S1:E9 75% Failure Rate…Not Good, Huh?

29 JUL 2020
Show Notes/Script

In a typical year, 75% of FEMA fund recipients, usually local governments and non-profits fail to follow the law. While the original analysis I did has aged some over the last four years, I’ll bet we’re still looking at massive failures with disaster related funds.

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Script

In a typical year, 75% of FEMA fund recipients, usually local governments and non-profits fail to follow the law. While the original analysis I did has aged some over the last four years, I’ll bet we’re still looking at massive failures with disaster related funds.

During the early weeks of the COVID-19 pandemic, my first response was “Shoot, here we go again?” Certainly, I have not been through a global pandemic of this magnitude. No one alive has.

“Here we go again” comes from my experience with disasters and FEMA. FEMA and federal granting agencies pour money on disasters. Behind the first disaster, hides a secondary disaster. There is a photo of me in Forbes Magazine from Forbes Magazine. The headline read: Meet the programmer trying to prevent the secondary disaster.

The purpose of FEMA disaster funding and the Stafford Act is to prevent secondary and long-term impacts of disasters. The funds intend to stabilize infrastructure so that public services, communities, families, and businesses can return to their original economic status. I live in a town were several roads that were destroyed in the 1938 hurricane were never repaired. Almost one hundred years later, these roads barely serve as reliable hiking trails. Bad timing for a hard-luck region during a difficult financial time. People and factories left the area just that much faster. That hurricane hastened a long-term economic decline and reduction in population – that oddly this pandemic maybe reversing?

Research

Is it possible that 75% of organizations that receive FEMA funds fail at that process? My research from 2015 looked at all of the cases that the Homeland Security Agency’s Office of Inspector looked at. Some portion of their audits are random – or random-ish. Some portion of the audits result from a report of possible corruption. Therefore, I stipulate my source data is not statistically random – yet, the data are representational, and the findings have validity. Furthermore, the research echoes my personal (anecdotal) experience.

I know some of the OIG staff. They take law enforcement seriously, yet they understand the impossible challenges of disaster response. I’ve seen these people on-site in the early days of disasters. They are just as tired and frustrated as everyone else. DHS OIG is not some mysterious or anonymous mass. We’re not friends but we have shaken hands and had warm conversations. I’ve emailed with them on routine business matters. I respect their work and the people doing this work. It is thankless and difficult.

And valued. This small group of people stand sentry against corruption. They help protect our tax dollars. Let me say thank you.

My analysis is based on their published reports. Just use your favorite internet search tool for DHS OIG Reports. You’ll find the link on the top few listings.

In federal fiscal year 2019, they did 17 investigations. This seems lower than most years. But I believe that there was a comment from the White House in the recent years that caused OIG to do less investigating. In 2015, they released 65 reports related to FEMA Disaster Recovery – in most years, I can find about 50 reports. If you look at the raw data hear, please know that the federal fiscal year runs from October 1 through September 30. That may remove confusing why data from 2018 appears with 2019 reports. Derogatory

Breathe and accept that, my friend.

2019 DHS OIG Reports

2019 OIG Reports (7 non-FEMA)
Failure 86%

With the 2015 data, we have 65 reports. 11 reports focused on FEMA. Leaving us with 54 reports that deal with how local government and non-profits managed FEMA’s funds. 31 of the reports focused on derogatory findings. 32 of 54… 57% failure rate.

2015 OIG Reports (54)
Failure 57%

Oh my, when I average the two years, I get 71% failure rate.

2015 & 2019 Average
Failure 71%

Failure to follow the laws, rules, policy, procedures, and account for federal funding following a disaster is so rampant that failure is more common than success. Let’s sing out some successes.

2015 Winner Board

Los Alamos County;
Rock county MN;
Knoxville Utilities Board;
Mankato County MN;
City of Kenner Louisiana;
Jefferson Parish Louisiana;
Scott County MN;
Montgomery County MD;
Atlanta GA;
NYNJPA;
South Carolina DOT;
Gwinnett County GA;
Gulf Coast Mental Health Center MS;
Gulfport School District MS.

Palm Beach Florida

DHS OIG 2014 Audits (3)

OIG-15-49D

Palm Beach County, FL got a mixed set of reports. OIG audited them for the period of calendar year 2014. They audited $3.8M of $6.4M award for the 2004 hurricane Frances. OIG wrote: the District generally accounted for and expended FEMA funds according to federal requirements. This OIG-15-49D .

OIG-15-50D

The auditors identified $145,000 in ineligible costs and $46K in duplicate benefits (getting paid twice for the same work or invoice).

OIG-15-51D

In report OIG-15-51D, the auditors identified failed to follow procurement law and record retention requires for $9.2M in contracts. But OIG suggests that the costs were reasonable, therefore they are not recommending any further action.

Failure is Common

Failure is very common. Anecdotally, I know this to be true. As a software developer, my team and I engage with raw grant data routinely. Our mission has been to engage technology to improve the experience people have with disaster funds. I’ve opened one white banker box of paper after another. Mistakes are everywhere. Math errors are common. People following the wrong policy. So easy. Sounds odd? but following the policy for 2015 for a disaster in 2013 gets you the wrong results.

You think this isn’t a problem? FEMA released a new policy guide on June 1st of 2020. FEMA and the president declared disasters in every all 58 states and territories; that’s over 3,000 counties. Nearly every public entity will be receiving some FEMA funds. Psst, that declaration was made in March. I know, this sounds so odd. The pandemic disaster declaration by FEMA falls under the April 2018 policy guide, and not the 2020 guide.

I went to download the older policies. My first effort from the FEMA website gave me a 404 error: page not found. The second try yielded results. There are three versions.

FEMA 404 Message

The bit I find entirely odd is that FEMA informs you that these policy guides have been superseded. Their website absolutely pushes all people to the current PAPPG, the one from June 2020. The impact? Most people will use the wrong policy guide. There are even FEMA people stating you must use the June 2020 policy guide. Precisely contradicted by their own website. I’ll quote:

Version 4 of the PAPPG is effective for all emergencies and major disasters declared on or after June 1, 2020. It supersedes Version 3.1 of the PAPPG which was published on April 1, 2018 and is effective for all emergencies and major disasters declared between August 23, 2017 and May 31, 2020.

FEMA Public Assistance Policy Guide Tweet
Alternates

Risks

When the federal government provides grant funding to an organization, that organization gets undergoes an invisible and powerful transformation. Here in tiny-town Vermont with 500-year round residents clinging to the side of these ancient hills, we lump along century after century arguing over stuff no-one will really remember. In 2011, our operating budget for 40 square miles / 100 square kilometers was just under $1M. The cost of Hurricane Irene approached $5M – five times our budget. We operate with a unpaid and untrained government.

Growing up in a New England town like this one, we had historic town roles such as Fence Viewer, Weigher of Coal. How cute, how archaic. Here, we got rid of those terms within the recent decade. Still, the tax assessors are called listers because they maintain the Grand List. In short, we are citizens engaged in self-governance locked into 400-year-old traditions.

When we got $4.5M in FEMA funds, magically we became an extension of the United States Federal Government. We had to follow all federal procurement laws. We had to follow federal contracting laws. We had to enforce the Clean Water Act and the Clean Air Act. We had to do quarterly reporting. And if you make a mistake, you go to Real Jail.

The biggest risk that tiny towns everywhere face with FEMA funds that FEMA takes its funds away when you foul up.

You make one mistake on the bidding process for a new bridge, and the town loses millions of dollars. That money gets clawed back by the feds.

Cost of Failure

Instead of having the cost of a million-dollar bridge being paid by 328 million taxpayers, that million-dollar bridge gets paid by the 800 property owners. That’s $1,250 per landowning family.

When a small organization, or county, or even state fouls up the management of a FEMA disaster grant, the local taxpayers have to carry that load, often alone.

The damage from the disaster is already massive and devastating. 

FEMA brings hope and cash. We grab and spend. We prioritize returning to normal, a short-term goal, over the long-term implications. And we make mistakes – and some people do commit fraud, also.

Months, in fact, years later investigators pick through FEMA data and then they arrive in communities looking for more data.

The immediate cost of failure is money. FEMA giveth and FEMA taketh away. When they take the money away, the organization has to recapture that money from something: cash reserves, taxes, bond, loans, or fund raising.

If OIG finds that the mistakes also involved fraud, then criminal investigations follow with the FBI. People go to jail. The people at the door hold plastic credentials and wear nylon windbreakers or suits. That day is worse.

DHS Agent

I had those two guys knock on my door in 2013. I bade them welcome, offered tea and comfortable chairs. Then they said: We’re inspectors with Homeland Security. Me: I said – Right you introduced yourselves. How can I help?

I was so relaxed and calm and very casual with two federal agents. They started telling their story – a story of criminal fraud involving a federal credit card and federal employee. Then the surprise showed on my face. “Really???”

I say: “I thought you guys were doing background checks on another of my friends”. Then they looked at me oddly. “Sure”, I say “much of my career I have carried a wide variety of federal security clearances and as such so do my friends – every few years someone knock on a door to check up.”

But no, someone (and not me) was going to prison for this effort. I held evidence and data they needed. Well, I did until I turned it over instantly. Here you go.

It’s just that easy. You may not even know you are being investigated. Then two lovelies arrive asking questions. Boom, you are done.

$35M Clawback

Returning to my 2019 research, I’ll show that OIG asked that FEMA claw-back $35M from these communities.

  • Jackson County FL, approximately $3M
  • Nashville-Davidson County TN, half million
  • Chippewa Cree Tribe from the Montana area: over $22M
  • Ascension Parish School Board, nine million
DHS OIG Claw Back

Jackson County

Let’s look at the first one. OIG-19-12 – Jackson County. I’ll quote

Jackson County did not always properly account for and expend Federal Emergency Management Agency (FEMA) grant funds according to Federal regulations and FEMA guidelines. This occurred because the Florida Division of Emergency Management (Florida) did not fulfill its grantee responsibility to ensure the County followed applicable Federal grant requirements. FEMA, in turn, did not provide the oversight needed to ensure Florida, as the grantee, carried out its responsibilities.
Without adequate oversight, the county did not follow procurement law in awarding $2.7 million. Another $400K in material costs were not documented completely.

DHS OIG Report 19-12

Listen, don’t blame the regulations on me. These regulations exist to prevent corruption and force organizations to follow relatively standard process when being stewards of our tax moneys.

For a 2014 disaster, this county got $28 million in disaster recovery grants from FEMA. OIG audited approximately $25M. And recommends that just over $3M be returned. That is about 11% of the grant funds. This issue is unresolved. I have no idea if the funds are actually being returned. This process can take a while.

This error may cost every resident of the county $60. The costs shift from the national tax base to the local tax base.

No jail time, just a tax increase.

Chippewa Cree Tribe

I know nothing about the Chippewa Cree Tribe, so I looked them up in Wikipedia. The population of the federally recognized tribe is 3,323 people. So at first blush, a derogatory finding of $22.3 million finding in the OIG report 19-06 likely won’t go well.

Imagine waking up on a random Tuesday to read this in a public document from our federal government:

The Tribe failed to manage a $32.4 million Public Assistance Program grant from FEMA according to Federal regulations and FEMA guidelines. As a result, FEMA has no assurance that expenditures the Tribe claimed for Project 2 (engineering and design), and plans to claim for Projects 132 (facility construction) and 133 (site preparation) are valid, allowable, or eligible. Therefore, FEMA should disallow about $22.3 million of the grant award for these three projects. The findings discussed in this report occurred in part because the Tribe was ineffective in managing day-to-day grant activities and did not comply with Federal procurement regulations or its own procurement procedures when awarding six prime contracts. In addition, the Tribe had poor cost accounting practices and inadequate financial administration procedures.

DHS OIG 19-06

Let me do the math on this. FEMA provided $32 million in grants and now is being advised to pull-back $22M. That $22M has been spent already.

So, a small government of 3,000 people will go to a bank to borrow $22M?

Or maybe this Tribe does a one-time tax increase of $7,000 to every resident?

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Blame

Does the failure sit on the untrained and over-tapped resources of a small Florida county of 50,000 people?

Does the failure sit on the volunteer government of tiny-town Vermont?

Or does is the failure somewhere else?

Will it ever change?

I am so tired of this. Year after year after year after year, organizations fail to follow the same bloody set of rules and policies. It is so bad, I made a bad joke of it calling them the 4 deadly sins.

  1. Failure to document costs
  2. Failure to execute procurement correctly
  3. Failure to have a procurement policy
  4. Failure to prevent duplicate submissions of costs

That doesn’t even touch on the math mistakes, the recording mistakes, the makes involving picking the right FEMA policy and FEMA equipment pricing schedule.

We, our government, arrives in town with a dark blue polo shirt and a checkbook. The staff and contractors give inconsistent advice and contradictory advice. They bow to a ton of political and economic pressure to get money moving – and quickly: “heckuva job, Brownie”.

We want that photo op. We want that school open.

We want to feel normal!

We want that sense that we helped and we’re back. Boston Strong, or what ever the phrase of the moment for your community is.

I agree the policies are a bit thick. They exist to encourage fairness, openness, and they echo national values that harken back to our founding.

I know that small government entities and non-profits struggle to survive on any normal Monday.

Hey, I know you just got whacked by a pandemic, or hurricane, or tornado, or flood, or terrorist act – but I’ll need now need you to follow these rules you’ve never seen before. And, while you are doing that, make sure that environment laws are enforced too. That’s a dear. See ya. You’ll get money real soon.

That’s the real failure isn’t it?

Created Perfect Environment for Failure

Sure, the failure is our federal governments. We have created a perfect environment to make sure that the Chippewa Cree Tribe out west fails when we hand them $22M to recover from a devastating flood and series of mudslides. Just like we ensured that Jackson County Florida fails.

Just like 75% of the organization who received federal disaster funds.

Yes, of course, there is real fraud going on too. I will explore in the future.

This massive failure rate is not indicative of massive fraud, nor of massive failure on small governments in our country.

It is our own failure, it is the shared failure of our federal government that creates this fouled up environment. Shame on us.

Psst, there are ways forward, I do have some hope… I think