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Second Appeal Letter
PA ID# XXX-XXXXX; Walsh County
DSR ID# N/A; Audit Report No. W-23-00
May 13, 2002
Mr. Douglas C. Friez
Alternate Governor's Authorized Representative
Division of Emergency Management
P.O. Box 5511
Bismark, ND 58506-5511
Re: Second Appeal: Walsh County; FEMA-DR-1157-ND; Audit Report No. W-23-00
Dear Mr. Friez:
This is in response to your May 24, 2001, second appeal letter that is referenced above. I apologize for the delayed response. You disagree with the findings of the Office of Inspector General's (OIG's) Audit Report No. W-23-00 dated May 9, 2000. The audit report found that $55,413 of Walsh County's (applicant's) claimed costs were not supported by appropriate source documentation.
This appeal issue relates to the Federal Emergency Management Agency's (FEMA's) methodology for funding force account snow removal operations following the severe winter storms in January 1997. By a memorandum dated February 26, 1997, FEMA Region VIII staff proposed to FEMA Headquarters, a methodology to determine the amount of eligible funding based on the number of road miles that were cleared of snow. The aim was to reduce the administrative and documentation burden on the applicant during the process of preparing and obligating Damage Survey Reports (DSRs). The Executive Associate Director for the Response and Recovery Directorate approved this methodology by a memorandum dated March 10, 1997. This memorandum specified that applicants must retain their cost records for three years after submission of their final claim; and if audited, they would be required to document snow removal costs at least to the level of their FEMA eligible amount.
The audit report states that State and applicant officials believe that because FEMA approved the road-mile concept, the only information needed to support the costs claimed was the actual miles of roadway cleared and the road-mile rate. The report further states that since these large project DSRs were processed in the same manner as small projects, these officials understood that they could claim total estimated costs rather than support the claim with actual cost documentation. The audit report concluded that Federal regulation 44 CFR 13.20(b)(6) requires that accounting records for amounts claimed are to be supported by specific types of source documentation such as equipment logs and payroll records. FEMA and the applicant were able to reconstruct source documentation for all but $55,413 of the applicant's claim. Of this amount, the OIG report determined that $42,668, which is the federal share, should be returned to FEMA. By a letter dated November 14, 2000, the Regional Director requested that the State return these funds.
The State submitted a first appeal on December 28, 2000, requesting that FEMA rescind its request for the return of funds. The State asserted that FEMA's written procedures for using the road-mile methodology only required documentation supporting the mile rate and the number of miles cleared of snow. The State also cited a memorandum from a member of FEMA Regional staff that stated that the State should process the large projects using the road-mile methodology in the same manner that small projects are processed.
The Regional Director's first appeal response dated April 9, 2001, stated that the simplified procedures for determining project funding did not waive any requirements for maintaining accounting records and source documentation as specified in 44 CFR Part 13. Rather, the road-mile methodology and the use of small project procedures were intended to streamline the inspection process, speed the preparation of DSRs and the obligation process, and reduce the number of appeals.
In the second appeal, you assert that FEMA and State officials instructed applicants that the road-mile rate and the number of miles cleared were the only source documentation required to support DSR costs. Further, you did not believe a waiver of the 44 CFR Part 13 accounting and documentation requirements was necessary, because you believed there was a non-written agreement with FEMA that applicants were required to keep records only of the miles of road cleared and the road-mile rate.
I have thoroughly reviewed the information submitted in support of the second appeal. I have also considered the information presented during a conference call with you, the applicant, OIG and FEMA Regional staff. I have determined that FEMA did not clearly inform applicants that an audit process would require additional cost documentation beyond what was required to develop the road mile cost estimate. The procedural guidance developed by FEMA stated that the designated mile rate and the road mile map would constitute full support of the costs approved by the DSRs. In addition, this estimating procedure was implemented on a pilot basis for this disaster and as with any new process there is potential for confusion and miscommunication of process requirements. While the estimating process was successful in delivering timely and effective disaster assistance, it is reasonable to conclude that the requirements for audit documentation were not made clear to the applicant. Based on the circumstances, it is reasonable that the applicant would not have kept the detailed actual cost documentation that would satisfy audit requirements. Therefore, pursuant to 44 CFR §13.6(c),
I am making an exception to the documentation requirements for this subgrantee. I am approving the appeal and the $55,413 of questioned costs.
Please inform the applicant of my decision. My determination constitutes the final decision on this matter as set forth in 44 CFR §206.206.
Kenneth S. Kasprisin Assistant Director
Readiness, Response and Recovery Directorate
cc: David I. Maurstad
FEMA Region VIII