Reimbursement of Local Private Nonprofit Organizations Under the Stafford Act

CRS Report for Congress
Reimbursement of Local Private Nonprofit
Organizations Under the Stafford Act
January 4, 2006
Ann Angelheart
Analyst in American Government
Government and Finance Division

Congressional Research Service ˜ The Library of Congress

Reimbursement of Local Private Nonprofit
Organizations Under the Stafford Act
Summary
Local private nonprofits (PNPs) may be reimbursed by the Federal Emergency
Management Agency either for their work to protect the lives of the general public
immediately before, during, or after a disaster, or for work associated with the PNP’s
site, equipment, or facilities. The former may include mass feeding, mass shelter
operations, search and rescue operations, or emergency medical services. The latter
may include debris removal, protective preparation of the PNP’s buildings and
equipment, repair or replacement of its buildings or equipment, or the use of
temporary buildings or equipment. However, before a local PNP may be reimbursed,
it must meet several eligibility requirements, as well as cost-share requirements. This
report will not be updated.

Contents
Funding Channel for PNP Reimbursement..........................1
Public Assistance Program Categories for Reimbursement.........1
Reimbursement for a PNP’s Emergency Disaster Services to the
General Public............................................2
Reimbursement for a PNP’s Costs Associated with Its Site,
Equipment, or Facilities.....................................2
Definition of an Eligible PNP................................3
Nonprofits Often Deemed Ineligible for Reimbursement...........3
Cost-share Requirements for PNPs................................4
Other Stafford Act Requirements for PNP Reimbursement.............4
Other Costs Ineligible for Reimbursement..........................5
Use of FEMA Reimbursement Funds for Operating Expenses...........5
Funds to PNPs for Capital Improvements...........................6
Conclusion ...................................................6
List of Figures
Figure 1. Potential Reimbursement to Local PNPs for Disaster-related Costs...7

Reimbursement of Local Private Nonprofit
Organizations Under the Stafford Act
This report summarizes the extent to which the Stafford Act allows local private
nonprofit (PNP) organizations to be reimbursed for disaster-related activities or
damages. The first requirement for determining a PNP’s potential eligibility for
reimbursement by the Federal Emergency Management Agency (FEMA) is that the
PNP have “an effective ruling letter from the Internal Revenue Service granting tax
exemption under Section 501(c), (d), or (e) of the Internal Revenue Code of 1954,
as amended, or [a] state certification that the organization is a nonprofit organization
under State law.”¹ A local PNP may be eligible for reimbursement in either of two
ways: for reimbursement of costs associated with protecting the general public; or for
reimbursement of costs associated with the PNP’s site, equipment, or facilities. In
the first instance, those efforts that protect the lives of the public, such as search and
rescue operations, evacuation assistance, mass sheltering, or mass feeding, would all
be eligible for reimbursement. In contrast, the second form of reimbursement is for
costs the PNP incurs protecting, repairing, or replacing its equipment, facilities, or
site. This reimbursement might include the overtime costs of boarding up windows,
moving equipment to a safer locale, repairing damaged windows and furniture, or
replacing destroyed equipment or structures. It might also cover debris removal and
other site cleanup costs. These two reimbursement justifications are presented in
more detail in the following eight brief sections.
Funding Channel for PNP Reimbursement
Eligible applicants may request reimbursement for disaster-related costs through
FEMA’s Public Assistance (PA) Program. The PA Program breaks out the various
types of reimbursable costs into seven categories. The presidential declaration
authorizing the federal disaster assistance identifies the counties eligible for
assistance and specifies which PA categories are authorized for each declared county.
Public Assistance Program Categories for Reimbursement. The
seven categories for reimbursement under the PA Program are:
^!Category A: debris removal;
^!Category B: emergency protective measures (including search and
rescue, shelter operations, mass feeding, emergency medical

¹ U.S. Federal Emergency Management Agency, Public Assistance Policy Digest, FEMA-
321 (Washington: FEMA, 2001), p. 91; 44 CFR 221(f) and 222(b). Both the FEMA Policy
Digest and the FEMA Public Assistance Guide, FEMA-322 (cited later), are at
[http://www.fema .gov/rrr/pa/padocs.shtm].

services, evacuation and reentry efforts, traffic control, and securing
equipment and facilities against disaster damage);²
^!Category C: roads and bridges;
^!Category D: water control facilities (including drainage channels
and some flood control facilities);
^!Category E: buildings and equipment;
^!Category F: utilities (including sewer, water, wastewater, and power
generation facilities);
^!Category G: parks, recreation, and other facilities (including an
eligible applicant’s cemeteries, playgrounds, pools, and beaches).
Reimbursement for a PNP’s Emergency Disaster Services to
the General Public
The Stafford Act authorizes reimbursement for costs associated with reducing³
the threat to the public. Examples of such emergency work include setting up,
staffing, and operating shelters; operating food kitchens; and conducting search and⁴
rescue operations. These activities fall under Category B of the PA Program.
Typically, the local government (or the affected state) has a formal agreement already
in place with local PNPs that delineates the responsibilities and roles of these
organizations within the broader framework of the community’s (or state’s)
emergency response plan. This agreement is necessary for reimbursement of costs
associated with emergency services provided to the public. Usually, the local
government (or the state) will apply to FEMA for reimbursement of the costs
incurred for providing these emergency services to the public, rather than the PNP⁵
itself. The written agreement with the PNP would indicate if the PNP is to be
reimbursed by the local (or state) government before or after the local (or state)
government is reimbursed by FEMA.
Reimbursement for a PNP’s Costs Associated with Its Site,
Equipment, or Facilities
The Stafford Act allows certain PNPs to request reimbursement for costs
incurred due to a disaster for measures taken to protect the facility, equipment, or on-
site staff; to resume operations; and to repair or replace damaged equipment or
structures. The evaluation of the request is to be predicated on the appropriate
category of activity under the PA Program being authorized by the presidential
declaration for the applicant’s county.

² For a more extensive list of emergency protective measures eligible for reimbursement,
see U.S. Federal Emergency Management Agency, Public Assistance Guide, FEMA-322
(Washington: FEMA, 1999), pp. 48-53.
³ Reducing threat to the public: Stafford Act Sec. 102(1), 42 U.S.C. 5122(1); use of PNPs:
Stafford Act Sec. 309, 42 U.S.C. 5152.
⁴ Stafford Act Sec. 403(a); 42 U.S.C. § 5170b(a).
⁵ U.S. Federal Emergency Management Agency, Public Assistance Guide, p. 33.

Definition of an Eligible PNP. In order to meet eligibility requirements for
reimbursement of costs associated with the PNP’s site, equipment, or facilities, the
PNP’s day-to-day mission must provide “essential services of a governmental nature
to the general public” (italics added).⁶ These services have been further broken down
into critical services and non-critical services. Examples of critical services that
PNPs may provide include power, water, wastewater treatment, irrigation,⁷
communications, or emergency medical care. PNPs that provide these services may
apply for FEMA reimbursement without first applying to the Small Business⁸
Administration (SBA) for a low-interest loan.
There are a number of PNP functions of a governmental nature that are not
defined as critical, but that may receive reimbursement. These include medical
facilities (e.g., hospitals and outpatient or rehabilitation facilities); custodial care
(e.g., nursing homes), emergency facilities (e.g., volunteer fire departments and
search and rescue organizations); and educational institutions (e.g., K-12 school
boards and accredited colleges or universities). Other eligible PNPs may provide
essential health and safety services, such as low-income housing; alcohol and drug
rehabilitation; facilities for battered spouses; food programs for the needy; and
daycare centers for those with “special needs (such as those with Alzheimer’s
disease, autism, and muscular dystrophy).”⁹ Finally, there are other PNPs that
provide services of a governmental nature that may also be eligible for
reimbursement. These may include zoos, museums, libraries, homeless shelters, and¹⁰
senior citizen centers.
Nonprofits Often Deemed Ineligible for Reimbursement. Some
nonprofit groups are typically deemed ineligible for reimbursement. They include
those whose efforts are geared to a narrow portion of the public (e.g., a nonprofit
whose membership is limited to a certain number of members; or an organization
whose members have a financial interest in the facility, such as a condominium
association).¹¹ These groups also include PNPs whose primary function is among the
following: job counseling or job training; advocacy or lobbying services; or providing

⁶ Stafford Act Sec. 102(9); 42 U.S.C. § 5122(9).
⁷ Stafford Act Sec. 406(a)(3)(A)(i) and 406(a)(3)(B); 42 U.S.C. 5172(a)(3)(A)(i) and
(a)(3)(B); 44 CFR 221(e).
⁸ Stafford Act Sec. 406(a)(3)(A)(ii); 42 U.S.C. 5172(a)(3)(A)(ii).
⁹ U.S. Federal Emergency Management Agency, Public Assistance Guide, p. 14; 44 CFR

221(e).

¹⁰ Ibid.; U.S. Federal Emergency Management Agency, Policy 9521.3, “Private Nonprofit
(PNP) Eligibility,” May 23, 2003, at [http://www.fema.gov/rrr/pa/9500toc.shtm].
¹¹ Questions regarding the eligibility of homeowners’ associations often arise if they incur
extensive costs for debris removal, or for repair of any roads or recreational facilities
maintained and operated exclusively by and for the associations. Under such circumstances,
associations are typically deemed ineligible for reimbursement by FEMA. For detailed
information on PNP eligibility or ineligibility, see U.S. Federal Emergency Management
Agency, Public Assistance Guide, pp. 9-17 and 32-33; see also FEMA Policy 9521.3,
“Private Nonprofit (PNP) Eligibility.”

religious services or education, a conference facility, or a center for the performing
arts.
However, there are exceptions. For example, a nonprofit with specific
membership requirements, but whose membership rules incorporate an open-ended
parameter, such as all youth under age 16, or any adult over age 65, may still be
eligible for reimbursement.¹² Thus, a rural electrical cooperative may be eligible for
reimbursement for damages to its substation, and a PNP that operates an elder-care
center may be eligible for reimbursement for damages to its building; but a PNP that
operates a job training center may not, since job training centers are not typically
eligible.
Cost-share Requirements for PNPs
The Stafford Act stipulates that the share of costs reimbursed by the federal
government will be not less than 75% of total costs. The remainder is the state-local
requirement. This is often euphemistically referred to as “the match.” The match is
to be split between the state and the applicant for reimbursement. In some states, it
is an even split (12.5% state and 12.5% applicant), but in others it is 10% state and
15% applicant. FEMA may increase the federal share up to 90%, but only the
President or Congress can eliminate the match altogether.¹³ If a local government
contracts with a PNP to provide services, then the local government is the applicant,
and it must come up with its portion of the match.¹⁴ If the PNP is operating
independently (e.g., a hospital or utility cooperative), and the PNP is the applicant,
then it must contribute the applicant’s portion of the 25% match in order to receive
reimbursement funding.
Other Stafford Act Requirements for PNP Reimbursement
Three other requirements are placed on nonprofit applicants for reimbursement
under the Stafford Act. First, the assistance provided by PNPs may not be¹⁵
discriminatory. Second, the assistance provided by PNPs may not use federal
supplies or aid to duplicate benefits provided by insurance or other federal agencies.
Thus, FEMA funding will reimburse for shelters, and Housing and Urban
Development funds can be used to find a federally subsidized apartment for a¹⁶
displaced victim. Third, permanent work (Categories C-G) that is undertaken in the
wake of a disaster must comply with all federal environmental and historic

¹² U.S. Federal Emergency Management Agency, Public Assistance Guide, pp. 10-11.
¹³ Minimum cost-share requirements for Cat. A: Stafford Act Sec. 407(d); for Cat. B:
Stafford Act Sec. 403(b); for Cats. C-G: Stafford Act Sec. 406(b). For reduction of cost-
share requirements, see 44 CFR 206.47.
¹⁴ It is possible that the agreement between the local government and the PNP may stipulate
that the PNP itself apply to FEMA for reimbursement, in which case the PNP must provide
the “local” (non-state, non-federal) portion of the match.
¹⁵ Stafford Act Sec. 309(b); 42 U.S.C. § 5152(b).
¹⁶ Ibid., Stafford Act Secs. 311(a)(1) and 312(a); 42 U.S.C. § 5154 (a)(1) and 5155(a).

preservation laws and regulations. Failure to comply may jeopardize the applicant’s
FEMA funding.¹⁷
Other Costs Ineligible for Reimbursement
A number of complex eligibility requirements must be met before FEMA
obligates Disaster Relief Fund monies to the state for distribution to the applicant.
“Not all costs incurred by an eligible applicant are eligible for public assistance
funding.”¹⁸ For instance, damaged buildings belonging to a PNP that were not being
used (e.g., were vacant or abandoned) at the time of the disaster are not eligible for
repair or replacement reimbursement.¹⁹ Costs for equipment or facility repairs that
are actually routine maintenance (e.g., replacing dead patrol car batteries or
repainting walls undamaged by the disaster) are also not eligible for reimbursement.²⁰
A last example is that the request for reimbursement must be for work or damages
directly resulting from the disaster itself, and not due to deferred maintenance,
negligence, or other causes.²¹
Figure 1 (at the end of this report) illustrates the manner in which a local PNP
may receive reimbursement from FEMA.
Use of FEMA Reimbursement Funds for Operating Expenses
FEMA does not officially reimburse for operating expenses, even if the
operating expenses have increased due to the disaster.²² However, the funds for
completed emergency work are to be distributed to PNPs after the work has been
documented and verified. Consequently, a PNP may use the reimbursement funds in
whatever manner it deems appropriate, including using them for operating expenses.
Furthermore, if a PNP has an urgent need for funding and the processing of the
application for reimbursement of emergency work costs has not been completed, but
these costs have been deemed eligible for reimbursement, the PNP may receive an
advance of a portion of the reimbursement for emergency work costs. This advance
is called Immediate Needs Funding.²³ For reimbursement of costs associated with

¹⁷ U.S. Federal Emergency Management Agency, Public Assistance Guide, pp. 102-111;
environmental protections also in Stafford Act Sec. 316 (42 U.S.C. § 5159). FEMA also has
several policy guidance documents addressing environmental and historic preservation
issues at [http://www.fema.gov/rrr/pa/9500toc.shtm].
¹⁸ U.S. Federal Emergency Management Agency, Public Assistance Policy Digest
(Washington: FEMA, 2001), p. 38.
¹⁹ Ibid., p. 39.
²⁰ Ibid., pp. 40 and 45.
²¹ Ibid., p. 40; U.S. Federal Emergency Management Agency, Public Assistance Guide, pp.

23-27; 44 CFR 206.223(a).

²² U.S. Federal Emergency Management Agency, Public Assistance Guide, p. 33.
²³ U.S. Federal Emergency Management Agency, Standard Operating Procedure (S.O.P.)
9570.7 (1999) at [http://www.fema.gov/rrr/pa/9500toc.shtm]; U.S. Federal Emergency
Management Agency, Public Assistance Policy Digest, p. 64.

repairing structural damage to a PNP’s facility (or for replacing a destroyed facility),
the distribution of funds is often done incrementally, once the damage has been
verified. For instance, for projects deemed “large” (currently, those that cost more
than $55,500), FEMA is required to reimburse for actual costs paid and therefore
must document the costs incurred as the project progresses. As a result, funds for
permanent work are required to be spent on the project stipulated in the request for
assistance.
On the other hand, the PNP may be eligible for assistance from the Small
Business Administration (SBA) for operating costs. Additionally, if the PNP is a
public-private organization, it may be eligible for assistance from the Economic
Development Agency (EDA) or, if it is in a rural area, the U. S. Department of
Agriculture (USDA). In addition, some insurers provide “business disruption”
insurance to cover operating costs and loss of revenue. Finally, the PNP may request
funding from foundations or other charitable organizations.
Funds to PNPs for Capital Improvements
If a disaster causes structural damage to a PNP’s facilities, and the cost of
bringing the facility up to new building code standards exceeds the revenue from
insurance and the PNP’s cash reserves, the amount of reimbursement under FEMA’s
Public Assistance Program may be augmented by additional funds provided through
the codes and standards channel under the Public Assistance Program. (This is
sometimes referred to as the Increased Cost of Compliance Program.)²⁴ Also, the
PNP may be eligible for assistance from SBA for capital improvements, or, if the
PNP is a public-private organization, it may be eligible for assistance from EDA or
USDA (if it is in a rural area). In addition, the PNP may be eligible for grants
through the United Way or charitable foundations for capital improvements.
Conclusion
While the Stafford Act permits private nonprofits to receive reimbursement for
disaster-related emergency work or damages, a number of eligibility requirements
must first be met. The first is that the Internal Revenue Service rule that the PNP is
tax exempt under Section 501(c), (d), or (e) of the Internal Revenue Code of 1954.
Additional eligibility requirements are stated in the Stafford Act, and expanded upon
in FEMA’s policy guidance documents: the Public Assistance Policy Digest (FEMA-
321); and the Public Assistance Guide (FEMA-322). For particular cases, FEMA’s
9500 series of Policy Statements discuss specific policy procedures and guidelines
(such as the use of temporary facilities). In addition, the costs for which the PNP is
requesting reimbursement must be related either to services or activities rendered to
protect the general public; or to disaster-related costs associated with the PNP’s site,
equipment, or facilities. Finally, the Stafford Act imposes cost-share requirements on
all local applicants for reimbursement, including PNPs.

²⁴ U.S. Federal Emergency Management Agency, Public Assistance Guide, p. 27.

Figure 1. Potential Reimbursement to Local PNPs
for Disaster-related Costs
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