B.3. Allowable Costs

FEMA only reimburses for actual, allowable costs, and the recipient or subrecipient must properly document all charges.

Subapplicants who are not awarded subawards for activities will not receive reimbursement for pre-award costs incurred in developing and submitting subapplications.

Salaries and other operational costs covered by other federal assistance such as Emergency Management Program Grants are not eligible.

All subapplications must include a line-item breakdown of all anticipated costs (cost estimate) and a budget narrative. A budget narrative must support the budget so FEMA can determine that costs are allocable, necessary and reasonable. The budget describes costs for which the recipient/subrecipient will use management costs assistance. The budget narrative provides information on how the assistance will be expended and monitored and shows that enough assistance will be available for closeout.

Typically, a budget for management costs will include the following cost categories, if applicable:

• Personnel (labor) and fringe: Provide the number of personnel, number of hours per quarter, average pay rate and fringe benefit rates.
• Travel: Provide a breakdown of travel costs: the type of transportation, lodging, mileage and per diem rates, and estimated description of travel needs. The budget narrative should describe the travel involved and its purpose and explain how the proposed travel is necessary for the project. If travel details are unknown, the basis for proposed costs should be explained. Lump sums will not be accepted.
• Equipment: Include a list of equipment and the intended use of the equipment. Provide a lease versus purchase analysis with each item with a value of more than $5,000. Provide a copy of rental agreement(s) and pricing.^[492]
• Supplies/materials: A unit cost estimate for each major component or element.
• Contractual: The estimate should be supported by a method of selection (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 recipient/subrecipient may submit an independent cost estimate.
• Other: Include information in narrative on how costs were identified.
• Pre-award: To be eligible for assistance, all pre-award costs must be noted in a separate line item including the date the cost was incurred and a narrative description of the task completed.^[493]
• Indirect costs: Indirect costs are only eligible as management costs.

Subrecipient management costs will be approved when the subaward is awarded. FEMA may obligate management costs in increments as noted below. Subrecipients will only receive management costs in conjunction with a subaward.

For HMGP and HMGP Post Fire, FEMA may advance management costs to recipients in the first year, prior to establishing the HMGP ceiling amount or HMGP Post Fire available assistance amount. Refer to Part 10 for more information about applying for management cost funds based on the 30-day and six-month estimates. Regardless of when subawards are obligated, if the total amount of the award is adjusted for any reason, FEMA will de-obligate management costs that exceed the 15% cap (10% for the recipient and 5% for the subrecipient) based on updated calculations.

All subapplications, including management costs greater than $1 million federal share, must be reviewed to determine whether the subaward is a candidate for strategic funds management. All recipient management cost awards greater than $1 million and all subrecipient management costs awarded in conjunction with subawards greater than $1 million will follow strategic funds management. As part of the strategic funds management review, FEMA will evaluate the need for incremental obligation of management costs. Additionally, all recipient management costs subawards between $500,000 and $1 million and all subrecipient management costs awarded in conjunction with subawards between $500,000 and $1 million will be subject to incremental obligation.

For subawards subject to incremental obligation, recipient and subrecipient management costs will be obligated in increments sufficient to cover recipient and subrecipient needs for no more than one year unless contractual agreements require additional assistance. Table 36 explains how obligations will be handled by the size of the total subaward (federal share and required non-federal share).

Table 36: Obligation Information by Total Award Amount

When incremental obligation is required, the recipient and the subrecipient should review their management costs schedule, budget and narrative to determine when the assistance will be needed. The recipient and subrecipient must develop their management costs financial plan by budget (or fiscal) year and include a roll-up of all budget years projected to submit to FEMA for review and approval. This requirement ensures the recipient and subrecipients adequately plan for expending management costs through the lifecycle of the award and ensures there is enough assistance through closeout.

After the recipient has reviewed current progress and determined that the next increment of assistance is needed, the recipient must request assistance from FEMA using the budget amendment procedures. FEMA reviews the recipient’s request, and if the recipient/subrecipient is ready to expend additional assistance, they will obligate the next increment of assistance. This incremental change is generally done on an annual basis, although exceptions can be made when justified.