Management Alert -

FEMA Should Recover 

$6.2 Million in Public 

Assistance Funds for 

Disaster Repairs That Are 

Not the Legal 

Responsibility of 

Richland County, North 

Dakota 

October 30, 2017 

OIG-18-09 
 

			

 

 

DHS OIG HIGHLIGHTS 

Management Alert - FEMA Should Recover 

$6.2 Million in Public Assistance Funds for 

Disaster Repairs That Are Not the Legal

Responsibility of Richland County, North Dakota 

October 30, 2017 

Why We Did 

This Report 

During an on-going audit 

of $7.0 million of FEMA 

Public Assistance funds 

awarded to Richland 

County, North Dakota, we 

discovered an eligibility 

issue that that requires 

immediate attention. We 

determined the County 

does not have legal 

responsibility for disasterrelated repairs on township 

roadway projects. 

What We 

Recommend 

We recommended FEMA 

determine whether a legal 

basis exists for the County 

to act as the subgrantee for 

townships; if not, to 

disallow the costs; and 

require future written 

agreements. 

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 

Richland County, North Dakota does not have legal 

responsibility for the disaster-related repairs on 

township roadway projects. Rather, the repairs are 

the legal responsibility of individual organized 

townships. In the four disasters we reviewed, funding 

for 283 projects totaling $6.2 million is ineligible 

because the County does not have the legal 

responsibility for repairs to township roadways. Legal 

responsibility is one of the cornerstones of overall 

Public Assistance funding eligibility. 

FEMA Response 

FEMA officials agreed with our three 

recommendations. Appendix B includes FEMA’s 

written response in its entirety. 

www.oig.dhs.gov OIG-18-09 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

OCT 30 2017 

MEMORANDUM FOR: 	 Nancy J. Dragani 

Acting Regional Administrator, Region VIII 

Federal Emergency Management Agency 

FROM: 	 John E. McCoy II tJ-1 {:J-;zr.­

Acting Assistant In ~~ ;; GeHeral for Audits 

SUBJECT: 	 Management Alert - FEMA Should Recover $6.2 

Million in Public Assistance Funds for Disaster 

Repairs That Are Not the Legal Responsibility of 

Richland County, North Dakota 

FEMA Disaster Numbers 1829-DR-ND, 

1907-DR-ND, 1981 -DR-ND, and 4118-DR-ND 

We are currently auditing $7.0 million of Federal Emergency Management 

Agency (FEMA) Public Assistance (PA) funds awarded to Richland County, 

North Dakota (County). The North Dakota Department of Emergency Services 

(NDDES), a FEMA grantee, awarded these funds to the County for disaster 

recovery work related to severe storms and flooding that occurred from 2009 to 

2013. FEMA provided PA funding to the County for 309 projects for the 4 

disasters (see table 1). This management advisory report informs you of an 

eligibility issue that requires your immediate attention. At the conclusion of our 

audit, we plan to issue our complete audit report including any additional 

findings and recommendations. 

. 
 T a e bl 1 . R" IC hi an d C oun:yt n· 1sas t ers

Disasters and Year of 

Occurrence 

County 

Project 

Count 

Awarded 

for County 

Facilities 

Township 

Project 

Count 

Identified as 

Awarded for 

Township 

Facilities 

Total 

Project 

Count Total Award 

1829-DR-ND (2009} 18 $584,572 127 $2,099,262 145 $2,683,834 

1907-DR-ND (2010} 1 84,867 70 1,850,060 71 1,934,927 

1981-DR-ND (2011) 6 121 ,169 80 1,994,640 86 2,115,809 

4118-DR-ND (2013} 1 12 445 6 207 931 7 220 376 

Total Cost 2.6 Siin<1 nr:::;., 2.83_ !II,;. 1!ii1 QO':l 3.02 l1!,;.or:::;404,;. 

Source: FEMA data and Office of Inspector General (OIG) analysis. 

www.oig.dhs.gov 
 

                                                      

  

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

North Dakota experienced nine major federally declared disasters from 2009 to 

2013. The County is located in the declared area for four of these nine 

disasters. North Dakota divides its counties into townships. The townships are 

either “organized” or “unorganized.” There are approximately 1,360 “organized” 

townships in North Dakota. 

In North Dakota, the “organized” townships, not the counties, have the legal 

responsibility for road construction and maintenance of roadways within the 

townships. Unorganized townships have relinquished these rights, 

responsibilities, and duties to the county in which they are located. 

The County contains a total of 36 townships. All of the County’s townships are 

organized and the townships, not the County, are legally responsible for repairs 

to their township roadways. FEMA determined that the County was the eligible 

applicant for disaster-related damages to roadways within the County. Our 

concern about the legal responsibility is the reason for this management 

advisory report. 

Results 

The County does not have legal responsibility for the disaster-related repairs on 

township roadway projects. Therefore, the County is not eligible to receive 

$6,151,893 in Federal funding identified as township projects because it is not 

legally responsible for the repairs to the damaged facilities (roadways). Rather, 

the repairs are the legal responsibility of individual “organized” townships. The 

Robert T. Stafford Disaster Relief and Emergency Assistance Act is the legal 

authority that provides for PA grants to state and local governments for the 

repair, reconstruction, or replacement of public facilities.1 To receive a PA 

grant, the applicant must meet the eligibility requirements set forth in FEMA’s 

implementing regulations (44 Code of Federal Regulations (CFR) 206.223). 

Those regulations require that the proposed work — 

(1) be required as the result of the emergency or major disaster event; 

(2) be located within the designated area of a major disaster or 

emergency declaration, except that sheltering and evacuation 

activities may be located outside the designated area; and 

(3) be the legal responsibility of an eligible applicant. 

1 42 United States Code § 5121 et seq 

www.oig.dhs.gov 2 OIG-18-09 
 

                                                      

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

FEMA policy further states that an eligible applicant must be legally 

responsible for the repair of the damaged facility and if an eligible applicant did 

not have legal responsibility, the facility is ineligible for assistance.2 In 

addition, the current FEMA Public Assistance Program and Policy Guide (April 

2017) states that “an eligible public facility is one that a ... local government 

owns or has legal responsibility for maintaining, including any ... non-Federalaid street, road, or highway.” Therefore, legal responsibility is one of the 

cornerstones of overall PA funding eligibility. 

There is some urgency for FEMA to address the issue of legal responsibility 

because FEMA Region VIII is reviewing and closing the County’s projects and 

there is a current presidentially-declared disaster for North Dakota. The legal 

responsibility issue also raises the question of eligibility of disaster-related 

work in ongoing and future disasters in North Dakota. Therefore, FEMA should 

not obligate Federal funding to the County unless the repairs are the legal 

responsibility of the County. 

The County is not eligible for Federal funding for the $6,151,893 of disasterrelated repairs on 283 projects that are the legal responsibility of the townships 

even though the County has been requesting and receiving Federal funds from 

NDDES as subgrantee. The townships completed repairs to roadways either 

with County resources (labor, equipment, and materials) or with third-party 

contractors the townships hired. The townships awarded the contracts and 

submitted paid invoices to the County for reimbursement. For township 

projects performed using County resources, the County tracked its own costs 

and then submitted disaster-related costs to NDDES for reimbursement. 

County officials said the townships had responsibility for road repairs and that 

the County has no legal responsibility for road maintenance and repairs. 

County officials also said that most townships do not have the capability to 

manage Federal grants; therefore, the County acts on the townships’ behalf as 

subgrantee for PA grants. County officials said there is no written agreement 

documenting this arrangement and that, historically, this was how the County 

and townships handled federally declared disasters. Further, County officials 

asserted that because they have no authority over townships, they cannot 

require the townships to follow Federal grant regulations and requirements. 

In essence, for projects that are the legal responsibility of the townships, the 

County is merely acting as a “pass-through” entity, reimbursing townships for 

costs the townships expended for repairs. NDDES has a FEMA-State agreement 

and is the FEMA grantee, responsible for passing Federal funds through to 

eligible applicants. Because the County is not a FEMA grantee and does not 

2

 FEMA, Public Assistance Guide (FEMA 322, June 2007, p. 23) 

www.oig.dhs.gov 3 OIG-18-09 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

have legal responsibility for the disaster-related repairs in the townships, the 

$6.2 million of funding the County received is ineligible. 

FEMA Region VIII officials said that there was a verbal agreement made long 

ago between FEMA and NDDES that the counties would be the subgrantee 

rather than the townships. FEMA stated that the counties acted as the 

subgrantee because townships lack the capability to manage Federal funds. 

FEMA also said that managing the potential 55 subgrantees (counties) versus 

about 1,000 subgrantees (townships) makes this practice more efficient. 

However, improved efficiency should not justify bypassing one of the basic 

eligibility requirements of legal responsibility. 

Conclusion 

In the four disasters we reviewed, funding for 283 projects totaling $6,151,893 

is ineligible because the County does not have the legal responsibility for 

repairs to the damaged facilities. Therefore, FEMA should disallow $6,151,893 

in grant funding as ineligible for disasters 1829, 1907, 1981, and 4118, unless 

there is a legal basis for allowing an entity without the legal responsibility to 

repair the roads to be the subgrantee. Further, FEMA should not provide 

future disaster funding to the County on projects it does not have legal 

responsibility for repairs. 

Recommendations 

We recommend that the Regional Administrator, FEMA Region VIII: 

Recommendation 1: Determine whether there is a legal basis for allowing the 

County to act as the subgrantee for townships even though the County is not 

legally responsible for the repair of township roads. 

Recommendation 2: Disallow $6,151,893 ($5,228,005 Federal share) in grant 

funding as ineligible unless FEMA determines there is a legal basis for the 

County to act as the subgrantee. 

Recommendation 3: If FEMA determines that the County may enter an 

agreement with the townships to act as subgrantee, in future disasters require 

that the agreement be in writing and explicitly set forth the County is legally 

accountable for the performance of the award and the expenditure of funds for 

repairs of damaged township roads. 

www.oig.dhs.gov 4 OIG-18-09 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Discussions with Management and Audit Follow-up 

We discussed the preliminary results of our management alert with FEMA and 

NDDES officials and included their comments in this alert, as appropriate. We 

also provided a draft advisory report in advance to these officials and discussed 

it at exit conferences held with FEMA on March 1, 2017, and July 25, 2017, 

and with NDDES on March 24, 2017, and July 25, 2107. We considered their 

comments in developing our final report and incorporated their comments as 

appropriate. 

FEMA Region VIII officials provided a written response to a report draft on 

September 8, 2017, and concurred with our recommendations (see appendix 

B). In their response, FEMA officials stated there is a legal basis under North 

Dakota state law for the County to act as the subgrantee for the township road 

projects, and that the County is legally responsible for the projects referenced 

in the report. FEMA identified that the North Dakota Constitution article 

VII § 10 and North Dakota Century Code (NDCC) §§ 54-40.3-01 allow political 

subdivisions the legal authority to jointly or cooperatively administer any 

function that is authorized or assigned to one of them under a joint powers 

agreement. However, this type of agreement is contingent upon approval of the 

political subdivisions’ governing bodies, as noted below: 

54-40.3-01. Joint powers agreements – General authority. 

Any county, city, township, city park district, or other political 

subdivision of the state, upon approval of its respective governing body, 

may enter into an agreement with any other political subdivision of this 

state for the cooperative or joint administration of any power or function 

that is authorized by law or assigned to one or more of them. [emphasis 

added] 

We agree with FEMA’s observation that the operation of state law cannot be 

ignored. The preceding citation makes clear that such agreements may be 

entered into, not that they operate automatically to convey concurrent legal 

responsibility. We found no evidence, nor did any North Dakota, FEMA, or 

County official indicate that either the townships’ or County’s governing bodies 

approved joint powers agreements for any of the disasters under review. To the 

contrary, officials told us that the practice in place was based on decades-old 

tradition rather than a formal statutory-compliant process. While such an 

agreement may not be required to be in writing, documentation of the approval 

to enter into such an agreement would likely be required of the County’s 

governing body. County officials were not able to provide us with evidence of 

such approval. 

www.oig.dhs.gov 5 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

In addition, FEMA likened the County-township relationship in North Dakota 

to that of providing disaster funding to states as the applicant for debris 

removal and emergency protective measures conducted on behalf of their 

political subdivisions. While FEMA’s example points out the importance of 

recognizing legal authority under state law, it does not truly reflect the 

economic ramifications of the County-township relationship in North Dakota. 

In FEMA’s example, the state, as the applicant, incurs the costs for the debris 

removal or emergency protective measures and bears the financial risk if FEMA 

determines noncompliance has occurred. In North Dakota, the County did not 

incur the costs for repair of township roads; townships performed all 

procurements and incurred the disaster-related costs. Therefore, the County is 

not accountable for the performance of the award and has no incentive to 

ensure proper expenditure of grant funds. Should costs be questioned and 

funding denied, the County, as the applicant, does not bear the loss of monies 

expended; the township does. This key difference emphasizes the need for any 

such agreement between County and township to be very explicit on the 

individual parties’ responsibilities and duties under the PA grant. 

FEMA has asked that recommendations 1 and 2 be resolved and closed. We 

agree that the NDCC provides the vehicle through a joint powers agreement to 

convey legal responsibility to Richland County for township disaster-related 

repairs. However, the statutorily-mandated approval process was not carried 

out in the four subject disasters. Because this shortcoming cannot be rectified 

at this point, we will resolve and close recommendations 1 and 2. We 

encourage, however, that FEMA and NDDES focus on all North Dakota 

counties’ full compliance of the joint powers agreement in future disasters. 

In addition, FEMA provided documentation of their action directing the state to 

memorialize in writing any future joint powers agreements for the purpose of 

the County applying for PA funds and managing projects on behalf of 

townships. We consider recommendation 3 resolved and closed. 

Therefore, based on FEMA’s actions, we consider recommendations 1, 2, and 3 

to be resolved and closed and require no further action from FEMA. 

Major contributors to this report are Paige Hamrick, Director; John Polledo, 

Audit Manager; Patti Smith, Auditor-in-Charge; Rebecca Hetzler, Senior 

Auditor; and Nigel Gardner, Independent Reference Reviewer. 

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 

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

www.oig.dhs.gov 6 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

We are currently auditing FEMA Public Assistance grant funds awarded to 

Richland County, North Dakota (County), Public Assistance Identification 

Number 077-99077-00. Our full audit will include a review of costs claimed 

from disasters 1829, 1907, 1981, and 4118. Our audit objective will be to 

determine whether the County accounted for and expended FEMA grant funds 

according to Federal regulations and FEMA guidelines. 

Our review covers the period of March 13, 2009, through November 14, 2016, the 

cutoff date of the management advisory report. We reviewed the funding and 

location of damaged facilities for 309 projects in the four disasters totaling $7.0 

million to determine the legal responsible entity for the damaged facilities. 

To complete our management advisory report, we interviewed FEMA, NDDES, 

and County officials; reviewed applicable Federal regulations and FEMA 

guidelines; reviewed North Dakota statutory codes; 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, 

however, as part of this management advisory, did a limited review of the 

eligibility of projects for township roadway repairs. We conducted fieldwork at 

FEMA, NDDES, and County offices. 

We are conducting the full performance audit 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. We are conducting this audit by 

applying the statutes, regulations, and FEMA policies and guidelines in effect 

at the time of the disaster. 

www.oig.dhs.gov 7 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Management Comments 

www.oig.dhs.gov 8 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B (continued) 

www.oig.dhs.gov 9 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B (continued) 

www.oig.dhs.gov 10 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B (continued) 

www.oig.dhs.gov 11 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B (continued) 

www.oig.dhs.gov 12 OIG-18-09 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

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-16-055) 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Disaster Recovery Chief, North Dakota Department of Emergency Services 

State Auditor, North Dakota Office of the State Auditor 

Emergency Manager, Richland County, North Dakota 

www.oig.dhs.gov 13 OIG-18-09 
Additional Information and Copies 

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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on the red "Hotline" tab. If you cannot access our website, call our hotline at 

(800) 323-8603, fax our hotline at (202) 254-4297, or write to us at: 

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Attention: Hotline 

245 Murray Drive, SW 

Washington, DC 20528-0305