OIG Audit – Support Documentation

Conclusion:  On second appeal, the City of Kenner (Applicant) provided adequate documentation to demonstrate that $824,500.84 of the $889,616.62 de-obligated due to insufficient documentation should be reinstated. 

Background

Hurricane Katrina impacted the City of Kenner (Applicant) in 2005.  The disaster produced significant debris, which presented an immediate threat to lives, public health, and safety of the Applicant’s citizens.  The Applicant used two separate contractors for debris removal and monitoring.  In total, the Applicant accumulated 33,500 haul tickets for debris removal.  FEMA developed a series of PWs, including 1221 and 16642, to capture the eligible disaster debris removal cost. 

In January 2009, the Department of Homeland Security’s Office of Inspector General (OIG) issued Audit Report DD-09-04, in which the OIG concluded that the Applicant failed to comply with FEMA guidance and overestimated the amount of debris hauled.   The OIG used an Excel spreadsheet that transcribed the necessary data from the 33,500 haul tickets.[1]  The OIG recommended de-obligating $5,464,037.00 for unsupported debris removal costs.

In an April 16, 2012, memo, FEMA determined $889,616.62 in debris removal cost was ineligible because: 1) the Applicant claimed $738,971.64 for debris hauled by uncertified and unverified trucks, and 2) the Applicant claimed $150,644.98 for 11,822 cubic yards (CY) of debris that was billed at more than 100 percent of certified and verified truck capacities.  On May 31, 2012, FEMA de-obligated the ineligible costs from PWs 1221 and 16642.

First Appeal

In a first appeal letter submitted June 15, 2012, the Applicant asserted that there were two issues for review.  The first issue was whether certain debris trucks were properly certified.  The second issue concerned whether certain debris hauling loads were in excess of the certified capacity of the debris trucks.  The Applicant contended that both FEMA and the Applicant properly certified or verified the debris trucks used by its contractor.  The Applicant also asserted that any statistical analysis of haul tickets which reflected that the debris loads were in excess of truck capacity was the result of re-certification of the debris trucks.  

On June 6, 2013, the Regional Administrator (RA) denied the appeal because “the Applicant did not adequately document the questioned debris removal costs or provide sufficient evidence with its appeal to reinstate the de-obligated amounts,” as required by OMB Circular A-87. 

Second Appeal

In a second appeal letter, dated August 22, 2013, the Applicant argues that the additional documentation, presented with its second appeal, provides sufficient evidence to reinstate most of the de-obligated amount still at issue.  The Applicant presents the same two first appeal issues for review.  Regarding the certification issue, the Applicant provides additional documentation to address each haul ticket in question.  In addition, the Applicant asserts that the trucks were improperly identified on the haul ticket or improperly transcribed from the haul ticket to the FEMA spreadsheet.  Regarding the issue of excess capacity load, the Applicant asserts that a spreadsheet that FEMA created to calculate the de-obligated amount has mathematical errors.  With its second appeal, the Applicant submitted a revised spreadsheet to correct these errors.    

On April 30, 2014, the Applicant presented its second appeal to FEMA in a meeting held at FEMA Headquarters in Washington, D.C.  During the meeting, the Applicant’s contractor and sub-contractor fielded questions from FEMA staff and explained discrepancies in the FEMA spreadsheet.  The Applicant also provided binders of each haul ticket at issue in this appeal and demonstrated where and why errors were committed.  Finally, the Applicant’s sub-contractor conceded that Trucks 6, 7, 9, 11, 12, 15, 61, 86, 430, 450, 505, 704, 711 and FB1were initially certified; however, after the trucks were refitted to equip larger capacity loads, neither the Applicant nor its contractors could locate the necessary re-certification documentation.

Discussion

Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) §13.22, only allowable costs are eligible for Public Assistance funding.  In addition, all allowable procurement cost must be adequately documented.[2]

FEMA originally de-obligated $889,616.62 between PWs 1221 and 16642.  Due to the extensive nature of the debris removal project—33,500 total haul tickets—and the Applicant’s admission that it did not fully understand FEMA’s reason for de-obligation until after the first appeal, the Applicant did not produce the necessary documentation demonstrating allowable costs until its second appeal.  Accordingly, the RA’s determination was correct based on the data submitted.   

The de-obligated amount of $889,616.62 addresses two different issues: 1) debris hauled in uncertified and unverified trucks and 2) debris exceeding 100 percent of truck capacity.  This figure was derived using an Excel spreadsheet that FEMA produced in consultation with DHS OIG.  The Excel spreadsheet includes dates prior to September 12, 2005 in its analysis.  However, all debris removal done before September 12, 2005 was done on a time and materials (T & M) contract and documented in another PW.[3]  Therefore, FEMA did not include these haul tickets in its analysis of the second appeal.

1. Debris Hauled in Uncertified or Unverified Trucks

Regarding the first issue, the Applicant provided documentation to address each truck FEMA determined to be “uncertified” or “unverified.”  A “certified” truck is one that is measured by a debris monitor to determine the truck’s height, width, and depth to determine its hauling capacity.[4]  The Applicant provided copies of truck certifications for the trucks at issue in this appeal in Exhibits 7 and 8 and copies for additional trucks during its meeting with FEMA.[5]  A “verified” truck is one that a FEMA debris monitor certified at the Temporary Disposal and Reduction Site (TDRS).[6]

The Applicant provided FEMA with extensive documentation, including certification forms, haul tickets, and written explanations for discrepancies in the data, to support its assertion that each truck in question was certified.  In addition, during the meeting, the Applicant demonstrated that many of the discrepancies regarding certified trucks that led to de-obligation were due to poor penmanship on the haul tickets or input errors regarding the Excel spreadsheet used to document the debris project.  For example, because the Applicant used a contractor and sub-contractor for debris removal, many of the trucks displayed more than one identification placard.  This resulted in an identification number on the haul ticket that was different than the identification number on the “certified” truck even though it was the same truck.[7]  In addition, some truck numbers were not properly input into the spreadsheet.  This error led to FEMA mistakenly classifying these trucks as “uncertified.”[8]   Using the documentation and other evidence provided by the Applicant, FEMA reconciled the certification of the trucks at issue in this appeal.  Accordingly, the FEMA funding that was de-obligated because trucks were deemed “uncertified” or “unverified” is eligible and should be re-instated.

2. Debris Exceeding 100 Percent of Truck Capacity

The second issue of this appeal involves excess load capacity.  FEMA de-obligated $150,644.98 to address the total amount billed for excess cubic yard capacity.  The Applicant asserts that this overage primarily is due to misplaced certification forms that reflect the re-certification of trucks once they were re-fitted for expanded capacity.  In its second appeal, the Applicant produced documentation to address many of the trucks associated with this issue.  However, by the Applicant’s admission, there are instances where it did not provide documentation to reflect that the truck was re-certified once it was re-fitted.[9]

For Trucks 6, 12, 430, 450, 505, and 711, the Applicant asserts that these trucks were “duplicate truck identification numbers” and the Applicant cannot locate the certification forms for the larger capacity trucks.[10]  While the February 14, 2014 letter states that the Applicant was unable to retrieve re-certification forms for these trucks, the May 14, 2014 letter provides haul tickets for these trucks that demonstrate that both a small and large capacity were noted throughout the hauling process.[11]  In addition, the haul ticket numbers associated with overages in the Excel spreadsheet document the larger capacities.[12]  Finally, the Excel spreadsheet shows a consistent increase representative of the larger capacity for the haul tickets that are identified as overages.  Considering the catastrophic magnitude of Hurricane Katrina, the Applicant had to produce records seven years after the disaster, and other extenuating circumstances, FEMA uses a level of reasonableness to review the Applicant’s documentation.  Although the Applicant did not provide certification forms for the larger capacity trucks, the documentation provided is sufficient to justify the Applicant’s assertion that Trucks 6, 12, 430, 450, 505, and 711 were duplicate truck identification numbers.