Audit 412484

Finding 2025-001 Timing of Recognition of FEMA Public Assistance Expenditures on the Schedule of Expenditures of Federal Awards Award Information Cluster: Not applicable Federal Granting Agency: Department of Homeland Security Award Name: Disaster Grants – Public Assistance Award Numbers: FEMA 4420-DR-NE, FEMA 4325-DR-NE, FEMA 4521-DR-NE, FEMA 4616-DR-NE, FEMA 4641-DR-NE, FEMA 4662-DR-NE Award Years: 2019-2023 Assistance Listing #: 97.036 Assistance Listing Title: Disaster Grants – Public Assistance Pass-through Entity: Nebraska Emergency Management Agency Criteria For Disaster Grants – Public Assistance, nonfederal entities are required to record expenditures on the Schedule of Expenditures of Federal Awards ("SEFA") when both (1) FEMA has approved the nonfederal entity's project and (2) the nonfederal entity has incurred the eligible expenditures. FEMA's approval of a subaward is indicated when FEMA obligates the federal share of the eligible project cost to the recipient. Condition Historically, the District's process for determining the timing of expenditures reported on its SEFA for Assistance Listing 97.036 considered the date eligible project expenditures were incurred following a federally declared disaster but did not consistently consider the date on which FEMA approved the related project by obligating the federal share of eligible project costs. As a result, certain eligible expenditures associated with FEMA Public Assistance projects were reported on the District's SEFAs in fiscal years prior to the fiscal year in which FEMA obligated the related federal funding. Management's retrospective analysis of the fiscal years 2019 through 2023 identified differences between expenditures historically reported on the SEFA and expenditures that would have been reported had the FEMA obligation date been considered in determining the appropriate reporting period. The underlying eligible project expenditures associated with these differences had been subject to audit in prior periods. Accordingly, the matter resulted in differences in the timing of reporting expenditures among fiscal years rather than identification of unallowable expenditures, and no questioned costs were identified. Cause The District's historical process for preparing the SEFA was based on an insufficient understanding of the program-specific reporting criteria applicable to FEMA Public Assistance expenditures and incorrect interpretation that eligible expenditures should be reported once the expenditures were incurred following declaration of a federal disaster and the District expected the project to subsequently qualify for FEMA reimbursement. Consequently, the process did not include a control requiring management to identify and consider the date FEMA obligated the federal share for each project when determining the fiscal year in which the related eligible expenditures should be reported on the SEFA. Effect Without a control that considers both the date eligible expenditures are incurred and the date FEMA approves the project through obligation of the federal share, expenditures related to FEMA Public Assistance projects could be reported on the SEFA in an incorrect fiscal year. Incorrect timing of SEFA recognition could affect the amount of federal expenditures reported for a fiscal year and, depending on the amount of expenditures affected, could also affect the District's determination of whether it is subject to the audit requirements of 2 CFR Part 200, Subpart F and the identification of programs subject to audit. Questioned Costs The matter did not result in questioned costs because the underlying project expenditures were incurred and were subject to audit in either fiscal year 2021 or 2022. Repeat Finding No Recommendation We recommend that the District maintain controls over preparation of the SEFA that require management, for each FEMA Public Assistance project, to identify and document both (1) the period in which eligible project expenditures were incurred and (2) the period in which FEMA approved the project by obligating the federal share. For expenditures incurred before FEMA obligation, the District should ensure that such expenditures are included on the SEFA in the fiscal year in which FEMA obligation occurs and that the SEFA includes the applicable disclosure of expenditures incurred in a prior fiscal year. Management should also maintain a reconciliation of eligible expenditures, FEMA obligations, amounts reported on the SEFA, and subsequent reimbursements to support the completeness and accuracy of SEFA reporting. Management’s Views and Planned Corrective Actions Management’s response is included in “Management’s Views and Corrective Action Plan” included at the end of this report after the summary schedule of prior audit findings and status.