To: Board of Supervisors
From: Monica Nino, County Administrator
Report Title: CONTRACT AMENDMENT WITH ERNST & YOUNG LLP
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE and AUTHORIZE the County Administrator, or designee, to enter into a contract amendment with Ernst and Young, LLP for COVID-19 cost recovery consulting services extending the termination date from June 30, 2024 to June 30, 2025 with no change to the payment limit.
FISCAL IMPACT:
Up to a total payment limit of $2,000,000. All fees are 100% eligible for FEMA Category Z reimbursement; however, initial payments to the vendor come from the General Fund. FEMA has obligated a total of $1,711,112 to date and the County has submitted claims for reimbursement in the amount of $1,521,374 to the Governor’s Office of Emergency Services (CalOES). The reimbursement request has been approved by CalOES but has not yet been received by the County.
BACKGROUND:
Federal Disaster Relief Actions
On Friday, March 13, 2020, President Trump declared a nationwide emergency in response to the growing COVID-19 pandemic pursuant to Sec. 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the “Stafford Act”). That action provides access to the Federal Emergency Management Agency (FEMA) Public Assistance program, which allows for a 75% federal cost share on certain emergency protective measures taken at the direction or guidance of public health officials in response to the COVID-19 pandemic. Qualifying expenditures are those that are not supported by the authorities of another federal agency (i.e. reimbursement for response activities funded by another federal agency grant program). Examples of reimbursable activities include the activation of Emergency Operations Centers, National Guard costs, law enforcement and other measures necessary to protect public health and safety.
The Governor's Office of Emergency Services (CalOES) is facilitating the collection of FEMA Requests for Public Assistance (RPA) from agencies (public and private) impacted by the COVID-19 pandemic. CalOES advised that RPA documents, which do not include a specific dollar amount of public assistance being requested, be filed no later than April 17, 2020. Filing of this document allows agencies, including the County, to be on record stating that costs have been incurred as part of the response effort and allows for a request to FEMA that a portion of those costs be reimbursed in the future. In addition, CalOES requested that impacted agencies adopt required Project Assurances for federal Assistance and a resolution designating agents that can act on behalf of the impacted agency.
On March 31, 2020, the Board of Supervisors took action to adopt Resolution No. 2020/112 authorizing the County Administrator to submit the RPA documents discussed above to CalOES to ensure the opportunity for Federal cost reimbursement. The County subsequently filed its RPA with FEMA, which was approved on April 17, 2020.
State Disaster Request and Presidential Authorization
Following the President's action, Governor Newsom requested that the federal government declare a major disaster in California due to COVID-19. The President approved the State's request on Sunday, March 22, 2020, which activated additional federal resources directed to assist California, including deployment of mobile hospital units and a U.S. Navy hospital ship, among other things. Contra Costa County was a recipient of mobile field hospital equipment and took delivery of those resources at the Craneway Pavilion in Richmond, which served as a 250-bed alternate care site supporting the capacity of the County's hospital and clinic system.
Contract with Ernst & Young, LLP
On June 2, 2020, the Board of Supervisors authorized the County Administrator to execute an agreement with Ernst & Young, LLP, a well-known and respected accounting and financial services firm, for assistance with cost recovery operations related to the COVID-19 pandemic. At that time, there was significant financial relief legislation being passed, such as the CARES Act, and varying guidance coming from FEMA as to what local costs may be eligible for the FEMA Public Assistance program reimbursement under the Stafford Act (discussed above). It was imperative for the County to secure financial advisory services before there was a rush by other jurisdictions to secure the same services and to begin strategizing how the County would weather the financial impacts of the pandemic, while attempting to align all of the varying revenue sources properly to maximize cost recovery. The California Association of Public Hospitals and Health Systems Association (CAPH) was conducting a process to identify a vendor to provide similar advice for the benefit of statewide public hospital systems generally - Ernst & Young LLC was chosen to provide those services to CAPH. Since Contra Costa County is one of a small amount of counties in the State to operate a public hospital and clinic system, it was determined that relying on the CAPH process and contracting with Ernst & Young LLP would create potential synergies and maximize cost recovery coordination efforts.
On October 19, 2021, the Board authorized an increase to the contract payment limit with Ernst & Young, LLP by $700,000 from $300,000 to $1,000,000 and an extension of the contract period through December 31, 2022 (Agenda Item No. C.34). This provided for continuity of consultancy services related to FEMA-claiming activity through calendar year 2022. At that period of time, the federal government had directed all entities seeking FEMA Public Assistance program funds to file claims for COVID-19 related response costs through July 1, 2022 by December 31, 2022. In addition, CalOES requested that those claims be submitted no later than September 30, 2022, in advance of the FEMA date above, to allow the State sufficient time to review and sign off on the claims. Stafford Act reimbursement claims must first flow through and be approved by States prior to release to the federal government for review and processing.
On September 13, 2022, the Board authorized an additional increase to the contract payment limit with Ernst & Young, LLP by $500,000, from $1,000,000 to $1,500,000 and an extension of the contract period through June 30, 2023 (Agenda Item No. C.69). This allowed the County to continue processing FEMA claims for expenditures through July 1, 2022, which were due for submission by December 31, 2022. COVID-19 related expenditures incurred from July 1, 2022 forward are still eligible for FEMA reimbursement, but at a 90% Federal / 10% Local cost share (down from 100% Federal).
On May 16, 2023, the Board approved an additional increase to the payment limit of the County's existing contract with Ernst & Young, LLP by $500,000, from $1,500,000 to $2,000,000 and extended the termination date of the contract through June 30, 2024 (Agenda Item No. C.39). All costs paid to Ernst & Young, LLP for these services continued to be eligible for reimbursement from FEMA as Category Z management fee claims; however, the County General Fund incurs those costs prior to reimbursement similar to other COVID-19, FEMA eligible expenditures. Category Z management fees are typically claimed at the end of the incident claiming period and, in the case of the COVID-19 disaster, FEMA has advised that management expenditures can be incurred through May 11, 2025, which may include any assistance provided in closing out FEMA projects that have already been obligated and paid to local jurisdictions.
Today’s action extends the termination date of the contract with Ernst & Young, LLP by an additional year, through June 30, 2025, to ensure that the County continues to benefit from professional consultation on FEMA Public Assistance program claims, including closeout and final audit of projects obligated by FEMA for which the County has received a federal reimbursement payment. To date, FEMA has obligated a total of $1,711,112 and the County has submitted claims for reimbursement in the amount of $1,521,374 to the Governor’s Office of Emergency Services (CalOES). The reimbursement request has been approved by CalOES but has not yet been received by the County. FEMA has not disallowed any costs claimed by the County and staff does not anticipate any such action on future claims related to consulting services provided by Ernst & Young, LLP.
CONSEQUENCE OF NEGATIVE ACTION:
The County’s current contract with the vendor will expire on June 30, 2024 resulting in a gap of professional consulting services related to FEMA Public Assistance program claims.