Department of Homeland Security
 

Costs Claimed by the Port Authority of New York 


and New Jersey Under Transit Security 


Grant No. 2009-RA-R1-0105 


American Recovery and Reinvestment Act of 2009 

OIG-13-03 October 2012
 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Federal Emergency Management Agency 

Anne L. Richards 

Assistant Inspector General for Audits 

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

OCT 23 2012 

MEMORANDUM FOR: 	 Elizabeth Harman 

 Assistant Administrator

 Grant Programs Directorate 

FROM: 

SUBJECT: 	 Costs Claimed by the Port Authority of New York and New 

Jersey Under Transit Security Grant No. 2009-RA-R1-0105 

Attached for your information is our final letter report, Costs Claimed by the Port 

Authority of New York and New Jersey Under Transit Security Grant No. 2009-RA-R1­

0105. Since the report contains no recommendations to Federal Emergency 

Management Agency management, 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; Karl Gallagher, 

Audit Manager; and Kevin Donahue, 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 

The AmericanfRecoveryfandfReinvestmentfActfoff2009, as amended (Recovery Act), 

appropriated $610 million to the Federal Emergency Management Agency (FEMA). Of 

that amount, the Recovery Act allocated $150 million for Public Transportation Security 

Assistance and Railroad Security Assistance (hereinafter referred to as Transit Security 

Grants) under sections 1406 and 1513 of the Implementing Recommendations of the 

9/11 Commission Act of 2007, as amended. 

On September 29, 2009, FEMA awarded a Transit Security Grant of $48,286,592 

(number 2009-RA-RI-0105) to the Port Authority of New York and New Jersey (Port). 

The purpose of the grant is to fund exterior and interior mitigation measures to 

strengthen the PATH1

 rail tunnels connecting cities in northern New Jersey to 

Manhattan. Reimbursement for eligible project costs is based on the grant agreement; 

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

andfIndianfTribalfGovernments, Revised; and FEMA guidance.2

 As of March 31, 2012, 

the Port had claimed project costs totaling $42,020,112. The costs covered the period 

from September 1, 2009, through March 31, 2012. 

The FEMA grant agreement also requires the Port 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-made iron, 

steel, and manufactured goods. 

The objective of this audit was to determine whether costs claimed by the Port were 

allowable, allocable, and reasonable according to the funding agreement and applicable 

Federal requirements. 

 

1

 PATH is a wholly owned subsidiary corporation of the Port. PATH provides rail transit service between 


New Jersey and New York operating 24 hours a day, 7 days a week, on four major service routes: 


Newark/World Trade Center (WTC), Journal Square/33rd Street, Hoboken/WTC, and Hoboken/33rd 


Street. 


2

 FEMA guidance for the Transit Security Grants is contained in the FiscalfYearf2009,fAmericanfRecoveryf
 

andfReinvestmentfActfoff2009,fTransitfSecurityfGrantfProgram,fGuidancefandfApplicationfKit,fMay 2009. 


www.oig.dhs.gov 2 OIG-13-03 
 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Results of Audit

We determined that claimed costs of $42,020,112 for the interior and exterior tunnels 

mitigation were allowable, allocable, and reasonable. The majority of the $42 million 

consists of payments made under competitively awarded construction contracts for 

strengthening the PATH tunnels. We also determined that the Port fulfilled the 

requirements for submitting quarterly reports, paying prevailing wages, and complying 

with the requirement for buying goods manufactured in America. However, the Port did 

not follow OMB guidance in calculating the number of jobs presented in its quarterly 

recipient reports to the Federal Government. 

The quarterly reports submitted for fiscal years 2010, 2011, and 2012 showed the 

creation of jobs ranging from 34 to 134 each quarter. OMB Memorandum M-10-08 

requires grantees to estimate the number of Recovery Act jobs created based on 

(1) work performed by the grantees only in the quarter being reported (not cumulative), 

(2) work performed by subrecipients, and (3) a calculation that divides the total actual 

hours worked in funded jobs by the number of hours representing a full work schedule 

for the kind of job being estimated. 3 This calculation converts part-time and temporary 

jobs into full-time equivalent positions. The Port did not follow the guidance. For the 

quarterly report tested, the Port based its reported jobs created on an estimate of the 

number of construction workers on the job for periods of up to 1 month. The Port also 

included an estimate of the office/administrative labor provided by its contractors. We 

are not recommending any corrective action regarding this matter because OMB 

Memorandum M-10-34 states that “Changes to prior reports [quarterly recipient 

reports] may not be initiated for the ‘Number of Jobs’ field.” 4 

3 UpdatedfGuidancefonfthefAmericanfRecoveryfandfReinvestmentfActf–fDatafQuality,fNon-Reportingf

Recipients,fandfReportingfoffJobfEstimates, December 18, 2009. 4 UpdatedfGuidancefonfthefAmericanfRecoveryfandfReinvestmentfAct, September 24, 2010. 

www.oig.dhs.gov 3 OIG-13-03 
 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 claimed by the Port were 

allowable, allocable, and reasonable according to the funding agreement and applicable 

Federal requirements. Our audit covered claimed costs of $42,020,112 for the period 

September 1, 2009, through March 31, 2012. 

Our tests and procedures included— 

•	 Reviewing FEMA project files, the grant and grant modification, the Recovery 

Act, and FEMA and OMB guidelines; 

•	 Interviewing FEMA officials to gain an understanding of the project and project 

management; 

•	 Examining the Port accounting records supporting amounts invoiced; 

•	 Interviewing Port officials to obtain an understanding of project management, 

accounting, procurement, and invoicing; 

•	 Inspecting the project; and 

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

performed the Single Audits of the Port for the fiscal years ending December 31, 

2010, and December 31, 2011. 

The Single Audits of the Port were performed by Deloitte and Touche LLP and included 

Recovery Act–funded project costs totaling $40,246,084 (or 96 percent of invoiced 

costs). The Single Audit reports classified the Recovery Act Transit Security Grant as a 

major program. The Single Audit reports did not identify any questionable costs or 

compliance issues related to the grant, or any material weaknesses in internal controls 

that would affect the grant. 

www.oig.dhs.gov 4	 OIG-13-03 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

We also tested Port records supporting costs invoiced to determine compliance with 

OMB Circular A-87, Revised, and with other terms and conditions of the agreement. We 

considered Port internal controls over the administration of FEMA funds in determining 

our audit procedures. 

We conducted this performance audit between June and September 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 

conclusions based on our audit objectives. We believe that the evidence obtained 

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

objectives. 

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

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

affect the allowability of invoiced costs. 

www.oig.dhs.gov 5 OIG-13-03 
 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 

Departmental Recovery Act Coordinator 

Federal Emergency Management Agency 

Branch Chief, Transportation Infrastructure Security 

Chief, Audit Branch, Grants Program Directorate 

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 6 OIG-13-03 
 

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