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 FEMAï¿½s 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 
2006ï¿½consistent with rising home valuesï¿½the 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 FEMAï¿½s 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, FEMAï¿½s 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 
[email protected]. 

[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 contractorï¿½s 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 [email protected]. 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 [email protected]: 

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. ï¿½ï¿½ 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. ï¿½ 4013. 

[12] The maximum policy limit of $100,000 is for contents only coverage 
for residential properties. 42 U.S.C. ï¿½ 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. ï¿½ 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. ï¿½ï¿½ 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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