From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage in the State of New York. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. CDM Smith’s employees often traveled to the Applicant’s jurisdiction and worked on multiple projects during each trip or billing period. CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). On May 30, 2014, FEMA obligated PW 3750 to cover emergency response-related expenses incurred by the Applicant’s Department of Sheriff and Corrections (delivering food to the Emergency Operation Center, installing warning and hazard blockades, performing search and rescue, etc.). By letter dated January 6, 2017, FEMA informed the Applicant that as a general matter, many of CDM Smith’s travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as DAC, as they were actually indirect travel costs. On February 23, 2017, the Grantee submitted to FEMA the Applicant’s Large Project Final Accounting (LPFA) for PW 3750, and submitted a revised LPFA by letter dated April 5, 2018. On July 10, 2018, following its inspection of the revised LPFA, FEMA adjusted PW 3750 to include DAC that it found the Applicant had substantiated, but denied funding for indirect travel costs in PW 3750, in accordance with its January 6, 2017 letter. The Applicant appealed FEMA’s LPFA determination by letter dated September 10, 2018, arguing that the Expense Allocation Methodology was permissible under the Applicant’s interpretation of applicable regulations and FEMA policy, and that the travel costs so allocated were eligible for reimbursement as either DAC or contract costs. On first appeal, FEMA Region II’s Regional Administrator (RA) upheld the denial of costs either as DAC or as contract costs. The Applicant filed a second appeal, reiterating its arguments from its first appeal.
Authorities and Second Appeals
- Stafford Act § 324
- 2 C.F.R. § 200.110
- 44 C.F.R. §§ 207.2, 207.6
- DAP 9525.9 (Nov. 13, 2007); Memo., DAC Guidance (Sept. 8, 2009);
DAP 9525.11 (Apr. 22, 2001)
- FEMA-4069-DR-MN, City of Duluth, Mult. PWs, at 5 (June 15, 2015)
- FEMA policy provides that travel expenses related to one specific PW qualify as DAC, while travel expenses “related to general support and not directly tied to one specific project” are indirect costs, and therefore ineligible as DAC. By extension, expenses allocated to every task for all PWs in proportion to the hours worked on the task are not eligible as DAC.
- CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across individual PWs on a prorated basis. Accordingly, the costs are not eligible DAC.
Conclusion: Nassau County’s (Applicant) contractor’s employees’ travel expenses benefitted more than one Project Worksheet (PW). Under FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, these expenses are therefore indirect costs and are not eligible for reimbursement as Direct Administrative Costs (DAC) or as contract costs.