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Risk in Context

3 FEMA Rule Changes for Public Entities to Watch During Hurricane Recovery

Posted by Raymond Hutnik October 24, 2018

For two years in a row, major hurricanes — including Harvey, Irma, and Maria in 2017 and Florence and Michael this year — have damaged, shut down, or even leveled municipalities, school systems, and other public entities across the South. The Federal Emergency Management Agency (FEMA) plays an essential role in helping these organizations recover from, and better prepare for, future catastrophes. But changes in FEMA policies and procedures — along with turnover in public entities themselves — can sometimes lead to confusion, delays, or denials of public assistance applications during a critical time.

To streamline its internal procedures and direct spending to areas of real need, FEMA has shifted the burden of documentation and recordkeeping onto organizations applying for public assistance. Other changes may limit reimbursement of claims or administrative costs related to disaster response.

As they prepare claims for damage resulting from this year’s hurricanes, public entity risk professionals should pay particular attention to three major changes in FEMA processes and procedures.

A New Public Assistance Delivery Model

Given the residential, business, and public entity recovery it supports, FEMA resources can be severely stretched. To better manage the many requests that arise after a storm, FEMA requires public entity applicants to use its online Grants Manager and Grants Portal tool to upload information, which is then remotely reviewed by FEMA’s Consolidated Resource Center. While the technology can be helpful for FEMA and applicants, the volume and complexity of claims may take time to work through and there may be additional documentation requests, which could delay assistance.

Fixed Capped Grants

To reduce FEMA’s closeout burden while offering rebuilding flexibility, the agency now allows some organizations to agree a scope of damage and receive a fixed-cost budget in advance of repairs. While fixed capped grant allowances have reduced paperwork and documentation burdens, some organizations have found agreed-to ranges too low and actual recovery costs far greater.

Implementation of Direct Administrative Costs (DAC)

Administrative costs paid to consultants, risk management experts, and others helping with the public assistance process have historically been subject to detailed audit processes. Incurred DAC had to be apportioned to each worksheet opened for each project, which was difficult and time-consuming. Now, allowable costs are set at 5% of the value of each project worksheet subject to certain criteria. Organizations must be aware of these limits when retaining outside expertise.

Managing Your FEMA Claim

It’s important to review insurance coverage, be familiar with FEMA’s rules, and have documentation and procedures in place to apply for assistance on a timely basis. Requests for public assistance must typically be submitted within 30 days of the federal declaration of a disaster.

FEMA can provide valuable support to public entities affected by Hurricane Michael or other disasters. But public entities must make preparations before an event by conducting thorough property reviews, documenting assets, developing loss mitigation contingency plans, and understanding the interplay between insurance and FEMA processes in order to minimize a disaster’s impact and maximize financial recovery.

Related to:  Public Entity

Raymond Hutnik

Ray Hutnik is the global practice leader of Marsh Advisory's Financial Risk Consulting Solutions