B-161611, SEP 18, 1969

B-161611: Sep 18, 1969

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THAT THE WORK INVOLVED WAS COMPLETED BEFORE THE OFFICE OF EMERGENCY PREPAREDNESS (OEP) PUBLISHED ITS REGULATIONS IN THE FEDERAL REGISTER AND THAT ETS-HOKIN HAD NO WAY TO ANTICIPATE THE REGULATIONS. YOU BELIEVE THAT THE ONLY FEASIBLE APPROACH IS TO CONSIDER ETS-HOKIN TOTAL COSTS DURING THE ENTIRE CONSTRUCTION PERIOD. THE HIRING OF THE CERTIFIED PUBLIC ACCOUNTING FIRM IS PROPOSED BECAUSE YOU FEEL THAT THIS IS STRICTLY AN ACCOUNTING MATTER WHICH REQUIRES ACCOUNTING EXPERTISE. NO ENGINEERING DETERMINATIONS ARE INVOLVED. THERE IS HEREBY AUTHORIZED TO BE APPROPRIATED SUCH SUMS AS MAY BE NECESSARY TO REIMBURSE NOT MORE THAN 50 PER CENTUM OF ELIGIBLE COSTS INCURRED TO REPAIR. OR AIRPORT CONSTRUCTION WHICH WAS DAMAGED OR DESTROYED AS A RESULT OF A MAJOR DISASTER.

B-161611, SEP 18, 1969

MISCELLANEOUS - DISASTER RELIEF - GRANTEE'S COMPLIANCE WITH REGULATIONS DECISION TO DIRECTOR, OFFICE OF EMERGENCY PREPAREDNESS AUTHORIZING THE PAYMENT OF A GRANT UNDER THE DISASTER RELIEF ACT OF 1966 INVOLVING ETS- HOKIN CORPORATION EVEN THOUGH THE GRANTEE'S ACCOUNTING PRACTICES DO NOT REFLECT COST BREAKDOWNS REQUIRED UNDER SUBSEQUENTLY PUBLISHED REGULATIONS.

MR. LINCOLN:

YOUR LETTER OF AUGUST 27, 1969, CONCERNS A CLAIM (GRANT) UNDER THE DISASTER RELIEF ACT OF 1966, PUBLIC LAW 89-769, 80 STAT. 1316, WHICH INDIRECTLY INVOLVES THE ETS-HOKIN CORPORATION (ETS-HOKIN).

YOU STATE THAT THE CLAIM RELATES TO AN EVENT WHICH QUALIFIES FOR A FEDERAL GRANT UNDER PUBLIC LAW 89-769, BUT THAT THE WORK INVOLVED WAS COMPLETED BEFORE THE OFFICE OF EMERGENCY PREPAREDNESS (OEP) PUBLISHED ITS REGULATIONS IN THE FEDERAL REGISTER AND THAT ETS-HOKIN HAD NO WAY TO ANTICIPATE THE REGULATIONS.

YOU FIND THAT THE NATURE OF ETS-HOKIN ACCOUNTING PRACTICES AND PROCEDURES DOES NOT REFLECT USABLE JOB SITE COST BREAKDOWNS SUGGESTED BY THE OEP REGULATIONS. IN VIEW OF THIS, YOU BELIEVE THAT THE ONLY FEASIBLE APPROACH IS TO CONSIDER ETS-HOKIN TOTAL COSTS DURING THE ENTIRE CONSTRUCTION PERIOD, SUBTRACT THEIR TOTAL RECEIPTS, ASSUME NO PROFIT OR LOSS, AND CONSIDER THE REMAINDER AS BEING THE TOTAL DISASTER COST. HALF OF THIS DISASTER COST, WITH INTEREST ADDED, WOULD BECOME THE AMOUNT OF GRANT. A PRECAUTIONARY MEASURE, YOU WOULD PROPOSE TO TAKE ONE-HALF THE GROSS AMOUNT OF ANY INSURANCE OR DAMAGE AWARDS WHICH MIGHT MATERIALIZE IN THE FUTURE, BUT WITH ETS-HOKIN PAYING ALL COSTS.

IN ORDER TO CONFIRM THE ACCURACY OF THE FIGURES WHICH WOULD DEVELOP THE GRANT, YOU PROPOSE THAT THE OFFICE OF EMERGENCY PREPAREDNESS HIRE A CERTIFIED PUBLIC ACCOUNTING FIRM TO PERFORM THE NECESSARY AUDIT OF THE CLAIM AND ETS-HOKIN'S BOOKS OF ACCOUNT. THE HIRING OF THE CERTIFIED PUBLIC ACCOUNTING FIRM IS PROPOSED BECAUSE YOU FEEL THAT THIS IS STRICTLY AN ACCOUNTING MATTER WHICH REQUIRES ACCOUNTING EXPERTISE. YOU ADVISE THAT UNDER THIS APPROACH, NO ENGINEERING DETERMINATIONS ARE INVOLVED.

YOU DO NOT PROPOSE TO CHANGE YOUR REGULATIONS. YOU FEEL THAT ANY REQUEST FOR GRANTS ARISING FROM DISASTERS SUBSEQUENT TO THE PUBLISHING OF THE REGULATIONS AFFORDS THE CLAIMANT AMPLE OPPORTUNITY TO ADOPT ACCOUNTING PRACTICES AND PROCEDURES WHICH WOULD ISOLATE THE JOB SITE COSTS WHICH WOULD BE ELIGIBLE FOR A GRANT UNDER PUBLIC LAW 89-769.

YOU INQUIRE AS TO WHETHER WE WOULD TAKE EXCEPTION TO YOUR APPROACHING THIS CLAIM ON THE PROPOSED BASIS, AS AN EXCEPTION TO THE PUBLISHED REGULATIONS, AND AS TO WHETHER WE WOULD TAKE EXCEPTION TO YOUR HIRING A PUBLIC ACCOUNTING FIRM TO DETERMINE AND CONFIRM A CORRECT ACCOUNTING RESULT.

SECTION 9 OF PUBLIC LAW 89-769 READS, IN PART, AS FOLLOWS:

"SEC. 9. THERE IS HEREBY AUTHORIZED TO BE APPROPRIATED SUCH SUMS AS MAY BE NECESSARY TO REIMBURSE NOT MORE THAN 50 PER CENTUM OF ELIGIBLE COSTS INCURRED TO REPAIR, RESTORE, OR RECONSTRUCT ANY PROJECT OF A STATE, COUNTY, MUNICIPAL, OR OTHER LOCAL GOVERNMENT AGENCY FOR FLOOD CONTROL, NAVIGATION, IRRIGATION, RECLAMATION, PUBLIC POWER, SEWAGE TREATMENT, WATER TREATMENT, WATERSHED DEVELOPMENT, OR AIRPORT CONSTRUCTION WHICH WAS DAMAGED OR DESTROYED AS A RESULT OF A MAJOR DISASTER, AND OF THE RESULTING ADDITIONAL ELIGIBLE COSTS INCURRED TO COMPLETE ANY SUCH FACILITY WHICH WAS IN THE PROCESS OF CONSTRUCTION WHEN DAMAGED OR DESTROYED AS A RESULT OF SUCH MAJOR DISASTER. ELIGIBLE COSTS ARE DEFINED TO MEAN THOSE COSTS DETERMINED BY THE DIRECTOR OF THE OFFICE OF EMERGENCY PLANNING AS INCURRED OR TO BE INCURRED IN (1) RESTORING A PUBLIC FACILITY TO SUBSTANTIALLY THE SAME CONDITION AS EXISTED PRIOR TO THE DAMAGE RESULTING FROM THE MAJOR DISASTER, AND (2) COMPLETING CONSTRUCTION NOT PERFORMED PRIOR TO THE MAJOR DISASTER TO THE EXTENT THE INCREASE OF SUCH COSTS OVER ORIGINAL CONSTRUCTION COSTS IS ATTRIBUTABLE TO CHANGED CONDITIONS RESULTING FROM THE MAJOR DISASTER. REIMBURSEMENT UNDER THIS SECTION SHALL BE MADE TO THE STATE, COUNTY, MUNICIPAL, OR OTHER LOCAL GOVERNMENTAL AGENCY WHICH IS CONSTRUCTING THE PUBLIC FACILITY OR FOR WHICH IT IS BEING CONSTRUCTED, EXCEPT THAT IF THE ECONOMIC BURDEN OF THE ELIGIBLE COSTS OF REPAIR, RESTORATION, RECONSTRUCTION OR COMPLETION IS INCURRED BY AN INDIVIDUAL, PARTNERSHIP, CORPORATION, AGENCY, OR OTHER ENTITY (OTHER THAN AN ORGANIZATION ENGAGED IN THE BUSINESS OF INSURANCE), THE STATE, COUNTY, MUNICIPALITY, OR OTHER LOCAL GOVERNMENTAL AGENCY SHALL REIMBURSE SUCH INDIVIDUAL, PARTNERSHIP, CORPORATION, AGENCY, OR OTHER ENTITY NOT TO EXCEED 50 PER CENTUM OF THOSE COSTS. ELIGIBLE COSTS SHALL NOT INCLUDE ANY COSTS FOR WHICH REIMBURSEMENT IS RECEIVED PURSUANT TO INSURANCE CONTRACTS OR OTHERWISE BY THE PARTY INCURRING THE ECONOMIC BURDEN OF SUCH COSTS."

THE OEP REGULATIONS IMPLEMENTING THE ABOVE-QUOTED PROVISION OF LAW REQUIRE GENERALLY THAT THE CLAIMANT FURNISH OEP AN ITEMIZED ESTIMATE OF CONSTRUCTION COSTS, BY WORK ITEMS, INCURRED OR TO BE INCURRED AS A RESULT OF THE DISASTER (32 CFR 1711.3 AND 1711.22 (D)).

IN VIEW OF ALL THE FACTS AND CIRCUMSTANCES, AND MORE PARTICULARLY SINCE THE WORK INVOLVED WAS COMPLETED BY ETS-HOKIN BEFORE THE PUBLICATION IN THE WORK INVOLVED WAS COMPLETED BY ETS-HOKIN BEFORE THE PUBLICATION IN THE FEDERAL REGISTER OF OEP'S REGULATIONS PRESCRIBING THE STANDARDS AND PROCEDURES RELATING TO GRANTS UNDER PUBLIC LAW 89 769, AND APPARENTLY NEITHER THE LOCAL GOVERNMENT AGENCY INVOLVED NOR ETS-HOKIN WERE AWARE OF THE CONTENTS OF THE REGULATIONS, WE WOULD NOT OBJECT TO YOUR APPROACHING THIS CLAIM ON THE PROPOSED BASIS, AS AN EXCEPTION TO THE PUBLISHED REGULATIONS IF YOU DETERMINE THE COSTS INVOLVED ARE OTHERWISE ELIGIBLE, PROVIDED THAT THE INTEREST ADDED IS SPECIFICALLY RELATED TO THE ELIGIBLE WORK (CF. 32 CFR 1711.33(A)(2)(IV)), AND THAT THE GRANT (PAYMENT) IS MADE TO THE APPROPRIATE STATE, COUNTY, MUNICIPAL OR OTHER LOCAL GOVERNMENT AGENCY.

ALSO, WE WOULD HAVE NO OBJECTION IN THE INSTANT CASE TO OEP HIRING A PUBLIC ACCOUNTING FIRM TO DETERMINE AND CONFIRM A CORRECT ACCOUNTING RESULT.