Audit of. Hurricane Recovery/Reimbursement From FEMA

Transcription

1 Audit of Hurricane Recovery/Reimbursement From FEMA December 7, 2007 Report

2 Audit of Hurricane Recovery/Reimbursement From FEMA Table of Contents Page PURPOSE AND AUTHORITY 1 SCOPE AND METHODOLOGY 1 BACKGROUND 2 CONCLUSIONS 3 Repairs and Recovery for Hurricane Damages 3 Additional Reimbursement Claims 3 Submission for FEMA Reimbursement 4 APPENDIX Management s Response 6

3 THE SCHOOL DISTRICT OF LUNG CHIU, CPA ARTHUR C. JOHNSON, Ph.D. PALM BEACH COUNTY, FLORIDA DISTRICT AUDITOR SUPERINTENDENT OFFICE OF THE DISTRICT AUDITOR 3346 FOREST HILL BLVD., B-302 WEST PALM BEACH, FL (561) FAX: (561) M E M O R A N D U M TO: FROM: Honorable Chair and Members of the School Board Arthur C. Johnson, Ph.D., Superintendent of Schools Chair and Members of the Audit Committee Lung Chiu, CPA, District Auditor DATE: December 7, 2007 SUBJECT: Audit of Hurricane Recovery/Reimbursement from FEMA PURPOSE AND AUTHORITY Pursuant to the District s Audit Plan of , we have audited the Hurricane Recovery and FEMA Reimbursement Procedures. The primary objectives of this audit were to determine (1) the extent to which the School District has repaired and recovered for hurricane damages and (2) if all eligible repair expenses for damages caused by Hurricanes Frances, Jeanne, and Wilma during 2004 and 2005 were timely submitted to the Federal Emergency Management Agency (FEMA) for reimbursement. SCOPE AND METHODOLOGY This audit was performed in accordance with Government Auditing Standards by Stephanie Steeves, CIA, during May and June, 2007, and included: Reviewing the Project Worksheets to determine the amount of funds that FEMA is obligated to reimburse to the District. Identifying the vendor invoices paid that are reimbursable from FEMA. Determining the amount of outstanding invoices that are eligible for reimbursement from FEMA. Ascertaining the timeliness of eligible billings to FEMA. Review the District s 2007 Procedures for Hurricane Preparedness. Draft audit findings were sent to the Maintenance and Plant Operations Department (Maintenance) for review and comments. Management response is included in the Appendix. We appreciate the courtesy and cooperation extended to us by staff during the audit. The final draft report was presented to the Audit Committee at its December 7, 2007, meeting. 1

4 BACKGROUND In September 2004, Hurricanes Frances and Jeanne, followed by Wilma in October 2005, caused substantial damage to District property. FEMA estimated the cost of damage that was eligible for reimbursement and issued Project Worksheets, which indicated the amount obligated by and to be reimbursed by FEMA. For all eligible repair costs, 90% of the funding comes from the Federal, and 5% comes from the State. Administrative costs reimbursement is calculated based on a sliding scale. The Program Management Department was originally responsible for coordination with FEMA for eligible repair expenses; and this responsibility was transferred to the Maintenance and Plant Operations Department (Maintenance) after Hurricane Jeanne and before Wilma. No billing had been completed prior to this transfer. Damage Caused By the Hurricanes. FEMA agreed to pay approximately $4.5 million, $6.8 million and $30.3 million for damage caused by Hurricanes Frances, Jeanne, and Wilma respectively. As of June 27, 2007, the District has not received all the funds as indicated on the Project Worksheets. The School District will continue to bill FEMA when repair expenses are incurred. Repair Costs Exceeded FEMA Obligations. The costs of repairs for damage caused by the three hurricanes have exceeded the amounts obligated by FEMA on the Project Worksheets. Additionally, as of June 14, 2007, the School District had not received all the invoices for work that had been completed. It is noted that not all of the invoiced payments were eligible for reimbursement from FEMA; and billings to FEMA cannot exceed the obligated amounts on the Project Worksheets. The excess in repair costs over the amount allowed by FEMA have to be negotiated between the District and FEMA at project closeout. Maintenance indicated that this process has begun for Hurricanes Frances and Jeanne. 2

5 CONCLUSIONS Repairs and Recovery for Hurricane Damages According to staff, Palm Beach County School District's rate of submission (54%) to FEMA for damages caused by Hurricane Wilma was slightly higher than Broward County School District's. As of September 12, 2007, the School District had submitted a total claim of $16.3 million (or 54%) of $30.4 million in damages caused by Hurricane Wilma. Schools were reopened without incidence after the hurricanes. FEMA awarded $2.2 million in Wind Retro-Fit Grant for window upgrade at the Central Office. The School District has also reorganized the safety recovery teams based on hurricane experience and FEMA requirements. Moreover, as of September 20, 2007, the District has completed the following major actions: 37 roofs were replaced. Roofs for 300 portable were replaced. 98% of permanent roof repairs were completed. The District was in the process of developing a database containing RS Means pricing guide, merge capability with historical data from three previous hurricanes. When completed, the database will allow the District to provide estimates closer to actual repair costs thus reducing the number of closeout issues; using handheld devices to capture data from safety recovery teams. Repair listed on the project work sheet will be assigned to a contractor by line item in order to reduce the number of days between billing cycles with FEMA. Additional Reimbursement Claims Since the audit began, the following additional actions have been taken by the District between June 14, and September 12, 2007: An additional $1.1 million has been billed to FEMA; and $794,455 has been received from FEMA for damages caused by the hurricanes. An additional $2.9 million in claims has been submitted to the insurance company. The District had previously received $2 million from the insurance company. Close out process has begun for the roofing projects for damages caused by Hurricanes Frances and Jeanne. 3

6 Submission for FEMA Reimbursement The review of vendor invoices, payments to contractors, and FEMA billing for (1) 30 locations with damage caused by Hurricane Wilma, (2) the damage in central-north locations caused by Hurricane Frances, and (3) the damage in north-north area caused by Hurricane Jeanne, revealed the followings: Some individual Project Worksheet repair costs for damage caused by Hurricanes Frances and Jeanne were billed to FEMA in one single billing, instead of sequential billings as expenses were incurred. This practice resulted in holding up some bills over an extended period after the costs had been paid. Repair costs for damage caused by Hurricane Wilma have been billed to FEMA in an incremental process; however, it appeared that the oldest payments for repair work were not submitted to FEMA for reimbursement at the earliest possible time. For example: - The School District billed FEMA for invoices that were paid on March 2, 2007, (for invoice # Woodlands Middle School); however, as of June 14, 2007, the School District had not billed FEMA for expenses that were paid on December 7, 2005, (for invoice #25103W-567 Olympic Heights High School), while some invoices that were also paid on December 7, 2005, had been billed to FEMA (for invoice #5442 Congress Middle School and invoice # for Fulton Holland). - Costs for repair work performed at Lake Worth Middle School and North Palm Beach Elementary School had not been billed to FEMA as of June 14, 2007; both schools incurred repair expenses over 12 months ago. Based on the review of 142 sample invoices, we noted that it took an average of 135 days to submit a billing to FEMA after payments were made. The number of days ranged from seven to 429. Of the 142 sample billings, 15 (or 11%) were processed in 30 days or less; 45 (or 32%) were processed between 31 and 89 days; and 82 (or 57%) were processed in 90 days or more. Maintenance reported that 95% of the repair work had been completed as of June 14, 2007, for damage caused by Hurricane Wilma. However, only 50% of the repair expenses had been submitted to FEMA for reimbursement. As of June 14, 2007, the School District had submitted requests for a total $26,105,865 in reimbursement from FEMA, which represented 62.59% of the $41,712,585 in damages for the three storms. So far, the District had received a total of $24,724,521 from FEMA. However, a total of $15.6 million in repair work payments had not been submitted to FEMA for reimbursement. To ensure early receipt of reimbursement from FEMA, the District should ensure timely submission of billings to the agency. 4

7 Hurricane Frances (September 2004) Hurricane Jeanne (September 2004) Hurricane Wilma (October 2005) Total Damages $4,525, $6,794, $30,392, $41,712, Work Completed 99% 99% 95% Submitted to FEMA $4,224, $6,636, $15,245, $26,105, Percent Submitted 93.35% 97.67% 50.16% 62.59% Reimbursement Received $4,038, $6,255, $14,430, $24,724, District's Portion $186, $380, $814, $1,381, Amount to be Submitted to FEMA $301, $158, $15,147, $15,606, Management s Response: Hurricanes Frances and Jeanne. Prior to these storms the District lacked FEMA processing experience, designated staff or manuals for FEMA interaction. The District decided to process all the FEMA requests by adding this work to the existing employee workload and the staff was overwhelmed. Temporary staff from outside companies were used to supplement the workload. Contributing to the billing delay was several contractors used the date of commencement of repair work as the invoice date versus the actual date of invoice preparation, which added numerous days to the referenced time period. Hurricane Wilma. Some repair work required engineering, permit processing and approval or long lead time for materials which resulted in a greater time span between contractor payments and the request for reimbursement. Wilma caused sufficient damage to meet the deductible at certain sites on the District s insurance policy. Since insurance is primary, this process must be completed before the balance can be requested from FEMA. We recommend that the District properly staff the FEMA process with people who are solely dedicated to and trained in the FEMA process. Other departments such as fiscal, building and purchasing should provide priority approval for FEMA projects. End of Report 5

8 Appendix Management s Response 6

9 Appendix Management s Response 7