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Second Appeal Letter
PA ID# 037-90568-00; Santa Clarita Health Care Association
DSR ID# DSRs 05638, 92013, 92014, 01032, 48030; Office of the Inspector General's Audit
January 5, 2009
Governors Authorized Representative
Governors Office of Emergency Services
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655
Re: Second AppealSanta Clarita Health Care Association, PA ID 037-90568-00, Office of Inspector Generals Audit
, FEMA-1008-DR-CA, Damage Survey Reports (DSRs) 05638, 92013, 92014, 01032, 48030
Dear Mr. McCarton:
This letter is in response to your letter dated October 13, 2006, which transmitted the referenced second appeal on behalf of the Santa Clarita Health Care Association (Applicant). The Applicant is requesting that the Department of Homeland Securitys Federal Emergency Management Agency (FEMA) reinstate $2,104,418 for the Henry Mayo Newhall Memorial Hospital (Hospital).Background
Following the Northridge earthquake on January 17, 1994, FEMA approved a Grant Acceleration Project (GAP) settlement offer of $19,929,469 for the Hospital. Following completion of the project, the Office of the Inspector General (OIG) conducted an audit of the Hospital project and recommended, in OIG Audit Report Number DS-12-04, dated May 7, 2004, that FEMA de-obligate $2,290,275 based on four findings:
(A) $1,525,901 for duplication of benefits;
(B) $353,726 for ineligible project costs;
(C) $311,309 for excessive construction management costs; and
(D) $99,339 for unsupported project costs.
Subsequently, the Applicant provided documents to support eligibility of site work that was questioned in Finding B in the amount of $185,857. FEMA agreed with the remaining Audit recommendations and de-obligated $2,104,418 on DSRs 60608, 60610, 60681, 60683, and 60687.
The Applicant submitted its first appeal to the Governors Office of Emergency Services (OES) on April 8, 2005. In its appeal, the Applicant requested reinstatement of all funding de-obligated as a result of the audit. The Applicant claimed that finding A of the audit was invalid and FEMA was obligated to fund the total amount of all DSRs included in the GAP settlement ($21,502,371). The Applicant also asserted that, according to its bankruptcy plan, any claims that arose before the bankruptcy filing date were discharged and would not be paid unless specifically stated in the plan.
The Acting Regional Director denied the appeal in a letter dated June 1, 2006. The Acting Regional Administrator stated that FEMA approved $19,929,469 in GAP funding in multiple DSRs. Unfortunately, the sum of the relevant DSRs exceeded the approved amount by $1,525,901. Therefore, it was appropriate to de-obligate $1,525,901. In addition, the Acting Regional Administrator concluded that the Applicant did not provide any information to justify the eligibility of items or costs addressed in Findings B-D. Second Appeal
The Applicant submitted its second appeal to OES on April 11, 2006. In the appeal, the Applicant claimed that FEMA contractually agreed to a 78 percent allocation of insurance benefits to the GAP DSRs. Therefore, FEMA should not have de-obligated the remaining 22 percent of insurance proceeds ($1,525,901). The Applicant also asserted that FEMA violated
44 Code of Federal Regulations (CFR) §206.206(c), which required resolution of appeals within 90 days following receipt. The delay in responding to the appeal prejudiced the Applicants right to a speedy resolution of the first appeal. In its transmittal of the second appeal to FEMA, OES concurred with FEMAs findings in the first appeal and maintained its right to enforce a claim against the Applicant for repayment of funds.Discussion
The Applicant accepted a GAP settlement offer of $19,976,469, which FEMA funded with several DSRs. Unfortunately, FEMA did not reconcile the DSRs correctly and obligated $21,502,370. The error was due in part to the way FEMA reflected anticipated insurance proceeds on DSR 77490. The Acting Regional Administrator thoroughly explained in the first appeal analysis how the error occurred. FEMA final funding reflects the actual insurance proceeds that the Applicant received.
44 CFR §206.206(c) states that FEMA will respond to appeals within 90 days of receipt of the appeals. Unfortunately, FEMA did not meet the deadline in this case. The regulations do not authorize FEMA to grant an appeal when it does not meet the regulatory appeal deadline.Conclusion
Based on all the information submitted with the appeal, I have determined that the Deputy Regional Administrators decision in the first appeal is consistent with Public Assistance regulations and policy. Accordingly, I am denying the second appeal.
Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206.
Carlos J. Castillo
Disaster Assistance Directorate
cc: Karen Armes
Acting Regional Administrator
FEMA Region IX