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Direct Administrative Costs & Management Costs
Appeal Brief
Disaster | 4245 |
Applicant | Texas Division of Emergency Management |
Appeal Type | Second |
PA ID# | 000-U007C-00 |
PW ID# | 421, 422, 423, 424 |
Date Signed | 2023-03-03T17:00:00 |
Summary Paragraph
During the incident period of October 22–31, 2015, severe storms and flooding impacted Texas. The Texas Division of Emergency Management (Recipient) requested $1,488,425.20 in Public Assistance (PA) reimbursement for Direct Administrative Costs (DAC). FEMA prepared Project Worksheets 421, 422, 423, and 424, to document the Recipient’s claimed DAC for this disaster, completed through contract labor. The Recipient provided spreadsheets with individual line items for each DAC expenditure and invoices for costs claimed. FEMA issued a determination letter, finding that $812,838.76 was eligible, but $675,586.44 was ineligible. FEMA found that for some line items the descriptions provided by the Recipient 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 its first appeal for $675,586.44, stating that previously submitted summary spreadsheets and documentation provided the information necessary to determine eligibility. It stated the narrative descriptions were sufficient and consistent with FEMA’s policies. FEMA sent a request for information asking for detailed activity descriptions for each line item on the Recipient-provided spreadsheets. The FEMA Region 6 Regional Administrator denied the appeal, finding that the Recipient did not demonstrate that $675,586.44 in DAC was reasonable and eligible. In a letter dated November 17, 2022, the Recipient submitted its second appeal, reiterating its first appeal arguments.
Authorities and Second Appeals
- 2 C.F.R. § 200.403(a), (g); 44 C.F.R. § 206.206(a).
- DAP 9525.9, at 1, 5.
- Campbell Cnty. Fire Dist. #1, FEMA-4497-DR-KY, at 3.
Headnotes
- To be eligible, DAC must be necessary and reasonable for the performance of eligible work, and adequately documented.
- The Recipient did not provide sufficient details for FEMA to determine if the claimed DAC were necessary and reasonable.
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
W. Nim Kidd
Chief, Texas Division of Emergency Management
Vice Chancellor – The Texas A&M University System
2883 Highway 71 E.
P.O. Box 285
Del Valle, TX 78617-9998
Re: Second Appeal – Texas Division of Emergency Management, PA ID: 000-U007C-00,
FEMA-4245-DR-TX, Project Worksheet (PW)s 421, 422, 423, and 424
Direct Administrative Costs & Management Costs
Dear Chief Kidd:
This is in response to the Texas Division of Emergency Management’s (Recipient) letter dated November 17, 2022. The Recipient is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding in the amount of $675,586.44 for direct administrative costs (DAC).
As explained in the enclosed analysis, I have determined 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, this appeal is denied.
This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
Sincerely,
/S/
Ana Montero
Division Director
Public Assistance Division
Enclosure
cc: George A. Robinson
Regional Administrator
FEMA Region 6
Appeal Analysis
Background
During the incident period of October 22–31, 2015, severe storms and flooding impacted Texas. The Texas Division of Emergency Management (Recipient) requested $1,488,425.20 in Public Assistance reimbursement for direct administrative costs (DAC). FEMA prepared Project Worksheets (PWs) 421, 422, 423, and 424, 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 spreadsheets with individual line items for each DAC expenditure, and invoices for costs claimed. In an August 31, 2021 determination letter and subsequent Project Worksheet, FEMA found that $812,838.76 was eligible, but $675,586.44 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.
First Appeal
The Recipient submitted a November 5, 2021 first appeal, stating that $675,586.44 was the amount in dispute. It asserted that previously submitted summary spreadsheets and documentation provided the information necessary for eligibility. It stated the narrative descriptions were sufficient and consistent with FEMA Disaster Assistance Policy 9525.9, FEMA Recovery Policy 9525.14, and FEMA’s Memorandum from the Assistant Administrator Disaster Assistance Directorate dated September 8, 2009.[1] The Recipient also provided examples it claimed showed inconsistency in FEMA’s DAC eligibility determinations.
On December 20, 2021, FEMA sent a Request for Information 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 October 11, 2022, the FEMA Region 6 Regional Administrator denied the appeal, finding that the Recipient did not demonstrate that $675,586.44 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.
Second Appeal
The Recipient submitted a November 17, 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 necessary and reasonable for the performance of the federal award and adequately documented.[2] DAC includes costs incurred that can be tracked, charged, and accounted for directly to a specific project.[3] Eligible DAC is limited to actual reasonable costs incurred for a specific project.[4] Examples of eligible DAC include, but are not limited to: staff’s time to conduct an initial inspection, prepare and submit a PW, and make interim and final project inspections.[5] 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.[6]
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 78 listed the administrative task as “Data Collection and Dissemination” with an accompanying administrative activity description of “Activities to collect damage data, invoices, estimates, and support documentation related to one specific project” and a narrative that stated “Data Collection & Dissemination”.[7] Similarly, a different entry assigned to PW 177 listed the administrative task as “Site Visits” with an accompanying administrative activity description of “Activities related to visiting, surveying, and assessing sites for one specific project” with no narrative information.[8] Yet another entry for previously denied DAC notes the administrative task as being “Other Program Management/Close-Out Activities” and only provides “Activities related to the close-out process of a one specific project worksheet” as the narrative.[9] 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.[10]
The Recipient provides instances it contends show eligibility determination inconsistency, such as an ineligible “QR” that it compares with an eligible “Quarterly Report” entry. However, these examples do not demonstrate the eligibility of denied DAC and additionally do not accurately reflect the full narrative context of the approved costs. Similarly, the Recipient refers to other recipients’ DAC PWs, but neither provides the referenced PWs, nor demonstrates how they establish eligibility of denied DAC. Regarding the denied DAC example, some entries assigned to various PWs listed an administrative task of “Other Program Management/Close-Out Activities” with an accompanying activity description of “Activities related to the close-out process of one specific project worksheet” and a narrative that stated “QR.”[11] FEMA noted in the spreadsheet, however, that it was a “Generic statement - no activity detail.”[12] In contrast, although a different entry associated with eligible costs listed an administrative task of “Program Funding Request Processing,” with an activity description of “Activities to assemble, transmit, and process program funding documents to request disbursement of funds for one specific project,” of importance is the accompanying narrative that specifically describes the administrative work as, “Program Funding Request Processing: Processing EMMIE reports to update tracker for obligated PWs and new PWs; PW Status Update.”[13]
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, the appeal is denied.
[1] The Applicant cited to: (1) Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007); (2) FEMA Recovery Policy (RP) 9525.14, Grantee Administrative Costs (Nov. 7, 2006) (superseded on Nov. 13, 2007); and (3) Memorandum from Assistant Adm’r, Disaster Assistance Directorate, FEMA, to Reg’l Adm’rs, FEMA Regions I-X, et al., Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs and Recovery Policy 9525.14, Grantee Administrative Costs (Sept. 8, 2009) [hereinafter Zimmerman Memo] .
[2] Title 2, Code of Federal Regulations (C.F.R.) § 200.403(a), (g) (2015).
[3] DAP 9525.9, at 5.
[4] Id.
[5] Id. at 1.
[6] 44 C.F.R. § 206.206(a); FEMA Second Appeal Analysis, Campbell Cnty. Fire Dist. #1, FEMA-4497-DR-KY, at 3 (Dec. 19, 2022).
[7] Project Worksheet 422, Tex. Div. of Emergency Mgmt., Version 0 (Apr. 16, 2021), Attachment 19-2-47187_DR4245_TDEM DAC Request_Ernst Young.xlsx, at row 620.
[8] Id. at row 804.
[9] Project Worksheet 423, Tex. Div. of Emergency Mgmt., Version 0 (Apr. 16, 2021), Attachment GT - 4245 DAC Submittal_Ineligible Costs.xlsx., at row 39.
[10] Although the Applicant cites to RP 9525.14, and FEMA’s Zimmerman Memo, neither of these authorities support the Applicant’s claim. The RP 9525.14 pertained to the state statutory administrative allowance authorized in section 406(f)(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Regarding FEMA’s Zimmerman Memo, it provided additional guidance on implementing DAP 9525.9, but did not eliminate the requirement that eligible DAC include costs that can be tracked, charged, and accounted for directly to a specific project.
[11] Project Worksheet 423, (Version 0), Attachment GT - 4245 DAC Submittal_Ineligible Costs.xlsx, at row 4015.
[12] Id.
[13] Project Worksheet 422 (Version 0), Attachment EY - 4245 DAC Submittal.xlsx, at row 6284.