Department of Homeland Security
 

Review of Costs Invoiced by Jackson Hole Airport 

Board Relating to Jackson Hole Airport Checked 

Baggage Screening Project Under Other 

Transaction Agreement Number 

HSTS04-09-H-REC125 Awarded by the 

Transportation Security Administration 

American Recovery and Reinvestment Act of 2009 

OIG-12-41 February 2012
 
 Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528

 FEB 16 2012 

MEMORANDUM FOR: 	 Robin Kane 

Assistant Administrator/Chief Technology Officer 

Office of Operational Process and Technology 

 Transportation Security Administration 

FROM: 	 ds 

ctor General for Audits 

Anne L. Richar

Assistant Inspe

SUBJECT:	 Review of Costs Invoiced by Jackson Hole Airport Board 

Relating to Jackson Hole Airport Checked Baggage 

Screening Project Under Other Transaction Agreement 

Number HSTS04-09-H-REC125 Awarded by the 

Transportation Security Administration 

Attached for your information is our final report, Review of Costs Invoiced by Jackson 

Hole Airport Board Relating to Jackson Hole Airport Checked Baggage Screening 

Project Under Other Transaction Agreement Number HSTS04-09-H-REC125 Awarded 

by the Transportation Security Administration. Since the report contains no 

recommendations to Transportation Security Administration 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. 


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 

Background 

On February 17, 2009, Congress enacted the American Recovery and Reinvestment Act of 

2009 (Recovery Act), as amended, to preserve and create jobs, promote economic 

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

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

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

checked baggage explosive detection systems and checkpoint explosives detection 

equipment....” According to TSA, it awarded $574,023,483 of that amount to 25 airport 

organizations for 29 projects related to modifying airports to accommodate new baggagescreening equipment. 

Under Other Transaction Agreement (OTA) No. HSTS04-09-H-REC125, TSA agreed to 

reimburse the Jackson Hole Airport Board (the Board) for allowable, allocable, and 

reasonable costs to support installation of a Checked Baggage Inspection System (CBIS) 

at the Jackson Hole Airport. The OTA cost ceiling is $6,212,437 and covered 95% of 

project design, management, and construction for the CBIS portion of the Airport’s 

overall baggage handling system ($6,175,437) plus the costs of screening equipment 

relocation up to $37,000. 

The OTA was signed on June 18, 2009, and specified a project period from March 23, 

2009, through December 31, 2010. The OTA required the Board to submit invoices for 

reimbursement of project costs to TSA. Reimbursement for eligible project costs is based 

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

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

publication Reimbursable and Non-Reimbursable Costs for the Electronic Baggage 

Screening Program, version 1.0, June 2008. As of December 6, 2010, the Board 

invoiced costs of $6,212,437 for installation of the CBIS, which represented 95% of the 

costs incurred. 

The agreement also required the Board to comply with OMB Circular A-133, Revised, 

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

provisions to submit quarterly recipient reports to the federal government; pay prevailing 

wages as determined by the Secretary of Labor; and use American1

 iron, steel, and 

manufactured goods. 

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

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

federal requirements. 

1

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

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

that at least 95% 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% of total project costs to be used for non-American products. 

Page 2 
Results of Review 

We determined that that the Board invoiced sufficient allowable, allocable, and 

reasonable costs to earn the funds provided under the OTA, as follows: 

Description Invoiced Cost 

Construction, Design, and Management $6,500,460 

TSA Share 95% 

6,175,437 

Equipment Relocation 37,000

 Total TSA Share 6,212,437 

In addition, we verified that the Board submitted the required quarterly reports on project 

activities to the federal government. We also determined that the Board complied with 

the OTA requirements for paying prevailing wages and using American iron, steel, and 

manufactured goods in the construction of the project. 

Page 3 
Appendix A 

Purpose, Scope, and Methodology 

The objective of this audit was to determine whether costs invoiced 

by the Board are allowable, allocable, and reasonable according to 

the funding agreement and applicable federal requirements. Our 

audit covered invoiced costs of $6,212,437 for the period March 

23, 2009, through December 6, 2010. This project is completed, 

and as such this amount represents the total reimbursable and 

invoiced amount. 

Our tests and procedures included the following: 

•	 Reviewing TSA project files, the OTA and modifications, 

the Recovery Act, and TSA and OMB guidelines; 

•	 Interviewing TSA officials to get an understanding of the 

project and project management; 

•	 Examining Board accounting records supporting amounts 

invoiced; 

•	 Interviewing Board officials to obtain an understanding of 

project management, accounting, and invoicing; 

•	 Inspecting the CBIS project; and 

•	 Reviewing the audit working papers of the certified public 

accounting firm that performed the Single Audit of the 

Airport for the fiscal year ending June 30, 2010. 

The Single Audit of the Board was performed by Porter, Muirhead, 

Cornia, & Howard, and included Recovery Act-funded CBIS 

project costs totaling $5,687,696 (or about 92% of invoiced costs). 

The Single Audit report classified the CBIS as a major program 

and assessed the Board as a low risk. 2 The Single Audit report did 

not identify any questionable costs related to the CBIS or any 

deficiencies in internal controls that were identified as material 

weaknesses. 

We also tested the Board records supporting costs invoiced to 

determine compliance with OMB Circular A-87 and with other 

terms and conditions of the agreement. We considered the Board’s 

internal controls over the administration of TSA funds in 

determining our audit procedures. 

We conducted this performance review between June 7, 2011, and 

January 20, 2012, pursuant to the Inspector General Act of 1978, 

as amended, and according to generally accepted government 

2

 A low-risk assessment results from the preceding annual Single Audit with an unqualified opinion on the 

entity’s financial statements and the schedule of expenditures of federal awards, and no deficiencies in 

internal controls that were identified as material weaknesses under the requirements of generally accepted 

government auditing standards. This assessment allows for reduced audit coverage. 

Page 4 
Appendix A 

Purpose, Scope, and Methodology 

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. The evidence we obtained from our 

tests and procedures 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 TSA of the materials and manufactured components 

used in the construction of the CBIS project; therefore, our 

conclusions are qualified to the extent that a technical evaluation 

may affect the allowability of invoiced costs. However, we 

coordinated our review with appropriate contracting officials. 

We appreciate the cooperation of the Board and TSA officials in 

providing the information and access necessary to accomplish this 

review. 

Page 5 
Appendix B 

Major Contributors to this Report 

Roger LaRouche, Director 

Karl Gallagher, Audit Manager 

Sandra Ward-Greer, Report Referencer 

Page 6 
 

Appendix C 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

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 General Manager, Checked Baggage Division/Program

 Manager, Electronic Baggage Screening Program, TSA 

Branch Chief, Office of Acquisition, Security Technology

 Acquisition Division, 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 

Page 7 
 

 

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