Dhs OIG 25 13 Fema Needs To Improve Oversight Of Covid 19 Emergency Protective Measures Grants
Summary
Final audit report OIG-25-13, issued January 30, 2025 by the U.S. Department of Homeland Security Office of Inspector General and transmitted by Inspector General Joseph V. Cuffari to FEMA. The report finds that FEMA over-obligated at least $1.5 billion for one state's COVID-19 medical staffing grant and did not determine the cost allowability of $8.1 billion drawn down by that state. It reports approximately $32.8 million in improper payments in a sample of 20 other grants and states that FEMA did not issue determination memorandums when denying or reducing reimbursement requests, as required. A table lists obligations on the medical staffing project totaling $9,053,782,360 after a de-obligation of $500 million on April 21, 2023. The report makes seven recommendations, with which FEMA concurred, and includes appendices on methodology and FEMA's comments.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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OIG-25-13 January 30, 2025
FINAL REPORT
FEMA’s Insufficient Oversight of COVID-19 Emergency
Protective Measures Grants Led to Over $8.1 Billion in
Questioned Costs and $1.5 Billion in Over-obligated
Funds
OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
Washington, DC 20528 | www.oig.dhs.gov
January 30, 2025
MEMORANDUM FOR: Cameron Hamilton
Senior Official Performing the Duties of
FEMA Administrator
FROM: Joseph V. Cuffari, Ph.D.
Inspector General
SUBJECT: FEMA’s Insufficient Oversight of COVID-19 Emergency Protective
Measures Grants Led to Over $8.1 Billion in Questioned Costs and
$1.5 Billion in Over-obligated Funds
Attached for your action is our final report, FEMA’s Insufficient Oversight of COVID-19 Emergency
Protective Measures Grants Led to Over $8.1 Billion in Questioned Costs and $1.5 Billion in Over-
obligated Funds. We incorporated the formal comments provided by your office.
The report contains seven recommendations aimed at improving FEMA’s oversight of COVID-19
emergency protective measures grants. Your office concurred with all seven of the
recommendations. Based on the information provided in your response to the draft report, we
consider recommendations 1, 4, 5, 6, and 7 open and resolved. Once your office has fully
implemented the recommendations, please submit a formal closeout letter to us within 30 days
so that we may close the recommendations. The memorandum should be accompanied by
evidence of completion of agreed-upon corrective actions and of the disposition of any monetary
amounts.
We consider recommendations 2 and 3 open and unresolved. As prescribed by Department of
Homeland Security Directive 077-01, Follow-Up and Resolutions for the Office of Inspector
General Report Recommendations, 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 responsible parties and any other supporting documentation necessary to inform us
about the current status of the recommendation. Until your response is received and evaluated,
the recommendations will be considered open and unresolved.
Please send your response or closure request to OIGAuditsFollowup@oig.dhs.gov.
Consistent with our responsibility under the Inspector General Act, we will provide copies of our
report to congressional committees with oversight and appropriation responsibility over the
OIG Project No. 22-047-AUD-FEMA
Department of Homeland Security. We will post the report on our website for public
dissemination.
Please contact me with any questions, or your staff may contact Kristen Bernard, Deputy
Inspector General of Audits, at (202) 981-6000.
Attachment
Office of Inspector General
U.S. Department of Homeland Security | Washington, DC 20528 | www.oig.dhs.gov
2
DHS OIG HIGHLIGHTS
FEMA’s Insufficient Oversight of COVID-19 Emergency
Protective Measures Grants Led to Over $8.1 Billion in Questioned
Costs and $1.5 Billion in Over-obligated Funds
January 30, 2025 What We Found
During fiscal years 2020 through 2023, recipients and
Why We Did This subrecipients of the Federal Emergency Management Agency’s
(FEMA) COVID-19 emergency protective measures grants we
Audit reviewed received Federal funds as intended. However, FEMA
over-obligated at least $1.5 billion in funds for one state’s
Through its Public Assistance medical staffing grant and did not determine the cost
Program, FEMA provides Federal allowability of the $8.1 billion in funds drawn down by the state.
funding to reimburse communities Additionally, we reviewed a sample of 20 other grants and
for disaster response and recovery identified approximately $32.8 million in improper payments.
projects. These projects may include Finally, FEMA did not issue determination memorandums when
emergency protective measures denying or reducing reimbursement requests, as required.
undertaken to save lives or protect
public health or safety. FEMA These issues occurred due to the unprecedented circumstances
administers COVID-19 pandemic surrounding the COVID-19 pandemic and FEMA not following
recovery measures as part of its established requirements when delivering Public Assistance
disaster response mission. We funding. For example, for the medical staffing grant, FEMA did
conducted this audit to determine not validate the reasonableness of cost estimates provided by
whether FEMA ensured Federal funds the state before obligating funds. Further, FEMA experienced
for COVID-19 emergency protective delays in its improper payment reviews of the state’s expended
measures reached intended funds due to an increased workload from COVID-19 and other
recipients and subrecipients and major disasters. FEMA also delayed taking action to recoup
were used as required. unsupported costs it identified in its improper payment reviews
and instead worked with the state to maximize reimbursements
during the review process.
What We
Recommend Insufficient oversight of the Public Assistance grants resulted in
FEMA obligating $1.5 billion in funds that could have been put to
better use for other disasters, disbursing $8.1 billion in
We made seven recommendations to questioned costs that have yet to be determined allowable, and
improve FEMA’s oversight of making $32.8 million in improper payments.
reimbursements for COVID-19
emergency protective measures
projects. FEMA Response
For Further Information: FEMA concurred with all seven recommendations.
Contact our Office of Public Affairs at
(202) 981-6000, or email us at:
DHS-OIG.OfficePublicAffairs@oig.dhs.gov.
www.oig.dhs.gov OIG-25-13
OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
Table of Contents
Background .......................................................................................................................................... 1
FEMA Public Assistance Program ............................................................................................ 1
Results of Audit .................................................................................................................................... 2
FEMA Over-obligated at Least $1.5 Billion to One State for a Medical Staffing Grant .......... 3
FEMA Has Not Determined Cost Allowability of $8.1 Billion in Funds Drawn Down by One
State .......................................................................................................................................... 7
FEMA Did Not Validate Actual Costs before Reimbursement on Completed Projects
Totaling $32.8 Million ............................................................................................................... 9
FEMA Inconsistently Issued Determination Memorandums when Denying or Reducing
Reimbursement Requests ..................................................................................................... 10
Subsequent Event .............................................................................................................................. 10
Recommendations ............................................................................................................................. 10
Management Comments and OIG Analysis ....................................................................................... 11
Appendix A: Objective, Scope, and Methodology ............................................................................. 15
DHS OIG’s Access to DHS Information................................................................................... 16
Appendix B: FEMA’s Comments on the Draft Report ........................................................................ 17
Appendix C: Potential Monetary Benefits ......................................................................................... 27
Appendix D: Project Worksheets with Missing Support Documentation ........................................ 28
Appendix E: Office of Audits Major Contributors to This Report ...................................................... 29
Appendix F: Report Distribution ........................................................................................................ 30
Abbreviations
C.F.R. Code of Federal Regulations
FEMA Federal Emergency Management Agency
U.S.C. United States Code
VAYGo Validate As You Go
www.oig.dhs.gov OIG-25-13
OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
Background
In March 2020, the President declared a nationwide emergency because of the COVID-19
pandemic. The Federal Emergency Management Agency (FEMA), using its authority under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as amended,
approved major disaster declarations to state, local, territorial, and tribal governments.1 In
addition, Congress passed two primary laws in response to the COVID-19 pandemic. The
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)2 was a $2.2 trillion economic
stimulus plan signed into law on March 27, 2020. Additionally, The American Rescue Plan Act of
20213 was a $1.9 trillion economic stimulus plan signed into law on March 11, 2021. FEMA
received about $45 billion in CARES Act funding and more than $50 billion from the American
Rescue Plan Act. By the end of fiscal year 2023, FEMA had obligated about $69 billion to fund
COVID-19 recovery measures.
The Stafford Act allows state, local, territorial, and tribal governments, and some private
nonprofit applicants, to apply for reimbursement of eligible essential assistance, also known as
emergency protective measures, that they provided in response to the COVID-19 disaster at the
direction or guidance of public health officials. Emergency protective measures save lives or
protect public health or safety. These measures are generally short-term, lasting less than 6
months, but FEMA can authorize extensions.4 Some emergency protective measures approved in
response to COVID-19 included meals for high-risk individuals, emergency medical care, and
non-congregate medical sheltering.
FEMA Public Assistance Program
FEMA funds emergency protective measures projects through its Public Assistance Program.
Public Assistance is a reimbursement program that provides Federal funding to help
communities respond to and recover from disasters. FEMA must determine whether the
applicant, facility, scope of work, and cost for all Public Assistance projects are eligible for
reimbursement before approving and obligating funds. Federal regulations require FEMA to use
a project worksheet to document the location, damage description and dimensions, scope of
work, and cost estimate for each project. All costs must be adequately documented.5
During the COVID-19 pandemic, FEMA implemented a streamlined project application process
that allowed recipients to receive 100 percent of the funding for emergency protective measures
1
FEMA P-592, Stafford Act, as Amended, and Related Authorities Homeland Security Act, as amended (Emergency
Management-related Provisions), May 2019.
2
Coronavirus Aid, Relief, and Economic Security Act, Public Law 116-136, 116th Congress, March 27, 2020.
3
American Rescue Plan Act of 2021, Public Law 117-2, 117th Congress, March 11, 2021.
4
44 Code of Federal Regulations (C.F.R.) § 206.204(c)(2)(ii).
5
2 C.F.R. § 200.403(g).
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
projects based on cost estimates instead of actual costs. The cost estimates needed to include,
at a minimum, a unit cost breakdown so FEMA could validate the estimates and determine cost
reasonableness.
FEMA’s four Consolidated Resource Centers review applicant-provided documentation and
develop and validate the scope of work and costs for the projects. FEMA uses one of two primary
project formulation processes, depending on the complexity of the project and the skillsets
needed to develop it: (1) completed projects and (2) standard or specialized projects. The
primary difference between the two types of projects is whether the work is complete and actual
cost information is available. Awards for completed projects are based on actual costs, while
awards for standard or specialized projects can be based on estimated costs.
Validate As You Go (VAYGo) is a payment review process for projects that enables FEMA to
validate Public Assistance grant recipients’ use of funds throughout their projects’ life
cycles. FEMA launched VAYGo as a pilot program in February 2019 and expanded the
applicability of VAYGo to disasters declared in FY 2020, including COVID-19 declarations. VAYGo
is an incremental reconciliation process that involves validating post-payment actual costs
shortly after the actual expenditures occur instead of waiting until years later after the project is
completed. Through VAYGo, FEMA validates grant recipients’ use of funds throughout the post-
award phase instead of waiting until closeout. Using the Probability Proportional to Size
sampling6 method, FEMA samples disaster drawdowns from the previous quarter for payment
integrity testing. According to FEMA, the goal of the VAYGo process is to provide reliable
assurance that grant recipients and subrecipients maintain complete and compliant payment
documentation that adheres to Federal regulations and FEMA policy.
We conducted this audit to determine whether FEMA ensured Federal funds for COVID-19
emergency protective measures reached intended recipients and subrecipients and were used as
required.
Results of Audit
During fiscal years 2020 through 2023, recipients and subrecipients of the Federal Emergency
Management Agency’s (FEMA) COVID-19 emergency protective measures grants we reviewed
received Federal funds as intended. However, FEMA over-obligated at least $1.5 billion in funds
for one state’s medical staffing grant and did not determine the cost allowability of the $8.1
billion in funds drawn down by the state. Additionally, we reviewed a sample of 20 other grants
and identified approximately $32.8 million in improper payments. Finally, FEMA did not issue
determination memorandums when denying or reducing reimbursement requests, as required.
6
Probability Proportional to Size sampling means that the probability of selecting each item (disbursement) in the
sample is directly proportional to its size (dollar amount) in the population.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
These issues occurred due to the unprecedented circumstances surrounding the COVID-19
pandemic and FEMA not following established requirements when delivering Public Assistance
funding. For example, for the medical staffing grant, FEMA did not validate the reasonableness
of cost estimates provided by the state before obligating funds. Further, FEMA experienced
delays in its improper payment reviews of the state’s expended funds due to an increased
workload from COVID-19 and other major disasters. FEMA also delayed taking action to recoup
unsupported costs it identified in its improper payment reviews and instead worked with the
state to maximize reimbursements during the review process. Insufficient oversight of the Public
Assistance grants resulted in FEMA obligating $1.5 billion in funds that could have been put to
better use for other disasters, disbursing $8.1 billion in questioned costs that have yet to be
determined allowable, and making $32.8 million in improper payments.
FEMA Over-obligated at Least $1.5 Billion to One State for a Medical Staffing
Grant
As of April 2023, FEMA obligated at least $1.5 billion more than actual expenditures to one state’s
COVID-19 emergency protective measures grant. We selected this grant for review, in addition to
20 others selected randomly, because it represented $9.6 billion (approximately 14 percent) of
the $69 billion FEMA had obligated nationwide by the end of FY 2023 for COVID-19 emergency
protective measures. The unliquidated obligations cumulatively remained above $1.5 billion for
2 years. In April 2023, FEMA officials de-obligated $500 million after our discussion about the
high balance of unliquidated obligations. As of April 2024, the project’s unliquidated obligations
remain at approximately $1 billion that will have to be reconciled as the project reaches
maturity.
In September 2020, FEMA awarded an emergency protective measures project for the same state,
totaling approximately $853 million, to initially address medical staffing shortages at 236
healthcare facilities statewide. The state provided the funding to a subrecipient, who in turn,
awarded three time-and-materials contracts for contractors to provide needed medical staff. In
just over a year, FEMA increased the obligations to approximately $9.6 billion through project
modifications, known as versions, as shown in Table 1 below. This project is one of only two
FEMA standard projects for which the project worksheet documents more than $1.5 billion in
obligations. In fact, funding for this project accounted for approximately 13 percent of the funds
FEMA approved and obligated from the Disaster Relief Fund for COVID-19 as of September 30,
2023.
www.oig.dhs.gov 3 OIG-25-13
OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
Table 1. State Medical Staffing Project Worksheet Obligation Amounts
Version Amount of Obligation Date of Obligation
0 $853,255,368 09/29/2020
1 $0 10/21/2020
2 $2,542,357,177 01/28/2021
3 $1,131,870,849 03/31/2021
4 $2,706,758,485 05/28/2021
5 $2,319,540,481 12/27/2021
6 $0 01/04/2022
7 $0 03/15/2022
8 $0 11/30/2022
Subtotal
$9,553,782,360 N/A
(0-8)
9 -$500,000,000 04/21/2023
Total $9,053,782,360 N/A
Source: Developed by the Department of Homeland Security Office of Inspector General based
on FEMA data
As a standard grant where work had not already been completed, the obligation was based on an
estimate of future costs. Per FEMA’s Public Assistance Program and Policy Guide,7 FEMA can
accept estimated costs from the grantee if the estimate:
• is prepared by a licensed Professional Engineer or other estimating professional, such as
a licensed architect or certified professional estimator who certifies that the estimate was
prepared in accordance with industry standards;
• includes certification that the estimated cost directly corresponds to the repair of the
agreed-upon damage;
• is based on the unit costs for each component of the scope of work and not on a lump
sum amount;
• contains a level of detail sufficient for FEMA to validate that all components correspond
with the agreed-upon scope of work; and
• is reasonable.
7
FP 104-009-2, Public Assistance Program and Policy Guide, April 2018 (page 138 of 206).
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
FEMA must determine the reasonableness of the estimated costs by looking at historical
documentation (for completed work), using average area costs, or relying on published cost-
estimating services. Once funding is obligated, FEMA must review all open obligation balances to
monitor the validity of the obligations. Specifically, FEMA must determine whether open
obligation balances are accurate; are properly recorded; and contain sufficient, readily available
supporting documentation.8
As shown in Figure 1, the unliquidated obligations for the medical staffing grant cumulatively
remained above $1.5 billion for 2 years. From May 2021 through April 2023, the project had
consecutive unliquidated obligations ranging from $1.5 billion to almost $4 billion.
Figure 1. Unliquidated Obligation Totals from August 2020 through August 2023
Source: DHS OIG compilation from FEMA data
The over-obligation of funds occurred because FEMA did not validate cost estimates or
determine cost reasonableness before obligating funds for the medical staffing grant. FEMA did
not:
• require an itemized budget estimate that included unit prices broken down by the type
and number of resources necessary to complete the work;
8
FEMA Directive #125-3, Review and Certification of Open Obligations, Rev. 2, December 10, 2020.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
• document in its official system of record the required review of the cost estimates for
accuracy and proper supporting documentation before making obligations; and
• validate cost estimates provided by the recipient and ensure they were prepared by an
estimating professional who could certify the estimates were prepared using industry
standards.
For example, the first cost estimate totaling approximately $1.1 billion for this project was
supported by one sheet of paper with no itemized costs and was not prepared by a licensed
Professional Engineer or cost-estimating professional. Due to the unprecedented nature of the
COVID-19 pandemic, FEMA initially had limited historical data to reference. Cost estimates for
subsequent obligations did not contain sufficient information to validate actual costs incurred
from the previous obligations for the project. Validation of the cost estimate is a critical pre-
award control because it sets the boundaries around the grant and establishes the obligation
amount. FEMA officials stated that they relied on the subrecipient to develop the cost estimates.
However, the cost estimates were not developed by a professional cost estimator as required by
FEMA guidance. FEMA’s inadequate validation of pre-award costs for the state’s medical staffing
project contributed to $1.5 billion in funds that could have been put to better use (see Appendix
C). Had the $1.5 billion not been over-obligated to this project, it could have been transferred to
the Disaster Relief Fund and made available to provide funding for other disasters.
Citing the low balance of the Disaster Relief Fund, in
August 2023, FEMA prioritized response and immediate Over-obligating funds that
recovery efforts while concurrently pausing new obligations remained unliquidated for
that were not essential for lifesaving or sustaining activities. extended time periods may
According to FEMA officials, the $500 million FEMA de- have contributed to an
obligated in April 2023 was returned to the Disaster Relief accelerated depletion of
Fund and used for general disasters or other COVID-19 the Disaster Relief Fund in
projects. As of April 2024, FEMA continues to carry almost $1 2023.
billion in unliquidated obligations on this project even
though accelerated depletion of the Disaster Relief Fund
remains a concern. According to the U.S. Government Accountability Office, FEMA reported a
projected deficit of nearly $6.4 billion for the Disaster Relief Fund by September 2024.9
9
GAO-24-107351, FEMA – Opportunities Exist to Address Mission Challenges and Increased Workload, March 12, 2024.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
FEMA Has Not Determined Cost Allowability of $8.1 Billion in Funds Drawn Down
by One State
As of April 2024, FEMA has not determined the cost allowability10 of approximately $8.1 billion
drawn down11 by the state for the same medical staffing grant discussed above. FEMA has
begun, but not completed, its review of approximately $1.3 billion in costs. However, FEMA has
taken no action to determine the allowability of the remaining $6.8 billion.
FEMA validates the actual costs of completed projects before making awards, but it does not
validate the actual costs of standard or specialized projects until the grant closeout phase,
unless the drawdowns by the recipient are selected for the VAYGo process. According to FEMA’s
VAYGo guidance,12 the recipient should submit the supporting documentation for validation
within 80 to 124 days after notification by the regional point of contact that they have been
selected for testing. If the documentation is not received by the deadline, an agreed-upon
resolution memorandum or a notice of potential debt letter should be issued.
In August 2021, FEMA began the VAYGo post-payment testing process on the state project’s $1.3
billion in FY 2020 Q1 and Q2 disbursements. As of April 2024, of the approximately $9.1 billion
obligated for the medical staffing grant, FEMA had a zero percent completion rate on VAYGo
reviews for completeness and compliance of drawdowns that began almost 3 years previously.
From the documentation already provided by the state in March 2024, FEMA had questioned
$255 million of the $1.3 billion. FEMA was in the process of validating the remaining $1 billion, as
shown in Figure 2.
10
Costs are allowable if they meet general criteria established in 2 C.F.R. § 200.403.
11
A drawdown means Federal funds requested and received by a state.
12
Standard Operating Procedure: Incremental Reconciliation Procedures Validate As You Go Pilot, February 5, 2019.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
Figure 2. VAYGo Status as of March 2024
Source: Developed by DHS OIG from FEMA data
Additionally, as of April 2024, the state had not adequately supported the subrecipients’ total
reimbursement requests with actual cost documentation. Grants Manager, FEMA’s official
system of record for Public Assistance grants, noted FEMA’s remediation with the state had
lasted for 893 days. FEMA had not made final eligibility determinations and had issued neither a
resolution memorandum nor a notice of potential debt letter. Consequently, the $255 million
that FEMA questioned remained unresolved.
According to FEMA officials, VAYGo post-payment testing has been behind since its
implementation, primarily because of the enormity of hurricanes Harvey, Irma, and Maria
followed by the COVID-19 pandemic and a pause of testing in 2022 to improve the process. FEMA
officials also noted they decided to delay action against the state on questioned costs, opting to
continue to work with the state to resolve the questioned costs, in the hopes of maximizing
reimbursements during the review process. As a result, FEMA has not resolved the state’s initial
VAYGo samples and expects the process to continue at least through FY 2025. FEMA stated it
intends to begin testing VAYGo transactions closer to the time of disbursements beginning in FY
2024 to align with the requirements of the Payment Integrity Information Act of 2019.13
As a result of FEMA’s inability to establish cost allowability
We are questioning the $8.1 through validation of post-award costs of the state’s medical
billion based on unknown staffing project, we are questioning the $8.1 billion based on
eligibility of costs. unknown eligibility of costs (see Appendix C). When pre-award
controls are ineffective, it becomes critical that FEMA
13
Payment Integrity Act of 2019, 31 U.S.C. 3301, Public Law 116-117, 116th Congress.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
implement effective post-award controls, such as the VAYGo process, in a timely manner.
Extending the review period indefinitely defeats the purpose of VAYGo incremental testing. It
reduces the assurance that the recipient and subrecipient have appropriately spent project
funding and indicates an increased risk that they have not maintained complete and compliant
payment documentation that adheres to Federal regulations and FEMA policy.
FEMA Did Not Validate Actual Costs before Reimbursement on Completed
Projects Totaling $32.8 Million
FEMA did not validate approximately $32.8 million in actual costs submitted for reimbursement
on completed projects before obligating funds. According to the Stafford Act, Public Assistance
is a reimbursement program.14 Additionally, per Federal regulations and FEMA guidance, FEMA
must evaluate the eligibility of all costs claimed15 and those costs must be adequately
documented.16 As outlined in FEMA guidance, project worksheets must contain the required
support documentation to substantiate the actual costs of the scope of work being funded,
describe the emergency response measures, document the percentage of “work completed,”
and quantify the eligible costs.17
We selected a random, non-statistical sample of 20 large projects totaling $58 million from a
universe of 8,420 projects ranging from $131,100 through $100 million and reviewed pre-award
controls. We determined that 6 of the 20 completed projects, totaling approximately $33 million
(56 percent), did not have the required supporting documentation to validate completion of the
work and actual costs incurred before project award and reimbursement. Documentation
included in FEMA’s system of record, Grants Manager, predominately consisted of high-level
summary information and lacked details, such as documentation indicating when and if the
services were performed, who performed the services, and whether the services were provided to
eligible participants as required in the grants’ scope of work (see Appendix D).
FEMA’s documentation was insufficient because it focused primarily on expediting delivery of
grant awards without sufficient oversight. According to FEMA officials, they had to expedite
funding and assumed they could rely on post-payment controls to reconcile the actual cost
submissions at closeout. Three staff members from FEMA’s Consolidated Resource Centers
reported being instructed to “not do a deep dive” when reviewing cost eligibility during a “Stand
Down” meeting in 2020 in anticipation of a surge of project worksheet submissions. We
exhausted all avenues, including requesting audio or video recordings of the meeting, to verify
the context of what was discussed. However, the material provided by FEMA did not yield
documentary evidence of this direction being given.
14
Stafford Act Sec. 313, Standards and Reviews (42 U.S.C. § 5156).
15
44 C.F.R. § 206.201(i)(1) (now 44 C.F.R. § 206.201(k)(1)).
16
2 C.F.R. § 200.403(g).
17
FEMA Fact Sheet 9580.5, Elements of a Project Worksheet, December 17, 2005.
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OFFICE OF INSPECTOR GENERAL
U.S. Department of Homeland Security
FEMA’s inability to establish cost allowability by validating pre-award costs for the six projects in
our sample contributed to $32.8 million in costs we questioned as improper payments (see
Appendix C).
FEMA Inconsistently Issued Determination Memorandums when Denying or
Reducing Reimbursement Requests
According to the Public Assistance Operations Manual,18 FEMA must issue a determination
memorandum to the recipient (state) and subrecipient if it determines that a reimbursement
request should be denied or reduced due to ineligible costs. The determination memorandum
explains why a project worksheet’s work or cost is not eligible. It is accompanied by a letter
discussing the appeals process.
We reviewed the project worksheets for the 20 completed large projects in our sample and found
that FEMA had adjusted the requested reimbursement for 5 projects, resulting in $1,800,664 in
reduced funding to the applicants. These reductions were based on reimbursement requests
that were outside the scope of work, inadequately supported, or for work completed outside the
period of performance. In all five instances, FEMA did not issue a determination memorandum.
FEMA did not follow its determination memorandum process consistently and instead relied on
an informal process. During the extraordinary circumstances responding to the pandemic, FEMA
accepted emails and phone calls, which were not always documented in Grants Manager, in lieu
of issuing determination memorandums as required by guidance. This informal process
decreases transparency and accountability and potentially exposes FEMA to future claims.
Subsequent Event
After we provided our Notice of Findings and Recommendations to FEMA in July 2024, FEMA
informed us that it completed additional VAYGo work since we conducted our audit. Specifically,
FEMA claimed that it has now performed VAYGo procedures on approximately $6.9 billion in
expenditures. However, we have not verified or performed analysis on any subsequent testing
FEMA completed after our close of fieldwork on March 31, 2024.
Recommendations
Recommendation 1: We recommend the FEMA Administrator assess and update FEMA’s review
process and guidance to ensure project costs are validated and estimates are verified by
qualified, subject matter expert staff, as required by the Public Assistance Program and Policy
Guide.
18
Public Assistance Operations Manual Stage 4, no date.
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Recommendation 2: We recommend the FEMA Administrator review unliquidated obligations for
all COVID-19 project worksheets to determine whether additional funds can be de-obligated and
returned to the Disaster Relief Fund.
Recommendation 3: We recommend the FEMA Administrator conduct an incurred cost audit of
all expenditures for the state medical staffing project worksheet and disallow and recover any
ineligible costs identified.
Recommendation 4: We recommend the FEMA Administrator ensure the Office of the Chief
Financial Officer implements FEMA’s Validate As You Go policies and establish reasonable time
limits for the validation and remediation processes to meet the intent of Federal regulations.
Recommendation 5: We recommend the FEMA Administrator resolve questioned costs of
approximately $32.8 million on the six project worksheets identified in our report.
Recommendation 6: We recommend the FEMA Administrator ensure that costs are sufficiently
documented and reviewed before obligation and disbursement of awards for completed
projects.
Recommendation 7: We recommend the FEMA Administrator ensure FEMA complies with the
requirement to issue determination memorandums to subrecipients when ineligible costs are
found.
Management Comments and OIG Analysis
FEMA provided management comments on a draft of this report. We included the comments in
their entirety in Appendix B. FEMA concurred with all seven recommendations and is taking
actions to address them. We consider recommendations 1, 4, 5, 6, and 7 open and resolved, and
recommendations 2 and 3 open and unresolved. We also received technical comments on the
draft report and made revisions as appropriate. A summary of FEMA’s management comments
and our analysis follows.
Although FEMA concurred with our seven recommendations, it raised contextual concerns about
the findings, conclusions, and recommendations in the report. Specifically, FEMA commented
that we did not adequately consider the unprecedented nature of the COVID-19 pandemic and
the unique challenges Public Assistance applicants and FEMA personnel experienced while
working to save lives and protect public health and safety.
We believe that our report represented the unprecedented circumstances of COVID-19 as we
highlighted many of the unprecedented challenges and limitations FEMA faced, including:
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- that FEMA initially had limited historical data to reference concerning the medical staffing
grant; and
- that distributing funding quickly to those in need strained FEMA’s management and
oversight capabilities, as well as its ability to ensure funds were spent appropriately.
We again emphasize that our audit findings, within the context of these circumstances, can
result in the absence of effective controls and increase the risk of potential improper payments,
which we outlined in the report.
FEMA also claimed that a major factor in its $500 million reduction of the medical staffing award
was due to the decrease in COVID-19 caseloads caused by the development of new treatments
and vaccinations. However, FEMA has not provided us information to support that statement.
Therefore, we stand by our original conclusions.
FEMA’s Response to Recommendation 1: Concur. FEMA stated that it updated the Public
Assistance Program and Policy Guide in June 2020 to provide improved guidance on cost
development for new disaster declarations. FEMA also issued the Public Assistance Program
Delivery Guide - September 2022 (Operational Draft), which provides specific guidance on
developing or validating scopes of work and costs. FEMA requested that we consider this
recommendation closed and resolved, as implemented.
OIG Analysis: FEMA’s corrective actions are responsive to the recommendation. The
recommendation will remain open and resolved until we can confirm that qualified staff has
validated project costs for COVID-19 emergency protective measures and verified estimates on
subsequent disasters using the improved guidance in FEMA’s 2020 Public Assistance Program
and Policy Guide and newly issued Public Assistance Program Delivery Guide.
FEMA’s Response to Recommendation 2: Concur. FEMA stated that its review of unliquidated
obligations to determine whether additional funds can be de-obligated is already standard
practice. As such, FEMA requested that we consider this recommendation closed and resolved,
as implemented.
OIG Analysis: We consider FEMA’s actions partially responsive to the recommendation. Although
FEMA has a process in place to review unliquidated obligations, we saw no evidence that FEMA
used that process until we identified the lapse in the process during our audit. Therefore, this
recommendation will remain open and unresolved until FEMA can provide a complete review of
the unliquidated obligations for COVID-19 declarations.
FEMA’s Response to Recommendation 3: Concur. FEMA stated that it is conducting eligibility
reviews and validations of actual costs incurred to date, has requested additional information to
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verify ongoing expenditures, and has determined reasonably expected expenditures, specifically
for the state medical staffing project. FEMA’s estimated completion date is June 30, 2025.
OIG Analysis: We consider FEMA’s actions partially responsive to the recommendation. Although
FEMA plans additional expenditures reviews, it does not commit to performing an incurred cost
audit. FEMA’s VAYGo process did not adequately take into consideration the level of risk in the
medical staffing project and cannot provide assurance the testing adequately covers that risk.
We therefore consider this recommendation open and unresolved until FEMA completes an
incurred cost audit of all expenditures on the state’s medical staffing project, and we review the
documentation.
FEMA’s Response to Recommendation 4: Concur. FEMA stated that it issued a new VAYGo Guide
that details roles and responsibilities, communicated expectations, timelines, and validation and
remediation processes. Additionally, FEMA’s Office of the Chief Financial Officer will continue to
evaluate VAYGo timelines and processes and look for ways to conduct payment reviews closer to
drawdowns without imposing unreasonable burdens on FEMA recipients. FEMA’s estimated
completion date is September 30, 2025.
OIG Analysis: FEMA’s corrective actions are responsive to the recommendation. The
recommendation will remain open and resolved until FEMA provides evidence of its Office of the
Chief Financial Officer conducting payment reviews closer to the time of Public Assistance
drawdowns.
FEMA’s Response to Recommendation 5: Concur. FEMA stated that, as of the end of August 2024,
it had resolved $32,036,012 of the questioned costs for six of the projects identified in the draft
report and determined that these costs were directly tied to the performance of eligible work
and adequately documented. FEMA’s estimated completion date for the remaining project is
June 30, 2025.
OIG Analysis: FEMA’s corrective actions are responsive to the recommendation. The
recommendation will remain open and resolved until FEMA provides documentation showing it
has completed actions to resolve the questioned costs of approximately $32.8 million on the six
project worksheets identified in our report.19 The documentation should include the final
inspection reports with sufficient details of the completed validation, beyond adding totals of
submitted invoices, including the justification for FEMA’s determination that the costs were
eligible and a brief explanation of the methodology used to validate the costs.
Based on FEMA’s technical comments, we were able to resolve the issues with one of the original seven projects
19
we reviewed. Therefore, we adjusted the number of projects reviewed to six as indicated in Appendix D.
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FEMA’s Response to Recommendation 6: Concur. FEMA stated that it currently uses a substantial
layered approach to ensure costs are sufficiently documented and reviewed before obligating
and disbursing awards. Additionally, FEMA indicated the Public Assistance sampling procedure
now uses a random attribute-based sampling approach, following the U.S. Government
Accountability Office’s Financial Audit Manual, to verify supporting documentation for Public
Assistance projects. In accordance with this process, FEMA does not require that records beyond
those sampled be retained in FEMA’s system of record. Further, FEMA uses the VAYGo program,
which it implemented in March 2019, to monitor its internal controls. The VAYGo program is
FEMA’s internal control review process to meet the statutory improper payment review and
reporting requirements of disbursements by recipients. FEMA requests that we consider this
recommendation closed and resolved, as implemented.
OIG Analysis: FEMA’s corrective actions are partially responsive to the recommendation. The
recommendation will remain open and resolved until FEMA provides documentation showing it
has used a layered approach to ensure costs are sufficiently documented and reviewed before
obligating and disbursing awards. This should include five examples of documentation
supporting project worksheets that were similarly processed and contain the names of the files
used to support the detail in a project worksheet’s summary validation along with a
methodology statement used for cost validation.
FEMA’s Response to Recommendation 7: Concur. FEMA explained that it does not issue a
determination memorandum when an applicant withdraws a project or part of a project claim
because the applicant is no longer claiming those costs. FEMA agreed that the withdrawal
process is often informal and establishing a more formal process for documenting withdrawals
would be beneficial in preventing confusion on whether a reduction in claimed work or costs is
due to a determination by FEMA or a withdrawal by the applicant. Accordingly, FEMA Recovery
Public Assistance will establish the process for documenting when an applicant withdraws a
project or part of a project claim in the Public Assistance Program Delivery Guide. FEMA’s
estimated completion date is August 29, 2025.
OIG Analysis: FEMA’s corrective actions are responsive to the recommendation. The
recommendation will remain open and resolved until FEMA provides documentation showing it
has updated the Public Assistance Program Delivery Guide to establish a more formal process for
documenting withdrawals.
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Appendix A:
Objective, Scope, and Methodology
The Department of Homeland Security Office of Inspector General was established by the
Homeland Security Act of 2002 (Public Law 107−296) by amendment to the Inspector General Act
of 1978.
The objective of this audit was to determine whether FEMA ensured Federal funds for COVID-19
emergency protective measures reached intended recipients and subrecipients and were used as
required.
To answer our audit objective, we analyzed Public Assistance legislation and departmental
regulations, policies, procedures, and other guidance. We also reviewed U.S. Government
Accountability Office and DHS OIG reports regarding prior issues in the oversight of Public
Assistance.
In addition, we interviewed FEMA officials assigned to work on Public Assistance projects,
including officials from headquarters; Consolidated Resource Centers East, Central, and West;
and FEMA Region 6. We also interviewed officials from Response and Recovery, the Office of the
Chief Financial Officer, and the FEMA Finance Center, as well as officials from the FEMA Region 1
Pandemic Response Accountability Committee and emergency management officials from two
states.
To test FEMA’s pre- and post-payment controls for Federal funds for COVID-19 emergency
protective measures, we selected and evaluated two samples totaling 21 large project
worksheets. The first sample was a non-statistical random selection of 20 projects using a
random number generator from the strata for total project costs between $131,100 through $100
million. For the other sample, the team judgmentally selected one project worksheet exceeding
$100 million due to the increased risks associated with high project costs for this project
worksheet.
We reviewed internal controls of FEMA’s Public Assistance COVID-19 grant formulation and
reimbursement processes, and the sufficiency of documentation to support these obligations,
amendments, and reimbursement to state, local, territorial, and tribal governments, and certain
types of private nonprofit organizations. We further reviewed internal controls related to VAYGo
post-payment integrity reviews. Our limited assessment disclosed control deficiencies within the
pre- and post-award phases of the Public Assistance life cycle. These weaknesses are discussed
in the body of this report.
We reviewed Grants Manager system data for duplicate records, null file entries, and blank fields.
We compared Public Assistance COVID-19 projects and project worksheets to a merged source
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file of major disaster declarations, merged data to include project and project worksheet
application type, and performed other financial and operational integrity tests of data fields to
ensure consistency of the presented data. We determined that the Grants Manager data was
reasonably sufficient and accurate based on our testing. Thus, we consider the data sufficiently
reliable for our findings and recommendations.
We conducted this performance audit between October 2022 and April 2024 pursuant to the
Inspector General Act of 1978, 5 U.S.C. §§ 401–424, 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 on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
DHS OIG’s Access to DHS Information
During this project, DHS provided timely responses to our requests for information and did not
delay or deny access to information we requested.
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Appendix B:
FEMA’s Comments on the Draft Report
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Appendix C:
Potential Monetary Benefits
Emergency Unsupported Ineligible Total Funds to Be
Protective Costs Costs Questioned Put to Better
Measures Questioned Questioned Costs Use Rec. No.
1 Statewide Grant $0 $0 $0 $1.5 Billion 1 and 2
1 Statewide Grant $8.1 Billion $0 $8.1 Billion $0 3 and 4
6 Sampled Grants $32.8 Million $0 $32.8 Million $0 5 and 6
Source: DHS OIG analysis of Grants Manager/FEMA-supplied data
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Appendix D:
Project Worksheets with Missing Support Documentation
Project Project Amount Drawn
Number Worksheet Down Missing Support Documentation
Force account locations: labor
hours logs, description of force
185210 00305 $433,937
account equipment function
performed, payroll records
Detailed invoices; complete
333321 00080 $148,122
occupancy logs and roster
Detailed invoices; delivery
333949 00139 $1,193,663 schedules to support services
rendered; list of eligible recipients
Support showing actual services
rendered or details such as a roster
691674 00139 $3,142,302
of COVID-19 tests provided or
sector counts by location
Detailed invoices, such as delivery
188013 00977 $25,864,378 schedules to support services
rendered
Invoice details supporting medical
671185 00417 $2,013,729 services and costs rendered to
correctional facilities
Total $32,796,131 N/A
Source: Developed by DHS OIG from Grants Manager data
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Appendix E:
Office of Audits Major Contributors to This Report
Ruth Blevins, Director
Steve Doran, Acting Manager
Jay Jackson, Auditor
James Townsend, Auditor
Tom Hamlin, Communications Analyst
Jennifer Eads, Independent Referencing Review
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Appendix F:
Report Distribution
Department of Homeland Security
Secretary
Deputy Secretary
Chief of Staff
Deputy Chiefs of Staff
General Counsel
Executive Secretary
Director, GAO/OIG Liaison Office
Under Secretary, Office of Strategy, Policy, and Plans
Assistant Secretary for Office of Public Affairs
Assistant Secretary for Office of Legislative Affairs
Office of Management and Budget
Chief, Homeland Security Branch
DHS OIG Budget Examiner
Congress
Congressional Oversight and Appropriations Committees
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Additional Information
To view this and any other DHS OIG reports, Please visit our website: www.oig.dhs.gov
For further information or questions, please contact the DHS OIG Office of Public Affairs via email:
DHS-OIG.OfficePublicAffairs@oig.dhs.gov
DHS OIG Hotline
To report fraud, waste, abuse, or criminal misconduct involving U.S. Department of Homeland
Security programs, personnel, and funds, please visit: www.oig.dhs.gov/hotline
If you cannot access our website, please contact the hotline by phone or mail:
Call: 1-800-323-8603
U.S. Mail:
Department of Homeland Security
Office of Inspector General, Mail Stop 0305
Attention: Hotline
245 Murray Drive SW
Washington, DC 20528-0305
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