DEPARTMENT OF HOMELAND SECURITY 

Office of Inspector General 

Audit of the Federal Emergency 

Management Agency’s Public 

Assistance Grant Funds Awarded to 

the Macon Water Authority After 

Tropical Storm Alberto 

Office of Audits 

OIG-07-06 November 2006

Table of Contents/Abbreviations 
 

Executive Summary.........................................................................................................................1 
 

Background......................................................................................................................................2 
 

Results of Audit ...............................................................................................................................3 
 

Ineligible Project Costs..............................................................................................................3 

 Accounting Errors....................................................................................................................11 
 

Small Project not Completed ...................................................................................................12 
 

Interest Earned on Federal Funds ............................................................................................ 12

 Recommendations....................................................................................................................13 
 

Appendices 

 Appendix A: Objectives, Scope, and Methodology. ....................................................... 14 
 

Appendix B: Schedule of Projects Audited, Questioned Costs, and Funds 
 

That Could Have Been Put to Better Use .................................................. 15 
 

Appendix C: Schedule of Funds Awarded for the Replacement of the Riverside 
 

Water Treatment Plant ............................................................................... 17 
 

Appendix D: FEMA Region IV Responses to the Draft Report ..................................... 18 
 

Appendix E: Major Contributors to this Report.............................................................. 27 
 

Appendix F: Report Distribution .................................................................................... 28 
 

Abbreviations and Acronyms 

Authority Macon Water Authority, Macon, Georgia 

CFR Code of Federal Regulations 

DSR Damage Survey Report 

FEMA Federal Emergency Management Agency 

GEMA Georgia Emergency Management Agency 

OIG Office of Inspector General 

Stafford Act Robert T. Stafford Disaster Relief and Emergency Assistance Act 
Audit OIG Report 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

The Office of Inspector General (OIG) audited public assistance grant funds 

awarded by the Federal Emergency Management Agency (FEMA) to the 

Macon Water Authority, Macon, Georgia (Authority) after Tropical Storm 

Alberto. The objective of the audit was to determine whether the Authority 

expended and accounted for FEMA funds according to federal regulations and 

FEMA guidelines. During the audit, we added an objective to determine 

whether FEMA’s decision to fund the replacement of the Authority’s 

Riverside Water Treatment Plant was appropriate. 

We determined that FEMA’s decision to fund the replacement and relocation 

of the Authority’s Riverside Water Treatment Plant was not a cost-effective or 

practicable alternative to repairing the existing facility and mitigating the 

effects of future flooding when considering the $93.5 million cost of the new 

plant and the fact that disaster-related repairs had restored the damaged plant 

to its pre-disaster condition. Further, FEMA’s alternatives analysis required 

by floodplain management regulations was flawed, documentation to support 

replacing the plant contained gaps, and actions to authorize federal funding to 

replace and relocate the plant were contrary to federal regulations and a 

wasteful use of taxpayers’ dollars. 

FEMA Region IV officials did not concur with our conclusion and said: 

(1) FEMA acted within its statutory authority and thus, fulfilled the intent of 

the Robert T. Stafford Disaster Relief and Emergency Assistance Act 

(Stafford Act, Public Law 93-288, as amended), the purposes of floodplain 

management, and the aims of mitigation against future critical infrastructure 

interruption; and (2) approval authority rested solely within FEMA’s 

discretion, and the Authority relied upon FEMA’s approval authority and 

representations and acted in good faith when it relocated its facility from the 

floodplain. 

We also questioned $88,093 in duplicate expenditures and monies for an 

uncompleted small project, and identified $245,708 in interest earned on 

FEMA-advanced funds. The Region concurred with those findings and 

indicated that its final decision was dependent on evidence provided by the 

Authority. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 1 
Background 

Section 406 of the Stafford Act authorizes federal grants to state and local 

governments for the repair, restoration, reconstruction, or replacement of 

public facilities damaged or destroyed by a major disaster. Title 44 of the 

Code of Federal Regulations (CFR) implements the Stafford Act and among 

other things provides for floodplain management and wetland protection (Part 

9), uniform administrative requirements for grants to state and local 

governments (Part 13), and rules for federal disaster assistance (Part 206), 

including public assistance project administration (Subpart G) and public 

assistance eligibility (Subpart H). 

As a result of Tropical Storm Alberto that occurred in July 1994, the Macon 

Water Authority received a public assistance grant award of $102.6 million 

from the Georgia Emergency Management Agency (GEMA), a FEMA 

grantee, for repairs to and replacement of damaged public facilities. The 

award relative to FEMA Disaster Number 1033-DR-GA provided 90 percent 

federal funding for 25 large projects and 60 small projects.1 The audit covered 

the period July 1994, to November 2004, and included a review of 24 large 

projects and 60 small projects with a total award of $100.1 million. 

According to 44 CFR § 13.42, grantees and subgrantees are required to retain 

all financial and programmatic records, supporting documents, statistical 

records, and other records for at least 3 years after the grantee submits its final 

expenditure report. Although the disaster occurred over 12 years ago, one 

large project remained open at the time of our audit. Therefore, GEMA and 

the Authority had not submitted final expenditure reports or a final project 

completion and certification report. As such, Authority records were available 

for our review. 

1

 Federal regulations in effect at time of the disaster set the large project threshold at $42,400. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Results of Audit 

Ineligible Project Costs 

The Authority received a $93.5 million public assistance award to replace the 

Riverside Water Treatment Plant (facility) at a new location.2 Replacement of 

the facility was not eligible for federal funding because the Authority had 

already completed FEMA-approved repairs that restored the existing facility 

to its pre-disaster condition, and FEMA’s actions to authorize federal funding 

to replace the facility at a new location were contrary to federal regulations. 

As a result of the July 1994 disaster, FEMA awarded the Authority 

$1,001,752 for debris removal and emergency work (Categories A and B) to 

restore the operation of the facility,3 and an additional $3,363,844 for 

permanent work (Category F - Utilities) to restore the facility to its 

pre-disaster condition.4 FEMA records showed that as early as August 1994, 

the facility was back in operation.5 We reviewed Authority records showing 

that the facility was originally designed and built to produce 48 million 

gallons per day, but based on demand, it was only producing 29 million 

gallons of drinkable water per day before the disaster. The Authority’s project 

records showed that following restoration, demand increased and the facility’s 

output and efficiency improved to 31 million gallons per day. Those records 

also showed that the facility continued operation under the same unrestricted 

water production permit that was in place prior to the disaster. Both FEMA 

and the Authority confirmed that the facility’s efficiency improved as a result 

of the disaster repairs. However, in September 1994, design of a “new” 48 

million gallon per day water treatment plant began, and in November 1994, 

FEMA approved replacing the facility at a new site. Construction began in 

November 1996 and the last of the work was completed in May 2003. In 

total, FEMA awarded the Authority $93,466,334 for the engineering and 

construction of the replacement facility. See Appendix C for the schedule of 

projects, project purposes, amounts awarded and expended, work start dates, 

and final inspection dates. In addition to the engineering and construction of 

2

 FEMA Project records indicated that (1) the plant began operation at the turn of the 20th Century, (2) the oldest 

remaining structures at the time of the disaster were built in the 1930s, and (3) the newest structures were built in the 

early 1970s. Those records also indicated that at the time of the disaster, the plant could supply 48 million gallons per 

day during peak demand periods but the typical output was between 30 and 35 million gallons per day. This varied from 

Authority records that supported a typical output of 29 to 31 million gallons per day. 3

 Primary Damage Survey Reports (DSRs) 90854 and 86464. 4

 Primary DSRs 90855 and 86462. 5

 FEMA project records indicated that final inspection for debris removal and emergency work was completed by 

late-March 1995 and facility restoration work was completed in January 1996. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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the replacement facility, FEMA also awarded $2.5 million for the demolition 

of the previously restored facility.6 

Section 406 of the Stafford Act authorizes federal assistance for repair, 

restoration, reconstruction, or replacement of certain public and private 

nonprofit facilities damaged or destroyed by a major disaster (Public 

Assistance). According to 44 CFR § 206.226(b) [October 1993], FEMA is 

authorized to provide federal assistance to restore damaged facilities on the 

basis of the design of such facilities as they existed immediately prior to the 

disaster without allowing for non-code required improvements. In addition, 

§ 206.226(d) provides that a decision to replace a damaged facility should be 

supported with a repair versus replacement analysis showing that repair costs 

equal or exceed 50 percent of replacement costs. Further, § 206.226(e)(1) 

states, “The Regional Director may approve funding for and require 

restoration of a destroyed facility at a new location when: (i) The facility is 

and will be subject to repetitive heavy damage; (ii) The approval is not barred 

by other provisions of title 44 CFR; and (iii) The overall project, including all 

costs, is cost effective.” 

FEMA Region IV comments regarding restoration of the old facility. The 

Region disagreed with our conclusion that repairs to the damaged facility 

restored it to its pre-disaster condition. The Region asserted that while 

permanent in nature, the work actually performed restored the plant to the 

“...minimum level of production necessary to meet the daily demand and to 

end the three-week-long emergency distribution of drinking water to over 

150,000 Macon/Bibb County residents, businesses, and industries.” The 

Region noted that contemporaneous project notes indicated that only essential 

facility components were repaired and thus, supported its conclusion that the 

facility, in total, was not restored to it pre-disaster condition. 

OIG comments and analysis. The FEMA and Authority project records we 

reviewed did not support that the facility was repaired to meet minimal 

production. In fact, DSR 90855 authorized the Authority to clean, repair, and 

restore all plant machinery, equipment, and control systems to their 

pre-disaster operating function and condition. In addition, a summary 

attached to that DSR noted that on August 2, 1994, the plant capacity returned 

to “...100% of daily demand for water.” We noted that restoration work 

continued after the 3-week emergency water distribution period and the public 

assistance completion date indicated in FEMA’s final inspection report was 

January 7, 1996. Further, as we noted earlier, the facility continued operating 

under the same unrestricted water production permit before and after the 

6

 DSR 14711 that approved the demolition of the restored facility was in process during our fieldwork and was not 

included in our sample for review. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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disaster, and production did not decline prior to March 29, 2001, when 

operations transferred to the new facility. 

While FEMA funded repairs that restored the Authority’s facilities to 

pre-disaster condition, on July 21, 1994, the Authority authorized a contract to 

prepare documents requested by GEMA and FEMA for constructing a new 

water treatment plant at a different location using federal funds.7 In an 

unsigned and undated site assessment, FEMA recommended relocating a new 

plant outside the floodplain. An unsigned project background and approval 

document dated November 30, 1994, indicated that based on the design and 

engineering report prepared by the Authority’s contractor, FEMA’s National 

Office approved the relocation project. FEMA supported its decision to 

replace the facility by erroneously determining that: 

• 	 The cost of restoring the damaged facility to pre-disaster condition exceeded 

50 percent of the cost to replace it and thus, replacement was appropriate under 

federal regulations. 

• 	 Executive Order 11988 and federal floodplain regulations [44 CFR 

§ 9.11(d)] prohibited FEMA from making major improvements to the 

damaged facility at its current location. 

As discussed in greater detail below, our review of FEMA and Authority 

records showed that FEMA’s repair versus replacement analysis was 

completed incorrectly, and Executive Order 11988 as implemented by 44 CFR 

Part 9 did not require FEMA to replace the facility outside the floodplain. 

Repair versus Replacement Analysis not Properly Completed 

Federal regulations state that a facility is considered repairable when disaster 

damages do not exceed 50 percent of the cost of replacing a facility to its predisaster condition, and it is feasible to repair the facility so that it can perform 

the function for which it was being used as well as it did immediately prior to 

the disaster [44 CFR § 206.226(d)(1)]. While the repair versus replacement 

ratio is simply computed by dividing the estimated repair cost by the 

estimated replacement cost, subsequent to this disaster, FEMA provided 

guidance to Regional Offices and Federal Coordinating Officers covering 

various interpretations of this regulation.8 The guidance recognized that 

disaster damage in some cases had been misinterpreted to include all FEMA 

7

 Authority Board of Directors’ meeting minutes dated July 21, 1994. The contractor’s report, entitled Water Treatment 

Plant at Town Creek Reservoir, dated September 1994, provided the preliminary scope of work for a 60 million gallon 

per day facility, and was included with FEMA project documentation. 8

 Response and Recovery Directorate Guidance No. 4511.61E dated June 1, 1995. This guidance was later incorporated 

in FEMA’s Public Assistance Guide (FEMA 286 – September 1996) and made available to Public Assistance applicants. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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eligible costs rather than costs related to the repair of the disaster damage 

only. FEMA clarified the “50% Rule” as follows: 

[T]he determination of a facility for replacement will be 

calculated by the following fraction: The cost of repair of the 

disaster damage (repair of the damaged components only, 

using present day materials and methods) divided by the cost of 

replacement of the facility with a facility of equivalent 

capacity, using current codes for new construction. If this 

calculation is greater than 50%, then replacement is considered 

to give a better return on the taxpayers’ investment, and is thus 

eligible for FEMA funding under § 206.226(d)(1). 

The guidance specified that the estimated repair costs used for the calculation 

do not include the costs of any triggered or mandatory upgrades, site work, or 

applicable soft costs even though these costs may be eligible for FEMA 

funding. 

According to the repair versus replacement requirement of 44 CFR 

§ 206.226(d), FEMA summarized its methodology for determining the ratio of 

repair and replacement costs in a site assessment document attached to the 

November 30, 1994 project background and approval document. We 

reviewed FEMA’s methodology and supporting records and determined that 

FEMA used incorrect cost estimates and calculated an incorrect ratio. We 

concluded that the analysis incorrectly supported federal funding for a new 

facility. 

Even though FEMA funded most of the debris removal and emergency and 

permanent work totaling $4,365,596 to bring the facility back to its predisaster condition by January 1995,9

 in November 1994, FEMA estimated 

repair costs at $26.9 million, including $7.0 million in facility repairs and 

$19.9 million in upgrade/mitigation work to protect the facility against future 

damages. This repair estimate was then divided by an estimated $39.4 million 

replacement cost10 to arrive at the 68 percent repair versus replacement ratio. 

As previously stated, FEMA is authorized to provide federal assistance to 

restore damaged facilities on the basis of the design of such facilities as they 

existed immediately prior to the disaster without allowing for non-code 

required improvements (or mitigation to undamaged components of a facility). 

9

 This date represents the latest date that funding was provided to the Authority but as indicated earlier, the plant was 

operational in August 1994. 10 In its site assessment, FEMA used a replacement cost of $39.4 million. The source of this figure was not clear from 

the information FEMA provided to us during the audit. In its response to this finding, FEMA Region IV provided us an 

Authority-prepared document entitled Calculation of Current Value of Existing Water Treatment Plant that showed a 

replacement cost of $39.4 million. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Thus, the disaster damage estimate should have only included estimated 

facility repair cost. Using FEMA’s facility repair estimate ($7.0 million) and 

replacement estimate ($39.4 million) results in repair versus replacement ratio 

of 17.8 percent, well below the 50 percent required to justify facility 

replacement. 

Review of FEMA records showed that FEMA not only erroneously included 

upgrade/mitigation work in the disaster damage repair estimate but it did not 

use the best repair and replacement costs available as discussed below. 

• 	 The $7 million in estimated repair costs was based on an engineering 

estimate completed 3 months prior to FEMA’s repair versus replacement 

calculation.11 As of November 1994, the restoration of the damaged 

facility was substantially complete and most of the $4.37 million in debris 

removal and emergency and permanent repair costs was already known to 

FEMA. Using this actual repair cost of $4.37 million and FEMA’s initial 

replacement cost of $39.4 million results in a repair versus replacement 

ratio of 11.1 percent. 

• 	 FEMA records supported $77 million in estimated replacement costs12 

versus the $39.4 million used to determine the ratio. Using the actual cost 

of facility repairs ($4.37 million) and the $77 million replacement cost 

results in a repair versus replacement ratio of 5.7 percent. 

FEMA Region IV comments regarding estimated and actual repair costs 

and replacement costs. The Region indicated that the application of the 50% 

Rule was undertaken after it was determined that relocation of the plant was 

the most practicable alternative. It indicated that it was not possible to 

anticipate the replacement cost of the new facility in August 1994 and thus the 

Region used the best available data for relocation/construction costs. The 

Authority provided the Region with its Calculation of Current Value of 

Existing Water Treatment Plant (Attachment A to the Region’s response) that 

estimated the replacement cost of the existing plant at $39.4 million, which 

was used in the 50% Rule calculation. For the repair side of the calculation, 

FEMA used a $7.0 million repair estimate (the $4.17 million “...actual repair 

costs did not reflect all the costs that would have been necessary to return the 

facility to its pre-disaster design and function.”) plus $19.9 million mitigation 

costs (estimated costs to be in compliance with Executive Order 11988 and 

Part 9 of 44 CFR). The Region recognized that under current guidance, 

11 The engineering estimate was completed in September 1994 and project approval occurred in November 1994 after the 

ratio was calculated in an unsigned and undated site assessment. 12 A preliminary engineering report, prepared by the Authority’s contractor, estimated the cost of a 60 million gallons per 

day (MGD) plant at $94.3 million. Using this preliminary estimate, FEMA estimated that the cost of a 48 MGD plant 

would be $77.0 million. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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mitigation (or codes and standards upgrades) costs would not be included in 

the calculation but it was reasonable to add mitigation costs to the estimated 

repair costs in 1994 to be in compliance with floodplain management orders 

and regulations. In that regard, the Region pointed out that clarification of 

FEMA regulations on the 50% Rule occurred a year after the disaster. In 

total, the Region believed that the repair versus replacement analysis was 

properly completed based on the information available at the time. 

OIG comments and analysis. The project background and approval 

document we discussed earlier alludes to a previous report that applied federal 

regulations to the Authority’s plant in the floodplain. The undated site 

assessment applied the preparer’s interpretation of the regulations to three 

alternatives and computed the repair versus replacement ratio at 68% using 

the figures discussed in the Region’s response. This ratio was used as part of 

the basis for recommending relocation of the existing plant (Alternative 3) 

that was approved by FEMA Headquarters in November 1994. 

As we pointed out in our discussion of permanent repairs to the existing 

facility, FEMA and Authority project records support that the existing plant 

was 100 percent operational in August 1994. While all actual repair costs 

may not have been known in total at that time, FEMA’s records do not 

sufficiently support $7 million in total estimated repair costs or $19.9 million 

in estimated mitigation costs. While the Region commented on the fact that 

misinterpretations of the 50% Rule were not uncommon in 1994, FEMA’s 

guidance in June 1995, a year after the disaster, only clarified the regulations 

and did not change them. 

Contrary to the Region’s response, we concluded that FEMA did not use the 

best available information at the time to assess repair versus replacement 

costs. For example, the Authority’s own contractor issued a September 1994 

report entitled Water Treatment Plant at Town Creek Reservoir wherein it 

estimated that the cost to construct a 60 million gallon per day plant was 

$94.3 million. FEMA’s November 1994 project background and approval 

document prorated the contractor’s total estimated cost to bring it in line with 

a 48 million gallon per day facility and arrived at a $77.02 million 

replacement estimate. Using this replacement estimate in lieu of the 

unsubstantiated $39.4 million replacement cost estimate provided by the 

Authority results in a repair versus replacement ratio of only 35 percent even 

if we accept FEMA’s unsupported $7 million repair estimate and 

unsubstantiated $19.9 million in estimated mitigation costs. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Relocation of Facility Not Required by Federal Rules 

FEMA also justified the replacement of the facility on the premise that the 

damaged facility was located in a 100-year floodplain, and Executive Order 

11988 (implemented by 44 CFR Part 9), related to floodplain management, 

required FEMA to locate the replacement facility outside the floodplain 

because a practicable alternative existed to do so. In its summarized analysis, 

FEMA documented that 44 CFR § 9.11(d) does not allow any new 

construction or substantial improvements in a floodway or any construction 

that would result in increased flood levels, with two exceptions not applicable 

here. 

We agree with FEMA’s analysis in that Executive Order 11988 requires 

federal agencies to reduce the risk of floods and to preserve the natural and 

beneficial values served by floodplains [44 CFR § 9.2(b)(7)]. However, we 

disagree that federal regulations barred FEMA from replacing or restoring the 

facility at its original location. According to § 9.9(b), FEMA was required to 

identify and evaluate practicable alternatives to carrying out a proposed action 

in floodplains or wetlands. These alternatives included: (1) locating 

alternative sites outside the floodplains or wetlands, (2) taking alternative 

actions serving the same purpose of the proposed alternative with less affect 

on the floodplains or wetlands, and (3) taking no action because the site itself 

is a practicable location based on such factors as the natural environment, 

social concerns, economic aspects, and legal constraints.13 Further, § 9.11 sets 

out mitigation actions required if a preliminary determination is made to carry 

out an action that affects or is in a floodplain or wetland, and § 9.11(d) 

pertains primarily to new construction or substantial improvements in a 

floodway. The regulations required FEMA to consider the costs of relocating 

the facility in determining whether a practicable alternative existed outside the 

floodplain [44 CFR Part 9] and to ensure that the relocation of the facility was 

cost effective [44 CFR 206.226(e)]. In our view, the expenditure of 

$93.5 million to construct a new facility was not cost effective and therefore, 

relocation was not a practicable alternative. 

FEMA Region IV comments regarding relocating the facility outside the 

floodplain. FEMA Region IV did not concur with our conclusion that 

relocation of the facility was not required by federal rules and indicated that 

based on its review of project records and files, FEMA considered three 

alternatives that would assist in lessening future damages to the facility. 

FEMA asserts that two of the alternatives—mitigating at the existing site and 

constructing a levee—were rejected because they would raise flood 

elevations. Thus, FEMA considered the third alternative, relocation, as the 

13 44 CFR § 9.9(c) requires FEMA to analyze the practicability of taking no action including the costs of space, 

construction, services, and relocation. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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only practicable alternative. FEMA also considered the health, safety, and 

economic impacts when a community is without potable water. 

The Region also points out that in October 2004, we noted that mitigation 

funds to protect the facility against future damage were not provided and that 

not mitigating against future damage was a violation of Executive Order 

11988. The response concludes that based on the Regional Director’s 

authority to evaluate and implement practicable alternatives, the relocation 

project was determined by FEMA to be eligible and the project was approved. 

OIG comments and analysis. While the Region believes it acted in an 

appropriate and responsible manner when it recommended project approval to 

FEMA Headquarters, FEMA has not produced a persuasive analysis showing 

that relocation outside the floodplain was practicable given its substantial 

costs. In fact, FEMA’s contemporaneous 4-page site assessment and 

alternatives analysis and its 2-page project background and approval 

document are minimal at best. The expenditure of $93.5 million in public 

assistance funds to construct a new facility was not cost effective and 

therefore, relocation was not a practicable alternative especially when 

considering the costs associated with the alternative to mitigate at the existing 

site identified in FEMA’s site assessment document. 

Conclusion. FEMA Region IV said that it acted appropriately and within its 

statutory authority to approve the relocation of the Authority’s water treatment 

plant. Further, the Region asserted that the grantee, GEMA, and the 

subgrantee, the Authority, complied with their respective responsibilities in 

administering grant funds as outlined in 44 CFR. The Region did not concur 

with our initial conclusion that $93.5 million in costs claimed by the Authority 

be disallowed and recommended that this finding be removed from the audit 

report. 

The Region’s comments have not altered our conclusion that relocation was 

not a practicable alternative for the reasons discussed above. However, those 

comments have altered the recommendation we initially made in our 

August 29, 2006 draft report. While we still question the grant award to 

replace the Riverside Water Treatment Plant in a new location, we are not 

recommending that the $93.5 million in costs associated with construction of 

the new water treatment plant be disallowed from the Authority’s claim. This 

finding reports on a lost opportunity for FEMA to have put this funding to a 

better, more practicable use. 

In our view, FEMA failed to act as good stewards of public funds in 

approving this grant especially when one considers that FEMA’s decision was 

based on a contemporaneous 4-page site assessment and alternatives analysis 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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and a contemporaneous 2-page project background and approval document. 

FEMA’s failure to document the legitimacy of its funding decision calls into 

question its propriety. 

The lack of, and gaps in, project documentation and the anecdotal nature of 

FEMA’s decision making process relative to this award lead us to conclude 

that FEMA must better substantiate its funding decisions such as the one 

reviewed here. FEMA needs to develop policies and procedures that require 

grant awarding officials to perform comprehensive analyses of funding 

options to ensure that disaster assistance funds are spent wisely and 

effectively. Those policies and procedures should establish record keeping 

requirements for all analyses and documentation relative to the decision 

making process. The basis for grant awards should be “transparent” and 

readily available for external oversight. 

Accounting Errors 

The Authority’s claim for project 90855 contained $63,093 in accounting 

errors consisting of expenditures that were posted in duplicate. According to 

44 CFR § 13.20(b)(1), the Authority is required to accurately report the results 

of financially assisted activities. Table 1, below, identifies the amounts the 

Authority recorded in duplicate in its accounting system. 

Table 1 

Source Cost Claimed 

Actual Cost 

Incurred 

Amount Recorded 

in Duplicate 

Contractor Invoice $ 15,524 $ 7,762 $ 7,762 

Contractor Labor 31,200 15,600 15,600 

Contractor Invoice 70,332 35,166 35,166 

Contractor Invoice 9,130 4,565 4,565 

Total $126,186 $63,093 $63,093 

Since the accounting errors resulted in the recording and claiming of the 

expenditures twice, the $63,093 is questioned. 

FEMA Region IV comments. Region officials concurred with this finding 

and indicated that subject to receipt of evidence to the contrary from the 

Authority, and upon its final decision sustaining the finding, FEMA will deobligate $63,093. 

OIG comments and analysis. Based on the Region’s response, we consider 

this finding resolved. However, it will remain open for follow up action until 

we receive the final decision sustaining the finding and the supporting 

documentation indicating that the de-obligation has occurred. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Small Project not Completed 

The Authority claimed $25,000 for a small project that was not completed. 

According to 44 CFR § 206.205(a), FEMA may require the Authority to 

return funds advanced for any small project when the project is not completed 

in accordance with the approved scope of work. In reviewing the Authority’s 

certification of small project completions, we noted that the Authority did not 

complete project 90893. This project provided funding to cleanup a diesel 

spill, a task Authority officials explained was not done. Therefore, the 

$25,000 claimed for small project 90893 is questioned. 

FEMA Region IV comments. Region officials concurred with this finding. 

The Region plans to seek confirmation from the Authority that the small 

project was not completed. Upon its final decision sustaining the finding, 

FEMA will de-obligate $25,000. 

OIG comments and analysis. Based on the Region’s response, we consider 

this finding resolved. However, it will remain open for follow up action until 

we receive the final decision sustaining the finding and the supporting 

documentation indicating that the de-obligation has occurred. 

Interest Earned on Federal Funds 

The Authority deposited $46,787,500 of FEMA funds in an interest bearing 

account and earned interest of $245,708. However, the Authority did not 

account for the interest to FEMA as required by Federal regulations.14 

According to 44 CFR § 13.21(c) grantees may advance funds to subgrantees 

only where adequate procedures are in place to minimize the time elapsed 

between receipt and disbursement of the funds. GEMA drew down and 

disbursed FEMA funds to the Authority based upon its practice of funding 

large projects in 25 percent increments. However, GEMA did not monitor the 

Authority’s activities effectively to ensure that the funds were spent timely. 

For example, GEMA received a monthly report of expenditures from the 

Authority; however, the reports were not used to verify that the Authority had 

disbursed the funds. We determined that the Authority took an average of 83 

days to liquidate the advances during which it earned $245,708 in interest on 

those advanced funds. 

In the absence of an exception under the Intergovernmental Cooperation Act, 

44 CFR § 13.21 (i) indicates that grantees and subgrantees are required to 

remit to FEMA the interest earned on advances at least quarterly. FEMA 

14 44 CFR § 13.21(i) 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Region IV should take appropriate action to determine if the interest earned on 

advances was properly accounted for under the Intergovernmental 

Cooperation Act, and if not, should recover the $245,708 in interest earned on 

the public assistance funds provided to the Authority; $235,570 under project 

14718 and $10,138 under project 14719. 

FEMA Region IV comments. Region officials agreed with the finding 

subject to receipt of evidence to the contrary from the Authority, or validated 

information showing different amounts earned. Upon FEMA’s final decision 

sustaining the finding, the Authority will be directed to remit the interest 

earned on FEMA funds. In addition, FEMA will instruct GEMA of its 

requirements to have procedures in place to minimize the time elapsed 

between subgrantees’ receipt and disbursement of federal funds. 

OIG comments and analysis. Based on the Region’s response, we consider 

this finding resolved. However, it will remain open for follow up action until 

we receive the final decision sustaining the finding and the supporting 

documentation indicating that a bill for collection has been issued or the 

interest earned on FEMA funds has otherwise been recovered. 

Recommendations 

We recommend that the Under Secretary, Federal Emergency Management: 

1. 	 Develop policies and procedures that require FEMA grant awarding 

officials to perform comprehensive analyses of funding options to ensure 

that disaster assistance funds are spent wisely and effectively, and 

establish record keeping requirements for all analyses and documentation 

relative to the decision making process. 

2. Require FEMA Region IV to: (a) obtain comments from the Authority 

regarding the accounting errors and the uncompleted small project 

discussed in this report and (b) disallow and de-obligate $88,093 in costs 

claimed by the Authority if appropriate. 

3. 	 Require FEMA Region IV to recover $235,570 (or a validated different 

amount) in interest earned by the Authority on FEMA funds, if the funds 

were not otherwise recovered. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 13 
Appendix A 

Objectives, Scope, and Methodology 

The announced objective of the audit was to determine whether the Authority 

expended and accounted for FEMA funds according to federal regulations and 

FEMA guidelines. During the audit, we added an objective to determine 

whether FEMA’s decision to fund the replacement of the Authority’s 

Riverside Water Treatment Plant was appropriate. 

The Authority received a public assistance grant award of $102.6 million from 

the Georgia Emergency Management Agency (GEMA), a FEMA grantee, for 

repairs to and replacement of facilities damaged as a result of Tropical Storm 

Alberto in July 1994. The award provided 90 percent federal funding for 

25 large projects and 60 small projects. The scope of the audit covered the 

period July 1994, to November 2004, and included a review of 24 large 

projects and 60 small projects with a total award of $100.1 million. One large 

project remained open at the time of our audit and was excluded from our 

review. Appendix B provides a schedule of the individual projects we 

audited. 

We performed the audit under the authority of the Inspector General Act of 

1978, as amended, and according to Government Auditing Standards issued 

by the Comptroller General of the United States. The audit included a review 

of FEMA, GEMA, and Authority records, a judgmental sample of project 

expenditures, and other auditing procedures considered necessary under the 

circumstances. We held discussions with FEMA, GEMA, and Authority 

officials throughout the course of the audit and discussed initial audit results 

with FEMA Region IV officials on November 21, 2005. We provided FEMA 

Headquarters and FEMA Region IV officials a draft report for comment on 

August 29, 2006. We received responses to the draft report from the Acting 

Regional Director, FEMA Region IV on September 12, 2006. We 

summarized the Region’s responses in the body of the report and attached a 

complete text of the Region’s comments as Appendix D to this report. 

Major contributors to the audit are identified in Appendix E. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 14 
Appendix B 

Schedule of Projects Audited, Questioned Costs, and Funds That Could Have Been Put to 

Better Use 

Project 

Number 

Amount 

Awarded 

Amount 

Claimed 

Amount 

Questioned Finding 

Large Projects 

14718 $ 66,766,703 $ 66,766,703 $66,766,703 A 

14714 10,404,981 10,404,981 10,404,981 A 

14719 7,650,451 7,650,451 7,650,451 A 

14716 3,067,160 3,067,160 3,067,160 A 

14717 2,822,761 2,822,761 2,822,761 A 

90855 2,527,048 2,527,048 63,093 B 

14720 2,269,482 2,269,482 2,269,482 A 

86462 836,796 836,796 0 

90854 745,811 745,811 0 

90816 457,002 457,002 0 

90852 341,871 341,871 0 

8646415 255,941 255,941 0 

14713 244,733 244,733 244,733 A 

90830 187,672 187,672 0 

14715 240,063 240,063 240,063 A 

86465 104,704 104,704 0 

90875 114,095 114,095 0 

90833 76,232 76,232 0 

90821 73,637 73,637 0 

57974 83,388 83,388 0 

90834 63,754 63,754 0 

90832 43,892 43,892 0 

86469 46,906 46,906 0 

8646016 0 0 0 

Subtotal $99,425,083 $99,425,083 $93,529,427 

Small Projects 

90893 $ 25,000 $ 25,000 $ 25,000 C 

Various 605,191 605,191 0 

Subtotal $ 630,191 $ 630,191 $ 25,000 

Total $100,055,274 $100,055,274 $93,554,427 

Legend: 

Finding A – Ineligible Project Costs (funds that could have been put to better use) 
 

Finding B – Accounting Errors (costs questioned in the Authority’s claim)
 

Finding C – Small Project not Completed (costs questioned in the Authority’s claim
 

15 DSR 91154 replaced DSR 86464 that was 100 per cent complete in March 1995. 16 Under project 86460, FEMA de-obligated $385,699 of funds it had obligated for repair of the Authority’s sewer 

system. The de-obligation was made to recognize the amount the Authority received from insurance proceeds for those 

same repairs. We allocated that reduction to the DSRs (90816, 90821, 90830, 90832, 90833, 93834, and 90852) based 

on their individual ratio of the total awarded the Authority for sewer repairs. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 15 
Appendix B 

Schedule of Projects Audited, Questioned Costs, and Funds That Could Have Been Put to 

Better Use 

OIG Note: While the first finding in this report questions the grant award to replace the Riverside 

Water Treatment Plant in a new location, we are not recommending that the $93.5 million in costs 

associated with construction of the new water treatment plant be disallowed from the Authority’s 

claim. The finding reports a lost opportunity for FEMA to have put the $93.5 million to a better, 

more practicable use. We concluded that FEMA failed to act as good stewards of public funds in 

approving this grant and its failure to document the legitimacy of its funding decision calls into 

question its propriety. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 16 
Appendix C 

Schedule of Funds Awarded for the Replacement of the Riverside Water Treatment Plant1 

Project 

Numbers Project Purpose 

Amount 

Awarded and 

Expended 

Date Started 

Final 

Inspection 

Date 

14719 Design engineering –48 

million gallons per day water 

treatment plant 7,650,451 09/07/94 ** 01/11/02 

14713 Road improvements $ 244,733 05/16/96 * 04/17/97 

14718 Water treatment plant 

construction 66,766,703 11/04/96 ** 02/01/02 

14714 River intake and raw water 

pump station 10,404,981 01/16/97 * 05/20/03 

14716 64” finished water main and 

54” raw water main 3,067,160 03/31/97 ** 03/05/02 

14715 42” finished water main 240,063 09/25/97 ** 09/30/98 

14717 62” finished water main 2,822,761 01/27/98 ** 07/20/00 

14720 Other professional engineering 

services17 2,269,482 Various 09/11/01 

Totals $93,466,334 

* Based on contract award date 

** Based on available billing information 

As indicated above, design began in September 1994 and the last project related to the plant 

was final inspected in May 2003. 

17 Non-design phase engineering including such services as project management and engineering, and services related to 

the booster pump station building. 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 17 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 18 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 19 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 20 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 21 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 25 
Appendix D 

FEMA Region IV’s Response to the Draft Report 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 26 
Appendix E 

Major Contributors to this Report 

Robert J. Lastrico, Audit Division Director 

Humberto Melara, Supervisory Auditor 

George Peoples, Supervisory Auditor 

Ravinder Anand, Auditor 

Homer Johnson, Auditor 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

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Appendix F 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

Under Secretary, Management 

Under Secretary, Federal Emergency Management 

Chief Financial Officer 

Chief Information Officer 

Assistant Secretary for Public Affairs 

Assistant Secretary for Policy 

Assistant Secretary for Legislative and Intergovernmental Affairs 

Chief Security Officer 

Chief Privacy Officer 

OIG Liaison 

Federal Emergency Management 

Director, FEMA Recovery Division 

OIG Liaison 

Regional Director, FEMA Region IV 

Office of Management and Budget 

Chief, Homeland Security Bureau 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as appropriate 

Audit of FEMA’s Public Assistance Grant Funds Awarded to 

the Macon Water Authority After Tropical Storm Alberto 

Page 28 
Additional Information and Copies 

To obtain additional copies of this report, call the Office of Inspector General (OIG) at 

(202) 254-4100, fax your request to (202) 254-4285, or visit the OIG web site at 

www.dhs.gov/oig. 

OIG Hotline 

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal 

or noncriminal misconduct relative to department programs or operations, call the 

OIG Hotline at 1-800-323-8603; write to DHS Office of Inspector General/MAIL 

STOP 2600, Attention: Office of Investigations - Hotline, 245 Murray Drive, SW, 

Building 410, Washington, DC 20528, fax the complaint to (202) 254-4292; or email 

DHSOIGHOTLINE@dhs.gov. The OIG seeks to protect the identity of each writer 

and caller.