Appeal Timeliness – 705(c) – OIG Audit

Appeal Brief

Summary Paragraph

As a result of Hurricane Wilma, FEMA obligated multiple versions of Project Worksheets (PWs) 3017 and 5332, providing Public Assistance funding for the City of Pembroke Pines’ (Applicant) debris removal work.  However, after a Department of Homeland Security Office of Inspector General audit, FEMA deobligated a total of $3,712,419.56 in funding from the above-referenced PWs.  By way of letters dated June 11 and July 30, 2012, the Applicant submitted its first appeals of the PWs to the Florida Division of Emergency Management (Grantee), requesting FEMA reinstate $3,290,276.32 in funding.  The Applicant argued it transmitted documentation of expenses for both PWs in 2006, therefore, Stafford Act section 705(a) prohibited the deobligations that occurred six years later.  It also argued Stafford Act section 705(c) additionally barred the deobligations.  In a September 5, 2012 letter, the Grantee recommended FEMA approve the appeal.  FEMA issued a Final Request for Information, seeking documentation that demonstrated the Grantee transmitted the appeal package within the required 60-day timeframe, as FEMA had no record of receiving it before April 16, 2014.  FEMA Region IV’s Regional Administrator denied the appeal, determining that (1) the Grantee forwarded the first appeals beyond the requisite 60-day timeframe; (2) because the Grantee submitted the appeal after expiration of the 60-day timeframe, the Applicant’s first appeal rights lapsed and the protections of Stafford Act section 705(c) were therefore not applicable; and (3) section 705(a) of the Stafford Act did not prohibit FEMA from recovering payments, as the deobligations occurred before the Grantee’s June 2012 transmission of the final expenditure report for the Applicant.  The Applicant and the Grantee reiterate their previously raised arguments on second appeal.

Authorities and Second Appeals

• Stafford Act §§ 101(a), (b); 325(a)(1), (2); 423(a)-(c); 705(a), (c).
• 44 C.F.R. §§ 206.32(d); 206.44; 206.201(a), (e); 206.202; 206.206(c).
• FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, at 2, 4, 7.
• PA Guide, at 86.
• 55 Fed. Reg. 2,297 (Jan. 23, 1990).
• Nashville-Davidson Cty., FEMA-1909-DR-TN, at 4-5 (July 2, 2018); City of Atlanta, FEMA-1858-DR-GA, at 6 (May 10, 2018); Town of Nichols, FEMA-4031-DR-NY, at 5 (May 10, 2018); Town of Windermere, FEMA-1561-DR-FL, at 5 (Apr. 2, 2018); Port of Galveston, FEMA-1791-DR-TX, at 7 (Jan. 19, 2017); Broward Cty. Sch. Bd. of Fla., FEMA-1609-DR-FL, at 3 (Aug. 22, 2016); Village of Waterford, FEMA-4020-DR-NY, at 4 (Sept. 4, 2014).

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.  Multiple prior second appeal decisions have reinforced the rule that an applicant has the burden of substantiating its arguments and must explain how documentation supports its appeal.
  • As the Applicant has not demonstrated that the Grantee timely submitted the first appeals to FEMA within the requisite 60-day timeframe, its appeal rights pertaining to the deobligations lapsed.

• Stafford Act section 705(a) provides that generally, FEMA must initiate an administrative action to recover payments within three years of the date of the transmission of the final expenditure report for the disaster or emergency. 
  • Here, the Applicant’s 2006 documentation of expenses relate only to the two individual PWs at issue in this appeal; it has not therefore demonstrated a final expenditure report was transmitted for all of the  projects for the disaster more than three years before the deobligations.

Conclusion

The Applicant’s first appeals were untimely.  Thus, Stafford Act section 705(c) does not bar FEMA’s recovery of funds.  Moreover, the Applicant has not demonstrated the deobligations occurred more than three years after transmission of the final expenditure report for the disaster in violation of Stafford Act section 705(a). 

Appeal Letter

Appeal Analysis

Background

As a result of Hurricane Wilma, the City of Pembroke Pines (Applicant) suffered strong winds and flooding from October 23 through November 18, 2005.  Consequently, FEMA obligated multiple versions of Project Worksheets (PWs) 3017 and 5332, providing Public Assistance (PA) funding for debris removal work.  FEMA originally approved PW 3017 (Version 0) on March 13, 2006, obligating $20,231,213.32 for debris removal, monitoring, and other associated costs; and PW 5332 (Version 0) on May 13, 2006, obligating $1,361,600.00 for stump removal work.  However, on July 13, 2007, the Department of Homeland Security Office of Inspector General (OIG) issued a Memorandum to the Director of FEMA’s Florida Long Term Recovery Office setting forth concerns regarding the PWs at issue in this appeal.  It confirmed that as a result of an audit, the OIG recommended FEMA disallow a total of $3,046,419 from PW 3017[1] and additionally noted that due to a lack of supporting documentation, FEMA would not be able to readily determine the eligibility of the stump removal costs at project closeout, i.e., that the stumps posed a public safety hazard.

On March 21, 2012, FEMA approved PW 5332 (Version 4), the final version of the PW, deobligating $1,081,772.00 in ineligible costs from the project because the Applicant only substantiated eligible costs of $279,828.00.  FEMA additionally approved the final version of PW 3017, Version 5, on May 22, 2012, awarding $17,600,565.76 in PA funding, thus, deobligating $2,630,647.56 for ineligible costs.

By way of letters dated April 13, 2012 and June 1, 2012, the State of Florida Division of Emergency Management (Grantee) notified the Applicant of the deobligations in PW 5332 (Version 4) and PW 3017 (Version 5), respectively, and included language advising the Applicant of its appeal rights and appeal procedural requirements concerning the determinations.  The Grantee transmitted with each letter the PW closeout transmittals, also known as the Project Application Summary packages, for each PW’s final version.

First Appeal

By way of letters dated June 11 and July 30, 2012, the Applicant appealed FEMA’s determinations of PW 5332 (Version 4) and PW 3017 (Version 5), respectively, and requested a total amount of $3,290,276.32 in previously awarded funding for both PWs.  In the June 11, 2012 letter, the Applicant requested FEMA reinstate the previously deobligated $1,081,772.00 in costs for PW 5332, arguing: (1) thousands of downed trees created an immediate threat to life, public health, and public safety, and (2) FEMA’s Regional Guidance in effect at the time of the disaster, which required FEMA approval prior to stump removal, conflicted with FEMA’s National Guidance, which recognized an applicant’s obligation to immediately remove debris in order to eliminate an immediate threat to lives, public health, and safety.  In the July 30, 2012 letter, the Applicant requested FEMA reinstate the previously deobligated costs in the amount of $2,208,504.32 from PW 3017, arguing that it acted reasonably and responsibly to: (1) protect the health, safety, and welfare of its residents; (2) document its efforts; and (3) comply with FEMA’s regulations. 

In a letter dated September 5, 2012, the Grantee recommended FEMA approve the appeals.  It supported the Applicant’s assertions that the projects’ costs were reasonable, and that the FEMA Regional Guidance for stump removal work in effect at the time disaster was inconsistent with FEMA National Guidance, which placed an undue burden on the Applicant.

On April 9, 2015, FEMA transmitted a Basic Request for Information (RFI) to the Applicant and the Grantee, notifying them that the administrative record did not contain sufficient documentation to support that: (1) for PW 3017, the Applicant complied with Federal procurement regulations with its use of time and materials contracts; (2) for PW 3017, the contract costs were reasonable; and (3) for PW 5322, the costs for tree stump removal were eligible.  It requested the Applicant and the Grantee provide any relevant information that should be considered.

In response, the Applicant transmitted two letters, dated May 8 and July 20, 2015, with accompanying attachments.  In the May 8, 2015 letter, the Applicant set forth multiple arguments as support for reinstating funding, two of which are discussed below because they are relevant to the issues on second appeal.  First, it asserted that section 705(a) of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act[2] statutorily barred FEMA from deobligating funding in the PWs, as the deobligations occurred more than three years after the date of transmission of the final expenditure report for the disaster.  The Applicant stated that the OIG Memorandum, which reviewed the costs for both PWs, identified potential issues concerning alleged non-compliance in both PWs.  However, FEMA did not implement the audit recommendations until 2012, five years after the OIG Memorandum.  In addition, the Applicant asserted it transmitted its final expenditure report for both PWs to FEMA in 2006, six years before FEMA deobligated funding.  Consequently, the Applicant argued FEMA could not seek to recover payments as the deobligations occurred: (1) five years after FEMA became aware of the potential non-compliance in the OIG Memorandum, and (2) six years after the Applicant submitted its final expenditure reports for each PW.  For support, the Applicant provided, among other records, the documentation of expenses it submitted for both PWs, dated March 13 and April 5, 2006.

Second, the Applicant asserted section 705(c) of the Stafford Act also statutorily barred FEMA from deobligating the previously awarded funding in both PWs as all three conditions that prohibit recovering funding were present – both payments were authorized by an approved agreement specifying the costs; the costs were reasonable; and the purposes of both grants were accomplished.   Lastly, the Applicant asserted the deobligations were contrary to public policy as the Applicant relied on and in good faith followed authorized FEMA staff direction and advice when completing the debris removal work.  Therefore, it argued any corrective action or sanction should be directed at FEMA, not the Applicant.[3]

In the July 20, 2015 letter, the Applicant transmitted a supplemental response to the Basic RFI, setting forth additional substantive arguments that do not pertain to the issues on second appeal, and reiterating its section 705(a) and (c) arguments. 

On September 27, 2017, FEMA transmitted a Final RFI to the Applicant and the Grantee, notifying them that the administrative record did not contain sufficient documentation demonstrating the Applicant’s appeal was submitted to FEMA within the timeframe required by Title 44 Code of Federal Regulations (44 C.F.R.) § 206.206(c).[4]  FEMA noted that while the Grantee’s first appeal letter was dated September 5, 2012, FEMA did not receive the first appeal package until April 16, 2014.  Accordingly, FEMA requested documentation demonstrating the first appeals were submitted within the 60-day regulatory time limit.

The Applicant responded in a letter dated October 26, 2017.  While it noted that the Grantee’s letter forwarding the appeal is dated September 5, 2012, it acknowledged that the letter is dated more than 60 days after the Grantee’s receipt of the Applicant’s June 11, 2012 appeal of PW 5332 per a certified mail proof of delivery verifying the Grantee’s receipt of that appeal on June 14, 2012. [5]  Regardless, it did not concede that FEMA was correct in its statement that it received the first appeal package from the Grantee on April 16, 2014, as the Applicant stated it had not seen any evidence verifying the April 16, 2014 receipt date.  However, the Applicant also submitted screenshots of the Grantee’s PA grants management database (database).  The database showed entries under the appeal workflow summary for each PW that referenced the date the Grantee “last advanced” each PW’s appeal as April 8, 2014.[6] 

Ultimately, the Applicant contended the date of the Grantee’s appeal transmission was immaterial because the Applicant had submitted its first appeals of the final PWs within 60 days of receiving notice of the deobligations.  Thus, the Applicant stated it met all of its appeal obligations imposed by the Stafford Act.  The Applicant argued that FEMA should not extinguish the Applicant’s statutory right of appeal due to the Grantee’s delay in forwarding the appeals (which the Applicant stated it could not verify actually occurred). The Applicant noted that the Stafford Act does not provide a role for grantees in the appeal process, only applicants and FEMA.  While it acknowledged that 44 C.F.R. § 206.206 includes grantees (recipients), the Applicant emphasized the distinction between the use of “must” in 44 C.F.R. § 206.206(c)(1), which describes the appellant’s appeal submission obligation, versus the use of “will” in 44 C.F.R. § 206.206(c)(2) and (c)(3),[7] which references the grantee’s appeal transmittal obligation and FEMA’s disposition obligation, respectively.  The Applicant argued that there is no provision in FEMA’s regulations that specify a remedy if a grantee does not meet its 60-day deadline for forwarding appeals.  Moreover, the Applicant noted that FEMA did not take action on the first appeal within the timeframe outlined in 44 C.F.R. § 206.206(c), and additionally cited to sections from the Stafford Act that discuss Congress’ intent for aid to be rendered expeditiously to alleviate the suffering that results from disasters.[8]  Therefore, it contended a decision that denied funding based on the Grantee’s untimeliness when FEMA also did not adhere to the time constraints for issuing appeal decisions, was neither a “fair and impartial consideration of appeals”[9] as required by Stafford Act section 423(c), nor did it preserve the Applicant’s “right of appeal”[10] guaranteed by the Stafford Act.

Next, the Applicant asserted FEMA’s action of denying appeals based solely on a grantee’s untimely transmission violates Stafford Act section 325, as this is a change in policy only consistently followed since 2017, which could result in a significant reduction of assistance, and which is being applied retroactively without public notice and comment.  While the Applicant acknowledged FEMA promulgated the current set of deadlines outlined in Federal regulation more than 25 years ago, without a material change occurring since, it stated that decisions denying appeals based solely on grantee untimeliness are extremely hard to locate prior to 2017.

The Applicant then argued the three year statute of limitation imposed by section 705(a) of the Stafford Act prohibited FEMA from recovering the deobligated funding, because it asserted the 2012 deobligations occurred approximately six years after the Applicant submitted its final expenditure reports for the PWs.  The Applicant stated that FEMA is incorrect when it interprets the phrase “final expenditure report for the disaster or emergency,” to mean the report provided by the grantee that submits to FEMA “all closeout information . . . for all of [the Applicant’s] projects under the disaster or emergency.”[11]  The Applicant asserted this interpretation was contrary to the intent of Congress expressed in section 101 of the Stafford Act[12] as the years long delay in seeking to recover funding already received and spent, was: (1) unreasonable, (2) caused considerable disruption to the Applicant’s budget and taxpayers, and (3) prejudiced the Applicant.

Lastly, the Applicant reiterated its argument that section 705(c) of the Stafford Act prohibited FEMA from recovering the previously disbursed funding.

The Grantee transmitted the Applicant’s response to FEMA with an accompanying letter dated October 27, 2017.  The Grantee posited that a September 2012 submission of the appeals would make both appeals timely.  In support, the Grantee attached printouts of the Notes and Comments section of its database for both PWs, which listed entries made by the Grantee’s former appeals officer.  The employee entered two internal notes under each PW in the database on April 8, 2014, stating “Appeal sent to FEMA in September 2012.”[13]  The Grantee acknowledged, however, that aside from the printouts, it did not have any additional supporting documentation verifying its submission was within the required 60-day timeframe.  It asserted though, that timeliness of the first appeals was not relevant since FEMA had not demonstrated its legal authority to proceed with the deobligations.  It asserted that section 705(c) required FEMA to provide a showing to the Applicant or the Grantee that it had completed the required section 705(c) analysis.  Otherwise, FEMA could not proceed with the deobligations.

On March 2, 2018, the FEMA Region IV Regional Administrator (RA) denied the appeal. The RA first concluded that the Grantee forwarded the first appeals beyond the 60-day timeframe required by 44 C.F.R. § 206.206(c)(2).  While the RA observed that the Grantee provided internal notes from its database that stated both appeals were transmitted to FEMA in September 2012, she discussed a January 24, 2013 letter from the Applicant addressed to the Grantee that discussed concern over the lack of the Grantee’s appeal transmittal.  The RA cited language from the letter, in which the Applicant noted that more than 60 days had elapsed since the Applicant forwarded its appeals to the Grantee, and stated that the Grantee’s database still indicated the Grantee was in the process of preparing a letter to FEMA, and that the Grantee had not taken additional action in furtherance of the appeals.  The RA expanded on this timeline by bringing up the Grantee’s database workflow history screenshots, which the RA stated did not reveal any action taken by the Grantee to forward the appeals to FEMA prior to April 8, 2014.  Next, the RA pointed out that even though the Grantee’s letter forwarding the first appeals was dated September 5, 2012, FEMA did not receive the letter or the appeals until April 16, 2014.[14]  Lastly, the RA noted that the Grantee had not provided supporting documentation that it forwarded the appeals by way of email, USPS, UPS, or FedEx, prior to April 2014.  Based on the above, the RA noted the appeals were untimely, and as such, the substantive issues raised would not be considered. 

Moreover, the RA concluded that because the Grantee submitted the appeal after expiration of the 60-day timeframe, the Applicant’s first appeal rights lapsed.  Consequently, the RA determined that the protections of Stafford Act section 705(c) were not applicable.

Finally, the RA addressed the Applicant’s invocation of section 705(a) of the Stafford Act, which generally prohibits FEMA from recovering funding more than three years after transmission of the final expenditure report for the disaster or emergency.  The RA noted that the Applicant argued that its March 13 and April 5, 2006 documentation of expense sheet submissions constitute the final expenditure reports that trigger the start of the three year statute of limitation calculation.  However, the RA emphasized that FEMA policy clarifies Stafford Act section 705(a) pertains to the date that the grantee submits to FEMA, on behalf of an applicant, the final expenditure report for all of the applicant’s PWs for the disaster or emergency.[15]  Additionally, the RA discussed that the policy further clarifies that the three year calculation begins from the date the grantee submits to FEMA the quarterly Federal Financial Report that represents the last expenditures of an applicant under the program for the disaster or emergency.  Therefore, the RA determined that the transmission of the final expenditure report occurred when the Grantee submitted it in its June 30, 2012 quarterly Federal Financial Report transmission.  Consequently, the RA determined section 705(a) of the Stafford Act did not prohibit FEMA from recovering payments, as the March and May 2012 deobligations effectuated in the final versions of the PWs occurred before transmission of the June 2012 final expenditure report.  Thus, the three year statute of limitation had not yet been triggered at the time of the deobligations.

Second Appeal

The Applicant appeals FEMA’s decision to uphold the deobligations of funding in an April 30, 2018 letter, requesting FEMA either reverse its first appeal decision and issue a decision on the merits so that the Applicant may file an appeal of any merits-based denials, or, alternatively, reverse its deobligations based on sections 705(a) and (c) of the Stafford Act.[16]  The Applicant reiterates its arguments raised on first appeal, incorporated by reference into this decision, and further expands on them by discussing additional bases for approval.   

It first addresses FEMA’s discussion of the Grantee’s inability to produce documentation of its timely transmittal (other than the April 2014 internal database entry that said the appeal was transmitted in September 2012), by stating the failure to provide such documentation is not a violation of any legal or policy requirement.  It then states there is no reason for FEMA to discredit the Grantee’s signed, written statement that it transmitted the appeals in September 2012, as FEMA itself chose to insert the Grantee into the appeal process and thus, should trust any representations it makes.

The Applicant next argues that FEMA’s denial on first appeal based on the Grantee’s alleged untimely appeal transmission is inconsistent with the right of appeal provided by Stafford Act section 423(a). The Applicant emphasizes that it should not be denied funding based on the actions of the Grantee, as it is a third party pass-through entity FEMA injected into the process through regulation.  It notes that the C.F.R. only provides that grantees “will” transfer applicant appeals within 60 days and there is no remedy for them failing to do so; thus, it argues FEMA’s policy and regulation contravene an applicant’s appeal rights.  Furthermore, the Applicant contends that a denial based on the Grantee’s alleged untimeliness (when the Applicant complied with the statutory and regulatory appeal deadline), further violates section 423(c) of the Stafford Act, which requires fair and impartial consideration of appeals, considering FEMA arguably did not abide by its own statutory deadline.[17]

Moreover, the Applicant asserts that under 44 C.F.R. § 206.206(c)(2), the Grantee’s role is to review appeals for FEMA and provide recommendations, which renders the Grantee more of an agent of FEMA than an agent of the Applicant.  Also, the Applicant notes that it has no control over the action of the Grantee.  In addition, the Applicant disputes any finding that “applicant” as used in Stafford Act section 423(a) pertains to both the grantee and the applicant.  The Applicant asserts that “applicant,” as used in the Act, was not meant to encompass both entities,[18] evidenced by FEMA’s 1990 comment in the Federal Register, which the Applicant asserts  protected the rights of applicants under Stafford Act section 423.[19]  Accordingly, the Applicant argues any delay from the Grantee in transmitting the appeals to FEMA cannot be imputed to the Applicant.

Next, the Applicant contends that FEMA policy in effect at the time of the disaster allowed grantees to extend the time for forwarding appeals if the grantee identified additional information it wanted to review prior to forwarding an appeal.[20]  The Applicant then reiterates its previously raised argument concerning section 325(a) of the Stafford Act and cites to FEMA administrative decisions in which the Applicant contends FEMA chose to address the substantive merits of an appeal even where either the applicant or grantee, or both, transmitted untimely appeals.  The Applicant additionally argues that FEMA’s denial on timeliness alone, without addressing the substantive merits of the appeals, is contrary to FEMA’s policies for appeal processing and contrary to the requirement of section 423(c) of the Stafford Act, which provides for the fair and impartial consideration of appeals.  Finally, the Applicant reiterates its previously raised assertion that sections 705(a) and (c) of the Stafford Act prohibit FEMA from deobligating the funding at issue in this appeal.

The Grantee forwarded the appeal to FEMA by way of a June 22, 2018 letter, recommending approval.  It argues section 705(c) of the Stafford Act prohibited the deobligations of funding as all three conditions of the section were met for both PWs.  Additionally, it asserts that FEMA has not met its burden for overcoming section 705(c)’s prohibition as it has failed to affirmatively demonstrate that the statute does not apply, i.e., that any of the three conditions were not met for either PW.  Lastly, the Grantee contends that FEMA should render a decision on the merits because any purpose of holding the Applicant and Grantee accountable for abiding by timeframes was defeated by FEMA’s untimely determination.

Discussion

Appeal Timeliness

Section 423(a) of the Stafford Act provides that “any decision regarding eligibility for . . . 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.”  Within 60 days of receiving an applicant’s appeal, a grantee will review and forward the appeal with a written recommendation.[21]  If either the applicant or the grantee fail to meet these deadlines, the appeal is untimely and the applicant’s appeal rights lapse.[22]  In addition, an applicant has the burden of substantiating its arguments and must explain how documentation supports its appeal.[23] 

The Applicant argues that no law, regulation, or policy establishes that applicants and grantees need to provide proof of how and when they submit appeals.  However, applicants are tasked with the burden of justifying their bases for appeal; here, the Applicant has the burden of demonstrating that the appeals were timely, seeing that FEMA Region IV has no record of receiving them on or about the previously referenced September 5, 2012 date, nor within the requisite 60-day timeframe, which FEMA notified the Applicant of in the Final RFI.[24]

Beyond pointing to the date on the Grantee’s first appeal transmission letter, the Applicant relies on the internal April 2014 note from the Grantee’s database, retroactively documenting the transmission of the appeal, to demonstrate that the appeals were submitted in September 2012.  However, this internal note does not actually demonstrate that the Grantee timely submitted the appeals in September 2012[25] as it is not a contemporaneous memorialization of the transmittal. Thus, the Applicant has not met its burden of demonstrating that the first appeals were timely submitted to FEMA.  As a result of the untimeliness of the first appeals, the Applicant’s appeal rights pertaining to the deobligations effectuated in both PWs 3017 and 5332 lapsed.   

In addition, the Applicant argues that FEMA policy allows for grantees to extend the regulatory timeframe for forwarding appeals.  The Applicant contends that the following language from the FEMA Public Assistance Guide gives grantees the discretion to extend appeal timeframes:  “The State reviews the appeal documentation and requests additional information if necessary.  The State then prepares a written recommendation on the merits of the appeal and forwards that recommendation to FEMA within 60 days of its receipt of the appeal letter or receipt of additional information that it had requested.”[26]  This provision affords the grantee the opportunity to forward a written recommendation in support of the appeal within 60 days after it receives additional information from the Applicant.[27]  It does not, however, allow the grantee to delay submitting the Applicant’s appeal outside the 60 days of receiving the appeal from the Applicant.[28]  Indeed, FEMA regulation provides that grantees submit an applicant’s appeal within 60 days of receipt,[29] whether or not the grantee submits a written recommendation, or defers submitting a written recommendation until it receives more information.[30]  Thus, FEMA policy and regulation do not allow grantees to extend the timeframes for appeal submission under 44 C.F.R. § 206.206.

FEMA’s Regulatory Implementation of Stafford Act section 423

The Applicant maintains that 44 C.F.R. § 206.206(c)(2) conflicts with the intent of section 423 of the Stafford Act and contravenes an applicant’s statutory right of appeal; however, this is not the case.  FEMA is tasked with “issu[ing] rules which provide for the fair and impartial consideration of appeals under” the Stafford Act.[31]  Inclusion of grantees within the appeal process is necessary because grantees, as the recipient of grant awards, are legally accountable for use of the funds.[32]  As grantees are responsible for any resulting financial outcome of an award, excluding them from them appeal process would not comport with the Stafford Act.[33]  Moreover, a contrary interpretation of the implementing regulations would absolve grantees from complying with a basic grant management function that they receive funding to complete and legally agreed to perform by signing the FEMA-State Agreement.[34]  Therefore, 44 C.F.R. § 206.206(c)(2) does not conflict with section 423 of the Stafford Act.

Notice and Comment Requirements - Stafford Act section 325(a)

Section 325(a) of the Stafford Act provides for a notice and comment period for any new or modified policy that governs implementation of the PA program and that could result in “significant reduction of assistance under the program.”[35]  Furthermore, such policies can only apply to a disaster “declared on or after the date on which the policy is issued.”[36]  The Applicant acknowledges that FEMA provided a notice and comment period for 44 C.F.R. § 206.206(c) nearly thirty years ago,[37] but argues FEMA has only started consistently denying appeals solely on a grantee’s untimeliness within the last year, and thus, has implemented a new policy requiring a new notice and comment period.  This is not a new interpretation of the regulations, however, nor is it a new policy; FEMA has enforced submission timeframes that apply to both the applicant and the grantee for years.   Furthermore, as the Applicant acknowledges, a notice and comment period was provided for the very section at issue, 44 C.F.R. § 206.206, and neither the regulations nor statute governing the appeal period have changed since that time.[38]  The Applicant’s assertion that FEMA has instituted a new policy, without a notice and comment period, and applied it retroactively, is without merit.

Stafford Act section 705(a)

Stafford Act section 705(a) provides that generally, “no administrative action to recover any payment made to a State or local government for disaster or emergency assistance under this Act shall be initiated in any forum after the date that is 3 years after the date of transmission of the final expenditure report for the disaster or emergency.”[39]   

Here, the Applicant argues its transmission of the documentation of expenses for both PWs triggered the start of the three-year statute of limitation imposed by Stafford Act section 705(a).  It therefore contends FEMA is prohibited from recovering the funding deobligated in 2012, asserting the deobligations occurred three years beyond the permissible timeframe.  The Applicant, however, disregards the plain language of the Act, which states that the three-year period begins after the final expenditure report for the disaster.  Consequently, the Applicant’s argument that FEMA incorrectly interprets the section to apply to the report transmitted by the Grantee rather than the Applicant, is immaterial.  The Applicant’s documentation of expenses relate only to the two PWs at issue in this appeal;[40] it has not demonstrated a final expenditure report was transmitted for all of the projects for the disaster more than three years before the enactment of the deobligations, which is the threshold requirement triggering section 705(a)’s three-year statute of limitations.  Accordingly, the Applicant has not demonstrated the deobligations effectuated in PWs 3017 (Version 5) and 5332 (Version 4) occurred more than three years after transmission of the final expenditure report for the disaster in violation of Stafford Act section 705(a).

Stafford Act section 705(c)

Section 705(c) of the Stafford Act bars FEMA from deobligating funding from a State or local government if (1) the payment was authorized in an approved agreement specifying the costs, (2) the costs were reasonable, and (3) the purpose of the grant was accomplished.  FEMA issued Recovery Policy FP 205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, to establish the criteria necessary to implement section 705.[41]  If all of the section 705(c) criteria are met, FEMA is prohibited from recouping grant funds, even if it later determines that it made an error in determining eligibility.[42]

However, section 705 must be read in context with all sections of the Stafford Act,  including section 423 as described above in the previous section.[43]  After the 60-day timeframe allowed by section 423 ends, an applicant’s right to appeal FEMA’s eligibility determination is exhausted, the opportunity to seek remedy through the administrative PA appeal process lapses, and FEMA’s decision becomes final.[44]  This also applies if a grantee fails to forward an appeal in the 60-day period outlined in regulation.[45]  Consistent with this element of finality, FP 205-081-2 provides that the section 705(c) prohibition against recoupment of funds does not apply to PWs where the applicant’s appeal rights have lapsed and FEMA has made a final administrative decision.[46]

As discussed above, the Applicant’s first appeals were untimely.  Accordingly, its appeal rights concerning the determinations of PWs 3017 (Version 5) and 5332 (Version 4) lapsed.  Therefore, per FP 205-081-2, and as the RA noted in the first appeal determination, section 705(c) does not preclude FEMA from recouping PA funds associated with the deobligations in those PWs.[47]  

Conclusion

The Applicant’s first appeals were untimely because the Grantee submitted them beyond the 60-day timeframe required by 44 C.F.R. § 206.206(c)(2).  Moreover, the Applicant has not demonstrated the deobligations effectuated in PWs 3017 (Version 5) and 5332 (Version 4) occurred more than three years after transmission of the final expenditure report for the disaster in violation of Stafford Act section 705(a).  Furthermore, because the Applicant’s appeal rights regarding the deobligations effectuated in those PWs lapsed, Stafford Act section 705(c) is not applicable.  Accordingly, the second appeal is denied.