Colorado County, Texas, 

Has Adequate Policies, 

Procedures, and Business 

Practices to Manage Its 

FEMA Grant 

May 4, 2017 

OIG-17-57-D
 
 

 

 

 

 

DHS OIG HIGHLIGHTS 

Colorado County, Texas, Has

Adequate Policies, Procedures, and

Business Practices to Manage Its FEMA Grant
 

May 4, 2017 

Why We Did 

This Audit 

The County estimated it 

had sustained 

approximately $2.4 

million in damages from 

severe storms and 

flooding in late April 

2016. At the time of our 

fieldwork, FEMA had not 

completed project 

worksheets to define the 

scope of disaster work. 

We conducted this audit 

early in the grant 

process to identify areas 

where the County may 

need additional 

technical assistance and 

monitoring to ensure 

compliance with Federal 

requirements. 

What We 

Recommend 

FEMA should not fund 

$458,150 of ineligible 

contract costs. 

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 

Colorado County, Texas’ (County) accounting policies, 

procedures, and business practices are adequate to 

account for Federal Emergency Management Agency 

(FEMA) grant funds according to Federal regulations and 

FEMA guidelines. However, the County did not have 

adequate procurement policies, procedures, and 

business practices to comply fully with all Federal 

procurement standards. As a result, the County 

awarded two contracts totaling $458,150 without full 

and open competition. 

Because of our audit, the County revised its 

procurement policies and procedures to meet Federal 

requirements. The County plans to complete the 

majority of its disaster-related repairs using its own 

labor force. Further, County officials said they do not 

plan to claim the $458,150 for the two contracts 

awarded improperly or any contract costs that do not 

meet Federal requirements. Therefore, if the County 

follows its procedures, FEMA should have reasonable 

assurance that the County will properly manage its 

Federal grant. 

FEMA Response 

FEMA officials generally agreed with our finding and 

recommendation and have taken action sufficient to 

resolve and close our recommendation. Therefore, we 

consider this report closed and require no further action 

from FEMA. 

www.oig.dhs.gov OIG-17-57-D 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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


May 4, 2017 


MEMORANDUM FOR: George A. Robinson 

Regional Administrator, Region VI 

Federal Emere:ency Management Agency 

P-~?~ FROM: John E. McCoy II 

Acting Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: Colorado County, Texas, Has Adequate Policies, 

Procedures, and Business Practices to Manage Its 

FEMA Grant 

Audit Report Number OIG-17-57-D 

We audited the capability of Colorado County, Texas (County), to manage 

Federal Emergency Management Agency (FEMA) Public Assistance grant funds. 

We conducted this audit early in the Public Assistance process to identify areas 

where the County may need additional technical assistance or monitoring to 

ensure compliance with Federal regulations and FEMA guidelines. In addition, 

by undergoing an audit early in the grant cycle, grant recipients have the 

opportunity to correct noncompliance before they spend the majority of their 

grant funding. It also allows them the opportunity to supplement deficient 

documentation or locate missing records before too much time elapses. 

At the time of our fieldwork, the Texas Department of Public Safety, Texas 

Division of Emergency Management (Texas), a FEMA grant recipient, had not 

yet awarded any of the $2 .4 million in estimated damages the County 

sustained from severe storms and flooding beginning April 17, 2016, and 

continuing through April 24, 2016. The award will provide 75 percent Federal 

funding for debris removal, emergency protective measures, and permanent 

work. The disaster did not cause damage to insurable facilities. Therefore, the 

County did not receive any insurance proceeds for damages resulting from this 

disaster or need to obtain insurance to cover similar damages in future 

disasters. At the time of our fieldwork, FEMA had not completed project 

worksheets to define the scope of disaster work, and the County had not 

completed most of its disaster-related work or filed claims for reimbursement. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

Colorado County is located in south central Texas and is home to nearly 

20,878 residents. Beginning on April 17, 2016, heavy rains and severe storms 

caused flooding that damaged roads and culverts and destroyed one bridge. 

The President declared a major disaster on April 25, 2016. 

Figure 1: Fussel Road at Eagle Lake, Colorado County 

Source: Colorado County, Texas 

Results of Audit 

The County’s accounting policies, procedures, and business practices are 

adequate to account for FEMA grant funds according to Federal regulations 

and FEMA guidelines. The County should be able to accurately account for 

disaster-related costs and maintain documentation sufficient to support 

disaster costs. However, at the time of our fieldwork, the County did not have 

adequate procurement policies, procedures, and business practices to comply 

fully with all Federal procurement standards. As a result, the County awarded 

two bridge construction contracts totaling $458,150 without full and open 

competition. 

County officials said they plan to complete the majority of disaster-related work 

using their own labor force and do not plan to claim any contract-related costs. 

However, if the County decides to seek reimbursement, FEMA should disallow 

the $458,150 because the County did not properly award the two contracts. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

For the remaining $1.9 million ($2.4 million minus $458,150 ineligible contract 

costs) of estimated damages, if the county follows its policies, procedures and 

business practices, FEMA should have reasonable assurance that the County 

will properly manage its Federal grant. 

Finding A: Policies, Procedures, and Business Practices 

Project Cost Accounting 

The County has adequate policies, procedures, and business practices to 

account for FEMA grant funds according to Federal regulations and FEMA 

guidelines. The County has an effective system in place to ensure it accounts 

for disaster costs and can adequately support disaster-related costs as the 

following Federal regulation and FEMA guideline require: 

x Subrecipients must maintain accounting records that adequately identify 

the source and application of Federal funds and maintain source 

documentation to support those accounting records (2 Code of Federal 

Regulations (CFR) 200.302(b)(3)). 

x Applicants must maintain all source documentation supporting project 

costs. In addition, applicants should file all supporting documentation by 

project to facilitate closeout and audits (Public Assistance Program and 

Policy Guide, FP 104-009-2, January 2016, p. 134). 

The County designated specific accounting codes for all disaster-related costs. 

We assessed the adequacy of the County’s policies and procedures to account 

for procurement costs and the County’s own labor, equipment, and materials. 

We did not test specific project costs because the County had not summarized 

its costs as of our audit cutoff date. However, we discussed these accounting 

policies and procedures with County officials to gain an understanding of how 

the County will track the costs it intends to claim for FEMA reimbursement, 

and they appear adequate. We determined that the County could properly 

segregate costs by project and maintain sufficient detailed documentation to 

support its disaster-related costs. 

Procurement Practices 

The County’s procurement policies, procedures, and business practices do not 

meet all Federal procurement standard requirements. As a result, (1) full and 

open competition may not always occur, which increases the risk of 

unreasonable prices, fraud, waste, and abuse; (2) disadvantaged businesses, 

such as minority firms and women’s business enterprises may not have 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

received sufficient opportunities to bid on federally funded work; (3) the risk of 

misinterpretations and disputes relating to contracts may increase; and 

(4) contract costs may be unreasonable. 

Federal procurement standards at 2 CFR 200.317 through 2 CFR 200.326 

require, in part, that subrecipients — 

x perform procurement transactions in a manner providing full and open 

competition (2 CFR 200.319(a)); 

x take all necessary affirmative steps to assure the use of small and 

minority businesses, women’s business enterprises, and labor surplus 

area firms when possible (2 CFR 200.321(a)); 

x include required provisions in all their contracts (2 CFR 200.326); and 

x perform a cost or price analysis in connection with every procurement 

action in excess of the Simplified Acquisition Threshold (2 CFR 200.323). 

To evaluate the County’s procurement practices, we reviewed its policies and 

procedures in effect at the time of the disaster and reviewed the methodology it 

used to award two contracts totaling $458,150. We also discussed procurement 

practices with the County’s contracting officials. 

The County’s procurement procedures require it to competitively bid contracts 

of $50,000 or more. However, the County awarded two disaster-related bridge 

construction contracts totaling $458,150 without full and open competition. 

Instead of soliciting competitive proposals, the County waived its bidding 

requirements through various resolutions that cited Texas law as an 

exception.1 Regardless, as a condition of the grant, the County must comply 

with Federal regulations for all procurement transactions.2 County officials 

acknowledged the two contracts may have been improperly procured but said 

they would honor them because they had already committed to the contractors. 

In addition, the County did not have adequate policies and procedures in place 

to assure the use of small and minority businesses, women’s business 

enterprises, and labor surplus area firms when possible. It also did not have 

procedures in place to include all required provisions in either of the two 

contracts it awarded and did not perform the federally required cost or price 

analysis to determine cost reasonableness. 

Because of our audit, County officials said they will not claim FEMA 

reimbursement for either of the two bridge construction contracts totaling 

$458,150. We discussed this decision with FEMA officials who said they will be 

1 Texas Local Government Code, § 262.024, Discretionary Exemptions 

2 See 2 CFR 200.318(a) and 2 CFR 200.319(a). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

 

alert for the costs should the County seek reimbursement for either of the two 

bridge construction contracts. Further, the County updated its procurement 

policies to include, among other things: (1) taking the necessary affirmative 

steps to assure the use of small and minority businesses, women’s business 

enterprises, and labor surplus area firms when possible; (2) including all 

federally required contract provisions; and (3) performing a cost or price 

analysis in connection with every procurement action, including contract 

modifications. Because the County did not compete either of the two bridge 

construction contracts, FEMA should not fund the $458,150 bridge 

construction costs. 

Recommendation 

We recommend that the Regional Administrator, FEMA Region VI: 

Recommendation 1: Not fund $458,150 ($343,613 Federal share) of ineligible 

contract costs, unless FEMA grants an exception for all or part of the costs as 

2 CFR 200.102(b) allows and determines the costs are reasonable (finding A).3 

We consider this recommendation to be resolved and closed and require no 

further action from FEMA because, on January 23, 2017, FEMA agreed to 

notify the Office of Inspector General (OIG) if the County sought 

reimbursement, and that it would analyze these requests for reimbursement 

for eligibility and reasonableness prior to any funding. 

Discussions with Management and Audit Follow-Up 

We discussed the results of our audit with FEMA, Texas, and County officials 

during our audit. We considered their comments in developing our final report 

and incorporated their comments as appropriate. We also provided a draft 

report in advance to these officials and discussed it at exit conferences with 

FEMA officials on December 13, 2016, and with Texas and County officials on 

December 15, 2016. FEMA, Texas, and County officials generally agreed with 

our finding and recommendation. 

On January 23, 2017, we received FEMA’s written response to this report (see 

appendix C). FEMA officials agreed with our finding and concurred with our 

recommendation. FEMA officials acknowledge the County had informed them 

that it will not seek reimbursement for the two bridge construction projects. 

However, FEMA said it will notify OIG in the event the County seeks 

reimbursement, and that it will analyze these requests for eligibility or 

reasonableness prior to any funding. Based on FEMA’s proposed action, we 

3 Because FEMA had not yet obligated these costs, we classify them as cost avoidance. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

consider recommendation 1 to be resolved and closed and require no further 

action from FEMA 

The Office of Emergency Management Oversight major contributors to this 

report are Paige Hamrick, Director; David B. Fox, Audit Manager; and 

Douglas Denson, Auditor-in-Charge. 

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

Paige Hamrick, Director, Central Regional Office - North, at (214) 436-5200. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

We audited the capability of Colorado County, Texas (County), Public 

Assistance Identification Number 089-99089-00 to manage Federal Emergency 

Management Agency (FEMA) Public Assistance grant funds. Our audit objective 

was to determine whether the County’s policies, procedures, and business 

practices are adequate to account for and expend FEMA grant funds according 

to Federal regulations and FEMA guidelines for FEMA Disaster Number 4269-

DR-TX. As of September 1, 2016, the cutoff date of our audit, FEMA had not 

yet obligated any funding or completed its development of project worksheets 

for damages resulting from severe storms and flooding beginning on April 17, 

2016, and continuing through April 30, 2016. The County estimated it had 

sustained approximately $2.4 million of disaster-related damages. The award 

will provide 75 percent FEMA funding for debris removal, emergency protective 

measures, and permanent work for large and small projects.4 As of the audit 

cutoff date, Texas had not paid the County for any of its projects; and the 

County had not submitted any reimbursement requests for its disaster costs. 

We interviewed FEMA, Texas, and County officials; assessed the adequacy of 

the policies, procedures, and business practices the County uses and plans to 

use to account for and expend Federal grant funds and to procure for and 

monitor disaster work; reviewed applicable Federal regulations and FEMA 

guidelines; and performed other procedures considered necessary to 

accomplish our objective. We did not perform a detailed assessment of the 

County’s internal controls over its grant activities because it was not necessary 

to accomplish our audit objective. 

We conducted this performance audit between August and December 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. In 

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

and guidelines in effect at the time of the disaster. 

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

greater than $121,800 [Notice of Adjustment of Disaster Grant Amounts, Vol. 80, No. 198, Fed. 

Reg. 61,836 (Oct 14, 2015)]. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Potential Monetary Benefits 

Table 1: Cost Avoidance 

FEMA Category 

of Work * Type of Work 

Estimated Cost 

to Repair 

Cost Avoidance** 

(Finding A) 

C Contract $ 458,150 $ 458,150 

C Force Account 1,895,050 0 

Totals $ 2,353,200 $ 458,150 

Source: Office of Inspector General (OIG) analysis 

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

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

** FEMA has not obligated the estimated $458,150 for damage to the projects on which the 

County expects to expend contracting costs; therefore, we classify these costs as a cost 

avoidance. 

Table 2: Summary of Potential Monetary Benefits 

Type of Potential Monetary Benefit Amount 

Federal 

Share 

Questioned Costs – Ineligible $ 0 $ 0 

Questioned Costs – Unsupported 0 0 

Funds Put to Better Use (Cost Avoidance) 458,150 343,613 

Totals $ 458,150 $ 343,613 

Source: OIG analysis of report findings 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

FEMA Region VI Audit Response 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C (Continued)
 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

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 (Job Code G-16-046) 

Audit Liaison, FEMA Region VI 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Director, Texas Department of Public Safety, Division of Emergency 

Management 

State Auditor, Office of the Texas State Auditor 

County Judge, Colorado County, Texas 

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