Debris Disposal and Monitoring, Force Account Labor & Equipment Costs, Duplication of Benefits, Work Completion Deadlines, Section 705

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	1545-1561-16
Applicant	Lake Worth
Appeal Type	Second
PA ID#	099-39075-00
PW ID#	Multiple
Date Signed	2022-09-12T16:00:00

Summary Paragraph

From 2004-2005, Hurricanes Frances, Jeanne, and Wilma caused damage in Florida.  FEMA prepared various Project Worksheets (PW) for damages incurred by the City of Lake Worth (Applicant), 23 of which are at issue here.  In 2011, FEMA deobligated $3,119,435.94 across 3 of these PWs due to insufficient documentation to support debris removal costs.  In 2012, the Office of the Inspector General (OIG) audited Public Assistance funding awarded to the Applicant, recommending that FEMA recover $8,152,776.00.  FEMA concurred with the OIG and deobligated the funding.  In 2012-2013, the Applicant submitted several first appeals.  On December 28, 2021, the FEMA Region IV RA partially granted the Applicant’s first appeal.  FEMA determined that Section 705(c) of the Stafford Act precluded the deobligation of $16,105.00 from PW 602; however, it was not precluded from deobligating costs from the remaining projects because the Applicant had not demonstrated the eligibility of the questioned costs.  On February 25, 2022, the Applicant submitted a second appeal, asserting that it substantiated the eligibility of all costs and that Section 705(c) of the Stafford Act prevents FEMA from deobligating the costs.

Authorities and Second Appeals

• Stafford Act §§ 312, 403, 407, 705(c).
• 44 C.F.R. §§ 13.42(b), 206.204(c)(1)-(2); 206.204(d), 206.205(a), 206.223(a)(1), 206.224(a), 206.228(a)(1).
• PA Guide, at 27, 35, 37, 45, 83, 94, 113-114.
• Debris Management Guide, at 30.
• FP 205-081-2, at 4-6.
• Brevard (County), FEMA-4337-DR-FL, at 3, Dep’t of Transp., FEMA-4068-DR-FL, at 5, and City of Sweetwater, FEMA-1345-DR-FL, at 3.

Headnotes

• An applicant must provide documentation to support its claim as eligible and show that costs are directly tied to the performance of eligible work.
  • The Applicant has not provided documentation that supports the claimed costs or else has not explained how the available documentation supports the claimed costs.
• An applicant is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if the payment was authorized in the approved agreement specifying the costs, the costs were reasonable, and the purpose of the grant was accomplished.  Typically, whether the purpose of the grant was accomplished will be determined during the project closeout process.  Prior to determining whether Section 705(c) applies, FEMA will adjust and correct project funding based on properly supported actual costs for the approved and completed scope of work.
  • For ­­PWs 6405, 3783, 6477, and 8398, FEMA finds that all three criteria of Section 705(c) were met.  Therefore, Section 705(c) prohibits FEMA from recovering payments.
  • For its remaining projects, because the Applicant has not provided documentation to support the claimed costs, it has not demonstrated that it accomplished the purpose of the grant.

Conclusion

FEMA finds that the Applicant has not provided documentation that supports the costs in dispute.  However, FEMA is reinstating $126,246.11 of funding under PW 6405, $282,264.00 of funding under PW 3783, $288,034.23 of funding under PW 6477, and $204,594.00 of funding under PW 8398 because Section 705(c) of the Stafford Act prohibits FEMA from recovering the funds.

 

Appeal Letter

Appeal Analysis

Background

From September 3-October 8, 2004, Hurricane Frances caused damage in Florida (FEMA-1545-DR-FL).  Hurricane Jeanne caused additional damage from September 24-November 17, 2004 (FEMA-1561-DR-FL), and Hurricane Wilma caused further damage from

October 23-November 18, 2005 (FEMA-1609-DR-FL).  The City of Lake Worth (Applicant) reported damage from each disaster.  FEMA, in turn, prepared multiple Project Worksheets (PWs) to document the various projects, 23 of which are at issue in this appeal.  In 2011, FEMA deobligated funding totaling $3,119,435.94 across 3 of the projects due to insufficient documentation to support debris removal costs.  In 2012, the Department of Homeland Security’s Office of the Inspector General (OIG) performed two audits on Public Assistance (PA) funding awarded to the Applicant.  The OIG recommended that FEMA recover $8,152,776.00 across the three disasters due to, among other things, insufficient documentation to support force account labor (FAL) and equipment (FAE) costs, duplication of benefits (DOB) from insurance, and small project activities that were not completed.[1]  FEMA concurred with the OIG’s findings and deobligated the funding. 

The following is a list of the PWs at issue in this appeal:

FEMA-1545-DR-FL (Frances)
PW	Work	Initial Award	Disputed Costs	Reason for Deobligation
470	debris removal	$2,152,331.80	($1,927,591.61)	documentation
1286	pool and beach area repairs	$4,022.92	($1,730.00)	OIG audit; incomplete small project
1336	debris removal	$111,591.74	($45,616.70)	documentation
2646	debris removal	$17,801.66	($17,801.66)	OIG audit; DOB
4237	casino pool and beach repairs	$11,238.77	($3,253.00)	OIG audit; incomplete small project
6405	electric distribution system repairs	$521,211.02	($126,246.11)	OIG audit; FAE documentation
FEMA-1561-DR-FL (Jeanne)
PW	Work	Initial Award	Disputed Costs	Reason for Deobligation
2386	Barton Park repairs	$3,318.57	($1,107.00)	OIG audit; incomplete small project
2387	Sunset Ridge Park repairs	$4,372.17	($4,372.00)	OIG audit; DOB, incomplete small project
2766	northwest ball field repairs	$11,254.77	($1,595.00)	OIG audit; incomplete small project
3783	electric distribution system repairs	$1,208,188.04	($282,264.00)	OIG audit; FAE and FAL documentation

 

 

 

FEMA-1609-DR-FL (Wilma)
PW	Work	Initial Award	Disputed Costs	Reason for Deobligation
3429	parking meter repairs	$21,755.00	($14,555.00)	OIG audit; DOB
3651	Memorial Park fence repairs	$2,632.50	($2,632.50)	OIG audit; DOB
3830	landfill repairs	$10,905.18	($7,905.00)	OIG audit; DOB
4536	Bryant Park repairs	$11,375.85	($3,949.00)	OIG audit; DOB
5166	Pinecrest Cemetery building/vehicles	$31,737.53	($27,008.00)	OIG audit; DOB
5192	municipal golf course repairs	$18,353.98	($18,353.98)	OIG audit; DOB
5590	Sunset Park, northwest ballfields	$31,990.04	($16,927.00)	OIG audit; DOB
6477	debris removal	$2,675,927.08	($1,146,227.63)	documentation
($288,034.23)	OIG audit; FAE documentation
8279	Howard Park repairs	$42,953.75	($42,953.75)	OIG audit; DOB
8398	miscellaneous and FA expenses	$1,371,035.11	($204,594.00)	OIG audit; FAE and FAL
8443	exterior pool house repairs	$4,530.60	($4,530.60)	OIG audit; incomplete small project
8472	casino pool and beach complex	$46,340.76	($46,340.76)	OIG audit; DOB
8511	pool house repairs	$51,765.96	($4,273.40)	OIG audit; incomplete small project
		Total in Dispute:	($4,239,861.93)

 

First Appeal

On February 7, 2012, and July 12, 2013, the Applicant submitted several first appeals, asserting that it properly documented project costs.  On June 10, 2014, and July 30, 2014, the Florida Division of Emergency Management (Grantee) transmitted the appeals to FEMA.  On July 23, 2018, the FEMA Region IV Regional Administrator (RA) denied the first appeals, in one response, finding that the Grantee’s transmittal of the Applicant’s first appeals was untimely.

On September 20, 2018, the Applicant submitted a second appeal, reiterating and expanding upon previous arguments.  On October 18, 2019, the Acting FEMA PA Division Director found the Applicant’s first appeal was untimely; however, FEMA reinstated $18,329.00 because it was barred by Section 705(a) of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act from recovering funds more than three years after the Grantee transmitted its final expenditure reports.

On August 12, 2019, the Applicant filed a petition in U.S. District Court challenging FEMA’s decision to deny the Applicant’s appeals on timeliness grounds.  On January 4, 2021, the District Court granted FEMA’s motion to dismiss the Applicant’s complaint.  On March 4, 2021, the Applicant appealed the District Court’s decision to the United States Court of Appeals.  The Applicant and FEMA entered into a Settlement Agreement on September 10, 2021, which provided that FEMA would address the substantive issues raised in the Applicant’s first appeal submission and FEMA would not revisit the substantive issues already resolved in FEMA’s October 18, 2019 second appeal decision.

On December 28, 2021, the FEMA Region IV RA responded to all associated appeal requests in one response and partially granted the Applicant’s requests.  FEMA found that Section 705(c) of the Stafford Act precluded the deobligation of engineering costs for PW 602, and therefore, it would reinstate $16,105.00.  However, FEMA found that it was not precluded from deobligating costs on the Applicant’s remaining PWs because the Applicant had not properly supported the costs, so FEMA could make project cost adjustments prior to determining whether Section 705(c) applied.  Further, FEMA was unable to determine eligibility of debris, equipment usage, and labor based on the documentation, so the associated costs were ineligible.  FEMA also found that the Applicant either received insurance proceeds, or was required to file claims, on insured work for 14 projects, so those actual or anticipated insurance proceeds were ineligible for funding.  Finally, FEMA found that Section 705(a) of the Stafford Act did not preclude the recovery of additional funding.

Second Appeal

On February 25, 2022, the Applicant submitted a second appeal, stating that the amount in dispute is $4,258,190.93[2] and asserting that:

• It substantiated its debris removal work and the associated FAL and FAE costs, and that FEMA’s debris monitors observed the work, validated the documentation and costs at the time of obligation, approved reasonable costs, and the costs were reimbursed.
• It substantiated the insurance proceeds it received; FEMA reviewed the Applicant’s insurance documentation, reduced the amount of assistance in the respective projects by the anticipated insurance proceeds, and verified the remaining documentation before it approved the project costs.  Further, it has not received additional proceeds and neither the OIG nor FEMA cited any documentation stating otherwise.
• Its small projects were completed within 18 months of the respective disaster declaration date, and neither the OIG nor FEMA cited to specific documentation when determining that the small projects at issue were not completed within regulatory guidelines.
• Nevertheless, Section 705(c) of the Stafford Act prevents FEMA from deobligating the costs at issue and FEMA misinterpreted the application of Section 705(c) in the first appeal determination.

The Applicant submitted a supplement to its appeal on April 25, 2022, providing a declaration from its Department of Public Works (DPW), describing the Applicant’s debris removal efforts and documentation of FAL and FAE costs.  The DPW states that the Applicant removed only debris from within its jurisdiction and did not remove debris from any private or commercial properties not owned or maintained by the Applicant.  The Applicant provides a statement of loss and insurance payment regarding the work under PW 2646.  The Grantee transmitted the second appeal to FEMA, recommending its approval.

 

Discussion

Debris Removal

FEMA is authorized to provide PA funding for debris removal when it is necessary to eliminate immediate threats to lives, public health and safety; eliminate immediate threats of significant damage to improved public or private property; or ensure economic recovery of the affected community.[3]  FEMA’s Debris Management Guide provides guidance on debris removal documentation requirements, including that load tickets are normally required for payment under a unit price contract.[4]

It is the applicant’s responsibility to show that the damage is disaster-related.[5]  It is critical that the applicant establish and maintain accurate records of events and expenditures related to disaster recovery work.[6]  All of the documentation pertaining to a project should be filed with the corresponding PW and maintained by the applicant as the permanent record of the project.  These records become the basis for verification of the accuracy of project cost estimates during validation of small projects, reconciliation of costs for large projects, and audits.[7]  The burden to fully substantiate an appeal with documented justification falls exclusively on the applicant and hinges on the applicant’s ability not only to produce its own records, but to clearly explain how those records support the appeal.[8]

PWs 470, 1336, and 6477

FEMA prepared PW 470 for debris removal throughout Lake Worth after Hurricane Frances, initially awarding $2,152,331.80 in PA funding.  In 2011, FEMA performed a project closeout review, finding that the supporting documentation only substantiated eligible costs of $224,740.19, which resulted in an underrun of $1,927,591.61.[9]  FEMA explained that the variance was due to the lack of load tickets necessary to validate completed work, as well as accurate truck certifications.  FEMA conducted numerous meetings with the Applicant to overcome the lack of documentation, but the Applicant was unable to provide documentation to verify the remaining costs.[10]  The Applicant submitted a first appeal, stating that it was unable to locate some load tickets, and other load tickets did not document where the debris originated, but the Applicant asserts that it originated in public/utility rights of way and properties.  The Applicant also stated that the amount of debris removed by area was similar to that of nearby communities.  Finally, it argued that it is reasonable that some documentation would be lost given the amount of time elapsed between the event in 2004 and the beginning of FEMA’s closeout process in 2011.  The Applicant submitted additional documentation, but did not respond to FEMA’s request to help associate specific pages of documentation to particular PWs, with remarks explaining how the information supports the Applicant’s position.[11]  Consequently, FEMA found in the first appeal response that it could not determine that the work was eligible.

FEMA also prepared PW 1336 for debris removal after Hurricane Frances, initially awarding $111,591.74.  In 2011, FEMA performed a final inspection of the supporting documentation, finding that the documentation only substantiated eligible expenditures of $65,975.04, resulting in an underrun of $45,616.70.[12]  FEMA explained that the variance was due to the Applicant not providing load tickets or proof of payment for contract disposal costs despite FEMA holding numerous meetings with the Applicant to try to obtain additional information with respect to missing load tickets.[13]  The Applicant submitted a first appeal, making similar arguments as it did for PW 470.  FEMA found in its first appeal response that the debris removal costs remained ineligible because the Applicant had not provided documentation substantiating the work.

After Hurricane Wilma, FEMA prepared PW 6477 for debris removal, initially awarding $2,675,927.08 in PA funding.  In 2011, FEMA performed a final inspection of the supporting documentation, finding that the documentation only substantiated eligible expenditures of $1,529,699.45, resulting in an underrun of $1,146,227.63.[14]  FEMA explained that the underrun was due to: 1) the Applicant not providing load ticke­­ts to substantiate invoice payments; 2) a 15 percent eligible volume deduction for all loads picked up before November 17, 2005, due to truck load capacity discrepancies; and 3) recalculation of eligible work hours due to Applicant not properly monitoring debris operations until after November 17, 2005.[15]  In its first appeal, the Applicant asserted that FEMA monitored each truck load and raised no questions as to where the debris came from, and that available load tickets consistently showed that the debris came from public/utility rights of way and properties. 

On second appeal, the Applicant does not cite to specific documentation to validate its debris removal claims for PWs 470, 6477, and 1336, instead asserting that the available information should satisfy FEMA’s requirements, as well as providing a declaration from the DPW to corroborate its debris removal activities.  The Applicant has not provided documentation that enables FEMA to verify the origin of the debris, or that otherwise supports the costs.  FEMA cannot rely on assertions that the costs are eligible; rather supporting documentation is required, and the Applicant must explain how that documentation supports its claims.  FEMA is unable to determine the eligibility of the costs in dispute with the available information. 

Force Account Equipment

For applicant-owned equipment, costs are reimbursed using an hourly rate.[16]  Equipment rates typically include operation, insurance, depreciation, and maintenance; however, they do not include the labor of the operator.  Stand-by time for equipment is not eligible.[17]  However, if an applicant uses equipment intermittently for the majority of the day, use for the entire day may be claimed if adequate documentation is submitted.[18]

PWs 6405, 3783, 8398, and 6477

FEMA prepared PWs 6405 and PW 3783 for repairs to the Applicant’s electric distribution system, initially awarding $521,211.02 and $1,208,188.04, respectively.  FEMA prepared PW 8398 for miscellaneous and force account expenses, initially awarding $1,371,035.11.  As mentioned previously, FEMA prepared PW 6477 for debris removal, initially awarding $2,675,927.08.

The OIG questioned FAE costs under the four projects, finding that the Applicant did not document the hours its equipment was in use, relying instead on employee timesheets that did not account for idle time.[19]  FEMA concurred with the OIG’s recommendation and deobligated funding across the four projects.  On first appeal, the Applicant argued that the costs were documented and that the Grantee’s audit/closeout team determined the documentation was adequate.  In its first appeal response, FEMA found that the equipment costs remained ineligible because the Applicant had not provided additional documentation substantiating the costs.

On second appeal, the Applicant’s DPW states that it was common practice for FAL and FAE logs to match since its employees were assigned equipment during its work assignments; this was how the Applicant used equipment, and captured the operating time, on a normal basis.[20]  The Applicant disagrees with FEMA’s determination, but does not cite to documentation to validate its claim.

Given the information provided, FEMA is unable to validate the equipment costs in dispute.  The documentation did not verify the claimed equipment hours and associated costs.  However, as explained later, Section 705(c) of the Stafford Act prohibits FEMA from recovering the funds.

Force Account Labor

FAL is defined as labor performed by the applicant’s employees, rather than by a contractor. [21]  Force account labor costs associated with the conduct of eligible work may be claimed at an hourly rate.[22]  Labor rates include actual wages paid plus fringe benefits paid or credited to personnel.[23]  Straight time and overtime will be determined according to the applicant's written

policies and labor union contracts in effect prior to the disaster.[24]

PWs 3783 and 8398

As above, FEMA prepared PW 3783 for repairs to the electric distribution system, initially awarding $1,208,188.04.  FEMA later deobligated $37,360.00 after concurring with the OIG’s findings that the Applicant included FAL costs that were not based on the Applicant’s compensation policy.[25]  The OIG made similar findings with regard to PW 8398 and FEMA deobligated $18,732 from the project.[26]  The Applicant did not provide additional documentation to substantiate the eligibility of its FAL costs.  Consequently, FEMA found on first appeal that the Applicant’s FAL costs remained ineligible.

On second appeal, the Applicant states that FEMA originally validated FAL documentation and that it relied on the OIG’s findings when it deobligated funding.  Though the Applicant states that neither the OIG nor FEMA provided adequate information for the Applicant to respond to questions about its FAL costs, it only provides assertions in the DPW’s declaration, and is  unable to further justify the costs.

The Applicant has not provided any new information on second appeal to substantiate its FAL costs, nor has it undertaken a review of its employee pay documentation from the time of the disaster that might show compliance with predisaster pay policies.  On appeal, it is the Applicant’s burden to demonstrate eligibility of the costs in dispute.  Without documented justification, FEMA is unable to verify the costs as eligible.  However, as explained later, Section 705(c) of the Stafford Act prohibits FEMA from recovering the funds.

Work Completion Deadlines

The project completion deadline for permanent work projects is 18 months from the date of the major disaster declaration.[27]  Based on extenuating circumstances, the grantee, under its authority, may extend the deadline an additional 30 months for permanent work.[28]  Requests for additional time extensions must be submitted to the FEMA RA.[29]  The grantee must certify that all small projects were completed as specified in the FEMA-State Agreement.[30]  Failure to complete a project may require that the Federal payment be refunded.[31]  FEMA requires grant recipients to maintain financial and program records on file for three years following submission of a final expenditure report.[32]  If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the three-year period, the records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular three-year period, whichever is later.[33]

PWs 1286, 4237, 2766, 2387, 8443, and 8511

FEMA initially awarded several small projects that are at issue in this appeal.  FEMA later deobligated the funding after concurring with the OIG’s findings that the Applicant did not provide evidence that it completed the work.  On first appeal, the Applicant stated that the repairs were made, but that subsequent renovations to the facilities made this difficult to prove, and that the confusion was due to the significant lapse of time.  However, FEMA found in its first appeal response that these small projects remained ineligible because the Applicant did not provide any documentation, specifically a P.4 Closeout Report, to substantiate project completion costs.  FEMA added that the Applicant was made aware of the deobligations during the mandatory document retention period and placed on notice that all relevant information regarding all of the  projects in this appeal needed to be retained until the issues in dispute were resolved.[34]

On second appeal, the Applicant argues that neither FEMA nor the OIG cited to any documentation supporting the conclusion that the small projects were not completed, and that FEMA did not request documentation until years after the work had been completed.  The Applicant reiterated that the facilities had subsequently undergone extensive renovations, and that it was only required to maintain records for three years.  Therefore, it contends that it should not be expected to maintain documentation evidencing project completion beyond that time frame, but nevertheless, asserts these projects were completed in accordance with FEMA deadlines.

The Applicant does not provide additional information, nor does it cite to specific documentation, such as the aforementioned P.4, to substantiate its claim.  As a result, FEMA is unable to validate the small project completion costs.  The Applicant claims that it was only required to maintain documentation evidencing project completion for three years; however, it was required to retain relevant records until all outstanding issues were resolved.

Duplication of Benefits

Section 312 of the Stafford Act prevents FEMA from duplicating benefits from any source, including insurance.[35]  FEMA is required to reduce the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.[36]  FEMA cannot provide assistance for disaster-related losses that duplicate benefits available to an applicant from another source, including insurance.[37]

PWs 2646, 2387, 2386, 8472, 5166, 3651, 3429, 3830, 4536, 5590, 5192, and 8279

FEMA initially obligated funding for these 12 projects.  FEMA concurred with the OIG’s recommendation that FEMA reduce funding because the Applicant received insurance proceeds to cover repair costs, but failed to reduce project costs accordingly.  For PWs 5192 (Memorial Golf Course) and PW 8279 (Howard Park), the facilities were fully insured, so the Applicant was responsible for pursuing full insurance recoveries for the damage.  On first appeal, the Applicant contended that the OIG made its calculations based on inadequate documentation.  FEMA requested that the Applicant provide documentation, specifically the insurance carrier’s statements of loss related to each project, to demonstrate that the insurance coverage did not cover all disaster-related damages.  However, the Applicant did not provide additional information, so FEMA found on first appeal that the costs were ineligible for funding.  For PWs 5192 and 8279, FEMA found that the Applicant had insurance coverage and could have pursued proceeds for the damage identified, so the costs in dispute were likewise ineligible.

On second appeal, the Applicant asserts that neither FEMA nor the OIG identified the documentation it relied upon to conclude that the projects received insurance proceeds in excess of what FEMA deducted in anticipated insurance proceeds during project formulation.  Moreover, the Applicant contends that FEMA’s request of additional insurance documentation ten years after the events is unreasonable.  The Applicant could not locate any documentation showing that it received any insurance proceeds in excess of the reduction FEMA already made to each project, nor any documentation demonstrating that the facilities covered under PWs 5192 and 8279 were specifically insured against the damages caused by the storms.  Therefore, the Applicant states that no insurance proceeds were available for these projects, and the costs should be re-obligated.

The Applicant adds in the supplement to the second appeal that it appears that FEMA and the OIG relied on its insurance carrier’s statement of loss when determining that the Applicant received $24,339.00 in actual insurance proceeds for repair of the Osborne Community Center under PW 2646.  However, the Applicant claims it received only $10,385.90 for the Osborne Community Center repair work, providing a statement of loss and payment from its insurer as evidence.  Accordingly, it asserts that only $10,385.90 in actual insurance proceeds should be deducted from PW 2646 in order to prevent a duplication of benefits.

Upon review, the documentation that the Applicant provides for PW 2646 does not demonstrate that the Applicant only received $10,285.90 from its insurance carrier.  The Applicant highlights multiple insurance claims in its statement of loss that it believes FEMA erroneously relied on in determining that the Applicant received $24,339.00 in proceeds, and then contrasts this with documentation showing a lower actual payment of $10,385.90 from its insurer.  However, the highlighted costs in the statement of loss do not include or total $24,339.00 or reference the Osborne Community Center, so there is no indication that FEMA relied on this statement for its insurance reduction.  Further, the payment from its insurer that the Applicant cites only refers to a “Recreation Bldg,”[38] without reference to any other specific facility, so FEMA cannot determine that this payment was for work at the Osborne Community Center either.

For the Applicant’s remaining insurance projects, the insurance information in the administrative record showed that these properties were insured and FEMA deducted the proceeds accordingly.  FEMA requested that the Applicant provide documentation demonstrating that there was less coverage than what FEMA estimated.  However, the Applicant is unable to provide additional information, nor is it able to cite to specific documentation, such as a record of insurance proceeds, to substantiate its claim.  As a result, the costs in dispute remain ineligible for funding.

 

Section 705(c)

Section 705(c) of the Stafford Act provides that a state or local government is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if: (1) the payment was authorized in the approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.[39]  Section 705(c) prohibits FEMA from recovering payments for a project if all three criteria are met.  This prohibition applies even if FEMA later determines that it made an error in determining eligibility, regardless of whether the eligibility determination violated law, regulations, or FEMA policy, or in cases where the OIG has made an audit recommendation to recover payments.[40]  Prior to determining whether Section 705(c) applies, FEMA will adjust and correct project funding based on properly supported actual costs for the approved and completed scope of work and duplication of benefits (e.g., insurance proceeds).[41]

FEMA considers that the purpose of the grant was accomplished if the scope of work is completed and post-award terms and conditions are met.[42]  Typically, whether the purpose of the grant was accomplished will be determined during the project closeout process when the grantee must submit documentation to FEMA demonstrating completion of the approved scope of work and compliance with post-award terms and conditions.[43]  For small projects, FEMA will accept the P.4 or a letter certifying completion of all of an applicant’s small projects in accordance with applicable law and regulation.[44]  If the applicant or grantee fails to provide all necessary information to FEMA that materially impacts FEMA’s determination regarding project eligibility, cost of the approved scope of work, or compliance with the terms and conditions of the award, then Section 705(c) does not apply and FEMA will take all appropriate actions to recover payments to remedy the failure.[45] 

PWs 6405, 3783, 8398, and 6477

FEMA closed out each of these projects in 2011, awarding the funding listed below.  In 2013, FEMA deobligated funding from each of these projects after concurring with the results of the OIG’s 2012 audit findings.

 

PW	Award at Closeout (2011)	Deobligations (2013)
6405	$521,165.28	$126,246.11
3783	$1,200,408.81	$282,264.00
6477	$1,529,699.45	$288,034.23
8398	$1,370,964.11	$204,594.00
	Total:	$901,138.34

 

When FEMA closed out each of these projects, it determined eligible costs and verified that the scope of work was completed and the projects complied with terms and conditions of the award.  At that time, FEMA did not take action to recover payments based on the Applicant’s or Grantee’s failure to provide all necessary information,[46] but rather the project notes for PWs 6405 and 3783 indicate that documentation was reviewed and validated, and force account labor and equipment costs were validated using acceptable closeout methods.  Notes for PWs 6477 and 8398 similarly indicate that FEMA reviewed supporting documentation to substantiate eligible costs.  For these projects, all three criteria of Section 705(c) had been met prior to the 2013 deobligations.  Therefore, Section 705(c) prohibits FEMA from recovering these payments even though the OIG made audit findings with which FEMA agreed.  As such, FEMA will reobligate $901,138.34 in funding.

Small Projects: PWs 1286, 4237, 2766, 2387, 8443, and 8511

As stated previously, the Applicant did not provide documentation certifying completion of its small projects, so FEMA cannot verify that the projects’ scopes of work were completed.  As a result, the Applicant has not satisfied the third condition under Section 705(c) that the purpose of the grant was accomplished.  Therefore, Section 705(c) does not prohibit FEMA from recovering the funds determined to be ineligible.

 

Remaining Projects

Prior to closing out the remaining projects, FEMA made project cost adjustments, as permitted, before determining whether Section 705(c) applied based on properly supported actual costs for the approved and completed scope of work and to avoid a duplication of benefits from insurance.  Throughout its appeal, the Applicant has either not provided supporting documentation, has provided unclear documentation, or has not explained how the existing documentation supports the costs in dispute, such as how to associate specific pages of documentation to costs with explanations.  Specifically, the Applicant has not provided documentation validating completed debris removal work or demonstrating that it had less coverage than FEMA estimated for its insurance reductions.  Therefore, FEMA was unable to find the requested costs to be properly supported and as such, Section 705(c) does not prohibit FEMA from recovering the funds.

 

Conclusion

FEMA finds that the Applicant has not provided documentation that supports the costs in dispute.  However, FEMA is reinstating $126,246.11 of funding under PW 6405, $282,264.00 of funding under PW 3783, $288,034.23 of funding under PW 6477, and $204,594.00 of funding under PW 8398 because Section 705(c) of the Stafford Act prohibits FEMA from recovering the funds even though FEMA later found that it made an error in determining eligibility.

 

[1] U.S. Dep’t of Homeland Sec. Office of Inspector Gen. (OIG), DA-13-04, FEMA Should Recover $7.7 Million of Public Assistance Grant Funds Awarded to the City of Lake Worth, Florida - Hurricane Wilma (2012); and U.S. Dep’t of Homeland Sec. OIG, DA-13-08, FEMA Should Recover $470,244 of Public Assistance Grant Funds Awarded to the City of Lake Worth, Florida - Hurricanes Frances and Jeanne (2012).

[2] The amount in dispute includes $18,329.00 that FEMA previously restored because Section 705(a) of the Stafford Act prohibited FEMA from recovering the funds.  See FEMA Second Appeal Analysis, City of Lake Worth, FEMA-1545-1561-1609-DR-FL, at 2 (Oct. 18, 2019).

[3] Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act §§ 403, 407, 42 U.S.C. §§ 5170b, 5173 (2000); Title 44 Code of Federal Regulations (44 C.F.R.) §§ 206.223(a)(1), 206.224(a) (2003); Public Assistance Guide, FEMA 322, at 45 (Oct. 1999) [hereinafter PA Guide].

[4] Public Assistance Debris Management Guide, FEMA 325, at 30, F-2 (Apr. 1999).

[5] PA Guide, at 27.

[6] PA Guide, at 113.

[7] Id.

[8] FEMA Second Appeal Analysis, Brevard (County), FEMA-4337-DR-FL, at 3 (Dec. 8, 2021); FEMA Second Appeal Analysis, Dep’t of Transp., FEMA-4068-DR-FL, at 5 (Aug. 5, 2016); FEMA Second Appeal Analysis, City of Sweetwater, FEMA-1345-DR-FL, at 3 (Aug. 15, 2017). 

[9] Project Worksheet 470, Lake Worth, City of, Version 1 (Dec. 8, 2011).

[10] Id.

[11] Letter from Dir., Rec. Div., FEMA Region 4, to Assistant Fin. Dir., City of Lake Worth and Dir., Fla. Div. of Emergency Mgmt., at 2 (Apr. 9, 2018).

[12] Project Worksheet 1336, Lake Worth, City of, Version 1 (Nov. 15, 2011).

[13] Id.

[14] Project Worksheet 6477, Lake Worth, City of, Version 3 (Nov. 15, 2011).

[15] Id.

[16] 44 C.F.R. § 206.228(a)(1); PA Guide, at 37.

[17] PA Guide, at 37.

[18] Id.

[19] DA-13-08, at 5.

[20] Waste Supervisor, Dep’t of Pub. Works, City of Lake Worth, Declaration, at 1 (Apr. 14, 2022).

[21] 44 C.F.R. § 206.221(b); PA Guide, at 35.

[22] PAPPG, at 35.

[23] Id.

[24] Response and Recovery Directorate Policy 9525.7, Labor Costs – Emergency Work, at 2 (July 20, 2000).

[25] DA-13-08, at 6 (“…the City paid employees double time for all hours worked, including regular hours, when an employee worked 16 consecutive hours during a work period.  According to the City’s compensation policy and labor union contract, employees who work between 8 and 16 consecutive hours during a work period would be paid at time-and-a-half rates, and all hours over 16 will be paid at double-time rates”).

[26] DA-13-04, at 7-8.

[27] 44 C.F.R. § 206.204(c)(1); PA Guide, at 114.

[28] 44 C.F.R. § 206.204(c)(2).

[29] Id. at § 206.204(d).

[30] Id. at § 206.205(a); PA Guide, at 83.

[31] 44 C.F.R. § 206.205(a).

[32]Id. § 13.42(b).

[33]Id. § 13.42(b)(2).

[34] FEMA First Appeal Analysis, City of Lake Worth, FEMA-1545-1561-1609-DR-FL, at 26 (Dec. 28, 2021).

[35] Stafford Act § 312, 42 U.S.C. § 5155; PA Guide, at 94.

[36] PA Guide, at 94.

[37] Id. at 34.

[38] Compare Westchester Surplus Lines Insurance Company, Statement of Loss, City of Lake Worth – Hurricane Frances, at 2 (Jan. 18, 2005), with Westchester Surplus Lines Insurance Company, Insurance Payment, City of Lake Worth – Hurricane Frances, at 2 (Apr. 22, 2005).

[39] Stafford Act § 705(c), 42 U.S.C. § 5205(c).  See also FEMA Policy (FP) 205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, at 4 (June 2, 2021).

[40] FP 205-081-2, at 4 and 7.

[41] Id. at 4.

[42] Id. at 5.

[43] Id. at 6.

[44] Id.

[45] Id. at 7.

[46] Id. at 6-7.