FEMA finds the NCS costs incurred for unused rooms were not reasonable and necessary to address the public health needs of the COVID-19 emergency. Appeal Letter William Ray Director North Carolina Emergency Management 4236 Mail Service Center Raleigh, North Carolina, 27699-4236 Brenda Mathews Project Writer Mecklenburg County 700 East 4th Street, 4th Floor Charlotte, North Carolina 28202 Re: Second Appeal – Mecklenburg County, PA ID: 119-99119-00, FEMA-4487-DR-NC, Grants Manager Project (GMP) 686563/Project Worksheet (PW) 785, Allowable Costs & Reasonable Costs Dear William Ray and Brenda Mathews: This is in response to the June 25, 2025 letter from the North Carolina Emergency Management, which forwarded the referenced second appeal on behalf of Mecklenburg County (Applicant). The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $843,664.51 for non-congregate sheltering (NCS) costs. As explained in the enclosed analysis, I have determined that the NCS costs incurred for unused rooms were not reasonable and necessary to address the public health needs of the COVID-19 emergency. Accordingly, I am denying this appeal. This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206. Sincerely, /S/ Robert M. Pesapane Director, Public Assistance Enclosure cc: Robert Ashe Acting Regional Administrator FEMA Region 4 Appeal Analysis Background The coronavirus (COVID-19) pandemic resulted in a major disaster declaration for the State of North Carolina on March 25, 2020, with an incident period of January 20, 2020 to May 11, 2023. On March 17, 2020, Mecklenburg County (Applicant) entered into an agreement to lease an entire 120-room EconoLodge Inn & Suites (EconoLodge) to provide non-congregate sheltering (NCS) for COVID-19 infected/exposed individuals.[1] The Applicant renewed the EconoLodge lease multiple times. The first seven lease amendments included the entire 120 rooms, and the eighth amendment, entered on September 23, 2021, included 66 rooms per day. FEMA created Grants Manager Project 686563 to document the NCS costs incurred between June 1 and December 31, 2021, when the Applicant was still leasing rooms at the EconoLodge. The Applicant requested reimbursement for its leasing costs of $987,000.00. The Applicant provided documentation showing that the number of leased rooms used for NCS totaled 2,995 nights (i.e., the sum of the calculation of each room, times the number of nights that room was occupied), which equated to a total cost of $143,335.49.[2] The Applicant requested costs for 20,712 nights, for both used and unused rooms during this period. On November 4, 2024, FEMA issued a Determination Memorandum partially granting $143,335.49 for rooms used for NCS while denying $843,664.51 for unused rooms. FEMA found the Applicant did not provide an analysis of NCS options or justify leasing 20,712 room nights was reasonable and necessary. First Appeal On January 3, 2025, the Applicant submitted a first appeal, requesting $843,664.51 for the cost of the unused rooms it leased at the EconoLodge. The Applicant stated that leasing the entire EconoLodge: (1) complied with guidance from a public health official; (2) was necessary to protect the health of the community and save lives; and (3) was prudent based on anticipated COVID-19 transmission and infection rates at the time. The Applicant also stated that it tried to identify additional local hotels to participate in an NCS program but only the EconoLodge was willing to serve as an isolation/quarantine unit for the Applicant. The Applicant also asserted the claimed NCS costs complied with FEMA’s COVID-19 policies and a prior FEMA second appeal decision. The North Carolina Emergency Management (Recipient) transmitted the appeal in a letter dated January 24, 2025, with its support. On March 19, 2025, the FEMA Region 4 Regional Administrator denied the first appeal.[3] FEMA determined that the Applicant did not demonstrate the NCS costs were related to the performance of eligible emergency work or were reasonable and necessary to address the public health needs under COVID-19. FEMA also asserted that, beginning June 9, 2020, letters from FEMA extending NCS indicated that contracts requiring payment for unused sheltering may be considered unreasonable and, therefore, associated costs may be ineligible for PA reimbursement. FEMA stated that, during this project’s period of performance, 85 percent of the billed rooms were unused. FEMA explained that, in the second appeal the Applicant cited to where FEMA approved costs, the unused room rate was 2.5 percent.[4] Further, FEMA stated that although the Applicant amended the lease agreement several times, the Applicant did not explain why it did not cancel its lease given the high rate of unused rooms. Second Appeal On May 19, 2025, the Applicant submitted a second appeal, reiterating first appeal arguments. In a letter dated June 25, 2025, the Recipient forwarded the Applicant’s appeal with a letter stating its support. Discussion FEMA is authorized to provide assistance for emergency protective measures to save lives and protect public health and safety.[5] For emergency protective measures to be eligible, work must be required due to an immediate threat resulting from the declared incident.[6] In limited circumstances, FEMA may reimburse costs related to NCS.[7] Under the COVID-19 declarations, FEMA will consider requests for reimbursement of NCS for health and medical-related needs, such as isolation and quarantine resulting from the public health emergency.[8] Any approval of funding is limited to that which is reasonable and necessary to address the public health needs of the event.[9] To be eligible, costs must be, among other requirements, necessary and reasonable to accomplish the work properly and efficiently, and adequately documented.[10] A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.[11] Here, the Applicant asserts that leasing all the rooms in the EconoLodge, even though that resulted in an 85 percent rate of unused rooms, was necessary to protect the health of the community and save lives. The Applicant maintains that leasing the rooms in the EconoLodge was the only option available for sheltering potentially COVID-19 positive individuals or high-risk individuals. However, the Applicant did not provide information showing how it evaluated the health and medical-related needs resulting from the public health emergency to determine that leasing all the rooms in the EconoLodge was reasonable and necessary. Further, while the Applicant amended the lease in September 2021, which reduced the number of NCS rooms from 120 to 66 rooms per day, the Applicant does not explain how it evaluated the continued need for unused rooms or how it analyzed the population data it presented. It also does not show why it determined in September 2021, but not earlier, to decrease the number of leased EconoLodge NCS rooms to shelter the portion of the population identified as potentially requiring NCS. Last, although the Applicant asserts it continually monitored the need for NCS, it does not explain how it evaluated COVID-19 information at the time it decided to continue the EconoLodge lease agreement for the timeframe of June through December 2021.[12] Therefore, the Applicant has not demonstrated the additional $843,664.51 for unused rooms was reasonable and necessary to address the public health needs of the COVID-19-declared event.[13] Conclusion