Policy Update: New FEMA Small Project Threshold Guidance and What it Means for Recovering Communities
Last year, we updated you on a seismic shift in FEMA Public Assistance (PA) regulation and policy: the Small Project Maximum (“threshold”) was increased to $1 million, effective August 3, 2022. The change was so swift that it preceded policies and guidance from FEMA to clarify what this might mean in practice. Accordingly, State, Local, Tribal, and Territorial (SLTT) governments and eligible Private Non-Profits (PNPs) have been following existing guidance in the Public Assistance Program and Policy Guide (PAPPG) and other policies created following the adoption of Simplified Procedures under Stafford Act Section 422. Our original blog post aimed to give potential applicants advice in the absence of any policies or guidance from FEMA. We encourage readers to review this earlier post, which summarizes the impetus and potential implications of this change – including both benefits and risks.
On January 6, 2023, FEMA issued formal policy (FEMA Policy FP-104-23-001) providing further detail on how it will treat Small Projects going forward. While our previous advice largely remains the same, we have two immediate takeaways.
FEMA might require less documentation prior to awarding funds, but applicants may be subject to additional requirements.
With the FEMA PA program, funding is distributed from the federal government to eligible applicants (State, Tribal, and Territorial governments) who then distribute the funding to eligible recipients (local governments and certain private non-profit organizations). The new FEMA policy clarifies documentation requirements for Small Projects in a manner that is more detailed than the previous policy. For example, Appendix A outlines information and documentation that Applicants must submit with all Small Projects – requirements that are less rigorous than Large Projects. This makes sense and is in line with the Simplified Procedures concept aiming to get funding to Applicants more quickly and with less administrative burden.
However, the new policy reiterates previous guidance that “Applicants must continue to retain all source documentation, including project eligibility records and financial records, for 3 years after the date the Recipient submits to FEMA certification of completion of the last Small Project.” This is a significant point. “Source documentation” could include the level of detail and documentation required for Large Projects (a level of documentation much more robust than what is outlined in Appendix A), which, the policy states, must be provided to FEMA “[i]f requested.” Moreover, the policy cautions that “Recipients may require documentation not otherwise required by FEMA (such as actual cost documentation for Small Projects). In such cases, the Applicant must provide the documentation to the Recipient.” Therefore, Applicants should pay close attention to Recipient requirements, particularly since Applicants are given the funding and, therefore, are ultimately responsible for managing the reimbursement process as well as any federal reporting and audit requirements.
Application of the new FEMA policy is not retroactive – even for disasters and projects to which the updated $1 million threshold applies.
While the $1 million threshold itself is retroactive to all major disasters and emergencies declared on or after March 13, 2020, and unobligated projects as of August 3, 2022, the new Small Projects policy, as with most FEMA policies, applies only to disaster declarations on or after its date of issuance: January 6, 2023. For example, while the updated $1 million threshold applies to both of the following scenarios, different policy and guidance applies for how certain requirements will be applied by FEMA:
- Scenario A: Major disasters and emergencies declared, and/ or projects obligated, between March 13, 2020, and January 5, 2023:
- Applicable policy is either the Public Assistance Program and Policy Guide (PAPPG) Version 3.1 or PAPPG Version 4.0.
- Scenario B: Major disasters and emergencies declared on or after January 6, 2023:
- The applicable policy is the new Small Projects policy cited above: FEMA Policy: Public Assistance Simplified Procedures (FP-104-23-001).
FEMA has announced it will host several webinars from January 31 – February 3, 2023, from 3:00-4:00pm ET to explain the updated Public Assistance (PA) Simplified Procedures policy. To register for the webinars, click here.
Stay tuned! We anticipate additional FEMA guidance and recommend that all eligible PA Recipients and Applicants continue to closely monitor these changes. Further, as updates become available, we will share any additional guidance here.
Ari Renoni is a Deputy Director of Recovery at Hagerty and has over 13 years of professional emergency management experience working with government and international public organizations. He has a deep familiarity with federal policy, given his experience supporting FEMA projects for clients in New York, California, Puerto Rico, Texas, and Florida.
Chris Thomas is a Deputy Director of Recovery at Hagerty and has almost two decades of experience as a leader of large, complex disaster recovery projects. He has extensive experience implementing disaster emergency plans, providing analyses of PA policy, cost recovery strategy, and supporting grants management.