Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance (Chapter Report, 05/23/96, GAO/RCED-96-113).
Pursuant to a congressional request, GAO reviewed the Federal Emergency
Management Agency's (FEMA) public assistance program, focusing on: (1)
its procedures for determining eligibility for public assistance; (2)
its efforts to ensure that funds are spent in accordance with authorized
work; and (3) options to modify FEMA eligibility criteria.
GAO found that: (1) while FEMA must fund the restoration of eligible
facilities in accordance with applicable building codes, it is unclear
whether the building codes that existed before the disaster or at the
time of restoration should apply; (2) the eligibility of certain
private, nonprofit facilities that provide essential governmental
services to the general public is unclear; (3) without clear eligibility
criteria, FEMA cannot control program costs or ensure consistent
eligibility determinations; (4) eligibility determinations were not
systematically codified and disseminated to FEMA personnel; (5) FEMA
relies on states, independent audits, and its inspector general to
ensure that federal funds are only spent on eligible restorations; and
(6) changing various eligibility requirements in accordance with FEMA
program officials' recommendations could reduce FEMA public assistance
program costs.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-96-113
TITLE: Disaster Assistance: Improvements Needed in Determining
Eligibility for Public Assistance
DATE: 05/23/96
SUBJECT: Building codes
Disaster relief aid
Information dissemination operations
Fund audits
Eligibility criteria
Grants to states
Non-profit organizations
Property damages
Facility repairs
IDENTIFIER: Loma Prieta Earthquake
Northridge Earthquake
FEMA Public Assistance Program
FHWA Emergency Relief Program
SCS Emergency Watershed Protection Program
Community Development Block Grant
Hurricane Andrew
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to the Chairman, Subcommittee on VA, HUD and Independent
Agencies, Committee on Appropriations, U.S. Senate
May 1996
DISASTER ASSISTANCE - IMPROVEMENTS
NEEDED IN DETERMINING ELIGIBILITY
FOR PUBLIC ASSISTANCE
GAO/RCED-96-113
Eligibility for FEMA's Public Assistance
(385601)
Abbreviations
=============================================================== ABBREV
CDBG - Community Development Block Grant
DSR - damage survey report
FEMA - Federal Emergency Management Agency
FHWA - Federal Highway Administration
GAO - General Accounting Office
HUD - Department of Housing and Urban Development
NEMA - National Emergency Management Association
OIG - Office of Inspector General
OMB - Office of Management and Budget
PNP - private nonprofit organization
USDA - U.S. Department of Agriculture
Letter
=============================================================== LETTER
B-271543
May 23, 1996
The Honorable Christopher S. Bond
Chairman, Subcommittee on VA, HUD
and Independent Agencies
Committee on Appropriations
United States Senate
Dear Mr. Chairman:
As requested, we are reporting on the Federal Emergency Management
Agency's (FEMA) procedures for determining the eligibility for
assistance, under FEMA's public assistance program, of state and
local governments and other recipients following disasters, the
controls used to ensure that disbursements made under the program are
in accordance with the work authorized by FEMA, and possible options
to modify FEMA's eligibility criteria. The report contains
recommendations to the Director of FEMA.
We are sending copies of this report to the appropriate congressional
committees; the Director, FEMA; the Director, Office of Management
and Budget; and the President, National Emergency Management
Association. We will also make copies available to other interested
parties upon request.
If you or your staff have any questions, please call me on (202)
512-7631. Major contributors to this report are listed in appendix
IV.
Sincerely yours,
Judy A. England-Joseph
Director, Housing and Community
Development Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
The Federal Emergency Management Agency's (FEMA) public assistance
program funds the repair of eligible public and private nonprofit
facilities--such as roads, government buildings, utilities, and
hospitals--that are damaged in natural disasters. Under the program,
FEMA has obligated over $6.5 billion for disasters that occurred
during fiscal years 1989 through 1994. Concerned about the growing
costs, the Chairman of the Subcommittee on VA, HUD and Independent
Agencies, Senate Committee on Appropriations, asked GAO to
-- review FEMA's criteria for determining eligibility for public
assistance,
-- determine how FEMA ensures that public assistance funds are
expended only for eligible items, and
-- identify changes in eligibility that could lower the costs of
public assistance in the future.
BACKGROUND
---------------------------------------------------------- Chapter 0:1
When disasters such as floods, tornadoes, or earthquakes strike,
state and local governments are called upon to help citizens cope.
FEMA may provide assistance if the President, at a state governor's
request, declares that an emergency or disaster exists and that
federal resources are required to supplement state and local
resources. The 1988 Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C. 5121 and following) authorizes
the President to issue major disaster or emergency declarations and
specifies the types of assistance the President may authorize. The
assistance includes temporary housing and other benefits for
individuals as well as public assistance.
FEMA may make public assistance grants to state and local governments
and certain nonprofit organizations for three general purposes: the
removal of debris, emergency protective measures,\1
and permanent restoration. Generally, the grants are to cover not
less than 75 percent of the eligible costs. Over the years, the
Congress has increased eligibility for public assistance through
legislation that expanded the categories of assistance and/or
specified the persons or organizations eligible to receive the
assistance. FEMA is responsible for developing regulations and
guidance to implement the program.
Following a disaster declaration, FEMA helps survey damaged
facilities and prepares damage survey reports that contain estimates
of repair costs. Officials in FEMA's regional offices make the
initial determinations of eligibility. The applicants may appeal
these decisions, first to the regional office and subsequently to
FEMA headquarters.
--------------------
\1 Emergency protective measures are activities undertaken to save
lives and protect the public's health and safety; examples include
search and rescue operations, security measures, and demolition and
removal of damaged structures.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:2
FEMA's criteria for determining (1) the extent to which the permanent
restoration of disaster-damaged public facilities is eligible for
funding and (2) the eligibility of certain private nonprofit
facilities are ambiguous. Also, FEMA has not systematically updated
or disseminated to regional officials its policy changes affecting
eligibility. Clear and up-to-date criteria are needed because
eligibility decisions effectively determine the level of federal
spending for public assistance. Furthermore, in large disasters FEMA
often uses temporary personnel with limited training to help prepare
and process damage survey reports. Without clear and up-to-date
criteria, inconsistent or inequitable eligibility determinations and
time-consuming appeals may be more likely to occur.
FEMA relies on states (the grantees for all public assistance grants)
to ensure that expenditures are limited to eligible items. The
states certify to FEMA at the completion of each subgrantee's project
(subgrantees are state and local government agencies, nonprofit
organizations, and other recipients) and at the closeout of each
disaster that all disbursements of public assistance grants have been
in accordance with the approved damage survey reports. Additional
controls over disbursements include audits of some subgrantees by (1)
independent auditors pursuant to the Single Audit Act of 1984\2 and
(2) FEMA's Office of Inspector General, with possible augmentation by
state audit agencies.
Public assistance program officials in FEMA's 10 regional offices
identified a variety of options that, if implemented, could reduce
the costs of the public assistance program. Among the options
recommended most strongly were placing limits on the appeals process;
eliminating eligibility for some facilities that generate revenue,
lack required insurance, or are not delivering government services;
and limiting the impact of codes and standards. Implementing these
options might require amending the Stafford Act and/or FEMA's
regulations.
--------------------
\2 The Single Audit Act generally requires that entities receiving
over $25,000 annually in federal grant funds have an independent
audit (see ch. 3).
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:3
CLEARER CRITERIA ARE NEEDED
TO DETERMINE ELIGIBILITY
-------------------------------------------------------- Chapter 0:3.1
GAO's review of FEMA's regulations and implementing guidance, and
discussions with FEMA officials responsible for making eligibility
determinations, revealed a need for clarifying the criteria related
to the standards (building codes) to which damaged facilities should
be restored. Generally, FEMA's regulations provide that the agency
will provide funding to restore an eligible facility on the basis of
its design as it existed immediately before the disaster and in
accordance with the applicable standards. For a number of reasons,
determining what standards are "applicable" can be contentious. One
reason is that FEMA may fund the restoration to standards that were
established after the damage occurred. Following the January 1994
Northridge (California) earthquake, a decision on assistance for
restoring damaged hospitals was delayed for 2 years because of a
dispute over which standards were applicable.
Similarly, the criteria for determining the eligibility of certain
private, nonprofit facilities are unclear. The Stafford Act and
FEMA's regulations provide that private nonprofit facilities that
"provide essential services of a governmental nature to the general
public" may be eligible for assistance. Because of this criterion's
ambiguity, FEMA officials have found it difficult to interpret and
apply. FEMA's Inspector General has cited examples of private
nonprofits that do not appear to provide essential government
services, yet have received public assistance funding. For example,
following the Northridge earthquake, a small performing arts theater
received about $1.5 million to repair earthquake damage because it
offered discount tickets to senior citizens and provided acting
workshops for youth and seniors.
Clear criteria are important for controlling federal costs and
helping to ensure consistent and equitable eligibility
determinations. For example, depending on which set of standards
were "applicable," FEMA's costs of restoring one of the hospitals
damaged in the Northridge earthquake would have ranged from $3.9
million to $64 million. Furthermore, in large disasters FEMA often
uses temporary personnel with limited training to help prepare and
process damage survey reports, which are used in determining the
scope of the work eligible for funding.
According to FEMA regional officials, the decisions made in
determining eligibility following one disaster are not systematically
codified or disseminated to FEMA personnel to serve as a precedent in
subsequent disasters. FEMA has supplemented its regulations with a
manual published in draft in 1992 and with policy memorandums. The
manual was intended to be supplemented with guidance, examples, and
training to clarify the eligibility criteria and help ensure their
consistent application; because of competing workload, this did not
occur.
FEMA and other officials recognize the need to clarify the criteria
and improve policy dissemination. At a January 1996 hearing,\3 the
Director of FEMA noted that in previous disasters, FEMA staff worked
without having policies in place that addressed public assistance,
making eligibility determinations difficult. FEMA plans to republish
and subsequently update the public assistance manual and has begun
offering a new training course for officials who prepare damage
survey reports.
--------------------
\3 Hearings before the Subcommittee on Government Management,
Information, and Technology, House Committee on Government Reform and
Oversight, Northridge, California, January 19, 1996.
FEMA RELIES ON STATE
CERTIFICATIONS AND
INDEPENDENT AUDITS TO ENSURE
ELIGIBILITY OF EXPENDITURES
-------------------------------------------------------- Chapter 0:3.2
In accordance with a governmentwide effort launched in 1988 to
simplify federal grant administration, FEMA relies on states--in
their role as grantees--to ensure that expenditures are limited to
eligible items. The states are responsible for disbursements to
subgrantees and for certifying at the completion of each project
undertaken by a subgrantee and at the closeout of each disaster that
all disbursements have been proper and eligible under the approved
damage survey reports.
Independent audits serve as a further check on the eligibility of the
items funded by public assistance grants, although the audit coverage
is somewhat limited. The FEMA Inspector General audits recipients on
a selective basis and attempts to audit any disaster when asked to by
a FEMA regional office. For a number of reasons, federally required
single audits may not include public assistance funds from FEMA. For
the 4-year period ending September 30, 1995, the FEMA Inspector
General received 219 such reports, 17 of which questioned disaster
assistance expenditures.
CHANGES TO ELIGIBILITY
CRITERIA COULD REDUCE THE
PUBLIC ASSISTANCE PROGRAM'S
COSTS
-------------------------------------------------------- Chapter 0:3.3
Because the public assistance officials in FEMA's 10 regional offices
are involved in the day-to-day operations of the public assistance
program, giving them a high degree of expertise, GAO obtained those
officials' recommendations for reducing the costs of future public
assistance. GAO also asked the officials to identify the potential
obstacles to implementing those recommendations. GAO asked the
National Emergency Management Association, which represents state
emergency management officials, to respond to the options that the
FEMA officials generated because implementing many of the options
would affect the states. Because the available records did not
permit quantifying the impact of each option on past public
assistance expenditures, and because future costs will be driven in
part by the number and scope of declared disasters, the options'
impact on the public assistance costs of future disasters is
uncertain.
Following are the options that (1) the FEMA regional officials
strongly recommended and (2) the National Emergency Management
Association endorsed for further consideration:
-- Better define which local authorities govern the standards
applicable to the permanent restoration of damaged facilities.
-- Limit the time period following a disaster during which the
authority can establish new standards applicable to the
restoration.
-- Eliminate eligibility for facilities that are owned by
redevelopment agencies and are awaiting investment by a
public-private partnership.
-- Restrict the eligibility of public facilities to those being
actively used for public purposes at the time of the disaster.
-- Reduce the number of times that recipients may appeal a decision
by FEMA on the eligibility of work.
-- Improve insurance requirements by (1) eliminating the states'
current authority to waive the mandatory purchase of property
insurance otherwise required as a condition of FEMA's financial
assistance and (2) requiring applicants to obtain at least
partial insurance, if it is reasonably available.
Additional options strongly recommended by the FEMA officials or
endorsed for further consideration by the National Emergency
Management Association are discussed in chapter 4.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:4
GAO recommends that the Director of FEMA issue criteria that more
clearly and comprehensively identify what facilities and work are
eligible for public assistance and develop a system for disseminating
these criteria and future changes in the criteria to FEMA regional
staff. GAO also recommends that the Director determine whether the
options identified by FEMA officials should be implemented and, if
so, take action to implement them, including, if necessary, proposing
changes to the legislation and/or FEMA's regulations.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:5
GAO provided a draft of this report to FEMA for its review and
comment. In responding, the Director of FEMA commented that the
report is clear in its presentation and constructive in its
recommendations and agreed in principle with the recommendations.
Specifically, the Director stated that FEMA (1) supports the issuance
of criteria that more clearly and comprehensively identify what
facilities are eligible for public assistance and (2) will propose
changes in regulations as policy decisions are made on the options
suggested by GAO, FEMA officials, the FEMA Inspector General, the
National Emergency Management Association, and others.
The Director also commented that there are places in the report where
another perspective is needed for balance. Specifically, the
Director commented that the report should (1) not attribute the
magnitude of increasing disaster assistance costs to the lack of
clarity in the eligibility criteria, (2) clarify the management
oversight function of FEMA's architect and engineering studies, and
(3) point out that FEMA is more involved in verifying the eligibility
of the costs of large projects. GAO modified the report where
appropriate in response to these comments. The letter from the
Director of FEMA and GAO's response are in appendix III.
INTRODUCTION
============================================================ Chapter 1
When disasters such as floods, tornadoes, or earthquakes strike,
state and local governments are called upon to help citizens cope.
Assistance from the Federal Emergency Management Agency (FEMA) may be
provided if the President, at a state governor's request, declares
that an emergency or disaster exists and that federal resources are
required to supplement state and local resources. The Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5121 and following) authorizes the President to issue major disaster
or emergency declarations and specifies the types of assistance that
the President may authorize. The scope of authorized assistance is
smaller for emergencies than for major disasters.
THE PUBLIC ASSISTANCE PROGRAM
---------------------------------------------------------- Chapter 1:1
Generally, FEMA's public assistance program (also called the
"infrastructure" program) provides financial and other assistance to
restore or rebuild disaster-damaged facilities that serve a public
purpose.\1 Under the Stafford Act, FEMA may make public assistance
grants to state and local governments and certain nonprofit
organizations for the repair of a range of facilities, including
government buildings, water distribution systems, parks and
recreational facilities, and public utilities. Generally, the grants
are to cover not less than 75 percent of eligible costs. The act
also provides that FEMA's grants for permanent restoration may
include work designed to mitigate the effects of future disasters--in
effect, to lessen or prevent future damages by making the facilities
better able to withstand disaster events. As of August 1995, FEMA
had obligated a total of over $6.5 billion (constant 1995 dollars) in
public assistance grants for major disasters declared during fiscal
years 1989 through 1994.\2
--------------------
\1 FEMA also provides assistance to individuals, such as
disaster-related unemployment benefits, temporary housing, and cash
grants for clothing and medical expenses.
\2 We obtained detailed cost data for disasters during fiscal years
1989 through 1994 because (1) FEMA's data for these years were the
most complete and (2) disaster assistance legislation was
substantively revised in 1988.
ASSISTANCE IS PROVIDED FOR A
VARIETY OF FACILITIES
-------------------------------------------------------- Chapter 1:1.1
Generally, FEMA provides public assistance grants to repair or
restore the facilities of states, municipalities, and other local
government entities. In addition, grants may go to private,
nonprofit organizations that own and operate certain types of damaged
facilities. The grants are made for three general purposes: debris
removal, emergency protective measures, and permanent restoration.
Emergency protective measures are activities undertaken to save lives
and protect the public's health and safety; examples include search
and rescue operations, security measures, the provision of temporary
transportation or communication facilities, and demolition and
removal of damaged structures that pose a safety threat to the
general public.
Generally, permanent restoration work is aimed at restoring a
facility to perform its pre-disaster function; however, it may
include work designed to mitigate the effects of future disasters.
FEMA categorizes facilities eligible for permanent restoration as
follows:
-- Roads and bridges--non-federal-aid roads, highways, and
bridges.\3
-- Water control facilities, including dams, levees, drainage
channels, shore protection devices, and pumping facilities.
-- Buildings and equipment, including the contents of buildings as
well as equipment such as vehicles (for example, fire trucks or
police cars).
-- Utilities.
-- Parks, recreational, and other facilities, including playground
equipment, swimming pools, boat docks and piers, bath houses,
tennis courts, picnic tables, golf courses, and some trees and
landscape features.
In addition, FEMA makes public assistance grants to cover a portion
of the cost of administering grants for the above purposes. The
amounts of grants for administrative expenses are determined by a
formula that takes into account the total amount of public assistance
grants provided to grantees following the disaster.
--------------------
\3 Federal-aid highways and roads are the more important state,
county, and city roads; they constitute about 25 percent of all
public road mileage.
PUBLIC ASSISTANCE COSTS HAVE
INCREASED IN RECENT YEARS
-------------------------------------------------------- Chapter 1:1.2
As shown in table 1.1, the amounts that FEMA has obligated for public
assistance have increased substantially for the disasters and
emergencies declared in recent years, exceeding $2 billion for fiscal
year 1994 alone.\4 In constant 1995 dollars, FEMA obligated over $6.5
billion in public assistance for 246 disasters and emergencies
declared during fiscal years 1989 through 1994, as compared with
about $1 billion for 151 disasters and emergencies declared during
the preceding 6 fiscal years.\5
Table 1.1
FEMA's Obligations for Public
Assistance, Major Disasters and
Emergencies Declared in Fiscal Years
1983-1994
(In millions of constant 1995 dollars)
Number of
disasters and
Fiscal year emergencies Amount
------------------------------ ------------------ ------------------
1994 37 $2,153.8
1993 58 1,073.7
1992 48 1,394.5
1991 39 301.8
1990 35 927.6
1989 29 686.4
======================================================================
Total, 1989-94 246 $6,537.8
1988 17 72.4
1987 25 102.1
1986 30 360.3
1985 19 63.9
1984 40 142.6
1983 20 310.2
======================================================================
Total, 1983-88 151 $1,051.5
----------------------------------------------------------------------
Note: The obligations for the disasters declared in each fiscal year
were converted to constant dollars using the Gross Domestic Product
implicit price deflator series published by the Department of
Commerce. Because obligations for a disaster may be made during the
year(s) following the fiscal year in which the disaster was declared,
the conversion may somewhat overstate the obligations for earlier
disasters.
Source: GAO's analysis of FEMA's data.
FEMA could not readily provide data showing the amounts obligated for
the permanent restoration of each category of facilities; however,
FEMA provided data showing the projected cost for each category. The
projected costs are FEMA's best estimates of what the total
obligations will be when all activities associated with the disaster
are completed. As shown in table 1.2, for disasters that occurred
during fiscal years 1989 through 1994, the public assistance category
with the highest projected cost was the permanent restoration of
public buildings and equipment--over $2.6 billion, or about one-third
of the total projected public assistance costs for these disasters.
Table 1.2
Projected Public Assistance Costs for
Disasters in Fiscal Years 1989-1994
(In millions of 1995 dollars)
Public assistance category Amount
-------------------------------------------------- ------------------
Permanent restoration of public buildings and $2,641.6
equipment
Emergency protective measures 1,769.6
Debris removal 1,322.6
Permanent restoration of public utilities 1,178.2
Permanent restoration of roads and bridges 571.5
Permanent restoration of parks, recreational, and 564.6
other facilities
Permanent restoration of water control facilities 259.7
Grant administration 175.3
======================================================================
Total $8,483.1
----------------------------------------------------------------------
Source: GAO's analysis of FEMA's data.
--------------------
\4 Table 1.1 reflects FEMA's obligations through August 1995 for the
disasters declared in fiscal years 1989 through 1994. The actual
costs of the disasters for these fiscal years will likely be higher
as additional projects are approved or completed. The data for
fiscal years 1983 to 1988 are current as of August 1994; according to
FEMA, the data are unlikely to change for these years.
\5 FEMA's total disaster assistance obligations during fiscal years
1989 through 1994, including assistance for individuals, was about
$12.4 billion in constant 1995 dollars.
OTHER PUBLIC
ASSISTANCE-RELATED COSTS
-------------------------------------------------------- Chapter 1:1.3
To help verify the scope of work needed for individual public
assistance projects and the estimated costs, FEMA contracts with
technical specialists such as architect/engineering firms. For
disasters declared during fiscal years 1989 through 1994, FEMA has
obligated about $71.4 million for this purpose.\6
Under section 404 of the Stafford Act, FEMA may provide additional
grants to mitigate the damage from future disasters, for example, to
strengthen or retrofit undamaged public facilities in the disaster
area. These grants can cover up to 75 percent of the cost of the
mitigation effort. For the disasters declared during fiscal years
1989 through 1994, FEMA has obligated about $275.3 million for this
purpose.
Also, when a disaster is declared, FEMA may make "mission
assignments" directing other federal agencies to perform work.
Mission assignments may be made for a number of purposes, including
those related to restoring public services or facilities; for
example, FEMA may assign the U.S. Army Corps of Engineers the
mission of debris removal in a disaster area. According to FEMA,
mission assignments are primarily for public assistance work. For
disasters declared in fiscal years 1989 through 1994, FEMA obligated
about $1.07 billion for mission assignments. According to a 1995
Senate report, for fiscal years 1990 through 1993 FEMA obligated
nearly two-thirds of all mission assignment dollars to the Corps of
Engineers.\7
--------------------
\6 Unless stated otherwise, dollar figures in this chapter are
expressed in constant 1995 dollars.
\7 Federal Disaster Assistance, Report of the Senate Task Force on
Funding Disaster Relief (Senate Document No. 104-4, Mar. 15, 1995).
ELIGIBILITY FOR PUBLIC
ASSISTANCE HAS EXPANDED
-------------------------------------------------------- Chapter 1:1.4
A number of factors may help explain the trend toward increasing
costs, including an increase in the number of declared disasters and
emergencies and the incidence of unusually large disasters. The
period encompassing fiscal years 1989 through 1994 included some very
destructive and costly disasters, including hurricanes Andrew and
Iniki in 1992, the Midwest floods of 1993, and the Northridge
(California) earthquake in 1994. FEMA estimates that the total
public assistance costs of the Northridge earthquake alone will
exceed $3.4 billion.
Additionally, more facilities have gradually become eligible for
public assistance. The Stafford Act is an expansion of the first
permanent authority (P.L. 81-875) enacted in 1950 to provide
disaster assistance on a continuing basis without the need for
congressional action.\8 Over the years, the Congress has generally
increased eligibility for public assistance through legislation that
expanded the categories of assistance and/or specified persons or
organizations eligible to receive assistance. In some cases,
legislation also imposed requirements as a condition of eligibility.
(App. I provides a chronology of major legislative changes affecting
public assistance eligibility.)
Also, FEMA has made regulatory changes that may have expanded the
federal cost of the public assistance program, according to a July
1995 report by FEMA's Inspector General.\9 These included changes in
(1) the building codes applicable to the repair and restoration of
damaged buildings and (2) the damage threshold governing the decision
on whether to repair or replace a damaged facility.
--------------------
\8 In 1988, P.L. 100-707 amended existing disaster relief
legislation and renamed it as the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (the Stafford Act).
\9 Options for Reducing Public Assistance Program Costs (Inspection
Report I-02-95, July 1995).
OTHER FEDERAL AGENCIES HELP
REPAIR PUBLIC FACILITIES
---------------------------------------------------------- Chapter 1:2
Under authorities other than the Stafford Act, federal agencies
provide financial assistance for the permanent repair or restoration
of certain public facilities--an important factor in determining the
eligibility of some of FEMA's public assistance. The Federal Highway
Administration's (FHWA) emergency relief program funds 80 percent of
the costs of permanently restoring federal-aid roads or highways (90
percent for Interstate highways) that have been seriously damaged by
natural disasters. By law, FHWA can provide up to $100 million in
emergency relief funding to a state for each natural disaster or
catastrophic failure (such as a bridge collapse) that is found
eligible; however, the Congress has passed special legislation
lifting the cap for specific disasters. In fiscal years 1989 through
1994, FHWA obligated over $2.5 billion for its emergency relief
program.
The Department of Agriculture's (USDA) Emergency Watershed Protection
program funds, among other things, a portion of the costs of
repairing certain nonfederal levees and other water control works
damaged by flooding. The program is applicable to small-scale,
localized disasters as well as those of national magnitude. For
fiscal years 1989 through 1994, USDA received about $494 million in
appropriations for this program. Also, the U.S. Army Corps of
Engineers funds 80 percent of the costs to repair qualifying
flood-damaged nonfederal levees. To qualify for the Corps' funding,
levees must be publicly sponsored by entities such as levee districts
and municipalities. The Corps obligated about $54.5 million for the
program during fiscal years 1989 through 1994.
The Department of Housing and Urban Development (HUD) provides
financial assistance to public housing authorities for the
modernization (physical improvement) of public housing. Distributed
by formulas, the funds may be used to meet modernization needs
resulting from natural and other disasters and from emergencies. In
addition, HUD administers a $75 million reserve fund (established in
1992) specifically for disaster- and emergency-related modernization
needs. HUD could not readily provide the amount of formula funds
used for repairing disaster-damaged public housing; about $62 million
from the emergency reserve fund was allocated during fiscal years
1993 through 1994.
Also, funds provided under HUD's Community Development Block Grant
(CDBG) program may be used for disaster recovery. CDBG funds may be
used for some purposes similar to those for which FEMA's public
assistance funds are used, including clearing debris, providing extra
security, reconstructing essential utility facilities, and, in some
cases, repairing or reconstructing government buildings. HUD
officials could not provide accurate data on the amount of CDBG funds
used for disaster assistance.\10
Program appropriations for fiscal years 1989 to 1994 ranged from
about $3.1 billion to about $4.4 billion.
--------------------
\10 According to an official in HUD's Office of Block Grant
Assistance, grantees are required to report on their use of CDBG
funds for disaster assistance; however, a backlog exists on recording
the information.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:3
The Chairman, Subcommittee on VA, HUD and Independent Agencies,
Senate Committee on Appropriations, asked GAO to
-- review FEMA's criteria for determining eligibility for public
assistance,
-- determine how FEMA ensures that public assistance funds are
expended only for eligible items, and
-- identify changes in eligibility that could lower the costs of
federal public assistance in the future.
To review FEMA's criteria for determining eligibility, we reviewed
the Stafford Act and related regulations, FEMA's public assistance
manual and policy memorandums, and other relevant documents. We
interviewed public assistance officials at FEMA's Washington, D.C.,
headquarters, including the Engineering Branch Chief, Infrastructure
Support Division. We also interviewed officials at FEMA's regional
office in San Francisco and its disaster field office in Pasadena,
California. We selected these field locations because of their
responsibility for administering the public assistance program for
the Northridge earthquake and other significant disasters. At the
field locations, we documented the steps involved in approving
projects and reviewed files pertaining to specific public assistance
projects. We also interviewed officials of FEMA's Office of
Inspector General (OIG) and reviewed OIG reports pertaining to public
assistance generally and to specific disasters. In addition, we
incorporated information obtained in telephone interviews with public
assistance officials in each of FEMA's 10 regions (see below).
To determine how FEMA ensures that funds are expended only for
eligible items, we reviewed FEMA's written guidance and procedures
for disbursing funds to public assistance grantees. At FEMA's
headquarters, the California locations, and FEMA's regional office in
Atlanta, Georgia, we interviewed financial officials, including
FEMA's Deputy Chief Financial Officer; public assistance personnel of
the Response and Recovery Directorate; and state personnel. We also
examined the relevant financial standards and requirements posed by
the Office of Management and Budget. Because FEMA's process involves
audits, we interviewed OIG officials, including the Deputy Inspector
General, and obtained OIG and contractors' audit reports of public
assistance projects. We also obtained from the OIG information about
the extent of its audit coverage. We also interviewed and obtained
documents from the Price-Waterhouse auditors contracted by FEMA.
To identify the changes in eligibility criteria that could
potentially reduce the costs of public assistance in the future, we
examined published literature and reports, including reports by
FEMA's Inspector General. We also surveyed public assistance
officials in each of FEMA's 10 regional offices to obtain their ideas
for reducing the future costs of public assistance, including the
rationale for each proposal and the likely impacts. (Because of
limitations on the availability of FEMA's financial data, we were
generally unable to estimate the potential impacts on public
assistance expenditures.) We specifically surveyed these officials
because they work closely with the program on a day-to-day basis and
are knowledgeable about the application of FEMA's public assistance
criteria. To balance their perspectives, we also asked the National
Emergency Management Association--an organization of state emergency
management officials--and the Association of State Floodplain
Managers to comment on the proposals cited by the FEMA regional
officials. (A list of the proposals not discussed elsewhere in this
report and additional details on our methodology are contained in
app. II.)
FEMA provided historical data on its financial obligations and cost
projections. We did not independently verify the accuracy of this
information. In March 1995, we testified that because FEMA's
Disaster Relief Fund (which accounts for the majority of the agency's
funds) has not been subject to audit, there is no assurance that the
fund's financial data are accurate.\11 In July 1995, FEMA's Inspector
General reported that FEMA's accounting system lacks the internal
controls and discipline necessary to ensure the integrity of
financial data.\12
We provided a draft of this report to FEMA for its review and
comment. FEMA provided comments in a letter from the Director; this
letter and our response are in appendix III. We modified the report
where appropriate in response to the comments. Our review was
conducted from August 1995 through March 1996 in accordance with
generally accepted government audit standards.
--------------------
\11 Disaster Assistance: Information on Expenditures and Proposals
to Improve Effectiveness and Reduce Future Costs (GAO/T-RCED-95-140,
Mar. 16, 1995).
\12 Audit of FEMA's Disaster Relief Fund (Audit Report H-16-95, July
1995).
CLEARER ELIGIBILITY CRITERIA COULD
IMPROVE ACCURACY AND CONSISTENCY
OF DETERMINATIONS
============================================================ Chapter 2
The Stafford Act provides a general framework for federal assistance
programs for public losses sustained in disasters. Within that
framework, FEMA provides the basic criteria for determining the work
that is eligible for public assistance funding. While applying the
criteria may inevitably entail subjectivity, we found ambiguities in
the criteria that created difficulties in determining (1) the extent
to which the permanent restoration of disaster-damaged facilities is
eligible for funding and (2) the eligibility of the facilities of
private nonprofit applicants. We also found that until recently,
FEMA had not systematically updated or disseminated policy changes to
the regional officials involved in making eligibility determinations.
The decisions on eligibility effectively determine the level of
federal spending for public assistance, affecting the amounts of
grants and of FEMA's and applicants' administrative costs.
Additionally, without clear, up-to-date criteria, inconsistent or
inequitable eligibility determinations and time-consuming appeals by
grantees and subgrantees may be more likely to occur. The importance
of clear criteria is heightened because in large disasters FEMA often
uses temporary personnel with limited training to help prepare and
process applications. FEMA and other officials have recognized a
general need for clearer criteria and improved policy dissemination
to help determine eligibility for public assistance.
CRITERIA FOR STANDARDS
APPLICABLE TO PERMANENT
RESTORATION ARE NOT SPECIFIC
---------------------------------------------------------- Chapter 2:1
For disasters declared in fiscal years 1989 through 1994, FEMA
projects that public assistance grants for permanent repairs and
restorations will total over $5.2 billion (in 1995 dollars). The
decisions made on the eligibility of work on facilities are based on
the general criteria for determining federal public assistance and on
the criteria specific to such facilities. In order to apply these
criteria, FEMA officials may have to make subjective judgments
because the criteria lack specificity and/or concrete examples.
GENERAL CRITERIA ARE USED TO
SCREEN POTENTIAL PROJECTS
-------------------------------------------------------- Chapter 2:1.1
FEMA requires that potential applicants prepare a list of all damaged
sites and equipment or inventory lost, provide photos or site
sketches, and provide information on insurance coverage and
applicable codes and standards. A survey team--consisting of FEMA,
other federal, state, and/or local officials--inspects each damage
site and reviews the applicable records to determine the extent of
the disaster damage, the scope of the eligible work, and the
estimated cost of that work. This information is recorded on a
damage survey report (DSR). DSRs are reviewed by FEMA officials
located at the relevant regional offices or, in the case of larger
disasters, at disaster field offices near the disaster areas. The
reports are reviewed to verify the scope of work, cost calculations,
adequacy of documentation, eligibility, and compliance with special
requirements, such as those for floodplain management and hazard
mitigation. (For facilities that are approved, the DSR serves as the
basis for obligating FEMA funds.)
Once it is determined that an applicant is eligible for federal
public assistance, the next step is to identify what work is eligible
for such assistance. There are three general criteria that apply to
all types of work for all applicants:
-- The work must be required as a direct result of the declared
disaster. Primarily, damages that occur during the "incident
period,"\1 or are the direct result of events that occurred
during the incident period, are considered for eligibility.
Also potentially eligible are (1) protective measures and other
preparation activities performed within a reasonable time in
advance of the event and (2) damages that occur after the close
of the period that can be tied directly to the declared event.
For example, a landslide caused by heavy rains may not occur for
some time after the rains have stopped.
-- The damages must have occurred and the work or activity must be
performed within the designated disaster area. A presidential
disaster declaration authorizes federal assistance in the
affected state; FEMA determines which counties within the state
will receive assistance and the type(s) of assistance. Other
political subdivisions, such as a city or special district, may
be designated, but the county is the most common unit of
designation.
-- The work or expense must be the legal responsibility of the
applicant. Generally, ownership of a facility is sufficient to
establish responsibility for repairs to the facility.
--------------------
\1 The period of time during which the disaster event occurred, as
established by FEMA in consultation with a state representative.
FEMA HAS ENCOUNTERED
PROBLEMS IN DETERMINING
STANDARDS APPLICABLE TO
PERMANENT RESTORATION OF
FACILITIES
-------------------------------------------------------- Chapter 2:1.2
According to FEMA regional officials, applying the criteria for
public assistance can be difficult. Among the more problematic
issues is determining the standards (building codes) that are
applicable to repair/restoration work, which in turn affect decisions
on whether facilities should be repaired or replaced.
Generally, FEMA's criteria define eligible work as that needed to
restore the facility on the basis of the design of the facility as it
existed immediately before the disaster and in accordance with
certain other conditions; in some instances, grant funds may be used
to replace a facility entirely or for an alternative facility. One
condition is that permanent restoration work must comply with the
applicable standards. Such standards must
-- apply to the type of repair or restoration being performed (for
example, there may be different standards for repair and for new
construction);
-- be appropriate to the pre-disaster use of the facility;
-- be in writing and formally adopted by the applicant before the
project is approved;
-- apply uniformly to all similar types of facilities within the
jurisdiction of the owner of the facility; and
-- if in effect at the time of the disaster, have been enforced
during the time they were in effect.
Furthermore, to be considered "applicable," the standards must be in
a formally adopted written ordinance of the jurisdiction in which the
facility is located, or be a state or federal requirement. The
standards do not necessarily have to be in effect at the time of the
disaster; if the applicant adopts new standards before FEMA has
approved the damage survey report for the permanent restoration of a
facility in the jurisdiction, the work done to meet these standards
may be eligible for public assistance. As discussed in chapter 4,
FEMA regional officials cited a need to better define the authority
with the ability to adopt and approve standards. They suggested that
clarifying the language in the regulations to define who has the
authority to adopt and approve standards might reduce the costs and
the confusion that surrounds this issue.
Also, to be applicable to the eligible facility, FEMA requires that
the standards must be applied to all similar types of facilities.
However, there are no criteria that (1) specify a time period during
which the newly adopted standards must be in place after the eligible
facility is funded or (2) define "similar" facilities.
According to a public assistance official at FEMA headquarters, FEMA
can determine whether or not post-disaster standards proposed for the
restoration of a facility are "reasonable" before making a funding
decision. However, he said that there are no written criteria to
determine reasonableness. He added that FEMA assumed that public
scrutiny during the adoption process would discourage unreasonable
standards, because the standards have to be applicable to all similar
facilities whether owned by the public or private sector. However,
this approach is not without problems. For example, the official
noted that a standard adopted for hospitals after the Northridge
earthquake, although not necessarily unreasonable, provided for
extensive upgrading for relatively little damage, and there was not
the self-policing effect that FEMA had expected.
FEMA inspectors involved in assessing the damages following the
Northridge earthquake said that determining the applicability of
standards appears especially problematic in the case of earthquakes.
FEMA and its applicants have had significant disagreements about the
applicability of standards to eligible facilities following both the
Loma Prieta and Northridge earthquakes. A source of contention
between FEMA and some applicants surrounds the applicability of
triggers--integral parts of the building codes signaling the point at
which various upgrades, or the replacement of an entire facility,
must be undertaken. Further complicating this problem is the fact
that in the case of earthquakes, some structural damage may not be
apparent upon first inspection.
Determining what standards are applicable to permanent restoration
affects whether or not facilities will be replaced entirely. FEMA
provides that if repairing a facility (in accordance with standards
applicable to repairs) would cost 50 percent or more of the cost of
replacing the facility to its pre-disaster design (in accordance with
the standards applicable to new construction), then the facility is
eligible for replacement in accordance with the new construction
standards.
CRITERIA FOR DETERMINING
ELIGIBILITY OF CERTAIN PRIVATE
NONPROFIT APPLICANTS ARE
UNCLEAR
---------------------------------------------------------- Chapter 2:2
Before 1970, private nonprofits were not eligible for public
assistance. As detailed in appendix I, the Congress enacted
legislation over the next few years that expanded the number and
types of private nonprofit organizations eligible for assistance.
Public assistance for private nonprofits has averaged about $60
million annually during the 1990s. In addition to making specific
facilities, such as schools and hospitals, eligible, Public Law
100-707 (enacted in 1988) established a category of "other" eligible
private nonprofit organizations, defined as "other private nonprofit
facilities which provide essential services of a governmental nature
to the general public" (42 U.S.C. 5122).
When developing regulations to implement the legislation, FEMA relied
on an accompanying report\2 to define the "other" category. The
report's examples included museums, zoos, community centers,
libraries, shelters for the homeless, senior citizens' centers,
rehabilitation facilities, and shelter workshops. FEMA's regulations
incorporated the list of examples from the House report but
recognized that other, similar facilities could be included.
FEMA experienced problems in applying this regulation because, among
other things, the wide range of services provided by state and local
governments made it difficult to determine whether the services of a
private nonprofit facility were of a governmental nature. In 1993,
FEMA amended its regulations to limit eligible "other" private
nonprofit facilities to those specifically included in the House
report and those facilities whose primary purpose is the provision of
health and safety services.
It can be difficult to determine the eligibility of these other
private nonprofit facilities. The Federal Coordinating Officer (the
person in charge of FEMA's recovery efforts) for the Northridge
earthquake said that clearer eligibility criteria are needed to
determine whether private nonprofit facilities may qualify as
"community centers." Specifically, there has been much debate over
the extent to which a facility must be open to the public in order to
be eligible. In the past, FEMA gave many facilities the benefit of
the doubt and funded them, even though it appeared that these
facilities were not really open to the public.
FEMA's Inspector General has cited examples of private nonprofits
that do not appear to provide essential government services, yet
received FEMA public assistance.\3 In a July 1995 report,\4 the
Inspector General pointed out three private nonprofits that the
agency found eligible following the January 1994 Northridge
earthquake and concluded that they did not appear to provide
essential government services:
-- A contemporary dance foundation received public assistance to
repair damage to its building caused by the earthquake because
it provided a dance program for underprivileged children. As of
the beginning of April 1996, FEMA had obligated about $120,000
in public assistance funds to the foundation.
-- A small performing arts theater received public assistance for
earthquake damages because it offered discount tickets to senior
citizens and provided acting workshops for youth and seniors.
As of the beginning of April 1996, FEMA had obligated about $1.5
million in public assistance to the theater.
-- An institute, used primarily as retreat center for youth of a
particular religion, but also open to other youth and senior
citizens' groups of other religions, received public assistance
for earthquake damage. As of the beginning of April 1996, FEMA
had obligated about $4.8 million in public assistance funds to
the institute.
To supplement its regulations and to help public assistance personnel
interpret them, FEMA developed a manual entitled "Public Assistance:
Guide for Applicants." The manual (hereafter referred to as the
public assistance manual), published as a draft in September 1992,
has not been revised and is thus not entirely consistent with the
1993 regulation's definition of "other" private nonprofit facilities.
Furthermore, the manual does not define "essential services" or
"governmental nature," nor does it make clear the extent to which the
facilities must be used to provide services to the general public in
order to be eligible.
At least partly in response to its experience following the
Northridge earthquake, FEMA has revised the definition of community
center so that the primary purpose of a facility must be "community
oriented." A FEMA headquarters official told us, in early April 1996,
that the agency is again developing a definition for community
centers, but because of problems in developing the definition, it may
be some time before the definition is ready to be issued.
--------------------
\2 House Report No. 100-517.
\3 The Inspector General determined that since the 1988 legislation,
about $48 million has been granted to community centers, day-care
facilities, recreational facilities, and senior citizens' centers.
\4 Options for Reducing Public Assistance Program Costs (Inspection
Report I-02-95, July 1995).
CLEARER CRITERIA ARE IMPORTANT
FOR CONTROLLING COSTS AND OTHER
REASONS
---------------------------------------------------------- Chapter 2:3
Eligibility decisions effectively determine the level of federal
spending for public assistance, affecting the amounts of grants and
of FEMA's and applicants' administrative costs. Without clear
criteria, inconsistent or inequitable eligibility determinations and
time-consuming appeals by grantees and subgrantees may be more likely
to occur. The importance of clear criteria is heightened because in
large disasters FEMA often uses temporary personnel with limited
training to help prepare and process applications.
ELIGIBILITY DETERMINATIONS
AFFECT PUBLIC ASSISTANCE
COSTS
-------------------------------------------------------- Chapter 2:3.1
Eligibility decisions effectively determine the level of federal
spending for public assistance. Determining whether a facility is
eligible, and the appropriate scope of work, can affect the
expenditure of millions of federal dollars.
For example, determining which standards are applicable to
earthquake-damaged facilities found eligible for assistance may have
enormous federal cost implications. Originally, FEMA determined that
one hospital damaged in the Northridge earthquake was eligible for
$3.9 million for repairs and an additional $2.9 million for
cost-effective seismic upgrading. California, as the grantee, argued
that the hospital was eligible for $64 million because an alternate
set of standards was applicable. (Ultimately, as described in ch.
4, FEMA and the state reached an agreement whereby FEMA will provide
$29 million.) The Inspector General noted that the total costs of
some Northridge projects far exceeded the actual repair costs because
of the upgrades and other items "triggered" by the standards found to
be applicable.
Furthermore, to the extent that the lack of clear criteria
contributes to the number of appeals, FEMA's administrative costs are
increased. Any decision on eligibility for assistance may be
appealed by a potential recipient. If necessary, the applicant can
formally appeal to three levels: the FEMA Regional Director, the
Associate Director of the Response and Recovery Directorate, and the
Director of FEMA. Each appeal is processed through the state for
review and comment before being forwarded to FEMA. The Inspector
General's report pointed out that it is not unusual for the appeals
process to take more than 2 years to complete and concluded that the
federal government could save considerable staff time and money if
the appeals process were shortened.
According to FEMA officials, between fiscal year 1990 and the end of
fiscal year 1995, there were 882 first-level appeals of public
assistance eligibility determinations. FEMA headquarters had begun
logging in second- and third-level appeals in January 1993 and could
not quantify the number of such appeals before then. Between January
1993 and the end of March 1996, there have been 104 second-level
appeals and 30 third-level appeals. Although FEMA may always expect
some appeals, clearer guidance on applying eligibility criteria could
help reduce their number.
In the case of the Northridge earthquake recovery effort,
disagreements over applicable standards have caused additional
expenses for both FEMA and some applicants. For example:
-- FEMA has funded applicants' costs for architectural and
engineering evaluations to help ascertain the degree of
structural damage. In cases in which FEMA officials disagreed
with the evaluations, FEMA has incurred additional expense by
conducting its own architect and engineering studies.
-- Applicants have pointed out that they have found an increasing
need to hire contractors who specialize in interpreting the FEMA
public assistance program. A lack of clarity in the eligibility
criteria was cited as the reason for disagreements still
outstanding between FEMA and the state of California nearly 6
years after the Loma Prieta earthquake.
Finally, in part because of the large dollar implications, the lack
of clarity in FEMA's criteria may encourage potential applicants to
make the most of opportunities for assistance. In our 1992 report on
the recovery from the Loma Prieta earthquake, we discussed a lack of
criteria on hazard mitigation, historic buildings, and private
nonprofit applicants.\5 At the time, FEMA regional officials told us
that, lacking specific guidelines to implement the criteria, they
sought to "moderate the drain on federal disaster funds, while local
applicants sought to maximize assistance." Similarly, in the course
of preparing our June 1994 report on the potential impediments to
rebuilding after the Northridge earthquake, federal officials said
that state and local governments often try to maximize federal
contributions.\6
Ambiguities in the existing criteria for public assistance echo a
lack of clear criteria for determining that disaster damage warrants
federal assistance--i.e., a presidential disaster declaration--which
we have reported on previously.\7 As a prerequisite to federal
disaster assistance under the Stafford Act, a governor must take
"appropriate response actions" and provide information on the nature
and amount of state and local resources committed to alleviating the
results of the disaster; the President then decides whether federal
assistance is needed to supplement state and local resources.
However, the act does not identify the criteria for evaluating
governors' requests. FEMA's Inspector General reported in 1994 that
(1) neither a governor's findings nor FEMA's analysis of capability
is supported by standard factual data or related to published
criteria and (2) FEMA's process does not always ensure equity in
disaster decisions because the agency does not always review requests
for declarations in the context of previous declarations. We
previously reported that disclosing the process for evaluating
requests would help state and local governments determine the
circumstances that warrant federal assistance.\8
--------------------
\5 Earthquake Recovery: Staffing and Other Improvements Made
Following Loma Prieta Earthquake (GAO/RCED-92-141, July 30, 1992).
\6 Los Angeles Earthquake: Opinions of Officials on Federal
Impediments to Rebuilding (GAO/RCED-94-193, June 17, 1994).
\7 See Disaster Assistance: Information on Declarations for Urban
and Rural Areas (GAO/RCED-95-242, Sept. 14, 1995).
\8 Requests For Federal Disaster Assistance Need Better Evaluation
(GAO/CED-82-4, Dec. 7, 1981).
TEMPORARY PERSONNEL WITH
LIMITED TRAINING MAY BE USED
TO HELP PREPARE SURVEY
REPORTS
-------------------------------------------------------- Chapter 2:3.2
The need for clearer, more definitive FEMA criteria dealing with
eligibility for public assistance takes on added importance because
of FEMA's use of temporary personnel with limited training to help
prepare and process DSRs, which are used in determining the scope of
work eligible for funding. The Federal Coordinating Officer for the
Northridge earthquake told us that better criteria and guidelines
ultimately result in better DSRs. (As discussed in ch. 3, FEMA has
limited control over funds following DSR approval; consequently,
criteria and/or training that would help improve DSR preparation may
help ensure that funds are used only for eligible items.)
The number of large disasters during the 1990s has resulted in a
great number of DSRs. For example, after the Northridge earthquake,
over 17,000 DSRs were prepared; after the 1993 Midwest floods, over
48,000 DSRs were prepared in nine states. The combination of
inexperienced personnel forced to do staggering amounts of work in a
limited amount of time highlights the need for clear and
comprehensive criteria.
FEMA regional officials working on the recovery from the Northridge
earthquake pointed out a need to develop training for FEMA
inspectors. They said that the lack of training directly results in
poor quality DSRs that may cause overpayments or underpayments to
public assistance recipients. They added that increased training is
also needed to ensure the standardization of eligibility
determinations across the country. The lack of standardization could
cause inconsistent determinations because, in large disasters such as
Northridge, FEMA may send in staff from different regions of the
country.
Our July 1992 report on the recovery from the Loma Prieta earthquake
pointed out that FEMA's customary reliance on emergency reserve
staff, who usually stayed only a few months, led to discontinuity and
inefficiency. The applicants complained that each time a new FEMA
representative took over a case, that person had to duplicate the
agency's previous efforts to examine the damage, review the
documentation, and learn the complexities. Similarly, a FEMA summary
of disaster response and recovery operations after flooding in Kansas
in the summer of 1993 pointed out that attempts to expedite public
assistance inspections met with immediate roadblocks because, in
part, FEMA's pool of available inspectors was quickly exhausted and
because the training of inexperienced inspectors consumed numerous
staff days that could have been used more productively to prepare
damage surveys.
FEMA officials told us that early on in a disaster, a number of
people with very different levels of experience are involved in the
damage survey process. FEMA and California officials told us that
training is often not adequate, resulting in DSRs that are deficient
and that hinder FEMA officials in making determinations about project
eligibility. Officials involved in inspecting the damage sites from
the Northridge earthquake said that early in the recovery effort,
they made incorrect decisions on eligibility. One inspector told us
that some damage survey reports prepared soon after the earthquake
included work that had been specifically ruled ineligible after the
Loma Prieta earthquake 5 years earlier.
CRITERIA HAVE NOT BEEN
SYSTEMATICALLY UPDATED AND
DISSEMINATED
---------------------------------------------------------- Chapter 2:4
For determining eligibility for public assistance, FEMA's written
guidance supplementing the regulations are the draft public
assistance manual and policy memorandums. A FEMA task force
developed the regulations following the Stafford Act. According to a
FEMA regional official who was a member of the task force, the
regulations were intended to be supplemented with guidance, examples,
and training to clarify the eligibility criteria and help ensure
their consistent application; however, this supplementation has not
occurred as envisioned. According to a FEMA headquarters official,
the agency has not been able to complete the public assistance manual
since 1992 because of the significant workload caused by the large
number of disasters.
A FEMA contractor responsible for reviewing DSRs noted that various
decisions made in determining eligibility following a disaster have
not been systematically codified or otherwise made easily available
to FEMA personnel to serve as a precedent. FEMA inspectors told us
that there have been a number of policy changes throughout the course
of the recovery from the Northridge earthquake, but there is no one
central source where the changes are recorded. They added that some
agreements, made by personnel who have since rotated, were never put
into writing. Also, the Federal Coordinating Officer for Northridge
told us that some policy decisions have been informal and unwritten.
OFFICIALS RECOGNIZE NEED TO
CLARIFY CRITERIA AND IMPROVE
POLICY DISSEMINATION
---------------------------------------------------------- Chapter 2:5
FEMA, state, and local officials have generally identified the need
for (1) clearer criteria to help determine eligibility for public
assistance and (2) better training for inspectors. The Inspector
General's July 1995 report pointed out that there is a demand for
increasingly specific criteria because significant and numerous
changes in eligibility in the public assistance program over the past
25 years have created substantial, time-consuming, and expensive
disagreements with applicants. The Inspector General found that
virtually every applicant interviewed complained that the federal
criteria governing the program were not sufficiently specific; as a
result, the applicants contended that neither they nor FEMA staff can
easily and consistently determine eligibility and appropriate costs.
FEMA officials told us that a major problem in the Northridge
earthquake recovery effort has been the difficulty of determining
what is eligible for FEMA funding.
At a January 1996 hearing,\9 the Director of FEMA said that in
previous disasters, FEMA staff worked without having policies in
place that addressed public assistance. He added that determining
what is and is not eligible for assistance has been difficult. He
said that FEMA is developing criteria to address these areas. A FEMA
headquarters official added that FEMA plans on completing the public
assistance manual before the end of fiscal year 1996. The
eligibility criteria will not differ significantly from those in the
draft manual; however, according to the official, FEMA plans to begin
updating and supplementing the manual immediately after it is issued.
The Northridge Federal Coordinating Officer noted that FEMA has
recently taken steps to improve policy dissemination. He offered as
examples (1) a compendium of policy material compiled by one FEMA
regional office, which FEMA headquarters is circulating to the other
regions; (2) the development of a new system of disseminating policy
memorandums, including a standardized format and numbering system;
and (3) the dissemination by headquarters of the results of second-
and third-level appeals to all regional offices.
FEMA has also identified a need to better train inspectors. In March
1996, a training division official at FEMA headquarters said that the
agency held the first session of a new training course in February
1996. For the remainder of fiscal year 1996 and fiscal year 1997,
the division projects an additional 13 courses. However, the
official added that currently a major restriction in reaching these
projections is a lack of qualified instructors. The targeted
audiences are full-time FEMA staff and disaster assistance
reservists, as well as employees of other federal agencies, such as
the Corps of Engineers, that assist FEMA on an as-needed basis to
inspect damage. The bulk of the course is devoted to the subjects of
eligibility for the public assistance program and DSR operations.
--------------------
\9 Hearing before the Subcommittee on Government Management,
Information, and Oversight, House Committee on Government Reform and
Oversight, Northridge, California, January 19, 1996.
CONCLUSIONS
---------------------------------------------------------- Chapter 2:6
Clearer and more comprehensive criteria, supplemented with specific
examples and systematically disseminated, could help ensure that
eligibility determinations are consistent and equitable and could
help control the costs of future public assistance. To the extent
that the criteria are more restrictive, the costs of public
assistance in the future could be less than they would otherwise be.
In the 1990s, the potential adverse effects of a lack of clear
criteria have become more significant because of (1) an increase in
large, severe disasters and (2) the need to use temporary employees
with limited training in the process of inspecting damage and
preparing damage survey reports.
RECOMMENDATION
---------------------------------------------------------- Chapter 2:7
We recommend that the Director of FEMA issue criteria that more
clearly and comprehensively identify what facilities and work are
eligible for public assistance and develop a system for disseminating
these and future changes in criteria to FEMA regional staff. The
Director should specifically clarify the criteria for determining the
extent to which the permanent restoration of disaster-damaged
facilities is eligible for funding and the eligibility of private
nonprofit facilities.
FINANCIAL OVERSIGHT OF APPROVED
PUBLIC ASSISTANCE PROJECTS IS A
STATE RESPONSIBILITY
============================================================ Chapter 3
In accordance with a governmentwide effort to simplify federal grant
administration, FEMA relies on the states--in their role as
grantees--to ensure that expenditures are limited to eligible items.
The states certify to FEMA at the completion of each subgrantee's
project and the closeout of each disaster that all disbursements of
public assistance grants have been in accordance with approved DSRs.
Additional controls over disbursements include audits of subgrantees
by (1) independent auditors pursuant to the Single Audit Act of 1984
and (2) FEMA's Office of Inspector General (OIG), with possible
augmentation by state audit agencies.
Audits by the Inspector General have identified disbursements for
ineligible items--that is, for items not authorized by approved DSRs.
We believe that the Inspector General's findings, in light of FEMA's
reliance on the states for financial controls after DSRs are
approved, reinforce the need for clearer criteria to guide the
process of determining eligibility for public assistance funds.
FEMA RELIES ON STATES TO ENSURE
THAT EXPENDITURES ARE LIMITED
TO ELIGIBLE ITEMS
---------------------------------------------------------- Chapter 3:1
In October 1988, as part of a governmentwide effort to standardize
federal grant administration, FEMA implemented the "Uniform
Administrative Requirements for Grants and Cooperative Agreements to
State and Local Governments." For the public assistance program, the
states became FEMA's only grantees, and all other
recipients--including state agencies, local governments, and eligible
private nonprofits--became subgrantees of the states. (Previously,
all public assistance recipients had dealt directly with FEMA.) Under
the uniform requirements, it is the states' responsibility, rather
than FEMA's, to ensure that all costs applied against FEMA funding
are eligible.
STATES ARE RESPONSIBLE FOR
DISBURSEMENTS
-------------------------------------------------------- Chapter 3:1.1
The states, as grantees, must comply with the applicable regulations
and FEMA's guidance to ensure that federal funds are properly used
and accounted for. Among other things, the uniform requirements
provide that the states must (1) develop a plan to administer the
program, (2) establish appropriate budget and accounting records and
procedures, and (3) comply with the applicable circulars from the
Office of Management and Budget (OMB). For example, Circulars A-87
and A-122 set forth cost principles for state and local governments
and nonprofit organizations, and Circular A-110 has special rules for
grants to hospitals, educational institutions, and nonprofit
organizations.
When FEMA approves a DSR, it obligates an amount equal to the
estimated federal share of the project's cost. The obligation makes
these funds available to the state to draw upon as needed by the
subgrantees. (For "small" projects--those with an estimated cost of
less than $46,800--the entire amount may be provided by the state to
the subgrantee immediately.) Generally, subgrantees request
disbursements when bills for projects are due. If a subgrantee
wishes to modify a project after a DSR is approved or experiences
cost overruns, it must apply through the state to FEMA for an amended
or new DSR. This procedure gives FEMA the opportunity to review the
supporting documentation justifying the modification and/or cost
overrun.
FEMA REQUIRES STATE
CERTIFICATION AT PROJECT
COMPLETION OR DISASTER
CLOSEOUT
-------------------------------------------------------- Chapter 3:1.2
FEMA's regulations state that after all recovery activities for a
particular disaster have been completed, the disaster is ready for
closeout. (Before closeout, the disaster is considered to be
"open.") One aspect of the closeout is the state's certification that
all disbursements have been proper and eligible under the approved
DSRs.
FEMA does not specify what actions the state should take to enable it
to make the certification. The agency's public assistance manual
states that inspections and audits can be used, and that the state
plan should include procedures for complying with the administrative
aspects of 44 C.F.R. parts 13 (grants management) and 206 (public
assistance). The manual also notes that FEMA has no reporting
requirements for the subgrantees but expects the grantees to impose
reporting requirements on the subgrantees so that the grantees can
submit the necessary reports.
Most disasters stay open for several years before reaching the
closeout stage. FEMA officials involved in the closeout process in
the San Francisco, Atlanta, and Boston regions said that they review
the states' closeout paperwork to verify the accuracy of the reported
costs, but they rely on the states to ensure the eligibility of
costs. In commenting on a draft of this report, the Director of FEMA
stated that FEMA conducts final inspections and project reviews to
verify the actual eligible costs for large projects "in which the
grantee is required to make an accounting to FEMA of eligible costs."
FEMA public assistance program officials generally believe that the
states' reviews are adequate to ensure that disbursements are made
only for eligible items; conversely, FEMA's Deputy Inspector General
advised us that the quality of the states' closeout reviews varies
considerably from state to state and that he does not rely on the
closeout reviews as adequate assurance that all costs charged against
the DSR were proper, especially when many states' disaster recovery
personnel view themselves as advocates for the subgrantees.
AUDITS MAY SERVE AS CHECK ON
DISBURSEMENTS FOR INELIGIBLE
ITEMS
---------------------------------------------------------- Chapter 3:2
In addition to certifications by the states, independent audits can
serve as a further check on the eligibility of items funded by public
assistance grants. Audits of public assistance funds can be done by
independent auditors in compliance with the Single Audit Act of 1984,
by the FEMA OIG, and/or by the states' audit organizations. However,
the coverage of individual projects appears to be limited.
SINGLE AUDIT PROCESS MAY
PROVIDE ADDITIONAL
ASSURANCES
-------------------------------------------------------- Chapter 3:2.1
FEMA may obtain additional assurances about the use of its funds from
the audits of subgrantees conducted as part of the single audit
process.\1 State and local governments and nonprofit organizations
that receive federal funds of $100,000 or more in a year must have a
single audit\2 that includes an audit of the entity's financial
statements and additional testing of the entity's federal programs.
The auditors conducting the single audits must test the internal
controls and compliance with the laws and regulations for the
programs that meet specified dollar criteria. Those criteria result
in the largest programs, in terms of expenditures, being tested. The
entities that receive $25,000 to $100,000 in federal assistance in a
year have the option of having a single audit or an audit in
accordance with the requirements of each program that the entity
administers. The entities that receive federal assistance of less
than $25,000 in a year are exempt from federally mandated audits.
To the extent that subgrantees meet the audit criteria and FEMA's
programs meet the testing criteria, FEMA can obtain assurances about
the use of its funds. However, in the absence of such audit
coverage, FEMA must rely on the grant recipients to exercise
effective monitoring activities or conduct its own monitoring
efforts.
For the 4-year period ending September 30, 1995, FEMA's OIG received
219 Single Audit Act and OMB Circular A-133 audit reports, 17 of
which questioned a total of $1.1 million in disaster assistance
expenditures. Most of the reports received are audits of the states
rather than of communities or other subgrantees. However, as we
noted in a recent report, while Single Audit Act reports on grantees
are required to be sent to the funding federal agency, reports on
subgrantees are not so required, and many federal agencies thus do
not receive reports on subgrantees even when they are prepared.\3
--------------------
\1 State and local governments are subject to the Single Audit Act of
1984 and its implementing guidance, OMB Circular A-128, "Audits of
State and Local Governments." Nonprofit entities are administratively
subject to the single audit process under OMB Circular A-133, "Audits
of Institutions of Higher Education and Other Nonprofit
Organizations."
\2 Nonprofit organizations that operate only one federal program may
elect to have an audit of that program.
\3 Single Audit: Refinements Can Improve Usefulness
(GAO/AIMD-94-133, June 21, 1994).
FEMA INSPECTOR GENERAL
AUDITS
-------------------------------------------------------- Chapter 3:2.2
FEMA's OIG audits the recipients of public assistance funds on a
selective basis and has identified inappropriate disbursements to
recipients. For reports issued in the 6 fiscal years ending
September 30, 1995, the OIG has questioned over $83 million in
subgrantees' public assistance costs.
SCOPE OF OIG AUDIT
COVERAGE
------------------------------------------------------ Chapter 3:2.2.1
The OIG attempts to audit any disaster when asked to by the
appropriate FEMA regional office, as staffing availability permits.\4
However, the staff available to perform the audits is limited; the
OIG has 8 full-time and 17 temporary or part-time employees in two
district field offices. A great many subgrantees, and even entire
disasters, are not audited by the OIG.
Officials in the OIG's Eastern District Office could not estimate
their audit coverage but said that the number of subgrantees and DSRs
they review varies from disaster to disaster. They felt that
although many recipients, and even entire disasters, were not
audited, a more significant percentage of the dollars was audited by
focusing on where the large sums of money went. For example,
although the officials had looked at only about 20 of the several
hundred public assistance subgrantees for Hurricane Hugo, they
believed those subgrantees represented about $200 million of the $240
million in public assistance costs (but could not confirm this
estimate without a time-consuming review of their records).
Officials in the OIG's Western District Office said that less than 10
percent of the disasters receive some sort of OIG audit coverage.
Overall, they believe that probably less than 1 percent of DSRs are
covered.
The states may also perform audits of specific subgrantees.
Currently, California is the only state that has an arrangement with
FEMA's OIG to do audits that meet generally accepted auditing
standards.\5 (Audit coverage in California is disproportionately
important relative to the other states, because in recent years
California has received far more public assistance funds than any
other state.) However, these audits have been temporarily
discontinued while the responsibility for and control over such
audits is negotiated between two state agencies. OIG officials said
that the Office has attempted to negotiate similar audit coverage
from other states, but none of them have agreed to do so, generally
citing the difficulty of hiring and paying for the audit staff and
keeping a sustained audit effort under way in light of the sporadic
nature of FEMA's disaster assistance.
--------------------
\4 The OIG has also recently begun participating early in the
recovery process for large disasters to advise potential recipients
of the possibility of an audit, explain to them what they will need
in the event of an audit, and survey initial claims to identify
problems.
\5 Generally accepted auditing standards include such things as the
technical proficiency of personnel, personal and organizational
independence, performing audit steps likely to detect noncompliance
with laws and regulations, and an evaluation of the adequacy of the
audited organization's internal controls. (See Government Auditing
Standards, U.S. General Accounting Office, June 1994.)
EXPENDITURES QUESTIONED
------------------------------------------------------ Chapter 3:2.2.2
For the 6-year period from October 1, 1989, through September 30,
1995, FEMA's OIG has reported on 203 subgrantees of public assistance
funds, questioning over $83 million in federal funds charged against
approved subgrantee DSRs.\6
According to OIG officials, ineligible cost claims constitute most of
the problems identified. These include claims of
non-disaster-related damage, the use of labor and other rates that
exceed FEMA-approved rates, the improper calculation of fringe
benefits, inadequate documentation, and improper overtime charges.
These types of improper charges can be discovered only through close
scrutiny of the records as is provided in audits. Examples of
questioned costs that did not conform to the approved DSRs included
the following:
-- One Florida community received $12.7 million to repair its
electrical distribution system damaged by Hurricane Andrew.
This amount included over $6 million in materials, all of which
was paid for with a public assistance grant from FEMA. However,
the auditors found that not all of the materials purchased were
used in the repairs; much of it remained in inventory. City
officials agreed that the funds should be refunded. FEMA
subsequently deobligated $1.2 million, over 9 percent of the
total grant.
-- A state utility in Puerto Rico was awarded $3.3 million in FEMA
funds to cover damages and debris removal for several disasters,
of which it had received $2.3 million at the time of the audit.
The auditors subsequently found that the utility had a $64
million fund to cover uninsured losses. FEMA program officials
agreed to send bills to collect the disbursed amount and
deobligate the remainder of the approved award.
-- A city in Indiana received $2.9 million in FEMA funds for debris
removal, emergency services, and repairs resulting from an ice
storm. However, the auditors found that the city had submitted
claims for only $2.5 million of the $2.9 million provided by
FEMA. FEMA's OIG advised us that the nearly $400,000 difference
was returned.
--------------------
\6 In some cases, the recipient may have been able to provide
sufficient documentation or other justification for the cost in
responding to the audit report.
CHANGES TO ELIGIBILITY CRITERIA
COULD REDUCE THE COSTS OF THE
PUBLIC ASSISTANCE PROGRAM
============================================================ Chapter 4
Public assistance program officials in FEMA's 10 regional offices
identified a variety of options that, if implemented, could reduce
the costs of the public assistance program. Among the options
recommended most strongly were improving the appeals process;
eliminating eligibility for some facilities that generate revenue,
lack required insurance, or are not delivering government services;
and limiting the impact of building codes and standards.
Implementing these options might require amending the Stafford Act
and/or FEMA's regulations.
Because available records did not permit quantifying the impact of
each option on public assistance expenditures in the past, and
because future costs will be driven in part by the number and scope
of declared disasters, the impact on future public assistance costs
is uncertain.
RECOMMENDATIONS BY FEMA'S
REGIONAL OFFICIALS FOR REDUCING
THE COSTS OF THE PUBLIC
ASSISTANCE PROGRAM
---------------------------------------------------------- Chapter 4:1
We asked public assistance officials in FEMA's 10 regional offices
for their perspectives on the program. We sought their opinions
because they are involved in the day-to-day operations of the public
assistance program, giving them a high degree of expertise. Using a
telephone survey, we asked the FEMA officials to identify options
that could potentially reduce the costs of public assistance. In a
follow-up mail questionnaire, we asked the respondents to rate each
option to indicate how strongly they recommended implementing each.\1
We also asked the respondents to elaborate on the options they
recommended most strongly and to identify the potential obstacles to
implementing them, where appropriate. We asked the National
Emergency Management Association (NEMA), which represents state
emergency management officials, to respond to the options that the
FEMA officials generated because implementing many of the options
would affect the states.
Following are the options that the FEMA respondents rated most
highly\2 when considering changes to the eligibility criteria that
could reduce the public assistance program's costs. In addition to
describing each option, we provide, where appropriate, examples
related by the officials, the dissenting views of FEMA respondents,
and NEMA's views. We did not independently verify the accuracy of
information that the officials cited in their examples. (A list of
other options generated by FEMA regional officials appears in app.
II.)
--------------------
\1 We obtained a single response from each regional office. The
details of the survey are in appendix II.
\2 We defined "most highly rated" as those options which received at
least a 5.7 mean average response from FEMA respondents (on a scale
of 1 to 7) or those for which at least eight respondents assigned at
least a "5." We considered every rating above "4" as an indication of
support for implementing the option.
APPEALS POLICIES COULD BE
IMPROVED
-------------------------------------------------------- Chapter 4:1.1
Responding officials highly rated two options concerning the appeals
process:
-- Limit funding for temporary relocation facilities during
appeals, because the appeals process can take several years.
This option would be comparable to the insurance industry's
practice of calculating the maximum allowable costs for
temporary relocation.
-- Limit the number of appeals to one or two.
LIMITING FUNDING FOR
TEMPORARY RELOCATIONS
------------------------------------------------------ Chapter 4:1.1.1
The rationale provided for this option was that cost savings could be
achieved by limiting both the length of time for which relocation
costs are funded and the types of facilities eligible for relocation
costs. FEMA currently funds the costs of temporarily relocating
applicants to suitable quarters while their damaged or destroyed
facilities are being restored. If a project is being appealed, the
length of time that FEMA funds relocation costs may be extended until
the appeal is resolved. One obstacle identified to implementing this
option is that objective criteria defining appropriate time frames
and usage would need to be developed.
In its July 1995 report, the FEMA OIG noted that it is not unusual
for the appeals process to take more than 2 years to complete.\3 We
found appeals taking more than 5 years. The OIG report stated that
since relocation costs are not capped or limited to a specific time,
they may provide a disincentive for applicants to resolve disputes.
Two respondents suggested that temporary facilities often are used
for years. Applicants may then use this time to maximize the gains
from a lease-purchase agreement or to extend the length of time they
are eligible to receive funding for relocation costs.
In its July 1995 report, the OIG reported that following the Loma
Prieta earthquake, repairs to the Oakland City Hall were in dispute
for over 5 years. FEMA's share of the temporary relocation costs for
this time period was $31 million. The OIG reported that the
relocation costs, although not necessarily linked exclusively to the
appeals process but also to the disputes over damage survey reports,
could have been decreased if limits had been placed on the time
frame. For example, California State University at Northridge was in
temporary quarters for 18 months after the earthquake; FEMA funded 90
percent of the monthly relocation costs of $300,000. During the 18
months, none of the University's primary buildings with earthquake
damage were repaired because of disagreements with FEMA about the
required repairs.
NEMA did not endorse this option. NEMA pointed out that the focus of
concern about continuing costs during the appeals process should not
be on eliminating or limiting relocation costs but rather on
complying with the timelines for the appeals process established in
FEMA's regulations.
--------------------
\3 Options for Reducing Public Assistance Program Costs (Inspection
Report I-02-95, July 1995).
LIMIT THE NUMBER OF
STAGES IN THE APPEALS
PROCESS
------------------------------------------------------ Chapter 4:1.1.2
The other appeals-related recommendation suggests that the appeals
process could be truncated. As noted in chapter 2, FEMA's
regulations authorize three levels of appeal. The first appeal is to
the FEMA Regional Director with jurisdiction over the geographical
area in which the disaster occurs. If the Regional Director denies
the appeal, the second appeal is to the Associate Director for
Response and Recovery at FEMA headquarters. A final appeal may be
submitted to the FEMA Director.
The responding officials generally recommended limiting the number of
appeals to two--one to the Regional Director and the other to either
the Associate Director or the Director. The respondents stated that
two appeal stages should be sufficient to fairly consider appeals.
(Before 1988, appeals were limited to two stages: the Regional
Director and the Associate Director.) According to the July 1995 OIG
report, considerable federal staff time and money would be saved if
the process was shortened.
However, one FEMA respondent strongly disagreed. He stated that, in
some instances, FEMA regional staff do not require as detailed a
review as that required by FEMA headquarters staff during the second
stage of the appeals process. In his opinion, the increased
documentation requirements and field visits result in a more
objective opinion than that achieved during the first stage of the
appeals process. He added that because few appeals reach the third
level, there is no need to eliminate it completely. (As noted in ch.
2, between January 1993 and the end of March 1996, FEMA logged 30
third-level appeals.) Furthermore, he estimated that nearly all
appeals that go beyond the first level support the region's decision,
but the increased documentation requirements confirm the region's
perspective and better support that the decision was reached
objectively. Conversely, NEMA endorsed further consideration of this
option.
ELIMINATE ELIGIBILITY FOR
REVENUE-GENERATING PRIVATE
NONPROFIT ORGANIZATIONS
-------------------------------------------------------- Chapter 4:1.2
The responding officials recommended eliminating eligibility for
revenue-generating private nonprofit organizations, such as
utilities, hospitals, and universities, because these types of
facilities may not serve the general public and may have alternate
sources of income sufficient to repair disaster-related damage.
As noted in chapter 2, a wide range of private nonprofit
organizations have received public assistance funding, including
day-care facilities, community centers, utilities, hospitals, and
educational facilities. In July 1995, the OIG reported that since
the passage of the Stafford Act, FEMA has provided nearly $400
million in public assistance for private nonprofit organizations.
FEMA funded nearly 90 percent of that amount to utilities, hospitals,
and schools. These types of facilities often generate revenue. The
respondents stated that such revenue-generating facilities
potentially have alternate sources of income to independently repair
disaster-related damages. For instance, schools can increase
tuition, and utilities can raise rates or obtain loans.
One rationale for this option is that revenue-generating private
nonprofit organizations may not provide a service accessible to the
general public since they often charge competitive fees for service.
The respondents cited Stanford University and Los Angeles' Cedars
Sinai Hospital as examples of private nonprofit organizations that
have alternative sources of income and that may not serve the general
public.
One responding official disagreed that this eligibility criterion
should be changed. He stated that some revenue-generating private
nonprofit organizations generate revenue to meet their operational
costs and may not have sufficient revenue to cover disaster-related
costs.
NEMA did not endorse this option, observing that utilities and
hospitals provide vital services both during responses to disasters
and during nondisaster times. NEMA also noted that because a private
nonprofit organization generates revenue does not necessarily mean
that it would not face a financial hardship in recovering from a
disaster. If these private nonprofit organizations were eliminated
from eligibility, the general public would still bear the brunt of
the recovery expenses through higher fees for the services provided
by the facilities. This approach would, according to NEMA officials,
simply shift the burden from the federal government back to the
general public.
ELIMINATE FEMA FUNDING FOR
SOME WATER CONTROL PROJECTS
-------------------------------------------------------- Chapter 4:1.3
The regional respondents recommended eliminating eligibility
consideration for disaster assistance--either completely or by
transferring it to the Department of Agriculture (USDA)--for water
control projects that do not provide public benefits, for example,
those that primarily protect and/or drain unimproved private
property--typically farmland--and that are owned by one or not more
than a few farmers.
They recommended transferring eligibility for federal funding for
water control projects, such as drainage and levee districts, to USDA
because the projects tend to be agricultural or rural facilities,
generally established to protect farmland from flooding. The USDA's
Natural Resources Conservation Service has offices in most counties
and works regularly with the drainage and levee districts.
(Furthermore, as noted in ch. 1, USDA's existing Emergency Watershed
Protection program funds, among other things, a portion of the cost
of repairing certain nonfederal levees and other water control works
damaged by flooding.) Therefore, according to one respondent, it is
more logical for USDA's Natural Resources Conservation Service, which
has the historical maintenance and operational expertise that FEMA
lacks, to provide assistance for these water control projects.
One respondent suggested that while it may not be apparent that
federal cost savings would occur by transferring eligibility
consideration to another federal agency, the potential for cost
savings does exist. He explained that USDA has limited funding for
repairing water control projects and therefore has a priority system.
While FEMA provides funding to all eligible water control projects,
USDA might not necessarily be able to provide funding to all that
have suffered damage. The respondent pointed out that while savings
might be recognized, some special districts that are currently
eligible might lose their eligibility for FEMA's assistance.
Several respondents mentioned that special districts would prefer
FEMA'S assistance to USDA's assistance because, for instance, FEMA
generally provides larger amounts of funding than USDA and provides
the funding more rapidly.
An alternate option raised by some respondents was to eliminate
eligibility for federal grants for special districts that do not
provide a public service. In some instances, special water control
districts are established by one or not more than a few farmers to
protect their own farmland. Several respondents suggested
eliminating eligibility for those special districts that could not
demonstrate that they provided public benefits, such as protecting
improved property. An example of improved property is an area where
there are a substantial number of residences, such as urban areas.
Two examples of special districts in urban areas are (1) in Arizona,
where there are countywide flood control districts, and (2) the
Denver Urban Drainage District, which integrates water-related
activities between all jurisdictions surrounding greater Denver. One
respondent explained that special districts in rural areas generally
do not address health and safety threats because the drainage ditches
are usually miles from residential areas.
The financial impact of funding disaster assistance for special water
control districts can be great. For example, in Iowa alone,
following the Midwest floods of 1993, the federal share for the 80
drainage districts that applied for FEMA's assistance was about $7.5
million.
One obstacle that the respondents identified to eliminating
eligibility for special districts that do not provide a public
service would be establishing an objective and clear definition of
"special district" and "providing a public service." NEMA concurred
that special districts that do not provide a public service could be
eliminated for eligibility but stressed the need for clear
definitions. The Association of State Floodplain Managers, which
represents over 3,000 state and local floodplain managers, also
concurs with this option provided that it applies solely to districts
that deal with agricultural protection. They also cited the need of
a clear definition of "special district."
LIMIT THE IMPACT OF CODES
AND STANDARDS ON FEDERAL
ASSISTANCE
-------------------------------------------------------- Chapter 4:1.4
As noted in chapter 2, building codes and standards significantly
affect the costs of public assistance; the decision on which
standards are "applicable" to a permanent restoration project greatly
influences its cost. Seismic code upgrades have proven to be
particularly costly. Over the years, one issue that has been debated
is whether to reconstruct to the codes and standards in place at the
time of the disaster or to higher codes and standards to mitigate
against future damage.
The respondents cited three interrelated options concerning codes and
standards as strong candidates for change:
-- Limit federal funding to the eligible cost of upgrading only the
parts of the structure damaged by the disaster. Applicants
would bear the expense of upgrading undamaged parts of the
structure.
-- Tighten the wording on codes and standards to define what
entity, such as a state or local government, has the authority
to adopt and approve codes and standards.
-- Limit the time after the disaster during which new codes can be
adopted.
UPGRADE ONLY
DISASTER-DAMAGED PORTIONS
OF STRUCTURES
------------------------------------------------------ Chapter 4:1.4.1
The respondents suggested that only the damaged portions of
facilities should be eligible for upgrading. The regulations
authorize the upgrading of facilities to current codes and standards
when the pre-disaster condition of the facilities does not conform
with current standards. According to the FEMA OIG's July 1995
report, FEMA program officials estimate that the majority of
upgrading costs are more than 500 percent of the cost of repairing
actual disaster damage. In many cases, the total eligible costs far
exceed the actual repair costs because of triggers that require
upgrades to major systems throughout the structure as well as costly
items such as asbestos removal.
The FEMA respondents suggested that code upgrades should be limited
to the parts of the structure damaged by the disaster. The expense
of upgrading undamaged parts would be borne by the applicants.
Upgrading significantly raises the cost of public assistance in large
disasters: In the Northridge earthquake, seismic standards, in some
instances, required upgrading undamaged portions of disaster-damaged
structures.
NEMA did not support the implementation of this option, pointing out
that limiting repairs to the damaged portions of facilities would not
be a cost-effective approach to spending federal tax dollars. NEMA
stated that the federal government must comply with codes and
standards and cannot pick and choose what parts to recognize. For
example, the undamaged portions of a structure are generally part of
the force-resisting system. If that system is not upgraded to the
same standards as the rest of the system, there is a likelihood of a
weak link that would fail in future disasters.
One FEMA respondent generally agreed with the NEMA perspective. He
stated that FEMA should enforce local codes and ordinances when there
is a history that those codes and ordinances were being enforced
prior to the disaster.
DEFINE THE AUTHORITY FOR
ADOPTING STANDARDS
------------------------------------------------------ Chapter 4:1.4.2
FEMA respondents cited a need to better define who has the authority
to adopt and approve codes and standards. As noted in chapter 2, to
be considered "applicable," written building codes and standards must
be formally adopted by the jurisdiction in which the facility is
located, or be a state or federal requirement. The codes and
standards do not necessarily have to be in effect at the time of the
disaster.
Following the Northridge earthquake, a decision on assistance for
restoring damaged hospitals was delayed for 2 years because of a
dispute over which standards were applicable: those promulgated by
the California Office of Statewide Health Planning and Development
(the Health Office) or the standards in the California Building Code.
FEMA officials stated that the Health Office did not have the
authority to amend the state code. FEMA determined that one hospital
was eligible for $3.9 million, the amount required to repair the
building in a manner consistent with the state code. As the grantee,
California argued that the hospital was eligible for $64 million;
FEMA, after reviewing the request for additional funding, offered
$6.8 million for repairs and upgrades. The Health Office's standards
would have required demolishing and replacing the hospital. On
December 6, 1995, the FEMA Director announced that the agency would
provide funding for the hospitals using discretionary authority to
fund mitigation measures. On March 12, 1996, FEMA announced that it
would provide nearly $1 billion in federal funds to repair or replace
four hospitals damaged by the Northridge earthquake. The hospital
cited above will receive $29.3 million.
The respondents to our survey suggested that clarifying the language
in the regulations to define what entity has the authority to adopt
and approve codes and standards might reduce the confusion that
surrounds this issue and the costs.
LIMIT TIME PERIOD FOR
ADOPTING NEW CODES
------------------------------------------------------ Chapter 4:1.4.3
FEMA's regulations state that building standards can be adopted by
the applicant up to the time FEMA approves a project. In some
instances, especially catastrophic disasters such as earthquakes,
projects are not approved for years. According to FEMA, such delays
may be attributable to insurance questions, environmental reviews, or
reviews required by the National Historic Preservation Act.
FEMA respondents suggested that the regulations should be revised to
limit the length of time after the disaster during which codes can be
adopted. The respondents had varying views on what the time limit
should be, but they generally agreed that some limit would be useful.
The suggestions ranged from about 1 month to about 1 year after a
disaster occurs. The respondents generally agreed that the limit
should give sufficient time to allow the codes in place at the time
of the disaster to be evaluated and strengthened to mitigate against
future damage but should not provide an opportunistic window for
applicants to gain the maximum amount of federal funding.
According to one respondent, providing more than a few months for the
applicant to enforce new codes provides too long a period of
opportunism. In his opinion, the costs of FEMA's public assistance
for the Northridge earthquake and the 1993 Midwest flood were higher
because the applicants adopted new standards after the events, but
before FEMA approved specific projects. The respondent explained
that because FEMA lacks a clear and consistent internal policy on
codes and standards, its interpretation of eligibility is subjective
and not completely accountable.
Another respondent suggested limiting the time because codes are
always changing, which makes it difficult to determine which codes
are applicable. The codes may change as a result of a number of
factors, including changes in technology and the identification of
new degrees or kinds of hazards.
NEMA endorsed this option for further consideration. However, one
FEMA respondent did not completely concur. He stated that although
he was not opposed to a time limit, that limit would have to allow
communities sufficient time to fully explore and adopt the most
appropriate codes for their highest risks. Furthermore, he stated
that FEMA should develop acceptable minimum codes for each type of
peril. As in the flood insurance program, public entities should be
expected to build to those codes and carry sufficient insurance. If
the public entities did not comply, they would be penalized, e.g.,
the amount of the award would be reduced by the amount of insurance
coverage that should have been provided, or no DSRs would be signed
until new codes were adopted.
Several respondents recommended revising FEMA's regulations to
disallow the adoption of codes after the disaster occurs. Funding
would be limited to repairing the damaged facility to comply with the
codes and standards in effect at the time of the disaster occurrence.
INSURANCE CRITERIA COULD BE
STRENGTHENED
-------------------------------------------------------- Chapter 4:1.5
Respondents recommended two options related to insurance:
-- Require insurance for public entities when insurance is
reasonably available.
-- Reduce or eliminate eligibility for facilities that are not at
least partially covered by reasonably available hazard
insurance.
ELIMINATING WAIVERS
------------------------------------------------------ Chapter 4:1.5.1
The regulations provide that FEMA will provide assistance only once
before the applicant is required to purchase and maintain insurance
against future loss. Applicants are required to commit to purchase
and maintain insurance in the amount equal to the eligible damage if
the damage exceeds $5,000. The regulations state that future
assistance will be contingent upon this commitment. In some
instances, FEMA has waived the insurance requirement and has provided
funding as a result of damage from a recurring similar disaster. The
responding officials recommended adherence to the regulations, which
require that applicants purchase and maintain insurance after FEMA
provides initial funds. One respondent recommended that in those
cases where insurance has not been purchased after FEMA has provided
funds and similar disaster-related damage recurs, FEMA should
subtract the limit of available insurance from its grant. Another
said that because FEMA has authorized waivers to the insurance
requirement, public entities may lack the incentive to purchase
insurance.
One responding official stated that he did not believe this
eligibility criterion needed revising because he was not aware of
waivers being authorized.
REQUIRE REASONABLY
AVAILABLE PARTIAL
INSURANCE
------------------------------------------------------ Chapter 4:1.5.2
The respondents suggested reducing or eliminating eligibility for
facilities for which at least partial earthquake, fire, and extended
hazard insurance is reasonably available, even if full coverage is
not. State insurance commissioners are authorized to determine
whether or not insurance is reasonably available. If the
commissioner deems insurance not to be reasonably available, FEMA
waives the requirement for insurance coverage on public facilities.
The respondents recommended requiring partial coverage rather than
waiving the requirement for full coverage.
In discussing this option, the responding officials also suggested
that the criteria for flood insurance and insurance against damage
from disasters other than floods be applied consistently. The
Stafford Act requires the purchase of flood insurance as a condition
of receiving public assistance in flood-prone areas. If a facility
is located in a flood-prone area, is damaged by flooding, and is not
covered by flood insurance, the amount of assistance that would be
available from FEMA is reduced. However, the Stafford Act does not
require insurance against damage by disasters other than floods until
after FEMA has already provided funding under a prior disaster
declaration. The responding officials suggested that where coverage
is reasonably available, public entities should be required to have
insurance coverage for all types of disasters before a disaster
occurs rather than after FEMA has provided funding.
NEMA endorsed for further consideration the options of eliminating
waivers and requiring partial coverage.
ELIMINATE ELIGIBILITY FOR
FACILITIES NOT ACTIVELY USED
TO DELIVER GOVERNMENT
SERVICES
-------------------------------------------------------- Chapter 4:1.6
The respondents identified three interrelated options that would
restrict or eliminate eligibility for facilities that are used for
purposes other than the direct delivery of public services:
-- Eliminate eligibility for facilities that are owned by
redevelopment agencies and are awaiting investment by a
public-private partnership. Such facilities are usually
abandoned and unoccupiable.
-- Restrict eligibility of public facilities to those being
actively used for public purposes at the time of the disaster.
-- Eliminate eligibility for publicly owned facilities that are
being rented out to generate income. For example, facilities
owned by local governments and rented to the private sector for
use as warehouses, restaurants, stadiums, etc., would not be
eligible.
The respondents contended that some facilities, such as those that
are abandoned or leased to a private vendor who is generating income
from them, should not receive FEMA funding. They suggested that
revenue-producing properties and investment properties could be
insured by their owners. One issue raised was that the Congress did
not contemplate eligibility for redevelopment properties because they
are speculative properties, serve no public purpose at the time of
the disaster, and are generally unoccupiable or abandoned.
The respondents provided this example:
-- The Williams Building had been owned by the San Francisco
Redevelopment Agency since the mid-1980s when it was damaged by
the Loma Prieta earthquake. At the time of the earthquake, more
than half of the building was vacant. The portion that was not
rented would have required considerable repair to lure
prospective tenants. Although no essential government services
were being provided in the facility, FEMA funded nearly $7
million for this building, including $2 million for structural
stabilization. Currently, the building is unusable. The
Redevelopment Agency has requested, and FEMA has approved, the
option of using eligible funds for an alternate project.
NEMA stated that eliminating eligibility for facilities owned by
redevelopment agencies may be reasonable, especially if the
facilities were abandoned at the time of the disaster.
The respondents generally agreed that public facilities that are
leased to the private sector, which in turn generates income that may
not be returned to the government, should be ineligible for public
assistance. Examples of such facilities include warehouses,
restaurants, and stadiums. According to the OIG's July 1995 report,
such facilities have the ability to generate funds, independent of
tax revenues, for the repair of disaster damage.
The respondents recommended eliminating eligibility for public
facilities that are leased to concessionaires who generate income
because they, like redevelopment properties, do not provide a
critical government service. In addition, they stated that the
concessionaires often generate sufficient income to carry insurance
against disaster losses or to repair damages.
Several examples follow of public facilities that were leased to the
private sector but received public assistance from FEMA:
-- The Port of Oakland operates 30 ship berths that are leased to
private operating companies. It also has authority for the
Oakland International Airport. Total disaster funding following
the Loma Prieta earthquake was over $35 million.
-- Pier 45 was owned by the Port of San Francisco and leased out to
private fish-processing companies. It was also leased out for
occasional activities, such as the Italian Festival, attended by
thousands of people. Although no essential public services were
provided on Pier 45, FEMA funded about $9 million to repair the
facility, which was leased to private vendors who generated
income.
-- The Gilroy Old City Hall is owned by the City of Gilroy but was
not used as the city hall. It had been converted to a
restaurant and meeting facility. At the time of the earthquake,
the restaurant was not being used because of ongoing
renovations. The total funding from FEMA for Gilroy's Old City
Hall as a result of the Loma Prieta earthquake was more than $2
million.
-- The Los Angeles Coliseum serves as a major source of
entertainment for the greater Los Angeles community. The
facility hosts revenue-generating events, such as professional
sports events. It suffered extensive structural and cosmetic
damage as a result of the Northridge earthquake, and damage
survey reports have been written for about $91 million.
One respondent strongly disagreed with this option. He stated that
it is becoming increasingly common for local governments to lease
facilities to concessionaires as a means of reducing the cost of
delivering government services and increasing tax revenues. He
stated that concessionaires should be responsible for carrying
insurance on the contents of their business enterprise but not on the
facility itself.
NEMA generally concurred that facilities that do not provide a public
service should be ineligible. However, the President of NEMA noted
that clear definitions and guidelines would need to be developed to
distinguish between eligible and ineligible facilities.
ELIMINATE ELIGIBILITY FOR
FACILITIES NOT REASONABLY
MAINTAINED PRIOR TO THE
DISASTER
-------------------------------------------------------- Chapter 4:1.7
The respondents recommended eliminating or reducing eligibility for
facilities when the lack of reasonable pre-disaster maintenance
contributes to the scope of damage from a disaster. According to
these officials, in some cases eligible applicants have not
adequately maintained facilities before a disaster occurs, due, for
example, to budget shortfalls. These facilities may be more likely
to be damaged as a result of a disaster. The issue raised is whether
taxpayers should pay for repairs to facilities that are structurally
deficient before the disaster.
One respondent said that there is a nationwide trend for local
governments to insufficiently maintain facilities. As a result, when
disaster occurs, the damage sustained to those facilities is more
serious and therefore more costly to repair had the facilities been
maintained. For example, one respondent noted that during a
hurricane of moderate intensity, an entire roof of a facility blew
off because it had been improperly attached. Other nearby facilities
were not damaged. Had the roof on the seriously damaged facility
been properly maintained, the need for federal assistance might have
been reduced, if not eliminated.
NEMA officials and one FEMA official noted the need for clear
definitions and sufficient guidelines to objectively determine
eligibility.
ELIMINATE VOLUNTEER LABOR
AND DONATIONS AS CREDIT
TOWARD LOCAL SHARE OF COSTS
-------------------------------------------------------- Chapter 4:1.8
Under FEMA's regulations, applicants are eligible to receive credit
toward the local share of the costs of public assistance for
volunteer labor and donated equipment and material. The respondents
recommended eliminating credit for these items, with the rationale
that there is no cost to the applicant.
The responding officials stated that it is difficult to establish
reasonable costs (dollar values) to be applied to this credit. For
example, one stated that experience has shown that the volunteer
credit allowance has proven to be a very time-consuming process and
relies almost exclusively upon the subgrantees' estimates of the
number of volunteers involved, hours worked, and material utilized.
As the subgrantees incur no out-of-pocket cost, they do not
accurately track volunteer labor and donated material and equipment.
Therefore, they are often unable to provide with accuracy the
required documentation to support their claims. One respondent noted
that the volunteer allowance provides an opportunity for a
duplication of federal funding in cases where direct costs and
materials are commingled with volunteer labor and donated material
and equipment, since it is difficult to distinguish between the two.
FEMA respondents indicated that this allowance was most liberally
applied during the Midwest floods. Floods, because of their
longer-term nature in flat areas, lend themselves to volunteer labor,
such as sandbagging, which occurred extensively during the Midwest
floods. FEMA's records indicate that nearly $1.4 million was
obligated for volunteer credits in Iowa in response to the Midwest
floods.
FEMA officials explained that this allowance is not unique to FEMA.
It is contained in OMB Circular A-87, which authorizes all executive
agencies to use the value of donated services to meet cost-sharing
requirements. The allowance generally may not be modified by an
individual agency.
One respondent acknowledged that the allowance does result in
increased federal administrative costs, but he stated that the public
benefit of assisting some cash-strapped local governments to meet
their share of costs outweighs the increase in administrative costs.
RAISE THE DAMAGE THRESHOLD
FOR REPLACING FACILITIES
-------------------------------------------------------- Chapter 4:1.9
As noted in chapter 2, FEMA's policy authorizes replacing
disaster-damaged public facilities when the repair cost exceeds 50
percent of the replacement cost. The responding officials suggested
raising the percentage of damage required for FEMA to replace a
structure (rather than repair it) to a higher threshold, for example,
80 percent.
The respondents said that the 50-percent threshold is not based on
prudent use of federal tax dollars. For instance, the undamaged
portions of bridges may be replaced. Bridges have two abutments--one
at each end. If one abutment needs to be replaced as a result of
disaster damage, the costs will likely border on the 50-percent
threshold. In that case, the entire bridge will be replaced.
However, if the threshold was higher, only the damaged abutment would
be replaced--not both abutments.
Other organizations have higher replacement thresholds--for example,
insurance companies, according to one respondent. FEMA's Inspector
General noted that when insurance companies calculate the costs of
repair versus replacement, they determine that if repair is less
expensive than replacement, the facility is repaired. Other federal
agencies also have higher thresholds. For example, the Department of
Transportation and HUD require that replacement be more
cost-effective than repair. The Inspector General identified, as an
option for reducing the costs of public assistance, revising FEMA's
regulations to raise the threshold repair cost that triggers the
replacement of a public facility.
One respondent offered a different perspective. He stated that FEMA
had already taken steps to control replacement costs when the agency
clarified this policy in June 1995.\4 The revised policy states that
the 50 percent should be calculated on the actual costs of the
disaster damage--exclusive of the cost of, for example, seismic
upgrading, plumbing, heating, asbestos removal, mitigating against
future damage, and other nonstructural repairs. Before the policy
was clarified, these types of costs had been considered in repair
cost calculations. According to this respondent, the clarified
policy does not require additional revision because, although it does
not address the 50-percent threshold, it will likely save substantial
federal outlays.
The Association of State Floodplain Managers saw merit in raising the
percentage provided it does not apply to buildings insurable under
the National Flood Insurance Program. In commenting on a draft of
this report, FEMA noted that revising the damage threshold for public
assistance eligibility would have no effect on the requirements of
the National Flood Insurance Program or local floodplain regulations.
NEMA did not completely concur with revising the 50-percent
replacement rule, stating that the rule is a cost-effectiveness test
for deciding if federal money is better spent in repairing or
replacing a damaged facility. NEMA warned that arbitrarily raising
the threshold would result in an invalid test of cost-effectiveness
and suggested that a true measure would be a sliding scale taking
into account the age of the facility, the economy of the surrounding
community, and the function of the facility.
--------------------
\4 "Eligibility of Facilities for Replacement under 44 CFR
206.226(d)(1), (The 50% Rule)," Response and Recovery Directorate
Guidance No. 4511.61 E, June 1, 1995.
NEMA OFFICIALS CITED ADDITIONAL
OPTIONS
---------------------------------------------------------- Chapter 4:2
As noted above, NEMA endorsed for further consideration many of the
options most strongly recommended by FEMA respondents. However, the
President of NEMA questioned whether public costs would be reduced by
the options identified by FEMA respondents, noting that costs could
be shifted from the federal level to the state level and not
necessarily reduced.
NEMA proposed that considerable savings in the federal costs of
public assistance could be realized by reducing the federal
administrative structures. NEMA also endorsed for further
consideration the following options, identified but not most strongly
recommended by FEMA respondents:
-- Eliminate eligibility for postdisaster beach renourishment, such
as pumping sand from the ocean to reinforce the beach.
-- Limit the scope of emergency work to the legislative intent.
(NEMA believes that assistance for debris removal and emergency
protective measures has been used for permanent repairs.)
-- Eliminate eligibility for revenue-producing recreational
facilities, e.g., golf courses and swimming pools.
The rationale that NEMA provided for eliminating eligibility for
postdisaster beach renourishment is that it is prohibitively
expensive, provides only temporary relief, and encourages the
development of oceanfront property, which makes that property
vulnerable to future flooding. Seven of the 10 FEMA respondents also
recommended implementing this change. One noted that, like other
water control projects, beach renourishment could be handled by USDA
or the Corps of Engineers.
As noted in chapter 1, the regulations provide for the eligibility of
emergency work and permanent restoration work. The purpose of
emergency work, i.e., debris removal and protective measures, is to
eliminate or lessen immediate threats to life, public health, and
safety. Permanent restoration work is a longer-term process that
involves restoring the damaged facilities to their pre-disaster
condition.
NEMA stated that the scope of emergency work is not always
interpreted consistently. According to NEMA, one obstacle to
implementing this option is that "temporary" would need to be clearly
defined and the legislative intent would need to be thoroughly
explored. NEMA advised that federal regulations must not conflict
with or limit the authority of the code enforcement agency in the
legally binding determination of temporary repair. Six of the 10
FEMA respondents concurred that this option should be implemented.
The option of eliminating the eligibility of revenue-producing
recreational facilities involves the issue that recreational
facilities may not represent an essential component of a community
because they may not serve a purpose related to health and safety.
According to the July 1995 OIG report, recreational facilities, such
as golf courses and tennis courts, could be said to fall into the
"nice to have" category since many fully functional communities do
not have them. Furthermore, as discussed earlier, revenue-generating
facilities may have an alternate source of income for repairing
disaster-related damages.
NEMA noted that one obstacle to eliminating revenue-producing
recreational facilities is that a clear definition of
"revenue-producing facility" would need to be developed. Other
eligible government facilities besides recreational ones produce
revenue and could be determined ineligible without a clear
definition. In addition, according to NEMA, in certain instances, a
revenue-producing recreational facility may play a critical role in
the economic redevelopment of a stricken area.
Five of the 10 FEMA respondents also supported implementing this
option. FEMA has already eliminated from eligibility private
nonprofit organizations providing recreational services since they do
not provide an essential governmental service.
CONCLUSION
---------------------------------------------------------- Chapter 4:3
FEMA public assistance officials identified a number of options that
they believe could help reduce future public assistance costs. A
number of their recommendations are consistent with options proposed
by FEMA's Inspector General, with GAO's past work,\5 and with our
current review. Furthermore, the options highlight a number of
instances in which the existing eligibility criteria need to be
clarified or strengthened with additional guidance, as we recommended
in chapter 2.
--------------------
\5 For example, Earthquake Recovery: Staffing and Other Improvements
Following the Loma Prieta Earthquake (GAO/RCED-92-141, July 30, 1992)
and Los Angeles Earthquake: Opinions of Officials on Federal
Impediments to Rebuilding (GAO/RCED-94-193, June 17, 1994).
RECOMMENDATION
---------------------------------------------------------- Chapter 4:4
We recommend that the Director of FEMA determine whether the options
identified in this chapter should be implemented and, if so, take
actions to implement them, including, if necessary, proposing changes
to legislation and/or FEMA's regulations.
MAJOR LEGISLATIVE CHANGES
AFFECTING ELIGIBILITY FOR FEMA'S
PUBLIC ASSISTANCE
=========================================================== Appendix I
The Stafford Act of 1988 is an expansion of the first permanent
authority (P.L. 81-875) enacted in 1950 to provide disaster
assistance on a continuing basis without the need for congressional
action.\1 Over the years, the Congress has generally increased
eligibility for public assistance through legislation that expanded
the categories of assistance and/or specified the persons or
organizations eligible to receive the assistance. In some cases, the
legislation also imposed requirements as a condition of eligibility,
as shown by the following chronology:
-- In 1962, Public Law 87-502 authorized the emergency repair or
temporary replacement of damaged state facilities; local
facilities already were eligible for such assistance under the
1950 act.
-- In 1966, Public Law 89-769 authorized the repair of damaged
higher-education facilities and reimbursement to states and
localities for the repair or restoration of damaged public
facilities.
-- In 1969, Public Law 91-79 authorized grants for 50 percent of
the cost of repairing nonfederal-aid highways or roads. (As
discussed in ch. 1, the Department of Transportation assists in
the repair and restoration of federal-aid highways and roads.)
-- The Disaster Relief Act of 1970 (Public Law 91-606) authorized
grants of up to 100 percent of the cost of repairing or
replacing public facilities. The law also established
compliance with the applicable building codes as a condition for
receiving federal funds to repair or replace public facilities.
-- In 1971, Public Law 92-209 authorized grants for the repair or
replacement of nonprofit privately owned medical facilities
damaged in declared disasters.
-- The Disaster Relief Act of 1974 (1) expanded the category of
public facilities eligible for repair or replacement to include
educational and recreational facilities and similar nonprofit
facilities and (2) allowed localities to select an "in-lieu"
contribution of 90 percent of the estimated cost of repairing or
replacing all public facilities to be used as needed to build
new facilities. The law also required state and local
governments to take actions to mitigate future losses as a
condition for receiving grants or loans and required insurance
(including self-insurance) to be maintained as a condition for
receiving disaster assistance in the future.
-- In 1988, Public Law 100-707 (1) established 75 percent as the
minimum level of federal assistance to be provided for the
removal of debris and repair of public facilities and (2)
authorized federal reimbursement for the expenses associated
with administering federal assistance. The law also mandated
that federal assistance for repairing public facilities in flood
zones be linked to participation in the National Flood Insurance
Program.\2
--------------------
\1 In 1988, P.L. 100-707 amended existing disaster relief
legislation and renamed it the Stafford Act.
\2 Communities participating in the National Flood Insurance Program
must follow the program's building standards that are aimed at
minimizing flood losses.
SURVEY OF FEMA'S REGIONAL
OFFICIALS
========================================================== Appendix II
To develop an understanding of options for reducing\1 public
assistance program costs, we surveyed officials responsible for
administering the program in each of the Federal Emergency Management
Agency's (FEMA) 10 regional offices. Through a telephone survey,
FEMA officials identified options that could potentially reduce the
costs of public assistance. In a follow-up mail questionnaire, we
asked the respondents to rate each option to indicate how strongly
they recommended implementing each. While we asked the respondents
to rate each option in connection with its potential for reducing the
program's costs, to some extent the ratings that FEMA officials
assigned reflect their personal views. We subsequently telephoned
the respondents to obtain additional information on or clarification
of their responses.
In addition to obtaining a federal perspective, we obtained a state
perspective. We asked the National Emergency Management Association
(NEMA), which represents state emergency management officials, to
respond to the options that FEMA officials generated, because the
states would be affected by the implementation of many of the
options. The Association of State Floodplain Managers also commented
on the options that affected their constituents.
We limited the scope of our survey to changes that could be made to
the eligibility criteria for public assistance. Frequently, FEMA
respondents suggested, as a way to reduce federal expenditures for
the public assistance program, changing the cost- share formula so
that the states and local governments would be responsible for a
larger share of disaster costs. However, since that suggestion did
not directly result in changes to the eligibility criteria, we
considered it beyond the scope of this report.
Following is a list of options generated by FEMA respondents that are
not mentioned in chapter 4.
--------------------
\1 We define "reduce" to mean making future federal disaster
assistance costs lower than they would otherwise be if the option was
not implemented. Because future costs depend in part on the
incidence and severity of disasters, which are unpredictable, we
cannot precisely estimate the dollar impact of any option.
SMALL PROJECTS
------------------------------------------------------ Appendix II:0.1
Require an applicant to return funds if the actual cost of a small
project is less than the estimated cost.
Fund small projects on the basis of actual rather than estimated
costs.
Eliminate funding for small projects.
PRIVATE NONPROFIT
ORGANIZATIONS (PNP)
------------------------------------------------------ Appendix II:0.2
Amend the Stafford Act to eliminate eligibility for PNPs.
Eliminate eligibility for PNPs providing essential governmental-type
services to the general public.
Apply a means test to PNPs to determine their eligibility.
CATEGORY G (PUBLICLY OWNED
PARKS, RECREATIONAL
FACILITIES, MUSEUMS, AND
ZOOS)
------------------------------------------------------ Appendix II:0.3
Convert eligibility for category G projects from public assistance
grants to federal loans. Since publicly owned facilities are not
currently eligible for loans, a new federal loan program would be
required.
Eliminate eligibility for category G projects.
COMPLETION OF WORK DEADLINES
------------------------------------------------------ Appendix II:0.4
Eliminate eligibility for cost overruns that occur because work is
not completed on time.
Enforce adherence to time limits established in the regulations for
activities such as completing work (both emergency and permanent
work), reporting damage, making appeals, and submitting a notice of
interest. Otherwise, these tasks drag on and become administratively
costly.
ALTERNATE/IMPROVED PROJECTS
------------------------------------------------------ Appendix II:0.5
Although assessments of the impact on the environment are not
generally required for repair and restoration work, they are required
for alternate projects. Require applicants to share the increased
costs associated with the environmental impact analyses needed for
alternate projects.
Require applicants to bear all costs associated with environmental
impact analyses for alternate/improved projects.
When an applicant qualifies for relocation costs under a normal grant
but selects an alternate project as the funding option, eliminate
eligibility for relocation costs.
Amend the Stafford Act to eliminate eligibility for alternate
projects.
FLOODPLAIN MANAGEMENT AND
WATER CONTROL
------------------------------------------------------ Appendix II:0.6
Eliminate eligibility for recreational developments in floodplains.
Eliminate eligibility for dikes, levees, and irrigation control
projects. Assistance could be provided by the Corps of Engineers and
the Natural Resources Conservation Service (formerly the Soil
Conservation Service), organizations that are routinely involved in
flood control projects.
CODES AND STANDARDS
------------------------------------------------------ Appendix II:0.7
Amend the Stafford Act to eliminate eligibility for code upgrades by
limiting federal funding to the estimated federal cost of returning
the facility to its pre-disaster condition and use regardless of code
requirements.
ASSOCIATED COSTS
------------------------------------------------------ Appendix II:0.8
Grantees receive funds for administrative costs in two ways: (1) a
statutory fee calculated as a percentage of the public assistance
award and (2) a management grant. Tighten the definitions of these
two funding mechanisms to prevent duplicate payments.
Although limitations on labor costs associated with services provided
by state agencies were instituted in regulatory changes dated October
1993, additional limitations should be considered. To this end,
establish a deductible that states would have to satisfy before they
were eligible for federal funding on services, including labor,
provided by state agencies, such as state transportation departments
and state public health departments.
INSURANCE
------------------------------------------------------ Appendix II:0.9
The Stafford Act prohibits FEMA from requiring greater types and
amounts of insurance than the state insurance commissioner certifies
as reasonable. Revise the legislation to require the state insurance
commissioner to coordinate with FEMA in determining the types and
amounts of insurance reasonably available.
Revise the Stafford Act to shift authority from the state insurance
commissioner to FEMA to determine the types and amounts of insurance
reasonably available.
MINIMUM DAMAGE SURVEY REPORT
THRESHOLD
----------------------------------------------------- Appendix II:0.10
Raise the eligibility threshold for permanent work to at least
$5,000, from its current level of $1,000.
Set a minimum threshold for emergency work above the $1,000 minimum
eligibility requirement.
EMERGENCY WORK
----------------------------------------------------- Appendix II:0.11
Revise FEMA's regulations to make them consistent for labor costs.
For emergency declarations, straight time is eligible, while for
major disaster declarations, only overtime is eligible. Revise
FEMA's regulations so that only overtime is eligible for federal
funding for both emergency and major disaster declarations.
MISCELLANEOUS ISSUES
----------------------------------------------------- Appendix II:0.12
Eliminate eligibility for landscaping costs (e.g., replacing trees
and shrubbery, sodding). However, maintain eligibility for regrading
areas and controlling erosion to stabilize sites.
Eliminate the section 406 hazard mitigation funding. The owner of
the facility, whether a public entity or a PNP, would be required to
cover postdisaster upgrading.
(See figure in printed edition.)Appendix III
COMMENTS FROM FEMA
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
GAO'S RESPONSE
-------------------------------------------------------- Appendix II:1
FEMA commented that there are places in the report where another
perspective is needed for balance. Our response to these comments
follows.
FEMA commented that the report is somewhat misleading in attributing
the magnitude of increasing public assistance costs to the lack of
clarity in eligibility criteria, noting that the escalating cost of
disasters in recent years is due mostly to the extent of damage from
several catastrophic major disasters. The language in our report was
not intended to attribute the large increase in federal costs to a
lack of clarity in eligibility criteria. The report states that the
period from 1989 through 1994, during which federal disaster costs
increased significantly, encompassed very destructive and costly
disasters, including hurricanes Andrew and Iniki in 1992, the Midwest
floods of 1993, and the Northridge (California) earthquake in 1994.
The report also points out that over the years, legislative changes
have gradually expanded eligibility for public assistance; this
expansion would certainly have the effect of making federal costs
higher than they would be without the expansion. Also, our report
notes that FEMA's Inspector General concluded that the regulatory
changes made by FEMA may have expanded public assistance costs.
FEMA commented that our report seems to indicate that FEMA's
assessment of structural damages using its own architect and
engineering studies is an unnecessary duplication and stated that
such studies are (rather) a part of management oversight to help
ensure that cost savings are fully considered. GAO's point is that
the lack of clarity in the criteria for determining the standards
"applicable" to the permanent restoration of facilities may lead to
both an applicant and FEMA undertaking architectural and engineering
evaluations for the same project, which adds to administrative
expenses. GAO agrees that in cases in which an applicant and FEMA
disagree over which standards are applicable--and thus the scope of
work that is eligible for FEMA funding--additional studies by FEMA
may result in a narrower scope of work and thus a lower federal cost
for the project than would be the case on the basis of the
applicant's study alone.
FEMA commented that the agency is more involved in the process of
ensuring that expenditures are limited to eligible items than our
report suggests, noting that FEMA (1) approves scope-of-work changes
and cost overruns prior to obligating additional funds for projects
and (2) conducts final inspections and project reviews to verify the
actual eligible costs for "large" projects. Our report notes that if
a subgrantee wishes to modify a project or experiences cost overruns
after FEMA's initial approval of a damage survey report (DSR), it
must apply to FEMA for an amended or new DSR. We added language
noting that such applications provide FEMA with opportunities to
review the supporting documentation justifying the modification
and/or cost overrun. We also added the Director's statement that
FEMA conducts final inspections and project reviews to verify actual
eligible costs for "large" projects.
Finally, FEMA suggested (1) adding language to clarify why project
approval may be delayed, (2) updating an example--the Williams
Building--of a redevelopment property that was found eligible for
public assistance, and (3) clarifying that increasing the damage
threshold for public assistance eligibility would have no effect on
the requirements of the National Flood Insurance Program. GAO
revised the report as FEMA suggested.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
RESOURCES, COMMUNITY, AND
ECONOMIC DEVELOPMENT DIVISION
-------------------------------------------------------- Appendix IV:1
David G. Wood, Assistant Director
Paul W. Bryant, Senior Evaluator
Carole S. Buncher, Senior Evaluator
Eugene J. Chuday, Jr., Senior Evaluator
Alice G. Feldesman, Assistant Director
Carolyn M. Boyce, Senior Social Science Analyst
OFFICE OF THE GENERAL COUNSEL
-------------------------------------------------------- Appendix IV:2
John T. McGrail, Senior Attorney
LOS ANGELES OFFICE
-------------------------------------------------------- Appendix IV:3
Bonnie D. Hall, Senior Evaluator
Janet Fong, Senior Evaluator
Marco F. Gomez, Evaluator
ATLANTA OFFICE
-------------------------------------------------------- Appendix IV:4
Sherrill C. Dunbar, Evaluator
RELATED GAO PRODUCTS
Natural Disaster Insurance: Federal Government's Interests
Insufficiently Protected Given Its Potential Financial Exposure
(GAO/T-GGD-96-41, Dec. 5, 1995).
Disaster Assistance: Information on Declarations for Urban and Rural
Areas (GAO/RCED-95-242, Sept. 14, 1995).
Disaster Assistance: Information on Expenditures and Proposals to
Improve Effectiveness and Reduce Future Costs (GAO/T-95-140, Mar.
16, 1995).
GAO Work on Disaster Assistance (GAO/RCED-94-293R, Aug. 31, 1994).
Los Angeles Earthquake: Opinions of Officials on Federal Impediments
to Rebuilding (GAO/RCED-94-193, June 17, 1994).
Earthquake Recovery: Staffing and Other Improvements Made Following
Loma Prieta Earthquake (GAO/RCED-92-141, July 30, 1992).
*** End of document. ***