Procurement & Contracting Requirements

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4085
Applicant	New York Department of Environmental Protection
Appeal Type	Second
PA ID#	081-51000-26
PW ID#	PW 12
Date Signed	2020-11-10T17:00:00

Summary Paragraph

From October 27 to November 9, 2012, high winds and storm surge from Hurricane Sandy caused major flooding and structural damage to New York City.  As a result, FEMA created and implemented the Sheltering and Temporary Essential Power (STEP) Pilot Program.  Under this program the New York Department of Environmental Protection (Applicant) would repair utilities in multifamily dwellings (MFDs).  FEMA created Project Worksheet (PW) 12 to address these repairs.  A condition of the PW required the Applicant to make reasonable attempts to recover funds from the owners of the MFDs.  However, the Applicant acknowledged that it made no such efforts.  As a result, FEMA deobligated all costs associated with the associated work.  In response, the Applicant filed its first appeal claiming that FEMA’s application of the policy was arbitrary and that state and local law barred it from attempting to recover costs from the MFD owners.  The FEMA Region II Regional Administrator (RA) denied the appeal.  The RA stated that FEMA has discretionary authority to provide assistance; and when the Applicant failed to amend its policies and attempt to recover the costs as required by the terms of the award, FEMA properly deobligated the funds.  The RA also found that the Applicant was not barred by state or local law from attempting to recover the costs in question.  Subsequently, the Applicant filed a second appeal reiterating many of the arguments it made on first appeal. 

 

Authorities and Second Appeals

• Sheltering and Temporary Essential Power (STEP) Pilot Program.
• Stafford Act § 403, 42 U.S.C. § 5172(a)(1)(A).
• 44 C.F.R. § 13.43.
• Town of Trophy Club, FEMA-4223-DR-TX, at 2 (Sept. 13, 2019); City of San Bruno v. FEMA, 181 F. Supp. 1010, 1015-16 (N.D. Cal. 2001).

 

Headnotes

• Under section 403 of the Stafford Act, FEMA may provide disaster assistance, but it is discretionary.
• Under 44 C.F.R. § 13.43, when an applicant fails to comply with a term of an award, FEMA may take an enforcement action.
  • The PW required the Applicant to make reasonable efforts to recover funds from the owners of the MFD as a condition of participating in the STEP Program.  However, the Applicant did not make any attempt to collect the funds and as such, FEMA employed its authority to deobligate the funding.

 

Conclusion

The Applicant made no effort to recover funds from the MFD owners despite an obligation to do so.  Accordingly, when the Applicant failed to comply with the terms of the award, FEMA properly deobligated the funds.  Therefore, the appeal is denied.

Appeal Letter

Appeal Analysis

Background                                                                

From October 27 to November 9, 2012, high winds and storm surge from Hurricane Sandy caused major flooding and structural damage in New York City.  Following the storm, thousands of residential customers, in both single and multi-family dwellings (MFDs), remained without power.  Given the region’s population density, limited space, and low rental vacancy rates, FEMA recognized that many of its traditional sheltering options were either overwhelmed (e.g., congregate shelters) or not viable (e.g., temporary housing units).  As a result, FEMA implemented the Sheltering and Temporary Essential Power (STEP) Pilot Program.[1]  Under this program, FEMA would provide funding to state and local governments that performed (or contracted to perform) power, heat, and hot water restoration and other minor repairs to disaster-damaged residential properties (up to $10,000 per unit), so that individuals could shelter in their own homes until permanent repairs were completed.  One of the requirements for STEP was to get a signed Right of Entry (ROE) form from each property owner before starting the work.  These ROE forms stated that the work would be completed “at no expense to the [property] owner.” 

The New York Department of Environmental Protection (Applicant) began implementing STEP on November 21, 2012.[2]  On December 7, 2012, the Office of the Inspector General (OIG) published a report on the STEP program commending FEMA for the program and advising FEMA to institute adequate internal controls to protect against fraud, waste, and abuse of the new program.  

Through a December 27, 2012 memorandum to the Governor’s Authorized Representative (GAR), FEMA amended the STEP program to include MFDs with common utilities (as opposed to units with individually powered utilities).  However, for these entities to receive Public Assistance (PA) funding they would have to agree to certain conditions. One condition of note was ‘Provision 7’ which states:

As a condition of assistance, the applicant must agree to make reasonable efforts when appropriate and allowed for under state and local laws to compel commercial building owners/operators to make permanent repairs to health and safety hazards and other housing code violations addressed by FEMA-funded emergency protective measures under this initiative, and to recover from commercial owners any Federal funds expended on emergency protective measures for facilities they own or operate.[3]

FEMA prepared Project Worksheet (PW) 12 to fund these costs and included the language from Provision 7 as a term of the award.[4]  By the end of March 2013, the Applicant completed all STEP-related repairs.  These repairs included work performed in 18 commercially owned or operated dwellings which totaled $1.4 million.[5]  Of the 18 MFDs, the Applicant did not provide FEMA signed ROE forms from two of them, and five of the signed ROE forms did not reflect the requirement that the Applicant make reasonable efforts to recover funds.[6] 

On February 10, 2017, the OIG issued an audit report of STEP, which included findings related to FEMA’s enforcement of Provision 7.[7]  As part of this report, the OIG issued Recommendation 3, which stated that FEMA should:

Ensure New York City made reasonable efforts when appropriate and allowed for under State and local laws to compel commercial building owners/operators to make permanent repairs to health and safety hazards and other housing code violations addressed by FEMA-funded emergency protective measures under this initiative, and to recover from commercial owners any Federal funds expended on emergency protective measures for facilities they own or operate.[8]

In a January 23, 2017 response to the OIG report, FEMA agreed with Recommendation 3 and sought to implement it saying that it would enforce the conditions of the grant and determine if applicants made reasonable efforts to recover such funds.[9] 

As part of ongoing discussions between the Applicant and FEMA, the Applicant acknowledged in a May 28, 2019 letter that it chose not to attempt to recover STEP costs from the commercial property owners.[10]  On August 13, 2019, FEMA issued a determination memorandum stating that it would deobligate a total of $458,186.00[11] associated with the five MFDs that signed the ROE after December 27, 2012, and the two for which ROE forms were not provided to FEMA.[12]  FEMA did not deobligate any funding for the costs associated with the 11 MFDs with ROEs signed before December 27, 2012, the date on which FEMA provided notice of the requirement.  

 

First Appeal

On November 25, 2019, the Applicant filed its first appeal with the New York Division of Homeland Security and Emergency Services (Grantee).  In its appeal the Applicant argued that: 1) it adhered to FEMA’s December 27, 2012 memorandum including Provision 7; 2) the deobligation based on the post-December 27, 2012 ROE’s was not responsive to the OIG’s Recommendation 3; and, 3) FEMA’s decision was arbitrary.

First, the Applicant claimed that Provision 7 was not an affirmative requirement for the Applicant to attempt to recover funds from the commercial MFD owners and that if it had complied with the Provision, it would have violated STEP’s four guiding principles, (safety, cost effectiveness, speed, and common sense).  Second, the Applicant contends that the OIG’s recommendation pertains to FEMA’s oversight of STEP and not to the Applicant’s administration of the program itself.  It states that Recommendation 3 does not make any correlation between the recommendation and the ROE forms.  Finally, the Applicant argues that FEMA’s decision to deobligate funds for the costs of work after December 27, 2012 is arbitrary and altered the policy post-hoc.  Further, the Applicant argues that enforcement of Provision 7 would result in potential discrimination of vulnerable populations.  On December 9, 2019, the Grantee forwarded a letter of support to FEMA.

On March 12, 2020, the FEMA Region II Regional Administrator denied the first appeal.  FEMA noted it had discretionary authority to provide assistance under section 403 of the Robert T. Stafford Act Disaster Relief and Emergency Assistance (Stafford) Act along with the discretion to determine the type and conditions of assistance.  FEMA reasoned that this authority was not an obligation and FEMA may disallow all or portions of costs when an applicant fails to comply with a term of a PA award.  Accordingly, FEMA was within its discretion when adding Provision 7, which stated clearly that while the Applicant must make reasonable efforts to recover the funds, it does not have to actually recover them.  By not making reasonable efforts, the Applicant failed to comply with the terms.

FEMA also rejected claims made by the Applicant that by requiring commercial owners to pay for the work, some would have rejected the repairs and as such the policy would have had a disparate impact on lower income groups and minority persons (i.e., enforcement of Provision 7 would have violated the nondiscrimination provisions of Title 44 Code of Federal Regulations (44 C.F.R.) § 206.11 which requires entities receiving assistance from FEMA to follow 44 C.F.R. Part 7).[13]  However, FEMA found the Applicant needed to show that a disparate impact resulted by providing documentation: 1) identifying the policy at issue; 2) establishing the adversity harm; 3) establishing significant disparity; and, 4) establishing causation (between a facially neutral policy and a disproportionate impact on a protected class).  The Applicant did not provide documentation to support this claim.  Further, FEMA noted that courts review this discrimination analysis on policies like STEP as a whole, instead of individual pieces of policies like the MFD provision.

 

Second Appeal

On May 29, 2020, the Applicant filed its second appeal.  In its appeal, the Applicant reiterated the arguments made on first appeal.  On August 21, 2020, the Grantee forwarded the Applicant’s appeal with a letter of support.

 

Discussion

The Stafford Act § 403 states that FEMA may provide assistance essential to meeting immediate threats to life and property resulting from a major disaster.[14]  While FEMA is authorized to provide reimbursement to eligible applicants, the Stafford Act does not require FEMA to provide PA funding; meaning FEMA’s authority is discretionary.[15]  Further, under 44 C.F.R. § 13.43, FEMA is authorized to take an enforcement remedy when an Applicant fails to comply with a term of the award.[16]

In the December 27, 2012 memorandum to the GAR, FEMA provided notice of the requirement to make reasonable efforts to recover funds from commercial property owners.  Further, the language of Provision 7 was included in PW 12 as part of the terms of the award.  By signing the PW, the Applicant agreed to comply with all terms of the award  While the Applicant was not required to recover the funds, it was required to make reasonable efforts to attempt to recover the costs of the work it performed.  When then Applicant failed to comply with this term of the award, FEMA was authorized to take an enforcement remedy and deobligate the costs.  Rather than deobligate all costs associated with MFDs for which the applicant did not attempt to recover funds, FEMA only deobligated those with no ROE, or a ROE signed after FEMA provided notice of the requirement on December 27, 2012.

Further, the Applicant states that N.Y. Lien Law § 3 prohibits it from attempting to recover the repair costs and contends that FEMA ignores the language in Provision 7, which states that it must make reasonable efforts to recover funds “when appropriate and allowed for under state and local laws.”  The Applicant argues that this law limits the type of entities that may impose a lien to recover repair expenses and argues that municipal corporations, such as itself, are not included in that list.  However, FEMA and the language of Provision 7 did not limit the way by which the Applicant could attempt to recover from the MFD owners (e.g., a lien, a request letter, a mediated discussion) or meet its obligation to “make reasonable efforts.”  The Applicant acknowledged it made no efforts to recover those funds.  As such, the Applicant failed to comply with the terms of the award and FEMA employed an enforcement remedy.

 

Conclusion

The Applicant was required to make reasonable efforts to recover funds expended on the repairs of multifamily dwelling units but did not make such efforts.  Therefore, because the Applicant did not comply with the terms of the award, FEMA properly deobligated those costs.  As such, this appeal is denied.  

 

[1] FEMA Recovery Program Guidance, Sheltering and Temporary Essential Power (STEP) Pilot Program (Nov. 16, 2012).

[2] The Agency who initially handled the work was the New York City Department of Environmental Protection. However, later the New York City Office of Management and Budget advised that it would function as the administrator for this PW for the City.  See First Appeal Decision FN 1.

[3] Memorandum from Fed. Coordinating Officer/Disaster Recovery Manager, to Alternate Governor’s Authorized Rep., NY Div. of Homeland Sec. and Emergency Servs.  (Dec. 27, 2012) (emphasis added).

[4] Project Worksheet 13, New York Department of Environmental Protection, Version 0 (Dec. 4, 2012).  Note: FEMA originally created PWs 12 and 13 to differentiate between single family and multifamily dwellings but merged them both in PW 12 for ease of administration.

[5] Note: Eleven of these MFDs signed the original ROE forms prior to FEMA’s December 27, 2012 clarification to the STEP policy and are not at issue.

[6] The five ROE forms signed after the December 27, 2012 amendment were signed on: January 6, 14, 30, February 25, and April 1, 2013.

[7] U.S. Dep’t of Homeland Sec. Office of Inspector Gen. (OIG), OIG-17-38-D, FEMA Needs to Improve Its Oversight of the Sheltering and Temporary Essential Power Pilot Program (2017).

[8] Id., at 10.

[9] Letter from Acting Associate Adm’r, FEMA, to Asst. Inspector General, OIG (Jan. 23, 2017).

[10] Letter from Asst. Dir., Mayor’s Office of Mgmt. & Budget, to Recovery Division, FEMA Region II (May 28, 2019).

[11] The August 13, 2019 letter originally deobligated $498,001.48; however, a subsequent letter from FEMA dated October 2, 2019 acknowledged an error and adjusted the amount deobligated to $458,186.00.

[12] Letter from Regional Administrator, FEMA, to Alternate Governor’s Authorized Rep., NY Div. of Homeland Sec. and Emergency Servs. (Aug. 13, 2019).

[13] Which prohibits discrimination on the basis of race, color, and national origin.

[14] Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act, § 403, 42 U.S.C. § 5172(a)(1)(A) (2012).   

[15] FEMA Second Appeal Analysis, Town of Trophy Club, FEMA-4223-DR-TX, at 2 (Sept. 13, 2019);  See City of San Bruno v. FEMA, 181 F. Supp. 1010, 1015-16 (N.D. Cal. 2001) (finding that FEMA’s decision whether or not to obligate funds is a discretionary decision). 

[16] Title 44 Code of Federal Regulations (C.F.R.) § 13.43 (2012).