Can a federal grant pay for software?

Often, yes. The federal Uniform Guidance (2 CFR Part 200) has no rule against software. A software cost is allowable when it is necessary, reasonable and allocable to the award, falls inside the budget period, and fits what the specific program funds. The program's notice of funding opportunity decides the last point, so read it before you budget.

Can a public agency buy software without an RFP?

For purchases paid with federal award money, the micro-purchase threshold has been $15,000 since October 1, 2025. Below it, a recipient may buy without competitive quotes if the price is reasonable and documented. State and local procurement rules can be stricter and still apply, so check your own purchasing policy first.

Is a software subscription treated differently from a custom build?

Yes. A subscription paid for the period it covers is an ordinary operating cost. Software that is developed or bought and then capitalized is a capital expenditure, which generally needs prior written approval from the federal agency or pass-through entity. Under either route, costs must be incurred during the approved budget period.

Can FEMA mitigation grants pay for a planning or data tool?

In limited cases. FEMA's HMGP 5 Percent Initiative lists geographic information system software, hardware and data used for hazard mitigation as eligible. The Fiscal Years 2024-25 BRIC round limited capability and capacity building to work tied to specific infrastructure projects, and that round is closed. Check the current notice for any program you apply to.

Who pays for the software after the grant ends?

The grantee does. Grant funds cover costs incurred during the budget period, so hosting, licences and maintenance after that date need another source: the operating budget, a later grant or a partner. Reviewers increasingly ask for that plan, so put the annual running cost and who will pay it in the application.

Can a Grant Pay for Software? Rules for Public Agencies and Nonprofits

The Short Answer

Yes, many grants can pay for software, a dashboard or a data tool. Whether yours can depends on three things: the federal cost rules, the program's own list of eligible activities, and your procurement rules. None of the three bans software. Each sets conditions.

This guide covers the questions local governments, resilience authorities and environmental nonprofits ask most before they write a digital tool into a budget. Figures and program statuses are as of November 11, 2026. It is general information, not legal or grant-compliance advice: confirm the details with your program officer and your purchasing office.

What the Federal Cost Rules Say

The Uniform Guidance, 2 CFR Part 200, governs most federal awards and the state and pass-through grants built on them. It has no section on software. Software is handled by the general test and by a few definitions.

The general test. A cost must "be necessary and reasonable for the performance of the Federal award and be allocable thereto" (2 CFR 200.403(a)). A tool that tracks the projects a grant pays for passes more easily than one the whole organization uses for everything.

How software is classified. The definitions in 200.1 place "software, or software subscriptions or licenses" under intangible property, and include software in "information technology systems". Equipment means tangible property with a per-unit cost at or above $10,000, or your own lower capitalization level. Software development costs count toward acquisition cost when they are capitalized under generally accepted accounting principles.

Why the classification matters. Capital expenditures for general purpose equipment need "the prior written approval of the Federal agency or pass-through entity" (200.439), and information technology systems are named as general purpose equipment. A subscription expensed as it is used is an operating cost. The regulation does not address subscriptions by name, so this reading is an inference from the definitions. Ask your grants officer how your organization will book the cost before you budget it.

Timing. Costs "must be incurred during the approved budget period" (200.403(h)). A three-year licence prepaid in the last month of a grant is the classic problem. Budget the months the grant covers.

What you are paying for	Usually treated as	Watch for
A subscription or licence for the grant period	Operating cost	Only the months inside the budget period
A consultant to scope or configure a tool	Contractual services	Procurement rules below
Custom software you will own, capitalized	Capital expenditure	Prior written approval
Computers and devices	Supplies below $10,000 per unit, equipment above	Must be essential and allocable to the award
Hosting and maintenance after the grant	Not a grant cost	Needs its own funding source

Buying Under the Thresholds

Procurement under a federal award follows 2 CFR 200.320, which borrows its dollar thresholds from the Federal Acquisition Regulation.

Micro-purchases. The federal micro-purchase threshold is $15,000, raised from $10,000 by an inflation adjustment effective October 1, 2025. Below it, purchases "may be awarded without soliciting competitive price or rate quotations if the recipient or subrecipient considers the price reasonable" and keeps documents to support that.
Small purchases. Between the micro-purchase threshold and the simplified acquisition threshold, now $350,000, you need price or rate quotations "from an adequate number of qualified sources".
Formal competition. Sealed bids or proposals are required above the simplified acquisition threshold.
Sole source. Allowed only in listed cases, including a purchase under the micro-purchase threshold, a single available source, an emergency, or written approval from the awarding agency.

Two cautions. First, the threshold you use "must be authorized or not prohibited under State, local, or tribal laws or regulations". Many counties and towns set lower limits, and those still bind you. Second, these rules cover purchases paid with federal award money. A purchase from your own general fund follows your own rules alone.

This is why some vendors price a first phase below $15,000. Council Fire Labs' Tool Sprint is $12,500 for that reason. A price under the threshold does not remove your obligation to document that it is reasonable.

Program by Program

Eligibility lives in each program's notice. The table quotes the language that bears on software and data tools, with the status of each program as of November 11, 2026.

Program	What the guidance says	Status
FEMA Hazard Mitigation Grant Program, 5 Percent Initiative	Eligible activities include "acquisition of geographic information system software, hardware and data used for hazard mitigation" (HMA Program and Policy Guide v2.1)	Available only after a presidential disaster declaration, through the state
FEMA BRIC	The Fiscal Years 2024-25 round limited capability and capacity building to "activities directly tied to infrastructure resilience"; hazard mitigation plan development and updates were not eligible (fact sheet)	Application period closed
FEMA Flood Mitigation Assistance	Project scoping funds "can be used to gather data, and prioritize, select, and develop future localized flood risk reduction projects". The notice does not mention software	Fiscal year 2026 round open; applications due to FEMA February 26, 2027
NFWF National Coastal Resilience Fund	Capacity building can include "supporting planning or broader environmental or economic data collection". Equipment is considered "on a case-by-case basis" (2026 request for proposals)	2026 round closed; watch for the 2027 notice
HUD CDBG-MIT	Funds "may also be used to upgrade mapping, data and other capabilities to better understand evolving potential disaster risks" (84 FR 45838)	Already allocated to specific grantees

Two patterns stand out. No program we reviewed names project-tracking or prioritization software as such, so a tool has to be justified by the eligible activity it serves: planning, data collection, project scoping or capacity building. And the federal picture changes quickly. Our resilience funding hub keeps a dated status for each federal and Maryland program.

Writing the Tool into the Budget

Reviewers fund activities, and a tool is a means to one. Four habits make a software line credible.

Name the decision it supports. "A project portfolio tool so the authority can rank 40 projects against adopted criteria and report status to the council" is fundable. "A dashboard" is not.
Split build from run. Show the one-time cost of scoping and configuration separately from the annual cost of licences, hosting and support.
Say who owns and operates it. Name the staff role that will keep it current, and where the data and code will live.
State the plan after the grant. Give the annual running cost and its source. This answers the reviewer's first objection before it is raised.

A tool also strengthens the rest of an application. A ranked project list with an adopted method is evidence of readiness, which is what most resilience programs score. Our guide to prioritizing resilience projects covers the method, and the RFP guide for resilience planning software covers buying one.

For Nonprofits

The same cost rules apply to nonprofits with federal or pass-through funds, with one more choice to make: direct or indirect.

Software used only for the funded project can be a direct cost. Software the whole organization shares belongs in indirect costs. You may not charge the same kind of cost both ways. Organizations without a negotiated indirect rate "may elect to charge a de minimis rate of up to 15 percent of modified total direct costs" (2 CFR 200.414(f)).

Private foundations set their own rules. Many now fund technology as part of capacity building, and most will tell you if you ask before you apply. For how funders think about the data they ask for, see our grant reporting question audit.

Common Pitfalls

Budgeting a tool with no named activity. A line reading "software" invites a cut. Tie it to the planning, data or scoping activity the program lists as eligible.

Prepaying past the budget period. Multi-year licences bought at the end of a grant are a common audit finding.

Assuming the federal threshold is your threshold. A county purchasing policy with a $5,000 limit overrides the $15,000 federal figure.

Treating a grant as guaranteed. Scope the tool so the first phase is useful whether or not the larger award arrives.

Forgetting accessibility and records rules. A public-facing tool has to meet your accessibility standard and your records retention schedule. Price both in.

How Council Fire Can Help

Council Fire is a sustainability consultancy and certified B Corp based in Annapolis, and Council Fire Labs is our software studio. We built Aptation with the Resilience Authority of Annapolis and Anne Arundel County, so we have written these budgets from the grantee's side.

Two fixed-price starting points fit the questions above. The Grant-Ready Tool Scope gives an application the requirements, line-item budget, technical approach and timeline a digital tool needs, for $4,500. The Tool Sprint delivers a working prototype in two to three weeks for $12,500. For the wider funding picture, see how we work with local governments.

We don't decide eligibility; your program officer does. We can help you ask the right question and put a defensible scope in front of them. Talk to us about the tool you have in mind.