Earlier in the week, BHDA attorneys Steven Weller and Lori Robinson addressed how to make a Public Assistance reimbursement claim through FEMA if you are a local governmental entity that has been impacted by the COVID-19 health emergency. Today, they address what costs are potentially reimbursable when making a Public Assistance claim. Read below for more.
What Costs are Potentially Reimbursable?
FEMA has stated that the nature and scale of COVID-19 is beyond any prior Public Assistance event, and that expenses could be reviewed on a case-by-case basis to determine if they are appropriate for reimbursement. For COVID-19, it is possible that the expenses eligible for reimbursement could be expanded, and that some reimbursement prohibitions could be temporarily suspended. Local governmental entities are strongly encouraged to track and document all costs related to COVID-19 that can be clearly differentiated from your normal operating expenses, because they may later be recognized as reimbursable.
FEMA’s Public Assistance Program and Policy Guide (“PAPPG”) contains the most comprehensive overview of the Public Assistance Program and details the overall categories of emergency measures eligible for reimbursement.
As part of initial guidance, FEMA has issued a list of eligible emergency protective measures related specifically to COVID-19. However, FEMA has stated that it is a preliminary, non-exhaustive list.
Emergency Work and Permanent Work
FEMA provides grant funding for disaster response work in two categories: (1) Emergency Work and (2) Permanent Work. Emergency Work[1] includes Labor Costs, Equipment Costs, Supplies, recognized Emergency Protective Measures, and other work done immediately to save lives, protect improved property, protect health and safety, or lessen the threat of a major disaster. Permanent Work[2] generally refers to permanent restoration of physically damaged facilities (such as wind damage or flood damage). At this time, it is anticipated that reimbursement of most expenses responsive to COVID-19 would be sought under the category of Emergency Work/Emergency Protective Measures.
Emergency Protective Measures are a subcategory of Emergency Work, and are defined as expenses incurred before, during, and after an incident that:
- Eliminate or lessen immediate threats to lives, public health, or safety; or
- Eliminate or lessen immediate threats of significant additional damage to improved public or private property in a cost-effective manner.[3]
Categories of Reimbursable Emergency Work
FEMA’s PAPPG lists the following as recognized categories of Emergency Work. To determine if an entity’s specific expenses are reimbursable, you should review FEMA guidance and consult with your legal counsel.
- Labor Costs (Force Account Labor). FEMA refers to an applicant’s personnel as “Force Account Labor.”
- Includes reimbursement of some hourly rates plus actual fringe benefits.[4]
- FEMA’s PAPPG lists eligible fringe benefits.[5]
- Typically, only overtime work (not straight-time work) is reimbursable for permanent, budgeted employees performing Emergency Work.[6]
- For unbudgeted employees performing Emergency Work, both straight-time and overtime work are eligible.
- Extraordinary costs (such as hazardous-duty pay, call-back pay, night-time and weekend differential pay) may be reimbursable for essential employees who are called back to duty during administrative leave to perform Emergency Work.[7] This may include both straight-time work and overtime.
- Reassigned employee pay for employees called upon to perform work that is not part of their regular job duties is reimbursable at their normal pay rates, even when performing work normally paid at lower rates.[8]
- Backfill employee pay for employees who temporarily replace other employees who are responding to an incident is eligible for reimbursement even if the backfilling employees are not performing Emergency Work, as long as the employees they are replacing are performing Emergency Work.[9]
- Overtime pay for Supervisors can be reimbursable.[10]
- Stand-By Time can be reimbursable if incurred in good faith in preparation for and directly related to actions necessary to save lives and protect public health and safety, even if the employee on standby was not ultimately used.[11]
- Equipment and Purchased Equipment Costs (Force Account Equipment) – an applicant’s own equipment that is used to respond to an event (based on hourly rates) or equipment purchased. FEMA provides funding of the purchase price and either:
- The use of equipment based on equipment rates (without ownership or depreciation components); or
- The actual fuel and maintenance costs.
- FEMA publishes equipment rates applicable on a national basis.
- Leased Equipment.
- Equipment lease costs are eligible if (i) the applicant performed an analysis of the cost of leasing versus purchasing the equipment[12] and (ii) the total lease costs don’t exceed the cost of purchasing and maintaining equipment during the life span of the event.
- Supplies.
- If the supplies are purchased or justifiably needed to effectively respond to and/or recover from the incident; or
- If taken from the applicant’s stock and used for the incident. A local governmental entity should document items taken from stock with withdrawal and usage records.
- Project Management and Design Services.
- Some project management activities (typically related to construction work) are reimbursable, such as services related to procurement, document review, and construction oversight; and
- Engineering and design services are eligible if necessary to complete eligible work.
- Section 324 Management Costs[13] including indirect costs, administrative expenses, or other expenses incurred in administering and managing a PA award that are not chargeable to a specific project.
- Examples could potentially include, but are not limited to, the following costs to:
-
- Conduct preliminary damage assessments;
- Conduct meetings regarding the PA Program or overall damage claims;
- Organize damage sites into logical groups;
- For travel; or to
- Prepare correspondence.
- Direct Administrative Costs (DACs) are costs that are tracked, charged, and accounted for directly for a specific project.
- Examples of DAC could potentially include, but are not limited to, the following costs:
-
- Collecting, copying, filing, or submitting documents to support a PA claim;
- Requesting disbursement of PA funds;
- Legal or consultant expenses related to the preparation or submission of a PA claim;
- Preparing a Project Worksheet (PW);
- Preparing correspondence;
- Travel expenses;
- Site inspections;
- Development of a detailed site-specific damage description;
- Evaluation of Section 406 hazard mitigation measures;
- Preparing Small Projects[14].
- FEMA considers the following factors when determining the reasonableness of DAC:
-
- Whether the type of employee and skill level is appropriate for the activities performed; and
- The level of effort required to perform an activity.
- Surveys to assess or locate damage.
- Certain emergency work, such as debris removal, preventing damage to property, removal of hazardous materials or privately owned vehicles, disposal of same, staging sites.
- Other Emergency Protective Measures, such as the following:
-
- Transporting and pre-positioning equipment and other resources for response;
- Flood fighting;
- Emergency Operation Center[15] (“EOC”) related costs;
- Emergency access;
- Supplies and commodities;
- Medical care and transport;
- Evacuation and sheltering, including that provided by another state or tribal government;
- Child care;
- Safety inspections;[16]
- Search and rescue to locate survivors, household pets, and service animals requiring assistance;
- Animal carcass removal;
- Security and law enforcement expenses (including but not limited to things such as barricades, fencing, etc.);
- Demolition of structures;
- Use or lease of temporary generators for facilities that provide essential community services;
- Firefighting;
- Dissemination of information to the public to provide warnings and guidance about health and safety hazards using various strategies, such as flyers, public service announcements, or newspaper campaigns;
- Mass mortuaries/morgues;
- Emergency communications services and public transport;
- Meals for emergency workers and volunteers;
- Expenses related to operating a facility or providing an emergency service;
- Mosquito abatement;
- Repair of residential electrical meters;
- Temporary relocation of essential services, including safe rooms for schools.
FEMA guidance provides that all costs for Emergency Protective Measures must be[17]:
- Directly tied to the performance of eligible work;
- Adequately documented[18];
- Reduced by all applicable credits (such as insurance proceeds)[19];
- Authorized and not prohibited under law;
- Consistent with an applicant’s internal policies and procedures; and
- Necessary and reasonable to accomplish the work properly[20].
FEMA determines reasonableness of costs[21] based on:
- Whether the cost is of a type recognized as ordinary and necessary for the type of facility or work[22];
- The cost is comparable to the current market price[23];
- Whether shortages or other complexities escalated the costs;
- Exigent circumstances;
- Whether the applicant participated in ethical business practices, ensuring parties to a transaction are independent of each other, without familial ties or shared interests, and on equal footing[24];
- The applicant complied with procurement requirements.
[1] PAPPG at 159.
[2] Permanent Work is defined by FEMA as “[r]estorative work that must be performed through repairs or replacement to restore an eligible facility on the basis of its pre-disaster design and current applicable codes and standards.” PAPPG at 162.
[3] 44 C.F.R. § 206.225(a)(3); PAPPG at 19 and 57.
[4] FEMA calculates fringe benefit costs based on a percentage of the employee’s hourly pay rate. PAPPG at 23.
[5] PAPPG at 23.
[6] Stafford Act § 403(d)(1)(B), 42 U.S.C. § 5170b, and 44 C.F.R. § 206.228(a)(2)(iii).
[7] PAPPG at 24.
[8] PAPPG at 24.
[9] PAPPG at 25.
[10] PAPPG at 25.
[11] PAPPG at 25.
[12] 2 C.F.R. § 200.318(d).
[13] Stafford Act § 324(a), 42 U.S.C. § 516(b); 44 C.F.R. § 207.2; and 2 C.F.R. §§ 200.56 and 200.412; PAPPG at 37.
[14] An applicant can prepare its own Small Projects, defined at PAPPG 164.
[15] FEMA defines an Emergency Operations Center as “the physical location at which the coordination of information and resources to support incident management (on-scene operations) activities normally takes place. An EOC may be a temporary facility or may be located in a more central or permanently established facility, perhaps at a higher level of organization within a jurisdiction. EOCs may be organized by major functional disciplines (e.g., fire, law enforcement, medical services), by jurisdiction (e.g., Federal, State, regional, tribal, city, county), or by some combination thereof.”
[16] Safety inspection expenses are reimbursable if incurred to establish whether a building is safe for entry, occupancy, and lawful use, as well as posting appropriate placards. Expenses to determine general building damage are not reimbursable.
[17] PAPPG at 21-22.
[18] 2 C.F.R. § 200.403(g).
[19] Stafford Act § 312, 42 U.S.C. § 5155, and 2 C.F.R. § 200.406.
[20] 2 C.F.R. § 200.403.
[21] PAPPG at 22.
[22] 2 C.F.R. § 200.404(a).
[23] 2 C.F.R. § 200.404(c).
[24] 2 C.F.R. § 200.404(b).
