Institutional Federal Compliance Report 2021

Schedule of Findings and Responses

2018-001

Finding: Insufficient level of precision in the State’s review of the year-end Emergency Management accrual calculation

Severity of Control Deficiency: Significant Deficiency (Unremediated as of March 31, 2018)

Background

New York State’s Division of Homeland Security and Emergency Services (DHSES) routinely provides disaster recovery assistance to state and local government entities through a variety of emergency management programs that are eligible for both State and Federal funding. Upon approval by the Federal Emergency Management Agency (FEMA) of a Public Assistance project worksheet, which is obligated after a federally declared disaster and includes a detailed scope of work, the governmental entity (the applicant) will track project-related expenditures as they are incurred. For open large projects only, the applicant will submit requests for reimbursement to DHSES. Additionally, for eight projects related to Superstorm Sandy recovery, DHSES has advanced payments to those applicants in order to accelerate initial recovery efforts. DHSES will review the applicants’ claims for reimbursement and/or advancement and, once approved, will process a payment and then draw funds from the Federal government. For the State’s fiscal year ended March 31, 2018, DHSES reported to the New York State Office of the State Comptroller (OSC) a liability for emergency management services representing the cumulative amount of expenditures that applicants have reported as incurred on approved open large projects and for which they have not yet been reimbursed. Further, at the State’s fiscal year-end, DHSES reported the total advanced payments for which expenditures have not yet been incurred as prepayments (other assets) for financial reporting purposes. To quantify the State’s payable to local governments and prepayments (other assets) as of March 31, 2018, DHSES utilized FEMA’s quarterly report consisting of open large projects for all disasters, by project number, that considered the applicants’ cumulative expenditures incurred to date as compared to the amounts drawn down by DHSES on behalf of the applicants as either prepayments or reimbursements. During our testwork, KPMG noted the following observations over management’s analysis:  Management’s analysis takes into account the amount of applicant expenditures incurred to date for each open large project, which are reported to DHSES by local governments through Quarterly Progress Reports (QPRs) and subsequently forwarded to FEMA. To assess the accuracy of the expenditures being utilized in management’s analysis, KPMG haphazardly selected a sample of 26 applicant expenditures and vouched the expenditures to supporting documentation, which consisted of approved project worksheets and QPRs. Based on the procedures performed, we identified 13 projects where the amounts recorded and used to determine the State’s liability did not agree to the supporting documentation. Per inquiry of DHSES management, the discrepancies were attributable to a combination of DHSES input error and outdated QPR information included in the analysis.  Management’s analysis utilizes DHSES’s record of cash drawdowns reported on the QPR for the FEMA-approved open large projects; however, this does not represent all actual disbursements to applicants. Actual disbursements to applicants are recognized within the State’s Statewide Financial System (SFS), and this historical data is determined to be readily available. Observations

 Certain formatting and formula errors were identified on the FEMA QPR, resulting in inaccurate expenditures and drawdown amounts being utilized by management to calculate the liability.

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