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The Associated Press reported on September 25, 2007. New Orleans--nearly 2, 000 pages spell out in excruciating detail something that is plain to Virgil Tiller but not the Federal Emergency Management Agency. His school was destroyed and needs to be rebuilt.
FEMA has yet to find the school is 51 percent destroyed--the clerical benchmark that must be reached before the agency will pay to completely rebuild something. And so, two years after Katrina, while the state and federal government haggle over the extent of the damage, the school lies empty, a ruin of toppled bricks, sagging roofs, and missing window panes.
"The story could be written that the federal government is nitpicking," a FEMA spokesperson said. "The other side is that we're trying to be good stewards of the taxpayer dollar."
When your city or jurisdiction suffers a disaster and emergency response is needed, without question the first priority is taking care of life and property But after that first response, the financial reality of a disaster looms large for most governments. Doing some planning and preparing for the financial cost recovery aspects of a disaster will serve you well. And being prepared to deal with the Federal Emergency Management Agency (FEMA) and state offices of emergency services is key. This article is intended to give local government finance officials some basic information for dealing with disaster finance realities.
My first disaster was a storm in the mid-1980s. The San Francisco Water Department received about $800,000 from FEMA for storm-related damage. Seven years later after all the auditors were done, we kept about $70,000. Clearly we needed to do something differently. When we had the 1989 earthquake, we actually had state auditors in our offices helping us apply for more FEMA reimbursement than we had requested. Trust me, this is a better place to be.
When you are dealing with a disaster, you will often be working with staff from your state Office of Emergency Services (OES) or private contractors hired by FEMA. They are all representing FEMA and trying to follow FEMA rules. In this article, when I say FEMA, I am including all of these others who are involved.
WHAT CAN YOU DO NOW?
DOCUMENT, DOCUMENT, DOCUMENT
A good accountant knows that documentation of costs should be an important part of any request for reimbursement. What is different here is the kind of documentation that may be needed and the long time period that may be involved in reviews of that documentation.
After any major disaster strikes, you should expect to be dealing with FEMA for anywhere from five to seven years before the incident is closed. FEMA staff that you will be working with will change. FEMA rules will change. Items that have been approved at one level will be denied at another level. The only protection you have is to document everything that is humanly possible to document.
Pictures. Yes, a picture is worth a thousand words. Any conversation about the need for emergency repair work is much easier if you have a picture of the situation before and after the emergency repair work is done. It is worthwhile to have disposable cameras in vehicles that might be called out to do emergency repairs and train people to use them. While you're at it, put a whole emergency financial kit in a baggy in the glove compartments of your vehicles. It can include a disposable camera and a couple of forms where staff can list the location of the emergency work, what staff are on location between what hours, and whether any equipment was used. A picture and this kind of on the spot documentation will be worth its weight in gold five years later when an auditor asks you what happened at a specific site.
Account codes. Set up an emergency accounting code structure. Why wait for an emergency to occur to set up tracking codes? Set them up now. Even a rudimentary coding system with a code for each department or division for charging time and costs for an emergency is a good idea. As the emergency response unfolds, you can and should add tracking codes for specific locations or other designations of costs needed for each FEMA Project Worksheet (PW), the form they will use for tracking costs and providing approvals.
You will need to track all costs at the PW level. FEMA prefers to have extremely specific PWs. You can often get by with one PW covering all police work on the first day of an emergency and separate ones covering all fire, emergency medical, public works, and other immediate costs. But after that very immediate response, FEMA is going to want to see detailed charges--usually down to very specific geographical detail. You need to set up tracking codes at the PW or lower levels to insure reimbursement. This applies to force account expenses, contractor costs, and any other miscellaneous expenses. You should set up your accounting structure to accommodate this level of tracking.
OTHER THINGS TO DO BEFORE AN EMERGENCY
As-needed contracts. Establish as-needed contracts for emergency work using your jurisdiction's bidding process. There are many reasons to do this. First, in a regional disaster there will be more work than there will be contractors available--so you want to make sure you are served first through a pre-existing contract. Also, FEMA will only reimburse what they term "reasonable" costs and if you are in a bidding war after a disaster to get overloaded contractors to do your work, FEMA may consider the costs unreasonable.
Overtime policy. Establish a policy on emergency overtime payment for salaried staff. Most organizations have a policy that high-level staff does not earn overtime. That policy makes perfect sense under ordinary circumstances. But what if your accounting manager is working seven days a week, 12 hours a day for a prolonged period of time in the aftermath of a major storm or earthquake? It would be reasonable to pay a higher rate than base salary. If you have not established the policy before the disaster hits, FEMA will not reimburse you for a new policy you put into place after the disaster.
Training. San Francisco currently has a good relationship with FEMA and state OES staff. They are more than willing to come on-site and provide detailed training for how to track costs to provide for FEMA reimbursement. It also helps to build a relationship of trust indicating that we are only trying to do what is right--not to rip off the federal government. This has been most useful and I believe it will continue to serve us well as we deal with disaster recovery in the future.
KNOW THE RULES OF THE GAME
When a disaster strikes, it helps to know the FEMA rules. The general guideline is that FEMA will only pay to replace what was damaged--not for an improvement. While that seems quite straightforward, see how this plays out in real life with changes such as stricter building codes or advances in technology
What is an improvement? During our 1989 earthquake, the card catalogue in our public library fell apart and thousands of cards ended up on the floor. FEMA was quite willing to pay to have people rebuild the old wooden card catalogue and realphabetize the cards. But it was cheaper and better to buy a computer and scanner, scan the cards into the system, and have an automated card catalogue. Even though it was cheaper to do this alternative, it threw FEMA for a loop because it was an "improvement." We had our computer/scanner option approved and denied and ultimately approved at seven levels over a period of nine years after the disaster.
I mentioned that in my first FEMA experience we received about $800,000 for storm damage repairs but had to return almost all of it many years later. The major item involved in the storm damage was a road that was not in good shape and fell in a storm-related landslide. It made sense to us to fix the road so that it was in good shape. We fixed the road--but FEMA does not pay for improvements so the cost of the entire project was denied.
This also means that you need to do your own cost/benefit analysis to make sure that it is worth your while to make claims for certain types of reimbursement. After our last earthquake we had many buildings with cracks in the walls. We met with FEMA and learned that their policy was to pay for the crack to be repaired and for the wall to be repainted--but they would only pay to paint one foot on each side of the crack. We were told if we painted the whole wall, FEMA would consider that to be an improvement and would pay nothing. We could not just pro-rate the cost of the two feet they would pay to paint and pay for the rest ourselves because that wasn't allowed. It was easier for all concerned to just repair the walls ourselves in a way that made sense and not charge FEMA at all.
WHERE IS THE LINE ON "DISASTER-RELATED?"
FEMA will only pay additional, disaster-related costs. One of the most difficult issues relates to employee compensation. The result is that it is, counter-intuitively, often cheaper to hire contractors than assign work to city staff.
You should understand how FEMA will treat "force account" or city staff labor versus contractors. FEMA will rarely question paying a bill from an outside contractor as long as the amount seems reasonable. However, FEMA takes a much different view of reimbursements for emergency work done by your staff. For example, if you reassign staff to do clean-up work during their regular hours, FEMA will not reimburse you since they will not see any additional cost. If you then have to pay staff overtime to catch up on their normal work, FEMA will not pay that either because it is not disaster related. If you hire a contractor to do the work, you avoid the issue. ("Force account" costs also include equipment and supplies, but these are normally relatively straightforward so I will skip them. But do not try to charge equipment for 24 hours because it was at the disaster site for 24 hours when you only have an operator for eight hours.)
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