DEPARTMENT OF HOMELAND SECURITY 

Office of Inspector General 

Audit of the State of Colorado 

Homeland Security Grant Program 

OIG-08-16 December 2007
Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528

 December 11, 2007 

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was established by 

the Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector General 

Act of 1978. This is one of a series of audit, inspection, and special reports prepared as part of our 

oversight responsibilities to promote economy, efficiency, and effectiveness within the department. 

This report presents the results of our audit of the State of Colorado Homeland Security Grant 

Program. It assesses the state’s homeland security strategic plan, grant spending, and management 

practices and controls. It is based on interviews with employees and officials of relevant agencies 

and institutions, direct observations, and a review of applicable documents. 

The recommendations herein have been developed to the best knowledge available to our office, and 

have been discussed in draft with those responsible for implementation. It is our hope that this 

report will result in more effective, efficient, and economical operations. We express our 

appreciation to all of those who contributed to the preparation of this report. 

Richard L. Skinner 

Inspector General 
Table of Contents/Abbreviations 

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

Background ....................................................................................................................................3 

Results of Audit..............................................................................................................................4

Colorado’s Homeland Security Organization Faces Challenges............................................... 4 

Colorado Has Not Assured That Its Homeland Security Strategy Has Been Followed ............ 6 

Grant Management Efforts Need Improvement ........................................................................ 8 

Expenditures Were Not Always In Compliance With Grant Requirements............................ 12 

Funding Was Not Always Allocated To High Risk Projects................................................... 16 

Opportunities Exist For Improving Program Readiness..........................................................17 

Recommendations....................................................................................................................19 

 Management Comments and OIG Analysis ............................................................................ 20 

Appendices 

Appendix A: Objective, Scope, and Methodology.......................................................... 21 

Appendix B: Homeland Security Grants 2003 - 2006 .................................................... 22 

Appendix C: Program Funding Allocations FY 2003-2006............................................ 24 

Appendix D: Map – Colorado’s All-Hazard Regions ..................................................... 25 

Appendix E: Multi-Agency Coordination Center – Summary of Key Events................ 26 

Appendix F: Summary of Questioned Costs................................................................... 28 

Appendix G Grant Programs Directorate’s Response to the Draft Report.....................29 

Appendix H: Major Contributors To This Report ........................................................... 30 

Appendix I: Report Distribution .................................................................................... 31 

 Abbreviations 

CFR Code of Federal Regulations 

DHS U.S. Department of Homeland Security 

DOJ Department of Justice 

FY Fiscal Year 

G&T Office of Grants and Training 

OIG Office of Inspector General 

UASI Urban Areas Security Initiative 
OIG 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

At the request of the Office of Grants and Training (G&T),1 we audited the 

State of Colorado’s (Colorado) management of homeland security and urban 

areas security initiative grants awarded by G&T during fiscal years 2003, 

through 2006. The objective of our audit was to determine whether Colorado 

effectively and efficiently implemented its homeland security program, 

achieved the goals of the program, and spent funds according to grant 

requirements. Our goal was to identify problems and recommend solutions to 

help the Department of Homeland Security (DHS) and Colorado improve the 

nation’s ability to prevent, prepare for, and respond to major disasters, 

terrorist attacks, and other emergencies (‘all-hazards’ preparedness). 

Appendix A provides additional details regarding audit objective, scope, and 

methodology. 

Colorado has improved its management of the grant programs, including the 

hiring of additional executive and technical personnel and initiating program 

reviews to improve the effectiveness of its homeland security efforts. 

However, Colorado has not complied with critical Homeland Security Grant 

Program requirements, as the state has not assured adequate oversight of 

program activities and compliance with its homeland security strategy. In 

addition, the state’s internal controls for managing homeland security grant 

programs, and ensuring sub-grantee compliance and program readiness were 

ineffective. This report highlights (1) the challenges facing Colorado’s 

homeland security organization, (2) Colorado’s need to assure adherence to its 

homeland security strategy has been followed, (3) areas where grant 

management could be improved, and (4) opportunities for improving program 

readiness. 

Our report includes six recommendations for G&T to consider in improving 

its oversight of the state’s management of Colorado’s homeland security 

program. Our report also questions approximately $7.8 million in program 

expenditures that we concluded were not in compliance with grant 

requirements. Except for the expenditures we questioned, Colorado officials 

generally agreed with our findings and noted that corrective action to address 

most of the issues presented in this report would be taken. In the written 

1

 On April 1, 2007, the Office of Grants and Training was transferred to the Federal Emergency Management Agency 

and renamed the Grant Programs Directorate. For the purposes of this report, we will use G&T as the awarding entity. 

Audit of the State of Colorado Homeland Security Grants Program 

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OIG 

Department of Homeland Security 

Office of Inspector General 

response we received on November 15, 2007, G&T agreed with the 

recommendations we made in our draft report (see Appendix G). 

Audit of the State of Colorado Homeland Security Grants Program 

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Background 

In 1998, the Department of Justice, pursuant to Public Law 105-119, 

established the Office for Domestic Preparedness and made it responsible for 

developing and administering a domestic preparedness program to provide 

financial assistance to states, U.S. territories, and local governments for 

domestic preparedness training and equipment. Public entities such as police, 

fire, and emergency medical personnel, commonly referred to as “first 

responders,” generally receive this assistance through the state or territory. 

Since its inception, the Office for Domestic Preparedness and later, the 

Department of Homeland Security’s Office of Grants and Training (G&T), 

awarded domestic preparedness or homeland security grants to purchase 

specialized equipment and to develop and conduct training and exercises to 

enhance first responder capabilities to prevent, prepare for, and respond to 

major disasters, terrorist attacks, and other emergencies (“all-hazards” 

preparedness).2 

In February 2003, with the signing of Public Law 108-7, the Fiscal Year (FY) 

2003 Consolidated Appropriations Resolution, initial funding was provided 

for the Urban Areas Security Initiative (UASI) Grant Program. This program 

provided federal assistance to high risk urban areas to: 1) address unique 

planning, equipment, training, and exercise needs; and 2) assist them in 

building an enhanced and sustainable capacity to prevent, prepare for, and 

respond to, threats or acts of terrorism. FY 2003 through FY 2006 Homeland 

Security and UASI Grant Programs provided financial assistance to each state, 

U.S. territory, and the District of Columbia. As a condition for receiving 

grant funds, G&T required grantees to develop homeland security strategic 

plans that reflect: 1) risks and threats; 2) equipment, training, exercises, and 

other program needs; 3) goals and objectives to enhance capabilities; and 

4) an evaluation plan to measure the accomplishment of the goals and 

objectives. 

G&T awarded Colorado $156.3 million in first responder grants for FYs 2003 

through 2006 including $125.7 million under the homeland security grant and 

UASI grant programs. Appendix B describes the grant programs we audited, 

and Appendix C shows program funding. 

Colorado’s Office of Preparedness, Security, and Fire Safety within the 

Department of Public Safety served as the State Administrative Agency from 

2

 On March 1, 2003, the Office for Domestic Preparedness transferred from the Department of Justice to DHS’ 

Preparedness Directorate and was later renamed the Office of Grants and Training. On April 1, 2007, the Office of 

Grants and Training became part of the National Preparedness Directorate under the Federal Emergency Management 

Agency. An Assistant Administrator for Grant Programs will now oversee homeland security and urban area grants but 

for the purposes of this report we will use G&T as the awarding entity. 

Audit of the State of Colorado Homeland Security Grants Program 

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2002 through the end of the state fiscal year 2004. On July 1, 2004, the 

Division of Emergency Management within Colorado’s Department of Local 

Affairs assumed State Administrative Agency responsibility for administering 

FY 2003 and subsequent years’ grants. In this capacity, the Department of 

Local Affairs was responsible for allocating federal grants to state agencies 

and local jurisdictions and for overseeing compliance with program 

requirements. 

Colorado’s homeland security program serves nine All-Hazard Emergency 

Management Regions and the Denver urban area under the UASI grant 

program (Denver UASI). The 9 regions include 64 counties and 2 Indian 

Tribes. The Denver UASI includes the City and County of Denver and parts 

of four other counties. Appendix D depicts Colorado’s all-hazards regions. 

Results of Audit 

Colorado’s Homeland Security Organization Faces Challenges 

Notwithstanding the changes made by Colorado to develop and improve 

processes and procedures for managing homeland security and UASI grants, 

the state’s oversight of these grants has not been effective because of a lack of 

statewide control and significant turnover among senior management. G&T 

stated in its FY 2006 Homeland Security Grant Program Guidance and 

Application Kit that a state homeland security program should provide a 

strategic and management framework to integrate and ensure consistency 

among program activities, plans, and procedures. 

Since 2003, Colorado continued to develop processes and procedures for 

managing its homeland security program and to improve preparedness as 

illustrated below: 

• In FY 2003, the state established nine all-hazard regions, 

• In FY 2004, the state reorganized its homeland security administration 

wherein the state’s Department of Local Affairs became the grantee and 

State Administrative Agency, and 

• For FY 2005, the state created a Senior Advisory Committee as required 

by G&T’s grant program guidance to provide a direct link between 

homeland security program activities and the Governor. 

State Executive Order B 002 05 established the Homeland Security and 

All-Hazard Senior Advisory Committee and among other things, required the 

Audit of the State of Colorado Homeland Security Grants Program 

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committee to: 1) meet at least quarterly, 2) oversee federal assistance for the 

state’s homeland security program, 3) review annually the state homeland 

security strategy and make recommendations on the goals, objectives, and 

priorities, and 4) prepare written quarterly reports to advise the Governor 

regarding planning, implementation, and achievement of the goals in the 

strategy. 

Despite the changes noted above, Colorado’s homeland security organization 

was ineffective and provided only minimal assurance that its processes were 

well controlled or that program funding was allocated in a collaborative and 

transparent manner to mitigate statewide risks and accomplish the goals and 

objectives of its homeland security strategy. Specifically, 

• The committee had not met the objectives of the Governor’s executive 

order in that it did not regularly hold meetings or report to the 

Governor on a quarterly basis. Further, the committee had not 

reviewed the state’s grant applications, or reviewed sub-grantee 

applications from the all-hazard regions and UASI for FYs 2005 and 

2006. 

• The committee had not formally reviewed the state homeland security 

strategy or evaluated the outcomes of funded activity. There was no 

evidence that homeland security funding from all sources was 

allocated in a collaborative manner or that funded projects were 

evaluated based on statewide risks. Local agency sub-grantee 

applications and funding recommendations were made independent of 

one another by separate entities, rather than as a collaborative 

statewide risk mitigation effort. This lack of activity and collaboration 

by the Senior Advisory Committee was indicative of a significant 

leadership and oversight void. 

• Ineffective statewide oversight was exacerbated by a high turnover 

rate among executive management. For example, three different 

individuals held the position of Executive Director in the state’s 

Department of Local Affairs from July 2004 through December 2006. 

In one instance, the same individual served as the Director of the 

Division of Emergency Management, Acting Executive Director of the 

Department of Local Affairs, and the State Administrative Agency 

Director. In August 2006, a new Department of Local Affairs 

Executive Director was hired. In addition, the Governor also 

appointed the new Director of the Division of Emergency 

Management as the State Administrative Agency Director. However, 

this individual vacated the position in April 2007. 

Audit of the State of Colorado Homeland Security Grants Program 

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• The State Administrative Agency made state policy and allocation 

decisions that exceeded its advisory or administrative role in such 

activities. In most cases, the Senior Advisory Committee was not 

included in the decisions. 

In the absence of leadership and oversight from the Senior Advisory 

Committee, the State All-Hazard Advisory Committee provided ‘in lieu’ 

leadership. For example, at its February 2007 meeting, this committee voted 

to modify and continue the 2006 state strategy into grant year 2007 and to 

revise it, as needed, for grant year 2008. Typically, the role of the committee 

is to make recommendations and provide advice to the State Administrative 

Agency. It does not have authority to modify state directives or policy, such 

as the state’s homeland security strategy. 

Overall, Colorado’s homeland security management organization met critical 

program deadlines, but as discussed in the remaining findings in this report, 

the state was unable to perform all of the expected functions related to G&T’s 

grant guidelines and state and federal fiscal guidance. Without strong 

commitment to providing the leadership and staffing needed to administer its 

homeland security program, the state may be unable to sustain its stated 

homeland security intentions or meet the federal guidelines associated with 

receiving federal homeland security grant funding. 

Comments from state officials. State officials agreed with this finding and 

noted that the Governor's staff is conducting a broad review of all state 

homeland security organizations including the Senior Advisory Committee. 

Changes are expected by early fall 2007. Regarding the grant review process, 

the state will use its Division of Emergency Management Policies and 

Procedures 06-02, dated December 8, 2006, for 2007 wherein the Senior 

Advisory Committee will have a review and approval role for all state and 

local sub-grantee applications. 

Colorado Has Not Assured That Its Homeland Security Strategy Has Been 

Followed 

In 2005, G&T performed a capabilities assessment and a review of the 

2003 Colorado Homeland Security Strategy and reported that the state had not 

achieved some of the critical elements, including planning, training and 

exercises, specified in its strategy. While the state: (1) revised the strategy in 

2006, (2) aligned its goals with National Preparedness Goals and Presidential 

Directives, and (3) assigned objectives, with specified due dates, to various 

stakeholders, it had not verified with the stakeholders whether the milestones 

through December 2006 were met for certain state goals and objectives. As a 

result, the state did not have assurance that its goals and objectives were met, 

Audit of the State of Colorado Homeland Security Grants Program 

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whether federal dollars were effectively or properly spent, or whether the state 

had realized improvements in preparing for an all-hazards emergency, 

including a terrorist attack. 

A viable homeland security strategy provides a blue print for comprehensive, 

enterprise-wide planning for homeland security efforts; and strategic direction 

for enhancing the state’s capability and capacity to prevent, prepare for and 

respond to major all-hazards events, including terrorist attacks. It also 

provides state and local officials with the means to develop interlocking and 

mutually supporting emergency preparedness programs. In order to maintain 

reliability of the goals and objectives in the strategy and related funding 

requests, the state is required to evaluate and update the strategy annually – a 

task that necessitates coordination with stakeholders. 

The state was unaware that some of the state agency stakeholders we visited 

measured their successes; were attempting to achieve revised 2006 goals, 

objectives, and milestones; and were revising objectives for 2007. Other 

stakeholders were not aware of the revised 2006 strategy objectives, assigned 

milestones, or that they were responsible for completing an objective. These 

stakeholders provided a variety of reasons for not updating or complying with 

the 2006 strategy. Some explained that state had not: (1) provided revisions to 

the final draft of the 2006 strategy, (2) informed the stakeholder s of 

individual responsibilities and milestones required by the strategy, or 

(3) provided a complete copy of the strategy showing revised objectives or 

milestones. Others noted that objectives in the strategy were vague and the 

state had not provided guidance for measuring accomplishments. 

Because some stakeholders failed to meet specific responsibilities under the 

2006 strategy, critical statewide goals and objectives were not completed. For 

example, one objective required that the nine all-hazard regions develop a 

terrorism annex to their emergency operations plans and submit a copy to the 

state by December 2006. While the state’s strategy identifies this effort as a 

national priority, our review of records and discussions with state officials 

showed that the objective was not completed because some Regions failed to 

take action on this objective and the state failed to enforce the requirement. 

We also identified instances where state homeland security program 

administrators within the State Administrative Agency had not completed 

national priorities assigned to them in the strategy. For example, the training 

coordinator had not initiated specialized training to elected officials, and the 

exercise coordinator had not evaluated exercise after-action-reports to 

determine areas needing improvement. 

Colorado needs to take effective and immediate action to ensure that 

stakeholders comply with strategy goals, objectives, and milestones and that 

Audit of the State of Colorado Homeland Security Grants Program 

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the strategy becomes a long-term plan annually updated with clear and 

measurable goals and objectives. By monitoring compliance with the 

strategy, Colorado can have some assurance of success in meeting program 

goals. 

Comments from state officials. State officials agreed with this finding and 

explained that the Division of Emergency Management, in cooperation with 

the State All-Hazard Advisory Committee and state agencies, is proposing 

changes to the homeland security planning cycle with assistance from the 

University of Colorado (contract vendor). The State Administrative Agency 

plans to synchronize the strategy planning process with the grant cycle 

thereby creating a more inclusive and transparent process. They noted that 

this initiative is dependant upon a predictable federal grant cycle. 

Colorado’s Grant Management Efforts Need Improvement 

Colorado needs to improve internal controls and management of its homeland 

security program to ensure the accuracy of recorded transactions and to certify 

sub-grantee compliance with federal and state requirements. Further, staff 

members managing the grant programs were few in number and not 

sufficiently trained, and thus sub-grantee monitoring efforts were ineffective. 

The State of Colorado, as a grantee, is responsible for establishing and 

maintaining accounting systems, internal controls, and accounting records to 

properly account for grant activities. In addition, the state is responsible for 

managing the grant programs to ensure: 1) the success of grant applications 

review and award processes, 2) the eligibility and supportability of claims and 

cost reimbursements, and 3) sub-grantees’ grant management practices 

conform to state and federal guidelines. 

Ineffective Internal Controls 

The state lacked effective internal controls for managing its homeland security 

grant program. Specifically: 

• Federal drawdowns were not reviewed for accuracy and the state drew 

down cash in excess of needs. In two instances, the state initiated cash 

drawdowns of about $4 million in excess of needs but did not detect or 

correct the error until weeks after the transactions took place. In 

addition, the state earned about $11,555 in interest from excess 

drawdowns. State officials agreed to forward the interest to the federal 

government and to strengthen their procedures to ensure cash 

drawdowns are not in excess of needs. 

Audit of the State of Colorado Homeland Security Grants Program 

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• Cash advances to sub-grantees were not monitored to ensure 

compliance with federal cash management requirements. The state 

was unaware that certain cash payments to sub-grantees were not for 

immediate needs. In one instance, a sub-grantee earned $5,460 in 

interest from a cash advance but did not forward the interest earned to 

the state or to the federal government. The 2005 State Auditor’s report 

identified this weakness and recommended recovery of an unspecified 

amount of interest earned by sub-grantees during a 9-month period. 

However, the state did not take action on the recommendation because 

the related sub-grantee awards had been closed. 

• Grants management reports generated from the state’s “Oracle” 

database were not reviewed for accuracy and completeness. We 

identified errors in the reports that had not been detected or corrected. 

State officials agreed that the reports included errors and planned to 

update the programming and to monitor accuracy. 

• Inventories of grant-funded equipment were incomplete or not 

maintained. The state’s inventory database did not reflect all 

equipment purchased with homeland security and UASI grant funds, 

and the sub-grantees we visited either kept incomplete inventory 

records or kept no records at all. In addition, not all sub-grantees 

maintained adequate inventories of sensitive security equipment, such 

as portable radios and critical first responder equipment. 

• Sub-grantees accounted for some management and administrative 

costs as direct program costs, and the state did not have procedures in 

place to ensure that reimbursements for management and 

administrative costs remained below or at the percentage allowable 

under the grants. Sub-grantees’ accounting records showed that the 

administrative tasks of a grant coordinator and tasks associated with 

general computer equipment were recorded as direct program costs 

instead of management and administrative costs. In addition, 

sub-grantees did not specifically separate claimed management and 

administrative costs by grant effort or year. Thus, the state did not 

have an accurate record of management and administrative costs 

relative to a specific grant and a specific year. 

In addition, management and administrative costs claimed by the state 

included a charge of 20 % of the salaries paid to seven state field 

managers. These managers assisted the state in providing field support 

in all areas of emergency management. The state did not monitor the 

employees’ efforts or the benefits they provided to the homeland 

security grant program. 

Audit of the State of Colorado Homeland Security Grants Program 

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• Established grant application, review, and award processes were not 

always understood or followed. For example, the state awarded 

$1.5 million to a state agency to acquire Colorado’s Multi Agency 

Coordination Center – a project not eligible under the FY 2004 State 

Homeland Security Grant Program. The State Auditor and G&T 

questioned this transaction; and the state has since returned the funds 

to G&T. However, some state officials still believe the transaction 

was proper and that the state should have been allowed to retain the 

funds. We confirmed that in this instance the state did not follow grant 

award protocols and awarded the grant funds for an ineligible purpose. 

See Appendix E for a chronology of key events on this issue. 

• The state did not ensure that funds were spent within the stated grant 

performance period. G&T’s financial management guide provides that 

funds not properly obligated by the recipient within the grant 

performance period will lapse and revert to G&T. Instead of enforcing 

this requirement, the state routinely granted time extensions to 

sub-grantees or allowed transfers of costs from recently awarded 

grants to older grants to exhaust expiring funds. 

• The state did not perform analytical reviews of grant applications to 

ensure the adequacy of planned grant expenditures and cost estimates. 

Grant estimates were generally overstated, resulting in surplus funds at 

the sub-grantee because actual costs were less than budgeted. Unlike 

state agencies that received homeland security funding from the state, 

most of the other sub-grantees kept the extra funds and used them for 

other projects. In some cases, they purchased items in numbers that 

exceeded those authorized in the grant agreement. In other instances, 

sub-grantees re-directed the funds by making transfers among budget 

line items; e.g., applying unused exercise and training funds to pay for 

equipment, supplies, and management and administrative costs. 

Insufficient Number of Trained Staff 

State employees managing homeland security and UASI grant programs were 

few in number and were not sufficiently trained. High employee turnover 

hampered the state’s ability to manage these grant programs and monitor 

sub-grantee spending. 

In September 2006 when this audit started, seven individuals accomplished 

homeland security grant management functions within the State 

Administrative Agency on a full- or part-time basis. Those employees 

included a recently hired State Administrative Agency Director, a Branch 

Chief, a Program Administrator, a trainee, a part-time grant technician, an 

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accountant, and a temporary employee hired to conduct sub-grantee site visits 

and monitoring. As of November 2006, five of the seven employees 

remained. The State Administrative Agency Director and Program 

Administrator continued managing the grants, the accountant processed grant 

claims on a part time basis, and two employees, borrowed from other 

departments, processed incoming grant information. The borrowed 

employees had no formal grant management training, and one employee had 

no prior experience in grant operations. 

As of May 2007, a new acting Division of Emergency Management Director 

(State Administrative Agency) and Branch Chief (filled by promoting the 

Program Administrator) remained as the only permanent employees involved 

in homeland security grants management. While the State Administrative 

Agency continued grant operations with one employee borrowed from another 

department, the lack of adequately trained staff impacted grant management 

operations and resulted in overall weak internal controls for managing 

program activities. In addition, officials from the all-hazards regions 

expressed dissatisfaction with the State Administrative Agency in that they 

had difficulty obtaining adequate and timely grant technical support. 

Sub-grantee Monitoring Efforts Were Not Effective 

The State Administrative Agency performed limited on-site, sub-grantee 

monitoring visits during FYs 2003 through 2005. Those visits were 

conducted on an add-hoc basis and reviews were limited to verifying the 

delivery and physical location of equipment purchased under the grants. The 

State Administrative Agency did not perform any on-site monitoring reviews 

of grant financial management practices until FY 2006. Despite its current 

efforts to expand the depth and breadth of on-site sub-grantee monitoring, 

deficiencies remain in the State Administrative Agency’s monitoring process. 

The State Administrative Agency developed a formal sub-grantee monitoring 

guide that included specific steps for evaluating grant financial management 

practices and for verifying equipment purchases during on site monitoring 

visits. Using its guide, the State Administrative Agency completed 

monitoring reviews of the 9 all-hazards regions, 16 state agencies, and the 

Denver urban area in FY 2006 but reported no adverse findings. However, 

State Administrative Agency records supporting its on site monitoring efforts 

and our reviews at selected sub-grantee locations disclosed deficiencies in the 

monitoring process. 

• State records generally did not include documentation to support the 

adequacy and thoroughness of the monitoring. The completed 

monitoring guides included minor comments and checkmarks that 

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indicated a step was completed, but no explanations were provided to 

describe the details of the work. The employee who completed the 

reviews explained that the purpose of the site visits was primarily to 

provide technical support. This individual further explained that 

discrepancies observed in grant management were resolved in the 

field; thus, they were not recorded or disclosed in the sub-grantees’ 

site monitoring reports. 

• Our review of financial management practices of some sub-grantees 

produced different results. As noted in this finding and other areas of 

this report, sub-grantees did not always comply with grant financial 

management practices. We identified deficiencies with cash 

management, procurement, equipment inventories, and general grant 

compliance. 

Comments from state officials. State officials agreed that grant management 

efforts need improvement and explained that the state has taken steps to 

correct the internal control weaknesses discussed in this finding. With regard 

to management and administrative costs, they said additional controls have 

been introduced with the 2006 grant awards including steps to discontinue 

routinely charging 20% of the field managers’ salaries to the grants. Instead, 

they plan to charge only the actual time spent by the managers on program 

activities. They also said that transferring costs from recently awarded grants 

to older grants was done on an exception basis. The state officials we talked 

to said that the state is planning to: (1) hire two employees to help manage 

homeland security and UASI grant programs, (2) develop a training checklist 

for new staff by June 1, 2007, (3) establish a training program for all staff by 

August 1, 2007, and (4) hire a financial compliance officer to improve state 

monitoring of sub-grantee activities. 

Expenditures Not Always in Compliance With Grant Requirements 

We reviewed the propriety of $26.9 million in homeland security and UASI 

grant expenditures and questioned about $7.8 million in costs claimed against 

those grants. The costs we questioned relate to the potential supplanting of 

state or local funds with federal funds ($3,900,000), commingling of grant 

program funding ($3,457,553), paying ineligible construction costs 

($252,235), and paying other unallowable costs ($229,508). Appendix F 

summarizes the costs we questioned by grant program and grant year. 

Office of Management and Budget Circular A-87, Cost Principles for State, 

Local, and Indian Tribal Governments, 2 CFR Part 225, requires that costs 

charged to the grants (federal awards) must be: a) allocable to federal awards 

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and b) comply with any limitations set forth in the terms and conditions of the 

federal awards, such as grantor (i.e., G&T) guidelines and grant requirements. 

Potential Supplanting of Grant Funds 

G&T guidelines and grant regulations prohibit the use of federal funds to 

supplant state or local funds appropriated for objectives similar to grant 

purposes. Specifically, the Department of Justice (DOJ), Office of Justice 

Programs financial guide, part II, chapter 3 – standards for financial 

systems/supplanting, specifies that federal funds must not replace those 

(state/local) funds that have been appropriated for the same purpose... and the 

applicant or grantee will be required to supply documentation demonstrating 

that the reduction in non-Federal resources occurred for reasons other than the 

receipt or expected receipt of federal funds3. Also, Title 28, Code of Federal 

Regulation, Part 66, Uniform Administrative Requirements for Grants and 

Cooperative Agreements to State and Local Governments, Section 66.40, 

requires grantees to monitor grant and sub-grant supported activities to assure 

compliance with applicable federal requirements and to ensure that 

performance goals are achieved. 

The North Central Region expended $3.9 million of FY 2004 Homeland 

Security Grant Program funds for infrastructure equipment associated with a 

digital trunked radio system (system). Section 24-30-908.5 of the Colorado 

revised statutes establishes the state’s Public Safety Communications Trust 

Fund to pay for the acquisition and maintenance for public safety 

communications equipment, including the digital trunked radio system 

components. Using trust funds, the state purchased two of the three radio 

system controllers needed for its communications infrastructure and the region 

purchased the third controller. Region officials stated that the state’s 

communications infrastructure required the third controller for system 

expansion and would allow: 1) for additional repeater sites to be added to the 

statewide system, 2) communications centers to directly access the system 

without backroom equipment, and 3) agencies utilizing non-compatible 

equipment to create easy points of access between communications centers. 

Records supporting the purchase of the third controller and discussions with 

state officials indicated that the region and the state agreed that title to the 

controller would transfer from the region to the state after acquisition and the 

equipment would become part of Colorado’s overall communications 

infrastructure. However, the region did not transfer the equipment to the state 

but transferred title to a local non-profit organization. This non-profit 

organization is a consortium of government agencies that manage 

3

 DOJ, Office of Justice Programs, provided financial management support and monitoring of homeland security grants 

through fiscal year 2005. 

Audit of the State of Colorado Homeland Security Grants Program 

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communications issues for the State of Colorado and is organized exclusively 

for the purpose of managing, promoting, and propagating the Colorado 

Statewide Digital Trunked Radio System. There was no indication in the files 

that the region sought or received approval from the state or G&T. Regarding 

the transfer, the region’s Board of Directors minutes stated, “...all operating 

and maintenance expenses will be the responsibility of the local non-profit 

and if the local non-profit is unable to fulfill ownership requirements in the 

future, the zone controller will be turned over to the State.” Further, the 

region’s procurement did not conform to federal, state, and local acquisition 

requirements inasmuch as the acquisition was sole source procurement and 

was not reviewed or approved by responsible officials. 

With regard to applying federal funds to purchase the third controller, a state 

official explained that homeland security grants allowed for the expenditure 

and therefore using the trust fund monies was not necessary. We did not 

verify the balance of the trust fund and related budgets as of the date the 

controller was acquired because the Colorado State Auditor was in the process 

of auditing the trust fund. We recommend that G&T contact the Colorado 

State Auditor and determine the nature of the transaction. We also 

recommend that, if state funds were supplanted with federal funds, G&T 

de-obligate the $3.9 million of 2004 grant funds applied to the purchase of the 

third controller. 

Commingling of Grant Funds 

Federal regulations require sub-grantees to obtain approval prior to 

transferring grant funds among direct cost categories or among separately 

budgeted programs, functions, or activities, when such transfers would exceed 

10% of the total approved budget whenever the grantor’s share exceeds 

$100,000. These regulations also require sub-grantees to obtain prior 

approval for revisions to project scope or objectives and provide two other 

instances when sub-grantees must obtain prior approval for fund or budget 

transfers. In addition, G&T’s financial guide requires separate accounting for 

each grant award and prohibits commingling funds on either program-byprogram or project-by-project bases. The guide also specifies that funds 

specifically budgeted and/or received for one project may not be used to 

support another. 

We question $3.4 million in transfers among grants because prior written 

approval had not been obtained from G&T. Of the amount questioned, we 

identified $2 million at the Denver UASI and $1.4 million attributable to other 

sub-grantees. The transfers were initiated because: 1) older grants had 

reached the end of the grant performance period and unspent funds were due 

to expire; and 2) the sub-grantees did not want to return the unspent funds to 

Audit of the State of Colorado Homeland Security Grants Program 

Page 14 
the state. These transfers undermine the appropriateness of the grant award 

process and do not ensure: 1) appropriate expenditure of grant funds; 

2) effective management of G&T grant resources; and 3) programmatic and 

fiscal accountability. In addition, we question how the sub-grantees plan to 

use the grant funds awarded under current grant programs since approved 

project expenditures under the current awards were defrayed by funds 

transferred from the expiring awards. 

Ineligible Construction Costs 

The Denver UASI used $252,235 of grant funds to pay for ineligible 

construction costs. Specifically, the Denver UASI used $116,427 of the 

FY 2003 grant to construct a foundation, stairs, and a room for interoperable 

equipment at one site and $135,808 of the FY 2004 grant to construct a 

telecommunications room at the City of Denver’s new fire station. G&T 

program guidelines specifically prohibit the use of grant funds for 

construction or renovation of facilities. 

Unallowable Costs 

The Denver UASI claimed $236,606 in consulting fees that were not prorated 

among benefiting activities. The fees related to a City of Denver 

interoperable communications project that was funded with UASI and DOJ 

grants and with City of Denver funds. Denver UASI and City of Denver 

records show that $236,606 in fees was charged to the FY 2004 UASI grant 

although the grant only represented 3% of the overall project objective and 

costs. As such, only $7,098 of the fees was attributable to the UASI grant 

($236,606 x 3%) and the other $229,508 is questioned as an unallowable cost 

($236,606 x 97%). Office of Management and Budget Circular A-87, G&T’s 

financial guidelines, and the Office for Justice Programs financial guide 

require sub-grantees to maintain adequate documentation of grant 

expenditures and allocate the cost of goods or services to cost objectives in 

accordance with relative benefits received. 

Comments from state officials. The state officials who reviewed this finding 

did not agree that the cost of the digital trunked radio controller should be 

questioned and explained that the state infrastructure did not require the 

equipment. Therefore, they concluded that using homeland security grant 

funds to purchase the controller was not supplanting local funds. They agreed 

that the equipment was transferred to the non-profit without state or G&T 

approval, but did not provide a comment about procurement standards that the 

sub-grantee failed to follow. The state also noted that it plans to resolve 

remaining issues as follows: 1) UASI transfer of $317,451 among grants will 

be resolved by December 31, 2007, 2) ineligible construction costs of 

Audit of the State of Colorado Homeland Security Grants Program 

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$252,235 will be resolved by October 31, 2007, and 3) unallowable costs of 

$236,606 will be resolved by October 31, 2007. The state acknowledged that 

transfers between newer grants and older grants have occurred but only on an 

exception basis. Since we completed the review of costs after our fieldwork, 

state officials did not have an opportunity to comment on the $3.1 million in 

transfers among grants that were initiated by state grant administrators. 

Funding Was Not Always Allocated To High Risk Projects 

From FY 2003 to FY 2006, Colorado improved its methodology to ensure that 

grant funds were allocated to the state’s highest priorities; and in FY 2007, the 

state continued to make improvements. However, the state did not always 

reallocate surplus or excess grant funding to projects with the highest 

priorities. Colorado’s State Homeland Security Strategy and federal 

homeland security program guidelines identify risk as the primary factor to 

consider when allocating grant funds. The state should use planning and data 

from multiple sources to identify and fund the highest priority activities on a 

statewide basis. This ensures that the state’s homeland security preparedness 

contributes to national preparedness goals. 

Documentation for the FY 2005 homeland security grant program showed that 

the state reallocated about $600,000 reverted from a canceled state project to 

eight of the nine all-hazards regions but documentation did not support that 

the funds went to projects with a high statewide priority. Further, the state did 

not monitor sub-grantees to ensure that they returned excess funds resulting 

from over estimated costs in grant budgets. While state guidelines require 

prior approval for reusing excess funds, local sub-grantees did not comply 

with the requirement, and the state did not enforce it. For example, two of the 

five all-hazards regions visited used over $250,000 in excess funds to acquire 

radio equipment in excess of the number approved in their grant budgets. The 

state only became aware of the transactions when the regions submitted the 

costs for reimbursement. Finally, the state either approved or allowed 

sub-grantees to reallocate grant funds within budget line items without 

considering high-priority needs on a statewide basis. 

Comments from state officials. State officials agreed with this finding and 

noted that equipment prices fluctuated due to market conditions. These 

officials noted that previously, the regions operated autonomously and could 

use unexpended funds to pay for the next highest regional priority once 

approved by the regional board of directors. However, because of the 

Governor’s interest in implementing a clearer homeland security strategy, the 

State Administrative Agency is strengthening methods for identifying and 

funding the regions’ highest priority projects. 

Audit of the State of Colorado Homeland Security Grants Program 

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Opportunities Exist For Improving Program Readiness 

While the state has taken steps to acquire needed equipment and to establish 

exercise and training programs, it has not ensured equipment readiness or 

effectively implemented exercise and training programs. The overarching 

objective of the homeland security grant program is to provide federal funding 

for the purchase of specialized equipment, exercises, and training to assist the 

state in its efforts to meet national preparedness goals. 

Equipment Readiness 

A sub-grantee is responsible for ensuring the overall readiness of equipment 

once purchased and received, including keeping inventories, training 

operators, and providing regular maintenance. The state lacked guidance on 

equipment readiness requirements and sub-grantees did not always keep 

equipment inventories or use or plan to use some of the purchased equipment. 

For example: 

• A sub-grantee mistakenly omitted a phone system in a command 

vehicle from its inventory. The system was not functional at the time 

of our visit, but because it was not included in the inventory, the 

manufacturer was not contacted to address the defect while it was still 

under warranty. 

• The picture below depicts a decontamination tent that remained in its 

original box for over 6 months without an immediate plan for using it 

or training personnel. Hospital officials explained that they hoped to 

use the tent for personal protective equipment training but could not 

provide us a timeline for when the training would be developed. 

Audit of the State of Colorado Homeland Security Grants Program 

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• Radiation detectors, such as the one pictured below, remained stored 

and undistributed months after being purchased because sub-grantees 

had not executed memoranda of understanding with the future 

recipients of the equipment. 

A 2005 state audit reported similar equipment readiness issues, including 

damaged equipment, emergency weather information systems and radio 

equipment not distributed for months, personal protective equipment not 

inventoried or distributed to end users, and instances of untrained equipment 

users. 

Exercise and Training 

State representatives responsible for managing homeland security exercise and 

training programs did not have a clear understanding of their assigned 

responsibilities and were not in compliance with the objectives and timelines 

of state’s homeland security strategy. In addition, state representatives were 

not always coordinating program activities with stakeholders and the 

stakeholders expressed concern regarding the representatives’ role in meeting 

program objectives. 

The state exercise representative neither participated in exercises conducted 

throughout the state, nor reviewed after action reports to: (1) identify areas for 

improvements and (2) ensure the adequacy and implementation of corrective 

actions. Similarly, the state training representative, as a general practice, did 

not collect training data from the regions or Denver UASI and did not 

maintain an ongoing dialog with stakeholders to identify training needs. 

Program readiness is critical to ensuring that emergency personnel can 

effectively respond to acts of terrorism and natural disasters. Because the 

state did not monitor equipment readiness and has not implemented effective 

Audit of the State of Colorado Homeland Security Grants Program 

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exercise and training programs, it has little assurance that critical response 

components, such as medical, health, and mutual aid systems, will be effective 

when responding to emergencies. 

Comments from state officials. Senior state officials agreed with our finding 

and noted that the Division of Emergency Management has developed and 

implemented new policies and procedures for equipment monitoring. 

Monitoring will include verification by Regional Field Managers that the 

equipment is ready and in working order. Training and exercise functions are 

being assessed by the Division of Emergency Management director and a plan 

for improving both programs will be developed by June 30, 2007. 

Recommendations 

We recommended that the Acting Assistant Administrator, Grant Programs 

Directorate: 

Recommendation #1: Monitor Colorado's review of its homeland 

security responsibilities and organizational structure and provide technical 

assistance, guidance, and training, as needed, to ensure that Colorado 

(1) achieves its organizational objectives planned for the fall of 2007, 

(2) establishes a sustainable organization, and (3) pays particular attention 

to management controls, including accountability and executive level 

oversight of all homeland security activities. 

Recommendation #2: Monitor Colorado’s development, maintenance, 

and use of its homeland security strategy as a long-range planning 

instrument and evaluate the state’s strategy planning cycle to ensure there 

is an adequate and effective evaluation of risk, capabilities, needs, and 

outcomes. 

Recommendation #3: Provide Colorado technical assistance, as needed, 

to ensure that it takes effective action to: 

a. Improve grant management internal control weaknesses identified 

in this report, 

b. Remit $11,555 in interest earned on excessive federal drawdowns, 

c. Remit $5,460 in interest earned by one sub-grantee on federal 

advances, 

d. Adequately staff the State Administrative Agency to administer the 

state’s homeland security program effectively, 

Audit of the State of Colorado Homeland Security Grants Program 

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e. Improve sub-grantee monitoring site visits, 

f. Properly account for and claim management and administrative 

costs by grant award at the state and sub-grantee levels, and 

g. Discontinue its practice of transferring costs from recently awarded 

grants to older grants to exhaust expiring funds. 

Recommendation #4: Review and report on the eligibility of the 

$7.8 million in homeland security grant expenditures questioned in this 

report and disallow those costs determined to be unallowable or 

unsupported. 

Recommendation #5: Monitor Colorado’s practices for grant allocations 

and work with the state to ensure that it allocates grant funding to projects 

with the highest risk and priority. 

Recommendation #6: Assist Colorado in establishing (1) a means to 

regularly monitor statewide equipment readiness, and (2) effective 

exercise and training programs that are in compliance with the objectives 

of the state’s homeland security program. 

Management Comments and OIG Analysis 

On November 15, 2007, we received written comments to our September 7, 

2007 draft report (see Appendix G). The Grant Programs Directorate 

(successor to the Office of Grants and Training) concurred with the 

recommendations without providing specific comments on the draft report or 

corrective actions planned or taken. We subsequently requested that the 

Acting Assistant Administrator provide us a corrective action plan within 

90 days after issuance of this report. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix A 

Objective, Scope, and Methodology 

The objective of this audit was to determine whether the State of Colorado 

effectively and efficiently implemented its homeland security grant program, 

achieved the goals of the program, and spent funds according to grant 

requirements. Our goal was to identify problems and solutions to help DHS 

and Colorado improve the nation’s ability to prevent, prepare for, and respond 

to major disasters, terrorist attacks, and other emergencies (“all-hazards” 

preparedness). To accomplish our objective, we examined the State 

Administrative Agency’s internal control system; followed up on a related 

State Auditor’s report, recommendations and questioned costs; and addressed 

additional concerns reported by G&T regarding pervasive and serious 

weaknesses in program management. 

The scope of our audit included state homeland security and urban areas 

security initiative grants awarded by G&T to the State of Colorado for FYs 

2003 through 2006 (See Appendix B for grant program descriptions). 

We worked closely with G&T and state officials at Colorado’s Office of the 

State Auditor, the Colorado Department of Public Safety, the Colorado 

Department of Local Affairs, five of the nine all-hazards regions (Northwest, 

Northeast, North Central, South Central, and San Luis Valley), the Denver 

UASI, and five state agencies (Governor’s Office of Cyber Security and the 

Departments of Personnel and Administration, Public Safety, Revenue, and 

Agriculture). We considered G&T and Colorado policies and procedures as 

well as applicable federal requirements. We interviewed responsible officials 

regarding Colorado’s homeland security strategy and achievement of 

homeland security goals and objectives. We reviewed applicable 

documentation supporting Colorado’s management of grant funds. We also 

reviewed the 2005 Colorado State Auditor’s report and working papers. In 

addition, our audit work regarding exercises and training included meetings 

with appropriate grantee and sub-grantee officials, and a review of 

administrative documentation. 

We performed the audit between September 2006 and April 2007 and 

conducted it in accordance with Government Auditing Standards prescribed 

by the Comptroller General of the United States (Yellow Book, June 2003). 

Although this audit included a review of claimed costs, we did not perform a 

financial audit of those costs. Accordingly, we do not express an opinion on 

Colorado’s financial statements or the funds claimed in the financial status 

reports submitted to G&T. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix B 

Homeland Security Grants 2003 - 2006 

FY 2003 State Homeland Security Grant Program - Part I. (1) Purchase 

specialized equipment to enhance the capability of grant recipients to respond 

to incidents of terrorism involving the use of chemical, biological, 

radiological, nuclear, or explosive weapons; (2) protect critical infrastructure 

and prevent terrorist incidents; (3) cover costs related to the design, 

development, conduct, and evaluation of chemical, biological, radiological, 

nuclear, or explosive exercises; (4) provide funding for the design, 

development, and conduct of chemical, biological, radiological, nuclear, or 

explosive training programs; and (5) provide funding for costs associated with 

updating and implementing grantees’ homeland security strategies. 

FY 2003 State Homeland Security Grant Program - Part II. (1) Provide 

supplemental funding for the program activities described above for Part I, 

and (2) provide funding to mitigate the cost of enhanced security at critical 

infrastructure facilities during the period of hostilities in Iraq and future 

periods of heightened threat. 

FY 2003 Urban Areas Security Initiative Grant Program. This initiative 

includes an urban area assessment and strategy component, which will be used 

by G&T and urban area working groups to both allocate grant funding and 

guide delivery of direct services in the form of equipment, planning, training, 

exercises, and technical assistance. 

FY 2003 Urban Areas Security Initiative Grant Program – Part II. This 

initiative provides financial assistance to address unique equipment, training, 

planning, exercise and operational needs of large urban areas, and to assist 

them in building an enhanced and sustainable capacity to prevent, respond to 

and recover from threats or acts of terrorism. 

FY 2004 Homeland Security Grant Program. Provide funding for 

specialized equipment, training, exercises, and planning costs associated with 

updating and implementing each state's homeland security strategy. Awards 

under the FY 2004 program integrated three grants– State Homeland Security 

Grant Program, Law Enforcement Terrorism Prevention Program, and 

Citizens Corps Program – into a single application kit. 

FY 2004 Urban Areas Security Initiative Grant Program. This initiative 

includes an urban area assessment and strategy component, which will be used 

by G&T and urban area working groups to both allocate grant funding and 

guide delivery of direct services in the form of equipment, planning, training, 

exercises, and technical assistance. In addition, this year’s grant allowed for 

the funding of new urban areas as well as funds for identified mass transit 

authorities to enhance their security and improve their preparedness. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix B 

Homeland Security Grants 2003 - 2006 

FY 2005 Homeland Security Grant Program. The FY 2005 Homeland 

Security Grant Program was changed to integrate six programs into one 

application kit; the State Homeland Security Program, the Urban Areas 

Security Initiative, the Law Enforcement Terrorism Prevention Program, the 

Citizen Corps Program, the Emergency Management Performance Grants, and 

the Metropolitan Medical Response System. This funding and consolidation 

of programs streamlined the process to enhance security and overall 

preparedness to prevent, respond to, and recover from acts of terrorism. The 

Homeland Security Grant Program will continue to provide funding for 

planning, equipment, training, exercises, and program management and 

administration for emergency prevention, preparedness, and response 

personnel. 

FY 2006 Homeland Security Grant Program. This FY 2006 grant program 

maintained the concept of program integration by combining five programs 

into one application kit; the State Homeland Security Program, the Urban 

Areas Security Initiative, the Law Enforcement Terrorism Prevention 

Program, the Citizen Corps Program, and the Metropolitan Medical Response 

System. This program built upon previous improvements in the grant process 

with the intent to focus resources towards building capabilities to achieve 

national preparedness goals. Program guidelines required the use of a 

risk-based approach to allocate funding. The program continued to provide 

funding for planning, equipment, training, exercises, and program 

management and administration for emergency prevention, preparedness, and 

response personnel. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix C 

Colorado Homeland Security Grant Program Funding Allocations FY 2003-2006 

Homeland Security 

Grants Program FY 2003 FY 2004 FY 2005 FY 2006 Total 

Homeland Security “First 

Responder” Grants Program4 $34,591,0005 $28,041,000 $17,796,658 $8,080,000 $88,508,658 

Urban Areas Security 

Initiatives 15,568,4746 8,595,347 8,718,395 4,380,000 37,262,216 

Sub-Total $50,159,474 $36,636,347 $26,515,053 $12,460,000 $125,770,874 

Law Enforcement Terrorism 

and Prevention Program N/A 8,321,000 6,471,512 7,600,000 22,392,512 

Metropolitan Medical 

Response System N/A N/A 682,776 696,990 1,379,766 

Citizen Corps Program N/A 582,000 225,929 322,819 1,130,748 

Buffer Zone Protection N/A N/A 1,450,000 N/A 1,450,000 

Transit Grant N/A N/A 1,225,000 N/A 1,225,000 

Emergency Management 

Performance N/A N/A 2,903,630 N/A 2,903,630 

Sub-Total $0 $8,903,000 $12,958,847 $8,619,809 $30,481,656 

Combined Total $50,159,474 $45,539,347 $39,473,900 $21,079,809 $156,252,530 

4

 In FY 2003, the Homeland Security Grant was called “State Homeland Security Grant”. 5

 The total of $34,591,000 included $9,480,000 awarded in FY 2003 – Part I and $25,111,000 ($21,763,000 for First 

Responder Preparedness and $3,348,000 for Critical Infrastructure Protection) awarded 

in FY 2003 – Part II. 6

 The total of $15,568,474 was for the Urban Area Security Initiative Grant – Part II in FY 2003. The State did not 

receive any Urban Areas Security Initiative Grant – Part I funding in FY 2003. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix D 

Colorado’s Nine All-Hazard Regions 

Map Provided by the State of Colorado 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix E 

Multi Agency Coordination Center - Summary of Key Events 

Date Event 

April 2002 South Metro Fire Rescue Finance Corporation (South Metro Finance) holds title to 

South Metro Fire & Rescue Building subject to mortgage. 

April 2002 South Metro Fire Rescue District leases South Metro Fire Rescue District building 

from South Metro Finance; anticipates acquiring title by the end of December 2016. 

December 2003 Department of Local Affairs begins discussion with South Metro about leasing space 

in the South Metro building. 

January 2004 The Department of Local Affairs applies for state homeland security grant of $1.25 

million from the State Administrative Agency (Colorado Department of Public Safety). 

January 2004 South Metro Fire Rescue District receives $20,000 from 2004 Mineral Impact funds, 

through the Department of Local Affairs, to design Multi Agency Coordination Center. 

February 2004 The Office for Domestic Preparedness approves using homeland security grant 

program funds to prepay a long-term lease. 

July 2004 The Office of Justice Programs rescinds Office for Domestic Preparedness’ approval to 

use homeland security grant funds to prepay a long term lease 

July 2004 The Governor changed the State Administrative Agency from the Department of 

Public Safety to the Department of Local Affairs. 

July 2004 South Metro Fire Rescue District receives $1.2 million from 2005 Mineral Impact 

funds through the Department of Local Affairs to build out the Multi Agency 

Coordination Center. 

August 2004 The Department of Local Affairs signs sub-lease agreement with South Metro Fire 

Rescue District with an option to purchase. 

August 2004 South Metro Fire Rescue District passes a resolution invoking purchase option in the 

sub-lease allowing the state to make $1.5 million payment, $400,000 in cash within 

60 days, and $1.1 million for the design, construction, and equipping of facilities by 

the end of December 2005. 

October 2004 The Department of Local Affairs awards $1.6 million of 2004 homeland security grant 

program funds to South Metro Fire Rescue District in exchange for the state’s right to 

occupy the building and to satisfy South Metro Fire Rescue District’s August 2004 

resolution plus $100,000 for state’s communications equipment. 

March 2005 The Department of Local Affairs pays South Metro Fire Rescue District $400,0007 in 

homeland security grant program funds for payment of the cash portion of the state’s 

$1.5 million advance payment towards purchase price. The state continued to have a 

liability of $1.1 million which was later cancelled 

March to June 

2005 

The Department of Local Affairs records a $1.1 million liability to South Metro Fire 

Rescue District in its books by recording the sub-lease agreement as a capital lease. 

The Department of Local Affairs later cancelled the liability because South Metro Fire 

Rescue District donated $1.1 million to the Department. 

July 2005 The Department of Local Affairs obtained Office for Domestic Preparedness approval 

to use $400,000 in homeland security grant program funds to pay rent under the 

sub-lease through the grant performance period of November 30 2005. The 

performance period was later extended to November 30, 2006. 

7

 $400,000 was originally paid as part of the Department of Local Affairs’ SHSG to South Metro. The Department of 

Local Affairs subsequently deobligated said money from South Metro’s SHSG and credited the payment to State’s 

SHSG portion 

Audit of the State of Colorado Homeland Security Grants Program 

Page 26 
Appendix E 

Multi Agency Coordination Center - Summary of Key Events 

Date Event 

October 2005 The Office of the State Auditor issued an audit report regarding Colorado’s Homeland 

Security Grant Program. The report found that the Department of Local Affairs had 

not complied with state and federal guidelines with regard to the grants issued to South 

Metro Fire Rescue District. The Office of the State Auditor found that the Department 

of Local Affairs used grant monies in exchange for state’s right to occupy space in the 

South Metro Fire Rescue District Building. The Office of the State Auditor concluded 

that South Metro Fire Rescue District could not donate something it did not own (title 

to the South Metro Fire Rescue District Building). 

December 2005 G&T conducted an independent review of state’s homeland security program and 

raised similar concerns as reported by the Office of the State Auditor. G&T questioned 

the $1.5 million in federal funds used by the Department of Local Affairs for 

acquisition of Multi Agency Coordination Center. 

June 2006 G&T sends letter to the Department of Local Affairs requesting a 15-day response as 

to actions taken by state on the Office of the State Auditor report. G&T requests 

refund of $1.5 million federal funds used by Department of Local Affairs to acquire 

Multi Agency Coordination Center. 

July 2006 The Department of Local Affairs reverted $1.5 million by warrant. 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix F 

Summary of Questioned Costs 

Homeland Security Grant Program Questioned Costs 

Grant 

 Year Description of questioned costs 

INELIGIBLE 

Costs 

UNSUPPORTED 

COSTS Totals 

SUPPLANTING OF GRANT FUNDS 

FY 2004 Acquisition of the Digital Trunked Radio controller #3. $3,900,000 $0 $3,900,000 

UNAPPROVED TRANSFERS/ COMMINGLING OF GRANT FUNDS. 

FY 2003 • Transfer of FY 2004 homeland security grant program 

expenditures to the FY 2003 homeland security grant. 600,162 0 600,162 

FY 2004 • Transfer of FY 2003 homeland security grant program 

expenditures to the FY 2004 homeland security grant. $133,944 0 $133,944 

FY 2004 • Transfer of FY 2005 homeland security grant program 

expenditures to the FY 2004 homeland security grant. $632,511 0 $632,511

 SUB-TOTAL $5,266,617 $0 $5,266,617 

Urban Areas Security Initiative - Denver Urban Area Questioned Costs 

Grant 

 Year Description of questioned costs 

INELIGIBLE 

Costs 

UNSUPPORTED 

COSTS Totals 

UNAPPROVED TRANSFERS/ COMMINGLING OF GRANT FUNDS. 

FY 2003 • Transfer of FY 2003 UASI funds for costs budgeted 

under the FY 2005 UASI grant $1,399,895 $0 $1,399,895 

FY 2003 • Transfer of FY 2003 Homeland Security Grant 

Program expenditures to the FY 2003 UASI grant 161,036 0 161,036 

FY 2003 • Transfer of FY 2005 Law Enforcement Terrorism 

Prevention Program expenditures ($128,407) and FY 

2005 UASI expenditures ($5,604) to the FY 2003 

UASI grant134,011 0 134,011 

FY 2004 • Transfer of FY 2005 UASI expenditures to the FY 

2004 UASI grant 395,994 $0 395,994 

INELIGIBLE CONSTRUCTION COSTS 

FY 2003 • West Metro Fire Department 116,427 0 116,427 

FY 2004 • City of Denver, Fire Department 135,808 0 135,808 

UNSUPPORTED CONSULTING COSTS. 

FY 2004 • Consulting fees not properly allocated to the grant 229,508 229,508 

SUB-TOTAL $2,343,171 $229,508 $2,572,679 

COMBINED TOTAL QUESTIONED COSTS $7,609,788 $229,508 $7,839,296 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix G 

Grant Programs Directorate’s Response to the Draft Report 

Audit of the State of Colorado Homeland Security Grants Program 

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Appendix H 

Major Contributors to this Report 

Robert J. Lastrico, Audit Division Director 

Humberto Melara, Supervisory Auditor 

Ravi Anand, Auditor 

Arona Maiava, Auditor 

Bill Stark, Auditor 

Carlos Feliciano, Program Analyst 

Audit of the State of Colorado Homeland Security Grants Program 

Page 30 
Appendix I 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

Under Secretary, Management 

Chief Financial Officer 

Chief Information Officer 

Assistant Secretary, Public Affairs 

Assistant Secretary, Policy 

Assistant Secretary, Legislative Affairs 

Chief Security Officer 

DHS GAO/OIG Liaison 

Chief Privacy Officer 

Federal Emergency Management Agency 

Administrator 

Acting Assistant Administrator, Grant Programs Directorate 

Acting Director, Financial Accountability and Oversight Division 

OIG Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Bureau 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as appropriate 

Audit of the State of Colorado Homeland Security Grants Program 

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Additional Information and Copies 

To obtain additional copies of this report, call the Office of Inspector General 

(OIG) at (202) 254-4199, 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; 

• Fax the complaint directly to us at (202) 254-4292; 

• Email us at DHSOIGHOTLINE@dhs.gov; or 

• Write to use at: 

DHS Office of Inspector General/MAIL STOP 2600, Attention: 

Office of Investigations - Hotline, 245 Murray Drive, SW, Building 410, 

Washington, DC 20528, 

The OIG seeks to protect the identity of each writer and caller.