April 9, 2012

Bryan Koon

Director

Florida Division of Emergency Management

2555 Shumard Oak Blvd.

Tallahassee, Florida 32399

Re:  Second Appeal–City of Fort Walton Beach, PA ID 091-24475-00, Overtime – Labor Costs, FEMA-1595-DR-FL, Project Worksheet (PW) 717

Dear Mr. Koon:

This in response to a letter from your office dated January 13, 2011, which transmitted the referenced second appeal on behalf of the City of Fort Walton Beach (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding in the amount of $104,995 in labor costs for emergency protective measures.   

Background

In July 2005, the Applicant incurred costs for emergency protective measures performed as a result of Hurricane Dennis.  On December 8, 2006, PW 717 was obligated for $181,494 in funding for the cost of force account labor overtime ($157,063), force account equipment ($19,561), and purchased materials ($4,870). 

At project closeout, FEMA determined that employee straight time was paid as overtime, that overtime was claimed as double time instead of time and one-half, and that exempt employees were paid for overtime.  FEMA denied $104,995 of the Applicant’s claimed labor costs in accordance with FEMA regulations at 44 CFR §206.228 (a)(2), Allowable costs, Force Account Labor Costs, because the straight time salaries of an applicant’s permanently employed work force are not eligible in calculating the cost of eligible work.  FEMA also determined that the Applicant’s personnel policy was discretionary and did not comply with Federal requirements as described in the Office of Management and Budget (OMB) Circular A-87, which states that only those costs “that apply uniformly to both Federal awards and other activities of the governmental unit” are allowable under Federal awards.  In addition, a 2200 watt generator was misclassified as a 2200 kilowatt generator, and a mathematical error occurred relating to the purchased materials.  On April 7, 2009, FEMA de-obligated $109,480 in funding from PW 717, including $104,995 for labor costs, $3,985 for force account equipment, and $500 for purchased materials.

First Appeal

The Applicant appealed the $104,995 deobligation in funding in a letter dated July 30, 2009, which the Florida Division of Emergency Management (State) transmitted to FEMA in a letter dated October 9, 2009.  The Applicant acknowledged a mathematical error for purchased material and that a generator was incorrectly classified, and agreed that a reduction of $4,485 for those items was appropriate.  However, the Applicant stated that its labor costs were consistent with its payroll policy and that the personnel rules and regulations addressing its pay policy were officially adopted prior to the disaster declaration.  The Applicant also stated that its pay practices mirrored those in effect since Hurricane Ivan in 2004.  To support its first appeal, the Applicant provided a copy of FEMA’s Final Inspection Signoff Report and a copy of Section 30, Emergency or Disaster Preparedness/Recovery, from its Personnel Rules and Regulations Manual.

In response to the first appeal, the Regional Administrator determined that the Applicant did not take steps to modify its written pay policies, which were codified in Section 14, Hours of Work and Overtime, in its Personnel Rules and Regulations Manual, until July 8, 2005 – two days prior to the major disaster declaration for Hurricane Dennis.  The Regional Administrator further determined that there was no provision in Section 14 to pay overtime to exempt employees, and that the Applicant did not provide documentation to support that it had applied its pay policy uniformly as required by OMB Circular A-87.  The Regional Administrator denied the appeal in a letter dated August 25, 2010.

Second Appeal

The Applicant submitted its second appeal in a letter dated November 3, 2010, which the State forwarded to FEMA on January 13, 2011.  The Applicant reiterated its position in the first appeal and states that it also activated its Emergency Operations Center in November 2009 in preparation for Tropical Storm Ida and paid its staff in accordance with Section 30, Emergency or Disaster Preparedness/Recovery from its Personnel Rules and Regulations Manual.  The Applicant provided copies of Tropical Ida payroll timesheets to support its appeal.

Discussion

Under the terms of Section 30, Emergency or Disaster Preparedness/Recovery, in the Applicant’s personnel pay policy rules and regulations, “Exempt and nonexempt personnel who are instructed by their Department/Division Head…or the City Manager to work during an impending or declared emergency or disaster, shall be eligible for overtime compensation at the rate of time and one-half regardless of whether or not they have worked forty hours in that work week”,  and that exempt and nonexempt employees will be compensated “at a rate of two times their normal rate of pay for up to 72-hours for hours worked following a full activation of the City’s Emergency Operations Center.”

FEMA Response and Recovery Directorate Policy 9525.7, Labor Costs – Emergency Work, Section 7.D. (July 20, 2000), allows reimbursement for costs in accordance with an applicant’s written pre-disaster policies.  Based on a review of the Applicant’s personnel pay policy of providing overtime costs whenever its employees work during an impending or declared emergency, and FEMA Response and Recovery Directorate Policy 9525.7 (July 20, 2000) on the reimbursement for such force account overtime costs, the overtime labor costs for exempt and non-exempt employees are eligible. 

Further, OMB Circular A-87 Section C(1)(e), Basic Guidelines, states that an Applicant’s policies must be “consistent with policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the governmental unit.”  Based on a review of the Applicant’s personnel pay policy, reimbursement of the Applicant’s labor costs is consistent with the requirements of OMB Circular A-87.

Conclusion

I have determined that the Applicant’s request is consistent with applicable policies and requirements, and the requested costs are eligible. Therefore, I am granting the appeal.  By copy of this letter, I am requesting that the Regional Administrator take appropriate action to implement this determination.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

Sincerely,

/s/

Deborah Ingram

Assistant Administrator

Recovery Directorate

cc:  Major P. May

       Regional Administrator

       FEMA Region IV