Sacramento Mayor Kevin Johnson at a press conference Feb. 1 announcing $7.5 million in federal funds handed to the city. Nearby is a bomb disposal robot commonly purchased with homeland security grants. Image: CalEMA

Federal auditors are once again raising questions about how California chose to spend hundreds of millions in federal homeland security grants awarded to the state for fighting terrorism and preparing for catastrophes after the Sept. 11 hijackings.

Investigators working for the Department of Homeland Security’s watchdog inspector general say state oversight officials in California could have identified “poor investments” sooner and put a stop to certain purchases that cities made during later stages of the war on terror.

Instead, state workers often rubber-stamped grant applications from major cities and didn’t focus on the merit or value of a purchase, allowing critical needs to go unmet, according to a report made available March 15.

Several examples were cited.

A so-called “fusion center” used by police to collect threat information bought 55 big-screen digital TVs that it planned to use with a training system for employees. But the training system was never purchased, and when auditors showed up, all of the televisions were tuned to a single station.

Auditors also learned that one area of the state bought thousands of special suits designed to protect against dangerous chemical and biological substances, but practical consideration wasn’t given to the “limited” number of emergency responders that would actually need them. The suits were purchased to replace an existing stock due to expire.

The report says a training facility for emergency operations costing more than $2 million was “seldom used” in another area. Local officials elsewhere shelled out over $700,000 for computer software, but it was abandoned after the program “did not perform as well as the supplier indicated it would.” So a different software package carrying a price tag of $1.2 million had to be purchased instead.

The inspector general won’t mention offenders by name, making it a challenge to hold cities in California accountable or identify companies that profited from the meteoric rise in security spending after Sept. 11. Such reports are designed in part to improve how federal dollars are handled, and auditors list recommendations they hope will lead to the more responsible use of taxpayer cash.

As for the four-dozen fusion center TVs, they cost taxpayers almost $75,000, and auditors had this to say about them:

The center director told us televisions like these are a standard element in most fusion centers. However, without the training system, the original justification for purchasing the televisions was not valid.

Dozens of fusion centers were built nationwide following Sept. 11 for local, state and federal officials to analyze and share intelligence about possible terrorist or criminal threats. Congressional investigators said last year the federal government had spent $426 million supporting them with homeland security grants since 2004.

Matthew Bettenhausen, who recently departed as secretary of the California Emergency Management Agency, or CalEMA, did not challenge the findings in a response letter to auditors dated Dec. 1. He promised the state would distribute guidance to cities “specifying the importance of efficient and cost effective use of grant funds.”

FEMA officials from the federal government provided their own answers in a separate letter, emphasizing that once the grants flow out of Washington, California becomes responsible “for all programmatic and fiduciary actions.” They say problems leading up to 2008 and beyond that were exposed by auditors in California “are historic, systemic and permeate the state,” according to the report.

A similarly critical assessment in 2009 of California’s grant spending found that during the earliest turbulent years of the war on terror, local communities purchased large-ticket items without requiring private suppliers to compete for taxpayer money, allowed a generator to sit unused for two years, and didn’t compile necessary documents to support millions of dollars worth of expenditures, among other things.

The latest report zeros in on just one federal grant program that singularly benefits major California cities and their surrounding areas. Known as the Urban Areas Security Initiative, the report says six designees raked in over $420 million between 2006 and 2008, the period of spending auditors examined. They are Anaheim/Santa Ana, San Diego, Sacramento, Riverside, Los Angeles/Long Beach and the San Francisco Bay Area.

An appendix in the report also lists local offices visited by the auditors, from the Sacramento Police Department to San Francisco’s bomb squad.

Auditors say that California is still signing sole-source contracts without competition and without providing justification. They pointed to millions in purchases as examples where federal procurement rules weren’t followed, among them public-safety radios, consulting contracts, “intelligence analysis” software and a $6.2 million license-plate reader system designed to notify police of stolen cars or outstanding warrants.

In fact, several jurisdictions were buying automated license-plate scanners costing over $6 million from a single supplier. Officials claimed they had to do so because the equipment relied on proprietary software, and in order for information to be shared with neighboring jurisdictions, “all users had to buy from the same manufacturer,” the report said.

Sole-source investments deny taxpayers “the full economic value of a competitive marketplace,” according to auditors, who added that no cost analysis was done to ensure prices were fair and reasonable in purchases they reviewed.

While state officials acknowledge this problem and have made some effort to correct it, we found little progress since the condition was originally reported.

In CalEMA’s response letter, Bettenhausen vowed that the state would give grant overseers the power to block sole-source purchases not approved in advance.

But there’s more. One urban area that bought a license-plate scanner system had not bothered to collect data on how many stolen vehicles were recovered or criminals were nabbed with the technology’s help, let alone compile evidence of how it contributed to the prevention or investigation of terrorist attacks. “Without clear performance measures,” the report said in general about the Urban Areas Security Initiative, “there was no assurance these funds were well spent.”

Next to New York, California is a leader in the sheer volume of homeland security grants it receives from Washington, and the state’s congressional delegation isn’t shy about complaining when FEMA proposes any reduction in the funds. States are eligible for a vast array of grants managed by FEMA, and overall the federal government had pumped $3 billion into California by 2009.

California Watch and the Center for Investigative Reporting joined numerous media partners across the state in 2009 to investigate homeland security grant spending. Based on an extensive review of available public records, the stories showed how several counties in California were struggling to responsibly manage the money as it poured out of the federal government. An interactive map was also made available that allowed readers to see how local officials were spending readiness grants.

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G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED,, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.