oversight

Major Management Challenges and Program Risks: Federal Emergency Management Agency

Published by the Government Accountability Office on 2003-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               United States General Accounting Office

GAO            Performance and Accountability Series




January 2003
               Major Management
               Challenges and
               Program Risks
               Federal Emergency
               Management Agency




GAO-03-113
               a
A Glance at the Agency Covered in This Report
The Federal Emergency Management Agency coordinates federal disaster and
emergency assistance policies and administers programs that provide assistance
before and after disaster strikes. Agency programs and activities include
●       supplemental assistance to enhance state and local preparedness activities,
●       disaster relief for communities and individuals,
●       a national flood insurance program,
●       fire prevention and suppression assistance, and
●       support for hazard mitigation projects.


The Federal Emergency Management Agency’s Budgetary and Staff Resources


Budgetary Resources a, b                                                Staff Resources b
Dollars in billions                                                     FTEs in thousands

16                                                                      8


                                                  12
12                                                                      6              5.2                4.9         5.0
                                      10                                     4.6                4.6
           8           8     7
    8                                                                   4


    4                                                                   2


    0                                                                   0
         1998    1999      2000      2001         2002                      1998      1999      2000     2001         2002
         Fiscal year                                                        Fiscal year
Source: Budget of the United States Government.

a Budgetary resources include new budget authority (BA) and unobligated balances of previous BA.

b Budget and staff resources are actuals for FY 1998-2001. FY 2002 are estimates from the FY 2003 budget, which
    are the latest publicly available figures on a consistent basis as of January 2003. Actuals for FY 2002 will be
    contained in the President’s FY 2004 budget to be released in February 2003.




This Series
This report is part of a special GAO series, first issued in 1999 and updated in
2001, entitled the Performance and Accountability Series: Major Management
Challenges and Program Risks. The 2003 Performance and Accountability Series
contains separate reports covering each cabinet department, most major
independent agencies, and the U.S. Postal Service. The series also includes a
governmentwide perspective on transforming the way the government does
business in order to meet 21st century challenges and address long-term fiscal
needs. The companion 2003 High-Risk Series: An Update identifies areas at high risk
due to either their greater vulnerabilities to waste, fraud, abuse, and
mismanagement or major challenges associated with their economy, efficiency, or
effectiveness. A list of all of the reports in this series is included at the end of
this report.
                                                    January 2003


                                                    PERFORMANCE AND ACCOUNTABILITY SERIES

                                                    Federal Emergency Management Agency
Highlights of GAO-03-113, a report to
Congress included as part of GAO’s
Performance and Accountability Series




The 2003 performance and                            FEMA has made progress in recent years in achieving its mission of
accountability series includes the                  supplementing state and local governments’ efforts to prepare and respond
first report on the Federal                         to major disasters. FEMA’s mission will be absorbed into a new Department
Emergency Management Agency                         of Homeland Security. As FEMA moves to integrate its mission into this new
(FEMA) since the series started in                  department, FEMA faces several management challenges to:
1999. GAO reported on
management challenges facing
FEMA this year because of the                       •   Ensure effective coordination of preparedness and response
increased national significance of                      efforts. FEMA and its missions will be transferred in their entirety into
the agency’s missions and the                           the new Department of Homeland Security (DHS)—the largest
additional responsibilities placed                      reorganization of the federal government since 1947. However, FEMA’s
on the agency.                                          homeland security and nonhomeland security missions will be under
                                                        separate DHS directorates. The separation of disaster and emergency
The information GAO presents in                         preparedness responsibilities will present coordination challenges for
this report is intended to help                         the Undersecretaries within DHS.
sustain congressional and agency
attention on continuing to make
                                                    •   Enhance the provision and management of disaster assistance for
progress in addressing these
challenges and ultimately                               efficient and effective response. FEMA has demonstrated its ability
overcoming them. This report is                         to quickly get resources to stricken communities in many disasters.
part of a special series of reports                     However, FEMA needs to develop more objective and specific criteria to
on governmentwide and                                   assess the capabilities of states and localities to respond to a disaster.
agency-specific issues.                                 FEMA needs to assess how the extent of its response and recovery
                                                        assistance to future disasters may be affected by the magnitude and
                                                        scope of recovery efforts undertaken in New York City. Information
                                                        system problems and a shortfall of appropriately trained FEMA staff
GAO believes that FEMA should                           could compromise FEMA’s ability to respond to a disaster.
•  ensure effective coordination
   of preparedness and response
                                                    •   Reduce the impact of natural hazards by improving the efficiency
   efforts,
•  enhance the provision and                            of mitigation and flood programs. As the number of large, costly
   management of disaster                               disasters has grown, FEMA has placed more emphasis on disaster
   assistance for efficient and                         mitigation efforts to reduce the effects of natural hazards. However,
   effective response,                                  concerns about the cost effectiveness of some of the mitigation
•  reduce the impact of natural                         programs have been raised. The National Flood Insurance Program has
   hazards by improving the                             not operated on a sound financial footing for several years.
   efficiency of mitigation and
   flood programs, and                              •   Resolve financial management weaknesses to ensure fiscal
•  resolve financial management                         accountability. From 1998 to 2000, FEMA’s Inspector General issued
   weaknesses to ensure fiscal                          unqualified opinions on FEMA’s consolidated financial statements.
   accountability.                                      However, problems with some of FEMA’s systems resulted in a qualified
                                                        opinion on their 2001 financial statement, and FEMA plans to take
                                                        corrective action. Until corrective actions are completed to address
                                                        reliability of information and instances of noncompliance with
www.gao.gov/cgi-bin/getrpt?GAO-03-113.                  requirements of certain laws and regulations, FEMA will not be able to
                                                        achieve effective financial accountability.
To view the full report, click on the link above.
For more information, contact John H.
Anderson Jr. at (202) 512-2834 or
andersonj@gao.gov.
Contents



Transmittal Letter                                                                                                1


Major Performance                                                                                                  2

and Accountability
Challenges

GAO Contacts                                                                                                      29


Related GAO Products                                                                                              30


Performance and                                                                                                   33

Accountability and
High-Risk Series




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                       Page i                                                       GAO-03-113 FEMA Challenges
A
United States General Accounting Office
Washington, D.C. 20548
                                                                                            Comptroller General
                                                                                            of the United States




           January 2003                                                                                           T
                                                                                                                  ransmL
                                                                                                                       ta
                                                                                                                        ileter




           The President of the Senate
           The Speaker of the House of Representatives

           This report addresses the major management challenges and program risks facing the Federal
           Emergency Management Agency (FEMA) as it works to carry out its missions, which range from
           hazard mitigation to disaster response coordination. It is part of a special series GAO has issued
           biennially since January 1999.

           This report discusses the actions that FEMA has taken and that are under way to address its
           management challenges. The report also discusses major events that have occurred that significantly
           influence the environment in which the agency carries out its mission. Also, GAO summarizes the
           challenges that remain, new ones that have emerged, and further actions that GAO believes are
           needed.

           This analysis should help the new Congress and the administration carry out their responsibilities and
           improve government for the benefit of the American people. For additional information about this
           report, please contact John H. Anderson Jr., Managing Director, Physical Infrastructure, at (202) 512-
           2834 or at andersonj@gao.gov.




           David M. Walker
           Comptroller General
           of the United States




                                     Page 1                                              GAO-03-113 FEMA Challenges
Major Performance and Accountability
Challenges

              For more than 20 years, the Federal Emergency Management Agency
              (FEMA) has been the nation’s lead federal agency for preparing for,
              responding to, and recovering from emergencies and disasters, natural and
              manmade. The agency provides disaster management assistance and
              funding for disaster response and recovery activities to communities and
              individuals in situations where catastrophic events are beyond the
              capabilities of the state and local governments affected. During this past
              year, the agency has faced the daunting challenge of leading the federal
              response to aid victims of the September 11, 2001 terrorist attacks—the
              most costly disaster and most devastating terrorist incident since FEMA
              was created. Moreover, FEMA’s role in working with first responder
              agencies—police, fire departments, and emergency medical personnel—
              has taken on new urgency in preparing for similar, or possibly worse,
              terrorist incidents. Yet, FEMA’s traditional responsibility of preparing for
              and responding to natural disasters has not lessened, and the agency
              responded to 49 major disaster events in 2002.

              Consistent with the increasing responsibilities placed upon FEMA, its
              budget is growing substantially. The fiscal year 2003 FEMA budget request
              is $6.7 billion, roughly three times the request for fiscal year 2002.1 The
              largest portion of the fiscal year 2003 request is meant to support state and
              local preparedness through the proposed $3.5 billion First Responder
              Initiative.

              On November 25, 2002, President Bush signed into law a bill creating the
              Department of Homeland Security (DHS)—the largest reorganization of the
              federal government since the formation of the Department of Defense in
              1947. DHS will be dedicated to protecting the United States from terrorist
              attacks and will combine about 170,000 federal workers from 22 agencies.
              FEMA and its missions will be placed entirely into DHS.




              1
               FEMA's annual budget request provides for normal agency operations and for conducting
              its various programs. Supplemental funding is requested if funds appropriated in annual
              legislation are not sufficient to respond to disasters. In fiscal year 2002, most of the funds
              appropriated to FEMA were provided through supplemental appropriations.




              Page 2                                                          GAO-03-113 FEMA Challenges
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Challenges




The placement of FEMA within DHS represents a significantly changed
environment in which FEMA will conduct its missions in the future. FEMA
has traditionally operated in an “all hazards” approach—preparing
simultaneously for all types of disasters—and it will be important for
FEMA and DHS management to ensure that sufficient management
capacity and accountability is provided to both homeland security and
natural hazards missions. Some of these missions—such as hazard
mitigation and flood insurance—have not traditionally been security
related. In testimony to the Congress, the Comptroller General stated that
care needs to be taken so that nonsecurity functions in agencies such as
FEMA receive adequate funding, attention, visibility, and support when
subsumed into a department that will be under tremendous pressure to
succeed in its primary mission.2

This year, for the first time, we are issuing a report that addresses
challenges facing FEMA because of the increased national significance of
the agency’s missions and the additional responsibilities placed on the
agency. These responsibilities include responding to the effects of terrorist
attacks and providing a central focal point for disaster preparedness and
response. As a result, the agency faces a number of challenges, some of
which result from the creation of the DHS, and some which the agency will
bring into the new department. The performance and accountability
challenges facing FEMA are described below.




2
 U.S. General Accounting Office, Homeland Security: Critical Design and Implementation
Issues, GAO-02-957T (Washington, D.C.: July 17, 2002).




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Ensure Effective   As a result of the legislation forming DHS, FEMA and its missions will be
                   transferred in their entirety into DHS. However, its homeland security and
Coordination of    nonhomeland security missions will be under separate DHS directorates.
Preparedness and   This divisional separation could complicate FEMA’s historical all-hazards
                   approach—a comprehensive approach focused on preparing for and
Response Efforts   responding to all types of disasters, either natural or man-made. The
                   separation of disaster and emergency responsibilities across two
                   directorates of the new department will present coordination challenges
                   for the appropriate Undersecretaries within DHS.




                   Page 4                                            GAO-03-113 FEMA Challenges
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Challenges




Separation of responsibilities for preparedness and response activities has
created problems in the past. Prior to 1979, more than 100 federal agencies
were involved in some aspect of disasters and emergencies, causing
problems at all levels of government and highlighting the need for
consolidation of functions. Thus, one of the objectives in the establishment
of FEMA in that year was to bring together disaster and emergency
response for all hazards in a single federal entity. More recently,
fragmentation of responsibilities for combating and responding to
terrorism has been recognized as a problem. As we reported in March 2002,
over 40 federal entities have had a role in combating and responding to
terrorism.3 The absence of a central focal point resulted in two major
problems. First, there was a lack of cohesive effort from within the federal
government. Second, the lack of leadership resulted in the federal
government’s development of multiple, similar programs to assist state and
local governments. For example, numerous federal entities offered state
and local governments training, planning, and assistance in dealing with the
consequences of chemical, biological, radiological, or nuclear attacks. Not
only did these efforts overlap, they potentially duplicated other efforts to
prepare for possible disasters such as from biological outbreaks, nuclear
power plants, or chemical factories.

In May 2001, as one approach to achieving a more integrated federal
terrorism preparedness response, the President created an Office of
National Preparedness within FEMA to coordinate all federal programs
that support state and local preparedness. In our September 2001 report,
we recommended a move beyond coordination—program consolidation.4
We believed that consolidation of assistance programs would best
eliminate overlapping assistance programs and provide a single liaison for
state and local officials. The need for consolidation of preparedness and
response assistance efforts has been similarly expressed in the Gilmore
Commission’s reports on assessing domestic response capabilities for
terrorism involving weapons of mass destruction.

Placing varied preparedness and response functions, which are currently
dispersed across several different departments, within DHS does achieve a
measure of consolidation. However, responsibility for terrorism

3
 U.S. General Accounting Office, Combating Terrorism: Key Aspects of a National Strategy
to Enhance State and Local Preparedness, GAO-02-473T (Washington, D.C.: Mar. 28, 2002).
4
 U.S. General Accounting Office, Homeland Security: A Framework for Addressing the
Nation’s Issues, GAO-01-1158T (Washington, D.C.: Sept. 21, 2001).




Page 5                                                     GAO-03-113 FEMA Challenges
                          Major Performance and Accountability
                          Challenges




                          preparedness and response will reside in the department’s Border and
                          Transportation Security Directorate, which will include FEMA’s Office of
                          National Preparedness. Other types of FEMA disaster preparedness and
                          response efforts will transfer to DHS’s Emergency Preparedness and
                          Response Directorate. With this division of preparedness and response
                          responsibilities, close coordination will be needed among these
                          directorates to ensure programs are developed, and activities undertaken,
                          that do not replicate the problems of duplication, overlap, and confusion
                          that occurred in the past. Additionally, a single face for the new department
                          will be needed so that state and local governments can be provided with
                          clear leadership and assistance. This will be particularly critical as the
                          funding requested by the President to assist state and local preparedness is
                          expected to be substantial. The President has requested $3.5 billion for a
                          First Responder Initiative that will aid state and local preparedness and
                          response efforts.

                          As FEMA has been at the forefront of preparedness and response efforts,
                          and has established networks with state and local governments, it will be
                          incumbent upon the FEMA components within the new department to play
                          a lead role in helping to establish an effective, coordinated preparedness
                          and response program that integrates both the homeland security and
                          nonhomeland security elements. Additionally, the DHS Undersecretaries
                          responsible for the Border and Transportation Security and the Emergency
                          Preparedness and Response Directorates will have the challenge of
                          establishing strong leadership and links between the directorates to ensure
                          that coordinated preparedness and response is achieved. The new
                          department will need this leadership to be able to quickly undertake this
                          important mission.



Enhance Provision and     FEMA faces a number of challenges pertaining to the provision and
                          management of disaster assistance. The agency administers several
Management of             programs authorized under the Robert T. Stafford Disaster Relief and
Disaster Assistance for   Emergency Assistance Act5 that provide federal assistance to supplement
                          state and local governments’ disaster response, recovery, preparedness,
Efficient and Effective   and mitigation efforts. Since the Act’s passage in 1988, FEMA provided over
Response                  $34 billion in assistance for more than 600 disasters. In fiscal year 2001,
                          FEMA disaster assistance obligations totaled $3.4 billion, reflecting FEMA’s


                          5
                          Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.)




                          Page 6                                                      GAO-03-113 FEMA Challenges
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                              response and recovery efforts for 50 declared major disasters, 15 declared
                              emergencies, and 36 events related to fire assistance.

                              FEMA has demonstrated its ability to quickly get resources to stricken
                              communities and disaster victims, but has problems ensuring the effective
                              use of such assistance, according to the Office of Management and Budget
                              (OMB). FEMA will be challenged to

                              • improve its criteria for determining state and local eligibility to receive
                                federal disaster assistance,

                              • assess extent of assistance for future major disasters based on the
                                recovery efforts undertaken in New York City,

                              • build on lessons learned from charities’ response to September 11,

                              • enhance disaster assistance staff training and resource planning,

                              • strengthen oversight of disaster assistance, and

                              • improve an existing information system before it is used as a building
                                block for a multiagency disaster management Web site.



Improve Eligiblity Criteria   FEMA is developing more objective and specific criteria to assess the
for Federal Disaster          capabilities of state and local governments to respond to a disaster. The
                              Stafford Act requires that the President determine if conditions are beyond
Assistance
                              state and local capability to respond before major disaster assistance from
                              the federal government is warranted. In 1999, FEMA published revised
                              regulations that established formal criteria for recommending presidential
                              approval of disaster declarations. These criteria include both minimum
                              financial thresholds and other qualitative measures that FEMA applies in
                              deciding whether to recommend presidential approval. As we reported in
                              August 2001,6 FEMA can recommend a disaster declaration if preliminary
                              estimates of the damage exceed $1.04 per capita statewide and $1 million in
                              total. FEMA’s other criteria include qualitative factors such as the impact of



                              6
                               U.S. General Accounting Office, Disaster Assistance: Improvement Needed in Disaster
                              Declaration Criteria and Eligibility Assurance Procedures, GAO-01-837 (Washington,
                              D.C.: Aug. 31, 2001).




                              Page 7                                                    GAO-03-113 FEMA Challenges
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                              a disaster on a particular area or the occurrence of recent multiple
                              disasters in the same area.

                              FEMA’s criteria, however, may not be an appropriate measure of state
                              financial resources. The current threshold was established in 1999 at $1.00-
                              per-capita and is adjusted for inflation. However, FEMA initially proposed
                              this $1.00-per-capita threshold in 1986, as it then represented about 0.1
                              percent of estimated General Fund expenditures by states. Adjusting for
                              annual inflation since 1986, the threshold level would have been $1.58 in
                              2001. Additionally, better measures of a state’s financial capacity exist.
                              Total Taxable Resources, a measure developed by the Department of the
                              Treasury, provides a more comprehensive measure of the resources that
                              are potentially subject to state taxation and are used to target aid in other
                              federal programs. Use of Total Taxable Resources criteria would result in
                              varying financial capability thresholds for states instead of a uniform
                              threshold and might better reflect states’ capacity to bear the burden of
                              responding to a disaster.7

                              We recommended in our August 2001 report that FEMA develop more
                              objective and specific criteria to assess the capabilities of state and local
                              governments to respond to a disaster. FEMA commented that our
                              observations would be valuable for its review of disaster declaration
                              criteria, but FEMA has yet to implement this recommendation. As the
                              President noted in his fiscal year 2002 budget proposal, the lack of clear
                              and meaningful criteria for recommending disaster declarations puts
                              FEMA at risk of providing federal funds to some states that do not need
                              assistance, while ignoring the legitimate needs of others. This situation will
                              remain until FEMA develops more objective assessment criteria.



Assess the Extent of          FEMA needs to assess how the extent of its response and recovery
Assistance for Future Major   assistance to future disasters may be affected by recovery efforts
                              undertaken in New York City after the September 11, 2001, terrorist
Disasters Based on the
                              attacks. The assistance FEMA is providing New York is of historic
Recovery Efforts              proportions. Following the attacks, President Bush pledged at least $20
Undertaken in New York        billion in federal funds to New York City to be delivered through various
City                          federal agencies. Of these funds, FEMA is responsible for the largest share,
                              a total of $9 billion, an amount that is also the greatest level of financial

                              7
                               U.S. General Accounting Office, Federal Grants: Design Improvements Could Help
                              Federal Resources Go Further, GAO/AIMD-97-7 (Washington, D.C.: Dec. 18, 1996).




                              Page 8                                                   GAO-03-113 FEMA Challenges
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Challenges




assistance FEMA has ever provided for any single disaster. To provide this
funding and respond to the degree of damage resulting from the attacks,
FEMA has needed to expand its assistance guidelines. The amount and
extent of assistance FEMA is providing may, however, have consequences
on spending for future major disasters if other affected communities
expect comparable federal disaster assistance.

FEMA’s response to the horrific damage resulting from the terrorist attacks
on New York City has led to a generally higher level of federal assistance.
According to the Stafford Act, once a disaster is declared, FEMA may
reimburse state and local governments for between 75 to 100 percent of the
eligible cost for response and recovery activities. FEMA states that
assistance has generally been limited to 75 percent of eligible costs;
however, assistance levels were increased to 100 percent of eligible costs
for the terrorist attacks on New York and other affected areas due to the
magnitude of the disaster. Although FEMA funding of 100 percent of
eligible costs is not unprecedented, funding of all eligible costs not only
places a greater financial burden on the federal government and potentially
reduces the cost control incentives inherent in cost-sharing arrangements,
but may also be viewed as a precedent for FEMA assistance by other
affected communities that may experience major disasters.

Additionally, in light of the magnitude and scope of damage to New York
City, FEMA determined—in some cases, at the direction of Congress—that
it was necessary to expand its guidelines to allow for maximum flexibility
in defining eligible response and recovery activities. FEMA Public
Assistance has traditionally been limited to coverage of disaster-related
losses and damages to existing infrastructure, and such assistance has not
been provided to enhance or modernize the infrastructure beyond its
predisaster condition. However, in recognizing the interdependence of
Lower Manhattan’s transportation system, FEMA officials reported that
they were able to broadly interpret their guidelines in order to ensure the
transportation needs of New York City were met. As a result, FEMA will
work with the Department of Transportation to rebuild the various
transportation systems that were damaged from attacks and to improve
Lower Manhattan’s overall transit system. Similarly, FEMA officials, as
mandated by the Congress, reported expanding eligibility guidelines of the
Mortgage and Rental Assistance program (MRA). Prior to September 11,
MRA was a rarely used FEMA program designed to aid individuals in
disaster areas whose employment was directly damaged by the event.
However, with the 2002 Supplemental Appropriations Act for Further
Recovery From and Response To Terrorist Attacks on the United States



Page 9                                            GAO-03-113 FEMA Challenges
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                              Challenges




                              (P.L. 107-206), FEMA expanded the eligibility guidelines of MRA to include
                              individuals who lived and worked in Lower Manhattan and lost significant
                              income regardless of whether their place of employment was damaged.
                              According to FEMA, the expansion represented the broadest interpretation
                              of the program in FEMA’s history.

                              FEMA faces several challenges as it continues to lead the largest recovery
                              effort in its history. Currently, FEMA faces the challenge of providing an
                              unprecedented amount of federal assistance to efficiently meet the needs
                              of New York City. For the future, it will be important for FEMA to consider
                              how the landmark federal response to the terrorist attacks could pose a
                              challenge in determining the level and breadth of future federal assistance.



Build On Lessons Learned      FEMA needs to work with charities to build on lessons learned from
from Charities’ Response to   charities’ response to September 11 in order to improve the collective
                              response to future disasters. FEMA is the lead federal agency for
September 11                  responding to disasters and may link with charitable organizations to
                              provide assistance. In fact, FEMA is required to coordinate government
                              relief and assistance activities with those of the American Red Cross and
                              the Salvation Army, as well as other voluntary organizations that agree to
                              operate under FEMA’s direction. Charitable aid made a major contribution
                              in the nation’s response to the September 11 attacks. However, the scope
                              and complexity of the September 11 disasters presented a number of
                              challenges to charities in their attempts to provide seamless social services
                              for survivors of the disaster. At the same time, FEMA and the various
                              charities involved in the response learned valuable lessons that could
                              improve future disaster response.

                              Thirty-five of the larger charities reported raising an estimated $2.6 billion
                              since September 11, 2001. Charities reported distributing their September
                              11 funds for a broad range of assistance. For example, in addition to cash
                              grants to more than 3,000 families of the victims, charities aided at least
                              50,000 families who lost jobs or income or whose homes were damaged
                              and served millions of meals to thousands of rescue workers. To distribute
                              aid, charities had to make extensive efforts to identify victims and
                              survivors, as there was no uniform contact lists for families of victims;
                              charity officials also said privacy issues affected the sharing of information
                              among charities.




                              Page 10                                             GAO-03-113 FEMA Challenges
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                          Initially, little coordination of charitable aid occurred, but a more
                          integrated approach emerged some months later. Despite these efforts,
                          however, September 11 survivors reported they generally had to navigate a
                          maze of service providers in the early months, and both charities and those
                          individuals who were more indirectly affected by the disaster were
                          confused about what aid might be available to them. Although steps were
                          taken to address some of these issues in previous disasters, the scope and
                          complexity of the September 11 attacks presented a number of challenges
                          to charities in their attempts to provide seamless social services for
                          surviving family members. Some months after the disaster, however,
                          oversight agencies and large charities established a more coordinated
                          approach. This included the formation of coordinating entities, the
                          implementation of case management systems, and attempts to implement
                          key coordination tools, such as client databases. To help facilitate future
                          collaborative efforts, we recommended in a December 2002 report that
                          FEMA convene a working group of involved parties to take steps to
                          implement strategies for future disasters, building upon lessons learned in
                          the aftermath of September 11. 8 FEMA generally agreed that a broad based
                          working group is likely to foster enhanced communication and
                          coordination among charitable organizations and others involved in
                          disaster response.



Enhance Disaster          FEMA faces challenges to enhance its disaster assistance training and
Assistance Training and   resource planning. After a disaster has been declared, FEMA officials
                          determine which projects meet Stafford Act criteria for funding. Given this
Resource Planning         responsibility, it is critical that a process exists to ensure staff have the
                          requisite disaster assistance knowledge, skills, and abilities. In fiscal year
                          1999, FEMA developed a credentialing program that provided a framework
                          for evaluating the knowledge, skills, and abilities of its staff—including its
                          permanent full-time employees as well as its temporary disaster assistance
                          employees, who are deployed to respond to a disaster. FEMA expected that
                          this program would ensure that its employees would have the basic
                          qualifications to perform their jobs and would make FEMA managers,
                          applicants, and the public more confident about their performance.
                          According to FEMA officials, however, the credentialing program has not
                          been implemented because of budget constraints.


                          8
                           U.S. General Accounting Office, September 11: More Effective Collaboration Could
                          Enhance Charitable Organizations’ Contributions in Disasters, GAO-03-259 (Washington,
                          D.C.: Dec. 19, 2002).




                          Page 11                                                  GAO-03-113 FEMA Challenges
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                          The credentialing program may be a critical need because FEMA staff may
                          not be getting adequate training. As we reported in 2001,9 the Public
                          Assistance budget for training has decreased from about $1.9 million for
                          fiscal year 1999 to $725,000 for fiscal year 2001. In addition, several studies
                          conducted by individual FEMA disaster field offices during 1999 and 2000
                          found training either was not timely or was not offered at all. For example,
                          according to available data on formal training, only 20 percent of the staff
                          had received training on the agency’s core information tracking system—
                          the National Emergency Management Information System (NEMIS).
                          NEMIS is the management information system staff is expected to use to
                          document disaster assistance to various recipients. Only one FEMA region
                          had trained over half of its staff to use the system.

                          In our 2001 report, we recommended that FEMA reconsider budgetary
                          priorities to determine if a higher priority should be assigned to
                          implementing a credentialing and training program for federal disaster staff
                          that focuses on the knowledge, skills, and abilities needed for each of the
                          various roles involved in disaster management. FEMA disagreed with the
                          need to assign training a higher budgetary priority, as FEMA stated that all
                          disaster staff attended its basic training class, which provides such
                          instruction. We still believe, however, that FEMA should consider giving
                          higher priority to implementing a credentialing program such as the one the
                          agency has designed.

                          In addition, FEMA faces the challenge posed by attrition from retirements.
                          According to FEMA projections, 48 percent of FEMA’s workforce will be
                          eligible to retire in the next 5 years. FEMA is working to develop a
                          workforce-restructuring plan to address how the agency will attract and
                          retain personnel with the skills to perform core agency functions. FEMA
                          advised us that they expect to have a draft of the plan in early 2003.



Strengthen Oversight of   For a presidentially declared disaster, FEMA has primary responsibility for
Disaster Assistance       coordinating the federal response. Typically, this response consists of
                          providing grants to assist state and local governments and certain private
                          nonprofit organizations to alleviate the damage resulting from such
                          disasters. FEMA’s monitoring of grantee and contractor performance can
                          be improved. In 1998, FEMA’s Inspector General (IG) reported that FEMA


                          9
                          GAO-01-837.




                          Page 12                                              GAO-03-113 FEMA Challenges
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grantees were not fully complying with FEMA and federal grant
regulations, and problems went undetected because FEMA did not have an
effective grants management system. In response, FEMA formed a grants
management team to develop policies and procedures to enable FEMA
regional offices to manage grants. However, GAO and the FEMA IG have
continued to report FEMA grant and contractor oversight problems.

An example of an area where FEMA can improve its oversight is debris
removal. According to a 2001 FEMA IG report,10 FEMA needs to continue
improving its controls over the debris removal program to prevent fraud,
waste, and abuse. The IG identified examples of excess charges that did not
meet eligibility criteria, unsupported costs not substantiated by
documentation, and duplicate payments. The IG also called for FEMA to
improve grantees’ recording of debris information, to provide better
technical assistance for debris removal, and to improve debris
management training. Although confronted with unprecedented challenges
such as the site’s immense scale and its status as a crime scene, FEMA
officials noted steps were taken to improve oversight of debris removal at
the World Trade Center site. Specifically, FEMA officials reported that
grantees used best practices to ensure contractor accountability, such as
trip tickets, load counts and equipping trucks with global positioning
satellite tracking systems. Figure 1 shows debris at the World Trade Center.




10
   FEMA, Office of Inspector General Audit Division, Audit of FEMA’s Debris Removal
Program (Washington, D.C., March 2001).




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Figure 1: Debris at the World Trade Center




FEMA lacks adequate procedures and processes to recapture improper
payments. GAO's work over the past several years has demonstrated that
improper payments (payments that should not have been made or were
made for incorrect amounts) are a significant and widespread problem in
federal agencies,11 and FEMA’s IG has found improper payments to be a
problem area for FEMA. For example, the IG found an $8.5 million
improper grantee payment, and FEMA management indicated in February
2001 that they would take action to recover the money. However, 7 months
later, FEMA had not taken any action to collect these funds. Moreover,
FEMA officials explained that the agency was actively pursing such debts,
but that collecting debts was an arduous process due to poor or no
documentation, lack of final inspections on disaster related projects, and
difficulty in negotiating final debt amounts with the states.


11
  U.S. General Accounting Office, Financial Management: Coordinated Approach Needed
to Address the Government's Improper Payments Problems, GAO-02-749 (Washington,
D.C.: Aug. 9, 2002).




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                              FEMA’s lack of documentation was also noted as a problem in our July 2001
                              report on a presidentially declared major disaster—the Cerro Grande fire in
                              New Mexico.12 Although a systematic process for the payment of fire
                              victims’ injury claims had been established, we found that certain key
                              procedures used by the claim reviewers under contract were not formally
                              documented. Further and more importantly, because of the condition of the
                              files, FEMA officials could not effectively carry out their responsibilities
                              for assessing the contractor’s work to determine the validity and
                              reasonableness of the amounts claimed. As a result, inconsistent claims
                              determinations can occur, and there is no assurance that the proper
                              amounts are paid. To address the lack of documentation, we recommended
                              that FEMA direct the Office of Cerro Grande Fire Claims to require all
                              claims reviewers to document all steps and procedures they perform to
                              determine the validity of a claim and the amount recommended for
                              payment. Although FEMA did not specifically comment on our
                              recommendation, officials reported that claim reviewers have responded to




Improve Existing              FEMA’s disaster information system, NEMIS, has fundamental problems
Information System Prior to   that must be resolved before it can be used as a springboard for an
                              expanded disaster assistance tool. FEMA plans to create and manage a
System Expansion
                              one-stop information Web site that will include information to assist in
                              emergency preparedness. The new site, Disasterhelp.gov—one of the top
                              three e-government initiatives of the Bush administration—aims to provide
                              a single federal point of contact for all assistance in response to major
                              disasters. FEMA officials hope that states and localities will use the Web
                              site as an information source for preparedness, mitigation, response, and
                              recovery, and that public and private organizations might use it to share
                              knowledge and information. The new system is being structured to use
                              FEMA’s existing system—NEMIS—as a building block.




                              12
                               U.S. General Accounting Office, Federal Emergency Management Agency: Weaknesses
                              Exist in the Cerro Grande Fire Assistance Claim Validation Process, GAO-01-848
                              (Washington, D.C.: July 13, 2001).




                              Page 15                                                GAO-03-113 FEMA Challenges
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                           FEMA needs to resolve NEMIS problems before the system can effectively
                           be used for developing Disasterhelp.gov. As we reported in 2001,13 NEMIS
                           has limited application in providing the information needed to manage and
                           oversee disasters and suffers from a lack of quality controls. We found that
                           NEMIS can provide information on a project-by-project basis, but it is
                           severely limited in its ability to provide higher-level information that could
                           help FEMA management review the agency’s performance. Further, there
                           have been many complaints from federal and state disaster personnel that
                           the system is difficult to use and subject to sporadic shutdowns. In
                           addition, the system does not automatically verify certain information that
                           has been entered; and it can be unreliable, time-consuming, and difficult to
                           use in a remote disaster environment. The quality of the information in
                           NEMIS is also suspect because of FEMA’s reliance on temporary staff that
                           may lack experience with the system or training in its use.

                           Furthermore, in the administration’s fiscal year 2002 budget, OMB noted
                           that FEMA has traditionally given little oversight to its information
                           technology spending. OMB stated this led to ineffective and costly
                           information technology projects, and specifically noted the $67 million
                           NEMIS system. OMB said that the system has a history of crashing during
                           disaster response operations.



Reduce the Impact of       For many years, FEMA has focused increased emphasis on reducing the
                           impact of natural hazards, not only to lessen the impact to property and
Natural Hazards by         individuals, but also to reduce federal disaster costs. Two of the agency’s
Improving the              major efforts in this regard have been its mitigation programs and the
                           National Flood Insurance Program. These programs seek to strengthen
Efficiency of Mitigation   structures against the effects of hazards or remove them from harm’s way
and Flood Programs         and to minimize the need for future FEMA disaster assistance. However,
                           concerns exist in both of these efforts that may limit their effectiveness in
                           achieving these objectives.

                           Moreover, the placement of FEMA within DHS represents a substantially
                           changed environment in which FEMA will conduct its missions in the
                           future, and missions that focus on reducing the impacts of natural hazards,
                           such as hazard mitigation and flood insurance, may receive decreased
                           emphasis. Sustained attention to these programs will be needed to ensure


                           13
                                GAO-01-837.




                           Page 16                                             GAO-03-113 FEMA Challenges
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                         they maintain or improve their effectiveness in protecting the nation
                         against, and reducing federal costs associated with, natural hazards.



Multihazard Mitigation   The cost of federal disaster assistance has grown significantly since the late
Programs                 1980s. During the 12-year period ending in 1989, the expenditures from the
                         disaster relief fund totaled about $7 billion (in fiscal year 2001 dollars).
                         However, during the following 12-year period ending in 2001, as the number
                         of large, costly disasters has grown and the activities eligible for federal
                         assistance have increased, expenditures from the disaster relief fund
                         increased fivefold to about $39 billion (in fiscal year 2001 dollars). (See
                         figure 2.) Disaster assistance costs are expected to remain high in 2002, in
                         part as a result of the September 11, 2001, terrorist attacks. According to
                         FEMA’s projections, disaster assistance expenditures from the disaster
                         relief fund will total more than $4 billion in fiscal year 2002.




                         Page 17                                             GAO-03-113 FEMA Challenges
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Figure 2: Disaster Relief Fund Expenditures and Number of Declared Disasters, Fiscal Years 1978-2001 (in Fiscal Year 2001
Dollars)




                                          As costs for disaster assistance have increased, mitigation actions—both
                                          “brick and mortar” efforts, such as elevating buildings in flood-prone areas
                                          or creating tornado-resistant structures, and outreach activities, such as
                                          providing mitigation education and awareness to the public—have taken
                                          on greater importance. Figure 3 shows a house in the process of being
                                          elevated to mitigate flood damage.




                                          Page 18                                                 GAO-03-113 FEMA Challenges
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Figure 3: House in North Carolina in the Process of Being Elevated to Mitigate Flood
Damage




Page 19                                                 GAO-03-113 FEMA Challenges
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FEMA has placed more emphasis on disaster mitigation efforts to reduce or
eliminate long-term risks to people and property from hazards and their
effects. Among the most significant of these efforts are its multihazard
mitigation programs that address a broad range of hazards. These are the
Hazard Mitigation Grant Program, which provides funding to undertake
mitigation actions in areas that have recently suffered a major disaster, and
the Project Impact program, which funds predisaster mitigation actions.14

Concerns have been raised regarding the demonstration of cost
effectiveness of some mitigation projects in these programs. For example,
as we reported in 1999, FEMA had exempted four categories of projects in
the Hazard Mitigation Grant Program from benefit-cost analysis,15 and for
projects in these categories—the number of which FEMA could not
identify—the cost effectiveness was unknown. Similarly, FEMA’s Office of
Inspector General reported in March 1998 and again in February 2001
concerns about the cost-effectiveness of mitigation projects and pointed
out that analyses had often not been done and techniques for conducting
them were poorly understood. Furthermore, many projects had been
exempted from analysis.16

The administration has also had concerns with the cost-effectiveness of
mitigation projects, and in FEMA’s fiscal year 2003 budget request, a
consolidation of the mitigation programs has been proposed. This
proposed consolidation would (1) eliminate the Hazard Mitigation Grant
Program, (2) establish a new predisaster mitigation program, and (3)
require all grants to be awarded on a national, cost-competitive basis. The
funding for mitigation activities would be around $300 million annually—
relatively consistent with historical averages—but all mitigation funding
would be subject to the annual appropriation process and spending caps.
Currently, funding for the Hazard Mitigation Grant Program can total up to

14
 The Project Impact program was discontinued in 2002, but a similar program was funded
by the Congress to continue predisaster mitigation activities. However, this new program
has not yet been implemented. Consequently, we refer to the predisaster mitigation program
as Project Impact.
15
 U.S. General Accounting Office, Disaster Assistance: Opportunities to Improve Cost-
Effectiveness Determinations for Mitigation Grants, GAO/RCED-99-236 (Washington,
D.C.: Aug. 4, 1999).
16
   FEMA, Office of Inspector General Audit Division, Auditors Report on FEMA Fiscal Year
2001 Financial Statement (Washington, D.C., February 2002) and Improvements are
Needed in the Hazard Mitigation Buyout Program 1-01-98 (Washington, D.C. March
1998).




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                          15 percent of the total grant funds for disasters, an amount that has no
                          dollar limit.

                          We reported in September 2002 that the administration's proposals to
                          change the mitigation programs could raise additional challenges to
                          mitigation program participation and implementation.17 These challenges
                          include: (1) a reduced window of opportunity for taking advantage of the
                          heightened interest in mitigation that exists after a disaster has struck, (2)
                          potential exclusion of some states from disaster mitigation funding, and (3)
                          possible curtailment of outreach and planning activities that increase
                          mitigation awareness and participation. Additionally, FEMA does not have
                          a process for determining or comparing the relative benefits and costs of
                          projects needed for a competitive grant program. As a result, these changes
                          to the mitigation programs could lessen their effectiveness.



Flood Insurance Program   Floods have inflicted more economic losses upon the United States than
                          any other natural disaster. From fiscal year 1992 through fiscal year 1999
                          alone, 20 major flooding disasters caused over $97 billion in damages. Since
                          its inception 34 years ago, the National Flood Insurance Program has
                          become a major component of the federal government’s efforts to provide
                          disaster assistance. The program offers insurance to property owners in
                          communities that have joined the program and encourages floodplain
                          management efforts to mitigate flood hazards. Additionally, the program
                          has reduced federal expenditures on disaster assistance. It is estimated
                          that community compliance with the program’s standards for new
                          construction are now saving about $1 billion annually in flood damage
                          avoided, and that its payment of nearly $12 billion in insurance claims
                          replaced costs that would, to some extent, have increased taxpayer-funded
                          disaster relief.




                          17
                             U.S. General Accounting Office, Hazard Mitigation: Proposed Changes to FEMA’s
                          Multihazard and Mitigation Programs Present Challenges, GAO-02-1035 (Washington,
                          D.C.: Sept. 30, 2002).




                          Page 21                                                 GAO-03-113 FEMA Challenges
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Figure 4: Net Financial Status of the National Flood Insurance Program (Annual
Income Minus Costs)




Nevertheless, the National Flood Insurance Program has not operated on
solid financial footing. Annual operating losses or net revenues from the
insurance program’s operations have varied significantly from year to year,
and while revenues exceeded program costs in some years, cumulative
program costs exceeded income by more than $1.3 billion during fiscal
years 1993 through 2001. (See Figure 4.)

This long-term loss has occurred because the flood insurance program is
not actuarially sound. As we reported in July 2001,18 about 30 percent of the
policies in force are subsidized. By law, FEMA is prohibited from charging
full premiums for structures that were in existence before a community
joined the program, and on average the premium on subsidized policies
represents only about 38 percent of the true risk premium for these
properties. FEMA estimates subsidized properties to be as much as four


18
 U.S. General Accounting Office, Flood Insurance: Information on the Financial
Condition of the National Flood Insurance Program, GAO-01-992T (Washington, D.C.: July
19, 2001).




Page 22                                                   GAO-03-113 FEMA Challenges
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times more likely to suffer a flood loss, and to receive 40 percent more
damage, than properties with unsubsidized policies. FEMA officials
estimated that premium income from subsidized policyholders is about
$500 million per year less than it would be if these rates had been
actuarially based.

Further, the program is not designed to collect sufficient premium income
to build reserves to meet the long-term future expected flood losses. The
program’s annual target for premium income is at least the amount of
losses and expenses in an average year. However, the program has only
been in existence since 1978 and has not experienced any catastrophic loss
years; consequently, in determining losses and expenses in an average year,
it does not include possible catastrophic losses.19 This, in turn, does not
enable the program to build sufficient reserves to cover such a loss.
Because the program does not collect sufficient premium income to build
reserves to meet the long-term future expected losses, it is inevitable that
losses from the claims and program expenses will exceed the funds
available to the program in some years and, cumulatively, over time. Figure
5 illustrates severe flooding that occurred in East Grand Forks, Minnesota.




19
 A catastrophic loss year is defined as a year resulting in $5.5 to $6 billion in claims losses,
which has a 1 in 1,000 chance of occurring.




Page 23                                                          GAO-03-113 FEMA Challenges
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Figure 5: Destructive Flooding in East Grand Forks, Minnesota




In addition to these concerns, the level of compliance with requirements
for the mandatory purchase of flood insurance is unknown. The purchase
of flood insurance is required for properties located in flood-prone areas of
participating communities for the life of mortgage loans made or held by
federally regulated lending institutions, guaranteed by federal agencies, or
purchased by government-sponsored enterprises.20 However, no system
exists upon which to determine the level of compliance. In June 2002,21 we
reported that, based on an analysis of data on new mortgages and new
flood insurance policies, compliance with mandatory insurance purchase


20
   A federally regulated lending institution is any bank, savings and loan association, credit
union, farm credit bank, federal land bank, production credit association, or similar
institution supervised by a federal entity for lending regulation. A government-sponsored
enterprise is a privately owned, federally chartered corporation that serves a public
purpose.
21
 U.S. General Accounting Office, Flood Insurance: Extent of Noncompliance with
Purchase Requirements Is Unknown, GAO-02-396 (Washington, D.C.: June 21, 2002).




Page 24                                                         GAO-03-113 FEMA Challenges
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                            requirements does not appear to be a problem at the time mortgage loans
                            are originated. However, no readily available data exists upon which to
                            determine if flood insurance policies are being maintained over the life of
                            the mortgage loan as required. Consequently, the federal government
                            remains at risk of having to provide disaster assistance to properties that
                            should be covered by flood insurance and of not receiving all the flood
                            insurance premiums that it should.

                            The administration has recognized that the National Flood Insurance
                            Program faces major financial challenges, and has proposed several
                            reforms to improve financial performance and transfer greater financial
                            liability to individuals building in flood-prone areas. These reforms include
                            phasing out premium subsidies on second homes and vacation properties
                            and requiring that mortgage borrowers insure the full replacement value of
                            their properties. Nevertheless, while these steps may result in some
                            improvement to the program’s financial soundness, the underlying
                            problems have yet to be fully addressed. Additionally, beginning in fiscal
                            year 2003, FEMA expects to begin a program to update existing flood rate
                            maps, an effort that may increase the number of properties within the
                            identified flood zone and exacerbate the current problems in the flood
                            insurance program.



Resolve Financial           Sound financial management is critical to ensuring that FEMA’s—and by
                            extension, the federal taxpayer’s—funds are appropriately controlled,
Management                  managed, and reported. In fiscal year 2001, FEMA received a qualified
Weaknesses to Ensure        opinion on its financial statement from its independent auditors—a
                            reversal from the previous 3 years in which it received unqualified audit
Fiscal Accountability       opinions. Further, the auditors reported six material internal control
                            weaknesses in FEMA’s financial systems as well as substantial
                            noncompliance with certain laws and financial regulations such as the
                            Federal Financial Management Improvement Act. Until these weaknesses
                            and instances of noncompliance are addressed, FEMA will not be able to
                            achieve effective financial accountability and will continue to be at risk for
                            errors, fraud, or noncompliance that may not be promptly detected.



Inadequate Accounting for   FEMA received a qualified audit opinion on its financial statements for
Property and Unliquidated   fiscal year 2001.22 This was a departure from the last 3 years when FEMA
                            received unqualified opinions on its financial statements. FEMA’s auditor
Obligations
                            was unable to issue an unqualified opinion because, with regard to



                            Page 25                                             GAO-03-113 FEMA Challenges
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                           personal property amounts, it found that FEMA’s systems were not
                           integrated and required two different manual accounting processes, which
                           together were inadequate for financial reporting purposes. Due to these
                           inadequate processes, FEMA could not reconcile the property information
                           from the manually created spreadsheets to its personal property
                           management system and to its core financial system. As a result, the
                           auditors were unable to determine the accuracy of the $10.8 million
                           amount reported for FEMA’s equipment.

                           Further, FEMA did not have adequate support for its unliquidated
                           obligations accounts. The auditors found that FEMA did not reconcile
                           many of these accounts fully or on time. Once FEMA reconciled
                           unliquidated obligations from its subsidiary records to the general ledger, it
                           reduced the general ledger by $77 million, as of September 30, 2001, in
                           order to bring its financial statement into balance. However, FEMA did not
                           have supporting documentation for the reduction. As a result, the auditors
                           were unable to determine the accuracy of the adjustment made to FEMA’s
                           financial statements.



Internal Control           FEMA’s auditor has also identified six serious weaknesses with the
Weaknesses Impede          agency’s internal financial controls. These are as follows:
Financial Accountability   • Weak information security controls and insufficient financial system
                             controls increase vulnerability, such that users with viewing access
                             could modify data, including creating new records. This results in a
                             substantial risk that financial resources and data may be exposed to
                             unauthorized modification, disclosure, loss, or impairment.

                           • Ineffective interfaces between FEMA financial systems result in
                             inefficient and potentially inaccurate manual processes to integrate data
                             for financial reporting or financial statement preparation. Such interface
                             problems and manual processes significantly affect FEMA’s ability to
                             process, maintain, and report financial information.

                           • The financial statement reporting process is unreliable and does not
                             generate reliable reports, as financial statements are not accurate until a
                             significant number of adjustments are made and substantial resources

                           22
                            The qualified opinion was due to inadequate documentation to support personal property
                           amounts and an unsupported adjustment to its unliquidated obligations account.




                           Page 26                                                    GAO-03-113 FEMA Challenges
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                              are committed to review and validate the statements. These conditions
                              increase the risk that FEMA’s financial statements could be inaccurately
                              presented.

                           • FEMA does not have adequate accounting systems and processes that
                             ensure that all property, plant, and equipment is properly recorded,
                             accurately depreciated, and tracked in accordance with FEMA policies
                             and applicable federal accounting standards. As a result, the system
                             cannot track items to supporting documentation or to a current
                             location.

                           • Many of FEMA’s accounts had not been reconciled during the year and,
                             once reconciliations were performed, significant adjustments to FEMA
                             financial accounts and records were required. For example, a $177
                             million reduction was required in records supporting accounts payable,
                             and at the time the report was issued, there still existed a $22.6 million
                             unreconciled difference in a fund account between FEMA and the
                             Department of the Treasury’s records.

                           • Due to noncompliance with applicable regulations and policies, FEMA’s
                             accounts receivable required detailed analysis and stronger collection
                             efforts. For example, as of September 30, 2001, FEMA has made no
                             attempt to recoup about $30 million of overpayments recorded as
                             accounts receivable in 1998.

                           The FEMA IG reported in January 2002 that problems with the agency’s
                           internal controls significantly affect its financial accountability. In the fiscal
                           year 2001 Annual Performance and Accountability Report, FEMA’s IG
                           reported that FEMA does not have a functioning integrated management
                           system and that its system of internal controls has weaknesses that have
                           adversely affected its ability to record, process, summarize, and report
                           accurate, reliable, and timely financial information.



FEMA Did Not Comply with   The auditors reported that FEMA’s financial management systems did not
Certain Laws and           substantially comply with requirements of certain laws and regulations
                           intended to improve financial accountability. The auditors reported the
Regulations
                           following:

                           • FEMA’s financial management systems did not substantially comply
                             with federal financial management systems’ requirements or applicable




                           Page 27                                                GAO-03-113 FEMA Challenges
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   federal accounting standards under the Federal Financial Management
   Improvement Act.

• Improvements were needed to FEMA’s information security program in
  order to fully comply with the Government Information Security Reform
  Act.

• FEMA’s selection, control, and evaluation processes for information
  resource investments did not comply with the Clinger-Cohen Act.

• FEMA did not have a financial management system plan with action
  plans and time frames for enhancing the agency’s financial systems
  environment and, other than its IG coordinated reviews, did not perform
  reviews of financial management systems to ensure sufficient controls
  were in place as required by the Federal Managers’ Financial Integrity
  Act and OMB Circular A-127, Financial Management Systems.

In a February 2002 letter responding to the audit report, FEMA officials
agreed with each issue and identified corrective actions to all
recommendations. FEMA stated that processes would be in place during
fiscal year 2002 to address the report qualifications and the material
internal control weaknesses. In addition, FEMA officials expect the Chief
Information Officer’s final report to provide responses to concerns about
information technology and information system security controls.

Until these qualifications, weaknesses, and instances of non-compliance
are addressed, FEMA will not have accurate financial statements or
adequate internal controls over financial information. FEMA will continue
to require intensive time-consuming manual efforts to develop reliable
information and be at risk for errors, fraud, or noncompliance that may not
be promptly detected. The results of the fiscal year 2002 financial
statement audit will be the determining factor in the success of FEMA’s
efforts to address these issues.




Page 28                                           GAO-03-113 FEMA Challenges
GAO Contacts




               Subject(s) covered in this report             Contact person
               Coordination of preparedness and response     JayEtta Hecker, Director
               efforts                                       Physical Infrastructure
                                                             (202) 512-2834
               Provision and management of disaster          heckerj@gao.gov
               assistance

               Reducing impact of natural hazards
               Building on lessons learned from charities’   Sigurd Nilsen, Director
               response to September 11                      Education, Workforce and Income
                                                             Security
                                                             (202) 512-7215
                                                             nilsens@gao.gov
               Financial management                          Linda Calbom, Director
                                                             Financial Management and Assurance
                                                             (202) 512-6906
                                                             calboml@gao.gov




               Page 29                                                   GAO-03-113 FEMA Challenges
Related GAO Products



Homeland Security   Building Security: Interagency Security Committee Has Had Limited
                    Success in Fulfilling Its Responsibilities. GAO-02-1004. Washington,
                    D.C.: September 17, 2002.

                    Homeland Security: Effective Intergovernmental Coordination is Key to
                    Success. GAO-02-1013T. Washington, D.C.: August 23, 2002.

                    Homeland Security: Critical Design and Implementation Issues. GAO-02-
                    957T. Washington, D.C.: July 17, 2002.

                    National Preparedness: Integrating New and Existing Technology and
                    Information Sharing into an Effective Homeland Security Strategy.
                    GAO-02-811T. Washington, D.C.: June 7, 2002.

                    Homeland Security: Integration of Federal, State, Local, and Private
                    Sector Efforts Is Critical to an Effective National Strategy for Homeland
                    Security. GAO-02-621T. Washington, D.C.: April 11, 2002.

                    Combating Terrorism: Enhancing Partnerships Through a National
                    Preparedness Strategy. GAO-02-549T. Washington, D.C.: March 28, 2002.

                    Homeland Security: Progress Made, More Direction and Partnership
                    Sought. GAO-02-490T. Washington, D.C.: March 12, 2002.

                    Homeland Security: Challenges and Strategies in Addressing Short- and
                    Long-Term National Needs. GAO-02-160T. Washington, D.C.: November 7,
                    2001.

                    Homeland Security: A Risk Management Approach Can Guide
                    Preparedness Efforts. GAO-02-208T. Washington, D.C.: October 31, 2001.

                    Homeland Security: Need to Consider VA’s Role in Strengthening Federal
                    Preparedness. GAO-02-145T. Washington, D.C.: October 15, 2001.

                    Homeland Security: Key Elements of a Risk Management Approach.
                    GAO-02-150T. Washington, D.C.: October 12, 2001.

                    Homeland Security: A Framework for Addressing the Nation’s Issues.
                    GAO-01-1158T. Washington, D.C.: September 21, 2001.

                    Combating Terrorism: Selected Challenges and Related
                    Recommendations. GAO-01-822. Washington, D.C.: September 20, 2001.


                    Page 30                                          GAO-03-113 FEMA Challenges
                             Related GAO Products




FEMA / Disaster Assistance   September 11: More Effective Collaboration Could Enhance Charitable
                             Organizations’ Contributions in Disasters, GAO-03-259. Washington,
                             D.C.: December 19, 2002.

                             Hazard Mitigation: Proposed Changes to FEMA’s Multihazard Mitigation
                             Programs Present Challenges. GAO-02-1035. Washington, D.C.: September
                             30, 2002.

                             September 11: Interim Report on the Response of Charities. GAO-02-1037.
                             Washington, D.C.: September 3, 2002.

                             Flood Insurance: Extent of Noncompliance with Purchase Requirements
                             Is Unknown. GAO-02-396. Washington, D.C.: June 21, 2002.

                             Disaster Assistance: Improvement Needed in Disaster Declaration
                             Criteria and Eligibility Assurance Procedures. GAO-01-837. Washington,
                             D.C.: August 31, 2001.

                             Chemical Weapons: FEMA and Army Must Be Proactive in Preparing
                             States for Emergencies. GAO-01-850. Washington, D.C.: August 13, 2001.

                             Flood Insurance: Information on the Financial Condition of the National
                             Flood Insurance Program. GAO-01-992T. Washington, D.C.: July 19, 2001.

                             Federal Emergency Management Agency: Weaknesses Exist in the Cerro
                             Grande Fire Assistance Claim Validation Process. GAO-01-848.
                             Washington, D.C.: July 13, 2001.

                             Federal Emergency Management Agency: Status of Achieving Key
                             Outcomes and Addressing Major Management Challenges. GAO-01-832.
                             Washington, D.C.: July 9, 2001.

                             Disaster Relief Fund: FEMA's Estimates of Funding Requirements Can
                             Be Improved. RCED-00-182. Washington, D.C.: August 29, 2000.

                             Observations on the Federal Emergency Management Agency's Fiscal
                             Year 1999 Performance Report and Fiscal Year 2001 Performance Plan.
                             RCED-00-210R. Washington, D.C.: June 30, 2000.

                             Disaster Assistance: Opportunities to Improve Cost-Effectiveness
                             Determinations for Mitigation Grants. RCED-99-236. Washington, D.C.:
                             August 4, 1999.


                             Page 31                                         GAO-03-113 FEMA Challenges
                        Related GAO Products




                        Federal Grants: Design Improvements Could Help Federal Resources Go
                        Further. AIMD-97-7. Washington, D.C.: December 18, 1996.



Public Health           Bioterrorism: The Centers for Disease Control and Prevention's Role in
                        Public Health Protection. GAO-02-235T. Washington, D.C.: November 15,
                        2001.

                        Bioterrorism: Review of Public Health Preparedness Programs. GAO-02-
                        149T. Washington, D.C.: October 10, 2001.

                        Bioterrorism: Public Health and Medical Preparedness. GAO-02-141T.
                        Washington, D.C.: October 9, 2001.

                        Bioterrorism: Coordination and Preparedness. GAO-02-129T. Washington,
                        D.C.: October 5, 2001.

                        Bioterrorism: Federal Research and Preparedness Activities. GAO-01-915.
                        Washington, D.C.: September 28, 2001.



Budget and Management   Financial Management: Coordinated Approach Needed to Address the
                        Government's Improper Payments Problems. GAO-02-749. Washington,
                        D.C.: August 9, 2002.




                        Page 32                                         GAO-03-113 FEMA Challenges
Performance and Accountability and High-
Risk Series

              Major Management Challenges and Program Risks: A Governmentwide
              Perspective. GAO-03-95.

              Major Management Challenges and Program Risks: Department of
              Agriculture. GAO-03-96.

              Major Management Challenges and Program Risks: Department of
              Commerce. GAO-03-97.

              Major Management Challenges and Program Risks: Department of
              Defense. GAO-03-98.

              Major Management Challenges and Program Risks: Department of
              Education. GAO-03-99.

              Major Management Challenges and Program Risks: Department of
              Energy. GAO-03-100.

              Major Management Challenges and Program Risks: Department of
              Health and Human Services. GAO-03-101.

              Major Management Challenges and Program Risks: Department of
              Homeland Security. GAO-03-102.

              Major Management Challenges and Program Risks: Department of
              Housing and Urban Development. GAO-03-103.

              Major Management Challenges and Program Risks: Department of the
              Interior. GAO-03-104.

              Major Management Challenges and Program Risks: Department of
              Justice. GAO-03-105.

              Major Management Challenges and Program Risks: Department of
              Labor. GAO-03-106.

              Major Management Challenges and Program Risks: Department of State.
              GAO-03-107.

              Major Management Challenges and Program Risks: Department of
              Transportation. GAO-03-108.




              Page 33                                      GAO-03-113 FEMA Challenges
Performance and Accountability and High-
Risk Series




Major Management Challenges and Program Risks: Department of the
Treasury. GAO-03-109.

Major Management Challenges and Program Risks: Department of
Veterans Affairs. GAO-03-110.

Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111.

Major Management Challenges and Program Risks: Environmental
Protection Agency. GAO-03-112.

Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113.

Major Management Challenges and Program Risks: National
Aeronautics and Space Administration. GAO-03-114.

Major Management Challenges and Program Risks: Office of Personnel
Management. GAO-03-115.

Major Management Challenges and Program Risks: Small Business
Administration. GAO-03-116.

Major Management Challenges and Program Risks: Social Security
Administration. GAO-03-117.

Major Management Challenges and Program Risks: U.S. Postal Service.
GAO-03-118.

High-Risk Series: An Update. GAO-03-119.

High-Risk Series: Strategic Human Capital Management. GAO-03-120.

High-Risk Series: Protecting Information Systems Supporting the
Federal Government and the Nation’s Critical Infrastructures. GAO-03-
121.

High-Risk Series: Federal Real Property. GAO-03-122.




Page 34                                        GAO-03-113 FEMA Challenges
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