A Performance Audit
An Audit of Public Assistance Disaster Grants Related to Hurricane Harvey
The Texas Division of Emergency Management (TDEM) is responsible for administering the Federal Emergency Management Agency’s Public Assistance Program (Program). While TDEM complied with most federal and state requirements to expend and monitor Program grant funds, it should strengthen its processes related to:
- Reviewing supporting documentation for large projects (those with total eligible costs greater than or equal to $123,100) to ensure that subrecipients are not overpaid and that subrecipients comply with applicable requirements.
- Allocating expenditures to the appropriate cost reimbursement rate of 90 percent, recording transactions in its accounting system, and accounting for equipment related to its emergency work project.
- Ensuring that subrecipients with small projects (those with total eligible costs less than $123,100) retain documentation for the expenditures and procurement used to support the projects.
TDEM had adequate processes and controls in place to monitor the contract with the grant compliance contractor that it used to administer and monitor disaster grants. TDEM also developed a process and performed reconciliations of Program funding as part of its financial monitoring of the grant. In addition, TDEM allocated state grant funding for debris removal assistance in accordance with the requirements in the contract it had with the Texas Commission on Environmental Quality.
Hurricane Harvey made landfall in Texas as a Category 4 hurricane on August 25, 2017. The president declared a major disaster for the state of Texas on August 25, 2017. FEMA approved federal grant assistance for Texas through a FEMA-State Agreement, which was signed by the governor and FEMA on August 27, 2017 and included the Public Assistance Program (Program). The funding provided through the Program was for (1) debris removal, (2) emergency protective measures, (3) restoration of disaster-damaged, publicly owned facilities and the facilities of certain private nonprofit organizations, and (4) administrative costs. For Hurricane Harvey, FEMA reimbursed 90 percent of eligible costs for most project work categories. The FEMA-State Agreement designated 53 counties in Texas as eligible for Program funding as a result of Hurricane Harvey. As of May 31, 2019, FEMA had approved and funded 4,546 projects totaling $1.5 billion for Hurricane Harvey-related Program grants, and the amount reimbursed to the subrecipients totaled approximately $1.1 billion.
TDEM Had Adequate Controls in Place to Ensure That Subrecipients of Funding for Large Projects Complied with Federal Grant Requirements, But It Should Strengthen Its Review of Project Documentation
TDEM ensured that the subrecipients complied with federal grant requirements for most of the large projects tested (those with total eligible costs greater than or equal to $123,100). However, TDEM should strengthen its processes related to its review of project expenditure and procurement documentation to ensure subrecipients are (1) reimbursed for the correct amounts and (2) comply with applicable procurement requirements.
FEMA approved a large emergency work project for TDEM, allocating approximately $119.7 million for the costs TDEM incurred to provide emergency response assistance during and directly following Hurricane Harvey. TDEM complied with most federal and state requirements related to expending Public Assistance Program (Program) grant funds for its emergency work project, but it should strengthen its processes and documentation, including: (1) allocating project expenditures to the appropriate cost reimbursement rate of 90 percent, (2) recording transactions in its accounting system, and (3) accounting for equipment it purchased for the project.
While TDEM Followed Its Procedures to Expend Program Grants for Small Projects, It Should Ensure That Subrecipients Maintain Documentation as Required
Auditors tested 25 small projects totaling $1.9 million; for those projects, TDEM ensured that the subrecipients submitted certifications that work was completed prior to reimbursing the subrecipients, which is in accordance with its policy. However, TDEM did not always ensure that subrecipients maintained documentation to support the work performed for the project or that expenditures were within the approved project time frames for 13 (52 percent) of the 25 projects tested.
TDEM Properly Reviewed Invoices and Approved Payments to the Contractor It Used to Administer Disaster Grant Programs
TDEM had adequate processes and controls in place to monitor the contractor it used to monitor projects for Hurricane Harvey response and recovery. However, TDEM should improve its processes to make payments timely and remit required interest.
TDEM Had Adequate Processes to Perform Reconciliations as Part of Its Financial Monitoring of the Program Grant
TDEM developed a process in February 2019 to reconcile project-level expenditure data from its grant management system to the federal system it used to obtain Program funds from FEMA. TDEM performed the first reconciliation in February 2019 and four additional reconciliations in April and May 2019. Over that time, TDEM had been refining its reconciliation procedures and had reduced the number of projects with discrepancies from 14 to 2.
TDEM Had Adequate Processes to Allocate State Debris Removal Assistance Funding to Eligible Subrecipients
TDEM appropriately allocated state grant funding for debris removal assistance in accordance with the requirements in the contract it had with the Texas Commission on Environmental Quality (TCEQ). As of May 31, 2019, TDEM appropriately allocated a total of $34.6 million in accordance with contract requirements to 200 eligible subrecipients of Program debris removal funding and reimbursed subrecipients a total of $24.9 million of that amount.
Graphics, Media, Supporting documents