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Second Appeal Brief
PA ID# 167-72000-00; City of Springfield
PW ID# N/A; OIG Audit Report DD-10-04 Labor Costs
Citation: FEMA-1633-DR-IL, City of Springfield, Office of Inspector General, Audit Report DD-10-04
Reference: Labor Costs, Reasonable Cost
Summary: In 2006, tornadoes and heavy rains caused extensive damage to the electrical distribution system in Springfield, Illinois. As no other entities were available to assist with the repair, the City of Springfield (Applicant) supplemented its force account capability by executing a Mutual Aid Agreement (MAA) with AMEREN, a private utility company, to restore the system. FEMA reimbursed the Applicant the Federal share of $11.4M in emergency and permanent work costs. On January 13, 2010, the Department of Homeland Security Office of the Inspector General (OIG) issued the results of an audit of the Applicant’s disaster related expenses. The OIG determined that some of the costs related to mutual aid labor and force account labor were ineligible and questioned $794,732 in funding. The Regional Administrator (RA) agreed with the OIG recommendations and requested that the Applicant return the funds. In the first appeal, the Applicant claimed that the costs were eligible as AMEREN was paid in accordance with the MAA and the force account labor costs were consistent with the local labor agreement. The RA denied the appeal, stating that AMEREN’s labor rate mark-ups are a form of cost-plus-percentage-of-cost (CPPC) contract, which is prohibited according to Title 44 of the Code of Federal Regulation (44 CFR) §13.36(f)(4), Procurement, Contract cost and price. The RA further stated that FEMA only reimburses the actual time during which eligible work is performed; therefore, the employees’ rest time was not eligible. The Applicant maintains that FEMA should not de-obligate the funding because FEMA field staff had reviewed and approved the costs. Included with the second appeal, was a letter from AMEREN asserting that the mark-ups were not CPPC, but instead, represent a standard approach for calculating overhead items as a percentage of the labor cost. Also included was the City’s Labor Contract as evidence that the payments to the employees for rest time were in accordance with the established labor agreement.
Issues: 1. Has the Applicant demonstrated that the mutual aid costs questioned by the OIG are not CPPC?
2. Are the costs for rest periods of force account staff eligible for reimbursement if they are incurred in accordance with the applicable labor agreement?
Findings: 1. No.
Rationale: 44 CFR §13.36(f)(4); 44 CFR §206.223(a)(1); DAP9525.7(VII)(8)