Department of Homeland Security
 

Costs Invoiced for Checked Baggage Inspection 

Systems and Closed-Circuit Television Cameras 

at Orlando International Airport 

American Recovery and Reinvestment Act of 2009 

OIG-12-129 September 2012
 
 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security

Transportation Security Administration 

Anne L. Richards 

Assistant Inspector General for Audits 

 Washington, DC 20528 / www.oig.dhs.gov

 September 25, 2012 

MEMORANDUM FOR: John P. Sanders 

Assistant Administrator 

Office of Security Capabilities 

FROM: 

SUBJECT: Costs Invoiced for Checked Baggage Inspection Systems and 

Closed-Circuit Television Cameras at Orlando International 

Airport 

Attached for your information is our final letter report, Costs Invoiced for Checked 

Baggage Inspection Systems and Closed-Circuit Television Cameras at Orlando 

International Airport. Since the report contains no recommendations to Transportation 

Security Administration officials, we did not solicit formal comments. 

Consistent with our responsibility under the Inspector General Act, we are providing 

copies of our report to appropriate congressional committees with oversight and 

appropriation responsibility over the Department of Homeland Security. We will post 

the report on our website for public dissemination. 

Major contributors to this report are Roger LaRouche, Audit Director; William J. Gillies, 

Audit Manager; Karl T. Gallagher, Audit Manager; and Marisa Coccaro, Report Referencer. 

Please call me with any questions, or your staff may contact John E. McCoy II, Deputy 

Assistant Inspector General for Audits, at (202) 254-4100. 

Attachment 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Background 

On February 17, 2009, Congress enacted thefAmericanfRecoveryfandfReinvestmentfActf

off2009, as amended (Recovery Act) to preserve and create jobs, promote economic 

recovery, and invest in transportation, environmental protection, and other infrastructure 

that will provide long-term economic benefits. The Recovery Act appropriated $1 billion 

to the Transportation Security Administration (TSA) for “procurement and installation of 

checked baggage explosives detection systems and checkpoint explosives detection 

equipment....” According to TSA, it awarded $574,023,419 of that amount to 25 airport 

organizations for 29 projects modifying airports to accommodate new checked baggage 

inspection systems (CBISs) and $61,827,702 to 14 airport organizations for the 

Advanced Surveillance Program (ASP). Under the ASP, TSA funds the purchase and 

installation of closed-circuit television cameras (CCTVs) throughout TSA’s passenger and 

baggage screening areas of responsibility at the airport. 

TSA awarded four Other Transaction Agreements (OTAs) to the Greater Orlando 

Aviation Authority (Authority) for the following projects: 

OTA 

NUMBER PROJECT DESCRIPTION 

ESTIMATED 

COST 

TSA SHARE 

PERCENT AMOUNT 

HSTS04-09­

H-REC127 

Design, modification, and 

construction for TSA’s in-line CBIS 

at Orlando International Airport’s 

(MCO) Central East and West 

Terminal baggage screening 

locations. 

$16,585,898 90 $14,927,308 

HSTS04-09­

H-REC162 

Design for new in-line CBIS at 

MCO’s Remote Screening Facility. 

1,448,276 90 1,303,448 

HSTS04-10­

H-REC112 

Engineering and construction for 

TSA’s in-line CBIS at MCO’s Remote 

Screening Facility. 

25,436,000 90 22,892,400 

HSTS04-10­

H-REC401 

Design, procurement, and 

installation for additional CCTV 

equipment at passenger screening 

checkpoints, baggage resolution 

rooms, and Federal inspection 

services checkpoints at MCO. 

7,525,000 100 7,525,000 

Totals 50,995,174 46,648,156

Reimbursement for eligible project costs is based on the scope of the OTAs; Office of 

Management and Budget (OMB) Circular A-87, Revised, CostfPrinciplesfforfState,fLocalf

andfIndianfTribalfGovernments;fand the TSA publication Reimbursable/Non-Reimbursablef

www.oig.dhs.gov 2 OIG-12-129
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

CostsfforfthefElectronicfBaggagefScreeningfProgram, relevant version. The agreements 

also require the Authority to comply with OMB Circular A-133, Revised, AuditsfoffStates,f

LocalfGovernments,fandfNonprofitfOrganizations,fand Recovery Act provisions to submit 

quarterly recipient reports to the Federal Government. Additionally, for construction 

projects the Recovery Act requires payment of prevailing wages as determined by the 

Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40 of the 

United States Code and the use of American iron, steel, and manufactured goods. 

www.oig.dhs.gov 3 OIG-12-129
 
 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Results of Review

We determined that project costs of $24,255,866 were allowable, allocable, and 

reasonable, as summarized below: 

OTA NUMBER 

PROJECTS 

COST

TSA SHARE 

TSA 

PAYMENTS 

PROJECT 

PERCENT AMOUNT STATUS

HSTS04-09-H-REC127 $13,906,255 90 $12,515,630 $12,515,630 Completed 

HSTS04-09-H-REC162 1,380,082 90 1,242,074 1,242,074 Completed 

HSTS04-10-H-REC112 8,258,924 90 7,433,032 6,689,729* Open 

HSTS04-10-H-REC401 710,605 100 710,605 710,605 Open

 Totals 24,255,866 21,901,341 21,158,038 

*TSA withholds from payment 10 percent of its share of construction project costs pending completion of the 

project. In this case, TSA withheld $743,303 for 10 percent of the $7,433,032. 

In addition, we verified that the Authority complied with the Recovery Act requirements 

for submitting quarterly reports on project activities to the Federal Government; for 

paying prevailing wages; and for using American iron, steel, and manufactured goods1

 in 

the CBIS construction projects. TSA determined that the additional CCTV equipment 

project was not subject to the “buy American” provisions of the Recovery Act. 

1

 On October 13, 2009, the Department of Homeland Security issued a limited waiver of the “buy 

American” requirements for each TSA Electronic Baggage Screening Program project. The waiver specifies 

that at least 95 percent of the costs of each project will comply with buy American requirements of 

section 1605 of the Recovery Act, and allows up to 5 percent of total project costs to be used for nonAmerican products. 

www.oig.dhs.gov 4 OIG-12-129
 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix A 

Objectives, Scope, and Methodology 

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

established by the HomelandfSecurityfActfoff2002 (Public Law 107-296) by amendment 

to the InspectorfGeneralfActfoff1978. 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. 

The objective of this audit was to determine whether costs invoiced by the Authority 

were allowable, allocable, and reasonable according to the funding agreements and 

applicable Federal requirements. Our audit covered invoiced costs of $21,901,341 for 

the period April 2009 through March 2012. 

In conducting our audit, we— 

•	 Reviewed the Recovery Act, OTAs, and TSA and OMB guidelines; 

•	 Interviewed TSA officials to obtain an understanding of the project and project 

management; 

•	 Interviewed Authority officials to obtain an understanding of the project, project 

management, accounting, and invoicing; 

•	 Examined Authority accounting records and supporting documents for the amounts 

invoiced to TSA; 

•	 Reviewed the eligibility of 100 percent of the costs submitted for reimbursement, 

relying on the Single Audits performed for fiscal years (FYs) 2009, 2010, and 2011 

and discussing our findings with Authority officials; 

•	 Inspected the CBIS and the CCTV projects; and 

•	 Reviewed the audit working papers of the certified public accounting firms that 

performed the Single Audits of the Authority for FYs 2009, 2010, and 2011. 

Ernst & Young, LLP, performed the Single Audit of the Authority for FY 2009, and Moore 

Stephens and Lovelace, P.A., performed the audits for FYs 2010 and 2011. The audits 

included Recovery Act–funded CBIS and CCTV project costs totaling $18,361,048 

(84 percent of invoiced costs). The Single Audit reports classified the CBIS and CCTV 

projects as major programs. The Single Audit reports did not identify any questionable 

costs or compliance issues related to the CBIS and CCTV projects, or any deficiencies in 

internal controls over financial reporting or compliance with Federal requirements. 

We tested Authority records to determine their compliance with OMB Circular A-87 and 

with other terms and conditions of the OTA. We considered the Authority’s internal 

www.oig.dhs.gov 5 	OIG-12-129
 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

controls over the administration of TSA funds and the Single Audits’ results in 

determining our audit procedures. 

Our audit was conducted without the benefit of a technical evaluation by TSA of the 

materials and manufactured components used in the construction of the CBIS and CCTV; 

therefore, our conclusions are qualified to the extent that a technical evaluation may 

affect the allowability of invoiced costs. 

We conducted this performance audit between May and June 2012, pursuant to the 

InspectorfGeneralfActfoff1978, as amended, and according to generally accepted 

government auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based upon our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions based upon our 

audit objectives. 

www.oig.dhs.gov 6 OIG-12-129
 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix B 

Report Distribution 

Department of Homeland Security

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Acting Chief Privacy Officer 

Recovery Act Coordinator 

Administrator, Transportation Security Administration 

Acting General Manager, Checked Baggage Division/Program 

Manager, Electronic Baggage Screening Program, TSA 

Audit Liaison Official, TSA 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as appropriate 

www.oig.dhs.gov 7 OIG-12-129
 
 

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