Omaha Public Power 

District in Nebraska 

Generally Accounted for 

and Expended FEMA Grant 

Funds Properly 

January 4, 2017 

OIG-17-17-D 
 

 

DHS OIG HIGHLIGHTS 

Omaha Public Power District in Nebraska 

 Generally Accounted for and Expended 

FEMA Grant Funds Properly 

January 04, 2017 

Why We Did 

This Audit 

The Omaha Public Power 

District (OPPD) in Nebraska 

received a $4.6 million 

Federal Emergency 

Management Agency 

(FEMA) grant award for 

damages it sustained from 

June 2014 storms. Our 

audit objective was to 

determine whether OPPD 

accounted for and expended 

FEMA funds according to 

Federal requirements. 

What We 

Recommend 

FEMA should disallow as 

ineligible $67,570 of 

overstated fringe benefit 

costs and instruct Nebraska 

to ensure OPPD properly 

calculates and applies its 

fringe benefit rate in future 

disasters. 

For Further Information: 

Contact our Office of Public Affairs at 

(202) 254-4100, or email us at 

DHS-IG.OfficePublicAffairs@oig.dhs.gov 

What We Found 

Generally, OPPD accounted for and expended 

FEMA grant funds according to Federal 

regulations and FEMA guidelines. For example, 

OPPD accounted for disaster costs on a projectby-project basis and adequately supported costs 

it claimed. However, OPPD overstated the fringe 

benefit rate it applied to its labor costs on three 

large projects. As a result, OPPD requested 

$67,570 in reimbursements for fringe benefit 

costs it did not incur. 

OPPD officials said they applied a 73 percent 

fringe benefit rate because they used this rate to 

allocate fringe benefit costs for other purposes. 

OPPD officials also said FEMA Region VII officials 

have approved this method of allocating fringe 

benefit costs in previous disasters. However, a 

grant recipient cannot claim costs it did not 

incur, and past incorrect practices do not justify 

current incorrect practices. 

FEMA Response 

FEMA officials agreed with our finding and 

recommendations and provided written 

comments on October 19, 2016, which we have 

included as appendix D. 

www.oig.dhs.gov OIG-17-17-D 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Washington, DC 20528 / www.oig.dhs.gov 

January 4, 2017 

MEMORANDUM FOR: Beth Freeman 

Regional Administrator, Region VII 

Federal Emergency Management Agency 

~nt<4-· /)1. ~ 

FROM: 	 Thomas M. Salmon 

Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: 	 Omaha Public Power District in Nebraska Generally 

Accounted for and Expended FEMA Grant Funds 

Properly 

Audit Report Number OIG- 17-17-D 

We audited Federal Emergency Management Agency Public Assistance grant 

funds awarded to Omaha Public Power District (OPPD) in Omaha, Nebraska. 

The Nebraska Emergency Management Agency (Nebraska), a Federal 

Emergency Management Agency (FEMA) grantee, awarded OPPD $4.6 million 

for damages sustained from severe storms, tornadoes, straight-line winds, and 

flooding that occurred June 1-4, 2014. The award provided 75 percent Federal 

funding for nine projects. We audited five projects totaling $4.3 million, or 

93 percent of the total award (see appendix B, table 1). At the time of our audit, 

OPPD had completed the majority of its work and submitted final expenditures 

to Nebraska for seven projects. Insurance did not cover any disaster-related 

damage. 

Background 

OPPD is a public corporation and political subdivision of the State of Nebraska 

governed by an elected board of directors. OPPD provides electrical service to 

almost 800,000 people, which is more than any other electric utility in the 

state. OPPD's service area includes 130 electrical substations covering 13 

counties and 5,000 square miles. In early June 2014, severe storms inundated 

eastern Nebraska causing large hail, prolonged periods of rainfall, .and flash 

flooding. The storms caused substantial building and roof damage to several of 

OPPD's structures. 

www.oig.dhs.gov 	 OIG-17-17-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Results of Audit 

Generally, OPPD accounted for and expended FEMA grant funds according to 

Federal regulations and FEMA guidelines. For example, OPPD accounted for 

disaster costs on a project-by-project basis and adequately supported costs 

claimed. However, OPPD overstated its labor (force account labor) fringe benefit 

rate for three large projects. OPPD officials said they applied a 73 percent fringe 

benefit rate because that is the standard benefit rate they use for non-disaster 

purposes. OPPD officials also said Region VII officials approved OPPD’s fringe 

benefit rate and calculations in previous disaster claims. As a result, OPPD 

received $67,570 in reimbursements for costs it did not incur. 

Finding A: Excess Fringe Benefit Costs 

OPPD overstated its fringe benefit rate for overtime labor costs in three large 

projects (Projects 7, 44, and 45), resulting in approximately $67,570 of excess 

reimbursements. FEMA’s Public Assistance Guide (FEMA 322, June 2007, 

p. 45) states that fringe benefit rates should be different for regular and 

overtime hours because certain items in a benefits package, such as health 

insurance, are not dependent on hours worked. Therefore, the overtime fringe 

benefit rate should be significantly lower than the regular time fringe rate. 

However, OPPD applied a 73 percent fringe rate to both regular and overtime 

costs. 

FEMA guidance on separating regular time and overtime is clear (see FEMA 

worksheet in appendix A). OPPD should have established a separate benefit 

rate for the overtime pay because many fringe benefit costs do not apply to 

overtime and premium pay hours. For example, OPPD’s employee healthcare 

costs do not increase when an employee works overtime hours or receives 

premium pay. 

OPPD officials explained that they calculate the single benefit rate at the 

beginning of each year and add that rate to total payroll costs for all employee 

benefit calculations. While OPPD reviews this rate quarterly for budgetary 

adjustments, it always applies a single rate to total payroll costs. Because 

OPPD could not provide separate benefit rates, we used the most conservative 

benefit rate of 1.45 percent 1 to calculate fringe benefit costs for the overtime 

hours OPPD claimed. Using the conservative rate, we determined that OPPD 

1 In 2014, the employer Social Security matching employment tax rate was 6.2 percent up to 

$117,000 and the Medicare matching rate was 1.45 percent with no earnings limit. However, 

OPPD does not withhold or match Social Security taxes because of the way its employee 

retirement plan is structured. 

www.oi 2 g.dhs.gov OIG-17-17-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

overstated fringe benefit costs by up to $67,570. Because OPPD did not 

establish separate rates as required, FEMA has no assurance that these costs 

are valid and eligible. Therefore, we question $67,570 as ineligible. 

Because of this audit, OPPD officials said they have a better understanding of 

the Federal requirements regarding fringe benefits. OPPD officials also 

explained they used the 73 percent benefit rate because FEMA Region VII 

officials approved their use of the benefit rate methodology in prior disasters. 

Region VII officials said they were not aware of OPPD’s fringe benefit 

application issue for this disaster because they generally do not review a subrecipient’s methodology. At the exit conference, FEMA officials agreed the 

regular time and overtime fringe benefit rates should be different and plan to 

work with OPPD officials to determine the appropriate benefit rates. Nebraska 

officials said they were not aware of OPPD’s fringe benefit methodology. 

We recognize that FEMA allowed OPPD to use this rate in the past; however, 

incorrect past practices do not make current practices correct. These costs are 

ineligible because OPPD did not incur the costs, and that alone makes the 

costs ineligible under Federal cost principles and FEMA’s Public Assistance 

program.2 However, if OPPD is able to demonstrate to FEMA that any of its 

other benefits costs increase incrementally with overtime costs, FEMA should 

reduce the questioned costs in this report appropriately. 

Recommendations 

We recommend that the Regional Administrator, FEMA Region VII: 

Recommendation 1: Disallow as ineligible $67,570 ($50,678 Federal share) in 

ineligible (excessive) fringe benefit costs OPPD claimed (finding A) unless OPPD 

provides evidence that it incurred fringe benefit costs at a higher rate than 

1.45 percent on overtime pay. 

Recommendation 2: Instruct Nebraska to ensure OPPD calculates and applies 

its fringe benefit rate according to Federal cost principles and FEMA guidelines 

for all future disasters (finding A). 

2 According to 2 Code of Federal Regulations (CFR) Part 225 Appendix B, (8)(d)(5), fringe 

benefits are allocated to Federal awards in a manner consistent with the pattern of benefits 

attributable to the individuals or groups of employees whose wages are chargeable to the 

awards. 

www.oi 3 g.dhs.gov OIG-17-17-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Recommendation 3: Ensure that FEMA Public Assistance personnel provide 

adequate guidance and training to Nebraska regarding allowable fringe benefit 

rates (finding A). 

Discussion with Management and Audit Follow-up 

We discussed the results of our audit with FEMA, Nebraska, and OPPD officials 

during our audit and included their comments in this report, as appropriate. 

We also provided a draft report in advance to these officials and discussed it at 

exit conferences with FEMA officials on September 1, 2016, with Nebraska 

officials on September 23, 2016, and with OPPD officials on 

September 28, 2016. Nebraska officials agreed with the finding and 

recommendations. Nebraska officials said they will continue to work with 

disaster applicants to ensure they correctly apply fringe benefit rates. OPPD 

officials agreed with the finding but disagreed with the recommendation to 

disallow funds. At the exit conference, OPPD officials said they were working to 

determine the appropriate fringe benefit rate. 

FEMA officials agreed with the finding and recommendations and provided a 

written response on October 19, 2016, which we included as appendix D. 

FEMA’s response and planned actions were sufficient to resolve, but not close, 

the three recommendations with target completion dates of 90 days after report 

issuance. Therefore, we consider all three recommendations resolved but open. 

We will close those recommendations once we receive documentation to verify 

that FEMA has completed its planned actions. Please email a signed PDF copy 

of all responses and closeout request to Chiquita.Washington@oig.dhs.gov. 

The Office of Emergency Management Oversight major contributors to this 

report are Christopher Dodd, Director; Chiquita Washington, Audit Manager; 

Sharon Snedeker, Senior Auditor; Lena Stephenson-George, Auditor; and 

Heather Hubbard, Auditor. 

Please call me with any questions at (202) 254-4100, or your staff may contact 

Chiquita Washington, Audit Manager, Central Regional Office - South, at 

(214) 436-5200. 

www.oi 4 g.dhs.gov OIG-17-17-D 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Applicant’s Benefits Calculation Worksheet 

www.oi 5 g.dhs.gov OIG-17-17-D 
 

 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Objective, Scope, and Methodology 

We audited FEMA Public Assistance grant funds awarded to OPPD (Public 

Assistance Identification Number 000-UWJJ6-00). Our audit objective was to 

determine whether OPPD accounted for and expended FEMA grant funds 

according to Federal regulations and FEMA guidelines for FEMA disaster 

number 4185-DR-NE. Nebraska awarded OPPD $4.6 million for disaster 

damages resulting from severe storms, tornadoes, straight-line winds, and 

flooding that occurred June 1-4, 2014. We audited five projects totaling 

$4.3 million or 93 percent of the total award (see table 1). The audit covered 

the period June 1, 2014, through February 29, 2016, the cutoff date of our 

audit. The award provided 75 percent Federal funding for four large and five 

small projects.3 

Table 1: Schedule of Projects Awarded and Audited 

Project 

Number 

Category 

of Work* 

Total 

Project 

Amount 

Total 

Claimed 

Costs 

Audit 

Scope 

Questioned 

Cost 

32 E $ 20,512 $ 20,512 $ 0 $ 0 

18 E 20,791 20,988 0 0 

09 F 49,736 49,453 0 0 

08 F 54,023 54,023 54,023 0 

43 B 107,918 106,498 107,918 0 

17 E 219,649 249,593 0 0 

07 F 525,648 525,648 525,648 59,757 

44 E 865,976 363,045 865,976 7,730 

45 E 2,747,606 1,843,037 2,747,606 83 

Total $4,611,859 $3,232,797 $4,301,171 $ 67,570 

Source: FEMA project worksheets, OPPD records, and Office of Inspector General 

(OIG) analysis 

*FEMA identifies type of work by category: A for debris removal, B for emergency 

protective measures, and C-G for permanent work. 

3 Federal regulations in effect at the time of the disaster set the large project threshold at 

$120,000 [Amendment to the Public Assistance Program’s Simplified Procedures Project 

Thresholds, 79 Fed. Reg. 10,685 (February 26, 2014)]. 

www.oi 6 g.dhs.gov OIG-17-17-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B (continued) 

We interviewed FEMA, Nebraska, and OPPD officials; gained an understanding 

of OPPD’s method of accounting for disaster-related costs and its procurement 

policies and procedures; judgmentally selected and reviewed (generally based 

on dollar amounts) project costs and procurement transactions for the projects 

in our audit scope; reviewed applicable Federal regulations and FEMA 

guidelines; and performed other procedures considered necessary to 

accomplish our objective. As part of our standard audit procedures, we also 

notified our Office of Information Technology Audits of contracts in the audit 

scope the subgrantee awarded under the grant that we reviewed to determine 

whether there were any indications of issues related to those contractors that 

would indicate fraud, waste, or abuse. As of the date of this report, the Office of 

Information Technology Audits’ analysis of contracts was ongoing. When it is 

complete, we will review the results and determine whether additional action is 

necessary. We did not assess the adequacy of OPPD’s internal controls 

applicable to grant activities because it was not necessary to accomplish our 

audit objective. 

We conducted this performance audit between February and September 2016, 

pursuant to the Inspector General Act of 1978, as amended, and according to 

generally accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based upon our 

audit objective. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based upon our audit objective. We 

conducted this audit by applying the statutes, regulations, and FEMA policies 

and guidelines in effect at the time of the disaster. 

www.oi 7 g.dhs.gov OIG-17-17-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

Potential Monetary Benefits 

Table 2: Summary of Potential Monetary Benefits 

Type of Potential Monetary Benefit Total Federal Share 

Questioned Costs – Ineligible $ 67,570 $ 50,678 

Questioned Costs – Unsupported 0 0 

Funds Put to Better Use 0 0 

Totals $67,570 $50,678 

Source: OIG analysis of the finding in this report 

www.oi 8 g.dhs.gov OIG-17-17-D 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

FEMA Region VII Audit Response 

www.oi 9 g.dhs.gov OIG-17-17-D 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D (continued) 

FEMA Region VII Audit Response 

www.oi 10 g.dhs.gov OIG-17-17-D 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix E 

Report Distribution 

Department of Homeland Security 

Secretary 

Chief of Staff 

Chief Financial Officer 

Under Secretary for Management 

Chief Privacy Officer 

Audit Liaison, DHS 

Federal Emergency Management Agency 

Administrator 

Chief of Staff 

Chief Financial Officer 

Chief Counsel 

Chief Procurement Officer 

Director, Risk Management and Compliance 

Audit Liaison, FEMA Region VII 

Audit Liaison, FEMA (Job Code G-16-012) 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Nebraska State Auditor 

Assistant Director, Nebraska Emergency Management Agency 

Corporate Accountant, Omaha Public Power District 

www.oi 11 g.dhs.gov OIG-17-17-D 
 

 

 

 

 

 

 

ADDITIONAL INFORMATION AND COPIES 

To view this and any of our other reports, please visit our website at: www.oig.dhs.gov. 

For further information or questions, please contact Office of Inspector General Public Affairs 

at: DHS-OIG.OfficePublicAffairs@oig.dhs.gov. Follow us on Twitter at: @dhsoig. 

OIG HOTLINE 

To report fraud, waste, or abuse, visit our website at www.oig.dhs.gov and click on the red 

"Hotline" tab. If you cannot access our website, call our hotline at (800) 323-8603, fax our 

hotline at (202) 254-4297, or write to us at: 

Department of Homeland Security 

Office of Inspector General, Mail Stop 0305 

Attention: Hotline 

245 Murray Drive, SW 

Washington, DC 20528-0305