Department of Homeland Security
 

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Santa Cruz County, California, 


Generally Followed Regulations for Spending 


FEMA Public Assistance Funds
 

OIG-14-03-D October 2013
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

October 31, 2013 

MEMORANDUM FOR: Nancy Ward 

Regional Administrator, Region IX 

Federal Emergency Management Agency 

FROM: John V. Kelly 

Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: Santa Cruz County, California, Generally Followed 

Regulations for Spending FEMA Public Assistance Funds 

FEMA Disaster Number 1646-DR-CA 

Audit Report Number OIG-14-03-D 

We audited Federal Emergency Management Agency (FEMA) Public Assistance grant 

funds awarded to Santa Cruz County, California (County), Public Assistance Identification 

Number 087-99087-00. Our audit objective was to determine whether the County 

accounted for and expended FEMA grant funds according to Federal regulations and 

FEMA guidelines. 

The California Governor’s Office of Emergency Services (Cal OES), a FEMA grantee, 

awarded the County $6,214,400 for costs resulting from storms, flooding, debris flows, 

and mudslides from March 29, through April 16, 2006.1 The award provided 75 percent 

FEMA funding for 17 large projects and 26 small projects.2 Our audit covered the period 

from March 29, 2006 to September 6, 2013. We audited 7 large and 16 small projects 

totaling $4,628,127 (see exhibit). As of the date of this report, Cal OES was in the 

process of reviewing the County’s final claim. 

We conducted this performance audit between March and September 2013 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 

1 At the time of this disaster, the grantee’s name was the Governor’s Office of Emergency Services (OES).
 

However, OES became part of Cal EMA from January 1, 2009 to June 30, 2013—including during the time
 

of our fieldwork. As of July 1, 2013, Cal EMA transitioned back to the California Governor’s Office of
 

Emergency Services (Cal OES).
 2 Federal regulations in effect at the time of the disaster set the large project threshold at $57,500.
 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

audit objective. We conducted this audit by applying the statutes, regulations, and 

FEMA policies and guidelines in effect at the time of the disaster. 

We interviewed FEMA, Cal OES, and County officials; reviewed judgmentally selected 

project costs (generally based on dollar value); and performed other procedures 

considered necessary to accomplish our objective. We did not assess the adequacy of 

the County’s internal controls applicable to grant activities because it was not necessary 

to accomplish our audit objective. However, we did gain an understanding of the 

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

and procedures. 

BACKGROUND 

Santa Cruz County is located on the California coast, approximately 65 miles south of 

San Francisco, California. It is the Gateway to the Monterey Bay National Marine 

Sanctuary with 29 miles of beaches, six state parks, and six state beaches. The County 

also has more than 200 miles of bike lanes and paths for commuters and recreational 

riders. The County’s Public Works Department is responsible for maintaining more than 

600 miles of County roads. However, the heavy rains that occurred during the incident 

period caused flooding and mudslides, which severely damaged several hillside roads 

throughout the County. Figure 1 shows damage that occurred to one of the County’s 

roads. 

Figure 1: Project 268, Santa Cruz County – road damage at two sites of Vine Hill Road 

Source: Santa Cruz County 

 

www.oig.dhs.gov 2 OIG-14-03-D 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

RESULTS OF AUDIT 

County officials generally accounted for and expended FEMA Public Assistance grant

funds according to Federal regulations and FEMA guidelines. However, the County 

received $213,574 for 16 small projects and approximately $81,760 for 1 large project 

they did not complete. According to 44 CFR 206.204(d)(2), FEMA will not provide 

funding if an eligible applicant fails to complete a large or small project. Therefore, 

FEMA should disallow $213,574 as ineligible for 16 small projects the County did not

complete and deobligate $81,760 in funds the County did not use to complete 1 large 

project. 

County officials concurred with the finding and confirmed that they did not perform any 

work on the 16 small projects and 1 large project. Cal OES and FEMA officials also 

concurred with the finding. After our September 2013 exit conferences, FEMA 

disallowed and deobligated $213,574 for the 16 uncompleted small projects and 

deobligated $81,760 for the uncompleted large project. Therefore, we consider the 

recommendations for this report to be resolved and closed. 

RECOMMENDATIONS 

We recommend that the Regional Administrator, FEMA Region IX: 

Recommendation #1: Disallow $213,574 (Federal share $160,181) as ineligible for 

16 small projects the County did not complete.

Recommendation #2: Deobligate $81,760 (Federal share $61,320) in unused funding for 

Project 85 and put those funds to better use.

DISCUSSION WITH MANAGEMENT AND AUDIT FOLLOWUP 

We discussed the results of our audit with County officials during our audit and included 

their comments in this report, as appropriate. We also provided a written summary of 

our finding and recommendations in advance to FEMA on September 6, 2013. We 

discussed the summary document at an exit conference with Cal OES and County 

officials on September 6, 2013, and with FEMA officials on September 24, 2013. Those 

officials agreed with the finding and recommendations. 

After our exit conferences, FEMA provided proof that it had disallowed and deobligated 

$213,574 for the 16 uncompleted small projects and deobligated $81,760 for the 

uncompleted large project. We consider these actions sufficient to resolve and close the 

www.oig.dhs.gov 3 OIG-14-03-D 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

recommendations we included in this report. Therefore, we require no further actions 

and consider this report closed. 

Consistent with our responsibility under the InspectorGeneralAct, we will provide 

copies of our report to appropriate congressional committees with oversight and 

appropriation responsibility over the Department of Homeland Security. We will post 

the report on our website for public dissemination. 

Major contributors to this report are Humberto Melara, Director; Louis Ochoa, 

Audit Manager; and Renee Gradin and Arona Maiava, Senior Auditors. 

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

Humberto Melara, Director, Western Regional Office, at (510) 637-1463. 

www.oig.dhs.gov 4 OIG-14-03-D 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Exhibit 

Schedule of Projects Audited, Questioned Costs, and Unused Funding 

Project 

Number 

FEMA 

Category 

of Work 

Net Award 

Amount 

Costs 

Claimed 

Questioned 

Costs 

Unused 

Funding

Large Projects 

85 C $81,760 $0 $81,760

92 C 977,694 $977,694

94 C 822,232 812,296

266 C 633,662 633,662

268 C 829,539 829,539

524 A 227,640 256,140

531 C 823,462 823,462

Small Projects 

62 C $9,415 $9,415 

65 C 7,757 7,757 

66 C 8,523 8,523 

67 C 8,641 8,641 

313 C 2,681 2,681 

363 C 2,888 2,888 

448 C 11,943 11,943 

455 C 7,560 7,560 

509 C 12,742 12,742 

521 C 7,161 7,161 

529 C 44,003 44,003 

530 C 5,774 5,774 

569 C 2,728 2,728 

575 C 40,484 40,484 

582 C 10,228 10,228 

587 C 31,046 31,046 

Totals $4,609,563 $4,332,793 $213,574 $81,760

Note: The audit amount of $4,628,127 consists of costs claimed totaling $4,332,793 (including 

$18,564 in cost overruns) plus $213,574 the County received for uncompleted small projects plus 

$81,760 in unused funding for a large project the County did not complete. 

www.oig.dhs.gov 5 OIG-14-03-D 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix
 

Report Distribution 

Department of Homeland Security

Acting Secretary 

Chief Financial Officer 

Under Secretary for Management 

Audit Liaison 

Acting Chief Privacy Officer 

Federal Emergency Management Agency

Administrator 

Chief of Staff 

Chief Financial Officer 

Chief Counsel

Director, Risk Management and Compliance 

Chief Procurement Officer 

Audit Liaison (Job Code G-13-015)

Director, Recovery Division, Region IX 

Deputy Director, Recovery Division, Region IX 

Audit Liaison, Region IX 

Audit Followup Coordinator 

Grantee (California Governor’s Office of Emergency Services)

Director 

Executive Assistant to the Director 

Chief of Staff 

Audit Liaison 

State (California)

California State Auditor, Bureau of State Audits

Subgrantee (Santa Cruz County, California)

Director of Public Works 

Senior Manager 

Interim Manager 

Principal Accountant-Auditor 

Recovery Accountability and Transparency Board

Director, Investigations, Recovery Accountability and Transparency Board

www.oig.dhs.gov 6 OIG-14-03-D 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix

(continued) 

Congressional Oversight and Appropriations Committees, as appropriate, including:

Senate Committee on Appropriations, Subcommittee on Homeland Security 

Senate Committee on Homeland Security and Governmental Affairs 

House Committee on Appropriations, Subcommittee on Homeland Security 

House Committee on Homeland Security 

House Committee on Oversight and Government Reform

Office of Management and Budget

Chief, Homeland Security Branch

DHS OIG Budget Examiner

www.oig.dhs.gov 7 OIG-14-03-D 
 

ADDITIONAL INFORMATION AND COPIES 

To obtain additional copies of this document, please call us at (202) 254-4100, fax your 

request to (202) 254-4305, or e-mail your request to our Office of Inspector General 

(OIG) Office of Public Affairs at: DHS-OIG.OfficePublicAffairs@oig.dhs.gov. 

For additional information, visit our website at: www.oig.dhs.gov, or follow us on Twitter 

at: @dhsoig. 

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