oversight

Federal Disaster Assistance: Improved Criteria Needed to Assess a Jurisdiction's Capability to Respond and Recover on Its Own

Published by the Government Accountability Office on 2012-09-12.

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

                 United States Government Accountability Office

GAO              Report to Congressional Addressees




September 2012
                 FEDERAL DISASTER
                 ASSISTANCE

                 Improved Criteria
                 Needed to Assess a
                 Jurisdiction’s
                 Capability to Respond
                 and Recover on Its
                 Own




GAO-12-838
                                               September 2012

                                               FEDERAL DISASTER ASSISTANCE
                                               Improved Criteria Needed to Assess a Jurisdiction's
                                               Capability to Respond and Recover on Its Own
Highlights of GAO-12-838, a report to
congressional addressees




Why GAO Did This Study                         What GAO Found
The growing number of disaster                 During fiscal years 2004-2011, the President received governors’ requests for
declarations—a record 98 in fiscal year        629 disaster declarations and approved 539, or 86 percent, of which the Federal
2011 compared with 65 in 2004—has              Emergency Management Agency (FEMA) reported 71 percent were for severe
contributed to increased federal               storms. For these 539 declarations, FEMA obligated $80.3 billion, or an average
disaster costs. FEMA leads federal             of about $10 billion a year, from the Disaster Relief Fund (DRF), as of January
efforts to respond to and recover from         31, 2012. Almost half of the obligations were for Hurricane Katrina; excluding
disasters and makes recommendations            obligations for Hurricane Katrina, FEMA obligated $40.6 billion, or an average of
to the President, who decides whether          about $5 billion a year. As of January 31, 2012, FEMA anticipated that when all
to declare a disaster and increase the
                                               539 declarations are closed, total DRF obligations will be about $91.5 billion.
usual federal cost share of 75 percent.
This report addresses (1) the number           GAO’s analysis shows that FEMA primarily relied on a single criterion, the per
of declarations requested and                  capita damage indicator, to determine whether to recommend to the President
approved from fiscal years 2004-2011           that a jurisdiction receive public assistance (PA) funding. However, because
and associated DRF obligations; (2)            FEMA’s current per capita indicator, set at $1 in 1986, does not reflect the rise in
the criteria FEMA used to recommend            (1) per capita personal income since it was created in 1986 or (2) inflation from
a declaration for PA, and the extent           1986 to 1999, the indicator is artificially low. The indicator would be $3.57 in 2011
that FEMA assessed whether an                  had it been adjusted for increases in per capita income and $2.07 in 2012 had it
effective response to a disaster was           been adjusted for inflation from 1986 to 1999, rather than its current $1.35.
beyond the capabilities of state and
                                               GAO’s analysis of FEMA’s anticipated obligations for 508 declarations with PA
local governments; (3) how FEMA
                                               during fiscal years 2004-2011 shows that 44 percent and 25 percent would not
determined whether to recommend
cost share adjustments, and their              have met the indicator if it had been adjusted for increases in personal income
costs; and (4) FEMA’s administrative           and inflation, respectively, since 1986. Further, the per capita indicator does not
cost percentages for declarations.             accurately reflect a jurisdiction’s capability to respond to or recover from a
GAO reviewed declaration data for              disaster without federal assistance. GAO identified other measures of fiscal
fiscal years 2004-2011 and conducted           capacity, such as total taxable resources, that could be more useful in
site visits in 2011 to the two FEMA            determining a jurisdiction’s ability to pay for damages to public structures.
regions with the highest DRF                   Developing a methodology to more comprehensively assess state capabilities
obligations. The results are not               and reexamining the basis for the indicator could help FEMA more accurately
generalizable, but provide insights.           determine a jurisdiction’s capacity to respond without federal assistance.
                                               FEMA recommends raising the usual 75 percent federal share for PA to 90
What GAO Recommends                            percent when federal obligations, excluding FEMA administrative costs, meet a
GAO recommends, among other                    qualifying threshold. However, FEMA has no specific criteria for assessing
things, that FEMA develop a                    requests to raise the federal share for emergency work to 100 percent, but relies
methodology to more accurately                 on its professional judgment. For the 539 disaster declarations during fiscal years
assess a jurisdiction’s capability to          2004-2011, governors made 150 requests to adjust the federal cost share to 90
respond to and recover from a disaster         or 100 percent; 109, or 73 percent, were approved or statutorily mandated,
without federal assistance, develop            mostly for hurricanes. Without specific criteria for 100 percent cost share, FEMA
criteria for 100 percent cost                  risks making inconsistent or inequitable recommendations to the President.
adjustments, and implement goals for
and track administrative costs. FEMA           GAO’s analysis of administrative costs for 539 disaster declarations during fiscal
concurred with the first two, but              years 2004-2011 shows that administrative cost percentages frequently
partially concurred with the third,            exceeded FEMA’s targets, although FEMA does not require that they be met.
saying it would conduct a review               GAO’s analysis of 1,221 disaster declarations shows that average administrative
before taking additional action.               costs doubled from 9 to 18 percent during fiscal years 1989-2011, the time period
                                               for which FEMA has data available. FEMA is working on short- and long-term
View GAO-12-838. For more information,         actions to improve efficiencies in delivering disaster assistance, but the agency
contact William O. Jenkins at (202) 512-8757   does not plan to set goals or track performance for administrative costs. Until this
or jenkinswo@gao.gov.                          happens, it will be difficult for FEMA to ensure assistance is being delivered in an
                                               efficient manner.
                                                                                        United States Government Accountability Office
Contents


Letter                                                                                      1
               Background                                                                   7
               Over 500 Disasters Were Declared during Fiscal Years 2004
                  through 2011 with Total Obligations of Over $90 Billion
                  Anticipated                                                             14
               Eligibility for Assistance Is Primarily Determined Using a Damage
                  Estimate Indicator                                                      22
               FEMA Does Not Have Specific Criteria to Evaluate Some Cost
                  Share Adjustment Requests and Does Not Track Additional
                  Costs for All Adjustments                                               33
               Costs of Providing Disaster Assistance Have Increased, but FEMA
                  Is Working to Reduce Costs                                              38
               Conclusions                                                                48
               Recommendations for Executive Action                                       50
               Agency Comments and Our Evaluation                                         51

Appendix I     GAO Analyses of the Number of Disaster Declarations and
               Amount of Obligations                                                      54



Appendix II    Objectives, Scope, and Methodology                                         65



Appendix III   Total Public Assistance Indicator Amount for Fiscal Year 2012, by
               Jurisdiction                                                               69



Appendix IV    Description of Three Approaches to Measure a Jurisdiction’s Fiscal
               Capacity                                                                   71



Appendix V     Comments from the Department of Homeland Security                          78



Appendix VI    GAO Contact and Staff Acknowledgments                                      82




               Page i                                   GAO-12-838 Federal Disaster Assistance
Tables
         Table 1: Number of Disaster Declarations Requested and Approved
                  during Fiscal Years 2004 through 2011                             14
         Table 2: Obligations by Fiscal Year for 539 Disaster Declarations
                  during Fiscal Years 2004 through 2011                             19
         Table 3: Number and Percentage of Closed Disasters Declared
                  during Fiscal Years 1989 through 2011, by Obligation
                  Amounts as of January 31, 2012                                    21
         Table 4: Number and Percentage of Disasters Declared during
                  Fiscal Years 2004 through 2011, by Combined Actual and
                  Projected Total Obligation Amounts, as of April 30, 2012          22
         Table 5: Three Potential Approaches to Measure a Jurisdiction’s
                  Fiscal Capacity                                                   32
         Table 6: Number of Cost Share Adjustments Requested and
                  Approved, Fiscal Years 2004 through 2011                          34
         Table 7: Average Administrative Cost Percentages for 1,221
                  Disaster Declarations during Fiscal Years 1989
                  through 2011                                                      41
         Table 8: Average Administrative Cost Percentages by Type of
                  Assistance during Fiscal Years 1989 through 2011                  44
         Table 9: Status of Disaster Declarations during Fiscal Years 1992
                  through 2011, as of January 31, 2012                              54
         Table 10: Number of Disaster Declarations during Fiscal Years 1953
                  through 2011 by Jurisdiction                                      55
         Table 11: Disaster Declarations by Incident Type during Fiscal
                  Years 2004 through 2011                                           58
         Table 12: Obligations for Disaster Declarations during Fiscal Years
                  2004 through 2011, by Jurisdiction, as of January 31, 2012        59
         Table 13: Obligations Per Person Including Hurricane Katrina for
                  Disaster Declarations during Fiscal Years 2004 through
                  2011, by Jurisdiction                                             61
         Table 14: Obligations Per Person Excluding Hurricane Katrina for
                  Disaster Declarations during Fiscal Years 2004 through
                  2011, by Jurisdiction                                             63
         Table 15: 2010 Population and Total PA Per Capita Indicator
                  Amount for Fiscal Year 2012, by Jurisdiction                      69
         Table 16: PA Indicator Adjusted by Jurisdiction for 2009 TTR               77




         Page ii                                  GAO-12-838 Federal Disaster Assistance
Figures
          Figure 1: Number of Disaster Declarations during Fiscal Years 1953
                   through 2011                                                       10
          Figure 2: Disaster Declaration Process                                      13
          Figure 3: Number of Disaster Declarations during Fiscal Years 2004
                   through 2011, by Jurisdiction                                      16
          Figure 4: Major Disaster Declarations by Type of Assistance, Fiscal
                   Years 2004 through 2011                                            17
          Figure 5: Disaster Relief Fund Obligations, Including Hurricane
                   Katrina, by Jurisdiction during Fiscal Years 2004 through
                   2011, as of January 31, 2012                                       20
          Figure 6: Comparison of Actual Public Assistance Per Capita
                   Indicator with the Indicators if They Had Been Adjusted
                   for Increases in Personal Income and Inflation, 1986
                   through 2011                                                       26
          Figure 7: Frequency of Declarations above and below FEMA’s
                   Target of 20 Percent or Less for Administrative Costs for
                   Small Declarations during Fiscal Years 1989 through 2011           42
          Figure 8: Frequency of Declarations above and below FEMA’s
                   Target of 15 Percent or Less for Administrative Costs for
                   Medium Declarations during Fiscal Years 1989 through
                   2011                                                               43
          Figure 9: Frequency of Declarations above and below FEMA’s
                   Target of 12 Percent or Less for Administrative Costs for
                   Large Declarations during Fiscal Years 1989 through 2011           44
          Figure 10: Number of Disaster Declarations and Amount of
                   Obligations by FEMA Region during Fiscal Years 2004
                   through 2011                                                       57




          Page iii                                  GAO-12-838 Federal Disaster Assistance
Abbreviations
DHS          Department of Homeland Security
DRF          Disaster Relief Fund
FCO          federal coordinating officer
FEMA         Federal Emergency Management Agency
GDP          gross domestic product
GSP          gross state product
IA           Individual Assistance
IFMIS        Integrated Financial Management Information System
JFO          joint field office
NEMIS        National Emergency Management Information System
PA           Public Assistance
PCI          state personal income
PDA          Preliminary Damage Assessment
PPD-8        Presidential Policy Directive-8
TTR          Total Taxable Resources


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Page iv                                            GAO-12-838 Federal Disaster Assistance
United States Government Accountability Office
Washington, DC 20548




                                   September 12, 2012

                                   The Honorable Jason Chaffetz
                                   Chairman
                                   Subcommittee on National Security,
                                   Homeland Defense, and Foreign Operations
                                   Committee on Oversight and Government Reform
                                   House of Representatives

                                   The Honorable Roy Blunt
                                   United States Senate

                                   The growing number of major disaster declarations has contributed to an
                                   increase in federal expenditures for disaster assistance. 1 For example,
                                   during the 8 fiscal years from 2004 through 2011, Presidents declared 26
                                   percent more major disaster declarations than during the preceding 8
                                   fiscal years from 1996 through 2003. The Federal Emergency
                                   Management Agency (FEMA), a component of the Department of
                                   Homeland Security (DHS), leads the federal effort to mitigate, respond to,
                                   and recover from disasters, both natural and man-made. Disaster
                                   declarations can trigger a variety of federal response and recovery
                                   assistance for government and nongovernmental entities, households,
                                   and individuals. FEMA’s disaster assistance programs include Individual
                                   Assistance (IA) and Public Assistance (PA), which provide financial




                                   1
                                    Hereafter in this report, major disaster declarations are referred to as disaster
                                   declarations. In addition to issuing major disaster declarations, the President may issue
                                   emergency declarations (42 U.S.C. § 5191) and fire assistance declarations (42 U.S.C. §
                                   5187). If the President declares an emergency, the federal government may provide
                                   immediate and short-term assistance that is necessary to save lives, protect property and
                                   public health and safety, or lessen or avert the threat of a catastrophe, among other
                                   things. 42 U.S.C. § 5192. Federal assistance may not exceed $5 million under an
                                   emergency declaration unless continued emergency assistance is immediately required;
                                   there is a continuing and immediate risk to lives, property, public health or safety; and
                                   necessary assistance will not otherwise be provided on a timely basis. 42 U.S.C. § 5193.
                                   Upon the request of a governor, the President may issue a fire assistance declaration that
                                   provides financial and other assistance to supplement state and local firefighting
                                   resources for fires that threaten destruction that might warrant a major disaster
                                   declaration. 44 C.F.R. § 204.21.




                                   Page 1                                             GAO-12-838 Federal Disaster Assistance
assistance to individuals and jurisdictions, respectively. 2 Typically, FEMA
pays 75 percent of the PA costs for disaster declarations, and state and
local governments pay the other 25 percent. However, governors can
request that the President approve an adjustment to the cost share, so
that state and local governments would pay less than 25 percent. 3

FEMA’s Disaster Relief Fund (DRF) is the major source of federal
disaster recovery assistance for state and local governments when a
disaster is declared. The DRF is appropriated no-year funding, which
allows FEMA to direct, coordinate, manage, and fund response and
recovery efforts associated with domestic disasters and emergencies. 4
FEMA categorizes DRF obligations according to five categories: IA, PA,
Hazard Mitigation, Mission Assignments, and Administration. 5 During
fiscal years 2004 through 2011, PA was the category with the largest
obligations. In addition, from fiscal years 2004 through 2011, the costs to
administer some declarations exceeded the amount of federal assistance
provided. In August 2011, the DRF diminished to a level that caused


2
 Hereafter in this report, jurisdictions refer to U.S. states, the District of Columbia, U.S.
territories, Freely Associated States (nations in free association with the United States
under the Compacts of Free Association), and local governments. The IA program
provides for the necessary expenses and serious needs of disaster victims that cannot be
met through insurance or low-interest Small Business Administration loans. For example,
FEMA may provide temporary housing assistance, counseling, unemployment
compensation, or medical expenses incurred as a result of a disaster. The PA program
provides for debris removal; emergency protective measures; and the repair, replacement,
or restoration of disaster-damaged, publicly owned facilities and the facilities of certain
private nonprofit organizations that provide services otherwise performed by a government
agency.
3
 44 C.F.R. § 206.47.
4
 No-year funds are available for obligation without fiscal year limitation. An obligation is a
definite commitment that creates a legal liability of the government for the payment of
goods and services ordered or received, or a legal duty on the part of the United States
that could mature into a legal liability by virtue of actions on the part of the other party
beyond the control of the United States. Payment may be made immediately or in the
future. An agency incurs an obligation, for example, when it places an order, signs a
contract, awards a grant, purchases a service, or takes other actions that require the
government to make payments to the public or from one government account to another.
GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP
(Washington, D.C.: September 2005).
5
 Hazard Mitigation provides additional funds to states to assist communities in
implementing long-term measures to help reduce the potential risk of future damages to
facilities. Mission Assignments are costs paid by FEMA for work assigned to other
agencies and departments.




Page 2                                               GAO-12-838 Federal Disaster Assistance
FEMA to temporarily halt funding on long-term recovery projects and
focus on immediate needs. According to the FEMA Administrator,
because of the shortage of available balances in the DRF, FEMA
accelerated its efforts to recover previously obligated funds from states
for completed projects that had unexpended balances. During fiscal year
2011, FEMA deobligated and recovered $2.2 billion from prior disaster
declarations.

In 2001, we reported on the need for improvements to the criteria and
eligibility procedures that FEMA used to make recommendations to the
President for disaster declaration requests. 6 In 2012, we reiterated the
need for FEMA to, among other things, reexamine the criteria FEMA
primarily uses to make recommendations to the President for disaster
declaration requests. 7 Furthermore, we have identified as a 21st century
challenge the determination of costs to be borne by federal, state, and
local governments or the private sector in preparing for, responding to,
and recovering from disasters of all types. 8

This report provides the results of our review of federal disaster
assistance efforts by addressing the following questions: (1) For each
fiscal year from 2004 through 2011, how many disaster declaration
requests did FEMA receive, how many were approved, for which types of
disasters, and how much were the associated obligations from the DRF?
(2) What criteria has FEMA used to recommend to the President that a
disaster declaration is warranted for PA, and to what extent does FEMA
assess whether an effective response to a disaster is beyond the
capabilities of state and local governments? (3) How does FEMA


6
 GAO, Disaster Assistance: Improvement Needed in Disaster Declaration Criteria and
Eligibility Assurance Procedures, GAO-01-837 (Washington, D.C.: Aug. 31, 2001).
7
 GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington,
D.C.: Feb. 28, 2012), 321–328.
8
 Since September 11, 2001, the federal government has provided billions of dollars to
state and local governments for planning, equipment, and training to enhance the
capabilities of first responders to respond to both smaller-scale natural disasters and
terrorist attacks. However, the federal financial assistance provided in the last several
years has not been guided by a clear risk-based strategic plan that outlines the role of
federal, state, and local governments in identifying, enhancing, maintaining, and financing
critical first responder capabilities for emergencies. See GAO, 21st Century Challenges:
Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.:
Feb. 1, 2005).




Page 3                                             GAO-12-838 Federal Disaster Assistance
determine whether a cost share adjustment recommendation for PA is
warranted and how much additional federal assistance did jurisdictions
receive during fiscal years 2004 through 2011 because of cost share
adjustments? (4) What were FEMA’s administrative cost percentages for
disaster declarations during fiscal years 2004 through 2011, how have
they changed over time, and what actions is FEMA taking, if any, to
reduce the costs of delivering disaster assistance?

To determine how many disaster declaration requests FEMA received,
how many were approved, for which types of disasters, and how much
the associated obligations were from the DRF, we obtained and analyzed
data for each disaster declaration approved during fiscal years 2004
through 2011. We focused on this time frame because it contains the
most current data for disaster declarations. It also comprises the time
period after FEMA was merged into the newly created DHS, on March 1,
2003, and predates Hurricane Katrina in 2005. We focused primarily on
fiscal years 2004 through 2011; however, to provide historical context and
to compare results across similar periods, we also reviewed obligations
data during fiscal years 1989 through 2011. In addition, to provide further
historical perspective, we include information on the number of disaster
declarations by jurisdiction from the first presidential disaster declaration
in fiscal year 1953 through fiscal year 2011 in appendix I. FEMA provided
data to us from its National Emergency Management Information System
(NEMIS) and Integrated Financial Management Information System
(IFMIS). To assess the reliability of these data, we reviewed the data that
FEMA officials provided and discussed data quality control procedures
with them. We determined that the data we used from these systems
were sufficiently reliable for the purposes of this report.

To determine the criteria that FEMA used to recommend to the President
that a disaster declaration was warranted for PA, and to what extent
FEMA assessed whether an effective response to a disaster was beyond
the capabilities of jurisdictions, such as state and local governments, we
examined FEMA policies, regulations, and other documents related to the
disaster declaration process. We also interviewed FEMA officials in
headquarters and 2 of 10 FEMA regions as well as officials in two state




Page 4                                     GAO-12-838 Federal Disaster Assistance
emergency management agencies. 9 In addition, to determine the
probability that a state was granted PA if the related damage estimate
met or exceeded the PA per capita indicator, we obtained and analyzed
data within Preliminary Damage Assessments (PDA) from fiscal years
2008 through 2011. 10 To assess the reliability of these data, we reviewed
the data that FEMA officials provided and discussed data quality control
procedures with them. We determined that the PDA data were sufficiently
reliable for the purposes of this report.

To determine how FEMA evaluated whether a cost share adjustment
recommendation was warranted and how much additional federal
assistance jurisdictions received during fiscal years 2004 through 2011
because of the adjustments, we obtained and reviewed relevant laws,
regulations, and policies. We also reviewed Standards for Internal Control
in the Federal Government to assess FEMA’s process for making
recommendations to the President on the need for cost share
adjustments. 11 We also obtained and analyzed the cost share


9
 In addition to conducting interviews with officials in FEMA headquarters, we conducted
site visits in September 2011 to the two FEMA regions that had the highest total
obligations during fiscal years 2004 through 2011. The regional administrative offices were
located in Atlanta, Georgia, and Denton, Texas, respectively. At each region, we
interviewed the Regional or Deputy Administrator and various other regional personnel. In
addition, we visited the emergency management agencies for Georgia and Oklahoma and
interviewed various officials, including the directors for each of these agencies. We
selected the Georgia and Oklahoma state emergency management agencies based on
their respective proximity to FEMA’s regional offices, their high level of experience with
disasters, and their availability for a visit during September 2011. We wanted to avoid
states that were actively responding to a disaster during that time. While the information
we obtained on these site visits is not generalizable, the information provided important
insights into the disaster declaration process.
10
  The PA per capita indicator is an amount of funding, $1.35 per capita for fiscal year
2012, that is multiplied by the population of the jurisdiction (for example, state) for which
the governor is requesting a disaster declaration for PA, to arrive at a threshold amount,
which is compared with the estimated amount of damage done to public structures. 44
C.F.R. § 206.48 (a)(1). FEMA uses the comparison as an indicator of the jurisdiction’s
need for federal assistance. For this analysis, we used 4 years of data (fiscal years 2008
through 2011) instead of 8 years of data (fiscal years 2004 through 2011) because PDA
summaries are available in electronic format only back to fiscal year 2008. PDAs are
conducted to identify the amount of damage a jurisdiction has incurred as a result of a
disaster. Because of the associated workload and length of time required to provide PDA
summaries in paper format, we did not request that FEMA provide PDA summaries prior
to fiscal year 2008.
11
  GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999).




Page 5                                               GAO-12-838 Federal Disaster Assistance
adjustments and types requested, approved, and denied during fiscal
years 2004 through 2011. We interviewed FEMA officials who process
cost share adjustment requests and participate in making
recommendations to the President as to whether the requests should be
approved or denied. To assess the reliability of these data, we reviewed
the data that FEMA officials provided and discussed data quality control
procedures with them. We determined that the cost share adjustment
data were sufficiently reliable for the purposes of this report.

To determine what FEMA’s administrative cost percentages were for
disaster declarations, we obtained DRF obligations, projected obligations,
and related data for 1,221 disaster declarations during fiscal years 1989
through 2011. 12 The projected obligations were FEMA’s estimates, as of
April 30, 2012, of the anticipated total obligations—actual to date and
estimated—for each disaster eligible to receive federal disaster
assistance after April 30, 2012. 13 We compared FEMA’s administrative
cost percentages for each disaster declaration from fiscal years 2004
through 2011 with FEMA’s administrative cost percentage target ranges
and FEMA’s administrative cost percentages for disaster declarations
from fiscal years 1989 through 2003. 14 We used these time periods
because they provide larger sample sizes and an opportunity to assess
potential trends over a longer period of time. In addition, we included
projected obligations in our analysis because FEMA officials told us that
administrative costs are typically higher as a percentage of assistance
costs in the early months following a disaster. By including projected
obligations, we were able to analyze disaster obligations—actual and



12
   We examined fiscal years 1989 through 2011 because FEMA does not maintain detailed
financial data on disaster declarations prior to fiscal year 1989.
13
  In 2008, we analyzed 83 disaster declarations to determine the reliability of FEMA’s
projections. We found that after the declarations had been open for 6 months, FEMA’s
projections were within roughly 10 percent of the amount that was ultimately obligated.
While the results could not be generalized across all disaster declarations, the analysis
provides valuable insight into the reliability of FEMA’s projections after a declaration has
been open for 6 months. As our projections data were as of April 30, 2012, all open
disaster declarations from fiscal years 2004 through 2011 had been open for at least 6
months. Thus, we believe the projections are reliable for purposes of this report. Our 2008
analysis can be found within GAO, Disaster Cost Estimates: FEMA Can Improve Its
Learning from Past Experience and Management of Disaster-Related Resources,
GAO-08-301 (Washington, D.C.: February 2008).
14
  The administrative costs that we identify in this report were defined by FEMA as
obligations from the DRF that support the delivery of disaster assistance.




Page 6                                              GAO-12-838 Federal Disaster Assistance
             estimated—for the entire time period that disaster declarations were in
             the following three levels of status: programmatically open, closed, and
             reconciled. 15 To assess the reliability of these data, we reviewed the data
             that FEMA officials provided and discussed data quality control
             procedures with them. We determined that the DRF data were sufficiently
             reliable for the purposes of this report. To determine what actions FEMA
             is taking, if any, to reduce the costs of delivering disaster assistance, we
             reviewed relevant FEMA documents and briefings, and interviewed FEMA
             officials.

             We conducted this performance audit from July 2011 through September
             2012 in accordance with generally accepted government auditing
             standards. 16 Those standards require that we plan and perform the audit
             to obtain sufficient, appropriate evidence to provide a reasonable basis
             for our findings and conclusions based on our audit objectives. We
             believe that the evidence obtained provides a reasonable basis for our
             findings and conclusions based on our audit objectives. For more
             information on our scope and methodology, see appendix II.


             The Robert T. Stafford Disaster Relief and Emergency Assistance Act
Background   (Stafford Act), as amended, established the basic process for states to
             request a presidential disaster declaration. 17 The act also generally
             defines the federal government’s role during the response and recovery
             after a disaster and establishes the programs and process through which
             the federal government provides disaster assistance to state and local



             15
               According to FEMA officials, administrative costs are typically higher as a percentage of
             assistance costs in the early months following a disaster, with the administrative cost
             percentage typically decreasing as the declaration matures. Thus, administrative costs for
             declarations with ongoing assistance, particularly recently declared disasters, could
             overstate final administrative costs as a percentage of total disaster assistance
             obligations. FEMA has three levels of status for disaster declarations—programmatically
             open, closed, and reconciled. Programmatically open means that all financial decisions
             are not completed and eligible work remains. Closed means that financial decisions have
             been made, but all projects are not complete. Reconciled means that all projects are
             complete and the FEMA-state agreement is closed.
             16
               During this time, we reported preliminary observations on opportunities to reduce the
             costs to the federal government related to major disaster declarations. See
             GAO-12-342SP. 321-328.
             17
              42 U.S.C. § 5170.




             Page 7                                             GAO-12-838 Federal Disaster Assistance
governments, tribes, and certain nonprofit organizations and individuals. 18
In addition to its central role in recommending to the President whether to
declare a disaster, FEMA has primary responsibility for coordinating the
federal response when a disaster is declared as well as recovery, which
typically 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 disaster declarations process is implemented by FEMA
headquarters as well as its 10 regional offices. FEMA’s Administrator, in
accordance with the Post-Katrina Emergency Management Reform Act of
2006 (Post-Katrina Act), appoints a Regional Administrator to head each
regional office. 19 Regional Administrators—in partnership with state, local,
and tribal governments, and other nongovernmental organizations—
oversee emergency management activities within their respective
geographical area. 20 Joint Field Offices (JFO) are temporary FEMA
offices established to respond to declared disasters and are headed by
Federal Coordinating Officers (FCO) who, among other things, coordinate
the activities of the disaster reserve workforce deployed for a particular
disaster. Once a disaster is declared, FEMA deploys Disaster Assistance
Employees and any other employees needed to the affected
jurisdiction(s). 21 FEMA provides assistance through the PA, IA, and
Hazard Mitigation programs as well as through Mission Assignments. For
instance, some declarations may provide grants only for IA and others
only for PA. Hazard Mitigation grants, on the other hand, are available for
all declarations if the affected area has a FEMA-approved Hazard
Mitigation plan.




18
 42 U.S.C. § 5121 et seq.
19
 6 U.S.C. § 317.
20
  “Emergency management” is defined as the managerial function charged with creating
the framework within which communities reduce vulnerability to hazards and cope with
disasters.
21
  Disaster Assistance Employees are a cadre of temporary reserve staff who go to field
locations to help communities respond to and recover from disasters.




Page 8                                            GAO-12-838 Federal Disaster Assistance
The Changing Disaster     According to FEMA, the agency is evolving from originally focusing on
Declaration Environment   grants management to being an organization implementing increasingly
                          more complex programs, with an increasingly sophisticated and
                          specialized workforce and procedures in response to changing
                          circumstances and expectations. As illustrated by figure 1, the number of
                          disaster declarations has significantly increased since 1953, when the
                          first presidential disaster declaration was issued. 22 See appendix I for
                          more information about the number of disaster declarations.




                          22
                           The first presidential disaster declaration was issued in 1953 under the authority of the
                          Disaster Relief Act of 1950. Pub. L. No. 81-875, 64 Stat. 1109.




                          Page 9                                              GAO-12-838 Federal Disaster Assistance
Figure 1: Number of Disaster Declarations during Fiscal Years 1953 through 2011




Various factors have contributed to the increase in disaster declarations.
Population growth has occurred in U.S. geographic areas that are
vulnerable when a disaster hits, such as those near coastlines. FEMA
officials also cited more active weather patterns as a factor. FEMA



Page 10                                       GAO-12-838 Federal Disaster Assistance
                       guidance to states and localities and the enhanced capabilities and
                       professionalization of state and local emergency management personnel
                       have also been factors. For example, in 1999, FEMA published a list of
                       factors that it considers when evaluating disaster declaration requests.
                       According to FEMA and state emergency management officials from two
                       states, the guidance, along with state and local emergency management
                       officials’ additional knowledge about the process and the enhanced
                       transparency of the process for federal disaster declarations, has helped
                       state and local officials better justify a request for federal disaster
                       assistance. Increased media attention on disasters, especially those in
                       which there have been casualties or deaths, has also been a factor,
                       according to FEMA and state emergency management officials for two
                       states.


Disaster Declaration   The disaster assistance process generally starts at the local level,
Process                proceeds to the county and state levels, and then to the federal level. The
                       Stafford Act states that the governor of the affected state shall request a
                       declaration by the President that a disaster exists. 23 FEMA is the primary
                       federal disaster assistance agency, but others can have major roles, such
                       as the U.S. Army Corps of Engineers, which can provide engineering and
                       contracting support to FEMA. 24

                       As part of the request to the President, a governor must affirm that the
                       state’s emergency plan has been implemented and the situation is of
                       such severity and magnitude that effective response is beyond the
                       capabilities of the state and the affected local governments and that
                       federal assistance is necessary, among other things. 25 Before a governor


                       23
                          42 U.S.C. § 5170. In addition to issuing major disaster declarations, the President may
                       issue emergency declarations. If the President declares an emergency, the federal
                       government may provide immediate and short-term assistance that is necessary to save
                       lives, protect property and public health and safety, or lessen or avert the threat of a
                       catastrophe, among other things. 42 U.S.C. § 5192. Federal assistance may not exceed
                       $5 million under an emergency declaration unless continued emergency assistance is
                       immediately required; there is a continuing and immediate risk to lives, property, public
                       health or safety; and necessary assistance will not otherwise be provided on a timely
                       basis. 42 U.S.C. § 5193.
                       24
                         Federal agencies may provide assistance under Titles IV and V of the Stafford Act only
                       upon a presidential declaration, but some federal agencies may respond to disasters
                       under separate authorities.
                       25
                            44 C.F.R. § 206.36.




                       Page 11                                             GAO-12-838 Federal Disaster Assistance
asks for federal disaster assistance, state and local officials typically
conduct an initial PDA to identify the amount of damage and determine if
the damage exceeds their capability to respond and recover without
federal assistance. Based on the initial PDA findings, a joint PDA, in
which FEMA participates, may be requested by the governor. 26 FEMA
uses the joint PDA in its evaluation of the state’s need for federal
assistance and makes a recommendation to the President as to whether
the request for a disaster declaration should be approved or denied. Later
in this report, we discuss in more detail how FEMA evaluates the need for
PA. To evaluate the need for IA, FEMA considers various factors,
including insurance coverage; the extent to which volunteer agencies and
state or local programs can meet the needs of disaster victims;
concentration of damages due to the disaster; number of deaths and
injuries; amount of disruption to normal community services; amount of
emergency needs, such as extended or widespread loss of power or
water; and special populations, such as elderly or low-income people. 27
Figure 2 shows the basic process that is followed from the time a disaster
occurs until the President approves or denies a governor’s disaster
declaration request. 28




26
  The requirement for a joint PDA may be waived for those incidents of unusual severity
and magnitude that do not require field damage assessments to determine the need for
supplemental federal assistance or in other instances as determined by the Regional
Administrator upon consultation with the state. 44 C.F.R. § 206.33.
27
 44 C.F.R. § 206.48(b).
28
  In November 2009, FEMA implemented a new policy for disaster declarations for
snowstorms. Prior to that, snowstorms were only declared as emergencies. The process
for snowstorms is the same as that used for other types of disasters; however, a disaster
declaration resulting from a snowstorm requires record or near-record snowfall—within 10
percent of a county’s record snowfall as measured in inches. Covered costs for
snowstorms include sanding, salting, de-icing, and removing snow.




Page 12                                           GAO-12-838 Federal Disaster Assistance
Figure 2: Disaster Declaration Process




Page 13                                  GAO-12-838 Federal Disaster Assistance
                            During this period, FEMA received 629 disaster declaration requests and
Over 500 Disasters          approved 539 of them. Most disaster declarations were for severe storms.
Were Declared during        FEMA anticipates that when all disasters declared during fiscal years
                            2004 through 2011 are closed, its total obligations for these disasters will
Fiscal Years 2004           exceed $90 billion.
through 2011 with
Total Obligations of
Over $90 Billion
Anticipated

Most Declarations for       The President received requests from governors during fiscal years 2004
Severe Storms, Highest in   through 2011 for 629 disaster declarations and approved 539 of them, or
Southeast and Central       86 percent, as shown in table 1.
Midwest
                            Table 1: Number of Disaster Declarations Requested and Approved during Fiscal
                            Years 2004 through 2011

                                Fiscal year          Number requested        Number approved           Percentage approved
                                2004                                 76                         65                             86
                                2005                                 55                        45a                             82
                                2006                                 67                         53                             79
                                2007                                 78                         68                             87
                                2008                                 79                         68                             86
                                2009                                 72                         63                             88
                                2010                                 90                         79                             88
                                2011                               112                          98                             88
                                Total                              629                        539                              86
                            Source: GAO analysis of FEMA data.
                            a
                             Despite the amount of destruction wrought by Hurricane Katrina in fiscal year 2005, only 4 of the 45
                            disaster declarations were associated with Hurricane Katrina—1 declaration each in Florida,
                            Alabama, Mississippi, and Louisiana.


                            Governors can appeal a decision when the President initially denies a
                            disaster declaration request. 29 During fiscal years 2004 through 2011,
                            governors made 629 requests for disaster declarations, and the President
                            ultimately denied 90 of them, or 14 percent.


                            29
                                44 C.F.R. § 206.46.




                            Page 14                                                  GAO-12-838 Federal Disaster Assistance
FEMA has 10 regions throughout the United States that, among other
things, provide technical assistance to state and local officials and make
recommendations to FEMA headquarters as to whether a disaster
declaration is warranted. Individual FEMA regions had varying numbers
of disaster declarations during fiscal years 2004 through 2011. The two
FEMA regions that had the most disaster declarations were Region IV in
the Southeast and Region VII in the central Midwest, which together
accounted for 163, or 30 percent, of the 539 declarations. The two FEMA
regions that had the fewest declarations were Regions IX and X along the
west coast, including Alaska, which together accounted for 71
declarations, or 13 percent. See appendix I, figure 10, for a map that
shows the number of declarations by FEMA region.

During fiscal years 2004 through 2011, the average number of disaster
declarations was 9.3 for each of the 58 jurisdictions—that is, the 50
states, the District of Columbia, 5 territories, and 2 Freely Associated
States. 30 However, our analysis shows that some jurisdictions had over
20 disaster declarations, while other jurisdictions had 3 or fewer disaster
declarations during this period. For example, Oklahoma had the most
disaster declarations at 25, while Colorado and Guam had 1 each and the
Marshall Islands did not have any. In addition, the 5 jurisdictions with the
highest number of disaster declarations accounted for 105, or 19 percent,
of the 539 declarations during fiscal years 2004 through 2011, whereas
the 4 jurisdictions with the lowest number of disaster declarations
accounted for 4, or less than 1 percent. 31 See figure 3 for the number of
disaster declarations for each jurisdiction.




30
  The 5 territories are American Samoa, Guam, the U.S. Virgin Islands, the
Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.
The 2 Freely Associated States are the Federated States of Micronesia and the Republic
of the Marshall Islands.
31
   For the analysis of the jurisdictions with the lowest number of disaster declarations
during fiscal years 2004 through 2011, we report on 4 jurisdictions because 6 jurisdictions
tied for the fifth lowest, with 3 disaster declarations each.




Page 15                                            GAO-12-838 Federal Disaster Assistance
Figure 3: Number of Disaster Declarations during Fiscal Years 2004 through 2011, by Jurisdiction




                                         Note: In addition to Pohnpei, the Federated States of Micronesia consists of three additional major
                                         island groups, including Chuuk, Yap, and Kosrae.


                                         As reported by FEMA, severe storms accounted for 71 percent of
                                         declarations during fiscal years 2004 through 2011. According to FEMA
                                         officials, a disaster is classified as a severe storm when multiple storm-
                                         related incidents (for example, floods or heavy rains) affect a jurisdiction,
                                         but no single incident type is responsible for the majority of the damage.




                                         Page 16                                                  GAO-12-838 Federal Disaster Assistance
See appendix I, table 11, for the number and percentage for each of the
incident types that occurred during fiscal years 2004 through 2011.

For each disaster declaration, various types of assistance can be
approved. For example, the President can approve PA only, IA only, or
PA and IA for each declaration. As shown in figure 4, during fiscal years
2004 through 2011, 6 percent of the declarations were awarded for IA
only, while a total of 94 percent of declarations were awarded for either
PA only or IA and PA.

Figure 4: Major Disaster Declarations by Type of Assistance, Fiscal Years 2004
through 2011




Page 17                                        GAO-12-838 Federal Disaster Assistance
Total Obligations of Over     Through January 31, 2012, FEMA obligated $80.3 billion, or an average
$90 Billion Anticipated for   of about $10 billion a year, from the DRF for 539 disasters declared
Disasters Declared during     during fiscal years 2004 through 2011; and FEMA anticipates that when
                              all 539 declarations are closed, obligations will be about $91.5 billion.
Fiscal Years 2004 through     Thirteen of these declarations had incurred obligations of over $1 billion
2011                          each. 32 Almost half of the $80.3 billion in obligations was for Hurricane
                              Katrina. Excluding obligations of $39.7 billion for Hurricane Katrina, FEMA
                              obligated $40.6 billion for the other disaster declarations during fiscal
                              years 2004 through 2011, or an average of about $5 billion a year. Total
                              obligations are higher for fiscal years 2004, 2005, and 2008 than for the
                              remaining 5 years primarily because of hurricanes that occurred with
                              more frequency or force during those years. For example, over half of the
                              $8.8 billion for disasters declared in fiscal year 2004 was due to four
                              hurricanes, over half of the $44.9 billion for disasters declared in fiscal
                              year 2005 was for Hurricane Katrina, and about half of the $10.3 billion
                              for disasters declared in fiscal year 2008 was for Hurricanes Ike and
                              Gustav. Table 2 shows the obligations by fiscal year.




                              32
                                In addition to the $80.3 billion for the 539 disaster declarations during fiscal years 2004
                              through 2011, FEMA obligated funds for disaster declarations that occurred prior to fiscal
                              year 2004 but were still receiving obligations during fiscal years 2004 through 2011. The
                              $80.3 billion in obligations also excludes FEMA obligations for Emergency Declarations,
                              Fire Management Assistance Grants, and non-DRF obligations of appropriated funds for
                              FEMA and federal agencies outside of DHS, such as the Department of Defense and
                              Department of Health and Human Services. In addition to the 13 disasters that had
                              exceeded $1 billion in obligations, other disasters declared during fiscal years 2004
                              through 2011 that were still open as of January 31, 2012, could reach obligations of over
                              $1 billion as FEMA continues to obligate funds for them.




                              Page 18                                              GAO-12-838 Federal Disaster Assistance
Table 2: Obligations by Fiscal Year for 539 Disaster Declarations during Fiscal Years 2004 through 2011

(Dollars in millions)
                             Public             Individual                   Hazard         Mission
                                                                                                                                                a
Fiscal year              Assistance            Assistance                 Mitigation    Assignment           Administration             Total
2004                          $3,725                  $2,741                   $435              $817                  $1,077          $8,794
2005                          17,770                  15,529                   1,431            4,143                   5,993          44,867
(including Katrina)
2005                           2,067                    1,504                   278                472                    776           5,097
(excluding Katrina)
2006                           2,605                      633                   206                151                    386           3,982
2007                           1,628                      336                   238                  6                    281           2,488
2008                           6,116                    1,880                   816                157                  1,394          10,364
2009                           1,700                      340                   236                 41                    455           2,772
2010                           1,616                      828                   120                  6                    451           3,022
2011                           1,599                    1,213                    41                438                    769           4,061
Total                       $36,759                 $23,500                   $3,522           $5,761                $10,806         $80,349a
(including Katrina)
Total                       $21,057                   $9,476                  2,369            $2,090                 $5,589        $40,579a
(excluding Katrina)
                                         Source: GAO analysis of FEMA data.

                                         Note: This analysis shows obligations from the DRF only and does not include any potential
                                         administrative cost expenditures from FEMA’s other annual appropriations. Also, the obligations
                                         exclude obligations by other federal agencies and state and local governments.
                                         a
                                          Obligations for each year may not add up to the total obligations reported because of rounding.


                                         Obligations for disaster declarations during fiscal years 2004 through
                                         2011 varied greatly by FEMA region and jurisdiction. FEMA Region VI
                                         had the highest obligations at $40.0 billion. However, when excluding
                                         obligations from all FEMA regions due to Hurricane Katrina, FEMA
                                         Region IV had the highest obligations at $13.2 billion. FEMA Region X
                                         had the lowest obligations at $0.6 billion. As shown in figure 5, the
                                         amount of obligations also varied greatly by jurisdiction for disasters
                                         declared during fiscal years 2004 through 2011. For example, Louisiana
                                         had the highest obligations, at $32.3 billion, but after excluding obligations
                                         for Hurricane Katrina, Florida had the highest obligations, at $9.3 billion,
                                         while for the jurisdictions with the lowest obligations, Guam had $1.9
                                         million and the Marshall Islands did not have any. As a comparison, the
                                         nationwide average obligations per jurisdiction were $1.38 billion, and
                                         decreased to $700 million when obligations for Hurricane Katrina were
                                         excluded. Appendix I, figure 10, shows the obligations by FEMA region
                                         for fiscal years 2004 through 2011.



                                         Page 19                                                  GAO-12-838 Federal Disaster Assistance
Figure 5: Disaster Relief Fund Obligations, Including Hurricane Katrina, by Jurisdiction during Fiscal Years 2004 through
2011, as of January 31, 2012




                                          Note: For the jurisdictions that had disaster declarations for Hurricane Katrina, the obligations
                                          excluding Hurricane Katrina were Alabama, $1.4 billion; Florida, $9.3 billion; Louisiana, $3.8 billion;
                                          and Mississippi, $236 million. In addition to Pohnpei, the Federated States of Micronesia consists of
                                          three additional major island groups, including Chuuk, Yap, and Kosrae.


                                          Furthermore, obligations for individual disaster declarations declared
                                          during fiscal years 2004 through 2011 varied greatly. For example, as of
                                          January 31, 2012, FEMA had obligated $28.5 billion for Louisiana’s fiscal
                                          year 2005 Hurricane Katrina disaster declaration compared with about



                                          Page 20                                                    GAO-12-838 Federal Disaster Assistance
$803,000 for a South Dakota disaster declaration during that same fiscal
year. Disaster declarations can take over a decade to close; therefore, to
obtain a more comprehensive and longer-term perspective, we analyzed
obligations for 811 disaster declarations during fiscal years 1989 through
2011 that had been closed as of January 31, 2012. 33 Of the 811 closed
declarations, we found that 440, or 54 percent, had obligations of less
than $10 million (see table 3).

Table 3: Number and Percentage of Closed Disasters Declared during Fiscal Years
1989 through 2011, by Obligation Amounts as of January 31, 2012

    Obligations for each disaster                    Number of disaster
    declarationa                                          declarations Percentage of total
    Less than $1 million                                                  21                         3
    $1 million to less than $5 million                                   261                        32
    $5 million to less than $10 million                                  158                        19
    $10 million to less than $25 million                                 179                        22
    $25 million to less than $50 million                                  81                        10
    $50 million to less than $100 million                                 55                         7
    At least $100 million                                                 56                         7
    Total                                                                811                      100
Source: GAO analysis of FEMA data.
a
 Obligations include the funds obligated by FEMA from the DRF and exclude obligations by other
federal agencies and state and local governments. These amounts are not in constant, inflation-
adjusted dollars, because the data were not detailed enough to identify the specific year an obligation
was made.


For those disaster declarations approved during fiscal years 2004 through
2011, we analyzed the total obligations as of April 30, 2012, for closed
disasters, and the total projected obligations—actual to date and
estimated—for those declarations that remained open as of April 30,
2012. 34 Specifically, for open declarations as of April 30, 2012, instead of
analyzing how much FEMA had obligated as of that date, we analyzed


33
  We analyzed reconciled and closed disaster declarations because all financial decisions
have been made for these declarations.
34
  Throughout this report, projected obligations refers to the actual amount obligated by
FEMA as of April 30, 2012, plus the amount FEMA anticipates obligating between April
30, 2012, and the date a disaster declaration is ultimately reconciled. The information we
analyzed included projections data for each declaration approved during fiscal years 1989
through 2011; however, the results within table 4 only focus on fiscal years 2004 to 2011.




Page 21                                                   GAO-12-838 Federal Disaster Assistance
                       the amount FEMA had obligated plus the amount FEMA anticipated it
                       would obligate from the time a declaration was approved through its
                       closure. On the basis of our analysis, when all 539 declarations that were
                       declared during fiscal years 2004 through 2011 are eventually closed,
                       FEMA anticipates that 193, or 36 percent, will have total obligations of
                       less than $10 million, thus signifying that these were relatively small
                       disasters (see table 4).

                       Table 4: Number and Percentage of Disasters Declared during Fiscal Years 2004
                       through 2011, by Combined Actual and Projected Total Obligation Amounts, as of
                       April 30, 2012

                           Obligations for each disaster                     Number of disaster             Percentage of
                                       a
                           declaration                                            declarations                      total
                           Less than $1 million                                                    5                        1
                           $1 million to less than $5 million                                     99                       18
                           $5 million to less than $10 million                                    89                       17
                           $10 million to less than $25 million                                 140                        26
                           $25 million to less than $50 million                                   76                       14
                           $50 million to less than $100 million                                  55                       10
                           At least $100 million                                                  75                       14
                           Total                                                                539                      100
                       Source: GAO analysis of FEMA data.
                       a
                        Obligations include the funds obligated by FEMA from the DRF and exclude obligations by other
                       federal agencies and state and local governments. These amounts are not in constant, inflation-
                       adjusted dollars, because the data were not detailed enough to identify the specific year an obligation
                       was made.




                       The per capita damage indicator FEMA uses to assess a jurisdiction’s
Eligibility for        eligibility for PA is the primary factor on which disaster declaration
Assistance Is          decisions are based. However, the per capita damage indicator is
                       artificially low. In addition, FEMA’s process to determine eligibility for
Primarily Determined   federal assistance does not comprehensively assess a jurisdiction’s
Using a Damage         capability to respond to and recover from a disaster on its own.
Estimate Indicator




                       Page 22                                                   GAO-12-838 Federal Disaster Assistance
FEMA Relies Almost        According to FEMA and state emergency management officials, FEMA
Exclusively on a Single   has primarily relied on a single indicator, the statewide per capita damage
Indicator                 indicator, to determine whether to recommend that a jurisdiction receive
                          PA funding. In fiscal year 2012, the per capita indicator is $1.35. 35 Thus, a
                          state with 10 million people would generally have to incur $13.5 million in
                          estimated eligible disaster damages to public structures for FEMA to
                          recommend that a disaster declaration for PA is warranted. 36 However,
                          other factors could also influence the recommendation, such as whether a
                          jurisdiction has incurred multiple disasters within a short period of time. Of
                          the 58 jurisdictions for fiscal year 2012, based on population, California
                          has the highest statewide indicator total, at $50.3 million, while Wyoming
                          has the lowest amount at $760,895. 37 See appendix III, table 15, for the
                          total PA per capita indicator amounts for each of the 58 jurisdictions.

                          FEMA’s method to determine the affected jurisdictions’ capabilities to
                          respond without federal assistance relies on a governor’s certification and
                          damage estimates. The Stafford Act requires that a governor’s request for
                          a disaster declaration be based on a finding that the disaster is of such
                          severity and magnitude that an effective response is beyond the
                          capabilities of the jurisdiction and that federal assistance is necessary. 38
                          FEMA officials stated that governors must certify in their letter to the
                          President requesting a disaster declaration that the disaster is beyond the
                          capabilities of the jurisdiction. FEMA regulations list quantitative and
                          qualitative factors, such as recent disasters within the same jurisdiction
                          that the agency considers when determining whether a disaster
                          declaration is warranted. 39 However, in describing the declarations
                          process, FEMA and emergency management officials in two states said
                          that FEMA uses the statewide per capita indicator as the primary


                          35
                               76 Fed. Reg. 63,936 (Oct. 14, 2011).
                          36
                             In addition to using a PA indicator for states, FEMA uses a PA indicator for counties to
                          help determine a county’s need for assistance. The countywide per capita indicator for
                          fiscal year 2012 is $3.39. 76 Fed. Reg. 63,936 (Oct. 14, 2011).
                          37
                            FEMA has established a minimum threshold of $1 million in PA damages per disaster in
                          the belief that even the lowest population states can cover this level of public assistance
                          damage. 44 C.F.R. § 206.48(a)(1).
                          38
                            42 U.S.C. § 5170. In this report, we consider a state’s capabilities to respond to and
                          recover from a disaster to include elements such as the fiscal capacity and preparedness
                          of the state.
                          39
                               44 C.F.R. § 206.48.




                          Page 23                                             GAO-12-838 Federal Disaster Assistance
                              determining factor for PA funding. This damage indicator, which FEMA
                              has used since 1986, is essentially a proxy fiscal measure of a state’s
                              capacity to respond to and recover from a disaster, rather than a more
                              comprehensive assessment of a state’s fiscal capacity.

                              According to our analysis of readily available indicator data, as well as
                              officials in two FEMA regions and state emergency management officials
                              in two states, the principal factor used to determine eligibility for a disaster
                              declaration was whether the damage estimate exceeded the PA per
                              capita indicator. Our analysis of 246 disaster declarations during fiscal
                              years 2008 through 2011 identified the PA per capita indicator as having
                              been the primary determining factor—essentially being used as an
                              eligibility threshold. 40 Specifically, 244 of the 246 approved disaster
                              declarations that we reviewed, or 99 percent, had PA damage estimates
                              that met or exceeded the PA per capita indicator in effect in the year in
                              which the disaster was declared. 41 Seven gubernatorial requests for a
                              disaster declaration during fiscal years 2008 through 2011 had a damage
                              estimate higher than the PA per capita indicator yet were denied for
                              various reasons, such as the damage being a result of multiple storms or
                              the normal depreciation of structures rather than a single disaster.


FEMA’s Per Capita             Because FEMA’s current per capita indicator does not reflect the rise in
Indicator Used to Assess      (1) per capita personal income since it was created in 1986 or (2) inflation
Eligibility Is Artificially   from 1986 to 1999, the indicator is artificially low. In 1986, FEMA
                              proposed a $1.00 per capita indicator for PA as a means of gauging a
Low                           jurisdiction’s fiscal capacity. 42 The indicator was based on the 1983 per
                              capita personal income nationwide, then estimated at $11,667. Current


                              40
                                 The Stafford Act prohibits a geographic area from being precluded from receiving
                              assistance solely by virtue of an arithmetic formula or sliding scale based on income or
                              population. 42 U.S.C. § 5163. We only reviewed FEMA’s PDA summaries as far back as
                              fiscal year 2008 because that is when FEMA began maintaining them in electronic format.
                              For each of the 308 disaster declarations during fiscal years 2008 through 2011, we
                              reviewed the PDA summary to determine whether a governor requested PA and the
                              President approved PA, and whether the PA damage estimate met or exceeded the PA
                              per capita indicator. Of the 308 PDA summaries, 246 of them included the data necessary
                              to determine whether the PA damage estimate met or exceeded the PA per capita
                              indicator.
                              41
                                As discussed later in this report, the PA per capita indicator remained at $1.00 from
                              1986 through 1999 and has been adjusted for inflation on an annual basis since 2000.
                              42
                               51 Fed. Reg. 13,332 (Apr. 18, 1986).




                              Page 24                                            GAO-12-838 Federal Disaster Assistance
FEMA officials were unable to explain how per capita personal income
was used to establish the indicator level at $1.00. However, FEMA
documentation noted that the agency thought it reasonable that a state
would be capable of providing $1.00 for each resident of that state to
cover the damage from a disaster. While the proposed rule was not
codified in 1986, FEMA began to use the $1.00 per capita indicator
informally as part of its preliminary damage assessment efforts and did
not adjust the indicator annually for either inflation or increases in national
per capita income. In 1998, FEMA considered adjusting the PA indicator
to $1.51 to account for inflation since 1986, but because of input from
state emergency management officials, FEMA decided not to do so.

In 1999, FEMA issued a rule codifying the per capita indicator at $1.00,
which was stipulated to include an annual adjustment for inflation, but the
rule was silent on whether the indicator would continue to be based on
nationwide per capita personal income. 43 As a result, the indicator has
risen 35 percent from $1.00 to $1.35 in the 13 years since FEMA began
its annual inflationary adjustments. Figure 6 shows the actual increases in
the per capita indicator for PA from 1986 to 2010 compared with the
increases that would have occurred if FEMA had adjusted the indicator
for inflation or the increase in per capita personal income during this
period.




43
 64 Fed. Reg. 47,697 (Sept. 1, 1999).




Page 25                                     GAO-12-838 Federal Disaster Assistance
Figure 6: Comparison of Actual Public Assistance Per Capita Indicator with the
Indicators if They Had Been Adjusted for Increases in Personal Income and
Inflation, 1986 through 2011




FEMA officials stated that the rise in construction and other costs to
respond to and recover from disasters have outpaced the rise in the per
capita indicator. In jurisdictions with smaller populations, damage to a
single building or facility, such as a water treatment facility, could result in
a damage estimate sufficient to meet the per capita damage threshold
and warrant a disaster declaration. For example, the damage from
Hurricane Katrina to a single water treatment facility in Carrollton,
Louisiana, exceeded Louisiana’s 2005 per capita threshold. 44 In addition,
the Washington National Cathedral incurred approximately $15 million of
damage during the August 23, 2011, earthquake in Washington, D.C.,




44
  The Carrollton, Louisiana, water treatment facility was eligible for and did receive PA
funding.




Page 26                                             GAO-12-838 Federal Disaster Assistance
which has a per capita damage indicator threshold of less than $1
million. 45

The Stafford Act requires that conditions due to a disaster be beyond a
jurisdiction’s (state and local) capability to respond effectively before
disaster assistance from the federal government is warranted. 46 The law,
however, prohibits FEMA from denying federal assistance solely by virtue
of an arithmetic formula or sliding scale based on income or population. 47
According to Standards for Internal Control in the Federal Government,
activities should be established to monitor indicators and controls should
be aimed at validating the propriety and integrity of such indicators. 48 Had
the indicator been adjusted for inflation beginning when FEMA started
using it in 1986, the indicator would have risen more than 100 percent,
from $1.00 to $2.07 in 2012. Had the indicator been adjusted for
increases in per capita personal income since 1986, the indicator would
have risen over 250 percent, from $1.00 to $3.57 in 2011, based on 2011
national per capita personal income of $41,663.

Our analysis of actual and projected obligations for 508 disaster
declarations in which PA was awarded during fiscal years 2004 through
2011 showed that fewer disasters would have met either the personal
income-adjusted or the inflation-adjusted PA per capita indicators for the
years in which the disaster was declared. 49 Specifically, our analysis
showed that 44 percent of the 508 disaster declarations would not have
met the PA per capita indicator if adjusted for the change in per capita
personal income since 1986. Similarly, our analysis showed that 25 percent


45
  FEMA determined that the National Cathedral was not eligible for PA; therefore the
damage estimate was not included in the PDA and the cathedral was not eligible to
receive PA funds. The epicenter of the earthquake was in Virginia.
46
 42 U.S.C. § 5170.
47
 42 U.S.C. § 5163.
48
 GAO/AIMD-00-21.3.1.
49
  Our analysis included FEMA’s projected obligations as of April 30, 2012, for only those
508 disaster declarations that had received PA and had been declared during fiscal years
2004 through 2011. We did not analyze the 31 disaster declarations that received IA only.
We analyzed obligations instead of PDA damage estimates for PA because FEMA
officials stated that estimating the damage from a disaster is sometimes stopped when the
estimate equals or exceeds the PA per capita indicator. Therefore, we concluded that
conducting the analysis using projected obligations would be more accurate than using
incomplete PDA damage estimates for PA.




Page 27                                           GAO-12-838 Federal Disaster Assistance
of the 508 disaster declarations would not have met the PA per capita
indicator if adjusted for inflation since 1986. 50 Thus, had the indicator been
adjusted annually since 1986 for personal income or inflation, fewer
jurisdictions would have met the eligibility criteria that FEMA primarily used
to determine whether federal assistance should be provided, which would
have likely resulted in fewer disaster declarations. 51

In discussions with FEMA officials about raising the per capita damage
indicator, they noted that updating the indicator completely in a single
year could create problems for jurisdictions, which, in response, may
need to increase their rainy day fund or take other actions to adjust to the
change. However, FEMA officials stated that adjusting the indicator in a
phased approach over several years would be more feasible for
jurisdictions. The current annual inflation adjustment generally increases
the damage indicator incrementally. However, were the “catch-up”
inflation adjustment (from $1.35 to $2.07) implemented in a single year,
the increase would be considerably more than the annual inflation
adjustments since 1999. For example, for a jurisdiction with a population
of 5 million, fully implementing the catch-up adjustment for inflation would
raise the damage indicator from $6.75 million to $10.35 million. Adjusting
the indicator in phases over several years could help FEMA examine
future requests for disaster declarations in a manner that reflects changes
in per capita income or inflation since 1986 and provide jurisdictions more
time to plan for and adjust to the change.




50
  In addition to our analysis of the 508 disaster declarations, we separately analyzed 144
of the 508 declarations wherein all financial decisions had been made as of January 31,
2012. Thus, we relied on actual obligations rather than projections to conduct the analysis.
Our analysis of the 144 declarations showed that fewer disasters would have met either
the personal income-adjusted or the inflation-adjusted PA per capita indicators for the
years in which the disasters were declared. Specifically, our analysis showed that 49
percent of the 144 disaster declarations would not have met the PA per capita indicator if
adjusted for the change in per capita personal income since 1986. Similarly, 31 percent of
the 144 disaster declarations would not have met the PA per capita indicator if adjusted
for inflation since 1986.
51
  In May 2012, the DHS Office of Inspector General reached a similar conclusion based
on its analysis that, if FEMA had continually updated the indicator for changes in
economic conditions, many recent disasters would not have met the financial statewide
per capita indicator for federal assistance. See DHS Office of Inspector General,
Opportunities to Improve FEMA’s Public Assistance Preliminary Damage Assessment
Process, OIG-12-709 (Washington, D.C.: May 2, 2012).




Page 28                                             GAO-12-838 Federal Disaster Assistance
FEMA’s Eligibility Process     Reliance on the PA per capita indicator to determine a jurisdiction’s
Does Not                       eligibility for federal assistance—whether the indicator is artificially low or
Comprehensively Assess a       adjusted for increases in personal income or inflation—does not provide
                               an accurate measure of a jurisdiction’s capability to respond to or recover
Jurisdiction’s Capability to   from a disaster without federal assistance. Determining a jurisdiction’s
Respond and Recover            fiscal capacity is important because a jurisdiction with greater resources
                               should be able to more easily recover in the aftermath of a disaster than a
                               jurisdiction with fewer resources. Further, a jurisdiction’s fiscal capacity is
                               an important component of the jurisdiction’s overall response and
                               recovery capability.

                               In 1999, when the rule was codified to set the per capita indicator at
                               $1.00, FEMA stated that it recognized that a straight per capita figure may
                               not be the best measurement of a state’s capability, but that it provided a
                               simple, clear, consistent, and long-standing means of measuring the
                               severity, magnitude, and impact of a disaster while at the same time
                               ensuring that the President can respond quickly and effectively to a
                               governor’s request for assistance. 52 As we reported in 2001, per capita
                               personal income is a relatively poor indicator of a jurisdiction’s fiscal
                               capacity because it does not comprehensively measure all income
                               potentially subject to jurisdiction taxation and is not necessarily indicative
                               of jurisdiction or local capability to respond effectively without federal
                               assistance. 53 For example, it does not include income produced in a
                               jurisdiction unless it is received as income by a jurisdiction resident. Thus,
                               profits retained by corporations for business investment, though
                               potentially subject to jurisdiction taxation, are not included in a jurisdiction
                               per capita income measure because they do not represent income
                               received by jurisdiction residents. In 2001, we recommended that FEMA
                               consider alternative criteria. FEMA’s response noted that we provided
                               valuable input for the FEMA team that was reviewing the disaster
                               declaration process and the criteria used to assess jurisdiction damages.
                               According to FEMA, in 2001, the President’s budget for fiscal year 2002
                               included a provision for the development of improved guidelines for
                               disaster assistance that provided jurisdictions with meaningful criteria that
                               must be met to become eligible for federal disaster assistance. FEMA
                               undertook a review of disaster declaration guidelines; however, no




                               52
                                64 Fed. Reg. at 47,697 (Sept. 1, 1999); 64 Fed. Reg. 3910, 3911 (Jan. 26, 1999).
                               53
                                GAO-01-837.




                               Page 29                                          GAO-12-838 Federal Disaster Assistance
changes to the established declaration guidelines were adopted, and
ultimately, FEMA did not change its reliance on the per capita indicator.

The Post-Katrina Act required FEMA to develop a set of preparedness
metrics that could be used to assess operational preparedness
capability. 54 Also, Presidential Policy Directive-8 (PPD-8), issued in March
2011, required the Secretary of Homeland Security to develop a national
preparedness system to, in part, define existing capabilities and capability
gaps, and drive investments to close those gaps across the nation’s
federal, state, local, tribal, and territorial governments. Much of the growth
in disaster declarations has occurred at the same time (that is, since the
terrorist attacks of September 11, 2001) that the federal government has
provided more than $37 billion to state and local governments to enhance
their preparedness to protect against, respond to, and recover from
disasters of all types. However, FEMA has not yet finished developing
metrics to assess state preparedness capability, a fact that limits its ability
to comprehensively assess jurisdictions’ disaster preparedness and
capabilities.

Without an established means of assessing jurisdiction response and
recovery capability, FEMA has continued to rely primarily on the per
capita damage indicator when determining whether a disaster declaration
is warranted. The National Preparedness Goal, released in September
2011, identifies 31 core capabilities and targets. Further, FEMA officials
stated that jurisdictions provided reports to FEMA on their preparedness,
including their core capabilities, on December 31, 2011. According to
FEMA, the state preparedness reports resulted in up to 155 individual
measures to track residual capability gaps, the results of which are
reported by core capability in the annual National Preparedness Report.
These core capabilities are the latest evolution of the Target Capabilities
List. 55 While the preliminary core capability targets provide a basis for
jurisdictions to understand the core capabilities, FEMA has not yet
developed national preparedness capability requirements based on
established metrics for the core capabilities at the state and local levels—
as called for in the Post-Katrina Act and PPD-8. In addition, according to



54
 6 U.S.C. § 749.
55
  GAO, Federal Emergency Management Agency: Continuing Challenges Impede
Progress in Managing Preparedness Grants and Assessing National Capabilities,
GAO-12-526T (Washington, D.C.: Mar. 20, 2012).




Page 30                                        GAO-12-838 Federal Disaster Assistance
FEMA officials, FEMA does not have any plans or policies in place to use
preparedness data to inform its recommendations regarding presidential
disaster declarations. Metrics to assess a jurisdiction’s disaster
preparedness and capabilities could augment the PA per capita indicator,
and other relevant information, to provide a more comprehensive
understanding of a jurisdiction’s capacity to respond to and recover from
a disaster without federal assistance.

The 2011 state preparedness reports provide some potentially useful
information to understand a state’s response capabilities. However,
FEMA does not use these reports or an assessment of a jurisdiction’s
response capabilities to determine eligibility for disaster assistance, and
the FEMA Administrator stated that state and local governments are
capable of handling much of the workload related to responding to a
declared disaster, which has allowed FEMA to mostly focus on recovery
efforts. 56 Recovery refers to efforts aimed at restoring an area to its prior
status, including the reconstruction of damaged structures, including its
housing stock, business establishments, public facilities, and the
environment. The availability of funds is critical to these efforts; however,
FEMA does not conduct an assessment of a jurisdiction’s fiscal capacity
to fund a recovery effort without federal assistance before determining
whether to award federal assistance.

As we previously reported and continue to believe, Total Taxable
Resources (TTR), a measure developed by the U.S. Department of the
Treasury, provides a more comprehensive measure of a jurisdiction’s
fiscal capacity than FEMA’s current PA indicator. 57 For example, TTR
includes much of the business income that does not become part of the
income flow to jurisdiction residents, undistributed corporate profits, and
rents and interest payments made by businesses to out-of-jurisdiction real
estate owners and lenders. In the case of FEMA’s PA program,
adjustments for TTR in setting the threshold for a disaster declaration
could result in a more realistic estimate of a jurisdiction’s ability to
respond to a disaster. Furthermore, since TTR provides estimates of each



56
  The Honorable W. Craig Fugate, FEMA Administrator, Testimony before the House of
Representatives, Committee on Appropriations Subcommittee on Homeland Security,
Budget Hearing–Federal Emergency Management Agency–Director and State and Local
Witnesses, March 7, 2012.
57
 GAO-01-837.




Page 31                                        GAO-12-838 Federal Disaster Assistance
jurisdiction’s fiscal capacity, adjustments for TTR growth would vary by
jurisdiction. FEMA could also use other measures of fiscal capacity, such
as state personal income or gross state product, to more accurately
determine a jurisdiction’s ability to pay for damages to public structures
without federal assistance. 58 Table 5 describes three potential
approaches to measure a jurisdiction’s fiscal capacity. Federal
departments and agencies have used some of these approaches to help
determine a jurisdiction’s fiscal capacity and the extent to which a
jurisdiction should be eligible for federal assistance. For example, the
Department of Health and Human Services’ Substance Abuse and Mental
Health Services Administration’s block grant program and Community
Mental Health Service use TTR. Also, personal income is used by many
federal grant programs.

Table 5: Three Potential Approaches to Measure a Jurisdiction’s Fiscal Capacity

    Potential approach                      Description
    State Personal Income                   Personal income is the income received by all persons
                                            from all sources. Personal income is the sum of net
                                            earnings by place of residence, property income, and
                                                                                a
                                            personal current transfer receipts.
    Gross State Product (GSP)               Also known as Gross Domestic Product by state, GSP is
                                            the state counterpart of the nation’s gross domestic
                                            product (GDP), the Bureau of Economic Analysis’
                                            featured and most comprehensive measure of U.S.
                                            economic activity. GDP by state is derived as the sum of
                                            the GDP originating in all the industries in a state.b
    Total Taxable Resources                 TTR is the unduplicated sum of the income flows
                                            produced within a state (GSP) and the income flows
                                            received by its residents (personal resident income) that a
                                            state can potentially tax. TTR does not consider the actual
                                            fiscal choices made by states. It measures all income
                                            flows a state can potentially tax.c
Source: GAO analysis of Bureau of Economic Analysis and U.S. Department of Treasury data.
a
    http://www.bea.gov/newsreleases/regional/spi/sqpi_newsrelease.htm,
b
    http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm, and
c
 http://www.treasury.gov/resource-center/economic-policy/taxable-resources/Pages/Total-Taxable-Re
sources.aspx.




58
  In addition to TTR, personal resident income, and gross state product, Representative
Tax System is a measure of fiscal capacity. However, we did not include it as a potential
means for FEMA to assess fiscal capacity because it is not currently calculated for U.S.
jurisdictions, although it could be should FEMA choose to do so.




Page 32                                                                 GAO-12-838 Federal Disaster Assistance
                       Without an accurate assessment of a jurisdiction’s capabilities to respond
                       to and recover from a disaster without federal assistance, including a
                       jurisdiction’s preparedness capabilities and fiscal capacity, FEMA runs
                       the risk of recommending that the President award federal assistance to
                       jurisdictions that have the capability to respond and recover on their own.
                       Reexamining the basis for the PA indicator and the usefulness of
                       preparedness metrics and jurisdiction fiscal capacity could help FEMA
                       more accurately determine whether a jurisdiction should be eligible for
                       federal assistance. In appendix IV, we provide additional information
                       about the three approaches to measure a jurisdiction’s fiscal capacity as
                       well as examples of how these fiscal measures could assist FEMA in
                       more accurately determining whether the magnitude of damage is beyond
                       the capacity of the jurisdiction.


                       According to the Stafford Act, the usual cost share arrangement for
FEMA Does Not Have     disaster declarations calls for the federal government to pay not less than
Specific Criteria to   75 percent of the eligible PA costs of a disaster and nonfederal entities
                       (that is, state and local governments) to pay the remaining 25 percent; at
Evaluate Some Cost     a governor’s request, the President can adjust this cost share. 59 FEMA
Share Adjustment       has specific criteria to evaluate a request to adjust the federal share from
Requests and Does      75 percent to 90 percent, but does not have specific criteria to evaluate a
                       request to adjust the federal share to 100 percent. Adjusting the federal
Not Track Additional   share to 100 percent is typically done for emergency work such as life-
Costs for All          saving activities and debris removal projects through FEMA’s PA
                       program. In addition, FEMA does not know the additional costs (that is,
Adjustments            the costs of paying an additional 15 or 25 percent) associated with either
                       type of cost share adjustment because the agency does not track these
                       costs.

                       Governors can request that the President reduce the 25 percent cost share
                       for nonfederal governments to 10 percent or 0 percent. 60 FEMA generally


                       59
                         42 U.S.C. §§ 5170b(b), 5172(b), 5173(d). Generally, there is no nonfederal share for IA
                       (FEMA’s Other Needs Assistance program does require a cost share). 42 U.S.C.
                       § 5174(g).
                       60
                         44 C.F.R. § 206.47. Instead of jurisdictions paying cash for their 25 percent or 10
                       percent share of eligible PA costs, they can use in-kind donations. According to FEMA,
                       donated resources used on eligible work that is essential to meet immediate threats to life
                       and property resulting from a major disaster may be credited toward the nonfederal cost
                       share. For example, donated resources may include volunteer labor, equipment,
                       materials, food, and shelter.




                       Page 33                                            GAO-12-838 Federal Disaster Assistance
follows the same process to evaluate a request from a governor for a cost
share adjustment as it follows to evaluate a request for a disaster
declaration, according to FEMA officials. FEMA makes a recommendation
to the President as to whether the request for a cost share adjustment
should be approved or denied and the President makes the decision.

For the 539 disaster declarations during fiscal years 2004 through 2011,
governors requested that the President adjust the usual federal/nonfederal
(that is, state and local government) cost share 150 times. As shown in
table 6, 109 of the 150 requests, or 73 percent, were approved during this
period. However, 23 of the 109 cost share adjustments were required by
provisions in law; therefore, FEMA’s recommendation was not a factor in
whether these cost share adjustment requests were approved or denied. 61
For example, 10 of the 23 cost share adjustments required by law were for
Hurricanes Katrina, Wilma, Dennis, and Rita. 62

Table 6: Number of Cost Share Adjustments Requested and Approved, Fiscal Years
2004 through 2011

 Fiscal year                Number requested   Number approved        Percent approved
 2004                                    29                   22                      76
 2005                                    46                   42                      91
 2006                                      7                   5                      71
 2007                                      9                   3                      33
 2008                                    23                   17                      74
 2009                                    15                    7                      47
 2010                                      9                   6                      67
 2011                                    12                    7                      58
 Total                                  150                  109                      73
Source: GAO analysis of FEMA data.




61
   Excluding the 23 legislatively required cost share adjustments from the 150 total
requests means that FEMA’s recommendation was a factor in 127 of the requested cost
share adjustments. The President approved 86 of the 127 cost share adjustment requests,
or 68 percent.
62
   See, e.g., Pub. L. No. 110-28, § 4501, 121 Stat. 112, 156 (2007) (“… the Federal share
of assistance, including direct Federal assistance, provided for the States of Alabama,
Florida, Louisiana, Mississippi, and Texas in connection with Hurricanes Katrina, Wilma,
Dennis, and Rita under sections 403, 406, 407, and 408 of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act… shall be 100 percent of the eligible costs under
such sections.”).




Page 34                                           GAO-12-838 Federal Disaster Assistance
Note: For the number of cost share adjustments requested and approved, we used the fiscal year in
which the disaster declaration was approved. Of the 109 cost share adjustments, 23 were required by
legislation. Excluding the 23 cost share adjustments, the President approved 86 of the 127 cost share
adjustment requests, or 68 percent.
Our analysis shows that 64 of the 109 cost share adjustments during
fiscal years 2004 through 2011 were for the following six disasters: 23 for
Hurricane Katrina, 11 for Hurricane Rita, 9 for Hurricane Ike, 8 for
Hurricane Ivan, 7 for midwest flooding in fiscal year 2008, and 6 for
Hurricane Dennis. Furthermore, 34 of the 109 cost share adjustments
involved a single adjustment, whereas 23 cost share adjustments
involved multiple adjustments. FEMA officials explained this by stating
that a 100 percent cost share adjustment could be approved for a 72-hour
period and the governor could subsequently request another 100 percent
cost share adjustment for another 72-hour period, which the President
could approve. For example, the disaster declaration in Louisiana in fiscal
year 2005 for Hurricane Katrina had 8 cost share adjustments and the
disaster declaration in Mississippi in fiscal year 2005 for Hurricane Katrina
had 9 cost share adjustments.

According to FEMA officials, although the process is similar, the agency
uses different criteria to evaluate a request from a governor to increase
the federal government share for PA up to 90 percent than it does for
requests up to 100 percent. Specifically, FEMA may recommend to the
President that the federal cost share be increased up to 90 percent when
a disaster is so extraordinary that actual federal obligations, excluding
FEMA administrative costs, meet or exceed a qualifying threshold. To
determine the threshold, the jurisdiction population is multiplied by a per
capita amount, which is $135 for calendar year 2012 (or 100 times the
2012 per capita damage indicator of $1.35). 63 Forty-one of the 109 cost
share adjustments increased the federal cost share to 90 percent and
reduced the nonfederal share to 10 percent. According to FEMA’s
regulations, if warranted by the needs of the disaster, FEMA may
recommend up to 100 percent federal funding for emergency work, such
as debris removal and emergency protective measures, for a limited
period in the initial days of the disaster irrespective of the per capita




63
  44 C.F.R. § 206.47(b).




Page 35                                                  GAO-12-838 Federal Disaster Assistance
amount. 64 Sixty-eight of the 109 cost share adjustments increased the
federal cost share to 100 percent.

Unlike its evaluation of a request that the federal share be increased from
75 percent up to 90 percent, FEMA does not use specific criteria to
evaluate requests to adjust the federal cost share up to 100 percent.
FEMA officials stated that a recommendation to the President for up to a
100 percent cost share adjustment is based on a subjective assessment
of the jurisdiction’s needs and that it is usually pretty obvious when a
jurisdiction needs debris removal and emergency protective measures,
although the officials acknowledged that FEMA’s recommendation is a
judgment call. According to FEMA, it does not use the same criteria to
evaluate a request for a 100 percent cost share adjustment as it uses for
a 90 percent cost share adjustment because the criteria for the 90
percent adjustment are based on actual federal obligations. FEMA
officials explained that they would not be able to apply those criteria for
the 100 percent adjustment in the initial days of a disaster because there
would not be much, if any, funding obligated at that point. However,
criteria for assessing a request for a 100 percent cost share adjustment
for PA (that is, emergency work) do not have to be the same criteria
FEMA uses to assess requests for 90 percent cost share adjustments.
For example, FEMA’s IA grant program uses multiple factors to determine
whether to recommend to the President that a jurisdiction be granted IA. 65

We have previously reported that clear criteria are important for
controlling federal costs and helping to ensure consistent and equitable
eligibility determinations. 66 For example, if a 100 percent cost share
adjustment is approved, the federal government could pay millions of
dollars more than it ordinarily would for a single disaster declaration.
Furthermore, Standards for Internal Control in the Federal Government
state that internal control activities help ensure that management’s
directives are carried out and that actions are taken to address risks. 67


64
  44 CFR §206.47(d). Generally, 72 hours is the period of time that the federal
government will pay 100 percent of these costs; however, the President can extend the
time period.
65
 44 C.F.R. § 206.48(b).
66
 GAO/RCED, Disaster Assistance: Improvements Needed in Determining Eligibility for
Public Assistance, GAO-96-113 (Washington, D.C.: May 1996).
67
 GAO/AIMD-00-21.3.1.




Page 36                                          GAO-12-838 Federal Disaster Assistance
Moreover, internal control standards state that control activities should be
an integral part of an entity’s accountability for stewardship of government
resources. Without such activities, FEMA is at risk that its
recommendations related to 100 percent cost share adjustments may not
be justified. Further, relying on professional judgment only, FEMA is at
risk of making inconsistent, and potentially inequitable, recommendations
to the President about whether to grant 100 percent cost share
adjustments.

In addition, FEMA officials stated that they do not know the costs
associated with the 109 cost share adjustments because the agency does
not track the costs for all cost share adjustments, although on rare
occasions, at the request of congressional staff, FEMA officials have
identified the costs associated with cost share adjustments, such as those
for Hurricane Katrina. The officials stated that they have not routinely
tracked the additional costs associated with cost share adjustments
because they did not see a need for this information. According to
Standards for Internal Control in the Federal Government, program
managers need financial data to determine whether they are meeting
their goals for accountability for effective and efficient use of resources. 68
Financial information is needed for both external and internal uses, and
on a day-to-day basis to make operating decisions, monitor performance,
and allocate resources. Pertinent information should be identified,
captured, and distributed in a form and time frame that permits people to
perform their duties efficiently. Because FEMA does not track the costs
associated with cost share adjustments, FEMA does not know the
financial impact of its recommendations to the President on whether to
increase the federal cost share for PA. Understanding the financial impact
of FEMA’s recommendations to the President for cost share adjustments
would enable FEMA to make more informed recommendations and
estimate the impact of the adjustments on available DRF balances.




68
     GAO/AIMD-00-21.3.1.




Page 37                                     GAO-12-838 Federal Disaster Assistance
                          FEMA’s administrative cost percentages have often surpassed its targets
Costs of Providing        for all sizes of disasters and have doubled in size since fiscal year 1989.
Disaster Assistance       FEMA provided guidance for administrative cost targets but does not
                          assess how well the targets were achieved. The agency is working on
Have Increased, but       three short- and long-term initiatives to deliver disaster assistance in a
FEMA Is Working to        more efficient manner.
Reduce Costs

Administrative Cost       Our analysis of the 539 disaster declarations during fiscal years 2004
Percentages Often         through 2011 shows that 37 percent of the declarations exceeded
Exceeded FEMA’s Targets   administrative cost percentage targets established in guidance prepared
                          by FEMA in 2010. 69 Administrative cost percentages varied widely among
and Have Doubled since
                          disaster declarations that required a similar amount of federal financial
Fiscal Year 1989          assistance, suggesting that certain declarations may have been
                          administered more efficiently than others. In addition, FEMA’s average
                          administrative cost percentage for disaster declarations has doubled
                          since fiscal year 1989. 70

                          FEMA’s administrative costs relate to the delivery of disaster assistance
                          programs, such as the PA or IA programs, and are primarily obligated




                          69
                            In November 2010, FEMA established administrative cost percentage target ranges for
                          disaster declarations. According to FEMA officials, the target ranges are not considered
                          formal guidance and FEMA officials responsible for managing administrative costs are not
                          held accountable for meeting the targets; however, the targets are supposed to shape
                          how its leaders in the field think about gaining and sustaining efficiencies in operations.
                          Event Level 1 declarations—with projected obligations of $500 million to $5 billion—have
                          an administrative cost percentage target range of 8 percent to 12 percent of total
                          obligations. Event Level 2 declarations—with projected total obligations from $50 million to
                          $500 million—have a target range of 9 percent to 15 percent. Event Level 3 declarations—
                          with projected obligations of less than $50 million—have a target range of 12 percent to 20
                          percent.
                          70
                            According to FEMA officials, the agency relied on the Statement of Federal Financial
                          Accounting Standards 4 to define its administrative costs. Agency officials calculate a
                          declaration’s administrative cost percentage by dividing administrative cost obligations by
                          total obligations. Total obligations include funds obligated for PA, IA, Hazard Mitigation,
                          Mission Assignment, and administration. We calculated administrative cost percentages
                          using the formula provided by FEMA.




                          Page 38                                             GAO-12-838 Federal Disaster Assistance
from the DRF. 71 Examples of administrative costs include the salary and
travel costs for the disaster reserve workforce, rent and security expenses
associated with JFO facilities, and supplies and information technology
support for JFO staff. According to FEMA officials, the agency’s
administrative costs are primarily due to activities at JFOs; however,
administrative costs can also be incurred at FEMA regional offices,
headquarters, and other locations. 72

We analyzed actual administrative costs for disaster declarations that
were closed as of April 30, 2012, and, for declarations that were still open
as of April 30, 2012, we analyzed actual obligations as of April 30, 2012,
plus the amount that FEMA projected to obligate in the future until the
declarations are eventually closed. 73 FEMA categorizes disaster
declarations using three event levels, essentially small, medium, or large
based on the amount of federal funding obligated for the disaster, and
has established target ranges for administrative cost percentages for
each. Our analysis shows that FEMA frequently exceeded the
administrative cost percentage targets established by FEMA guidance for
all three sizes of disaster declarations during fiscal years 2004 through
2011. Specifically:

•    For small disaster declarations (total obligations of less than $50
     million), the target range for administrative costs is 12 percent to 20



71
   In addition to FEMA’s administrative costs, funds are obligated from the DRF to
reimburse states and localities for certain administrative costs. Because these
administrative costs are for state and local activities rather than FEMA activities, we did
not include the costs in our administrative cost analyses. Further, certain administrative
costs associated with disaster declarations are obligated from FEMA’s annual
appropriations. For example, according to FEMA officials, the salary of a full-time FEMA
employee who works at headquarters is obligated from the agency’s appropriations, even
if the employee works on a specific disaster declaration. As FEMA could not quantify the
amount of administrative costs obligated from its appropriations that related to disaster
declarations, these costs were excluded from our administrative cost analyses.
72
  In addition to using JFOs, FEMA utilizes other temporary offices to respond to disaster
declarations, including Disaster Recovery Centers and PA Processing Centers, which also
incur administrative costs.
73
   FEMA uses three categories to characterize the status of a disaster declaration:
programmatically open, closed, and reconciled. “Programmatically open” means that all
financial decisions are not completed and eligible work remains. “Closed” means that
financial decisions have been made, but all projects are not complete. “Reconciled”
means that all projects are complete and the FEMA-state agreement is closed.




Page 39                                             GAO-12-838 Federal Disaster Assistance
     percent; for the 409 small declarations that we analyzed, 4 out of
     every 10 had administrative costs that exceeded 20 percent.

•    For medium disaster declarations (total obligations of $50 million to
     $500 million), the target range for administrative costs is 9 percent to
     15 percent; for the 111 declarations that we analyzed, almost 3 out of
     every 10 had administrative costs that exceeded 15 percent.

•    For large disaster declarations (total obligations greater than $500
     million to $5 billion), the target range for administrative costs is 8
     percent to 12 percent; for the 19 large declarations that we analyzed,
     over 4 out of every 10 had administrative costs that exceeded 12
     percent. 74

For small declarations that we analyzed, administrative cost percentages
averaged 20 percent and ranged from less than 1 percent to 73 percent.
Thus, on average, small disaster declarations were within the upper limit of
FEMA’s target range. However, 12 small declarations had administrative
cost percentages greater than 50 percent, which means that FEMA
obligated more for administrative costs than for disaster assistance. 75 For
example, if FEMA required $6 million to deliver $4 million in disaster
assistance to a jurisdiction, then the related administrative cost percentage
would be 60 percent of the total DRF obligations of $10 million. For medium
declarations that we analyzed, administrative cost percentages averaged
12 percent and were, therefore, in the middle of the target range. However,
administrative cost percentages for medium declarations ranged from less
than 1 percent to 55 percent and, for 1 medium declaration, FEMA
obligated more for administrative costs than for disaster assistance. For
large declarations that we analyzed, administrative cost percentages
averaged 13 percent—slightly above the upper limit of the target range—
and ranged from 3 percent to 25 percent; therefore, none of the large



74
   Two of the 19 large disaster declarations had projected obligations over $5 billion, which
is above the dollar range that FEMA uses to define large declarations. We included them
in the group of large declarations.
75
  The administrative cost percentage is a percentage of the total obligation, not a
percentage of the amount for disaster assistance. For example, if FEMA obligated $5
million for administrative costs and $5 million for disaster assistance, we divided the $5
million in administrative costs by $10 million ($5 million in administrative costs plus $5
million in disaster assistance). Therefore, in this example, the administrative cost
percentage is 50 percent of the total $10 million obligation for that disaster.




Page 40                                             GAO-12-838 Federal Disaster Assistance
declarations we analyzed had obligations for administrative costs higher
than disaster assistance.

FEMA’s administrative cost percentages also differed significantly
depending on the type of assistance delivered to a jurisdiction. For
example, for disaster declarations during fiscal years 2004 through 2011,
the average administrative cost percentage for disaster declarations that
involved only IA was 34 percent, while the average was less than half of
that, at 16 percent, for declarations with only PA. Disaster declarations
that included both IA and PA had an average administrative cost
percentage of 18 percent. 76

According to FEMA, incidents of similar size and type have witnessed
growing administrative costs since 1989. 77 Our analysis of 1,221 small,
medium, and large disaster declarations during fiscal years 1989 through
2011 confirms this increase. As discussed in more detail later in this
report, administrative costs have increased dramatically because of a
number of factors, including the number of staff deployed to a disaster,
which tripled during fiscal years 1989 through 2009. Since fiscal year
1989, the average administrative cost percentage for the 1,221 disaster
declarations doubled from 9 percent in the 1989-to-1995 period to 18
percent in the 2004-to-2011 period as shown in table 7.

Table 7: Average Administrative Cost Percentages for 1,221 Disaster Declarations
during Fiscal Years 1989 through 2011

 Fiscal years that declaration was                        Average administrative cost
 approved                                                                percentage
 1989 to 1995                                                                            9
 1996 to 2003                                                                           14
 2004 to 2011                                                                           18
Source: GAO analysis of FEMA data.



As shown in figure 7 for the 409 small declarations during fiscal years
2004 through 2011, the frequency of declarations that had administrative



76
 As discussed later in this report, FEMA offered some reasons why administrative cost
percentages for IA are generally higher than for PA.
77
 FEMA, Achieving Efficient JFO Operations: A Guide for Managing Staffing Levels and
Administrative Costs (Washington, D.C.: November 2010).




Page 41                                          GAO-12-838 Federal Disaster Assistance
                                        cost percentages above FEMA’s target of no more than 20 percent is five
                                        times what it was during fiscal years 1989 through 1995. 78

Figure 7: Frequency of Declarations above and below FEMA’s Target of 20 Percent or Less for Administrative Costs for Small
Declarations during Fiscal Years 1989 through 2011




                                        As shown in figure 8 for the 111 medium declarations during fiscal years
                                        2004 through 2011, the frequency of declarations that had administrative
                                        cost percentages above FEMA’s target range of no more than 15 percent,
                                        is almost 10 times what it was during fiscal years 1989 through 1995.




                                        78
                                           We examined fiscal years 1989 through 2011 because FEMA maintains detailed
                                        financial data on disaster declarations only back to fiscal year 1989. To examine whether
                                        administrative costs changed over time, we divided the 23 years into three periods—two
                                        periods of 8 years each and one period of 7 years. FEMA officials stated that no
                                        significant changes have been made to the agency’s definition of administrative costs
                                        during fiscal years 1989 through 2011.




                                        Page 42                                            GAO-12-838 Federal Disaster Assistance
Figure 8: Frequency of Declarations above and below FEMA’s Target of 15 Percent or Less for Administrative Costs for
Medium Declarations during Fiscal Years 1989 through 2011




                                        As shown in figure 9, for the 19 large declarations during fiscal years
                                        2004 through 2011, the frequency of declarations that had administrative
                                        cost percentages above FEMA’s target of no more than 12 percent is 42
                                        percent, whereas, during fiscal years 1996 to 2003, 20 percent of the
                                        large declarations exceeded FEMA’s target and, during fiscal years 1989
                                        through 1995, there were no large declarations that exceeded FEMA’s
                                        target.




                                        Page 43                                        GAO-12-838 Federal Disaster Assistance
Figure 9: Frequency of Declarations above and below FEMA’s Target of 12 Percent or Less for Administrative Costs for Large
Declarations during Fiscal Years 1989 through 2011




                                        Furthermore, our analysis of administrative cost percentages by type of
                                        disaster assistance shows a similar trend of significant increases since
                                        fiscal year 1989. As shown in table 8, since fiscal year 1989,
                                        administrative cost percentages doubled for declarations with IA only,
                                        quadrupled for declarations with PA only, and doubled for declarations
                                        with PA and IA.

                                        Table 8: Average Administrative Cost Percentages by Type of Assistance during
                                        Fiscal Years 1989 through 2011

                                         Type of assistance                  1989-1995         1996-2003          2004-2011
                                         IA                                        17%               27%                34%
                                         PA                                         4%               11%                16%
                                         PA, IA                                     9%               14%                18%
                                        Source: GAO analysis of FEMA data.




                                        Page 44                                        GAO-12-838 Federal Disaster Assistance
FEMA Provided Targets         FEMA officials created a management guide to better manage some of
for Administrative Costs in   the controllable factors for administrative costs. The guide noted that
Its Guidance to Staff but     administrative costs had been steadily rising for 20 years and that little
                              emphasis had been placed on controlling overall costs. The guide set
Does Not Assess               target ranges for administrative costs, but according to FEMA officials, the
Performance in Achieving      administrative cost goals are not required to be met. While a number of
the Targets                   factors affect FEMA’s administrative cost percentages, the agency is
                              working to better manage some of the factors it can control. According to
                              FEMA officials, the amount and type of assistance provided to a
                              jurisdiction are factors that significantly affect administrative cost
                              percentages. Some of the key factors that FEMA can control include the
                              number of staff deployed to a disaster and amount of overtime these staff
                              can work. FEMA officials stated that managing staffing levels according to
                              need throughout the course of a disaster can be a cost-effective
                              alternative to requiring staff to work overtime.

                              FEMA officials stated that the amount and type of assistance provided to
                              a jurisdiction can affect a disaster declaration’s administrative cost
                              percentage. For example, FEMA may be able to achieve economies of
                              scale for relatively large disasters, thereby reducing the related
                              administrative cost percentage. In contrast, relatively small disasters do
                              not benefit from economies of scale and may experience high
                              administrative cost percentages because of the need for a certain number
                              of staff. For instance, according to a FEMA official responsible for
                              controlling disaster-related costs, a typical declaration requires a
                              minimum of 30 to 35 staff to deliver PA and an additional 30 to 35 people
                              to deliver IA. Therefore, even for a small disaster declaration that includes
                              IA and PA, 60 to 70 staff will be required to administer the assistance.
                              According to FEMA officials, declarations that include IA often experience
                              higher administrative cost percentages. Moreover, FEMA officials stated
                              that the delivery of IA can be more labor intensive than the delivery of PA,
                              as IA often requires one-on-one attention to individuals and families
                              affected by a disaster. Costs associated with a typical JFO, such as rent
                              and employee travel, can be reduced when FEMA utilizes a virtual JFO;
                              however, because of the personal nature of the response required for IA,
                              FEMA is rarely able to utilize a virtual JFO for a declaration with IA
                              according to FEMA officials. 79 Furthermore, while there is no limit on the



                              79
                                A virtual JFO is an off-site location wherein disaster workforce personnel utilize
                              communication tools to deliver disaster assistance programs.




                              Page 45                                              GAO-12-838 Federal Disaster Assistance
amount of PA a jurisdiction can receive, the maximum amount an
individual/household can receive for IA is $31,400 in fiscal year 2012. As
a result of the limit for IA, it is more difficult for FEMA to achieve
economies of scale when delivering IA compared with PA.

According to FEMA officials, certain factors that affect administrative
costs are managed by the designated FCO. 80 FCOs are primarily
responsible for managing JFO operations and planning FEMA’s initial
disaster response and recovery efforts, including the number of staff
needed, and when and how long the staff will be deployed. Salaries,
benefits, and travel costs for FEMA staff, as well as costs associated with
contractors, account for roughly three-quarters of a disaster declaration’s
administrative costs. Also, the average number of FEMA staff deployed to
a disaster has increased significantly, from fewer than 500 in fiscal year
1989 to over 1,500 in fiscal year 2009. When we asked FEMA why the
staff deployed to a disaster had tripled during this time, FEMA stated that
it is extremely difficult to identify any principal factors causing increases in
staff and costs because of the complexities associated with the
underlying factors, particularly in light of the span of time involved. In
addition, for small declarations, a JFO typically closes within 90 days of
its opening, and FEMA officials stated that the majority of administrative
costs are obligated before a JFO closes. Therefore, planning for and
managing the first 90 days of disaster response and recovery can greatly
affect the administrative costs for a small declaration.

In November 2010, the FEMA Administrator issued guidance to FCOs on
how to better control staffing levels and administrative costs associated
with disaster declarations. For example, the document provided guidance
on how FCOs can set targets for administrative cost percentages, plan
staffing levels, time the deployment of staff, and determine whether to use
virtual JFOs. According to FEMA, the guidance is not required to be
followed because the agency’s intent was to ensure that it was providing
guidance to shape how its leaders in the field think about gaining and
sustaining efficiencies in operations rather than to lay out a prescriptive
formula. In addition, FEMA has a strategic plan that calls for improving
the delivery of disaster assistance while minimizing opportunities for


80
 The FCO is a position created by the Stafford Act and is appointed by the President to
manage federal resource support activities related to disaster declarations. 42 U.S.C. §
5143. The FCO is responsible for coordinating the timely delivery of federal disaster
assistance resources and programs to the affected localities.




Page 46                                            GAO-12-838 Federal Disaster Assistance
                           waste, fraud, and abuse. To accomplish this, FEMA plans to
                           collaboratively adopt and communicate policies and practices that
                           successfully safeguard against waste, fraud, and abuse. The plan states
                           that, to justify FEMA funding to all of its stakeholders, including taxpayers,
                           there must be a focus on identifying outcomes and measuring
                           performance. Furthermore, according to the plan, FEMA’s ability to
                           analyze and evaluate the results of its plans, programs, and
                           organizational initiatives is key to managing its strategic and long-range
                           organizational goals. However, neither the guidance to FCOs nor the
                           strategic plan sets goals for administrative cost percentages that are
                           required to be met or tracked for performance. While we recognize
                           complexities exist that can affect administrative costs for disasters,
                           FEMA’s implementation of goals to control administrative costs and
                           monitoring of performance in achieving these goals would provide
                           valuable information in assessing the agency’s performance in this area
                           and help to provide reasonable assurance that FEMA is delivering
                           disaster assistance in an efficient manner.


FEMA Is Working to         FEMA officials are considering other short- and long-term actions to
Increase Efficiencies in   increase efficiencies in the delivery of disaster assistance. According to
Delivering Disaster        FEMA officials, on the basis of a recent review of the PA program, the
                           agency created a plan with three initiatives focused on delivering
Assistance                 assistance to jurisdictions in a more efficient manner. The first initiative
                           under this plan attempts to promote consistency across FEMA’s 10
                           regional offices. For example, FEMA plans to issue a Public Assistance
                           Program Field Operations Pocket Guide to provide consistent guidance
                           and approaches to regional staff to help ensure that PA policies are being
                           consistently followed across FEMA regions. FEMA provided the PA
                           Pocket Guide to FEMA regional staff and state, local, and tribal officials
                           who attended FEMA’s PA Conference and State Workshop in April 2012
                           to solicit feedback.

                           The second initiative attempts to reduce the problems associated with
                           debris removal. For example, the agency hopes to reduce its reliance on
                           the Army Corps of Engineers for debris removal, which FEMA officials
                           said can be costlier than hiring local contractors. According to FEMA
                           officials, the agency plans to implement this initiative during the next 2 to
                           3 years and it may require regulatory changes.

                           The third initiative addresses inefficiencies within the permanent work
                           portion of PA and includes the consideration of a new model to deliver
                           this assistance. In October 2011, the FEMA Administrator testified that


                           Page 47                                     GAO-12-838 Federal Disaster Assistance
              the agency is considering a new, two-step process wherein FEMA and
              the state would agree on the estimated damages for a large-scale project
              and FEMA would make a one-time payment to the state. 81 The
              Administrator stated that the agency currently uses a reimbursement
              program, which requires a high degree of FEMA oversight and
              administrative costs. 82 While FEMA officials told us that the agency is in
              the conceptual stages of developing the new model, officials have
              identified some potential benefits. For example, the new model could
              lower FEMA’s administrative costs and the time needed to close a
              disaster declaration. In addition, the new model could allow states to
              rebuild as they see fit rather than requiring states to replace damaged
              structures to the status that existed prior to the disaster, which is FEMA’s
              current practice. According to FEMA officials, implementation of this
              model could require regulatory and legislative changes and is, therefore,
              years away.


              Disaster declarations have increased over recent decades, and FEMA
Conclusions   has obligated over $80 billion in federal assistance for disasters declared
              during fiscal years 2004 through 2011, highlighting the importance of
              FEMA’s assessment of jurisdictions’ capabilities to respond and recover
              without federal assistance. The PA per capita indicator is artificially low
              because it does not reflect the rise in per capita personal income since
              1986 or 13 years of inflation from 1986, when the indicator was set at
              $1.00 and adopted for use, to 1999. By primarily relying on an artificially
              low indicator, FEMA’s recommendations to the President are based on
              damage estimates and do not comprehensively assess a jurisdiction’s
              capability to respond to and recover from a disaster on its own. For
              example, on the basis of FEMA’s actual and estimated disaster
              assistance obligations, more than one-third of the 539 major disasters
              declared during fiscal years 2004 through 2011 are expected to have total



              81
                Statement of the Honorable W. Craig Fugate, Administrator, FEMA, before the House
              Committee on Transportation and Infrastructure, Subcommittee on Economic
              Development, Public Buildings, and Emergency Management, Streamlining Emergency
              Management: Improving Preparedness, Response, and Cutting Costs, U.S. House of
              Representatives (Washington, D.C.: October 13, 2011).
              82
                 Under the current reimbursement program, the state and local governments pay for the
              item or service and submit documentation to FEMA officials, who review the
              documentation to ensure it is an eligible expense and reimburse the state and local
              governments.




              Page 48                                          GAO-12-838 Federal Disaster Assistance
DRF obligations of less than $10 million, and more than 60 percent are
expected to have total obligations of less than $25 million. Therefore,
many of these declarations were for relatively small disasters. At a
minimum, adjusting the existing PA per capita indicator fully for changes
in per capita income or inflation could ensure that the per capita indicator
more accurately reflects changes in U.S. economic conditions since 1986,
when the indicator was adopted. Making the appropriate inflation
adjustment to the indicator would raise it from $1.35 to $2.07. A change of
this size in 1 year could present challenges for jurisdictions, which could
find that disasters with PA damage estimates that would now qualify for
PA would no longer qualify. Thus, phasing in the adjustment over several
years could provide jurisdictions time to take actions, such as increasing
any rainy day funds, to adjust to the effects of higher qualifying indicators.

A more comprehensive approach to determine a jurisdiction’s capabilities
to respond to a disaster would be to replace or supplement the current
indicator with more complete data on a jurisdiction’s fiscal resources,
such as TTR, and would be informed by data on a jurisdiction’s response
and recovery assets and capabilities. Because FEMA’s current approach
of comparing the amount of disaster damage with the PA per capita
indicator does not accurately reflect whether a jurisdiction has the
capabilities to respond to and recover from a disaster without federal
assistance, developing a methodology that provides a more
comprehensive assessment of jurisdictions’ response and recovery
capabilities, including a jurisdiction’s fiscal capacity, could provide FEMA
with data that are more specific to the jurisdiction requesting assistance.
For example, developing preparedness metrics in response to the Post-
Katrina Act and Presidential Policy Directive-8 could provide FEMA with
readily available information on jurisdictions’ response and recovery
capabilities. Without an accurate assessment of jurisdictions’ capabilities
to respond to and recover from a disaster, FEMA runs the risk of
recommending to the President that federal disaster assistance be
awarded without considering a jurisdiction’s response and recovery
capabilities or its fiscal capacity. As we recommended in 2001, we
continue to believe that FEMA should develop more objective and specific
criteria to assess the capabilities of jurisdictions to respond to a disaster.
Given the legislative and policy changes over the past decade, we believe
that including fiscal and nonfiscal capabilities, including available
preparedness metrics in its assessment, would allow FEMA to make
more informed recommendations to the President when determining a
jurisdiction’s capacity to respond without federal assistance.




Page 49                                     GAO-12-838 Federal Disaster Assistance
                      Making informed recommendations to the President about whether cost
                      share adjustments should be granted is important for FEMA and the
                      requesting jurisdictions because every cost share adjustment has
                      financial implications for both entities. A specific set of criteria or factors to
                      use when considering requests for 100 percent cost share adjustments
                      would provide FEMA a decision-making framework and enable more
                      consistent and objectively based recommendations to the President. Also,
                      when FEMA recommends that a cost share adjustment be approved and
                      the President approves it, the federal government assumes the financial
                      burden of paying 15 percent or 25 percent more in PA, which could total
                      millions of dollars. Tracking the additional costs to the federal government
                      because of cost share adjustments would allow FEMA to better
                      understand the financial implications of its recommendations to the
                      President.

                      FEMA’s average administrative costs as a percentage of total DRF
                      disaster assistance obligations have risen for disasters of all sizes. The
                      agency recognized that delivering assistance in an efficient manner is
                      important and published guidance to be used throughout the agency to
                      help rein in administrative costs. However, FEMA has not implemented
                      the goals and does not track performance against them. Over time,
                      reducing administrative costs could save billions of dollars—dollars that
                      could be used to fund temporary housing, infrastructure repairs, and other
                      disaster assistance. Therefore, incentivizing good management over
                      administrative costs by adopting administrative cost percentage goals and
                      measuring performance against these goals would help provide FEMA
                      with additional assurance that it is doing its utmost to deliver disaster
                      assistance in an efficient manner.


                      To increase the efficiency and effectiveness of the process for disaster
Recommendations for   declarations, we recommend that the FEMA Administrator take the
Executive Action      following four actions:

                      1. Develop and implement a methodology that provides a more
                         comprehensive assessment of a jurisdiction’s capability to respond to
                         and recover from a disaster without federal assistance. This should
                         include one or more measures of a jurisdiction’s fiscal capacity, such
                         as TTR, and consideration of the jurisdiction’s response and recovery
                         capabilities. If FEMA continues to use the PA per capita indicator to
                         assist in identifying a jurisdiction’s capabilities to respond to and
                         recover from a disaster, it should adjust the indicator to accurately
                         reflect the annual changes in the U.S. economy since 1986, when the


                      Page 50                                       GAO-12-838 Federal Disaster Assistance
                         current indicator was first adopted for use. In addition, implementing
                         the adjustment by raising the indicator in steps over several years
                         would give jurisdictions more time to plan for and adjust to the
                         change.

                     2. Develop and implement specific criteria or factors to use when
                        evaluating requests for cost share adjustments that would result in the
                        federal government paying up to 100 percent of disaster declaration
                        costs.

                     3. Annually track and monitor the additional costs borne by the federal
                        government for the cost share adjustments.

                     4. Implement goals for administrative cost percentages and monitor
                        performance to achieve these goals.


                     We provided a draft of this report to DHS for comment. We received
Agency Comments      written comments from DHS on the draft report, which are summarized
and Our Evaluation   below and reproduced in full in appendix V. DHS concurred with three
                     recommendations and partially concurred with the fourth
                     recommendation.

                     Regarding the first recommendation, that FEMA develop and implement a
                     methodology that provides a more comprehensive assessment of a
                     jurisdiction’s capability to respond to and recover from a disaster without
                     federal assistance, DHS concurred. DHS stated that a review of the
                     criteria used to determine a state’s response, recovery, and fiscal
                     capabilities is warranted and that such a review would include the need to
                     update the per capita indicator as well as a review of alternative metrics.
                     DHS stated that any changes would need to be made through the notice
                     and comment rulemaking process and that, if changes are made to the
                     per capita indicator, FEMA’s Office of Response and Recovery will review
                     the feasibility of phasing them in over time. However, the extent to which
                     the planned actions will fully address the intent of this recommendation
                     will not be known until the agency completes its review and implements a
                     methodology that provides a more comprehensive assessment of a
                     jurisdiction’s capability to respond and, if the per capita indicator
                     continues to be used, adjusts the per capita indicator to accurately reflect
                     annual changes in the U.S. economy since 1986. We will continue to
                     monitor DHS’s efforts.




                     Page 51                                    GAO-12-838 Federal Disaster Assistance
Regarding the second recommendation, that FEMA develop and
implement specific criteria or factors to use when evaluating requests for
cost share adjustments that would result in the federal government paying
up to 100 percent of disaster declaration costs, DHS concurred with the
recommendation and stated that FEMA’s Office of Response and
Recovery will review specific cost share factors or criteria and develop
guidelines to support decision making. These actions, if implemented
effectively, should address the intent of the recommendation.

DHS concurred with the third recommendation, to track and monitor the
additional costs associated with cost share adjustments, and stated that
FEMA’s Office of Response and Recovery will be responsible for tracking
these costs on an annual basis. DHS stated that such actions would
provide valuable information for budgetary purposes and for decision
makers who consider requests for cost share adjustments. We agree.
Thus, these actions, if implemented effectively, should address the intent
of the recommendation.

DHS partially concurred with the fourth recommendation, to implement
goals for administrative cost percentages and monitor performance to
achieve these goals. Specifically, DHS stated that it agrees that setting
goals and monitoring performance for achieving these goals is a good
practice in any program and can help ensure more effective and efficient
operations. However, DHS stated that it plans to conduct a review to
better understand and describe its current measures. DHS stated that a
number of factors affect administrative costs, which can present
difficulties when trying to implement a simple measure of percentage of
administrative costs to total costs. For example, DHS noted that the types
of assistance provided and the location of the JFO would affect the
percentage of administrative costs. DHS also stated that establishing
meaningful administrative cost percentage goals will be challenging
because of the many factors involved and that a suite of measures to
track administrative cost percentages could help ensure more effective
and efficient operations. Thus, DHS is pursuing development of such a
suite of measures. We agree that a number of factors affect the
percentage of administrative costs and that establishing meaningful
administrative cost percentage goals can be challenging. In developing a
suite of measures, it is important that FEMA’s leadership be able to use
them to effectively monitor a disaster declaration’s overall administrative
costs in addition to the factors that affect administrative costs. If these
measures allow FEMA to monitor overall administrative costs as well as
the factors that affect such costs, then development and implementation
of such measures should meet the intent of the recommendation.


Page 52                                   GAO-12-838 Federal Disaster Assistance
DHS also provided technical comments, which we incorporated, as
appropriate.


We will send copies of this report to the Secretary of Homeland Security,
the FEMA Administrator, and appropriate congressional committees. If
you or your staffs have any questions about this report, please contact
me at (202) 512-8777 or JenkinsWO@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Other key contributors to this report are listed
in appendix VI.




William O. Jenkins, Jr.
Director
Homeland Security and Justice




Page 53                                     GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
              Appendix I: GAO Analyses of the Number of
              Disaster Declarations and Amount of
              Obligations


Disaster Declarations and Amount of
Obligations
              Disaster declarations can take a decade or more to close because of a
              number of factors, including the Federal Emergency Management
              Agency’s (FEMA) reimbursement process for Public Assistance (PA)
              infrastructure projects, which can take a long time to finish. In addition,
              some projects are delayed because of disagreements, and sometimes
              litigation, over the appropriate amount that should be obligated, according
              to FEMA officials. As shown below in table 9, the oldest open disaster
              dates back to 1992, making it 20 years old, and only 54 percent of
              disaster declarations from fiscal year 2001 were closed as of January 31,
              2012. All disaster declarations prior to fiscal year 1992 are closed. Table
              9 shows the number of major disaster declarations by fiscal year that
              were open as of January 31, 2012, and the percentage of declarations
              that have been closed for each year since fiscal year 1992. 1

              Table 9: Status of Disaster Declarations during Fiscal Years 1992 through 2011, as
              of January 31, 2012
                                             Number of disaster declarations
               Fiscal year                     Declared       Open         Closed      Percentage closed
               1992                                  46           1            45                     98
               1993                                  39           1            38                     97
               1994                                  36           2            34                     94
               1995                                  29           4            25                     86
               1996                                  72           2            70                     97
               1997                                  49           4            45                     92
               1998                                  61           8            53                     87
               1999                                  53          10            43                     81
               2000                                  40           9            31                     78
               2001                                  50          23            27                     54
               2002                                  42          16            26                     62
               2003                                  62          29            33                     53
               2004                                  65          46            19                     29
               2005                                  45          31            14                     31
               2006                                  53          46             7                     13
               2007                                  68          65             3                      4
               2008                                  68          68             0                      0
               2009                                  63          63             0                      0
               2010                                  79          79             0                      0
               2011                                  98          98             0                      0
              Source: GAO analysis of FEMA data.




              1
               Figure 1 presented earlier in the report includes data on declarations since 1953, when
              the first presidential disaster declaration was issued.




              Page 54                                                GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




Fifty-nine jurisdictions received major disaster declarations during fiscal
years 1953 through 2011. Texas had the most, with 86 declarations, while
Palau had 1. Wyoming, Utah, and Rhode Island had the fewest
declarations for a state, each with 9 declarations. Table 10 identifies the
number of disaster declarations for all jurisdictions during fiscal years
1953 through 2011.

Table 10: Number of Disaster Declarations during Fiscal Years 1953 through 2011
by Jurisdiction

Jurisdiction                                               Number of declarations
Texas                                                                          86
California                                                                     78
Oklahoma                                                                       70
New York                                                                       65
Florida                                                                        63
Louisiana                                                                      57
Alabama                                                                        55
Kentucky                                                                       55
Arkansas                                                                       53
Missouri                                                                       53
Illinois                                                                       51
Mississippi                                                                    50
Tennessee                                                                      50
Iowa                                                                           48
Minnesota                                                                      48
Kansas                                                                         47
Nebraska                                                                       47
Pennsylvania                                                                   46
West Virginia                                                                  46
Ohio                                                                           45
Washington                                                                     44
Virginia                                                                       43
North Dakota                                                                   42
North Carolina                                                                 40
Indiana                                                                        39
Maine                                                                          39
South Dakota                                                                   39
Georgia                                                                        36
Alaska                                                                         35
Wisconsin                                                                      35
Vermont                                                                        32
New Jersey                                                                     31
Oregon                                                                         28




Page 55                                       GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




    Jurisdiction                                                       Number of declarations
    New Hampshire                                                                          27
    Massachusetts                                                                          26
    Hawaii                                                                                 25
    Michigan                                                                               25
    Puerto Rico                                                                            25
    Federated States of Micronesia                                                         24
    Arizona                                                                                23
    Idaho                                                                                  23
    New Mexico                                                                             23
    Maryland                                                                               21
    Montana                                                                                20
    Nevada                                                                                 17
    Virgin Islands                                                                         17
    Colorado                                                                               16
    Connecticut                                                                            16
    South Carolina                                                                         15
    Delaware                                                                               14
    Northern Mariana Islands                                                               14
    Guam                                                                                   12
    American Samoa                                                                         11
    District of Columbia                                                                   10
    Rhode Island                                                                            9
    Utah                                                                                    9
    Wyoming                                                                                 9
    Marshall Islands                                                                        7
    Palaua                                                                                  1
Source: GAO analysis of FEMA data.
a
 We did not include Palau in our analysis of disaster declarations during fiscal years 2004 through
2011 because Palau is a Freely Associated State that, under the terms of its Compact of Free
Association with the United States, ceased to receive disaster assistance from the U.S. government.
Prior to entering the compact, Palau received one disaster declaration as a territory.


The number of major disaster declarations and total obligations varied
among FEMA regions during fiscal years 2004 through 2011. For
example, FEMA Region X had 32 declarations, while FEMA Region IV
had 87. In addition, obligations for FEMA Region VI during this time,
which was affected by Hurricane Katrina, reached nearly $40 billion, while
FEMA Region X had obligations of $647 million. See figure 10 for more
information.




Page 56                                                 GAO-12-838 Federal Disaster Assistance
                                       Appendix I: GAO Analyses of the Number of
                                       Disaster Declarations and Amount of
                                       Obligations




Figure 10: Number of Disaster Declarations and Amount of Obligations by FEMA Region during Fiscal Years 2004 through
2011




                                       Note: American Samoa, Federated States of Micronesia, Guam, Marshall Islands, U.S. Virgin Islands,
                                       Commonwealth of the Northern Mariana Islands, and Commonwealth of Puerto Rico are not visually
                                       represented in the figure, but the number of disaster declarations and obligations due to these
                                       jurisdictions were included in the figure under Regions II and IX. Specifically, the U.S. Virgin Islands
                                       and Commonwealth of Puerto Rico are served by FEMA Region II, and America Samoa, Federated
                                       States of Micronesia, Guam, Marshall Islands, and Commonwealth of the Northern Mariana Islands
                                       are served by FEMA Region IX.




                                       Page 57                                                   GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




FEMA classifies major disaster declarations by incident type, and these
types include floods, tornadoes, and hurricanes, among other types of
disasters—both natural and man-made. As shown in table 11, the most
frequent type of incident was, according to FEMA data, severe storms,
which accounted for 71 percent of the declarations during fiscal years
2004 through 2011.

Table 11: Disaster Declarations by Incident Type during Fiscal Years 2004 through
2011

    Incident typea                        Number of declarations            Percentage of total
    Severe storm                                                  385                        71
    Hurricane                                                      37                         7
    Flood                                                          34                         6
    Fire                                                           21                         4
    Snow                                                           20                         4
    Severe ice storm                                               12                         2
    Tornado                                                          8                        1
    Typhoon                                                          7                        1
    Other                                                            5                        1
    Earthquake                                                       4                        1
    Tsunami                                                          3                        1
    Freezing                                                         2             Less than 0.5
    Dam/levee break                                                  1             Less than 0.5
    Total                                                         539                       100
Source: GAO analysis of FEMA data.
a
We are reporting the incident type for each disaster declaration as assigned by FEMA.


FEMA obligates funds from the Disaster Relief Fund (DRF) to help
jurisdictions respond to and recover from declared disasters. FEMA
classifies these funds into five categories: PA, Individual Assistance,
Hazard Mitigation, Mission Assignments, and Administration. Table 12
shows the obligations for each category by jurisdiction.




Page 58                                                GAO-12-838 Federal Disaster Assistance
                                          Appendix I: GAO Analyses of the Number of
                                          Disaster Declarations and Amount of
                                          Obligations




Table 12: Obligations for Disaster Declarations during Fiscal Years 2004 through 2011, by Jurisdiction, as of January 31, 2012

(Dollars in millions)
                                          Disaster assistance
                            Public     Individual       Hazard               Mission      Total                         Grand
Jurisdiction            Assistance    Assistance     Mitigation          Assignment assistance Administration             total
Alabama                       $656          $903           $99                  $383    $2,041          $414            $2,456
(including Katrina)
Alabama                        536           297              53                  320       1,206              228       1,433
(excluding
Katrina)
Alaska                          81             5               7                      1        95               25         120
American Samoa                  74            66               4                      9       153               64         217
Arizona                         43             0               2                      0        44                9          53
Arkansas                       372            53              50                      3       477               80         557
California                   1,057           113              76                      4     1,251              117       1,368
Colorado                         0             1               a                      a         1                2           3
Connecticut                     38            18               2                      a        58               28          85
Delaware                        12             0               1                      0        12                2          14
District of Columbia            12             0               0                      0        12                1          13
Federated States of             16             8               1                      a        25                8          33
Micronesia
Florida                      4,904         2,201            498                   847       8,449            1,128       9,578
(including Katrina)
Florida                      4,687         2,201            490                   847       8,225            1,105       9,331
(excluding Katrina)
Georgia                        190            80             57                     1         329               94         422
Guam                             1             0              0                     0           1                1           2
Hawaii                          56            16              4                     a          76               17          93
Idaho                           12             0              a                     0          12                4          17
Illinois                       251           481             23                     3         757               98         855
Indiana                        213           140             40                     3         396               66         463
Iowa                         1,626           227            296                    10       2,158              169       2,327
Kansas                         973            89             94                     4       1,160               71       1,231
Kentucky                       375           102             45                     2         524              108         632
Louisiana                   13,682        11,353            981                 2,742      28,758            3,579      32,337
(including Katrina)
Louisiana                    1,770           991            172                   328       3,261              587       3,848
(excluding Katrina)
Maine                           74             4              6                     a          84               21        $105
Maryland                        96             0              2                     0          98                6         104
Massachusetts                  173            99              9                     1         282               58         340
Michigan                        15            45              4                     0          64                8          72
Minnesota                      168            38             13                     3         222               41         264
Mississippi                  3,561         3,111            296                 1,207       8,174            2,072      10,246
(including Katrina)




                                          Page 59                                         GAO-12-838 Federal Disaster Assistance
                                      Appendix I: GAO Analyses of the Number of
                                      Disaster Declarations and Amount of
                                      Obligations




                                       Disaster assistance
                          Public    Individual       Hazard                     Mission      Total                                     Grand
Jurisdiction          Assistance   Assistance     Mitigation                Assignment assistance Administration                        total
Mississippi                  107            54             6                         13       180             56                         236
(excluding Katrina)
Missouri                    592            112                    66                   152             923                  137          1,060
Montana                      32              7                     1                     0              40                   17             57
Nebraska                    292              8                    29                     a             329                   37            366
Nevada                       21              2                     2                     a              25                    5             30
New Hampshire                91             15                    12                     a             119                   28            147
New Jersey                  193            232                    37                     2             464                   71            535
New Mexico                   57              8                     1                     0              66                   17             82
New York                    839            266                    40                    22           1,168                  152          1,320
North Carolina              152            102                     5                     1             259                   70            329
North Dakota                437            209                    21                    42             710                  146            856
Northern Mariana             10             14                     2                     0              26                    6             32
Islands
Ohio                         238           92                   29                      1             359                  45             404
Oklahoma                     463           37                   38                      1             539                  82             622
Oregon                       106            9                   19                      0             134                  24             159
Pennsylvania                 276          298                   25                     10             610                  85             695
Puerto Rico                  152          485                   17                      9             664                  99             763
Rhode Island                  27           42                    4                      a              73                  18              91
South Carolina                43            8                    3                      0              54                   7              61
South Dakota                 200           13                    8                      1             222                  52             273
Tennessee                    332          203                   56                      2             593                 118             711
Texas                      2,795        1,843                  395                    280           5,313               1,056           6,369
Utah                          28            0                    1                      0              28                   7              36
Vermont                       51           28                    3                      1              82                  36             118
Virgin Islands                18            0                    1                      0              19                   8              27
Virginia                     144           14                    6                      a             164                  22             187
Washington                   209           43                   41                      a             293                  58             352
West Virginia                108          117                   19                     12             256                  58             314
Wisconsin                    113          138                   30                      a             282                  50             332
Wyoming                        8            3                    a                      0              11                   3              15
Total                    $36,759      $23,500               $3,522                 $5,761         $69,542             $10,806         $80,349
                                      Source: GAO analysis of FEMA data.

                                      Note: Total obligations include obligations for Hurricane Katrina and do not factor in jurisdictions’
                                      obligations that exclude Hurricane Katrina.
                                      a
                                       Obligations less than $0.5 million




                                      Page 60                                                     GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




Obligations on a per person basis varied for disasters declared during
fiscal years 2004 through 2011. For example, including Hurricane Katrina,
Louisiana had the highest per capita obligations at $7,236, but excluding
obligations for Hurricane Katrina, American Samoa had the highest
obligations at $3,795 per person. For the lowest obligations per person,
Colorado had 81 cents and the Marshall Islands had zero. See tables 13
and 14 for obligations on a per person basis for all 58 jurisdictions when
including and excluding obligations for Hurricane Katrina, respectively.

Table 13: Obligations Per Person Including Hurricane Katrina for Disaster
Declarations during Fiscal Years 2004 through 2011, by Jurisdiction

Rank                                                    Obligated per person as of
order        Jurisdiction                                        January 31, 2012
1.           Louisiana                                                       $7,236
2.           American Samoa                                                    3,795
3.           Mississippi                                                       3,602
4.           North Dakota                                                      1,332
5.           Iowa                                                               795
6.           Florida                                                            599
7.           Alabama                                                            552
8.           Northern Mariana Islands                                           460
9.           Kansas                                                             458
10.          South Dakota                                                       362
11.          Federated States of Micronesia                                     307
12.          Texas                                                              305
13.          Virgin Islands                                                     245
14.          Nebraska                                                           214
15.          Arkansas                                                           208
16.          Puerto Rico                                                        200
17.          Vermont                                                            194
18.          Alaska                                                             191
19.          Missouri                                                           189
20.          Oklahoma                                                           180
21.          West Virginia                                                      174
22.          Kentucky                                                           156
23.          Tennessee                                                          125
24.          New Hampshire                                                      119
25.          Rhode Island                                                         87
26.          Maine                                                                82




Page 61                                        GAO-12-838 Federal Disaster Assistance
Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




 Rank                                                Obligated per person as of
 order             Jurisdiction                               January 31, 2012
 27.               Hawaii                                                      77
 28.               Indiana                                                     76
 29.               New York                                                    70
 30.               Illinois                                                    69
 31.               New Jersey                                                  64
 32.               Montana                                                     63
 33.               Wisconsin                                                   62
 34.               Washington                                                  60
 35.               Pennsylvania                                                57
 36.               Minnesota                                                   54
 37.               Massachusetts                                               54
 38.               Georgia                                                     52
 39.               Oregon                                                      46
 40.               New Mexico                                                  45
 41.               North Carolina                                              41
 42.               California                                                  40
 43.               Ohio                                                        36
 44.               Wyoming                                                     29
 45.               Virginia                                                    26
 46.               Connecticut                                                 25
 47.               District of Columbia                                        22
 48.               Maryland                                                    20
 49.               Delaware                                                    18
 50.               Utah                                                        16
 51.               South Carolina                                              15
 52.               Nevada                                                      15
 53.               Idaho                                                       13
 54.               Guam                                                        12
 55.               Arizona                                                     10
 56.               Michigan                                                     7
 57.               Colorado                                                  0.81
 58.               Marshall Islands                                             0
                   Total                                                 $23,362
Source: GAO analysis of FEMA data.




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Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




Table 14: Obligations Per Person Excluding Hurricane Katrina for Disaster
Declarations during Fiscal Years 2004 through 2011, by Jurisdiction

Rank                                                    Obligated per person as of
order        Jurisdiction                                        January 31, 2012
1.           American Samoa                                                 $3,795
2.           North Dakota                                                     1,332
3.           Louisiana                                                         861
4.           Iowa                                                              795
5.           Florida                                                           584
6.           Northern Mariana Islands                                          460
7.           Kansas                                                            458
8.           South Dakota                                                      362
9.           Alabama                                                           322
10.          Federated States of Micronesia                                    307
11.          Texas                                                             305
12.          Virgin Islands                                                    245
13.          Nebraska                                                          214
14.          Arkansas                                                          208
15.          Puerto Rico                                                       200
16.          Vermont                                                           194
17.          Alaska                                                            191
18.          Missouri                                                          189
19.          Oklahoma                                                          180
20.          West Virginia                                                     174
21.          Kentucky                                                          156
22.          Tennessee                                                         125
23.          New Hampshire                                                     119
24.          Rhode Island                                                        87
25.          Mississippi                                                         83
26.          Maine                                                               82
27.          Hawaii                                                              77
28.          Indiana                                                             76
29.          New York                                                            70
30.          Illinois                                                            69
31.          New Jersey                                                          64
32.          Montana                                                             63
33.          Wisconsin                                                           62
34.          Washington                                                          60




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Appendix I: GAO Analyses of the Number of
Disaster Declarations and Amount of
Obligations




 Rank                                                Obligated per person as of
 order             Jurisdiction                               January 31, 2012
 35.               Pennsylvania                                                57
 36.               Minnesota                                                   54
 37.               Massachusetts                                               54
 38.               Georgia                                                     52
 39.               Oregon                                                      46
 40.               New Mexico                                                  45
 41.               North Carolina                                              41
 42.               California                                                  40
 43.               Ohio                                                        36
 44.               Wyoming                                                     29
 45.               Virginia                                                    26
 46.               Connecticut                                                 25
 47.               District of Columbia                                        22
 48.               Maryland                                                    20
 49.               Delaware                                                    18
 50.               Utah                                                        16
 51.               South Carolina                                              15
 52.               Nevada                                                      15
 53.               Idaho                                                       13
 54.               Guam                                                        12
 55.               Arizona                                                     10
 56.               Michigan                                                     7
 57.               Colorado                                                  0.81
 58.               Marshall Islands                                             0
                   Total                                                 $13,222
Source: GAO analysis of FEMA data.




Page 64                                     GAO-12-838 Federal Disaster Assistance
Appendix II: Objectives, Scope, and
               Appendix II: Objectives, Scope, and
               Methodology



Methodology

               This report addresses the following questions: (1) For each fiscal year
               from 2004 through 2011, how many disaster declaration requests did
               FEMA receive, how many were approved, for which types of disasters,
               and how much were the associated obligations from the DRF? (2) What
               criteria has FEMA used to recommend to the President that a disaster
               declaration is warranted for PA, and to what extent does FEMA assess
               whether an effective response to a disaster is beyond the capabilities of
               state and local governments? (3) How does FEMA determine whether a
               cost share adjustment recommendation for PA is warranted and how
               much additional federal assistance did jurisdictions receive during fiscal
               years 2004 through 2011 because of cost share adjustments? (4) What
               were FEMA’s administrative cost percentages for disaster declarations
               during fiscal years 2004 through 2011, how have they changed over time,
               and what actions is FEMA taking, if any, to reduce the costs of delivering
               disaster assistance funds?

               To determine how many disaster declaration requests FEMA received,
               how many were approved, for which types of disasters, and how much
               the associated obligations were from the DRF, we obtained data for each
               disaster declaration approved during fiscal years 2004 through 2011. 1 We
               focused on this time frame because it contains the most current data for
               disaster declarations. It also comprises the time period after FEMA was
               merged into the newly created DHS, on March 1, 2003, and predates
               Hurricane Katrina in 2005. We focused primarily on fiscal years 2004
               through 2011; however, to provide historical context and to compare
               results across similar periods, we also reviewed obligations data from
               fiscal years 1989 through 2011. In addition, to provide further historical
               perspective, we include information on the number of disaster
               declarations by jurisdiction from the first presidential disaster declaration
               in fiscal year 1953 through fiscal year 2011 in appendix I. FEMA provided
               data to us from its National Emergency Management Information System
               (NEMIS) and Integrated Financial Management Information System
               (IFMIS). To determine whether the data were reliable, we reviewed the
               data that FEMA officials provided and discussed data quality control
               procedures to ensure the integrity of the data with them. We determined



               1
                The obligations data were current as of January 31, 2012. When finalizing our study, we
               received projected obligations data from FEMA that included updated actual obligations as
               of April 30, 2012. However, we did not receive detailed actual obligations data that would
               have allowed us to update all of our actual obligations data analysis, so this analysis
               remained as of January 31, 2012.




               Page 65                                           GAO-12-838 Federal Disaster Assistance
Appendix II: Objectives, Scope, and
Methodology




that the data we used from these systems were sufficiently reliable for the
purposes of this report.

To determine the criteria that FEMA used to recommend to the President
that a disaster declaration was warranted for PA, and to what extent
FEMA assessed whether an effective response to a disaster was beyond
the capabilities of jurisdictions, such as state and local governments, we
examined FEMA policies, regulations, and other documents related to the
disaster declarations process. To determine the probability of a disaster
declaration request being approved for PA if the Preliminary Damage
Assessments (PDA) met or exceeded the PA per capita indicator, we
obtained and analyzed data on FEMA’s PDAs from fiscal years 2008
through 2011. For this analysis, we used 4 years of data (fiscal years
2008 through 2011) instead of 8 years of data (fiscal years 2004 through
2011) that we used for other analyses because FEMA did not have data
for fiscal years 2004 through 2007 in an electronic format. We believe that
our analysis of 4 years of data is sufficient for purposes of this report.
Specifically, we analyzed 246 disaster declarations during fiscal years
2008 through 2011, and excluded 293 declarations during fiscal years
2004 through 2007 because FEMA had readily available data only for
PDAs for fiscal years 2008 through 2011. For each of the 246 disaster
declarations, we reviewed the PDAs to determine whether a state
requested PA, whether the President approved it, and the extent to which
the PA damage estimate exceeded the PA per capita indicator.

In addition, we conducted an analysis to determine whether disaster
declarations from 2004 through 2011 would have met the PA per capita
indicator if adjusted for the change in per capita personal income since
1986. Our analysis included FEMA’s projected obligations as of April 30,
2012, for only those 508 disaster declarations that had received PA and
had been declared during fiscal years 2004 through 2011. We did not
analyze the 31 disaster declarations that only received IA. We analyzed
obligations instead of PDA damage estimates for PA because FEMA
officials stated that estimating the damage from a disaster is sometimes
stopped when the estimate equals or exceeds the PA per capita indicator.
Therefore, we concluded that conducting the analysis using projected
obligations would be more accurate than using incomplete PDA damage
estimates for PA. In addition, we separately analyzed actual obligations
for 144 closed disaster declarations because closed declarations would
be either complete or very close to being complete. To determine whether
the data were reliable, we reviewed the data that FEMA officials provided
and discussed data quality control procedures to ensure the integrity of



Page 66                                   GAO-12-838 Federal Disaster Assistance
Appendix II: Objectives, Scope, and
Methodology




the data with them. We determined that the data we used from PDAs
were sufficiently reliable for the purposes of this report.

To determine how FEMA evaluated whether a cost share adjustment
recommendation was warranted and how much additional federal
assistance states received during fiscal years 2004 through 2011
because of the adjustments, we obtained and reviewed relevant laws,
regulations, and policies. We also obtained and analyzed the cost share
adjustments and types requested, approved, and denied during fiscal
years 2004 through 2011. In addition, we interviewed FEMA officials who
process cost share adjustment requests and participate in making
recommendations to the President as to whether the requests should be
approved or denied. We also reviewed internal control standards for the
federal government related to ensuring management directives are
carried out and that actions are taken to address risks. 2 To determine
whether the data were reliable, we reviewed the data that FEMA officials
provided and discussed data quality control procedures to ensure the
integrity of the data with them. We determined that the cost share
adjustment data were sufficiently reliable for the purposes of this report.

To determine FEMA’s administrative cost percentages for disaster
declarations, we obtained DRF actual obligations, projected obligations,
and related data for all 1,221 disaster declarations from fiscal years 1989
through 2011. While the focus of our objective was fiscal years 2004
through 2011, we obtained obligations data back to fiscal year 1989 to
assess potential trends over time because FEMA only maintains
obligations data since then. To assess FEMA’s current practices, we
compared FEMA’s administrative cost percentages for disaster
declarations during fiscal years 2004 through 2011 with FEMA’s target
ranges for administrative cost percentages. To identify potential trends
over time, we compared FEMA’s administrative cost percentages during
fiscal years 1989 through 2003 with FEMA’s administrative cost
percentages during fiscal years 2004 through 2011 and with FEMA’s
target ranges. According to FEMA officials, administrative costs are
typically higher in the early months of a declaration, typically decreasing
as the declaration matures (that is, as labor-intensive response activities
decline). In order to ensure the results of both analyses were not skewed



2
 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999).




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Appendix II: Objectives, Scope, and
Methodology




by declarations that had not yet matured and whose administrative costs
were high, we analyzed actual administrative costs for disaster
declarations that were closed as of April 30, 2012. For declarations that
were still open as of April 30, 2012, we analyzed actual obligations as of
April 30, 2012, plus the amount that FEMA projected to obligate in the
future until the declarations are eventually closed. To determine whether
the data were reliable, we reviewed the data that FEMA officials provided
and discussed data quality control procedures to ensure the integrity of
the data with them. We determined that the DRF data were sufficiently
reliable for the purposes of this report. To determine what actions FEMA
is taking, if any, to reduce the costs of delivering disaster assistance, we
interviewed FEMA officials and reviewed relevant policies, documents,
and briefings.

In addition to conducting interviews with officials in FEMA headquarters
for all four objectives, we conducted site visits to two FEMA regions—
Regions IV and VI, which had the highest total obligations during fiscal
years 2004 through 2011. The regional administrative offices were
located in Atlanta, Georgia, and Denton, Texas, respectively. At each
region, we interviewed the Regional or Deputy Administrator and various
other personnel. In addition, we visited the emergency management
agencies for Georgia and Oklahoma—one state within each of the two
FEMA regions. We selected the two state emergency management
agencies—Georgia and Oklahoma—based on their respective proximity
to FEMA’s regional offices, their high level of experience with disasters,
and their availability for a visit during September 2011. We wanted to
avoid states that were actively responding to a disaster during that time.
While the information we obtained on these site visits is not generalizable,
the visits provided important insights into the disaster declaration process.

We conducted this performance audit from July 2011 through September
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




Page 68                                    GAO-12-838 Federal Disaster Assistance
Appendix III: Total Public Assistance
               Appendix III: Total Public Assistance Indicator
               Amount for Fiscal Year 2012, by Jurisdiction



Indicator Amount for Fiscal Year 2012, by
Jurisdiction
               FEMA uses a PA per capita indicator to help determine a jurisdiction’s
               need for federal assistance in the wake of a disaster. Table 15 shows
               how the indicator is calculated for each jurisdiction. FEMA multiplies the
               2010 population for each jurisdiction by the PA per capita indicator for the
               fiscal year in which the disaster occurs. In fiscal year 2012, the PA per
               capita indicator is $1.35. The results of these calculations are the total
               indicator amounts in table 15. If the PA damage estimate exceeds the
               total indicator amount, a jurisdiction is likely to receive a major disaster
               declaration.

               Table 15: 2010 Population and Total PA Per Capita Indicator Amount for Fiscal Year
               2012, by Jurisdiction

                                                                                   Total indicator amount
                                                                                                          a
               Jurisdiction                             2010 population       (based on $1.35 per capita)
               California                                        37,253,956                    $50,292,841
               Texas                                             25,145,561                     33,946,507
               New York                                          19,378,102                     26,160,438
               Florida                                           18,801,310                     25,381,769
               Illinois                                          12,830,632                     17,321,353
               Pennsylvania                                      12,702,379                     17,148,212
               Ohio                                              11,536,504                     15,574,280
               Michigan                                           9,883,640                     13,342,914
               Georgia                                            9,687,653                     13,078,332
               North Carolina                                     9,535,483                     12,872,902
               New Jersey                                         8,791,894                     11,869,057
               Virginia                                           8,001,024                     10,801,382
               Washington                                         6,724,540                      9,078,129
               Massachusetts                                      6,547,629                      $,839,299
               Indiana                                            6,483,802                      8,753,133
               Arizona                                            6,392,017                      8,629,223
               Tennessee                                          6,346,105                      8,567,242
               Missouri                                           5,988,927                      8,085,051
               Maryland                                           5,773,552                      7,794,295
               Wisconsin                                          5,686,986                      7,677,431
               Minnesota                                          5,303,925                      7,160,299
               Colorado                                           5,029,196                      6,789,415
               Alabama                                            4,779,736                      6,452,644
               South Carolina                                     4,625,364                      6,244,241
               Louisiana                                          4,533,372                      6,120,052




               Page 69                                                GAO-12-838 Federal Disaster Assistance
Appendix III: Total Public Assistance Indicator
Amount for Fiscal Year 2012, by Jurisdiction




                                                                            Total indicator amount
                                                                                                   a
    Jurisdiction                                     2010 population   (based on $1.35 per capita)
    Kentucky                                               4,339,367                      5,858,145
    Oregon                                                 3,831,074                      5,171,950
    Oklahoma                                               3,751,351                      5,064,324
    Puerto Rico                                            3,725,789                      5,029,815
    Connecticut                                            3,574,097                      4,825,031
    Iowa                                                   3,046,355                      4,112,579
    Mississippi                                            2,967,297                      4,005,851
    Arkansas                                               2,915,918                      3,936,489
    Kansas                                                 2,853,118                      3,851,709
    Utah                                                   2,763,885                      3,731,245
    Nevada                                                 2,700,551                      3,645,744
    New Mexico                                             2,059,179                      2,779,892
    West Virginia                                          1,852,994                      2,501,542
    Nebraska                                               1,826,341                      2,465,560
    Idaho                                                  1,567,582                      2,116,236
    Hawaii                                                 1,360,301                      1,836,406
    Maine                                                  1,328,361                      1,793,287
    New Hampshire                                          1,316,470                      1,777,235
    Rhode Island                                           1,052,567                      1,420,965
    Montana                                                 989,415                       1,335,710
    Delaware                                                897,934                       1,212,211
    South Dakota                                            814,180                       1,099,143
    Alaska                                                  710,231                        958,812a
    North Dakota                                            672,591                        907,998a
    Vermont                                                 625,741                        844,750a
    District of Columbia                                    601,723                        812,326a
    Wyoming                                                 563,626                        760,895a
    Guam                                                    159,358                        215,133a
    Federated States of Micronesia                          107,154                       144,658a,b
    Virgin Islands                                          106,405                        143,647a
    Marshall Islands                                         65,859                        88,910a,b
    American Samoa                                           55,519                          74,951a
    Northern Mariana Islands                                 53,883                        $72,742a
Source: GAO analysis of U.S. Census and FEMA data.
a
 FEMA has established a minimum threshold of $1 million in PA damages per disaster in the belief
that even the lowest-population states can cover this level of PA damage. 44 C.F.R. § 206.48(a)(1).
b
 The 2010 populations for the Federated States of Micronesia and the Marshall Islands are estimates
from the U. S. Census Bureau.




Page 70                                                        GAO-12-838 Federal Disaster Assistance
Appendix IV: Description of Three
               Appendix IV: Description of Three Approaches
               to Measure a Jurisdiction’s Fiscal Capacity



Approaches to Measure a Jurisdiction’s Fiscal
Capacity
               The Stafford Act requires that a governor’s request for a major disaster
               declaration be based on a finding that the disaster is of such severity and
               magnitude that an effective response is beyond the capabilities of the
               jurisdiction and that federal assistance is necessary. 1 In the wake of a
               disaster, FEMA prepares dollar estimates of the damage to public
               infrastructure incurred in an area that would be eligible for federal
               assistance under a federal major disaster declaration. Currently the key
               metric for determining eligibility for federal disaster assistance is a “per
               capita indicator,” which, since 1999, has been adjusted annually for
               inflation. For 2012, the indicator is $1.35 per capita (that is, total
               estimated damages eligible for federal PA divided by the jurisdiction’s
               population equals $1.35 or more). Damage estimates in excess of this
               number typically result in FEMA recommending that the President issue a
               major disaster declaration, which makes jurisdictions eligible for federal
               reimbursement of at least 75 percent of certain repair and replacement
               costs. The per capita indicator FEMA currently uses is not a measure of a
               jurisdiction’s fiscal capacity to address the damages caused by a disaster.
               Rather, there is an assumption that generally jurisdictions are unable
               without federal major disaster assistance to rectify damages that equal or
               exceed $1.35 per capita.

               Jurisdictions’ abilities to finance their own disaster relief and recovery
               vary with their fiscal capacity, among other factors. A jurisdiction’s fiscal
               capacity is defined as the ability of a government to raise revenue from its
               own sources, by taxes, license fees, user charges, and public enterprises,
               among other devices. Fiscal capacity is usually expressed as a
               percentage of the national average for the 50 states plus the District of
               Columbia, in the form of an index number. For example, if a jurisdiction’s
               capacity is equal to 100 percent or 90 percent of the national average, its
               index number would be 100 or 90, respectively. In general, the ability of
               jurisdictions to pay for public services increases with the size of their
               economies. The simplest application of fiscal capacity criteria to disaster
               assistance is an adjustment of the per capita indicator for every
               jurisdiction. “Richer” jurisdictions—those above the national average—
               would have a higher level, reflecting their greater ability to pay, while
               “poorer” jurisdictions would have a lower level. The fiscal capacity index
               could be converted into a percentage (for instance, 110 = 110 percent or
               90 = 90 percent) and applied to each jurisdiction’s per capita indicator



               1
               42 U.S.C. § 5170.




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Appendix IV: Description of Three Approaches
to Measure a Jurisdiction’s Fiscal Capacity




($1.35 times the population) to get an adjusted indicator. For example, a
jurisdiction with a population of 10 million would have a per capita
indicator of $13.5 million dollars ($1.35 times its 10 million population). If
the jurisdiction’s capacity index was 100 percent, its capacity threshold
would be the same as the current indicator—$13.5 million. However, if the
jurisdiction’s fiscal capacity index was 110 (indicating a fiscal capacity
index 10 percent above the national average), its damage threshold
would be $14.85 million—$13.5 million plus 10 percent of $13.5 million.
The variation in the results could be narrowed, if desired, by setting upper
and lower limits to the adjustments, among other possible methods.
However, adjusting the per capita indicator according to a jurisdiction’s
fiscal capacity would not necessarily reduce total federal spending. It is
possible that disaster assistance adjusted by fiscal capacity, and focused
on jurisdictions with below-average fiscal capacity, could increase total
federal spending. How total annual spending is affected would depend on
the specific disasters taking place for that year, as well as the affected
jurisdictions.

In addition to the theoretical aspects of comparing and contrasting various
measurements of fiscal capacity, there are other matters to consider. 2
Specifically, there are certain attributes that are desirable in a fiscal
capacity measure. These attributes could help FEMA determine the
extent to which the agency could use measurements of jurisdiction fiscal
capacity when determining a jurisdiction’s eligibility for federal assistance.
These attributes include the following:

Simple and easy to calculate: For political acceptance and analytical
ease, the methodology of measurement should be as simple as possible.
For practicality and transparency, a measure should be easy and
inexpensive to calculate.

Convenient, available, and timely: Ideally the data for a measure would
be routinely collected, checked, and published by a government agency
on a timely basis. For example, the measurement should be possible on
an annual basis with as little a time lag as possible, in order to provide the
most timely indicator of jurisdictions’ capacities.



2
 Stephen M. Barro, “Macroeconomic Versus RTS Measures of Fiscal Capacity:
Theoretical Foundations and Implications for Canada,” Institute of Intergovernmental
Relations, Working Paper, (Queens University, 2002), 1-5.




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                  Appendix IV: Description of Three Approaches
                  to Measure a Jurisdiction’s Fiscal Capacity




                  Comprehensive: A measure should be comprehensive with respect to the
                  implementation of its approach. Incompleteness could bias results.

                  Analytically sound: The principal analytical choice in capacity
                  measurement is between economic measures that aim for
                  comprehensive measurement free of double-counting, and tax base
                  measures that in some way take account of governments’ choices in how
                  to tax. 3 There is debate among economists as to which type of
                  measurement (economic or tax base) is more analytically sound.

                  Does not affect or is not affected by any individual jurisdiction’s fiscal
                  choices: Capacity measures should not be affected by or affect a
                  jurisdiction’s actual fiscal choices, in terms of what to tax, how to tax, or
                  how much to tax. In principle a government’s fiscal behavior could affect
                  its own tax bases. No capacity measure makes any adjustments based
                  on the impact of taxes on a state’s economy because of the extreme
                  difficulty of arriving at a simple method of making such adjustment that
                  would earn political consensus.


Fiscal Capacity   The three fiscal capacity measures discussed below provide various
Measurements      methods that can be used to determine a jurisdiction’s fiscal capacity.
                  Each of these measures has benefits and potential shortcomings
                  regarding the extent to which they measure a jurisdiction’s fiscal capacity.

                  State personal income (PCI): As a measurement of a jurisdiction’s fiscal
                  capacity, state personal income is simple, available, and timely. The
                  personal income of all residents of a jurisdiction consists of labor
                  earnings, proprietors’ and partnership income, rent, interest, dividends,
                  and transfers (public cash benefits). It is the most commonly used
                  measure in the United States for federal grants. PCI is simple and familiar
                  to most people, and it is routinely calculated and published by the federal
                  government on a jurisdiction-by-jurisdiction basis. More local measures of
                  personal income are less comprehensive, for lack of data. Some
                  jurisdictions may choose to tax only part of income, or not to tax it at all.



                  3
                   The three fiscal measures we discuss in this appendix are economic measures.
                  However, in addition to TTR, personal resident income, and gross state product,
                  Representative Tax System (RTS) is a tax base measure. We did not include RTS as a
                  potential means for FEMA to assess fiscal capacity because it is not currently calculated
                  for U.S. jurisdictions, although it could be should FEMA choose to do so.




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to Measure a Jurisdiction’s Fiscal Capacity




PCI aims to be a comprehensive measure of residents’ personal income,
without regard to how they are taxed.

PCI is not a comprehensive measure of a jurisdiction’s fiscal capacity and
is affected by a jurisdiction’s fiscal choices. The principal shortcoming of
PCI is its failure to reflect a jurisdiction’s ability to raise tax revenue from
nonresidents, also known as tax exporting. For example, a jurisdiction
government may tax nonresident commuters, property owners, shoppers,
and tourists. The ability to export taxes varies sharply across jurisdictions.
Also, data on one component of personal income, accrued capital gains,
is not available. More generally, changes in asset values are not captured
in any fiscal capacity measures, because of lack of data. Another missing
element in PCI is the net income of a jurisdiction’s government
enterprises. An example is state-owned liquor stores, whose profits never
pass through private hands. Another example is royalties paid to
governments by extractive industries, such as oil, gas, and uranium.
These scenarios amount to income received by a jurisdiction’s residents,
through their government. In one state (Alaska), a share of such
revenue—a “bonus” payment—is paid directly to state residents, which
would appear as part of PCI. To a limited extent, PCI is biased to the
extent to which a jurisdiction government finances transfer payments with
taxes on income, since this income is counted twice, once by source and
the second time by receipt.

Gross state product (GSP): As a measure of a jurisdiction’s fiscal
capacity, GSP is simple, available, timely, and not affected by a
jurisdiction’s fiscal choices. Also called gross domestic product by state,
GSP consists of all income “produced” in a state. It includes labor
earnings of those who work in a jurisdiction, irrespective of their
residence, the net income of business firms operating in a jurisdiction,
indirect business taxes paid to the governments of the jurisdiction, and
the output of the public sector (in national income accounting,
government output is valued at cost). GSP partially captures the ability of
a jurisdiction to export taxes, since it includes income received by
nonresidents and by the residents’ own governments directly. As with
PCI, with the benefit of government publication, the data are available on
a timely basis and are easily converted into a fiscal capacity index. It is
less affected by a jurisdiction’s fiscal choices than PCI because it does
not double-count income.

Similar to PCI, GSP is not a comprehensive measure of a jurisdiction’s
fiscal capacity. More specifically, PCI includes income received by a
jurisdiction’s residents, but not income generated in a jurisdiction but


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Appendix IV: Description of Three Approaches
to Measure a Jurisdiction’s Fiscal Capacity




received by nonresidents. GSP does not include income received by a
jurisdiction’s residents that originates elsewhere.

Total taxable resources (TTR): As a measure of a jurisdiction’s fiscal
capacity, TTR is comprehensive, available, and not affected by
jurisdictions’ fiscal choices. According to the Department of the Treasury
(Treasury), the object of TTR is to capture the unduplicated sum of PCI
and GSP that is susceptible to taxation by a jurisdiction’s government. 4
By this means the entirety of income potentially exposed to taxation is
measured. In practice the calculation is relatively simple. A jurisdiction’s
GSP is supplemented with income received by jurisdiction residents that
originated in other jurisdictions. This would include the labor earnings of
residents who commute to jobs in other jurisdictions, and the capital
income (mainly interest, dividends, rent, and capital gains) of all
jurisdiction residents due to asset holdings in other jurisdictions. It
excludes indirect business taxes paid to the federal government (such as
the payroll tax and federal excises). TTR is used in two grant programs—
the Department of Health and Human Services’ Substance Abuse and
Mental Health Services Administration’s block grant program and
Community Mental Health Service—and is calculated by Treasury. 5

TTR is a complex measure of a jurisdiction’s fiscal capacity and is not as
timely as other measures. A crude measure of TTR is obtained by simply
averaging a jurisdiction’s PCI and GSP. This was done for official TTR
estimates between 1992 and 1997. Subsequently the calculations were
based more closely on the original conceptual framework for TTR. At
present there is a 2-year lag in the publication of TTR estimates by
Treasury. As of May of 2012, the most recent year available is 2009. The
primary reason for the delay in publishing TTR estimates is the need to
wait for federal excise tax revenues and nontax liabilities, and federal
civilian enterprise surpluses, to become available. These data are
provided to Treasury in August or September for the year ending 20
months prior. According to the Chief of the Regional Product Branch,
Regional Product Division, at the Bureau of Economic Analysis, it could


4
 U.S. Department of the Treasury, Office of Economic Policy, Treasury Methodology for
Estimating Total Taxable Resources (TTR), (Washington, D.C.: revised November 2002).
http://www.treasury.gov/resource-center/economic-policy/taxable-resources/Pages/Total-
Taxable-Resources.aspx.
5
 Michael L. Compson, “Historical Estimates of Total Taxable Resources for U.S. States,
1981-2000,” The Journal of Federalism, 33:2 (Spring 2003), 55-72.




Page 75                                           GAO-12-838 Federal Disaster Assistance
                          Appendix IV: Description of Three Approaches
                          to Measure a Jurisdiction’s Fiscal Capacity




                          be possible to speed up the availability of TTR by 2 or 3 months. In
                          addition, TTR is less transparent than PCI or GSP. It relies on
                          approximations of capital income (dividends, interest, and rent), since
                          such quantities are not reported by place of origination. It does not
                          discriminate among income flows according to the degree of susceptibility
                          to taxation.


Examples of Fiscal        Each of these three measures of a jurisdiction’s fiscal capacity to respond
Measures Applied to the   to and recover from a disaster without federal assistance has its
Per Capita Indicator      limitations and can affect each jurisdiction somewhat differently,
                          compared with using the current $1.35 per capita damage estimate
                          indicator. FEMA’s current per capita indicator is simple and easy to
                          understand, but it is not a measure of a jurisdiction’s fiscal capacity. Nor
                          does FEMA have a useful measure of a jurisdiction’s response
                          capabilities. All current measures of those capabilities are jurisdictions’
                          self-reported data without reference to common metrics for assessing
                          capability. Because FEMA’s per capita indicator does not
                          comprehensively assess a jurisdiction’s response and recovery
                          capabilities, including a jurisdiction’s fiscal capacity, some combination of
                          these measures could provide a more robust and useful assessment of a
                          jurisdiction’s capability to respond to and recover from a disaster without
                          federal assistance, or with minimal federal assistance. This could include
                          exploring the usefulness of supplementing the current damage indicator
                          (which does not fully reflect changes in inflation since its adoption in
                          1986) with other measures of a jurisdiction’s fiscal capacity and response
                          capability.

                          For example, one potential alternative methodology could involve
                          adjusting the per capita indicator for each jurisdiction based on a measure
                          of jurisdiction fiscal capacity. If FEMA were to adjust the PA indicator for
                          inflation, the adjusted PA indicator for fiscal year 2011 would be $2.07.
                          Beginning with the adjusted PA indicator of $2.07, each jurisdiction’s PA
                          indicator could then be adjusted based on that jurisdiction’s fiscal
                          capacity. For example, if the $2.07 base were adjusted for “jurisdiction A,”
                          which has a 2009 TTR index of 71.8, jurisdiction A’s PA indicator would
                          be $1.49. If the $2.07 base were adjusted for “jurisdiction B’s” 2009 TTR
                          index of 149, jurisdiction B’s PA indicator would be $3.08 (see table16).
                          The variation in jurisdiction A’s $1.49 indicator and jurisdiction B’s $3.08
                          indicator represents the difference in the two jurisdiction’s fiscal capacities
                          in accordance with each jurisdiction’s TTR. In making any changes or
                          enhancements to the methods used to assess a jurisdiction’s fiscal
                          capacity, policymakers would need to consider the relative priority of key


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Appendix IV: Description of Three Approaches
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attributes, as previously discussed, and the benefits and costs of
developing and implementing such changes.

Table 16: PA Indicator Adjusted by Jurisdiction for 2009 TTR

                                    PA indicator                                                      PA indicator as
                                    adjusted for                                                         adjusted for
                                     inflation, as            Jurisdictions’ 2009                  jurisdiction’s TTR
                                  recommended                      index for TTR                fiscal capacity index
 Jurisdiction A                                 $2.07                                71.8                      $1.49
 Jurisdiction B                                 $2.07                              149.0                       $3.08
Source: GAO analysis of Department of Commerce, Department of Treasury, and Bureau of Labor Statistics data.




Page 77                                                                 GAO-12-838 Federal Disaster Assistance
Appendix V: Comments from the Department
             Appendix V: Comments from the Department
             of Homeland Security



of Homeland Security




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of Homeland Security




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of Homeland Security




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of Homeland Security




Page 81                                    GAO-12-838 Federal Disaster Assistance
Appendix VI: GAO Contact and Staff
                  Appendix VI: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  William O. Jenkins Jr., (202) 512-8777 or JenkinsWO@gao.gov
GAO Contact
                  In addition to the contact named above, Leyla Kazaz (Assistant Director),
Staff             David Alexander, Lydia Araya, Peter DelToro, Joseph E. Dewechter,
Acknowledgments   Jeffrey Fiore, Carol Henn, R. Denton Herring, Tracey King, Linda Miller,
                  Max Sawicky, and Jim Ungvarsky made key contributions to this report.




(440978)
                  Page 82                                  GAO-12-838 Federal Disaster Assistance
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