Department of Homeland Security
 

Costs Claimed by Grand Traverse Metro 


Emergency Services Authority under 


a Fire Station Construction Grant 


American Recovery and Reinvestment Act of 2009 

OIG-12-98 July 2012
 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Washingloo, DC 20528 I www.oig.dhs.gov 

JUL 1 3 2012 

MEMORANDUM FOR: Elizabeth M. Harman 

Assistant Administrator, Grant Programs Directorate 

Federal Emergency Management Agency 

fROM: Anne 

Assistant 

l. Richards 

Inspector 

~;/ 

General 

~ 

for Audits 

SUBJECT: Costs Claimed by Grand Traverse Metro Emergency 

Services Authority Under a Fire Station Construction Grant 

Attached for your action is our final report, Costs Claimed by Grand Traverse Metro 

Emergency Services Authority Under a Fire Station Construction Grant. 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 three recommendations for FEMA to resolve $591,457 of 

questionable costs that the Metro Emergency Services Authority claimed for 

reimbursement. The Office of Policy and Program Analysis concurred with all 

recommendations. As prescribed by 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 responsibi lity over the Department of Homeland Security. We will post 

the report on our website for public dissemination. 

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 

Table of Contents 

Executive Summary ............................................................................................................ 1 


Background ......................................................................................................................... 2 


Results of Audit ................................................................................................................... 3 


Purchases Not in Compliance With Procurement Requirements ($278,286) ........ 3 


Recommendation ................................................................................................... 7 


Management Comments and OIG Analysis ........................................................... 7 


Ineligible Costs ($190,916) ..............................................................................................8 

Recommendation ...........................................................................................................11 

Management Comments and OIG Analysis.......................................................... 11 

Unsupported Salary and Benefits Costs ($122,255) ............................................. 12
 

Recommendation ................................................................................................. 13 


Management Comments and OIG Analysis.......................................................... 14 


Compliance with Requirements for Reporting, Buying American Products, and 

Paying Prevailing Wages ...................................................................................... 14 

Appendixes 

Appendix A: Objectives, Scope, and Methodology ............................................ 15 


Appendix B: Management Comments to the Draft Report ............................... 17 


Appendix C: Major Contributors to This Report ................................................ 19 


Appendix D: Report Distribution ........................................................................ 20 


Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FEMA Federal Emergency Management Agency 

NFPA National Fire Protection Association 

OIG Office of Inspector General 

OMB Office of Management and Budget 

www.oig.dhs.gov OIG-12-98 
 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Executive Summary 

The Federal Emergency Management Agency (FEMA) awarded a grant of $2,813,034 to the 

Grand Traverse, Michigan, Metro Emergency Services Authority, to construct a new fire 

station in the Garfield Charter Township Silver Lake Recreation Area. At the time of our 

audit, the Metro Emergency Services Authority had received cost reimbursement of 

$2,589,021 from FEMA. 

We conducted our audit to determine whether costs claimed by the Metro Emergency 

Services Authority were allowable, allocable, and reasonable according to the grant 

agreement and applicable Federal requirements. 

We questioned the eligibility for reimbursement of $591,457 of claimed costs. We also 

determined that the Metro Emergency Services Authority submitted the required status 

reports to the Federal Government and complied with grant requirements for using 

American-made materials in the new fire station and paying prevailing wages to 

construction workers. 

FEMA agreed with our three recommendations to resolve the questioned costs claimed by 

the Metro Emergency Services Authority. 

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Background 

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

appropriated $210 million to FEMA for competitive grants for modifying, upgrading, or 

constructing non-Federal fire stations. On September 25, 2009, FEMA awarded grant 

number EMW-2009-FC-01786R, totaling $2,813,034, to the Grand Traverse Metro 

Emergency Services Authority (Traverse Metro) to construct a new fire station in the 

Garfield Charter Township Silver Lake Recreation Area. 

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

2012. As of September 30, 2011, Traverse Metro had completed construction of the 

new fire station (figure 1) and had received reimbursements of $2,589,021 from FEMA 

for project design, engineering, construction, and management. 

Figure 1. Traverse Metro New Fire Station 

Source: Traverse Metro. 

Under the terms of the grant, Traverse Metro agreed to use the grant funds according 

to FEMA’s A.R.R.A. Assistance to Firefighters, Fire Station Construction Grants, Guidance 

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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 (2 Code of Federal Regulations (CFR) Part 225), and the 

Uniform Administrative Requirements for Grants and Cooperative Agreements to State 

and Local Governments (44 CFR Part 13). 

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

States, Local Governments, and Nonprofit 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. 

Results of Audit 

Of the $2,589,021 Traverse Metro received from FEMA, we questioned costs of 

$591,457 for purchases that did not comply with procurement requirements ($278,286); 

for ineligible services, systems, and equipment ($190,916); and for salary and benefits of 

two Traverse Metro employees that were not adequately supported ($122,255). We 

concluded that Traverse Metro did comply with grant requirements for submitting 

quarterly Recovery Act reports to the Federal Government and for ensuring that 

contractors were paid prevailing wages and that American-made iron, steel, and 

manufactured goods were used in the construction of the new fire station. 

Purchases Not in Compliance with Procurement Requirements ($278,286) 

We questioned costs of $278,286 pertaining to two noncompetitive purchases 

by Traverse Metro that were not in compliance with its Purchasing and Bid Policy 

and Federal procurement regulations. The Traverse Metro Purchasing and Bid 

Policy requires that goods and services must be solicited and/or requests for 

proposals prepared under the following circumstances. 

a.	 $5,000–$20,000: A request for written bids must be prepared and three 

quotes must be obtained. Publication of a Notice to Bidders is not required. 

The bids do not have to be sealed. 

b.	 $20,001 and above: A request for bid must be prepared and three bids must 

be obtained. A Notice to Bidders should be available in the Administration 

Office. The bids must be sealed. 

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Department of Homeland Security 

c.	 Bids for recurring services must be solicited and requests for bids must be 

prepared for all contracted services, including professional services. 

Section 7 of the Purchasing and Bid Policy says that bids are not required for “an 

emergency purchase . . . the vendor is the sole source of an item or the vendor is 

the sole source for an item requiring matching or compatibility with current 

goods equipment.” The policy also requires that all purchases of goods and 

services in an amount higher than $20,000 and all contracts for recurring 

services must be approved by the Traverse Metro Board. 

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 Guidance and Application Kit warns that 

grantees “who fail to adhere to their own procurement policy or otherwise fail 

to fully ‘compete’ any transaction involving Federal funds may find their 

expenditures questioned and subsequently disallowed.” The Uniform 

Administrative 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 the proposed price. 44 CFR 

Part 13.36 allows noncompetitive procurements only when a competitive award 

is infeasible under small purchase procedures, sealed bids, or competitive 

proposals, and the item or service is available from a single source; a public 

emergency will not permit delay resulting from competition; the awarding 

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

number of sources, competition is determined to be inadequate. 

The purchases listed in table 1 were noncompetitive, not justified as sole-source 

purchases, and not approved by FEMA. 

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Department of Homeland Security 

Table 1. Noncompliant Purchases 

Payee Description Amount 

Advantage Design Architectural services and 

construction oversight $220,349 

Gourdie-Fraser & Associates Engineering services and testing 57,937 

Total $278,286 

Advantage Design 

In September 2008, Traverse Metro awarded a sole-source, time and materials 

contract to a local architectural firm, Advantage Design, to create a design and 

the plans for a new “model” fire station to be built in the future when adequate 

funds were available. Traverse Metro awarded the contract on the basis of an 

unsolicited proposal from Advantage Design. When FEMA announced the fire 

station construction grant competition, Traverse Metro asked Advantage Design 

to accelerate the completion of the fire station plans and submitted those plans 

with its grant application. 

Following the grant award, Traverse Metro noncompetitively amended the firm’s 

contract to add new services and increased the fees to a ceiling of $270,000. The 

services included preparing initial and subsequent construction cost estimates; 

assisting Traverse Metro in identifying, selecting, and coordinating the 

professional services of surveyors, special consultants, and testing laboratories; 

preparing, receiving, and evaluating contract bids and making award 

recommendations; and assisting Traverse Metro in obtaining building permits. 

The amendment also stipulated that Advantage Design oversee the general 

construction contractor, including certifying the general contractor’s 

performance and the accuracy of the work invoices. 

Traverse Metro included $220,349 of fees paid to Advantage Design in its 

requests for reimbursement to FEMA. We questioned the $220,349 because 

Traverse Metro noncompetitively modified the contract and did not perform a 

cost and price analysis, did not prepare a sole-source procurement justification, 

and did not obtain FEMA approval for the purchase. Traverse Metro officials 

said that they used Advantage Design because the firm had nearly completed the 

fire station plans when FEMA advertised the fire station construction grant, and 

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doing so helped provide a shovel-ready1

 project. Traverse Metro also 

maintained that there was no time to compete this effort, and that doing so 

would not have been cost effective since Advantage Design retained ownership 

of the fire station design. Finally, Traverse Metro officials said that they were 

not aware of the Federal requirement to seek FEMA approval for 

noncompetitive procurements. 

We also determined that $62,391 of the $220,349 of Advantage Design costs 

were incurred before the award of the grant and would otherwise be ineligible 

for reimbursement according to requirements. The Guidance and Application Kit 

identifies preaward costs, including design, planning, and engineering expenses, 

as ineligible for reimbursement. Traverse Metro officials agreed that these 

preaward costs should not have been submitted for reimbursement. 

Gourdie-Fraser & Associates 

Traverse Metro signed an agreement with Gourdie-Fraser & Associates for 

engineering services, including updating the topographical survey of the building 

site and locating the roadway, rights-of-way, utilities, and boundaries; furnishing 

layout and design services; conducting soil tests and drainage assessments; 

coordinating site plans; and obtaining permits from local health, public works, 

and building departments. The agreement provides for a fixed-fee payment of 

$12,900 for the initial site engineering work and was increased to $57,937 at the 

completion of the project. Traverse Metro incurred and included engineering 

services fees of $57,937 in its requests for FEMA reimbursement. 

We questioned costs of $57,937 because Traverse Metro did not award the 

agreement competitively or perform a cost or price analysis, prepare a solesource procurement justification, or obtain FEMA approval for the purchase. 

Traverse Metro officials advised us that they hired Gourdie-Fraser & Associates 

because the firm provides similar engineering services to Garfield Charter 

Township (Township), had assisted the Township in the development of a park 

adjacent to the new fire station site, and was part of the preaward design team 

that prepared plans for the fire station. Also, officials believed that competing 

this effort after the grant award would have caused unnecessary delay and loss 

of the value already invested by the firm, and prior involvement with the firm on 

this effort would justify the sole-source procurement. Traverse Metro officials 

1

 The Guidance and Application Kit states, “The timing of the project would have an effect on both 

stimulating the local economy in addition to improving protection of the firefighters and the community. 

As such, projects capable of starting immediately upon receipt of DHS approval receive higher priority.” 

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Department of Homeland Security 

also said that they were not aware of the Federal requirement to seek FEMA 

approval for noncompetitive procurements. 

We also determined that $9,518 of the $57,937 of Gourdie-Fraser & Associates 

costs were incurred before the award of the grant and would otherwise be 

ineligible for reimbursement according to the Guidance and Application Kit. 

Traverse Metro agreed that these preaward costs should not have been 

submitted for reimbursement. 

Recommendation 

We recommend that the Assistant Administrator, Grant Programs Directorate: 

Recommendation #1: 

Resolve the questioned costs of $278,286 pertaining to the contracts that were 

noncompetitively awarded. 

Management Comments and OIG Analysis 

FEMA provided formal comments to our draft report, which are included as 

appendix B. 

FEMA Comments to Recommendation #1 

FEMA concurred with the intent of the recommendation and indicated that it is 

in contact with Traverse Metro to review the questioned costs. FEMA said that it 

expects to have completed its review in time to provide a “more specific plan for 

corrective action within 90 days in response to the final report.” 

OIG Analysis 

Although FEMA concurred with the recommendation, it did not identify 

corrective actions. Therefore, the recommendation will remain unresolved and 

open until FEMA provides a corrective action plan, including target completion 

dates and responsible parties. 

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Department of Homeland Security 

Ineligible Costs ($190,916) 


Table 2 summarizes costs totaling $190,916 for services, systems, and equipment 

that are not eligible for reimbursement according to the grant. 

Table 2. Ineligible Services, Systems, and Equipment 

Description Amount 

Land Lease Costs $4,314 

Security Systems 8,300 

Office Furnishings 10,225 

Public Safety Radio System 25,811 

Legal Services 26,261 

Landscaping 34,761 

Equipment 81,244 

Total $190,916 

Land Lease Costs 

We questioned $4,314 related to leasing land for the fire station building site. 

Traverse Metro obtained a 50-year lease from the Township for a 3-acre building 

site for the new fire station. Included in the project costs were legal fees 

($1,050) and title insurance premiums ($3,264) associated with the land lease. 

However, the Guidance and Application Kit lists the costs of land acquisition as 

ineligible. Traverse Metro officials advised us that they were unaware that costs 

associated with the lease of the fire station building site would not be eligible for 

reimbursement. 

Security Systems 

We questioned $8,300 associated with a security system. Traverse Metro 

installed a station alarm system, including a fire alarm, electronic card locks, and 

a station monitoring system, at a combined cost of $8,300. The Guidance and 

Application Kit lists security systems among items not eligible for funding. 

Traverse Metro was not able to segregate the costs between the allowable fire 

alarm and the ineligible security system; therefore, we questioned the entire 

amount. Traverse Metro advised us that this system is consistent with those 

installed in other fire stations and administrative buildings and is necessary to 

monitor those entering and exiting the buildings. 

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Office Furnishings 

We questioned $10,225 for built-in bookcases and cabinets for fire station 

offices. The Guidance and Application Kit identifies office furnishings as an 

ineligible item. Traverse Metro believed that the office furnishings were eligible 

because they were built in as part of the construction costs. 

Public Safety Radio System 

We questioned $25,811 claimed for a public safety radio system. Traverse 

Metro subsequently told us that the $25,811 included $6,090 for video devices 

that it had mistakenly included in the claimed amount. Traverse Metro 

purchased and installed the $19,721 public safety radio system in the new fire 

station to communicate with the other Traverse Metro fire stations and the 

emergency response network. Traverse Metro believes that the radio system is 

required by National Fire Protection Association (NFPA) 1500,2 Standard on Fire 

Department Occupational Safety and Health Program, Chapter 8, Emergency 

Operations. 

Although the Guidance and Application Kit does not specifically identify radio 

systems as an eligible or ineligible item, it does say that projects that duplicate 

other Federal awards are ineligible. Communications systems may be obtained 

under FEMA’s Assistance to Firefighters Grant program. Given the lack of 

specificity as to what is eligible under NFPA 1500 and the specific identification 

in the Guidance and Application Kit of projects that duplicate other Federal 

awards as ineligible, we questioned the $19,721 cost of the radio system and the 

$6,090 for video devices mistakenly included in the claim. 

Legal Services 

We questioned $26,261 of legal services fees. According to the Traverse Metro 

Chief, legal services included preparing land lease documentation and reviewing 

and advising Traverse Metro about Federal requirements, construction plans, 

and contract bid procedures. 

2

 The Guidance and Application Kit identifies as eligible expenses those necessary to comply with NFPA 

1500. The 2007 edition of NFPA 1500 is a 90-page document that covers activities such as fire department 

administration, training, fire apparatus and equipment, emergency operations, facility safety, and medical 

and physical requirements. The Guidance and Application Kit does not comment further on the expenses 

that would qualify for funding under NFPA 1500. 

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Department of Homeland Security 

We questioned the $26,261 because Traverse Metro did not include legal 

services in the approved fire station grant budget. The grant agreement 

specifies that the grantee shall perform work as described in the approved grant 

application, including the budget, and may not deviate from the approved scope 

of work without approval from FEMA. FEMA did not approve any changes to the 

grant budget. 

We also determined that $1,476 of the legal services fees were incurred before 

the award of the grant and were otherwise ineligible for reimbursement 

according to the Guidance and Application Kit. Traverse Metro agreed that the 

preaward costs should not have been submitted for reimbursement. Finally, the 

fire chief said that some of the legal fees related to leasing land for the new 

station. According to the Guidance and Application Kit, the cost of land 

acquisition is ineligible. We could not identify the amount of legal services 

pertaining to the land lease because the bills from the legal firm did not itemize 

the charges for work on the new fire station. 

Landscaping 

We questioned $34,761 in landscaping costs for landscape design and 

installation of plants and irrigation lines ($6,871), irrigation system ($2,890), and 

trees and shrubs ($25,000). The Guidance and Application Kit identifies 

landscaping as an ineligible item. We also determined that Traverse Metro 

noncompetitively awarded the contract for the landscape design and 

installation; and that $3,652 of the $6,871 was incurred before the start of the 

grant period. Traverse Metro officials said that the landscaping design, plants, 

and installation are necessary to comply with the Leadership in Energy and 

Environmental Design certification, which was encouraged by FEMA and an 

important part of the Traverse Metro grant application. 

Equipment 

We questioned $81,244 in equipment costs, as follows: 

• Apple laptop computer	 $2,404 

• Stair chair for removing victims from fire scene 2,321 

• Commercial washer and dryer	 19,462 

• Washer and dryer for firefighting protective gear 14,057 

•	 Air compressor for self-contained breathing apparatus 43,000
 

$81,244
 

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 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

The Guidance and Application Kit specifically identifies firefighting equipment 

and apparatus and washers/extractors as not eligible for funding. The Guidance 

and Application Kit also says that projects that duplicate other Federal awards 

are ineligible. Firefighting equipment, such as air compressors, may be obtained 

under FEMA’s Assistance to Firefighters Grant program. Finally, OMB Circular 

A-87 requires prior approval of the grantor agency for capital expenditures as 

direct costs for general-purpose equipment; special-purpose equipment with a 

unit cost of $5,000 or more; and improvements to land, buildings, or equipment 

which materially increase their value or useful life. FEMA did not approve any of 

the above-listed equipment items. 

Traverse Metro agreed that the stair chair and video system should not have 

been included in the reimbursement request, but said that the laundry machines 

and air compressors are required to meet the provisions of NFPA 1500. 

Recommendation 

We recommend that the Assistant Administrator, Grant Programs Directorate: 

Recommendation #2: 

Resolve the questioned costs of $190,916 pertaining to the ineligible costs. 

Management Comments and OIG Analysis 

FEMA provided formal comments to our draft report, which are included as 

appendix B. 

FEMA Comments to Recommendation #2 

FEMA concurred with the intent of the recommendation and indicated that it is 

in contact with Traverse Metro to review the questioned costs. FEMA said that it 

expects to have completed its review in time to provide a “more specific plan for 

corrective action within 90 days in response to the final report.” 

OIG Analysis 

Although FEMA concurred with the recommendation, it did not identify 

corrective actions. Therefore, the recommendation will remain unresolved and 

open until FEMA provides a corrective action plan including target completion 

dates and responsible parties. 

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Department of Homeland Security 

Unsupported Salary and Benefits Costs ($122,255) 


We questioned costs of $122,255 claimed for the salary and benefits of a 

Traverse Metro assistant fire chief who managed the fire station construction 

project ($119,244) and the Traverse Metro accountant who prepared financial 

documents for the grant ($3,011). 

Upon learning of the FEMA fire station construction grant opportunity in 

February 2009, Traverse Metro assigned the assistant chief for fire prevention to 

work on obtaining a grant. The assistant chief helped prepare the new fire 

station grant application, arrange for local planning approval, apply for land use 

permits, and obtain a long-term lease for the building site. The assistant chief 

also performed other related tasks. After FEMA awarded the grant in September 

2009, the fire chief designated the assistant chief as the owner’s representative 

for the fire station construction project and began charging the hours the 

assistant chief worked on the project to the grant. The assistant chief oversaw 

construction contractors and subcontractors, monitored “Buy American” 

compliance, led weekly management meetings, and interacted with FEMA and 

local authorities involved in the construction of the fire station. Traverse Metro 

compensated the assistant chief at his regular rate of pay and claimed 

reimbursement of $119,244 for salary and associated benefits for the period 

from October 2009 to June 2011. The fire chief told us that the assistant chief 

did not perform any fire prevention duties while functioning as the owner’s 

representative and that the assistant chief retired in June 2011. 

We questioned the $119,244 as an unsupported cost for the following reasons: 

•	 The assistant chief for fire prevention did not keep time distribution records 

to document the amount of time spent as the owner’s representative. OMB 

Circular A-87, Attachment B.8, h(4), Support of Salaries and Wages, a 

subsection under Compensation for Personal Services, states that where 

“employees work on multiple activities or cost objectives, a distribution of 

their salaries or wages will be supported by personnel activity reports or 

equivalent documentation” that meets certain standards. 

•	 Traverse Metro did not include costs for administration or otherwise specify 

an owner’s representative in the approved grant budget. The grant 

agreement requires that the grantee shall perform work as described in the 

approved grant application, including the budget, and may not deviate from 

the approved scope of work without approval from FEMA. Traverse Metro 

did not request or receive approval for changing the project scope/budget. 

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Department of Homeland Security 

•	 Traverse Metro did not prepare a compensation analysis or survey local wage 

rates to determine the appropriate salary for the tasks performed by the 

owner’s representative or provide an estimate of the amount of time needed 

for the oversight. Accordingly, there is no basis to show that the salary and 

benefits paid were fair and reasonable for the work performed. 

•	 Some of the owner’s representative’s responsibilities were shared by the 

firms performing architectural and engineering services, resulting in potential 

duplication of effort and/or inefficient use of funds. For example, the 

architect was tasked with identifying contractors, reviewing bidding 

procedures, overseeing the general contractor and subcontractors, providing 

current cost estimates and analyses, and obtaining building permits. The 

engineer’s tasks also including obtaining permits. 

Traverse Metro advised us that the assistant chief provided invaluable 

management and oversight of the fire station construction project that could not 

have otherwise been obtained in a timely and cost effective manner after the 

grant award. 

We questioned the $3,011 in salary and benefits of the accountant because she 

did not prepare time distribution records and the approved grant budget did not 

include costs for administration. 

Although the grant budget did not include costs for administration, the Guidance 

and Application Kit allows as a grant expense administrative costs that are 

directly related to the implementation and management of the grant and that do 

not exceed 3 percent of the award. For the grant to Traverse Metro, the 

3 percent limit is $84,391 (3 percent times $2,813,034). Traverse Metro claimed 

$122,255 for the salary and benefits of employees who performed administrativetype duties. If administrative costs had been approved and properly documented, 

the amount incurred would have exceeded the 3 percent limit by $37,864 

($122,255 less $84,391). 

Recommendation 

We recommend that the Assistant Administrator, Grant Programs Directorate: 

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Department of Homeland Security 

Recommendation #3: 

Resolve the questioned costs of $122,255 related to unsupported salary and 

benefits. 

Management Comments and OIG Analysis 

FEMA provided formal comments to our draft report, which are included as 

appendix B. 

FEMA Comments to Recommendation #3 

FEMA concurred with the intent of the recommendation and indicated that it is 

in contact with Traverse Metro to review the questioned costs. FEMA said that it 

expects to have completed its review in time to provide a “more specific plan for 

corrective action within 90 days in response to the final report.” 

OIG Analysis 

Although FEMA concurred with the recommendation, it did not identify 

corrective actions. Therefore, the recommendation will remain unresolved and 

open until FEMA provides a corrective action plan including target completion 

dates and responsible parties. 

Compliance With Requirements for Reporting, Buying American Products, and 

Paying Prevailing Wages 

The Recovery Act requires recipients to submit quarterly reports on project 

activities to the Federal Government, and to ensure that projects are 

accomplished with American-made iron, steel, and manufactured goods and that 

workers are paid prevailing wages as determined by the Secretary of Labor. We 

verified that Traverse Metro submitted the required quarterly reports. Also, 

Traverse Metro included “Buy 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, onsite oversight by the owner’s 

representative; and a requirement for vendors/contractors to submit pay 

vouchers showing payment of prevailing wages. 

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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 Traverse Metro 

were allowable, allocable, and reasonable according to the grant and applicable Federal 

regulations. This audit covered costs of $2,589,021 claimed by Traverse Metro 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 Traverse Metro 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 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; 

•	 Performed fraud detection procedures; and 

•	 Inspected the new fire station and surrounding property. 

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Department of Homeland Security 

We conducted this performance audit between August 15, 2011 and October 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 16 OIG-12-98 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Management Comments to the Draft Report 

LS. n"pnlm<fIt <of "on-ld"nd S<'""dj~ 

Washngl<ln,I.><': 2')472 

FE1vIA 

lilY 1 , 2tlll 

MEMORANDtJM FOR: Anne!., Hic11nrds 

Assisteot Inspector Gcnc1'ulh11' Audit" 

Office of inspeemr nencra! 

FROM: David J. Kaufman 

Director 

FEMA Office of Policy and Prugraul Analysis 

SUBJECT, Comments to OIG Dratl Report, Rrvie,t o..f'CO,\-ts Claimed by 

Grand Travcr,~c, }.f/,VetroEmcr;2;cm,)' Services Authority under 

FIre .<)'tatiof1 Construi"tion (;ram N!lmbel'E'~fW-20(}(i-FC-01786R 

The Federal Emergency Man:'1gement Agency (FEMA) appreciates the opportunity to review and 

rc..s~xl1ld to the Departmcnt of Homdand Security (DBS) Office of Inspector Genera! (OIG) Draft 

Report, As noted in our responses to your recommendations, below - FEMA is continuing to work 

to resolve the issues identified in the audit 

OIG Recommendation #1: We recommend that the Assistant Administrator. Grant Prograuls 

Directorate. resolve the questioned costs ofS278,286 pertaining to the eontrads that were 

nuncompetitivdy d\vdnh:d. 

FEMA Response: FEMA ClJI1CUfS with the intent of'the n:eOIllmendation 1:0 resolve the questioned 

cc:;ts related to non competitively awarded. cOJ11:racts. Vie arc currently in contact with the grantee to 

l(;;vie:\y the qUt-;;timwd costs identified as "vel! <1:" any other co,~ts :lSSOCi;)lCd wirh the SLi.tiiuIl 

Construction Gnm1 that were incurred OHi:sid" oftbc federlll fiJn(h We expcct tc hil\';'; completed 

our ,c '/ il,.~W in tiu:c to pro' ide a ~l1(n: "recife phn!i:lT CntTc',tive tE:h(}f) wiThin 90 d,lY" in re"pon>.;(; to 

the final report 

Ole Recommendation #2: \Vc rec;ml;nend tlw( \'he ;\. o;"ir.itant ,\dministHl1:0:', Gn:nt PTc-gran)'; 

q;Jtcsrioned costs of'S I (} rW'1;)ini~)g he incligihir: ccm:. 

FE:\'L\ R(:sIHIHS{, to the Draft tiepnrt: F;E\,1 i\ concur" with the intcn' t\'culrilw'ndaii:m 10 

resolve the qucstwned C03tS dE S 19(1,9 j 6. \Vc (:1J,rr~1JtlY in (\)niact v, itl" L'hc grantee to ;CVJCW the 

cost" L:lenli i'icd '1S weL ,E :my mhCf CDS\.'> nssociatdl \viJJ the SLujon (~ {}jH .: dion (rnmt tiD\ \V; n~ 

iW;J,rrcd / ) f thc :,(;·\J-c"JJ fiX1d.";' \l/c c:'l.'lCci i'HYC C,')n10k;cd ODr rc\Cic'-,", in pruvide it 

iTh.we ~pf'cifi{~ ph!' f;-c conTx~r:\;C ;Ktion \vi1hin q) d:.:y,:" csp(l1is -, v ) the f Da) reo{}rt 

www.oig.dhs.gov 17 OIG-12-98 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

OIG Recommendation #3: \\ic recommend that :hC'-\5,,::<tnnt Administrator, Grnnt Prognuns 

Directorate, resolve the questlOned costs ofSI22255 related to unsupported salary and benefits 

costs. 

FEl\lA Response to the Draft Report: FEMA concurs \vith the mtent ofthc recommendation 

to resolve the questioned costs related to sa:ary and benefits. \Vc are currently in contact with 

the grantee to review the costs identitlcd as well as (IllY olheT L:[lsl.s assuciated ,vith the Station 

Construction Grant that \Vere incurred outside ofthe federal funds. \Ve expect to have completed 

(JUf revic;,.\' in timc to provlde a more specific plan for corrective action within 90 days in 

responsc to the final report. 

Again, we thank you f(Jr the opportunity to rcvic'w your rcport If you have further Questions, 

please do not hesitate to call (Jina Nortol1,FEMA Audit Liaison Office, 202~646~4287. 

www.oig.dhs.gov 18 OIG-12-98 
 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

Major Contributors to This Report 

Roger La Rouche, Director of Recovery Act Audits 

Matthew Mongin, Auditor 

Sandra Ward-Greer, Independent Referencer 

www.oig.dhs.gov 19 OIG-12-98 
 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

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 20 OIG-12-98 
 

ADDITIONAL INFORMATION AND COPIES 

To obtain additional copies of this document, please call us at (202) 254-4100, fax your 

request to (202) 254-4305, or e-mail your request to our Office of Inspector General 

(OIG) Office of Public Affairs at: DHS-OIG.OfficePublicAffairs@dhs.gov. 

For additional information, visit our website at: www.oig.dhs.gov, or follow us on Twitter 

at: @dhsoig. 

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To expedite the reporting of alleged fraud, waste, abuse or mismanagement, or any 

other kinds of criminal or noncriminal misconduct relative to Department of Homeland 

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reviewed by DHS OIG. 

Should you be unable to access our website, you may submit your complaint in writing 

to: DHS Office of Inspector General, Attention: Office of Investigations Hotline, 245 

Murray Drive, SW, Building 410/Mail Stop 2600, Washington, DC, 20528; or fax it 

directly to us at (202) 254-4297. 

The OIG seeks to protect the identity of each writer and caller.