Audit Report on the Department of Parks and Recreation’s Controls over Its Disaster-Related Costs That Could Be Reimbursed by the Federal Emergency Management Agency

EXECUTIVE SUMMARY

The objective of this audit was to determine whether the Department of Parks and Recreation (DPR) has adequate controls in place to ensure that it receives the Superstorm Sandy-related reimbursement from the Federal Emergency Management Agency (FEMA) to which it is entitled.  The audit’s primary scope was Fiscal Years 2013 and 2014.  Certain audit information has been updated to include Fiscal Year 2015 data.

DPR maintains a municipal park system of more than 29,000 acres, including roughly 1,900 parks, 1,000 playgrounds, 650,000 street trees and two million park trees.  DPR facilities range from community and recreation centers to golf courses and swimming pools throughout the five boroughs.   In October 2012, Superstorm Sandy damaged more than 400 DPR park sites; many parks were closed to the public.  FEMA, a division of the U.S. Department of Homeland Security (DHS), awards disaster assistance grants to states, local governments, and individuals.  In November 2012, FEMA and the New York State Office of Emergency Management (State OEM) conducted an ‘Applicant Briefing’ at which time they informed City agencies, including DPR, how to apply for and obtain disaster-related funding under the FEMA Public Assistance Program.

In January 2013, the City’s Office of Management and Budget (OMB) signed a contract with Hagerty Consulting, Inc. (Hagerty) to support the City’s claims process related to Superstorm Sandy.  Hagerty is an emergency management consulting firm that, among other things, helps its clients obtain federal funding to assist them in their recovery from disasters.  DPR, through OMB’s contract, has used Hagerty to help it to obtain FEMA disaster relief funds.  Hagerty assists DPR with project formulation and helps assemble the information and documentation needed for FEMA reimbursement.

As of August 2014, FEMA had obligated $77 million to DPR for 23 projects.  Up to that point, FEMA had paid DPR $33.4 million for the emergency cleanup work it had performed and $286,755 for the initial work it had already done on four restoration projects.  The remaining $43.3 million balance of obligated funds has been transmitted to the State OEM, from which DPR can request drawdown payments as restoration project work progresses and can request closeout payments upon project completion.

OMB allocates funds to the DPR budget to cover expenditures pending DPR’s receipt of reimbursement from FEMA pursuant to the process described above.  However, to be eligible for such reimbursement, DPR, and all similarly situated City agencies, must comply with federal reimbursement requirements.  Therefore, DPR must have adequate internal controls in place to ensure that those requirements are met.

Audit Findings and Conclusion

The audit identified weaknesses in certain areas where DPR needs to improve its controls to better ensure that it receives all of the Superstorm Sandy-related reimbursement from FEMA to which it is entitled.  We found weaknesses in DPR’s maintenance of payment documentation related to its FEMA-eligible projects which needs to be improved in accordance with federal and City guidelines.  When submitting its requests to the State OEM for reimbursement, DPR must include all relevant invoices and ensure that the payments are properly labeled.  In addition, DPR needs to improve the timeliness of its requests for disaster-related federal reimbursement.  As of May 27, 2015, the date of our draft report, DPR officials had informed us of only two requests having been filed with the State OEM for any of DPR’s FEMA-reimbursable restoration projects since the Project Worksheets (PWs) for these projects were approved.

The audit also found that DPR did not have formal procedures to guide its implementation and oversight of the disaster-related federal reimbursement process.  Formal written operating procedures can help to ensure that every person involved in a process understands the tasks they are responsible for and the acceptable methods and timeframes for accomplishing those tasks.  Written procedures can help ensure that DPR effectively handles its responsibilities in this area and receives all of the FEMA reimbursement to which it is entitled.  Finally, DPR has limited oversight responsibility for Hagerty’s work at the agency.  OMB does not request and DPR does not provide documentation to OMB regarding Hagerty’s performance and hours worked at DPR.

Audit Recommendations

To address these issues, the audit recommends, among other things, that:

• DPR ensure that the documentation that it maintains for submission for reimbursement is complete and properly labeled.
• DPR ensure that it does not make any overpayments to its contractors.
• DPR submit requests for reimbursement in a more timely manner.
• DPR ensure that it has formal procedures to guide its implementation and oversight of the disaster-related federal reimbursement process.
• DPR provide OMB with regular reports on the work each Hagerty staff member does while working with and for DPR.
• DPR conduct a formal assessment of the work being performed by Hagerty and the continued need for its assistance.

Agency Response

In their response, DPR officials disagreed with certain findings in the report but agreed with five of the eight recommendations.  Officials stated that they “appreciate that the Draft Audit Report helped identify areas where our internal processes related to Superstorm Sandy reimbursements could be further strengthened.”  In terms of the three recommendations with which they disagreed, the officials stated that they already properly maintain the documentation that they will submit for reimbursement; that it is unnecessary for them to submit requests for reimbursements in a more timely manner; and that, for improvement projects (which DPR and FEMA refer to as “Improved Projects”), it is unnecessary to endeavor to track restoration costs separately from the improvement costs so that they could appeal for additional reimbursement if actual costs exceed the estimated costs for restoring the site to pre-disaster condition.  These and other comments in DPR’s response to the audit’s findings and recommendations are presented and addressed in the body of the report.