Cost Overruns

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1467-DR
ApplicantMonroe County
Appeal TypeSecond
PA ID#055-99055-00
PW ID#Various Project Worksheets
Date Signed2006-04-25T04:00:00
Citation: FEMA-1467-DR-NY, Monroe County, Cost Overruns

Cross-reference: Cost Overruns

Summary: As a result of a severe ice storm the Applicant removed debris from county roads and installed temporary power to its wastewater plant. Nineteen PWs were prepared and obligated in August 2003. All work was completed by November 12, 2003. On January 28, 2005 the Applicant submitted Project Completion and Certification Reports (P-4s) on all projects and, requested reimbursement for cost overruns totaling $132,346.36 on PWs 816, 818, 914, and 926. Region II denied this request because the Applicant did not meet the requirements of 44 CFR §206.202(d)(ii). The Applicant filed a first appeal on July 5, 2005 arguing that the cost overruns were all related to PWs that previously had been approved. Region II denied the first appeal because the approved PWs had been marked “100% complete” at the time of obligation. The Applicant filed a second appeal dated October 25, 2005 arguing that the cost overruns had not been discovered until a county audit associated with preparation of the P-4s.

Issues: 1. Are cost overruns eligible for funding after a PW has been obligated?

Findings: 1. Yes; however, the regulations establish a 60-day deadline for requesting consideration of cost overruns on small projects; there no such deadline for large project cost overruns.

Rationale: 44 CFR §206.204(e)

Appeal Letter

April 25, 2006

Mr. John A. Agostino
Alternate Governor’s Authorized Representative
New York State Emergency Management Office
1220 Washington Avenue
Public Security Building 22, Suite 101
Albany, New York 12226-5000

Re: Second Appeal- Monroe County, PA ID 055-99055-00
Cost Overruns, FEMA-1467-DR-NY, Various Project Worksheets

Dear Mr. Agostino:

This is in response to your letter dated November 4, 2005, regarding the second appeal on behalf of Monroe County (Applicant). The appeal disputes the basis on which the Federal Emergency Management Agency (FEMA) denied consideration of additional costs incurred by the Applicant for debris removal and emergency protective measures in connection with this disaster.

As explained further in the enclosed appeal analysis, the Applicant is eligible for reimbursement of the cost overruns on its two large projects, Project Worksheets (PW) #818 and 914 for a total of $25,986.28, but is not eligible for reimbursement of overruns on its two small projects. Furthermore, FEMA will prepare a supplement to PW #756 for ($10,039.92) to correct a duplicate payment in the original PW. Accordingly, the appeal is partially approved.

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

Sincerely,
/S/
David Garratt
Acting Director of Recovery
Federal Emergency Management Agency

Enclosure

cc: Mr. Steve Kempf
Regional Director
FEMA Region II

Appeal Analysis

BACKGROUND
As a result of a severe ice storm during the period April 3-5, 2003, Monroe County (Applicant) performed debris removal from public roads and parks, and installed electric generators to restore temporary power to the county’s wastewater treatment plant and pumps stations. The Applicant requested assistance from the Federal Emergency Management Agency (FEMA) for costs associated with this work, as well as other emergency protective measures costs which are not the subject of this appeal.

During the month of August 2003, FEMA prepared and obligated nineteen Project Worksheets (PWs) for $2,147,980.66 of actual and estimated eligible work. All work on these PWs was completed by November 12, 2003.

In a letter date January 28, 2005, the Applicant submitted to the New York State Emergency Management Office (SEMO) Project Completion and Certification Reports (P-4s) on all nineteen PWs, certifying that the work had been completed and that all eligible claims had been paid in full. In that same letter the Applicant requested that SEMO and FEMA consider additional costs that had not been included in the nineteen PWs and not discovered until the Applicant’s county controller audited the ice storm records in the process of preparing the P-4s. Those additional costs totaled $132,346.36, which included a cost reduction of $9,608.67 for a duplicate claim.

In a letter dated June 8, 2005, FEMA Region II informed SEMO that it had denied the additional costs based on the 60-day deadline required in 44 C.F.R. §206.202. SEMO conveyed FEMA’s denial of additional assistance to the Applicant in a letter dated
June 23, 2005.

First Appeal
The Applicant submitted its first appeal in a letter dated July 5, 2005, arguing that the additional costs were directly associated with the work on five of the nineteen PWs which had been approved and obligated and, therefore, were not in violation of the 60-day regulatory deadline. SEMO conveyed the Applicant’s first appeal letter without recommendation to FEMA Region II on July 18, 2005. FEMA Region II denied the Applicant’s first appeal in a letter dated August 25, 2005, stating that the five PWs in question had been written as 100% complete at the time they were obligated in August 2003. SEMO informed the Applicant of FEMA’s decision in a letter dated November 4, 2005.

Second Appeal
The Applicant submitted a second appeal of FEMA’s determination to SEMO on October 25, 2005, which was transmitted by SEMO to FEMA in a letter dated November 4, 2005. The Applicant again pointed out that the additional costs had not been discovered until late 2004 when the county controller reconciled disbursement records while preparing the P-4s. The Applicant’s appeal included detailed information concerning the unreported costs and provided adjustments to the five PWs which are summarized as follows:

Table 1 – Cost changes to PWs 926, 816, 914,818, & 756

PW #

Approved Amt

Additional Amt

Comments

926

$22,565.17

$431.25

EOC food service in excess of estimate

816

$30,642.38

$115,968.75

Vendor invoices were erroneously posted to County operating account instead of to disaster recovery account

914

$372,783.86

$4,824.03

Accounting error resulted in 50% of eligible costs coded to wrong account

818

$93,125.92

$21,162.25

Eligible overtime hours for force account labor not claimed

756

$62,233.07

($10,039.92)

EOC food costs claimed twice



DISCUSSION
44 CFR §206.204(e) addresses cost overruns, and allows subgrantees to request additional funding when actual project costs exceed approved Project Worksheet estimates. These regulations establish a different treatment of cost overruns on small projects from those on large projects. 44 C.F.R. §206.204(e)(2) requires a subgrantee to apply for a net cost overrun on all its small projects within 60-days following the completion of all its small projects. Since all of the Applicant’s projects were completed by November 12, 2003, and it did not apply for consideration of cost overruns on its small projects until January 28, 2005, the Applicant is well past the deadline for filing a timely appeal for cost overruns on its small projects. Consequently, FEMA cannot consider cost overruns on the Applicant’s small projects, PWs #926 and #816. However, the cost overruns on the Applicant’s two large projects, PWs #914 and #818, are eligible for FEMA funding.

CONCLUSION
Cost overruns may be considered under the provisions of 44 C.F.R. §206.204(e).

The Applicant’s deadline for filing an appeal for a net cost overrun on its small projects has passed; consequently, its request for additional funding on its small projects, PWs #926 and #816, is denied.

However, the Applicant is eligible for reimbursement of the cost overruns on its two large projects, PWs #Z818 and #914. The Regional Director will prepare supplements to PWs #818 and #914 for $21,162.25 and $4,824.03, respectively. The Regional Director will also prepare a supplement to PW #756 for ($10,039.92) because EOC food costs were claimed twice in the original PW. The Applicant’s appeal is partially approved.
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