Direct Administrative Costs & Management Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4277
Applicant	East Baton Rouge School Board
Appeal Type	Second
PA ID#	033-012D8-00
PW ID#	PW 1165
Date Signed	2021-01-29T17:00:00

Summary Paragraph

During the incident period of August 11 through August 31, 2016, heavy rainfall caused flooding that damaged numerous facilities operated by the East Baton Rouge School Board (Applicant).  FEMA obligated Project Worksheet (PW) 1165 to provide Public Assistance (PA) funding for the replacement of damaged contents at 13 facilities and eligible direct administrative costs (DAC).  FEMA approved $3,539,243.21 for contents replacement work.  The Applicant requested $268,333.75 in DAC incurred by its disaster consultant, CSRS, Inc. (CSRS).  In a Determination Memorandum, FEMA approved $226,356.25 of the requested DAC.  The Applicant appealed and requested $16,220.00 of previously disallowed DAC.  FEMA partially granted the Applicant’s appeal, but denied the appeal as to: (1) work performed in support of an audit was not eligible because it amounted to ineligible indirect costs; (2) certain work found as billed at excessive rates for the level of skill involved; (3) work organizing email folders found to represent excessive time for the task; and (4) work consisting of a conversation about documenting procurement.  The Applicant filed a second appeal reiterating earlier arguments.

Authorities and Second Appeals

• Stafford Act § 324.
• PAPPG, at 37-38.

Headnotes

• FEMA provides PA funding for administrative costs related to managing the PA Program and PA projects.  If an applicant tracks, charges, and accounts for these costs directly to a specific eligible project, the costs are eligible as DAC.
  • DAC requested for time spent developing information for a financial audit is not eligible, as that work was not in direct support of the development of this specific project, even if the work may have led to the development of a version request for this project.
  • The full amount of DAC reduced based on excessive rates charged is not eligible; a subject matter expert rate was not reasonable because this project involved contents damage and did not require the work of specialized experts, and time spent organizing files at a rate above the administrative rate was not reasonable.  However, time spent developing contents spreadsheets serving as PW 1165’s scope of work was billed at a reasonable rate for the task, and the reduced rate for that work was not warranted.
  • DAC requested for the time spent organizing emails is eligible, though at a lower hourly rate, as this work involved hundreds of emails concerning 13 different sites.
  • DAC requested for a conversation addressing documenting contents procurement is eligible, as the conversation addressed eligibility for this specific project.

Conclusion

The Applicant has not demonstrated its audit work is eligible DAC.  However, the Applicant has demonstrated that its procurement conversation work and the email organization work are eligible DAC, as well as a portion of the DAC previously reduced based excessive rates.  As such, this appeal is partially granted in the amount of $3,733.75.

Appeal Letter

Appeal Analysis

Background

During the incident period of August 11 through August 31, 2016, heavy rainfall caused flooding that damaged numerous facilities operated by the East Baton Rouge School Board (Applicant).  FEMA prepared Project Worksheet (PW) 1165 to provide Public Assistance (PA) funding for the replacement of damaged or lost contents at 13 facilities, including elementary and middle schools and administration buildings.  The Applicant also requested direct administrative costs (DAC) totaling $268,333.75 for work incurred by its disaster consultant, CSRS, Inc. (CSRS or contractor).  The CSRS contract set billing rates for a number of labor categories, including:  Subject Expert ($200.00/hour), PA Consultant I ($125.00/hour), Accounting Specialist ($105.00/hour) and Administrative ($70.00/hour).  The Applicant’s DAC request included a spreadsheet detailing each task performed, by whom, for how long, and at what rate.

In an August 2, 2018 determination memorandum (DM), FEMA approved $226,356.25 of the requested DAC.[1]  FEMA did not fund $41,977.50 of the requested DAC, including $22,600.00 associated with estimated work-to-be-completed.[2]  FEMA determined that the remaining $19,377.50 in requested DAC represented indirect costs, work associated with other projects, work reflecting unreasonable rates or unreasonable levels of effort, or otherwise ineligible costs.  Relevant here, this included:

• a reduction of $2,625.00, representing 21 hours of work assisting the Applicant with a financial audit, disallowed as not being directly related to the scope of PW 1165;
• a reduction of $10,328.75, representing 205.25 hours of work disallowed as being billed at too high an hourly rate based on the skill levels of the tasks involved;
• a reduction of $406.25, representing 3.25 hours organizing email folders, disallowed as being based on an excessive amount of time for the task involved; and
• a reduction of $31.25, representing.25 hours (15 minutes) discussing how to properly document contents procurement, disallowed as not being related to PW 1165.

 

First Appeal

The Applicant filed a first appeal on September 24, 2018, requesting $16,220.00 of the denied DAC for completed work.[3]  The Applicant included numerous exhibits providing detailed reasons why it believed the requested DAC was eligible.  Specific to the audit work, the Applicant stated that that work included providing documentation on an individual project basis and, therefore, this work was directly related to PW 1165.  It also explained that the documentation developed and provided to the auditors was also submitted to FEMA and the Louisiana Governor’s Office of Homeland Security and Emergency Preparedness (Grantee) for PW version and reimbursement requests—in this case, contents lists gathered for the audit were used for the Applicant’s initial PW 1165 version request. 

The Grantee forwarded the Applicant’s appeal on November 19, 2018.[4]  The Grantee supported the appeal and, as to the audit-related work, further explained that the audit work was in response to the Office of Inspector General’s (OIG) inquiry concerning the PA award for the Applicant under this disaster, which the Grantee felt was directly related to the specific project and should be eligible.  

FEMA issued a first appeal decision on November 8, 2019, partially approving the Applicant’s appeal.[5]  Regarding the requested DAC for audit-related work, FEMA found that the 21 hours of work did not constitute audit preparation but, instead, addressed internal financial concerns related to audits.  FEMA further found that the rate adjustments based on skill level and effort were applied when the work could properly be done by a less-skill worker and, therefore, the reductions were reasonable.  Regarding the email folders work, FEMA determined the Applicant had not provided information justifying DAC for additional time beyond the 15 minutes FEMA had allowed.  Regarding the procurement conversation, FEMA determined that the conversation related to another project and the documentation the Applicant provided did not tie the conversation to PW 1165.

 

Second Appeal

The Applicant submitted a second appeal on January 6, 2020, seeking $13,391.25 in requested DAC remaining at issue and largely repeating its arguments on first appeal.[6]  The Grantee forwarded the Applicant’s appeal on February 21, 2020, again supporting the appeal.[7]

 

Discussion

FEMA provides PA funding for administrative costs related to managing the PA Program and PA projects.  If an applicant tracks, charges, and accounts for these costs directly to a specific eligible project, the costs are eligible as DAC.[8]  The types of activities for which costs are eligible as DAC include: assessing damaged sites, developing damage descriptions, reviewing project worksheets, collecting and submitting documents to support claims, and requesting disbursement of PA funds.[9]  When determining the reasonableness of DAC, FEMA considers whether the type of employee and skill level is appropriate for the activities performed and the level of effort required to perform an activity.  If the type of employee or skill level is not appropriate for the specific task, FEMA limits funding to a rate based on the appropriate employee type or skill level.  FEMA will use the level of effort required by FEMA staff to perform similar functions as a reference point to determine whether the level of effort claimed by the applicant is reasonable.[10]

 

DAC disallowed for audit work

Regarding DAC disallowed for 21 hours of work to assist with a financial audit, the Applicant again stresses that its audit work performed was concurrent with the work of collecting, filing, analyzing, and preparing supporting documentation for this PW and asserts that the 13 final contents spreadsheets CSRS provided to the Applicant correlates with the data supplied to FEMA for the Applicant’s December 2017 version request.  However, even if the Applicant utilized the same documentation that was developed in support of the audit engagement, that time spent developing that documentation was not used in direct support or development of this specific project.  Therefore, these costs are not eligible.

 

DAC reduced as billed at too high a rate for the task involved

FEMA reduced DAC based on excessively high rates for skill levels required in three categories: (1) all 66.5 hours of work performed at the subject expert rate of $200.00/hour; (2) work performed by a PA Consultant I billed at $125.00/hour to develop and update spreadsheets; and (3) work FEMA labeled as “file records” activities, such as adding documents and inputting data into software systems.

Regarding work performed at the subject expert rate, FEMA informed the Applicant that because this project involved the replacement of damaged contents, it did not require the services of a licensed professional, such as an engineer or architect or others with specialized expertise.  Therefore, a subject matter expert was not required, and FEMA determined that the work of the subject matter expert could have been completed adequately by someone at the PA Consultant III level.  FEMA therefore determined that the PA Consultant III rate of $145.00/hour was reasonable.  On appeal, the Applicant stated that its subject matter expert served essentially as a senior grants manager leading the team for the Applicant’s projects under this disaster, providing overall direction of the Applicant’s disaster grant projects and specifically monitoring, reviewing, and ensuring quality control of the team’s work.  However, this specific project, while detailed, did not require specialized subject matter expertise, and a reduction of $55.00/hour to the PA Consultant III rate of $145.00/hour for 66.5 hours of work was reasonable.

Regarding the work to develop and update spreadsheets by a PA Consultant I contractor employee, FEMA generally considered this work administrative in nature and, accordingly, reduced the allowable rate to the CSRS contract rate of $70.00/hour in many cases.  The Applicant has persuasively explained, however, that the spreadsheet work involved complex tasks that were key to developing PW 1165’s scope of work, which essentially was the preparation of the spreadsheet itself.  The Applicant explained that the spreadsheet, which ultimately grew to over 3,500 lines, was based on coordinating efforts among staff, principals, department heads, school system leadership, accounting and purchasing and procurement professionals, project managers, and others.  As the Applicant stated, the spreadsheet captured complex, detailed information required by FEMA, such as item descriptions, model numbers, estimate replacement costs, unit prices, vendor contracts, purchase orders, and more.  Given the complexity of compiling this information and the central role the spreadsheet played in the development of PW 1165, work related to create and update it, billed at the PA Consultant I rate, is reasonable.  The DAC therefore is eligible in the amount of $3,506.25.

Regarding the “file records” work, FEMA determined that this work (for example, organizing and consolidating library files and scanning and uploading documents; entering in contract and check amounts and dates; and preparing and maintaining project files) was administrative in nature and that the administrative rate of $70.00/hour was reasonable.  Therefore, for these tasks performed by a PA Consultant I contractor employee at $125.00/hour and a contract accounting specialist at $105.00/hour, FEMA reduced the allowable rate to the administrative rate.  Notably, many of the “file records” tasks performed by the administrative assistant contract employee and billed at that rate were similar in nature to those that performed by the PA Consultant I and the accounting specialist.  After a careful review of the record, the administrative rate of $70.00/hour represents reasonable costs. 

 

DAC disallowed for excessive time spent on email tasks

The Applicant’s DAC submission included 15-minute task entries described as work to create email folders for emails related to each school.  Each 15-minute entry pertained to one of the 13 specific school or facility buildings.  These tasks were performed by a PA Consultant I and billed at $125.00/hour.  FEMA allowed a total of one 15-minute entry for this work, amounting to $31.25.  On appeal, the Applicant states that the PA Consultant I involved in this work was the only team member managing and responding to email correspondence and associated documents related to contents losses throughout the school system; it was a data management task for information that became the basis of PW 1165’s scope of work (including the spreadsheet consisting of thousands of line items for damaged contents).  The Applicant states the CSRS employee created 13 folders in order to organize hundreds of emails related the damaged contents at each facility.  The effort required 15 minutes per folder, adding up to the 3.25 hours of claimed DAC.

Given the complexity of this project and the voluminous information and communications involved, the time claimed for these entries is reasonable and is in line with similar email organization work performed by other CSRS employees that FEMA allowed as eligible.  However, this task was administrative in nature and the PA Consultant I rate is excessive for this type of work.  Consistent with other instances involving similar work, FEMA will reduce the PA Consultant Rate of $125.00/hour to the administrative rate of $70.00/hour.  FEMA finds $227.50 for the email folder organizing work eligible (a total of 3.25 hours—15 minutes for each of the 13 facilities—billed at the $70/hour rate), and therefore awards $196.25.

 

DAC disallowed as conversation unrelated to PW

The Applicant’s DAC request included a 15-minute task entry described as a discussion regarding how to document contents purchases for temporary and permanent facilities.  FEMA denied the $31.25 claimed for this task, stating that it pertained to another project.  On appeal, the Applicant argues the conversation directly related to PW 1165 by addressing how to properly document contents procurement activities in order to secure eligibility for reimbursement under this project.  The Applicant explains that the conversation addressed the procurement of contents that were first used while the schools were housed in temporary facilities and then transferred to permanent facilities.  In other words, the conversation related to the procurement of damaged contents, the costs of which PW 1165 was written to capture.  This cost therefore is eligible.

 

Conclusion

The Applicant has not demonstrated its audit work is eligible DAC.  However, the Applicant has demonstrated that its procurement conversation work and the email organization work are eligible DAC, as well as a portion of the DAC previously reduced based excessive rates.  As such, this appeal is partially granted in the amount of $3,733.75.

 

[1] Letter from Public Assistance Branch Chief, FEMA Region VI, to Assistant Deputy Director of Public Assistance, Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) and Chief Business Operations Officer, East Baton Rouge Parish School Board (EBRPSB) (Aug. 2, 2018).

[2] On appeal, the Applicant did not challenge the $22,600.00 reduction for DAC for work-to-be-completed.

[3] Letter from Chief Business Operations Officer, EBRPSB to Assistant Deputy Director of Public Assistance, GOHSEP (Sept. 24, 2018).

[4] Letter from Assistant Deputy Dir. of Public Assistance, GOHSEP to Reg’l Adm’r, FEMA Region VI (Nov. 19, 2018).

[5] Letter from Reg’l Adm’r, FEMA Region VI, to Dir., GOHSEP and Chief Bus. Operations Officer, E. Baton Rouge Par. Sch. Sys. (Nov. 8, 2019).

[6] Letter from Chief Bus. Operations Officer, E. Baton Rouge Par. Sch. Sys. to Assistant Deputy Dir. of Public Assistance, GOHSEP (Jan. 6, 2020).

[7] Letter from Assistant Deputy Dir. of Public Assistance, GOHSEP, to Reg’l Adm’r, FEMA Region VI (Feb. 21, 2020).

[8] Public Assistance Program and Policy Guide, FP-104-009-2, at 37 (Jan. 1, 2016) (citing the Robert T. Stafford Disaster Relief and Emergency Assistance Act § 324, 42 U.S.C. § 5165b (2012)).

[9] Id. at 38.

[10] Id.