Direct Administrative Costs – Reasonable Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	FEMA-4129
Applicant	Village of Herkimer
Appeal Type	Second
PA ID#	043-34121-00
PW ID#	PW 656
Date Signed	2019-08-26T00:00:00

Summary Paragraph

Between June 26, 2013 and July 10, 2013, torrential rain and flooding scoured and collapsed the embankment of Belling Brook, located in the Village of Herkimer, New York (Applicant).  The Applicant requested Public Assistance (PA) funding to implement emergency protective measures and hired Simmons Recovery Consulting (Simmons) to administer its PA grant funds.  On January 2, 2018, the New York Department of Homeland Security and Emergency Management (Grantee) requested a Large Project Final Accounting (LPFA) on the Applicant’s behalf.  In response to FEMA’s LPFA Request for Information (RFI), the Grantee determined that the record contained only generic task descriptions for some costs, and recommended that FEMA deny $9,307.50 in DAC.  FEMA accepted the recommendation.  The Applicant appealed, arguing that both the Grantee and FEMA misunderstood Simmons’ terminology.  FEMA issued a Final RFI requesting detailed justification for the DAC, including an itemized list of administrative tasks.  The Applicant provided a rough timeline correlating document submissions to the Grantee with invoice line item costs.  FEMA found that the Applicant substantiated its DAC claims for an additional $382.50, but denied the remaining $8,925.00. 

 

Authorities and Second Appeals 

• Disaster Assistance Policy DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007); Memorandum from FEMA Assistant Administrator, Disaster Assistance Directorate, to Regional Administrators (Sept. 8, 2009)
• North Dakota Dep’t of Emergency Servs., PW 4905, FEMA-1981-DR-ND (Jan. 12, 2018);

Central Bradford Progress Auth., FEMA-4030-DR-PA (Feb. 29, 2016)

 

Headnotes

• Under DAP 9525.9, FEMA will reimburse applicants and grantees for reasonable administrative activities if the costs are properly tracked, documented, and directly chargeable to a Project Worksheet (PW).
  • The Applicant’s generic task descriptions do not allow FEMA to evaluate whether its costs are reasonable and related to eligible direct administrative activities that benefitted only a single PW.
• DAP 9525.9 requires grantees and applicants to provide detailed information about each activity or task performed so that FEMA may evaluate the following factors to determine whether the costs are reasonable, necessary, and appropriate: (1) methods of contracting for the services, (2) the skill level of persons performing the activities, and (3) the amount of time required to perform an activity.
  • The Applicant’s cost descriptions do not allow FEMA to determine what specific administrative tasks its consultant performed, nor whether the costs charged for those tasks were reasonable, necessary, and appropriate.
• Travel that benefits more than one project is not an eligible DAC even if an applicant only charges the costs to one PW.
  • The Applicant’s travel cost descriptions do not allow FEMA to determine whether the travel benefitted only a single PW.

 

Conclusion

The Applicant’s claimed costs are not eligible DAC because the Applicant did not provide documentation demonstrating the costs are reasonable, necessary, appropriate, and chargeable to a single PW. 

 

Appeal Letter

Appeal Analysis

Background

Torrential rain and flooding from severe storms occurring between June 26, 2013 and July 10, 2013 caused scour and collapse to the embankment of Bellinger Brook, located in the Village of Herkimer, New York (Applicant).  The Applicant requested Public Assistance (PA) funding to implement emergency protective measures to prevent further embankment erosion.  On September 12, 2013, the Applicant contracted with disaster management firm Simmons Recovery Consulting (Simmons) to assist in administering the Applicant’s PA grants.  On September 11, 2014, FEMA obligated $145,492.89, including $1,312.00 in direct administrative costs (DAC), to fund Project Worksheet (PW) 656 for the placement of riprap on Bellinger Brook’s embankment.  On January 2, 2018, the New York State Division of Homeland Security and Emergency Services (Grantee) requested on the Applicant’s behalf a Large Project Final Accounting for PW 656.  Project costs totaled $153,483.12, including $38,080.00 of DAC for Simmons’ work from 2014 to 2017.  On April 19, 2018, FEMA issued a Request for Information (RFI) to both the Grantee and the Applicant requesting a detailed justification of the DAC, including an itemized list explaining the type of DAC tasks performed for PW 656.  On May 16, 2018, the Grantee responded with a recommendation that FEMA deny $9,307.50 in DAC funding.  The ineligible costs corresponded to 23 invoice line items for “PW Grants Management,” and five invoice line items for “Billable Travel (Direct).”  The Grantee explained that Simmons classified its DAC into eight categories, and the record sufficiently described the tasks performed in each category except for “PW Grants Management” and “Billable Travel.”  The Grantee concluded that $8,797.50 in PW Grants Management costs and $510.00 in Billable Travel costs were not eligible DAC.  FEMA concurred with the Grantee.  In a letter dated August 7, 2018, FEMA approved a final total award of $144,175.62, including $28,722.50 in eligible DAC.

 

First Appeal

 

The Applicant appealed FEMA’s denial of $9,307.50 in DAC on September 17, 2018.  The Applicant believed that both the Grantee and FEMA based their ineligibility determinations on a misunderstanding of Simmons’ terminology because “PW Grants Management,” as used by Simmons in its invoices, is analogous to the categories of administrative activities described in FEMA’s September 8, 2009 memorandum regarding Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs.[1]  Specifically, the Applicant explained that “PW Grants Management” is a general term referring to specific activities listed in the DAC Memo under the category “PW Management & Close Out.”  The Applicant admitted that the terminology is general, but suggested that “it would be impractical to separate each individual activity” during “DAC performance [periods] where multiple activities are performed in a short period of time.”[2]  The Grantee supported the Applicant’s appeal, and noted that FEMA had previously funded other Simmons’ DAC categorized as “PW Management and Closeout.”  The Grantee likewise acknowledged that Simmons uses “PW Grants Management” “when a short period of time is spent performing work [that] cross[es] into multiple tasks, and where the time cannot be reasonably broken down.”[3]

 

On December 10, 2018, FEMA issued a Final RFI requesting:

 

• Documentation demonstrating that PW Grant Management costs claimed as DAC were directly chargeable to PW 656 and were not prorated across multiple PWs, and

• Specific descriptions of the actual work or activities performed as part of each claimed PW Grants Management time entry.

 

The Applicant responded via letter dated January 9, 2019.  The Applicant objected to the notion that any hours had been prorated and included a spreadsheet that provided a “rough timeline” of grant activities, which it then correlated to invoice line items.  For example, the Applicant’s spreadsheet noted that a “fax of cancelled checks for closeout” occurred on January 13, 2017, and subsequently categorized four “PW Grants Management” line items incurred between January 18, 2017 and January 27, 2017 as “Other Program Management/Closeout Activities.”[4]

 

In a first appeal determination dated February 25, 2019, FEMA denied the Applicant’s appeal for $8,925.00, but found that the Applicant substantiated its claims for an additional $382.50 in DAC related to a time extension request submitted to the Grantee on May 29, 2014.  FEMA found that “Billable Travel (Direct)” line item costs were indirect costs and not directly attributable to PW 656, and could not determine whether costs described as “QPR [Quarterly Progress Reporting]” or “Other Program Management/Closeout Activities” were reasonable and related to administrative activities directly supporting PW 656.[5]

 

Second Appeal

 

The Applicant disagrees with FEMA’s characterization of the task descriptions as vague and nonspecific in a second appeal letter dated March 27, 2019 and maintains that “PW Grants Management” covers “activities associated with providing documentation for closeout and other required reporting on the PW status.”  The Applicant’s second appeal provides additional detail regarding its task description labels: “QPR” refers to required quarterly status and progress reporting to the Grantee, “closeout activities” relates to the [Large Project] Final Accounting of all work and costs, and “Other Program Management” relates to tracking FEMA deadlines, “which may require time extension requests and associated documentation.”  The Applicant also claims that FEMA arbitrarily applied a higher standard of detail to its DAC by requiring details not typically captured on timesheets and invoices.  The Applicant insists that the invoices it has already submitted, coupled with its closeout and reporting documentation, identify by day the hours worked and the relevant PW for each task.[6]   

 

The Grantee supports the Applicant’s second appeal via letter dated May 22, 2019.  The Grantee points out that “PW Grants Management” might reasonably include “checking on the period of performance end date, emailing the Grantee about a time extension, drafting an official request letter, getting the letter signed, and transmitting the letter to the state.”  The Grantee explained that requiring applicants to “no[te] the specific details of each step in the task workflow would be confusing and inefficient” and “would unnecessarily increase the administrative burden.”  The Grantee also contends that FEMA has not provided guidance on what constitutes a “sufficient” level of detail.[7]

 

Discussion

Under DAP 9525.9, FEMA will reimburse applicants and grantees for reasonable administrative costs to perform eligible PA activities if those costs are properly tracked, documented, and directly chargeable to a PW for a specific project.  Examples of eligible DAC include staff’s time to conduct an initial inspection, prepare and submit a PW, and make interim and final project inspections.[8]  Applicants must track and document these costs in a manner that allows FEMA to determine if they are reasonable, necessary, and appropriate.[9]  Applicants and grantees must provide detailed information about each activity or task performed so that FEMA can evaluate the following factors: (1) methods of contracting for the services, (2) the skill level of persons performing the activities, and (3) the amount of time required to perform an activity.[10] 

 

FEMA’s September 8, 2009 memorandum provides additional guidance for implementing DAP 9525.9.  The memorandum includes a non-exhaustive list of PA project phases: Project Listing Development, Project Formulation, PW Processing, and PW Management and Closeout.  The memorandum also identifies corresponding examples of specific administrative activities and tasks performed during each phase.[11]  These types of specific activities and tasks may be eligible as DAC if the applicant’s documentation allows FEMA to determine that the time spent on the activity or task was reasonable and allocable to one specific project.[12]  Travel and per diem expenses are eligible DAC if they “relate to one specific project for any of the direct administrative activities” performed during a project phase.[13]  Travel that benefits more than one project is not an eligible DAC even if an applicant only charges the costs to one PW.[14] 

 

The Applicant is appealing FEMA’s first appeal denial of $8,925 in ineligible DAC: $8,415.00 in administrative costs and $510.00 in travel costs.[15]  The administrative costs correspond to 22 line items described in the Simmons invoices as “PW Grants Management.”  The Applicant’s Final RFI response further described these costs as either “QPR [Quarterly Progress Reporting]” or “Other Program Management/Closeout Activities.”  Neither of these cost descriptions allows FEMA to determine what specific administrative tasks the Simmons consultant performed.  Even “QPR” refers only to a general administrative requirement rather than a specific administrative task.  Without knowing what tasks the consultant performed, FEMA cannot evaluate whether the costs charged for those tasks are reasonable, necessary, and appropriate.  

 

The travel costs correlate with five line-item charges identified in the Simmons’ invoices as “Billable Travel (Direct).”  The Applicant’s Final RFI response further describes these costs as “Travel for one specific Project.”  The Applicant’s generic descriptions do not allow FEMA to evaluate whether these costs are reasonable and related to eligible administrative activities that solely benefitted PW 656.[16]

 

Conclusion

 

The Applicant did not provide descriptive documentation to show that its claimed costs are reasonable, necessary, and appropriate, or that the claimed expenses are direct rather than indirect costs.  FEMA denies the second appeal.

 

 

 

[1] See Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs (Nov. 13, 2007); see also Memorandum from FEMA Assistant Adm’r, Disaster Assistance Directorate, to Reg’l Adm’rs (Sept. 8, 2009) [hereinafter DAC Memo]. 

[2] Letter from Clerk/Treasurer, Vill. of Herkimer, to Disaster Assistance Mgr., N.Y. State Div. of Homeland Sec. & Emergency Servs., at 2 (Sept. 17, 2018).

[3] Letter from Deputy Comm’r for Disaster Recovery Programs, N.Y. State Div. of Homeland Sec. & Emergency Servs., to Reg’l Adm’r, FEMA Region II, at 2 (Oct. 2, 2018).

[4] Letter from Clerk/Treasurer, Vill. of Herkimer, to Disaster Assistance Mgr., N.Y. State Div. of Homeland Sec. & Emergency Servs., at Attachment (Jan. 9, 2019).

[5] First Appeal Analysis, Vill. of Herkimer, FEMA-4129-DR-NY, at 6-7 (Feb. 25, 2019).

[6] Letter from Mayor, Vill. of Herkimer, at 1-2 (Mar. 27, 2019).

[7] Letter from Deputy Comm’r for Disaster Recovery Programs, N.Y. State Div. of Homeland Sec. & Emergency Servs., to Reg’l Adm’r, FEMA Region II, at 2 (May 22, 2019).

[8] DAP 9525.9 at 1, 5.

[9] Id. at 5.

[10] Id. at 2.

[11] DAC Memo at Attachment. 

[12] Id.

[13] Id. at 3, Attachment.

[14] FEMA Second Appeal Decision, North Dakota Dep’t of Emergency Servs., PW 4905, FEMA-1981-DR-ND, at 3 (Jan. 12, 2018) (labor and mileage costs that benefit multiple PWs are not eligible DAC even if charged to a single PW).

[15] FEMA partially granted Applicant’s first appeal, approving $382.50 but denying $8,925.00 in DAC.  FEMA’s cover letter transmitting the first appeal determination contained a typographical error stating that FEMA approved $328.50.  See FEMA First Appeal Analysis, Vill. of Herkimer, FEMA-4129-DR-NY, at 7 (Feb. 25, 2019).  The Applicant’s second appeal also mistakenly states that “FEMA approved $328.50 of the claimed costs . . . . and [the Applicant] is appealing the denial of the remaining $8,979.”  Letter from Mayor, Village of Herkimer, at 1 (Mar. 27, 2019).  The correct amount on appeal is $8,925.00.

[16] FEMA Second Appeal Analysis, Central Bradford Progress Auth., FEMA-4030-DR-PA, at 6 (Feb. 29, 2016) (finding travel costs ineligible where a travel cost balance sheet, unsupported by invoices or descriptions of each trip, did not enable FEMA to determine what actual costs Applicant incurred or to allocate them to a specific PW).