PA Management Costs Under Section 324 and FP 104-11-2

FEMA pays for the administrative side of a Public Assistance (PA) grant through a dedicated contribution authorized by Section 324 of the Stafford Act and implemented by FEMA Recovery Policy FP 104-11-2, Public Assistance Management Costs (Interim). The caps are percentage-based: the recipient (typically the state, territorial, or tribal government administering the award) may be reimbursed for actual management costs up to 7 percent of the total award amount for the disaster, and each subrecipient (the local government, tribal entity, or eligible private nonprofit performing the work) up to 5 percent of its own total award amount — not more than 12 percent combined under the statute. Management costs are obligated on Category Z project worksheets and funded at 100 percent federal share, so there is no state or local cost share on these dollars.

FP 104-11-2 implements the Disaster Recovery Reform Act of 2018 (DRRA), which amended Section 324 and folded direct administrative costs (DAC) into the management cost definition. The policy applies to major disasters and emergencies declared on or after August 1, 2017, and it is the exclusive management-cost framework for incidents declared on or after October 5, 2018 — 44 CFR Part 207 and the older PAPPG DAC provisions no longer govern those declarations.

What Section 324 actually says

As amended by DRRA, Stafford Act Section 324 (codified at 42 U.S.C. § 5165b) defines a management cost to include any indirect cost, any direct administrative cost, and any other administrative expense associated with a specific project under a major disaster, emergency, or disaster preparedness or mitigation activity. For Public Assistance — awards under Stafford Act Sections 403, 406, 407, and 502 — the statute caps reimbursement at 12 percent of the total award amount, of which no more than 7 percent may be used by the grantee (recipient) and 5 percent by the subgrantee (subrecipient).

For context, the statute sets a higher rate for Hazard Mitigation grants under Section 404: 15 percent total, split 10 percent grantee and 5 percent subgrantee. It also directs a review of the rates within three years of establishment and periodically thereafter. FEMA's interim policy states that the agency will evaluate it as implemented and update management costs in a future PAPPG; PAPPG v5 carries the same 7 and 5 percent rates in its Cost Eligibility chapter and refers readers to the interim policy and its standard operating procedures for detail.

How the 7 and 5 percent caps are calculated

The percentages apply to the total award amount, which the policy defines as actual eligible PA project costs, including the non-federal share, after insurance and any other reductions. In other words, the cap rides on the full eligible project cost, not just the federal portion. Category B donated resource project worksheets are excluded from the 7 and 5 percent calculations because they are not project awards.

These interim obligations are subject to FEMA's Strategic Funds Management procedures, and FEMA may require a plan describing how the funds will be used. If a state and a tribal government both receive a presidential declaration for the same incident, or a tribal government opts to be a recipient under the state's declaration, both are recipients — and both are eligible for the 7 percent.

The contribution is reconciled to actual costs at the end. After FEMA receives the recipient's certification of all projects under 44 CFR § 206.205, processes final project claims, and receives the final management cost claim, it processes a final Category Z obligation or deobligation based on actual reasonable costs up to the cap. Excess management cost funding may not be retained.

Which activities qualify

Under FP 104-11-2, eligible management cost activities are those related to developing eligible PA projects and receiving reimbursement, including but not limited to:

• Preliminary Damage Assessments (PDAs) and meetings about the PA Program or overall damage claim;
• Organizing damage sites into logical groups and preparing correspondence;
• Site inspections and travel expenses;
• Developing detailed site-specific damage descriptions;
• Evaluating Section 406 hazard mitigation measures;
• Preparing small and large projects and reviewing project worksheets;
• Collecting, copying, filing, or submitting documents to support a claim;
• Requesting disbursement of PA funds; and
• Training.

Keep management costs distinct from project management. PAPPG v5 explains that project management — procurement actions, legal review of contracts, monitoring contractor work, construction oversight and inspections — covers activities required to manage the actual project regardless of whether the entity receives PA funding, and those costs remain eligible as part of the project itself. Management costs, by contrast, are the costs of receiving and administering PA funding. PAPPG v5 also notes that costs of assessing an incident's overall impacts, locating damage or debris, and conducting PDAs are not eligible project costs at all — they are claimable only as management costs.

Two hard limits: activities related to ineligible projects cannot be claimed as management costs, and while the minimum project threshold does not apply to management cost projects, they are only eligible when related to an eligible project that meets that threshold.

How management costs interact with DAC

Before DRRA, direct administrative costs were handled separately from recipient management costs — through PAPPG Chapters 2.V.N and 3.V.B, the DAC Pilot alternative procedures, and 44 CFR Part 207. The DRRA amendment wrote DAC directly into the Section 324 definition of management costs, and FP 104-11-2 supersedes all of those earlier authorities. As a result of the amendment, Part 207 is no longer effective.

The practical effect: for incidents declared on or after October 5, 2018, project-specific administrative work is compensated through the capped, 100-percent-federal Category Z contribution — not claimed as separate DAC line items on each project. For the transition window of incidents declared August 1, 2017 through October 4, 2018, the policy gave elections: entities that had opted into the DAC Pilot could continue it or switch to management cost contributions; entities outside the pilot with DAC already obligated could continue DAC under the PAPPG or switch; entities with no pilot election and no obligated DAC receive management cost contributions under the interim policy. Elections applied to all of an entity's projects for the declaration and required written notification to FEMA within 90 calendar days of the policy date, with defaults for those that did not respond.

Deadlines to claim management costs

Both recipients and subrecipients may claim management costs incurred up to whichever of the following occurs first (measured against the subrecipient's own projects for subrecipient claims):

1. 180 days after work is completed on the last non-management-cost PA project for the declaration;
2. 180 days after the latest performance period of a non-management-cost PA project;
3. Two years from the date of an emergency declaration; or
4. Eight years from the date of a major disaster declaration.

Documentation and claims

FP 104-11-2 requires actual cost documentation sufficient to demonstrate eligibility — including payroll data, procurement procedures, contracts, invoices, and an explanation of the activities performed — plus information showing the costs are reasonable. PAPPG v5 adds that a management cost claim must include a summary of the work performed and costs claimed: the number of employees, equipment used and equipment rates, total labor and equipment hours (or vehicle miles), total labor and equipment costs, and a general description of tasks performed during the time frame. FEMA may request more documentation and makes the final decision on eligibility and reasonableness.

Operationally, management costs surface early in the delivery process: PAPPG v5 requires applicants to identify on their impact list whether they are claiming management costs, and all Section 324 grant management activities are grouped into a single Category Z project. PAPPG v5 also incorporated and superseded FEMA's March 2023 "Simplifying the PA Management Costs" memo. Building the tracking habit early — separating grant-administration time from project work — is the cleanest way to protect the claim; see the PA documentation checklist for what to capture from day one.