Summary

The Inspector General of the Department of Homeland Security (DHS) has requested a decision regarding the reimbursement in July 2000 of $3.8 million in Stafford Act grant funds provided by the Federal Emergency Management Agency (FEMA) to the state of Arizona for the Wellton-Mohawk Irrigation and Drainage District in Arizona. A public assistance award was made to the irrigation and drainage district for emergency repairs and improvements to facilities damaged by floods. The award provided that the FEMA grant funds would cover 75 percent of the district's costs up to a maximum of $44,200,000, and the state would cover the remaining 25 percent. Id. After an audit of the district's costs, FEMA's Inspector General reported that the district used an incorrect valuation methodology to claim $5.1 million for the replacement value of rocks used from its own stock that had cost it under $20,000.2 Skinner Letter. Wellton-Mohawk had used a Bureau of Land Management (BLM) average royalty rate method to value its rocks. At issue here is FEMA's use of its appropriations to reimburse the district $3.8 million, FEMA's share of the $5.1 million claimed.

FEMA should reassess its reimbursement to Wellton-Mohawk to ensure that it did not amount to a sizable windfall to the subgrantee. Nothing in the record before us addresses whether FEMA, in assessing the reasonableness of its reimbursement to Wellton-Mohawk, considered other pricing methods that may be more appropriate to the circumstances or whether Wellton-Mohawk, up to this time, had consistently applied the BLM average royalty method to value its inventory of rocks, as required by FEMA regulations. The Stafford Act requires FEMA to initiate an administrative action to recover payments within 3 years of the date of transmission of the final expenditure report for a disaster. We recommend that FEMA determine whether the statute of limitations bars recovery of funds from Wellton-Mohawk in this case. Even if recovery actions are barred under the Stafford Act, administrative offset may be available under 31 U.S.C. 3716, which permits agencies to offset or withhold funds notwithstanding statutes of limitations. If FEMA finds that the reimbursement in question should be reduced or disallowed, FEMA should be alert to opportunities that may be available to offset or withhold other funds payable to the state of Arizona.