Appeal Timeliness, 705(C), Private Nonprofit

In August 2005, winds and wind-driven rainwater from Hurricane Katrina severely damaged La Salle High School, a private nonprofit (PNP) owned and operated by the Roman Catholic Archdiocese of Miami (Applicant).  FEMA prepared Project Worksheet (PW) 1354 to document damage to five buildings on the school’s campus (Facilities).[1]  The PW noted that the Applicant was required to obtain and maintain a wind insurance policy covering the Facilities, as they were previously damaged in Hurricane Andrew.  The PW indicated that the Applicant provided documentation demonstrating compliance with this insurance requirement and that the Facilities were covered under a blanket insurance policy.  FEMA determined the amount of required insurance coverage equaled the amount of eligible damage that was previously sustained by the Facilities.  FEMA subsequently deobligated funding associated with a cost underrun and amounts of Public Assistance (PA) received previously from FEMA ($260,286.03 of which was associated with the prior assistance reduction).  FEMA issued a Project Application Summary (P.2) on October 17, 2014 notifying the Florida Division of Emergency Management (Grantee) of the PW’s deobligation, which the Grantee posted to its website (FloridaPA.org).  The Grantee then notified the Applicant of FEMA’s deobligation in an October 24, 2014 letter and posted the letter to FloridaPA.org on November 6, 2014.[2]

 

The Applicant appealed FEMA’s deobligation in a letter dated May 10, 2015.  The Applicant argued that FEMA did not have the authority to reduce funding for noncompliance with insurance requirements on a PW by PW basis, but rather only had authority to reduce on a facility by facility basis.  The Applicant also noted that there were 5 buildings damaged by Katrina and 10 damaged by Hurricane Andrew.  It noted it was not clear if the 5 buildings damaged by Katrina (Facilities) were previously damaged in Hurricane Andrew.  The Applicant pointed out that FEMA’s deobligation amount equaled the amount of the Applicant’s insurance deductible and the deobligation would only be appropriate if all 5 buildings were previously damaged in Andrew and if the valuation of prior damage, per building, equaled or exceeded the amount of damage from Katrina.  In addition, the Applicant claimed that The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988 (Stafford Act) Section 705(c) bars FEMA from deobligating funding.  In support thereof, the Applicant stated that the PW was an approved agreement that specified the costs and that FEMA had not suggested the costs were not reasonable; and that the purpose of the grant – to repair the Facilities – was accomplished.  Finally, the Applicant stated that due to a delay from FloridaPA.org, it did not receive notice of FEMA’s deobligation until late December 2014.  It then expended time to speak with consultants, brokers, and counsel and to look for its records from Hurricane Andrew before submitting its appeal in May 2015.

 

The Grantee forwarded the Applicant’s appeal to FEMA on August 14, 2015, along with its August 7, 2015 concurrence.  The Grantee recommended FEMA approve the appeal and also argued that FEMA policy provided that insurance deductibles were eligible for PA.  Because FEMA incorrectly deobligated the amount of the Applicant’s deductible, FEMA should therefore provide the funding requested.  The Grantee conceded that Stafford Act Section 705(c) does not mention PNPs, but argued the omission does not mean Congress necessarily excluded them, especially because those entities are most affected by sudden losses of funding.  In addition, the Grantee contended that it is covered under Stafford Act Section 705(c) and FEMA took funding back from the Grantee, who is liable and it had no assurances that it could recover the funding from the Applicant.  As such, the Grantee suffered a harm or loss, which Section 705(c) protects against.

 

The FEMA Region IV Regional Administrator (RA) denied the appeal on April 12, 2017.  The RA determined that the Applicant’s appeal was untimely.  The RA stated that FEMA notified the Grantee in a P.2 of its deobligation on October 17, 2014, and that the Grantee posted the P.2 the same day on FloridaPA.org.  The Grantee also notified the Applicant in a letter dated October 24, 2014, which was posted to FloridaPA.org on November 6, 2014.  Further, the RA noted that the Applicant conceded it received notice in late December 2014.  Thus, the RA found that even if the Applicant did not receive notice until December 31, 2014, the Applicant had 60 days to file its appeal, which expired on March 1, 2015.  However, the Applicant did not submit its appeal to the Grantee until May 10, 2015.  Additionally, the RA indicated that the Grantee’s transmittal was likewise untimely, since the Grantee’s August 7, 2015 letter was not emailed to FEMA until August 14, 2015, more than 90 days after receiving the Applicant’s appeal.  Last, the RA determined that Stafford Act Section 705(c) must be read in context with all sections of the Stafford Act, which also provides that an applicant must submit an appeal within 60 days of receipt.  After the 60 day period ends, an applicant’s right to appeal is exhausted and the Agency’s action becomes final.  Accordingly, the RA concluded that the Section 705(c) prohibition did not apply where appeal rights are exhausted and FEMA has made a final administrative decision. 

 

In its second appeal dated June 9, 2017, the Applicant requests $260,286.03 in funding.  The Applicant argues that it complied with FEMA’s obtain and maintain insurance requirement and no regulations exist to justify a reduction beyond the amount received for insurance proceeds.  The Applicant notes that neither it nor FEMA has the records associated with Hurricane Andrew and a specific amount of insurance would have been required for each of the 10 damaged facilities.  Reducing funding for the 5 buildings damaged in Hurricane Katrina by the total obtain and maintain requirement resulting from Hurricane Andrew would be incorrect as the Applicant does not carry a blanket insurance policy.  The Applicant states that it purchased a specific-scheduled limits policy after Hurricane Andrew.  In response to the RA’s decision that its appeal was untimely, the Applicant notes that no reduction was warranted in the first place and when it brought the issue to FEMA’s attention during the 60-day appeal period, FEMA, through the Grantee, sent the Applicant a document on March 18, 2015.[3]  The Applicant, however, contends that the policy referred to in the March 2015 correspondence was not published until June 2015 and was not retroactively applicable to a 2005 disaster.  Finally, the Applicant notes that FEMA also missed its regulatory deadline in responding to the appeal and questions why FEMA would assert timeliness when its response was late.

 

In an August 1, 2017 letter, the Grantee concurs with and supplements the Applicant’s second appeal arguments.  The Grantee asserts that each building at the Applicant’s high school was insured at replacement cost and because the coverage per building exceeded the total amount of eligible damage sustained in Hurricane Andrew, the Applicant was compliant with the obtain and maintain requirement.  The Grantee repeats its prior arguments regarding Section 705(c) that it made on first appeal.

 

The Stafford Act 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.”[4]  FEMA’s implementing regulations require that applicants file an appeal with the grantee within 60 days after receipt of notice of the action that is to be appealed, at which point the grantee will forward the appeal, along with a written recommendation, to the RA within 60 days.[5]  Failure by either the applicant or the grantee to comply with these requirements renders the appeal untimely and the Applicant’s appeal rights lapse.[6]  Neither the Stafford Act, nor FEMA’s regulations, authorize FEMA to grant time extensions for filing appeals.[7]

 

Here, the Grantee first posted FEMA’s notification of the deobligation to FloridaPA.org on October 17, 2014.  The Grantee again notified the Applicant on November 6, 2014, through FloridaPA.org and in its letter advised the Applicant of its right to appeal within 60 days.  However, the Applicant claims in its first appeal that it did not receive the notification until late December 2014 due to issues with the website.  The Applicant submitted its first appeal to the Grantee on May 10, 2015.  Thus, the Applicant’s first appeal to the Grantee was untimely because it was submitted 60 days after the statutory and regulatory timeframe.  Even if the Applicant did not receive notification until December 31, 2014, it still was required to submit the appeal by March 1, 2015.  The Applicant submitted the appeal at least 130 days after receipt of notice.  The Applicant’s argument that it was still corresponding with FEMA because it believes FEMA’s determination was in error is not persuasive, as the Applicant received notice of its second appeal right.  The date for submission does not toll due to an Applicant’s continued correspondence with FEMA.  Due to the first appeal being submitted by the Applicant after the expiration of the 60-day timeframe required by 44 C.F.R. § 206.206(c)(1), the RA correctly determined that the first appeal was untimely.

 

Section 705(c) of the Stafford Act bars FEMA from deobligating from States or local governments previously awarded funding if: “(1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”[8]  FEMA issued FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures (FEMA FP-205-081-2), to implement these criteria.[9]  If all three criteria are met, FEMA is prohibited from recouping grant funds even if it later determines that it made an error in determining eligibility.[10]  This policy, however, does not apply where appeal rights are exhausted and FEMA has made a final administrative decision.[11] 

 

As discussed above, the Applicant submitted its first appeal past the statutory and regulatory timeframe.  FEMA’s previous determination is therefore the final administrative action and its guidance implementing Stafford Act Section 705(c) is inapplicable to the Applicant’s first appeal.  Therefore, per FEMA policy, the protections of Section 705(c) do not apply.  Setting the appeal timeliness matter aside, as the Applicant is a PNP, Section 705(c) is not applicable to this type of Applicant.  While Section 705(c) explicitly provides that a “State or local government shall not be liable for reimbursement” when the three prongs described above are satisfied, it does not mention PNPs. This omission is viewed as purposeful because where Congress intended to include PNPs in the Stafford Act, it did so explicitly (i.e., Sections 406 and 407).[12]    

 

The Applicant did not submit its first appeal within the 60-day timeframe pursuant to Stafford Act § 423 and 44 C.F.R. § 206.206(c).  Thus, the Applicant’s first appeal is untimely.  FEMA policy FP 205-081-2 implementing Section 705(c) does not apply after an applicant's appeal rights have lapsed.  Furthermore, Section 705(c) does not apply to PNPs.  The Applicant’s appeal is therefore denied.