FEMA policy provides that travel expenses related to one specific PW qualify as DAC, while travel expenses “related to general support and not directly tied to one specific project” are indirect costs, and therefore ineligible as DAC. By extension, expenses allocated to every task for all PWs in proportion to the hours worked on the task are not eligible as DAC. CDM Smith utilized its Expense Allocation Methodology to divide travel expenses incurred by its employees to benefit multiple PWs across said PWs on a prorated basis. Accordingly, the costs are not eligible DAC.

From October 27, 2012, to November 9, 2012, Hurricane Sandy caused damage in the State of New York. The Applicant hired project management contractors, including Camp Dresser McKee & Smith (CDM Smith), to assist with the administration of multiple Public Assistance (PA) grants. CDM Smith’s employees often traveled to the Applicant’s jurisdiction and worked on multiple projects during each trip or billing period. CDM Smith allocated these expenses on a pro rata basis according to the eligible hours worked by a given employee (Expense Allocation Methodology). In 2015, the Applicant, the New York State Division of Homeland Security & Emergency Services (Grantee), and FEMA agreed to a process that would allow for further review of certain contractor expenses without delaying reimbursement for other work done on the various PWs. By letter dated January 6, 2017, FEMA informed the Applicant that CDM Smith’s travel expenses associated with direct administrative and project coordination tasks were not eligible for reimbursement as Direct Administrative Costs (DAC). Following its final inspection of each Large Project Final Accounting (LPFA) for the PWs, FEMA adjusted the PWs to include DAC that it found the Applicant had substantiated, but denied funding for indirect travel costs in each PW, in accordance with its January 6, 2017 letter. The Applicant appealed FEMA’s LPFA determinations, arguing that the Expense Allocation Methodology was permissible under its interpretation of applicable regulations and FEMA policy, and that the travel costs so allocated were eligible for reimbursement as either DAC or contract costs. On first appeal, FEMA’s Regional Administrator (RA) upheld the denial of indirect costs as either DAC or contract costs. The Applicant timely filed second appeals, reiterating its arguments from its first appeals.

Stafford Act § 324 (2006) 44 C.F.R. §§ 207.2, 207.6 (2012); 2 C.F.R. § 200.110 (2014) DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs (Mar. 12, 2008); Memo., DAC Guidance (Sept. 8, 2009); DAP 9525.11, Payment of Contractors for Grant Management Tasks (Apr. 22, 2001) FEMA-4069-DR-MN, City of Duluth, Mult. PWs, at 5 (June 15, 2015)