C.3. Budget

The budget should match the proposed level of effort from the scope of work and work schedule.

All cost elements must match tasks and provide sufficient detail for FEMA to determine whether the application is eligible. The budget should include consideration regarding cost share, pre-award costs, closeout, format and contingency costs. Note that ineligible formats, such as lump sum estimates, are not eligible and will not be accepted.

Budgets must include cost item categories, such as personnel (labor) and fringe benefits, travel, equipment, supplies (materials), contractual, construction, other pre-award costs, contingencies, program income and management costs. The budget should be supported with a budget narrative and documentation to support the basis of the estimate and substantiate that the budget is reasonable. Costs must be in accordance with applicable cost principles.^[193]

The budget is essential for understanding if the requested costs are allowable (allocable, necessary and reasonable).

The budget documentation should indicate the method(s) used to determine the mitigation activity costs (e.g., the estimate was prepared by a consultant, previous assistance was used to inform the estimate).

Costs must be associated to each applicable cost category(s). All costs must be detailed and not contain lump sums. The budget must include a line-item breakdown of costs consistent with all elements described in the scope of work and schedule information.

Subapplicants should provide a budget narrative with explanations, justifications and line-item details of the costs. The budget narrative should explain how costs were derived and include details not in the line items.

The budget generally includes:

• Personnel (labor) and fringe: The number of personnel, number of hours per quarter, average pay rate and fringe benefit rates.
• Travel: A breakdown of travel costs, such as the type of transportation, lodging, mileage, per diem rates and estimated description of travel needs. Describe the travel involved and its purpose and explain how the proposed travel is necessary for the activity. If travel details are unknown, explain the basis for proposed costs. Lump-sums will not be accepted.
• Equipment: A list of equipment and the intended use of the equipment.^[194] Provide a lease versus purchase analysis for each item with a value greater than the recipient’s or subrecipient’s capitalization level or $5,000, whichever is more restrictive.^[195] Provide a copy of each rental agreement and pricing.
• Supplies/materials: A unit cost estimate for each major component or element.^[196]
• Contractual support: The estimate must be supported by a method of selection (e.g., competitive, sole source with justification, sealed bids, small purchase or micro-purchase), request for proposal/scope of work, period of performance, criteria for measuring accountability, bid documents or contract. If bids have not been received, the applicant/subapplicant may submit an independent cost estimate.
• Construction: The estimate should include administrative and legal expenses; land, structure, right-of-way and appraisals; relocation expenses and payments; architectural and engineering fees; inspection fees; site work; demolition and removal; and other construction costs.
• Other: Information in narrative form on how costs were identified.
• Pre-award: All pre-award costs must be noted in separate line items—including the date the cost was incurred and a narrative description of the task completed. For more information regarding pre-award costs, refer to Part 3.
• Contingencies: An allowance in the total budget to cover situations that cannot be fully defined when the budget is prepared but that will likely result in additional eligible costs. If contingency costs are requested, include them as a line item in the budget section of a subapplication. As with other line items in the budget, the subapplicant should justify the contingency estimate based on the nature of the proposed activity. For more information regarding contingencies, refer to Part 8.
• Program income: Anticipated program income must be identified in the budget.^[197]
• Management costs: Direct administrative and indirect costs are only eligible as management costs. Subrecipients must identify management costs in the budget as a separate line item, supported by a schedule and narrative describing personnel and fringe benefits, travel, equipment, supplies, contractual, indirect costs and other management costs expenses.
• Strategic funds management: For activities greater than or equal to $1 million, strategic funds management or incremental assistance applies. For details on strategic funds management, refer to Part 8. Both the activity and management costs are subject to strategic funds management requirements. The applicant or subapplicant must develop their financial plan along with the work schedule for the mitigation activity by budget (or fiscal) year and include a roll-up of all budget years. The schedule and applicable budget year budget should support incremental obligations as each activity milestone is reached. If the applicant or subapplicant determines that strategic funds management is not feasible for the activity, a narrative explaining the rationale shall be provided.

In addition to the budget, the applicant must identify the cost categories and value for anticipated cash and third-party in-kind contributions for meeting the non-federal cost share.

FEMA accepts estimated costs when they are:

• Prepared by a licensed professional engineer or other estimating professional, such as a licensed architect or certified professional cost estimator, who certifies that the estimate was prepared in accordance with industry standards.
• Based on unit costs for each component of the scope of work and not a lump-sum amount.
• Of sufficient detail for FEMA to validate that all components correspond with the scope of work.
• Based on the current phase of design or construction inclusive of any known costs.
• Inclusive of actual costs for work completed at the time the cost estimate is developed.
• Reasonable.

When estimated cost data does not provide enough detail for FEMA to complete an analysis, the agency may issue a Request for Information (RFI) to the applicant for additional information or clarification.

The budget must include a list of all sources and amounts used in the non-federal share, including all third-party in-kind contributions. ^[198] FEMA will not reimburse any in-kind contributions above the required non-federal share. If any portion of the non-federal share comes from nonapplicant sources (e.g., donated services, private donation), the applicant must attach letters of funding commitment for each non-applicant source.^[199]