Finding Text
2025-002 – Questioned or Unsupported Costs
Information on Federal Program
United States Department of Homeland Security - Federal Emergency Management
Agency (FEMA). Federal Assistance Listing Number 97.036 – Disaster Grants – Public
Assistance.
Compliance Requirements
Activities Allowed or Unallowed / Allowable Costs and Cost Principles
Criteria
In accordance with 2 CFR §200.403, costs charged to a federal award must be necessary,
reasonable, and allocable to the award. Additionally, costs must be adequately documented
to be allowable under federal awards.
Condition
During our testing of activities and allowable costs for the year ended December 31, 2024,
we identified seven (7) instances where the amounts requested for reimbursement were not
allowed.
Cause
No cause could be determined.
Effect
The City received FEMA grant reimbursements for unallowable or unsupported costs,
potentially reducing available federal funds for future emergencies. The City may also be
at risk of noncompliance with FEMA cost-sharing (matching) requirements.
Questioned Costs
$54,366 (Federal share $40,775). Context
Forty-two (42) disbursements totaling $410,854 were randomly selected for testing. We
identified seven (7) exceptions. These exceptions included unsupported equipment and
labor charges, duplicate payroll, duplicate material costs, and unsupported payroll.
Recommendation
We recommend the City review the identified transactions and consult with FEMA
regarding resolution of the questioned costs. The City should also take steps to ensure that
only allowable, adequately documented costs are submitted for reimbursement in the
future.
Management’s Response
Responsible Official’s Response and Corrective Action Planned: We have reached out to
FEMA and was provided this summarized response: “The project was obligated as a small
project. FEMA does not adjust the funding amount unless specific conditions are met. If
the applicant was stating that the actual cost for the small project was more than FEMA
obligated, we would have to request what is called a New Small Project Overrun Appeal
Request. But in this case, the actual cost resulted in an underrun based on the small project
obligated amount. FEMA only asks for the applicants to apply the underrun amount back
into the community." Management has also implemented a process to include financial
oversight and review of all documents prior to submission to FEMA for reimbursement
going forward. We will meet with all leadership staff to discuss documentation
requirements necessary for FEMA reimbursements. Lastly, Management will only sign off
on reimbursed costs after all changes to FEMA requests have been adequately documented.
Implementation Date: Immediate
Person Responsible for Corrective Action Plan: Chief Financial Officer, Ashley Cason