Federal Emergency Management Agency: Crisis Counseling Grants	 
Awarded to the State of New York after the September 11 Terrorist
Attacks (31-MAY-05, GAO-05-514).				 
                                                                 
To help alleviate the psychological distress caused by the	 
September 11, 2001, attacks the Federal Emergency Management	 
Agency (FEMA) awarded the state of New York two grants totaling  
$154.9 million to provide crisis counseling and public education.
Because of questions about whether the program, called Project	 
Liberty, had spent all the funds it received from the federal	 
government, GAO was asked to determine (1) the extent to which	 
the program expended the funds awarded from the federal 	 
government, (2) whether the federal government had an effective  
process in place to determine the amount of funds to provide the 
program, (3) whether the federal government had adequate	 
financial oversight of the program, and (4) steps taken by the	 
federal government and New York State to assess the program's	 
effectiveness.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-514 					        
    ACCNO:   A25518						        
  TITLE:     Federal Emergency Management Agency: Crisis Counseling   
Grants Awarded to the State of New York after the September 11	 
Terrorist Attacks						 
     DATE:   05/31/2005 
  SUBJECT:   Federal aid to states				 
	     Federal funds					 
	     Federal/state relations				 
	     Financial analysis 				 
	     Fund audits					 
	     Funds management					 
	     Grants to states					 
	     Internal controls					 
	     Program evaluation 				 
	     Terrorism						 
	     Disaster relief aid				 
	     Disaster recovery					 
	     Federal grants					 
	     Interagency relations				 
	     Financial management				 
	     Crisis Counseling Assistance and			 
	     Training Program					 
                                                                 
	     Project Liberty					 

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GAO-05-514

                 United States Government Accountability Office

                     GAO Report to Congressional Requesters

May 2005

FEDERAL EMERGENCY MANAGEMENT AGENCY

Crisis Counseling Grants Awarded to the State of New York after the September 11
                               Terrorist Attacks

                                       a

GAO-05-514

[IMG]

May 2005

FEDERAL EMERGENCY MANAGEMENT AGENCY

Crisis Counseling Grants Awarded to the State of New York after the September 11
Terrorist Attacks

  What GAO Found

For the period September 11, 2001, through September 30, 2004, Project
Liberty reported that it had expended approximately $121 million, or
threequarters of the $154.9 million in grants awarded by FEMA, leaving a
remaining balance of $33.9 million. The majority of the remaining balance,
approximately $32 million, related to unresolved issues involving the
adequacy of supporting documentation for the New York City Department of
Education's (NYC DOEd) expense claims. As of March 31, 2005, city and
state officials told GAO they had accepted alternative forms of supporting
evidence related to $5.2 million in NYC DOEd expenses; however, this
alternative evidence provides only limited assurance of the propriety of
the claimed amounts. It is unclear whether similar alternative sources of
evidence will be accepted for the remaining $26.8 million in NYC DOEd
expense claims.

FEMA assisted state officials in developing estimated funding needs for
Project Liberty immediately after the terrorist attacks. By necessity,
these initial budgets were developed using estimates established during
the initial stages of the disaster. However, FEMA never required Project
Liberty to prepare adjusted budgets to reflect new information or
subsequent changes to the program. As a result, FEMA did not have
realistic budget information to assess how city and state officials were
planning to spend Project Liberty grant funds.

FEMA assigned primary responsibility for oversight and monitoring to the
Substance Abuse and Mental Health Services Administration (SAMHSA) through
an interagency agreement. Although SAMHSA had procedures in place to
monitor Project Liberty's delivery of services, it performed only limited
monitoring of financial information reported by Project Liberty about the
cost of those services. For example, while SAMHSA received periodic
financial reports from Project Liberty, it did not perform basic analyses
of expenditures in order to obtain a specific understanding of how the
grant funds were being used and, as noted above, did not have updated
budget information to gauge how actual spending compared to budgets. As a
result, SAMHSA was not in a position to exercise a reasonable level of
oversight to ensure that funds were being used efficiently and effectively
in addressing the needs of those affected by the September 11 attacks.

Both the state of New York and the federal government have taken steps to
assess how Project Liberty delivered services. These assessments were
ongoing as of March 2005. FEMA plans to consider lessons learned from
Project Liberty when conducting its own internal review of the crisis
counseling program.

                 United States Government Accountability Office

Contents

  Letter

Results in Brief
Background
Remaining Grant Funds Primarily Relate to Unresolved Issues at

NYC DOEd Improvements Needed in the Process for Determining Federal
Funding Federal Oversight of Project Liberty's Financial Information Was

Limited Assessments of Project Liberty Ongoing Conclusions Recommendations
for Executive Action Agency Comments and Our Evaluation

1 3 5

11

17

21 25 29 29 30

Appendixes                                                              
                Appendix I:       Objectives, Scope, and Methodology       35 
                                       Organizations Contacted             38 
               Appendix II:    Comments from the Department of Homeland    40 
                                               Security                    
                             Comments from the Substance Abuse and Mental  
              Appendix III:                     Health                     
                                       Services Administration             42 
              Appendix IV:      GAO Contact and Staff Acknowledgments      49 

Tables   Table 1: Reported CCP Grant Activity for Project Liberty from 
                           September 11, 2001, through September 30, 2004  13 
               Table 2: Comparison of Project Liberty's RSP Reported      
                       Expenditures to Budget from June 14, 2002, through 
                                 September 30, 2004                        23 
Figures Figure 1: New York Areas Serviced by Project Liberty Figure 2:     
                    Organizational Structure of Project Liberty           6 7
                    Figure 3: Key Milestones for Project Liberty            8 
                    Figure 4: Flow of Funds for Project Liberty             9 
              Figure 5: Claim Review and Approval Process for Project     
                                      Liberty                              10 

Contents

Figure 6:	Project Liberty's Total CCP Grant Awards and Reported
Expenditures for the Period September 11, 2001, through September 30, 2004
14

Figure 7: ISP and RSP Application Processes for Project Liberty 19

Abbreviations

CCP Crisis Counseling Assistance and Training Program
CMHS Center for Mental Health Services
DHS Department of Homeland Security
FEMA Federal Emergency Management Agency
HHS Department of Health and Human Services
ISP Immediate Services Program
NCPTSD National Center for Post-Traumatic Stress Disorder
NYAM New York Academy of Medicine
NYC DOEd New York City Department of Education
NYC DOHMH New York City Department of Health and Mental Hygiene
NYS OMH New York State Office of Mental Health
RFMH Research Foundation for Mental Hygiene, Inc.
RSP Regular Services Program
SAMHSA Substance Abuse and Mental Health Services

Administration

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separately.

A

United States Government Accountability Office Washington, D.C. 20548

May 31, 2005

The Honorable Christopher Shays

Chairman, Subcommittee on National Security, Emerging Threats and
International Relations Committee on Government Reform House of
Representatives

The Honorable Carolyn B. Maloney House of Representatives

To help alleviate the psychological distress in the New York City area
caused by terrorist attacks on September 11, 2001, the Federal Emergency
Management Agency (FEMA)1 awarded the state of New York two grants
totaling $154.9 million to provide crisis counseling and public education
services.2 Specifically, FEMA awarded the state of New York $22.7 million
for an Immediate Services Program (ISP) on September 24, 2001,3 with
subsequent amendments bringing the ISP total to $22.8 million. In
addition, FEMA awarded the state of New York $132.1 million for a Regular
Services Program (RSP) on June 14, 2002.

The state of New York operated the crisis counseling and public education
program under the name Project Liberty. Project Liberty was funded under
FEMA's Crisis Counseling Assistance and Training Program (CCP), which is
an individual assistance program authorized by the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (Stafford Act).4 The CCP is

1In March 2003, FEMA became part of the Department of Homeland Security.
Most of FEMA-including its disaster assistance efforts-is now part of the
department's Emergency Preparedness and Response Directorate; however, it
has retained its name and individual identity within the department. We
therefore simply refer to FEMA in this report.

2In the past, only individuals from a declared disaster area were eligible
to receive counseling services. However, because of the broad impact of
the September 11 terrorist attacks, residents from New Jersey,
Connecticut, Massachusetts, and Pennsylvania were also eligible to receive
services from Project Liberty.

3Although the ISP grant was awarded to Project Liberty on September 24,
2001, the grant gave Project Liberty the authority to reimburse service
providers for services they began to provide immediately after the
terrorist attacks on September 11, 2001.

4Pub. L. No. 93-288, 88 Stat. 143 (1974), as amended. The Stafford Act
authorizes the public assistance program that gives FEMA authority to
provide assistance, defines basic program criteria and eligibility, and
authorizes FEMA to publish regulations.

administered by FEMA and its federal partner, the Substance Abuse and
Mental Health Services Administration (SAMHSA), an agency of the
Department of Health and Human Services (HHS) responsible for improving
the quality and availability of mental health services. Although all
crisis counseling services for the general public had been phased out by
December 31, 2003, Project Liberty continued to provide these services to
New York City firefighters and schoolchildren through December 31, 2004.

Because of concerns that Project Liberty may be discontinuing services
without having spent all of the funds it received from the federal
government to assist in providing crisis counseling and public education
following the September 11 terrorist attacks, you requested that we review
and report on the use of funds given to the state of New York by the
federal government for crisis counseling services. In response to this
request, we reviewed the use of funds given to the state of New York by
the federal government by determining (1) the extent to which Project
Liberty expended the funds awarded from the federal government, (2)
whether the federal government had an effective process in place to
determine the amount of funds to provide Project Liberty, (3) whether the
federal government had adequate financial oversight of Project Liberty,
and (4) steps taken by the federal government and the state of New York to
assess the effectiveness of the program in meeting stated objectives and
the results of these assessments.

To address these objectives, we (1) reviewed documentation relating to the
expenditure of Project Liberty funds through September 30, 2004, the most
recent data available as of March 31, 2005, the end of our fieldwork, and
found it sufficiently reliable for the purpose of this report; (2)
reviewed the grant applications and correspondence used to determine
funding; (3) assessed the sufficiency of the federal government's
financial oversight of Project Liberty in light of GAO's Standards for
Internal Control in the Federal Government;5 and (4) reviewed assessments
of Project Liberty. We performed our work from July 2004 through March
2005 in accordance with generally accepted government auditing standards.
Our scope and methodology are discussed in greater detail in appendix I.

We requested written comments on a draft of this report from the Secretary
of Homeland Security. We received written comments from DHS. The DHS

5GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999), which can be found
at www.gao.gov.

comments (reprinted in appendix II) incorporate by reference a letter from
SAMHSA to FEMA commenting on the draft (reprinted in appendix III). We
also provided excerpts of a draft report for technical comment to the New
York State Office of Mental Health (NYS OMH), the New York City Department
of Health and Mental Hygiene (NYC DOHMH), and the New York City Department
of Education (NYC DOEd). NYS OMH technical comments and the coordinated
NYC DOHMH and NYC DOEd technical comments were incorporated as
appropriate.

Results in Brief	For the period September 11, 2001, through September 30,
2004, Project Liberty reported that it had expended6 approximately $121
million, or three-quarters of the $154.9 million in grants awarded by
FEMA, leaving a remaining balance of $33.9 million. The majority of the
remaining balance, approximately $32 million, related to unresolved issues
involving the adequacy of supporting documentation for NYC DOEd's expense
claims. According to NYS OMH, NYC DOEd had not been fully reimbursed for
the Project Liberty expenses it incurred throughout the program because
NYC DOEd had not been able to provide support for these expenses that met
the CCP documentation standards for reimbursement under federal grants.
NYS OMH has been working with NYC DOEd to develop alternative forms of
support, including internal control summary memos prepared by NYC DOEd, as
a basis to pay NYC DOEd's expense claims. As of March 31, 2005, NYS OMH
had paid $5.2 million of NYC DOEd expense claims based on such alternative
support. However, this type of indirect supporting evidence provides only
limited assurance of the propriety of claimed amounts, and it is unclear
whether it will also be used to justify payment for the remaining NYC DOEd
expense claims.

FEMA had processes in place to assist New York in preparing its grant
applications and determining the level of funding for Project Liberty
immediately after the September 11 terrorist attacks. Because FEMA's
processes for determining funding are designed to be implemented quickly
after a presidential disaster declaration, the state of New York's ISP and

6Reported expenditures represent amounts included in periodic financial
reports submitted by the grantee, NYS OMH, to the federal government.
According to Project Liberty officials, reported expenditures include
program expenditures that have been paid, amounts advanced to service
providers, and certain accrued but unpaid expenses. As of the end of our
fieldwork in March 2005, the latest expenditure report submitted was for
the period ending September 30, 2004.

RSP grant applications were developed during the initial dynamic stage of
the recovery effort when damage reports were continuing to be updated and
response plans were still being formulated. The budgets included in the
grant applications were developed using estimates established during the
initial stages of the disaster. Although the budgets submitted with the
grant applications were revised by the grantee to satisfy certain
conditions of grant award, FEMA and SAMHSA never required Project Liberty
to formally submit revised budget requests to reflect new information and
subsequent changes to the program. As a result, FEMA and SAMHSA did not
have realistic budget information that could be used to effectively assess
how city and state officials were planning to spend Project Liberty grant
funds.

While SAMHSA did have procedures in place to monitor Project Liberty's
delivery of services, it did not have procedures in place to effectively
monitor financial information reported by Project Liberty about the cost
of those services. SAMHSA's limited financial oversight of Project Liberty
was driven in part by its assessment that the program was not high risk,
but this assessment did not fully consider the magnitude, complexity, and
unique nature of the program and was not revisited even after significant
program changes occurred. As a result, SAMHSA was not in a position to
exercise a reasonable level of oversight to ensure that funds were used
efficiently and effectively in addressing the needs of those affected by
the September 11 terrorist attacks.

Both the state of New York and the federal government have taken steps to
assess how Project Liberty delivered services. NYS OMH undertook its own
assessment of Project Liberty and partnered with the New York Academy of
Medicine (NYAM) to obtain information from telephone surveys. SAMHSA
contracted with the National Center for Post-Traumatic Stress Disorder
(NCPTSD), a center within the Department of Veterans Affairs, to conduct a
case study of New York's response to the terrorist attacks on September
11, with a primary focus on Project Liberty. Both NYS OMH and NCPTSD's
overall assessments of the program were ongoing as of March 2005. FEMA
plans to consider lessons learned from NYS OMH and NCPTSD when conducting
its own internal review of the CCP.

To improve accountability for federal grant funds, this report makes
recommendations for FEMA to work with SAMHSA to (1) help ensure proper and
timely expenditure of the remaining grant funds, (2) strengthen federal
financial oversight of future CCP grants, and (3) help ensure that

lessons learned from Project Liberty will be used to improve future
programs funded by the CCP.

In commenting on a draft of this report, DHS and SAMHSA generally agreed
with our recommendations. However DHS stated that we should give more
weight to the unprecedented conditions that led to Project Liberty, and
that it was these unique circumstances that led to our findings and
recommendations. SAMHSA took issue with our characterization of SAMHSA
oversight and stated that overall, the federal oversight of Project
Liberty was appropriate, reasonable, and responsive to state and local
needs. Our report clearly acknowledges the unprecedented circumstances
that led to the establishment of Project Liberty-it was these very
circumstances that led us to conclude that Project Liberty required a
higher level of federal oversight than was provided by SAMHSA.

Background	Following the terrorist attacks on September 11, 2001, the
President signed under the authority of the Stafford Act a major disaster
declaration for the state of New York. The presidential declaration
allowed the state of New York to apply for federal assistance to help
recover from the disaster. FEMA was responsible for coordinating the
federal response to the September 11 terrorist attacks and providing
assistance through a variety of programs, including the CCP. The CCP was
authorized in section 416 of the Stafford Act to help alleviate the
psychological distress caused or aggravated by disasters declared eligible
for federal assistance by the President. Through the CCP, FEMA released
federal grant awards to supplement the state of New York's ability to
respond to the psychological distress caused by the September 11 terrorist
attacks through the provision of short-term crisis counseling services to
victims and training for crisis counselors.

FEMA relied on SAMHSA to provide expertise related to crisis counseling
and public education for Project Liberty. FEMA assigns SAMHSA's
responsibilities for the CCP through an annual interagency agreement.
These responsibilities included, among other things, providing technical
assistance, monitoring the progress of programs conducted under the CCP,
and performing program oversight. Within SAMHSA, the Center for Mental
Health Services (CMHS) carried out these responsibilities for Project
Liberty. CMHS received support from SAMHSA's Division of Grants
Management, which provides grant oversight.

Figure 2: Organizational Structure of Project Liberty

Federal FEMAlevel

Federal agency responsible

                               Service providers

New York City agencies, community-based organizations, clinics, and hospitals in
  New York City and the 10 counties that provide crisis counseling and public
                   education services (for example, NYC DOEd)

Source: GAO analysis of information obtained from FEMA, SAMHSA, and
Project Liberty.

Under the CCP, Project Liberty's goal was to serve New York City and the
10 surrounding counties by assisting those affected by the September 11
terrorist attacks to recover from their psychological reactions and regain
predisaster level of functioning. The CCP supports services that are
shortterm interventions with individuals and groups experiencing
psychological reactions to a presidentially declared disaster and its
aftermath. Crisis counseling services were primarily delivered to disaster
survivors through outreach, or face-to-face contact with survivors in
familiar settings (e.g., neighborhoods, churches, community centers, and
schools). Although the

CCP does not support long-term, formal mental health services such as
medications, office-based therapy, diagnostic services, psychiatric
treatment, or substance abuse treatment, FEMA approved an enhanced
services program for Project Liberty. This enhanced services program
allowed for an expansion of services, including enhanced screening
methods; a broader array of brief counseling approaches; and additional
training, technical assistance, and supervision to a set of service
providers. These enhanced services were intended to address the needs of
individuals who continued to experience trauma symptoms and functional
impairment after initial crisis counseling but did not need long-term
mental health services.

Project Liberty was funded through two separate, but related, grant
programs: the ISP and RSP. The ISP grant was designed to fund Project
Liberty for the first 60 days following the disaster declaration. Because
there was a continuing need for crisis counseling services, the ISP was
extended to last about 9 months, until the RSP began. The RSP grant was
awarded and was designed to continue to provide funding for an additional
9 months of crisis counseling services, but was extended to last for 2 
1/2 years.7 Figure 3 shows key milestones for Project Liberty.

                  Figure 3: Key Milestones for Project Liberty

            2001                2002         2003        2004        2005

Source: GAO analysis of information obtained from SAMHSA and Project
Liberty.

aAccording to SAMHSA officials, there have been discussions about
extending the closeout for Project Liberty through September 30, 2005.

7At the time of the RSP grant award for Project Liberty, FEMA's
regulations provided for a maximum grant term of 9 months with one
extension of 90 days. FEMA amended the regulations effective March 3,
2003, to allow for extensions for more than 90 days for disasters of a
catastrophic nature when in the public interest. See 44 C.F.R.
206.171(g)(4)(2004).

For the approved ISP application, FEMA made funds available directly to
the state. Under the RSP, after approval, funds were transferred from FEMA
to SAMHSA, which awarded the grant to the state of New York through
SAMHSA's grants management process. The state of New York, in turn,
disbursed funds to the service providers and local governments through the
Research Foundation for Mental Hygiene, Inc. (RFMH), a notfor-profit
corporation affiliated with the state of New York that assists with
financial management of federal and other grants awarded to NYS OMH.
Figure 4 shows the flow of funds for Project Liberty's ISP and RSP.

                  Figure 4: Flow of Funds for Project Liberty

       Source: GAO analysis of information from FEMA and Project Liberty.

Service providers were required to submit claims and supporting
documentation to receive reimbursement for expenses incurred to provide
services. As shown in figure 5, these claims were to have multiple levels
of review to determine whether the expenses claimed were allowable under
the CCP's fiscal guidelines. This review structure, which placed primary
responsibility for reviewing claims on the local government units, was
based on the state of New York's existing grant management policies.
Additional controls for Project Liberty included (1) NYS OMH site visits
to service providers in New York City and surrounding counties; (2)
closeout audits by independent auditors of certain New York City service
providers to test whether claims were documented and allowable; and (3)
annual audits of New York City and surrounding counties conducted under
the

Single Audit Act,8 which requires independent auditors to provide an
opinion on whether the financial statements are fairly presented, a report
on internal control related to the major programs, and a report on
compliance with key laws, regulations, and the provisions of the grant
agreements.9

Figure 5: Claim Review and Approval Process for Project Liberty

Source: GAO compilation of information obtained from SAMHSA and Project
Liberty.

Our publication, Standards for Internal Control in the Federal Government,
provides a road map for entities to establish control for all aspects of
their operations and a basis against which entities can evaluate their
control structures.10 The five components of internal control are as
follows:

o 	Control environment. Creating a culture of accountability within the
entire organization-program offices, financial services, and regional

8The Single Audit Act of 1984, as amended (31 U.S.C. S: 7502 (a)),
required that nonfederal entities that spend $300,000 or more in federal
funding under more than one program undergo single audits. In 2003, the
threshold was raised to $500,000 for fiscal years ending after December
31, 2003.

9New York City's Single Audit Act audit for fiscal years 2002 and 2003
resulted in unqualified opinions for the city's financial statements, no
reported weaknesses in internal control, and no reported instances of
noncompliance.

10Internal controls are an integral component of an organization's
management that provide reasonable assurance that the organization
achieves its objectives of (1) effective and efficient operations, (2)
reliable financial reporting, and (3) compliance with laws and
regulations. For more information on internal controls, see
GAO/AIMD-00-21.3.1, which can be found at www.gao.gov.

offices-by establishing a positive and supportive attitude toward the
achievement of established program outcomes.

o 	Risk assessment. Identifying and analyzing relevant problems that might
prevent the program from achieving its objectives. Developing processes
that can be used to form a basis for measuring actual or potential effects
of these problems and manage their risks.

o 	Control activities. Establishing and implementing oversight processes
to address risk areas and help ensure that management's decisions-
especially about how to measure and manage risks-are carried out and
program objectives are met.

o 	Information and communication. Using and sharing relevant, reliable,
and timely information on program-specific and general financial risks.
Such information surfaces as a result of the processes-or control
activities-used to measure and address risks.

o 	Monitoring. Tracking improvement initiatives over time and identifying
additional actions needed to further improve program efficiency and
effectiveness.

SAMHSA and FEMA were responsible for providing oversight to ensure that
the state of New York had a reasonable level of controls in place.
Although FEMA retained responsibility for providing leadership and
direction for Project Liberty, it assigned primary responsibility to
SAMHSA for oversight and monitoring through an interagency agreement.

  Remaining Grant Funds Primarily Relate to Unresolved Issues at NYC DOEd

Approximately $121 million, more than three-quarters of the $154.9 million
in federal funds provided to Project Liberty, were reported as expended as
of September 30, 2004, leaving a remaining balance of $33.9 million. About
$32 million of the $33.9 million pertain to unresolved NYC DOEd expense
claims. According to NYS OMH, NYC DOEd had not been reimbursed for the
Project Liberty expenses it incurred throughout the program because NYC
DOEd had not been able to provide support for these expenses that met the
CCP documentation standards for reimbursement under federal grants. NYS
OMH began considering alternative indirect forms of evidence, including
internal control summary memos prepared by NYC DOEd, to begin paying NYC
DOEd's expense claims. As of March 31, 2005, NYS OMH had accepted
alternative forms of supporting evidence to pay $5.2 million of NYC DOEd
expense claims; however, this type of alternative evidence

provides only limited assurance of the propriety of the claimed amounts.
NYS OMH was not sure when and how the remaining NYC DOEd expense claims
would be resolved.

    Timing of Reported Expenditures

For the period September 11, 2001, through September 30, 2004,11 Project
Liberty reported that it had expended all of the $22.8 million ISP grant
and about $98.2 million of the $132.1 million RSP grant for total reported
expenditures of approximately $121 million, leaving a remaining balance
$33.9 million. Although crisis counseling services had been phased out as
of December 31, 2004, Project Liberty will continue to use the remaining
grant funds to process claims for reimbursement of program-related
expenses incurred through December 31, 2004, and to cover administrative
expenses during the closeout period, which at the end of our fieldwork,
was scheduled to end on May 30, 2005. Table 1 and figure 6 show the timing
and amount of expenditures reported by Project Liberty for the ISP and RSP
grants by quarter through September 30, 2004, compared to the total CCP
grant awards for Project Liberty.

11Project Liberty's ninth quarterly report, which includes reported
expenditures through September 30, 2004, was the last report issued by the
end of our fieldwork on March 31, 2005.

Table 1: Reported CCP Grant Activity for Project Liberty from September
11, 2001, through September 30, 2004

Dollars in thousands

                            CCP grant funds awarded

                          September 2001 -ISPa $22,777

                            June 2002 -RSPb 132,148

Subtotal $154,925

Project Liberty reported expenditures

                 September 11, 2001, through September 30, 2004

                    ISP -amounts per RFMH 12/14/2001c $6,056

                                03/14/2002 7,995

                               06/14/2002d 8,726

Subtotal $22,777

                       RSP -amounts per quarterly reports

09/14/2002 $24,217

12/14/2002 7,739

03/14/2003 6,454

06/14/2003 10,264

09/14/2003 18,618

                                                            12/14/2003 11,754
                                                             03/14/2004 8,813
                                                             06/14/2004 7,389
                                                            09/30/2004e 2,961
                                                             Subtotal $98,209
                                         Total reported expenditures $120,986
                       Remaining grant funds as of September 30, 2004 $33,939

Source: GAO analysis of FEMA, NYS OMH and RFMH data.

Note: All amounts are reported in nominal dollars

a The ISP award of $22.7 million was made on September 24, 2001, with
subsequent adjustments bringing the ISP total to about $22.8 million.

b The RSP award was made on June 14, 2002.

c Includes expenditures from September 11, 2001, through December 14,
2001.

d Includes ISP expenditures incurred after June 14, 2002, and reductions
for expenditures transferred to the RSP.

e Project Liberty modified its reporting period to include expenditures
incurred through September 30, 2004.

Figure 6: Project Liberty's Total CCP Grant Awards and Reported
Expenditures for the Period September 11, 2001, through September 30, 2004

Dollars in thousands 160,000

                          Total grant awards: 154,925

140,000

120,000

100,000

80,000

60,000

40,000

20,000

                                    120,986

0

                     Expenditures as of the period ending:

a

                                    12/14/01

b

                    3/14/02 6/14/029/14/02 12/14/02 3/14/03

c

                6/14/03 9/14/03 12/14/03 3/14/04 6/14/04 9/30/04

Cumulative reported expenditures

Source: GAO analysis of NYS OMH and RFMH data.

aIncludes expenditures from September 11, 2001, through December 14, 2001.

bIncludes ISP expenditures incurred after June 14, 2002, and adjustments
for expenditures transferred to the RSP.

cProject Liberty modified its reporting period to include expenditures
incurred through September 30, 2004.

According to NYS OMH officials, the expenditures reported by Project
Liberty from September 11, 2001, through September 30, 2004, included
expenses incurred as well as amounts advanced to service providers. During
the RSP, Project Liberty made advances to 109 service providers, for a
total of about $25.8 million. As of September 30, 2004, the outstanding

advance balance was $5.8 million; however, according to an NYS OMH
official, the balance had been reduced to $1.2 million as of March 31,
2005.12

    NYC DOEd Expense Claims Not Fully Resolved

The vast majority of remaining Project Liberty funds related to unresolved
expense claims of NYC DOEd. As of March 31, 2005, NYS OMH officials told
us that NYC DOEd had submitted claims for a portion of the $32 million
that was budgeted to NYC DOEd to provide crisis counseling services to New
York City school children, and planned to ultimately submit claims for the
full amount.

NYS OMH and NYC DOHMH had not approved the majority of NYC DOEd claims for
reimbursement incurred during the RSP because NYC DOEd had not provided
support for these expenses that met the CCP documentation standards for
reimbursement under federal grants. These standards require that the
expenditure of grant funds be supported by detailed documentation, such as
canceled checks, paid bills, time and attendance records, and contract and
subgrant award documents. According to NYC DOEd officials, they could not
meet the documentation standards established by NYS OMH because (1) NYC
DOEd reorganized on July 1, 2003, which coincided with the delivery of
crisis counseling services under the Project Liberty grant, resulting in
significant loss of staff, loss of institutional knowledge, and therefore
lost or diminished ability to retrieve supporting documentation, and (2)
NYC DOEd's complex financial systems cannot produce the type of
transaction-specific documentation required by NYS OMH and makes the
process of retrieving supporting documentation unwieldy and
administratively burdensome.

A SAMHSA official told us SAMHSA was aware of issues involving the
supporting documentation for the NYC DOEd expense claims; however, because
officials viewed it as a grantee issue, they have had limited involvement
with NYS OMH's efforts to resolve these issues. NYS OMH decided to
consider alternative evidence, including supplemental supporting
documentation in the form of internal control summary memos prepared by
NYC DOEd that describe the controls over payments for personnel,
other-than-personnel, and community-based organization

12In providing technical comments on a draft of this report, NYS OMH
officials told us the balance had been reduced to $483,000 as of May 13,
2005.

expenses.13 Personnel expenses include NYC DOEd workers while the
other-than-personnel expenses include other costs incurred directly by NYC
DOEd. The community-based organization expenses are those incurred by
other service providers on behalf of NYC DOEd.

Although NYC DOEd's Chief Financial Officer has signed an attestation
stating that the controls described in the summary memos for personnel and
other-than-personnel expenses were in place and working during Project
Liberty, the level of assurance provided by these internal control summary
memos is limited for several reasons. First and foremost, the memos do not
provide the type of supporting documentation necessary to verify the
validity of the claimed expenses as required by the federal documentation
standards. Second, the memos are not certified by an external source, such
as an independent auditor. Third, the memos were prepared solely to
support NYC DOEd's Project Liberty expenses and may not represent written
policies and procedures that existed during the time the claimed
expenditures were incurred. And lastly, the memos were prepared toward the
end of the program by officials who did not, in all cases, have firsthand
knowledge of the controls that existed during the program.

As of March 31, 2005, NYS OMH and NYC DOHMH had reviewed and accepted
internal control summary memos that describe the controls over payments
for personnel and other-than-personnel expenses, and NYS OMH had used
these memos and other alternative forms of evidence to reimburse NYC DOEd
for $5.2 million in expense claims. These other forms of evidence included
observations of services being provided during site visits, the existence
of encounter logs evidencing that some services had been provided, and
general familiarity with service providers. NYS OMH officials were not
sure when they would complete the review of the memo covering the controls
over payments for community-based organization expenses and how this memo,
along with other alternative forms of evidence, would be used to resolve
the remaining $26.8 million in NYC DOEd expense claims.

As part of its approval process for expense claims, NYS OMH relied upon
NYC DOHMH to certify that the claims submitted were valid and met the CCP
documentation requirements. However, because NYC DOEd did not

13The internal control memos use the terms personal services,
other-than-personal services, and community-based organization to denote
the categories of expenses.

provide the required supporting documentation, NYC DOHMH could not perform
the same level of review as it did for the claims of the other Project
Liberty service providers.14 Further, although NYC DOHMH contracted with
independent auditors to perform audits of expense claims of certain
service providers15 for Project Liberty, there were no audits performed of
NYC DOEd claims, which are expected to total approximately $32 million.

At the end of our audit fieldwork, it was not clear when and how the
remaining expense claims would be resolved. However, if the internal
control summary memos and other alternative evidence continue to be the
primary supporting documentation for $32 million in NYC DOEd expense
claims, the federal government will have only limited assurance that these
payments are an appropriate use of Project Liberty grant funds.

  Improvements Needed in the Process for Determining Federal Funding

FEMA's process for determining funding is designed to be implemented
quickly after a state requests federal assistance to recover from a
presidentially declared disaster. The state of New York's grant
applications for Project Liberty were developed during the initial dynamic
stages of the recovery effort when damage reports and response plans were
subject to frequent change. The budgets submitted with the grant
applications were revised by the grantee to satisfy certain conditions of
grant award. However, we found that although the budgets were developed
using estimates established during the initial stages of the disaster,
FEMA and SAMHSA never required the state of New York to formally submit
revised budget requests to reflect new information and significant changes
to the program that occurred as the needs of the affected population
became better identified. As a result, FEMA and SAMHSA did not have
realistic budget information that could be used to effectively assess how

14In providing technical comments on a draft of this report, NYS OMH
officials told us that they plan to rely on NYC DOHMH to certify that the
NYC DOEd claims are valid and meet the FEMA fiscal guidelines and
documentation standards. Further, subsequent to completion of our audit
fieldwork in March 2005, NYC DOHMH developed a random sampling methodology
that will be used to sample 20 percent of provider claims for each of the
NYC DOEd school years.

15According to RFMH, as of April 28, 2005, audits of 92 providers of
service had been completed and 7 were in process. RFMH further stated that
these audits will cover approximately $50.5 million, or 42 percent, of
total reported expenses for Project Liberty of $121 million through
September 30, 2004. NYC DOEd, the New York City Fire Department, and
certain other organizations were not selected for audit by NYC DOHMH.

responsible city and state officials planned to spend Project Liberty
grant funds.

    Federal Assistance Application Process

The grant applications that the state of New York submitted to FEMA for
Project Liberty were prepared with assistance from FEMA and SAMHSA and
included a needs assessment, plan of services, and budget. The needs
assessment, which was based on a formula developed by SAMHSA, was the
state's estimate of the number of people who would need crisis counseling.
The plan of services described the state's plan for treating the
identified population, including segments of the population needing
special services or outreach methods such as counseling and training in
various languages. The budget was developed based on the estimated cost to
treat the population identified in the needs assessment through the
program outlined in the plan of services.

FEMA and SAMHSA provided the state of New York the flexibility to submit
grant applications that reflected its identified and estimated needs,
which were based on information available at the time. In preparing the
budget, the state of New York relied on SAMHSA's Budget Estimating and
Reporting Tool, which was designed to assist states in developing budgets
consistent with FEMA guidelines. The state of New York took two different
approaches in constructing the ISP and RSP budgets for Project Liberty.
The ISP budget used estimates of administrative costs and a simple direct
services cost calculation. The direct services costs were based on the
estimated number of people needing crisis counseling services, the
estimated average length of treatment each person would need, the
estimated hourly rate for crisis counselors, and the estimated length of
the ISP. The RSP budget, on the other hand, was prepared by the state of
New York based on estimates provided by NYS OMH, each of the New York City
boroughs, and the 10 surrounding counties eligible for CCP grant funding.

Once the state of New York submitted its ISP and RSP grant applications,
FEMA had processes in place to review and approve them. Although the
processes differed, both shared common elements. The first step for both
applications was a technical review conducted by the FEMA regional office
with jurisdiction over the state of New York to ensure that the
applications had a direct link to the September 11 terrorist attacks. Once
this technical review was completed, the applications were sent to FEMA
headquarters and to SAMHSA for review and comment. In addition, the RSP
was reviewed by a panel of mental health professionals who had experience
with CCP grants. The ISP and RSP review processes also differed in that

FEMA's regional office had final decision authority for the ISP
application while FEMA headquarters had final decision authority for the
RSP application. Figure 7 shows the application processes for the ISP and
RSP.

Figure 7: ISP and RSP Application Processes for Project Liberty

Source: GAO analysis of information from FEMA and SAMHSA.

ISP

New York State FEMA regional Office of Mental Health office responsible
FEMA regional office, FEMA prepares for New York State
headquarters,application conducts a and SAMHSAtechnical review consult on

decision

RSP New York State FEMA regional

Office of Mental Health office responsible prepares for New York State
FEMA regional application conducts a office, FEMA technical review
headquarters, and SAMHSA

consult on decision

SAMHSA

  Convenes a panel of mental health professionals to provide additional input

                   FEMA regional office makes final decision

                               FEMA headquarters

                              makes final decision

After the reviews conducted by FEMA and SAMHSA were completed, FEMA
awarded the state of New York $22.7 million for the ISP on September 24,
2001,16 with subsequent amendments bringing the ISP total to $22.8
million. In addition, FEMA awarded the state of New York $132.1 million
for the RSP immediately after the ISP ended on June 14, 2002.

Budgets Were Not Adjusted Because FEMA's process for determining funding
is designed to be to Reflect New Information implemented quickly after
presidential disaster declarations and official or Program Changes loss
numbers were not known at the time the Project Liberty applications

were prepared, the state of New York used estimates of the number of

16The ISP grant was awarded to Project Liberty on September 24, 2001, and
authorized Project Liberty to reimburse service providers for expenses it
incurred beginning immediately after the terrorist attacks on September
11, 2001.

people who would need crisis counseling services, the length of the
program, and the services that would be provided. However, FEMA and SAMHSA
never required the budgets to be modified to reflect new information or
significant changes to the program.

The estimates used by the state of New York to develop its initial needs
assessment, or number of people it believed would need crisis counseling
services, included several risk factors and loss categories. In keeping
with existing CCP policy, FEMA and SAMHSA encouraged the state of New York
to modify the needs assessment formula by adjusting the loss categories of
affected persons and the risk factors for each of those loss categories to
better reflect the situation in New York. The state of New York also
estimated the number of direct victims in each loss category because
official numbers were not available. For example, the official number of
deaths was not known until more than 2 years after the disaster. As a
result of these estimates, the needs assessment for the state of New
York's ISP application determined that 2.3 million people would need
crisis counseling services as a result of the terrorist attacks on
September 11, 2001. With the RSP application, the needs assessment formula
was modified to estimate the pervasive reactions to the disaster and to
update the loss category numbers, such as the number of people dead,
missing, or hospitalized. These modifications increased the estimate of
the people who would need crisis counseling to 3.4 million.

We found that based on the approved budgets for the ISP and RSP, Project
Liberty estimated that it would need $154.9 million to provide crisis
counseling and public education to the estimated 3.4 million people and
training for Project Liberty staff who would be delivering these services,
at a cost of approximately $46 per person. In its report for the period
ending September 30, 2004, Project Liberty estimated that it had provided
crisis counseling to 1.5 million people at a cost of $121 million, or
approximately $83 per person.

Another estimate used in preparing the grant applications was the length
of time needed to carry out the services identified in the plan of
services. The state of New York used the maximum length of service
provision allowed by FEMA regulations in its ISP and RSP applications, 60
days and 9 months, respectively. However, crisis counseling services were
actually provided for approximately 9 months under the ISP and over 30
months under the RSP.

In addition, the state of New York initially understood that crisis
counseling and public education services offered by Project Liberty would
be limited to the services normally allowed by the CCP, such as short-term
individual and group crisis counseling, community outreach, and training
for crisis counselors. However, in August 2002, Project Liberty was
authorized to adjust the program to include enhanced services and began
providing these services in May 2003.

Other significant changes, which were not reflected in Project Liberty's
budget, included a reallocation from New York City's budget to the NYC
DOEd, which increased NYC DOEd's budget from $8.9 million to $40 million
and subsequent reductions of NYC DOEd's budget to $32 million. Despite
these major changes in the program, FEMA and SAMHSA did not require and
Project Liberty did not prepare adjusted budgets to reflect their revised
plans for meeting the needs of the victims of September 11. Therefore, New
York State and City officials did not have realistic budget information to
use as a tool to manage program funds, and FEMA and SAMHSA were not in a
position to effectively assess the planned use of the funds.

  Federal Oversight of Project Liberty's Financial Information Was Limited

While SAMHSA provided oversight of Project Liberty's delivery of services,
it provided only limited oversight of financial information reported by
Project Liberty about the cost of those services. SAMHSA received periodic
financial reports but did not perform basic analyses of expenditures to
obtain a specific understanding of how Project Liberty was using federal
funds. In addition, as discussed above, budget information was outdated
and therefore an ineffective tool to monitor actual expenditures. SAMHSA's
limited level of oversight over Project Liberty's financial information
was driven in part by its assessment that the program was not high risk,
but this assessment did not fully consider the magnitude, complexity, and
unique nature of the program and was not revisited even after significant
program changes occurred. As a result, SAMHSA was not in a position to
exercise a reasonable level of oversight to ensure that funds were used
efficiently and effectively in addressing the needs of those affected by
the September 11 terrorist attacks.

SAMHSA's oversight for Project Liberty included review of service delivery
information and identification of unusual items included in Project
Liberty's program reports, eight site visits, and routine communication
with NYS OMH and FEMA. These oversight activities helped SAMHSA gain
assurance that NYS OMH was delivering appropriate services. However,

SAMHSA's oversight of these services did not directly link with, and
therefore did not provide assurance related to, financial information
reported by Project Liberty. In addition to requiring Project Liberty to
submit budgets to show how it planned to use federal funds, FEMA
regulations also required Project Liberty to periodically submit financial
reports to show how funds were actually spent. Required financial reports
included quarterly expenditure reports, a final accounting of funds, and a
final voucher. SAMHSA officials told us they did some high-level review of
the financial information provided to determine how quickly the program
was using grant funds and when the grant funds should be made available
to NYS OMH. However, they did not perform basic analyses of
expenditures to obtain a specific understanding of how Project Liberty was
using federal funds.

We found that SAMHSA did not use financial information submitted by
Project Liberty to conduct basic analytical reviews of how funds were
being spent and whether this spending was consistent with the budgeted
program expenditures. Table 2 illustrates a basic analysis we performed of
Project Liberty's reported and budgeted expenditures for the period
June 14, 2002, through September 30, 2004, which identified significant
differences by category between reported expenditures and budget.

Table 2: Comparison of Project Liberty's RSP Reported Expenditures to
Budget from June 14, 2002, through September 30, 2004

                              Dollars in thousands

Category

                                     Reported expenditures (6/14/2002 through

9/30/2004) RSP budget a

        Difference- reported expenditures (under)/over budget Difference as a
                                                         precentage of budget

                  Personnel   $25,942       $93,489      ($67,547)       (72) 
               Office space    2,245          674          1,571          233 
                Consulting/    5,527        10,884        (5,357)        (49) 
                  contracts                                          
                      Media    9,347         8,887          460      
                     Crisis    47,912       15,809        32,103          203 
                 counseling                                          
                   Advances    5,798                 0     5,798         >100 
             Other expenses    1,438         2,405         (967)         (40) 
                      Total   $98,209      $132,148      ($33,939)       (26) 

Source: GAO analysis of FEMA, HHS, and Project Liberty data.

aReflects revisions made to the budget by the grantee to satisfy
conditions of the grant award.

Notwithstanding the fact that budgets were not updated for major program
changes, several of these differences should have raised questions about
whether Project Liberty was using federal funds within allowable
categories and within its approved budget. For example, the Project
Liberty personnel budget was over $93 million; however, as of September
30, 2004, over 26 months into the program that was initially planned for
completion in 9 months, it had reported personnel expenditures of only
about $26 million, for a difference of about $67 million. A SAMHSA
official said that because of the way Project Liberty reported its
expenditures, SAMHSA officials could not track its financial reports to
its budget. As a result, we found that SAMHSA was not aware of the
significant variations between Project Liberty's reported expenditures and
budget and did not make inquiries of Project Liberty officials to obtain
an understanding of why these variations were occurring. Some of the
differences between reported and budgeted expenditures may have resulted
from the fact that Project Liberty was not required to formally adjust the
initial program budget to reflect significant changes. However, the
differences may also have raised questions about whether SAMHSA's

understanding of how the program was planning to spend funds was
consistent with actual spending patterns. Comparisons between Project
Liberty's reported budget and expenditures could have helped SAMHSA better
assess the status of the program to allow it to take effective action to
ensure that Project Liberty was using federal funds to provide the most
value for victims of the September 11 terrorist attacks.

The differences between Project Liberty's reported budget and expenditures
may also have been caused by inconsistencies in financial information
submitted by Project Liberty. FEMA and SAMHSA did not provide detailed
guidance on how to classify CCP expenditures but instead left Project
Liberty to interpret how expenditures should be classified. We found that
Project Liberty expenditures were not always consistently reported to FEMA
and SAMHSA. For example, Project Liberty did not consistently classify
evaluation expenditures. If an NYS OMH employee was evaluating the
program, the expenditure was classified as personnel, but if the work was
contracted to someone outside of NYS OMH, the expenditure was classified
as evaluation. As a result, SAMHSA could not reliably use Project
Liberty's financial reports to determine how much it cost to evaluate the
program. By obtaining a better understanding of how federal funds were
spent by Project Liberty, SAMHSA would have improved its ability to
determine whether funds were used most efficiently and effectively in
carrying out the objectives of the program.

SAMHSA's limited oversight of Project Liberty's financial information was
driven in part by its own assessment that the program was not high risk.17
SAMHSA's oversight of Project Liberty included an initial assessment of
the risk associated with the grantee. SAMHSA applied risk factors
identified in HHS regulations regarding grants,18 including financial
management issues, such as financial stability and experience in handling
federal grants, to RFMH, the fiscal agent for NYS OMH responsible for
making payments to service providers. For example, SAMHSA reviewed the
result of RFMH's fiscal year 2001 financial audit that was required by the
Single Audit Act and found that RFMH received an unqualified audit opinion
while handling a total of about $62 million in federal funds. SAMHSA
concluded that RFMH had a strong track record for handling federal funds
and classified RFMH as not high risk. Based in part on this risk
assessment, SAMHSA

17SAMHSA classifies grantees as either high risk or not high risk. 18See
45 C.F.R. S: 92.12 (2004).

officials told us staff with financial backgrounds were not actively
involved in the oversight of Project Liberty.

However, we found that SAMHSA's risk assessment only considered risks
associated with RFMH and did not consider other potential risks associated
with the Project Liberty grant. For example, the assessment did not
consider all significant interactions in the complex federal, state, and
local government environment that existed for Project Liberty; the amount
of the RSP grant award, which was the largest RSP grant19 ever made by
FEMA; or the geographic complexities of the program, including the size of
the area affected and the diversity of the community being served. In
addition, SAMHSA did not revisit its initial risk assessment even after
the program encountered significant changes and challenges, including the
design of the first-ever enhanced services program and the documentation
issues with NYC DOEd expenses, which have yet to be resolved. As a result,
SAMHSA's level of oversight was not in line with the challenges and
complexities that increased the risks associated with Project Liberty.

Based in part on its risk assessment process, SAMHSA's oversight of
Project Liberty was primarily carried out by its programmatic staff who
focused on activities that did not directly link to the financial
information being reported by NYS OMH. Without useful financial
information, including updated budgets, and without analyses of the
financial information Project Liberty was reporting, SAMHSA was not in a
position to exercise a reasonable level of oversight to ensure that grant
funds were effectively used to address the needs of those affected by the
September 11 terrorist attacks.

  Assessments of Project Liberty Ongoing

Both the state of New York and the federal government have taken steps to
assess how Project Liberty delivered services. NYS OMH is conducting its
own assessment of Project Liberty and partnered with NYAM to obtain
information from telephone surveys. SAMHSA contracted with NCPTSD, a
center within the Department of Veterans Affairs, to conduct a case study
of New York's response to the terrorist attacks on September 11, with a
primary focus on Project Liberty. Both NYS OMH and NCPTSD's overall
assessments of the program were ongoing as of March 2005. FEMA plans

19The RSP grant award for Project Liberty of $132.1 million almost equaled
the total amount of RSP grant awards by FEMA for crisis counseling in the
history of the program.

to consider lessons learned from NYS OMH and NCPTSD when conducting its
own internal review of the CCP.

NYS OMH is conducting an evaluation of Project Liberty, which includes
designated funding for program evaluation. This nonstatistical evaluation
consists of several components, including analysis of data collected by
service providers documenting services delivered through encounter data
forms, recipient feedback through written questionnaires and telephone
surveys,20 provider feedback through written reports and staff surveys,21
and other initiatives. The data collected by service providers was the
primary method used to assess the services delivered by the program.22
Based on these data, NYS OMH preliminarily found that Project Liberty had
reached a large number of people affected by the September 11 terrorist
attacks and that it was successful in reaching many diverse communities.
NYS OMH reported that 95 percent of providers who responded to its surveys
rated the overall quality of services provided as good or excellent. NYS
OMH also reported that the majority of respondents to its recipient
surveys indicated that they have returned to their predisaster mental
health condition, a goal of Project Liberty. However, according to NYS
OMH, the recipient surveys were made available beginning in July 2003 to
organizations providing crisis counseling for distribution to individuals
receiving services and therefore may not be representative of all Project
Liberty recipients. NYS OMH did not report the number of providers who

20NYS OMH contracted with researchers at the Mount Sinai School of
Medicine to pilot methodologies for obtaining feedback from service
recipients. These methodologies included written surveys and telephone
interviews. According to NYS OMH, individuals who participated in the
written surveys and telephone interviews were representative of those
served by Project Liberty in terms of gender, age, race/ethnicity, and
preferred language. The written survey that had been piloted was provided
to all of Project Liberty's crisis counseling programs for distribution.
The written surveys asked service recipients about the Project Liberty
services they used, their opinions of the services, and their reactions to
the terrorist attacks on September 11. In February 2004, NYS OMH reported
results from its recipient surveys based on a total of 357 surveys
collected.

21In August of 2003, NYS OMH distributed 1,500 surveys to all
organizations providing crisis counseling. Each organization's director
was asked to give a survey to each staff member. Staff members were asked
to rate Project Liberty using a four-point scale (poor, fair, good, or
excellent). NYS OMH reported results from its survey based on a total of
265 surveys that were returned.

22According to NYS OMH officials, service providers' staffs were
responsible for completing encounter log forms documenting their
encounters with service recipients and providing this information to NYS
OMH for analysis. NYS OMH's data collection efforts were supplemented with
site visits to service providers, which covered the use of encounter logs.

received surveys and reported a low response rate23 for recipients.
Because the number of surveys offered to providers was not disclosed and
because of low response rates for the recipient surveys, we were unable to
determine the level of coverage provided by these surveys.

NYS OMH also partnered with NYAM, a not-for-profit organization dedicated
to enhancing public health through research, education, public policy, and
advocacy. NYAM conducted nonstatistical telephone surveys in 2001 and 2002
of New Yorkers to assess the magnitude and duration of the mental health
effects of the terrorist attacks.24 NYS OMH worked with NYAM to assess the
reach and recognition of Project Liberty by adding questions to NYAM's
ongoing September 11 telephone surveys. NYAM and NYS OMH reported that 24
percent of the respondents interviewed were aware of Project Liberty25
and, among respondents who had heard of the program, 67 percent had a good
impression of the program.26 However, because the sampling methodology for
the NYAM phone surveys was not disclosed and because of low response
rates, we were unable to determine the survey coverage.

Based on these evaluation activities, as well as their own experience with
Project Liberty, NYS OMH officials have begun to identify lessons to be
learned. For example, they found that emergency mental health plans and
resources in place prior to September 11 were insufficient to fully
respond to the mental health impact of the terrorist attacks. Much of the
infrastructure needed to implement Project Liberty, such as data
collection procedures and public education materials, had to be developed
in the

23According to NYS OMH, this low response rate resulted, in part, because
of the challenge in obtaining feedback from recipients, who were anonymous
as required by the CCP.

24NYAM conducted two telephone surveys. The sampling frame for the first
survey was adult residents of Manhattan living closest to the World Trade
Center, and the sampling frame for the second survey included all adults
in New York City with an oversampling of residents of Manhattan living
closest to the World Trade Center to permit comparison between the two
surveys. Both surveys used random-digit dialing. NYAM reported that 988
individuals responded to its first survey, and 2,001 responded to its
second survey.

25According to NYS OMH, NYAM conducted a third survey, which showed that
the percentage of respondents who were aware of Project Liberty increased
from January 2002 through September 2002, from 24 percent to 53 percent.

26Sasha Rudenstine and others, "Awareness and Perceptions of a
Communitywide Mental Health Program in New York City After September 11,"
Psychiatric Services, vol. 54, no. 10 (2003).

immediate aftermath of the terrorist attacks. In addition, NYS OMH found
that the services covered by the CCP were not sufficient to meet the
mental health needs of the minority of individuals who developed severe
and persistent symptoms that substantially interfered with day-to-day
functioning. Although the state of New York was given permission to
develop and implement an enhanced services program to meet the needs of
the more severely affected individuals, similar intensive interventions
are not currently routinely included as part of the FEMA CCP. NYS OMH
officials told us that when their evaluation is completed, they expect
that they will have comprehensively identified best practices and
obstacles encountered and that they will make recommendations to FEMA and
SAMHSA for actions needed to better organize a mental health response to
future disasters funded by the CCP.

SAMHSA entered into an interagency agreement with NCPTSD, a center within
the Department of Veterans Affairs, to conduct a case study of New York's
response to the September 11 terrorist attacks. The primary purpose of the
NCPTSD case study was to identify lessons to be learned from New York's
experience that could be useful to other communities that might have to
respond to major disasters, including acts of terrorism. As part of its
study, NCPTSD interviewed 103 individuals, including service providers and
management from 50 public and private provider organizations in New York
City and the surrounding counties.27 NCPTSD used a qualitative methodology
to analyze the data to develop findings and recommendations. According to
SAMHSA, the NCPTSD report is expected to be issued as soon as all
stakeholders' comments have been received and considered.

FEMA officials told us they plan to consider lessons learned from the
NCPTSD and NYS OMH assessments of Project Liberty through FEMA's internal
review of the CCP that was ongoing as of March 2005. 28 This internal
review is being conducted in partnership with SAMHSA and, according to
FEMA, will consider whether aspects of FEMA's CCP,

27According to NCPTSD, it chose the interview subjects based on input from
NYS OMH management.

28In 2002, we reported that FEMA and SAMHSA had not evaluated the
effectiveness of the disaster crisis counseling program and recommended
that the Director of FEMA work with the Administrator of SAMHSA to
evaluate the effectiveness of the program. See GAO,

Mental Health Services: Effectiveness of Insurance Coverage and Federal
Programs for Children Who Have Experienced Trauma Largely Unknown,
GAO-02-813 (Washington, D.C.: Aug. 22, 2002).

including its regulations and guidance, need to be improved. For example,
FEMA plans to work with SAMHSA to consider the extent to which the
enhanced services should be included as a permanent part of the CCP. FEMA
officials told us that the internal review will have to be completed in
conjunction with their primary work responding to disasters; therefore,
they have not established a timetable to complete this review. Given that
Project Liberty was awarded the largest RSP grant in the history of FEMA's
CCP and that FEMA provided funding to the state of New York to evaluate
Project Liberty, the timely assessment of lessons learned from this
program would be beneficial to future CCPs.

Conclusions	FEMA and SAMHSA's limited oversight of the planned and actual
spending of Project Liberty impeded their ability to monitor whether the
grant funds were being used in the most efficient and effective way to
meet the needs of those affected by the terrorist attacks of September 11,
2001. Further, until recently, FEMA and SAMHSA had limited involvement in
efforts to resolve issues surrounding the outstanding NYC DOEd expense
claims; additional oversight in this area could help bring appropriate and
timely resolution to these issues. FEMA will have an opportunity to
address these oversight issues, as well as lessons learned identified by
NYS OMH and NCPTSD, as part of its ongoing internal review of its CCP.

  Recommendations for Executive Action

In order to address the issues identified in our report, we recommend that
the Secretary of Homeland Security direct the Under Secretary of Emergency
Preparedness and Response to take the following eight actions:

To help ensure proper and timely expenditure of the remaining Project
Liberty funds, FEMA should work with SAMHSA to

o 	provide assistance to New York City and State officials in
appropriately resolving issues surrounding the NYC DOEd expense
reimbursements and

o 	determine whether an independent review of the propriety of the use of
funds for payments to the NYC DOEd is needed.

To strengthen federal financial oversight of future CCP grants, FEMA
should work with SAMHSA to

o 	require the recipients of CCP grants to submit updated budgets to
reflect approved changes to the program;

o 	revise the current risk assessment process to comprehensively identify
and assess risks associated with CCP grants;

o 	establish a process to update the risk assessment for significant
program changes;

o 	consider developing formal requirements for consistent classifications
of expense data; and

o 	develop formal procedures to perform more detailed analyses of
financial reports, including comparing actual expenditures and budgets to
identify variations and obtain an understanding of the reasons for any
unusual variations.

To help ensure that the lessons learned from Project Liberty will be used
to help improve future programs funded by the CCP, FEMA should establish a
clear time frame to complete its internal review of the CCP as
expeditiously as possible.

  Agency Comments and Our Evaluation

We received written comments on a draft of this report from DHS who
generally concurred with our recommendations but expressed reservations
regarding our assessment of the adequacy of FEMA and SAMHSA oversight.
SAMHSA in a separate comment letter to FEMA, did not object to our
recommendations but did take issue with our assessment of its oversight,
particularly given the unprecedented circumstances that led to the
establishment of Project Liberty. SAMHSA also provided additional
information on the NYC DOEd claim issue. DHS's comment letter (reprinted
in appendix II) incorporates by reference SAMHSA's letter (reprinted in
appendix III). We also received technical comments from NYS OMH, NYC
DOHMH, and NYC DOEd on excerpts of the report, which we incorporated as
appropriate.

DHS stated that our report should give more weight to the unprecedented
conditions that led to Project Liberty, and that it was these unique
circumstances that led to our findings and were the basis for our
recommendations. It further stated that our recommendations primarily
relate to the use of grant funds by NYC DOEd, and that no similar issues

were identified with respect to the use of funds by other program
subgrantees.

Our report clearly acknowledges the unique and unprecedented circumstances
that led to the establishment of Project Liberty. These unique
circumstances were largely the basis for our conclusion that Project
Liberty required a high level of federal oversight. A number of red flags
signaled the need for a heightened federal role, including: the RSP grant
was the largest such grant ever made by FEMA; the program initially
designed to last about a year is now over 3  1/2 years old and still
ongoing, with an extension being considered to September 30, 2005; and
reimbursements for approximately $32 million, representing over 20 percent
of the total federal funds awarded, remained unresolved as of May 2005.
The fact that the level of federal oversight was not commensurate with the
unprecedented circumstances surrounding Project Liberty was what led us to
our findings and recommendations in this area.

Five of our eight recommendations relate to strengthening federal
financial oversight of future CCP grants; two of the recommendations
specifically address the NYC DOEd use of grant funds; and the remaining
recommendation calls for ensuring that lessons learned from Project
Liberty will be used to improve future programs funded by the CCP. Thus,
DHS was incorrect in stating that our recommendations primarily relate to
the NYC DOEd issues.

As to FEMA's statement that we did not identify any other issues about the
use of grant funds, the scope of our work included determining the extent
to which Project Liberty expended grant funds and whether the federal
government had adequate financial oversight of Project Liberty. Our work
did not address whether payments made, including those made by NYC DOEd,
were a valid use of federal resources. We have no basis for reaching the
conclusion suggested by FEMA.

SAMHSA's letter also discussed the unprecedented conditions surrounding
Project Liberty and, as discussed below, strongly disagreed with our
assessment that SAMHSA's financial oversight was limited. SAMHSA also
stated that during a recent site visit, NYC DOEd's Chief Financial Officer
indicated that documentation was available to support claims as necessary.
SAMHSA further stated that it will be recommending that the NYS OMH
conduct an independent audit of these claims as one of the conditions of
approving an extension of the grant to September 30, 2005. During our
fieldwork, we were consistently told by NYC DOHMH officials that NYC

DOEd had not been able to produce documentation for the majority of
expenses it incurred on behalf of Project Liberty that met the
documentation standards for reimbursement under federal grants. Given
ongoing questions about the existence of documentation supporting NYC DOEd
claims, the sufficiency of this documentation, or both, we agree that an
independent audit is appropriate.

SAMHSA stated that overall, the federal oversight of Project Liberty was
appropriate, reasonable, and responsive to state and local needs. SAMHSA
outlined several factors to support this statement, including that it
received financial data from the state of New York on a routine basis and
monitored the allocability, allowability, and reasonableness of project
expenditures. While SAMHSA acknowledged that project budget data were not
updated comprehensively, it stated that it did request and receive updated
budget information in several instances, particularly in conjunction with
project extensions. SAMHSA further stated that we had not cited any
problems with program expenditures but instead seemed to focus on
differences between classification of budgeted and reported expenditures.
SAMHSA acknowledged that the budget was not prepared in the same format as
reported expenditures, and stated that inconsistent categorization of
expense accounts were largely the reason for the classification
discrepancies we highlighted in our report.

Our conclusion that SAMHSA's oversight of Project Liberty's financial
information was limited was based in large part on the fact that the
SAMHSA did not have a basis to reliably monitor how Project Liberty was
using federal funds, since, as SAMHSA acknowledged, it did not have
updated budget information and the reported expenditure data were not
accurate due to classification discrepancies. At the time of our review,
SAMHSA was not aware of these discrepancies because it had not been
conducting basic analyses, such as comparisons between Project Liberty's
budgeted and reported expenses. Further, there were no staff with
financial backgrounds involved with the oversight of Project Liberty
expenditures. SAMHSA's limited oversight was based in part on the fact
that it did not deem the project high risk from a financial standpoint,
despite the complex federal, state, and local environment, the fact that
this was by far the largest RSP grant ever awarded by FEMA, the size and
diversity of the community being served, and the overall challenging and
changing circumstances of September 11. Overall, we found that SAMHSA's
level of oversight was not in line with these challenges and complexities
associated with Project Liberty.

SAMHSA went on to state that in its opinion, classification of Project
Liverty as high risk simply based on total estimated project expenditures
would be inappropriate. It further noted that there is no regulatory
mechanism allowing SAMHSA to assess risk on a complex federal, state, and
local government environment as was specified in our report.

We did not suggest that the risk classification should simply be based on
total estimated project expenditures. As discussed above, our report
clearly delineates a number of different risk factors that should have
been considered in the risk classification. Further, we disagree that the
current regulatory mechanism would not allow SAMHSA to consider these risk
factors in making its risk assessment of Project Liberty. While current
regulations do not require SAMHSA to consider programmatic factors in its
risk assessment, they do not prevent SAMHSA from considering risk factors
other than those delineated in its regulations in its overall assessment
of the program and its operations. As noted by SAMHSA in its written
comments, Project Liberty was by far the largest and most complex effort
in the 30-year history of the CCP and presented unique and unprecedented
challenges for government authorities at all levels. We believe these
should have been key factors in SAMHSA's risk assessment and should have
triggered heightened financial oversight of Project Liberty.

As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
its date. At that time, we will send copies to appropriate House and
Senate committees; the Secretary of Homeland Security; the Under Secretary
of Homeland Security for Emergency Preparedness and Response; the
Administrator, Substance Abuse and Mental Health Services Administration;
the Director, Office of Management and Budget; and other interested
parties. We will make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site at
http://www.gao.gov.

If you or your staffs have any questions about this report, please contact
me at (202) 512-8341 or [email protected]. Contact points for our Offices of

Congressional Relations and Public Affairs may be found on the last page
of this report. Major contributors to this report are listed in appendix
IV.

Linda M. Calbom Director, Financial Management and Assurance

Appendix I

                       Objectives, Scope, and Methodology

To determine the extent to which Project Liberty spent the Immediate
Services Program (ISP) and Regular Services Program (RSP) grant funds
received from the Federal Emergency Management Agency (FEMA), we did the
following:

o 	Reviewed various documents, including quarterly RSP expenditure reports
for the first (June 15, 2002, through September 14, 2002) through the
ninth (June 15, 2004, through September 30, 2004) quarters; a detailed
listing of the outstanding advance balances as of September 30, 2004,
obtained from the Research Foundation for Mental Hygiene, Inc. (RFMH); a
summary of expense claims submitted by the New York City Department of
Education (NYC DOEd) as of March 2005; internal control summaries prepared
by NYC DOEd for its personnel and otherthan-personnel expenses; a draft
internal control summary prepared by NYC DOEd for its community-based
expenses; Crisis Counseling Assistance and Training Program (CCP) guidance
on appropriate uses of grant funds; and FEMA and Department of Health and
Human Services (HHS) regulations pertaining to the CCP.

o 	Interviewed officials from FEMA's headquarters and finance office, the
Substance Abuse and Mental Health Services Administration's (SAMHSA)
Center for Mental Health Services (CMHS), the New York State Office of
Mental Health (NYS OMH), RFMH, the New York City Department of Health and
Mental Hygiene (NYC DOHMH), and NYC DOEd.

o 	Determined that the total expenditures data obtained from RFMH and
Project Liberty's quarterly expenditure reports were sufficiently reliable
for the purposes of this report by the following:

o 	Obtaining and reviewing a copy of the independent auditor's report of
RFMH's financial statements for fiscal years ending March 31, 2004 and
2003, and Report on Compliance and on Internal Control Over Financial
Reporting Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards as of March 31, 2004. We
determined that RFMH received a clean opinion on its fiscal year 2004 and
2003 financial statements. In addition, the auditor concluded that its
tests of RFMH's compliance with certain provisions of laws, regulations,
contracts, and grants did not disclose any instances of noncompliance that
are required to be reported under Government Auditing Standards. Finally,
the auditor's consideration of internal control over RFMH's financial

Appendix I
Objectives, Scope, and Methodology

reporting did not identify any matters involving the internal control over
financial reporting and its operation that it considered to be material
weaknesses.

o 	Analyzing a database obtained from RFMH of the payments made on behalf
of Project Liberty for the ISP and RSP from the first payment made on
September 25, 2001, through September 30, 2004, including advances made to
service providers.

o 	Determining that the amount of the payments included in the database
was consistent with the total reported expenditures in the ISP final
report and the RSP quarterly expenditure reports that were prepared by
Project Liberty and submitted to SAMHSA and FEMA.

o 	Comparing the Project Liberty expenditures as reported by RFMH to
drawdowns reported by SAMHSA on Project Liberty's RSP grant award.

o 	Obtaining a written certification of data completeness from the
Managing Director of RFMH that the expenditures reported in the database
were complete and accurate for all payments made for, or on behalf of,
Project Liberty for the ISP and the RSP through September 30, 2004.

o 	Reviewing Single Audit Act reports for fiscal years 2003 and 2002 of
New York City and surrounding counties.

To determine whether the federal government had an effective process in
place to determine the amount of funds to provide to Project Liberty, we

o 	interviewed officials from FEMA headquarters, SAMHSA's CMHS, NYS OMH,
and RFMH;

o 	reviewed various documents, including the state of New York's ISP and
RSP grant applications, the ISP and RSP grant awards, and federal guidance
for the CCP, including the Robert T. Stafford Disaster Relief and
Emergency Assistance Act and FEMA and HHS regulations; and

o 	reviewed correspondence between officials from FEMA, SAMHSA's CMHS, NYS
OMH, and RFMH.

To assess federal oversight over Project Liberty's expenditures, we

Appendix I
Objectives, Scope, and Methodology

o 	obtained an understanding of CCP oversight roles and responsibilities
by reviewing FEMA and HHS regulations, FEMA and SAMHSA's fiscal year 2004
interagency agreement, CCP fiscal guidelines, HHS's grants management
manual, summary documents of the CCP's oversight structure prepared by
SAMHSA, and GAO reports;

o 	reviewed available documentation of oversight performed for Project
Liberty, including Project Liberty's financial reports and documentation
of site visits conducted by FEMA and SAMHSA;

o 	analyzed Project Liberty's financial reports and compared them to
initial grant budgets;

o 	designed our work to assess the effectiveness of federal oversight and
therefore considered but did not assess the controls over Project Liberty
payments implemented at the state and local levels;

o 	interviewed officials from FEMA headquarters and the FEMA regional
office that serves New York, SAMHSA's CMHS, SAMHSA's Division of Grants
Management, NYS OMH, and RFMH to identify policies and procedures for
overseeing Project Liberty; and

o 	reviewed and used Standards for Internal Control in the Federal
Government as criteria.

To identify the steps that have been taken by the federal government in
partnership with the state of New York to assess Project Liberty, we

o 	reviewed documentation of assessments performed, including a draft of
the National Center for Post-Traumatic Stress Disorder case study of
Project Liberty, NYS OMH summaries of survey results, an article written
by the Deputy Commissioner of NYS OMH on lessons learned about the mental
health consequences of the September 11 terrorist attacks, articles
published by the New York Academy of Medicine, and documentation from FEMA
related to its internal review of the CCP;

o 	reviewed various documents related to Project Liberty including the
grant applications and the response to conditions of the grant award set
out by FEMA and SAMHSA;

o 	reviewed GAO and FEMA Office of Inspector General reports to determine
whether the CCP was evaluated; and

                                   Appendix I
                       Objectives, Scope, and Methodology

o 	interviewed officials from FEMA headquarters, SAMHSA's CMHS, and NYS
OMH.

We requested written comments on a draft of this report from the Secretary
of Homeland Security. We received written comments from DHS. The DHS
comments (reprinted in app. II) incorporate by reference a letter from
SAMHSA to FEMA commenting on the draft (reprinted in app. III). We also
provided excerpts of a draft for technical comment to NYS OMH, NYC DOHMH,
and NYC DOEd. NYS OMH technical comments and the coordinated NYC DOHMH and
NYC DOEd technical comments are incorporated as appropriate.

We performed our work from July 2004 through March 2005 in accordance with
generally accepted government auditing standards.

  Organizations Contacted

Federal Agencies	Department of Homeland Security, Federal Emergency
Management Agency

o  Headquarters

o  New York Regional Office

o  Finance Office

Department of Health and Human Services, Substance Abuse and Mental Health
Services Administration

o  Center for Mental Health Services

o  Division of Grants Management

State of New York	New York State Office of Mental Health Research
Foundation for Mental Hygiene, Inc.

Appendix I
Objectives, Scope, and Methodology

New York City	New York City Department of Health and Mental Hygiene New
York City Department of Education

Appendix II

Comments from the Department of Homeland Security

Appendix II Comments from the Department of Homeland Security

Appendix III

Comments from the Substance Abuse and Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix III
Comments from the Substance Abuse and
Mental Health Services Administration

Appendix IV

                     GAO Contact and Staff Acknowledgments

GAO Contact Linda Calbom, (202) 512-8341.

Acknowledgments	Robert Owens (Assistant Director), Donald Neff
(Auditor-in-Charge), Lisa Crye, Edward Tanaka, and Brooke Whittaker made
key contributions to this report.

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