Hurricane Katrina: Comprehensive Policies and Procedures Are	 
Needed to Ensure Appropriate Use of and Accountability for	 
International Assistance (06-APR-06, GAO-06-460).		 
                                                                 
In response to Hurricane Katrina, countries and organizations	 
donated to the United States government cash and in-kind	 
donations, including foreign military assistance. The National	 
Response Plan establishes that the Department of State (DOS) is  
the coordinator of all offers of international assistance. The	 
Federal Emergency Management Agency (FEMA) within the Department 
of Homeland Security (DHS) is responsible for accepting the	 
assistance and coordinating its distribution. In light of	 
widespread congressional and public interest in U.S. agencies'	 
accountability in receiving and distributing assistance to	 
hurricane victims, this report is one of several initiated under 
the authority of the Comptroller General to review the federal	 
government's response to Hurricane Katrina. It examines (1) the  
amount and use of internationally donated cash, and (2) the	 
extent to which federal agencies have adequate policies and	 
procedures to ensure proper accountability for the acceptance and
distribution of that assistance.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-460 					        
    ACCNO:   A51039						        
  TITLE:     Hurricane Katrina: Comprehensive Policies and Procedures 
Are Needed to Ensure Appropriate Use of and Accountability for	 
International Assistance					 
     DATE:   04/06/2006 
  SUBJECT:   Accountability					 
	     Cash management					 
	     Disaster recovery					 
	     Disaster relief aid				 
	     Foreign financial assistance			 
	     Foreign military assistance			 
	     Funds management					 
	     Gifts or gratuities				 
	     Hurricane Katrina					 
	     Internal controls					 
	     International relations				 
	     National response plan				 
	     Policies and procedures				 
	     Transparency					 
	     National Response Plan				 

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GAO-06-460

     

     * Report to Congressional Committees
          * April 2006
     * Hurricane Katrina
          * Comprehensive Policies and Procedures Are Needed to Ensure
            Appropriate Use of and Accountability for International
            Assistance
     * Contents
          * Results in Brief
          * Background
          * Foreign Countries Donated Millions in Cash, But Policies,
            Procedures, and Plans Were Not in Place
               * Ad Hoc Procedures Allowed Reasonable Accountability for Cash
                 Donations
               * Cash Donation Management Policies, Procedures, and Plans Not
                 in Place
          * Policies and Procedures Were Lacking in the Acceptance and
            Distribution of in-Kind Donations, Including Foreign Military
            Donations
               * Process Developed for Accepting, Receiving, and Distributing
                 In-Kind Donations
               * Lack of Guidance Regarding the Tracking and Confirmation of
                 Receipt for International Assistance
               * Lack of Guidance Resulted in the Arrival of Food and Medical
                 Items that Could Not be Used
               * Policies and Procedures Were Lacking in the Oversight of
                 Foreign Military Donations
          * Conclusions
          * Recommendations for Executive Action
          * Agency Comments and Our Evaluation
     * Scope and Methodology
     * Comments from the Department of Defense
     * Comments from the Department of Homeland Security
     * GAO Contacts and Staff Acknowledgments
     * Related GAO Products

Report to Congressional Committees

April 2006

HURRICANE KATRINA

Comprehensive Policies and Procedures Are Needed to Ensure Appropriate Use
of and Accountability for International Assistance

Contents

Table

Figures

April 6, 2006Letter

Congressional Committees

Hurricane Katrina struck in August 2005, devastating the Gulf coast of the
United States, causing billions of dollars in damage, and dislocating
thousands of residents. Government at all levels-local, state, and
federal-struggled to respond to the magnitude of the event. As the storm's
devastation and destruction were viewed around the world, many foreign
countries offered both cash and in-kind donations, including foreign
military donations to the United States.1 For the first time in its
history, the U.S. government welcomed international offers of assistance
to this degree.

The framework for managing domestic events is the National Response Plan
(NRP).2 The NRP establishes that the Department of State (DOS) is the
coordinator of all offers of international assistance. In the aftermath of
the hurricane, Federal Emergency Management Agency (FEMA) officials told
us that they convened an interagency meeting to determine how the
international assistance would be managed. Shortly after this meeting the
DOS created a Hurricane Katrina Task Force. Through the task force, DOS
provided information about the offers to the FEMA, within the Department
of Homeland Security (DHS), and DOS communicated with the countries
offering assistance regarding what items would be accepted by the U.S.
government.3 FEMA utilized the Stafford Act4 to accept some of the
assistance. FEMA was responsible for coordinating the distribution of the
international assistance and ensuring that it was distributed as intended.
In carrying out these responsibilities, FEMA requested support from other
federal agencies, using a process known as mission assignment. In the
aftermath of Hurricane Katrina, FEMA requested that the Office of Foreign
Disaster Assistance (OFDA), an organization within the U.S. Agency for
International Development (USAID), manage all logistics/operations support
to coordinate the international in-kind assistance for FEMA. DOD was
involved in the receipt of foreign military donations.

The National Security Council (NSC) also had a role to play in the federal
response to the hurricane. In the NRP section that discusses the principal
organizational elements, issues that require policy adjudication or that
fall outside the Secretary of Homeland Security's areas of authority---as
defined by the Homeland Security Act,5 the Stafford Act, and other
relevant statues, Executive Orders, and directives---are elevated for
resolution through the Homeland Security Council and the NSC system. In
the case of Hurricane Katrina, the NSC convened an interagency working
group to decide how the donated funds would be used.

FEMA had responsibility to safeguard the international assistance and to
ensure that it was used as intended. In other words, FEMA was accountable
to ensure that offers of assistance were acceptable for consumption and
use and, if so, were properly received and distributed. Additionally in
our opinion, when FEMA asks other agencies for assistance through its
mission assignment process, FEMA is to maintain adequate oversight of the
agencies' management of the assistance, particularly since FEMA will
reimburse the agencies for providing assistance. The countries that
provided the United States with assistance did not stipulate specific uses
for their donations. Nevertheless, the United States often stipulates
conditions regarding how the assistance we provide to foreign countries
should be used, and for Hurricane Katrina DOS recognized that it had a
responsibility to maintain accountability and transparency with regard to
the use of the cash donations.

In light of widespread congressional and public interest in U.S. agencies'
accountability in receiving and distributing assistance to hurricane
victims, this report is one of several to review the events and aftermath
surrounding Hurricane Katrina initiated under the statutory authority
provided to the Comptroller General of the United States. Our objectives
were to determine (1) the amount of cash that was donated by foreign
countries, and the extent to which it had been used to assist in the
relief efforts, and (2) the extent to which those federal agencies with
responsibilities regarding the international assistance offered to the
United States had policies and procedures in place to ensure the
appropriate accountability for the acceptance and distribution of in-kind
donations, including foreign military donations.

To achieve these objectives, we reviewed legislation and other guidance,
including the NRP, and met with key officials from DOS, DHS, DOD, USAID,
Department of Treasury (Treasury), U.S. Department of Agriculture (USDA),
and Food and Drug Administration (FDA) within the Department of Health and
Human Services. In addition, we collected and reviewed relevant data,
including lists of items offered and received, and letters of acceptance
from the agencies. We determined that the data used were sufficiently
reliable for the purposes of this report. We conducted our review from
October 2005 through February 2006 in accordance with U.S. generally
accepted government auditing standards. For additional details on our
scope and methodology, see appendix I.

Results in Brief

The U.S. government had never before received such large amounts of
international disaster assistance, and ad hoc procedures were developed to
manage the acceptance and distribution of the assistance. It is
understandable that not all procedures would be in place at the outset to
ensure full accountability of the assistance. We were able to track the
funds received and disbursed to those held in designated U.S. Treasury
accounts. In the absence of policies, procedures, and plans, DOS developed
an ad hoc process to manage the cash donations flowing to the U.S.
government from other countries to assist in Hurricane Katrina relief
efforts. Through this process, $126 million was donated to the U.S.
government from 36 foreign countries and international organizations
without restrictions, which DOS recorded in a designated account at the
U.S. Treasury to hold the funds. FEMA had identified an account that
earned interest in which to accept and hold the international cash
donations. However, as cash donations arrived, an NSC-led interagency
working group was convened to make policy decisions about the use of the
funds.  6 FEMA officials told us they had identified and presented to the
working group a number of items that the donated funds could be spent on.
The NSC-led interagency working group determined that use of those donated
funds, once accepted by FEMA under the Stafford Act, would be more limited
than the wider range of possible uses available if the funds were held
until their ultimate use was determined and accepted under the gift
authorities of other agencies. By September 21, about $115 million had
been received. In October 2005, $66 million of the donated funds were
accepted by FEMA under the Stafford Act and spent on a case management
grant to provide case workers to help 100,000 households affected by
Hurricane Katrina identify their needs and direct them to available
assistance. As of March 16, 2006, $60 million remained undistributed in
the DOS designated account at the Treasury that does not pay interest.7 As
explained below, Treasury can pay interest on funds accepted by FEMA under
the Stafford Act. Because Treasury did not have statutory authority to pay
interest on the funds held in the DOS account, the purchasing power of
those funds held in that account have diminished due to inflation.
Although it is understandable that procedures were not in place at the
outset, given that an additional $400 million or more in potential
international donations are outstanding and could materialize, it is
important that cash management policies and plans be put in place to deal
with the forthcoming donation so that the purchasing power of the donated
cash is maintained.

FEMA, OFDA, and DOD lacked sufficient policies and procedures prior to
this disaster to adequately ensure the acceptance and distribution of
in-kind donations, which includes such things as food, blankets, medical
items, and foreign military donations such as ships and diving teams. This
lack of guidance, as well as inadequate information up front about the
nature and content of foreign offers of in-kind assistance, and
insufficient advance coordination before items entered the United States
resulted in food and medical items, such as Meals Ready to Eat (MREs) and
medical supplies, that arrived and did not meet USDA or FDA standards and
thus could not be distributed in the United States. That said, these
agencies created ad hoc policies and procedures to reasonably account for
the assistance in most cases. For example, although FEMA requested that
USAID/OFDA manage the receipt and distribution of the international
assistance that arrived in the United States, the ad hoc procedures did
not include confirmation of receipt of the donated goods at FEMA
distribution sites. USAID/OFDA's mission is to deliver assistance in
foreign countries and thus it did not have guidance on how to deliver
assistance in the United States. Nevertheless, we found that USAID/OFDA
recorded the type and amount of assistance as it arrived, and it
reasonably accounted for the assistance, particularly given the lack of
information on the manifests and the large quantity of goods arriving
within a short time. However, we noted the ad hoc procedures did not
include internal controls that would have provided more agency oversight
and assurance that the assistance was used as intended. Neither agency had
a system to track the assistance and confirm its arrival at those sites.
Thus, FEMA could not provide us evidence that it had determined or
confirmed that the assistance arrived at these sites. According to
Standards for Internal Control in the Federal Government, policies and
procedures help provide this oversight and are necessary to manage agency
activities. These policies and procedures were lacking because the
agencies did not anticipate that the United States would be receiving this
assistance. Further, FEMA's initial list of items that could be used was
not specific and DOS did not respond to FEMA's requests for more specific
information about the foreign offers. As a result, the U.S. government
received food and medical assistance, MREs and medical supplies, that did
not meet USDA or FDA standards and thus could not be distributed and had
to be stored. In addition to the storage fees of about $80,000
consequently incurred, there are diplomatic ramifications for rejecting
foreign countries' donations after their arrival. For receiving foreign
military donations for disaster relief, DOS established a process to
coordinate with FEMA and DOD. FEMA and DOD apparently each assumed the
other agency had accepted these donations under their respective gift
authorities; however it is unclear whether either agency did so. As a
result, even for the foreign military donations that were vetted through
the DOS process, it is unclear whether either agency accepted these
donations or maintained oversight of these donations and knew how they
were eventually used. In addition, while some foreign military donations
were coordinated through DOS, we learned that in other cases, some foreign
military donations-we were unable to determine the amount-arrived directly
at a military base without being coordinated through DOS. This occurred in
part because DOD lacked internal policies and procedures for managing
foreign military donations intended for use in the United States. For
foreign military shipments that were not vetted through the task force,
DOS, FEMA, and DOD officials could not provide us with information
regarding the amount or type of foreign military donations received, and
as a result, we were not able to confirm that they were used as intended.

Officials from DOS, FEMA, and DOD acknowledged the need for delineated
policies and procedures to manage international assistance in the event
that the United States receives international assistance in the future. As
called for by The Federal Response To Hurricane Katrina: Lessons Learned,8
officials from DOS, FEMA, and DOD told us that by June 1, 2006, they will
provide policies and procedures for managing international assistance to
the Homeland Security Council. We make six recommendations that focus on
specific areas for agencies with a role in international assistance to
develop in the National Response Plan or other appropriate plan. Our
recommendations complement the administration's recommendations, but are
more specific in some areas such as the management of cash donations. In
commenting on a draft of this report, DOD and DHS generally agreed with
our recommendations, while DOS and Treasury did not comment on the
recommendations. We received technical comments from DOS, DOD, USAID/OFDA,
FEMA, FDA, and USDA, which we incorporated as appropriate.

Background

Historically, governments worldwide-including that of the United
States-have provided areas stricken by major disasters with aid in the
recovery process. Unlike many other countries, the U.S. government has
previously neither asked for nor accepted disaster assistance directly
from foreign countries, choosing instead to direct offers of assistance to
nongovernmental organizations such as the Red Cross. However, on August
29, 2005, Hurricane Katrina struck the coasts of Louisiana, Mississippi,
and Alabama, causing billions of dollars in damage, and 3 days afterward
the federal government, through the DOS announced worldwide assistance
would be accepted. As of December 31, 2005, 76 countries and international
organizations, such as UNICEF, donated $126 million in cash to the U.S.
government; various types of in-kind donations, such as food, clothing,
and blankets; and foreign military goods and services, such as the use of
ships and diving teams. Seven countries donated both cash and in-kind
items.

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)9 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.

When and if natural disasters or terrorist attacks occur within the United
States, the National Response Plan (NRP), released in December 2004 by
DHS, provides federal agencies with a framework to coordinate federal
support to states and localities in need. The NRP works on a tiered
request system, according to which requests for assistance flow from
localities to states to the federal government when or if local and state
resources are exhausted. However, under the NRP, the federal
government-DHS-can in certain cases declare a catastrophic incident and
provide assistance without waiting for requests for assistance. According
to the NRP, as events occur and shortcomings are identified, FEMA is
responsible for updating the plan. In the NRP section that discusses the
principal organizational elements, issues that require policy adjudication
or that fall outside the Secretary of Homeland Security's areas of
authority---as defined by the Homeland Security Act,10 the Stafford Act,
and other relevant statues, Executive Orders, and directives---are
elevated for resolution through the Homeland Security Council11 and the
National Security Council system. In the case of Hurricane Katrina, the
NSC led an interagency working group to decide how the donated funds would
be used.

The Stafford Act also provides the President or his delegate with the
authority to accept and use gifts or donations in furtherance of the
purposes of the Stafford Act.12 FEMA, as the President's delegate,
utilized this provision to accept international in-kind donations for the
Hurricane Katrina recovery efforts. FEMA, through its mission assignments
to other agencies, directed the use of the assistance to response efforts.
Various other agencies have gift authorities, including DOS and DOD.
However, an agency's gift authority typically restricts the acceptance of
gifts or donations to those activities that are within the accepting
agency's mission. For the purposes of Hurricane Katrina, FEMA-through the
Stafford Act-accepted donations for the response and recovery efforts.

Pursuant to Homeland Security Presidential Directive 5, the Secretary of
Homeland Security is the principal federal official for domestic incident
management, and the Secretary of State is charged with the responsibility
to coordinate international activities related to the prevention,
preparation, response, and recovery from a domestic incident within the
United States.13 Further, the Secretary of State and Secretary of Homeland
Security are to establish appropriate relationships and mechanisms for
cooperation and coordination between their two departments. In the case of
Hurricane Katrina, DOS, through a Hurricane Katrina Task Force,
coordinated the acceptance of foreign monetary and nonmonetary assistance
on behalf of the U.S. government and DHS (FEMA), respectively. The Task
Force consisted of representatives from DOS and USAID/OFDA.

The NRP designates 15 Emergency Support Functions that identify specific
disaster responses and the organizations that have significant roles in
responding to the disasters. Two key annexes apply to international
disaster assistance. The International Coordination Support annex provides
guidance on carrying out responsibilities for international coordination
in support of the government's response to an Incident of National
Significance. Under this annex, DOS is charged with coordinating requests
for foreign assistance based on needs conveyed by DHS or other federal
agencies. DOS facilitates communication with foreign governments on behalf
of the United States that can assist and/or support response, mitigation,
and recovery efforts and acts as an intermediary for requests and foreign
offers of assistance to the U.S. government. The NRP also includes a
Financial Management Annex. This annex requires federal agencies to use
proper federal financial principles, policies, and regulations, and
management controls to ensure proper accountability of funds. To safeguard
the assets, agencies can use the Comptroller General's Standards for
Internal Controls in the Federal Government.14 These standards provide
federal agencies with the framework necessary to establish internal
controls and thus safeguard and monitor assets and inventory to prevent
waste, loss, or unauthorized use.

USDA and FDA were also involved in the Hurricane Katrina relief effort.
USDA is responsible for regulating the importation of animals and
animal-derived materials to ensure that exotic animal and poultry diseases
are not introduced into the United States, as well as to ensure that
imported meat, poultry, or egg products are fit for human consumption.15
FDA regulates the importation of foods (except for certain meats and
poultry products), drugs (human, animal, and biological), cosmetics,
medical devices and radiation emitting devices, as defined in the Federal
Food, Drug, and Cosmetic Act.16 For conventional operations, USDA and FDA
are notified by U.S. Customs and Border Protection (CBP) prior to the
import of food items or medical supplies in order to ensure that the items
are acceptable for receipt in the United States.17

The ad hoc processes to accept, receive, and distribute international
assistance varied depending on the type of assistance being offered.
However, whether the assistance was in the form of cash, or in-kind
donations, including foreign military donations, offers were supposed to
be initially coordinated through the DOS Hurricane Katrina Task Force.
However, we noted that not all foreign assistance was coordinated through
DOS. For example, an unknown quantity of in-kind assistance came to the
United States directly from foreign militaries.

On September 15, 2005, the President ordered a comprehensive review of the
federal government's response to Hurricane Katrina. The administration
released its report, The Federal Response To Hurricane Katrina: Lessons
Learned, on February 23, 2006. The report contained 125 recommendations,
one of which requires DOS and DHS to lead an interagency effort to develop
procedures for reviewing, accepting, or rejecting any offers of
international assistance for a domestic catastrophic incident, including a
mechanism to receive, disburse, and audit any cash assistance. Officials
from DOS, FEMA, and DOD told us that by June 1, 2006, they will provide
policies and procedures for managing international assistance to the
Homeland Security Council. Our report complements the findings in the
administration's report.

Foreign Countries Donated Millions in Cash, But Policies, Procedures, and
Plans Were Not in Place

In the absence of policies, procedures, and plans, DOS developed an ad hoc
process to manage the cash donations flowing to the U.S. government from
other countries to address Hurricane Katrina relief efforts.18 Through
this process, $126 million was donated to the U.S. government which DOS
recorded in a designated account at the U.S. Treasury to hold the funds.
An NSC-led interagency working group was established to make policy
decisions about the use of the funds.  FEMA officials told us they had
identified and presented to the working group a number of items that the
donated funds could be spent on. Once accepted by FEMA under the Stafford
Act, donated funds would be limited to use on activities in furtherance of
the Act. The working group wanted greater flexibility in the use of the
donated funds, and thus held the funds pending the group's determination
as to which agency or agencies should ultimately accept and use the
monies. By September 21, 2005 about $115 million had been received and in
October 2005, $66 million of the donated funds were accepted by FEMA and
spent on a case management grant. As of March 16, 2006, $60 million
remained undistributed in the DOS-designated account at the Treasury that
does not pay interest.19 As discussed previously, undistributed funds
accepted by FEMA under the Stafford Act and recorded at Treasury can
receive interest.20 Because DOS expects additional cash donations to be
received, it is important that cash management policies and spending plans
are in place to deal with the forthcoming donations so that the purchasing
power of the donated cash is maintained.

Ad Hoc Procedures Allowed Reasonable Accountability for Cash Donations

For offers of cash assistance, the DOS Hurricane Katrina Task Force
developed ad hoc procedures to track and account for amounts offered and
received as events evolved. Ad hoc procedures were necessary because
specific policies and procedures for handling international cash donations
to the federal government had not been developed. The DOS Hurricane
Katrina Task Force evaluated each monetary offer by working with foreign
donors to determine whether there were any specific restrictions or
conditions associated with the offers. In making their donations, foreign
donors did not generally place restrictions or conditions on amounts
pledged. DOS also encouraged governments and private foreign donors to
direct their cash contributions to the Red Cross and other organizations.
Additionally, DOS coordinated with other federal agencies to determine
whether any U.S. government sanctions imposed on a donating country
prevented the acceptance of its offer.21 Once an offer was accepted on
behalf of the U.S. government, DOS provided the donor with instructions on
how to wire transfer the funds to a designated Department of the Treasury
account maintained at the Federal Reserve Bank of New York specifically
for DOS.22 In other cases, countries and private citizens wrote checks to
the U.S. government that were deposited and routed to the same account
following normal operating procedures. Figure 1 below shows the process
developed to receive cash donations.

Figure 1: Overview of Process Developed to Receive International Cash
Donations

As of December 31, 2005, DOS reported that $126 million had been donated
by 36 countries and international organizations. Our review noted that
although DOS's procedures were ad hoc, they did ensure the proper
recording of international cash donations that have been received to date,
and we were able to reconcile the funds received with those held in the
designated DOS account at Treasury. DOS expects that additional donations
could come in from several countries including $400 million in pledged oil
products from a foreign country. DOS officials told us that the foreign
country's governing body must approve the donation before this pledge can
be executed and that the country intends to monetize-convert to cash-the
oil products if and when its governing body approves the donation.

Cash Donation Management Policies, Procedures, and Plans Not in Place

In the absence of international cash donation management policies,
procedures, and plans, an NSC-led interagency working group was
established to determine uses for the international cash donations. In
October 2005, $66 million of the donated funds had been accepted by FEMA
under the Stafford Act and used for a Hurricane Katrina relief grant. As
of March 16, 2006 the other $60 million from international donations
remained undistributed.23 We were told that the NSC-led interagency
working group did not transfer the funds to FEMA because it wanted to
retain the flexibility to spend the donated funds on a wider range of
assistance than is permitted under the Stafford Act. During this period
and while deliberations were ongoing, the funds were kept in a DOS account
that did not pay interest, thereby diminishing the purchasing power of the
donated funds and losing an opportunity to maximize the resources
available for relief. Under the Stafford Act, FEMA could have held the
funds in an account that can pay interest, but Treasury lacks the
statutory authority to credit these DOS-held funds with interest. If there
are dual goals of flexibility and maintaining purchasing power, there are
a number of options that could be considered.

Table 1 below shows the dates of key events in the receipt and
distribution of the international cash donations according to
documentation received and interviews with DOS and FEMA officials.

Table 1: International Cash Donations Received and Used - Key Dates

                                        

          Date                                 Event                          
August 29, 2005    Hurricane Katrina hit Gulf Coast Region                 
September 2, 2005  DOS Hurricane Katrina Task Force Established            
September 3, 2005  DOS provides deposit instructions to diplomatic and     
                      consular posts for foreign cash donations               
September 6, 2005  FEMA identified account that can earn interest          
September 21, 2005 About $115 million in foreign donations received        
September 23, 2005 FEMA presented items the funds could have been spent on 
October 20, 2005   DOS transferred $66 million to FEMA                     
October 28, 2005   FEMA awarded case management services grant to United   
                      Methodist Committee on Relief                           
February 28, 2006  $60 million in remaining donations undistributed        
March 16, 2006     Memorandum of Agreement signed between DOS and          
                      Department of Education to spend remaining $60 million  

Source: GAO analysis.

In early September 2005, FEMA officials had identified an account at the
U.S. Treasury for recording international cash donations and had developed
a number of potential uses for the donations that would help meet relief
needs of the disaster. By September 21, 2005, about $115 million in
foreign cash donations had been received. In its input to the NSC-led
interagency working group, dated September 22, 2005, DOS recognized that
every effort should be made to disburse the funds to provide swift and
meaningful relief to Hurricane Katrina victims without compromising needed
internal controls to ensure proper management and effective use of the
cash donations and transparency. FEMA officials told us that on September
23, 2005, they had identified and proposed to the NSC-led interagency
working group that the international cash donations could be spent on the
following items for individuals and families affected by Hurricane
Katrina: social services assistance, medical transportation, adapting
homes for medical and handicap needs, job training and education, living
expenses, building materials, furniture, and transportation. In responding
to our draft report, a DHS official said that at the next meeting of the
interagency working group on October 7, 2005, FEMA, at NSC's request,
presented a more detailed description of certain potential activities,
including a proposal to finance case management services for households
affected by Hurricane Katrina. On October 20, 2005, with the NSC-led
interagency working group consensus, DOS transferred to FEMA $66 million
of the international donations for the purpose of financing case
management services for up to 100,000 such households. These services will
provide case workers to help individual households define what their needs
are and to obtain available assistance. On October 28, 2005, FEMA awarded
a $66 million 2-year case management grant to the United Methodist
Committee on Relief. With these funds, the United Methodist Committee on
Relief will lead and manage a national consortium consisting of 10 primary
organizations that will provide case management services to victims of
Hurricane Katrina.24

As of February 2006, the remaining $60 million had not been released,
pending the NSC-led interagency working group determination as to which
agency or agencies should ultimately accept and use the remaining funds.
The NSC-led interagency working group set various parameters for using the
funds, including that the funds should be used for "bricks and mortar"
projects, such as buildings that provide tangible evidence of how
contributions were used. We were told that the NSC-led interagency working
group determined that use of those funds, once accepted by FEMA under the
Stafford Act, would be more limited than the wider range of possible uses
available if the funds were held until their ultimate use was determined
and then accepted under the gift authorities of other agencies.

DOS and FEMA officials told us that for the remaining $60 million in
donated funds, the NSC-led interagency working group was considering a
series of proposals received from various entities, both public and
private. At the time of our review, a member of the NSC-led interagency
working group told us they had agreed that the vital needs of schools in
the area would be an appropriate place to apply the donations and they
were working with the Department of Education to finalize arrangements to
provide funding to meet those needs. FEMA officials told us that under the
Stafford Act, they could use donated funds for projects such as rebuilding
schools, but projects for new school buildings are not consistent with
Stafford Act purposes unless replacing a damaged one. Also, according to a
DHS official, the Act would have required that receiving entities match
FEMA funds for these purposes. However, because of the devastation, the
entities would have difficulty matching FEMA funds, which in essence
limited FEMA from doing these types of projects. According to DHS, FEMA
considered whether it would be useful for donated funds to contribute to
the non-federal share for applicants having trouble meeting the
non-federal share, but would need legislative authority to use it to match
federal funds. We contacted NSC to further discuss these matters; however,
NSC did not respond to our requests for a meeting. On March 16, 2006, DOS
and the Department of Education signed a Memorandum of Agreement regarding
the use of $60 million of the international cash donations. We did not
review the details of this agreement.

Advance planning is very important given that outstanding pledges of $400
million or more that DOS officials indicated will likely be received.
While acknowledging that the U.S. government has never previously had
occasion to accept such large amounts of international donations for
disaster relief, going forward, advance planning is a useful tool to
identify potential programs and projects prior to the occurrence of an
event of such magnitude. The administration's report The Federal Response
To Hurricane Katrina: Lessons Learned, released on February 23, 2006,
recognized that there was no pre-established plan for handling
international donations and that implementation of the procedures
developed was a slow and often frustrating process. The report includes
recommendations that DOS should establish before June 1, 2006, an
interagency process to determine appropriate uses of international cash
donations, and ensure timely use of these funds in a transparent and
accountable manner, among others. DOS officials recognized that the ad hoc
process needed to be formalized and planned to develop such procedures by
June 1, 2006.

While the NSC-led interagency working group was reviewing various
proposals on the further use of the funds beyond the initial $66 million,
the remaining $60 million was being held in a DOS account at the U.S.
Treasury that does not pay interest. Treasury lacks the statutory
authority to credit these DOS-held funds with interest. Since these funds
have not yet been used, their purchasing power has diminished due to
inflation. If these funds had been placed in an account that could be
credited with interest to offset the erosion of purchasing power, the
amount of funds available for relief and recovery efforts would have
increased while decision makers determined how to use them. The U.S.
government would be responsible for paying the interest if these funds
were held in an account at the Treasury that can earn interest.

Although the Stafford Act does not apply to the donated funds maintained
in the DOS account at Treasury, the Stafford Act does provide that excess
donated funds may be placed in Treasury securities, and the related
interest paid on such investments would be credited to the account. This
Stafford Act provision applies only to donated funds that have been
accepted by FEMA. Had the foreign monetary donations been placed in

Treasury securities, we estimate that by February 23, 2006, the remaining
funds for relief efforts would have increased by nearly $1 million.25
Although Treasury lacks the authority to invest the foreign monetary
donations received by DOS, the FEMA account does permit the government to
protect the purchasing power of foreign monetary donations.

As noted previously, outstanding pledges totaling over $400 million could
be received in the near future. Advanced planning and procedures for the
decision-making process in the disbursement of funds is important so that
this money can be utilized for disaster relief in a timely manner or be
placed in an account to earn interest for the benefit of relief and
reconstruction efforts while decisions are being made on how to spend the
funds. When developing policies, procedures, and plans to provide the
flexibility given by leaving the international donations in the DOS
account, it is important that consideration also be given to strategies
that can help maintain the purchasing power of the international
donations. If the goal is to maintain both their purchasing power and
flexibility, then among the options to consider are seeking statutory
authority for DOS to record the funds in a Treasury account that can pay
interest similar to donations accepted under the Stafford Act, or to allow
DOS to deposit the funds in an existing Treasury account of another agency
that can pay interest pending decisions on how the funds would be used.26

Policies and Procedures Were Lacking in the Acceptance and Distribution of
in-Kind Donations, Including Foreign Military Donations

The agencies having responsibilities regarding international assistance
did not have policies and procedures in place to ensure the acceptance and
distribution of in-kind donations, including foreign military donations,
received from 43 countries and international organizations. With little
guidance, DOS, FEMA, OFDA, and DOD created ad hoc policies and procedures
in an effort to provide the assistance to victims as quickly as possible.
However, we did note areas in which the ad hoc procedures were missing
internal controls to ensure sufficient agency oversight of the assistance
and to ensure that the assistance was used as intended. For example, the
lack of guidance, inadequate information up front about the nature and
content of foreign offers of in-kind assistance, and insufficient advance
coordination before acceptance resulted in food and medical items, such as
Meals Ready to Eat (MREs) and medical supplies, that arrived and did not
meet USDA or FDA standards and thus could not be distributed in the United
States. Also, the ad hoc procedures allowed for confusion about which
agency-FEMA or DOD-accepted and was responsible for oversight of foreign
military donations.

Process Developed for Accepting, Receiving, and Distributing In-Kind
Donations

For offers of in-kind assistance, FEMA worked in close coordination with
the DOS Task Force to determine whether it should accept the offers.27
Specifically, FEMA provided the Task Force with a list of supplies the
agency could use to assist in recovery efforts. The Task Force compared
the offers of assistance against a list of needed supplies provided by
FEMA.28 As matches were identified by the Task Force, DOS relayed a
message to the donor that the offer would be accepted on behalf of the
United States for use in Hurricane Katrina relief efforts.

Once a message of acceptance was relayed to the foreign country or
international organization donating the in-kind assistance, the Office of
Foreign Disaster Assistance was tasked by FEMA with the responsibility of
providing logistical support for physical receipt of the donation.
USAID/OFDA coordinated with DOD-Northern Command to establish a location
that could be used to receive international donations. The location had to
be both accessible to numerous flights delivering supplies and in close
proximity to the areas devastated by Hurricane Katrina, and USAID/OFDA and
DOD-Northern Command determined that the Little Rock Air Force Base best
qualified for these criteria. Accordingly, USAID/OFDA coordinated with
foreign donors for in-kind donations to arrive in Little Rock, Arkansas,
where agency personnel would unload donations and, upon request from FEMA,
forward the donations to a distribution point.

Figure 2 below shows the process developed for accepting, receiving, and
distributing in-kind donations.

Figure 2: Overview of Process Developed for Accepting, Receiving, and
Distributing In-Kind Donations

Lack of Guidance Regarding the Tracking and Confirmation of Receipt for
International Assistance

In the absence of guidance, USAID/OFDA created a database to track the
assistance as it arrived. We found, under the circumstances, that
USAID/OFDA reasonably accounted for the assistance, especially given the
lack of manifest information and the amount of assistance that was
arriving within a short time. Compounding difficulties in USAID/OFDA's
ability to record the assistance as it arrived were planes that arrived
from the North Atlantic Treaty Organization for which the organization
would not provide reliable manifest information.

Internal controls, such as a system to track that shipments are received
at intended destinations, provides an agency with oversight, and for FEMA
in this case, they help ensure that international donations are received
at FEMA destination sites. On September 14, 2005, FEMA and USAID/OFDA
agreed that USAID/OFDA would track the assistance from receipt through
final disposition. However, the system USAID/OFDA created did not include
confirming that the assistance was received at the FEMA distribution
sites. In part, USAID/OFDA did not set up these procedures on its own in
this situation because USAID/OFDA had never distributed assistance within
the United States as its mission is to deliver assistance in foreign
countries. FEMA officials told us that they assumed USAID/OFDA had these
controls in place. FEMA and USAID/OFDA officials could not provide us with
evidence that confirmed that the assistance sent to distribution sites was
received. Without these controls in place to ensure accountability for the
assistance, FEMA does not know if all or part of these donations were
received at FEMA distribution sites. Had USAID/OFDA created a system to
track the items transported through receipt at distribution sites and had
FEMA overseen the USAID/OFDA process, FEMA would be able to determine the
extent to which all or part of the foreign assistance was received at the
FEMA distribution sites.

Lack of Guidance Resulted in the Arrival of Food and Medical Items that
Could Not be Used

The lack of guidance, inadequate information up front about foreign offers
of in-kind assistance and insufficient advance coordination before
agreeing to receive it, resulted in food and medical items, such as MREs
and medical supplies, that came into the United States and did not meet
USDA or FDA standards and thus could not be distributed in the United
States. The food items included MREs from five countries. Because of the
magnitude of the disaster, some normal operating procedures governing the
import of goods were waived. According to USDA and FDA officials, under
normal procedures, entry documents containing specific information which
are filed with CBP, are transmitted to USDA and FDA for those agencies'
use in determining if the commodities are appropriately admissible into
the United States. Based on U.S. laws and regulations, the agencies then
determine whether the items to be imported meet U.S. standards. CBP
authorized suspension of some normal operating procedures for the import
of regulated items like food and medical supplies without consultation or
prior notification to USDA or FDA.29 Thus, USDA and FDA had no involvement
in the decision-making process for regulated product donations, including
MREs and medical supplies before the United States agreed to receive them.

FEMA notified USDA and FDA on approximately September 4, 2005, that food
and medical supplies were received by the U.S. government and approved by
CBP for entry into the United States. However, FEMA officials told us that
they did not accept MREs from one country even though these MREs were
shipped and stored in the warehouse along with the MREs from the other
countries. On approximately September 4, the items were either in route or
had already arrived at the staging area in Little Rock, Arkansas. The USDA
and FDA then sent personnel to Little Rock to inspect the donations.
Simultaneously, USAID/OFDA personnel, unaware that some of these donations
would not be eligible for distribution and trying to expedite provision of
relief supplies, forwarded approximately 220,000 MREs to distribution
points. When USAID/OFDA officials became aware that the MREs they
distributed were not approved by the USDA, they recalled the items back to
Little Rock, Arkansas, pending USDA inspection.

According to USDA inspectors, they determined that a number of the MREs
donated to the United States contained meat and poultry products from
countries that, based on U.S. regulations,  were excluded from exporting
meat to the United States. According to USDA, the MREs from one country
were banned because of concerns regarding Bovine Spongiform Encephalopathy
(BSE) meat contamination,30 or because the MREs originated in countries
lacking food inspection systems equivalent to those in the United States.
In addition, FDA found that many of the medical supplies received in
Little Rock were not approved for use in the United States because they
were either labeled with instructions in a language other than English or
stored under conditions that were deemed unsanitary. Both USDA and FDA,
based on regulations intended to protect public health, prevented
distribution of some international donations.

Per FEMA guidance, USAID/OFDA received 359,600 rations of MREs that could
not be distributed within the United States. USAID/OFDA, on behalf of
FEMA, has been storing the MREs and medical supplies at a private
warehouse in Little Rock, Arkansas, until DOS and FEMA determine what to
do with them. As of February 1, 2006, FEMA and DOS31 had paid the
warehouse $62,000, with an additional $17,600 contract pending for the
month of February. In addition to the storage cost, there is an
unquantifiable cost in the diplomatic impact of rejecting foreign
donations after they have been received. DOS has arranged for some of the
MREs to be shipped to foreign countries in need and DOS officials told us
that the receiving countries will be paying the shipping costs. As of
February 3, 2006, approximately 40 percent of the 359,600 rations of MREs
have been forwarded to two other countries. The DOS plans to forward an
additional 21 percent to other countries by February 28, 2006.32 While the
disposition of the remaining 40 percent of the MREs and the medical
supplies still stored in the private warehouse is uncertain, DOS will
continue to pay storage fees. The following picture displays the numerous
pallets of MREs stored in Little Rock, Arkansas as of November 9, 2005.

Figure 3: Foreign Donated MREs in Storage as of November 9, 2005

The costs for FEMA's receipt and later storage of the MREs and medical
supplies that were not distributed for the disaster were attributable in
part to the lack of policies and procedures needed to guide it through the
process of coordinating and accepting international in-kind assistance.
First, our review noted that FEMA's list of items that could be used for
disaster relief that was provided to DOS was very general and did not
provide any exceptions, for example about contents of MREs. Also, DHS
commented on our report that FEMA repeatedly requested from DOS additional
information about the foreign items being offered to determine whether or
not they should be accepted and DOS did not respond. Had FEMA supplied DOS
officials with more detailed information early on about what could be
accepted and what could not be ultimately distributed, and had DOS
requested and received additional details from potential donors on the
nature and contents of the assistance such as MREs, they might have
prevented the unusable products from coming into the United States. FEMA
officials told us that in the event of another disaster of this size, they
would coordinate with USDA, FDA, and other agencies as required to avoid
similar problems.

Policies and Procedures Were Lacking in the Oversight of Foreign Military
Donations

In the absence of policies and procedures, DOS, FEMA, and DOD created ad
hoc policies and procedures to manage the receipt and distribution of
foreign military goods and services; however, this guidance allowed for
confusion about which agency had oversight of these donations. Also, there
were no controls or procedures to assure that all foreign military
donations were vetted through the DOS process. The offers of foreign
military assistance included, for example, the use of amphibious ships and
diver salvage teams.

For foreign military donations, the DOS Hurricane Katrina Task Force
coordinated with FEMA and DOD, through Northern Command, to determine
whether the offer of assistance could be utilized. Northern Command
reviewed the offers of assistance and compared them against the mission
assignments it received from FEMA that included such tasks as clearing
ports and waterways of debris. If Northern Command believed the foreign
militaries' offers of assistance could be utilized to accomplish a mission
assignment, the command coordinated the receipt of the assistance with the
foreign donor. Figure 4 below shows the process developed for acceptance
and receipt of foreign military assistance.

Figure 4: Overview of Process Developed for the Acceptance and Receipt of
Foreign Military Assistance

The ad hoc procedures, however, allowed confusion about which agency-DOD
or FEMA-was to formally accept the foreign military assistance and
therefore, each agency apparently assumed the other had done so under
their respective gift authorities. It is unclear whether FEMA or DOD
accepted or maintained oversight of the foreign military donations that
were vetted through the DOS task force. A FEMA official told us that they
were unable to explain how the foreign military donations were used
because FEMA could not match the use of the donations with mission
assignments it gave Northern Command. Establishing accountability is an
important internal control activity to help ensure that there is an
organization to account for the goods and services and that they are used
as intended. While we have found no evidence to suggest that any of the
foreign military goods or services were not used as intended, establishing
and maintaining oversight provides more assurance that these donations
were used as intended.

Moreover, FEMA and Northern Command officials told us of instances in
which foreign military donations arrived in the United States that were
not vetted through the DOS task force. For example, we were told of
foreign military MREs that were shipped to a military base and distributed
directly to hurricane victims. Having policies and procedures in place
would have instructed federal officials to coordinate all foreign military
offers of assistance through the DOS task force which would work with FEMA
and DOD to determine the best use for the items. DOD officials
acknowledged the need for policies and procedures and are trying to
establish policies and procedures to manage international assistance. When
we asked about shipments that were not vetted through the task force,
neither DOS, FEMA, nor DOD officials could provide us information on the
type, amount, or use of these donations. As a result, we can not determine
if these items of assistance were safeguarded and used as intended.

Conclusions

We recognize that since the United States government had never before
received such substantial amounts of international disaster assistance,
DOS, FEMA, OFDA, and DOD needed to create ad hoc procedures to manage the
acceptance and distribution of the assistance as best they could. Going
forward, it will be important to have in place clear policies, procedures,
and plans on how international cash donations are to be managed and used,
which would enhance the accountability and transparency of these funds. In
addition, there is a need to consider whether international donations
should be treated on the same basis as Stafford Act donations for the
purpose of Treasury crediting interest to such donations. Since this was
the first time international donations were accepted, this situation was
not contemplated. If the goal is to maintain both purchasing power and
flexibility, then among the options to consider are seeking statutory
authority for DOS to record the funds in a Treasury account that can pay
interest, or to allow DOS to deposit the funds in an existing Treasury
account of another agency that can pay interest pending decisions on how
the funds would be used. In addition, focusing immediate attention on the
potentially forthcoming donations of $400 million, as well as the $60
million in presently available funds, would be prudent.

With respect to the donations of food and medical supplies, we agree that
normal procedures should be waived to expedite recovery efforts when
necessary; however, food and medical supplies are essential in any
disaster and the health and safety of the public should be considered when
accepting food and medical assistance from the international community.
Moreover, the failure to track in-kind donations after they were loaded
onto trucks resulted in a lack of assurance that all of the international
assistance FEMA accepted was safeguarded, and used as intended. The need
to have proper knowledge, acceptance, and oversight of foreign military
donations is equally important.

Recommendations for Executive Action

As mentioned previously, in February 2006, the administration issued its
report on the federal response to Hurricane Katrina and the lessons
learned in that response. In the report, the administration made 125
recommendations, including several to improve the management of
international donations. Specifically, DOS and DHS are required to lead an
interagency effort to improve the management of international donations,
which includes developing procedures for reviewing, accepting, or
rejecting any offers as well as developing a mechanism to receive,
disburse, and audit any cash donations. To help ensure that the cognizant
agencies fulfill their responsibility to account for and effectively
manage foreign donations and maintain adequate internal controls over
government resources, we recommend that the Secretary, Department of
Homeland Security, in consultation with the Secretary, Department of
State, establish within the National Response Plan-or other appropriate
plans-clearly delineated policies and procedures for the acceptance,
receipt, and distribution of international assistance. As the agencies
develop and implement the administration's recommendations, we believe
they should also incorporate the following actions and procedures into
their guidance.

o Develop policies, procedures, and plans to help ensure international
cash donations for disaster relief and assistance are accepted and used
appropriately as needed.

o Consider cash management options as discussed in the conclusions section
above and place international cash donations in an account that would pay
interest while decisions are pending on their use to maintain the
purchasing power of those donations.

o Maintain oversight of foreign donated in-kind assets by tracking them
from receipt to disbursement, to reasonably ensure that assistance is
delivered where it is intended.

o Establish plans for the acceptance of foreign-donated items that include
coordinating with regulatory agencies, such as USDA and FDA, in advance,
in order to prevent the acceptance of items that are prohibited from
distribution in the United States, regardless of waivers that might be
established to expedite the importing of foreign assistance; these plans
should also include DOS obtaining information on acceptable or
unacceptable items in order to communicate to the international community
what is needed or what can not be accepted.

We also recommend that the Secretary of Defense, in consultation with the
Secretaries of State and Homeland Security, take the following two
actions:

o Establish within the National Response Plan or other appropriate
plans-clearly delineated policies and procedures to ensure that foreign
military offers of assistance for domestic disasters are coordinated
through the DOS to ensure they are properly accepted and safeguarded and
used as intended.

o Develop and issue internal DOD guidance to commanders on the agreed-upon
process to coordinate assistance through DOS.

Agency Comments and Our Evaluation

We asked the Secretaries of Defense, Homeland Security, State, and
Treasury to comment on our draft. We also asked USDA, FDA, and USAID/OFDA
to provide comments. DOD and DHS generally agreed with our recommendations
and provided written comments on a draft of this report, included at
appendixes II and III, respectively. We received technical comments from
DOS, DOD, USAID/OFDA, FEMA, FDA, and USDA which we incorporated as
appropriate.

DOD agreed with the recommendations pertaining to it and suggested that we
adjust the wording of the recommendation that procedures be developed to
assure that foreign military donations be routed through DOS. We adjusted
the recommendation based on DOD's suggestion. In its technical comments,
DOD also suggested specific information on the process to coordinate
international offers of assistance through DOS, including ensuring that
the offers match U.S. requirements, meet U.S. standards, and are received
at the right locations. These specifics may be considered as the agencies
develop policies, procedures, and plans for the management of future
international assistance.

DHS generally agreed with our recommendations and noted that, in some
cases, actions were already underway to address the recommendations.
Regarding our recommendation to develop policies, procedures, and plans
for international cash donations for disaster relief to assure they are
accepted and used appropriately as needed, DHS noted that, in coordination
with Treasury and the Office of Management and Budget, it is already
developing a system to manage such donations. DHS also agreed with our
recommendation regarding cash management options that would maintain the
purchasing power of the cash donations while decisions are pending on
their use. DHS added that this recommendation was consistent with what
FEMA did during Hurricane Katrina, pointing out that on September 6, 2005,
FEMA established an interest bearing account to hold international funds
and began identifying programs and needs that would not be eligible for
FEMA assistance but could benefit from monetary donations. DHS also agreed
that FEMA should maintain oversight of foreign donated in-kind assets to
the distribution points. DHS noted that FEMA and USAID/OFDA agreed that it
was USAID/OFDA's responsibility to track incoming international donations.
We acknowledge this agreement, but note in our report, however, that the
in-kind donations were not tracked to the final distribution points with
confirmation that they arrived and note that USAID/OFDA and FEMA could not
provide evidence that this had been accomplished. We clarified the report
in this regard. DHS agreed with our recommendation regarding the need to
coordinate with regulatory agencies such as USDA and FDA in advance to
prevent the receipt of items that could not be distributed in the United
States. DHS noted that FEMA coordinated with these agencies during
Hurricane Katrina, and made constant requests to DOS to obtain more
information from the donors about the donations to determine whether or
not they could be properly accepted. We agree that more specificity is
needed about the nature and content of items the United States can accept
and foreign nations are offering through DOS channels, such as MREs, and
reflected DHS's comment in the final report. Without such information, it
may not be possible to undertake appropriate coordination with regulatory
agencies such as USDA and FDA and make a sound determination as to whether
the items should be accepted and could be used in the United States before
they arrive. DHS also agreed that all foreign military offers of
assistance for domestic disasters should be coordinated through DOS for
official acceptance or denial. However, we continue to believe that clear
procedures are needed regarding which agency-FEMA or DOD-accepts and
maintains oversight of such donations in advance. We adjusted our draft
report to reflect the apparent confusion over the acceptance of foreign
military donations.

We also received technical comments from DOS, DOD, USAID/OFDA, FEMA, FDA,
and USDA, which we incorporated as appropriate.

We are sending copies of this report to the Secretaries of Homeland
Security, Defense, and State and interested congressional committees. We
will also make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
http:/www.gao.gov.

Please contact Davi M. D'Agostino at (202) 512-5431 or [email protected]
or McCoy Williams at (202) 512-9095 or [email protected] if your staff
have any questions concerning this report. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix IV.

Davi M. D'Agostino, Director Defense Capabilities and Management

McCoy Williams, Director Financial Management and Assurance

List of Congressional Committees

The Honorable Joseph I. Lieberman Ranking Minority Member Committee on
Homeland Security and Governmental Affairs United States Senate

The Honorable Tom Davis Chairman The Honorable Henry A. Waxman Ranking
Minority Member Committee on Government Reform House of Representatives

Scope and Methodology Appendix I

To meet our objectives for this report we relied on information gathered
through our visits and interviews with key personnel within the Department
of State's (DOS) Hurricane Katrina Task Force; Office of the General
Counsel for the DOS; Department of Homeland Security (DHS) Inspector
General; Office of the General Counsel for Federal Emergency Management
Agency (FEMA); FEMA Response Division; FEMA Recovery Division; Office of
the Chief Financial Officer for FEMA; FEMA/Financial and Acquisitions
Management Division; FEMA/Grants Management Division; United States Agency
for International Development (USAID)/Office of Foreign Disaster
Assistance (OFDA); OFDA/Response Alternatives for Technical Services;
Office of the Assistant Deputy Under Secretary of Defense; Office of the
Assistant Secretary of Defense; Northern Command (NORTHCOM)/ Joint Staff
Logistics; NORTHCOM/ Joint Staff Civil Affairs; NORTHCOM/Political
Advisor; Department of Treasury (Treasury)/Cash Accounting; Treasury/Chief
Systems Integrity Division; Food and Drug Administration (FDA); and United
States Department of Agriculture (USDA)/Food Safety and Inspection
Service. We conducted our work in Washington, D.C.; Little Rock, Arkansas;
Colorado Springs, Colorado, and New York, New York, from October 2005
through February 2006, in accordance with generally accepted government
auditing standards. DOS and FEMA officials told us the National Security
Council (NSC) had established an interagency working group that had a role
in determining how the international cash donations were to be used. We
contacted NSC to discuss its role in managing the international cash
donations; however, NSC did not respond to our request for a meeting.

To determine the amount of cash that was donated by foreign countries and
the extent to which it has been used to assist hurricane victims, we
gathered information from interviews with DOS, FEMA, and Treasury. To
assess the reliability of foreign cash donations received by the U.S.
government from the date Hurricane Katrina hit the United States until
December 31, 2005, we talked with DOS, FEMA, and Treasury officials to
gain an understanding of the procedures followed in recording the funds.
We also validated $123,611,143, which is 97.8 percent of the Hurricane
Katrina collections reflected in the Department of Treasury records by
comparing to supporting documentation such as Treasury wire transfers and
DOS check receipt documents. We also traced the transfer of $66 million in
funds from DOS to FEMA. We determined the data were sufficiently reliable
for the purpose of this report. To obtain an understanding of the
oversight controls over FEMA's-2 year case management grant, we
interviewed officials from FEMA/Grants Management Division, the United
Methodist Committee on Relief, and DHS Office of Inspector General, as
well as reviewed pertinent documents such as the grant proposal and
agreement. We also contacted the NSC to discuss why an interagency working
group and not FEMA was used to manage the donated cash and the process by
which they established the parameters governing how the cash was to be
used. NSC did not respond to our requests for a meeting.

To determine the extent to which those federal agencies with
responsibilities regarding the international assistance offered to the
United States had policies and procedures in place to ensure the
appropriate accountability for the acceptance and distribution of in-kind
donations, including foreign military donations, we relied on information
gathered during interviews with officials from DOS, DHS, DOD, USDA, and
FDA. We reviewed the National Response Plan International Coordination
Support Annex and Financial Management Annex; Robert T. Stafford Act;
Homeland Security Presidential Directive 5; Federal Food, Drug, and
Cosmetic Act; and 9 CFR 94.18 to determine the responsibilities of federal
agencies. We also obtained, reviewed, and analyzed the Memorandum of
Agreement between the Department of State and The Department of Homeland
Security; a FEMA-created international assistance flow chart and processes
document; a NORTHCOM-created international donations flowc hart; USAID
Commodity Dispatch Procedures; and FDA Import Procedures to assist in
understanding the roles of federal agencies. We reviewed and analyzed
summaries of international assistance received; instructional and
acceptance cables from the Department of State; instructions provided to
FEMA accountants for recording in-kind donations; and USAID Commodity
Dispatch Procedures for FEMA to call forward international donations from
the arrival site in Little Rock, Arkansas. To assess the reliability of
data provided, we talked with knowledgeable agency officials about the
data provided and reviewed relevant documentation. We visited Smart Choice
Delivery warehouse in Little Rock, Arkansas to discuss and observe the
international Meals-Ready-to-Eat that were stored in the facility. We
obtained and reviewed the contract between the Office of Foreign Disaster
Assistance and Smart Choice Delivery. In addition, we interviewed
representatives from the American Red Cross and the United Nations
International Children's Fund in order to understand the process and
procedures of leading non-governmental agencies that are experienced in
accepting non-monetary donations.

Comments from the Department of Defense Appendix II

Comments from the Department of Homeland Security Appendix III

GAO Contacts and Staff Acknowledgments Appendix IV

Davi M. D'Agostino (202) 512-5431 McCoy Williams (202) 512-9095

In addition to those named above, Kay Daly, Kate Lenane, Charles Perdue,
Jay Spaan, Lorelei St James, Pamela Valentine, Cheryl Weissman, and
Leonard Zapata made key contributions to this report.

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

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www.gao.gov/cgi-bin/getrpt? GAO-06-460 .

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and methodology, click on the link above.

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Highlights of GAO-06-460 , a report to congressional committees

April 2006

HURRICANE KATRINA

Comprehensive Policies and Procedures Are Needed to Ensure Appropriate Use
of and Accountability for International Assistance

In response to Hurricane Katrina, countries and organizations donated to
the United States government cash and in-kind donations, including foreign
military assistance. The National Response Plan establishes that the
Department of State (DOS) is the coordinator of all offers of
international assistance. The Federal Emergency Management Agency (FEMA)
within the Department of Homeland Security (DHS) is responsible for
accepting the assistance and coordinating its distribution. In light of
widespread congressional and public interest in U.S. agencies'
accountability in receiving and distributing assistance to hurricane
victims, this report is one of several initiated under the authority of
the Comptroller General to review the federal government's response to
Hurricane Katrina. It examines (1) the amount and use of internationally
donated cash, and (2) the extent to which federal agencies have adequate
policies and procedures to ensure proper accountability for the acceptance
and distribution of that assistance.

What GAO Recommends

GAO makes recommendations designed to improve the policies, procedures,
planning, and oversight of international cash and in-kind donations to the
U.S. government in response to disasters. DOD and DHS generally agreed
with GAO's recommendations and cited actions being taken.

Because the U.S. government had not received such substantial amounts of
international disaster assistance before, ad hoc procedures were developed
to accept, receive and distribute the cash and in-kind assistance.
Understandably, not all procedures would be in place at the outset to
provide a higher level of accountability. The Administration recognized
the need for improvement in its recent report on lessons learned from
Hurricane Katrina.

GAO was able to track the cash donations received to designated U.S.
Treasury accounts or disbursed. In the absence of policies, procedures,
and plans, DOS developed an ad hoc process to manage $126 million in
foreign cash donations to the U.S. government for Hurricane Katrina relief
efforts. As cash donations arrived, a National Security Council (NSC)-led
interagency working group was convened to make policy decisions about the
use of the funds. FEMA officials told GAO they had identified and
presented to the working group a number of items that the donated funds
could be spent on. The NSC-led interagency working group determined that
use of those donated funds, once accepted by FEMA under the Stafford Act,
would be more limited than the wider range of possible uses available if
the funds were held and then accepted under the gift authorities of other
agencies. In October 2005, $66 million of the donated funds were spent on
a FEMA case management grant, and as of March 16, 2006, $60 million
remained undistributed in the DOS-designated account at the Treasury that
did not pay interest. Treasury may pay interest on funds accepted by FEMA
under the Stafford Act. According to DOS, an additional $400 million in
international cash donations could arrive. It is important that cash
management policies and spending plan options are considered and in place
to deal with the forthcoming donations so that the purchasing power of the
donated cash is maintained for relief and reconstruction.

FEMA and other agencies did not have policies and procedures in place to
ensure the proper acceptance and distribution of in-kind assistance
donated by foreign countries and militaries. In-kind donations included
food and clothing. FEMA and other agencies established ad hoc procedures.
However, in the distribution of the assistance to FEMA sites, GAO found
that no agency tracked and confirmed that the assistance arrived at their
destinations. Also, lack of procedures, inadequate information up front
about the donations, and insufficient coordination resulted in the U.S.
government agreeing to receive food and medical items that were unsuitable
for use in the United States and storage costs of about $80,000. The
procedures also allowed confusion about which agency was to accept and
provide oversight of foreign military donations. DOD's lack of internal
guidance regarding the DOS coordinating process resulted in some foreign
military donations that arrived without DOS, FEMA, or DOD oversight.
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