Disaster Recovery
Past Experiences Offer Insights for Recovering from Hurricanes Ike and Gustav and Other Recent Natural Disasters Gao ID: GAO-08-1120 September 26, 2008This month, Hurricanes Ike and Gustav struck the Gulf Coast producing widespread damage and leading to federal major disaster declarations. Earlier this year, heavy flooding resulted in similar declarations in seven Midwest states. In response, federal agencies have provided millions of dollars in assistance to help with short- and long-term recovery. State and local governments bear the primary responsibility for recovery and have a great stake in its success. Experiences from past disasters may help them better prepare for the challenges of managing and implementing the complexities of disaster recovery. GAO was asked to identify insights from past disasters and share them with state and local officials undertaking recovery activities. GAO reviewed six past disasters-- the Loma Prieta earthquake in northern California (1989), Hurricane Andrew in south Florida (1992), the Northridge earthquake in Los Angeles, California (1994), the Kobe earthquake in Japan (1995), the Grand Forks/Red River flood in North Dakota and Minnesota (1997), and Hurricanes Katrina and Rita in the Gulf Coast (2005). GAO interviewed officials involved in the recovery from these disasters and experts on disaster recovery. GAO also reviewed relevant legislation, policies, and its previous work.
While the federal government provides significant financial assistance after major disasters, state and local governments play the lead role in disaster recovery. As affected jurisdictions recover from the recent hurricanes and floods, experiences from past disasters can provide insights into potential good practices. Drawing on experiences from six major disasters that occurred from 1989 to 2005, GAO identified the following selected insights: (1) Create a clear, implementable, and timely recovery plan. Effective recovery plans provide a road map for recovery. For example, within 6 months of the 1995 earthquake in Japan, the city of Kobe created a recovery plan that identified detailed goals which facilitated coordination among recovery stakeholders. The plan also helped Kobe prioritize and fund recovery projects, in addition to establishing a basis for subsequent governmental evaluations of the recovery's progress. (2) Build state and local capacity for recovery. State and local governments need certain capacities to effectively make use of federal assistance, including having sufficient financial resources and technical know-how. State and local governments are often required to match a portion of the federal disaster assistance they receive. Loans provided one way for localities to enhance their financial capacity. For example, after the Red River flood, the state-owned Bank of North Dakota extended the city of Grand Forks a $44 million loan, which the city used to match funding from federal disaster programs and begin recovery projects. (3) Implement strategies for businesses recovery. Business recovery is a key element of a community's recovery. Small businesses can be especially vulnerable to major disasters because they often lack resources to sustain financial losses. Federal, state, and local governments developed strategies to help businesses remain in the community, adapt to changed market conditions, and borrow funds at lower interest rates. For example, after the Loma Prieta earthquake, the city of Santa Cruz erected large pavilions near the main shopping street. These structures enabled more than 40 local businesses to operate as their storefronts were repaired. As a result, shoppers continued to frequent the downtown area thereby maintaining a customer base for impacted businesses. (4) Adopt a comprehensive approach toward combating fraud, waste, and abuse. The influx of financial assistance after a major disaster provides increased opportunities for fraud, waste, and abuse. Looking for ways to combat such activities before, during, and after a disaster can help states and localities protect residents from contractor fraud as well as safeguard the financial assistance they allocate to victims. For example, to reduce contractor fraud after the Red River flood, the city of Grand Forks established a credentialing program that issued photo identification to contractors who passed licensing and criminal checks.
GAO-08-1120, Disaster Recovery: Past Experiences Offer Insights for Recovering from Hurricanes Ike and Gustav and Other Recent Natural Disasters
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Report to the Committee on Homeland Security and Governmental Affairs,
U.S. Senate:
United States Government Accountability Office:
GAO:
September 2008:
Disaster Recovery:
Past Experiences Offer Insights for Recovering from Hurricanes Ike and
Gustav and Other Recent Natural Disasters:
Insights for Recovering from 2008 Disasters:
GAO-08-1120:
GAO Highlights:
Highlights of GAO-08-1120, a report to the Committee on Homeland
Security and Governmental Affairs, U.S. Senate.
Why GAO Did This Study:
This month, Hurricanes Ike and Gustav struck the Gulf Coast producing
widespread damage and leading to federal major disaster declarations.
Earlier this year, heavy flooding resulted in similar declarations in
seven Midwest states. In response, federal agencies have provided
millions of dollars in assistance to help with short- and long-term
recovery. State and local governments bear the primary responsibility
for recovery and have a great stake in its success. Experiences from
past disasters may help them better prepare for the challenges of
managing and implementing the complexities of disaster recovery.
GAO was asked to identify insights from past disasters and share them
with state and local officials undertaking recovery activities. GAO
reviewed six past disasters”the Loma Prieta earthquake in northern
California (1989), Hurricane Andrew in south Florida (1992), the
Northridge earthquake in Los Angeles, California (1994), the Kobe
earthquake in Japan (1995), the Grand Forks/Red River flood in North
Dakota and Minnesota (1997), and Hurricanes Katrina and Rita in the
Gulf Coast (2005). GAO interviewed officials involved in the recovery
from these disasters and experts on disaster recovery. GAO also
reviewed relevant legislation, policies, and its previous work.
What GAO Found:
While the federal government provides significant financial assistance
after major disasters, state and local governments play the lead role
in disaster recovery. As affected jurisdictions recover from the recent
hurricanes and floods, experiences from past disasters can provide
insights into potential good practices. Drawing on experiences from six
major disasters that occurred from 1989 to 2005, GAO identified the
following selected insights:
* Create a clear, implementable, and timely recovery plan. Effective
recovery plans provide a road map for recovery. For example, within 6
months of the 1995 earthquake in Japan, the city of Kobe created a
recovery plan that identified detailed goals which facilitated
coordination among recovery stakeholders. The plan also helped Kobe
prioritize and fund recovery projects, in addition to establishing a
basis for subsequent governmental evaluations of the recovery‘s
progress.
* Build state and local capacity for recovery. State and local
governments need certain capacities to effectively make use of federal
assistance, including having sufficient financial resources and
technical know-how. State and local governments are often required to
match a portion of the federal disaster assistance they receive. Loans
provided one way for localities to enhance their financial capacity.
For example, after the Red River flood, the state-owned Bank of North
Dakota extended the city of Grand Forks a $44 million loan, which the
city used to match funding from federal disaster programs and begin
recovery projects.
* Implement strategies for businesses recovery. Business recovery is a
key element of a community‘s recovery. Small businesses can be
especially vulnerable to major disasters because they often lack
resources to sustain financial losses. Federal, state, and local
governments developed strategies to help businesses remain in the
community, adapt to changed market conditions, and borrow funds at
lower interest rates. For example, after the Loma Prieta earthquake,
the city of Santa Cruz erected large pavilions near the main shopping
street. These structures enabled more than 40 local businesses to
operate as their storefronts were repaired. As a result, shoppers
continued to frequent the downtown area thereby maintaining a customer
base for impacted businesses.
* Adopt a comprehensive approach toward combating fraud, waste, and
abuse. The influx of financial assistance after a major disaster
provides increased opportunities for fraud, waste, and abuse. Looking
for ways to combat such activities before, during, and after a disaster
can help states and localities protect residents from contractor fraud
as well as safeguard the financial assistance they allocate to victims.
For example, to reduce contractor fraud after the Red River flood, the
city of Grand Forks established a credentialing program that issued
photo identification to contractors who passed licensing and criminal
checks.
What GAO Recommends:
GAO is not making any recommendations in this report.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1120]. For more
information, contact Stanley Czerwinski at (202) 512-6808 or
czerwinskis@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
Create a Clear, Implementable, and Timely Recovery Plan:
Build State and Local Capacity for Recovery:
Implement Strategies for Business Recovery:
Adopt a Comprehensive Approach to Combating Fraud, Waste, and Abuse:
Concluding Observations:
Agency Comments:
Appendix I: Selected GAO Products Related to Disaster Recovery:
Appendix II: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Counties in Gulf Coast States That Received Federal Major
Disaster Declarations as a Result of Hurricanes Gustav and Ike:
Figure 2: Counties in Seven Midwest States That Received Federal Major
Disaster Declarations as a Result of 2008's Severe Flooding:
Figure 3: Six Disasters Included in This Review (1989-2005):
Figure 4: Excerpt from the Financing Matrix in Grand Forks' Recovery
Plan Which Identified Potential Funding Sources and Target Dates for
Recovery Tasks:
Figure 5: Temporary Pavilions in Santa Cruz, California, Following the
Loma Prieta Earthquake:
United States Government Accountability Office:
Washington, DC 20548:
September 26, 2008:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
This month, Hurricanes Ike and Gustav struck the Gulf Coast producing
widespread damage and leading to federal major disaster declarations in
Texas, Louisiana, and Alabama. Earlier this year, widespread flooding
occurred in multiple states in the Midwest covering thousands of square
miles, and resulting in billions of dollars in damaged infrastructure
and crops. The severity of the impact resulted in federal major
disaster declarations in Illinois, Indiana, Iowa, Minnesota, Missouri,
Nebraska, and Wisconsin. Now that the winds have died down and the
floodwaters have receded, these affected areas face the challenge of
rebuilding damaged physical and economic infrastructure as well as
helping their residents to recover.[Footnote 1]
Several disaster assistance programs have been activated to help
Midwest residents recover from the severe flooding that occurred
earlier this year. For example, according to the Federal Emergency
Management Agency (FEMA) over $400 million in federal assistance has
been provided to help Iowa recover from the flooding. As of August
2008, FEMA has approved over $109 million in housing assistance grants
for rental or temporary lodging and housing repair. FEMA has also
obligated more than $79 million in Public Assistance grants in response
to requests from eligible entities that will provide funds for long-
term rebuilding efforts, such as restoring public infrastructure and
other disaster costs in Iowa. Similarly, the Small Business
Administration has also provided assistance with long-term recovery.
Over $274 million has been approved in loans for homeowners, renters,
and businesses in the affected areas as of mid-August 2008.
In contrast to the standardized set of activities and procedures
typically associated with the immediate response to a disaster, the
recovery process can be much more varied and complex. The particular
path a community takes when recovering from a major disaster will
differ as a result of several factors, including the scale of the
disaster's impact, specific community needs and conditions, and the
amount and type of resources available. While such specifics prevent
the development of a "cookbook" for an effective recovery, potentially
valuable insights can be learned from the experiences of communities
that have already navigated the disaster recovery process.
To assist you in your ongoing oversight of rebuilding in the wake of
Hurricanes Katrina and Rita, we briefed your staff on several occasions
on the results of our ongoing work regarding recovery lessons from past
disasters and how they might inform efforts on the Gulf Coast. Shortly
after the Midwest experienced widespread flooding, you requested that
we review the information we had collected and determine what insights
might be useful to state and local officials. Accordingly, as agreed
with your office, this report provides insights from six past disasters
that state and local governments can consider as they move ahead with
their recovery efforts following natural disasters, such as Hurricanes
Ike and Gustav and the Midwest floods. In addition, we expect to issue
a report next year that will build upon this framework with additional
insights for how federal, state, and local governments can recover from
major disasters as well as how these insights could inform ongoing
efforts in the Gulf Coast.
To that end, we selected previous disasters based on interviews with
academics and practitioners as well as reviews of the disaster recovery
literature and our body of work on natural disasters.[Footnote 2] We
reviewed recovery experiences related to six major disasters:[Footnote
3] (1) the 1989 Loma Prieta earthquake in northern California; (2)
Hurricane Andrew, which struck southern Florida in 1992; (3) the 1994
Northridge earthquake in Los Angeles, California; (4) the 1995 Kobe
earthquake in Japan; (5) the 1997 Grand Forks/Red River flood in North
Dakota and Minnesota; and (6) the 2005 Gulf Coast hurricanes.[Footnote
4] We have also published a body of work on the recovery of the Gulf
Coast states from the 2005 Gulf Coast hurricanes. For a list of
selected GAO reports on disaster recovery, see appendix I.
Results in Brief:
While the federal government provides significant financial assistance
after major disasters, state and local governments play the lead role
in disaster recovery. In our review of past disasters, we have
identified several actions--both short-and long-term--that state and
local governments can take as they prepare to recover after a major
disaster. Because each disaster is distinctive and the resources and
capacities of every community differ, affected jurisdictions need to
consider whether and how to apply these insights to their specific
circumstances.
First, state and local governments have created clear, implementable,
and timely recovery plans. Such plans, which the federal government has
both funded and helped communities develop, can provide a roadmap for
the recovery process. In the aftermath of a disaster, a recovery plan
provides state and local governments with a valuable tool to document
and communicate recovery goals, decisions, and priorities. In our
review of recovery plans we have identified certain shared
characteristics. Specifically, these plans (1) identify clear goals for
recovery, (2) include detailed information to facilitate
implementation, and (3) are established in a timely manner. For
example, within 6 months of the 1995 earthquake that hit Kobe, Japan,
the city completed a plan that helped Kobe prioritize and fund recovery
projects. The plan also established a basis for subsequent governmental
evaluations of the recovery's progress.
Second, state and local governments have strengthened certain
capacities--including having financial resources and technical know-
how--to effectively take advantage of federal assistance. When
recovering from past disasters, some local governments successfully
used loans and special taxes to enhance their financial capacity. For
example, after the 1997 Red River flood, the state-owned Bank of North
Dakota provided a $44 million line of credit to the city of Grand
Forks, North Dakota, which the city used to meet FEMA matching
requirements. Affected jurisdictions have also enhanced their technical
capacity to navigate federal disaster programs. For example, after the
2005 Gulf Coast hurricanes, FEMA and Mississippi state officials used
federal funding to obtain an on-line accounting system that tracked and
facilitated the sharing of operational documents, thereby reducing the
burden on applicants of meeting FEMA Public Assistance grant
requirements.[Footnote 5]
Third, federal, state, and local governments focused on strategies that
successfully fostered business recovery after a disaster. Small
businesses are vital to a community's economic health, yet are
especially vulnerable to disasters because they often lack resources to
sustain financial loss and have less capacity to withstand market
changes. We found that some local governments developed strategies to
help small businesses survive the disaster and keep them within the
community. For example, by creating temporary locations for businesses,
the city of Santa Cruz, California, provided businesses that suffered
physical damage during the Loma Prieta earthquake with the means to
continue operating. The city of Los Angeles provided technical
assistance to counsel businesses on how to adapt to the changed market
realities after the Northridge earthquake. The city of Grand Forks
offered business loans which provided incentives to remain within the
community. Further, tax incentives targeted to businesses and projects
consistent with long-term recovery goals can provide another tool to
help affected businesses recover.
Finally, federal, state, and local governments have looked for ways to
adopt a comprehensive approach to combating fraud, waste, and abuse.
The influx of financial assistance available to victims after a major
disaster provides increased opportunities for fraud, waste, and abuse.
Specifically, disaster victims are at increased risk for contractor
fraud. To address this issue after the 1997 Red River flood, the city
of Grand Forks, North Dakota established a credentialing program that
issued special photo identifications to contractors who passed
licensing and criminal checks. Residents were advised to check for
these credentials as they hired contractors to rebuild. Also at risk
for fraud, waste, and abuse are federal and state disaster assistance
programs. The need to quickly provide assistance to victims puts
assistance payments at risk to fraudulent applicants who try to obtain
benefits that they are not entitled to receive. We have previously
testified that with a framework that prevents, detects, and monitors
issues of fraud, waste, and abuse, government programs should not have
to make a choice between the speedy delivery of disaster recovery
assistance and effective fraud protection.[Footnote 6]
We provided a draft of this report to the Federal Coordinator of Gulf
Coast Recovery in the Department of Homeland Security. In addition, we
provided drafts of the relevant sections of this report to officials
involved in the particular practices we describe, as well as experts in
disaster recovery. They generally agreed with the contents of this
report. We have incorporated their technical comments as appropriate.
Background:
Overview of the disaster recovery process. According to the Department
of Homeland Security's National Response Framework, once immediate
lifesaving activities are complete after a major disaster, the focus
shifts to assisting individuals, households, critical infrastructure,
and businesses in meeting basic needs and returning to self-
sufficiency. Even as the immediate imperatives for response to an
incident are being addressed, the need to begin recovery operations
emerges. The emphasis on response gradually gives way to recovery
operations. During the recovery phase, actions are taken to help
individuals, communities, and the nation return to normal.
The National Response Framework characterizes disaster recovery as
having two phases: short-term recovery and long-term recovery.[Footnote
7]
* Short-term recovery is immediate and an extension of the response
phase in which basic services and functions are restored. It includes
actions such as providing essential public health and safety services,
restoring interrupted utility and other essential services,
reestablishing transportation routes, and providing food and shelter
for those displaced by the incident. Although called short-term, some
of these activities may last for weeks.
* Long-term recovery may involve some of the same actions as short-term
recovery but may continue for a number of months or years, depending on
the severity and extent of the damage sustained. It involves restoring
both the individual and the community, including the complete
redevelopment of damaged areas. Some examples of long-term recovery
include providing permanent disaster-resistant housing units to replace
those destroyed, initiating a low-interest façade loan program for the
portion of the downtown area that sustained damage from the disaster,
and initiating a buyout of flood-prone properties and designating them
community open space.
As the President has previously noted, state and local leaders have the
primary role in planning for recovery efforts. Under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (Stafford Act),
the federal government is authorized to provide assistance to those
jurisdictions in carrying out their responsibilities to alleviate
suffering and damage which results from disasters.[Footnote 8] In
general under the Stafford Act, the federal role is to assist state and
local governments--which have the primary role with regard to recovery
efforts.
In major disasters where the event overwhelms the capacity of state and
local governments, the federal government can offer more assistance to
supplement the efforts and available resources of states, local
governments, and disaster relief organizations in alleviating the
damage, loss, hardship, or suffering caused by the disaster. After a
major disaster, the federal government may provide unemployment
assistance; food coupons to low-income households; and repair,
restoration, and replacement of certain damaged facilities, among other
things. For example, the city of New Orleans estimated this April that
the federal government will provide over $15 billion for the rebuilding
of the city through numerous disaster assistance programs, including
FEMA's Public Assistance Grant Program and Community Disaster Loan
program, and the Department of Housing and Urban Development's
Community Development Block Grants program. Nevertheless, state and
local governments have the main responsibility of applying for,
receiving, and implementing federal assistance. Further, they make
decisions about what priorities and projects the community will
undertake for recovery.
Impact of Hurricanes Gustav and Ike. Hurricanes Gustav and Ike made
landfall in the Gulf Coast this month, resulting in federal major
disaster declarations for 95 counties in Texas, Louisiana, and Alabama
(see fig. 1). Gustav made landfall near Cocodrie, Louisiana, as a
category 2 hurricane on September 1, 2008. Ike made landfall as a
category 2 hurricane near Galveston, Texas, on September 13, 2008.
These hurricanes have caused widespread damage to affected Gulf Coast
states. For example, the state of Louisiana has confirmed 10 Gustav-
related deaths. Recent press accounts have attributed the death of
about 50 people in the United States to Hurricane Ike.
Further, Hurricanes Gustav and Ike have significantly disrupted utility
service as well as oil and natural gas production in the Gulf Coast.
Specifically, Gustav caused power outages for over 1.1 million
Louisiana and Mississippi customers, while over 2.2 million customers
in Texas lost power after Ike made landfall. The hurricanes have also
affected oil and natural gas production in the Gulf Coast. Most of the
refineries in Gustav's path were affected, resulting in a 100 percent
reduction in crude oil production. Almost all refineries in Ike's path
shut down, halting crude oil production in the area by 99.9 percent.
Over half of the 39 major natural gas processing plants in the affected
areas have ceased operations as a result of Hurricanes Gustav and Ike,
reducing the total operating capacity of the region by 65 percent.
Given the recent landfall of these hurricanes, comprehensive damage
assessments from government agencies were not available at the time of
this report's issuance.
Figure 1: Counties in Gulf Coast States That Received Federal Major
Disaster Declarations as a Result of Hurricanes Gustav and Ike:
This figure is a map showing counties in the Gulf Coast states that
received federal major disaster declarations as a result of hurricanes
Gustav and Ike.
[See PDF for image]
Source: GAO analysis of FEMA data.
[End of figure]
Impact of the 2008 Midwest Floods. Heavy rainfall across much of the
northern half of the Great Plains during early June 2008 resulted in
river flooding. This flooding became increasingly severe as heavy rain
continued into the second week of June and rising rivers threatened
dams and levees and submerged large areas of farmland along with many
cities and towns. As a result, the President issued federal major
disaster declarations for counties in seven states: Illinois, Indiana,
Iowa, Missouri, Minnesota, Nebraska, and Wisconsin (see fig. 2). The
flooding resulted in widespread damage for some communities in these
states. For example, the rivers in Cedar Rapids, Iowa, crested over 30
feet, flooding 10 square miles of the city and displacing over 18,000
people and several city facilitates, including the city hall, police
department, and fire station. The flooding also affected agricultural
production in these states. For example, the state of Indiana estimates
the floods will result in a crop shortfall of $800 million in the
coming year and $200 million in damaged farmlands.
Figure 2: Counties in Seven Midwest States That Received Federal Major
Disaster Declarations as a Result of 2008's Severe Flooding:
This figure is a map showing counties in seven midwest states that
received federal major disaster declarations as a result of 2008's
severe flooding.
[See PDF for image]
Source: GAO analysis of FEMA data.
[End of figure]
Scope and Methodology:
To identify insights from past disasters we interviewed officials
involved in disaster recovery in the United States and Japan.
Domestically, we met with officials from state and local governments
affected by the selected disasters, as well as representatives of
nongovernmental organizations involved in long-term recovery. In Japan,
we met with officials from the government of Japan, Hyogo Prefecture,
and the city of Kobe. In addition, we also interviewed over 40 experts-
-both domestic and international--on the subject of disaster recovery.
We visited the key communities affected by five of the six disasters in
our study to meet officials involved in the recovery effort and examine
current conditions. While we did not visit communities affected by the
Red River flood, we were able to gather the necessary information
through interviews by telephone with key officials involved in the
recovery as well as recovery experts knowledgeable about the disaster.
Further, we obtained and reviewed legislation, ordinances, policies,
and program documents that described steps taken to facilitate long-
term recovery following each of our selected disasters. The scope of
our work did not include independent evaluation or verification
regarding the extent to which the communities' recovery efforts were
successful.
We also drew on previous work we have conducted on recovery efforts in
the aftermath of the 2005 Gulf Coast hurricanes. We have issued
findings and recommendations on several aspects of the Gulf Coast
recovery, including protecting federal disaster programs from fraud,
waste, and abuse; providing tax incentives to assist recovery; and
determining the role of the nonprofit sector in providing assistance to
that region. See figure 3 for the locations of the six disasters that
we selected for this review. We reviewed lessons from past disasters
and collected information about the impact of Hurricanes Ike and Gustav
and the 2008 Midwest floods from June 2007 through September 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Figure 3: Six Disasters Included in This Review (1989-2005):
This figure is a map showing six disasters included in this review
(1989-2005).
Loma Prieta Earthquake, 1989: Northern California;
Hurricane Andrew, 1992: South Florida;
Northridge Earthquake, 1994: Southern California;
Kobe Earthquake, 1995: Southeastern Japan;
Grand Forks/ Red River Flood, 1997: North Dakota and Minnesota;
Hurricanes Katrina and Rita, 2005: Gulf Coast states.
[See PDF for image]
Source: GAO; Art Explosion (map).
[End of figure]
Create a Clear, Implementable, and Timely Recovery Plan:
After a major disaster, a recovery plan can provide state and local
governments with a valuable tool to document and communicate recovery
goals, decisions, and priorities. Such plans offer communities a
roadmap as they begin the process of short-and long-term recovery. The
process taken to develop these plans also allows state and local
governments to involve the community in identifying recovery goals and
priorities. After past disasters, the federal government has both
funded and provided technical assistance on how to create such plans.
In our review of recovery plans that state and local governments
created after major disasters, we identified three key characteristics.
Specifically, these plans (1) identified clear goals for recovery, (2)
included detailed information to facilitate implementation, and (3)
were established in a timely manner.
Identify Clear Recovery Goals:
A recovery plan containing clear goals can provide direction and
specific objectives for communities to focus on and strive for. Clear
recovery goals can also help state and local governments prioritize
projects, allocate resources, and establish a basis for subsequent
evaluations of the recovery progress. After the 1995 Kobe earthquake in
Japan, the areas most hard-hit by the disaster--Hyogo prefecture and
the city of Kobe--identified specific recovery goals to include in
their plans. Among these were the goals of rebuilding all damaged
housing units in 3 years, removing all temporary housing within 5
years, and completing physical recovery in 10 years. According to later
evaluations of Kobe's recovery conducted by the city and recovery
experts, these goals were critical for helping to coordinate the wide
range of participants involved in the recovery. In addition, it helped
to inform the national government's subsequent decisions for funding
recovery projects in these areas.
These goals also allowed the government to communicate its recovery
progress with the public. Each month, information on progress made
towards achieving these goals was provided to the public on-line and to
the media at press conferences. This communication helped to inform the
public about the government's recovery progress on a periodic basis.
Further, these goals provided a basis for assessing the recovery
progress a few years after the earthquake. Both Hyogo and Kobe convened
panels of international and domestic experts on disaster recovery as
well as community members to assess the progress made on these targets
and other recovery issues. These evaluations enabled policymakers to
measure the region's progress towards recovery, identify needed changes
to existing policies, and learn lessons for future disasters.
Similar efforts to inform the public about the government's recovery
progress are being taken in the wake of the 2005 Gulf Coast hurricanes.
In February 2008, FEMA and the Federal Coordinator of Gulf Coast
Recovery launched its Transparency Initiative. This web-based
information sharing effort provides detailed information about selected
buildings and types of projects in the Gulf Coast receiving Public
Assistance grants. For example, the web site provides information on
whether specific New Orleans schools are open or closed and how much
federal funding is available for each school site. To do this, FEMA and
Federal Coordinator staff pulled together information from state and
locals as well as data on all Public Assistance grants for permanent
infrastructure throughout the Gulf Coast. According to the Office of
the Federal Coordinator, the initiative has been useful in providing
information on federal funds available and the status of infrastructure
projects in a clear and understandable way to the general public and a
wide range of stakeholders.
Include Detailed Information to Facilitate Implementation:
With the uncertainty that can exist after major disasters, the
inclusion of detailed implementation information in recovery plans can
help communities realize their recovery goals. Implementable recovery
plans specify objectives and tasks, clarify roles and responsibilities,
and identify potential funding sources. Approximately 3 months after
the 1997 Red River flood, the city of Grand Forks approved a recovery
plan with these characteristics that helped the city take action
towards achieving recovery.
First, the Grand Forks plan identified 5 broad recovery goals covering
areas such as housing and community redevelopment, business
redevelopment, and infrastructure rehabilitation. The plan details a
number of supporting objectives and tasks to be implemented in order to
achieve the stated goals. For example, one of the 5 goals included the
plan was to clean up, repair, and rehabilitate the city's
infrastructure and restore public services to pre-flood conditions. The
plan outlined 5 objectives to accomplish that goal, including repairing
and rehabilitating the city's water distribution and treatment
facilities. Some of the tasks specified in the plan to achieve that
objective are repairing pumping stations, fixing water meters, and
completing a 2-mile limit drainage master plan. Additionally, the plan
identified a target completion date for each task so that the city can
better manage the mix of short-and long-term activities necessary to
recover.
Second, the Grand Forks recovery plan clearly identified roles and
responsibilities associated with the specific tasks, which helped with
achieving broader recovery goals. To do this, the plan identified which
personnel--drawn from city, state, and federal agencies--would be
needed to carry out each task. For example, the plan called for
collaboration of staff from the city's urban development and
engineering/building inspection departments, FEMA, and the Army Corp of
Engineers to create an inventory of substantially damaged buildings in
the downtown area. By clarifying the roles and responsibilities of
those who would be involved in accomplishing specific tasks, the plan
provided detailed information to facilitate implementation.
Third, the Grand Forks plan also identified funding sources for each
recovery task. For example, to fund the task of cleaning up and
repairing street lights (which would help achieve the objective of
cleaning, repairing, and rehabilitating the city's streets), the plan
referenced sources from FEMA's Public Assistance Grant Program, the
state of North Dakota, and the city's general revenue fund. The plan
contained a detailed financing matrix, organized by the broader
recovery goals identified in the body of the plan, which identified
various funding sources for each task (see fig. 4). The matrix also
included a target completion date for each task. A city evaluation of
the recovery plan found that the process of specifying goals and
identifying funding sources allowed the city to conceive and formulate
projects in collaboration with the city council and representatives
from state and local governments. This helped Grand Forks meet its
recovery needs as well as adhere to federal and state disaster
assistance funding laws and regulations.
Figure 4: Excerpt from the Financing Matrix in Grand Forks' Recovery
Plan Which Identified Potential Funding Sources and Target Dates for
Recovery Tasks:
This figure is a chart showing an excerpt from the financial matrix in
Grand Fork's recovery plan, which identified potential funding scores
and target dates for recovery tasks.
[See PDF for image]
Source: City of Grand Forks, North Dakota.
Note: "CDBG" refers to the Department of Housing and Urban
Development's Community Development Block Grant Program, "FEMA 406"
refers to FEMA's Public Assistance Grant Program, "FEMA 404" refers to
FEMA's Mitigation Grant Program, and "FHWA" refers to the Federal
Highway Administration.
[End of figure]
The recovery plans created by the Hyogo and Kobe governments after the
1995 earthquake also helped to facilitate the funding of recovery
projects. It served as the basis of discussions with the national
government regarding recovery funding by clearly communicating local
goals and needs. Towards this end, Hyogo and Kobe submitted their
recovery plans to a centralized recovery organization that included
officials from several national agencies including the Ministry of
Finance and the Ministry of Construction. Ministry staff worked with
local officials to reconcile the needs identified in their recovery
plans with national funding constraints and priorities. As a result of
this process, local officials were able to adjust their recovery plans
to reflect national budget and funding realities.
Establish the Plan in a Timely Manner:
Some state and local governments quickly completed recovery plans just
a few short months after a major disaster. These plans helped to
facilitate the ensuing recovery process by providing a clear framework
early on. The regional governments affected by the Kobe earthquake
promptly created recovery plans to help ensure that they could take
advantage of central government funding as soon as possible. After the
earthquake, there was a relatively short amount of time to submit
proposals for the national budget in order to be considered for the
coming year. Facing this deadline, local officials devised a two-phase
strategy to develop a plan that could quickly identify broad recovery
goals to provide a basis for budget requests to meet the national
budget deadline. After that initial planning phase, the governments
then collaborated with residents to develop detailed plans for specific
communities.
In the first phase, Kobe focused on creating a general plan to identify
broad recovery goals, such as building quality housing, restoring
transportation infrastructure, and building a safer city. This first
plan was issued 2 months after the earthquake and contained 1,000
projects with a budget of $90 billion. It was designed to establish the
framework for recovery actions and to provide the basis for obtaining
central government funds. In the second phase, the city involved
residents and local organizations, including businesses and community
groups, to develop a more detailed plan for the recovery of specific
neighborhoods. This second plan began 6 months after the earthquake.
The two-phase planning process enabled Kobe and Hyogo to meet their
tight national budget submission deadline while allowing additional
time for communities to develop specific recovery strategies.
Build State and Local Capacity for Recovery:
Given the lead role that state and local governments play in disaster
recovery, their ability to act effectively directly affects how well
communities recover after a major disaster. There are different types
of capacity that can be enhanced to facilitate the recovery process.
One such capacity is the ability of state and local governments to make
use of various kinds of disaster assistance. The federal government--
along with other recovery stakeholders, such as nongovernmental
organizations--plays a key supporting role by providing financial
assistance through a range of programs to help affected jurisdictions
recover after a major disaster. However, state and local governments
may need certain capacities to effectively make use of this federal
assistance, including having financial resources and technical know-
how. More specifically, state and local governments are often required
to match a portion of the federal disaster assistance they
receive.[Footnote 9] Further, affected jurisdictions may also need
additional technical assistance on how to correctly and effectively
process applications and maintain required paperwork. Following
Hurricanes Ike and Gustav and the Midwest floods earlier this year,
building up these capacities may improve affected jurisdictions'
ability to navigate federal disaster programs.
Enhance Local Financial Capacity:
After a major disaster, state and local governments may not have
adequate financial capacity to perform many short-and long-term
recovery activities, such as continuing government operations and
paying for rebuilding projects. The widespread destruction caused by
major disasters can impose significant unbudgeted expenses while at the
same time decimate the local tax base. Further, federal disaster
programs often require state and local governments to match a portion
of the assistance they receive, which may pose an additional financial
burden. In the past, affected jurisdictions have used loans from a
variety of sources including federal and state governments to enhance
their local financial capacity. For example, the Stafford Act
authorizes FEMA to administer the Community Disaster Loan program which
can be used by local governments to provide essential postdisaster
services. Additionally, affected localities have used special taxes to
build local financial capacity after major disasters.
Providing a loan to local governments is one way to build financial
capacity after a disaster. Soon after the 1997 Red River flood, the
state-owned Bank of North Dakota provided a line of credit totaling
over $44 million to the city of Grand Forks. The city used this loan to
meet FEMA matching requirements, provide cash flow for the city
government to meet operating expenses, and fund recovery projects that
commenced before the arrival of federal assistance. The city of New
Orleans also sought state loans to help build financial capacity in the
aftermath of the 2005 Gulf Coast hurricanes. The city is working with
Louisiana to develop a construction fund to facilitate recovery
projects. The fund would enable New Orleans to have more access to
money to fund projects upfront and reduce the level of debt that the
city would otherwise incur.
Another way to augment local financial capacity is to raise revenue
through temporary taxes that local governments can target according to
their recovery needs. After the 1989 Loma Prieta earthquake, voters in
Santa Cruz County took steps to provide additional financial capacity
to affected localities. The county implemented a tax increment, called
"Measure E," about 1 year after the disaster, which increased the
county sales tax by ½ cent for 6 years. The proceeds were targeted to
damaged areas within the county based on an allocation approved by
voters. Measure E generated approximately $12 million for the city of
Santa Cruz, $15 million for the city of Watsonville, and $17 million
for unincorporated areas of Santa Cruz County.
According to officials from Watsonville and Santa Cruz, Measure E
provided a critical source of extra funding for affected Santa Cruz
County localities. For example, officials from Watsonville (whose
general fund annual budget was about $17 million prior to the
earthquake) used proceeds from Measure E to meet matching requirements
for FEMA's Public Assistance Grant Program. These officials also used
Measure E to offset economic losses from the earthquake, as well as
provide financing for various recovery projects, such as creating
programs to repair damaged homes and hiring consultants that helped the
community plan for long-term recovery. While raising local sales taxes
may not be a feasible option for all communities, Santa Cruz officials
recognized the willingness of county voters to support this strategy.
Similarly, state and local governments in the Gulf Coast and Midwest
states can look to develop strategies for increasing financial capacity
in ways that are both practical and appropriate for their communities.
Strengthen Local Technical Capacity:
State and local governments face the challenge of implementing the wide
range of federal programs that provide assistance for recovery from
major disasters. Some of these federal programs require a certain
amount of technical know-how to navigate. For example, FEMA's Public
Assistance Grant Program has complicated paperwork requirements and
multistage application processes that can place considerable demands on
applicants.
After the 2005 Gulf Coast hurricanes, FEMA and Mississippi state
officials used federal funding to obtain an on-line accounting system
that tracked and facilitated the sharing of operational documents,
thereby reducing the burden on applicants of meeting Public Assistance
Grant Program requirements. According to state and local officials, the
state contracted with an accounting firm that worked hand-in-hand with
applicants to regularly scan and transmit documentation on
architectural and engineering estimates, contractor receipts, and
related materials from this Web-based system. As a result, FEMA and the
state had immediate access to key documents that helped them to make
project approval decisions. Further, local officials reported that this
information-sharing tool, along with contractor staff from an
accounting firm, helped to relieve the documentation and resulting
human capital burdens that state and local applicants of the Public
Assistance Grant Program faced during project development.
Implement Strategies for Business Recovery:
Business recovery is a key element of a community's recovery after a
major disaster. Small businesses are especially vulnerable to these
events because they often lack resources to sustain physical losses and
have little ability to adjust to market changes. Widespread failure of
individual businesses may hinder a community's recovery. Federal,
state, and local governments have developed strategies to facilitate
business recovery, including several targeted at small businesses.
These strategies helped businesses adapt to postdisaster market
conditions, helped reduce business relocation, and allowed businesses
to borrow funds at lower interest rates than would have been otherwise
available.
Provide Technical Assistance to Help Businesses Adapt to Postdisaster
Realities:
Major disasters can change communities in ways that require businesses
to adapt. For example, following Hurricane Andrew, large numbers of
people left south Miami-Dade County. The closing of Homestead Air Force
Base, which was permanently evacuated just hours before the hurricane
struck, reduced the population of the area significantly. Moreover, the
base closure removed families and individuals with reliable incomes and
spending power. Following the departure of Air Force personnel and
dependents, winter residents and retired people also left in great
numbers, never to return. Today, the city of Homestead is an entirely
different place as community demographics have changed dramatically.
Businesses that did not adapt to this new reality did not survive.
The extent to which business owners can recognize change and adapt to
the postdisaster market for goods and services can help those firms
attain long-term viability after a disaster. Recognizing this after the
Northridge earthquake, Los Angeles officials assisted neighborhood
businesses in adapting to short-and long-term changes, using a
combination of federal, state, and local funds. The Northridge
earthquake caused uneven damage throughout the Los Angeles area,
leaving some neighborhoods largely intact while creating pockets of
damaged, abandoned buildings. Businesses in these areas suffered
physical damage and the loss of customers when area residents abandoned
their homes.
The Valley Economic Development Center (VEDC), a local non-profit,
established an outreach and counseling program to provide direct
technical assistance to affected businesses throughout the San Fernando
Valley after the Northridge earthquake. With funding from the city of
Los Angeles, the state of California, and the Small Business
Administration, VEDC provided guidance on obtaining federal and local
governmental financial assistance, as well as strategies for adjusting
to changes in the business environment. Toward this end, VEDC staff
went door-to-door in affected business districts, served as a
clearinghouse for information on earthquake recovery, sponsored
workshops, reached out to business owners, and collected detailed
information about businesses. VEDC also hosted conferences that taught
business owners how to strategically market goods and services given
the changed demographics. Speakers at these conferences provided
information about the economic and social impact of the earthquake.
VEDC estimates that over 6,000 businesses were served by these efforts.
Additionally, they found that these services helped saved almost 8,000
jobs in the San Fernando Valley. Continuing programs provided
counseling and assistance with applying for financial assistance to
hundreds of businesses for more than 5 years after the earthquake.
The potential value of this type of technical assistance is illustrated
by an example of a Northridge business that did not receive it. A well-
established fish market outside of the San Fernando Valley reopened
after the earthquake with the intention of resuming its formerly
successful business of selling the same inventory that it sold before
the disaster. However, as a result of the earthquake, the area's
customer base had changed significantly and the new population did not
purchase the market's merchandise. Despite spending his life savings to
restore the business, the owner suffered considerable losses and
eventually was forced to close the fish market after the lease expired.
Create Strategies to Minimize Business Relocation and the Loss of
Customer Base:
Since major disasters can bring significant change to business
environments, communities may look for ways to help retain some
existing businesses because widespread relocation can hinder recovery.
In an effort to minimize relocations after the Red River flood, the
city of Grand Forks created incentives to encourage businesses to
remain in the community using funds from the Department of Housing and
Urban Development's Community Development Block Grant program and the
Department of Commerce's Economic Development Administration. Grand
Forks developed a program that provided $1.75 million in loans to
assist businesses that suffered physical damage in the flood. This
program offered 15-year loans with no interest or payments required for
the first 5 years of the loan. In addition, businesses which continued
to operate within the city at the end of 3 years had 40 percent of the
loan's principal forgiven. A Grand Forks official said that over 70
percent of the businesses that received the loan stayed in the
community for at least 3 years. This official also estimated that over
40 percent of the businesses would have closed without the loan
program.
The city of Santa Cruz also took steps to minimize the relocation of
businesses from its downtown shopping district, which also helped to
maintain a customer base for the community. Within weeks of the Loma
Prieta earthquake, the city worked together with community groups to
construct seven large aluminum and fabric pavilions where local
businesses that suffered physical damage temporarily relocated. These
pavilions, located in parking areas 1 block behind the main commercial
area, were leased to businesses displaced by the earthquake. Over 40
retail stores, including bookstores, cafes, and hardware stores,
operated out of the pavilions for up to 3 years while storefronts were
rebuilt (see fig. 5). City officials stated that these pavilions help
to mitigate the impact of the earthquake on small businesses by
enabling them to continue operations and thereby maintain their
customer base.
Figure 5: Temporary Pavilions in Santa Cruz, California, Following the
Loma Prieta Earthquake:
This figure is a photograph of temporary pavilions in Santa Crus,
California following the Loma Prieta earthquake.
[See PDF for image]
Source: Photograph courtesy of Charles Eadie (1990).
[End of figure]
In contrast, officials near Santa Cruz in the city of Watsonville did
not create such temporary locations after the Loma Prieta earthquake,
and as a result, businesses moved out of the downtown area to a newly
completed shopping center on the outskirts of the city. With the
relocation of these businesses, some consumers stopped shopping in
remaining stores in the downtown area. A senior Watsonville official
told us that these business relocations continue to hamper the recovery
of the downtown district almost two decades after the earthquake.
Implement an Allocation Strategy that Uses Federal Tax Incentives in a
Manner Consistent with Long-term Recovery Goals:
The federal government has used tax incentives to stimulate business
recovery after major disasters. These incentives provide businesses
with financial resources for recovery that may otherwise not be
available. Certain tax incentives are open-ended, meaning that any
individual or business that meets specified federal requirements may
claim the tax incentives. States allocate other tax incentives to
selected businesses, projects, or local governments and ensure
allocations do not exceed limits set for each state. For those tax
incentives where the states have primary allocation responsibility, an
opportunity exists for states to allocate the incentives in a manner
consistent with their communities' recovery goals. Midwest and other
states may find value in considering the experiences of communities
recovering from past disasters when developing their own approach in
how to allocate these incentives.
The Congress created tax incentives after the 2005 hurricanes through
the Gulf Opportunity Zone Act of 2005 (GO Zone Act) in part to promote
business recovery.[Footnote 10] Following those hurricanes, affected
state governments were responsible for allocating four tax incentives,
including a $14.9 billion tax-exempt private activity bond authority to
assist business recovery.[Footnote 11] These bonds allowed businesses
to borrow funds at lower interest rates than would have otherwise been
available because investors purchasing the bonds are not required to
pay taxes on the interest they earn on the bonds.[Footnote 12] The Gulf
Coast states exercising this authority are using the tax-exempt private
activity bonds for a wide range of purposes to support different
businesses, including manufacturing facilities, utilities, medical
offices, mortgage companies, hotels, and retail facilities.
Under the GO Zone Act, authorized states have established processes and
selected which projects were to receive these bond allocations up to
each state's allocation authority limit. These states generally used a
first-come, first-served basis for allocating the rights to issue tax-
exempt private activity bonds under the GO Zone Act and did not
consistently target the bond authority to assist recovery in the most
damaged areas at the beginning of the program. Officials in Louisiana
and Mississippi involved in allocating this authority acknowledged that
the first-come, first-served approach made it difficult for applicants
in some of the most damaged areas to make use of the bond provision
immediately following the 2005 hurricanes. Counties and parishes in the
most damaged coastal areas of Louisiana and Mississippi faced
challenges dealing with the immediate aftermath of the hurricanes and
could not focus on applying for this authority. Louisiana recently set
aside a portion of its remaining allocation authority for the most
damaged parishes.
This July, legislation was introduced in Congress modeled after the GO
Zone Act, which, among other tax incentives, would provide private
activity bond allocation authority to certain Midwest states to help
the victims of this year's floods.[Footnote 13] Under the proposed
legislation, similar to the GO Zone Act, affected states would also
have the authority to allocate additional low-income housing tax
credits for rental housing and issue tax credit bonds for temporary
debt relief, among other provisions. The Gulf Coast states' first-come,
first-served allocation process meant, according to some officials we
interviewed, that some projects that would have been viable without tax-
exempt private activity bond financing received tax-exempt private
activity bond allocations. Such allocations may not have fully
supported the long-term recovery goals of that region. This may be
particularly relevant to Midwest states given that the proposed
legislation contains provisions related to tax-exempt private activity
bonds similar to those authorized by the GO Zone Act of 2005.
Adopt a Comprehensive Approach to Combating Fraud, Waste, and Abuse:
The influx of federal financial assistance available to victims after a
major disaster provides increased opportunities for fraud, waste, and
abuse. Disaster victims are at risk, as well as the public funds
supporting government disaster programs. Specifically, many disaster
victims hire contractors to repair or rebuild their homes using
financial assistance from the government. Residents are potential
targets for fraud by unscrupulous contractors. In addition, government
programs are also vulnerable: the need to quickly provide assistance to
disaster victims puts assistance programs at risk of fraudulent
applicants trying to obtain benefits that they are not entitled to
receive. We identified two actions that state and local governments can
take after major disasters to combat fraud, waste, and abuse.
Require Credentialing to Help Reduce Contractor Fraud:
Communities are often faced with the problem of contractor fraud after
major disasters as large numbers of residents look to hire private
firms to repair or rebuild their homes and businesses. For example,
after Hurricane Andrew in 1992, over 7,000 homeowners filed formal
complaints of contractor fraud with Miami-Dade County's Construction
Fraud Task Force from August 1993 through March 1995. An official from
the Miami-Dade Office of the State Attorney reported that they
successfully prosecuted more than 300 felony cases, over 290
misdemeanor cases, and resulting in the restitution of more than $2.6
million to homeowners by October 1996. Other complaints that were not
criminal in nature resulted in substantial administrative fines and
additional restitution. More recently, FEMA and Midwest states
anticipate that fraud will also be a concern after this year's floods
and have issued warnings to residents about the need to be vigilant for
potentially fraudulent contractors. To help address this issue, FEMA
has issued tips and guidelines to the public about hiring contractors.
To help protect its residents from contractor fraud after the Red River
flood, the city of Grand Forks established a required credentialing
program for contractors. This included a "one-stop shop" that served as
a mandatory clearinghouse for any contractor who wanted to do business
with recovering residents. The clearinghouse was staffed by
representatives from a range of city and state offices, including the
North Dakota Secretary of State, the North Dakota Attorney General, the
North Dakota Workers Compensation Bureau, the North Dakota Bureau of
Criminal Investigations, and the Grand Forks Department of
Administration and Licensing. These staff carried out a variety of
functions, including checking that contractors had appropriate
licenses, insurance, and no criminal records, in addition to collecting
application fees and filing bonding information. After passing these
checks and completing all the required applications, contractors were
issued photo identification cards, which they were required to carry at
all times while working within the city limits.
To inform its citizens about this program, Grand Forks officials
conducted press briefings urging residents to check for these photo
identifications and to hire only credentialed contractors. In about 2
months, the city issued approximately 500 new contractor licenses and
2,000 contractor identification cards through the one-stop shop. During
that same period, officials arrested more than 20 individuals who had
outstanding warrants. City and state officials credited this approach
with playing a key role in limiting contractor fraud in Grand Forks
during the recovery from the Red River flood.
In the wake of this year's flooding, the city of Cedar Rapids, Iowa,
has created a similar contractor credentialing program modeled after
Grand Forks' One-Stop-Shop program, in an effort to minimize instances
of contractor fraud. Cedar Rapid's program requires contractors to
visit a local mall where representatives from the police department and
community development, and code enforcement divisions are assembled.
There, city officials check contractors' licenses and insurance
policies, as well as conducting criminal background checks. Similar to
Grand Forks' program, contractors who pass checks are issued photo
identification cards. Those who do not obtain identification before
working in the area can incur a fine of $100 or face up to 30 days of
jail time. As of August 2008, over 900 local and out-of-town
contracting companies and 6,200 individual contractors have been
credentialed through this program. Twelve people have been arrested as
a result of outstanding warrants that were identified through criminal
background checks.
Establish State Framework to Combat Fraud, Waste, and Abuse:
Our prior work on FEMA's Individuals and Households Program payments
and the Department of Homeland Security's purchase card program show
that fraud, waste, and abuse related to disaster assistance in the wake
of the 2005 Gulf Coast hurricanes are significant.[Footnote 14] We have
previously estimated improper and potentially fraudulent payments
related to the Individuals and Households Program application process
to be approximately $1 billion of the first $6 billion
provided.[Footnote 15] In addition, FEMA provided nearly $20 million in
duplicate payments to individuals who registered and received
assistance twice by using the same Social Security number and
address.[Footnote 16] Similarly, the Hurricane Katrina Fraud Task
Force--comprised of the Department of Justice's Criminal Division and
Offices of the United States Attorneys; several other federal agencies,
including the Federal Bureau of Investigations, Secret Service, and
Securities and Exchange Commission; and various representatives of
state and local law enforcement--have collaborated to prosecute
instances of fraud related to the hurricane. According to the Office of
the Federal Coordinator of Gulf Coast Recovery, the efforts of the task
force have resulted in the indictment of over 890 cases of fraud to
date.
Because of the role state governments play in distributing and
allocating this federal assistance, these known vulnerabilities call
for states to establish effective controls to minimize opportunities
for individuals to defraud the government. With the need to provide
assistance quickly and expedite purchases, programs without effective
fraud prevention controls can end up losing millions or potentially
billions of dollars to fraud, waste, and abuse. We have previously
testified on the need for fraud prevention controls, fraud detection,
monitoring adherence to controls throughout the entire program life,
collection of improper payments, and aggressive prosecution of
individuals committing fraud.[Footnote 17] These controls are crucial
whether dealing with programs to provide housing and other needs
assistance or other recovery efforts. By creating such a fraud
protection framework--especially the adoption of fraud prevention
controls--government programs should not have to make a choice between
the speedy delivery of disaster recovery assistance and effective fraud
protection.
Concluding Observations:
While receiving millions of dollars in federal assistance, state and
local governments bear the main responsibility for helping communities
cope with the destruction left in the wake of major disasters. Now that
the wind and storm surge from Hurricanes Ike and Gustav have passed and
the Midwest flood waters have subsided, state and local governments
face a myriad of decisions regarding the short-and long-term recovery
of their communities. We have seen that actions taken shortly after a
major disaster and during the early stages of the recovery process can
have a significant impact on the success of a community's long-term
recovery. Accordingly, this is a critical time for communities affected
by these major disasters.
Insights drawn from state and local governments that have experienced
previous major disasters may provide a valuable opportunity for
officials to anticipate challenges and adopt appropriate strategies and
approaches early on in the recovery process. There is no one right way
for how state and local governments should manage recovery from a major
disaster, nor is there a recipe of techniques that fits all situations.
While many of the practices we describe in this report were tailored to
the specific needs and conditions of a particular disaster, taken
together, they can provide state and local officials with a set of
tools and approaches to consider as they move forward in the process of
recovering from major disasters.
Agency Comments:
We provided a draft of this report to the Federal Coordinator of Gulf
Coast Recovery in the Department of Homeland Security. In addition, we
provided drafts of the relevant sections of this report to officials
involved in the particular practices we describe, as well as experts in
disaster recovery. They generally agreed with the contents of this
report. We have incorporated their technical comments as appropriate.
We are sending copies of this report to other interested congressional
committees, the Secretary of Homeland Security, the FEMA Administrator,
and state and local officials affected by Hurricanes Ike and Gustav as
well as the Midwest floods. We will make copies available to others on
request. In addition, the report will be available at no charge on
GAO's Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-6806 or czerwinskis@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made key contributions
to this report are listed in appendix II.
Signed by:
Stanley J. Czerwinski:
Director Strategic Issues:
[End of section]
Appendix I: Selected GAO Products Related to Disaster Recovery:
Recovery from the 2005 Gulf Coast Hurricanes:
Gulf Coast Rebuilding: Observations on Federal Financial Implications.
GAO-07-1079T. Washington. D.C.: August 2, 2007.
Preliminary Information on Rebuilding Efforts in the Gulf Coast. GAO-
07-809R. Washington, D.C.: June 29, 2007.
Gulf Coast Rebuilding: Preliminary Observations on Progress to Date and
Challenges for the Future. GAO-07-574T. Washington, D.C.: April 12,
2007.
Catastrophic Disasters: Enhanced Leadership, Capabilities, and
Accountability Controls Will Improve the Effectiveness of the Nation's
Preparedness, Response, and Recovery System. GAO-06-618. Washington,
D.C.: September 6, 2006.
Hurricane Katrina: GAO's Preliminary Observations Regarding
Preparedness, Response, and Recovery. GAO-06-442T. Washington, D.C.:
March 8, 2006.
Hurricane Katrina: Providing Oversight of the Nation's Preparedness,
Response, and Recovery Activities. GAO-05-1053T. Washington, D.C.:
September 28, 2005.
Agricultural Issues:
Department of Agriculture, Farm Service Agency: 2005 Section 32
Hurricane Disaster Programs; 2006 Livestock Assistance Grant Program.
GAO-07-715R. Washington, D.C.: April 16, 2007.
Department of Agriculture, Commodity Credit Corporation: 2006 Emergency
Agricultural Disaster Assistance Programs. GAO-07-511R. Washington,
D.C.: April 16, 2007.
Contracting Issues:
Small Business Contracting: Observations from Reviews of Contracting
and Advocacy Activities of Federal Agencies. GAO-07-1255T. Washington,
D.C.: September 26, 2007.
Hurricane Katrina: Agency Contracting Data Should Be More Complete
Regarding Subcontracting Opportunities for Small Business. GAO-07-
698T. Washington, D.C.: April 12, 2007.
Hurricane Katrina: Agency Contracting Data Should Be More Complete
Regarding Subcontracting Opportunities for Small Businesses. GAO-07-
205. Washington, D.C.: March 1, 2007.
Hurricane Katrina: Improving Federal Contracting Practices in Disaster
Recovery Operations. GAO-06-714T. Washington, D.C.: May 4, 2006.
Hurricane Katrina: Army Corps of Engineers Contract for Mississippi
Classrooms. GAO-06-454. Washington, D.C.: May 1, 2006.
Hurricane Katrina: Planning for and Management of Federal Disaster
Recovery Contracts. GAO-06-622T. Washington, D.C.: April 10, 2006.
Hurricanes Katrina and Rita: Preliminary Observations on Contracting
for Response and Recovery Efforts. GAO-06-246T. Washington, D.C.:
November 8, 2005.
Hurricanes Katrina and Rita: Contracting for Response and Recovery
Efforts. GAO-06-235T. Washington, D.C.: November 2, 2005.
Fraud, Waste, and Abuse:
Hurricane Katrina: Ineffective FEMA Oversight of Housing Maintenance
Contracts in Mississippi Resulted in Millions of Dollars of Waste and
Potential Fraud. GAO-08-106. Washington, D.C.: November 16, 2007.
Hurricanes Katrina and Rita Disaster Relief: Continued Findings of
Fraud, Waste, and Abuse. GAO-07-300. Washington, D.C.: March 15, 2007.
Hurricanes Katrina and Rita Disaster Relief: Prevention Is the Key to
Minimizing Fraud, Waste, and Abuse in Recovery Efforts. GAO-07-418T.
Washington, D.C.: January 29, 2007.
Response to a post hearing question related to GAO's December 6, 2006
testimony on continued findings of fraud, waste, and abuse associated
with Hurricanes Katrina and Rita relief efforts. GAO-07-363R.
Washington, D.C.: January 12, 2007.
Hurricanes Katrina and Rita Disaster Relief: Continued Findings of
Fraud, Waste, and Abuse. GAO-07-252T. Washington, D.C.: December 6,
2006.
Purchase Cards: Control Weaknesses Leave DHS Highly Vulnerable to
Fraudulent, Improper, and Abusive Activity. GAO-06-1117. Washington,
D.C.: September 28, 2006.
Hurricanes Katrina and Rita: Unprecedented Challenges Exposed the
Individuals and Households Program to Fraud and Abuse; Actions Needed
to Reduce Such Problems in Future. GAO-06-1013. Washington, D.C.:
September 27, 2006.
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.: September
5, 2006.
Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution. GAO-06-954T. Washington, D.C.:
July 12, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and
Abuse. GAO-06-655. Washington, D.C.: June 16, 2006.
Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially
Fraudulent Individual Assistance Payments Estimated to Be Between $600
Million and $1.4 Billion. GAO-06-844T. Washington, D.C.: June 14, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and
Abuse. GAO-06-403T. Washington, D.C.: February 13, 2006.
Housing Issues:
Disaster Housing: Implementation of FEMA's Alternative Housing Pilot
Program Provides Lessons for Improving Future Competitions. GAO-07-
1143R. Washington, D.C.: August 31, 2007.
Disaster Assistance: Better Planning Needed for Housing Victims of
Catastrophic Disasters. GAO-07-88. Washington, D.C.: February 28, 2007.
Human Services and Environmental Protection Issues:
Hurricane Katrina: Continuing Debris Removal and Disposal Issues. GAO-
08-985R. Washington, D.C. August 25, 2008.
Hurricane Katrina: Trends in the Operating Results of Five Hospitals in
New Orleans before and after Hurricane Katrina. GAO-08-681R.
Washington, D.C.: July 17, 2008.
Hurricane Katrina: EPA's Current and Future Environmental Protection
Efforts Could Be Enhanced by Addressing Issues and Challenges Faced on
the Gulf Coast. GAO-07-651. Washington, D.C.: June 25, 2007.
Hurricane Katrina: Allocation and Use of $2 Billion for Medicaid and
Other Health Care Needs. GAO-07-67. Washington, D.C.: February 28,
2007.
Hurricanes Katrina and Rita: Federal Actions Could Enhance Preparedness
of Certain State-Administered Federal Support Programs. GAO-07-219.
Washington, D.C.: February 7, 2007.
Hurricane Katrina: Status of Hospital Inpatient and Emergency
Departments in the Greater New Orleans Area. GAO-06-1003. Washington,
D.C.: September 29, 2006.
Child Welfare: Federal Action Needed to Ensure States Have Plans to
Safeguard Children in the Child Welfare System Displaced by Disasters.
GAO-06-944. Washington, D.C.: July 28, 2006.
Lessons Learned for Protecting and Educating Children after the Gulf
Coast Hurricanes. GAO-06-680R. Washington, D.C.: May 11, 2006.
Hurricane Katrina: Status of the Health Care System in New Orleans and
Difficult Decisions Related to Efforts to Rebuild It Approximately 6
Months After Hurricane Katrina. GAO-06-576R. Washington, D.C.:
March 28, 2006.
Infrastructure Issues:
Army Corps of Engineers: Known Performance Issues with New Orleans
Drainage Canal Pumps Have Been Addressed, but Guidance on Future
Contracts Is Needed. GAO-08-288. Washington, D.C.: December 31, 2007.
U.S. Army Corps of Engineers' Procurement of Pumping Systems for the
New Orleans Drainage Canals. GAO-07-908R. Washington, D.C.: May 23,
2007.
Hurricane Katrina: Strategic Planning Needed to Guide Future
Enhancements Beyond Interim Levee Repairs. GAO-06-934. Washington,
D.C.: September 6, 2006.
Small Business Assistance Issues:
Small Business Administration: Response to the Gulf Coast Hurricanes
Highlights Need for Enhanced Disaster Preparedness. GAO-07-484T.
Washington, D. C.: February 14, 2007.
Small Business Administration: Additional Steps Needed to Enhance
Agency Preparedness for Future Disasters. GAO-07-114. Washington, D.C.:
February 14, 2007.
Small Business Administration: Actions Needed to Provide More Timely
Disaster Assistance. GAO-06-860. Washington, D.C.: July 28, 2006.
Tax Issues:
Gulf Opportunity Zone: States Are Allocating Federal Tax Incentives to
Finance Low-Income Housing and a Wide Range of Private Facilities. GAO-
08-913. Washington, D.C.: July 16, 2008.
Tax Compliance: Some Hurricanes Katrina and Rita Disaster Assistance
Recipients Have Unpaid Federal Taxes. GAO-08-101R. Washington, D.C.:
November 16, 2007.
Recovery from Other Natural Disasters:
Disaster Assistance: Guidance Needed for FEMA's 'Fast Track' Housing
Assistance Process. RCED-98-1. Washington, D.C.: October 17, 1997.
Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance. RCED-96-113. Washington, D.C.: May 23, 1996.
Emergency Relief: Status of the Replacement of the Cypress Viaduct.
RCED-96-136. Washington, D.C.: May 6, 1996.
Disaster Assistance: Information on Expenditures and Proposals to
Improve Effectiveness and Reduce Future Costs. T-RCED-95-140.
Washington, D.C.: March 16, 1995.
GAO Work on Disaster Assistance. RCED-94-293R. Washington, D.C.: August
31, 1994.
Los Angeles Earthquake: Opinions of Officials on Federal Impediments to
Rebuilding. RCED-94-193. Washington, D.C.: June 17, 1994.
Earthquake Recovery: Staffing and Other Improvements Made Following
Loma Prieta Earthquake. RCED-92-141. Washington, D.C.: July 30, 1992.
Transportation Infrastructure: The Nation's Highway Bridges Remain at
Risk From Earthquakes. RCED-92-59. Washington, D.C.: January 23, 1992.
Loma Prieta Earthquake: Collapse of the Bay Bridge and the Cypress
Viaduct. RCED-90-177. Washington, D.C.: June 19, 1990.
Disaster Assistance: Program Changes Expedited Delivery of Individual
and Family Grants. RCED-89-73. Washington, D.C.: April 4, 1989.
Disaster Insurance:
National Flood Insurance Program: Financial Challenges Underscore Need
for Improved Oversight of Mitigation Programs and Key Contracts. GAO-
08-437. Washington, D.C.: June 16, 2008.
Natural Catastrophe Insurance: Analysis of a Proposed Combined Federal
Flood and Wind Insurance Program. GAO-08-504. Washington, D.C.: April
25, 2008.
National Flood Insurance Program: Greater Transparency and Oversight of
Wind and Flood Damage Determinations Are Needed. GAO-08-28. Washington,
D.C.: December 28, 2007.
Natural Disasters: Public Policy Options for Changing the Federal Role
in Natural Catastrophe Insurance. GAO-08-7. Washington, D.C.: November
26, 2007.
Federal Emergency Management Agency: Ongoing Challenges Facing the
National Flood Insurance Program. GAO-08-118T. Washington, D.C.:
October 2, 2007.
National Flood Insurance Program: FEMA's Management and Oversight of
Payments for Insurance Company Services Should Be Improved. GAO-07-
1078. Washington, D.C.: September 5, 2007.
National Flood Insurance Program: Preliminary Views on FEMA's Ability
to Ensure Accurate Payments on Hurricane-Damaged Properties. GAO-07-
991T. Washington, D.C.: June 12, 2007.
National Flood Insurance Program: New Processes Aided Hurricane Katrina
Claims Handling, but FEMA's Oversight Should Be Improved. GAO-07-169.
Washington, D.C.: December 15, 2006.
Federal Emergency Management Agency: Challenges for the National Flood
Insurance Program. GAO-06-335T. Washington, D.C.: January 25, 2006.
Federal Emergency Management Agency: Challenges Facing the National
Flood Insurance Program. GAO-06-174T. Washington, D.C.: October 18,
2005.
Catastrophe Risk: U.S. and European Approaches to Insure Natural
Catastrophe and Terrorism Risks. GAO-05-199. Washington, D.C.: February
28, 2005.
Catastrophe Insurance Risks: The Role of Risk-Linked Securities. GAO-
03-195T. Washington, D.C.: October 8, 2002.
Catastrophe Insurance Risks: The Role of Risk-Linked Securities and
Factors Affecting Their Use. GAO-02-941. Washington, D.C.: September
24, 2002.
Federal Disaster Insurance. GGD-95-20R. Washington, D.C.: November 7,
1994.
Federal Disaster Insurance: Goals Are Good, But Insurance Programs
Would Expose the Federal Government to Large Potential Losses. T-GGD-
94-153. Washington, D.C.: May 26, 1994.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Stanley Czerwinski, (202) 512-6806 or CzerwinskiS@gao.gov:
Acknowledgements:
In addition to the individual named above, Peter Del Toro, Assistant
Director; Patrick Breiding; Michael Brostek; Keya Chateauneuf; Thomas
Gilbert; Shirley Hwang; Gregory Kutz; Donna Miller; John Mingus;
MaryLynn Sergent; and Diana Zinkl made key contributions to this
report.
[End of section]
Footnotes:
[1] Other recent natural disasters resulting in federal major disaster
declarations this year include Hurricane Dolly, which made landfall in
Texas in late July, and Tropical Storm Fay, which struck Florida in
late August.
[2] We selected natural disasters that occurred recently enough so that
key officials and supporting documentation were still available.
[3] The five disasters we studied that occurred in the United States
received major disaster declarations from the federal government. The
sixth disaster in our study, the Kobe earthquake, was a magnitude 7.3
earthquake that killed over 6,400 people in Japan and is also
considered a major disaster.
[4] In this report, unless otherwise noted, we refer to the 1997 flood
in Grand Forks, North Dakota and East Grand Forks, Minnesota, as the
"Red River flood." In addition, "the 2005 Gulf Coast Hurricanes" refers
to Hurricanes Katrina and Rita, and for the purposes of this report,
they are treated collectively as a single disaster event.
[5] FEMA's Public Assistance Grant Program provides funding to state
and local governments to repair and rebuild damaged public buildings
and infrastructure.
[6] GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is the
Key to Minimizing Fraud, Waste, and Abuse in Recovery Efforts, GAO-07-
418T (Washington, D.C.: Jan. 29, 2007).
[7] The National Response Framework, issued by the Department of
Homeland Security in January 2008, is a guide for how federal, state,
local, and tribal governments, along with nongovernmental and private
entities, will collectively respond to and recover from all disasters,
particularly catastrophic disasters such as Hurricane Katrina,
regardless of their causes.
[8] The Stafford Act, as amended, establishes the primary programs and
processes for the federal government to provide major disaster and
emergency assistance to states, local governments, tribal nations,
individuals, and qualified private nonprofit organizations. 42 U.S.C.
§§ 5121-5207.
[9] Under the Stafford Act, the federal share of Public Assistance
grants may not be less than 75 percent of the eligible cost of repair,
restoration, reconstruction, or replacement after most disasters. 42
U.S.C. § 5172(b)(1). FEMA Public Assistance regulations recommend
increasing the federal share from 75 percent to not more than 90
percent whenever a disaster is so severe that actual federal
obligations meet a certain benchmark level (in 2008, $122 per capita of
the state population). 44 C.F.R. § 206.47(b). The regulations also
provide that "if warranted by the needs of the disaster" FEMA will
recommend up to 100 percent federal funding for emergency work for a
limited period in the initial days of the disaster irrespective of the
per capita impact. 44 C.F.R. § 206.47(d).
[10] Pub. L. No. 109-135, 119 Stat. 2577 (Dec. 21, 2005). The GO Zone
Act of 2005 also included a number of tax incentives available to
businesses and individuals not subject to state allocation limits.
These provisions are not addressed in the scope of this report.
[11] In addition to the tax-exempt private activity bond authority, the
GO Zone Act of 2005 authorized Gulf Coast states additional low-income
housing tax credit authority for building rental housing, authority to
advance refund certain tax-exempt bonds that could not otherwise be
advance refunded, and issue tax credit bonds, a relatively new form of
tax incentive where investors receive a credit against their tax
liability in lieu of receiving interest on the bonds. The latter two
provisions provided debt relief to the states in the aftermath of the
Gulf Coast hurricanes. For more information on how these provisions
were allocated and used in the GO Zone, see GAO, Gulf Opportunity Zone:
States Are Allocating Federal Tax Incentives to Finance Low-Income
Housing and a Wide Range of Private Facilities, GAO-08-913 (Washington,
D.C.: July 16, 2008).
[12] This bond authority is broadly similar to that offered to the city
of New York, referred to as the New York Liberty Zone, following the
September 11, 2001, terrorist attacks. See GAO, Tax Administration:
Information Is Not Available to Determine Whether $5 Billion in Liberty
Zone Tax Incentives Will Be Realized, GAO-03-1102 (Washington, D.C.:
Sept. 30, 2003) for more information.
[13] H.R. 6587, 110th Cong. (2008); S. 3322, 110th Cong. (2008).
[14] GAO-07-418T.
[15] GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
Between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.:
June 14, 2006).
[16] GAO-07-418T. We have issued a large body of work on fraud, waste,
and abuse of federal disaster relief programs after the 2005
hurricanes. See appendix I for a list of reports and testimonies on
this issue.
[17] See GAO-07-418T.
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