Department of Homeland Security 

Office of Inspector General 

Federal Emergency Management Agency 
 

Working Capital Fund 
 

FY 2009 
 

(Unclassified Version) 
 

OIG-10-35 February 2010 
Offce of Inspector General

U.S. Department of Homeland Security

Washington, DC 20528

Homeland

Security

FEEl 'ì 9 2010

Preface

(U) The Department of Homeland Security (DHS) Offce ofInspector General (OIG) was

established by the Homeland Securiiy Act of2002 (Public Law 107-296) by amendment

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and

special reports prepared as part of our oversight responsibilities to promote economy,

effciency, and effectiveness within the department.

(U) This report addresses the Federal Emergency Management Agency's management of

its Working Capital Fund. It is based on interviews with employees and offcials of

relevant agencies and institutions, direct observations, and a review of applicable

documents pertaining to staffing structure, budget and cost calculations, and the costs

allocated to tenants. We contracted with the independent public accounting firm KPMG,

LLP to assess the operations of the Federal Emergency Management Agency Working

Capital Fund. KPMG, LLP's report identifies conditions where the Federal Emergency

Management Agency Working Capital Fund could be improved, resulting in seven

recommendations addressed to the Administrator, Federal Emergency Management

Agency. KPMG, LLP is responsible for the attached draf auditor's report and the

conclusions expressed in it.

(U) The recommendations herein have been developed to the best knowledge available to

our office, and have been discussed with those responsible for implementation. We trust

this report wil result in more effective, efficient, and economical operations. We express

our appreciation to all of those who contributed to the preparation of this report. ¿~o(\~ Richard L. Skinner

Inspector General
KPMG LLP

2001 M Street, NW

Washington, DC 20036

December I, 2009

Ms. Anne L. Richards

Assistant Inspector General for Audits

Office of the Inspector General

U.S. Deparment of Homeland Security

Washington, DC 20528

Dear Ms. Richards:

Unclassified When Separated From Oril!inal Report

(U) - This repOlt represents the results of our work conducted to address the scope of work

relative to the Federal Emergency Management Agency's (FEMA) Working Capital Fund

(WCF). The scope and objectives of this work are set forth in Task Order TPDFIGBPA7001 i,

Performance Work Statement/or the Audit o/the Federal Emergency Management Agency's

Working Capital Fund 9/12/2008, section 2. Our procedures were performed using the

documentation provided to us by the Mount Weather Emergency Operations Center (MWEOC)

beginning February 12,2009. Interviews with FEMA personnel, including offcials at MWEOC,

and other test work were performed at various times through June 2, 2009, and our results

reported herein are as of June 2, 2009.

(U) - This scope of work did not constitute an audit of the financial statements of the WCF in

accordance with Government Auditng Standards, nor did it constitute an attestation engagement

in accordance with the Statements o/Standards/or Attestation Engagements.

We appreciate the opportnity to have conducted this review: Should you have any questions, or

if we can be of any further assistance, please contact Ron Longo at 202-533-4014.

Sincerely,

KPMc: LCP
(U) -Table of 
 Contents lAb brevi at ions

Executive Sumar ...................................................... .............~..............................'.........1
 

Background ............................................ ....... ................................. .....................................2
 

Results of Review.................................................................. ................................... ...........2
 

Appropriateness of 
 the FEMA WCF's Staffng Strctue.....................................2
 

Recommendations .......................................................... ................. ....... .................5
 

Management Comments and Auditor Analysis ......................................................6
 

Appropriateness of 
 the Budget and the Cost Calculations/Analysis ....................7
 

Recommendations ...... ................................. .........:................ ...................................8
 

Mangement Comments and Auditor Analysis .....................................................8
 

Fairness of Cost Allocations to Tenats ..............................................................9
 

Recommendations .... ................................ ...................................... .........................9
 

Mangement Comments and Auditor Analysis ..................................................10
 

Appendices 

Appendix A: Purose, Scope, and Methodology .............................................1 i
 

Appendix B: Management Comments to the Draf Report ................................13
 

Appendix C: Report Distrbution ................ .................................. ........ ..... .......... i 6
 

Abbreviations 

CFO
 

COOP
 

FEMA
 

FY
 

MWEOC
 

OCFO
 

OMB
 

WCF
 
Executive Summary 

(U - The objective of 
 ths engagement was to determe whether 
 the Federal Emergency

Management Agency's working capita fud at the Mount Weather Emergency 

Operations Center has been operating effciently and effectively. More specifically, we 

reviewed: (1) the appropriateness of the workig capita fud stafing strctue, (2) the
 

appropriateness of the budget and the cost calculations/analysis, and (3) the faiess of
 

cost allocations to tenants. 

(U - In general, the Federal Emergency Management Agency's workig capita fud has 

been operating effectively. The staf strctu is appropriate; however, our comparson 

of trsactions processed by the workig capital fud finace offce and the Federal 

Emergency Management Agency's fiance offce at Emmittburg, Marland showed
 

signficant differences in the number of accountig transactions processed per person in 

the respective offces. Most Federal Emergency Management Agency entities under the 

workig capita fud have clearly dermed organzational responsibilties and assignents 

of fuctions, but the fud manager is not overseeing the development of operating plans
 

and capita budgets and is not providing direction and assistace in the areas of cost 

accounting and rate development as stated in the working capital fud charer. In
 

addition, the 
 charer does not clearly derme whether responsibilty for working capita 

fud accounting operations 
 rests with the Federal Emergency Management Agency's 

Offce of the Chief Financial Officer or with workig capital fud sta. 

(U - The workig capita fud budget and cost calculations/analysis are appropriate. 

However, the budget plan does not provide the fud manager and other interested paries 

with a sumar of 
 budget to actual costs on at least an anual basis. In addition, the fud 

manger and the working capita fud finance offce do not reconcile the components of 

the fud balance with treasur account and the working capita fud operations budget to
 

properly identify fuds available for futue operations and capita improvements. 

(U) - We are making recommendations to the Admstrator of 
 the Federal Emergency

Management Agency that, if implemented, will help clarfy issues with the stamg 

strcte of the workig capita fud, enhance the budget and cost inormation provided
 

to those responsible for management of the workig capita fud, and result in a rate 

strctue that more closely reflects the costs required to support Areas A and B. The 

Chief Financial Offcer, Federa Emergency Management Agency commented on a draft

of ths report, neither concuig nor nonconcurg with our recommendations, but 

providing clarfications and information on actions taen to improve in each of the 

recommendation aras.
 

Federal Emergency Management Agency Working Capital Fund 

Page 1
 
Background 

(U - A workig capita fud (WCF) is a revolving fud established by an agency and 

approved by Congress to provide support to multiple agencies on a cost-reimbursable 

basis. The Federal Emergency Management Agency (FEMA) received approval for the 

establishment of a WCF on September 26, 1996, in the Department of Veterans Affairs 

and Housing and Urban Development, and Independent Agencies Appropriations Act of 

1997, Public Law 104-204, Stat. 2915. Ths Act established the FEMA WCF to be 

available without.fiscal year (FY) limitation for operations of such adinstrative 

services that the FEMA Admstrtor determnes may be performed more, 

advantageously though central services. Since FY 1997, FEMA has used the WCF to 

support centralized servces provided to selected facilties. The centralized servces 

include provision of offce, warehouse, conference, and trainig space; utilties, bileting, 

food servces, emergency health care, trporttion, payroll, accounting, printing, offce 

supplies, securty, fire protection, building matenance, and inormation technology 

support. The primar customers for the servces include both FEMA organzations and 

other federal agencies. 

(U - The WCF board was established to recommend activities for inclusion in the fud 

and advise the FEMA Admstrator, Fund Manger, and Activity Managers concernng 

the WCF. The WCF board consists of: 

. A chaierson(s);
 

. An activity manager for each separate business line under the WCF;
 

. A fud manager;
 

· An Assistat AdmIIstrator for the Offce of 
 National Contiuity Program; 

. A Deparent of 
 Homeland Securty representative; 

· Six representatives of 
 the Mount Weather Business Line for both Areas A and B, 

of which three ar members of the Mount Weather Steerig Commttee; and 

· A representative of 
 the Olney Business Line. 

Results of Review 

Appropriateness of the FEMA WCF's Staffing Structure 

(U - The WCF stastcte is appropriate; however, our comparson of transactions 

processed by the WCF finance office and the Federal Emergency Management Agency's 

finance offce at Emmttsburg, Marland showed signficant differences in the number of 

accounting tractions processed per person in the respective offces. Most Federal
 

Emergency Management Agency entities under the WCF have clearly defined 

organizationa responsibilties and assignents of fuctions, but the fud maager is not. 

overseeing the development of operatig plan and capital budgets and.is not providing 

Federal Emergency Management Agency Working Capital Fund 

Page 2
 
direction and assistace in the areas of cost accounting and rate development as stated in
 

the WCF charer. In addition, the charr does not clearly define whether responsibilty 

for WCF accounting operations rests with the Federal Emergency Mangement Agency's 

Office of the Chief Finacial Offcer (OCFO) or with WCF staf.
 

Ore:anization and Stafme: 

(U - The WCF organzational structue is established in accordance with the FEMA 

WCF charer signed on October 7,2008, by the FEMA Admstrator, R. David Paulison. 

The charer, among other thngs, describes the organization stctue of the fud and
 

establishes the operating priciples for the fud. The organzational strctue of the fud 

is in compliance with the WCF charer and the operating principles are being followed. 

(U) - With respect to the staffing of the fud, based on the documentation and 

explanations we received, the Securty, Operations and Maintenance, and Logistics 

Divisions each have suffcient wrtten 
 justification to support the number offull..time

needed for their missions. Nationa Programs and Engineering provided 

oral explanations that were suffcient to justify their full-time equivalent staff. 

equivalent sta 


(U - The wrtten documentation provided by WCF finance offce included inormation 

about the tranactional processing workload of the WCF accounting operations staff. To 

assess the workload of the finance offce, we requested trsaction processing 

inormation from other FEMA offces. The FEMA OCFO provided us informtion about 

the FEMA Emmittsburg offce, which we 

compared to the WCF fiance offce. Our comparison reflected signficant differences in 

the transaction processing workload of 


the number of transactions processed per person between the FEMA Emmittsburg and 

WCF finance offces. Without inormation about other duties performed by accountats 

of the respective offces, we were unable to drw conclusions from ths comparson. It 

would be beneficial for FEMA management to complete ths analysis to determe the 

appropriate number of staff needed for the transaction processing workload. 

(U) - Furer, we determed though interviews and review of documentation that the 

FEMA WCF was authorized 461 full-tie equivalent sta and actuly employed
 

approximately 410 full-time equivalents in 2008. Based on intervews and
 

documentation reviews, the FEMA WCF has planned for 461 ful-time equivalents in FY 

The FEMA WCF has not prepared a formal ful-time equivalent staffing 

plan for beyond 2010. 

2009 and 2010. . 


(U - Based on our discussions with division directors, we found that most recurng 

fuctions are performed by FEMA WCF employees and not by contrtors. The fultime equivalent staff total thee. Cern daily inormation technology services are
 

provided to the FEMA WCF under contrct. The FEMA WCF does not formally monitor 

the full-time equivalents of contrctors used. 

Federal Emergency Management Agency Working Capital Fund 

Page 3
 
Roles. Responsibilties. and Assienment of Functions 

(U - Most deparents have clearly defied organzational responsibilties and 

assignents of fuctions. Based on our interviews with deparent directors and other
 

employees, persnnel positions ar evaluated to determne mission needs and the
 

fuctions required to fulfill those needs. Also, divisions consider using contractors to 

perform cert duties that are short term in natue. For example, the engieerig 

division will contract with an architectue and engineering fi to prepare drawings if 

curent WCF engineerig division staff are at ful production capacity. 

(U) - WCF personnel are being traied and fulfillng fuctions that could otherwse be
 

performed by contractors., We were advised that on-site personnel must be able to 

perform repairs and/or maintenance durng emergency operations. For example, 

personnel are being trained for repais of certain tyes of equipment tht could be 

performed by a contractor. WCF personnel are being trained because the securty and 

clearance requirements dictated by the mission of the FEMA WCF make it diffcult to 

obta contractor support 
 in a timely fashion.

(U - We intervewed FEMA WCF division directors and other employees to gai an

understading of 
 the roles, responsibilties, trining, and fuctions of each division and

its assigned personneL. Our interviews included analyses of the division directors' 

responsibilties with respect to the FEMA WCF mission, fiancial operations includig 

budget preparation and execution, and staffng requirements. We inquied about the use 

of governent personnel employed by the FEMA WCF versus the use of contractors and 

the basis for such determintions. 

(U) - Furher, staffing levels appear to be appropriate to meet normal and emergency 

emergency servces, fire and police personnel are all
 

federal employees due to the sensitivity of the MWEOC and the need for cleared
 

operational requirements. Withn 


personneL. Prior to the events of September i 1, 2001, the police were contracted 

personnel; however, due to the heightened level of securty following that day, the site 

moved to a fuly federa police staf. One area with emergency services that is 

sometimes contracted out is medical services. Emergency Medical Techncians from the 

City of Winchestr, VA and the Winchester Medical Center will provide additional 

medical services on site when needed. MWEOC also executed a separate memorandum 

of understading with surounding local jursdictions to provide assistance durg 

emergencies. 

, (U) - FEMA WCF division directors and other employees provided us with an 

understanding of the appropriateness of sta and fuctions performed to meet normal and 

emergency operational requirements. We also requested documentation to support the 

Federal Emergency Management Agency Working Capital Fund 

Page 4
 

;.,~:", 
stang levels required by FEMA WCF personnel, with augmentation by other federal 

agencies and contractors. 

Fund Manae:er Responsibilties 

(U - We obtaed:te WCF Charer approved by the FEMA Adminstrator on October 7, the 2008. Under the charer, the duties of the Fund Manger are the responsibilty of 

FEMA OCFO. As Fund Maager of the WCF, FEMA's Chief Financial Officer (CFO) 

or designee will: 

.. Maintain a budget and accounting system to capture all WCF fiancial activities; 

. Prepare financial report;
 

Management and Budget (OMB) and Congressional budgets in 

coordination with the appropnate Activity Manager, based on approved WCF Board 

recommendations; 

. Prepare Offce of 


. Coordinate with the Inspector General in the preparation and performance of WCF
 

audits; 

. Provide direction and assistace in the areas of cost accounting and rate development;
 

. Provide oversight in the development of operatig plans and capita budgets;
 

. Provide such other finacial management support and servces as the Administrtor,
 

activity mangers, or the FEMA WCF board require or recommend; and 

. Sign incoming interagency agreements for accepting fudig for operating expenses
 

or tenant requirements. 

(U - However, the FEMA OCFO told us and our review confied that the charer is not 

spcific with respect to the responsibilty for cost accounting and rate development, or the
 

the development of operating plans and capital 

budgets. As a result, these fuctions are performed by the Progr Offce at MWEOC. 

responsibilty for providing oversight of 


However, the charer does not arculate whether the FEMA OCFO or the WCF finance 

office is responsible for processing accounting transactions. Curently, both offces 

process accounting tranactions. Economies could be achieved if these responsibilties 

were combined.
 

(U - To determine whether staff assigned to the WCF Finance Offce report to the 

FEMA CFO or to the program office, we intervewed personnel from the fud manager's 

offce and the WCF fmance offce. 

Recommendations 

(U) - We recommend that the FEMA Administrator direct the Acting Director for the Mount Weather Emergency Operations Center and the FEMA Chief Financial Officer to: 

Federal Emergency Management Agency Working Capital Fund 

Page 5
 
1. Determne the reasons for the differences in the number of transactions 

processed by the WCF finance offce and the FEMA accounting operations 

sta at FEMA Emmttsburg. 

2. Ensure that the Fund Manager designted by the FEMA CFO and approved by 

the WCF board performs the duties of 
 the fud manger as described in the

WCF charer. 

3. Develop and implement a plan to bring the WCF accountig operations in line 

with the accounting operations of other FEMA activities to obtan potential 

economies of scale. 

Manaeement Comments and Auditor Analvsis 

Financial Offcer, Federal Emergency Management Agency provided (U) The Chief 


comments on a draft of ths report, neither concurg nor nonconcurg with our 

recommendations, but providing clarfications and inormation on actions taken to 

improve in each of the recommendation areas. A copy ofthe comments is included in

Appendix B. 

(U The FEMA WCF response to recommendation 1 provided detailed information about 

the activities of the WCF fiance offce, highighting matters that could explai the 

differences between the transactions processed by the WCF finance offce and the FEMA 

accounting operations sta at FEMA Emmittsburg. FEMA provided verbal explanation 

in ths regard at the exit conference for ths review, but did not substantiate its comments 

with documentation that we could use as a basis for conducting and including an updated 

analysis in this report. FEMA needs to perform an updated analysis of its WCF finace 

offce activities in comparson with those of accounting operations staff at Emmittsburg 

to determe the extent of the differences and the related causes. Ths recommendation is 

resolved, but will remai open until FEMA provides a copy of the analysis for our 

review. 

(U) In response to recommendation 2, the OFCO believes that it performs the duties of 

the Fund Manager. However, we believe that the charer should be more specificin 

diferentiating the role of the Fund Manager an4 the Activity Manager at the MWEOC 

with respect to the development and approval of operating plans and capital budgets. 

Ths recommendation is resolved, but will remai open until FEMA provides a revised 

charer, differentiating duties of 
 the Fund Manager.

(U In response to recommendation 3, FEMA said that discussion will tae place about 

transferrng financial duties from MWEOC to the FEMA finance center as appropriate, 

subject to securty concern related to processing Mt. Weather documents. We have no 

comments on FEMA's response. This recommendation is resolved, but wil remain open 

until FEMA demonstrates that the financial duties have been centralized as appropriate. 

Federal Emergency Management Agency Working Capital Fund 

Page 6 
Appropriateness of the Budget and the Cost Calculations/Analysis 

(U - The WCF budget and cost calculations/analysis are appropriate. However, the 

budget plan does not provide the fud manager and other interested pares with an 

budget to actu costs on at least an anual basis. In 

addition, the fud manger and the WCF finance offce do not reconcile the components 

organation-wide sumar of 


of the fud balance with treasur account and the WCF operations budget to properly
 

identify fuds available for futue operations and capita improvements. 

(U) - The WCF finance offce does not provide a organzation-wide swnar level
 

comparson of the initial budget to actual expenditues. Our own analysis found that for 

FY 2008 in total, the difference between the budgeted and actual costs was less than 1 %. 

However, when we analyzed the components of the budget, we determed tht budgeted

payroll costs exceeded actul payroll costs by $3,673,360 and that actual capita 

improvement costs exceeded the amounts budgeted by $6,567,866. We were advised that 

payroll costs are recovered through the rate strctue and capital improvements are 

fuded by appropriations. Though our anysis we were able 
 to determne that operating

fuds obtaied though the rate setting process are being used to fud capital 

improvements. This fuding approach was not readily trparent using the existing 

reports provided by the WCF fiance offce. 

(U - A sumar comparison of 
 budget to actu is not prepared on a routine basis by the

WCF finance offce to provide trparency of financial results. As a result, the fud 

managers and other interested paries, such as the WCF board, are not being provided 

with the information needed to assess the accuracy of the budget and thus the rate 

strctue. 

(U - To make these determations about the accuracy of the budget process, we 

reviewed management reports prepared by the WCF finance offce. We also interviewed 

employees of the WCF finance offce who provided an understading of the process and 

basis for developing the WCF estimates. In FY 2007, the WCF revised its process for 

developing estimates in efforts to more accurately estiate futue costs of the fud. The
 

budget process 
 was broken down into four areas: Payroll and Position Management,

Buildig Maitenance, Asset Management, and Overhead. Each category was calculated
 separately. . 

(U) - Another concern we have with the development of the budget plan and the rate strctue is the lack of 
 analysis by the Fund Manager and the WCF fince offce 

regarding the makeup of the fud balance with treasur account to determine the plan for 

, using the available fud balance. We determed thoug discussions with the Fund 

Manager and the WCF finace offce that an analysis of the fud balance was not been 

performed in the pas. Because no analysis of the fud balance with treasur had been 

Federal Emergency Management Agency Working Capital Fund 

Page 7
 
perormed, we conducted the following analysis to determine the major components of 

the fud balance with treasur at September 30, 2008.
 

(U - TABLE 1: Fund Balance with Treasury Analysis 

As of September 30, 2008 

Fund Balance with Treasury 

Carryover (Unobligated Balance) 

Subtotal 

$ 109,814,829 

(35,759,108) 

$ 74,055,721 

Unpaid Obligations per Statement of Budgetary Resources $ 74,106,099 

Difference $ (50,378) 

(U) - The fud balance with treasur as of September 3.0, 2008, reported in the financial statements provided by the Fund Manager was $109,814,829. We obtained frm the 

WCF finance office an unobligated balance amount of$35,759,108 at year end caed 

forward into FY 2009. Ths amount was reconciled between the Fund Manager and the
 

WCF fiance offce. Our analysis disclosed a difference of $50,378 between unpaid 

obligations as reported on the statement of 
 budgetar resources and the unpaid obligation

amount we calculated. Due to the imatenal amount, we did not attempt to determine 

the cause of the difference. In addition, we did not attempt to determine how much of the 

unobligated balance ($35,759,108) and the unpaid obligations ($74,106,099) were for 

capital improvement projects or operations. 

Recommendations 

(U - We recommend that the FEMA Adminsttor direct the Acting Director for the 

Mount Weather Emergency Operations Center to ensure that: 

budget to actual in 4. The WCF fiance offce include a sumar comparson of 


finacial reports provided to all those responsible for managig the FEMA 

WCF. 

5. The WCF finance offce perform a quarerly anysis to determine the the components of the fud balance with treasur account and how much of 


unobligated balances and unpaid obligations are for fuding capita 

improvement projects or operations. 

Manae:ement Comments and Auditor Analvsis 

Financial Offcer, Federal Emergency Management Agency neither (U) The Chief 


concured nor nonconcured with recommendations 4 and 5. 

Federal Emergency Management Agency Working Capital Fund 

Page 8
 
budget to (U In respnse to recommendation 4, FEMA said a suar comparson of 


in the fmancial reports. We have no comments on the FEMA 

WCF response to recommendation 4. Ths recommendation is resolved, but will remai 

actu has been added 


open until FEMA provides a copy of the sumar comparson. 

quaerly (U) In response to recommendation 5, FEMA said that the WCF wil perform 


analyses. of the fud balance with treasury to identify unobligated balances and unpaid 

capita improvement obligations. We have no comments on the FEMA response. This 

recommendation is resolved, but will remain open until FEMA provides documentation 

of the quaerly anlyses conducted. 

Fairness of Cost Allocations to Tenants 

(U) - The rate per square foot charged to tenants of Areas A and B are not fairly
 

allocated. The allocation of costs to the respective areas also is not supported by a
 

detailed analysis. 

(U) - The serices provided by the MWEOC are necessar to operate each tenant's 

program for a specified period of time. Though inquiries of each chief of the
 

Engineering, Logistics, Emergency Services, National Programs, and Operations and
 

Maintenance divisions, we did not identify any serVices unelated to the mission of the 

MWEOC. 

Recommendations 

(U) - We recommend that the FEMA Admnistrtor direct the Acting Director for the
 

Mount Weather Emergency Operations Center to ensure that the WCF fiance offce:
 

6. Conduct an analysis and develop a rate strctue that reflects the costs requied to 

support Areas A and B by (a) determinng the direct costs incured to support area 

A; (b) determng the direct costs to support Area B; and (c) identifying tn.ose 

costs that canot be attbuted directly to either Area A or B. Those costs that 

canot be directly attbuted to either area will require an allocation on some
 

preetermed basis. 

7. Develop a plan to adjust, within a reasonable period of 
 time, the squar footage

rate between the two areas so tht the rates charged ar equitable according to the
 

servces provided to tenants in each area. '
 

Federal Emergency Management Agency Working Capital Fund 

Page 9
 
Manaeement Comments and Auditor AnaIvsis 

The Chief Financial Offcer, Federal Emergency Mangement Agency neither concured

nor nonconcured with recommendations 6 and 7. 

(U In response to recommendation 6, FEMA said that it has completed the analysis to 

split costs between areas A and B and is using it to develop one of the rate options. 

However, the methodology used for splittg the cost stil needs to be documented in 

order to provide more clarty to the rate calculations. We have no comments on the 

FEMA WCF response to recommendation 6. This recommendation is resolved, but will 

remain open until FEMA provides a copy of the anlysis supportd by a documented 

methodology. 

Directors deternes (U In response to recommendation 7, FEMA said that the Board of 
 multiple options presented to the Board for the rates charged to tenants anualy based on 


ths recommendation. As
 approval. FEMA's response does not address the intent of 


such, ths recommendation is unesolved and will remai open until FEMA provides its 

plan to adjust the squa~ footage rate between the two areas so that the rates charged are 

equitable according to the services provided to the tenants in each ara. 

Federal Emergency Management Agency Working Capital Fund 

Page 10
 
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 , 'c...".,.,.,,-" _pd.::. ,:,')'::';.';':': ';;-;""_'Ò,¡:' .;,;-' . :::",i56i.;:;¿-:~ ~",.;:,,;.:;:.;c~. ;b(:," ~'.,' , 

Appendix A 

Purpose, Scope, and Methodology 

ths engagement was to determe whether the FEMA WCF has (U - The objective of 
 specifically, we reviewed: (1) the been operating effciently and effectively. More 


appropriateness of the FEMA WCF stang strctue, (2) the appropriateness of the 

budget and the cost calculations/anlysis, and (3) the faiess of cost allocations to
 

tenants. 

(U) - To gai an understandig ofFEMA's WCF stag strctu and the fuctions they 

performed we interviewed FEMA WCF personneL. Our work included a review of: 

. Organzation strctue, includig management operations and determinations of


appropriate; whether the fuded ful-time employees are 


. Number of employees and contrctors employed by the WCF;
 

. Functions perormed by employees and contractors;
 

. Appropnateness of staf to meet normal and emergency operational requirements;
 

and staf of 
 the Accountig Operation, the . Reporting relationships among assigned 


FEMA OCFO, and the program offce. 

(U) - We reviewed the FEMA WCF budget to determe: 

. The process used to develop estimates for the WCF;
 

. The FEMA WCF rate strctue to support fees needed to operate and maintai the 

WCF; the WCF in line with .. The FEMA WCF costs to adequately support customers of 


its mission; and 

. The FEMA WCF life cycle costs to adequately support and sustain future WCF 

missions. 

(U - We also reviewed the FEMA WCF budget to determne the fairess of cost 

allocations to tenants. Specifically, we examned: 

. Square footage calculations to lear whether they are properly determned and
 

allocated; 

. Centrized servces to determine whether they are calculated properly and
 

allocated equitably and fairly; 

. Fees to see if 
 they captue all related costs and are appropriately allocated by

securty requirement and mission need; and
 

. Services offered by the WCF to determine whether they fall with the mission of
 

the MWEOC. 

Federal Emergency Management Agency Working Capital Fund 

Page 11
 
Appendix A 

Purpose, Scope, and Methodology 

(U - We 
 conducted ths review from Februar 2009 to June 2009 at the MWEOC in

Berrile, VA. The term "review" means to gather sufcient documentation to garer a
 

conclusion and/or recommendation about the process and documents provided. The 

performance of "review" procedures to meet these objectives is not intended to meet the 

context of a review as set fort in Statement of Standards for Attestation Engagements. 

Ths work was not done in accordance to Generally Accepted Government Auditing 

Standards. 

(U - KPMG, LLP also was not engaged to and did not perform a financial statement which would be to express an opinion on specified elements, 

accounts, or items. Ths report relates only to the programs specified and does not extend 

to any FEMA financial statements. Whle the review was performed and the report was 

prepared under contract, the review results are being reported by the Deparent of 

Homeland Secunty Office oflnspector General to appr~priate FEMA offcials. 

audit, the objective of 


(U) - We planed and performed the review to obtain sufcient, appropriate evidence to 

provide a reasonable basis for the findings and conclusions based on the review 

objectives. We believe that the evidence obtaned provides a reasonable basis for the
 

findings and conclusions based on the review objectives.
 

Federal Emergency Management Agency Working Capital Fund 

Page 12
 
Appendix B
 

Management Comments to the Draft Report 

U.S. Department or Homeland Security 

500 C Street, SW 

Washington, D.C. 20472 

_ FEMA
 ;r1"'ND ..ic.v 

RESPONSE TO FEMA WORKING CAPITAL FUND AUDIT DRAFT 

REPORT DATED SEPTEMBER 2009 

Appropriateness of the FEMA WCF's Staffng Structure 

Recommendations 

I) Determne the reasns for the differences in the number of transactions processed by the 

WCF finance office and the FEMA accunting operations staff at FEMA Emmittsburg. 

2) Ensure that the Fund Manager designated by the FEMA CFO and approved by the WCF 

board perform the duties ofthc fund manager 8S described in the WCF charer. 

3) Develop and implement a plan to bring the WCF accounting operations in line with the 

accounting operations of other FEMA activities to obtain potential economies of scale. 

MaDal!ement Comments 

I) The primar reason for the differences in the average number oftransaction processed 

per employee by the WCF Finance Offce and the FEMA accounting operations staff at 

FEMA Emmittsburg is that the analysis fails to recognize vacancies and new hires that 

result in less than a full FTE worth of work. In FY07 one employee had his duties 

changed to non-transactional duties halfway through the fiscal year. Another newly 

hired/certified was assigned transactional duties for only the last 5 pay periods. Another 

employee was on leave without pay for 5 pay periods. Höwever in the anlysis 

perfonned, these employees were used in the calculations as full year employees. If an 

FTE calculation would have been made, the comparisn would be 1,214 transactions per 

person for Emmittsburg versus 1,105 transactions for Mt. Weather. The same 

discrepancy exists for the FY08 analysis. IfITE were used, the comparison would be 

1,105 tranactions per person for Emmittsburg versus 916 transactions for Mt. Weather. 

The difference in the number of tranactions per person can be best explained by the 

number of additional non-transactional duties caried out by the financial staff and the 

classified environment in which they operate. The failure to use FTE in the analysis and 

the list of non-tranactional duties were brought to the auditors' attention but the 

information was ignored. 

Federal Emergency Management Agency Working Capital Fund 

Page 13
 
Appendix B
 

Mana~ement Comments to the Draft Report 

,;,~:; ;~,': j,; ,_;,";,-:¡-;~j~; ~'."~)':~,y(.: 

2) In accrdance with the Working Capital Fund Charter, the FEMA CFO is the Fund
 

the Fund
 Manager. It is our opinion that the FEMA OCFO performs the duties of 


Manager which include: 

. Maintain a budget and accounting system to captur all WCF fincial activities
 

Prepare fiancial reports
 

Prepare Offce of Mangement an Budget (OMB) and congrsional budgets in 

coordintion with the appropriate Activity Manager, base on WCF Board 

recmmendations 

Coordinate with the Insector Gener in the preparation an performnce of 

WCF audits 

Provide direction and assistance in the areas of cost accounting an rate 

development 

Provide oversigh in the development of operating plans an capital budgets 

Provide such other financial management support and serces as the 

Administrator, activity managers, or the FEMA WCF board require or 

recommend; and
 

Sign incoming interagency agreements for acctin funding for operationa
 

expenses or tent requirements.
 

fiancial duties from Mt. Weather
 3) Discussions wil take place concerning the tranfer of 


to th FEMA Finance Center. Although there are some activiies that ca be centralized, 

there are securty concers related to the processing ofMt. Weather documents. 

Appropriateness of the Budget and the Cost Calculationsl Analysis 

Recommendations 

budget to acual in financial 

reprts provided to al1 those resonsible for managing the FEMA WCF. 

4) Th WCF Finance Offce include a summ comparison of 


5) The WCF finance offce perform a quarerly analysis to detere the components ofthe 

fund balance with trea account and how much ofthe unobligated balances and
 

unpaid obligations are for funding capital improvement projects or operations. 

Manaiiement Comments 

4) The WCF Finance Offce has modified the budget report to include a sumary 

comparison of budget to actl and wil make the budget available to any interested 

parners. 

5) The WCF Finance Offce wil conduct the quaerly reconciliations. 

2 

Federal Emergency Management Agency Working Capital Fund 

Page 14
 
Appendix B

Man~~ement Comments to the Draft Report

Fairness oCCost Allocations to Tenants

Recommendations

6) Conduct an analysis and develop a rate structure that reflects the costs required to support

Areas A and B by (a) determining the direct costs incured to support area A; (b)

detenining the direct costs to support Area B; and (c) identitY those costs that cannot be

attributed to either area wil require an allocation on some predetennined basis.

7) Develop a plan to adjust, within a reasonable period oftime, the square footage rate

between the two areas so that the rates charged arc equitable according to the services

provided to tenants in each area.

Mana2ement Comments

6) The analysis to split operating costs between area." A and B has occured and is used as

the basis for developing one of the rate options. The rationale needs to be documented to

fortify and better explain the numbers assigned.

7) The operating rate charged to tenants is one of multiple options presented to the Board of

Directors anually for approvaL. The Board then decides the rate to be charged.

/li/J / //1/ :-... .;, NormanS. Pinancial

1/ it Dr

Date

Unclassifed went seDarated frm orlalnal reDort

3

Federal Emergency Management Agency Working Capital Fund

Page 15
Appendix C 

, Report Distribution 

Department of Homeland Security 

Secretary
 

Deputy Secretary
 

Chief of Staff for Operations
 

Chief of Staff for Policy 

Deputy Chiefs of Staff 

General Counsel 

Executive Secretariat
 

Director, GAO/OIG Audit Liaison Office
 

Assistant Secretar for Offce of Policy
 

Respective Under Secretary
 

Federal Emer2encv Manae:ement Aeencv 

Administrator
 

Director of Mount Weather Emergency Operation Center
 

Chief Financial Offcer .
 

Offce of Manae:ement and Bud2et 

Chief, Homeland Security Branch
 

DHS OIG Budget Examiner
 

Cone:ress 

Congressional Oversight and Appropriations Committees, as appropriate 

Federal Emergency Management Agency Working Capital Fund 

Page 16
 
ADDITIONAL INFORMATION AND COPIES 

To obtain additional copies of this report, please call the Office of Inspector General (OIG) at (202) 254-4100, 

fax your request to (202) 254-4305, or visit the OIG web site at www.dhs.gov/oig. 

OIG HOTLINE 

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal or noncriminal 

misconduct relative to department programs or operations: 

• Call our Hotline at 1-800-323-8603; 

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• Email us at DHSOIGHOTLINE@dhs.gov; or 

• Write to us at: 

DHS Office of Inspector General/MAIL STOP 2600, 

Attention: Office of Investigations - Hotline, 

245 Murray Drive, SW, Building 410, 

Washington, DC 20528. 

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