Appeal Brief | Appeal Letter | Back
Second Appeal Letter
PA ID# 003-99003-00; Baldwin County
PW ID# N/A; Audit Report DD-09-03
April 12, 2011
Mr. Art Faulkner
Alabama Emergency Management Agency
5898 County Road 41
P.O. Drawer 2160
Clanton, AL 35046-2160
Re: Second Appeal– Baldwin County, PA ID 003-99003-00, Office of the Inspector General (OIG) Audit Resolution, FEMA-1549-DR-AL and FEMA-1593-DR-AL
Dear Mr. Faulkner:
This is in response to your letter dated July 21, 2010, which transmitted the referenced second appeal on behalf of Baldwin County (Applicant). The Applicant is appealing the Department of Homeland Security’s (DHS) Federal Emergency Management Agency’s (FEMA) determination to de-obligate $5,230,578 based on the findings and recommendations of the DHS Office of Inspector General (OIG) Audit Report DD-09-03.
The Central Regional Office, Office of Disaster Assistance Oversight, DHS Office of the Inspector General (OIG) issued Audit Report DD-09-03 in December 2008 after auditing 26 approved projects totaling almost $39.6 million. The OIG questioned approximately $10.5 million in Public Assistance funding for costs the Applicant incurred in Hurricanes Ivan, Dennis and Katrina related to tipping fees, interest earned on these fees, stump removal costs, duplicate charges, and insurance claims. Of these five issues the Applicant concurred on two: duplicate charges and insurance claims.
The OIG audit questioned funding associated with tipping fees, and found that the fees were based on the amount of vegetative debris before the debris was burned and reduced for landfill disposal. The audit estimated the amount of eligible tipping fees to correspond with a 90% reduction in debris volume. The audit also questioned costs associated with stump removal, because the contractor did not expend the level of effort associated with the corresponding stump removal line item costs originally outlined in the contract. Lastly, the Applicant placed funds from the tipping fees into an interest bearing account, and the audit found that federal monies could not be used to grow interest.
The Regional Administrator concurred with the OIG findings and disallowed approximately $5.8 million of the questioned $10.5 million from Hurricanes Ivan, Dennis, and Katrina in a letter dated August 11, 2009. The Regional Administrator performed a thorough review of the OIG’s methodology, findings and recommendations, and the Applicant’s documentation, and determined that $3,464,324 of the $7,738,309 that the OIG questioned for tipping fees should be de-obligated.
This was based on the methodology outlined in Appendix B of the Debris Management Guide (FEMA 325), dated July 2007, which indicates that mixed debris should be reduced 42 percent, instead of the OIG audit recommendation of 90 percent. Based on the recalculation of tipping fees, the FEMA Regional Administrator determined that only $656,000 of $1,085,151 that the OIG questioned for interest earned on tipping fees should be de-obligated. The Regional Administrator determined the full amount of $1,633,295 in questioned funding for stump removal charges should be de-obligated.
On October 13, 2009, the Applicant submitted a first appeal and the State submitted the appeal to FEMA on November 16, 2009. The Applicant appealed FEMA’s de-obligation of $5,753,619 in funding for tipping fees, stump removal charges, and interest earned on tipping fees based on the OIG audit findings. The Applicant claimed that the costs questioned in the OIG audit were eligible under FEMA policy and debris monitoring procedures. The Regional Administrator upheld the determination to de-obligate the questioned funding for tipping fees associated with debris removal, excessive stump removal charges, and interest earned on tipping fees in a letter dated April 5, 2010. FEMA stated that the Applicant did not provide new information or sufficient justification to reverse its corrective actions related to the audit finding.
On June 9, 2010, the Applicant submitted a second appeal which was submitted to FEMA by the State on July 21, 2010. This appeal includes costs claimed from tipping fees, interest on these fees, and stump removal charges for FEMA-1549-DR-AL, FEMA-1593-DR-AL, and FEMA-1605-DR-AL. The Applicant claims that $5.8 million de-obligated by FEMA based on the OIG audit is eligible under FEMA policy and guidance in place at the time of the disasters. The Applicant claims that FEMA did not require documentation of landfill disposal costs, and that the tipping fee information was sufficient for FEMA reimbursement. Further, the Applicant claims that since the disputed tipping fees were correct that the interest earned on these fees should be allowed. In addition, the Applicant is requesting costs for stump removal, claiming the prices paid for stump removal were eligible.
On July 20, 2010 the Applicant submitted an additional letter withdrawing the second appeal for FEMA-1605-DR-AL for Hurricane Katrina. The issue with regard to funding under FEMA-1605-DR-AL was submitted to the U.S Civilian Board of Contract Appeals as part of the arbitration process for Hurricanes Katrina and Rita, and is no longer contested as part of the second appeal.
The Applicant is appealing the remaining disallowed tipping fees, interest, and stump removal costs from Hurricanes Ivan and Dennis, claiming that all tipping fees and stump removal costs were reasonable and consistent with applicable policy and guidance for FEMA-1549-DR-AL and FEMA-1593-DR-AL. The total amount of funding in question in the second appeal is $5,230,578.
The Applicant requested a meeting with FEMA to discuss the second appeal, and on December 1, 2010, met with Public Assistance representatives at FEMA Headquarters to present additional information supporting their appeal. This included clarification on the tipping fees, interest earned on these fees, and stump removal charges. The Applicant claimed that the tipping fees, based on the amount of debris brought to the landfill site, included costs incurred for debris sorting, labor, and equipment use associated with the management and reduction of the debris that occurred at the landfill site, in addition to actual landfill space occupied by the reduced debris. The Applicant indicated that they coordinated with FEMA during the debris management operations and did not keep records of specific individual costs covered in the tipping fees based on that coordination. They also claimed interest earned on the tipping fees was actually accrued in the county’s solid waste fund on monies reimbursed to the county, and thus did not gather interest as federal funds. Lastly, the Applicant stated that the amount for stump removal was reasonable and that Disaster Specific Guidance (DSG) #17 on stump removal did not apply because it was issued for disasters declared in the State of Florida for hurricanes in 2004.
FEMA guidance included in 9580.1, Public Assistance Debris Operations Job Aid, issued in 2000, states that tipping fees may include, “operation, cover materials, expansion, and monitoring.” The guidance does not limit tipping fees only to costs for landfill space occupied by debris, including debris that has been reduced prior to being placed in landfill sites. Therefore, the applicant’s claim that tipping fees for debris disposal included sorting, labor and equipment costs associated with the reduction of the debris prior to being placed in the landfill site is reasonable and acceptable. In addition, interest earned on funds in the applicant’s account for costs reimbursed by FEMA is allowable. Therefore, the Applicant’s costs of $3,024,557 for tipping fees are eligible and the $572,726 for interest earned should be returned to the applicant.
The OIG audit found that the Applicant’s stump removal costs for $1,633,295 are not eligible. The debris removal contract included costs for stump removal and hauling, landfill stump fees, and stump tipping fees. The stump removal specified in the contract was actually completed by individual homeowners who placed them in the right-of-way for disposal. In addition, stumps were included in the total cubic yards of vegetative debris removed and hauled by the contractor, and tipping fees were paid on this debris. Therefore, the fees allocated to stump extraction are not eligible because the debris contractor did not perform the level of effort required for FEMA to fund these costs.
Based on a review of all materials related to this appeal, I have determined that the Applicant’s requested funding for tipping fees are eligible for Public Assistance funding, and the interest earned on these fees should be returned to the applicant. Therefore, I am partially approving the second appeal in the amount of $3,597,283. By copy of this letter, I am informing the Regional Administrator of my determination in order for him to implement this decision.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
cc: Major P. May
FEMA Region IV