Inspector General's report: Joplin R-8 mishandling of FEMA funds paved path to waste, fraud, abuse to tune of $187 million

The Department of Homeland Security's Office of Inspector General gave away the whole story in the title of its report on the Joplin R-8 School District's handing of FEMA funds following the May 22, 2011 tornado.

Inadequate Management and Oversight Jeopardized $187.3 Million in FEMA Grant Funds Expended by Joplin Schools, Missouri

The audit was necessitated when the district claimed $218.5 million in disaster related costs, which was $65.8 million more than the amount FEMA had granted.

Our audit objective was to determine whether Joplin Schools accounted for and expended FEMA disaster grant funds according to Federal regulations and FEMA guidelines.

It did not take long to see a pattern by which R-8 officials and their contractor ignored practically every rule and did things the way they wanted.

Joplin officials did not come close to meeting deadlines for reporting to FEMA and made it clear they did not think those deadlines were important, according to the audit.

By the time the audit was issued and the closeout date passed, the officials who were responsible for nearly all of the questionable decisions, former Superintendent C. J. Huff  (left) and former CFO Paul Barr (below), were long gone, leaving their successors to deal with the fallout.

Audit summary

The inspector general's report did not limit its criticism to the actions of Joplin officials and the contractor. The State of Missouri and FEMA also came under fire for mishandling the situation.

From the report:

Specifically, Joplin Schools: 

-did not comply with Federal procurement regulations for contract provisions and affirmative steps in awarding construction contracts; 

-did not comply with Federal procurement regulations in awarding its grant management contract; and 

-claimed ineligible direct administrative costs related to its grant management contract. 

This occurred because Joplin School officials were either unaware of or did not understand procurement regulations.  Joplin School officials also disregarded Missouri’s authority and relied heavily on the advice of their grant management contractor.  

Improper management and oversight of the grant award further put the Federal funds at risk of fraud, waste, and abuse.  

Specifically, Joplin Schools did not comply with administrative requirements of its subgrant agreement.  Missouri did not enforce program and administrative requirements or impose restrictions on Joplin Schools for noncompliance.  

Additionally, FEMA’s oversight was limited and passive, and it did not hold Missouri accountable for effectively managing Joplin Schools’ subgrant activities.  As a result of these collective deficiencies, we questioned Joplin Schools’ costs of $187.3 million, which include ineligible direct administrative costs.  

The Inspector General recommended FEMA not allow the $187.3 million.

Joplin officials barely monitored management of FEMA grant

Joplin Schools also did not properly monitor the terms and conditions of the grant management contract award according to 44 CFR 13.36(b)(2). 

For example, Joplin School officials said they reviewed only a sample of the grant management contractor’s invoices before authorizing payments, whereas it used a three-checkpoint review process for invoices from construction-related contractors. 

Joplin School officials said they used different procedures to monitor the grant management contractor because the contractor was onsite; therefore, we determined they did not take certain actions, such as validating time worked against work logs or invoiced amounts. Instead, they considered a sample review sufficient.

For the grant management contract, Joplin Schools claimed $609,676 in DAC (direct administrative costs) that was ineligible because it included costs for indirect activities, costs associated with rates for contractor work that were higher than the rates in the contract, and costs based on unreasonable rates. 

First, Joplin Schools claimed costs for indirect activities that were not related or billable to a specific project and thus could not be claimed as DAC, such as attending applicant briefings and FEMA kick-off meetings.9 In addition, Joplin Schools claimed DAC for activities related to multiple projects, which also made the costs ineligible. For instance, Joplin Schools claimed DAC for discussions that took place on the Joplin Schools high school grounds, but the discussions were actually about temporary fencing for multiple school properties.

Second, Joplin Schools claimed costs the grant management contractor billed at rates exceeding contracted rates. For example, the grant management contractor billed $168 per hour for a Public Assistance Coordinator whose contracted rate was $134 per hour ($34 more per hour). Joplin School officials said they reviewed the contracted DAC rates on a sample basis, which they believed was sufficient. However, such sampling did not enable Joplin Schools to detect excessive billed rates.

Third, Joplin Schools claimed unreasonable DAC based on contract rates that exceeded FEMA’s capped rate. In June 2011, FEMA issued a memo to Missouri establishing a capped DAC rate of $155 per hour, unless an applicant provided a cost analysis and justification for a higher hourly rate.10 In April 2013, during a second-level appeal process for another subgrantee, FEMA Headquarters upheld this capped rate.11 Per Joplin Schools’ CFO, Joplin Schools received FEMA’s June 2011 memo early in the recovery process and used it to establish reasonable contract rates. However, the rates Joplin Schools claimed for a project manager under the grant management contract exceeded FEMA’s capped DAC rate of $155 per hour. Joplin School officials asserted that the project manager’s rate of $226 per hour was justified because of the complexity of the disaster, the extent of damages, and the project manager’s knowledge and experience. Despite their assertion, Joplin School officials did not provide the required documentation to justify the rate, and they submitted these costs for reimbursement, knowing FEMA would not approve the higher rate. 

The ineligible DAC claims occurred because Joplin School officials did not properly monitor the terms and conditions of the grant management contract and did not follow FEMA’s guidance on reasonable DAC rates. During closeout, Missouri officials identified issues related to ineligible costs for indirect activities and unreasonable DAC rates. They informed Joplin School officials that they should not include the costs in their reimbursement claim to FEMA. However, Joplin School officials insisted Missouri submit their entire DAC claim unaltered for FEMA’s review.

Joplin officials did not believe deadlines were important … and said so

The audit shows R-8 officials blithely ignored deadlines because they did not think the deadlines were important. They even shared that belief with the government.

Our document review showed that Joplin Schools did not fulfill its subgrantee responsibilities for managing the grant award. 

For example, Joplin Schools was supposed to submit to Missouri accurate and timely quarterly program progress reports on the performance of all large projects from October 2011 to June 2017. 

Our review of these documents showed that Joplin Schools submitted 13 of 24 required quarterly program progress reports. Joplin Schools submitted the 13 reports, on average, more than 2 months after the due dates, which was not useful for Missouri, or ultimately FEMA, to gauge project performance. 

Joplin School officials said they viewed submitting the reports as an administrative burden. They also said that the magnitude of the disaster recovery work made it challenging to submit the program progress reports on time. Finally, Joplin School officials said they did not believe that quarterly program progress reports were useful or important to their disaster recovery work.

In addition, although required by its subgrant agreement with Missouri, Joplin Schools continued to complete construction projects without getting Missouri’s prior approval of time extensions. For example, for the seven rebuilding projects, (Projects 488, 575, 1336, 1438, 1684, 1799, and 1980) Joplin Schools retroactively requested multiple time extensions over a 4-year period. In fact, for project 1684, Joplin Schools submitted one request for a time extension 3 years after the first extension approval date because Joplin School officials claimed they experienced many unexpected weather delays and unforeseen events.

Joplin officials often did not provide required updates to the state

In 1 year, Missouri repeatedly submitted the same outdated progress information to FEMA because, according to Missouri officials, Joplin Schools would not provide them with updated project status information.

The field work on the audit took place in 2017 and 2018. It was issued June 19, 2020.