[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                       THE NATIONAL FLOOD INSURANCE
                         PROGRAM: OVERSIGHT OF
                        SUPERSTORM SANDY CLAIMS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         HOUSING AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 2, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-28
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                 Subcommittee on Housing and Insurance

                 BLAINE LUETKEMEYER, Missouri, Chairman

LYNN A. WESTMORELAND, Georgia, Vice  EMANUEL CLEAVER, Missouri, Ranking 
    Chairman                             Member
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey            MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            WM. LACY CLAY, Missouri
BILL POSEY, Florida                  AL GREEN, Texas
ROBERT HURT, Virginia                GWEN MOORE, Wisconsin
STEVE STIVERS, Ohio                  KEITH ELLISON, Minnesota
DENNIS A. ROSS, Florida              JOYCE BEATTY, Ohio
ANDY BARR, Kentucky                  DANIEL T. KILDEE, Michigan
KEITH J. ROTHFUS, Pennsylvania
ROGER WILLIAMS, Texas
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 2, 2015.................................................     1
Appendix:
    June 2, 2015.................................................    39

                               WITNESSES
                         Tuesday, June 2, 2015

Kieserman, Brad, Deputy Associate Administrator for Federal 
  Insurance, Federal Insurance and Mitigation Administration, 
  Federal Emergency Management Agency, U.S. Department of 
  Homeland Security..............................................     4

                                APPENDIX

Prepared statements:
    King, Hon. Peter T...........................................    40
    Kieserman, Brad..............................................    41

              Additional Material Submitted for the Record

Luetkemeyer, Hon. Blaine:
    Written statement of the Property Casualty Insurers 
      Association of America.....................................    50
Pearce, Hon. Stevan:
    Written responses to questions for the record submitted to 
      Brad Kieserman.............................................    56

 
                      THE NATIONAL FLOOD INSURANCE
                         PROGRAM: OVERSIGHT OF
                        SUPERSTORM SANDY CLAIMS

                              ----------                              


                         Tuesday, June 2, 2015

             U.S. House of Representatives,
                            Subcommittee on Housing
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:12 p.m., in 
room 2128, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Members present: Representatives Luetkemeyer, Garrett, 
Pearce, Posey, Hurt, Stivers, Ross, Barr, Rothfus, Williams; 
Cleaver, Velazquez, Capuano, Green, and Beatty.
    Ex officio present: Representatives Hensarling and Waters.
    Also present: Representative Meeks.
    Chairman Luetkemeyer. The Subcommittee on Housing and 
Insurance will come to order. Without objection, the Chair is 
authorized to declare a recess of the subcommittee at any time.
    Today's hearing is entitled, ``The National Flood Insurance 
Program: Oversight of Superstorm Sandy Claims.'' Before we 
begin, I would like to thank the witness, Mr. Kieserman, for 
appearing today. And I look forward to his testimony.
    I will now recognize myself for 2 minutes to give an 
opening statement.
    In October 2012, Superstorm Sandy made landfall, damaging 
or destroying 650,000 residences and resulting in $65 billion 
in losses. Years later, the media reported initial causes of 
fraudulent engineering reports that facilitated lower flood 
insurance claims. FEMA acted, but only after public prodding, 
and today is in the midst of a significant legal battle, 
attempting to settle as many cases as possible. Still, no one 
has been able to tell Congress or the public why these 
engineering firms operated in the fraudulent manner in which 
they are believed to have done.
    One question we must examine is whether or not perverse 
incentives exist within the National Flood Insurance Program 
(NFIP). Sandy wasn't the first test of the NFIP, and 
unfortunately won't be the last. Fraudulent reports and alleged 
underpayment of claims that came in the wake of Sandy highlight 
a significant underlying issue. Reform of the NFIP is needed 
and is needed now. Today, we hear from Brad Kieserman, FEMA's 
Deputy Associate Administrator for Insurance. He is the 
individual charged with overseeing the Sandy settlements claims 
process. It is my hope he will be able to be forthcoming in his 
testimony and that he will provide this subcommittee with a 
better understanding of the events that occurred following 
Sandy. Time and again, we have seen Americans suffer because of 
government's failures, particularly when it comes to the 
National Flood Insurance Program.
    At this moment, what we know is that there was negligence 
and alleged fraud on the part of FEMA and certain engineering 
firms and that policyholders were mistreated. Today, we aim to 
garner more information on this situation, examine whether or 
not such significant issues presented themselves in the wake of 
similar disasters, and begin to discuss ways to fix a broken 
system in an effort to ensure it does more to benefit not only 
policyholders, but also taxpayers who foot much of the bill.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez, for 2 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman. I want to thank you 
and the ranking member for convening this important hearing. 
Superstorm Sandy was one of the worst natural disasters in U.S. 
history and hit homeowners especially hard. From completely 
destroying homes to thousands of flooded basements, this storm 
wrecked havoc in my district, causing millions of dollars in 
damage. In the face of such devastation, my constituents 
expected Write Your Own insurance companies to honestly and 
fairly assess damages and pay claims. Unfortunately, it appears 
that did not happen. Mounting evidence suggests that peer-
reviewed engineering reports were altered to specifically deny 
claims, citing that the damage was due to prior longstanding 
problems, even though the original report stated that Sandy was 
the cause.
    In other more egregious cases, reports were falsified to 
indicate no structural damage occurred at all, when, in fact, 
it did exist. These allegations are at the heart of today's 
hearing. Falsified engineering reports, underpayment of claims, 
and lax oversight by FEMA paint a troubling picture that led to 
significant harm for many victims who rightfully thought they 
were covered. We owe it to the victims to thoroughly 
investigate what FEMA knew, when they knew it, and what is 
being done to fix the problem. But, most importantly, to ensure 
it never happens again.
    Today's hearing will further that goal. And with that, I 
thank the chairman and the ranking member. And I yield back.
    Chairman Luetkemeyer. I thank the gentlelady.
    With that, we go to the gentleman from New Jersey, Mr. 
Garrett, for 2 minutes.
    Mr. Garrett. Thank you, Mr. Chairman. I would like to thank 
you for conducting this important hearing, and allowing us the 
opportunity to oversee the process of making those affected by 
Superstorm Sandy whole. Now, I was able to personally help some 
of those who suffered from the storm, personally able to help 
them to dig out of the rubble, if you will. So I saw the 
destruction and I saw the devastation firsthand of the storm. 
And I also saw the despair of the victims. But, at the same 
time, I also saw the strength and the determination of my 
constituents who worked hard to rebuild their homes and to 
rebuild their lives.
    But after enduring the storm and the clean-up and all that 
went with it, the people of New Jersey then had to face yet 
another challenge: some doctored flood insurance claims that 
threatened their ability to rebuild. This, quite frankly, is 
unacceptable. Frankly, it is actually maddening. And I hope 
that we can work together to ensure that victims are not 
cheated and taken advantage of. And of course, importantly, we 
need to also make sure that the taxpayer is also taken into 
consideration for overpayments for Sandy and of waste and 
fraud.
    And with that, I again thank the chairman for the hearing. 
I look forward to a discussion of how we can best serve those 
who are continuing to rebuild. I yield back.
    Chairman Luetkemeyer. I thank the gentleman.
    I now recognize the ranking member of the subcommittee, the 
gentleman from Missouri, Mr. Cleaver, for 2 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. I would like to begin 
by thanking the Chair for the hearing. As many in this room 
know, Superstorm Sandy, which hit the United States in October 
of 2012, is estimated to have been the second costliest 
hurricane in U.S. history. It damaged 650,000 homes and 
resulted in $65 billion in damages. Of the 144,000 insurance 
claims that have been filed, 2,800 were appealed. And because I 
have a boring life, last night I watched the 60 Minutes episode 
on the investigation of charges that many of the insurance 
claims were underpaid or doctored by engineering firms.
    A number of news stories have further echoed the same 
charge. In light of these grave claims, it is paramount that 
this subcommittee hold a hearing to determine the severity of 
these allegations, to assess FEMA's role or lack thereof in 
overseeing the Write Your Own flood policy, and to discuss how 
FEMA will reassess these claims and restructure their policies 
in light of these allegations.
    My congressional district was not impacted by Superstorm 
Sandy. Mother Nature, however, does not discriminate, not by 
city, by district, or by red or blue. As members of this 
committee, it is our responsibility to ensure that when 
disaster strikes, our constituents have the resources to 
rebuild in ways that allow them to move forward with their 
lives. I look forward to hearing from you, Mr. Director. And 
hopefully, many of the issues we have can be resolved. Thank 
you.
    Chairman Luetkemeyer. I thank the gentleman.
    With that, we have the gentleman from Texas, Mr. Green, for 
1 minute.
    Mr. Green. Thank you, Mr. Chairman. I especially thank you 
and the ranking member for this hearing. Because, as you know, 
on Memorial Day, in Texas, we had an inundation. And, 
literally, we have had trillions, trillions of gallons of water 
in Texas. And my congressional district in Houston, Texas, has 
been hit. We have one apartment complex, the Rockport 
Apartments, where hundreds of people have had to be relocated. 
Some of the units are uninhabitable. And we also have had an 
area in my district with homes that have been flooded to the 
extent that people are losing everything that they have on the 
first floor. Whatever they had on the first floor, I think, is 
lost. I have actually gone to them. I have been in their homes. 
I have seen it with my own eyes. And my hope is that we will be 
able to bring some resolution to the issue of concern today. 
Because we don't want to see other persons visited with these 
same concerns, especially when they are suffering and are 
expecting a helping hand, a hand up, not some person who is 
going to defraud them.
    So I thank you, Mr. Chairman. And I thank the witness for 
appearing today as well.
    Chairman Luetkemeyer. I thank the gentleman.
    We will now hear from our witness. Today, we welcome the 
testimony of Mr. Brad Kieserman, Deputy Associate Administrator 
for Federal Insurance at the Federal Emergency Management 
Agency. Mr. Kieserman, you will be recognized for 5 minutes to 
give your oral statement, and without objection, your written 
statement will be made a part of the record. And with that, you 
are recognized to proceed.

STATEMENT OF BRAD KIESERMAN, DEPUTY ASSOCIATE ADMINISTRATOR FOR 
      FEDERAL INSURANCE, FEDERAL INSURANCE AND MITIGATION 
   ADMINISTRATION, FEDERAL EMERGENCY MANAGEMENT AGENCY, U.S. 
                DEPARTMENT OF HOMELAND SECURITY

    Mr. Kieserman. Thank you, Mr. Chairman. Chairman 
Luetkemeyer, Ranking Member Cleaver, and members of the 
subcommittee, as you know, I am Brad Kieserman, the Deputy 
Associate Administrator for Federal Insurance in the Department 
of Homeland Security's Federal Emergency Management Agency. I 
am grateful for the opportunity to be here today. But I will be 
honest with you, I am regretful about the circumstances.
    Congressman Green, your comments resonated with me. I will 
tell you why, in particular, I have been very focused on Texas 
over the last week or so, along with my colleague, Deputy 
Associate Administrator Wright, who is here behind me. And 
there is a personal reason why. In 1972, my grandparents, Ben 
and Bertha Levy, lived in Wilkes-Barre, Pennsylvania, when that 
community was devastated by Hurricane Agnes and the flooding 
associated with it. While the flood waters did not kill my 
grandparents, the experience afterwards did. I was 10 years 
old. I have had a lot of opportunity, unfortunately, to think 
about that and remember it since Sandy, and over the last 114 
days since I have been in this job.
    Because about 120 days ago, the Administrator of FEMA, 
Craig Fugate, came to me and said, ``We have a problem. I need 
you to go solve it for me.'' Many people ask me what happened 
in Sandy. I think what happened is fairly simple to describe, 
but painful. There are some people, survivors of Sandy, who 
paid premiums, some for many years, for flood insurance. And 
they did not get what they were entitled to. They did not get 
what they deserved. Their government let them down. Their 
insurance company let them down. And people came to their homes 
and some of those people did wrong by those survivors.
    There is a lot of talk about why it happened. People want 
to talk about the incentive structure that is in place. I am 
not sure I am going to be able to give you very fulfilling 
answers on that today. But I will tell you why I think this 
happened. Why I think this happened is because the National 
Flood Insurance Program needs to be reformed. It has lost 
contact, it has lost connection with its survivors, with its 
customers, with its policyholders, with its premium payers. And 
I will tell you this, floods are the number one disaster in 
this country. You don't have to look any further than Texas, 
sir, to see that. And they continue to be the number one 
natural disaster in this country. And as long as that is the 
case, Americans will need flood insurance to help manage their 
risk. And they deserve a program they can count on.
    And over the past 32 years, since we put into place the 
public-private partnership that is the Write Your Own Program, 
in which commercial insurance companies deliver about 83 
percent of the services in the National Flood Insurance 
Program, we have allowed that program to grow to be a highly 
distributed network. It really lacks adequate governance. And 
we have lost the capability and the capacity to detect and 
monitor problems in that program. And here is the proof of 
that. Two years after Sandy, a Federal court judge finally set 
down in writing that he had seen reprehensible gamesmanship on 
the part of some people delivering the program. And he 
expressed concern that that may represent systemic wrongdoing 
in the program. It shouldn't have taken 2 years to recognize 
that. And it should never take 2 years to recognize that again.
    There is a great book about organizational change called, 
``Your Iceberg is Melting.'' It is written by Dr. John Cotter. 
The National Flood Insurance Program iceberg is melting. And 
what we saw in Sandy was the tip of it. The numbers don't tell 
the whole story, but let me talk about the numbers for just a 
moment. We had 144,000 claims for insurance filed in Sandy. We 
paid out $8 billion. Of those, about 3 or 4 percent of the 
people filed appeals to FEMA disagreeing with what their 
insurance company gave them, 3 percent. Another 1\1/2\ percent 
ultimately sued their insurance company or FEMA.
    And so you can say well, those numbers indicate that the 
problem is not that big. There is not really a serious issue. 
But those numbers don't tell the whole story. Those numbers are 
just the tip of the iceberg that is melting. And those numbers 
represent individual people like my grandparents, the Levys, 
and like some of our litigants, the Morellos or the Rameys, and 
the others that, Congressman, you saw on 60 Minutes. And for 
those people, this inability to detect their problem and react 
to it in a timely way devastated their lives. We cannot allow 
that to happen again. And so, we are settling claims. We are 
reviewing claims. And we are going to reform this program.
    I should inform the committee, in my final seconds here, 
before I take your questions, that I have tendered my 
resignation. I will be leaving FEMA on the 12th of June. I have 
accepted a position with the American Red Cross to be the vice 
president for operations and logistics. It was, literally, an 
opportunity I couldn't afford to decline. I care deeply about 
the work that the task force is doing. The Administrator, the 
Secretary, and the Deputy Administrator of FEMA are deeply 
committed to this. Mr. Wright, who is behind me, will take the 
helm of the Federal Insurance and Mitigation Administration. 
And he will drive forward to lead these reforms and to lead 
this change. I look forward to taking the committee's questions 
today. And, again, I thank you for the time.
    [The prepared statement of Mr. Kieserman can be found on 
page 41 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Kieserman. I 
appreciate your testimony today.
    And with that, I will begin the questioning by recognizing 
myself for 5 minutes.
    You said that the percentage of Sandy claims that remain, I 
guess that were in litigation, people who weren't happy, was 
about 1\1/2\ percent?
    Mr. Kieserman. That is correct, Congressman.
    Chairman Luetkemeyer. What percent of those have you 
resolved?
    Mr. Kieserman. We currently have--we began with 2,200 
claims in litigation in the fall of 2014. We are down to about 
900 claims in New York and about 1,100 claims in New Jersey. Of 
those, through the settlement process that we began about 110 
days ago, we have tentatively settled 60 percent of the cases 
in New York and 40 percent of the cases in New Jersey. My goal 
and expectation is that FEMA will be able to offer every 
litigant in New York and New Jersey, who was in litigation as 
of February when we began this process, with a fair and 
reasonable settlement by the end of August of this year. And 
that those who wish to litigate after that will certainly have 
the opportunity to do so. But our goal is to offer every 
litigant a fair and reasonable settlement. And we are well on 
our way to doing that.
    Chairman Luetkemeyer. With regard to the settlements, 
because some of the fraud allegations and realization of it 
came to light after some of the folks probably had their claims 
settled, do they have the ability to go back and get further 
restitution for their claim? Or do they have to present a 
situation where they believe they were defrauded and then show 
that they do have just cause to be considered for some further 
payment? How is it going to work, I guess is the question I 
need to ask.
    Mr. Kieserman. It is really on a case-by-case basis. And it 
depends on the release they executed and where their settlement 
was at the time that this process began. There were about 400 
or so cases that had been mediated with plaintiffs and defense 
attorneys and a mediator and folks agreed to the settlement of 
claims prior to our initiation of the process. If they signed a 
release of all claims, then they are complete with the process. 
A number of those cases had not been finalized at the time our 
process began. And so, we are moving forward to treat them 
within the scope of the process.
    Chairman Luetkemeyer. You made the comment that it looks 
like, quite frankly, rats off a sinking ship here with as many 
people leaving FEMA as they are and the Flood Program here. We 
are concerned that with this leadership leaving, maybe the bad 
apples are leaving, but maybe the folks who just don't want to 
deal with it are taking leave and leaving the ship without some 
folks to man the rudder here.
    And I am kind of concerned about the direction of the 
program. What do you see? You said the program lacks 
governance. Can you explain that, and how that is going to be 
impacted by all the folks who are leaving, including yourself?
    Mr. Kieserman. I guess I would begin by saying that my 
departure is motivated by nothing other than the fact that I 
have one son in out-of-State tuition at the University of 
Michigan and another son who dropped out of college and dropped 
back in. So I am putting two boys through school at the same 
time. I have been in Federal service for nearly 29 years. And I 
need to look after my family. I am not leaving for any other 
reason. I am very dedicated to Secretary Johnson, Administrator 
Fugate, and Deputy Administrator Nimmich. And I am very 
committed to this program. I am going to the Red Cross so I can 
keep helping people. Mr. Wright, who is behind me, is an 
outstanding senior executive.
    Chairman Luetkemeyer. Okay. But my question was, you made 
the statement that the program lacks governance, we are losing 
some people. You said it needs reform. So tell us what your 
suggestions are going to be or would be for reforming it and 
getting that governance that you testified, yourself, that it 
needs.
    Mr. Kieserman. I think we need to begin from the premise 
that governance needs to focus on customer service and 
governance needs to put the survivor first. So we need to 
figure out--first of all, the structure of the Write Your Own 
Program and the structure of how FEMA administers its policies 
on the direct side, frankly, is an anachronism to me. So I 
think we are going to have to look at that from a forensic 
accounting perspective and understand the various layers that 
have accrued during the years.
    For example, there are 82 Write Your Own companies plus 
FEMA. Between FEMA and one of those other Write Your Own 
companies, we have about 35 to 40 percent of all of the 
policies in force in the United States, 5.3 million total 
policies. Two entities have 35 to 40 percent of those. And 
then, 81 entities have the balance of the 60, 65 percent. That 
business model intuitively doesn't make sense. Why can 2 handle 
20 percent or 40 percent and then you have 81 to do the rest? 
That is a business model that was allowed to grow over the 
years. And as that business model has grown, what has happened 
is that many of the Write Your Own companies and FEMA have 
contracted out for these services. Because I have to tell you, 
this is a contract program. There is no one out there wearing a 
FEMA shirt or a U.S. Government employee shirt who is adjusting 
a claim. There is no one out there providing engineering 
services who is a Government employee. All of that is 
contracted for.
    So this is fundamentally going to be a contractual 
relationship if you want to have the capacity and capability 
and professionals in the field. So the question becomes, how do 
you govern that network of contract professionals in a way that 
is survivor-centric? Because flood insurance is another 
Emergency Management Program that has to focus on the survivor.
    Chairman Luetkemeyer. I am going to have to interrupt you. 
My time is up. If you see the little red button on there, you 
probably need to start winding up your comments because, 
otherwise, I have the gavel. With that, let me turn to the 
ranking member of the subcommittee, Mr. Cleaver from Missouri, 
for his 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. And Mr. Kieserman, 
thank you for your service with FEMA. I am sure it hasn't been 
all roses. But thank you nevertheless.
    I was born and raised in Texas, following up on what Mr. 
Green said earlier. And having gone to high school in Wichita 
Falls, it is hard to imagine that there was mandatory 
evacuation. My father lived in an area that didn't have to be 
evacuated during this flooding, but all around him did. I am 
thrilled over the fact that the flooding didn't hit him because 
he didn't have any flood insurance. And probably most of the 
people in Wichita Falls, not one of the great places of 
flooding, would have insurance.
    Mark Hanna of the Insurance Council in Texas has said that 
he believes less than half of the homeowners, half of them, 
have flood insurance. So why is it that you think most people 
in this area lack flood insurance, even though this is not a 
place that is going to be hit often? But do you have any idea 
why?
    Mr. Kieserman. Flood insurance, the purchase of flood 
insurance, Congressman, is only mandatory in the special flood 
hazard area, an area that is mapped for a particular hazard. 
Outside of that, it is not mandatory. However, it is 
interesting that nearly 25 percent of the claims we pay come 
from people who are outside that mandatory purchase area. So 
why don't people buy flood insurance? I suspect it is for the 
same reason that people don't wear seat belts and take other 
risks in life. They look at the cost-benefit analysis, probably 
not unlike my grandparents in 1972, and they assess what they 
believe their risk of flood is and whether they want to pay out 
the premium every month. And so, I think that is one of the 
reasons that people don't buy flood insurance.
    Mr. Cleaver. But even if they do, there is something wrong 
with the way insurance companies process claims. I was on this 
committee when Hurricane Katrina hit. And a number of us, 
including, I think, Mr. Green went and held hearings in New 
Orleans and in Mississippi. At Senator Trent Lott's house, I 
stood on the stoop of his house. That was the only thing 
remaining. It was the same thing at Congressman Gene Green's 
house; the only thing remaining was the stoop. Nothing else was 
there. And I think many Members of Congress were completely 
outraged that these two individuals were denied the insurance 
company protection from this flood because, all of a sudden, 
the insurance company, that was one of the biggest in the 
country, said well, I'm sorry, sir, that we can't pay this 
claim. You have flood insurance. And your house was not washed 
away, it was blown away. So should we have blow-away insurance? 
Something is not right. I am not accusing anybody of anything. 
I am accusing the not-right scenario that is being played out 
again and again and again after disasters. What do you have to 
say to that?
    Mr. Kieserman. Congressman, there is a line-drawing 
exercise that I have observed as you have. In Katrina, it was 
wind versus water. In Sandy, it was earth movement versus flood 
damage. I have to tell you, I don't think we are particularly 
good at drawing those lines. And I have seen many cases, in 
just working the Sandy cases alone, where one professionally 
licensed engineer will come in and say that the damage was 
caused by flood and another will come in and say it was caused 
by earth movement or, as Congresswoman Velazquez said, by 
preexisting damage. My experience with this is that any time we 
try to draw those lines, we don't always get it right, and we 
end up with very frustrated customers.
    And the other thing I would share with you is that many 
people don't understand the insurance coverage they bought. We 
need to do a better job helping them understand the product. 
Because the flood insurance product is a subsidized product and 
it doesn't cover everything. It has a lot of--
    Mr. Cleaver. What can we do with insurance companies to 
hold them more accountable for all of these problems that exist 
after major tragedies?
    Mr. Kieserman. I think insurance companies have to 
understand and acknowledge the role that they played in Sandy 
and where things went wrong there. I think they can be part of 
the solution as well. And I think, to the point I made earlier 
about better governance in the network, how do we hold those 
companies, adjusters, agents, bankers, and others who 
communicate with policyholders more accountable for helping 
them understand what they are buying and what their risk is. We 
all have to do a better job at risk communication. And I think 
there are a number of interventions we can take there.
    Mr. Cleaver. Thank you.
    Chairman Luetkemeyer. I thank the gentleman. With that, we 
go to the gentleman from New Jersey, Mr. Garrett, for 5 
minutes.
    Mr. Garrett. Thank you. Besides the insurance companies, I 
have heard reports--I will just throw it out there, whether it 
is true or not--that there are engineering firms, as well, that 
are accused of wrongdoing. If engineering firms have been found 
to act improperly, if they doctored reports or did anything 
else like that, then they obviously not only have victimized 
the government, but it is fair to say that they have victimized 
the Sandy victims as well, wouldn't you agree?
    Mr. Kieserman. Yes, Congressman.
    Mr. Garrett. Right. What is the status, briefly, of those 
cases right now? And do you know if there is a history with 
those particular firms that you are going to speak of, of this 
sort of thing?
    Mr. Kieserman. Congressman, I would begin by saying that 
FEMA is neither a law enforcement agency nor a regulatory 
agency. And I think it is imperative to understand the role 
that we play here. We deliver a flood insurance program. And 
some of the participants in that program have engaged, at a 
minimum, in highly irregular practices. I will leave it to the 
courts and the criminal investigators to determine whether they 
violated the law. The New York State Attorney General's Office 
and the New Jersey Attorney General's Office are investigating, 
very aggressively I might add, at least two of the engineering 
firms.
    Mr. Garrett. And is there a history with these firms in the 
system, so to speak?
    Mr. Kieserman. There are those who say that there is prior 
misconduct. And, again, I think that it is up to those who say 
that to prove it. But what I can say is that the president of 
at least one of those firms was disbarred from the practice of 
law for allegedly being involved in the commission of fraud. 
That firm and that individual should never have been allowed to 
participate--
    Mr. Garrett. So he is responsible for his own conduct. Who 
is responsible here in the government for making sure that 
people who have been disbarred or who have a history of 
wrongdoing not be allowed to be in this system that we have?
    Mr. Kieserman. Today, Congressman, I am responsible for 
that in the National Flood Insurance Program. It is for that 
reason that we have withdrawn the authority of insurance 
companies to make any allocation or--
    Mr. Garrett. Should that have been done by someone, you or 
otherwise, before Sandy occurred, making sure that if there is 
a list of bad actors, that these bad actors should not be 
allowed to be involved?
    Mr. Kieserman. I think, first, you have to detect it before 
you can deal with it--to my earlier point about the need to 
build in better governance and the ability to detect and 
monitor this problem.
    Mr. Garrett. That is what I am asking. In other words, did 
these folks that we see now are bad guys, have a history of 
being bad guys that we should have known beforehand?
    Mr. Kieserman. I think we should have had mechanisms in 
place to know that there were problems, to know, first of all, 
that the companies were not necessarily run by reputable 
people. And, second of all, to identify the problems long 
before a Federal judge had to tell us about it. I think both of 
those things should have happened and need to be done.
    Mr. Garrett. So when the judge--I didn't read the judge's 
opinion, I am just going by your quotes here--said that there 
was systemic wrongdoing and reprehensible conduct, I assume, I 
am guessing here that the systemic wrongdoing involves not only 
these bad guys, the bad engineers and the claims adjusters or 
anybody else, but it sounds like there is a systemic problem 
with the Flood Insurance Program, as well as this one point, 
that we didn't look at for the last several decades to see who 
the bad guys were. So he is saying that there is a systemic 
problem in the system, right?
    Mr. Kieserman. That is my understanding. And that is 
certainly how I approached it when I took the job.
    Mr. Garrett. Right. And so when you talk about the issues 
of well, they were just bringing up that there are certain 
cases, there is wind damage, certain times there are earth 
movements, other times there are problems that we have heard 
repeatedly storm after storm after storm. And, yet, here we are 
again in 2015, and I am trying to figure out what the common 
denominator is.
    We know there are always going to be bad actors in the 
world. That is one common denominator. But the other common 
denominator is FEMA and the Flood Insurance Program in general. 
That is the common denominator over storm after storm after 
storm, decade after decade after decade, and as the judge calls 
it, a systemic problem. That seems to be where the problem is. 
And we have had these hearings before. We have reformed before. 
And we just come back again time and time again with the same 
systemic problem.
    Mr. Kieserman. Congressman, I would say that the common 
denominator to emergency management in this country is FEMA and 
that FEMA helps millions and millions of people every year. And 
no one should forget that. I think it is absolutely the case 
that the National Flood Insurance Program needs to be reformed. 
And I would tell you, back to my analogy about the iceberg 
melting, there are a lot of people in the insurance business 
and in the banking business and in other businesses who would 
tell you there is nothing wrong, this is a small number of 
claims. I am not sitting here telling you that today and 
neither is Administrator Fugate or Deputy Associate 
Administrator Wright. We are absolutely acknowledging that this 
iceberg is melting. We are just seeing the tip of it. And it 
needs to change. But I need this body and we need the others to 
help maintain that sense of urgency around this issue. 
Otherwise, it will just slip back again.
    Mr. Garrett. I yield back.
    Chairman Luetkemeyer. I thank the gentleman. Next for 
questions, Ms. Velazquez, the gentlelady from New York, for 5 
minutes.
    Ms. Velazquez. Thank you, Mr. Chairman. Mr. Kieserman, I 
hear that you admitted that FEMA knew or should have known that 
there were claims of underpayment and fraud as early as 2013?
    Mr. Kieserman. That is correct, Congresswoman.
    Ms. Velazquez. So here you are. You said that FEMA is not 
an enforcer and FEMA is not a regulator. But what do you do 
when you made a statement like this, that you knew since 2013, 
so what do you do?
    Mr. Kieserman. I think you do three things. You offer 
people a fair and reasonable settlement in litigation because 
they should have never had to sue you to get what they are 
entitled to. You open up the process and you offer people the 
opportunity, the 142,000 people who didn't sue us and sue the 
Write Your Own companies, the opportunity to have their claims 
reviewed. Because, given what has come to light, they should 
have that opportunity if they choose to. And then, finally, I 
think you set a course in motion to reform the program and to 
reform it permanently, so that we don't continue to go through 
this cycle.
    Ms. Velazquez. What do you do with the Write Your Own 
participants? How do you hold them accountable? How do you send 
a strong message that we are not going to allow this type of 
behavior to ever happen again?
    Mr. Kieserman. I think there are a number of steps. The 
first was taking control of litigation. Normally, in the 
litigation process, the Write Your Owns make the decision, FEMA 
pays all the money. We have taken control of litigation and we 
are settling claims. And we are doing that in ways that 
probably the Write Your Owns would prefer we didn't. But we are 
doing it that way anyway.
    I would also say that the other thing we have to do with 
the Write Your Owns is try to make those who are willing be 
part of the solution. Because we will never have the capacity 
as a Federal Government to deliver an insurance program to 5.3 
million Americans. We are going to need the insurance industry 
to help us with that. So I think we have to set a standard. We 
have to set a culture of being survivor-centric. And I think we 
have to be careful not to alienate the very people whom we need 
to deliver the program.
    Ms. Velazquez. But we need to send a strong message to 
those in the industry. What type of stiffer penalties can we 
put in place to hold them accountable?
    Mr. Kieserman. Congresswoman, I think the first thing we 
have to recognize is that before we start penalizing anyone, 
there are court proceedings that are going on and 
investigations going on. And I didn't wait for those, we didn't 
wait for those to conclude in order to try to compensate 
survivors through litigation and through claims. But I do think 
it is imperative to get to dispassionate facts about who did 
what and what really happened. So, for now, what I have done--
yes, ma'am. Thank you.
    Ms. Velazquez. Okay. I have other questions. In March, FEMA 
announced that they would reopen all 144,000 Sandy-related 
flood insurance claims for review. And while this is good news, 
many homeowners at the time may not have taken advantage of 
other Federal recovery programs like SBA disaster loans, with 
the reasonable assumption that their insurance would be 
honored. In light of the fraud allegations, should we reopen 
other forms of assistance for those who thought they were 
covered by insurance, were denied, and missed out on applying 
for a loan?
    Mr. Kieserman. Congresswoman, I think that is a question 
for the SBA and, to the extent that it involves grants, for HUD 
and its grantees. From my perspective, we believe there was a 
sufficient basis to provide people the opportunity to have 
their insurance claims reviewed. And that is what we are doing.
    Ms. Velazquez. It is our understanding that FEMA and SBA 
have worked out a way to avoid the duplication of benefits 
issued using a joint checks model. However, SBA was not the 
only entity providing assistance after Sandy. Will FEMA work 
with New York City to replicate that model to expedite and 
lessen the burden resulting from overpayments to homeowners 
from the city?
    Mr. Kieserman. We have worked with New York City, with New 
York State, and with New Jersey State. And we will continue to 
do so. But everyone should understand that a grantor like New 
York City and New York State and New Jersey stands in different 
shoes than a loan maker like SBA. Policyholders assign their 
rights to policy proceeds to SBA so that SBA has a secured 
interest. That is not the case for the grant makers.
    So I would say that if anybody took an SBA loan, we are 
working with SBA, and if SBA determines there is a duplication, 
then folks can use their insurance policy proceeds to pay down 
their loan. But if folks took a grant from one of the HUD CDBG 
grantees, then it is going to be imperative for them to decide 
whether they want to go through this process. Because they very 
likely already received funds for the exact same purpose we 
would give them money. And they will have a debt when that is 
over.
    Ms. Velazquez. Going back to the handful of engineering 
firms that seem to be at the root of the Sandy fraud cases, how 
does FEMA currently conduct oversight over third-party 
contractors? And how, again, are these firms held accountable?
    Mr. Kieserman. Recognizing the time, the oversight is 
conducted through what are called operational reviews that are 
conducted for a week every 3 years. They are wholly inadequate 
in my view. There are other existing forms, like monitoring for 
improper payments. But, again, I think we have lost sight of 
the network. And these are not adequate mechanisms. But those 
are the ones that are in place.
    Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
    Chairman Luetkemeyer. I thank the gentlelady. Her time has 
expired. With that, we go to the gentleman from Florida, Mr. 
Posey, for 5 minutes.
    Mr. Posey. Thank you, Mr. Chairman. Mr. Kieserman, thank 
for your candid responses. I very much appreciate it. Somebody 
joked earlier--you mentioned that one of your sons dropped out 
of college temporarily, and somebody said that if you asked him 
why, he is so straightforward, he would probably tell you. That 
is a real compliment. We don't get a lot of that. We get a lot 
of people who like to dodge answering any questions or giving 
straight yes-or-no answers. So hats off to you for that. Thank 
you. And good luck at the Red Cross.
    What amount do you think was knowingly paid in losses to 
non-Sandy related property?
    Mr. Kieserman. I don't have a number for that, Congressman. 
I will have to get back to you on that one. I honestly don't 
have a number for that at all. I'm sorry. Especially after 
those nice compliments, I feel bad. But I don't know the 
answer.
    Mr. Posey. I shouldn't have said anything. Are you aware 
that some were knowingly paid that were non-Sandy related?
    Mr. Kieserman. I was not aware of that, sir.
    Mr. Posey. Like millions of dollars for new roofs on 
museums within a stone's throw of this building?
    Mr. Kieserman. I don't know that those were flood insurance 
funds as opposed to funds from other agencies. But we can get 
back to you on that.
    Mr. Posey. Yes. And I am looking at the whole Sandy 
package. I know there was a lot of pork in there when I read it 
that wasn't related. And I know that the Rules Committee felt 
it was not in order to require an amendment that said all 
Sandy-related losses have to be related to Sandy. I know that 
is good congressional sense. But it is not good common sense.
    And so my question to you is, how do you think Congress can 
better exercise its ability to perform oversight in the future? 
Members of Congress are really good at sitting back and patting 
ourselves on the back, saying we have it under control, until 
we have a catastrophic loss here, there, or elsewhere. And 
then, of course, it is the insurance industry's fault. It is 
the agency's fault. It is everybody's fault but Congress. What 
do you think Congress can be doing actually to be more engaged 
to make sure we don't have this kind of dysfunction when the 
time comes?
    Mr. Kieserman. Congressman, I think you hit the nail on the 
head. We all tend to pay attention to the catastrophic. But the 
reality is that in an average loss year for insurance or an 
average disaster year for the country, that is the time to be 
paying attention. That is the time to hold hearings. That is 
the time to ask questions. That is the time for the agency to 
be looking at its organization. That is the time for that to 
happen. Because when the catastrophic occurs, it is all hands 
on deck and we are just trying to deal with the moment. I think 
the key, as you pointed out, is having that level of attention 
when it is a non-catastrophic event.
    Mr. Posey. Exactly. Do you have any suggestions as to how 
we might engage that? Are there experts that we should bring in 
to do an audit? Do you think an Inspector General is 
sufficient? How do we look at doing a dry run? Do they have 
that? And who analyzes the results of those things?
    Mr. Kieserman. I think GAO has done phenomenal work. And I 
would urge you to continue their use. I have reached out to GAO 
and they have begun an audit on our program to help us 
understand the forensics of where the money goes. I am a big 
believer in ``follow the money'' and that will help you 
understand the organization. And I think GAO can be a great 
asset to this body.
    Mr. Posey. Has there been--certainly we have all heard of 
people who dropped the ball, who didn't do their job. 
Unfortunately, some of them were Federal employees. What has 
been the level of discipline for those employees who did not 
perform as they should have in this situation?
    Mr. Kieserman. As you know, there are several senior 
employees who have chosen to resign or retire as a result of 
this. And by doing that, I think they recognize their role and 
create space for others to come in and make change. There are 
some less senior employees whom I have asked the Inspector 
General to investigate so that we can, again, give everyone the 
process they are due, survivors, employees, contractors, 
everyone, so that we can understand. So I have asked the 
Inspector General to look at the performance of several 
employees whom I believe had information about this and should 
have alerted senior leadership earlier in the process. I am 
awaiting those investigations.
    Mr. Posey. I would hope that you would also include those 
members who have resigned and moved on. We had similar problems 
with Madoff at the SEC. And the Secretary came in here and 
actually told me, ``We haven't disciplined anybody yet. But it 
might make you comfortable to know that X number of people 
resigned.'' Well, it really doesn't make me comfortable. They 
probably have similar high-paying positions in other agencies 
that we are paying. And it is like saying that when a pedophile 
changes neighborhoods, the problem is solved.
    Mr. Kieserman. I agree, Congressman. Accountability doesn't 
stop when you leave the agency. I doubt it will stop for me. 
And it shouldn't stop for others. I can tell you that the 
States Attorneys General that are looking at this and the 
Inspector General are looking at anyone who is involved, 
regardless of their current employment status.
    Mr. Posey. Okay. Mr. Chairman, I hope we will get a report 
and an update on that. Even if he is gone, I would like to see 
the results of that for our committee. Thank you.
    Chairman Luetkemeyer. Absolutely. I thank the gentleman. 
And his time has expired. With that, we go to the gentleman 
from Texas, Mr. Green for 5 minutes.
    Mr. Green. Thank you again, Mr. Chairman, and I thank the 
ranking member as well. I have been in Congress for a number of 
years. And I must say that I agree with Mr. Posey. Mr. 
Kieserman, sir, your testimony has been brutally frank. I 
rarely hear the level of frankness that I have heard with your 
testimony. So I am grateful, as well, that you have been 
forthright. Now, I do have a couple of concerns. One, with all 
that you have said, I want to make it clear to all who are 
hearing your testimony that you do not contend that we should 
end FEMA. I think I am hearing you say we should mend it, but 
not end it. Is that a fair assessment?
    Mr. Kieserman. That is a very fair assessment, Congressman. 
I think you need a very strong National Flood Insurance 
Program. The private market does not appear ready to step in. 
Americans and businesses, small businesses need access to flood 
insurance, 5.3 million Americans are doing it now and need it. 
I don't know where they get it if we are not here. So I think 
we need to strengthen the National Flood Insurance Program.
    Mr. Green. Thank you. I had the opportunity this past 
weekend in Houston, Texas, to talk about FEMA and the various 
programs on a radio station. And we had a caller who appeared 
to be a young lady. Her indication was that she had paid her 
flood insurance regularly, wasn't behind, there was no lapse in 
the program in terms of her payments. And she indicated that 
she was very much distraught, perhaps not in these words, 
because the program did not reward her as she thought it should 
when she had fulfilled all of her obligations. And I am laying 
this out as a predicate for this question. Is it true that the 
penalty for overpaying a victim is more severe than the penalty 
for underpaying? I am trying to find some rational reason for 
the behavior that we are talking about today. Can you comment 
please?
    Mr. Kieserman. Yes, Congressman. It is not the case that 
the penalty, if you will, for overpaying is more severe than 
the penalty for underpaying. The penalty is for not paying the 
correct amount, over or under. And that was not true 4 years 
ago. But it is true today, based on some changes that were done 
after Katrina. As far as what the reason is behind the conduct 
of engineering firms that alter reports or any of that, I don't 
have an answer for you. It is really difficult to understand 
why.
    What I would offer to you is this: I think it is imperative 
that the system that we use to detect that kind of conduct 
needs to be strengthened. Because whatever the ``why'' is, 
until we understand the scope of it, we are not going to be 
able to fix it.
    Mr. Green. I rarely try to get an explanation for 
irrational behavior. But usually when fraud is involved, there 
is some reward someplace in the system. And I am trying to find 
that gravamen, if you would, that reward that is in the system. 
Are you indicating that at this point, you too have not been 
able to locate the reward that someone would receive?
    Mr. Kieserman. I have not. And I have brought forensic 
accountants in to help me. It is why I have asked GAO to come 
in. I have spoken with the Attorney General's Office in New 
York, in particular, because I know they are looking at the 
same question. I do not have an answer for you because I do not 
understand why anybody would do some of the things that are 
alleged.
    Mr. Green. All right. Mr. Chairman, with the remainder of 
my time, I would just like to focus on Houston, Texas, and 
recent events. We have had a catastrophe. We have had much 
property damage. Lives have been lost. And it is our job, as 
Members of Congress, to do all that we can to assist our 
constituents. But I also want to indicate that in Houston, I 
saw something that was very heartwarming. I saw a symbiosis 
develop. The mayor's office was involved and the mayor herself. 
The Governor immediately acted. The Red Cross, the agency that 
you are going to move to--and, by the way, I salute you if this 
is what you want to do--was very much involved. We even had the 
Mormon Church providing translators for persons who needed some 
assistance. We had a Chinese community center housing people 
who were victims of the storm. I want to just commend those in 
Houston who have done an outstanding job.
    But I also want those who are still suffering to know that 
we plan to do all that we can to be of assistance to them, 
especially people who are out of their homes now and have no 
place to go. Some will, but many do not. And it is important 
that we do all that we can to help and that they not be 
defrauded in this time of need. It is exceedingly important. 
Mr. Chairman, I thank you so much for the time. And I yield 
back.
    Chairman Luetkemeyer. The gentleman's time has expired. 
With that, we go to the gentleman from Virginia, Mr. Hurt, for 
5 minutes.
    Mr. Hurt. Thank you, Mr. Chairman. I thank the Chair for 
holding this important hearing. Mr. Kieserman, I am Robert 
Hurt. I represent Virginia's 5th District in southern Virginia. 
What I hate to see, and I know we all agree on this, is one 
more reason why the American people don't trust the Federal 
Government. And this is a perfect example of that. The people 
that I represent weren't affected by Hurricane Sandy directly. 
But certainly, the same distrust and terrible behavior reflects 
and affects them much in the same way.
    I guess my question, just building on Mr. Green's line of 
questioning though, it just seems impossible that you don't 
have some idea what it is that would motivate these agencies of 
the government, the engineering firms, or the adjusters to 
undervalue the damage. There has to be some incentive that can 
be adjusted to get to that. So it is hard for me to believe 
that you don't have any idea.
    Mr. Kieserman. Congressman, I have talked to plaintiffs' 
attorneys, I have talked to judges, I have talked to insurance 
companies and adjusters and engineers whom I believe are 
credible, trustworthy people, and they don't have any idea. It 
is--
    Mr. Hurt. What could it possibly be?
    Mr. Kieserman. I think there are separate pieces here. 
Where the adjusting piece is concerned, there is software that 
all adjusters use. And in the NFIP, there are multiple 
softwares that people are using. One of the things that I would 
change as a reform is I would go to a single software. I don't 
think you should have multiple types of software because they 
can result in different outcomes for different people. There 
should be consistency. So if there are errors in the software, 
errors in the algorithm, that can result--
    Mr. Hurt. But fraud necessarily requires an intent. So if 
there is intent to defraud the policyholder--I guess my 
question is, is having software that is inconsistent, that is 
not intentional, necessarily intentional. It could be, I guess. 
But that doesn't make sense to me.
    Mr. Kieserman. No.
    Mr. Hurt. All right. What about on the engineering side? 
There are these allegations that reports were doctored. What is 
that about?
    Mr. Kieserman. Right. So I think the best I can tell you is 
this that I do not understand why an individual at an 
engineering back office would take their report from a licensed 
professional engineer, alter it, not consult with that 
engineer, and then append that engineer's signature and seal.
    Mr. Hurt. Lazy?
    Mr. Kieserman. Lazy is one--Congressman, I will be honest 
with you, I am back to ``follow the money.'' I have to believe 
that somewhere, someone at some engineering company thought 
that they would either get more business if they found 
causation by flood less percent of the time, or maybe they 
thought they would get less business if they found otherwise. 
Maybe there is a money connection here we are just not seeing. 
But we haven't seen it.
    Mr. Hurt. Okay. But is that an incentive that is imposed by 
the Federal Government or by the Flood Insurance Program?
    Mr. Kieserman. I don't know. And I don't think anyone else 
does either. This is one of the reasons why these Attorney 
General investigations are critical. We simply do not have the 
facts.
    Mr. Hurt. But who makes those decisions? I guess going back 
to Mr. Garrett's question, who makes the decisions about which 
engineering firms that are chosen? And does efficiency or 
lowest amount of claims or dollar amount of claims--is that an 
incentive for hiring these folks?
    Mr. Kieserman. I don't have any reason to believe that is 
the case. But I do--so you asked me who makes the decision. The 
Write Your Own insurance companies and FEMA's direct side agent 
decide who to bring in for engineers. And most of the insurance 
companies, like FEMA, contract their work out to about nine 
vendors in the United States. So we are talking about 82 Write 
Your Owns. The reality of it is, there are about nine vendors 
and one or two companies who are doing most of the work here. 
And so what incentives do they have to hire bad engineers or to 
hire engineers who are going to defraud people? I don't know.
    Mr. Hurt. Who gets the money? That is the question. I am 
asking you that.
    Mr. Kieserman. Right. The money flows--and this is the 
point--back in layers. So the contracting firms, the vendors 
get money. The Write Your Owns get money. The engineering firms 
get money. And this is why we need to follow the money. Because 
here's where we should be, we should be making sure that every 
person who has paid a premium and is insured and has a loss 
caused by the flood, that they get their money. That is where 
we should be focused right now. And that is where, I think, we 
need to make sure that the program is focused, to make sure 
that every person who has a loss gets every dollar to which 
they were entitled.
    Mr. Hurt. Amen. Really quick, we only have 10 seconds, the 
fact that you have opened up 142,000 other cases, does anybody 
have any idea what that process in and of itself will cost? And 
are there concerns about that--any additional cost?
    Mr. Kieserman. The total cost of the claims review right 
now I estimate at about $40 million. And that is all the costs 
associated with running it, standing up, and doing all the 
work, and adjudicating claims. But, Congressman, to your 
earlier point about public trust and integrity, the cost of 
losing that trust is far greater than $40 million.
    Mr. Hurt. But we shouldn't be here in the first place.
    Mr. Kieserman. That is right.
    Mr. Hurt. All right. Thank you. I yield back.
    Chairman Luetkemeyer. The gentleman's time has expired. 
With that, we go to the gentleman from Massachusetts, Mr. 
Capuano, for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman. And thank you, Mr. 
Kieserman. I think you are 100 percent right, obviously, to 
follow the money. This is a money thing. Where it is, I don't 
know any more than you know. But I am just wondering do, 
engineers or whomever get paid by the number of parcels they 
review?
    Mr. Kieserman. In some cases, yes, Congressman, that's the 
model.
    Mr. Capuano. So that the more they do, the more they get 
paid. And the more you do, the quicker you are, the less 
detailed you are. And when you bring that back to the home 
office to say, here are my 100 reports for these hours' worth 
of time, if you say no, no one is going to tell you to go back 
out and check it because there is no payment to be made. If you 
say yes, and they say, hey, Fred, I am not so sure, maybe you 
ought to go check that one again, if we don't get paid for it. 
I am not saying that is here. But there is clearly money 
involved. You are 100 percent right to chase it.
    Mr. Kieserman. Congressman, I think you have a great point 
there. And all I would add is that just a few weeks ago in open 
court, there was evidence introduced that the billing process, 
even though it was a parcel-by-parcel structure--they billed a 
flat rate. And that was introduced in open court. So that is 
being investigated as potential fraud as well.
    Mr. Capuano. We all look forward to the results of all 
that. Thank you. I want to talk to you about some of the bigger 
issues. There are some of us who have continued to look at the 
flood insurance situation, not individually Sandy, but, 
obviously, lessons learned from Sandy. But also how we keep 
this thing alive, how we improve it, how we make it work. I 
just have a question for you. If I had a home on the Jersey 
shore, and I ran away because I was told to leave, and I came 
back and my house was gone, do you think I would really care if 
it was swept away by the ocean tides or the wind or shifting 
sands or little mice? My house is gone. Do you think it should 
matter?
    Mr. Kieserman. I, Brad Kieserman, don't think it should 
matter, Congressman. But I will tell you this, as somebody 
managing a Federal program, the actuarial difference between 
what it costs to limit causation to flood versus what it costs 
to deal with other issues is significantly different. And we 
are going to have to figure out how to manage that and how to 
educate the public about what they are buying.
    Mr. Capuano. I understand. The Flood Insurance Program, as 
you say in your testimony, was created for classic floods, rain 
and only rain, like what is going on in Texas right now. It 
wasn't necessarily created for hurricanes where there is wind 
and rain simultaneously. And it wasn't created for tornadoes.
    I would argue that one of the things we need to look at is 
natural disaster insurance, as opposed to simply flood 
insurance, therefore, getting rid of all the nonsense about was 
it rain, was it not. We heard it in Katrina. We are hearing it 
again in Sandy. And to be perfectly honest, I understand the 
technicalities of why it has to be done. But from my 
perspective, I think it is stupid for us to require it; a 
disaster is a disaster. And whatever specific item caused your 
specific loss, in my opinion, shouldn't matter.
    I guess I have another question. During your work, is there 
a difference if--I don't live on the shore of New Jersey. You 
know what? I have a small restaurant. I open it up 6, 7, 8 
months a year, try to make as much as I can to feed my family 
and send my kids to college. A hurricane comes along, and my 
business is blown away. Should that be treated differently than 
a homeowner?
    Mr. Kieserman. I acknowledge that there are a lot of public 
policy issues there. But if you are asking my opinion, my 
opinion is that if you are a small business and you have a 
loss, you should be able to get your loss adjusted and make 
sure that you get the money you need. You are the economic 
engine of the community. Why would we do anything other than 
treat them the same?
    Mr. Capuano. I would agree with you. Yet, I know you know 
that when we ``fixed'' our problem with flood insurance, we 
didn't fix it for small businesses.
    Mr. Kieserman. So we are now looking at the number of small 
businesses that we have. There is a study going on right now to 
identify how many small businesses are actually in the program. 
And that will help us understand better how we can better 
adjust their claims.
    Mr. Capuano. And when Sandy hit did it--well, you tell me, 
again, I am not terribly familiar with the Jersey shore, but is 
everybody who owns a house on the Jersey shore, are they all 
wealthy? Is Donald Trump the only one who owns a house along 
the Jersey shore? Or are there some working-class people who 
have struggled hard to get maybe a small, tiny little piece of 
the pie?
    Mr. Kieserman. I met a lot of working-class people, blue-
collar folks, and people who have worked for a long time to get 
their homes, who were impacted by that--
    Mr. Capuano. And some of those might be second homes. They 
actually might live in downtown Newark and have struggled to 
get a small, little piece on the Jersey shore so their family 
can get out of the city on occasion.
    Mr. Kieserman. That is right.
    Mr. Capuano. Yet, we didn't treat them well either. They 
are not covered by the fix that we had either, is that right?
    Mr. Kieserman. Right. The primary residences are the main 
focus of the National Flood Insurance Program. Secondary homes 
are treated differently. I take your point about why people 
have second homes. But the public policy decision--
    Mr. Capuano. I know. I am struggling with the public 
policy, I am not struggling with it, I actually think this is 
easy. Second homes--Donald Trump has a second home. It is too 
bad if he loses it. But I am not going to cry a lot. But that 
is not most people who own a second home. And I am sure that in 
your work on the Jersey shore, you have seen that. And I know 
you have seen it. I know you saw it in Katrina. I know you see 
it every time there is a disaster in areas where there are some 
second homes. And I guess my time is over. And I appreciate it. 
Thank you very much, Mr. Kieserman.
    Chairman Luetkemeyer. The gentleman's time has expired. 
With that, we go to the gentleman from Florida, Mr. Ross, for 5 
minutes.
    Mr. Ross. Thank you, Mr. Chairman. And, Mr. Director, thank 
you for being here. I come from a State that is surrounded on 
three sides by water. And we are used to a little bit of 
flooding. And we are used to some wind storms. We are also a 
donor State to the National Flood Insurance Program. We 
probably contribute more in terms of premiums than we ever get 
back in terms of claims. And my concern is is that we have 
created this model, that we use the word ``insurance'' when, in 
fact, what we have created is a relief model, relief being a 
post-event distribution of dollars in order to try to correct 
and resolve the damage, as opposed to insurance, which is a 
pre-event, actuarially-assessed, capital-based program.
    And so now in the NFIP, as we have seen happen in Sandy and 
what we have seen in other areas throughout the country, is we 
really have a relief program. And, actuarially, I am concerned 
that we are not assessing the value of the risk. Because the 
risk is what the risk is, and you understand that. If you 
choose to live next to an ammunition factory, you don't want to 
light a match. That is the risk of living there. If you choose 
to live in an area that is under a floodplain, there is a risk 
there. And so what we have to do is we have to somehow balance 
a market to make sure that we have a capital that will come in 
and bear that risk at the price that is appropriate. But also 
we have to do, from a policymaking point of view, what is 
necessary to do, what we refer to as mitigation. Because if it 
is going to be a true insurance program, then we have to 
realize that the pre-event investment is going to save us on 
the post-event contribution. In other words, studies have shown 
that for every $1 in mitigation, you receive a $3 benefit in 
value when it comes to relief.
    My question to you is, what is going on in terms of 
mitigation? Is there anything you specifically recommend that 
homeowners can do in terms of trying to mitigate against 
potential flood problems, whether it be structural 
improvements, whether it be waterproofing a basement, or things 
of that nature.
    First of all, that risk, if it is borne by the individual 
homeowner and they are aware of that risk, they are aware of 
the value of that risk, they have a tendency to want to make 
sure that they themselves manage that risk and protect that 
risk. Mitigation is the area. I would love your comments on 
that.
    Mr. Kieserman. I think it is critically important, whether 
it is homeowners or small businesses or public infrastructure 
that everyone prioritize mitigation, as you said, pre-storm and 
pre-event, because that is the way you truly buy down risk. You 
can either reduce risk, you can avoid risk or you can ignore 
it. We shouldn't be ignoring it.
    Mr. Ross. Right. I agree.
    Mr. Kieserman. So in order to mitigate, if I am the 
homeowner, I can dry floodproof, I can elevate, I can look at 
structures to reduce flood flow into my home. Those are all 
measures you can take. Frankly, again, it is not an option for 
everyone, but some people can choose to relocate, especially if 
they are in a floodplain, and those are decisions that people 
have to make.
    Mr. Ross. Has it been your experience that when people are 
incentivized financially to make mitigation improvements, they 
will do so?
    Mr. Kieserman. Sometimes, but there is more than just 
irrational actors involved in this. There is emotion involved. 
As the Congressman from New Jersey said earlier, sometimes 
people work their whole life and that is their parcel and they 
are not going to leave it. And so, I think it is both.
    Mr. Ross. I agree. But if given that emotional feeling, you 
would want to protect it and part of that protection is knowing 
that you have been incentivized to mitigate against them. For 
example, whether I have a tax-free savings account that I can 
use solely to put in that waterproof basement or put up those 
berms to keep from--
    Mr. Kieserman. Right.
    Mr. Ross. Those would be good options, would they not?
    Mr. Kieserman. I think they would be good options that are 
worth considering, along with the fact that to the extent that 
we can help people make good mitigation decisions, we can help 
educate people about how they can mitigate the risk and buy it 
down and how they protect their investment. That's a role all 
of us can play, including the banking industry and others.
    Mr. Ross. The housing industry, the banking industry, 
everybody.
    Mr. Kieserman. Yes.
    Mr. Ross. I think this isn't just solely a government 
responsibility.
    Let me ask you also, when we did the fix last year to the 
Biggert-Waters bill, we put a provision in there, I believe, 
that would allow for the disclosure of publishing of the 
science or the actuarial analysis that is being done. Has any 
of that been disclosed or has any of it even been requested by 
anybody on the outside?
    Mr. Kieserman. I don't know if the disclosures have been 
done. We will get that for you. There are a number of studies 
going on, on the actuarial soundness of the NFIP. But the 
reality of it is, this is a subsidized product. And I agree 
with everything you said prior about this being a hybrid 
between disaster assistance as a relief program and an 
insurance program. It is not pure insurance. It is not 
actuarially sound, and frankly, I don't think it will be. If it 
were actuarially sound, the private industry would sell it.
    Mr. Ross. And we should get the privacy industry in there, 
and if we can let them assess that risk because there is 
opportunity for that capital to be there.
    Mr. Kieserman. Yes, I agree. There is potential here, 
especially as we look at reform at a layered approach. It 
doesn't just have to be the National Flood Insurance Program. I 
think there are opportunities out there for reinsurance and 
other layers so that people can buy down their risk with 
private products, and that this product is really the last line 
of defense not the first.
    Mr. Ross. Exactly. The market of last resort. My time is 
up. Thank you very much.
    Mr. Kieserman. Thank you, Congressman.
    Chairman Luetkemeyer. I thank the gentleman. That was an 
interesting line of questioning. I enjoyed that. Very good, Mr. 
Ross.
    With that, we go to the gentlelady from Ohio, Mrs. Beatty, 
for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and I thank our 
ranking member, as well.
    Let me say to the witness, thank you. Usually, around here, 
it is bad news that travels fast about a witness. But I got a 
call saying we have a good witness, and both sides are saying 
that. So I expect you to carry that knowledge to your next 
position when you leave.
    We have heard a lot about the situation here and we have 
also heard a lot about FEMA. So my question is, FEMA has asked 
the Inspector General to make recommendations to help improve 
its oversight role. Can you shed any light or share with us, 
are there any efforts to improve that role currently, or will 
FEMA take any actions on its own in the interim?
    Mr. Kieserman. Congresswoman, we have established a task 
force at FEMA that I have had the honor to lead for the last 
100 or so days. Mr. Wright will be taking over the overall 
operation here in a few weeks.
    One of the three things the task force is doing is working 
near-term reform. We are not going to wait for others. We are 
going to move forward. We would like to move with our partners, 
but we know that there is a sense of urgency here and that we 
have to maintain that. One of the challenges that we have is 
that we have 75 Federal employees trying to oversee an 
enterprise of what really amounts to 6 million people when you 
take into account the 5.3 million policyholders.
    So some of the things we can do, and I would just raise for 
Congressman Green from Texas, I do intend to establish before I 
leave this job a hotline so that your constituents and others 
who may be affected by floods this season can call us until we 
have a more robust network that allows us to detect and monitor 
these potentially systemic problems. I want to make sure people 
have a place to go before they have to appeal their claim to 
their insurance company, before they have to sue. We will have 
that established before I leave office here in the next week-
and-a-half. So that will be the first thing that we do.
    We are going to work with our Write Your Own companies and 
others to see how we can better structure our oversight. We 
have withdrawn on their authority to pay for engineering 
services without our preapproval. That will help us do a better 
job at screening the engineering companies. We are going to 
immediately increase our policyholder education so that people 
understand what they bought. That is one of the things I have 
seen, Congresswoman, is that people are very surprised at times 
of loss because they don't really know what they bought. We 
need to work that piece.
    Adjustor training. The adjusters that we have brought in 
for the claims review process have received very special 
training. We are going to expand that to all adjusters over the 
course of the next year or so, so that all the adjusters can 
get the sort of training that we have that makes them more 
sensitive to the needs of survivors.
    That is just a few of the things that we will be doing. The 
reform team has come up with well over 50 ideas that I am sure 
Mr. Wright and I will be talking about over dinner on Sunday 
night.
    Mrs. Beatty. Thank you so much.
    Mr. Chairman, I yield back. If Mr. Cleaver needs some of my 
time, I would be willing to give him those minutes.
    Chairman Luetkemeyer. We will recognize the gentleman from 
Missouri.
    Mr. Cleaver. Thank you. Thank you, Mrs. Beatty.
    My concern is, a lot of it is the fact that FEMA is 
apparently going to open up 144,000 claims and that is very 
close to, if not the same as, the number of claims originally 
filed, although only 2,800 were appealed--2,800 of those claims 
that were filed were appealed. What precedent will you be 
setting for the storms of the future, and is this a corrective 
step?
    Mr. Kieserman. Congressman, this is a corrective step. It 
recognizes that there were deficiencies in the delivery of the 
program. So, I think two things have to happen: one, you have 
to provide redress for that now; and two, you have to correct 
the system going forward so that this doesn't happen again and 
you don't have to provide that type of redress.
    And just to clarify, we are providing everyone who was 
impacted by the storm and filed a claim with the opportunity to 
have their claim reviewed, it is their choice to opt in. Some 
people have gotten what they needed. Some people are fatigued 
by this and are just done with government, and that is fine. 
Some people got money from SBA or got money from HUD and their 
needs were met.
    This is really for people who believe they were underpaid 
and didn't have a form of redress. If you are litigating, you 
are not eligible for the process. If you had an appeal and it 
was closed, unless we can find wrongdoing, you won't be 
eligible for the services.
    Mr. Cleaver. We had a problem with Wall Street. They 
intentionally, the word was mentioned, committed fraud. Nobody 
has gone to jail. Nobody has even gone on trial for almost 
sending this Nation into another depression. Do you have any 
feeling about what will happen if we can prove without a doubt 
that insurance companies were committing fraud? Will someone be 
prosecuted? Will there be prosecutions, like if they robbed 7-
Eleven?
    Mr. Kieserman. I have no doubt that there will be 
prosecutions if there was evidence of that. But I will tell 
you, Congressman, that I think what you are going to see is 
evidence of subordinate entities doing that activity, not 
insurance companies. We will see.
    Chairman Luetkemeyer. Time has expired.
    With that, we go to the gentleman from Pennsylvania, Mr. 
Rothfus, for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    And I would like to pick up on a little bit of that line of 
questioning and also follow up on what Mr. Hurt was saying. 
Because I am still trying to get my arms around incentives that 
might be out there. And maybe if we could talk a little about 
the transaction that happens for the homeowner. Who is the 
homeowner going to interact with in the process?
    Mr. Kieserman. Congressman, in the review process or--
    Mr. Rothfus. When the claim gets filed.
    Mr. Kieserman. Right. So the first thing a homeowner does 
is that they call their agent and they say, I have had a loss. 
And then what happens next is the agent works with the 
homeowner and the insurance company to send an adjuster out. So 
that adjuster is the center of gravity for all of this. That is 
first contact, meaningful contact with an insurer.
    Mr. Rothfus. And the adjuster then sends out the engineer?
    Mr. Kieserman. The adjuster will call for an engineer if 
there is an issue with respect to causation of structural 
damage. Adjusters are not trained generally to assess 
structural damage. And so if they see that, they will bring an 
engineer in to say, hey, did the flood cause the damage, it is 
a--
    Mr. Rothfus. So the engineer comes out, does a study, then 
somebody back at the office somehow changes that study or the 
evaluation?
    Mr. Kieserman. Certainly those are the allegations of what 
occurred in Sandy, and I have seen evidence that that happened 
on multiple occasions. Should that happen? What I am told by 
professional engineering firms is that the notion of peer 
review doesn't involve the change in real time of reports. It 
involves a later look for QA, for quality assurance and quality 
control. It is not what has been alleged to have happened in 
Sandy.
    Mr. Rothfus. These engineers are licensed in a particular 
State?
    Mr. Kieserman. That is a great question. In Sandy, some of 
the engineers who performed functions were not licensed in the 
State where they were working. Some of the engineers who 
reviewed in the back office were not licensed in the State 
where the residence was located. And some engineers weren't 
licensed at all. In fact, some of the people doing this were 
biology majors.
    Mr. Rothfus. Are the processes that were followed in Sandy 
typical for how other claims will come in for NFIP?
    Mr. Kieserman. I don't know the answer to that, sir, 
because if we knew the answer, we would have prevented this up 
until now, which is why we are putting some of these measures 
in place in Texas and elsewhere so this doesn't happen again.
    Mr. Rothfus. Has FEMA's Inspector General been engaged to 
review this matter at all?
    Mr. Kieserman. Yes.
    Mr. Rothfus. What is the scope of that review?
    Mr. Kieserman. Sir, I think you have to ask the Inspector 
General, given their independence, but within the first week of 
taking the job I put a full referral package together. And I 
will just add that I met with plaintiffs' attorneys, the lead 
plaintiffs' counsel in this case. He was very generous in 
giving us information about his cases that we shared with the 
Inspector General and with the State's attorney in New York and 
New Jersey, so that they don't have to spend time reinventing 
the wheel on the investigation.
    Mr. Rothfus. In the claims process, what interaction is 
there between WYO, an engineer, an adjuster, and any individual 
at FEMA?
    Mr. Kieserman. Minimal, and it varies from Write Your Own 
to Write Your Own. Some of them use different models in terms 
of the services they buy from vendors. In some cases they get 
complete service from a vendor and they have minimal 
interaction. FEMA's first interaction in most cases with an 
insured is in the appeals process when the insurance company 
has denied a claim and an insured comes to us. And as I said in 
Sandy that happened--
    Mr. Rothfus. Do you know whether the Inspector General is 
asking or has asked for information from FEMA employees who may 
have any information about what happened prior to an appeal?
    Mr. Kieserman. I do not know the answer to that.
    Mr. Rothfus. In your testimony, you stated that NFIP has no 
consistent or reliable method to identify systemic problems, 
preemptively identify and address claims or appeals with 
similar adjustment issues, or recognize patterns from warning 
signs by policyholder complaints, congressional correspondence, 
appeals, and other data. What is being done about that?
    Mr. Kieserman. Several things. So to begin with, we are 
putting significant resources on bringing in the information 
technology that we would need. I am sure within the next year 
we will be setting a standard for data collection, this next 
year or 2 years a standard for data collection, so that 
insurance companies and others give us a standard that we can 
work through. We will set up this hotline so that we have the 
ability now to connect the dots and sort of clear the signal-
to-noise ratio, which has been a problem.
    But I think the real focus here is going to have to be the 
development of a customer service unit that focuses on the 
customer. And whether that is a combination of secret shopper 
or customer interviews, we cannot rely on adjusters and WYOs or 
anyone else to be assessing the services the customer is 
getting. We have an obligation to assess the customer service.
    Mr. Rothfus. Thank you. I yield back.
    Chairman Luetkemeyer. I thank the gentleman.
    We will now go to the ranking member of the full Financial 
Services Committee, Ms. Waters from California, for 5 minutes.
    Ms. Waters. Thank you very much.
    I am sorry that I was not able to be here at the same time 
that Chairman Hensarling was here, because first of all, I 
would like to express my deep concern about what is going on in 
Texas and inquire about what is being done to make sure that 
the citizens are being taken care of and that bodies are being 
located that may not have yet been identified as lost.
    But I would like to ask Mr. Kieserman here today, have you 
had an opportunity to talk with our chairman, to explain to him 
what you know about what has happened in Texas and how severe 
that is?
    Mr. Kieserman. No, Congresswoman, I have not had that 
opportunity.
    Ms. Waters. Perhaps he has not had the time to make that 
call to you, but I would ask you if you would offer yourself to 
the chairman to explain to him exactly how devastating the 
storms have been in Texas, and what it is going to take to 
compensate those who have been displaced, whose homes have been 
destroyed, on and on and on.
    I think it is very important. You may know that during the 
time that we were involved with the reauthorization of the 
National Flood Insurance Program, perhaps the chairman did not 
feel that we needed to reauthorize that program. And I am not 
asking you to convince him of anything. I am just asking you to 
share with him exactly what has taken place in Texas. This may 
cause him to rethink what he feels about the National Flood 
Insurance Program. So I appreciate that.
    Now, having said that, the NFIP is in the red with a 
staggering debt of $24 billion. Most people assume that is 
because of subsidies written into the program, but 
historically, the program had been self-sufficient. I believe 
we should be taking a close look at the administrative cost of 
the program.
    And I would like to ask, to what extent has FEMA revised 
its WYO compensation practices to address concerns identified 
in prior GAO reports? For example, a 2009 GAO report found that 
FEMA consistently overpays WYOs for operating expenses. The 
WYOs currently receive 30 percent of premiums just for 
operating expenses yet they hold none of the risk. So what, if 
any, is your timeline for better aligning the cost and expenses 
of the WYO program?
    Mr. Kieserman. Congresswoman, we have literally just met in 
the last week or so with GAO, who are now opening a very 
specific engagement on WYO compensation. And we gave them a 
substantial amount of input about our concerns, some of which 
we shared with you about the compensation framework.
    I would offer just two points, if I might. First, I 
respectfully disagree that WYOs don't share in the risk. While 
it is true that they don't financially share in terms of the 
pool of money from which claims are paid, I think if you asked 
any of the 25 or 27 or so companies that are in litigation in 
New York and New Jersey today, they would tell you they share 
considerably with respect to reputational harm.
    And frankly, I want them to share in that risk with FEMA 
and with the government. That is what we need in our partners 
regardless of whether they are contractors or Federal entities. 
And many of those Write Your Owns, Congresswoman, have, in 
fact, stepped up now that the evidence is becoming clearer. 
Some still need some additional persuasion.
    The other point that I would make with you is that 30 
percent, while it sounds like a large number, when you look at 
the industry-wide standard for overhead, it is not that far 
out. I believe we can get that number down and get service up, 
but I do want to put that in context. So I think our goal needs 
to be working with GAO and working with the Write Your Owns to 
cut layers out of this that we don't need 32 years into the 
program.
    We may end up reducing the number of WYOs or changing the 
structure of that, but there are ways for us to reduce costs 
while still increasing services, and I want to work with GAO 
and our partners to do that. And I know Mr. Wright is committed 
to that as well.
    Ms. Waters. Thank you very much. This is not in my notes 
for today, but it has been in my head for a long time. Because 
I am so concerned about the premium costs of this insurance to 
our constituents, I would love to forgive the whole $24 
billion, wipe it out. I know that is an unrealistic wish, 
perhaps, but what do you think about a bold idea like that?
    Mr. Kieserman. Without getting myself in too much trouble 
10 days before I leave Federal service, what I would say is 
this: This is not an actuarially sound program, and it was 
never designed to be. If a program could be delivered in an 
actuarially sound way, private industry would have taken care 
of it, and we wouldn't be involved.
    The notion that there is $23 billion in debt, as you said 
when you began, the Write Your Own program and the NFIP 
generally have run solvent with the exception of 9 years out of 
about 34 years. And one of those is Katrina. And I will just 
leave with this comment: The NFIP was as much a victim of 
Katrina as everyone else who was a victim of Katrina. It 
literally blew us out of the water.
    Ms. Waters. Thank you very much. I yield back the balance 
of my time.
    Chairman Luetkemeyer. The gentlelady's time has expired.
    With that, I recognize the gentleman from Texas, Mr. 
Williams, for 5 minutes.
    Mr. Williams. Thank you, Mr. Chairman.
    And thank you, Mr. Kieserman, for your testimony today.
    As you can imagine--well, first of all, I am from Texas. 
And Wimberley, Texas, is in my district. And you are very 
familiar with that. So as you can imagine, we are feeling for 
our fellow Texans as they are experiencing historic flooding, 
and this hearing to me is very timely.
    As you said in your testimony today, millions of Americans 
are physically and financially vulnerable to floods. A week's 
worth of flooding in my district, quite frankly, has brought 
that statement very close to home. As you probably know, the 
President just recently approved Governor Abbott's request for 
a major disaster declaration just last week; he approved it 
very quickly. The residents in Hays County, Texas, in my 25th 
district, which I represent, are beginning that process.
    Now, it goes without saying that I have a vested interest 
to make sure we get it right and that we fix the problems we 
have discussed this afternoon. I will tell you, shortly after 
this, I called your FEMA office and talked to the regional 
director. He was very much on top of the job. He got with us. 
They were on the ground, and I appreciated that very much and I 
have made that public.
    So I guess I would say my first question to you is, you 
mentioned, of course, that we have 142,000 claims which you are 
reopening. And you said that is approximately $40 million, is 
that right?
    Mr. Kieserman. That will be the cost to do the work. That 
is not necessarily the outflows of policy--
    Mr. Williams. Okay. Now, what does that do to your budget?
    Mr. Kieserman. There is no impact, Congressman, on our 
borrowing authority or our cash on hand. We have sufficient 
funds available on hand without having to borrow additional 
funds.
    Mr. Williams. But Sandy did strain your resources?
    Mr. Kieserman. Sandy did constrain our resources, yes.
    Mr. Williams. All right. So when I go back home to Texas, 
you are going to have plenty of room to help my Texans get done 
what needs to be done, right?
    Mr. Kieserman. We have sufficient funding available right 
now to deal with the disasters in Texas and Oklahoma and 
elsewhere. And I would also just point out that we did extend 
the period to file proof of loss by an additional 6 months to 
give people space and time to do that. We know it is going to 
take them time to get back into their homes, and it is going to 
take time to find all the damage. So they will have now up to 
240 days in order to file their proof of loss, and that should 
help.
    Mr. Williams. All right. Next question is, you have talked 
about reforms and the reforms you are doing now to make things 
better. And you talked in pretty good depth about that. Is it 
safe to say that all the reforms you talked about that you are 
making, that you talked about making today, will my 
constituents in Texas begin to see it tomorrow?
    Mr. Kieserman. I think that your constituents in Texas can 
count on the fact that we are hyper attentive to what is 
happening in Texas and Oklahoma and flooding this year because 
of what we have seen happen in Sandy; Mr. Wright and I and the 
leaders in our team are hyper attentive to this. That is why we 
are going to establish a hotline, that is why we have extended 
the proof of loss, and that is why we are going to be watching 
very closely on the ground from Washington in working with our 
Write Your Owns to reduce any sort of risk that this could 
happen again.
    Mr. Williams. So we have learned from the past, and we can 
be reassured that what we are talking about today won't happen 
again in Texas and Oklahoma?
    Mr. Kieserman. We are going to take every step we can, 
Congressman, to prevent that from happening.
    Mr. Williams. Because we have already had 5,000 claims in a 
short period of time, and you know there are going to be a lot 
more. So we really want to get it right.
    Mr. Kieserman. We do.
    Mr. Williams. I come from a retail background, and I think 
it is important that you--and I told your guys this when we 
talked last week that, please understand, these people are 
customers. They are customers. And they need to be treated as 
such. And they deserve good, they deserve on-time service with 
very few hassles. And I hope all of your folks will understand 
that.
    Thank retail and give them the opportunity to realize the 
benefits that they have coming to them and begin to get their 
lives back. Texans are resilient people and they just kind of 
need to know the rules. But I hope we have remembered from what 
has happened so we won't see this happen again. But I do thank 
you for your service, and I will look forward to working with 
your agency as we move forward to fix our needs back home in 
Texas.
    Mr. Chairman, I yield back.
    Chairman Luetkemeyer. The gentleman yields back.
    With that, we recognize the gentleman from Kentucky, Mr. 
Barr, for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman. And Mr. Kieserman, thank 
you for your testimony here today, and thank you for your 
forthrightness in acknowledging that there is a problem with 
the National Flood Insurance Program. I, too, saw the 60 
Minutes spot with your interview and with the really sad and 
tragic story of the victims of the mismanagement with the 
program. And obviously, the stories that were told in that 60 
Minutes spot and some of the testimony that you are offering 
here today demonstrate that the program does indeed need 
reform, there are governance issues, and there is a lost 
capacity to monitor some of these insurance carriers and the 
engineering firms that made some egregious, egregious errors.
    In that interview that you had with 60 Minutes, one of the 
points you made was that you had seen evidence of fraudulent 
reports and criminal activity by unlicensed engineers in August 
of 2013. I know you came in after that, but you saw that as 
soon as you came into your position of authority with the 
agency and that was why you referred the matter to the 
Inspector General.
    My question to you is, when do you believe evidence was 
available to your predecessors at FEMA that there was a 
problem? You indicated that there were signals in August, in 
late 2013. When were your predecessors made aware of the 
signals, or even worse, the actual evidence of misconduct by 
partnering insurance companies and engineering firms?
    Mr. Kieserman. Congressman, I think members of the staff 
had information in their possession by October, November of 
2013, so one year after Sandy struck, that would have led a 
reasonable person to conclude that there was at a minimum, 
irregular activity going on that warranted investigation. We 
did not act on that. I don't know that my predecessors were 
ever briefed on that. In fact, I don't think they were.
    It is one of the reasons that I think I need to reform that 
particular part of the program, because it is often the first 
time we touch the customer, that we have customer contact, and 
we have to get it right. And we didn't get it right.
    Mr. Barr. Okay. And the Inspector General, have there been 
findings issued yet?
    Mr. Kieserman. The Inspector General received a referral 
from FEMA after a Senate hearing in July of 2014. The criminal 
side declined to investigate. The programmatic audit side 
opened up an audit investigation. In defense of anyone who 
declined to investigate, I have to tell you, I don't think that 
all the pieces were clear. I think there was a high level of 
noise to the signal. There were lots of other things going on 
in the system until plaintiffs' attorneys really began to 
marshal the facts and do their jobs in court in New York and 
New Jersey.
    And frankly, when the plaintiffs' attorneys did that, it 
became very evident what was happening. And so we ended up 
relying on the courts and plaintiffs' attorneys and judges.
    Mr. Barr. What is the current liability of the NFIP? Is it 
$23 billion?
    Mr. Kieserman. It is $23 billion currently in actuarial 
debt.
    Mr. Barr. So there is enormous pressure on this, as you 
concede, an actuarially unsound and designed to be actuarially 
unsound Flood Insurance Program.
    Mr. Kieserman. Right.
    Mr. Barr. But there is enormous pressure to deal with that 
liability at the agency. So my question to you is, is there any 
evidence, to your knowledge, that FEMA is responsible for 
pressuring the engineering firms or the insurance companies to 
cram down these claims?
    Mr. Kieserman. I haven't seen a shred of evidence of that, 
Congressman. Not a shred.
    Mr. Barr. Okay. Part of the problem, and by the way, the 
seventh vote that I cast as a Member of Congress in January of 
2013 was whether or not we were going to raise the borrowing 
limit for the National Flood Insurance Program in the aftermath 
of Superstorm Sandy.
    And one of the problems that many of us had with simply 
raising the borrowing limit without reforms was that you create 
this pressure at the agency to not pay claims that people are 
entitled to. Perhaps we need to reform the program so that 
there is a little bit of better pricing involved so that you 
don't have this pressure at the agency to deal with that issue.
    My question to you is, why would you not entertain 
reforming the program so that there would be better pricing of 
the risk?
    Mr. Kieserman. I think it is a balance between properly 
pricing the risk and making sure that it is affordable, because 
if people can't buy it and they can't get policies, then we 
have no revenue to pay claims. So, it is a little bit of a 
catch-22.
    I think in the end, it really does come down to fully 
understanding the risk, which is the importance of mapping and 
the other programs to do risk identification, and then figuring 
out how do you get to a price that people can afford that 
properly balances the risk. This goes to the layers that 
private insurance can provide.
    Mr. Barr. My time has expired, but if you are not properly 
pricing the risk, you are subsidizing risky building.
    Mr. Kieserman. I would say that you are not properly 
pricing the risk. You are, in one case, dealing with people 
being able to afford it but then you have to look at the 
balance of whether you are subsidizing other risk. I agree with 
you. It is a public policy balance issue.
    Mr. Barr. My time has expired. I yield back.
    Chairman Luetkemeyer. The time of the gentleman has 
expired.
    With that, we recognize the gentleman from Ohio, Mr. 
Stivers, for 5 minutes.
    Mr. Stivers. Thank you very much.
    I certainly appreciate you being here, Mr. Kieserman, and I 
know your days are kind of numbered at this point, and I 
appreciate your forthrightness, especially with regard to the 
third point in your policy about reforms. I appreciated your 
forthrightness there and in answering Mr. Ross' questions from 
Florida about the status of the program, and clearly it is not 
actuarially sound.
    There is clear, adverse selection in flood insurance 
because the only people who buy flood insurance are people who 
are guaranteed to file a claim at some point. Instead of 
spreading risk around, we spread the plate around, and there is 
never enough money and the taxpayers end up subsidizing. And 
that is always going to be somewhat the nature of the program; 
I understand that.
    But I want to focus on your reform efforts, because I think 
there is a way to be more efficient, to actually manage the 
risk better. And I know you have been working on it for a 
while. I am curious if Mr. Wright has been engaged in these 
efforts, because frankly, some of the things you talked about, 
about reinsurance, and making sure that the Flood Insurance 
Program has some private sector engagement on pricing that I 
think will help everybody understand what the true risk is and 
help as you do that delicate balance of pricing to ensure 
accessibility, while also making sure that we charge as close 
to an appropriate amount as we can.
    So I guess my question is, has Mr. Wright been involved?
    Mr. Kieserman. Congressman, Mr. Wright has been involved, 
and I have to say that in addition to being my colleague and my 
friend, he has one of the highest degrees of business acumen in 
a government executive that I have ever encountered. He has 
been the Deputy Associate Administrator for Mitigation now for 
several years, and he has been involved in the National Flood 
Insurance Program in all of its aspects for several years.
    He also has at his disposal now a nearly 100-person task 
force, about a quarter of which is focused on reform, and that 
is all they come to work to do every day is to analyze this 
program and develop reform. Mr. Wright is probably the most 
capable person to drive this forward. He is far more capable in 
that area than I am. All I do is fix things that are broken. I 
am not very good at long term.
    Mr. Stivers. This thing is broken and needs to be fixed.
    Mr. Kieserman. And he will do that.
    Mr. Stivers. I wish you would be around a little bit 
longer.
    But the other concern I have is, if we don't step up our 
premiums quickly enough, it does not give incentives for the 
State and local governments to change their building standards 
and where they build. Because if we heavily subsidize through 
taxpayer subsidies, coastal properties or risky properties, I 
should say, because they are not all coastal, where we 
shouldn't be building, then we don't fix the real problem.
    The real problem is we have some things built in high-risk 
areas that frankly shouldn't be built. And I will single out 
one State in one area; Ward 9 in New Orleans probably should 
not have been rebuilt.
    Mr. Kieserman. Congressman, Mr. Wright has been 
instrumental in leading the effort to develop a Federal risk 
management standard for flooding, which has been implemented 
through Executive Order. It will affect Federal investment as 
opposed to State and local-only investment. But that is 
leadership by example, and it is a way to ensure that we are 
putting in money in ways that mitigate risk and don't have us 
repeating this over and over again.
    Mr. Stivers. Which is helpful, and it is a start of what we 
need to do. But if we raise the premium to a number closer to 
the actuarial standard and what the real cost of the risk is, 
then it would discourage people from rebuilding in some areas 
where they shouldn't rebuild. And I would like to encourage 
you, while I don't want to kick people out of their ancestral 
home, if their ancestral home is 3 feet below sea level and 
there is an ocean right there, that is a problem.
    Mr. Kieserman. I appreciate that, Congressman.
    Mr. Stivers. So if we can work with you on any of the 
legislative changes, Mr. Wright, that need to be made--
    Mr. Kieserman. Absolutely.
    Mr. Stivers. And I know a lot of things that you need to do 
will require legislative language. It does not require 
legislative language to train your adjusters and agents better 
or to align your management at litigation better, which I think 
can help the process along. It also probably does not--I don't 
think it requires legislation to require certification of your 
engineering firms that are filing reports, some of whom might 
have done so fraudulently.
    So I think there are a lot of things you have latitude to 
do to fix your processes, but to the extent that you need any 
legislation, my staff and I would love to help. I know there 
are other Members who are taking leadership roles already, but 
I am happy to help any way I can. And I just wanted to say that 
really for Mr. Wright's benefit.
    And I wanted to tell you, Mr. Kieserman, good luck at the 
American Red Cross. I am sure you will do a great job there. 
That is a very important organization. And as a soldier who 
gets to see some of their notifications and what they do with 
blood and other things, I really appreciate what they do there 
as well as the natural disaster piece. So thank you for that.
    And my time is up.
    Mr. Kieserman. Thank you, Congressman.
    Mr. Stivers. And I yield back.
    Chairman Luetkemeyer. The gentleman yields back.
    We will now go to the gentleman from New Mexico, Mr. 
Pearce, for 5 minutes.
    Mr. Pearce. Thank you, Mr. Chairman.
     Mr. Kieserman, I appreciate your testimony, especially 
with the straightforward approach you take to explaining the 
problems that the agency faces.
    As I was listening to Mr. Ross describing that Florida is 
surrounded on three sides by water, I realized that New Mexico 
is surrounded by water too. We have about 2,000 miles of buffer 
on the east side, and about 1,000 miles of buffer on the west 
side, Central America, Mexico, and Texas to the south of us, 
but other than that, we are surrounded by water.
    The problem that I have is that as we found the problems of 
Katrina, then we begin to raise the rates on people in New 
Mexico and so we went first to, I think, from a 250-year event 
to a 500-year and a 1,000-year event. Who makes the choice to 
do that?
    Mr. Kieserman. The rate structure is established in part in 
legislation and then in part by the actuarial structure of the 
program. So particularly after the legislation of the last 
several years, there is a mandatory rate structure that we have 
to follow.
    Mr. Pearce. But who decides the flood event rather than--
    Mr. Kieserman. I'm sorry?
    Mr. Pearce. Who decides the flood event rather than 
increased premiums?
    Mr. Kieserman. That is a process of mapping, and the way 
that we assess risk is by creating flood maps. And FEMA is 
responsible for the creation of flood maps with the 
participation, the very active participation of communities to 
help them understand their risk.
    Mr. Pearce. Okay. But then the agency--is it the National 
Flood Insurance Program that eventually decides that they are 
going to go with those flood maps or not?
    Mr. Kieserman. Yes, that is correct. And the community is a 
part of that as well.
    Mr. Pearce. Just be aware that I have a constituent who 
lives 7,000 feet above main sea level on a mountain, 3,000 feet 
above the little stream that is about as big as the pencil here 
running down, way down there, and he has to pay flood insurance 
because he is in the 1,000-year event level.
    So we are charging people who live on the top of a mountain 
in New Mexico, where the last time it rained was during that 
NOAA event, so we are charging them so that the people on the 
coast can rebuild houses that have been destroyed before at 
less-than-market value. And that is the problem. The average 
wage in our district is about $31,000, so we are taking from 
people making $31,000 a year in order to subsidize people with 
oceanfront property and that is a problem. And I don't think 
that it is going to change, because I think your agency is, 
frankly, going to do the same thing regardless of if you are 
there or not.
    I was interested in your answers to Mr. Williams. You said 
you are going to watch very closely to reduce the risk in 
Texas. Does that mean you are going to audit the vendor? You 
are going to review the engineering reports? What? What are you 
going to do differently?
    Mr. Kieserman. We are going to put an audit regime into 
place in near realtime so that we--and, of course, you need to 
understand the flow of events. Everything doesn't happen on day 
one. Many people won't even file a claim for another 3 or 4 or 
5 months, and that is one of the reasons why we have extended 
the period for proof of loss.
    So this program has a habit of sometimes using the phrase--
it is probably inappropriate here, and my staff is probably 
cringing--it is a little bit of the pig in the belly of the 
snake, right. And it takes a while for these pieces to move 
through and then suddenly it pops up later on and it is all but 
forgotten in the media, but then we have problems.
    I want to get in there early now. I want to take a look at 
what is going on. I want to make sure we are monitoring the 
flow of claims, monitoring the process of engineering, do 
secret shopper and check with people and see how that is 
working and create this hotline. I think that combination of 
audit interventions will help us significantly reduce the risk 
of any improper conduct or wrongdoing, along with alerting our 
Write Your Owns, which we have done through a bulletin to what 
our expectations are with respect to adjustment of claims and 
engineering.
    Mr. Pearce. You had mentioned then in answer to a previous 
question that one of the problems in Sandy was--and then you 
listed a series of problems with the engineers, and one was 
that they weren't licensed in the State in which they were 
operating. Now, that may be a technicality, but have you 
figured out that those people who weren't registered were a 
source of the problem?
    Because what I typically see as bureaucracies find a reason 
and just something to say, okay, okay, we have found the reason 
and let's go on. I suspect that if they are licensed engineers, 
if they weren't corrupt, that their stuff may have been 
somewhat correct. It may not have been perfect. Did you drill 
down on that at all?
    Mr. Kieserman. We have drilled down on that some, and I can 
tell you that at least in the case of one of the engineering 
firms that had a substantial part of the business, the 
individual who changed the report and then affixed the seal--
    Mr. Pearce. That is not a matter of being registered in 
another State. That is a matter of corruption.
    Mr. Kieserman. That is certainly a matter of not being 
licensed at all. I agree.
    Mr. Pearce. Have you gone back in the history of any of 
these people who have had problems, submitted previous reports 
5, 10, 15 years ago? Are you checking that far back on the 
people with problems?
    Mr. Kieserman. We are not checking that far back on people 
with problems. And I don't know whether the States' attorneys 
general are checking that far back on people with problems. One 
of the things we are doing is looking at people who had their 
claims adjusted with Irene or Lee just a year before Sandy to 
see whether adjusters or engineers came in at that point and 
identified preexisting damage. If there was no preexisting 
damage a year before, it is a little difficult to believe there 
was some new long-term preexisting damage that was discovered.
    Mr. Pearce. Yes, at the end of the day, people have to 
implement changes, and that I am a little bit worried about. 
But I do appreciate your approach, and I appreciate your 
service.
    Thank you, Mr. Chairman.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we will recognize the gentleman from New York, 
Mr. Meeks, for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman.
    Thank you, Mr. Kieserman. And I apologize; I was running 
around. It has been a busy day. But I represent the Fifth 
Congressional District in New York, which is basically the 
Rockaways in Jamaica Bay which was really devastated by 
Hurricane Sandy. And so I want to make sure I have the 
procedures and everything down because last month, a number of 
individuals in my constituency began to receive mail from the 
postal service informing them about the review process dealing 
with some of the claims of underpayment and fraud.
    So first, I just want to make sure that I am absolutely 
clear on what the process is. As I understand it, the 
homeowners who feel that they were, that they under settled, 
will get a 1-800 number that they will call to request a 
review, and a caseworker, I think, will be assigned to them to 
complete the file and that takes 30 to 45 days. And then it 
will be sent to an adjuster, who will then contact the 
policyholder within the next 7 to 10 days, and that puts us at 
55 to 60 days out when there should be some kind of 
correspondence there, I guess.
    And then a final decision with payment will be made in the 
next 7 to 21 days after the adjuster submits findings and 
determines the constituent is either eligible for additional 
payment or out of riders. Is that correct?
    Mr. Kieserman. Congressman, that is mostly correct, with 
just a couple of adjustments, no pun intended, if you would. 
The caseworker who will be assigned will be an NFIP-certified 
adjuster who has been specially trained by our program. So the 
caseworker is the adjuster. There is not another layer in 
there.
    In terms of how long it will take to process claims, cycle 
time will depend on input. So right now, we are receiving about 
300 to 400 calls and emails a day, that is not just the 1-866 
number people can call, that is on the Web page. They can also 
go online and they can register online and then we call them 
and collect the information and ensure they are eligible.
    No one should be in the process for more than 90 days. Our 
target will be to have a significantly lower turnaround time, 
but it will depend on cycle time and complexity of the issue. 
But otherwise, I think you got that pretty much right, sir.
    Mr. Meeks. And there are already resources, because 
sometimes you get these things set aside because it could be 
over 142,000 letters, from my understanding, in potential 
cases. So have resources already been set aside so that we can 
make those timeframes and have the appropriate individuals who 
are going to do the inspections--are those resources all there?
    Mr. Kieserman. Yes, Congressman. So 95,000 letters have 
gone out as of today. We will send out another 40,000 or so out 
over the next 2 weeks. By June 11th, all the letters will be 
out. People don't need to wait for their letters. They can call 
now or they can email now if they had a Sandy claim. We have 
600 human service specialists--these are people who answer the 
phone and do intake--fully trained and ready to do this. I have 
gotten some very positive feedback from your colleagues about 
your constituents' interactions with them. And I have gone back 
to them and told them I want them to keep all that up.
    We have 140 adjusters on staff. And yesterday or today we 
are awarding a contract for neutrals, because one of the things 
you didn't mention is that if an insured is not satisfied with 
what their adjuster caseworker has developed, they can, in 
fact, get the services of the complete third party neutral that 
we will provide at our cost to really make a final decision on 
this one.
    Mr. Meeks. Good point. I meant to ask that question with 
regard to neutrals.
    Mr. Kieserman. Yes, sir.
    Mr. Meeks. But let me follow up then more about the appeals 
process. Are there mechanisms in place or being developed to 
identify genuine claims and mitigate prior to legislation? Is 
that occurring?
    Mr. Kieserman. One of our top priorities, and where we are 
working right now, is to overhaul the appeals process. And I 
would say generally, it is the entire NFIP dispute resolution 
process; it is not just appeals. It is how people are treated 
in the field with an adjuster. It is how people are treated 
when they call their insurance company. It is the entire 
dispute resolution network that is there. We are moving to 
overhaul all that.
    The FEMA appeals network, though, will be appointing a new 
lead here in the next few weeks, and we will be contracting to 
bring people into help us do business process improvement with 
that now.
    Mr. Meeks. So those individuals will sit within the FEMA 
organizational structure?
    Mr. Kieserman. They do.
    Mr. Meeks. Okay. And they are decided--well, let me, in the 
past, when the victims filed appeals in the past, could you 
tell me, do you have any idea what the success rates were?
    Mr. Kieserman. 15 percent, Congressman. If you were a 
survivor, the average rate of appeal is about 3 to 5 percent of 
all claims filed are appealed. And of those, only 15 percent do 
we generally recommend to the Write Your Owns that they come up 
with a different answer. That does not necessarily indicate to 
me that the process works well. It indicates to me that people 
may be fatigued by the process and they may be worn down by the 
process.
    I don't think we have any internal or intrinsic view to 
though know whether that means we have a well working process 
or not. What I saw in the aftermath of Sandy with whether 
appeals detected wrongdoing or not concerned me enough that I 
wanted to overhaul the program, and the Administrator has 
directed me to do so.
    Mr. Meeks. Thank you very much. I am out of time, but I 
want to thank you for your testimony and wish you success.
    Mr. Kieserman. Thank you, Congressman.
    Chairman Luetkemeyer. The gentleman's time has expired.
    We would like to thank Mr. Kieserman for being here today. 
Thank you for your testimony. You have been very frank, very 
forthcoming, and we certainly appreciate it.
    You mentioned several times, reforms that you would like to 
see. I know I asked the question about it. You have also talked 
about a reform task force that you put together. If we can get 
you to give us some information on the task force, the parties 
that are involved, what you are trying to do with it, that 
would be fantastic.
    I understand that either yourself or some of your staff are 
going to sit down with the committee staff shortly, in the next 
week or two here, and discuss some reforms. We certainly want 
to continue to look forward to that opportunity.
    And also, if you have other ideas, to be willing to put 
them into a letter form or to inform your staff when they meet 
with our committee staff to see what your suggestions would be. 
Sometimes you need to be talking with the people who are in the 
eye of the storm to figure out what is going on and what we 
need to actually do to change things.
    But we certainly appreciate all of that. I wish you well--
    Mr. Kieserman. Thank you.
    Chairman Luetkemeyer. --in your new occupation. I know Mr. 
Wright has an awfully big set of shoes to fill. I wish him well 
and look forward to working with him in the future.
    I know one of the issues that was of concern to me that was 
brought up today was the mapping. I, like Mr. Pearce, have 
homes in my district that are sitting literally hundreds of 
feet above a floodplain and yet they are in a floodplain. So we 
have some work to do there, and we will look forward to working 
with you on that.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    And with that, this hearing is adjourned.
    [Whereupon, at 3:59 p.m., the hearing was adjourned.]

                            A P P E N D I X



                              June 2, 2015
                              
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