[Senate Hearing 112-493]
[From the U.S. Government Publishing Office]


 
                                                        S. Hrg. 112-493

                        ACCOUNTABILITY AT FEMA:
                           IS QUALITY JOB #1
=======================================================================

                                HEARING

                               BEFORE THE

 AD HOC SUBCOMMITTEE ON DISASTER RECOVERY AND INTERGOVERNMENTAL AFFAIRS

                                 OF THE

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 20, 2011

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
      Nicholas A. Rossi, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk
             Joyce Ward Publications Clerk and GPO Detailee


 AD HOC SUBCOMMITTEE ON DISASTER RECOVERY AND INTERGOVERNMENTAL AFFAIRS

                   MARK L. PRYOR, Arkansas, Chairman
DANIEL K. AKAKA, Hawaii              RAND PAUL, Kentucky
MARY L. LANDRIEU, Louisiana          SCOTT P. BROWN, Massachusetts
JON TESTER, Montana                  RON JOHNSON, Wisconsin
                Amanda Fox, Majority Professional Staff
                Brandon Booker, Minority Staff Director
                       Kelsey Stroud, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Pryor................................................     1
    Senator Johnson..............................................     2

                               WITNESSES

                       THURSDAY, OCTOBER 20, 2011

Hon. Richard Serino, Deputy Administrator, Federal Emergency 
  Management Agency, U.S. Department of Homeland Security........     4
Matt Jadacki, Assistant Inspector General, Emergency Management 
  Oversight, Office of Inspector General, U.S. Department of 
  Homeland Security..............................................     6
Hon. Maurice McTigue, Vice President and Distinguished Visiting 
  Scholar, The Mercatus Center, George Mason University..........     8
Craig Killough, Vice President, Project Management Institute.....    10

                     Alphabetical List of Witnesses

Jadacki, Matt:
    Testimony....................................................     6
    Prepared statement...........................................    34
Killough, Craig:
    Testimony....................................................    10
    Prepared statement with attachment...........................   101
McTigue, Hon. Maurice:
    Testimony....................................................     8
    Prepared statement with attachment...........................    43
Serino, Hon. Richard:
    Testimony....................................................     4
    Prepared statement...........................................    27

                                APPENDIX

Graph referenced by Senator Johnson..............................   112
Information submitted by Hon. Maurice McTigue on the Peterson-Pew 
  Commission for Budget Reform...................................   214
Questions and responses for the Record from:
    Mr. Serino...................................................   235
    Mr. Jadacki..................................................   253
    Mr. McTigue..................................................   257
    Mr. Killough.................................................   263


                        ACCOUNTABILITY AT FEMA:



                           IS QUALITY JOB #1

                              ----------                              


                       THURSDAY, OCTOBER 20, 2011

                                   U.S. Senate,    
             Ad Hoc Subcommittee on Disaster Recovery      
                         and Intergovernmental Affairs,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:33 a.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Mark L. 
Pryor, Chairman of the Subcommittee, presiding.
    Present: Senators Pryor and Johnson.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. All right. I will call our Subcommittee to 
order.
    I want to thank everyone for being here, thank all the 
witnesses and thank Senator Johnson.
    We may have some other Senators that come in and out during 
the course of the hearing. We have a vote in about an hour and 
a half. So Senator Johnson and I are kind of targeting that for 
a nice end point at about noon, to try to finish before our 
votes.
    I want to thank all of you all for being at the 
Subcommittee on Disaster Recovery and Intergovernmental Affairs 
(DRIA). We have entitled this hearing ``Accountability at FEMA: 
Is Quality Job #1,'' and I think it is a question that we 
should probably ask of all of our agencies to try to make sure 
that they have the quality controls and the efficiencies that 
we want to see and they are managed right and run well. We are 
certainly glad to put Federal Emergency Management Agency 
(FEMA) under a microscope today because all government agencies 
need to do this from time to time.
    We are here today to assess FEMA's progress in its effort 
to balance quick disaster response with good stewardship of 
taxpayer money.
    FEMA has responded to 87 major disasters this year, at 
least 10 of which caused damages in excess of a billion 
dollars. In August, FEMA had to redirect spending on past 
disasters in order to cover the immediate needs arising from 
Hurricane Irene and Tropical Storm Lee.
    In March, we convened this Subcommittee to examine the 
recoupment of $643 million in post-Hurricane Katrina disaster 
assistance and also to discuss ways to prevent improper 
payments in the future. We determined that stronger front-end 
controls are needed to identify and prevent waste, fraud and 
abuse at the outset. Without them, we get stuck with the costly 
pay-and-chase approach of recovering money after it is out the 
door. At that point, it is often too late.
    Today, I want to make sure quality control is a priority at 
FEMA. My goal is to review the organization and leadership of 
FEMA components, their emphasis on front-end accountability 
processes and how we can make additional improvements so that 
the American people can rest assured that their tax dollars are 
being put to good use.
    The Department of Homeland Security (DHS) Inspector General 
(IG) has examined FEMA's management and quality controls. It 
acknowledges that some improvements are being made, but the 
IG's findings are also troubling.
    For example, FEMA's Fraud Prevention and Investigation 
Branch had only six employees last year. Of the hundreds of 
thousands of cases processed by FEMA each year, only 3,108 were 
referred for review between 2007 and 2010. Although the Post-
Hurricane Katrina Emergency Management Reform Act required 
agency-wide employee training to better identify waste, fraud 
and abuse, this has not yet happened.
    In addition, FEMA's acquisitions processes lack the 
controls necessary to prevent wasteful spending, resulting in 
multimillion dollar contracts that do not clear requirements 
and performance measures. After Hurricane Ike, FEMA paid a 
million dollars for 60 days of access to 2 mobile medical units 
which they never used.
    The waste does not always end with the initial purchase. In 
the aftermath of the 2005 hurricane season, Hope, Arkansas 
became home to 19,000 unusable travel trailers and mobile homes 
that had cost $25,000 a month just to keep them stored there. 
Wasting taxpayer dollars in this way is simply unacceptable.
    Preventing inefficiency and abuse through enhanced 
government performance and accountability is a key focus of 
this Subcommittee. Last month, I included language in the DHS 
authorization bill to improve financial management and to 
prevent waste at DHS's acquisition processes. Earlier this 
year, I introduced the Disaster Assistance Recoupment Fairness 
Act (DARFA) of 2011 to address the recoupment of improper 
payments caused by FEMA error.
    Today, we will hear from FEMA and the DHS Inspector 
General. We will also get the perspective of two nongovernment 
witnesses from the Project Management Institute (PMI) and 
George Mason University's (GMU) Mercatus Center.
    I look forward to positive dialog on the lessons learned, 
improvements made and examples of best practices in 
accountability that are ready to be incorporated from the 
private sector into the Federal agencies, that can be applied 
to FEMA.
    With that, I would like to turn it over to Senator Johnson 
and ask for his opening statement if he has one.

              OPENING STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Well, Mr. Chairman, thank you for that. I 
love these field promotions.
    Senator Pryor. That is right.
    Senator Johnson. So now I am Ranking Member. Normally, I am 
down there.
    I do not have a prepared opening statement other than to 
say I appreciate the hearing. I certainly thank the witnesses 
for coming here.
    As a small government proponent, I am always looking at 
where the government is more effective. At the local level, 
State level versus Federal level.
    And I am actually making a copy of a chart I have that we 
will circulate to the witnesses a little bit later on to base 
some questions on, but it really shows that we have really had 
an explosion in things that are being declared Federal 
emergencies and then requiring a Federal response. So that is 
going to be sort of the thrust of my questions: What is the 
best level for addressing some of these issues, and have we 
tipped too far in the favor of Federal help in too many 
circumstances?
    But anyway, I look forward to your testimony. Thank you.
    Senator Pryor. Thank you, Mr. Ranking Member.
    Also, I would like to give the Subcommittee an update. 
Yesterday, we had a speech on the floor and some other 
developments that relate to some payments made by FEMA in a 
flood in Arkansas, and this has happened all over the country, 
where FEMA has wrongly paid out money to some people that have 
suffered damages and floods, hurricanes, tornadoes, et cetera.
    The reason I went to the floor yesterday is because FEMA 
actually has now turned this over to the Internal Revenue 
Service (IRS) for collection. And it was a $27,000 effort for 
recoupment. Because of IRS's taxes, penalties, interest, et 
cetera, it is now $37,000.
    And so, I met with Treasury yesterday. I talked to 
Secretary Timothy Geithner this morning, and we are working 
through that issue. He put out a statement last night saying 
that he is working with us, which is very true. So we are 
working to try to get that resolved in a way that makes sense 
for both parties.
    I do not have any real update on that yet, but as it 
currently stands, I still have those nominees held on the 
floor.
    What I would like to do now is introduce our witnesses, and 
each of these witnesses could have, and maybe deserves, a long 
introduction, with lots of interesting background, professional 
experience, et cetera. But in the interest of time, will just 
submit your full backgrounds and resumes for the record.
    But our first witness today will be the Hon. Richard 
Serino. He is the Deputy Administrator at the Federal Emergency 
Management Agency--again, lots of background there.
    But let me just move on to the second witness which is Matt 
Jadacki, the Assistant Inspector General for Emergency 
Management Oversight in the Office of Inspector General at the 
Department of Homeland Security.
    Third will be Maurice McTigue, Vice President and 
Distinguished Visiting Scholar at George Mason University's 
Mercatus Center. And he has a distinction that he is a former 
member of parliament in his home country. So we appreciate you 
here, and it is great to have you here.
    And then, our final witness, Mr. Craig Killough, is the 
Vice President of the Project Management Institute.
    So again, I want to thank all of you.
    We have a timer system today. We are hoping that everyone 
will keep their opening statement to 5 minutes or less. We like 
less, right? Do we not like less?
    Senator Johnson. Five minutes is fine. I do not want to put 
any pressure.
    Senator Pryor. OK, so 5 minutes or less.
    And we will submit your written testimony for the record. 
Then we will have questions.
    So Mr. Serino, would you lead off? Thank you.

  TESTIMONY OF HON. RICHARD SERINO,\1\ DEPUTY ADMINISTRATOR, 
    FEDERAL EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT OF 
                       HOMELAND SECURITY

    Mr. Serino. Thank you, Chairman Pryor, Senator Johnson and 
other Members of the Subcommittee that are not here right now.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Serino appears in the appendix on 
page 27.
---------------------------------------------------------------------------
    But as stated, my name is Rich Serino. I am the Deputy 
Administrator for FEMA. And it is an honor to appear before you 
today on behalf of the Department of Homeland Security and FEMA 
to discuss our quality assurance process and our internal 
financial controls.
    The American people and the disaster survivors all over 
this country rely on FEMA to meet our mission. Because of the 
serious responsibility, Administrator William Fugate and I took 
important steps early on in this Administration to, first, 
establish a culture of responsibility within FEMA; second, to 
engage the whole of community in disaster response and 
recovery. Our approach included a new doctrine, a new mission, 
a new strategic plan, as well as new policies.
    I am pleased to say, Mr. Chairman, that we are now seeing 
the benefits of the new approach in how we are responding to 
disasters and assisting the survivors of these disasters.
    But our responsibility goes beyond the need to provide 
quality service to disaster survivors. The American taxpayer 
expects and, in fact, needs us to meet that mission and to 
deliver those services in an efficient, cost effective manner. 
This is especially important under the current economic 
conditions that we now face.
    Because of this, FEMA took steps to reduce errors and 
increase effectiveness of how we provide services to disaster 
survivors as we implemented numerous fraud prevention controls 
designed to verify disaster survivors' information before the 
applicant receives any Federal disaster assistance. For example 
we now block automatic payments to high risk addresses such as 
check-cashing stores, mail drops, cemeteries and jails.
    The result of these efforts has been a reduction in the 
improper payment rate from 14 percent in the aftermath of 
Hurricane Katrina to currently less than one percent, in fact, 
0.3 percent in fiscal year 2010.
    In addition to improving these efficiencies in how we 
deliver assistance to disaster survivors, we also took steps to 
improve the acquisition management process at FEMA. In the 
past, the Inspector General let FEMA know the need to make 
significant improvements in this area, and we have changed a 
lot of our processes to comply with those recommendations. For 
example, we increased the number of prepositioned contracts 
that are frequently used and frequently needed in times, to put 
in place long before a disaster strikes. By doing so, we can 
increase the speed of delivery and also the cost of providing 
these supplies during disaster response. FEMA now maintains 
between 40 and 60 of these prepositioned contracts that are in 
place.
    Another improvement we made is the creation of the Disaster 
Acquisition Response Teams (DARTs). These teams are made up of 
skilled experts who can quickly deploy to our joint field 
offices or regional offices to provide contract administration 
and oversight for large disaster contracts in the field.
    These teams have already had an impact on how we do 
business. For example, after the flooding in North Dakota, in 
Minot, the DART staff were able to streamline some of the 
procurement processes of housing of disaster responders from 
which was an average 30-day process down to only 3 days, which 
allowed us to focus the need instead on addressing the needs of 
survivors.
    Following Hurricane Irene, DART members were also 
prepositioned in the field so they could provide contracting 
support for housing inspection missions as soon as they were 
required, including utility contracts, temporary housing unit 
pad leases and multifamily repair program contracts.
    During the past 2 years, we have worked especially hard to 
improve how we manage the Disaster Relief Fund (DRF), the main 
budget account we use to assist States as they respond to 
recover from disasters. We took steps to change how we expend 
the DRF resources and improved the closeout process for older 
disasters so we could bring updated funds back to the DRF. In 
fiscal years 2010 and 2011, by continually reviewing and 
identifying and recovering from these unobligated funds from 
previous disasters, FEMA was able to recover more than $4.7 
billion in unobligated funds to the fund.
    FEMA has found other efficiencies to stretch out the DRF 
relief fund dollars. We worked quickly to right-size the number 
of personnel we need in a disaster field office, but also, 
working with our State partners, we have created some virtual 
Joint Field Offices (JFOs) that are run out of our regional 
offices. For example, during the 4-month period earlier this 
year--last year, In Region 3, we realized the savings of $9.5 
million by using virtual JFOs and physical offices.
    When Administrator Fugate arrived to FEMA, one of the 
things we also created was FEMAStat, which is a new ongoing 
management process. This tool facilitates performance-based 
assessments by redefining metrics and conducting milestone-
based reviews. Included in the new process is our programs have 
helped identify trends and gaps that are important to improving 
the ability to meet our mission. FEMAStat is improving 
transparency, information sharing and customer support as well 
as program monitoring.
    In conclusion, FEMA recognizes the need to balance quality 
customer service and providing disaster assistance quickly but 
maintains the responsibility to be a good steward of the 
taxpayers' money. All the while, we still have work to do, and 
I am proud of the progress we have made in the last 2 years to 
ensure FEMA is run in a cost efficient, effective manner.
    I look forward to working with this Subcommittee and our 
many partners at the Federal, State and local levels as we 
continue to progress, to improve efficiencies, to increase 
efforts, to promote disaster response, recovery, and 
preparedness within the whole community.
    Thank you again for the opportunity to appear before you 
and look forward to answering your questions.
    Senator Pryor. Thank you. Mr. Jadacki.

  TESTIMONY OF MATT JADACKI,\1\ ASSISTANT INSPECTOR GENERAL, 
 EMERGENCY MANAGEMENT OVERSIGHT, OFFICE OF INSPECTOR GENERAL, 
              U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Jadacki. Good morning, Chairman Pryor, Senator Johnson.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Jadacki appears in the appendix 
on page 34.
---------------------------------------------------------------------------
    My name is Matt Jadacki. I am the Assistant Inspector 
General for Emergency Management Oversight in the Department of 
Homeland Security's Office of Inspector General. Thank you for 
the opportunity to discuss FEMA's quality controls and business 
practices.
    Since the Post-Hurricane Katrina Emergency Reform Act of 
2006, FEMA has made great strides in improving and 
strengthening disaster preparedness, interacting with other 
Federal agencies and assisting communities to recover after a 
disaster.
    Today, I want to focus my remarks on three key areas: fraud 
prevention and internal controls, acquisitions, and the 
Remedial Action Management Program. These areas and others are 
discussed in my written statement, are covered in upcoming 
department-wide management challenges reports and in numerous 
FEMA-specific reports we have issued over the last 2 years.
    In March 2011, I testified before the Subcommittee 
regarding FEMA's efforts to recoup $643 million in potentially 
improper disaster assistance payments beginning in the 
aftermath of Hurricanes Katrina and Rita. As of September 29, 
2011, almost 33,000 notices of debt have been mailed, over 500 
people had their claim debts terminated after utilizing the 
appeals process, and FEMA has recouped more than $3 million.
    The speed at which FEMA disburses assistance to individuals 
through its Individuals and Household Program results in the 
program's susceptibility to fraud. This susceptibility was 
increased during the response to Hurricane Katrina because FEMA 
disabled some internal control functions to speed up its 
response to the catastrophic disaster. More recent reports 
indicate that FEMA has made significant internal control 
improvements, including identity and address verifications, and 
inspections prior to approving assistance.
    Our review of FEMA's fraud prevention efforts noted that 
despite the assistance programs' continued susceptibility to 
fraud and abuse, FEMA has not implemented formal fraud 
awareness training mandated by the Post-Katrina Reform Act. 
Further, FEMA has not staffed the Fraud Prevention and 
Investigative Branch nor has it provided the authority 
necessary to review programs and agency-wide recommended 
improvements in internal controls.
    FEMA has made improvements in its internal controls since 
Hurricane Katrina but more needs to be done. The culture at 
FEMA is to get the money to disaster survivors as quickly as 
possible, but this commendable attitude needs to be tempered 
throughout the organization by an increased emphasis on 
providing assistance to only eligible disaster survivors.
    Although FEMA has developed and strengthened acquisition 
management policies and processes, it continues to face 
challenges. For example, weak internal controls have resulted 
in multimillion dollar contracts with vague and questionable 
requirements and no performance measures. Agency employees 
responsible for managing and monitoring the contractors do not 
always receive written guidance or training on how to evaluate 
contractor performance or certify billing invoices.
    FEMA has made progress in recruiting and retaining a 
workforce capable of managing complex acquisition programs. 
Nevertheless, FEMA's contracting program continues to face 
workforce challenges.
    FEMA has made great strides in improving its Contracting 
Officer Technical Representatives (COTRs), cadre. However, many 
trained COTRs have never been assigned to a contract and are 
unsure of their ability to be effective.
    We have also recommended that FEMA establish an overarching 
sourcing strategy. Headquarters, regional and local FEMA 
representatives were ordering goods without communicating to 
their counterparts at other locations. As a result, goods were 
ordered, were not needed or purchased from the wrong source or 
at the wrong time.
    We recommended that FEMA implement a single ordering 
concept to coordinate all sources and decisions made through 
the logistics section. FEMA is now making progress in adopting 
a single point ordering concept.
    FEMA's Remedial Action Management Program (RAMP), is 
intended to identify lessons learned and best practices, manage 
the subsequent remediation of issues, and share lessons learned 
and best practices. FEMA regions are responsible for their 
after-action reports and for collecting and transmitting to 
FEMA headquarters lessons learned and best practices identified 
in those reviews.
    FEMA officials had not always conducted after-action 
reviews to identify lessons learned and best practices, and 
when the reviews were held, lessons learned and best practices 
were often not converted into policy. However, in some cases, 
informal discussions were held in lieu of the RAMP review, in 
other cases due to the magnitude of the disaster and other 
circumstances.
    In May 2010, the server which housed FEMA's program 
database of lessons learned failed, and FEMA lost access to the 
lessons learned and best practices data. Recently, this was 
restored, and FEMA needs to conduct after-action reviews for 
all disasters and disseminate the data collected more widely.
    FEMA has made progress in many areas we reviewed. However, 
although corrective plans have been developed, implementation 
has been slow. FEMA needs to increase oversight of key 
management issues to ensure implementation of initiatives is 
sustained.
    Many recommendations in our audit of FEMA operations remain 
open. We will continue to work with FEMA to ensure that 
corrective action plans are developed and that progress is made 
to fully implement the recommendations.
    In conclusion, FEMA is an agency that is in a constant 
state of flux. Priorities, plans, initiatives, draft guidance 
and working groups often, understandably, take a back seat to 
disaster response and recovery, and the momentum toward 
finalization and implementation of key initiatives is slowed or 
lost.
    Involved in more than 87 Presidentially declared disasters 
this year alone, FEMA must continue to make progress in 
addressing its major management challenges, and must continue 
to improve in areas such as fraud prevention and acquisition, 
and implement lessons learned and corrective actions if it is 
to be an effective partner in emergency management.
    Mr. Chairman, this concludes my prepared remarks. I would 
be happy to answer any questions you or Senator Johnson may 
have.
    Senator Pryor. Thank you. Mr. McTigue.

   TESTIMONY OF HON. MAURICE MCTIGUE,\1\ VICE PRESIDENT AND 
  DISTINGUISHED VISITING SCHOLAR, THE MERCATUS CENTER, GEORGE 
                        MASON UNIVERSITY

    Mr. McTigue. Thank you, Chairman Pryor and Senator Johnson.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. McTigue appears in the appendix 
on page 43.
---------------------------------------------------------------------------
    I have been in the United States for 15 years now, at the 
Mercatus Center at George Mason University. I came to the 
United States from Canada where I spent 4 years as New 
Zealand's Ambassador and also Ambassador to the Caribbean, and 
prior to that, spent some time as a member of parliament and as 
a member of the New Zealand Cabinet. Some of my comments are 
therefore based upon that background of experience, and some of 
those experiences may be valuable to the work that you do here 
in Congress.
    When I look back at the role of the U.S. Government in 
disaster, that role goes back to about 1803 and the fires that 
occurred in the harbor of Portsmouth in New Hampshire. And the 
interesting thing about that disaster is that it has always 
been controversial and it always will be controversial. So I do 
not think we are ever going to get to a State where the 
activities of FEMA are going to be without criticism.
    Second, because you are always, in an operation like FEMA, 
dealing with distressed people, mistakes are going to be made, 
and the good should not be prevented by trying to be absolutely 
certain that no mistake is ever made.
    One of the successes, in our view, having looked at FEMA 
for over 10 years and every other major organization in the 
Federal Government, was when we did something called the 
Scorecard, which analyzed and looked at how accurately 
departments reported on their success and whether or not that 
information was appropriate to the accountability of that 
organization. We picked out FEMA as one of the turnaround 
organizations of the 1990s.
    What made it a turnaround organization? I think it was the 
vision that James Lee Witt came to that organization with. And 
as he said to me on one occasion when I was talking to him, 
``our job is to put back together the lives of individuals, 
communities and States, and to do that as quickly and as 
appropriately as possible.''
    So, some of the things that he did seemed to be 
counterintuitive, one of which was to spend more time on 
training and preparing the assessors in the field, and then to 
be prepared to rely more on the judgment of those people. And 
he actually found that too many layers of oversight actually 
contributed to errors rather than reducing them.
    So, I think that is something that should be borne in 
mind--that additional layers of oversight may not necessarily 
improve the accuracy rate, but they may also, at the same time, 
destroy the success that you are seeking in terms of putting 
back together people's lives as quickly as possible.
    Senator Johnson, you made some comments that I agree with, 
and that is that maybe FEMA is being asked to deal with too 
many situations that do not really constitute an emergency or a 
disaster. Some of that may be the definitions that are used by 
FEMA, but some of that may also reside right here with 
Congress, and that Congress has asked FEMA to address more and 
more issues that may not properly fit into that category of 
being a disaster or an emergency.
    There is the danger of unintended consequences by going 
down that course, and that local communities will not do the 
things that they should do to try and make the risk of harm in 
the face of a disaster or adverse event less likely to happen.
    In my view, a wet and windy day is not an emergency event, 
and sometimes we tend to see wet and windy days as something 
that is being supported by FEMA. I think that is inappropriate 
and, in the long run, will probably produce adverse results.
    Can I just finally say that listening to the radio this 
morning, Mr. Chairman--and you talked about the case that has 
just come up--one of the things that might help to deal with 
that case, and something that was used by the New Zealand 
government back in the late 70s when we were trying to deal 
with adverse payments and mistakes, was to make the decision 
that the government would make no payment to anybody who did 
not have a bank account. In the future, we would not write 
checks to anybody.
    As a result of doing that, and the protections you can put 
into a system like that, the level of adverse payments dropped 
by 33 percent.
    It is just something that is worth thinking about. It is 
not, in my view, a real hardship to ask anybody who is going to 
be the recipient to have a bank account before they can receive 
moneys from the Federal Government.
    Finally, some of the work that we did showed that local 
networks were very good at helping in disasters, whether they 
be voluntary organizations like churches or ethnic groups. The 
Vietnamese Society in New Orleans was particularly successful 
in putting back together their social group. Using those groups 
is probably something that FEMA should work on and that they 
should think about how you are able to support and activate 
those groups, rather than trying to take a command and control 
approach.
    My final comment is that when I look at FEMA and the things 
that govern it, it has an enormous number of laws that it is 
responsible for. Some bright people, between now and sometime 
in the future, should consolidate all of those laws into an 
emergency management act that deals with all of those laws, 
makes them comprehensive and understandable, and then repeal 
all the others laws.
    If you are not going to repeal all the other laws, please 
do not start. It is by adding to but not taking away at the 
same time, that we get the complexity and we often get the 
contradictions.
    Thank you very much, Mr. Chairman.
    Senator Pryor. Mr. Killough.

    TESTIMONY OF CRAIG KILLOUGH,\1\ VICE PRESIDENT, PROJECT 
                      MANAGEMENT INSTITUTE

    Mr. Killough. Chairman Pryor and Senator Johnson, my name 
is Craig Killough. I am a Vice President with the Project 
Management Institute (PMI). I appreciate the opportunity to 
participate in this important hearing and speak to the benefits 
of effective program management and our extensive research in 
program management and disaster recovery.
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    \1\ The prepared statement of Mr. Killough appears in the appendix 
on page 113.
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    The Project Management Institute is the world's largest 
project management membership association, with more than 
600,000 active members and credential holders worldwide, 
including large chapters in Arkansas and Kentucky.
    Program management delivers a competitive advantage by 
producing positive outcomes for organizations both in private 
industry and in government. Adoption of program management 
standards and strong support of the practitioners who are 
managing programs provide benefits that include increased 
efficiency and improved decisionmaking, both of which are 
critical in disaster response and recovery.
    If I were to leave you with three thoughts in the time 
available for me today, they would be:
    First, organizations and governmental bodies that use 
consistently applied program management standards and qualified 
program managers are more successful than organizations that do 
not.
    Second, the rapid response inherent to disaster recovery 
requires prepositioned program management processes and 
qualified people.
    And third, the entire government would benefit from broad 
adoption of program management standards and the creation of a 
job classification and defined career path for program and 
project managers.
    With reference to my first point, utilizing global 
standards is critical to the program management profession and 
to government because they ensure that a basic program 
management framework, lexicon and process is applied 
consistently across public and private organizations and 
agencies charged with disaster recovery. The most successful 
organizations have learned that employing program management 
techniques and creating a culture focused around program 
management is vital.
    PMI's research found that organizations using standard 
practices, along with formal training for program management, 
perform better by considerable margins. High performing 
organizations that use standards, and support certification and 
training, demonstrate 90 percent success rates on achieving 
business results while low performers achieve just over 34 
percent.
    In 2010, PMI conducted an analysis of successful government 
programs. Program managers from a wide variety of government 
agencies shared success factors and best practices. The most 
successful government programs start with a firm grounding in 
the fundamentals; that being experienced and well trained 
program managers and standardized program management practices. 
Combining this foundation with clear objectives and domain 
expertise creates a ripple effect of increased team morale and 
better intradepartmental collaboration, which perpetuates a 
cycle of success.
    The Army Corps of Engineers (ACE) noted a cost reduction of 
between 20 and 30 percent from implementing a policy of using 
trained program managers and a more systematic approach to 
managing their programs.
    To my second point, relating specifically to disaster 
relief, program management expertise has many practical 
applications for government, particularly for FEMA's primary 
mission. Disaster relief presents unique challenges because of 
the inherent urgency and high risk. Program management 
practices allow a disaster recovery team to stay organized and 
focused and to implement solutions a community needs after 
being struck by a disaster. Having these capabilities on hand 
and ready to deploy is critical to adequate response.
    Recognizing this need, PMI published ``Project Management 
Methodology for Post-Disaster Reconstruction,'' in response to 
the Asian tsunami and Hurricane Katrina. This is a methodology 
for use in a disaster recovery field where providing the kind 
of leadership and clarity of thought needed to help in the 
reconstruction effort. Reconstruction project management is 
about solving problems and delivering intended results through 
an organized, structured methodology.
    We also recently published another study on aid relief 
projects, which was submitted to the Subcommittee for the 
record.
    Finally, we believe that best practices should be adopted 
in every agency. In my written testimony, I have outlined six 
recommendations for the Subcommittee to consider. We believe 
creating more effective and efficient accountable government 
can be achieved by adopting these suggestions.
    Mr. Chairman, I would like to commend you on being 
proactive in this area by advocating for language to improve 
program management in the DHS authorization bill approved by 
the full committee in September.
    Thank you again, Chairman Pryor and the Subcommittee on 
Disaster Recovery and Intergovernmental Affairs, for the 
opportunity to speak here on behalf of the Project Management 
Institute. I will be happy to answer any questions you may 
have.
    Senator Pryor. Thank you, and I want to thank all of our 
witnesses for your testimony today.
    Let me start by saying that I want to make sure that FEMA 
has in the agency a culture of accountability. I am not sure 
that has always been the case there. Like Mr. McTigue said a 
few moments ago, I think it probably was the case there when 
James Lee Witt was there, and then it went through kind of a 
period in the wilderness, so to speak. And I think you are 
trying hard to get that accountability back.
    And I appreciate all of you--Mr. Jadacki for your work in 
looking at FEMA and making several recommendations on how we 
can increase that culture of accountability.
    So Mr. Serino, let me start with you if I may. I know that 
you, the agency--it appears to me at least the agency has 
worked hard to reestablish that and really make that a core 
value in the agency.
    But the Inspector General has made recommendations, and I 
am not sure you guys are following up on one of those. I want 
to make sure there is formal fraud awareness training with your 
employees, with your workforce, to again build that in with 
your people before any disasters happen. I know disasters are 
going on all the time, but we need to make sure that they have 
fraud awareness training, agency-wide.
    Can you give me an update on that? Are you all doing that 
or trying to do that?
    Mr. Serino. What we have done, Mr. Chairman, is we have for 
all of our personnel that are in the procurement office, all of 
our COTRs, we have increased the amount of training for all 
those personnel.
    Senator Pryor. And how much training is involved there?
    When we talk about fraud awareness training, what are we 
talking about? Is that a 1-hour thing? Is that a weekly thing?
    Mr. Serino. Well, for the people in that specific office, I 
can get the exact number of hours, but it is pretty in depth 
and trained for the folks that are assigned to that office--the 
COTRs, the contracting officers. Those folks go through 
substantial training and through what we call our FEMA 
Qualification System (FQS), specifically for those personnel in 
that office. I will get you the exact number of hours, but it 
is substantial, that they go through.
    In addition to that, for all of our personnel, we are 
making them aware of that, and we are going through the process 
of making sure that all of our personnel receive that training.


                       information for the record


    Since 2007, in compliance with the Post Katrina Emergency 
Management Reform Act, FEMA's Fraud Prevention and 
Investigation Branch has conducted Fraud Awareness and 
Detection training for a diverse audience. The training has 
been provided to more than 1000 FEMA employees to include 
PFT's, CORE's and DAE's as well as to other Federal and State 
personnel. Most recently in August 2011, the training was 
provided to approximately 600 employees of FEMA's Texas 
National Processing Service Center (NPSC). The Agency training 
is on-ongoing and will be provided to the Virginia and Maryland 
NPSC's in FY12.
    The training consists of a 2-hour classroom session. It 
encompasses the identifying, detecting and reporting of fraud 
in FEMA Programs as follows:

    1. FEMA's responsibility--Good stewardship of tax payer 
dollars
    2. The definition of Fraud
    3. The cost and effect of Fraud
    4. Analysis of Fraud
    5. Detecting Internal and External FEMA Fraud
    6. Preventing Fraud
    7. Reporting Fraud

    Senator Pryor. And so, that is going on now?
    Mr. Serino. We are in the process of doing that. Some of 
our personnel are getting it, yes.
    Senator Pryor. OK. So you trying to implement it system-
wide. Is that fair to say? But you are in process?
    Mr. Serino. Yes.
    Senator Pryor. Is that a fair characterization?
    And also, in your Fraud Prevention and Investigation 
Branch, I think I said a few moments ago that at one point you 
had a very small staff there. I think it was in the single 
digits. And has that changed, and if so, why and if not, why 
not?
    Mr. Serino. What we have done is we have increased the 
staff there. We have also increased the accountability for 
that. It is part of our weekly reports that we get. We have 
weekly meetings with all of our senior staff. In part of that 
report out, we get what the current status is on the fraud, 
waste and abuse of that fraud unit, what they are pursuing, 
what the current dollar amounts are that they are going after, 
and the number of cases they are after.
    So what we have done is increase the amount of oversight 
with them at the highest level, that they report out on a 
weekly basis to the entire senior staff, including the 
Administrator and myself, on where we are with those current 
numbers.
    Senator Pryor. Mr. Jadacki, let me ask you. In your 
capacity in the Inspector General's office there, on something 
like this, you want to make sure that they are doing the fraud 
awareness training and those types of things. I know you have 
made a set of recommendations. Do you monitor those 
continuously, or do you just come back maybe once a year and 
look and see what kind of progress they have made?
    Mr. Jadacki. After we issue a report with formal 
recommendations, within 90 days, we request and require a 
corrective action plan. And based on the corrective action 
plan, we will say this plan meets the intent of this 
recommendation or it does not.
    So we resolve the recommendation or leave it unresolved 
until they do it, but we continuously take a look at that 
periodically. We meet biweekly, or every other week, with 
FEMA--to discuss what is the status of the recommendations, 
what is going on.
    And also, included in our semiannual report to Congress we 
have to report the status of recommendations that we made to 
the agency, whether they have been implemented or not.
    We have been watching closely because we get a lot of 
questions about that, not only from this Subcommittee but from 
a lot of you, there is a lot of interest out there, both with 
Congress and other folks, with the fraud prevention unit 
itself.
    And obviously, we have a vested interest too because a lot 
of the recommendations or things that the fraud prevention unit 
identifies in FEMA are referred to us, and we ultimately have 
to resolve those things, whether criminal or not. So this is 
something that is near and dear to our heart and we monitor on 
a regular basis.
    I do want to expand on one thing. It is great that the 
contractors are getting the fraud awareness, but really, people 
in the front line need to get it too--the folks that are 
actually taking the input from the disaster survivors. There 
are certain red flags out there. They should be trained to 
identify those and turn them over.
    There is fraud in debris removal. There is also fraud in 
public assistance programs. It is great that FEMA is starting 
on the contractors, but I think in all aspects of disaster 
assistance there are elements of fraud we have found over the 
years.
    I think it is critical that FEMA maintain and expand their 
fraud awareness programs.
    Senator Pryor. Mr. Serino, do you want to comment on that?
    Mr. Serino. We are going to expand that, as I said earlier.
    Senator Pryor. OK. And so, what is your timetable in 
getting that fully implemented for all your folks on the ground 
that are out there handling these disasters?
    Mr. Serino. I do not have the time line for that, but we 
will certainly get that to you.
    Senator Pryor. OK.
    Let me ask another question, Mr. Serino. You gave some 
great statistics a minute ago about your error rates. I think 
that you said they went from 14 percent? Was that during 
Hurricane Katrina itself or during that time period?
    Mr. Serino. After.
    Senator Pryor. And then, they have gone down to 0.3 
percent, which those are great numbers.
    Do you attribute the big drop-off there in the fact that 
the agency was so overwhelmed during that Hurricane Katrina 
period and just there was a lot of, I hate to say mismanagement 
but a lot of bad practices that crept in during that time?
    Do you attribute it to that, or the fact that you really do 
have better systems in place now and you are just running like 
you always should have run, or is it a combination of both?
    Mr. Serino. I actually think it is the latter. I think it 
is a combination of both. I think it is a combination that 
initially people were trying to get a lot of aid out to the 
survivors.
    But in subsequently increasing a lot of the controls that 
we have in place, that we have put in place, before we actually 
issue any money to survivors, I think that is key. But we have 
been able to do that in a very cost efficient way but also have 
been able to do it quickly.
    We are still able to meet the needs of the survivors, that 
we are able to get the housing inspection, somebody actually 
out there looking at their homes, somebody actually through the 
process and getting checks in survivors' hands who are 
deserving but doing it in an efficient manner in actually a 
fairly short period of time. The average time for a housing 
inspection is about 3\1/2\ days from the time they call, and to 
get a check to a person is about 2\1/2\ days.
    But at the same time, we are able to increase the 
efficiency of doing that and decreasing the error rate down to 
0.3 percent, which is one of the best in the Federal 
Government.
    Senator Pryor. Well, that is always the balance that FEMA 
has to strike. You have people that are in severe need and they 
need it very quickly, but at the same time you want to make 
sure there is not fraud and people trying to abuse the system. 
So it is a hard balance.
    And I love the fact that the error rate has gone down so 
low and dropped so dramatically. That is a huge accomplishment.
    Let me ask you about the error rate, Mr. Jadacki. Do you 
all calculate that or does FEMA calculate it? Do you verify it, 
or what?
    Mr. Jadacki. Yes, we do not calculate that. FEMA calculates 
that.
    As part of the Improper Payments Elimination and Reduction 
Act (IPERA), the IG will actually have to go in and validate 
the methodology that is used by the agencies in a lot of cases. 
So this year we will be taking a look at their calculations of 
how they come up with their error rate.
    Senator Pryor. Have you validated it yet?
    Mr. Jadacki. No, we have not validated it yet. The first 
time we are going to do it is this year. We have jobs underway 
to do that right now. So we will take a look at that.
    I will say that part of the reason the error rate dropped 
is that a lot of controls were either circumvented or dropped 
after Hurricane Katrina. Things that you would normally do, 
checking Social Security numbers, for example, that control was 
dropped, and that is a key control.
    Senator Pryor. Is that just because they were so 
overwhelmed?
    Mr. Jadacki. They were so overwhelmed, and they felt there 
was a need to get the money out quickly to individuals.
    And there is always that balancing act. If you are too 
slow, you are criticized for being too slow, but you are 
checking all the controls. But if you act too quickly, again, 
the pay-and-chase type thing happens.
    Senator Pryor. So I am not trying to justify for Hurricane 
Katrina, but it was almost like the mind set may have been that 
if you get 10 people that are asking for a need and 9 of them 
need it, let's get it to the 9. And maybe one does not need it, 
and maybe there is fraud or whatever, but at least you are 
getting it to the 9. Is that the decision that was made?
    Mr. Jadacki. I do not know how that decision was made, but 
that seems to be the consequence of whatever decision was made 
to do that.
    A lot of people who were not eligible took advantage of the 
system for a number of reasons--because the controls were 
dropped or that they were circumvented--and it did result in a 
number of improper payments.
    Senator Pryor. Thank you. Mr. Johnson.
    Senator Johnson. Thank you, Mr. Chairman. Let me pick up on 
that point in terms of fraud rate with Mr. Serino. How is that 
measured?
    I realize you have to verify methodology, but can you 
just--I mean how do you measure it with any level of accuracy?
    Mr. Serino. I do not have all the details, but I can get 
that.
    A lot of the times what we do is we actually look and as we 
go back and look and see how many people that we met, we were 
able to get there. We actually verify, as I mentioned earlier, 
some of the addresses of where people go, what they--whether it 
is a jail or the addresses people use, the Social Security 
numbers, as well as actually sending somebody physically out to 
the home, which in the past was not always done. But somebody 
actually going to the home, looking at the home, speaking to 
the people--that in itself is one of the most controls that we 
have.
    So a combination of all those is how we actually reach that 
conclusion.


                       information for the record


    FEMA has performed improper payment testing over identified 
high risk program since 2006, and our Individual Assistance 
Individuals and Households Program was the first tested. 
Improper payment testing uses agreed-upon audit procedures that 
ensure program compliance with purpose, period of performance, 
and payment. We sample a statistically--valid sample of all 
disbursements made during the prior year and extrapolate the 
error rate across the population. The Individual Assistance 
Program is a good example of how a program that relaxed 
internal controls during a disaster recovery resulted in a high 
improper payments rate. These problems were identified through 
both the DHS Inspector General's external reviews and FEMA's 
own Improper payments testing. FEMA implemented the IG's 
recommendations and, through our corrective action plans, we 
have been able to improve controls for improper payment 
testing. Today, the program does their own testing throughout 
the year and that testing will be further reviewed in 
accordance with the Improper Payments Information Act of 2002.

    Senator Johnson. So it is obviously after the fact. It is 
more of an auditing process and really more statistics-based. 
Am I correct? I mean there is really no certainty to this 
number. It is an estimate, correct?
    Mr. Serino. Well, we actually have an audit that is done by 
the National Processing Center (NPC), where people are able to 
come in. And we have a large number of people that can handle 
the influx, large numbers of those, and we actually have 
agreements in place with the IRS, for example, if we need to 
increase the number of people to take those calls.
    During Hurricane Irene, we were receiving tens of thousands 
of calls a day and then processing those and finding out ahead 
of time. That is where we are able to find out ahead of time 
whether or not there is any potential that people did not meet 
that. So we were able to verify, get all that information right 
up front.
    Senator Johnson. So do you split out then actual fraud 
versus potential fraud?
    I mean do you include that in your--I mean people that are 
trying to commit fraud.
    Mr. Serino. Well, we actually look, and those are payments 
that we would not make. If we do not have that right 
information, those are payments that are not made.
    Senator Johnson. Then those would not be included in your 
statistic then.
    Mr. Serino. No, because these are payments that we made.
    Senator Johnson. OK.
    Mr. Serino. We would not include payments that we did not 
make.
    Senator Johnson. OK.
    Mr. Jadacki, let's talk about that $643 million worth of, I 
guess, fraudulent payments. The figure I have is that is 
160,000 people, individuals. Is that 160,000 claims?
    Mr. Jadacki. That is correct. Well, they were not potential 
fraudulent payments. They were improper payments, potential 
improper payments that were made during Hurricanes Katrina and 
Rita.
    And there was a hold on that because of a court order, 
because apparently due process was not followed and a judge put 
a hold on it, but they were held for several years.
    So in our report, we identified the potential improper 
payments and recommended that FEMA go through their continued 
due process and identify whether in fact they were proper, 
improper, and if they were fraudulent payments, they would 
actually turn them over to us. We understand that FEMA is in 
the process of reviewing most of those, and they have made 
pretty good headway on that.
    And I do not know the exact figure based on their review of 
how many cases they turn over for fraud. I think it is pretty 
low.
    But it is critical they are not fraudulent payments. They 
are improper payments that could potentially be fraudulent 
based on further review by FEMA.
    Senator Johnson. Can you typify? I mean improper is a term. 
Can you typify what, put some meat on that bone?
    Mr. Jadacki. Yes. An improper payment is anything that is 
not made for the correct amount to the correct person for the 
correct thing, in a nutshell.
    So it could be an underpayment. It could be an overpayment. 
It could be an ineligible payment if the recipient is not for 
it.
    A fraudulent payment is where somebody is not eligible and 
they either fabricate an application or they provide 
information that would deem them eligible at a later time. 
Whether making up a Social Security number or whether they 
provide a bogus document that would provide evidence of 
residency for a house or something like that, or a Social 
Security number, those would be fraudulent payments.
    So an improper payment is something that is not correct for 
whatever reason. A fraudulent payment is when the person is 
just simply not entitled; they are trying to defraud the 
government.
    Senator Johnson. Could either you or Mr. Serino tell me 
what is the No. 1 cause of improper payment?
    Mr. Jadacki. Based on a review of the improper payments, it 
is not validating a lot of the information on an application 
when you are dealing with individuals.
    FEMA had a lot of problems after Hurricane Katrina because, 
as you mentioned, one of the best controls FEMA has is actually 
going to visit property with the property owner. They provide 
evidence that they live there, or it could be a utility bill. 
It could be a deed, something like that.
    In the case of Hurricane Katrina, a lot of the homes were 
just simply washed away. And a lot of people, they literally 
went to all 50 States, and it would be impossible to bring them 
back.
    So as a compensating control, FEMA actually took aerial 
views and said OK: If you establish, if you say you lived in 
this area and it had two feet of water, you would get X number 
of dollars. If you had eight feet of water, you get X number of 
dollars.
    So it was really they did not have the controls, or the 
controls were not able to be used. They had controls, but they 
were not able to use those controls.
    And then, people found out about that. They found out yes, 
I lived in this place, or there are 10 people using the same 
thing. There were cemeteries that people applied for assistance 
on. So those are the improper payments.
    There are cases where there is insurance information. So 
somebody can get a payment for FEMA. FEMA later finds out well, 
that property was insured, so they are not eligible. So it is a 
duplicate payment. So that would also be an improper payment, 
not necessarily fraud, but it would be an improper payment 
because the person was ineligible for duplicate payments.
    Senator Johnson. OK. You said that you have--there are 
30,000 notices trying to recover. Is it 30,000 out of 160,000?
    Mr. Jadacki. Yes, as far as I know, there are 30,000 cases 
that have been reviewed. I know they are in the process of 
reviewing others.
    I know there is a significant amount that after FEMA did 
the review either the payments were adjusted.
    I know there is a small amount--and I do not know the exact 
numbers on that. We can do it as a followup--of actually where 
FEMA sent out notices to collect the funds. And I think the 
case in Arkansas is probably one of those that got caught up in 
that.
    Senator Johnson. How many cases like Arkansas do we have?
    Mr. Jadacki. I would have to defer to FEMA on that one.
    Senator Johnson. Mr. Serino.
    Mr. Serino. It is really hard to say exactly, cases similar 
to Arkansas that we have. But currently, 35,000 recoupment 
notices have gone out to folks, and that is the vast majority 
of them. And the rest will go out within the next month. In 
November sometime, we will have all of those out.
    So the vast majority of those already have gone out. Out of 
what was originally the number of 168,000, we have--that number 
has gone down quite a bit because we have gone through each one 
of those and looked and seen what the issues are, as well as 
talking to folks ahead of time.
    Senator Johnson. So how many do you expect out of the 
160,000 will receive notices?
    Mr. Serino. As I say, about 35,000 have gone out, and that 
is the majority of those. And then after that I cannot pin the 
exact number because we are still going through them, working 
through them.
    Senator Johnson. Are those notices demand for payment then?
    I mean is that going to be a pretty aggressive notice, or 
is this just kind of request for additional information to 
prove your claim?
    Mr. Serino. Well, it is both. We actually changed the 
letter. So it is in plain English so folks can understand what 
we are asking them--that if they have to make a payment, but if 
they have any questions at all that there is an opportunity for 
them to come in and to speak with us if there is a need for 
them to, whether it is to compromise the payment or to work out 
a payment plan or to put in an appeal process.
    And we encourage people to really, if there are any 
questions at all, to put in that appeal process within the 30 
days, and then we can followup with those. And they can do that 
very simply, and they can talk to somebody, and we can do that 
as an oral hearing over the phone if necessary. We have had 
success that we have been able to compromise and terminate a 
number of those.
    Senator Johnson. OK. Thank you.
    We will have another round, right?
    Senator Pryor. Sure.
    Senator Johnson. OK. Thanks.
    Senator Pryor. Let me followup on that, Mr. Serino, if I 
can since we brought up Arkansas there a few moments ago.
    I am wondering if the way this got started in Arkansas was 
that FEMA was not talking to each other within itself. In other 
words, apparently, the problem began. We had a flood there. 
That particular county had not passed the proper ordinance.
    FEMA's people working the flood should have known that, and 
they should have known when they deal with local people who 
have a loss what benefits they might be eligible for and not.
    So to me, that is a breakdown in internal communication. 
From one side of FEMA to the other. I do not know if that is 
fair, but that is my guess is how that started.
    Have we fixed that problem within FEMA?
    I mean now that folks are working on the ground do they 
understand exactly what benefits people are eligible for and 
not?
    Mr. Serino. One of the things that we have been able to do 
is to implement a number of the controls that I talked about 
earlier, and specifically, when people call up we are able to 
verify the address, and that is able to communicate that to the 
survivors and tell them the information that is needed. If that 
is not necessarily caught on the first time around, we are 
certainly going to be able to catch that when somebody actually 
goes out.
    So we put in a number of controls over the last couple 
years to actually catch a lot of those that in the past we had 
missed.
    Senator Pryor. OK. In that particular situation, FEMA came 
to this one couple. We will just focus on this one couple. FEMA 
came to the couple's home. FEMA apparently took pictures, gave 
them the forms, helped them fill out everything, said you are 
entitled to this, helped them fill out the form, walked them 
through the process.
    They got $27,000. They put it all back into their house 
just like they were supposed to. In the meantime, the local 
couple was foregoing other assistance that was being offered 
locally because they said we have FEMA's help.
    There were local charities and civic groups and churches, 
et cetera. Let us help you, and they said: No, FEMA is taking 
care of us. Go take care of other people.
    Nonetheless, 3 years later, they get a notice in the mail 
from FEMA: Oh, by the way, we fouled up. We should never have 
given you that money in the first place. So now you have X 
number of days to give us $27,000 back.
    And like I said, now it has been turned over to the IRS, 
$37,000.
    So just taking that one case, to me, that is money that 
should have never gone out the door in the first place. And so, 
has FEMA fixed that part, of where that money is just not going 
out the door?
    It sounds like your error rate is much lower. And are you 
fairly confident that you have fixed that?
    Mr. Serino. I am. I think if you look at where we were, at 
a 14 percent rate down to a 0.3 percent. Are we going to say 
never? I would like to be never, but 0.3 percent is the rate 
that we are currently.
    And I think it is important to realize that we are also 
required by law to go after all improper payments.
    Senator Pryor. Right.
    Mr. Serino. As you are well aware, it is something that we 
are required to do for any improper payments.
    If it is fraud, we actually send those away for fraud 
investigation. That is not a part of the recoupment. But part 
of the recoupment for whatever the improper payment is we are 
required to actually go through the process to do that.
    And that is why we work with the survivors. We also work 
with Members of Congress and their staffs to help us educate 
folks that it is important for people to actually take the time 
to put in those appeals because that is absolutely key for us 
to be able to work with them, to see what we are able to do, 
whether it is compromise part of that or all of it. I think 
that is really important.
    And we thank you and your staff. They have been working 
with us on cases like this, and we want to make sure that the 
survivors know that as much as it is important for them to 
actually file those as well.
    Senator Pryor. All right. Thank you.
    Then also, all my colleagues need to understand this is not 
going to be limited just to Arkansas. This is going to happen 
throughout the country.
    Mr. McTigue, let me ask you if I may. You mentioned James 
Lee Witt's FEMA, and you talked about his vision for FEMA. How 
would you rate FEMA during that time period because you have 
studied it, in terms of their preparedness, their morale, their 
ability to respond. And did they have best practices throughout 
the agency, or were there weak spots even back then?
    Mr. McTigue. It is pretty hard to make a general assessment 
of that, but if we looked at some of the surveys that were done 
of people working for FEMA in 1990, it was the least desirable 
place to work in the Federal Government and by 2000 it was the 
most desirable place to work in the Federal Government. I think 
that tells us something about morale.
    I think we also have to take cognizance of the fact that 
during the decade of 1990s there were not major disasters that 
occurred in the first decade of the 2000s. So it was not really 
tested, but what we could see was that the feedback from 
everybody was that there was a much greater level of 
satisfaction of the performance of FEMA.
    Then if we move to the 2000s, we saw the shock of September 
11, 2001, which turned everything upside down, and FEMA then 
placed a great deal of emphasis on preparing for terrorist acts 
and, unfortunately, at the expense of being prepared for 
natural disasters. And along came Hurricane Katrina, and they 
were not as well prepared as they had been in the past.
    I think that was part of the problem at that time, and 
also, I have to say a failure of leadership at that time. It 
did not have that leadership that is necessary to be able to 
get on top of major problems like those that were demonstrated 
during Hurricane Katrina.
    Mr. Chairman, can I just volunteer another comment from the 
discussion that has just gone past? And that is that from my 
experience with having to deal with some of these as a minister 
in my own country, one of the things that we did to try and get 
out of the problem that you have at the moment with the number 
of recipients of support now being asked to repay it.
    In disaster situations, we would go in and assess the 
damages that were to be paid to the individuals. And at the 
conclusion of that, we would actually sign a contract between 
that individual and the government's agent, and that was full 
and final. And unless there was malfeasance or fraud or 
outright lies, that could not be opened again.
    So if the government made a mistake, it had to live with 
that. And if the person used that guarantee from the government 
in good faith, you could not take it away.
    I think it is worth thinking about. This kind of event, I 
think does do a great deal to break down public trust in 
government generally and to destroy the reputation of the 
organization.
    This is going to be bad if you have 35,000 or 40,000 people 
who are going to be subjected to this process over the next 
whatever period of time. Finding a way forward would be a good 
way of dealing with that. Thank you.
    Senator Pryor. Yes, thank you for that.
    I am going to turn it over to Senator Johnson because he 
has to leave in just a few moments.
    Senator Johnson. Thank you, Mr. Chairman.
    Just a quick question on a point you brought up, how many 
payments do we make to people who do not have checking 
accounts?
    I mean do we have any stats on that?
    Mr. Serino. I, honestly, do not know right now.
    Senator Johnson. OK.
    Mr. Serino. I can get that for you.


                       information for the record


    FEMA does not track whether or not applicants have a 
personal bank account, only how they were issued payments. When 
no personal banking information is provided, FEMA issues U.S. 
Treasury Checks in lieu of an ACH payment.

     LIn FY 2010, FEMA made 124,176 payments to 
individuals with a Treasury Check instead of an ACH payment.
     LIn FY 2011 to date, FEMA made 148,341 payments to 
individuals with a Treasury Check instead of an ACH payment.

    Senator Johnson. That would be a good idea. I mean if that 
worked well. You said that in New Zealand that occurred?
    OK. That is a common-sense approach.
    Sorry I did not have this on a big blowup, but I passed out 
this graph\1\ in terms of number of declarations by FEMA in 
terms of the history of it, and it is pretty interesting.
---------------------------------------------------------------------------
    \1\ The graph referenced by Senator Johnson appears in the appendix 
on page 112.
---------------------------------------------------------------------------
    Back in the Eisenhower Administration, we had a yearly 
average of about 13 declarations; Carter Administration, about 
44; now under George W. Bush, 129; and then President Obama, 
141.
    I have been living during that phase, and yes, we have had 
years with big hurricanes and other types of disasters, but I 
did not think there has been that dramatic a difference. So 
obviously, what we consider a Federal emergency, something that 
requires Federal assistance, has grown.
    And I guess, Mr. McTigue, I would like to ask you in terms 
of your evaluation of that, particularly based on your comments 
about the ineffectiveness of layer after layer after layer. And 
obviously, when the Federal Government comes in that is a 
necessary additional layer to the problem.
    Mr. McTigue. In response to your questions, Senator, I am 
going to start from saying there are certain things that are my 
responsibility and certain risks that I should be aware of. If 
I am going to build my house on the flood plain or beside the 
river because I like the view, I do not really expect, or I 
should not expect, that you are going to bail me out when it 
gets flooded every 2 or 3 years. That is something I should 
deal with.
    If there are other things that are risks that might be 
dealt with by my local community, in terms of putting up flood 
walls or doing something or other to ameliorate that risk, and 
then if we go further it might be done at a State level.
    If the Federal Government comes into those situations very 
readily, you take away the accountability and the 
responsibility for mitigating against those risks.
    One of the things that were interesting for FEMA during the 
period of James Lee Witt was that he became quite aggressive in 
mitigating risk. And one of the facts that he used to use was 
that for every dollar that they spent on risk mitigation they 
saved two dollars in disaster recovery.
    What kind of things was he talking about? In different 
places, changed building codes, seeing that houses were more 
securely fastened to their foundations than they had been if 
you were in tornado alley, doing different things about how sea 
walls were built and how dam protection and river protection 
was done--all of those things learned from disasters and passed 
on and saying if we do this, then the bill next time around is 
going to be significantly less.
    Taking that risk and putting it all on the shoulders of the 
Federal Government just makes everybody else say ``Well, thank 
God, I do not have to do that any longer.'' And I think that is 
wrong.
    Senator Johnson. OK. Anybody else want to just comment in 
terms of the number of things, number of declarations, the 
increase of that?
    Mr. Serino. Well, I think a couple of points. I think this 
year specifically has been a very busy year, percentage-wise. 
If you actually look at this percentage-wise, at the number of 
requests versus the number of disasters actually declared, we 
are in the range of pretty much the last 10 years. We have 
pretty much been consistently in that range for the number of 
requests for disasters as well.
    This year, as mentioned, there have been 10 and now up to 
12 billion dollar disasters, not that FEMA has done, but it has 
been a very busy year, some historic disasters--the flooding of 
the Mississippi, the Missouri River, tornadoes that have broken 
records, Hurricane Irene which is the second deadliest 
hurricane to hit this country. So it has been a very busy year 
for the natural disasters that have struck this country.
    With that, I think it goes along with the number of actual 
disasters that we have to clear. But percentage-wise, we went 
back and looked at this actually, and it is actually for the 
last 10 it is pretty consistent.
    But one other point I think is important, to followup on 
Mr. McTigue's, it was about we have engaged what we call the 
whole community because we believe that along with the 
mitigation purposes. But it is also a combination of not just 
Federal, State and local and tribal governments, but it is also 
bringing together the entire community. We have to bring 
together the faith-based community. We have to bring together 
the private sector. We have to work together with the Red 
Cross.
    And most important part of the team is the public and how 
we are actually able to engage the public to take 
responsibility for themselves, to work together so that they 
can be prepared, so that they can have neighbor helping 
neighbor.
    What I have seen in disaster after disaster that I have 
been to over the last couple of years and for my 37 years prior 
to that is we talk a lot about first responders, but the first 
people on-scene are usually neighbors and family and bystanders 
that do make a difference--that if you have somebody who can 
go, if they are prepared, and go help a neighbor, that in 
itself is going to decrease the pull and the response on the 
local first responders and emergency management up and down the 
chain.
    So it is really important for us to really look at this 
whole community and to bring together the team of folks. And 
the mitigation is a very important part of that. It can be on 
the scales for tornadoes, but it can also be on individual 
preparedness. And that is one thing that we are stressing, that 
we have to do this together as a team.
    Senator Johnson. OK. Well, I totally agree with that 
comment, but to a certain extent the reality is different 
because if you are really going to rely on local districts or 
local governments we would not be increasing the size of FEMA. 
And we have received back in 2000 the number of full-time 
employees was about 3,400, and now that has risen to--well, in 
2008, it was over 8,000. We have backed that down a little bit.
    So going to Mr. McTigue's point, the number of layers I 
think can actually make things less effective. And again, we 
pulled it into a Federal responsibility as opposed to more 
local control. So I guess I just want to ask that question.
    I mean we have doubled the number of employees of FEMA. I 
mean have we really gotten the bang for the buck there, or has 
that actually created more problems?
    And I would first like to go to Mr. McTigue and then listen 
to the agency.
    Mr. McTigue. Well, I think it would be disingenuous to 
suggest that those 8,000 people do not have something to do. 
They clearly do, and that is because Congress has been putting 
more and more responsibility on them and States and communities 
have been asking for them to do more and more. So we have to 
take that into account.
    I think the definition of what this agency is going to do 
actually has to come from this institution here and decide what 
is appropriate rather than say to FEMA you are not interpreting 
the decisions of Congress in the right way. I think they 
probably are. I think that you are asking them to do things 
that should still be local responsibilities rather than Federal 
responsibilities.
    Senator Johnson. OK. I just want to quick give you an 
opportunity.
    Mr. Serino. Well, I think one of the things that we have 
done is to decrease some of the layers, to actually put a lot 
of the responsibility, authority and resources down closer to 
the States and to the cities, and pushed a lot of that down to 
our regional level so our regional administrators actually have 
some of the authority in order to do that.
    As far as the agency, over the past number of the years, 
some of the times that you are talking, actually, a number of 
areas came in from other parts of the government into FEMA, 
specifically, our entire grants agency which brought in large 
numbers of folks into the agency. That is cause for some of 
that influx. We actually took some things that were not part of 
FEMA, that actually came, to increase that number during that 
period of time as well.
    Senator Johnson. OK. Great. That answers the question. 
Thank you, Mr. Chairman.
    Senator Pryor. Thank you, Senator Johnson, and thank you 
for being here today and pinch-hitting. You did a great job.
    I just have a few more questions, and this will be our 
final round. We are going to have some questions that come in 
after the hearing, I am sure. So we will talk about that in 
just a few moments.
    But let me start with you if I may, Mr. Jadacki. You have 
heard Mr. McTigue talk about this idea of a bank account and 
tying a payment to a bank account. Have you looked at that from 
the IG's perspective to see if that makes sense, if that would 
cut down on problems?
    Mr. Jadacki. No, we actually have not looked at that.
    I know there was a number of ways FEMA provided expedited 
assistance before--just cutting checks on the fly, the debit 
card debacle that I have talked about before. But actually 
requiring people have bank accounts, I think for the most part, 
it would be a very good idea.
    I still think you are going to get some reluctance by 
individuals when the government is going to get their banking 
information in order to qualify for assistance. I still think 
that would be a problem, especially in some of the more rural 
parts of the country where big government is a bad thing, as is 
asking for that type of information.
    So I think it is a good idea. I think it is worth looking 
at, but I suspect you will get some pushback from certain 
individuals.
    Senator Pryor. Without having studied it at all, one 
initial concern I might have is the actual percentage of people 
in this country that have bank accounts because I do know that 
I talked to Walmart a couple of years ago. And I do not 
remember the exact statistic, but they have a number, and it is 
something like 30 percent of the people that shop at Walmart do 
not have a bank account. It is a big number, whatever the 
number is. I have forgotten the exact number.
    I think it is an idea that we ought to talk about and think 
about and see if it is feasible and see if it would help. If it 
helps, we ought to consider it. That is a good point.
    Now Mr. Killough, I do not want you to feel like you have 
been left out of this conversation.
    Mr. Killough. Thank you, Mr. Chairman.
    Senator Pryor. So let me just ask a question about--and I 
hope I am directing it at the right person--about lessons 
learned. I assume that part of what your organization does is 
try to learn from experience and lessons learned.
    Does FEMA have--I hate to say reputation. But do they have 
a reputation of learning from past mistakes and past 
difficulties?
    Mr. Killough. FEMA, specifically, sir, I cannot talk 
specifically about specific organizations because we do not 
participate in that, but I can provide a little bit of insight 
into some of the things that do work.
    I was reading Mr. Serino's testimony on page 6, and there 
is a section that says in there about improving coordination 
strategies and developing doctrine.
    And there is a vehicle that we can use here that is called 
the Disaster Recovery Framework that allows for the definition 
and what I call, or what I would refer to, horizontal and 
vertical integration of dependent agencies and Federal, State, 
local and Indian government agencies, in trying to coordinate 
and understand responsibilities for actions in disaster 
activities--the programmatic approach to defining those 
responsibilities combined with adequate training and the 
integration of training among the different layers of 
government, all the way down to the individual citizen.
    Now a couple of very good examples that are done that way 
in the government right now are you have the Red Cross Center, 
Clara Barton Center for Disaster Recovery Training in Pine 
Bluff, and you have the DHS Training Center for Disaster 
Preparedness in Anniston, Alabama. And what these two 
organizations have effectively done is taken a programmatic 
approach to first responders and training of first responders 
to respond to chemical, biological and nuclear disasters, 
domestic or outside domestic terrorism.
    What they have done is they go through all levels of the 
government in State, Federal, local, Indian territories, and 
also through all of the organizations that would have the 
occasion to respond, and have developed a program to react to 
these potential huge disasters and then have integrated that 
across governments throughout our country.
    And I think it is a fine example. I mean it is right in the 
Department of Homeland Security, that they are doing right now.
    And to be able to take that from the administrative aspect 
of how we respond in general to disasters, take a programmatic 
approach, define what we need to do and adequately train 
people.
    The big issue here is people being prepared and trained and 
having processes that are known throughout all of the agencies 
that are responding, and appropriate responsibilities assigned. 
The aspect of training is a very important one, especially in 
one of these incidents.
    I am a graduate of the Naval Academy and went through the 
Navy Nuclear Propulsion Program. I could not dream of placing 
an unqualified operator, not using approved procedures, in 
charge of a nuclear propulsion plant.
    Senator Pryor. Right.
    Mr. Killough. Likewise, there are areas of the government 
that ask untrained people to use, to create their processes, to 
manage mission-critical programs of billions of dollars. And I 
am not calling out FEMA. This is in general.
    Senator Pryor. Right.
    Mr. Killough. So the aspect of generally understanding that 
managing these disasters takes definite skills, and they take 
definite defined programs and processes.
    So having people understand those processes, are trained to 
execute them, can bring a little bit of sanity to chaos when 
you are responding to disasters like this.
    Senator Pryor. Right. That makes sense.
    Well, listen, thank you all for coming today.
    Like I said, we are going to leave the record open for 14 
days, and I am almost certain that we will have a few questions 
from at least a couple of the Senators that will come in, in 
writing. So we would love a rapid turnaround on that.
    But I want to thank you all for doing what you do, and we 
all want a very strong, healthy, robust FEMA and great response 
and great preparation for all kinds of disasters, including all 
the mitigation that we can do.
    So I want to thank all of you for being here and thank the 
staff here for always doing a great job.
    And with that, we will adjourn, and we will keep the record 
open for 14 days. Thank you.
    [Whereupon, at 11:45 a.m., the hearing was adjourned.]
                            A P P E N D I X

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