Hazard Mitigation Grant 

Funds Awarded to MEMA 

for the Mississippi Coastal 

Retrofit Program 

October 10, 2017 

OIG-18-01 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DHS OIG HIGHLIGHTS
 

Hazard Mitigation Grant Funds 

Awarded to MEMA for the Mississippi

Coastal Retrofit Program
 

October 10, 2017 

Why We Did 

This Audit 

MEMA received a $29.9 

million Hazard Mitigation 

grant from the Federal 

Emergency Management 

Agency (FEMA) for the state’s 

Coastal Retrofit Program 

(Program). The Program’s goal 

is to help 2,000 Mississippi 

homeowners strengthen their 

homes against wind damage 

in future disasters. We 

received complaints that 

MEMA was mishandling 

Federal funds for this 

Program. 

What We 

FEMA should disallow $29.9 

million in ineligible costs to 

MEMA unless MEMA officials 

can show they followed Federal 

regulations and FEMA 

guidelines. Since this amount was 

questioned in Management 

Advisory Report OIG-16-115-D, 

we will not question the same 

amount again. 

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 

Mississippi did not fulfill its grantee responsibility to 

ensure the Mississippi Emergency Management 

Agency (MEMA) followed applicable Federal grant 

requirements. It is FEMA’s responsibility to hold 

Mississippi accountable for proper grant 

administration. MEMA did not provide proper 

oversight of a $29.9 million Hazard Mitigation grant, 

or follow Federal regulations and FEMA guidelines 

when accounting for grant funds. As a result, FEMA 

has no assurance that MEMA properly accounted for 

and expended Federal funds. Specifically, MEMA did 

not— 

x complete the Program scope of work, 

retrofitting only 886 (44 percent) of the 

estimated 2,000 homes in the proposed 

scope; potentially depriving more than 

1,000 homeowners the opportunity to 

protect their homes from future disasters; 

x disclose, in a timely manner, a drawdown of 

Federal funds totaling $13.7 million; and 

x disallow excessive markups on prime 

contractor invoices. 

Additionally, we identified several areas of concern 

related to MEMA’s procurement practices. Although 

not required by Federal regulation but, in some cases, 

encouraged by state guidance, we believe these 

concerns are worthy of discussion. 

FEMA Response 

FEMA agreed with recommendations 1, 2, and 4. FEMA 

provided new evidence for recommendation 3. We agree with 

FEMA’s position and eliminated the finding and related 

recommendation. FEMA did not address recommendation 5. 

Appendix B includes FEMA’s written response in its entirety. 

www.oig.dhs.gov OIG-18-01 
 

 

 

 

 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

October 10, 2017 

MEMORANDUM FOR: Gracia Szczech 

Regional Administrator, Region IV 

FROM: 

Office of Audits 

SUBJECT: Hazard Mitigation Grant Funds Awarded to MEMA 

for the Mississippi Coastal Retrofit Program 

Audit Report Number OIG-18-01 

We audited Federal Emergency Management Agency (FEMA) Hazard Mitigation 

Grant Program (Hazard Mitigation) funds awarded to the Mississippi Emergency 

Management Agency (MEMA), for the state of Mississippi’s (Mississippi) Coastal 

Retrofit Program (Program). On May 3, 2011, MEMA received a $29.9 million 

Hazard Mitigation grant from FEMA. The Program’s goal is to help an estimated 

2,000 homeowners strengthen their homes against wind damages in future 

disasters. The award provided 90 percent FEMA funding. According to MEMA 

officials, MEMA spent $31.5 million in state funds and completed work on 945 

of the estimated 2,000 homes. Although MEMA asserts that it completed all 

project work as of May 31, 2015, MEMA records show that, as of October 26, 

2015, the cutoff date of our audit, it had only requested $957,776 of Program 

reimbursement costs from FEMA. We conducted this audit after receiving 

allegations of possible irregularities within the Program. 

This report is the second and final report on our audit of Hazard Mitigation 

grant funds awarded to MEMA. In August 2016, we issued a Management 

Advisory Report (Audit Report OIG-16-115-D) recommending that FEMA 

suspend all grant payments for the $29.9 million Program until Mississippi can 

properly account for Federal funds. FEMA officials agreed with our findings and 

recommendations and suspended payments until Mississippi can properly 

account for Federal funds. The scope of our audit covers August 29, 2005, 

through October 26, 2015. 

Federal Emergency Management Agency 

John E. McCoy II

 Acting Assistant Inspector General

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

On August 29, 2005, the President declared a major disaster in Mississippi for 

damages from Hurricane Katrina. Section 404(a) of the Robert T. Stafford 

Disaster Relief and Emergency Assistance Act, as amended, authorizes costeffective hazard mitigation measures that “substantially reduce the risk of 

future damage, hardship, loss, or suffering in any area affected by a major 

disaster.” As a result of Hurricane Katrina, the Federal Emergency Management 

Agency (FEMA) approved $29.9 million, with a 90 percent share of $26.9 million 

for the state of Mississippi’s Coastal Retrofit Program (Program). 

The Program’s goal is to help homeowners strengthen their homes to mitigate 

against wind damage from future disasters. FEMA approved the Program in 

May 2011. The first home retrofit started in February 2012, with plans to 

retrofit 2,000 homes in the lower 6 counties of Mississippi, with initial 

retrofitting confined to the lower 3 counties of Hancock, Harrison, and Jackson. 

Before September 2012, the Mississippi Department of Finance and 

Administration (DFA) managed the Program as a Mississippi Emergency 

Management Agency (MEMA) subgrantee. In October 2012, the Program 

transferred to MEMA. As reported in our Management Advisory Report, while 

being managed at DFA, management allowed one employee total control over 

the Program. This employee transferred to MEMA when it took over 

responsibility for the Program in October 2012. According to MEMA officials, 

this employee, while working for DFA and MEMA, approved and influenced 

other employees to process $31.5 million in payments—more than the amount 

of the grant—using state funds to retrofit 945 of the estimated 2,000 homes 

within the project’s scope. 

In February 2016, the newly appointed Executive Director of MEMA fired 

several employees, including the employee who had exercised total control over 

the Program, secured program records, and notified the Mississippi State 

Attorney General’s Office about concerns MEMA had with the administration of 

the Program. According to MEMA officials, personnel involved in the payment 

process, processed payments without following the agency’s established 

accounting procedures and, thus, created an absence of internal controls. 

Results of Audit 

Mississippi did not fulfill its grantee responsibility to ensure MEMA followed 

applicable Federal grant requirements. It is FEMA’s responsibility to hold 

Mississippi accountable for proper grant administration. MEMA did not provide 

proper oversight of a $29.9 million Hazard Mitigation grant for the Program, or 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

follow Federal regulations and FEMA guidelines when accounting for grant 

funds. Specifically, MEMA did not— 

x complete the scope of work, retrofitting only 886 (44 percent) of the 

estimated 2,000 homes in the proposed scope; potentially depriving more 

than 1,000 homeowners the opportunity to protect their homes from 

future disasters; 

x disclose, in a timely manner, a drawdown of FEMA funds totaling $13.7 

million; and 

x disallow excessive markups on prime contractor invoices. 

Additionally, although not required by Federal regulation but in some cases 

encouraged by state guidance, we identified several areas of concern relative to 

MEMA’s procurement practices that we believe are worthy of discussion. 

These issues occurred primarily because MEMA did not exercise proper 

oversight of the Program and did not comply with Federal regulations and 

FEMA guidelines. Also, FEMA did not ensure that MEMA complied with Federal 

regulations. Therefore, FEMA should take action necessary to protect against 

the improper use of Disaster Relief funds by disallowing $29.9 million in MEMA 

funding. Since this amount was questioned in Management Advisory Report OIG16-115-D, we will not question the same amount again. 

Initially we found that MEMA did not follow Federal regulations and FEMA 

guidelines when performing benefit cost analyses (BCA) to determine eligibility 

for mitigation of homes under the Program. However, after reviewing new 

evidence provided by FEMA in its official comments and our previous analysis 

of the BCA calculation, we agree that it is allowable. Therefore, we no longer 

consider this a finding. 

We acknowledge that the MEMA Executive Director has taken positive steps 

toward making the Program more transparent, but we believe additional steps 

are necessary as outlined in this report to ensure Disaster Relief funds are 

used appropriately. 

Finding A: Public Safety/Scope of Work 

MEMA did not complete the Program’s scope of work, finishing only 886 (44 

percent) of the estimated 2,000 homes in the proposed scope; thus, potentially 

depriving more than 1,000 homeowners the opportunity to protect their homes 

from future disasters. MEMA contends that it completed work on 945 homes— 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

still less than half of the 2,000 homes estimated in the project’s approved scope 

of work—and paid contractors $31.5 million for that work. This amount is $1.6 

million more than the entire $29.9 million grant. 

According to the FEMA approved scope of work, retrofitting each home against 

wind damage would cost an average $14,944 ($29.9 million divided by 2,000). 

However, according to MEMA, retrofitting the 945 homes it reported 

completing—cost an average of $33,308 ($31.5 million divided by 945), a 123 

percent increase over the original estimate (see table 1). 

Table 1: Cost Analysis of Homes Retrofitted 

$33,308 

$14,944 

$5,000 

Approved Scope of 

Work 

MEMA Costs for 

Completion 

Source: Office of Inspector General (OIG) analysis of retrofitted costs 

MEMA did not provide substantial evidence to justify the increase in costs. 

FEMA requires grant recipients to obtain prior approval from FEMA before 

implementing scope changes.1 Also, according to 44 Code of Federal 

Regulations (CFR) 13.30(d)(1) (2014)2, FEMA must approve any scope changes 

in advance regardless of the budget implications. 

1 FEMA Hazard Mitigation Grant Program Desk Reference, October 1999, at 13-12. 

2 This audit utilized the criteria in effect at the time of this program’s outset. During the audit
 

scope period, August 29, 2005 through October 26, 2015, 44 CFR 13 was superseded by 2 

CFR 200 and 3002, on an interim basis on December 19, 2014, and fully adopted November 2,
 

2015. This revision had no impact on this audit. Finally, unless otherwise noted, all CFR 

sections can be found in the 2014 edition.
 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

MEMA officials could not adequately explain why so many homes did not get 

retrofits. According to our review, prime and subcontractors records only 

support 886 (44 percent) of the 2,000 homes were completed within the scope 

of work, not the 945 MEMA contends (see table 2). As a result of mismanaging 

grant funds, MEMA potentially deprived more than 1,000 homeowners the 

opportunity to protect their homes from future disasters. Therefore, we 

recommend that FEMA disallow $29.9 million until MEMA can properly justify 

the lack of scope completion. Since this amount was questioned in Management 

Advisory Report OIG-16-115-D, we will not question the same amount again. 

Table 2: Analysis of Total Homes Retrofitted 

Retrofitted, 

886, 44% 

Not Retrofitted, 

1,114, 56% 

Source: OIG analysis of the number of homes retrofitted 

MEMA officials stated that a June 4, 2012, FEMA letter approved a scope 

change for the Program, which justifies the lesser number of homes retrofitted. 

The FEMA letter allowed MEMA to offer multiple packages and upgrades to 

applicants, which accounted for 945 packages and upgrades, not 945 homes. 

FEMA’s letter only increased the scope funding for additional retrofit options, 

such as gable sheathing and roof ridge vent protection for $555,374 in 

additional funding. FEMA, state, and local guidelines did not require the 

additional changes under current codes and standards. MEMA changed the 

project’s scope to conform to recent changes allowed by the Mississippi Wind 

Underwriting Association to reduce applicants’ insurance premiums. However, 

the original 2,000 homes estimate scope of work did not change. The June 4, 

2012, FEMA letter states “all terms, conditions, and provisions of the Grant 

Agreement Articles tendered as part of the original Grant Award and any 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

subsequently approved changes remain in effect except as previously amended 

and amended herein.” 

Finding B: Failure to Timely Report Federal Funds Received 

MEMA did not report a drawdown of Federal funds totaling $13.7 million to 

FEMA until 19 months had passed. Specifically, in March 2015, MEMA 

withdrew $13.7 million from a Federal account and did not report the funds on 

project quarterly financial FEMA reports or orally notify FEMA, or properly 

update a state disaster accounting system, until October 2016. 

According to 44 CFR 13.20(a)(2) , grantees and subgrantees must maintain 

accounting procedures that permit tracing of funds to a level of expenditures 

adequate to establish that such funds have not been used in violation of the 

restrictions and prohibitions of applicable statutes. Additionally, 44 CFR 

13.20(b)(2), requires grantees and subgrantees to maintain records that 

adequately identify the source and application of funds provided for financiallyassisted activities. These records must contain information pertaining to grant 

or subgrant awards and authorizations, obligations, unobligated balances, 

assets, liabilities, outlays or expenditures and income. Processes were in place 

to provide oversight. Nonetheless, MEMA did not update FEMA project 

quarterly reports and a state accounting system, thereby increasing the risk for 

misuse, abuse, and misstatement of Program costs. 

Federal Smartlink Account 

Smartlink drawdowns are not tied to specific projects; therefore, FEMA officials 

had no knowledge of the $13.7 million drawdown and have acknowledged that 

fact. Recent updates to the Smartlink system require new disasters drawdowns 

to link to specific projects. The Program in question predates that system 

update. 

FEMA obligates funding on projects for grantees and subgrantees, and this 

funding is made available via the Department of Health and Human Services 

Smartlink electronic payment system. A drawdown from Smartlink is initiated 

by the grantee based on documentation received from a subgrantee requesting 

payment. In the case of Mississippi, funds are transferred from Smartlink to 

the Mississippi State Treasury before payments are made to subgrantees. 

MEMA then notifies the State Treasury of the subgrantee and the amount to 

pay. The State Treasury makes payments either electronically or by issuing 

checks. MEMA officials contend that, since FEMA has access to Smartlink, 

FEMA officials were aware of the drawdown for the Program. MEMA withdrew 

two payments totaling $13.7 million ($4.7 million and $9.0 million) from 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Smartlink in March 2015 in support of the Program without following its own 

internal procedures of validating contractor invoices for eligibility and support. 

We became aware of the two drawdowns in July 2016 and validated that the 

Mississippi State Treasury received both drawdowns through Smartlink on 

March 23, 2015. A key MEMA hazard mitigation official who worked with the 

Program in March 2015 and is still employed with MEMA was notified of 

receiving the $13.7 million on June 12, 2015. 

FEMA Quarterly Status Reports 

MEMA did not report a drawdown of $13.7 million in almost seven quarterly 

status reports to FEMA, as required by Federal guidance.3 Since taking 

responsibility for the Program in September 2012, MEMA had only reported 

$957,776 of Smartlink drawdowns to FEMA as of October 2016, although it 

had drawdown $13.7 million in March 2015. MEMA did not orally report the 

drawdown to FEMA or include it on quarterly status reports to FEMA until 19 

months later. MEMA officials said that their required quarterly Federal 

Financial Report to FEMA, dated April 29, 2015, which identifies summary 

grant financial data under Hurricane Katrina (FEMA Disaster Number 1604) for 

the entire state, should suffice for reporting the $13.7 million. However, that 

report does not identify financial data at the project level. 

MEMA officials said they reported the drawdown to FEMA in October 2016 after 

they became aware of it in August 2016 during an unofficial internal audit they 

conducted of the Program. They said that no one had knowledge of the $13.7 

million before August 2016 because of the firing of personnel associated with 

the Program. Nevertheless, evidence shows that an employee still employed 

with MEMA in a key Hazard Mitigation position was involved in planning to 

withdraw $17.0 million in December 2014. This same employee also received 

notification of the $13.7 million drawdown that the Mississippi State Treasury 

made in Smartlink in March 2015. Yet, 19 months elapsed, almost seven 

quarterly status reports, before MEMA reported the $13.7 million to FEMA. 

Further, in June 2016, our office began biweekly meetings with MEMA and 

FEMA to discuss the status of documentation to support the $31.5 million that 

MEMA contends it spent to retrofit 945 homes. MEMA officials did not notify 

FEMA or us of the unreported $13.7 million in drawdowns during these 

meetings. We also learned that MEMA planned to drawdown an additional 

estimated $20.0 million after validating supporting documentation. The $20.0 

million represents the estimated subcontractor cost (see finding D). Due to the 

3 Grant recipients are required to provide quarterly financial reports to FEMA concerning the 

financial status of each project in accordance with FEMA Hazard Mitigation Grant Program Desk 

Reference, October 1999 at 13-11 (hereinafter “HMGP”). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

lack of Federal oversight of the $13.7 million, MEMA would have drawn $5.7 

million more than the Federal share amount (see table 3). 

Table 3: Analysis of Actual/Planned Smartlink Drawdowns 

Drawdowns 

Total Amount 

Claimed 

Federal Share 

(90 Percent) 

Reported Drawdown $ 1,064,196 $ 957,776 

Unreported Drawdown 15,179,109 13,661,198 

Planned Drawdown 20,000,000 18,000,000 

Total Actual/Planned Drawdowns $36,243,305 $32,618,974 

Obligated Amount $29,888,707 $26,899,836 

Potential Overdrawn Amount $ 6,354,598 $ 5,719,138 

Source: OIG analysis of MEMA’s actual and planned drawdowns 

According to FEMA officials, when MEMA finally notified them in October 2016 

of the drawdown, FEMA established a system to ensure MEMA provided 

adequate documentation supporting the $13.7 million before allowing any 

additional drawdowns. 

State Disaster Accounting System 

MEMA did not update its state disaster accounting system to reflect a 

drawdown of $13.7 million of Federal funds. Mississippi has a state disaster 

Hazard Mitigation system used to track funds associated with Federal 

disasters. The system tracks Federal funds paid to subgrantees via drawdowns 

from the Smartlink system. According to MEMA officials, the state system is 

updated after confirmation of payments to subgrantees. MEMA received two 

payments of $4.7 million and $9.0 million, totaling $13.7 million in March 2015 

from the Smartlink system. Yet, for 12 months, MEMA officials did not update 

the state accounting system. MEMA officials could not provide a reason why 

they did not update the system. 

Summary 

Because MEMA did not timely report $13.7 million in total drawdowns received 

from Smartlink for the Program in its required FEMA quarterly reports and did 

not update the state accounting system for such drawdowns, MEMA could 

have received $5.7 million in excess Federal funds, thus increasing the risk for 

misuse, abuse, and misstatement of Program costs. Therefore, FEMA has no 

reasonable assurance that MEMA properly accounted for and expended 

Program costs in accordance with Federal regulations and FEMA guidelines. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Finding C: Ineligible Benefit Cost Analysis 

After the exit conference, in their official comments, FEMA provided new 

evidence of Hazard Mitigation Assistance Program guidance dated June 19, 

2008, in place prior to the Program start of May 2011 to support the use of 

BCA aggregation. After reviewing the new evidence and our previous analysis of 

the BCA aggregation calculation, we agree that BCA aggregation is allowable. 

Although the June 2008 guidance was not in place prior to the August 2005 

disaster, it was in place prior to approval of the Program in May 2011. Finally, 

our review of documentation of the BCA calculation revealed that it is 

adequately documented and FEMA used the correct methodology. We no longer 

consider this a finding. 

Finding D: Excessive Prime Contractor Markup Costs 

Our review found, and MEMA acknowledges, the Program possibly paid 

excessive markups to the prime contractor. MEMA officials requested that we 

not review contractor invoices until it completes a costs review because of 

potential problems within the Program. Therefore, we did not review $30.5 

million of the contractor’s invoices. MEMA’s invoice review is ongoing and their 

officials are reporting there is a prime contractor markup of subcontractors’ 

costs of an estimated 25 percent. Therefore, MEMA is planning to only request 

reimbursement of the subcontractor’s costs, estimated at $20.0 million. In our 

opinion, this is a good strategy based on the uncertainty of the prime 

contractor’s markup of subcontractors’ costs. Our limited analysis of summary 

cost documentation provided by subcontractors and the prime contractor 

shows an estimated 26 percent markup of subcontractors’ costs ($24.9 million, 

prime contractor; minus $19.7 million, subcontractors; divided by $19.7 

million subcontractors). 

FEMA’s Cost Estimating Format provides guidance for overhead, insurance and 

bonds, and profit. Section D.1 of that document states a value of 7.7 percent 

for home office overhead costs, and Section D.2 a factor of 3.3 percent 

insurance, payment, and performance bonds. Table D.3, General Contractor’s 

Profit, estimates a profit of 3 percent for a retrofit project in excess of $10.0 

million. Therefore, guidance indicates an estimated total markup of 14 percent 

as reasonable. According to 44 CFR 13.36(f)(4) , the use of cost-plus-apercentage-of-cost contracts and percentage-of construction cost are prohibited 

because they provide no incentive for contractors to control costs—the more 

contractors charge, the greater the profit. 

Since MEMA has acknowledged the Program paid possible excessive markups 

to the prime contractor and taken action by only requesting FEMA 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

reimbursement of subcontractor’s costs, we are not questioning any prime 

contractor markups above the recommended FEMA guidance estimate of 14 

percent. However, we recommend that FEMA closely monitor any future MEMA 

claims to ensure subcontractor markup costs are not excessive. 

Finding E: Procurement Concerns 

We identified several areas of concern relative to MEMA’s procurement 

practices that we believe are worthy of discussion concerning contracts valued 

at $29.9 million awarded for work under Project 485. Specifically, MEMA did 

not take recommended state affirmative steps to use disadvantaged firms, 

monitor contractors’ work to ensure performance, and allowed a contract 

contingency clause based on the receipt of Federal funds. According to 44 CFR 

13.36 (a), “When procuring property and services under a grant, a State will 

follow the same policies and procedures it uses for procurements from its nonFederal funds.” This criterion alleviated MEMA from the necessity to follow 

certain Federal requirements since it is a state agency. However, since 

procurement requirements at 44 CFR 13.36 are good procurement practices, 

MEMA should strongly consider these practices in the future. Since MEMA is 

not required to comply with these Federal requirements, we are not questioning 

any funds. Although MEMA stated that DFA was in control of the program 

when these procurement decisions were made, MEMA, as grantee, was 

responsible for management and oversight of the grant. 

Disadvantaged Firms 

MEMA did not follow its state-encouraged affirmative steps to use minority 

firms, women’s business enterprises, and labor surplus area firms when 

possible for contract work valued at $29.9 million. As stated by MEMA officials, 

the State of Mississippi encourages state agencies to solicit minority and 

women-owned businesses. Additionally, the state has an agency, the 

Mississippi Procurement Technical Assistance Program, which operates as a 

bureau in the Mississippi Development Authority Minority and Small Business 

Development Division that promotes procurement outreach to minority firms, 

women’s business enterprises, and small businesses. Finally, the purpose of 44 

CFR 13.36(e) (1) concerning disadvantaged firms is to comply with Federal laws 

and is a continuing focus by Congress, and we strongly recommend that MEMA 

follow its state-encouraged guidance concerning disadvantaged firms. 

Contract Administration-Monitoring 

MEMA did not properly monitor the work the contractors performed to ensure 

performance in accordance with the terms, conditions, and specifications of the 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

contract. Instead, the prime contractor monitored the work performed by its 

subcontractors. Therefore, the prime contractor performed and monitored its 

own work. MEMA paid the prime contractor $425,250 to monitor its own work. 

Lack of monitoring to ensure performance in accordance with contract terms 

and conditions can result in misuse and abuse of funds. MEMA contends it 

monitored the work performed by the contractors from its office on the Gulf 

Coast; however, MEMA could not provide any documentation such as site visits 

or photos supporting adequate monitoring. Good monitoring ensures 

contractors perform in accordance with the terms, conditions, and 

specifications of the contract. 

Contract Contingency Clause 

MEMA’s $29.9 million contract and request for proposal (RFP) included the 

following statement: “It is expressly understood and agreed that the obligation 

of the Mississippi Department of Finance (subgrantee at contract initiation) to 

proceed under this agreement is conditioned upon the appropriation of funds 

by the Mississippi State Legislature and the receipt of state and/or federal 

funds.” MEMA allowed inclusions of contingent language in both the prime 

contract and the RFP. While Public Assistance Guide, FEMA-322, October 1999, 

at 40, would render such a contingency ineligible on a public assistance 

project, there is no corresponding prohibition in HMGP guidance. However, in 

our opinion, the intent of the Federal guidance is to prevent potential legal 

actions by contractors against the Federal Government or the grantee and 

subgrantee if obligated funds are found to be ineligible and not payable to 

contractors. Therefore, to promote consistency in its programs, FEMA should 

encourage MEMA, and other state emergency management agencies, to avoid 

the inclusion of contingency clauses in Hazard Mitigation contracts. 

Summary 

Although not required by Federal regulations but sometimes encouraged by 

state guidance, we identified several areas of concern relative to MEMA’s 

procurement practices concerning awarding contracts valued at $29.9 million. 

Therefore, FEMA has no assurance that disadvantaged firms had sufficient 

opportunities to bid on federally funded work. Additionally, the lack of 

monitoring and the inclusion of a contingency clause increased the risk of 

unreasonable costs, favoritism, collusion, fraud, waste, and mismanagement of 

Federal funds. We are not questioning any funds or providing any 

recommendations; however, we urge FEMA to encourage MEMA to consider 

these good procurement practices when awarding future Hazard Mitigation 

contracts. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Finding F: Grant Management 

Mississippi did not fulfill its grantee responsibility to ensure the Program 

followed applicable Federal regulations. The nature and extent of issues we 

identified concerning public safety, failure to timely report Federal funds, 

ineligible benefit cost analysis, excessive prime contractor costs, and good 

procurement practices demonstrate that Mississippi should have been more 

thorough in overseeing the Program. Federal regulations required grantees to 

(1) ensure that subgrantees are aware of Federal regulations, (2) manage the 

operations of subgrant activity, and (3) monitor subgrant activity to ensure 

compliance.4 

The present Executive Director of MEMA was appointed in February 2016. The 

Director acknowledged that the Program was not managed properly and lacked 

transparency before he arrived; however, he stated he has taken actions to 

correct those problems. We acknowledge that the Director has taken positive 

steps toward making the Program more transparent by removing control of the 

Program by one individual and having discussions with us and FEMA. Within 

the report, we acknowledge these actions. However, our audit covers August 

29, 2005, through October 26, 2015, and we had already identified the lack of 

management and transparency before February 2016. Accordingly, we are 

providing recommendations to address those findings. 

In addition, after requesting documentation for $30.5 million of contractor’s 

invoices as early as October 2015, MEMA officials only allowed us a partial 

review of those documents in September 2016. MEMA has also only allowed us 

limited access to its personnel and did not disclose, in a timely manner, a 

drawdown of Federal funds totaling $13.7 million to Federal officials. 

This is a unique situation since the state representative as the grantee is also 

the subgrantee and should not monitor itself. Therefore, FEMA should provide 

additional technical assistance and monitoring of the Program to ensure 

compliance with all Federal requirements. 

Recommendations 

We recommend that the Regional Administrator, FEMA Region IV: 

Recommendation 1: Disallow $29.9 million (Federal share $26.9 million) of 

ineligible costs until MEMA can properly justify why the scope of work was not 

4 44 CFR 13.37(a)(2) and 44 CFR 13.40(a). 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

completed in accordance with terms of the grant. Since this amount was questioned in 

Management Advisory Report OIG-16-115-D, we will not question the same 

amount again (finding A). 

Recommendation 2: Direct Mississippi to comply with Federal accounting 

regulations and FEMA guidelines so that funds are accounted for accurately, 

easily traced to support, and reported in a timely manner (finding B). 

Recommendation 3: Prior to issuance of this report, we determined that there 

was not a finding (finding C). The recommendation remains to allow proper 

tracking with FEMA’s response (see appendix B). 

Recommendation 4: Closely monitor any future MEMA reimbursements for 

subcontractor markup claims to ensure compliance with Hazard Mitigation 

requirements and cost eligibility (finding D). 

Recommendation 5: Provide additional technical assistance and monitoring 

to Mississippi to correct the deficiencies we identified in this report and to 

ensure compliance with grant requirements (finding F). 

Discussion with Management and Audit Follow-up 

We discussed the results of our audit with Mississippi and FEMA officials 

during our audit. We also provided a draft report in advance to these officials 

and discussed it at the exit conference on March 31, 2017. Mississippi officials 

disagreed with our findings, but agreed with four of our five recommendations 

(recommendations 1, 2, 4, and 5), while it did not concur and deferred to FEMA 

on recommendation 3. We included the officials’ comments, as applicable, in 

the body of the report. 

The Office of Emergency Management Oversight major contributors to this 

report are Larry Arnold, Director; John Skrmetti, Audit Manager; Mary James, 

Auditor-in-Charge; Alfonso Dallas, Auditor; J Dixon, Auditor; Rickey Smith, 

Auditor; Sean Forney, Auditor; and John Schmidt, 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 

Larry Arnold, Director, Gulf Coast Regional Office, at (228) 822-0387. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Evaluation of Management Comments 

On April 27, 2017, we received FEMA’s written comments response to this 

report (see appendix B). FEMA agreed with recommendations 1, 2, and 4, but 

did not agree with recommendation 3 and provided new evidence supporting its 

position. FEMA did not address recommendation 5. 

Based on FEMA’s proposed or actions taken, we agree with FEMA on 

recommendations 1, 2, 3, and 4. For recommendation 3, FEMA provided new 

evidence to support its position. After reviewing the new evidence and our 

previous analysis of the BCA aggregation calculation, we agree that it is 

allowable. Therefore, we consider recommendations 1, 2, and 4 resolved and 

open; recommendation 3 resolved and closed; and recommendation 5 

unresolved and open. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

We audited Hazard Mitigation grant funds awarded to MEMA (FIPS 

Identification Number 000-U0220-00). Our audit objective was to determine 

whether Mississippi accounted for and expended Hazard Mitigation grant funds 

according to Federal regulations and FEMA guidelines. We only reviewed 

documentation supporting $957,776 in cost because MEMA officials only 

allowed us partial access, starting September 2016, to contractor invoices until 

they performed an internal audit of the documents and limited access to MEMA 

employees. Due to time constraints, we could not wait until MEMA completed 

its review. Therefore, this report cannot make any conclusions on the validity of 

the support of $30.5 million in expenditures MEMA contends it paid to 

contractors. 

As of October 26, 2015, MEMA received a Hazard Mitigation grant award of 

$29.9 million (net) for damages resulting from FEMA Disaster Number 1604-

DR-MS that occurred in August 29, 2005. The audit covered the period August 

29, 2005, through October 26, 2015, the cutoff date of our audit and provided 

90 percent funding for Project 485 under the Hazard Mitigation Program. 

To accomplish our objective, we interviewed FEMA, Mississippi, and MEMA 

officials; gained an understanding of MEMA’s method of accounting for 

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

applicable Federal regulations and FEMA guidelines; performed an analysis of 

the BCA type and calculation; and performed other procedures considered 

necessary under the circumstances to accomplish our audit objective. 

Although we reviewed MEMA’s method of accounting for disaster-related costs 

and its procurement policies and procedures, we did not perform a detailed 

assessment of all of MEMA’s internal controls over its grant activities. 

We conducted this performance audit between October 2015 and March 2017, 

under the authority of 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 conducted this audit by applying 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 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

FEMA’s Response to Report 

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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 IV 

Audit Liaison, FEMA (Job Code G-17-002) 

Office of Management and Budget 

Chief, Homeland Security Branch DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

External 

Executive Director, Mississippi Emergency Management Agency 

State Auditor, Mississippi 

FEMA Coordinator, Mississippi Emergency Management Agency 

www.oig.dhs.gov 24 OIG-18-01 
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. 

OIG Hotline 

To report fraud, waste, or abuse, visit our website at www.oig.dhs.gov and click 

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: 

Department of Homeland Security 

Office of Inspector General, Mail Stop 0305 

Attention: Hotline 

245 Murray Drive, SW 

Washington, DC 20528-0305