FEMA Should Disallow 

$246,294 of $3.0 Million 

in Public Assistance Grant 

Funds Awarded to Lincoln 

County, Missouri 

September 29, 2017 

OIG-17-118-D 
 

 

 

 

DHS OIG HIGHLIGHTS 

FEMA Should Disallow $246,294 of 

$3.0 Million in Public Assistance Grant Funds 

Awarded to Lincoln County, Missouri 

September 29, 

2017 

Why We Did 

This Audit 

Lincoln County, Missouri 

(County) received a 

$3.0 million Federal 

Emergency Management 

Agency (FEMA) grant for 

damages resulting from 

severe storms occurring 

from May to July 2015. 

Our audit objective was 

to determine whether the 

County accounted for 

and expended FEMA 

funds according to 

Federal regulations and 

FEMA guidelines. 

What We 

Recommend 

FEMA should disallow 

$246,294 of ineligible 

and unsupported costs 

and provide clearer 

guidance for 

documenting eligible 

direct administrative 

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 

FEMA should disallow $246,294 of grant funds 

that the County spent on ineligible activities or 

did not support with adequate documentation. 

The County claimed $235,662 of direct 

administrative costs that were ineligible or 

unsupported. County officials said this occurred 

because they received inconsistent guidance from 

FEMA Region VII officials. FEMA Region VII 

officials acknowledged that applicants need 

clearer guidance to understand eligibility and 

support requirements for direct administrative 

costs. 

The County also claimed $10,632 of overstated 

material costs because of a clerical error. County 

officials acknowledged the error and agreed that 

FEMA should disallow those funds. After the exit 

conference, FEMA provided evidence it disallowed 

the ineligible material costs. 

FEMA Response 

FEMA agreed with our findings and 

recommendations. Appendix D includes FEMA’s 

response in its entirety. 

www.oig.dhs.gov OIG-17-118-D 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

September 29, 2017 

MEMORANDUM FOR: Kathy D. Fields 

Acting Regional Administrator, Region VII 

FROM: John E. McCoy II 

Acting Assistant Inspector General 

Office of Emergency Management Oversight 

SUBJECT: FEMA Should Disallow $246,294 of $3.0 Million in 

Public Assistance Grant Funds Awarded to Lincoln 

County, Missouri 

Audit Report Number OIG-17-118-D 

We audited Public Assistance grant funds awarded to Lincoln County, Missouri 

(County). The Missouri State Emergency Management Agency (Missouri), a 

Federal Emergency Management Agency (FEMA) grant recipient, awarded the 

County $3.0 million for damages resulting from severe storms that occurred 

May to July 2015. The award provided 75 percent Federal funding for eligible 

work. We audited four projects totaling $1.5 million, or 50 percent of the total 

award (see appendix B, table 2). As of November 14, 2016, the cutoff date of 

our audit, the County had completed work on three projects and submitted 

reimbursement claims to Missouri. 

Background 

The County is located in east central Missouri, which is about 55 miles 

northwest of St. Louis and situated on the western border of the Mississippi 

River. The County spans 627 square miles with a population of 54,696. In May, 

June, and July 2015, the County experienced numerous tornadoes, damaging 

straight-line winds, flooding, and severe storms. These severe storms brought 

torrential rains followed by rapidly rising river levels that washed away and 

damaged several roads and bridges throughout the County. The President 

declared the major disaster on August 7, 2015; however, FEMA did not finalize 

the majority of project worksheets until almost a year later in 2016. 

Federal Emergency Management Agency 

www.oig.dhs.gov OIG-17-118-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Results of Audit 

The County accounted for and expended the majority of FEMA grant funds 

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

claimed $246,294 of ineligible and unsupported costs for two large projects. 

These costs consisted of $235,662 in direct administrative costs and $10,632 

in overstated material costs. County officials said FEMA officials provided 

inconsistent guidance regarding the types of direct administrative costs that 

were eligible; and, as a result, they claimed all direct administrative costs 

incurred because they did not understand the eligibility and documentation 

requirements. County officials acknowledged they had erroneously overstated 

material costs by $10,632 and agreed with our recommendation to disallow 

those costs. 

Finding A: Direct Administrative Costs 

The County claimed $244,382 of direct administrative costs for projects 

1172 and 1178. The majority of these costs ($235,662 of $244,382) were either 

ineligible or unsupported. According to FEMA Disaster Assistance Policy 

9525.9, subrecipients must identify direct administrative costs separately and 

assign costs to a project.1 Further, Federal cost principles at 2 Code of Federal 

Regulations (CFR) 200.403(g) require recipients to document costs adequately. 

In this case, the County claimed direct administrative costs for both projects 

that did not meet the following criteria: 

x disaster work must directly relate to the major disaster declaration 

(44 CFR 206.223), 

x recipients must account for large project expenditures on a project-byproject basis (44 CFR 206.205(b)). FEMA requires subrecipients to keep 

records for all projects on a project-by-project basis (Public Assistance 

Guide, FEMA 322, June 2007, p.137), and 

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)). 

1 Direct administrative costs include costs that can be tracked, charged, and accounted for 

directly to a specific project, such as staff’s time to conduct an initial inspection, prepare and 

submit project worksheets, and make interim and final inspection reports. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

At the time of our audit, FEMA Region VII had obligated only $13,123 for direct 

administrative costs for projects 1172 and 1178. Regardless, County officials 

told us they had incurred and claimed $244,382 in direct administrative costs 

for the two projects. We questioned $235,662 of the $244,382 the County 

claimed for direct administrative costs as ineligible or unsupported (see 

table 1): 

x	 $229,548 was unsupported. Although County officials provided summary 

documentation for these costs, they did not provide specific details, such 

as time sheets or work logs, to validate the eligibility of the cost claimed. 

Without sufficient support for claimed costs, FEMA has no assurance 

that the costs are disaster related, valid, or eligible; and 

x	 $6,114 was ineligible because the costs were general in nature and, 

therefore, not related to a specific project. 

Table 1: Direct Administrative Costs (DAC) Questioned 

Project 

Number Total Award 

DAC 

Obligated 

DAC 

Claimed 

Not 

Specific to 

a Project 

Not 

Supported 

DAC 

Questioned

 1172 $ 200,213 $ 6,233 $ 6,173 $ 3,365 $ 1,911 $ 5,276 

 1178 805,264 6,890 238,209 2,749 227,6372 230,386 

Total 1,005,477 13,123 244,382 6,114 229,548 235,662 

Source: Office of Inspector General (OIG) analysis of report findings 

County officials said they submitted all direct administrative costs incurred 

because the program guidance they received from FEMA joint field office staff3 

was unclear and often contradicted subsequent FEMA determinations. For 

example, County officials said FEMA deemed pre-declaration costs as ineligible 

in this disaster (DR-4238), but allowed the same type of costs in a subsequent 

disaster. During fieldwork, Region VII officials said they base eligibility 

decisions on criteria in effect when a disaster is declared. Additionally, 

Region VII officials said FEMA’s revised Public Assistance Program and Policy 

Guide (PAPPG), which applies to all disasters declared after January 1, 2016, 

identifies certain pre-declaration costs as eligible expenditures. 

2 The $227,637 we found as unsupported costs for Project 1178 includes $4,141 recommended 

for disallowance based on remaining DAC obligated ($6,890 obligated DAC less $2,749 of 

ineligible costs), and unobligated DAC totaling $223,496 ($227,637 less $4,141). 

3 According to FEMA Interagency Integrated Standard Operating Procedure for Joint Field Office 

Activation and Operations, Version 8.3, the joint field office is a temporary facility established 

locally where FEMA and state officials coordinate protection, prevention, preparedness, 

response, and recovery actions. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Ultimately, FEMA Region VII officials acknowledged that applicants do need 

clearer guidance to determine eligibility and support requirements for direct 

administrative costs. FEMA Region VII officials also said they had limited 

knowledge of determination decisions made at the joint field office because they 

operate as a separate component of the Region. 

We maintain that, although a joint field office may operate as a separate 

component of the Region, the FEMA Region should maintain awareness of 

decisions made at the joint field office. It is the responsibility of FEMA Region 

VII to ensure program decisions are clearly communicated to applicants and 

adequately documented. According to FEMA policy, the Federal Coordinating 

Officer transfers grant administrative responsibilities to the FEMA Regional 

office when the joint field office closes. The Federal Coordinating Officer should 

identify any potential issues regarding projects and advise the FEMA Regional 

Public Assistance Branch Chief and staff of these issues. 

Missouri officials said they provided basic guidance to the County on 

documentation requirements and requested FEMA provide eligibility 

determinations on the County’s projects. Missouri officials also said that they 

were unaware of the basis for cost eligibility decisions FEMA made at the joint 

field office because FEMA did not issue determination memos; and they 

contend that the grant recipient (Missouri, in this case) has a limited role at the 

joint field office once FEMA begins obligating projects. 

We disagree with Missouri’s comments. Federal regulations and the FEMAState agreement require recipients to provide technical assistance to 

subreceipients and manage and monitor subaward activities.4 We understand 

that FEMA is ultimately responsible for making all eligibility decisions for grant 

awards. However, the recipient’s role at the joint field office should not be 

limited because its participation is critical to the success of disaster recovery 

operations at state and local levels throughout the life of the grant. 

We question $235,662, of which only $13,123 is obligated for both projects. 

Therefore, we recommend FEMA Region VII disallow $6,114 in ineligible costs, 

$6,052 in unsupported costs we question for Projects 1172 and 1178, and not 

fund the remaining $223,496, which is the amount we question as 

unsupported for Project 1178 (see table 1 and footnote 2). We also recommend 

FEMA Region VII officials provide guidance to Missouri to clarify the eligibility 

4 According to 2 CFR 200.331(d), recipients must 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.” 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

and documentation requirements for direct administrative costs and direct 

Missouri to provide the same guidance to the County. 

Finding B: Overstated Material Costs 

The County claimed $10,632 of overstated material costs for Project 1178 

because of a clerical error. Federal regulation at 2 CFR 200.403(a) requires 

costs to be necessary and reasonable to be allowable. We reviewed the County’s 

accounting records and determined the materials it used to repair damaged 

roads totaled $1,182 rather than $11,814, resulting in a $10,632 

overstatement. County officials acknowledged the input error and agreed with 

the recommendation to disallow the overstated costs. We also notified Missouri 

officials that the County acknowledged and accepted the finding and 

recommendation. As a result, we recommend FEMA disallow $10,632 in 

ineligible material costs. Since the exit conference, FEMA provided evidence it 

disallowed these costs. 

Recommendations 

We recommend that the Acting Regional Administrator, FEMA Region VII: 

Recommendation 1: Disallow $5,276 (Federal share $3,957) as ineligible and 

unsupported direct administrative costs in Project 1172 (finding A) based on 

the DAC-obligated balance totaling $6,233.5 

Recommendation 2: Disallow $6,890 (Federal share $5,167) as ineligible and 

unsupported direct administrative costs in Project 1178 (finding A) based on 

the DAC-obligated balance totaling $6,890. 

Recommendation 3: Deny and not fund the County’s claim for $223,496 

(Federal share $167,622) in unsupported direct administrative costs for 

Projects 1178 unless the County provides additional documentation sufficient 

to support the eligibility of the costs and their direct relation to Project 1178 

(finding A). 

5 The $235,662 we question in finding A (see table 1) includes: $3,365 of ineligible costs and 

$1,911 of unsupported costs obligated under Project 1172 and $2,749 of ineligible costs and 

$4,141 of unsupported costs obligated under Project 1178. Therefore, we recommend FEMA 

disallow $5,276 for Project 1172 and $6,890 for Project 1178. The remaining $223,496 that we 

question in finding A are unsupported costs the County claimed under Project 1178 but that 

FEMA has not obligated; therefore, we recommend FEMA deny and not fund these costs — 

$6,114 ineligible and $229,548 unsupported (see table 1 and footnote 2 for Project 1178 

analysis). Because FEMA has not obligated the $223,496 we question, we classify that amount 

as cost avoidance (see appendix C). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Recommendation 4: Provide guidance to Missouri to clarify the eligibility and 

documentation requirements for direct administrative costs (finding A). 

Recommendation 5: Direct Missouri to provide guidance to the County to 

clarify the eligibility and documentation requirements for direct administrative 

costs (finding A). 

Recommendation 6: Disallow $10,632 (Federal share $7,974) in ineligible 

material costs in Project 1178 (finding B). After the exit conference, FEMA 

provided evidence it disallowed these amounts. As a result, we consider this 

recommendation resolved and closed and require no further action from FEMA. 

Discussion with Management 

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

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

advance to these officials and discussed it at an exit conference with FEMA on 

May 23, 2017, with Missouri on June 27, 2017, and with the County on June 

20, 2017. FEMA Region VII officials provided technical comments on our draft 

report on May 25, 2017, which we addressed. We also incorporated Missouri 

and County official comments, as appropriate, in this report. Both Missouri 

and County officials agreed with the findings and recommendations. 

FEMA officials provided a written response to this report on July 13, 2017, 

agreeing with our findings and recommendations (see appendix D). For 

recommendations 1 through 3, FEMA will make final eligibility determinations 

within 90 days of the issuance of the final report. For recommendations 4 and 

5, FEMA plans to issue guidance to Missouri and direct Missouri to provide 

guidance to the County within 90 days of report issuance on eligibility and 

documentation requirements for direct administrative costs. For 

recommendation 6, FEMA provided evidence it disallowed these costs after the 

exit conference. Based on FEMA’s proposed actions, we consider 

recommendation 6 resolved and closed and the remaining recommendations 

resolved, but open. We can close the remaining recommendations once FEMA 

provides evidence it has completed planned actions. Please email a signed PDF 

copy of all responses and closeout requests to emo.auditliaison@oig.dhs.gov 

within 90 days of the date of this memorandum. 

The Office of Emergency Management Oversight major contributors to this 

report are Tonda L. Hadley, Director; Chiquita Washington, Audit Manager; 

William Lough, Auditor-in-Charge; Lauren Moore, Program Analyst; and Nigel 

Gardner, Independent Reference Reviewer. 

www.oi 6 g.dhs.gov OIG-17-118-D 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

Paul Wood, Acting Deputy Assistant Inspector General, at (202) 254-4100, or 

Chiquita Washington, Audit Manager, Central Regional Office - South, at 

(214) 436-5200. 

www.oi 7 g.dhs.gov OIG-17-118-D 
 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

We audited FEMA Public Assistance grant funds awarded to the County (Public 

Assistance Identification Number 113-99113-00). Our audit objective was to 

determine whether the County accounted for and expended FEMA grant funds 

according to Federal regulations and FEMA guidelines for FEMA disaster 

number 4238-DR-MO. As of November 14, 2016, the cutoff date of our audit, 

FEMA had obligated $3.0 million for damages resulting from severe storms, 

beginning May 15, 2015, and continuing through July 27, 2015. The award 

provided 75 percent Federal funding for emergency work and permanent work 

for six large and five small projects.6 As of the audit cutoff date, Missouri had 

paid the County $193,955 for the five small projects. 

We interviewed FEMA, Missouri, and County officials; judgmentally selected 

(generally based on dollar amounts) and reviewed project costs and 

procurement transactions; 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 did, however, gain an understanding of 

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

procurement policies and procedures. 

We conducted this performance audit from November 2016 to June 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. 

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

greater than $121,600 [Notice of Adjustment of Disaster Grant Amounts, 79 Federal Register 

62,648 (October 20, 2014)]. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Projects Audited and Questioned Costs 

Table 2: Projects Audited, Questioned Costs, and Costs Avoided 

Project/ 

Category 

of Work* 

Award 

Amount 

Costs Questioned 

(Findings A and B) 

Costs 

Avoided 

(Finding A) Totals 

Ineligible Unsupported Unsupported 

1154-C $ 403,919 $ 0 $ 0 $ 0 $ 0 

1167-C 74,335 0 0 0 0 

1172-C 200,213 3,365 1,911 0 5,276 

1178-C 805,264 13,381 4,141 223,496 241,018 

Totals $1,483,731 $16,746 $6,052 $223,496 $246,294 

Source: FEMA project worksheets, County records, and OIG analysis 

*FEMA identifies type of work by category: A for debris removal, B for emergency protective 

measures, and C–G for permanent work. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

Potential Monetary Benefits 

Table 3: Summary of Potential Monetary Benefits 

Type of Potential Monetary Benefit Amount Federal 

Share 

Questioned Costs – Ineligible $ 16,746 $ 12,560 

Questioned Costs – Unsupported 6,052 4,539 

Funds Put to Better Use (Cost Avoidance) 223,496 167,622 

Totals $246,294 $184,721 

Source: OIG analysis of report findings 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D 

FEMA Region VII Response 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D (continued) 

FEMA Region VII Response 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix D (continued)
 

FEMA Region VII Response 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix E 

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-16-060) 

Audit Liaison, FEMA Region VII 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Director, Missouri Department of Public Safety, Missouri State Emergency 

Management Agency 

Missouri State Auditor, Missouri Office of the State Auditor 

Chief Financial Officer, Lincoln County, Missouri 

www.oi 14 g.dhs.gov OIG-17-118-D 
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To view this and any of our other reports, please visit our website at: 

www.oig.dhs.gov. 

For further information or questions, please contact Office of Inspector General 

Public Affairs at: DHS-OIG.OfficePublicAffairs@oig.dhs.gov. 

Follow us on Twitter at: @dhsoig. 

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