Department of Homeland Security
 

Review of Costs Claimed by 


Washington Township, MI, Fire Department Under 


Fire Station Construction Grant Number 


EMW-2009-FC-01152R 


American Recovery and Reinvestment Act of 2009 

OIG-12-90 June 2012
 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Washington, DC 20528 1 www.oig.dhs.gov 

JUN 1 8 2012 

MEMORANDUM FOR: Elizabeth M. Harman 

Assistant Administrator, Grant Programs Directorate 

Federal Emergency Management Agency 

FROM: Anne L. Richards -f>r M..£~ Assistant Inspector GeL.; ;or Audits 

SUBJECT: Review of Costs Claimed by Washington Township, MI, Fire 

Department Under Fire Station Construction Grant Number 

£MW-2009-FC-Ol152R 

Attached for your action is our final letter report, Review of Costs Claimed by Washington 

Township, MI, Fire Department Under Fire Station Construction Grant Number EMW2009-FC-01152R. We incorporated the formal comments from the Office of Policy and 

Program Analysis, Federal Emergency Management Agency (FEMA), in the final report. 

The report contains one recommendation for FEMA to resolve $78,020 of questionable 

costs that Washington Township claimed for reimbursement. The Office of Policy and 

Program Analysis concurred with the recommendation and said that it would direct 

Washington Township to return the $78,020. 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 the recommendation. Also, please include responsible parties and supporting 

documents needed to inform us on the status of the recommendation. Until your 

response is received and evaluated, the recommendation will be considered open and 

unresolved. 

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

copies of our report to 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, Director of Recovery Act Audits; 

Matt Mongin, Auditor; and Ralleisha Dean, Report Referencer. 

Should you have any questions, please call me, or your staff may contact 

John E. McCoy II, Deputy Assistant Inspector General for Audits, at (202) 254-4100. 

Attachment 
FFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

 

 

 

 

 

 

 O

Background 

The American Recovery and Reinvestment Act of 2009 (Recovery Act), as amended, 

appropriated $210 million to the Federal Emergency Management Agency (FEMA) for 

competitive grants for modifying, upgrading, or constructing nonfederal fire stations. 

On September 25, 2009, FEMA awarded a grant of $1,510,016 to the Washington 

Township, Michigan, Fire Department for constructing a new fire station. 

The grant specified a period of performance from September 25, 2009, to September 24, 

2012. As of September 30, 2011, Washington Township had completed the 

construction of the new fire station (see figure 1) and had received reimbursements of 

$1,434,504 from FEMA for design, engineering, construction, and management of the 

project. 

Figure 1: Washington Township New Fire Station
 

Source: Washington Township 

Under the terms of the grant, Washington Township agreed to use the grant funds 

according to FEMA’s fiscal year 2009 A.R.R.A. Assistance to Firefighters, Fire Station 

Construction Grants, Guidance and Application Kit (Guidance and Application Kit), and 

to comply with Office of Management and Budget (OMB) Circular A-87, Revised, Cost 

Principles for State, Local and Indian Tribal Governments, and the Uniform Administrative 

Requirements for Grants and Cooperative Agreements to State and Local Governments 

contained in the Code of Federal Regulations (44 CFR Part 13). 

The grant also includes requirements for complying with OMB Circular A-133, Revised, 

Audits of States, Local Governments, and Non-Profit Organizations, and Recovery Act 

provisions for submitting quarterly recipient reports to the Federal Government on the 

use of Recovery Act funds; paying prevailing wages as determined by the Secretary of 

Labor; and using American-made iron, steel, and manufactured goods. 

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Results of Audit 

Of the $1,434,504 claimed for reimbursement by Washington Township, we questioned 

costs of $78,020 for purchases of professional services that did not comply with 

procurement requirements. Also, we concluded that Washington Township complied 

with grant requirements for submitting quarterly Recovery Act reports to the Federal 

Government and for ensuring that contractors were paid prevailing wages and used 

American-made iron, steel, and manufactured goods in the construction of the new fire 

station. 

Purchase Not in Compliance With Procurement Requirements 

We questioned costs of $78,020 claimed for the noncompetitive purchase of 

architectural services by Washington Township that were not in compliance with its 

Purchasing and Bid Policy and Federal procurement regulations. 

Section 6 of the Washington Township Purchasing and Bid Policy requires that— 

6.1 	 All purchases of goods and services and all contracts for recurring 

services must be competitively priced unless the purchase falls under 

the EMERGENCY PURCHASE GUIDELINES. 

6.2 	 Informal bids (quotes) are required for all purchases of goods or services 

between $0 and $20,000. 

6.3 	 Bids or proposals for recurring services or contracted labor, including 

professional services greater than $10,000.00, must be solicited.... 

Section 7 of the Purchasing and Bid Policy says that normal purchasing procedures 

need not be followed in emergency situations “only when life, property or equipment 

are endangered through unexpected circumstances, or when normal operation of a 

department would be severely hampered by a long delay.” In such cases, the township 

supervisor, or in the supervisor’s absence, the clerk or treasurer with the concurrence 

of the department head, can authorize immediate purchase of any materials, supplies, 

or services necessary to end the emergency situation. 

FEMA’s Guidance and Application Kit stresses the need for competitive procurements, 

summarizes Federal requirements for procurement documentation and use of 

specifications, and cautions against personal and organizational conflicts of interest. 

The kit warns that grantees “who fail to adhere to their own procurement policy or 

otherwise fail to fully ‘compete’ any purchase involving Federal funds, may find their 

expenditures questioned and subsequently disallowed.” The Uniform Administrative 

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Requirements for Grants and Cooperative Agreements to State and Local Governments, 

44 CFR Part 13.36, requires that a cost or price analysis be performed in connection 

with every procurement action, including contract modifications, to determine the 

reasonableness of proposed price. 44 CFR Part 13.36 also says that noncompetitive 

purchases can be used, but only when a contract award under small purchase 

procedures, sealed bids, or competitive proposals is infeasible, and the item or service 

is available from a single source; a public emergency precludes normal competition; the 

awarding agency authorizes the noncompetitive proposal; or after solicitation of a 

number of sources, competition is determined to be inadequate. 

SDA Architects 

In June 2009, Washington Township awarded a contract to SDA Architects following a 

competitive bid procedure to replace a roof on an existing fire station. In August 2009, 

after FEMA announced the Fire Station Construction grant competition, Washington 

Township expanded SDA’s effort to include preparing a set of building plans and 

specifications that could be used to procure the new fire station. Washington Township 

claimed $78,020 of fees paid to SDA Architects in its requests for reimbursement to 

FEMA. 

We questioned the $78,020 because Washington Township noncompetitively procured 

these professional services for the fire station construction project and did not perform 

a cost and price analysis to confirm that the price was fair and reasonable. Also, 

Washington Township did not prepare a sole-source procurement justification or 

obtain FEMA approval for the purchase. Washington Township officials said that they 

engaged SDA without competition for the fire station construction project because of 

time constraints. The FEMA Fire Station Construction Grant placed a premium on 

“shovel-ready” projects that were ready to build. Township officials believed that, to be 

competitive, the township needed to submit building plans with its application. Finally, 

Washington Township officials said that they were not aware of the Federal requirement 

to prepare a cost and price analysis or seek FEMA approval for a noncompetitive 

procurement. 

Compliance With Requirements for Reporting, Buying American, and Paying 

Prevailing Wages 

The Recovery Act requires recipients to submit quarterly reports on project activities to 

the Federal Government; to ensure that projects are accomplished with Americanmade iron, steel, and manufactured goods; and to ensure that laborers and mechanics 

are paid, at a minimum, prevailing wages as determined by the Secretary of Labor 

under 40 U.S.C. Chapter 31, Subchapter IV. We verified that Washington Township 

submitted the required quarterly reports. Also, Washington Township included “Buy 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

 

 

 

 

American” and prevailing wage provisions in the construction contracts for the fire 

station and instituted sufficient controls to ensure that these provisions were honored. 

Controls included written requirements for subcontractors to comply with the 

requirements; review and certification of all invoices by the architect; daily oversight by 

the general contractor; and a requirement for vendors/contractors to submit pay 

vouchers showing payment of prevailing wages. 

Recommendation 

We recommend that the Assistant Administrator, Grant Programs Directorate: 

Recommendation #1: 

Resolve the questioned costs of $78,020 pertaining to the contract that was 

noncompetitively awarded. 

Management Comments and OIG Analysis 

FEMA Comments to Recommendation #1 

FEMA concurs: FEMA said that “Within 30 days of receipt of the final report, the Grant 

Program Directorate will request that FEMA’s Finance Center notify the grantee that 

$78,020 is due to the Federal Government and inform the grantee about FEMA’s debt 

collection procedures.” 

OIG Analysis: 

The FEMA response sufficiently responds to the recommendation. The 

recommendation, however, will remain unresolved and open until FEMA provides a 

target completion date or evidence that the grantee has repaid the $78,020. 

www.oig.dhs.gov 5 OIG-12-90 
 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 objective of this audit was to determine whether costs claimed by Washington 

Township were allowable, allocable, and reasonable according to the grant and 

applicable Federal regulations. 

This audit covered costs of $1,434,504 claimed by Washington Township from 

September 2009 to September 2011 and reimbursed by FEMA. 

In conducting our audit, we did the following: 

Obtained and reviewed the Recovery Act, the grant application and award, the grant 

Guidance and Application Kit, and Federal cost principles and grant administrative 

requirements. 

Interviewed Washington Township personnel to gain an understanding of their 

accounting system and the applicable internal controls. 

Reviewed the fiscal year 2010 single audit report and interviewed the responsible 

auditor to identify issues and other conditions that could affect our examination. 

Reviewed the recipient’s internal controls specifically related to our objectives. 

Examined vendor invoices and other evidence supporting 100 percent of costs 

incurred and claimed for FEMA reimbursement. 

Reviewed contract files and supporting documentation for primary contractors and 

professional service providers for the fire station construction project. 

Reviewed accounting transactions related to purchases, payments, and receipt of 

FEMA reimbursements. 

Used the grant provisions and applicable Federal requirements to determine 


whether amounts claimed were eligible for reimbursement.
 

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Performed fraud detection procedures. 

Inspected the new fire station and surrounding property. 

We conducted this performance audit between August 22, 2011 and November 30, 2011, 

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-12-90 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix B 

Management Comments to the Draft Report 

U.S. I)t p.rtnltnt or lIomtlllnd Stellrl,,· 

Washington. DC 20472 

FEMA ~y 09 11111 

MEMORANDUM FOR: Anne L Richards 

Assistant Inspector Genera l for Audits 

Office of Inspector Gcner.t1 

FROM: 

Director 

David J. Kallfma

, -

ntJf ~ -

FEMA Office of Policy and Program Analysis 

SUBJECT: Comments to 010 Draft Repot1, COSIS Invoiced by the Washingtoll 

TOWlJship, MI Fire Depal'tmelllllllder Fire Slmion COIIstrllclioIJ Gram 

No. Efot/IV·1009·FC·OI151R Awarded by F£MA 

Thank you for the opportunity to comment on the subject draft report. The find ings in the report will 

be used to strengthen the effectiveness and cfficicncy of how we execute and measure our programs. 

We recognize the need to continue to improve the proc(..'Ss, including addressing the recommendation 

raised in this repon. Our response to the rccommendmion is as follows: 

Recommendation # 1: Resolve the questioned costs ofS78,020 pertaining to the contracts that were 

noncompetitivclyawarded. 

FE 1A Response: FEMA concurs with this recommendation to resolvc the questioncd costs of 

$78,020. Based upon our review and discussion o rthe OIG's dmfi repan, FEMA staff will requcst 

Washington Township to relurn the S78,020 spent on the SDA Architects. In accordance with 44 

CFR J 3.36(d)(4) Washinglon Township failed to meet any of the conditions necessary to justify sole 

source procurement orthe SDA Architects for thcir Fire Station Construction Grunt. 

Within 30 days of receipt orthe final report, the Grant Programs Directorate will request that 

FEMA's Finance Center notify the grantee thai S78,020 is due to the federal government and infonn 

the grantee about FEMA's debt collection procedures. 

FEMA requests this recommendation be resolved and open pending implementation of the statoo 

corrccti vc actions. 

Again, we thank you for the opportunity 10 revicw your rcport. If you have further questions, please 

do not hesitate 10 call Brad Shcfka, FEMA Audit Liaison Office, 202·646~ 1308. 

www.oig.dhs.gov 8 OIG-12-XXX 
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 

Recovery Act Coordinator 

Federal Emergency Management Agency 

Administrator 

Assistant Administrator, Grant Programs Directorate,

 Federal Emergency Management Agency 

Audit Liaison Official 

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 9 OIG-12-XXX 
 

 

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