oversight

Disaster Assistance: FEMA Can Improve Its Cost-Effectiveness Determinations for Mitigation Grants

Published by the Government Accountability Office on 1999-08-04.

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

                    United States General Accounting Office

GAO                 Testimony
                    Before the Subcommittee on Oversight, Investigations,
                    and Emergency Management, Committee on
                    Transportation and Infrastructure, House of
                    Representatives

For Release
on Delivery
Expected at
                    DISASTER ASSISTANCE
2:00 p.m., EDT,
Wednesday
August 4, 1999
                    FEMA Can Improve Its
                    Cost-Effectiveness
                    Determinations for
                    Mitigation Grants
                    Statement of Stanley J. Czerwinski, Associate Director,
                    Housing and Community Development Issues,
                    Resources, Community, and Economic
                    Development Division




GAO/T-RCED-99-274
    Madam Chairman and Members of the Subcommittee:

    We are here today to discuss how the Federal Emergency Management
    Agency (FEMA), in conjunction with the states, ensures the
    cost-effectiveness of projects funded under the Hazard Mitigation Grant
    Program. We conducted this work at the request of this Subcommittee and
    of the Chairman and Ranking Minority Member of the Subcommittee on
    VA, HUD, and Independent Agencies, Senate Committee on
    Appropriations.

    FEMA  has made disaster mitigation a primary goal in its efforts to reduce
    the long-term costs of disasters. Under its Hazard Mitigation Grant
    Program, state and local projects to mitigate the impact of future disasters
    must be cost-effective, as required by the Robert T. Stafford Disaster
    Relief and Emergency Assistance Act. However, the act does not specify
    how to determine cost-effectiveness. According to the Office of
    Management and Budget’s (OMB) guidelines and FEMA’s guidance,
    benefit-cost analysis is the recommended approach for determining
    cost-effectiveness. Benefit-cost analysis is used to determine how the
    anticipated dollar savings gained through implementing a project
    compares with its cost. To be considered cost-effective under benefit-cost
    analysis, a project must return more money over its life than it cost.

    Our statement, which is based on the report we are issuing today,1
    provides (1) an overview of the approaches FEMA and the states use to
    ensure that the program’s grants are targeted to cost-effective mitigation
    projects and (2) our findings on whether the approaches ensure that the
    mitigation measures are cost-effective.

    In summary, we found the following:

•   The states and FEMA work together, using different approaches, to help
    ensure that hazard mitigation grants are awarded for cost-effective
    projects. The states in our review2 established procedures and priorities
    for identifying and selecting mitigation projects; however, not all of them
    conducted formal analyses of their projects’ cost-effectiveness before
    submitting applications for their projects to FEMA. FEMA uses benefit-cost

    1
    Disaster Assistance: Opportunities to Improve Cost-Effectiveness Determinations for Mitigation
    Grants, (GAO/RCED-99-236, Aug. 4, 1999).
    2
     We performed work in Florida and in FEMA’s Region 6 (for Arkansas, Louisiana, and Texas). We
    selected Florida primarily because of the state’s role in analyzing projects for cost-effectiveness. We
    selected the states in Region 6 because they have addressed a wide range of disasters and have thus
    gained varied experience in hazard mitigation.



    Page 1                                                                            GAO/T-RCED-99-274
                 analysis as its primary approach for ensuring that mitigation projects
                 submitted by the states are cost-effective. However, FEMA also exempts
                 certain types of hazard mitigation projects from benefit-cost analysis,
                 including projects that fund the removal of certain structures from
                 floodways and floodplains and mitigation planning efforts. FEMA officials
                 stress a need for flexibility in assessing these projects, suggesting that
                 benefit-cost analysis does not always apply to all mitigation projects,
                 because of difficulties in quantifying the benefits of some projects and the
                 time needed to gather data for conducting the analyses.
             •   Our review of $20.1 million in funding for hazard mitigation projects in
                 four states found that projects receiving the majority of this funding
                 ($11.7 million) were considered cost-effective on the basis of the
                 benefit-cost analyses conducted. However, the best available
                 information—such as flood damage information available from past
                 insurance claims and updated information on flood hazards—was not
                 always used in conducting the analyses. Our review also found that
                 projects receiving over one-third of the funding ($8.4 million) were exempt
                 from benefit-cost analysis, even though no established analytical basis
                 supported the exemption of the majority of these projects. FEMA officials
                 explained that some projects were difficult to evaluate against traditional
                 quantitative benefit-cost criteria and the exemptions were meant to speed
                 the delivery of grants to the states. Establishing the basis for exempting
                 these acquisition projects and reviewing the cost-effectiveness of other
                 exempt projects after they have been implemented would help FEMA better
                 ensure that these mitigation projects are cost-effective.


                 FEMA is working to reduce disaster costs through mitigation activities that
Background       reduce losses from disasters or prevent such losses from occurring. The
                 activities include providing grants and training for state and local
                 governments, funding for preventing damage to public facilities and for
                 purchasing structures in flood-prone areas, and federal flood insurance.
                 While a number of FEMA programs and initiatives provide funding for
                 hazard mitigation assistance, our review focused on hazard mitigation
                 measures funded under the Hazard Mitigation Grant Program.

                 Up to 15 percent of the total grant funds spent on a disaster may be spent
                 under the Hazard Mitigation Grant Program for hazard mitigation
                 measures. Subject to certain dollar limits, the Stafford Act generally allows
                 federal funding of up to 75 percent of the cost of hazard mitigation
                 measures within communities that have been affected by a disaster (the




                 Page 2                                                     GAO/T-RCED-99-274
                       states or local governments pay the remaining portion of the costs).3 As a
                       condition of receiving a program grant, a state must prepare an
                       administrative plan that establishes its procedures and priorities for
                       identifying and selecting mitigation projects. FEMA, however, has the final
                       authority to approve the funding for these projects. In fiscal year 1998,
                       FEMA approved and obligated over $415 million in Hazard Mitigation Grant
                       Program grants.


                       The states in our review established procedures and priorities for
The States and FEMA    identifying and selecting mitigation projects; however, not all of them
Work Together, Using   conducted formal analyses of their projects’ cost-effectiveness before
Different Approaches   submitting applications for their projects to FEMA. FEMA uses benefit-cost
                       analysis—an approach recommended by OMB—as its primary approach for
to Ensure That         ensuring that mitigation projects are cost-effective. However, FEMA also
Cost-Effective         exempts certain categories of projects from benefit-cost analysis for a
                       number of reasons, including the fact that some projects do not have
Projects Are Funded    proven or clearly measurable benefits.

                       The state administrative plans we reviewed exhibited a broad range of
                       approaches for identifying and selecting mitigation projects. In general,
                       the states screened their projects using various criteria, such as the overall
                       costs of the projects, their potential environmental effects, and their
                       cost-effectiveness. For example, Louisiana calculates an initial benefit-cost
                       ratio for projects, which it uses as a part of its criteria for evaluating and
                       scoring them. The state’s scoresheet consists of three
                       components—engineering (50 points), effectiveness (100 points), and
                       environmental impact (50 points)—which combine to produce a total
                       possible score of 200 points. Projects that receive the highest scores are
                       then given priority for funding.

                       Several FEMA officials noted that the agency is initiating changes to
                       improve the states’ planning efforts. For example, FEMA has developed a
                       checklist of elements for a model state plan, which will help the states
                       identify cost-effective projects. Among other things, the checklist
                       addresses whether the state plan ranks projects on the basis of the
                       “greatest opportunity for loss reduction.” FEMA uses benefit-cost analysis
                       to assess whether the expected costs of investing in a hazard mitigation


                       3
                         In an Oct. 10, 1997, Federal Register notice, FEMA announced that for disasters declared after Apr. 6,
                       1997, eligibility for program funding would be statewide rather than limited to the communities
                       affected by the disaster. FEMA was attempting to give the states enhanced flexibility in using the
                       funding for priority projects across the states and to close out the funding from older disasters as soon
                       as possible.



                       Page 3                                                                           GAO/T-RCED-99-274
                              project are justified. That is, to what extent will the project help avoid the
                              costs of damage expected from future disasters (the benefits)? FEMA
                              generally conducts the benefit-cost analysis for the projects that states
                              submit for approval.4 FEMA developed several computer programs (known
                              as modules) to simplify the calculations needed to determine a project’s
                              benefit-cost ratio. Each module employs established economic principles,
                              OMB guidance, and risk calculations to determine the benefits (discounted
                              to present-day dollars) of a proposed project over its expected life. FEMA
                              has provided these computer programs to regional, state, and local
                              mitigation staff and taught them how to use the modules.


Certain Categories of         Since September 1996, FEMA has exempted the following four categories of
Mitigation Projects Are       Hazard Mitigation Grant Program projects from benefit-cost analysis:
Exempted From
                          •   projects involving the purchase of substantially damaged structures in
Benefit-Cost Analysis         100-year floodplains;
                          •   up to 5 percent of the Hazard Mitigation Grant Program’s funding for a
                              variety of hazard mitigation measures, such as disaster warning systems or
                              the application of new, unproven mitigation techniques;
                          •   hazard mitigation planning projects for older disasters; and
                          •   an additional 5 percent of the Hazard Mitigation Grant Program’s funding
                              for tornado-related projects.

                              FEMA’s rationale for the exemptions varies, although the agency’s policy
                              guidance indicates that two of the exemptions were established because
                              some mitigation projects were often difficult to evaluate against traditional
                              quantitative criteria for determining cost-effectiveness and eligibility. FEMA
                              officials stress a need for flexibility in assessing these projects, suggesting
                              that benefit-cost analysis models do not always apply to all mitigation
                              projects. For example, the benefits of some projects are difficult to
                              quantify and compare with the projects’ costs. Thus, it may be difficult to
                              determine the benefits of an educational program that uses brochures to
                              inform the public about the risks of living in a floodplain, because it is
                              hard to predict the changes in public behavior that may occur when
                              people read the brochures. However, without any measurement and
                              subsequent comparison of a project’s expected benefits with its expected
                              costs, it is unclear what criteria the agency is using to determine
                              cost-effectiveness.


                              4
                               As participants in a pilot program called the “managing state concept,” three states (Florida, North
                              Dakota, and Ohio) typically conduct benefit-cost analyses for projects from their communities and
                              submit summaries of the analyses for FEMA’s review.



                              Page 4                                                                           GAO/T-RCED-99-274
Projects Involving the      Through policy guidance established in September 1996, FEMA exempted
Purchase of Substantially   projects that involved purchasing structures located in floodways and
Damaged Structures          floodplains if the cost of restoring the damaged structures equaled or
                            exceeded 50 percent of the structures’ market value and the structures
                            were located in a 100-year floodplain. A senior FEMA mitigation official
                            explained that under the National Flood Insurance Program, these
                            substantially damaged structures had to be either elevated or relocated.
                            Thus, the Hazard Mitigation Grant Program was simply following the
                            policy already established by the flood insurance program. The official
                            also stated that the exemption was intended to speed the delivery of
                            hazard mitigation grants to the states. This particular exemption has been
                            criticized by FEMA’s Inspector General. In a March 1998 report,5 the
                            Inspector General noted the lack of analytical data supporting the
                            exemption’s contention that acquisition projects involving substantially
                            damaged properties in a 100-year floodplain were cost-effective. While
                            FEMA officials have begun to retroactively analyze some of the acquisition
                            projects exempted under this policy and agency officials expect to
                            complete this analysis by the end of August 1999,6 the agency is currently
                            unable to provide data that would support the exemption. Without this
                            analytical basis, it is difficult for FEMA to demonstrate the
                            cost-effectiveness of the exempt acquisition projects it is funding.


The 5-Percent Initiatives   In September 1996, FEMA established another policy that exempted certain
                            projects from benefit-cost analysis. Known as the “5 percent Hazard
                            Mitigation Grant Program initiatives,” this policy allows the states to use
                            up to 5 percent of their Hazard Mitigation Grant Program project funding
                            for a variety of hazard mitigation projects, including new, unproven
                            mitigation techniques and technologies and hazard identification or
                            mapping efforts.

                            Projects eligible for funding under this initiative can have unproven or not
                            clearly measurable benefits, making it difficult to evaluate the projects
                            under traditional criteria for determining cost-effectiveness and eligibility.
                            To be eligible, a project type had to be identified in the state’s hazard
                            mitigation plan and had to reduce or prevent future property damage,
                            injury, or loss of life. The policy’s intent was to provide the states with
                            discretion in deciding which mitigation measures to fund, as well as make

                            5
                              Improvements Are Needed in the Hazard Mitigation Buyout Program, FEMA OIG, Inspection Report
                            I-01-98 (Mar. 1998).
                            6
                             The officials explained that FEMA would be reviewing acquisition projects in communities within
                            three states. These projects encompass thousands of individual properties.



                            Page 5                                                                        GAO/T-RCED-99-274
                             the states responsible for providing the rationale for the cost-effectiveness
                             of the projects. FEMA officials explained that the policy was meant to spur
                             creativity and avoid the time and expense involved in conducting
                             benefit-cost analyses.

                             FEMA’s guidance instructs prospective grantees to apply for 5-percent
                             funding if a project was previously denied funding because of difficulty in
                             measuring its cost-effectiveness. However, projects denied funding for
                             other reasons may also be submitted under the 5-percent funding policy.
                             For example, a project to retrofit a homeless assistance center with items
                             such as shutters, a generator, a well, and a storage tank was originally
                             denied funding by FEMA because it was submitted more than 2 years past
                             the agency’s deadline for submitting projects. However, after the project
                             was resubmitted under the 5-percent initiative, it was approved for over
                             $220,000 in federal funding.

                             The 5-percent initiative policy states that instead of conducting a
                             benefit-cost analysis, the states are to include a narrative that identifies the
                             project’s mitigation benefits and establishes a reasonable expectation that
                             future property damage, injury, or loss of life will be reduced or prevented.
                             While FEMA’s guidance instructs the states to identify a project’s benefits, it
                             does not specifically suggest any comparison of the benefits with the
                             project’s costs or with the benefits and costs of competing alternative
                             projects. Without any measurement and subsequent comparison of a
                             project’s expected benefits and expected costs, the criteria the agency is
                             using to determine cost-effectiveness are unclear. Additionally, the
                             5-percent initiative allowed for funding projects that were difficult to
                             evaluate against traditional program eligibility criteria, thus providing the
                             appearance that any project could be funded under the 5-percent initiative.
                             For example, a mitigation project to develop a “Hurricane Information
                             Center/Partnership in Education” was denied funding three times by FEMA.
                             FEMA initially ruled that because the project was an “education and
                             awareness campaign,” it did not meet the Hazard Mitigation Grant
                             Program’s eligibility requirements and was thus ineligible for funding.
                             However, after the project was submitted for funding under the 5-percent
                             initiative, it was approved for $4,700 in federal funding.


Hazard Mitigation Planning   In October 1997, FEMA exempted hazard mitigation planning projects
Projects for Older           associated with older disasters. FEMA decided that in the interest of
Disasters                    expediting the closeout of funding for disasters that occurred on or before
                             June 10, 1993, the agency would make program funds remaining from



                             Page 6                                                        GAO/T-RCED-99-274
                           these disasters available for hazard mitigation planning purposes.7 The
                           policy memo stated that planning projects would be considered
                           cost-effective measures.


Tornado-Related Projects   In August 1998, FEMA announced a policy that temporarily exempted
                           tornado-related projects from benefit-cost analysis. In announcing this
                           exemption, FEMA noted that tornado mitigation projects, such as warning
                           systems, were often difficult to evaluate against traditional quantitative
                           criteria for determining cost-effectiveness and eligibility. The policy
                           memorandum stated that in lieu of conducting a benefit-cost analysis, FEMA
                           would allow the states to include a narrative that identified a project’s
                           mitigation benefits and established an expectation that the project would
                           reduce or prevent future property damage, injury, or loss of life. To receive
                           funding, a project had to be identified in a state’s hazard mitigation plan
                           and needed to reduce or prevent future damage to property, injury, or loss
                           of life from tornadoes. Additionally, among other requirements, states had
                           to develop a comprehensive plan for warning citizens. This policy will
                           remain in effect until FEMA adopts a proposed regulatory change that
                           warning systems will be funded only from the original 5-percent set-aside.
                           FEMA officials expect that the regulatory changes will be made final in
                           August 1999.


FEMA Cannot Quantify the   For a number of reasons, FEMA is unable to quantify the actual number and
Number and Dollar Value    dollar amount of the projects exempted from benefit-cost analysis. FEMA
of Exempt Projects         officials explain that, to present accurate data, headquarters would need
                           to make a special effort to gather the information directly from regional
                           project files. However, FEMA officials estimate that the maximum amount
                           that has been or could be spent for three categories of exempt projects is
                           approximately $258 million. This $258 million estimate includes
                           $113.5 million for exempt 5-percent initiative projects, $56.5 million for
                           exempt tornado-related projects, and $88.3 million for planning projects
                           using funding from older disasters. FEMA does not know the maximum
                           potential funding for the fourth category of exempt projects—acquisitions
                           of substantially damaged properties—although agency officials state that




                           7
                            When the Hazard Mitigation Grant Program was established, it provided federal matching grants on a
                           cost-share basis of up to 50 percent for a project. Thus, FEMA refers to these mitigation projects as
                           “50/50 planning” projects. With the 1993 amendments to the Stafford Act, the federal cost share was
                           changed from up to 50 percent to up to 75 percent.



                           Page 7                                                                         GAO/T-RCED-99-274
                             some portion of an estimated $1.6 billion8 in Hazard Mitigation Grant
                             Program funding will be spent on these projects.


                             FEMA’s use of benefit-cost analysis appears to demonstrate that certain
FEMA’s Approaches            hazard mitigation projects are cost-effective, although the agency could
Do Not Always                provide better information to the officials conducting benefit-cost analyses
Ensure That                  for some projects. Several factors are limiting the agency’s ability to
                             demonstrate the cost-effectiveness of projects that are exempt from
Mitigation Projects          benefit-cost analysis. For example, our review of $20.1 million in funding
Are Cost-Effective           for hazard mitigation projects in two FEMA regions9 found that projects
                             receiving over one-third of the funding were exempt from benefit-cost
                             analysis, even though there was no established analytical basis supporting
                             the exemption for the majority of these projects. Establishing the basis for
                             exempting these acquisition projects and reviewing the cost-effectiveness
                             of other exempt projects after they are implemented would help FEMA
                             better ensure that these mitigation projects are cost-effective.


FEMA’s Use of Benefit-Cost   Forty-one (75 percent) of the 55 projects we reviewed were evaluated
Analysis Appears to          using benefit-cost analysis. The projects included wind retrofits (shutter
Demonstrate Projects’        projects), drainage improvements, and seismic retrofits of buildings. These
                             projects, which accounted for 58 percent of the funding we reviewed
Cost-Effectiveness,          ($11.7 million of $20.1 million), were judged as cost-effective. However, we
Although the Best            also found that the best available information—such as flood hazard
Available Data Are Not       information from flood insurance studies and flood damage information
Always Used                  from past insurance claims—was not always used in benefit-cost analyses
                             on flooding projects, because the best data were not readily available. The
                             quality of this information can influence the outcome of a benefit-cost
                             analysis because overestimating the frequency or severity of a flood, or the
                             damage associated with a previous flood event, can inflate the estimated
                             benefits attributed to an acquisition project. FEMA officials have
                             acknowledged the shortcomings and understand the importance of
                             providing the best available data for analyzing the cost-effectiveness of
                             proposed flood hazard mitigation projects.




                             8
                              FEMA’s estimate of $1.6 billion is based on total program funds (i.e., $2.5 billion) minus
                             (1) $626 million for two large projects that underwent benefit-cost analysis and (2) $258 million in
                             potential funding for projects in the other exempted categories—5-percent initiative, tornado-related,
                             and planning.
                             9
                             The states in our review are located in FEMA’s regional offices in Atlanta, Georgia (Region 4), and
                             Denton, Texas (Region 6).



                             Page 8                                                                          GAO/T-RCED-99-274
Several Factors Are                      While FEMA has explained its reasons for exempting four types of
Limiting FEMA’s Ability to               mitigation projects, there are factors limiting its ability to demonstrate that
Demonstrate the                          these mitigation measures are, in fact, cost-effective. Of the 55 projects we
                                         reviewed, 14 underwent no benefit-cost analysis. Certain factors, such as
Cost-Effectiveness of                    the lack of an analytical basis supporting the exemption for acquisition
Projects Exempt From                     projects and a broad approach for determining cost-effectiveness, limit
Benefit-Cost Analysis                    FEMA’s ability to demonstrate cost-effectiveness. The 14 projects account
                                         for $8.4 million (42 percent) of the funding, and they include funding for
                                         emergency satellite communications, all-weather radios, emergency alert
                                         systems, a public awareness campaign, and property acquisitions. Figure 1
                                         shows the breakout of the $8.4 million in funding for these exempt
                                         projects.


Figure 1: Breakout of the $8.4 Million
in Funding for Exempt Mitigation         Tornado-related
Projects Reviewed by GAO                 ($2.3 million)



                                                                                   Acquisitions
                                                                                  ($5.8 million)




                                           5-percent
                                            initiative
                                         ($0.3 million)


                                         Note: This figure does not include a category for exempt planning projects because the 55
                                         projects we selected did not include any such projects.




                                         As figure 1 shows, the majority ($5.8 million of the $8.4 million, or
                                         69 percent) of the funding for exempt projects in our review went for
                                         property acquisition projects. FEMA’s Inspector General reported in
                                         March 1998 that FEMA had not produced the data or analysis to
                                         demonstrate the cost-effectiveness of buying substantially damaged
                                         structures in the floodplain, adding that the agency lacked an analytical
                                         basis for exempting such projects from benefit-cost analysis. While FEMA
                                         officials have begun initiating efforts to address this concern, over a year



                                         Page 9                                                                      GAO/T-RCED-99-274
has passed since the Inspector General’s report was issued, and the
analytical basis has still not been established.

For two other categories of exempt projects—the 5-percent initiative and
tornado-related projects—states are asked to provide a narrative that
identifies their potential mitigation benefits and establishes a reasonable
expectation that the projects will reduce or prevent future property
damage, injury, or loss of life. For example, one of the exempt projects
involved the development of a tornado warning network and a tornado
mitigation demonstration project. The project, which was approved for
$2.3 million in Hazard Mitigation Grant Program funding, was expected to
reduce storm-related damages. Another exempt project involved $45,000
in funding for the development of a public awareness campaign and a
brochure, which were intended to educate residents about the hazards of
living in a floodplain. While these projects may be cost-effective—because
they could reasonably be expected to reduce or prevent future property
damage, injury, or loss of life—it is difficult to determine their
cost-effectiveness. Given such a broad approach for determining a
project’s cost-effectiveness, it is difficult to provide an example of a
project that would not be considered cost-effective.

FEMA also exempted planning projects associated with older disasters,
although the agency has not demonstrated that such projects are
cost-effective. While we agree that it is difficult to determine the
cost-effectiveness of planning projects and that certain planning projects
could prove to be cost-effective, exempting all planning projects allows for
a wide range of project approvals.

One means of determining the cost-effectiveness of exempt projects would
be to conduct periodic reviews of selected projects after they have been
implemented. For example, FEMA could undertake targeted reviews of
projects that funded local efforts to establish mitigation strategies or
plans. These reviews could be used to demonstrate the value of the
projects—whether they enabled the localities to better identify future
mitigation projects or helped reduce potential disaster-related damage by
alerting residents to certain hazards. To the extent that the reviews
demonstrated the cost-effectiveness of the projects, they would establish a
basis for exempting similar projects in the future.

In conclusion, Madam Chairman, the majority of the projects that
underwent benefit-cost analyses appeared to be cost-effective, though we
also found that the best available information—such as flood hazard



Page 10                                                    GAO/T-RCED-99-274
information from flood insurance studies and flood damage information
from past insurance claims—was not always used in analyzing proposed
mitigation projects. FEMA could assist the officials performing the analyses
by conducting postdisaster reviews of flood hazards that could be used to
update flood hazard information and by making information on past
insurance claims more readily accessible.

Additionally, while FEMA has explained its rationale for exempting certain
types of projects from benefit-cost analysis, it is limited in its ability to
demonstrate their cost-effectiveness because it lacks an analytical basis
for exempting acquisitions of certain floodplain properties, uses a broad
approach to determine the cost-effectiveness of other projects, and seldom
reviews the cost-effectiveness of projects after they have been
implemented. FEMA estimates that approximately $258 million could be
spent on exempt projects, not counting the funding for exempt acquisition
projects. Our review of $20.1 million in funding for 55 mitigation projects
found that $5.8 million, or 29 percent of the funding, was for acquisition
projects that FEMA had exempted from benefit-cost analysis. Until FEMA
establishes an analytical basis supporting the cost-effectiveness of these
projects, it cannot ensure that it has allocated this funding cost-effectively.
Although FEMA officials have begun initiating efforts to address this
concern, over a year has passed since the Inspector General questioned
the cost-effectiveness of exempt acquisition projects, and an analytical
basis remains to be established.

The report we are issuing today includes recommendations designed to
improve how FEMA determines the cost-effectiveness of projects funded
under the Hazard Mitigation Grant Program including conducting periodic
reviews of projects after they have been implemented to determine
whether they were cost-effective. We look forward to working with you,
Madam Chairman and Members of the Subcommittee, as you consider
various means of ensuring that hazard mitigation funding is targeted to
cost-effective mitigation measures.

This concludes my prepared remarks. We will be pleased to respond to
questions that you or other Members of the Subcommittee may have.




Page 11                                                      GAO/T-RCED-99-274
                  For information about this testimony, please contact Stan Czerwinski at
Contact and       (202) 512-7631. Individuals making key contributions to this testimony
Acknowledgments   included Pat Moore and R. Tim Baden.




                  Page 12                                                  GAO/T-RCED-99-274
Page 13   GAO/T-RCED-99-274
Page 14   GAO/T-RCED-99-274
Page 15   GAO/T-RCED-99-274
Related GAO Products


              Disaster Assistance: Opportunities to Improve Cost-Effectiveness
              Determinations for Mitigation Grants (GAO/RCED-99-236, Aug. 4, 1999).

              Disaster Assistance: Information on the Cost-Effectiveness of Hazard
              Mitigation Projects (GAO/T-RCED-99-106, Mar. 4, 1999).

              Disaster Assistance: Information on Federal Costs and Approaches for
              Reducing Them (GAO/T-RCED-98-139, Mar. 26, 1998).

              Disaster Assistance: Information on Federal Disaster Mitigation Efforts
              (GAO/T-RCED-98-67, Jan. 28, 1998).

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

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




(385821)      Page 16                                                     GAO/T-RCED-99-274
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