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1T.S. Department of Honielarld Security 3003 Chamblee-Tucker Road Atlanta, Georgia 30341 orneland q ITD 5 ; Security June 30,2004 MEMORANDUM TO: Joseph F. Picciano FROM: Field Office Director SUBJECT: University of the Virgin Islands FEMA Disaster No. 1067-DR-VI Audit Report No. DA-30-04 The Office of Inspector General (OIG) audited public assistance funds awarded to the University of the Virgin Islands (UVI). The objective of the audit was to detennine whether the UVI accounted for and expended FEMA funds according to federal regulations and FEMA guidelines. The UVI received an award of $4.4 million from the V.I. Office of Management and Budget (OMB), a FEMA grantee, for debris removal, emergency protective measures, and repairing and providing code upgrades to buildings damaged as a result of Hurricane Marilyn in September 1995. The award provided 90 percent FEMA funding for 18 large projects and 98 small projects.' The audit covered the period September 1995 to August 2002. During this period, the UVI claimed $4,441,740 (see Exhibit) and received $3,943,38 1 of FEMA funds. The OIG performed the audit under the authority of the Inspector General Act of 1978, as amended, and according to generally accepted government auditing standards. The audit included tests of the UVI's accounting records, a judgmental sample of expenditures, and other auditing procedures considered necessary under the circumstances. ' According to FEMA regulations, a large project cost $43,600 or more and a small project cost less than $43,600. RESULTS OF AUDIT The Stafford Act prohibits the use of public assistance funds for damages covered by insurance. As such, grant recipients are responsible for pursuing comn~ercially reasonable insurance recoveries and crediting FEMA projects with all applicable proceeds. IHowever, the UVI's claim included $1,8 l8,63 8 of building repair cost (FEMA share - $1,636,774) that was covered by insurance. Specifically, the UVI received $1,586,953 of FEMA funds under 11 projects for losses that were fully covered by insurance. The UVI received $3.1 million of insurance proceeds and incurred project costs of $2.2 million for these projects. Thus, insurance proceeds were more than sufficient to cover the costs of repairs, alleviating the need for FEMA funds. The affected projects are: Project Insurance Amount Questioned Proiect No. Costs Proceeds ApprovedIClaimed Costs 85205 S 417,479 S 464,592 S 363,559 $ 363,559 85212 1,130,760 977,198 977,198 85219 646,254 1 14,474 114,474 85202 184,400 26,737 26,737 85215 27,297 11,364 11,364 852 18 122,515 7,106 7,106 85222 55,648 11,121 11,121 85224 44,394 7,865 7,865 85226 24,013 13,684 13,684 85234 26,2 1 1 12.289 12,289 85247 394.285 Total $3,120.369 The insurance proceeds of $414,846 for three other projects covered only part of the $1,170,767 repair costs. In this case, FEMA should have funded the short fall of $755,921. However, the UVI claimed and received FEMA fimds of $987,606, or $23 1,685 in excess of needs. Costs Project Insurance not covered Amount Questioned Proiect No. Costs Proceeds by Insurance ApprovedIClaimed Costs 85207 $ 177,251 $ 80,354 $ 96,897 $139,863 $ 42,966 85235 122,104 56,758 65,346 66,754 1,408 85240 871,412 277,734 593,678 780,989 187.3 11 Total $1.170.767 $414:846 $755.921 $987.606 $23 1:685 Ln an attempt to determine the cause of the above conditions, the OIG discovered that FEMA's Caribbean Office sent an insurance expert to the UVI to review insurance matters and ensure that appropriate credits were applied to the various projects. However, the efforts of the insurance expert were not discernible, and there was no evidence that a review of insurance recoveries was done on a project by project basis. Moreover, the UVI based its claim on the amounts approved by FEMA without regard to actual insurance recoveries. RECOMMENDATIONS The OIG recommends that the Regional Director, in coordination with the OMB: 1. Disallow the $1,8 l8,63 8 of questioned costs, and 2. Verify insurance recoveries on a project by project basis and ensure that future FEMA grants are credited with the appropriate amounts. DISCUSSION WITH MANAGEMENT AND AUDIT FOLLOWUP The results of the audit were discussed with FEMA, grantee, and W I officials on June 8,2004. UVI officials agreed with our findings, but indicated that their records may not reflect all costs for building repairs. They stated that they would research records for additional repair costs. Please advise the Atlanta Field Office-Audit Division by September 30, 2004, of actions taken to implement our recommendations. Should you have questions concerning this report, please contact me at (770) 220-5242. Exhibit Project Number 66813 38614 66686 85203 85205 85207 85212 85213 85219 85221 85223 85228 85235 85240 85249 84184 7765 1 58674 Sub-totals 85202 85215 852 18 85222 85224 85226 85234 85247 All other Small projects Sub-total Totals University of the Virgin Islands Disaster No. 1067-DR-VI Schedule of Clamed and Questioned Costs Large Projects Amount Amount Amount Awarded Claimed Questioned S 79,056 S 79,056 $ 0 98,402 98,402 0 500,000 500,000 0 63,902 63,902 0 363,559 363,559 363,559 139,863 139,863 42,966 977,198 977,198 977,198 62,838 62,838 0 114,474 114,474 114,474 109,745 109,745 0 76,305 76,305 0 56,173 56,173 0 66,754 66,754 1,408 780,989 780,989 187,311 159,530 159,530 0 32,245 32,245 0 4,428 4,428 0 42,003 42,003 0 $3,727,464 $3,727,464 $1,686,916 Small Proiects 26,737 11,364 7,106 11,121 7,865 13,684 12,289 41,556 582,696 $ 714,418 $4.441.882