Department of Homeland Security
 

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The City of Chattanooga, Tennessee, 


Properly Accounted For and Expended 


FEMA Public Assistance Grant Funds 


OIG-14-15-D December 2013
 
~ .• ~ s: Ol•HCE OF INSPECTOR GENERAL 

~ •• ,rr§ Department or H(lme\and Security 

\Va~hingtcm, UC 20528 / \\'Vo'W.olg.dhs.gt'\' 

DEC l I 2013 

MEMORANDUM FOR: Major P. (Phil) May 

Regional Administrator, Region IV 

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Federal Emergency Management Agency 

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FROM: j~ John V. Kelly 

?'~ - Assistant Inspector General 

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Office of Emergency Management Oversight 

SUBJECT: The City of Chattanooga, Tennessee Properly Accounted 

For and Expended FEMA Public Assistance Grant Funds 

FEMA Disaster Number 1974-DR-TN 

Audit Report Number OIG-14-15-D 

We audited Public Assistance funds awarded to the City of Chattanooga, Tennessee 

(City) (FIPS Code 065-14000-00). Our audit objective was to determine whether the City 

accounted for and expended Federal Emergency Management Agency (FEMA) grant 

funds according to Federal regulations and FEMA guidelines. 

The City received a Public Assistance award totaling $25.3 million from the Tennessee 

Emergency Management Agency (TEMA), a FEMA grantee, for damages resulting from 

severe storms, tornadoes, straight-line winds, and associated flooding that occurred in 

April 2011. The award provided 75 percent FEMA funding for debris removal, 

emergency protective measures, and permanent repairs to buildings, utilities, and 

recreational facilities. The award consisted of 111arge projects and 20 small projects. 1 

We audited six large projects ;md five small projects with awards totaling $23.8 million 

(see Exhibit, Schedule of Projects Audited and Questioned Costs) for debris removal, 

emergency protective measures, and repairs to roads and utilities. We limited our 

review of .small projects to determining whether: (1) the City completed the projects, 

and (2) another funding source covered the project costs. The audit covered the period 

from April 25, 2011, to July 25, 2013, during which the City claimed $23.8 million of 

costs under the projects reviewed. At the time of our audit, the City had completed 

work on all projects included in our scope and had submitted a final claim to TEMA for 

project expenditures. 

1 Federal regulations in effect at the time of the disaster set the large project threshold at $63,900. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

We conducted this performance audit between March 2013 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 audit objective. To conduct this audit, we applied the statutes, 

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

We judgmentally selected and reviewed project costs (generally based on dollar value); 

interviewed City, TEMA, and FEMA personnel; reviewed the City’s procurement policies 

and procedures; reviewed applicable Federal regulations and FEMA guidelines; and 

performed other procedures considered necessary to accomplish our audit objective. 

We did not assess the adequacy of the City’s internal controls applicable to its grant 

activities because it was not necessary to accomplish our audit objective. However, we 

gained an understanding of the City’s method of accounting for disaster-related costs 

and its policies and procedures for administering activities provided for under the FEMA 

award. 

RESULTS OF AUDIT 

The City generally accounted for and expended FEMA funds according to Federal 

regulations and FEMA guidelines. However, the City claimed $71,040 of excessive 

contract costs (less than 0.3 percent of its total award). Code of Federal Regulation (CFR) 

2 CFR 225, Cost Principles for State, Local and Indian Governments, Appendix A, Section 

C.1.a., states that costs under Federal awards must be both reasonable and necessary. 

We question the $71,040 as follows: 

•	 Under Project 1315, the City claimed $44,353 of excessive fuel costs. The City’s 

Electric Power Board hired several contractors to assist with restoring damaged 

electrical power and fiber optic services. The contractors billed the City based on 

contracted hourly rates for labor and equipment use. One of the contractors 

charged the City $44,353 of fuel cost for the use of 55-foot bucket trucks, pick-up 

trucks, and derrick diggers. However, the contracted hourly equipment rates for 

those pieces of equipment already included the cost of fuel. Therefore, the 

contractor should not have billed the City any additional fuel costs for the 

equipment. We question the $44,353 as ineligible costs because they duplicate 

costs that equipment rates covered. 

www.oig.dhs.gov	 OIG-14-15-D 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

City officials agreed with this finding. They said that their corrective action plan 

will be to implement new internal control procedures to properly review all 

invoices to prevent future duplicate costs. 

•	 Under Project 1312, the City claimed $26,687 of excessive contract labor costs. A 

contractor billed the City $114,217 of labor costs for debris removal and tree 

trimming services related to project work. However, the contractor did not bill 

the City at the contracted hourly labor rates. Based on the agreed-upon rates,
 

the contractor should have billed the City $87,530 for labor, or $26,687 less than 

the $114,217 it billed. The overbilling occurred because the City did not properly
 

review the contractor’s invoices for adherence to the contracted hourly rates.
 

Therefore, we question $26,687 as ineligible.
 

City officials agreed with this finding. 

RECOMMENDATIONS 

We recommend that the Regional Administrator, FEMA Region IV: 

Recommendation #1: Disallow $44,353 (Federal share $33,265) of ineligible contract 

fuel charges. 

Recommendation #2: Disallow $26,687 (Federal share $20,015) of ineligible contract 

labor costs. 

DISCUSSION WITH MANAGEMENT AND AUDIT FOLLOWUP 

We discussed the results of our audit with City, TEMA, and FEMA officials during our 

audit. We also provided a draft report in advance to these officials and discussed it at 

the exit conference held on September 16, 2013. We incorporated comments City 

officials provided into the body of this report where appropriate. 

Within 90 days of the date of this memorandum, please provide our office with a 

written response that includes your (1) agreement or disagreement, (2) corrective 

action plan, and (3) target completion date for each recommendation. Also, please 

include the contact information of responsible parties and any other supporting 

documentation necessary to inform us about the current status of the recommendation. 

Until we receive and evaluate your response, we consider the recommendations as 

open and unresolved. 

www.oig.dhs.gov	 OIG-14-15-D 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Consistent with our responsibility under the Inspector General Act, 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 David Kimble, Director; Adrianne Bryant, Audit 

Manager; Amos Dienye, Auditor-in-charge; and Jerry Aubin, Program Analyst. 

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

David Kimble, Director, Eastern Regional Office, at (404) 832-6702. 

www.oig.dhs.gov OIG-14-15-D 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Exhibit 

Schedule of Projects Audited and Questioned Costs 

FEMA 

Project Category Amount Amount Federal 

Number Project Scope of Work Awarded Questioned Share 

Large Projects: 

351 

Debris Removal – 

Public Works Department A $631,327 $0 $0 

373 

Debris Removal – 

Public Works Department A $867,076 $0 $0 

717 

Protective Measures – 

Public Works Department A $850,107 $0 $0 

1312 

Debris Removal – Electric 

Power Board A $904,898 $26,687 $20,015 

1313 

Protective Measures – 

Electric Power Board B $4,929,038 $0 $0 

1315 

Public Utilities – Electric 

Power Board F $15,384,886 $44,353 $33,265 

Small Projects: 

77 

Debris Removal – 

Public Works Department A $29,752 $0 $0 

714 

Debris Removal – 

Public Works Department A $61,488 $0 $0 

616 

Protective Measures – Police 

Dept. B $53,965 $0 $0 

1237 

Road Repairs – 

Public Works Department C $53,224 $0 $0 

1245 

Public Utilities – Electric 

Power Board F $50,626 $0 $0 

Total $23,816,387 $71,040 $53,280 

www.oig.dhs.gov OIG-14-15-D 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix 

Report Distribution 

Department of Homeland Security 

Acting Secretary 

Chief Financial Officer 

Under Secretary for Management 

Acting Chief Privacy Officer 

Audit Liaison, DHS 

Federal Emergency Management Agency 

Administrator 

Chief of Staff 

Chief Financial Officer 

Chief Counsel 

Director, Risk Management and Compliance 

Audit Liaison, FEMA Region IV 

Audit Liaison, FEMA (G-13-022-EMO-FEMA) 

State 

Executive Director, Tennessee Emergency Management Agency 

State Auditor, Tennessee 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Recovery Accountability and Transparency Board 

Director, Investigations, Recovery Accountability and Transparency Board 

Sub grantee 

Audit Liaison, City of Chattanooga, TN 

Congress 

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 

www.oig.dhs.gov OIG-14-15-D 

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