Appeals – Project Documentation and Closeout

Appeal Brief

Appeal Letter

Appeal Analysis

Background

From September – October 2008, Hurricane Ike deposited 470,000 cubic yards of vegetative and woody debris throughout Galveston County (Applicant).  FEMA prepared Project Worksheet (PW) 11009 to document the cost of debris removal and obligated the PW on June 23, 2009 with an estimated project cost of $737,374.40.  On July 22, 2011, the Applicant completed the approved scope of work and submitted a Project Completion and Certification Report (P.4) claiming $736,905.80 in actual costs. 

In 2012 the Texas Division of Emergency Management (Grantee) performed a compliance review and found that $63,586.69 was unaccounted for and only found documented project costs of $673,787.71.  The Grantee submitted its audit report to FEMA in a letter dated August 13, 2012 recommending FEMA deobligate $63,586.69 due to the Applicant’s inability to produce cancelled checks for that amount.  On November 20, 2012, FEMA approved an amendment to PW 11009 deobligating the above amount and notified the Grantee through a letter dated October 25, 2012 (FEMA sent the letter prior to the date of the deobligation). 

Several years later, the Grantee transmitted a compliance review to FEMA and notified the Applicant of the deobligation on January 25, 2019.  The Grantee also noted in a January 2019 email to the Applicant that it was unable to verify it transmitted notice of the deobligation to the Applicant in 2012.

First Appeal

The Applicant appealed on February 8, 2019.  The Applicant submitted documentation to substantiate a portion of the deobligated costs, including Invoice GALG906940-8 and check AP00342495.  The invoice contained a handwritten note indicating $59,204.22 related to a retainage release[1] included in Check AP00342495.  It also attached a spreadsheet schedule with the above costs and indicated that the costs were associated with check AP00342495 for PW 11009.  The Grantee transmitted the appeal to FEMA on February 25, 2019, supporting the appeal.

FEMA Region VI’s Regional Administrator (RA) denied the appeal in a letter dated June 6, 2019.  The RA found FEMA notified the Grantee of the deobligation in an October 25, 2012 letter and the Grantee transmitted that to the Applicant likely near the end of 2012.  The RA found that because the Grantee requested FEMA process the PW amendment, that action showed the Applicant’s knowledge of the determination.  In addition, FEMA released the closeout on September 9, 2014, providing the Grantee and Applicant additional notice of FEMA’s 2012 determination.  Though FEMA was not able to determine the precise date of notification, it found the Applicant’s appeal was untimely. 

The RA’s decision noted that the spreadsheet schedule submitted indicated only a portion of the more than $600,000.00 payable to the Applicant’s contractor was paid by check AP00342495.  No other checks were provided on appeal to establish the claimed total costs of PW 11009.  In addition, the RA found that in 2012, the Grantee’s auditors considered the $59,504.22 and either included that in their recommended total of $673,787.71 or had a reason to deny it.  The RA stated that seven years after this determination, FEMA must defer to the Grantee’s audit team, who had full access to the Applicant’s books and records. 

Second Appeal

The Applicant appealed in a letter dated August 13, 2019.  The Applicant stated that neither the Grantee nor its contractor/affiliate could find any closeout letter in any of their systems.  The Applicant continued to request a closeout letter for PW 11009 on a weekly basis starting in 2014.  The Applicant questions the mechanism used by FEMA to verify when the Grantee received the notification.  The Applicant also contends it is submitting documentation to verify the costs of $59,504.22.  In a letter dated October 7, 2019 the Grantee supports the Applicant’s appeal.

In January 2020, FEMA Headquarters sent the Applicant and Grantee a Request for Information (RFI).  FEMA noted that it was unable to reconcile the invoices and checks provided on appeal with the costs claimed and, therefore, asked the Applicant to provide any additional documentation supporting the costs.  The Applicant replied in February 2020 providing invoices, cancelled checks, emails, and explanations for the costs claimed.

Discussion

Appeals

Section 423(a) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act provides that any decision regarding eligibility for assistance may be appealed within 60 days after the date on which the applicant is notified of the award or denial of assistance.  Implementing this provision, Title 44 of the Code of Federal Regulations, section 206.206(c), requires that applicants must file appeals within 60 days after receipt of a notice of the action that is being appealed. 

The Grantee submitted its audit report to FEMA in a letter dated August 13, 2012 recommending FEMA deobligate some funding.  On November 20, 2012, FEMA approved an amendment to PW 11009 deobligating some funding and previously notified the Grantee through a letter dated October 25, 2012.  Though the RA stated that likely the Applicant received notification by late 2012, there is no documentation demonstrating when the Applicant was notified until January 2019.  While it is reasonable to suppose that the Applicant received notification in 2012 or even 2014, as the RA stated, without any documentation verifying receipt, FEMA cannot determine the appeal was untimely.[2] 

Project Documentation and Closeout

Costs must be adequately documented to be allowable.[3]  In order to be allowable, costs must be necessary and reasonable for the proper and efficient performance of the federal award.[4]  In determining reasonableness, consideration must be given to whether the cost is of a type generally recognized as ordinary and necessary for the performance of the federal award.[5]  The burden to substantiate appeals with documented justification falls exclusively to the applicant, and hinges upon the applicant’s ability not only to produce its own records but to clearly explain how those records are relevant to the appeal.[6]  FEMA regulations require that accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and subgrant award documents, etc.[7] 

In its response to FEMA’s RFI, the Applicant explained that for PW 11009, there were only two invoices and two payments.  One check paid for both invoices, minus the 10 percent retainage costs for each.  A second check (#342495) included payments for both invoices’ retainage costs (one for $13,585.22 and one for $59,504.22).  The Applicant supported this explanation with copies of the invoices and checks and clearly outlined where the costs matched up to the eligible work.  Therefore, the Applicant has demonstrated that the costs are eligible. 

Conclusion

FEMA cannot confirm the Applicant’s receipt of FEMA’s deobligation until January 2019.  As such, the Applicant’s first appeal is timely.  In addition, the documentation the Applicant submitted on second appeal demonstrates $59,504.22 in costs are eligible.  Accordingly, the second appeal is granted.