Southern High School A/C System

January 11, 2010

Raymond F. Y. Blas
Governor’s Authorized Representative
Office of Civil Defense
542-A N. Marine Corp Drive
DPW Compound
Tamuning, Guam 96913 

Re:  Second Appeal-Guam Department of Education, PA ID 000-U2DMO-00, Southern High
        School A/C System, FEMA-1426-DR-GU, Project Worksheet (PW) 1001

Dear Mr. Blas: 

This letter is in response to your letter dated December 29, 2008, which transmitted the referenced second appeal on behalf of the Guam Department of Education (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) deobligation of $402,230 in funding for the repair of Southern High School’s air conditioning system.
Background
As a result of Typhoon Chata’an, the electrical room at Southern High School that houses the controls and chilled water pumps for the air conditioning system flooded, damaging the pumps beyond repair.  High winds and flying debris damaged the air-cooled condensers located next to the building.  FEMA approved PW 1001 on March 4, 2004, for $450,609  to fund repairs to the condensers and circulating pumps with the condition that the Applicant obtain and maintain insurance on the damaged equipment in the amount of eligible assistance provided.  The Applicant subsequently documented $402,230 in actual cost and requested that FEMA close out the project.  In a letter to the Applicant dated March 12, 2008, FEMA informed the Applicant that it must obtain and maintain insurance for $402,230 as a condition of receiving the funds.  Further, FEMA stated it could not close the project until the Applicant purchased the required insurance. 
In its first appeal dated May 15, 2008, the Applicant requested that FEMA reconsider the deobligation of $402,230 because PW 1001 was written as a Category G PW, and therefore should not be required to be insured as a condition of receiving Federal assistance.  On September 4, 2008, FEMA denied the first appeal stating that category of work does not determine the requirement for the purchase of insurance, and that the damaged air conditioning
system is a component of an insurable building and insurance is required pursuant to CFR 44 §206.253, Insurance requirements for facilities damaged by disasters other than flood.
On November 7, 2008, the Applicant submitted a second appeal reiterating its position that insurance should not be required as a condition of receiving FEMA funding for any Category G
damage.  The Applicant also claims that the FEMA requirement for obtaining insurance as a condition of a financial assistance only applies to future disasters.
Discussion
FEMA approved PW 1001 on March 4, 2004, to repair parts of the school’s air conditioning system with the stated condition that the applicant must obtain and maintain insurance coverage.  Section 311 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act requires applicants, as a condition of receiving assistance, to obtain and maintain such types and extent of insurance as may be reasonably available, adequate, and necessary, to protect against future loss.   In addition, 44 CFR 206.253 states that “Assistance under section 406 of the Stafford Act will be approved only on the condition that the subgrantee obtain and maintain…insurance….” (emphasis added).  The Applicant failed to obtain the required insurance coverage.  Therefore, it is not eligible to receive assistance for the project.
Conclusion
I have reviewed all of the information submitted with the appeal and determined that the Deputy Regional Administrator’s decision on the first appeal was consistent with program statute and regulations.  Accordingly, I am denying this appeal. 
Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
Sincerely,
/s/
Elizabeth A. Zimmerman
Assistant Administrator
Disaster Assistance Directorate
cc:  Nancy Ward
       Regional Administrator
       FEMA Region IX