Federal Emergency Management Agency: Lack of Controls and Key
Information for Property Leave Assets Vulnerable to Loss or
Misappropriation (15-JUL-04, GAO-04-819R).
Prior to the transfer of the functions of the Federal Emergency
Management Agency (FEMA) to the newly established Department of
Homeland Security (DHS) within the Emergency Preparedness and
Response Directorate (EP&R), FEMA was one of 24 Chief Financial
Officers (CFO) Act agencies required to obtain annual financial
statement audits. While DHS obtained a financial statement audit
covering the period from March 1 through September 30, 2003, no
financial statement audit was performed for FEMA activities for
the 5 months prior to March 1, 2003. For fiscal year 2001, FEMA
received a qualified audit opinion, which was due mostly to the
auditor's inability to determine the accuracy of the amount
reported for FEMA's equipment as well as other property issues.
Although FEMA received an unqualified opinion from its auditor in
fiscal year 2002, the auditor reported six material weaknesses
(one relating to its real and personal property system processes)
and one reportable condition as well as significant year-end
adjustments made to property accounts. Furthermore, the audit
report noted that FEMA did not have policies and procedures in
place to ensure the accuracy of data recorded in its personal
property system, the Logistics and Information Management System
(LIMS). The previously reported weaknesses as well as the very
nature of FEMA's mission, disaster response, which entails the
acquisition of new personal property, sometimes very quickly,
raise the risk that property may have been acquired but not
recorded in LIMS and not accounted for by FEMA in the interim 5
months before the agency functions were transferred to DHS. As
such, given the past weaknesses and risks surrounding FEMA's
property management, the objectives of our review were to
determine (1) whether controls were in place to ensure that
property acquired during the 5 months prior to FEMA transferring
its functions to DHS was properly accounted for in LIMS and (2)
whether FEMA has corrected previously reported property
management weaknesses.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-819R
ACCNO: A10955
TITLE: Federal Emergency Management Agency: Lack of Controls and
Key Information for Property Leave Assets Vulnerable to Loss or
Misappropriation
DATE: 07/15/2004
SUBJECT: Accountability
Accounting procedures
Equipment inventories
Federal procurement
Financial management systems
Financial statement audits
Internal controls
Management information systems
Property and supply management
Federal agency reorganization
Audit reports
Data integrity
Personal property
Systems compatibility
Policies and procedures
FEMA Integrated Financial Management
Information System
FEMA Logistics and Information
Management System
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GAO-04-819R
United States Government Accountability Office Washington, DC 20548
July 15, 2004
The Honorable Tom Ridge
The Secretary of Homeland Security
Subject: Federal Emergency Management Agency: Lack of Controls and Key
Information for Property Leave Assets Vulnerable to Loss or
Misappropriation
Dear Mr. Secretary:
As you know, prior to the transfer of the functions of the Federal
Emergency Management Agency (FEMA), effective March 1, 2003, to the newly
established Department of Homeland Security (DHS) within the Emergency
Preparedness and Response Directorate (EP&R), FEMA was one of 24 Chief
Financial Officers (CFO) Act agencies required to obtain annual financial
statement audits.1 While DHS obtained a financial statement audit covering
the period from March 1 through September 30, 2003, no financial statement
audit was performed for FEMA activities for the 5 months prior to March 1,
2003. For fiscal year 2001, FEMA received a qualified audit opinion,2
which was due mostly to the auditor's inability to determine the accuracy
of the amount reported for FEMA's equipment as well as other property
issues. A major contributing factor was the lack of a property management
system that adequately met FEMA's accounting needs or Joint Financial
Management Improvement Program (JFMIP) requirements .3 Although FEMA
received an unqualified opinion from its auditor in fiscal year 2002, the
auditor reported six material weaknesses4 (one relating to its real and
personal property system processes) and one reportable condition5 as well
as significant year-end adjustments made to property accounts.
Furthermore, the audit report noted that FEMA did not have policies and
procedures in place to ensure the accuracy of data recorded in its
personal property system, the Logistics and Information Management System
1See 31 U.S.C. S:S: 901(b), 3515(a), 3521(e) (2000).
2A qualified opinion states that except for the effects of the matter to
which the qualification relates, the financial statements present fairly,
in all material respects, the assets, liabilities, net position, net
costs, changes in net position, budgetary resources, reconciliation of net
costs with budgetary obligations, and custodial activities (if applicable)
in conformity with U.S. Generally Accepted Accounting Principles.
3The Joint Financial Management Improvement Program (JFMIP) is a joint and
cooperative undertaking of the U.S. Department of the Treasury, the
General Accounting Office, the Office of Management and Budget, and the
Office of Personnel Management working with each other and other agencies
to improve financial management practices in government.
4A material weakness is a condition that precludes the entity's internal
control from providing reasonable assurance that misstatements, losses, or
noncompliance material in relation to the financial statements or to the
stewardship information would be prevented or detected on a timely basis.
5Reportable conditions are matters coming to an auditor's attention that,
in their judgment, should be communicated because these represent
significant deficiencies in the design or operation of internal control
that could adversely affect the federal government's ability to meet the
internal control objectives.
(LIMS).6 Appendix I categorizes the weaknesses identified in FEMA's fiscal
year 2002 audit report into nine general areas for which personal property
controls need to be improved.
The previously reported weaknesses as well as the very nature of FEMA's
mission, disaster response, which entails the acquisition of new personal
property, sometimes very quickly, raise the risk that property may have
been acquired but not recorded in LIMS and not accounted for by FEMA in
the interim 5 months before the agency functions were transferred to DHS.
As such, given the past weaknesses and risks surrounding FEMA's property
management, the objectives of our review were to determine (1) whether
controls were in place to ensure that property acquired during the 5
months prior to FEMA transferring its functions to DHS was properly
accounted for in LIMS and (2) whether FEMA has corrected previously
reported property management weaknesses.
To accomplish this work, we reviewed DHS's fiscal year 2003 Performance
and Accountability Report, FEMA's fiscal year 2002 Performance and
Accountability Report, reports by FEMA's Office of Inspector General (OIG)
and Independent Public Accountants; performed walkthroughs of FEMA's
acquisition and property management functions; and conducted interviews
with relevant FEMA officials. FEMA officials provided oral comments to
this report, which are summarized in the agency comments and our
evaluation section. We conducted our review from October 2003 to June 2004
in accordance with U.S. generally accepted government auditing standards.
Results in Brief
FEMA continues to lack the controls and key information necessary to
ensure that personal property is properly accounted for. Accordingly, we
were unable to perform statistically based testing to conclude whether or
not FEMA properly accounted for property acquired during the 5 months
prior to transferring its functions to DHS. We attempted to manually trace
property items from the acquisition system and related documentation to
the property system. Because these systems do not share common data
identifiers such as serial numbers, purchase order numbers, and the like,
we were unable to complete our tests of individual items.
Absent integrated or adequately interfaced systems with the key
information necessary to track and account for property, accountable and
sensitive property is highly vulnerable to loss or misappropriation. For
example, FEMA's current property system, LIMS, does not interface with the
acquisition or financial systems, and lacks a common data identifier, such
as a serial number or invoice number, which would allow managers to track
property from its acquisition to its receipt and entry in the property
system through disposal. In addition, while the original acquisition date
was recorded in LIMS, users of the system were able to change that date
and frequently did so to reflect when items were transferred to other
locations.
6Federal Emergency Management Agency, Annual Performance and
Accountability Report Fiscal Year 2002 (Washington, D.C.: Jan. 24, 2003).
FEMA has not corrected its reported weaknesses related to property and
equipment. Its property system is still not JFMIP compliant. Although new
data fields have been added to address compliance, the systems holding the
data needed to populate those fields are not linked to LIMS and thus, do
not routinely share information. While processes have been developed to
transfer information for certain data fields manually, it has only been
done for capitalized property, which makes up less than 1 percent of
property items and roughly 20 percent or $73 million of the total property
value in LIMS. FEMA's fiscal years 2001 and 2002 auditors reported
material weaknesses related to FEMA's accounting for real and personal
property, and we reiterated these weaknesses in our fiscal year 2003
Performance and Accountability Series.7 In addition, due to the reduced
materiality of FEMA's real and personal property for financial statement
audit purposes, these weaknesses were not included in the DHS's
departmentwide audit report. Instead, the material weaknesses were
included in an observations and recommendations comment provided to EP&R
management. Due to decreased visibility of this issue and the seriousness
of these problems given the nature of FEMA's operations, immediate
corrective actions are warranted, so that these problems do not continue
to grow or assets are not unnecessarily vulnerable to loss or
misappropriation.
This report makes six recommendations for actions, that, if fully
implemented, should help FEMA and, consequently, DHS, better protect and
account for its accountable and sensitive property. We obtained oral
comments on a draft of this report from FEMA officials. They generally
agreed with our conclusions and recommendations, but stated that some of
the actions called for are already in place. As such, we have incorporated
changes to emphasize that the appropriate officials not only receive the
inventory certifications and documentation, but also review, follow-up on,
and maintain them. FEMA officials also provided technical comments, which
we incorporated as appropriate.
Background
Effective March 1, 2003, the functions of FEMA were transferred to the
Department of Homeland Security (DHS) within the Emergency Preparedness
and Response (EP&R) Directorate. Prior to the transfer to DHS, FEMA was
one of the 24 CFO Act8 agencies required to obtain annual financial
statement audits. Now that it is a component of DHS, however, it is no
longer subjected to annual, stand-alone audits. Further, because its real
and personal property issues are much smaller in scope compared to other
agencies and components transferred to DHS, such as the U.S. Coast Guard,
FEMA's property is deemed less material for agencywide financial statement
audit purposes, which results in less rigorous audit procedures and
reviews than when it was a stand-alone agency.
In fiscal years 2001 and 2002, when it was a stand-alone agency, the
auditors reported that, among other things, FEMA did not have policies and
procedures in place to ensure the accuracy of data recorded in its
property system. This system, LIMS, was
7U.S. General Accounting Office, Major Management Challenges and Program
Risks: Federal Emergency Management Agency, GAO-03-113 (Washington, D.C.:
Jan. 24, 2003).
8See 31 U.S.C. S:S: 901(b), 3515(a), 3521(e) (2000).
developed in-house for the special property tracking needs of FEMA's
disasterrelated recovery mission. Since its inception in 1993, the
software has been updated several times, resulting in different versions.
LIMS II, which was implemented in 2001, was the version in place at the
time of FEMA's transfer to DHS. According to FEMA officials, it was run on
obsolete system software, was not JFMIP compliant, and was limited in
functionality. Further, each regional office had its own separate property
database, which meant that there were 31 different databases. Thus,
managers could not effectively oversee the overall property inventory.
According to one FEMA official, the system contained a financial module,
but use of the module was optional because the accounting system of record
was Integrated Financial Management Information System (IFMIS), an
entirely different system; thus, the module was rarely used.
Over the course of fiscal year 2002, FEMA took steps to improve its
property accounting. For example, FEMA hired contractors to conduct an
agencywide inventory of capitalized personal property (property valued at
$25,000 or greater) to ensure the correct reporting of equipment and
related depreciation. Based on inventory results, FEMA recorded prior
period adjustments that increased equipment acquisition costs and related
depreciation by $74.5 million and $71.7 million, respectively. In
addition, FEMA had planned to acquire a new JFMIP-compliant acquisition
system in fiscal year 2002, but plans to do so were placed on hold because
of an OMB moratorium on technology investments for agencies transferring
activities to DHS. Shortly after the transfer to DHS (April 2003), FEMA
installed its next iteration of the LIMS system, LIMS III, which was
designed to be a more complete and accountable system. It is a Web-based
system that combines all of the 31 formerly separate property databases
into one system and includes enhancements, that, if properly implemented,
would allow the system to be JFMIP compliant, according to FEMA officials.
According to FEMA guidance prior to FEMA's transfer to DHS, capitalized
property9 was defined as property over $25,00010 and accountable property
was property costing over $5,000 or that FEMA determined to be
"sensitive."11 FEMA guidance stated that these items are subject to
special control and safeguards and will be accounted for and controlled
through the use of a custody receipt,12 and the agency's property system
(i.e., LIMS). These items include items such as pagers, cellular
telephones, personal digital assistants, electronic test equipment, hand
tools, and personal computers.
9Capitalized property refers to nonexpendable property (excluding
stewardship property, plant, and equipment) with a useful life of 2 years
or more and an acquisition cost above a predetermined dollar value
threshold.
10This threshold was increased to $50,000 by DHS.
11FEMA defines sensitive property as accountable property (regardless of
original acquisition cost), that is highly susceptible to misuse, loss, or
theft, and will be accounted for and controlled through the use of LIMS.
An annual physical inventory and a complete audit trail from receipt to
final disposition are required for sensitive equipment.
12Custody receipts are used when property is issued or delivered to a
recipient, who is to sign for the items, retain a copy, and return the
signed original to the issuer to file.
Scope and Methodology
To determine what controls were in place to ensure that property acquired
during the 5 months prior to FEMA's transfer to DHS was properly accounted
for in LIMS, we obtained property data for fiscal year 2003 from FEMA's
Property Management Unit, which was extracted from LIMS II, the version in
place at the time of transfer. We attempted to verify the completeness and
validity of the property information by comparing purchases recorded in
the acquisition system for the 5-month period prior to its transfer to
DHS, from October 1, 2002 to March 1, 2003 to entries in the LIMS system
for the corresponding period. We determined that FEMA's acquisition and
property systems do not share data and lacked key data we needed to
perform our tests. Therefore, we were unable to validate that purchases
made over the 5-month period were properly recorded into LIMS. As a
result, we narrowed our scope of review to the adequacy of controls over
property management at the time of FEMA's transfer and the status of
previously reported property management weaknesses.
To determine whether FEMA has corrected prior reported weaknesses, we
performed walkthroughs of the purchasing, receiving, and property
management processes; reviewed FEMA's policies and procedures, as well as
GAO's Standards for Internal Control13 and JFMIP Guidance on Property
Management Systems;14 reviewed reports by FEMA's OIG and Independent
Public Accountants, as well as DHS's fiscal year 2003 Performance and
Accountability Report and FEMA's corrective action plans; and interviewed
FEMA staff. FEMA officials provided oral comments to this report, which
are summarized in the agency comments and our evaluation section. Our work
was conducted from October 2003 to June 2004 in accordance with U.S.
generally accepted government auditing standards.
FEMA Did Not Have Controls in Place to Ensure Property Acquired Prior to
Transfer Was Properly Accounted For
GAO's Standards for Internal Control in the Federal Government state that
internal control monitoring should assess the quality of performance over
time and ensure that the findings of audits and other reviews are promptly
resolved. Also, internal control should generally be designed to ensure
that ongoing monitoring such as comparisons, reconciliations, and other
actions, occurs in the course of normal operations, to ensure that known
weaknesses are resolved. FEMA lacks the controls and key information
necessary to ensure property is properly accounted for in LIMS. Due to
this lack of key information, we could not determine whether purchases
made during the 5 months prior to its transfer were accurately recorded.
We attempted to manually trace property items from the acquisition system
and related documentation to the property system, but because these
systems do not share common data identifiers such as serial numbers or
purchase order numbers, we were unable to conduct valid tests. These
weaknesses would summarily preclude FEMA
13U.S. General Accounting Office, Internal Control: Standards for Internal
Control in the Federal Government, GAO/AIMD-0021.3.1 (Washington, D.C.:
November 1999).
14Joint Financial Management Improvement Program, Federal Financial
Management System Requirements: Property Management Systems Requirements,
JFMIP-SR-00-4 (Washington, D.C.: October 2000).
itself from conducting any conclusive internal assessments and therefore,
there is a risk that property may have been purchased but not properly
recorded in LIMS.
FEMA did not perform fundamental internal control activities and track key
information necessary to document and account for property to ensure that
purchases made during the 5 months prior to its transfer to DHS were
properly or accurately recorded. Timely, accurate, and useful financial
information is essential for making day-to-day operating decisions.
Maintaining the government's operations more efficiently, effectively, and
economically; meeting the goals of federal financial management reform
legislation; supporting results-oriented management approaches; and
ensuring accountability on an ongoing basis are also critical. According
to the
Joint Financial Management Improvement Program Property System
Requirements Guide, 15 property management systems must be able to track
an item from acquisition through changes in location to disposal. The
guide also states that the property system must forward physical receipt
information including quantity and date of physical receipt to the
acquisition system and core financial system. Thus, the property system
should be capable of interfacing with other financial or mixed systems.
However, we found that despite FEMA's efforts to improve its current
property system, LIMS III, it still does not interface or share common
data identifiers with any of the other systems, including the financial
and acquisition systems.
Previously Reported Property Management Weaknesses Have Not Been Corrected
We found that FEMA has not corrected material weaknesses related to its
accounting for real and personal property that its auditor reported in
fiscal year 2001 and again in fiscal year 2002; and which we reiterated in
our fiscal year 2003 Performance and Accountability Series.16 Such
weaknesses include noncompliance with JFMIP requirements, key systems
lacking interfaces with each other, and not performing required annual
inventories of accountable and sensitive property. Among the lingering
issues carried over to DHS is that a number of factors have combined to
make FEMA's property control weaknesses less visible from a DHS-wide
perspective, but no less severe from the perspective of FEMA operations.
Therefore, EP&R must recognize the seriousness of these issues as it
impinges on FEMA operations and develop a course of action to resolve or
mitigate the issues.
In fiscal year 2002, the auditor reported that FEMA did not have adequate
accounting systems and processes to ensure that all property, plant, and
equipment were properly recorded, accurately depreciated, and tracked in
accordance with its policies and applicable federal accounting standards.
Specifically, the independent auditor reported that FEMA's personal
property management system, known as LIMS, was not interfaced with its
financial system, IFMIS, thus requiring numerous manual workarounds to
ensure accounting information is accurately recorded. LIMS, used primarily
to track the location and availability of equipment for its mission of
disaster response, cannot perform accounting functions required by JFMIP.
To address this, FEMA officials stated that data fields were added to LIMS
in its most
15JFMIP-SR-00-4.
16GAO-03-113.
recent upgrade (May 2003) so that the system would meet JFMIP
requirements. Having the capability to handle accounting information did
not entirely resolve this problem, however. During our review, we found
that these data fields were not automatically populated because the system
is not linked electronically to, and, thus, not able to routinely share
information with, the acquisition systems or IFMIS. While processes have
been developed to transfer some data manually, it is limited to the data
for capitalized property, which makes up less than 1 percent of property
items and 20 percent or $73 million of the total property value in LIMS as
shown in table 1. Thus, data for FEMA's accountable and sensitive
property, which constitute the majority of the property and which, by
their very nature are more susceptible to theft or pilferage are excluded
from this process.
Table 1: Property Totals in LIMS as of May 31, 2004
Source: GAO analysis of LIMS data.
(1) Property with an initial acquisition cost of more than $50,000 with an
expected service life of 2 years or more.
(2) Property with an initial acquisition cost of more than $5,000 or
property, which by their nature are vulnerable to theft or pilferage, for
which controls and official property records are maintained and physical
inventories are conducted.
(3) Property of a low dollar value, which loses its identity when consumed
or when incorporated into another item, or with an expected service life
of less than 1 year.
Another weakness reported in both FEMA's fiscal years 2001 and 2002 audit
reports is that property acquisition dates were changed when items were
transferred within FEMA and among disaster sites to reflect the transfer
dates. Thus, the original purpose of the data field, to show when the item
was purchased, has been altered to cater to the needs of FEMA's mission.
A related problem is that LIMS does not contain data fields to record
purchase order or invoice numbers that can be used to link property items
to accounting-related and acquisition records. The problems outlined above
contribute to weak linkages for substantiating the acquisition date and
valuation of property, which is paramount not only for computing
depreciation, but for overall accountability. These issues can contribute
to financial statement implications, as was the case in fiscal year 2002
when FEMA had to record a prior period adjustment as of September 30,
2001, to increase equipment acquisition cost and accumulated depreciation
by $74.5 million and $71.7 million, respectively. In general, property
items should track to their supporting procurement information, and
accounting records should correlate to any FEMA property located at either
FEMA sites or in the custody of others.
Although FEMA officials had hoped to acquire a new property management
system, plans to do so were deferred in 2002 because OMB issued a systems
purchase moratorium for agency functional areas being transferred to DHS.
To help address its issues regarding accountability over property, FEMA
hired contractors to perform an inventory of its capitalized property in
2002. The contractor found 11 specific areas that they believed "warranted
further attention by FEMA to ensure the completeness and accuracy of the
agency's capital property." One of the areas noted was the need for FEMA
to complete a wall-to-wall inventory of all property. The contractors
reported that a significant number of items were identified during the
inventories that were not in LIMS. According to the report, it "seems that
when headquarters requests an inventory of capitalized equipment,
typically the field simply `prints' what is in LIMS and then validates its
on-site or deployed location."
Such an approach does not account for or help identify noncapitalized
property such as accountable and personal property that is not recorded in
LIMS. FEMA's weak inventory practices were reported on again in FEMA's
fiscal year 2002 audit report, as the auditor noted that some Accountable
Property Officers (APO) did not check property on-site against LIMS
records (i.e., a floor-to-book test) and that some locations did not
provide a current or complete certified inventory17 as part of the
baseline inventory effort. Such inventory practices cast doubt as to the
completeness and reliability of FEMA's property information.
Despite agency guidance requiring annual inventories for capital,
accountable, and sensitive property, as well as its status as an action
item from its fiscal year 2002 audit, inventories for accountable or
sensitive property were not completed by all site locations in fiscal year
2003. One official told us this could be because FEMA wanted to wait until
bar-coding capability was fully functional in LIMS, which would help
provide for better and more accurate tracking of inventory, but that
capability was never fully implemented. Also, since each region is
responsible for doing its own inventory of capitalized and accountable
property and sending a memo to FEMA headquarters certifying that an
inventory was completed; and because the organizational structure for
FEMA's property management section has changed significantly since the
fiscal year 2002 financial statement audit, according to FEMA officials,
there may have been confusion among field staff as to the person
responsible for receiving the memos.
Because FEMA is just a piece of a much larger DHS and no longer receives a
standalone audit, it receives much less audit attention and problems that
are identified are not necessarily material when viewed DHS-wide. For
example, FEMA control weaknesses found during the 2002 audit were not
included in DHS's departmentwide audit report, but instead were included
in an observations and recommendations comment provided to EP&R. In
addition, FEMA's capitalization threshold was raised
17According to FEMA's Personal Property Management guidance, Property
Management Officers (PMO) and APOs must certify that an annual inventory
was accomplished as prescribed.
from $25,000 to $50,000 upon transferring its functions to DHS, which
results in less audit coverage for property on an agencywide basis. This
elevated capitalization level could result in an unintentional lack of
accountability over property that was formerly required to be tracked and
inventoried for financial statement purposes. A prime illustration of this
is the previously mentioned manual transfer of the acquisition dates,
which is currently limited to capitalized property, thus excluding
accountable and sensitive items. Further, due to its relatively decreased
prominence at DHS from an audit perspective, FEMA will not receive the
visibility and oversight afforded the annual financial statement audits,
as it had before transferring its functions to DHS. Thus, it is incumbent
upon FEMA to effectively account for, track, and inventory all of its
property to ensure that it does not lose what it has gained as a result of
its property management improvements.
Conclusions
Federal agency property management systems are critical for establishing
financial accounting and maintaining accountability over property. Such
systems assist property managers in managing their property in accordance
with missions and roles established by Congress. FEMA's lack of adequate
systems and processes to ensure that all property, plant, and equipment
are properly recorded, accurately depreciated, and tracked not only
creates an environment where property is highly susceptible to loss or
misappropriation with little risk of detection, but also affects the
accuracy of the property and financial information used by managers to
make key agency decisions. Even with the improvements made thus far, the
overall lack of transparency in FEMA's acquisition and property management
processes could result in highly sensitive and accountable property not
being entered into the property system and thus not accounted for. If this
situation continues over time, it could affect FEMA's and ultimately DHS's
ability to effectively manage its limited resources and assets. This is
extremely important for an organization such as FEMA whose mission
requires it and its property to be highly versatile and mobile on a
moment's notice. Therefore, it is important that FEMA management establish
adequate financial management systems and internal controls over these
highly vulnerable assets.
Recommendations for Executive Action
In order to establish adequate internal control over property management
and reduce vulnerability to fraud, waste, and abuse, we recommend that the
Secretary of the Department of Homeland Security direct the Under
Secretary for Emergency Preparedness and Response or Under Secretary for
Management to take the following six actions:
o Require FEMA's property system to be linked to acquisition and
financial systems so certain key information can be available for
effective property management.
o Require floor-to-book inventories in addition to current inventory
processes.
o Develop a tracking system to ensure that all FEMA locations complete a
comprehensive inventory of all property, including accountable and
sensitive items, on an annual basis.
o Reiterate and clarify property management procedures for certifying
and documenting inventories.
o Maintain documentation of inventory results and certifications in a
central location at headquarters for management review.
o Identify employees responsible for receiving, reviewing, following up
on, and maintaining inventory certifications and results from FEMA's field
and disaster locations.
Agency Comments and Our Evaluation
We obtained oral comments on a draft of this report from FEMA officials.
They generally agreed with our conclusions and recommendations. However,
they stated that some of the actions called for are already in place. As a
result, we have incorporated changes to emphasize that the appropriate
officials not only receive the inventory certifications and documentation,
but also review, follow-up on, and maintain them. Further, we recognize
the fact that some of the actions in our recommendations, namely those
dealing with the need for an integrated property management system and the
issuance of policy, are now under the direction of DHS and will likely
take time to be implemented at the departmental level. FEMA officials also
provided technical comments, which we incorporated as appropriate.
This report contains recommendations to you. The head of a federal agency
is required by 31 U.S.C. 720 to submit a written statement on actions
taken on these recommendations. You should submit your statement to the
Senate Committee on Governmental Affairs and House Committee on Government
Reform within 60 days of the date of this report. A written statement must
also be sent to the House and Senate Committees on Appropriations with the
agencies' first request for appropriations made more than 60 days after
the date of the report.
___________________________________________________________________________
We are sending copies of this report to the Chairs and Ranking Members of
the Senate Governmental Affairs Committee, the House Government Reform
Committee, and other interested congressional committees, as well as the
Director of the Office of Management and Budget, and other interested
parties within DHS. We will provide copies to others upon request. This
report will also be available on GAO's Web site at http://www.gao.gov.
We acknowledge and appreciate the cooperation and assistance provided by
FEMA officials during our review. If you or your staff have any questions
or wish to discuss this report, please contact please contact me at (202)
512-6906 or by e-mail at [email protected] or Casey Keplinger, Assistant
Director, at (202) 512-9323 or by
e-mail at [email protected]. Major contributors to this report were Cary
Chappell, Lisa Crye, and Saurav Prasad.
Sincerely yours,
McCoy Williams
Director, Financial Management and Assurance
In fiscal year 2002, FEMA's independent auditor identified several
weaknesses, which we have categorized into nine general areas for which
personal property controls need to be improved (see table 2).
Additionally, FEMA's corrective actions as of May 19, 2004 have been
included.
Table 2: Reportable Weaknesses from FEMA's Fiscal Year 2002 Performance
and Accountability Report
Appendix I: Reportable Weaknesses from FEMA's Fiscal Year 2002 Performance
and Accountability Report
LIMS
continues to
change
acquisition
dates for Although FEMA
equipment conducted an
when items agencywide
are inventory of o FEMA has
transferred equipment, it completed an
within FEMA, has not entered inventory of
and it does all of the capitalized
not contain results into property o
data fields, LIMS. As a FEMA has
such as result, established
Officials purchase baseline a schedule
participated in order or inventory for efforts
DHS's eMerge2 invoice information is and tasked
working group numbers, that scattered among APOs to
November 2003 link LIMS, update
to May 2004. FEMA does not equipment to contractor necessary
FEMA's eMerge2 stands have a the reports, data. In
personal for property accounting LIMS has spreadsheets, addition,
property "electronically management records. been updated and other FEMA tasked
management Managing system that Acquisition to no longer non-LIMS the
system, enterprise meets its dates are allow the ("cuff") Automated
LIMS, is resources for accounting Officials important for acquisition records. Unless Inventory
not government needs and participated depreciation date to be LIMS is fully Control
interfaced effectiveness JFMIP in DHS's calculations. changed and completely (AIC) group
Corrective with IFMIS, and requirements. eMerge2 Equipment after its updated and to assist
Reportable actions as and efficiency." It LIMS is used working needs to be initial maintained, and verify
weaknesses of May 19, requires is a primarily to group linked to the entry FEMA is at high data. o
2004 numerous businessfocused track the November accounting without the risk of losing Issuance of
manual system that location and 2003 to May records so prior the ability to regulations
workarounds seeks to availability 2004. that approval of substantiate is pending
to ensure consolidate and of equipment. equipment can FEMA's the baseline upon
accounting integrate DHS's LIMS cannot be Inventory numbers it has development
information budget, perform the substantiated Management worked so hard of eMerge2 ,
is accounting, accounting as to Specialists. to obtain. To scheduled
accurately cost functions acquisition ensure accurate for October
recorded. management, required by date and accounting 2004. o
asset JFMIP. valuation. In records going AIC verified
management, general, forward, FEMA and
acquisitions, property also will need validated
and grant items should to perform input data
functions. track to reconciliations for
supporting and use completeness
procurement workarounds to and
information, compensate for accuracy.
and LIMS's Oversight
accounting inability to was provided
records interface with by the
should the accounting Facilities
correlate to records and
any FEMA maintain
property acquisition
located at dates, and to
either FEMA adjust for
sites or in property
the custody acquisitions,
of others. disposals,
Page 12 GAO-04-819R FEMA Accountability Over Property
Page 13
GAO-04-819R FEMA Accountability Over Property
FEMA does not
Although have
FEMA has procedures to
developed ensure that
processes equipment is
for consistently
identifying, recorded on
valuing, and either a
tracking system or a
Construction component
in Process basis. For
(CIP) and example, the
deferred auditor found
maintenance, that some
these regions
processes recorded o FEMA has
have not servers as a completed an
o FEMA been fully single unit in inventory of
completed the implemented. LIMS, while capitalized
Real Property Reports other regions property. o
Asset related to entered the Established
Management CIP and components of a schedule
Desk Book and deferred o Annual the server as for efforts
Guide. Updates maintenance inventory is individual and tasked
were completed are to be due by the items in LIMS. APOs to
in May 2004. submitted by end of fiscal Therefore, update
o Management accountable year 2004. o servers might necessary
directives are property be recognized data. Tasked
now issued by officers Participating as a the AIC
DHS. FEMA is (APOs) and in DHS capitalizable group to
FEMA has implementing facilities Property item in one assist and
not fully process to managers on Council. o region but not verify data.
Management implemented review and a quarterly Property in another o Issuance
and and a prioritize basis. FEMA, manuals because the of
impairments. Service centralized repairs and however, has issuance on individual regulations
Division facilities improvements not hold pending components is pending
(FMSD). management to real implemented eMerge2 were under the upon
system. property under procedures development. capitalization development
EP&R control. to ensure o threshold. of eMerge2 ,
o Put a timely Implemented Also, the scheduled
process in submission on a auditor found for October
place for and proper quarterly that equipment 2004. o
planning and follow-up on basis that sometimes was AIC verified
programming delinquent property recorded twice and
future years' or management - once as part validated
budget plan. inadequate request and of a system, input data
Fiscal years reports. For review CIP and once as a for
2005-2009 its fiscal and deferred component. completeness
developed with year 2002 maintenance Specifically, and
yearly financial amounts are the auditor accuracy.
revisions statements, identified, found FMSD
planned to FEMA validated, equipment in provides
support budget developed and tracked. FEMA's mobile oversight.
cycle. o the deferred Data for response
Identified maintenance October 2003 vehicles that
budget and information - March 2004 was sometimes
accounting through a is due June double-counted
codes for onetime 2004. o in LIMS-once
programming engineering Implemented as part of the
into fiscal assessment on a vehicle, and
year 2004 provided by quarterly once as a
spending plan a contractor basis the component.
and future on a review of This situation
year budgeting selected data for made it more
and planning number of accuracy difficult to
Corrective requirements. FEMA regarding obtain an
actions as Now under the locations. property accurate
Reportable of May 19, responsibility additions and inventory
weaknesses 2004 of FMSD. deletions. valuation.
Page 14
GAO-04-819R FEMA Accountability Over Property
FEMA does not
have
procedures to
ensure that
equipment is
FEMA does not consistently FEMA does not
have procedures recorded on have procedures
to ensure that either a to ensure that
property system or a property
inventories are component inventories are
performed basis. For performed
properly. To example, the properly. To
establish a auditor found establish a
baseline that some baseline
inventory, FEMA regions o FEMA has inventory, FEMA
required its recorded completed an required its
six APOs to servers as a inventory of six APOs to
perform single unit in capitalized perform
equipment LIMS, while property. o equipment
inventories. A other regions Established inventories. A
FEMA contractor entered the a schedule FEMA contractor
then validated components of for efforts then validated
these the server as and tasked these
inventories. individual APOs to inventories.
During its items in LIMS. update During its
review, the Therefore, necessary review, the
auditor found servers might data. Tasked auditor found
that some Property be recognized the that some Property
regional manuals as a Automated regional manuals
inventories issuance is capitalizable Inventory inventories issuance is
were not on hold item in one Control were not on hold
performed pending region but not (AIC) group performed pending
properly, a further in another to assist properly, a eMerge2
finding eMerge2 because the and verify finding development.
consistent with development. individual data. o consistent with Further any
the validation Issuance of components Issuance of the validation issuance of
contractor's further were under the regulations contractor's agency
findings. For agency capitalization is pending findings. For directives
example, some directives threshold. upon example, some is now under
APOs did not is now under Also, the development APOs did not the purview
check property the purview auditor found of eMerge2 check property of DHS.
onsite against of DHS. that equipment scheduled onsite against
LIMS records; sometimes was for October LIMS records;
i.e., they did recorded twice 2004. o i.e., they did
not do a - once as part AIC verified not do a
"floor-to-book" of a system, and "floor-to-book"
test. The and once as a validated test. The
auditor also component. input data auditor also
identified Specifically, for identified
several the auditor completeness several
locations that found and locations that
did not provide equipment in accuracy. did not provide
a current or FEMA's mobile Oversight by a current or
complete response FMSD. complete
certified vehicles that certified
inventory as was sometimes inventory as
part of the double-counted part of the
baseline in LIMS-once baseline
inventory as part of the inventory
effort. These vehicle, and effort. These
omissions once as a omissions
indicate that component. indicate that
the required This situation the required
annual made it more annual
inventories difficult to inventories
Corrective that APOs are obtain an that APOs are
actions as to perform accurate to perform
Reportable of May 19, might also be inventory might also be
weaknesses 2004 incomplete. valuation. incomplete.
Corrective actions as of May
Reportable weaknesses 19, 2004
FEMA does not have procedures to ensure that o Annual inventory is due by
all equipment is entered into LIMS. Based on the end of fiscal year 2004.
the auditor's inquiries of the APOs and FEMA o Participating in DHS
management, they verified that two Property Council. o
significant equipment items had never been Property manuals issuance on
entered into LIMS, although various FEMA hold pending eMerge2
programmatic offices monitored this development. o Implemented
equipment. As a result, their related on a quarterly basis that
acquisition cost, accumulated depreciation, property management request
and net book value had never been reflected and review that CIP and
in FEMA's financial statements. deferred maintenance amounts
Specifically, radio communication equipment are identified, valid, and
located throughout the United States, as tracked. Data for October
part of FEMA's National Radio System (FNARS) 2003 - March 2004 due June
and government-furnished equipment (GFE) 2004. Implemented on a
located at a contractor site, had never been quarterly basis the review of
entered into LIMS. The acquisition cost of data for accuracy regarding
the FNARS and GFE property items were valued property additions and
at $27,876,000 and $882,000, respectively. deletions.
Source: FEMA Annual Performance & Accountability Report Fiscal Year 2002.
(195021)
*** End of document. ***