Cross Reference: Increased Current Operating Expenses, Replacement of Lost Revenues
Summary: Northern Illinois University (NIU) is seeking costs to cover approximately 13,000 record albums destroyed by flooding in the basement of the University's Broadcast Center that occurred in July 1996. These record albums were valued at $8,000 and included in DSR 41772 that was approved for $14,205 on February 2, 1997. DSR 89690 was subsequently written to de-obligate the full amount of DSR 41772 ($14,205) because of insurance proceeds received by NIU. In the comments section of the DSR, FEMA noted that "Donated record albums for resale at annual auction are not eligible. $8,000 estimate for loss of revenue from auction is not approved." The comments section of DSR 89690 also notes that FEMA approved DSR 89698 for $50,000 to cover the deductible that was applied to damages outlined on seven different DSRs. Insurance proceeds did not cover the damaged record albums because contents of the building were not covered under NIU's policy.
In the first appeal, the applicant argued that the records constituted an inventory loss and, thus, qualified for reimbursement. FEMA noted in its first appeal response that "payment of increased current operating expenses or replacement of lost revenues" is not eligible for FEMA funding pursuant to 44 CFR 206.226(a)(3). NIU argues in its second appeal that it does not seem correct to classify the loss of the auxiliary record library inventory resources as an ineligible payment of operating expenses or lost revenues. Instead, NIU states its belief that the loss is legally reimbursable under 44 CFR 206.226(f) (equipment and furnishings) or 44 CFR 206.226(g) (library books and publications).
Issues: Do the destroyed records at NIU constitute an inventory loss, making them eligible for reimbursement by FEMA?
Findings: Yes. The records were owned by NIU at the time of the disaster and qualify as eligible inventory.
Rationale: 44 CFR 206.226(g) (library books and publications)