Section 705

Appeal Brief

Summary Paragraph

The Town of Surry (Applicant) requested Public Assistance (PA). FEMA awarded Grants Manager Project (GMP) 315031, approving $24,725.00 for road and culvert repairs as the approved the scope of work (SOW). On June 11, 2019, the Recipient submitted the Final Federal Financial Report and requested closeout of the PA Grant. FEMA closed GMP 315031 on July 2, 2019. FEMA conducted an audit and, on March 3, 2022, issued a Request for Information (RFI), seeking documentation of completed SOW and stating the RFI constituted the beginning of an administrative action to potentially recover funds. The Recipient, on June 9, 2022, submitted the Applicant’s RFI response to FEMA. FEMA issued a Determination Memorandum dated November 28, 2022, finding the SOW incomplete and the previously awarded costs ineligible. FEMA also found that section 705 of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act did not bar it from recouping the funds. The Applicant submitted its first appeal, stating that it was entitled to retain the funds and that the SOW did not solely contain damages sustained from the disaster. On April 27, 2023, the FEMA Region 1 Regional Administrator denied the appeal. FEMA found that the Applicant did not complete the approved SOW and, because of this and the fact FEMA provided timely notice of its intent to deobligate funding, Stafford Act section 705 did not apply. The Applicant submitted its second appeal, reiterating its first appeal arguments.

Authorities

• Stafford Act § 705(a), (c).
• 44 C.F.R. §§ 13.43; 206.205(a).
• FP 205-081-2, at 1, 2, 5; PA Guide 96, 109.

Headnotes

• Failure to complete a project’s approved SOW may result in the deobligation of funds and require that the Federal payment be refunded.
  • The documentation, including the Applicant’s acknowledgement, shows it did not complete the approved SOW, and therefore, FEMA’s deobligation of funding was proper.
• FEMA is barred from recovering payments made for a project if all three conditions of Stafford Act section 705(c) are met, including the requirement that the purpose of the grant was accomplished. 
  • The Applicant did not complete the approved SOW. Therefore, the purpose of the grant was not accomplished, and section 705(c) does not bar the recovery of funding. 
• FEMA must provide notice of its intent to recover payments made to a recipient and/or an applicant within three years from the date that project completion certification is submitted. However, an RFI will pause the 3-year statute of limitations.
  • Because FEMA transmitted an RFI within the three-year time period, Stafford Act section 705(a) does not prohibit the recovery of funding.

Conclusion

The Applicant has not demonstrated it completed the project’s approved SOW. In addition, FEMA properly deobligated funding and is not barred by Stafford Act section 705 from  recovering the previously awarded funding. Therefore, this appeal is denied.

Appeal Letter

Appeal Analysis

Background

From June 26 to July 3, 2013, the Town of Surry (Applicant) was impacted by severe storms, flooding, and landslides.[1] On April 6, 2018, FEMA awarded Project Worksheet 25, approving $24,725.00[2] in Public Assistance (PA) funding to restore a gravel road site (e.g., the road and culvert).[3] On May 29, 2019, the Division of Homeland Security and Emergency Management, New Hampshire Department of Safety (Recipient) requested FEMA close out the grant and submitted a Final Federal Financial Report. The Recipient stated all projects under the disaster had “been completed in accordance with the approved scopes of work; all payments, refunds and fiscal matters have been completed; and final entries have been made into the [FEMA grant transfer] system.”[4] On July 2, 2019, FEMA closed the PA program for the disaster.[5]

Thereafter, the Applicant requested additional funding.[6] This request resulted in a FEMA review that raised concerns the Applicant had not completed work on this project at the time of closeout, which contrasted with the information contained in the Recipient’s closeout documentation for this project. On March 3, 2022, FEMA issued a Request for Information (RFI), expressing concern that the scope of work (SOW) was never completed and seeking documentation to demonstrate that: (1) the Applicant completed the SOW; or (2) the Recipient never drew down the previously awarded funding or if done, had previously returned that funding to FEMA. FEMA stated that the RFI began an administrative action to potentially recover funds and tolled the three-year statute of limitations for purposes of Section 705(a) of the Stafford Act until FEMA received the requested information and made a determination. FEMA noted that the three-year period began on June 11, 2019 for PW #25 and would remain paused until FEMA notified the Recipient and the Applicant that it had resolved the issues concerning PW #25.[7] 

In its response, dated June 6, 2022, the Applicant acknowledged that the SOW had not been completed, and it previously tried to return the drawn-down funding. On June 9, 2022, the Recipient forwarded the Applicant’s RFI response to FEMA. The Recipient also stated the Applicant reported to FEMA that it had no intent to repair the road. On November 28, 2022, FEMA issued a Determination Memorandum (DM) finding the previously awarded $24,725.00 was ineligible for PA funding and that FEMA was not barred by the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act sections 705(a) or (c) from deobligating funding and recovering previously awarded funding.

First Appeal 

On January 23, 2023, the Applicant submitted its first appeal, acknowledging that the road remained closed 10 years post-disaster, but stated this was the result of a 2012 disaster that occurred prior to the disaster at issue. It stated it had previously informed FEMA of this during a site visit, and so when it originally received the PA funding for PW 25, it timely notified the Recipient the funding was received in error and returned the funding to the Recipient. It stated that shortly after this, the Recipient re-sent the Applicant the previously returned funding, stating that the Applicant was entitled to it. The Applicant stated it spent that money trying to complete the intent of the PW, i.e., restoring and reopening the road, through various actions like securing plans and permitting. On January 30, 2023, the Recipient transmitted the appeal to FEMA with its supporting letter. 

On April 27, 2023, the FEMA Region 1 Regional Administrator denied the appeal. FEMA found that because the SOW was not completed, the purpose of the grant was not accomplished, and it was authorized to deobligate previously awarded funding. FEMA determined that the RFI provided the Applicant notice of its intent to recover funding within three years of the final expenditure report submission. Therefore, FEMA found that Stafford Act sections 705(a) and (c) did not preclude it from recouping the previously awarded funding. 

Second Appeal

On June 19, 2023, the Applicant submitted its second appeal reiterating that the road is closed and expanding on the damage, repayment, and closeout history in greater detail. The Applicant further explains various problems that contributed to confusion and the failure to timely complete the work and attaches additional documentation. On August 9, 2023, the Recipient transmitted the second appeal to FEMA with its supporting letter.

Discussion

The project worksheet is the basis of the grant and includes the SOW for each project.[8] Before the closeout of the disaster, the recipient must certify that projects were completed in accordance with the approved SOW.[9]Failure to complete a project’s approved SOW may result in the deobligation of funds and require that the Federal payment be refunded.[10]  

FEMA is barred from deobligating payments made for a project to a state or local government if: (1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.[11]FEMA considers that the purpose of the grant was accomplished if the SOW is completed as described in the obligated project and supporting documentation, and post-award terms and conditions are met.[12] In general, FEMA is also prohibited from initiating an administrative action to recover PA payments made to a state or local government after the date that is three years after the date of transmission of the final expenditure report for project completion as certified by the recipient.[13] However, where FEMA discovers an issue that needs to be addressed, it may send an RFI to the recipient, which constitutes the beginning of an administrative action to potentially recover funds.[14] This will pause the three-year statute of limitations until FEMA notifies the recipient in writing that FEMA has received all requested information, at which point the three-year time period will resume and will not restart from the beginning.[15] 

Here, the Applicant acknowledges, and the documentation shows, that the Applicant did not complete the approved SOW. In an RFI, FEMA provided the Recipient and the Applicant with an opportunity to provide documentation demonstrating that the Applicant completed the restoration/repair work included in the SOW. In its response to the RFI, and reiterated in its first and second appeal letters, the Applicant acknowledged the SOW was not completed and that the road remained closed. Accordingly, FEMA may deobligate the previously awarded funding. 

In addition, because the Applicant did not complete the approved SOW, the purpose of the grant was not accomplished, and FEMA is not barred from recovering obligated funds under Stafford Act section 705(c). Likewise, FEMA is not barred by Stafford Act section 705(a) from recovering the previously awarded funds. The Recipient’s June 11, 2019 transmittal letter represents the final expenditure report and thus commenced the three-year statute of limitations. However, FEMA’s issuance of the March 3, 2022 RFI, which preceded the November 28, 2022 DM, resulted in FEMA providing notice to the Recipient of the Agency’s intent to recover payments within three years from the date that the recipient submitted to FEMA its certification of project completion.

Conclusion

The Applicant has not demonstrated it completed the project’s approved SOW. In addition, FEMA properly deobligated funding and is not barred by Stafford Act section 705 from recovering the previously awarded funding. Therefore, this appeal is denied.