Homeland Security Watch

News and analysis of critical issues in homeland security

April 21, 2009

FEMA financials vetted

Filed under: Budgets and Spending — by Philip J. Palin on April 21, 2009

Last week the DHS Office of the Inspector General released the auditor’s management letter for the Department.  The letter outlines findings and recommendations from KPMG’s audit of FY2008.  The complete report can be accessed at the OIG website.

As is typical of audits for both private and public organizations, several “financial management comments” are offered. These reflect agency actions — or more commonly non-actions — that the auditors perceive reflect bad practice or non-compliance with laws and regulations.  These may range from trivial to truly troublesome.   Whether trivial or troublesome often depends on context.

I am more familiar with FEMA than with other DHS components.  Below I highlight two auditor findings that strike me as more than trivial.  I hope readers who are familiar with other components referenced in the audit  (or read more between the lines in the FEMA findings) will use the comment function to underline what seems important to you.

The KPMG audit found:

“FEMA has not established a process to verify an applicant’s homeowner’s insurance prior to granting disaster housing assistance… therefore, FEMA does not have controls in place to prevent a violation of Section 312 of the Stafford Act…”

“We randomly selected nine insurance companies to perform procedures over flood insurance premiums written during the period October 1, 2007 through April 30, 2008.  For the nine companies selected, we noted the following internal control deficiencies related to our 405 sample items:

  • Five instances where the check did not agree to the appropriate policy.
  • Six instances where the check received from the insured was not in the name of the company issuing the policy.”

There were a number of additional findings related to FEMA’s role in flood insurance that, taken together, suggest considerable inaccuracies and less than fully effective management controls.  FEMA administers the National Flood Insurance Program.  The NFIP is a perpetual source of controversy

(A recent comment by a reader provides more background on the NFIP.)

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1 Comment »

Comment by William R. Cumming

April 21, 2009 @ 7:55 am

Financial control stems from knowledgeable people, copetently trained and in adequate numbers. FEMA has never had these people. Director John Macy when told by the head of FEMA’s new accounting operation that without fifteen more accounting staff there was no hope of gaining financial control of the new agency considering the status of the records transferred from the predecessor agencies, with the except of DCPA (Defense Civil Preparedness Agency) a civilian agency under the Department of the Army until 1972 and then an independent civil agency within DOD until it became part of FEMA in July 1979. Macey turned down the request (he had the slots) with the comment that “He had more important fish to fry.” This comment was relayed to me personally by the Chief Accountant asking for my help in reversing the decision. Since the GC office in FEMA has transferred in all positions from predecessor agencies except for HUD it was understaffed and itself fighting for some basic strength to lawyer the agency. The new GC of FEMA George Jett had personally handled the OGC creation and transfer. Because he was given attorney time sheets from HUD he had documentation that 28 FTE were working full or part time on FIA and FDAA matters (the programs coming from HUD to FEMA). In “hard” bargaining according to Mr. Jett as he told me he obtained 8.0 positions unencumbered from HUD for OGC and so any HUD OGC attorney could if they wanted apply for one of those 8 slots. I did apply and got one of the 8.0 slots and was the highest ranking HUD OGC lawyer to transfer. Also I was the principal assisting the then non-statutory OIG in FEMA they received 10 positions (those transferred out of OEP in 1973) but in fact 25 OIG staff were working FEMA issues for those components in HUD at the time FEMA was created.

It seems to me that only OGC staff and OIG staff and accounting staff or ethics staff ever say no to the agency or departmental leadership. It is simple oversight of the accounting function that should be centralized within the governmental affairs committee and seperately budgeted each year. But of course Congress really does NOT want adequately staffed OGC’s, Accounting Staff, OIG staff, Ethics staff or of course Procurement staff. Why because their donors might somehow have to be honest in their dealings and numbers with the departments and agencies. Note how the CFO (Chief Finanical Officer) statutory responsiblities were watered down and subverted over time. As I mentioned in a previous post, billions for the Northridge Earthquake are still unobligated or only partially obligated. This kind of travesty is outrageous. As for the NFIP, the fact that 33% of all premium income goes to the WYO companies as a basic cost is outrageous. They also are paid a claim and adjustment fee. Don’t ask about finanical control in FEMA or DHS because now you know why not!

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