Direct Administrative Costs
Appeal Brief
Appeal Letter
Appeal Analysis
Appeal Brief
| Disaster | FEMA-1981 |
| Applicant | North Dakota Department of Emergency Services |
| Appeal Type | Second |
| PA ID# | 000-UGSDX-00 |
| PW ID# | PW 4905 |
| Date Signed | 2018-01-12T00:00:00 |
Conclusion: The North Dakota Department of Emergency Services’ (Grantee) has not demonstrated that its claimed travel time and mileage costs were incurred for a specific Project Worksheet (PW). Therefore, these costs are not eligible as Direct Administrative Costs (DAC).
Summary Paragraph
From February 14 to July 20, 2011, flooding caused damage throughout the State of North Dakota. FEMA prepared PW 4905 to document the Grantee’s claim for $3,716,618.04 in DAC, which included contractor labor and travel expenses incurred to perform Public Assistance (PA) grant administration work for FEMA-1981-DR-ND. FEMA determined that the Grantee’s DAC claim included $720,481.84 in indirect costs and $123.21 in other ineligible costs, and reduced the eligible DAC amount accordingly. The Grantee appealed FEMA’s determination, and requested $487,224.26 of the amount deducted from its DAC claim. The Grantee argued that its costs for travel to and from contractors’ duty stations and field locations are eligible as DAC because its travel cost methodology exceeds the requirements of Title 2 of the Code of Federal Regulations (C.F.R.) Part 200, as those costs were assigned to specific PWs in 15-minute increments on a “point-to-point” basis (i.e., by charging costs for inbound travel to the first PW worked on each day/trip and outbound travel to the last PW for each day/trip). Although effective starting December 26, 2014, the Grantee insisted that 2 C.F.R. Part 200 provides clarification applicable to all cost principles for federal awards prior to December 26, 2014. The Acting FEMA Region VIII Regional Administrator (RA) denied the appeal, and found the costs were claimed on a “first-in/last-out” basis to specific PWs, but were indirect costs incurred for the benefit of multiple PWs that could not be claimed as DAC. The Grantee appeals the Acting RA’s decision, and reiterates its first appeal arguments.
Authorities
- Stafford Act § 324.
- 2 C.F.R. pt. 225 (2011).
- 44 C.F.R. §§ 13.22(b); 207.2 (2010).
- 2 C.F.R. § 200.110 (2014).
- DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs.
- Memorandum from Assistant Administrator (Sept. 8, 2009).
Headnotes
- According to DAP 9525.9: (1) eligible DAC are actual reasonable costs that can be assigned to one specific project; (2) indirect costs are incurred for a common or joint purpose to benefit more than one cost objective and are not readily assignable to the cost objectives specifically benefited; and (3) indirect costs are not eligible for reimbursement as DAC. The Memorandum from the Assistant Administrator also explains that travel expenses related to general support and not directly tied to one specific project are indirect costs.
- The Grantee’s claimed travel costs were incurred for the benefit of multiple PWs during each respective trip. Accordingly, those costs are ineligible for reimbursement as DAC.
Appeal Letter
Greg M. Wilz, Director
Division of Homeland Security
North Dakota Department of Emergency Services
5511 Fraine Barracks Lane, Building 35
Bismarck, North Dakota 58506-5511
Re: Second Appeal – North Dakota Department of Emergency Services, PA ID 000-UGSDX-00, FEMA-1981-DR-ND, Project Worksheet (PW) 4905 – Direct Administrative Costs
Dear Mr. Wilz:
This is in response to a letter from your office dated May 16, 2017, which transmitted the referenced second appeal. Your office appealed the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $487,224.26 in funding for contractor labor and mileage costs claimed as direct administrative costs (DAC).
As explained in the enclosed analysis, I have determined that the Grantee’s claimed travel costs constitute indirect costs incurred for the benefit of multiple PWs and are therefore ineligible for reimbursement as DAC. Accordingly, I am denying this appeal.
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: Lee dePalo
Regional Administrator
FEMA Region VIII
Appeal Analysis
Background
Between February 14 and July 20, 2011, flooding caused damage throughout the State of North Dakota. On May 10, 2011, the President declared a major disaster for the State. The North Dakota Department of Emergency Services (Grantee) hired independent contractors to assist with the administration of the Public Assistance (PA) program. The contractors often traveled to attend kickoff meetings with subgrantees, conduct site inspections, document and review damages, and prepare project worksheets (PWs). In addition, many contractors worked on various subgrantee PWs at the joint field office duty station in Bismarck, North Dakota, and at other duty stations and locations.
The Grantee claimed direct administrative costs (DAC) in the amount of $3,716,618.04.[1] However, FEMA determined the Grantee’s DAC claim included $720,605.05 in ineligible costs, and reduced the eligible DAC amount accordingly.[2] The indirect costs deducted from the Grantee’s DAC claim included costs for labor, mileage, per diem, and lodging incurred by contractors for travel to and from locations to work on multiple PWs per trip, back and forth between home and duty stations over the weekend, and for kickoff meetings and applicant briefings.
First Appeal
The Grantee appealed FEMA’s determination in a letter dated December 5, 2016, requesting $487,224.26 in claimed DAC for travel costs incurred by its contractors while commuting to and from their duty stations and field locations.[3] The Grantee explained that it charged labor and mileage costs to the first PW of the workweek incurred during the inbound commute from each contractor’s address to each respective duty station, and such costs for travel on return from the duty station to the contractor’s address were charged to the last PW of the workweek. Similarly, the Grantee charged labor and mileage costs to the first PW of the workday for the contractors’ commute from their duty stations to field locations, and charged such costs to the last PW of the workday incurred for travel from the field locations to return to the duty stations.
The Grantee claimed that its travel cost methodology complies with federal regulations and FEMA policy, which do not require DAC to be measured by day, trip, or week. The Grantee also contended that its claimed travel costs were directly required for the first and last PW of each work day or trip, regardless of the other activities performed during that workday or trip. In addition, the Grantee argued that it tracked its travel costs in 15-minute increments on a “point-to-point” basis, which is a methodology that exceeds the requirements of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Rules) at Title 2 of the Code of Federal Regulations (C.F.R.) Part 200.[4] The Grantee insisted that any practice allowed under the Uniform Rules would also be allowed prior to the December 26, 2014 effective date because they were intended to provide clarification and uniformity of all prior cost principles for federal awards.[5]
On March 3, 2017, FEMA Region VIII issued a Final Request for Information (RFI) to advise the Grantee that the appeal would likely be denied due to lack of evidence showing the claimed labor and mileage costs benefitted one specific project, and to provide the Grantee with a final opportunity to submit documentation supportive of its appeal.[6] The Final RFI also emphasized that the labor and mileage costs were assigned to individual PWs on a “first in/last out” basis, but benefited multiple PWs.[7] The Grantee responded on March 27, 2017, reiterating its previous arguments and stating that it had already provided sufficient information to support its claims.[8]
The FEMA Region VIII Acting Regional Administrator (RA) denied the first appeal on April 26, 2017.[9] The RA found that the Grantee’s claimed travel costs for inbound and outbound travel benefited more than one specific project per daily or weekly trip. Consequently, the RA concluded the travel expenses were indirect costs that could be claimed as Section 324 Management Costs, but were ineligible for reimbursement as DAC.
Second Appeal
In its second appeal dated May 16, 2017, the Grantee reitierates its first appeal arguments and requests $487,224.26 in DAC for travel costs.[10]
Discussion
Pursuant to DAP 9525.9, FEMA may reimburse DAC if properly documented and directly chargeable to a specific project.[11] Eligible DAC must not only be tracked, but also charged directly to one specific project.[12] According to DAP 9525.9, indirect costs are “costs a grantee or subgrantee incurs for a common or joint purpose benefitting more than one cost objective that are not readily assignable to the cost objectives specifically benefitted.”[13] For instance, travel expenses “related to one specific project” are DAC, while travel expenses “related to general support and not directly tied to one specific project” are indirect costs.[14] A grantee may not assign costs to a PA project as DAC if those costs constitute indirect costs or if similar costs incurred for the same purpose in like circumstances have been allocated to indirect costs.[15] Indirect costs may be eligible as management costs as defined in Section 324 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act,[16] but are not eligible for reimbursement as DAC.[17]
Here, the contractors traveled to their duty stations and field locations, and worked on several PWs over the course of each trip. While the Grantee assigned DAC for contractor travel time and mileage to the first and last PWs per day or week, those costs benefited all PWs associated with each respective trip and were not incurred for the sole benefit of the first and last PW of the day or week. Travel expenses incurred for a single trip for the benefit of multiple PWs or “related to general support and not tied directly to one specific project,” are not eligible as DAC, but instead may be eligible as indirect costs.[18] Further, the Grantee incorrectly relies on the Uniform Rules under 2 C.F.R. Part 200 as support for its appeal because they do not apply to disasters declared before December 26, 2014.[19]
In sum, FEMA finds that the Grantee’s travel costs for labor and mileage were incurred for the benefit of multiple PWs during each respective trip. Consequently, the RA correctly concluded those costs were ineligible for reimbursement as DAC.
Conclusion
The Grantee’s claimed costs for contractor labor and mileage constitute indirect costs incurred for the benefit of multiple PWs, which are ineligible for reimbursement as DAC. Accordingly, the Grantee’s second appeal is denied.
[1] Project Worksheet 4905, North Dakota Department of Emergency Services, Version 0 (Nov. 29, 2016); Letter from Bus. Manager, N.D. Dep’t of Emergency Servs., to Pub. Assistance Grants Analyst, FEMA Region VIII (Jan. 4, 2016).
[2] PW 4905, North Dakota Department of Emergency Services (Version 0). FEMA reduced the eligible DAC amount in PW 4905 to $2,996,012.99 after deducting $720,481.84 in indirect costs, $27.00 in ineligible mileage costs, and $96.21 in ineligble costs due to mathematical discrepancies.
[3] Letter from Dir., Div. of Homeland Sec., N.D. Dep’t of Emergency Servs., to Response and Recovery Div., FEMA Region VIII, at 2–3, 7 (Dec. 5, 2016).
[4] See id. at 6–7 (quoting 2 C.F.R. § 200.405(d) (2014)).
[5] Id.
[6] Letter from Acting Reg’l Adm’r, Region VIII, to Dir., Div. of Homeland Sec. and Alt. gov. Auth. Repr., N.D. Dep’t of Emergency. Servs. (Mar. 3, 2017).
[7] Id. at 2.
[8] Letter from Dir., Div. of Homeland Sec., N.D. Dep’t of Emergency Servs., to Acting Reg’l Adm’r, FEMA Region VIII, at 1 (Mar. 27, 2017).
[9] FEMA First Appeal Analysis, N.D. Dep’t of Emergency Servs., FEMA-1981-DR-ND (Apr. 26, 2017).
[10] Letter from Dir., Div. of Homeland Sec., N.D. Dep’t of Emergency Servs., to Response and Recovery Div., FEMA Region VIII (May 16, 2017).
[11] See Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 1– 2 (Mar. 12, 2008) (explaining that DAC are costs that can be identified separately and assigned to a specific project, such as staff time to conduct an initial inspection, prepare and submit PWs, and perform interim and final inspections of projects).
[12] Id. at 6.
[13] Id. at 6.
[14] Memorandum from Assistant Adm’r, Disaster Assistance Directorate, to Reg’l Adm’rs, Acting Reg’l Adm’rs, Transitional Recovery Office Directors, Federal Coordinating Officers, and Disaster Assistance Div. Directors, at Attachment (Sept. 8, 2009) [hereinafter Memorandum from Assistant Administrator].
[15] 2 C.F.R. pt. 225 app. A ¶ C.1 (2011); DAP 9525.9, at 6.
[16] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 324(a), 42 U.S.C. § 5165b (2007) (defining “management cost”); 44 C.F.R. § 207.2 (2010).
[17] DAP 9525.9, at 6.
[18] Memorandum from Assistant Administrator, at Attachment; see id. at 3 (stating “[t]ravel and per diem costs for contractor employees that work on eligible Public Assistance projects are eligible as direct costs if such costs can be and are attributed to individual projects”).
[19] See 2 C.F.R. § 200.110 (2014) (specifying the effective date for the Uniform Rules under 2 C.F.R. pt. 200 as December 26, 2014); 79 Fed. Reg. 75,867, 75,872 (Dec. 19, 2014) (“For grants authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, this rule is applicable for emergency or major disaster declarations issued on or after December 26, 2014.”); see also 2 C.F.R. pt. 225 (2011) (codifying OMB CIRCULAR A-87, which sets forth the applicable cost principles for the Grantee in FEMA-1981-DR-ND based on the May 10, 2011 declaration date).
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