Office of Inspector General (OIG) Audit Report No. E-30-01
Appeal Brief
Appeal Letter
Appeal Analysis
Citation: FEMA-1209-DR-GA; DeKalb County; OIG Audit Report E-30-01
Cross-reference: Debris removal, demolition, legal responsibility, contract cap, OIG, audit report
Summary: Beginning on February 14, 1998, severe storms and flooding struck DeKalb County, Georgia resulting in a major disaster declaration. FEMA prepared Damage Survey Reports (DSRs) 39093, 90909, 90919 to fund debris removal, demolition of damaged residences, and repairs to recreational facilities within the County. Following closeout of the projects, FEMA's Office of Inspector General (OIG) audited the projects. The audit report questioned costs of $404,633 and recommended the de-obligation of the $404,633 and an additional $83,197. The audit report concluded that the County performed ineligible demolition and debris removal work in the form of removing slabs and other items and removal of debris from storms that were not included in the disaster declaration. The report also questioned costs associated with insurance proceeds that were not credited to the demolition work, excess charges for a performance bond, the repair of recreation facilities that were not the County's legal responsibility, and the interest earned on unused FEMA funds. Based on these findings, the Regional Director de-obligated funds totaling $487,830. The County submitted a first appeal of this decision, but did not disagree with all of the audit findings. The Regional Director denied the first appeal. The County's second appeal asserts that the slabs, driveways, and basements were damaged by the disaster and, therefore, the cost to remove them is eligible for funding. The County also asserts that the costs for removing debris not related to the disaster and the excess charges for the performance bonds are eligible because additional eligible work was performed that the County did not pay for because the cost exceeded the contract cap. The applicant asserts that FEMA should fund this other eligible work that was not paid for in lieu of the ineligible work.
Issues: 1. Are the removal of slabs, driveways, and basements eligible for funding?
2. Is the non-disaster related debris removal eligible for funding?
3. Is the County eligible to receive funding for the repair of the Brook Run facilities?
Findings: 1. Yes. The slabs, driveways, and basements were damaged by the disaster or during the performance of eligible demolition work.
2. No. The work must be required as the result of the major disaster event.
3. Yes. Both the State and the County are eligible applicants. Therefore, the repair of the recreation facilities is eligible for reimbursement.
Rationale: 44 CFR §§206.223(a)(1), 206.223(a)(3), 206.224(a)(1)
On March 11, 1998, the President declared a major disaster for Georgia due to severe storms and flooding that began on February 14, 1998. The incident period of the disaster was extended to May 11, 1998, due to additional storms and related damages. On April 9, 1998, DeKalb County was struck by a tornado that resulted in damage to several residential properties.
On April 13, 1998, the Federal Emergency Management Agency (FEMA) prepared Damage Survey Report (DSR) 90909 for $270,000 to provide Immediate Needs Funding to DeKalb County for emergency debris removal work. FEMA later prepared DSRs 90810 and 90911 for a total of $14,729,000 to remove public and private property debris within the county. At final closeout of these projects, FEMA prepared supplemental DSRs 90813 and 14747 for a total of $1,000,000 to account for the final actual costs for the scope of work performed under DSRs 90810 and 90911. The final funding for this work was $15,999,000.
On May 28, 1998, FEMA prepared DSR 90919 for $750,000 to fund the work to demolish and remove debris from approximately 75 residential properties that were damaged as a result of the tornado. The scope of work of the DSR stated: "Only items that have been condemned by the County as representing an immediate threat to public health and safety are eligible. The removal of concrete pads, foundations, basements, slabs on grade, driveways, capping of wells, cleaning of septic tanks, emptying tanks are not eligible." FEMA later prepared DSRs 90871 and 14701 to adjust the final funding for this project to $699,576.
On August 24, 1999, FEMA prepared DSR 39093 for $83,197 to repair the Brook Run recreational facilities. The scope of work included removing unsafe trees and repairing five buildings. It also included the repair or replacement of wooden furnishings, trash receptacles, soffits, fascias, pole lights, fencing, picnic shelters, security lights, signs, basketball fencing, windows, and nature trails.
On May 10, 2001, the Office of Inspector General (OIG) completed an audit report, which focused primarily on the $16,698,576 awarded to the County under DSRs 90909, 90810, 90911, 90813, 90919, 90871, 14747 and 14701. The audit report questioned costs of $404,633 (FEMA share $303,475) and recommended the de-obligation of an additional $83,197 for the Brook Run recreational facilities. A summary of the audit report and the questioned costs follows:
Unauthorized Activities
Under DSR 90919, FEMA approved funds for the work to demolish and remove debris from condemned structures that were damaged by the disaster. The DSR specifically stated that the costs associated with the removal of concrete foundations, basements, and driveways were not eligible for FEMA funding. Despite these restrictions, the County claimed costs of $203,084 for removing concrete foundations and driveways. The audit reported stated that the County officials asserted that a FEMA Regional official verbally authorized this work, but the FEMA official denied giving such authorization. Further, the audit report concluded that the damages to the foundations and driveways were a direct result of the contractor's work and not the disaster. Therefore, according to 44 CFR §206.223, the claimed costs for removing such debris was not eligible.
Unrelated Project Charges
The audit report concluded that the County's claim under DSRs 90909, 90810, and 90911 included $137,668 of contractor costs associated with the removal of debris resulting from two subsequent storms in June 1998 that did not receive presidential disaster declarations. The audit report stated that County officials asserted that FEMA Regional officials gave authorization for this activity. However, the audit found that the County had documentation on file acknowledging that FEMA informed the County that these charges were not eligible for funding. The audit report questioned the claimed cost in accordance with 44 CFR §206.223, because the work was not required as the result of a declared disaster event.
Uncredited Insurance
The audit report concluded that the County failed to apply $58,126 of insurance proceeds received from homeowners' insurance carriers for the work to demolish and remove the damaged residences funded under DSR 90919.
Excess Charges
The audit report questioned excess charges of $5,755. A contractor billed the County $100,000 for the costs of securing a performance bond. However, the contractor's actual cost of the bond was $94,245.
Ineligible Project
The County was awarded $83,197 under DSR 39093 for repairs to a recreational facility that was damaged by the disaster. However, the facility was not the legal responsibility of the County at the time of the disaster. In accordance with 44 CFR §206.223, repair of the facility was not eligible for assistance.
Interest Earned on FEMA Funds
The County deposited FEMA funds for two projects in an interest bearing account and earned interest of $4,677 from 1998 to 2001. However, the County did not remit the interest to FEMA as required by 44 CFR 13.21.
After reviewing the audit report, the Acting Regional Director agreed with the findings and de-obligated the $487,830 of questioned costs. In addition, FEMA instructed the County to forward a check in the amount of $4,677 to recoup the interest earned on FEMA funds.
First Appeal
By a letter dated July 18, 2001, the Georgia Emergency Management Agency (GEMA) forwarded the County's first appeal. The County disagreed with the findings of the audit report concerning the removal of concrete slabs and driveways, the unrelated project costs, the repair of the recreational facility, and the cost of the contractor's performance bond. The County did not refute the findings concerning the interest earned on FEMA funds or the insurance proceeds that were not returned to FEMA. A summary of the County's appeal follows.
Unauthorized Activities
Among the County's assertions were: 1) A FEMA representative verbally authorized the slab and driveway demolition and removal. 2) The slabs and driveways were a public health and safety threat and, therefore, met FEMA's eligibility requirements. 3) The County contested OIG's finding that the contractor's work caused the damage to the slabs and driveways. The County asserted that the foundations and slabs were damaged by the disaster as houses shifted or were lifted from their anchorage and from uprooted trees. 4) FEMA continued to fund progress invoices that clearly contained costs for removal of broken concrete that FEMA did not question at that time.
Unrelated Project Charges
The County asserted that the debris from the non-disaster declared events was mixed with the eligible debris and it was not possible to separate the eligible disaster-related debris from the non-disaster related debris. Further, the County asserted that the documentation referenced by OIG, which informed them that the debris was not eligible, was a memo summarizing a phone call with the same FEMA representative that gave a verbal authorization for the slab and driveway removal. The County asserted that it is a double standard to accept a verbal denial of eligibility for this work, but not to accept the verbal authorization for the slab and driveway removal.
The County also stated that the contractor performed additional eligible work that the County did not fund and that the cost of the additional work should have offset the ineligible costs for the non-disaster debris. The County had a "Not-To-Exceed" amount of $15,999,000 for its contract. However, the contractor billed the County for a total of $16,295,509. Thes amount of $137,688. The County asserted that it would have disallowed the ineligible contract costs and continued to pay the contractor up to the "Not-To-Exceed" amount for the additional eligible work.
Excess Charges
The County agreed that the $5,755 constituted an excess charge relative to the performance bond. However, the County used the argument stated previously, that it would have disallowed the excess charges, but allowed an additional $5,755 for the additional eligible work that was performed.
Ineligible Project
The County asserted that the repair of the recreation facility was eligible based on the Lease/Purchase Agreement between the State Properties Commission and the County. The County also asserts that the State Properties Commission, as a public entity, should be eligible to seek assistance through the County, which is a political subdivision of the State.
The County also states that it was in the process of closing on the lease/purchase of the facility at the time of the tornado. The actual closing was to occur on April 10, 1998, but was postponed until April 17, 1998 because of the tornado. In addition, the State Properties Commission and the County executed an Agreement to Purchase on December 18, 1997, which created a legal interest on the part of the County in the facilities.
The County also argued that the OIG based its determination on the Maintenance section of the Lease/Purchase Agreement, which was signed before there was a clear determination of what repair work was needed to recover from the tornado. The Maintenance section of the Agreement
states that the State and the County would cooperate with each other and with the State's insurer to determine the extent and cost of the disaster damage repair. It further states that the State agreed to pursue recovery of insurance proceeds for the damage and would credit any such proceeds against the County's lease payment that had not been applied to the cost of the repairs to the insured structures.
The County also claimed that it did not strictly comply with the Lease/Purchase Agreement prior to the execution of the agreement. Therefore, the agreement should not be strictly interpreted to determine who was responsible for the repair of the facilities. The County stated that the OIG, however, implied that a strict interpretation of the agreement was required. Finally, the County stated that it did not deduct any repair costs from its 1999 lease payment to the State Properties Commission, which indicated the understanding between the parties that the County would pursue disaster assistance.
First Appeal Response
By a letter dated September 4, 2001, the Acting Regional Director denied the first appeal. In regard to the removal of driveways and slabs, the Acting Regional Director determined that the County did not provide any information demonstrating that the damages were the result of the disaster. Rather, the Acting Regional Director determined that the information supplied by the County supported the OIG's finding that the majority of the damage resulted from the contractor's work.
Regarding the unrelated contract charges, the Acting Regional Director found documentation from the debris removal contractor that acknowledged new storm debris, not related to the disaster, which also provided a cost estimate for its removal. Based on this documentation, the Acting Regional Director agreed with the OIG's determination that the additional debris was not a direct result of the disaster, and, therefore the cost for removing this debris was not eligible for funding.
The Acting Regional Director also determined that the excess charges of $5,755 related to the performance bond were not eligible, as FEMA only funds actual costs for large projects. The audit found documentation demonstrating that the actual cost of obtaining the performance bond was $94,245 and not the $100,000 claimed.
Finally, the Acting Regional Director determined that the County did not have legal responsibility for the recreational facility at the time of the disaster. Furthermore, the Lease/Purchase Agreement for the facility stated that the State Properties Commission had responsibility for repairing the damages.
Second Appeal
By a letter dated November 5, 2001, the Georgia Emergency Management Agency transmitted the County's second appeal. The County maintains the same arguments of the first appeal, but provides additional information relating to the driveways, slabs, and basements that were removed as a part of the demolition project. The County submitted photographs that show damages to two driveways and two houses. The County contends that uprooted trees caused the damages to the driveways. The County also asserts that it was not possible to perform the demolition work without damaging the foundations, footings, patios, sidewalks, etc. The County also contends that the basement walls, house and garage slabs, and driveways adjacent to the houses are reasonable parts of the demolition itself, and if left in place present a public hazard. The County further contends that leaving such debris in place provides a refuge for rodents and other pests, a breeding ground for mosquitoes, as well as an attractive nuisance.
For the other specific appeal items, the County re-iterates the assertions of the first appeal. The County re-asserts that even if it had not paid for the items that the OIG audit found were not eligible, there was still additional eligible work that would have been funded up to the contract cap amount of $15,999,000. Therefore, the County contends that FEMA should fund $143,442 for an equal amount of eligible expenses to compensate for the costs of the performance bond and additional debris removal work that was disallowed.
ANALYSIS
Unauthorized Activities
DSR 90919 specifically stated that the removal of concrete pads, foundations, basements, slabs on grade, and driveways, were not eligible for funding. Based on information in the file and provided by the applicant during a conference call on July 16, 2002, all of the items removed were either damaged by the disaster or by the contractor in the performance of the eligible demolition work. According to the applicant, the determination to remove these items was made on a case-by-case basis and the decisions were based on local health and safety ordinances.
In accordance with 44 CFR §206.224(a)(1), FEMA will only fund debris removal work that is necessary to eliminate immediate threats to life, public health, and safety. Generally, driveways, foundations, slabs, and basement walls generally do not constitute immediate threats to life, public health, and safety. In this case, however, the driveways, slabs, basements, and other items were either damaged by the disaster or by the contractor during the performance of other eligible work. Also, the applicant reviewed each property on a case-by-case basis to determine if the items should be removed in accordance with its health and safety ordinances. Based on these circumstances, we have determined that the work to remove the slabs, basements, and other items is eligible for Public Assistance funding.
Unrelated Project Charges
The County acknowledges that the $137,668 was for debris related to storms in June 1998 that were not included in the disaster declaration. In accordance with 44 CFR §206.223(a)(1), this cost is not eligible for Public Assistance funding, as the work was not required as a result of the disaster.
Excess Charges
In accordance with 44 CFR §206.203(c)(1), FEMA funds large projects based on the actual costs of the project. Therefore, the $5,755 that was incorrectly ct cthe contractor performed additional eligible work above the contract cost cap that should compensate for the ineligible costs. The County, however, did not pay for the additional work above the contract cap. The County contends that if the costs had been deducted in the month that they were invoiced, the County could have claimed eligible debris removal work up to the contract cap amount. Thus, the $143,423 would not be disallowed.
As stated previously, for large projects, FEMA can only fund the actual costs incurred by an applicant for eligible work. As the County did not incur a cost for the additional work performed above the contract cap, FEMA cannot provide any additional funding. Regardless of how the County could have paid the contractor at the time it was invoiced, FEMA cannot reimburse the County for ineligible costs.
Ineligible Project
At the time of the disaster, the State of Georgia owned the Brook Run recreational facilities. The closing of the lease/purchase agreement occurred approximately one week after the disaster. Based on these circumstances and because both the State and the County are eligible applicants, the repair of the facilities is eligible for reimbursement. As noted in the Lease/Purchase Agreement, the State agreed to pursue insurance proceeds for the damages. As such, any insurance proceeds received for the scope of work described in DSR 39093 shall be deducted from the eligible cost.
CONCLUSION
The appeal is partially approved. The removal of slabs, driveways, basements, and other associated items is eligible as these items were damaged by the disaster or during the performance of other eligible work. FEMA will prepare a DSR for $203,084 to cover this work.
The County acknowledges that additional debris removal work was performed that was not related to the declared disaster. The excess charges related to the over billing of the performance bond and the costs above the contract cap are not eligible. FEMA funds actual costs for large projects. FEMA cannot reimburse costs that were not incurred in the performance of eligible work.
Finally, both the State and the County are eligible applicants. Therefore, the work to repair the Brook Run facilities is eligible for reimbursement. FEMA will re-obligate DSR 39093, with appropriate adjustments for insurance proceeds the State received for the facilities.
Appeal Brief
| Disaster | FEMA-1209-DR |
| Applicant | DeKalb County |
| Appeal Type | Second |
| PA ID# | 089-00000 |
| PW ID# | 39093, 90909, 90919 |
| Date Signed | 2002-11-18T05:00:00 |
2. Is the non-disaster related debris removal eligible for funding?
3. Is the County eligible to receive funding for the repair of the Brook Run facilities?
2. No. The work must be required as the result of the major disaster event.
3. Yes. Both the State and the County are eligible applicants. Therefore, the repair of the recreation facilities is eligible for reimbursement.
Appeal Letter
Mr. Gary W. McConnell
Director
Georgia Emergency Management Agency
PO Box 18055
Atlanta, Georgia 30316-0055
Re: Second Appeal: DeKalb County; PA ID# 089-00000, Office of Inspector General (OIG) Audit Report No. E-30-01, FEMA-1209-DR-GA
Dear Mr. McConnell:
This is in response to your November 5, 2001, letter forwarding the above referenced second appeal. I apologize for the delayed response. DeKalb County (applicant) submitted the second appeal related to the Office of Inspector General's Audit Report No. E-30-01. The applicant is requesting that the Federal Emergency Management Agency (FEMA) restore $429,704 of the $487,830 in funding that was de-obligated based on the audit report findings.
The questioned costs relate to the removal of slabs and other items from demolished residences, removal of debris that resulted from storms that were not related to the disaster, the actual cost of a performance bond, and the repair of the Brook Run recreational facilities. As explained in the enclosed appeal analysis, I am partially approving the appeal. We determined that the removal of slabs and related items and the repair of the recreational facilities are eligible for Public Assistance funding. We also determined that the removal of non-disaster debris is not eligible.
By copy of this letter, I am requesting that the Regional Director prepare a Damage Survey Report (DSR) for $203,084 for the removal of slabs and other items. I am also requesting that the Regional Director re-obligate DSR 39093 for the repair of the Brook Run recreational facilities with an appropriate adjustment for any insurance proceeds received by the State.
Please inform the applicant of my decision. My decision constitutes the final decision on this matter as set forth in 44 CFR §206.206.
Sincerely,
/S/
John R. D'Araujo, Jr.
Assistant Director
Response and Recovery Directorate
Enclosure
cc: Kenneth O. Burris, Jr.
Regional Director
FEMA Region IV
Director
Georgia Emergency Management Agency
PO Box 18055
Atlanta, Georgia 30316-0055
Re: Second Appeal: DeKalb County; PA ID# 089-00000, Office of Inspector General (OIG) Audit Report No. E-30-01, FEMA-1209-DR-GA
Dear Mr. McConnell:
This is in response to your November 5, 2001, letter forwarding the above referenced second appeal. I apologize for the delayed response. DeKalb County (applicant) submitted the second appeal related to the Office of Inspector General's Audit Report No. E-30-01. The applicant is requesting that the Federal Emergency Management Agency (FEMA) restore $429,704 of the $487,830 in funding that was de-obligated based on the audit report findings.
The questioned costs relate to the removal of slabs and other items from demolished residences, removal of debris that resulted from storms that were not related to the disaster, the actual cost of a performance bond, and the repair of the Brook Run recreational facilities. As explained in the enclosed appeal analysis, I am partially approving the appeal. We determined that the removal of slabs and related items and the repair of the recreational facilities are eligible for Public Assistance funding. We also determined that the removal of non-disaster debris is not eligible.
By copy of this letter, I am requesting that the Regional Director prepare a Damage Survey Report (DSR) for $203,084 for the removal of slabs and other items. I am also requesting that the Regional Director re-obligate DSR 39093 for the repair of the Brook Run recreational facilities with an appropriate adjustment for any insurance proceeds received by the State.
Please inform the applicant of my decision. My decision constitutes the final decision on this matter as set forth in 44 CFR §206.206.
Sincerely,
/S/
John R. D'Araujo, Jr.
Assistant Director
Response and Recovery Directorate
Enclosure
cc: Kenneth O. Burris, Jr.
Regional Director
FEMA Region IV
Appeal Analysis
BACKGROUNDOn March 11, 1998, the President declared a major disaster for Georgia due to severe storms and flooding that began on February 14, 1998. The incident period of the disaster was extended to May 11, 1998, due to additional storms and related damages. On April 9, 1998, DeKalb County was struck by a tornado that resulted in damage to several residential properties.
On April 13, 1998, the Federal Emergency Management Agency (FEMA) prepared Damage Survey Report (DSR) 90909 for $270,000 to provide Immediate Needs Funding to DeKalb County for emergency debris removal work. FEMA later prepared DSRs 90810 and 90911 for a total of $14,729,000 to remove public and private property debris within the county. At final closeout of these projects, FEMA prepared supplemental DSRs 90813 and 14747 for a total of $1,000,000 to account for the final actual costs for the scope of work performed under DSRs 90810 and 90911. The final funding for this work was $15,999,000.
On May 28, 1998, FEMA prepared DSR 90919 for $750,000 to fund the work to demolish and remove debris from approximately 75 residential properties that were damaged as a result of the tornado. The scope of work of the DSR stated: "Only items that have been condemned by the County as representing an immediate threat to public health and safety are eligible. The removal of concrete pads, foundations, basements, slabs on grade, driveways, capping of wells, cleaning of septic tanks, emptying tanks are not eligible." FEMA later prepared DSRs 90871 and 14701 to adjust the final funding for this project to $699,576.
On August 24, 1999, FEMA prepared DSR 39093 for $83,197 to repair the Brook Run recreational facilities. The scope of work included removing unsafe trees and repairing five buildings. It also included the repair or replacement of wooden furnishings, trash receptacles, soffits, fascias, pole lights, fencing, picnic shelters, security lights, signs, basketball fencing, windows, and nature trails.
On May 10, 2001, the Office of Inspector General (OIG) completed an audit report, which focused primarily on the $16,698,576 awarded to the County under DSRs 90909, 90810, 90911, 90813, 90919, 90871, 14747 and 14701. The audit report questioned costs of $404,633 (FEMA share $303,475) and recommended the de-obligation of an additional $83,197 for the Brook Run recreational facilities. A summary of the audit report and the questioned costs follows:
Unauthorized Activities
Under DSR 90919, FEMA approved funds for the work to demolish and remove debris from condemned structures that were damaged by the disaster. The DSR specifically stated that the costs associated with the removal of concrete foundations, basements, and driveways were not eligible for FEMA funding. Despite these restrictions, the County claimed costs of $203,084 for removing concrete foundations and driveways. The audit reported stated that the County officials asserted that a FEMA Regional official verbally authorized this work, but the FEMA official denied giving such authorization. Further, the audit report concluded that the damages to the foundations and driveways were a direct result of the contractor's work and not the disaster. Therefore, according to 44 CFR §206.223, the claimed costs for removing such debris was not eligible.
Unrelated Project Charges
The audit report concluded that the County's claim under DSRs 90909, 90810, and 90911 included $137,668 of contractor costs associated with the removal of debris resulting from two subsequent storms in June 1998 that did not receive presidential disaster declarations. The audit report stated that County officials asserted that FEMA Regional officials gave authorization for this activity. However, the audit found that the County had documentation on file acknowledging that FEMA informed the County that these charges were not eligible for funding. The audit report questioned the claimed cost in accordance with 44 CFR §206.223, because the work was not required as the result of a declared disaster event.
Uncredited Insurance
The audit report concluded that the County failed to apply $58,126 of insurance proceeds received from homeowners' insurance carriers for the work to demolish and remove the damaged residences funded under DSR 90919.
Excess Charges
The audit report questioned excess charges of $5,755. A contractor billed the County $100,000 for the costs of securing a performance bond. However, the contractor's actual cost of the bond was $94,245.
Ineligible Project
The County was awarded $83,197 under DSR 39093 for repairs to a recreational facility that was damaged by the disaster. However, the facility was not the legal responsibility of the County at the time of the disaster. In accordance with 44 CFR §206.223, repair of the facility was not eligible for assistance.
Interest Earned on FEMA Funds
The County deposited FEMA funds for two projects in an interest bearing account and earned interest of $4,677 from 1998 to 2001. However, the County did not remit the interest to FEMA as required by 44 CFR 13.21.
After reviewing the audit report, the Acting Regional Director agreed with the findings and de-obligated the $487,830 of questioned costs. In addition, FEMA instructed the County to forward a check in the amount of $4,677 to recoup the interest earned on FEMA funds.
First Appeal
By a letter dated July 18, 2001, the Georgia Emergency Management Agency (GEMA) forwarded the County's first appeal. The County disagreed with the findings of the audit report concerning the removal of concrete slabs and driveways, the unrelated project costs, the repair of the recreational facility, and the cost of the contractor's performance bond. The County did not refute the findings concerning the interest earned on FEMA funds or the insurance proceeds that were not returned to FEMA. A summary of the County's appeal follows.
Unauthorized Activities
Among the County's assertions were: 1) A FEMA representative verbally authorized the slab and driveway demolition and removal. 2) The slabs and driveways were a public health and safety threat and, therefore, met FEMA's eligibility requirements. 3) The County contested OIG's finding that the contractor's work caused the damage to the slabs and driveways. The County asserted that the foundations and slabs were damaged by the disaster as houses shifted or were lifted from their anchorage and from uprooted trees. 4) FEMA continued to fund progress invoices that clearly contained costs for removal of broken concrete that FEMA did not question at that time.
Unrelated Project Charges
The County asserted that the debris from the non-disaster declared events was mixed with the eligible debris and it was not possible to separate the eligible disaster-related debris from the non-disaster related debris. Further, the County asserted that the documentation referenced by OIG, which informed them that the debris was not eligible, was a memo summarizing a phone call with the same FEMA representative that gave a verbal authorization for the slab and driveway removal. The County asserted that it is a double standard to accept a verbal denial of eligibility for this work, but not to accept the verbal authorization for the slab and driveway removal.
The County also stated that the contractor performed additional eligible work that the County did not fund and that the cost of the additional work should have offset the ineligible costs for the non-disaster debris. The County had a "Not-To-Exceed" amount of $15,999,000 for its contract. However, the contractor billed the County for a total of $16,295,509. Thes amount of $137,688. The County asserted that it would have disallowed the ineligible contract costs and continued to pay the contractor up to the "Not-To-Exceed" amount for the additional eligible work.
Excess Charges
The County agreed that the $5,755 constituted an excess charge relative to the performance bond. However, the County used the argument stated previously, that it would have disallowed the excess charges, but allowed an additional $5,755 for the additional eligible work that was performed.
Ineligible Project
The County asserted that the repair of the recreation facility was eligible based on the Lease/Purchase Agreement between the State Properties Commission and the County. The County also asserts that the State Properties Commission, as a public entity, should be eligible to seek assistance through the County, which is a political subdivision of the State.
The County also states that it was in the process of closing on the lease/purchase of the facility at the time of the tornado. The actual closing was to occur on April 10, 1998, but was postponed until April 17, 1998 because of the tornado. In addition, the State Properties Commission and the County executed an Agreement to Purchase on December 18, 1997, which created a legal interest on the part of the County in the facilities.
The County also argued that the OIG based its determination on the Maintenance section of the Lease/Purchase Agreement, which was signed before there was a clear determination of what repair work was needed to recover from the tornado. The Maintenance section of the Agreement
states that the State and the County would cooperate with each other and with the State's insurer to determine the extent and cost of the disaster damage repair. It further states that the State agreed to pursue recovery of insurance proceeds for the damage and would credit any such proceeds against the County's lease payment that had not been applied to the cost of the repairs to the insured structures.
The County also claimed that it did not strictly comply with the Lease/Purchase Agreement prior to the execution of the agreement. Therefore, the agreement should not be strictly interpreted to determine who was responsible for the repair of the facilities. The County stated that the OIG, however, implied that a strict interpretation of the agreement was required. Finally, the County stated that it did not deduct any repair costs from its 1999 lease payment to the State Properties Commission, which indicated the understanding between the parties that the County would pursue disaster assistance.
First Appeal Response
By a letter dated September 4, 2001, the Acting Regional Director denied the first appeal. In regard to the removal of driveways and slabs, the Acting Regional Director determined that the County did not provide any information demonstrating that the damages were the result of the disaster. Rather, the Acting Regional Director determined that the information supplied by the County supported the OIG's finding that the majority of the damage resulted from the contractor's work.
Regarding the unrelated contract charges, the Acting Regional Director found documentation from the debris removal contractor that acknowledged new storm debris, not related to the disaster, which also provided a cost estimate for its removal. Based on this documentation, the Acting Regional Director agreed with the OIG's determination that the additional debris was not a direct result of the disaster, and, therefore the cost for removing this debris was not eligible for funding.
The Acting Regional Director also determined that the excess charges of $5,755 related to the performance bond were not eligible, as FEMA only funds actual costs for large projects. The audit found documentation demonstrating that the actual cost of obtaining the performance bond was $94,245 and not the $100,000 claimed.
Finally, the Acting Regional Director determined that the County did not have legal responsibility for the recreational facility at the time of the disaster. Furthermore, the Lease/Purchase Agreement for the facility stated that the State Properties Commission had responsibility for repairing the damages.
Second Appeal
By a letter dated November 5, 2001, the Georgia Emergency Management Agency transmitted the County's second appeal. The County maintains the same arguments of the first appeal, but provides additional information relating to the driveways, slabs, and basements that were removed as a part of the demolition project. The County submitted photographs that show damages to two driveways and two houses. The County contends that uprooted trees caused the damages to the driveways. The County also asserts that it was not possible to perform the demolition work without damaging the foundations, footings, patios, sidewalks, etc. The County also contends that the basement walls, house and garage slabs, and driveways adjacent to the houses are reasonable parts of the demolition itself, and if left in place present a public hazard. The County further contends that leaving such debris in place provides a refuge for rodents and other pests, a breeding ground for mosquitoes, as well as an attractive nuisance.
For the other specific appeal items, the County re-iterates the assertions of the first appeal. The County re-asserts that even if it had not paid for the items that the OIG audit found were not eligible, there was still additional eligible work that would have been funded up to the contract cap amount of $15,999,000. Therefore, the County contends that FEMA should fund $143,442 for an equal amount of eligible expenses to compensate for the costs of the performance bond and additional debris removal work that was disallowed.
ANALYSIS
Unauthorized Activities
DSR 90919 specifically stated that the removal of concrete pads, foundations, basements, slabs on grade, and driveways, were not eligible for funding. Based on information in the file and provided by the applicant during a conference call on July 16, 2002, all of the items removed were either damaged by the disaster or by the contractor in the performance of the eligible demolition work. According to the applicant, the determination to remove these items was made on a case-by-case basis and the decisions were based on local health and safety ordinances.
In accordance with 44 CFR §206.224(a)(1), FEMA will only fund debris removal work that is necessary to eliminate immediate threats to life, public health, and safety. Generally, driveways, foundations, slabs, and basement walls generally do not constitute immediate threats to life, public health, and safety. In this case, however, the driveways, slabs, basements, and other items were either damaged by the disaster or by the contractor during the performance of other eligible work. Also, the applicant reviewed each property on a case-by-case basis to determine if the items should be removed in accordance with its health and safety ordinances. Based on these circumstances, we have determined that the work to remove the slabs, basements, and other items is eligible for Public Assistance funding.
Unrelated Project Charges
The County acknowledges that the $137,668 was for debris related to storms in June 1998 that were not included in the disaster declaration. In accordance with 44 CFR §206.223(a)(1), this cost is not eligible for Public Assistance funding, as the work was not required as a result of the disaster.
Excess Charges
In accordance with 44 CFR §206.203(c)(1), FEMA funds large projects based on the actual costs of the project. Therefore, the $5,755 that was incorrectly ct cthe contractor performed additional eligible work above the contract cost cap that should compensate for the ineligible costs. The County, however, did not pay for the additional work above the contract cap. The County contends that if the costs had been deducted in the month that they were invoiced, the County could have claimed eligible debris removal work up to the contract cap amount. Thus, the $143,423 would not be disallowed.
As stated previously, for large projects, FEMA can only fund the actual costs incurred by an applicant for eligible work. As the County did not incur a cost for the additional work performed above the contract cap, FEMA cannot provide any additional funding. Regardless of how the County could have paid the contractor at the time it was invoiced, FEMA cannot reimburse the County for ineligible costs.
Ineligible Project
At the time of the disaster, the State of Georgia owned the Brook Run recreational facilities. The closing of the lease/purchase agreement occurred approximately one week after the disaster. Based on these circumstances and because both the State and the County are eligible applicants, the repair of the facilities is eligible for reimbursement. As noted in the Lease/Purchase Agreement, the State agreed to pursue insurance proceeds for the damages. As such, any insurance proceeds received for the scope of work described in DSR 39093 shall be deducted from the eligible cost.
CONCLUSION
The appeal is partially approved. The removal of slabs, driveways, basements, and other associated items is eligible as these items were damaged by the disaster or during the performance of other eligible work. FEMA will prepare a DSR for $203,084 to cover this work.
The County acknowledges that additional debris removal work was performed that was not related to the declared disaster. The excess charges related to the over billing of the performance bond and the costs above the contract cap are not eligible. FEMA funds actual costs for large projects. FEMA cannot reimburse costs that were not incurred in the performance of eligible work.
Finally, both the State and the County are eligible applicants. Therefore, the work to repair the Brook Run facilities is eligible for reimbursement. FEMA will re-obligate DSR 39093, with appropriate adjustments for insurance proceeds the State received for the facilities.
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