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Professional Accounting Services

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1008-DR
ApplicantCity of Santa Clarita
Appeal TypeSecond
PA ID#037-69088
PW ID#73331
Date Signed1997-06-19T04:00:00

Citation: Appeal Analysis; Second Appeal; City of Santa Clarita; California; FEMA-1008-DR-CA, PA 037-69088

Cross-Reference: Accounting Costs; Administrative Allowance; DSR 73331

Facts: Following the Northridge Earthquake, FEMA and the Office of Emergency Services (OES) prepared DSR 73331 in the amount of $19,500 for the City of Santa Clarita for professional accounting services relating to the recovery process.

On October 20, 1994, OES submitted a request, on behalf of the City, for a supplement to DSR 73331 in the amount of $24,151, for an extension of accounting services, due to the escalation of disaster costs and the increase in the number of projects. FEMA informed OES on November 13, 1995, that the request was denied, as the above costs were covered under the subgrantee's administrative allowance and that DSR 73331, which was inadvertently approved by FEMA, would be deobligated. Accordingly, DSR 47937 was prepared for that purpose.

The City submitted its first appeal on January 29, 1996, and claimed that the work performed by the extra hire accountants was project specific and not of a general administrative nature. The Disaster Recovery Manager denied the first appeal on September 25, 1996, according to 44 CFR 206.228 (2)(ii), and Stafford Act section 406(f)(1).

The subgrantee, in their second appeal dated December 31, 1996, reiterated that the work performed by the extra hire accountants was project specific relating to permanent restoration and was not of a general administrative nature.

Issue: Does the work performed by the extra hire accountants covered by the administrative allowance already provided to the subgrantee?

Findings: Yes

Rationale: According to 44 CFR 206.228(a)(2)(ii) and section 406(f) of the Stafford Act, all grant administration expenses for a subgrantee that could be allowed under OMB Circular A-87 are replaced by an allowance based on a percentage of the cost of eligible projects.

Appeal Letter

June 19,1997

Mr. Gilbert Najera
Governor's Office of Emergency Services
Disaster Field Office
Public Assistance Section
74 North Pasadena Avenue, West Annex, Third Floor
Pasadena, CA 91103-3678

Dear Mr. Najera:

This is in response to your letter dated December 31, 1996, to the Federal Emergency Management Agency. With that letter, you forwarded a second appeal on behalf of the City of Santa Clarita requesting that FEMA reinstate costs in DSR 73331 and grant the supplemental request for additional funds associated with project-specific accounting services.

Based on our analysis of the information submitted, we have determined that the costs in DSR 73331 and the supplemental request, to provide professional accounting services of the construction contract expenditures relating to the recovery process from the Northridge earthquake, were covered by the administrative allowance of $166,917 already provided to the subgrantee. Therefore, the second appeal is denied. The basis for my determination is contained in the enclosed appeal analysis.

Please inform the applicant of my determination. The applicant may submit a third appeal to the Director of FEMA, through your office and the Regional Director, in accordance with 44 CFR 206.206. A third appeal must be submitted within 60 days after receipt of this determination.

Sincerely,
/S/
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate

Enclosure

Appeal Analysis

BACKGROUND
On January 17, 1994, the Northridge Earthquake damaged and destroyed properties in the Los Angeles area. As a result, the President declared Los Angeles County and the surrounding communities a major disaster area.

On February 8, 1994, damage survey report (DSR) 73331 was written in the amount of $19,500 for the City of Santa Clarita, located 35 miles north of Los Angeles. DSR 73331 was prepared by FEMA and the California Office of Emergency Services (OES) to provide professional accounting services of the construction contract expenditures relating to the recovery process from the Northridge earthquake for a period of approximately three months.

On October 20, 1994, OES transmitted the subgrantee's letter requesting a supplement in the amount of $24,151 to DSR 73331 for a part-time accountant anticipated to be utilized through February 1995, because of the escalation of disaster costs and the increase in the number of projects.

By letter dated November 13, 1995, FEMA's Public Assistance Officer denied the subgrantee's request based on 44 CFR 206.228 (2)(ii) Subgrantee, which states: "Pursuant to section 406(f)(1) of the Stafford Act, necessary costs of requesting, obtaining, and administering Federal disaster assistance subgrants will be covered by an allowance which is based on established percentages of net eligible costs under sections 403, 406, 407, 502, and 503 of the Act, for an individual applicant." The additional position requested by the subgrantee falls within the purview of the above mentioned regulations. Consequently, DSR 73331 which was inadvertently approved by FEMA would be deobligated as the scope of work was covered by the administrative allowance.

Accordingly, DSR 47937 was prepared to deobligate DSR 73331 because the accounting services were already covered under the 3% statutory allowance.

On December 12, 1995, apparently prior to receiving FEMA's determination, the applicant forwarded another request for a supplemental cost adjustment for Category "G", DSR 73331 in the approximate amount of $34,088.

By letter dated January 29, 1996, to OES, the subgrantee appealed FEMA's determination to deobligate DSR 73331 and requested that the second supplemental request for additional funds be transmitted to FEMA. The applicant stated that the costs identified in DSR 73331 and its supplements were eligible because they related to extra employees hired to perform eligible work that represented an incremental disaster-related expense. Further, the work performed by the extra hire accountants was project specific, generally related to permanent restoration and was not of a general administrative nature.

OES transmitted the first appeal to FEMA on behalf of the subgrantee on March 26, 1996. OES added that the narrative of DSR 73331 states that due to the extensive earthquake damage to the City and the number of contracts involved, project accounting is required to ensure efficient and prudent distribution of contract expenditures to contractors who perform contract work to repair damages. Furthermore, the DSR narrative states that the costs associated with the accounting project are eligible as described in the Office of Management and Budget (OMB) Circular A-87, Attachment B, and the FEMA's reviewer comments, attached to the DSR indicate that the City's accounting services costs are not administrative as defined in 44 CFR 206.228(1).

By letter dated September 25, 1996, the FEMA's Disaster Recovery Manager denied the first appeal because accounting costs were already covered under the subgrantee's administrative allowance. FEMA recognizes that the City's professional accounting services relating to its recovery process were required and are an incremental disaster-related expense, as well as allowable under OMB Circular A-87, Attachment B, section (B)(1). However, the basis of the denial was that accounting costs relating to the recovery process were not considered eligible direct costs, as they were not directly attributable to an eligible project. According to 44 CFR 206.228 (2)(ii), and Stafford Act section 406(f)(1), accounting costs are considered indirect costs eligible for reimbursement under the subgrantee's administrative allowance, and allowing these costs separately would result in a duplication of benefits.

By letter dated December 31, 1996, OES transmitted the applicant's second appeal to the Associate Director. The applicant reiterated that the work performed by the extra hire accountants was project specific relating to permanent restoration and was not of a general administrative nature as the extra hire personnel were hired temporarily specifically for work on earthquake related projects.

DISCUSSION
The main issue is whether these costs are eligible for reimbursement under the Stafford Act. As stated earlier, FEMA recognizes that the City's professional accounting services relating to its recovery process were required and are an incremental disaster-related expense. However, the nature of the work, being that of administering the grant, falls into the classification of an associated expense and must be funded as such.

OMB Circular A-87 allows grant administration expenses to be claimed unless they are limited or replaced by a statutory provision. According to 44 CFR 206.228 (2)(ii), and Stafford Act section 406(f)(1), necessary costs of requesting, obtaining, and administering Federal disaster assistance subgrants that could be allowed under OMB Circular A-87 will be covered by an allowance which is based on established percentages of net eligible costs under sections 403, 406, 407, 502, and 503 of the Stafford Act, for an individual applicant. Accordingly, costs for administering grants are considered indirect costs eligible for reimbursement under the subgrantee's administrative allowance.

Based on the PAAS Report D.1: DSR Summary for disaster 1008 and the City of Santa Clarita, $166,917 was provided to the subgrantee for expenses associated with the administration of earthquake-related projects. Funding of the cost of extra hire accountants working on earthquake-related projects is consistent with this administrative allowance provision.

CONCLUSION
Finally, the applicant has not submitted any new information to determine that the cost in DSR 73331 and the supplemental request for additional funds, to provide professional accounting services of the construction contract expenditures relating to the recovery process from the Northridge earthquake, were outside of the intent and implementation of the statutory administrative allowance. Therefore, the second appeal is denied.

Last updated February 4, 2020