Appeals, Force Account Labor & Equipment Costs

Appeal Brief

Appeal Letter

Appeal Analysis

Background

The coronavirus (COVID-19) pandemic resulted in a disaster declaration for the state of North Carolina on March 25, 2020, with an incident period of January 20, 2020, to May 11, 2023. Blue Ridge HealthCare Hospitals, Inc., dba Carolinas HealthCare System Blue Ridge (Applicant), a private nonprofit medical care entity, requested reimbursement under FEMA’s Public Assistance (PA) program for depreciation of force account equipment (equipment) used during the COVID‑19 pandemic.[1] FEMA created Grants Manager Project (GMP) 736684 to document $95,176.26 in claimed costs.

FEMA issued a Request for Information (RFI), asking for (1) verification that the total equipment request, $95,176.26, is for depreciation, (2) justification for asserting depreciation expenses are eligible for reimbursement, and (3) an explanation for the need for the medical equipment and how the equipment was tied to emergency protective measures. The Applicant responded stating the project costs were entirely for depreciation of equipment, not for the costs of the equipment costs. In its provided spreadsheet, the Applicant states costs “only include depreciation for August 2022 to April 2023.”[2]

On July 8, 2024, FEMA issued a Determination Memorandum (DM) denying the claimed costs. FEMA found that equipment depreciation is not eligible, and the Applicant did not submit documentation necessary to establish cost code eligibility (e.g., hours used, specific eligible work performed). Further, FEMA explained it uses cost codes to determine equipment rates based on all costs associated with ownership and operation of equipment, with the exception of operator labor.

First Appeal

In a letter dated October 18, 2024, the Applicant submitted a first appeal. The Applicant stated that the amount in dispute was not associated with equipment depreciation costs. Rather, the Applicant stated that in response to the DM, it has now calculated equipment rates as required. The Applicant stated that it could not locate a FEMA equipment rate for the medical equipment it used. The Applicant claimed to have used the American Hospital Association asset guide to develop the equipment rates it used. The Applicant contended that using these rates, the requested amount increased from $95,176.26 to $108,759.70. The Applicant did not provide an accounting of how it calculated the rates used. On October 23, 2024, the Recipient forwarded the Applicant’s first appeal letter to FEMA. 

On November 25, 2024, the Region 4 Regional Administrator denied the Applicant’s appeal. FEMA found that the appeal was submitted after the 60-day timeframe required by FEMA’s regulations and was therefore untimely. FEMA stated that the Applicant received FEMA’s DM on July 8, 2024, and submitted its first appeal to the Recipient in a letter dated October 18, 2024, after the 60-day regulatory timeframe.

Second Appeal

On December 3, 2024, the Recipient submitted a letter to FEMA, stating that it received the Applicant’s first appeal on September 4, 2024. Additionally, the Recipient contends that when it was preparing the submission to FEMA, the date on the Applicant’s letter auto‑updated to the date when the appeal was packaged. The Recipient includes a screenshot of its emergency management portal, which shows that a document called “FEMA Project 736684 Appeal Letter (08‑30‑2024)” was created on September 4, 2024, and that a document called “FEMA Project 736684 Revised Appeal Letter (10‑18‑2024)” was created on October 18, 2024. However, the Recipient’s submission did not contain a second appeal letter from the Applicant. On December 6, 2024, FEMA notified the Recipient that the Applicant’s letter of appeal was required pursuant to Title 44 of the Code of Federal Regulations § 206.206(a).

On December 11, 2024, the Applicant submitted its second appeal letter, stating the Recipient changed the date on its first appeal letter from August 30, 2024, to October 18, 2024. It contests FEMA’s decision and maintains it submitted its appeal within the 60-day timeframe. The Applicant provides its initial first appeal letter, dated August 30, 2024, as well as the October 18, 2024 first appeal letter. Additionally, the Applicant provides a document summarizing the claimed costs and rates used.[3] On December 11, 2024, the Recipient forwarded the Applicant’s second appeal letter to FEMA.

Discussion

Appeals

An applicant may appeal any FEMA determination related to an application for or the provision of assistance under the PA program.[4] The applicant must submit a written appeal to the recipient within 60 days of receiving written notification of FEMA’s determination.[5] The recipient must forward the appeal, with its written recommendation, to FEMA within 60 days of receiving the appeal.[6]

Based on the administrative record, the Applicant received notice of FEMA’s DM denial on July 8, 2024. On second appeal, the Recipient states that the Applicant timely submitted its appeal. Further, the Applicant provided supporting documentation showing that it originally submitted its first appeal letter to the Recipient’s emergency management portal on September 4, 2024. This was within the 60-day timeframe required by FEMA’s regulations, making the Applicant’s first appeal timely.[7]

Force Account Equipment

FEMA provides PA funding for applicant-owned equipment (force account equipment) used to perform eligible work based on hourly rates.[8] FEMA only applies equipment rates to the time the Applicant is actually operating equipment.[9] FEMA develops equipment rates based on all costs associated with ownership and operation of equipment.[10] FEMA equipment rate components include depreciation, overhead, equipment overhaul (labor, parts, and supplies), maintenance (labor, parts, and supplies), lubrication, tires, ground engaging component (if applicable), and fuel.[11] To be eligible for PA funding, costs must be directly tied to the performance of eligible work and adequately documented.[12] An applicant is required to substantiate its appeal by not only producing records, but by explaining how those records should be applied to support the appeal.[13] 

Here, the Applicant requested funding for equipment used during COVID-19. Initially, the Applicant stated that its claimed costs “only include depreciation for August 2022 to April 2023.”[14] On first appeal, the Applicant subsequently stated that the amount on appeal was not associated with depreciation costs but was instead based on equipment rates it calculated using an American Hospital Association asset guide. However, FEMA only applies equipment rates to the time the Applicant is actually operating the equipment in the performance of eligible work. The Applicant has not produced documentation, such as an equipment usage log, that specifically describes the emergency work associated with the equipment, or the time the Applicant was actually operating the equipment, to directly tie its use to eligible emergency work.[15] Additionally, though the Applicant provided brief descriptions of the equipment, there is no accompanying information that precisely identifies the equipment for the purpose of evaluating the hourly rates claimed, nor did the Applicant provide an explanation of how it determined the hourly rates it used. Finally, the Applicant’s documentation does not support its claim on appeal that the amount claimed was not associated with depreciation costs. The Applicant’s documentation also does not indicate how the equipment depreciation is calculated or provide validation for its claimed costs. Consequently, the Applicant has not substantiated its claim for costs related to equipment.

Conclusion

The Applicant’s first appeal was timely submitted; however, it has not demonstrated that its equipment costs are eligible. Therefore, this appeal is denied.