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Second Appeal Brief
PA ID# 137-17000-00; City of Duluth
PW ID# Multiple PWs; Direct Administrative Costs
Conclusion: The Applicant’s claimed DAC constituted indirect costs because they were not assigned to specific projects as required by DAP9525.9. The claimed costs were divided evenly across multiple PWs, pertained to sites subject to multiple PWs, or constituted expenses that did not correspond to any one specific project. Therefore, funding for DAC is denied.
Between June 14 and June 21, 2012, severe storms and resulting flooding caused damage to buildings, public works facilities, and equipment owned and operated by the City of Duluth (Applicant). Dozens of facilities sustained flood-related damage. The Applicant retained a contractor, Adjusters International, Inc. (AI) to assist with the disaster recovery process. FEMA, the State of Minnesota Homeland Security and Emergency Management (Grantee), the Applicant, and AI agreed that the direct administrative costs (DAC) incurred would be managed separately from the project formulation process in order to avoid delaying project obligation. The Applicant provided FEMA with an invoice of the contractor’s claimed costs that included expenses that could not be charged directly to a particular project as required by DAP9525.9, Section 324 Management Costs and Direct Administrative Costs. FEMA therefore disallowed those indirect expenses from the amount of DAC claimed by the Applicant. The Applicant appealed, arguing that the claimed DAC represented work that corresponded to specific projects and that its allocation of the total amount of claimed travel expenses across all sites was a reasonable approach. The Regional Administrator denied the appeal, explaining that claimed costs that simply were divided evenly across multiple PWs or that applied to a specific flood-damage site that later was subject to multiple PWs constituted indirect costs, and travel expenses supporting all of the Applicant’s PWs are not direct costs. On second appeal, the Applicant again asserts that the claimed DAC was not divided across multiple PWs and that its costs, including travel expenses, correlate with specific projects.
Authorities and Second Appeals
- 44 C.F.R. § 207
- Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs
- Memorandum from Elizabeth A. Zimmerman, Assistant Administrator, Disaster Assistance Directorate, to Regional Administrators, Acting Regional Administrators, Transitional Recovery Office Directors, Federal Coordinating Officers, and Disaster Assistance Division Directors (Sept. 8, 2009)
- Public Assistance Guide, FEMA 322 at 63 (June 2007)
- Under 44 C.F.R. § 207, grantees and applicants have the opportunity to obtain reimbursement for management costs—indirect costs, administrative expenses, and any other expenses that a grantee or subgrantee reasonably incurs in administering and managing the PA grant that are not directly chargeable to a specific project.
- Under Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs, applicants may be reimbursed for direct administrative costs— costs that can be identified separately and assigned to a specific project.
- The Applicant’s claimed DAC constituted indirect costs because they could not be assigned to specific projects; claimed costs were divided evenly across multiple PWs, pertained to sites subject to multiple PWs, or constituted expenses that did not correspond to any one specific project.