Indirect Support Costs
Appeal Brief
Appeal Letter
Appeal Analysis
Citation: FEMA-1008-DR-CA; Los Angeles Unified School District, DSR 97751
Cross Reference: Project Management Costs and Indirect Support Costs
Summary: As a result of the Northridge Earthquake, the Los Angeles Unified School District (subgrantee) sustained damages to over 6,000 facilities throughout the school system. In September 1994, FEMA prepared Category B Damage Survey Report (DSR) 44358 in the amount of $525,372 to cover force account overtime labor, including fringe benefits and mileage, for custodial work for the first week following the earthquake. The subgrantee submitted additional requests for custodial overtime and "direct support" funding, totaling $307,091 and $107,186, respectively. FEMA prepared DSR 97751 in the amount of $307,091 to fund the additional custodial overtime, but found the "direct support" costs to be "indirect" and, therefore, covered under the statutory administrative allowance. The subgrantee submitted a first appeal asserting that the requested costs were directly related to the eligible work and not costs associated with the statutory allowance. Although recorded as "overhead" costs, the subgrantee indicated that these costs "represent direct costs which are charged to jobs via application of a calculated rate based on historical records," suggesting that these costs should be labeled more accurately as Force Account Supervision, Design and Inspection (FASDI) costs. FEMA denied the first appeal, primarily on the basis that sufficient documentation had not been provided to directly relate the labor efforts and materials to specific FEMA projects, such that these costs were not separately eligible for reimbursement. The second appeal again asserts that the requested costs are eligible, direct costs associated with the custodial work, that their method to account for job costs is in accordance with Federal regulations, and that the work performed in not covered under the statutory administrative allowance. The subgrantee did not, however, provide documentation to attribute the work to specific FEMA projects, as was requested in the first appeal response.
Issues: Is the supervisory time that was recorded on time sheets as overhead eligible?
Findings: No. The documentation provided by the subgrantee is not specific enough to directly attribute the work performed to an eligible scope of work, or to accurately estimate the effort associated with any given task.
Rationale: To be eligible for funding of project management or "direct" costs as a separate line item on a DSR, an applicant must provide sufficient documentation to accurately describe the work performed, attribute to a specific time and effort associated with this work, and to demonstrate that the scope of services were directly related to a specific scope of emergency or restoration work.
As a result of the January 1994 Northridge Earthquake, the Los Angeles Unified School District (subgrantee) sustained damages to over 6,000 facilities throughout the school system, ranging from patches of loosened paint to severe structural damages. In September 1994, the Federal Emergency Management Agency (FEMA) prepared and approved Category B Damage Survey Report (DSR) 44358 in the amount of $525,372 to cover force account overtime labor, including fringe benefits and mileage, for custodial work (general cleanup, emergency repair to utilities, emergency demolition to structures, etc.) for the first week following the earthquake. When the DSR was prepared, FEMA agreed that additional claims for custodial overtime and what the subgrantee termed "direct support costs" could be submitted.
Over the next five months, the subgrantee submitted several additional requests for custodial overtime and "direct support" funding, totaling $307,091 and $107,186, respectively. FEMA reviewed the financial data provided by the subgrantee, which included timecards and overtime request and verification documents. Based on a review of the documentation, FEMA prepared and approved DSR 97751 in November 1994 to fund only the $307,091 of additional custodial overtime. However, FEMA's review of this documentation also led to the determination that the "direct support" costs represented overhead labor, equipment and material expenses, which would be considered "indirect costs" and thus covered under the statutory administrative allowance (44 CFR 206.228(b)(2)).
First Appeal
In August 1997, the California Governor's Office of Emergency Services (OES) transmitted the subgrantee's first appeal asserting that the requested costs were directly related to the eligible work and not costs associated with the statutory allowance. The subgrantee described the costs as:
The Federal Coordinating Officer denied the first appeal in a letter dated January 20, 1998, providing a comprehensive response to each of the issues raised in the subgrantee's first appeal letter. The Federal Coordinating Officer acknowledged that some of the activities charged to the overhead accounts may have been eligible, however, the Federal Coordinating Officer concluded that sufficient documentation had not been provided to directly relate the labor efforts and materials to specific FEMA projects, such that these costs are considered indirect and not separately eligible for reimbursement. The first appeal response stated that for further consideration of eligibility of these costs, the subgrantee should request reimbursement on specific project DSRs or submit a detailed listing of labor, equipment or material charges, supported by computerized records or timecards, documenting that the employees did work on FEMA projects and detailing the nature of their work.
Second Appeal
In a letter dated June 12, 1998, OES forwarded the subgrantee's second appeal. The subgrantee again asserts that the requested costs are eligible, direct costs associated with the custodial work, that their method to account for job costs is in accordance with Federal regulations, and that the work performed is not covered under the statutory administrative allowance. The subgrantee revised its prior estimated FASDI rate from 24.4% to 12.2%, based on a time allocation survey of time used by senior staff, thus reducing the requested funding by half. The subgrantee did not, however, provide documentation to attribute the work to specific FEMA projects, as was requested in the first appeal response.
DISCUSSION
The primary issue of the appeal is the subgrantee's assertion that the efforts performed under their overhead accounts are eligible, direct costs associated with the custodial work. The subgrantee expressed concern that FEMA's first appeal response acknowledged that some of the activities related to these overhead costs represent items which could be reimbursable had they been charged directly to projects, yet later concluded that the costs are not direct in nature.
FEMA does not disagree that the costs reported by the applicant may have been incurred as a result of the disaster, however, FEMA regulations provide various mechanisms for funding disaster related services provided by an applicant. Primarily, services are categorized as either "direct" or "indirect" expenses. As stated in a memorandum from FEMA Headquarters to the FEMA Regions, dated July 6, 1995, (note: memo referenced by subgrantee in first appeal) grant management activities, and "indirect costs", are funded through the statutory administrative allowance (44 CFR 206.228(a)(2)(ii)) based on a percentage of eligible project costs. Activities included in this allowance include preliminary damage assessment, preparation of DSRs, project applications, interim and final inspections for grant management purposes, preparation and submission of final claims, and audits, as well as attendance at applicant's briefings and other training sessions. Conversely, "direct" costs would include specific work associated with management functions directly related to a specific scope of eligible work, and would normally be included as a line item on a specific DSR. These costs are often referred to as "project management costs", and include activities such as design and bid review, direct management of a construction project such as a resident engineer or quality control inspection, invoice review and approval, and similar activities.
To be eligible for funding of project management or "direct" costs as a separate line item on a DSR, an applicant must provide sufficient documentation to accurately describe the work performed, to attribute a specific time and effort associated with this work, and to demonstrate that the scope of services were directly related to a specific scope of emergency or restoration work. Work which is not accurately defined is not eligible for funding. Work which is found to be "indirect" to the disaster response is funded through the administrative allowance.
Based on a review of the description of work provided by the subgrantee, it is again concluded that the various activities may have included both "direct" and "indirect" work. Despite FEMA's request in the first appeal response for more detailed information, it is found that the documentation provided by the subgrantee is not specific enough to directly attribute the work performed to an eligible scope of work. The surd ypes of tasks. However, this survey does not associate the tasks to the performance of eligible work. As such, FEMA is unable to judge the necessity of such work or the reasonableness of the related costs. As stated above, work which is not accurately defined is not eligible for funding.
CONCLUSION
Sufficient documentation has not been provided by the subgrantee to connect their activities in question to eligible projects. As such, there is no basis to alter our initial determination of ineligibility. The subgrantee's appeal is denied.
Appeal Brief
| Disaster | FEMA-1008-DR |
| Applicant | Los Angeles County Unified School District |
| Appeal Type | Second |
| PA ID# | 037-91146 |
| PW ID# | 97751 |
| Date Signed | 1999-01-12T05:00:00 |
Cross Reference: Project Management Costs and Indirect Support Costs
Summary: As a result of the Northridge Earthquake, the Los Angeles Unified School District (subgrantee) sustained damages to over 6,000 facilities throughout the school system. In September 1994, FEMA prepared Category B Damage Survey Report (DSR) 44358 in the amount of $525,372 to cover force account overtime labor, including fringe benefits and mileage, for custodial work for the first week following the earthquake. The subgrantee submitted additional requests for custodial overtime and "direct support" funding, totaling $307,091 and $107,186, respectively. FEMA prepared DSR 97751 in the amount of $307,091 to fund the additional custodial overtime, but found the "direct support" costs to be "indirect" and, therefore, covered under the statutory administrative allowance. The subgrantee submitted a first appeal asserting that the requested costs were directly related to the eligible work and not costs associated with the statutory allowance. Although recorded as "overhead" costs, the subgrantee indicated that these costs "represent direct costs which are charged to jobs via application of a calculated rate based on historical records," suggesting that these costs should be labeled more accurately as Force Account Supervision, Design and Inspection (FASDI) costs. FEMA denied the first appeal, primarily on the basis that sufficient documentation had not been provided to directly relate the labor efforts and materials to specific FEMA projects, such that these costs were not separately eligible for reimbursement. The second appeal again asserts that the requested costs are eligible, direct costs associated with the custodial work, that their method to account for job costs is in accordance with Federal regulations, and that the work performed in not covered under the statutory administrative allowance. The subgrantee did not, however, provide documentation to attribute the work to specific FEMA projects, as was requested in the first appeal response.
Issues: Is the supervisory time that was recorded on time sheets as overhead eligible?
Findings: No. The documentation provided by the subgrantee is not specific enough to directly attribute the work performed to an eligible scope of work, or to accurately estimate the effort associated with any given task.
Rationale: To be eligible for funding of project management or "direct" costs as a separate line item on a DSR, an applicant must provide sufficient documentation to accurately describe the work performed, attribute to a specific time and effort associated with this work, and to demonstrate that the scope of services were directly related to a specific scope of emergency or restoration work.
Appeal Letter
January 12, 1999
Mr. Gilbert Najera
Governor's Authorized Representative
Governor's Office of Emergency Services
74 North Pasadena Avenue, West Annex, Second Floor
Pasadena, California 91103-3678
Dear Mr. Najera:
This letter is in response to your June 12, 1998 letter, submittal of the Los Angeles Unified School District's second appeal of Damage Survey Report (DSR) 97751 under FEMA-1008-DR-CA. The subgrantee is appealing FEMA's determination that the costs incurred by the subgrantee for oversight of construction and management are ineligible for reimbursement. The primary basis for FEMA's determination that these costs were ineligible for funding was that the documentation was not descriptive enough to determine that the work was directly related to specific scopes of eligible work.
As explained in the enclosed analysis, I have found that the documentation provided by the subgrantee is not of sufficient detail to specifically connect their activities to eligible projects, or to accurately estimate the effort associated with any given task. As such, there is no basis to alter our initial determination of ineligibility. Therefore, the subgrantee's second appeal is denied.
Please inform the subgrantee of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998. It amends 44 CFR 206.206.
Sincerely,
/S/
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate
Enclosure
cc: Christina Lopez
Federal Coordinating Officer
FEMA Region IX
Mr. Gilbert Najera
Governor's Authorized Representative
Governor's Office of Emergency Services
74 North Pasadena Avenue, West Annex, Second Floor
Pasadena, California 91103-3678
Dear Mr. Najera:
This letter is in response to your June 12, 1998 letter, submittal of the Los Angeles Unified School District's second appeal of Damage Survey Report (DSR) 97751 under FEMA-1008-DR-CA. The subgrantee is appealing FEMA's determination that the costs incurred by the subgrantee for oversight of construction and management are ineligible for reimbursement. The primary basis for FEMA's determination that these costs were ineligible for funding was that the documentation was not descriptive enough to determine that the work was directly related to specific scopes of eligible work.
As explained in the enclosed analysis, I have found that the documentation provided by the subgrantee is not of sufficient detail to specifically connect their activities to eligible projects, or to accurately estimate the effort associated with any given task. As such, there is no basis to alter our initial determination of ineligibility. Therefore, the subgrantee's second appeal is denied.
Please inform the subgrantee of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998. It amends 44 CFR 206.206.
Sincerely,
/S/
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate
Enclosure
cc: Christina Lopez
Federal Coordinating Officer
FEMA Region IX
Appeal Analysis
BACKGROUNDAs a result of the January 1994 Northridge Earthquake, the Los Angeles Unified School District (subgrantee) sustained damages to over 6,000 facilities throughout the school system, ranging from patches of loosened paint to severe structural damages. In September 1994, the Federal Emergency Management Agency (FEMA) prepared and approved Category B Damage Survey Report (DSR) 44358 in the amount of $525,372 to cover force account overtime labor, including fringe benefits and mileage, for custodial work (general cleanup, emergency repair to utilities, emergency demolition to structures, etc.) for the first week following the earthquake. When the DSR was prepared, FEMA agreed that additional claims for custodial overtime and what the subgrantee termed "direct support costs" could be submitted.
Over the next five months, the subgrantee submitted several additional requests for custodial overtime and "direct support" funding, totaling $307,091 and $107,186, respectively. FEMA reviewed the financial data provided by the subgrantee, which included timecards and overtime request and verification documents. Based on a review of the documentation, FEMA prepared and approved DSR 97751 in November 1994 to fund only the $307,091 of additional custodial overtime. However, FEMA's review of this documentation also led to the determination that the "direct support" costs represented overhead labor, equipment and material expenses, which would be considered "indirect costs" and thus covered under the statutory administrative allowance (44 CFR 206.228(b)(2)).
First Appeal
In August 1997, the California Governor's Office of Emergency Services (OES) transmitted the subgrantee's first appeal asserting that the requested costs were directly related to the eligible work and not costs associated with the statutory allowance. The subgrantee described the costs as:
- first line supervision of force account labor, including prioritizing jobs and assigning work to individual craft personnel;
- labor involved in planning or designing the repair work, including estimating the time and materials needed, ordering and segregating the materials, or subcontracting the work to outside vendors, as appropriate;
- coordinating and scheduling the work at the site school, including any necessary phasing of the work in process and at completion; and
- small tools and equipment, such as hammers, blades, bits, paintbrushes, that are used on more than one job, or minor consumables such as nails, washers, etc., where the costs of their allocation to jobs outweighs the benefit derived therefrom.
The Federal Coordinating Officer denied the first appeal in a letter dated January 20, 1998, providing a comprehensive response to each of the issues raised in the subgrantee's first appeal letter. The Federal Coordinating Officer acknowledged that some of the activities charged to the overhead accounts may have been eligible, however, the Federal Coordinating Officer concluded that sufficient documentation had not been provided to directly relate the labor efforts and materials to specific FEMA projects, such that these costs are considered indirect and not separately eligible for reimbursement. The first appeal response stated that for further consideration of eligibility of these costs, the subgrantee should request reimbursement on specific project DSRs or submit a detailed listing of labor, equipment or material charges, supported by computerized records or timecards, documenting that the employees did work on FEMA projects and detailing the nature of their work.
Second Appeal
In a letter dated June 12, 1998, OES forwarded the subgrantee's second appeal. The subgrantee again asserts that the requested costs are eligible, direct costs associated with the custodial work, that their method to account for job costs is in accordance with Federal regulations, and that the work performed is not covered under the statutory administrative allowance. The subgrantee revised its prior estimated FASDI rate from 24.4% to 12.2%, based on a time allocation survey of time used by senior staff, thus reducing the requested funding by half. The subgrantee did not, however, provide documentation to attribute the work to specific FEMA projects, as was requested in the first appeal response.
DISCUSSION
The primary issue of the appeal is the subgrantee's assertion that the efforts performed under their overhead accounts are eligible, direct costs associated with the custodial work. The subgrantee expressed concern that FEMA's first appeal response acknowledged that some of the activities related to these overhead costs represent items which could be reimbursable had they been charged directly to projects, yet later concluded that the costs are not direct in nature.
FEMA does not disagree that the costs reported by the applicant may have been incurred as a result of the disaster, however, FEMA regulations provide various mechanisms for funding disaster related services provided by an applicant. Primarily, services are categorized as either "direct" or "indirect" expenses. As stated in a memorandum from FEMA Headquarters to the FEMA Regions, dated July 6, 1995, (note: memo referenced by subgrantee in first appeal) grant management activities, and "indirect costs", are funded through the statutory administrative allowance (44 CFR 206.228(a)(2)(ii)) based on a percentage of eligible project costs. Activities included in this allowance include preliminary damage assessment, preparation of DSRs, project applications, interim and final inspections for grant management purposes, preparation and submission of final claims, and audits, as well as attendance at applicant's briefings and other training sessions. Conversely, "direct" costs would include specific work associated with management functions directly related to a specific scope of eligible work, and would normally be included as a line item on a specific DSR. These costs are often referred to as "project management costs", and include activities such as design and bid review, direct management of a construction project such as a resident engineer or quality control inspection, invoice review and approval, and similar activities.
To be eligible for funding of project management or "direct" costs as a separate line item on a DSR, an applicant must provide sufficient documentation to accurately describe the work performed, to attribute a specific time and effort associated with this work, and to demonstrate that the scope of services were directly related to a specific scope of emergency or restoration work. Work which is not accurately defined is not eligible for funding. Work which is found to be "indirect" to the disaster response is funded through the administrative allowance.
Based on a review of the description of work provided by the subgrantee, it is again concluded that the various activities may have included both "direct" and "indirect" work. Despite FEMA's request in the first appeal response for more detailed information, it is found that the documentation provided by the subgrantee is not specific enough to directly attribute the work performed to an eligible scope of work. The surd ypes of tasks. However, this survey does not associate the tasks to the performance of eligible work. As such, FEMA is unable to judge the necessity of such work or the reasonableness of the related costs. As stated above, work which is not accurately defined is not eligible for funding.
CONCLUSION
Sufficient documentation has not been provided by the subgrantee to connect their activities in question to eligible projects. As such, there is no basis to alter our initial determination of ineligibility. The subgrantee's appeal is denied.
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