Home News Feeds National Situation Updates
Newsfeeds
FEMA.gov


  • Direct Result of Disaster
    Appeal Type: 
    2nd
    Report Type: 
    PW
    Appeal Categories: 
    Applicant Name: 
    City of Cedar Rapids
    Disaster Number: 
    1763-DR-IA
    DSR: 
    9000
    Date Signed: 
    Monday, March 31, 2014
    PA ID: 
    113-12000-00
    Summary/Brief: 

    Conclusion: The repairs to the Waste Heat Recovery Boiler (WHRB) and the Low Pressure Oxidation System Third Stage Heat Exchanger Tube (LPO) are eligible for funding because they were damaged as a result of the disaster.  The repairs to the Nine Large Burners and the Gas and Air Piping Valves are ineligible for funding because they were not damaged as a result of the disaster.

    Summary Paragraph

    Heavy rainfall that began on May 25, 2008 caused flooding on June 13, 2008 at the Water Pollution Control Facility, where the Applicant operates a sludge incinerator, and resulted in an emergency shutdown of the incinerator.  In August 2009, FEMA prepared a version of the PW9000 to fund replacement of the incinerator.  In March 2011, FEMA re-inspected the facility and determined: (1) certain components of the facility were not damaged as a result of the disaster; (2) at the time of the disaster, the facility was functioning at a lesser capacity than designed; and (3) certain improvements and code and standard upgrades were not eligible.  As a result of the inspection, in October 2011, FEMA prepared another version to the PW approving the revised repair estimate for the facility. In the first appeal, the Applicant requested FEMA find repair costs for eleven components of the incinerator eligible.  The Regional Administrator partially approved the first appeal.  On second appeal, the Applicant argues that repair costs associated four components should be found eligible.

    Authorities Discussed

    • 44 C.F.R. § 206.223(a)(1)

    • FEMA Disaster Assistance Policy DAP9524.4, Repair vs. Replacement of a Facility under 44 CFR §206.226(f) (The 50 Percent Rule) (Mar. 25, 2009)

    Headnotes

    • Under 44 CFR §206.223(a)(1), General work eligibility, in order to be eligible for financial assistance, an item of work must be required as the result of the emergency or major disaster event
      • The Applicant provided evidence that the WHRB and the LPO were damaged as a result of the disaster by substantiating the pre-disaster and post-disaster condition of the two components.  A review of affidavits from the Applicant’s engineer and employees demonstrate how these components were damaged after the disaster.  Therefore, these components are eligible for funding.
      • The Applicant failed to demonstrate that the Nine Large Burners or the Air and Gas Piping Valves were damaged as a result of the disaster.  The components were not submerged during the flooding, and the Applicant did not provide sufficient documentation to show that they were damaged.  Thus, those components are not eligible for public assistance funding. 
    Letter: 

    March 31, 2014

    Mark Schouten
    Administrator
    Iowa Homeland Security and Emergency Management Division
    7105 NW 70th Avenue
    Camp Dodge, Bldg. W-4
    Johnston, Iowa 50131-1824

    Re: Second Appeal – City of Cedar Rapids, PA ID 113-12000-00, FEMA-1763-DR-IA, Project Worksheet (PW) 9000 – Direct Result of Disaster

    Dear Mr. Schouten:

    This is in response to your letter dated November 28, 2012, which transmitted the referenced second appeal on behalf of the City of Cedar Rapids (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of reimbursement for costs related to repairing four components of an incinerator at its Water Pollution Control Facility.  The Applicant’s appeal does not include a specific amount in dispute.

    As explained in the enclosed analysis, the Applicant has demonstrated that repair of two of the four remaining incinerator components was required as the result of the disaster.  Therefore, I am partially granting this appeal.  By copy of this letter, I am requesting the Regional Administrator take appropriate action to implement this determination. 

    Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206.

    Sincerely,

    /s/

    Brad J. Kieserman
    Assistant Administrator
    Recovery Directorate

    Enclosure

    cc:  Beth Freeman
          Regional Administrator
          FEMA Region VII

    Analysis: 

    Background           

    On June 13, 2008, the Cedar Rapids Water Pollution Control Facility (WPCF) was flooded as a result of severe rainfall, which began on May 25, 2008.  That facility is owned and operated by the City of Cedar Rapids (Applicant).  The flooding inundated the basements of the sludge incinerator building with approximately 15 feet of water causing an operational failure at the WPCF and abrupt shutdown of the incinerator and ancillary equipment located on upper floors.  The flood waters damaged various components of the incinerator, which required the Applicant to haul additional sewage sludge to a landfill until the incinerator became operational.[1]  FEMA initially prepared PW 2774 to fund (1) the costs to haul and dispose of the sludge until the incinerator was operational and (2) emergency repairs to restore incinerator operations.  In March 2009, FEMA prepared Project Worksheet (PW) 9000 to reimburse the Applicant for repairs to the incinerator and other components.  In April 2009, FEMA prepared Version 1 to PW 9000 to fund additional permanent repairs and determined that some emergency repairs were temporary.  FEMA de-obligated the funding for the emergency repairs from PW 9000 and added the funding to PW 2774.  In August 2009, FEMA determined that the replacement of the incinerator was eligible in accordance with FEMA Disaster Assistance Policy DAP9524.4, Repair vs. Replacement of a Facility under 44 CFR §206.226(f) (The 50 Percent Rule) and prepared a second version to PW 9000 to fund the replacement ($29,455,000).

    On March 22, 2011, FEMA re-inspected the facility and determined: (1) certain components of the facility were not damaged as a result of the disaster; (2) at the time of the disaster, the facility was functioning at a lesser capacity than designed; and (3) certain improvements and code and standard upgrades were not eligible.  As a result of the inspection, FEMA developed a new cost estimate for the repair of components damaged by the event and also determined replacement of the facility was not eligible in accordance with the 50 Percent Rule.  In October 2011, FEMA prepared Version 3 to PW 9000 approving funding for the eligible repairs and including the eligible scope of work initially covered in PW 2774.  In approving PW 9000 Version 3, FEMA adjusted the eligible funding amount for repairs and sludge disposal to $8,106,635.  FEMA de-obligated all funds from PW 2774.

    First Appeal

    The Applicant submitted a first appeal on December 27, 2011, requesting reimbursement for repair and/or replacement costs for several components of the incinerator: (1) Waste Heat Recovery Boiler (WHRB); (2) High Pressure Process Air Compressor No. 2 (PAC No. 2); (3) Low Pressure Oxidation (LPO) System Third Stage Heat Exchanger Tube; (4) High Pressure Positive Displacement Pumps (HPP); (5) ID Fan Housing and Shroud; (6) Impingement Scrubber; (7) Sludge Combustion Air Fans and Retrofitted Ducts; (8) PLC Controller Panels; (9) Electrical Control Panels; (10) Nine large burners; and (11) Gas and Air Piping Valves.  The Applicant also requested additional funding for sludge hauling and disposal that occurred after July 30, 2009 (the date that the incinerator was able to operate at full capacity) because incinerator repairs continued to be made after that date.  The Applicant estimated the future costs of sludge disposal and argued that such costs should be added to the 50 Percent Rule calculation as part of the repair estimate.  The Grantee supported the Applicant’s appeal.

    On August 1, 2012, after considering all of the information provided by Applicant as well as various engineering and site visit reports generated by FEMA personnel, the FEMA Region VII Regional Administrator (RA) partially approved the first appeal, finding repair or replacement costs for seven of the eleven components were eligible for reimbursement, and increased the total eligible funding amount to $11,202,485.  The RA denied the Applicant’s request for repair or replacement costs related to the following components: (1) WHRB; (2) LPO System Third State Heat Exchanger Tubes; (3) Nine Large Burners and (4) Gas and Air Piping Valves.  With regard to the first two, the RA indicated that the pre-disaster condition of the components was “unclear,” and that the Applicant did not clearly demonstrate damages to them were a result of the declared disaster.  As for the nine large burners, the RA found that replacement costs were not eligible because they were not in compliance with environmental standards at the time of the disaster.  Finally, the RA found the gas and air piping valves to be ineligible because they were not flooded and did not require repairs. 

    The RA also found that the sludge hauling and disposal costs during the incinerator repairs were eligible, but did not consider them for purposes of the 50 Percent Rule calculation because those costs were not a direct repair or replacement of an item associated with the facility.[2]  Overall, based on a revised 50 Percent Rule calculation, adding in the additional eligible component repair and replacement costs, the RA determined that the replacement of the incinerator was not eligible. 

    Second Appeal

    The Applicant submitted a second appeal on September 28, 2012 and the Grantee indicated support for the appeal through its November 28, 2012 transmittal to FEMA.  Included with the second appeal was new information, not considered by the Regional Administrator, consisting of affidavits from the Applicant’s employees, state and county employees that regulate operations at the Applicant’s facility, and employees from Brown and Caldwell (B&C), the engineering firm consulting the Applicant in making determinations about component repairs and replacements at the facility.  The Applicant also provided for the first time copies of inspection certificates, invoices from cleaning services, and doctrine associated with principles for the cold shutdown of the incinerator.[3]

    In the second appeal, the Applicant maintains that the costs related to the remaining four components are eligible for reimbursement.  In asserting that the WHRB should be eligible for repair or replacement of damages that were the result of the disaster, the Applicant argues that the WHRB was in good condition before the flood and submitted certificates indicating passage of state inspections for the two years preceding the disaster to substantiate this claim.  Further, the Applicant documented that it cleaned the WHRB on July 31, 2008, and again on November 24, 2008.  Approximately 15 months after the disaster, the Applicant sought bids to address problems with the WHRB.  Within those bidding documents, the Applicant indicated that the WHRB “required significant repairs of leaks after sitting idle for 9 months.” 

    With regard to the LPO, the Applicant indicates that the emergency shutdown of the incinerator resulted in sludge remaining inside of the LPO tubes and not being removed for an extended period of time.  The Applicant explains that the sludge corroded the tubes and the “dried” sludge within the tubes can only be cleaned by double chemical washes.  The Applicant states that it did not perform double chemical washes before the flood and started chemical washes more than one year after the flood in the fall of 2009.   

    The Applicant also argues that the costs associated with replacing the nine large burners and the burner gas and air piping valves should be reimbursed.  While the Applicant concedes that flood waters did not submerge these components, it argues that FEMA should fund the repairs because they work in conjunction with parts of the Programmable Logic Controller (PLC).  The Applicant notes that FEMA funded replacement of the PLC components that were inundated during the event and that components that were not submerged had problems working with the replaced PLC components after the incinerator was restarted.  The Applicant asserts that if the incinerator continues to operate without the replacement parts for the nine large burners and the burner gas and air piping valves, then it will have problems meeting emission standards.  The Applicant also notes that it complied with environmental standards before the flood. 

    Discussion

    Waste Heat Recovery Boiler and Low Pressure Oxidation System Third State Heat Exchanger Tube

    Pursuant to Title 44 of the Code of Federal Regulations (44 CFR) 206.223(a)(1), General work eligibility, to be eligible for financial assistance, an item of work must be required as the result of the emergency or major disaster event.  The RA found that the Applicant did not substantiate the pre-disaster condition of the WHRB or the LPO nor clearly demonstrate the damages incurred were the result of the declared disaster.  In its second appeal, the Applicant demonstrated that the WHRB was in good working condition before the disaster based on passing inspections the two years preceding the disaster.  The Applicant provided boiler inspection notices in its second appeal demonstrating those results.  Additional information provided with the second appeal indicated that the WHRB was damaged as a result of the disaster.  The Grantee also provided an affidavit from a subcontractor hired to run a test of the WHRB, which indicated that a test of the component was run following the event, and it failed.[4]

    Through a review of all of the information submitted by the Applicant, both with its first appeal and new documentation supporting its second, FEMA finds that the WHRB was damaged as a result of the disaster, which caused an emergency shutdown of the incinerator and prolonged outage following the event.  Specifically, a B&C engineer stated that the WHRB experienced numerous leaks and mechanical valve failures due to a prolonged outage period in the immediate aftermath of the flood.[5]   Another B&C engineer also indicated that a normal incinerator shutdown can take several days and that, as a result of an emergency shutdown, “hot steam, baking sludge, and abrupt material expansion and contraction due to rapid thermal changes will otherwise damage the components of the incineration system.”[6]  To further support its point, the Applicant provided the incinerator shutdown principles with both its first and second appeal.  In a September 13, 2011 letter from the Applicant to the Grantee, the Applicant noted the several ways that the WHRB was damaged after the flood and why making repairs to the boiler did not happen immediately after the flood.  The Applicant stated that when power was lost, superheated water was trapped inside the boiler and the feed lines.  The Applicant indicated that flushing water with chemical stabilizers and corrosion inhibitors could not be circulated through the system due to the loss of power and controls to the recirculation pumps and water softening process.  The Applicant stated that the WHRB remained in an unstable state until power was restored, which was nine months after the flood.  Therefore, the Applicant through its first and second appeals provided support for its assertion that the WHRB was in good condition before the disaster, and it required repairs as result of the disaster. 

    In a January 21, 2009 B&C Memorandum submitted with the first and second appeals, B&C indicated that the WHRB provides steam to the LPO.  As the LPO’s operation is linked to the WHRB’s operation, the LPO was damaged because the WHRB was damaged.  Regarding the LPO, the Applicant in its second appeal submission provided some indication as to the condition of the LPO before the flood.  Specifically, the Utilities Plant Manager at the Applicant’s facility stated that the LPO was regularly chemically cleaned.[7]  In the above-mentioned September 13, 2011 letter submitted with the first appeal, the Applicant explained that the cool shutdown of LPO component takes four to five days.  As stated above, the immediate shutdown did not allow the plant managers to perform the proper cool shutdown of the system, which would have allowed the Applicant to remove any sludge that was being processed.  Through consultation with the LPO’s manufacturer, it was confirmed that an immediate shutdown in all likelihood would have caused a scale buildup on all tube surfaces.[8]

    As such, based upon previously considered and substantive, new information provided by the Applicant, sufficient evidence has been provided to demonstrate that the damage to the LPO was a result of the disaster.  Additionally, Applicant’s explanation that “the power and control for the pumps and compressors that feed the LPO was not fully restored and/or energized for many months following the flood, preventing staff from flushing the lines, reactors and heat exchangers” adequately explains why it was not able to clear sludge from the tubes sooner.[9]  Therefore, the Applicant has provided information about the condition of the LPO before the disaster and the damage that the LPO suffered as a result of the disaster.

    In both instances, the Applicant demonstrated that the repair of the components was required as a result of the disaster.  Therefore, the repair and/or replacement of these components is eligible for Public Assistance funding.

    Nine Large Burners

    The RA found that the burners were not flooded, that the damages were attributable to the age of the burners, and the Applicant did not demonstrate that the burners complied with applicable air emission standards in effect at the time of the disaster.  The Applicant has not demonstrated that the burners were flooded or required repairs as a result of the disaster.  In the January 21, 2009 Technical Memorandum, B & C indicated that the burners were not flooded but that replacing the burners would allow the Applicant to meet updated air pollution regulations and permits. The Applicant further indicated that the incinerator would have difficulty meeting air emission standards if the burners were not replaced.  As stated above, public assistance applicants need to demonstrate that repairs were required as a result of the disaster, not that repairs are required to meet air emission standards.  The Applicant has not shown that repair of the nine burners was required as a result of the disaster.  Therefore, repair or replacement of the nine burners is not eligible for Public Assistance funding.      

    Gas and Air Piping Valves

    The RA found that the gas and air piping valves were not flooded and did not require repairs as a result of the disaster.   The Applicant indicated that when it restarted the incinerator after replacing the damaged PLC components, the gas and air piping valves experienced various operational issues.  While the Applicant asserts that the operational issues occurred because the non-damaged components were not able to function properly with the newer, replaced components, it did not provide adequate documentation to demonstrate the gas and air piping valves were damaged or required repair as a result of the disaster.  None of the affidavits or the reports submitted with the second appeal sufficiently addressed damage to the gas and air piping valves.  Therefore, repair of the gas and air piping valves is not eligible for funding.      

    Conclusion

    The Applicant provided information necessary to demonstrate that repairs to both the WHRB and the LPO are required as a result of damage caused by the disaster.  As such, repair of the two components in question are eligible for public assistance funding.  The remaining two components, the nine burners and the gas and air piping valves, are ineligible for public assistance funding. 


    [1] Before the disaster, the Applicant incinerated most of the sludge but a portion was stockpiled, hauled away and land applied for agricultural purposes.  In PW 2774, FEMA captured costs and obligated funding for sludge hauling and disposal during emergency repairs at the facility.  The Applicant requested additional funding for sludge hauling and disposal while the Applicant was making permanent repairs to the facility.  

    [2] Page 36 of the Public Assistance Guide, FEMA 322, dated June 2007.

    [3] On second appeal, Applicant re-submitted some documents that were part of its first appeal including instructions for the cold shutdown of the incinerator and a January 21, 2009 Brown and Caldwell technical memorandum.

    [4] Jerry Dietsch Affidavit, dated November 27, 2012 (submitted with the second appeal).

    [5] Adam Keckler Affidavit, dated February 21, 2012 (submitted with the first appeal).

    [6] Brian Copeland Affidavit, dated February 22, 2012 (submitted with the first appeal).

    [7] Roy Hesemann Affidavit, dated September 28, 2012 (submitted with the second appeal).

    [8] Brian Copeland Affidavit, dated February 22, 2012 (submitted with the first appeal).

    [9] September 13, 2011 Letter from the Applicant to the Grantee (submitted with the first appeal).

     



  • Operation of Fixed Generators
    Appeal Type: 
    2nd
    Report Type: 
    PW
    Appeal Categories: 
    Applicant Name: 
    Noble County Emergency Management Agency
    Disaster Number: 
    4077-DR-OH
    DSR: 
    254
    Date Signed: 
    Friday, March 14, 2014
    PA ID: 
    121-U1HKY-00
    Summary/Brief: 

    Conclusion:  The Noble County Emergency Management Agency’s fixed generator costs are eligible; however, the eligible cost associated with that usage is limited to the cost of the fuel consumed during the performance of eligible work. 

    Summary Paragraph

    During the incident period of June 29 through July 2, 2012, strong winds and severe storms produced extensive damage, causing downed utility lines and widespread power outages for multiple days.  The Noble County Emergency Management Agency (Applicant) utilized one portable and five fixed generators during the event to support emergency protective measures at the operations center, county water and sewage systems, sheriff’s office and jail.  FEMA prepared Project Worksheet (PW) 254 for $3,641 to fund usage of the portable generator and fuel for the fixed generators.  FEMA did not reimburse the usage of the five fixed generators based on FEMA’s schedule of equipment rates.  The Applicant submitted a first appeal for $8,242 requesting that FEMA use equipment rates for the fixed generators to determine eligible funding.  The Regional Administrator denied the first appeal, explaining that the ownership costs of permanently mounted generators are viewed as components of the cost of operating the facility.  The Applicant reiterates its position in its second appeal; however, the applicant has not provided sufficient justification for reimbursing the use of fixed generators based on equipment rates.

    Authorities and Previous Appeals Discussed

    • Stafford Act Title IV Sec.403 Essential Assistance 42 U.S.C. § 5170b(3)
    • 44 CFR § 206.226 Restoration of damaged facilities.
    • Public Assistance Guide, FEMA 322 (June 2007), pages 54-55, 85
    • Public Assistance Digest, FEMA 321 (Jan 2008), page 135
    • FEMA-DR-4077-OH, Trimble Township Wastewater Treatment District (January 17, 2014

    Headnotes

    • 42 U.S.C. § 5170b(3) and 44 CFR § 206.225(a)(3) provide that generally, those prudent actions taken by an Applicant to ensure the continuation of essential public services and protect lives and public health are eligible for assistance.

    • FEMA 322, Public Assistance Guide (June 2007), at 54-55 provides that the cost of obtaining power from alternate sources is considered an increased operating expense and is not eligible.  The guidance does provide an exception for increased operating costs constituting “reasonable short-term additional costs to an applicant that are directly related to accomplishing specific emergency health and safety tasks as part of eligible emergency protective measures.”

      • Application of this guidance necessitates a distinction between portable and fixed generators.
      • FEMA reimburses the use of portable generators based on FEMA equipment rates or similar set rates. 
      • FEMA does not reimburse the use of fixed generators based on equipment rates.  However, if fixed generators are used in the performance of eligible emergency work, FEMA will reimburse the fuel consumed during the performance of that work.


     

     

    Letter: 

    March 14, 2014

    Nancy J. Dragani
    Executive Director
    Ohio Emergency Management Agency
    2855 West Dublin-Granville Road
    Columbus, Ohio 43235-2206

    Re: Second Appeal – Noble County Emergency Management Agency, PA ID 121-U1HKY-00, Operation of Fixed Generators, FEMA-4077-DR-OH, Project Worksheet (PW) 254

    Dear Ms. Dragani:

    This is in response to your letter dated July 3, 2013, which transmitted the referenced second appeal on behalf of the Noble County Emergency Management Agency (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) of $8,242 for reimbursement of the operation of fixed generators based on FEMA’s schedule of equipment rates.

    As explained in the enclosed analysis, I have determined that the Applicant’s use of fixed generators is eligible.  However, the eligible cost associated with that usage is limited to the cost of the fuel consumed during the performance of eligible emergency work.  Therefore, I am denying the appeal.

    Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 CFR § 206.206, Appeals.

    Sincerely,

    /s/

    Brad Kieserman
    Assistant Administrator
    Recovery Directorate

    Enclosure

    cc:  Andrew Velasquez, III
          Regional Administrator
          FEMA Region V

    Analysis: 

    Background

    During the incident period of June 29 through July 2, 2012, strong winds and severe storms produced extensive damage throughout Noble County, causing downed utility lines and widespread power outages for multiple days.  The Noble County Emergency Management Agency (Applicant) utilized one portable and five fixed generators during the event to support emergency protective measures at the operations center, county water and sewage systems, sheriff’s office and jail.    FEMA prepared Project Worksheet (PW) 254 for $3,641 to fund usage of the portable generator based on FEMA’s schedule of equipment rates and fuel for the fixed generators.  Because five of the generators were fixed, FEMA did not reimburse the use of those generators based on FEMA’s equipment rates but instead reimbursed the fuel costs only ($3,063). 

    First Appeal

    The Applicant submitted a first appeal for $8,242 in a letter dated April 4, 2013, asserting that reimbursement for the fixed generator usage should be based on FEMA’s schedule of equipment rates.  The FEMA Region V Regional Administrator denied the first appeal in a letter dated
    May 7, 2013, explaining that the depreciation and ownership costs of permanently mounted generators are viewed as components of the cost of operating the facility.

    Second Appeal

    The Applicant submitted a second appeal for $8,242 in a letter dated June 14, 2013, reiterating its request for FEMA to apply equipment rates in reimbursing the fixed generator usage.  The Applicant states that two of the generators were installed after construction of the buildings that house them and are not integral parts of the buildings, while the other three are anchored to concrete pads outside as standalone structures.  The Applicant maintains that because the generators are not part of the respective buildings they are not depreciated like a furnace or hot water tank.  The Grantee supports the Applicant’s appeal, and the Grantee’s transmittal letter also cites a second appeal under FEMA-EM-3288-FL, dated January 17, 2012, involving a Miami-Dade County, Florida, project for which FEMA funded fixed generator costs using FEMA’s schedule of equipment rates.

    Discussion

    Generally, prudent actions taken by an Applicant to ensure the continuation of essential public services and protect lives and public health are eligible for assistance.[1]  However, as specifically delineated in FEMA policy,[2] the cost of obtaining power from alternate sources is considered an increased operating expense and is generally not eligible.[3]  Noting such, policy provides an exception for “reasonable short-term additional costs to an applicant that are directly related to accomplishing specific emergency health and safety tasks as part of eligible emergency protective measures.”[4]

    Application of this guidance necessitates a distinction between portable and fixed generators.  FEMA reimburses the use of portable generators based on FEMA equipment rates or similar set rates.  FEMA equipment rates include such costs as operation of equipment, depreciation, overhead, maintenance, field repairs, fuel, lubricants, tires, Occupational Safety and Health Administration equipment, and other costs incidental to operation.  This method of calculating reimbursement is not applicable to fixed generators or generators that are permanent fixtures because a portion of the costs included in the equipment rates, like depreciation and the other ownership components, are viewed as elements of the operating costs of the facility that the fixed generator is installed to support.  Accordingly, FEMA will reimburse fuel costs for fixed generators if the generators are used in the performance of eligible emergency work, because those are the only increased costs incurred by the applicant as a direct result of the event. 

    The fundamental issue and basic facts presented in this appeal are analogous to those in the January 2014 Trimble Township Wastewater Treatment District second appeal decision.[5]  The Trimble second appeal decision reinforced existing policy in finding that when fixed generators are used in the performance of eligible emergency work, FEMA will reimburse the fuel consumed during the performance of that work, but will not reimburse the usage based on equipment rates and that this applies regardless of whether the generators are affixed inside a facility or to a concrete slab outside of a facility.  The Trimble decision also found that the Miami-Dade second appeal decision[6] referenced by the Grantee, accurately reflected FEMA policy regarding reimbursement of fixed generator usage but provided ambiguous direction to the Regional Administrator and consequently was misapplied.

    Conclusion

    FEMA does not reimburse the use of fixed generators based on equipment rates.  However, if fixed generators are used in the performance of eligible emergency work, FEMA will reimburse the fuel consumed during the performance of that work.  In this case, FEMA has provided all eligible funding for the fixed generator usage in PW 254.


    [1] See, e.g., 42 U.S.C. § 5170b(3); 44 CFR § 206.225(a)(3).

    [2] See FEMA 322, Public Assistance Guide (June 2007), at 54-55.

    [3]  Id.

    [4]  Id. at 55.

    [5] See FEMA_DR-4077-OH, Trimble Township Wastewater Treatment District (January 17, 2014).

    [6] See FEMA-EM-3288-FL, Miami-Dade County, (January 17, 2012).

     



  • Direct Administrative Costs
    Appeal Type: 
    2nd
    Report Type: 
    PW
    Appeal Categories: 
    Applicant Name: 
    Los Angeles County
    Disaster Number: 
    1810-DR-CA
    DSR: 
    268
    Date Signed: 
    Wednesday, March 19, 2014
    PA ID: 
    037-99037-00
    Summary/Brief: 

    Conclusion: The Applicant did not provide sufficiently detailed and descriptive documentation to demonstrate that the direct administrative costs (DAC) were directly related to the performance of eligible tasks.

    Summary Paragraph

    Wildfires between November 13 and November 28, 2008 were a threat to public safety, resulting in evacuations and widespread damage.  Los Angeles County performed emergency protective measures at nine sites.  At project closeout, FEMA determined that the Applicant did not identify specific direct administrative tasks performed on a given date, by a specific employee.  The Applicant submitted its first appeal requesting reimbursement of $52,979.07 for DAC, providing time cards for each employee and an explanation of the codes defining the task each employee performed. The Region IX Regional Administrator (RA) partially approved the first appeal for $1,963.94  The RA determined the remaining balance was ineligible as the documentation was insufficient to demonstrate that the costs claimed were directly related to eligible administrative tasks in support of PW 268.

    Authorities and Previous Appeal Decisions Discussed

    • Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs dated March 12, 2008. 
    • FEMA’s Second Appeal Decision, Cedar Rapids Community School District, FEMA-DR-IA PW 649 dated April 22, 2013.

    Headnotes

    • Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, Section VII(D)(1).
    • DAC include costs that can be tracked, charged and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW.
    • Direct costs are limited to actual reasonable costs incurred for a specific project.  Such costs will be considered project costs.

    FEMA’s Second Appeal Decision, Cedar Rapids Community School District, FEMA-DR-IA PW 649

    • FEMA noted that terms such as “Project Formulation”, “Project Administration”, Project Management” and “Documentation Development” are too broad and fail to describe specific administrative tasks as required by
    Letter: 

    March 19, 2014

    Mark S. Ghilarducci
    Secretary
    California Emergency Management Agency
    3650 Schriever Avenue
    Mather, California 95655

    Re: Second Appeal – Los Angeles County, PA ID 037-99037-00, Direct Administrative Costs, FEMA-1810-DR-CA, Project Worksheet (PW) 268

    Dear Mr. Ghilarducci:

    This is in response to the letter from your office dated September 11, 2013, which transmitted the referenced second appeal on behalf of Los Angeles County (Applicant).  The Applicant is appealing the Department of Homeland Security's Federal Emergency Management Agency (FEMA) denial of  $51,015.13 in direct administrative costs.

    As explained in the enclosed analysis, I have determined that the documentation provided by the Applicant on direct administrative costs failed to demonstrate that the performed activities were directly related to PW 268.  Therefore, I am denying this appeal.

    Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

    Sincerely,

    /s/

    Brad Kieserman
    Assistant Administrator
    Recovery Directorate

    Enclosure

    cc: Karen Armes
         Acting Regional Administrator
         FEMA Region IX

     

    Analysis: 

    Background

    Wildfires occurred in California from November 13 through November 28, 2008, resulting in evacuations and widespread damage in Los Angeles County.  On April 9, 2009, FEMA prepared Project Worksheet (PW) 268 for the cost of emergency protective measures at nine sites in Los Angeles County (Applicant) for a total of $600,243.98.  FEMA prepared the PW based on estimated costs and noted that the Applicant would subsequently provide documentation supporting actual costs.

    On September 6, 2012, FEMA approved a version of PW 268 for $944,861.24 for the cost of emergency protective measures, but denied $52,889.98 in direct administrative costs (DAC). The FEMA Region IX Regional Administrator informed the California Governor’s Office of Emergency Services Management Agency (Grantee) that the documentation provided in support of the DAC did not identify specific tasks performed on a given date by a specific employee as required by FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs.  

    First Appeal

    On November 7, 2012, the Applicant submitted its first appeal requesting reimbursement of $52,979.07 for DAC.  The Applicant included time cards for each employee and an explanation of the codes defining the task each employee performed after May 16, 2010.  The Applicant did not provide descriptions of the work performed before the May 16, 2010.  The following codes were used to define the tasks:

    20.01- Financial Compliance Review

    20.02- Other Funding Anticipation

    20.08- Project Cost Estimation & Documentation

    20.11- Additional FEMA/Grantee Documentation Requests

    20.12- Other Program Administration

    On May 10, 2013, the Regional Administrator partially approved the first appeal for $1,963.94.  The Regional Administrator determined that the descriptions of codes 20.01, 20.02 and 20.12 were too broad to determine if the work was directly related to eligible direct administrative activities in support of PW 268.  According to the first appeal response, the work designated with codes 20.08 and 20.11 was typical for the administrative process in direct support of PW 268.  The costs associated with codes 20.08 and 20.11 totaled $1,963.94. The Regional Administrator found the remaining amount ineligible because the documentation failed to demonstrate the costs claimed were eligible direct administrative activities for the project.

    Second Appeal

    The Applicant submitted its second appeal on July 19, 2013, and maintains that the information contained in the time cards provided to FEMA with its first appeal followed FEMA’s task definitions, guidelines and policies, and that the direct administrative activities were properly documented and directly related to PW 268.  The Applicant requests approval of its remaining claimed DAC in the amount of $51,015.13.  The Applicant did not provide additional documentation with its second appeal.                                                                                                                                                                                                                                                                                                                                                                      

    Discussion

    Pursuant to FEMA Disaster Assistance Policy (DAP) 9525.9 Section 324 Management Costs and Direct Administrative Costs, FEMA may reimburse DAC incurred by grantees and subgrantees that are properly documented and directly chargeable on a PW for a specific project.  DAC include costs that can be tracked, charged and accounted for directly to a specific project.[1]  In FEMA’s response to the second appeal for Cedar Rapids Community School District, FEMA-1763-DR-IA, PW 649,[2] it noted that terms such as “Project Formulation,” “Project Administration,” “Project Management,” and “Documentation Development” are too broad and fail to describe a specific administrative task as required by DAP 9525.9.

    Here, although “Project Cost Estimation and Documentation” and “Additional FEMA/Grantee Documentation Requests” may seem broad, the Regional Administrator had sufficient information to substantiate that the administrative  tasks were directly related to PW 268.  This project required a significant amount of administrative support because the PW included nine sites, each pertaining to emergency protective measures performed by a different county department.  The reconciliation of estimated costs with the actual force account labor costs was labor intensive and required two time extensions to complete.  Given the nature of this project and FEMA’s additional knowledge of underlying activities associated with those tasks, the descriptions of those administrative tasks was specific enough to warrant reimbursement.  The remaining three category descriptions – “Financial Compliance Review,” “Other Funding Anticipation” and “Other Program Administration” – do not provide enough information to enable FEMA to determine if the work constituted administrative activities in direct support of PW 268.      

    Conclusion

    The documentation provided by the Applicant is not sufficiently detailed and descriptive to demonstrate that the remaining DAC is related to the performance of eligible direct administrative tasks associated with PW 268.  As such, the remaining DAC is not eligible for Public Assistance funding.


    [1] DAP 9525.9 Section 324 Management Costs and Direct Administrative Costs, March 12, 2008.

    [2] FEMA’s Second Appeal Decision, Cedar Rapids Community School District, FEMA-DR-IA PW 649, April 22, 2013.

     

     



  • Direct Administrative Costs
    Appeal Type: 
    2nd
    Report Type: 
    PW
    Appeal Categories: 
    Applicant Name: 
    City of Cedar Rapids
    Disaster Number: 
    1763-DR-IA
    DSR: 
    1299, 1411, and 9556
    Date Signed: 
    Wednesday, March 19, 2014
    PA ID: 
    113-12000-00
    Summary/Brief: 

    Conclusion: The documentation submitted by the Applicant did not demonstrate that the costs incurred for contracted labor at $285 per hour were reasonable for grant administration work.  Furthermore, The Applicant failed to provide sufficiently detailed and descriptive documentation to demonstrate that the previously funded contracted DAC tasks/activities are eligible or reasonable.

    Summary Paragraph

    Heavy rainfall beginning in May 2008 resulted in severe flooding that caused extensive damage in the City of Cedar Rapids (Applicant).  FEMA prepared three PWs for a combined total of $699,503 for costs to perform emergency and permanent work.  Included in the project costs were $33,256 in Direct Administrative Costs (DAC).  After the Iowa Homeland Security and Emergency Management Division (Grantee) reviewed the Applicant’s documentation of actual costs, FEMA closed out the three PWs and reduced the total eligible DAC to $27,246 based on the Grantee’s recommendation.  The Applicant requested an additional $6,010 in DAC; however, FEMA determined that the Applicant’s documentation did not support the eligibility of $6,010 in DAC associated with a consultant’s hourly rate that exceeded $155.  In the first appeals, the Applicant asserted that the DAC was eligible for reimbursement.  In the appeals response, the Regional Administrator noted that the Applicant did not justify the hourly rate above $155 and determined that the claims for $6,010 were ineligible.  In the second appeals, the Applicant argues that the consultant’s project manager rate was appropriate by virtue of the time required to review and supervise a project officer,  reasonable by the Applicant’s adherence to proper contract procurement protocols, and comparable to another consulting contractor’s rates employed by the Grantee.

    Authorities Discussed

    • Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs

    Headnotes

    • Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, Section VII(D)(1).
    • DAC include costs that can be tracked, charged and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW. Direct costs are limited to actual reasonable costs incurred for a specific project. Such costs will be considered project costs.


     

    Letter: 

    March 19, 2014

    Mark Schouten
    Administrator
    Iowa Homeland Security and Emergency Management Division
    7105 NW 70th Avenue
    Camp Dodge, Bldg. W-4
    Johnston, Iowa 50131-1824

    Re:   Second Appeal–City of Cedar Rapids, PA ID 113-12000-00, Direct Administrative Costs, FEMA-1763-DR-IA, Project Worksheets (PWs) 1299, 1411, and 9556        

    Dear Mr. Schouten:

    This letter is in response to letters from your office dated June 7, 2013, which transmitted the referenced second appeals on behalf of the City of Cedar Rapids (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of a combined total $6,010 for Direct Administrative Costs (DAC) in the referenced three PWs.

    As explained in the enclosed analysis, the Applicant has not demonstrated that the $6,010 in additional claimed DAC was reasonable and eligible.  The Applicant’s second appeal is therefore denied.  This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

    In addition, FEMA’s review of this appeal has revealed that the documentation submitted by the Applicant is not sufficiently detailed to enable FEMA to determine whether any of the claimed contracted DAC are eligible and reasonable.  Therefore, by copy of this letter, I am requesting the Regional Administrator de-obligate all contracted DAC previously approved in the referenced PWs.  In accordance with 44 CFR §206.206 (b)(1), Appeals, Levels of Appeal, the Applicant may appeal, to the Regional Administrator, all contracted DAC, with the exception of  the $6,010 denied as stated above.  Please inform the Applicant of my decision.                       

    Sincerely,

    /s/

    Brad Kieserman
    Assistant Administrator
    Recovery Directorate

    Enclosure

    cc:  Beth Freeman
          Regional Administrator
          FEMA Region VII

    Analysis: 

    Background

    Heavy rainfall between May and August 2008 resulted in severe flooding that caused extensive damage in the City of Cedar Rapids (Applicant).  The Applicant performed emergency and permanent work in response to disaster related damages.  FEMA prepared the referenced three PWs to capture the costs of the eligible work performed by the Applicant for a total of $699,503.  The PWs included a combined total of $33,256 in Direct Administrative Costs (DAC).  During project closeout, the Iowa Homeland Security and Emergency Management Division (Grantee) reviewed the Applicant’s documentation of actual costs and recommended that FEMA only approve $27,246 as eligible DAC in the three PWs ($6,010 less than claimed) due to insufficient documentation to support consultant’s rates in excess of $155 per hour.

    First Appeal

    The Applicant submitted first appeals of the referenced three PWs to the Grantee July 20 – November 27, 2012.  With the three appeals, the Applicant requested reimbursement for a combined total $6,010 for DAC that were charged at an hourly contract rate above $155.  The Applicant asserted that the contractor’s project manager rate of $285 per hour was eligible because the Applicant followed a proper procurement process, in accordance with federal regulations, and the awarded the contract based on fair market value.  Further, the Applicant claimed that the project manager’s review and oversight of consultant staff required “special skills”, referencing OMB Circular A-87, Attachment B, paragraph 32.  The Grantee forwarded the Applicant’s first appeals to FEMA with letters supporting the Applicant’s requests on Septembers 10, 2012 – January 14, 2013.

    Upon receipt of the Applicant’s first appeals, the FEMA Region VII Regional Administrator (RA) issued a request for information to assist in its analysis of the eligibility of the DAC claimed.  The requested information included:

    • Professional designation or title of employee performing task;
    • Specific description of each task performed and the associated cost (i.e., site identification, kick-off meeting, immediate needs, preliminary cost estimate, data collection & dissemination, travel expenses, etc.) because the project phases were too broad and did not substantiate specific work activity;
    • Justification for each task why specific staff or skills were required to accomplish the work;
    • Documentation demonstrating non-FEMA related historical costs for similar tasks.

    In response to the RA’s request, the Applicant submitted information and documentation related to its procurement process, non-FEMA related historical costs, and task descriptions, costs and employees performing them.

    On November 21, 2012 – February 13, 2013, the RA denied the first appeals with letters explaining that the Applicant’s request for a combined total $6,010 in contract cost was not eligible for reimbursement as the Applicant had not justified the $285 per hour rate. 

    Second Appeal

    The Applicant submitted second appeals March 7 – April 9, 2013, which the Grantee transmitted to FEMA on June 7, 2013.  In the second appeals, the Applicant argues that the documentation provided describing the time required for the project manager to review and supervise its lower level employees is appropriate and therefore reasonable and eligible for reimbursement.  The Applicant maintains that its competitive procurement process for services demonstrates reasonable costs, and notes the costs claimed are similar to another consulting contractor’s rates employed by the Grantee.  In support of its claim, the Applicant provided a contract between the Grantee and James Lee Witt Associates.  However, the Applicant did not provide any information or documentation in support of the specific tasks performed under its contract beyond what it submitted with the first appeal and in response to the RA’s request for additional information.

    Discussion

    Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, describes grant management and administrative costs that are eligible under the Public Assistance Program.  The policy defines direct administrative costs as “costs incurred by the grantee or subgrantee that can be identified separately and assigned to a specific project.[1] In accordance with OMB Circular No. A-87, as codified in Title 2 Code of Federal Regulations (CFR) Part 225, treatment of direct costs must be consistent across all federal awards and other activities of the grantee or subgrantee. Direct administrative costs include costs that can be tracked, charged, and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW.  Eligible DAC must be in compliance with 44 CFR §13.22, and, by extension, OMB Circular A-87, and the costs must be reasonable and properly documented in order to qualify for reimbursement.  Such costs cannot be assumed eligible if the costs are not tracked and documented in a manner that enables FEMA to determine if they are reasonable, necessary, and appropriate.

    In order for FEMA staff to be able to evaluate DAC, grantees and subgrantees need to provide information about each activity in sufficient detail (i.e., specific description of administrative tasks performed such as site identification, kick-off meeting, immediate needs, preliminary cost estimate, data collection & dissemination, travel expenses, etc.) to be able to properly assess the skill level of each person performing the activities, the suitability of that skill level to the activity in question, and the level of effort required to complete the activity.

    DAP 9525.9 also defines indirect costs as “costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted.”  A grantee or subgrantee cannot direct charge costs to a PA project if such costs are considered indirect costs for any other Federal award or activity of the grantee or subgrantee or if similar costs incurred for the same purpose in like circumstances have been allocated to indirect costs. (See OMB Circular No. A-87, Attachment A.)  Indirect costs are considered to be eligible Section 324 management costs and are not eligible as DAC.

    The Applicant’s contract with Adjusters International includes tasks that are defined as indirect costs, project management, or consulting activities.  For example, the scope of work includes the following items:

    • Provide general grant management advice
    • Assist in the development of a disaster recovery team
    • Assist in the development of a comprehensive recovery strategy
    • Provide advice to disaster recovery team
    • Prepare program management plan
    • Prepare weekly report

    It also includes insurance adjusting services that are not eligible for FEMA funding as DAC or indirect grant management costs. 

    FEMA’s records indicate that the Applicant submitted funding requests for DAC related activities performed by Adjusters International for 458 PWs totaling approximately $2,399,295.  Given the Applicant’s contract for services with Adjusters International included project management, indirect cost activities, consulting and insurance adjusting services, and the number of PWs that Adjusters International charged against, it is incumbent upon the Applicant to provide sufficiently detailed and descriptive documentation to demonstrate that the tasks performed were, in fact, eligible DAC directly attributable to a specific PW.

    In this case, however, the documentation provided by the Applicant lacked sufficient detail to discern the specific tasks or work performed by Adjusters International.  Without such information, FEMA is unable to determine eligibility and reasonableness of cost.  The consultant’s spreadsheet details the specific tasks that were performed:

    “Tasks performed by Senior Consultant/Project Manager in accordance with FEMA DAP 9525.9 as direct costs to the project worksheet include: supervise consultants; provide advice; consultation; funding strategies to City; report status; eligibility consultation; client recovery strategy and work plan development; ensure quality deliverables; document review and comment; PW formulation; continually monitoring progress; milestones; deliverables…”

    The provided spreadsheet contains descriptions for the types of tasks that are generally not related to grant administration for a specific PW.  The tasks listed appear to include consulting services and tasks more appropriately claimed in indirect costs.

    FEMA requested additional information, during the first appeal review process, to ascertain eligibility for the Applicant claimed DAC including:

    “Specific description of each task performed and the associated cost (i.e. site identification, kick-off meeting, immediate needs, preliminary cost estimate, data collection & dissemination, travel expenses, etc.)  Project phases are too broad and are not acceptable to substantiate specific work activity engaged in.”

    The Applicant’s response included a table describing its consultant’s task and task description, which lacked sufficient detail to discern specific tasks or work performed.  As an example, the table provided lists tasks performed by Adjusters International and uses the terms “Project Formulation” to describe an “Administrative Task”.  In FEMA’s guidance, “project formulation” describes a project “Phase” (which may include activities that are considered either “Direct” or “Indirect” costs).  Despite FEMA’s caution that project phases are not acceptable, the Applicant provided this documentation.  Other terms used in the Applicant’s documentation such as “Project Administration”, “PW Assembly”, and “Site Insurance Anticipation” are vague and do not describe a specific administrative task.  Of the tasks submitted by the Applicant, only “Damage Description Development” is an acceptable task as described in FEMA guidance.

    The Applicant lists “Project Administration” under “Task” and provides the following as a task description: “Ensuring quality deliverables, assuring conformance with program specific requirements, report status, document review and comment, and follow up on inquiries related to specific project worksheets.”  In its second appeal the Applicant asserts that these terms are not broad, but are “a clear, common sense description of project administration and supervision.”    While the Applicant asserts the description of the “Project Administration” task is clear, the description does not provide sufficient detail to determine if the activities were eligible DAC.  Overall, project administration and management of personnel preparing PWs is not a direct administrative activity. 

    Reasonableness of $285 per hour contract rate

    The reasonableness of the contract rate of $285 per hour is a central issue in the appeal.  However, as discussed previously, FEMA is unable to determine whether the $285 per hour rate is reasonable due to the lack of sufficiently detailed descriptions of the tasks performed.  

    Noting such, there is no indication from the information considered and provided by the Applicant that the administrative grant management tasks for these projects were complex.  The PWs documented the scopes of work and project costs provided by the Applicant.  A project manager’s review and supervision of a subordinate’s work in the administration of a PW, in and of itself, is not complex. The Applicant’s determination that the time required for the project manager to provide review and supervision is “appropriate” does not justify the hourly rate claimed or the reasonableness of work performed.  From a grant management standpoint, these PWs were not complex and did not require the skills or experience of a Senior Consultant compensated at $285 per hour to review the PWs. 

    In an attempt to demonstrate the reasonableness of the charged rate, the Applicant submitted a contract between the Grantee and another contractor noting that the rates paid were similar to its contractor rates.  While the rates may be similar, there is no evidence to indicate that the work performed or the level of expertise required to perform the work by the other contractor is comparable to the scope of work contracted by the Applicant.  Thus, the other contract does not establish a basis to conclude the rate at issue in this case was reasonable.   

    Conclusion

    The documentation submitted by the Applicant does not demonstrate that the costs incurred for contracted labor at $285 per hour were reasonable for grant administration work.  Furthermore, the documentation provided by the Applicant was not sufficiently detailed and descriptive to enable FEMA to determine that the previously funded contracted DAC tasks/activities are eligible or reasonable.  Based on these findings, all such costs claimed are ineligible and the Regional Administrator must de-obligate all contracted DAC previously determined eligible in the PWs.


    [1] DAP 9525.9 Section 324 Management Costs and Direct Administrative Costs (April 2007), at 6. See also FEMA-DR-1763, City of Cedar Rapids, (July 19, 2013).

     



  • Electric Power System
    Appeal Type: 
    2nd
    Report Type: 
    PW
    Appeal Categories: 
    Applicant Name: 
    Puerto Rico Electric and Power Authority
    Disaster Number: 
    1247-DR-PR
    DSR: 
    Various Project Worksheets (PWs)
    Date Signed: 
    Friday, March 14, 2014
    PA ID: 
    000-92043-00
    Summary/Brief: 

    Conclusion: The Regional Administrator correctly concluded that there was a duplication of benefits between DSRs 06827 and 15717.  Applicant’s assertion the Governor’s Authorized Representative (GAR) de-obligated certain amounts twice is a matter that must be raised with the Grantee, not FEMA, to attain possible relief.  As such, Applicant’s second appeal is denied.    

    Summary Paragraph

    The OIG audited Public Assistance grant funds that FEMA awarded to the Applicant.  The audit  identified $16,800,558 of questionable costs resulting from duplicate charges; losses covered by insurance; unsupported, excessive, unrelated, and unauthorized charges; unapplied credit; and mathematical error.  After meeting with OIG and the Applicant, the amount of questionable costs was reduced to $14,006,987 and FEMA de-obligated that amount.  In its first appeal, the Applicant provided additional documentation to support its position that some of the funding should not be de-obligated because the costs in question were not duplicative.  In light of this new information, the Regional Administrator partially approved the appeal, reducing the de-obligation to $8,821,402.  In the second appeal, the Applicant requested $4,424,073 de-obligated by the Governor’s Authorized Representative (GAR), claiming that this was a double de-obligation.  The Applicant also requested

    $3,609,950 related to a de-obligation which FEMA imposed, asserting it was duplicative, and inquired about another potential discrepancy in FEMA’s accounting.

    Authorities

    • 44 CFR Section 206.206
    • PA Guide, FEMA 322, at 108 (2007)

    Headnotes

    • The DSRs in question were for work completed and materials purchased during the same periods of time on the same facility, so there would be a duplication of funding if the Applicant received funding for both DSRs.
    • PA Guide, FEMA 322, at 108 (2007)
      • FEMA and the grantee share responsibility for making PA Program funds available to the Applicant.  FEMA makes the federal share of the approved amount available to the grantee through a process known as obligation. 
      • Funds that FEMA has obligated are available to the grantee via electronic transfer, but reside in a Federal account until the grantee is ready to award grants to the appropriate applicant.  The grantee is responsible for providing the grantee share of the eligible costs.
    • The Applicant should raise the issue of any potential double de-obligation with the GAR.  
    Letter: 

    March 14, 2014

    Mr. Miguel A. Ríos Torres
    Director
    Puerto Rico Emergency Management Agency
    PO Box 194140
    San Juan, PR00919-4140

    Re:   Second Appeal –Puerto Rico Electric Power Authority, PA ID 000-92043, Electric Power System, FEMA-1247-DR-PR, Various Project Worksheet (PWs)

    Dear Mr. Rios Torres:

    This letter is in response to the letter from your office dated September 17, 2013, which transmitted the referenced second appeal on behalf of the Puerto Rico Electric Power Authority (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) de-obligation of costs associated with the recovery of the Puerto Rico electric power system.  The appeal does not specify a total amount in dispute. 

    As explained in the enclosed analysis, I have determined that FEMA correctly de-obligated funding based on the Office of Inspector General (OIG) report and review of additional supporting documentation submitted by the Applicant.  With regard to the Applicant’s assertion that the Grantee double de-obligated certain costs, the Applicant was advised that this was a matter that would need to be addressed by your office, not FEMA.  Accordingly, I am denying this appeal.

    Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 CFR §206.206 Appeals.

    Sincerely,

    /s/

    Brad Kieserman
    Assistant Administrator
    Recovery Directorate

    Enclosure

    cc:  Jerome Hatfield
          Regional Administrator
          FEMA Region II

    Analysis: 

    Background

    In September 1998, Hurricane Georges caused severe damage to the Puerto Rico Electric Power Authority (PREPA).  Originally, FEMA approved $159,602,045 for the recovery of Puerto Rico’s electric power transmission and distribution (T&D) system, including debris removal, emergency protective measures, and the repair of the T&D system to its pre-disaster condition. 

    The Office of Inspector General (OIG) later audited the Public Assistance grant funds that FEMA had awarded to PREPA (Applicant) for the disaster-related work.  The August 11, 2009, OIG Audit Report[1] reviewed costs totaling $69.7 million under 34 large projects and 221 small projects.  With regard to the small projects, the OIG limited its scope to determining whether claimed costs were covered by insurance proceeds.  Overall, the OIG identified $16,800,558 of questionable costs resulting from duplicate charges; losses covered by insurance; unsupported, excessive, unrelated and unauthorized charges; unapplied credit; and mathematical error.  On July 11, 2011, after a thorough review of the OIG audit, the Applicant’s response to it, and a series of meetings between the Grantee, OIG, FEMA, and PREPA, the amount of questionable costs was reduced to $14,006,987 and FEMA de-obligated that amount.[2]

    First Appeal

    On January 23, 2012, the Applicant sent a letter to the Governor’s Authorized Representative for Puerto Rico (Grantee) indicating it located 40 boxes of additional documentation related to six Damage Survey Reports (DSRs)[3] in question and to insurance coverage.  PREPA requested additional time to review this documentation and provide evidence of payments made related to the matter.  Further, regardless of the request for more time, the Applicant highlighted a potential issue related to two of the DSRs, contending that FEMA incorrectly identified a duplication of benefits in DSRs 15717 and 06827.  According to the Applicant, FEMA granted $3,607,650 under DSR 06827 for the cost of materials to complete restoration work of the T&D system through December 15, 1998; FEMA then approved DSR 15717 in the amount of $5,450,849 to complete work on the T&D lines from December 16, 1998 until June 30, 1999.  On February 1, 2012, the Grantee transmitted the Applicant’s letter to FEMA as a first appeal of the de-obligation of funding, noting that the appeal time had been exhausted but the Grantee agreed with the Applicant’s position. 

    On July 17, 2012, FEMA met with the Applicant, Grantee, and OIG to review the additional documentation submitted by the Applicant and to ensure that this information was different from the information originally submitted.  By the time of the meeting, the documentation amounted to 56 boxes of records related to insurance proceeds and seven DSRs—DSRs 02462, 06828, 15717, 06827, 05074, 15846, and 11608.  While the OIG de-obligation involved multiple DSRs, FEMA limited its appeal review to the insurance coverage and seven DSRs included in the 56 boxes of documentation.  After evaluating the documentation, FEMA only found new supporting documentation for DRSs 06828, 02462, 15717, and insurance coverage.  FEMA did not find any additional information related to DSRs 06827, 05074, 15846, and 11608 and, therefore, made no changes with regards to those DSRs.   On April 22, 2013, the Regional Administrator partially granted the appeal, reducing the total de-obligated amount to $8,821,401.71.

    Second Appeal

    The Grantee transmitted the Applicant’s second appeal on September 17, 2013.  The Applicant’s second appeal letter, dated September 12, 2013, outlines three issues. 

    First, the Applicant claims that it experienced a double de-obligation by the Governor’s Authorized Representative (GAR) and FEMA.  The Applicant claims that the OIG conducted an audit “passing judgment on the documentation already audited by the GAR.”  According to the Applicant, as a result of the OIG audit, FEMA then de-obligated $15,120,502.90 from the amount originally allocated, regardless of the $4,424,073 already withheld by the GAR as a result of its audit. 

    Second, the Applicant contends that FEMA incorrectly determined that it duplicated funding in DSRs 06827 and 15717.  Part B of the OIG audit found a duplication of benefits under those two DSRs for $3,553,700 related to labor and transportation charges for the repair of T&D lines and $56,250 for repair of street lighting.  FEMA concurred with the OIG’s determination and de-obligated $3,609,950.  The Applicant cites the following examples to illustrate that the work completed under one DSR was different than the work completed under the other one:

    • Expenses concerning the construction of power lines can be mistakenly interpreted as duplicated costs because various electric lines often run in the same sections of the poles. 
    • In the handling of poles, a crane operator carries and installs the poles but another “brigade of employees” installs hardware and cables on the poles.
    • Applicant claims it used funds approved in DSR 06827 to purchase poles and in DSR 15717 for their assembly.

    Third, the Applicant claims that the OIG recommended that FEMA find $2,500,582 eligible for DSR 06827 but that FEMA, even though it de-obligated the same amount for this DSR as the OIG recommended, only found $2,398,637 to be eligible.  The Applicant also contends that it could not determine how much of the $2,500,582 corresponds to the contract charges under DSR 06827.

    Discussion

    Alleged Double De-Obligation Related to GAR and OIG Audit Reports

    The FEMA Public Assistance (PA) Guide outlines the process through which FEMA obligates PA Program funds:

    FEMA and the State share responsibility for making PA Program funds available to the applicant. FEMA is responsible for determining eligibility, conducting environmental/ historic preservation review, approving projects, and making the Federal share of the approved amount (that is, the grant) available to the State through a process known as obligation. Funds that FEMA has obligated are available to the State via electronic transfer, but reside in a Federal account until the State is ready to award grants to the appropriate applicants…The State is responsible for providing the State share of the eligible costs and for notifying the applicant that funds are available.[4]

    In accordance with regulation and policy, when FEMA obligates DSRs, currently referred to as Project Worksheets (PWs), FEMA passes the federal cost share through the Grantee.  If the Applicant is concerned that the GAR mistakenly de-obligated the same funds twice, that issue must be raised with the Grantee.

    DSRs 06827 and 15717: Duplication of Funding

    Title 44, Section 206.206, of the Code of Federal Regulations (CFR), specifies that an “appeal shall contain documented justification supporting the appellant’s position, specifying the monetary figure in dispute and the provisions in Federal law, regulation, or policy with which the appellant believes the initial action was inconsistent.”[5]

    Based on a review of the Applicant’s supporting cost documentation, the OIG determined, and FEMA concurred, that the Applicant claimed the same funding twice under DSRs 06827 and 15717.  The Applicant maintains that this determination is incorrect and asserts that it completed the work under DSRs 06827 and 15717 during different time periods.  Although the language used to identify the dates of the work in the two DSRs is different—as DSR 15717 covers “the restoration of all electrical transmission and distribution to pre-disaster condition during the period of December 16, 1998 through June 30, 1999 and DSR 06826 covers “all work not completed as of December 15, 1998 to restore all electric transmission and distribution lines and public lighting to pre-disaster condition— the two time frames described in the DSRs start at the same time. 

    Although the Applicant provides examples within its second appeal letter to suggest the DSRs were written for different work on the same facilities, it failed to submit any documentation, as required by 44 CFR 206.206, to support those assertions.  Similarly, no documentation was submitted to contradict the results of the OIG audit and subsequent FEMA Region II assessment, both of which reviewed all of the supporting cost documentation available for actual costs incurred.  Finally, although the funding approved in DSR 15717 was based on actual force account costs and the funding approved in DSR 06827 was based on a cost estimate for work that was not completed, the scope of work for both DSRs is essentially the same - DSR 15717 covered “the restoration of all electrical transmission and distribution to pre-disaster condition during the period of December 16, 1998 through June 30, 1999,” and DSR 06827 covered “all work not completed [as of December 15, 1998] to restore all electrical transmission and distribution lines and public lighting to pre-disaster condition.” 

    DSR 06827:  Alleged Cost Discrepancy

    FEMA de-obligated the exact same amount, $4,072,488, for DSR 06827 as the OIG recommended in its audit report.  The Applicant asserts that the OIG Audit Report states that the OIG concluded that $2,500,582 of costs claimed in DSR 06827 are eligible, but FEMA only found $2,398,637 of these costs to be eligible.  In making this assertion, the Applicant points to page 4 of the OIG audit report, where the OIG supports $2,500,582 of the costs claimed under DSR 06827.[6]

    In looking closely at how the OIG organized its audit report in comparison to how FEMA organized its first appeal analysis, it is apparent that the Applicant mistakenly overlooked a critical section of the OIG audit report in coming to the above conclusion.  The OIG organized its audit report by subject matter whereas FEMA organized its analysis by DSR.  The OIG’s assertion, on page 4 of its report, that it supports $2,500,582 in eligible costs is only with regards to “project charges not supported by documentation” for DSR 06827.  On page 5 of the OIG audit report, the OIG outlines additional costs, specifically $101,945 in “overhead charges,” that it found questionable with regards to DSR 06827.[7]  This amount equals the difference between the $2,500,582 that the Applicant believes is eligible for DSR 06827 and the $2,398,637 that FEMA found eligible for this DSR.  The OIG did not question costs in relation to this DSR anywhere else in its report.

    Conclusion

    FEMA correctly de-obligated the funding at issue in this appeal because there was a duplication of funding within the two DSRs in question.  Moreover, there was no inconsistency between the OIG recommended eligible amount for DSR 06827 and the amount FEMA found to be eligible.  Finally, the assertion the GAR double de-obligated certain costs is a matter that should be raised with the Grantee, not FEMA. 


    [1] OIG Audit, Hurricane Georges Activities for Puerto Rico Electric and Power Authority, DA-09-21 (August 11, 2009).

    [2] Letter to PR Governor’s Authorized Representative from Ana Luz Morales, FEMA Disaster Recovery Manager (July 11, 2011) (On file with FEMA).  

    [3] Damage Survey Reports 06827, 02462, 06828, 15717, 05074, and 15846. 

    [4] Federal Emergency Management Agency, Public Assistance Guide, FEMA 322, at 108 (June 2007)(noting that throughout FEMA regulations and policy the term “State” is used interchangeably with the term “grantee).

    [5] 44 CFR § 206.206 Appeals.

    [6] OIG Audit at 4.

    [7] Id at 5.

     



 

Latest Events

No events

Who's Online

We have 6 guests online
© 2012 Minnesota ARES- Site Developed by Kevin Haney