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Timeliness – PNP Facility Eligibility - Legal Responsibility - SBA Loan

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1603
ApplicantBethel Missionary Outreach Ministries, Inc.
Appeal TypeSecond
PA ID#071-U49OE-00
PW ID#20042
Date Signed2017-06-22T00:00:00

Conclusion:  The Bethel Missionary Outreach Ministries, Inc.’s (Applicant) leased facility is not eligible for Public Assistance (PA) because the Applicant failed to demonstrate: 1) the primary use for the facility was an eligible activity, 2) it was legally responsible for repairs to the facility; and 3) that its losses exceeded the loan amount received from the Small Business Administration (SBA).  

Summary Paragraph

The Applicant requested PA after Hurricane Katrina damaged its rented building and destroyed its equipment. FEMA initially determined the Applicant was an eligible private nonprofit  (PNP) organization.  FEMA was unable to confirm the primary use of the Facilities and determined they were not eligible for PA.  The Applicant appealed this determination and the FEMA Region VI Regional Administrator (RA) denied the appeal because the Applicant did not demonstrate the primary use for the Facilities was an eligible activity.  The RA also found the Applicant was not legally responsible for the building and the Applicant did not provide documented justification that its losses exceeded the amount it received from the SBA as a loan.  On January 17, 2017, the Applicant appealed the RA’s decision, claiming it never received the first appeal decision and emphasized that FEMA originally found it to be an eligible PNP.  The Applicant also claimed its Facilities were open to the public, and that it lost everything in the Hurricane far in excess of what it received in the SBA loan.

Authorities and Second Appeals

  • Stafford Act § 406(a)(2).
  • 44 C.F.R. §§ 206.206, 206.221(e), 206.222(b), 206.223(a)-(b), 206.226(c)(2).
  • PA Guide, at 10, 11, 14, 25, 32-33 (Oct. 1999).
  • DAP 9521.3, Private Nonprofit Facility Eligibility, at 2 (May 23, 2003).

Headnotes

  • 44 C.F.R. § 206.206 requires appeals to be filed within 60 daysafter the applicant received notice. 
    • The Applicant filed its second appeal almost 4 years after the Grantee mailed the first Appeal decision to the Applicant’s last known address.
  • FEMA’s PA Guide states that “facilities established or primarily used for religious… [or] recreational activities are not eligible” for PA. 
    • The Applicant was unable to demonstrate its Facilities’ primary use was for an eligible purpose.  The record indicates the primary use was for religious services and community recreation.
  • Per 44 C.F.R. § 206.223, an eligible applicant must be legally responsible for the repairs caused by the disaster.  FEMA’s PA Guide states, “if the PNP were located in a rented facility, repairs to the facility would not be eligible unless the written lease placed such responsibility on the PNP.”
    • The Applicant’s lease assigns legal responsibility to the owner for repairs resulting from circumstances beyond the tenant’s control.
  • 44 C.F.R. § 206.226(c)(2) states that PNPs that provide other essential services of a governmental nature must first seek a loan from the SBA before requesting PA.  Only losses exceeding the SBA loan amount are eligible for PA.
    • The Applicant applied for and received a loan from the SBA, but did not demonstrate its losses exceeded the loan amount.

Appeal Letter

James Waskom
Director
Governor’s Office of Homeland Security and Emergency Preparedness
7667 Independence Boulevard
Baton Rouge, Louisiana 70806

Re:  Second Appeal–Bethel Missionary Outreach Ministries, Inc., PA ID 071-U49OE-00,

FEMA-1603-DR-LA, Project Worksheet (PW) 20042 – Timeliness – PNP Facility

Eligibility – Legal Responsibility – SBA Loan

Dear Mr. Waskom:

This is in response to a letter from your office dated March 31, 2017, which transmitted the referenced second appeal on behalf of Bethel Missionary Outreach Ministries, Inc. (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of the Applicant’s request for Public Assistance (PA).

As explained in the enclosed analysis, I have determined the Applicant’s second appeal, filed almost four years after FEMA’s response to the Applicant’s first appeal, is untimely.  Additionally, I find the Applicant did not demonstrate that the primary use of its Facilities were eligible for PA; did not have a legal responsibility to repair the leased building; and did not show its losses exceeded the amount received through a Small Businesses Administration loan.  Accordingly, I am denying this appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

Christopher Logan
Director
Public Assistance Division

Enclosure

cc: George A. Robinson
     Regional Administrator
     FEMA Region VI

 

Appeal Analysis

Background

Bethel Missionary Outreach Ministries, Inc. (Applicant) is a Private Nonprofit (PNP) religious corporation duly formed and in good standing in the State of Louisiana since August 2002.[1]  In September 2002, the Applicant leased part of Fellowship Hall from another church for an indefinite term.[2]  On August 29, 2005, high winds and floodwaters, resulting from Hurricane Katrina, inundated Fellowship Hall causing damage to the building and destroying various pieces of the Applicant’s equipment (Facilities).[3]  The Applicant evacuated to Houston, Texas, and returned to New Orleans in 2007.[4] 

The Applicant applied for Public Assistance (PA)[5] to recover from the damage to its Facilities.  FEMA responded to the Applicant’s request as follows:

The [Request for PA] (RPA) indicates the Applicant operated a food bank prior to the declared disaster event. This organization meets the [PNP] requirements contained in [44 C.F.R. § 206.221(f)] and has facilities that may be classified as either providing a critical or non-critical function…  Approval of any [PA] grant for this Applicant is dependent on the outcome of a thorough review of the Applicant’s facilities....[6]

FEMA prepared Project Worksheet (PW) 20042 to document the Applicant’s claimed damage to its Facilities, but did not obligate funding.[7]  FEMA and the Grantee met the Applicant to visit the Facilities, but were unable to gain access because the landlord repaired the building and the Applicant was no longer the tenant.[8]  Consequently, FEMA found the Applicant was ineligible for PA because the Applicant: 1) was not legally responsible for the building; 2) did not demonstrate the primary use of the Facilities were eligible; and 3) did not substantiate its losses exceeded the Small Business Administration (SBA) disaster recovery loan it received.[9]  In a letter dated June 22, 2012, the Grantee notified the Applicant of FEMA’s disapproval.[10] 

First Appeal

The Applicant appealed FEMA’s determination on July 17, 2012, arguing the Applicant was legally responsible to repair the building pursuant to its lease, which stated, “[t]enant shall make, at Tenant’s expense, all necessary repairs to the Leased Premises.”[11]  The Applicant also argued it spent its own resources to make significant improvements and repairs to the facility after taking possession of it in 2002 and was seeking PA to regain those losses.[12] 

The FEMA Region VI Regional Administrator (RA) denied the appeal in a letter dated March 7, 2013 for three reasons.[13]  First, the RA determined the Applicant was unable to show the Facilities’ primary use was eligible for PA.  Second, the RA found that the Applicant was not legally responsible for the disaster related repairs to the building.  Finally, the RA noted that the Applicant did not demonstrate that its losses exceeded the $33,600.00 the Small Business Administration (SBA) loaned to the it.  The Grantee received FEMA’s first appeal decision on March 14, 2013 and forwarded it to the Applicant the following day.[14] 

Second Appeal

On February 2, 2017, the Grantee received a letter from the Applicant, dated January 17, 2017, captioned, “Appeal Project to be Reopen (Bethel Missionary Outreach Missionary).”[15]  In a second letter to the Grantee dated February 9, 2017, the Applicant asserts it “did not receive an appeal letter.”  The Grantee, considering these letters to be an appeal of FEMA’s 2013 first appeal decision, forwarded them with a recommendation to grant the appeal. 

The Applicant’s purported second appeal requests FEMA find it eligible for PA, emphasizing that in April 2011, FEMA determined it was an eligible PNP.  With regard to the primary use of the Facility, the Applicant claims it provided a variety of services, such as providing clothing and non-perishable food, creating a safe haven for children to study, and hosting family movie nights.  The Applicant generally claims that the “facility was used for community outreach purposes more than it was utilized as a ministry.”[16]

The Applicant acknowledges it could not gain access during the site visit, but argues it still “had documents and proof of [it] occupying the building for service and community recreational purposes.”[17]  The Applicant also seems to address FEMA’s finding that it lacked legal responsibility for repairs to the building by renewing its argument that FEMA should find it eligible for PA because it invested a significant amount of its own resources to improve the Facility and procure furnishings and other personal property, which were “all used for community purposes.”[18]  

The Grantee indicates that the Applicant’s request includes an additional $45,000.00 to cover losses in excess of the SBA loan.  The Grantee also supplements the Applicant’s arguments by stating the Applicant is eligible for PA because FEMA previously declared it eligible on

April 15, 2011, and that its appeal should be deemed timely.[19]

Discussion

Timeliness

The Robert T. Stafford Disaster and Emergency Assistance Act requires appeals of FEMA’s PA eligibility decisions be filed within 60 days after an applicant is notified of the decision.[20]  The RA issued his first appeal decision on March 7, 2013 and the Grantee mailed it to the Applicant on March 15, 2013.[21]  In its February 2017 letter, the Applicant informed the Grantee, “we didn’t appeal, because we never received an appeal letter.”[22]  FEMA interprets the Applicant’s claim to mean the Applicant did not file a second appeal because it did not receive notice of FEMA’s first appeal decision.

While FEMA cannot absolutely confirm precisely when the Applicant received notice of the first appeal decision, FEMA finds based on the information available that the Applicant’s appeal is untimely.  The Applicant acknowledged in its second appeal that its application for PA was closed, indicating it knew or was aware of FEMA’s decision.  Furthermore, the Grantee affirmed that it forwarded the first appeal decision to the same address used to inform the Applicant of FEMA’s denial of the Applicant’s RPA in 2012; notice which served to prompt the Applicant’s first appeal.[23]  Based on those facts, FEMA finds that the submission of a second appeal nearly four years after the issuance of the first appeal determination is untimely.  Timeliness aside, the substantive issues of this appeal likewise merit its denial.

Facility Eligibility 

Applicant and facility eligibility determinations are intertwined for PNPs.  A PNP organization, unlike local, state and tribal governments, is only an eligible applicant if it has an eligible facility.[24]  FEMA may reimburse costs associated with the repair, restoration, replacement, or reconstruction of an eligible PNP facility that provides critical services or non-critical services after certain conditions are met.[25]  Facilities must be primarily used for one of the services or facilities defined in 44 C.F.R. § 206.221(e).[26]  Facilities used primarily for religious, athletic, recreational or vocational purposes are not eligible under the PA program.[27]

In this case, the Applicant is ineligible for PA because the Applicant has not demonstrated the primary use for its Facilities was for an eligible purpose.  As a threshold matter, FEMA’s 2011 letter informing the Applicant that its operation of a “food bank” conditionally qualified the Applicant for PA, subject to the “outcome of a thorough review of the Applicant’s facilities.”  The Applicant acknowledges in its appeal that it was unable to gain access for FEMA and Grantee representatives to inspect.  As FEMA conditioned its approval on a thorough review of the Facilities, and no review occurred, the initial approval is void.  Consequently, FEMA properly made a final determination that the Applicant’s Facilities were not eligible.

Furthermore, FEMA’s initial characterization of the Applicant’s use of its Facilities as a “food bank” was not substantiated.  The Applicant’s general claim that it provided clothing and non-perishable food to the needy does not rise to the level to consider the Facility as a food bank as it was unable to provide documentation demonstrating the actual performance, frequency, or capacity of the claimed services.  Similarly, the Applicant does not explain how it was organized to acquire and systematically distribute food to those in need.  Likewise, the Applicant’s assertion that the Facilities also functioned as a home for people in the community and safe haven for children to study is not corroborated. 

Instead, the available information supports the conclusion that the Applicant’s primary use of its Facilities was for religious and community recreational purposes.  First, the Applicant’s initial RPA, a hand-written version, apparently filled-out and signed by the PNP’s representative, describes the Facilities as “non-profit religious organizations.”[28]  Second, the Applicant’s PNP Questionnaire states the primary purpose of the Facilities as, “nonprofit religious facilities open to the public.”[29]  Third, in its application for an Employer Identification Number, the Applicant described itself as a “church” whose principal activity was “ministries” and the principal service provided was “church services.”[30]  Finally, the Applicant’s Articles of Incorporation set forth its primary purpose as “[t]o extend the cause of Christianity; to established and maintain missions and ministers in fields of need in order to teach Christianity.” [31]  While its Articles of Incorporation list other purposes that might qualify as essential services of a governmental nature, such as feed and clothe the poor, supply medical aid, provide homes for orphans, etc., FEMA finds, based on the available information, these stated purposes were aspirational, rather than actual.[32]  As such, FEMA finds the Applicant’s primary use of the facility was for ineligible purposes, i.e. religious and community recreation services, and consequently it is not eligible for PA. 

Legal Responsibility

An applicant for PA must be legally responsible for the facility damaged by the disaster[33] and the resulting work.[34]  FEMA generally presumes the owner of a facility is legally responsible for its repair.  However, when an applicant leases a facility, FEMA presumes the applicant is not legally responsible for its repair unless the lease specifically requires the lessee to repair disaster related damage.[35] 

The Applicant leased Fellowship Hall, from the Bethel Evangelical United Church of Christ on September 16, 2002 for an indefinite term.[36]  While paragraph 5 of the lease (entitled, “Repairs”) holds the tenant responsible for damage resulting from normal wear and use of the facility,[37]  paragraph 14 (entitled “Damage and Destruction”) makes the owner responsible for damage resulting from “fire, casualty or structural defects… [and] any occurrence which is beyond Tenant’s reasonable control….”[38]  Paragraph 14 also provides that the tenant has the right to terminate the lease within 90 days following such major damage.[39]  The terms of the Applicant’s lease specifically dictate that the property owner is responsible for all property damage resulting from occurrences beyond the tenant’s reasonable control. 

Hurricane Katrina caused floodwaters to inundate the Applicant’s rented building and destroyed its contents; the resultant property damage is directly attributable to Hurricane Katrina, a natural catastrophe beyond the Applicant’s reasonable control.  Because the Applicant’s lease does not hold it legally responsible for repairs to the building when damages result from occurrences beyond the Applicant’s reasonable control, the repair of the damages to the building was the legal responsibility of the property owner, not the Applicant.  Furthermore, at the time of its request for PA, the Applicant was no longer the tenant at Fellowship Hall and the landlord had made repairs to the facility.[40]  Accordingly, because the Applicant was not legally responsible for repairs to the building, it was not eligible for PA.

SBA loan 

Eligible PNPs that provide essential services of a governmental nature to the public may qualify for PA if: 1) they apply for a Small Business Administration loan, and 2) they can demonstrate their losses exceed the maximum amount covered by the loan.[41]  The Applicant applied for and received an SBA loan amounting to $33,600.00 for damages the Applicant sustained in the disaster.[42]  While, the Applicant states in its second appeal that PW 20042 “doesn’t show even a half of what we lost” and claimed in earlier correspondence their losses exceeded the proceeds of the SBA loan, it did not substantiate its claimed losses.  It is incumbent upon applicants to provide documented justification in support of its appeal.[43]  In this case, the Applicant has failed to meet this burden.

Conclusion

The Applicant’s second appeal is denied because it is untimely.  Timeliness aside, as the Applicant’s primary use of its Facilities is for an ineligible purpose, it is not an eligible PNP and is ineligible for PA funding.  Furthermore, the Applicant is neither legally responsible for repair of the building facility, nor has it demonstrated that its losses totaled more than what it received in its SBA loan.  Accordingly, the appeal is also denied on these substantive issues.

 


[1] Commercial Division, Secretary of State, State of Louisiana, https://coraweb.sos.la.gov/CommercialSearch/CommercialSearchDetails.aspx?CharterID=605715_F09D8EEBCF

(last visited June 14, 2017).

[2] See Commercial Lease Agreement between Reverend GN and Pastor AC, at Paragraph 1 (Sep. 16, 2002) [hereinafter Commercial Lease].

[3] Project Worksheet (PW) 20042, Bethel Missionary Outreach Ministries, Inc., Version 0 (Jan. 3, 2011).

[4] FEMA Form 90-121, PNP Facility Questionnaire, at 1 (Dec. 6, 2010); Letter from Rep., Bethel Missionary Outreach Ministries, Inc., to Rep., Pub. Assistance Section, Governor’s Office of Homeland Sec. and Emergency Preparedness (GOHSEP), at 1 (Dec. 6, 2010).

[5] The Applicant was one of several PNPs allowed to submit RPAs after the original deadline for Hurricane Katrina survivors because of the widespread devastation and the resultant lengthy period potential applicants took to return to the area.  On April 14, 2011, FEMA notified the Grantee that it received and accepted a number of late RPA’s from PNPs affected by Hurricane Katrina.

[6] Letter from Dep. Dir., FEMA, La. Rec. Office, to Dep. Dir., Disaster Rec. Div., GOHSEP, at 1 (Apr. 15, 2011).

[7] PW 20042, Bethel Missionary Outreach Ministries, Inc. (Version 0).

[8] Id.

[9] Id.

[10] Letter from Section Chief, Pub. Assistance Grants Admin., GOHSEP, to President, Bethel Missionary Outreach Ministries, Inc., at 1 (June 22, 2012) [hereinafter Final Eligibility Notification].

[11] Commercial Lease, at 2.

[12] Letter from Rep. Bethel Missionary Outreach Ministries, Inc., to State Coordinating Officer, GOHSEP, at 1 (July 17, 2012).

[13] Letter from Reg’l Adm’r, FEMA Region VI, to Dir., GOHSEP at 2 (Mar. 7, 2013).

[14] Letter from Dep. Dir., Disaster Recovery, GOHSEP, to Assistant Adm’r, Recovery Directorate, FEMA, at Attachment 2, at 2 (Mar. 31, 2017) [hereinafter GOHSEP Appeal Analysis].

[15] Letter from Rep. Bethel Missionary Outreach Ministries, to Dep. Dir., Disaster Recovery Div., GOHSEP at 1 (Jan 17, 2017) (received on Feb. 2, 2017) [hereinafter Applicant’s Second Appeal].

[16] Id.

[17] Id.

[18] Id. at 2.

[19] GOHSEP Appeal Analysis, at 3-9.

[20] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288 § 423, 42 U.S.C. § 5189a (2005); 44 C.F.R. § 206.206(c)(1) (2004).

[21] GOHSEP Appeal Analysis, at 1.

[22] Letter from President, Bethel Missionary Outreach Ministries, Inc. to Dep. Dir., Disaster Recovery Div., GOHSEP, at 1 (Feb. 9, 2017).

[23] Compare Final Eligibility Notification with GOHSEP Appeal Analysis, at 2.

[24] FEMA Second Appeal Analysis, Duxbury Beach Reservation, Inc, FEMA-4110-DR-MA, at 3 (May 15, 2017).

[25] Stafford Act § 406(a)(2); 44 C.F.R. §§ 206.222(b), 206.226(c).

[26] Disaster Assistance Policy DAP 9521.3, Private Nonprofit (PNP) Facility Eligibility, at 2 (May 23, 2003).

[27] Id. at 4; FEMA Second Appeal Analysis, Neringa, Inc., FEMA-4022-DR-VT at 2 (Dec. 19 2013).

[28] FEMA Form 90-49, Request for Public Assistance, Applicant: Bethel Missionary Outreach Ministries, Inc. (Undated).  A second printed version, dated December 6, 2010, contains essentially the same information as the hand-written version with the noteworthy exception that whoever entered that data onto the printed form left the space for describing the primary use of the facility blank. 

[29] FEMA Form 90-121, PNP Facility Questionnaire, Applicant: Bethel Missionary Outreach Ministries, Inc. (Dec.6, 2010).

[30] I.R.S. Form SS-4 (Rev 12-2001), Application for Employer Identification Number, Applicant: Bethel Missionary Outreach Ministries, Inc., (Aug. 23, 2002).

[31]  Articles of Incorporation, Bethel Missionary Outreach Ministries, Inc. (Aug. 23, 2002). 

[32] Id.  The Applicant’s general description of the equipment lost in the flood, e.g., musical equipment, a 60-inch television, a digital videodisc player used for “community movie nights,” tables, chairs, puzzles and games indicates its actual operations were, at the time of the disaster, limited to religious and community recreational purposes.

[33] 44 C.F.R. § 206.223(a)(3); Public Assistance Guide, FEMA 322, at 16 (Oct. 1999) [hereinafter PA Guide].

[34] PA Guide, at 25.

[35] Id. at 33.

[36] Commercial Lease, at 1.

[37] Id. at 2.

[38] Id. at 4.

[39] Id.

[40] PW 20042, Bethel Missionary Outreach Ministries, Inc. (Version 0); Applicant’s Second Appeal, at 2.

[41] 44 C.F.R. § 206.226(c)(2).

[42] Letter from Small Bus. Admin. to Bethel Missionary Outreach Ministries, Inc. at 1 (Sept. 8, 2006).

[43] 44 C.F.R. § 206.206(a).

Last updated May 28, 2020