Department of Homeland Security
 

Costs Invoiced by Sacramento County for a 


Checked Baggage Screening Project Under 


Agreement Number HSTS04-09-H-REC148 


American Recovery and Reinvestment Act of 2009 

OIG-12-123 September 2012
 
 Washington, DC 20528 / www.oig.dhs.gov

 SEP 14 2012 

MEMORANDUM FOR: John P. Sanders 

 Assistant Administrator 

 Office of Security Capabilities

 Transportation Security Administration 

FROM: Anne L. Richards 

 Assistant Inspector General for Audits 

SUBJECT: Costs Invoiced by Sacramento County for a Checked 

Baggage Screening Project Under Agreement Number 

HSTS04-09-H-REC148 



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

County for a Checked Baggage Screening Project Under Agreement Number HSTS04-09­

H-REC148. We incorporated the formal comments from the Administrator of the 

Transportation Security Administration in the report. 

The report contains two recommendations to (1) resolve unsupported invoiced costs of 

$246,479 and (2) ensure that Sacramento County complied with the requirement to buy 

American goods. The Administrator concurred with the two recommendations and 

described the corrective actions to be taken by the contracting officer. As prescribed by 

the Department of Homeland Security Directive 077-1, Follow-Up and Resolutions for 

the Office of Inspector General Report Recommendations, within 90 days of the date of 

this memorandum, please provide our office with a written response that includes your 

(1) agreement or disagreement, (2) corrective action plan, and (3) target completion 

date for each recommendation. Also, please include responsible parties and any other 

supporting documentation necessary to inform us about the current status of the 

recommendation. Until your response is received and evaluated, the recommendations 

will be considered open and unresolved. 

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 La Rouche, Director of Recovery Act Audits; 


Robert Leonard, Audit Manager; Gary Greer, Auditor; and Katrina Reuben-Bynes, 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 
 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

The American Recovery and Reinvestment Act of 2009, as amended (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 ....” TSA awarded $574,023,419 of that 

amount to 25 airport organizations for 29 projects modifying airports to accommodate 

new baggage-screening equipment. 

Under Other Transaction Agreement (OTA) No. HSTS04-09-H-REC148, dated August 7, 

2009, TSA agreed to provide Sacramento County (County) up to $11,340,000 

(90 percent) of estimated project costs of $12,600,000 for a Checked Baggage 

Inspection System (CBIS) solution at Sacramento International Airport’s (Airport) new 

Terminal B. 

The OTA requires the County to submit invoices for reimbursement of project costs. 

TSA will reimburse project costs limited specifically to those associated with the CBIS 

(defined as that area from the baggage insertion point into the explosives detection 

system screening matrix to the points where screened baggage is reinserted into the 

baggage makeup area), the On Screen Resolution room, the Checked Baggage 

Resolution Area, and the Explosives Detection System network equipment room. 

As of May 15, 2012, the County submitted nine invoices to TSA for reimbursement of 

$6,393,427 ($7,103,808 × 90 percent). The invoices covered the period from January 

2010 through March 2012. Reimbursement for eligible project costs is based on the 

scope of the OTA; Office of Management and Budget (OMB) Circular A-87, Cost 

Principles for State, Local and Indian Tribal Governments; and the TSA publication 

Reimbursable/Non-Reimbursable Costs for the Electronic Baggage Screening Program, 

version 1.0, June 2008. 

The OTA also requires the County to comply with Recovery Act provisions to submit 

quarterly recipient reports to the Federal Government; pay prevailing wages as 

determined by the Secretary of Labor; and use American iron, steel, and manufactured 

goods.1 

1 On October 13, 2009, the Department of Homeland Security (DHS) 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 the 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 2 OIG-12-123 
 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Results of Review 

We questioned $246,479 of the $6,393,427 (Federal share) invoiced by the County. The 

questioned costs represent project management, for which there was inadequate 

support for the amount allocated to the TSA project. We concluded that the County 

fulfilled the requirements for submitting quarterly reports and for paying prevailing 

wages. In addition, we determined that the County’s quarterly reports contained 

accurate expenditure and jobs data. The County could not, however, provide adequate 

support that it complied with the requirement for buying goods manufactured in 

America. 

Unsupported Costs 

We classified project management costs of $246,479 as unsupported because the 

County did not properly allocate the costs to the TSA-funded project. 

Guidelines in OMB Circular A-87 say that to be allowable, a cost must be properly 

documented and be allocable to the Federal award. The guidelines say that “[a] cost is 

allocable to a particular cost objective if the goods or services involved are chargeable 

or assignable to such cost objective in accordance with relative benefits received.” 

In May 2008, the County embarked on a modernization program for the Airport, 

referred to as The Big Build. The Big Build program included the construction of a 

baggage-handling system (BHS) for the new Terminal B. In addition to the CBIS, the BHS 

comprises outbound conveyors, airline baggage makeup devices, domestic inbound 

conveyors and carousels, international inbound conveyors and claim device, a recheck 

conveyor, and all associated logic and controls. 

The County invoiced TSA for project management costs totaling $246,479 ($273,865 × 

90 percent). The $273,865 consisted of the salary and expenses for the “BHS/APM 

[Automated People Mover] Project Manager” ($167,224) and the salary and expenses 

for the “Baggage Handling Project Mgr.” ($106,641). The County allocated all such costs 

to TSA’s project for the CBIS. We could not determine how much of the work performed 

by the two managers was directly related to the TSA-funded CBIS project and how much 

was applicable to the other BHS features. 

The County’s Associate Administrative Analyst II/Special Projects disagreed with our 

position and said that both of the project managers were mandated to work specifically 

on the CBIS. However, project reports from the subcontractor that performed the BHS 

work to one of the project managers discussed all of the BHS features, not just the CBIS. 

Therefore, we believe that the project managers’ costs should have been allocated to 

www.oig.dhs.gov 3 OIG-12-123 
 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

both the TSA project and the BHS project in proportion to the benefits actually derived. 

Therefore, we classified the $246,479 as unsupported. 

Use of American Iron, Steel, and Manufactured Goods 

Section 1605 of the Recovery Act requires the use of American iron, steel, and 

manufactured goods in the construction of Recovery Act projects. Under DHS’ limited 

waiver of the requirement for TSA’s Electronic Baggage Screening Program projects, up 

to 5 percent of the total project costs may be for the purchase of non-American goods. 

However, the County’s support to demonstrate compliance with the “buy American” 

requirement was incomplete. 

The County submitted invoice packages to TSA that included “Buy American Exceptions” 

forms. The final submittal, dated March 21, 2012, showed that the total CBIS materials 

cost to date was $3,204,782, and contained the statement “None of the materials 

delivered to-date [were foreign].” Although this submittal appeared to have been 

signed by the BHS subcontractor, most of the earlier submittals we reviewed were not 

signed or dated. In addition, the County did not obtain any letters or other documents 

from the BHS subcontractor or the individual BHS vendors certifying the source of the 

components that were used for the CBIS. Therefore, we could not determine whether 

the County complied with the requirement to use American manufactured goods. 

TSA officials told us that they have not examined the County’s compliance with the 

requirement to use American goods. TSA did publish an administrative checklist on 

February 3, 2011, to aid contracting officials in determining “buy American” compliance. 

TSA’s Director, Security Technology Acquisition Division, told us that TSA is developing 

procedures to implement the checklist. 

We believe that TSA should use the checklist to help determine whether the County 

complied with the buy American requirement for the CBIS. The County’s Associate 

Administrative Analyst II/Special Projects told us that she believed the County had 

complied with the buy American requirement because it had used the form specified in 

the OTA. 

Recommendations 

We recommend that TSA’s Contracting Officer: 

Recommendation #1: Resolve the $246,479 of unsupported project management costs. 

www.oig.dhs.gov 4 OIG-12-123 
 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Recommendation #2: Review the iron, steel, and manufactured goods used in the CBIS 

to determine whether the County complied with applicable “buy American” 

requirements. 

Management Comments and OIG Analysis 

TSA provided formal comments to our draft report, which are included as appendix B. 

TSA Comments to Recommendation #1 

TSA concurred with the recommendation and said that it “will work with the County to 

determine the extent to which the invoiced project management costs were related to 

the CBIS.” 

OIG Analysis 

Although TSA concurred with the recommendation, it did not identify specific corrective 

actions. Therefore, the recommendation will remain unresolved and open until TSA 

provides a corrective action plan including target completion dates and responsible 

parties. 

TSA Comments to Recommendation #2 

TSA concurred with the recommendation and said that it will work with the Contracting 

Officer’s Technical Representative and the County to obtain certification from the 

subcontractor and vendors that the materials used were buy American compliant. 

OIG Analysis 

TSA’s decision sufficiently responds to the recommendation. However, the 

recommendation will remain unresolved and open until TSA provides a corrective action 

plan including target completion dates and responsible parties, or evidence that it has 

obtained the certifications. 

www.oig.dhs.gov 5 OIG-12-123 
 

 

 

 

 

 

 

 

 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 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. 

The objectives of this audit were to determine whether (1) costs invoiced by 

Sacramento County were allowable, allocable, and reasonable according to the funding 

agreement and applicable Federal requirements and (2) expenditure and jobs data 

contained in the most recent quarterly recipient reports were adequately supported. 

Our audit covered invoiced costs of $7,103,808 (Federal share of invoiced costs is 

$6,393,427) for the period January 1, 2010, to March 31, 2012. This represents the total 

amount invoiced as of May 15, 2012. 

Our tests and procedures included the following: 

•	 Reviewing the Recovery Act, OTA, TSA, and OMB guidelines 

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

management 

•	 Interviewing County officials to obtain an understanding of the project, project 

management, accounting, and invoicing 

•	 Examining County accounting records and supporting documents for the amounts 

invoiced to TSA 

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

and discussing our findings with County officials 

•	 Inspecting the CBIS 

•	 Reviewing the audit working papers of the certified public accounting firm that 

performed the Single Audit of the County for the fiscal year ending June 30, 2011 

The Single Audit of the County was performed by Vavrinek, Trine, Day & Co., LLP, 

Certified Public Accountants. However, in OTA Modification P00003, TSA deleted the 

requirement for the County to comply with OMB Circular A-133, Audits of States, Local 

www.oig.dhs.gov 6	 OIG-12-123 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Governments, and Nonprofit Organizations. As a result, the certified public accountants 

did not subject the Federal funds for the CBIS to financial or compliance testing. 

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

other terms and conditions of the OTA. We considered the County’s internal controls 

over the administration of TSA funds 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; 

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 December 2011 and May 2012, 

pursuant to the Inspector General Act of 1978, 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 7 OIG-12-123 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Management Comments to the Draft Report 

u.s. Oep.nmul or Homd and S«utllJl 

601 South I2lh S\m:1 

AllioglOn. VA 2OS9S 

Transportation 

Security All> 2 1 2012 AdmiIristTation 

INFORMATION 

MEMORANDUM FOR: Charles Edwards 

Acting Inspector Genera] 

Department of Homeland Security 

,v 

FROM: John S. Pistole !AI' ~\.\ \

Administrator -0' 

THROUGH: l.W. Halinski.qd 

Deputy Administrator 

SUBlECT: Transportation Security Administration's Response to the 

U.S, Department of Homeland Security Office of Inspector 

Genera]'s Draft Report: Costs Invoiced by Sacramento County for 

a Checked Baggage Screening Project under Agreement No. 

HSTS04-09-H-RECI48 - For Official Use Only 

This memorandwn constitutes the Transportation Security Administration's (TSA) formal 

Agency response to the U.S, Department of Homeland Security (DBS), Office of Inspector 

General's (OIG) draft letter report of July 20 12, Cosl:; Invoiced by Sacramento County for a 

Checked Baggage Screening Project under Agreemenl No. STS04~09~ RECJ48 - For Official 

Use Only. TSA appreciates the opportunity to review and provide comments to your draft 

report. 

Background 

As pan of the American Recovery and Reinvestment Act of 2009 (Recovery Act), TSA was 

appropriated 51 billion for the "procurement and installation of checked baggage explosives 

detection systems and checkpoint explosives detection equipment.. ... TSA has awarded over 

$500 million in Recovery Act funding to airport organizations for modifYing facilities to 

·accommodate new baggage-screening equipment through the Electronic Baggage Screening 

Program. 

 

www.oig.dhs.gov 8 OIG-12-123 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

2 

One of these Recovery Act awards was to Sacramento County (the County) for a Checked 

Baggage Inspection System (eBIS) project in the new Tenninal B of Sacramento International 

Airport (SMF) through an Other Transaction Agreement (OTA) dated August 7, 2009. In May 

2008, and prior to this OTA, the County started a modernization program for SMF that included 

the construction of a baggage.handling system (BHS) for the new Tenninal B. The CBIS project 

is a portion of the overaJl BHS. Under the OTA, TSA agreed to provide the County up to 

$1 1,340,000, representing 90 pe",ent of the estimated project costs of SI2,600,OOO for the CBIS 

project. 

Discussion 

The draft OIG letter report questions approximately 4 percent of the costs invoiced by the 

County, finding them unsupported because they were not properly allocated to the CBIS project. 

Specifically. the DIG questions $246,479, which represents costs for project management, 

consisting of salary and expenses for a "BHS/APM [Automated People Mover] Project 

Manager" and a "Baggage Handling Project Mgr." The OIG could not determine which portion 

of the work perfonned by the two project managers was directl y related to the CBIS project and 

which portion was applicable to other BHS features. The County informed the OIG that the two 

project managers were mandated to work specifically on the eBIS. Despite this assertion, the 

010 still deems these costs to be unsupported, as one of the project managers received project 

reports discussing all of the BHS features, not just the CBlS, from a subcontractor that 

performed the BHS work. Accordingly, OIG believes that costs for project management should 

have been allocated proportionally to the CBIS project and the BHS project. To resolve these 

unsupported costs, TSA will work with the County to determine the extent to which the invoiced 

project management costs were related to the CBlS project. 

The draft report also finds that TSA officials did not examine the County's compliance with the 

Buy American Act. As the OIG notes, the County submitted invoice packages to TSA that 

included "Buy American Exceptions" forms. The final submittal contained the statement that 

''In]one of the materials delivered to-date [were foreign]." While this final submittal was signed 

by the BHS subcontractor. most of the earlier submittals reviewed by the 010 were not signed or 

dated. Additionally, the County did not obtain any documentation from the BHS subcontractor 

or individual BHS vendors certifying the source of the components used for the eBIS. In order 

to verify that the goods used are in fact Buy American Act compliant, TSA will work with the 

County to obtain certification of the sources of materials used in the CBIS project. 

TSA concurs with both of the recommendations made in the subject draft report and will take the 

actions necessary to resolve these issues. 

Recommendation 1: TSA's Contracting Officer resolve tbe S246,479 of unsupported 

project management costs. 

TSA Concun: As indicated above, TSA will work with the County to determine the extent to 

which the invoiced project management costs were related to the CBIS project 

 

www.oig.dhs.gov 9 OIG-12-123 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

3 

Recommendation 2: TSA's Contracting Officer review the iron, steel, and ma nufactured 

goods used in tbe CBIS project to determine wbether the County complied with applicable 

"Buy American" requirements. 

TSA Concurs: In order to verify that the materi als used arc compliant with Buy American Act 

requirements, the Contracting Officer will work with the TSA Contracting Officer's 

Representative and the County 10 obtain certification from the subcontractor and vendors. 

Additionally, the TSA Office of Acquisition has begun using a checklist to assist acquisition 

workforce staff in assessing and monitoring Recovery Act recipient compliance with Buy 

American Act requirements. This checklist was provided 10 the OIG in TSA's 90-day update to 

0 10- 11 -07, Final Report, Use of American Recovery and Reinveslmenr ACI Funds by Ihe TSAfor 

Ihe Eleclronic Baggage Screening Program (November 12, 2010). This checklist has previously 

been agreed to by the 0 10 as a beneficial tool in the resolution of simi lar recommendations on 

other Recovery Act-related audits. 

www.oig.dhs.gov 10 OIG-12-123 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

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 

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 11 OIG-12-123 
 

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