Federal Emergency Management Agency
Lack of Controls and Key Information for Property Leave Assets Vulnerable to Loss or Misappropriation Gao ID: GAO-04-819R July 15, 2004Prior 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.
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. 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. 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. 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-819R, Federal Emergency Management Agency: Lack of Controls and Key Information for Property Leave Assets Vulnerable to Loss or Misappropriation
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July 15, 2004:
The Honorable Michael Brown:
Under Secretary for Emergency Preparedness & Response:
Department 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. Under 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.[Footnote 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,[Footnote 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.[Footnote 3]
Although FEMA received an unqualified opinion from its auditor in
fiscal year 2002, the auditor reported six material weaknesses[Footnote
4] (one relating to its real and personal property system processes)
and one reportable condition[Footnote 5] 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).[Footnote 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. 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.
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.[Footnote 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 Act[Footnote 8] 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 developed in-house for the
special property tracking needs of FEMA's disaster-related 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
property[Footnote 9] was defined as property over $25,000[Footnote 10]
and accountable property was property costing over $5,000 or that FEMA
determined to be "sensitive."[Footnote 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,[Footnote 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.
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 Control[Footnote 13] and JFMIP Guidance
on Property Management Systems;[Footnote 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. 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 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,[Footnote 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.[Footnote
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 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.
[See PDF for image]
Property with an initial acquisition cost of more than $50,000 with an
expected service life of 2 years or more.
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.
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.
[End of table]
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
inventory[Footnote 17] 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 stand-alone 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 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.
Conclusion:
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:
* Require FEMA's property system to be linked to acquisition and
financial systems so certain key information can be available for
effective property management.
* Require floor-to-book inventories in addition to current inventory
processes.
* Ensure, through the use of a tracking system or official document,
that all FEMA locations complete a comprehensive inventory of all
property, including accountable and sensitive items, on an annual
basis.
* Reiterate and clarify property management procedures for certifying
and documenting inventories.
* Ensure that documentation of the inventories is collected and
maintained in a central location at headquarters for management review.
* Identify employees responsible for receiving, reviewing, following
up on, and maintaining inventory certifications and results from FEMA's
field and disaster locations.
Agency Comments on 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 would like to recognize the fact that some
of these 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.
Once published, we plan to send copies of this letter 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 letter will also be available on GAO's Web
site at http://www.gao.gov. Please contact me at (202) 512-6906 or by
e-mail at williamsM1@gao.gov or Casey Keplinger, Assistant Director, at
(202) 512-9323 or by e-mail at keplingerc@gao.gov. Major contributors
to this letter were Cary Chappell, Lisa Crye, and Saurav Prasad.
Sincerely yours,
Signed by:
McCoy Williams:
Director, Financial Management and Assurance:
Appendix I:
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).
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:
[See PDF for image]
Source: FEMA Annual Performance & Accountability Report Fiscal Year
2002.
[End of table]
(195021):
FOOTNOTES
[1] See 31 U.S.C. §§ 901(b), 3515(a), 3521(e) (2000).
[2] A 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 Generally Accepted
Accounting Principles.
[3] The 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.
[4] A 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.
[5] Reportable 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.
[6] Federal Emergency Management Agency, Annual Performance and
Accountability Report Fiscal Year 2002 (Washington, D.C.: Jan. 24,
2003).
[7] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Federal Emergency Management Agency, GAO-03-113
(Washington, D.C.: Jan. 24, 2003).
[8] See 31 U.S.C. §§ 901(b), 3515(a), 3521(e) (2000).
[9] Capitalized 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.
[10] This threshold was increased to $50,000 by DHS.
[11] FEMA 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.
[12] Custody 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.
[13] U.S. General Accounting Office, Internal Control: Standards for
Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999).
[14] Joint Financial Management Improvement Program, Federal Financial
Management System Requirements: Property Management Systems
Requirements, JFMIP-SR-00-4 (Washington, D.C.: October 2000).
[15] JFMIP-SR-00-4.
[16] GAO-03-113.
[17] According to FEMA's Personal Property Management guidance,
Property Management Officers (PMO) and APOs must certify that an annual
inventory was accomplished as prescribed.
