The purpose of this advisory report is to notify FEMA of an issue we observed during our ongoing audit of CalRecycle. We determined that CalRecycle expects it will cost about $230 million to complete debris removal work, and has received invoices totaling $200 million from two contractors performing the work. Yet, these invoices included documentation with numerous discrepancies that did not fully support the invoiced costs as Federal cost principles and procurement standards require. Moreover, as of September 8, 2016, our audit cutoff date, CalRecycle had paid its contractors about $186.4 million of the $200 million in invoiced costs, but had not completed its review of invoices nor collected all missing support records. FEMA and California, therefore, should continue to assist CalRecycle in assuring that all costs are valid and eligible. We recommended that FEMA Region IX Administrator (1) direct California, as grantee, to provide CalRecycle with technical assistance it may need to ensure compliance with all applicable Federal regulations, specifically for document support and contract management, and to avoid improperly funding any of the $230 million ($173 million Federal share) in contract costs CalRecycle estimates it will claim for damages caused by this disaster; and (2) direct California, as grantee, to ensure that all CalRecycle’s cost reimbursement claims for debris removal work are supported with adequate documentation and that costs are eligible in accordance with FEMA’s debris removal guidelines.
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