oversight

Disaster Assistance: Guidance Needed for FEMA's 'Fast Track' Housing Assistance Process

Published by the Government Accountability Office on 1997-10-17.

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

                United States General Accounting Office

GAO             Report to the Chairman, Committee on
                Commerce, Science, and Transportation,
                U. S. Senate


October 1997
                DISASTER
                ASSISTANCE
                Guidance Needed for
                FEMA’s “Fast Track”
                Housing Assistance
                Process




GAO/RCED-98-1
          United States
GAO       General Accounting Office
          Washington, D.C. 20548

          Resources, Community, and
          Economic Development Division

          B-276359

          October 17, 1997

          The Honorable John McCain
          Chairman, Committee on Commerce,
            Science, and Transportation
          United States Senate

          Dear Mr. Chairman:

          On January 17, 1994, an earthquake that became the nation’s costliest
          natural disaster struck the Northridge area of metropolitan Los Angeles,
          California. The estimated cost of the disaster is approximately $30 billion
          and rising, of which over $7 billion will be borne by the Federal
          Emergency Management Agency (FEMA). Approximately 12 percent, or
          about $143 million, of FEMA’s temporary housing assistance to about
          400,000 households was distributed through an expedited process known
          as “Fast Track.” The Fast Track process differed from the regular
          temporary housing assistance process in that for applications from certain
          designated zone improvement plan (ZIP) code areas, FEMA issued checks to
          the applicants before conducting physical inspections of the applicants’
          residences to verify their eligibility. Fast Track recipients were advised
          that in cashing the check, they were confirming that their application was
          correct and that they would use the money only for disaster-related
          emergency housing needs, rent for alternative housing, or repairs. FEMA
          spent another $32 million to provide crisis-counseling services for persons
          suffering earthquake-related mental stresses.

          In response to your February 14, 1997 request, we examined several issues
          pertaining to FEMA’s use of the Fast Track process and FEMA’s
          crisis-counseling assistance to victims of the Northridge earthquake.
          Specifically, we agreed to examine

      •   the authority and rationale for the Fast Track process;
      •   what FEMA’s experience with the Fast Track process in Northridge was and
          whether the process was influenced by the Office of Inspector General’s
          (OIG) recommendations;
      •   the advantages and disadvantages of the Fast Track process, including the
          amounts of payments that FEMA designated for recovery and subsequently
          recovered and the reasons for ineligibility; and
      •   FEMA’s criteria and process for providing crisis-counseling funds and
          ensuring their use for authorized purposes.




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                   In addition, you asked us to provide information on other federal disaster
                   assistance programs that assist victims prior to determining an applicant’s
                   eligibility. Appendix I provides information on the programs we identified.



                   The legislation authorizing FEMA’s temporary housing assistance—the
Results in Brief   Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L.
                   93-288), as amended—has no explicit provision for a process such as Fast
                   Track. However, as FEMA concluded, the act gives the agency wide latitude
                   in providing expeditious assistance for disaster victims. We agree that
                   FEMA is authorized to use the process. FEMA’s rationale in implementing the
                   Fast Track process following the Northridge earthquake was to assist the
                   largest number of disaster victims in the shortest possible amount of time.
                   Within the first week of the earthquake, over 27,000 disaster victims were
                   living in or outside of shelters, and FEMA’s application centers were
                   overwhelmed by crowds of applicants.

                   In implementing the process, FEMA experienced operational difficulties
                   including the inconsistent application of criteria when designating ZIP
                   codes; some ZIP code areas that met FEMA’s criteria were omitted (i.e.,
                   applications from residents of those areas were not processed under Fast
                   Track) while some ZIP code areas that did not meet the criteria were
                   included. Because of these errors, not all Northridge victims in similar
                   circumstances were treated the same. FEMA also experienced constraints
                   with the computer software used to process applications. These
                   difficulties, combined with an enormous volume of applications for
                   assistance and FEMA’s decisions on applicants’ eligibility for payments
                   made under both the regular and Fast Track processes, may have
                   contributed to FEMA’s provision of housing assistance beyond actual needs.
                   FEMA has not developed written guidance for implementing the Fast Track
                   process, even though FEMA’s Inspector General recommended establishing
                   formal procedures after the Fast Track process’s first (and only other) use
                   in 1992. FEMA officials could not explain why the agency had not
                   implemented the Inspector General’s recommendation but observed that
                   there had been uncertainty about whether the process would ever be used
                   again. Well-planned and well-documented guidance could help FEMA avoid
                   operational difficulties in implementing a future Fast Track process and
                   help avoid ineligible payments.

                   A principal advantage of the Fast Track process is that it provides
                   temporary housing assistance grants for some applicants more quickly



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             than would the regular process (which requires an on-site inspection prior
             to the receipt of assistance). Also, according to FEMA officials involved in
             the response to the Northridge earthquake, Fast Track provided an
             intangible benefit by demonstrating to the victims and the general public
             that help was actually on the way. A principal disadvantage to Fast Track
             is the relative loss of control over the disbursement of federal funds and
             the subsequent need to recover ineligible payments. FEMA ultimately
             designated for recovery 6.7 percent ($9.6 million of $143 million) of the
             temporary housing assistance provided under the Fast Track process for
             3,856 Northridge earthquake applicants, primarily because (1) the damage
             to the applicants’ primary residence was not sufficient to qualify the
             applicants for the assistance, (2) the applicants received insurance
             payments for the damage, or (3) the damaged residence was not the
             applicants’ primary residence. As of September 1997, FEMA had recovered
             about $4 million, and recovery efforts were underway for most of the rest.

             FEMA provides crisis-counseling funding for screening and diagnosing
             individuals, short-term crisis counseling, community outreach,
             consultation, and education services. To receive grants, states must
             demonstrate that existing state and local resources are inadequate and
             provide estimates of the number of individuals affected, the types of
             assistance needed, and the estimated cost of assistance. For approved
             applications for the immediate services program, which generally covers
             the first 60 days after a disaster, the FEMA Regional Director or designee
             makes funds available to the state for disbursement to its department of
             mental health. Under the regular program, FEMA’s headquarters transfers
             funds to the Department of Health and Human Services’ Center for Mental
             Health Services for distribution through the grants management process.
             FEMA, the Center for Mental Health Services, and the state’s department of
             mental health all participate in site visits and monitor programmatic,
             accounting, and financial management of the programs. Detailed periodic
             and final reports on activities and costs are submitted to the Center and to
             FEMA. For funds provided after the Northridge earthquake, FEMA officials
             said that they visited all service providers and that Center officials
             evaluated their accounting procedures and controls and found them to be
             satisfactory.


             FEMA assists with providing a large range of services for disaster victims,
Background   including mass care (such as food and emergency medical care) in the




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                         immediate aftermath of disasters. FEMA also pays for temporary housing
                         and crisis counseling for eligible victims.1


Temporary Housing        Authorized by section 408 of the Stafford Act, as amended, FEMA’s
Assistance               temporary housing grants cover the costs of renting alternate housing
                         when victims’ primary predisaster residence is rendered uninhabitable or
                         inaccessible, and/or quickly repairing damages to make the residence
                         habitable. Until they receive such assistance, disaster victims may be
                         forced to stay with friends or relatives or in temporary mass care shelters.
                         The intent of the assistance is to get victims out of mass care shelters or
                         other temporary dwellings—not to restore their residence to its
                         predisaster condition. (Federal assistance for permanent restoration
                         generally comes in the form of a Small Business Administration disaster
                         loan.)

                         A FEMA inspector typically visits each applicant’s residence, confirms
                         whether or not it is uninhabitable or inaccessible, and obtains insurance
                         information and documentation verifying that the dwelling is the
                         applicant’s primary residence.2 Applicants whose residence is in need of
                         repairs costing less than $100 are not eligible; the maximum grant amount
                         is $10,000.


The Fast Track Process   The Fast Track process differed from the regular temporary housing
                         assistance process in that for applications from certain designated ZIP code
                         areas, the physical inspection of the applicant’s residence and the
                         determination of eligibility were made after FEMA issued a check to the
                         applicant.

                         For the Northridge earthquake, FEMA utilized earthquake shaking
                         intensities as criteria for designating certain geographic areas as eligible
                         for Fast Track housing assistance. FEMA used the “Modified Mercalli
                         Intensity” (MMI) scale, which measures the intensity of earthquake shaking
                         on a scale of 1 to 12—the more severe the shaking, the higher the number.
                         The most severe shaking in Northridge was at level 10; FEMA decided to use
                         the Fast Track process for applicants residing in each ZIP code area with

                         1
                          In addition, FEMA’s public assistance program funds the repair of eligible public and private nonprofit
                         facilities, such as roads, government buildings, utilities, and hospitals that are damaged in natural
                         disasters. See Disaster Assistance: Improvements Needed in Determining Eligibility for Public
                         Assistance (GAO/RCED-96-113, May 23, 1996).
                         2
                          FEMA’s program guidance provides for exceptions to the inspection requirement when a blanket
                         eligibility determination can be made, such as when a tornado destroys an entire block of houses.



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                    an MMI level of 8 or above. The degree of damage associated with this level
                    includes the partial collapse of ordinary-quality masonry; the fall of
                    chimneys, factory stacks, monuments, towers, and elevated tanks; and the
                    movement of frame houses on their foundation if not bolted down. (A
                    description of MMI intensity levels is in app. II.)

                    FEMA officials selected a total of 68 ZIP codes to designate as eligible
                    geographic areas with MMI readings of level 8 or higher. This designation
                    covered an approximately 40-by-40 mile area from Santa Monica and
                    Burbank westward into Simi Valley. FEMA initiated the Fast Track process
                    for Northridge victims in the 68 designated ZIP code areas on January 23,
                    1994; limited it to applicants in only three ZIP code areas on February 3, on
                    the basis of an analysis of the degree of damage reported by field
                    inspectors and the temporary housing applications received; and
                    discontinued it altogether on April 7. About 47,000 housing assistance
                    applicants—out of about 409,000—received a check under the Fast Track
                    process.

                    Prior to the Northridge earthquake, FEMA used the Fast Track process for
                    only one disaster—Hurricane Andrew in 1992. As with Northridge, FEMA
                    used the Fast Track process for applicants in ZIP code areas believed to
                    have sustained the greatest damage.


Crisis-Counseling   As authorized by section 416 of the Stafford Act, FEMA provides funding for
Assistance          professional counseling services for disaster workers and victims.
                    Individuals are eligible for crisis-counseling services if they were residents
                    of the designated disaster area or were located in the area at the time of
                    the disaster and are experiencing mental health problems caused or
                    aggravated by the disaster. States must apply for crisis-counseling funds.
                    The magnitude of need is based primarily on a formula that takes into
                    account such factors as the numbers of fatalities, injuries, homes
                    destroyed or damaged, and unemployment resulting from the disaster.
                    FEMA makes the funds available to the Center for Mental Health Services
                    (CMHS), which awards grants to applicant states (typically to the state’s
                    department of mental health). The state, in turn, disburses funds to local
                    governments, which fund the activities of private organizations actually
                    providing the counseling services. In the case of the Northridge
                    earthquake, California’s Department of Mental Health was the grantee,
                    while Los Angeles and Ventura counties contracted with 51 service
                    providers and oversaw their day-to-day activity. Crisis-counseling grants
                    totaled $36 million, of which $32 million was actually expended.



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                       The Fast Track process is not specifically authorized in the Stafford Act. In
FEMA Has the Legal     a letter to us setting forth FEMA’s determination of the legality of the
Authority to           process, FEMA’s Acting General Counsel stated that FEMA believes that the
Implement Fast Track   legal authority to process temporary housing assistance in this manner is
                       implicit in the Stafford Act and its implementing regulations. (The letter
                       appears in app. III). Sections 302(a) and 302(b) of the Stafford Act, 42
                       U.S.C. § 5143, state that the President shall, immediately upon his major
                       disaster declaration, appoint a Federal Coordinating Officer to operate in
                       the affected area and

                       “take such other action, consistent with authority delegated to him by the President, and
                       consistent with the provision of this Act, as he may deem necessary to assist local citizens
                       and public officials in promptly obtaining assistance . . . .”


                       The statute describes those persons eligible and the circumstances under
                       which they are eligible to receive temporary housing aid. Under section
                       408(a), FEMA may help those “persons who, as a result of a major disaster,
                       require temporary housing.” (42 U.S.C. § 5174(a)(1)(A)). Assistance can be
                       provided for up to 18 months from the time of the disaster declaration
                       unless an extension is granted because of extraordinary circumstances.
                       (42 U.S.C § 5174(a)(3)). No statutory provision, however, requires that
                       FEMA verify that the applicants have met all relevant conditions of
                       eligibility prior to providing temporary housing assistance. FEMA has the
                       discretion under the Stafford Act to set the methods it will use to verify
                       eligibility. Thus, we agree with FEMA that it has the authority under the
                       Stafford Act to implement the Fast Track process.

                       FEMA also noted that the purpose of the temporary housing regulations is
                       to assist “the greatest number of people in the shortest possible time.” (44
                       C.F.R. § 206.101(b)). In the case of Northridge, FEMA concluded that the
                       Fast Track process was essential to meet the needs of disaster victims
                       expeditiously. The enormous number of disaster victims and their
                       psychological and physical need for immediate assistance provided the
                       rationale for implementing the Fast Track process. After the earthquake,
                       FEMA’s on-site disaster application centers and teleregistration center were
                       overwhelmed by the unprecedented number of applicants. Because the
                       application centers received more applicants than could be
                       accommodated, FEMA gave applicants appointments to come back at a
                       later date. Even so, by the end of the first month after the disaster, nearly




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                      360,000 applications had been filed, and the backlog of housing
                      inspections had grown to about 189,000 residences.3

                      Within the first week of the January 17, 1994 disaster, over 27,000 disaster
                      victims were living in or outside of shelters, and appointments to submit
                      applications for assistance were not available until mid-March. Police
                      intervention was required at application centers to help contain unruly
                      crowds. On January 21, 4 days after the disaster, the President visited the
                      disaster scene and, noting the long lines of applicants, decided that the
                      situation was unacceptable. As a result, FEMA instituted the Fast Track
                      process to provide residents with checks quickly so they could find better
                      accommodations.


                      In implementing the Fast Track process following the Northridge
Northridge            earthquake, FEMA experienced operational difficulties, including the
Experience Suggests   inconsistent application of criteria when designating areas with the
Need for Fast Track   greatest estimated damage and constraints in its application processing
                      software. These difficulties, combined with the logistical challenge of
Guidance              processing an enormous volume of applications for assistance, as well as
                      FEMA’s decisions on the eligibility of housing assistance under both the
                      regular and Fast Track processes, may have contributed to FEMA’s
                      providing housing assistance in excess of actual needs.

                      The decision to use the Fast Track process is ultimately a subjective
                      judgment—specifically, that the benefit of rushing aid to certain disaster
                      victims outweighs the risk of disbursing funds to ineligible recipients or in
                      excess of recipients’ needs. Hence, a large-scale future disaster could lead
                      FEMA to use a Fast Track approach again. FEMA has not developed written
                      guidance for implementing the Fast Track process, even though FEMA’s
                      Inspector General recommended establishing formal procedures after its
                      first use in 1992. Furthermore, FEMA officials acknowledge that the
                      guidance for the temporary housing assistance program needs revision.
                      Well-planned and well-documented guidance could help FEMA avoid
                      operational difficulties in implementing a future Fast Track process and
                      help avoid ineligible payments.




                      3
                       After the Northridge earthquake, 681,765 total disaster assistance applications were filed, while
                      304,369 and 219,825 total applications were filed after Hurricanes Hugo and Andrew (two other
                      “catastrophic” disasters), respectively.



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FEMA Experienced Errors       One of the first implementation tasks facing FEMA was designating the
in Designating ZIP Code       areas whose inhabitants would be “Fast Tracked.” There were no
Areas                         preexisting criteria for FEMA to draw on. FEMA worked with the state of
                              California and California Institute of Technology seismologists to develop
                              MMI maps of the Northridge area. According to a FEMA official involved in
                              identifying ZIP code areas, the process was undertaken on a “crash” basis,
                              possibly resulting in some errors in the selection of ZIP codes. Our analysis
                              shows that some ZIP code areas that met FEMA’s criteria were omitted (i.e.,
                              applications from residents of those areas were not processed under Fast
                              Track) and vice versa. Because of these errors, not all Northridge victims
                              in similar circumstances were treated the same.

                              According to a FEMA official who was involved in the process, FEMA
                              ultimately designated 68 ZIP code areas whose inhabitants’ applications for
                              temporary housing assistance would be processed under Fast Track. We
                              traced the 68 ZIP codes—which designated eligible geographic areas with
                              MMI readings of 8 or higher—to an MMI map identical to the one used by
                              FEMA officials. We found that 56 of the 68 ZIP codes met FEMA’s announced
                              criteria—they were located in areas that had experienced earthquake
                              shaking intensities of 8, 9, or 10 on the MMI scale. As shown on the map in
                              figure 1, we also found the following:

                          •   Nine of the 68 ZIP codes did not meet the criteria because they were
                              located in areas that had experienced earthquake shaking intensities of
                              less than 8 on the MMI scale. (These nine ZIP codes account for about
                              4 percent of the payments that FEMA designated for recovery.)
                          •   Three of the designated ZIP codes did not appear on the map.
                          •   Twelve ZIP codes that met FEMA’s criteria were not designated for the Fast
                              Track process.




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Figure 1: ZIP Code Areas Designated for the Fast Track Process




                                Simi Valley

                                                                  Northridge


                                                                                                    Burbank




                                                                                              Beverly Hills
                                         Malibu Beach
                                                                                                                 Properly designated

                                                                                                                 Erroneously included
                                                       Santa Monica
                                                                                                                 Erroneously excluded




                                              Note: Circle is 20 miles from epicenter of the earthquake.




                                              Including ZIP codes that did not meet the criteria means that residents
                                              within those ZIP code areas inappropriately received Fast Track funding,
                                              and the reverse was likely true. Because we were unable to locate three of



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                        the designated ZIP codes on the map, we do not know whether they met
                        the selection criteria. However, according to data compiled by FEMA’s OIG,
                        no temporary housing assistance payments were made under the Fast
                        Track process to applicants from these three ZIP code areas.

                        According to a FEMA official who participated in the process, his notes
                        suggest that the officials debated which MMI shaking intensities should be
                        included— specifically, whether to include areas with an MMI level of 7.
                        The official noted that some of the designation errors might have occurred
                        because the final list of ZIP codes that was distributed to the federal
                        certifying officers handling applications from Northridge victims was
                        hand-written and therefore difficult to read.

                        Data developed by FEMA’s Inspector General indicated that Fast Track
                        payments were made to 110 ZIP code areas, as opposed to the 68 that FEMA
                        designated.4 FEMA officials reviewed their records for a few of the ZIP codes
                        and found that some of the discrepancy may be due to errors made in
                        entering addresses into the database or that some recipients’ post-disaster
                        mailing address was different from the address of the damaged residence.

                        We analyzed the payments that FEMA made to ineligible disaster victims to
                        determine the extent to which they might be attributable to the inclusion
                        of ZIP codes that did not meet FEMA’s Fast Track criteria. We found that
                        payments made to those ZIP code areas had a negligible effect on the
                        ineligible payments, accounting for about 4 percent of the total amount.
                        (App. IV provides a more detailed explanation of our analysis.)


Computer Software       In accordance with the sequence of events under the regular temporary
Required Modification   housing assistance program, FEMA’s automated system for processing
                        applications required FEMA to enter the date of the inspection of an
                        applicant’s residence. The date was required before the system would
                        process the application further for the issuance of a check. Because FEMA
                        intended that applicants under the Fast Track process receive a check
                        before an inspection occurred, FEMA officials had to develop a way of
                        overriding the automated system. While FEMA was able to accomplish this,
                        the resulting records are not entirely reliable because of inconsistent data.
                        Fictitious inspection dates were initially entered to circumvent the
                        control, but the computer program was subsequently modified. Also,
                        according to FEMA officials, personnel handled data entries in different

                        4
                        Letter dated March 27, 1997, from FEMA’s Inspector General to Senator John McCain. The Inspector
                        General analyzed a list of all Fast Track recipients.



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                         ways; some made adjusting entries while others eliminated the initial
                         entry.

                         FEMA was able to overcome this operational problem in order to distribute
                         checks to recipients. However, through improved planning in designing a
                         system to accommodate the Fast Track process, such operational
                         difficulties might be avoided without creating unreliable records. In
                         commenting on a draft of this report, FEMA stated that the agency has been
                         developing a new automated processing system that would include the
                         ability to handle a Fast Track procedure.


FEMA Allowed More Than   FEMA normally limits housing assistance to one application and grant per
One Payment Per          household. In its efforts to expedite assistance to disaster victims at
Household                Northridge, FEMA lacked the normal controls used to verify duplication
                         among applicants and/or households. Because of this, FEMA provided more
                         than one payment for some households. FEMA decided that, to treat all
                         Northridge disaster victims equitably, it would allow this exception to its
                         normal policy. An April 19, 1994, memorandum from FEMA’s headquarters
                         clarifying the policy for the Northridge earthquake stated that

                         “largely because of the fast track system, multiple housing checks have been provided to
                         individual household members. . . . In dealing with this situation, the following policies
                         should apply: 1. The initial increment of assistance should be provided to all applicants
                         without regard to their membership in a household. This decision is based on the need to
                         treat all applicants in like situations similarly.”


                         According to some FEMA officials involved in processing Northridge
                         applications, the large volume of applications, combined with limitations
                         in the capability of FEMA’s application-processing computer system, made
                         it difficult, if not impossible, to search the applicant database for potential
                         duplicate names and/or addresses. This may have contributed to situations
                         in which more than one applicant per household received a check. While
                         physical inspections may have identified—and thus
                         prevented—duplication for applicants under the regular program, the
                         inspections would not have done so for Fast Track applicants because
                         inspections of their residences were performed after they received checks.
                         A memorandum laying out general procedures for the Fast Track process
                         from the Northridge Human Services Officer to all certifying officers
                         stated that disbursements would be based on the applicant’s letter and ZIP
                         code and that as a result, items such as proper name spelling, address, fair




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                           market rent, and ownership could not be determined until the inspection
                           was completed.


FEMA Did Not Attempt       FEMA’s temporary housing grantees generally receive funds to cover either
Recovery of Payments       the cost of renting alternate housing or to cover the estimated cost of
Exceeding Repair Costs     minor repairs needed to quickly make the residence habitable. The
                           decision of whether a residence can be made quickly habitable and the
                           estimated cost is based on a physical inspection. For Fast Track
                           applicants, FEMA was unable to make this distinction because payment
                           preceded the physical inspection. Therefore, FEMA provided all Fast Track
                           applicants with rental assistance funds—2 months’ rental assistance to
                           renters and 3 months’ rental assistance to owners. For owners, the amount
                           averaged about $3,400, on the basis of the average fair market rental of a
                           residence for 3 months. Along with the check, FEMA included an insert
                           stating that

                           “This is in response to your application for FEMA disaster housing assistance. By cashing the
                           enclosed check, you are confirming that the information is true and correct and are
                           agreeing to use these funds only to meet your disaster-related emergency housing needs,
                           rent for alternative housing, or repairs to your home. You will soon receive a letter from
                           FEMA with more specific information concerning this assistance.”



                           The physical inspection of a Fast Track applicant’s residence could have
                           indicated that repairs costing less than $3,400 could have made the
                           residence habitable. According to FEMA officials, such applicants were
                           allowed to keep the full amount even if it was more than the cost of
                           repairs. Because it did not seek the recovery of amounts exceeding the
                           estimated costs of repairs needed to make a residence habitable, FEMA
                           potentially provided some Fast Track applicants with payments in excess
                           of their needs.


FEMA Did Not Limit         FEMA’s Instruction 8620.11, Policies and Guidance for the Administration of
Assistance to Applicants   the Temporary Housing Assistance Program, and current regulations on
With Uninhabitable         the housing program, 44 C.F.R. 206.101, provide that an applicant’s
                           residence must be uninhabitable or inaccessible in order for the applicant
Residences                 to be eligible for temporary housing assistance. However, FEMA provided
                           assistance for Northridge earthquake applicants whose residences were
                           not uninhabitable or inaccessible. A February 4, 1994, joint state/FEMA
                           news release stated that




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                        “some people receiving housing checks mistakenly believe that they are not eligible for
                        housing assistance because they’re still able to live in their homes. ’In many cases the
                        housing checks which applicants receive can be used to repair quake damage, including
                        damage to chimneys, windows, doors and walls, even though the applicants weren’t forced
                        to move out of the home . . . .’”


                        In a 1996 report on FEMA’s housing program, the Inspector General
                        reported that FEMA had also not limited temporary housing assistance to
                        applicants with uninhabitable residences in other disasters. The Inspector
                        General concluded that FEMA was using the temporary housing assistance
                        program in a manner inconsistent with the Stafford Act.5 Specifically, the
                        Inspector General found that rather than make a habitability
                        determination for damaged residences, FEMA “accepts damages over $100
                        as evidence of an uninhabitable house,” and that FEMA was also paying for
                        repairs apparently not related to making the residence habitable, such as
                        carpet replacement, rain gutters, drywall finishing, wall tiles, and paint.
                        The Inspector General recommended that in the future, FEMA limit grants
                        to uninhabitable housing and for only those repairs necessary to make the
                        housing habitable. According to a FEMA official, the agency has adopted
                        this recommendation.


Payments Exceeding      In the case of the Northridge earthquake, FEMA provided 408,663 applicants
Actual Needs May Have   with $1.2 billion in housing assistance. In applying for federal assistance
Been Significant        shortly after the earthquake, Los Angeles and Ventura counties reported a
                        combined total of 9,919 housing units destroyed, 15,096 suffering major
                        damage, and 29,927 suffering minor damage, for a total of 54,968
                        residences suffering minor damage or worse. These numbers were based
                        on preliminary assessments. However, in a January 1995 report, the
                        Department of Housing and Urban Development (HUD) stated that a total
                        of 308,900 units of housing were damaged by the Northridge earthquake;
                        presumably, the damage in many cases did not render the residences
                        uninhabitable.

                        Because of limitations in FEMA’s computerized database, we were unable to
                        determine the frequency of the various deviations from normal policy
                        discussed above or the role they played in the apparent discrepancy
                        between housing grants and damaged housing units. FEMA program
                        officials explained that it is difficult to determine when a residence has
                        sustained enough damage to be uninhabitable and that the decisions are


                        5
                         Audit of Home Repair Grants Provided Through FEMA’s Disaster Housing Program, Office of
                        Inspector General, FEMA, H-07-96 (Sept. 20, 1996).



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                              subjective. They suggested that FEMA probably tended to err on the liberal
                              side, rather than risk denying aid to someone who needed it, when
                              damages of as little as $100 can be eligible under current policy.


Guidance for Fast Track       FEMA’s basic policy and procedures guidance for the regular temporary
Could Help Avoid              housing assistance program—FEMA Instruction 8620.11—does not address
Implementation                the Fast Track process. FEMA’s Inspector General recommended
                              establishing formal procedures for Fast Track after its first use in 1992.
Difficulties and Ineligible   Additionally, FEMA officials acknowledge that the May 12, 1987, guidance
Payments                      needs revision and is sometimes modified in actual practice. Well-planned
                              and well-documented guidance could help FEMA avoid operational
                              difficulties in implementing a future Fast Track process and help avoid
                              ineligible payments.

                              FEMA’s Office of Inspector General reviewed FEMA’s experience with Fast
                              Track after Hurricane Andrew.6 At that time, the Inspector General
                              recommended that FEMA develop formal procedures for the Fast Track
                              process. The recommendations included actions that would help
                              implement the Fast Track process and minimize the loss of federal funds
                              through overpayments. Specifically, the Inspector General recommended
                              that FEMA develop a Fast Track method with appropriate controls and limit
                              grants to 1 month’s rental assistance. (In the wake of Hurricane Andrew,
                              owners had received 4 months’ assistance under Fast Track, and renters
                              received 3 months’ assistance.)

                              FEMA  officials could not explain why the Inspector General’s
                              recommendations were not implemented. We note that because of major
                              reorganizations and personnel reassignments that took place between
                              Hurricane Andrew and the Northridge earthquake, many of FEMA’s
                              program staff who worked on Fast Track at Northridge were not involved
                              in the housing program at the time of Hurricane Andrew and were likely
                              unaware of the Inspector General’s recommendations. Also, several FEMA
                              officials had concerns about Fast Track’s vulnerability to fraud, waste, and
                              abuse; hence, formalizing guidance for the process may not have been a
                              priority because of the uncertainty about its future use. Several FEMA
                              program officials expressed concern that reducing Fast Track payments to
                              increments of 1 month’s rental assistance—as recommended by the
                              Inspector General—could increase FEMA’s administrative burden and



                              6
                               FEMA’s Disaster Management Process: A Performance Audit After Hurricane Andrew, Office of
                              Inspector General, FEMA, H-01-93 (Jan. 14, 1993).



                              Page 14                                                   GAO/RCED-98-1 Disaster Assistance
                         B-276359




                         congestion at the Disaster Application Centers, a major concern at
                         Northridge.

                         In the absence of preexisting guidance, officials implementing the Fast
                         Track process after the Northridge earthquake developed guidance on an
                         ad hoc basis, issuing several memorandums detailing how the process
                         would be implemented. Memorandums included information on the
                         amount of rental assistance to be provided, the designated ZIP code areas,
                         the modification of the computerized database to accommodate Fast
                         Track, and the handling of appeals and recertifications (the provision of
                         additional assistance to applicants beyond the initial time period).

                         We believe that if FEMA had followed the Inspector General’s
                         recommendations and developed written guidance for the Fast Track
                         process, some of the operational difficulties experienced following the
                         Northridge earthquake may have been avoided. For example, FEMA might
                         have identified and mitigated limitations in its application-processing
                         software or developed criteria for designating the areas for which the Fast
                         Track process might be used following different kinds of large-scale
                         disasters. Preexisting guidance would avoid the need to develop ad hoc
                         guidance in the crisis atmosphere that inevitably follows a large-scale
                         disaster.


                         A principal advantage of the Fast Track process is that it hastens the
Fast Track Represents    distribution of temporary housing assistance grants to some applicants,
Trade-Off Between        facilitating a move into alternate housing more quickly than would the
Expedited Assistance     regular process. Also, according to FEMA officials involved in the response
                         to the Northridge earthquake, Fast Track provided an intangible benefit by
and Control of Federal   demonstrating to the victims and the general public that help was actually
Funds                    on the way. A principal disadvantage is the relative loss of control over the
                         disbursement of federal funds and the subsequent need to recover
                         ineligible payments. FEMA determined that it should recover about
                         $9.6 million in Fast Track payments made to 3,856 Northridge earthquake
                         recipients. As of September 1997, FEMA had recovered $4 million, and
                         recovery efforts were under way for most of the rest.


Fast Track Expedited     The obvious benefit of implementing Fast Track is its potential to provide
Assistance               assistance for those victims most in need as quickly as possible—more
                         quickly than would be the case under the regular process. While it is
                         difficult, 3 years after the event, to assess how much Fast Track helped



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    disaster victims, FEMA program officials estimate that because of the
    catastrophic nature of the Northridge disaster, applicants would have
    received their checks several months later without the Fast Track process.
    A primary bottleneck in the regular housing assistance process was
    physical inspections. As of mid-February 1994, nearly 1,400 inspectors
    were inspecting approximately 8,000 residences a day; in spite of this, the
    backlog of inspections grew steadily, from 94,000 on February 7 to a peak
    of 189,000 on February 13. Fast Track applicants did not have to wait for
    FEMA to inspect their residences prior to receiving housing assistance
    checks.

    We were unable to determine—and therefore to compare—the average
    lengths of time actually taken to provide Northridge applicants with
    temporary housing assistance under either the Fast Track or regular
    process, because FEMA’s data systems cannot readily provide information
    on the average length of time taken to provide temporary housing
    assistance and because, according to FEMA officials, the accuracy of the
    database is questionable. According to a FEMA analysis of past large
    disasters—in which the regular process was used exclusively—the average
    time between a disaster victim’s application and the Treasury’s mailing of
    a temporary housing assistance check was 21 days, as follows:

•   Application taken and mailed to FEMA’s processing center for
    processing—2 days.
•   Application electronically transmitted to inspector and inspection
    made—9 days.
•   Processing center makes eligibility determination—2 days.
•   FEMA requests check issuance from Treasury Department; check is
    prepared and mailed—8 days.

    According to FEMA’s analysis, this time could be reduced to an average of
    10 days for Fast Track applicants because the inspection (usually requiring
    an average of 9 days) and the normal eligibility determination (usually
    requiring 2 days) would be performed after the check was issued—thus
    saving 11 of the 21 days. However, this analysis may not be comparable to
    the Northridge earthquake or other extraordinarily large disasters. The
    sheer volume of temporary housing assistance applications resulting from
    the Northridge earthquake dramatically exceeded any previous disaster. In
    the absence of the Fast Track process, this large volume could have
    caused the average time period for Northridge applicants to take more
    than 21 days; if so, then the time savings attributable to Fast Track would
    be even larger.



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                           B-276359




                           When scheduling inspections, FEMA did not distinguish between
                           applications from victims that had already received a check under the Fast
                           Track process and victims who had not. Because the non-Fast Track
                           applicants had to wait for the inspections of their residences before
                           receiving assistance, the Fast Track process did not shorten (or lengthen)
                           the time between the application and receipt of funds for these applicants.


Fast Track Provided        Most of the FEMA officials contacted for this review stated that expedited
Intangible Benefits        check issuance was not the primary benefit of Fast Track. Rather, they
                           cited the intangible benefits of assuring shaken disaster victims that help
                           was forthcoming and helping dissipate the threat of unruly crowds at
                           disaster application centers. According to the officials, the Fast Track
                           process enabled FEMA to tell victims and the media that checks were being
                           issued and sent—not that applications were simply being processed by a
                           government bureaucracy.

                           We did not talk directly to any of the Northridge earthquake victims to
                           identify the process’s advantages and disadvantages partly because of the
                           time lapse since they received assistance and their potential inability to
                           know whether they had been “Fast Tracked.” However, a FEMA customer
                           survey after the earthquake found a general sense of satisfaction with the
                           agency’s overall disaster response. Most respondents (63 percent) felt that
                           FEMA should have been able to get a check to them within 2 weeks, but
                           two-thirds of those felt that a check received during the second week was
                           sufficient. Seventy-four percent expressed satisfaction with how quickly
                           they received assistance. Slightly over half the respondents (56 percent)
                           felt that the amount of housing assistance they received was insufficient,
                           40 percent thought it was just right, and 4 percent said it was more than
                           enough.


Fast Track Provides Less   The primary concern with the Fast Track process cited by FEMA officials is
Control Over               the knowledge that some funding will be disbursed to ineligible recipients,
Disbursement of Federal    thus requiring subsequent recovery efforts. FEMA’s follow-up report on the
                           Northridge earthquake noted the trade-off between the cost of debt
Funds                      collection and the benefits of expedited assistance.

                           FEMA ultimately designated for recovery 6.7 percent ($9.6 million of
                           $143 million) of the temporary housing assistance provided under the Fast
                           Track process for 3,856 Northridge earthquake applicants. This figure
                           excludes some ineligible payments made to disaster victims who



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                              voluntarily returned the funds. (Because of limitations in its information
                              systems, FEMA could not readily provide the amount of payments
                              voluntarily returned.) However, as noted above, the Fast Track process
                              contributed to FEMA’s decision not to seek recovery of some payments that
                              normally would have been recovered. Therefore, a smaller proportion of
                              Northridge temporary housing assistance payments—including Fast Track
                              payments—were designated for recovery than otherwise.

Northridge Payments Were      FEMA identified three major reasons for recovering payments to ineligible
Designated for Recovery for   recipients: (1) damage to residences was insufficient to qualify them for
Three Primary Reasons         assistance, (2) the payee received duplicate damage reimbursements from
                              insurance payments, and (3) the damaged residence was not the
                              recipient’s primary residence.

                              The extent to which an applicant is found to be ineligible generally
                              appears as narrative from the inspector on the inspection form, such as a
                              comment that the damage was insufficient to make the residence
                              uninhabitable or that the applicant’s damages were covered by insurance.
                              Other ineligible applicants may be found during the processing of the
                              application, such as duplicate applications from the same individual or
                              duplicate applications for the same residence.

FEMA Has Recovered About 40   FEMA’s National Processing Services Center, which handles assistance to
Percent of the $9.6 Million   applicants, begins the recovery process by sending an ineligible recipient
Designated                    three letters—one every 30 days—requesting the return of disaster
                              funding. If there is no response from the recipient, the case is referred to
                              FEMA’s Disaster Finance Center, where penalties and interest begin to
                              accrue on the debt and three additional letters are sent over a period of 4
                              months. Subsequently, the cases are turned over to a collection agency
                              and the Treasury Department. Nearly all currently overdue Fast Track
                              payments from the Northridge disaster designated for recovery have
                              reached this point. The Treasury Department then begins garnishing the
                              debt from the recipient’s federal payments (e.g., social security checks,
                              income tax refunds, etc.). Table 1 shows the status of FEMA’s efforts to
                              recover the funds as of September 11, 1997.




                              Page 18                                        GAO/RCED-98-1 Disaster Assistance
                                         B-276359




Table 1: Status of Fast Track Payments
Designated for Recovery                  Description                                                                                Amount
                                         Recovered
                                             Paid in full to Disaster Finance Center                                             $2,305,255
                                             Payments received on payment plans                                                      667,803
                                                              a
                                             Other collections                                                                     1,006,549
                                         Subtotal                                                                                  3,979,607
                                         Under review                                                                                122,292
                                         Written off as uncollectible                                                                116,301
                                         Remainder
                                             Unpaid amounts on payment plans and                                                     500,311
                                             partial recoveries
                                             In default                                                                            4,826,324
                                             Bankruptcies                                                                             36,207
                                         Subtotal                                                                                  5,362,842
                                         Total                                                                                   $9,581,042
                                         a
                                          Includes partial collections from grantees found eligible for a portion of their grant, partial
                                         collections on bankruptcies, partial collections on hardship and other forgiveness requests, etc.
                                         FEMA estimates that a small percentage, perhaps 5 percent, represents a determination that the
                                         recipient was eligible, rather than a recovery of funds.

                                         Source: GAO’s analysis of FEMA’s Disaster Finance Center data.



                                         It should be noted that while the data in table 1 reflect only those
                                         payments made under the Fast Track process, the status of the funds may
                                         not reflect the fact that they were made under the Fast Track process. For
                                         example, the table includes some payments designated for recovery
                                         because the recipient later received insurance proceeds for the same
                                         needs. Such payments were made under both the regular housing
                                         assistance and Fast Track processes and designated for recovery
                                         regardless of whether they were made under the Fast Track process.
                                         Furthermore, the above figures represent only those recoveries made after
                                         the cases were turned over to the Disaster Finance Center for collection.
                                         As noted above, some recipients voluntarily returned payments; hence,
                                         there was no need for the Disaster Finance Center’s involvement. FEMA
                                         advised us that because the payment data in its database are unreliable, it
                                         could not provide reliable information on the amounts returned
                                         voluntarily.

                                         FEMA officials were reluctant to estimate the likelihood of additional
                                         recoveries because they have so little experience with the newly revised
                                         federal recovery process. Prior to Northridge, each FEMA region handled its



                                         Page 19                                                      GAO/RCED-98-1 Disaster Assistance
                        B-276359




                        own recovery efforts. At about the same time as Northridge, the recovery
                        process was centralized at FEMA’s Disaster Finance Center near Berryville,
                        Virginia. Also, until recently, FEMA referred its uncollectible debts to the
                        Internal Revenue Service only. Now they are referred to both the
                        Department of the Treasury for offset and the Department of Justice for
                        possible prosecution. FEMA officials said they do not yet have enough
                        experience on the Treasury Department’s success rate under the new
                        procedures and are also still in the process of learning what type of
                        information the Justice Department needs before it feels it has a
                        prosecutable case.

                        FEMA officials pointed out that it takes some time before the Processing
                        Center concludes that payments designated for recovery are bad debts and
                        turns them over to the Finance Center. Additionally, some time was
                        probably lost in transferring the collection responsibility from FEMA’s
                        regional offices to the Finance Center. Also, until recently, cases were
                        referred to the Internal Revenue Service only once a year, and it would
                        take upwards of another year before there was a tax return to apply the
                        debt against.


                        FEMA provides crisis-counseling funding for screening and diagnosing
FEMA Relies on          individuals, short-term crisis counseling, community outreach,
States to Ensure That   consultation, and education services. To receive grants, states must
Crisis-Counseling       demonstrate that existing state and local resources are inadequate and
                        provide estimates of the number of individuals affected, the types of
Funds Are Used          assistance needed, and their estimated costs. There are two
Appropriately           crisis-counseling programs—the immediate services program and the
                        regular program. For approved applications under the immediate services
                        program, the FEMA Regional Director or designee makes funds available to
                        the state for disbursement to its department of mental health. Under the
                        regular program, after approval, funds are transferred from FEMA’s
                        headquarters to CMHS for distribution through the grants management
                        process. While FEMA participates in site visits to service providers, agency
                        officials said that FEMA relies largely on CMHS and the states (the grantees)
                        to ensure that crisis-counseling funds are used and accounted for
                        appropriately. Detailed periodic and final reports on activities and costs
                        are submitted to CMHS and FEMA. For the distribution of funds provided
                        after the Northridge earthquake, FEMA officials said that they visited all
                        service providers, and CMHS officials evaluated the providers’ accounting
                        procedures and controls and found them to be satisfactory.




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Eligible Crisis-Counseling   FEMA’s crisis-counseling program is specifically authorized by section 416
Activities                   of the Stafford Act (42 U.S.C. 5183), which states that

                             “The President is authorized to provide professional counseling services, including
                             financial assistance to State or local agencies or private mental health organizations to
                             provide such services or training of disaster workers, to victims of major disasters in order
                             to relieve mental health problems caused or aggravated by such major disaster or its
                             aftermath.”


                             According to CMHS officials, much of the services provided are of an
                             outreach nature, such as visiting homes, schools, disaster application
                             centers, and senior citizens homes.

                             FEMA’s draft crisis-counseling program handbook, prepared as a reference
                             for state and local government, states that eligible activities under the
                             immediate services program include screening, diagnostic, and
                             crisis-counseling techniques, as well as outreach services, such as public
                             information and community networking, which can be applied to meet
                             mental health needs immediately after a major disaster. The immediate
                             services program runs for 60 days, but extensions, generally of 30 days,
                             may be granted if requested by the state. The regular program funds
                             further screening and diagnostic techniques, short-term crisis counseling,
                             community outreach, consultation, and education services that can be
                             applied to meet mental health needs precipitated by the disaster.
                             Prolonged psychotherapy measures are not eligible for program funding.
                             The regular program generally runs for up to 9 months following the
                             disaster.

                             Individuals are eligible for crisis-counseling services if they were residents
                             of the designated disaster area or were located in the area at the time of
                             the disaster and if they have problems of a psychological or emotional
                             nature caused or aggravated by the disaster. A state’s application for
                             crisis-counseling funds must certify that existing state and local resources
                             are inadequate and identify what the mental health needs are. Although it
                             can be adjusted upward or downward on the basis of specific information,
                             a formula has been developed to estimate the number of persons in need
                             of crisis-counseling assistance on the basis of past experience. The
                             formula takes into account the number of fatalities, injuries, homes
                             destroyed or damaged, and unemployment resulting from the disaster.


CMHS Awards and              As provided in FEMA’s instructions, FEMA makes the funds available to CMHS,
Oversees Grants              which awards crisis-counseling grants to states—normally to the state’s


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                       B-276359




                       department of mental health. The states, in turn, disburse funds to the
                       service providers and local government. CMHS provides the primary federal
                       oversight by reviewing and evaluating the application and reports
                       submitted by state agencies.

                       Both the application and periodic reporting processes for the regular
                       program are detailed and comprehensive. The application provides
                       estimates of the nature of the need, the number of people needing
                       assistance, and detailed cost estimates. The reports provide information
                       on, among other things, the numbers of people that received assistance,
                       the types of problems that victims experienced, and the actual program
                       costs incurred. In addition, FEMA’s instructions for the program provide
                       that CMHS and FEMA are to make a joint site visit early in the project to
                       ensure that the program is being administered according to the approved
                       application.

                       According to FEMA officials, other program controls include possible audits
                       performed under the Single Audit Act or by the Inspector General.


Crisis Counseling at   Following the Northridge earthquake, the state of California applied for
Northridge             $12.8 million in immediate-services-program funding for Los Angeles and
                       Ventura counties on January 31, 1994; FEMA approved the funding on
                       February 1. (In March, the state requested a funding increase to
                       $13.6 million, which FEMA approved.) The regular 9-month program was
                       approved for an additional $22.4 million. Together, the approved funding
                       totaled $36 million. Not all of the approved funds were used, however;
                       actual expenditures totaled about $32 million.

                       According to CMHS officials, they made more visits to Northridge than is
                       normally the case because of the relatively large amount of money
                       involved. CMHS and FEMA personnel both considered state and local
                       handling of the program to be exemplary. CMHS’ records indicate at least
                       four visits to state and local agencies and service providers by CMHS and
                       FEMA personnel, plus an additional visit by CMHS’ Acting Grants
                       Management Officer specifically to review the control and use of the
                       funds. The report on that particular visit stated in part that

                       “There did not appear to be any weaknesses in the relationship and flow of funds to and
                       from providers.”




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                      “At the Ventura County site, accounting records were reviewed to ensure compliance with
                      [federal] policies and procedures and allowability of expenditures. . . . No deficiencies were
                      observed in the accounting system or records reviewed.”


                      Similar comments were made regarding Los Angeles County.


                      The nature of the Fast Track process—providing disaster victims with
Conclusions           expedited disaster housing assistance without first verifying their
                      eligibility—represents a trade-off between the risk of delaying needed aid
                      to certain disaster victims and the risk of disbursing funds to ineligible
                      recipients or in excess of recipients’ needs. The absence of established
                      guidance required FEMA to implement the process on an ad hoc basis
                      following the Northridge earthquake in a crisis atmosphere less conducive
                      to the careful consideration of alternatives. A future large-scale disaster
                      could engender a need for the Fast Track process. If so, FEMA’s continuing
                      lack of guidance for implementing it could allow continued inequitable
                      treatment of disaster victims and the provision of more temporary housing
                      assistance than warranted. These problems could be lessened by
                      establishing formal guidance for the process and incorporating it into the
                      directive for the temporary housing assistance program.

                      FEMA’s Office of Inspector General reached similar conclusions in its
                      January 1993 report on Hurricane Andrew. Also, FEMA’s after-action report
                      on Northridge stated a need to develop guidance “that clarif[ies] assistance
                      requirements and conditions under which fast tracking will occur.”


                      The Director of FEMA should develop written guidance for the Fast Track
Recommendation        process that

                  •   specifies when and under what circumstances the process will be used
                      and
                  •   explains how to implement the process, including identifying eligible
                      victims and avoiding payments in excess of needs.


                      We provided FEMA with a draft copy of this report for review and comment.
Agency Comments       In its written comments, FEMA said that the report’s description of the
                      problems faced in providing assistance for the Northridge earthquake
                      victims was comprehensive and balanced. FEMA agreed with our
                      recommendation that guidance should be developed for the Fast Track




                      Page 23                                                  GAO/RCED-98-1 Disaster Assistance
              B-276359




              process, stating that the agency would establish formal guidance for the
              process and incorporate it into the guidance for the temporary housing
              program. FEMA also commented that in the last 3 years, it has strengthened
              its application registration and processing capabilities by building and
              refining three teleregistration and processing centers and has strengthened
              its inspection capability by establishing three national inspection service
              contracts to train inspectors. In addition, FEMA mentioned that it is raising
              the threshold at which it will consider implementing the Fast Track
              process. FEMA also suggested some revisions to our report for technical
              accuracy, which have been incorporated where appropriate. FEMA’s written
              comments are contained in appendix V.


              To examine the authority and rationale for the Fast Track process, we
Scope and     reviewed the legislation authorizing the disaster assistance housing
Methodology   program; the Stafford Act, as amended; and FEMA’s regulations for
              implementing temporary housing assistance (44 C.F.R. § 206.101). We also
              requested from FEMA an explanation of its legal basis to implement the
              process. (See app. III for FEMA’s written response.)

              To examine FEMA’s experience with the Fast Track process in Northridge,
              including whether FEMA adopted its Inspector General’s previous
              recommendations on the Fast Track process and how FEMA determined the
              geographic areas included in Fast Track, we interviewed FEMA officials
              from FEMA’s headquarters; FEMA’s OIG office; the Disaster Finance Center
              and the National Processing Services Center at Mt. Weather, Virginia; and
              the Disaster Field Office in Pasadena, California (which was responsible
              for administering FEMA’s assistance to Northridge earthquake victims). We
              reviewed OIG’s prior studies on the housing program, Fast Track, and
              crisis-counseling program, and information used by the Disaster Field
              Office in determining the geographic areas included in Fast Track. We also
              reviewed FEMA’s news releases, internal memorandums on implementing
              the Fast Track process, and post-disaster internal assessments.

              To examine the advantages and disadvantages of Fast Track, we
              interviewed officials from FEMA’s OIG; FEMA’s Response and Recovery
              Directorate, including the National Processing Services Center; the
              Disaster Finance Center; the Disaster Field Office in Pasadena; and the
              state of California’s Office of Emergency Services. We also reviewed press
              articles, FEMA’s news releases, internal memos on implementing the Fast
              Track process, post-disaster internal assessments, and a FEMA customer
              satisfaction survey conducted after the Northridge disaster. For



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information on the amounts of erroneous payments and subsequent
recoveries, we relied primarily on data that we were provided with from
the Disaster Finance Center’s database containing financial information on
recovery efforts. FEMA’s National Processing Services Center’s ADAMS
database contained information on additional recoveries, but we were
unable to extract this information from the ADAMS database. Our
information thus omits some early cases in which disaster victims
returned housing assistance funds. The archiving of paper documentation
of housing assistance applications, inspections, and grants to an unstaffed
repository near San Francisco limited our review to the information
contained in these databases. Additionally, both FEMA’s Inspector General
and program staff advised us that the ADAMS database was prone to
inaccuracies and had a tendency to “crash” or take inordinate amounts of
time when doing broad-based informational searches.

To examine FEMA’s criteria and process for using crisis-counseling funds
and ensuring that they were used for their authorized purpose, we
interviewed officials from FEMA’s headquarters (including OIG) and its
Pasadena field office; and the Department of Health and Human Services’
Center for Mental Health Studies. We examined numerous reports and
studies, including FEMA’s regulations and guidance for implementing the
crisis-counseling program; California’s crisis-counseling grant requests,
application materials, and internal program memos; and final program and
expenditure reports.

To identify whether other federal disaster assistance programs provide
assistance for victims prior to determining applicant eligibility, we
contacted program officials within the Departments of Housing and Urban
Development, Agriculture, Commerce, and Health and Human Services;
the Environmental Protection Agency; and the Small Business
Administration. Additionally, we reviewed FEMA’s catalog of federal
disaster assistance programs, drew on our prior work on HUD and
Agriculture disaster assistance programs, and reviewed guidance for
implementing their programs. We performed our work from March
through September 1997 in accordance with generally accepted
government auditing standards.


We are sending copies of this report to appropriate congressional
committees; the Director, FEMA; the Secretary of Health and Human
Services; the Secretary of Agriculture; the Secretary of HUD; and the




Page 25                                       GAO/RCED-98-1 Disaster Assistance
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Director, Office of Management and Budget. We will make copies available
to other interested parties upon request.

If you or your staff have any questions, please call me on (202) 512-7631.
Major contributors to this report are listed in appendix VI.

Sincerely yours,




Judy A. England-Joseph
Director, Housing and Community
  Development Issues




Page 26                                       GAO/RCED-98-1 Disaster Assistance
Page 27   GAO/RCED-98-1 Disaster Assistance
Contents



Letter                                                                  1


Appendix I                                                             30

Federal Programs
That Provide Disaster
Assistance Prior to
Verifying Applicant
Eligibility
Appendix II                                                            32

Definition of
Estimated Modified
Mercalli Earthquake
Intensities
Appendix III                                                           33

Letter From FEMA on
Legal Authority for
Fast Track Process
Appendix IV                                                            36

Analysis of Payments
Designated for
Recovery and Errors
in ZIP Code
Designation
Appendix V                                                             37
                        GAO’s Comments                                 42
Comments From the
Federal Emergency
Management Agency



                        Page 28          GAO/RCED-98-1 Disaster Assistance
                        Contents




Appendix VI                                                                                       43

Major Contributors to
This Report
Related GAO Products                                                                              44


Tables                  Table 1: Status of Fast Track Payments Designated for Recovery            19
                        Table IV.1: Payments Designated for Recovery by ZIP Code                  36

Figure                  Figure 1: ZIP Code Areas Designated for the Fast Track Process             9




                        Abbreviations

                        FEMA       Federal Emergency Management Agency
                        ZIP        zone improvement plan
                        OIG        Office of Inspector General
                        MMI        Modified Mercalli Intensity
                        CMHS       Center for Mental Health Services
                        HUD        Department of Housing and Urban Development


                        Page 29                                     GAO/RCED-98-1 Disaster Assistance
Appendix I

Federal Programs That Provide Disaster
Assistance Prior to Verifying Applicant
Eligibility
               We identified two federal programs, in addition to the Federal Emergency
               Management Agency’s (FEMA) Fast Track process for its temporary
               housing assistance program, that provide disaster assistance for
               individuals prior to verifying their eligibility: the Department of
               Agriculture’s disaster food stamp program and the Department of Housing
               and Urban Development’s (HUD) disaster housing program. Both programs
               may relax their initial requirements for verifying applicants’ eligibility,
               including income requirements, with subsequent reviews of applicants’
               files to identify eligibility problems and, if necessary, take recovery
               actions.1 In both cases—as with the Fast Track program—the intent is to
               get the assistance to victims as quickly as possible.

               Under the first program, the Department of Agriculture provides disaster
               food stamps for eligible victims. When a state applies for assistance, the
               Secretary of Agriculture may approve the issuance of food stamps for up
               to 30 days to qualifying households within the disaster area. The disaster
               food stamp program is different from Agriculture’s regular food stamp
               program in that certain criteria used in determining eligibility for the
               disaster program are relaxed when determining eligibility. For example,
               regular requirements to verify criteria such as residency in the disaster
               area (as opposed to the project area for the regular program), work
               requirements, household members’ social security number, and the
               availability of financial resources, are either not included as criteria or
               verified “where possible.” After the food stamps have been distributed, the
               applicants’ files are then reviewed to identify problems, such as whether
               applicants received duplicate benefits. The state agency in charge of
               disseminating the assistance conducts this post-disaster review of a
               10-percent sample of cases, up to a maximum sample size of 1,200 cases.

               The second program is administered by HUD, which provides housing
               assistance to disaster victims in the form of rental certificates or vouchers
               that are used by eligible families to rent housing units in privately owned
               rental housing. The assisted households may live in rental units of their
               choice as long as the units meet HUD’s standards for rent and quality.
               Generally, local public housing agencies administer the program,
               providing landlords with rent payments in compliance with a housing
               assistance payment contract between HUD and the owner. Two significant
               differences between the FEMA and HUD housing assistance programs are
               that the HUD program contains income eligibility requirements—the

               1
                According to a HUD official, as of mid-July 1997, the aftermaths of the Northridge earthquake and
               Hurricane Andrew were the only times that HUD relaxed its initial requirements for verifying the
               eligibility of applicants. HUD took this action so it could quickly meet the housing needs of an
               overwhelming number of disaster victims.



               Page 30                                                       GAO/RCED-98-1 Disaster Assistance
Appendix I
Federal Programs That Provide Disaster
Assistance Prior to Verifying Applicant
Eligibility




program is targeted only to very-low-income families—and it generally
provides the assistance over a longer period of time. HUD’s income
eligibility requirements are based on annual gross income and family size,
and the assistance is guaranteed for a period of up to 18 months.

While HUD normally verifies the income eligibility requirements of
applicants, for severe disasters such as the Northridge earthquake, the
Department allowed housing agencies to issue housing certificates without
first fully verifying the applicants’ income eligibility. For the Northridge
disaster, housing agencies were given 3 months from the time the
assistance was provided to verify a victim’s income eligibility. The victims
were notified that their assistance could be adjusted or terminated if the
deferred verification found that they were ineligible. In response to
congressional inquiries, HUD stated that delaying the verification helped
allow the Department to provide housing assistance for victims during the
first few days after the disaster.




Page 31                                       GAO/RCED-98-1 Disaster Assistance
Appendix II

Definition of Estimated Modified Mercalli
Earthquake Intensities


Intensity     Definition
12            Damage nearly total. Large rock masses displaced. Lines of sight and level distorted. Objects thrown into the air.
11            Railroad rails bent greatly. Underground pipelines completely out of service.
10            Most masonry and frame structures destroyed with their foundations. Some well-built wooden structures and bridges
              destroyed. Serious damage to dams, dikes, and embankments. Large landslides. Water thrown on banks of canals,
              rivers, lakes, etc. Sand and mud shifted horizontally on beaches and flat land. Railroad rails bent slightly.
9             General panic. Low-quality masonry destroyed; good-quality masonry seriously damaged. Frame structures, if not
              bolted, shifted off foundations. Frames racked. Serious damage to reservoirs. Underground pipes broken.
              Conspicuous cracks in ground. In alluviated areas, sand and mud ejected, earthquake fountains and sand craters.
8             Steering of motor cars affected. Damage to ordinary-quality masonry; partial collapse. Some damage to good-quality
              masonry but not to reinforced masonry. Fall of stucco and some masonry walls. Twisting/falling of chimneys, factory
              stacks, monuments, towers, elevated tanks. Frame houses moved on foundations if not bolted down; loose panel
              walls thrown out. Decayed piling broken off. Branches broken from trees. Changes in flow or temperature of springs
              and wells. Cracks in wet ground and on steep slopes.
7             Difficult to stand. Shaking noticed by drivers of motor cars. Hanging objects quiver. Furniture broken. Damage to
              low-quality masonry, including cracks. Weak chimneys broken at roof line. Fall of plaster, loose bricks, stones, tiles,
              cornices. Some cracks in ordinary-quality masonry. Waves on ponds; water turbid with mud. Small slides and caving
              in along sand or gravel banks. Large bells ring. Concrete irrigation ditches damaged.
6             Shaking felt by all. Many frightened and run outdoors. Persons walk unsteadily. Windows, dishes, glassware broken,
              knickknacks, books, etc., off shelves. Pictures fall off walls. Furniture moved or overturned. Weak plaster and
              low-quality masonry cracked. Small bells ring (church, school). Trees, bushes shaken (visible or heard to rustle).
5             Shaking felt outdoors. Duration estimated. Sleepers wakened. Liquids disturbed; some spilled. Small unstable objects
              displaced or upset. Doors swing open, close; shutters, pictures move. Pendulum clocks stop, start, change rate.
4             Hanging objects swing. Vibration like passing of heavy trucks; sensation of a jolt like a ball striking the walls. Standing
              motor cars rock. Windows, dishes, doors rattle. Glasses clink. Crockery clashes. In the upper range of Modified
              Mercalli Intensity (MMI) level 4, wooden walls and frames creak.
3             Shaking felt indoors. Hanging objects swing. Vibrations like passing of light trucks. Duration estimated. May not be
              recognized as earthquake.
2             Shaking felt by persons at rest, on upper floors, or favorably placed.
1             Shaking not felt. Marginal and long-period effects of large earthquakes.




                                           Page 32                                                  GAO/RCED-98-1 Disaster Assistance
Appendix III

Letter From FEMA on Legal Authority for
Fast Track Process




               Page 33          GAO/RCED-98-1 Disaster Assistance
Appendix III
Letter From FEMA on Legal Authority for
Fast Track Process




Page 34                                   GAO/RCED-98-1 Disaster Assistance
Appendix III
Letter From FEMA on Legal Authority for
Fast Track Process




Page 35                                   GAO/RCED-98-1 Disaster Assistance
Appendix IV

Analysis of Payments Designated for
Recovery and Errors in ZIP Code
Designation
                                      We analyzed the payments that FEMA designated for recovery to determine
                                      if they were concentrated in zone improvement plan (ZIP) codes that were
                                      erroneously designated for the Fast Track process. FEMA decided to use
                                      the Fast Track process for applicants residing in ZIP code areas with an MMI
                                      level of 8 or above. Our analysis showed that the inclusion of ZIP codes that
                                      did not meet this criterion in Fast Track did not have a significant effect on
                                      payments designated for recovery. Ninety-six percent of the
                                      disbursements still subject to recovery were made to applicants in ZIP
                                      codes of MMI intensities of at least 8. Table IV.1 shows, for the cases still
                                      subject to recovery, that 96 percent of the grants were in appropriately
                                      designated ZIP codes, as categorized by the MMI shaking intensity. (An
                                      analysis of the data developed for all grants designated for recovery and
                                      reported on by FEMA’s Inspector General gives much the same result.1

Table IV.1: Payments Designated for
Recovery by ZIP Code                                                    Dollar amount of
                                      MMI                                disbursements              Percentage
                                      shaking                             still subject to                   of             Cumulative
                                      intensity                                  recovery                 total             percentage
                                      Intensity 10                            $3,787,736                    62.6                  62.6
                                      Intensity 9                              1,071,240                    17.7                  80.3
                                      Intensity 8                                949,606                    15.7                  96.0
                                      Intensity 7                                131,485                      2.2                 98.2
                                      Intensity 6                                  92,833                     1.5                 99.7
                                      Less than intensity 6                         2,300                       •                 99.7
                                      Indeterminate                                10,851                     0.2                 99.9
                                      Total                                   $6,046,051                    99.9                  99.9a
                                      a
                                          Does not add because of rounding.

                                      Source: GAO’s analysis of FEMA’s March 1997 data.



                                      Thus, it appears that a more accurate designation of eligible ZIP codes
                                      would not have significantly reduced inappropriate disbursements at
                                      Northridge. Many of the errors may have been data entry errors rather
                                      than mistakes in selecting ZIP codes.




                                      1
                                       Letter dated March 27, 1997, from FEMA’s Inspector General to Senator John McCain.



                                      Page 36                                                     GAO/RCED-98-1 Disaster Assistance
Appendix V

Comments From the Federal Emergency
Management Agency

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




For GAO’s response to
FEMA’s comments 1-12,
see GAO’s comment 1.




Now on p. 2.




Now on p. 3.




Now on p. 3.




                             Page 37   GAO/RCED-98-1 Disaster Assistance
                Appendix V
                Comments From the Federal Emergency
                Management Agency




Now on p. 4.




Now on p. 5.




Now on p. 6.




Now on p. 7.




Now on p. 8.




Now on p. 10.




                Page 38                               GAO/RCED-98-1 Disaster Assistance
                 Appendix V
                 Comments From the Federal Emergency
                 Management Agency




Now on p. 11.




Now on p. 12.




Now on p. 12.




See comment 2.
Now on p. 13.




See comment 3.
Now on p. 19.



See comment 4.
Now on p. 20.




See comment 4.
Now on p. 21.




                 Page 39                               GAO/RCED-98-1 Disaster Assistance
                 Appendix V
                 Comments From the Federal Emergency
                 Management Agency




See comment 5.




                 Page 40                               GAO/RCED-98-1 Disaster Assistance
Appendix V
Comments From the Federal Emergency
Management Agency




Page 41                               GAO/RCED-98-1 Disaster Assistance
                 Appendix V
                 Comments From the Federal Emergency
                 Management Agency




                 The following are GAO’s comments on the Federal Emergency Management
                 Agency’s letter dated September 25, 1997.


                 1. GAO revised the report to address FEMA’s comments numbered 1 through
GAO’s Comments   12.

                 2. FEMA’s current policy does provide for the award of home repair funds
                 when damages are more than a $100 minimum. However, our report notes
                 that FEMA’s IG reported that FEMA was accepting damages of over $100 as
                 evidence of an uninhabitable house, and that FEMA was also paying for
                 repairs apparently not related to making the residence habitable, such as
                 carpet replacement, rain gutters, drywall finishing, wall tiles, and paint.
                 Because the statement is that of the FEMA IG, rather than GAO, we did not
                 change the language involved.

                 3. FEMA’s updated figures were confirmed with table 1.

                 4. GAO revised the report to address FEMA’s comment.

                 5. In the agency comment section on page 23 of the report, we note FEMA’s
                 comments about its recent efforts to strengthen its registration,
                 inspection, and processing capability for future disasters and to raise the
                 threshold at which FEMA would consider implementing the Fast Track
                 process.




                 Page 42                                       GAO/RCED-98-1 Disaster Assistance
Appendix VI

Major Contributors to This Report


                        Dave Wood, Assistant Director
Resources,              Paul Bryant, Senior Evaluator
Community, and          Tim Baden, Senior Evaluator
Economic
Development Division
                        John McGrail, Senior Attorney
Office of the General
Counsel




                        Page 43                         GAO/RCED-98-1 Disaster Assistance
Related GAO Products


              Disaster Assistance: Improvements Needed in Determining Eligibility for
              Public Assistance (GAO/RCED-96-113, May 23, 1996).

              Disaster Assistance: Information on Expenditures and Proposals to
              Improve Effectiveness and Reduce Future Costs (GAO/T-95-140, Mar. 16,
              1995).

              GAO   Work on Disaster Assistance (GAO/RCED-94-293R, Aug. 31, 1994).

              Los Angeles Earthquake: Opinions of Officials on Federal Impediments to
              Rebuilding (GAO/RCED-94-193, June 17, 1994).

              Disaster Management: Improving the Nation’s Response to Catastrophic
              Disasters (GAO/RCED-93-186, July 23, 1993).




(385669)      Page 44                                         GAO/RCED-98-1 Disaster Assistance
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