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Oregon Office of Emergency Management - Administrative Costs NEMIS Calculation Error

Appeal Brief Appeal Letter

Appeal Brief

ApplicantOregon Office of Emergency Management
Appeal Type2nd
Date Signed2014-05-25T00:00:00
1st Appeal
• Issue
o FEMA Headquarters notified FEMA Region X in July 2011 that NEMIS was inaccurately calculating the 4/3 rule, resulting in an overpayment of subgrantee administrative (SGA) funding for projects with less than a 75% Federal cost share. Region X sent a Notice of Debt letter in June 2013, requesting OEM to repay the overpayment of $38,907.88 in SGA funds that had already been paid out to the subgrantees. OEM appealed and Region X denied the appeal.
• Reason for Denial
o The denial by Region X stated that it is not within FEMA’s purview or legal authority to forgive debt imposed by Federal regulations.
• Reference(s)
o 44 CFR 206.440 Appeals; 44 CFR 13.51 Later disallowances and adjustments;   44 CFR 13.52 Collection of amounts due; 44 C.F.R. 206 § 439 Allowable costs

2nd Appeal
• Issue
o OEM restated arguments in the 1st appeal that the three subgrants did not exceed the 75% federal cost share, the subgrantees had already paid more than their fair share, and the debt should be forgiven due to the federal system error, adding that forcing grantees to cover the cost of an error in a federal system represents an unfair burden. The relevant issues identified by FEMA HQ are: 1) Whether the Grantee must repay excess funds due to a miscalculation error from a Federal system and; 2) Whether the subgrantee is entitled to additional funds based on the funding of the subgrants below the 75% maximum Federal Cost Share.
• FEMA Findings
o FEMA HQ denied the 2nd appeal, upholding Region X’s decision to deny the 1st appeal.
o Rationale: FEMA is required to recoup excess funds in accordance with 44 CFR 13.51 and 44 CFR 13.52, stating respectively:
“The closeout of a grant does not affect:  (a) The Federal agency’s right to disallow costs and recover funds on the basis of a later audit or review; (b) The grantee’s obligation to return any funds due as a result of later refunds, corrections, or other transactions.”; and,  “Any funds paid to a Grantee in excess of the amount to which the grantee is finally determined to be entitled under the terms of the award constitute a debt to the Federal Government.”                                                              .
o Reference(s):  44 CFR 206.440 Appeals; 44 CFR 13.51 Later disallowances and adjustments;   44 CFR 13.52 Collection of amounts due; 44 C.F.R. 206 § 439 Allowable costs.

 

Appeal Letter

Dave Stuckey, Director
Oregon Military Department
Office of Emergency Management
P.O. Box 14370
Salem, Oregon 97309-5062
 
RE: Second Appeal: Hazard Mitigation Grant Program (HMGP)
      Subgrantee Administrative Costs Miscalculation Error, DR-1683-OR 
 
Dear Mr. Stuckey:
 
This is in response to your letter dated December 6, 2013, which transmitted the referenced appeal on behalf of the Oregon Office of Emergency Management (OEM).  My office received the request to reconsider the repayment of excess Subgrantee administrative funds related to a National Emergency Management Information System (NEMIS) calculation error.  The OEM is appealing the Regional Administrator’s decision to recoup DR-1683 funding under the Hazard Mitigation Grant Program.
 
Background:
 
For Disasters declared prior to November 13, 2007, Grantees and Subgrantees received administrative funding for each project awarded under the Hazard Mitigation Grant Program (HMGP).  The amounts were automatically calculated in NEMIS and added to each sub-grant award based on the net eligible cost of each project as explained in Section 13 of the HMGP Desk Reference using what is known as “the 4/3 rule.”  The 4/3 rule states that administrative costs are based on the lesser amount of either the total project cost or 4/3 the amount of the federal share.  This rule prevents the federal government from paying out larger amounts of administrative costs on projects where there is only a small federal funding contribution; or as often the case, where the project share is simply less than the standard 75/25 percent for HMGP.
 
On July 15, 2011, FEMA Headquarters notified Region X that NEMIS was inaccurately calculating the 4/3 rule.  This resulted in an overpayment of subgrantee administrative (SGA) funding for projects with less than a 75% Federal cost share.  On November 22, 2011 FEMA Region X informed the Oregon Emergency Management (OEM) of the NEMIS calculation error.  By this time, the grantee (OEM) had already reimbursed monies to the subgrantees (West Oregon Electric, City of Wheeler, and the City of Dalles).  This included an overpayment of $38,907.88 for subgrantee administrative costs.
 
The Regional office sent a Notice of Debt letter on June 27, 2013, requesting that OEM repay the overpayment of $38,907.88 in SGA funds. (See scanned copy of letter attached for a table itemizing administrative costs calculation.)

First Appeal
 
OEM responded with their First Appeal on August 6, 2013.  In this appeal OEM stated the subgrantees already paid more than their “fair share” as “For all three subgrantees, the Federal share amount, to include the total of the project obligation and miscalculated subgrantee administrative costs, is below the maximum Federal share contribution of 75% for HMGP.  Per
44 CFR part 13.52(a), all three sub-grants have not exceeded the Federal share amount entitled under the terms of the grant program.” OEM also requested for the debt to be forgiven as the mistake was a Federal system error. 

FEMA responded to first appeal on November 05, 2013 noting that is not within FEMA’s purview or legal authority to forgive debt imposed by Federal regulations and outlined the State’s options for an appeal.
 
Second Appeal
 
On December 06, 2013 OEM submitted a second level appeal to FEMA Region X.  In this memorandum OEM reiterated their previous arguments, adding their concern that forcing Grantees to cover the cost of an error in a Federal system represents an unfair burden.  The Region forwarded the second level appeal to FEMA headquarters on January 29, 2014.
 
Analysis:
 
The issues in this appeal that must be addressed include 1) Whether the Grantee must repay excess funds due to a miscalculation error from a Federal system and; 2) Whether or not the subgrantee is entitled to additional funds merely because the subgrants in question were funded below the 75% maximum Federal Cost Share.
  
FEMA is required to recoup excess funds in accordance with the following regulations:
 
Title 44 CFR 13.51 Later disallowances and adjustments, states in part: “The closeout of a grant does not affect:  (a) The Federal agency’s right to disallow costs and recover funds on the basis of a later audit or review; (b) The grantee’s obligation to return any funds due as a result of later refunds, corrections, or other transactions.”
 
Furthermore, Title 44 CFR 13.52 Collection of amounts due, states in part: “Any funds paid to a Grantee in excess of the amount to which the grantee is finally determined to be entitled under the terms of the award constitute a debt to the Federal Government,” and must be repaid.
 
Conclusion:
 
After review of the second level appeal documentation, FEMA Headquarters concurs with the determination by the Region and $38,907.88 must be repaid to FEMA.  This determination is consistent with regulations, guidance, and appropriations law. 
 
Please inform the Grantee of my determination.  This determination is the final decision on this issue in accordance with 44 CFR 206.440, Appeals.
 
Sincerely,
 
Roy E. Wright
Deputy Associate Administrator for Mitigation
Federal Insurance and Mitigation Administration
 
cc: Sharon Loper, Deputy Regional Administrator, FEMA Region X
Last updated August 19, 2014