Grants

KPMG, LLP found that the Federal Emergency Management Agency (FEMA) did not always ensure Virgin Islands Territorial Emergency Management Agency (VITEMA) and the Virgin Islands Department of Education (VIDE) established and implemented policies, procedures, and practices to account for and expend Public Assistance (PA) grant funds according to Federal regulations and FEMA guidance.  For example, VIDE did not have policies and procedures to address procurement-related conflicts of interest and related disciplinary actions.  This occurred because FEMA did not adequately train VIDE personnel and did not review these policies and procedures.  We made five recommendations that, when implemented, should improve management of FEMA PA grant funds, ensuring the funds are expended according to Federal regulations and FEMA guidance.  FEMA concurred with the recommendations. 

KPMG, LLC found the Federal Emergency Management Agency (FEMA) did not provide adequate guidance to the Virgin Islands Emergency Management Agency (VITEMA) and the Virgin Islands Housing Finance Agency (VIHFA) and that VITEMA and VIHFA did not adequately manage FEMA Public Assistance (PA) funds.  Also, VITEMA and VIHFA did not always ensure the accuracy of project funding information or promptly notify FEMA about significant project cost overruns.  This occurred because FEMA did not provide the necessary guidance to and oversight of VITEMA and VIHFA to properly manage PA funds.  Because of these deficiencies, PA programs are at increased risk of mismanagement and expenditure of funds for unallowable activities.  We made seven recommendations to improve VITEMA’s and VIHFA’s management of FEMA PA funds, ensuring they are expended according to Federal regulations and FEMA guidance.  FEMA concurred with the recommendations.

FEMA did not take sufficient actions to prevent fraud, waste, and abuse of transportation assistance funds for vehicles considered damaged or destroyed by Hurricanes Harvey, Irma, and Maria in FY 2017.  These weakness occurred because FEMA does not require that agencies collect and retain documentation used to establish applicant eligibility; consider pre-disaster vehicle market value when determining award amounts; provide guidance to state, territorial and tribal governments on how to set transportation assistance thresholds; and conduct post-payment reviews to ensure funds are spent appropriately.  We made three recommendations that, when implemented, will help FEMA ensure it is spending Federal funds for transportation assistance properly.  FEMA concurred with one recommendation and non-concurred with two recommendations.

Federal Emergency Management Agency (FEMA) did not properly oversee the Louisiana Governor’s Office of Homeland Security and Emergency Preparedness (Louisiana or State) to ensure it complied with Federal regulations and FEMA guidelines.  Louisiana and the Office of Community Development (OCD), in turn, did not always properly account for and expend Federal grant funds.  Specifically, Louisiana did not provide adequate documentation to support costs, as required by Federal regulations, and FEMA is not requiring the State to provide mandatory documentation to close out the $706.6 million Hazard Mitigation Grant Program (HMGP) grant.  Louisiana also has not provided FEMA with required documentation showing that homeowners paid $79.7 million in promissory notes for state-funded mitigation work on their homes.  Finally, Louisiana drew down funds exceeding project obligations by $50.4 million due to a lack of FEMA controls.  These issues arose primarily because FEMA did not ensure Louisiana exercised proper oversight of the HMGP grant and the State did not comply with Federal regulations.  As a result, Federal funds are at risk of fraud, waste, and abuse.  We provided five recommendations to FEMA to postpone project closeout until Louisiana provides adequate documentation that supports $706.6 million in costs and that FEMA ensures compliance with Federal regulations and FEMA guidelines.  FEMA’s responses were sufficient to close all but one recommendation, which we consider open and unresolved.  

The Chief Financial Officers Act of 1990 (Public Law 101-576) and the Department Of Homeland Security Financial Accountability Act (Public Law 108-330) require us to conduct an annual audit of the Department of Homeland Security’s (DHS) consolidated financial statements and internal control over financial reporting. KPMG noted that the financial statements present fairly, in all material respects, DHS’ financial position as of September 30, 2018.

KPMG issued an adverse opinion on DHS’ internal control over financial reporting of its financial statements as of September 30, 2018. The report identifies the following six significant deficiencies in internal control, the first two of which are considered material weaknesses, and four instances where DHS did not comply with laws and regulations.

Department of Homeland Security shall submit a report not later than October 15, 2017, to the DHS Office of Inspector General listing all grants and contracts awarded by other than full and open competition (OTFOC) during fiscal years 2016 and 2017. We contracted with Williams, Adley & Company-DC, LLC to review the OTFOC report and assess DHS compliance with applicable laws, regulations, and departmental procedures.  Williams Adley concluded that DHS complied with applicable statutes, regulations, and policies governing grants and contracts awarded by OTFOC in FY 2017. During that year, DHS awarded 62 noncompetitive grants worth about $140 million and 121 noncompetitive contracts worth about $118 million through OTFOC. The independent auditors determined that DHS’ Report on OTFOC for FY 2017 as well as the information related to these grants and contracts in the Federal Procurement Data System – Next Generation and USASpending.gov were accurate. The auditors also found that DHS followed written policies and procedures and the requirements of the Federal Funding Accountability and Transparency Act of 2006 when awarding grants and contracts

noncompetitively.

At the time of our audit, Federal Emergency Management Agency (FEMA) estimated that the City of Waterloo, Iowa (City), sustained approximately $1.9 million in damages from severe storms and flooding from September 21 through October 3, 2016. The City did not provide all requested information and explanations necessary to perform our review; therefore, we were unable to assess whether the City’s policies, procedures, and business practices were adequate to account for FEMA Public Assistance grant funds properly. The City’s failure to cooperate with a Federal audit put approximately $1.9 million dollars in potential FEMA grant funding at risk of being deobligated or not funded.