10 Tips for Municipalities to Improve Accuracy and Efficiency in CAT Claims

By following these tips, organizations ranging from municipalities to educational institutions can improve the accuracy and timeliness of their catastrophic claims, ensuring a smoother recovery process with both insurance providers and FEMA. By leveraging forensic accounting consultants, organizations can help ensure their claims are accurate, comprehensive and well-supported, maximizing recoveries from both insurance companies and FEMA while avoiding costly delays and disputes.

1. Quantifying Financial Losses

• Task: Forensic accountants specialize in evaluating the true cost of damages by reviewing financial records, contracts and project expenses.
• How it Helps: They can accurately calculate the total losses, including property damage, business interruption and extra expenses incurred as a result of the catastrophe. This ensures that your insurance and FEMA claims are well-supported by reliable data.
• Example: In the case of damaged public infrastructure (e.g., roads, bridges), they calculate the repair costs, as well as any related economic losses due to closures or delays in services.

2. Creating Detailed Loss Documentation

• Task: Forensic accountants meticulously compile documentation that insurance adjusters and FEMA auditors require, including receipts, contracts, change orders and financial statements.
• How it Helps: They ensure all the necessary evidence is collected and organized to meet the requirements for insurance and FEMA claims, helping to avoid delays or rejections.
• Example: They create detailed reports breaking down loss categories (e.g., emergency repairs, permanent work) for FEMA's Public Assistance Program.

3. Validating Expenses

• Task: Forensic accountants verify the legitimacy of expenses related to disaster response and recovery, such as labor, materials, equipment rentals and emergency services.
• How it Helps: By ensuring that all expenses are reasonable, necessary and properly documented, they reduce the risk of disputes with insurers or FEMA over inflated or unsupported costs.
• Example: They validate the costs of temporary measures like debris removal and emergency repairs, which are eligible for FEMA reimbursement but require thorough documentation.

4. Aligning Compliance with FEMA and Insurance Guidelines

• Task: Forensic accountants are experts in navigating complex regulations and guidelines from both insurance companies and FEMA.
• How it Helps: They present claims in a format to align with relevant policies and regulations, reducing the likelihood of rejections or requests for additional information. They also help categorize claims into FEMA’s approved expense categories (e.g., emergency work, permanent work).
• Example: They ensure that costs submitted to FEMA align with its strict eligibility criteria (e.g., labor costs must be directly related to disaster response, not regular municipal operations).

5. Tracking and Substantiating Losses Over Time

• Task: Many claims, especially large CAT claims, extend over a long period of time. Forensic accountants continuously track costs and provide periodic reports to insurers and FEMA.
• How it Helps: Ongoing tracking ensures that no costs are overlooked and that both insurers and FEMA have up-to-date information about the recovery process.
• Example: They document ongoing project costs for large infrastructure repairs, ensuring that all phases of the work are covered by insurance or FEMA reimbursements.

6. Preparing Business Interruption Claims (if applicable)

• Task: For public entities that experience revenue loss due to a disaster (e.g., loss of toll revenue from a damaged bridge), forensic accountants calculate and document the lost income.
• How it Helps: This is vital for preparing business interruption claims under insurance policies and for FEMA Public Assistance where revenue losses impact government functions.
• Example: They assess the financial impact of service interruptions (e.g., public transportation systems being down) and prepare claims to recover lost revenue.

7. Supporting Negotiations with Insurers and FEMA

• Task: Forensic accountants provide expert support during negotiations with insurance adjusters and FEMA auditors.
• How it Helps: Their clear, fact-based analysis makes it easier to justify claims and expedite settlement processes. This can also prevent underpayment by ensuring that all eligible losses are included.
• Example: If an insurance adjuster disputes the value of repair costs, forensic accountants can back up the claim with precise cost analyses, contract documentation and precedent cases to support the payment of disputed costs.

8. Addressing FEMA’s Duplication of Benefits Rules

• Task: Forensic accountants are familiar with FEMA's strict "duplication of benefits" rules, which prevent overpayment for damages covered by both insurance and FEMA.
• How it Helps: They help municipalities navigate the balance between insurance claims and FEMA reimbursements, ensuring that costs are not mistakenly claimed twice, which could result in denied or delayed FEMA payments.
• Example: They coordinate the timing of insurance recoveries and FEMA applications, making sure FEMA only covers gaps that insurance doesn't handle.

9. Calculating Extra Costs and Soft Costs

• Task: Beyond direct property damage, forensic accountants calculate extra costs incurred due to the disaster, such as temporary facilities, overtime pay and expedited shipping of materials.
• How it Helps: Many of these "soft costs" are eligible for both insurance and FEMA reimbursements, but they require detailed evidence. Forensic accountants ensure that these expenses are included in claims and well-supported.
• Example: They prepare claims for temporary office space or additional staffing needed to handle recovery efforts, which are often covered under insurance or FEMA's administrative cost reimbursement programs.

10. Providing Audit-Ready Documentation

• Task: Forensic accountants prepare claims in a manner that supports a successful outcome to the rigorous audit process, whether from insurance adjusters or FEMA auditors.
• How it Helps: This reduces the chances of funds being clawed back during an audit, as the claims are supported by thorough, organized documentation and accurate financial reporting.
• Example: In case of a FEMA audit, forensic accountants ensure that all receipts, contracts and records are in place and easily accessible to justify the amounts reimbursed.