Direct Administrative Costs, Improved Projects, Support Documentation

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	1791-DR-TX
Applicant	University of Texas Medical Branch
Appeal Type	Second
PA ID#	000-UV3S5-00
PW ID#	14834, 15624
Date Signed	2017-11-14T00:00:00

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.  

Summary Paragraph

From September 12 to 13, 2008, Hurricane Ike caused substantial damage to the Applicant’s campus and facilities in Galveston, Texas.  FEMA documented replacement costs and DAC in Project Worksheet (PW) 14834 for the Applicant’s laboratory equipment stored in a commercially leased storage facility estimated at $354,544.00, and in PW 15624 for the Applicant’s furnishings in the Keiller Building estimated at $86,628.35.  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 there was no cost overrun at the time.  The Applican­­­­t requested improved projects, which FEMA approved and capped at $2,654.00 for PW 14834 after deducting anticipated insurance proceeds and $77,965.52 for PW 15624.  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).

   

Headnotes

• 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. 

Appeal Letter

Appeal Analysis

Background

From September 12 to 13, 2008, Hurricane Ike caused substantial damage to the University of Texas Medical Branch (Applicant) campus and facilities in Galveston, Texas.  FEMA documented replacement costs and direct administrative costs (DAC) in Project Worksheet (PW) 14834 for the Applicant’s laboratory equipment stored in a commercially leased storage facility estimated at $354,544.00, and in PW 15624 for the Applicant’s furnishings in the Keiller Building estimated at $86,628.35.

On August 31, 2012, the Applicant requested an improved project for PW 14834 for flexibility to purchase different types of laboratory equipment, which FEMA approved and capped at $2,654.00 on March 26, 2013, after deducting $351,890.00 in anticipated insurance proceeds.[1]  The Applicant also requested an improved project for PW 15624 on August 22, 2011, for flexibility to purchase different types of furnishings for various buildings on campus, which FEMA approved and capped at $77,965.52 on October 6, 2011, before deducting insurance proceeds of $77,200.52.[2] 

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 18, 2012, the Applicant submitted individual amendment requests to increase DAC amounts by $12,992.15 in PW 14834 and $7,678.25 in PW 15624.[3] 

The Texas Division of Emergency Management (Grantee) transmitted the Applicant’s amendment requests for PWs 14834 and 15624 with individual letters to FEMA respectively dated January 15, 2013, and January 31, 2013, explaining that it did not support the requests because the projects had not incurred a cost overrun at that time.[4]  FEMA concurred with the Grantee and issued individual denial letters for each PW, informing the Applicant that FEMA would prepare the appropriate amendment for each project at closeout.[5]    

In a letter for PW 14834 dated September 10, 2015, and a letter for PW 15624 dated December 16, 2015, the Grantee requested closeout and stated that it conducted a compliance review of each project, which revealed that: (1) the Applicant did not competitively bid its contracts with JLWA; and (2) the JLWA contracts were time and materials (T&M) contracts with an indefinite value and did not contain a cost ceiling or “not-to-exceed” provision.[6]  In response to those findings, 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.[7]  Accordingly, the Grantee recommended that FEMA review the costs and determine eligibility of the Applicant’s claimed DAC totaling $20,480.91 for PW 14834 and $18,521.40 for PW 15624.[8]

In response, FEMA prepared amendments documenting its closeout process for each PW and issued a determination letter for PW 14834 dated December 8, 2015, and for PW 15624 dated March 4, 2016.[9]  In each closeout determination letter, FEMA explained that it 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;[10] and (3) an adjustment to each project’s approved DAC estimate was justified to account for eligible work.[11] 

To calculate the final approved DAC estimates, FEMA used the Applicant’s claimed DAC, but subtracted DAC claimed for labor performed after the improved projects were approved.[12]   FEMA also disallowed all DAC claimed for travel expenses.  Therefore, FEMA developed new DAC estimates of $16,700.00 in PW 14834 and $8,000.00 in PW 15624, and summarily awarded DAC based on those estimates without determining the amount of actual DAC that could be substantiated in the Applicant’s source documentation.[13]  

First Appeal

The Applicant submitted its first appeal for PW 14834 dated March 18, 2016, and its first appeal for PW 15624 dated June 1, 2016, contesting FEMA’s closeout determination and requesting $7,097.52 for PW 14834 and $10,505.61 for PW 15624 in additional DAC for labor and travel expenses.[14]  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.[15]  

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.[16]  The Applicant also stated that FEMA derived its DAC estimates from the Subgrantee Direct Administrative Cost (SDAC) Table during project formulation, which only provided a “nominal placeholder” to estimate DAC without taking each project’s complexities into account.[17]  Furthermore, the Applicant stressed that FEMA did not increase the DAC amounts when it approved each 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 in each project 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.[18]  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 to Generally Accepted Accounting Principles, and (5) accorded consistent treatment.[19]  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.[20]

The Grantee transmitted the appeals to FEMA for PW 14834 on March 21, 2016, and for PW 15624 on June 9, 2016.[21]  FEMA issued Final Requests for Information (RFIs) advising the Applicant the appeals 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.[22]  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 appeals.  In response, the Applicant provided additional documentation itemizing indirect costs charged to the general services pool, contractor invoices, proof of payment for each contractor invoice, and copies of the Grantee’s closeout request letters stating its recommendations and audit findings.[23]   

The RA denied the Applicant’s first appeals.[24]  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.[25] 

Second Appeal                 

The Applicant appeals the RA’s first appeal decisions, and requests DAC for contractor labor and travel expenses in the amounts of $5,134.93 for PW 14834 and $10,496.05 for PW 15624.[26]  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.”[27]  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.”[28]  The Applicant also emphasizes that FEMA did not put forth a good faith effort to estimate DAC because the estimates were 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.”[29]

The Applicant also argues that FEMA should grant the appeals 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.[30]  The Applicant also asserts that although FEMA’s promulgated guidance may not conflict with federal statutes and regulations, the Agency should grant the appeals because federal statutes and regulations allow for allocation of direct costs to multiple cost objectives.  The Grantee transmitted the Applicant’s second appeals to FEMA with an attached letter dated February 15, 2017.[31]

Discussion

Improved Projects

Pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) § 406, FEMA may provide grant assistance for the costs to repair, restore, reconstruct, or replace a facility damaged or destroyed by a major disaster.[32]  FEMA may reimburse costs when an applicant makes improvements, but still restores the predisaster function of a damaged facility.[33]  In such instances, FEMA limits funding for the improved project to the federal share of the approved estimate of eligible costs “associated with repairing or replacing the damaged facility to restore its pre-disaster design, or actual costs of completing the improved project, whichever is less.”[34]  In order to appeal the eligible grant amount for an improved project, an applicant must separately document and track the costs incurred for eligible work that exceed the approved cost estimate.[35]  In many instances, the costs associated with eligible work in an improved project cannot be tracked separately due to physical changes or contracting arrangements related to improvements.[36]

The Applicant contends that FEMA should grant the appeals because improved project funding caps do not apply to DAC.  In addition, the Applicant claims that FEMA’s requirement to track costs for eligible work separately from improvements does not apply to DAC because it only applies to “repair and replacement costs.”  Contrary to the Applicant’s assertion, FEMA policy includes DAC as a project cost[37] and limits improved project funding to the approved estimate of eligible costs “associated with repairing or replacing the damaged facility to restore its pre-disaster design.”[38]  Moreover, the Applicant and Grantee signed and submitted improved project request forms, opting to proceed with the improved projects capped at $2,654.00 in PW 14834 (after deducting anticipated insurance proceeds)[39] and $77,965.52[40] in PW 15624.[41]  The Applicant also argues that the Assistant Administrator’s Memorandum providing guidance on DAP 9525.9 includes improved project formulation and development on its list of eligible DAC activities, which supports eligibility of all DAC for improved projects.[42]  However, the Assistant Administrator’s Memorandum does not list any eligible DAC activities for improved projects after project formulation and development.[43] 

To appeal an improved project’s capped amount, FEMA requires an applicant to separately track the costs incurred for eligible work that exceed the project’s approved cost estimate.[44]  Here, the Applicant did not provide such documentation.  The Applicant’s DAC documentation did not include detailed descriptions to differentiate DAC associated with the eligible scope of work from DAC for improvements.  Consequently, the Applicant has not justified additional funding above each project’s original capped amount. 

After reviewing the appeals, FEMA concludes that the improved project funding caps were improperly increased at closeout based on selection of the date the request for each improved project was approved.   This methodology was flawed because the Applicant still did not track eligible costs separately from improvement costs and did not substantiate eligibility of additional DAC exceeding each project’s approved cost estimate.  Accordingly, the eligible grant amounts are limited to the approved estimate of eligible costs originally capped at $2,654.00 in PW 14834 and $850.00 in PW 15624 (after deducting anticipated insurance proceeds). 

DAC Eligibility

Pursuant to DAP 9525.9, FEMA may reimburse DAC if properly documented and directly chargeable on a PW for a specific project.[45]  Eligible DAC must not only be tracked and charged directly to one specific project,[46] but must also be reasonable under the relevant OMB Circulars, regulations, and FEMA policies.[47]  An applicant’s claimed DAC cannot be assumed eligible if the costs are not tracked and documented in a manner that enables FEMA to determine if they are reasonable and allocable to one specific project.[48]  DAP 9525.9 also defines indirect costs as “costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted.”[49]  An applicant may not assign costs to a Public Assistance (PA) project as DAC if those costs constitute indirect costs or if similar costs incurred for the same purpose in like circumstances have been allocated to indirect costs.[50]  Indirect costs may be eligible management costs under Stafford Act § 324, but are not eligible for reimbursement as DAC.[51]  In addition, an applicant must maintain documentation to support all costs it requests for reimbursement.[52]

     1. DAC Claimed for Contractor Labor

The Applicant’s documentation shows that it claimed DAC for labor items with no description other than generic task codes such as “Add’l FEMA/Grntee Doc” and “review compliance.”  Such task codes do not provide enough information to enable FEMA to determine if the work constituted administrative activities in direct support of a specific PW as well as whether the costs are reasonable.[53]  Furthermore, the Applicant claimed DAC for labor items that could not be individually attributed to any of the PWs related to this appeal.  For instance, the Applicant claimed DAC in PW 14834 for tasks described as project cost reconciliation related to “UHC,” the “Cancer Ctr,” and the “Blood Bank.”[54] The Applicant’s documentation also shows that it claimed indirect costs as DAC, such as a task in PW 15624 in which MFR personnel “[p]icked up approved PWs from Admin and processed them accordingly.”[55]

FEMA concludes that the Applicant has not provided documentation tracking DAC for eligible work separately from improvements.  In addition, the Applicant has not substantiated the general eligibility of its claimed DAC for tasks without detailed descriptions or that benefited other or multiple PWs.

     2. DAC Claimed for Travel Expenses

The Applicant explains that its methodology allocated all travel expenses incurred during each specific time period to individual PWs and the general services pool based on hours worked.  Further, the Applicant insists that its travel expense methodology comports with OMB Circular A-87[56] because it identifies particular final cost objectives for all costs and shows they were incurred specifically to carry out the award.  However, as noted above, this methodology is not consistent with the definition of DAC in DAP 9525.9.  While FEMA reimburses travel expenses that can be attributed to specific projects, travel expenses allocated to multiple PWs in proportion to the hours worked are not eligible as DAC.[57]  Moreover, travel expenses “related to general support and not tied directly to one specific project,” are not eligible as DAC, but instead may be eligible as indirect costs.[58]  The Applicant’s documentation shows that it requested reimbursement for a percentage of its total travel expenses based on the amount of contractor labor hours billed for certain PWs rather than how specific travel costs were incurred to carry out the award.  Further, the Applicant incorrectly relies on the RA’s first appeal decision in City of Galveston to support its travel expense methodology because first appeal decisions do not establish binding precedent for second appeal determinations.[59] 

In sum, FEMA finds that the Applicant’s travel expenses were prorated across multiple PWs to tasks charged to individual PWs and the general services pool.  Consequently, the RA correctly concluded those travel expenses were indirect costs and ineligible for reimbursement as DAC.

Conclusion

The Applicant has not demonstrated that it tracked costs for eligible work separately from improvements, nor has it substantiated the eligibility of DAC for all claimed labor costs.  In addition, the Applicant’s travel expenses constitute indirect costs, which are ineligible for reimbursement as DAC.  Accordingly, the Applicant’s second appeals related to PWs 14834 and 15624 are denied.  Funding for those PWs should be limited to the previously established caps prior to closeout.  FEMA Region VI will execute this determination subject to Section 705(c) of the Stafford Act, as implemented by Recovery Policy, FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures.[60]

 

[1] Project Worksheet 14834, University of Texas Medical Branch, Version 2 (Mar. 26, 2013); Div. of Emergency Mgmt. Tex. Dept. of Public Safety Request for Improved or Alternate Project, Project No. 14834 (Aug. 31, 2012) [hereinafter Improved Project Request Form].

[2] Project Worksheet 15624, University of Texas Medical Branch, Version 1 (Oct. 6, 2011); Improved Project Request Form, Project No. 15624 (Aug. 2, 2011). The project’s total estimated costs of $86,629.00 and insurance proceeds of $85,778.35 were adjusted respectively to $77,965.52 and $77,200.52 to reflect the 90 percent Federal cost share.

[3] Letters from Authorized Representative, Univ. of Tex. Med. Branch, to Tex. Div. of Emergency Mgmt. (Apr. 18, 2012). 

[4] Letters 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 & Jan. 31, 2013).

[5] Letters 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 & Feb. 20, 2013).

[6] Letters from State Coordinator, Recovery, Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI, at Attachment (Sept. 10, 2015 & Dec. 16, 2015).

[7] Id.

[8] The Grantee also recommended that FEMA deobligate unsubstantiated contract costs of $11,636.93 for PW 14834 and $14,424.67 for PW 15624, which were costs covered under each project’s anticipated amount of insurance proceeds.

[9] Project Worksheet 14834, University of Texas Medical Branch, Version 3 (Dec. 2, 2015); Project Worksheet 15624, University of Texas Medical Branch, Version 2 (Mar. 1, 2016).

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

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

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

[13] FEMA also deducted unsubstantiated contract costs of $11,636.93 for PW 14834 and $14,424.67 for PW 15624 that were covered by insurance proceeds, which required adjustment to each project’s insurance deduction.

[14] Letters 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. 18, 2016 & June 1, 2016) [hereinafter Applicant’s First Appeal letters].  The Applicant’s appeal amounts differ from its original amounts claimed at closeout because the Applicant withdrew its claims for some costs and requested reimbursement for additional DAC not claimed at closeout. 

[15] See id. (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 (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.  See PA Policy Digest, at 3, 42.

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

[17] 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).

[18] 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.).

[19] 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]).

[20] 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. 21, 2011) (notifying the Grantee of FEMA’s first appeal decision in City of Galveston, FEMA-1791-DR-TX).

[21] Letters 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 & June 9, 2016).

[22] Letters from Acting Dir., Recovery Div., FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (May 6, 2016 & Aug. 11, 2016).

[23] Letters 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 & Nov. 3, 2016). 

[24] The RA issued its first appeal decision for PW 14834 on December 5, 2016, and for PW 15624 on January 20, 2017.

[25] See DAP 9525.9, at 6 (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).

[26] Letters 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. (Feb. 6, 2017).   

[27] Id. at 2.

[28] Id. at 3.

[29] 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”).

[30] See id. (citing to the 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)).

[31] Letters from Deputy Assistant Dir., Tex. Dep’t of Pub. Safety, Tex. Div. of Emergency Mgmt., to Recovery Div. Dir., FEMA Region VI (Feb. 15, 2017).

[32] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406(a)(1), 42 U.S.C. § 5172(a)(1) (2007).

[33] Title 44 Code of Federal Regulations (44 C.F.R.) § 206.203(d)(1) (2007).

[34] PA Guide, at 110; PA Policy Digest, at 71.

[35] PA Guide, at 110; FEMA Second Appeal Analysis, Clarke Electric Cooperative, FEMA-1737-DR-IA, at 4 (Jan. 15, 2015).

[36] PA Policy Digest, at 71.

[37] DAP 9525.9, at 6.

[38] PA Guide, at 110; PA Policy Digest, at 71.

[39] See Improved Project Request Form (memorializing the signatures of the Applicant’s Authorized Representative dated August 31, 2012, and the Grantee’s Authorized Representative dated September 17, 2012). 

[40] This amount would later be reduced to $850.00 after insurance adjustment.

[41] See Improved Project Request Form (memorializing the signatures of the Applicant’s Authorized Representative dated August 2, 2011, and the Grantee’s Authorized Representative dated August 22, 2011). 

[42] Assistant Administrator’s Memorandum, at Attachment.

[43] Id.

[44] PA Guide, at 110; FEMA Second Appeal Analysis, Clarke Electric Cooperative, FEMA-1737-DR-IA, at 4 (Jan. 15, 2015).

[45] DAP 9525.9, at 1.

[46] Id. at 6.

[47] See 44 C.F.R. § 13.22(b) (explaining that allowable costs will be determined in accordance with OMB CIRCULAR A-21, which sets forth the applicable cost principles for educational institutions).  The applicable OMB Circulars are: Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations, and OMB Circular A-21, Cost Principles for Educational Institutions (2004) (codified respectively at 2 C.F.R. pts. 215 and 220).

[48] 2 C.F.R. pt. 220 app. A ¶ C.3 (2008).

[49] DAP 9525.9, at 6.

[50] 2 C.F.R. pt. 220 app. A ¶ D.1; DAP 9525.9, at 6.

[51] See DAP 9525.9, at 6; see also PA Applicant Handbook, at 17–19 (explaining that a grantee may request funding for its own administrative costs as well as pass-through funds to cover applicants’ indirect or management costs; the grantee has discretion to determine the amount of pass-through funds it will provide to applicants who request such funding), and FEMA Second Appeal Analysis, City of Duluth, FEMA-4096-DR-MN, at 4 (June 15, 2015) (stating that that Grantees have discretion to provide applicants with pass-through funding for indirect costs).

[52] Assistant Administrator’s Memorandum, at 3.

[53] See FEMA Second Appeal Analysis, Los Angeles County, FEMA-1810-DR-CA, at 2 (Mar. 18, 2014), and FEMA Second Appeal Analysis, Linn County, FEMA-1763-DR-IA at 2–3 (Aug. 9, 2013), and FEMA Second Appeal Analysis, Cedar Rapids Community School District, FEMA-DR-IA, at 5 (Apr. 22, 2013) (all providing examples of descriptions that are too broad to describe a specific administrative task as required by DAP 9525.9, such as “Project Formulation,” “Project Administration,” “Project Management,” “PW Assembly,” and “Documentation Development,” “Financial Compliance Review,” “Other Funding Anticipation,” and “Other Program Administration”).

[54] See Applicant’s DAC Labor Spreadsheet for MFR in PW 14834, at tasks dated March 18, 2011.

[55] See Applicant’s DAC Labor Spreadsheet for MFR in PW 15624 at task dated October 20, 2010.

[56] The Applicant’s appeals incorrectly refer to OMB Circular A-87 rather than OMB Circular A-21, which applies to educational institutions.

[57] See Assistant Administrator’s Memorandum, at 2 (stating “[t]ravel and per diem costs for contractor employees that work on eligible Public Assistance projects are eligible as direct costs if such costs can be and are attributed to individual projects”); see also FEMA Second Appeal Analysis, City of Duluth, FEMA-4069-DR-MN, at 5 (June 15, 2015) (concluding that travel expenses prorated across multiple PWs are ineligible for DAC reimbursement because they are indirect expenses).

[58] Assistant Administrator’s Memorandum, at Attachment.

[59] See 44 C.F.R. § 206.206(b); FEMA Second Appeal Analysis, Public Health Trust, FEMA-1561 & 1608-DRs-FL, at 5 (Sep. 26, 2016) (explaining that the Assistant Administrator for FEMA’s Disaster Assistance Directorate has the sole authority to consider second appeals and to overturn first appeal determinations, thus an RA’s first appeal decision is not binding on second appeal).

[60] FEMA Recovery Policy FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures (Mar. 31, 2016).