Buildings and Equipment: Mastering One of the Most Complex Categories of Work



...same general purpose. (One simple, yet surprisingly common mistake to avoid in determining replacement costs: be sure the costs provided to FEMA are not based on the depreciated values kept by your accounting department, which are often significantly lower than market value.)

In addition, “the cost to replace the same number of destroyed equipment, vehicles and supplies with new items may be eligible if applicants can provide written justification that a used item is not reasonably available, or does not meet applicable national consensus standards.” 7 This is a consideration particularly in situations where a large area has been impacted by a disaster — for example, widespread flooding —where similar used replacement equipment that would normally be available in the surrounding areas may have been similarly compromised.

Damage to Equipment Performing Emergency Work

When accounting for disaster-related damages to equipment, it is worth noting that equipment rates used by FEMA for reimbursement for the use of applicant- owned equipment include “parts and labor for normal maintenance and periodic equipment overhaul. These rates are expected to cover most damage to equipment used under emergency conditions. However, when equipment sustains unusual damage or requires extraordinary maintenance as a result of emergency use under severe conditions (e.g., high water or very rough terrain), and such damage cannot be reasonably avoided, repair and/or maintenance costs may be eligible for reimbursement.” 8 The referenced policy contains examples of eligible and ineligible costs associated with this policy.


Insurance Coverage and Settlements

FEMAfunding is secondary to all other sources of available funding, including insurance. This means that your anticipated and/or actual property insurance claim settlement(s) will be one of the major considerations impacting your FEMAgrant. To protect against duplication of benefits, “once the amount and availability of coverage have been determined, an appropriate reduction in eligible project costs can be made based on anticipated insurance proceeds. If an applicant has already received an insurance payment at the time of project approval, FEMAwill review the settlement. … [and] may limit funding if the applicant’s policy provides coverage which should be pursued from the insurer.” 9

Anticipated insurance proceeds are typically determined by an insurance specialist hired by FEMA and placed in the Insurance Special Considerations queue to review PWs. Keep in mind that these specialists, typically former insurance adjusters of some kind, will have a stack of PWs to work through and — not having had the opportunity to examine the loss themselves — will have only the policy information, damage description and scope of work provided. This means that thorough documentation and clarity of presentation are critical.

Mandatory NFIP Reductions

In addition, for an insurable facility located in a special flood hazard area that incurs damage from a declared disaster and is not covered by flood insurance, the StaffordAct requires that the federal assistance which would otherwise be available for restoring this facility be reduced by the maximum amount of insurance that would have been available if the facility had been covered by flood insurance, or the value of the facility at the time of the disaster, whichever is less. The maximum amount of NFIP coverage for commercial properties is currently $500,000 per building and $500,000 for contents — for a total potential reduction in FEMAPublic Assistance funding on an uninsured facility of $1 million.

Obtain and Maintain Requirements

Insurance issues become, if possible, even more complicated after funding has been received. This topic is discussed in detail in Disaster Recovery Today Issue #11, but is touched on here as an important consideration for Category E grant management decisions.

Applicants must, as a condition for receiving Public Assistance funding for permanent work, obtain and maintain insurance on the impacted and funded facility for (at minimum) the amount of the estimated...