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Finding 2025-001 Program Name: Covid 19: Disaster Grants – Public Assistance Federal Grantor: U.S. Department of Homeland Security, Federal Emergency Management Agency Passthrough Grantor: State of New York Homeland Security and Emergency Services Assistance Listing Number: 97.036 Federal Award Year: January 1, 2025 December 31, 2025 Grant Number and Years: PW4708-Pjct685140 (January 1, 2025 December 31, 2025) Compliance Requirements: Activities Allowed or Unallowed/Allowable Costs/Cost Principles Criteria FEMA evaluates the eligibility of all costs claimed by the applicant. Not all costs incurred as a result of the incident are eligible. According to the FEMA Public Assistance Program and Policy Guide (PAPPG), FP 104-009-2 (June 1, 2020), Chapter 6: Cost Eligibility (pages 65 and 93–95), as referenced in the 2025 OMB Compliance Supplement for ALN 97.036, all claimed costs must be: • Directly tied to the performance of eligible work; • Adequately documented (2 CFR section 200.403(g)); • Reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155, and 2 CFR section 200.406); • Authorized and not prohibited under federal, state, territorial, tribal, or local government laws or regulations; • Consistent with applicant's internal policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the applicant; and • Necessary and reasonable to accomplish the work properly and efficiently (2 CFR section 200.403). Condition and Context VNS Health claimed $32,483 for additional cleaning services at a rented location, asserting the costs were necessary incremental expenditures incurred in response to the COVID-19 pandemic. Upon inspection of the supporting documentation, which consisted of an invoice with multiple line items summing to $32,483, only $2,024 of the claimed amount represented incremental COVID-19-related costs as defined by the grant agreement. The remaining $30,459 consisted of routine rent related expenses that did not meet FEMA eligibility requirements for emergency protective measures and therefore is unallowable under FEMA guidance and 2 CFR § 200.403. To assess whether this matter was pervasive, we expanded our testing to all expenditures within the Infection Control contracted services category. While reviewing the population, we observed no other unallowable claims, however we identified $2,630 of COVID-19-related eligible costs that had not been included in the reimbursement claim. Cause VNS Health's internal control for reviewing invoiced expenditures, while generally effective, was not performed with sufficient precision to identify and segregate ineligible expenditures on non-standard invoices where federal and non-federal reimbursable charges are comingled. As a result, the control did not prompt the reviewer to obtain a detailed breakdown of the commingled charges, which resulted in the unallowable portion being approved for reimbursement. Effect VNS Health received reimbursement from FEMA for $30,459 of costs determined to be unallowable. Questioned costs $30,459 Statistical Sample No Repeat Finding A similar finding was not reported in the prior year audit. Recommendation We recommend VNS Health enhance its grant expenditure review process to specifically address the risk posed by complex or commingled invoices. View of Responsible Official Management agrees with the auditor’s recommendation and will strengthen procedures related to the verification of the allowability of the expenditures to ensure they are reported to the granting agencies completely and accurately.