1.1.8. Department of Homeland Security FEMA Region 6 800 N. Loop 288 Denton, TX 76209 June 30, 2016 Reference: Regional Tracking No: R6-2016-NM-2012 Jay Mitchell, Cabinet Secretary New Mexico Department of Homeland Security and Emergency Management PO Box 271 1 Santa Fe, NM 87502 Attention: Sarah Petersen Dear Secretary Mitchell: The purpose of this letter is to provide the results of the grant monitoring site visit conducted by the Federal Emergency Management Agency (F EMA), Grant Programs Directorate, Region 6 Grants Management, Mitigation and Recovery Divisions from May 16 through May 20, 2016. Our monitoring visit included ?nancial grant monitoring and select programmatic monitoring for EMA grant programs. Additionally, to prepare your organization for this monitoring, staff members from FEMA Region 6 were onsite at your location from March 21 through March 24, 2016, and provided additional support related to all of the information we requested relevant to the event. Our previous grant monitoring site visit took place on July 6 through July 10, 2015, during the visit we documented numerous de?ciencies in the overall grant management program. In the short time since the visit, we have observed improvements across all program areas. Improvements exists in overall records management, added internal controls, the development and implementation of new policies and procedures, grant performance tracking, improved documentation on expenditures and streamlining of grant related processes. We would like to commend New Mexico Department of Homeland Security and Emergency Management on all of your hard work and encourage you to continue progressing. We examined 34 grant awards managed by these awards are listed in Enclosure 1. Our monitoring also included testing of a random sample of 10 grant reimbursement drawdowns totaling $4,662,481.74 in FEMA Public Assistance (PA), Hazard Mitigation Assistance (HMA), and Preparedness grant funding. Grant Files Grant and subrecipient ?le requirements are addressed in Title 44 of the Code ofFederal Regulations (CF R) Part 13 and 2 CFR Part 200, as appropriate, which identify Speci?c Mr. Jay Mitchell June 30, 2016 Page 2 documents to be included in a grant ?le such as: documentation to support ?nancial transactions such as invoices, ledgers, transaction reports, cancelled checks; ?nancial status and progress reports; application documentation including SF-424, assurances, and lobbying forms; requests for payments (if applicable); monitoring related information such as letters, protocols, and checklists; contract information such as bid notices, awarded contracts, and requests for proposals; and matching and cost sharing documentation.'- Although we have observed overall records management improvements, does not have a standard ?le management convention across all programs. This created challenges to ensuring grant ?les contained all required documentation and impacted the overall ?le management review. We observed variability across programs with regard to how ?les were organized. Speci?cally, some programs maintained separate ?les for programmatic and ?nancial information, while other programs maintained one ?le. We did, however, observe checklists that have been implemented under select program areas, which will add to the formalization of the overall records management program. This combined with the addition of a Records Manager, should greatly improve the management of comprehensive records management program. Recommendation 1: should create and implement policies and procedures for maintaining grant ?les. A single comprehensive ?le system would enhance ability to ensure grant ?les contain all required programmatic and ?nancial documentation. Additionally, having comprehensive, up-to-date information for all open grants would assist in the day-to-day management of its programs. Pre-Award Cost Eligibility During the ?le review of projects awarded through Hazard Mitigation Grants Program, two hazard mitigation projects funded through two separate disasters have activities resulting in questioned costs. The ?rst project is DR1936-005, City of Ferguson, the subrecipient incurred $22,024.48 on activities that were performed/delivered before the award of the grant. In accordance with the FY2010 Hazard Mitigation Assistance (HMA) Uni?ed Guidancez, the following line items must be listed separately in the budget: 0 Pre-award cost; 0 Subapplicant management cost. The costs incurred were not identi?ed in the project budget as a pre-award activities. As a result, the costs are being questioned as ineligible for reimbursement. In the second project, DR4153-0017, Nambe Pueblo Debris Flow Barrier project, the sub- recipient incurred pre-award costs of $13,875.74 with High Water Mark. In accordance with the FY2013 Hazard Mitigation Assistance (HMA) Uni?ed Guidance3 in order to be eligible for HMA funding, pre-award costs must be identi?ed as separate line items in the cost estimate of the subapplication. For FEMA grant awards received after December 27, 2014, Title 2- Grants and Agreements (2 CFR ?200) replaces 44 CF ?l3 with respect to grant administrative requirements. 2 FY 2010 Hazard Mitigation Assistance Uni?ed Guidance Part H. Subapplication Guidance, Section H3 3 FY2013 Hazard Mitigation Assistance (HMA) Uni?ed Guidance Part V. Section F.2, Pre-Award Costs Mr. Jay Mitchell June 30, 2016 Page 3 Recommendation 2: should request that the subrecipients amend the necessary contracts to resolve the concerns and provide supporting documentation con?rming compliance to the requirements or return questioned costs to FEMA. Grant and Subrecipient Monitoring Subrecipient monitoring is required by 44 CFR ?13.40 and 2 CFR 200. While this federal regulation does not prescribe the manner in which a recipient has to monitor its subrecipients, it does describe important elements of oversight such as assuring compliance with applicable federal requirements and achievement of performance goals. While generally collects timely performance and ?nancial reports from PA and disaster HMA subrecipients, it does not compare these reports to actual performance prior to project completion nor did we ?nd evidence of validation of this performance reporting, such as consistent onsite monitoring.4 For large PA projects, conducts onsite monitoring of partially or fully completed projects for the purpose of ?nancial reconciliation, but only at the request of subrecipients. By comparison, we did not ?nd documentation of onsite project monitoring of HMA subgrants during our review. of?cials stated they had implemented several informal procedures, such as maintaining spreadsheets with ?nancial data and outlining milestones and target dates to use as triggers and reminders. Additionally, we found that programmatic subrecipient monitoring was being performed consistently on the Emergency Management Performance Grant (EMPG) Program and the Homeland Security Grant Program (HSGP) by but ?nancial and administrative monitoring of EMPG and HSGP subrecipients had not been conducted in excess of two years. During our visit, we found that had adopted a very complex monitoring policy that had not yet been implemented. Without the consistent implementation of a formalized subrecipient monitoring process, has no way to ensure subrecipient compliance with applicable Federal requirements and established performance goals. Moreover, the absence of periodic subrecipient monitoring throughout the lifecycle of grants can lead to undetected costs that should not be charged to grants. Federal grant ?nancial risk mitigation is a shared goal of FEMA and and is addressed in 44 CF ?l3.40. By not conducting monitoring and validation at the subrecipient level, assumes an increased risk that it will be unable to validate FEMA subrecipient performance. Further, ongoing project validation assurances by may in turn expedite subrecipient project closures, as potential subrecipient or project weaknesses can be resolved while projects are underway. Recommendation 3: should implement their monitoring policy for subrecipient monitoring through a phased approach that will allow staff to identify risk 4 Grant monitoring can mean the active surveillance of grants and subrecipients through the assessment of various grant reports submitted by grant recipients and subrecipients throughout the lifecycle of ?nancial assistance. However, the term ?onsite monitoring? addresses the ability to validate the achievement of performance goals consistent with 44 CFR ?13.40 and 2 CFR 200. Mr. Jay Mitchell June 30, 2016 Page 4 through desk reviews that can inform needed site visits. requested and was approved for technical assistance with this implementation as part of their scheduled Grant Management Technical Assistance delivery in July of 201 6. Debarred and Suspended Entities As required by 44 CF ?13.35, ?Grantees and subgrantees must not make any award or permit any award (subgrantee or contract) at any tier to any party which is debarred and suspended or is otherwise excluded ?om or ineligible for participation in Federal assistance programs under Executive Order 12549, ?Debarment and Suspension. We have noted an improvement in this area. Evidence of SAM.gov veri?cation is located in the newer grant ?les which demonstrates that a process has been developed and implemented to support debarment and suspension requirements. Recommendation 4: should continue to implement its policy and/or procedure to require all staff responsible for awarding grants, contracts, and other agreements with federal funds to con?rm that the entity is not debarred or suspended and the steps needed to avoid making an award to such an entity. The policy should be consistently applied across all program areas and evidence of this veri?cation should be captured in the grant ?les. Single Audit Compliance has not submitted its Single Audit for Fiscal Year 2015, as the audit was in progress during our monitoring site visit. As speci?ed in 2 CF Part 200, a grantee that expends more than $750,000 in federal awards in a ?scal year must obtain a Single Audit consistent with Of?ce of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, Non-Pro?t Organizations.5 The report must be submitted nine months after the end of the audit period. Recommendation 5: Once has ?nalized their FY15 Single Audit, they should notify FEMA Region 6 of its completion and submission to the Federal Audit Clearinghouse. We recommend continue to implement established Single Audit policies/procedures to ensure audits are completed in a timely manner. should continue to work with FEMA to resolve all 2015 audit ?ndings. Please provide an estimate on the date of completion in the corrective action plan. Financial Management Accountability Oversight of Withdrawn Grant Funds As part of our overall ?nancial review, FEMA randomly selected a single draw for each of 10 grant reimbursement drawdowns, totaling $4,662,481.74 in PA, HMA, and Preparedness grant funding. produced all required supporting documentation evidencing both the nature of the expenses as well as adherence to proper review for allowability prior to issuing 5 2 CFR ?200 replaces 44 CFR ?13 with respect to grant administrative requirements. With this transition, the threshold is increased to $750,000. Mr. Jay Mitchell June 30, 2016 Page 5 reimbursement to subrecipients. While this represents signi?cant improvement since our 2015 monitoring visit, we did observe that ?nancial documentation is not always included in the grant ?le. However, of?cials stated that they are moving towards a uni?ed ?ling system which will ensure that all subrecipient documents are included in the grant ?le. Recommendation 6 - We recommend that develop and implement a policy to ensure that copies of supporting documentation for transactions are retained in grant ?les. While we noted considerable improvement in ability to obtain supporting documentation from its ?nancial records, consistent adherence to such a policy would ensure that grant ?les contain accurate, up-to-date activity associated with the expenditure of federal funds. We acknowledge that has plans in place for a uni?ed ?ling system and offer our assistance with developing a policy to ensure this ?ling system captures supporting documentation for all transactions. Equipment Management Our review of policies and procedures for equipment management found inventory was properly tracked, but there was no approved written procedure for the use, management, and disposition of equipment as required by 44 CFR There is, however, a draft policy on Property Control that, once implemented, will meet federal requirements. Recommendation 7: should update and implement policies and procedures for the use, management, and disposition of equipment acquired under a grant by the State in accordance with State laws and requirements found in 44 CFR Property control should enable the State to provide a list of all Federally-?mded equipment showing the program through which it was funded. Federal Funding Accountability and Transparency Act (FFATA) In accordance with the Federal Funding Accountability and Transparency Act of 2006 (FFATA) (PL. 109-282), as amended by Section 6202(a) of the Government Funding Transparency Act of 2008 (PL. 110-252), it is the responsibility of the grantee to report all cooperators, contractors, and subrecipients receiving awards of more than $25,000 starting in ?scal year 2010. In order to meet this requirement, the grantee must enter subawards into the Federal Funding Accountability and Transparency Act Sub?award Reporting System (FSRS). To achieve compliance, must enter into FSRS all subawards over $25,000 for ?scal years 2011 through the current ?scal year. Recommendation 8: should develop a policy and procedure, which includes identi?cation of the individuals responsible for setting up accounts in FSRS and reporting requirements for subawards. Technical assistance from FEMA is available for both policy development and implementation of this requirement. Corrective Actions We discussed the ?ndings contained in this letter during our May 20, 2016, ?eld exit brie?ng with of?cials. As we stated at that time, we require a schedule from with proposed corrective actions within 30 days from receipt of this letter. Mr. Jay Mitchell June 30, 2016 Page 6 Again, we would like to commend the staff on all of your accomplishments since the previous site visit. We offer our availability to work with collaboratively to address any outstanding issues if necessary. All correspondence related to this matter should be addressed to: US. Department of Homeland Security/F EMA Region 6, Grants Management Division 800 North Loop 288 Denton, Texas 76209 Attn: David McCoy, Branch Chief Sincerely, Mark D. Price, Director Grants Management Division Region 6 Enclosures cc: George A. Robinson, Regional Administrator Moises Dugan, Deputy Regional Administrator Stacey Street, Director, EMA Grant Operations John Long, Acting Division Director, Region 6 Recovery Division Sandra Keefe, Division Director, Region 6 Mitigation Division Randy Meshell, Division Director, Region 6 National Preparedness Division Mr. Jay Mitchell June 30, 2016 Page 7 ENCLOSURE 1 7' "Grant Number . . . 1 Program 7 Award Amount . Public Assistance $1,894,496.24 Public Assistance $1 1,959,702.73 Hazard Mitigation Grant Program $91,306.00 193 Public Assistance $7,740, 5 54_79 Hazard Mitigation Grant Program $209,530.00 Public Assistance $1,301,133 312 Hazard Mitigation Grant Program $15,000.00 Fire Management Assistance $4,300,099.03 Public Assistance $0,402,795.76 Hazard Mitigation Grant Program $737,815.00 Public Assistance $19,203,21 3.31 Hazard Mitigation Grant Program $2,006,506.00 Public Assistance $5,395,696_73 Hazard Mitigation Grant Program $108,300_00 Public Assistance $42,432,900.49 Hazard Mitigation Grant Program $1,775,330.00 Public Assistance $5,236,860.21 Hazard Mitigation Grant Program $51,914.00 Public Assistance ?1,223,459.79 Hazard Mitigation Grant Program $224,536.00 Fire Management Assistance $2,515,374.00 EMT-2012-PC-0003 Pre-Disaster Mitigation $206,628.25 EMT-2012-PD-0002 Legislative Pre?Disaster Mitigation $98,038.22 EMT-2013-CA-0010 Cooperating Technical Partners $50,000.00 Cooperating Technical Partners $75,000.00 Assistance Program - State Support Services $62,250.00 Mr. Jay Mitchell June 30, 2016 Page 8 EMT-2014-CA-0003 Community Assistance Program - State Support Services Element $120,290.00 EMT-2015-PC-0001 Pre-Disaster Mitigation $200,625.00 Emergency Management Performance Grant $3,889,089.00 Emergency Management Performance Grant $3,801,166.00 BMW-2013-SS-00152 Homeland Security Grant Program $6,605,865.00 Emergency Management Performance Grant $3,992,978.00 EMW-2014-SS-00030 Homeland Security Grant Program $6,380,317.00 EMW-2015-EP-00066 Emergency Management Performance Grant $3,981,883.00 Mr. Jay Mitchell June 30, 2016 Page 9 ENCLOSURE 2 PUBLIC ASSISTANCE GRANTS MONITORING SITE VISIT NEW MEXICO May 16 - 20, 2016 Dec PW Applicant County Cat Close/Open Comment (There are no open, large or small projects in this declaration) 1 NA DR-I 783 0094 I Ruidoso I Lincoln Open I Program and Financial ?le review DR-I 936 I 241 I Farmington I San Juan I Open I Program and Financial ?le review (There are no Open, large or small projects in this declaration) NA I 26 Pueblo of Acoma Statewide Open Program and Financial file review 34 Grants Cibola Open Program and Financial file review DR-4079 93 Alamogordo Otero A Open Program and Financial ?le review 74 Ruidoso Lincoln Open Program and Financial ?le review DR-4148 192 Cochiti Pueblo Statewide Open Program and Financial ?le review I72 Sandia Pueblo Statewide Open Program and Financial ?le review DR-4152 325 NM Spaceport Authority Socorro Open Program and Financial ?le review 72 Farmington San Juan Open Program and Financial ?le review 344 Las Vegas San Miguel Open Program and Financial ?le review 33 Acequia Junta Cienaga Rio Arriba Closed Program and Financial ?le review 25 Acequia de la Conception San Miguel Closed Program and Financial ?lc rcvicw 16 Rio Arriba County Rio Arriba Closed Program and Financial ?le review 45 Santo Domingo Pueblo Statewide A Open Program and Finamial ?le Mr. Jay Mitchell June 30, 2016 Page 10 DR-4 I 99 23 Nambe Pueblo Statewide Closed Program and Financial ?le review 32 Eddy County Eddy 3 Closed Program and Financial ?le review 43 Eddy County Eddy open Program and Financial ?le review 44 Eddy County Eddy Open Program and Financial ?le review FM-2918 I 5 I NM Dept. of Public Safety I Statewide I I Open I Program and Financial ?le review FM-5026 I 2 I NM EM NR Dept. I Statewide I I Closed I Program and Financial ?le review HAZARD MITIGATION GRANT PROGRAM GRANTS MONITORING SITE VISIT - NEW MEXICO May 16 20, 2016 DR I Project I Recipient/Sub-Recipient I County I Close/Open I COmment 1783 I 1 I Dona Ana County I Dona Ana I Open I Program and Financial ?le review 1936 I 5 I City of Farmington/Porter Arroyo I San Juan I Open I Program and Financial ?le review 4047 Lincoln County Hazardous fuels reduction and IO defensible space Lincoln Open Program and Financial ?le review 4079 I 8 I Montoyas Arroyo Bank Stabilization Open Program and Financial ?le review 4152 16 Dexter Early Warning System Statewide Open Program and Financial ?le review/Site Visit 17 Nambe Pueblo Debris Flow Barrier Statewide Open Program and Financial ?le review/Site Visit 4I51 3 Santa Clara Pueblo Mitigation plan update Statewide Open Program and Financial ?le review 4 Santa Clara Communications Initiative Statewide Open Program and Financial ?le review 4197 I 1 I State Management Costs Statewide Open Program and Financial ?le review 4199 1 State Management Costs Statewide Open Program and Financial ?le review 3 City of Las Cruces Flood Warning System Open Program and Financial ?le review Mr. Jay Mitchell June 30, 2016 Page 11 NON-DISASTER MITIGATION GRANTS MONITORING SITE VISIT NEW MEXICO May 16 20, 2016 Grant/Project Sub-Recipient County Close/Open Comment EMT-2012-PC-0003 PDMC-PL-06-NM-2012-OOI Valencia County Valencia OPEN program and Financial ?le review McKinley County McKinley OPEN program and Financial ?le review Bernalillo County Bernalillo OPEN program and Financial ?le review Luna Luna OPEN Program and Financial ?le review Guadalupe County Guadalupe OPEN program and Financial ?le review curry COUHW OPEN Program and Financial ?le review EMT-2012-PD-0002 LPDM-PL-OG-NM-ZOIO-OOI San Miguel County San Miguel OPEN program and Financial ?le review PREPAREDNESS GRANTS MONITORING SITE VISIT NEW MEXICO May 16 20, 2016 RecipientISub-Recipient Area Comment NMSU Board of Regents Area 6 Open Financial Monitoring Bernalillo County Area 5 Open Financial Monitoring San Juan County Area 4 Open Financial Monitoring San Miguel County Area 2 Open Financial Monitoring City of Clovis/Curry County Area 1 Open Financial Monitoring BMW-20 S-EP-00066 Dona Ana County Area 6 Open Financial Monitoring City of Santa Fe Area 3 Open Financial Monitoring City of Albuquerque Area 5 Open Financial Monitoring Taos County Area 4 Open Financial Monitoring Lea County Area 1 Open Financial Monitoring Mr. Jay Mitchell June 2016 Page 12 ENCLOSURE 3 Grant Monitoring Site Visit Onsite Observation List Grant Number Grant Program Project Project Description Award Amount Observations 4152 HMGP 0017 Nambe Pueblo Debris Flow Barrier $1,106,171 This project is ready for close-out, which was initiated shortly after our visit. The project was executed consistently with the application and the completed debris ?ow barrier is quite impressive. There are minor contract and pre-award cost adjustment issues to ?nalize prior to close-out.