What You Need to Know About FEMA Public Assistance Program Funding

On March 13, 2020 President Trump signed a nationwide emergency declaration as a result of the coronavirus pandemic. As part of the $2 trillion relief package known as the CARES Act, $45 billion has been allocated to the Federal Emergency Management Agency (FEMA) Disaster Relief Fund, allowing state, local and tribal leaders to effectively respond to COVID-19. This emergency declaration also allows for some private nonprofit (PNP) organizations to apply for funding through FEMA’s Public Assistance program, if they meet eligibility requirements. For nonprofits struggling with cash flow and financial sustainability during this unprecedented time, FEMA funds can help offset some significant costs.

This emergency assistance is authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), which makes emergency protective measures taken in response to the ongoing pandemic at the direction or guidance of public health officials eligible for reimbursement under category B of FEMA’s Public Assistance (PA) program.

Category B of FEMA’s PA program defines emergency protective measures as actions taken to save lives and protect public health, safety and property. Nonprofit organizations can apply directly to FEMA for PA, but they can also receive reimbursement from local governments as a pass-through entity. While social welfare is the responsibility of state and local government, certain services provided by local governments are done through nonprofit organizations. Thus, nonprofits may be able to receive FEMA reimbursement through the funds that flow through state and local governments. Through FEMA’s PA Program, federal disaster grant assistance is provided for a variety of measures, primarily for the facilities of eligible nonprofit organizations.

Subject to a federal cost share of 75%, your organization may qualify for financial assistance through FEMA’s PA Program if the services provided satisfy all of the following four components of eligibility: applicant, facility, work and cost eligibility.

Step 1: PNP Applicant Eligibility

FEMA must first determine if a nonprofit organization is an eligible applicant for federal disaster relief funding or reimbursement. Organizations must be able to provide the following:
  1. A current ruling letter from the U.S. Internal Revenue Service granting tax exemption under Figure 6. PNP Eligibility sections 501(c), (d) or (e) of the Internal Revenue Code of 1954; or
  2. Documentation from the state substantiating it is a non-revenue producing, nonprofit entity organized or doing business under state law.
Additionally, to obtain PNP applicant eligibility, it is also required that FEMA determines whether the nonprofit provides the appropriate services through an eligible facility if:
  1. The facility provides a critical service defined as education, utility, emergency or medical;
  2. The facility provides a non-critical, but essential social service to the general public (e.g. not restricted based on certain limiting factors);
  3. The facility restricts access, but clearly in a manner that is related to the operations of the facility (e.g. senior or youth centers).
If an organization can prove its nonprofit status, along with meeting the criteria above, FEMA will move ahead to determine the eligibility of the facility that provides the emergency services.

Step 2: PNP Facility Eligibility

For nonprofit organizations, the operating facility must be eligible for work to be eligible for reimbursement. According to the Stafford Act, a facility is a building, a works system (e.g. water distribution, mechanical, electrical, plumbing, etc.), equipment, built or manufactured, or an improved and maintained natural feature. Unimproved property and land used for agricultural purposes are not eligible facilities.

An eligible nonprofit facility must provide educational, utility, irrigation, emergency, medical, rehabilitation and/or custodial services. When there are multiple facilities functioning simultaneously, or a single facility consists of multiple buildings, FEMA will evaluate each facility individually for funding or reimbursement eligibility. Facilities that provided multiple services, eligible and ineligible, will be determined for funding based on the primary use of the facility, which is measured by the physical space dedicated to either the eligible or ineligible service. If the facility is owned by multiple organizations, the facility must be primarily owned by the nonprofit and meet primary use requirements in order to be eligible.

Keep in mind that FEMA will not provide funding to facilities that are under the authority of other federal agencies, even if said authorized agency does not provide its own funding. Currently inactive facilities will only be deemed eligible for funding if the closure was temporary, if the future active use is foreseen in an approved budget, or if it can be established that work on the facility was planned to begin within a sensible amount of time prior to the pandemic.

If a nonprofit organization is an eligible applicant, along with operating an eligible facility, FEMA must then ensure general work eligibility before authorizing funding through the PA program.

Step 3: PNP Work Eligibility

Work declared by eligible nonprofit organizations must be in accordance with all three of the following criteria:
  1. Be required as a result of the declared incident;
  2. Be located within the designated area, except for sheltering and evacuation activities; and
  3. Be the legal responsibility of an eligible applicant.
The nonprofit organization must prove that the necessary work to be performed is resulting from an immediate declared incident (in this case the COVID-19 pandemic), that the work is located in the area defined in the declaration (e.g. all 50 states, the District of Columbia or U.S. territories.) and that the organization is legally responsible to request financial assistance for the work.

Step 4: PNP Cost Eligibility

Once FEMA evaluates the eligibility of a nonprofit organization’s applicant status, facility services and work performed, the last factor for determining what qualifies for FEMA funding is the eligibility of all costs claimed by the applicant. Eligible costs must be:
  1. Linked directly to work approved as eligible by FEMA;
  2. Sufficiently documented;
  3. Reduced by all applicable credits, such as insurance proceeds and salvage values;
  4. Not prohibited under state and local laws, rules or regulations;
  5. Aligned with internal policies and procedures of the applicant; and
  6. Required and reasonable to perform the work effectively and efficiently.
Section 2 CFR § 200.404 of the Uniform Guidance outlines that a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made for the nonprofit applicant to incur the cost. If, throughout the evaluation of cost eligibility, FEMA determines costs to be unreasonable, a part or the entirety of the costs may be disallowed by adjusting eligible funding to the amount that is deemed reasonable.

FEMA Procurement and Contracting Standards

Once a nonprofit evaluates whether it is a viable applicant for FEMA funding, as well as provides eligible services, it must also ensure that it is compliant to strict federal procurement and contracting requirements. While the most important aspects of federal procurement standards are summarized below, refer to FEMA’s Procurement Guidance for Recipients and Subrecipients Under 2 C.F.R. Part 200 (Uniform Rules) for full details.

At minimum, nonprofits need to comply with the following federal procurement standards:
  1. Per 2 CFR § 200.319(a), provide full and open competition;
  2. Per 2 CFR § 200.321, conduct all necessary affirmative steps to ensure the use of minority businesses, women’s business enterprises and labor surplus area firms when possible;
  3. Per 2 CFR § 200.319(a), exclude contractors that develop or draft specifications, requirements, statements of work or invitations for bids or requests for proposals from competing for such procurements to ensure objective contractor performance and eliminate unfair competitive advantage;
  4. Per 2 CFR § 200.318(c)(1), maintain written standards of conduct covering conflicts of interest and governing the performance of employees who engage in the selection, award and administration of contracts; and
  5. Per 2 CFR § 200.318(i), maintain records sufficient to detail the history of the procurement. These records will include, but are not limited to:
    • Rationale for the method of procurement
    • Selection of contract type
    • Contractor selection or rejection
    • The basis for the contract price
Additionally, per 2 CFR § 200.320, PNP organizations must apply the federally accepted procurement methods:
  1. Micro-purchase: purchase of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold
  2. Small purchase procedure: relatively simple and informal procurement method for securing services, supplies or other property that do not cost more than the simplified acquisition threshold set by the Federal Acquisition Regulation at 48 CFR Subpart 2.1
  3. Sealed bid (formal advertising): publicly solicited bid awarded via a firm-fixed price contract to the lowest responsible bidder
  4. Competitive proposal: normally conducted with more than one source submitting an offer and generally used when conditions are not appropriate for the use of sealed bids.
A noncompetitive proposal is an accepted form of procurement for FEMA for PA, but only in one or more of the following circumstances:
  1. The item is only available from a single source;
  2. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
  3. FEMA or the recipient expressly authorizes a noncompetitive proposal in response to a written request from the applicant; or
  4. After solicitation of a number of sources, competition is determined inadequate.
Lastly, nonprofit organizations are required to perform cost-price analyses in relation to every procurement action that is over the simplified acquisition threshold. To begin, the applying nonprofit must make independent estimates prior to receiving bids or proposals, while also negotiating profit separately from the price for all contracts with no price competition and in all cases where cost analyses are performed.

FEMA reimburses costs through three types of contract payment obligations:
  1. Fixed-price
  2. Cost-reimbursement
  3. Time and materials (T&M) – to a more limited extent. In fact, FEMA advises against the use of T&M contracts due to the lack of incentive to ensure the contractor maintains cost control and labor efficiency. FEMA only reimburses for T&M contracts if all of the following apply per 2 CFR § 200.318(j):
    • No other contract was suitable;
    • The contract has a ceiling price that the contractor exceeds at its own risk; and
    • The applicant provides a high degree of oversight to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls.
Applicants are obligated to include required provisions in every contract awarded while maintaining oversight through the performance of the contract to ensure compliance. Note that FEMA does not reimburse costs incurred through a cost-plus percentage of cost contract, nor through a percentage of construction cost method.

Overall, nonprofit organizations should determine their scope of work as soon as possible to ensure the procurement of a FEMA-approved type of contract.

Application Process

Once it is determined that a nonprofit meets the eligibility requirements noted above, an application can be submitted to FEMA for a PA grant. This process starts by attending a Virtual Applicant Briefing, which is hosted online by state and local governments. Then, the applicant must create an account online at the Public Assistance Grant Portal to complete and submit an application. The application process will require various documents based on the eligibility criteria noted above, so organizations should make sure they have all pertinent information readily available.

If you think nonprofit organization may be eligible for FEMA public assistance funding, it is critical to confirm you meet the eligibility criteria, and that you are prepared to meet procurement and contracting standards. Should nonprofits be able to comply with the requirements of this program, they may be able to offset significant costs during this financially challenging time.

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