Cost Eligibility

• Lost revenue: for example, waived tolls, ferry fares or tipping fees, cancelled events, utility shutdowns, or hospitals releasing patients or losing capacity.
• Loss of useful service life: for example, long-term effects of flooding on a road, or lost landfill capacity from disaster debris.
• Tax assessments: re-assessing property values after the disaster.
• Increased operating costs: higher costs from increased demand for a service are generally ineligible. Short-term costs directly tied to specific emergency health and safety tasks can be eligible as emergency protective measures, such as fuel for increased pumping station use.

For any increased operating cost you claim as emergency work, records tying it to the specific health and safety task and the period it lasted.

A third party is a private entity or individual outside the federal award whose actions caused damage or increased costs.

Grant agreements and donor letters showing each fund’s purpose, settlement documents for third-party recoveries, and your certification of no duplicate funding.

• FEMA limits funding if your policy provides coverage you should pursue.
• Reasonable costs of pursuing a larger settlement can offset the reduction, if tied to FEMA-eligible work and documented as winning more than the first offer.
• If proceeds cover both eligible and ineligible losses, such as business interruption, FEMA apportions them by settlement allocation, policy limits or the ratio of eligible to ineligible losses.

• Policies: property, auto, flood, wind, and self-insurance or self-insured retention.
• Policy documents: declaration pages, schedule of covered locations, forms and endorsements, inland marine and equipment breakdown sections.
• Settlement records, as soon as available: final statement of loss, adjuster estimates, settlement checks, correspondence on allocation, and any denial letter.

Source: PAPPG Table 19. See also FEMA Recovery Policy FP 206-086-1.

• Assessing overall impacts, locating damage or debris, and preliminary damage assessments: eligible only as management costs.
• Inspecting a facility where damage was found during a post-declaration survey: eligible as management costs if the facility is eligible.
• Detailed inspections and professional evaluations to determine extent of damage, debris quantities and repair method: eligible as project costs.
• For partially damaged systems, eligible inspection cost is proportional: inspect 500 feet of sewer and find 100 feet damaged, and one-fifth of the cost is eligible.

Inspection reports, the length or area inspected versus damaged, and time and cost records.

• Costs must be associated with eligible facilities, work and costs.
• Costs to survey overall impacts, locate damage or conduct preliminary damage assessments are management costs, not project costs.

A summary of work and costs: number of employees, equipment used with rates, total labor and equipment hours (or miles), total costs, and a general description of tasks performed. FEMA may ask for more.

• Eligible project management includes procurement actions, legal review of contracts, monitoring contractors, construction oversight and inspections, environmental and historic studies, permits, and debris load tickets.
• Architectural, engineering and design services for the approved scope, including hazard mitigation, are eligible if reasonable.
• Management and design costs for ineligible improvements are not eligible, including added design for improved projects.

Time and cost records that tie each project management or design activity to a specific project.

• The donation came from a third party, including your own employees volunteering unpaid and not on your behalf;
• It was necessary and reasonable;
• It was used for eligible work within the project’s period of performance; and
• You tracked the resources and work, with descriptions, locations and hours.

Donations from federal agencies or federally funded sources, used as an offset on another federal award, or used for ineligible work don’t count. Don’t solicit donations from contractors bidding on your work, or favor contractors who donate.

Sign-in sheets with each volunteer’s name, function, dates, hours, location and work; donor, equipment details, sites and hours for equipment; donor, description, quantity, location and value support for supplies. Source: PAPPG Table 18.

• Employees: hours worked up to the expiration.
• Purchased materials and equipment: items needed and used during the period, plus usage up to the expiration.
• Leased equipment and facilities: prorated by time up to the expiration.
• Contracts: work performed up to the expiration; if dates can’t be separated, FEMA prorates by percentage of work completed.

Timesheets, equipment logs, leases and contractor invoices that show dates of work relative to the deadline.

• Prisoners: pay at your normal prisoner rate; transportation to and from the worksite and extraordinary security, food and lodging costs are eligible.
• National Guard on State Active Duty performing eligible work: straight time, overtime, fringe and per diem are eligible.
• Title 32 and Title 10 personnel and other Department of Defense-funded costs are ineligible.

For prison labor on large projects: the prison’s labor policy, names, locations, dates, hours, pay rate and daily activity logs. Source: PAPPG Table 17.

• The assisting entity’s labor is treated as contract labor: regular time, overtime and certain benefits, at reasonable rates. If both entities are divisions of the same government, budgeted regular time is ineligible.
• Travel to the declared area is eligible. Preparing to deploy, dispatch outside the receiving state, training, and long-term recovery support are not.
• Backfill for deployed personnel: overtime only.
• Equipment is paid under the agreement’s terms or equipment rates.
• No written agreement? A verbal agreement works, but it must be put in writing and adopted by both entities before funding, consistent with past practice.
• Some states reimburse assisting entities directly under a statewide agreement; FEMA then funds the state.
• EMAC work follows EMAC rules, and FEMA does not do a reasonable cost analysis on it.

• Non-EMAC, small projects: services requested and received, total cost, and proof of payment at closeout.
• Non-EMAC, large projects: the written agreement, services requested and received, dates, entity names, work descriptions and costs, labor, equipment and supply records, and invoices.
• EMAC: the signed Resource Support Agreement at obligation; R-1 and R-2 reimbursement forms and proof of payment at closeout.

Source: PAPPG Table 16.

All small projects must still comply with procurement rules, and FEMA reviews any small project using noncompetitive, time-and-materials or cost-plus-percentage contracts.

• Small projects: procurement method (competitive or noncompetitive), contract type, and total contract award for each contractor.
• Large projects: contractor name, dates worked, invoice numbers, amounts and description of work; requests for proposals, bids, selection process, procurement policy, cost or price analysis, contracts and change orders, and invoices; and, for time-and-materials contracts, daily or weekly logs or performance meeting records.

Source: PAPPG Table 15.

FEMA reimburses reasonable costs under a pre-positioned contract if:

• It was originally procured in compliance with federal requirements;
• Its scope of work covers the work performed;
• The work was eligible; and
• The contract term covers when the work was done.

If you use a cooperative purchasing program, you must document how its use complied with all procurement requirements. Joint procurements, where two or more entities run one solicitation together, see fewer compliance problems.

The original solicitation and award for any pre-positioned contract, and a written compliance analysis for any cooperative purchase.

You must oversee every contract to make sure the contractor performs to its terms. Time-and-materials (and time-and-equipment) contracts are used only for a reasonable period until you can define the scope of work.

For time-and-materials contracts, daily or weekly logs or records of performance meetings showing oversight. Source: PAPPG Table 15.

A sole-source contract is allowed only when:

• The item is available from only one source;
• A public exigency or emergency won’t permit the delay of competition;
• FEMA or the recipient authorizes it in writing at your request; or
• Competition proved inadequate after soliciting several sources.

For large projects, document which circumstance applied, a description and expected amount, why competition wasn’t possible, how long the contract will be used, the steps you took to try to compete, and any conflicts of interest. Failing to plan the transition is not a reason to keep using a sole-source contract.

A written justification covering each of the points above, prepared when the decision was made.

• Follow your own policies and procedures for non-federal procurements, and 2 CFR 200.322 on recovered materials.
• FEMA may review your procurement rules or ask your attorney to certify in writing that you followed them.
• Include the required provisions of 2 CFR 200.327 in all contracts: remedies; termination for cause and convenience; equal employment opportunity; Contract Work Hours and Safety Standards Act; Clean Air Act and Clean Water Act; debarment and suspension; Byrd anti-lobbying clause and certification; recovered materials; covered telecommunications; and domestic preference.

Your procurement procedures or an attorney certification, and contracts showing the required clauses. FEMA’s Contract Provisions Guide gives the exact wording where verbatim language is required.

• Full and open competition, using one of five methods: micro-purchase, small purchase, sealed bid, competitive proposal, or noncompetitive proposal.
• A cost or price analysis for every procurement above the simplified acquisition threshold ($250,000 at publication), including modifications, with an independent estimate before receiving bids.
• Steps to include small, minority, women-owned and veteran-owned businesses and labor surplus area firms.
• Documented review of the contractor’s integrity, past performance and resources, and confirmation that it is not suspended or debarred.
• Exclusion of contractors that helped write the specifications.
• Records of the procurement history: method, contract type, selection or rejection, and the basis for the price.
• Written standards of conduct covering conflicts of interest.

Your procurement policy, solicitations, bids, selection documentation, cost or price analysis, contracts, change orders and invoices. Source: PAPPG Table 15.

Equipment is property with a useful life over one year and a unit cost at or above the lesser of your capitalization level or $10,000. Everything else is a supply. Small projects handle fair market value during project formulation, with no reduction for supplies.

An inventory of FEMA-funded equipment and supplies, with fair market value calculations when they are no longer needed.

• Track items taken from stock with inventory withdrawal and usage records.
• Without invoices, FEMA uses your established inventory pricing method; without one, historical data or area vendor prices.

• Small projects: type, quantity and total cost.
• Large projects: for stock items, original invoices or cost records, inventory records, quantities used and location; for purchases, receipts or invoices, quantities used, and a justification for anything not used.

Source: PAPPG Table 14.

FEMA weighs whether:

• The cost is ordinary and necessary for the type of facility or work, with the right skill level and level of effort;
• The hours claimed fit the severity of the incident, the need for extraordinary hours, the employee’s function and consecutive hours worked;
• You used sound business practices and arm’s-length bargaining;
• You acted with prudence, and followed your own established practices and policies;
• You complied with procurement rules, including a cost or price analysis and selecting the lowest responsible bidder under your criteria; and
• The cost matches current market prices in the area, based on your history, average area costs, other applicants’ costs, published cost data or FEMA cost codes.

FEMA also considers shortages, project complexity, economy of scale, extraordinary labor needs and your written justification. If a cost is not reasonable, FEMA may fund only the reasonable portion, using the least-cost alternative, the lowest bid, another applicant’s properly procured price or a FEMA estimate.

Bid tabulations, your cost or price analysis, historical invoices for similar work, and a written justification for any cost above market, prepared at the time.

To be eligible, a cost must be:

• Directly tied to the performance of eligible work;
• Adequately documented, substantiated or certified;
• Reduced by all applicable credits, such as insurance proceeds and salvage values;
• Authorized and not prohibited under federal, state, local, tribal or territorial law;
• Consistent with your internal policies that apply uniformly to federal awards and your other activities; and
• Necessary and reasonable to accomplish the work properly and efficiently.

Keep cost, financial, procurement, property, equipment and program records for three years from the date the final expenditure is documented. If litigation, an audit or another claim starts before then, keep them until it is resolved.

• An analysis of renting or leasing versus purchasing.
• Total rental cost no higher than purchase and maintenance over the life of the project. If it is higher, FEMA judges whether you acted prudently given the circumstances at the time.
• Rent-to-own: if you gain ownership during the work, FEMA switches to the hourly equipment rate; if the work ends first, FEMA pays the rental cost.

The rental or lease agreement, invoices, and the rent-versus-buy comparison.

If comparing rates item by item is too burdensome, you can ask FEMA to reimburse all equipment at whichever whole schedule is lower.

Your rate schedule and its basis, or the FEMA equipment code for each item.

• Rates apply only to operating time. Transporting equipment to an eligible site is eligible.
• Standby time is not eligible, unless the operator used the equipment intermittently for more than half of the working hours that day.
• Purchased equipment must have been justifiably needed, and disposition rules apply when you are done with it.

• Small projects: an itemized summary by equipment type with total usage hours and total cost; for purchases, total cost.
• Large projects: equipment type and attachments (year, make, model, size, capacity, horsepower or wattage), sites used, FEMA equipment code or your rate schedule, and the operator’s name with date and hours each day; for purchases, invoices or receipts.

Source: PAPPG Table 12.

• Standby use and pay follow your labor policy and your practice in non-federal incidents, or a contract or union agreement requires it;
• Standby was needed to keep resources ready for the life-saving action;
• The number of people and hours was reasonable for the resources needed; and
• The employee was conducting that life-saving action, and all other labor rules were met.

Examples include bus drivers deployed to move evacuees and first responders deployed for evacuation or emergency medical care. Where firefighters must be paid portal to portal, FEMA reimburses reasonable costs for up to 14 calendar days from the start of the incident period, with documentation of the need for continuous support.

The policy or agreement requiring standby pay, deployment records, and documentation of the need for continuous support.

• The premium is paid on an hourly basis for hours actually worked on eligible emergency work.
• It follows a pre-disaster written labor policy that meets FEMA’s conditions.
• Bonuses and incentive pay are treated as discretionary rewards and are not eligible, even when tied to hazardous conditions from the disaster.

The labor policy provision for each premium pay type and timesheets showing the hours it was paid on.

• The supervisor was directly involved with a specific project;
• You normally charge that person’s time to specific projects, regardless of federal funding; and
• The overtime was paid under a labor policy that meets FEMA’s conditions.

Daily records of the supervisor’s hands-on project work and evidence that their time is normally charged to projects.

• The furlough was budget-related, and the call-back was due to the declared incident.
• The costs were not already in your budget.
• The employees performed eligible work.

The furlough notice, the call-back notice and timesheets for the eligible work.

• Overtime only when the backfill employee is budgeted or is called in from scheduled leave.
• Regular hours too when the backfill employee is a contracted or temporary worker, or a permanent employee called in on a scheduled day off.
• Backfill must be for a limited time based on the exigency, and you must track and document the added costs.
• The trigger is the regular employee doing eligible emergency work, not being on leave or furloughed.

Records linking each backfill shift to the employee being covered and that employee’s eligible emergency work.

• Pay is based on the employee’s normal rate, because that is your actual cost.
• If the employee is paid from an outside source, such as a federal grant or dedicated funds, their regular hours are eligible only when reassigned to eligible emergency work that source doesn’t fund. FEMA must confirm there is no duplication of benefits first.

The employee’s normal assignment and funding source, and daily records of the disaster work performed.

Pay for employees on leave of any kind is not eligible, and neither is administrative leave for staff sent home because of emergency conditions.

Timesheets that separate regular and overtime hours by project and category of work, plus your budget showing which positions are budgeted. Source: PAPPG Table 11.

The policy must:

• Not make payment contingent on federal funding;
• Apply the same way whether or not there is a presidential declaration; and
• Set non-discretionary criteria for when each pay type is triggered.

“Pre-disaster” means before the incident start date in the declaration, so a policy adopted during the incident period does not count.

Keep a dated copy of the labor or pay policy in effect before the incident start date, and show it was applied in non-declared events.

• Benefits must be provided under established written policies. Eligible fringe can include holiday, sick and vacation leave accrual, Social Security and Medicare matching, unemployment insurance, workers’ compensation, retirement, and health, life and disability insurance.
• Calculate fringe as a percentage of the hourly pay rate, separately for regular time and overtime.

• Small projects: an itemized summary with the number of employees, total budgeted and unbudgeted hours, and average regular and overtime rates with fringe. Averages may be used only for employees at similar pay grades and the same employee category.
• Large projects: your pay policy plus, for each employee, name, employee type, job title and function, dates and hours worked, pay and fringe rates, a description of the work with daily logs, timesheets, and fringe calculations.

Source: PAPPG Table 10.