1. DHS OIG’s proactive audit approach
DHS OIG continued a proactive approach to conducting audits where the DHS OIG would assess Subrecipients’ capacity to account for and spend federal funds responsibly before the funds are spent. With this approach, the IG has started conducting audits much earlier into the disaster recovery process. In addition to the IG’s proactive approach, FEMA is also proactively scrutinizing eligibility of costs prior to obligation of funding. As a result, Recipients and Subrecipients will need to be audit ready from day one in the financial recovery process.
2. Disaster Recovery Reform Act of 2018 (DRRA)
In response to the significant impact of natural disasters in 2017, on October 5, 2018, President Donald J. Trump, signed HR 302, which contains the DRAA. The DRRA modifies several FEMA programs and provides greater flexibility to assist state and local disaster mitigation, preparedness and recovery. As part of the new Act, FEMA can no longer recoup any aid provided more than three years after its release.
3. Public Assistance Program and Policy Guide (PAPPG) — version 3.1
In April 2018, FEMA issued the PAPPG version 3.1. PAPPG superseded the majority of all prior Public Assistance guidance, and PAPPG version 3.1 is in effect for incidents declared on or after August 23, 2017.
Version 3.0 incorporated many revisions regarding houses of worship and religious institutions. Whereas, Version 3.1 made additional revisions to align with the changes made by the Bipartisan Budget Act, including changes regarding “essential social services” and “essential social-type services,” houses of worship and other private nonprofit educational facilities.
Included in previous versions of the guidance are changes to debris removal operations. The PAPPG eliminated the responsibility of FEMA and state government to monitor debris removal. Instead, the Subrecipient is solely responsible for monitoring debris removal operations and will need to identify issues or concerns during operations.
4. Public Assistance Management Costs Interim Policy (Interim Policy)
On October 5, 2018, as part of the DRRA, FEMA issued the Interim Policy, which redefined management costs. The Interim Policy defines management costs as “indirect costs, direct administrative costs and other administrative expenses associated with a specific project.”
Under the Interim Policy, a Recipient is allowed no more than 12% of the total award. A maximum of 7% can be used by a Recipient and a maximum of 5% used by a Subrecipient. Costs are funded at 100% federal cost share. The Interim Policy details eligibility and several deadlines to claim the costs. Under the Interim Policy, FEMA bases management costs on the total award amount, which is the actual eligible PA project cost, including the non-federal share, after insurance and any other reductions.
5. Public Assistance Alternative Procedures for Direct Administrative Costs (PAAP DAC)
For events declared between August 1, 2017 and October 4, 2018, FEMA’s PAAP DAC could apply if the Recipient and Subrecipient do not opt into the interim policy. Recipient and Subrecipient participation is optional in this program; however, if a Recipient elects to opt out of the pilot program, Subrecipients cannot participate. The pilot program includes accounting for all DAC on one single project worksheet (PW) at a fixed rate of 5% (4% standard with a 1% 90-day closeout incentive) of the total eligible project costs based on PWs that have been signed and submitted to FEMA within two years of the declaration (with the exception of DAC costs for Permanent Work Pilot projects). When a fixed estimate is developed under the Permanent Work Pilot, FEMA will calculate and lock in the related DAC amount based on the agreed-upon Permanent Work fixed estimate.
Test your disaster financial recovery quotient to check if you can avert a second disaster.