Federal Emergency Management Agency:

Lack of Controls and Key Information for Property Leave Assets Vulnerable to Loss or Misappropriation

GAO-04-819R: Published: Jul 15, 2004. Publicly Released: Jul 15, 2004.

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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In January 2013, FEMA officials informed GAO that, because of continuing uncertainties concerning future funding for any new or enhanced FEMA systems, they are unable to determine if, and if so, when any major enhancements will be made to FEMA's financial or property management systems.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to require FEMA's property system to be linked to acquisition and financial systems so certain key information can be available for effective property management.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

  2. Status: Closed - Implemented

    Comments: FEMA's Personal Property Management Manual 119-7-1, was revised on April 13, 2011, to require a complete annual physical inventory of all personal property and capitalized property. The revised manual includes a requirement for a 100 percent wall-to-wall inventory of all items located within a facility as of a scheduled date. Such an inventory will help to locate or find property that has not been posted to the property management system of record, which may indicate inadequate interfacing with procurement, lax procurement practices on the part of the staff, failure to report the acquisition of assets by equipment and purchase card holders, or assets received and delivered to custodians, bypassing property management channels.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to require floor-to-book inventories in addition to current inventory processes.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

  3. Status: Closed - Implemented

    Comments: FEMA's Personal Property Management Manual 119-7-1 was revised on April 13, 2011, to require a complete annual physical inventory of all personal property and capitalized property. This includes a requirement for the accountable property officer to establish an inventory schedule with all custodial officers and custodians to ensure that they have all property with their hand receipts on personal charge available for verification and counting at the time and place specified by the accountable property officer. Upon completion and reconciliation of the inventory, the property management officer, accountable property officer and inventory team chiefs must certify that an annual inventory was accomplished as prescribed.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to 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.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

  4. Status: Closed - Implemented

    Comments: FEMA's Personal Property Management Manual 119-7-1 was revised on April 13, 2011, to require a complete annual physical inventory of all personal property and capitalized property. Upon completion and reconciliation of the inventory, the property management officer, accountable property officer and inventory team chiefs are now required to certify that an annual inventory was accomplished as prescribed. The property management officer is also to submit the certification to the agency property management officer no later than 30 calendar days after completion of the inventory. Further, all inventories must be completely reconciled and filed with the agency property management officer by close of business June 30 each year.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to reiterate and clarify property management procedures for certifying and documenting inventories.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

  5. Status: Closed - Implemented

    Comments: FEMA's Personal Property Management Manual 119-7-1 was revised on April 13, 2011, to require a complete annual physical inventory of all personal property and capitalized property. The deputy agency property management officer was designated responsible for developing guidelines and procedures to conduct and reconcile physical inventories on an annual basis, with completion prior to October 1 of each fiscal year and for maintaining the official records of designation letters, certification results, and inventory results.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to maintain documentation of inventory results and certifications in a central location at headquarters for management review.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

  6. Status: Closed - Implemented

    Comments: FEMA's Personal Property Management Manual 119-7-1 was revised on April 13, 2011, to require a complete annual physical inventory of all personal property and capitalized property. The deputy agency property management officer was designated responsible for developing guidelines and procedures to conduct and reconcile physical inventories on an annual basis, with completion prior to October 1 of each fiscal year and for maintaining the official records of designation letters, certification results, and inventory results for both disaster sites and fixed facilities during disaster and non-disaster operations. As the FEMA Administrator's official representatives during disasters, federal coordinating officers were designated with overall responsibility for all property management operations during a disaster and to serve as property management officers.

    Recommendation: In order to establish adequate internal control over property management and reduce vulnerability to fraud, waste, and abuse, the Secretary of the Department of Homeland Security should direct the Under Secretary for Emergency Preparedness and Response or Under Secretary for Management to identify employees responsible for receiving, reviewing, following up on, and maintaining inventory certifications and results from FEMA's field and disaster locations.

    Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response

 

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