Appeal Timeliness

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1791
ApplicantUniversity of Texas Medical Branch
Appeal TypeSecond
PA ID#000-UV3S5-00
PW ID#15132
Date Signed2017-09-22T00:00:00

Conclusion:  The University of Texas Medical Branch’s (Applicant) second appeal is untimely because the Texas Division of Emergency Management (Grantee) submitted it outside of the 60-day regulatory timeline.  

Summary Paragraph

From September 12 to 13, 2008, Hurricane Ike caused substantial damage to the Applicant’s campus in Galveston, Texas.  FEMA documented replacement costs and DAC for the Applicant’s medical equipment and scientific research materials in its Medical Research Building #059 in Project Worksheet (PW) 15132 estimated at $208,982.18.  The Applicant incurred labor costs and travel expenses for grant administration exceeding the approved DAC estimate and requested an amendment to increase DAC.  FEMA denied the request because the project had not incurred a cost overrun at that time.  On June 11, 2012, the Applicant requested an improved project to purchase updated equipment and materials, which FEMA approved and capped at $188,083.96.  The Texas Division of Emergency Management (Grantee) requested closeout, and informed FEMA the Applicant did not competitively procure one of its DAC contracts, which was a time and materials contract 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 the improved project’s approval and travel expenses, FEMA awarded estimated DAC without determining the amount of actual costs substantiated or addressing the procurement issue raised by the Grantee.  The Applicant appealed FEMA’s determination 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 estimate 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) denied the first appeal and concurred with the findings at closeout.  On second appeal, the Applicant requests $14,565.33 in DAC and reiterates its previous arguments. The Applicant also 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 §§ 423, 705(c).
  • 44 C.F.R. § 206.206(c)(2).
  • FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures.
  • Fla. Dep’t of Transp., FEMA-1785-DR-FL, at 3 (July 9, 2016).

Headnotes

  • Per 44 C.F.R. § 206.206(c)(2), a grantee must review and forward an applicant’s appeal to FEMA within 60-days of receipt.  FEMA has no authority under the Stafford Act or 44 C.F.R. to grant time extensions for filing appeals.
    • The Grantee submitted the second appeal 137 days after receipt, thus it is untimely.

Appeal Letter

W. Nim Kidd, CEM
Assistant Director, Texas Department of Public Safety
Texas Division of Emergency Management
PO Box 4087
Austin, Texas 78773-0220             

Re:  Second Appeal – University of Texas Medical Branch, PA ID 000-UV3S5-00, FEMA‑1791-DR-TX, Project Worksheet (PW) 15132 – Appeal Timeliness

Dear Chief Kidd:

This is in response to your letter dated May 31, 2017, which transmitted the referenced second appeal on behalf of the University of Texas Medical Branch (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding in the amount of $14,565.33 in direct administrative costs (DAC) for contractor labor and travel expenses.

As explained in the enclosed analysis, I have determined that the Applicant’s second appeal is untimely under Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.206(c)(2) because it was not forwarded within the required 60-day timeframe.  Accordingly, I am denying the appeal.  In addition, consistent with my determination in University of Texas Medical Branch, FEMA-1791-DR-TX (September 21, 2017), I am directing FEMA Region VI to assess whether funding awarded above the project’s capped amount should be deobligated.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

Alex Amparo
Assistant Administrator
Recovery Directorate

Enclosure

cc: George A. Robinson
      Regional Administrator
      FEMA Region VI

 

Appeal Analysis

Background

From September 12 to 13, 2008, Hurricane Ike caused substantial damage to the University of Texas Medical Branch (Applicant) campus in Galveston, Texas.  FEMA documented replacement costs and direct administrative costs (DAC) in Project Worksheet (PW) 15132 for the Applicant’s medical equipment and scientific research materials in its Medical Research Building # 59 estimated at $208,982.18.

The Applicant contracted with James Lee Witt Associates (JLWA) and Mir, Fox and Rodriguez (MFR) to perform grant administration tasks, and claimed contractor labor costs and travel expenses related to these tasks as DAC.  On April 19, 2012, the Applicant submitted an amendment request to increase the project’s DAC amount by $15,580.01.[1] 

The Texas Division of Emergency Management (Grantee) transmitted the Applicant’s amendment request for PW 15132 with a letter to FEMA dated January 15, 2013, explaining that it did not support the request because the project had not incurred a cost overrun at that time.[2]  FEMA concurred with the Grantee and issued a denial letter dated February 8, 2013, which informed the Applicant that FEMA would prepare the appropriate amendment at closeout.[3]      

Concurrent with their amendment request, on June 11, 2012, the Applicant requested an improved project for PW 15132 to purchase updated equipment and different materials.  FEMA approved and capped at $188,083.96 on October 22, 2012.[4] 

In a letter to FEMA dated September 16, 2015, the Grantee requested closeout and stated that it conducted a compliance review of the project, which revealed that: (1) the Applicant did not competitively bid its contract with JLWA; (2) the JLWA contract was a time and materials (T&M) contract with an indefinite value and did not contain a cost ceiling or “not-to-exceed” provision; and (3) a cost analysis was not performed in connection with the procurement.[5]  In response to the Grantee’s findings regarding JLWA, the Applicant argued that the costs claimed for JLWA’s services are eligible because a public emergency existed and JLWA’s rates did not constitute price gouging.[6]  Accordingly, the Grantee recommended that FEMA review the costs and determine eligibility of the Applicant’s claimed DAC totaling $39,594.32.

In response, FEMA prepared an amendment to document its closeout process and issued a determination letter dated December 3, 2015.[7]  The closeout determination letter explained that FEMA found: (1) the Applicant did not track DAC associated with improvements separately from DAC for eligible work; (2) the Applicant’s claimed travel expenses were ineligible as DAC because those expenses were “indirect costs” prorated across multiple PWs;[8] and (3) an adjustment to the project’s approved DAC estimate was justified to account for eligible work.[9] 

To calculate the final approved DAC estimate, FEMA used the Applicant’s claimed DAC, but subtracted DAC claimed for labor performed after the improved project was approved.[10]  

FEMA also disallowed all DAC claimed for travel expenses.  Therefore, FEMA developed a new DAC estimate of $23,800.00, and summarily awarded estimated DAC based on that estimate without determining the amount of actual DAC that could be substantiated in the Applicant’s source documentation.  In addition, FEMA reduced project funding by $6,177.73 for an underrun in material costs.  As a result, FEMA increased the eligible grant amount by $16,310.27.

First Appeal

The Applicant submitted its first appeal dated March 17, 2016, contesting FEMA’s closeout determination and requesting $14,943.39 in additional DAC for labor and travel expenses.[11]  First, the Applicant contended that a project’s grant management activities remain the same even after it becomes an improved project, and those activities may continue for up to three years after a disaster’s closure.  The Applicant also argued that improved project funding caps do not apply to DAC because: (1) FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, requires DAC to be reimbursed based on actual costs; (2) the Assistant Administrator’s Memorandum dated September 8, 2009, lists improved project formulation as an eligible DAC activity; and (3) the Public Assistance Policy Digest states that applicants may receive an administrative allowance for DAC in addition to all other project costs.[12]  

According to the Applicant, its documentation distinguished DAC for eligible work from DAC for improvements in accordance with the Public Assistance Guide because it tracked DAC separately from all other project costs and assigned DAC to specific PWs.[13]  The Applicant also stated that FEMA derived its DAC estimate from the Subgrantee Direct Administrative Cost (SDAC) Table during project formulation, which only provided a “nominal placeholder” to estimate DAC without taking the project’s complexities into account.[14]  Furthermore, the Applicant stressed that FEMA did not increase the DAC amount when it approved the improved project, nor did it inform the Applicant that such costs would be capped or instruct the Applicant to track those costs for eligible work separately from DAC for improvements.  The Applicant also noted that FEMA’s decision to award estimated DAC rather than actual costs caused difficulties for the Applicant in appealing the matter because FEMA did not deny specific costs.

In addition, the Applicant challenged FEMA’s classification of its travel expenses as indirect costs, and argued that its expenses were not divided across multiple PWs or tracked by site like the travel expenses in FEMA’s second appeal decision for the City of Duluth.  The Applicant contended that its travel expenses were “attributable” to individual projects in accordance with the Assistance Administrator’s Memorandum because those travel expenses were tied to labor hours for tasks charged to specific PWs.[15]  Moreover, the Applicant explained that its travel expenses comport with OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments because those costs were (1) allocable to specific cost objectives based on relative benefits received, (2) necessary to carry out the grant, (3) reasonable, (4) claimed in accordance Generally Accepted Accounting Principles, and (5) accorded consistent treatment.[16]  The Applicant also stated that binding precedent requires FEMA to award DAC for its travel expenses because the FEMA Region VI Regional Administrator (RA) granted travel expenses claimed under the same methodology on first appeal for City of Galveston, FEMA-1791-DR-TX.[17]

The Grantee transmitted the appeal to FEMA on March 21, 2016.[18]  FEMA issued a Final Request for Information (RFI) on May 6, 2016, advising the Applicant that the appeal would likely be denied due to a lack of documentation demonstrating: (1) the Applicant tracked DAC for eligible work separately from improvements, and (2) the eligibility of the claimed travel expenses.[19]  In addition, FEMA requested copies of the Applicant’s contracts with JLWA and MFR, its invoices itemizing the costs for each contract element, and any other information supportive of its appeal.  The Applicant responded on June 15, 2016, and provided additional documentation itemizing indirect costs charged to the general services pool, contractor invoices, proof of payment for each contractor invoice, and a copy of the Grantee’s closeout request letter stating its recommendations and audit findings.[20]   

The RA denied the Applicant’s first appeal in a decision dated November 21, 2016.  The RA found that the Applicant did not track DAC for improvements separately from DAC for eligible work, and DAP 9525.9 precludes the Applicant from directly charging travel expenses to individual PWs when similar travel expenses are allocated among indirect costs in the general services pool.[21]  Lastly, the RA explained that the previously unclaimed DAC could not be considered on appeal because those costs were not submitted prior to closeout.

Second Appeal

The Applicant appeals the RA’s first appeal decision, and requests $14,565.33 in DAC for labor and travel expenses.[22]   On second appeal, the Applicant reiterates its first appeal arguments, and contends that the RA erred in applying DAP 9525.9 on first appeal because the costs claimed do not include “management costs.”[23]  In addition, the Applicant insists that FEMA’s requirement to track costs for improvements separately from costs for eligible work does not apply to DAC because it only applies to “repair or replacement costs.”[24]  The Applicant also emphasizes that FEMA did not put forth a good faith effort to estimate DAC because its estimate was derived from the SDAC Table.  As support for its claim that improved project caps do not apply to DAC, the Applicant cites to the SDAC Table which states that “large projects . . . will be reconciled to actual cost at closeout”[25]

The Applicant also argues that FEMA should grant the appeal because FEMA Second Appeal Analysis, Nashville-Davidson County, FEMA-1909-DR-TN establishes eligibility of DAC for the life of a grant and on appeal.  Furthermore, the Applicant claims it would be arbitrary and capricious for FEMA to deny reimbursement of DAC without explaining what constitutes sufficient DAC documentation, and emphasizes that the U.S. Government Accountability Office (GAO) has found that FEMA’s DAC policy and guidance lacks clarity and specificity.[26]  The Applicant also asserts that although FEMA’s promulgated guidance may not conflict with federal statutes and regulations, the Agency should grant the appeal because federal statutes and regulations allow for allocation of direct costs to multiple cost objectives. 

FEMA received the Grantee’s transmission of the Applicant’s second appeal on June 12, 2017, with an attached letter from the Grantee dated May 31, 2017.[27]  In its letter, the Grantee explains that it overlooked the Applicant’s January 26, 2017 appeal submission in error, and accepts full responsibility for the untimely appeal transmittal.

Discussion

Appeal Timeliness

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) § 423 provides that: “[a]ny decision regarding eligibility for, from, or amount of assistance under this title may be appealed within 60 days after the date on which the applicant for such assistance is notified of the award or denial of award of such assistance.”[28]  Furthermore, 44 C.F.R. § 206.206(c)(2) requires the grantee to review and forward an applicant’s appeal, together with a written recommendation, to the FEMA RA within a 60-day timeframe triggered by the date the grantee receives the applicant’s appeal.[29]  Neither the Stafford Act nor 44 C.F.R. provides FEMA with authority to grant time extensions for filing appeals.[30]

In its letter to FEMA dated May 31, 2017, the Grantee explains that it overlooked the Applicant’s second appeal submission in error, and submitted the appeal to FEMA outside of 60-day regulatory timeframe.[31]  As the Grantee forwarded the second appeal beyond the 60-day timeframe stipulated by 44 C.F.R. § 206.206(c)(2), the submission is untimely.

Conclusion

The Applicant’s second appeal is untimely because the Grantee submitted it beyond the 60 day timeframe stipulated by 44 C.F.R. § 206.206(c)(2).  Accordingly, the Applicant’s second appeal is denied.   

 

 


[1] Letter from Authorized Representative, Univ. of Tex. Med. Branch, to Tex. Div. of Emergency Mgmt. (Apr. 19, 2012). 

[2] Letter from Recovery Section Adm’r, Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (Jan. 15, 2013).

[3] Letter from Dir., Recovery Div., FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Feb. 8, 2013).

[4] Project Worksheet 15132, University of Texas Medical Branch, Version 1 (Oct. 22, 2012); Letter from State Coordinating Officer, Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI, at Attachment (Sept. 10, 2012); Div. of Emergency Mgmt. Tex. Dept. of Public Safety Request for Improved or Alternate Project, Project No. 15132 (May 9, 2012) [hereinafter Improved Project Request Form]. 

[5] Letter from State Coordinator, Recovery, Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (Sept. 16, 2015).

[6] Id.

[7] Project Worksheet 15132, University of Texas Medical Branch, Version 2 (Nov. 24, 2015).  Letter from Dir., Recovery Div., FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Dec. 3, 2015).

[8] FEMA Second Appeal Analysis, City of Duluth, FEMA-4096-DR-MN (June 15, 2015).

[9] FEMA’s closeout determination did not address the Grantee’s findings regarding the Applicant’s improper procurement of the JLWA contract.

[10] The total labor costs for tasks performed up to the improved project approval date included costs for tasks associated with other PWs, tasks with no documented description, and tasks benefiting multiple PWs. 

[11] Letter from Vice President of Fin. Accounting and Reporting, Univ. of Tex. Med. Branch, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Mar. 17, 2016) [hereinafter Applicant’s First Appeal Letter]. This amount differs from the amount denied at closeout because the Applicant withdrew some of its claimed costs and included previous unclaimed DAC.

[12] See id. at 2–5 (citing to FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs (Mar. 12, 2008); Memorandum from Assistant Administrator, Disaster Assistance Directorate, FEMA to Regional Administrators, FEMA, at Attachment (Sept. 8, 2009) [hereinafter Assistant Administrator’s Memorandum]; Public Assistance Policy Digest, FEMA 321, at 42 (January 2008) [hereinafter PA Policy Digest].).  The Applicant cited to the PA Policy Digest’s provision for administrative allowances, which does not apply to DAC for subgrantees. PA Policy Digest, at 3, 42.

[13] See Applicant’s First Appeal Letter, at 2 (quoting Public Assistance Guide, FEMA 322, at 110 (June 2007) [hereinafter PA Guide]).

[14] See id. at 3 (referencing a document the Applicant submitted as support for its appeal labeled “DRAFT . . . FEMA’s Subgrantee Direct Administrative Cost (SDAC) table for declarations on or after March 12, 2008).

[15] See id. at 6–8 (quoting the Assistant Administrator’s Memorandum dated September 8, 2009, which provided additional guidance on Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs and Recovery Policy 9525.14, Grantee Administrative Costs.).

[16] See id. (citing to Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments (2004) (codified at 2 C.F.R. pt. 225) [hereinafter OMB Circular A-87].).

[17] See Letter from Reg’l Adm’r, FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Aug. 31, 2011) (notifying the Grantee of FEMA’s first appeal decision in City of Galveston, FEMA-1791-DR-TX).

[18] Letter from Deputy Assistant Dir., Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (Mar. 21, 2016).

[19] Letter from Dir., Recovery Div., FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (May 6, 2016).

[20] Letter from Vice President of Fin. Accounting and Reporting, Univ. of Tex. Med. Branch, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (June 15, 2016). 

[21] See DAP 9525.9, at 2 (stating that a subgrantee cannot direct charge costs to a Public Assistance (PA) project that are considered indirect costs or if similar costs incurred for the same purpose in like circumstances have been allocated to indirect costs).

[22] Letter from Vice President of Fin. Accounting and Reporting, Univ. of Tex. Med. Branch, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Jan. 26, 2017).

[23] Id. at 2.

[24] Id. at 3.

[25] See id. at 4 (quoting a document the Applicant submitted on appeal labeled “DRAFT . . . FEMA’s Subgrantee Direct Administrative Cost (SDAC) table for declarations on or after March 12, 2008”).

[26] See id. at 5 (citing to U.S. Gov’t Accountability Off., GAO-15-65, Federal Emergency Management Agency: Opportunities Exist to Strengthen Oversight of Administrative Costs for Major Disasters 37 (2014)).

[27] Letter from Deputy Assistant Dir., Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (May 31, 2017).

[28] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 423(a), 42

U.S.C. 5189(a) (2007).

[29] 44 C.F.R. § 206.206(c)(2) (2007).

[30] FEMA Second Appeal Analysis, Fla. Dep’t of Transp., FEMA-1785-DR-FL, at 3 (July 19, 2016).

[31] Letter from Deputy Assistant Dir., Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (May 31, 2017); see also  Memorandum from Reg’l Adm’r, FEMA Region VI, to Assistant Adm’r, Recovery Directorate, FEMA (June 20, 2017) (confirming that FEMA Region VI received the Applicant’s January 26, 2017 second appeal from the Grantee on June 12, 2017).

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