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.
GFOA recommends state and local government financial managers to take all necessary steps to ensure that they will be able to collect and maintain adequate documentation on disaster-related costs to support maximum reimbursement from all levels of government that offer such assistance, including the following:
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:
- Establish a supplemental chart of accounts specifically designed to collect data on disaster-related costs, including payroll, at a level of detail sufficient to meet grantor documentation requirements. The supplemental chart of accounts should, for example:
- Classify projects based on categories used by the government offering reimbursement (e.g., large projects v. small projects; emergency repairs v. permanent repairs) in the case of FEMA),
- Track costs, at a minimum, at the project worksheet or equivalent level,
- For staff hours, specify name, title, dates, times, and rates and nature of work performed;
- Educate program staff in the various departments on the level of detail on costs required to substantiate claims for reimbursement;
- Educate all staff about record retention guidelines for disaster-related documents. Disaster-related documents should be retained at least as long as required by federal guidelines, which may be longer than the government’s or the state’s document retention requirements;
- Maintain grant reimbursement documentation along with all support in a centralized location, preferable electronic, to allow for ease in access when needed.
- Collect and maintain appropriate nonfinancial data to support claims for reimbursement, such as, but not limited to, the following:
- Before and after photographs of each repair, labeled by location (with map, as needed) and date,
- Relevant correspondence and press releases,
- Insurance policies for the types of coverage, policy limits, and what is insured;
- Precise information on materials and equipment used (e.g., number of bricks v. square footage)
- Any emergency powers granted by the governing body (i.e. the city manager given the authority to enter into contracts without the board’s approval);
- Track volunteer hours, and donated items, with documentation of value (applicable to local share, even if not reimbursable); and
- Track local equipment usage (by hours, operators, and purposes for which actually used).
Federal assistance may come from more than one agency (e.g., both the Federal Highway Administration and FEMA). In such cases, it is important to determine from the start which agency’s rules apply to a given project. Governments should be knowledgeable of their state emergency department requirements and how they interact with federal and local funding requirements and required matching funds. Governments should also ensure that controls are in place to reduce the risk of claiming the same expenditure from more than one agency (“double dipping”).