Finding 2025-002 Assistance Listing Number 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Activities Allowed or Unallowed, Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Instance of Noncompliance During the COVID-19 emergenc...
Finding 2025-002 Assistance Listing Number 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Activities Allowed or Unallowed, Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Instance of Noncompliance During the COVID-19 emergency, the City faced a high volume of FEMA Public Assistance (PA) grant submissions through CalOES and engaged an outside consultant to support cost recovery efforts. While internal controls were in place, the combination of evolving program determinations, high transaction volume, and limited staffing contributed to a breakdown in tracking payroll costs across projects. Specifically, labor costs associated with the Great Plates program were initially included in an early project submission but were subsequently challenged and removed by CalOES/FEMA. These same labor costs were later included in Category Z (Cat Z) project costs. CalOES subsequently approved the previously disallowed Great Plates labor and obligated funding without additional notification. As a result, the same payroll costs were inadvertently included in both projects, and the duplication was not identified prior to submission. Following the audit, the City conducted a detailed review of labor and fringe benefit costs across all applicable projects. Through this review, the City identified duplicate payroll charges and revised the reported expenditures to remove the duplicate charges. To prevent recurrence, the City has implemented enhanced oversight and centralized tracking controls across all grant programs, including strengthened payroll cost monitoring by funding source, cross-project reconciliations prior to submission, and supervisory review of reimbursement requests to ensure costs are not duplicated, particularly when eligibility determinations change. The City will also enhance monitoring of funding determinations and obligation updates and provide ongoing staff training on federal cost allowability and documentation requirements. These measures will be applied consistently across all grants, with additional attention during high-volume or emergency response activities. Contact person responsible for corrective action: Pooja Shrestha Anticipated completion date: Partially implemented and ongoing as of March 2026; full implementation by June 30, 2026