Direct Administrative Costs & Management Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4272
Applicant	Texas Division of Emergency Management
Appeal Type	Second
PA ID#	000-U007C-00
PW ID#	921, 922, 923, 924
Date Signed	2023-02-27T17:00:00

Summary Paragraph

During the incident period of May 22 to June 24, 2016, severe storms and flooding impacted Texas. On October 22, 2019, the Recipient requested $3,033,370.78 in Public Assistance for DAC. FEMA prepared Project Worksheets (PWs) 92, 922, 923, and 924, to document the Recipient’s claimed DAC for this disaster, completed through contract labor, that the Recipient stated was associated with assisting applicants with their projects. The Recipient provided supporting documentation including, spreadsheets with individual line items for each DAC expenditure, and invoices for costs claimed. On August 31, 2021, FEMA issued a determination letter, finding that $2,372,122.79 was eligible, but $661,247.99 was ineligible. FEMA found that the descriptions provided in the spreadsheets did not adequately describe the tasks performed, and in some instances, tasks were either not needed or not performed on specific projects. The Recipient submitted a November 5, 2021 first appeal, stating that $661,247.99 was the amount in dispute. It asserted it followed applicable guidance to document DAC, asserting that it could not determine if a consistent methodology was applied in determining eligibility, and contending that FEMA’s request for additional activity descriptions is not supported by policy or procedure and creates an administrative burden. It stated the narrative descriptions were sufficient and consistent with FEMA’s Public Assistance Program and Policy Guide and pre-disaster policies. On December 20, 2021, FEMA sent a request for information asking for detailed activity descriptions for each line item on the Recipient-provided spreadsheets. The Recipient did not provide a response. On September 6, 2022, the FEMA Region VI Regional Administrator denied the appeal, finding that the Recipient did not demonstrate that $661,247.99 in DAC was reasonable and eligible. The Recipient submits a November 6, 2022 dated second appeal, restating its first appeal arguments.

Authorities and Second Appeals

• 2 C.F.R. § 200.403(a), (g); 44 C.F.R. § 206.206(a).
• PAPPG, at 21, 37-38, 127, 132, 134 (Jan. 2016).
• Campbell Cnty. Fire Dist. #1, FEMA-4497-DR-KY, at 3.

Headnotes

• To be eligible, DAC must be directly tied to the performance of eligible work, necessary and reasonable to accomplish the work properly and efficiently, and adequately documented.

• The Recipient did not provide sufficient details for FEMA to consider whether the type of employee and skill level was appropriate for the activities performed and/or the level of effort required to perform an activity in order to determine reasonableness of the claimed DAC.

Conclusion

FEMA finds that the Recipient has not demonstrated the costs were necessary, reasonable, and accounted for directly to a specific eligible project. Accordingly, the claimed costs are not eligible as DAC. Therefore, the appeal is denied.

 

Appeal Letter

Appeal Analysis

Background

During the incident period of May 22 to June 24, 2016, severe storms and flooding impacted Texas. On October  22, 2019, the Texas Division of Emergency Management (Recipient) requested $3,3003,370.78 in Public Assistance (PA) reimbursement for direct administrative costs (DAC) it stated were associated with activities directly charged to various projects statewide under the disaster. FEMA prepared Project Worksheets (PWs) 923, 924, 925 and 926 to document the Recipient’s claimed DAC for this disaster, completed through contract labor, that the Recipient stated was associated with assisting applicants with their projects. On August 31, 2021, FEMA issued a determination letter, finding that $2,372,122.79 was eligible but $661,247.99 was ineligible. FEMA found that the descriptions provided in the spreadsheets did not adequately describe the tasks performed, and in some instances, tasks were either not needed or were not performed on specific projects.

First Appeal

The Recipient submitted a November 5, 2021 first appeal, stating that $661,247.99 was the amount in dispute. The Recipient asserted it completed a detailed analysis of the line items identified as ineligible costs and was unable to determine if any consistent methodology was applied in determining eligibility. It stated the narrative descriptions were sufficient and consistent with FEMA’s Public Assistance Program and Policy Guide and pre-disaster policies.^[1] The Recipient also stated that it requested that its vendors comply with the guidance provided by FEMA going forward but that it was a burden to request that it comply with these requests so long after the work had occurred

On December 20, 2021, FEMA sent a request for information (RFI) asking for detailed activity descriptions for each line item on the Recipient-provided spreadsheets; documentation demonstrating non-FEMA-related historical costs for similar administrative tasks/administrative activity descriptions; and any additional documentation (i.e., deliverables, work products, meeting notes, etc.). The Recipient did not provide a response. On September 6, 2022, the FEMA Region VI Regional Administrator denied the appeal, finding that the Recipient did not demonstrate that $661,247.99 in DAC was eligible. FEMA determined that the DAC administrative task descriptions lacked sufficient detail for FEMA to determine that the costs were reasonable, necessary, and appropriate for a specific project. FEMA also found that the documentation provided contained descriptions of types of tasks that are generally not related to grant administration for a specific PW; therefore, those tasks were associated with indirect costs, not direct costs.

Second Appeal

The Recipient submitted a November 6, 2022 appeal, restating its first appeal arguments. The Recipient referenced, but did not provide, other recipients’ DAC PWs, asserting they all use similar activity and data detail language to support costs claimed and approved.

Discussion

To be eligible, all costs must be directly tied to the performance of eligible work, necessary and reasonable to accomplish the work properly and efficiently, and adequately documented.^[2] Costs may be eligible as DAC if a recipient or an applicant incurs administrative costs that it tracks, charges, and accounts for directly to a specific eligible project.^[3] Recipients may claim DAC related to different applicants in one PW, but must link the costs and activities to specific subawards.^[4] Examples of eligible DAC include, but are not limited to: visiting, surveying, and assessing the damage site; developing the detailed site-specific damage description; reviewing the project worksheet; preparing correspondence; preparing small projects; and collecting, copying, filing, or submitting documents to support the claim.^[5] When evaluating the reasonableness of DAC, FEMA considers: (1) whether the type of activity and skill level is appropriate for the activities performed; and (2) the level of effort required to perform an activity.^[6] To support claimed DAC, the Applicant should submit a specific description of the administrative task performed by an individual, and the skill level and position description of the individual performing the task.^[7] It is the applicant’s responsibility to substantiate its claim as eligible.^[8] The burden to substantiate appeals with documented justification falls exclusively to the applicant and hinges upon the applicant’s ability to not only produce its own records, but to clearly explain how those records support the appeal.^[9]

The DAC at issue relates to spreadsheet entries that are generic in nature and do not include specific descriptions of the administrative tasks performed. For example, an entry the Recipient assigned to PW 65 listed the administrative task as “PW Review & Final Approval,” with an administrative activity description of “Activities related to supporting the review of one specific project, including the final review and approval of the project worksheet by FEMA and the grantee” but provided no narrative.[10] Similarly, a different entry assigned to PW 89, listed the administrative task as “Data Collection and Dissemination,” with an administrative activity description of “Activities to collect damage data, invoices, estimates, and support documentation related to one specific project,” with an narrative description of “follow up on previous issue.”[11] Yet another example of previously denied DAC notes an administrative task as “Additional FEMA /Grantee Document Request” with a narrative of “Worked to prepare transition plan.”[12] These descriptions do not demonstrate that the costs are directly tied to the performance of administrative activities that were necessary and reasonable, and accounted for directly to a specific eligible project.[13] In addition, due to the lack of specificity concerning what administrative work was actually performed, FEMA does not have the information necessary to consider whether the skill level (i.e., position position) of the individual performing each task was appropriate, or to evaluate the level of effort required to perform each activity.

The Recipient provides instances it contends show eligibility determination inconsistency, noting costs for each PW under appeal that were disallowed for lack of detail, asserting that the narrative descriptions provided were sufficient, and arguing that it could not provide the additional detail. However, these examples do not demonstrate the eligibility of denied DAC. Similarly, the Recipient refers to other recipients’ DAC PWs, but neither provides the referenced PWs, nor demonstrates how they establish eligibility of denied DAC.

 

Conclusion

The Recipient has not demonstrated the costs were necessary, reasonable, and accounted for directly to a specific eligible project. Accordingly, the claimed costs are not eligible as DAC. Therefore, this appeal is denied.

 

[1] The Applicant cited to: (1) Public Assistance Program and Policy Guide, FP 104-009-2 (Jan. 1, 2016) [hereinafter PAPPG]; (2) Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007); and (3) Recovery Policy (RP) 9525.14, Public Assistance Grantee Administrative Costs (Nov. 7, 2006) (superseded on Nov. 13, 2007).

[2] Title 2 Code of Federal Regulations (C.F.R.) § 200.403(a), (g) (2016); PAPPG, at 21.

[3] PAPPG, at 37.

[4] Id. at 38.

[5] Id.

[6] Id.

[7] Id. at 132, 134.

[8] Id. at 127.

[9] 44 C.F.R. § 206.206(a) (2015); FEMA Second Appeal Analysis, Campbell Cnty. Fire Dist. #1, FEMA-4497-DR-KY, at 3 (Dec. 19, 2022).

[10] Project Worksheet 922, Tex. Div. of Emergency Mgmt., Version 0 (June 15, 2021), Attachment DR-4272 TDEM DAC for EY_MD review Ineligible Costs, at row 28.

[11] Id. at row 187.

[12] Project Worksheet 924, Tex. Div. of Emergency Mgmt., Version 0 (July 12, 2021), Attachment DR-4272 TDEM affiliate DAC -Horne_MD review Ineligible Costs, at PDF 2.

[13] Although the Applicant cites to DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs, and RP 9525.14, Public Assistance Grantee Administrative Costs, these are not applicable to the disaster underlying this appeal. Nonetheless, this decision notes that similar to the policy requirement applicable to this appeal, DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 5, also provided that DAC included costs that can be tracked, charged, and accounted for directly to a specific project, and were limited to actual reasonable costs incurred for a specific project. Regarding RP 9525.14, Public Assistance Grantee Administrative Costs, that policy pertained to the state statutory administrative allowance authorized in section 406(f)(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.