APRIL 2014 97.039 HAZARD MITIGATION GRANT PROGRAM State Project/Program: Federal Authorization: State Authorization: N.C. MITIGATION Federal Emergency Management Agency Robert T. Stafford Disaster Relief and Emergency Assistance Act, Section 404, 42 U.S. C. 1521 et seq., and subpart N of the CFR. Sections 206.431, 206.432, and 206.433(a) of the CFR N.C. Department of Public Safety Agency Contact Person Program and Financial Chris Crew State Hazard Mitigation Officer Hazard Mitigation Branch Division of Emergency Management 4105 Reedy Creek Rd Raleigh, NC 27607 (919) 825-2305 John.Crew@ncdps.gov Address Confirmation Letters To: Jamelle White NC Department of Public Safety Controller s Office 4220 Mail Service Center Raleigh, NC 27699-4220 919.716.3613 Jamelle.White@ncdps.gov The auditor should not consider the Supplement to be safe harbor for identifying audit procedures to apply in a particular engagement, but the auditor should be prepared to justify departures from the suggested procedures. The auditor can consider the supplement a safe harbor for identification of compliance requirements to be tested if the auditor performs reasonable procedures to ensure that the requirements in the Supplement are current. The grantor agency may elect to review audit working papers to determine that audit tests are adequate. I. PROGRAM OBJECTIVES The purpose of the Hazard Mitigation Grant Program is to provide states and local governments financial assistance to implement measures that will permanently reduce or eliminate future damages and losses from natural hazards through safer building practices and improving existing structures and supporting infrastructure. II. PROGRAM PROCEDURES The HMGP is a state-administered federal program to which local governments submit project applications (FEMA Region IV Hazard Mitigation Grant Program (HMGP) Application (no form number) on behalf of the affected citizens in their communities. In North Carolina, the Division of Emergency Management, within the Department of Public Safety administers HMGP. The State solicits reviews, prioritizes and selects applications from the communities for funding and forwards the applications to FEMA for review. FEMA reviews each project application to ensure that projects meet environmental regulations and minimum eligibility requirements. The amount of funding available for these projects is 20% of the Federal cost share provided during a Disaster Declaration, due to the fact that North Carolina is an Enhanced Mitigation State. Projects are funded on a 75% Federal and 25% State cost share ratio. In addition to a State Administrative Plan and a State 409 Plan, the forms required are as follows: SF-424 fact sheet and a project narrative and description. B-4 97.039 1
FEMA approves the State application and grants the award through an award transmittal letter and utilizes a Comprehensive Cooperative Agreement (CCA), which includes other FEMA grant awards. The State awards certain grant monies to local governmental units through a local application process and subsequent State/local grant agreement. III. COMPLIANCE REQUIREMENTS A. Activities Allowed or Unallowed Only relevant and necessary measures taken to eliminate future losses from natural hazards through safer building practices and improving existing structures and supporting infrastructure and included in the State/local grant agreement are allowed. The test of eligibility of a given activity will be whether it contributes to a State s capability to reduce losses to disasters. It is incumbent upon each State to develop, with the assistance of the FEMA Regional Mitigation Divisions, Cooperative Agreements that effectively utilize the Mitigation Assistance funds for this purpose. Mitigation Assistance combines three categories of assistance: State Hazard Mitigation Program (SHMP) assistance (for which all States and Territories are eligible); Hurricane Program (HP) hazard assistance (for which States and Territories subject to tropical storm hazards are eligible); and Earthquake Program (EP) hazard assistance (for which States and Territories subject to seismic hazards are eligible). In accordance with North Carolina s CA, eligible projects must solve problems independently or constitute a functional portion of a solution to the threat of hazards. The North Carolina HMGP has five (5) categories of eligible activities: Category I Acquisition/Elevation of Primary Residences (Note: Participation by homeowners is voluntary. They are offered pre-disaster fair market value and ownership of vacated land is transferred to local governments who must permanently restrict its use to open space. Category II Retrofitting of Critical Public Facilities (e.g. flood-proofing and providing for backup power connections to shelters, hospitals, emergency operation centers, water treatment plants, and other such public facilities). Category III Flood-proofing/Acquisition of Businesses. Category IV Storm-water Management (e.g., design of culverts, channelization, etc.) Category V Other (e.g. Recovery Education/Outreach Programs, Mitigation Plans, etc.). Projects in categories I-IV must prove to be cost beneficial (i.e.: achieve a b/c ratio of 1/1 or better) when analyzed using the applicable FEMA Benefit-Cost Analysis Module. Projects in category V are exempt from cost/benefit requirements. In addition, proposed HMGP projects must go through the state s environmental clearinghouse process, address repetitive problems, be cost-effective and in general, reduce risks to public health and safety. 1. Review Comprehensive Cooperative Agreement and/or State/local grant agreement with related budget. B-4 97.039 2
2. Test expenditures and related records for adherence to approved budget activity. B. Allowable Costs/Cost Principles Only relevant and necessary costs as authorized by the FEMA-State Agreement and contained in the State/local grant agreement and costs in 2 CFR for local governments and A-122 for private non-profit organizations are allowed. 1. Review Comprehensive Cooperative Agreement and/or State/local grant agreement budget. 2. Test expenditures and related records for adherence to approved budget and to 2 CFR cost principles for local governments and A-122 cost principles for private non-profit organizations. C. Cash Management Funds are submitted to all grantees on a reimbursement basis. The only exception to this is when a relocation package is being closed and the contractor does not have sufficient funds on hand, a request is made for the exact amount of the closing amount to arrive on the day of the closing. No additional testing is required since funds are not advanced to grantees. D. Davis-Bacon Act All funds from this grant are disbursed to local units of government in accordance with their grant agreement. As a result, it becomes the responsibility of the local unit to ensure that construction contracts in excess of $2,000 are administered in compliance with the Davis-Bacon Act. Test expenditures for payrolls for construction contracts in excess of $2,000 to ensure that the payroll was in compliance with the Davis-Bacon Act. G. Matching, Level of Effort, Earmarking FEMA can fund up to 75% of the eligible costs of each project. The State or project applicant (grantee) must provide a 25% match. The 25% non-federal share can be a combination of cash, in-kind services, or materials. The amount of funding for the program is based on 15% of all other disaster grants. 1. Review FEMA-State Agreement and/or State-local agreement. 2. Test the expenditures and reports to ascertain total cost of project and verify that the nonfederal matching requirements were met. B-4 97.039 3
3. Verify the source of the non-federal match. H. Period of Availability of Federal Funds Program funds are to be obligated within 2 years after the disaster declaration (Policy effective date 12/15/97). Project completion deadlines for grantees are specifically stated in the grant agreement on a project-by-project basis. Verify that the funds were encumbered within the two-year timeframe after the disaster declaration. I. Procurement and Suspension and Debarment According to OMB Circulars (A-102, A-110, A-21, 2 CFR and A-122) and as stated in the grant agreement; the grantee must comply with Federal Debarment and Suspension regulations by requiring completion of the Certificate Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-Lower Tier Covered Transactions by sub-recipients prior to entering into a financial agreement with the sub-recipients for any transaction as outlined below: Any procurement contract for goods and services, regardless of amount, under which the subrecipients will have a critical influence on or substantive control over the transaction. The grantee is responsible for monitoring the submission and maintaining the official document for review by the Hazard Mitigation Staff. 1. As stated in the grant agreement, verify that all contracts have received prior approval by the Hazard Mitigation staff prior to execution. 2. A certification is required regarding debarment and suspension from the contractor. K. Real Property Acquisition and Relocation Assistance All applicants must comply with federally mandated negotiation, acquisition and relocation requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. Verify applicant s adherence to URA and RPAP Act. L. Reporting Each quarter, the State completes and submits to FEMA a Financial Status Report that reveals outlays for all approved projects. Also, the State will submit to FEMA a quarterly performance report on the implementation schedule, any delays, project overruns, and any problems that may have been encountered. B-4 97.039 4
Compliance Supplement Grantees submit monthly Cost Reports to the State in order to be reimbursed for their expenditures. The Cost Report is a one-page document, which the grantee uses to report its monthly expenditures according to the five major budget categories (personnel, contractual, travel, supplies, and equipment). Periodic progress reports may be required to be submitted to the State 1. Review State/local grant agreement with approved budget and reporting requirements. 2. Verify that expenditures are classified properly and within approved budget categories. 3. Test Cost Reports to agree the amounts reported to the State for reimbursement to the expenditures in the grantee s accounting records. B-4 97.039 5