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Second Appeal Letter
PA ID# 037-91032-00; Los Angeles County Courts
DSR ID# DSR 60598; Central Jail Arraignment Court Building
Governor’s Authorized Representative
Governor’s Office of Emergency Services
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655
Re: Second Appeal–Los Angeles County Courts, PA ID 037-91032-00, Central Jail Arraignment Court Building, FEMA-1008-DR-CA, Damage Survey Report (DSR) 60598
Dear Mr. McCarton:
This letter is in response to your letter dated July 8, 2008, which transmitted the referenced second appeal on behalf of Los Angeles County Courts (Applicant). The Applicant is requesting that the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) re-obligate $273,928 for the Central Jail Arraignment Court Building project (Central Jail).Following the Northridge earthquake on January 17, 1994, the Applicant accepted a Grant Acceleration Program (GAP) offer for $1,965,418 to repair the Central Jail. Based on the Applicant’s request, FEMA designated the Central Jail project an Improved Project. At closeout, FEMA reduced the Applicant’s claim by $31,306 for Architectural and Engineering (A&E) construction administration and $17,235 for safety police because these costs exceeded the maximum allowed project management or “soft” costs. FEMA also determined that the Applicant did not complete certain portions of the approved scope of work and deobligated an additional $237,613.On August 16, 2007, the Applicant appealed FEMA’s closeout decisions. The Applicant stated that FEMA mischaracterized A&E fees and safety police as project management soft costs. The Applicant also stated that it completed the approved scope of work; however, it could not provide auditable cost documentation to support the claim. The Applicant also requested that FEMA rescind the Improved Project status for the Central Jail project. The Deputy Regional Administrator approved funding for safety police and denied the remainder of the appeal on February 26, 2008.
The Applicant filed its second appeal on May 9, 2008. The Applicant maintained that the $31,306 in A&E costs should not be categorized as project management (soft costs), but treated as eligible hard costs associated with design and engineering of the project. The amount in
dispute for this issue is $36,315 ($31,306 in hard costs plus $5,009, the 16 percent allowance for project management soft costs attributable to the increase in hard costs). The Applicant
provided a copy of the project closeout worksheet and additional excerpts from the A&E Services Agreement to support its claim. The closeout worksheet lists categories of work with corresponding vendor names, job invoice numbers and service fees. The Applicant also provided photographs to document that the approved scope of work was completed and maintained that funding should not be deobligated for items of work for which auditable documentation of costs is not available. Finally, the Applicant requested that FEMA reduce eligible costs by $11,691 as the estimated cost of “improvements” and rescind the Improved Project status for the Central Jail project.The approved GAP funding for the Central Jail contained a limit on project management costs (soft costs). In 1999, FEMA approved construction administration as a project management cost in the GAP settlement offer pursuant to the Northridge GAP Cost Estimating Format (CEF) Guide. In 2000, FEMA and Los Angeles County agreed to caps on the County’s claims for project management costs because FEMA determined that the County’s initial claims for project management costs were excessive. FEMA did not place caps on construction costs (hard costs). For the Central Jail project, the Applicant exceeded the approved project management costs and claimed construction administration costs as hard costs at closeout. However, the Applicant did not submit a description of the specific tasks that it performed under construction administration that would justify their treatment as hard costs. In absence of documentation that the construction administration costs were hard costs, it is appropriate, and consistent with the GAP CEF Guide, to treat these costs as project management costs. It is also appropriate to address these costs during closeout in the same manner they were treated in the GAP settlement offer. Therefore, FEMA considers the $31,306 in construction administration costs to be excess project management costs. Therefore, these costs are not eligible.
Public Assistance Program regulations and policy require applicants to provide sufficient documentation to support costs the applicants incurred to complete eligible work. The Applicant has stated that it cannot provide documentation to support costs it incurred to accomplish the approved scope of work because its regular employees performed the work. The Applicant further stated that its financial system does not allow it to easily track these costs. The Applicant stated that photographs of the completed work should be sufficient documentation to support its claim that it completed the work. The issue is not whether the Applicant completed the work. Rather, the issue is that the Applicant did not provide documentation to support costs it claimed for the work. Federal regulations and policy require all grant recipients to document the expenditure of all grant funds. The Applicant could not document that it incurred the claimed costs. Therefore, there is no basis for reinstating the disallowed costs of $237,613.
Regarding the Applicant’s request that FEMA remove the Improved Project status for the Central Jail project, we have determined that the record does not support this request. The Applicant
completed work beyond the approved scope of work. Pursuant to 44 CFR §206.203(d), FEMA appropriately designated the Central Jail as an Improved Project.
Based on the above, 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