Disaster Cost Estimates
FEMA Can Improve Its Learning from Past Experience and Management of Disaster-Related Resources Gao ID: GAO-08-301 February 22, 2008Public Law No. 110-28 directed GAO to review how the Federal Emergency Management Agency (FEMA) develops its disaster cost estimates. Accordingly, GAO addressed the following questions: (1) What is FEMA's process for developing and refining its cost estimates for any given disaster? (2) From 2000 through 2006, how close have cost estimates been to the actual costs for noncatastrophic (i.e., federal costs under $500 million) natural disasters? (3) What steps has FEMA taken to learn from past experience and improve its management of disaster-related resources and what other opportunities exist? To accomplish this, GAO reviewed relevant FEMA documents and interviewed key officials. GAO also obtained and analyzed disaster cost data and determined that they were sufficiently reliable for the purposes of this review.
After a disaster is declared, FEMA staff deployed to a joint field office work with state and local government officials and other relevant parties to develop and refine cost estimates. The overall estimate comprises individual estimates for FEMA's assistance programs plus any related tasks assigned to other federal agencies (mission assignments) and FEMA administrative costs. The methods used to develop these estimates differ depending on program requirements including, in some cases, historical knowledge. FEMA officials told GAO that cost estimates are updated on a continuing basis. Decision makers need accurate information to make informed choices and learn from past experience. FEMA officials stated that by 3 months after a declaration estimates are usually within 10 percent of actual costs--which they defined as reasonable. GAO's analysis showed that decision makers did not have cost information within this 10 percent band until 6 months after the disaster declaration. These results cannot be generalized since this comparison could only be made for the 83 (24 percent) noncatastrophic natural disaster declarations for which final financial decisions had been made. Disaster coding issues also hamper FEMA's ability to learn from past experience. For example, in several instances the code for the incident type and the description of the disaster declaration did not match. Officials described several ways in which FEMA has learned from past disasters and improved its management of disaster-related resources. For example, FEMA uses a national average to predict costs for expected applicants for Individual Assistance. FEMA has also taken several actions to professionalize and expand the responsibilities of its disaster comptrollers. Nonetheless, FEMA could further learn from past experience by conducting sensitivity analyses to identify the marginal effect various factors have on causing fluctuations in its estimates. FEMA could improve its management of disaster-related resources by developing standard procedures for staff involved in entering and updating cost estimate data in its database.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
February 2008:
Disaster Cost Estimates:
FEMA Can Improve Its Learning from Past Experience and Management of
Disaster-Related Resources:
FEMA Disaster Cost Estimates:
GAO-08-301:
GAO Highlights:
Highlights of GAO-08-301, a report to congressional committees.
Why GAO Did This Study:
Public Law No. 110-28 directed GAO to review how the Federal Emergency
Management Agency (FEMA) develops its disaster cost estimates.
Accordingly, GAO addressed the following questions: (1) What is FEMA‘s
process for developing and refining its cost estimates for any given
disaster? (2) From 2000 through 2006, how close have cost estimates
been to the actual costs for noncatastrophic (i.e., federal costs under
$500 million) natural disasters? (3) What steps has FEMA taken to learn
from past experience and improve its management of disaster-related
resources and what other opportunities exist? To accomplish this, GAO
reviewed relevant FEMA documents and interviewed key officials. GAO
also obtained and analyzed disaster cost data and determined that they
were sufficiently reliable for the purposes of this review.
What GAO Found:
After a disaster is declared, FEMA staff deployed to a joint field
office work with state and local government officials and other
relevant parties to develop and refine cost estimates. The overall
estimate comprises individual estimates for FEMA‘s assistance programs
plus any related tasks assigned to other federal agencies (mission
assignments) and FEMA administrative costs. The methods used to develop
these estimates differ depending on program requirements including, in
some cases, historical knowledge. FEMA officials told GAO that cost
estimates are updated on a continuing basis.
Decision makers need accurate information to make informed choices and
learn from past experience. FEMA officials stated that by 3 months
after a declaration estimates are usually within 10 percent of actual
costs”which they defined as reasonable. GAO‘s analysis showed that
decision makers did not have cost information within this 10 percent
band until 6 months after the disaster declaration. These results
cannot be generalized since this comparison could only be made for the
83 (24 percent) noncatastrophic natural disaster declarations for which
final financial decisions had been made. Disaster coding issues also
hamper FEMA‘s ability to learn from past experience. For example, in
several instances the code for the incident type and the description of
the disaster declaration did not match.
Figure: Percentage Difference between Estimated and Actual Disaster
Costs for 83 Noncatastrophic Natural Disasters from 2000 through 2004:
This figure is a combination bar graph of the percentage differences
between estimated and actual disaster costs for 83 noncatastrophic
natural disasters from 2000 through 2004. The X represents the time of
estimate, and the Y axis represents percentage difference. One bar
represents the average, and the other represents the median.
[See PDF for image]
Source: GAO analysis of data from FEMA's Disaster Financial Status
Report database, as of June 30, 2007.
Note: This figure covers noncatastrophic natural disaster declarations
for which all financial decisions have been made. At the time of our
review none of the disasters declared in 2005 or 2006 met this
criterion. Because individual estimates were either greater or less
than actual costs, we used absolute value to treat them the same in
calculating the average difference between the two.
[End of figure]
Officials described several ways in which FEMA has learned from past
disasters and improved its management of disaster-related resources.
For example, FEMA uses a national average to predict costs for expected
applicants for Individual Assistance. FEMA has also taken several
actions to professionalize and expand the responsibilities of its
disaster comptrollers. Nonetheless, FEMA could further learn from past
experience by conducting sensitivity analyses to identify the marginal
effect various factors have on causing fluctuations in its estimates.
FEMA could improve its management of disaster-related resources by
developing standard procedures for staff involved in entering and
updating cost estimate data in its database.
What GAO Recommends:
GAO makes a number of recommendations to the Secretary of Homeland
Security to improve the information provided to decision makers; better
inform future estimates, including the ability to incorporate past
experience in those estimates; and improve the management of FEMA‘s
disaster-related resources. In commenting on a draft of this report DHS
generally agreed with these recommendations. In addition, FEMA provided
technical comments, which were incorporated where appropriate.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-301]. For more information, contact Susan
J. Irving at (202) 512-9142 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Objectives, Scope, and Methodology:
FEMA Uses Various Methods to Develop and Refine Cost Estimates
Depending on Program Requirements:
Time Needed to Predict Disaster Costs and Data Reliability Issues
Hamper Decision Making:
FEMA Has Taken Steps to Learn from Past Disasters and Improve Its
Management of Disaster-Related Resources but Further Opportunities
Exist:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: FEMA's Incident Type Codes:
Table 2: Status of Noncatastrophic Natural Disaster Declarations by
Calendar Year:
Figures:
Figure 1: FEMA's Disaster Cost Estimation Process:
Figure 2: Percentage Difference between Estimated and Actual Costs for
83 Noncatastrophic Natural Disasters from 2000 through 2004:
Figure 3: Status of Noncatastrophic Natural Disaster Declarations from
2000 through 2006 (N=347):
Abbreviations:
CFO: Chief Financial Officer:
DFSR: Disaster Financial Status Report:
DHS: Department of Homeland Security:
DPR: Disaster Projection Report:
EP&R: Emergency Preparedness and Response:
FEMA: Federal Emergency Management Agency:
GWOT: Global War on Terrorism:
JFO: joint field office:
OMB: Office of Management and Budget:
United States Government Accountability Office:
Washington, DC 20548:
February 22, 2008:
The Honorable David E. Price:
Chairman:
The Honorable Harold Rogers:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives:
The Honorable Robert C. Byrd:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
United States Senate:
The mission of the Federal Emergency Management Agency (FEMA) is to
lead the nation in mitigating, responding to, and recovering from major
domestic disasters, both natural and man-made, including terrorist
incidents. Budgeting for FEMA's mission is inherently difficult because
the number, severity, and timing of disasters are unknown. In
recognition of this fact, a large portion of FEMA's funding is provided
in emergency supplemental appropriations when a disaster is declared.
In a recent report, we raised concerns about FEMA's ability to manage
its day-to-day resources and the lack of information on how FEMA's
resources are aligned with its operations.[Footnote 1] More recently,
the House Committee on Appropriations expressed its concern about
FEMA's ability to manage resources in a manner that maximizes its
ability to effectively and efficiently deal with disasters. One aspect
of particular concern to the committee is how FEMA makes projections of
funding needed in response to any given disaster or to address future
disasters. The U.S. Troop Readiness, Veterans' Care, Katrina Recovery,
and Iraq Accountability Appropriations Act of 2007 enacted a directive
from a House Committee on Appropriations report that we review how FEMA
develops its estimates of the funds needed to respond to any given
disaster.[Footnote 2] Accordingly, this review addresses the following
questions: (1) What is FEMA's process for developing and refining its
cost estimates for any given disaster? (2) From 2000 through 2006, how
close have cost estimates been to the actual costs for
noncatastrophic[Footnote 3] natural disasters? (3) Given the findings
from the first two questions and our relevant past work, what steps has
FEMA taken to learn from past experience and improve its management of
disaster-related resources and what other opportunities exist? To
address these questions, we obtained and reviewed FEMA regulations,
policies, procedures, training materials, and other documents and
interviewed key FEMA, Department of Homeland Security (DHS) Inspector
General, and Office of Management and Budget (OMB) staff. We also
obtained and analyzed disaster estimate and cost data from FEMA. We
determined that these data were sufficiently reliable for the purposes
of our review.
We conducted this performance audit from June 2007 through February
2008 in accordance with generally accepted government auditing
standards.
Results in Brief:
Once a major disaster has been declared, FEMA staff deployed to a field
office--located at or near the disaster site and jointly operated by
the federal and state governments--work with state and local officials
and other relevant parties (e.g., private nonprofit organizations,
other federal agencies, etc.) to develop and refine cost estimates for
the declared disaster. The overall estimate comprises individual
estimates for the assistance programs that may be activated for a given
disaster--Public Assistance, Individual Assistance, Hazard Mitigation
grants--plus any related mission assignments (FEMA-issued tasks to
other federal agencies) and FEMA administrative costs. Cost estimates
for each of these five categories are developed using different methods
depending on program requirements. Public Assistance officials, for
example, told us that they rely on applicants' past experience and
historical knowledge of costs for similar projects. For administrative
cost estimates major elements are the number of staff deployed, salary
costs, rent for office space, and projected travel expenses. FEMA
officials told us that an initial estimate is reported within 1 week of
the joint field office opening. Updated estimates are entered into
FEMA's Disaster Financial Status Report (DFSR) database on a monthly
basis.
Decision makers need accurate information in order to make informed
choices and learn from past experience. FEMA officials told us that at
90 days (3 months) after the declaration the overall estimate of costs
related to any given noncatastrophic natural disaster is usually
reasonable, which they defined as within 10 percent of actual costs.
However, our analysis of FEMA's data for the 83 noncatastrophic natural
disaster declarations from 2000 through 2006 with actual or close to
actual costs (known as reconciled or closed, respectively) was not
consistent with this.[Footnote 4] Decision makers did not have cost
information within 10 percent of actual costs until about 6 months
after the disaster declaration.[Footnote 5] What the results would be
for the universe of noncatastrophic natural disaster declarations is
unknown because our analyses could only include the 24 percent of
declarations for which final financial decisions had been made. In
addition, issues concerning the reliability of disaster coding could
hamper FEMA's ability to learn from past experience and better inform
its decisions. For example, in analyzing the data FEMA provided, we
found several instances in which the code FEMA used to describe a
disaster event and the related description from the disaster
declaration did not match.[Footnote 6] In addition, the multiplicity of
codes and the fact that FEMA's database only allows for one code per
declaration, even when the description lists several causes, further
limits the ability to learn from analyses of past events.
FEMA officials described several ways in which the agency has learned
from past disasters and improved the management of disaster-related
resources. For example, Individual Assistance officials use demographic
data and a national average of individual assistance costs to predict
average costs for expected applicants. FEMA has also taken several
actions to professionalize and expand the responsibilities of its cadre
of disaster comptrollers. These actions include developing and updating
a credentialing plan since 2002, converting six disaster comptrollers-
-who are normally temporary (disaster assistance) employees--into
permanent positions, and combining the Disaster Comptroller and
Finance/Administration Section Chief into one position at the joint
field office to better manage financial activities. FEMA has also
developed--but has not fully tested--a model to better predict costs
prior to a major hurricane making landfall as well as while it occurs.
Nonetheless, we identified additional ways in which FEMA could further
its learning from past experience and improve its management of
disaster-related resources. For instance, some of the factors that can
lead to changes in FEMA's cost estimates are beyond its control, such
as the discovery of hidden damage. Others are not, such as its
management of mission assignments. Sensitivity analyses to identify the
marginal effect of key cost drivers could provide FEMA a way to isolate
and mitigate the effect of these factors on its early estimates. To
better predict applicant costs for the Individual Assistance program,
FEMA could substitute or add more geographically specific indicators
for its national average. Moreover, FEMA does not have standard
operating procedures or training for staff involved in entering and
updating disaster cost estimate data in its database. Developing these
could improve the management of disaster-related resources and ensure
consistency among staff in regional offices and headquarters who are
responsible for these data thus increasing their usefulness for future
estimates. Finalizing decisions about how much funding is needed to
complete work for "older" open declarations--those 5 years or older--
would allow FEMA to better target its remaining resources. From a
broader perspective, annual budget requests and appropriations for
disaster relief do not include all known costs from still open disaster
declarations, in particular those from catastrophic disasters. This
leads to requests for supplemental appropriations not only for new
disasters, but also for costs related to ongoing, past disasters. As a
result, decision makers may not have a comprehensive view of overall
funding claims and trade-offs.
We make a number of recommendations to the Secretary of Homeland
Security to improve the information provided to decision makers; better
inform future estimates, including the ability to incorporate past
experience in those estimates; and improve the management of FEMA's
disaster-related resources. In commenting on a draft of this report,
DHS generally agreed with these recommendations. FEMA also provided
technical comments, which we have incorporated as appropriate.
Background:
In response to concerns about the lack of a coordinated federal
approach to disaster relief, President Carter established FEMA by
Executive Order in 1979 to consolidate and coordinate emergency
management functions in one location. In 2003, FEMA became a component
of the Emergency Preparedness and Response (EP&R) Directorate in the
newly created DHS. Much like its FEMA predecessor, EP&R's mission was
to help the nation to prepare for, mitigate the effects of, respond to,
and recover from disasters. While FEMA moved intact to DHS and most of
its operations became part of the EP&R Directorate, some of its
functions were moved to other organizations within DHS. In addition,
functions that were formerly part of other agencies were incorporated
into the new EP&R organization. After FEMA moved into DHS it was
reorganized numerous times. FEMA's preparedness functions were
transferred over 2 years to other entities in DHS,[Footnote 7] reducing
its mission responsibilities. However, recent legislation transferred
many preparedness functions back to FEMA.[Footnote 8] Today, once
again, FEMA's charge is to lead the nation's efforts to prepare for,
protect against, respond to, recover from, and mitigate the risk of
natural disasters, acts of terrorism, and other man-made disasters,
including catastrophic incidents.
Disaster Declaration Process:
The Robert T. Stafford Disaster Relief and Emergency Assistance Act
(Stafford Act),[Footnote 9] establishes the process for states to
request a presidential disaster declaration. The Stafford Act requires
the governor of the affected state to request a declaration by the
President.[Footnote 10] In this request the governor must affirm that
the situation is of such severity and magnitude that effective response
is beyond the capabilities of the state and the affected local
governments and that federal assistance is necessary.[Footnote 11]
Before a governor asks for disaster assistance, federal, state, and
local officials normally conduct a joint preliminary damage assessment.
FEMA is responsible for recommending to the President whether to
declare a disaster and trigger the availability of funds as provided
for in the Stafford Act.[Footnote 12] When an obviously severe or
catastrophic event occurs, a disaster may be declared before the
preliminary damage assessment is completed.
In response to a governor's request, the President may declare that a
major disaster or emergency exists.[Footnote 13] This declaration
activates numerous assistance programs from FEMA and may also trigger
programs operated by other federal agencies, such as the Departments of
Agriculture, Labor, Health and Human Services, and Housing and Urban
Development, as well as the Small Business Administration to assist a
state in its response and recovery efforts.[Footnote 14] FEMA can also
issue task orders--called mission assignments--directing other federal
agencies and DHS components, or "performing agencies," to perform work
on its behalf to respond to a major disaster. The federal disaster
assistance provided under a major disaster declaration has no overall
dollar limit. However, each of FEMA's assistance programs has limits
either in the form of federal-state cost share provisions or funding
caps.
Disaster Assistance Provided by FEMA:
FEMA provides assistance primarily through one or more of the following
three grant programs:
* Public Assistance provides aid to state government agencies; local
governments; Indian tribes, authorized tribal organizations, and
Alaskan Native villages; and private nonprofit organizations or
institutions that provide certain services otherwise performed by a
government agency. Assistance is provided for projects such as debris
removal, emergency protective measures to preserve life and property,
and repair and replacement of damaged structures, such as buildings,
utilities, roads and bridges, recreational facilities, and water-
control facilities (e.g., dikes and levees).
* Individual Assistance provides for the necessary expenses and serious
needs of disaster victims that cannot be met through insurance or low-
interest Small Business Administration loans. FEMA provides temporary
housing assistance to individuals whose homes are unlivable because of
a disaster. Other available services include unemployment compensation
and crisis counseling to help relieve any grieving, stress, or mental
health problems caused or aggravated by the disaster or its aftermath.
FEMA can cover a percentage of the medical, dental, and funeral
expenses that are incurred as a result of a disaster.
* The Hazard Mitigation Grant Program provides additional funding (7.5
to 15 percent of total federal aid for recovery from the
disaster)[Footnote 15] to states and Indian tribal governments to
assist communities in implementing long-term measures to help reduce
the potential risk of future damages to facilities.
Not all programs are activated for every disaster. The determination to
activate a program is based on the needs identified during the joint
preliminary damage assessment. For instance, some declarations may
provide only Individual Assistance grants and others only Public
Assistance grants. Hazard Mitigation grants, on the other hand, are
available for most declarations.
Initial Response:
Once a federal disaster is declared, the President appoints a federal
coordinating officer to make an appraisal of the types of relief
needed, coordinate the administration of this relief, and assist
citizens and public officials in obtaining assistance. In addition, the
federal coordinating officer establishes a joint field office at or
near the disaster site. This office is generally staffed with a crew
made up of permanent, full-time FEMA employees; a cadre of temporary
reserve staff, also referred to as disaster assistance employees; and
the state's emergency management personnel.
Objectives, Scope, and Methodology:
Public Law No. 110-28, the U.S. Troop Readiness, Veterans' Care,
Katrina Recovery, and Iraq Accountability Appropriations Act, 2007,
directs us to review how FEMA develops its estimates of the funds
needed to respond to any given disaster, as described in House Report
No. 110-60. Accordingly, we addressed the following questions:
(1) What is FEMA's process for developing and refining its cost
estimates for any given disaster?
(2) From 2000 through 2006, how close have cost estimates been to the
actual costs for noncatastrophic natural disasters?
(3) Given the findings from the first two questions and our relevant
past work, what steps has FEMA taken to learn from past experience and
improve its management of disaster-related resources and what other
opportunities exist?
To address the first question, we examined FEMA policies, regulations,
and other documents that govern its estimation processes. We
interviewed senior staff from FEMA's Office of the Chief Financial
Officer, as well as headquarters and regional personnel responsible for
FEMA's disaster assistance programs (Public Assistance, Individual
Assistance, and the Hazard Mitigation Grant Program). Although we
looked at how the estimates from other federal, state, and local
government and private nonprofit organizations feed into FEMA's
process, we did not review the estimating processes of these entities.
Also, we did not review whether FEMA implemented its cost estimation
processes as described.
To address the second question, we compared FEMA's cost estimates at
various points in time (initial; 1, 2, 3, 6 months; and a year) to
actual costs to determine when estimates reasonably predicted actual
costs. FEMA officials defined "reasonable" as within 10 percent of
actual costs. Although the total number of disaster declarations from
2000 through 2006 was 363, we focused on noncatastrophic, natural
disasters. Two of the 363 disaster declarations were not natural--they
were related to the terrorist attacks of 9/11--and another 14 were
considered catastrophic.[Footnote 16] Of the remaining 347 disaster
declarations, 83 (24 percent) had actual or close to actual costs--
known as reconciled or closed, respectively--that could be compared to
earlier estimates. None of these 83 disaster declarations occurred in
2005 or 2006. Although the analysis of these 83 disaster declarations
is informative, it is not generalizable to all declarations as it does
not represent the general population of disasters. Finally, to assess
the reliability of FEMA's estimate data, we reviewed the data FEMA
officials provided and discussed data quality control procedures with
them. We determined that the data were sufficiently reliable for
purposes of this report.
To address the third question of how FEMA has improved its management
of disaster-related resources and identify other opportunities for
improvement, we reviewed available policies, procedures, and training
materials for staff involved in developing disaster cost estimates or
the management of disaster-related resources. In addition, we reviewed
our earlier work that identified areas for improvement and discussed
FEMA's related management issues with DHS's Deputy Inspector General
for Disaster Assistance Oversight. We interviewed staff in FEMA's
Office of the Chief Financial Officer and OMB to learn more about
FEMA's planning for annual and supplemental requests for disaster-
related resources. Finally, the work we did to address questions one
and two provided valuable insights on other opportunities for FEMA to
improve its management of disaster-related resources.
FEMA Uses Various Methods to Develop and Refine Cost Estimates
Depending on Program Requirements:
Once a major disaster has been declared, FEMA staff deployed to the
joint field office, along with state and local officials and other
relevant parties (e.g., private nonprofit organizations, other federal
agencies, etc.), develop and refine cost estimates for each type of
assistance authorized in the disaster declaration. According to FEMA
officials, these estimates build upon and refine those contained in the
preliminary damage assessment. They said that the estimates contained
in the preliminary damage assessment are "rough" and are used primarily
to ensure that the damage is of a severity and magnitude that the state
requires federal assistance.
FEMA officials said that while the joint field office is open FEMA
program and financial management staff work on a continuing basis to
refine these estimates.[Footnote 17] Staff provide these estimates to a
disaster comptroller, who enters them into the Disaster Projection
Report (DPR), which compiles and calculates the overall estimate. The
disaster comptroller reports the estimates (via the DPR) to both the
responsible regional office and the Disaster Relief Fund Oversight
Branch within FEMA's Office of the Chief Financial Officer. The first
DPR is provided to these two entities within 1 week of the joint field
office opening; updates are reported at least monthly or when large
changes occur in the underlying estimates. However, regional office
staff only enter updated estimates into the Disaster Financial Status
Report (DFSR)--FEMA's central database for disaster costs--on a monthly
basis.
After the joint field office is closed, the responsible regional office
updates estimates for the given disaster along with all others within
its jurisdiction. Regional office program staff (i.e., staff in Public
Assistance, Individual Assistance, and the Hazard Mitigation Grant
Program) provide updated estimates for all ongoing declared disasters
for monthly DFSR reporting. How this information is entered into the
DFSR database varies by region; in some regional offices program staff
update the estimates for their programs' costs (e.g., Public
Assistance) directly into DFSR, whereas in other regional offices this
function is performed by financial management staff, who collect and
enter updated disaster estimate data from the program staff. Figure 1
illustrates FEMA's disaster cost estimation process.
Figure 1: FEMA's Disaster Cost Estimation Process:
This figure is a flow chart showing FEMA's disaster cost estimation
process.
[See PDF for image]
Note: We did not review whether this process was implemented as
described.
[End of figure]
FEMA's Estimation Processes and Related Costs Are Driven by the Types
of Assistance Provided:
FEMA's overall estimate for any given disaster may cover programmatic
and administrative costs in up to five different categories, and the
methods for developing these underlying estimates vary. The overall
cost estimate for any given disaster could include projected costs for
Public Assistance, Individual Assistance, and Hazard Mitigation grants,
depending on what type of assistance was authorized in the disaster
declaration. In addition, the overall estimate may also cover projected
costs for mission assignments--FEMA-issued tasks to other federal
agencies or components within DHS, known as performing agencies--as
well as administrative costs associated with operating the joint field
office and administering disaster assistance. Our review focused on
FEMA's policies and procedures for developing these estimates, as
described in related documents and by FEMA officials; we did not review
whether these processes were implemented as described.[Footnote 18]
Public Assistance officials said that initial estimates for their
program are prepared by category of work and then refined for specific
projects. Working with potential applicants following a disaster,
program staff will develop overall estimates for Public Assistance
costs for each category of emergency and permanent work, as authorized.
Costs for Public Assistance are shared between the federal and state
governments. The minimum federal share is 75 percent; the President can
increase it to 90 percent when a disaster is so extraordinary that it
meets or exceeds certain per capita disaster costs, and to 100 percent
for emergency work in the initial days after the disaster irrespective
of the per capita cost. Later, the overall estimate is refined to
reflect the estimates for individual projects. The Public Assistance
program uses many methods to develop these estimates. Common methods
include time and materials estimates and competitively bid contracts.
Public Assistance officials told us that they rely heavily on the
applicants' (state government agencies, local governments, etc.) prior
experience and historical knowledge of costs for similar projects. For
small projects (those estimated to cost less than $59,700 in fiscal
year 2007, adjusted annually), applicants can develop the estimates
themselves--FEMA later validates their accuracy through a sample--or
they can ask FEMA to develop the estimates. According to a senior
Public Assistance official, most applicants choose the latter option.
For large projects (estimated to cost more than $59,700 in fiscal year
2007, adjusted annually), Public Assistance staff are responsible for
working with applicants to develop project worksheets, which include
cost estimates.
According to senior program officials, Individual Assistance cost
estimates depend on individuals' needs. Using demographic, historical,
and other data specific to the affected area, as well as a national
average of costs, Individual Assistance staff project program costs.
Depending on the type of Individual Assistance provided, estimates are
refined as individuals register and qualify for certain types of
assistance or as FEMA and the state negotiate and agree upon costs. For
housing and other needs assistance--such as disaster-related medical,
dental, and funeral costs--estimates are based on the number of
registrations FEMA receives, the rate at which registrants are found
eligible for assistance, and the type and amount of assistance for
which they qualify. For fiscal year 2007, federal costs for housing
assistance were limited to $28,600 per individual or household. This
amount is adjusted annually. Other needs assistance is a cost-share
program between the federal and state governments with the federal
share set at 75 percent of costs. Disaster unemployment assistance is
provided to those unemployed because of the disaster and not otherwise
covered by regular unemployment insurance programs. The amount provided
is based on state law for unemployment insurance in the state where the
disaster occurred. The state identifies any need for crisis counseling
services and FEMA works with the state mental health agency to develop
the estimate for that. Individual Assistance officials also told us
that although they set aside $5,000 for legal services FEMA is rarely
billed for these services.
Hazard Mitigation Grant Program costs are formulaic and based on a
sliding scale. If a grantee (state or Indian tribal government) has a
standard mitigation plan, the amount FEMA provides to the grantee is a
statutorily set percentage of the estimated total amount provided under
the major assistance programs. This percentage ranges from 7.5 to 15
percent[Footnote 19] and is inversely related to the total; that is,
when overall assistance estimates are higher, the percentage available
for Hazard Mitigation grants decreases. Costs for Hazard Mitigation
grants are shared among the federal government, grantees, and
applicants (e.g., local governments), with a federal share of up to 75
percent of the grant estimate.[Footnote 20] FEMA calculates and
provides an estimate of Hazard Mitigation funding to grantees 3, 6, and
12 months after a disaster declaration. The 6-month figure is a
guaranteed minimum.[Footnote 21] At 12 months FEMA "locks in" the
amount of the 12-month estimate unless the 6-month minimum is greater.
Cost estimates for mission assignments are developed jointly by FEMA
staff and the performing agencies. Among the information included in a
mission assignment are a description of work to be performed, a
completion date for the work, an estimate of the dollar amount of the
work to be performed, and authorizing signatures. Mission assignments
may be issued for a variety of tasks, such as search and rescue
missions or debris removal, depending on the performing agencies' areas
of expertise. The signed mission assignment document provides the basis
for obligating FEMA's funds. When federal agencies are tasked with
directly providing emergency work and debris removal--known as direct
federal assistance mission assignments--costs are shared in the same
manner as Public Assistance grants.[Footnote 22]
Estimates for FEMA's administrative costs are developed by financial
management staff in the joint field office. These costs are based on
several factors including the number of staff deployed, salary costs,
rent for office space, and travel expenses.
Time Needed to Predict Disaster Costs and Data Reliability Issues
Hamper Decision Making:
Although estimates developed in the immediate aftermath of a major
disaster are necessarily based on preliminary damage assessments,
decision makers need accurate cost information in order to make
informed budget choices. FEMA officials told us that by 3 months after
a declaration the overall estimate of costs related to any given
noncatastrophic natural disaster is usually reasonable, that is, within
10 percent of actual costs. However, as figure 2 illustrates, our
analysis of the 83 noncatastrophic natural disaster declarations with
actual or close to actual costs shows that on average 3-month estimates
were within 23 percent of actual costs and the median difference was
around 14 percent. Although the average (mean) difference did not
achieve the 10 percent band until approximately 1 year, the median
difference reached this band at 6 months.
Figure 2: Percentage Difference between Estimated and Actual Costs for
83 Noncatastrophic Natural Disasters from 2000 through 2004:
This figure is a bar graph showing percentage difference between
estimated and actual costs for 83 noncatastrophuc natural disasters
from 2000 through 2004. The X axis represents the time of estimate, and
the Y axis represents percentage difference.
[See PDF for image]
Source: GAO analysis of data from FEMA's Disaster Financial Status
Report database, as of June 30, 2007.
Note: This figure covers noncatastrophic natural disaster declarations
for which all financial decisions have been made. At the time of our
review none of the disasters declared in 2005 or 2006 met this
criterion. Because individual estimates were either greater or less
than actual costs, we used absolute value to treat them the same in
calculating the average difference between the two.
[End of figure]
These results, however, cannot be generalized to disaster declarations
for which all financial decisions have not been made since we were only
able to compare estimates to actual costs for about one-quarter of the
noncatastrophic natural disasters declared from 2000 through 2006. From
2000 through 2006, there were 347 noncatastrophic natural disasters. As
of June 30, 2007, 83 of these (approximately 24 percent) had actual or
near actual costs to which we could compare estimates, as figure 3
illustrates. Fourteen disasters were "reconciled," meaning that all
projects were completed and the FEMA-State Agreement was closed and 69
disasters were "closed," meaning that financial decisions had been made
but all projects were not completed. The rest of the disasters (264)
were "programmatically open," meaning financial decisions were not
completed, eligible work remains, and estimates are subject to change.
According to FEMA officials, it takes 4 to 5 years to complete all work
for an "average" disaster. Time frames for the underlying assistance
programs vary. For example, according to a FEMA official, Individual
Assistance takes approximately 18 months and Public Assistance 3 years
to complete all work. Projects using Hazard Mitigation grants are
expected to last 4 years although they can be extended to 6 years.
Figure 3: Status of Noncatastrophic Natural Disaster Declarations from
2000 through 2006 (N=347):
This figure is a pie chart showing status of noncatastrophic natural
disaster declarations from 2000 through 2006.
Open: 76%;
Closed: 20%;
Reconciled: 4%.
[See PDF for image]
Source: GAO analysis of FEMA's Disaster Financial Status Report data,
as of June 30, 2007.
[End of figure]
Data Reliability Issues Hamper Decision Makers' Ability to Learn from
Past Disasters:
Accurate data permits decision makers to learn from previous
experience--both in terms of estimating likely costs to the federal
government and in managing disaster assistance programs. However, the
way FEMA records disaster information, specifically the way in which it
codes the disaster that occurred, inhibits rather than facilitates this
learning process. The combination of a single-code limit to describe
disasters, inconsistent coding of disasters with similar descriptions,
and overlapping codes means that the data are not easily used to inform
estimates and other analyses. Such issues mean that we could not
compare estimated and actual costs by type of disaster. Moreover, they
limit FEMA's ability to learn from past disasters.
Every disaster declaration is coded with an incident type to identify
the nature of the disaster (e.g., earthquake, wildfire, etc.) As shown
in table 1, there are 27 different incident codes in the DFSR database.
We found problems with these data. First, the coding of incident type
did not always match the description of the disaster. For example, 31
declarations are coded as tsunamis, but many of these are described--
and should be coded--as something else. Second, each disaster
declaration can be coded with only one incident type even though most
descriptions list multiple types of incidents. We found declarations
with similar descriptions coded differently--FEMA has no guidance on
how to select the incident type code to be used from among the types of
damage. For example, a number of declarations are described as "severe
storms and flooding" or "severe storms, flooding, and tornadoes," but
sometimes these were coded as flooding, other times as severe storms,
and still other times as tornadoes.
Table 1: FEMA's Incident Type Codes:
Code: 0;
Description: Not Applicable;
Code: I;
Description: Terrorist;
Code: R;
Description: Fire.
Code: A;
Description: Tsunami;
Code: J;
Description: Typhoon;
Code: S;
Description: Snow.
Code: B;
Description: Biological;
Code: K;
Description: Dam/Levee Break;
Code: T;
Description: Tornado.
Code: C;
Description: Coastal Storm;
Code: L;
Description: Chemical;
Code: U;
Description: Civil Unrest.
Code: D;
Description: Drought;
Code: M;
Description: Mud/Landslide;
Code: V;
Description: Volcano.
Code: E;
Description: Earthquake;
Code: N;
Description: Nuclear;
Code: W;
Description: Severe Storm(s).
Code: F;
Description: Flood;
Code: O;
Description: Severe Ice Storm;
Code: X;
Description: Toxic Substances.
Code: G;
Description: Freezing;
Code: P;
Description: Fishing Losses;
Code: Y;
Description: Human Cause.
Code: H;
Description: Hurricane;
Code: Q;
Description: Crop Losses;
Code: Z;
Description: Other.
Source: FEMA Incident Type Code list dated April 24, 2007.
Note: Although our review focuses on natural disasters, this table
illustrates all of FEMA's incident codes, including those for man-made
disasters.
[End of table]
Any coding system should be designed for the purpose it must serve.
From the point of view of looking at the cause of damage (e.g., water,
wind, etc.), many of the 27 incident codes track weather events but do
not necessarily capture or elaborate on the type of information
relevant to FEMA's mission of providing disaster assistance. Moreover,
they are not all mutually exclusive and thus some codes could be
consolidated or eliminated. For example, coastal storms (C), hurricanes
(H), and typhoons (J) might all be seen as describing similar events
and therefore could be seen as candidates for consolidation.
FEMA Has Taken Steps to Learn from Past Disasters and Improve Its
Management of Disaster-Related Resources but Further Opportunities
Exist:
FEMA officials identified several ways in which FEMA takes past
experience into account and uses historical data to inform its cost
estimation processes for any given disaster. For example, Individual
Assistance officials told us that they use demographic data (such as
population size and average household income) and a national average of
program costs to predict average costs for expected applicants.
Furthermore, based on past experience, Individual Assistance officials
adjust cost estimates for different points in time during the 60-day
registration period. Individuals with greater need tend to apply within
the first 30 days of the registration period, according to Individual
Assistance officials. This is usually followed by a lull in
registrations, then an increase in registrations prior to the close of
the registration period. The Public Assistance program has compiled a
list of average costs for materials and equipment, which is adjusted
for geographic area. As noted earlier, the Public Assistance program
also relies heavily on the past experience and historical knowledge of
its applicants for the costs of similar projects.
Staff within FEMA's Office of the Chief Financial Officer also
contribute to FEMA's learning from past disasters. For example, in
collecting and compiling estimates at the joint field office, the
disaster comptroller may question certain estimated costs based on his
or her past experience with similar disasters. Similarly, once these
estimates are reported to the Disaster Relief Fund Oversight Branch,
staff there will review the DPR and, based on their knowledge of and
experience with past disasters, may question certain estimates and
compare them to similar past disasters. Office of the Chief Financial
Officer staff also have worked with others throughout FEMA to develop a
model to predict costs for category 3 or higher hurricanes prior to and
during landfall. Among other types of data, the model uses historical
costs from comparable hurricanes to predict costs. Although the model
is finished, it has not been fully tested; no category 3 or higher
hurricanes have made landfall in the United States since it was
developed.
FEMA Has Taken Steps to Improve Its Management of Disaster-Related
Resources:
FEMA has taken several steps to improve its management of disaster-
related resources. In the past few years, FEMA has undertaken efforts
to professionalize and expand the responsibilities of its disaster
comptroller cadre. For example, FEMA has developed and updated
credentialing plans since 2002 in an attempt to ensure that
comptrollers are properly trained. The agency has also combined the
Disaster Comptroller and Finance/Administration Section Chief into one
position to better manage financial activities at the joint field
office. The Office of the Chief Financial Officer introduced the DPR--
developed by the Disaster Relief Fund Oversight Branch--as a tool for
comptrollers to standardize the formulation and reporting of disaster
cost projections. At the time of our review, FEMA was converting six
disaster comptrollers from temporary to permanent positions. Officials
told us that they plan to place two comptrollers in headquarters to
assist with operations in the Office of the Chief Financial Officer,
and four in regional offices to provide a "CFO presence" and to have
experienced comptrollers on hand to assist with disasters.
FEMA has also taken steps to better prepare for disasters. According to
FEMA officials, the agency is focusing on "leaning forward"--ensuring
that it is in a state of readiness prior to, during, and immediately
following a disaster. For example, FEMA officials told us that they pre-
position supplies in an attempt to get needed supplies out more quickly
during and after a disaster. Similarly, FEMA has negotiated and entered
into a number of contingency contracts in an attempt to begin work
sooner after a disaster occurs and to potentially save money in the
future since costs are prenegotiated.
Other Opportunities Exist for FEMA to Learn from Past Experience and
Improve Its Management of Disaster-Related Resources:
According to FEMA officials, each disaster is unique, and because of
this, FEMA "starts from scratch" in developing estimates for each
disaster. Although each disaster may be unique, we believe that
commonalities exist that would allow FEMA to better predict some costs
and have identified a number of opportunities to further its learning
and management of resources.
Opportunities to Learn from Past Experience:
FEMA officials told us that a number of factors can lead to changes in
FEMA's disaster cost estimates, some of which are beyond its control.
For example, the President may amend the disaster declaration to
authorize other types of assistance, revise the federal portion of the
cost share for Public Assistance, or cover the addition of more
counties. Also, hidden damage might be discovered, which would increase
cost estimates. Fluctuations in estimates also may occur with events
such as the determination of insurance coverage for individuals and
public structures or higher-than-estimated bids to complete large
projects (Public Assistance). Changes in the state or local government
housing assistance strategies can also drive changes in costs.
However, that these are beyond FEMA's control does not mean FEMA has no
way to improve its estimates. FEMA could conduct sensitivity analyses
to understand the marginal effects of different cost drivers, such as
the addition of counties to a declaration, revisions to the cost share,
or the determination of insurance coverage, and to provide a range for
the uncertainty created by these factors. We recently reported that as
a best practice sensitivity analysis should be used in all cost
estimates because all estimates have some uncertainty.[Footnote 23]
Using its experiences from prior disasters, FEMA could analyze the
underlying causes of changes in estimates. This could help FEMA develop
and provide to policymakers an earlier and more realistic range around
its point estimate.
In addition, there are other areas where FEMA has greater control. FEMA
could review the effect its own processes have on fluctuations in its
disaster cost estimates and take actions to better mitigate these
factors. For example, FEMA officials told us that mission assignments
are generally overestimated but these are not corrected until the
performing agencies bill FEMA. We previously reported that when FEMA
tasks another federal agency with a mission assignment, FEMA records
the entire amount up front as an obligation, but does not adjust this
amount until it has received the bill from the performing agency,
reviewed it, and recorded the expenditure in its accounting
system.[Footnote 24] The performing agency might not bill FEMA until
months after it actually performs the work. If upon reviewing
supporting reimbursement documentation FEMA officials determine that
some amounts are incorrect or unsupported, FEMA may retrieve or "charge
back" the moneys from the agencies. In these instances, agencies may
also take additional time to gather and provide additional supporting
documentation. We made several recommendations aimed at improving
FEMA's mission assignment process and FEMA officials told us that they
are reviewing the management of mission assignments.
One official posited that overestimates of mission assignments could
have caused the overall estimates to take longer than expected to reach
the 10 percent band FEMA officials defined as a reasonable predictor of
actual costs. If a review of the mission assignment process shows this
to be the case, FEMA should take steps--such as working with performing
agencies to develop more realistic mission assignment estimates up
front and ensuring that these agencies provide FEMA with bills
supported by proper documentation in a timely manner--to improve this
process and lessen its effect on the overall estimates. If, however,
the overestimation of mission assignments is not driving these changes,
FEMA should focus on identifying what is and take appropriate actions
to mitigate it. Another area that could warrant review is the
determination of eligible costs for Public Assistance. For example,
after Public Assistance projects are completed, FEMA sometimes adjusts
costs during reconciliation to disallow ineligible costs or determine
that other costs are eligible. Focusing on this issue earlier in the
process might lead to a more accurate determination of costs eligible
for reimbursement and so improve projections.
FEMA could also expand its efforts to better consider past experience
in developing estimates for new disasters. For example, in tracking
incident types, FEMA could improve both the accuracy and the usefulness
of the data for its analytic and predictive purposes. A review and
revision of incident type codes to reflect the cause(s) of damage would
tie the data and coding to their purposes. This could permit making
comparisons among similar disasters to better inform and enhance both
cost estimates and decision making. Also, FEMA could ensure that for
past declarations in the DFSR database, as well as for future
declarations, incident codes match the related descriptions and are
consistently entered. This effort could be aided by revising the DFSR
database to allow for multiple incident types for each declaration to
better reflect what occurred. Other opportunities may also exist for
the assistance programs. For example, in predicting costs for the
Individual Assistance program, the usefulness of a national average
should be examined. The substitution or addition of more geographically
specific indicators might better predict applicant costs.
In some ways, FEMA recognizes the value of using past experience to
inform current estimates. For example, it draws upon the experience of
its disaster comptrollers and staff in the Disaster Relief Fund
Oversight Branch to question estimated costs. In addition, the
aforementioned model to predict hurricane costs shows that FEMA
recognizes that similar disasters may lead to similar costs, which can
be analyzed and applied to better predict costs. According to FEMA
officials, they are considering expanding the model to predict costs
from other potentially catastrophic disasters, such as earthquakes. In
the same vein, we believe that FEMA could expand upon this effort to
better predict costs for other types of disasters, particularly those
that are noncatastrophic and recur more frequently.
FEMA's opportunities to learn from past experience, especially from its
disaster cost data, could be hampered by some costs that are no longer
distributed to individual disaster declarations. FEMA officials told us
that they use a "surge account" to support federal mobilization,
deployment, and preliminary damage assessment activities prior to a
disaster declaration. FEMA records subsequent costs by declaration. In
the past these surge account costs were distributed on a proportional
basis to each disaster declared in the year--so the data for the 83
disaster declarations we were able to review do include these costs.
However, FEMA no longer does this. FEMA officials told us that they
determined that there was no obvious benefit to distributing surge
account costs to subsequent declarations, especially in potential
hurricane events that might result in multiple declarations. We note
that costs in the surge account have increased significantly in recent
years. For fiscal years 2000 through 2003, annual obligations in the
surge account were less than $20 million each year; after 2004 they
increased to over $100 million each year, according to FEMA data as of
June 30, 2007.[Footnote 25] In fact by that date surge account costs
for fiscal year 2007--three-quarters through the fiscal year--had
already reached $350 million. No longer distributing these costs to
disasters poses an analytical challenge for FEMA's learning as costs
for current and future disasters are not comparable to those that
occurred in the past.
Opportunities to Improve Management of Disaster-Related Resources:
To improve data reliability, FEMA could also develop standard operating
procedures and training for staff entering and maintaining disaster
estimate data in the DFSR database. In a recent review of FEMA's day-
to-day operations we found that it does not have a coordinated or
strategic approach to training and development programs.[Footnote 26]
Further, FEMA officials described succession planning as nonexistent
and several cited it as the agency's weakest link. We have previously
reported that succession planning--a process by which organizations
identify, develop, and select their people to ensure an ongoing supply
of successors who are the right people, with the right skills, at the
right time for leadership and other key positions--is especially
important for organizations that are undergoing change.[Footnote 27]
Like the rest of the government, FEMA faces the possibility of losing a
significant percentage of staff--especially at the managerial and
leadership levels--to retirement. About a third of FEMA's Senior
Executive Service and GS-15 leaders were eligible to retire in fiscal
year 2005, and Office of Personnel Management data project that this
percentage will increase to over half by the end of fiscal year 2010.
Since FEMA relies heavily on the experience of its staff, such a loss
could significantly affect its operations. Furthermore, according to
FEMA officials with whom we met, there are no standard operating
procedures or training courses for staff who are involved in entering
and maintaining disaster cost estimate data in the DFSR database that
would help mitigate this loss of knowledge and ensure consistency among
staff in regional offices and in headquarters. Standard operating
procedures also might reduce the coding errors described earlier.
FEMA may be able to improve its management of disaster-related
resources by reviewing the reasons why "older" disaster declarations
remain open and take action to close and reconcile them if possible. By
finalizing decisions about how much funding is actually needed to
complete work for these open declarations, FEMA will be better able to
target its remaining resources. FEMA officials told us that it takes 4
to 5 years to obligate all funding related to an average disaster
declaration but we found the average life cycle to be longer--a
majority of the noncatastrophic natural disasters declared from 2000
through 2002 (5 to 7 years old) are still open (see table 2).
Table 2: Status of Noncatastrophic Natural Disaster Declarations by
Calendar Year:
Year: 2000;
Total: 44;
Open: 18;
Closed/reconciled: 26.
Year: 2001;
Total: 42;
Open: 22;
Closed/reconciled: 20.
Year: 2002;
Total: 49;
Open: 32;
Closed/reconciled: 17.
Year: 2003;
Total: 56;
Open: 39;
Closed/reconciled: 17.
Year: 2004;
Total: 62;
Open: 59;
Closed/reconciled: 3.
Year: 2005;
Total: 42;
Open: 42;
Closed/reconciled: 0.
Year: 2006;
Total: 52;
Open: 52;
Closed/reconciled: 0.
Total: Year;
Total: 347;
Open: 264;
Closed/reconciled: 83.
Source: GAO analysis of FEMA's Disaster Financial Status report data as
of June 30, 2007.
[End of table]
We previously reported that in November 1997, FEMA's Director chartered
three teams of Office of Financial Management staff--referred to as
closeout teams--to assist FEMA regional staff and state emergency
management personnel in closing out funding activities for all past
disasters.[Footnote 28] Their primary goal was to eliminate remaining
costs for these disasters by obligating or recovering funds. We found
that these teams were effective in doing so. According to FEMA
officials, the closeout teams no longer formally exist because they had
successfully closed out funding activities for past disasters. FEMA now
relies on regional offices to perform this function, and several use
teams similar to the closeout teams to undertake this work.
Given its mission, FEMA tends to focus much of its resources on
disaster response and recovery. For example, as we previously reported,
all FEMA employees are expected to be on call during disaster response
and no FEMA personnel are exclusively assigned to its day-to-day
operations.[Footnote 29] Indeed, FEMA officials have said that what
FEMA staff label "nondisaster" programs are maintained on an ad hoc
basis when permanent staff are deployed, and the agency does not have
provisions for continuing programs when program managers are called to
response duties. Without an understanding of who holds a mission-
critical position for day-to-day operations and what minimum level of
staffing is necessary even during disaster response, business
continuity and support for the disaster-relief mission are put at
increased risk. FEMA staff's strong sense of mission is no substitute
for a plan and strategies of action. It is likely, therefore, that the
tasks necessary to close disasters become subordinated to responding to
new disasters. This contributes to a situation in which disaster
declarations remain open for a number of years. However, closing and
reconciling declarations is not merely a bookkeeping exercise. Given
the multiple claims on federal resources, it is important to provide
decision makers with the best information possible about current and
pending claims on those resources.
Opportunities to Improve Budgeting for Disaster Relief:
FEMA's annual budget requests and appropriations for disaster relief
are understated because they exclude certain costs. Currently, annual
budget estimates are based on a 5-year historical average of
obligations, excluding costs associated with catastrophic disaster
declarations (i.e., those greater than $500 million).[Footnote 30] This
average--which serves as a proxy for an estimate of resources that will
be needed for the upcoming year--presumes to capture all projected
costs expected not only from future disasters but also those previously
declared. However, as demonstrated by FEMA's receipt of supplemental
appropriations in years when no catastrophic disasters occurred, it
does not do so. Excluding certain costs associated with previously
declared catastrophic disasters results in an underestimation of annual
disaster relief costs for two reasons. First, because FEMA finances
disaster relief activities from only one account--regardless of the
severity of the disaster--the 5-year average as currently calculated is
not sufficient to cover known costs from past catastrophic disasters.
Second, from fiscal years 2000 through 2006, catastrophic disasters
occurred in 4 out of 7 years, raising questions about the relative
infrequency of such events. Excluding costs from catastrophic disasters
in annual funding estimates prevents decision makers from receiving a
comprehensive view of overall funding claims and trade-offs. This is
particularly important given the tight resource constraints facing our
nation. Therefore, annual budget requests for disaster relief may be
improved by including known costs from previous disasters and some
costs associated with catastrophic disasters.
Funding for natural disasters is not the only area where a
reexamination of the distribution between funding through regular
appropriations and funding through supplemental appropriations might be
in order. In our work on funding the Global War on Terrorism (GWOT), we
also noted that the line between what is funded through regular, annual
appropriations and supplemental appropriations has become
blurred.[Footnote 31] The Department of Defense's GWOT funding guidance
has resulted in billions of dollars being added for what DOD calls the
"longer war against terror," making it difficult to distinguish between
base costs and the incremental costs to support specific contingency
operations.
Conclusions:
Given FEMA's mission to lead the nation in mitigating, responding to,
and recovering from major domestic disasters, many individuals as well
as state and local governments rely on the disaster assistance it
provides. The cost estimates FEMA develops in response to a disaster
have an effect not only on the assistance provided to those affected by
the disaster but also on federal decision makers, as supplemental
appropriations will likely be needed. As such, it is imperative for
FEMA to develop accurate cost estimates in a timely manner to inform
decision making, enhance trade-off decisions, and increase the
transparency of these federal commitments.
We were able to identify ways in which FEMA has learned from past
disasters; however a number of opportunities exist for FEMA to continue
this learning and to improve its cost estimation process. For example,
FEMA could better ensure that incident codes are useful and accurate.
In addition, a number of factors can lead to revisions in its estimates
but FEMA can mitigate these factors by conducting sensitivity analyses
and reviewing its estimation processes to identify where improvements
could be made. To further facilitate learning, FEMA needs to better
ensure that it has timely and accurate data from past disasters and
this report suggests several ways in which FEMA could do so. FEMA can
also explore refining its learning, for example, by using
geographically specific averages to complement the national averages it
uses. In addition, to facilitate analysis by making current disaster
cost data comparable to past disaster data, FEMA could resume
distribution of surge account costs to disasters, as appropriate.
FEMA has also taken steps to improve its management of disaster-related
resources, such as "leaning forward," professionalizing and expanding
the responsibilities of its disaster comptroller cadre, and developing
a model to predict costs for category 3 or higher hurricanes prior to
and during landfall. However, additional steps would further improve
how FEMA manages its resources. For example, to improve data
reliability FEMA could develop standard operating procedures and
training for staff entering and maintaining disaster estimate data in
the DFSR database. Also, although FEMA officials told us that it takes
4 to 5 years to finish all work related to an average disaster, our
analysis of FEMA's data shows that a majority of disasters declared
from 2000 through 2002 were still open--that is they had work ongoing-
-during our review. In the past FEMA formed teams to review these
"older" disasters, which resulted in the elimination of remaining costs
for these disasters by obligating or recovering funds. A similar effort
today could have the same effect. Also, FEMA relies on supplemental
appropriations both to cover the costs of providing assistance for new
disasters and known costs from past disasters. To promote transparency
in the budget process and to better inform decision making, annual
budget requests for disaster relief should cover these known costs,
including some from catastrophic disasters.
Recommendations for Executive Action:
To better mitigate the effect of factors both beyond and within FEMA's
control to improve the information provided to decision makers; to
better inform future estimates, including the ability to incorporate
past experience in those estimates; and to improve the management of
FEMA's disaster-related resources, the Secretary of Homeland Security
should instruct FEMA's Administrator to take the following nine
actions:
* Conduct sensitivity analyses to determine the marginal effects of key
cost drivers to provide a range for the uncertainty created by factors
beyond FEMA's control.
* Review the effect FEMA's own processes have on fluctuations in
disaster cost estimates and take steps to limit the impact they have on
estimates.
* Review the reasons why it takes 6 months or more for estimates to
reasonably predict actual costs and focus on improving them to shorten
the time frame.
* Undertake efforts--similar to those FEMA used to develop its model to
predict hurricane costs--to better predict costs for other types of
disasters, informed by historical costs and other data.
* Evaluate the benefits of using geographically specific averages in
addition to national averages to better project Individual Assistance
costs.
* Resume the distribution of surge account costs to individual
disasters, as appropriate, to make cost data from past, current, and
future disasters comparable.
* Review and revise incident coding types to ensure that they are
accurate and useful for learning from past experience. At a minimum,
incident codes should match the descriptions and be consistently
entered and reflect what occurred, which may require permitting
multiple incident types for each declaration.
* Develop training and standard operating procedures for all staff
entering incident type and cost information into the DFSR database.
* Review reasons why "older" disasters remain open and take action to
close/reconcile them if possible.
To promote a more informed debate about budget priorities and trade-
offs, the Secretary of Homeland Security also should instruct FEMA's
Administrator to work with OMB and Congress to provide more complete
information on known costs from prior disasters and costs associated
with catastrophic disasters as part of the annual budget request.
Agency Comments:
We requested comments on a draft of this report from the Secretary of
Homeland Security. In its comments, DHS generally agreed with eight of
our ten recommendations. It stated it would take our recommendation to
conduct sensitivity analyses to determine the marginal effects of key
cost drivers under advisement and did not comment on our recommendation
that it work with OMB and Congress to provide more complete information
as a part of its annual budget requests. FEMA also provided technical
comments, which we have incorporated as appropriate.
We are sending copies of this report to the Director of OMB, the
Secretary of Homeland Security, the Administrator of FEMA, and
interested congressional committees. We will also make copies available
to others upon request. In addition, the report will be available at no
charge on GAO's Web site at [hyperlink, http://www.gao.gov].
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Signed by:
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Director for Federal Budget:
Analysis Strategic Issues:
[End of section]
Appendix I: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan J. Irving, (202) 512-9142:
Acknowledgments:
In addition to the individual listed above, Carol Henn, Assistant
Director; Benjamin T. Licht; and Kisha Clark made significant
contributions to this report. Pedro Briones, John Brooks, Stanley
Czerwinski, Peter Del Toro, Carlos Diz, Gabrielle Fagan, Chelsa Gurkin,
Elizabeth Hosler, William Jenkins, Casey Keplinger, Tracey King,
Latesha Love, James McTigue, Jr., Tiffany Mostert, John Vocino,
Katherine Hudson Walker, Greg Wilmoth, and Robert Yetvin also made key
contributions to this report.
[End of section]
Footnotes:
[1] GAO, Budget Issues: FEMA Needs Adequate Data, Plans, and Systems to
Effectively Manage Resources for Day-to-Day Operations, GAO-07-139
(Washington, D.C.: Jan. 19, 2007).
[2] Pub. L. No. 110-28, 121 Stat. 112, 155 (May 25, 2007),
incorporating by reference a directive in H.R. Rep. No. 110-60, at 211
(2007). The Appropriations Committee report directs us to complete our
review within 6 months of enactment of Pub. L. No. 110-28. We fulfilled
this requirement by briefing relevant committees in November 2007. This
report expands upon the information provided in that briefing.
[3] For budget purposes, FEMA defines a disaster as catastrophic when
related federal costs reach or exceed $500 million.
[4] None of these 83 disaster declarations occurred in 2005 or 2006.
[5] Because individual estimates were either greater or less than
actual costs, we used absolute value to treat them the same in
calculating the average difference between the two.
[6] These coding issues meant that we could not compare estimated and
actual cost by type of disaster but did not affect our ability to look
at disaster cost estimates in the aggregate.
[7] From enactment of the Homeland Security Act of 2002, Pub. L. No.
107-296, in November 2002 to September 2005, 11 preparedness functions
or authorities were transferred from FEMA. In October 2005, FEMA's
remaining preparedness functions were transferred to DHS's new
Preparedness Directorate, which was created to consolidate preparedness
assets from across DHS, facilitate grants, and oversee nationwide
preparedness efforts.
[8] Post-Katrina Emergency Management Reform Act of 2006, Pub. L. No.
109-295, Title VI, 120 Stat. 1355, 1394 (Oct. 4, 2006).
[9] The Stafford Act, as amended, is codified at 42 U.S.C. §§ 5121-
5206.
[10] The Stafford Act defines "state" to include the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and
the Commonwealth of the Northern Mariana Islands.
[11] FEMA considers both quantitative and qualitative factors when
evaluating a governor's request for a major disaster declaration. See
44 C.F.R. § 206.48. For the Public Assistance program, for example,
quantitative factors include overall damage costs of $1.22 or more per
capita (for fiscal year 2007, adjusted annually with the Consumer Price
Index) as an indicator that the disaster is of such size that it might
warrant federal assistance and a minimum threshold of $1 million in
state public assistance damages per disaster. Qualitative criteria
include heavy impact of a disaster on a particular area or the
occurrence of multiple disasters in the same area within the last 12
months.
[12] FEMA also uses the data from the damage assessment to determine
what resources are necessary to respond to the disaster, including the
personnel required to staff joint field offices and the resources
needed from other federal agencies involved in the disaster response.
[13] If the President declares an emergency, rather than a major
disaster, the federal response is limited to the immediate and short-
term assistance that is necessary to save lives, protect property and
public health and safety, or lessen or avert the threat of a
catastrophe. FEMA's expenditures may generally not exceed $5 million
under an emergency declaration, though the President may exceed this
limitation if he makes certain determinations and notifies Congress of
the nature and extent of the assistance requirements. Our review
focused on disaster, not emergency, declarations.
[14] The Stafford Act grants the President broad authority to direct
any federal agency to support disaster or emergency assistance efforts
(42 U.S.C. §§ 5170a, 5192) although some agencies, such as the Federal
Highway Administration and the Army Corps of Engineers, have
authorities independent of the Stafford Act to initiate certain
emergency assistance efforts without a presidential disaster
declaration.
[15] This percentage changed twice from 2000 through 2006. Prior to
November 1, 2004, Hazard Mitigation grants were calculated at 15
percent. They were calculated at 7.5 percent from that date until
October 4, 2006, when it changed to the current sliding scale. In
addition, for states with approved enhanced mitigation plans FEMA
calculates Hazard Mitigation grants at 20 percent.
[16] For budget purposes, FEMA defines a disaster as catastrophic when
related federal costs reach or exceed $500 million.
[17] According to FEMA officials, the joint field office generally
opens within 1 week of the disaster declaration and remains open at the
discretion of the federal coordinating officer.
[18] At the request of the Senate Committee on Homeland Security and
Governmental Affairs, we are reviewing the implementation of permanent
work in the Public Assistance program in the Gulf Coast.
[19] For states with enhanced state mitigation plans, the percentage is
set at 20 percent regardless of total costs. Enhanced state mitigation
plans contain all elements of the standard plan and document (1) that
the plan is integrated to the extent practicable with other state and/
or regional planning initiatives; (2) the state's project
implementation capability; (3) the state's effective use of existing
mitigation programs to achieve its mitigation goals; and (4) the
state's commitment to a comprehensive mitigation program. As of
December 10, 2007, six states--Maryland, Ohio, Oklahoma, Oregon,
Virginia, and Wisconsin--had approved enhanced state mitigation plans.
Two additional states (Iowa and Washington) had such plans under review
but FEMA had not yet approved them.
[20] Although typically 75 percent, the state may choose to request
funding for specific activities with a federal share less than 75
percent.
[21] Even if the later estimate is lower, the state receives the amount
of the 6-month estimate.
[22] The minimum federal share is 75 percent; the President can
increase it to 90 percent when a disaster is so extraordinary that it
meets or exceeds certain per capita disaster costs, and to 100 percent
for emergency work in the initial days after the disaster irrespective
of the per capita cost.
[23] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs (Exposure Draft), GAO-07-1134SP (Washington,
D.C.: July 2007).
[24] GAO, Disaster Relief: Governmentwide Framework Needed to Collect
and Consolidate Information to Report on Billions in Federal Funding
for the 2005 Gulf Coast Hurricanes, GAO-06-834 (Washington, D.C.: Sept.
6, 2006).
[25] According to FEMA officials, the increase in surge account costs
after 2004 was due to four major hurricanes in 2004 and three major
hurricanes in 2005. However, it is unclear what led to the increases in
2006 and 2007.
[26] GAO-07-139.
[27] GAO, Human Capital: Succession Planning and Management Is Critical
Driver of Organizational Transformation, GAO-04-127T (Washington, D.C.:
Oct. 1, 2003).
[28] GAO, Disaster Relief Fund: FEMA's Estimates of Funding
Requirements Can Be Improved, GAO/RCED-00-182 (Washington, D.C.: Aug.
29, 2000).
[29] GAO-07-139.
[30] Costs associated with catastrophic disaster declarations are
excluded because they are considered relatively infrequent and not
necessarily representative of future costs.
[31] GAO, Global War on Terrorism: DOD Needs to Take Action to
Encourage Fiscal Discipline and Optimize the Use of Tools Intended to
Improve GWOT Cost Reporting, GAO-08-68 (Washington, D.C.: Nov. 6,
2007).
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