTICE TO AUDITEES
 

Financial Assistance Audits
 

1. Audit requirements applicable to a particular financial assistance award may be established 

by law, regulation, policy, or the terms of the recipient's financial assistance agreement with 

the Department of Commerce. 

2. Audit results will be reported to the bureau or office administering the financial assistance 

award and to you (the recipient/auditee), unless the Department’s inspector general 

determines it is in the government's interest to withhold the audit report. 

3. Audit results may lead to adverse consequences for you, including the following actions 

(which are subject to applicable laws and regulations): 

o	 suspension and/or termination of current awards; 

o	 referral of identified problems to other federal funding agencies and entities as deemed 

necessary for remedial action; 

o	 denial of eligibility for future awards; 

o	 cancellation of authorization for advance payment and substitution of reimbursement 

by check; 

o	 establishment of special conditions in current or future awards; and, 

o	 disallowance of costs, which could result in a reduction in the amount of federal 

payments, withholding of payments, offset of amounts due the government 

against amounts due you, or establishment of a debt and appropriate debt 

collection follow-up (including referrals to collection agencies). 

Because of these and other possible consequences, it is important that you take your 

responsibility to respond to audit findings seriously by providing explanations and evidence 

to support your position with respect to the disputed results. 
 

Enclosure 1 

Page 2 of 2 

4. You have the following opportunities to point out errors (of fact or law) that you believe 

were made in the audit, to explain other disagreements with audit findings and 

recommendations, to present evidence that supports your positions, and to dispute final 

determinations: 

o	 At any time during the audit, you may bring to the attention of the auditors 

evidence you believe affects the auditors' work. 

o	 At the completion of the audit on-site, as a matter of courtesy, you will usually be 

given the opportunity to discuss (during an exit conference) the preliminary audit 

findings and to present a clear statement of your position on the significant 

preliminary findings, including possible cost disallowances. 

o	 When the draft audit report is issued, you will have the opportunity to comment 

and to submit evidence during the 30 days after we transmit the report to you. 

(We will not extend this deadline.) 

o	 When the final audit report is issued, you will have the opportunity to comment 

and to present evidence during the 30 days after we transmit the report to you. 

(We will not extend this deadline.) 

o	 When the Department issues its decision (the "Audit Resolution Determination") on 

the audit report's findings and recommendations, you have the right to appeal for 

reconsideration within 30 calendar days after receiving the Determination Letter if 

monies are due the government. (We will not extend this deadline.) The 

Determination Letter will explain the specific appeal procedures. 

o	 Once you file an appeal or the appeal period has expired, the Department will not 

accept any further submissions concerning your dispute of its decisions. If it is 

determined that you owe money or property to the Department, the Department will 

take appropriate collection action but will not thereafter reconsider the merits of the 

debt. 

There are no other administrative appeals available in the Department. 
 

Report In Brie

U.S. Department of Commerce Office of Inspector General 

f

November 5, 2010 

Why We Did this Review 

Background 

The Digital Television Transition 

and Public Safety Act of 2005 

authorized NTIA, in consultation 

with DHS, to implement the PSIC 

program—a $1 billion one-time, 

formula-based matching grant 

program intended to enable public 

safety agencies to establish interoperable emergency communications 

systems using reallocated radio 

spectrum. 

The Implementing Recommendations of the 9/11 Commission Act 

of 2007 requires the Commerce Inspector General to conduct financial 

audits, over 4 years, of a representative sample of at least 25 states or 

territories receiving PSIC grants. 

On September 30, 2007, the 

National Telecommunications and 

Information Administration (NTIA) 

awarded a $65,069,247 Public 

Safety Interoperable Communications (PSIC) grant to the State of 

Texas to enhance interoperable 

emergency communications. NTIA 

also required a minimum 

20 percent matching share from 

nonfederal sources for the acquisition and deployment of communications equipment, and management 

and administration costs. 

The original award period ran from 

October 1, 2007, to September 

30, 2010. In November 2009, the 

President signed an act extending 

the award period to September 30, 

2011. 

TxDPS was designated as Texas’s 

state administrative agency to apply 

for and administer PSIC funds.We 

audited costs claimed by TxDPS 

to determine whether the recipient 

complied with NTIA PSIC grant 

guidelines and the Department of 

Homeland Security’s (DHS) award 

terms and conditions. 

National Telecommunications and Information Administration 

Texas Public Safety Interoperable Communications Grant 

PSIC Award No. 2007-GS-H7-0044 (OIG-11-007-A) 

What We Found 

Our audit covered the award period of October 1, 2007, through June 30, 2009, during which 

time the Texas Department of Public Safety’s (TxDPS) Governor’s Division of Emergency 

Management claimed total costs of $2,207,092. In general, TxDPS appears to be on track to 

complete its investments before the end of the award, but we did discover several areas of concern. Specifically, we found the following: 

• TxDPS has not provided sufficient nonfederal funds to meet its matching share requirement and has been incorrectly reporting its matching funds in its quarterly financial reports. 

While the agency agrees with this finding, it continues to report incorrect amounts. 

• In 11 out of 25 cases we reviewed, TxDPS did not fully comply with the grant’s requirements for drawing down funds within 30 days of disbursement and placing these funds in 

an interest-bearing account so that any accrued interest can be remitted to the U.S. Treasury. Based on this finding, we calculated that TxDPS needs to remit imputed interest of 

$1,205 to the Treasury. In response to our draft report, TxDPS provided information that it 

had deposited the funds in an interest-bearing account; however, it still had not remitted the 

interest to the U.S. Treasury. 

• TxDPS transferred a total of $1,265,226 from the budgets of several of its investments to 

another investment without requesting or receiving the needed approval from NTIA or the 

Federal Emergency Management Agency (FEMA). 

What We Recommended 

We recommend the NTIA Assistant Secretary for Communications and Information, in conjunction with FEMA’s Grant Programs Directorate, take the following actions: 

• Direct TxDPS to provide evidence that it has addressed the deficiencies in its accounting 

system that allowed the improper nonfederal matching share to be reported, and confirm 

that the correct amount is currently being reported. If TxDPS cannot demonstrate that corrective actions have been taken, the agency should be designated “high risk” and advance 

payments suspended until corrective actions are implemented. 

• Remind TxDPS of its obligations to (1) limit advances of federal funds to its immediate 

(30-day) cash needs, (2) deposit all advances in an interest-bearing account, and (3) remit 

to the federal government the interest earned on advances, including the $1,205 of imputed 

interest mentioned above. Remitting this amount will enable these funds to be put to better 

use. 

• Direct TxDPS to submit a modification request for the budget transfer between investments, explaining how the PSIC project will benefit from these transfers. 
U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

CONTENTS 

Introduction......................................................................................................................................1
 

Findings and Recommendations ......................................................................................................3
 

I. Investments Appear to Be on Schedule for Completion Before End of Grant .............................3
 

II. Matching Share Requirement in Process ....................................................................................3
 

III. TxDPS Did Not Fully Comply with Grant Terms and Conditions............................................4
 

A. Financial Status Reporting Requirement Not Met ...........................................................4
 

B. TxDPS Did Not Comply with Cash Drawdown Requirements .......................................5
 

C. TxDPS Did Not Comply with the PSIC Modification Policy .........................................6
 

IV. Questioned Costs ..................................................................................................................6
 

Summary Results of Financial Audit ...............................................................................................8
 

Appendix A: Objectives, Scope, and Methodology.........................................................................9
 

Appendix B: Summary of Source and Application of Funds ........................................................11
 

Appendix C: Summary of Financial/Compliance Audit ................................................................12
 

Appendix D: Imputed Interest .......................................................................................................14
 

Appendix E: Recipient Response...................................................................................................15
 
 

 

U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

INTRODUCTION
 

On September 30, 2007, the National 

Telecommunications and Information Public Safety Interoperable 

Administration (NTIA) awarded a Public Communications Program

Safety Interoperable Communications (PSIC) 

grant to the state of Texas to enhance The Digital Television Transition and Public 

Safety Act of 2005 authorized NTIA, in interoperable emergency communications. consultation with the Department of The grant provided federal funding of Homeland Security (DHS), to implement the $65,069,247, of which $63,836,923 required PSIC program─a $1 billion one-time, nonfederal matching contributions. Federal formula-based matching grant program funds provided for acquisition and intended to enable public safety agencies to deployment of communication equipment and establish interoperable emergency management and administration (M&A) costs communications systems using reallocated 

must be matched by nonfederal contributions radio spectrum. 

of at least 20 percent of the total cost of those 

activities. Statewide planning, planning and NTIA signed a memorandum of 

coordination, and training costs do not require understanding with DHS, under which DHS 

matching share. The $63,836,923 provided for oversees and administers the PSIC

program. acquisition and deployment and M&A 

represents 80 percent of the total cost of those The Implementing Recommendations of the activities, leaving a minimum nonfederal 9/11 Commission Act of 2007 requires the matching share requirement of $15,959,231. Commerce Inspector General to conduct 

financial audits, over 4 years, of a The award period runs from October 1, 2007, representative sample of at least 25 states 

to September 30, 2011. On November 6, or territories receiving PSIC grants. The

2009, the President signed Public Law 111- Texas grant program is the second largest of 

96, which extended the PSIC program beyond the 56 states and territories receiving 

its original expiration date of September 30, awards. 

2010. The new law extended the performance 

period of all PSIC grants through September 30, 2011, and allowed for additional extensions, 

through September 2012, on a case-by-case basis, if approved by the Assistant Secretary for 

Communications and Information. 

The governor of Texas designated the Texas Department of Public Safety’s (TxDPS) Governor’s 

Division of Emergency Management as Texas’s state administrative agency to apply for and 

administer PSIC funds.1

 TxDPS prepared an investment justification, based on the NTIA PSIC 

Program Guidance and Application Kit, which detailed individual communications projects 

intended to achieve meaningful and measurable improvements in interoperability and fill gaps 

identified in the statewide communications interoperability plan. The investment justification 

had 10 investments (table 1), involving a total of 42 subrecipients, and was approved by NTIA 

on April 3, 2008. 

1 The PSIC program requires the governor of each state and territory to designate a state administrative agency to 

apply for and administer PSIC funds. Administrative agencies are required to pass through no less than 80 percent of 

the total award amount to local or tribal governments or authorized nongovernmental public safety agencies, unless 

the local entity opts, via written agreement, to have the state agency retain and spend the funds on its behalf. 

1
 
 

U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

Table 1: Investment Justification and Funding 

PSIC Investment Justification 

PSIC Funds 

Awarded 

Non-Federal 

Match 

(Budgeted) Total 

1. State of Texas Multi-Agency 

Interoperability Project $10,591,050 $2,040,000 $12,631,050 

2. State of Texas Strategic 

Technology reserve Project 5,039,518 1,007,904 6,047,422 

3. Multi-COG Communications 

Network 8,501,075 1,700,215 10,201,290 

4. Regional - Texas/Mexico Border 

Interoperable Communications 9,117,464 1,813,493 10,930,957 

5. Houston Urban Area 

Interoperability Expansion 14,586,128 3,646,532 18,232,660 

6. San Antonio Urban Area P-25 

700 MHz Multi-Region 

Evacuation/Border Security 

Initiative 3,043,692 442,904 3,486,596 

7. Regional Interoperability 

Communication Upgrades 7,444,443 1,487,689 8,932,132 

8. Coastal Four-County Trunked 

Radio Interoperability Expansion 1,798,271 454,567 2,252,838 

9. Houston-Galveston Area 

Council Regional Infrastructure 

and Subscriber Units 1,238,481 306,145 1,544,626 

10. North Central Texas Regional 

700 MHz Interoperability Overlay 1,657,048 216,955 1,874,003 

Management and Administration 1,952,077 488,019 2,440,096 

Statewide Planning 100,000 100,000 

State Match 2,354,808 2,354,808 

Total 65,069,247 15,959,231 81,028,478 

Source: TxDPS Investment Justification 

States were required to include a prescribed strategic technology reserve in their investment 

justifications. The strategic reserve is designed to pre-position, or secure in advance, 

interoperable communications equipment for immediate deployment in an emergency situation 

or major disaster. Texas’s prescribed strategic reserve amount was $5,039,518 and was included 

as investment 2. 

2
 
U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

FINDINGS AND RECOMMENDATIONS
 

In June 2009, we initiated an audit of costs claimed by TxDPS to determine whether it had 

complied with NTIA PSIC grant guidelines and DHS award terms and conditions. The audit 

covered the award period of October 1, 2007, through June 30, 2009, during which time the 

recipient claimed total costs of $2,207,092. The objective of our audit was to determine whether 

TxDPS was using its grant funds in accordance with federal requirements. In particular, we 

assessed whether TxDPS (1) is on track to complete its interoperable communications 

investment by September 30, 2011; (2) met the 20 percent matching share requirement for 

acquiring and deploying interoperable communications equipment and M&A costs; (3) claimed 

reasonable, allowable, and allocable costs under the award; and (4) complied with grant terms 

and conditions. Appendix A outlines the objectives, scope, and methodology we used in the 

audit. The following sections detail our findings with respect to each audit objective. 

I. Investments Appear to Be on Schedule for Completion Before End of Grant 

TxDPS anticipates completing the 10 investments by September 30, 2011. Our audit found 

nothing to indicate that any of the investments would not be completed before the end of the 

grant. 

II. Matching Share Requirement in Process 

In its approved investment justification, TxDPS budgeted the required 20 percent matching share 

from nonfederal sources for the acquisition and deployment of interoperable communications 

equipment, and M&A. The match is required by Section 3006 of the Digital Television 

Transition and Public Safety Act of 2005, Public Law 109-171, the PSIC Program Guidance and 

Application Kit, and the special award conditions. 

We found that TxDPS’ budgeted matching share of $15,959,231 meets the minimum match 

required by the PSIC grant. We did note that six subrecipients, with combined matching share 

requirements of $1,765,927, have not provided documentation to TxDPS in support of their 

matching share commitments. We discussed this issue with TxDPS officials who stated that the 

six subrecipients will not be allowed to proceed with their PSIC-funded projects until TxDPS 

receives evidence that matching share commitments are in place. 

NTIA’s PSIC Program Guidance and Application Kit, section VI, part B, requires the match to 

be expended at the same rate as the federal share. As of June 30, 2009, TxDPS had expended 

$1,992,944 in federal funds and reported $214,148 in matching expenditures, which is less than 

the required matching share for that level of federal expenditures. However, we were able to 

verify that an additional $206,447 in nonfederal matching funds had been expended, but were not 

included in the state’s financial reports. Thus, total nonfederal matching contributions were 

$420,595 as of June 30, 2009. A summary of source and application of funds is provided in 

appendix B. After accounting for the unreported matching expenditures, TxDPS still has not 

fully provided sufficient nonfederal funds to meet its matching share requirement. 

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U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

III. TxDPS Did Not Fully Comply with Grant Terms and Conditions 

We found TxDPS to be in compliance with PSIC requirements related to timely submission of 

financial reports, but the reports themselves were not accurate. TxDPS complied with 

requirements to pass PSIC funds to local public safety agencies. We found instances of 

noncompliance in the areas of cash advances and approval for project scope modifications, as 

described below. 

A. Financial Status Reporting Requirement Not Met 

We reviewed the financial status reports (SF-269) filed by TxDPS for the period October 1, 

2007, through June 30, 2009. The PSIC Program Guidance and Application Kit, section VI, part 

C.1, states that these reports must be filed within 30 days of the end of each calendar quarter for 

every quarter the award is active, including partial calendar quarters and periods during which no 

grant activity occurs. TxDPS submitted all of its financial status reports within the 30-day time 

period. 

In our draft report, we stated that TxDPS did not report the correct matching share amount on its 

SF-269 for the period ended June 30, 2009. TxDPS had reported $214,148 in matching share 

contributions, but we determined actual nonfederal matching share was $420,595, as mentioned 

above. When we brought the discrepancy to the attention of TxDPS officials, they agreed that the 

reported matching share was inaccurate. The officials stated that the incorrect amount had been 

reported due to an error in TxDPS’ accounting system. Even though TxDPS agreed that its 

reported nonfederal matching share was incorrectly reported as of June 30, 2009, it has not 

corrected the error and continues to report inaccurate matching share amounts on its quarterly 

financial reports. 

TxDPS Response 

TxDPS concluded that the amount shown in its accounting records is incorrect and that the actual 

amount should have been $456,309. TxDPS stated that the correct amount will be reported on 

the quarterly reports dated September 30, 2010. TxDPS’ complete response to our draft report, 

excluding attachments, is included as appendix E. 

OIG Comments 

We concur with TxDPS’ stated corrective action; however, as we stated in our draft report, we 

were only able to verify a matching share amount of $420,595. 

Recommendation 

We recommend that the NTIA Assistant Secretary for Communications and Information, in 

conjunction with the FEMA Grant Programs Directorate, direct TxDPS to provide evidence that 

it has addressed the deficiencies in its accounting system that allowed the improper nonfederal 

matching share to be reported and that the correct amount is currently being reported. If TxDPS 

cannot demonstrate that corrective actions have been taken, we recommend TxDPS be 

4
 
U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

designated “high risk” and advance payments suspended until corrective actions are 

implemented. 

B. TxDPS Did Not Comply with Cash Drawdown Requirements 

The PSIC Program Guidance and Application Kit, section VI, part B, page 31, states that 

grantees should draw down funds as close to expenditure as possible, up to 30 days prior to 

expenditure/disbursement. Advances of funds received by grantees must be placed in an interestbearing account, and interest earned must be remitted to the United States Treasury. We 

reviewed 25 drawdowns to assess TxDPS’ compliance with PSIC requirements for advances of 

federal funds. Excluding one immaterial item, we found 11 drawdowns, totaling $242,565, for 

which TxDPS exceeded 30 days between receipt and disbursement. On August 31, 2009, TxDPS 

returned $211,643 of the cash accumulated through drawdowns to the program. 

In our draft report, we stated TxDPS did not place the advanced funds in an interest-bearing 

account, as required by PSIC guidelines. In its response to our draft report, TxDPS provided 

information that it had deposited the funds in an interest-bearing account. However, it had not 

remitted the interest to the U.S. Treasury; therefore, we determined that imputed interest of 

$1,205 is due the government. Grantees are allowed to retain up to $100 per year for 

administrative expenses for all federal grants combined, and we allowed the full $100 for 

simplicity of calculations. We calculated the imputed interest based on the U.S. Treasury 

Department’s 13-Week Treasury Bill rate during the state’s fiscal year, pursuant to requirements 

in Title 31, Code of Federal Regulations, § 205.19(b). See appendix D for details of our 

calculation of imputed interest. 

TxDPS Response 

TxDPS stated that it placed the funds from all drawdowns in an interest-bearing account (the 

Texas State Comptroller’s account), and that the Texas State Comptroller’s Accounting Policy 

#23, “Earned Federal Funds,” is the current policy over how federal funds are deposited in the 

State Comptroller’s account. The response further stated that the State Comptroller controls how 

the money and interest earned is remitted. TxDPS stated it is taking the necessary steps to refund 

to the U.S. Treasury the amount of interest accrued. 

OIG Comments 

The PSIC federal program requirement to deposit funds in an interest-bearing account and remit 

that interest to the U.S. Treasury takes precedence over a state requirement. However, since the 

state intends to remit the interest, we concur with its stated corrective action. 

Recommendations 

We recommend that the NTIA Assistant Secretary for Communications and Information, in 

conjunction with the FEMA Grant Programs Directorate, remind TxDPS of its obligations to (1) 

limit advances of federal funds to its immediate (30-day) cash needs, (2) deposit all advances in 

an interest-bearing account, and (3) remit to the federal government the interest earned on 

advances, including the $1,205 of imputed interest discussed above. 

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U.S. Department of Commerce Final Report OIG-11-007-A
 

Office of Inspector General November 5, 2010
 

Funds to Be Put to Better Use 

The return of imputed interest on the advance drawdown of $242,565 PSIC funds will permit 

$1,205 to be put to better use. 

C. TxDPS Did Not Comply with the PSIC Modification Policy 

The PSIC Budget and Scope Modification Packet, section B, part 1, states that a written request 

and prior approval by NTIA and FEMA are required for modifications to PSIC investments and 

for budget and scope changes. A budget modification is defined as a transfer of funds among 

categories that are expected to exceed 10 percent of either the total approved investment budget 

or the budget for any individual investment category. 

In our draft report, we stated that TxDPS transferred to investment 10 a cumulative total of 

$1,265,226 originally budgeted for investments 1, 6, 7, and 9. TxDPS neither requested nor 

received approval for these transfers. TxDPS stated that the funds were moved to better address 

the needs of the project; however, this does not absolve TxDPS of the requirement for NTIA and 

FEMA approval for the transfers. 

TxDPS Response 

TxDPS stated that its investment justification submission to NTIA dated December 5, 2007, 

contained the wrong budgets for investment justifications 1, 6, 7, 9, and 10. TxDPS stated that it 

readjusted the budget figures for the affected justifications, thinking that it had authority to do so 

without written permission from NTIA. TxDPS also stated that it is now requesting NTIA 

approval of the stated budget corrections. 

OIG Comments 

We concur with TxDPS’ stated corrective action. 

Recommendation 

We recommend that the NTIA Assistant Secretary for Communications and Information, in 

conjunction with the FEMA Grant Programs Directorate, direct TxDPS to submit a modification 

request for the budget transfer of $1,265,226, explaining how the PSIC project will benefit from 

these transfers. 

IV. Questioned Costs 

TxDPS claimed costs of $2,207,092 on its June 30, 2009, financial status report. We found that 

$2,478 of claimed M&A costs lacked adequate supporting documentation; therefore, we 

questioned this amount in our draft report. 

6
 
 

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TxDPS provided a spreadsheet that included a breakdown of costs with appropriate support for 

the items, including the $2,478 we questioned in our draft report. Therefore, we have eliminated 

the questioned cost. 

V. Follow-Up on Prior Audit Recommendations 

As part of our audit, we reviewed the state of Texas’s Office of Management and Budget (OMB) 

Circular No. A-133 audit report for the year ended August 31, 2008. Although the PSIC grant 

was not part of the audit, we reviewed the report for issues that could have a direct and material 

effect on the PSIC program. We found no issues that would concern the PSIC grant. 

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U.S. Department of Commerce Final Report OIG-11-007-A
 

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SUMMARY RESULTS OF FINANCIAL AUDIT
 

The results of our interim cost audit for the period October 1, 2007, through June 30, 2009, 

which are detailed in appendix C, are summarized as follows: 

Costs Claimed 

Add: Nonfederal Costs Not Previously Claimed 

Cost Accepted 

$2,207,092 

206,447 

$2,413,539 

Accepted Costs Not Subject to Match 

Accepted Costs Subject to Match 

Federal Share Ratio 

Federal Funds Earned 

Federal Funds Disbursed (a) 

Excess Disbursements Due the Government 

$2,412,339 

x 80% 

$1,200 

1,929,871 

1,931,071 

2,056,927 

$ 125,856 

Interest Due the Government $1,205 (b) 

(a) Federal funds disbursed include total drawdowns of $2,268,570, as of June 30, 2009, less 

$211,643 of advanced funds that were returned to the government on August 31, 2009. 

Although the repayment was outside the scope of our audit period, we treated it as if it 

happened as of June 30, 2009. 

(b) Imputed interest $1,305 (appendix D) less $100 allowance for administrative expenses, as 

discussed on page 5. 

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APPENDIX A: OBJECTIVES, SCOPE, AND METHODOLOGY 

The objective of our audit was to determine whether TxDPS was using its grant funds in 

accordance with federal requirements. In particular, we assessed whether TxDPS (1) is on track 

to complete its interoperable communications investments by September 30, 2011; (2) met the 

minimum 20 percent match for acquiring and deploying interoperable communications 

equipment, and M&A costs; (3) claimed reasonable, allowable, allocable costs under the award; 

and (4) complied with grant terms and conditions. 

The audit scope included a review of costs claimed during the award period of October 1, 2007, 

through June 30, 2009. We conducted our audit fieldwork from June through September 2009 at 

TxDPS in Austin, Texas, and at subgrantee sites in Houston, Beaumont, and Bryan, Texas. 

To meet our objectives, we did the following: 

•	 reviewed investment documentation and discussed each investment with agency officials; 

•	 analyzed source documents related to the minimum 20 percent match for acquiring and 

deploying interoperable communications equipment and for M&A of the grant; 

•	 traced costs claimed to source documentation; 

•	 interviewed TxDPS officials and the Texas state legislative auditor and reviewed the 

state's OMB Circular No. A-133 audit report for the year ended August 31, 2008; and 

•	 reviewed pertinent laws, regulations, and guidance (listed below) against TxDPS’ PSIC 

activities and internal controls. 

We evaluated TxDPS’ compliance with the following federal laws and regulations applicable to 

PSIC grants: 

•	 Section 3006 of the Digital Television Transition and Public Safety Act of 2005, Public 

Law 109-171 

•	 Call Home Act of 2006, Public Law 109-459 

•	 Implementing Recommendations of the 9/11 Commission Act of 2007, Public Law 110-

53 

•	 Public Safety Interoperable Communications Grants, Public Law 111-96 

•	 Title 15, Code of Federal Regulations, Part 24, Uniform Administrative Requirements for 

Grants and Agreements to State and Local Governments 

•	 PSIC Program Guidance and Application Kit, August 16, 2007 

•	 NTIA PSIC Grant Program Allowable Cost Matrix 

•	 NTIA PSIC Grant Program Frequently Asked Questions 

•	 OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments 

•	 OMB Circular A-133, Compliance Supplement, CFDA 11.555 

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• Special Award Conditions 

• Department of Commerce Financial Assistance Standard Terms and Conditions 

• DHS, Office of Grant Operations, Financial Management Guide 

We verified the validity and reliability of computer-processed data supplied by TxDPS by 

directly testing data against supporting documentation. Based on our tests, we concluded the 

computerized data were reliable for use in meeting our objectives. 

We analyzed nonstatistical samples of TxDPS, and subrecipient transactions, generally focusing 

on the highest dollar transactions and line items. Since we did not attempt to extrapolate findings 

from sample analyses to all transactions, we believe our sampling methodology represented a 

reasonable basis for the conclusions and recommendations included in our report. 

We obtained an understanding of the management controls of TxDPS by interviewing TxDPS 

officials, as well as examining policies and procedures, the state’s most recent single audit 

report, and written assertions from TxDPS officials. Our report contains recommendations to 

address TxDPS’ reporting of matching share, cash drawdowns, budget and scope modifications, 

and undocumented costs. 

We conducted this performance audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on our audit objectives. 

We performed this audit under the authority of Implementing Recommendations of the 9/11 

Commission Act of 2007; the Inspector General Act of 1978, as amended; and Department 

Organization Order 10-13, August 31, 2006. 

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APPENDIX B: SUMMARY OF SOURCE AND APPLICATION OF FUNDS 

TEXAS DEPARTMENT OF PUBLIC SAFETY 

DIVISION OF EMERGENCY MANAGEMENT

 PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS
 

GRANT NUMBER 2007-GS-H7-0044 

OCTOBER 1, 2007, THROUGH JUNE 30, 2009 

Approved Receipts & 

Budget Expenses

 (a) (b) 

SOURCE OF FUNDS: 

Federal $65,069,247 $2,056,927 

Non-Federal 15,959,231 420,595 

Total $81,028,478 $2,477,522 

APPLICATION OF FUNDS: 

Investment 1 $12,631,050 $ 905,280 

Investment 2 6,047,422 391,346 

Investment 3 10,201,290 0 

Investment 4 10,930,957 0 

Investment 5 18,232,660 0 

Investment 6 3,486,596 0 

Investment 7 8,932,132 506,574 

Investment 8 2,252,838 0 

Investment 9 1,544,626 0 

Investment 10 1,874,003 166,510 

M&A Costs 2,440,096 22,034 

Statewide Planning 100,000 1,200 

State Match 2,354,808 420,595 

Total $81,028,478 $2,413,539 

Notes: 

(a) Approved budgeted costs are for the period of October 1, 2007, through September 30, 2011, 

based on Texas’s approved investment justification. 

(b) Receipts and expenses are for the period of October 1, 2007, through June 30, 2009. 

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APPENDIX C: SUMMARY OF FINANCIAL/COMPLIANCE AUDIT 

TEXAS DEPARTMENT OF PUBLIC SAFETY,

 DIVISION OF EMERGENCY MANAGEMENT
 

PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS
 

GRANT NUMBER 2007-GS-H7-0044 

OCTOBER 1, 2007, THROUGH JUNE 30, 2009 

Results of Audit

Description

 Approved 

Budget

Costs 

 Claimed

Costs Costs 

Questioned Accepted 

Investment 1 

Investment 2 

Investment 3 

Investment 4 

Investment 5 

Investment 6 

Investment 7 

Investment 8 

Investment 9 

Investment 10 

M&A Costs 

Statewide Planning 

State Match 

$12,631,050 

6,047,422 

10,201,290 

10,930,957 

18,232,660 

3,486,596 

8,932,132 

2,252,838 

1,544,626 

1,874,003 

2,440,096 

100,000 

2,354,808

 $ 905,280 

391,346 

0 

0 

0 

0 

506,574 

0 

0 

166,510 

22,034 

1,200 

214,148

$ 0 $905,280 

0 391,346 

0 0 

0 0 

0 0 

0 0 

0 506,574 

0 0 

0 0 

0 166,510 

0 22,034 

0 1,200 

-(206,447)* 420,595 

Total $81,028,478 $2,207,092 $(206,447) $2,413,539 

Costs Claimed $2,207,092 (a) 

Add: Nonfederal Cost not Previously Claimed 206,447 * 

Cost Accepted $2,413,539 

Accepted Costs Not Subject to Match $ 1,200 (b) 

Accepted Costs Subject to Match $2,412,339 

Federal Share Ratio x 80% 1,929,871 

Federal Funds Earned 1,931,071 

Federal Funds Disbursed 2,056,927 

Excess Disbursements Due the Government $ 125,856 

Interest Due the Government $1,205 (c) 

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Notes: 

(a) TxDPS reported total outlays of $2,207,092 on its June 30, 2009, financial status report. 

(b) Accepted costs not subject to the matching share requirement consist of $1,200 in the 

statewide planning category. 

(c) Imputed interest $1,305 (appendix D) less $100 allowance for administrative expenses, as 

discussed on page 5. 

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U.S. Department of Commerce Final Report OIG-11-007-A
 

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APPENDIX D: IMPUTED INTEREST
 

Date Drawn Down 

Amount 

Carry over 

Balance 

No. of 

Days 

Interest 

Incurred 

Interest 

Rate for 

the Period 

Imputed 

Interest 

6/25/2008 16,449.37 5 1.940% 4.37 

7/31/2008 14,709.07 0 1.877% $ -

7/31/2008 16,449.37 31 1.877% 26.22 

8/31/2008 31,158.44 31 1.887% 49.94 

9/4/2008 16,503.64 26 1.607% 18.89 

9/30/2008 31,158.44 30 1.607% 41.15 

10/3/2008 15,264.08 28 1.436% 16.81 

10/7/2008 22,640.42 24 1.436% 21.38 

10/31/2008 47,662.08 31 1.436% 58.13 

11/7/2008 27,831.73 24 1.228% 22.47 

11/13/2008 11,603.44 18 1.228% 7.03 

11/31/2008 85,566.58 31 1.228% 89.24 

12/19/2008 70,554.79 12 1.082% 25.10 

12/31/2008 125,001.75 31 1.082% 114.87 

1/27/2009 11,473.38 4 0.806% 1.01 

1/31/2009 195,556.54 31 0.806% 133.87 

2/12/2009 4,613.45 16 0.712% 1.44 

2/28/2009 207,029.92 28 0.712% 113.08 

3/31/2009 211,643.37 31 0.642% 115.40 

4/28/2009 

4/30/2009 211,643.37 30 0.573% 99.68 

5/26/2009 30,921.64 30,921.64 5 0.515% 2.18 

5/31/2009 211,643.37 31 0.515% 92.57 

6/30/2009 242,565.01 30 0.458% 91.31 

7/31/2009 242,565.01 31 0.400% 82.41 

8/31/2009 242,565.01 31 0.372% 76.64 

Total 242,565. 1,305 

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APPENDIX E: RECIPIENT RESPONSE
 

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(DEN-19671) 

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