This lesson provides an overview of cost eligibility requirements for Public Assistance grant funding.

Upon completion of this lesson, participants should be able to:

• Define cost eligibility.
• Identify labor, equipment, supplies, contracting, and administrative duties that meet eligibility requirements.
• Understand the application of procurement or contracting policies

A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the Applicant makes the decision to incur the cost.

The Applicant is responsible for providing documentation to demonstrate its claimed costs are reasonable. If FEMA determines any of the costs to be unreasonable based on its evaluation, FEMA may disallow all or part of the costs by adjusting eligible funding to an amount it determines to be reasonable.

FEMA determines reasonableness by evaluating whether:

• The cost is of a type generally recognized as ordinary and necessary for the type of facility or work
• The cost is comparable to the current market price for similar goods or services based on:
• Historical documentation
• Average costs in the area
• Published unit costs from national cost estimating databases

FEMA determines reasonableness by evaluating whether (continued):

• Cost escalation was the result of:
• Shortages in equipment, materials, supplies, labor, or contractors. If due to shortages, FEMA considers whether the Applicant's work continued beyond the period of shortages and if the opportunity to obtain more reasonable pricing existed
• Project-specific complexities, including: environmental or historic issues, remote access or location, provision of a unique service with few providers, or elements requiring an extraordinary level of effort
• The Applicant deviated from its established practices
• Exigent circumstances existed.  If so, FEMA evaluates the length of time the circumstances existed compared to the length of time costs were incurred
• The Applicant participated in ethical business practices, ensuring parties to a transaction are independent of each other, without familial ties or shared interests and on equal footing without one party having control of the other
• The Applicant complied with procurement requirements

This next section will explore the various categories of labor costs, which may be eligible for Public Assistance.

FEMA refers to the Applicant's personnel as "force account." FEMA reimburses force account labor based on actual hourly rates plus the cost of the employee's actual fringe benefits.

FEMA calculates the fringe benefit cost based on a percentage of the hourly pay rate.

• Certain items in a benefit package are not dependent on hours worked (e.g., health insurance), therefore the percentage for overtime is usually different than the percentage for straight-time.

Fringe benefits may include:

• Holiday leave
• Accrued vacation leave
• Sick leave
• Social security matching
• Medicare matching
• Unemployment insurance
• Workers compensation
• Retirement
• Health insurance
• Life and disability insurance
• Administrative leave

FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the Applicant's pre-disaster written labor policy, provided the policy:

• Does not include a contingency clause that payment is subject to Federal funding;
• Is applied uniformly regardless of a Presidential declaration; and
• Has set non-discretionary criteria for when the Applicant activates various pay types.

All rates and fringe benefits should be applied uniformly and not contingent on receipt of federal funds.

All costs must be reasonable and equitable for the type of work being performed.

FEMA will determine whether the number of hours claimed are reasonable and necessary by evaluating:

• The severity of the incident;
• Whether the work was performed at a time when it was necessary to work extraordinary hours based on the circumstances of the incident;
• The function of the employee for which the hours are claimed; and
• The number of consecutive hours the employee worked.

FEMA's criteria for reimbursing straight-time labor costs differ depending on the type of employee and whether that employee is performing Emergency Work or Permanent Work.

Permanent Work:

• Straight-time and overtime labor costs are eligible for both budgeted and unbudgeted employees
• Budgeted Employees Hours
• Permanent employee
• Seasonal employee working during normal season of employment
• Unbudgeted Employees Hours
• Reassigned employee funded from external sources
• Essential employee called back from furlough
• Temporary employee hired to perform eligible work
• Part-time or Seasonal employee working outside normal hours or season of employment
• Types of employees include:
• Reassigned employees
• Backfill employees
• Supervisors
• Other

Emergency Work:

• For budgeted employees only, overtime labor is eligible
• For unbudgeted employees performing Emergency Work, both straight-time and overtime labor are eligible.

Under the Alternative Procedures authorized by Section 428 of the Stafford Act, straight-time labor costs are eligible for budgeted employees conducting eligible debris removal (Category A) activities.

The next five screens will take a closer look at cost eligibility for specific types of employees.

A backfill employee is when the Applicant temporarily replaces an employee who is responding to the incident. Overtime costs for the backfill employee may be eligible even if the backfill employee is not performing eligible work as long as the employee that he/she is replacing is performing eligible Emergency Work.

FEMA may also provide Public Assistance funding for straight-time if the backfill employee is a:

• Contracted or temporary employee; or
• Permanent employee called in on a normally scheduled day off (weekend or other off day).

Note that if the backfill employee is called in from scheduled leave, only overtime is eligible.

Extraordinary costs (such as call-back pay, night-time and weekend differential pay, and hazardous duty pay) for essential employees who are called back to duty during administrative leave to perform eligible Emergency Work are eligible if costs are paid in accordance with a labor policy that meets the criteria above.

Administrative leave or similar labor costs incurred for employees sent home or told not to report due to emergency conditions are not eligible.

• Standby use and pay are consistent with the Applicant’s labor policy (or contractual obligation based on a labor agreement) and consistent with its practice in non-federally declared incidents;
• The standby time occurred when it was necessary to have resources available to conduct the respective life-saving action;
• The number of hours and individuals were reasonable and necessary based on the number of resources required;
• The employee was conducting the respective life-saving action; and
• All other labor cost eligibility criteria were met.

 Examples of eligible stand-by time costs include:

• When bus drivers are prudently deployed to transport evacuees, even if the bus is not ultimately used
• When first responders are prudently deployed for the purpose of evacuating or providing emergency medical care to survivors in order to save lives or protect health and safety, even if the employee does not ultimately perform eligible Emergency Work
• When a contract or union agreement requires payment for stand-by time

FEMA determines if the cost is reasonable and necessary based on whether:

• There is a contractual obligation to pay for stand-by time based on a labor agreement
• The stand-by time occurred when it was necessary to have resources available to save lives and protect health and safety

FEMA provides Public Assistance funding for the use of Applicant-owned equipment (force account equipment) based on FEMA, State, Territorial, Tribal, or Local equipment rates.

An Applicant may not have sufficient equipment to effectively respond to an incident. If the Applicant purchases equipment that it justifiably needs to respond effectively to the incident, FEMA provides Public Assistance funding for both the purchase price and either:

• The use of the equipment based on equipment rates (without the ownership and depreciation components); or
• The actual fuel and maintenance costs.

Equipment rates are only applied to the time the Applicant is actually operating equipment.

• Although costs associated with mobilizing equipment to a project site are eligible, costs for standby time are not eligible unless the equipment operator uses the equipment intermittently for more than half of the working hours for a given day.
• In this case the intermittent standby time is eligible.

FEMA provides Public Assistance funding for force account equipment usage based on FEMA, State, Territorial, Tribal, or local equipment rates in accordance with the specific criteria. The following six screens will expand on the specific criteria for the different equipment rates.

FEMA publishes equipment rates applicable on a national basis. FEMA's rate schedule includes any item powered by fuel or attached to any item powered by fuel. FEMA develops equipment rates based on all costs associated with ownership and operation of equipment, with the exception of operator labor.

FEMA equipment rate components include:

• Depreciation
• Overhead
• Equipment overhaul (labor, parts, and supplies)
• Maintenance (labor, parts, and supplies)
• Lubrication
• Tires
• Ground engaging component (if applicable)
• Fuel

Because the rates include maintenance costs, a mechanic's labor costs to maintain Applicant-owned equipment are ineligible.

State and Territorial rates are those established under State or Territorial guidelines for use in normal day-to-day operations.

• FEMA provides Public Assistance funding based on State or Territorial rates up to $75 per hour
• FEMA only provides Public Assistance funding for a rate above $75 per hour if the Applicant demonstrates that each of the components of the rate is comparable to current market prices

Tribal rates are those established under Tribal guidelines for use in normal day-to-day operations. 

• FEMA provides Public Assistance funding based on Tribal rates up to $75 per hour
• FEMA only provides Public Assistance funding for a rate above $75 per hour if the Applicant demonstrates that each of the components of the rate is comparable to current market prices

However, if the Tribal rate is lower, but it does not reflect all of the costs associated with operating the equipment, FEMA may provide Public Assistance funding based on the higher FEMA rate. Additionally, if the Tribal rate is higher, the Applicant must document the basis for that rate and obtain approval from FEMA for the higher rate.

Local rates are those developed under Local government guidelines for use in normal day-to-day operations. FEMA generally provides Public Assistance funding for equipment usage based on the lower of either the Local rate or the FEMA rate.

However, if the Local rate is lower, but it does not reflect all of the costs associated with operating the equipment, FEMA may provide Public Assistance funding based on the higher FEMA rate.

Additionally, if the local rate is higher, the Applicant must document the basis for that rate and obtain approval from FEMA for the higher rate.

If determining the lowest rate for each piece of equipment is overly burdensome because of the number of different types of equipment used, or if the Applicant prefers, FEMA will reimburse all equipment use based on the lower of the two rate schedules, rather than based on a comparison of each individual rate. In these cases, the PA Division at FEMA Headquarters determines which schedule of rates is lower.

If the Applicant uses equipment that has no established State, Territorial, Tribal, or Local rate, FEMA reimburses that equipment based on the FEMA rate.

If FEMA does not have a rate established for the equipment, the Applicant may either submit a rate for approval or request that FEMA provide a rate.

If the Applicant submits a rate, it must include documentation demonstrating that each component of the rate is comparable to current market prices. The rate cannot be based on rental rates as such rates include cost components, such as profit, that are above and beyond what is necessary to operate and maintain force account equipment.

When the Applicant leases equipment, FEMA provides Public Assistance funding based on the terms of the lease. Leasing costs may be eligible if:

• The Applicant performed an analysis of the cost of leasing versus purchasing the equipment; and
• The total leasing costs do not exceed the cost of purchasing and maintaining equipment during the life of the eligible project.

If the leasing costs exceed the cost of purchasing and maintaining the equipment, FEMA determines the amount of eligible costs based on an evaluation of the reasonableness of the costs claimed, including whether the Applicant acted with prudence under the circumstances at the time it leased the equipment.

If the Applicant has a lease-purchase agreement and obtains ownership during completion of eligible work, FEMA provides Public Assistance funding for the equipment use based on the hourly equipment rate.

If the Applicant has a lease-purchase agreement and completes the eligible work prior to obtaining ownership, FEMA provides Public Assistance funding based on the cost to lease the equipment.

This section examines the eligibility of costs related to procurement and contracting.

FEMA provides Public Assistance funding for contract costs based on the terms of the contract if the Applicant meets Federal procurement and contracting requirements.

• The Program Delivery Managers should remind Applicants of this requirement early in the process
• FEMA Public Assistance staff coordinates with the Office of Chief Counsel when evaluating whether the Applicant complied with federal procurement requirements

Applicants must comply with Federal procurement requirements as a condition of receiving Public Assistance funding for contract costs for eligible work. Federal procurement requirements for State and Territorial governments are different than those for Tribal and Local governments and private nonprofits.

State and Territorial government Applicants must:

• Follow the same policies and procedures they would use for procurements with non-Federal funds
• Comply with 2 Code of Federal Regulations 200.322, Procurement of recovered materials
• Ensure that every purchase order or other contract includes any clauses required by 2 Code of Federal Regulations 200.326

FEMA does not typically review State or Territorial procurement policies or procedures. In certain circumstances, FEMA may review State or Territorial procurement policies or procedures or request that a State or Territorial attorney certify in writing whether the Applicant complied with the State’s or Territorial’s procurement policies and procedures.

Tribal and local governments, including Tribal Recipients, and Private Nonprofits must comply with:

• Their own documented procurement procedures;
• Applicable State Local Tribal Territorial government laws and regulations; and
• Applicable Federal laws and regulations. 

If a Federal requirement is different than the State Local Tribal Territorial requirement, or the Applicant’s own requirements, it must use the more restrictive requirement. Additionally, Territorial governments should consult their legal counsel when a project involves a public building or public works facility as the Buy American Act may apply to the procurement process.

For more information on procurement, refer to course: Procurement Under FEMA Awards: Requirements for Recipients and Subrecipients When Procuring Services and Supplies with Funding under Stafford Act Grant Programs or FEMA's Procurement Disaster Assistance Team website: https://www.fema.gov/procurement-disaster-assistance-team.

• Place such organizations that are qualified on solicitation lists;
• Ensure such organizations are solicited whenever they are potential sources;
• Divide total requirements, when economically feasible, into smaller tasks or quantities;
• Establish delivery schedules, where the requirement permits, which encourage their participation;
• Use the services and assistance, as appropriate, of the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and
• Require prime contractor to conduct the above steps if subcontracting.

Note that Tribal government Applicants using the Indian Self-Determination and Education Assistance Act preference do not need to separately follow the six socioeconomic steps outlined above.

• Excluding contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals from competing for such procurements to ensure objective contractor performance and eliminate unfair competitive advantage;
• Evaluating and documenting the contractor’s integrity, compliance with public policy, record of past performance, and financial and technical resources.
• Ensuring that the contractor was not suspended or debarred.
• Maintaining records to detail the history of the procurement including, but are not limited to:
• Rationale for the method of procurement
• Selection of contract type
• Contractor selection or rejection
• The basis for the contract price

Tribal and local governments and Private Nonprofits must use one of the following procurement methods:

• Micro-purchases
• Small purchase procedure
• Sealed bid (formal advertising)
• Competitive proposal
• Noncompetitive proposal (sole-sourcing)

Non competitive Procurement

FEMA may reimburse costs incurred under a contract procured through a noncompetitive proposal, also referred to as sole-source, only when one or more of the following circumstances apply:

• The item is only available from a single source
• The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation (this exception to competitive procure is only for work specifically related to the circumstance and only while the circumstances exists. Therefore Applicants need to immediately begin the process of competitively procuring similar goods and services and transition to a competitively procured contract as soon as the circumstances cease to exist)
• FEMA or the Recipient expressly authorizes a noncompetitive proposal in response to a written request from the Applicant
• After solicitation of several sources, competition is determined inadequate

For each noncompetitive procurement, the Applicant must identify which of the four circumstances, listed on the previous slide, apply and provide all of the following information, documentation, and justification:

• A brief description of the product or service being procured, including the expected amount of the procurement;
• Explanation of why a noncompetitive procurement is necessary. If there was a public exigency or emergency, the justification should explain the specific conditions and circumstances that clearly illustrate why competitive procurement would cause unacceptable delay in addressing the public exigency or emergency. (Failure to plan for transition to competitive procurement cannot be the basis for continued use of noncompetitive procurement based on public exigency or emergency);
• Length of time the noncompetitive contract will be used for the defined SOW, and the impact on that SOW should the noncompetitively procured contract not be available for that amount of time (e.g., how long does the Applicant anticipate the exigency or emergency circumstances to continue; how long it will take to identify requirements and award a contract that complies with all procurement requirements; or how long it would take another contractor to reach the same level of competence);
• The specific steps taken to determine that the Applicant could not have used, or did not use, full and open competition for the SOW (e.g., research conducted to determine that there were limited qualified resources available that could meet the contract provisions);
• Any known conflicts of interest and any efforts that the Applicant made to identify potential conflicts of interest before the noncompetitive procurement occurred. If the Applicant made no efforts, explain why; and
• Any other justification.

Public Assistance staff and FEMA's Office of Chief Counsel coordinate when evaluating the compliance with Federal procurement requirements.

If FEMA determines that none of the allowable circumstances existed or did not preclude the Applicant from adhering to competitive procurement requirements, FEMA may disallow all or part of the associated costs.

FEMA generally limits the use of Time and Materials contracts to a reasonable timeframe based on the circumstances during which the Applicant could not define a clear scope of work. Therefore, the Applicant should define the scope of work as soon as possible to enable procurement of a more acceptable type of contract. 

Time and materials contracts do not provide incentives to the contractor for cost control or labor efficiency. FEMA will only reimburse costs under a time and materials contract if all of the following apply:

• No other contract was suitable
• The contract has a ceiling price that the contractor exceeds at its own risk
• The Applicant maintains a high degree of oversight to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls

Some States have a statewide mutual aid agreement that designates the State as being responsible for reimbursing mutual aid costs. In these States, the Providing Entity may request funding directly from the State, with prior consent of the Requesting Entity, in accordance with applicable State laws and procedures.

If the Requesting Entity and the State approve the request and the State pays the Providing Entity, FEMA provides Public Assistance funding to the State. The Requesting Entity may be responsible for reimbursing the State for any non-Federal Local cost share, depending on specific State requirements.

The Requesting Entity or State, if applicable, must provide a description of the services requested and received, along with documentation of associated costs (e.g., labor, equipment, supplies, materials) to FEMA in support of a request for Public Assistance funding.

Three types of mutual aid are eligible:

• Emergency Work
• Emergency utility restoration (regardless of whether it is deemed Category B or F)
• Grant management

Mutual aid work is subject to the same eligibility criteria as contract work. Costs to transport the Providing Entity's equipment and personnel to the declared area are eligible.

Ineligible work performed by a Providing Entity includes:

• Preparing to deploy or "standing-by"
• Dispatch operations outside the receiving State, Territory, or Tribe
• Training and exercises
• Support for long-term recovery and mitigation operations

The Emergency Management Assistance Compact, a national interstate mutual aid agreement, enables States and Territories to share resources in response to an incident.

Work performed outside the receiving State or Territory that is associated with the operation of the Emergency Management Assistance Compact, including tracking of resources, is ineligible unless the work is associated with the receiving State's or Territory's emergency operations for the incident.

The Providing Entity's straight-time and overtime labor are eligible, including fringe benefits. When the Requesting Entity is a State, Territorial, Tribal, or Local government and the Providing Entity is another division within the same State, Territorial, Tribal, or Local government, straight-time for budgeted employees of the Providing Entity is ineligible.

If the Providing Entity backfills deployed personnel, overtime for backfill personnel is eligible even if they are not performing eligible work. However, straight-time for backfill personnel is ineligible.

FEMA reimburses the use of equipment provided to a Requesting Entity based on either the terms of the agreement or equipment rates. FEMA provides Public Assistance funding to repair damage to this equipment the same way as it provides Public Assistance funding to repair damage to Applicant-owned equipment.

In some cases, the Requesting and Providing Entities do not have a written agreement, OR where such an agreement exists but is silent on reimbursement, the entities may verbally agree on the resources to be provided and on the terms, conditions, and costs of such assistance.

The agreement should be consistent with past practices for mutual aid between the entities. For example, if the Requesting Entity does not normally reimburse a Providing Entity for its costs, it should not agree to do so specifically for the declared incident.

Prior to funding, the Requesting Entity must document the verbal agreement in writing, have it executed by an official of each entity with the authority to request and provide assistance, and submit it to FEMA (preferably within 30 days of the Applicant's Briefing).

Individuals and organizations often donate resources (equipment, supplies, materials, or labor) to assist with response activities. FEMA does not provide Public Assistance funding for donated resources; however, the Applicant may use the value of donated resources to offset the non-Federal share of its eligible Emergency Work projects and Direct Federal Assistance.

The Applicant may apply the offset if all of the following conditions are met:

• The donated resource is from a third party (a private entity or individual that is not a paid employee of the Applicant or Federal, State, Territorial, or Tribal government);
• The Applicant uses the resource in the performance of eligible Emergency Work; and
• The Applicant or volunteer organization tracks the resources and work performed, including description, specific locations, and hours.

FEMA considers unpaid individuals who volunteer their labor to an Applicant to be third party even if they are officially members or employees of the Applicant organization (e.g. volunteer fire fighters at a Private Nonprofit volunteer fire department).

Resources donated to the Applicant by an organization that would normally provide the same resources under its mission are eligible as an offset provided the organization is not federally funded.

Volunteer Labor: The offset for volunteer labor is based on the same straight-time hourly labor rate, and fringe benefits, as a similarly qualified person in the Applicant's organization who normally performs similar work. FEMA does not offset volunteer labor based on overtime or premium rates. If the Applicant does not have employees performing similar work, FEMA credits the non-Federal share based on a rate consistent with those ordinarily performing the work in the same labor market.

Donated Equipment: The offset for donated equipment is based on equipment rates and must not exceed the fair rental value (if loaned) or the fair market value of equipment that is in similar age and condition at the time of donation (if donated with a transfer of title). 

Donated Supplies or Materials: The offset for donated supplies or materials is based on current commercial rates, which FEMA validates based on invoices from previous purchases or information available from vendors in the area.

Logistical Support: Reasonable logistical support for volunteers doing eligible work, such as donations warehousing and management related to eligible Emergency Work, may be eligible either for funding (if the Applicant provides the logistical support) or as a donations credit (if a third party provides the logistical support), subject to approval by FEMA.

Project management activities, such as procurement, document review, and construction oversight, are eligible provided the activities are tracked and directly related to a specific, eligible project.

Engineering and design services and construction inspection are also eligible provided the services are necessary to complete eligible work. Some projects require only very basic services or none at all, while others require specialized engineering and design.

When evaluating the eligibility of project management and design services and the reasonableness of associated costs, FEMA considers all of the following:

• Project complexities
• Whether redesign was necessary as a result of unexpected site conditions
• Whether the project includes improvements that are not eligible for funding (management and design costs associated with ineligible work are not eligible)

Section 324 of the Stafford Act authorizes FEMA to provide contributions under this Act for management costs incurred in the administration of the Public Assistance (PA) Program. The Disaster Recovery Reform Act of 2018 (DRRA) amends Section 324 of the Stafford Act to define management costs to include “any indirect cost, any direct administrative cost, and any other administrative expense associated with a specific project under a major disaster, emergency, or disaster preparedness or mitigation activation or measure.”

Activities eligible as management costs include those related to developing eligible PA projects and receiving reimbursement. These activities may include, but are not limited to:

• Preliminary Damage Assessments
• Meetings regarding the PA Program or overall PA damage claim
• Organizing PA damage sites into logical groups
• Preparing correspondence
• Site inspections
• Travel expenses
• Developing the detailed site-specific damage description
• Evaluating Section 406 hazard mitigation measures
• Preparing Small and Large Projects
• Reviewing PWs
• Collecting copying, filing, or submitting documents to support a claim
• Requesting disbursement of PA funds
• Training

FEMA provides Federal funding for management costs based on actual costs incurred up to a percentage of the Federal share of projected eligible program costs, not including Direct Federal Assistance.

If a State and Tribal Government are both Recipients for the same incident within the same State, then both are eligible to receive management cost funding. The Recipient determines the amount of funds, if any, that it will pass through to Subrecipients for management costs.

Additional information is available in FEMA’s interim policy, FEMA Recovery Policy FP 104-11-2, Public Assistance Management Costs (Interim) and FEMA’s Public Assistance Management Costs Standard Operating Procedures.

If the Recipient or Subrecipient incurs administrative costs that it tracks, charges, and accounts for directly to a specific eligible project, the costs are eligible as Direct Administrative Costs. Costs cannot be charged to a project if it previously allocated similar costs incurred for the same purpose in like circumstances to indirect costs.

Costs associated with the following activities are eligible Direct Administrative Costs if they are related to only one project and meet the above requirements (this list is not all-inclusive):

• Site inspections
• Developing the detailed site-specific damage description
• Evaluating Section 406 hazard mitigation measures
• Reviewing the Project Worksheet
• Preparing Small Projects
• Preparing correspondence
• Travel Expenses
• Collecting, copying, filing, or submitting documents to support the claim
• Requesting disbursement of Public Assistance funds

FEMA normally considers the salaries of administrative and clerical staff as indirect costs. Direct charging of these costs may be appropriate only if all of the following conditions are met:

• Administrative or clerical services are integral to a project or activity
• Individuals involved are specifically identified with the project or activity
• Such costs are explicitly included in the budget for that project or have FEMA's prior written approval
• The costs are not also recovered as indirect costs

DAC applies to all major disasters and emergencies declared on or before July 31, 2017. For additional information regarding Direct Administrative Costs see “IS-1012: Direct Administrative Costs”.

FEMA considers the following factors when determining the reasonableness of Direct Administrative Costs:

• Whether the type of employee and skill level is appropriate for the activities performed; and
• The level of effort required to perform an activity.

If the type of employee or skill level is not appropriate for the specific task, FEMA limits Public Assistance funding to a rate based on the appropriate employee type or skill level. For complex projects, staff with a higher level of technical proficiency and experience may be appropriate.

FEMA will use the level of effort required by FEMA staff to perform similar functions as a reference point to determine whether the level of effort claimed by the Recipient or Subrecipient is reasonable.

FEMA does not reimburse Direct Administrative Costs based on blended rates (e.g., a labor rate plus a percentage of overall travel expenses or one rate for all levels of employees involved in a project). Labor and travel expenses must be tracked separately and shown as directly related to a specific project.

FEMA provides Public Assistance funding for Direct Administrative Costs at the same cost-share provisions applicable to the declaration.

Direct Administration Costs (DAC) applies to all major disasters and emergencies declared on or before July 31, 2017. For additional information regarding Direct Administrative Costs see “IS-1012: Direct Administrative Costs”.

The next section of this module will discuss the requirements for the disposition of purchased equipment, supplies, and real property after they are no longer needed for federally funded projects.

In the context of disposition, equipment is any tangible personal property (including information technology systems) having a useful life of more than 1 year and a per-unit acquisition cost that equals or exceeds the lesser of the capitalization level established by the Applicant for financial statement purposes, or $5,000. Tangible personal property that does not fall under this definition of equipment is a supply.

When equipment or supplies (including materials) purchased with Public Assistance funding are no longer needed for response to or recovery from the incident, Tribal and local governments and Private Nonprofit Applicants may use the items for other federally funded programs or projects.

In accordance with Federal regulations, State and Territorial government Applicants dispose of equipment in accordance with State or Territorial laws and procedures.

Tribal and Local governments and Private Nonprofits must calculate the current fair market value of each individual item of equipment. The Applicant must provide the current fair market for any items that have a current fair market value of $5,000 or more. FEMA reduces eligible funding by this amount.

• If an individual item of equipment has a current fair market value less than $5,000, FEMA does not reduce the eligible funding.

Tribal and local governments and Private Nonprofit Applicants must comply with all disposition requirements described in 2 Code of Federal Regulations 200.313, Disposition.

Real property refers to land as well as land improvements, structures, and appurtenances thereto. Real property does not include moveable machinery and equipment.

If the Applicant acquires or improves real property with Public Assistance funds, disposition and reporting requirements apply when acquired or improved real property is no longer needed for the originally authorized purpose.

The Public Assistance Division at FEMA Headquarters provides disposition instructions.

The Stafford Act authorizes FEMA to provide Public Assistance funding for specific work performed as a result of the incident. It does not authorize FEMA to provide Public Assistance funding for all losses or costs resulting from the incident.

Examples of Common Ineligible Costs include but are not limited to:

Duplication of Benefits:

FEMA is legally prohibited from duplicating benefits from other sources. If the Applicant receives funding from another source for the same work that FEMA funded, FEMA reduces the eligible cost or de-obligates funding to prevent a duplication of benefits. For example, FEMA cannot provide Public Assistance funding that duplicates insurance proceeds. When it comes to non-Federal grants and cash donations, duplication depends on whether the funds are provided toward a specific purpose and whether that specific purpose is otherwise eligible for Public Assistance funding.

Loss of Revenue:

FEMA cannot provide Public Assistance funding for revenue lost as a result of the incident. The following are examples of when loss of revenue may occur as a result of an incident:

• Hospitals release non-critical patients to make room for survivors
• Hospitals sustain damage that reduces pre-existing capacity
• States open a toll road for evacuation and do not charge a toll
• States waive the normal fee for ferry service to encourage alternate transportation after an incident
• A utility system is shut down as a result of the incident
• Events are cancelled as a result of an entity using a venue for incident-related activities, such as sheltering

Examples of Common Ineligible Costs include but are not limited to (continued):

Loss of Useful Service Life:

FEMA cannot provide Public Assistance funding for the projected loss of useful service life of a facility. For example, if a road has been inundated by flood waters for an extended period of time, FEMA cannot provide Public Assistance funding for the value of the projected loss of useful life of the road due to the long-term effects the inundation might have on the road.

Tax Assessments:

State, Territorial, Tribal, and Local governments may conduct tax assessments to re-assess real property values after an incident. Costs related to conducting these assessments are ineligible because the assessments are neither essential to addressing an immediate threat to life or improved property, nor connected with the permanent restoration of eligible facilities.

Increased Operating Costs:

Increased costs of operating a facility or providing a service are generally ineligible, even when directly related to the incident. However, short-term increased costs that are directly related to accomplishing specific emergency health and safety tasks as part of emergency protective measures may be eligible.

In this Lesson, participants learned about cost eligibility of Applicant projects in order to meet all requirements of Public Assistance Program grants.

The next lesson will summarize the content of the course, and participants will complete the Post-Course Assessment.