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Second Appeal Letter
PA ID# 000-92070; Nevada Division of Forestry
DSR ID# 84888, 19475; FEMA OIG Audit W-19-01
Mr. Frank Siracusa
Governors Authorized Representative
State of Nevada Department of Public Safety
Division of Emergency Management
2525 South Carson St.
Carson City, Nevada 89711
Re: Second Appeal Nevada Division of Forestry, PA ID: 000-92070,
FEMA OIG Audit W-19-01; FEMA 1153-DR-NV, Damage Survey Reports (DSRs) 84888 and 19475
Dear Mr. Siracusa:
This is in response to your letter of April 3, 2003, forwarding an amended second appeal for the Nevada Division of Forestry (NDF) dated April 1, 2003. The NDF was granted $1.9 million in Public Assistance funding for debris removal as a result of severe storms, flooding, mud, and landslides during the period from December 20, 1996 through April 4, 1997. The NDF is requesting that FEMA reconsider the deobligation of $236,120 in funding based on the Office of Inspector General (OIG) Report W-19-01, findings A and B, and consideration of additional costs of $38,882 in under-billed labor costs.
In 2001, the OIG conducted an audit of four large projects that were part of the grant award package for NDF debris removal. On April 16, 2001, the OIG issued audit report W-19-01, which found $256,949 in overall questionable costs related to DSR 84888. As it pertains to this appeal, finding A of the audit cited $192,987 in overstated inmate labor costs, and finding B of the audit cited $38,133 in overstated Force Account Labor costs.
FEMA notified the State on June 20, 2001, that it concurred with the OIG audit findings and was preparing DSR 19475 to deobligate funding. On August 17, 2001, The State forwarded the NDF first appeal letter dated, August 16, 2001. The NDF stated that the costs had not previously been questioned by FEMA and that FEMA had already reviewed the projects approved in the final report. It was further argued that the methodology for determining the minimum wage rates for inmate labor and average overtime rates were allowable under Office of Management and Budget (OMB) Circular A-87 regulations of reasonable, allowable, and allocable costs. FEMA denied the appeal on January 17, 2002, citing that the additional unsupported costs resulted in a surplus, and were ineligible under 44 CFR § 13.22 (2), and 206.223 (1).
Subsequently, on April 23, 2002, the State submitted a second appeal upon a verbal request from the NDF. FEMA allowed additional time for the applicant to amend its appeal and gather supporting documentation of actual costs that directly related to disaster activities, to support its appeal. On April 3, 2003, the region forwarded the NDF amended second appeal dated April 1, 2003.
The amended second appeal claims that $192,987 of disallowed costs under finding A of the audit represented not only the actual cost of the inmate labor, but took into consideration all of the other costs associated with providing a ready, able outfitted workforce for responding to emergencies. Furthermore, the NDF determined that the true cost per hour of work for each inmate was actually $4.67 per hour, $.042 cents higher than the cost submitted to FEMA. Thus, the NDF claims that it under-billed FEMA by $38,882 for the 93,256 inmate hours worked. In response to the $38,133 in disallowed costs in finding B of the audit, the NDF asserts that it was not feasible, efficient, nor cost effective for the NDF to track [actual] individual employee costs associated with individual incidents, and that the application of averaged costs is accepted by the State of Nevada and other Federal Agencies.
The NDF proposes, that the disallowance of $197,987 for finding A be reversed and the proposed disallowance of $38,133 for finding B be offset against the under-billed costs of $38,882. The NDF submits that their claim is allowable under 44 CFR § 13.20 (b)(5), Allowable Costs, and OMB Circular A-87 regulations of reasonable, allowable, and allocable costs.
The NDF has not submitted any documentation that would reverse the OIG audit findings and disallowance of costs. Regarding finding A, 44 CFR § 13.20 (b)(1), which implements OMB cost principles, requires grant recipients to accurately report the result of financially assisted activities. Section 406 (a)(2)(B) of the Stafford Act, states, Associated expenses shall include the costs of using prison labor to perform eligible work, including wages actually paid, transportation to a worksite, and extraordinary costs of guards, food, and lodging. In addition, these costs must be for those items that directly relate to the disaster per 44 CFR § 206.223 (a)(1). Therefore, prison labor costs are only eligible at the actual wage rate, and the costs submitted for items such as guards, transportation, food, etc., must be submitted as separate items along with supporting documentation, such as invoices or time sheets.
The documentation submitted in response to finding A shows overall categories and costs that were used to calculate the averages for various items applied to the labor rates. It does not break out costs directly related to the disaster and does not provide the supporting documentation needed for verification.
The documentation submitted in response to finding B, which proposes to offset the disallowance of $38,133 in overtime force account labor costs with $38,882 in newly claimed costs, contains clearly ineligible work under the Public Assistance Program, and was not broken down to reflect activities that were directly related to the disaster.
I have determined that the NDF has not provided documentation to support the eligibility of the appealed work and costs. Unfortunately, I conclude that the NDF is not eligible for additional assistance. Therefore, I am denying the appeal.
Please inform the NDF of my decision. My determination constitutes the final decision on this matter pursuant to 44 CFR § 206.206.
Daniel A. Craig
Emergency Preparedness and Response
cc: Jeff Griffin
FEMA Region IX