PA Management Costs in Public Assistance

Administering a Public Assistance grant costs money of its own — the staff time that goes into assessing damage, preparing and documenting projects, and claiming payment. FEMA contributes toward that cost under Section 324 of the Stafford Act, through what the program calls management costs. FEMA's Public Assistance Management Costs policy and the cost eligibility chapter of its Public Assistance Program and Policy Guide (PAPPG) describe how the contribution works, and they are the sources for this page.

What the Stafford Act provides

As amended by the Disaster Recovery Reform Act of 2018, the Stafford Act defines a management cost as any indirect cost, any direct administrative cost and any other administrative expense associated with a specific project, and it sets percentage limits on what FEMA may reimburse for Public Assistance: a combined cap on the total award, divided into a share the recipient may use and a smaller share for each subrecipient. The recipient is typically the state, territorial or tribal government that administers the grant; a subrecipient is the local government, Tribal Nation or private nonprofit that carries out the work. The Act sets a different, higher rate for hazard mitigation grants and directs FEMA to review the rates periodically.

How the contribution works

FEMA's policy turns the statutory caps into a contribution reimbursed at actual cost. The percentage is applied to the total award amount, which the policy defines as the eligible project costs, including the non-federal share, after insurance and other reductions; donated resources and the management costs themselves are left out of the base. The recipient's share covers the management costs of its own projects as well, so it does not also receive the subrecipient share for those, and when a state and a Tribal Nation are both recipients for the same incident each is eligible for the recipient share.

All of an applicant's management cost activities are grouped into a single project, which FEMA calls Category Z, and funded entirely by the federal government, with no state or local cost share, for small projects, large projects and alternative-procedures projects alike. FEMA may obligate part of the contribution early, before the project awards have accumulated, and adjust it as obligations grow; it may ask for a plan describing how the funds will be used. At the end, after the final project claims are processed and the final management cost claim is received, FEMA sets the final amount on the actual, reasonable costs up to the cap. Funding above the actual costs is not kept.

Which activities qualify

FEMA's policy describes eligible management cost activities as those related to developing eligible projects and receiving reimbursement, and it lists examples: preliminary damage assessments and meetings about the program or the overall claim, grouping damage sites and preparing correspondence, site inspections and travel, writing detailed damage descriptions, evaluating hazard mitigation measures, preparing projects and reviewing project worksheets, collecting and submitting supporting documents, requesting payment, and training.

FEMA's guide keeps management costs distinct from the cost of managing the project itself. Procurement, legal review of contracts, monitoring the contractor, construction oversight and inspections are work the applicant would do whether or not it received Public Assistance, and the guide treats them as costs of the project. The guide also treats the costs of assessing a disaster's overall impact, locating damage and conducting preliminary damage assessments as management costs rather than project costs. Two limits in the policy: activities related to ineligible projects cannot be claimed as management costs, and although the minimum project size that applies to other projects does not apply to a management cost project, the contribution is tied to eligible projects that meet it.

Where direct administrative costs fit

Before 2018, the administrative costs an applicant could tie to one project were claimed on that project, as direct administrative costs, while a recipient's management costs ran under a separate part of FEMA's regulations. The amendment to the Stafford Act wrote direct administrative costs into the definition of management costs, and FEMA's policy states that it supersedes the earlier arrangements. For disasters declared on or after October 5, 2018, project-specific administrative work is reimbursed through the contribution rather than as separate items on each project; for declarations from August 1, 2017 through October 4, 2018 the policy offered a one-time election between the old and the new approach, and earlier declarations stay under the earlier rules. Our page on direct administrative costs describes the line between administering the grant and managing the project.

When costs may be incurred, and when the claim is due

FEMA's policy sets a period during which management costs may be incurred, defined by several triggers — the completion of the last ordinary project, the end of its performance period, and a set number of years after the declaration, depending on whether it was an emergency or a major disaster — whichever comes first. FEMA's standard operating procedures tie the management cost project's own period of performance to those triggers and describe when the final claim, with its supporting documentation, is due after that period ends.

Documentation

FEMA's policy expects cost records that show eligibility — payroll data, procurement records, contracts and invoices, with an explanation of the activities performed — together with support for the reasonableness of the costs. FEMA's guide adds that a claim includes a summary of the work performed and the costs claimed: the number of employees, the equipment used and its rates, the hours of labor and equipment, the total costs and a general description of the tasks each person performed. The guide also expects an applicant to say on its impact list whether it will claim management costs. FEMA may ask for more, and it makes the final decision on eligibility and reasonableness.