FEMA Should Recover $1.78 Million of Public Assistance Grant Funds Awarded to the City of Duluth, Minnesota

The City of Duluth, Minnesota, (City) received a Public Assistance grant award of $13.34 million from Minnesota’s Department of Public Safety, Division of Homeland Security and Emergency Management (Minnesota), a FEMA grantee, for damages resulting from severe storms and flooding in June 2012. The City did not follow Federal procurement standards in awarding $3.08 million for 12 contracts—$1.54 million for 8 non-exigent contracts and $1.54 million for 4 exigent contracts. Although the City competitively awarded all but 3 of the 12 contracts we reviewed, it did not take required steps to provide opportunities to disadvantaged firms to bid on federally funded work, as Congress intended. Therefore, we question the $1.54 million the City claimed for eight contracts for non-exigent work. We generally do not question costs for work when lives and property are at risk. Therefore, of the $1.54 million the City claimed for exigent work, we question only $8,566 in markups on the cost because one of the City’s contractors billed on a prohibited cost-plus-percentage-of-cost basis.