Situation

Hagerty was tasked by NISTAC (Nationwide Infrastructure Support Technical Assistance Consultants) to analyze 152 Special Community Disaster Loans (SCDL) in Louisiana (LA) and Mississippi (MS). The loans, valued at $1.4 billion, were awarded by the Federal Emergency Management Agency (FEMA) in 2006 as a result of special legislation passed by Congress in October 2005 to help local governments in LA and MS likely to be affected with a loss of revenue due to Hurricane Katrina.

Need

Based on the loan regulations, applicants could qualify for full or partial cancellation (forgiveness) if they had a 3-year operating deficit and that deficit was due to a loss in revenue caused by the disaster and/or an increase in unreimbursed-disaster related expenditures. It was Hagerty’s job to analyze the data and see if the local state governments qualified for full or partial loan forgiveness.

Solution

Prior to conducting the analysis, Hagerty’s subject matter experts on government accounting worked with FEMA management to streamline the cancellation process; refine the cancellation regulations; respond to questions and issues raised during the public comment period; draft standard operating procedures and training for the cancellation process; brief senior staff at the Department of Homeland Security (DHS), the Office of Management and Budget (OMB), the Vice President’s Office, the senior staffs of Senators Vitter and Landrieu; and several members of Congress.

To complete the analysis, Hagerty assigned a dozen accountants, many with CPAs, to review the audited financial reports of the local governments and meet with their Chief Financial Officers. They compared actual post-disaster revenue to base lines revenues would have been had the disaster not occurred, and reviewed documentation associated with Unreimbursed Disaster Related Expenditures (UDRE). These reviews helped to determine whether the expense was disaster-related, not covered by another federal, state, or private (e.g., insurance) program, and incurred within the 3-year period following the disaster.

Outcome

Based on Hagerty’s analysis, more than 60% of all of the loan dollars were eligible for cancellation. FEMA agreed with Hagerty’s conclusion and approved for notifications to begin. Once the cancellation program was ready to be implemented, Hagerty management briefed senior officials in each state and conducted applicant briefings with all applicants.