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Second Appeal Brief
PA ID# 000-UV3S5-00; University of Texas Medical Branch
PW ID# 1001, 10638 & 12128; Direct Administrative Costs, Improved Projects, Support Documentation
Conclusion: The University of Texas Medical Branch (Applicant) has not demonstrated that it tracked costs for eligible work separately from improvement costs, or that all claimed contract labor is eligible as direct administrative costs (DAC). Additionally, the Applicant’s travel expenses are indirect costs, which are ineligible as DAC.
From September 12 to 13, 2008, Hurricane Ike caused substantial damage to the Applicant’s campus in Galveston, Texas. FEMA documented restoration work, DAC, and hazard mitigation proposals for the Open Gates Conference Center in Project Worksheet (PW) 1001 estimated at $1,752,438.27, Martin Graves Building in PW 10638 estimated at $1,988,490.89, and University Health Center Parking Garage #2 in PW 12128 estimated at $209,619.00. The Applicant incurred labor costs and travel expenses for grant administration exceeding the approved DAC estimates and requested amendments to increase DAC. FEMA denied the requests because PW 1001 incurred no cost overrun and PWs 10638 and 12128 were 90 percent complete. The Applicant requested improved projects, which FEMA approved and capped at $1,252,438.27 (before insurance reduction) in PW 1001, $630,867.89 in 10638, and $64,025.00 in 12128. The Texas Division of Emergency Management (Grantee) requested closeout, and informed FEMA the Applicant did not comply with federal bidding requirements with respect to one of its DAC contractors providing services under time and materials contracts with an indefinite value and no ceiling price. At closeout, FEMA determined the Applicant did not track DAC for eligible costs separately from improvements and deemed the travel expenses ineligible as indirect costs prorated across multiple PWs. Based on actual DAC claimed minus costs for labor incurred after each improved project’s approval and travel expenses, FEMA awarded estimated DAC without determining the amount of actual costs substantiated or addressing the procurement concerns raised by the Grantee. The Applicant appealed FEMA’s determinations arguing: (1) grant management continues regardless of improvements for up to three years after a disaster’s closure; (2) improved project caps do not apply to DAC; (3) it tracked eligible costs separately from improvements in accord with FEMA policy by claiming DAC separately and with specific PWs; (4) FEMA’s DAC estimates did not account for project complexities; (5) FEMA did not advise that it would cap DAC or require DAC for eligible work to be tracked separately from improvements; (6) the travel expense methodology complies with FEMA policy and OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments; and (7) FEMA granted travel expenses claimed under the same methodology in a recent first appeal, which is precedent for this appeal. The FEMA Region VI Regional Administrator (RA) concurred with the closeout determination findings, and denied the appeals. On second appeal, the Applicant reiterates its previous arguments and contends: (1) the RA erred in applying FEMA Disaster Assistance Policy, DAP9525.9, Section 324 Management Costs and Direct Administrative Costs because “management costs” were not claimed; (2) FEMA’s policy to track costs for improvements separately from eligible work only applies to “repair or replacement costs,” not DAC; (3) a recent second appeal decision deemed DAC eligible for the life of a grant and on appeal; (4) FEMA’s DAC policy lacks clarity and specificity, thus denying DAC for inadequate documentation would be arbitrary and capricious; and (5) FEMA’s guidance conflicts with federal law allowing allocation of direct costs to multiple cost objectives.
Authorities and Second Appeals
- Stafford Act §§ 324(a), 406, 705(c).
- 2 C.F.R. pts. 215 and 220; 44 C.F.R. §§ 13.22(b), 206.203, 206.206, 207.2.
- DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs.
- FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures.
- PA Guide, at 29, 53, 110.
- PA Policy Digest, at 71.
- Public Health Trust, FEMA-1561 & 1608-DRs-FL, (Sept. 26, 2016).
- City of Duluth, FEMA-4069-DR-MN (June 15, 2015).
- Los Angeles County, FEMA-1810-DR-CA (Mar. 18, 2014).
- Linn County, FEMA-1763-DR-IA (Aug. 9, 2013).
- Cedar Rapids Community School District, FEMA-DR-IA (Apr. 22, 2013).
- Pursuant to 44 C.F.R. § 206.203(d)(1), funding for improved projects is limited to the Federal share of the approved estimate of eligible costs, or actual costs, whichever is less. The PA Guide notes FEMA may adjust its contribution if the approved costs exceeded the original estimate and costs can be separately documented.
- The Applicant did not track costs for eligible work separately from improvements to appeal the eligible grant amount. Thus, funding is limited to the estimate of eligible costs when FEMA approved each improved project.
- Under DAP 9525.9, applicants may be reimbursed for reasonable direct administrative costs that can be identified separately and assigned to a specific project.
- Not only did the Applicant claim DAC for costs that were not documented with detail to demonstrate reasonableness, but it also claimed DAC for indirect costs divided evenly across multiple PWs, costs that did not correspond to any one specific project, and costs that benefited unrelated projects, all of which are ineligible as DAC.