Hurricane Katrina: GAO's Preliminary Observations Regarding	 
Preparedness, Response, and Recovery (08-MAR-06, GAO-06-442T).	 
                                                                 
The size and strength of Hurricane Katrina resulted in one of the
largest natural disasters in our nation's history. Hurricane	 
Katrina raised major questions about our nation's readiness and  
ability to respond to catastrophic disasters. Hurricane Rita	 
increased demands on an already stressed response and recovery	 
effort by all levels of government. The two hurricanes provided a
sobering picture of the overwhelming strains on response and	 
recovery if there are back-to-back catastrophic disasters in the 
same area. GAO has a large body of ongoing work on a range of	 
issues relating to all phases of the preparation, response,	 
recovery, and rebuilding efforts related to Hurricanes Katrina	 
and Rita.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-442T					        
    ACCNO:   A48617						        
  TITLE:     Hurricane Katrina: GAO's Preliminary Observations	      
Regarding Preparedness, Response, and Recovery			 
     DATE:   03/08/2006 
  SUBJECT:   Disaster planning					 
	     Disaster recovery					 
	     Disaster recovery plans				 
	     Disaster relief aid				 
	     Emergency preparedness				 
	     Federal agency reorganization			 
	     Hurricane Katrina					 
	     Hurricane Rita					 
	     Hurricanes 					 
	     Intergovernmental relations			 
	     Lessons learned					 
	     Natural disasters					 
	     Risk management					 
	     Strategic planning 				 

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GAO-06-442T

     

     * Background
     * Leadership, Planning, Exercises, and Capabilities Underpin C
          * Leadership Roles, Responsibilities, and Lines of Authority M
          * Procedures for Activating the NRP and Applying It to Emergin
          * Planning, Training, and Exercises Can Aid Preparation for Ca
          * Emergency Management Capabilities Require Greater Emphasis f
     * Planning for a Catastrophic Disaster Calls for a Risk Manage
          * Risk Management Is A Continuous Process
          * Risk Management Can Aid in Investment Decisions for a Catast
          * Specific Capabilities Can Be Identified
          * A Focus on Assessing Planning and Capabilities Will Be Criti
     * Organizational Placement Has Been Raised as a Key FEMA Perfo
          * Factors Other Than Organizational Placement May Impact FEMA'
          * Certain Criteria Could Be Used if a Change in FEMA's Organiz
     * Long Term Rebuilding Efforts Raise Issues for Congressional
          * The Hurricanes' Destruction Resulted in Widespread Adverse E
          * Rebuilding Strategies Are Underway
          * Transportation Infrastructure Was Significantly Damaged and
          * Federal Facilities Were Damaged or Destroyed
          * Federal Flood Insurance Program Faces Record Claims and Fina
          * The Small Business Administration's Disaster Loan Program Al
          * Uncertainty About Catastrophic Disasters Affects the Availab
          * The Federal Role and Involvement Will Raise Ongoing Issues
     * Concluding Observations
     * GAO Contacts
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

                 United States Government Accountability Office

Testimony before the Senate Homeland Security and Governmental Affairs
Committee

For Release on Delivery Expected at 9:30 a.m. EST March 8, 2006

HURRICANE KATRINA

 GAO's Preliminary Observations Regarding Preparedness, Response, and Recovery

Statement of David M. Walker Comptroller General of the United States

  GAO-06-442T

HURRICANE KATRINA:

GAO's Preliminary Observations Regarding Preparedness, Response, and
Recovery

  What GAO Found

Significant government and private resources were mobilized to respond to
the hurricanes. However, these capabilities were clearly overwhelmed and
there was widespread dissatisfaction with the results. Many of the lessons
emerging from Hurricanes Katrina and Rita are similar to those we
identified more than a decade ago, in the aftermath of Hurricane Andrew in
1992, which leveled much of South Florida. Four major issues have emerged
from our preliminary work:

     o The preparation and response to Hurricane Katrina are similar to
       lessons learned from past catastrophic disasters. These include the
       critical importance of (1) clearly defining and communicating
       leadership roles, responsibilities, and lines of authority for
       catastrophic response in advance of such events, (2) clarifying the
       procedures for activating the National Response Plan and applying them
       to emerging catastrophic disasters, (3) conducting strong advance
       planning and robust training and exercise programs, and (4)
       strengthening response and recovery capabilities for a catastrophic
       disaster.
     o A risk management decision making approach is vital to develop the
       nation's capabilities and expertise to respond to a catastrophic
       disaster. Given the likely costs, Congress should consider using such
       an approach in deciding how best to invest in specific capabilities
       for a catastrophic disaster.
     o Because of FEMA's mission performance during Hurricane Katrina,
       concerns have been raised regarding the agency's organizational
       placement, including whether it should be disbanded and functions
       moved to other agencies, remain within the Department of Homeland
       Security, or become an independent agency. However, other factors such
       as leadership and resources may be more important to FEMA's future
       success than organizational placement.
     o Lastly, the federal government will be a major partner in the
       longer-term rebuilding of the Gulf Coast, supporting state and local
       efforts. The federal role in rebuilding will be particularly important
       for transportation and health infrastructures and federal facilities.
       In addition, federal programs will face financial difficulties and
       there is uncertainty about catastrophic losses affecting the
       availability and affordability of insurance. Long term rebuilding
       raises issues concerning the need for consensus on what rebuilding
       should be done, who will pay for what, and what oversight is needed to
       ensure federal funds are spent for their intended purposes.

                 United States Government Accountability Office

Madame Chairman and Members of the Committee:

I appreciate the opportunity to participate in today's hearing to discuss
our work stemming from the catastrophic hurricanes in the Gulf Coast last
fall. GAO has a large body of ongoing work on a range of issues relating
to all phases of the preparation, response, recovery, and rebuilding
efforts related to Hurricanes Katrina and Rita. We currently have nearly
40 different engagements underway. Consequently, my remarks today are
preliminary, but well grounded in the work we have done to-date as well as
our completed work on prior disasters and catastrophes. We also recently
provided to this committee a summary of the views of several groups
regarding potential changes to the national emergency response system. In
the coming months, we will provide Congress with more detailed findings,
and a comprehensive summary of what went well and why, what did not go
well and why, and what specific changes, if any, are called for in this
nation's emergency preparedness, response, and recovery system. In
addition, based on the work reflected in our recent testimony before the
committee on fraud and abuse related to the Individuals and Households
Program, we plan to issue recommendations to FEMA intended to strengthen
fraud prevention controls over the process for applying for disaster
benefits, including validating an individual's identity and damaged
property address. 1

Hurricane Katrina was one of the largest natural disasters in our nation's
history; its size and strength will have long standing effects for years
to come. It exacted terrible human costs with the loss of significant
numbers of lives and resulted in billions of dollars in property damage.
The fact that Hurricane Rita followed closely on the heels of Hurricane
Katrina only added to the destruction and suffering. It also increased
demands of an already stressed response and recovery effort by all levels
of government, especially in Louisiana. Moreover, the two hurricanes
provided a sobering picture of the overwhelming strains on disaster
response and recovery if there are back-to-back catastrophic disasters in
the same area.

Significant local, state, and federal resources were mobilized to respond
to the Hurricane Katrina disaster, along with significant participation
from charitable and private sector organizations. However, the
capabilities of several federal, state, and local agencies were clearly
overwhelmed,

1GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
Abuse.

GAO-06-403T. (Washington: D.C.: February 13, 2006).

    Page 1 GAO-06-442T

especially in Louisiana. Therefore, there was widespread dissatisfaction
with the level of preparedness and the collective response. As events
unfolded in the immediate aftermath and ensuing days after Hurricane
Katrina's final landfall, responders at all levels of government-many
victims themselves-encountered significant breakdowns in vital areas such
as emergency communications as well as obtaining essential supplies and
equipment.

The causes of these breakdowns must be well understood and addressed in
order to strengthen the nation's ability to prepare for, respond to, and
recover from major catastrophic events in the future-whether natural or
man-made. Unfortunately, many of the lessons emerging from Hurricanes
Katrina and Rita are similar to those we identified more than a decade
ago, in the aftermath of Hurricane Andrew in 1992, which leveled much of
South Florida. The experience of Hurricane Andrew raised questions about
whether and how national disaster response efforts had incorporated
lessons from experiences with Hurricane Hugo in 1989. All critical players
must do much more to learn from past mistakes and actually implement
recommendations that address prior deficiencies in preparing for and
responding to catastrophic disasters. However, these actions will not be
cost-free-posing a range of challenges in determining the priority of
various action steps and how they will be funded.

GAO staff have visited areas most affected by Hurricanes Katrina and
Rita-Alabama, Louisiana, Mississippi, and Texas. They have interviewed
officials and analyzed information from the various involved federal
agencies such as the Department of Homeland Security's Federal Emergency
Management Agency (FEMA) and the Department of Defense (DOD); state and
local organizations, including state emergency management agencies; state
adjutant generals; local officials; and representatives from
nongovernmental agencies. I have personally toured southern Mississippi,
southern Louisiana, and the city of New Orleans. I also have had
discussions with many governmental and other officials, including the
governors of Alabama, Mississippi, Louisiana, and Texas; the mayor of New
Orleans; the principal federal official on the scene; the joint task force
commander of active duty forces, and the federal coordinator for federal
support for the Gulf Coast's recovery and rebuilding. Additionally, we
have closely followed the hearings conducted by this Committee, the
House's Select Committee to Investigate the Preparation for and Response
to Hurricane Katrina, and other Congressional committees on Hurricane
Katrina issues. We have studied the House Select Committee report and are
carefully reviewing the recently issued White House report on lessons
learned from the federal response to Hurricane Katrina. Finally, we
discussed our preliminary observations with the Deputy Secretary of the
Department of Homeland Security.

In addition, we have done a great deal of work on prior disasters. In
1993, we conducted several reviews examining the federal response to
Hurricane Andrew. The reviews focused on the unique challenges involved in
responding to "catastrophic disasters." 2 These reviews defined
"catastrophic disasters" as a subset of other disasters requiring federal
assistance. Unlike the bulk of the disasters requiring FEMA to respond,
catastrophic disasters can overwhelm the ability of state, local and
voluntary agencies to adequately provide victims with essential services,
such as food and water, within 12 to 24 hours. These prior GAO reports
focused on improving the immediate response to catastrophic disasters, and
we made various recommendations within this context. We recommended that,
in a catastrophic disaster, (1) a single individual directly responsible
and accountable to the President should be designated to act as the
central focal point to lead and coordinate the overall federal response
when a catastrophic disaster has happened or is imminent, (2) FEMA should
immediately establish a disaster unit to independently assess damage and
estimate response needs following a catastrophic disaster, and (3) FEMA
should enhance the capacity of state and local governments to respond to
catastrophic disasters by

(a) continuing to give them increasing flexibility to match grant funding
with individual response needs, (b) upgrading training and exercises for
catastrophic disaster response, and (c) assessing each state's
preparedness for catastrophic disaster response. We also recommended that
Congress should consider (1) giving FEMA and other federal agencies
explicit authority to take actions to prepare for catastrophic disasters
when there is warning and (2) removing statutory restrictions on DOD's
authority to activate Reserve units for catastrophic disaster relief.

Unfortunately, some of these recommendations were not adopted or in effect
when Hurricane Katrina hit the Gulf Coast. We continue to believe, for the
most part, these recommendations are still viable, as we discuss later in
this testimony. For example, current DOD strategy calls for reliance on
the reserve components (National Guard and reserves) for civil support
missions. Modifying statutory restrictions to allow for the use

See, for example, GAO, Disaster Management: Improving the Nation's
Response to Catastrophic Disasters , GAO-93-186 ( Washington, D.C.: July
23, 1993) and GAO, Disaster Management: Recent Disasters Demonstrate the
Need to Improve the Nation's Response Strategy, GAO-93-46 ( Washington,
D.C.: May 25, 1993).

    Page 3 GAO-06-442T

of the reserves for catastrophic disasters would provide greater access to
Reserve units in the event they are needed for future responses.

Other work we have conducted related to disaster preparedness and
management has involved programs to prevent or mitigate disasters or to
improve the capabilities and readiness of first responders. We have
identified needed improvements in a number of areas, including
preparedness for "all-hazards," balancing efforts to prepare for emergency
incidents resulting from terrorism and natural disasters or man-made
accidents; support for training, exercises, evaluations, and disseminating
lessons learned to first responders; and interoperable communications for
first responders. Similarly, our work on response to disasters has
identified a number of problems, such as the lack of clarity of various
federal, state, and local roles in coordinating the response and medical
and public health response capabilities.

Today, I will cover several major areas based on our preliminary work
related to the 2005 hurricane season. In summary:

     o Four key themes underpin many of the challenges encountered in the
       response to Hurricane Katrina and are similar to lessons learned from
       past catastrophic disasters. These include the central importance of
       (1) clearly defining and communicating leadership roles,
       responsibilities, and lines of authority for response in advance of a
       catastrophic disaster, (2) clarifying the procedures for activating
       the National Response Plan and applying them to emerging catastrophic
       disasters, (3) conducting strong advance planning and robust training
       and exercise programs, and (4) strengthening response and recovery
       capabilities for a catastrophic disaster.
     o It is vital to have in place a risk management decision making
       approach to develop federal capabilities and the expertise to use them
       to respond to a catastrophic disaster. Given the likely costs,
       Congress should consider using such an approach in deciding how best
       to invest in specific capabilities for a catastrophic disaster.
     o Because of FEMA's mission performance during Hurricane Katrina,
       concerns have been raised regarding the agency's organizational
       placement, including whether it should be disbanded and functions
       moved to other agencies, remain within the Department of Homeland
       Security, or again become an independent agency. Importantly, other
       factors, such as the experience and training of FEMA leadership and
       the adequacy of its resources may be more important to FEMA's future
       success than its organizational placement.
     o Lastly, the federal government will be a major partner in the
       longer-term rebuilding of the Gulf Coast because of the widespread
       damage and economic impact. In support of state and local efforts, the
       federal role in rebuilding will be particularly important for
       transportation and health care infrastructures and federal facilities.
       In addition, federal programs will face financial difficulties and
       there is uncertainty concerning the impact of catastrophic disasters
       on the availability and affordability of insurance. Long term
       rebuilding raises issues concerning the need for consensus on what
       rebuilding should be done, where and based on what standards, who will
       pay for what, and what oversight is needed to ensure federal funds are
       spent prudently and for their intended purposes.

                                   Background

There are several federal legislative and executive provisions that
support preparation for and response to emergency situations. The Robert
T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford
Act) 3 primarily establishes the programs and processes for the federal
government to provide major disaster and emergency assistance to states,
local governments, tribal nations, individuals, and qualified private
nonprofit organizations. FEMA has responsibility for administering the
provisions of the Stafford Act.

Upon a governor's request, the President can declare an "emergency" or a
"major disaster" under the Stafford Act, which triggers specific types of
federal relief. The Stafford Act defines an emergency as any occasion or
instance for which, in the determination of the President, federal
assistance is needed to supplement state and local efforts and
capabilities to save lives and to protect property and public health and
safety, or to lessen or avert the threat of a catastrophe in any part of
the United States. Under an emergency declaration, the federal government
has authority to engage in various emergency response activities, debris
removal, temporary housing assistance, and the distribution of medicine,
food, and other consumables. The Stafford Act places a $5 million limit on
federal emergency assistance, but the President may exceed the limit,
followed by a report to Congress.

The Stafford Act defines a "major disaster" as any natural catastrophe or,
regardless of cause, any fire, flood, or explosion, in any part of the
United States, which the President determines causes damage of sufficient

3

42 U.S.C. S:S: 5121-5206.

severity and magnitude to warrant major disaster assistance under the
Stafford Act to supplement the efforts and available resources of states,
local governments, and disaster relief organizations in alleviating
damage, loss, hardship, or suffering. Under a major disaster declaration,
the federal government has the authority to engage in the same activities
authorized under an emergency declaration, but without the $5 million
ceiling. In addition, major disaster assistance includes a variety of
assistance not available in the context of an emergency. For example, in a
major disaster, the federal government may provide unemployment
assistance, food coupons to low-income households, and repair, restoration
and replacement of certain damaged facilities, among other things.

For Hurricane Katrina, the President issued emergency declarations under
the Stafford Act for Louisiana on August 27, 2005 and Mississippi and
Alabama on August 28, 2005. The President made major disaster declarations
for Florida on August 28, 2005, and Louisiana, Mississippi, and Alabama on
August 29, 2005, the same day that Hurricane Katrina made final landfall
in the affected states.

The Homeland Security Act of 2002 4 required the newly established DHS to
develop a comprehensive National Incident Management System (NIMS) and a
comprehensive National Response Plan (NRP). NIMS is intended to provide a
consistent framework for incident management at all jurisdictional levels
regardless of the cause, size, or complexity of the situation and to
define the roles and responsibilities of federal, state, and local
governments, and various first responder disciplines at each level during
an emergency event. NIMS established the Incident Command System (ICS) as
a standard incident management organization with five functional
areas-command, operations, planning, logistics, and
finance/administration-for management of all major incidents. It also
prescribes interoperable communications systems and preparedness before an
incident happens, including planning, training, and exercises.

The Homeland Security Act of 2002 also required DHS to consolidate
existing federal government emergency response plans into a single,
coordinated national response plan. In December 2004, DHS issued the
National Response Plan (NRP), intended to be an all-discipline,
all-hazards plan establishing a single, comprehensive framework for the
management of domestic incidents where federal involvement is necessary.
It is to

Pub. L. No. 107-296, 116 Stat. 2135 (2002).

operate within the framework of NIMS. The NRP only applies to incidents of
national significance, defined as an actual or potential high-impact event
that requires a coordinated and effective response by an appropriate
combination of federal, state, local, tribal, nongovernmental, and/or
private-sector entities in order to save lives and minimize damage, and
provide the basis for long-term community recovery and mitigation
activities. The NRP does not apply to the majority of incidents occurring
each year that are handled by local jurisdictions or agencies through
established authorities and existing plans under the planning assumption
that incidents are typically managed at the lowest possible geographic,
organizational, and jurisdictional level.

The NRP states that the Secretary of Homeland Security, as the principal
federal official for domestic incident management, designates incidents of
national significance, pursuant to the criteria in Homeland Security
Presidential Directive 5 (HSPD-5). HSPD-5 requires one or more of the
following to qualify as an incident of national significance:

(1) a federal department or agency acting under its own authority has
requested the assistance of the Secretary of Homeland Security, (2) the
resources of state and local authorities are overwhelmed and federal
assistance has been requested by the appropriate state and local
authorities, 5 (3) more than one federal department or agency has become
substantially involved in responding to an incident, or (4) the Secretary
of Homeland Security has been directed to assume responsibility for
managing a domestic incident by the President.

The Secretary of Homeland Security provides overall coordination for
incidents of national significance. Under the NRP, a principal federal
official (PFO) is to be personally designated by the Secretary of Homeland
Security for a particular incident and is to be the primary point of
contact and provide local situational awareness for the secretary. Under
the NRP, the PFO is to coordinate the activities of the senior federal law
enforcement official for the incident, the federal coordinating officer
(FCO) who manages and coordinates federal resource support activities
related to Stafford Act disasters and emergencies, and other federal
officials involved in incident management activities acting under their
own authorities. The PFO does not have directive authority over these
officials, but is to play a coordinating function under the NRP. The
Stafford Act

The NRP notes that major disasters and emergencies under the Stafford Act
are examples of this criterion.

    Page 7 GAO-06-442T

requires that a FCO be appointed to coordinate relief for major disasters
and emergencies declared by the President. The FCO retains this
coordination authority notwithstanding the appointment of a PFO under the
NRP.

The NRP can be partially or fully implemented in anticipation of or in
response to an incident of national significance. The NRP base plan
includes planning assumptions, roles and responsibilities, concept of
operations, and incident management actions. Annexes (i.e. appendixes) to
the NRP provide more detailed information on emergency support functions
such as transportation and communications and functional processes and
administrative requirements such as financial management and international
coordination. Incident annexes address contingency or hazard situations
that require specialized application of the NRP for incidents of national
significance.

The Catastrophic Incident Annex of the NRP references "catastrophic
incidents." The NRP defines a catastrophic incident as any natural or
manmade incident, including terrorism, resulting in extraordinary levels
of mass casualties, damage, or disruption severely affecting the
population, infrastructure, environment, economy, national morale, and/or
government functions. A catastrophic incident could result in sustained
national impacts over a prolonged period of time; almost immediately
exceeds resources normally available to state, local, tribal, and
privatesector authorities in the impacted area; and significantly
interrupts governmental operations and emergency services to such an
extent that national security could be threatened.

The Catastrophic Incident Annex describes an accelerated, proactive
national response to catastrophic incidents. The annex establishes
protocols to pre-identify and rapidly deploy key essential resources that
are expected to be urgently needed or required to save lives and contain
incidents. Expedited assistance can be provided in one or more areas, such
as mass care, housing, human services, urban search and rescue, and public
health and medical support.

A draft of a more detailed and operationally specific Catastrophic
Incident Supplement for the NRP's Catastrophic Incident Annex had not been
approved at the time of Hurricane Katrina, although the NRP's 120-day
schedule for implementing the supplement had passed. The draft supplement
is intended to provide the operational framework for implementing the
annex. The draft supplement, for example, includes operations to be
carried out by local, state, and federal responders;

  Leadership, Planning, Exercises, and Capabilities Underpin Catastrophic
  Preparation, Response, and Recovery

detailed execution schedules and implementation strategies; functional
capability overviews (such as coverage for transportation support); and
key responsibilities of federal departments and agencies. The draft
supplement language says it is designed for catastrophic incidents that
occur with little or no notice, without an opportunity for advance
planning and positioning of resources. The Secretary of Homeland Security
is to make a catastrophic incident designation to activate the provisions
of the Catastrophic Incident Annex. Otherwise, the basic provisions of the
NRP will apply to the incident. The Secretary of Homeland Security
declared Hurricane Katrina an incident of national significance on August
30, 2005, but never declared it a catastrophic incident.

I will now turn to the four major topics I identified at the beginning of
my testimony.

Four key themes, based on our preliminary work, underpin many of the
challenges encountered in the response to Hurricane Katrina and reflect
certain lessons learned from past catastrophes. These are generally
consistent with the themes I highlighted in a statement to the House
Select Committee. 6 They include the central importance of (1) clearly
defining and communicating leadership roles, responsibilities, and lines
of authority for the response at all levels in advance of a catastrophic
disaster, (2) clarifying the procedures for activating the National
Response Plan and applying them to emerging catastrophic disasters, (3)
conducting strong advance planning and robust training and exercise
programs to test these plans in advance of a real disaster, and (4)
strengthening response and recovery capabilities for a catastrophic
disaster, including those such as emergency communications, continuity of
essential government services, and logistics and distribution systems
underpinning citizen safety and security. They have been among the topics
covered in this committee's hearings and were also highlighted among the
many factors in the House Select Committee report and the White House
report.

6

GAO, Statement by Comptroller General David M. Walker on GAO's Preliminary
Observations Regarding Preparedness and Response to Hurricanes Katrina and
Rita, GAO-06-365R (Washington, D.C.: February 1, 2006).

Page 9 GAO-06-442T

Leadership Roles, Responsibilities, and Lines of Authority Must Be Clearly
Defined and Communicated in Advance of Catastrophic Disasters

In the event of a catastrophic disaster, the leadership roles,
responsibilities, and lines of authority for the response at all levels
must be clearly defined and effectively communicated in order to
facilitate rapid and effective decision making, especially in preparing
for and in the early hours and days after the disaster. During incidents
of national significance, including catastrophic disasters, the overall
coordination of federal incident management activities is executed through
the Secretary of Homeland Security. Other federal departments and agencies
are to cooperate with the secretary in the secretary's domestic incident
management role.

There are three key roles in the management of a catastrophic disaster.
First, the Secretary of Homeland Security provides strategic, national
leadership. The Secretary of Homeland Security is to act as a focal point
for natural and manmade crises and emergency planning under the provisions
of the Homeland Security Act. In addition, HSPD-5, signed by the
President, also names the secretary as the principal federal official for
domestic incident management. This is consistent with our recommendation
in 1993 that a single individual directly responsible and accountable to
the President should be designated to act as the central focal point to
lead and coordinate the overall federal response in the event of a
catastrophic disaster. 7 At the time of our recommendation in 1993, FEMA
was an independent agency. President Clinton elevated the FEMA director to
cabinet status in 1996. Subsequent passage of the Homeland Security Act
established the DHS secretary as the cabinet-level focal point for natural
and manmade crises and emergency planning. We view this as a strategic
role to coordinate federal activities and policy from a national
standpoint and be directly responsible and accountable to the President.

The second key role is the principal federal official (PFO) whom the
Secretary of Homeland Security designates to be the secretary's
representative under the NRP structure and to coordinate the federal
response at an operational level. The third role is that of a federal
coordinating officer (FCO) which, under the Stafford Act, is to coordinate
relief for major disasters and emergencies declared by the President.

The Secretary of Homeland Security initially designated the head of FEMA
as the PFO, who appointed separate FCOs for Alabama, Louisiana, and
Mississippi for Hurricane Katrina. However, it appeared there were

7 GAO-93-46 summarizes GAO work in 1993 that contains this recommendation.

Procedures for Activating the NRP and Applying It to Emerging Catastrophic
Disasters Should Be Clarified

shifting roles and responsibilities of the players in all 3 of these
roles. Our initial field work indicated this resulted in disjointed
efforts of many federal agencies involved in the response, a myriad of
approaches and processes for requesting and providing assistance, and
confusion about who should be advised of requests and what resources would
be provided within specific time frames.

The House Select Committee also found difficulties with roles and
responsibilities, including federal officials' unfamiliarity with their
roles and responsibilities under the NRP and NIMS. The White House has
made numerous recommendations, including revising the NRP to address
situations that render state and local governments incapable of an
effective response, giving the PFO the authority to execute
responsibilities and coordinate federal response assets, and requiring
agencies to develop integrated operational plans, procedures, and
capabilities for their support to the base NRP and the NRP's emergency
support functions and support annexes.

Consistent with the provisions of the Homeland Security Act and the
Stafford Act, we recommend that DHS clarify and communicate the roles of
the secretary, the PFO, and the FCO. If legislative changes are
considered, the roles and responsibilities should be clarified
accordingly.

The NRP distinguishes between incidents that require DHS coordination,
termed Incidents of National Significance, and the majority of incidents
occurring each year, such as snow storms, that are handled by responsible
jurisdictions or agencies through other established authorities and plans.
However, the NRP is not clear regarding what triggers an incident of
national significance. To illustrate this ambiguity, the NRP's Planning
Assumptions provide that "all presidentially-declared disasters and
emergencies under the Stafford Act are considered Incidents of National
Significance," indicating that they do not need to be declared as such by
the Secretary of Homeland Security. Elsewhere, the NRP suggest that the
Secretary must formally declare an incident of national significance in
consultation with other department and agencies, as appropriate.

The question of how and when an event becomes an incident of national
significance was also raised in the White House report on the federal
response to Hurricane Katrina. According to the White House report, the
NRP did not make clear whether the secretary must formally declare an
incident of national significance or, alternatively, whether such an
incident is automatically triggered when one or more of the HSPD-5
criteria (discussed on page 7) are satisfied, including when the President
declares a disaster or emergency under the Stafford Act. In addition, the
White House report questioned whether an event becomes an incident of
national significance simply by satisfying an HSPD-5 criterion, or whether
additional considerations apply. The White House report observed that
since the NRP was adopted in December 2004, many parts of the NRP had been
used to various degrees and magnitudes for thirty declared Stafford Act
events to coordinate Federal assistance. Yet, the Secretary of Homeland
Security had never formally declared an Incident of National Significance
until Tuesday, August 30, 2005, after Hurricane Katrina made final
landfall.

We agree that the process and operational consequences of declaring an
incident of national significance should be further defined and clarified.
Without such clarification of the NRP, confusion will persist regarding
DHS's activation of the NRP. We therefore recommend that DHS clarify the
NRP regarding whether the Secretary of Homeland Security must formally
declare an incident of national significance to activate the NRP, and, if
not, whether the secretary must take any specific actions when the
President, in effect, activates the NRP by declaring a Stafford Act
emergency or major disaster.

In addition, we believe that the NRP's provisions regarding the proactive
response of the federal government to emerging catastrophic incidents
should be clarified. As I stated earlier, the NRP includes a Catastrophic
Incident Annex that describes an accelerated, proactive national response
to catastrophic incidents and establishes protocols to pre-identify and
rapidly deploy essential resources that are expected to be urgently needed
to save lives and contain incidents. At the time of Hurricane Katrina, a
draft of a more detailed and operationally specific Catastrophic Incident
Supplement to the annex had not been approved. Under the language of the
draft supplement, the annex would only apply to no-notice or shortnotice
catastrophic incidents, not incidents that may evolve or mature to
catastrophic magnitude, which could be the case with strengthening
hurricanes.

Because it is possible to respond to incidents maturing to catastrophic
magnitude in a more proactive manner than surprise catastrophic incidents,
it does not make sense to exclude evolving catastrophic incidents from the
scope of the annex's coverage. The White House report on the federal
response to Hurricane Katrina also questioned this exclusion. As the White
House report states, "Ultimately, when a catastrophic incident occurs,
regardless of whether the catastrophe has been a warned or is a surprise
event, the Federal government should not

Planning, Training, and Exercises Can Aid Preparation for Catastrophic
Disasters

rely on the traditional layered approach and instead should proactively
provide, or `push,' its capabilities and assistance directly to those in
need."

A proactive approach to catastrophic disasters when there is warning is
also in keeping with recommendations we made in 1993 following Hurricane
Andrew. At that time, from an administrative perspective, we recommended
that FEMA improve its catastrophic disaster response capability by using
existing authority to aggressively respond to catastrophic disasters,
assessing the extent of the damage, and then advising state and local
officials of identified needs and the federal resources available to
address them. From a legislative standpoint, we recommended that Congress
should consider giving federal agencies explicit authority to take actions
to prepare for catastrophic disasters when there is warning. We continue
to believe that actions such as these are warranted.

Madame Chairman, to increase the ability of the nation to prepare for,
respond to, and recover from catastrophic disasters such as Hurricane
Katrina, there should be strong advance planning, both within and among
responder organizations, as well as robust training and exercise programs
to test these plans in advance of a real disaster. By their very nature,
catastrophic disasters involve extraordinary levels of mass casualties,
damage, or disruption that likely will immediately overwhelm state and
local responders, circumstances that make sound planning for catastrophic
events all the more crucial. Our previous work on Hurricane Andrew
highlighted the importance of such plans to focus specifically on
catastrophic disasters.

Our initial review of the NRP base plan and its supporting catastrophic
annex as well as lessons based on Hurricane Katrina suggest that planning
must be strengthened to implement their provisions. Therefore, we
recommend that these documents should be supported and supplemented by
more detailed and robust operational implementation plans. Such
operational plans should, for example, further define and leverage any
military capabilities as might be needed in a catastrophic disaster. Prior
catastrophic disasters and the actual experience of Hurricane Katrina show
that DOD is likely to contribute substantial support to state and local
authorities, including search and rescue assets, evacuation assistance,
provision of supplies, damage assessment assets, and possibly helping to
ensure public safety. More detailed planning would provide greater
visibility and understanding of the types of support DOD will be expected
to provide following a catastrophic event, including the types of
assistance and capabilities that might be provided, what might be done
proactively and in response to specific requests, and how the efforts of
the active duty and National Guard would be integrated. We will be making
several recommendations to DOD to enhance its planning and response for
future events, in the areas of identifying specific active duty and
National Guard capabilities that would likely be available to respond to a
catastrophe, and integrating the active duty and National Guard response
including Guard units within and outside of the affected state. Planning
also must explicitly consider the need for, and management of, the
contractor community.

In addition, regular training and periodic exercises provide a valuable
way to test emergency management plans. In our previous work on Hurricanes
Andrew and Hugo, we identified the need for the federal government to
upgrade training and exercises for state and local governments
specifically geared towards catastrophic disaster response. Hurricane
Katrina demonstrated the potential benefits of applying lessons learned
from training exercises and experiences with actual hurricanes as well as
the dangers of ignoring them. During our initial fieldwork, we found
examples of how an incomplete understanding of NRP and NIMS roles and
responsibilities could lead to misunderstandings, problems, and delays.
For example, we were told in Louisiana that in one city there did not
appear to be clarity in roles and responsibilities, with officials not
knowing what federal agencies were responsible for. In one example in
Mississippi, we were told that county and city officials were not
implementing NIMS due to a lack of understanding of its provisions.

A November 2005 report by DHS's Office of Inspector General (OIG) on the
April 2005 "Top Officials 3 Exercise" noted that the exercise
highlighted-at all levels of government-a fundamental lack of
understanding regarding the principles and protocols set forth in the NRP
and NIMS, including confusion over the different roles and
responsibilities performed by the PFO and FCO. The report recommended that
DHS continue to train and exercise NRP and NIMS at all levels of
government and develop operating procedures that clearly define individual
and organizational roles and responsibilities under the NRP. We would see
this training and exercising effort as recognizing the role of joint
decision making and not result in a centralized, top-down process.

The 2004 "Hurricane Pam" planning exercise illustrates the benefits and
consequences of applying and not applying lessons learned from training
exercises and experiences with actual hurricanes for future catastrophic
disasters. This catastrophic hurricane exercise, sponsored by FEMA, was to
develop a response and recovery plan for a major hurricane that floods New
Orleans and the surrounding parishes and to identify any issues that could
not be resolved based on current capabilities. The weather scenario
involved a slow moving category 3 hurricane sustaining 120 mph winds at
landfall and generating a storm surge that inundated New Orleans under 15
to 20 feet of water. In addition to widespread flooding, the exercise
posed impacts of extensive evacuations and the resulting need to shelter
thousands of individuals left homeless after the storm, disposing of tons
of debris, and recreating school systems. We were told in Louisiana that
the exercise anticipated many of the events transpiring as the result of
Hurricane Katrina. The Hurricane Pam exercise and other planning
activities resulted in some action, but others were incomplete. For
example, efforts to finalize agreements with hospital and university
officials to create temporary medical operations staging areas around the
state did occur. Louisiana revised its contraflow evacuation plan.
However, plans for evacuating those with special needs and post-landfall
care and evacuation had not been finalized by the time Hurricane Katrina
made landfall. The House Select Committee also noted that the Hurricane
Pam exercise reflected recognition by all levels of government of the
dangers of a category 4 or 5 hurricane striking New Orleans.

The White House has made several recommendations regarding planning and
exercises to improve the response to catastrophic disasters such as
Hurricane Katrina. For example, the White House recommends that all
federal departments and agencies should develop emergency plans and a
response capability. Other White House recommendations are intended to
strengthen training, exercises, and lessons learned. To illustrate,
recommendations cover (1) strengthening Homeland Security Council
coordination of federal emergency training, exercises, and lessons
learned,

(2)
           DHS conducting state and local officials' training and exercises,
           and

(3)
           DHS establishing a national exercise and evaluation program. The
           White House also recommended development of a comprehensive
           homeland security professional development and education program.

We recommend that DHS provide strong oversight of federal, state, and
local planning, training, and exercises to ensure such activities fully
support preparedness, response, and recovery responsibilities at a
jurisdictional and regional basis. This should also include applying
lessons learned from actual major and catastrophic disasters. We will soon
be starting work examining DHS's catastrophic planning initiatives,
including Hurricane Pam, in order to help identify more specific
recommendations.

Emergency Management Capabilities Require Greater Emphasis for
Catastrophic Response and Recovery

The experience with Hurricanes Katrina and Rita highlights critical
emergency management capabilities that must be ramped up from normal
disaster management levels. Our preliminary work suggests that while many
organizations provided significant support in these areas during the
response and recovery efforts, several key capabilities were not available
when needed or with the quantity or quality needed. When catastrophic
disaster occurs, significantly more capabilities-in terms of quantity and
quality-are needed. Our work is beginning to identify many examples of
where the lack of additional response or recovery capabilities, or the
delay in getting these capabilities to where they were needed, caused
extended suffering.

I want to emphasize that across these capabilities, streamlining,
simplifying, and expediting decision making should quickly replace
"business as usual" and the unquestioned following of long-standing
policies and operating procedures. We were told of many examples where
quick action could not occur as agencies followed procedures that required
extensive, time-consuming processes, delaying the delivery of vital
supplies and other assistance. When there is a catastrophic disaster,
temporarily suspending certain rules and regulations may be necessary in
order to expedite relief and recovery of the affected area, even if such a
suspension requires legislation. The key is to recognize when flexibility
is needed to meet response and recovery needs in a catastrophic disaster.

Continuity of essential government operations: Hurricane Katrina exposed
difficulties in continuing essential government operations, particularly
at the local level. In the devastated areas, local government
infrastructure was destroyed and essential government employees, including
many first responders, were evacuated or victimized by the storms. Local
officials in Mississippi and Louisiana told us of cases where there was
limited continuity of operations for public safety and service agencies
because both structures and equipment were destroyed or too damaged to
use. For example, one Mississippi county lost all of its public buildings
located south of Interstate 10. We were also told criminal justice
facilities in New Orleans and St Bernard parishes were disabled as both
jurisdictions had to evacuate jails damaged by flood waters.

Emergency telecommunications: Agencies affected by a catastrophic disaster
must first be operable, with sufficient communications to meet everyday
internal and emergency communication requirements. Once operable, they
then should have communications interoperability whereby public safety
agencies (police, fire, EMS) and service agencies (public works,
transportation, hospitals, etc.) can communicate within and across
agencies and jurisdictions in real time. The storms significantly damaged
or destroyed communications infrastructure affecting public safety and
security in Louisiana, Mississippi, and Alabama. This is an area where
military capabilities can be utilized.

Our work on interoperable communications identified problem definition,
performance goals and standards, and defining the roles of federal, state,
local government and other entities as the three principal challenges to
achieving effective interoperable communications for first responders. The
single greatest barrier to addressing the decades-old problems of
interoperable communications has been the lack of effective,
collaborative, interdisciplinary, and intergovernmental planning. No one
first-responder group or governmental agency can "fix" the
interoperability problems that face the nation. We believe that our 2004
recommendations to the Secretary of DHS are still appropriate: (1) work
with the Federal Communications Commission to develop a nationwide
database of interoperable communications frequencies and a common
nomenclature so that first responders from different disciplines and
jurisdictions can quickly identify shared frequencies when arriving at the
scene of an incident; (2) establish interoperability requirements whose
achievement can be measured; and (3) through grants, encourage states to
establish statewide bodies that will develop a comprehensive statewide
interoperable communications plan and condition the purchase of new
equipment on the adoption of such a plan.

Damage and needs assessment: Damage and needs assessment is the capability
to immediately conduct damage assessments of infrastructure and to
estimate services needed by disaster victims. The scope of the devastation
and the flooding in the New Orleans area made a comprehensive damage
assessment and estimate of services victims might need very difficult.
Clearly, the military has significant capability through a range of
reconnaissance aircraft and satellite imagery. However, while some
capabilities were employed, there had been no advance planning among
federal, state, and local responders as to how DOD would provide these
capabilities in the event of a catastrophic disaster.

Logistics: Logistics is the capability to identify, dispatch, mobilize,
and demobilize and to accurately track and record available critical
resources throughout all incident management phases. Our early work
indicates that logistics systems were often totally overwhelmed by
Hurricane Katrina. The result was that critical resources apparently were
not available, properly distributed, or provided in a timely manner. In
addition, acquisition efforts, while noteworthy given the scope of
Hurricane Katrina, indicated agencies needed additional capabilities to
(1) adequately anticipate requirements for needed goods and services, (2)
clearly communicate responsibilities across agencies and jurisdictions,
and

(3) deploy sufficient numbers of personnel to provide contractor
oversight. 8

Evacuation: This capability involves evacuation to areas of safe refuge in
response to a potential or actual dangerous environment. Our early work
indicated that some evacuations were considered successful, but others
encountered serious challenges, including evacuating special needs
populations. Evacuating those in hospitals and nursing homes due to
Hurricane Katrina posed a special challenge. For example, although the
National Disaster Medical System (NDMS) is a mechanism through which the
federal government can provide assistance with patient evacuations, NDMS
has agreements with hospitals only and does not address the needs of
nursing homes. 9

Search and rescue: Search and rescue is the capability to coordinate and
conduct urban search and rescue response efforts for all hazards. Search
and rescue also requires a seamless transition from rescue to safe
shelter. The Coast Guard, state and local agencies, and military assets
rescued thousands in the aftermath of Hurricane Katrina. However,
particularly in New Orleans, those rescued may have been taken to high
ground where, because of flooding or roadway blockage, they spent hours or
days without shelter, food, or water.

Mass care (housing and human services): This is the capability to provide
immediate shelter, feeding centers, basic first aid, bulk distribution of
needed items, and related services to persons affected by a large-scale
incident, including special needs populations such as those with physical
or mental disabilities that need additional attention. Charities and other
organizations such as government agencies that provide human services,
supported by various federal programs, helped meet the mass care needs of
the hundreds of thousands of evacuees. However, because the American Red
Cross does not establish shelters in

8GAO, Hurricanes Katrina and Rita: Preliminary Observations on Contracting
for Response and Recovery Efforts, GAO-06-246T ( Washington, D.C.:
November 8, 2005).

For additional information, see GAO, Disaster Preparedness: Preliminary
Observations on the Evacuation of Hospitals and Nursing Homes Due to
Hurricanes, GAO-06-443R (Washington, D.C.: February 16, 2006).

Page 18 GAO-06-442T

areas that might become flooded or in structures that could be compromised
by strong winds, some Gulf Coast areas did not have sufficient shelter
facilities. 10

Volunteer management and donations: Volunteer management and donations is
the capability to effectively manage and deploy volunteers and unsolicited
donations. Federal and charity organization officials we spoke to
indicated that because of the catastrophic nature of the storms,
volunteers and donations, in some cases, were not well integrated into
response and recovery activities. In addition, federal agencies involved
in managing the international assistance were not prepared to coordinate,
receive, distribute, or account for the assistance. Agency officials
involved in the cash and in-kind assistance told us the agencies were not
prepared to accept international assistance for use in the United States
and, therefore, developed ad hoc processes to address this scenario. We
will be making several recommendations to the Departments of Homeland
Security, Defense, and State to improve preparedness in these areas.

Restoration of lifelines: Restoration of lifelines is the capability to
manage clearing and restoration activities such as demolition, repair,
reconstruction, and restoration of essential gas, electric, oil,
communications, water, wastewater and sewer, transportation and
transportation infrastructure, and other utilities. Because of the mass
devastation, restoration is proceeding slowly.

Economic assistance and services: Economic assistance and services is the
capability to meet the demands for cash assistance, human services
programs, educational services, and family and child welfare services. Our
preliminary work indicated that a number of federal and state programs
provided assistance and services to eligible individuals and families
before the catastrophic disaster. Significant ongoing assistance after the
catastrophic disaster has also been required.

Secretary Chertoff has announced plans to emphasize several of these
capabilities in the near term. For example, DHS will acquire a hardened
set of communications capabilities, including equipment and specialized
reconnaissance teams to improve awareness about conditions and events
unfolding during a disaster. It was clear that DHS did not have adequate

GAO, Hurricanes Katrina and Rita: Provision of Charitable Assistance,
GAO-06-297T (Washington, D.C.: December 13, 2005).

Page 19 GAO-06-442T

  Planning for a Catastrophic Disaster Calls for a Risk Management Approach

situational awareness of how Hurricane Katrina-caused conditions were
worsening and thus required additional federal response. As was noted
during a hearing before this committee, technological advances should
provide the capability to prevent or significantly reduce "the fog of war"
during a catastrophe. The secretary also has announced plans for better
logistics and debris removal capabilities.

The House Select Committee had findings in several of these areas, such as
medical care and evacuations, communications, emergency shelter and
temporary housing, and logistics and contracting systems. The White House
devoted a large number of its recommendations to capabilities. For
example, White House recommendations cover (1) developing a National
Emergency Communications Strategy and a modern, flexible, and transparent
logistics system, (2) reviewing and revising the NRP to ensure effective
integration of all federal search and rescue assets during disaster
response, (3) strengthening public health and medical command for federal
disaster response, and (4) assigning responsibility for coordinating the
provision of human services during disasters to the Department of Health
and Human Services.

Addressing these four themes-leadership; the clarity of the NRP; advance
planning, training, and exercises; and strengthening capabilities for
catastrophic events-will require developing priorities and making
tradeoffs, given finite resources. A risk management framework could aid
agency and congressional decision making on these issues.

It is vital to have in place a risk management decision making approach to
develop federal capabilities and the expertise to use them to respond to a
catastrophic disaster. Given the likely costs, Congress should consider
using such an approach in deciding whether and how to invest in specific
capabilities for a catastrophic disaster.

Risk Management Is A Continuous Process

We have advocated a comprehensive risk management approach as a framework
for decision making. 11 Risk involves three elements: (1) threat, the
probability that a specific type of event will occur; (2) the
vulnerability of people and specific assets to that particular event; and
(3) the adverse consequences that would result from the particular event
should it occur. Another closely related element is criticality, that is,
the relative importance of the assets involved, such as equipment,
facilities, and operations.

We define risk management as a continuous process of assessing risks,
taking actions to reduce, where possible, the potential that an adverse
event will occur; reducing vulnerabilities as appropriate; and putting
steps in place to reduce the consequences of any event that does occur.
Risk management addresses risks before mitigating actions have been
applied, as well as risk that remains after countermeasures have been
taken. A risk management framework links strategic goals to plans and
budgets, assesses the value and risks of various courses of actions as a
tool for setting priorities and allocating resources, and provides for the
use of performance measures to assess outcomes and adjust future actions
as needed. The goal of risk management is to integrate systematic concern
for risk into the normal cycle of agency decision making and
implementation.

Risk Management Can Aid in Investment Decisions for a Catastrophic
Disaster

Risk management can be central to assessing the risk for catastrophic
disasters. Our risk management framework calls for the management of risk
based on careful analysis of all available risk information,
identification of alternatives for reducing risks through preparation and
response, selection among those alternatives, implementing choices,
monitoring their implementation, and continually using new information to
adjust and revise the assessments and actions as needed, all within
available resources. As I mentioned earlier, we have identified several
key capabilities that may be needed in the event of a catastrophic
disaster such as emergency telecommunications, damage and needs
assessment, and logistics. Given that resources are finite, the
administration and Congress should consider using a risk management
approach in deciding whether and how to invest in specific capabilities
for a catastrophic disaster.

11

A summary of GAO's risk management framework specifically related to
homeland security and combating terrorism can be found in GAO, Risk
Management: Further Refinements Needed to Assess Risks and Prioritize
Protective Measures at Ports and Other Critical Infrastructure, GAO-06-91
(Washington, D.C.: December 15, 2005).

Page 21 GAO-06-442T

Specific Capabilities Can Be Identified

Some of the changes that the government will need to prepare for
catastrophic disasters are relatively inexpensive. Establishing more
robust surveillance and warning mechanisms should build on existing
systems, with communication of known information a key feature. Developing
more detailed plans for ramping up from a "normal" disaster to a
catastrophic disaster where warranted will impose additional costs.
Providing the needed training to ensure the readiness of first responders
and exercising the catastrophic disaster plans are much more costly
endeavors, as well as increasing the quantity and quality of the federal
government's preparedness and response capabilities.

A catastrophic disaster may be anticipated based on past history and the
expectation that there will be another catastrophic disaster.
Expectations, based on a risk management approach, would call for building
basic capabilities and contingency planning to leverage other resources in
anticipation of a likely event. For example, a major earthquake in a major
metropolitan area in California has occurred in the past, is expected to
occur at some point in the future, and is likely to cause significant loss
of life and extensive damage to critical infrastructure. Flooding along
the Mississippi River also has occurred and would similarly cause
widespread destruction and disrupt the transport of goods along this major
waterway. Man-made catastrophic disasters that involve, for example, a
nuclear power plant or liquefied natural gas installations could cause
catastrophic damage and deaths across a wide area.

Developing preparedness for large-scale disasters is part of an overall
national preparedness effort that should integrate and define what we need
to do, where and based on what standards, how we should do it, and how
well we should do it. DHS developed three documents to address these
needs. The National Response Plan was designed to identify what needs to
be done, the National Incident Management System describes how to manage
what needs to be done in response to an emergency incident, and the
National Preparedness Goal is designed to define how well we should do
what needs to be done. Hurricane Katrina was the first major test of the
NRP.

These three documents, considered as a group, can be one basis for risk
analyses to assess the most productive and urgent investments in emergency
preparedness and response capabilities. The National Preparedness Goal,
whose development was required by Homeland Security Presidential Directive
8 (HSPD-8), is particularly important. DHS issued an interim version of
the goal in March 2005 and an expanded draft in December 2005. The
December 2005 draft National Preparedness Goal defines both the 37 major
capabilities that first responders should possess to prevent, respond, and
recover from a wide range of major emergency incidents and the most
critical tasks associated with these capabilities. These critical tasks
are appropriately considered in risk analysis. An inability to effectively
perform these tasks would, by definition, have a detrimental impact on
effective prevention, response, and recovery capabilities.

To identify the needed capabilities, DHS used 15 National Planning
Scenarios developed by the President's Homeland Security Council that
included 12 terrorist attacks and 3 natural disasters-an earthquake, a
hurricane, and a pandemic influenza outbreak. According to DHS, the
planning scenarios are intended to illustrate the scope and magnitude of
large-scale, catastrophic emergency events for which the nation needs to
be prepared. Because no single jurisdiction or agency would be expected to
perform every preparedness task or have every capability to the same
degree, possession of critical capabilities could involve enhancing and
maintaining local resources, ensuring access to regional and federal
resources, or some combination of the two. Risk factors include population
and population density, the presence of critical infrastructure and key
resources, and location in high terrorist threat or high risk natural
disaster areas. The National Preparedness Goal includes seven national
priorities, including implementing the NIMS and NRP and expanding regional
collaboration. Those seven priorities are incorporated into DHS's fiscal
year 2006 homeland security grant guidance. The guidance also adds an
eighth priority that emphasizes emergency operations and catastrophic
planning.

In earlier work on the National Preparedness Goal, we observed that if
properly planned and executed, the goal and its related products, such as
program implementation plans and requirements, may help guide the
development of realistic budget and resource plans for an all-hazards
national preparedness program. 12 However, questions remain regarding what
should be expected in terms of basic capabilities for most disasters
compared to the expanded capabilities and mutual aid needed from other
jurisdictions to meet the demands of a catastrophic disaster.

GAO, Homeland Security: DHS' Efforts to Enhance First Responders'
All-Hazards Capabilities Continue to Evolve, GAO-05-652 (Washington, D.C.:
July 11, 2005).

Page 23 GAO-06-442T

A Focus on Assessing Planning and Capabilities Will Be Critical

HSPD-8 called for strengthening preparedness capabilities of federal,
state, and local entities. However, guidance on implementing the National
Preparedness Goal appears to have been targeted at state and urban area
jurisdictions. It does not appear that similar attention has been paid to
guidance for federal agencies and their progress in supporting the
National Preparedness Goal's expectations. Consequently, we recommend that
DHS should take the lead in strengthening guidance for federal agencies
and monitoring their efforts to meet the National Preparedness Goal's
provisions for federal agencies.

Our recommendation is consistent with those of the White House. The White
House has recommended that future preparedness of the federal, state, and
local authorities should be based on the risk, capabilities, and needs
structure of the National Preparedness Goal. More specifically, the White
House recommends that the National Preparedness Goal and its target
capabilities list should be used, for example, in (1) defining required
capabilities and what levels of those capabilities are needed, including
those within the purview of the federal government, (2) developing mutual
aid agreements and compacts informed by the National Preparedness Goal's
requirements, and (3) developing strategies to meet required levels of
capabilities that prioritize investments on the basis of risk. We have
work underway to assess if the provisions of the National Preparedness
Goal will aid catastrophic disaster preparedness and NRP implementation.

In our work on the National Preparedness Goal, we also observed that DHS's
assessment and reporting implementation plan, intended to accurately
identify the status of capabilities at the state, regional, and local
levels, is vital for establishing a baseline and providing an ongoing
feedback loop upon which decisions at multiple levels of government about
preparedness needs will rest. Assessment of catastrophic disaster planning
and capability needs will be a critical piece.

In the conference report to the Department of Homeland Security Fiscal
Year 2006 Appropriations Act, the conferees directed DHS to report on the
status of catastrophic planning, including mass evacuation planning in all
50 states and the 75 largest urban areas. 13 In addition, the Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for
Users required the Secretary of Transportation and the Secretary of

13

H. R. Rep. No. 109-241, at 68 (2006).

Homeland Security to jointly review and assess federal and state
evacuation plans for catastrophic hurricanes impacting the Gulf Coast
Region. 14

In response, DHS launched a nationwide review of state, territorial, and
urban area emergency and evacuation plans. In the first phase of the
review, each state and territory and urban area was to certify the status
of its emergency operations plans and identify when plans were last
updated and exercised. According to the DHS report on the first phase's
results, 56 states and territories and 72 urban areas responded. Fewer
than half of those reporting might have adequate planning for a
catastrophic disaster. Of those jurisdictions reporting that their base
plan was consistent with federal guidance and voluntary standards, 42
percent of the states and territories and 36 percent of urban areas were
confident that their plan was adequate to manage a catastrophe. 15 In a
second phase of the review, peer review teams are to validate the
self-assessments, determine requirements for planning assistance, collect
best practices, and recommend corrective actions. DHS plans to complete
these peer reviews by the end of April 2006 and report to the President
and Congress before June 1, 2006. The White House has recommended DHS
establish a program to measure and assess the effectiveness of
preparedness capabilities on an annual basis and recommend appropriate
adjustments to the National Preparedness Goal, capabilities, and yearly
priorities for homeland security grants. We are currently examining
evacuation planning and assistance, including the federal role in the
emergency evacuation of transportation-disadvantaged populations-including
the elderly, disabled, and low income individuals-and preparedness for the
evacuation of hospitals and nursing homes.

Similar to DHS's overall national preparedness planning, no single state
or area should be expected to have the same capability to prepare for a
catastrophic disaster. The stand-up and sustaining of capabilities should
be based on a risk assessment that would call for examining what
vulnerabilities from a potential catastrophic disaster require attention
and how they should be addressed within available resources and with
contingency planning. Periodic assessments should determine if plans

14

Pub. L. No. 109-59, 119 Stat. 1144, 1934 (2005).

15

Department of Homeland Security, Nationwide Plan Review Phase 1 Report
(Washington, D.C.: February 10, 2006).

Page 25 GAO-06-442T

remain viable, actual capabilities match planned capabilities, and if
contingency planning still is appropriate.

I would suggest that before the Congress and the Administration embark on
implementing the more expensive aspects of preparing for a catastrophic
disaster, policymakers should discuss in a timely fashion and reach
consensus on the following issues:

     o What is known about the likelihood of a catastrophic disaster
       occurrence in specific areas of the nation? For example, what are the
       odds that more category 4 and 5 hurricanes will strike specific areas
       of the Gulf and East Coasts? How likely is it that California or other
       earthquake-prone areas will experience "the big one?" What are the
       chances that a nuclear plant will suffer an incident that results in
       massive radiation exposure?
     o How vulnerable are the areas that would be affected by these
       catastrophic disasters and what would be the consequences, in terms of
       human life, economic impact, and other generally accepted measures?
     o What are the costs and potential benefits of actions governments can
       take to mitigate the occurrence and consequences of these disasters?
       For example, in the case of catastrophic hurricanes, what are the
       costs and benefits of greater and more precise early warnings, better
       resourced and exercised evacuation plans, more pre-positioned
       equipment such as generators and water, more designated shelters and
       medical care resources, enhanced health care operations, and better
       mutual aid planning and specific agreements?
     o Finally, based on all of the above, what are the most prudent courses
       of action for various levels of government and their partners, such as
       private industry and nongovernmental organizations, in preparing for
       and responding to catastrophic disasters?

These are not easily answered questions. However, given the enormous
potential costs and the increasing demands on federal discretionary
funding, these are some of the questions that policymakers should
explicitly discuss, reach consensus, and periodically reassess as events
and considerations change. If federal funds will be used to increase first
responders' capabilities for catastrophic disasters, we suggest that the
Congress require the use of risk management principles to assess state and
urban area investments in capabilities to respond to a catastrophic
disaster.

  Organizational Placement Has Been Raised as a Key FEMA Performance Factor

Because of FEMA's mission performance during Hurricane Katrina, concerns
have been raised regarding the agency's organizational placement,
including whether it should be disbanded and functions moved to other
agencies, remain within the Department of Homeland Security, or again
become an independent agency. Importantly, other factors, such as the
experience of and training provided to FEMA leadership and adequacy of
resources may be more important to FEMA's future success than its
organizational placement.

Factors Other Than Organizational Placement May Impact FEMA's Performance

Organizational changes, such as separating FEMA from DHS, are often viewed
as a quick fix to address performance issues. Based on our institutional
knowledge regarding organizational performance factors, organizational
changes alone may not adequately address underlying systemic conditions
that result in an organization's performance problem. Conditions
underlying FEMA's performance during Hurricane Katrina could involve the
experience and training of DHS or FEMA leadership; the clarity of FEMA's
mission and related responsibilities and authorities to achieve mission
performance expectations; the adequacy of its human, financial, and
technological resources; and the effectiveness of planning, exercises, and
related partnerships.

These factors have been highlighted, for example, by the House Select
Committee which noted (1) senior officials were ill prepared due to their
lack of experience and knowledge of the required roles and
responsibilities prescribed by the NRP, (2) DHS and FEMA lacked adequately
trained and experienced staff for the Katrina response, observing that
FEMA had lost, since 2002, a number of its top disaster specialists,
senior leaders, and experienced personnel, described as "FEMA brain
drain," and that even before Hurricane Katrina, FEMA suffered from a lack
of sufficiently trained procurement professionals, and

(3) FEMA's logistics systems were unable to support large-scale logistical
challenges. In addition, White House recommendations covered areas such as
DHS expertise and experience, development of a national crisis
communications system, and development of DHS regions that are fully
staffed, trained, and equipped to manage and coordinate all preparedness
activities and any emergency that may require a substantial federal
response.

Factors such as the experience and training of leadership and the adequacy
of resources can lead to performance difficulties pointed out in the House
Select Committee, the White House report, and in testimony before this
committee. These difficulties would not, we believe, be fixed

Certain Criteria Could Be Used if a Change in FEMA's Organizational
Placement is Considered

by simply moving FEMA to an independent status. Indeed, we know that many
of lessons learned from Hurricane Katrina were acted on for Hurricane
Rita, with a much better response effort, indicating that organizational
change is not the primary key to success. Such factors, we believe, should
be more carefully assessed and action taken where appropriate to
strengthen any weaknesses in FEMA's leadership and resources.

However, if an organizational change remains under consideration, our past
work could be helpful. Before the formation of DHS, I testified before the
House Select Committee on Homeland Security that reorganizations of
government agencies frequently encounter start-up problems and
unanticipated consequences and are unlikely to fully overcome obstacles
and challenges, and may require additional modifications in the future. 16
I also presented specific criteria to evaluate whether individual agencies
or programs should be included or excluded from the proposed department.
Those criteria included, for example, mission relevancy, similar goals and
objectives, leveraging the effectiveness of other agencies and programs or
the new department as a whole, and gains in efficiency and effectiveness
through eliminating duplications and overlaps. I also stated that Congress
should consider not only the mission and roles that agencies fulfill
today, but the mission and role that they should fulfill in the coming
years.

Some of these criteria are appropriate today for discussing FEMA's future,
and I would suggest that they might be useful if a change in FEMA's
organizational placement is under consideration. For example, Congress
might consider whether or how moving FEMA out of DHS would impact DHS's
mission, as stated in the Homeland Security Act of 2002, of acting as a
focal point for natural and manmade crises and emergency planning. DHS's
Emergency Preparedness and Response Directorate-primarily FEMA-was to help
ensure the effectiveness of emergency response providers to terrorist
attacks, major disasters, and other emergencies. Removing FEMA from DHS
might impact the ability of the department and its remaining components
and FEMA itself in fully addressing the close links between preparedness,
prevention, response, and recovery for all hazards.

16

GAO, Homeland Security: Critical Design and Implementation Issues,
GAO-02-957T (Washington, D.C.: July 17, 2002).

Page 28 GAO-06-442T

The dispersion of responsibility for all hazards preparedness and response
across more than one federal agency was a problem we identified during the
formation of DHS.17 FEMA was established in 1979 to consolidate federal
emergency preparedness mitigation, and response in a single federal
agency. Its responsibilities were to include, among other things, the
coordination of civil defense and civil emergency planning and the
coordination of federal disaster relief. FEMA responded to a wide range of
disasters, including floods, hurricanes, earthquakes, hazardous material
accidents, nuclear accidents, and biological, chemical, and nuclear
attacks.18 However, when Congress created DHS, it separated FEMA's
responsibilities for preparedness and response activities into two
directorates. Responsibility for preparedness for terrorism disasters was
placed in the department's Border and Transportation Security Directorate,
which included FEMA's Office of National Preparedness. Other types of FEMA
disaster preparedness and response efforts were transferred to the
department's Emergency Preparedness and Response Directorate. In January
2003, we observed that this organizational arrangement would challenge
FEMA in ensuring the effective coordination of preparedness and response
efforts and enhancing the provision and management of disaster assistance
for efficient and effective response.19

A division of responsibility remains under the recent DHS reorganization
resulting from Secretary Chertoff's Second Stage Review (2SR), with
preparedness efforts-including planning, training, exercising, and
funding-consolidated into a Preparedness Directorate. FEMA reports
directly to the Secretary of Homeland Security for response and recovery
missions. Secretary Chertoff has explained the reorganization would focus
FEMA on its historic mission of response and recovery.

If FEMA were to become independent of DHS, then a comprehensive approach
to preparedness, response, and recovery may become even more difficult to
maintain. The lack of a single department or agency with responsibility
for preparedness, response, and recovery also could jeopardize clear
federal leadership and assistance for state and local governments. These
entities would have two primary points of contact,

GAO, Major Management Challenges and Program Risks: Department of Homeland
Security, GAO-03-102 ( Washington, D.C.: January 2003). 18 GAO-93-186.
19GAO-03-113.

Page 29 GAO-06-442T

two points of guidance and regulation, two points of funding
opportunities, and two points of assistance and oversight. Nongovernmental
and private sector partners in all hazards preparedness would be similarly
affected.

Other organizational changes are also being considered. The White House
report on lessons learned from Hurricane Katrina recommended keeping FEMA
within DHS, but allows for other organizational changes, such as creating
new positions and offices within DHS and transferring the National
Disaster Medical System from DHS to the Department of Health and Human
Services.

Lastly, I believe we should bear in mind that the Department of Homeland
Security is only three years old this month. In my testimony on the
formation of DHS in 2002, I stated that often it has taken many years for
the consolidated functions in new departments to effectively build on
their combined strengths.

Madame Chairman, the federal government will be a major partner in the
longer-term rebuilding of the Gulf Coast because of the widespread damage
and economic impact. In support of state and local efforts, the federal
role in rebuilding will be particularly important for transportation and
health infrastructures and federal facilities. In addition, federal
programs will face financial difficulties and there is uncertainty
concerning the impact of catastrophic disasters on the availability and
affordability of insurance. Long term rebuilding raises issues concerning
the need for consensus on what rebuilding should be done, where and based
on what standards, who will pay for what, and what oversight is needed to
ensure federal funds are spent for their intended purposes.

  Long Term Rebuilding Efforts Raise Issues for Congressional Consideration

The Hurricanes' Destruction Resulted in Widespread Adverse Economic
Disruptions

Hurricane Katrina destroyed considerable numbers of residential
structures; consumer durable goods, such as motor vehicles, household
furnishings, and appliances; and business structures and equipment,
particularly in the energy and petrochemical industries. Hurricane Rita
appears to have had a smaller impact on residential structures and
consumer durable goods, and its damage to the energy industry may be as
great as or greater than Hurricane Katrina's.

Some federal agencies have developed programs to initially identify and
assess the recovery needs of the region. For example, the U.S.
Environmental Protection Agency (EPA) and the Centers for Disease Control
and Prevention (CDC), created the Environmental Health Needs Assessment
and Habitability Taskforce. This taskforce was charged with identifying
the overarching environmental health issues faced by New Orleans to
re-inhabit the city. According to the taskforce, the most striking feature
of the Hurricane Katrina catastrophic disaster in New Orleans is the array
of key environmental health and infrastructure factors affected all at
once. All key environmental health and related services are being
reestablished, and this work needs to be done in a very coordinated and
well-planned way. Full restoration of drinking water systems and
wastewater treatment systems will be delayed by the many disruptions in
the distribution and collection systems and by the need for upgrade and
repairs in older systems. The task force also noted timeline for debris
treatment, disposal, containment, and transport, as well as for the
testing of potentially contaminated soil, will also slow or accelerate the
rate at which New Orleans can be re-inhabited.

The task force found that restoration of the city's housing infrastructure
is its most complex issue. Housing is likely the most critical issue in
reinhabiting the city because of factors such as the large percentage of
city housing that was flooded and may not be viable, as well as the large
proportion of the city population that is displaced with some residents a
significant distance away from New Orleans or not intending to return,
according to the task force. EPA and other federal partners are continuing
to assess and address environmental and health issues that will impact the
recovery and rebuilding of the Gulf Coast.

The ongoing progress of recovery and rebuilding is being studied by
several organizations. For example, the Brookings Institute created an
index of economic and social indicators measuring the impact of rebuilding
efforts in Orleans Parish, the New Orleans metropolitan area, Louisiana,
and Mississippi. Brookings' February 1, 2006 report noted that over five
months since Hurricane Katrina made landfall, New Orleans lacks enough
essential services to support all of its returning residents and the area
continues to lose workers. More specifically, the report observed that
only 32 percent of the city's hospitals are open. Only 15 percent of the
city's schools have reopened and some of those are reporting difficulty
accommodating demand. Nearly 750,000 households remain displaced. Mortgage
delinquency rates rose between the second and third quarters of 2005. In
the state of Louisiana, nearly 1 in 4 mortgages is 30 days or more past
due. Currently, the New Orleans metro area lost 42,000 people in its labor
force between November and December, while the state of Louisiana lost
over 100,000 people. Although the state of Louisiana created over 11,000
jobs between November and December, it lost over 100,000 people

Rebuilding Strategies Are Underway

in its labor force. Mississippi lost 2,000 jobs and about 2,000 of its
labor force. According to the Brookings' analysis, the slow pace of
recovery strongly suggests that the city and state will be unable to
restore essential services on their own, and require direct federal
assistance to do so.

In Louisiana and Mississippi, several efforts are underway to develop
longterm rebuilding strategies in these states. In Louisiana, the governor
and the mayor of New Orleans have charged different groups with guiding
various aspects of the rebuilding efforts. Under the mayor, the Bring New
Orleans Back Commission is intended to help New Orleans develop a "Master
Plan" to include recommendations for rebuilding the city. The commission
has issued several final reports, including those on urban planning,
education, health and social services, and infrastructure. At the state
level, the Louisiana Recovery Authority is the planning and coordinating
body created by the Governor to assist in implementing the state's vision
for the recovery of Louisiana. Working in collaboration with local, state
and federal agencies, the authority serves to address short-term recovery
needs and guide the long-term planning process.

In Mississippi, the Governor's Commission on Recovery, Rebuilding and
Renewal was formed to develop a strategy for rebuilding the affected areas
of Mississippi. Developed as an advisory body, the commission is intended
to solicit the input of local leaders and facilitate decision making in
their regions. In early January the commission released a report with
numerous recommendations intended to guide Mississippi's post-Katrina
rebuilding. The report recommends, for example, that local governments
immediately adopt revised flood maps and begin assessing and revising
their flood zone management ordinances and building requirements. In
addition, the report suggests ways communities can tap into federal,
state, and private funding sources to accomplish some of the report's
goals.

On November 1, 2005, the President issued Executive Order 13390, which
directed the creation of a central figure in the administration's efforts
to support the Gulf Coast recovery and rebuilding phases.20 Specifically,
the President directed the Secretary of Homeland Security to establish
within the department the position of Coordinator of Federal Support for
the

20

U.S. President (G.W. Bush), "Establishment of a Coordinator of Federal
Support for the Recovery and Rebuilding of the Gulf Coast Region," E.O.
13390, Federal Register, vol. 70, Nov. 4, 2005, p. 67327-67328.

Page 32 GAO-06-442T

Transportation Infrastructure Was Significantly Damaged and Poses Major
Cost and Funding Concerns

Recovery and Rebuilding of the Gulf Coast region. The federal coordinator,
Donald Powell, is responsible for developing principles and goals and
leading the development and monitoring of the implementation of specific
federal support. The coordinator also serves as the focal point for
managing information flow, requests for actions, and discussions with the
Congress, state and local governments, the private sector, and community
leaders.

Madame Chairman, we need to make sure that rebuilding in the Gulf Coast
should not replace that which was built in the past to 20th century
standards, but be built for the future and to 21st century standards.
State and local officials will have the lead on determining the future
needs of the Gulf Coast. However, the federal government should be a
willing partner in the rebuilding strategies so we build better than
before and in anticipation of future catastrophic events.

Now, I would like to turn to more specifically discuss rebuilding
transportation and health infrastructures and federal facilities.

Transportation infrastructure destruction will have a considerable impact
on federal programs. The hurricanes destroyed significant amounts of the
region's transportation infrastructure. The largest transportation capital
costs will be associated with reconstruction of highways and bridges-
Hurricanes Katrina, Rita, and Wilma resulted in about $2.7 billion in
needed repairs to roads on the federal-aid highway system. Hurricane
Katrina resulted in the bulk of this cost, with about $2.1 billion in
highway damage. Louisiana, Mississippi, and Florida suffered the vast
majority of the highway damage. Federal Highway Administration (FHWA)
officials said that because many roads have been submerged, determination
of the full extent of highway damage will depend on the results of
testing.

FHWA works with the states to develop these estimates, and funding for
repair and reconstruction comes through FHWA's Emergency Relief Program.
Under this program, states are reimbursed the cost of repairs and
reconstruction of the existing highway facilities, and improvements are
generally not allowed. However, bringing a facility up to current highway
design standards is allowed. Only roads on the federal-aid highway system
are eligible for funding. A large backlog of funding requests to this
program existed prior to the hurricanes, about $650 million pre-Katrina,
resulting in a total state demand for emergency funds of about $2.85
billion. In its fiscal year 2006 Defense Appropriations Act, Congress
appropriated $2.75 billion to the FHWA Emergency Relief Program. These
funds are available for both the 2005 hurricanes and other emergency
projects. We plan to review the FHWA Emergency Relief Program and related
surface transportation financing issues that have arisen as a result of
the hurricanes.

Transit systems in the region sustained considerable damage, especially in
New Orleans, where most of the transit fleet was lost. This included three
bus garages, an operations and maintenance facility, much of the trolley
system, and a majority of the city's bus fleet. In addition, the
population of Baton Rouge roughly doubled in a matter of days, which
presented an unprecedented transit problem for that city. While no transit
program comparable to the FHWA Emergency Relief Program exists, FEMA
provided $47 million under a mission assignment to help provide basic
transit services within and between Baton Rouge and New Orleans.

Ports in the region also suffered significant damage. The Port of New
Orleans estimated reconstruction and relocation needs of $435 million to
cover damages sustained from Hurricane Katrina, assuming $75 million would
be funded by insurance claims or FEMA reimbursements. The remaining $360
million is unfunded. The Port of Gulfport was also hard hit, and while it
is still developing estimates, according to the port director,
reconstruction will likely total between $300 million and $400 million.
Part of these costs will be covered by insurance and revenues from resumed
port operations. According to officials from other ports in the region,
they also sustained damage, though not of this magnitude. For example, the
Port of Mobile sustained $28 million in damages, while other Louisiana
ports, such as Port Fourchon and the Port of South Louisiana, estimate
damages of $7 million and $2 million respectively. We have initiated a
review of how ports mitigate their vulnerability to natural disasters,
what lessons have been learned, and what the potential federal role may be
in mitigating port vulnerability.

A number of railroads suffered damage from Hurricane Katrina. The large
railroads have nearly completed repairs to their systems, while a number
of smaller short lines are in the process of repairing lines. These costs
are currently borne by the railroads themselves, and the Department of
Transportation does not have estimates of the damages. However, a
financial statement from the CSX railroad estimated damages from Hurricane
Katrina to that railroad's assets at over $40 million.

Numerous airports in the region were affected by the hurricanes. The
Federal Aviation Administration (FAA) estimates that about $100 million
will be needed from the Airport Improvement Program to pay for damage.

              Health Care Infrastructure Was Significantly Damaged

In addition, FAA estimated that its facilities sustained about $41 million
in damage, for a total of $141 million.

The health care infrastructure in the New Orleans area, including
emergency, hospital and clinic facilities, was significantly damaged by
Hurricane Katrina. The city is struggling to restore some capacity to meet
the immediate needs of the population currently there. Moreover, numerous
decisions that will need to be made on how to rebuild the health care
system. The decisions are complicated by several factors, including the
need to improve efficiency by moving away from New Orleans
hospital-centric system and uncertainty about how many people will return
to New Orleans and where they will settle.

The damage inflicted by Hurricane Katrina on the New Orleans health system
was severe. In particular, the Medical Center of Louisiana at New Orleans
(MCLNO), which included Charity and University Hospitals, was forced to
close its doors. MCLNO operated the only Level I trauma unit along the
Gulf Coast. With its closure, the closest Level I trauma units are in
Shreveport, Louisiana, Houston, Texas, and Birmingham, Alabama.21 In
addition, MCLNO provided more than 25,000 inpatient admissions, over
300,000 clinic visits and 135,000 emergency visits in fiscal year 2004. It
was the primary safety net hospital for many local residents, and about
half of its patients were uninsured and about one-third were covered by
Medicaid. Under the Stafford Act, Charity Hospital is eligible for federal
funds to repair Hurricane Katrina related damage. These funds,
administered under FEMA's Public Assistance Program, would be available to
defray a portion of the cost to rebuild or repair Charity Hospital. FEMA
and Louisiana State University, which owns Charity Hospital, have prepared
estimates of the cost to repair the hospital that differ considerably in
their assumptions and conclusions, and no decision has been made as to
whether to rebuild or repair the facility.

Other health services in New Orleans were also severely damaged, including
hospitals, emergency services, and safety net clinics.

o  Hospitals: The number of staffed hospital beds in the City of New
Orleans was about 80 percent less in February 2006 than before Hurricane
Katrina, according to figures submitted daily by

21

MCLNO announced plans to re-establish Level I trauma unit in the New
Orleans area working in conjunction with another facility.

Page 35 GAO-06-442T

hospitals to an internet database about their bed capacity.22 Of the nine
acute care hospitals in the city prior to Katrina, only 3 had reopened at
a capacity of approximately 456 staffed beds as of February 22, 2006.

     o Emergency Care: Increasing demand has been reported at the open
       emergency departments and has led to slow unloading of patients from
       ambulances and to patients being housed in the emergency department
       because beds were not available. For example, according to data
       reported by hospitals on February 22, 2006, wait times for emergency
       medical services (EMS) vehicles to offload stable patients into
       emergency departments varied from no wait to as long as 2 hours at two
       facilities, and 38 patients had been admitted and were housed in the
       emergency department.
     o Safety Net Clinics: More than three-fourths of the safety net clinics
       in the New Orleans area were closed, and many of those that were open
       had limited capacity, according to data gathered by officials at the
       Louisiana Department of Health and Hospitals (DHH). For example, prior
       to Katrina, 90 clinics were in operation, including 70 various clinics
       run by MCLNO, with the remainder federally qualified health centers,
       mental health or addictive disorder clinics, or other specialty
       clinics. Post-hurricane, 19 clinics were operating according to DHH
       figures, generally operating at less than 50 percent of pre-Katrina
       capacity.

In addition to the severe damage sustained by health facilities,
maintaining and attracting the workforce is also a serious issue for local
officials. An estimated 3,200 physicians lived in the metropolitan area
before Hurricane Katrina, with 2,664 of those physicians residing in New
Orleans itself, according to DHH figures. We were unable to obtain an
estimate of how many physicians are currently in New Orleans. Hospital
officials said they faced a shortage of support staff, such as food
service or janitorial workers, who were unable to return due to a lack of
housing or were being offered higher wages at hotels and restaurants.

As the city struggles to restore the health system in New Orleans,
longterm decisions on how to rebuild it are affected by questions about
whether the health system should be rebuilt to its pre-Katrina

The internet database is called "GNOEMS" and was developed by the Greater
New Orleans Healthcare Taskforce with the assistance of the U.S. Public
Health Service.

Page 36 GAO-06-442T

                  Federal Facilities Were Damaged or Destroyed

configuration and uncertainties about the returning population. Some
health policy researchers have noted that the pre-Katrina health system in
New Orleans needed improvement. Some local officials have also suggested
that the health care situation prior to the hurricane was less than ideal
and the city has a chance to rebuild a better system. Also, uncertainty
about how quickly the population would return to New Orleans, as well as
who would return and where people will settle, poses difficult challenges
for local officials to plan the restoration of health services, such as
how much capacity will be required and where to locate services.

Over the long term, building a new health care system will be vital to
attract people back to New Orleans and ensure its recovery. State, local
and federal governments all have important roles to play in the recovery
process. At the state and local levels, commissions to plan for the future
health care system have been established, and one has completed its work.
The Bring New Orleans Back Commission issued recommendations shifting the
focus, to the degree possible, toward ambulatory care, wellness and
preventive medicine, health promotion and chronic disease prevention and
away from institutional care; maintaining a university teaching hospital
in New Orleans; and building capacity for electronic medical records. The
commission also noted the difficulty of doing effective planning without
reliable information on the population and what segments of the population
will return. The Louisiana Recovery Authority included one task force
dedicated to health care issues. The NRP also gives the Department of
Health and Human Services a support role under long-term community
recovery and mitigation to enable community recovery from the long-term
consequences of a large-scale incident. We will be following HHS' efforts
to fulfill this role in the coming months.

Several federal agencies had their facilities damaged or destroyed by the
hurricanes and may face significant costs to repair or replace them,
although these costs are relatively small in relation to those I just
discussed. The Department of Veterans Affairs (VA) estimated damage to its
medical centers in New Orleans and Biloxi at $170 million and $50.7
million respectively. VA's Gulfport hospital complex suffered catastrophic
damage and will not be rebuilt since VA had already planned to close it.
The National Aeronautics and Space Administration estimated the cost of
facility repair at the Stennis Space Center in Mississippi and Michoud
Assembly Facility in New Orleans at $84 million and $69 million
respectively. The General Services Administration estimated the cost of
repairing its owned and leased facilities and leasing alternative space at
$60 million. The U.S. Postal Service estimated the cost of facility repair

Federal Flood Insurance Program Faces Record Claims and Financial
Difficulties

from Hurricane Katrina at $57 million. The Department of Interior
estimated damage to facilities, which includes damages to buildings, phone
systems, electrical systems, and information technology systems among
other things, at about $41 million. In addition, there was damage to
military bases and to shipyard repair facilities.

The federal flood insurance program faces major financial difficulties
challenges as the Gulf Coast recovers. The program is essentially
bankrupt. FEMA officials estimate that Hurricanes Katrina and Rita will
result in flood insurance claims of about $23 billion, far surpassing the
total amount of claims paid in the entire history of the National Flood
Insurance Program (NFIP) through 2004.

These storms have presented, among other challenges for the NFIP, the need
to adjust a record number of claims, many for properties that were
inaccessible for weeks after the flooding occurred, and the need to borrow
funds from the U.S. Treasury to pay the settlements due to policyholders.
Almost 87,000 loss claims totaling over $8 billion were paid for Hurricane
Katrina claims in Alabama, Florida, Mississippi, and Louisiana through
November 30, 2005. By comparison, in 2004, the previous record year, the
NFIP paid about $1.95 billion in claims on flood events, including
Hurricanes Charley, Frances, Ivan, and Jeanne that caused major damage in
Florida and other East Coast and Gulf Coast states. Though numbers are not
finalized, a FEMA official said that by the end of December, 2005, more
than 70 percent of claims for Hurricanes Katrina, Rita, and Wilma had been
paid totaling more than $11 billion.

The amount paid per claim for flood damage in Hurricane Katrina ranged
from a high of $130,281 in Mississippi to a low of $17,727 per claim in
Florida. In Louisiana, where more than three fourths of the claims were
filed, the average amount paid per claim was $92,549. A FEMA official
noted that claims for total losses were paid quickly, so the average
amount paid per claim may be less when all claims are settled. The average
amount paid per claim for damage from Hurricane Rita was $52,185 in
Louisiana and $24,489 in Texas.

The magnitude and severity of the flood losses from Hurricanes Katrina and
Rita overwhelmed the ability of the NFIP to absorb the costs of paying
claims, providing an illustration of the extent to which the federal
government is exposed to claims coverage in catastrophic loss years. As of
March 1, 2006, FEMA's authority to borrow from the U.S. Treasury was
increased from $1.5 billion prior to the 2004 hurricane season to

The Small Business Administration's Disaster Loan Program Also Faces
Financial Concerns

$18.5 billion through fiscal year 2008. While no determinations have been
made about whether the NFIP will repay any of the debt, it is unlikely
that the program could generate sufficient revenues to cover the enormous
losses.

Until the 2004 hurricane season, FEMA had exercised its borrowing
authority three times in the last decade when losses exceeded available
fund balances. In each instance, FEMA repaid the funds with interest.
According to FEMA officials, as of August 31, 2005, FEMA had outstanding
borrowing of $225 million with cash on hand totaling $289 million. FEMA
had substantially repaid the borrowing it had undertaken to pay losses
incurred for the 2004 hurricane season that, until Hurricane Katrina
struck, was the worst hurricane season on record for the NFIP. FEMA's
current debt with the U.S. Treasury is almost entirely for payment from
flood events that occurred in 2005. We currently have work underway
examining the challenges facing the NFIP and options for improving the
program.

Flood maps are the foundation of the NFIP. They identify the areas at risk
of flooding, and accurate, updated flood maps are a critical component for
devastated communities in Mississippi and Louisiana, in particular, for
making decisions about where and how to rebuild. Thus, new maps for these
areas need to be expedited and completed as soon as possible.

As of January 2006, FEMA had not yet fully implemented provisions of the
Flood Insurance Reform Act of 2004, including establishing a regulatory
appeals process for claimants and establishing minimum education and
training requirements for insurance agents who sell NFIP policies. These
reforms should also be completed expeditiously, and we have recommended
that FEMA develop documented plans with milestones for implementing the
reforms required by the 2004 legislation.

We have initiated work to identify and assess the factors that have
affected the Small Business Administration's (SBA) ability to respond to
disaster victims through its disaster loan program in a timely manner. As
the primary federal lender to disaster victims, including individual
homeowners, renters, and businesses, SBA's ability to process and disburse
loans in a timely manner is critical to the recovery of the Gulf Coast
region. As of February 25, 2006, SBA had mailed out more than 1.6 million
loan applications, received over 337,800 completed applications, processed
more than 230,900 applications, and disbursed about $426.8 million in
disaster loan funds. Although SBA's current goal is to process loan
applications within seven to 21 days, as of February 25, 2006, SBA faced a
backlog of about 103,300 applications in loan processing pending a final
decision, and the average age of these applications is about 94 days. At
the average rate SBA processed loans during the past month, it will take
the agency 51 days to process its current backlog. However, this figure
will be further affected by the number of new loan applications that are
being received daily. SBA also faces a backlog of more than 37,100 loan
applications that have been approved but have not been closed or fully
disbursed. As a result, disaster victims in the Gulf Region have not been
receiving timely assistance in recovering from this disaster and
rebuilding their lives.

Based on our preliminary analysis of SBA's disaster loan origination
process, we have identified several factors that have affected SBA's
ability to provide a timely response to Gulf Coast disaster victims.
First, the volume of loan applications SBA mailed out and received has far
exceeded any previous disaster. Compared with the Florida hurricanes of
2004 or the 1994 Northridge earthquake, the hurricanes that hit the Gulf
Coast in 2005 resulted in roughly 2 to 3 times as many loan applications
issued.23 Second, although SBA's new disaster loan processing system
provides opportunities to streamline the loan origination process, it has
experienced numerous outages and slow response times in accessing
information. However, we have not yet determined the duration and impact
of these outages on processing. SBA officials have attributed many of
these problems to a combination of hardware and telecommunications
capacity limitations as well as the level of service SBA has received from
its contractors. Third, SBA's planning efforts to address a disaster of
this magnitude appear to have been inadequate. Although SBA's disaster
planning efforts focused primarily on responding to a disaster the size of
the Northridge earthquake, SBA officials said that it initially lacked the
critical resources such as office space, staff, phones, computers, and
other resources to process loans for this disaster. SBA has participated
in disaster simulations only on a limited basis and it is unclear whether
previous disaster simulations of category 4 hurricanes hitting the New
Orleans area were considered.

In comparison, SBA issued loan applications for the Northridge earthquake
and the Florida hurricanes of 2004, totaling about 570,000 and 870,000,
respectively. For those two disasters, SBA received loan applications
totaling about 250,000 for Northridge and about 180,000 for the Florida
hurricanes.

Page 40 GAO-06-442T

Uncertainty About Catastrophic Disasters Affects the Availability and
Affordability of Insurance

We are also assessing other factors that have affected SBA's ability to
provide timely loans to the disaster victims in the Gulf region including
workforce transformation, exercising its regulatory authority to
streamline program requirements and delivery to meet the needs of disaster
victims, coordination with state and local government agencies, SBA's
efforts to publicize the benefits offered by the disaster loan program,
and the limits that exist on the use of disaster loan funds.

The magnitude and severity of Hurricane Katrina and other recent
catastrophes also impacted the insurance industry's willingness and
ability to provide insurance protection for catastrophic disasters. A
crucial aspect of being able to successfully provide such coverage is the
ability to obtain what the industry refers to as credible "vulnerability
assessments" or risk assessments. To be useful, a risk assessment must be
able to estimate both the likely "frequency" and "severity" of
catastrophic events- two key characteristics that insurance companies need
to assess the probability and financial significance of a loss. In
addition, based on credible information, insurers must be able to estimate
both their "probable maximum loss (PML)," an estimate of the maximum
dollar value that can be lost under realistic conditions, and their
"maximum foreseeable loss (MFL)," an estimate of the maximum dollar loss
under a worst-case scenario. Risk assessments can be used to provide a
basis for making loss projections for catastrophes such as hurricanes or
earthquakes, although the projections may not be accurate. Insurance
companies use these estimates to determine the amount of coverage and the
price at which to offer coverage within a geographic area. Potential
losses are acceptable if the probability that they may occur is understood
and companies can set prices that fully reflect the consequences of a
specific risk. When projections fail to anticipate an event, such as an
earthquake, or underestimate the severity of an event, such as Hurricane
Katrina, insurance companies may become insolvent, as happened in the
aftermath of Hurricane Andrew, or may choose to reduce the amount of
coverage offered in a given area, as happened for wind losses in Florida
and for earthquakes in California.

While the practice of risk assessment has become more sophisticated in
recent years, the ability of such assessments to estimate losses remains
inexact, particularly for many potential catastrophes. These assessments
are typically undertaken by risk modeling companies that assist clients,
such as insurance companies, with predicting and managing the financial
impact of catastrophes and weather. In addition, as demonstrated by
Hurricane Katrina, estimating the amount of losses that insurers could pay
for an event is also contingent on unforeseen circumstances, such as the
unusual magnitude and consequences of the Hurricane Katrina storm surge.
In addition, as a result of Hurricane Katrina, hundreds of thousands of
buildings may have suffered damage from both the hurricane's winds and the
storm surge. Because determining which factor caused the damage to a given
structure is difficult and sometimes contentious, estimates of the amount
that private insurers ultimately will pay to cover the costs of Hurricane
Katrina are still very preliminary.

Because catastrophic disasters are likely to occur in the future, and
because forecasting their probability and severity is an inexact science,
state insurance regulators have recommended that the federal government
provide a final layer of insurance protection in the event of a
"megacatastrophe." The National Association of Insurance Commissioners
(NAIC) is considering a broad national plan that would create a mechanism
to handle disasters, especially those larger than Hurricane Katrina. The
plan proposes a public-private partnership that would reward hazard
mitigation and spread catastrophic risk broadly among individual insureds,
insurers, reinsurers, state reinsurance funds, and the federal government,
according to NAIC. The federal government could provide a top layer of
protection by acting as a reinsurer of last resort or, alternatively, by
providing financial capacity to a multi-state risk pooling mechanism that
could borrow from the federal government should catastrophic losses exceed
the pool's accumulated funds. This plan is similar in scope to the
Terrorism Risk Insurance Act (TRIA), which Congress enacted to create a
program of shared public and private compensation for insured losses
attributable to acts of terrorism. Under the NAIC plan, however, taxpayers
would presumably not have to pay for losses. Furthermore, the NAIC plan
asserts that if state and federal governments insured the top layers of
catastrophe risk, private insurers would continue to insure the initial
layer of risk that they might otherwise not insure.

However, some in the insurance industry oppose additional government
involvement and others have set forth alternative proposals. Some
insurance company representatives believe that the private market for
catastrophic coverage for natural events continues to exist and that
insurance costs should be based upon free market principles. Still others
have proposed that insurance companies be permitted to set aside
additional catastrophic disaster reserves on a pre-tax basis. Supporters
of tax-deductible reserves argue that the tax-free status would give
insurers a financial incentive to increase their reserves and expand
insurers' capacity to cover catastrophic risks and avoid insolvency.

We anticipate undertaking work that would examine the merits of involving
federal and state governments in alternative methods of insuring against
catastrophic disasters-for example, by acting in a reinsurance capacity.
We will continue to monitor legislation and proposals aimed at the
long-term restoration of the Gulf Coast, such as the recently passed Gulf
Opportunity Zone Act of 2005, which contains a variety of tax-related
incentives designed to encourage rehabilitation in the region.

The Federal Role and As we move forward, long-term rebuilding in the Gulf
Coast raises issues concerning the need for consensus on what rebuilding
should be done,

Involvement Will Raise

Ongoing Issues where and based on what standards, who will pay for what,
and what oversight is needed to ensure federal funds are spent for their
intended purposes. Over 20 years ago, we issued a report describing the
U.S. government's involvement and experience in four large-scale
assistance programs (Conrail, Lockheed, New York City, and Chrysler) and
suggested guidelines for future programs in helping other failing firms or
municipalities.24 That report described four conditions that we suggested
the Congress could use as a framework of ideas about how to structure
future financial assistance programs and what program requirements to
include to achieve Congressional goals and objectives while minimizing the
risk of financial loss to the government. Congress might consider such
guidelines as it considers federal assistance to the Gulf Coast for
restoration:

     o The scope of the problem should be identified, such as if the problem
       reflects broader industry-wide or regional economic conditions. For
       the Gulf Coast, this would involve financial and economic analyses,
       perhaps utilizing current studies of prior conditions and the ongoing
       progress of recovery and rebuilding.
     o The effect of the problem on the national interest should be clearly
       established, for example, whether the problem presents potentially
       large economy-wide or regional consequences. For example, in the Gulf
       Coast, Congress might consider the costs of municipal and corporate
       collapse and the challenges associated with providing assistance.
     o The legislative goals and objectives associated with the response
       should be clear, concise, and consistent. For example, in the Gulf
       Coast, goals and

24

See GAO, Guidelines for Rescuing Large Failing Firms and Municipalities,
GAO-84-34 (Washington, D.C.: Mar. 29, 1984).

Page 43 GAO-06-442T

objectives for rebuilding should be clearly stated, working with the state
and local groups already tasked with recovery planning and with the
Administration's Coordinator of Federal Support for the Recovery and
Rebuilding of the Gulf Coast region.

o  Lastly, the government's financial interest should be protected. In the
Gulf Coast, controls might be put in place so there is review of the most
important financial and operating plans.

  Concluding Observations

Madame Chairman and members of the committee, the past several weeks have
provided significant insights into the Hurricane Katrina catastrophic
disaster with the release of the House Select Committee report, the White
House report on the federal response, and the testimony provided to this
committee. Secretary Chertoff has announced immediate actions in
preparation for the upcoming hurricane season and plans to work with the
White House and the Homeland Security Council to assess and address the
White House recommendations. Findings, lessons learned, and observations
all paint a complex mosaic of challenges the federal, state, and local
governments face in preparing for, responding to, and recovering from
catastrophic disasters. This committee's report as well as GAO's work will
add to the understanding of what happened and what needs to be done.

Moving forward, the challenge will be to determine if the recommendations
and initial and longer-term actions will truly close the gap in needed
preparedness or add to the problem through additional bureaucracy, complex
processes, and inflexible policies. Also, the key question remains if the
revised policies and procedures, even if sound, will be effectively
implemented. Will they join those past recommendations that were not
implemented, resulted in actions that were not sustained, or proved to be
inadequate? We look forward to working with this committee and others to
focus our work on these key issues.

This concludes my statement. I would be pleased to respond to any
questions that you or other members of the committee may have at this
time.

Contact points for our Offices of Congressional Relations and Public

  GAO Contacts

Affairs may be found on the last page of this statement. For further
information about this testimony, please contact Norman Rabkin at
(202)-512-8777 or at [email protected].

Page 44 GAO-06-442T

Appendix I: Recent GAO Products Concerning Hurricanes Katrina and Rita

Emergency Preparedness and Response: Some Issues and Challenges Associated
with Major Emergency Incidents. GAO-06-467T. Washington: D.C.: February
23, 2006.

Disaster Preparedness: Preliminary Observations on the Evacuation of
Hospitals and Nursing Homes Due to Hurricanes. GAO-06-443R. Washington:
D.C.: February 16, 2006.

Investigation: Military Meals, Ready-To-Eat Sold on eBay. GAO-06-410R.
Washington: D.C.: February 13, 2006.

Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and Abuse.
GAO-06-403T. Washington: D.C.: February 13, 2006.

Statement by Comptroller General David M. Walker on GAO's Preliminary
Observations Regarding Preparedness and Response to Hurricanes Katrina and
Rita. GAO-06-365R. Washington, D.C.: February 1, 2006.

Federal Emergency Management Agency: Challenges for the National Flood
Insurance Program. GAO-06-335T. Washington, D.C.: January 25, 2006.

Hurricane Protection: Statutory and Regulatory Framework for Levee
Maintenance and Emergency Response for the Lake Pontchartrain Project.
GAO-06-322T. Washington, D.C.: December 15, 2005.

Hurricanes Katrina and Rita: Provision of Charitable Assistance.
GAO-06-297T. Washington, D.C.: December 13, 2005.

Army Corps of Engineers: History of the Lake Pontchartrain and Vicinity
Hurricane Protection Project. GAO-06-244T. Washington, D.C.: November 9,
2005.

Hurricanes Katrina and Rita: Preliminary Observations on Contracting for
Response and Recovery Efforts. GAO-06-246T. Washington, D.C.: November 8,
2005.

Hurricanes Katrina and Rita: Contracting for Response and Recovery
Efforts. GAO-06-235T. Washington, D.C.: November 2, 2005.

Federal Emergency Management Agency: Oversight and Management of the
National Flood Insurance Program. GAO-06-183T. Washington, D.C.: October
20, 2005.

Federal Emergency Management Agency: Challenges Facing the National Flood
Insurance Program. GAO-06-174T. Washington, D.C.: October 18, 2005.

Federal Emergency Management Agency: Improvements Needed to Enhance
Oversight and Management of the National Flood Insurance Program.
GAO-06-119. Washington, D.C.: October 18, 2005.

Army Corps of Engineers: Lake Pontchartrain and Vicinity Hurricane
Projection Project. GAO-05-1050T. Washington, D.C.: September 28, 2005.

Hurricane Katrina: Providing Oversight of the Nation's Preparedness,
Response, and Recovery Activities. GAO-05-1053T. Washington, D.C.:
September 28, 2005.

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