This policy provides guidance on recouping current fair market value of equipment and supplies purchased by Grantees and subgrantees and salvaged materials. This policy is applicable to all major disasters and emergencies declared on or after the publication date of this policy. This policy is intended for personnel involved in the administration of the Public Assistance (PA) Program.
This policy is archived and has been superseded by the policy currently in effect.
Date Published: August 29, 2000
Response and Recovery Directorate Policy Number: 9525.12
Title: Disposition of Equipment, Supplies and Salvaged Materials
Purpose: This policy provides guidance on recouping current fair market value of equipment and supplies purchased by Grantees and subgrantees and salvaged materials.
Scope and Audience: This policy is applicable to all major disasters and emergencies declared on or after the publication date of this policy. This policy is intended for personnel involved in the administration of the Public Assistance (PA) Program.
There are many instances after a disaster where a Grantee or subgrantee will not have sufficient equipment and supplies to respond to a Presidentially declared disaster in an effective manner. While FEMA may assist in purchasing the needed equipment and supplies, the Grantee or subgrantee may be required to compensate FEMA for the fair market value of the cost of the equipment and supplies when the items are no longer needed for a disaster.
For the purpose of this policy, the current fair market value is the value of equipment and supplies determined by selling them in a competitive market or researching advertised prices for similar items on the used market. The current fair market value should be determined at the time the equipment and supplies are no longer needed for disaster operations by the Grantee or subgrantee regardless of when actual disposition takes place.
Equipment already owned by Grantees and subgrantees or purchased without Federal funds is reimbursed at FEMA equipment rates when used for eligible purposes.
Disasters often result in large amounts of debris that may have a market value. With the exception noted in Paragraph 7.B., revenue from debris must be used to reduce the project cost.
The Federal share in disposition and salvage revenue is the same as its participation in the original cost.
Grantees and subgrantees may be eligible to purchase supplies and equipment that are necessary to respond to the effects of a disaster and to be reimbursed through a Project Worksheet (PW). The items must be needed for, and used directly on, the disaster from which funding was provided.
The term "supplies" means all tangible personal property other than equipment, as defined in 7.A.2. Disposition of residual supplies purchased by a Grantee or subgrantee with an aggregate current fair market value exceeding $5,000 requires compensation to FEMA as described in 44 CFR 13.33(b) when the supplies are no longer needed for the current operation of the PA Program. Aggregate value is calculated per Grantee/subgrantee.
The word "equipment" means tangible, non-expendable, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.
Disposition by a State Grantee. States will dispose of equipment purchased for managing the PA Program in accordance with State laws and procedures as described in 44 CFR 13.32(b). The State is not required to compensate FEMA for FEMA's share of the current fair market value.
Disposition by a Non-State Grantee.
A non-State Grantee disposing of equipment purchased for managing the PA Program with a current fair market value in excess of $5,000 per unit as described in 44 CFR 13.32(e)(2) is required to compensate FEMA its share of the current fair market value.
A non-State Grantee disposing of equipment purchased for managing the PA Program with a current fair market value less than $5,000 per unit as described in 44 CFR 13.32(e)(1) may retain, sell or otherwise dispose of it with no further obligation to FEMA.
Disposition by a Subgrantee.
A subgrantee disposing of equipment purchased for disaster operations under the PA Program with a current fair market value exceeding $5,000 per unit as described in 44 CFR 13.32(e)(2) is required to compensate FEMA its share.
A subgrantee disposing of equipment purchased for disaster operations under the PA Program with a current fair market value less than $5,000 per unit as described in 44 CFR 13.32(e)(1) may be retained, sold or otherwise disposed of with no further obligation to FEMA.
Fair Market Value. Fair market value will be determined by FEMA and may be based on Grantee or subgrantee research and recommendation.
Reimbursement and Compensation.
Grantees will receive reimbursement for eligible equipment and supplies through the PW for management costs as allowed by 44 CFR 206.228(a)(3). Non-State Grantees must compensate FEMA for FEMA's share of the fair market value no later than financial closure of the disaster. If State laws and procedures provide for compensation to the entity providing the funds, State Grantees must compensate FEMA for FEMA's share of the fair market value no later than financial closure of the disaster.
Subgrantees will receive reimbursement for the acquisition of eligible equipment and supplies through the PW process by project. Generally, reimbursement will be made without an estimated salvage value deducted on the PW. In accordance with 44 CFR 13.32 and 13.33 and the following guidelines, compensation to FEMA will be made, if required, when the items are no longer needed for disaster operations. (Exception: If the subgrantee concurs, the salvage value can be estimated and deducted on the original PW in order to reduce tracking records and additional administrative work.) Any compensation for fair market value to FEMA must be no later than financial closeout of the subgrantee.
Leasing equipment is an eligible method of obtaining use of equipment to perform eligible work without the administrative burden of disposition requirements.
Leasing costs must be reasonable and total leasing costs cannot exceed the purchase price.
For equipment leased through the PA grant process: Even though a long-term lease may cost as much as purchasing the same equipment, the subgrantee still would be required to compensate FEMA for its share of the fair market value of the purchased item if the subgrantee opts to purchase instead of lease.
If the subgrantee purchases equipment outside the PA grant process, the subgrantee may be reimbursed for the eligible use of the equipment using FEMA equipment rates. If the subgrantee holds a lease-purchase agreement, the following applies:
Reimbursement to the subgrantee is made at FEMA equipment rates based upon usage. However, if a subgrantee completes the eligible work prior to obtaining ownership through the contract, the subgrantee can request supplemental funding for the difference between the FEMA equipment rate that the subgrantee was paid and the higher lease cost that the subgrantee actually incurred for the equipment.
If the subgrantee obtains ownership through the lease-purchase contract, there is no requirement to compensate FEMA its share of the current fair market value.
Disposition of salvaged materials by subgrantees must be at a fair market value and the value must be shared with FEMA. Some of the materials that can be expected to be marketable are timber debris, mulched debris, and scrap metals.
Reasonable cost for administering and marketing the sale of the salvageable materials is allowed to be recouped by the subgrantee from the fair market value.
To reduce contract costs, subgrantee debris removal contracts may provide for the contractors to take possession of salvageable material and benefit from its sale in order to lower bid prices. When this is the method of award, there is no salvage value to be recouped at the end of the project.
Supersession: This policy updates and replaces relevant provisions of previous public assistance policy documents.
Authorities: 44 CFR 13.32 and 13.33.
Originating Office: Infrastructure Division, Response and Recovery Directorate.
Review Date: Five years from date of publication.
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate
Distribution: Regional Directors, Regional and Headquarters R&R Division Directors