EMForum Presentation — February 12, 2014

Maximizing Your Disaster Cost Recovery
The Critical Role of Purchasing and Procurement

Michael Martinet, CEM
Martinet Group, LLC

Amy Sebring
EMForum Moderator

This transcript contains references to slides which can be downloaded from http://www.emforum.org/vforum/recovery/DisasterCostRecovery.pdf
A video recording of the live session is available at http://www.emforum.org/pub/eiip/lm140212.wmv
MP3 format at http://www.emforum.org/pub/eiip/lm140212.mp3 or in MP4format at http://www.emforum.org/pub/eiip/lm140212.mp4

[Welcome / Introduction]

Amy Sebring: Good morning/afternoon everyone and welcome to EMForum.org. I am Amy Sebring and will serve as your Host and Moderator today and we are very glad you could join us.

We hope you will find today’s topic to be very helpful to you in preventing common and costly mistakes under a Disaster Declaration for public assistance, resulting from failing to closely follow all applicable regulations.

[Slide 1]

Now it is my pleasure to introduce Michael Martinet, CEM and Principal of the Martinet Group LLC, specializing in disaster finance training and cost recovery planning. Previously he served as Emergency Planning Manager with the Controller’s Office in the City and County of San Francisco. He also served for 16 years as the Executive Director for the Office of Disaster Management, Area G, a consortium of 14 cities in Los Angeles County.  Please see today’s Background Page for further biographical details and links to related resources.

Welcome back Mike, and thank you very much for taking the time to be with us today. I now turn the floor over to you to start us off please.


Mike Martinet:  Thank you, Amy and good morning, everyone.  Thanks you for joining us.  I’m delighted to be here again.  I start out with the spaceman picture.  I suppose many of you saw the movie “Gravity”.  I am told by people who have had the experience of working in a federal disaster for the first time that it is not unlike this experience.  You are free floating and you don’t know where gravity and the ground are.

I have had twenty-five years as an emergency manager.  I had a Master’s Degree in emergency services administration and as a certified emergency manager.  More significantly I have been teaching finance administration cost recovery for over fifteen years.  I have done forty classes primarily in California but in other states as well with well over a thousand students who have been with me for these classes.

[Slide 2]

I am preaching to the choir here but as you can see this annual disaster loss chart from Munich Re which is an international reinsurance company and tracks natural disasters globally and worldwide.  What is significant about the line I just added is those are the insured losses halfway up. 

If you can see the cut-off, which is not great—you can see the difference.  That is typical for these catastrophic disasters.  Only half of the losses are insured.  Fortunately in this country we do have the Federal Emergency Management Agency’s Stafford Act to provide us with additional financial resources and it becomes critical when only half your losses are insured. 

[Slide 3]

My work is largely based on audits.  I have a collection of 250 audits which tells you the fabulous social life I have.  I use audits because this is where the rubber meets the road.  You can see where people are making mistakes and losing money and what are the specific fixes they need to implement changes to avoid these kinds of findings in the future.

[Slide 4]

This is how federal government people see our poorly managed project worksheets.

[Slide 5]

This is what they want to see.

[Slide 6]

We have to stay within the lines and use appropriate information because this is how the auditors see those same files—strictly black and white.  Years after the emotion and drama of a disaster is over the auditors come in and to them it is just if you followed the rules or you did not.  Their findings sometimes run into tens of millions of dollars.

[Slide 7]

In my review of audits and I’ve done an analysis of these 250 audits, these are the top five audit problems that the auditors cite by numeric count.  Number one is purchasing and we’re going to get into that in a minute.  The second one is lack of proper documentation.  The third is ineligible work.  The fourth is insurance and the fifth is project management.

We are going to through those here and spend most of our time on purchasing.  First I’m going to give you some examples.

[Slide 8]

This is a high school in the Midwest.  They had a couple of issues cited in the audit.  One was repair versus replace and the other was insurance.  On purchasing they lost 1.36 million dollars on purchasing alone.

[Slide 9]

This is a city on the west coast.  They lost 16 million dollars on an audit.

[Slide 10]

This is a county in the northeast United States.  The auditors hit them for 39 million dollars in purchasing alone.  The total findings were for 48 million.  Purchasing alone was 39 million.  The United States senator from that state and FEMA revised the finding and decided they only owed 705,000.  That was a rather extraordinary case in that reversal.

[Slide 11]

This is university in the southern part of the United States.  In August they got hit for 46 million dollars—every penny purchasing related. 

[Slide 12]

This is a university in the Midwest.  This was a repair/replace situation.  The OIG (Office of Inspector General) had a finding of almost 84  million dollars they want back from the university  on this particular case. You can see some of these cases really run into some serious money.

[Slide 13]

Where are we spending public assistance dollars?  One experience is most people want to track their fire, water, public works and emergency response activities but this data comes from the FEMA website itself from the fiscal years 2011 through 2012.  The 2013 data is not yet available.  This is where the feds say they are spending money.

[Slide 14]

First of all you have water control facilities which is less than two percent then you have state management which is very small, less than three percent.  We’re not going to concern ourselves with that.

[Slide 15]

This is recreation or other, just over three percent.

[Slide 16]

This is Category A, debris removal.  I’m waiting for the 2013 numbers because that is going to include Sandy and I think we’re going to see a big jump in those numbers for debris removal.  Those previous two years were kind of low.

[Slide 17]

Then you have Category F, public utilities.

[Slide 18]

Then you have Category B, protective measures.  This is the law, fire, sheltering, sandbagging and flood fights—we are going to come back to that.  I put that in red for a very specific reason.  I’ll talk about that more in a second.

[Slide 19]

Then we have public buildings—repair and replace.

[Slide 20]

Finally we have roads and bridges which is over 25 percent.

[Slide 21]

When we total these numbers, this Category B is still less than 20% of all the federal money the feds distribute.  In my experience that is where most people focus their cost recovery efforts—tracking those emergency numbers and units less than 20 percent.

[Slide 22]

What that means when we take away the state management is 79 % of the money that cities and counties are spending goes through the purchasing function. 

[Slide 23]

Almost 80 percent goes through the purchasing function but purchasing people often are not a part of the emergency planning spectrum.

[Slide 24]

When we talk about disaster purchasing this is the kind of thing we have—emergency supplies, food, water, ice, generators and fuel—those kinds of things that we need for the crisis.

[Slide 25]

But when we are doing disaster purchasing we must follow our rules…

[Slide 26]


[Slide 27]

…we must follow federal rules.  There are two sets of federal rules.  One is Title 44 Section 13.36 in the Code of Federal Regulations.  The other is Title Two of Federal Regulations (you have Sections 215, 220, 225 and 230).  For local governments you only follow the 215.  If you are a college, university or non-profit—we only follow one of those four—they are almost identical.

If you are following Title 44 13.36 you are probably picking up all the requirements in the other four sections.  They are a little bit conflictive.

[Slide 28]

Why am I telling you this?  This is purchasing and not emergency management.  My observation is that most emergency managers are not aware of this information.  I have talked to dozens of people at conferences and this is a big revelation to them.  And purchasing people don’t know it either.  That is the key.  No one is really aware of this except Homeland Security auditors.

[Slide 29]

Let’s talk about the purchasing function for a minute.  On our day to day purchasing we have to follow our rules and our rules for buying all of these different components on a day to day basis—regular purchasing.

[Slide 30]

In a disaster we have a dual pathway.  In that crisis phase we have exigent circumstance, life and death situations.  When we make purchases without going through our processes they must address life safety, a threat to public health or improved property. 

We have a 70 hour window—the only way the feds allow us—it is a good idea though to support those with documentation that shows why we bought this stuff without going through the processes that it was necessary to address an issue of life safety, a threat to public health or improved property.

[Slide 31]

Beyond that we have disaster related non-emergency purchases that must comply with 44 CFR.  Let me repeat that—disaster related but non-emergency purchases.  I’ll explain that concept in a minute.  Those must comply with 44 CFR and our day to day purchasing rules.

[Slide 32]

For those sole source things, we can rent equipment, materials and supplies, debris management for 70 hours, and emergency services but again, they have to be in this criterion of exigent circumstances.

[Slide 33]

Once we get past that first phase—the first few days—we then have to start complying with 44 CFR for all of these purchases.

[Slide 34]

The fact we have a local of gubernatorial proclaimed disaster does not give us an exemption from following the federal rules—no exemption whatsoever.

[Slide 35]

In my analysis I went through and did a search for every occurrence of 13.36 and these are what I call the dirty dozen—the most commonly cited findings in audits.  Cost-price analysis—so in 250 audits there were 390 findings and almost 20% were related to cost-price analysis.

Unreasonable requirements—that includes geographic preferences—many agencies will give a local vendor a slight preference in purchasing and that violates federal codes.  People fail to maintain procurement records.  They do sole source purchasing beyond that eligible window and so on.  You can read these.  They won’t be available but these are the most common findings for purchasing violations.

[Slide 36]

The number one take away this morning is—“Does my agency’s purchasing system meet federal requirements?”  I am working with a client in the San Francisco Bay area with sixteen agencies.  I’ve looked at the purchasing policies for four of those agencies.  All four of those agencies in one way or another violate some section of this Title 44 Section 13.36.

It is fairly common.  If you look at the audits, you’ll see why.

[Slide 37]

The second most common failing is lack of supporting documentation.  This includes having all your purchasing documentation in your file.  That includes bid announcements, all the bids—winning and losing—and all the contractor documents.  We have the three year retention period for documents and the contractors we have also have to have three years past that close of the file.

[Slide 38]

What we need is a plan.  Do we have separate stand alone disaster cost-recovery plans?  I have seen all kinds of emergency plans.  I’ve not yet seen a good current complete plan for disaster cost recovery.  The disaster itself may last a few days or a couple of weeks but the cost recovery process goes on for years and sometimes decades.

Fire, law and even public works get frequent and intense training.  Finance, purchasing and administrative people almost never get training, yet their part of the disaster goes on for years and sometimes decades.  I think we have to refocus our training efforts and realization in where the real costs of disasters lie.

[Slide 39]

Take away number two—“Do we really understand the breadth and depth of the documentation requirements?”

[Slide 40]

The third most common is ineligible work.  Three out of ten failed on this score.  I have two clients working on a presidentially declared disaster right now.  One of them is interesting because what was destroyed was a summer camp that the agency owned in the mountains.  The community goes up every summer and camps out but the entire camp is on federally owned land. 

It is owned by the United States Department of Agriculture. It is going to have some interesting implications. One of the things they want them to do, the USDA, is to cut down about 1400 trees.  Those trees are federal property and they sit on federal land.  I’m not sure we’ll be reimbursed for that work because it is the domain of another federal agency.  It is not eligible.

[Slide 41]

You can look at hundreds of cases where auditors cite and FEMA often denies eligibility because we don’t understand going in what the rules are. Eligibility also includes the fact that it has to be in the disaster area, caused by the disaster—the legal responsibility of the agency.  This is a big deal—this legal responsibility. 

In an analysis with one of my clients we looked at how many of the agencies lease a building to or from another government agency, lease to or from a private for or non-profit, because depending on how the lease terms are structured they may have written themselves out of responsibility to be eligible to get reimbursed for disaster damage. That is one of the issues we are going to address.  How do we make sure we are eligible applicants—that we haven’t contracted that to someone who isn’t eligible?

[Slide 42]

Eligibility—this is another issue that is coming up.  People have facilities they aren’t fully using.  When you don’t fully use a facility, that portion of the facility is not eligible for federal reimbursement. 

The city of Atascadero, California lost 2.7 million dollars on an eligibility issue because a building they reported as being 100% used was in fact only a little over 80% used. When the auditors did the calculations it cost them 2.7 million dollars for that empty space.

[Slide 43]

Ineligible work also includes lack of maintenance or deferred maintenance.  It includes work where you don’t have a maintenance plan.  I know of an agency not far from us here in Southern California—heavy damage to their roof systems.  They did not have a regular roof inspection and they did not have a roof maintenance program so FEMA denied eligibility for those damaged roofs.

[Slide 44]

That doesn’t mean however that ineligible expenses are lost forever.  We can capture that.  The flagship example of this is Joplin, Missouri.  After the tornado ripped through there in May of 2011 they did a fabulous job of tracking all the disaster volunteer hours and in-kind donations.  They got credit against their local cost share of 17.7 million dollars.

Seventeen point seven million dollars they recovered—not as a payment from FEMA but as money they did not have to pay to the federal government as a local cost share. This is a shining example if you have a disaster cost recovery program and it includes your volunteer component it can be a substantial amount of money to the local agency when it is properly handled.

[Slide 45]

Take away number three—“We need to understand eligibility requirements.  This will help us avoid huge surprises later.”

[Slide 46]

The next one is insurance failure—findings relative to insurance in a variety of different cases.

[Slide 47]

The feds look at insurance—it is one of the special considerations.  It is written into every single project worksheet.  They want to know if we have insurance, how much is covered and what is covered.  They can deduct from the obligation of the budget worksheet the actual or the anticipated insurance proceeds.

If you have a 10 million dollar policy on a 10 million dollar building they may owe you nothing but the deductible if they choose to interpret it that day.   They may wait and see what the insurance people are going to pay and they pay the balance.  Sometimes it doesn’t go that way.
After a disaster applicants are required to obtain and maintain insurance coverage on all insurable facilities.  This is huge in that portion of the country where they have flood insurance available.
If you don’t buy flood insurance after you get federally funded for a disaster repair and reconstruction I can show you several audits where the auditors come back and said that you didn’t buy insurance or maintain insurance and therefore we want twelve million dollars back.  In one case in a southern city they wanted 62 million dollars back because the city failed to purchase insurance.

That is a serious hit and also a nasty headline if you happen to be an emergency manager or a finance director.  We also have to know what is covered by the policy.  What are the deductibles? Do we have before pictures so we can demonstrate to FEMA that this is the quality of some things we had judged by these photos? Here are the after photos.  Pre-disaster photo documentation is very important and can be a huge tool in getting the maximum federal reimbursements.

[Slide 48]

Here’s another issue.  It’s a school district in Louisiana hit by Hurricane Rita that had 500 buildings.  Their policy said they had a 10,000 dollar per facility deductible.  Ten thousand times 500 is 5 million dollars.  Had the language read they had a 10,000 dollar per occurrence—and Rita was the occurrence—their deductible would have been only 10,000 dollars instead of 5 million dollars

[Slide 49]

Integrating our risk management people into our disaster cost public program is extremely important because one out of four audits has insurance related findings.

[Slide 50]

We have to ask ourselves how we are protecting our agency assets.  When were our insurance policies last reviewed and where are we keeping them?  The first time I took a class in cost recovery it was taught by a gentleman who had been the state director for South Carolina and they had a small city where the city hall was blown off its foundations in a hurricane.

The feds were kind of abrupt and said they didn’t think they had this nice a city hall.  Why don’t you show us the plans?  Where do you store the plans for city hall?  Typically they are stored in the city hall.  The question is if we have our important documentation backed up off site out of the hazard zone that we’re dealing with.

[Slide 51]

Another issue we have to look at is when we are doing the debris clearance from the public right of way following a disaster the agency has to go back to the homeowner and make an inquiry about debris removal insurance.  It is common in policies that if they had insurance the homeowner has to go up against the insurance company and give that money back for the local agency and sent back to FEMA otherwise they will deduct that amount of money.

Otherwise they will deduct that amount of money and the experience they have is that one out of every so many homes has it and they’ll make an automatic deduction so we have to make good faith efforts to cost recover insurance for debris removal.

[Slide 52]

Another thing we can do is determine in advance who our insurance adjustor is going to be.  A hospital in the San Diego area did this before they were hit by a wildfire some years ago.  The hospital and insurance company agreed on an individual who would be the adjustor.  They both agreed they would honor the adjustor’s findings. 
It sped up the process and no one had a bad taste that they were taken in by the other side.  It is one of the little things we can do up front for our own agency facilities—know who is going to be our insurance adjustor.

[Slide 53]

We have insurance nightmares.  It may take a long time.  One of my clients in the Bay Area is telling me it may take insurance a year to settle.  That means they may be in limbo in terms of actual cost recovery for at least a year while the insurance is settling out.  One of the ways we can speed up this process is to consider using a public adjusting firm to bat for our team because the insurance people are in business. And they are going to look to shave and cut corners wherever they can.  The public adjustor is someone who works for us—they are paid by us—and they can help maximize our insurance recovery.

[Slide 54]

Take away number four—“We want to make risk management a part of our disaster cost recovery plan.  Is our risk manager even aware?”  In one survey I did of communities, two-thirds of the communities didn’t even have a full-time risk manager and yet we are looking at millions or tens of millions of dollars in potential federal disaster assistance.   All of a sudden risk management becomes a very significant player in the entire process.

[Slide 55]

The last of the top five is project management and accounting failures.  People simply don’t have systems in place.

[Slide 56]

This is how the auditor sees our files when we don’t have good project accounting.  It is just simply a mass of documents.  We can’t solve this puzzle.  We have no information and no colors.  There is no way to determine what is right and what is wrong.  When the auditors can’t determine that the findings always go against the local agency.  We have to have definition and good information in our project management system.

[Slide 57]

Words are everything.  We can write projects.  We can explain the damages in ways that are eligible and we can also explain them in ways that are ineligible.  How things are written is absolutely critical.

Let me give you one example.  You have a library that is hit by an earthquake and all the books are off the shelves.  If the librarians come in and put the books back on the shelf, that is librarians work and that is not eligible.  If you have public works come in and put the books and put on the shelf in no particular order, that can be described as debris clearance and can be eligible.

Better yet have volunteers come in or contract outside workers to come in and pick books up, clear debris, and it is now eligible in one way or another as opposed to having the librarians do it.  Yes, the librarians will have to come in and put them in order but part of that work can be eligible.  There are lots of different things like that. 

How we describe it can set off alarms to FEMA and the auditors or if we write it properly and give it a full definition it won’t even raise an eyebrow.

[Slide 58]

Take away number five—“Are we integrating project management and accounting into the disaster cost recovery plan?”  In a survey I recently did with clients we found virtually none of them had a system in place for managing the whole project worksheet grants process.

[Slide 59]

Disaster cost recovery management is a team sport.  We can’t do it alone.  We need risk management.  We need our purchasing people.  I’m finding that we are going to be having some discussions with city attorneys and county councils on issues about leasing property to private for profit and non-profit and other government agencies, other policies for disaster feeding and lodging for employees. 

We need to integrate the attorney so that lots of people outside the emergency people—frankly I often don’t care if fire and law are at the table in terms of cost recovery.  From my experience they are not going to be involved in this years and decades later.  It is the back office people and the business people within city government.

[Slide 60]

Disaster cost recovery is about good communication with all parties involved.  We have to be talking to all departments that sustain a loss.  We have to talk to our insurance carriers.  We have to talk to the state and to FEMA and we need to talk to other agencies that were hit in a disaster.  We just had an experience with this—two clients were hit with this in the Bay Area.

FEMA was asking Client A about the building codes involved with Client B.  They are different cities of different sizes in the San Francisco Bay yet that one city ought to know that FEMA is making inquiries about its building codes.  You will never know that unless you are talking and communicating on a regular basis.

[Slide 61]

That’s my presentation.  Thank you all once again.  I’m going to do a short non-commercial advertisement.  The International Association of Emergency Managers just started a disaster cost recovery ad hoc committee.  It is just forming up.  We have about thirty-eight members who have expressed interest.  If you would like to get on this committee or be on the mailing list, please send an email to me at that address and in the subject line just put “disaster cost recovery committee”. 

I will add you to the list and make you a part of the emails I send out.  Amy, that is the presentation.  I’m going to turn it back to you and any questions you might get.

Amy Sebring: Thank you very much Mike. You have certainly given us a few things to think about. Many are not so obvious. Hopefully we won’t have to learn them the hard way as they have in the past. We will move to the Q&A portion.

[Audience Questions & Answers]

Amy Sebring:  Did you mention a spreadsheet?

Mike Martinet:  I did not.  Thanks for bringing that up Amy.  Title 44 Section 13.36—that section of the federal code has almost 100 points of compliance—things that we are required to do or in some cases not to do to comply with federal regulations.  If you send me an email at that address I will send you an Excel spreadsheet that contains every point of compliance within that section of code and you can work your way through it.

It is fairly simple to use.  The questions in there all want to be answered yes.  If you answer yes to all of them you will be on 100% compliant.  To the extent you answer no or unknown it will give you a numeric compliance score.  It is not a FEMA document it is not in any way shape or form a federally approved document but it is a detailed analysis of this code section that will give you a guidepost by which you can measure your own purchasing policy.

I just started to distribute it.  If you get it and use it I would love to get your comments back on it.  Put in the email “44 CFR 13.36 spreadsheet” and I will send that to you.

Dan Linehan:  At what point does the 70 hour rule start?  Who declares the start?

Mike Martinet:  My understand is—and that question came up recently in a FEMA briefing—the local agency determines when that 70 hour period starts.  Depending on the kind of disaster you have—if you have a tornado it is a sudden start and maybe you can’t mobilize for six or eight hours so why penalize yourself six or eight hours of that valuable time?

The local agency can declare that start period.  That said, that is what they are telling us in Region IX.  There are ten FEMA regions and they all interpret things differently sometimes.  Check with your FEMA representative.  That is what we were recently told in a FEMA briefing—that the local agency determines the start time.  Check it.  If there is anything about public assistance it is variable across the country.  Good question, though.

Paul John: Do we recommend using an IMAT [Incident Management Assistance Team] and if so, what type and specialist?

Mike Martinet: I believe you would and it will depend on the kind of disaster you have.  What kind of IMAT team you use or if you use one shouldn’t have a huge impact on cost recovery because they will be in there for such a short time relative to the entire cost recovery process.  By the way I don’t know if there are any cost recovery IMAT teams and that is one of the things I am hoping may come out of this disaster cost recovery committee that the IAEM has just started.

Maybe we can pull together a cost recovery IMAT team.  I’m not aware that one exists anywhere the country.  It is an excellent idea and I know some people that would like to have one.

Isabel McCurdy: Hi Mike, where does one find a public adjustor?

Mike Martinet:  The yellow pages—young people don’t know what the yellow pages are anymore.  Search Yahoo.  If you call me offline I can give you the name of one company I know.  They are national.  I’m not here to pitch anybody.  Your insurance agency is probably not going to want to share the information with you because they are the opponent.

Yellow pages, or Google or give me a call offline or send an email.  IN one case I recently  talked to one relative to one of my clients and they said their typical experience is that they can save sometimes upwards—they can get the client up to 70% more money from insurance settlements than they would have gotten from the insurance company.

If I have to get brain surgery I want a real specialist and I want someone on my side.

Wm Warren: Today's emergency manager should know as much about cost recovery as everything else (response, mitigation, etc...). I guess that says a lot about how the field has advanced over the years.

Mike Martinet: That is what I’m trying to do—make people more aware that cost recovery is huge.  If I could get all the rest of the money I wouldn’t care about police, fire or emergency money because I know I’d get 80% which is way above the average for cost recovery.

Carolyn Harshman:  Who do you recommend "lead the charge" on developing a Cost Recovery Plan?  Seems like it should be risk management or finance since the emergency manager is so far removed from the daily processes.

Mike Martinet:  That is a good question because this is really an emerging area to me.  Most emergency managers in my experience don’t have the breadth and depth of knowledge of cost recovery but finance and risk management people by and large in my experience do not have this knowledge either.  It is kind of a boot strap. 

I will say that I try to get to conferences and talk about this subject often and when I get a chance I seem to grab people’s attention pretty good. So I think it has to be raised but I’m finding the more I can pitch this to finance directors and financial people it seems to get much better traction than if I talk to the fire or police chief or even the city manager—the finance people seem to grasp this much more.

I’m finding that the audit tools are really effective because this is real life and no finance director wants to have a multimillion dollar audit find against their agency.

Amy Sebring:  You made the point about putting a team together for this purpose, right?

Mike Martinet:  Absolutely.  In fact that is one of the things we are doing with one of my clients in the Bay Area is we are going to be integrating emergency management, finance directors, risk management, public works and other business people and office people—fire and law will play a secondary role in the whole cost recovery thing.  They aren’t the real driving business people.  It is the finance and finance related people—purchasing especially or accounting within a city.

Andrew Berglund: Can you expound on the difference between using volunteers and contractors in relation to cost recovery?

Mike Martinet: If you are using contractors on disaster related work, the cost of that contract, assuming the work is eligible, is reimbursable by the federal government typically at 75% percent.  If you get into a big event like Katrina or Sandy it can go up to 90% or theoretically higher.  You spend the money on the contract and you will get reimbursed when you put your documentation in.

For the volunteers you cannot get reimbursed.  When I go the doctor I have to pay twenty dollars co-pay.  That is my share of the doctor visit.  The value of a volunteer’s time—in Joplin they had 100,000 volunteers—something along that order.  They had 600,000 documented hours of volunteer time.  They valued that time at just under fifteen dollars an hour.

That alone was 9 million dollars that they could apply towards their co-pay to the federal government.  If I had a seventy five dollar prescription in my hand when I went to the doctor’s office and they would say I had already paid seventy-five dollars in medical care so I wouldn’t owe us a co-pay today.

Contract is reimbursable and you have to spend the money.  Volunteers don’t get paid in the first place but you can value what you would have paid them and use that to offset the share you would have to pay to the federal government.  (Like an in-kind donation.)

Wm Warren: Would the cost of a public adjuster be considered a recoverable expenditure?

Mike Martinet:  My understanding is that it may be.  I am told by a public adjustor that in Sandy the agency is getting reimbursed for those expenses.  It makes good sense in this way because the more money the agency recovers from the insurance carrier the less money FEMA has to put out.  It makes sense that it is a recoverable expenditure because ultimately it helps reduce the cost to FEMA.

But again, we have to go and see which of the ten regions we are in the United States to see whether they agree with that logic.  One of the things I say in class is that anything I say today could be wrong tomorrow because as we all know regulations change and interpretations change..

Amy Sebring:  I understand FEMA is doing a new pilot to simplify the public assistance procedures.  Do you have any information about that?

Mike Martinet: I read the regulations pretty carefully.  It is simplification in one way but it doesn’t reduce the complexity of the process if that makes any sense.  Most of the rules that were in place in terms of process—the kinds of information we have to have—the definition of scope of damage and scope of work, all the paperwork still has to be done. 

It is not simplified in that manner.  What has simplified a little bit is we now have alternate procedures that will allow us flexibility in what we rebuild and how we rebuild or repair.  Simplification is probably not the most appropriate word to use.  It gives us some alternate pathways but those pathways for repair or reconstruction do come at a potential cost.

They have to be analyzed very carefully, in my opinion, whether someone is going to use these alternate procedures or not.

Amy Sebring:  Does it get you your money any faster?

Mike Martinet:  It can.  The question is, at what cost?  Once you commit to that you are fixed so if you get a million dollar repair job and it ends up costing you a million three, you are stuck with a million. It will not allow you any additional money.  If you get your money six months early it costs three hundred thousand dollars to get that money early. 

Each case has to be carefully weighed as to how sure you are of the estimate and how sure you are there are going to be no unforeseen circumstances.  That’s why they call them unforeseen circumstances because you can’t see them coming.


Amy Sebring: On behalf of Avagene, myself, and all our participants, thank you very much Mike for being with us and sharing this really excellent information. 

Our next program will be March 19th when our topic will be “The NWS Tsunami Program,” and our guest will be Rocky Lopes, now serving as Deputy Program Manager for Stakeholder Engagement.

Thanks to everyone for participating today and have a great afternoon. We are adjourned.