FEMA Should Recover 

$3.9 Million of $13.2 

Million in Grant Funds 

Awarded to the Borough 

of Lavallette, New Jersey 

July 5, 2017 

OIG-17-93-D
 
 

 

 

 

 

DHS OIG HIGHLIGHTS
 

FEMA Should Recover $3.9 Million of 

$13.2 Million in Grant Funds Awarded 

to the Borough of Lavallette, New Jersey 

July 5, 2017 

Why We Did 

This Audit 

The Borough of Lavallette 

(Borough), New Jersey, 

received a $13.2 million 

grant award from the 

New Jersey Office of 

Emergency Management 

(New Jersey), a Federal 

Emergency Management 

Agency (FEMA) grantee, 

for damages from 

Hurricane Sandy that 

occurred in October 

2012. 

What We 

Recommend 

FEMA should disallow 

$3,179,876 of ineligible 

or unsupported costs and 

deobligate $680,871 in 

unneeded funds. 

For Further Information: 

Contact our Office of Public Affairs at 

(202) 254-4100, or email us at 

DHS-OIG.OfficePublicAffairs@oig.dhs.gov 

What We Found 

The Borough did not always comply with FEMA grant 

requirements. We reviewed $9.5 million of the $13.2 million 

award, and questioned $3.2 million composed of the 

following amounts: 

x $2,659,824 of duplicate costs; 

x $369,854 of ineligible labor, equipment, and contract 

costs; 

x $125,058 of unsupported equipment costs; and 

x $25,140 of project income. 

Additionally, we identified $680,871 of unneeded funds that 

FEMA should deobligate and put to better use. 

These findings occurred primarily because of Borough 

officials’ limited familiarity with Federal regulations and 

FEMA guidelines. Nevertheless, New Jersey, as FEMA’s 

grantee, is responsible for ensuring that subgrantees are 

aware of and comply with Federal requirements. 

FEMA Response 

FEMA agreed with our findings and recommendations. 

Appendix C includes FEMA’s written response in its entirety. 

www.oig.dhs.gov OIG-17-93-D 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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


July 5, 2017 


MEMORANDUM FOR: John Rabin 

Acting Regional Administrator, Region II 

Federal Emergency Management Agency 

/d-C:?__;rFROM: John E. McCoy II 

Acting Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: FEMA Should Recover $3.9 Million of$13.2 in Grant 

Funds Awarded to the Borough ofLavallette, New 

Jersey 

Audit Report Number OIG-17-93-D 

We audited Federal Emergency Management Agency (FEMA) Public Assistance 

grant funds awarded to the Borough of Lavallette (Borough), New Jersey. The 

Borough received a Public Assistance award of $13.2 million! from the New 

Jersey Office of Emergency Management (New Jersey), a FEMA grantee, for 

damages resulting from Hurricane Sandy, which occurred in October 2012 (see 

table 1). The award provided 90 percent FEMA funding. We audited 12 

projects, totaling $9.5 million, or about 83 percent of the total award (see 

appendix B, table 5). At the time of our audit, the Borough had completed work 

on the 12 projects in our audit scope but had not submitted final claims to 

New Jersey for all expenditures. 

Table 1: Gross and Net Award Amounts 

Gross Award Insurance Net Award 

Amount Reductions Amount 

All Projects $13,202,935 $(1,190,350) $ 12,012,588 

Audit Scope $ 9,503,242 $ (773,968) $ 8,729,267 

Source: FEMA and Borough documentation 

The gross award amount represents FEMA's initial estimate of eligible damages before the 

deduction of anticipated or actual insurance proceeds. 

www.oig.dhs.gov 1 OIG- 17-93-D 

i 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

The Borough of Lavallette is located in Ocean County, New Jersey, on the 

Barnegat Peninsula, a long, narrow barrier island that separates the Barnegat 

Bay from the Atlantic Ocean. On October 29, 2012, Hurricane Sandy’s high 

winds and widespread landfall caused severe storm surge, flooding, structural 

damages, loss of power to homes and businesses, and blocked roads with 

debris (see figures 1 and 2). The President issued a disaster declaration on 

October 30, 2012, a day later. 

Figure 1: Damaged Boardwalk after Hurricane Sandy 

Source: Borough of Lavallette, New Jersey 

Figure 2: Debris and Damage to Road after Hurricane Sandy 

Source: Borough of Lavallette, New Jersey 

www.oig.dhs.gov 2 OIG-17-93-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Results of Audit
 

The Borough did not always comply with FEMA grant requirements. Of the 

$9.5 million in expenditures we reviewed, we questioned $3.2 million composed 

of the following amounts: 

x $2,659,824 in duplicate costs; 

x $369,854 in ineligible labor, equipment, and contract costs; 

x $125,058 of unsupported equipment costs; and 

x $25,140 of project income. 

Additionally, we identified $680,871 in unneeded funds that FEMA should put 

to better use. The Borough completed work on projects for $680,871 less than 

the FEMA estimate. 

These findings occurred primarily because of Borough officials’ limited 

familiarity with Federal regulations and FEMA guidelines. Nevertheless, it was 

New Jersey’s responsibility as FEMA’s grantee to ensure that the subgrantee, 

the Borough, was aware of and complied with all Federal regulations and 

FEMA guidelines applicable to FEMA Public Assistance grants. 

Finding A: Duplicate Benefits 

The Borough claimed $2,659,824 in duplicate benefits. Specifically, the 

Borough received $2,643,936 in insurance reimbursements for multiple 

projects that it did not use to reduce FEMA funding. In addition, the Borough 

claimed costs totaling $15,888 twice for Project 1717. According to Section 312 

of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as 

amended, no entity will receive assistance for any loss for which it has received 

financial assistance from other programs, insurance, or any other source. 

Furthermore, according to 44 Code of Federal Regulation (CFR) 206.250(c), 

grant recipients must deduct actual and anticipated insurance recoveries from 

otherwise eligible costs. Therefore, we question $2,659,824 as duplicate 

benefits. 

Duplicate Benefits – Insurance 

The Borough received insurance benefits that it applied to its insurable 

facilities. However, FEMA did not reduce the project funding to account for 

these proceeds. The result was FEMA overfunding the projects by $2,608,386.2 

2 During our audit, we identified $2,379,542 of funds the Borough received readily available for 

deobligation and return to FEMA after the projects are completed and closed. The Borough 

properly identified and maintained the Federal share of $2,379,542 in a separate account. 

www.oig.dhs.gov 3 OIG-17-93-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Borough officials said they were working with FEMA officials to return the 

unneeded funding. In addition, we identified $35,550 of unapplied insurance 

proceeds, which FEMA should apply to individual projects. At the time of our 

fieldwork, however, FEMA had not yet deobligated the funding. Therefore, we 

question $2,643,936 as duplicate benefits (see table 2). 

Table 2: Duplicate Insurance Benefits 

Project Number and 

Category of Work3 Project Scope 

Insurance 

Proceeds 

Questioned 

1717 – A Debris Removal $ 186 

0043 – B Temporary Facilities 44,649 

3981 – C Roads 159 

5180 – E Repairs-Police Cars 107,267 

1273 – F Sewer Systems 30,913 

4188 – F Water Distribution System 555,694 

4300 – F Electric Distribution Systems 1,632,599 

1398 – G Bulkheads 126,129 

3961 – G Boardwalk 87,072 

4797 – G Parks 23,718 

Unallocated Not Yet Allocated to FEMA Projects 35,550 

Total $2,643,936 

Source: Office of the Inspector General (OIG) analyses of FEMA and Borough documentation 

Duplicate Benefits – Non-Insurance 

The Borough claimed costs for equipment rental twice, once as rental 

equipment and again as force account4 equipment for Project 1717 as well as 

claimed some force account cost as both force account and contract costs. As a 

result, the Borough claimed $15,888 of ineligible costs. Specifically, the claim 

included $14,718 of duplicate costs for equipment used in debris removal. 

Additionally, the Borough claimed $1,170 both as force account material costs 

and as contract costs. Borough officials explained the $1,170 in expenses were 

force account materials and not contract expenses. Therefore, we question 

$15,888 as duplicate costs. 

Finding B: Ineligible and Excessive Costs 

The Borough’s claim included $369,854 of ineligible and excessive costs (see 

table 3). Specifically, the Borough’s claim of $5,412,474 included $269,537 of 

3 FEMA classifies disaster–related work by type: debris removal (Category A), emergency 

protective measures (Category B), and permanent work (Categories C through G). 

4 “Force account” is the term FEMA uses to identify work an entity performs with its own 

employees, equipment, or materials as opposed to work that a contractor performs. 

www.oig.dhs.gov 4 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

ineligible force account labor, $57,378 of ineligible contract costs, and $42,939 

of excessive equipment costs. 

Table 3: Ineligible Labor, Contract, and Excessive Equipment Costs 

Project 

Number 

Amount 

Claimed 

Ineligible Labor, Contract Costs, 

and Excessive Equipment Costs 

Total 

Question 

Costs 

Ineligible 

Labor Costs 

Ineligible 

Contract 

Costs 

Excessive 

Equipment 

Costs 

0103 $ 939,050 $ 269,537 $ 33,259 $ 30,387 $ 333,183 

1717 1,057,324 0 7,775 0 7,775 

4300 3,201,700 0 0 12,552 12,552 

5180 214,400 0 16,344 0 16,344 

Total $5,412,474 $269,537 $57,378 $42,939 $369,854 

Source: OIG analyses of FEMA and Borough documentation 

Ineligible Force Account Labor 

The Borough’s claim for Project 0103 for emergency work included $269,537 of 

ineligible labor costs. Specifically, the Borough claimed improperly $202,234 as 

regular-time salaries and $67,303 of ineligible overtime for Project 0103. 

The Borough’s claim included $202,234 of ineligible regular-time salaries. 

According to 44 CFR 206.228(a)(2), straight or regular-time salaries and 

benefits of a grant recipient’s permanent employees engaged in emergency work 

(emergency protective measures) are not eligible for FEMA reimbursement. This 

occurred because the Borough officials erroneously applied FEMA Fact Sheet 

9580.215,5 Hurricane Sandy Debris Removal Force Account Labor Costs, 

allowances to ineligible emergency protective measures and not the eligible 

debris removal work as specified in FEMA guidance. Therefore, FEMA should 

disallow $202,234 of force account labor costs as ineligible. 

Finally, the Borough’s claim included $67,303 of ineligible force account labor 

overtime. The Borough incorrectly calculated the claimed overtime hours by not 

applying the appropriate Borough departments’ overtime policies. Employees 

from several different Borough departments performed emergency work. 

However, each department has a different union contract with different 

overtime policies. For example, the contract for the police department requires 

officers to work more than 84 hours in a 2-week pay period to earn overtime 

compared to dispatchers, clerks, and other public works employees who must 

5 FEMA Recovery Fact Sheet 9580.215 dated 11/5/2012 – Hurricane Sandy: Debris Removal Force 

Account Labor Costs authorized all FEMA public assistance recipients to claim regular time and benefits 

of its permanent employees who performed debris removal activities. 

www.oig.dhs.gov 5 OIG-17-93-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

work more than 80 hours in a 2-week period. We recalculated the hours using 

the correct contracts policies and determined the Borough incorrectly claimed 

regular time as overtime. Therefore, FEMA should disallow $67,303 as 

ineligible force account labor overtime. 

Ineligible Contract Costs 

The Borough’s claim included $57,378 of ineligible contract costs for Projects 

0103, 5180, and 1717. Specifically, the Borough’s claim for Project 0103 

included $33,259, Project 5180 included $16,344, and Project 1717 included 

$7,775 of ineligible contract costs. 

The Borough claimed ineligible contract labor costs for Project 0103 totaling 

$23,065 under a mutual aid contract with the Township of Lyndhurst Police 

Department (Township) to assist with emergency services. The Township’s 

overtime policy states that police officers must work more than 80 hours in a 

pay period to be eligible for overtime pay. Nonetheless, the Township charged 

the Borough at overtime rates for police officers that had not reached their 80 

hours. Therefore, FEMA should disallow $23,065 as ineligible contract costs. 

The Borough’s claim included $6,194 of ineligible Direct Administrative Costs 

for Project 0103. Specifically, we identified a contractor charged $135.71 an 

hour rather than the contract rate of $129.25 an hour. A rate paid is inherently 

unreasonable if it exceeds the agreed upon rate. As a result, we questioned the 

additional $6.46 per hour the contractor charged the Borough, and FEMA 

should disallow $6,194 as prohibited markup contract costs. 

The Borough also claimed $4,000 of ineligible contract costs for Project 0103. 

Specifically, the Borough claimed $4,000 for expenses incurred as part of a 

preexisting intergovernmental payment agreement, which it entered into with 

Ocean County in 2012. The $4,000 was not eligible for FEMA reimbursement 

because the Borough was not able to show that the work was disaster related 

and the agreement predated the disaster. Further, the agreement obligated the 

Borough to pay the $4,000 regardless of whether or not the disaster occurred. 

Therefore, FEMA should disallow $4,000 as ineligible contract costs. 

The Borough’s claim for Project 5180 included $16,344 for vehicle replacement 

costs it did not incur. The Borough’s claim included deductibles that it did not 

incur for 7 of its 13 damaged vehicles. FEMA would reimburse deductibles if 

the Borough incurred them. Federal cost principles (Cost Principles for State, 

Local , and Indian Tribal Governments) at 2 CFR Part 225, Appendix A, C.1.a, 

requires that costs must be incurred and necessary for proper and efficient 

performance and administration of Federal awards. Therefore, FEMA should 

disallow $16,344 as ineligible costs. 

www.oig.dhs.gov 6 OIG-17-93-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

The Borough’s claim included $7,775 of ineligible Direct Administrative Costs 

for Project 1717. Specifically, a contractor charged $135.71 an hour rather 

than the contract rate of $129.25 an hour. A rate paid is inherently 

unreasonable if it exceeds the agreed upon rate. As a result, we questioned the 

additional $6.46 per hour the contractor charged the Borough, and FEMA 

should disallow $7,775 as prohibited markup contract costs. 

Excessive Equipment Costs 

The Borough’s claim included $42,939 of excessive equipment costs; $30,387 

for Project 0103 and $12,552 for Project 4300. This occurred because the 

Borough applied the wrong equipment rates from FEMA’s 2010 Schedule of 

Equipment Rates. As a result, we question $42,940 as excessive equipment 

costs. 

Specifically, for Project 0103 the Borough claimed $20,103 of excessive 

equipment costs for several generators it used for emergency lighting and a jet 

ski it used for emergency transportation. For example, the Borough claimed 

$70 per hour for a 187-kilowatt generator; however, FEMA’s 2010 Schedule of 

Equipment Rates allows only $50 per hour, or $20 less than the Borough 

claimed (see table 4). 

Table 4: Excessive Equipment Claimed Costs 

Equipment 

Description 

Equipment 

Kilowatt 

FEMA 

Cost 

Code 

Hourly 

Costs 

Claimed 

Hours 

claimed 

Total 

Amount 

Claimed 

Corrected 

FEMA 

Hourly 

rate 

Adjusted 

Costs 

Questioned 

Costs 

Generator 187 8314 $70.00 319 $22,330 $50.00 $15,950 $ 6,380 

Generator 50 8312 22.00 319 7,018 17.00 5,423 1,595 

Generator 106 8313 46.00 319 14,674 34.00 10,846 3,828 

Generator 50 8312 22.00 319 7,018 17.00 5,423 1,595 

Generator 275 8315 80.00 319 25,520 60.00 19,140 6,380 

Generator 10 8310 4.10 319 1,308 3.25 1,037 271 

Jet Ski 

Total 

N/A 8131 18.50 12 

1,926 

222 

$78,090 

14.00 168 

$57,987 

54 

$20,103 

Source: OIG analyses of FEMA and Borough documentation 

The Borough’s claim for Project 0103 also included $6,465 of excessive costs 

for vehicles it used to control traffic. Specifically, the Borough used two 

different types of non-police vehicles6 as barricades and at checkpoints to 

control traffic during the disaster. The Borough incorrectly claimed $25 per 

hour for a 1-ton pickup truck; FEMA rates only allow $20 per hour. 

Furthermore, the Borough claimed $30 per hour for a 1.5-ton pickup truck; 

6 The Borough used 34 1-ton pick-up trucks and 16 1.5-ton pick-up trucks, for a total of 50 

non-police vehicles. 

www.oig.dhs.gov 7 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

however, FEMA rates allow only $25 per hour. We recalculated the costs using 

the FEMA-approved rates and identified a $6,465 difference. Therefore, we 

question a total of $6,465 as excessive equipment costs for the vehicles used as 

barricades and at checkpoints. 

The Borough's claim for Project 0103 also included $3,819 of excessive 

equipment costs. The Borough entered into a mutual aid contract with 

Township of Lyndhurst Police Department to patrol Borough streets and 

provide additional security. We determined that the Township incorrectly used 

FEMA equipment rates in its billing to the Borough. For example, it used an 

incorrect FEMA rate of $17 per hour for a 20-kilowatt generator used for 

emergency lighting for 406 hours. The correct FEMA rate is only $8 per hour. 

Additionally, the Borough claimed oil change costs of $165 that FEMA already 

includes in its equipment rates. Therefore, we question $3,819 as excessive 

equipment costs. 

Finally, the Borough’s claim for Project 4300 included $12,552 of excessive 

equipment costs. For example, the Borough claimed $61.50 per hour for a 

utility truck;7 however, according to the FEMA Schedule of Equipment Rates, 

FEMA allows only $57.25 per hour for this type of equipment. Furthermore, the 

Borough erroneously claimed the use of 1-ton pickup truck for $30 per hour; 

the FEMA rate allows only $20 per hour. We recalculated the rates using the 

allowable FEMA rates. As a result, we question a total $12,552 as excessive 

equipment costs. 

Finding C: Supporting Documentation 

The Borough’s claim for Project 0103 included $125,058 of unsupported costs 

for force account equipment. This occurred because the Borough could not 

support adequately $125,058 of the costs that it claimed for vehicles used to 

patrol Borough streets during Hurricane Sandy. As a result, FEMA has no 

assurance that these costs are valid and eligible. Federal cost principles (Cost 

Principles for State, Local , and Indian Tribal Governments) at 2 CFR Part 225, 

Appendix A, C.1.j., require costs to be documented adequately to be allowable. 

In addition, 44 CFR 13.20(b)(2)(6) requires that grant recipients provide source 

documentation to support accounting records. 

The FEMA Schedule of Equipment Rates, dated September 2010, identifies 

mileage as the basis for reimbursement for vehicle expenses used for patrolling 

the streets during an event and the rate schedule does not allow the use of 

hourly rates. According to a Borough official, the Borough lost its mileage data 

7 The vehicle claimed was a 45,000 gross vehicle weight with a 45-foot aerial boom. 

www.oig.dhs.gov 8 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

because a computer server malfunctioned. Therefore, we could not verify the 

claimed costs and question $125,058 as unsupported. 

Finding D: Applicable Credits 

The Borough did not reduce its claim by $25,140 for the net proceeds it 

realized from the sale of copper wire and transformers for Project 4300, as 

required by Federal regulation. Borough officials said they did not reduce their 

claim because they were not aware of the requirement. The sales resulted from 

the repair and replacement of the Borough’s electrical distribution systems. 

Federal regulations at 44 CFR 13.25(b) and g(1) state that income received or 

earned by a subgrantee during the grant period that is related to the grantsupported activity shall be deducted from the total allowable costs to determine 

the net allowable costs. In addition, FEMA Disaster Assistance Policy 9525.12 

(Disposition of Salvageable Materials, July 18, 2008) holds that costs directly 

tied to the performance of eligible work are generally eligible for 

reimbursement, but applicants must reduce costs by all applicable credits, 

such as insurance proceeds and salvage values, and must cost-share any 

income with FEMA. As a result, we question $25,140 as an applicable credit. 

Finding E: Unneeded Funds 

The Borough completed work on Projects 0103 and 3820 for $680,871 less 

than FEMA obligated for the projects. Specifically, in December 2013, the 

Borough completed authorized work on Project 0103 for $614,950 less than 

the $1,554,000 FEMA estimated and funded for the project. However, these 

unused funds remained obligated at the time of our audit. Additionally, for 

Project 3820, the Borough confirmed it no longer needs $65,921 of funds 

obligated to complete the project. 

Federal Appropriations laws and the Statement of Federal Financial Accounting 

Standards (SFFAS) require Federal agencies to record obligations in the 

accounting records on a factual and consistent basis throughout the 

government.8 That is, the agency must increase or decrease obligated funds 

when probable or measurable information becomes known. The over-recording 

and under-recording of obligations are equally improper. Both practices make 

it impossible to determine the precise status of Federal appropriations. 

Therefore, FEMA should deobligate the $680,871 of Federal funds and put 

those funds to better use. 

8 U.S Government Accountability Office ( GAO), Principles of Federal Appropriations Law, Third 

Edition, Volume II, February 2006, chapter 7, Section B: Criteria for Recording Obligations (31 

U.S.C.§ 1501); 7 Government Accountability Office-Policy and Procedures Manual § 3.5.D; B300480, April 9, 2003; and SFFAS Number 5, paragraphs 19, 24, 25, and 29. 

www.oig.dhs.gov 9 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Finding F: Grant Management 

New Jersey should have done more as FEMA’s grantee to ensure the Borough 

was aware of and complied with Federal grant requirements. In its FEMA-State 

Agreement, New Jersey agreed to “comply with the requirements of laws and 

regulations found in the Stafford Act and 44 CFR.” Further, 44 CFR 13.37(a)(2) 

and 13.40(a) require grantees to (1) ensure that applicants are aware of Federal 

regulations, (2) manage subgrant activity, and (3) monitor subgrant activity to 

assure compliance. Therefore, it was New Jersey’s responsibility to ensure the 

Borough complied with applicable Federal regulations and FEMA guidelines. It 

is FEMA’s responsibility to hold New Jersey accountable for proper grant 

administration. Therefore, New Jersey should provide additional technical 

assistance to the Borough and verify that the Borough implements and adheres 

to Federal requirements. 

www.oig.dhs.gov 10 OIG-17-93-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Recommendations 

We recommend the Regional Administrator, FEMA Region II: 

Recommendation 1: Disallow as ineligible $2,659,824 (Federal share 

$2,393,842) of duplicate benefits (finding A). 

Recommendation 2: Disallow $369,854 (Federal share $332,869) of 

ineligible labor, equipment, and contract costs (finding B). 

Recommendation 3: Disallow $125,058 (Federal share $112,552) of 

unsupported force account equipment costs the Borough claimed unless the 

Borough provides adequate documentation to support the costs (finding C). 

Recommendation 4: Disallow $25,140 (Federal share $22,626) of project 

income that should be used to reduce Project 4300 (finding D). 

Recommendation 5: Deobligate and put to better use $680,871 (Federal 

share $612,784) of unneeded Federal funding obligated for project work 

(finding E). 

Recommendation 6: Direct New Jersey to provide additional technical 

assistance to the Borough and verify that the Borough adheres to Federal 

requirements to account for disaster-related expenses (finding F). 

Discussion with Management and Audit Follow-up 

We discussed the results of our audit with Borough, New Jersey, and FEMA 

officials during our audit. We also provided a draft report in advance to these 

officials and discussed it at the exit conference on February 22, 2017, with 

FEMA and New Jersey and Borough officials on February 24, 2017 

FEMA Region II officials provided a written response on March 23, 2017, 

agreeing with our findings and recommendations (see appendix C). The 

response indicated that FEMA expects to implement its proposed corrective 

actions to address all recommendation by August 31, 2017. Therefore we 

consider the six recommendations contained in this report resolved, but open. 

We will evaluate closure upon documentation that FEMA has implemented its 

proposed corrective actions. Please email closeout documentation and requests 

to emo.auditliaison@oig.dhs.gov. 

The Office of Emergency Management Oversight major contributors to this 

report are William Johnson, Director; Anthony Colache, Audit Manager; and 

www.oig.dhs.gov 11 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Amos Dienye, Auditor-In-Charge, John Jadick, Independence Reference 

Reviewer. 

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

Paul Wood, Acting Deputy Assistant Inspector General or William Johnson, 

Director, Eastern Regional Office - North at (404) 832-6703. 

www.oig.dhs.gov 12 OIG-17-93-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

We audited FEMA Public Assistance grant funds awarded to the Borough, 

Public Assistance Identification Number 029-39390-00. Our audit objective 

was to determine whether the Borough accounted for and expended FEMA 

grant funds according to Federal regulations and FEMA guidelines for FEMA 

Disaster Number 4086 DR-NJ. New Jersey, a FEMA grantee awarded the 

Borough a total gross amount of $13.2 million ($12 million-net of Insurance 

recoveries) for damages resulting from Hurricane Sandy that occurred in 

October 2012. The award provided 90 percent FEMA funding for 11 large 

projects and 6 small projects for debris removal, emergency protective 

measures, and permanent repairs to buildings and facilities. 

We audited 12 projects with awards totaling $9.5 million (see appendix B, table 

5). The audit covered the period from October 29, 2012, to June 9, 2015, 

during which the Borough claimed $9.7 million under the 12 projects in our 

audit scope. At the time of our audit, the Borough had completed work on five 

large projects we audited, but had not submitted a final claim to New Jersey for 

all expenditures. 

To accomplish our objective, we interviewed Borough, New Jersey, and FEMA 

personnel; gained an understanding of the Borough’s method of accounting for 

disaster-related costs and its procurement policies and procedures; 

judgmentally selected (generally based on dollar amounts) and reviewed 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 audit objective. We 

did not perform a detailed assessment of the Borough’s internal controls 

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

audit objective. 

We conducted this performance audit between June 2015 and February 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 the evidence obtained provides a reasonable basis 

for our findings and conclusions based upon our audit objective. To conduct 

this audit, we applied the statutes, regulations, and FEMA policies and 

guidelines in effect at the time of the disaster. 

www.oig.dhs.gov 13 OIG-17-93-D 
 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Potential Monetary Benefits 

Table 5: Questioned Costs and Funds Put to Better Use by Project 

Project 

Number 

Category 

of Work9 

Amount 

Awarded 

Claimed 

Amount 

Costs 

Questioned Finding 

Funds Put 

to Better 

Use 

(Finding E) 

1717 A $ 1,031,730 $ 1,057,324 $ 23,849 A,B, 

0103 B 1,554,000 939,050 458,241 B,C $614,950 

0043 B 227,147 227,147 44,649 A 

3981 C 339,422 339,422 159 A 

5180 

1273 

E 

F 

15,000 

37,767 

214,400 

37,767 

123,611 

30,913 

A,B 

A 

3820 

4188 

4300 

1398 

3961 

4797 

Unallocated 

Totals 

F 

F 

F 

G 

G 

G 

65,921 

941,378 

2,600,329 

100,886 

2,528,028 

61,634 

$9,503,242 

65,921 

941,378 

3,201,700 

100,886 

2,528,028 

61,634 

$9,714,657 

0 

555,694 

1,670,291 

126,129 

87,072 

23,718 

35,550 

$3,179,876 

0 

A 

A,B,D 

A 

A 

A 

A 

65,921 

$680,871 

Source: OIG analyses of FEMA and Borough documentation 

Table 6: Summary of Potential Monetary Benefits 

Type of Potential Monetary Benefit Amounts Federal Share 

Questioned Costs – Duplicate & Insurance $ 2,659,824 $ 2,393,842 

Questioned Costs – Ineligible Labor, Equip & Contracts 369,854 332,869 

Questioned Costs – Unsupported 125,058 112,552 

Questioned Costs – Project Income 25,140 22,626 

Funds Put to Better Use 680,871 612,784 

Totals $3,860,747 $3,474,673 

Source: OIG analyses of report findings 

9 FEMA classifies disaster-related work by type: debris removal (Category A), emergency protective 

measures (Category B), and permanent work (Categories C through G). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

FEMA Region II Audit Response 

www.oig.dhs.gov 15 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C (continued) 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C (continued) 

www.oig.dhs.gov 17 OIG-17-93-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

General Council 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Chief Privacy Officer, Under Secretary for Management 

Federal Emergency Management Agency 

Administrator 

Chief of Staff 

Chief Financial Officer 

Chief Counsel 

Chief Procurement Officer 

Associate Administrator, Response and Recovery 

Director, Risk Management and Compliance 

Audit Liaison, FEMA (Job Code G-15-034) 

Audit Liaison, FEMA Region II 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

www.oig.dhs.gov 18 OIG-17-93-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D (continued) 

External 

Director, Governor’s Office of Recovery and Rebuilding, New Jersey 

State Coordination Officer, New Jersey State Police, Homeland Security

 Branch 

State Auditor, New Jersey 

Attorney General, New Jersey 

Borough Administrator, Borough of Lavallette 

Chief Financial Officer, Borough of Lavallette 

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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