[Federal Register Volume 67, Number 169 (Friday, August 30, 2002)]
[Proposed Rules]
[Pages 56130-56136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21890]



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Part VI





Federal Emergency Management Agency





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44 CFR Parts 206 and 207



Management Costs; Proposed Rule

  Federal Register / Vol. 67, No. 169 / Friday, August 30, 2002 / 
Proposed Rules  

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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Parts 206 and 207

RIN 3067-AD29


Management Costs

AGENCY: Federal Emergency Management Agency.

ACTION: Proposed rule.

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SUMMARY: This rule implements the management costs provisions of the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act 
(Stafford Act), simplifies and clarifies the method by which FEMA 
contributes to costs incurred by grantees and subgrantees in 
implementing the Public Assistance and Hazard Mitigation Grant 
programs, and establishes fixed management cost rates for compensating 
eligible grantees and subgrantees while adequately protecting Federal 
financial interests.

DATES: We invite comments on this proposed rule. Please submit written 
comments on or before September 30, 2002.

ADDRESSES: Please address all comments to the Rules Docket Clerk, 
Office of General Counsel, Federal Emergency Management Agency, room 
840, 500 C Street, SW., Washington, DC 20472, or (facsimile) (202) 646-
4536 or (e-mail) [email protected].

FOR FURTHER INFORMATION CONTACT: Veandeen H. Pace, Financial and 
Acquisition Management Division, Federal Emergency Management Agency, 
500 C Street, SW., Washington, DC 20472, 202-646-3256, (facsimile) 
(202) 646-3846, or (e-mail) [email protected].

SUPPLEMENTARY INFORMATION:

Introduction

    Section 324 of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (Stafford Act), 42 U.S.C. 5165b,\1\ requires FEMA: (1) 
To establish management cost rates for grantees and subgrantees that 
will be used to determine contributions for management costs; and (2) 
to review the management cost rates established not later than three 
years after the date of establishment of the rates and periodically 
thereafter.
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    \1\ Enacted in the Disaster Mitigation Act of 2000, Pub. L. 106-
390, Sec. 202.
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    The Management Cost Rate will replace what we currently pay State 
and local governments through the ``sliding scale'' under section 
406(f) of the Stafford Act, State Management Costs, and indirect costs 
that are paid in accordance with 44 CFR 206.228(a)(2) through 
206.228(a)(3)(ii) and Sec. 206.228(b) for Public Assistance (PA), and 
44 CFR 206.439(b)(1) through (c)(2) for the Hazard Mitigation Grant 
Program (HMGP). Management costs include any direct or indirect cost, 
any administrative expense, and any other expense not directly 
chargeable to a specific project for PA and HMGP.
    Any costs that can be directly attributable to a project (at the 
grantee or subgrantee levels) will continue to be added directly to the 
PA Project Worksheet (PW) or HMGP application for the project.
    In the proposed rule, we state that management costs as outlined 
will be effective to apply to major disasters and emergencies declared 
on or after October 1, 2002. We anticipate implementing management 
costs on October 1, 2002; however, this date may change as the 
implementation process progresses. We invite comments from the public 
on the proposed implementation date.
    Because management costs are authorized by a section separate from 
those authorizing PA and HMGP, we propose to implement section 324 
separately from those two programs.

Calculation of Management Costs

    We propose to use the ``lock-in'' concept to determine the amount 
of funds that we will make available to a State for management costs 
for a particular major disaster or emergency. We will base the lock-in 
on a flat percentage of the Federal share for the combined programs (PA 
and HMGP); the percentage will be equivalent to the average percentage 
amount paid by FEMA to grantees and subgrantees for those programs for 
management and administrative costs, including indirect costs, for 
major disaster and emergency declarations from 1995 through 2000.
    To determine the percentage to be used for management costs, we 
collected data on management, administrative, and indirect costs from 
our Automated Disaster Assistance Management System, National Emergency 
Management Information System, Hazard Mitigation Historical Database, 
Integrated Financial Management Information System, and Disaster 
Financial Status Report. These systems and reports contain the 
accounting and financial data for FEMA and we believe it is logical to 
use these data types and sources when calculating the management cost 
rates.
    We compiled raw data on actual obligations for PA and HMGP (total 
program obligations); administrative costs (``sliding scale''); and 
management costs, including indirect costs, for major disasters and 
emergencies declared 1995-2000. The data were as of September 30, 2000 
and represented what grantees and subgrantees received in total 
administrative costs. The raw data were then sorted various ways to 
determine whether trends existed. Among the data sorts we conducted 
were by type of declaration (major disaster or emergency), type of 
disaster, size of disaster, State, area or region of country, and 
number of declarations within the State. The data, when sorted, 
generally did not demonstrate any clear trends to support a multi-
tiered rate structure. However, because on average management and 
administrative costs for emergency declarations were substantially less 
than for major disasters, we believe the data support having different 
rates for major disaster and emergency declarations.
    Although we considered the feasibility of providing different 
management cost rates to States that participate in either the HMGP as 
a Managing State or in PA as a State managing a small disaster, we do 
not have any information at this time to support different rates for 
those initiatives. We encourage States that participate in either of 
these initiatives to document extraordinary management costs for our 
use in the required review of the rates.
    FEMA contracted with a managerial cost accounting firm to validate 
our methodology for calculating the management cost rates. The firm 
reported to us at the conclusion of its review that the methodology 
used to set the rates was both reasonable and correct, and that we 
fairly assessed other possible alternatives in coming to our 
conclusions.
    In the proposed rule, we state that the rate on or after October 1, 
2002 will be 4.41% for major disaster declarations and 3.16% for 
emergency declarations. We invite comments from the public on the rates 
and the calculation.
    Not earlier than 30 days from the date of declaration, we propose 
to provide the State a preliminary lock-in amount for management costs 
based on the combined estimated projections at that time of the Federal 
share for PA and HMGP. At the time of the preliminary lock-in, we will 
obligate up to 25 percent of the estimated lock-in amount to States 
through an obligation separate from the obligations for PA and HMGP.
    To aid States in planning, we will revise the lock-in amount at six 
months after the date of the declaration. We will determine the final 
lock-in amount after the final HMGP lock-in amount is determined. At 
that time, we will

[[Page 56131]]

obligate the full amount of management costs to the State.
    The dollar amount provided to a State for management costs for a 
single declaration will not exceed $20,000,000. The grantee must 
justify in writing to the FEMA Regional Director (RD) any requests to 
change the amount of the lock-in or the cap, or extend the time before 
lock-in. The RD will recommend to the FEMA Chief Financial Officer 
(CFO) whether to approve the extension or change. We may also initiate 
such changes. We will not make extensions or changes to lock-in time or 
amounts without approval of the CFO.

Eligible Use of Funds

    Because grantees have the primary relationship with their 
subgrantees, States are responsible for passing through to their 
subgrantees a portion of the management cost funds that FEMA provides. 
States will have the flexibility to determine the amount of management 
costs funding used for each program (PA and HMGP) and passed through to 
their subgrantees under the two programs for their administrative 
costs. States will be responsible for managing the funds in order to 
ensure that the programs can be properly implemented and closed out in 
a timely manner.
    We may allow the grantee or subgrantee to retain any management 
cost funds not needed for a particular major disaster or emergency so 
long as the grantee or subgrantee uses the remaining funds to cover 
costs associated with disaster programs' general financial and grants 
management enhancements. Remaining funds may not be used for disaster-
specific PA and HMGP management for any declarations other than the 
major disaster or emergency for which FEMA provided them.
    The grantee must submit a plan in writing to the FEMA Regional 
Director after the PA and HMGP grants are closed describing how it 
proposes to spend any remaining funds. The Regional Director will 
recommend to the FEMA Chief Financial Officer whether to approve the 
plan. Examples of allowable charges include grants management training, 
financial systems improvements, and accounting enhancements. Grantees 
must spend all such funds in compliance with 44 CFR 13.22.
    The State must spend management cost funds, including approved 
remaining funds, within six years from date of major disaster or 
emergency declaration, or by 90 days after grant closeout, whichever is 
sooner. This may only be extended at the request of the State, with the 
recommendation of the FEMA Regional Director, and with the approval of 
the FEMA Chief Financial Officer.

Disasters Declared Prior to Implementation of Management Costs

    Associated expenses (administrative costs commonly known as costs 
paid through the ``sliding scale'') and State management costs paid in 
accordance with 44 CFR 13.22 will continue to be eligible for 
reimbursement for major disasters or emergencies declared before the 
effective date of this rule. We will reimburse such eligible costs for 
a maximum of six years from the date of the major disaster or emergency 
declaration. We will only extend payment of these costs at the written 
request of the State justifying the extension, with the recommendation 
of the FEMA Regional Director, and with the approval of the FEMA Chief 
Financial Officer.

National Environmental Policy Act (NEPA)

    44 CFR 10.8(d)(2)(ii) excludes this rule from the preparation of an 
environmental assessment or environmental impact statement, where the 
rule relates to actions that qualify for categorical exclusion under 44 
CFR 10.8(d)(2)(i), such as the provision of management costs. We have 
not prepared an environmental assessment or environmental impact 
statement for this proposed rule.

Paperwork Reduction Act of 1995

    FEMA has determined that the implementation of management costs is 
subject to the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520. As 
required by the Paperwork Reduction Act of 1995 and concurrent with 
this proposed rule, we have submitted a request for Office of 
Management and Budget (OMB) review and approval of a new collection of 
information, which is contained in this proposed rule. This request for 
collection of information and notice for comment will be processed 
under OMB's clearance procedures in accordance with 5 CFR 1320.10 and 
complies with provisions of the Paperwork Reduction Act of 1995, 44 
U.S.C. 3506(c)(2)(A). We invite the general public to comment on the 
collection of information.

Collection of Information

    Title: Management Costs.
    Type of Information Collection: New.
    OMB Number: New OMB number 3067-XXXX.
    Form Numbers: SF 424, Application for Federal Assistance; FEMA Form 
20-10, Financial Status Report; FEMA Form 20-16, Summary Sheet for 
Assurances and Certifications; FEMA Form 20-16A, Assurances `` Non-
Construction Programs; FEMA Form 20-16C, Certifications Regarding 
Lobbying; Debarment, Suspension and Other Responsibility Matters; and 
Drug-Free Workplace Requirements; FEMA Form 20-20, Budget Information--
Non-Construction Programs; and SF LLL, Disclosure of Lobbying 
Activities.
    Abstract: This collection is in accordance with our 
responsibilities under 44 CFR part 207 to provide an orderly and 
continuing means of assistance by the Federal Government to State and 
local governments. The assistance contributes funds toward the cost of 
managing and administering public assistance and hazard mitigation 
grant programs provided as a result of a Presidential major disaster or 
emergency declaration.
    Affected Public: State and Indian tribal governments.
    Estimated Total Annual Burden Hours: 3555.3 hours. A breakdown of 
the burden is charted below:

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                                           No.  of        Frequency of    Hours per response and   Annual burden
              FEMA Forms               respondents (A)    response (B)      recordkeeping (C)      hours (AxBxC)
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SF-424: Application for Federal                    56                2   45 minutes.............              84
 Assistance.
FEMA Form 20-16: Financial Status                  56                4   1 hour.................             224
 Report.
FEMA Forms 20-16, 20-16A, 20-16C:                  56                1   20 minutes.............            18.6
 Summary Sheet for Assurances and
 Certifications.
SF LLL: Disclosure of Lobbying                     56                1   10 minutes.............             9.3
 Activities.
FEMA Form 20-20: Budget Information                56                2   9.7 hours..............          1086.4
 Non-Construction Programs.
Narrative Statement..................              56                1   4 hours................             224

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Progress Reports.....................              56                2   2 hours................             224
Extension or Change Requests.........               5                1   1 hour.................               5
Audits of States, Local Governments,               56                1   30 hours...............            1680
 and Non-Profit Organizations.
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    Total............................  ...............             789   .......................          3555.3
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    Estimated Cost: The total annual estimated costs to States and 
Indian tribal governments for information collection associated with 
management costs are $67,195. This calculation is based on the number 
of burden hours for each type of information collection/form, as 
indicated above, and the estimated wage rates for those individuals 
responsible for collecting the information or completing the forms.
    Comments: Written comments are solicited to (a) evaluate whether 
the proposed data collection is necessary for the proper performance of 
the agency, including whether the information shall have practical 
utility; (b) evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (c) enhance the 
quality, utility, and clarity of the information to be collected; and 
(d) minimize the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses. Comments should be received within 60 days of 
the date of this notice.

ADDRESSES: Interested persons should submit written comments to Muriel 
B. Anderson, Chief, Records Management Section, Program Services and 
Systems Branch, Facilities Management and Services Division, 
Administration and Resource Planning Directorate, Federal Emergency 
Management Agency, 500 C Street, SW., room 316, Washington, DC 20472.

FOR FURTHER INFORMATION CONTACT: Contact Veandean H. Pace, Financial 
and Acquisition Management Division, Federal Emergency Management 
Agency, 500 C Street, SW., Washington, DC 20472, telephone (202) 646-
3256, facsimile (202) 646-3846, or e-mail [email protected] for 
additional information. You may contact Ms. Anderson for copies of the 
proposed collection of information at telephone number (202) 646-2625 
or facsimile number (202) 646-3347 or email [email protected].

Executive Order 12866, Regulatory Planning and Review

    Under Executive Order 12866, 58 FR 51735, October 4, 1993, a 
significant regulatory action is subject to OMB review and the 
requirements of the Executive Order. The Executive Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more, 
or may adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    This proposed rule would not have an annual effect on the economy 
of $100 million or more and is not an economically significant rule 
under Executive Order 12866. Also, we know of no other conditions that 
would qualify the rule as a ``significant regulatory action'' within 
the definition of section 3(f) of the Executive Order. To the extent 
possible, this rule adheres to the principles of regulation as set 
forth in Executive Order 12866. The Office of Management and Budget has 
not reviewed this rule under the provisions of the Executive Order.

Executive Order 13132, Federalism

    Executive Order 13132 sets forth principles and criteria that 
agencies must adhere to in formulating and implementing policies that 
have federalism implications, that is, regulations that have 
``substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.'' Federal 
agencies must closely examine the statutory authority supporting any 
action that would limit the policymaking discretion of the States, and 
to the extent practicable, must consult with State and local officials 
before implementing any such action.
    We have reviewed this proposed rule under Executive Order 13132 and 
have determined that the rule does not have ``substantial direct 
effects on the States'' and therefore does not have the type of 
federalism implications contemplated by the Executive Order. We do not 
foresee that the rule would affect significantly the distribution of 
power and responsibilities among the various levels of government or 
limit the policymaking discretion of the States.
    We believe that the publication of this proposed rule is consistent 
with the terms of Executive Order 13132. We invite comment from State 
and local representatives on this important issue.

Executive Order 12898, Environmental Justice

    Under Executive Order 12898, Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations, 59 FR 7629, February 16, 1994, we have undertaken to 
incorporate environmental justice into our policies and programs. The 
Executive Order requires each Federal agency to conduct its programs, 
policies, and activities that substantially affect human health or the 
environment, in a manner that ensures that those programs, policies, 
and activities do not have the effect of excluding persons from 
participation in, denying persons the benefits of, or subjecting 
persons to discrimination because of their race, color, or national 
origin. No action that we can anticipate under the proposed rule will 
have a disproportionately high and adverse human health effect on any 
segment of the population. In addition, the proposed rule does not 
impose substantial direct compliance costs on those communities. 
Accordingly, the

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requirements of the Executive Order do not apply to this proposed rule.

Executive Order 13084, Consultation and Coordination with Indian Tribal 
Governments

    Under Executive Order 13084, FEMA may not issue a regulation that 
is not required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal government, or we consult with those 
governments. If FEMA complies by consulting, Executive Order 13084 
requires us to provide to the Office of Management and Budget a 
description of the extent or our prior consultations with 
representatives of affected tribal governments, a summary of the nature 
of their concerns, and a statement supporting the need to issue the 
regulation. In addition, Executive Order 13084 requires us to develop 
an effective process permitting elected officials and other 
representatives of Indian tribal governments ``to provide meaningful 
and timely input in the development of regulatory policies on matters 
that significantly or uniquely affect their communities.''
    This proposed rule is required by statute, but we do not believe 
that it will significantly and uniquely affect the communities of 
Indian tribal governments, or the relationship between the Federal 
government and Indian tribes, or the distribution of power and 
responsibilities between the Federal government and Indian tribes. 
Moreover, the rule does not impose substantial direct compliance costs 
on tribal governments, nor does it preempt tribal law, impair treaty 
rights or limit the self-governing powers of tribal governments.

List of Subjects in 44 CFR Parts 206 and 207

    Administrative costs, Administrative practice and procedure, 
Disaster assistance, Grant programs, Management costs, Reporting and 
recordkeeping requirements.

    Accordingly, we propose to amend 44 CFR, Subchapter D--Disaster 
Assistance, as follows:
    1.Add part 207 to read as follows:

PART 207--MANAGEMENT COSTS

Sec.
207.1   Purpose.
207.2   Definitions.
207.3   Applicability and eligibility.
207.4   Responsibilities.
207.5   Determination of management costs.
207.6   Eligible use of funds.
207.7   Application procedures.
207.8   Grants management oversight.
207.9   Declarations before October 1, 2002.
207.10   Review of management cost rates.

    Authority: Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, 42 U.S.C. 5121-5206; Reorganization Plan No. 3 of 
1978, 43 FR 41943, 3 CFR, 1979 Comp., p. 329; E.O. 12127, 44 FR 
19367, 3 CFR, 1979 Comp., p. 376; E.O. 12148, 44 FR 43239, 3 CFR, 
1979 Comp., p. 412.


Sec. 207.1  Purpose.

    The purpose of this part is to implement section 324 of the 
Stafford Act, 42 U.S.C. 5165b.


Sec. 207.2  Definitions.

    Cap means the maximum dollar amount provided to a State for 
management costs for a single declaration.
    Chief Financial Officer (CFO) is the Chief Financial Officer of 
FEMA, or his/her designated representative.
    Cognizant Agency means the Federal agency responsible for 
reviewing, negotiating, and approving cost allocation plans or indirect 
cost proposals developed on behalf of all Federal agencies. The Office 
of Management and Budget publishes a listing of cognizant agencies.
    Grant means an award of financial assistance. The management cost 
grant award will be based on a percentage of the projected Federal 
share of assistance provided under sections 403, 404, 406, 407, 502, 
and 503 of the Stafford Act.
    Grantee means the government to which a grant is awarded that is 
accountable for the use of the funds provided. The grantee is the 
entire legal entity even if only a particular component of the entity 
is designated in the grant award document. Generally, the State is the 
grantee. However, after a declaration, an Indian tribal government may 
choose to be a grantee, or may act as a subgrantee under the State for 
purposes of administering a grant under Public Assistance (PA) and/or 
the Hazard Mitigation Grant Program (HMGP). When an Indian tribal 
government has chosen to act as grantee under PA and/or HMGP, it will 
also assume the responsibilities of a ``grantee'' under this part for 
the purposes of administering the management costs grant.
    Hazard Mitigation Grant Program (HMGP) means the program authorized 
under section 404 of the Stafford Act, 42 U.S.C. 5170c and implemented 
at 44 CFR part 206, subpart N.
    HMGP lock-in means the maximum level of HMGP funding available to a 
grantee for a particular disaster.
    Indian tribal government is a federally recognized governing body 
of an Indian or Alaska Native tribe, band, nation, pueblo, village, or 
community that the Secretary of Interior acknowledges to exist as an 
Indian tribe under the Federally Recognized Tribe List Act of 1994, 25 
U.S.C 479a. This does not include Alaska Native corporations, the 
ownership of which is vested in private individuals.
    Lock-in means the amount of management cost funds available to a 
grantee for a particular major disaster or emergency, as FEMA 
determines at 30 days, six months, and after the final HMGP lock-in. 
The lock-in is a flat percentage of the Federal share for the combined 
dollar projections for PA and HMGP.
    Management Costs means funding made available by FEMA to PA and 
HMGP grantees for use by grantees and subgrantees for contributions 
towards indirect costs, administrative expenses, and any other expenses 
not directly chargeable to a specific project.
    Project refers to project as defined at 44 CFR 206.201(i) for PA 
and at 44 CFR 206.431(f) for HMGP.
    Project Worksheet refers to FEMA Form 90-91, on which the scope of 
work and cost estimate for a logical grouping of work required as a 
result of a declared major disaster or emergency is documented.
    Public Assistance (PA) means the program authorized under sections 
403, 406, 407, 418, 419, 502, and 503 of the Stafford Act (42 U.S.C. 
5170b, 5172, 5173, 5185, 5186, 5192, and 5193, respectively) and 
implemented at 44 CFR part 206, subparts C, G, and H.
    Regional Director is a director of a regional office of FEMA, or 
his/her designated representative.
    Stafford Act refers to the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, Public Law 93-288, as amended (42 U.S.C. 
5121-5206).
    State is any State of the United States, the District of Columbia, 
Puerto Rico, the Virgin Islands, Guam, American Samoa, and the 
Commonwealth of the Northern Mariana Islands.
    Subgrantee means the government or other legal entity to which a 
grantee awards a subgrant and which is accountable to the grantee for 
the use of the funds provided. Subgrantees can be a State agency, local 
government, private non-profit organization, or Indian tribal 
government.
    We, our or us means FEMA.


Sec. 207.3  Applicability and Eligibility.

    This rule applies to major disasters and emergencies declared by 
the President on or after October 1, 2002.

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Only major disasters and emergencies for which the Public Assistance 
and/or Hazard Mitigation Grant Programs are declared and implemented 
are eligible for funding under this part.


Sec. 207.4  Responsibilities.

    (a) General. This section identifies key responsibilities of FEMA 
and grantees in carrying out section 324 of the Stafford Act, 42 U.S.C. 
5165b. These responsibilities are unique to the administration of this 
part and are in addition to common Federal government requirements of 
grantees and subgrantees, consistent with Office of Management and 
Budget circulars and other applicable requirements.
    (b) FEMA. Key responsibilities of FEMA include:
    (1) Determining the lock-in amount for management costs at no 
earlier than 30 days, six months, and after the final HMGP lock-in 
ceiling, using the most currently available estimates of projected 
costs (Federal share) of PA and HMGP.
    (2) Obligating funds for management costs under Sec. 207.5(b) 
within five days of each applicable lock-in date.
    (3) Reviewing management cost rates not later than three years 
after this rule is in effect and periodically thereafter.
    (c) Grantee. Key responsibilities of the grantee include:
    (1) Determining the amount of management cost funding to be applied 
to eligible costs for PA and HMGP.
    (2) Determining the amount of management cost funding to be passed 
through to subgrantees for contributions to their costs for 
administering PA and HMGP projects and ensuring that it provides such 
funds to subgrantees.
    (3) Managing management cost funds to ensure that PA and HMGP are 
properly implemented and closed out in a timely manner.
    (4) Submitting a plan to the Regional Director for expenditure of 
any remaining management costs and ensuring that any such approved 
expenditures are closed out properly in a timely manner.


Sec. 207.5  Determination of management costs.

    (a) General. This section describes how we determine the amount of 
funds that we will contribute under this part for management costs for 
a particular major disaster or emergency.
    (b) Lock-in. We will determine the amount of funds that we will 
make available for management costs by a lock-in, which will act as a 
ceiling for funds available to grantees and subgrantees.
    (1) We will determine the lock-in based on a flat percentage rate 
of the Federal share for the combined programs (PA and HMGP, sections 
403, 404, 406, 407, 418, 419, 502, and 503 of the Stafford Act, 42 
U.S.C. 5170b, 5170c, 5172, 5173, 5185, 5186, 5192, and 5193, 
respectively). For major disaster declarations on or after October 1, 
2002, the rate will be 4.41%. For emergency declarations on or after 
October 1, 2002, the rate will be 3.16%.
    (2) Not earlier than 30 days from the date of declaration, we will 
provide the grantee a preliminary lock-in amount for management costs 
based on the combined estimated projections at that time of the Federal 
share for PA and HMGP. At the time of the preliminary lock-in, we will 
obligate up to 25 percent of the estimated lock-in amount to grantees 
separately from obligations for PA and HMGP.
    (3) For planning purposes, we will revise the lock-in amount at six 
months after the date of the declaration.
    (4) We will determine the final lock-in amount nine months after 
date of declaration or after we determine the final HMGP lock-in, 
whichever is later. We will obligate the remainder of the lock-in 
amount to the grantee at that time.
    (c) Grant limits. The dollar amount that we will provide to a 
grantee for management costs for a single declaration will not exceed 
$20,000,000.
    (d) Extensions or changes. The grantee must justify in writing to 
the Regional Director any requests to change the amount of the lock-in 
or the cap, or to extend the time before lock-in. The Regional Director 
will recommend to the Chief Financial Officer whether to approve the 
extension or change. We will not make extensions or changes to lock-ins 
without the approval of the Chief Financial Officer.
    (e) Chief Financial Officer determination. The Chief Financial 
Officer may change the amount of the lock-in or the cap, or extend the 
time before lock-in, if the Chief Financial Officer determines that the 
projections used to determine the lock-in were inaccurate to such a 
degree that the change to the lock-in would be material, or for other 
reasons that may warrant such changes. The Chief Financial Officer will 
not make such changes without consultation with the grantee and the 
Regional Director.


Sec. 207.6  Eligible use of funds.

    (a) General. The grantee has primary responsibility for 
administration of management cost activities and accountability of 
funds as required by 44 CFR part 13, which details the general 
principles and requirements for allowable costs and grants management 
to State, local and federally recognized Indian tribal governments.
    (b) Grant determinations. Grantees will determine the percentage or 
amount of funding used for each program (PA and HMGP) and the 
percentage or amount to pass through for subgrantee use under the two 
programs.
    (c) Pre-award costs. Pre-award costs incurred from date of 
declaration until the application is submitted and approved in 
accordance with Sec. 207.7 may be eligible for reimbursement by funds 
provided under this part in accordance with 44 CFR 13.22.
    (d) Eligible costs. The following represents eligible activities 
for which, if not charged directly to a project, the grantee or 
subgrantee may use management cost funds provided under this part in 
accordance with 44 CFR 13.22:
    (1) Maintain a disaster administrative office, e.g., staff, staff 
travel, communications, printing, supplies, equipment, professional 
services, including indirect costs, directly related to the declaration 
for which the funds are provided;
    (2) Provide technical assistance to disaster community applicants 
and subgrantees of disaster funding;
    (3) Develop, revise, or update State administrative plans as 
required in 44 CFR 206.207(b) for PA and 44 CFR 206.437 for HMGP to 
assure that the plans are current with State policies and procedures 
and comply with program regulations;
    (4) Review local plans for mitigation consistent with 44 CFR part 
201;
    (5) Assist in subgrantee application development, review, and 
selection of projects;
    (6) Conduct or assist FEMA or the grantee in environmental 
consideration reviews;
    (7) Provide oversight of grant, subgrant, or project contract 
implementation of:
    (i) Grantee and subgrantee cash management;
    (ii) Grantee and subgrantee accounting and reporting, including 
subgrantee accounting and tracking of progress and expenditure for 
projects;
    (iii) Grantee and subgrantee cost documentation review;
    (iv) Grantee and subgrantee monitoring, including report/desk 
reviews and site visits;
    (v) Grantee and subgrantee audit compliance;
    (vi) Closeout of subgrantee projects, e.g., final inspection, 
reconciliation of costs and payments, etc.; and
    (8) Grantee closeout of all program activities.

[[Page 56135]]

    (e) Ineligible direct costs. The following represents eligible 
project-related activities which, if paid with management cost funds 
provided under this part, may not be charged directly on a project 
worksheet:
    (1) Project worksheet and application preparation;
    (2) Small project validations;
    (3) Technical assistance;
    (4) Environmental consideration reviews;
    (5) Project inspections;
    (6) Cost reviews and/or financial audits; and
    (7) Quarterly and closeout reports.
    (f) Subgrantee costs. Subgrantees may not charge indirect costs 
directly to a project, but rather will consider them eligible for funds 
provided under this part.
    (g) Overtime, travel, and per diem costs. Overtime, travel, and per 
diem costs incurred during work under sections 403, 407, 502, and 503 
of the Stafford Act are not eligible for reimbursement under this part, 
but rather will be reimbursed directly through a Project Worksheet.
    (h) Retained management cost funds. We may allow the grantee or 
subgrantee to retain any management cost funds not needed for a 
particular declaration so long as the grantee or subgrantee uses the 
remaining funds to cover costs associated with the disaster programs' 
general financial and grants management enhancements. Remaining funds 
may not be used for disaster-specific PA and HMGP program management 
costs for any declaration other than the one for which FEMA provided 
them. After the PA and HMGP grants are closed, the grantee must submit 
a plan in writing to the FEMA Regional Director describing how it 
proposes to expend the remaining funds. The Regional Director will 
recommend to the FEMA Chief Financial Officer whether to approve the 
plan. Examples of allowable charges include grants management training, 
financial systems improvements, and accounting enhancements. All such 
funds expenditures must comply with 44 CFR 13.22.


Sec. 207.7  Application procedures.

    (a) General. This section describes the procedures to be used by 
the grantee in submitting an application for management cost funding.
    (b) Application submission. The grantee must submit its initial 
management cost application to the Regional Director within 30 days of 
the declaration. We must receive the initial application before we will 
provide any assistance for management costs under this part. FEMA will 
work with the grantee to approve or reject the application within 30 
days after we receive the application. If we reject the application, 
the grantee will have 30 days to resubmit it for reconsideration and 
approval. Once we approve the application, we will obligate the balance 
of the management costs lock-in in accordance with Sec. 207.5(b)(4).
    (c) Application Content. The grantee will submit its management 
cost application to the Regional Director. The application must 
include:
    (1) Standard Form (SF) 424, Application for Federal Assistance;
    (2) FEMA Form 20-20, Budget Information--Non-Construction Programs 
and Budget Narrative;
    (3) Necessary Assurances, Certifications, and Lobbying Disclosures:
    (i) FEMA Form 20-16, Summary Sheet for Assurances and 
Certifications;
    (ii) FEMA Form 20-16A, Assurances--Non-Construction Programs;
    (iii) FEMA Form 20-16C, Certifications Regarding Lobbying; 
Debarment, Suspension and Other Responsibility Matters; and Drug-Free 
Workplace Requirements;
    (iv) SF-LLL, Disclosure of Lobbying Activities; and
    (4) Narrative statement. The narrative statement must contain:
    (i) A description of which types of activities described in 
Sec. 207.6, Eligible use of funds, the grantee will undertake with 
management costs provided under this part;
    (ii) A description of how the grantee will undertake activities 
described in Sec. 207.6 if it does not plan to use management costs 
provided under this part to support them;
    (iii) The grantee's plan for expending and monitoring the funds 
provided under this part and ensuring sufficient funds for grant 
closeout; and
    (iv) An estimate of the percentage or amount of pass-through funds 
for management costs provided under this part that the grantee will 
make available to subgrantees.
    (5) Copies of the PA and HMGP Administrative Plans that were 
updated pursuant to the declaration.
    (d) Revised Application. The grantee must submit a revised SF 424, 
FEMA Form 20-20 and Budget Narrative to the Regional Director after 
final lock-in is determined.


Sec. 207.8  Grants management oversight.

    (a) General. The grantee has primary responsibility for managing 
management cost activities and accountability of funds as indicated in 
44 CFR part 13, which details the general principles and requirements 
for grants management for state, local and federally recognized Indian 
tribal governments. The grantee is responsible for ensuring that 
subgrantees meet all program and administrative requirements.
    (b) Period of performance. The grantee must expend all management 
cost funds not later than six years from the date of major disaster or 
emergency declaration, or by 90 days after grant closeout, whichever is 
sooner. We will deobligate and return to FEMA any funds that the 
grantee does not disburse within six years. We may extend this period 
only at the written request of the grantee, with the recommendation of 
the Regional Director, and with the approval of the Chief Financial 
Officer. The grantee must include a justification in its request for an 
extension, and must demonstrate that there is work in progress that can 
be completed within the extended period of performance
    (c) Reporting requirements.
    (1) Financial status reports. The grantee must provide quarterly 
financial status reports to the Regional Director as required by the 
FEMA--State Agreement.
    (2) Progress reports. The grantee must provide semi-annual progress 
reports to the Regional Director that describe overall progress on 
managing PA and HMGP, such as monitoring activities, results, obstacles 
to project completion, milestones, and upcoming events. Examples of 
progress that can be reported are completion of project identification 
and funding, pending environmental reviews, and scheduled technical 
assistance meetings to help local communities identify projects. The 
progress reports are due each April 30 and October 30 until the grant 
ends. The final progress report is due 90 days after the grant ends.
    (d) Closeout. The grantee has primary responsibility for the 
closeout tasks associated with both the program and subgrantee 
requirements. Complying with each program's performance period 
requirement, the grantee must conduct final inspections for projects, 
reconcile subgrantee costs and payments, resolve negative audit 
findings, obtain final reports from subgrantees and reconcile the 
closeout activities of subgrantees with PA and HMGP grant awards.
    (e) Audit requirements. Uniform audit requirements in 44 CFR 13.26 
apply to all grant assistance provided under this part.
    (f) Document Retention. In compliance with State law and procedures 
and with 44 CFR 13.42, grantees must retain records, including

[[Page 56136]]

source documentation to support expenditures/costs incurred against the 
grant award, for three years from the date of submission of the final 
Financial Status Report to FEMA. The grantee is responsible for 
resolving questioned costs that may result from the grant funding audit 
during the three-year record retention period and returning disallowed 
costs from ineligible activities.


Sec. 207.9  Declarations before October 1, 2002.

    (a) General. This section describes how we will provide management 
costs for PA and HMGP for major disasters or emergencies declared 
before October 1, 2002.
    (b) Direct costs. Eligible direct costs to complete approved 
activities are governed by 44 CFR part 13. The eligible direct costs 
for administration and management of the program are divided into two 
categories as follows:
    (1) Grantee costs--(i) Administrative costs. We may provide funds 
to the grantee to cover the extraordinary costs that it incurred to 
prepare project worksheets or applications, final inspection reports, 
quarterly reports, final audits, and related field inspections by State 
employees, including overtime pay and per diem and travel expenses, but 
not including regular time for such employees. We will base the funds 
on the following percentages of the total amount of assistance provided 
(Federal share) for all subgrantees in the State under sections 403, 
404, 406, 407, 502, and 503 of the Stafford Act (42 U.S.C. 5170b, 
5170c, 5172, 5173, 5192, and 5193, respectively):
    (A) For the first $100,000 of total assistance provided (Federal 
share), three percent of such assistance.
    (B) For the next $900,000, two percent of such assistance.
    (C) For the next $4,000,000, one percent of such assistance.
    (D) For assistance over $5,000,000, one-half percent of such 
assistance.
    (ii) Management costs. Except for the items listed in paragraph 
(b)(1)(i) of this section, other administrative costs will be paid in 
accordance with 44 CFR 13.22. The grantee and we will share such costs 
under the cost share provisions of applicable PA and HMGP regulations.
    (2) Subgrantee administrative costs. The grantee may provide funds 
to the subgrantee to cover necessary costs of requesting, obtaining, 
and administering Federal disaster assistance subgrants, based on the 
following percentages of net eligible costs under sections 403, 404, 
406, 407, 502, and 503 of the Stafford Act (42 U.S.C. 5170b, 5170c, 
5172, 5173, 5192, and 5193, respectively), for an individual applicant 
(applicants in this context include State agencies):
    (i) For the first $100,000 of net eligible costs, three percent of 
such costs.
    (ii) For the next $900,000, two percent of such costs.
    (iii) For the next $4,000,000, one percent of such costs.
    (iv) For those costs over $5,000,000, one-half percent of such 
costs.
    (c) Indirect costs--(1) Grantee. Indirect costs of administering 
the disaster program are eligible in accordance with the provisions of 
44 CFR part 13 and OMB Circular No. A-87, if the grantee provides us 
with an Indirect Cost Rate approved by its Cognizant Agency.
    (2) Subgrantee. No indirect costs of a subgrantee are separately 
eligible because all costs are to be either charged directly, or 
covered by the subgrantee administrative costs allowed under paragraph 
(b)(2) of this section.
    (d) Availability. We will reimburse allowable costs as described in 
this section for a maximum of six years from date of the major disaster 
or emergency declaration. The period may only be extended at the 
written request of the grantee justifying the extension to the FEMA 
Regional Director and with the approval of the FEMA Chief Financial 
Officer.


Sec. 207.10  Review of management cost rates.

    (a) We will review management cost rates not later than three years 
after this rule is in effect and periodically thereafter.
    (b) In order for FEMA to review the management cost rates 
established, the grantee and subgrantee must document all costs 
expended for management costs (including cost overruns) and in 
accordance with 44 CFR part 13 and the approved grant award budget. 
After review of this documentation, we will determine whether the 
established management cost rate is adequate for the administration and 
closeout of the PA and HMGP programs.
    (c) We will publish as a Notice in the Federal Register any changes 
to the management cost rates.

PART 206--FEDERAL DISASTER ASSISTANCE FOR DISASTERS DECLARED ON OR 
AFTER NOVEMBER 23, 1988

    2. The authority citation for part 206 continues to read:

    Authority: The Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, 42 U.S.C. 5121 et seq.; Reorganization Plan No. 3 of 
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127, 44 FR 
19367, 3 CFR, 1979 Comp., p. 376; E.O. 12148, 44 FR 43239, 3 CFR, 
1979 Comp., p. 412; E.O. 12673, 54 FR 12571, 3 CFR, 1989 Comp., p. 
214.

Subpart H--Public Assistance

    3. Amend Sec. 206.228 as follows:
    (a) Remove paragraphs (a)(2), (a)(3) and (b), and reserve paragraph 
(b).
    (d) Redesignate paragraph (a)(4) as paragraph (a)(2).
    (e) Add paragraph (a)(3) to read as follows:


Sec. 206.228  Allowable costs.

    (a) Eligible direct costs. * * *
    (3) Administrative and management costs for major disasters and 
emergencies will be paid in accordance with 44 CFR part 207.
    (b) [Reserved]
    4. Revise Sec. 206.439(a) to read as follows:

Subpart N--Hazard Mitigation Grant Program


Sec. 206.439  Allowable costs.

    (a) General. Administrative and management costs for major 
disasters and emergencies will be paid in accordance with 44 CFR part 
207.
* * * * *

    Dated: August 20, 2002.
David A. Trissell,
Acting General Counsel.
[FR Doc. 02-21890 Filed 8-29-02; 8:45 am]
BILLING CODE 6718-01-P