Establishes that recipients are responsible for sound management and cannot earn a profit from Federal assistance.
Provides the foundational fiscal philosophy; failure to follow sound management practices makes all subsequent project costs indefensible during an audit.
Defines that these principles must be used in determining allowable costs and as a guide for pricing fixed-price contracts.
Ensures a universal standard for cost determination; applying the wrong set of principles (e.g. for-profit vs nonprofit) leads to mandatory cost disallowance.
Defines total cost as the sum of allowable direct and allocable indirect costs minus applicable credits.
Mechanical necessity for budgeting; failure to subtract 'applicable credits' (like purchase discounts) is considered a duplication of benefits and a violation of fiscal integrity.
Lists non-negotiable criteria: costs must be necessary, reasonable, allocable, and consistently treated.
The primary 'Eligibility Gate'; if a cost fails any one of these factors (e.g. it's not 'necessary' for the project), FEMA is legally prohibited from reimbursing it.
Defines a cost as reasonable if it does not exceed what a 'prudent person' would incur under prevailing circumstances.
Requires market validation; costs that significantly exceed geographic market averages without extraordinary justification are deemed unreasonable and unallowable.
Requires costs to be assigned to a Federal award in accordance with the relative benefits received.
Prevents 'grant shifting'; you cannot charge a cost to a FEMA grant solely to cover a deficit in a different project or to avoid local budget restrictions.
Mandates that purchase discounts, rebates, or insurance refunds be credited to the Federal award as a cost reduction.
Ensures the Federal government only pays for actual net costs; failure to credit refunds constitutes a debt to the Federal government.
Lists specific costs (e.g. equipment, travel, pre-award costs) that may require Federal consent before being incurred.
Acts as a 'Safe Harbor'; obtaining written approval before spending prevents post-disaster disputes regarding the allowability of high-dollar or unusual expenses.
Mandates that unallowable costs be refunded with interest to the Federal Government.
Creates immediate financial liability; every dollar misspent becomes a legal debt that can impact the municipality's general fund and credit rating.
Requires that costs incurred for the same purpose in like circumstances be treated consistently as either direct or indirect.
Prevents 'double-charging'; charging a cost as both a direct project expense and through an indirect rate is a major audit finding.
Defines costs that can be identified specifically with a particular final cost objective with high accuracy.
Essential for project-level accounting; specifically prohibits charging clerical salaries as direct costs unless they are integral and uniquely identifiable to the award.
Governs the reimbursement of 'Facilities and Administration' costs and establishes the 15% de minimis rate option.
Provides a predictable revenue stream for administrative overhead; using the de minimis rate allows for reimbursement without a complex negotiated agreement.
Requires a high-level official to sign a statement that reports are true and accurate under penalty of the False Claims Act.
Assigns personal and organizational liability; the signer acknowledges that false information can lead to criminal prosecution and administrative penalties.
Mandates that charges for salaries and wages be based on records that accurately reflect the work performed.
The 'Labor Standard'; budget estimates or 'set-and-forget' allocations are unallowable. Reimbursement must be based on actual, after-the-fact activity records.
Allowable only if provided under established written policies and consistently applied to all activities.
Prevents 'disaster premiums'; if a municipality pays a benefit that is not in its pre-existing written personnel policy, FEMA will not reimburse that cost.
Requires prior written approval for capital expenditures for general purpose equipment, buildings, and land.
Strict control on asset acquisition; purchasing a vehicle or constructing a facility without FEMA's advance written consent is a fundamental compliance failure.
Prohibits charging the salaries of chief executives (Governors/Mayors) or legislative bodies to the award.
Maintains the separation of disaster relief from general political operations; ensures Federal funds only pay for recovery-specific labor.
Allows costs of required insurance but prohibits reimbursement for actual losses that could have been covered by insurance.
Reinforces the 'Payer of Last Resort' mandate; if you choose not to insure a risk that is commercially insurable, FEMA will not bail you out for the loss.
Allowable for financing capital assets only if obtained via an arm's-length transaction and limited to the least expensive alternative.
Fiscal efficiency requirement; Federal funds will not pay for 'premium' interest rates or non-competitive financing arrangements.
Prohibits the use of Federal funds for attempting to influence elections, referenda, or legislation.
Strict integrity requirement; any expenditure related to lobbying activities results in immediate cost disallowance and potential investigation.
Allowable only with written approval and if necessary for efficient and timely performance.
High-risk area; expenditures made before the grant is formally awarded are made at the recipient's own risk until approved in writing.
Allowable for consultants and SKILL-based professionals if reasonable and supported by an adequate contract.
Ensures third-party expertise is procured fairly; contracts must clearly define the scope, rate, and termination provisions to be compliant.
Restricts reimbursement to the 'basic least expensive unrestricted' airfare class unless health or timing needs are documented.
Standardizes travel spending; first-class or business-class airfare is unallowable without a case-by-case justification that survives federal review.