Appeal Brief | Appeal Letter | Back
Second Appeal Letter
PA ID# 095-38000-00; City of Kansas City
PW ID# NA; Office of the Inspector General (OIG) Audit Resolution
December 14, 2009
State Emergency Management Agency
P.O. Box 116
Jefferson City, Missouri 65102-0116
Re: Second Appeal– City of Kansas City, PA ID 095-38000-00, Office of the Inspector General (OIG) Audit Resolution, FEMA-1403-DR-MO
Dear Mr. Parmenter:
This letter is in response to a letter from your office dated October 8, 2008, which transmitted the referenced second appeal on behalf of the City of Kansas City (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) decision to de-obligate $4,708,927 based on the OIG Audit Report DD-09-06 findings and recommendations.
The DHS OIG issued Audit Report DD-09-06 in July 2006 after auditing 14 approved Applicant’s projects totaling $26.9 million. DHS OIG recommended that FEMA de-obligate $9,301,699 because of unsupported contractor and force account costs and ineligible and unreasonable costs. The OIG also recommended that the Grantee take action to improve its management and administration of FEMA’s Public Assistance grants. The Grantee and the Applicant strongly objected to the tone of the OIG report and disagreed with most of the audit findings.
Before taking any action on the OIG recommendations, FEMA Region VII hired a contractor to review the documentation that the OIG used in its audit report. Based on the contractor’s review, FEMA Region VII concluded that the amount that the OIG questioned should be reduced from $9,301,699 to $5,739,416. The Region also concluded that the scope of the OIG audit should have been limited to the review of documentation for the 14 projects and should not have included the Grantee’s management and administration practices and procedures. On August 21, 2007, the OIG agreed that FEMA and the Grantee had resolved recommendations 4 (regarding the Applicant’s written procedures and internal control for resolving OMB 1-133 reports) and 15 (PW 660) and agreed to close these findings. The OIG also agreed to FEMA’s proposed reduction in the amount the OIG questioned in recommendations 5 (PW 179), 6 (PW 637), 9 (PW 661), 10 (PW 652), 11 (PWs 651 and 557), 12 (PW 083), 13 (PW 270), 14 (PW 218), and 16 (PW 558), and stated that it would close these findings after FEMA de-obligated the
funds. On December 18, 2007, the Regional Administrator sent to the OIG the information the Grantee provided to support its request to close recommendations 1, 2, and 3, and resolve recommendation 7. On May 5, 2008, the Region forwarded to the OIG information the Grantee submitted to resolve recommendation 8 (PW 593).
On February 28, 2008, the Grantee and Applicant submitted the first appeal of FEMA’s proposed de-obligations based on the OIG audit report. The Grantee accepted the OIG recommendations 12 (de-obligate $237,697 on PW 83), 14 (de-obligate $230,215 for PW 218), and 16 (de-obligate $12,344 for PW 588). The Grantee did not accept the OIG’s other findings and recommendations. The Grantee and Applicant stated that recommendation 9 (PW 661) should be reduced $853,567 because the OIG based the recommendation on the amount the Applicant initially claimed instead of the amount FEMA obligated for the project. Accordingly, the amount questioned should be $4,885,849, not $5,739,416 as stated in the OIG report. The Grantee and Applicant also reiterated earlier statements regarding the tone of the original audit report and its timing and method of disclosure. Finally, the Grantee and Applicant stated that FEMA reviewed and approved the Applicant’s documentation when FEMA wrote the PWs. Therefore, it was inappropriate for FEMA to de-obligate funds later based on the OIG recommendations.
The Regional Administrator denied the Applicant’s first appeal on June 10, 2008, because the Applicant did not provide source documentation to support the questioned contractor and force account costs or the ineligible and unreasonable costs determinations. The Regional Administrator concurred with the Grantee’s assertion that the recommended de-obligation for PW 661 (recommendation 9) should be based on the amount FEMA obligated instead of the amount the Applicant requested. The Regional Administrator reduced the de-obligated amount from $5,562,492 to $4,708,927 (- $853,566).
The Grantee and Applicant submitted the second appeal on October 8, 2008. The Grantee and Applicant agree that the following costs should be de-obligated: $216,358 of $1,338,993 for PW 179; $200,760 of $1,898,547 for PW 637; and, $271,270 of $577,311 for PW 652. In addition, the Grantee stated that FEMA reviewed and approved documentation when FEMA prepared the PWs and determined that the documentation supported the claimed costs and that the costs were reasonable. Therefore, it was inappropriate for FEMA to de-obligate costs later based on the OIG audit.
The OIG has statutory authority to review any Federal grant to ensure that the Federal agency awarded the grant in accordance with the applicable program regulations and guidelines and the grant recipient used the funds for the intended purpose. Grant recipients must document the
expenditure of all Federal funds. The OIG provides its audit findings and recommendations to Federal agencies for appropriate action. The OIG does not direct a Federal agency to implement its recommendations. The Federal agency may accept or reject the OIG’s recommendations based on its due diligence.
In the case of the OIG audit of the City of Kansas City, the FEMA Regional Administrator did not agree with all of the OIG’s findings and recommendations. The Regional Administrator performed a through review of the OIG’s methodology, findings and recommendations and the Applicant’s documentation and determined that only $5,739,416 of $9,301,699 that the OIG questioned and recommended for de-obligation was appropriate. The Regional Administrator further reduced the amount questioned to $4,708,927 based on information that the Applicant submitted. The FEMA regional staff has coordinated extensively with the Grantee and Applicant regarding additional documentation to support the Applicant’s claim for reimbursement. The Applicant did not provide any additional documentation to support the questioned costs or any compelling reason FEMA should not de-obligate the funds.
Based on a review of all materials related to this appeal, I have determined that the Regional Administrator performed a thorough review of the OIG audit report and concurred, in part, with the OIG’s findings that the Applicant did not document all of its claimed costs. The Applicant did not submit any compelling reasons to show that the Regional Administrator’s decision on the first appeal was inconsistent with program regulations and policies. Therefore, I deny the second appeal.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
Elizabeth A. Zimmerman
Disaster Assistance Directorate
cc: Arthur L. Freeman
Acting Regional Administrator
FEMA Region VII