OIG Audit, Reasonable Costs, Support Documentation, 705(c)

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	FEMA-1791
Applicant	Chambers County
Appeal Type	Second
PA ID#	071-99071-00
PW ID#	4, 1152, 4663, and 6623
Date Signed	2017-05-26T00:00:00

Conclusion:  FEMA correctly determined that the Applicant did not demonstrate that $8.6 million in costs associated with debris removal were eligible.  Section 705(c) of the Stafford Act does not prohibit FEMA from deobligating funding because the Applicant failed to comply with federal procurement laws and post-award grant conditions.  

Summary Paragraph

Hurricane Ike occurred on September 7, 2008, causing massive debris deposits in Chambers County.  The Applicant requested, and FEMA approved, Public Assistance funding for debris removal.  The OIG performed an audit and found that the Applicant did not comply with federal procurement standards for four debris removal contracts totaling $44.6 million and recommended that FEMA deobligate all funding.  FEMA issued a response after performing a technical review of the projects.  While FEMA Region VI agreed with most of the OIG’s findings, it elected to award reasonable costs and deducted approximately $9.1 million for unsupported costs that could not be deemed reasonable, including additional ineligible or unsupported costs that the OIG did not previously identify.  The Applicant appealed the deobligation, arguing that FEMA was aware of and approved the costs associated with all its actions.  FEMA’s Region VI Regional Administrator (RA) denied the appeal, as he determined the costs were not reasonable and the Applicant failed to submit documentation to support eligibility.  The Applicant appeals the RA’s determination, reiterating its first appeal arguments and adding that FEMA is barred by Section 705(c) of the Stafford Act from deobligating previously approved funding.  The Applicant presented the same arguments in support of its second appeal at an oral meeting with FEMA in October 2015.

Authorities and Second Appeals

• Stafford Act § 705(c).
• 44 C.F.R. §§ 13.36, 13.43, 13.51, 206.206(a).
• PA Guide, at 2, 40-41.
• RP9525.7, at 2.
• FP-205-081-2, at 4-7.
• OMB Circular A-87.
• Village of Waterford, FEMA-4020-DR-NY, at 4.

Headnotes

• 44 C.F.R. § 13.36 requires that all procurement transactions be conducted in a manner that provides full and open competition, that awards be made to a responsible bidder with the ability to perform under the contract, and that an applicant perform a cost or price analysis where competition is lacking.
  • The Applicant did not provide documentation showing that it solicited bids from multiple contractors nor a cost or price analysis.
• FEMA may enforce noncompliance by disallowing costs, pursuant to 44 C.F.R. § 13.43.  OMB Circular A-87 notes that a cost is reasonable if it does not exceed that which a prudent person in the same situation would incur.
  • FEMA properly exercised its enforcement discretion by awarding reasonable costs for the supported costs.
• 44 C.F.R. §206.206(a) states that an appeal must contain documented justification supporting an applicant’s position.
  • The Applicant has not demonstrated eligibility for unsupported costs through the documentation provided on appeal.
• Stafford Act § 705(c) prohibits FEMA from deobligating funding where it was authorized by an approved agreement, the associated costs were reasonable, and the purpose of the grant was accomplished.
  • Because the Applicant failed to comply with federal procurement laws, post-award grant conditions, and costs were not reasonable, Stafford Act § 705(c) does not prohibit FEMA from deobligating funding.

Appeal Letter

Appeal Analysis

Background

Hurricane Ike struck the Gulf Coast of Texas on September 7, 2008, and caused massive debris deposits in Chambers County (Applicant), Texas.  The Applicant contracted with an engineer who assessed the extent of the debris deposits and reported the following: (1) significant numbers of closed refrigerators and freezers, some of which might contain food as well as open ones that were potential breeding ground for mosquitoes and chlorofluorocarbons; (2) numerous propane tanks that posed fire and explosion risks; and (3) dead animals and potential human remains, which caused serious health concerns.[1]  In a letter dated September 27, 2008, Chambers County Department of Environmental Protection reported catastrophic debris and declared it an “imminent threat.”[2]  The Applicant subsequently requested FEMA Public Assistance (PA) funding for debris removal.

On October 14, 2008, FEMA found debris removal from private property eligible for PA funding due to the immediate threat created by the debris.[3]  The Applicant subsequently requested PA funding for the search for human remains, as well as debris removal on unimproved private property, claiming such debris posed an immediate threat to public health and safety and hindered economic development of the county.  FEMA approved multiple Project Worksheets (PWs) for debris removal, including PWs 4, 1152, 4663, and 6623.  The Applicant contracted with Garner Environment Services, Inc. (Garner) and Cecil W. Parker, Jr. (Parker), who subcontracted Ceres Environmental Services, Inc. (Ceres) to sift through the debris and remove hazardous material.  In addition, the Applicant’s sheriff’s office (SO) was tasked with patrolling the debris sites to provide access control.  Debris removal operations continued through October 2009.

Office of Inspector General (OIG) Audit Report No. DD-11-05

The U.S. Department of Homeland Security Office of Inspector General (OIG) performed Audit # DD-11-05 and issued an audit report in December 2010.  The audit covered 16 large projects and found the Applicant did not comply with federal procurement standards when awarding four debris removal contracts (PWs 4, 1152, 4663, and 6623) totaling $44.6 million.  The OIG also found that the Applicant did not monitor its time and material contracts.

Applicant’s Response to OIG Audit DD-11-05

In a December 3, 2010 response to the OIG, the Applicant stated that, following the disaster, the Chambers County Court authorized the County Engineer and Solid Waste Director to select a debris removal contractor from a pre-approved list.  At the time of the disaster, the Applicant had interviewed one contractor, Ceres, who was contracted by the Texas Department of Transportation and United States Army Corps of Engineers to provide debris removal services following the disaster.  The County Engineer negotiated a price and selected Ceres.  Three other contractors expressed interest in providing debris removal services, but after being informed they needed to perform work at the same rate as Ceres, only one company responded.  The Applicant also had a Master Service Agreement with a contractor, but it was unable to perform the work because it was clearing an oil spill elsewhere.  The Applicant indicated that as it needed additional help, FEMA recommended and approved the use of current local contractors and participated in the rate negotiation meetings.  The Applicant denied all of the allegations made by the OIG and stressed that under the emergency circumstances that existed after Hurricane Ike, the contracts were handled with a good faith effort to follow the law.

FEMA’s Response and Corrective Actions for OIG Audit DD-11-05

FEMA acknowledged receipt of the OIG’s Audit by letter dated February 11, 2011 and indicated it would respond after conducting a technical review of the issues.  On July 23, 2012, FEMA outlined its corrective actions.  FEMA agreed with the OIG’s finding that the Applicant did not comply with federal procurement standards, but disagreed with the recommendation to deobligate all funding, as FEMA determined that the Applicant paid less for debris removal services than the Reasonable Cost Matrix rate (e.g., $17.78 per cubic yard (CY), where the Applicant only paid $16.98 per cubic yard (CY)).  As such, FEMA found all costs reasonable and allowed full payment for contracts, less ineligible and unsupported costs it identified, including: commuting costs for local employees; excessive overtime; straight time where employees either did not sign in, or blanket sign-ins for multiple employees, or an employee was in training on the same date they submitted for labor; personal protective equipment (PPE) charges corresponding to ineligible labor costs; training for employees in violation of a contract provision requiring the contractors provide trained workers; labor costs for SO personnel whose timesheets did not support the hours claimed or submitted overtime in violation of their employment contract; and tipping fees for white goods.  In sum, while the OIG questioned a total of $44,569,839.00, FEMA determined that only $9,125,566.31 would be deobligated.[4]  For each PW, FEMA deobligated the amounts depicted in Table 1.[5]

 

Table 1: Costs Deobligated as a Result of DD-11-05

PW #	FEMA Deobligated
4	$24,547.50
1152	$401,025.57
4663	$2,473,140.56
6623	$6,193,861.75

 

 

FEMA informed the Applicant of its decision in a letter dated February 19, 2013.  The Grantee transmitted FEMA’s response to the OIG Audit and FEMA’s subsequent decision to the Applicant on March 22, 2013. 

First Appeal

By letter dated July 18, 2013, the Applicant appealed FEMA’s decision.  The Applicant agreed with the finding that it did not follow contracting procedures but stated that it now had a management plan in place.  The Applicant disagreed with FEMA’s other findings, arguing that FEMA agreed to all rates and terms.[6]

Regarding FEMA’s finding of ineligible overtime, the Applicant stated that labor rates and work schedules were approved by FEMA.[7]  In response to FEMA’s finding regarding ineligible equipment fees where more vehicles were charged for than there were workers present, the Applicant explained it billed for the appropriate equipment used.[8]  As for the ineligible disposal fees, site access control, training fees, and other costs deobligated, the Applicant argued they were all costs overseen and approved by FEMA.  The Applicant concluded that it worked with FEMA throughout the entire process and FEMA should have informed the Applicant if anything was being done improperly.[9]

Request for Information (RFI)

On October 30, 2013, FEMA requested from the Applicant the letter of approval from FEMA’s Federal Coordinating Officer regarding the terms and rates of the contracts, and the specific PWs that the Applicant was appealing with corresponding issues.  FEMA also asked for additional documentation supporting the Applicant’s claim, specifying amounts in dispute and provisions in federal law, regulations or policy with which the Applicant believes the initial action was inconsistent.[10] 

The Applicant responded to the RFI on January 3, 2014.  The Applicant maintained that it acted in good faith throughout the period of performance, and that it was specifically appealing 4 PWs (PWs 4, 1152, 4663, and 6623) totaling $8,812,968.81 in costs, as depicted in Table 2.[11]

 

Table 2: Costs Deobligated and Applicant’s Appeal Amounts

PW #	FEMA Deobligated	Applicant's 1st Appeal
4	$24,547.50	$24,547.50
1152	$401,025.57	$394,287.50
4663	$2,473,140.56	$2,455,077.75
6623	$6,193,861.75	$5,939,056.06

 

Regarding PW 4, the Applicant argued that the deobligation of $24,547.50 for tipping fees for white goods was in error because this cost was for facilitating debris sorting, labor, and equipment associated with the management and reduction of debris at the county landfill.[12]  In addition, regarding PWs 1152, 4463 and 6623, the Applicant asserted it provided the necessary supporting documentation and that all costs were approved by FEMA.  Finally, the Applicant also noted that all of the work performed and costs expended were in accordance with applicable statutes, regulations and FEMA guidance.  The Grantee transmitted the RFI response to FEMA on January 10, 2014.

First Appeal Decision

On April 6, 2015, the FEMA Region VI Regional Administrator (RA) denied the first appeal.[13]  Regarding PW 4, the RA found that the Applicant should not have been awarded tipping fees because generally they are not charged for white goods, and here the white goods were placed in a temporary storage facility adjacent to the landfill, and later sold as scrap metal.  As such, tipping fees should not have been incurred.  Accordingly, FEMA determined that the Applicant did not provide sufficient documentation to support its claim for tipping fees.[14] 

As for PW 1152, FEMA determined the Applicant supported eligibility for commuting costs for fulltime Garner employees allowing for two hours of travel time per day.  However, FEMA found miscellaneous access control overtime costs were ineligible because the invoices demonstrated that SO employees worked less overtime than claimed, and the actual hours worked on Hurricane Ike related duties could not be validated due to poorly kept records and possible duplication of hours on other PWs.[15]

Likewise, for PW 4663, FEMA found that the Applicant properly documented commuting costs for full-time Garner employees, but also that the deobligation was justified where the Applicant charged more overtime hours than straight time, resulting in excessive payroll hours.  In addition, Garner’s contract allowed for only 3.5 hours of daily overtime and the Applicant consistently charged 4 hours, a half hour above the contracted amount. 

The RA determined that the Applicant’s contractors submitted questionable documentation, specifically sign-in sheets showing one employee signing in for other employees, employees not signing in at all, and employees signing in at work sites while they were actually in training.  Additionally, the RA found the finder fees (charged by the contractors for each hazardous piece of debris found, but duplicating costs of hourly wages and hauling to final disposal) ineligible, noting the Applicant agreed to such treatment in PW 6623.  The RA also concluded that the Applicant did not validate the hours charged for site access control by SO personnel, as well as some labor and equipment hours.[16]

As it relates to PW 6623, FEMA concluded that the deobligation was necessary for the same reasons noted above regarding commuting, overtime, and unsupported costs.  The RA did approve a $5,698.00 adjustment due to mathematical errors discovered on first appeal.

Second Appeal

Through a June 12, 2015 letter, the Applicant appeals the RA’s decision, disputing a total of $8,651,914.07 related to PWs 4, 1152, 4663, and 6623.[17]  The Applicant claims that FEMA acknowledged, through its response to the OIG’s audit, that the costs were reasonable.  The Applicant also claims that because the funds were obligated in accordance with approved agreements and the purpose of the grant was accomplished, FEMA is prohibited by Section 705(c) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) from deobligating funds.  In responding to the procurement findings, the Applicant also reiterates FEMA’s involvement throughout the process and cites to the Office of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments (OMB Circular A-87) to demonstrate cost reasonableness.

As for specific deobligated costs, the Applicant states: (1) FEMA’s excessive overtime finding incorrectly based labor costs on hours worked over 40 hours per week in contravention with its policy to calculate overtime based on hours worked over 8 hours per day; (2) tipping fees on white goods were not part of the OIG audit, but rather a FEMA review of the project, and were allowed in the pricing section of the Garner contract;[18] (3) all supporting documentation for commuting costs was submitted to FEMA, which used that documentation to prepare the PWs;[19] (4) FEMA incorrectly deobligated all labor costs associated with blanket sign-ins when it was the Applicant’s practice to do so; and (5) training was required for debris removal because the type of debris removal required for Hurricane Ike was more involved than regular debris removal.   

The Grantee transmitted the second appeal on July 15, 2015.[20]  The Applicant also presented its second appeal at an oral meeting with FEMA on October 29, 2015.

Discussion

Noncompliance with Procurement Requirements

Title 44 of the Code of Federal Regulations (C.F.R.) Part 13, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, establishes procurement requirements for local governments.  Section 13.36 requires an applicant to procure services in a manner that allows full and open competition.[21]  In doing so, the Applicant can follow its own procedures provided they conform to applicable Federal laws and standards.[22]  Upon request, applicants must also make available to FEMA pre-award review procurement documents such as requests for proposals or invitations for bids, independent cost estimates, etc.[23]  In addition, an applicant must perform a cost or price analysis in connection with every procurement action including contract modifications.[24] 

Procurement by noncompetitive proposals occurs where an applicant solicits a proposal from only one source, or after solicitation of a number of sources, competition is deemed inadequate.[25]  This method of procurement must be utilized after other methods—small purchase, sealed bids, and competitive proposals—are found infeasible, provided that the applicant shows at least one of the following: (1) the item is available only from a single source; (2) the public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) the awarding agency authorizes noncompetitive proposals; or (4) after solicitation of a number of sources, competition was determined inadequate.[26] 

The RA correctly determined that the Applicant did not comply with procurement standards established in 44 C.F.R. § 13.36.  The Applicant has not provided documentation to dispute the findings that it failed to: (1) award the contracts competitively; (2) prepare a cost or price analysis to support the reasonableness of the rates; (3) contemporaneously document how it made award decisions; (4) or negotiate profit separately for non-competitive contracts.  The Applicant’s argument throughout the second appeal rests on the fact that FEMA previously approved all costs as eligible, citing multiple versions of each PW, and essentially equating those approvals to procurement evaluations.  However, FEMA’s approval of a PW in of itself is inconsequential in preventing FEMA from disallowing ineligible or unallowable costs following award; whether in furtherance of an audit corrective action or agency review.[27]

Award of Reasonable Costs as an Enforcement Action

FEMA has discretionary enforcement authority that it exercises on a case-by-case basis to resolve noncompliance with procurement requirements.  Its range of authorized actions include disallowing all or part of the cost of the activity or action not in compliance.[28]  While enforcement action taken by FEMA is discretionary, the action selected must be appropriate given the circumstances.  To the extent FEMA might allow funding, FEMA determines whether the costs are reasonable.  OMB Circular A-87 requires that for a cost to be allowable and therefore reimbursable, under a PA award, the cost must be, among other requirements, reasonable and adequately documented.[29]  Pursuant to OMB Circular A-87, “a cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs.”[30]  Such documentation might include similar work done in the past, average costs for similar work in the area, published unit costs from national cost estimating databases, or FEMA cost codes.[31] 

The RA appropriately exercised his discretion in awarding reasonable costs as opposed to adopting the OIG’s recommendation to deobligate all funding.[32]  In FEMA’s July 23, 2012 response to the OIG, the RA articulated his consideration of the circumstances that resulted in the noncompliance, detailed its review of the documentation, and considered market prices for comparable services (lower costs than cost matrix) in line with OMB Circular A-87,[33] the extent of the Applicant’s deviation from the procurement requirements,[34] and the Applicant’s prudence in establishing an Emergency Management Plan for future events.  However, as reflected in the discussion below, the Applicant has not demonstrated the costs requested in the appeal are reasonable. 

Lack of Supporting Documentation

Pursuant to 44 C.F.R. § 206.206(a), an appeal must contain documented justification supporting an applicant’s position.[35]  In considering the second appeal with respect to whether costs were reasonable and adequately documented, FEMA must rely exclusively on the documentation provided by the Applicant.  On several previous occasions, including FEMA’s response to the OIG audit, first appeal decision, and at the oral meeting, the Agency reviewed the Applicant’s supporting documentation and found it incomplete, unspecific or, otherwise deficient such that it did not substantiate eligibility.  With the issuance of the RFI, the RA afforded the Applicant additional time to supplement its appeal with specifically requested documentation to support the Applicant’s claim.  The burden to substantiate appeals with “documented justification” falls exclusively to the Applicant[36] and hinges upon the Applicant’s ability to produce not only its own records but to clearly explain how those records are relevant to the appeal.  In response to the OIG audit, on first appeal and now on second appeal, FEMA has reviewed the Applicant’s timesheets, sign-in sheets, invoices, descriptions of work, disposal tickets, training certificates, contracts and rates with Garner, Parker, and CERES, as well as the SO timesheets, corresponding submissions to FEMA, and employment policies.[37] 

While the Applicant contends that it has provided documentation to demonstrate eligibility, the documentation reviewed by FEMA in response to the OIG audit, and on first and second appeal reveal the quality or substance of the documentation to be lacking, and not supportive of eligibility.  As explained in the subsections below, the information submitted contains omissions, inconsistencies, and patterns of deviation that have not been explained to justify the eligibility of the work and the reasonableness of the costs claimed.

 

1. Overtime Costs

 

The Applicant correctly states that there are multiple ways to calculate overtime, such as charging overtime for hours above the standard daily 8 hours.[38]  However, in this instance Garner charged 28 hours regular time (RT) and 44 hours overtime (OT) for the 6 day weeks, instead of 40 hours RT and 32 hours OT.[39]  Also, Garner charged for 4 hours of OT, when the time sheets showed 3.5 hours of OT.  This 3.5 hours charged is consistent with Garner’s overtime allowance in its contract with the Applicant (which allows for OT before 7:30 a.m. and after 4:00 p.m.).  The Applicant does not address this discrepancy, but reiterates that FEMA already approved the costs and is essentially barred from reviewing and finding procurement noncompliance.  However, upon review of the OIG audit and accompanying findings and recommendations, FEMA was obligated to review the award and respond to the OIG accordingly.  The RA’s resulting enforcement action was appropriate because the claimed OT is in excess of the contract allowance and more than what was reflected in Garner’s timesheets and therefore unreasonable.  Likewise, the contractor’s billing of the Applicant for 28 hours RT and 44 hours OT is also unreasonable.  As such, these excessive overtime costs are ineligible.

 

1. Commuting Costs

 

The Applicant claims that it provided all documents pertaining to commuting time and disputes FEMA’s deobligation of costs based on a lack of documentation.  The Applicant asserts that FEMA possesses the documentation and relied on it to approve the costs in the first instance.  FEMA acknowledged and found eligible commuting costs for which adequate supporting documentation was available in its response to the OIG audit, (e.g., documentation showing permanent Garner employees commuting to the debris sites from Port Arthur, Texas).  With regard to the employees who lived locally, the Applicant did not refute FEMA’s finding by providing documentation to support eligibility.  To the contrary, at the oral meeting with FEMA, the Applicant stated that it did not have documentation to show where the Parker or part-time employees of Garner traveled from and instead used Google Maps to estimate commutes.[40]  The Applicant’s estimates do not adequately document costs that the Applicant actually incurred in furtherance of eligible work.  The RA appropriately found these claimed costs to be unreasonable given the lack of supporting documentation.

1. Tipping fees

 

FEMA disallowed tipping fees for white goods that it found were stockpiled at a temporary debris storage facility and sold to a scrap dealer rather than disposed in a landfill.  The Applicant does not address the method of disposal of the white goods or FEMA’s finding that the white goods were sold as scrap.  Rather, the Applicant reiterates that the tipping fees were for sorting, labor, and equipment for management and reduction of the debris that was at the landfill, but does not provide further documentation distinguishing these costs.  On second appeal, FEMA’s review finds that the disposal tickets itemized the goods taken to the landfill and specified the amount of white goods being hauled on each ticket, but did not specify if the goods were taken to the landfill or to the adjacent temporary disposal site.  This distinction is important because while the landfill charged tipping fees[41] for white goods, the temporary disposal site should not have.

It appears from the Parker contract that it managed the temporary disposal site, which would mean it was charging itself for the disposal of the white goods and passing these costs on to the Applicant.  FEMA previously contacted the Applicant by email to determine if the $7.50 per CY charge for tipping fees was a pass through charge from the County managing the disposal site, which would be eligible.[42]  The Applicant responded that it charged its contractors for the disposal fees and the contractors provided documentation to the Applicant for those fees.  However, the amounts charged are inconsistent with what the landfill charges.  The costs for tipping fees for each white good was listed in the documentation submitted by the Applicant as a $37.55 removal fee, which was an all-inclusive fee.  Therefore, the RA appropriately found the cost inconsistencies in the Applicant’s documentation and lack of explanation for them undercut any ability to find the tipping fees reasonable.

                                       

1. Questionable Signatures and Personal Protective Equipment (PPE)

 

The Applicant disputes FEMA’s deobligation of labor costs and associated equipment charges, stating that it is not appropriate for FEMA to retroactively reject a contractor’s methods of signing in employees five years after the disaster.  Noting such, it is important to recognize that all of FEMA’s reviews are performed after the fact, as the Public Assistance Program is a reimbursement program, and consequently the documentation should be able to clearly demonstrate the associated costs were for eligible work.[43]

 

Second, the Applicant has not provided any documentation connecting the blanket sign-ins or missing signatures with the employees that actually worked on any given day nor has it shown a regular or routine method for signing in employees.  In FEMA’s review, the sign-in sheets reveal a lack of pattern or regular method of signing in employees that would be consistent with, for example, a supervisor signing everyone in.  In addition, certificates submitted by the Applicant for reimbursement of the contractors’ employee trainings show that while these employees were in training, the contractors billed for work at the debris sites.  FEMA’s review also revealed employees who did not sign in at all (including missing signatures on consecutive days), yet the timesheets submitted showed them working on those days.  These sign-in sheet inconsistencies are important because they account for the work performed.  As such, when there are discrepancies it calls into question the legitimacy of both the documentation and underlying work claimed.  If the contractors allowed employees to skip signing in or allowed for blanket sign-ins routinely, they should be able to explain how it is done and point to prior examples.  The Applicant has not justified these discrepancies and inconsistencies or submitted adequate documentation to rebut.  Because these underlying labor costs are ineligible, the PPE associated with them are ineligible.  As the Applicant has not demonstrated with documentation that costs were reasonable and incurred for eligible work, the RA’s enforcement action for these matters was appropriate.

 

1. Training

 

FEMA regulations require that contract awards be made “only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement.”[44]  The contract in question states that the contractor would provide trained and competent personnel.[45]  The Applicant argues that it was prudent to pay for the contractor’s training given the unusual type of debris present after the storm.  While FEMA recognizes the importance of trained personnel, the guidance does not support funding training for contractors, especially where the contract specifically states that the personnel will be trained and competent.  Quite the contrary, in fact, because 44 C.F.R. § 13.36(b)(8) specifically requires competent personnel.  Thus, the RA correctly found these costs to be unreasonable.

 

1. Site Access Control by Sherriff’s Personnel

 

The Applicant argues that costs for site access control by the SO’s personnel were previously found eligible and should therefore be reinstated.  As stated above, the fact that FEMA previously found an item of work eligible does not bar FEMA from subsequently reviewing the cost and supporting documentation and finding it ineligible or unallowable. 

 

In this instance, the SO personnel were deployed to the debris sites to provide access control and assist with the recovery of human remains.  However, based on the timesheets provided, prior to FEMA funding 100 percent of the costs, the SO personnel were not present at the debris sites, which undermines the Applicant’s argument that it was necessary to fund the SO’s presence due to safety concerns, which would make the costs reasonable and necessary.  In addition, the timesheets submitted by SO personnel were incomplete or unspecific with regard to duties performed, and often did not distinguish between Hurricane Ike related duties and regular duties (which are not eligible for PA funding).  Moreover in the weeks following Hurricane Ike, some of the timesheets showed intermittent descriptions of hurricane related duties, but after a few months there was little mention of it.  Nevertheless, the SO billed for access control for approximately one year.  Additionally, the SO employment policy required a threshold number of hours an employee had to work before overtime was allowed.  Here, the submissions for overtime did not comply with the employment contract.  Finally, the overtime submitted to FEMA often did not correspond to the timesheets submitted by SO personnel.  In sum, the documentation submitted do not support the site access control costs as reasonable.

 

705(c) Analysis

 

Section 705(c) of the Stafford Act bars FEMA from deobligating previously awarded funding if: “(1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”[46]  FEMA issued FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures (FEMA FP-205-081-2), to implement these criteria.[47]  If all three are met, FEMA is prohibited from recouping grant funds even if it later determines that it made an error in determining eligibility.[48]  For an applicant to accomplish the purpose of the grant, the scope of work must be completed in compliance with the terms and conditions of the award, as described in the PW, FEMA-State Agreement, and mandatory provisions of policy or law, such as the federal procurement requirements.[49]  Also, FEMA determines whether a cost is reasonable by consulting relevant OMB Circulars and regulations as well as applicable FEMA policies and guidelines.[50]

 

For projects where there is a procurement noncompliance, such as in this case, Section 705(c) does not prevent FEMA from recovering funding for costs determined to be ineligible because the purpose of the grant was not accomplished.  In this instance, the four procurement actions at issue did not comply with federal procurement requirements, a condition of the grant, and consequently FEMA is not precluded by Section 705(c) from recovering funding from the corresponding projects.  Additionally, the Applicant failed to provide adequate documentation, which is also required by the terms and conditions of the award to substantiate the costs. Accordingly, the RA’s enforcement action (deobligating PA funding) was appropriate and is not barred by Section 705. 

 

The RA also correctly found, as discussed in the prior subsection, that while the Applicant failed to comply with federal procurement requirements, FEMA decided, as part of its discretionary, case-by-case enforcement authority, to fund part of the project based on documented costs determined to be reasonable.  However, in doing so, FEMA also found that certain costs were not reasonable, and consequently, is not precluded from taking enforcement action and recovering costs. 

 

Conclusion

 

The Applicant has not demonstrated the previously deobligated costs associated with debris removal was in error.  In addition, Section 705(c) of the Stafford Act does not prohibit FEMA from deobligating funding because the Applicant failed to accomplish the purpose of the grant and the claimed costs were not reasonable.  As such, the appeal is denied.

 

[1] Disaster Debris Assessment from Senior Project Manager, Dannenbaum Envtl. Corp., to Chambers Cty. Judge, Chambers Cty. (Sep. 26, 2008).

[2] Request for Private Prop. Debris Removal under Policy 9523.14 from Chambers Cty. Judge, Chambers Cty., to Fed. Coordinating Officer, FEMA (Sep. 27, 2008).

[3] Determination Letter from Reg’l Adm’r, FEMA, to Chambers Cty. (Oct. 14, 2008).

[4] Memorandum on Audit Report DD-11-05 from Acting Reg’l Adm’r, FEMA, to Dir., Cent. Reg’l Office, U.S. Dep’t of Inspector Gen. (July 23, 2012).

[5] Deobligations associated with other PWs, not relevant to this appeal are omitted.

[6] Letter from Cty. Judge, Chambers Cty., to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (July 18, 2013).

[7] Id. at 2.

[8] Id.

[9] Id. at 4.

[10] Letter from Dir., Recovery Div., FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt. (Oct. 30, 2013).

[11] Letter from Cnty. Judge, Chambers Cty., to Dir., Recovery Div., FEMA Region VI, through State Coordinator, Tex. Div. of Emergency Mgmt. (Jan. 3, 2014).

[12] Id. at 2 (further stating that records were not kept due to FEMA’s presence on site for operational oversight and ongoing FEMA approval of supporting documentation that was reimbursed as submitted).

[13] Letter and analysis from Reg’l Adm’r, FEMA Region VI, to Assistant Dir., Tex. Dep’t of Pub. Safety, Chief, Tex. Div. of Emergency Mgmt., and Cty. Judge, Chambers Cty. (Apr. 6, 2015).

[14] Id. at 2-3.

[15] Id. at 3.

[16] Id. at 4.

[17] The Applicant no longer disputes $142,990.00 for finders’ fees in PW 4663.

[18] The Applicant does not address FEMA’s claim that the items were stored in a temporary facility, did not incur tipping fees, and were sold for scrap.

[19] The Applicant claims that FEMA provided no citations to substantiate its claim that these costs were contrary to Public Assistance guidance or other determinations that these costs were reasonable.

[20] Letter from State Coordinator – Recovery, Tex. Dep’t of Pub. Safety, to Dir., Recovery Div., FEMA Region 6, (July 15, 2015).

[21] 44 C.F.R. § 13.36(c)(1) (2007).

[22] Id. § 13.36 (b)(1).

[23] Id. § 13.36(g)(2)(i).

[24] Id. § 13.36(f).

[25] Id. § 13.36(d)(4)(i).

[26] Id.

[27] Id. § 13.51 (stating that the closeout process “does not affect… [t]he Federal agency’s right to disallow costs and recover funds on the basis of a later audit or other review”).

[28] Id. § 13.43(a).

[29] Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, att. A § (C)(1)(b) and (j) (2004).

[30] Id.

[31] PA Guide, at 40-41.

[32] See 44 C.F.R. § 13.43(a) (stating that FEMA may take enforcement actions against an applicant for noncompliance with procurement requirements) (emphasis added).

[33] OMB Circular A-87, att. A § (C)(2)(c).

[34] Id. Att. A § (C)(2)(e).

[35] 44 C.F.R. § 206.206(a).

[36] 44 C.F.R. § 206.206(a); FEMA Second Appeal Analysis, Village of Waterford, FEMA-4020-DR-NY, at 4 (Sep. 4, 2014) (stating the “Applicant has the burden of substantiating its claims…”).

[37] FEMA reviewed 100 percent of the Applicant’s documentation in response to the OIG audit, and on first appeal. In addition, on second appeal, FEMA conducted a sampling of the documentation submitted by the Applicant related to PWs 4, 1152, 4663, and 6623.  FEMA reviewed 20 percent of the invoices and associated timesheets, sign-in sheets, and certificates for Garner and Parker (as well as FEMA’s corresponding audit findings); Garner, Parker, and Ceres contracts; disposal load tickets, landfill rates, Parker invoices 1-6 for PW 4, Beck Disaster Recovery review of invoices, weekly productivity reports for waste removal (and FEMA’s corresponding audit findings relating to tipping costs); 20 percent of the SO personnel’s individual timesheets, spreadsheets reflecting time submitted for PA funding, and SO’s personnel contract; and other miscellaneous emails, policies, rates, and FEMA’s audit recommendations broken down by deobligations related to each ineligible cost).

[38] Recovery Policy RP9525.7, Labor Costs – Emergency Work, at 2 (Nov. 16, 2006) (recognizing that an applicant may define labor exceeding eight (8) hours a day as overtime).

[39] The contractor charged 8RT/4OT, 8/4, 8/4, 4/8, 0/12, 0/12 (28 RT and 44 OT) instead of 8/4, 8/4, 8/4, 8/4, 8/4, 0/12 (40 RT and 32 OT).

[40] Chambers Cty. Second Appeal Oral Meeting Minutes, PWs 4, 1152, 4663, 6623 (Oct. 29, 2015) (on file with FEMA) at 2.

[41] FEMA contacted the Applicant’s solid waste disposal department, where an employee confirmed the landfill charged tipping fees for white goods.  In addition, the costs for disposal at the county landfill was $0.01/lb for residential goods and $0.03/lb for commercial goods.

[42] Multiple emails between FEMA Region VI and Applicant (on file with FEMA Region VI).

[43] Public Assistance Guide, FEMA 322, at 2 (June 2007).

[44] 44 C.F.R. § 13.36(b)(8).

[45] Agreement for Response Services, Chambers Cty. and Garner Envt’l Servs., Inc., at Article 2.1 (June 13, 2006).

[46] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 705(c), 42 U.S.C. § 5205 (2006).

[47] FEMA Recovery Policy FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, at 4-7 (Mar. 31, 2016).

[48] Id. at 4.

[49] Id. at 5.

[50] Id. at 7.