Lesson 3 Overview and Objectives

This lesson provides an overview of the requirements associated with direct administrative costs.

Upon completion of this lesson, the participants will be able to:

  • Identify the difference between direct and indirect administrative costs
  • Identify the documentation requirements for direct and indirect administrative costs
Overview: Grant Management and Administrative Costs

FEMA provides Public Assistance funding for administrative costs related to managing the Public Assistance Program and projects.

FEMA provides Public Assistance funding differently depending on whether the Recipient or Applicant incurs costs while administering and managing grant awards that are not directly chargeable to a specific project, or if the costs are directly chargeable to a specific project.

Therefore, FEMA categorizes administrative costs as direct and indirect costs. A cost cannot be both direct and indirect and must be claimed as either direct or indirect.

A Cape Canaveral town employee shows a FEMA Site Inspector the affected area damaged by Hurricane Irma at the waste water treatment plant.
Direct Administrative Costs

Direct Administrative Costs are expenses the Recipient or Applicant incurs while administering and managing Public Assistance awards that are directly chargeable to a specific project.

In order to be eligible as Direct Administrative Costs, the Recipient or Applicant must track, charge, and account for the administrative costs incurred that is directly related to a specific eligible project.

Every project has an Essential Element of Information document requirement included to capture and quantify Direct Administrative Costs within Grants Portal. Public Assistance Alternative Procedures for Direct Administrative Costs projects will be captured under a single Category Z project created for the Applicant for the entire event.

  • A Program Delivery Manager will discuss Essential Elements of Information at the Recovery Scoping Meeting
  • For each project, documentation requirements corresponding to Direct Administrative Costs may differ

For an in-depth course on Direct Administrative Costs, please refer to: IS-1012 Direct Administrative Costs.

For more information on the Public Assistance Alternative Procedures for Direct Administrative Costs, please refer to the course: IS-1005 Public Assistance Alternative Procedures.

FEMA Public Assistance Site Inspectors take measurements of a Camden County library damaged by Hurricane Irma. Site inspections are a Direct Administrative Costs.
Examples of Direct Administrative Costs

FEMA makes eligibility considerations for costs associated with the following activities as Direct Administrative Costs if they are related to only one project:

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

Applicants must also ensure costs incurred meet certain restrictions and are deemed reasonable. For any Direct Administrative Cost, an Applicant must submit documentation backing their claim.

FEMA Mitigation staff survey home destroyed by Hurricane Maria.
Restriction of Direct Administrative Costs

A Recipient or Applicant, in most cases, cannot charge costs to a project if it previously allocated similar costs incurred for the same purpose in like circumstances to indirect costs.

  • There may be situations in which salaries of administrative and clerical staff may qualify as direct or indirect costs. In these unique circumstances, the Recipient or Applicant can submit a salary as one or the other despite previous allocation of similar costs
Direct Charging of Administrative Staff Salaries

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
  • Costs are not also recovered as indirect costs
Reasonableness of Direct Administrative Costs

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

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

For additional information on the process for claiming Direct Administrative Costs and associated requirements, please refer to the course: IS-1012 Direct Administrative Costs.

Indirect Costs

Indirect costs (commonly referred to as management costs) are expenses a Recipient or Applicant incurs while administering and managing grant awards that are not directly chargeable to a specific project.

The Program Delivery Manager will discuss documentation required to support indirect cost claims at the Recovery Scoping Meeting. Based on the Applicant's project(s), required documentation for each project may differ.

Indirect costs are addressed in Section 324 of the Stafford Act which authorizes grant funding for management costs.

  • For information specific to Section 324 Management Costs, please refer to the Public Assistance Program and Policy Guide
Examples of Indirect Costs

Costs incurred as part of normal business processes can be claimed as Direct Administrative Costs if they are directly attributable to the creation of a project. However, if costs are not directly attributable to only one project, Applicants may be able to claim such expenses as indirect costs if they relate to the management and administration of the Public Assistance Program.

Examples of indirect costs include, but are not limited to:

  • Preliminary Damage Assessments
  • Meetings regarding the Public Assistance Program or overall damage claim, except Exploratory Calls and Recovery Scoping Meetings 
  • Travel expenses not attributable to one single project
  • Correspondence not attributable to one single project

FEMA typically considers the salaries of administrative and clerical staff as indirect costs. The circumstances in which direct charging of these costs may be appropriate are outlined later in this lesson. For each of these examples of indirect costs, an Applicant must submit documentation backing their claims.

Eligibility of Indirect Costs

FEMA provides the Recipient all grant funding that can be used for Applicants' indirect costs.

  • If a State and Tribal government are both Recipients for the same incident within the same state, both are eligible to receive management cost funding

For the Applicant to receive reimbursement of indirect costs, they must seek reimbursement from the Recipient.

  • Applicants are only eligible if they use the Recipient as a pass-through entity

The Recipient determines the amount of their grant management funding available for Applicant indirect costs.

  • Recipients pass on reimbursement for management costs to Applicants
  • The Recipient determines the amount of grant funding, if any, that it will pass through to Applicants for management costs
Lesson 3 Summary

In this lesson, participants learned how to:

  • Identify the difference between direct and indirect administrative costs
  • Identify the documentation requirements for direct and indirect administrative costs

The next lesson provides an overview of requirements associated with grant management and monitoring.