FEMA Should Recover $2.0 Million in Unneeded Funds and Disallow $1.2 Million of $7 Million in Grant Funds Awarded to Spring Lake, New Jersey, for Hurricane Sandy

The Borough received a $7 million grant award from the New Jersey Office of Emergency Management (New Jersey), a Federal Emergency Management Agency (FEMA) grantee, for damages resulting from Hurricane Sandy, which occurred in October 2012. We conducted this audit early in the grant process to identify areas where the Borough may need assistance in managing Federal funds. The Borough of Spring Lake, New Jersey, (Borough) accounted for disaster costs on a project-by-project basis and met applicable Federal regulations in processing disaster related procurement transactions. However, the Borough completed one large project below the estimated project cost, and about $2.0 million remains obligated for that project. Therefore, FEMA should deobligate the $2.0 million in unneeded funds as soon as possible and put those funds to better use. In addition, the Borough could not provide adequate support for emergency and permanent restoration work totaling $798,317. The Borough also had not applied insurance proceeds totaling $431,507 against claims for eligible project costs. Therefore, the $431,507 represents ineligible duplicate benefits, because FEMA cannot fund costs that insurance covers. These findings occurred, in part, because the Borough did not effectively coordinate with New Jersey to ensure Borough compliance with FEMA grant requirements.