    National Flood Insurance Program: Financial Challenges Underscore
    Need for Improved Oversight of Mitigation Programs and Key
    Contracts (16-JUN-08, GAO-08-437).

    The Federal Emergency Management Agency (FEMA) and its
    contractors administer and implement the National Flood Insurance
    Program (NFIP). GAO designated NFIP as a high-risk area in March
    2006, and as of December 2007, FEMA owed more than $17.3 billion
    to the Treasury for hurricane-related losses. Concerns have been
    raised about the financial condition of NFIP and FEMA's efforts
    to mitigate losses and monitor NFIP contractors. This report (1)
    describes statistical and financial trends for NFIP from 1997
    through 2006, (2) assesses the extent to which flood-damaged
    properties were purchased to mitigate risk, and (3) evaluates
    procedures for monitoring NFIP-related contracts. For this study,
    GAO analyzed financial and statistical data on the NFIP and its
    mitigation programs, reviewed documentation of contract
    monitoring activities, and interviewed FEMA officials and
    contractors.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-08-437
        ACCNO:   A82363
      TITLE:     National Flood Insurance Program: Financial Challenges
    Underscore Need for Improved Oversight of Mitigation Programs and
    Key Contracts
         DATE:   06/16/2008
      SUBJECT:   Claims processing
    	     Claims settlement
    	     Contract oversight
    	     Contractors
    	     Data integrity
    	     Flood insurance
    	     Floods
    	     Hurricanes
    	     Information management
    	     Insurance claims
    	     Insurance premiums
    	     Internal controls
    	     Monitoring
    	     Natural disasters
    	     Performance measures
    	     Policy evaluation
    	     Procurement policy
    	     Procurement regulations
    	     Program evaluation
    	     Program management
    	     Property damage claims
    	     Property losses
    	     Records management
    	     Risk management
    	     Contract mismanagement
    	     Policies and procedures
    	     FEMA National Flood Insurance Program
    	     GAO High Risk Series

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    GAO-08-437

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    Report to the Ranking Member, Committee on Banking, Housing, and Urban
    Affairs, U.S. Senate:

    United States Government Accountability Office:
    GAO:

    June 2008:

    National Flood Insurance Program:

    Financial Challenges Underscore Need for Improved Oversight of
    Mitigation Programs and Key Contracts:

    GAO-08-437:

    GAO Highlights:

    Highlights of GAO-08-437, a report to the Ranking Member, Committee on
    Banking, Housing, and Urban Affairs, U.S. Senate.

    Why GAO Did This Study:

    The Federal Emergency Management Agency (FEMA) and its contractors
    administer and implement the National Flood Insurance Program (NFIP).
    GAO designated NFIP as a high-risk area in March 2006, and as of
    December 2007, FEMA owed more than $17.3 billion to the Treasury for
    hurricane-related losses. Concerns have been raised about the financial
    condition of NFIP and FEMA�s efforts to mitigate losses and monitor
    NFIP contractors. This report (1) describes statistical and financial
    trends for NFIP from 1997 through 2006, (2) assesses the extent to
    which flood-damaged properties were purchased to mitigate risk, and (3)
    evaluates procedures for monitoring NFIP-related contracts.

    For this study, GAO analyzed financial and statistical data on the NFIP
    and its mitigation programs, reviewed documentation of contract
    monitoring activities, and interviewed FEMA officials and contractors.

    What GAO Found:

    The number of federal flood insurance policies in force nationwide
    increased 36 percent from 1997 through 2006, but most homeowners at
    risk of flooding still lacked such insurance. While average insurance
    amounts (per policy) increased 78 percent from 1997 through
    2006�consistent with rising home values�the average premium decreased 3
    percent from 1997 through 2006, likely driven in part by the increase
    in policies sold in moderate- to low-risk areas. Conversely, loss
    amounts fluctuated by year, peaking at more than $17.7 billion in 2005.
    Seventy-nine percent of the funds paid out through NFIP from 1997
    through 2006 were for hurricane-related claims, but the percentages in
    individual years varied widely (correlating with hurricane activity).
    Finally, the extent of claim payments attributed to repetitive loss
    properties (those with two or more claims in a rolling 10-year period)
    increased from 1997 through 2006, from $3.7 billion to nearly $8
    billion, with the most significant increases resulting from the 2005
    Gulf Coast hurricanes.

    Because of data limitations, GAO was not able to determine the actual
    number of properties acquired through FEMA mitigation programs, which
    are intended to minimize the damage and financial impact of floods.
    Information on completed mitigation projects (which encompass multiple
    properties) indicates that about one-third of properties approved for
    acquisition from 1997 to 2006 were acquired. However, these data are
    limited because they do not include a count of properties acquired in
    ongoing projects. Projects may take several years to complete, and FEMA
    does not report properties acquired until a project is complete.
    Further, FEMA collected property acquisition data (for completed
    projects) in an ad hoc manner because FEMA�s grants management system
    lacks the capability to record acquisition data. As a result, FEMA
    cannot readily determine the extent to which flood-damaged and
    repetitive loss properties have been acquired through its mitigation
    programs.

    Lack of monitoring records, inconsistent application of procedures, and
    lack of coordination have diminished the effectiveness of FEMA
    monitoring of NFIP-related contracts. While federal internal control
    standards state that records should be properly maintained, FEMA did
    not consistently follow its monitoring procedures for preparing or
    maintaining monitoring reports and was unable to provide copies of the
    majority of monitoring reports GAO requested. Further, FEMA offices did
    not coordinate information and actions relating to contractor
    deficiencies and payments. In some cases, key officials were unaware of
    decisions on contractor performance. As a result, FEMA cannot
    consistently ensure adherence to contract requirements and lacks
    information critical for effective oversight of key contractors. Given
    the reliance of NFIP upon contractors, it is important that FEMA have
    in place adequate controls that are consistently applied to all
    contracts.

    What GAO Recommends:

    GAO recommends that FEMA establish processes to track property
    acquisitions in real time and ensure systematic monitoring and reviews
    of contractor performance. FEMA agreed with the recommendations on
    contractor oversight and has taken steps to address them. FEMA
    questioned the value of collecting property acquisition data real-time.
    Without such data, FEMA�s ability to assess program effectiveness is
    limited.

    To view the full product, including the scope and methodology, click on
    [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-437]. For more
    information, contact Orice M. Williams at (202) 512-8678 or
    williamso@gao.gov.

    [End of section]

    Contents:

    Letter:

    Results in Brief:

    Background:

    Policies and Insurance Amounts Increased, Premiums Decreased, and
    Losses Fluctuated from 1997 through 2006 with Hurricane Activities:

    Funding for Mitigation Programs Has Increased, but FEMA Cannot Readily
    Track Real-time Property Acquisitions:

    FEMA's Oversight of Contractor Activities Lacked Consistency,
    Documentation, and Coordination:

    Conclusions:

    Recommendations for Executive Action:

    Agency Comments and Our Evaluation:

    Appendix I: Objectives, Scope, and Methodology:

    Appendix II: National Flood Insurance Program Statistics, 1997-2006:

    Appendix III: National Flood Insurance Program Statistics by Flood
    Zone, 1997-2006:

    Appendix IV: National Flood Insurance Program Statistics by Occupancy
    Type, 1997-2006:

    Appendix V: National Flood Insurance Program Statistics for Hurricane-
    Related Losses and Repetitive Loss Properties:

    Appendix VI: Flood-Related Damages:

    Appendix VII: Definitions of Flood Zones:

    Appendix VIII: Comments from the Federal Emergency Management Agency:

    Appendix IX: GAO Contact and Staff Acknowledgments:

    Tables:

    Table 1: NFIP Flood Zone Designations:

    Table 2: NFIP-Funded Mitigation Grant Programs:

    Table 3: Average Amount of Insurance Coverage per Policy in Force and
    Average Premium Paid, 1997-2006:

    Table 4: Funding for the FMA Program, 1997-2007:

    Table 5: Properties Approved for Acquisition and Acquired through the
    FMA Program, 1997-2007 (Acquisition-Only Projects):

    Table 6: FMA Program Properties Approved for Acquisition and Acquired,
    1997-2007 (Mixed Mitigation Projects):

    Table 7: Extent to Which FEMA Produced Required Monthly Monitoring
    Reports for the BSA Contractor (October 2005-May 2007):

    Table 8: Analysis of FEMA Monthly Monitoring Reports Required for the
    BSA Contract (October 2005-May 2007):

    Table 9: Number and Percentage Change for Policies in Force, 1997-2006:

    Table 10: Maximum Level of Flood Insurance Available, Regular Program,
    1997-2006:

    Table 11: Average Amount of Insurance Coverage per Policy in Force,
    1997-2006:

    Table 12: NFIP Average Premium per Policy in Force, 1997-2006:

    Table 13: NFIP Losses, 1997-2006:

    Table 14: Average Loss per Policy in Force in Dollars, 1997-2006:

    Table 15: Average NFIP Claim Payment by Insurance Policy Type, 1997-
    2006:

    Table 16: Average Historical Loss Year Estimate for NFIP, 1997-2005:

    Table 17: NFIP Flood Zone Designations:

    Table 18: Number of Policies in Force by Flood Zone, 1997-2006:

    Table 19: NFIP Average Amount of Insurance Coverage per Policy in Force
    by Flood Zones, 1997-2006:

    Table 20: Average Premium Per Policy in Force by Flood Zone, 1997-2006:

    Table 21: NFIP Losses Paid Out by Flood Zones, 1997-2006:

    Table 22: NFIP Residential (Single-and Two-Four Family) Average Loss
    per Claim by Flood Zone, 1997-2006:

    Table 23: NFIP Policies in Force--Percentage for Residential (Single-
    and Two-Four Family) Properties and Condominiums, 1997-2006:

    Table 24: Average Amount of Insurance Coverage by Occupancy Type, 1997-
    2006:

    Table 25: Average Premium by Occupancy Type, 1997-2006:

    Table 26: Losses by Occupancy Type, 1997-2006:

    Table 27: NFIP Average Loss per Claim by Occupancy Type, 1997-2006:

    Table 28: Percentage of NFIP Losses Attributable to Hurricanes, 1997-
    2006:

    Table 29: Net Cumulative Total Repetitive Loss (RL) Properties, Net
    Cumulative Number of Losses for RL Properties, and Net Cumulative Total
    Losses Paid Out for RL Properties, 1997-2006:

    Table 30: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at the Insurance Limit, 1997-2004:

    Table 31: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at the Insurance Limit, 2005:

    Table 32: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at Less Than the Insurance Limit, 1997-2004:

    Table 33: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at Less Than the Insurance Limit, 2005:

    Table 34: Percentage of Claims and Damages in Excess of NFIP Insurance
    Available by Policy Type, for Policies Purchased at the Insurance
    Limit, 1997-2004:

    Table 35: Percentage of Claims and Damages in Excess of NFIP Insurance
    Available by Policy Type, for Policies Purchased at the Insurance
    Limit, 2005:

    Table 36: Percentage of Claims and Damages in Excess of NFIP Insurance
    Purchased by Policy Type, for Policies Purchased at Less Than the
    Insurance Limit, 1997-2004:

    Table 37: Percentage of Claims and Damages in Excess of NFIP Insurance
    Purchased by Policy Type, for Policies Purchased at Less Than the
    Insurance Limit, 2005:

    Figures:

    Figure 1: FEMA Offices with Contract Monitoring Responsibilities:

    Figure 2: Number of NFIP Policies in Force and Year to Year Percentage
    Changes, 1997-2006:

    Figure 3: NFIP Average Premium per Policy in Force, by Flood Zone, 1997-
    2006:

    Figure 4: NFIP Losses, 1997-2006:

    Figure 5: Percentage of NFIP Losses Attributable to Hurricanes, 1997-
    2006:

    Figure 6: Net Cumulative Claims Filed and Losses Paid for Repetitive
    Loss Properties, and Number of Repetitive Loss Properties, 1997-2006:

    Figure 7: Trends in Percentage Change and Average Amount of Insurance
    Coverage per Policy in Force, 1997-2006:

    Figure 8: Number of NFIP Claims and Average Loss per Claim, 1997-2006:

    Figure 9: Number of Policies in Force by Flood Zone, 1997-2006:

    Figure 10: NFIP Average Amount of Insurance Coverage per Policy in
    Force in Selected Flood Zones, 1997-2006:

    Figure 11: NFIP Losses Paid Out by Flood Zones, 1997-2006:

    Figure 12:NFIP Residential (Single-and Two-Four Family) Average Loss
    per Claim by Flood Zone for Selected Flood Zones, 1997-2006:

    Figure 13: Percentage of Losses Attributable to Residential (Single-and
    Two-Four Family) Properties and Condominiums, 1997-2006:

    Figure 14:NFIP Average Loss per Claim for Residential (Single-and Two-
    Four Family) Properties and Condominiums, 1997-2006:

    Abbreviations:

    BFE: Base Flood Elevation:

    BSA: Bureau and Statistical Agent:

    COTR: Contract Officer's Technical Representative:

    DHS: Department of Homeland Security:

    DSA: Direct Servicing Agent:

    eGovernment: Electronic Government:

    eGrants: Electronic Grants Management System:

    FEMA: Federal Emergency Management Agency:

    FIRM: Flood Insurance Rate Map:

    FIS: Flood Insurance Study:

    FMA: Flood Mitigation Assistance Program:

    HMGP: Hazard Mitigation Grant Program:

    IFMIS: Integrated Financial Management Information System:

    NEMIS: National Emergency Management Information System:

    NFIF: National Flood Insurance Fund:

    NFIP: National Food Insurance Program:

    OMB: Office of Management and Budget:

    RFC: Repetitive Flood Claims Program:

    RCBAP: Residential Condominium Building Association Policy:

    SRL: Severe Repetitive Loss Pilot Program:

    TRRP: Transaction Record Reporting and Processing:

    WYO: Write Your Own:

    [End of section]

    United States Government Accountability Office:
    Washington, DC 20548:

    June 16, 2008:

    The Honorable Richard C. Shelby:
    Ranking Member:
    Committee on Banking, Housing, and Urban Affairs:
    United States Senate:

    Dear Senator Shelby:

    Following the signing of the Bunning-Bereuter-Blumenauer Flood
    Insurance Reform Act of 2004, which reauthorized the National Flood
    Insurance Program (NFIP) through September 30, 2008, the United States
    experienced back-to-back catastrophic hurricane seasons and experienced
    nearly $20 billion in flood-insurance losses. Because NFIP premium
    rates have been set to cover losses in an average year (that is, based
    on "average historical losses"), the program has been unable to set
    aside sufficient funds to meet future expected losses.[Footnote 1]
    According to the Federal Emergency Management Agency (FEMA) of the
    Department of Homeland Security (DHS), which administers NFIP, claims
    from Hurricane Katrina alone have totaled in excess of $16.3 billion,
    as of October 2007. The Katrina-related claims represent more than
    eight times the amount for claims in 2004 and surpass (by more than $1
    billion) the aggregate amount of all claims previously paid in the
    nearly 40-year history of NFIP.[Footnote 2]

    In response to the magnitude and severity of losses from the 2005
    hurricanes, Congress increased NFIP's borrowing authority from the
    Department of the Treasury (Treasury) to $20.8 billion. As of December
    2007, FEMA owed more than $17.3 billion to Treasury, an amount the
    program is unlikely to be able to repay while paying future claims with
    its current premium income of about $2 billion annually. We designated
    NFIP as a high-risk area in March 2006 because the program likely will
    not generate sufficient revenues to repay the billions it borrowed from
    the Treasury to cover flood claims from the 2005 hurricanes.[Footnote
    3] In addition, it is unlikely that NFIP--a key component of the
    federal government's efforts to minimize the damage and financial
    impact of floods--could cover catastrophic losses in future years. The
    insufficient revenues highlight structural weaknesses in how the
    program is funded, and Congress is considering a number of legislative
    changes to improve NFIP's financial solvency.[Footnote 4]

    NFIP was created in 1968 in part to provide some insurance protection
    for flood victims because private insurers were (and largely still are)
    unwilling to bear the economic risks associated with the potentially
    catastrophic impact of flooding. NFIP also provides incentives for
    communities to adopt and enforce floodplain management regulations to
    reduce future flood damage. Such incentives include mitigation programs
    that provide grants to acquire and demolish flood-prone structures that
    NFIP insures and perform other activities (such as elevating buildings)
    to reduce or eliminate flood losses and insurance claims. Floods are
    the most common and destructive natural disasters in the United States.
    According to NFIP statistics, 90 percent of all natural disasters in
    the United States involve flooding. In previous work, we reported that
    between 1980 and 2005, about 97 percent of the U.S. population lived in
    a county that had at least one declared flood disaster, and 45 percent
    lived in a county that had six or more flood disaster declarations.
    [Footnote 5] Under NFIP, federally backed flood insurance is available
    to homeowners and other property owners in communities that adopt and
    enforce local floodplain ordinances. Finally, FEMA makes extensive use
    of contractors to implement NFIP. For example, about 68 FEMA employees,
    assisted by about 170 contract employees, manage and oversee NFIP.

    As agreed with your staff, this report:

    * describes trends for NFIP policies, insurance amounts, premiums, and
    losses from 1997 through 2006, and the extent to which NFIP losses were
    attributable to hurricanes and repetitive loss properties;

    * assesses how the amounts available for the purchase of flood-damaged
    and repetitive loss properties changed over time, and the extent to
    which FEMA purchased flood-damaged and repetitive loss properties; and:

    * evaluates the extent to which FEMA followed its procedures for
    monitoring selected NFIP-related contracts.

    To address these objectives, we analyzed data on NFIP policies,
    insurance amounts, premiums, and losses for calendar years 1997 through
    2006 and assessed the reliability of these data. In addition, we
    analyzed available data on funds available for three NFIP-funded
    mitigation programs and properties purchased in connection with two of
    these programs. We reviewed monthly contractor monitoring reports and
    documentation of contract-specific monitoring policies and procedures
    at FEMA. We also assessed the extent to which these procedures were
    followed for two of the largest NFIP-related contracts--the Bureau and
    Statistical Agent (BSA) and Direct Servicing Agent (DSA) contracts--
    upon which FEMA relies to collect all financial and statistical data
    related to NFIP and directly sell and service flood insurance policies.
    Finally, we interviewed FEMA officials in Washington, D.C., and
    Virginia and NFIP contractors based in Kansas and Maryland. Appendix I
    provides more information on our scope and methodology. We conducted
    this performance audit from March 2007 to June 2008 in accordance with
    generally accepted government auditing standards. Those standards
    require that we plan and perform the audit to obtain sufficient,
    appropriate evidence to provide a reasonable basis for our findings and
    conclusions based on our audit objectives. We believe that the evidence
    obtained provides a reasonable basis for our findings and conclusions
    based on our audit objectives.

    Results in Brief:

    From 1997 through 2006, NFIP showed steady increases in the number of
    policies in force, the average amount of insurance per policy, and the
    net cumulative amount paid to settle claims for repetitive loss
    properties; while average premiums decreased, total losses fluctuated,
    and the majority of losses were hurricane-related. The number of
    policies in force increased 36 percent, from nearly 4 million in 1997
    to more than 5.4 million in 2006. However, a 2006 study estimated that
    about half of single-family homes in special flood hazard areas
    nationwide did not have flood insurance policies. The average amount of
    insurance per policy increased 78 percent from 1997 through 2006, from
    about $158,000 to almost $214,000.[Footnote 6] The average annual
    premium per flood insurance policy decreased slightly from 1997 through
    2006, from $489 to $475 annually in part because most of the policies
    being sold were in moderate-and low-risk areas that tend to have lower
    rates. However, premiums increased in the high-risk coastal flood zone
    from about $1,039 in 1997 to more than $1,400 in 2006. Total loss
    amounts fluctuated from year to year, ranging from a low of $302
    million in 2000 to more than $17.7 billion in 2005. Further, 79 percent
    of the funds paid out through NFIP from 1997 through 2006 were for
    hurricane-related claims, but the percentages in individual years
    varied widely (correlating with hurricane activity). More specifically,
    while less than 10 percent of the losses paid out in 5 of the 10 years
    were linked to hurricane-related damage, 97 percent of the losses paid
    out in 2005, the highest loss year in the history of the program, were
    for hurricane-related losses. The net cumulative amount FEMA had paid
    to settle claims filed for repetitive loss properties (properties with
    two or more claims paid by NFIP in a rolling 10-year period) totaled
    $7.9 billion at the end of 2006, more than doubling from the net
    cumulative total of $3.7 billion in 1997. Clearly, repetitive loss
    properties continue to be a drain on NFIP. FEMA's annual estimates of
    average historical losses also increased, from $622 million in calendar
    year 1997 to $2.3 billion in 2006. Finally, analysis by occupancy type
    shows that more than 90 percent of policyholders owned residential
    properties (single-and two-four family homes) or condominiums, and the
    majority of these properties were in flood zones that FEMA designated
    as high risk.

    The amounts available for mitigation activities such as the purchase
    and demolition of flood-damaged properties increased for one of NFIP's
    mitigation programs and became available for two others in 2006.
    Properties have been purchased through two of the three NFIP-funded
    mitigation programs--Flood Mitigation Assistance (FMA) and Repetitive
    Flood Claims (RFC). However, the total number of properties purchased
    is unknown at the headquarters level due to a lack of reporting
    requirements and information system limitations that hamper assessments
    of the extent of property acquisitions in the two programs. According
    to data provided by FEMA, funding for the FMA program increased in the
    period we reviewed, from $12.5 million in fiscal year 1997 to nearly
    $31 million in fiscal year 2006, while funds for the other two
    programs--RFC and the Severe Repetitive Loss (SRL) pilot program--only
    have been available since 2006. In addition, the SRL pilot program
    guidance was not published and applications for grant funds were not
    accepted until January 2008.[Footnote 7] According to available data on
    completed mitigation projects, 35 percent of properties approved for
    acquisition through FMA, and 19 percent of properties approved through
    RFC, have been acquired as of October 2007. However, the total number
    of properties acquired through NFIP-funded mitigation programs is
    unknown because FEMA lacks real-time data on property acquisitions for
    ongoing mitigation projects. For example, of the properties reported as
    being acquired through the FMA program as of October 2007, FEMA records
    show that none have been acquired since 2003. However, this number is
    likely understated because FEMA does not explicitly require the timely
    recording of property acquisitions, and FEMA regional staff may not
    record property acquisitions until a project closes, which could take
    several years. Internal control standards for the federal government
    direct that transactions be promptly recorded to maintain their
    relevance and value to management in controlling operations and making
    decisions.[Footnote 8] In addition, FEMA's grants management system
    does not allow for the electronic capture of data on property
    acquisitions. As a result of these limitations, FEMA management cannot
    readily determine the effectiveness of the mitigation programs and the
    number of acquisitions, a key means of reducing or eliminating future
    insurance claims on NFIP-insured properties and determining the
    effectiveness of these programs.

    FEMA lacked monitoring records, inconsistently followed its procedures
    for monitoring contractors, and did not coordinate contract monitoring
    responsibilities for the two major contracts we reviewed. At FEMA, a
    Contracting Officer's Technical Representative (COTR) and staff
    (referred to as "monitors") are responsible, respectively, for ensuring
    compliance with contract terms and regularly monitoring and reporting
    on the extent to which an NFIP contractor has met standards in contract-
    specified performance areas. FEMA lacked records for the majority of
    the monitoring reports we requested and did not consistently follow the
    monitoring procedures for preparing, reviewing, and maintaining
    monitoring reports. Internal control standards for the federal
    government state that records should be properly managed and
    maintained. Additionally, key FEMA offices responsible for addressing
    contractor deficiencies did not share information and coordinate
    actions about contractor performance problems and payments. As a
    result, FEMA cannot ensure adherence to contract requirements and lacks
    information critical for effective oversight of contractors performing
    key NFIP data collection, reporting, and insurance functions.

    We are making five recommendations to the Secretary of Homeland
    Security to more accurately track the extent to which flood-prone
    properties are acquired in NFIP mitigation programs and help ensure
    adherence to contract monitoring requirements. They include
    establishing written guidance about consistent and timely recording of
    property acquisition data and establishing a way to track real-time
    property acquisitions. The remaining recommendations address contract
    management and oversight and include establishing a process to
    systematically review monitoring reports and develop guidance to
    improve coordination among key FEMA offices in addressing contractor
    deficiencies.

    We provided a draft of this report to the Secretary of Homeland
    Security. The Assistant Administrator, Mitigation Directorate, FEMA,
    provided written comments that are reprinted in appendix VIII. In these
    comments, FEMA generally agreed with the three recommendations on
    contract monitoring and described various steps they are taking to
    implement them. While FEMA did not explicitly address our two
    recommendations related to tracking property acquisitions, it noted the
    challenges it faces in tracking property acquisitions but questioned
    the value of tracking such acquisitions at the headquarters level. As
    noted in our report, real-time data would improve FEMA headquarters'
    ability to produce, analyze, and report timely information on ongoing
    operations and thus improve its ability to assess the effectiveness of
    its mitigation programs. Specifically, FEMA would be able to more
    accurately assess the rate at which properties are acquired and thus
    pinpoint within a shorter timeframe the extent to which mitigation
    programs were reducing the number of flood-damaged and repetitive loss
    properties. Finally, FEMA's written response also included technical
    comments that we incorporated in this report as appropriate.

    Background:

    NFIP was established in the National Flood Insurance Act of 1968 to
    provide policyholders with some insurance coverage for flood damage, as
    an alternative to disaster assistance, and to try to reduce the
    escalating costs of repairing flood damage.[Footnote 9] NFIP has mapped
    flood risks, assigning a flood zone designation based on the risk level
    for flooding (see table 1 for examples), which is a factor in
    determining premium rates.

    Table 1: NFIP Flood Zone Designations:

    Designations: Flood zones B,C, X;
    Risk level: Moderate-to low-risk.

    Designations: Flood zones A, AE;
    Risk level: High-risk.

    Designations: Flood zones V, VE;
    Risk level: High-risk coastal.

    Designations: Flood zone D;
    Risk level: Undetermined risk.

    Source: GAO analysis of FEMA data.

    Notes: See appendix VII for a description of all FEMA flood zones. The
    FEMA contractor responsible for collection and analysis of NFIP data
    uses two additional designations when collecting and reporting data by
    flood zone. Zone "O" (Other) is not a flood zone designation; rather,
    it is used to indicate missing or erroneous data for policies. Policies
    under FEMA's Emergency Program, which is the program through which
    communities enter NFIP, do not have designated flood zones. Instead,
    the FEMA contractor captures data on the policies by using their
    Emergency Program status.

    [End of table]

    To participate in NFIP, communities agree to enforce regulations for
    land use and new construction in high-risk flood zones. As of May 2007,
    more than 20,300 communities across the United States and its
    territories participated in NFIP by adopting and agreeing to enforce
    state and community floodplain management regulations to reduce future
    flood damage.[Footnote 10] Although community participation in the
    program is voluntary, homeowners with mortgages from federally
    regulated lenders on properties in special high-risk, flood hazard
    areas are required to purchase flood insurance on their dwellings for
    at least the outstanding mortgage amount, up to the maximum policy
    limit of $250,000.[Footnote 11] Optional, lower-cost coverage also is
    available under NFIP to protect homes in areas of moderate-to low-risk.
    In addition, owners of properties built before NFIP officially mapped a
    community (known as pre-FIRM properties, referring to the Flood
    Insurance Rate Map) pay premiums that do not reflect their true risk
    because Congress authorized subsidized insurance rates to be made
    available for policies covering certain structures to encourage
    communities to join the program. To insure other personal property
    items against flood damage, homeowners may purchase separate NFIP
    personal property (or "contents") coverage, up to the maximum coverage
    limit of $100,000.[Footnote 12]

    In addition to mapping and categorizing flood risk zones, FEMA also has
    developed two estimates of potential losses to help set rates and
    develop information relating to losses. FEMA introduced the concept of
    the average historical loss year--the purpose of which is to estimate
    the amount of premium that would be sufficient to pay for losses
    resulting from the type of loss years that previously occurred.
    According to FEMA, this estimate is used as one indicator in setting
    subsidized premium rates. FEMA also prepares a catastrophic loss year
    estimate, usually every other year, to provide Congress with an
    informal guide on the losses that could occur in the event of a storm
    that would have 0.1 percent chance of occurring in a given year (a 1 in
    a 1,000 year event).

    For more than a decade, FEMA has pursued a variety of strategies to
    reduce the number of repetitive loss properties, which are insurable
    buildings for which NFIP paid two or more claims of more than $1,000
    within any rolling 10-year period. For example, NFIP funds three
    mitigation programs, the FMA program, the RFC program, and the SRL
    pilot program.[Footnote 13] The purpose of the FMA program is to fund
    activities that reduce or eliminate the long-term risk of flood damage
    to buildings and other structures insured by NFIP, such as property
    acquisition.[Footnote 14] The FMA program requires applicants to
    provide a portion of the funds for the proposed mitigation activities.
    If the applicant cannot secure funding for the proposed activities,
    FEMA may contribute 100 percent of the funding through the RFC program,
    which is specifically designed to mitigate repetitive loss properties
    (structures insured by NFIP that have had one or more claim payments
    for flood damages).[Footnote 15] Finally, the SRL program is designed
    for repetitive loss properties that have at least four claim payments
    of more than $5,000 each.[Footnote 16] See table 2 for more information
    on these mitigation programs.

    Table 2: NFIP-Funded Mitigation Grant Programs:

    Program element: Purpose;
    FMA: To implement cost-effective measures that reduce or eliminate the
    long-term risk of flood damage to buildings, manufactured homes, and
    other structures insured under NFIP;
    RFC: To reduce or eliminate the long-term risk of flood damage to
    structures insured under NFIP that have had one or more claim payments
    for flood damage;
    SRL: To reduce or eliminate the long-term risk of flood damage to
    severe repetitive loss residential properties and the associated drain
    on the National Flood Insurance Fund (NFIF) from such properties.

    Program element: Applicant eligibility;
    FMA: State emergency management agencies or a similar state office[A];
    RFC: Same as FMA, but for those states or communities that cannot meet
    the requirements of the FMA program for either cost share or capacity
    to manage the activities;
    SRL: State emergency management agencies or a similar state office.[A]

    Program element: Eligible project grants;
    FMA: Acquisition, structure demolition, or structure relocation with
    the property deed restricted for open space uses in perpetuity;
    elevation of structures; dry floodproofing of nonresidential
    structures; and minor structural flood control activities;
    RFC: Acquisition, structure demolition, or structure relocation with
    the property deed restricted for open space uses in perpetuity;
    SRL: Acquisition, structure demolition, or structure relocation with
    the property deed restricted for open space uses in perpetuity;
    elevation of structures; dry floodproofing of historic structures;
    minor physical localized flood control projects; and mitigation
    reconstruction (demolition and rebuilding of structures).

    Program element: Funding;
    FMA: 2-year funds[B];
    RFC: No-year funds;
    SRL: No-year funds.

    Source: FEMA.

    Note: In fiscal year 2008, appropriations for RFC changed from "one-
    year funds"--congressionally appropriated funds that must be expended
    within the fiscal year--to "no-year" funds, congressionally
    appropriated funds with no time limit for expenditure.

    [A] The office that has primary emergency management or floodplain
    management responsibility.

    [B] Congressionally appropriated funds that must be expended within two
    fiscal years.

    [End of table]

    NFIP staff are located at FEMA headquarters in Washington, D.C., and 10
    regional offices. Their functions include tasks for administering
    mitigation grant programs such as processing applications for grant
    funds and distributing the funds to eligible applicants. While FEMA
    establishes policies and procedures for NFIP, and has some staff
    dedicated to the management of the program, FEMA relies on contractors
    to administer key aspects of the program. Contractors collect NFIP
    data, market the program, and sell specific flood-insurance policies.
    Private insurance companies that participate in FEMA's Write Your Own
    (WYO) program largely are responsible for insurance sales and claims
    adjustment.[Footnote 17]

    At the time of our work, there were four major ongoing contracts in
    place for NFIP, two of which we reviewed in this report. For example,
    FEMA awards a contract for a BSA, which is responsible for conducting
    financial and statistical reporting based upon data submissions from
    the 92 WYO companies, developing forms and information related to NFIP,
    and providing various data analyses.[Footnote 18] The BSA contract that
    was effective from September 2005 through December 2007 was valued at
    $38 million. FEMA also awards a contract for a DSA, which is
    responsible for selling and servicing standard and group insurance for
    policies that are not sold through WYOs. For that agent, the value of
    the contract in effect from September 2003 to September 2008 is $26.5
    million.

    Two offices in FEMA are responsible for contracts and contract
    oversight (see fig. 1). A Contracting Officer in the Acquisition
    Operations Branch awards contracts related to NFIP and has
    responsibility for determining the adequacy of a contractor's
    performance.[Footnote 19] The Program Management Office also has
    responsibilities for overseeing each contractor's performance. A COTR
    is assigned to each contract. The COTR is authorized to act on behalf
    of the Contracting Officer to monitor the contract. However, the COTR
    is not authorized to make any contractual commitments or contractual
    changes on behalf of FEMA; any changes that the contractor deems may
    affect the contract, price, terms, or conditions are referred to the
    Contracting Officer in the Acquisition Operations Branch for action.
    Each COTR is assisted by monitors, who review and report on technical
    aspects of the contractor's performance such as compliance with
    specific contract terms.

    Figure 1: FEMA Offices with Contract Monitoring Responsibilities:

    [See PDF for image]

    This figure is an illustration of FEMA offices with contract monitoring
    responsibilities, as follows:

    Acquisition Operations Branch:
    * Mitigation Section;
    - Contracting Officer (enters into, administers, and terminates
    contracts).

    Mitigation Directorate:
    * Risk Insurance Division:
    - Operations Management Branch:
    - COTR (assure proper surveillance of the contractor�s performance);
    - Monitor (responsible for the technical administration of specific
    functional areas under the contract).

    Source: GAO.

    Note: During the period of our review, the Operations Management Branch
    was referred to as the Program Management Office.

    [End of figure]

    Policies and Insurance Amounts Increased, Premiums Decreased, and
    Losses Fluctuated from 1997 through 2006 with Hurricane Activities:

    Overall, data relating to the number of NFIP policies and amount of
    insurance coverage indicated upward trends for the period we reviewed
    and most losses were paid for hurricane-related claims, primarily due
    to losses from the 2005 hurricane season. The number of policies in
    force increased 36 percent and the average amount of coverage increased
    78 percent from 1997 through 2006, consistent with average rising home
    values. The average premium per flood-insurance policy decreased 3
    percent, but when analyzed by flood risk zone, average premiums
    increased in the high-risk coastal flood zone, from about $1,039 in
    1997 to more than $1,400 in 2006. Over this period, total losses
    fluctuated from a low of $302 million in 2000 to a high of $2 billion
    in 2004 before reaching more than $17.7 billion in 2005. In 5 of the 10
    years reviewed, less than 10 percent of losses paid out were linked to
    hurricane-related damage, and over the 10-year period cumulative losses
    for repetitive loss properties increased from $3.7 billion to $7.9
    billion. FEMA's estimates for average historical loss and catastrophic
    loss increased over this 10-year period. Finally, analysis by occupancy
    type shows more than 90 percent of policyholders owned residential
    properties (single and two-four family homes) or condominiums, and the
    majority of these properties were found in zones that FEMA designated
    as high risk. For additional statistical and trend data, see appendixes
    II-VI.

    Policies in Force and Average Insurance Amounts Increased, and Average
    Premiums Decreased:

    The number of federal flood insurance policies in force increased from
    3.96 million in 1997 to 5.40 million at the end of 2006, an increase of
    36 percent.[Footnote 20] The number of policies increased from 1 to 6
    percent each year from 1997 through 2005, but increased 12 percent the
    year after the Gulf Coast hurricanes (see fig. 2). While the number of
    policies in force has increased, a 2006 study commissioned by FEMA
    estimated that about half of the single-family homes in special flood
    hazard areas nationwide do not have flood insurance policies.[Footnote
    21] Moreover, the study estimated that market penetration outside of
    special flood hazard areas is about 1 percent.

    Figure 2: Number of NFIP Policies in Force and Year to Year Percentage
    Changes, 1997-2006:

    [See PDF for image]

    This figure is a combination line and vertical bar graph depicting the
    following data:

    Calendar year: 1997;
    Policies in force: 3,962,080;
    Percentage change (from year to year): baseline year.

    Calendar year: 1998;
    Policies in force: 4,114,32o;
    Percentage change (from year to year): +4%.

    Calendar year: 1999;
    Policies in force: 4,206,910;
    Percentage change (from year to year): +2%.

    Calendar year: 2000;
    Policies in force: 4,255,430;
    Percentage change (from year to year): +1%.

    Calendar year: 2001;
    Policies in force: 4,360,680;
    Percentage change (from year to year): +2%.

    Calendar year: 2002;
    Policies in force: 4,406,660;
    Percentage change (from year to year): +1%.

    Calendar year: 2003;
    Policies in force: 4,447,770;
    Percentage change (from year to year): +1%.

    Calendar year: 2004;
    Policies in force: 4,558,700;
    Percentage change (from year to year): +2%.

    Calendar year: 2005;
    Policies in force: 4,827,180;
    Percentage change (from year to year): +6%.

    Calendar year: 2006;
    Policies in force: 5,404,950;
    Percentage change (from year to year): +12%.

    Source: GAO analysis of NFIP data.

    Note: See appendix II for more detailed information.

    [End of figure]

    The average amount of insurance coverage per policy in force increased
    from about $158,000 in 1997 to almost $214,000 at the end of 2006, an
    increase of 78 percent (see table 3).[Footnote 22] While we did not
    attempt to determine the reason that the average amount of insurance
    purchased increased, we note that this increase coincides with the
    increase in average home values over this period.[Footnote 23]

    Table 3: Average Amount of Insurance Coverage per Policy in Force and
    Average Premium Paid, 1997-2006:

    Calendar year: 1997;
    Average insurance per policy in force: $158,125;
    Average premium paid: $489.

    Calendar year: 1998;
    Average insurance per policy in force: $163,688;
    Average premium paid: $503.

    Calendar year: 1999;
    Average insurance per policy in force: $167,162;
    Average premium paid: $493.

    Calendar year: 2000;
    Average insurance per policy in force: $168,788;
    Average premium paid: $468.

    Calendar year: 2001;
    Average insurance per policy in force: $176,797;
    Average premium paid: $451.

    Calendar year: 2002;
    Average insurance per policy in force: $178,467;
    Average premium paid: $444.

    Calendar year: 2003;
    Average insurance per policy in force: $187,709;
    Average premium paid: $453.

    Calendar year: 2004;
    Average insurance per policy in force: $198,136;
    Average premium paid: $465.

    Calendar year: 2005;
    Average insurance per policy in force: $206,501;
    Average premium paid: $469.

    Calendar year: 2006;
    Average insurance per policy in force: $213,944;
    Average premium paid: $475.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    The average annual premium per policy in force decreased from $489 in
    1997 to $475 at the end of 2006, a decrease of almost 3 percent (see
    table 3). According to FEMA, the average premium has been influenced by
    changes in two types of flood zones. First, the average premium has
    been strongly influenced by changes in the moderate-to low-risk flood
    zones, where policies as a percentage of the total policies in force
    have increased greatly primarily due to increased sales of Preferred
    Risk Policies, FEMA's lowest-cost flood insurance policy.[Footnote 24]
    Second, average annual premium per policy has been influenced by the
    steep increase in the average premium of high-risk coastal zone
    policies, but because they make up a smaller percent of policies in
    force, this increase did not drive up the average policy premium. As
    figure 3 illustrates, the average premium increased in the high-risk
    coastal zone the most (41 percent), from about $1,039 in 1997 to more
    than $1,400 at the end of 2006.

    Figure 3: NFIP Average Premium per Policy in Force, by Flood Zone, 1997-
    2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data:

    NFIP Average Premium per Policy in Force, by Flood Zone, 1997-2006:

    Calendar year: 1997;
    High-risk (Zone A): $520.7;
    High-risk coastal (Zone V): $1038.6;
    Moderate- to low-risk (Zones B, C, and X): $377.05.

    Calendar year: 1998;
    High-risk (Zone A): $537.82;
    High-risk coastal (Zone V): $1041.1;
    Moderate- to low-risk (Zones B, C, and X): $384.43.

    Calendar year: 1999;
    High-risk (Zone A): $525.27;
    High-risk coastal (Zone V): $1053.33;
    Moderate- to low-risk (Zones B, C, and X): $379.67.

    Calendar year: 2000;
    High-risk (Zone A): $497.2;
    High-risk coastal (Zone V): $1049.2;
    Moderate- to low-risk (Zones B, C, and X): $363.24.

    Calendar year: 2001;
    High-risk (Zone A): $481.58;
    High-risk coastal (Zone V): $1059.18;
    Moderate- to low-risk (Zones B, C, and X): $349.61.

    Calendar year: 2002;
    High-risk (Zone A): $471.68;
    High-risk coastal (Zone V): $1117.63;
    Moderate- to low-risk (Zones B, C, and X): $343.24.

    Calendar year: 2003;
    High-risk (Zone A): $478.47;
    High-risk coastal (Zone V): $1231.85;
    Moderate- to low-risk (Zones B, C, and X): $349.38.

    Calendar year: 2004;
    High-risk (Zone A): $491.96;
    High-risk coastal (Zone V): $1343.04;
    Moderate- to low-risk (Zones B, C, and X): $343.81.

    Calendar year: 2005;
    High-risk (Zone A): $502.28;
    High-risk coastal (Zone V): $1398.43;
    Moderate- to low-risk (Zones B, C, and X): $339.52.

    Calendar year: 2006;
    High-risk (Zone A): $520.57;
    High-risk coastal (Zone V): $1463.34;
    Moderate- to low-risk (Zones B, C, and X): $335.97.

    Source: GAO analysis of NFIP data.

    Notes: We excluded flood zone D and the Emergency Program because
    policies in force in these zones represented less than 1 percent of the
    policies in force for each year reviewed. Dollars are in 2006 constant
    dollars. See appendix III for supporting data.

    [End of figure]

    Total Losses Fluctuated in the Period We Reviewed, and the Majority of
    Losses Were Attributable to Hurricanes:

    With the exception of 2005, the amount that FEMA paid out in losses
    over the 10-year period fluctuated between a low of $302 million in
    2000 and a high of $2 billion in 2004 (see fig. 4).[Footnote 25] Losses
    refer to the amount that FEMA paid to settle flood insurance claims and
    are recorded for the year in which the loss occurred.[Footnote 26] For
    example, if a flood damaged an insured property in 2005, but the claim
    was not paid until 2006, the amount paid out would be recorded as a
    2005 loss. For 2005, as a result of the Gulf Coast hurricanes, FEMA
    paid out more than $17.7 billion in losses.[Footnote 27]

    Figure 4: NFIP Losses, 1997-2006:

    [See PDF for image]

    This figure is a vertical bar graph depicting the following data:

    NFIP Losses, 1997-2006:

    Calendar year (number of hurricanes): 1997 (2);
    Losses: $0.684 billion;

    Calendar year (number of hurricanes): 1998 (9);
    Losses: $1.129 billion;

    Calendar year (number of hurricanes): 1999 (2);
    Losses: $0.935 billion;

    Calendar year (number of hurricanes): 2000 (1);
    Losses: $0.302 billion;

    Calendar year (number of hurricanes): 2001 (2);
    Losses: $1.472 billion;

    Calendar year (number of hurricanes): 2002 (4);
    Losses: $0.48 billion;

    Calendar year (number of hurricanes): 2003 (1);
    Losses: $0.82 billion;

    Calendar year (number of hurricanes): 2004 (4);
    Losses: $2.273 billion;

    Calendar year (number of hurricanes): 2005 (5);
    Losses: $17.71 billion;

    Calendar year (number of hurricanes): 2006 (2);
    Losses: $0.612 billion.

    Source: GAO analysis of NFIP data.

    Notes: "Other residential" and "nonresidential" are excluded because,
    for each year of our review, over 90 percent of all policies were for
    the residential (single-and two-four family) and the condominium
    occupancy type. Dollars are in 2006 constant dollars. We excluded loss-
    related expenses because they were not available for all of the
    categories of losses in our analysis, such as hurricane-related losses.
    Loss-related expenses, which accounted for from 6-8 percent of the
    total losses paid out each year from 1997 through 2006, refer to the
    administrative costs associated with paying losses. See appendix II for
    supporting data.

    [End of figure]

    From 1997 through 2006, 79 percent of the funds paid out in losses were
    for hurricane-related claims, but the percentages in individual years
    varied widely (correlating to hurricane activity). As shown in figure
    5, in five of the years reviewed, less than 10 percent of losses were
    attributable to hurricanes, and in four other years, more than 60
    percent of losses were attributable to hurricanes.[Footnote 28] In
    2005, the Gulf Coast hurricanes accounted for 97 percent of all losses
    paid. Moreover, the 2005 hurricanes accounted for 65 percent of the
    losses paid during the 10-year period we reviewed. As we have
    previously reported, it is highly unlikely that NFIP, as currently
    funded, could generate revenues to repay the amount borrowed from
    Treasury to pay for claims from the 2005 hurricane season.[Footnote 29]

    Figure 5: Percentage of NFIP Losses Attributable to Hurricanes, 1997-
    2006:

    [See PDF for image]

    This figure is a vertical bar graph depicting the following data:

    Percentage of NFIP Losses Attributable to Hurricanes, 1997-2006:

    Calendar year: 1997;
    Percentage of losses: 2.4%.

    Calendar year: 1998;
    Percentage of losses: 28%.

    Calendar year: 1999;
    Percentage of losses: 81%.

    Calendar year: 2000;
    Percentage of losses: 1.1%.

    Calendar year: 2001;
    Percentage of losses: 0.03%.

    Calendar year: 2002;
    Percentage of losses: 8.4%.
    Calendar year: 2003;
    Percentage of losses: 65%.

    Calendar year: 2004;
    Percentage of losses: 85%.

    Calendar year: 2005;
    Percentage of losses: 97%.

    Calendar year: 2006;
    Percentage of losses: 6.4%.

    Source: GAO analysis of NFIP data.

    Notes: In 2001, approximately $463,000, or less than 1 percent of total
    NFIP losses, was attributable to hurricanes. See appendix V for
    supporting data.

    [End of figure]

    From 1997 through 2006, the net cumulative amount that FEMA paid to
    settle claims filed for repetitive loss properties increased from $3.7
    billion to $7.9 billion.[Footnote 30] Congress has noted that
    repetitive loss properties constitute a significant drain upon NFIP.
    While FEMA has tried to decrease the portfolio of repetitive loss
    properties, during this same period, the net cumulative number of
    repetitive loss properties increased approximately 64 percent, from
    76,000 to 125,000 (see fig. 6). Clearly, repetitive loss properties
    continue to be a problem for NFIP. While these repetitive loss
    properties account for about 1 percent of NFIP-insured properties, they
    account for between 25 and 30 percent of all flood claims. We could not
    determine the extent to which losses paid in a given year were
    attributable to repetitive loss properties because FEMA collects net
    cumulative, not annual, data on such losses. However, as shown in
    figure 6, the cumulative totals have continued to increase, in
    particular in the past 3 years, as the number of repetitive loss
    properties has increased.

    Figure 6: Net Cumulative Claims Filed and Losses Paid for Repetitive
    Loss Properties, and Number of Repetitive Loss Properties, 1997-2006:

    [See PDF for image]

    This figure is a combined vertical bar and line graph depicting the
    following data:

    Calendar year: 1997;
    Number of repetitive loss claims: 207,550;
    Number of repetitive loss properties: 76,108;
    Total repetitive loss dollars: $3.69 billion.

    Calendar year: 1998;
    Number of repetitive loss claims: 229,895;
    Number of repetitive loss properties: 83,374;
    Total repetitive loss dollars: $4.1 billion.

    Calendar year: 1999;
    Number of repetitive loss claims: 235,649;
    Number of repetitive loss properties: 85,234;
    Total repetitive loss dollars: $4.17 billion.

    Calendar year: 2000;
    Number of repetitive loss claims: 254,313;
    Number of repetitive loss properties: 91,731;
    Total repetitive loss dollars: $4.59 billion.

    Calendar year: 2001;
    Number of repetitive loss claims: 264,024;
    Number of repetitive loss properties: 95,177;
    Total repetitive loss dollars: $4.83 billion.

    Calendar year: 2002;
    Number of repetitive loss claims: 271,945;
    Number of repetitive loss properties: 97,881;
    Total repetitive loss dollars: $4.9 billion.

    Calendar year: 2003;
    Number of repetitive loss claims: 281,426;
    Number of repetitive loss properties: 101,173;
    Total repetitive loss dollars: $5.01 billion.

    Calendar year: 2004;
    Number of repetitive loss claims: 297,377;
    Number of repetitive loss properties: 107,041;
    Total repetitive loss dollars: $5.34 billion.

    Calendar year: 2005;
    Number of repetitive loss claims: 333,756;
    Number of repetitive loss properties: 119,292;
    Total repetitive loss dollars: $7.23 billion.

    Calendar year: 2006;
    Number of repetitive loss claims: 354,010;
    Number of repetitive loss properties: 125,239;
    Total repetitive loss dollars: $7.94 billion.

    Source: GA analysis of NFIP data.

    Notes: Dollars are in 2006 constant dollars. All claims and loss data
    are net cumulative. See appendix V for supporting data.

    [End of figure]

    FEMA's Average Historical Loss and Catastrophic Loss Estimates
    Increased from 1997 through 2005:

    FEMA's average historical loss estimate increased from $622 million in
    1997 to $1 billion in 2005, or about 62 percent. As previously noted,
    FEMA uses this estimate to calculate the premium that would be
    sufficient to pay for the average level of losses that occurred in past
    years and help set the rate level for subsidized flood insurance
    policies. The estimate is also part of the calculation that FEMA uses
    to determine the minimum subsidy price that should be charged for pre-
    FIRM flood insurance policies. When this calculation is used, it
    ensures that sufficient premiums are collected, in aggregate, to cover
    at least the average annual loss as determined by historical data (see
    app. II).[Footnote 31] This estimate increased from 1997 to 2005
    because it is annually updated with the previous years' flooding
    activity. To date, FEMA has not determined how it will use the 2005
    catastrophic losses from Hurricanes Katrina, Rita, and Wilma in its
    2006 or subsequent average historical loss year calculations.

    FEMA's estimates (in ranges) for probable maximum loss in the event of
    a catastrophic loss year gradually increased from $6-9 billion in 1998
    (the first year the estimate was made) to $8-11 billion in 2000, $9-12
    billion in 2002, and to $11-15 billion in 2005.[Footnote 32] According
    to FEMA, the estimate increased over this period due to inflation and
    the increased policyholder base. Estimates of a catastrophic loss year
    are designed to provide Congress with an informal guide on the loss
    potential of a catastrophic event--an event that has a 0.1 percent
    chance of occurring in any given year. According to FEMA, these
    estimates generally are done every other year due to the slow growth in
    policies in force, limited actuarial staff, and the imprecision of such
    estimates.

    More Than 90 Percent of Policies Were for Residences (Single and Two-
    Four Family) and Condominiums, with Coverage and Premiums Higher for
    Residences Than for Condominiums:

    Analysis of policies in force, average insurance per policy, average
    premium per policy, and losses by two occupancy types--residential and
    condominium--from 1997 through 2006 indicates the following:[Footnote
    33]

    * More than 90 percent of the insured properties annually were
    residential (single-and two-four family) or condominium properties from
    1997 through 2006. Specifically, more than 70 percent of the insured
    properties were residential properties, and more than 20 percent were
    condominiums.[Footnote 34]

    * For residential properties, the average amount of insurance purchased
    per flood insurance policy ranged from about $170,000 in 1997 to about
    $235,000 in 2006. For condominiums, the average amount of flood
    insurance per policy increased from about $98,000 in 1997 to $121,000
    in 2006. As mentioned previously, this is consistent with the increase
    in house values during this period.

    * For residential properties, the average premium decreased from about
    $522 in 1997 to about $494 in 2006. For condominiums, the average
    premium decreased from about $216 in 1997 to $201 in 2006. Premiums may
    have decreased because the number of policies in the moderate-and low-
    risk zones, which have more affordable premiums, have increased at a
    greater rate than in other zones--even though the average amount of
    insurance was increasing.

    * Residential and condominium losses accounted for 82.5 percent and 3
    percent, respectively, of all flood insurance losses that occurred from
    1997 through 2006. Losses paid out for residential properties ranged
    from a low of $185 million in 2000 to a high of $15.5 billion in 2005,
    a result of the Gulf Coast hurricanes. Losses paid out for condominiums
    ranged from $6.6 million in 2002 to $395 million in 2004, which were
    largely driven by the 2004 Florida hurricanes. The average loss per
    claim (for building-only, contents-only, and building and contents
    policies) was higher for condominiums than for residential properties
    because the data for condominium includes losses for entire condominium
    structures, not just individual units. For example, if an insured
    condominium building flooded, the (building) claim amount would be for
    the whole building and not for the average amount per unit.

    See appendix IV for additional detail about policies in force by
    dwelling type, amount of insurance purchased, average premium, and
    losses by occupancy type.

    Funding for Mitigation Programs Has Increased, but FEMA Cannot Readily
    Track Real-time Property Acquisitions:

    Funding for NFIP mitigation programs that can be used to acquire
    properties that are at risk of repetitive flooding has increased from
    1997 through 2006, but FEMA's ability to track the effectiveness of
    these programs is limited because it does not track property
    acquisitions real time. As we mentioned earlier, property acquisition
    is one of the tools that FEMA uses to reduce losses from flood-damaged
    and repetitive loss properties. FEMA acquires these properties out of
    funds appropriated for mitigation programs.[Footnote 35] Three of these
    programs are funded by the NFIP: the FMA program, the RFC program, and
    the SRL pilot program. Since 1997, annual funding for FMA more than
    doubled, while funding for the RFC program and the SRL pilot program
    remained the same from 2006, the first year of funding, to 2007.
    [Footnote 36] While overall funding for mitigation has increased, the
    total number of properties that have been acquired through the
    mitigation programs that have expended funds--the FMA and RFC programs-
    -is unknown. As a result, FEMA's ability to evaluate the effectiveness
    of the programs, such as the extent to which repetitive loss properties
    have been acquired, is limited. For the FMA and RFC programs, FEMA does
    not have real-time property acquisition data because the agency does
    not require its regional staff to report the status of individual
    property-level acquisitions to headquarters before a project closes--a
    process that can take several years--and its current grants management
    system does not have the capability to capture and track such data. As
    a result, FEMA management cannot readily access information on the
    current status of property acquisitions, limiting their ability to
    evaluate the effectiveness of these programs on a real-time basis.

    Funds for One Mitigation Program Increased, While Funds for Two Other
    Mitigation Programs Only Have Been Available Since 2006:

    The purpose of the FMA program is to fund activities that reduce or
    eliminate the long-term risk of flood damage to buildings and other
    structures insured by NFIP. FEMA data shows that, for the FMA program,
    funding increased from $12.5 million in fiscal year 1997 to $31 million
    in fiscal year 2007 (see table 4). During this period, nearly $229
    million was appropriated to reduce or eliminate the long-term risk of
    flood damage to buildings, manufactured homes, and other structures
    insured under NFIP.

    Table 4: Funding for the FMA Program, 1997-2007:

    Fiscal year: 1997;
    Amount appropriated: $12,500,000;
    Obligational authority brought forward[A]: $7,500,000.

    Fiscal year: 1998;
    Amount appropriated: $17,500,000;
    Obligational authority brought forward[A]: $6,917,400.

    Fiscal year: 1999;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $8,677,975.

    Fiscal year: 2000;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $10,636,707.

    Fiscal year: 2001;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $8,996,504.

    Fiscal year: 2002;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $9,729,370.

    Fiscal year: 2003;
    Amount appropriated: $19,870,000;
    Obligational authority brought forward[A]: $2,573,363[B].

    Fiscal year: 2004;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $9,394,960.

    Fiscal year: 2005;
    Amount appropriated: $20,000,000;
    Obligational authority brought forward[A]: $18,000,072.

    Fiscal year: 2006;
    Amount appropriated: $28,000,000;
    Obligational authority brought forward[A]: $13,689,240.

    Fiscal year: 2007;
    Amount appropriated: $31,000,000;
    Obligational authority brought forward[A]: $10,465,962.

    Source: FEMA's Integrated Financial Management Information System
    (IFMIS).

    [A] Prior year funds that have not expired and have not been obligated.

    [B] According to FEMA, part of the obligational authority brought
    forward from fiscal year 2002 to fiscal year 2003 was transferred to
    DHS, which was established in fiscal year 2003.

    [End of table]

    For each of fiscal years 2006 and 2007, Congress appropriated $50
    million for the RFC and SRL programs. In fiscal year 2006, Congress
    apportioned $10 million specifically for the RFC program and $40
    million for the SRL pilot program.[Footnote 37] For fiscal year 2007,
    Congress appropriated a sum of $50 million for the two programs, which
    FEMA apportioned the same way.[Footnote 38] RFC funds are intended to
    assist states and communities in reducing flood damages to insured
    properties that have had one or more claims of more than $1,000 to
    NFIP. While funding for the SRL pilot program has been made available
    since 2006, the application period did not open until January 2008 when
    program guidance was published. The purpose of the SRL program is to
    provide grant funds for mitigation projects that reduce or eliminate
    the long term risk of flood damage to severe repetitive loss
    residential structures insured under NFIP.[Footnote 39]

    Lack of Current Property-Level Information Limits FEMA's Ability to
    Accurately Account for Property Acquisitions:

    According to FEMA data, the FMA program acquired 35 percent of the
    properties approved for acquisition from fiscal years 1997 through
    2007, and the RFC program acquired 19 percent of the properties
    approved for acquisition from 2006 through 2007. However, FEMA
    headquarters cannot readily account for the actual number of properties
    acquired through each of these programs because it does not require
    real-time reporting of individual acquisitions, and its grant
    management system does not record purchase information. According to
    FEMA data, as of October 2007, FEMA approved the acquisition of 980
    properties through the FMA program from 1997 through the end of fiscal
    year 2007. However, FEMA does not routinely track how many of these
    properties have been acquired until a project closes, which can take
    several years. According to FEMA's records, 342 of the 980 properties
    (35 percent) approved through the FMA program have been acquired
    through acquisition-only projects, or mixed mitigation projects, which
    involve acquisition and at least one other type of mitigation, such as
    relocation, elevation, or floodproofing.[Footnote 40]

    Of the 980 properties FEMA approved for acquisition, 952 were approved
    as acquisition-only projects. As of October 2007, 331 of the 952
    properties approved for acquisition were recorded as acquired. However,
    this number is likely understated because FEMA does not account for
    property acquisitions until the projects are closed, and no projects
    have been recorded as closed since 2003 (see table 5). Based on FEMA
    data provided on properties acquired through the FMA program, the
    average acquisition amount for acquisition-only projects was more than
    $55,000.[Footnote 41]

    Table 5: Properties Approved for Acquisition and Acquired through the
    FMA Program, 1997-2007 (Acquisition-Only Projects):

    Fiscal year approved: 1997;
    Approved: Number of projects: 28;
    Approved: Total properties in projects: 75;
    Closed as of October 2007: Number of projects: 23;
    Closed as of October 2007: Total properties in projects: 39.

    Fiscal year approved: 1998;
    Approved: Number of projects: 27;
    Approved: Total properties in projects: 71;
    Closed as of October 2007: Number of projects: 27;
    Closed as of October 2007: Total properties in projects: 71.

    Fiscal year approved: 1999;
    Approved: Number of projects: 43;
    Approved: Total properties in projects: 116;
    Closed as of October 2007: Number of projects: 36;
    Closed as of October 2007: Total properties in projects: 72.

    Fiscal year approved: 2000;
    Approved: Number of projects: 52;
    Approved: Total properties in projects: 130;
    Closed as of October 2007: Number of projects: 41;
    Closed as of October 2007: Total properties in projects: 71.

    Fiscal year approved: 2001;
    Approved: Number of projects: 72;
    Approved: Total properties in projects: 139;
    Closed as of October 2007: Number of projects: 44;
    Closed as of October 2007: Total properties in projects: 63.

    Fiscal year approved: 2002;
    Approved: Number of projects: 51;
    Approved: Total properties in projects: 83;
    Closed as of October 2007: Number of projects: 12;
    Closed as of October 2007: Total properties in projects: 13.

    Fiscal year approved: 2003;
    Approved: Number of projects: 18;
    Approved: Total properties in projects: 79;
    Closed as of October 2007: Number of projects: 2;
    Closed as of October 2007: Total properties in projects: 2.

    Fiscal year approved: 2004;
    Approved: Number of projects: 14;
    Approved: Total properties in projects: 32;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Total properties in projects: 0.

    Fiscal year approved: 2005;
    Approved: Number of projects: 21;
    Approved: Total properties in projects: 49;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Total properties in projects: 0.

    Fiscal year approved: 2006;
    Approved: Number of projects: 33;
    Approved: Total properties in projects: 112;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Total properties in projects: 0.

    Fiscal year approved: 2007;
    Approved: Number of projects: 18;
    Approved: Total properties in projects: 66;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Total properties in projects: 0.

    Fiscal year approved: Total;
    Approved: Number of projects: 377;
    Approved: Total properties in projects: 952;
    Closed as of October 2007: Number of projects: 185;
    Closed as of October 2007: Total properties in projects: 331.

    Source: FEMA.

    [End of table]

    According to FEMA, the remaining 28 of 980 properties approved through
    the FMA program were approved as mixed mitigation projects. Of the 28
    properties approved since 1997, 11 were recorded as acquired (see table
    6). However, FEMA headquarters cannot reliably account for the actual
    number of properties acquired because it does not collect data on
    individual acquisitions until a project closes, and no mixed mitigation
    projects have been reported as closed since 1999.

    Table 6: FMA Program Properties Approved for Acquisition and Acquired,
    1997-2007 (Mixed Mitigation Projects):

    Fiscal year approved: 1997;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 9;
    Approved[A]: Properties to be acquired: 6;
    Approved[A]: Properties to be otherwise mitigated[B]: 3;
    Closed as of October 2007: Number of projects: 1;
    Closed as of October 2007: Properties in project: 9;
    Closed as of October 2007: Properties acquired: 6;
    Closed as of October 2007: Properties otherwise mitigated[B]: 3.

    Fiscal year approved: 1998;
    Approved[A]: Number of projects: 2;
    Approved[A]: Properties in project: 8;
    Approved[A]: Properties to be acquired: 3;
    Approved[A]: Properties to be otherwise mitigated[B]: 5;
    Closed as of October 2007: Number of projects: 2;
    Closed as of October 2007: Properties in project: 8;
    Closed as of October 2007: Properties acquired: 3;
    Closed as of October 2007: Properties otherwise mitigated[B]: 5.

    Fiscal year approved: 1999;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 5;
    Approved[A]: Properties to be acquired: 2;
    Approved[A]: Properties to be otherwise mitigated[B]: 3;
    Closed as of October 2007: Number of projects: 1;
    Closed as of October 2007: Properties in project: 5;
    Closed as of October 2007: Properties acquired: 2;
    Closed as of October 2007: Properties otherwise mitigated[B]: 3.

    Fiscal year approved: 2000;
    Approved[A]: Number of projects: 0;
    Approved[A]: Properties in project: 0;
    Approved[A]: Properties to be acquired: 0;
    Approved[A]: Properties to be otherwise mitigated[B]: 0;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2001;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 17;
    Approved[A]: Properties to be acquired: 9;
    Approved[A]: Properties to be otherwise mitigated[B]: 8;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2002;
    Approved[A]: Number of projects: 2;
    Approved[A]: Properties in project: 12;
    Approved[A]: Properties to be acquired: 3;
    Approved[A]: Properties to be otherwise mitigated[B]: 9;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2003;
    Approved[A]: Number of projects: 0;
    Approved[A]: Properties in project: 0;
    Approved[A]: Properties to be acquired: 0;
    Approved[A]: Properties to be otherwise mitigated[B]: 0;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2004;
    Approved[A]: Number of projects: 0;
    Approved[A]: Properties in project: 0;
    Approved[A]: Properties to be acquired: 0;
    Approved[A]: Properties to be otherwise mitigated[B]: 0;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2005;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 8;
    Approved[A]: Properties to be acquired: 3;
    Approved[A]: Properties to be otherwise mitigated[B]: 5;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2006;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 5;
    Approved[A]: Properties to be acquired: 1;
    Approved[A]: Properties to be otherwise mitigated[B]: 4;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: 2007;
    Approved[A]: Number of projects: 1;
    Approved[A]: Properties in project: 7;
    Approved[A]: Properties to be acquired: 1;
    Approved[A]: Properties to be otherwise mitigated[B]: 6;
    Closed as of October 2007: Number of projects: 0;
    Closed as of October 2007: Properties in project: 0;
    Closed as of October 2007: Properties acquired: 0;
    Closed as of October 2007: Properties otherwise mitigated[B]: 0.

    Fiscal year approved: Total;
    Approved[A]: Number of projects: 10;
    Approved[A]: Properties in project: 71;
    Approved[A]: Properties to be acquired: 28;
    Approved[A]: Properties to be otherwise mitigated[B]: 43;
    Closed as of October 2007: Number of projects: 4;
    Closed as of October 2007: Properties in project: 22;
    Closed as of October 2007: Properties acquired: 11;
    Closed as of October 2007: Properties otherwise mitigated[B]: 11.

    Source: FEMA.

    [A] Approved for mitigation.

    [B] Properties that were to be mitigated through means other than
    acquisition.

    [End of table]

    FEMA has approved the acquisition of 79 properties through the RFC
    program since 2006.[Footnote 42] As of October 2007, FEMA regional
    offices confirmed that mitigation activities for 15 properties (19
    percent) were completed, although none of these projects have been
    closed officially.[Footnote 43]

    According to FEMA officials, the data on property acquisitions are
    limited because they include only data for completed, or closed,
    projects. The completion of a mitigation project, which can include
    mitigation activities for multiple properties, may take several years.
    The officials stated that a variety of factors can slow or hinder
    property acquisitions including historic preservation concerns or
    environmental issues. However, FEMA officials stated that the agency
    does not require FEMA regional offices to record property acquisitions
    until an entire project closes. Internal control standards for the
    federal government direct that transactions be promptly recorded to
    maintain their relevance and value to management in controlling
    operations and making decisions.[Footnote 44] While FEMA guidance for
    mitigation programs requires grantees to submit quarterly performance
    reports on significant activities, whether work will be completed
    within the performance period, and cost information, this guidance does
    not explicitly require the reporting of property acquisitions. The lack
    of an explicit requirement for FEMA regional offices to record property
    acquisitions data in a consistent and timely manner hinders FEMA's
    ability to account for the extent to which flood-damaged and repetitive
    loss properties have been acquired through its mitigation programs
    (thereby decreasing the inventory of these properties).

    In addition to lacking a requirement to record acquisition data
    promptly, the information system that FEMA currently uses for the NFIP
    mitigation programs does not record property acquisition data at all.
    Prior to 2004, FEMA regional staff recorded data on properties acquired
    through closed projects into FEMA's National Emergency Management
    Information System (NEMIS). In 2004, FEMA transitioned from NEMIS to
    the Electronic Grants Management System (eGrants) in an effort to meet
    the intent of the Electronic Government (eGovernment) initiative.
    [Footnote 45] While eGrants was envisioned to help manage all phases of
    grants, the system currently assists in the front end of the grant life
    cycle by providing grant applicants the ability to electronically
    search and apply for grants. The eGrants system does not have the
    capability to capture any acquisition data. That is, eGrants records
    neither ongoing nor completed property acquisition data for FEMA's
    mitigation programs. According to FEMA officials, FEMA is in the
    process of consolidating all nondisaster grants into one information
    system that will support the entire grants life cycle from solicitation
    through closeout.[Footnote 46] The enhanced information system will
    track property acquisitions in real-time and will have project closeout
    capabilities; however, this information system is not scheduled to be
    completed until 2010. Until the nondisaster grants management system is
    developed, FEMA will continue to manage grants using eGrants, despite
    its limited capabilities.

    While FEMA's headquarters officials explained that, since 2004 their
    regional staff have used paper files and electronic spreadsheets to
    maintain information on property acquisitions for closed projects, FEMA
    did not provide information on project closures that have occurred
    since 2004 for the FMA program because they could not easily collect
    the information from their regional offices. Specifically, when we
    requested property acquisition data for the 10-year period of our
    review, FEMA was able to provide data on closed projects for 1997
    through 2003 (6 of 10 years) for the FMA program, and for 2006, the
    first year of the RFC program. FEMA had to collect data from at least
    two information systems for the FMA program and from paper files for
    the RFC program. GAO has previously reported on the continued lack of
    standardization and other inefficiencies in grant administration across
    agencies, including not aligning federal grant processes with typical
    grantees' business processes, inadequate advance information on
    potential grant availability, and unexplained delays in grant awards.
    [Footnote 47] However, a lack of standardization does not preclude FEMA
    from having a mechanism that allows it to effectively track real-time
    property acquisition data.

    As a result of the limitations of eGrants in capturing property
    acquisition data, FEMA cannot readily determine the extent to which
    NFIP-funded mitigation programs have been reducing or eliminating the
    risk of losses from repetitive loss properties, a key measure needed to
    determine the effectiveness of the program. Coupled with lack of a
    requirement for staff to consistently and promptly record acquisitions
    data, the lack of comprehensive data impedes FEMA's ability to account
    for the properties acquired through its mitigation programs and hinders
    its ability to provide Congress with timely information with which to
    assess the impact of these programs on mitigating losses to NFIP and
    ensure that limited resources are appropriately allocated.

    FEMA's Oversight of Contractor Activities Lacked Consistency,
    Documentation, and Coordination:

    FEMA makes extensive use of contractors who perform critical functions
    to implement the NFIP. Contractors perform functions such as the
    collection and reporting of all financial and statistical data and the
    selling and servicing of some flood insurance policies. While FEMA
    relies upon contractors to implement the NFIP, our review of FEMA's
    monitoring documentation for the BSA contract showed that FEMA did not
    consistently follow its own monitoring procedures for preparing,
    maintaining, and reviewing monitoring reports, and was unable to
    provide copies of the majority of the monitoring reports we requested.
    Moreover, key FEMA offices that have responsibilities for addressing
    contractor deficiencies did not coordinate information and actions
    related to deficiencies identified for the BSA and DSA contractors. As
    a result, FEMA could not ensure adherence to contract requirements and
    lacked information critical for effective oversight on key NFIP
    contractors.

    FEMA Staff Responsible for Regularly Monitoring BSA Performance Areas
    Did Not Clearly or Consistently Follow Monitoring Procedures:

    Our review found that FEMA staff did not consistently follow monitoring
    procedures related to the submission, documentation, and review of
    monitoring reports for the BSA contract. In assessing the extent to
    which FEMA staff followed their contract-specific procedures, we
    focused on monitoring of the BSA contractor, which is responsible for
    all financial and statistical reporting related to NFIP.

    FEMA lacked comprehensive monitoring policies and procedures for all
    NFIP-related contracts during the period of our review; instead, FEMA's
    procedures were summarized in individual contracts, and, for the BSA
    contract we reviewed, in a "surveillance plan" that specified
    monitoring roles and responsibilities. According to the BSA contract,
    in effect from October 2005 through December 2007, FEMA monitors were
    to review the BSA's performance in 10 specific performance areas. FEMA
    assigned five monitors including a COTR to the BSA contract, and each
    was required to prepare monitoring reports containing the results of
    their specific surveillance activities.[Footnote 48] The reports were
    to indicate clearly the performance area monitored and whether the
    performance standard was met, according to an official from the Program
    Management Office. The surveillance plan also specified that reports
    were to be submitted in a timely fashion to the COTR and maintained by
    the COTR for the life of the contract in a quality assurance file. Both
    the COTR and the Program Management Office were supposed to review the
    monitoring reports.

    In March 2008, FEMA provided GAO with a set of contract monitoring
    procedures that are applicable to all Risk-Insurance NFIP contracts
    that have performance requirements. However, these procedures were not
    scheduled to be implemented until May 1, 2008.

    FEMA Lacks Records for Most Monitoring Reports We Requested, and
    Available Reports Were Not Clearly Linked to Performance Requirements:

    FEMA did not clearly or consistently follow the requirements to submit
    a monitoring report as specified in both the BSA contract and the
    surveillance plan. Seven of these performance areas were to be
    monitored monthly, one was to be monitored quarterly, and two were to
    be monitored annually. For the time period we reviewed (from October
    2005 through May 2007), FEMA monitors should have produced 380 monthly
    monitoring reports. In response to our request for all of these
    monitoring reports, FEMA made 145 available for our review. While
    monitors stated that some of the missing reports were submitted to
    either the COTR or the Program Management Office, the monitor, COTR,
    and the Program Management Office were not able to produce evidence of
    these reports or their findings. FEMA officials stated that many
    reports were not prepared because most monitors were detailed to assist
    with recovery efforts following Hurricane Katrina. However, our
    analysis shows the majority of the monthly monitoring reports that were
    required to be prepared throughout 2006 apparently were not.

    Further, more than 70 percent of the 145 monthly reports we reviewed
    did not specify the performance areas to which they related (see table
    7).[Footnote 49] For example, some monitoring reports described the
    contractor's activities, without specifying what performance area was
    being reviewed or an assessment of the performance. Because some
    monitors were responsible for reporting on multiple performance areas,
    and did not specify the areas on which they were reporting, we could
    not consistently determine the performance area(s) that the reports
    were intended to address.

    Table 7: Extent to Which FEMA Produced Required Monthly Monitoring
    Reports for the BSA Contractor (October 2005-May 2007):

    Performance area: 1 - Statement of Work;
    Monitoring reports required by contract: 100;
    Monitoring reports provided to GAO: 42;
    Monitoring reports that GAO could link to a performance area: 20.

    Performance area: 3 - Implementation of Program Management Plans;
    Monitoring reports required by contract: 100;
    Monitoring reports provided to GAO: 42;
    Monitoring reports that GAO could link to a performance area: 4.

    Performance area: 5 - Disaster Response;
    Monitoring reports required by contract: 20;
    Monitoring reports provided to GAO: 12;
    Monitoring reports that GAO could link to a performance area: 12.

    Performance area: 6 - Program Development, Operations, and Systems;
    Monitoring reports required by contract: 100;
    Monitoring reports provided to GAO: 36;
    Monitoring reports that GAO could link to a performance area: 1.

    Performance area: 7 - Timeliness of Service;
    Monitoring reports required by contract: 20;
    Monitoring reports provided to GAO: 4;
    Monitoring reports that GAO could link to a performance area: 1.

    Performance area: 8 - Quality of Customer Service;
    Monitoring reports required by contract: 20;
    Monitoring reports provided to GAO: 4;
    Monitoring reports that GAO could link to a performance area: 0.

    Performance area: 10 - Timeliness of Prior Term Refunds;
    Monitoring reports required by contract: 20;
    Monitoring reports provided to GAO: 5;
    Monitoring reports that GAO could link to a performance area: 0.

    Performance area: Total;
    Monitoring reports required by contract: 380;
    Monitoring reports provided to GAO: 145;
    Monitoring reports that GAO could link to a performance area: 38.

    Source: GAO analysis of FEMA's monitoring reports for the BSA contract.

    Notes: This table focuses on monthly monitoring reports for the BSA
    contract. Thus, it excludes analysis of performance area 9, which was
    to be monitored quarterly, and performance areas 2 and 4, which were to
    be monitored annually. We arrived at the number of "reports required by
    contract" by multiplying the number of monitors who were required to
    monitor the performance areas with the number of months for which GAO
    requested information.

    [End of table]

    Many of the monthly reports were not clearly linked to contract-
    specified requirements because they used performance area names and
    numbers that were inconsistent with names and numbers in the BSA
    contract. When asked about the lack of a direct link to specific
    performance areas, as listed in the BSA contract, most of the BSA
    monitors we interviewed stated that they did not know the "number" of
    the performance area they were to monitor but knew the general areas.
    When we brought this issue to the attention of FEMA's Program
    Management Office in August 2007, it determined that the numbering of
    performance areas was inconsistent in the BSA contract and the
    surveillance plan. As a result, the office revised the surveillance
    plan to make numbering of performance areas consistent with the
    contract. The surveillance plan also was modified to include the
    specific names of the monitors responsible for each performance area.

    FEMA's inability to provide documentation that clearly indicated how
    contractor performance linked to contract standards indicates that
    records had not been properly managed and maintained in accordance with
    internal control standards for the federal government.[Footnote 50]
    FEMA management acknowledged the problem when we presented a
    preliminary analysis of performance reports and performance standards.
    While we did not become aware of any significant performance problems
    with the BSA contractor during the course of our review, our results
    are inconclusive because most of the monitoring reports were not
    documented. Given FEMA's extensive use of contractor's to implement the
    NFIP, it is vital that FEMA maintain internal controls, which are
    critical to ensuring that contractors are performing as required. The
    lack of documentation and linkages between performance reports and
    performance areas and the extent to which FEMA effectively monitored
    the BSA contract revealed weaknesses that could adversely impact the
    functioning of the NFIP.

    For Most of Available Reports, We Found Little Evidence of Required
    Timely Submission or Systematic Review and Maintenance of
    Documentation:

    The majority of the 145 monthly monitoring reports that we reviewed
    were not date stamped or otherwise annotated to reflect the date they
    were submitted to either the COTR or the Program Management Office.
    Moreover, an official from the Program Management Office was unable to
    provide evidence that her office tracked the dates on which monitoring
    reports were received from each monitor.

    In response to our and other queries about the timeliness with which
    monitoring reports were submitted to the Program Management Office, in
    July 2007, the office directed monitors to submit their monthly
    monitoring reports to the COTR on the fifth of each month. The COTR was
    then directed to review these reports and provide the Program
    Management Office with a summary of the findings by the tenth of each
    month. While we did not evaluate monitoring reports submitted after May
    2007, these contract-specific policies are a step in the right
    direction for ensuring that monitoring reports are collected and
    reviewed in a timely manner.

    In addition, the COTR and the Program Management Office appeared not to
    have consistently reviewed the monitoring reports. For example,
    according to the COTR, the Program Management Office directed monitors
    to send their monitoring reports directly to the Program Management
    Office. The COTR did not begin to receive them until July 2007, 21
    months into the 27-month BSA contract. Therefore, it was not until July
    2007 that the COTR began maintaining a quality assurance file for the
    BSA contract. While FEMA provided documentation of a portion of the
    required monitoring reports, FEMA could not provide evidence that they
    were reviewed systematically by the COTR or the Program Management
    Office. Internal control standards for the federal government provide
    that ongoing monitoring that occurs in the normal course of operations
    is performed continually and is ingrained in the agency's operations.
    [Footnote 51] Moreover, these standards call for clear areas of
    authority and appropriate lines of reporting. While the surveillance
    plan established that the COTR had responsibility for collecting
    monitoring reports from each monitor and maintaining them in a quality
    assurance file, he was not a part of the process for reviewing
    monitoring reports until July 2007.

    As a result of these conditions, the extent to which monitoring reports
    were being reviewed appropriately and in a timely fashion was unclear.
    Such conditions could allow performance problems to go unnoticed and
    potentially worsen, thereby affecting the quality of NFIP. In addition,
    the failure of the COTR to begin maintaining a quality assurance file
    until July 2007 meant that a complete file of monitoring reports could
    not be provided to the Contracting Officer for consideration during
    contract renewal negotiations. Although the BSA contract was awarded to
    a different contractor in January 2008, the Contracting Officer would
    have been unable to determine whether the original contractor had a
    record of performance problems, potentially useful information to
    consider when deciding whether to renew a contract.

    In March 2008, FEMA provided GAO with monitoring procedures that
    established a clear process through which monitoring reports should be
    submitted to the COTR and the Program Management Office, and the review
    steps that should be taken by the COTR. However, these procedures do
    not specify the role of the Program Management Office in reviewing
    monitoring reports, or its broader responsibilities for the
    implementation of the contract monitoring procedures. Again, such
    conditions could allow performance problems to go unnoticed and
    potentially worsen, thereby affecting the quality of NFIP.

    FEMA's Handling of BSA and DSA Contractor Deficiencies Was Not
    Coordinated and Was Poorly Documented:

    Analysis of FEMA's efforts to address performance deficiencies for two
    major NFIP contractors--the BSA and DSA--indicates a lack of
    coordination between key FEMA officials and a failure to properly
    document decisions and actions associated with performance problems. Of
    the 38 monitoring reports that FEMA provided in relation to the BSA
    contract, and that could be linked to specific performance areas, 2
    indicated that performance standards were not met. While no discrepancy
    reports (which FEMA requires the Contracting Officer to issue when
    contractors fail to meet specified performance standards) were written
    as a result of the BSA deficiencies, 18 discrepancy reports were issued
    for the DSA contract.

    While Monitoring Reports Noted Some BSA Deficiencies, FEMA Staff Did
    Not Issue Discrepancy Reports or Inform the Contracting Officer of
    Deficiencies:

    Two of the 38 BSA monthly monitoring reports that could be clearly
    linked to performance standards indicated that a performance standard
    was not met (see table 8). In both cases, one of which involved the
    failure of the BSA's computer security system to meet performance
    standards, and the other related to the contractor's failure to submit
    a deliverable to FEMA on time, the COTR determined that a discrepancy
    report was not necessary and did not inform the Contracting Officer of
    the contractor's failure to meet its performance standards. According
    to the COTR, a discrepancy report was not necessary in the first case
    because the computer security standards were relatively new at the time
    and have been updated since. The COTR stated that, in the second case,
    he used his discretion to determine that a discrepancy report was not
    necessary and resolved the issue through discussions with the
    contractor.

    Table 8: Analysis of FEMA Monthly Monitoring Reports Required for the
    BSA Contract (October 2005-May 2007):

    Performance area: 1 - Statement of Work;
    Performance requirement was met: 19;
    Performance requirement was not met: 1.

    Performance area: 3 - Implementation of Program Management Plans;
    Performance requirement was met: 4;
    Performance requirement was not met: 0.

    Performance area: 5 - Disaster Response;
    Performance requirement was met: 12;
    Performance requirement was not met: 0.

    Performance area: 6 - Program Development, Operations and Systems;
    Performance requirement was met: 0;
    Performance requirement was not met: 1.

    Performance area: 7 - Timeliness of Service;
    Performance requirement was met: 1;
    Performance requirement was not met: 0.

    Performance area: 8 - Quality of Customer Service;
    Performance requirement was met: 0;
    Performance requirement was not met: 0.

    Performance area: 10 - Timeliness of Prior Term Refunds;
    Performance requirement was met: 0;
    Performance requirement was not met: 0.

    Performance area: Total;
    Performance requirement was met: 36;
    Performance requirement was not met: 2.

    Source: GAO analysis of FEMA's monitoring reports for the BSA contract.

    Note: This table focuses on monthly monitoring reports for the BSA
    contract. Thus, it excludes analysis of performance area 9, which was
    to be monitored quarterly, and performance areas 2 and 4, which were to
    be monitored annually.

    [End of table]

    While only a few deficiencies were identified, the monthly monitoring
    reports that we reviewed most often found that the performance
    requirement was met. In two instances, they revealed a lack of
    coordination between the BSA COTR and the Contracting Officer. The BSA
    contract stated that if a performance standard was not met, the
    Contracting Officer was to issue a discrepancy report to which the
    contractor had to respond. Upon evaluation of the contractor's
    response, the Contracting Officer would determine whether a deduction
    in payment to the contractor was appropriate. The failure of the COTR
    to share his assessment may be due to the lack of written policies and
    procedures specifying how such assessments should be shared with the
    Contracting Officer. While FEMA developed guidance in July 2007
    specifying when and how the COTR should communicate discrepancies with
    the Contracting Officer, this guidance is specifically for the BSA
    contract. Federal standards for internal control call for appropriate
    documentation of significant events. Because the COTR did not document
    and inform the Contracting Officer of his assessment, FEMA management
    was unaware of the contractor's failure to meet a performance
    requirement; the contractor was not penalized financially.[Footnote 52]

    FEMA's Handling of Discrepancy Reports for the DSA Contract Was
    Uncoordinated and Hampered by Lack of Guidance:

    Our analysis of the actions taken in connection with the 18 discrepancy
    reports written from September 2004 through May 2007 on the DSA
    contract also found that FEMA offices did not coordinate in preparing,
    documenting, and reviewing these determinations. Specifically, the COTR
    for the DSA contract, FEMA's Program Management Office, and FEMA's
    Contracting Officer did not coordinate to address the failure of the
    DSA to meet contract-specified performance standards.[Footnote 53]
    Generally, the DSA received discrepancy reports for not processing NFIP
    policy documents, such as renewals and applications, within required
    time frames. According to the COTR, these types of deficiencies had
    minimal negative effects because, in some cases, the universe of
    documents the contractor processed was so small that the failure to
    process 10-20 documents in a timely manner resulted in a discrepancy
    report. But, interviews with the FEMA offices responsible for
    processing discrepancy reports revealed that FEMA's Contracting Officer
    was unaware that the COTR for that contract had sent 18 discrepancy
    reports to the DSA. According to the Contracting Officer, her office
    became aware that discrepancy reports had been sent to the DSA in June
    2007 during the course of our review.

    In addition to a lack of communication about the discrepancy reports,
    some reports lacked required signatures, or evidence that different
    offices had reviewed the contractor's responses and determined what, if
    any, actions would be taken. The discrepancy report is to contain a
    signature from FEMA's Contracting Officer; a response from the
    contractor; FEMA's subsequent evaluation of the contractor's response;
    and the resulting action, such as a payment reduction. While
    discrepancy reports were to be signed by the Contracting Officer, none
    of the reports we reviewed had the signatures. The lack of signatures
    by the Contracting Officer suggests that this officer was unaware of
    the performance problems associated with the DSA and potentially could
    have renewed the contract without complete information about the
    contractor's performance.

    Our review also showed a failure to consider the contractor's written
    response to the report. According to the DSA contract, FEMA's
    determination of payment changes is to be based on consideration of the
    contractor's response to the discrepancy report. Neither the contract
    nor the discrepancy reports specify how the Contracting Officer was to
    be made aware of contractor performance problems; that is, whether and
    how either the COTR or the Program Management Office was responsible
    for informing the Contracting Officer of contractor performance
    problems. Six reports contained a written response from the contractor,
    yet none of the reports contained information on FEMA's assessment of
    the contractor's response or its subsequent actions (for example,
    payment reductions). According to the COTR for the DSA contract, if a
    contractor did not meet a performance standard, the COTR would arrange
    for deductions, regardless of the contractor's stated or written
    response.

    Moreover, we found that the 18 discrepancy reports called for a total
    of more than $55,000 in financial disincentives for the DSA. However,
    FEMA had not debited nearly $19,000 in financial disincentives from the
    contractor's invoices as of January 2008. According to the COTR, the
    disincentives that had not been debited had been assessed in 6
    discrepancy reports prepared from 2005 through 2006. The COTR never
    gave 2 of these discrepancy reports to FEMA's accounting department for
    processing, and the accounting department did not process the remaining
    4. According to the COTR, all 6 discrepancy reports were not properly
    processed due to human error. The COTR said that FEMA had no process by
    which he could be informed that a financial penalty had been processed
    as a result of the discrepancy reports. In addition to the 6
    unprocessed reports that assessed disincentives, FEMA did not process 2
    other reports because they were drafted within the first 6 months of
    the contract. According to the COTR, the contractor had a 6-month
    "grace period" for meeting its performance standards; therefore, no
    financial disincentives were either calculated or applied for these
    discrepancy reports. However, such a grace period is not specified in
    the DSA contract. The lack of clear, written policies and procedures
    regarding the specific roles of various FEMA offices in processing
    discrepancy reports and ensuring the appropriate application of
    financial disincentives resulted in the failure of FEMA to process
    financial disincentives.

    In the monitoring procedures that FEMA provided to GAO in March 2008,
    the role of the COTR in identifying deficiencies and communicating them
    with a representative of the Contracting Officer is specified. However,
    the procedure does not explain how the Program Management Office will
    be involved, or how the agency will ensure that financial disincentives
    are appropriately applied.

    Conclusions:

    Various statistical trends reveal that while NFIP is growing and
    becoming more widely purchased enabling it to more widely diversify its
    risks, FEMA continues to face a number of challenges in managing this
    program including a growing number of claims on repetitive loss
    properties, insufficient information to readily track the property
    acquisitions of its mitigation programs, inconsistent application of
    contract monitoring procedures, and inconsistent documentation and
    coordination of contractor oversight. The ability of FEMA officials to
    effectively monitor the effectiveness of its flood mitigation programs,
    as well as its NFIP contractors, is essential to the effective
    implementation of NFIP.

    Floods impose an enormous financial burden on the nation's flood
    insurer, the federal government. Consequently, FEMA management,
    Congress, and the public need accurate and timely information to assess
    the effectiveness of programs designed to mitigate flood-related
    damages, particularly for repetitive loss properties that account for a
    significant portion of claims paid under NFIP. We found that FEMA does
    not have specific written policies for the timely recording of property
    acquisition data in its mitigation programs. By developing such
    policies and guidance, FEMA could improve its ability to produce,
    analyze, and report on property acquisitions and thus improve its
    ability to assess the operations and effectiveness of these programs.
    In addition to not requiring the timely recording of acquisition data,
    since 2004 when FEMA began using eGrants as its grants management
    system, FEMA has been unable to use this grants management system to
    record such information. The eGrants system can process "front-end"
    processes (such as accepting applications) but not subsequent grants
    management processes (such as project closures). Not having an end-to-
    end grant management capability makes it particularly challenging for
    grant management staff to oversee the grant process across their
    organization. Grant management systems were intended to enhance the
    ability of federal managers and grant-making agencies to readily
    collect, analyze, and report information. With its current system
    limitations, FEMA cannot accurately assess or report the extent to
    which its mitigation programs are reducing the number of flood-damaged
    and repetitive loss properties.

    Deficiencies in FEMA processes relating to NFIP data and performance
    extend to oversight of contractors responsible for supporting NFIP. For
    instance, we were unable to link a substantial number of monitoring
    reports to contract-specified performance areas and were unable to
    determine, based upon available documentation, the extent to which
    monthly monitoring reports were submitted on time, systematically
    reviewed by appropriate officials and offices, and the associated
    documentation properly filed and maintained. The lack of a framework to
    ensure that essential oversight and control functions were completed
    could allow performance problems to go unnoticed or worsen.
    Furthermore, the lack of documentation to determine the extent to which
    specific performance standards were met makes it appear that FEMA was
    not effectively monitoring its contractors, diminishes its ability to
    determine if and when problems occurred, and may have led the agency to
    not apply specific financial incentives or disincentives per contract
    terms (such as when the BSA COTR independently determined that
    discrepancy reports were not necessary). Given the reliance of NFIP
    upon contractors, poor contractor performance could diminish the
    overall quality of program operations and management.

    In addition to enhancing its management and oversight of its
    contractors, FEMA also has an opportunity to improve internal
    operations and communication as they relate to contract oversight
    functions. Our review indicated a lack of overall contract-monitoring
    guidance and consequently conflicting understandings of procedures,
    responsibilities, and authority for addressing contractor deficiencies
    among FEMA officials and offices. While FEMA developed guidance during
    the course of our review for all Risk-Insurance NFIP-related contracts
    that have performance requirements, in part as a result of issues that
    we identified during our work, revised monitoring procedures were not
    scheduled to be implemented until May 2008, which was after the period
    of our analysis.

    Recommendations for Executive Action:

    To more accurately track the extent to which flood-prone properties are
    acquired, we recommend that the Secretary of Homeland Security take the
    following two actions:

    * Establish written guidance for FEMA regional offices to better ensure
    consistent and timely recording of property acquisition data.

    * Establish a means to track real-time property acquisitions for NFIP-
    funded mitigation programs.

    To ensure more effective oversight of contractors performing key NFIP
    data collection, reporting, and insurance functions, we also recommend
    that the Secretary of Homeland Security take the following three
    actions:

    * Implement a process to ensure that monitoring reports are submitted
    on time and systematically reviewed by the COTR and the Program
    Management Office and copies of monitoring reports are retained in a
    quality assurance file, as directed by the contract.

    * Ensure that FEMA staff clearly monitor each performance standard that
    the contractor is required to meet in the time frames required by
    contract and that FEMA staff clearly link monitoring reports and
    performance areas.

    * Ensure implementation of written guidance for all NFIP-related
    contracts on how to consistently handle the failure of a contractor to
    meet standards in performance areas and establish written policies and
    procedures about the coordination between FEMA officials and offices
    (including the COTR, the Program Management Office, and the Contracting
    Officer) when addressing contractor deficiencies, including determining
    whether and under what circumstances to issue discrepancy reports, and
    ensuring that financial disincentives are appropriately and
    consistently applied.

    Agency Comments and Our Evaluation:

    We requested comments on the draft of this report from the Secretary of
    Homeland Security. The Assistant Administrator, Mitigation Directorate,
    FEMA, provided written comments that are reprinted in appendix VIII.
    FEMA's written response also included technical comments, which we
    incorporated as appropriate. In its written comments, FEMA generally
    concurred with our recommendations and noted that the agency has taken
    actions to address the recommendations related to oversight of
    contractors performing key data collection, reporting, and insurance
    functions. In particular, the agency stated that it has:

    * implemented a procedure whereby monitors will provide a monthly
    status report to the COTR using a specific format to ensure monitoring
    is performed in a consistent manner across all contracts; and:

    * developed written procedures on monitoring reporting requirements and
    conducted a training session with all monitors.

    In commenting on our presentation of information related to mitigation
    programs that can be used to acquire properties, FEMA headquarters
    agreed that the agency does not track property acquisition data in real
    time; that is, between review of project applications and closeout.
    FEMA stated that it would be inefficient for headquarters to collect
    real-time data from regional, state, and local partners, and asserted
    that the added value of such data was unclear.

    We agree that FEMA lacks an efficient process for collecting data on
    the extent to which properties have been acquired before a project is
    closed out and, therefore, recommend that FEMA establish written
    guidance for FEMA regional offices to better ensure consistent and
    timely recording of property acquisition data. We disagree that the
    value of collecting real-time property acquisition data at the
    headquarters level is unclear. Real-time data would improve FEMA
    headquarters' ability to produce, analyze, and report information on
    ongoing operations and thus improve its ability to assess the
    effectiveness of its mitigation programs. For example, FEMA
    headquarters would be able to more accurately assess the rate at which
    properties are acquired and thus pinpoint within a shorter time frame
    the extent to which mitigation programs were reducing the number of
    flood-damaged and repetitive loss properties.

    As agreed with your office, unless you publicly announce the contents
    of this report earlier, we plan no further distribution of this report
    until 30 days from the report date. At that time, we will provide
    copies to the Chairman, Senate Banking, Housing and Urban Affairs
    Committee; the Chairman and Ranking Member of the Senate Committee on
    Homeland Security and Governmental Affairs; the Chairman and Ranking
    Member of the House Committee on Financial Services; the Chairman and
    Ranking Member of the House Committee on Homeland Security; and other
    interested committees. We are also sending a copy of this report to the
    Secretary of Homeland Security and other interested parties. We also
    will make copies available to others upon request. In addition, the
    report will available at no charge on our Web site at [hyperlink,
    http://www.gao.gov]. Contact points for our Offices of Congressional
    Relations and Public Affairs may be found on the last page of this
    report.

    If you or your staff has any questions about this report, please
    contact me at (202) 512-8678 or williamso@gao.gov. GAO contact and
    staff acknowledgments are listed in appendix IX.

    Sincerely yours,

    Signed by:

    Orice M. Williams:
    Director, Financial Markets and Community Investment:

    [End of section]

    Appendix I: Objectives, Scope, and Methodology:

    Our objectives were to (1) describe trends for National Flood Insurance
    Program (NFIP) policies, insurance amounts, premiums, and losses from
    1997 through 2006 and the extent to which NFIP losses were attributable
    to hurricanes and repetitive loss properties; (2) assess how the
    amounts available for the purchase of flood-damaged properties changed
    over time, and the extent to which the Federal Emergency Management
    Agency (FEMA) purchased flood-damaged properties; and (3) evaluate the
    extent to which FEMA followed its procedures for monitoring selected
    NFIP-related contracts.

    Description of NFIP Trends:

    To describe overall NFIP statistics, we obtained data from FEMA on
    policies in force and claims made. We obtained data as of December 31
    for each year of the period from calendar year 1997 through calendar
    year 2006 on policies in force, average insurance per policy in force,
    and average premium per policy in force. For the claims data, we
    obtained information (as of May 31, 2007) about the claim dates of
    losses incurred between January 1, 1997, and December 31, 2006. For all
    monetary data obtained, we adjusted dollar amounts to 2006 constant
    dollars using the Shelter Total formulas found in the Consumer Price
    Index.[Footnote 54]

    To describe statistics by flood zone, we first determined in which
    flood zones the majority of flood insurance policies were located by
    analyzing the data using SAS software version 9.1. FEMA has mapped
    flood risks in the United States and in most flood-prone areas has
    assigned a flood zone designation based on the level of flood risk.
    Although FEMA uses 12 types of flood zones (see appendix VII), we
    combined these into four flood zone designations based on risk levels-
    -moderate-to low-risk (Zones B, C, and X); high-risk (Zone A); high-
    risk coastal (Zone V); and undetermined risk (Zone D). FEMA officials
    agreed with the way these were combined. In appendix III we also
    present data on Zone "O" (Other), which is not an official flood zone;
    rather, FEMA's contractor uses the designation for coding purposes to
    indicate missing values or incorrect codes. Less than 1 percent of all
    policies and less than .5 percent of all losses fell under Zone "O." In
    addition, in appendix III we present data on Zone "E" (Emergency
    Program), which indicates policies in the Emergency Program, which does
    not assign flood-risk zone designations. Communities participating in
    NFIP initially enter the Emergency Program. We determined that, for the
    10-year period of our review, 99 percent of policies in force were
    located in the high-risk, high-risk coastal, and moderate-to low-risk
    zones. We, therefore, reported on these in the body of the report, and
    provided data on the remaining zones (undetermined risk and Emergency
    Program) in appendix III. For all flood zones, we obtained data on
    policies in force, annual average amount of flood insurance purchased,
    annual average premium, and losses.

    To describe statistics by occupancy type, we first determined which
    occupancy types represented the majority of policies in force. We
    determined that, for the period of our review, residential (single-
    family and two-four family) properties generally accounted for more
    than 70 percent of policies in force each year, and condominiums
    accounted for more than 20 percent of policies in force each year. We
    reported information on these occupancy types in the body of the report
    and provided data on the remaining occupancy types (other residential
    and nonresidential) in appendix IV.

    We conducted electronic testing of FEMA's data to identify outliers and
    missing data elements. We also cross-checked various tables to assess
    the consistency of the data provided. For example, we compared data on
    overall losses with the losses reported by flood zone to ensure that
    the losses reported each year were consistent. According to our
    electronic testing and cross-checking, we determined that these data
    were sufficiently reliable for the purposes of this report.

    We obtained data on FEMA's average historical loss estimate (the
    purpose of which is to estimate the amount of premium that would be
    sufficient to pay for the average level of losses that occurred in past
    years) for calendar years 1997 through 2006 from FEMA's Chief Actuary.
    We interviewed FEMA officials about the basis for the average
    historical loss estimate, reviewed FEMA's white paper on the estimate,
    and reviewed FEMA's 2006 Actuarial Rate Review for additional
    information about this estimate. We also obtained data on FEMA's
    estimates of catastrophic loss years from FEMA's Chief Actuary. FEMA
    prepares the catastrophic loss year estimate, usually every other year,
    to indicate the maximum amount that NFIP would have to expend during a
    catastrophic loss year. That is, the estimate is designed to provide
    Congress with an informal guide on the losses that could occur in the
    event of a storm that has a 0.1 percent chance of occurring. We did not
    assess FEMA's methodology for either of these estimates.

    To evaluate the extent to which flood-related damages exceeded flood
    insurance limits, we requested and obtained data from FEMA on flood-
    insurance policies that were purchased for coverage at the maximum
    limit for building-only coverage and contents-only coverage for
    calendar years 1997 through 2005. For policies that contained both
    building and contents coverage, we obtained data on policies where the
    maximum insurance limit was purchased for either the building or
    contents coverage (or both) for calendar years 1997 through 2005. We
    excluded group flood insurance policies because they have coverage
    limits that differ from other flood insurance policies.[Footnote 55] We
    obtained data on the number of claims that were paid for the resulting
    subset of flood-insurance policies and the number of claims for which
    damage data were available. We then identified the number of claims for
    which flood-related damages exceeded the maximum amount of insurance
    available and the losses associated with these claims. We presented the
    data for 1997-2004 and 2005 separately due to the high number of claims
    that occurred in 2005. For more information, see appendix VI. In
    conjunction with this work, we also reviewed parts of the 2006 study
    commissioned by FEMA.[Footnote 56]

    To evaluate the extent to which flood-related damages were greater than
    the amount of insurance purchased, we obtained data on flood insurance
    policies that were purchased for coverage below the maximum limit for
    contents coverage, and below the maximum limit for building coverage,
    for calendar years 1997 through 2005. For policies that contained both
    building and contents coverage, we obtained data on policies where less
    than the maximum insurance limit was purchased for either the building
    or contents coverage (or both) for calendar years 1997 through 2005. We
    excluded group flood insurance policies because they have coverage
    limits that differ from other flood insurance policies. We obtained
    data on the number of claims that were paid for the resulting subset of
    flood insurance policies and the number of claims for which damage data
    were available. We then identified the number of claims for which flood-
    related damages exceeded the amount of insurance purchased and the
    losses associated with these claims. We presented the data for 1997-
    2004 and 2005 separately due to the high number of claims that occurred
    in 2005.

    To describe the extent to which losses were attributable to repetitive
    loss properties, we obtained data from FEMA on the net cumulative
    number of claims filed for repetitive loss properties and the amount of
    losses FEMA paid out for these properties as of December 31 for each
    calendar year from 1997 through 2006. We obtained net cumulative data
    because this is the only way that FEMA collects data on repetitive loss
    properties. We also obtained data on the net cumulative number of
    repetitive loss properties for calendar years 1997-2006. According to
    FEMA officials, the number of repetitive loss properties represents a
    snapshot in time of the number of insured repetitive loss properties as
    of the end of each calendar year. The number of claims and amount of
    losses paid out on repetitive loss properties represents the net
    cumulative total of all dollars paid out. As a result, based upon the
    configuration of the available data, we were unable to calculate the
    average loss paid out to repetitive loss properties.

    To describe the extent to which losses were paid out for hurricane-
    damaged properties, we requested information on hurricane-related
    claims from FEMA for calendar years 1997 through 2006. According to
    FEMA officials, claims are not coded or notated as being hurricane-
    related. However, FEMA does maintain a list of "significant events." To
    provide GAO data on hurricane-related claims, FEMA identified claims
    that were associated with significant events, then identified those
    events that were hurricanes. We did not verify FEMA's categorizing of
    claims as being "hurricane-related."

    Analysis of Amounts Available for Property Acquisition and Extent of
    Property Acquisition:

    To assess how the amounts available for the purchase of flood-damaged
    properties have changed over time, we obtained data from FEMA on
    funding appropriations, obligation authority brought forward, and
    funding available for the three NFIP-funded mitigation programs.
    [Footnote 57] For the Flood Mitigation Assistance (FMA) program, we
    obtained data for fiscal years 1997 through 2007. For the Repetitive
    Flood Claims (RFC) program and the Severe Repetitive Flood (SRL) pilot
    program, we obtained data for fiscal years 2006 and 2007, as both
    programs were unfunded until 2006. To assess the extent to which flood-
    damaged properties have been acquired, we also obtained data from FEMA
    on the number of projects and properties approved for acquisition and
    the number of properties actually acquired through the FMA and RFC
    programs, but not the SRL program because guidance for this program was
    not published until January 2008. FEMA officials informed us that the
    most reliable information that they could provide on property
    acquisitions was at the project level. FEMA officials also stated that
    because not all properties approved for acquisition are ultimately
    acquired, it may take several years for a project to close. Because
    FEMA's grant management system does not track project closures or
    property acquisitions in real time, the data we report is likely an
    undercount of the actual number of properties that have been acquired
    through the FMA and RFC mitigation programs.

    For the FMA program, FEMA officials obtained data on property
    acquisitions (for closed projects) that occurred from 1997 through 2003
    from FEMA's Enterprise Data Warehouse. According to FEMA officials, the
    warehouse data are extracted from the National Emergency Management
    Information System (NEMIS), the information system FEMA used to manage
    the FMA program until 2003. In 2004, FEMA transitioned from NEMIS to
    the Electronic Grants Management System (eGrants) to manage the FMA
    program. eGrants does not have project closure capabilities; therefore,
    FEMA was unable to provide any data on property acquisitions for FMA
    projects that may have closed from 2004 through 2007. While we did not
    attempt to verify the reliability of this information, we did look for
    inconsistencies between the number of properties approved for
    acquisition and the number actually acquired and followed up with FEMA
    officials for an explanation of any differences.

    The property acquisition data FEMA provided for the FMA program
    differentiated acquisition-only projects, and mixed mitigation
    projects, or projects that mitigate flood-prone properties through
    acquisition and additional mitigation strategies, such as property
    elevation. We did not attempt to verify the categorization of
    acquisition-only or mixed mitigation projects but presented them as
    provided by FEMA.

    For the RFC program, which started in 2006, FEMA provided data on
    properties acquired (through closed projects) from regional FEMA
    offices, which keep such data in electronic spreadsheets or paper
    files. We did not attempt to verify the accuracy of this information.

    Analysis of Extent to Which FEMA Followed Monitoring Procedures for
    Selected NFIP Contracts:

    To obtain information on the procedures FEMA uses to monitor its NFIP-
    related contracts, we reviewed contracts awarded in support of NFIP,
    federal acquisition regulations, a surveillance plan, performance
    standards, and the template for discrepancy reports (which FEMA
    requires a Contracting Officer to issue when a contractor fails to meet
    its performance standards). For selected contracts, we interviewed FEMA
    officials and staff with responsibility for issuing and overseeing
    contracts--the Contracting Officer, the manager of FEMA's Program
    Management Office, the Contracting Officer's Technical Representatives
    (COTR) for each contract we reviewed, and monitors--as well as
    contractors.

    To determine how effectively FEMA followed its monthly monitoring
    procedures, we focused upon the contract for FEMA's Bureau and
    Statistical Agent (BSA), which is responsible for collecting and
    reporting on financial and statistical data for the NFIP. First, we
    collected documentation of monthly monitoring reports for the period
    from October 2005 through May 2007 to determine if the reports were
    submitted by monitors to the appropriate office in a timely manner. We
    then compared these reports with the contract-specified performance
    standards to see if FEMA reported on each standard and to assess the
    extent to which FEMA determined whether the contractor met performance
    standards. We asked FEMA officials to provide an explanation of missing
    reports and explain why discrepancy reports were not required when
    performance standards were not met. In August 2007, we were provided
    with a Contract Administration Plan for the BSA contract, dated July
    25, 2007 (nearly 22 months after the contract award date) that
    documented the contract administration process.

    During the course of our work, we learned the NFIP's Direct Servicing
    Agent (DSA) contractor had received multiple discrepancy reports from
    FEMA. To determine if FEMA had followed its stated policies and
    procedures for addressing deficiencies identified through monitoring,
    we obtained copies of the discrepancy reports written for the DSA
    contractor, documentation of the contractor's responses to the reports,
    and documentation of financial penalties made against the contractor.
    We also interviewed the Contracting Officer, the manager of FEMA's
    Program Management Office, the COTRs for each contract we reviewed - as
    well as contractors.

    We conducted this performance audit in Atlanta, Georgia; Lanham,
    Maryland; and Washington, D.C., from March 2007 to June 2008 in
    accordance with generally accepted government auditing standards. Those
    standards require that we plan and perform the audit to obtain
    sufficient, appropriate evidence to provide a reasonable basis for our
    findings and conclusions based on our audit objectives. We believe that
    the evidence obtained provides a reasonable basis for our findings and
    conclusions based on our audit objectives.

    [End of section]

    Appendix II: National Flood Insurance Program Statistics, 1997-2006:

    Under the NFIP, homeowners with mortgages from federally regulated
    lenders on property in communities identified to be in high-risk flood
    zones are required to purchase flood insurance for at least the
    outstanding mortgage amount, up to the maximum policy limit of
    $250,000. NFIP covers both residential and commercial properties.
    However, residential (defined as single-and two-four family dwellings)
    and condominium properties account for more than 90 percent of all
    policies in force. Optional, lower-cost coverage also is available
    under NFIP to protect homes in zones designated as moderate-to low-
    risk. In addition to building coverage, NFIP offers policies to protect
    personal property ("contents") against flood damage, up to a maximum of
    $100,000.

    The tables and figures in this appendix provide selected information
    for the period we analyzed on:

    * policies in force;
    * insurance coverage amounts;
    * premiums;
    * claims, and;
    * losses by calendar year.

    Tables and figures (see tables 9, 10, 11, 12, 13, 14, 15, and 16 and
    figures 7 and 8) in appendix II include all data unless specified
    otherwise. In addition, we provide data on estimates for historical
    loss years. The estimates are used as one indicator to help set annual
    premiums in NFIP that would be sufficient to pay for the average level
    of losses that occurred in past years.

    Table 9: Number and Percentage Change for Policies in Force, 1997-2006:

    Calendar year: 1997;
    Number of policies in force: 3,962,077;
    Percentage change: Baseline.

    Calendar year: 1998;
    Number of policies in force: 4,114,319;
    Percentage change: 3.84%.

    Calendar year: 1999;
    Number of policies in force: 4,206,914;
    Percentage change: 2.25.

    Calendar year: 2000;
    Number of policies in force: 4,255,425;
    Percentage change: 1.15.

    Calendar year: 2001;
    Number of policies in force: 4,360,678;
    Percentage change: 2.47.

    Calendar year: 2002;
    Number of policies in force: 4,406,664;
    Percentage change: 1.05.

    Calendar year: 2003;
    Number of policies in force: 4,447,774;
    Percentage change: 0.93.

    Calendar year: 2004;
    Number of policies in force: 4,558,696;
    Percentage change: 2.49.

    Calendar year: 2005;
    Number of policies in force: 4,827,181;
    Percentage change: 5.89.

    Calendar year: 2006;
    Number of policies in force: 5,404,952;
    Percentage change: 11.97%.

    Source: GAO analysis of NFIP data.

    [End of table]

    Table 10: Maximum Level of Flood Insurance Available, Regular Program,
    1997-2006:

    Building type: Noncondominium and nonunit owner: Single-family
    dwelling;
    Amount available: Building[A]: $250,000;
    Amount available: Contents[AB]: $100,000.

    Building type: Noncondominium and nonunit owner: Two-four family
    dwelling;
    Amount available: Building[A]: $250,000;
    Amount available: Contents[AB]: $100,000.

    Building type: Noncondominium and nonunit owner: Other residential[C];
    Amount available: Building[A]: $250,000;
    Amount available: Contents[AB]: $100,000.

    Building type: Noncondominium and nonunit owner: Nonresidential[D];
    Amount available: Building[A]: $500,000;
    Amount available: Contents[AB]: $500,000.

    Source: FEMA.

    [A] The National Flood Insurance Act of 1968 (Pub. L. No. 90-448), as
    amended by the Disaster Assistance Act of 1973 (Pub. L. No. 93-234),
    specifies the maximum levels of coverage.

    [B] Limit per unit.

    [C] Hotels or motels where the normal occupancy of a guest is 6 months
    or more; a tourist home or rooming house that has more than four
    boarders.

    [D] Includes, but is not limited to small business concerns, churches,
    schools, farm buildings, poolhouses, clubhouses, recreational
    buildings, mercantile structures, agricultural and industrial
    structures, warehouses, hotels and motels with normal room rentals for
    less than 6 months' duration, and nursing homes.

    [End of table]

    Figure 7: Trends in Percentage Change and Average Amount of Insurance
    Coverage per Policy in Force, 1997-2006:

    [See PDF for image]

    This figure is a combination vertical bar and line graph depicting the
    following data:

    Calender year: 1997;
    Average insurance per policy in force: %158,125;
    Percentage change (from year to year): baseline.

    Calender year: 1998;
    Average insurance per policy in force: $163,688;
    Percentage change (from year to year): +4%.

    Calender year: 1999;
    Average insurance per policy in force: $167,162;
    Percentage change (from year to year): +2%.

    Calender year: 2000;
    Average insurance per policy in force: $168,788;
    Percentage change (from year to year): +1%;

    Calender year: 2001;
    Average insurance per policy in force: $176,797;
    Percentage change (from year to year): +5%;

    Calender year: 2002;
    Average insurance per policy in force: $178,467;
    Percentage change (from year to year): +1%.

    Calender year: 2003;
    Average insurance per policy in force: $187,709;
    Percentage change (from year to year): +5%.

    Calender year: 2004;
    Average insurance per policy in force: $198,136;
    Percentage change (from year to year): +6%.

    Calender year: 2005;
    Average insurance per policy in force: $206,501;
    Percentage change (from year to year): +4%.

    Calender year: 2006;
    Average insurance per policy in force: $213,944;
    Percentage change (from year to year): +4%.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of figure]

    Table 11: Average Amount of Insurance Coverage per Policy in Force,
    1997-2006:

    Calendar year: 1997;
    Average insurance per policy in force: $158,125;
    Annual percentage change: Baseline.

    Calendar year: 1998;
    Average insurance per policy in force: $163,688;
    Annual percentage change: 3.52%.

    Calendar year: 1999;
    Average insurance per policy in force: $167,162;
    Annual percentage change: 2.12.

    Calendar year: 2000;
    Average insurance per policy in force: $168,788;
    Annual percentage change: 0.97.

    Calendar year: 2001;
    Average insurance per policy in force: $176,797;
    Annual percentage change: 4.74.

    Calendar year: 2002;
    Average insurance per policy in force: $178,467;
    Annual percentage change: 0.94.

    Calendar year: 2003;
    Average insurance per policy in force: $187,709;
    Annual percentage change: 5.18.

    Calendar year: 2004;
    Average insurance per policy in force: $198,136;
    Annual percentage change: 5.55.

    Calendar year: 2005;
    Average insurance per policy in force: $206,501;
    Annual percentage change: 4.22.

    Calendar year: 2006;
    Average insurance per policy in force: $213,944;
    Annual percentage change: 3.60%.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    Table 12: NFIP Average Premium per Policy in Force, 1997-2006:

    Calendar year: 1997;
    Average premium per policy in force: $489.

    Calendar year: 1998;
    Average premium per policy in force: $503.

    Calendar year: 1999;
    Average premium per policy in force: $493.

    Calendar year: 2000;
    Average premium per policy in force: $468.

    Calendar year: 2001;
    Average premium per policy in force: $451.

    Calendar year: 2002;
    Average premium per policy in force: $444.

    Calendar year: 2003;
    Average premium per policy in force: $453.

    Calendar year: 2004;
    Average premium per policy in force: $465.

    Calendar year: 2005;
    Average premium per policy in force: $469.

    Calendar year: 2006;
    Average premium per policy in force: $475.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    Both the average loss per policy and the average loss per claim
    fluctuated from 1997 through 2006 (See figure 8 and table 13). The
    average loss per flood insurance claim is the amount that NFIP pays to
    settle the average claim. The loss per claim (for all flood insurance
    policy types) averaged around $19,000 from 1998 through 2000, but
    fluctuated more widely since 2001, with peaks in 2001 as a result of
    Tropical Storm Allison and in 2005 (at more than $84,000) as a result
    of the Gulf Coast Hurricanes.[Footnote 58]

    Figure 8: Number of NFIP Claims and Average Loss per Claim, 1997-2006:

    [See PDF for image]

    This figure is a combination vertical bar and line graph depicting the
    following data:

    Calendar year: 1997;
    Number of claims: 30,338;
    Average loss per claim: $22,544.

    Calendar year: 1998;
    Number of claims: 57,345;
    Average loss per claim: $19,684.

    Calendar year: 1999;
    Number of claims: 47,245;
    Average loss per claim: $19,797.

    Calendar year: 2000;
    Number of claims: 16,361;
    Average loss per claim: $18,454.

    Calendar year: 2001;
    Number of claims: 43,550;
    Average loss per claim: $33,808.

    Calendar year: 2002;
    Number of claims: 25,280;
    Average loss per claim: $18,989.

    Calendar year: 2003;
    Number of claims: 36,647;
    Average loss per claim: $22,370.

    Calendar year: 2004;
    Number of claims: 55,468;
    Average loss per claim: $40,972.

    Calendar year: 2005;
    Number of claims: 210,204;
    Average loss per claim: $84,208.

    Calendar year: 2006;
    Number of claims: 24,231;
    Average loss per claim: $25,245.

    Source: GAO analysis of NFIP data.

    Notes: Dollars are in 2006 constant dollars. We excluded loss-related
    expenses because they were not available for all of the categories of
    losses in our analysis, such as hurricane-related losses. Loss-related
    expenses, which accounted for 6-8 percent of the total losses paid out
    each year from 1997 through 2006, refer to the administrative costs
    associated with paying losses.

    [End of figure]

    Table 13: NFIP Losses, 1997-2006:

    Calendar year: 1997;
    Losses paid out: $683,929,040;
    Number of claims: 30,338;
    Average loss per claim: $22,544.

    Calendar year: 1998;
    Losses paid out: $1,128,782,402;
    Number of claims: 57,345;
    Average loss per claim: 19,684.

    Calendar year: 1999;
    Losses paid out: $935,293,635;
    Number of claims: 47,245;
    Average loss per claim: 19,797.

    Calendar year: 2000;
    Losses paid out: $301,920,782;
    Number of claims: 16,361;
    Average loss per claim: 18,454.

    Calendar year: 2001;
    Losses paid out: $1,472,324,685;
    Number of claims: 43,550;
    Average loss per claim: 33,808.

    Calendar year: 2002;
    Losses paid out: $480,039,474;
    Number of claims: 25,280;
    Average loss per claim: 18,989.

    Calendar year: 2003;
    Losses paid out: $819,783,210;
    Number of claims: 36,647;
    Average loss per claim: 22,370.

    Calendar year: 2004;
    Losses paid out: $2,272,625,290;
    Number of claims: 55,468;
    Average loss per claim: 40,972.

    Calendar year: 2005;
    Losses paid out: $17,700,798,980;
    Number of claims: 210,204;
    Average loss per claim: 84,208.

    Calendar year: 2006;
    Losses paid out: $611,711,511;
    Number of claims: 24,231;
    Average loss per claim: $25,245.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    According to FEMA, from 2000 through 2004 the average loss per flood
    insurance policy in force varied from about $82 to about $567. The
    average annual loss per policy increased significantly in 2005 as a
    result of the Gulf Coast Hurricanes to $4,189 (See table 14).

    Table 14: Average Loss per Policy in Force in Dollars, 1997-2006:

    Calendar year: 1997;
    Average loss per policy: $210.

    Calendar year: 1998;
    Average loss per policy: $324.

    Calendar year: 1999;
    Average loss per policy: $262.

    Calendar year: 2000;
    Average loss per policy: $82.

    Calendar year: 2001;
    Average loss per policy: $398.

    Calendar year: 2002;
    Average loss per policy: $129.

    Calendar year: 2003;
    Average loss per policy: $211.

    Calendar year: 2004;
    Average loss per policy: $567.

    Calendar year: 2005;
    Average loss per policy: $4,189.

    Calendar year: 2006;
    Average loss per policy: $129.

    Source: FEMA.

    Note: Trended to May 2009 dollars. Includes all loss and allocated loss
    adjustment expenses. Analyzed by the type of flood insurance policy
    that covered the claim (building, contents, or building and contents),
    NFIP data indicate that from 1997 through 2006 the average claim
    payment increased for each type of flood insurance policy (see table
    15). The average claim payment increased 13 percent for building-only
    policies, nearly double to 25 percent for contents-only policies, and
    increased by 8 percent for building and contents policies.

    [End of table]

    Table 15: Average NFIP Claim Payment by Insurance Policy Type, 1997-
    2006:

    Calendar year: 1997;
    Average claim payment: Building-only policy: $15,768;
    Average claim payment: Contents-only policy: $16,944;
    Average claim payment: Building and contents policy: $36,644.

    Calendar year: 1998;
    Average claim payment: Building-only policy: $11,786;
    Average claim payment: Contents-only policy: $15,971;
    Average claim payment: Building and contents policy: $31,656.

    Calendar year: 1999;
    Average claim payment: Building-only policy: $14,348;
    Average claim payment: Contents-only policy: $26,205;
    Average claim payment: Building and contents policy: $28,376.

    Calendar year: 2000;
    Average claim payment: Building-only policy: $13,275;
    Average claim payment: Contents-only policy: $19,665;
    Average claim payment: Building and contents policy: $23,590.

    Calendar year: 2001;
    Average claim payment: Building-only policy: $17,767;
    Average claim payment: Contents-only policy: $21,147;
    Average claim payment: Building and contents policy: $49,462.

    Calendar year: 2002;
    Average claim payment: Building-only policy: $10,865;
    Average claim payment: Contents-only policy: $11,905;
    Average claim payment: Building and contents policy: $30,429.

    Calendar year: 2003;
    Average claim payment: Building-only policy: $15,559;
    Average claim payment: Contents-only policy: $15,894;
    Average claim payment: Building and contents policy: $36,175.

    Calendar year: 2004;
    Average claim payment: Building-only policy: $26,118;
    Average claim payment: Contents-only policy: $19,809;
    Average claim payment: Building and contents policy: $65,575.

    Calendar year: 2005;
    Average claim payment: Building-only policy: $49,977;
    Average claim payment: Contents-only policy: $12,631;
    Average claim payment: Building and contents policy: $113,299.

    Calendar year: 2006;
    Average claim payment: Building-only policy: $17,762;
    Average claim payment: Contents-only policy: $21,154;
    Average claim payment: Building and contents policy: $39,719.

    Source: GAO analysis of NFIP data.

    Note: Adjusted to 2006 dollars.

    [End of table]

    As shown in table 16, the average historical loss year estimates has
    increased each year except 2001 and 2003.

    Table 16: Average Historical Loss Year Estimate for NFIP, 1997-2005:

    Calendar year: 1997;
    Average historical loss year: $622,007,303;
    Percentage change: Baseline.

    Calendar year: 1998;
    Average historical loss year: $649,349,085;
    Percentage change: 4.40%.

    Calendar year: 1999;
    Average historical loss year: $685,178,316;
    Percentage change: 5.52.

    Calendar year: 2000;
    Average historical loss year: $819,986,865;
    Percentage change: 19.67.

    Calendar year: 2001;
    Average historical loss year: $741,469,715;
    Percentage change: (9.58).

    Calendar year: 2002;
    Average historical loss year: $803,489,615;
    Percentage change: 8.36.

    Calendar year: 2003;
    Average historical loss year: $802,254,959;
    Percentage change: (0.15).

    Calendar year: 2004;
    Average historical loss year: $820,889,663;
    Percentage change: 2.32.

    Calendar year: 2005;
    Average historical loss year: $1,008,347,561;
    Percentage change: 22.84%.

    Source: GAO analysis of NFIP data.

    [End of table]

    [End of section]

    Appendix III: National Flood Insurance Program Statistics by Flood
    Zone, 1997-2006:

    FEMA's NFIP studies and maps flood risks, assigning 12 flood zone
    designations based on the risk level for flooding. We combined FEMA's
    flood zone designations into four groups relating to risk levels (see
    table 17). FEMA agreed with the way we combined the designations.

    Table 17: NFIP Flood Zone Designations:

    Designations: Flood zones B, C, X;
    Risk level: Moderate-to low-risk.

    Designations: Flood zones A, AE;
    Risk level: High-risk.

    Designations: Flood zones V, VE;
    Risk level: High-risk coastal.

    Designations: Flood zone D;
    Risk level: Undetermined risk.

    Source: FEMA.

    Note: See appendix VII for a description of each zone.

    [End of table]

    NFIP incorporates the flood zones into Flood Insurance Rate Maps--which
    also show land elevations and floodplain boundaries--and uses the maps
    to manage flood risks and help set insurance rates. More specifically,
    more than 20,300 communities participating in NFIP adopt and enforce
    the program's minimum building standards for new construction within
    identified floodplains; NFIP also uses the maps to help set flood
    insurance policy rates for properties in a given area based on the
    designated flood risks. Further, federally regulated mortgage lenders
    use the maps to identify those property owners who are required to
    purchase federal flood insurance.

    To present additional detailed information on NFIP trends, we collated
    our analyses of policies in force, insurance amounts, premiums, losses,
    and other information by flood zone in this appendix. For the purposes
    of our analysis, the tables and figures in this appendix also include
    the Emergency Program as a zone. The Emergency Program is the initial
    phase of a community's participation in the NFIP and was designed to
    provide a limited amount of insurance at less than actuarial rates. A
    community participating in the Emergency Program either does not have
    an identified and mapped flood hazard or has been provided with a Flood
    Hazard Boundary Map. According to FEMA officials, flood zone
    designations are not assigned to policyholders that are in the
    Emergency Program. As a result, FEMA captures data on these policies by
    referring to their Emergency Program status. Additionally, the FEMA
    contractor responsible for collection and analysis of NFIP data uses a
    coding designation of Zone "O" for policies for which flood zone
    information is missing or erroneous. That is, Zone "O" is not a FEMA
    flood zone but rather is used to help code data. The tables and figures
    in this appendix include Emergency Program and Zone O data unless
    otherwise indicated.

    The number of policies in force increased to the greatest extent (64
    percent) in the moderate-to low-risk flood zone and to the least extent
    (24 percent) in the high-risk. More specifically, policies in force
    increased steeply in the moderate-to low-risk flood zone following the
    Gulf Coast hurricanes in 2005 (see fig. 9 and table 18) as more
    property owners purchased flood policies. However, as mentioned
    earlier, a FEMA commissioned study found the penetration rate outside
    of the high-risk areas to be about 1 percent.

    Figure 9: Number of Policies in Force by Flood Zone, 1997-2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data:

    Number of Policies in thousands:

    Calendar year: 1997;
    High-risk (Zone A): 2,703,350;
    High-risk coastal (Zone V): 79,393;
    Moderate to low-risk (Zones B, C, and X): 1,151,375.

    Calendar year: 1998;
    High-risk (Zone A): 2,801,370;
    High-risk coastal (Zone V): 84,332;
    Moderate to low-risk (Zones B, C, and X): 1,199,030.

    Calendar year: 1999;
    High-risk (Zone A): 2,872,630;
    High-risk coastal (Zone V): 84,391;
    Moderate to low-risk (Zones B, C, and X): 1,220,850.

    Calendar year: 2000;
    High-risk (Zone A): 2,904,800;
    High-risk coastal (Zone V): 82,481;
    Moderate to low-risk (Zones B, C, and X): 1,239,450.

    Calendar year: 2001;
    High-risk (Zone A): 2,931,470;
    High-risk coastal (Zone V): 82,737;
    Moderate to low-risk (Zones B, C, and X): 1,309,200.

    Calendar year: 2002;
    High-risk (Zone A): 2,970,970;
    High-risk coastal (Zone V): 84,876;
    Moderate to low-risk (Zones B, C, and X): 1,313,550.

    Calendar year: 2003;
    High-risk (Zone A): 3,025,120;
    High-risk coastal (Zone V): 83,668;
    Moderate to low-risk (Zones B, C, and X): 1,299,480.

    Calendar year: 2004;
    High-risk (Zone A): 3,126,320;
    High-risk coastal (Zone V): 83,946;
    Moderate to low-risk (Zones B, C, and X): 1,320,110.

    Calendar year: 2005;
    High-risk (Zone A): 3,210,440;
    High-risk coastal (Zone V): 87,148;
    Moderate to low-risk (Zones B, C, and X): 1,496,360.

    Calendar year: 2006;
    High-risk (Zone A): 3,350,210;
    High-risk coastal (Zone V): 105,183;
    Moderate to low-risk (Zones B, C, and X): 1,889,240.

    Percent change from 1997 to 2006:
    High-risk (Zone A): +24%;
    High-risk coastal (Zone V): +32%;
    Moderate to low-risk (Zones B, C, and X): +64%.

    Source: GAO analysis of NFIP data.

    Note: We excluded flood zones D and O and the Emergency Program because
    they accounted for 1 percent or less of the policies in force for each
    of the years we reviewed.

    [End of figure]

    Table 18: Number of Policies in Force by Flood Zone, 1997-2006:

    Calendar year: 1997;
    High-risk (zone A): 2,703,350;
    High-risk coastal (zone V): 79,393;
    Moderate-to low-risk (zones B, C, and X): 1,151,375;
    Undetermined risk level (zone D): 5,346;
    Emergency Program[A]: 1,826;
    Flood zone O[B]: 20,787;
    Total: 3,962,077.

    Calendar year: 1998;
    High-risk (zone A): 2,801,370;
    High-risk coastal (zone V): 84,332;
    Moderate-to low-risk (zones B, C, and X): 1,199,032;
    Undetermined risk level (zone D): 4,167;
    Emergency Program[A]: 1,580;
    Flood zone O[B]: 23,838;
    Total: 4,114,319.

    Calendar year: 1999;
    High-risk (zone A): 2,872,625;
    High-risk coastal (zone V): 84,391;
    Moderate-to low-risk (zones B, C, and X): 1,220,851;
    Undetermined risk level (zone D): 4,069;
    Emergency Program[A]: 1,568;
    Flood zone O[B]: 23,410;
    Total: 4,206,914.

    Calendar year: 2000;
    High-risk (zone A): 2,904,796;
    High-risk coastal (zone V): 82,481;
    Moderate-to low-risk (zones B, C, and X): 1,239,448;
    Undetermined risk level (zone D): 3,809;
    Emergency Program[A]: 1,590;
    Flood zone O[B]: 23,301;
    Total: 4,255,425.

    Calendar year: 2001;
    High-risk (zone A): 2,931,474;
    High-risk coastal (zone V): 82,737;
    Moderate-to low-risk (zones B, C, and X): 1,309,200;
    Undetermined risk level (zone D): 3,509;
    Emergency Program[A]: 1,752;
    Flood zone O[B]: 32,006;
    Total: 4,360,678.

    Calendar year: 2002;
    High-risk (zone A): 2,970,972;
    High-risk coastal (zone V): 84,876;
    Moderate-to low-risk (zones B, C, and X): 1,313,551;
    Undetermined risk level (zone D): 3,283;
    Emergency Program[A]: 1,632;
    Flood zone O[B]: 32,350;
    Total: 4,406,664.

    Calendar year: 2003;
    High-risk (zone A): 3,025,121;
    High-risk coastal (zone V): 83,668;
    Moderate-to low-risk (zones B, C, and X): 1,299,483;
    Undetermined risk level (zone D): 2,942;
    Emergency Program[A]: 1,605;
    Flood zone O[B]: 34,955;
    Total: 4,447,774.

    Calendar year: 2004;
    High-risk (zone A): 3,126,322;
    High-risk coastal (zone V): 83,946;
    Moderate-to low-risk (zones B, C, and X): 1,320,107;
    Undetermined risk level (zone D): 2,975;
    Emergency Program[A]: 1,606;
    Flood zone O[B]: 23,740;
    Total: 4,558,696.

    Calendar year: 2005;
    High-risk (zone A): 3,210,442;
    High-risk coastal (zone V): 87,148;
    Moderate-to low-risk (zones B, C, and X): 1,496,359;
    Undetermined risk level (zone D): 2,868;
    Emergency Program[A]: 1,690;
    Flood zone O[B]: 28,672;
    Total: 4,827,179.

    Calendar year: 2006;
    High-risk (zone A): 3,350,209;
    High-risk coastal (zone V): 105,183;
    Moderate-to low-risk (zones B, C, and X): 1,889,242;
    Undetermined risk level (zone D): 3,069;
    Emergency Program[A]: 1,851;
    Flood zone O[B]: 55,398;
    Total: 5,404,952.

    Source: GAO analysis of NFIP data.

    [A] Properties in the Emergency Program have no assigned flood zone.

    [B] Flood zone "O" includes policies where zone is missing or
    erroneously coded.

    [End of table]

    The average amount of flood insurance purchased gradually increased in
    the high risk and moderate-to low-risk zones from 1997 through 2006
    (see fig. 10 and table 19). Flood-insurance policyholders in the
    moderate-to low-risk flood zones consistently purchased on average a
    higher amount of flood insurance than policyholders in the high-risk
    and high-risk coastal flood zones.[Footnote 59] As we mentioned
    previously, premiums in this zone tend to be more affordable and FEMA
    has been marketing in these areas through its FloodSmart program (see
    table 20).[Footnote 60]

    Figure 10: NFIP Average Amount of Insurance Coverage per Policy in
    Force in Selected Flood Zones, 1997-2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data:

    (Dollars in thousands):

    Calendar year: 1997;
    Average coverage in force, High-risk (zone A): $150,118;
    Average coverage in force, High-risk coastal (zone V): $157,885;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $179,429.

    Calendar year: 1998;
    Average coverage in force, High-risk (zone A): $156,334;
    Average coverage in force, High-risk coastal (zone V): $157,577;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $184,190.

    Calendar year: 1999;
    Average coverage in force, High-risk (zone A): $159,776;
    Average coverage in force, High-risk coastal (zone V): $160,599;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $187,876.

    Calendar year: 2000;
    Average coverage in force, High-risk (zone A): $161,417;
    Average coverage in force, High-risk coastal (zone V): $164,007;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $189,282.

    Calendar year: 2001;
    Average coverage in force, High-risk (zone A): $169,019;
    Average coverage in force, High-risk coastal (zone V): $169,387;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $198,725.

    Calendar year: 2002;
    Average coverage in force, High-risk (zone A): $170,990;
    Average coverage in force, High-risk coastal (zone V): $168,352;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $200,167.

    Calendar year: 2003;
    Average coverage in force, High-risk (zone A): $180,462;
    Average coverage in force, High-risk coastal (zone V): $175,881;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $210,096.

    Calendar year: 2004;
    Average coverage in force, High-risk (zone A): $187,627;
    Average coverage in force, High-risk coastal (zone V): $180,961;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $227,488.

    Calendar year: 2005;
    Average coverage in force, High-risk (zone A): $193,052;
    Average coverage in force, High-risk coastal (zone V): $183,750;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $240,352.

    Calendar year: 2006"
    Average coverage in force, High-risk (zone A): $197,893;
    Average coverage in force, High-risk coastal (zone V): $180,624;
    Average coverage in force, Moderate-to low-risk (zones B, C, and X):
    $249,949.

    Source: GAO analysis of NFIP data.

    Notes: Flood zones D, O, and Emergency Program are excluded. Dollars
    are in 2006 constant dollars.

    [End of figure]

    Table 19: NFIP Average Amount of Insurance Coverage per Policy in Force
    by Flood Zones, 1997-2006:

    Calendar year: 1997;
    High-risk (zone A): $150,118;
    High-risk coastal (zone V): $157,885;
    Moderate to low-risk (zone B, C, X): $179,429;
    Undetermined risk level zone D: $153,142;
    Emergency Program[A]: $46,608;
    Flood zone O[B]: $31,441.

    Calendar year: 1998;
    High-risk (zone A): $156,334;
    High-risk coastal (zone V): $157,577;
    Moderate to low-risk (zone B, C, X): $184,190;
    Undetermined risk level zone D: $153,937;
    Emergency Program[A]: $45,532;
    Flood zone O[B]: $27,784.

    Calendar year: 1999;
    High-risk (zone A): $159,776;
    High-risk coastal (zone V): $160,599;
    Moderate to low-risk (zone B, C, X): $187,876;
    Undetermined risk level zone D: $165,643;
    Emergency Program[A]: $44,668;
    Flood zone O[B]: $25,300.

    Calendar year: 2000;
    High-risk (zone A): $161,417;
    High-risk coastal (zone V): $164,007;
    Moderate to low-risk (zone B, C, X): $189,282;
    Undetermined risk level zone D: $168,974;
    Emergency Program[A]: $43,611;
    Flood zone O[B]: $23,011.

    Calendar year: 2001;
    High-risk (zone A): $169,019;
    High-risk coastal (zone V): $169,387;
    Moderate to low-risk (zone B, C, X): $198,725;
    Undetermined risk level zone D: $176,839;
    Emergency Program[A]: $42,231;
    Flood zone O[B]: $18,648.

    Calendar year: 2002;
    High-risk (zone A): $170,990;
    High-risk coastal (zone V): $168,352;
    Moderate to low-risk (zone B, C, X): $200,167;
    Undetermined risk level zone D: $179,675;
    Emergency Program[A]: $40,887;
    Flood zone O[B]: $17,299.

    Calendar year: 2003;
    High-risk (zone A): $180,462;
    High-risk coastal (zone V): $175,881;
    Moderate to low-risk (zone B, C, X): $210,096;
    Undetermined risk level zone D: $190,723;
    Emergency Program[A]: $40,111;
    Flood zone O[B]: $17,480.

    Calendar year: 2004;
    High-risk (zone A): $187,627;
    High-risk coastal (zone V): $180,961;
    Moderate to low-risk (zone B, C, X): $227,488;
    Undetermined risk level zone D: $186,208;
    Emergency Program[A]: $38,881;
    Flood zone O[B]: $22,833.

    Calendar year: 2005;
    High-risk (zone A): $193,052;
    High-risk coastal (zone V): $183,750;
    Moderate to low-risk (zone B, C, X): $240,352;
    Undetermined risk level zone D: $200,645;
    Emergency Program[A]: $37,610;
    Flood zone O[B]: $25,486.

    Calendar year: 2006;
    High-risk (zone A): $197,893;
    High-risk coastal (zone V): $180,624;
    Moderate to low-risk (zone B, C, X): $249,949;
    Undetermined risk level zone D: $207,744;
    Emergency Program[A]: $38,271;
    Flood zone O[B]: $26,194.

    Source: GAO analysis of NFIP data.

    [A] Properties in the Emergency Program have no assigned flood zone.

    [B] Flood zone "O" includes policies where zone is missing or
    erroneously coded.

    [End of table]

    Table 20: Average Premium Per Policy in Force by Flood Zone, 1997-2006:

    Calendar year: 1997;
    High-risk (zone A): $521;
    High-risk coastal (zone V): $1,039;
    Moderate-to low-risk (zones B, C, and X): $377;
    Undetermined risk level (zone D): $794;
    Emergency Program: $492;
    Flood zone O: $372.

    Calendar year: 1998;
    High-risk (zone A): $538;
    High-risk coastal (zone V): $1,041;
    Moderate-to low-risk (zones B, C, and X): $384;
    Undetermined risk level (zone D): $814;
    Emergency Program: $501;
    Flood zone O: $342.

    Calendar year: 1999;
    High-risk (zone A): $525;
    High-risk coastal (zone V): $1,053;
    Moderate-to low-risk (zones B, C, and X): $380;
    Undetermined risk level (zone D): $824;
    Emergency Program: $484;
    Flood zone O: $313.

    Calendar year: 2000;
    High-risk (zone A): $497;
    High-risk coastal (zone V): $1,049;
    Moderate-to low-risk (zones B, C, and X): $363;
    Undetermined risk level (zone D): $788;
    Emergency Program: $438;
    Flood zone O: $277.

    Calendar year: 2001;
    High-risk (zone A): $482;
    High-risk coastal (zone V): $1,059;
    Moderate-to low-risk (zones B, C, and X): $350;
    Undetermined risk level (zone D): $766;
    Emergency Program: $409;
    Flood zone O: $240.

    Calendar year: 2002;
    High-risk (zone A): $472;
    High-risk coastal (zone V): $1,118;
    Moderate-to low-risk (zones B, C, and X): $343;
    Undetermined risk level (zone D): $775;
    Emergency Program: $392;
    Flood zone O: $228.

    Calendar year: 2003;
    High-risk (zone A): $478;
    High-risk coastal (zone V): $1,232;
    Moderate-to low-risk (zones B, C, and X): $349;
    Undetermined risk level (zone D): $824;
    Emergency Program: $370;
    Flood zone O: $262.

    Calendar year: 2004;
    High-risk (zone A): $492;
    High-risk coastal (zone V): $1,343;
    Moderate-to low-risk (zones B, C, and X): $344;
    Undetermined risk level (zone D): $842;
    Emergency Program: $353;
    Flood zone O: $476.

    Calendar year: 2005;
    High-risk (zone A): $502;
    High-risk coastal (zone V): $1,398;
    Moderate-to low-risk (zones B, C, and X): $340;
    Undetermined risk level (zone D): $912;
    Emergency Program: $340;
    Flood zone O: $572.

    Calendar year: 2006;
    High-risk (zone A): $521;
    High-risk coastal (zone V): $1,463;
    Moderate-to low-risk (zones B, C, and X): $336;
    Undetermined risk level (zone D): $980;
    Emergency Program: $348;
    Flood zone O: $600.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    Approximately 73 percent of the $26 billion in losses paid from 1997
    through 2006 were for properties in the high-risk flood zone, followed
    by 24 percent in moderate-to low-risk zones, and 3 percent for
    properties in the high-risk coastal zones.[Footnote 61] Over time,
    losses consistently were highest in the high-risk zone. As figure 11
    illustrates, for all three of the flood zones analyzed, losses peaked
    in 2005 as a result of the Gulf Coast hurricanes. See table 21 for
    supporting data.

    Figure 11: NFIP Losses Paid Out by Flood Zones, 1997-2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data
    (dollars in billions):

    Calendar year: 1997;
    High-risk (zone A): $0.46;
    High-risk coastal (zone V): $0.001;
    Moderate-to low-risk (zones B, C, and X): $0.21.

    Calendar year: 1998;
    High-risk (zone A): $0.72;
    High-risk coastal (zone V): $0.08;
    Moderate-to low-risk (zones B, C, and X): $0.30.

    Calendar year: 1999;
    High-risk (zone A): $0.70;
    High-risk coastal (zone V): $0.03;
    Moderate-to low-risk (zones B, C, and X): $0.20.

    Calendar year: 2000;
    High-risk (zone A): $0.21;
    High-risk coastal (zone V): $0.001;
    Moderate-to low-risk (zones B, C, and X): $0.08.

    Calendar year: 2001;
    High-risk (zone A): $0.80;
    High-risk coastal (zone V): $0.01;
    Moderate-to low-risk (zones B, C, and X): $0.66.

    Calendar year: 2002;
    High-risk (zone A): $0.31;
    High-risk coastal (zone V): $0.02;
    Moderate-to low-risk (zones B, C, and X): $0.14.

    Calendar year: 2003;
    High-risk (zone A): $0.64;
    High-risk coastal (zone V): $0.02;
    Moderate-to low-risk (zones B, C, and X): $0.15.

    Calendar year: 2004;
    High-risk (zone A): $1.56;
    High-risk coastal (zone V): $0.18;
    Moderate-to low-risk (zones B, C, and X): $0.52.

    Calendar year: 2005;
    High-risk (zone A): $13.51;
    High-risk coastal (zone V): $0.35;
    Moderate-to low-risk (zones B, C, and X): $3.79.

    Calendar year: 2006;
    High-risk (zone A): $0.38 ;
    High-risk coastal (zone V): $0.01;
    Moderate-to low-risk (zones B, C, and X): $0.22.

    Source: GAO analysis of NFIP data.

    Notes: We excluded flood zones D, O, and the Emergency Program. Loss-
    related expenses, which are administrative costs associated with paying
    losses, are excluded. Dollars are in 2006 constant dollars.

    [End of figure]

    Table 21: NFIP Losses Paid Out by Flood Zones, 1997-2006:

    Calendar year: 1997;
    High-risk (zone A): $456,555,698;
    High-risk coastal (zone V): $6,276,654;
    Moderate-to low-risk (zones B, C, and X): $207,839,169;
    Undetermined risk level (zone D): $7,045,459;
    Emergency Program: $2,329,301;
    Flood zone O: $3,882,759.

    Calendar year: 1998;
    High-risk (zone A): $722,519,934;
    High-risk coastal (zone V): $83,150,008;
    Moderate-to low-risk (zones B, C, and X): $300,483,030;
    Undetermined risk level (zone D): $5,533,197;
    Emergency Program: $902,569;
    Flood zone O: $16,193,665.

    Calendar year: 1999;
    High-risk (zone A): $698,374,286;
    High-risk coastal (zone V): $28,006,656;
    Moderate-to low-risk (zones B, C, and X): $200,253,001;
    Undetermined risk level (zone D): $2,199,064;
    Emergency Program: $529,447;
    Flood zone O: $5,931,182.

    Calendar year: 2000;
    High-risk (zone A): $213,622,872;
    High-risk coastal (zone V): $1,329,540;
    Moderate-to low-risk (zones B, C, and X): $83,029,277;
    Undetermined risk level (zone D): $314,843;
    Emergency Program: $190,356;
    Flood zone O: $3,433,894.

    Calendar year: 2001;
    High-risk (zone A): $797,975,329;
    High-risk coastal (zone V): $7,536,546;
    Moderate-to low-risk (zones B, C, and X): $660,967,216;
    Undetermined risk level (zone D): $1,298,790;
    Emergency Program: $1,078,207;
    Flood zone O: $3,468,596.

    Calendar year: 2002;
    High-risk (zone A): $307,332,791;
    High-risk coastal (zone V): $24,553,984;
    Moderate-to low-risk (zones B, C, and X): $140,549,419;
    Undetermined risk level (zone D): $571,768;
    Emergency Program: $1,728,792;
    Flood zone O: $5,302,721.

    Calendar year: 2003;
    High-risk (zone A): $642,742,686;
    High-risk coastal (zone V): $26,054,254;
    Moderate-to low-risk (zones B, C, and X): $147,100,294;
    Undetermined risk level (zone D): $473,973;
    Emergency Program: $297,744;
    Flood zone O: $3,114,258.

    Calendar year: 2004;
    High-risk (zone A): $1,563,110,977;
    High-risk coastal (zone V): $181,973,420;
    Moderate-to low-risk (zones B, C, and X): $521,236,606;
    Undetermined risk level (zone D): $790,689;
    Emergency Program: $758,046;
    Flood zone O: $4,755,553.

    Calendar year: 2005;
    High-risk (zone A): $13,512,906,531;
    High-risk coastal (zone V): $359,573,054;
    Moderate-to low-risk (zones B, C, and X): $3,789,992,998;
    Undetermined risk level (zone D): $2,158,546;
    Emergency Program: $513,176;
    Flood zone O: $35,654,675.

    Calendar year: 2006;
    High-risk (zone A): $381,933,348;
    High-risk coastal (zone V): $3,133,077;
    Moderate-to low-risk (zones B, C, and X): $221,502,820;
    Undetermined risk level (zone D): $739,772;
    Emergency Program: $289,475;
    Flood zone O: $4,113,019.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    For single-and two-four family homes, average losses per claim were
    generally highest in the high-risk zone from 1997 to 2006 (see fig. 12
    and table 22). For all three of the flood zones analyzed average losses
    peaked in 2005.

    Figure 12: NFIP Residential (Single-and Two-Four Family) Average Loss
    per Claim by Flood Zone for Selected Flood Zones, 1997-2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data
    (dollars in thousands):

    Calendar year: 1997;
    High-risk (zone A): $15,224.80;
    High-risk coastal (zone V): $8,839.63;
    Moderate-to low-risk (zones B, C, and X): $14,639.10.

    Calendar year: 1998;
    High-risk (zone A): $13,341;
    High-risk coastal (zone V): $13,026.40;
    Moderate-to low-risk (zones B, C, and X): $13,936.40.

    Calendar year: 1999;
    High-risk (zone A): $11,993.20;
    High-risk coastal (zone V): $13,862.60;
    Moderate-to low-risk (zones B, C, and X): $13,656.90.

    Calendar year: 2000;
    High-risk (zone A): $10,395.5;
    High-risk coastal (zone V): $9,243.24;
    Moderate-to low-risk (zones B, C, and X): $14,065.5.

    Calendar year: 2001;
    High-risk (zone A): $27,499.10;
    High-risk coastal (zone V): $11,153.60;
    Moderate-to low-risk (zones B, C, and X): $26,749.70.

    Calendar year: 2002;
    High-risk (zone A): $15,201.30;
    High-risk coastal (zone V): $14,179.80;
    Moderate-to low-risk (zones B, C, and X): $15,234.50.

    Calendar year: 2003;
    High-risk (zone A): $18,568.60;
    High-risk coastal (zone V): $18,505.50;
    Moderate-to low-risk (zones B, C, and X): $14,424.50.

    Calendar year: 2004;
    High-risk (zone A): $31,256.70;
    High-risk coastal (zone V): $44,592.50;
    Moderate-to low-risk (zones B, C, and X): $27,239.50.

    Calendar year: 2005;
    High-risk (zone A): $79,681;
    High-risk coastal (zone V): $51,802.50;
    Moderate-to low-risk (zones B, C, and X): $78,556.90.

    Calendar year: 2006;
    High-risk (zone A): $19,842.80;
    High-risk coastal (zone V): $15,200.60;
    Moderate-to low-risk (zones B, C, and X): $20,712.70.

    Source: GAO analysis of NFIP data.

    Notes: Flood zones D, O, and the Emergency Program are excluded.
    Dollars are in 2006 constant dollars. Data are for calendar years 1997-
    2006.

    [End of figure]

    Table 22: NFIP Residential (Single-and Two-Four Family) Average Loss
    per Claim by Flood Zone, 1997-2006:

    Calendar year: 1997;
    High-risk (zone A): $20,043;
    High-risk coastal (zone V): $11,637;
    Moderate-to low-risk (zones B, C, and X): $19,272;
    Flood zone D: $40,197;
    Emergency Program: $15,945;
    Flood zone O: $17,945.

    Calendar year: 1998;
    High-risk (zone A): $17,004;
    High-risk coastal (zone V): $16,603;
    Moderate-to low-risk (zones B, C, and X): $17,763;
    Flood zone D: $38,567;
    Emergency Program: $16,473;
    Flood zone O: $10,361.

    Calendar year: 1999;
    High-risk (zone A): $14,862;
    High-risk coastal (zone V): $17,178;
    Moderate-to low-risk (zones B, C, and X): $16,924;
    Flood zone D: $45,761;
    Emergency Program: $16,103;
    Flood zone O: $10,672.

    Calendar year: 2000;
    High-risk (zone A): $12,476;
    High-risk coastal (zone V): $11,093;
    Moderate-to low-risk (zones B, C, and X): $16,880;
    Flood zone D: $17,741;
    Emergency Program: $10,985;
    Flood zone O: $7,744.

    Calendar year: 2001;
    High-risk (zone A): $31,817;
    High-risk coastal (zone V): $12,905;
    Moderate-to low-risk (zones B, C, and X): $30,950;
    Flood zone D: $41,505;
    Emergency Program: $24,514;
    Flood zone O: $9,942.

    Calendar year: 2002;
    High-risk (zone A): $16,954;
    High-risk coastal (zone V): $15,815;
    Moderate-to low-risk (zones B, C, and X): $16,991;
    Flood zone D: $28,054;
    Emergency Program: $23,132;
    Flood zone O: $6,555.

    Calendar year: 2003;
    High-risk (zone A): $20,224;
    High-risk coastal (zone V): $20,155;
    Moderate-to low-risk (zones B, C, and X): $15,711;
    Flood zone D: $39,711;
    Emergency Program: $14,178;
    Flood zone O: $7,671.

    Calendar year: 2004;
    High-risk (zone A): $33,157;
    High-risk coastal (zone V): $47,303;
    Moderate-to low-risk (zones B, C, and X): $28,895;
    Flood zone D: $31,728;
    Emergency Program: $17,263;
    Flood zone O: $7,860.

    Calendar year: 2005;
    High-risk (zone A): $82,415;
    High-risk coastal (zone V): $53,580;
    Moderate-to low-risk (zones B, C, and X): $81,253;
    Flood zone D: $33,396;
    Emergency Program: $18,083;
    Flood zone O: $13,966.

    Calendar year: 2006;
    High-risk (zone A): $19,843;
    High-risk coastal (zone V): $15,201;
    Moderate-to low-risk (zones B, C, and X): $20,713;
    Flood zone D: $40,074;
    Emergency Program: $19,838;
    Flood zone O: $14,134.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars.

    [End of table]

    [End of section]

    Appendix IV: National Flood Insurance Program Statistics by Occupancy
    Type, 1997-2006:

    Policies under the NFIP insure buildings categorized into five
    different occupancy types: single-family, two-four family unit,
    condominium, other residential, and nonresidential. Other residential
    includes long-stay hotels or motels and rooming houses. Nonresidential
    includes small businesses, churches, schools, warehouses, short-stay
    hotels and motels, and nursing homes. We focused our analysis on the
    residential (single-and two-four family units) and condominium
    occupancy types because more than 90 percent of the policies in force
    each year (from 1997 through 2006) were for those occupancy types. Both
    the owners of units and condominium associations can take out policies.
    That is, while a condominium unit owner may purchase flood insurance
    for the unit, a condominium association could purchase coverage for all
    of the units in a condominium community.

    To present additional detailed information on NFIP policy trends, we
    collated our analysis of policies in force, insurance amounts,
    premiums, and losses by occupancy type. In this appendix, residential
    includes all single-and two-four family residences, excluding
    condominiums. Condominium includes policies that are purchased by
    condominium associations, which may cover all residential units within
    that association, as well as policies purchased by individual unit
    owners. The Emergency Program is separated out, or excluded, in some
    tables since it is through this program that properties enter NFIP, and
    participation in this program is temporary. Statistics by occupancy
    type are presented in tables 23, 24, 25, 26, and 27 and figures 13 and
    14.

    Table 23: NFIP Policies in Force--Percentage for Residential (Single-
    and Two-Four Family) Properties and Condominiums, 1997-2006:

    Calendar year: 1997;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 70%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 23%.

    Calendar year: 1998;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 70%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 24%.

    Calendar year: 1999;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 71%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 23%.

    Calendar year: 2000;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 72%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 22%.

    Calendar year: 2001;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 72%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 22%.

    Calendar year: 2002;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 72%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 22%.

    Calendar year: 2003;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 72%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 22%.

    Calendar year: 2004;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 71%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 23%.

    Calendar year: 2005;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 7%1;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 23%.

    Calendar year: 2006;
    Percentage of total (residential and condominiums): 94%;
    Compared with total policies in force, Residential percentage of
    policies in force: 71%;
    Compared with total policies in force, Condominiums percentage of
    policies in force: 23%.

    Source: GAO analysis of NFIP data.

    Note: Percentages for residential and condominiums may not add to the
    total because of rounding. Data includes the Emergency Program.

    [End of table]

    Table 24: Average Amount of Insurance Coverage by Occupancy Type, 1997-
    2006:

    Calendar year: 1997;
    Residential (single-and two-four family): $169,593;
    Condominiums: $98,166.

    Calendar year: 1998;
    Residential (single-and two-four family): $177,709;
    Condominiums: $94,690.

    Calendar year: 1999;
    Residential (single-and two-four family): $180,864;
    Condominiums: $95,960.

    Calendar year: 2000;
    Residential (single-and two-four family): $181,788;
    Condominiums: $96,968.

    Calendar year: 2001;
    Residential (single-and two-four family): $190,446;
    Condominiums: $100,113.

    Calendar year: 2002;
    Residential (single-and two-four family): $192,131;
    Condominiums: $101,936.

    Calendar year: 2003;
    Residential (single-and two-four family): $203,622;
    Condominiums: $104,980.

    Calendar year: 2004;
    Residential (single-and two-four family): $217,068;
    Condominiums: $108,809.

    Calendar year: 2005;
    Residential (single-and two-four family): $227,172;
    Condominiums: $114,707.

    Calendar year: 2006;
    Residential (single-and two-four family): $235,424;
    Condominiums: $120,599.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars. Data includes the Emergency
    Program.

    [End of table]

    Table 25: Average Premium by Occupancy Type, 1997-2006:

    Calendar year: 1997;
    Residential (single-and two-four family): $522;
    Condominiums: $216.

    Calendar year: 1998;
    Residential (single-and two-four family): $538;
    Condominiums: $216.

    Calendar year: 1999;
    Residential (single-and two-four family): $523;
    Condominiums: $209.

    Calendar year: 2000;
    Residential (single-and two-four family): 493;
    Condominiums: 191.

    Calendar year: 2001;
    Residential (single-and two-four family): $474;
    Condominiums: $174.

    Calendar year: 2002;
    Residential (single-and two-four family): $467;
    Condominiums: $164.

    Calendar year: 2003;
    Residential (single-and two-four family): $479;
    Condominiums: $163.

    Calendar year: 2004;
    Residential (single-and two-four family): $494;
    Condominiums: $165.

    Calendar year: 2005;
    Residential (single-and two-four family): $497;
    Condominiums: $174.

    Calendar year: 2006;
    Residential (single-and two-four family): $494;
    Condominiums: $201.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars. Data includes the Emergency
    Program.

    [End of table]

    Figure 13: Percentage of Losses Attributable to Residential (Single-and
    Two-Four Family) Properties and Condominiums, 1997-2006:

    [See PDF for image]

    This figure is a stacked vertical bar graph depicting the following
    data:

    Calendar year: 1997;
    Residential (single and two-four family): 75.85%;
    Condominium: 1.03%;
    Total: 76.88%.

    Calendar year: 1998;
    Residential (single and two-four family): 75.4%;
    Condominium: 3.16%;
    Total: 78,54%.

    Calendar year: 1999;
    Residential (single and two-four family): 67.8%;
    Condominium: 3.73%;
    Total: 71.53%.

    Calendar year: 2000;
    Residential (single and two-four family): 61.16%;
    Condominium: 6.26%;
    Total: 67.42%.

    Calendar year: 2001;
    Residential (single and two-four family): 83.34%;
    Condominium: 2.04%;
    Total: 85.38%.

    Calendar year: 2002;
    Residential (single and two-four family): 76.8%;
    Condominium: 1.36%;
    Total: 78.16%.

    Calendar year: 2003;
    Residential (single and two-four family): 76.29%;
    Condominium: 1.71%;
    Total: 78%.

    Calendar year: 2004;
    Residential (single and two-four family): 65.56%;
    Condominium: 17.4%;
    Total: 82.96%.

    Calendar year: 2005;
    Residential (single and two-four family): 87.36%;
    Condominium: 1.72%;
    Total: 89.08%.

    Calendar year: 2006;
    Residential (single and two-four family): 68.93%;
    Condominium: 2.69%;
    Total: 91.52%

    Calendar year: 10-year total;
    Residential (single and two-four family): 82.5%;
    Condominium: 3.27%;
    Total: 85.77%.

    Source: GAO analysis of NFIP data.

    Notes: Other residential and nonresidential occupancy types and the
    Emergency Program are excluded. Expenses associated with losses are
    excluded. Data are for calendar years 1997-2006.

    [End of figure]

    Table 26: Losses by Occupancy Type, 1997-2006:

    Calendar year: 1997;
    Residential (single-and two-four family): $518,753,614;
    Condominium: $7,078,057;
    Other residential: $19,378,331;
    Nonresidential: $136,389,738;
    Emergency Program: $2,329,301;
    All: $683,929,040.

    Calendar year: 1998;
    Residential (single-and two-four family): $851,053,810;
    Condominium: $35,676,473;
    Other residential: $22,063,163;
    Nonresidential: $219,086,388;
    Emergency Program: $902,569;
    All: $1,128,782,402.

    Calendar year: 1999;
    Residential (single-and two-four family): $634,106,104;
    Condominium: $34,878,457;
    Other residential: $35,014,809;
    Nonresidential: $230,764,818;
    Emergency Program: $529,447;
    All: $935,293,635.

    Calendar year: 2000;
    Residential (single-and two-four family): $184,654,279;
    Condominium: $18,906,280;
    Other residential: $13,817,485;
    Nonresidential: $84,352,381;
    Emergency Program: $190,356;
    All: $301,920,782.

    Calendar year: 2001;
    Residential (single-and two-four family): $1,227,105,081;
    Condominium: $30,076,589;
    Other residential: $44,185,525;
    Nonresidential: $169,879,283;
    Emergency Program: $1,078,207;
    All: $1,472,324,685.

    Calendar year: 2002;
    Residential (single-and two-four family): $368,650,564;
    Condominium: $6,551,591;
    Other residential: $14,878,813;
    Nonresidential: $88,229,715;
    Emergency Program: $1,728,792;
    All: $480,039,474.

    Calendar year: 2003;
    Residential (single-and two-four family): $625,416,917;
    Condominium: $14,010,311;
    Other residential: $29,118,069;
    Nonresidential: $150,940,169;
    Emergency Program: $297,744;
    All: $819,783,210.

    Calendar year: 2004;
    Residential (single-and two-four family): $1,489,992,465;
    Condominium: $395,329,908;
    Other residential: $35,734,052;
    Nonresidential: $350,810,820;
    Emergency Program: $758,046;
    All: $2,272,625,290.

    Calendar year: 2005;
    Residential (single-and two-four family): $15,463,740,780;
    Condominium: $303,945,881;
    Other residential: $349,603,946;
    Nonresidential: $1,582,995,197;
    Emergency Program: $513,176;
    All: $17,700,798,980.

    Calendar year: 2006;
    Residential (single-and two-four family): $421,637,712;
    Condominium: $16,454,476;
    Other residential: $20,620,278;
    Nonresidential: $152,709,571;
    Emergency Program: $289,475;
    All: $611,711,511.

    Source: GAO analysis of NFIP data.

    Notes: Expenses associated with losses are excluded. Dollars are in
    2006 constant dollars. Flood insurance policies that are purchased
    through the Emergency Program are not designated by flood zone. As a
    result, we include a separate column on policies purchased through the
    Emergency Program to provide complete data on losses.

    [End of table]

    Figure 14: NFIP Average Loss per Claim for Residential (Single-and Two-
    Four Family) Properties and Condominiums, 1997-2006:

    [See PDF for image]

    This figure is a multiple line graph depicting the following data
    (dollars in thousands):

    Calendar year: 1997;
    Residential (single-and two-four family): $19,767;
    Condominium: $21,449.

    Calendar year: 1998;
    Residential (single-and two-four family): $17,009;
    Condominium: $25,054.

    Calendar year: 1999;
    Residential (single-and two-four family): $15,267;
    Condominium: $31,593.

    Calendar year: 2000;
    Residential (single-and two-four family): $13,389;
    Condominium: $36,012.

    Calendar year: 2001;
    Residential (single-and two-four family): $31,104;
    Condominium: $52,859.

    Calendar year: 2002;
    Residential (single-and two-four family): $16,555;
    Condominium: $22,592.

    Calendar year: 2003;
    Residential (single-and two-four family): $19,178;
    Condominium: $29,067.

    Calendar year: 2004;
    Residential (single-and two-four family): $32,485;
    Condominium: $121,715.

    Calendar year: 2005;
    Residential (single-and two-four family): $80,486;
    Condominium: $91,827.

    Calendar year: 2006;
    Residential (single-and two-four family): $20,059;
    Condominium: $45,707.

    Notes: Condominium data includes Residential Condominium Building
    Association Policies (RCBAP), which cover entire condominium buildings.
    Dollars are in 2006 constant dollars. Other residential and
    nonresidential occupancy types and Emergency Program data are excluded.
    Data are for calendar years 1997-2006.

    [End of figure]

    Table 27: NFIP Average Loss per Claim by Occupancy Type, 1997-2006:

    Calendar year: 1997;
    Residential (single-and two-four family): $19,767;
    Condominiums: $21,449.

    Calendar year: 1998;
    Residential (single-and two-four family): $17,009;
    Condominiums: $25,054.

    Calendar year: 1999;
    Residential (single-and two-four family): $15,267;
    Condominiums: $31,593.

    Calendar year: 2000;
    Residential (single-and two-four family): $13,389;
    Condominiums: $36,012.

    Calendar year: 2001;
    Residential (single-and two-four family): $31,104;
    Condominiums: $52,859.

    Calendar year: 2002;
    Residential (single-and two-four family): $16,555;
    Condominiums: $22,592.

    Calendar year: 2003;
    Residential (single-and two-four family): $19,178;
    Condominiums: $29,067.

    Calendar year: 2004;
    Residential (single-and two-four family): $32,485;
    Condominiums: $121,715.

    Calendar year: 2005;
    Residential (single-and two-four family): $80,486;
    Condominiums: $91,827.

    Calendar year: 2006;
    Residential (single-and two-four family): $20,059;
    Condominiums: $45,707.

    Source: GAO analysis of NFIP data.

    Note: Dollars are in 2006 constant dollars. Data includes the Emergency
    Program.

    [End of table]

    [End of section]

    Appendix V: National Flood Insurance Program Statistics for Hurricane-
    Related Losses and Repetitive Loss Properties:

    This appendix presents statistics related to the percentage of losses
    under the program attributable to hurricanes (see table 28), as well as
    certain properties insured under NFIP of FEMA (see table 29).
    Repetitive loss properties are those with two or more flood insurance
    claims filed against them in a 10-year period. FEMA does not collect
    annual data on the number of repetitive loss properties, the number of
    losses paid out on repetitive loss properties, or the total amount paid
    out on repetitive loss properties. Rather, FEMA data on repetitive loss
    properties are cumulative. For every loss that NFIP pays out,
    information is collected on the reason for the flood loss, including
    whether the loss was related to a significant flooding event. To
    determine whether losses were related to a hurricane, FEMA's BSA (the
    contractor responsible for collecting, analyzing, and reporting NFIP
    financial and statistical data) identified the significant flooding
    events that were hurricanes from 1997 through 2006.

    Table 28: Percentage of NFIP Losses Attributable to Hurricanes, 1997-
    2006:

    Calendar year: 1997;
    Losses attributable to hurricanes: $16,688,745;
    Total NFIP losses: $683,929,040;
    Percentage of losses attributable to hurricanes: 2.4%.

    Calendar year: 1998;
    Losses attributable to hurricanes: $315,397,036;
    Total NFIP losses: $1,128,782,402;
    Percentage of losses attributable to hurricanes: 27.9%.

    Calendar year: 1999;
    Losses attributable to hurricanes: $757,332,268;
    Total NFIP losses: $935,293,635;
    Percentage of losses attributable to hurricanes: 81.0%.

    Calendar year: 2000;
    Losses attributable to hurricanes: $3,402,022;
    Total NFIP losses: $301,920,782;
    Percentage of losses attributable to hurricanes: 1.1%.

    Calendar year: 2001;
    Losses attributable to hurricanes: $463,178;
    Total NFIP losses: $1,472,324,685;
    Percentage of losses attributable to hurricanes: <1%.

    Calendar year: 2002;
    Losses attributable to hurricanes: 40,277,150;
    Total NFIP losses: 480,039,474;
    Percentage of losses attributable to hurricanes: 8.4%.

    Calendar year: 2003;
    Losses attributable to hurricanes: $529,584,857;
    Total NFIP losses: $819,783,210;
    Percentage of losses attributable to hurricanes: 64.6%.

    Calendar year: 2004;
    Losses attributable to hurricanes: $1,927,168,199;
    Total NFIP losses: $2,272,625,290;
    Percentage of losses attributable to hurricanes: 84.8%.

    Calendar year: 2005;
    Losses attributable to hurricanes: $17,223,480,732;
    Total NFIP losses: $17,700,744,265;
    Percentage of losses attributable to hurricanes: 97.3%.

    Calendar year: 2006;
    Losses attributable to hurricanes: $39,002,051;
    Total NFIP losses: $611,725,757;
    Percentage of losses attributable to hurricanes: 6.4%.

    Calendar year: Total;
    Losses attributable to hurricanes: $20,852,796,237;
    Total NFIP losses: $26,407,168,541;
    Percentage of losses attributable to hurricanes: 79.0%.

    Source: GAO analysis of NFIP data.

    Note: Dollars are adjusted to 2006 constant dollars.

    [End of table]

    Table 29: Net Cumulative Total Repetitive Loss (RL) Properties, Net
    Cumulative Number of Losses for RL Properties, and Net Cumulative Total
    Losses Paid Out for RL Properties, 1997-2006:

    Calendar year: 1997;
    Total number of properties designated as RL: 76,108;
    Total number of losses for RL properties: 207,550;
    Total losses paid out for RL properties: $3,693,755,135.

    Calendar year: 1998;
    Total number of properties designated as RL: $83,374;
    Total number of losses for RL properties: $229,895;
    Total losses paid out for RL properties: $4,097,632,582.

    Calendar year: 1999;
    Total number of properties designated as RL: $85,234;
    Total number of losses for RL properties: $235,649;
    Total losses paid out for RL properties: $4,173,082,273.

    Calendar year: 2000;
    Total number of properties designated as RL: $91,731;
    Total number of losses for RL properties: $254,313;
    Total losses paid out for RL properties: $4,586,465,818.

    Calendar year: 2001;
    Total number of properties designated as RL: $95,177;
    Total number of losses for RL properties: $264,024;
    Total losses paid out for RL properties: $4,831,966,271.

    Calendar year: 2002;
    Total number of properties designated as RL: $97,881;
    Total number of losses for RL properties: $271,945;
    Total losses paid out for RL properties: $4,900,612,408.

    Calendar year: 2003;
    Total number of properties designated as RL: $101,173;
    Total number of losses for RL properties: $281,426;
    Total losses paid out for RL properties: $5,005,016,348.

    Calendar year: 2004;
    Total number of properties designated as RL: $107,041;
    Total number of losses for RL properties: $297,377;
    Total losses paid out for RL properties: $5,340,144,550.

    Calendar year: 2005;
    Total number of properties designated as RL: $119,292;
    Total number of losses for RL properties: $333,756;
    Total losses paid out for RL properties: $7,227,098,779.

    Calendar year: 2006;
    Total number of properties designated as RL: 125,239;
    Total number of losses for RL properties: 354,010;
    Total losses paid out for RL properties: $7,940,022,187.

    Source: GAO analysis of NFIP data.

    Note: Dollars are adjusted to 2006 constant dollars.

    [End of table]

    [End of section]

    Appendix VI: Flood-Related Damages:

    Under NFIP flood insurance can be purchased through policies with
    building-only coverage, contents-only coverage, or both building and
    contents coverage. For each coverage type, a policyholder can purchase
    up to the maximum amount of coverage, depending on the type of
    structure that they are insuring, and whether it is in the Emergency or
    Regular Program.[Footnote 62] NFIP also offers group flood insurance
    policies to recipients of disaster assistance (generally low-income
    persons), which provide coverage for 3 years following a flood loss. We
    excluded data on these policies from our analysis because they have
    coverage limits that differ from other flood insurance policies.

    According to FEMA information, data on the amount of flood-related
    damages that insured properties received are available for more than 99
    percent of all claims filed from 1997 through 2004, and 97 percent of
    all claims filed in 2005 for policies that were purchased at the
    insurance limit. However, the reliability of available damage data is
    uncertain. According to FEMA guidance found in the NFIP Transaction
    Record Reporting and Processing (TRRP) Plan for the Write Your Own
    (WYO) Program, WYO insurers are required to report "Total Building
    Damages" and "Total Content Damages" to NFIP. Furthermore, FEMA
    guidance states that the amounts WYO insurers report to NFIP are not
    limited to the amount of insurance coverage on the property. However, a
    2006 report that FEMA commissioned on NFIP states that in cases where
    the amount of flood insurance carried was less than the amount of
    damages, adjusters did not determine losses above the limit. Rather,
    the adjusters only recorded the losses needed to reach the limit.
    [Footnote 63] Therefore, the use of FEMA data to determine the number
    of claims and the dollars by which damages exceed the insurance limit
    (tables 30 to 37) is likely to result in an undercount.

    For single-and two-four family flood insurance policies with building-
    only, or both building and contents coverage that were purchased at the
    insurance limit, damage data were available (see table 30) for more
    than 99 percent of claims filed from 1997 through 2004 and damage data
    was available for about 98 percent of claims filed for policies with
    contents-only coverage. For policies with building-only, or both
    building and contents coverage, damage data were available (see table
    31) for almost all claims filed in 2005, damage data was available for
    about 33 percent of the claims filed with contents-only coverage.

    Table 30: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at the Insurance Limit, 1997-2004:

    Building coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 11,227;
    Claims for which damage data are available: 11,144;
    Percentage of claims for which damage data are available[A]: 99.3%.

    Building coverage: Other residential;
    Claims for policies purchased at the insurance limit: 1,454;
    Claims for which damage data are available: 1,444;
    Percentage of claims for which damage data are available[A]: 99.3.

    Building coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 1,999;
    Claims for which damage data are available: 1,973;
    Percentage of claims for which damage data are available[A]: 98.7.

    Building coverage: Condominium;
    Claims for policies purchased at the insurance limit: 269;
    Claims for which damage data are available: 269;
    Percentage of claims for which damage data are available[A]: 100.0.

    Contents coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 352;
    Claims for which damage data are available: 344;
    Percentage of claims for which damage data are available[A]: 97.7.

    Contents coverage: Other residential;
    Claims for policies purchased at the insurance limit: 4;
    Claims for which damage data are available: 4;
    Percentage of claims for which damage data are available[A]: [B].

    Contents coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 303;
    Claims for which damage data are available: 300;
    Percentage of claims for which damage data are available[A]: 99.0.

    Contents coverage: Condominium;
    Claims for policies purchased at the insurance limit: 22;
    Claims for which damage data are available: 22;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 8,854;
    Claims for which damage data are available: 8,848;
    Percentage of claims for which damage data are available[A]: 99.9.

    Building and contents coverage: Other residential;
    Claims for policies purchased at the insurance limit: 117;
    Claims for which damage data are available: 117;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 1,210;
    Claims for which damage data are available: 1,209;
    Percentage of claims for which damage data are available[A]: 99.9.

    Building and contents coverage: Condominium;
    Claims for policies purchased at the insurance limit: 109;
    Claims for which damage data are available: 109;
    Percentage of claims for which damage data are available[A]: 100.0.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at the insurance limit. Data are for
    calendar years 1997-2004.

    [A] We derived the percentages by dividing the number of claims for
    which damage data are available by the total number of claims (for
    policies purchased at the insurance limit).

    [B] Too few values to present percentage.

    [End of table]

    Table 31: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at the Insurance Limit, 2005:

    Building coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 8,592;
    Claims for which damage data are available: 8,578;
    Percentage of claims for which damage data are available[A]: 99.8%.

    Building coverage: Other residential;
    Claims for policies purchased at the insurance limit: 1,154;
    Claims for which damage data are available: 1,154;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 1,144;
    Claims for which damage data are available: 1,138;
    Percentage of claims for which damage data are available[A]: 99.5.

    Building coverage: Condominium;
    Claims for policies purchased at the insurance limit: 178;
    Claims for which damage data are available: 177;
    Percentage of claims for which damage data are available[A]: 99.4.

    Contents coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 1,287;
    Claims for which damage data are available: 427;
    Percentage of claims for which damage data are available[A]: 33.2.

    Contents coverage: Other residential;
    Claims for policies purchased at the insurance limit: 2;
    Claims for which damage data are available: 1;
    Percentage of claims for which damage data are available[A]: [B].

    Contents coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 89;
    Claims for which damage data are available: 88;
    Percentage of claims for which damage data are available[A]: 98.9.

    Contents coverage: Condominium;
    Claims for policies purchased at the insurance limit: 22;
    Claims for which damage data are available: 20;
    Percentage of claims for which damage data are available[A]: 90.9.

    Building and contents coverage: Single-and two-four family;
    Claims for policies purchased at the insurance limit: 13,431;
    Claims for which damage data are available: 13,430;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Other residential;
    Claims for policies purchased at the insurance limit: 143;
    Claims for which damage data are available: 143;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Nonresidential;
    Claims for policies purchased at the insurance limit: 865;
    Claims for which damage data are available: 865;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Condominium;
    Claims for policies purchased at the insurance limit: 40;
    Claims for which damage data are available: 40;
    Percentage of claims for which damage data are available[A]: 100.0.

    Total:
    Claims for policies purchased at the insurance limit: 26,947;
    Claims for which damage data are available: 26,061;
    Percentage of claims for which damage data are available[A]: 96.7%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at the insurance limit. Data are for
    calendar year 2005.

    [A] We derived the percentages by dividing the number of claims for
    which damage data are available by the total number of claims (for
    policies purchased at the insurance limit).

    [B] Too few values to present percentage.

    [End of table]

    For single-and two-four family flood insurance policies with building-
    only, or both building and contents coverage (see table 32) that were
    purchased at less than the insurance limit, damage data were available
    for more than 99 percent of claims filed from 1997 through 2004 and
    damage data was available for about 98 percent of claims filed for
    policies with contents-only coverage. For policies with building-only
    coverage, or both building and contents coverage (see table 33), damage
    data were available for almost all claims filed in 2005, damage data
    was available for 39 percent of the claims filed with contents-only
    coverage.

    Table 32: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at Less Than the Insurance Limit, 1997-2004:

    Building coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit:
    148,565;
    Claims for which damage data are available: 147,410;
    Percentage of claims for which damage data are available[A]: 99.2%.

    Building coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 4,117;
    Claims for which damage data are available: 4,100;
    Percentage of claims for which damage data are available[A]: 99.6.

    Building coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 13,776;
    Claims for which damage data are available: 13,694;
    Percentage of claims for which damage data are available[A]: 99.4.

    Building coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 5,577;
    Claims for which damage data are available: 5,433;
    Percentage of claims for which damage data are available[A]: 97.4.

    Contents coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit: 6,558;
    Claims for which damage data are available: 6,416;
    Percentage of claims for which damage data are available[A]: 97.8.

    Contents coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 353;
    Claims for which damage data are available: 353;
    Percentage of claims for which damage data are available[A]: 100.0.

    Contents coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 3,955;
    Claims for which damage data are available: 3,905;
    Percentage of claims for which damage data are available[A]: 98.7.

    Contents coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 1,520;
    Claims for which damage data are available: 1,520;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit:
    106,266;
    Claims for which damage data are available: 106,209;
    Percentage of claims for which damage data are available[A]: 99.9.

    Building and contents coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 600;
    Claims for which damage data are available: 600;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 8,275;
    Claims for which damage data are available: 8,265;
    Percentage of claims for which damage data are available[A]: 99.9.

    Building and contents coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 820;
    Claims for which damage data are available: 819;
    Percentage of claims for which damage data are available[A]: 99.9.

    Total:
    Claims for policies purchased at less than the insurance limit:
    300,382;
    Claims for which damage data are available: 298,724;
    Percentage of claims for which damage data are available[A]: 99.4%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at less than the insurance limit.
    Data are for calendar years 1997-2004.

    [A] The number of claims for which damage data were available divided
    by the total number of claims (for policies purchased at less than the
    insurance limit).

    [End of table]

    Table 33: Percentage of Claims for Which Damage Data Are Available, for
    Policies Purchased at Less Than the Insurance Limit, 2005:

    Building coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit: 56,210;
    Claims for which damage data are available: 56,037;
    Percentage of claims for which damage data are available[A]: 99.7%.

    Building coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 2,773;
    Claims for which damage data are available: 2,769;
    Percentage of claims for which damage data are available[A]: 99.9.

    Building coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 5,259;
    Claims for which damage data are available: 5,236;
    Percentage of claims for which damage data are available[A]: 99.6.

    Building coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 1,990;
    Claims for which damage data are available: 1,941;
    Percentage of claims for which damage data are available[A]: 97.5.

    Contents coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit: 12,257;
    Claims for which damage data are available: 4,745;
    Percentage of claims for which damage data are available[A]: 38.7.

    Contents coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 343;
    Claims for which damage data are available: 303;
    Percentage of claims for which damage data are available[A]: 88.3.

    Contents coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 1,348;
    Claims for which damage data are available: 1,328;
    Percentage of claims for which damage data are available[A]: 98.5.

    Contents coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 805;
    Claims for which damage data are available: 722;
    Percentage of claims for which damage data are available[A]: 89.7.

    Building and contents coverage: Single-and two-four family;
    Claims for policies purchased at less than the insurance limit:
    111,602;
    Claims for which damage data are available: 111,582;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Other residential;
    Claims for policies purchased at less than the insurance limit: 429;
    Claims for which damage data are available: 429;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Nonresidential;
    Claims for policies purchased at less than the insurance limit: 4,111;
    Claims for which damage data are available: 4,111;
    Percentage of claims for which damage data are available[A]: 100.0.

    Building and contents coverage: Condominium;
    Claims for policies purchased at less than the insurance limit: 464;
    Claims for which damage data are available: 464;
    Percentage of claims for which damage data are available[A]: 100.0.

    Total:
    Claims for policies purchased at less than the insurance limit:
    197,591;
    Claims for which damage data are available: 189,667;
    Percentage of claims for which damage data are available[A]: 96.0%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at less than the insurance limit.
    Data are for calendar year 2005.

    [A] The number of claims for which damage data were available divided
    by the total number of claims (for policies purchased at less than the
    insurance limit).

    [End of table]

    According to NFIP data, properties insured for the maximum flood
    insurance available and with damage claims that exceeded the insurance
    maximum represented from 0 to 17 percent of claims filed from 1997
    through 2004 (see table 34), and from 1 to 57 percent of claims filed
    in 2005 (see table 35), depending upon the type of flood insurance
    coverage and the type of structure insured.

    Table 34: Percentage of Claims and Damages in Excess of NFIP Insurance
    Available by Policy Type, for Policies Purchased at the Insurance
    Limit, 1997-2004:

    Building coverage: Single-and two-four family;
    Claims for which damage data are available: 11,144;
    Claims for which damage amounts exceeded insurance available: 23;
    Amount of damages for all claims (where damage data are available):
    $205,855,130;
    Amount of damages in excess of insurance limit[A]: $2,924,050;
    Percentage of claims for which damages exceeded insurance limit: 0.2%;
    Percentage dollars for which damages exceeded insurance limit[B]: 1.4%.

    Building coverage: Other residential[C];
    Claims for which damage data are available: 1,444;
    Claims for which damage amounts exceeded insurance available: 19;
    Amount of damages for all claims (where damage data are available):
    $90,308,627;
    Amount of damages in excess of insurance limit[A]: $2,313,666;
    Percentage of claims for which damages exceeded insurance limit: 1.3%;
    Percentage dollars for which damages exceeded insurance limit[B]: 2.6%.

    Building coverage: Nonresidential;
    Claims for which damage data are available: 1,973;
    Claims for which damage amounts exceeded insurance available: 32;
    Amount of damages for all claims (where damage data are available):
    $173,220,384;
    Amount of damages in excess of insurance limit[A]: $10,312,164;
    Percentage of claims for which damages exceeded insurance limit: 1.6%;
    Percentage dollars for which damages exceeded insurance limit[B]: 6.0%.

    Building coverage: Condominium;
    Claims for which damage data are available: 269;
    Claims for which damage amounts exceeded insurance available: 0;
    Amount of damages for all claims (where damage data are available):
    $14,902,054;
    Amount of damages in excess of insurance limit[A]: 0;
    Percentage of claims for which damages exceeded insurance limit: 0.0;
    Percentage dollars for which damages exceeded insurance limit[B]: 0.0.

    Contents coverage: Single-and two-four family;
    Claims for which damage data are available: 344;
    Claims for which damage amounts exceeded insurance available: 5;
    Amount of damages for all claims (where damage data are available):
    $2,786,787;
    Amount of damages in excess of insurance limit[A]: $98,323;
    Percentage of claims for which damages exceeded insurance limit: 1.5%;
    Percentage dollars for which damages exceeded insurance limit[B]: 3.5%.

    Contents coverage: Other residential;
    Claims for which damage data are available: 4;
    Claims for which damage amounts exceeded insurance available: 1;
    Amount of damages for all claims (where damage data are available):
    $284,881;
    Amount of damages in excess of insurance limit[A]: $956;
    Percentage of claims for which damages exceeded insurance limit: [D];
    Percentage dollars for which damages exceeded insurance limit[B]: [D].

    Contents coverage: Nonresidential;
    Claims for which damage data are available: 300;
    Claims for which damage amounts exceeded insurance available: 50;
    Amount of damages for all claims (where damage data are available):
    $72,560,292;
    Amount of damages in excess of insurance limit[A]: $11,012,711;
    Percentage of claims for which damages exceeded insurance limit: 16.7%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    15.2%.

    Contents coverage: Condominium;
    Claims for which damage data are available: 22;
    Claims for which damage amounts exceeded insurance available: 1;
    Amount of damages for all claims (where damage data are available):
    $534,633;
    Amount of damages in excess of insurance limit[A]: $1,157;
    Percentage of claims for which damages exceeded insurance limit: 4.6%;
    Percentage dollars for which damages exceeded insurance limit[B]: 0.2%.

    Building and contents coverage[E]: Single-and two-four family;
    Claims for which damage data are available: 8,848;
    Claims for which damage amounts exceeded insurance available: 934;
    Amount of damages for all claims (where damage data are available):
    $749,722,860;
    Amount of damages in excess of insurance limit[A]: $33,801,218;
    Percentage of claims for which damages exceeded insurance limit: 10.6%;
    Percentage dollars for which damages exceeded insurance limit[B]: 4.5%.

    Building and contents coverage[E]: Other residential;
    Claims for which damage data are available: 117;
    Claims for which damage amounts exceeded insurance available: 17;
    Amount of damages for all claims (where damage data are available):
    $15,353,560;
    Amount of damages in excess of insurance limit[A]: $641,519;
    Percentage of claims for which damages exceeded insurance limit: 14.5%;
    Percentage dollars for which damages exceeded insurance limit[B]: 4.2%.

    Building and contents coverage[E]: Nonresidential;
    Claims for which damage data are available: 1,209;
    Claims for which damage amounts exceeded insurance available: 195;
    Amount of damages for all claims (where damage data are available):
    $401,306,344;
    Amount of damages in excess of insurance limit[A]: $58,890,423;
    Percentage of claims for which damages exceeded insurance limit: 16.1%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    14.7%.

    Building and contents coverage[E]: Condominium;
    Claims for which damage data are available: 109;
    Claims for which damage amounts exceeded insurance available: 6;
    Amount of damages for all claims (where damage data are available):
    $46,538,569;
    Amount of damages in excess of insurance limit[A]: $372,826;
    Percentage of claims for which damages exceeded insurance limit: 5.5%;
    Percentage dollars for which damages exceeded insurance limit[B]: 0.8%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at the total insurance limit.

    [A] Amount of flood damages in excess of the respective insurance
    available (for policies purchased at the total insurance limit).
    Dollars are adjusted to 2006 dollars.

    [B] The dollar amount paid out for damages in excess of the maximum
    NFIP insurance available divided by the total amount of damages paid
    out (for policies purchased at the total insurance limit):

    [C] Other residential properties include hotels or motels where the
    normal occupancy of a guest is 6 months or more.

    [D] Cell counts considered too low to report this figure.

    [E] The amount of damages are the sum of both building and contents
    damages combined for only claims that exceed the insurance coverage
    limit.

    [End of table]

    Table 35: Percentage of Claims and Damages in Excess of NFIP Insurance
    Available by Policy Type, for Policies Purchased at the Insurance
    Limit, 2005:

    Building coverage: Single-and two-four family;
    Claims for which damage data are available: 8,578;
    Claims for which damage amounts exceeded insurance available: 162;
    Amount of damages for all claims (where damage data are available):
    $337,362,745;
    Amount of damages in excess of insurance limit[A]: $14,916,018;
    Percentage of claims for which damages exceeded insurance limit: 1.9%;
    Percentage dollars for which damages exceeded insurance limit[B]: 4.4%.

    Building coverage: Other residential[C];
    Claims for which damage data are available: 1,154;
    Claims for which damage amounts exceeded insurance available: 323;
    Amount of damages for all claims (where damage data are available):
    $248,056,786;
    Amount of damages in excess of insurance limit[A]: $44,846,713;
    Percentage of claims for which damages exceeded insurance limit: 28.0%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    18.1%.

    Building coverage: Nonresidential;
    Claims for which damage data are available: 1,138;
    Claims for which damage amounts exceeded insurance available: 199;
    Amount of damages for all claims (where damage data are available):
    $373,097,199;
    Amount of damages in excess of insurance limit[A]: $121,705,313;
    Percentage of claims for which damages exceeded insurance limit: 17.5%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    32.6%.

    Building coverage: Condominium;
    Claims for which damage data are available: 177;
    Claims for which damage amounts exceeded insurance available: 2;
    Amount of damages for all claims (where damage data are available):
    $9,168,451;
    Amount of damages in excess of insurance limit[A]: $87,100;
    Percentage of claims for which damages exceeded insurance limit: 1.1%;
    Percentage dollars for which damages exceeded insurance limit[B]: 1.0%.

    Contents coverage: Single-and two-four family;
    Claims for which damage data are available: 427;
    Claims for which damage amounts exceeded insurance available: 45;
    Amount of damages for all claims (where damage data are available):
    $15,037,299;
    Amount of damages in excess of insurance limit[A]: $5,549,366;
    Percentage of claims for which damages exceeded insurance limit: 10.5%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    36.9%.

    Contents coverage: Other residential;
    Claims for which damage data are available: 1;
    Claims for which damage amounts exceeded insurance available: 0;
    Amount of damages for all claims (where damage data are available):
    $1,034;
    Amount of damages in excess of insurance limit[A]: 0;
    Percentage of claims for which damages exceeded insurance limit:
    [Empty];
    Percentage dollars for which damages exceeded insurance limit[B]:
    [Empty].

    Contents coverage: Nonresidential;
    Claims for which damage data are available: 88;
    Claims for which damage amounts exceeded insurance available: 39;
    Amount of damages for all claims (where damage data are available):
    $40,013,671;
    Amount of damages in excess of insurance limit[A]: $10,563,914;
    Percentage of claims for which damages exceeded insurance limit: 44.3%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    26.4%.

    Contents coverage: Condominium;
    Claims for which damage data are available: 20;
    Claims for which damage amounts exceeded insurance available: 9;
    Amount of damages for all claims (where damage data are available):
    $4,553,974;
    Amount of damages in excess of insurance limit[A]: $1,184,553;
    Percentage of claims for which damages exceeded insurance limit: 45.0%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    26.0%.

    Building and contents coverage[D]: Single-and two-four family;
    Claims for which damage data are available: 13,430;
    Claims for which damage amounts exceeded insurance available: 6793;
    Amount of damages for all claims (where damage data are available):
    $2,854,477,247;
    Amount of damages in excess of insurance limit[A]: $308,150,782;
    Percentage of claims for which damages exceeded insurance limit: 50.6%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    10.8%.

    Building and contents coverage[D]: Other residential;
    Claims for which damage data are available: 143;
    Claims for which damage amounts exceeded insurance available: 68;
    Amount of damages for all claims (where damage data are available):
    $53,995,270;
    Amount of damages in excess of insurance limit[A]: $19,495,267;
    Percentage of claims for which damages exceeded insurance limit: 47.6%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    36.1%.

    Building and contents coverage[D]: Nonresidential;
    Claims for which damage data are available: 865;
    Claims for which damage amounts exceeded insurance available: 496;
    Amount of damages for all claims (where damage data are available):
    $702,615,730;
    Amount of damages in excess of insurance limit[A]: $233,547,555;
    Percentage of claims for which damages exceeded insurance limit: 57.3%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    33.2%.

    Building and contents coverage[D]: Condominium;
    Claims for which damage data are available: 40;
    Claims for which damage amounts exceeded insurance available: 13;
    Amount of damages for all claims (where damage data are available):
    $14,229,915;
    Amount of damages in excess of insurance limit[A]: $454,052;
    Percentage of claims for which damages exceeded insurance limit: 32.5%;
    Percentage dollars for which damages exceeded insurance limit[B]: 3.2%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at the total insurance limit.

    [A] Amount of flood damages in excess of the respective insurance
    available (for policies purchased at the total insurance limit).
    Dollars are adjusted to 2006 dollars.

    [B] The dollar amount paid out for damages in excess of the maximum
    NFIP insurance available divided by the total amount of damages paid
    out (for policies purchased at the total insurance limit):

    [C] Other residential properties include hotels or motels where the
    normal occupancy of a guest is 6 months or more.

    [D] The amount of damages are the sum of both building and contents
    damages combined for only claims that exceed the insurance coverage
    limit.

    [End of table]

    Similarly, properties insured for less than the maximum flood insurance
    available and with damage claims that exceeded the amount of insurance
    purchased represented from less than 1 to more than 27 percent of
    claims filed from 1997 through 2004 (see table 36), and from 5 to 71
    percent of claims filed in 2005 (see table 37), depending upon the type
    of flood insurance coverage and the type of structure insured.

    Table 36: Percentage of Claims and Damages in Excess of NFIP Insurance
    Purchased by Policy Type, for Policies Purchased at Less Than the
    Insurance Limit, 1997-2004:

    Building coverage: Single-and two-four family;
    Claims for which damage data are available: 147,410;
    Claims for which damage amounts exceeded insurance available: 2,069;
    Amount of damages for all claims (where damage data are available):
    $2,256,558,707;
    Amount of damages in excess of insurance limit[A]: $281,311,921;
    Percentage of claims for which damages exceeded insurance limit: 1.4%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    12.5%.

    Building coverage: Other residential[D];
    Claims for which damage data are available: 4,100;
    Claims for which damage amounts exceeded insurance available: 195;
    Amount of damages for all claims (where damage data are available):
    $192,907,814;
    Amount of damages in excess of insurance limit[A]: $7,113,743;
    Percentage of claims for which damages exceeded insurance limit: 4.8%;
    Percentage dollars for which damages exceeded insurance limit[B]: 3.7%.

    Building coverage: Nonresidential;
    Claims for which damage data are available: 13,694;
    Claims for which damage amounts exceeded insurance available: 478;
    Amount of damages for all claims (where damage data are available):
    $482,115,190;
    Amount of damages in excess of insurance limit[A]: $20,012,459;
    Percentage of claims for which damages exceeded insurance limit: 3.5%;
    Percentage dollars for which damages exceeded insurance limit[B]: 4.2%.

    Building coverage: Condominium;
    Claims for which damage data are available: 5,433;
    Claims for which damage amounts exceeded insurance available: 40;
    Amount of damages for all claims (where damage data are available):
    $438,636,443;
    Amount of damages in excess of insurance limit[A]: $5,855,113;
    Percentage of claims for which damages exceeded insurance limit: 0.7%;
    Percentage dollars for which damages exceeded insurance limit[B]: 1.3%.

    Contents coverage: Single-and two-four family;
    Claims for which damage data are available: 6,416;
    Claims for which damage amounts exceeded insurance available: 563;
    Amount of damages for all claims (where damage data are available):
    $47,434,548;
    Amount of damages in excess of insurance limit[A]: $4,248,471;
    Percentage of claims for which damages exceeded insurance limit: 8.8%;
    Percentage dollars for which damages exceeded insurance limit[B]: 9.0%.

    Contents coverage: Other residential;
    Claims for which damage data are available: 353;
    Claims for which damage amounts exceeded insurance available: 68;
    Amount of damages for all claims (where damage data are available):
    $4,847,785;
    Amount of damages in excess of insurance limit[A]: $275,007;
    Percentage of claims for which damages exceeded insurance limit: 19.3%;
    Percentage dollars for which damages exceeded insurance limit[B]: 5.7%.

    Contents coverage: Nonresidential;
    Claims for which damage data are available: 3,905;
    Claims for which damage amounts exceeded insurance available: 861;
    Amount of damages for all claims (where damage data are available):
    $218,802,981;
    Amount of damages in excess of insurance limit[A]: $26,132,535;
    Percentage of claims for which damages exceeded insurance limit: 22.1%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    11.9%.

    Contents coverage: Condominium;
    Claims for which damage data are available: 1,520;
    Claims for which damage amounts exceeded insurance available: 314;
    Amount of damages for all claims (where damage data are available):
    $22,470,296;
    Amount of damages in excess of insurance limit[A]: $2,930,008;
    Percentage of claims for which damages exceeded insurance limit: 20.7%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    13.0%.

    Building and contents coverage[C]: Single-and two-four family;
    Claims for which damage data are available: 106,209;
    Claims for which damage amounts exceeded insurance available: 19,367;
    Amount of damages for all claims (where damage data are available):
    $4,036,695,005;
    Amount of damages in excess of insurance limit[A]: $168,592,193;
    Percentage of claims for which damages exceeded insurance limit: 18.2%;
    Percentage dollars for which damages exceeded insurance limit[B]: 4.2%.

    Building and contents coverage[C]: Other residential;
    Claims for which damage data are available: 600;
    Claims for which damage amounts exceeded insurance available: 157;
    Amount of damages for all claims (where damage data are available):
    $30,319,077;
    Amount of damages in excess of insurance limit[A]: $1,642,330;
    Percentage of claims for which damages exceeded insurance limit: 26.2%;
    Percentage dollars for which damages exceeded insurance limit[B]: 5.4%.

    Building and contents coverage[C]: Nonresidential;
    Claims for which damage data are available: 8,265;
    Claims for which damage amounts exceeded insurance available: 2,250;
    Amount of damages for all claims (where damage data are available):
    $678,052,867;
    Amount of damages in excess of insurance limit[A]: $46,763,739;
    Percentage of claims for which damages exceeded insurance limit: 27.2%;
    Percentage dollars for which damages exceeded insurance limit[B]: 6.9%.

    Building and contents coverage[C]: Condominium;
    Claims for which damage data are available: 819;
    Claims for which damage amounts exceeded insurance available: 191;
    Amount of damages for all claims (where damage data are available):
    $103,637,989;
    Amount of damages in excess of insurance limit[A]: $1,464,236;
    Percentage of claims for which damages exceeded insurance limit: 23.3%;
    Percentage dollars for which damages exceeded insurance limit[B]: 1.4%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at less than the insurance limit.

    [A] Amount of flood damages in excess of the amount of insurance
    purchased (for policies purchased at less than the insurance limit).
    Dollars are adjusted to 2006 dollars.

    [B] The dollar amount paid out for damages in excess of the amount of
    NFIP insurance purchased divided by the total amount of damages paid
    out (for policies purchased at less than the insurance limit).

    [C] The amount of damages are the sum of both building and contents
    damages combined for only claims from policies purchased at less than
    the insurance coverage limit.

    [End of table]

    Table 37: Percentage of Claims and Damages in Excess of NFIP Insurance
    Purchased by Policy Type, for Policies Purchased at Less Than the
    Insurance Limit, 2005:

    Building coverage: Single-and two-four family;
    Claims for which damage data are available: 56,037;
    Claims for which damage amounts exceeded insurance available: 4,934;
    Amount of damages for all claims (where damage data are available):
    $2,881,408,610;
    Amount of damages in excess of insurance limit[A]: $194,355,195;
    Percentage of claims for which damages exceeded insurance limit: 8.8%;
    Percentage dollars for which damages exceeded insurance limit[B]: 6.8%.

    Building coverage: Other residential[D];
    Claims for which damage data are available: 2,769;
    Claims for which damage amounts exceeded insurance available: 646;
    Amount of damages for all claims (where damage data are available):
    $393,351,226;
    Amount of damages in excess of insurance limit[A]: $79,407,484;
    Percentage of claims for which damages exceeded insurance limit: 23.3%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    20.2%.

    Building coverage: Nonresidential;
    Claims for which damage data are available: 5,236;
    Claims for which damage amounts exceeded insurance available: 619;
    Amount of damages for all claims (where damage data are available):
    $696,224,026;
    Amount of damages in excess of insurance limit[A]: $152,365,225;
    Percentage of claims for which damages exceeded insurance limit: 11.8%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    21.9%.

    Building coverage: Condominium;
    Claims for which damage data are available: 1,941;
    Claims for which damage amounts exceeded insurance available: 97;
    Amount of damages for all claims (where damage data are available):
    $236,415,187;
    Amount of damages in excess of insurance limit[A]: $7,818,754;
    Percentage of claims for which damages exceeded insurance limit: 5.0%;
    Percentage dollars for which damages exceeded insurance limit[B]: 3.3%.

    Contents coverage: Single-and two-four family;
    Claims for which damage data are available: 4,745;
    Claims for which damage amounts exceeded insurance available: 1,073;
    Amount of damages for all claims (where damage data are available):
    $72,534,988;
    Amount of damages in excess of insurance limit[A]: $15,199,933;
    Percentage of claims for which damages exceeded insurance limit: 22.6%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    21.0%.

    Contents coverage: Other residential;
    Claims for which damage data are available: 303;
    Claims for which damage amounts exceeded insurance available: 163;
    Amount of damages for all claims (where damage data are available):
    $6,550,690;
    Amount of damages in excess of insurance limit[A]: $1,074,163;
    Percentage of claims for which damages exceeded insurance limit: 53.8%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    16.4%.

    Contents coverage: Nonresidential;
    Claims for which damage data are available: 1,328;
    Claims for which damage amounts exceeded insurance available: 758;
    Amount of damages for all claims (where damage data are available):
    $132,715,501;
    Amount of damages in excess of insurance limit[A]: $29,493,756;
    Percentage of claims for which damages exceeded insurance limit: 57.1%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    22.2%.

    Contents coverage: Condominium;
    Claims for which damage data are available: 722;
    Claims for which damage amounts exceeded insurance available: 337;
    Amount of damages for all claims (where damage data are available):
    $28,218,416;
    Amount of damages in excess of insurance limit[A]: $5,978,872;
    Percentage of claims for which damages exceeded insurance limit: 46.7%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    21.2%.

    Building and contents coverage[C]: Single-and two-four family;
    Claims for which damage data are available: 111,582;
    Claims for which damage amounts exceeded insurance available: 78,902;
    Amount of damages for all claims (where damage data are available):
    $14,362,248,586;
    Amount of damages in excess of insurance limit[A]: $1,719,892,117;
    Percentage of claims for which damages exceeded insurance limit: 70.7%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    12.0%.

    Building and contents coverage[C]: Other residential;
    Claims for which damage data are available: 429;
    Claims for which damage amounts exceeded insurance available: 251;
    Amount of damages for all claims (where damage data are available):
    $62,643,182;
    Amount of damages in excess of insurance limit[A]: $10,522,880;
    Percentage of claims for which damages exceeded insurance limit: 58.5%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    16.8%.

    Building and contents coverage[C]: Nonresidential;
    Claims for which damage data are available: 4,111;
    Claims for which damage amounts exceeded insurance available: 2,621;
    Amount of damages for all claims (where damage data are available):
    $965,751,875;
    Amount of damages in excess of insurance limit[A]: $195,370,843;
    Percentage of claims for which damages exceeded insurance limit: 63.8%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    20.2%.

    Building and contents coverage[C]: Condominium;
    Claims for which damage data are available: 464;
    Claims for which damage amounts exceeded insurance available: 306;
    Amount of damages for all claims (where damage data are available):
    $70,503,326;
    Amount of damages in excess of insurance limit[A]: $15,031,919;
    Percentage of claims for which damages exceeded insurance limit: 66.0%;
    Percentage dollars for which damages exceeded insurance limit[B]:
    21.3%.

    Source: GAO analysis of NFIP data.

    Notes: Data are for the Regular Program (Emergency Program is
    excluded), for policies purchased at less than the insurance limit.

    [A] Amount of flood damages in excess of the amount of insurance
    purchased (for policies purchased at less than the insurance limit).
    Dollars are adjusted to 2006 dollars.

    [B] The dollar amount paid out for damages in excess of the amount of
    NFIP insurance purchased divided by the total amount of damages paid
    out (for policies purchased at less than the insurance limit).

    [C] The amount of damages are the sum of both building and contents
    damages combined for only claims from policies purchased at less than
    the insurance coverage limit.

    [End of table]

    [End of section]

    Appendix VII: Definitions of Flood Zones:

    Zone V: Areas along coasts subject to inundation by the 1-percent-
    annual-chance flood event with additional hazards associated with storm-
    induced waves. Because detailed hydraulic analyses have not been
    performed, no Base Flood Elevations (BFE) or flood depths are shown.
    Mandatory flood insurance purchase requirements apply.

    Zones VE and V1-V30: Areas along coasts subject to inundation by the 1-
    percent-annual-chance flood event with additional hazards due to storm-
    induced velocity wave action. BFEs derived from detailed hydraulic
    analyses are shown within these zones. Mandatory flood insurance
    purchase requirements apply. (Zone VE is used on new and revised maps
    in place of Zones V1-V30.)

    Zone A: Areas subject to inundation by the 1-percent-annual-chance
    flood event. Because detailed hydraulic analyses have not been
    performed, no BFEs or flood depths are shown. Mandatory flood insurance
    purchase requirements apply.

    Zones AE and A1-A30: Areas subject to inundation by the 1-percent-
    annual-chance flood event determined by detailed methods. BFEs are
    shown within these zones. Mandatory flood insurance purchase
    requirements apply. (Zone AE is used on new and revised maps in place
    of Zones A1-A30.)

    Zone AH: Areas subject to inundation by the 1-percent-annual-chance
    shallow flooding (usually areas of ponding) where average depths are
    between 1 and 3 feet. BFEs derived from detailed hydraulic analyses are
    shown in this zone. Mandatory flood insurance purchase requirements
    apply.

    Zone AO: Areas subject to inundation by the 1-percent-annual-chance
    shallow flooding (usually sheet flow on sloping terrain) where average
    depths are between 1 and 3 feet. Average flood depths derived from
    detailed hydraulic analyses are shown within this zone. Mandatory flood
    insurance purchase requirements apply.

    Zone A99: Areas subject to inundation by the 1-percent-annual-chance
    flood event, but which will ultimately be protected upon completion of
    an under-construction federal flood protection system. These are areas
    of special flood hazard where enough progress has been made on the
    construction of a protection system, such as a dikes, dams, or levees,
    to consider it complete for insurance rating purposes. Zone A99 may
    only be used when the flood protection system has reached specified
    statutory progress toward completion. No BFEs or flood depths are
    shown. Mandatory flood insurance purchase requirements apply.

    Zone AR: Areas that result from the decertification of a previously
    accredited flood protection system that is determined to be in the
    process of being restored to provide base flood protection. Mandatory
    flood insurance purchase requirements apply.

    Zones AR/AE, AR/AH, AR/AO, AR/A1-A30, AR/A: Dual flood zones that,
    because of the risk of flooding from other water sources that the flood
    protection system does not contain, will continue to be subject to
    flooding after the flood protection system is adequately restored.
    Mandatory flood insurance purchase requirements apply.

    Zones B, C, and X: Areas identified in the community Flood Insurance
    Study (FIS) as areas of moderate or minimal hazard from the principal
    source of flood in the area. However, buildings in these zones could be
    flooded by severe, concentrated rainfall coupled with inadequate local
    drainage systems. Local stormwater drainage systems are not normally
    considered in the community's FIS. The failure of a local drainage
    system creates areas of high flood risk within these rate zones. Flood
    insurance is available in participating communities but is not required
    by regulation in these zones. (Zone X is used on new and revised maps
    in place of Zones B and C.)

    Zone D: Unstudied areas where flood hazards are undetermined, but
    flooding is possible. No mandatory flood insurance purchase
    requirements apply, but coverage is available in participating
    communities.

    In addition, the FEMA contractor responsible for collection and
    analysis of NFIP data uses two additional designations when collecting
    and reporting data by flood zone. Zone "O" (Other) is not a flood zone
    designation; rather it is used to indicate missing or erroneous data
    for policies. Policies under FEMA's Emergency Program, which is the
    program through which communities enter NFIP, also do not have
    designated flood zones. Instead, the FEMA contractor captures data on
    the policies by using their Emergency Program status.

    [End of section]

    Appendix VIII: Comments from the Federal Emergency Management Agency:

    FEMA:
    U.S. Department of Homeland Security:
    500 C Street, SW:
    Washington, DC 20472:
    [hyperlink, http://www.fema.gov]:

    May 16, 2008:

    Orice M. Williams:
    Director:
    Financial Markets and Community Investments:
    United States Government Accountability Office:
    441 G Street, NW:
    Washington, DC 20548:

    RE: GAO Draft Report, NFIP- Financial Challenges Underscore Need for
    Improved Oversight of Mitigation Programs and Key Contracts (GAO-08-
    437):

    Dear Ms Williams:

    Thank you for providing the Department of Homeland Security, Federal
    Emergency Management Agency (FEMA), the opportunity to review and
    comment on the GAO draft report, NFIP- Financial Challenges Underscore
    Need for Improved Oversight of Mitigation Programs and Key Contracts.

    FEMA has completed its review. We have taken actions related to each of
    the Recommendations for Executive Actions to resolve issues identified
    in the reports. These actions were taken prior to issuance of this
    report. In addition we have comments on statements and analysis
    contained in the report.

    FEMA Actions related to Recommendations:

    For each of the recommendations for executive action, I highlight the
    FEMA actions taken to date to resolve the noted issues:

    Recommendation #1: Implement a process to ensure that monitoring
    reports are submitted on time and systematically reviewed by the COTR
    and the Program Management Office and copies of monitoring reports are
    retained in a quality assurance file, as directed by the contract.

    FEMA Action:

    A process has been implemented as part of the newly installed Program
    Management Office; a procedure is now in place whereby Technical
    Monitors will provide a monthly status report by the fifth working day
    of the month to the COTR. All Technical Monitors will use the
    established Monthly Status Report format to ensure monitoring is
    performed in a consistent manner across all contracts. The result will
    ensure the Federal Government receives the quality of services called
    for in the contract and pays only for the acceptable level of services
    received.

    The COTR will, in addition to providing documentation to the
    Contracting Specialist, maintain a complete Performance Monitoring
    file. All such records will be retained for the life of this contract.
    The COTR shall forward these records to the Contracting Officer at
    termination or completion of the contract.

    Recommendation #2: Ensure that FEMA staff clearly monitors each
    performance standard that the contractor is required to meet in the
    time frames required by contract and that FEMA staff clearly link
    monitoring reports and performance areas.

    FEMA Action:

    The Program Management Office developed a written procedure on the
    proper reporting requirements and conducted a training session with all
    Technical Monitors. A Monthly Status Report form has been developed
    that states each contract performance objective as identified in the
    contract. A Performance Summary section is provided to summarize each
    performance objective as either exceeded; met; or unmet as required by
    the contract's SOW/PWS. When citing performance standards, the
    Technical Monitor must link the comment to the appropriate section of
    the SOW/PWS. Where performance is identified as unmet for any monthly
    reporting period, appropriate action must be taken by the COTR who
    reviews the Monthly Status Report. The COTR submits the Discrepancy
    Report for follow-up by the Contracting Officer on the performance
    deficiency.

    Recommendation #3: Ensure implementation of written guidance for all
    NFIP-related contracts on how to consistently handle the failure of a
    contractor to meet standards in performance areas and establish written
    policies and procedures about the coordination between FEMA officials
    and offices (including the COTR, the Program Management Office, and the
    Contracting Officer) when addressing contractor deficiencies, including
    determining whether and under what circumstances to issue discrepancy
    reports, and ensuring that financial disincentives are appropriately
    and consistently applied.

    FEMA Action:

    The Program Management Office developed a written procedure on the
    proper reporting requirements and conducted a session with all
    Technical Monitors. At the training session, copies of the Monthly
    Status Report format were provided and reviewed. An electronic copy of
    the form was provided to each Technical Monitor to use each month.

    It is the responsibility of the COTR to thoroughly review the Monthly
    Status Reports and to follow up with the Contracting Officer where
    deficiencies in a contractor's performance are discovered. The COTR
    will complete out the Discrepancy Report and will discuss the
    consequences of the deficiencies with the Contracting Officer as
    required. The Contracting Officer will decide if disincentives are
    appropriate.

    General Comments:

    The following are comments we have on various aspects of the statements
    and comments made throughout the report:

    Various pages: Throughout the document there are statements to the
    effect that "...FEMA's ability to track the effectiveness of these
    programs (FMA, SRL, RFC) is limited because it does not track property
    acquisitions in real time (page 23)" and "FEMA does not have real time
    property acquisition data because the agency does not require its
    regional staff to report the status of individual property level
    acquisitions before a project closes - a process that can take several
    years - and its current grants management system does not have the
    capability to capture and track such data (page 24)." Additional cites
    are pages 26, 27, 29, 43

    Comment: Currently FEMA does track and verify the effectiveness of the
    grant programs at two points:

    1- During application submission and review - when engineering
    feasibility and cost effectiveness are determined; and;

    2- At close out when the project is considered completed.

    GAO is correct in the statement that FEMA does not currently "track
    property acquisitions in real time," assuming GAO means that we do not
    record in the eGrants system on the date of the property ownership
    transfer. That "real time" data is not obtainable under our existing
    reporting systems and tools. FEMA can obtain this information; however
    it would involve multiple levels of contacts between Headquarters (HQ),
    Region, State, and local partners and is not efficient. The two points
    that are currently used to verify the effectiveness of projects
    (application review and close out) are used for several reasons
    including:

    * The project development and award process is fluid. Site specific
    projects (e.g. acquisition of a certain house) may change in an
    application once a project is selected for further review. In other
    words, when a community submits a multiple property project
    application, some properties may be eliminated and new ones (identified
    as alternates in the application) may become available for project
    funding. This fluidity is in fact tracked at the State and Regional
    level, however not at FEMA HQ.

    * Tracking in between status prior to closeout currently requires
    multiple levels of contacts including FEMA HQ, Region, State, and local
    partners; and, it is not clear that there is added value to have that
    information at HQ. Program effectiveness of the grant programs is
    verified at two key points. By verifying effectiveness at application
    for benefit cost analysis and engineering feasibility, FEMA is able to
    project potential effectiveness (e.g. losses avoided) for each project.
    That effectiveness is subsequently reverified at project closeout, when
    all property acquisition transactions are completed.

    Page 5: states that the amounts available for mitigation activities
    such as the purchase and demolition of flood-damaged properties
    increased for one of the NFIP's mitigation programs and became
    available for two others in 2006, yet the total number of properties
    purchased through these three programs is unknown."

    Comment: We disagree that it is unknown, however we do concur that the
    data is not easily obtained under our existing reporting systems and
    tools. This information is in fact tracked at the State and Regional
    level, however not at HQs. FEMA can obtain this information; however it
    involves multiple levels of contacts including HQ, Region, State, local
    partners and is not efficient. This information is only reported to HQ
    at closeout or on an as-needed basis.

    Page 6: Format issue: The paragraph that begins "FEMA lacked monitoring
    records, inconsistently followed it procedures for monitoring
    contractors..." pertains to contracts for the Insurance side of
    Mitigation Directorate. This paragraph is located between two
    paragraphs pertaining to the Mitigation grants programs. The placement
    of the paragraphs gives the impression that the NFIP contract issues
    has something to do with the grant program issue (tracking property
    acquisitions), which is does not, and we suggest GAO rearrange
    paragraphs.

    Page 10 Format issue: (same issue as Page 6) Paragraph below Table 2
    also mixes grant management issues with Insurance contract management
    issues and needs to be clearly separated.

    We appreciate your continued interest in improving the National Flood
    Insurance Program and the opportunity to review and comment on this
    report.

    If you need additional information, please contact me by telephone at
    202-646-2780.

    Sincerely,

    Signed by:

    David I. Maurstad:
    Assistant Administrator:
    Mitigation Directorate:

    [End of section]

    Appendix IX: GAO Contact and Staff Acknowledgments:

    GAO Contact:

    Orice M. Williams, (202) 512-5837, or williamso@gao.gov:

    Staff Acknowledgments:

    In addition to the contact named above, Lawrence Cluff, Assistant
    Director; Verginie Amirkhanian; Crystal Swain-Bates; William (Rudy)
    Chatlos; May Lee; Lisa Moore; Barbara Roesmann; Christine San; Paul
    Thompson; Shamiah Woods; and William T. Woods made significant
    contributions to this report.

    [End of section]

    Footnotes:

    [1] GAO, National Flood Insurance Program: FEMA's Management and
    Oversight of Payments for Insurance Company Services Should Be
    Improved, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1078]
    (Washington, D.C.: Sept. 5, 2007).

    [2] Senate Committee on Banking, Housing, and Urban Affairs, testimony
    of David I. Maurstad, Assistant Administrator and Federal Insurance
    Administrator, Mitigation Division of the Federal Emergency Management
    Agency of the Department of Homeland Security, 110th Cong., 1st sess.,
    October 2, 2007.

    [3] GAO's High-Risk Series identifies federal programs and operations
    that, in some cases, are high risk due to their greater vulnerabilities
    to fraud, waste, abuse, and mismanagement. GAO, High-Risk Series: An
    Update, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-310]
    (Washington, D.C.: January 2007).

    [4] H.R. 3121, 110TH Cong. (2007), S. 2284, 110TH Cong. (2007), each
    entitled "Flood Insurance Reform and Modernization Act of 2007;" see
    also GAO, National Flood Insurance Program: New Processes Aided
    Hurricane Katrina Claims Handling, but FEMA's Oversight Should Be
    Improved, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-169]
    (Washington, D.C.: Dec. 15, 2006).

    [5] GAO, Natural Hazard Mitigation: Various Mitigation Challenges
    Exist, but Federal Efforts Do Not Provide a Comprehensive Strategic
    Framework, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-403]
    (Washington, D.C.: Aug. 22, 2007).

    [6] All dollars are in 2006 constant dollars.

    [7] In October 2007, FEMA published an interim rule effective December
    3, 2007, that began implementation of the SRL program. 72 Fed. Reg.
    61720 (Oct. 31, 2007); see 44 C.F.R. Part 79. On January 14, 2008, FEMA
    issued guidance for the program.

    [8] GAO, Internal Control: Standards for Internal Control in the
    Federal Government, [hyperlink, http://www.gao.gov/cgi-
    bin/getrpt?GAO/AIMD-00-21.3.1] (Washington, D.C.: November 1999).

    [9] The National Flood Insurance Act of 1968, as amended, is codified
    at 42 U.S.C. �� 4001-4129.

    [10] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1078].

    [11] The maximum policy limit of $250,000 is for building-only coverage
    for residential properties. 42 U.S.C. � 4013.

    [12] The maximum policy limit of $100,000 is for contents only coverage
    for residential properties. 42 U.S.C. � 4013.

    [13] The SRL pilot program was authorized by the Bunning, Bereuter-
    Blumenauer Flood Insurance Reform Act of 2004, Pub. L. No. 108-264, 118
    Stat.712 (codified in scattered sections of 42 U.S.C. (2004)).

    [14] Properties that are acquired through NFIP-funded mitigation
    programs are demolished or relocated and the land kept as open space in
    perpetuity.

    [15] Except for the RFC program, NFIP defines repetitive loss
    properties as those with two or more paid claims of more than $1,000
    within any rolling 10-year period.

    [16] More specifically, SRL properties are those for which four or more
    separate claim payments have been made, with the amount of each claim
    payment exceeding $5,000; or for which at least two separate claims
    payments have been made, with the cumulative amount of such claims
    exceeding the reported value of the property.

    [17] A WYO is a private insurance company that sells and service
    policies and adjusts claims for NFIP.

    [18] The BSA serves as the liaison between the government and
    independent property and casualty insurance companies that issue
    federally guaranteed NFIP policies.

    [19] According to the Federal Acquisition Regulation, the Contracting
    Officer is responsible for "ensuring compliance with the terms of the
    contract, and safeguarding the interests of the United States in its
    contractual relationships." 48 C.F.R. � 1.602-2.

    [20] Overall data on policies in force, average insurance coverage,
    average premium, and losses are based on all NFIP occupancy types
    (single and two-four family, other residential, nonresidential, and
    condominium), all flood zones, and all policy types (building,
    contents, and building and contents). For more information on occupancy
    types, see appendix IV.

    [21] RAND, The National Flood Insurance Program's Market Penetration
    Rate: Estimates and Policy Implications (Santa Monica, California:
    2006).

    [22] This figure is based on the average amount of insurance purchased
    by all policyholders, including those that had building-only coverage,
    contents-only coverage, or both building and contents coverage.

    [23] Under the National Flood Insurance Reform Act of 1994, borrowers
    in flood zones with loans from federally regulated lenders are to
    purchase flood insurance, for the term of the loan, up to $250,000 for
    building coverage and $100,000 for contents coverage for the
    residential occupancy type and up to $500,000 for nonresidential
    occupancy type. Pub. L. No. 103-325, title V, 108 Stat. 2255 (Sept. 23,
    1994); see 42 U.S.C. �� 4012a, 4013.

    [24] A Preferred Risk Policy is a lower-cost protection option for
    residential and nonresidential properties in moderate-to low-risk
    areas.

    [25] NFIP defines a catastrophic loss year as one in which the level of
    paid losses associated with the loss year had a 0.1 percent chance of
    occurring.

    [26] We excluded loss-related expenses because they were not available
    for all of the categories of losses in our analysis, such as hurricane-
    related losses. Loss-related expenses, which accounted for 6-8 percent
    of the total losses paid out each year from 1997 through 2006, refer to
    the administrative costs associated with paying losses.

    [27] To pay out flood losses, FEMA borrowed $17.5 billion from
    Treasury. As of December 2007, FEMA owed more than $17.3 billion to
    Treasury.

    [28] In the remaining year, 1998, 28 percent of losses were
    attributable to hurricanes.

    [29] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-310].

    [30] Under NFIP the repetitive loss property is defined as any
    insurable building for which two or more claims of more than $1,000
    were paid by NFIP within a rolling 10-year period.

    [31] According to FEMA, the average historical loss year is computed to
    determine the minimum (target) amount of premium that needs to be
    collected to cover at least the average annual loss as determined by
    historical data. The risk-premium, or "actuarial" rates, are then set
    according to a rate model for high-risk zones, and remaining actuarial
    rates are set based on judgment and the high-risk rates. Finally, using
    the average historical loss year target, the subsidized rates are
    judgmentally set to generate sufficient additional premium to attain
    the target.

    [32] The probable maximum loss estimate was not made in 2004 due to
    staffing reductions.

    [33] There are five occupancy types: single-family, two-four family
    unit, condominium, other residential, and nonresidential. Other
    residential includes long-stay hotels or motels and rooming houses.
    Nonresidential includes small businesses, churches, schools,
    warehouses, short-stay hotels and motels, and nursing homes. We focused
    on the residential (single and two-four family unit) and condominium
    occupancy types because over 90 percent of the policies in force each
    year (from 1997 through 2006) were for these occupancy types.

    [34] The remaining policies were for the non-condo other residential,
    nonresidential, or unknown dwelling types.

    [35] The Hazard Mitigation Grant Program (HMGP) provides funds for
    mitigation-related activities during the immediate recovery from a
    disaster. While we did not include this program in our analysis because
    it is not funded by the NFIP, as of March 2008, HMGP funds have been
    used to acquire approximately 30,647 flood-damaged properties.

    [36] Though funds have been made available, the application period for
    the SRL program did not open until January 2008 when program guidance
    was published.

    [37] Pub. L. No. 109-90.

    [38] Pub. L. No. 109-295. The RFC program was authorized in the Bunning-
    Bereuter-Blumenauer Flood Insurance Reform Act of 2004 but was unfunded
    until fiscal year 2006.

    [39] The SRL pilot program was authorized by the Bunning-Bereuter-
    Blumenauer Flood Insurance Reform Act of 2004, but was unfunded until
    fiscal year 2006. In the SRL pilot program, a severe repetitive loss
    property is defined as an NFIP-insured residential property that has
    incurred flood-related damage for which four or more separate claims
    payments have been paid, with the amount of each claim payment
    exceeding $5,000; or for which at least two separate claims payments
    have been made, with the cumulative amount of such claims exceeding the
    value of the property.

    [40] Floodproofing is any combination of structural and nonstructural
    additions, changes, or adjustments to structures that reduces or
    eliminates flood damage to real estate or improved real property, water
    and sanitary facilities structures, and their contents.

    [41] The "average acquisition amount" was determined by dividing the
    amount of federal funds for a project by the number of properties
    acquired for closed projects. Average acquisition amount for "mixed"
    mitigation projects are not available by property because mixed
    mitigation project funding data is not separated by mitigation type.

    [42] In 2007, a total of 41 properties were approved for acquisition
    through the RFC program. One property was withdrawn and, as of March
    2008, two projects remained under environmental and historic
    preservation review.

    [43] Acquisition is the only project type currently approved under the
    RFC program.

    [44] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]

    [45] Federal Financial Assistance Management Improvement Act of 1999,
    Pub. L. No. 106-107, section 5(1), 113 Stat. 1487-1488, 1999. Following
    the authorization of this act, in 2001 the President's Management
    Agenda introduced five government-wide initiatives, which included
    expanded electronic government and integration of budget and
    performance information. To achieve the overall goal of improving
    government performance, the e-government initiative included strategies
    such as creating "easy-to find single points of access to government
    services"--for example, a common grant application and reporting
    system.

    [46] All federal agencies that award grants have been required to
    streamline their grants management systems. The Office of Management
    and Budget (OMB) encouraged these agencies to join one of three
    consortiums (of specific agencies with existing grants management
    systems) and coordinate use of these systems. While agencies can
    request a waiver from OMB to opt out of joining the consortiums and use
    their own grants management systems, as of March 2008, FEMA's waiver
    application had been denied.

    [47] GAO, Grants Management: Additional Actions Needed to Streamline
    and Simplify Processes, [hyperlink, http://www.gao.gov/cgi-
    bin/getrpt?GAO-05-335] (Washington, D.C.: Apr. 18, 2005).

    GAO, Grants Management: Grantees' Concerns with Efforts to Streamline
    and Simplify Processes, [hyperlink, http://www.gao.gov/cgi-
    bin/getrpt?GAO-06-566] (Washington, D.C.: July 28, 2006).

    [48] The COTR is responsible for technical administration of the
    projects and assuring proper surveillance of the contractor's
    performance.

    [49] According to the BSA contract, performance areas 1, 3, 5, 6, 7, 8,
    and 10 should be monitored monthly; performance area 9 (effectiveness
    of workshops and training materials) should be monitored quarterly; and
    performance areas 2 and 4 (cost control, and financial management,
    respectively) should be monitored annually.

    [50] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1],
    15.

    [51] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1],
    20.

    [52] Based on the contract-specified formulas, the BSA could have
    received more than $25,000 in financial penalties for failing to meet
    these two performance standards.

    [53] The DSA is responsible for selling and servicing flood insurance
    directly to property owners on behalf of FEMA.

    [54] Office of the President, Economic Report of the President: 2007
    Report. Spreadsheet tables, appendix B, spreadsheet B-61, "Consumer
    Price Indexes for Selected Expenditure Classes, 1959-2006," Shelter
    Total.

    [55] NFIP offers group flood-insurance polices to recipients of
    disaster assistance (generally low-income persons), which provide
    coverage for 3 years following a flood loss. The amount of coverage is
    equal to the maximum grant amount.

    [56] American Institute for Research, Assessing the Adequacy of the
    National Flood Insurance Program's 1 Percent Flood Standard (College
    Park, Md.: University of Maryland, October 2006).

    [57] Eligible applicants for FMA and RFC mitigation grant funds include
    state emergency management agencies or a similar office of the state,
    various territories, and federally recognized Indian tribal
    governments. Subapplicants such as state-level agencies, federally
    recognized Indian tribal governments and local communities are eligible
    to apply to the applicant for assistance.

    [58] Tropical Storm Allison caused major flooding in Texas and
    Louisiana and heavy losses in other states as distant as Pennsylvania.

    [59] The price of flood insurance varies by risk; therefore, the cost
    of purchasing flood insurance is lower in a low-risk area, or flood
    zone, than in a high-risk area.

    [60] Since 2004, FEMA has implemented a mass media campaign called
    "FloodSmart" to educate the public about the risks of flooding and to
    encourage the purchase of flood insurance.

    [61] Losses for the undetermined and the Emergency Program accounted
    for less than 2 percent of all losses. From 1997 through 2006, 67
    percent of the 44.5 million policies in force were in the high-risk
    zone, followed by 30 percent in moderate-to low-risk zones, and 2
    percent in high-risk coastal zones.

    [62] The maximum amount of insurance available for purchase is lower
    for NFIP's Emergency Program. We excluded analysis of the Emergency
    Program because policyholders in this program represent 1 percent or
    less of all policyholders for each of the years we reviewed. The
    maximum amounts of insurance that can be purchased (for either building
    or contents coverage) did not change from 1997 through 2006.

    [63] American Institute for Research, Assessing the Adequacy of the
    National Flood Insurance Program's 1 Percent Flood Standard (College
    Park, Md.: University of Maryland, October 2006).

    [End of section]

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