An OIG report has found that FEMA should disallow $20.4 million of ineligible and unsupported costs, and direct Mississippi to provide additional technical assistance and monitoring to the Diamondhead Water and Sewer District for its compliance with federal requirements.
The District received a FEMA grant award of $49.3 million from the Mississippi Emergency Management Agency for damage resulting from Hurricane Katrina in 2005.
The OIG found that Mississippi did not fulfill its grantee responsibility to ensure the District followed applicable federal grant requirements. It also found that FEMA officials incorrectly applied the agency’s “50 Percent Rule” – a cost comparison tool which FEMA officials use to compare certain repair costs to certain replacement costs when deciding to replace, rather than repair, the Diamondhead Wastewater Treatment Plant. As a result, FEMA awarded the District $18.9 million in ineligible replacement costs.
It also identified $1.5 million of improper procurement, unsupported costs, duplicate insurance benefits, and uncompleted project costs that FEMA should disallow to the District. “These problems were largely the result of Mississippi not fulfilling its grantee responsibility to ensure the District properly managed FEMA funds,” the audit states. “Mississippi is responsible for monitoring subgrant activities, and is compensated with Federal funds to support subgrant management and oversight. It is FEMA’s responsibility to hold Mississippi accountable for proper grant administration.”