Texas Should Continue to 

Provide Deweyville 

Independent School 

District Assistance in 

Managing FEMA Grant 

Funds 

May 24, 2017 

OIG-17-62-D
 
 

 

 

DHS OIG HIGHLIGHTS 

Texas Should Continue to Provide 

 Deweyville Independent School District

 Assistance in Managing FEMA Grant Funds 

May 24, 2017 

Why We Did 

This Audit 

The Deweyville 

Independent School 

District (District) 

sustained an estimated 

$22 million in damages 

from flooding in 

March 2016. We 

conducted this audit 

early in the grant cycle to 

identify areas where the 

District may need 

additional assistance or 

monitoring to ensure 

compliance. 

What We 

Recommend 

FEMA should direct 

Texas to continue 

providing District 

officials with technical 

assistance and increase 

monitoring to help 

ensure compliance with 

applicable Federal 

standards. 

For Further Information: 

Contact our Office of Public Affairs at 

(202) 254-4100, or email us at 

DHS-IG.OfficePublicAffairs@oig.dhs.gov 

What We Found 

Although the District’s policies, procedures, and 

business practices are adequate to account for 

grant funds, they were not adequate to meet 

Federal procurement requirements. For example, 

the District’s policies did not adequately address 

providing sufficient opportunities for 

disadvantaged firms to compete for Federal 

Emergency Management Agency (FEMA)-funded 

work or include all contract provisions, including 

those needed to prevent discrimination and 

control costs. 

After we discussed these issues with District 

officials, they moved quickly to amend existing 

contracts and modify contracting policies and 

procedures. 

The Texas Division of Emergency Management 

(Texas), as the grantee, should provide the 

District additional technical assistance and 

increase monitoring to ensure the District follows 

all Federal grant requirements. Doing so should 

provide FEMA reasonable assurance that the 

District will avoid improperly spending the 

$12.9 million of estimated contract costs for 

remaining permanent disaster work. 

FEMA Response

FEMA officials agreed with our findings and 

recommendations (see FEMA’s written response 

in appendix C). 

www.oig.dhs.gov OIG-17-62-D 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

May 24, 2017 

MEMORANDUM FOR: George A. Robinson 

Regional Administrator, Region VI 

Federal Emergency Management Agency 

FROM: 

/d-~~yr John E. McCoy II 

Acting Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: Texas Should Continue to Provide Deweyville 

Independent School District Assistance in 

Managing FEMA Grant Funds 

Audit Report Number OIG-17-62-D 

We audited the capability of the Deweyville Independent School District 

(District), Deweyville, Texas, 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 District 

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 and too much time elapses. 

In April 2016, FEMA estimated the District sustained $22 million in 

damages composed of $9.1 million in emergency work and $12.9 million 

in permanent work (appendix B, table 1). As of August 9, 2016, the cutoff 

date of our audit, FEMA and the Texas Division of Emergency 

Management (Texas), a FEMA grantee, had formulated one project for 

$1.8 million for emergency protective measures. When FEMA approves 

projects for the permanent work, it will reduce funding by the $1 million 

in insurance proceeds the District received. The grant will provide 

75 percent Federal funding for eligible work. 

At the time of our audit the District had not submitted claims for 

reimbursement. However, of the $9.1 million of estimated emergency 

work, the District had spent $653,000 for disaster work and awarded 

more than $6.5 million for disaster-related emergency contracts. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

With the Sabine River rising, on March 10, 2016, District officials 

dismissed students early and moved all District buses to higher ground. 

The County Judge of Newton County issued mandatory evacuation orders 

to the 1,200 residents of the small town of Deweyville, Texas. On 

March 12 and 13, catastrophic flooding completely isolated the town. 

Floodwaters inundated the District’s elementary school campus including 

its elementary school, administration office, and maintenance facilities. 

Five feet of water filled the elementary school for an extended period (see 

figures 1 and 2), and District officials canceled classes for an entire 

month. During this time, officials relocated all staff and services to the 

Deweyville High School campus. The President declared the major 

disaster on March 19, 2016. Students returned to classes on Monday, 

April 11, 2016. 

Figure 1: Deweyville Elementary School 

Source: Deweyville Independent School District 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Figure 2: The Deweyville Elementary Campus 

Before and After the March 2016 Flooding 

Source: Deweyville Independent School District 

Results of Audit 

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

account for FEMA Public Assistance grant funds; however, the District’s 

policies were not adequate to meet all Federal procurement standards. 

District policies did not provide sufficient opportunities for disadvantaged 

firms to compete for contracts, help ensure reasonable costs, or include 

all required contract provisions. After we identified these problems, 

District officials moved quickly to amend existing contracts and modify 

procurement policies to comply with Federal requirements. These actions 

should help provide reasonable assurance that the District will comply 

with Federal procurement standards in administering the $12.9 million in 

estimated future contracting. 

The problems we identified occurred because District officials were not 

fully aware of Federal procurement requirements. Therefore, FEMA 

should direct Texas, as FEMA’s grantee, to continue providing technical 

assistance and increase monitoring to ensure the District follows all 

Federal grant requirements. Doing so should provide FEMA reasonable 

assurance that the District will avoid improperly spending the 

$12.9 million of estimated contract costs for remaining permanent 

disaster work. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Finding A: Policies, Procedures, and Business Practices 

Project Cost Accounting 

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

account for disaster-related costs on a project-by-project basis and can 

adequately support costs as the following Federal regulations require: 

x Recipients must account for large project expenditures on a projectby-project basis (44 Code of Federal Regulation (CFR) 206.205(b)). 

FEMA policy also requires subrecipients to keep records for all 

projects on a project-by-project basis (Public Assistance Program 

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

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 CFR 

200.302(b) (3)). 

The District designated a specific accounting code to segregate all 

disaster-related costs. We assessed the adequacy of the District’s policies 

and procedures and determined that it could properly segregate costs by 

project and maintain sufficient detailed documentation to support the 

costs. 

Insurance 

The District’s insurance procedures and practices are adequate to ensure 

that the District can provide accurate information to deduct insurance 

proceeds from eligible projects in accordance with 44 CFR 206.250(c). As 

of August 9, 2016, the District had received $1 million of insurance 

coverage to its facilities. However, FEMA had not formulated any 

permanent project worksheets and, therefore, had not allocated the 

insurance proceeds to reduce the cost to repair disaster damages. 

We also discussed with District officials the need to obtain and maintain 

insurance. The District must obtain and maintain insurance that is 

reasonable and necessary to protect facilities repaired or replaced using 

Federal funds against future loss from the types of hazard which caused 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

the major disaster.1 The District’s policies and procedures related to 

insurance did not specifically mention this Federal requirement. However, 

after our discussion with District officials, they told us they understand 

that both current and future FEMA Public Assistance funding is 

contingent on the District’s compliance with the requirement. 

Procurement Policies 

The District’s procurement policies did not meet all Federal procurement 

requirements in awarding more than $6.5 million to six contractors. 

Generally, this occurred because District officials were not aware of all 

requirements. Federal regulations require, in part, that subrecipients — 

1. take 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)); 

2. perform a cost or price analysis in connection with every 

procurement action, including contract amendments, in excess of 

the Simplified Acquisition Threshold2 (2 CFR 200.323(a)); 

3. include all applicable provisions in contracts (2 CFR 200.326); 

4. ensure all bonding requirements are met (2 CFR 200.325); 

5. ensure no award to any party debarred or suspended from Federal 

assistance programs (2 CFR 200.205(d)); and 

6. include a ceiling price in time-and-materials contracts (2 CFR 

200.318(j)). 

As we discuss below, the District did not have policies, procedures, and 

business practices in place to ensure compliance with these six Federal 

regulations. 

Disadvantaged Firms — Federal regulations require specific steps to 

assure the use of disadvantaged firms whenever possible. These steps 

include placing qualified small and minority businesses and women’s 

business enterprises on solicitation lists; assuring such business 

enterprises are solicited whenever they are potential sources; using the 

1 Section 311 of the Robert T. Stafford Disaster Relief and Emergency Act, Public Law 93-

288, 42 United States Code 5154, as amended, (Stafford Act) requires recipients of 

disaster assistance to obtain and maintain such types of insurance “as may be 

reasonably available, adequate, and necessary, to protect against future loss” to “any 

property to be replaced, restored, repaired, or constructed with such assistance.”

2 The Simplified Acquisition Threshold is the dollar amount below which a non-Federal 

entity may purchase property or services using small purchase methods. As of 

January 1, 2016, the threshold is $150,000. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

services and assistance, as appropriate, of such organizations as the 

Small Business Administration and the Minority Business Development 

Agency of the Department of Commerce; and requiring the prime 

contractor, if subcontractors are used, to take the affirmative steps as 

well. 

Cost or Price Analysis — Federal regulations require a cost or price 

analysis with every procurement action in excess of the Simplified 

Acquisition Threshold, including contract modifications. The absence of a 

cost or price analysis increases the risk of unreasonable contract costs. 

Required Contract Provisions — Federal regulations require specific 

provisions for contracts and subcontracts, including remedies and 

termination clauses, non-discrimination, compliance with labor laws, and 

prohibitions of “kickbacks.” These provisions describe the rights and 

responsibilities of the parties and minimize the risk of misinterpretations 

and disputes. 

Minimum Bonding Requirements — Bid bonds are necessary to ensure 

the winning bidder will undertake the contract under the terms they bid, 

protect against an adverse event that may cause disruptions, and protect 

against failure to complete the project due to insolvency of the builder or 

the job’s failure to meet contract specifications. Contracting parties 

execute a performance bond to secure fulfillment of all the contractor’s 

obligations under the contract and a payment bond to assure payment of 

all persons supplying labor and material in execution of the contract work 

provided. 

Debarred/Suspended Contractors — Compliance with this regulation 

lessens the risk of subrecipients awarding contracts to unscrupulous 

firms or individuals. District officials told us they understood this Federal 

requirement, but had problems navigating the website to perform this 

verification. 

Ceiling Price for Time-and-Materials Contracts — Federal regulations 

require time-and-materials contracts to set a ceiling price that the 

contractor exceeds at its own risk. Absent a ceiling price, time-andmaterials type contracts are open-ended with no incentive for the 

contractor to control costs; the more time a contractor takes to do the 

work, the greater the contractor’s profit. 

We verified the District did not award work to contractors debarred or 

suspended from Federal grant awards and awarded all contracts to either 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

labor surplus area firms or small businesses. During the audit, the 

District amended its contracts to include required Federal provisions and 

added a ceiling price to its time-and-materials type contract. Additionally, 

the District modified its procurement process to perform a cost or price 

analysis, take affirmative steps, and include minimum bonding 

requirements. 

Finding B: Grant Management 

Federal regulation at 2 CFR 200.331(d) requires recipients to monitor the 

subrecipient’s activities to ensure that it uses the subaward in 

“compliance with Federal statutes, regulations, and the terms and 

conditions of the subaward.” Because District officials lack experience 

with Federal subgrant requirements, Texas should continue providing 

technical assistance to the District and closely monitor the District to 

ensure compliance with Federal procurement standards. Doing so should 

provide FEMA reasonable assurance that the District will avoid 

improperly spending the $12.9 million of estimated contract costs for 

remaining permanent disaster work. 

At our exit conference with Texas officials, they said they were already 

providing technical assistance, guidance, and monitoring to the District 

and believe they would have eventually found and corrected the findings 

in this report. Although that may be true, we believe that technical 

assistance and guidance early in the grant cycle is critical because it 

provides grant recipients the opportunity to correct noncompliance before 

too much time elapses and they spend a significant amount of their grant 

funding. 

Recommendation 

We recommend that the Regional Administrator, FEMA Region VI: 

Recommendation 1: Direct Texas to continue providing technical 

assistance and closely monitor the District to ensure it complies with 

Federal procurement standards for awarding and administering disasterrelated contracts and to prevent improper spending of the estimated 

$12,854,705 ($9,641,029 Federal share) in contract costs for remaining 

permanent disaster work. We consider this recommendation to be 

resolved and closed because FEMA’s corrective action directed Texas to 

take specific corrective actions (findings A and B). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Discussion with Management and Audit Follow-up 

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

officials during and after our audit. We also provided a draft report in 

advance to these officials and discussed it at exit conferences with 

District officials on January 3, 2017, and with Texas and FEMA officials 

on January 4, 2017. We considered their comments in developing our 

final report and incorporated their comments as appropriate. District 

officials agreed with our findings and recommendation. Texas officials 

generally agreed with our findings and disagreed with our 

recommendation (see finding B). FEMA officials generally agreed with our 

findings and recommendation. FEMA’s written response, dated 

February 16, 2017, and subsequent actions were sufficient to resolve and 

close our recommendation (see appendix C). Therefore, we consider this 

report closed and require no additional actions from FEMA. 

The Office of Emergency Management Oversight major contributors to 

this report are Tonda L. Hadley, Director; Christopher Dodd, Director 

(retired); Kathleen Hughes, Audit Manager; and Patricia Epperly, Auditorin-Charge. 

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

contact Tonda L. Hadley, Director, Central Regional Office – South, 

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 Deweyville Independent School District 

(District), Deweyville, Texas, Public Assistance Identification Number 351-

UJ4FW-00, to manage FEMA Public Assistance funds. Our audit objective 

was to determine whether the District’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 DR-4266-TX. FEMA’s Preliminary Damage Assessment 

estimated the District award to be $21,954,705, before the insurance 

reduction of $1 million, for damages resulting from severe storms, 

straight-line winds, and flooding that occurred March 7–29, 2016. The 

award will provide 75 percent funding for eligible work. 

The audit covered the period March 7, 2016, through August 9, 2016, the 

cutoff date of our audit. We interviewed FEMA, Texas, and District 

officials; assessed the adequacy of the policies, procedures, and business 

practices the District uses and plans to use to account for and expend 

Federal grant funds and to procure and monitor contracts for disaster 

work; gained an understanding of the District’s method of accounting for 

disaster-related costs and its procurement policies and procedures; and 

reviewed all disaster-related contracts awarded by the District. We 

judgmentally selected and reviewed project costs (generally based on 

dollar amounts); 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 

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

necessary to accomplish our audit objective. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A (continued) 

We conducted this performance audit between August 2016 and 

January 2017 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. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Potential Monetary Benefits 

Table 1: Estimated Disaster Costs 

Category 

of Work* Description Estimated Costs 

B Emergency work completed $ 9,100,000 

E Permanent work to be completed 12,854,705 

Total $21,954,705 

Source: FEMA’s Preliminary Damage Assessment and 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). 

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 

(Avoid Potential Improper Costs) 12,854,705 9,641,029 

Totals $12,854,705 $9,641,029 

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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Department of Homeland Security 

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Department of Homeland Security 

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Department of Homeland Security 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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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 Region VI 

Audit Liaison, FEMA (Job Code G-16-043) 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Chief, Texas Division of Emergency Management Deputy Assistant 

Director Response, Texas Division of Emergency Management 

Texas State Auditor’s Office 

Superintendent, Deweyville Independent School District 

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