DEPARTMENT OF HOMELAND SECURITY

**CFDA 97.008** **URBAN AREAS SECURITY INITIATIVE**

**I. PROGRAM OBJECTIVES**

The Urban Areas Security Initiative (UASI) is intended is to create a
sustainable national model program to enhance security and overall
preparedness to prevent, respond to, and recover from acts of terrorism.
In general, the UASI provides financial assistance to States to address
the unique equipment, training, planning, and exercise needs of large
urban areas, and to assist them in building an enhanced and sustainable
capacity to prevent, respond to, and recover from threats or acts of
terrorism. It also includes awards to (1) selected State and local
governmental entities and commercial companies to develop plans and
approaches to ensuring the safety and protection of the Nation's ports,
and (2) selected State and local governmental entities to develop plans
and approaches to ensuring the safety and protection of the Nation's
transit systems.

**II. PROGRAM PROCEDURES**

UASI funding is provided to the States by the Office of Domestic
Preparedness (ODP), Department of Homeland Security (DHS). ODP was
transferred to DHS from the Department of Justice (DOJ) on March 1,
2003, but DOJ's Office of Justice Programs (OJP) continues to serve as
the DHS agent for awarding and managing these grants.

During FY 2003, funding was provided to the States pursuant to different
UASI funding opportunity announcements, each with separate program
guidance. There were four announcements: Urban Area Security Initiative
I, Urban Area Security Initiative II, Urban Area Security Initiative -
Port Security, and Urban Area Security Initiative - Transit System
Security. In general, the basic requirements of the program are the same
among the individual program guidances for these initiatives but may
vary based on the language in the applicable appropriation (e.g., the FY
03 supplemental appropriation). Funding under each initiative was
accomplished by a separate grant award. Recipients may not use funds
provided under an award pursuant to one funding opportunity announcement
to support activities under an award for another of the announcements.
In FY 2004, ODP issued a single funding opportunity announcement for
this program.

The State Administering Agency (SAA), as the direct recipient of grant
funds, is expected to pass through a specified percentage of funds to
local jurisdictions, whether identified urban areas or mass transit
authorities. See the program guidance, as referenced in the
"Availability of Other Program Information" below, for a list of these
urban areas and transit authorities.

**Source of Governing Requirements**

This program is authorized under section 430 of the Homeland Security
Act of 2002; Section 1014 of USA PATRIOT Act of 2001 (Pub. L. 107-56, 42
USC 3714); Title I, Chapter 6, Wartime Supplemental Appropriations Act
of 2003 (Pub. L. 108-11); Title III, FY 2004 Department of Homeland
Security Appropriations Act, Pub. L. 108-90; and Title III, FY 2005
Department of Homeland Security Appropriations Act (Pub. L. 108-334)
(see CFDA 97.067 for FY 2005).

**Availability of Other Program Information**

Additional information, including the program guidance, is available
from the ODP website at
<http://www.ojp.usdoj.gov/odp/grants_programs.htm>.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Funds may be used for terrorism prevention activities (Title I,
> Chapter 6, Pub. L. 108-11; 117 Stat 583; Title III, Pub. L. 108-90).
>
> 2\. Funds may be used for operational costs, including personnel
> overtime as needed (Title I, Chapter 6, Pub. L. 108-11, 117 Stat 583).
>
> 3\. Funds may be used for operational costs, including personnel
> overtime and overtime associated with the Office for Domestic
> Preparedness certified training, as needed (Title III, Pub. L.
> 108-90).
>
> 4\. Funds may be used for management and administration (42 USC
> 3714(c)(2); Title III, Pub. L. 108-90) (see section III.G.3.a for a
> limitation).
>
> 5\. Funds may not be used for the construction or renovation of
> facilities (Title I, Chapter 6, Pub. L. 108-11, 117 Stat 583; Title
> III, Pub. L. 108-90).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching -** Not Applicable
>
> **2. Level of Effort --** Not Applicable
>
> **3. Earmarking**
>
> a\. Not more than three percent of the grant funds made available to a
> State may be used for costs of management and administration (42 USC
> 3714(c)(2)).
>
> b\. The SAA must obligate at least 80 percent of the funding to
> designated mass transit agency headquarters or urban areas (Title I,
> Chapter 6, Pub. L. 108-11, 117 Stat 583; Title III, Pub. L. 108-90).

**I. Procurement and Suspension and Debarment**

> Funds must be used consistent with the applicable provisions of the
> Buy American Act (41 USC 10a *et seq*.) (Section 518, Pub. L. 108-90).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Not Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** -- Not Applicable

**N. Special Tests**

> **1. Subgrant Awards**
>
> **Compliance Requirement** - States must obligate funding for
> subgrants to designated mass transit agency headquarters and urban
> areas within 60 days of their receipt of funds from ODP[^1] (Title I,
> Chapter 6, Pub. L. 108-11, 117 Stat 583; Title III, Pub. L. 108-90)
> unless, based on written agreements with all affected urban areas in
> the State, the State retains the funding and makes purchase on behalf
> of the urban areas. Obligate" has the same meaning as in Federal
> appropriations law, i.e., there must be an action by the State to
> establish a firm commitment; the commitment must be unconditional on
> the part of the State; there must be documentary evidence of the
> commitment, and the award terms must be communicated to the subgrantee
> and, if applicable, accepted by the grantee.
>
> **Audit Objectives** - To determine if (1) the State (other than a
> State operating under a written agreement to retain and spend funds on
> behalf of the affected urban areas in that State) complied with the
> requirement to obligate funds for subgrants within 60 days after the
> date of the grant award and (2) subgrantees were able to draw down
> funds immediately following State obligation of funds.
>
> **Suggested Audit Procedures**
>
> a\. Determine if the State has written procedures for making subgrant
> awards, including any standards for administrative lead-time for
> obligation of funds and issuance of awards.
>
> b\. Review the State's written procedures, if any, for consistency
> with the compliance requirement.
>
> c\. Determine if the subgrant amounts were obligated in a timely
> manner, consistent with UASI requirements and the State's own
> procedures.
>
> d\. Select a sample of subgrant awards under this program and review
> the subrecipients' payment requests to determine if funds were
> disbursed by the State to the subgrantee consistent with the dates of
> their awards.

## **IV. OTHER INFORMATION**

When completing the Schedule of Expenditures of Federal Awards,
recipients should record their expenditures using the CFDA number(s)
shown on the notice of award for the period in which the funds were
awarded. Expenditures under this program in the current audit period may
be attributable to awards made in prior years under other CFDA numbers
as indicated below and shown in the table.

Recipients' 2003 funding for UASI was awarded under CFDA 16.011; their
2004 UASI funding included supplemental funding under CFDA 16.011 as a
result of Pub. L. 108-11 (Emergency Wartime Supplemental Appropriations
Act, 2003) and funds awarded under CFDA 97.008. Recipients' 2005 funding
for UASI is part of the consolidated Homeland Security Grant Program
under CFDA 97.067 (see program supplement for CFDA 97.004/97.067) and
should be audited with that program.

+---------------------------------+------------------------------------+
| *Urban Areas Security           |                                    |
| Initiative*                     |                                    |
+---------------------------------+------------------------------------+
| *Year of Grant Award*           | *CFDA Number*                      |
+---------------------------------+------------------------------------+
| 2003                            | 16.011                             |
+---------------------------------+------------------------------------+
| 2004                            | 16.011 (supplemental award)        |
|                                 |                                    |
|                                 | 97.008                             |
+---------------------------------+------------------------------------+
| 2005                            | 97.067                             |
+---------------------------------+------------------------------------+

**DEPARTMENT OF HOMELAND SECURITY**

**CFDA 97.036 PUBLIC ASSISTANCE GRANTS**

**I. PROGRAM OBJECTIVE**

The objective is to provide assistance to States, local governments, and
selected non-profit organizations under the Public Assistance Grants
(PA) program.

**II. PROGRAM PROCEDURES**

Following a Presidential declaration of a major disaster or an
emergency, the Federal Emergency Management Agency (FEMA), Department of
Homeland Security (DHS), awards grants for public assistance to States.
The State may use the funds to restore its own disaster-damaged projects
and to provide subgrants to local governments (including Indian tribes,
authorized tribal organizations, and Alaskan native villages and
organizations) and selected private non-profit facilities.

The PA program is administered by the State (e.g., the State Emergency
Agency) in accordance with a FEMA-State Agreement to provide assistance
that may be available under an emergency or major disaster declaration.
The State acts as the grant administrator for all funds provided under
the PA program. The grant administrator's responsibility includes
providing technical advice and assistance to eligible subgrantees,
providing State support for damage survey activities, ensuring that all
potential applicants are aware of assistance available, and submission
of documents necessary for grant awards (44 CFR sections 206.200 through
206.349). In certain circumstances an Indian Tribe may be a grantee.

For purposes of the PA program, the following terms will be used:

> *State* - The State Agency that is defined as the grantee under FEMA
> regulations and acts as the grant administrator for the program.
>
> *Subgrantee* - The government or other legal entity to which a
> subgrant is awarded and which is accountable to the grantee for the
> use of the funds provided (44 CFR section 206.201(l)). (For example,
> in explaining this program, a State Highway Agency is considered a
> subgrantee of a State Emergency Agency even though both agencies may
> be included in the same Statewide single audit.)
>
> *RD* - The FEMA Regional Director.

PA program awards are made based upon a Project Worksheet (PW) prepared
by a project formulation team. The project formulation team normally
includes a representative of FEMA, the State, and the subgrantee. The PW
documents the project formulation team's determination of the eligible
scope of work and cost estimate. The PA program will fund a part of this
eligible work in accordance with the FEMA-State Agreement. Each PW has a
control number and any supplemental PWs will be referenced to the
original PW.

Projects are classified as large or small projects according to the cost
of the eligible work for the individual project. FEMA sets a dollar cost
threshold annually for distinguishing large from small projects.
Projects with costs that equal or exceed this threshold are large
projects; projects that cost less than the threshold are small projects.
The threshold is adjusted each October to reflect changes in the
Consumer Price Index. The threshold is \$55,500 for the period October
1, 2004 through September 30, 2005; \$57,500 for the period October 1,
2005 through September 30, 2006; and \$59,700 for the period October 1,
2006 through September 30, 2007. The date the disaster is declared by
the President determines the threshold in use for that project.

**Small Projects**

Applicants are encouraged to make their own estimates for small projects
and prepare PWs to be submitted to FEMA. FEMA will then take a 20
percent sample of the small projects prepared by the applicant and
verify that the scope of the work is eligible and the cost estimate
reasonable. If the sample passes this validation, FEMA accepts all small
project PWs from the applicant and obligates the funds. If the sample
fails, a second 20 percent is reviewed. If the second sample also fails,
FEMA assigns a specialist to assist the applicant in reformulating and
resubmitting all small projects to FEMA. A FEMA representative is
assigned to formulate an applicant\'s small projects, when an applicant
elects not to do so.

For small projects, final payment of the Federal share of eligible costs
is made upon approval of the project. The amount awarded for small
projects based on the PW generally will not change except under unusual
circumstances, such as failure to complete the work, an unexpected
insurance recovery, or an obvious error in calculation. At closeout of
the disaster contract, the State is required to certify that all
projects were properly completed and that the State cost-sharing
contribution, as specified in the FEMA-State Agreement, was paid.
However, this certification does not specify the amount spent by a
subgrantee on small projects. If the actual cost for small projects is
less than the estimated cost on the PW, FEMA generally will not ask for
a refund. Similarly, FEMA generally will not provide additional funding
when actual costs exceed the PW estimate. However, provision is made
that, when a subgrantee has significant overruns, an appeal may be made
to FEMA for additional funding based upon the total final costs for all
small projects (44 CFR sections 206.204(e) and 206.205(a)).

**Large Projects**

For large projects, the State must make an accounting to FEMA of
eligible costs for each approved large project. In submitting the
accounting, the State must certify that reported costs were incurred in
the performance of eligible work, that the approved work was completed,
that the project is in compliance with the FEMA-State Agreement, and
that payments for the project have been made in accordance with 44 CFR
section 13.21 requirements for payment. The subgrantee is required to
make similar accounting and certifications to the State. If actual costs
are less than the approved amount, then the FEMA share will be based
upon the actual costs. The subgrantee may request additional funding for
eligible cost overruns on large projects. For additional funding, these
requests must include a written recommendation from the State and
approval of the RD (44 CFR sections 206.204(e) and 206.205).

**Improved Projects**

If a subgrantee desires to make improvements, but still restore the
pre-disaster function of a damaged facility, State approval must be
obtained. Federal funding for an improved project is limited to the
Federal share of the approved estimate of the eligible costs. The
Federal share will only restore the pre-disaster capacity of the damaged
or destroyed facility. For example, if eligible work to restore the
pre-disaster capacity is \$100,000, and the subgrantee chooses to
rebuild an improved facility that costs \$200,000, then the FEMA share
is only based on the \$100,000. However, if the actual cost is less than
the eligible work of \$100,000 (e.g., construction costs are much lower
than expected), then a FEMA adjustment is required\
(44 CFR section 206.203).

**Alternate Projects**

In a case where the subgrantee determines that the public welfare would
not be best served by restoring a damaged public facility, the State may
request that FEMA approve an alternate project. This option is available
only for permanent, restorative work. Funds contributed for alternate
projects may be used to repair or expand other selected public
facilities, to construct new facilities, or to fund hazard mitigation
measures. These funds may neither be used to pay the non-Federal share
of any project nor for any operating expense (44 CFR section
206.203(d)(2)).

Funds approved for an alternate project can be used only for alternate
projects specifically approved by FEMA. While the States and subgrantees
have flexibility to propose the type and size of alternate projects they
wish to construct, FEMA must review such proposed projects to ensure
compliance with environmental and other special concerns (44 CFR section
206.203).

**Administrative Costs**

FEMA also provides funding for costs incurred by States and their
subgrantees in administering the PA Program. The State receives a
statutory administrative cost allowance determined according to a
formula based on percentages of the aggregate Federal share of funding
provided to subgrantees for approved projects. State administrative
costs not covered by this allowance may also be allowed with FEMA prior
approval. The State awards administrative cost allowances to subgrantees
according to a formula based on percentages of the subgrantees' net
eligible project costs. All administrative costs must be supported with
source documentation.

**Source of Governing Requirements**

This program is authorized by 42 USC 5121 *et seq*. Program regulations
issued by FEMA are codified at 44 CFR sections 206.200 through 206.349.

**Availability of Other Program Information**

Additional program information is available on the FEMA web site at
<http://www.fema.gov/rrr/pa>.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> The allowed activities for the PA program are for the approved project
> as described on the PW and supporting documentation. The approved
> project may be repair of the damaged facility, an improved project, or
> an alternate project (44 CFR section 206.203).

**B. Allowable Costs/Cost Principles**

> 1\. *Equipment Usage* - The PA program restricts eligible direct costs
> for applicant-owned equipment used to perform eligible work to
> reasonable rates that were established under State guidelines, or when
> the hourly rate exceeds \$75, rates may be determined on a
> case-by-case basis by FEMA. When local guidelines are used to
> establish equipment rates, reimbursement is based on those rates or
> rates in a Schedule of Equipment Rates published by FEMA, whichever is
> lower. Provision is also made when no rates are established or the
> entity wishes to claim an equipment rate that exceeds the FEMA
> Schedule (44 CFR section 206.228(a)(1)).
>
> 2\. *Administrative Costs*
>
> a\. *Grantee* - A State may use funds made available by FEMA under its
> administrative cost allowance only for extraordinary direct costs of
> preparing PWs, final inspection reports, project applications, etc.,
> and for making final audits and related field inspections. Specific
> cost items allowable for such purposes include overtime pay, per diem
> and travel expenses for State employees, but not regular (straight
> time) salaries. Cost items not eligible for funding from the State's
> administrative cost allowance, but still related to managing the
> program, may be funded from the grant if prescribed in an approved PW.
> A State may recover regular (straight time) salaries and certain other
> administrative costs in this way (44 CFR sections 206.228(a)(2) and
> (a)(3)).
>
> b\. *Subgrantee* - A subgrantee may use funds made available in its
> administrative cost allowance for necessary costs of requesting,
> obtaining, and administering its subgrant. No other direct or indirect
> costs are allowable at the subgrantee level (44 CFR sections
> 206.228(a)(2) and (a)(3)).
>
> 3\. *Force Account Labor Costs* - The straight- or regular-time
> salaries and benefits of a subgrantee's permanently employed personnel
> are not eligible in calculating the cost of eligible work for
> emergency protective services or debris removal under sections 403 and
> 407 of the Stafford Act (42 USC 5170b and 5173, respectively). For
> performance of eligible permanent restoration under section 406 of the
> Stafford Act (42 USC 5172), straight-time salaries and benefits of a
> subgrantee's permanently employed personnel are eligible (44 CFR
> section 206.228(a)(4)).
>
> 4\. *Insurance and Other Recoveries* - Auditors are advised that there
> are likely to be amounts from insurance settlements, salvage, or other
> sources which must be considered in determining allowable costs
> because allowable costs must be net of applicable credits.

**E. Eligibility**

> **1. Eligibility for Individual**s - Not Applicable
>
> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients**
>
> A State may award subgrants under this program to the following types
> of entities:
>
> a\. State and local governments;
>
> b\. Private non-profit organizations or institutions which own or
> operate a private non-profit facility, such as (but not limited to) an
> educational, medical, or custodial care facility, or other facility
> providing essential governmental type services to the public; and
>
> c\. Indian tribes or authorized tribal organizations and Alaskan
> Native villages or organizations (but not Alaskan Native Corporations,
> the ownership of which is vested in private individuals) (44 CFR
> sections 206.221 and 206.222).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> Costs must be on a shared basis, as specified in the FEMA-State
> agreement. In general, the minimum Federal share is 75 percent of
> eligible costs. For an alternate project, however, Federal funding is
> based on 75 percent of the Federal share of the approved estimate of
> eligible costs. For example, if the approved estimate of eligible
> costs to restore the pre-disaster capacity is \$100,000, and the
> entity chooses not to rebuild but instead to do alternate work, then
> assuming a 75 percent match, the Federal share is computed as:
>
> Approved estimate of eligible costs \$100,000
>
> Assumed match of 75% Federal/25% State X 75%
>
> Subtotal \$ 75,000
>
> Adjustment for alternate project X 75%
>
> Federal share \$ 56,250
>
> If unstable soil at the original site is the reason for a governmental
> applicant choosing an alternate project, the adjustment is 90 percent
> (Pub. L.. 93-288, as amended by the Stafford Act; 42 USC 5121 *et
> seq*.; 44 CFR sections 206.203(b) and 206.203(d)(2)).
>
> The matching split between the State and the subgrantee will vary. The
> accountability for meeting the matching requirement is determined at
> the time of project accounting as part of project closeout, (e.g., the
> State match does not have to be provided until the end of the
> project).

**2. Level of Effort** - Not Applicable

**3. Earmarking**

> The State makes funding available to subgrantees for their direct
> costs of requesting, obtaining, and administering public assistance
> projects according to the following formula: (a) three percent of the
> subgrantee's first \$100,000 of net eligible project costs; (b) two
> percent of the subgrantee's next \$900,000 of such costs; (c) one
> percent of the subgrantee's next \$4 million of such costs; and (d)
> one-half of one percent of the subgrantee's net eligible costs over
> \$5 million (44 CFR section 206.228(a)(2)).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269, *Financial Status Report* - Not Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Applicable only
> to those non-Federal entities who do not utilize the Department of
> Health and Human Services, Payment Management System.
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Applicable
>
> e\. FEMA 20-10, *Financial Status Report* (*OMB No. 3067-0206)* - This
> form is used in lieu of the SF-269.
>
> **2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

**1. Project Accounting**

> **Compliance Requirement** - For large projects, the State is required
> to make an accounting to FEMA of eligible costs. Similarly, the
> subgrantee must make an accounting to the State. In submitting the
> accounting, the entity is required to certify that reported costs were
> incurred in performance of eligible work, that the approved work was
> completed, that the project is in compliance with the provisions of
> the FEMA-State Agreement, and that payments for that project were made
> in accordance with the 44 CFR section 13.21 payment provisions. For
> improved and alternate projects, if the total cost of the projects
> does not equal or exceed the approved eligible costs, then the auditor
> should expect to see an adjustment to reduce eligible costs (44 CFR
> section 206.205).
>
> **Audit Objective** - Determine whether ongoing and completed projects
> were accounted for in accordance with the required certification.

**Suggested Audit Procedures**

> *Projects not completed -* Select a sample of ongoing large projects
> and ascertain if costs submitted for reimbursement were in compliance
> with the requirements for eligible work under the applicable PW.
> Testing should consider the differences in the requirements and
> approvals required of improved and alternate projects.
>
> *Completed projects -* Select a sample of large projects completed
> during the audit period and ascertain if the entity's files document
> the total costs as allowable costs and if the costs are for allowable
> activities under the applicable PW. This testing should consider the
> differences in the requirements and approvals required of improved and
> alternate projects.

**IV. OTHER INFORMATION**

Effective March 1, 2003, FEMA became part of DHS. Grants under this
program continue to be funded under FEMA requirements and should be
audited using FEMA's requirements until those requirements are
superseded by DHS requirements and made part of subsequent awards. Since
recipients' funding periods may not coincide with the change in CFDA
number, recipients should include the CFDA number shown on their notices
of award (whether 83.544 and/or 97.036) in completing the Schedule of
Expenditures of Federal Awards (SEFA). When awards from both CFDA 97.036
and CFDA 83.544 are present, they should be combined when determining
Type A programs. If the program was a major program under the legacy
CFDA number in either of the previous two years, the provision in the
risk-based approach for prior audits is considered to have been met. On
the SEFA, both the DHS CFDA number and the legacy agency's corresponding
CFDA number should be presented separately.

See Appendix VI for information related to Hurricane Katrina.

**DEPARTMENT OF HOMELAND SECURITY**

**CFDA 97.039 HAZARD MITIGATION GRANT (HMGP)**

**I. PROGRAM OBJECTIVES**

The Hazard Mitigation Grant Program (HMGP) is a cost-shared program
administered by the Federal Emergency Management Agency (FEMA),
Department of Homeland Security. The program's purpose is to mitigate
the vulnerability of life and property to future disasters during the
recovery and reconstruction process following an actual disaster. To
accomplish this purpose, FEMA assists States to avoid or lessen the
impact of natural hazards through such strategies as safer building
practices and the improvement of existing structures and supporting
infrastructure.

**II. PROGRAM PROCEDURES**

**Program Administration**

FEMA awards HMGP grants to States, which in turn may award subgrants to
other State agencies, local governments, Indian tribal organizations,
and other eligible entities. Each State administers the HMGP according
to a FEMA-State Agreement, a comprehensive Standard or Enhanced State
Mitigation Plan, and a State HMGP Administration Plan. These plans must
be approved by FEMA before funds are awarded to the State. FEMA is
responsible for assisting the State, approving or denying project
applications, and reviewing the State's quarterly and final reports.

FEMA also provides funding for costs incurred by States and their
subgrantees in administering the HMGP. The State receives a statutory
administrative cost allowance determined according to a formula based on
percentages of the aggregate Federal share of funding provided to
subgrantees for hazard mitigation projects. State management costs not
covered by the allowance may be allowed with FEMA prior approval. The
State awards statutory administrative cost allowances to subgrantees
according to a formula based on percentages of the subgrantee's net
eligible project costs. If requested, management costs are awarded as a
part of the HMGP ceiling.

**Application and Award Process**

After determining that disaster relief and recovery needs cannot be met
with resources available within the State, the Governor requests a
Presidential declaration designating the State a disaster area. States
have up to 12 months from the date the disaster is declared to review
and submit applications for disasters declared on or after February 26,
2002. Disasters declared before February 26, 2002, have an application
period of 18 months. The application must identify the specific
mitigation measure(s) for which the State requests funding, and any
entities to which the State intends to award subgrants.

In addition to submitting applications and supporting documents to FEMA,
the Governor's Authorized Representative appoints a State Hazard
Mitigation Officer. This official ensures that all potential applicants
are made aware of the assistance available under the HMGP, and provides
technical advice and assistance to eligible subgrantees. Indian tribal
organizations can receive HMGP assistance as subgrantees of States or
apply directly to FEMA. Where FEMA awards a grant directly to an Indian
tribal government, the two entities enter into a FEMA-Tribal agreement
modeled on the FEMA-State agreement.

**Source of Governing Requirements**

The HMGP is authorized by section 404 of the Stafford Act (42 USC
5170c). Program regulations are codified at 44 CFR parts 201 and 206,
subpart N (Hazard Mitigation Grant Program).

**Availability of Other Program Information**

Additional program information is available from the FEMA web site at:
<http://www.fema.gov/fima/hmgp>. The HMGP *Desk Reference* is available
at <http://www.fema.gov/fima/hmgp/hmgp_ref.shtm>.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> The activities allowed for an HMGP project are those described in the
> grant application approved by FEMA and the supporting documentation
> (44 CFR section 206.436(d)). Within these parameters, they may be of
> any nature that will result in the protection of life and property
> from natural hazards. All projects funded must otherwise conform to
> the State's comprehensive Hazard Mitigation Plan. Eligible projects
> include, but are not limited to (44 CFR section 206.434(d)):
>
> 1\. Structural hazard control or protection projects;
>
> 2\. Construction activities that will result in protection from
> hazards;
>
> 3\. Retrofitting of facilities;
>
> 4\. Property acquisition or relocation;
>
> 5\. Development of State or local mitigation standards;
>
> 6\. Development of comprehensive mitigation programs with
> implementation as an essential component; and
>
> 7\. Development or improvement of warning systems.

**B. Allowable Costs/Cost Principles**

> 1\. *Direct Administrative Costs*
>
> a\. *Grantee* - A State may use funds made available by FEMA under its
> administrative cost allowance only for extraordinary direct costs of
> preparing applications and quarterly reports, and making final audits
> and related field inspections. Specific cost items allowable for such
> purposes include overtime pay, per diem and travel expenses for State
> employees, but not their regular (straight-time) salaries. Cost items
> not eligible for funding from the State's administrative cost
> allowance, but still related to managing the program, may be funded
> from the grant if FEMA gives prior approval. Regular (straight-time)
> salaries may be funded in this way. In the case of staffing costs for
> the State's Disaster Field Office, FEMA gives prior approval by
> approving the State's staffing plan (44 CFR section 206.439(b)).
>
> b\. *Subgrantee* - A subgrantee may use funds made available by the
> grantee in its administrative cost allowance only for direct costs of
> requesting, obtaining, and administering its subgrants (44 CFR section
> 206.439(b)).
>
> 2\. *Indirect Costs -* Grantee indirect costs identified in accordance
> with the Federal cost principles are allowable. Indirect costs at the
> subgrantee level are unallowable (44 CFR section 206.439(c)).

**E. Eligibility**

**1. Eligibility for Individuals** - Not Applicable

> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients**
>
> The following types of entities are eligible to apply to the State for
> HMGP subgrants:

a\. State and local governments;

> b\. Private non-profit organizations or institutions that own or
> operate a private non-profit facility as defined at 44 CFR section
> 206.221(e); and
>
> c\. Tribes or authorized tribal organizations and Alaskan Native
> villages or organizations (44 CFR section 206.434(a)).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> The Federal and non-Federal shares of a project's cost are established
> in the State's FEMA-State Agreement. While the non-Federal share may
> exceed the Federal share, it may never be less than 25 percent of the
> cost of a project approved for disasters declared after June 10, 1993.
> (That is, the Federal share may never exceed 75 percent.) The Federal
> share may not exceed 50 percent for projects approved for disasters
> declared before that date. Funds made available to a State or
> subgrantee in its administrative cost allowance are not subject to
> this requirement (44 CFR section 206.432(c)).
>
> **2. Level of Effort** - Not Applicable
>
> **3. Earmarking**
>
> a\. *Subgrantees* - The State makes funding available to subgrantees
> for their direct costs of requesting, obtaining, and administering
> HMGP projects according to the following formula: (a) three percent of
> the subgrantee's first \$100,000 of net eligible project costs; (b)
> two percent of the subgrantee's next \$900,000 of such costs; (c) one
> percent of the subgrantee's next \$4 million of such costs; and (d)
> one-half of one percent of the subgrantee's net eligible project costs
> over \$5 million (44 CFR section 206.439(b)(1)(ii)).
>
> b\. *Planning* - Up to 7 percent of the State's HMGP grant may be used
> to develop State, tribal, or local mitigation plans to meet the
> planning criteria outlined in 44 CFR part 201 (44 CFR 206.434(d)(1)).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction* *Programs* - Applicable, but not required unless the
> State has a grant for direct construction.
>
> d\. SF-272, *Federal Cash Transactions Report*- Applicable
>
> e\. FEMA Form 20-10, *Financial Status Report (OMB No. 3067-0206)* -
> This form may be used in lieu of the SF-269, as determined by the
> grantee and the FEMA regional office. Once this determination is made,
> the State uses the selected form for all its reporting on FEMA
> programs.
>
> f\. FEMA Form 20-18, *Report of Government Property* (*OMB No.
> 3067-0206*) - This form is submitted upon completion work under a
> grant, cooperative agreement, or contract. It provides an inventory of
> equipment purchased by the grantee or provided by the Federal
> Government. FEMA and the grantee use this information to determine the
> disposition of the equipment.
>
> g\. FEMA Form 20-19, *Reconciliation of Grants and Cooperative
> Agreements* (*OMB No. 3067-0206*) - This report captures a State's
> program transactions and related unobligated balances of Federal
> funds, cash drawdowns, and undrawn cash balances. It is used to
> reconcile awards, outlays, and drawdowns during and at the completion
> of a HMGP grant.

*Key Line Items* - The following line items contain critical
information:

B. History of Transactions:

> 1\. Column (b) - *Description of Transaction*
>
> 2\. Column (d) - *Total Federal Share*
>
> 3\. Column (f) - *Amount (of cash drawdown)*
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting -** Not Applicable

**IV. Other Information**

> *Subgrants to Other State Agencies*
>
> In the administration of this grant, the State may "subgrant" funds to
> another part of the State (e.g., a State agency). If the other part of
> the State receiving the subgrant is included in the audit of the
> State, such as a State-wide audit, then for purposes of determining
> Type A programs and reporting on the Schedule of Expenditures of
> Federal Awards, these "subgrants" within the single audit reporting
> entity should be eliminated. However, all Federal awards expended
> under this program by the State (including a part of the State
> receiving a subgrant from the State) should be subject to the State's
> OMB Circular A-133 audit.
>
> *Transfer to Department of Homeland Security*
>
> Effective March 1, 2003, FEMA became part of the Department of
> Homeland Security (DHS). Grants under this program continue to be
> funded under FEMA requirements. And should be audited using FEMA's
> requirements until those requirements are superseded by DHS
> requirements and made part of subsequent awards. Since recipients'
> funding periods may not coincide with this change in the CFDA number,
> recipients should include the CFDA number shown on their notices of
> award (whether 83.548 and/or 97.039) in completing the Schedule of
> Expenditures of Federal Awards (SEFA). When awards from both CFDA
> 97.039 and CFDA 83.548 are present, they should be combined when
> determining Type A programs. If the program was a major program under
> the legacy CFDA number in either of the previous two years, the
> provision in the risk-based approach for prior audits is considered to
> have been met. On the SEFA, both the DHS CFDA number and the legacy
> agency's corresponding CFDA number should be presented separately.

**DEPARTMENT OF HOMELAND SECURITY**

**CFDA 97.067 HOMELAND SECURITY GRANT PROGRAM**

**CFDA 97.004 STATE DOMESTIC PREPAREDNESS EQUIPMENT SUPPORT PROGRAM
(State Homeland Security Grant Program)**

**I. PROGRAM OBJECTIVES**

The Homeland Security Grant Program (HSGP) is intended to improve and
significantly enhance the ability of the Nation to prevent, deter,
respond to and recover from, threats and incidents of terrorism and to
enhance regional preparedness. The HSGP provides financial assistance to
the States (and through the States to local governments) to support
activities such as planning, equipment, training, and exercises to
address critical resource gaps identified in the assessments and
priorities outlined within each States' Homeland Security Strategy.
States are encouraged to develop regional approaches to planning and
preparedness and to adopt, as appropriate, regional response structures.

**II. PROGRAM PROCEDURES**

HSGP funding is provided to the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, U. S. Territories, and select urban areas,
by the Department of Homeland Security (DHS)/Preparedness Directorate.
The grants are awarded to a State Administering Agency (SAA), who must
pass through a specific percentage of the funds to local governments.
G&T, formerly the Office for Domestic Preparedness, was transferred to
DHS from the Department of Justice (DOJ) on March 1, 2003, is
responsible for this program. G&T's Office of Grant Operations (OGO)
provides fiscal support and oversight of this grant program, however G&T
uses DoJ/Office of Justice Programs (OJP) systems for awarding grants
and making grant payments.

**Multiple Funding Streams**

For awards made in FY 2004, funding for the State Homeland Security
Program (SHSP), Citizen Corps Program (CCP) and the Law Enforcement
Terrorism Prevention Program (LETPP) were combined in a single award
under the HSGP. For awards made in FY 2005, the HSGP included the SHSP,
CCP, LETPP, Urban Areas Security Initiative (UASI), Emergency Management
Performance Grant (EMPG), and the Metropolitan Medical Response System
(MMRS). For awards made in FY 2006, the HSGP program includes the same
programs as in FY 2005 programs except for EMPG; EMPG was awarded as a
stand-alone program beginning in FY 2006 (CFDA 97.042). Under the
combined program, although States were advised of their funding
allocations using the legacy CFDA numbers for each of the programs (see
Section IV), the awards (and reports based on them) carry only the
single CFDA number of the consolidated HSGP program: FY 2004/97.004, FY
2005/97.067, and FY 2006/97.067.

The several funding streams and their objectives are as follows:

*State Homeland Security Program (SHSP)* provides funds to enhance the
capability of State and local jurisdictions to prepare for and respond
to terrorist acts, including events of terrorism involving weapons of
mass destruction and biological, nuclear, radiological, incendiary,
chemical, and explosive devices.

*Citizens Corps Program (CCP)* provides support to establish and operate
Citizen Corps Councils to play a role in public outreach, education, and
training to make States and local communities better prepared to respond
in the event of an emergency.

*Law Enforcement Terrorism Prevention Program* (LETPP) provides funds to
law enforcement communities to enhance their capabilities to detect,
deter, disrupt, and prevent acts of terrorism.

*Urban Areas Security Initiative* (UASI) (for FY 2003 and 2004 awards,
see the program supplement for CFDA 97.008).

*Emergency Management Performance Grants* (EMPG) assist States and local
jurisdictions in the development, maintenance, and improvement of State
and local emergency management capabilities, which are key components of
a comprehensive national emergency management system for disasters and
emergencies that may result from natural disasters or accidental or
man-caused events.

*Metropolitan Medical Response Systems* (MMRS) funding is intended to
help U.S. cities prepare for a rapid, coordinated medical response by
emergency first responders, public health systems, and hospitals to
large-scale public emergencies. .

See section IV of this program supplement for additional information
(including the CFDA numbers under which awards for the several funding
streams were made in FY 2003).

**Source of Governing Requirements**

These programs are authorized under Section 430 of the Homeland Security
Act of 2002; Section 1014 of USA PATRIOT Act of 2001 (Pub. L. No.
107-56, 42 USC 3714); Title I, Chapter 6 of Pub. L. No. 108-11, the
Wartime Supplemental Appropriations Act of 2003; Title III of the FY
2004 Department of Homeland Security Appropriations Act (Pub. L. No.
108-90); Title III of the FY 2005 Department of Homeland Security
Appropriations Act ((Pub. L. No. 108-334); Title III of the FY 2006
Department of Homeland Security Appropriations Act (Pub. L. No. 109-90),
and the Robert T. Stafford Disaster Relief and Emergency Assistance Act,
as amended (42 USC 5196 and 5196(b), 42 USC 5196 and 5196(b), and 42 USC
5121-5206). There are no program regulations. The applicable program
guidance is incorporated by reference into awards and becomes part of
the terms and conditions of award.

**Availability of Other Program Information**

Additional information is available at
<http://www.ojp.usdoj.gov/odp/grants_programs.htm>.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. *Activities Allowed - General.*
>
> a\. Funds may be used to enhance the capability of State and local
> jurisdictions to prepare for and respond to terrorist acts including
> events of terrorism involving weapons of mass destruction and
> biological, nuclear, radiological, incendiary, chemical, and explosive
> devices. Allowable activities include purchase of needed equipment and
> provision of training and technical assistance to State and local
> first responders (42 USC 3714(b)).

b.  Funds may be used for management and administration (42 USC
    3714(c)(2); Title III, Pub. L. No. 108-334, Title III, Pub. L. No.
    109-90) (see section III.G.3.a for a limitation).

> 2\. *Activities Allowed - FY 2003*
>
> Funds for critical infrastructure protection under the SHSP are
> available for operational costs to include personnel overtime as
> needed (Title I, Chapter 6,\
> Pub. L. No. 108-11, 117 Stat 583).

3\. *Activities Allowed -* *FYs 2004, 2005, and 2006*

> Funds for LETPP and UASI[^2] may be used for operational costs,
> including personnel overtime and overtime associated with ODP (G&T)
> certified training (Title III, Pub. L. No. 108-90; Title III, Pub. L.
> No. 108-334; Title III 109-90).
>
> 4\. *Activities Unallowed* - *FYs 2003* and *2004*
>
> SHSP and LETPP funds may not be used for the construction or
> renovation of facilities (Title I, Chapter 6, Pub. L. No. 108-11, 117
> Stat 583; Title III,\
> Pub. L. No. 109-90).
>
> 5\. *Activities Unallowed* - *FY 2005*
>
> SHSP, LETPP, and UASI funds may not be used for construction or
> renovation other than for a minor perimeter security project not to
> exceed \$1 million (Title III, Pub. L. No. 108-334).
>
> 6\. *Activities Unallowed -- FY 2006*
>
> SHSP, UASI, LETPP funds shall not be used for the construction or
> renovation of facilities, except for a minor perimeter security
> project, not to exceed \$1,000,000, as determined necessary by the
> Secretary of Homeland Security. The erection of communication towers,
> which are included in a jurisdiction's interoperable communications
> plan, does not constitute construction. Conference Report 109-241 to
> the FY 2006 Department of Homeland Security Appropriations Act\
> (Pub. L. No. 109-90), Title III, State and Local Programs.)

**C. Cash Management**

> Beginning in FY 2005, HSGP awards to States were exempted from the
> provisions of 31 USC 6503(a) (the Cash Management Improvement Act
> (CMIA)) (Sec. 521, Pub. L No. 108-334). In accordance with Pub .L. No.
> 109-241, the DHS FY 2006 Appropriations Act, and notwithstanding any
> other provision of law, this exemption became permanent. See section
> IV below for a complete list of affected DHS programs.
>
> Grantees are permitted to draw down funds up to 120 days prior to
> expenditure/disbursement, but must place those funds in an
> interest-bearing account, and the interest earned must be submitted to
> the U.S. Treasury. All other requirements of OMB Circulars A-102 and
> A-110 (as implemented by DOJ at\
> 28 CFR section 66.23 and 28 CFR section 70.22, respectively) or the
> Cash Management Improvement Act (31 USC 6503; 31 CFR part 205), as
> applicable, related to the retention and payment of interest apply.

**G. Matching, Level of Effort, Earmarking**

**1. Matching -** Not Applicable

**2. Level of Effort** **-** Not Applicable

**3. Earmarking**

> a\. Not more than five percent of the FY 2006 grant funds (three
> percent for 2005) made available to a State may be used for costs of
> management and administration (42 USC 3714(c)(2); Title III, Pub. L.
> No. 108-334; Conference Report 109-241 to the FY 2006 Department of
> Homeland Security Appropriations Act (Pub. L. No. 109-90)). For FY
> 2005, any portion of the three percent retained by the State for this
> purpose must be included within the maximum twenty percent of total
> funds retained by the State for the SHSP, LETPP, and UASI programs
> (Conference Report 108-774 to the FY 2005 Department of Homeland
> Security Appropriations Act\
> (Pub. L. No. 108-334)).
>
> b\. Each State shall obligate not less than 80 percent of grant funds
> under the SHSP, LETPP, and UASI[^3] programs to local units of
> government within 60 days of receipt of funds (Title I, Chapter 6,
> Pub. L. No. 108-11, 117 Stat 583, April 16, 2003; Title III, Pub. L.
> No. 108-90; Title III, Pub. L. No. 108-334, Title III, Pub. L. No.
> 109-90).

**L. Reporting**

**1. Financial Reporting**

> a\. *SF-269,* *Financial Status Report* - Applicable
>
> b\. *SF-270,* *Request for Advance or Reimbursement* - Not Applicable
>
> c\. *SF-271,* *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. *SF-272,* *Federal Cash Transactions Report* - Not Applicable
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting -** Not Applicable

**N. Special Tests and Provisions**

**1. Subgrant Awards**

> **Compliance Requirement** -- Under the SHSP, LETPP and UASI programs,
> States must obligate funds for subgrants within 60 days after the date
> of the grant award\
> (Title III, Pub L. No. 108-90; Title III, Pub. L. No. 108-334, Title
> III; and Pub. L. No. 109-90). "Obligate" has the same meaning as in
> Federal appropriations law, i.e., there must be an action by the State
> to establish a firm commitment; the commitment must be unconditional
> on the part of the State; there must be documentary evidence of the
> commitment, and the award terms must be communicated to the subgrantee
> and, if applicable, accepted by the grantee.
>
> **Audit Objectives** - To determine if (1) the State complied with the
> requirement to obligate funds for subgrants within 60 days after the
> date of the grant award and (2) subgrantees were able to draw down
> funds immediately following State obligation of funds.
>
> **Suggested Audit Procedures**
>
> a\. Determine if the State has written procedures for making subgrant
> awards, including any standards for administrative lead-time for
> obligation of funds and issuance of awards.
>
> b\. Review the State's written procedures, if any, for consistency
> with the compliance requirement.
>
> c\. Determine if subgrant amounts were obligated by the State in a
> timely manner, consistent with HSGP requirements and the State's own
> procedures.
>
> d\. Select a sample of subgrant awards under this program and review
> the subrecipients' payment requests to determine if funds were
> disbursed by the State to the local government consistent with the
> dates of their awards.

IV. **OTHER INFORMATION**

When completing the Schedule of Expenditures of Federal Awards,
recipients should record their expenditures using the CFDA number(s)
shown on the notice of award for the period in which the funds were
awarded. Expenditures under the Homeland Security Cluster in the current
audit period may be attributable to awards made in prior years under
other CFDA numbers. The current and previous CFDA numbers are shown in
the following table. Expenditures under the CDFA numbers shown in the
table should be combined when determining Type A programs. If a
program(s) was a major program under the CFDA number shown in the table
in either of the previous two years, the provision in the risk-based
approach for prior audits is considered to have been met.

The following exceptions should be noted:

1\. Urban Areas Security Initiative grants, which are part of the
Homeland Security Grant Cluster for 2005 and 2006 awards, should be
evaluated separately in making the major program determination for the
previous 2 years (see program supplement for CFDA 97.008).

2\. Although activities under CFDA 97.004, 97.005, and 97.006 were
folded into the SHSP and, subsequently, the HSGP, these CFDA numbers
continue to be used in awards other than the SHSP or HSGP. Expenditures
for awards under CFDA 97.004, State Domestic Preparedness Equipment
Support Program, should not be included in the audit of this cluster.
Expenditures under CFDA 97.005, State and Local Domestic Preparedness
Training Program, and CFDA 97.006, State and Local Domestic Preparedness
Exercise Support, unless received from a pass-through entity, should not
be included in the audit of this cluster.

3\. Expenditures under EMPG and CCP awards that predated assignment of
DHS numbers for these programs should not be included in the audit of
this cluster.

  ------------ --------------- ------------ -------------- ----------- ----------
  *Year of     *SHGP*          *CCP*        *LETPP*        *EMPG*      *MMRS*
  Grant*                                                               

  2003         16.007          97.053       N/A            97.042      N/A

  2004         16.007          97.004\*     97.004         97.042      97.071
               (supplemental                                           
               award)\*\                                               
               97.004                                                  

  2005         97.067\*\*      97.067       97.067\*\*\*   97.067      97.067

  2006 and     97.067          97.067       97.067         N/A (no     97.067
  2007                                                     longer part 
                                                           of the      
                                                           cluster)    
  ------------ --------------- ------------ -------------- ----------- ----------

\* Public Law No. 108-11 (Emergency Wartime Supplemental Appropriations
Act, 2003) appropriated supplemental FY 2003 funds. The appropriations
legislation made funds available until December 31, 2003 and awards from
this supplemental were made under CFDA 16.007.

\*\* At the subgrantee level, this CFDA number may have been listed as
97.073 and should be included in this cluster.

\*\*\* At the subgrantee level, this CFDA number may have been listed as
97.074 and should be included in this cluster.

It also should be noted that, except as otherwise provided by statute,
DHS awards of property and/or equipment are subject to the requirements
of OMB Circular A-133.  A DHS policy statement that addresses this
requirement is available at
<http://www.dhs.gov/xopnbiz/grants/gc_1162481125903.shtm>.

In addition to the Homeland Security Grant Program (CFDA 97.067), the
exemption from 31 USC 6503(a), the Cash Management Improvement Act,
applies as follows:

a\. In FY 2005 to CFDA 97.008, the Urban Areas Security Initiative; CFDA
97.056, the Port Security Grant Program; CFDA 97.057, the Intercity Bus
Security Grants Program; CFDA 97.059; the Truck Security Program; and
CFDA 97.075, the Rail and Transit Security Grant Program.

b\. In FY 2006, to the preceding programs as well as CFDA 97.078, the
Buffer Zone Protection Plan.

[^1]: For FY 03, the funds were required to be obligated by the State
    within 45 days of the Federal award\
    (Title I, Chapter 6, Pub. L. 108-11).

[^2]: See CFDA 97.008 for UASI FY 03 and 04.

[^3]: See CFDA 97.008 for UASI in FY 03 and 04.