Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance (Testimony, 04/30/96, GAO/T-RCED-96-166).
The Federal Emergency Management Agency's (FEMA) public assistance
program funds the repair of public facilities, such as roads, government
buildings, utilities, and hospitals, that are damaged by natural
disasters. Under the program, FEMA spent more than $6.5 billion for
disasters that occurred during fiscal years 1989-94. FEMA may make
public assistance grants to state and local governments and nonprofit
groups for three general activities: debris removal, emergency
protective measures, and permanent restoration. GAO testified that
clearer and more-comprehensive criteria for determining eligibility for
public assistance would ensure that eligibility determinations were
consistent and equitable. To the extent that the criteria were more
restrictive, the cost of future public assistance could be reduced. In
the 1990s, the potential adverse effects of a lack of clear criteria
have become more significant because of (1) an increase in major
disasters and (2) the need to use temporary workers with limited
training to inspect damage and prepare damage survey reports.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-96-166
TITLE: Disaster Assistance: Improvements Needed in Determining
Eligibility for Public Assistance
DATE: 04/30/96
SUBJECT: Disaster relief aid
Flood insurance
Eligibility criteria
State-administered programs
Intergovernmental fiscal relations
Federal aid to states
IDENTIFIER: California
Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance (Testimony, 04/30/96, GAO/T-RCED-96-166).
The Federal Emergency Management Agency's (FEMA) public assistance
program funds the repair of public facilities, such as roads, government
buildings, utilities, and hospitals, that are damaged by natural
disasters. Under the program, FEMA spent more than $6.5 billion for
disasters that occurred during fiscal years 1989-94. FEMA may make
public assistance grants to state and local governments and nonprofit
groups for three general activities: debris removal, emergency
protective measures, and permanent restoration. GAO testified that
clearer and more-comprehensive criteria for determining eligibility for
public assistance would ensure that eligibility determinations were
consistent and equitable. To the extent that the criteria were more
restrictive, the cost of future public assistance could be reduced. In
the 1990s, the potential adverse effects of a lack of clear criteria
have become more significant because of (1) an increase in major
disasters and (2) the need to use temporary workers with limited
training to inspect damage and prepare damage survey reports.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-96-166
TITLE: Disaster Assistance: Improvements Needed in Determining
Eligibility for Public Assistance
DATE: 04/30/96
SUBJECT: Disaster relief aid
Flood insurance
Eligibility criteria
State-administered programs
Intergovernmental fiscal relations
Federal aid to states
IDENTIFIER: California
******************************************************************
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Cover
================================================================ COVER
Before the Subcommittee on VA, HUD and Independent Agencies,
Committee on Appropriations, U.S. Senate
For Release
on Delivery
Expected at
10:00 a.m. EDT
Tuesday
April 30, 1996
DISASTER ASSISTANCE - IMPROVEMENTS
NEEDED IN DETERMINING ELIGIBILITY
FOR PUBLIC ASSISTANCE
Statement of Judy A. England-Joseph,
Director, Housing and Community Development Issues
Resources, Community, and Economic
Development Division
GAO/T-RCED-96-166
GAO/RCED-96-166T
(385639)
Abbreviations
=============================================================== ABBREV
FEMA -
GAO -
DSR -
OIG -
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to provide this statement for the
record, which discusses our recent review of the Federal Emergency
Management Agency's (FEMA) public assistance program. We plan to
issue our final report on this work in May. Our statement today will
focus on (1) FEMA's criteria for determining eligibility for public
assistance, (2) the means by which FEMA ensures that public
assistance funds are expended only for eligible items, and (3)
changes in eligibility that could lower the costs of public
assistance in the future.
In summary, we found the following:
-- FEMA's criteria for determining the extent of permanent
restoration for public facilities and for determining the
eligibility of certain private nonprofit facilities are
ambiguous. Also, FEMA has not systematically updated or
disseminated to regional officials 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. Further, in large disasters
FEMA often uses temporary personnel with limited training to
help prepare and process damage survey reports, which are used
in determining eligibility. 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. FEMA approves specific subgrantee projects (subgrantees
are state and local government agencies, nonprofit
organizations, and other recipients) before obligating funds,
and also reviews project modifications and/or cost overruns.
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 damage survey reports. Additional
controls over disbursements include audits of some subgrantees
by (1) independent auditors pursuant to the Single Audit Act of
1984\1 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
building codes and standards applicable to permanent
restoration. Implementing these options might require amending
disaster assistance legislation and/or FEMA's regulations.
--------------------
\1 The Single Audit Act generally requires that entities receiving
over $25,000 annually in federal grant funds have an independent
audit.
BACKGROUND ON THE PUBLIC
ASSISTANCE PROGRAM
---------------------------------------------------------- Chapter 0:1
When disasters such as floods, tornadoes, or earthquakes strike,
state and local governments are called upon to help citizens cope.
Assistance from 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 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.
The public assistance program funds the repair of eligible public
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 (in constant 1995 dollars) for
disasters that occurred during fiscal years 1989 through 1994. FEMA
may make public assistance grants to state and local governments and
certain nonprofit organizations for three general purposes: debris
removal, emergency protective measures,\2 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 (DSRs) that contain
estimates of repair costs. Officials in FEMA's regional offices make
the initial eligibility determinations. The applicants may appeal
these decisions, first to the regional office and subsequently to
FEMA headquarters.
--------------------
\2 Emergency protective measures are activities undertaken to save
lives and protect public health and safety; examples include search
and rescue operations, security measures, and the demolition and
removal of damaged structures.
CLEARER CRITERIA ARE NEEDED TO
DETERMINE ELIGIBILITY
---------------------------------------------------------- Chapter 0:2
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. 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. 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.
CRITERIA FOR DETERMINING
EXTENT OF PERMANENT
RESTORATION ARE UNCLEAR
-------------------------------------------------------- Chapter 0:2.1
Our review of FEMA 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 applicable standards. For a number of reasons,
determining what standards are "applicable" can be contentious. For
example, 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.
To be considered "applicable," the standards must--among other
things--be in a formally adopted written ordinance of the
jurisdiction in which the facility is located or be state or federal
requirements. The standards do not necessarily have to be in effect
at the time of the disaster; if new standards are adopted before FEMA
has approved the DSR for the permanent restoration of a facility in
the jurisdiction, the work done to meet these standards may be
eligible for public assistance. FEMA regional officials cited a need
to better define the authority for adopting and approving standards.
CRITERIA FOR ELIGIBILITY OF
PRIVATE NONPROFIT FACILITIES
ARE UNCLEAR
-------------------------------------------------------- Chapter 0:2.2
Similarly, the criteria for determining the eligibility of certain
private nonprofit facilities are unclear. The Stafford Act provides
that, in addition to specific types of private nonprofit facilities
such as educational institutions and medical facilities, "other"
private nonprofit facilities that "provide essential services of a
governmental nature to the general public" may be eligible for
assistance. When developing regulations to implement the
legislation, FEMA relied on an accompanying report\3 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 services 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. However,
FEMA officials have still found it difficult to determine whether
facilities are eligible. FEMA's Inspector General has cited examples
of private nonprofits that do not appear to provide essential
government services yet 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.
--------------------
\3 House Report No. 100-517.
CLEAR CRITERIA ARE IMPORTANT
FOR CONTROLLING COSTS AND
OTHER REASONS
-------------------------------------------------------- Chapter 0:2.3
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--which determine the scope of work needed for permanent
restoration--were deemed "applicable," FEMA's costs of restoring one
of the hospitals damaged in the Northridge earthquake ranged from
$3.9 million to $64 million. (The latter estimate is based on the
cost of demolishing and replacing the hospital.)
Additionally, without clear criteria, inconsistent or inequitable
eligibility determinations and time-consuming appeals by grantees and
subgrantees may be more likely to occur. 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 that occurred before then; but from January 1993 to
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.
The need for clearer, more definitive criteria dealing with the
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 number of large disasters during the
1990s has resulted in a great number of DSRs; for example, over
17,000 after the Northridge earthquake and over 48,000 after the 1993
Midwest floods. FEMA regional officials working on the recovery from
the Northridge earthquake pointed out that the lack of training
directly results in poor quality DSRs that may cause overpayments or
underpayments to public assistance recipients.
OFFICIALS RECOGNIZE NEED FOR
CLEARER CRITERIA
SYSTEMATICALLY DISSEMINATED
-------------------------------------------------------- Chapter 0:2.4
According to FEMA regional officials, decisions made in determining
eligibility following one disaster have not been systematically
codified or disseminated to FEMA personnel to serve as a precedent in
subsequent disasters. The regulations were intended to be
supplemented with guidance, examples, and training to clarify
eligibility criteria and help ensure their consistent application,
but because of competing workload, this did not occur as envisioned.
FEMA's written guidance supplementing the regulations include a
manual published in draft in 1992 and policy memorandums.
FEMA and other officials recognize the need to clarify the criteria
and improve policy dissemination. At a January 1996 hearing,\4 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 DSRs.
Also, FEMA has recently taken steps to improve policy dissemination.
Examples include (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 to all regional
offices--of the results of second- and third-level appeals.
--------------------
\4 Hearings before the Subcommittee on Government Management,
Information, and Oversight, House Committee on Government Reform and
Oversight, Northridge, California, Jan. 19, 1996.
FEMA RELIES LARGELY ON STATES
TO ENSURE ELIGIBILITY OF
EXPENDITURES
---------------------------------------------------------- Chapter 0:3
To ensure that expenditures are limited to eligible items, FEMA
relies largely on states' (grantees') certifications. Further
limited assurance is provided by audits.
STATES CERTIFY THAT
DISBURSEMENTS ARE
APPROPRIATE
-------------------------------------------------------- Chapter 0:3.1
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. 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 gives FEMA the
opportunity to review supporting documentation justifying the
modification and/or cost overrun.
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 certify at the completion of each subgrantee's
project and the closeout of each disaster that all disbursements have
been proper and eligible under the approved DSRs. FEMA does not
specify what actions the states should take to enable them to make
the certifications, but provides that inspections and audits can be
used. FEMA has no reporting requirements for subgrantees but expects
grantees to impose reporting requirements on subgrantees so that the
grantees can submit 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 told us 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.
AUDITS PROVIDE SOME
ADDITIONAL ASSURANCE
-------------------------------------------------------- Chapter 0:3.2
Independent audits serve as a further check on the eligibility of
items funded by public assistance grants, although the audit coverage
is somewhat limited. FEMA's Office of Inspector General (OIG) audits
recipients on a selective basis and attempts to audit any disaster
when asked to by a FEMA regional office. Officials in the OIG's
Eastern District Office could not estimate their audit coverage but
said that a significant percentage of the dollars were 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 that those subgrantees represented about $200 million of the
$240 million in public assistance costs. Officials in the Western
District Office said that less than 10 percent of the disasters
receive some sort of audit coverage by the OIG. Overall, they
believe that probably less than one percent of DSRs are covered.
States may also perform audits of specific subgrantees. Currently,
California is the only state that has an arrangement with FEMA's OIG
to perform audits that meet generally accepted auditing standards.
(Audit coverage in California is particularly important because in
recent years California has received far more public assistance funds
than any other state.) OIG officials said that they have attempted to
negotiate for similar audit coverage by other states, but none have
agreed to provide it, 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.
FEMA may obtain additional assurances about the use of its funds from
audits of subgrantees conducted as part of the "single audit"
process.\5 State and local governments and nonprofit organizations
that receive $100,000 or more of federal funds in a year must have a
"single audit"\6 that includes an audit of their financial statements
and additional testing of their federal programs. Auditors
conducting single audits must test the internal controls and
compliance with laws and regulations for programs that meet specified
dollar criteria. The largest programs, in terms of expenditures, are
therefore tested. 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
they administer.
--------------------
\5 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."
\6 Nonprofit organizations that operate only one federal program may
elect to have an audit of that program.
CHANGES TO ELIGIBILITY CRITERIA
CITED BY DISASTER MANAGEMENT
OFFICIALS
---------------------------------------------------------- Chapter 0:4
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, we obtained their
recommendations for reducing the costs of future public assistance.
We also asked the officials to identify potential obstacles to
implementing those recommendations. We 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 impact on the public assistance costs of
future disasters is uncertain.
Options that (1) the FEMA regional officials strongly recommended and
(2) the National Emergency Management Association endorsed for
further consideration are:
-- 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 those
authorities can establish new standards applicable to the
restoration.
-- Eliminate the eligibility of 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 FEMA
decision on eligibility of work.
-- Improve insurance requirements by (1) eliminating states'
current authority to waive 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 but not
specifically endorsed for further consideration by the National
Emergency Management Association include the following:
-- Limit funding for facilities used to temporarily relocate
subgrantees during appeals, because the appeals process can take
several years. This option would be comparable to the insurance
industry's practice of calculating maximum allowable temporary
relocation costs.
-- Eliminate the eligibility of revenue-generating private
nonprofit organizations.
-- Eliminate funding from FEMA for some water control projects.
-- Limit funding for permanent restoration to the eligible cost of
upgrading only the parts of structures damaged by the disaster.
(Applicants would bear the expense of upgrading undamaged parts
of the structures.)
-- Eliminate the eligibility of 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.
-- Eliminate or reduce the eligibility of facilities when the lack
of reasonable pre-disaster maintenance contributes to the scope
of the damage from a disaster.
-- Eliminate the eligibility of the credit toward the local share
of the costs of public assistance for volunteer labor and
donated equipment and material.
-- Increase the percentage of damage required for FEMA to replace a
structure (rather than repair it) to a threshold higher than the
current 50 percent.
The National Emergency Management Association proposed that
considerable savings in the federal costs of public assistance could
be realized by reducing the federal administrative structures. The
association also endorsed for further consideration the following
options, identified but not most strongly recommended by FEMA
respondents:
-- Eliminate the eligibility of postdisaster "beach renourishment,"
such as pumping sand from the ocean to reinforce the beach.
-- Limit the scope of emergency work to the legislative intent.
(The association believes that assistance for debris removal and
emergency protective measures has been used for permanent
repairs.)
-- Eliminate the eligibility of revenue-producing recreational
facilities, e.g., golf courses and swimming pools.
CONCLUSIONS
---------------------------------------------------------- Chapter 0:5
Clearer and more comprehensive criteria (supplemented with specific
examples) that are 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.
A number of FEMA public assistance officials' recommendations are
consistent with options proposed by FEMA's Inspector General, with
our work,\7 and with our current review. Furthermore, the options
highlight a number of instances in which existing eligibility
criteria need to be clarified or strengthened with additional
guidance. Our May report contains recommendations designed to
clarify and help ensure consistent application of the criteria and to
identify changes that should be implemented.
--------------------
\7 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).
RELATED GAO PRODUCTS
============================================================ Chapter 1
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. ***