Flood Insurance: Emerging Opportunity to Better Measure Certain  
Results of the National Flood Insurance Program (16-MAY-01,	 
GAO-01-736T).							 
								 
This testimony discusses GAO's preliminary results of its ongoing
review of the National Flood Insurance Program (NFIP),		 
administered by the Federal Emergency Management Administration's
(FEMA) Federal Insurance Administration (FIA) and Mitigation	 
Directorate. This program, which includes building standards	 
aimed at minimizing flood losses, is a major component of the	 
federal government's efforts to provide flood-related assistance.
GAO found that FEMA has a number of performance goals aimed at	 
improving the results of the NFIP, including increasing the	 
number of insurance policies in force. While these goals provide 
valuable insights into how well the NFIP's mission of reducing	 
flood-related losses is being carried out, they do not assess the
degree to which the most vulnerable residents--those living in	 
flood-prone areas--participate in the program. Capturing data on 
the numbers of uninsured and insured structures in flood-prone	 
areas can provide FEMA with another indication of how effectively
the program is penetrating those areas most at risk of flooding, 
whether the financial consequences of floods in these areas are  
increasing or decreasing, and where marketing efforts can better 
be targeted.  However, before participation rates can be used to 
measure the success of NFIP, better data are needed on the total 
number of structures in flood-prone areas. While FIA tracks data 
on the number of insurance policies in these areas, data on the  
overall number of structures are incomplete and inaccurate. Some 
communities are developing more accurate data on the number of	 
structures in flood-prone areas. FEMA is also working to improve 
the quality of its data on the number of structures in		 
flood-prone areas and is participating in the development of new 
mapping technologies that could facilitate the collection of such
data. The cost of using the new technologies to gather data on	 
the number of structures is not fully known, but this expense	 
will be shared through partnerships with federal, state, and	 
local agencies. 						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-736T					        
    ACCNO:   A01008						        
  TITLE:     Flood Insurance: Emerging Opportunity to Better Measure  
             Certain Results of the National Flood Insurance Program          
     DATE:   05/16/2001 
  SUBJECT:   Data collection					 
	     Flood insurance					 
	     Geographic information systems			 
	     Performance measures				 
	     Program evaluation 				 
	     Digital Orthophoto Quadrangles			 
	     FEMA Cooperating Technical Partners		 
	     Initiative 					 
								 
	     FEMA Mitigation Directorate			 
	     FEMA National Flood Insurance Program		 

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GAO-01-736T
     
Testimony Before the Subcommittee on VA, HUD, and Independent Agencies,
Committee on Appropriations, U. S. Senate

United States General Accounting Office

GAO Hearing Held on May 16, 2001 Statement Submitted on May 15, 2001 FLOOD
INSURANCE

Emerging Opportunity to Better Measure Certain Results of the National Flood
Insurance Program

Statement for the Record by JayEtta Hecker, Director, Physical
Infrastructure Issues

GAO- 01- 736T

Page 1 GAO- 01- 736T

Mr. Chairman and Members of the Subcommittee: We are pleased to provide a
statement for the record discussing the preliminary results of our ongoing
review of the National Flood Insurance Program (NFIP). According to the
Federal Emergency Management Agency (FEMA), floods have collectively been
the most destructive natural hazard in terms of economic loss to the nation.
From fiscal year 1992 through fiscal year 1999, 20 major flooding disasters
caused over $97 billion in damages. The recent flooding in the Midwest again
demonstrated the destructive nature of this hazard to the nation.

The NFIP is administered by FEMA?s Federal Insurance Administration (FIA)
and Mitigation Directorate. This program, which includes building standards
aimed at minimizing flood losses, is a major component of the federal
government?s efforts to provide flood- related assistance. Other major
components are low- interest loans provided by the Small Business
Administration and individual and family grants provided by FEMA. As you
know, we are reviewing aspects of the NFIP at the request of this
Subcommittee and the Senate Committee on Banking, Housing, and Urban Affairs
and its Subcommittee on Economic Policy. We plan to report the results of
our assessment this fall.

Our statement today will focus on issues associated with measuring the
performance of the NFIP. Specifically, we will address (1) whether FEMA
could better evaluate the program?s results by adding to the performance
goals it currently uses a goal tied to rates of participation in the
program- the percentage of structures in flood- prone areas that are
insured; and (2) what obstacles and opportunities exist for measuring these
participation rates. 1 To meet these objectives, we reviewed FEMA reports
that provide some information on participation rates, analyzed FEMA?s
performance goals, and interviewed officials from FEMA and other federal
agencies on mapping technologies that can help determine participation
rates. This statement will also summarize other work we have under way at
FEMA.

1 Our work on the NFIP also includes reviewing the policies and procedures
that federal depository institution regulators, Government Sponsored
Enterprises, and federal lending agencies and loan guarantors have developed
to monitor and enforce lenders? compliance with the mandatory flood
insurance purchase requirement. We are also assessing whether there are any
gaps in information and responsibilities in the processes that may impede
lenders? compliance. Our report will include any recommendations or options
we can identify to improve controls over lenders? compliance.

Page 2 GAO- 01- 736T

In summary, we found the following: FEMA has a number of performance goals
aimed at improving the results of the NFIP, including increasing the number
of insurance policies in force. While these goals provide valuable insights
into how well the NFIP?s mission of reducing flood- related losses is being
carried out, they do not assess the degree to which the most vulnerable
residents- those living in flood- prone areas- participate in the program.
Capturing data on the numbers of uninsured and insured structures in flood-
prone areas can provide FEMA with another indication of how effectively the
program is penetrating those areas most at risk of flooding, whether the
financial consequences of floods in these areas are increasing or
decreasing, and where marketing efforts can better be targeted.

However, before participation rates can be used to measure the success of
the NFIP, better data are needed on the total number of structures in flood-
prone areas. While FIA tracks data on the number of insurance policies in
these areas, data on the overall number of structures are incomplete and
inaccurate. Some communities are developing more accurate data on the number
of structures in flood- prone areas. FEMA is also working to improve the
quality of its data on the number of structures in flood- prone areas and is
participating in the development of new mapping technologies that could
facilitate the collection of such data. The cost of using the new
technologies to gather data on the number of structures is not fully known,
but this expense will be shared through partnerships with federal, state,
and local agencies.

The NFIP seeks to minimize human suffering and flood- related property
losses by making flood insurance available on reasonable terms and
encouraging its purchase by people who need flood insurance protection-
particularly those living in flood- prone areas known as special flood
hazard areas (SFHA). 2 Prior to the flood insurance program?s inception,
private insurance companies generally did not offer coverage for flood
disasters because of the high risks involved, such as high- risk homeowners
being more likely to purchase flood insurance.

2 An SFHA is an area determined by FEMA to have a 1- percent or greater
chance of being flooded in any given year- these areas are also called 100-
year flood plains. Flood insurance for federally related mortgages is
required only in SFHAs located in communities that participate in the NFIP.
Background

Page 3 GAO- 01- 736T

The National Flood Insurance Act of 1968 (P. L. 90- 448) established the
program to identify SFHAs, make flood insurance available to property owners
living in communities that joined the program, 3 and encourage floodplain
management efforts to mitigate flood hazards and thereby reduce federal
expenditures on disaster assistance. In order for a community to join the
program, any structures built within an SFHA after it has been identified as
such are required to be built to the program?s building standards, which are
aimed at minimizing flood losses. FEMA estimates that its implementation of
the program?s standards for new construction is now saving about $1 billion
annually in flood damage avoided.

The 1973 Flood Disaster Protection Act (P. L. 93- 234) required flood
insurance for borrowers whose mortgages are on structures located in SFHAs
in participating communities and are originated, guaranteed, or serviced by
federal agencies or federally regulated institutions. 4 Subsequently, the
National Flood Insurance Reform Act of 1994 (P. L. 103- 325) directed
federal regulators of lending institutions to assess penalties on any
regulated lending institution found to have a pattern or practice of
violating the act. Violations include failing to require flood insurance
coverage for properties in SFHAs used to secure mortgage loans. In addition,
the act mandated that regulated lenders (1) purchase flood insurance for
borrowers who are required to have it but fail to purchase it and (2) escrow
funds for flood insurance premiums if other funds are also escrowed. The
owners of properties in SFHAs with no mortgages or properties with mortgages
held by unregulated lenders are not legally required to buy flood insurance.
Because risk levels are the same for homeowners in SFHAs regardless of
whether flood insurance is required, FEMA encourages all homeowners residing
in SFHAs to buy flood insurance.

3 A participating community is any community that voluntarily elects to
participate in the NFIP and adopts and enforces floodplain management
regulations and building codes that are consistent with the standards of the
NFIP. In exchange, NFIP flood insurance becomes available for most
residential and commercial buildings in the community. If FEMA discovers
that a participating community is not complying with the NFIP, it may
suspend that community from the program. As of May 10, 2001, there were
19,635 participating communities, 278 suspended communities, and 5
communities on probation. There were also 1, 713 communities that have been
mapped and contain floodplains, but do not participate in the program.

4 A federally regulated institution means any bank, savings and loan
association, credit union, farm credit bank, federal land bank association,
production credit association, or similar institution subject to the
supervision of a federal entity for lending regulation.

Page 4 GAO- 01- 736T

FEMA?s Mitigation Directorate maintains and updates flood insurance rate
maps (FIRM), 5 which identify the geographic boundaries of SFHAs. FIRMs are
derived from base maps, which show the basic geographic and political
boundaries of a community. Various mapping technologies are used to
establish flood elevations on FIRMs and to delineate the boundaries of
SFHAs. Base maps are generally obtained from local communities or the U. S.
Geological Survey (USGS). While flood maps should be updated as necessary to
remain accurate, approximately 63 percent of the nation?s 100, 000 flood
maps are at least 10 years old. Consequently, the Mitigation Directorate has
developed a Flood Map Modernization Plan to update the maps and convert them
to a digital format. 6 Digital mapping processes, along with other
technologies, will improve the collection of data on structures in SFHAs and
allow for the electronic distribution of these data through the Internet and
on CD- ROM.

In accordance with the Government Performance and Results Act (GPRA), 7 FEMA
has established various goals and strategies to determine the success of the
NFIP in fulfilling its mission to minimize property losses after flood
disasters and to reduce losses from future disasters. According to FEMA
officials, these goals allow the agency to monitor its progress in meeting
its performance goals and address key outcomes.

While the results achieved under these goals- increasing the number of
insurance policies in force and reducing flood- related losses- provide
valuable insights into how well the NFIP?s mission is being accomplished,
they do not gauge participation in the program by the most vulnerable
residents- those living in SFHAs. Participation rates- the percentage of
structures in SFHAs that are insured- are an effective way to measure the
results of the NFIP because they are objective, measurable, and

5 A FIRM is the official map of a community on which FEMA has delineated
both the SFHAs and the risk premium zones applicable to the community. FIRMs
are used for both insurance and floodplain management purposes.

6 In our report Disaster Assistance: Opportunities to Improve Cost-
Effectiveness Determinations for Mitigation Grants (GAO/ RCED- 99- 236, Aug.
4, 1999), we pointed out that many of FEMA?s maps are out of date or
incomplete and that analysts conducting costbenefit determinations must rely
on evidence from local officials or residents to establish the frequency and
severity of a flood. Our report contained a recommendation aimed at revising
flood hazard map information.

7 GPRA seeks to shift the focus of government decision- making and
accountability from activities to results. Emerging Opportunity

to Better Measure the NFIP?s Results

Page 5 GAO- 01- 736T

quantifiable. By using participation rates to measure performance, FEMA
could assess other program results, such as the extent to which the most
vulnerable residents are participating in the program; determine whether the
financial risk to the government from floods is increasing or decreasing;
and focus marketing and compliance activities to maximize program
participation in SFHAs.

Like other federal agencies, FEMA is mandated under GPRA to develop annual
performance plans that link the agency?s long- term strategic planning to
its daily activities. FEMA established three performance goals that pertain
to the flood insurance program. These goals include reducing flood losses,
increasing the number of flood insurance policies sold, and improving the
program?s financial status. These endeavors are part of FEMA?s mission to
protect lives and reduce losses from future disasters through insurance and
mitigation efforts.

Table 1 describes FEMA?s fiscal year 2002 Performance Plan goals for the
NFIP and the strategies by which the agency intends to accomplish these
goals. Performance Goals Strive

to Measure Success in Achieving FEMA?s Mission

Page 6 GAO- 01- 736T

Table 1: FEMA?s Fiscal Year 2002 Performance Plan Performance goal
Strategies

Flood- Loss Reduction- Collect, validate, and refine building and flood-
loss data. Confirm that the reduction in estimated losses from NFIP
activities exceeds $1 billion.

 Apply insurance coverage and premium rates as an economic incentive or
disincentive to reinforce mitigation through building requirements that
reflect sound floodplain management.

 Conduct a floodplain management program including technical assistance and
monitoring.

 Conduct a comprehensive review of NFIP to measure accomplishments and
increase effectiveness and efficiency. Flood Insurance Policy Growth-
Increase the number of NFIP policies in force by 5 percent.

 Conduct comprehensive marketing and advertising campaigns to increase
awareness and promote policy sales.

 Coordinate mandatory flood insurance purchase requirements with regulatory
and lending institutions.

 Continue outreach efforts to create partners in the real estate community.

 Develop a market- segmented approach to increasing policies in force that
balances the risks incurred by growth.

 Promote changes to program processes that simplify the sale and purchase
of insurance.

 Continue promotion of flood mitigation. Repetitive Loss, Subsidy
Reduction, and Operations Modernization- Improve NFIP?s combined loss- and-
expense ratio a by 1 percent.

 Identify and target repetitive- loss properties for select insurance and
mitigation actions.

 Develop and implement proposals to reduce the subsidy provided to certain
properties.

 Continue implementation of the business improvement process begun at the
end of fiscal year 1999. a NFIP?s combined loss- and- expense ratio is the
sum of claims paid plus expenses divided by the total premium income. A
ratio of less than 1 means a net profit on insurance operations. A ratio
greater than 1 represents a net loss.

Source: FEMA, Final Annual Performance Plan, Fiscal Year 2002.

In developing annual performance goals, agencies should focus on the results
they expect their programs to achieve- the differences the programs will
make in people?s lives. The three NFIP performance goals address the
program?s objectives of minimizing human suffering and property losses
caused by floods. However, opportunities are developing for FEMA to obtain
valuable information about the program?s success through analysis of the
rate of participation for those communities involved in the program. The
participation rate is obtained by dividing the number of properties located
in SFHAs with flood insurance by the total number of properties in these
SFHAs. This information would allow FEMA to assess whether the program is
penetrating those areas most at risk of flooding, determine whether the
financial risks to the government in these areas are increasing or
decreasing, and better target marketing efforts to increase participation.
In other words, through analysis of participation rates, FEMA would be
better able to maximize the effectiveness and efficiency of the program in
protecting lives and reducing financial losses. Information on

Participation Rates Could Better Measure Program Results

Page 7 GAO- 01- 736T

FEMA currently collects data on the number of active flood insurance
policies. Its goal is to increase the number of NFIP policies in force by 5
percent annually. While FEMA tracks the growth in the number of active
policies, its estimates of the number of households located in SFHAs without
flood insurance coverage vary.

A DeKalb County, Georgia, study illustrates why participation- rate data can
be a more useful measure of the program?s success than a tally of policies
in force. According to the study, the number of policies in force in DeKalb
County grew from the previous year by 13 percent in 1998 and by 17 percent
in 1999 but fell to 3 percent in 2000. In fiscal year 1999, DeKalb County
officials conducted a study of NFIP participation. This study was initiated
to provide information about flood hazards, prevention, and mitigation.
Local officials made flood- zone determinations on every structure in the
county using FIRMs, tax maps, and limited geographic information system
technology. This effort resulted in the creation of an electronic database
of the addresses of all structures in the SFHAs. According to the data
collected, there were 17,078 buildings in the SFHAs, of which 3,145, or 18
percent, had flood insurance. Thus, while an analysis of the number of
policies in force showed significant growth in 1998 and 1999, these data did
not capture the fact that fewer than 20 percent of the homeowners in DeKalb
County?s SFHAs had flood insurance.

FEMA?s policy growth target also does not take into account whether the
policy growth is greater or less than the population change in DeKalb
County?s SFHAs. For example, a 5- percent increase in the number of policies
at a time when the SFHA?s population is increasing by 20 percent may not
represent program success for DeKalb County or any other community
participating in the NFIP. Nor does the policy growth target take into
account changes that occur when flood maps are updated, which could result
in the addition of some structures to an SFHA. Such information is important
for communities like DeKalb County, where new maps took effect this month.

Knowledge of DeKalb County?s participation rate would also help FEMA better
market its flood insurance program there. As noted in table 1, marketing and
educational outreach efforts are two of FEMA?s strategies to increase the
number of policies in force. A 5- percent increase in the number of policies
might lead to the erroneous conclusion that DeKalb County did not need
additional marketing or outreach campaigns to increase public awareness of
flood insurance. A participation rate of 18 percent, however, might indicate
that, among other things, additional

Page 8 GAO- 01- 736T

marketing and educational outreach was necessary for DeKalb County
residents.

Increasing the share of structures in SFHAs with flood insurance would
provide added income to the NFIP?s insurance fund and decrease the financial
burden that flooding places on the federal government and the citizens who
are victims of floods when uninsured structures suffer flood damage and may
qualify for other forms of federal disaster relief. Moreover, increased
participation would provide a broader base of policyholders so that the
primary objective of insurance- the pooling of risk- would be more fully
realized. FIA officials agree that program participation rates are a useful
measure that can provide insights for measuring the program?s success,
including the effectiveness of marketing.

The data currently available to determine flood insurance participation
rates within SFHAs are not always accurate or complete. While FIA maintains
data on the number of flood insurance policies, the information it has on
the total number of structures within SFHAs is poor, according to FIA?s
Acting Administrator. FIA acknowledges weaknesses in its estimates of the
total number of structures within SFHAs nationwide and is taking steps to
obtain more accurate data. New technologies are also becoming available that
may be used to estimate the number of structures within floodplains, thereby
increasing the reliability of the data needed to determine participation
rates. Similarly, local communities are increasingly using these
technologies to obtain a more reliable count of the number of structures
within SFHAs. While the cost of obtaining more reliable data is not fully
known, FEMA is engaging in partnerships to test new technologies that will
allow it to share the costs with local communities and other federal
agencies.

Two numbers are needed to determine participation rates in the NFIP- the
number of insured structures and the total number of structures located
within SFHAs. When flood insurance policies are sold, private insurance
companies that have agreements with FIA to sell NFIP policies collect
information on the insured structure, such as whether it is located within
an SFHA, its address, and the name of the mortgage lender. They report this
information to FIA, which maintains a database on the number of flood
insurance policies in force including the number in SFHAs.

FEMA also maintains a database containing estimates of the number of
structures within SFHAs. However, FIA?s Acting Administrator Available

Participation- Rate Data Not Always Accurate, But Technology Promises
Improvement

Key Data Needed to Determine Participation Rates Are Incomplete and
Inaccurate

Page 9 GAO- 01- 736T

acknowledges that the data on both the national and local community levels
are of varying quality. FEMA has been unable to identify one definitive
source of information on the number of structures within SFHAs but is taking
steps to obtain more reliable information. 8

FEMA collects data for its Biennial Report on the number of structures
within SFHAs from local communities participating in the NFIP. Every 2
years, participating communities report on, among other things, the number
of structures within SFHAs as well as within the entire community. However,
communities do not always report or provide accurate information. According
to a Mitigation Directorate official, about 10 percent of the communities do
not report any information. Consequently, older data on the number of
structures in these communities are used. Moreover, the communities that do
report such information do not always update or report accurate data, since
they use different ways to determine the number of structures within SFHAs.
For example, some communities have submitted reports showing no increase in
the number of structures, but significant increases in population. In other
cases, communities reported more structures within the SFHA than within the
entire community. According to this official, smaller rural communities may
rely on local officials to use their personal knowledge or conduct drive-
bys to estimate the number of structures within the SFHA. In contrast, large
urban areas typically use technologies such as geographic information
systems 9 (GIS) to estimate the number of structures within the SFHA.

FIA officials also told us they have information on the number of structures
in SFHAs from other databases, but the accuracy of these data is also low.
For example, FEMA has a database that estimates the number of structures in
SFHAs nationally at six to eight million. However, FIA officials told us
that these data are based on the assumption that there is a

8 FEMA is developing a Flood Module as part of its HAZUS natural hazard loss
estimation methodology, which will be available in late 2002. Among other
things, the model will be able to provide estimates of numbers of structures
in flood hazard areas that will probably be more accurate than the data
currently available. This information will allow FEMA to develop a more
accurate estimate of market penetration at the national level and possibly
at the state and community level.

9 A geographic information system is a network of computers, software, and
data that automate various features of a geographic area for mapping.
Geographically referenced data are represented as different layers in a GIS
system, where each layer holds data about a particular feature. Each feature
is then linked to a position on the graphical image of a map.

Page 10 GAO- 01- 736T

uniform distribution of structures in SFHAs. Other agencies, such as the U.
S. Bureau of the Census, maintain data on street names, addresses, and
locations, but their data are not in a format that is useful for determining
the number of structures in SFHAs.

Similarly, data on the total number of structures cannot be captured from
FIRMs, which FEMA currently uses to identify SFHAs, because FEMA?s
Mitigation Directorate does not include data on structures on these maps.
Existing FIRMs identify only the boundaries of SFHAs, streams, and selected
roads. Furthermore, FEMA?s Mitigation Directorate does not use FIRMs to
identify structures because (1) FEMA?s regulations on floodplain mapping do
not require the depiction of structures on FIRMs; (2) the map scales used
for FIRMs are too small to legibly show structures, and enlarging the scales
would be cost prohibitive; and (3) the information available on the location
of structures is inconsistent.

Four studies conducted between 1997 and 2000 that were designed to examine
compliance with the mandatory purchase of flood insurance provide some
information on participation rates within SFHAs. One study was conducted by
FEMA?s Inspector General (IG), one was sponsored by FEMA, and private
companies conducted the remaining two. Each of the studies was limited to a
few communities; none produced nationally representative results or included
all of the structures in the appropriate SFHAs in their analysis. See table
2 for a synopsis of each of these four studies.

Page 11 GAO- 01- 736T

Table 2: Studies on NFIP Participation Study Scope Methodology Findings

FEMA IG, August 2000 Residences built in 16 communities in 10 states (AL,
DE, FL, KY, LA, MD, MO, NC, NE, and NJ) after the National Flood Insurance
Reform Act of 1994.

Screened addresses through the FIA policy database; determined whether there
was a lien with a regulated lender or an exemption from the insurance
requirement.

30 percent of homes sampled did not have flood insurance; 10 percent of
homes sampled should have had flood insurance but did not. Geotrac, 1997
Grand Forks, ND properties totally

within SFHA and with post- 1994 Reform Act mortgages.

Screened addresses through the FIA policy database and local property
records system.

28 percent of homes sampled did not have flood insurance. FEMA Post-
Disaster Compliance Study, 1999 11 counties in Vermont following

two presidentially declared flood disasters.

Identified disaster assistance applicants, determined which lived in a local
SFHA, and determined which applicants had flood insurance. Assessed whether
those without flood insurance had a mortgage from a regulated lender.

84 percent of homes sampled did not have flood insurance; at least 45
percent of homes sampled should have had flood insurance.

Strategic Advocacy Group, 1999 2 counties in Kentucky following

presidentially declared flood disasters.

Identified mortgaged parcels of land in SFHAs; compared these to FIA?s
policy database. Analyzed mortgages made before and after the Reform Act.

70 percent of the sample of homes mortgaged prior to the 1994 Reform Act,
which required lenders to ensure the purchase of flood insurance when
required, did not have flood insurance; 48 percent of the sample of homes
mortgaged after the Reform Act did not have flood insurance.

Source: GAO?s compilation of NFIP participation studies.

While these studies provide some useful information, they are of limited
value in understanding the percentage of structures in SFHAs covered by
flood insurance.

several current mapping technologies can be used to facilitate the
collection of data on the number of structures in SFHAs. These technologies
can be used not only to show buildings and houses on maps but also to
pinpoint the exact location of such structures. Combining these technologies
with the digital flood maps that FEMA is already producing would allow for
increased accuracy in the identification of structures within SFHAs and the
calculation of participation rates.

For example, USGS has produced computer- generated images of aerial
photographs- that is, pictures taken from airplanes of the land below- for
about 74 percent of the United States. These images are called digital
Technologies Can Improve

the Accuracy of Data Used to Determine Participation Rates

Page 12 GAO- 01- 736T

orthophoto quadrangles (DOQ), and essentially combine the characteristics of
a photograph with the geometric qualities of a map. FIA currently uses these
images to produce some if its flood maps. While DOQs show pictures of
structures, each structure must be digitized in order to be identified by a
geographic information system.

Local communities are also beginning to use these emerging technologies,
although to widely differing degrees. In DeKalb County, Georgia, local
officials have purchased DOQs of its 270 square miles from a contractor and
digitized the structures in the photos. The county plans to geographically
reference each of the structures to create a base map that shows the
accurate location of structures. The county can then lay digital flood- maps
over its base maps to determine the number of structures in the local SFHAs.
According to county officials, once this technology is in place, it will be
easy to determine the number of structures in local SFHAs. NFIP
participation rates will also be easy to calculate. A DeKalb County official
told us that this digitized mapping technology has many practical
applications for the county, including engineering, planning and zoning,
crime analysis, and disaster recovery, and it will allow maps to be
generated for presentations at public hearings and other meetings.

FEMA officials told us that similar efforts are occurring in Charlotte,
North Carolina, and Louisville, Kentucky. A 1998 survey by the National
States Geographic Information Council and the Federal Geographic Data
Committee found that 69 percent of the GIS data users from state, regional,
and local governments responding to its survey create, update, integrate,
and distribute digital geographic data. This indicates that a number of
localities have some technology available to create digital base maps and
that the potential exists for localities to use such technology to identify
structures within SFHAs.

However, FIA officials told us that the number of communities that currently
have detailed data available is small. They also told us that as more FIRMs
are produced digitally and more communities improve the ability of their
mapping technologies to collect data on properties and buildings, measuring
the number of structures located within SFHAs will become easier and more
efficient.

The costs of using technology to accurately identify the number of
structures in SFHAs are not fully known. In March 2000, FEMA estimated the
total costs to modernize flood maps from fiscal year 2001 through fiscal
year 2007 to be $773 million above expected annual funding levels, The Costs
of Technology

Are Not Fully Known, but Will Be Shared

Page 13 GAO- 01- 736T

with digitization and map maintenance costs alone totaling $156 million. 10
The modernization of maps includes converting paper flood maps to a digital
format, which is the first step in using available technology to identify
the number of structures within SFHAs. FEMA continues to refine the cost
estimate as it updates its projection of needs and improves its cost data,
including the impacts on costs of partnerships with communities and other
local, regional, state, and federal agencies, and new technologies.

The partnerships that FEMA has developed with state, local, and other
federal agencies should reduce some of its costs to modernize its flood
maps. Along with enabling the agency to share some of the costs to modernize
flood maps, the partnerships will facilitate the development of technology
that can be used to estimate the number of structures within SFHAs. For
example, through FEMA?s Cooperating Technical Partners initiative, 62
partnerships had been developed with local communities as of September 2000.
Through this effort, communities, states, and regional agencies perform all
or portions of data collection and mapping tasks to create their own FIRMs.
An FIA official told us that the cost benefits to FEMA from this effort have
not yet been determined.

FEMA has also entered into partnerships with other federal agencies to fund
cooperatively the production of DOQs and high- accuracy elevation data. As
discussed previously, DOQs provide detailed images of land, including the
location of houses. Elevation data are useful because they help make flood
maps more accurate. Both of these technologies can be manipulated with
geographic information systems to more accurately identify the number of
structures within SFHAs. While FIA has factored in the costs of
cooperatively producing DOQs with other agencies in its mapping
modernization cost estimate, funding arrangements to produce elevation data
with other federal agencies have not yet been determined.

10 FEMA?s IG has previously questioned the soundness of FEMA?s then $750
million estimate to modernize flood maps. While acknowledging that FEMA took
into account some of the new cost- saving partnerships and technologies when
preparing its cost estimate, the IG asserts that FEMA did not, in some
instances, verify data, use reliable data, or establish a sound basis for
some assumptions. Moreover, the IG also stated that FEMA did not fully
factor in savings that could be realized from technology. The IG recommended
that FEMA include in its mapping modernization plan the cost impact of
partnerships, new mapping techniques, and technological advancements. See
Audit of FEMA?s Cost Estimate for Implementing the Flood Map Modernization
Plan (H- 09- 00, September, 2000).

Page 14 GAO- 01- 736T

Program participation rates are an effective way to gain insights into and
improve the performance of the NFIP program. Incorporating participation
rates into FEMA?s goals can provide results that are in line with GPRA-
objective, measurable, and quantifiable. While it will be many years before
the data needed to determine national participation rates become available,
some communities are already collecting such data. These communities are
using technologies that allow them to count the number of structures in
SFHAs and some are using these technologies to determine participation
rates. As our preceding discussion of DeKalb County, Georgia, demonstrates,
such community- level data can provide FIA with useful information on the
degree of participation by residents living in SFHAs.

In addition to our work on the NFIP, we have two other studies under way
involving FEMA. The first responds to your request, in the September 16,
1999, Senate Report (106- 161) accompanying the fiscal year 2000
appropriations bill, that we evaluate FEMA?s processes for ensuring that
disaster assistance funds are used effectively and efficiently. This report,
which we expect to issue this summer, will provide information on (1) the
adequacy of the criteria FEMA employs to determine if a presidential
disaster declaration is warranted and the consistency with which FEMA
applies these criteria and (2) the policies and procedures FEMA has
developed to ensure that individual Public Assistance Program projects in
disaster areas meet eligibility requirements.

We also plan to issue a report in late summer that looks at all federal
agencies involved in combating terrorism- including FEMA- with a specific
emphasis on (1) the overall framework for managing federal agencies?
efforts; (2) the status of efforts to develop a national strategy, plans,
and guidance; (3) the federal government?s capabilities to respond to a
terrorist incident; (4) federal assistance to state and local governments to
prepare for an incident; and (5) the federal structure for developing and
implementing a strategy to combat cyber- based terrorism.

For future information on this testimony, please contact JayEtta Hecker at
(202) 512- 2834. Individuals making key contributions to this testimony
included Martha Chow, Lawrence Cluff, Kerry Hawranek, Signora May, John
McGrail, Lisa Moore, Robert Procaccini, and John Strauss. Observations

Contact and Acknowledgments

Page 15 GAO- 01- 736T

Combating Terrorism: FEMA Continues to Make Progress in Coordinating
Preparedness and Response (GAO- 01- 15, Mar. 20, 2001).

Disaster Relief Fund: FEMA?s Estimates of Funding Requirements Can Be
Improved (GAO/ RCED- 00- 182, Aug. 29, 2000).

Observations on the Federal Emergency Management Agency?s Fiscal Year 1999
Performance Report and Fiscal Year 2001 Performance Plan (GAO/ RCED- 00-
210R, June 30, 2000).

Disaster Assistance: Issues Related to the Development of FEMA?s Insurance
Requirements (GAO/ GGD/ OGC- 00- 62, Feb. 25, 2000).

Flood Insurance: Information on Financial Aspects of the National Flood
Insurance Program (GAO/ T- RCED- 00- 23, Oct. 27, 1999).

Flood Insurance: Information on Financial Aspects of the National Flood
Insurance Program (GAO/ T- RCED- 99- 280, Aug. 25, 1999).

Disaster Assistance: Opportunities to Improve Cost- Effectiveness
Determinations for Mitigation Grants (GAO/ RCED- 99- 236, Aug. 4, 1999).

Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance (GAO/ RCED- 96- 113, May 23, 1996).

Flood Insurance: Financial Resources May Not Be Sufficient to Meet Future
Expected Losses (GAO/ RCED- 94- 80, Mar. 21, 1994). Related GAO Products

(385859)

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