Many governments each year must face the challenge of disasters. Financial assistance frequently is available from one or more levels of government (e.g., Federal Emergency Management Agency (FEMA), state). Accountants in the public sector must ensure that the governments they serve collect and maintain adequate documentation on reimbursable costs to take full advantage of this assistance.

1. Establish Formal Policies and Procedures for the documentation of disaster-related costs

• Every government should establish written policies and procedures on how to account for disaster-related reimbursable costs
• Policies should be included within the government’s overall disaster recovery plan, reviewed and tested annually, and updated after the annual testing and at least once every three years;
• At the conclusion of an event, governments should have a project debrief to identify issues that require policies and procedures to be updated so the government is better prepared for the next event.
• Both financial and nonfinancial staff should receive training on these policies and procedures;
• Elected officials should also be briefed on the government’s policies and procedures whenever new officials take office.
• Financial and nonfinancial staff also should receive training on FEMA requirements and guidelines, as well as those of other assistance providers;1
• All disaster-related documentation should be routed to a member of the finance department, who will be the point of contact for all reviewer and auditor requests.
• Finance staff should review and approve all costs submitted by program staff before those costs are assigned to an emergency account and submitted as part of the disaster relief grant reimbursement package (project worksheets, for FEMA’s Public Assistance Program);
• An emergency/disaster clause should be incorporated into all contracts for goods and services in the event of a disaster to ensure that those goods and services will be available on a timely basis at a reasonable price. Also, vendors should be required to supply the necessary level of detail in their billing to support reimbursement (e.g., detailed breakdown of labor v. materials);
• Procurement policies and procedures and cost analysis documentation requirements should be periodically reviewed to ensure compliance with federal agency requirements and reviewed with the appropriate staff so the government is prepared before an event occurs;
• Bids and contracts should be reviewed in advance for compliance with relevant reimbursement requirements;
• Adequate controls should be set in place for inventories of emergency supplies;
• Any provision for changes in compensation levels for salaried staff who work long hours in the event of a disaster should be properly approved and documented before a disaster occurs;
• Audit(s) from those providing reimbursement should be sought as soon as possible (e.g., request a separate audit of immediate response costs) to minimize the possibility of disallowance because additional requested documentation is no longer available;
• Governments should have procedures in place to return funds to a grantor if it is determined to be necessary  (e.g., duplicate reimbursement, disallowed expenditures, or unanticipated insurance reimbursements); and
• If a government plans to use nonprofit organizations to provide certain types of assistance in the event of an emergency, it may wish to consider obligating itself by contract to using the services of selected nonprofit organizations so those costs can be eligible for reimbursement.

2. Ensure Adequate Detail to Support Claims

To ensure sufficiently detailed documentation to support reimbursement of disaster-related costs, governments should: