Homeland Security First Responder Grants: Cash Management Improvement Act Exemption and Cash Advance Funding Require Additional DHS Oversight

FEMA convened two task forces to examine why federal funds were not reaching local governments and first responders in a timely fashion. Their review identified several issues that contribute to the delay of drawdown and disbursement of funds such as budgetary and procurement processes that vary by state and local jurisdiction. Also, grantee project plans, which are determined at the state or local level, are not required to include procurement time, and can cause unforeseen delays in the drawdown process. FEMA reported that although the local variances in budgetary and procurement processes are largely out of their control, the agency is monitoring these issues in order to make improvements. By identifying several issues contributing to delays in the drawdown and disbursement of funds, FEMA implemented this recommendation and we are closing it.

FEMA determined that the CMIA exemption has little impact on first responders' ability to draw down grant funds. FEMA reported that its Accountability, Management, and Oversight Branch (AMO) reviewed fiscal year 2008 monitoring visits and found that the 120-day advance exemption had very little impact on first responders' ability to drawdown and disperse FEMA funds. According to FEMA, this option was made available to states by DHS for those localities that require subgrantees to have funds on hand before purchases or expenses are initiated. However, FEMA found that the majority of states and subgrantees are allowed to make purchases without having the funds on hand, and therefore do not choose to invoke the 120-day advance option as a means to expedite funds. Rather, they instead choose to draw down on a reimbursement basis. Moreover, AMO found no correlation between implementation of the 120-day advance exemption and documented cash on hand.

DHS agrees with the recommendation and has completed action on it. The Office of Grants and Training (G&T) did an impact assessment of the CMIA exemption during FY2005 and a final assessment is to be completed by FY2008. At this point, it appears grantees will not use the exemption due to (1)interest owed DHS not being exempted and (2) state reluctance to allow localities to spend federal grant dollars without adequate oversight. If the trend in "CMIA exemption reluctance" is reversed, however, more G&T resources will be needed. No further action will be taken on this recommendation.

FEMA's Accountability, Management, and Oversight Branch determined that a case-by-case cash exemption would be the most reasonable alternative, largely because DHS and FEMA found that the majority of states do not choose to invoke the 120-day cash advance exemption. According to FEMA, this would allow the small number of localities that have experienced hardship in managing States' reimbursement processes due to limited resources or other factors to take advantage of the cash advance option.

FEMA reported that following FY 08 monitoring efforts, the agency took several operational actions to improve drawdown and dispersement of funds and their oversight ability. First, FEMA regionalized three major grant functions: financial monitoring, cash management, and closeout activities. FEMA reports that the regionalization yields several benefits, notably; moving stakeholder relationship responsibilities close to the actual stakeholders has contributed to improved response times to stakeholder inquiries and greater coordination between programmatic and financial elements of grants management. FEMA also reports implementing the ND Grants System, which when fully implemented will provide FEMA with a single system that will allow FEMA to retrieve current data to respond to data reporting needs. FEMA notes that taking preemptive actions to address unavoidable additional lag time for varying state and local jurisdiction matters may expedite the earliest possible date that funds can be drawn down. Further, FEMA plans to take additional actions to encourage more transparency and stringent controls to lessen the delay in drawdown of funds. GAO's work on this matter helped FEMA to recognize that operational changes were necessary to help alleviate delays in the drawdown and disbursement of funds.

To address GAO's recommendation that DHS direct the Office of Grants and Training to develop policies and procedures to handle requests for cash advance funding, FEMA's Accountability, Management, and Oversight Branch (AMO) identified the need for a more detailed cash management policy and procedure at the regional level. To address the issue of some grantees having excess cash on hand, AMO developed updated site visit protocols and the monitoring report template that FEMA regional offices use. The new protocols and template highlight CMIA act requirements and encourage the monitoring of cash on hand and interest accrual.

FEMA's Accountability, Management, and Oversight Branch (AMO) implemented several new practices intended to improve overall grants management. Starting in fiscal year 2010, AMO now provides external grantee training sessions that focus heavily on financial monitoring, providing an overview of site visit protocols, report templates, and official correspondence samples. Further, FEMA requires that its regional grants management specialists complete quarterly financial analysis activities, including a full cash-on-hand analysis, to encourage better cash management practices across regions and grantees. AMO also reports developing written procedures on monitoring and reviewing grant programs by analyzing grant financial reports and has included steps related to financial analysis and cash management in all protocols used at the regional level.