Magazine article Government Finance Review

Documenting Disaster Recovery Costs

Magazine article Government Finance Review

Documenting Disaster Recovery Costs

Article excerpt

Good record keeping is the basis for successful cost recovery from federal and state disaster assistance programs. Some points to consider.

Large disasters such as Hurricane Hugo, the Loma Prieta Earthquake and Hurricane Andrew have a major impact on individuals, governmental and nonprofit organizations, and the impacted areas' economic activity and base. Governments expend resources in preparing for, responding to and recovering from a disaster event. As an event progresses from preparatory activities to response and repairs to postevent recovery, the last thought of those caught up in the long list of unanticipated activities is record keeping. Good record keeping, however, is the basis for successful cost recovery from federal and some state disaster assistance programs. Failure to produce adequate expenditure records of disaster-related activities will severely limit an affected jurisdiction's ability to recover disaster-related costs from these programs. Participation in federal disaster assistance programs is long term and detail intensive.

Federal Relief

When a disaster event is beyond the response capability of a state and impacted local government(s), the President may declare an emergency or major disaster upon a governor's request. This makes a variety of federal resources and programs available, one of which is administered by the Federal Emergency Management Agency (FEMA). FEMA is the lead agency to fund and coordinate the assistance programs under the Robert T. Stafford Disaster Relief and Emergency Act (PL 100-707, 1988- an amendment to PL 93-288). The Stafford Act substantially broadened the federal assistance programs and increased the states' responsibility and flexibility in administering the programs.

In addition to direct federal assistance, there are two major federal disaster assistance programs: 1) Individual Assistance (IA) to assist with loans and/or grants for losses suffered by individuals and families and 2) Public Assistance (PA) to assist with grants to public agencies and some nonprofit organizations. Eligible organizations with disaster-related costs and damages, such as a state or state entities, local governments and "governmental-type" nonprofit groups, become applicants (subgrantees) in FEMA's PA program. The state serves as the administrator (grantee) of this program. Public Assistance is a cost-sharing program. Under the Stafford Act, the federal government is required to fund not less than 75 percent of "net eligible costs;" the remaining nonfederal share is the responsibility of the state and local governments. In some severely impacted areas, the President may, and in some instances has, fully funded the net eligible costs.

Required Forms and Procedures

A massive effort is activated upon a Presidential disaster declaration. FEMA and the state brief public agencies in the declared area on the PA program. Subgrantees incurring disaster related costs open their PA application by filing a Notice of Interest (NOI). This federal form identifies the types of public property damages and response costs incurred.

It is incumbent on the subgrantee to provide a thorough listing of all damage sites and cost pools related to disaster preparedness, response, repair and recovery activity. The subgrantee faces a series of (extendable) deadlines to identify its losses to the state and FEMA. Failure to identify sites and costs in a timely manner may result in a loss of available federal funds, hence the importance of accurate and thorough record keeping.

Inspection teams composed of a federal, state and local representative prepare quantitative estimates of the scope and cost of work performed or to be performed as a result of the declared disaster event. The inspection teams prepare a document called a Damage Survey Report (DSR) for each site or cost

pool. A DSR is a multi-page, federally supplied and prepared form to define and delimit the net eligible work and costs of a subgrantee's response, repair and restoration efforts. …

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