October 4, 2022

RESTORE Act Direct Component Application Supplement: Guide to Completing a Budget 

Justification 

The budget justification should provide specific justification for all budget categories that apply, 

including an explanation of the necessity, allowability, reasonableness, and allocability of 

proposed costs. The guidance will aid applicants seeking funding under a Direct Component –

Construction and Real Property Acquisition Activities or Direct Component – Non-Construction 

Funding Opportunity Announcement and in responding to Questions 18 – 21 on the Direct 

Component Narrative Form in the application package.

Pre-Award Costs: 

In the budget justification, applicants should state the Total Budget and specify if any of the 

amounts in the Total Budget will be incurred pre-award. Any pre-award costs should be 

requested as part of an application under this funding opportunity announcement. The 

applicant must clearly describe the proposed pre-award costs in the scope of work and budget 

justification and provide a compelling justification as to why Treasury should approve them. 

Applicants considering the inclusion of pre-award costs in an application should contact 

Treasury as soon as possible to discuss them. See also FAQs 35 and 36 for more on pre-award 

costs (FAQs can be found on the Direct Component Resources webpage).

Budget Categories: 

The narrative should relate each budget category listed in the SF‐424A and SF‐424C to the 

specific tasks identified in the proposed scope of work, including any third-party funding. 

Applicants should review and include the following details regarding the relevant cost 

categories as they prepare the budget justification.

1. Personnel – This refers to salaries and wages paid to employees of the applicant 

organization who are directly involved in grant implementation. The budget justification 

must identify the personnel category type by Full-Time Equivalent (FTE), including FTE 

percentage for part-time employees, number of personnel proposed for each category, 

and the estimated funding amounts. The applicant’s budget justification should identify 

positions by title and function, include a brief description of duties, and state the rate of 

compensation and the amount of time to be allocated for each position. 

Tip for completing the SF-424A: This line item does not include personnel hired as 

subrecipients; those costs are included in the “Contractual” line item.

2. Fringe Benefits – This refers to the allowances and services employers provide their 

employees as compensation in addition to regular salaries and wages. Fringe benefits 

include, but are not limited to, the costs of leave (vacation, family-related, sick, or 

military) employee insurance, pensions, and unemployment benefit plans. The budget 
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justification should identify the organization’s fringe benefit rate and/or explain the 

basis for the calculation for each position. 

3. Travel – This refers to the expenses for transportation, lodging, subsistence, and related 

items incurred by employees who are in travel status on official business of the nonFederal entity. Such costs may be charged on an actual cost basis, on a per diem or 

mileage basis in lieu of actual costs incurred, or on a combination of the two, provided 

the method used is applied to an entire trip and not to selected days of the trip, and 

results in charges consistent with those normally allowed in like circumstances in the 

non-Federal entity's non-federally funded activities and in accordance with the nonFederal entity's written travel reimbursement policies. The budget justification must 

provide an estimated number of trips, points of origin and destination, and purpose of 

travel. It should also show how each trip (or type of trip) is needed to achieve the goals 

and objectives of the project or program.

Tip for completing the SF-424A: This line item does not include a subrecipient’s travel 

expenses; those costs are included in the “Contractual” line item.

4. Equipment – This refers to tangible personal property (including information technology 

systems) having a useful life of more than one year and a per-unit acquisition cost that 

equals or exceeds the lesser of the capitalization level established by the non-Federal 

entity for financial statement purposes, or $5,000. The budget justification must include 

an itemized listing of all equipment proposed under the agreement. For each item to be 

purchased, provide an estimated unit cost, estimated useful life, basis for the estimated 

useful life, and justification for items of equipment to be purchased. Include a lease 

versus purchase analysis for each item of equipment.

5. Supplies – This refers to all tangible personal property other than equipment. A 

computing device is a supply if the acquisition cost is less than the lesser of the 

capitalization level established by the non-Federal entity for financial statement 

purposes or $5,000, regardless of the length of its useful life. The budget justification 

must include a brief description of and justification for the supplies required to perform 

the work. These costs should be listed by major supply categories, e.g., office supplies, 

computer supplies, and monitoring supplies, and include the estimated costs by 

category. 

6. Contractual – This refers to purchases of property or services needed to carry out the 

project or program under a Federal award. It is not specific to the legal instrument used, 

so it may include both subawards and contracts. The budget justification must include 

the name of the proposed contractor or subrecipient, if known, and list the amount 

budgeted for each contract or subaward. For proposed subawards, the application must 

include an itemized subrecipient budget by object class, with appropriate justification. 
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7. Construction – This refers to the total costs of all construction categories carried out by 

the recipient (further broken down in the SF-424C). All costs must be project specific. 

The applicant’s budget justification must include a brief description of and justification 

for each of the budget categories on the SF-424C.

8. Other – This refers to direct costs that do not fit any of the aforementioned categories, 

such as rent for buildings used to conduct grant activities, utilities and/or leased 

equipment, transportation expenses, tuition for training, etc. The budget justification 

should list and describe other items by major type, provide a cost estimate or budget for 

each item, and describe the basis for the cost estimates or budget computations.

9. Indirect Costs – This refers to costs incurred for a common or joint purpose benefitting 

more than one cost objective, and not readily assignable to the cost objectives 

specifically benefitted, without effort disproportionate to the results achieved. See the 

Direct Component Narrative Form in the application package for further details on the 

three percent cap on certain indirect costs, i.e., administrative costs. 

Indirect costs must be supported by either a current federally approved Indirect Cost 

Rate Agreement or an election to use the de minimis indirect cost rate. In accordance 

with 2 CFR §200.414(f), any non-federal entity, i.e., state government department, 

Florida county, or Louisiana parish, that has never received a negotiated indirect cost 

rate with the Federal government and receives less than $35 million in direct Federal 

funding per year, may elect to use a de minimis rate of 10% of Modified Total Direct 

Costs (MTDC) within their Direct Component grant. The applicant may elect to use the 

de minimis rate indefinitely and grantees must keep the documentation of this decision 

on file. Applicants electing to use the de minimis rate should include in their applications 

a letter or other similar document, signed by their Chief Financial Officer or other senior 

official, stating that the state government department/county/parish: 

1) is electing to use the de minimis indirect cost rate of 10% of Modified Total 

Direct Costs based on 2 CFR § 200.414(f); 

2) has never previously negotiated an indirect cost rate with the Federal 

government; and 

3) receives less than $35 million in direct Federal funding per year.

Identification of Other Funding Sources: 

Some Direct Component projects will require additional funds to cover the full cost of the 

project (“other funds”), which may include local government funds, state funds, or other 

federal funds. Treasury requires documentation of proof of availability of other funds needed 

for completion of project activities. Treasury will accept the following documentation as proof 

of the availability of other funds:

• Bonds: When an applicant wishes to use bond funds as part of its budget on a 

project using Direct Component funds, it must show that it has the legal capacity 

and authority to issue bonds sufficient to cover the total cost of the project less the 
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federal funds of the Direct Component grant. A statement from the applicant’s 

attorney or bond attorney certifying to the applicant’s capacity and authority will 

suffice as documentation.

• Grants/Loans: When an applicant wishes to use a grant or loan from a third party as 

part of its budget on a project using Direct Component funds, it must provide a 

letter of commitment or similar confirmation, signed by an authorizing official, that 

it will receive a grant or loan from a third party sufficient to cover the total cost of 

the project less the federal funds of the Direct Component grant.

• Local Funds (Cash): When an applicant wishes to use cash as part of its budget on a 

project using Direct Component funds, it must submit as part of its application an 

assurance signed by its Chief Executive Officer, attorney, or authorizing official 

certifying that the local funds will be available for the project, have been budgeted 

expressly for the project, and will not be used for any purpose other than the 

project. 

Using Direct Component Funds as Non-Federal Cost-Share 

Treasury’s implementing regulations at 31 CFR § 34.200(b) allow eligible applicants to use funds 

under the Direct Component to satisfy the non-Federal cost-share of an activity that is eligible 

for funding under 31 CFR § 34.201 and authorized by Federal law. Treasury will not award funds 

for the non-federal share of a project receiving funding from another Federal agency until the 

other Federal agency has approved the activity and Treasury receives documentation of the 

approval.

If a proposed activity was approved by another agency prior to July 6, 2012, the application also 

must include the following:

1. The project description must clarify when the activity was approved, the name of the 

approving agency, the current status of the project, the original approved budget for the 

project, the amount of funds that have already been expended on the project, and the 

expected funds required for project completion. If any cost overruns have occurred or 

are expected to occur, the applicant must provide an explanation.

2. The applicant must clearly explain how it addressed procurement, public input, and the 

RESTORE Act’s best available science requirement, and how its approach substantively 

fulfilled RESTORE Act requirements. See 33 USC § 1321(t)(1)(E).

3. If the information requested in this application was included in the application for the 

earlier approving agency, the applicant may include cross-references between particular 

questions and responses.

4. Documentation showing that the activity was approved prior to July 6, 2012, such as a 

grant approval letter, other approval documentation, or meeting minutes from the 

governmental entity with authority to approve the project. 

5. Documentation of the original budget and scope of work, e.g., approved grant 

application or other approval document.