APRIL 2015
97.039
HAZARD MITIGATION GRANT PROGRAM
State Project/Program:
N.C. MITIGATION
Federal Emergency Management Agency
Federal Authorization:
Robert T. Stafford Disaster Relief and Emergency Assistance Act,
Section 404, 42 U.S. C. 1521 et seq., and subpart N of the CFR.
State Authorization:
Sections 206.431, 206.432, and 206.433(a) of the CFR
N.C. Department of Public Safety
Agency Contact Person – Program and Financial
Address Confirmation Letters To:
Nicholas M. Burk
Section Manager for HM Grants
Recovery Section
Division of Emergency Management
4105 Reedy Creek Rd
Raleigh, NC 27607
(919) 825-2301
Nicholas.Burk@ncdps.gov
Jamelle White
NC Department of Public Safety
Controller’s Office
4220 Mail Service Center
Raleigh, NC 27699-4220
919.716.3613
Jamelle.White@ncdps.gov
The auditor should not consider the Supplement to be “safe harbor” for identifying audit
procedures to apply in a particular engagement, but the auditor should be prepared to justify
departures from the suggested procedures. The auditor can consider the supplement a “safe
harbor” for identification of compliance requirements to be tested if the auditor performs
reasonable procedures to ensure that the requirements in the Supplement are current. The grantor
agency may elect to review audit working papers to determine that audit tests are adequate.
I. PROGRAM OBJECTIVES
The purpose of the Hazard Mitigation Grant Program is to provide states and local governments
financial assistance to implement measures that will permanently reduce or eliminate future damages
and losses from natural hazards through safer building practices and improving existing structures and
supporting infrastructure.
II. PROGRAM PROCEDURES
The HMGP is a state-administered federal program to which local governments submit project
applications (FEMA Region IV Hazard Mitigation Grant Program (HMGP) Application (no form
number) on behalf of the affected citizens in their communities. In North Carolina, the Division of
Emergency Management, within the Department of Public Safety administers HMGP.
The State solicits reviews, prioritizes and selects applications from the communities for funding and
forwards the applications to FEMA for review. FEMA reviews each project application to ensure that
projects meet environmental regulations and minimum eligibility requirements. The amount of
funding available for these projects is 20% of the Federal cost share provided during a Disaster
Declaration, due to the fact that North Carolina is an Enhanced Mitigation State. Projects are funded
on a 75% Federal and 25% State cost share ratio. In addition to a State Administrative Plan and a
State 409 Plan, the forms required are as follows: SF-424 fact sheet and a project narrative and
description.
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FEMA approves the State application and grants the award through an award transmittal letter and
utilizes a Comprehensive Cooperative Agreement (CCA), which includes other FEMA grant awards.
The State awards certain grant monies to local governmental units through a local application process
and subsequent State/local grant agreement.
III. COMPLIANCE REQUIREMENTS
A. Activities Allowed or Unallowed
Compliance Requirement
Only relevant and necessary measures taken to eliminate future losses from natural hazards
through safer building practices and improving existing structures and supporting infrastructure
and included in the State/local grant agreement are allowed.
The test of eligibility of a given activity will be whether it contributes to a State’s capability to
reduce losses to disasters. It is incumbent upon each State to develop, with the assistance of the
FEMA Regional Mitigation Divisions, Cooperative Agreements that effectively utilize the
Mitigation Assistance funds for this purpose. Mitigation Assistance combines three categories of
assistance: State Hazard Mitigation Program (SHMP) assistance (for which all States and
Territories are eligible); Hurricane Program (HP) hazard assistance (for which States and
Territories subject to tropical storm hazards are eligible); and Earthquake Program (EP) hazard
assistance (for which States and Territories subject to seismic hazards are eligible).
In accordance with North Carolina’s CA, eligible projects must solve problems independently or
constitute a functional portion of a solution to the threat of hazards. The North Carolina HMGP
has five (5) categories of eligible activities:
Category I – Acquisition/Elevation of Primary Residences (Note: Participation by
homeowners is voluntary. They are offered pre-disaster fair market value and ownership
of vacated land is transferred to local governments who must permanently restrict its use
to open space.
Category II – Retrofitting of Critical Public Facilities (e.g. flood-proofing and providing
for backup power connections to shelters, hospitals, emergency operation centers, water
treatment plants, and other such public facilities).
Category III – Flood-proofing/Acquisition of Businesses.
Category IV – Storm-water Management (e.g., design of culverts, channelization, etc.)
Category V – Other – (e.g. Recovery Education/Outreach Programs, Mitigation Plans,
etc.).
Projects in categories I-IV must prove to be cost beneficial (i.e.: achieve a b/c ratio of 1/1 or
better) when analyzed using the applicable FEMA Benefit-Cost Analysis Module. Projects in
category V are exempt from cost/benefit requirements.
In addition, proposed HMGP projects must go through the state’s environmental clearinghouse
process, address repetitive problems, be cost-effective and in general, reduce risks to public
health and safety.
Suggested Audit Procedures
1. Review Comprehensive Cooperative Agreement and/or State/local grant agreement with
related budget.
2. Test expenditures and related records for adherence to approved budget activity.
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B. Allowable Costs/Cost Principles
Compliance Requirement
Only relevant and necessary costs as authorized by the FEMA-State Agreement and contained in
the State/local grant agreement and costs in 2 CFR for local governments and A-122 for private
non-profit organizations are allowed.
Suggested Audit Procedures
1. Review Comprehensive Cooperative Agreement and/or State/local grant agreement budget.
2. Test expenditures and related records for adherence to approved budget and to 2 CFR cost
principles for local governments and A-122 cost principles for private non-profit
organizations.
C. Cash Management
Compliance Requirement
Funds are submitted to all grantees on a reimbursement basis. The only exception to this is when
a relocation package is being closed and the contractor does not have sufficient funds on hand, a
request is made for the exact amount of the closing amount to arrive on the day of the closing.
Suggested Audit Procedures
No additional testing is required since funds are not advanced to grantees.
D. Davis-Bacon Act
Compliance Requirement
All funds from this grant are disbursed to local units of government in accordance with their grant
agreement. As a result, it becomes the responsibility of the local unit to ensure that construction
contracts in excess of $2,000 are administered in compliance with the Davis-Bacon Act.
Suggested Audit Procedures
Test expenditures for payrolls for construction contracts in excess of $2,000 to ensure that the
payroll was in compliance with the Davis-Bacon Act.
G. Matching, Level of Effort, Earmarking
Compliance Requirement
FEMA can fund up to 75% of the eligible costs of each project. The State or project applicant
(grantee) must provide a 25% match. The 25% non-federal share can be a combination of cash,
in-kind services, or materials. The amount of funding for the program is based on 15% of all
other disaster grants.
Suggested Audit Procedures
1. Review FEMA-State Agreement and/or State-local agreement.
2. Test the expenditures and reports to ascertain total cost of project and verify that the nonfederal matching requirements were met.
3. Verify the source of the non-federal match.
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H. Period of Availability of Federal Funds
Compliance Requirement
Program funds are to be obligated within 2 years after the disaster declaration (Policy effective
date 12/15/97). Project completion deadlines for grantees are specifically stated in the grant
agreement on a project-by-project basis.
Suggested Audit Procedures
Verify that the funds were encumbered within the two-year timeframe after the disaster
declaration.
I. Procurement and Suspension and Debarment
Compliance Requirement
According to OMB Circulars (A-102, A-110, A-21, 2 CFR and A-122) and as stated in the grant
agreement; the grantee must comply with Federal Debarment and Suspension regulations by
requiring completion of the “Certificate Regarding Debarment, Suspension, Ineligibility and
Voluntary Exclusion-Lower Tier Covered Transactions” by sub-recipients prior to entering into a
financial agreement with the sub-recipients for any transaction as outlined below:
Any procurement contract for goods and services, regardless of amount, under which the subrecipients will have a critical influence on or substantive control over the transaction.
The grantee is responsible for monitoring the submission and maintaining the official document
for review by the Hazard Mitigation Staff.
Suggested Audit Procedures
1. As stated in the grant agreement, verify that all contracts have received prior approval by the
Hazard Mitigation staff prior to execution.
2. A certification is required regarding debarment and suspension from the contractor.
K. Real Property Acquisition and Relocation Assistance
Compliance Requirement
All applicants must comply with federally mandated negotiation, acquisition and relocation
requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of
1970, as amended.
Suggested Audit Procedures
Verify applicant’s adherence to URA and RPAP Act.
L. Reporting
Compliance Requirement
Each quarter, the State completes and submits to FEMA a Financial Status Report that reveals
outlays for all approved projects. Also, the State will submit to FEMA a quarterly performance
report on the implementation schedule, any delays, project overruns, and any problems that may
have been encountered.
Compliance Supplement
Grantees submit monthly “Cost Reports” to the State in order to be reimbursed for their
expenditures. The “Cost Report” is a one-page document, which the grantee uses to report its
monthly expenditures according to the five major budget categories (personnel, contractual,
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travel, supplies, and equipment). Periodic progress reports may be required to be submitted to the
State
Suggested Audit Procedures
1. Review State/local grant agreement with approved budget and reporting requirements.
2. Verify that expenditures are classified properly and within approved budget categories.
3. Test “Cost Reports” to agree the amounts reported to the State for reimbursement to the
expenditures in the grantee’s accounting records.
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