Finding No. 2022–007 – Activities Allowed or Unallowed, Eligible Uses – FEMA
Federal Program
ALN 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program
Name of Federal Agency
U.S. Department of Homeland Security
Pass-through Entity
Central Office of Recovery, Reconstruction and Resiliency (COR3)
Category
Non-compliance / Material weakness in internal controls over compliance
Compliance Requirement
Activities Allowed or Unallowed, Eligible Uses
Criteria
As per 2 CFR section 200.403(g), except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
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Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
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Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
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Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
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Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
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Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
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Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also § 200.306(b).
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Be adequately documented. See also §§ 200.300 through 200.309 of this part.
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Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).
Condition
During the closeout procedures, the Central Office of Recovery, Reconstruction and Resiliency (COR3) office performed a 100% validation on Rental Equipment, supporting documents including contract summary record, invoices, and proofs of payment. As a result of the validation, the total validated amount is $979,259 from an original amount of $1,260,775 submitted by the Corporation for reimbursement.
Cause
The Corporation claimed ineligible days in rent of equipment, certain invoices were claimed at a greater monthly rate, various expenses were claimed using retroactive memorandum of necessity as well as other transactions were found to not be eligible due to non-compliance with Puerto Rican Contract law, failing to comply with the proper documentation as required by the regulation.
Effect
The Corporation has to return a total amount of $281,516 due to the unallowed activities that were claimed to the fund.
Questioned Cost
The known questioned cost was calculated by the amount deemed to be unallowable activity of $281,516.
Context
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An amount of $26,127 was deducted from invoice #16307820 due to the dates 9/3/18 to 9/15/18 that falls in the 100% cost share." This amount was claimed under a different PW.
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For chillers, invoice 16307877 was partially covered (15 days eligible), invoice 16308069 was partially covered (12 days eligible), and invoice 16308131 was partially covered (14 days eligible) due to the service order execution date.
• For generators, invoices 16307884, 16307953, 16308033, 16308092, 16308146, 16308207, 16308270, 16308318, 16308357, 16308402, 16308449 and 16308476 were partially covered due to the maximum contract amount.
• For generators, invoices 16307820, 16308622, 16308665, and 16308706 were found to not be eligible for reimbursement due to both retroactive execution as well as non-compliance with Puerto Rican Contract law.
Identification of a repeat finding
This is not a repeat finding from the immediate previous audit.
Recommendation
The management of the Corporation should reinforce its procedures of the administration of federal funds to ensure the compliance with the requirements with each program. Also, the Corporation should establish communication with the Central Office of Recovery, Reconstruction and Resiliency in order to obtain instructions for the correction of the non-compliance event and the related questioned cost.
Views of responsible officials and planned corrective actions
The Corporation’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Corporation’s response on pages 89 to 98.