U.S. DEPARTMENT OF COMMERCE 

Office of Inspector General 

National Telecommunications and 

Information Administration 

Pennsylvania Public Safety 

Interoperable Communications 

Grant Award No. 2007-GS-H7-0028 

Final Audit Report No. DEN-19429 

March 2010 

Denver Regional Office of Audits 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington, D.C. 20230 

March 17,2010 

MEMORANDUM FOR: Lawrence E. Strickling 

Assistant Secretary for 

Communications and Information 

National Telecommunications and 

Information Administration 

FROM: r. Brett M, Baker

Assistant Inspector General for Audit 

SUBJECT:	 Final Audit Report No. DEN-I 9429 

Auditee: Pennsylvania Emergency 

Management Agency 

PSIC Award No. 2007-GS-H7-0028 

Attached is a copy of our final audit report of the Pennsylvania Public Safety Interoperable 

Communications (PSIC) award, Since there are no recommendations in the audit report, no 

further action is needed and an agency Audit Resolution Proposal is not required. A copy of the 

report will be posted on OIG's Web site pursuant to section 8L of the Inspector General Act of 

1978, as amended. 

If you have any questions regarding this report, please call John S. Bunting, our Denver regional 

inspector general for audits, at (303) 312-7650 and reference the final audit report number above 

in any related correspondence. 

Attachment 

cc:	 Milton Brown, NTIA audit liaison 

Kathy Smith, NTIA chief counsel 

Laura Pettus, PSIC program manager 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington. D.C. 20230 

March 17,2010 

Mr. Jeffrey A. Thomas 

Deputy Director for Administration 

Pennsylvania Emergency Management Agency 

2605 Interstate Drive 

Harrisburg, PA 17110 

Dear Mr. Thomas: 

Enclosed is a copy of final audit report number DEN-19429 prepared by our Denver Regional 

Office. The report concerns the Public Safety Interoperable Communications (PSIC) grant 

awarded to your agency (award number 2007-GS-H7-0028) by the National 

Telecommunications and Information Administration (NTIA). 

Your response to the draft audit report has been incorporated into the final report. Since there are 

no recommendations in the final report, no further action is needed. 

We appreciate the cooperation and courtesies extended by you and your staff during the audit. 

The report, along with your response, will be posted on OIG's Web site pursuant to section 8L of 

the Inspector General Act of 1978, as anlended. 

Dr. Brett M. Baker 

Assistant Inspector General for Audit 

Enclosures 

cc: Laura M. Pettus, NTIA PSIC program manager 

Carolyn P. Dunn, DHS/FEMA Grant Programs Directorate 

Rita Kipp, PEMA, deputy director of finance 

Charles Brennan, OA/OPRS, Deputy Secretary OA for Public Safety Radio 

Steven Kuller, OA/OPRS, Director of Administration and Planning 

Greg Steckel, OAlOPRS, PSIC project manager 

Jack Wagner, Auditor General 

Mary Soderberg, Secretary of the Budget 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington. D.C. 20230 

March 17,2010 

Ms. Tracey Trautman 

Deputy Assistant Administrator 

Grant Programs Directorate 

FEMA 

500 C Street, SW 

Washington, DC 20472-3615 

Dear Ms.Trautman: 

Enclosed is our final audit report (DEN-I 9429) regarding Public Safety Interoperable 

Communications grant award number 2007-GS-H7-0028, which was awarded by the National 

Telecommunications and Information Administration to the Pennsylvania Emergency 

Management Agency. 

A copy of the report will be posted on OIG's Web site pursuant to section 8L of the Inspector 

General Act of 1978, as amended. 

If you have any questions regarding this report, please call John S. Bunting, our Denver regional 

inspector general for audits, at (303) 312-7650 and reference the final audit report number above 

in any related correspondence. 

Dr. Brett M. Baker 

Assistant Inspector General for Audit 

Enclosure 

cc: Richard	 L. Skinner, DI-IS inspector general 

Carolyn Dunn, Dl-IS/FEMA Grant Programs Directorate 

Bradley A. Shefka, Dl-IS audit liaison 

Penny McCormack, FEMA audit liaison 

Gina Norton, FEMA audit liaison 

Mildred Lloyd, DHS/FEMA Grant Programs Directorate audit liaison 

Mike Siviy, DHS OIG Grants Management 
Report In Brief

U.S. Department of Commerce Office of Inspector General 

March 2010 

Why We Did this Review 

Background 

The Digital Television and Public 

Safety Act of 2005 authorized NTIA, 

in consultation with the DHS, to 

implement the PSIC program—a 

$1 billion one-time, formula-based 

matching grant program intended 

to enable public safety agencies to 

establish interoperable emergency 

communications systems using reallocated radio spectrum. 

The Implementing Recommendations

of the 9/11 Commission Act of 2007 

requires the Commerce Inspector 

General to conduct fi nancial audits, 

over 4 years, of a representative 

sample of at least 25 states or territories receiving PSIC grants. The Pennsylvania grant program is among our 

first audits under this requirement. 

We made no formal recommendations in our report, but did suggest ways to enhance internal controls: 

• During our fieldwork, we pointed out unallowable matching share funds, which PEMA corrected; this 

change will put $3,310,338 of funds to better use. 

• As of December 31, 2008, PEMA expended $102,228 of federal funds for management and administration that required a matching share contribution. However, PEMA did not claim any matching share, 

although they had incurred sufficient matching share costs. As a result of our exit conference, PEMA is 

now reporting matching share costs in accordance with grant terms and conditions and reporting requirements. 

Also, as part of our audit we reviewed the results of Pennsylvania’s Office of Management and Budget 

Circular No. A-133 audit report for the year ended June 30, 2007. Although PSIC was not part of the audit, 

we reviewed the report for issues that could have a direct and material effect on the program. We found 

that PEMA did not have formal procedures in place to ensure the equipment being requested is included on 

the federal government’s authorized list of allowable equipment. Further, PEMA did not have the required 

properly signed receiving report on file to support the receipt of the equipment by the designated location. 

Also, PEMA charged expenditures to the accounting system after the grant period ended. PEMA did not 

have adequate procedures in place to ensure that expenditures were liquidated within the required 90-day 

time period after the grant ending date. 

 

On September 30, 2007, the National 

Telecommunications and Information 

Administration (NTIA) awarded a 

$34,190,555 Public Safety Interoperable Communications (PSIC) grant to

the Commonwealth of Pennsylvania 

to enhance interoperable emergency 

communications. NTIA required a 

minimum 20 percent matching share 

from nonfederal sources for the 

acquisition and deployment of communications equipment, and management and administration costs. 

The original award period ran from 

October 1, 2007, to September 

30, 2010. In November 2009, the 

President signed an act extending 

the award period to September 30, 

2011, by which time all funds must 

be expended. 

The governor of Pennsylvania designated the Pennsylvania Emergency 

Management Agency (PEMA) as 

Pennsylvania’s state administrative 

agency to apply for and administer PSIC funds. We audited costs 

claimed by PEMA to determine 

whether the recipient complied with 

NTIA PSIC grant guidelines and the 

Department of Homeland Security 

(DHS) award terms and conditions. 

 

National Telecommunications and Information Administration 

Pennsylvania Public Safety Interoperable Communications Grant PSIC Award No. 2007-GS-H7-0028 (DEN-19429) 

What We Found 

Our audit covered the award period of October 1, 2007, through December 31, 2008, during 

which time PEMA claimed total costs of $346,850. In general, we found PEMA to be in compliance with 

requirements and on track to complete the project on time. 

Specifically, PEMA has 

• prepared an investment justification describing how PSIC grant funds would be used to improve interoperable communications and ensure interoperability with other public safety agencies. It anticipates 

completing all 10 of its investments on schedule by the September 30, 2011, program deadline; 

• corrected an unallowable portion of its matching share funds, thus meeting the minimum 20 percent 

nonfederal matching share requirement for acquiring and deploying equipment, and managing and 

administering projects; 

• complied with grant terms and conditions by fulfilling financial reporting requirements, meeting the 

cash drawdown requirement of drawing down funds 30 days prior to expenditure or a disbursement, and 

complying with the 80 percent pass-through requirement by passing through $27.9 million (about 81 

percent) of $34.2 million to PSIC fund recipients; 

• begun to claim matching share costs in accordance with grant terms and conditions and PSIC’s reporting 

requirements; and 

• claimed costs of $346,850 on the December 31, 2008, financial status report; we determined that 

the costs claimed were reasonable, allowable, and allocable according to PSIC grant regulations. 

What We Recommended 
U.S. Department of Commerce Final Report (DEN)-19429
 

Office of Inspector General March 2010
 

Contents 

Introduction......................................................................................................................................1
 

Findings and Recommendations ......................................................................................................3
 

I. Investment Justification's Individual Investments Are on Schedule ................................... 3
 

II. PEMA Corrected Its Unallowable Matching Share ......................................................... 6
 

III. PEMA Had Not Claimed Matching Share Costs ............................................................. 7
 

IV. PEMA Has Complied with Grant Terms and Conditions ................................................ 7
 

A. PEMA Complied with Financial Status Reporting Requirement ....................................7
 

B. PEMA Complied with Cash Drawdown Requirement ....................................................7
 

C. PEMA Complied with 80 Percent Pass-Through Requirement .......................................8
 

V. Reasonable and Allowable Costs Were Claimed ............................................................. 9
 

VI. Follow-Up Was Conducted on Prior Audit Recommendations ....................................... 9
 

Summary Results of Financial Audit .............................................................................................10
 

Summary of Agency Response and OIG Comments .....................................................................11
 

Appendix A: Objectives, Scope, and Methodology.......................................................................12
 

Appendix B: Summary of Source and Application of Funds ........................................................14
 

Appendix C: Summary of Financial/Compliance Audit ................................................................15
 

Appendix D: Recipient Response ..................................................................................................16
 

 
 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Introduction 

On September 30, 2007, the National 

Telecommunications and Information 

Administration (NTIA) awarded a 

$34,190,555 Public Safety Interoperable 

Communications (PSIC) grant to the 

Commonwealth of Pennsylvania to enhance 

interoperable emergency communications. 

The amount of the award subject to match is 

$32,764,195. NTIA required a minimum 

20 percent matching share ($8,191,049) from 

nonfederal sources for acquisition and 

deployment of communications equipment, 

and management and administrative costs. 

Statewide planning, coordination, and training 

costs do not require matching share. 

The original award period runs from October 

1, 2007, to September 30, 2010. On 

November 6, 2009, the President signed 

Public Law 111-96, which extended the 

allowable completion periods for all PSIC 

grants for one year, but not later than 

September 30, 2011, except as determined by 

NTIA. 

Public Safety Interoperable Communications 

Program

The Digital Television Transition and Public 

Safety Act of 2005 authorized NTIA, in 

consultation with the Department of Homeland 

Security (DHS), to implement the PSIC 

program—a $1 billion one-time, formula-based 

matching grant program intended to enable 

public safety agencies to establish interoperable 

emergency communications systems using 

reallocated radio spectrum. 

NTIA signed a memorandum of understanding 

with the Department of Homeland Security, 

under which DHS oversees and administers the 

PSIC program. 

The Implementing Recommendations of the 9/11 

Commission Act of 2007 requires the Commerce 

Inspector General to conduct financial audits, 

over 4 years, of a representative sample of at 

least 25 states or territories receiving PSIC 

grants. The Pennsylvania grant program is 

among the first audits under this requirement. 

The governor of Pennsylvania designated the Pennsylvania Emergency Management Agency 

(PEMA) as Pennsylvania's state administrative agency to apply for and administer PSIC funds.1 

PEMA delegated authority for the administration of the PSIC grant program to the Governor’s 

Office of Administration pursuant to a memorandum of understanding. 

In November 2008, we initiated an audit of costs claimed by PEMA to determine whether it had 

complied with NTIA PSIC grant guidelines and DHS award terms and conditions. The audit 

covered the award period of October 1, 2007, through December 31, 2008, during which time the 

recipient claimed total costs of $346,850. 

The objective of our audit was to determine whether PEMA was using its grant funds in 

accordance with federal requirements. In particular, we assessed whether PEMA (1) was on track 

to complete its interoperable communications investments by September 30, 2010 (the original 

1

 The PSIC program requires the governor of each state and territory to designate a state administrative agency to 

apply and administer PSIC funds. Administrative agencies are required to pass through no less than 80 percent of the 

total award amount to local or tribal governments or authorized nongovernmental public safety agencies, unless the 

local entity opts, via written agreement, to have the state agency retain and spend the funds on its behalf. Grantees 

must meet a 20 percent nonfederal match for acquisition and deployment. 

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U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

deadline before P.L. 111-96); (2) met the minimum 20 percent match for acquiring and 

deploying interoperable communications equipment, and management and administrative costs; 

(3) claimed reasonable, allowable, and allocable costs under the award; and (4) complied with 

grant terms and conditions. Appendix A outlines the objectives, scope, and methodology we used 

in the audit. 

PEMA asserts that all 10 investments are on schedule to be completed by September 30, 2011. 

(See pages 3 through 6.) 

PEMA has sufficient minimum budgeted matching share of $8,191,049. However, during our 

fieldwork we found that PEMA planned to claim in-kind rent of $3,310,338 as match, which was 

unallowable. PEMA changed this match to an allowable method. In addition, we counseled 

PEMA that only a portion of its planned local-cash match could be claimed. (See pages 6 

through 8.) 

PEMA claimed costs of $346,850 on the December 31, 2008, financial status report. We 

determined that the costs claimed were reasonable, allowable, and allocable according to PSIC 

grant regulations. (See appendix C.) 

PEMA generally complied with grant terms and conditions. PEMA complied with requirements 

for financial status reporting, cash drawdowns, and 80 percent pass-through to local applicants. 

(See pages 8 through 10.) 

2 
 

 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Findings and Recommendations 

I. Investment Justification's Individual Investments Are on Schedule 

PEMA prepared an investment justification based on the NTIA PSIC Investment Justification 

Reference Guide (dated September 2007) that detailed individual communications projects 

intended to (1) achieve meaningful and measurable improvements in interoperability and (2) fill 

gaps identified in the statewide communications interoperability plan. The investment 

justification had a total of 10 investments (table 1) and was approved on July 25, 2008. PEMA 

asserts that all 10 investments are on schedule to be completed by September 30, 2011. 

Table 1. Investment Justification and Funding 

Non- PSIC Funds PSIC Investment Justification Federal Total Awarded Match 

1. North Central Task Force - Mutual Aid 

Gateway Systems and Console Interfaces With 

PA STARNet 

$ 750,000 $ 177,500 $ 927,500 

2. Northwest Central Emergency Response 

Group - Deployable Interoperable 

Communications Systems 

750,000 185,000 935,000 

3. Northeast Pennsylvania Emergency Response 

Group - PSAP Console Interface with the PA 

STARNet Statewide radio system 

2,030,000 481,250 2,511,250 

4. Southeast Pennsylvania Regional Task Force 

& City of Philadelphia 8,350,994 24,911,552 33,262,546 

5. South Central Task Force - Microwave and 

Gateway Network 4,000,000 946,298 4,946,298 

6. Pennsylvania Region 13 8,253,718 1,955,161 10,208,879 

7. Northeast Pennsylvania Emergency Response 

Group - VHF, UHF Gateway Overlay System 

and Microwave Upgrade for Interoperability 

2,648,008 1,606,992 4,255,000 

8. Commonwealth of Pennsylvania - Tactical 

Video and Data Interoperability System 4,105,713 2,053,988 6,159,701 

9. Commonwealth of Pennsylvania - Interface of 

the PA STARNet System with all Public Safety 

Answering Points, Statewide 

875,000 215,000 1,090,000 

10. Southeast Pennsylvania Regional Task Force 

- PA STARNet Deployable Tactical 

Interoperability Systems and Radio Caches 

1,099,006 273,251 1,372,257 

Statewide Plan 302,400 302,400 

Management and Administration 1,025,716 256,429 1,282,145 

Total $34,190,555 $33,062,421 $67,252,976 

Source: PEMA investment justification 

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Office of Inspector General March 2010 

The PSIC program requires investment justifications to include plans for establishing a strategic 

technology reserve of interoperable communications equipment prepositioned for immediate 

deployment during emergencies or disasters. States were permitted to request a waiver for this 

requirement if they could demonstrate they already had such a reserve or that other PSIC project 

proposals represented a higher priority for public safety communications. PEMA was able to 

demonstrate it had strategic technology reserve capability and requested a waiver, which NTIA 

approved. 

Investment 1: North Central Task Force - Mutual Aid Gateway Systems and Console Interfaces 

with PA STARNet 

The region will install a network of Tyco Network First gateways equipped with applicable 

VHF, UHF, and 800-MHz National Mutual Aid frequencies for interoperability between local 

and out-of-region responders. PEMA asserts investment 1 is on schedule to be completed by 

September 30, 2011. 

Investment 2: Northwest Central Emergency Response Group - Deployable Interoperable 

Communications Systems 

PEMA will purchase four deployable Mobile Communications 

Trailers equipped with gateway equipment; VHF, UHF, 700-MHz 

(future), and 800-MHz radio equipment to support interoperability 

across different frequency bands; interface with the PA STARNet 

system; and be capable of narrow-band analog, OpenSky, and P25 

digital operation. PEMA asserts investment 2 is on schedule to be 

completed by September 30, 2011. 

 

Investment 3: Northeast Pennsylvania Emergency Response Group 

- PSAP Console Interface with the PA STARNet Statewide Radio 

System 

Project 25 (P25) is a set of 

national standards for 

manufacturing 

interoperable digital twoway wireless 

communications products. 

Radio equipment that meets 

P25 standards can 

communicate with any 

other P25 system, 

regardless of vendor, 

enabling users of different 

systems to talk via direct 

radio contact. 

PEMA will implement and interface the PA STARNet system 

directly to the existing ZETRON ACOM dispatch consoles in county Public Safety Answering 

Points (PSAPs). PEMA will also implement and stage a fleet of eight vehicle-mounted mobile 

gateways throughout the region, equipped with VHF, UHF, Future 700-MHz, and 800-MHz 

National Mutual Aid frequencies, to enable on-scene interoperability among responding units 

with disparate systems. PEMA asserts investment 3 is on schedule to be completed by September 

30, 2011. 

Investment 4: Southeast Pennsylvania Regional Task Force and City of Philadelphia 

PEMA will upgrade the city of Philadelphia’s current 800-MHz Trunked Radio system from 

legacy Analog/Digital 800-MHz-only capability to an Internet protocol-based, P25, 700/800-

MHz system that is capable of network-level interoperability. PEMA will also add bidirectional 

amplifiers and/or distributed antenna networks to below-grade subway transit stations to allow 

multiple disciplines (police, fire, emergency medical services) and jurisdictions (city, Southeast 

Pennsylvania Transportation Authority, universities, federal) to communicate during incidents 

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U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

that occur in the subway system. Philadelphia will upgrade its existing radio system to a P25-

compatible system. PEMA asserts investment 4 is on schedule to be completed by September 30, 

2011. 

Investment 5: South Central Task Force - Microwave and Gateway Network 

PEMA will build an overlay network of gateway systems, with VHF, UHF, 700-MHz (future), 

and 800-MHz National Mutual Aid frequencies installed. The Mutual Aid stations will be 

located at 10 tower sites in the region. These sites will be linked by digital microwave in a loop 

configuration, which will provide connectivity between the gateways and repeaters; control of 

the gateways from all PSAPs and secure highly reliable connectivity between PSAPs. PEMA 

asserts investment 5 is on schedule to be completed by September 30, 2011. 

Investment 6: Pennsylvania Region 13 (two separate projects) 

1.	 PEMA will develop and implement a UHF, county-wide, P25 standard-based, public 

safety communications system for Allegheny County. 

2.	 Greene, Fayette, and Somerset counties will implement microwave connectivity to enable 

communications between PSAPs for radio and data interoperability, provide redundant 

dispatch and call-taking capability in the event of the loss of one or more PSAPs, and 

create a common network backbone for a merged radio system. 

PEMA asserts investment 6 is on schedule to be completed by September 30, 2011. 

Investment 7: Northeast Pennsylvania Emergency Response Group - VHF, UHF Overlay 

System, and Microwave Upgrade for Interoperability 

PEMA will provide a gateway overlay system and a microwave upgrade for local jurisdictions 

operating on disparate VHF and UHF frequencies and state agencies operating on the PA 

STARNet statewide OpenSky system. This will increase efficiency and add capacity to the 

system. PEMA asserts investment 7 is on schedule to be completed by September 30, 2011. 

Investment 8: Commonwealth of Pennsylvania - Tactical Video and Data Interoperability 

System (two separate projects) 

1.	 The Commonwealth of Pennsylvania will provide statewide UHF and VHF overlay 

systems to connect to the 800-MHz system. 

2.	 The Commonwealth will provide deployable air-to-ground video and data systems to 

provide scene-of-incident video and data to incident commanders and ground tactical 

units. 

PEMA asserts investment 8 is on schedule to be completed by September 30, 2011. 

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U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Investment 9: Commonwealth of Pennsylvania - Interface of the PA STARNet System with All 

Public Safety Answering Points Statewide 

PEMA will enhance 911 centers by connecting them to an 800-MHz system and interface 

standalone PA STARNet control stations with the dispatch consoles in each PSAP. PEMA 

asserts investment 9 is on schedule to be completed by September 30, 2011. 

Investment 10: Southeast Pennsylvania Regional Task Force - PA STARNet Deployable 

Tactical Interoperability Systems and Radio Caches 

PEMA will buy deployable equipment, such as radios, mobile radios, and vehicle tactical 

repeater systems, to provide a common interoperability platform at the scene of a major incident 

or event and provide direct in-field access to the PA STARNet system. PEMA asserts investment 

10 is on schedule to be completed by September 30, 2011. 

II. PEMA Corrected Its Unallowable Matching Share 

PEMA is required to have 20 percent matching share in place from nonfederal sources for the 

acquisition, deployment, and management and administration of interoperable communications 

equipment. The match is required by the Digital Television Transition and Public Safety Act of 

2005; Public Law 109-171, Section 3006; the PSIC Grant Program Guidance and Application 

Kit; and special award conditions. 

Based on these requirements, PEMA must have a minimum matching share of $8,191,049 in 

place. PEMA’s minimum required share consists of local-cash match of $2,087,749, 

commonwealth cash match of $2,792,962, and commonwealth in-kind match of $3,310,338. 

PEMA’s approved investment justification budgeted matching share of $33,062,421. This was 

categorized into three types: local-cash match of $24,911,552; commonwealth cash match of 

$2,792,962; and commonwealth in-kind match of $5,357,907. PEMA’s local match was to be 

provided over a 10-year period, but we counseled PEMA that it can claim only that portion of the 

$24,911,552 local-cash match ($2,087,749) that will be expended before September 30, 2010 

(now September 30, 2011). 

We also questioned the budgeted portion of commonwealth in-kind match of $3,310,338 that 

was originally categorized as in-kind rents. The in-kind rents were to be based on the present 

value of foregone rental receipts on radio towers and radio shelters owned by the Commonwealth 

of Pennsylvania. Although 15 CFR § 24.24 (d)(2) allows space donated by a third party to be 

considered as a matching share contribution, valued at the fair value rental rate of the space, in 

this case there is no third party donating the space. The Commonwealth of Pennsylvania—the 

recipient of the PSIC grant—constructs, owns, maintains, and manages the radio towers. As a 

grant recipient, allowable costs are limited to those actually incurred as expenses in the 

accounting records. Since foregone rental revenue on space the commonwealth may have leased 

to an outside entity is not an actual incurred expense, it may not be claimed as a matching share. 

PEMA agreed with our findings, and in lieu of in-kind rent PEMA proposed a use allowance of 

the capital acquisition costs for structures and buildings, and equipment for 57 sites used for 

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Office of Inspector General March 2010 

investments 7 and 8. The structures and buildings cost $22 million, and the equipment cost 

$15 million. 

Office of Management and Budget (OMB) Circular A-87, Attachment B, Section 11.f., states, 

“Where the use allowance method is followed, the use allowance for buildings and 

improvements will be computed at an annual rate not exceeding two percent of acquisition costs. 

The use allowance for equipment will be computed at an annual rate not exceeding 6.67 percent 

of acquisition cost.” Using these percentages and a 3-year benefit period, PEMA calculated a 

total use allowance for match purposes of $4.4 million. 

We accept PEMA’s use allowance methodology, provided PEMA is consistent in its accounting 

treatment. PEMA has confirmed that the $37 million of use allowance costs have not been 

charged to any other cost objectives. If some of these costs are charged directly, they all must be 

direct charges. None of these costs can be allocated as indirect costs. 

PEMA’s change of $3,310,338 of budgeted match from in-kind rents to a use allowance of the 

capital acquisition costs for structures and buildings will put $3,310,338 of funds to better use. 

III.PEMA Had Not Claimed Matching Share Costs 

NTIA’s PSIC Grant Program Guidance and Application Kit, Section VI (B), requires the match 

be expended at the same rate as the federal share. As of December 31, 2008, PEMA expended 

$102,228 of federal funds for management and administration that required a matching share 

contribution. As of December 31, 2008, PEMA did not claim any matching share, although they 

had incurred sufficient matching share costs. 

As a result of our exit conference, PEMA is now reporting matching share costs in accordance 

with grant terms and conditions and reporting requirements. As of September 30, 2009, PEMA 

claimed matching share costs beyond the amount required to keep pace with federal outlays. 

IV. PEMA Has Complied with Grant Terms and Conditions 

A. PEMA Complied with Financial Status Reporting Requirement 

We reviewed the financial status reports (Standard Form 269) filed by PEMA for the period of 

October 2007 through December 2008. The PSIC Program Guidance and Application Kit states 

that these reports must be filed within 30 days of the end of each calendar quarter for every 

quarter the award is active, including partial calendar quarters and periods during which no grant 

activity occurs. PEMA submitted all of its financial status reports within the 30-day time period. 

B. PEMA Complied with Cash Drawdown Requirement 

The PSIC Grant Program Guidance and Application Kit allowed states to draw down funds up 

to 5 percent of their PSIC allocations prior to receiving their full grant amounts to ensure that 

PSIC requirements were addressed in their statewide communications interoperability plan. On 

June 3, 2008, PEMA drew down $240,000 for statewide planning funds to update their statewide 

communications interoperability plan. 

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U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

The PSIC Grant Program Guidance and Application Kit, Section VI (B), states that grantees 

should draw down funds as close to expenditure as possible, up to 30 days prior to 

expenditure/reimbursement to avoid accruing interest. Funds received by grantees must be 

placed in an interest-bearing account, and if not expended in 30 days, interest earned must be 

remitted to the U.S. Treasury. We reviewed PEMA’s PSIC cash drawdowns as of December 31, 

2008, which totaled $345,090. We found one drawdown that was 4 days in excess of 30 days 

from payment. The imputed interest on the cash drawn down in excess of 30 days was 

immaterial. We consider PEMA to be materially in compliance with the cash drawdown 

requirement. 

C. PEMA Complied with 80 Percent Pass-Through Requirement 

PEMA passed through $27.9 million (81 percent) of the $34.2 million in PSIC federal funds to 

six task forces,2 exceeding the 80 percent pass-through requirement stated in the PSIC Grant 

Program Guidance and Application Kit. States are also required to pass through PSIC funds to 

local or tribal applicants within 60 days after approval of an investment justification. PEMA 

complied with this requirement as well (see table 2). 

Table 2. Pass-Through of PSIC Funds 

Funds Total Funds Retained by PSIC Funding Passed State via Funds Total Federal Passed Through to Memorandums Retained Funds Through to Locals of by the State Locals Understanding 

Investment 1 $ 750,000 $ 750,000 $ 750,000 

Investment 2 750,000 750,000 750,000 

Investment 3 2,030,000 2,030,000 2,030,000 

Investment 4 $8,350,994 8,350,994 8,350,994 

Investment 5 4,000,000 4,000,000 4,000,000 

Investment 6 8,253,718 8,253,718 8,253,718 

Investment 7 2,648,008 2,648,008 2,648,008 

Investment 8 $4,105,713 4,105,713 

Investment 9 875,000 875,000 

Investment 10 1,099,006 1,099,006 

Statewide 

Planning 

302,400 302,400 

M&A Costs 1,025,716 1,025,716

 Total $8,350,994 $19,530,732 $27,881,726 $6,308,829 $34,190,555 

Percent 24 57 82 18 100 

Source: PEMA Documents 

2

 Pennsylvania has divided the commonwealth into nine regional task forces, of which six received PSIC funds. 

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U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

The six task forces receiving pass-through funds for interoperable communication equipment, 

planning, training, program administration, and exercise activities requested in writing for the 

commonwealth to procure equipment and provide services on their behalf. The commonwealth 

and the six task forces entered into formal memorandums of understanding for the procurement 

and services. 

PEMA retained $6.3 million in funding to complete commonwealth projects, $5 million for 

commonwealth investments, $1 million for management and administration costs, and 

$0.3 million for statewide planning. 

V. Reasonable and Allowable Costs Were Claimed 

PEMA claimed costs of $346,850 on the December 31, 2008, financial status report. We 

determined that the costs claimed were reasonable, allowable, and allocable according to PSIC 

grant regulations (see appendix C). 

VI. Follow-Up Was Conducted on Prior Audit Recommendations 

As part of our audit, we reviewed the results of Pennsylvania’s OMB Circular No. A-133 audit 

report for the year ended June 30, 2007. Although the PSIC program was not part of the audit, 

we reviewed the report for issues that could have a direct and material effect on the program, and 

identified two items: 

1.	 Federal purchasing requirements. PEMA did not have formal procedures in place to 

review the detailed equipment lists submitted by the subrecipients to ensure the items 

being requested are included on the federal government’s authorized list of allowable 

equipment. Further, PEMA did not have a properly signed receiving report on file to 

support the receipt of the equipment by the designated location within the task force’s 

region as required under the contract with each task force. Through December 31, 2008, 

PEMA had not charged any equipment to the PSIC grant; therefore, we could not test 

PEMA’s compliance with purchasing requirements in regards to the PSIC grant. 

2.	 Federal reimbursement requirements. PEMA charged expenditures to the accounting 

system after the grant period ended. Costs claimed under various PEMA grants were 

unallowable since they were not liquidated within the required time period under federal 

regulations. PEMA did not have adequate procedures in place to ensure that expenditures 

were liquidated within the required 90-day time period after the grant ending date. The 

PSIC grant has not reached the end of the grant period; therefore, we could not test 

PEMA’s compliance. 

9 
 

 

 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Summary Results of Financial Audit 

The results of our interim cost audit for the period October 1, 2007, through December 31, 2008, 

which are detailed in appendix C, are summarized as follows: 

Federal Funds Disbursed 

Costs Incurred 

Less Questioned Costs 

Costs Accepted

Less Matching Share 

Federal Funds Earned 

$346,850 

0 

 $ 346,850 

0 

$346,850 

$346,850 

Refund Due the Government $ 0 

10 
 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Summary of Agency Response and OIG Comments 

PEMA wished to rescind the statement, found on page 3 of our draft audit report, that 6 of its 10 

investments are at risk of not being completed by September 30, 2010, the original date for the 

end of the performance period of the grant. 

Public Law 111-96, signed on November 6, 2009, provides all 56 PSIC grantees a one-year 

period of performance extension to complete approved PSIC investments no later than 

September 30, 2011. Based on the extension, PEMA asserts that all 10 investments are on 

schedule to be completed by September 30, 2011. We followed up on this response to determine 

whether PEMA is on track to complete its interoperable communications investments by 

September 30, 2011, and we concur with PEMA. 

PEMA’s complete response to our draft report is in appendix D. The response provides a percent 

complete estimation for each investment as of February 2010. 

11 
U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Appendix A: Objectives, Scope, and Methodology 

The objective of our audit was to determine whether PEMA was using its grant funds in 

accordance with federal requirements. In particular, we assessed whether PEMA (1) is on track 

to complete its interoperable communications investments by September 30, 2010 (original 

deadline before P.L. 111-96); (2) met the minimum 20 percent match for acquiring and 

deploying interoperable communications equipment, and management and administrative costs; 

(3) claimed reasonable, allowable, and allocable costs under the award; and (4) complied with 

grant terms and conditions. 

The audit scope included a review of costs claimed during the award period of October 1, 2007, 

through December 31, 2008. We conducted our fieldwork in November 2008 at the PEMA office 

in Harrisburg, Pennsylvania, and in Philadelphia and Pittsburgh. We reviewed PEMA’s financial 

management of the award and its implementation of award requirements. 

To meet our objectives, we did the following: 

•	 reviewed investment documentation and discussed each investment with agency officials 

•	 analyzed source documents related to the minimum 20 percent match for acquiring and 

deploying interoperable communications equipment 

•	 traced costs claimed to source documentation 

•	 interviewed PEMA officials, the governor’s Office of Administration officials, and the 

Pennsylvania state legislative auditor, and reviewed the state's OMB Circular No. A-133 

audit report for the year ending June 30, 2007 

•	 reviewed pertinent laws, regulations, and guidance (listed below) against PEMA's PSIC 

activities and internal controls 

We evaluated PEMA’s compliance with federal laws and regulations applicable to the PSIC 

grant project and found them to be generally in compliance with the following: 

•	 Section 3006 of the Digital Television Transition and Public Safety Act of 2005, Public 

Law 109-171 

•	 Call Home Act of 2006, Public Law 109-459 

•	 Implementing Recommendations of the 9/11 Commission Act of 2007, Public Law 110-

53 

•	 Public Safety Interoperable Communications Grants, Public Law 111-96 

•	 PSIC Grant Program Guidance and Application Kit, August 16, 2007 

•	 NTIA PSIC Grant Program Allowable Cost Matrix 

•	 NTIA PSIC Grant Program Frequently Asked Questions 

•	 OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments 

•	 OMB Circular A-133, Compliance Supplement, CFDA 11.555 

12 
U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

• Special Award Conditions 

• Department of Commerce Financial Assistance Standard Terms and Conditions 

• DHS, Office of Grant Operations, Financial Management Guide 

We obtained an understanding of the management controls of PEMA by interviewing PEMA 

officials, examining policies and procedures, reviewing written assertions of PEMA officials, 

and examining the state of Pennsylvania’s most recent OMB Circular No. A-133 audit report. 

We did not rely on the accounting firm’s internal control reviews but instead determined that we 

could better meet our audit objectives through testing of PSIC transactions. 

We verified the validity and reliability of computer-processed data supplied by PEMA by 

directly testing data against supporting documentation. Based on our tests, we concluded the 

computerized data was reliable for use in meeting our objectives. 

We conducted this performance audit in accordance with 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 on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on our audit objectives. 

We performed this audit under authority of Implementing Recommendations of the 9/11 

Commission Act of 2007, the Inspector General Act of 1978, as amended, and Department 

Organization Order 10-13, August 31, 2006. 

13 
 

 

 

 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Appendix B: Summary of Source and Application of Funds 

PENNSYLVANIA EMERGENCY MANAGEMENT AGENCY 

PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS
 

GRANT NO. 2007-GS-H7-0028 

OCTOBER 1, 2007, THROUGH DECEMBER 31, 2008 

Approved 

Budget

 (a) 

Receipts & 

Expenses

(b) 

SOURCE OF FUNDS: 

Federal 

Nonfederal 

$34,190,555 

33,062,421

$346,850 

0 

Total $67,252,976 $346,850 

APPLICATION OF FUNDS: 

Investment 1 $927,500 $2,205 

Investment 2 935,000 0 

Investment 3 2,511,250 1,760 

Investment 4 33,262,546 0 

Investment 5 4,946,298 0 

Investment 6 10,208,879 657 

Investment 7 4,255,000 0 

Investment 8 6,159,701 0 

Investment 9 1,090,000 0 

Investment 10 1,372,257 0 

Statewide Planning 302,400 240,000 

M&A Costs 1,282,145 102,228 

Total $67,252,976 $346,850 

Notes: 

(a) Approved budgeted costs are for the period of October 1, 2007, through September 30, 2011, 

based on Pennsylvania's approved investment justification. 

(b) Receipts and expenses are for the period of October 1, 2007, through December 31, 2008. 

14 
 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Appendix C: Summary of Financial/Compliance Audit 

PENNSYLVANIA EMERGENCY MANAGEMENT AGENCY 

PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS
 

GRANT NO. 2007-GS-H7-0028 

OCTOBER 1, 2007, THROUGH DECEMBER 31, 2008 

Results of Audit

Description

 Approved 

Budget

Costs 

 Claimed

Costs 

Questioned

Costs 

Accepted 

Investment 1 

Investment 2 

Investment 3 

Investment 4 

Investment 5 

Investment 6 

Investment 7 

Investment 8 

Investment 9 

Investment 10 

Statewide Plan 

M&A Costs 

Total 

$927,500 

935,000 

2,511,250 

33,262,546 

4,946,298 

10,208,879 

4,255,000 

6,159,701 

1,090,000 

1,372,257 

302,400 

1,282,145

$67,252,976

$2,205 

0 

1,760 

0 

0 

657 

0 

0 

0 

0 

240,000 

$102,228

 $346,850

$0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0

 $0

$2,205 

0 

1,760 

0 

0 

657 

0 

0 

0 

0 

240,000 

102,228 

$346,850 

Federal Funds Disbursed 

Costs Incurred 

Less Questioned Costs 

Costs Accepted 

Less Matching Share 

Federal Funds Earned 

$346,850 

0 

346,850 

0 

$346,850 

346,850 

Refund Due the Government $0 

15 
 

U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

Appendix D: Recipient Response 

16 
U.S. Department of Commerce Final Report (DEN)-19429 

Office of Inspector General March 2010 

17