Wednesday, October 19, 2016

Headlines Over OIG's FEMA Audit Are Misleading

Headlines are powerful tools of media. They catch the attention of the reader or viewer and hopefully entice them to read further. Unfortunately, in today’s instant and abbreviated news feeds, the headline often becomes the story.

Such was the case in the recent media storm concerning the City of Louisville and an (OIG) Office of the Inspector General’s report concerning FEMA’s operation related to procurement and grant application after the April 28, 2014 tornado in Winston County. The eighteen page audit report dated September 29, 2016 was titled – “FEMA Should Recover $25.4 Million in Grant Funds Awarded to Louisville, Ms. for an April, 2014 Disaster.”

That bureaucratic report title of the audit between federal agencies became the headline of a multitude of news reports across the state of Mississippi. These included print, online and tv and radio media. The headline was a good one for the media’s purpose…. It grabbed attention, created drama and uncertainty, especially for local citizens and technically it was accurate….sorta.

What that headline didn’t do was critical. It didn’t entice the reader (and most likely the media) to
take the time to read that full report and understand its purpose. It didn’t create an incentive for media to investigate further into the response of FEMA, MEMA and the City to the initial report and it also didn’t incentivize the media to determine if this type of audit and its results were unusual and/or generally led to such consequences that would be so dire for a small community in rural Mississippi.

I am not an expert on federal agencies and their audit and reporting practices but I have worked around government for almost 35 years. Procedures, policies and political posturing take precedent over everything else…including accuracy and clarity. In particular, clarity was missing from most of these news reports as well.

It is a complicated news story with multiple parties involved, multiple time lines and the typical governmental jargon and acronyms that make most readers eyes spin in their sockets. The full accurate story is difficult to convey with clarity and I like most in the media have struggled with it. That is the reason that up until this time, our reporting on this issue has been limited and cautionary.

It is the OIG’s responsibility to audit the activity of other federal agencies including FEMA. In its audit of FEMA relating to disaster recovery after the 2014 tornado, OIG believed that it found some practices that did not meet federal requirements related directly to the City of Louisville:

  • Finding A: The City did not take full affirmative action steps required to ensure the use of minority firms for roughly $24 million in contracts related to Winston Plywood.
  • Finding B: Questioned whether FEMA properly accounted for roughly $1.5 million dollars in funds that were already in place from CDBG grants and ARC (Appalachian Regional Commission) and that had not been spent prior to the disaster. Per the report, FEMA did not reduce eligible funding by an equivalent amount.

It is the OIG’s practice to initially recommend the disallowance of funds whenever there are audit findings contrary to their policies, thus the headline that caused so much turmoil.

It is FEMA’s practice to acknowledge any mistakes but to not disallow any funding unless the findings are significant. As an example, MEMA Director, Lee Smithson noted in Tuesday night’s Aldermen meeting in Louisville that after Hurricane Katrina, OIG recommended roughly $1.5 billion in expenditures be de-obligated but only $10 million was actually withheld.

The following facts should be known:

  1. The audit in question was begun in October of 2015 and the City of Louisville was made aware of the issues in question over that time and has worked with MEMA to address them to the satisfaction of FEMA.
  2. The City of Louisville worked directly with FEMA and MEMA on the procurement and bidding process for the contracts in question. This includes working through conflicts where state and federal policies may have conflicted.
  3. No effort to discriminate in the bidding process or procurement was undertaken by the City or suggested by the audit. The issues relate to proper procedures as defined by OIG.

FEMA’s September 15, 2016 response to the OIG audit was included in the final report (page 10) and indicated that the issue related to the Finding A ($24 million) had been addressed and resolved and closed without further action from FEMA. Finding B ($1.5 million) has also been addressed and resolved but remains open for further consideration until January, 2017.

In Tuesday night’s meeting of the Louisville Board of Aldermen, Mayor Will Hill addressed the issue
noting that the headline did not reflect the nature of the audit or FEMA’s response to the issues involved. Hill indicated that relating to Finding A, the City followed state procurement laws in place at that time and if the City had known of other requirements, they would have been followed as directed. Hill also noted that the $1.5 million dollars related to Finding B was never budgeted by the City and that there is still a possibility that Louisville could receive those funds.

Hill also noted that total public dollars projected to be needed for these projects was $57 million while actual expenditures are now projected at only $46 million. Noting the hard work and the success of the recovery process and then the media frenzy over the headline, Hill said, “One negative spin in a positive recovery is a hard pill to swallow.”

MEMA Director Lee Smithson indicated that MEMA has been a part of the recovery process in Louisville since April 28, 2014. “Nothing was done by the city without MEMA/FEMA approval. Some mistakes were made but Louisville’s grade is about 95. In terms of minority contracts, bids were transparent and open to everyone……. Ignorance is no defense but we did not exclude any minority businesses from the process. FEMA is not going to de-obligate these funds.