Background: Annually, the Office of Management and Budget (OMB) publishes the Compliance Supplement. This document includes audit guidance for federal programs. One of the programs with a significant change for 2023 is the Disaster Grants Program (AL #97.036). Specifically, the updates include project worksheet references and when expenditures should be reported on the Schedule of Expenditures of Federal Awards (“SEFA”).
Previous Guidance: In the past, project worksheets served as the primary tool (official record) for documenting project details, scope of work, and cost estimates by both the Federal Emergency Management Agency (“FEMA”) and the applicant. Non-federal entities recorded expenditures on the SEFA when two conditions were met: (1) FEMA had approved the project worksheet, and (2) the non-federal entity had incurred eligible expenditures.
Current Guidance: The project application has now become the official record once it’s obligated to the recipient for eligible project costs. The approved project will be documented on either the subgrant application (FEMA Form 90-91) or the project report in the grant portal. Non-federal entities should record expenditures on SEFA when the following conditions are met: (1) FEMA has approved the non-federal entity’s project and (2) the non-federal entity has incurred eligible expenditures. Federal awards expended in years subsequent to the fiscal year in which the project is approved are to be recorded on the nonfederal entity’s SEFA in those subsequent years.
Audit Impact: The transition from project worksheets to project applications ultimately impacts the timing of when expenditures should be reported on the SEFA, which, in turn, affects which programs will be audited for a specific period. Non-federal entities no longer need to wait for project worksheets to be approved to report expenditures on the SEFA. Instead, once a project is approved by FEMA, and eligible expenditures are incurred, expenditures will be reported on the SEFA. We anticipate this change to enhance the overall efficiency of the process, leading to a better alignment (matching) of SEFA expenditures to the actual period the expenditures are incurred.
Other Changes to AL #97.036:
- Period of Performance Clarified: FEMA has also clarified the default period for debris removal and permanent work projects. For debris removal, the default period is (6) six months from date of disaster or emergency declaration. An additional extension of (6) six months is available with approval from FEMA. For permanent work projects, the default period is (18) eighteen months, with an additional extension of (30) thirty months available with approval from FEMA.
- Earmarking Clarified: For disasters or emergency declarations on or after October 5, 2018, FEMA has clarified that up to (12%) twelve percent of the total award may be used for management costs, which include both direct and indirect administrative expenses.
- Quarterly progress reports no longer required: FEMA has eliminated the quarterly progress reporting requirement. However, reporting under the Federal Funding Accountability and Transparency Act (FFATA) is still applicable.
As always, your Mauldin & Jenkins professionals are available to assist you with any questions.