[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
      LOOKING A GIFT HORSE IN THE MOUTH: A POST-KATRINA REVIEW OF 
                   INTERNATIONAL DISASTER ASSISTANCE

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 6, 2006

                               __________

                           Serial No. 109-151

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform

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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 6, 2006....................................     1
Statement of:
    D'Agostino, Davi M., Director, Defense Capabilities and 
      Management; Scott Rowell, Deputy Assistant Secretary for 
      Homeland Defense, U.S. Department of Defense; Gregory C. 
      Gottlieb, Acting Director of the Office of U.S. Foreign 
      Disaster Assistance, U.S. Agency for International 
      Development; Casey Long, Acting Director of the Office of 
      International Affairs, Federal Emergency Management Agency, 
      U.S. Department of Homeland Security; Deborah McCarthy, 
      Director of the Hurricane Katrina Task Force Working Group, 
      U.S. Department of State; and Hudson La Force, Senior 
      Counselor to the Secretary, U.S. Department of Education...    18
        D'Agostino, Davi M.......................................    18
        Gottlieb, Gregory C......................................    44
        La Force, Hudson.........................................    84
        Long, Casey..............................................    62
        McCarthy, Deborah........................................    70
        Rowell, Scott............................................    36
Letters, statements, etc., submitted for the record by:
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    13
    D'Agostino, Davi M., Director, Defense Capabilities and 
      Management, prepared statement of..........................    21
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    Gottlieb, Gregory C., Acting Director of the Office of U.S. 
      Foreign Disaster Assistance, U.S. Agency for International 
      Development, prepared statement of.........................    46
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................    98
    La Force, Hudson, Senior Counselor to the Secretary, U.S. 
      Department of Education, prepared statement of.............    86
    Long, Casey, Acting Director of the Office of International 
      Affairs, Federal Emergency Management Agency, U.S. 
      Department of Homeland Security, prepared statement of.....    64
    McCarthy, Deborah, Director of the Hurricane Katrina Task 
      Force Working Group, U.S. Department of State, prepared 
      statement of...............................................    72
    Rowell, Scott, Deputy Assistant Secretary for Homeland 
      Defense, U.S. Department of Defense, prepared statement of.    38
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................     8


      LOOKING A GIFT HORSE IN THE MOUTH: A POST-KATRINA REVIEW OF 
                   INTERNATIONAL DISASTER ASSISTANCE

                              ----------                              


                        THURSDAY, APRIL 6, 2006

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:13 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis 
(chairman of the committee) presiding.
    Presents: Representatives Tom Davis, Ros-Lehtinen, 
Gutknecht, Platts, Miller, Dent, Waxman, Owens, Cummings, 
Kucinich, Clay, Ruppersberger, Higgins, and Norton.
    Staff present: David Marin, staff director; Chas Phillips, 
policy counsel; Rob White, communications director; Andrea 
LeBlanc, deputy director of communications; Grace Washbourne 
and Wimberly Fair, professional staff members; Teresa Austin, 
chief clerk; Sarah D'Orsie, deputy clerk; Phil Barnett, 
minority staff director/chief counsel; Michael McCarthy, 
minority counsel; Earley Green, minority chief clerk; and Jean 
Gosa, minority assistant clerk.
    Chairman Tom Davis. Good morning. Thank you for your 
patience. A quorum being present, the committee will come to 
order.
    After Hurricane Katrina, donations from other countries 
poured into the U.S. Government. Offers of money, water, food, 
and medical supplies and other commodities came from more than 
130 nations and a dozen international organizations. In cash 
alone, the United States has received $126 million to date.
    On behalf of the members of the committee and the people we 
represent, I want to thank those nations who rushed in to offer 
assistance and aid to those Americans affected by Hurricane 
Katrina. The list of countries who offered to help as reported 
by the State Department and the Department of Defense is 
enormous, and it reflects the goodwill of all people who come 
to the aid of those in need. The United States is eternally 
grateful for your generosity.
    We are here today to find out if our government in effect 
looked this gift horse in the mouth. We will examine how 
prepared the Federal Government was to accept this 
unprecedented level of aid from foreign governments and whether 
the ad hoc procedures for accepting aid put in place after 
Katrina has been adequate. It appears that policies and 
procedures were lacking simply because no one in the Federal 
Government anticipated needing or receiving this assistance. It 
does no good to be offered money, food, water, or potentially 
life-saving medical supplies if we don't have procedures in 
place to get those donations into the hands of the people who 
need them.
    The Government Accountability Office is here to talk about 
some of the problems they uncovered, among them about $66 
million of $126 million donated has been allocated to the 
Federal Emergency Management Agency to assist with long-term 
recovery of Gulf Coast citizens. The remaining $60 million is 
being held by the Department of State in a non-interest bearing 
account. Why is this money not earning interest? Are there not 
people or organizations in New Orleans or southern Louisiana or 
the Mississippi Gulf Coast who could use the money?
    Several thousand MREs, or meals ready to eat, were donated 
for the hurricane relief but were not used. Why? The Federal 
Government had difficulty accounting for in-kind assistance 
received. The ad hoc procedures put in place after Katrina 
didn't include policies to help ensure FEMA had oversight of 
donated commodities such as food and water and medical supplies 
and to ensure that commodities were vetted through the State 
Department exceptions process. This resulted in incomplete 
knowledge of in-kind assistance received from foreign 
countries.
    It appears in-kind contributions were not always properly 
tracked at those final destinations. In one case, this failure 
cost the U.S. Government approximately $80,000 in storage fees. 
These are GAO's conclusions. FEMA may have a different view, 
and we have FEMA here today as well to give its side of the 
story.
    I chaired the House Bipartisan Select Committee that 
investigated the Katrina disaster. I traveled to New Orleans 
and the Gulf Coast twice to see the damage and the recovery 
firsthand. The American people saw the destruction on their TV 
screens and the pages of their newspaper for weeks. I think 
they, like me, would want answers as to how this unprecedented 
amount of foreign assistance was used or not used.
    The National Response Plan does contain procedures for 
accepting offers of international assistance and response to 
domestic incidents of national significance. The plan's 
international coordination support annex charges the State 
Department to coordinate and facilitate U.S. requests for aid 
as conveyed by the U.S. Department of Homeland Security or our 
Federal Agencies. The State Department also acts as an 
intermediary for offers of assistance, expediting delivery of 
such assistance whenever possible. In addition, international 
affairs offices within our government agencies are to act as 
primary partners with the State Department in such endeavors. 
Under this annex, the department may also engage the Red Cross 
and the U.S. Agency for International Development.
    Today we have witnesses from across the government, the 
Department of State, the Department of Defense, USAID, FEMA, 
the Department of Education, and the GAO to explain what 
procedures were used to accept and distribute foreign disaster 
assistance received during the aftermath of Katrina. We need to 
get to the bottom of how this coordination should work and if 
the current polices in place for the acceptance and use the 
foreign disaster assistance are adequate. Under what authority 
did the Department of State determine that it should hold 
foreign cash donations that were meant for domestic disaster 
assistance for Hurricane Katrina? Why did it take so long to 
decide where to distribute the money? When the decisions were 
made to give money for levy repair, why did the Army Corps of 
Engineers turn down the $60 million? Why were they allowed to? 
How did the Department of Education become involved in the 
distribution of funds? And what led to the involvement of the 
National Security Council regarding the international cash 
donations?
    Since the Department of Homeland Security is responsible 
for developing the National Response Plan, how does DHS or FEMA 
ensure the agencies involved in international assistance are 
prepared to manage international assistance? How does FEMA 
provide oversight for international assistance that is received 
in the United States for domestic incident? Equally important, 
does Congress understand how priorities for distribution are 
reached and are we helping to make sure that the people who 
need the foreign assistance are getting it?
    On February 23rd, the White House released its report, 
``The Federal Response for Hurricane Katrina, Lessons 
Learned.'' The report recommended that the State and Homeland 
Security Departments lead an interagency effort to develop 
procedures for reviewing and accepting or rejecting any offers 
of international assistance for a domestic catastrophic 
incident, including a mechanism to receive, disburse, and audit 
any cash assistance. These procedures are due to the Homeland 
Security Council June 1st.
    I look forward today to hearing what changes need to be 
made so that this country can take advantage of the generosity 
of other countries in our time of tragedy.
    I would now yield to our ranking member, Mr. Waxman, for 
his opening statement.
    [The prepared statement of Chairman Tom Davis follows:]

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    Mr. Waxman. Mr. Chairman, this Nation is grateful for the 
outpouring of support from around the world the aftermath of 
Hurricane Katrina. Nations large and small generously offered 
money, supplies, and technical aid to help us recover from this 
enormous natural disaster.
    Unfortunately, we will hear today of a new GAO report that 
finds serious waste and mismanagement of these international 
donations. More than 6 months after Katrina made landfall, 
nearly half of the funds donated by other nations have yet to 
be spent. The Army Corps of Engineers for reasons unknown 
decided not to accept $60 million of this money for levy 
reconstruction. As a result, the $60 million has been sitting 
in a State Department account that doesn't earn interest.
    GAO says FEMA could have earned more than $1 million in 
interest on this money, but the State Department wanted to keep 
control of it. Well, this is bureaucracy at its worst and the 
citizens of the Gulf Coast are suffering for it.
    The Bush administration's mishandling of international 
donations for Hurricane Katrina comes on the heals of its 
mismanagement of international donations to rebuild Iraq. Just 
this week, the Army Corps admitted that a project to build 142 
health clinics in Iraq would run out of money with just 20 
clinics completed due in part to runaway contractor overhead 
costs as high as 50 percent. Army Corps officials said they 
would seek foreign donations to complete the work, but the top 
world health organization official for Iraq found the lack of 
progress, ``shocking'' and said, ``that is affecting people's 
expectations and people's trust, I must say.''
    The same problems are recurring in the Gulf Coast except 
the funds being squandered are for Katrina relief and it is our 
citizens who are suffering. The State Department, the National 
Security Council, which have no experience administering 
domestic programs, have been controlling how international 
donations will be distributed. The Agency for International 
Development, which does have experience in rebuilding, seems to 
have been pushed to the sidelines just as it was in Iraq.
    Meanwhile, donations remain in limbo for months, and other 
nations questioned whether their contributions were necessary 
or appreciated. We should all be grateful for the generosity of 
other nations. We should be equally grateful for the hard work 
of the many government officials and volunteers who have been 
working diligently to rebuild the Gulf Coast, but what we need 
to overcome is the bureaucracy and mismanagement that is 
frustrating their efforts and impeding recovery in the Gulf 
Coast.
    I commend the chairman for holding this hearing and hope 
that this hearing will be a first step toward progress.
    [The prepared statement of Hon. Henry A. Waxman follows:]

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    Chairman Tom Davis. Do any other Members wish to make 
statements?
    The gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman, and I have 
to tell you I really appreciate you calling this vitally 
important hearing to examine the Federal Government's system 
for accepting and distributing foreign donations intended for 
Hurricane Katrina relief, and as I listen to you, Mr. Chairman, 
and certainly to our ranking member, I can only say that a lot 
of what has happened with regard to Katrina either shows one of 
three things or a combination: a lack of empathy, incompetence, 
or a failure to synchronize conscience with conduct.
    I guess what I have seen and what we have seen over and 
over again, Mr. Chairman, and I do applaud you for your Select 
Committee on the Gulf Coast problems and the way that was 
handled, but we have seen it over and over and over again, a 
failure on the part of the greatest government in the world to 
shoot straight. It is incredible to me. It is incredible to me 
that people could literally be begging for a piece of bread and 
a glass of water in the United States where 100 miles away 
there was probably a Safeway or a Giant that somebody could 
have put some food in a helicopter and got it to them, but yet 
and still, we with all of our phenomenal expertise and our 
ability to go clear across the world to deliver disaster 
relief, we can't seem to get it right.
    One need not study the history of the United States very 
long to identify the legacy of generosity our Nation has shown 
to the world. In light of that tradition, it may come as a 
surprise that before Hurricane Katrina, America had never 
accepted international assistance following a disaster; 
however, as images from the Gulf Coast evoked grief and 
compassion throughout the world, some 76 foreign countries and 
international organizations were empathetic enough to provide 
cash, in-kind contributions, and military assistance to support 
our relief efforts.
    While the Federal Government embraced the helping hand of 
the world community, it seemed ill-equipped to accept and 
distribute this international assistance effectively and 
efficiently due to inadequate planning and inadequate 
interagency communication. Incredible. Consequently, nearly 
half of the $126 million in cash donations have yet, have yet, 
to be spent and donated relief supplies were distributed slowly 
if at all.
    Specifically, the GAO reported that efforts to distribute 
international aid were plagued by the absence of a commodity 
tracking system and procedures to identify resource needs at 
FEMA, a divide between Federal agencies that included the 
Department of Homeland Security and the Department of Defense 
and intergovernmental turf battles. For example, donations of 
meals ready to eat and medical supplies were poorly handled and 
failed to meet our health and safety standards. While thousands 
of Gulf Coast Americans were abandoned for days without food or 
water and called refugees, by the way, Federal officials were 
at times bewildered about what supplies were safe and therefore 
eligible for distribution.
    I am also concerned that the international cash donations 
were deposited with the U.S. Treasury in a non-interest-
generating account. It runs counter to common sense that such 
an account be utilized when an interest-bearing account could 
have thus far accrued $1 million in interest. With an 
additional $400 million in international cash donations 
expected, we must immediately address this problem. In doing 
so, we would generate millions of additional dollars that could 
be used to meet the critical needs of the Gulf Coast residents 
for housing, jobs, education, and reconstruction.
    Mr. Chairman, 6 months after Hurricane Katrina, the need 
still exists for us to clarify what entity or entities have the 
authority and experience to best manage international aid. 
Moreover, we must make certain that contracts that are funded 
with international donations are awarded through a competitive 
process. This helps to ensure that we obtain the best goods and 
services at the best price. Make no mistake. Our international 
donors put faith in us that the assistance given to help 
Americans are efficiently and effectively utilized to provide 
meaningful relief to those in need. We must honor that trust by 
demonstrating that we are good stewards who are willing to take 
immediate action to strengthen our Nation's systems for 
accepting, managing, and distributing international assistance.
    I look forward to the testimony of today's witnesses, and 
with that, Mr. Chairman, I yield back.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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[GRAPHIC] [TIFF OMITTED] T8228.124

    Chairman Tom Davis. Thank you very much.
    Ms. Norton, do you want to say anything?
    Ms. Norton. I do want to. This is one of those hearings 
which astonish you, you really learn something very 
astonishing. I appreciate that you have called the hearing and 
hope that it will not only keep something like this from 
happening again, but hasten what are some pretty obvious 
remedies.
    I start out with an understanding that if we had no 
experience with a hurricane like Katrina, we certainly had no 
experience with receiving cash donations from other countries. 
We are the country who donates to other countries. So I can 
certainly understand that we would not have in place a capacity 
to know how to do that and then to do it quickly.
    I find this GAO report, however, depressing, Mr. Chairman, 
because we are talking about a little itty bit of money, $126 
million. It seems to me it is such a small amount of money that 
it leads me to another concern, and that is whether or not the 
government is sufficiently flexible in the face of something 
new to do what is required. I have regarded and I think there 
is no way to avoid believing that Katrina was a dress rehearsal 
for a terrorist attack; otherwise, why do we have these 
agencies all together in the Department of Homeland Security, 
and we have seen what happened when we had no notice that a 
hurricane was coming. Imagine what the chaos would have been 
with a surprise attack.
    Here, we have 76 countries generously offering us aid. My 
first instincts given who some of these countries were would be 
to say perhaps we should not have accepted some of the aid, but 
should have said it is a wonderfully generous thing to do. That 
might have offended them. So I guess in the behavior of 
diplomacy, that is something you do, you accept the aid; but 
what kind of flexibility does it take to assign the money to a 
lead agency, use existing procedures even if you insist--and I 
don't know if this was a turf battle or not--that it go to an 
agency with no responsibility in the past for distributing 
funds on the domestic side? There are procedures, gazillions of 
procedures, one could borrow from, pick your agency, pick the 
one that best suits you, assign it to a lead agency, and there 
goes the money.
    Apparently, early in September 2005, FEMA identified an 
account that could earn interest. Hey, FEMA was incompetent, 
but you know the account wasn't. Simply depositing the account, 
it seems to me, would have taken care of that. Of course, that 
would have meant that the administration would assign somebody 
to do this job, and that is what is most disturbing, that 
somebody wasn't put in charge of this little itty bit of money, 
small to us, small to our government, but when you consider 
what the need was out there at the time that this money began 
to flow in, the notion that there would have been chaos on what 
to do and still undistributed money and we are talking about so 
small an amount can hardly give this committee confidence in 
our ability to handle larger items, larger matters, associated 
with natural disasters and with terrorist attacks.
    Here, we had the money, plenty of notice it is coming, 
procedures on the domestic side for distributing money, a small 
amount of money relative to what our government is used to 
handling and can't figure out what to do rapidly enough to 
matter to many. It is very disconcerting, particularly that 
there is money left now almost a year after the event needs to 
be fixed, but to me what is important is what it tells me about 
the larger effort and the lack of flexibility in the face of 
the unknown that our government has, the lack of an ability to 
move in keeping with the challenge that you are faced with, and 
that is the whole ball game on homeland security. If you can't 
do that for money you are glad to receive this late after the 
event, then I don't know how the committee can have confidence, 
and it has to do what you are doing, Mr. Chairman, and simply 
find out why.
    I am going to try to stay as long as I can, and thank you 
very much, Mr. Chairman.
    Chairman Tom Davis. Thank you very much.
    We may have to be interrupted by votes on the floor. We 
expect a series of two votes. So it won't be lengthy. Why don't 
we get started with our very first distinguished panel.
    We have Ms. Davi M. D'Agostino, who has been no stranger, 
who is the Director of Defense Capabilities and Management of 
the GAO; Mr. Scott Rowell, the Deputy Assistant Secretary for 
Homeland Security; Mr. Gregory Gottlieb, who is Acting Director 
of the Office of U.S. Foreign Disaster Assistance at USAID; Mr. 
Casey Long, the Acting Director of the Office of International 
Affairs at FEMA; Ms. Deborah McCarthy, the Director of the 
Hurricane Katrina Task Force Working Group, U.S. Department of 
State; and Mr. Hudson La Force, the Senior Counselor to the 
Secretary, U.S. Department of Education.
    Thank you all for being here with us. It is our policy we 
swear you in before you testify. So if you would just rise and 
raise your right hands.
    Ms. D'Agostino, you have someone behind you that is going 
to help you?
    Ms. D'Agostino. Yes. McCoy Williams.
    Chairman Tom Davis. All right. Thank you very much.
    And DOD does. OK. Let me just state their names for the 
record, so it is on the record. We have Berand McConnell and 
Deborah Cagan. Is that right?
    OK.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you.
    Ms. D'Agostino, we will start with you. Thank you.

      STATEMENTS OF DAVI M. D'AGOSTINO, DIRECTOR, DEFENSE 
  CAPABILITIES AND MANAGEMENT; SCOTT ROWELL, DEPUTY ASSISTANT 
  SECRETARY FOR HOMELAND DEFENSE, U.S. DEPARTMENT OF DEFENSE; 
  GREGORY C. GOTTLIEB, ACTING DIRECTOR OF THE OFFICE OF U.S. 
  FOREIGN DISASTER ASSISTANCE, U.S. AGENCY FOR INTERNATIONAL 
   DEVELOPMENT; CASEY LONG, ACTING DIRECTOR OF THE OFFICE OF 
  INTERNATIONAL AFFAIRS, FEDERAL EMERGENCY MANAGEMENT AGENCY, 
    U.S. DEPARTMENT OF HOMELAND SECURITY; DEBORAH McCARTHY, 
  DIRECTOR OF THE HURRICANE KATRINA TASK FORCE WORKING GROUP, 
U.S. DEPARTMENT OF STATE; AND HUDSON LA FORCE, SENIOR COUNSELOR 
         TO THE SECRETARY, U.S. DEPARTMENT OF EDUCATION

                STATEMENT OF DAVI M. D'AGOSTINO

    Ms. D'Agostino. Mr. Chairman, members of the committee, I 
am pleased to be here today before you to discuss GAO's work on 
international assistance for Hurricane Katrina. My testimony is 
based on the report we issued today that reviewed how several 
departments and agencies dealt with the accountability for both 
international cash and in-kind donations. In-kind donations 
include food, medical, and other tangible items as well as 
technical assistance and support.
    As you and the members have noted, Mr. Chairman, Hurricane 
Katrina was the first time the U.S. Government had been 
generously offered and welcomed such large amounts of 
international assistance for domestic disaster relief. The U.S. 
Government received $126 million in cash from 36 foreign donors 
by December 31, 2005 and literally tons of in-kind items from 
43 foreign donors.
    Several departments and agencies were involved in agreeing 
to receive, accept, and distribute the international 
assistance, including the Departments of Homeland Security, 
State, Defense, and Treasury, and FEMA. Also, the National 
Security Council was involved in decisions about the 
international cash donations.
    In summary, the agency has created ad hoc procedures to 
manage the acceptance and distribution of the cash and in-kind 
assistance. For cash donations, while we could account for all 
the funds that were received and disbursed, cash management 
policies were not in place to deal with their acceptance and 
use. Instead, the National Security Counsel established an 
interagency working group to decide how to use the foreign cash 
donations. State Department provided parameters to the working 
group regarding conditions it believed important for the use of 
the donated funds.
    While the group was deciding how to spend them, the funds 
were kept in a State Department custodial account that did not 
pay interest. As a result, the funds's purchasing power was 
diminished and the opportunity to maximize the resources 
available for relief was lost.
    The chart we provided today lists the key dates and events 
that took place regarding the cash donations. As you can see, 
by September 21st, $115 million was received and FEMA had 
identified an interest-bearing account to accept the donations. 
On September 23rd, FEMA presented a number of items for funding 
to the interagency group, including living expenses, building 
materials, furniture, and transportation. Then on October 20th, 
the State Department transferred $66 million to FEMA for a 
grant to provide case management assistance for up to 100,000 
households affected by the hurricane.
    As of March 2006, the remaining $60 million was 
undistributed; however, on March 16th, the State Department and 
Department of Education signed a memorandum of agreement on the 
remaining $60 million to support various educational needs in 
the affecting areas, including holding $121 million in reserve 
for further potential projects. State also told us that at 
least $400 million in additional cash donations could possibly 
arrive, making it even more important that good planning and 
cash management policies be in place going forward.
    Now I will turn to the in-kind donations, and I have three 
key points about the accountability of these items. First, 
while the in-kind assistance was reasonably accounted for as it 
arrived at Little Rock Air Force Base and the Office of Foreign 
Disaster Assistance did account for it, these goods, however, 
were not tracked to the FEMA distribution sites with 
confirmation of receipt from those sites.
    Second, the lack of clear policies, inadequate information 
up front, and insufficient coordination with regulatory 
agencies resulted in the U.S. Government agreeing to receive 
food and medical items that could not be distributed in the 
United States.
    Third, the ad hoc procedures allowed confusion as to which 
agency, FEMA or DOD, Defense, was to accept foreign military 
donations that were vetted through a State Department process 
that was created for that purpose. As a result, it is unclear 
today whether any agency properly accepted and took 
responsibility for the foreign military donations.
    The administration's recently issued Lessons Learned Report 
you mentioned highlighted the need for improvements as well in 
policies and procedures. We also recommended a number of areas 
where such improvements could be made in managing and 
overseeing international cash and in-kind donations. Homeland 
Security and Defense Departments generally agreed with our 
recommendations.
    Mr. Chairman, that concludes my prepared statement, and I 
would be happy to respond to any questions.
    [Note.--The GAO report entitled, ``Hurricane Katrina, 
Comprehensive Policies and Procedures are Needed to Ensure 
Appropriate Use of and Accountability for International 
Assistance, April 2006, GAO-06-460,'' may be found in committee 
files.]
    [The prepared statement of Ms. D'Agostino follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Rowell.

                   STATEMENT OF SCOTT ROWELL

    Mr. Rowell. Chairman Davis, Ranking Member Waxman, 
distinguished members of the committee, thank you for the 
opportunity to address you today on international disaster 
relief received by the United States as a result of Hurricane 
Katrina. In order to save the maximum amount of time for 
questions, I would like to submit my formal prepared testimony 
for the record, but provide the committee a brief verbal 
summary.
    Chairman Tom Davis. Great. Everyone's entire statement is 
in the record.
    Mr. Rowell. I would also like to take this opportunity to 
introduce Mr. Berand McConnell, Director of Interagency 
Coordination from the U.S. Northern Command, and Ms. Deborah 
Cagan from the Office of the Assistant Secretary of Defense for 
International Security Affairs. I have asked these two 
individuals to join me at today's hearing to provide any 
additional details to your questions on the Department of 
Defense's involvement in the receipt of international disaster 
relief assistance.
    Hurricane Katrina was one of the most destructive natural 
disasters in U.S. history and proved to be the deadliest storm 
to strike since 1928. The international assistance received by 
the United States in the wake of this disaster was tremendous. 
151 nations and international organizations offered assistance. 
Many of these same nations had accepted donations from the 
United States in previous disasters in their our countries. 
This generosity displayed by our friends and neighbors 
continued until well after Hurricane Katrina had passed.
    When it became clear that the United States was going to 
accept international assistance in response to Katrina, the 
U.S. Agency for International Development Office of Foreign 
Disaster Assistance contacted the U.S. Northern Command in 
order to establish an appropriate location for the delivery of 
international donations. Working with U.S. Northern Command's 
logistics director, OFDA identified Little Rock Air Force Base 
Arkansas as the central collection point for foreign relief 
donations.
    Little Rock Air Force Base was selected because of its 
proximity to the affected area and because the supplies that 
were arriving could then be loaded on trucks and moved out 
immediately. Although it was not a major hurricane relief 
staging area and was not responsible for warehousing relief 
supplies, Little Rock Air Force Base served as a vital 
transportation hub in the response.
    The receipt of international donations was a mission led by 
OFDA; however, the men and women of Little Rock Air Force Base 
provided needed assistance to OFDA contract support on base. 
Overall for the Hurricane Katrina response, relationships 
between USAID, OFDA, and U.S. Northern Command worked well.
    As with any significant event, the lessons learned from 
Katrina, the Katrina experience, are critical to future 
success. For the Department of Defense, the three 
recommendations identified in the GAO report require our 
attention.
    We concur with the recommendations one through three. 
Specifically, recommendations one and two speak to the need for 
policies and procedures to ensure that foreign military offers 
of assistance for domestic disasters are coordinated with the 
Department of State and that internal DOD guidance to our 
military commanders on this issue is clear and for 
recommendation three, which speaks to the need for Federal 
Departments, DOD among them, to have appropriate State guidance 
on how offers of assistance are processed, match existing 
requirements, meet U.S. standards, and are delivered to the 
right locations.
    Mr. Chairman, I commend you and the members of this 
committee for your leadership, interest in, and support of the 
Department's homeland defense and civil support missions with 
the particular focus today on international disaster relief 
assistance received by this country as a result of Katrina, and 
I look forward to any questions you may have.
    [The prepared statement of Mr. Rowell follows:]

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    Chairman Tom Davis. Mr. Rowell, thank you.
    Mr. Gottlieb, you will probably be the last one we get in 
before the break, and then we will probably take a 15, 20-
minute break.

                 STATEMENT OF GREGORY GOTTLIEB

    Mr. Gottlieb. Thank you, Mr. Chairman and committee 
members, for this opportunity to testify today. I will present 
a synopsis of USAID's role during Hurricane Katrina and what we 
are doing to make improvements in case there is a next time.
    Hurricane Katrina response was the first of its kind for 
the USAID, which is a signatory agency to the National Response 
Plan. Although USAID coordinates often with FEMA, until 
Katrina, USAID had never before been asked to provide 
significant support for domestic response. Our role in the 
Hurricane Katrina response was one of our most challenging and 
unusual experiences.
    On August 29th, the day the hurricane came ashore on the 
Gulf Coast, USAID's Office of Foreign Disaster Assistance, 
which has a long history of coordination with FEMA, offered any 
assistance it could provide. On August 31st, the USAID 
Administrator offered the entire agency's support to FEMA.
    Through formal mission assignments from FEMA, USAID began 
its work on Hurricane Katrina shortly thereafter. In probably 
its most important role, USAID provided support for handling 
internationally donated resources and commodities. FEMA, the 
Department of State, and USAID came to agreement on a division 
of labor.
    The State Department task force would receive international 
offers of assistance from countries around the globe. FEMA 
would determine which offers to accept, and USAID would 
coordinate the overall process, including the logistics, of 
receiving the donated goods and integrating them into the FEMA 
distribution system.
    USAID was perhaps uniquely qualified to fill this function. 
On the one hand from its extensive experience responding to 
disasters overseas, USAID understood the operational 
responsibilities of FEMA. On the other hand, from its 
experience as an operational foreign assistance agency, USAID 
understood the foreign policy concerns of the Department of 
State.
    Since international assistance of this magnitude had never 
been previously received, ad hoc systems were rapidly developed 
by FEMA, State, and USAID. While these systems were not 
perfect, the cooperation among these three agencies was 
outstanding and in the end performed remarkably well. The 
mechanisms established during Katrina have become a rough model 
for a more formalized and codified management tool that is 
currently being created.
    On behalf of the overall effort and at FEMA's request, 
USAID activated a response management team in Washington and 
dispatched USAID personnel throughout the Gulf Coast. USAID 
disaster response systems lend themselves to easy integration 
with FEMA because both agencies operate on the principals of 
the Incident Command System.
    During the weeks following Hurricane Katrina, USAID 
provided a variety of staff, commodities, and services in 
support of the overall domestic response efforts. Some 
highlights include: The response management team in Washington 
became a hub for coordination of international offers of 
assistance, working closely with State and FEMA. The work was 
in some ways more complex than some of the largest foreign 
responses we have ever orchestrated. In particular, the 
response management team hosted a variety of liaison officers 
from domestic U.S. Government Agencies, including State, 
Defense, Department of Homeland Security, the Department of 
Health and Human Services, and USDA. We also for first time 
hosted international counterparts, including NATO, several 
United Nation's officers, the European Union, and the 
International Federation of Red Cross and Red Crescent 
Societies.
    The response management team worked to integrate 
international partners into Federal and regional agencies, 
coordinating field visits throughout the affected regions. 
USAID also created systems and procedures to support the 
review, acceptance, and delivery of international donations. 
Specifically, the RNT negotiated and communicated official 
dispatch procedures for supplies that had been received from 
international donors and also created a comprehensive data base 
to organize and track transportation of commodity offers and 
donations.
    I have brought with me today copies of our final dispatch 
spread sheet from Little Rock which indicates the distribution 
points for all commodities received. We believe this will show 
the effectiveness of the dispatch system to donation points. 
Overall, USAID deployed a total of 24 field officers to the 
affected region in the first several weeks of the response. We 
facilitated a total of 52 flights of donated goods from 
international donors and consolidated all of these at Little 
Rock Air Force Base. From that reception point, USAID processed 
more than 2,500 metric tons of donated goods and transported 
142 truckloads of foreign donated commodities to distribution 
centers.
    Let me just say in conclusion through its unprecedented 
involvement in a domestic disaster response, USAID has learned 
many lessons. There is a unique and valuable interagency role 
for USAID during incidents of national significance. USAID 
staff members adapt quickly and our systems function well 
within the context of the domestic response, a proficiency that 
we have come to expect in a foreign environment. Experience 
gained by USAID overseas is valued and beneficial when applied 
in the United States and, as with most things, nothing works 
perfectly the first time.
    Finally, USAID has learned that it can look constructively 
and critically at itself to continually improve its performance 
and is already working hard to ensure that it will.
    Thank you.
    [The prepared statement of Mr. Gottlieb follows:]

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    Chairman Tom Davis. Thank you very much. I am going to 
declare, I would say, about a 15-minute recess, maybe 20 
minutes you can count on, and then we will finish up.
    Thank you for your patience.
    [Recess.]
    Chairman Tom Davis. I want to thank you all for your 
patience. I think, Mr. Long, we can start with you. Is that 
where we left off?

                    STATEMENT OF CASEY LONG

    Mr. Long. Good morning, Mr. Chairman. My name is Casey 
Long, and I am the Acting Director of the Office of 
International Affairs at the Federal Emergency Management 
Agency of the Department of Homeland Security. I want to thank 
you for inviting me here today to discuss international 
assistance in the wake of Hurricane Katrina and how that 
assistance was used.
    It is important to note that the United States had never 
before accepted international assistance on such a large scale 
as it did during Hurricane Katrina. The outpouring of 
international aid was both heartwarming and beneficial, but 
also created some difficulties. In total, 151 nations and 
international organizations offered financial and material 
assistance. In response to this outpouring of generosity, FEMA 
with their Federal partners quickly developed a system to 
manage international assistance. Today I hope to explain to you 
that system and what we intend to do in the future to manage 
both material and cash donations.
    After Hurricane Katrina hit the Gulf Coast of the United 
States, the U.S. Government began to receive offers of 
assistance from foreign governments and private organizations. 
On September 1st, the administration indicated that the U.S. 
Government was accepting all offers of international assistance 
in principle. Consistent with its role in the National Response 
Plan [NRP], the State Department set up a Hurricane Katrina 
task force and took on the duty of receiving those offers of 
international assistance.
    As the lead agency in coordinating the Federal response to 
Stafford Act disasters and emergencies, FEMA has the authority 
to request assistance in responding to these disasters from 
other Federal agencies. Accordingly, in the immediate aftermath 
of Katrina, FEMA turned to the agency that has expertise 
working with the international community in responding to 
disasters, the U.S. Agency for International Development's 
Office of Foreign Disaster Assistance [OFDA].
    On September 2nd, FEMA formally tasked OFDA to manage 
logistics and operations of international donations in response 
to Katrina. On Saturday, September 3rd, FEMA convened those 
departments and agencies that might play a role in managing 
national donations. These departments and agencies included 
other components of DHS such as Customs and Border Protection, 
the State Department, OFDA, the Department of Defense, Health 
and Human Services, and the American Red Cross, all of whom are 
signatories to the NRP. Collectively, this group met to discuss 
the roles and responsibility of each agency and to determine 
how the United States was going to management international 
material donations. The outcome of this meeting was a system 
for accepting and using or declining commodities from 
international donors, which worked as follows: The State 
Department would act as the focal point for receiving and 
responding to international offers of assistance. FEMA would 
identify the potential requirements and communicate acceptance 
of offers to State. OFDA would manage the operations and 
distribution for those international donations.
    Despite the fact that the U.S. Government had never managed 
such a large quantity of donated international assistance 
before, we successfully accepted blankets, cots, tents, 
generators, school supplies, and other materials. Ultimately, 
on FEMA's behalf, OFDA distributed 143 truckloads of 
international donations to distribution centers in Louisiana, 
Alabama, Mississippi, Texas, and Arkansas.
    Since additional decisions were required to determine how 
to send monetary donations, pledges of cash were handled under 
a different system. State received and held donated funds in a 
custodial account until a decision about how these funds would 
be used was made. When it became apparent that the Nation's 
cash would be coming in from foreign sources, FEMA also 
identified an account to hold a portion of these funds. An 
interagency group was convened to discuss how international 
donations, cash donations, would be accepted and distributed. 
FEMA identified types of activities for which the donated funds 
could be used to help meet the needs of communities and 
individuals impacted by the disaster, and we provided these 
options to the monetary donations working group.
    Later, FEMA provided this working group with a more 
detailed proposal for individual case management which proposed 
that the funds be used to assist disaster victims by 
identifying immediate needs and helping them reach a level of 
self-sufficiency and begin the process of recovery. As a 
result, a portion of the cash donations were transferred to 
FEMA and awarded for a case management initiative.
    Last November, FEMA initiated meetings to form an 
interagency work group made up of departments and agencies that 
participated in Hurricane Katrina's international donations 
effort. This effort corresponded with recommendations from the 
Homeland Security Council to develop a process for 
international assistance. The working group has begun 
formalizing an international assistance system. Participants 
include DHS components of FEMA, Customs and Border Protection, 
Immigration and Customs Enforcement, Citizenship and 
Immigration Services, the State Department, Defense, 
Agriculture, USAID, FDA, the American Red Cross, and the U.S. 
Army Corps of Engineers, among others.
    Much progress has been made to develop standardized 
procedures to review and accept or decline international offers 
of assistance and to respond to international inquiries. By 
June 1st, the interagency group expects to agree to a system on 
managing offers of international assistance.
    Once again, Mr. Chairman, I thank you again for having me 
here today. If you have any questions, I would be happy to 
answer them at the appropriate time.
    [The prepared statement of Mr. Long follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. McCarthy.

                 STATEMENT OF DEBORAH MCCARTHY

    Ms. McCarthy. Thank you Mr. Chairman.
    I would like to immediately go to the issue of how we 
managed the cash donations and how we came to decisions on how 
best to place them, and I would like to start off by first 
saying that we have placed the balance of the funds that we 
have received. $60.4 million were transferred on March 17th to 
the Department of Education. So the amounts of money that we 
have received, the $126 million, have been transferred to FEMA 
and to the Department of Education.
    I wanted to note a couple of things with regards to the 
cash process and noting, for one, that on September 15th at a 
Homeland Security meeting, the Department of State agreed and 
was given the lead in developing options on how to distribute 
and utilize the funds. Subsequently, the Department of State 
and the National Security Council initiated as many have 
referred to here an interagency process. FEMA was requested and 
provided proposals for consideration for use of the funds. It 
was agreed in the interagency to use the funds immediately for 
immediate needs, and the case management system met that 
requirement.
    Subsequently, we obviously entered into a memorandum of 
agreement with FEMA. Then the interagency looked for ways to 
place the money into tangible reconstruction projects where 
there were unmet needs. We considered a number of options and 
ultimately decided through the interagency that the funds 
should go to support schools, K through 12 and universities, in 
the affected area where there were unmet needs for 
reconstruction, bricks and mortar, libraries, scholarships for 
students, and financial and ability to retain some staff and 
faculty. On March 16th, as I noted, we signed an agreement with 
the Department of Education, and we transferred the moneys on 
March 17th.
    We have obviously learned a lesson on how to process the 
money, and in the wake of the recommendations of the Homeland 
Security Council, we are developing guidelines to set up an 
interagency process that would be more swift, more effective in 
moving international donations should we get them and accept 
them in another crisis. We are under a short time line to 
report to the Homeland Security Council by June 1st and we are 
well on way.
    I want to note one other thing just before I sum up on a 
conclusion, and that is we need to recognize that moneys came 
in not only from governments, but this country received a huge 
amount of assistance, the sum total of which has never been 
calculated, from private individuals and organizations, and I 
want to mention a few: The donation of an entire life savings 
by a senior citizen in Europe who arrived at one of our 
embassies and asked that this gift be accepted in return for 
her having been liberated by U.S. soldiers from a concentration 
camp in World War II. She could not afford to give her savings 
but she did; the donation from one family in France of a check 
of approximately $602,000; millions of dollars in private 
donations from individuals and companies in Japan; funds raised 
by our own State Department foreign service nations; and last 
but not least, the offers of many Canadians to open up their 
homes to take in displaced people as they had after September 
11th when our planes were stranded.
    To sum up a few things, our Nation received, as we have 
noted, an unprecedented amount of international assistance 
reflective that the people and governments around the world are 
prepared to support us and stand with us in our hour of need. 
We want to thank the international community and all those 
private citizens who gave so generously. We have ensured the 
best we could that the gifts made reached those affected by 
Hurricane Katrina.
    We believe that in a major domestic crisis, it is likely 
that we will again receive generous offers, particularly from 
neighbors and close partners. Should we decide to accept them, 
we will have the mechanisms in place to quickly process the 
assistance given.
    I would like to thank you for having the opportunity to 
discuss the international support we received during Katrina. 
It is an unknown aspect of this crisis, and I look forward to 
responding to your questions.
    [The prepared statement of Ms. McCarthy follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. La Force.

                STATEMENT OF HUDSON LA FORCE III

    Mr. La Force. Mr. Chairman and members of the committee, on 
behalf of Secretary Margaret Spellings, thank you for the 
opportunity to testify on the actions Education is taking to 
distribute funds received from international donors following 
Hurricane Katrina. We regard these international donations as 
one important element of our total effort to provide assistance 
to schools and colleges directly impacted by the hurricanes 
last summer and to those schools who have enrolled students 
displaced by those storms.
    Within days of when Hurricane Katrina made landfall, 
Secretary Spellings sent high level officials to the affected 
States to gain firsthand information about the situation and 
the needs in those jurisdictions. We focused on listening to 
the issues faced by educators in the Gulf States and developing 
solutions that would work for schools, colleges, and students. 
We have provided significant technical and financial assistance 
to States, school districts, and colleges and have granted 
waivers when necessary to support State and local school 
leaders in managing their response to the disaster.
    On December 30th, President Bush signed into law the 
Hurricane Education Recovery Act which gave education $1.6 
billion for hurricane relief activities. Included was $750 
million to help public and private schools in Louisiana, 
Mississippi, Texas, and Alabama restart their schools, $645 
million to public and private schools across the Nation for the 
costs they have incurred in enrolling displaced students, and 
$190 million for colleges in Louisiana and Mississippi.
    We made the first allocation of over $250 million less than 
1 week after President Bush signed the law, made the first 
allocation of aid for displaced students 1 week after final 
applications were due from the States, and as of today have 
fully allocated nearly $1.5 million of the $1.6 billion 
appropriation. The only remaining funds are a portion of the 
aid for displaced students which by statute is intended to be 
made in four quarterly payments across the school year.
    We are actively engaged with the States and our Inspector 
General in monitoring the use of these funds. In January, we 
began discussions with the Department of State regarding 
approximately $60 million in donations that State had received 
from foreign donors. We developed a proposed strategy for using 
this aid and on February 16th presented that strategy to an 
interagency task force comprised of officials from the 
Departments of State and Homeland Security, the National 
Security Council, FEMA, and the Office of the Federal 
Coordinator for Gulf Coast Rebuilding. The task force decided 
that education should receive and manage these foreign 
donations.
    On March 16th, we entered into a memorandum of agreement 
with State under which Education has accepted these donations 
and will allocate the funds to educational institutions in 
Louisiana and Mississippi. The agreement provides a framework 
for education to maintain the funds in a separate trust account 
and to administer them in an accountable and transparent 
manner, including proper Internet controls and performance 
measures. While we have not yet made final decisions on the 
distribution of this aid, we do know that it will go to schools 
and colleges in the hardest hit areas of Louisiana and 
Mississippi, and we expect to make those final decisions and 
disburse the money in May. I believe that we have established 
and maintained an effective working relationship with State on 
this matter, and if the Federal Government were to receive 
education assistance from foreign sources in the future, we 
would be ready to do so again.
    Education has learned important lessons about crisis 
management and response from our Katrina experiences. We are 
using those lessons to inform ongoing agency activities in 
emergency response and crisis management, including our 
preparedness for the potential flu pandemic. We are working 
with the Homeland Security Council and other agencies to 
implement the recommendations of the Federal Response to 
Hurricane Katrina, Lessons Learned Report and are reviewing our 
internal capabilities for crisis planning and response and our 
capabilities to work with State and local education leaders in 
emergency situations.
    This concludes my statement, and I am happy to respond to 
any questions you have.
    [The prepared statement of Mr. La Force follows:]

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    Chairman Tom Davis. Thank you.
    The good news is I am the only one here. The bad news is 
there is no time limit. So I get to ask what I need to ask.
    I will start with Mr. Long. Is it accurate that FEMA has 
not invested the $66 million in international funds yet?
    Mr. Long. I don't know. I know that the money was 
transferred into a FEMA account, and then it is my 
understanding that as the UMCOR got up and running that we 
would then transfer upon receipt. As to how we would utilize 
those funds, FEMA would then transfer the money to UMCOR to 
utilize those, but I don't have a current status as to where 
the money resides.
    Chairman Tom Davis. Is there anyone here from GAO that can 
answer that? What is your understanding of the money?
    Mr. Williams. Thank you, Mr. Chairman. That is our 
understanding also, that is the case.
    Chairman Tom Davis. But these funds sat in non-interest 
bearing accounts. Is that accurate?
    Mr. Williams. We identified $60 million that had been in 
non-interest bearing accounts.
    Chairman Tom Davis. For how long?
    Mr. Williams. From the September timeframe when the money 
first started to come into the organization, and I would feel 
it was through March 16th.
    Chairman Tom Davis. Six months, 7 months.
    Mr. Williams. About 7 months or so, and we estimate that if 
it had been invested, it would have earned nearly $1 million.
    Chairman Tom Davis. Mr. Long, do you know why that is? Is 
there some law that makes it go to a non-interest-bearing 
account or anything?
    Mr. Long. I am sorry, Mr. Chairman. Can you repeat that 
question?
    Chairman Tom Davis. Why would the money go to a non-
interest-bearing account? Is there a prohibition in law about 
putting it in an interest-bearing account or was it thought 
that it would be there a short period and it just languished 
there?
    Mr. Long. It is my understanding that the FEMA account is 
interest-bearing.
    Chairman Tom Davis. Is that correct?
    Ms. D'Agostino. Yes.
    Chairman Tom Davis. So was any money lost as a result of 
going into the--did we lose any money in the investments, I 
guess is my question.
    Ms. D'Agostino. By not placing it in the FEMA account, the 
FEMA interest-bearing account, yes.
    Chairman Tom Davis. How long did that happen? Was it a 6-
month period?
    Ms. D'Agostino. We calculated about $1 million in interest 
would have been gained on the moneys had they been in the FEMA 
account.
    Chairman Tom Davis. Ms. McCarthy, you sat on the money, not 
you personally, but State sat on the money for 6 months?
    Ms. McCarthy. I think Mr. Chairman, I think we need to 
clarify something here, which is absent specific authority, 
funds held in the U.S. Treasury do not ordinarily accumulate 
interest. We discussed with Treasury and OMB that we had a 
specific State Department account and it would be the 
appropriate place to place the money as it flowed in over time. 
It didn't come in in one fell swoop, and it was determined at 
the time that the donations in this account could not earn 
interest.
    Chairman Tom Davis. Why not?
    Ms. McCarthy. I would have to ask my legal team here.
    Chairman Tom Davis. Go ahead. Ask them.
    Ms. McCarthy. Absent statutory authority, our moneys could 
not earn the interest.
    Chairman Tom Davis. OK.
    Ms. McCarthy. That is the key element, and another element 
to consider is----
    Chairman Tom Davis. I gather you would welcome statutory 
authority in a case like this so we don't leave $1 million on 
the table.
    Ms. McCarthy. We are discussing in the interagency group 
right now that is looking at how best to stand up a team 
immediately and an interagency, we are discussing precisely 
that.
    Chairman Tom Davis. Well, hurricane season officially 
starts shortly, and moving things through this Congress even 
when they are easy takes a period of time. We will probably 
just initiate something on that right away and try to work with 
your team.
    I think that is something we all ought to be a little 
embarrassed about, not that it is anybody's fault. I understand 
the rationale, but when money is pouring in, maybe somebody 
should have said this ought to go in an account where it can 
earn some interest.
    Ms. McCarthy. One of the things we may have to keep in mind 
is that the interest, I suppose, that these funds--again, I am 
not from Treasury, but if these funds earn interest in U.S. 
Government investment mechanisms, those who are paying the 
interest are the U.S. taxpayers.
    Chairman Tom Davis. Well, basically you are using it for 
debt reduction instead of for its intended purpose. That is 
all. I mean, I know everything is fungible, accounts and 
everything like that, but I think in a case like this, this is 
$1 million that really should have been earmarked for the coast 
and should have gone to the coast as opposed to debt reduction. 
I understand Government think and how this works, but at a time 
when you still have a lot of people along the coast that are 
looking for help and aid and everything else, that is my only 
point.
    So I think from a statutory point of view, we would like to 
get this to a conclusion sooner or later, which is probably 
moving. I know what the government pays in interest. I don't 
know if we could have gotten something better off in a 
different marketplace or not, but I think that explains it.
    Now, FEMA has not invested the $66 million in international 
funds yet; is that right, Mr. Long, and what is it about the 
United Methodist Committee of Relief Contract? Can you tell us 
a little bit more about that?
    Mr. Long. The interagency group upon receiving 
international donations collectively as a group decided that 
case management would be an appropriate use of those funds. 
After that decision was made, FEMA pulled together a panel and 
reviewed proposals in the November timeframe and based on 
reviewing those proposals decided that UMCOR was a cost-
effective efficient way to utilize those funds.
    Chairman Tom Davis. Well, Ms. McCarthy, FEMA has told the 
committee and GAO that they provided the State Department-led 
task force with uses for $326 million on September 23rd, 
identifying that the international cash donations could be 
spent on social service assistance, medical transportation, 
adopting homes for medical and handicap needs, job training, 
education, living expenses, building materials, and so forth. 
Why did the task force decide not to give the entire amount to 
FEMA for these purposes?
    Ms. McCarthy. If I can respond, Mr. Chairman.
    Chairman Tom Davis. Sure. I was asking you.
    Ms. McCarthy. The initial allocation was for the case 
management system, which would be for people to go out and 
determine the longer-term needs of those who had been affected 
by the hurricane. The other proposals as reviewed by the 
interagency needed further development and would flow from the 
case management system, and essentially what we decided to do 
in the interagency process is to look for something that was 
tangible immediate reconstruction and not wait for the 
development of what would be the results of the case management 
system, the citizens would need ``X'' or ``Y'' or housing, 
etc., because that process was going to take a longer time.
    Chairman Tom Davis. I mean, I know these are foreign 
dollars flowing and somebody has to hold them, but I wonder if 
the State Department is competent. I mean they are not really 
part of the FEMA and recovery efforts as we look at this in the 
future. I don't know if that is something we are looking at, 
but it is just not something you are used to, the State 
Department is used to, overseeing. Right?
    Ms. McCarthy. Correct. It is not something we are used to 
overseeing, and that is why in the interagency process that we 
set up, we pulled in agencies who have a better feel for what 
is occurring on the ground, and in the future, that is what we 
would do. Obviously, the nature of the crisis is hard to 
determine. It could be manmade. It could be natural-made. And 
the moneys could go to one agency or another. That is 
essentially what we are discussing right now, to set up at 
least a mechanism to determine which agency would be the 
appropriate one to then process the money depending on the 
nature of the crisis.
    Chairman Tom Davis. Mr. Rowell, during the aftermath of 
Katrina, what process did DOD use to route foreign military 
assistance through the State-led task force charged with the 
responsibility for recording all offers of assistance? Was it 
an effective process?
    Mr. Rowell. Mr. Chairman, let me ask you to restate the 
question, please.
    Chairman Tom Davis. What process did DOD use to route the 
foreign military assistance that came in through the Department 
of State-led task force charged with the responsibility of 
recording all offers of assistance?
    Mr. Rowell. Sir, let me ask Mr. Berand McConnell to address 
that, please.
    Chairman Tom Davis. That would be fine.
    Mr. McConnell. Good morning, sir.
    Chairman Tom Davis. Good morning.
    Mr. McConnell. The NORTHCOM role in particular followed 
essentially the same procedures that you have heard already 
described, which is to say when an offer of foreign assistance 
was received directly, we would refer those to the State-led 
task force for determination as to whether that task force 
would go to accepting the offer. Our part directly was to 
validate with General Honre and his task force whether those 
offers met a valid military need and then we made a 
recommendation on that point.
    If all the pieces aligned, to include the Department of 
State task force agreement, we communicated directly with the 
military representatives to facilitate delivery.
    Chairman Tom Davis. Ms. D'Agostino, GAO reports that the 
Federal Government didn't have the policies to help ensure FEMA 
had oversight of donated commodities and to ensure that the 
commodities were vetted through the Department of State 
acceptance process, but FEMA reports to the committee yesterday 
that everything went through the DOS acceptance process. Can 
you resolve that for us?
    Ms. D'Agostino. Apparently not everything went through the 
DOS acceptance process, and, in fact, there is actually still 
confusion about particularly the foreign military donations, 
who actually accepted them and was responsible for them. 
Basically, as we understand it from DOD, well, actually 
NORTHCOM General Counsel, they believed that because they used 
the task force process at the State Department that FEMA 
accepted the foreign military donations, and FEMA has also told 
us that they did not accept anything that went through the 
foreign military donations.
    Chairman Tom Davis. I mean, this is part of the debate 
going on with Congress about should FEMA be part of Homeland 
Security or should it be attached to the Office of the 
President. Obviously, if this were in the White House or 
attached right there, this stuff moves very, very quickly. It 
looks here like we have a bureaucratic jumble. Everybody is 
getting sign-offs and everything and money is sitting in 
accounts and it is not getting out there.
    Mr. McConnell. Mr. Chairman, if I may.
    Chairman Tom Davis. Yes, please.
    Mr. McConnell. Maybe I misunderstood the question. The 
interagency process either accepted or declined the military 
offers. Once the acceptance of those things, purely military 
goods, was complete, then they----
    Chairman Tom Davis. What kind of things did you decline?
    Mr. McConnell. I don't know that we declined anything, 
because the things that we accepted were divers, nurses. Ships 
from various countries came in to provide that sort of support. 
I don't know that once something was defined as a purely 
military offer, I do not believe we declined anything.
    Chairman Tom Davis. My information shows that some of the 
items that were declined, we had some Japanese self-defense 
force units. Jordan offered two field hospitals. France offered 
an enabled frigate and hospital ship. Israel and Germany 
offered ground-based cellular communication systems, 
Switzerland two disaster relief platoons.
    Mr. Rowell. Mr. Chairman, we will have to take that one for 
the record. We are not prepared to speak to that.
    Chairman Tom Davis. There have been widespread news reports 
about items that were offered from countries that we weren't 
prepared to take and turned back. Does GAO want to add anything 
to that?
    Ms. D'Agostino. No, we don't.
    Chairman Tom Davis. I just named a few. We have a couple of 
pages of things that were declined at this point.
    Mr. McConnell. Sir, I agree with you that there were things 
that were declined. As far as NORTHCOM was concerned, our 
process was part of the interagency process. Those things that 
we were able to validate against General Honres' requirements, 
we recommended for the interagency process.
    Chairman Tom Davis. All right. Mr. La Force, in your joint 
memorandum of agreement with the Department of State, which I 
think is in Attachment A, are you familiar with what I am 
talking about?
    Mr. La Force. Yes, sir.
    Chairman Tom Davis. It indicates that the department will 
dedicate funds to Xavier and Dillard Universities, the 
Louisiana Department of Education, and the Laura Bush 
Foundation for American Libraries. In your written testimony, 
you say that you haven't yet decided who to give the money to. 
Is this like a draft?
    Mr. La Force. The attachment to the memorandum is a summary 
of the proposals that we had received at the time the 
memorandum was signed. We have received additional proposals 
since that time and have made no decisions about the actual 
grant awards that we would be making.
    Chairman Tom Davis. Ms. McCarthy, you reported to this 
committee that State-led interagency working group offered 
international funds to the Army Corps of Engineers for the 
rebuilding of levies and that the Corps turned down the offer. 
Is that basically the gist of it?
    Ms. McCarthy. In the interagency effort to move the money 
swiftly for reconstruction, yes, we did approach the Corps, and 
once they had made a determination based on the moneys they 
received in the supplemental, they indicated to us that they 
did not need the international funds.
    Chairman Tom Davis. All right. I am just trying to 
understand it. The Corps reports to the committee this morning 
that the Department of State was looking for options regarding 
how they could best allocate the foreign donations, but they 
never actually offered to give the money to the Corps. The 
Corps said they referred State's inquiry to the Department of 
Homeland Security Office of the Federal Coordinator for Gulf 
Coast Rebuilding who is responsible for overseeing all of the 
recovery operations because they felt they would have a better 
feel as to where the greatest needs were.
    Ms. McCarthy. Sir, I am not privy to how internally they 
deliberated and who they went to, but ultimately the response 
to us on approximately November 22nd was that they did not and 
would not need these funds.
    Chairman Tom Davis. Thank you.
    Ms. D'Agostino, does GAO believe that the current process 
that is currently in operation for acceptance and distribution 
of international assistance is transparent enough for proper 
oversight by Congress?
    Ms. D'Agostino. Certain aspects of the process were very 
transparent and we were able to get very good records and 
access and information on. I would say that certain aspects 
regarding the role of the National Security Council were not as 
transparent.
    Chairman Tom Davis. Mr. Long, how does FEMA provide 
oversight for international assistance it has received in the 
United States for domestic incidents?
    Mr. Long. We would utilize standard case management 
oversight. Just to give you a brief overview of how FEMA 
manages these sorts of engagements, one would be to review the 
financial status, provide progress reports and close-out 
reports. In the case of UMCOR, we conduct site visits where we 
would go over a routine checklist of business and 
administrative systems, review the subgrantee selection and 
monitoring process. We monitor by telephone to maintain 
consistent communication, and there is consultation with the 
program officer at the time of payment requests and also at the 
time of progress reports, and then there is review of audit 
reports as well.
    Chairman Tom Davis. OK. Let me ask this: I will start with 
Ms. D'Agostino, if you can shed some light on it. The National 
Security Council had a large role in determining how 
internationally donated funds would be used. What led to the 
involvement of the National Security Council regarding 
international cash donations? Any idea?
    Ms. D'Agostino. The only thing I can tell you is that part 
of the National Response Plan acknowledges that there may be 
policy issues that need to be elevated to either the Homeland 
Security Council or the National Security Council. Since these 
were international cash donations and the State Department is a 
member of the NSC, I assume that is why they went the route of 
the NSC.
    Chairman Tom Davis. Can anybody shed light on that? Is 
somebody afraid we would take some bad money from somebody? The 
NSC seems that it is really not equipped to decide how this 
stuff ought to be sent and accepted and stuff. Can anybody shed 
any light on that?
    Ms. McCarthy. If I could clarify, the NSC offered to pull 
together agencies working with us so we would start a 
deliberative process. I don't think one can infer from that 
they had veto making authority. It was an interagency 
deliberative process. They pulled the agencies together for 
meeting.
    Chairman Tom Davis. OK. Until just a week or two ago, we 
still had some of these commodities sitting in a warehouse in 
Arkansas; is that right?
    Ms. D'Agostino. That is our understanding.
    Chairman Tom Davis. While everybody is meeting and 
discussing and everything else.
    Ms. McCarthy, as you interpret it, what kind of authority 
does the NRP give the Department of State for making decisions 
about handing foreign assistance to the United States? As you 
interpret it, what kind of authority does the NRP give the 
Department of State to make decisions about spending foreign 
assistance given to the United States? What is the current 
thought?
    Ms. McCarthy. Essentially, we act as an intermediary for 
foreign offers of assistance under the NRP and we work with 
other agencies to respond to requests and expedite the delivery 
of assistance. That in a nutshell is essentially our role under 
the NRP.
    Chairman Tom Davis. All right. Mr. Long, GAO reports that 
FEMA and USAID's Office of Foreign Disaster Assistance were 
unable to provide the GAO with evidence that they had 
determined or confirmed that international in-kind assistance 
arrived at FEMA distribution sites. Can you shed any light on 
that?
    Mr. Gottlieb. Mr. Chairman, I think I mentioned in my 
remarks that we actually recently received from our dispatch 
agent, DHL, a thorough listing of all that came into Little 
Rock, what those donations were, who the donors were, and the 
distribution points to which those are were dispatched. I 
believe we left 30 copies with the clerk.
    Chairman Tom Davis. OK.
    Mr. Gottlieb. So I think if you look----
    Chairman Tom Davis. We just got them. OK. That is fine.
    Mr. Long, let me ask you this: If matching funds that are 
required for State and local governments for public assistance 
was an issue and not using Stafford Act funds, could the 
Stafford Act be amended to permit international donations to be 
used for such matching funds? Do you have any thought on that?
    Mr. Long. I was just informed that it would require 
statutory action.
    Chairman Tom Davis. So that is something we could consider 
from our end?
    Mr. Long. Yes. It is something we could consider.
    Chairman Tom Davis. Is FEMA seeking statutory authority to 
change the Stafford Act to allow it to use international funds 
for other uses currently permitted under the act? That is what 
we are asking. That is something else we ought to look at.
    Mr. Long. We are currently looking at all the changes that 
should be considered to be made to the Stafford Act based on 
what happened in Katrina.
    Chairman Tom Davis. Let me ask this for the panel, if 
somebody can answer it: Who is responsible for tracking who 
received in-kind donations to their final destinations, from 
the beginning to the end, receiving them and going to the end 
with this process? Who is ultimately responsible for that? We 
have all these different agencies up here. We have all these 
task forces. Ultimately, who makes those decisions, or it is 
just so diffuse at this point that you just kind of have to get 
GAO involved to try to follow the cash?
    Mr. Gottlieb. Mr. Chairman, if I can respond in part and I 
think Mr. Long may respond afterwards, I think the way the 
system developed, which is fairly rapidly after we----
    Chairman Tom Davis. Kind of ad hoc?
    Mr. Gottlieb. Ad hoc, but because we didn't have a system, 
that is the best we can call it, but it was pretty clear what 
our role was at OFDA, and that was once a decision had been 
made to accept an offer, after OFDA then liaised with wherever 
that donor was, whether it was consolidated goods from a NATO 
air base or it was Britain or wherever it was, and then those 
planes were directed into Little Rock. At Little Rock Air Force 
Base, that is where we had our logisticians. We were working 
with DOD. They helped us with some of the offloads. We then 
engaged the services of DHL to help us then dispatch those 
goods to destination points that were given to us through 
consultation with FEMA.
    So in the documents to which I referred earlier, it shows 
many, many destinations throughout Mississippi and Louisiana 
and Alabama where we actually dispatched those. Now, after that 
point, that was the end point for us. We sent it to a 
distribution center.
    Chairman Tom Davis. You sign off at that point?
    Mr. Gottlieb. That is where we sign off, yes.
    Chairman Tom Davis. Then who gets it? I guess FEMA gets it.
    Mr. Long. At that point, when the goods landed in Little 
Rock, FEMA would be in communication with OFDA as to where to 
distribute those based on need. If the goods were transferred 
to a Federal staging area, which would be FEMA warehouse or 
distribution center, we then, yes, would take physical receipt 
of those goods.
    Chairman Tom Davis. Mr. Rowell, let me ask did we have any 
issues with DOD coordinating with the Department of State, 
ensuring permission or visa for foreign military ships and 
planes and personnel during this emergency? Did it run pretty 
smoothly or did you run into some red tape in moving and 
getting people in and out?
    Mr. Rowell. Our information is even though this was an ad 
hoc and quickly formed group, I have to say that the people at 
this table and the folks that supported them, it went well 
after we got our sea legs, if you will, and DOD has no problem.
    Chairman Tom Davis. So we don't need any statutory or any 
changes in a case like this to make sure that it functions 
should this happen again? We are asking this not to come back 
and chew everybody out for what happened this time around, 
but----
    Mr. Rowell. In my discussions in the department, I know of 
no conversations regarding a change to statutory authority.
    Chairman Tom Davis. This was the largest storm in recorded 
history in the United States, and I think as we take a look at 
that, and I have been down there three times and I know many of 
you have been down, even though it was predicted, it was 
predictable, we learned a lot and a lot of mistakes got made. 
The key is to make sure the next time around we are ready and 
we can be a smooth efficient machine.
    We are going to wrestle up here with some major issues on 
organization. Frankly, we know FEMA is having trouble filling 
the slots at this point. There is some concern that being 
attached to the Department of Homeland Security, that it can't 
operate as quickly and efficiently under the National Response 
Plan. It really never got a chance to operate in this 
particular case because Michael Brown who was on the ground 
kind of didn't believe in the plan to begin with. He had 
handled emergencies before. He just tried to circumvent it and 
deal directly with the White House.
    So, look, a lot of things happened that in retrospect today 
we would all do differently. You are just spokesmen for your 
different agencies. What we are trying to elicit here is the 
kind of statutory changes so we can give these departments the 
flexibility you need to get the job done should something like 
this occur again. That is ultimately what we are after.
    Any other comments before we close the hearing? I 
appreciate everybody's patience today.
    Mr. McConnell. Just one brief one, sir, and that is I am 
here as the NORTHCOM kind of representative, and just speaking 
from an operational basis, I think in many ways this is a very 
good news story. Yes, there was no system, there was no 
anticipation that there would be a need for this kind of a 
system, but once the people on the ground started to work 
together--and particularly kudos to the Office of U.S. Foreign 
Disaster Assistance who has impressed the men and women of JTF 
Katrina very well--I think this in some ways as a good news 
story in allowing us to proceed along the lines that you just 
described.
    Chairman Tom Davis. I am not sure I disagree with that. I 
think one of the problems is that we have institutional 
barriers, some statutory, some regulatory, that made it harder 
for people to get the jobs done, and that is really what we are 
trying to solicit here.
    I was down on the ground and saw people working 24-7. I saw 
volunteers, fire departments, and emergency personnel from all 
over the country coming in and making this work. I saw people 
in the face of the storm who had made some early decisions 
decide they were going to put everything into saving lives, 
which meant some other things had to go by the wayside and did 
a remarkable job of actually limiting loss of the life once the 
levies broke and once some of the initial decisions that they 
probably wished had gone otherwise came about, and there were a 
lot of heroes in this story, and I don't mean to detract from 
that at all.
    We are really ultimately after institutionally what do we 
need to do to make sure that we can be a smooth-running 
machine. I know you have to deal with the rules and regulations 
that are passed by Congress and in some cases regulations that 
come through the agencies, and you are subject to that, and 
when you violate them, we will call you up and say why did you 
do that. Of course, emergency situations are different, and one 
of the things we found with FEMA and the folks on the ground--
the Governor of Louisiana talked about this, even Michael Brown 
when the military came in--they were mission-oriented. They 
were not driven by regulations, and they were able to get 
things done a lot quicker than some other elements of the 
government that seemed to be just constrained by regulations. 
In emergencies, you have to look at the mission. You have to 
get the job done. It sometimes goes outside the box. We are 
seeing this all the time.
    Anyway, I appreciate everybody sharing their thoughts with 
us today, coming before us. I am sure if we had it to do over 
again, we would all do it differently, but so would we up here. 
We are just trying to see what we need to do so that the next 
time, we give you the tools.
    I appreciate your patience. The hearing is adjourned.
    [Whereupon, at 1:07 p.m., the committee was adjourned.]
    [The prepared statement of Hon. Dennis J. Kucinich and 
additional information submitted for the hearing record 
follow:]

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