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Second Appeal Analysis
PA ID# 065-85446-00; City of Wildomar
PW ID# 314; Emergency Work Documentation
Heavy rainfall during severe winter storms in January and February 2010 resulted in flooding in the city of Wildomar, California. The City of Wildomar (Applicant) utilized its contract labor force, which functioned as the Applicant’s Public Works Department, to perform emergency protective measures by placing barricades and road closure signs, cleaning flood debris from roads and public areas, and sandbagging. FEMA prepared Project Worksheet (PW) 314 in the amount of $170,604 for the Applicant’s claimed costs in emergency protective measures (Category B) and PW 323 in the amount of $113,000 for the Applicant’s claimed debris removal costs (Category A). Upon review, FEMA determined that the documentation did not support $165,323 in emergency protective measures and obligated PW 314 for $5,280 on August 5, 2010. In addition, FEMA found all costs on PW 323 ineligible because the Applicant did not provide documentation to substantiate the claimed costs.
The Applicant submitted a first appeal to the California Emergency Management Agency (Grantee) on September 23, 2010. The first appeal requested reimbursement of the total denied costs of $278,323. The Applicant provided assurances that all of the claimed costs were for emergency work undertaken by the community to combat the storm during the emergency response and were necessary to keep the residents of the city safe. The Grantee forwarded the Applicant’s first appeal to FEMA with a letter dated November 29, 2010. Based on an analysis of the two PWs, the Grantee determined that the submitted documentation supported only the costs on PW 314 and recommended that FEMA approve $165,323 in emergency protective measures.
On November 23, 2011, the FEMA Regional Administrator denied the first appeal with a letter explaining that the documentation provided by the Applicant prevented FEMA from being able to make a determination of precisely which claimed costs constituted eligible work. One of the principal factors that complicated delineation of eligible costs was that the documentation did not distinguish between emergency work activities performed during regular work hours and those accomplished during overtime. The response stated that because the Applicant’s contractors acted as the Applicant’s Public Works Department, the contracted labor represented fixed-term employees and the budgeted costs for the contract constituted the normal costs of operation. Pursuant to Recovery Policy RP9525.7, Labor Costs-Emergency Work (November 16, 2006), emergency work performed during normal working hours by fixed-term employees that are covered under existing budgets is not eligible for funding through FEMA’s Public Assistance Program.
In addition, the Regional Administrator explained that, in accordance with Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs (March 12, 2008), in order for Direct Administrative Costs (DAC) to be eligible for reimbursement, the associated activities must be documented, clearly described, and linked to a specific project. The appeal analysis observed that for the Applicant’s costs identified as DAC, the documentation lacked sufficient information to discern the particular task performed or the specific project to which it related As the work descriptions were broad and the tasks could not be tracked to specific projects, the analysis concluded that they were indirect costs that were not eligible for reimbursement but could be covered under the Grantee’s management costs as codified in Part 207 of Title 44 Code of Federal Regulations, Management Costs.
The Applicant submitted a second appeal on February 10, 2012, which the Grantee transmitted to FEMA on May 31, 2012. In the second appeal, the Applicant concedes that certain costs requested in the first appeal are not eligible for reimbursement and reduced the requested amount for PW 314 to $108,779 and to $0 for PW 323. The reduction in costs for PW 314 represents work that the contractor performed on federal-aid roads and the reduction in costs for PW 323 was due to a duplication of debris related costs included in PW 314. Nevertheless, with respect to the $108,779 in denied costs, the Applicant maintains that FEMA’s determination was not consistent with FEMA’s policies RP9525.7 and DAP9525.9. The Applicant stresses that the contractors are not full time staff and the work performed by the contractor in response to the declared event had not been included in the budget. In support of its claim, the Applicant provided a City Council resolution from March 24, 2010, that authorized a contract amendment for additional funds to compensate the contractors for disaster related work. The Applicant also insists that the requested DAC costs are eligible as they are direct costs associated with the work documented on PW 314. In support of the second appeal the Applicant submitted City Reimbursement Requests for both DAC and emergency work performed by their contractors, as well as labor and equipment spreadsheets.
In the Applicant’s first appeal the supporting documentation totaled $170,646 for both PW 314 (Category B) and PW 323 (Category A). However, the documentation did not identify which costs were associated with which PW. The Grantee recommended FEMA deny PW 323 (Category A) due to lack of documentation, and approve PW 314 for the total amount, despite the fact that the documentation submitted identifies costs associated with both debris removal and emergency protective measures.
In an email dated February 14, 2011, the Applicant informed FEMA that all the documentation submitted in their appeal should be considered as Category B costs under PW 314. Therefore, no supporting documentation was submitted for PW 323 (Category A). FEMA contacted the Applicant on several occasions in an attempt to explain the differences between emergency protective measures and debris removal, as well as the documentation required to determine eligibility. The Applicant’s third submission of documentation failed to separate costs in a manner that enabled FEMA to determine eligibility.
FEMA initially determined that the emergency work performed during regular working hours are the Applicant’s normal cost of operations and are not eligible for funding. The Applicant’s Public Works Department is comprised of employees from Interwest Consulting Group (Interwest) and PV Maintenance (PVM), companies to which the Applicant outsourced operations since 2009. In its second appeal the Applicant asserted that the work performed during the disaster by Interwest and PVM is eligible because the contracted work was not included in the city budget. The Applicant demonstrated this with an amendment passed by the City to the original contract that provided additional funding for accomplishing the disaster related work. Therefore, the work was performed by contracted labor that was not covered by the Applicant’s budget. FEMA regulation at 44 CFR § 206.228(a)(2) Force Account Labor Costs, restricts funding for emergency work performed by a subgrantee’s permanently employed personnel to overtime. As this provision does not apply to contract labor, the straight-time of the contractors’ employees who performed eligible emergency work is eligible for reimbursement.
The Applicant also claimed costs incurred from Interwest for DAC and emergency protective measures. DAP9525.9 provides guidance on the eligibility of administrative costs. The policy states that FEMA will reimburse DAC that are “properly documented and directly chargeable on a PW for a specific project. The policy also states that DAC include “costs that can be tracked, charged, and accounted for directly to a specific project … [and] are limited to actual reasonable costs incurred for a specific project.” In order for FEMA staff to be able to evaluate DAC they would need information about each activity in sufficient detail (specific description of administrative task performed i.e. site identification, kick-off meeting, immediate needs, preliminary cost estimate, data collection & dissemination, travel expenses, etc.) to be able to make a proper assessment regarding the skill level of each person performing the activities, and the necessity of that skill level for the activity in question. The task description “Storm Clean-up” in the documentation submitted by Interwest is not properly documented with sufficient detail and is therefore not eligible.
Similarly, the supporting documentation for the activities performed by Interwest and claimed by the Applicant as emergency protective measures does not clearly identify the type of work performed by the contractor’s employees nor do the work descriptions demonstrate that the actions eliminated or lessened threats to lives, public health, and safety, or threats of additional damage to improved property as required by 44 CFR §206.225, Emergency Work. Consequently, as the eligibility of these claimed costs is unverifiable they are ineligible for funding.
The Applicant also incurred costs from its other contractor, PMV, for emergency protective measures. The additional documentation submitted identifies personnel, work descriptions, corresponding locations of the emergency protective measures performed, and according to the Applicant does not include federal-aid roads or debris removal costs. While the Applicant has adjusted the original submissions to exclude ineligible work, some of PVM’s tasks still include ineligible costs. Upon review of the remaining items, the Applicant is eligible to receive $73,622 for emergency protective measures.
In order to receive Public Assistance funding, applicants must establish and maintain accurate records of events and expenditures to document eligible work. In this case, the Applicant’s documentation was insufficient to confirm that the all of the claimed work complied with 44 CFR §206.225 and DAP9525.9. Of the $108,779 requested by the Applicant with the second appeal, the documentation submitted supports the eligibility of $73,622 in eligible emergency protective measures.