OMB has set policies for the $84 billion in the catchall budget measure enacted in late March for disaster relief related to recent hurricanes and other natural disasters.
Memo M-18-14 provides guidance on: identifying and documenting incremental risks and mitigating controls with robust criteria related to the disaster relief funding; the applicability of the Improper Payments Information Act of 2002 to disaster relief funds; documenting the linkages between risks related to disaster and emergency funding and efforts to address known internal control risks; and ensuring that grantees expend all awarded disaster relief funds within the 24-month period following the agency’s obligation of those funds, unless waived by OMB.
“In disaster situations, fraud risks are higher than under normal circumstances because the need to provide services quickly can hinder the effectiveness of existing controls and create additional opportunities for individuals to engage in fraud. As a result, federal managers face the additional challenge of balancing their mission to provide assistance quickly with implementing controls to address the increased risk of fraud. A risk-based approach includes establishing risk tolerances in disaster situations,” it says.
“Agencies must balance their priorities to fulfill the program mission. Risk tolerance reflects a federal manager’s willingness to accept a higher level of fraud risks and may vary depending on the circumstances of the program. When determining risk tolerances in disaster situations, managers must weigh the program’s operational objectives against the objective of lowering the likelihood of fraud,” it says.
