TO: Board of Supervisors
FROM: Tracy A. Schulze, Auditor-Controller
REPORT BY: Kaitlin Ager, Principal Grant Compliance Auditor
SUBJECT: Disaster Restricted Fund Balance Analysis and Planned Release
RECOMMENDATION
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Receive a presentation on the status of Federal Emergency Management Agency (FEMA)-funded emergencies in Napa County; approve the release of restricted fund balance; and approve related Budget Amendments to return the released funds to the subdivisions that originally funded the disaster-related projects. (Fiscal Impact: $4,345,895 Reclass Fund Balance Reserves from Restricted to Available; Various Funds; Not Budgeted; Discretionary)
[4/5 vote required]
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BACKGROUND
Since 2014, Napa County has received approximately $20 million in Public Assistance funding from the Federal Emergency Management Agency (FEMA) and the California Governor’s Office of Emergency Services (CalOES) for federally declared disasters. These reimbursements have been recorded as restricted fund balance, meaning the funds cannot be used until they are deemed free from audit or claw-back risk. To date, approximately $7 million has been released from restriction, with about $13 million remaining restricted.
The most recent federally declared disasters prior to 2014 were the 2005-06 flood events, which have been fully closed out, with no remaining restricted funds. The Auditor-Controller’s Office (ACO) currently tracks 127 disaster-related projects across ten separate emergency events. This includes detailed monitoring of claims, FEMA/CalOES payments, closeout statuses, and project-specific risk assessments.
Since 2014, the Board of Supervisors has supported the ACO policy of restricting FEMA/CalOES reimbursements until each disaster project is determined to be free of significant audit risk. Under the 2018 Disaster Recovery Reform Act (DRRA), FEMA’s ability to recoup funds is generally limited to three years following CalOES’ submission of the Final Inspection Report (FIR) for a project. However, CalOES may still adjust its payments until all projects within a declared event are finalized. Therefore, the ACO evaluates each project individually to determine when it is appropriate to release funds from restriction.
Please see Attachment A for a chart summarizing the projected release of restricted fund balance for the current fiscal year and the following three years.
As shown in the chart, the incremental planned release of restricted fund balance for fiscal year 2024-25 is $4,345,895. These funds will be returned to the subdivisions that originally advanced funding for the disaster-related projects, including:
• $2,844,229 to subdivision 1050000 - General Fund Non-Departmental
• $913,654 to subdivision 1220053 - Public Works Measure T
• $342,502 to subdivision 2040000 - Public Works Roads Operations
• $173,539 to subdivision 3000000 - Accumulated Capital Outlay
Each subsequent fiscal year shown is an estimate based on each project’s current status.
In addition, $71,971 will be returned to CalOES/FEMA to reconcile advances received for projects from which the County subsequently withdrew.
The “No Estimate” column in Attachment A, for a total of $454,636, reflects amounts that will remain restricted due to outstanding risks, unresolved issues, or because the projects have not yet entered the three-year post-FIR audit window.
The “Additional Anticipated” column in Attachment A, for a total of $5.3 million, provides an estimate of remaining funds owed to Napa County based on FEMA’s original obligation amounts less payments received to date. These figures remain subject to change until CalOES completes final closeout procedures for each disaster.
Over the past 11 years, Napa County has experienced a series of federally declared disasters requiring significant coordination and fiscal management. Despite the challenges, County departments have collaborated effectively, gaining valuable experience throughout the process. While a somewhat conservative fiscal approach has been maintained by restricting funds until claw-back risks have passed, current projections indicate that a majority of the remaining restricted balances will be released by fiscal year 2027-28. Further, the General Reserve is currently fully funded, providing additional comfort and flexibility to continue this prudent fiscal policy while ensuring the County remains in a strong financial position.
Requested Actions:
1. Approve a release of restricted fund balance $4,095,807 in the General Fund, Fund 1000, Non-Departmental Declared Emergency subdivision 1058000.
2. Approve a release of restricted fund balance $250,088 in the General Fund, Fund 1000, 2014 Earthquake subdivision 1058001.
3. Approve Budget Amendments for the following (rounded to the nearest $10):
a. Increase appropriations of $76,550 in account 57900 to transfer-out of 2014 Earthquake subdivision 1058001 using available fund balance, with an increase of transfer-in (account 49900) revenue in Non-Departmental subdivision 1050000; and
b. Increase appropriations of $2,767,680 in account 57900 to transfer-out of Declared Emergency subdivision 1058000 using available fund balance, with an increase of transfer-in (account 49900) revenue in Non-Departmental subdivision 1050000; and
c. Increase appropriations of $173,540 in account 56110 to transfer-out of 2014 Earthquake subdivision 1058001 using available fund balance, with an increase of transfer-in (account 48210) General Fund revenue in Fund 3000, Accumulated Capital Outlay subdivision 3000000; and
d. Increase appropriations of $37,510 in account 53600 in Declared Emergency subdivision 1058000, project 19S34, using available fund balance to return funds to CalOES/FEMA; and
e. Increase appropriations of $34,470 in account 53600 in Declared Emergency subdivision 1058000, project 20F58, using available fund balance to return funds to CalOES/FEMA; and
f. Increase appropriations of $913,660 in account 56100 to transfer-out of Declared Emergency subdivision 1058000 using available fund balance, with an increase of transfer-in (account 48200) revenue in Fund 2440, Measure T subdivision 1220053; and
g. Increase appropriations of $342,510 in account 56120 to transfer-out of Declared Emergency subdivision 1058000 using available fund balance, with an increase of transfer-in (account 48210) General Fund revenue in Fund 2040, Roads Operations subdivision 2040000.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
Future releases of restrictions will require additional Board action. |
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Consequences if not approved: |
If this item is not approved, the identified funds will remain classified as restricted and will not be available for use by the original funding subdivisions. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines), and therefore, CEQA is not applicable.