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S. HRG. 108–364

REVIEW OF THE GENERAL ACCOUNTING OFFICE

REPORT ON FEMA’S ACTIVITIES AFTER THE

TERRORIST ATTACKS ON SEPTEMBER 11, 2001

HEARING

BEFORE THE

SUBCOMMITTEE ON CLEAN AIR, CLIMATE CHANGE,

AND NUCLEAR SAFETY

AND THE

COMMITTEE ON ENVIRONMENT AND

PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

SEPTEMBER 24, 2003

Printed for the use of the Committee on Environment and Public Works

(
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Virginia

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

MICHAEL D. CRAPO, Idaho

LINCOLN CHAFEE, Rhode Island

JOHN CORNYN, Texas

LISA MURKOWSKI, Alaska

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

JAMES M. JEFFORDS, Vermont

MAX BAUCUS, Montana

HARRY REID, Nevada

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

THOMAS R. CARPER, Delaware

HILLARY RODHAM CLINTON, New York

ANDREW WHEELER, Majority Staff Director

KEN CONNOLLY, Minority Staff Director

SUBCOMMITTEE ON CLEAN AIR, CLIMATE CHANGE, AND NUCLEAR SAFETY

GEORGE V. VOINOVICH, Ohio, Chairman

MICHAEL D. CRAPO, Idaho

CHRISTOPHER S. BOND, Missouri

JOHN CORNYN, Texas

CRAIG THOMAS, Wyoming

THOMAS R. CARPER, Delaware

JOSEPH I. LIEBERMAN, Connecticut

HARRY REID, Nevada

HILLARY RODHAM CLINTON, New York

(II)
(III)

CONTENTS

Page

SEPTEMBER 24, 2003

OPENING STATEMENTS

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware ................... 23

Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New York ........ 15

Jeffords, Hon. James M., U.S. Senator from the State of Vermont .................... 8

Voinovich, Hon. George V., U.S. Senator from the State of Ohio ........................ 1

Letter to The President .................................................................................... 11

WITNESSES

Brown, Michael D., Under Secretary of Emergency Preparedness and Response, Department of Homeland Security ........................................................ 5

Prepared statement .......................................................................................... 155

Response to additional question Senator Jeffords ......................................... 160

Hecker, JayEtta, Director of Physical Infrastructure Issues, General Accounting Office ............................................................................................................... 25

Prepared statement....................................................................................... 161–193

Responses to additional questions from:

Senator Jeffords ......................................................................................... 201

Senator Voinovich ..................................................................................... 203

Larson, Bud, associate director, New York City Office of Management and

Budget ................................................................................................................... 147

Prepared statement .......................................................................................... 310

Responses to additional questions from Senator Jeffords ............................. 312

Shipley, Dale, executive director, Ohio Emergency Management Agency, on

behalf of the National Emergency Management Association ........................... 145

Application Packet for the State Disaster Relief Program, September

2001 ............................................................................................................ 275–307

NEMA, Issues and recommendations for possible amendments to the

Stafford Act to better address catastrophic disasters ................................ 308

Prepared statement .......................................................................................... 269

Skinner, Rick, Deputy Inspector General, Department of Homeland Security .. 28

Prepared statement .......................................................................................... 252

Responses to additional questions from Senator Jeffords ............................. 268

ADDITIONAL MATERIAL

Charts:

Compensation of Losses ................................................................................... 197

Differences in this Public Assistance Approach ............................................. 200

Economic Revitalization ................................................................................... 199

Federal Assistance to the New York City Area (FEMA, HUD, DOT,

and Liberty Zone Tax Benfits) ..................................................................... 195

Infrastructure Restoration ............................................................................... 198

Initial Response ................................................................................................ 196

Ohio Infrastructure Impact for Federal FY 2003 .......................................... 273

Reports:

Federal Emergency Management Agency, FEMA’s Delivery of Individual

Assistance Programs: New York—September 11, 2001 ........................... 36–105

General Accounting Office:

Major Management Challenges and Program Risks, Federal Emergency Management Agency (FEMA)................................................. 106–144
Page

IV

—Continued

Disaster Assistance, Information on FEMA’s Post 9/11 Public Assistance to the New York Area ............................................................... 204–251
(1)

REVIEW OF THE GENERAL ACCOUNTING OFFICE REPORT ON FEMA’S ACTIVITIES

AFTER THE TERRORIST ATTACKS ON SEPTEMBER 11, 2001

WEDNESDAY, SEPTEMBER 24, 2003

U.S. SENATE,

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS,

SUBCOMMITTEE ON CLEAN AIR, CLIMATE CHANGE, AND

NUCLEAR SAFETY,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:02 a.m. in room

406, Senate Dirksen Building, the Hon. George V. Voinovich (chairman of the subcommittee) presiding.

Present: Senators Voinovich, Jeffords, Clinton, and Carper.

OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,

U.S. SENATOR FROM THE STATE OF OHIO

Senator VOINOVICH. The subcommittee will come to order.

Good morning all. Today’s hearing continues our ongoing oversight of the Federal Emergency Management Agency. This oversight has long been a priority for the Environment and Public

Works Committee. It is my intention as chairman of this subcommittee to continue this strong oversight.

Today’s hearing is also the first FEMA oversight hearing we

have held since the Agency was transferred into the Department

of Homeland Security. The attacks of September 11 were unprecedented in scope and have served as a catalyst for major reform

within the Federal Government in its ability to prevent and respond to such events in the future.

Also unprecedented was our Nation’s response to the attacks.

Thousands of workers and volunteers from around the country responded to those in need at the World Trade Center and the Pentagon, including 74 Ohioans who arrived in New York City within

24 hours of the attacks as part of Ohio Task Force One, one of

FEMA’s urban search and rescue teams.

The attacks of September 11 were the most costly disaster in U.S. history. President Bush pledged $20 billion in aid, and approximately $7.4 billion of it is being distributed through FEMA’s

Public Assistance Program. The Public Assistance Program is used

throughout the country to provide grants to State and local governments to respond and to recover from disasters.

In order to ensure that FEMA was properly carrying out its obligations in response to the attacks, Chairman Inhofe, Senator Jef-
2

fords, Senator Clinton, and I requested that GAO look into the

three aspects of FEMA’s response:

No. 1, what activities the Agency supported in New York through

its Public Assistance Program; No. 2, how this response differed

from their approach to providing public assistance in past disasters; and, No. 3, what implications this approach may have on the

delivery of public assistance should other major terrorist attacks

occur.

I understand that GAO has completed its review and analysis of

FEMA’s actions. I look forward to hearing from GAO about what

they found. Also, in response to the attack, members of the committee on both sides of the aisle, including myself, worked with the

Administration to create the Department of Homeland Security

and move several administrative agencies, including FEMA, into

that department.

Members of this committee have also worked with the Administration to ensure that they have all the tools necessary to prevent

events of this magnitude from happening again. To this date, this

has not been an issue where we have kept partisanship in check.

There is no questioning the fact that we must be able to prevent

a repeat of that terrible day and hope that we will be able to keep

politics away from this issue as we look back at those events and

our response to them.

As members of this subcommittee know, the Homeland Security

Act of 2002 created the Department of Homeland Security, established a directorate of emergency preparedness and response, and

transferred the functions, personnel, assets, and liabilities of

FEMA, along with several other administration systems and offices, into that directorate. The Act also defined the homeland security role of FEMA, maintains FEMA as the lead agency for Federal

response established by Executive Order, and requires that the

FEMA Director revise the plans to reflect the establishment of the

Department of Homeland Security.

The creation of the Department of Homeland Security is the largest reorganization of Federal agencies and activities since the creation of the Department of Defense back in 1947. I have commented that it was much more difficult because of the connectivity

of the departments than the 1947 reorganization. We are pretty

clear. Some of these agencies that thread was rather thin.

Any reorganization will need more time to be fully implemented

and will take even longer before all of the structural stresses in the

new department can be identified, let alone resolved. I can tell you

that as a former mayor and Governor who undertook reorganizations, they are not done overnight. It takes a long time in order to

get them done properly.

We are interested, though, that in the process of going through

this reorganization that FEMA continues to perform its duties adequately during the transition period. In other words, it is not good

enough to just have a reorganization. Everybody is in limbo. The

agencies within Homeland Security that were functioning before

should continue to function so that they provide the services that

they are supposed to perform.

During the debate on the Homeland Security Act, I included the

first government-wide workforce reform since the Civil Service Re-
3

form Act of 1978, 25 years ago. I am hopeful that these new flexibilities which all Federal agencies now will use will complement

the specific human capital authorities granted to the department

which is still in the process of establishing its personnel system.

I have been very pleased to hear from union leadership that the

work of the Department of Homeland Security personnel system

design team has been inclusive and collaborative. They have taken

their time. They have not rushed this thing through.

I would be interested in hearing any observations the witnesses

may have on how these workforce flexibilities are helping FEMA

manage its critically important part of the Homeland Security

team. I think when Joe Allbaugh was here testifying before us he

talked about the human capital crisis that they were experiencing

in FEMA where many of the people who participated in 9/11 afterwards reevaluated their relationship with their families and decided that those eligible retire.

Finally, at a hearing conducted by the subcommittee on the attacks last year, I learned that members of the FEMA teams that

responded to the call for assistance to Ground Zero have been denied health coverage. In response, I sent letters to former FEMA

Director, Joe Allbaugh and Secretary of Labor Elaine Chao asking

them to develop a process for providing these workers the health

care coverage they need and deserve. I would like to know what

process has been put in place to prevent such denials of coverage

and eliminate any confusion surrounding the filing process if it

happens again.

It is extremely important that we take care of these individuals.

Whether people want to be first responders in the future depends

on how first responders from the World Trade Center are treated.

In order to ensure that those brave souls that respond to, as well

as those who live and work in the area of a disaster, are protected,

monitored, and informed of risks.

Senator Clinton and I have introduced the Disaster Area Health

and Environmental Monitoring Act of 2003. This important legislation was reported out of committee on July 30. I would like to hear

any comments that our witnesses may have in regard to that legislation.

Our first witness today is the Under Secretary of Emergency Preparedness and Response, Department of Homeland Security, Michael D. Brown.

On the second panel we have JayEtta Hecker, Director of Physical Infrastructure Issues, General Accounting Office; and Rick

Skinner, Deputy Inspector General, Department of Homeland Security.

The third panel consists of Dale Shipley, executive director, Ohio

Emergency Management Agency, on behalf of the National Emergency Management Association. I worked with Dale while I was

Governor of Ohio. He has done an outstanding job for our State.

We also have Bud Larson, associate director, New York City Office

of Management and Budget.

I thank each of our witnesses for coming here to discuss these

issues today. I look forward to their testimony.

Mr. Brown, we are looking forward to your testimony this morning. You may begin.
4

[The prepared statement of Senator Voinovich follows:]

STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR FROM

THE STATE OF OHIO

The Hearing will come to order. Good morning.

Today’s hearing continues our ongoing oversight of the Federal Emergency Management Agency (FEMA). This oversight has long been a priority for the Environment and Public Works Committee, and it is my intention as chairman of this subcommittee to continue this strong oversight. Today’s hearing is also the first FEMA

oversight hearing we have held since the Agency was transferred into the Department of Homeland Security.

The attacks of September 11 were unprecedented in scope and have served as a

catalyst for major reform within the Federal Government and its ability to prevent

and respond to such events in the future.

Also unprecedented was our nation’s response to the attacks. Thousands of workers and volunteers from around the country responded to those in need at the World

Trade Center and the Pentagon, including 74 Ohioans, who arrived in New York

City within 24 hours of the attacks as part of Ohio Task Force One one of FEMA’s

Urban Search and Rescue Teams.

The attacks of September 11 were the most costly disaster in U.S. history. Presi- dent Bush pledged $20 billion in aid and approximately $7.4 billion of it is being

distributed through FEMA’s public assistance program. The public assistance program is used throughout the country to provide grants to State and local governments to respond to and recover from disasters.

In order to ensure that FEMA was properly carrying out its obligations in response to the attacks, Chairman Inhofe, Senator Jeffords, Senator Clinton, and I requested that the GAO look into three aspects of FEMA’s response: • What activities the Agency supported in New York through its public assistance

program; • How this response differed from the approach to providing public assistance in

past disasters; and • What implications this approach may have on the delivery of public assistance

should other major terrorist attacks occur.

I understand that GAO has completed its review and analysis of FEMA’s actions

and I look forward to hearing from GAO about what they have found.

Also in response to the attacks, members of this committee on both sides of the

aisle including myself worked with the Administration to create the Department of

Homeland Security and move several Administration agencies including FEMA into

the Department.

Members of this committee have also worked with the Administration to ensure

that they have all of the tools necessary to prevent events of this magnitude from

ever happening again. To date, this has been an issue where partisanship has been

kept in check because there is no questioning the fact that we must be able to prevent a repeat of that terrible day. I hope that we will be able to keep politics away

from this issue as we look back at those events and our response to them.

As members of this subcommittee know, the Homeland Security Act of 2002 created the Department of Homeland Security, established a Directorate of Emergency

Preparedness and Response, and transferred the functions, personnel, assets and liabilities of FEMA (along with several other Administration Systems and Offices)

into that Directorate. The Act also defined the homeland security role of FEMA,

maintains FEMA as the lead agency for the Federal Response Plan established by

Executive Order, and requires the FEMA director to revise the Plan to reflect the

establishment of DHS.

The creation of the Department of Homeland Security is the largest reorganization of Federal agencies and activities since the creation of the Department of Defense in 1947. Any reorganization of this magnitude will need some time to be fully

implemented and will take even longer before all of the structural stresses in the

new Department can be identified, let alone resolved. I along with my colleagues

on the committee am interested in making sure that FEMA continues to perform

its duties adequately during this lengthy transition period.

During debate on the Homeland Security Act, I included the first governmentwide workforce reforms since the Civil Service Reform Act of 1978 25 years ago. I

am hopeful that these new flexibilities, which all Federal agencies now may use,

will complement the specific human capital authorities granted to the Department,

which is still in the process of establishing its personnel system. I have been pleased

to hear from union leadership that the work of the DHS personnel system design

team has been inclusive and collaborative. I would be interested in hearing any ob-
5

servations the witnesses might have on how these workforce flexibilities are helping

FEMA manage its critically important part of the Department of Homeland Security

team.

Finally, at a hearing conducted by this committee on the attacks last year, I

learned that members of the FEMA teams that responded to the call for assistance

at Ground Zero had been denied health coverage. In response, I sent letters to

former FEMA Director Joe Allbaugh and Secretary of Labor Elaine Chao asking

them to develop a process for providing these workers the health coverage they need

and deserve. I would like to know what process has been put in place to prevent

such denials of coverage and eliminate any confusion surrounding the filing process

from happening again.

It is extremely important that we take care of these individuals because whether

people want to be first responders in the future depends on how first responders

from the World Trade Center are treated. In order to ensure that those brave souls

that respond to as well as those that live and work in the area of a disaster are

protected, monitored, and informed of risks, Senator Clinton and I have introduced

the Disaster Area Health and Environmental Monitoring Act of 2003 (S. 1279). This

important legislation was reported out of the committee on July 30, and I would like

to hear any comments that our witnesses have on it.

Our first witness today is the Under Secretary for the Emergency and Response

Directorate in the Department of Homeland Security, Michael Brown.

On the second panel, we have JayEtta Hecker from the General Accounting Office

and Rick Skinner who is the Deputy Inspector General of the Department of Homeland Security.

On the final panel, we will hear from Bud Larson from New York City and the

executive director of the Ohio Emergency Management Agency, Dale Shipley.

I thank each of our witnesses for coming here to discuss these issues today, and

I look forward to their testimony.

STATEMENT OF MICHAEL D. BROWN, UNDER SECRETARY OF

EMERGENCY PREPAREDNESS AND RESPONSE, DEPARTMENT OF HOMELAND SECURITY

Mr. BROWN. Thank you, Mr. Chairman. Thank you for having me

here today. I certainly appreciate your comments about having

gone through the reorganization in Cleveland and all the things

you had to do to do that. I know you appreciate some of the challenges that we have as we put this together.

Since becoming a part of the Department of Homeland Security,

the Federal Emergency Management Agency has continued its traditional role of leading the Nation to prepare for, respond to, recover from, and mitigate against disasters of all types and of all

hazards.

Over the last 2 weeks, we have worked closely with the State

and our Federal partners to effectively prepare for and respond to

Hurricane Isabel—all within the structure of the Department of

Homeland Security. DHS brought its resources to bear in response

to Hurricane Isabel in order to protect the public. We deployed two

new assets, including the National Disaster Medical Systems

teams, in response to Hurricane Isabel. The U.S. Coast Guard also

deployed its assets to assist us in the response effort. All of our response efforts have been coordinated department-wide through

Homeland Security and through its Emergency Operations Center.

Prior to joining Homeland Security, the focus of our disaster programs at FEMA was that of an all-hazards approach. This focus remains today. It fact, it benefits more from a global perspective of

the Department of Homeland Security and its related components.

I am proud of our response to Hurricane Isabel because it clearly

demonstrates our steady improvement in coordinating and leading

Federal, State, and local response efforts to protect life and property in times of disasters.
6

There was a seamless collaboration of different response elements in the Department, as well as those in other Federal departments and agencies, which allowed for an effective and rapid prepositioning of disaster assets and capabilities throughout the Eastern United States to quickly provide any assistance needed by

States and communities to protect the life and property of those

citizens.

At FEMA, we are proud to be a part of the Department of Homeland Security in doing our part to secure the homeland. I am proud

to lead this organization. On behalf of the Secretary and President

Bush, it is made up of so many really good individuals, such as,

the urban search and rescue teams and others, who put their lives

on the line daily to protect this country and to make it more secure.

FEMA’s greatest asset is, indeed, our people. As we have

transitioned into Homeland Security, we have continued our efforts

to ensure that our workforce remains one of the finest in the Federal Government through the development of a comprehensive strategic Human Capital Plan.

We have also continued to work to integrate the new missions

into FEMA’s existing structure. The good work that FEMA continues to do after being incorporated into Homeland Security is a

commentary on how well the transition has gone to date. Since the

March 1 transition into Homeland Security, FEMA has provided

disaster relief in over 50 presidentially declared disasters and

emergencies in 32 different States and two Territories, ranging

from Alaska to New York to American Samoa.

When I have traveled to disaster areas, I have had the opportunity to meet some of the victims. Secretary Ridge, the President,

and I just did that over the past 3 or 4 days. The victims’ lives

have been totally devastated. They have lost family members. They

have lost things that they will never be able to replace. They have

lost their homes. I truly cannot adequately describe in words the

impact of looking into the eyes of people who have simply lost everything.

But when things are at their absolute worst, I believe that our

people in FEMA and the Homeland Security Department are at

their best. I am extremely proud to be a part of this organization.

I am constantly impressed with the Agency’s ability to quickly and

efficiently put individuals on the ground, to provide assistance to

those in need, and to get the process of disaster recovery underway

immediately.

But we cannot rest on our past achievements. The key to our

continued improvement is to take these lessons and incorporate

them into our planning, our doctrine, and our procedures so that

we do even better the next time. The transition into Homeland Security offers new opportunities to make such improvements. FEMA

is actively participating in the effort to develop the National Response Plan and the framework for the National Incident Management System.

As directed by the President, the goal is to establish a single

comprehensive National Incident Management System that provides for the integration of separate Federal response plans into a

single all-discipline, all-hazards, national response plan.
7

We are also consolidating and integrating our existing and our

new disaster response assets, our new teams, our current systems,

new programs, and responsibilities to create a more unified and

comprehensive all-hazards disaster response capacity. We are looking into new approaches that can result in greater efficiencies and

effectiveness in our disaster response activities.

I am really confident that over time we will be able to introduce

a new response culture, one that will enable us to elevate our operational response capabilities to a higher level of proficiency and ensure better protection of and service to the American people.

Homeland Security also remains committed to helping firefighters improve their effectiveness and to stay safe. The responsibilities of the fire service have increased since 9/11, and as you

know very well, Senator, include planning for and responding to

possible terrorist attacks. So far, just this year, Homeland Security

has awarded over $250 million of $745 million appropriated by

Congress to fire departments through the Assistance to Firefighters

Grant Program.

I will digress for just a second. As I met with some of those firefighters, and as we have given those grants out, it is absolutely incredible how important the grants are to those firefighters and

those fire departments. In some places they actually have to borrow boots and personal protective gear from other departments to

do their job. To me, that is just not acceptable.

When we have to respond to a terrorist attack or a natural disaster, and people start backfilling from department-to-department,

it is absolutely essential that all departments in this country be

equipped to respond to anything. That program helps us do that.

I just want to thank you, Senator, for helping us in that regard.

With the formation of Homeland Security, we have the opportunity to better serve our State and local governments and our first

responders by bringing together the various terrorism and emergency preparedness grant programs that were scattered throughout

the Federal Government.

The Secretary has announced plans to centralize these programs

within a single office in Homeland Security to make them even

more accessible to its customers. State and local authorities will

now have a single point of contact for both terrorism and emergency preparedness efforts, one access point to obtain critical grant

funding.

With regard to today’s hearing, the committee has expressed interest in the GAO report on the public assistance program as implemented in New York following the September 11 attacks. While

the GAO report does not address FEMA’s performance or provide

specific recommendations, it does note some differences in the delivery of assistance that I would like to take this opportunity to

emphasize.

FEMA implemented the Public Assistance Program, which provides State and local governments reimbursement for debris removal, emergency protective measures, or the repair or replacement of damaged public facilities. However, the Consolidated Appropriations Resolution of 2003 provided some additional flexibility

that allowed recovery operations to move more quickly.
8

The Resolution directed FEMA to fund non-Stafford Act related

projects with any remaining funds from the appropriation they received for the September 11 terrorist attacks after all eligible

projects have been funded. But this flexibility did not forfeit the accountability or detract from the effectiveness of the programs.

In summary, as part of the Department of Homeland Security,

FEMA has continued to carry out its mission to prepare for, respond to, recover from, and mitigate against disasters and emergencies caused by all hazards. We will continue to do so.

Again, Senator, I appreciate the opportunity to testify before

your subcommittee today. I would be happy to answer any questions that you or Senator Jeffords might have. I would ask that my

written statement be placed in the record in its entirety.

Senator VOINOVICH. Thank you.

We have been joined by Senator Jeffords, the ranking member of

this committee. Senator Jeffords, do you have any remarks that

you would like to make?

OPENING STATEMENT OF HON. JAMES M. JEFFORDS,

U.S. SENATOR FROM THE STATE OF VERMONT

Senator JEFFORDS. No, I do not want to interfere with the proceedings. I would just as soon have them made a part of the record.

Senator VOINOVICH. Thank you.

Without objection, so ordered.

[The prepared statement of Senator Jeffords follows:]

STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM

THE STATE OF VERMONT

Mr. Chairman, thank you for holding this hearing today.

It is a little disturbing for me to see the words ‘‘General Accounting Office Report’’, which often precede what some might consider to be a mundane financial disclosure statement, preceding the words ‘‘September 11th’’ which was such an emotional, traumatic moment in our nation’s history for everyone in our country, and

particularly for the people directly affected by it.

I will never forget my visit to Ground Zero.

I hope that September 11 is an event that will never be repeated, on any scale,

in our country. However, I believe that it is critical for us to be prepared, should

such an event occur. I want to do everything I can to ensure that our level of preparedness goes up, not down, as we move into the future.

One of the best ways is to evaluate our performance on September 11, and find

ways that we can improve.

That is why I asked for this GAO report with my colleagues, Senator Smith of

New Hampshire, Senator Clinton of New York, and Senator Voinovich.

Since Senator Inhofe became Chairman of this committee, we have continued

working on this issue with the same bi-partisan rapport I enjoyed with Senator

Smith, and I appreciate that.

The GAO report finds that there were multiple activities performed by FEMA at

the World Trade Center that were outside of the norm.

Congress explicitly authorized many of these activities.

The GAO report also finds that due to the departure from standard emergency

response and recovery operations, there is some uncertainty about what the Federal

response to another terrorist attack would be, should one occur.

It is imperative that this committee, with jurisdiction over the nation’s emergency

preparedness and response activities, consider whether any changes to FEMA’s legislative authorities are required to ensure that the nation’s ability to respond to a

terrorist attack improves after September 11th.

I look forward to hearing more detail on the conclusions of the GAO.

The EPA Inspector General raising questions about the government’s response to

the World Trade Center collapse.
9

In addition to troubling revelations about the White House’s Council on Environmental Quality influencing EPA’s public communications, the report questions the

extent and adequacy of the post-September 11 indoor air cleanup program.

This program was funded, in part, by FEMA, and I believe that we need to examine whether there are additional steps that FEMA, in conjunction with other governmental agencies, should take today to protect the health of all New Yorkers.

In reviewing the activities of FEMA in September 2001, we will be reviewing the

activities of a robust agency, with extensive experience in all-hazards planning, preparing, response, and recovery, and with a tradition of providing quick response to

people in immediate need.

Vermont has a long history with emergency management my colleague and friend,

Senator Bob Stafford of Vermont, served as chairman of this committee for many

years and ushered the Stafford Act through this committee and the legislative process in 1974.

The Stafford Act gave structure to an emergency response process where virtually

none existed in the past.

As Chairman of this committee during the 107th Congress, I expressed grave concerns since the proposal to incorporate FEMA into the Department of Homeland Security first came to my attention.

I was concerned at that time that the robust agency we saw jumping every hurdle

after September 11, 2001 to provide assistance to World Trade Center and the Pentagon, and to hundreds of natural disasters each year, would give way under the

pressure of the enormous bureaucracy of the Department of Homeland Security and

lose its ability to respond quickly and effectively to disasters.

I remain concerned today.

However, the Administration prevailed in this situation and incorporated FEMA

in DHS with the enactment of the Homeland Security Act of 2002.

Since the formation of DHS, FEMA has administered aid for 50 major disasters,

16 emergency declarations, and 33 fire management assistance declarations all natural disasters.

That is 109 communities, in less than 1 year, that have received emergency assistance from the Federal Government.

One would think that this type of mission would deserve significant focus from

the Administration.

However, while FEMA performed all of this activity, the Administration managed

to allow the Disaster Relief Fund to dip dangerously low, with FEMA cutting off

benefits for all but two of the seven categories of public assistance in declared disaster areas.

On July 9, the Administration finally asked Congress for $1.5 billion in emergency

funding to refill the Disaster Relief Fund.

This week, the Congress may consider the conference report for the legislative

branch appropriations, which contains just $441.7 million for the Disaster Relief

Fund.

We are still in the early days of this disaster, and I have heard some concerns

raised by local communities about FEMA’s responsiveness.

I hope that as we work our way through the effects of this disaster, we find that

even with FEMA’s insertion into DHS and the lack of focus the Agency has received,

it has lived up to its reputation of a quick responder that provides critical assistance.

I have two goals for today’s hearing.

First, I want to hear what lessons can be learned from FEMA’s activities in New

York following September 11th, and what changes, if any, you believe this committee should consider to ensure that our nation’s emergency response capabilities

improve, not degrade into the future.

Second, I want to hear from each of our witnesses how things have changed since

FEMA became part of DHS specifically, if being a part of the Department of Homeland Security is improving or degrading FEMA’s ability to respond to disasters of

all types, whether manmade or natural.

It is imperative that in seeking to improve our capability to respond to terrorism,

we do not lose our capability to respond to natural disasters, which, thankfully, happen much more frequently.

Thank you, Mr. Chairman.

Senator VOINOVICH. Mr. Brown, in your testimony you seem to

indicate that being placed into the new Department of Homeland

Security has actually helped response to disasters.
10

I would like for you, as carefully as you can, outline how going

into the Department of Homeland Security has been enhanced. I

think in your testimony you mentioned something about the Coast

Guard. Could you give us a little bit more on that?

Mr. BROWN. Hurricane Isabel unfortunately has given us a grand

opportunity to really test some of the new equipment and some of

the new resources that we have at our disposal. Commandant Collins was absolutely insistent that they provide whatever assistance

they could to FEMA and DHS as we responded to the hurricane.

They were just outstanding.

There is nothing better than being able to sit at a table where

you have your partners right there with you at the table and to be

able to say, ‘‘Well, what is it that you can offer?’’ They can explain

to us, and as we understand our response efforts we can say, ‘‘Oh,

yes, we can use that equipment.’’

Commandant Collins and I spoke yesterday after an Under Secretary’s meeting. What we intend to do now, following the hurricane, and once our recovery is finished, is to go through and to actually formulate MOUs and understandings of how we are going to

operate together. But being that close together in the Department

with those kinds of assets just gives us the capability to respond

that we never had before.

I would actually take it one step further.

Senator VOINOVICH. In other words, the Coast Guard had never

been part of the consideration when you had other events?

Mr. BROWN. They would be part of the consideration, but it

would be almost after the fact. It would be looking around the room

saying, ‘‘We need to do ‘x.’ Who could help us do that? Oh, let us

reach out to the Coast Guard.’’

Now the Coast Guard is actually reaching out to us and saying,

‘‘By the way, because we are going to be doing x,y,z, moving certain assets

because of the approach of the hurricane, we can make these things available

to you. Will that help you respond more quickly?’’

So, we were able to tie our missions together, then protecting our

assets by getting them out of the way, with us having to move certain materials and supplies into the affected area. It worked out

great.

I think it is the willingness of the team, too, to sit down and say,

‘‘We are all part of the Department now. What do you bring to the

table? How can we make them work better together?’’

I think someone actually coined a phrase for it, but it is ‘‘FEMA

on steroids’’. It gives us the chance to reach out to partners within

the Department and say, ‘‘We want you now to be a part of our response mechanism.’’

Senator VOINOVICH. Mr. Brown, I have a question that is specifically rated to my home State of Ohio. As you know, the Northeast

and Midwest, including Ohio, experienced massive electrical power

outages beginning on August 14. Governor Taft requested Federal

assistance to deal with the aftermath of this situation. I wrote a

letter to the Administration in support of a major disaster declaration for the State of Ohio. I am going to insert this letter to the

President in the record.

Without objection, so ordered.

[The referenced letter follows:]
11
12

Senator VOINOVICH. While I understand that New York also requested Federal assistance and has received it, if you pardon the

reference, Ohio remains in the dark about its request.

First, why has it taken so long? Can we expect a response soon?

Second, what is the reason for the delay? Is it a result of being

transferred into the Department or is it some other factor?

Mr. BROWN. I will tell you it is not because of the transfer into

the Department. That request crossed my desk yesterday. We have

made the recommendation to the President. So that has been

moved.

I will tell you what part of the delay was. As we work very closely with our State and local partners to make the assessments—and

this is not to pick on Ohio or anyone else—but sometimes we have

to go and really dig to get information about the damage sustained,

what the needs are, and how can we help.

Although I think Dale Shipley does an incredibly good job, in

some States—not Ohio—but in some States it takes longer to get

that kind of information. I do not know why Ohio took longer. I am

going to try to find out, Senator.

Senator VOINOVICH. I would like to know it because your response to New York was swift.

Mr. Brown, I would like to give you an opportunity to respond

to the GAO report that we released today on FEMA’s actions and

financial allocations in New York after the September 11 attacks.

The first question is: The report states that both FEMA and New

York City officials agreed that FEMA’s public assistance approach

to the New York City area creates uncertainties regarding the delivery of public assistance in the event of another major terrorist

event. What are some of those specific uncertainties?

Second, the report states that FEMA officials claim that the Public Assistance Program worked well. New York City officials argue

that major revisions are needed. FEMA said, ‘‘We did it.’’ New York

said, ‘‘no.’’ Can you elaborate on the Agency’s position on this

issue?

Mr. BROWN. I think, Senator, that generally the response to New

York was incredibly good. The President authorized and asked us

to spend $8.8 billion in assistance in New York. We have done that,

and we have done it with incredible flexibility. There is no doubt

that we have a learning curve on some of those issues—mortgage

and rental assistance, for example. How far out do we take that in

terms of economic damage as opposed to physical damage?

FEMA has traditionally dealt with physical damage. There is

something that you can point to that you can say is broken, and

because that is broken, you can no longer do your job. You no

longer have a job to go to because it does not exist. We were always

accustomed to dealing with economic damage where the thing

which your job was tied to, the location was still there, but the job

was no longer there. The airlines were shut down, or they cut back,

or something. We had to deal with that.

For example, in terms of dealing with mortgage and rental assistance, how far out do we go? Do we draw a geographic line? Do

we figure out if there is some economic line by which we draw

those boundaries?
13

It was a challenge for us. It truly was a challenge. But I think

we worked very closely with the State and with the city to figure

out how to draw those lines, and upon what basis we drew the

lines. At the end, I would say that we had agreement on the drawing of the lines. So I think we did pretty good in that regard.

We still have some outstanding issues, for example, on debris re- moval and the liability insurance. We have allocated the $1 billion

for that. As we like to say in Washington, we are really down in

the weeds trying to figure out exactly what liabilities that $1 billion will cover.

Congress was good to us and gave us flexibilities on the money that was left over after the $8.8 billion had been allocated to meet

the unmet budget needs in New York City. We actually turned to

the city and the State and said,

‘‘You tell us what your priorities are. Tell us how you want to spend those

moneys. Once we do all the eligible costs, whatever money is left over, we will

let you figure out where that needs to go and give you the maximum flexibility

to use that where you need it.’’

So I think in that regard it worked very well also.

There are flexibilities in terms of FEMA figuring out what its

primary role is. For example, rebuilding some of the subways or

some of the highways. I do not believe that FEMA has that expertise. FEMA, instead, turns to the Federal Transit Administration

and says, ‘‘If you will take over this project for us, we will fund

that.’’ It is clearly an eligible funding for us to do, but we do not

have the expertise within FEMA to deal with the environmental

issues, to deal with the engineering issues. That is for the FTA to

do. I think that worked very well also.

Senator VOINOVICH. One of the things that I would be interested

in, and I am sure somebody is working on it, if it is not already

done, is lessons learned.

Mr. BROWN. Absolutely.

Senator VOINOVICH. You are right. This is a brand new deal. You

had some things I do not think the Agency was ever confronted

with in the past in terms of standards of how far do you go in reimbursing people, for example. When I was Governor, I went through

several floods. Sometimes it is not as clear as it should be. But I

think in your case it would be interesting to say, if we had one of

these, what kind of standards would we be using so that you have

something. You would have learned from your experience there. I

would be interested in seeing that information.

Mr. BROWN. We will share that with you. We are in the process

of doing that now.

Senator VOINOVICH. Senator Jeffords.

Senator JEFFORDS. This is an issue I have raised before, but one

that I am concerned about. Since I witnessed some of the challenges faced by the first responders after September 11, in interoperable communications, I am aware of some of the actions taken

by the Department of Homeland Security to improve inter-operability, but I am not satisfied with the progress. I do not seem to

have any evidence of what has changed on the ability for communications.

I was at the Pentagon. I talked with the first responders there.

I asked them, ‘‘What was your main problem?’’ They answered,
14

‘‘Well, we all arrived from Nebraska and every place else, but nobody could talk to anybody.’’

Is there any improvement?

Mr. BROWN. I think there is significant improvement. We are on

the track to continue to make improvements, Senator. There are

two things I would offer. First and foremost is that we have started

defining what inter-operability means. It meant different things to

different people. Some thought that it meant that everyone should

be able to talk with everyone else. If you did that, we would get

nowhere.

We have defined inter-operability as a command and control in

a national incident management system whereby we define who is

going to talk with the one in charge, and who takes orders from

whom. That is No. 1.

The second thing that we have done is that Congress allocated approximately $25 million for us to do what we call demonstration

projects. We are actually making the distribution of those grants

on a competitive basis. We just started doing those grants this

week. We have, on a competitive basis, said to the States,

‘‘Come to us with some of your best practices. We will give you planning and

money to put those projects together in your States. We will take the best practices and try to use those nationwide.’’

Those grants are going out this week to actually start doing

those projects.

Senator JEFFORDS. Thank you.

I understand that in response to the low balance in the Disaster

Relief Fund that you have adopted a policy of funding only Categories A and B of public assistance for federally declared disasters. Can you explain this policy, why it was adopted, and what

types of and how many requests for assistance are being delayed?

Mr. BROWN. Senator, when the DRF got down to a level of $700

million or less, we had projects in the pipeline that were basically

public assistance projects—rebuilding of roads and bridges, or the

rebuilding of a library, or something to that effect.

I made the critical decision at that point that we would fund only

individual needs, and make sure that individuals got the money

and the assistance they needed until we had some resolution of

where we were going to be. I was more concerned about making

sure that people were taken care of and that buildings became secondary.

So while we did not stop any projects that were already ongoing,

those that were in the pipeline, we did put a halt on until we got

the appropriation.

Senator JEFFORDS. Using lessons that you have learned since

September 11, what changes, if any, to FEMA’s authorities do you

believe are necessary to allow the Agency to improve your response

to terrorist attacks?

Mr. BROWN. Quite honestly, Senator, I do not think there are any

at this stage. I think the Stafford Act is so well designed and it has

so well withstood the test of time, that we have the flexibilities

that we need to be able to respond.

I think the chairman is correct in that what we need to do post9/11 is to take our lessons learned about where those flexibilities

need to be better defined and incorporate those into our regulations
15

and our policies. But the act itself gives us broad discretion and

broad flexibility to do what we need to do.

Senator JEFFORDS. The GAO reports that FEMA determined that

the testing of air quality and cleaning were eligible for public assistance funding where the collapse of the World Trade Center

buildings, resulting fires, and subsequent debris removal caused

potential health issues related to air quality. FEMA entered into

an interagency agreement with EPA and partnered with the New

York Department of Environmental Protection to execute testing

and cleaning.

I have two questions in that regard. First, what role did FEMA

play in providing information to the public on the results of the air

quality testing that was connected at the site and in the surrounding areas?

Mr. BROWN. We did not really differ from what we do in a traditional disaster. If we need expertise elsewhere, we mission-assign

another department or agency with that expertise. In this case, it

was EPA and the New York Department of Health who came in

and did that monitoring for us.

Our people on the ground continue to work with those people

day-in and day-out: ‘‘What are you doing? How are you doing it?

What are the results? What additional assistance do you need from

us?’’ We do not have that expertise in-house.

Senator JEFFORDS. Selecting which buildings or areas of the city

would be eligible for public assistance funding, did FEMA include

all the areas impacted by the dust cloud resulting from the collapse

of the buildings?

Mr. BROWN. We attempted to. Again, that goes back to my point

earlier of where we draw the line. We always worked very closely

with the State and local officials to define where that line should

be drawn. If you take Manhattan, for example, do you draw it at

53rd? Do you draw it at 82nd? Do you include Staten Island? Do

you not include Staten Island?

You do all those kinds of deliberations solely in concert with

State and locals to get their input. Again, they are the experts.

They are the ones on the ground who are coming to us asking for

the assistance. That is how we make those kinds of decisions.

Senator JEFFORDS. Thank you.

Thank you, Mr. Chairman.

Senator VOINOVICH. Senator Clinton.

OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,

U.S. SENATOR FROM THE STATE OF NEW YORK

Senator CLINTON. Thank you very much, Mr. Chairman.

I welcome Secretary Brown. I had the great pleasure and privilege of working with him over the last 2 years. I thank you for

holding this hearing. I particularly appreciate all of FEMA’s staff,

including Brad Gair, who has been the FEMA person on the

ground in New York. He has done a remarkable job.

I also want to acknowledge and welcome Bud Larson, the Associate Director of New York City’s Office of Management and Budget who will be testifying on the third panel.

Mr. Chairman, I just want to briefly comment on the GAO report

that has come out just over 2 years since the horrible attacks we
16

suffered. I suppose for the average person going through that report the numbers and dollars associated with Federal assistance

can seem quite large when it comes to our needs in New York.

There was over $20 billion in total, including some $5 billion in tax

incentives and about $8.8 billion in FEMA assistance alone.

I know that the support that New York received from the Administration and the Congress has been extremely important. There

are different estimates that have come forward about what the actual economic loss to New York was. It ranges from about $80 billion to $110 billion. Even today, 2 years after the event, there are

those who still remain still displaced from their homes and their

jobs. Economic repercussions continue.

As I am sure Mr. Larson will testify later, we have had a continuing reassessment of what our needs have. As the GAO report

points out, FEMA aid to New York has been capped at a fixed

amount which has required very difficult efforts to prioritize needs

and allocate dollars, even before we fully knew what the costs

were.

In the case of the horrible Oklahoma City bombing, or the North

Ridge earthquake, so many other previous disasters, as long as the

need was tied to the disaster, the dollars have continued to flow

from FEMA’s Disaster Relief Fund. In fact, sometimes it has taken

4, 5, 6 years, and even longer after the event to take care of all

of the needs that were catalogued. In almost single case, the State

where the disaster took place was eligible for hazard mitigation

grants in an amount equal to 15 percent of the dollars that FEMA

sent on disaster recover.

In New York’s case, FEMA disaster aid was capped at a predetermined amount that I think we are realizing has little connection to the actual need. I am not saying that to in any way suggest

that the amount is too low, but just that it is probably too early

to tell. I am very grateful for the support that we have received.

In this instance where we know there is so much that needs to

be done to prepare for and prevent against a future similar event,

we have had hazard mitigation funding capped at 5 percent versus

the traditional 15 percent.

One specific example I wanted to bring to the committee’s attention is with the mental health services provided under New York’s

Project Liberty. FEMA allocated $132 million. When I went to the

Ground Zero Commemorative services on September 11, a few

weeks ago, a number of firefighters and the top leadership of the

fire department, including the Commissioner, expressed very serious concerns that there is a December 31 scheduled termination of

these mental health services.

We have seen counseling services provided to more than 7,000

firefighter victims. I think that we have provided counseling not

only to active members, but also to family members, retired members, paramedics, and others.

In the original fire department proposal to FEMA, the Counseling Unit requested 7 years of funding for Tier 1 victims. This is,

in large measure, based on the experience in Oklahoma City which

showed clearly that it took a while for these men to come forward.

It was not something that they did lightly or easily. It is only now

that some of them are feeling ready to go into counseling and to
17

seek help. What we learned from Oklahoma City is that it literally

took years. Different things triggered the need or the motivation to

go into counseling.

I would hope, Mr. Secretary, that we can look at a way to try

to extend these resources. They are going to run out at the end of

this year if we do not extend it. The close out date is something

that concerns me greatly. The GAO goes through specific reasons

as to why that is the case.

I think that we really have to look at these closeout dates for

these various services. It is important that we know how well we

used our dollars, but I think we have to recognize also that there

are continuing needs. Perhaps some of the priorities that were set

because of the capped amount and the deadlines that were set are

just not reflective of the human and other needs that we continue

to confront.

Mr. Secretary, could you update me on the status of the mental

health and crisis counseling services provided through Project Liberty?

Mr. BROWN. I could not agree with you more about the importance of that program. I went to New York. We made that $132

million announcement because it is the largest that we have ever

expended on crisis counseling. I was just absolutely amazed at the

people and the job they are doing. The dedication is just overwhelming. As you so eloquently put it, there are many first responders who are macho and they are not going to do it until they

crash and have to do it.

In coordination with the State, we made the decision to keep that

program open into 2004. I will continue to work very closely with

the State to do what we need to do to make it work.

Senator CLINTON. Thank you very much.

Senator VOINOVICH. Mr. Brown, there are a couple of issues I

would like to discuss. One is after 9/11 the members of our team

in Ohio that responded to 9/11 had a dickens of a time getting their

compensation.

No. 1, I would like to know what you have done to improve that

situation so that other first responders are not going to go through

the line as our people did in the State of Ohio to have their claims

processed through the Department of Labor for compensation and

for health care as a result of their being at 9/11.

No. 2, gets into something that both Senator Clinton and I are

interested in. I am going to quote a couple things that were said

at hearings here.

On March 12, 2002, Joe Allbaugh was here. He said,

‘‘I, too, am deeply concerned about what everyone was exposed to in New

York City. On the first of February I put together a task force representing all

the agencies. We are working through those issues. There was a followup yesterday that we will be sharing information that we have gleaned from all the

agencies as quickly as possible as we can. I am trying to find out what these

people were exposed to.’’

Then at another hearing in September 2002, more than a year

after the attacks, I asked more questions of EPA. Again, Director

Allbaugh went on about what people were exposed to and if they

were getting the information out. Allbaugh stated,
18

‘‘We are looking for our guidance from HHS. They have been very successful

providing that leadership. Every bit of information they share with us from a

scientific standpoint we give to every FEMA employee, every USAR employee,

and those volunteers that came to help us at Pier 94. We are sharing as much

information as we possibly can. It is all based on science.

‘‘EPA and ASTAR is keeping a health registry. They are working with the city

of New York on this. They are collecting data now and will be keeping the people information through websites. That is obviously something that they are

very dedicated to make sure that people understand what the exposure was.’’

The fact of the matter is that the evaluation of what people were

exposed to was a complete disaster among Federal agencies. I will

never forget Allbaugh being before this committee. It was awful.

Senator Clinton and I have introduced a bill, a first responders

bill, that is going to give the President authority after one of these

things happen again—God forbid—that will allow them to immediately go in there and get this information.

I would like for you to comment on both of these things. They

are very, very important to, first of all, for the people that are

there that are the victims, but then the first responders. If we have

other disasters like this, these people are going to want to know

that it is a different deal than it was before.

I can tell you that the people in Dayton, OH are not going to be

exited about doing another one of these things because of the way

they have been treated. As a matter of fact, it was a year afterwards that we finally got screening for them. In New York City,

you were able to get your screening. We opened up a screening center in Cincinnati at the University of Cincinnati to finally get them

in there to be screened for what they were exposed to.

I would like you to comment on both those issues.

Mr. BROWN. Well, first let me go back to the Ohio team. We

talked first with Life Care. We made certain that they were doing

what they were supposed to be doing and reaching out. We had

them reach out two or three times. As I understand it, there are

no unpaid claims at this point.

But what it has taught us, Senator, is that we need to go back

and look more closely at our contracts and our relationship with

the folks who do that contracting for us and the payment of those

bills to make sure it gets done more efficiently. That is just unacceptable to me.

Senator VOINOVICH. From another perspective, you might look at

whether or not they could be better done by the Agency itself than

to farm it out to somebody else. In terms of this whole competitiveness, the thing that bothers me is that we always talk about competing out commercial services, but we never look at either services

that maybe ought to be brought back into those agencies. We have

dedicated people that will get the job done for the folks that need

the help.

Mr. BROWN. Absolutely. I could not agree more that the primary

concern should be how to get the job done most effectively and

most efficiently for the first responders. That is my priority. To me,

it is just unacceptable that we ask these men and women to go out

and put their lives on the line. Then we dally around with getting

them reimbursed or paid for what they should be paid for. It is just

unacceptable.
19

That is why we have looked at all the contracts. We did go back

to Life Care and talked with them to make sure it was getting done

right. I have asked my response team to go back and look at what

caused those glitches. I do not try to presuppose how we are going

to fix the glitches. I want my team to come and tell me what the

glitch is and then figure out how we are going to fix it. That falls

wherever it may fall just to get it done.

Senator VOINOVICH. I would like to know the procedure that if

this happens again, how it gets done. I would also like to have you

evaluate the people that were doing the work for you. You farmed

out the work to screen the people that worked at TSA. The people

that did it, in my opinion, did a lousy job. The rumor was that

about 2,000 of them could not pass the FBI’s list.

In terms of the administration, I think that so often you get the

idea, ‘‘Well, we will just farm it out to some firm. They are going

to get the job done.’’ The question is: Do you have the people inhouse that can find out whether the firm that it has been farmed

out to are able to do the job? Really. I think Secretary Ridge ought

to start looking at some of this stuff that you have going on all over

to find out whether or not it is working or not and whether you

are better off bringing it in-house.

Mr. BROWN. That is a very legitimate point. I do not want to repeat myself. But I think we should always look at how do we best

get the job done and let those chips fall where they may—if that

is in-house or if that is contracting. It needs to be done efficiently

to take care of the customer.

From my point of view, the customer is always either the first

responder, the people who are asking to go out and deal with the

disaster, and/or it is the disaster victim, and how we best take care

of those victims and/or the people who are doing that job for us.

That is just my philosophy.

Senator VOINOVICH. How about the issue of letting people know

immediately what they are exposed to? Let the Administration explain it. It happened. There was stuff there. Senator Clinton has

made an issue of the fact. The word on the street was to go back.

I am sure they were trying to get the stock exchange going. They

were trying to get the country moving. We were in an awful situation.

But the fact is that we did not know what we were talking about

at the time that we made those comments. What are you going to

do to make sure that does not happen again?

Mr. BROWN. Well, I think one of the good things is this. Again,

going back to the transition of FEMA into the Department of

Homeland Security, I intend to fully utilize the Science and Technology Group that we have at the Department. I have gone to

Under Secretary McQueary and said, ‘‘Chuck, listen. I do not even

understand some of the questions I should be asking you.’’ FEMA

has never really had what I would call a Research and Development Department. We now have that within Homeland Security.

I want to work closely with them. We have actually assigned

some of his folks into FEMA to watch all of our response activities

and tell us where they can provide us the kind of expertise, whether it is technological expertise or human capital expertise, to answer these kinds of questions.
20

Again, I think it is one of the grand benefits of the creation of

the Department that a small organization like FEMA now has that

kind of talent that we can turn to and say,

‘‘Our first responders are facing these kinds of things. What can you develop

for us? Where can you lead us to give us the technology or the human capital

to provide them with the protection they need.’’

Senator VOINOVICH. Again, I would like to have you come in and

specify exactly how you are getting it done. Allbaugh was saying,

‘‘I am looking for EPA. EPA was looking at HHS.’’ Who knows who

is on first base. It was just awful.

Hopefully we are going to get this legislation passed by Congress.

I would like to know if it is passed what entity you are going to

put in place so that we know that if it does happen we are ready

to go. We would expect also that the Agency would anticipate possibly something that could happen. What are all of the options out

there in terms of what people could be exposed to? Then start anticipating possibly what kind of equipment individuals would need

if they were going to go in there to deal with the issue.

Mr. BROWN. I will do.

Senator VOINOVICH. Senator Clinton.

Senator CLINTON. I want to thank the chairman for his incredible attention to this issue. He has long been a champion of making

sure that we have the right work for us and they know what their

mission is. I think we all learned some very difficult lessons coming

out of 9/11 about what our first responders needed and they information they could or should have had. It is equivalent to a military

after action review. We have to know the right questions. We have

to be unafraid to ask them. We have to be unafraid of getting the

answers.

I just had a few more issues. In following up on what the chairman said, the GAO report refers to FEMA providing funding to cities from the Department of Environmental Protection for the exterior cleaning of buildings, and the interior cleaning of residences.

The EPA, through interagency agreements, would sample and test

the air quality in the New York City area.

One of the things we learned is that the city just did not have

the expertise to do this assignment. There was a lot of confusion

initially about who is responsible for indoor air. Some of us believed that EPA should have been responsible for indoor air. They

went to the city. The city accepted the responsibility, but by February when I held a hearing in lower Manhattan, I asked the representative from the city Department of Environmental Protection,

‘‘How did you get this responsibility? What are you doing with it?’’

He was very honest. He said, ‘‘You know, we know about water. We

do not know about air.’’

This was something that the ball fell in the cracks. I think the

legislation that Senator Voinovich and I are putting forward is to

try to get everybody on the same page. Who has responsibility?

What is the chain of command? Who is held accountable? We hope

that the Administration will really strongly support this legislation.

We think it is needed.

But as you know, there has been a lot of scrutiny in recent days

over the information that EPA provided to citizens and workers in

lower Manhattan. Can you give me some more information on what
21

specifically EPA was provided resources for, and the level of accountability required under the interagency agreement?

Mr. BROWN. No, Senator, I cannot right today. But I will get that

to you. I just know when our Emergency Support Team mission

tasks an agency to do something, they will spell out in that mission

assignment exactly what it is that they want the Agency to do and

the requirements. I will get that mission assignment and provide

it to you.

Senator CLINTON. That would be very helpful.

Let me also ask you two other questions. On the issue of hazard

mitigation funding, and again you probably cannot do it sitting

here, but as soon as possible can you provide me with a history of

what disasters in the past have received 15 percent versus 5 percent caps.

Also, has Governor Pataki submitted his request for hazard mitigation grants? If so, where is FEMA in the process of funding

them?

Mr. BROWN. We will get you the background on who has received

what in terms of the 15 and 5 percent. We will provide you that

completely.

The Governor has requested some mitigation projects which we

have funded, some of which went to the Indian Point Nuclear

Power Plant. But he has not expended all of those funds. He has

used part of it for that program.

Senator CLINTON. Thank you.

Finally, Mr. Secretary, there is a new issue that has come to

light which has very serious implications. As you know, earlier this

year Congress specifically directed that $1 billion of the 9/11 related FEMA funds be used to create a captive insurance company

to cover claims arising from the debris removal and cleanup of

Ground Zero.

The accompanying conference report said that this captive insurance company should not cover, and I quote, ‘‘claims arising from

the terrorist-related aircraft crashes of September 11, 2001.’’ The

conference report said that because Congress had taken care of liability for those attacks in Section 408 of the Air Transportation

Safety and System Stabilization Act.

Section 408 is in the title concerning the Victim Compensation

Fund. It provides that if someone is injured by terrorist attacks

and does not seek compensation under the Victims Compensation

Fund, they can sue the airlines or the city of New York. But the

liability of the airlines and the city would be limited. There was a

specific provision for that limitation. In the case of New York City,

the limitation was $350 million.

I think the clear language of Section 408 makes it absolutely

crystal clear that it was not meant to cover litigation arising out

of the cleanup. That was a post-terrorist event. The terrorists attacked. If the people do not want to go to the Victims Compensation Fund, they have a right to sue. But then we had the aftermath—the cleanup of the debris.

The cleanup was completed in August 2002. I think that we have

a problem here because of a recent court decision in a case called

‘‘In Re: World Trade Center Disaster Site Litigation: Hickey v. City

of New York.’’
22

I would ask unanimous consent, Mr. Chairman, to put in the

record the specifics about this question. I think this raises an issue

that the committee will have to address.

This judge recently determined that Section 408, which the Congress specifically said was related to terrorist attacks, capped liability for airlines and for the city, will apply to debris removal

cases that stem from the period when the contractors and the

workers were on the pile.

I know that FEMA is recently considering concluding that all debris removal cases would be handled under Section 408 rather than

under this Captive Insurance Company. I hope that is not the case.

I think the explicit legislative purpose of the Captive Insurance

Company was to deal with these debris removal cases.

I know this is complicated. I know you are currently negotiating

with contractors and the city of New York about the specifics about

the Captive Insurance Company, but this is a very important issue.

It would be just unbelievable if we had set money aside, allocated

this Captive Insurance Company’s responsibility, and all of a sudden we throw them into Section 408 which I think would be a

nightmare for everybody.

The city of New York has told me there are over 1,000 debris removal cases that were filed, with the vast majority of them going

after the contractors. Everybody remembers what it was like there

in those first weeks and months. Everybody knows people were just

working as hard as they could, literally, around the clock. The debris cleanup was done before the scheduled deadline and under

budget. It was a great tribute to the contractors and the workers,

the city, and others who were involved.

This is a very significant issue. I just do not think that we want

to go outside the clear intention of Congress because one judge

somewhere misreads the statute and end up using that as an excuse for dumping all these cases into that Section. I hope we can

resolve this in line with what the congressional intent was, and the

clear language of the statute intended.

Mr. BROWN. I am happy to say, Senator, that issue has not

crossed my desk yet. I am sad to say it is about to cross my desk.

Now I know. I will certainly take that into consideration. I do understand the issue.

Senator CLINTON. My office was intimately involved in drafting

these sections along with the city. We stand ready to work with

you and to try to resolve this in a way that we think reflects the

language and the intent of the two different provisions.

Mr. BROWN. It is frustrating because it has taken so long. We

have finally gotten to this final point now. Captive is ready. We

have all that ready to go. We just need to resolve this.

Senator CLINTON. It would make no sense. I look forward to resolving this with you.

Thank you, Mr. Chairman.

Senator VOINOVICH. We have had a couple of rounds of questions.

We have been joined by Senator Carper.

Senator Carper, before we excuse Mr. Brown from his work here

this morning, do you have any questions or a statement?
23

OPENING STATEMENT OF HON. THOMAS R. CARPER,

U.S. SENATOR FROM THE STATE OF DELAWARE

Senator CARPER. Yes, I do. Thank you very much.

Mr. Brown, it is good to see you. I appreciate very much the

chance to talk with you last week.

Mr. Chairman, and my colleagues, this obviously is a very important hearing. FEMA’s responses in New York after 9/11 were unprecedented. We hope that your Agency is never going to have to

do anything like that again.

I think we would not be doing our jobs, however, if we did not

take some time to look back over the last 2 years and see what

went well and what did not, what we can learn, and what we

might want to change.

I really want to applaud FEMA for starting this process on your

own through the Public Assistance Program. We designed the

project. We look forward to working with you and others on this

committee to see what kind of reforms ought to be carried out.

Mr. Chairman, I spoke with Mr. Brown last week on the heels

of Hurricane Isabel, a freak storm that visited us several days earlier as the remnants of tropical storm Henri, called by some as

Henry. The storm caused heavy rains not so much in northern

Delaware, but more in Southeastern Pennsylvania of anywhere

from 8 to 10 inches within about a 3-hour period.

It led to flooding, not so much in Pennsylvania, but in Northern

Delaware because of the confluence of the Red Clay and White

Clay Creeks. It washed out a community of about 200 homes called

Glenville, which you were good enough to talk with me about. It

is almost 4 years to the day that they were washed out by Hurricane Floyd. It is the third time in about a dozen years that this

community has been devastated. Each time they have come back,

they have rebuilt and people have gone back into their homes.

They have put a lot of blood, sweat, tears, and money into doing

that. I think their spirits are broken this time.

Through our own local agencies, we have helped them. FEMA

has been right there. We appreciate them being there and working

with our team to help people get into shelters and go in and do preliminary damage assessments and that sort of thing.

The question I would have is this. If you can answer it today,

then terrific. But if you would like have a little more time to give

you answer then you can send it to me later this week, if possible.

One of the people who live in Glenville do not want to go back.

They have been through this two or three times. Their spirits are

broken. They are interested in our congressional delegation finding

out how they go forward with a buy-out program. Could you just

take a moment and explain to us how it works. Our Governor has

submitted to President Bush a request for Federal emergency designation, a disaster designation, because of the most recent hurricane. She has also submitted a separate request for this community and the surrounding area because of the damage from tropical

storm Henri.

How does the buy-out program work?

Mr. BROWN. Well, let me first address the request for declarations. The Henri request came in. We were looking at it. What we

do often times is that we go back to the State and local officials
24

and really work with them to try to define the numbers, to see if

we are close. Are we clearly over the threshold? Are we under the

threshold? How close are we? What additional information do we

need that might help us get to that point? We do all those things.

We were actually in the process of doing that for Glenville. Then

Isabel hits. We have already expedited, at the Governor’s request,

the Isabel declaration. That is done. It will include Glenville. The

entire State will be included based on this latest declaration. The

prior declaration is still pending and still out there.

What I need to figure out, Senator, is there anything additional

we can do in terms of buy-outs? I do not know how many people

had flood insurance and how many did not have insurance. It is

something that I am going to have to come back to you and tell you

that this is exactly what we will or will not be able to do or here

are the flexibilities we have.

I do want to assure you that under the expedited declaration we

did for Isabel, that the entire State will be covered. I have told my

folks to extend an incident period to make sure we get that covered.

Senator CARPER. All right. Thank you. In the next day or two,

that would help us.

The kind of things we are interested in resolving from FEMA is

how does this program work in some other places? I am sure we

are not the only community and we are not the only State this has

happened in.

Mr. BROWN. That is why I want to be sure that I give you good

accurate information. We will get something together and sit down

with you.

Senator CARPER. Thank you. The questions will include: What

can the community consider before they decide to try to pursue

buy-outs? What is expected in terms of State and local participation in funding these. Are buy-outs even feasible or desirable for

a community like Glenville?

Those are the kind of questions we would like to resolve. If you

can put us in touch with the right person, we would be grateful.

Mr. BROWN. We will do that.

Senator CARPER. I want to express a special thanks for the quick

turnaround with response to the disaster declaration. That was

much appreciated. Thank you.

Thank you, Mr. Chairman.

Senator VOINOVICH. Senator Jeffords, do you have any other

questions?

Senator JEFFORDS. No further questions.

Senator VOINOVICH. Mr. Brown, I want to say to you that I really

appreciate your service to this country. Your Agency has had an

enormous burden with the aftermath of 9/11 and all the other

things that just come your way. I would like to thank you personally and to carry back to the people that work with you our appreciation for the extraordinary work that they are doing to try to be

responsive to all the things that they are being asked to do.

Mr. BROWN. Senator, I would just like to say in closing also that

we certainly appreciate your concern about our people. It is our

people within this Agency that makes us what we are. I really appreciate that.
25

Senator VOINOVICH. Thank you.

Our next panel is JayEtta Hecker, Director of Physical Infrastructure Issues, General Accounting Office; and Rick Skinner,

Deputy Inspector General, Department of Homeland Security.

Welcome. We are very happy to have you here this morning. We

will begin with Ms. Hecker.

STATEMENT OF JAYETTA HECKER, DIRECTOR OF PHYSICAL

INFRASTRUCTURE ISSUES, GENERAL ACCOUNTING OFFICE

Ms. HECKER. Thank you, Mr. Chairman.

We are very pleased to be here to present our work to both you

and Senator Jeffords. In fact, most of the work that I will be basing

my remarks on is work that either we have recently completed for

you or has been ongoing for you as well as Senator Inhofe and Senator Clinton.

The remarks that I will focus on today will cover two points—

how much and what types of assistance the Federal Government

provided to the New York City area following 9/11, and how the

Federal Government’s response differed from prior disasters. The

presentation that I have uses a number of charts. Let me just briefly review; there is a lot of work that we have done and I do not

want to confuse you.

The report that you are releasing today is, as you stated, on the $7.4 billion Public Assistance Program by FEMA exclusively. That

is what this report reviews in detail. In addition, we have a report

on major management risks facing FEMA, which was another objective you had for today’s hearing. I have some remarks in my

statement based on that as well.

My statement, though, and as you can see in this overview, is about the full $20 billion, not about the $7.4 billion FEMA program

exclusively. However, I can talk about that in detail if we want to

focus on that. Basically, I will be looking at the entirety of funding,

with the focus on the distribution and the role that FEMA played

in these four broad areas.

To assist in your following this, we have made copies of the

posterboards for you if you want to take a closer look at them. The

overview is the estimated $20 billion that was pledged and that

Congress has subsequently authorized.

The major contribution that we have made to reviewing the provision of assistance is in two areas. First is giving more detail to

it. You have seen it by agency and it has been authorized by agency, but what we have done is to sort it into four broad categories—

initial response, compensation for losses, infrastructure restoration,

and economic revitalization. These numbers actually exclude committed assistance where its use has not yet been decided. There is

$1.16 billion that HUD has committed, but it has not been determined where it is going to go. The total also excludes the Victim’s

Compensation Fund.

The next four charts are going to take each of these slices and

talk about how much was provided and what was provided by each

agency. In the initial response, you have $2.5 billion that has been

provided for the initial response. We have pictures of the debris removal, the urban search and rescue teams. I do not know what

State that team is from, but they are similar to your teams from
26

Ohio who came in to aid New York. There were 20 of the 28 urban

search-and-rescue teams that actually came to New York, the biggest deployment ever.

Then on the bottom you have emergency transportation repairs.

You can see the devastation to the tunnels that completely block

them and the emergency cleanup that worked to clean that up. Of

the $2.5 billion, in initial response funding, about $1 billion is for

insurance to cover the liability of the city for the claims from workers and city officials who were involved in the cleanup and who

may have been affected with health claims.

That billion is not yet allocated and that agreement is not yet fi- nalized. That is the $2.5 billion. It certainly was a record rate of

activity. It was a pile of devastation that was seven stories deep.

It was 11 stories high. It happened in record time and well below

budget. The second phase which covers $4.8 billion is for compensation

of specific disaster related costs. This goes to three categories of recipients—to city and State officials and other government organizations like the Port Authority; it goes to individuals; and it goes to

businesses. The distribution included about $3.3 billion which went

to New York City and State, about $800 million to individuals, and

$683 million to businesses.

The pictures we have here really are just symbolic. There are

dozens of programs that are involved in serving those three constituencies. One picture is of the replacement of emergency vehicles. There were, of course, hundreds of emergency vehicles destroyed. That is what I think Assistant Secretary Brown was referring to is the traditional approach looking at vehicles, or physical

damage. That was very quickly reimbursed.

We also have a picture of the substantial number of folks coming

in looking to find out what kind of individual assistance and compensation were available. There were dozens of programs, not just

by FEMA, but by HUD as well. The total is $4.8 billion for compensation to the three categories of recipients.

The next phase is for infrastructure restoration. This is actually

a very unique area. Of course, there was the traditional damage

that is always compensated under public assistance. But in this

case there was an early agreement by FEMA and subsequently authorized by the Congress, not just for replacement of the damaged

infrastructure, but actual enhancement and substantial improvement of the infrastructure.

What we show in this picture is actually one of the renditions of

a transportation infrastructure restoration of the South Ferry

Street subway station. What you have is the current line, which is

that yellow loop, which is very inefficient. It only allows 5 of the

10 cars to open in the station. The plan is to change that so that

the full ten cars can come into the station. There was no damage

whatsoever to this station. This is part of an agreement to substantially enhance the infrastructure of lower Manhattan.

Similarly, the Fulton Street station was not damaged. There are

improvements planned there at the $750 million level. There has

been a real commitment by the Federal Government and with the

endorsement by Congress to do far more than the simple historic

replacement of the infrastructure, but a substantial improvement.
27

There is also a similar commitment with HUD funding. The

amount is about $500 million for improvement of telecommunications and communications infrastructure. That also was an improvement. That is not simply a replacement. It is meant to try to

induce and improve the economy and make it more attractive to

businesses like the Stock Exchange to have a more robust support

and networked infrastructure so that they feel safe being in an environment where they could be so easily interrupted.

The fourth phase is economic revitalization. This is estimated at

a little over $5 billion. This includes a range of initiatives on the

part of HUD to promote business attraction and retention. There

is a diverse range of programs for large businesses, small businesses, as well as the $5 billion estimated value of the Liberty Zone

Tax benefit plan that was passed by the Congress to assist in the

revitalization of New York City.

Let me turn quickly to the last chart which tries to summarize

the major differences of this approach. Of course, it was the biggest

disaster ever. It was certainly profound in terms of being a terrorist incident. But what I focus on is the changes in the process

and the types of assistance that were provided.

Basically we have categorized the changes into three areas. The

first is that there was a complete waiving of State and local match.

The law requires about a 75 percent match. At times some of the

assistance has gone up to 100 percent, but never the entire amount

of assistance. The State and local match was completely waived for

all the FEMA public assistance for the first time in history and for

all of the Department of Transportation funding. That is over $10

billion. The match there was waived.

The second biggest area—I think this was not quite brought out

this morning, and I would like to make this point clear. What was

really unique is that it was first time in which the amount of the

disaster assistance was set very early. It basically functioned as a

funding target. Congress supported the President’s commitment to

provide approximately $20 billion to New York City.

Basically, as Senator Clinton said, that has then functioned as

a cap. So you had the various agencies who had dedicated funds,

whether it was FEMA, HUD, or DOT, looking at how they could

spend the funds allocated to them. The key thing was that they

could not spend the $20 billion under Stafford-eligible projects.

Substantial flexibility was provided to be able to expend those

funds. That actually was related to the recent consolidated appropriations that authorized FEMA to basically do what amounts to

a cash transfer to the city of approximately $1 billion.

This is for the type of assistance that was very nontraditional.

FEMA basically closed out, for the first time in history, all of their

assistance as of April 30. Then the amount that was left over is

what was transferred. That was $1.1 billion that has recently been

transferred to the city.

That really summarizes the work. The key things are that it was

an extraordinary Federal response. I am sorry to tell you that the

data was a mess. It took us a long time to try to get it to tell you

where the money went and how it was used. Our report on this

area will have very comprehensive reviews for you in more detail
28

on this, including the disbursement rate as well. We know that has

been an issue of interest.

Thank you, Mr. Chairman. I would ask that my written statement be placed in the record in its entirety.

Senator VOINOVICH. Thank you very much.

Mr. Skinner.

STATEMENT OF RICK SKINNER, DEPUTY INSPECTOR

GENERAL, DEPARTMENT OF HOMELAND SECURITY

Mr. SKINNER. Good morning. I would like to thank you for having

me here. I am Rick Skinner, Deputy Inspector General at the Department of Homeland Security. I would like to briefly summarize

my remarks. I would like to discuss two issues.

One is the work of the OIG in New York City following the 9/

11 terrorist attacks. Two is the OIG’s perspective on FEMA’s merger into the new Department of Homeland Security.

First, let me address our work in New York. In response to the

President’s declaration, FEMA applied the full range of its authorized disaster assistance programs. The FEMA OIG, in turn, deployed four teams of auditors, inspectors, and investigators early in

October 2001 to New York City to oversee the management of

those programs.

One team worked directly with the Federal Coordinating Officer

and monitored the general management of the disaster field office

and the disaster field operations. Another team worked with the

FEMA public assistance staff, debriefed applicants on how to maintain records, reviewed accounting systems, and reviewed grant applications and claims to ensure the eligibility of costs.

The third team worked with the U.S. Attorney and the New York

City District Attorney to detect and prosecute fraudulent claims.

The fourth team, in the fall of 2002, conducted a full-blown review

of FEMA’s Individual Assistance Program. I brought extra copies

of the report for those who may not have seen it. It was issued in

December 2002. I will summarize a few of our more significant

findings.

Mortgage and Rental Assistance Program. FEMA historically has

not had to implement the Mortgage and Rental Assistance Program

on a large scale because previous disasters did not result in widespread unemployment and economic loss. Consequently, Congress

eliminated the program when it enacted the Disaster Mitigation

Act of 2000, making the program unavailable after October 2002.

The effects of the 9/11 terrorist attack, however, demonstrated

genuine need for programs such as this. Therefore, we have recommended in this report that Congress consider reinstating the

program under the Stafford Act.

Interagency Coordination Challenges. Responsibility shared

among FEMA, EPA, and the U.S. Department of Justice’s Office for

Victims of Crime, and voluntary agencies were not defined clearly

enough to distinguish roles and establish the sequence of delivery

of assistance. Recovery from the 9/11 terrorist attacks highlighted

the need for advance agreements and memorandums of understanding regarding shared roles, responsibilities, and authorities

among those agencies most likely to respond to future such events.
29

I know that Under Secretary Brown has addressed a few of those

issues, particularly with regards to the coordination between

FEMA and EPA in the cleanup and testing that took place there.

It took place very late in the disaster because people simply did not

have experience in dealing with issues like this.

Assistance to Aliens. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 requires that FEMA public

benefits be provided only to U.S. citizens, noncitizen nations, and

qualified aliens. Yet, there were 9/11 disaster victims who do not

meet this criteria, but who were lawful residents of the United

States, in this country legally.

One immigration advocacy group estimated that as many as

80,000 lawfully present individuals in New York City are not qualified for Federal disaster assistance. This would include aliens here

on work visas or student visas.

We believe that FEMA should consider pursuing legislative

change that would exempt its programs from the Federal Public

Benefit Classification, when victims needing aid are lawfully

present in the United States.

Grants to small businesses were made on an ad hoc basis. The

9/11 terrorist attack had a negative impact on the New York City

economy, strongly affecting businesses, both large and small. In

fact, GAO issued a report on this very subject last year. There is,

however, presently no ongoing Federal program that provides grant

support to businesses adversely affected by terrorist attacks.

SBA is authorized to make loans, not grants, to businesses adversely affected by disaster. The SBA is prohibited, however, from

making loans to businesses that do not meet established eligibility

criteria. SBA was unable, for example, to make loans to businesses

that did not meet the Agency size requirements or standards.

After the 9/11 attacks, Congress enacted special legislation allowing the State of New York to use Community Development Block

Grant funds to make business recovery grants for those affected by

the 9/11 disaster. However, this was a one-time exception. Congress may wish to consider whether the Federal Government

should be the insurer of last resort for terrorist-related business

losses. Such a policy decision would eliminate the need to respond

on an ad hoc basis if a future event like this should occur.

I would like to shift gears and address FEMA’s transition into

the Department of Homeland Security. This will be brief. As Under

Secretary Brown has already noted in his testimony, FEMA has

not missed a step in responding to disasters since becoming part

of DHS.

In May of this year, we sent a team of auditors to monitor

FEMA’s response and recovery efforts in the State of Missouri. The

caliber and effectiveness of FEMA’s response was the same high

standard we have seen in the past. Notwithstanding the continued

success of FEMA’s response and recovery efforts, FEMA has many

problems that need to be address. Its ability to effectively address

them is compounded by its merger with DHS.

Areas of particular concern include FEMA’s financial management, the development and security of its IT systems, and grants

management. Deficiencies in these areas could most certainly ham-
30

per the effective and efficient integration of FEMA programs and

operations into the Department of Homeland Security.

However, the FEMA OIG has also transitioned into DHS and the

ability of that staff to provide oversight, as we have in the past,

of those activities has been diluted due to the many high profile,

non-FEMA programs and activities that the DHS’ OIG has responsibility for.

In addition, although numerous grant programs are now consolidated within DHS, their management is divided among various

components of the Department. For example, preparedness for terrorism is in the Border and Transportation Security Directorate,

while other preparedness efforts are in the Emergency Preparedness and Response Directorate. This bifurcation could create additional challenges related to intergovernmental coordination, performance accountability, and financial accountability.

It is our understanding that these problems are now being addressed legislatively. Further, we just learned that Secretary Ridge

has announced plans to centralize these programs within a single

office in the Department. These initiatives, either legislatively or

through reorganization, if implemented, could very well resolve

many of our concerns.

This concludes my opening remarks. Again, I appreciate the opportunity to testify before you today. I will be happy to answer any

questions you may have. I would ask that my written statement be

placed in the record in its entirety.

Senator VOINOVICH. Thank you very much for being here.

Ms. Hecker, this last chart that you showed us, the nontraditional work funded, such as improvements to transportation infrastructure in lower Manhattan. This is brand new to me. This was

a massive infusion of public dollars to enhance the existing set up.

In other words, this was more than just a replacement that we are

dealing with?

Ms. HECKER. Precisely.

Senator VOINOVICH. What is the dollar amount on how much of

this nontraditional money that was put in there? FEMA comes in

and they do their work. They help with the library and fix it up.

There may be other public buildings that may have been damaged.

This seems to have gone way beyond anything like that.

Ms. HECKER. We have not been able to identify an explicit number that was above and beyond Stafford in part because there was

substantial flexibility that FEMA officials decided that they had

within the Stafford Act to actually improve transportation infrastructure.

There was actually a legal opinion. There was a conclusion that

simple replacement of the infrastructure would not restore its

functionality. Therefore, they felt improvements were necessary.

There were certain types of improvements that they said would

have been Stafford covered. But then you had congressional authorization saying that these completely unrelated areas could also be

funded as well.

It is not clean-cut of what is over and above Stafford. The Fulton

Street station, as I said, was $750 million. There was no damage

there. What they are doing is that they are connecting lines that

previously were not connected. They are making it a complete
31

lower Manhattan transit center where all the lines connect. There

used to be at least three areas with more than 10 lines. There

would be different stations. The South Ferry Station that was on

the chart is $400 million.

Ms. HECKER. Do you have that in your report on one page that

you can see that? The reason I am asking the question is that this

is an extraordinary commitment of infrastructure dollars. This was

part of the cap, right?

Ms. HECKER. Absolutely.

Senator VOINOVICH. It is all within the cap?

Ms. HECKER. Precisely.

Senator VOINOVICH. The point I am making is that we may get

some requests now to come in and say there are ongoing things

that we needed to do and were capped out. What I am trying to

say is it is an allocation of resources. If you put all the money, $1.5

billion, into public improvements and then you come back and say,

‘‘Well, hey folks, we do not have enough money to take care of the

people.’’ I think Senator Clinton mentioned mental health.

Who decided the allocation of the funds? The same people are

coming to us to say, ‘‘Hey, we do not have enough money for these

people. But by the way, we did have enough money to do these

public improvements to lower Manhattan.’’

Ms. HECKER. It is certainly a choice that officials in New York

City and State made working with FEMA on the allocation of the

funds. There were many meetings about it. There were lots of areas

that came before the Congress where there were concerns about

coverage. One was costs—$11 million for the rescheduling of elections, not a cost traditionally covered. There were increased Medicaid costs by the State—not a cost traditionally covered.

There were costs of COLA adjustments to pensions. The city was

looking for reimbursement of that. These are nontraditional types

of costs nowhere covered by the Stafford Act, but with that expedited closeout and that transfer of additional funds, the city and

State now will be making the choices of that remaining $1 billion

and have made many choices already in terms of dedicating funds

to transportation improvements.

Senator VOINOVICH. I am really interested in that—all these

things that are nontraditional.

Ms. HECKER. We will try to isolate that. As I said, there is a

fuzzy line in some of them.

Senator VOINOVICH. Thank you.

Senator Jeffords.

Senator JEFFORDS. Thank you, Mr. Chairman.

Ms. Hecker, did you find any information as to why the President capped the disaster funding for New York $20 billion? Was

there any rationale given for that?

Ms. HECKER. We have not seen much documentation on that. Basically the press reports were that there were overtures to him that

he should come out with a very strong statement of a commitment

to provide support for New York. There is no documentation of

where the $20 billion came from. The Secretary said, ‘‘There was

very little known in the beginning about the buildings.’’

For example, the buildings were owned by the Port Authority.

There was some concern at the beginning that perhaps the cost of
32

the replacement of the building might be part of public assistance.

There is not much documentation.

But as the process went on and traditional applications came in,

it was clear that the $8.8 billion that Congress set aside for FEMA

was not going to be met with eligible Stafford Act projects.

Senator JEFFORDS. Is the $20 billion sufficient?

Ms. HECKER. Once you are out of the Stafford Act, everything is

a question of judgment. The Stafford Act has its history about what

is covered. What is covered by the Stafford Act has been provided

or is covered in this $1 billion transfer. The above and beyond is

a discretion of Congress to decide what is adequate.

Senator JEFFORDS. This is a question for Mr. Skinner.

In your written testimony you state that FEMA should be more

proactive in requesting EPA to conduct necessary testing and there

are studies to determine that the public health or safety threat exists in the future in future disasters.

So that cleaning efforts can begin much earlier in the recovery

phase, am I correct in understanding that had EPA expressed their

concerns about indoor air quality in lower Manhattan earlier,

FEMA could have provided emergency response funding more

quickly?

Mr. SKINNER. Yes, I believe they could have. FEMA knew early

on that there was asbestos in the air as a result of these attacks.

But because FEMA’s lack of experience in this area—as well as

EPA’s lack of experience in this area—and the question of whether

they even had the authority to authorize cleanup of individual residences, particularly on the inside, was something that I think was

discussed for many months before an ultimate decision was made

to test and clean residences.

What we are suggesting here is that in the future we need to be

a little bit more proactive. If there is any evidence whatsoever, particularly after an event such as the terrorist attacks, or any possibility that there could be some contamination in the air, then

FEMA should probably be going to EPA early on and directing

them to test the air quality to find out exactly what hazards may

exist. This needs to be done early on.

I do not think either FEMA or EPA was prepared after 9/11 to

address this issue in the early stages of the disaster.

Senator JEFFORDS. What complicating factors are present in the

new Department that may make it more difficult for FEMA to conduct its work and address some of the management challenges you

describe in your testimony?

Mr. SKINNER. FEMA’s Financial Management System is a good

example. It is fraught with problems and if you pull one string, the

whole thing could fall apart. Now it is being integrated into the Department of Homeland Security’s Financial Management System.

FEMA’s financial management systems have several material

weaknesses that will affect the Department of Homeland Security’s

ability to build a reliable department-wide accounting system. The

same holds true, for example, with the IT systems. There were IT

development efforts ongoing within FEMA prior to the creation of

DHS. Many of those development efforts now have to take a back

seat or have to compete with other priorities within the Depart-
33

ment of Homeland Security as to which IT projects should be continued.

The security of FEMA’s IT systems, like the security of all the

legacy agencies, are very weak. Only a handful of them may have

passed an IT security ‘‘litmus’’ test. The problem will certainly affect DHS’ ability to integrate legacy systems into a departmentwide system.

Grants management has always been a problem with FEMA. It

also has been a problem with the DOJ programs, from what I understand. According to DOJ-OIG reports, grants to the States are

oftentimes made late. In FEMA’s case, grants are timely, but once

the funds are passed out, there is no accountability. FEMA does

not obtain accurate and timely financial reports, nor are they making onsite monitoring visits. FEMA is validating that the funds are

being spent the way they are supposed to be.

I was the Deputy Inspector General at FEMA before the merger

with DHS. We questioned over $900 million in grant expenditures

in just FEMA programs alone over the last 9 years. These are the

types of issues that the DHS must now grapple with, now that they

are merged in with DHS. These are problems that will need to be

addressed now that they have been transferred into DHS.

Another issue, and I think it is a very serious one, DHS needs

to take a very close look at, is this: Are these grants, in fact, enhancing the State and local’s ability to respond to and recover from

disasters, whether they are caused by natural events or terrorist

events? DHS has no performance measures to suggest that the

grants that are being passed out on a yearly basis, costing billions

of dollars, are, in fact, having an impact on the nation’s ability to

prepare for and respond to disasters. I think that this issue needs

to be addressed sometime soon as these accounts get larger and

larger as time goes on.

Senator JEFFORDS. Thank you. I know I went well over my time,

but I think it is information well deserved to be received.

May I continue?

Senator VOINOVICH. I have some other questions.

Senator JEFFORDS. Then you go ahead and let me rest.

Senator VOINOVICH. Probably what we need to do is to look at

all the various agencies that are being merged into the Department

of Homeland Security. How many of them are on GAO’s high risk

area?

Ms. HECKER. The whole merger is on the high risk list.

Senator VOINOVICH. The issue that Mr. Skinner is getting at is

that some of these components were already weak to begin with

and now they are going into the new Agency. The issue is: Are they

going to better cured by having DHS just focusing on that issue in

other agencies and put it all in one basket? Will they be better off

just focusing on FEMA to make sure that their financial management systems are in place? That is a policy decision that needs to

be made.

One of the points that you made—and again I would like to capture it, is that the grants that were given to New York did not require the match. Have you captured the cost savings in terms of

not having to come forward with a match? Traditionally the locals
34

have to come up with a match. In this particular case, that was

waived. Did you put a dollar amount on that?

Ms. HECKER. As I said, the law requires a maximum 75/25 percent State/local match. In prior disasters, the State/local match has

been waived for part of the disaster. In the North Ridge earthquake, part of public assistance, the emergency or the short-term

work, the State/local match was reduced to 10 percent. In some disasters, the Federal Government has covered 100 percent for some

specific expenses or time period. As such, you cannot just estimate

what is 25 percent of $8.8 billion. Historically there is a lot of a

discretion there to vary the amount. The point is that it has never

been entirely without a State or local match for the entire value

of the public assistance, in this case $8.8 billion.

Senator VOINOVICH. What I would like to do would be to take a

minimum figure. In other words, if you look at other projects, is

this is worth 25 percent, 15 percent, or 10 percent? I would like to

get a handle on how much money the local communities were saved

as a result of not having to come up with the match which is a

match that traditionally communities have to come up with. We

had to come up with it in Ohio when we had our disasters.

Ms. HECKER. Particularly for the transportation improvements.

This is the first time that the transportation match has been

waived as well.

Senator VOINOVICH. I am really interested in that. I would like

to really capture the total cost of all of this and what was done.

All right?

Ms. HECKER. Yes.

Senator VOINOVICH. Mr. Skinner, I would like to talk about the

issue of information on what people are exposed to. Does FEMA

traditionally get into the issue of air quality?

Mr. SKINNER. To my knowledge, no. It is somewhat unique.

Senator VOINOVICH. That is like an EPA’s responsibility. The

issue then becomes when EPA gets involved, are they responsible

for the air quality outside and inside? You may not have the answer to this.

Mr. SKINNER. I do not know the answer to that. It was my understanding that at the time of the World Trade Center incident, they

did not believe they had the authority or responsibility for the air

quality inside a residence.

Senator VOINOVICH. In other words, they felt that was up to the

local health department to determine what was the condition inside?

Mr. SKINNER. Yes; that is my understanding, but that question

could be better answered by EPA.

Senator VOINOVICH. One of the things that I am interested in, as

I mentioned earlier, is the legislation that Senator Clinton and I

have that was voted out of this committee that empowers the

President to move in and get all that information. We still have the

situation where you have the EPA out there. Allbaugh was taking

about Health and Human Services being involved.

I would like to get an answer in terms of what is the vehicle that

would be looked to if the President were to exercise his authority

under this legislation. It is easy to have legislation. But the issue

is if it happens, who is responsible for what? Is it going to be EPA
35

that is going to be the one that is doing it? Is it Homeland Security

that is going to be done? Is it HHS?

Something has to be put together so that it is comprehensive.

Are they responsible for just the exterior air? All of that, I think,

really needs to be worked out. I think we ought to get a question

to the Agency and really followup on that particular issue.

Mr. SKINNER. Yes, I agree. That was our point in our report. I

think the lessons learned from 9/11 should be a guideline for

FEMA and EPA to start developing some protocols before the next

disaster, so when the next incident does occur, they will be better

equipped.

Senator VOINOVICH. In terms of your oversight there, did you

ever get into the issue of their processing of these claims for the

first responders in terms of their health claims? Did you look at

that at all?

Mr. SKINNER. No, we did not, sir.

Senator VOINOVICH. It is just another area where they just did

not get the job done.

Mr. SKINNER. It was just so much to do there. Again, we focused

primarily on the individual assistance programs, knowing that

GAO was going to be focusing on the public assistance programs.

Senator VOINOVICH. OK. I have exhausted my time.

Senator Jeffords.

Senator JEFFORDS. I have no further questions.

Senator VOINOVICH. I would like to thank you both for being here

today. It has been really illuminating.

Mr. SKINNER. Thank you. It was our pleasure.

Senator VOINOVICH. I am going to ask that FEMA report and the

GAO report on FEMA, ‘‘Major Challenges and Program Risks,’’ released today be entered into the record.

Without objection, so ordered.

[The referenced reports follow:]
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Senator VOINOVICH. We have people here at the front lines today.

Brother Shipley and I have been through a lot together. I think you

were on a leave of absence to go over to Chicago and work for

FEMA for awhile. Now he has returned back to Ohio.

Senator Jeffords, I would like you to know that we probably have

the best emergency management facility in the United States of

America. In fact, James Lee Witt was there when we cut the ribbon

on it. Mr. Shipley is really an outstanding individual that has

served our State and country for many years.

Senator JEFFORDS. Is that because you have so many disasters

out there?

Senator VOINOVICH. Thank God we did not have that many of

them.

[Laughter.]

Senator VOINOVICH. Mr. Larson, you certainly have been through

it and probably could write a book. Maybe you are starting to do

that. We are very happy to have you here with us today.

If you could limit your comments to 5 minutes, I would appreciate it.

I think we will begin the testimony with Mr. Shipley.

STATEMENT OF DALE SHIPLEY, EXECUTIVE DIRECTOR, OHIO

EMERGENCY MANAGEMENT AGENCY, ON BEHALF OF THE

NATIONAL EMERGENCY MANAGEMENT ASSOCIATION

Mr. SHIPLEY. Thank you, Chairman Voinovich. I appreciate the

opportunity to be here today. Senator Jeffords, it is a pleasure to

be here with you. I am Dale Shipley, Director of the Emergency

Management Agency for Ohio, and Past President of the National

Emergency Management Association. I am here today representing

NEMA.

Certainly it is a historic time as we create the Department of

Homeland Security. Part of my focus will be to emphasize an allhazards approach to disasters which have been the basis for our response to disasters for some 25 years.

NEMA supported the inclusion of the Federal Emergency Management Agency into the Department of Homeland Security because it was obvious that the primary focus for that Department

was to address a major new threat to the United States, that of

terrorism, which we view as one of many threats. Hurricane Isabel

recently reinforced the all-hazards approach that the Department

is built upon.

In Ohio, we have had two Federal disaster declarations since

FEMA was incorporated into the Department in March. We have

seen no change in the speed, availability, or the flexibility of assistance from FEMA since it came into the new Department.

Other agencies within the Department of Homeland Security, as

was mentioned by Secretary Brown, will provide even greater assistance to us as we look to them for research and development,

new requirements we have in light of the focus on weapons of mass

destruction, and increased security against that threat through

prevention. The Department of Homeland Security repeatedly

stresses as its number one mission as information-sharing programs and funding for increasing the capabilities for a more effective response.
146

You specifically asked me to address the Public Assistance Program. As you know, it addresses public needs, specifically the costs

of debris removal, damages to roads and bridges, water control facilities, public buildings, public utilities, and parks and recreation

facilities.

Public assistance is particularly important for disaster relief because communities need these vital functions restored in order to

get back on their feet. A terrorist event, such as the World Trade

Center or the anthrax attacks, cause redefinition of programs

which are based on threats experienced during the previous 25

years.

As Secretary Brown testified, the Stafford Act allows flexibility

and continues to serve us well, although certainly policies and procedures had to be rewritten after this unprecedented disaster occurred.

In Ohio, we have staff that work with FEMA to assist various

applicants for public assistance in identification, applications and

accomplishing eligible projects. During this current Federal fiscal

year, we have had four Presidential disaster declarations in Ohio

with some 997 public entities—villages, townships, counties—apply

and received $49 million in public assistance.

Ohio employees act to manage these problems and interface all

these applicants with the Federal Government, and are charged

with keeping records, handling all reporting requirements, closing

out the projects, closing out the disasters, and managing the 25

percent non-Federal cost share.

We also manage one of the few State programs for public assistance. Under the State law, the Ohio Governor can declare a disaster, and if it does not warrant or is not large enough to warrant

a Presidential declaration, then we will implement a State public

assistance program. We have had four such declarations in this

same 1-year period, which have assisted 83 applicants at a total

cost of $4.8 million. You can see the relevant size that I am talking

about in State disaster versus Federal disaster declarations.

One challenge this year was a congressional appropriations for

2003 were about half the normal anticipated costs in the disaster

relief fund. That resulted in the Federal Government writing some

IOUs which the committee asked about earlier in this hearing. We

have had some examples where snow and ice in Monroe County,

for instance, one our smallest counties. I think 15,000 people live

there. They had a public assistance approval for almost a half million dollars in losses from that snow and ice disaster. Only earlier

this month, we were able to draw dollars to help them accomplish

those projects.

Other issues that I would like to bring before this committee involve both pre- and post-disaster mitigation programs. I have really

been pleased to see some questions involving mitigation and the

cost shares of these programs. Senator Clinton, in particular,

brought up the fact that recently we have reduced the formula for

mitigation money from 15 percent of total disaster cost to 7.5 percent. In fact, she addressed the issue of a 5 percent cap put on

mitigation for the New York disaster.

Let me just give you the most recent success story that emphasizes what I believe is critically important to our mitigation efforts.
147

Hurricane Isabel—there were 220 homes in Bell Haven, NC that

were elevated with Hazard Mitigation Grant Program funds after

Hurricane Fran in 1996.

None of these homes flooded last week, even though there was

significant flooding on the Pungo River.

We try constantly to find examples where we can go back and

show that getting people out of harm’s way is good government,

good business, and reduces costs of life and property ultimately if

we can just mitigate what we know will be future disasters.

My written testimony includes comments about a correction to

the Disaster Mitigation Act of 2000 asking for more flexibility in

our assistance to individuals and households where we ended up

with a cap of $5,000 in that program which should be flexible. We

should be able to increase it. It is in the best interest of ourselves

and our victims.

Senator, you asked specifically if we would address your proposed legislation on health monitoring of volunteers. My personal

angle on that not only is to be supportive of that, but that we all

need to be critical, as you know, in all of our disaster response. We

are absolutely dependent upon the thousands and thousands of volunteers who come forth to help us. Government cannot do everything for everybody, nor should we even try.

The Salvation Army and the Red Cross are voluntary organizations active in disasters. All the religious organizations and all the

people that come forth to help are critical to our success. People

like we have volunteering to serve in our urban search and rescue

task forces must be cared for. I appreciate your interest and your

concern in doing that.

As we work to establish a new Federal Department of Homeland

Security, we must not forget the all hazards approach to emergency

management. We must prepare for and respond to all threats, the

common as well as the extraordinary, whether it is flooding in

Ohio, a hurricane in North Carolina, tornadoes in Kansas, or an

explosion of known or unknown origin.

States need a Federal commitment and system, recognizing that

each State and local government has unique disaster mitigation,

preparedness, response, and recovery needs that require flexible,

predictable, and adequate funding assistance that is coordinated

with the State emergency management plan.

Again, I thank you very much for the opportunity to be here. I

would ask that my written statement be placed in the record in its

entirety.

Senator VOINOVICH. Thank you for being here.

Mr. Larson.

STATEMENT OF BUD LARSON, ASSOCIATE DIRECTOR,

NEW YORK CITY OFFICE OF MANAGEMENT AND BUDGET

Mr. LARSON. Good morning, Chairman Voinovich and Senator

Jeffords. My name is Bud Larson. I am the associate director of the

New York City Office of Management and Budget.

My responsibilities include, among others, coordinating and processing all the FEMA claims by the city of New York. I am thankful

for the opportunity to share the city’s experiences in this process

over the last 2 years. In particular, I would like to provide you with
148

some insight on how the city and FEMA responded to certain limitations in the Stafford Act.

Immediately following the attacks of September 11, 2001, the

President and Congress committed over $20 billion of much needed

aid to the city of New York. The aid included a $5 billion Liberty

Zone tax incentive package, over $3 billion in Community Development Block Grants for Economic Development, and almost $2 billion to the U.S. Department of Transportation for downtown transit

upgrades, and over $8 billion to FEMA for transit improvements,

individual and family assistance grants, and public assistance programs.

Of these, the city of New York is eligible to make direct claims

for reimbursement of disaster-related costs only through the

FEMA’s Public Assistance Programs. The city’s claims have totaled

approximately $3.5 billion.

Overall, FEMA has been remarkably efficient and flexible in reimbursing the city, given the constraints of the Stafford Act. Since

the 9/11 terrorist attack was the largest disaster ever in the United

States, the associated costs borne by the local government was the

largest FEMA has ever had to deal with. FEMA recognized very

early on in the process that they had entered into new uncharted

territory.

As this disaster was unlike any they had responded to before,

FEMA officials were willing to work as hard as possible in order

to provide the necessary reimbursements to the city of New York.

The city has already received almost 100 percent of the claims filed

and currently eligible to be reimbursed, excluding the $1 billion insurance fund. A large portion of the balance of Public Assistance

funds have been earmarked for transportation improvements for

the new transit hub in lower Manhattan and will be provided to

the appropriate entity when the expenses occur.

The city has already received almost 100 percent of all claims

filed and currently eligible to be reimbursed, excluding the $1 billion insurance fund. A large portion of the balance of Public Assistance funds have been earmarked for transportation improvements

for a new transit hub in Lower Manhattan, and will be provided

to the appropriated entity when the expense occur.

This success is attributable to the staff of FEMA, the State of

New York, all our city agencies, and the assistance of our congressional delegation including Senator Clinton. While we greatly appreciate the work done by FEMA in providing the city with appropriate reimbursement, there are a number of limitations in the

Stafford Act that did not make this an easy process.

If not for congressional action, the city would still not have received reimbursement necessary to cover the unique expenses a

local government incurs when responding to a terrorist attack. In

fact, there are some instances where the city will never receive appropriate reimbursement due to these limitations.

First and foremost, due to the extent of the damages and the destruction of the financial center of the Nation, the city and the

State lost a substantial amount of tax revenue as a direct result

of this terrorist attack. The city estimated substantial losses in tax

revenue of almost $3 billion in 2002 and the 2003 city fiscal years
149

directly attributable to the attack, and independent of the economic

slow down.

These losses were due to decreases in city personal income taxes,

business taxes, and reduced sales taxes. In addition, the actual destruction of property, the closure of lower Manhattan, and the significant effect on travel and tourism to New York in particular,

also had a devastating effect on our tax revenues.

While some have argued that it is impossible to link the loss of

these revenues to the terrorist attack, the General Accounting Office issued a report on July 26, 2002, reviewing these estimates,

and noted that the tax revenue loss estimates for 2002 ‘‘appear to

reasonably approximate the impact of the terrorist attacks on tax

revenue.’’ I also want to make it clear that the city did not receive

any funds based on the city’s experiencing a budget shortfall as a

result of these lost tax revenues.

Currently, the Stafford Act does not allow FEMA to provide any

reimbursement for lost tax revenue to local governments. While the

Community Disaster Loan Program currently exists, the loan

amount is capped at only $5 million, not even a fraction of the costs

associated to such a large terrorist attack in a major metropolitan

city.

Since the Stafford Act does not accommodate this very real need

for disaster stricken local governments, the people of the city and

the State of New York have been forced to shoulder these additional financial burdens caused by an act of war.

Another limitation of the Stafford Act is the lack of provision for

local governments to receive reimbursement for unique expenses

associated with a terrorist attack. New York City was the direct

target, as were the Pentagon and the District of Columbia. And as

a direct target, the city needed to take an action immediately by

heightening security in all parts of the city.

Prudence demanded that the entire city needed to be shut down.

Bridges and tunnels into Manhattan needed to be closed. Subway

lines and rail lines needed to be suspended. The security at the

United Nations and other key locations were immediately heightened. These costs were incurred directly as a result of the city

being a terrorist target.

However, the Stafford Act does not recognize these expenses as

eligible reimbursements since these additional expenses did not

occur at the actual site of the disaster. While FEMA worked to interpret the Act as broadly as possible under the narrow confines of

the Stafford Act, FEMA could not grant reimbursement. It took a

special act of Congress to allow FEMA to provide the reimbursement to the city of New York for these costs which would clearly

not have been incurred but for the terrorist attacks.

After receiving congressional authorization, FEMA responded

diligently and effectively in processing these new claims. But the

fact remains that in any future terrorist attack there will be a significant related cost incurred by local government that will be ineligible for reimbursement under the Stafford Act.

Finally, one of the most complex obstacles to full reimbursement

under the Stafford Act encountered by the city involved in the environmental liability as it relates to debris removal. Immediately

after the attack on September 11, the city responded by deploying
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police officers, firefighters, EMS workers, and other employees to

the site for search and rescue.

At the same time, the city contacted four construction management companies to begin the process of debris removal. These companies, along with dozens of subcontractors, acted with a sense of

patriotism and worked without contracts, insurance, or indemnity.

This response by the municipality and its contractors were immediate and necessary. All parties took substantial risks.

In order to protect against liability for the city and its contractors, the city sought to obtain insurance in the private market, but

was able to obtain only $79 million of general liability coverage.

Even that coverage came with significant exclusions. The city and

its contractors accordingly sought legislation providing for Federal

indemnification of these claims, but without success.

Finally, as a result of congressional action, FEMA set aside ap- proximately $1 billion for an insurance fund to protect the city and

its contractors from claims relating to the debris removal process.

While the city and the contractors will benefit from the substantial

coverage, the amount of coverage is only a fraction of the $12 billion of damage claimed already against the city.

The creation of this insurance fund was difficult and complex and

was aggravated because the Stafford Act provided no facility for its

funding. In fact, even after 2 years since this attack, and 7 months

after the additional congressional action, this insurance fund has

yet to be created and negotiations between FEMA, the city, and its

contractors are still ongoing.

This clearly is an unfortunate circumstance and one no local government or contractor should have to deal with. In fact, this experience may cause governments and others to think twice before responding to a terrorist attack. The Federal Government must address this issue by either enacting Federal indemnification or an

insurance plan to protect municipalities and their contractors.

While the city’s experience with FEMA has not been without difficulties as I just explained, I want to be very clear that this was

in no way due to the staff or the mission of the Agency. I have the

utmost respect for the professionalism and the diligence of the people at FEMA. It was the constraints in Federal statute that proved

to be difficult.

I urge you to examine these issues and determine the best course

of action so local governments and taxpayers are protected from the

additional financial burdens of a terrorist attacks.

I thank you for your patience and would be glad to take any

questions. I would ask that my written statement be placed in the

record in its entirety.

Senator VOINOVICH. Thank you, Mr. Larson.

I am impressed with your testimony. It follows up on some of the

questions that I asked the previous witness. The point you are

making is that even though the local share was waived when you

calculate some of the losses that you incurred that were nontraditional in a typical disaster, that that cost far exceeded any waiver

of local match that you might have benefited from?

Mr. LARSON. That is true.

Senator VOINOVICH. I think the real issue here is this. Are you

aware whether FEMA is now reevaluating the Stafford Act to have
151

a separate category dealing with terrorist attacks like you experienced?

Mr. LARSON. I believe that they are doing a review, but I am not

really sure what the details of that review entail.

Senator VOINOVICH. I think what we will do is find out.

The question I would like to ask both of you is this. 9/11 was not

typical. God forbid we have another one. But the fact is that we

could. Would you suggest having a separate set of criteria laid out

for that kind of disaster separate and apart from the Stafford Act

in terms of its traditional response to disasters in this country?

Mr. LARSON. I believe that there are modifications required to

the Stafford Act to look at those issues that relate specifically to

acts of terrorism which are not necessarily something that FEMA

has normally dealt with in a natural disaster. The Act should be

adjusted in such a way that those could be recognized as true costs

are reimbursed. Also very importantly, because of the types of

things that happen at terrorist attacks, to make sure that those responders are covered for any liability claims that might be put

against them in the future.

In the case of 9/11, obviously this was such a huge event that the

insurance industry was not able to handle this which is how it

would be handled under a normal event. In a normal situation,

when we would have entered into a contract with the contractors,

included within that contract would be standard insurance. FEMA

would pay for it. But since there was no market for insurance,

FEMA had no mechanism to provide the type of liability coverage

that they would normally do.

Senator VOINOVICH. On behalf of your national organization, do

you have an opinion on that?

Mr. SHIPLEY. Sir, it would be my personal opinion. Yes, I think

we could establish thresholds at which certain additional assistance might be available. Just as you have had occasion as Governor to make a decision on when a local government was impacted

so severely that they could not even meet their 12.5 cost share,

which we normally ask them, States would go ahead and say, ‘‘We

will cover 100 percent of your costs.’’

When you get into the sort of disaster that occurred here, lost tax

revenue, if we are without power for 24 or 48 hours, probably

should not be a consideration. But lost tax revenue with an incident the size that occurred in New York City, I think brings new

dynamics into play. Yes, maybe we should look at what point

should additional assistance be made available when it is just beyond the capability of local governments to make it up.

Senator VOINOVICH. Do you the staff capacity at your organization to put something together and make a recommendation?

Mr. SHIPLEY. I would take it back to NEMA and work with them,

if that is OK.

Senator VOINOVICH. I would really like them to sit down and

think about this and come back with some recommendations on

how we can handle this thing so we can prepare and eliminate

some of the problems that Mr. Larson has encountered.

Mr. SHIPLEY. I think the issues were faced not only in New York

but in Virginia with the Pentagon, and the office building in Oklahoma. I think all of those States have experienced these extraor-
152

dinary sized disasters. There was Hurricane Andrew in Florida

also. We will probably have valuable input for us to look at what

we might revise to deal with those.

Senator VOINOVICH. Thank you.

The other issue that you talked about and I am really interested

in is mitigation. Let us take the Ohio River. We had those folks

that continued to have their places flooded. We made a condition,

did we not, that they could not get any help unless they moved?

But then the issue was how much money did we have available to

help them move? Is that what you are talking about, that they

have limited the amount of money that is available?

Mr. SHIPLEY. Yes, sir.

Senator VOINOVICH. I do not understand. Fifteen percent of

what? The cost of moving?

Mr. SHIPLEY. The money that has been made available for mitigation projects has historically been set as a formula of total disaster costs for a disaster. So if we in Ohio have a disaster that we

expend $20 million in recovery, then we would take 15 percent of

that amount which would be made available for mitigation projects.

The percentage of the total disaster costs to calculate mitigation

was reduced from 15 percent to 7.5 percent in the 2003 Omnibus

Appropriations bill.

Senator VOINOVICH. So you have less money to move people out.

Do you still have the rule that says that if you have been a disaster

victim and you do not move, you are not going to get relief a second

time without insurance?

Mr. SHIPLEY. What we require is flood insurance. We cannot

force people to move. It is a voluntary program. But we can require

them to buy flood insurance or they would receive no individual assistance in future flooding. We are trying to encourage people to

cover themselves, either through insurance or elevation, or other

forms of flood proofing, or let us buy you out and get you completely out of the area.

There are a lot of options. As the Senator commented earlier,

sometimes people do not want to leave, but sometimes even they

get beaten down to the point where they say, ‘‘Hey, we have to get

out of this town. We have to get to higher ground.’’

We have had some success, as you know, in doing that.

Senator VOINOVICH. Senator Jeffords.

Senator JEFFORDS. Thank you, Mr. Chairman.

I was pleased to have your testimony. It has been very helpful.

Mr. Shipley, in light of the fact that the FEMA Director was once

a Cabinet-level position, and the past close relationships FEMA Directors had with the Presidents, in your opinion, how do you think

FEMA is doing in the new Department of Homeland Security? Are

disaster declarations and assistance taking longer to get approval?

Does anything need to be done to address FEMA’s role in the Department?

Mr. SHIPLEY. My answer may surprise you. FEMA and the Department of Homeland Security leadership and the White House

have worked out the procedures for disaster declaration so that

they still move directly from FEMA to the White House with information to the Secretary of Homeland Security’s office.
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There is no slow down in the processing and requesting that the

President make a decision and response. The major difference that

I am seeing is that there is a new boss over FEMA dealing with

all disasters, all threats. That organization is still struggling to figure out exactly how they are going to deal with defining the threat,

accomplishing the intelligence gathering and sharing, focus on prevention at the same time that FEMA still has the mission of preparedness, response, and recovery.

I think it is interesting to see that Senator Voinovich has asked

some of the questions of who is responsible for what and when

which is the essence of emergency planning. Who is responsible

and under what conditions? When you look at indoor air, outdoor

air, that is the responsibility of the Federal response plan written

by FEMA to spell out just those exact things.

We are in the process, under the Department of Homeland Security, of rewriting what we are calling a national response plan. It

is not being led by FEMA. Those are just some things I see going

on that is complicated, whereas Secretary Brown is the Director of

FEMA, was responsible for coordinating Federal organizations in

response to disaster. The Secretary is now directly responsible to

the President for that same thing. So there is some growing pains

and some coordination issues that they are working hard on.

Senator JEFFORDS. I appreciate that response. We would like to

followup with you as time goes by to make sure that those problems are resolved.

Thank you.

Mr. SHIPLEY. I would welcome the opportunity.

Senator JEFFORDS. Mr. Larson, the GAO report indicates that

New York City officials interviewed believe that changes need to be

made to existing authorities under the Stafford Act in order to effectively respond to events of terrorism.

Can you explain first what New York City wanted to do but

could not do in the structure of the existing program? Then describe what legislative changes you might propose?

Mr. LARSON. First, I do not believe that we were prohibited in

any fashion from doing what we wanted to do because of the Stafford Act. All of the decisions as to how to respond to this emergency were based on public safety issues being priority. We did everything we believe we needed to do.

After we did those things, the ability to be reimbursed for costs

which we believe were directly related to this being a terrorist attack, were not eligible reimbursement costs under the Stafford Act.

We believe that the definition of reimbursable costs for terrorist attacks should have some flexibility relating to those types of costs

that do not occur on the site, which is the limited focus of Stafford

Act.

Also, unfortunate as it might be, we experienced such a tremendous loss of members of our emergency response forces that we had

significant additional training costs to return those offices to full

staffing, after the event. Those costs were not reimbursable. As unfortunate as it may be, we have huge additional disability costs related to this event which were not covered under the normal Stafford Act—potentially $170 million of additional disability pension

costs.
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There are a whole series of those types of costs that I can track

directly back to this being a terrorist event, somewhat different

than the natural disaster. But the guidelines under the Stafford

Act did not permit those to be reimbursed. I think we need to expand that definition to recognize some of these issues.

Again, the other thing that is very important is the type of liability that local governments might be facing because of the actions

they took to protect their citizens. They should have some comfort

that they will not be bearing a burden of liability for what was an

attack against this country.

Senator JEFFORDS. Will you or someone be preparing suggestions

on how to make improvements in the Stafford Act to alleviate those

problems?

Mr. LARSON. We would be happy to work with somebody on that.

Senator JEFFORDS. I would appreciate that very much. Thank

you.

Thank you, Mr. Chairman.

Senator VOINOVICH. I would like to thank both of you very much

for coming. We would really appreciate your followup to some of

the questions that we have raised here today and your organization

looking at this whole thing. We also appreciate your continuing

input as this reorganization goes.

I would welcome, as the chairman of this subcommittee, periodically receiving information from you as to how you think things are

going, that they are doing this or they are doing that, and ‘‘Gee,

if they did it differently, it would be better.’’ We do not want to not

hear from you for a year and they go ahead and do their thing. I

would rather correct it as we go along rather than wait until it is

too late to do anything.

Again, Mr. Larson, you have the experience. You have done a

nice job of outlining some of the things that you have been confronted with that were not covered. You have the real perspective.

Then you have an issue—is it in the Stafford Act?

I would like from my perspective to lay out all the things that

you would be doing if you were sitting in the Department of Homeland Security. You are the people that are on the ground and know

it.

Mr. Shipley knows I am a big believer in empowerment and

quality management and going to the people that are dealing with

the problems to get their information. I have to tell you that in too

many instances the folks here do not know what it is. They do not

understand what it is on the street. You would really help me to

give me the street impression of what is going on so that can be

fit into the Department of Homeland Security and FEMA. Thank

you.

Mr. SHIPLEY. Thank you.

Mr. LARSON. Thank you.

Senator VOINOVICH. With that, we are adjourned.

[Whereupon, at 11:20 a.m., the subcommittee was adjourned, to

reconvene at the call of the chair.]

[Additional statements submitted for the record follow:]
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STATEMENT OF MICHAEL BROWN, UNDER SECRETARY, EMERGENCY PREPAREDNESS

AND RESPONSE DIRECTORATE, DEPARTMENT OF HOMELAND SECURITY

Good morning Chairman Voinovich and Members of the Subcommittee. I am Michael Brown, Under Secretary for the Emergency Preparedness and Response Directorate of the Department of Homeland Security, which includes the Federal Emergency Management Agency (FEMA).

Since becoming part of the Emergency Preparedness and Response Directorate

(EP&R) of the Department of Homeland Security (DHS), FEMA has continued its

traditional role of preparing for, mitigating against, responding to, and recovering

from disasters caused by all hazards.

Over the last 2 weeks, we have worked closely with the States and our Federal

partners to effectively respond to Hurricane Isabel and all within the new structure

of DHS. DHS brought its resources to bear in response to Hurricane Isabel in order

to protect the public. We deployed key new assets, including the National Disaster

Medical System (NDMS) teams. The U.S. Coast Guard also deployed its assets to

assist in the response effort. All of our response efforts have been coordinated department-wide through the DHS emergency operations center.

Our Hurricane Liaison Team was invaluable in arranging up to the minute meteorological information and predictions from the National Hurricane Center and

other National Oceanic and Atmospheric Administration (NOAA) components for

State and local officials and emergency managers in the path of the storm. We established mobilization centers at Ft. Bragg, North Carolina, and Edison, New Jersey, and staging areas at Ft. A. P. Hill, Virginia, and Columbus, Ohio. Advanced

elements of our Emergency Response Teams and our State Liaisons were dispatched

before the storm to the affected States and the District of Columbia to coordinate

disaster response activities. Many other assets which we positioned from Alabama

to New York were also critical to staging an effective response including the Rapid

Needs Assessment Teams, National Disaster Medical System (NDMS) Disaster Medical Assistance Teams, Urban Search and Rescue Task Forces, Mobile Emergency

Response Support Detachments, Environmental Protection Agency HazMat Teams,

Army Corps of Engineers, Forest Service, General Services Administration, Department of Energy, and Department of Health and Human Services Teams.

But, we must not rest on our past achievements. As in all major incidents, we

will learn valuable lessons from the Hurricane Isabel response. The key to our continued improvement will be taking these lessons and incorporating them into our

planning, doctrine, and procedures to ensure our continued improvement. DHS will

continue working with the Congress and our Federal partners, State and local leaders, and other affected stakeholders and partners to continue to enhance our ability

to respond effectively to all types of disasters.

Prior to joining DHS, the focus of the disaster programs within FEMA was an allhazards approach. This focus remains today, and in fact it benefits from the more

global perspective of DHS and its related components. I am proud of our response

to the Hurricane Isabel disaster on the east coast because it clearly demonstrates

our steady improvement in coordinating and leading Federal, State, tribal and local

response efforts to protect life and property in times of disaster. The seamless collaboration of the different response elements in the Department of Homeland Security, as well as those in other Federal departments and agencies, allowed for a rapid

and effective positioning of disaster assets and capabilities throughout the eastern

United States to quickly provide any assistance needed by States and communities

to protect the life and property of their citizens.

We at FEMA, are proud to be doing our part to secure the homeland, and I am

proud to be a part of an organization made up of so many fine and dedicated individuals. FEMA’s greatest asset is its people. As we have transitioned into DHS, we

have continued our efforts to ensure that FEMA’s workforce remains one of the finest in the Federal Government through the development of a comprehensive strategic Human Capital Plan. We have also continued to work to integrate the new

missions into FEMA’s structure. We are working with the Department of Health

and Human Services on a wide array of issues including finalizing the consolidation

of staff in the FEMA headquarters building within the next few months, fully integrating NDMS assets into the FEMA response structure and enhancing the operational readiness of NDMS teams.

Since becoming part of the Department of Homeland Security, FEMA has continued to carry out its mission to prepare for, mitigate against, respond to, and recover

from disasters of all kinds. It is a great honor for me to serve Secretary Tom Ridge

as I lead FEMA into a new era as part of DHS.

In order to achieve our mission more efficiently, FEMA has been divided into four

disciplines: Preparedness, Mitigation, Response, and Recovery. This organizational
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alignment reflects the traditional areas of emergency management. It also resembles the organizational flow used by many States, who continue to be our principal

partners in emergency management.

PREPAREDNESS

Since joining DHS on March 1, FEMA’s Preparedness Division has continued to

implement its grants and training programs and has already gained assets in the

transition. The Preparedness Division had the opportunity to test its capabilities

during exercises including the nationwide Top Officials 2 exercise (TOPOFF2) in

May 2003; to provide funding to State, tribal, and local governments; and to forge

strong working relationships with the Office for Domestic Preparedness (ODP),

which is also now part of DHS.

The recent TOPOFF2 exercise served as a good test of significant new organizational structures and provided some good lessons as to how our efforts can be improved. It tested new procedures, such as our operational relationship with the DHS

Crisis Assessment Team and systems transferred to DHS, such as the Strategic National Stockpile. Exercises such as TOPOFF2 allow us to pinpoint challenges to help

ensure a better response and a more timely delivery of assistance.

Although national level exercises like TOPOFF2 are important and valuable, community-based exercises are equally important for a comprehensive and truly effective national exercise program. Several months ago, a train carrying hazardous materials derailed near Laguna, New Mexico. Fortunately, local emergency responders

and the New Mexico Office of Emergency Services were ready. A response exercise

held just weeks earlier had prepared responders for such an event. The bottom line

is that community-based exercises work, and they work at the first responder level.

In cooperation with ODP, FEMA is continuing to support a robust, multi-tiered system of exercises.

As a sign of the growing national interest in individual and community preparedness, Citizen Corps has increased its number of local councils by 377 since March

1, for a total of more than 628 Councils in 51 States and territories. Councils are

serving nearly 35 percent of the U.S. population or approximately 90 million people.

Five new affiliates have partnered with Citizen Corps since March, including the

U.S. Junior Chamber of Commerce, the National Volunteer Fire Council, the National Voluntary Organizations Active in Disaster, the Points of Light Foundation,

and the National Safety Council.

Additionally, Federal affiliates have partnered with Citizen Corps. On July 29,

2003, Tom Dunne, EPA’s Associate Assistant Administrator for the Office of Solid

Waste and Emergency Response, signed an agreement adding EPA as an affiliate

with Citizen Corp. NOAA and the Department of Education’s Office of Safe and

Drug-Free Schools have also signed agreements.

A key component of Citizen Corps is the Community Emergency Response Team

(CERT) program, which helps train citizens to be better prepared to respond to

emergency situations in their communities. In May 2003, DHS provided nearly $19

million in grant funds to States and territories to expand the CERT program

through additional State-offered Train-the-Trainer courses and to help communities

start CERT programs and expand existing teams. When I announced these grants

in Olathe, Kansas, I had the good fortune to meet Community Emergency Response

Team members who worked together to help their neighbors recover from the destructive tornadoes in the Midwest this past spring. This is a fine example of what

CERT can accomplish.

Our National Emergency Training Center, which includes the National Fire Academy and the Emergency Management Institute, continues to provide training to the

leaders of the fire service and emergency management communities. We train more

than 16,000 students a year on campus and more than 100,000 students a year

through off-campus programs with our partners in the State fire and emergency

management training systems. We also have trained over 185,000 students this year

through our Independent Study Program. Our training prepares the fire, EMS and

emergency management community, as well as local officials all across the country.

With the addition of Noble Training Center in Anniston, Alabama, our capabilities

are being expanded, and we will be able to reach more personnel than ever before.

DHS is committed to helping firefighters improve their effectiveness and stay

safe. The responsibilities of the fire service have increased since 9/11 to include

planning for and responding to possible terrorist attacks. So far this fiscal year,

DHS has awarded over $250 million to fire departments through the Assistance to

Firefighters grant program.

Given the recommendations to better consolidate and coordinate grants for first

responders and terrorism preparedness, the President’s Budget for fiscal year 2004
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requested that Assistance to Firefighters Grant Program be placed within ODP. In

order for State and local governments to be effective partners with the Federal Government in securing the homeland, they need quick and easy access to terrorism

and emergency preparedness grant programs designed to support their work. Prior

to the formation of the Department of Homeland Security, information about terrorism and emergency preparedness grant programs were scattered throughout the

Federal Government. Many are now centered within DHS, though still divided

among our various components. To make them even more accessible, Secretary

Ridge announced plans to centralize these programs within a single office. State and

local authorities will soon have a single point of contact for terrorism and emergency

preparedness efforts—one access point to obtain critical grant funding. It will help

ensure that nationwide, State and local officials have one place in the Department

where they can tap into the resources and information they need, from applying for

funds to protect critical infrastructure to receiving funding for first responders.

As a Department we have not waited to begin new initiatives that leverage the

resources of the Federal Government in support of our first responders and first preventers. For example, DHS and the Department of Justice COPS program coordinated the application and review of their separate appropriations for interoperable

communication pilot programs. This innovative DHS/DOJ partnership demonstrated

Federal leadership and illustrates the importance of integrating multiple disciplines

in addressing the nation’s preparedness needs. In the coming weeks, the Departments will be announcing approximately $150 million in pilot project grants that

will establish best practices and help develop unique solutions to the interoperable

communication issues that have hampered our first responders.

RESPONSE

The Response Division continues working hard to consolidate and integrate our

existing and new disaster response assets, teams, systems, programs and responsibilities into the Emergency Preparedness and Response Directorate to create a

more unified and comprehensive all-hazards disaster response capability. We are

looking into new approaches that can result in greater efficiency and effectiveness

in our disaster response activities. I am confident that over time we will be able

to introduce a new response culture, one that will enable us to elevate our operational response capabilities to a higher level of proficiency and ensure better protection of and service to the American people.

The Response Division’s structure is based on the Incident Management System

so that it is optimally aligned to meet the needs of State and local responders and

designed to meet the President’s direction to establish a National Incident Management System (NIMS) and National Response Plan (NRP). On February 28, 2003, the

President established a single, comprehensive national incident management system

and provided for the integration of separate Federal response plans into a single alldiscipline, all-hazards national response plan. The Secretary of Homeland Security

is responsible for developing and implementing both initiatives. FEMA has been actively participating in the effort to develop the National Response Plan (NRP) and

a framework for National Incident Management System (NIMS). We are also a cofacilitator and have regional participation on the State, tribal and local NIMS/NRP

workgroup, which is an intergovernmental advisory group assembled to provide

State and local input, guidance and expertise to the NRP/NIMS revision efforts. As

directed in the Department of Homeland Security Act of 2002, FEMA will play a

key role in the management and maintenance of NIMS once it is developed.

The Response Division is pulling together critical national response assets formerly maintained within other Federal agencies, such as the National Disaster

Medical System (NDMS), the Strategic National Stockpile (SNS), the Domestic

Emergency Support Team (DEST), and the Nuclear Incident Response Team

(NIRT). Different options are under consideration on the best way to staff and deploy these teams and integrate these assets into a mission capable operation that

builds upon our existing and proven disaster response foundation. The Response Division is also initiating steps to create dedicated, rapid-deployment DHS Incident

Management Teams that would form the initial core on-scene management component of the Federal disaster response capability interfacing with the State/local Incident Commander. The teams have not been fielded yet but are an important aspect

of FEMA’s implementation of Homeland Security Presidential Directive-5. We plan

to staff, train, and equip the teams over the next year.

We are coordinating with different elements of DHS to enhance the operational

readiness and capability of our National Emergency Operations Center (NEOC), Regional Operations Centers, NDMS, DEST, Urban Search and Rescue (US&R) Task
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Forces, Mobile Emergency Response Support elements, and other specialized disaster response teams to respond to protect the Nation in times of disaster.

In addition, the Response Division is taking steps to reduce disaster response

times so that eventually disaster teams will be able to respond anywhere in the

country within 12 hours and disaster logistics packages, commodities, and equipment can be delivered anywhere in the country within 24 hours of a disaster declaration. A pilot test of a prototype disaster logistics pre-deployment program is

being planned as part of our efforts to ensure that we provide maximum assistance

to help State and local governments meet immediate disaster needs in the first 24

hours of a disaster while additional disaster response commodities and equipment

are enroute.

We are placing additional emphasis on increasing patient evacuation capabilities

and conducting more hospital training and exercises under NDMS, improving coordination of Strategic National Stockpile activities, and working to ensure that

US&R Task Forces can safely respond to weapons of mass destruction incidents

with the necessary medical screening and equipment.

Work continues with the Department of Health and Human Services on a wide

array of issues including finalizing the consolidation of staff in the FEMA headquarters building within the next few months, fully integrating NDMS assets into

the FEMA response structure, and enhancing the operational readiness of NDMS

teams. We are also finalizing guidance that will clarify and specify in greater detail

DHS and HHS roles and responsibilities agreed to under the Memorandum of

Agreement the two departments signed related to the SNS.

Over the next few years we intend to focus much more attention on completing

catastrophic all-hazards planning for our most vulnerable cities. Some work has already been accomplished in this area, but we want to make sure as we move forward that we are addressing those issues that are most critical to State and local

officials in responding to a truly catastrophic disaster. We are also drawing up a

plan to develop the capability to provide intermediate emergency housing for up to

100,000 displaced disaster victims within 60 days of a disaster, a situation that we

could be easily faced following a truly catastrophic disaster. Different options are

being reviewed including the possibility of using portable housing solutions involving trailers, manufactured homes, modular housing, and other innovative approaches. Our goal is to develop a methodology and template that will provide useful planning and operational tools for all levels of government.

The consolidation of national response assets allows the Federal Government not

only to continue to provide the services which existed prior to the establishment of

DHS to which the American people have become accustomed during emergencies

and disasters, but also to enhance our ability to maximize Federal resources,

streamline delivery processes, and directly focus programs and assets on meeting

State and local needs.

RECOVERY

The good work that FEMA continues to do after being incorporated into the Department of Homeland Security is a commentary on how well the transition has

gone. Since the March 1 transition into DHS, FEMA has provided disaster relief in

50 Presidentially declared disasters and emergencies in 34 States and one territory

from Alaska to New York to American Samoa. These disasters include such events

as the President’s Day snowstorm and the devastating tornadoes that struck the

Midwest and South in May. Most recently, of course, we have been dealing with

Hurricane Isabel.

When I traveled to these disaster areas, I had the opportunity to meet with some

of the victims. Their lives had been totally devastated. They had lost family members. They had lost their homes. I cannot adequately describe in words the impact

of looking into the eyes of people who have lost everything. But when things are

at their worst, our people are at their best I have never been more proud to be a

part of the Federal organization that already had individuals on the ground providing assistance to those in need and getting the process of disaster recovery underway.

The committee has expressed an interest in the GAO report on the Public Assistance Program as implemented in New York following the September 11, 2001 terrorist attacks. While the GAO report does not address FEMA’s performance or provide specific recommendations, it does note some differences in the delivery of assistance that I would like to take this opportunity to emphasize. FEMA implemented the Public Assistance Program, which provides State and local governments

reimbursement for debris removal, emergency protective measures, and/or the repair or replacement of public damaged facilities. However, the Consolidated Appro-
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priations Resolution of 2003 provided some flexibility that allowed recovery operations for New York to move more quickly. The resolution directed FEMA to fund

non-Stafford Act 9/11 related projects with any remaining funds from the appropriation it received for the September 11 terrorist attacks in P.L. 107–117, after eligible

projects had been funded. This flexibility did not forfeit accountability or detract

from the effectiveness of the program.

In our ongoing efforts to assist the recovery from the terrorist attacks of September 11, FEMA has also finalized a Memorandum of Understanding with the

Centers for Disease Control and Prevention to fulfill requirements in the Consolidated Appropriations Resolution of 2003. This agreement is providing $90 million

for administering baseline and followup screening, clinical exams, and health monitoring for emergency services, rescue, and recovery personnel. I know this issue is

of particular interest to you Mr. Chairman, Senator Clinton and the rest of the Subcommittee with regard to the legislation you have recently introduced and considered.

MITIGATION

Since the integration into DHS, the Mitigation Division has focused primarily on

two Presidential initiatives: the flood map modernization program and pre-disaster

mitigation. This groundwork sets the stage for results for the rest of this fiscal year

and beyond.

We have nearly $200 million available for our flood map modernization program

this fiscal year, $149 million appropriated by Congress and $50 million in National

Flood Insurance Program (NFIP) policyholder fees.

The funding enables us to embark on a multi-year effort to update and digitize

our flood map inventory. Updating flood insurance rate maps will make community

assessment of flood risks more accurate and improve floodplain management decisions. An updated map inventory will also provide the basis for prudent flood insurance decisions and an actuarially sound insurance rating.

Flood risk identification is central to informing decisionmakers at all levels of government and in helping to shape their assessment of risks. Effective flood hazard

mitigation hinges, in the final analysis, on accurate identification of the risk. A sustained commitment to the President’s initiative for updating the NFIP’s flood map

inventory will result in even more effective risk reduction.

Our flood map modernization initiative reflects, too, the President’s overall management agenda; the effort will be citizen-centered, results-oriented, and marketbased. We have been laying the groundwork for this significant undertaking and

plan to award a contract for the flood map modernization program soon.

We have also continued our commitment to hazard mitigation programs. This fiscal year, Congress appropriated $149 million for the Pre-disaster Mitigation (PDM)

Program and directed that grants be awarded on a competitive basis and without

reference to state allocations, quotas, or other formula-based allocation.

The PDM program provides a significant opportunity to raise risk awareness and

to reduce the Nation’s disaster losses through mitigation planning that includes risk

assessment, and the implementation of pre-identified, cost-effective mitigation measures before disasters occur. Examples of these measures include retrofitting existing

structures to protect against natural hazard events and acquisition and relocation

of flood-prone structures. Funding these hazard mitigation plans and projects will

reduce overall risks to the population and infrastructure and—in the long-term—

will reduce reliance on funding from disaster assistance programs following an

event.

We are requesting that the PDM program be reauthorized through fiscal year

2009 to allow us to continue to implement this critical initiative. We have worked

closely with States, tribal governments, and territories over the past months to

share the PDM concepts through a number of outreach opportunities, including

meetings with the National Emergency Managers Association and the Association

of State Floodplain Managers, and have conducted state mitigation workshops in all

10 FEMA regions. We have also developed an electronic grants system for stakeholders to electronically create, review, and submit grant applications for the PDM

program through the Internet, which will enable us to review and evaluate grant

applications more efficiently.

CONCLUSION

As part of the Department of Homeland Security, FEMA has continued to carry

out its mission to prepare for, mitigate against, respond to, and recover from disasters and emergencies caused by all-hazards. And we will continue to do so.
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I appreciate the opportunity to testify before you today. I would be glad to answer

any questions that you have.

RESPONSE BY MICHAEL BROWN TO ADDITIONAL QUESTION FROM SENATOR JEFFORDS

Question. One of the issues raised in the GAO report is whether or not FEMA

should have reimbursed New York City for heightened security costs in the wake

of the terrorist attack. The GAO report states that FEMA believed that this work

was not eligible for reimbursement because it was similar to work being done nationwide. How much did New York spend on increased security costs in the wake

of September 11th? How does that compare with similar expenditures nationwide?

Response. New York City was a direct target of a terrorist act, as were the District of Colombia and the Pentagon. The immediate response required immediate action in the areas of bridges, tunnels, subways, railroads, water supplies, foreign missions, the United Nations and other potential targets located in the city. All entries

to Manhattan needed to be secured and there were certainly other security costs

surrounding the World Trade Center site. These steps taken in the immediate aftermath of the attacks were, we believe, different than steps taken elsewhere in the

country that had not been attacked.
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RESPONSES BY JAYETTA Z. HECKER TO ADDITIONAL QUESTIONS

FROM SENATOR JEFFORDS

Question 1. Another issue raised in your report is that NYC was not required to

pay the 25 percent cost share that is normally required of communities that receive

Federal disaster assistance. In addition, you report that the President reduced the

amount of Hazard Mitigation Grant Program Funds to 5 percent rather than the

standard 15 percent of the amount spent on the disaster. Coupled with the $20 billion cap I mentioned earlier, do you believe that New York ultimately received less

or more Federal assistance than they would have if the normal Stafford Act procedures were followed?

Response. Clearly, the Federal Government provided more assistance to the New

York City area in this disaster than if all funding has been provided through the

typical Stafford Act framework; however, it is impossible to provide a definitive answer as to how much more. After a large disaster, Congress has often appropriated

funds outside the constructs of the Stafford Act. In this disaster, well over $10 billion was provided to the New York City area outside of Stafford Act provisions. For

example, Congress appropriated $2.37 billion for transportation restoration and improvements. Congress also appropriated $3.48 billion in HUD grants to compensate

individuals, businesses and State and local governments and other organizations for

economic losses and costs. Additionally, Congress passed the first ever tax benefit

package targeted to a disaster area to provide for economic development, estimated

to be $5.03 billion in benefits. This assistance was all funded outside of the established Stafford Act framework.

In addition to this funding, FEMA was appropriated $8.8 billion to assist in recovery efforts in the New York City area. Approximately $7.4 billion was provided in

public assistance funding, In order for public assistance funding to be distributed,

projects must meet criteria set forth within the provisions of the Stafford Act. However, in this disaster, Congress granted FEMA authority to provide funds that were

not eligible under the Stafford Act criteria. For example, FEMA provided $2.75 billion in transportation funding that was authorized for transportation infrastructure

improvement, beyond pre-disaster conditions. Under the Stafford Act, infrastructure

restoration projects would be eligible, but infrastructure improvement projects

would not be eligible. Furthermore, for some of these projects, the replacement value

was clear, but for others it would be impossible to determine how much more funding has been provided for costs associated with enhancing the infrastructure. As a

result, a portion of the $2.75 billion in transportation funding was for projects that

would not traditionally be eligible under the Stafford Act, but the exact amount is

unclear. Moreover, because Congress authorized FEMA to provide funding for costs

incurred regardless of project eligibility within the provisions of the Stafford Act,

FEMA conducted an early close-out process that made available $1.2 billion, which

was transferred to the city and State at the end of fiscal year 2003. Although the

close out process linked the payout of the $1.2 billion with a variety of costs that

were associated with the disaster but not previously eligible for FEMA funds (such

as heightened security across the state, increased pension costs, and tourism campaigns), New York City and State now have discretion for allocating these funds.

Most of these uses would not have been eligible for reimbursement under the Stafford Act. However, as of the date of the early close-out, some projects that were

clearly eligible for Stafford Act funding had not yet been not fully funded. As a result, some portion of the $1.2 billion will likely be used to reimburse agencies for

Stafford eligible projects. Thus, it is impossible to provide a definitive answer as to

how much of the $1.2 billion in public assistance funds provided to FEMA was for

projects beyond traditional Stafford Act eligibility.

New York also benefited from the elimination of the State and local matching requirement for FEMA public assistance funding and DOT funding. Typically, FEMA’s

public assistance program shares disaster costs burdens, with FEMA providing 75

percent of the costs—the minimum provided for under the Stafford Act—and affected State and local governments paying the remaining share. After a major disaster, sometimes the cost share balance has shifted and the State share reduced for

a limited time. In this disaster, at the direction of the President, FEMA provided

100 percent of the entire range of public assistance costs and over the full period

of assistance for the New York City area. This was the first time an entire FEMA

public assistance operation was 100 percent federally funded. Had New York City

and State been required to provide a 25 percent match of the $7.46 billion in public

assistance and public assistance-related funding authorized for this disaster, these

governments would have incurred costs of $1.85 billion. However, prior disasters

have had varying State match requirements for specified uses or over limited time

periods, when up to 100 percent of funding was provided. As a result, it is difficult
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to pinpoint an exact savings to the New York City area. In the case of DOT assistance, Congress eliminated the State and local matching requirement for the entire

disaster relief effort. Historically, DOT funding has required a State and local share;

for FHWA projects this share has ranged from 80 to 90 percent and for FTA projects

it has ranged from 50 percent to 80 percent. By Congress authorizing DOT funding

to be provided with no State and local matching requirement, the New York City

area achieved significant savings, but again, it is difficult to quantify the exact savings.

Although New York received the benefits of 100 percent funding of FEMA public

assistance programs and DOT funding, the President reduced the amount of related

Hazard Mitigation. Grant Program funds provided to New York. At the time of the

terrorist attacks, grant funds up to 15 percent of the total amount of FEMA assistance provided were available to states following a disaster to support mitigation activities. However, in this case, the President limited the mitigation grant funds to

5 percent of the amount spent, Had the hazard mitigation funding percentage not

been reduced, more than $1.2 billion in mitigation funds would have been available

using the customary 15 percent of total cost criteria.

Question 2. I discussed some of the air quality issues surrounding the World

Trade Center with Mr. Brown on the earlier panel, and I would like your perspective on some of the same questions. Your report states that FEMA determined that

the testing of air quality and cleaning were eligible for public assistance funding

where the collapse of the World Trade Center buildings, resulting fires, and subsequent debris removal caused potential health issues related to air quality. FEMA

entered into an interagency agreement with EPA and partnered with the New York

Department of Environmental Projection to execute this testing and leaning. I have

several questions: What role did FEMA play in providing information to the public

on the results of the air quality testing that was conducted at the site and in the

surrounding areas? In selecting the buildings or areas of the city that would be eligible for public assistance funding, did FEMA include all areas impacted by the dust

cloud resulting from the collapse of the buildings?

The GAO report cites $8.6 million that went to the New York Department of Environmental Protection for exterior building cleaning and interior residence cleaning. I have several questions regarding this expenditure. Who decided that New

York would take, the lead for this function? In selecting the 244 buildings that received exterior cleaning and the residences that received interior cleaning did FEMA

include all areas impacted by the dust cloud resulting from the collapse of the buildings? Can you explain why the interior cleaning program was limited to lower Manhattan and why the interior cleaning program was limited to residences and did not

include workspaces? What precautions were taken to protect the workers conducting

this cleaning, pedestrians, and other people in the area of these clean-ups? What

monitoring has occurred to ensure that those interior cleanings were effective?

Response. The objectives of our audits of FEMA’s post-9/11 public assistance and

overall Federal assistance to the New York City area did not include a detailed review of the World Trade Center Dust. Cleaning Program or the dissemination of information to the public regarding air quality testing, but we can share some data

we gathered on this work related to your question.

In terms of providing a description of FEMA’s role in, providing the public with

information regarding the air quality testing, it appeared to us that FEMA did not

have a direct role. That responsibility was assigned to the U.S. Environmental Protection Agency (EPA), the NYC Department of Environmental Protection, and its

contractors.

In terms of the World Trade Center Dust Cleaning Program, FEMA entered into

an interagency agreement with EPA in August 2002, under which FEMA provided

EPA with $19.5 million to provide overnight, data management and data assessment. The interagency agreement specifically tasked EPA with disseminating information to the public on the cleaning program. EPA was to conduct outreach efforts

and develop information including printing, advertising, graphics, direct mail, and

translation services. In addition, EPA was to establish an Internet hotline that residents could use to obtain information on the program and develop a data base to

support the hotline and house analytical data. Validated laboratory analyses of dust

samples were to be mailed to residents, building owners and/or building associations

who made requests for cleaning and monitoring and to be uploaded to the EPA request data base, where they could be accessed electronically by the requester.

The New York City Department of Environmental Protection was a partner in the

management of the Dust Cleaning Program and had lead responsibility for key aspects of the program. For example, the city agency developed contracts for the operation of the information hotline for residents to request cleaning and sampling, and
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for performance of the actual cleaning and sampling. However, EPA was to manage

and direct the contractors.

The scope of the Dust Cleaning Program included residences in the specific area

of lower Manhattan south and/or west of Canal, Allen and Pike Streets—an estimated 20,000 to 25,000 residences. A FEMA official said that this scope was within

the zone that NYC closed to public access immediately after the World Trade Center

attacks. Workspaces were not included because FEMA officials concluded that business owners were more likely than residents to receive assistance for interior and

exterior building cleaning through the Small Business Administration and/or private

insurance companies. We did not do audit work to determine whether residences

outside of the area eligible for assistance were impacted by the dust cloud nor to

determine whether businesses received dust cleaning assistance from SBA and/or

private insurance companies.

Under the FEMA/EPA interagency agreement, oversight of the cleaning and monitoring effort of NYC’s monitoring and scheduling contractors was to be done by EPA.

The U.S. Occupational Safety and Health Administration (OSHA) was to provide

oversight to ensure worker protection. The scope of our audit did not extend to evaluating the amount and quality of oversight done by these Federal agencies.

Question 3. One of the issues raised in the GAO report is whether or not FEMA

should have reimbursed New York City for heightened security costs in the wake

of the terrorist attack. How much did New York spend on increased security costs

in the wake of September 11? How does that compare with similar expenditures nationwide?

Response. In our reviews, we did not estimate how much security expenses have

increased in the United States. in the aftermath of September 11. To do so would

be a difficult challenge. New York City Office of Management and Budget officials

have not yet determined the amount of heightened security expenses they will reimburse city agencies from the $1.2 billion in discretionary funds available as a result

of the early close-out of FEMA’s traditional public assistance program and Congressional authorization to FEMA to provide reimbursement for heightened security

costs.

It is important to reiterate that heightened security is a cost incurred by NYC

that FEMA officials told us they would not have reimbursed had they not been directed by legislation to do so. FEMA officials determined that costs related to

heightened security in the New York City area after the terrorist attacks were not

eligible for reimbursement under the provisions of the Stafford Act because these

costs were not a direct response to the disaster that occurred. On February 20, 2003,

Public Law 108–7 was enacted. The law stated,

‘‘notwithstanding, any other provision of law, funds appropriated to FEMA for

disaster relief for the terrorist attacks of September 11, 2001 may be used to

provide funds to the city of New York and the State of New York for costs associated with such attacks that are unreimbursable under the Stafford Act . . .’’

Under this provision, FEMA has the authority to provide the city and State funds

for costs incurred as a result of the disaster that officials can use to reimburse some

city agencies for extra security measures they took in the immediate aftermath of

the terrorist attacks.

RESPONSE BY JAYETTA Z. HECKER TO ADDITIONAL QUESTION

FROM SENATOR VOINOVICH

Question. Please provide a complete accounting of the nontraditional projects that

were funded in New York City. For example, what were the extra costs of enhancing

and modernizing Lower Manhattan’s transportation system rather than repairing

the existing infrastructure? In addition to this accounting of all the nontraditional

work, what were the nontraditional costs that New York City faced due to the nature off this disaster? Also, how much additional assistance was provided since the

cost share was waived?

Response. We have not directly evaluated what the nontraditional costs that New

York City faced due to the nature of this disaster. However, issues related to extra

costs of enhancing the lower Manhattan transportation system and an accounting

of the nontraditional assistance and savings related to the elimination of a State

and local cost share are addressed in our response above to the first question from

Senator Jeffords.
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STATEMENT OF RICHARD L. SKINNER, DEPUTY INSPECTOR GENERAL, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF HOMELAND SECURITY

Good morning Mr. Chairman and Members of the Subcommittee. I am Richard

L. Skinner, Deputy Inspector General of the Office of Inspector General (OIG) for

the Department of Homeland Security, which includes the Federal Emergency Management Agency (FEMA).

Thank you for the opportunity to be here today to discuss the work of the OIG

in response to the unparalleled terrorist events of September 11, 2001, as well as

our perspective on FEMA’s merger into the new Department of Homeland Security.

First let me address our work in New York following the September 11, 2001, terrorist attacks.

OIG RESPONSE TO SEPTEMBER 11

September 11, 2001, resulted in catastrophic physical damage and loss to the

business and residential infrastructure in the lower part of the Borough of Manhattan. FEMA applied the full range of authorized disaster assistance programs to the

post-disaster needs of the city of New York and its individuals, including Public Assistance grants, Temporary Housing (specifically Mortgage and Rental Assistance),

Individual and Family Grants, Disaster Unemployment Assistance, Crisis Counseling Assistance and Training, and Legal Services. FEMA, however, due to the

unique circumstances of this disaster, (i.e., managing the consequence of a terrorist

attack rather than the consequences of hurricanes, tornadoes, or floods), had to use

its authorities and programs more broadly than it ever had before. FEMA’s authorities were not adequate to meet everyone’s expectations in recovering from the unprecedented needs created by this event.

The FEMA OIG deployed teams of auditors, inspectors, and investigators from

Headquarters and various field offices in early October 2001 to the New York City

Disaster Field Office (DFO). Our mission was to assist the Federal Coordinating Officer (FCO) in reviewing and assessing procedures, practices, and controls in place

throughout the operation, to identify and prevent fraud, and to assure FEMA’s Director that all possible actions were being taken to protect public welfare and to ensure the efficient, effective, and economic expenditure of Federal funds. One team

of auditors and inspectors worked directly with the FCO and monitored set-up and

operation of the DFO. Another team of auditors worked with the FEMA public assistance staff and a team of inspectors worked with the FEMA individual assistance

staff. Several teams of investigators worked round the clock at the DFO and at

ground zero.

GENERAL MANAGEMENT OVERSIGHT

We worked in direct support of the FCO to respond to specific requests and addressed matters that independently came to our attention. Some of the tasks we

performed related to accounting and auditing, but some were as varied as tracking

down missing copy machines. We worked closely with a team of FEMA comptrollers

and OGC representatives, helping them with a wide assortment of financial matters. We also worked with other Federal agencies, as well as State and city organizations and voluntary agencies. Our support included establishing a partnership

with program staff to identify and suggest courses of action with regard to potential

and emerging issues regarding duplication of benefits, donations management, accountable property, program limitations and administration, DFO training, safety

and security. We identified a number of significant issues and made recommendations for improvement.

INVESTIGATIVE INTIATIVES

Our Office of Investigations processed 787 fraud complaints and resolved or closed

771 of them. Sixteen complaints remain open. We continually receive new complaints through the DHS OIG fraud hotline, FEMA personnel, and numerous Federal, state, and local agencies. We have opened 112 criminal investigations and have

received 89 indictments and arrested 86 individuals. We have recovered $922,028,

received restitution of $6,729,728, issued fines of $1,686,538, and reported cost savings of $7,429,502.

PUBLIC ASSISTANCE OVERSIGHT

The FEMA OIG responded to the World Trade Center attack as a partner to

FEMA’s response and recovery components. We deployed a team of auditors to monitor public assistance operations and assist in reviewing requests for assistance.

This team maintained a presence for more than a 11⁄2 years working with FEMA
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1FEMA’s Recovery Division, December 2002.

public assistance staff to ensure that recovery efforts were on track and complied

with Federal laws and regulations.

Our efforts were far from the traditional role of the OIG, but this was an extremely unique situation, and we were able to contribute significantly to the effectiveness of FEMA’s response by providing proactive oversight rather than hindsight.

Early in the process we briefed applicants on how to qualify for FEMA assistance

and maintain records, and we reviewed accounting systems of some of the local governments to ensure they were adequate for collecting necessary cost data.

We reviewed requests for funding and the detailed worksheets for proposed

projects and met with public assistance program staff on a regular basis to provide

them technical assistance on cost allowability. At FEMA’s request, we reviewed

questionable bills submitted by applicants for payment and FEMA’s implementation

of its policy on heightened security eligibility.

We did not conduct any traditional grant compliance audits of public assistance

grants, nor did we audit any costs incurred under the Consolidated Appropriations

Resolution Act of 2003, which provided that costs not eligible for public assistance

funding, referred to as associated expenses, will be funded with the remainder of

the $8.8 billion of authorized FEMA funding. FEMA estimates that $7.6 billion will

be required for Stafford Act purposes and $1.2 billion will be used for associated expenses. Associated expenses include such costs as local government employees’ salaries, heightened security costs, and the I Love NY campaign to encourage visitors

to the state.

INDIVIDUAL ASSISTANCE REVIEW

In response to congressional inquiries, the FEMA OIG reviewed FEMA’s delivery

of individual assistance in New York after September 11, 2001. The review focused

on issues that need to be addressed by both FEMA and Congress as they consider

regulatory and legislative changes to improve FEMA’s delivery of assistance to victims of future terrorist attacks that result in Presidential disaster declarations. Following is a summary of issues raised during our review.

Eligibility Issues in the Mortgage and Rental Assistance Program

FEMA historically has not had to implement the Mortgage and Rental Assistance

(MRA) program on a large scale because previous disasters did not coincide with nor

result in widespread unemployment and national economic losses. From the inception of MRA until September 11, 2001, only $18.1 million had been awarded under

the program for 68 declared disasters, compared to approximately $76 million as a

result of the New York disaster alone.1 Because it was seldom used, Congress eliminated the program when it enacted the Disaster Mitigation Act of 2000 (DMA 2000)

making the program unavailable after May 1, 2002.

FEMA had to face the challenge of implementing this program in a disaster that

caused significant economic consequences, including not only the obvious economic

impact of the incident itself but also the indirect economic effects felt throughout

the country. The language of the Stafford Act’s MRA authority establishes as a criterion for assistance a written notice of dispossession or eviction. The law is silent,

however, on what constitutes a financial hardship. This omission required FEMA

to interpret to what extent a personal financial loss constitutes a financial hardship,

and to determine if that hardship resulted directly from the primary effects of the

attacks or from secondary effects on the Nation.

The MRA program’s limited use, the broad economic impact of this unprecedented

event, and FEMA’s challenge to differentiate between primary and secondary economic effects contributed to difficulties in delivering timely and effective assistance.

The MRA program is unique because it addresses limited, individual economic

losses versus physical damage resulting from a disaster. Traditional inspection of

damages as a basis for program eligibility, therefore, does not apply to MRA. Individual financial hardships caused by the disaster must be evaluated case-by-case.

FEMA attempted to clarify eligibility criteria that required a clear link between

physical damage to the business or industry caused by the disaster and an applicant’s loss of household income, work, and/or employment regardless of geographic

location.

In summary, the MRA program, if reinstated, could continue to meet a fairly narrow economic need but would still require legislative revision to make it less complicated to administer. A broader, more flexible program, however, would more appropriately meet the range of economic losses experienced after events such as the

September 11, 2001, terrorist attacks. The OIG believes FEMA should explore such
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2 Because the September 11 event was both a disaster and a criminal act, programs of the

U.S. Department of Justice’s (DOJ) Office for Victims of Crime were also applicable. As a result,

expenses related to medical, dental, and funeral were covered by DOJ.

a program with Congress. In doing so, Congress may wish to consider studying

other existing mechanisms within the Federal Government as possible vehicles

through which broader assistance could be provided.

State Capability to Implement the Individual and Family Grants Program

The Stafford Act authorizes the Individual and Family Grants (IFG) program to

meet disaster related necessary expenses or serious needs of disaster victims that

could not be met through other provisions of the Stafford Act or through other

means such as: insurance, other Federal assistance, or voluntary agency programs.

Eligible expenses may include those for real and personal property, medical and

dental expenses, funeral expenses, transportation needs, and other expenses specifically requested by the State.2

Applications for IFG assistance rose sharply in June 2002, as applicants requested

assistance for the air quality items. FEMA believes the increase in new applications

coincided with public announcements being made by the U.S. Environmental Protection Agency (EPA) regarding the poor air quality in the city and the need for airconditioning and related items because of the unusually warm spring and early

summer. The State believes the surge in new applications coincided with the closing

of the nonprofit programs. FEMA received an average of 7,660 applications per

month from June to August 2002 for air-quality items. Applications for IFG assistance typically do not spike at this point in the recovery phase of a disaster.

The unanticipated increase in applications received after June 2002 also may be

related to two other decisions regarding assistance for air-quality items. First, assistance was made available to all households in the five boroughs of New York

City. The broad geographic eligibility was not related to the areas of actual impact.

A better model might have been to limit eligibility to the same areas identified by

EPA and the New York City Department of Health for purposes of the apartment

cleaning and testing program. If the IFG program and the EPA testing and cleaning

program had worked more closely together in terms of geographic eligibility, the

program would have had reasonable and justifiable boundaries. Second, as a result

of concerns expressed by certain advocacy groups, applicants were allowed to certify

that they were unable to pay for the air-quality items (costing as much as $1600).

Funding was advanced to those applicants and they were requested to provide receipts after purchase. There were few limitations placed upon who could qualify for

this ‘‘unable to pay’’ option. This may also have increased the likelihood of fraud

and abuse.

INTERAGENCY COORDINATION CHALLENGES

Responsibilities shared among FEMA, EPA, and the U.S. Department of Justice

(DOJ) Office for Victims of Crime were not defined clearly enough to distinguish

roles and establish the sequence of delivery of assistance. Recovery from the September 11, 2001, event highlighted the need for advance agreements regarding

shared roles and responsibilities among key agencies likely to respond to future

events.

Response to Residential Air Quality, Testing, and Cleaning Requires More Coordination

EPA was aware, based on its work in the aftermath of the 1993 WTC terrorist

bombing, that the WTC towers contained asbestos material. Neither FEMA nor New

York City officials, however, initially requested that EPA test or clean inside buildings because neither EPA nor the New York City Department of Environmental Protection (NYCDEP) could identify any specific health or safety threat. EPA nevertheless advised rescue workers early after the terrorist attack on the WTC that materials from the collapsed buildings contained irritants, and advised residents and

building owners to use professional asbestos abatement contractors to clean significantly affected spaces. Directions on how to clean the exterior of buildings affected

by dust and debris were provided to building owners by NYCDEP, and directions

on how to clean interior spaces were provided by the New York City Department

of Health.

Neither FEMA nor EPA traditionally has been involved in testing and cleaning

private residences. Neither agency is specifically authorized to provide such services.

However, when a potential health and safety threat was identified and New York

officials documented that interior testing and cleaning would beneficially impact the

city’s economic recovery, FEMA used its debris removal authorities under the Staf-
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ford Act to provide the necessary funding. Though the entire New York public cannot be serviced, the low level of applications for cleaning and testing, along with the

low number of residences found with dangerous asbestos levels, may indicate that

FEMA and EPA have addressed the need, or that individuals already have taken

the initiative to clean their residences.

The program to test and clean residences in lower Manhattan did not commence

until months after the disaster. Although FEMA has the responsibility to coordinate

recovery from Presidentially declared disasters, FEMA must depend on the particular expertise of EPA in circumstances involving possible air contaminants or environmental hazards. EPA must confirm that such hazards constitute a public

health and safety threat before FEMA can provide funding for emergency response.

FEMA should be more proactive in requesting EPA to conduct necessary testing

and/or studies to determine if a public health or safety threat exists in future, similar disasters so that cleaning efforts can begin much earlier in the recovery phase.

FEMA also should address the roles of state and local agencies in such circumstances, as consultation with these agencies would provide useful information

in review or evaluation.

Department of Justice Authorities Compliment FEMA Authorities

Because the September 11, 2001, terrorist attack sites were Presidentially declared disasters resulting from criminal actions, both FEMA and the DOJ’s Office

for Victims of Crime (OVC) had authority to provide victim assistance. FEMA’s Crisis Counseling Assistance and Training Program (CCP) providers found it necessary

to offer support services that went beyond the normal levels of CCP mental health

programs. Too many entities were involved at the outset to ensure coordination and

avoid potential confusion of services provided to victims.

The September 11, 2001, attacks uncovered potential DOJ-FEMA overlaps in

some programs covering disaster areas that are also crime scenes. FEMA’s CCP program funds crisis counseling and IFG program reimburse victims of disasters for

medical, dental, and funeral expenses. The Victims of Crime Act of 1984, as amended (42 United States Code § 10603), authorizes DOJ’s OVC to provide financial assistance to victims of Federal crimes and of terrorism and mass violence in the form

of (1) grants to state crime victim compensation programs to supplement state funding for reimbursement of the same out-of-pocket expenses, including mental health

counseling; and (2) grants to state victim assistance agencies in support of direct

victim services, i.e., crisis counseling, criminal justice advocacy, shelter, and other

emergency assistance services.

FEMA, OVC, and DOJ’s Executive Office for United States Attorneys subscribed

to a Letter of Intent to ensure that victims receive needed services and information

and to articulate services needed in responding to catastrophic Federal crime. The

Letter of Intent should serve as the foundation for future cooperative activities but

more detailed and comprehensive guidance is necessary to ensure that services delivered to disaster victims who are also victims of crime are appropriate, consistent,

and not duplicative. These objectives could be accomplished through a Memorandum

of Understanding between FEMA and DOJ’s OVC that formalizes the relationship,

the responsibilities and authorities to be applied, programs, timeframes, and sequencing when a disaster is also a crime scene.

Coordination with Voluntary Agencies

Voluntary Agencies (VOLAGS) typically provide immediate emergency assistance

to victims, FEMA addresses short and long-term recovery needs, and, near the end

of the recovery cycle, VOLAGS address victims’ unmet needs. After the September

11, 2001, terrorist attacks, individuals donated time, resources, and money in record

volumes to a large number of VOLAGS. The overwhelming generosity and rapid influx of cash donations likely contributed to the ability of VOLAGS and other groups

to provide higher levels of assistance. Since so many VOLAGS, ad hoc organizations,

and other entities not traditionally in the sequence of delivery were distributing assistance, it was difficult to collect accurate information necessary to understand the

scope of assistance being provided.

FEMA, attempting to bring order to the chaos created by the multitude of voluntary organizations, and developed a matrix of various government and non-government entities. At one point, this matrix included over 100 organizations and was

used to identify their contributions to disaster recovery efforts and the types of assistance provided. FEMA validated the information and became familiar with the

kinds of assistance being offered so that staff could make informed referrals. In

spite of these efforts, FEMA was not able to ensure that all voluntary agencies were

coordinated appropriately to ensure that benefits are not duplicated among disaster

programs, insurance benefits, and/or any other types of disaster assistance.
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3GAO draft report, ‘‘More Effective Collaboration Could Enhance Charitable Organizations’

Contributions in Disaster,’’ December 2002. 4The New York Immigration Coalition, ‘‘Recommendation to improve FEMA’s Mortgage and

Rental Assistance Program,’’ June 23, 2002.

Historically, FEMA has not considered the assistance of voluntary agencies to be

duplicative under normal disaster conditions. In response to this event, however,

VOLAGS far exceeded their traditional role in the provision of assistance. FEMA,

to ensure timely assistance to victims, decided to activate its own IA program and

to treat VOLAG and other non-governmental assistance as non-duplicative as it related to the events of September 11, 2001. Had FEMA expended the resources necessary to fully identify and quantify such assistance after September 11, 2001, the

timely provision of urgently needed assistance would have been delayed. FEMA acknowledges, however, that some people may have received assistance for similar

losses from more than one source.

Regardless of FEMA’s decision to not identify and quantify voluntary agency assistance on a case-by-case basis, the potential that duplication occurred does exist

although the nature and amount of duplication remain unknown. FEMA needs to

be better able to anticipate the proactive role non-governmental organizations will

play in disaster recovery operations and attempt to coordinate relationships with

those organizations through protocols such as Memorandums of Understanding to

alleviate the potential for duplicating benefits. The General Accounting Office (GAO)

has also emphasized the need to improve coordination among charities and between

charities and FEMA.3

UNMET NEEDS

Several gaps in authorizations appear to exist for FEMA and other Federal agencies to address recovery needs of certain individuals and businesses. The OIG believes these gaps may be of concern in future disasters.

Federal Public Benefit Classification Limits IA Eligibility

Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act

of 1996 requires that Federal public benefits be provided only to United States citizens, non-citizen nationals, and qualified aliens. Under Title IV, the following

FEMA IA programs authorized by the Stafford Act are considered Federal public

benefits: Temporary Housing Assistance; Unemployment Assistance; Individual and

Family Grants Programs; and Food Coupons and Distribution.

Temporary Housing Assistance and the IFG program have been repealed and

combined into one grant program, the Individuals and Households Program, under

DMA 2000. This new program falls under the Federal public benefit standard.

The recipient limitations imposed by the Federal public benefit standard do not

apply to some types of post-disaster assistance. Any victim may receive short-term,

non-cash, in-kind emergency disaster relief, including emergency medical care,

emergency mass care, emergency shelter, and other assistance provided by

VOLAGS. Other recovery tasks also must occur without regard to limitations. These

include clearing roads; constructing temporary bridges needed to perform emergency

repairs and deliver essential community services; warning of further risk or hazards; disseminating public information; assisting victims with health and safety

measures; providing food, water, medicine, and other essential goods; transporting

supplies or persons; and otherwise reducing immediate threats to life, property, and

public health and safety.

The September 11, 2001, disaster affected victims who are not United States citizens, non-citizen nationals, or qualified aliens but who were lawful residents of the

United States under a valid immigration category or classification. Because these

residents are not granted an alien status that would allow them to receive a Federal

public benefit, they were ineligible for assistance under the IA program. For example, individuals who possess an un-expired Employment Authorization Card, which

permits lawful employment in the United States, are precluded from Federal public

benefit assistance. One immigration advocacy group estimates that as many as

80,000 lawfully present individuals in New York are not qualified for Federal disaster assistance beyond the short-term emergency relief.4

FEMA should consider pursuing legislative changes that would exempt FEMA’s

IA programs from the Federal public benefit classification when victims needing IA

are lawfully present in the United States at the time of the applicable disaster but

may not have the qualified alien status required by Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
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FEMA Assistance for Non-Critical Private Non-Profit Service Organizations is Limited

To be eligible for FEMA grant assistance, a Private Non-Profit (PNP) organization

must fall within the Stafford Act’s definition of a PNP that provides an essential

service of a governmental nature. This was true prior to DMA 2000 and DMA 2000

did not change the definition of an eligible PNP applicant. However, with DMA

2000, Congress created a two-tiered system of reimbursement for FEMA-eligible

PNP’s. For eligible PNP facilities that provide ‘‘critical services,’’ FEMA may provide

assistance for eligible work just as it did prior to DMA 2000. For eligible non-critical

PNP facilities, DMA 2000 now requires the PNP to first apply to SBA. FEMA can

then provide the PNP assistance if the PNP does not qualify for an SBA loan or

if it obtains one in the maximum amount for which it is eligible.

The intent of Congress to limit grant assistance to ‘‘critical’’ PNP organizations

without applying first for a loan, is unambiguous. Even the discretion given to the

President to add to the list of ‘‘critical’’ PNP services is limited to a few emergencyrelated activities. The attacks of September 11, 2001, enabled the first significant

test of this new approach to funding PNPs, and the reactions were predictable.

PNPs that lost immediate access to grants as a result of DMA 2000 Colleges, Universities, and various providers of social services understandably questioned the equity of the new law. While these changes were under consideration by Congress,

concern surfaced that dividing PNP services into ‘‘critical’’ and ‘‘non-critical’’ categories would be perceived as inequitable and would, in fact, affect the relatively

smaller and less well financially endowed organizations more substantially than

larger organizations that enjoyed better, ongoing access to other forms of revenue.

On December 12, 2002, FEMA implemented a new policy, based on the President’s

announcement to strengthen the Administration’s compassion agenda by making it

easier for America’s faith-based and community groups to work with the Federal

Government. FEMA’s new policy extends assistance to eligible and necessary faithbased organizations by broadening the eligibility of certain non-profit organizations

to receive Federal disaster assistance. This policy recognizes the statutory eligibility

of PNP organizations that provide necessary and vital functions to local communities and is retroactive to January 20, 2001.

Congress may wish to reconsider this ‘‘critical’’ and ‘‘non-critical’’ PNP approach

and either require all PNPs to apply first for an SBA loan, which would achieve

greater cost-savings, or require no PNPs to apply for loans before qualifying for

FEMA grants, which would level the playing field but increase the amount of Federal grant assistance.

LEGISLATIVE ISSUES

Congress may wish to consider legislation to either reinstate the MRA program

or develop a comparable program. Congress also might wish to consider whether

FEMA or another Federal agency should administer grants to small businesses that

have been adversely affected by a disaster.

MRA is Eliminated by the Disaster Mitigation Act of 2000

DMA 2000 amendments to the Stafford Act repealed the MRA program as a component of FEMA’s Temporary Housing Assistance for disasters declared on or after

May 1, 2002. FEMA received an extension from Congress and has made this effective for all disasters declared on or after October 15, 2002. DMA 2000 also establishes a $25,000 cap on the Individuals and Households Program. These new limitations raise serious issues for addressing economic losses and financial hardships suffered by victims of events similar to this one. Congressional consideration may be

warranted to better position FEMA to address economic issues in future acts of terrorism.

Grants to Small Businesses Were Made on an Ad Hoc Basis

In its November 2002 report, September 11, Small Business Assistance Provided

in Lower Manhattan in Response to the Terrorist Attacks, GAO documented assistance made available under various grant and loan programs to both public and private entities. GAO reported, ‘‘The September 11, 2001 terrorist attacks on the World

Trade Center had a substantially negative impact on the New York City economy,

strongly affecting businesses, both large and small, and as disparate as financial

services firms, travel agencies, and retail stores. Some businesses were destroyed,

some displaced, and still others could not operate because of street closures and the

lack of utilities. Many businesses still face a diminished client base and uncertainty

about the future redevelopment of the World Trade Center site.’’ There is, however,

presently no on-going Federal program that provides grant support to businesses ad-
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5 Cerro Grande Fire Assistance Act, Division C. It should be noted that FEMA received substantial assistance from SBA in implementing the compensation program for businesses.

versely affected by disasters, except in the instance of special legislation targeted

to an event.

FEMA is prohibited by the Stafford Act from providing disaster assistance to businesses of any size. The Stafford Act provides funding, principally in the form of

grants, to individuals, state and local governments, and certain private, non-profit

organizations adversely affected by a disaster. SBA is authorized to provide loans,

not grants, to businesses adversely affected by a disaster. SBA is administratively

prohibited, however, from making loans to businesses that do not meet specific and

generally established eligibility criteria. SBA was unable, for example, to make

loans to businesses that did not meet the agency’s size standards or financial qualifications.

SBA’s limited ability to assist businesses financially after the September 11, 2001,

event was recognized early in the response phase. FEMA, under special legislation,

was already involved in compensating businesses adversely affected by the May

2000 Cerro Grande fire in northern New Mexico. Some Members of Congress introduced legislation specific to the September 11, 2001, events that would allow FEMA

to initiate a similar program in Lower Manhattan.5 The bill would have authorized

FEMA to compensate businesses in an amount generally not to exceed $500,000 for

specified business losses. A companion bill was introduced in the House of Representatives. Neither bill, however, was enacted.

Alternatively, Congress enacted the Department of Defense and Emergency Supplemental Appropriations for Recovery From and Response to Terrorist Attacks on

the United States Act of 2002, a provision of which allowed the State of New York

to use Community Development Block Grant (CDBG) funds administered by the

U.S. Department of Housing and Urban Development (HUD) to make Business Recovery Grants. GAO noted that the Business Recovery Grants covered, in total,

about 17 percent of business losses that were not covered by insurance and New

York City and State grants. GAO further reported that the Empire State Development Corporation, which is administering the Business Recovery Grant program,

planned to increase payments to some businesses and thereby reduce the amount

of their uncompensated economic losses.

Congress may wish to consider whether the Federal Government should be the

insurer of last resort for all or part of disaster-related business losses. Such a policy

decision would eliminate the need to respond on an ad hoc basis after each terrorist

attack that results in a Presidential disaster declaration. Factors that should be considered are whether the lack of such assistance in recovering from difficulties related to terrorist incidents could increase other Federal response costs, such as DUA

and MRA; and the respective roles of FEMA, SBA, and HUD in administering financial assistance to small businesses.

TRANSITIONING INTO DHS

As Undersecretary Brown noted in his testimony, FEMA has not missed a step

in responding to disasters since becoming a part of DHS. In May of this year, we

sent a team of auditors to monitor FEMA’s response and recovery efforts to a series

of major tornadoes in Missouri. The caliber and effectiveness of FEMA’s response

was the same high standard we have seen in the past.

In addition, the consolidation of first responder organizations within DHS offers

opportunities for a better coordinated, more responsive, disaster response and recovery capability. In particular, the addition of Department of Health and Human Services programs to DHS and the creation of a National Incident Management System

and a National Response Plan should add to that capability. The OIG plans to review those areas in the near future. However, the OIG has also transitioned into

DHS, and our ability to provide oversight has been diluted due to the many nonFEMA priorities and demands being placed on our limited staff.

Notwithstanding the continued success of FEMA’s response and recovery efforts,

there are still shortcomings in FEMA operations (see Attachment 2). Although we

have not witnessed any changes in services, FEMA has many problems that need

to be addressed and its ability to effectively address them is compounded by its

merger into DHS. Areas of particular concern as FEMA transitions into DHS include FEMA’s financial management, the security of FEMA’s information technology

(IT) systems, and grant management. Deficiencies in these areas could most certainly hamper the effective and efficient integration of FEMA programs and operations into DHS.
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* Approved funding includes New Jersey, Connecticut, Massachusetts, and Pennsylvania.

Regarding financial management, the OIG identified six material weaknesses in

fiscal year 2002 related to FEMA’s financial statement audit. For example, FEMA’s

financial system functionality and financial reporting process both need significant

improvement. This problem is exacerbated by other DHS components having similar

problems.

Regarding IT security, The Office of Management and Budget scored FEMA’s egov status as unsatisfactory, and FEMA did not receive a passing grade for computer security from the House Subcommittee on Government Efficiency, Financial

Management and Intergovernmental Relations. FEMA is aware of its problems in

IT management and is working to address the weaknesses.

Regarding grants management, FEMA has had longstanding problems, although

it has made improvements and worked to develop a viable grants management program. Previous FEMA OIG reports have identified significant shortcomings in the

pre-award process, cash management, monitoring, and grant closeout processes.

This in turn has allowed grant recipients to misuse millions of dollars in Federal

funds each year.

In addition, although numerous grant programs are now consolidated within

DHS, their management is divided among various components within the Department. Preparedness for terrorism is in the Border and Transportation Security directorate, while other preparedness efforts are in the Emergency Preparedness and

Response directorate. This bifurcation will create additional challenges related to

inter-departmental coordination, performance accountability, and fiscal accountability. Furthermore, program managers have yet to develop meaningful performance measures necessary to determine whether the grant programs being absorbed

by DHS have actually enhanced state and local capabilities to respond to terrorist

attacks and natural disasters. The OIG addressed these concerns in the early days

of the Department’s creation (see Attachment 3). It is our understanding that this

problem is now being addressed legislatively. Further, Secretary Ridge recently announced plans to centralize these programs within a single office of the Department.

In summary, although FEMA has made progress in many areas, additional improvement is needed, and the remaining problems will make an effective transition

into DHS more difficult.

CONCLUSION

This concludes my written statement. Again, I appreciate the opportunity to testify before you today. I would be happy to answer any questions that you may have.

ATTACHMENT 1.—FINANCIAL STATUS OF INDIVIDUAL ASSISTANCE PROGRAM AS OF

NOVEMBER 1, 2002

Temporary Housing Assistance: Mortgage and Rental Assistance—$76,275,000;

Minimal Home Repair—$1,450,000; Transient Accommodations—$1,225,000; Rental

Assistance—$26,150,000.

Individual and Family Grants: $25,400,000.

Crisis Counseling Assistance and Training Program: $162,400,000*.

Unemployment Assistance: $13,200,000.

Legal Services: $2,000.

Total FEMA Individual Assistance for New York: $306,102,000.

ATTACHMENT 2.—FEDERAL EMERGENCY MANAGEMENT AGENCY, OFFICE OF

INSPECTOR GENERAL, WASHINGTON, DC.

December 31, 2002

Memorandum for: Joe M. Allbaugh (Director Signed)

From: Richard L. Skinner, Acting Inspector General

Subject: Management Challenges

The Office of Inspector General has identified the most serious management and

performance challenges we believe FEMA is facing and the progress FEMA is making in addressing those challenges. We are required to provide this statement to you

under the Reports Consolidation Act of 2000. This statement is to be included in

the consolidated report described by the Act.
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We believe, based on our work and our general knowledge of FEMA operations

and programs, that FEMA must continue to focus attention on the following management and program initiatives to ensure public accountability and improve program effectiveness. Although FEMA managers acknowledge most of these issues

and are addressing them to varying degrees, much work is left to be done to ensure

that business is conducted economically and efficiently, and that appropriate program results are achieved.

PROGRAM CHALLENGES

Homeland Security Transition.—The President established the Department of

Homeland Security on November 25, 2002. The mission of the Department is to develop, coordinate, and implement a comprehensive national strategy to secure the

United States from terrorist threats or attacks. The Department is responsible for

coordinating efforts to detect, prepare for, prevent, protect against, respond to, and

recover from terrorist attacks within the United States. FEMA will transfer into the

Department on March 1, 2003, as part of the Emergency Preparedness and Response Directorate. FEMA will continue to lead and support the Nation in responding to and recovering from any destructive event, whether natural or man-made.

FEMA will also continue its preparedness and mitigation programs for non-terrorist-related disasters. These programs will be coordinated with similar programs

from the components of the Departments of Health and Human Services and Energy

that are also transferring into the Emergency Preparedness and Response Directorate. FEMA will cooperate closely with the new Office for Domestic Preparedness

in preparing for and mitigating terrorist activities. The challenges facing FEMA are

many. There are concerns of FEMA losing its identity as an agency that is quick

to respond to all hazards and disasters. Members of Congress and the general public

have expressed concern that FEMA’s disaster response and recovery and mitigation

missions will be diluted as it is absorbed into a much larger organization and that

funding issues will limit FEMA’s ability to respond to disasters as it has in the past.

Further, the integration of FEMA’s many management and financial information

systems with those of other entities that will be brought into the Department will

be a daunting task. This is of particular concern because of problems plaguing

FEMA’s systems lack of integration, security issues, and non-compliance with the

Federal Financial Management Integrity Act. There are also concerns relating to the

workforce—FEMA’s most important asset. As with all entities being transferred to

the Department, employees are concerned about their role and how the transfer will

affect their job. FEMA is well aware of these issues and is addressing them as they

arise through active communication with staff. FEMA’s experience in coordinating

the Federal Response Plan will contribute to the success of the Department’s transition and integration efforts.

Disaster Response and Recovery.—FEMA’s largest spending category is disaster

relief. According to the President’s fiscal year 2003 budget proposal, $3.5 billion was

obligated in that category in fiscal year 2001 and due largely to the World Trade

Center attack, $8.7 billion was estimated to be obligated in fiscal year 2002. Managing disaster response and recovery continues to be one of FEMA’s largest challenges. FEMA faces difficulties establishing disaster declaration criteria, reducing

disaster response and recovery costs, managing its disaster workforce, ensuring the

integrity of its many financial assistance programs, and improving program services. FEMA has begun to address all of these problems. FEMA recently centralized

deployment of the Disaster Assistance Employee cadre, for example, to improve the

efficiency of disaster staffing; but much remains to be done.

Recent amendments to the Stafford Act increased FEMA’s challenges in managing

disaster recovery. The amendments change estimating and payment procedures

under the Public Assistance Grant Program, FEMA’s largest grant program. Disaster grant applicants will be paid based on damage estimates rather than actual

damage repair costs. FEMA tested a similar approach, called the Grant Acceleration

Program, after the Northridge Earthquake in Southern California. The test results

reflected inflated estimates, extreme overpayments, and ineligible work performed

at taxpayer expense. Finding solutions to these problems and instituting other

changes required by the amendments, such as establishing fixed management cost

rates for grantees and subgrantees, will confront managers of FEMA’s disaster assistance grants in fiscal year 2003.

Managing disaster response is a major challenge, particularly when the Federal

Response Plan is activated and FEMA must coordinate the activities of dozens of

Federal, State, and local organizations. FEMA also manages its own response assets

to increase its ability to respond quickly, and its disaster response capabilities have

improved substantially in recent years. Less than 3 hours after the World Trade
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Center attack the first Urban Search and Rescue Teams were at the site. FEMA

also has warehouses around and outside the country in which commodities and

equipment are stocked to support disaster field offices. Commodities such as water,

meals, generators, tents and blankets—that victims need immediately after a disaster—also are stocked at the warehouses. These facilities contain thousands of

items valued at more than $40 million. Maintaining the warehouses, accounting for

property, and the logistics of deploying, recovering, and refurbishing reusable items

are continuing challenges for FEMA.

State and Local Preparedness.—The Director announced in November 2002 that

FEMA will provide $225 million in grants to help State and local responders and

emergency managers to become better prepared to respond to acts of terrorism and

other emergencies and disasters. The funds are available through the fiscal year

2002 supplemental appropriation, a part of President Bush’s First Responder Initiative. The funds will serve as down payments on resources for States and local communities to modernize plans and strengthen their preparedness for disasters of all

kinds. The funds will flow through the States, with at least 75 percent going to local

governments. Roughly $100 million of the $225 million in supplemental funds will be used for

updating plans and procedures to respond to all hazards, with a focus on weapons

of mass destruction. Updated plans will address a common incident command system, mutual aid agreements, resource typing and standards, interoperability protocols, critical infrastructure protection, and continuity of operations for State and

local governments. FEMA intends that the comprehensive plans will be linked

through mutual aid agreements and that they will outline the specific roles of all

first responders (fire service, law enforcement, emergency medical services, public

works, etc.) to terrorist incidents and other disasters.

FEMA also will provide $56 million in 2002 supplemental funds to upgrade State

emergency operations centers. States and territories will receive a base allocation

but must submit grant proposals for additional funding. A total of $25 million is

available for Citizen Corps activities, including Citizen Corps Councils, and expanded training for FEMA’s Community Emergency Response Teams (CERTs)

across the country. Other fiscal year 2002 supplemental fund allocations will include

$7 million for secure communications, $5 million to begin laying the groundwork for

a national mutual aid system, and $32.4 million for weapons-of-mass-destruction

training for FEMA’s urban search and rescue task forces.

Although funds have been set aside to address State and local preparedness

issues, FEMA still faces the following challenges: • Building and sustaining a national preparedness and response capability; and • Coordinating national terrorism preparedness programs.

FEMA must continue to place a high priority on developing State and local capabilities to respond to acts of terrorism as well as natural disasters. FEMA must develop State and local capacity to respond to and manage small- to medium-sized disasters, particularly fairly predictable ones such as repeated flooding in flood-prone

areas.

FEMA also must continue expanding the development of the National Hazard

Loss Estimation Methodology for all hazards. Models for estimating potential losses

from hurricane wind and riverine flooding are to be introduced in February 2003,

but additional development is required with regard to thunderstorms, tornadoes,

tropical cyclones, hail, and coastal flooding. The mounting dollar losses cannot be

adequately addressed by a fragmented approach to natural hazards. Instead, estimated losses for other hazards are needed to support FEMA’s risk-based approach

to mitigation and emergency preparedness, and for comprehensive mitigation programs by local communities.

The increased threat of acts of terrorism spurred by the attacks of September 11,

2001, also indicates a need for FEMA to consider developing a terrorism-response

methodology. Those attacks highlighted the need to fully equip and train fire departments so they will be better prepared to respond to terrorist events. FEMA is

addressing this matter through the U.S. Fire Administration’s (USFA) Assistance to

Firefighters Grant Program (AFGP). FEMA and USFA also had awarded more than

$170 million to 2,756 fire departments throughout the United States at the end of

fiscal year 2002 under the AFGP. An additional $190 million is predicted to be

awarded in the first quarter of fiscal year 2003. To date, nearly 5,500 fire stations

have received funds for training or equipment upgrades and purchases since the inception of this program. It is likely that this program will continue indefinitely and

probable that the amount of grant funds will be increased. It is imperative, therefore, that FEMA administer the program effectively and efficiently to ensure that

funds are directed to those most in need and those most likely to be required to respond to a terrorist attack or natural disaster.
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Mitigation Programs.—The President’s fiscal year 2003 budget proposal includes $300 million under the National Pre-Disaster Mitigation Fund to initiate a competitive grant program for pre-disaster mitigation. FEMA is preparing to implement the

program, which would replace the current formula-based Hazard Mitigation Grant

Program, if enacted by Congress. FEMA is challenged with designing a program

that ensures fair evaluation of all applicants and their proposed mitigation projects.

Eligible activities include: risk assessments; State and local planning; the reinforcement of structures against seismic, wind, and other hazards; elevation, acquisition,

or relocation of flood-prone structures; and minor flood-control or drainage-management projects. Program success will depend on the quality and effectiveness of

FEMA’s evaluation process and criteria. FEMA is taking into account stakeholder

input to create the new program. Considerable work remains to be done, specifically

the development of eligibility and evaluation criteria.

The OIG issued a report, ‘‘Status of Funds Awarded under the Hazard Mitigation

Grant Program and Other Project Management Issues,’’ in July 2001. In response,

FEMA is strengthening its management of the HMGP by monitoring unliquidated

obligations and deobligating unspent funds. The agency also is planning to publish

new regulations that will address problems cited in our report, such as co-mingling

of funds, the quality of applicant progress reports, and inadequate project timeframes. Challenges remain for FEMA to ensure that States and local governments

are making the best use of Federal funds and carrying out their mitigation projects

timely and in accordance with grant agreements.

Multi-Hazard Flood-Map Modernization.—Flooding stands out as the single most pervasive hazard facing the Nation, causing an estimated $6 billion in property

damage annually. Much of the recovery spending could be avoided by efficient, upfront planning using accurate, up-to-date flood maps. Before flood maps can be used

effectively, however, they must reflect current hydrological conditions. An aggressive

program to update, modernize, and maintain the inventory of flood maps is essential.

Multi-hazard flood-map modernization, a Presidential initiative, is based on the

need for FEMA to update its aging inventory of flood maps in such a way that they

can accommodate other hazards. A recent assessment revealed that 67 percent of

FEMA’s flood maps are more than 10 years old and that the average age of a FEMA

flood map is 14.1 years. Many of these maps do not reflect past development and,

as a result, do not show changes in flood hazards. Reliance on these outdated flood

maps in making decisions about new development harms commercial and residential property owners and the taxpayers who ultimately pay for flood damages. Accurate and useable flood maps are the foundation of good local planning and naturaldisaster mitigation. New and updated flood maps will enable lenders, insurance

agents, and many others to make critical decisions on where to build, where and

when insurance is required, and what is an appropriate insurance premium.

FEMA is seeking $300 million in new discretionary appropriations in the President’s budget for fiscal year 2003 for the multi-hazard flood-map modernization program. FEMA is also seeking roughly $300 million per year in its fiscal year 2004

and 2005 budgets. Approximately $1 billion may be spent over the next three fiscal

years. With more than 19,000 communities in the National Flood Insurance Program (NFIP), FEMA faces a daunting challenge in setting priorities for areas to be

mapped, keeping maps current, and creating new maps for participating, unmapped

communities.

Another significant challenge for FEMA is effective collaboration with States and

local entities through the Cooperating Technical Partners (CTP) Program. The CTP

program gives States and local entities the opportunity to interject a tailored, local

focus into the national map-modernization program. The partnership mechanism

also provides for pooling resources, extending the productivity of public funds, and

sharing successes among partners. FEMA must also continue to seek input from the

Map Modernization Coalition, members of which are substantial users of flood

maps.

National Flood Insurance Program.—The NFIP continues to be the largest singleline property insurer in the Nation with coverage in excess of $580 billion. Aside

from the fiscal enormity of this program, FEMA faces an array of formidable management challenges that include:

• Increasing numbers of repetitively flooded structures that are subsidized by the

NFIP,

• Continued development and uninsured property in special flood-hazard areas,

• Insufficient funds to mitigate repetitive-loss properties, and

• Lack of exposure to mitigation opportunities.

Subsidized and low-cost flood insurance, available to residents of NFIP-participating communities, helps to manage the risk of financial loss due to flooding. Much
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more of the risk could be alleviated if homeowners would take responsibility for

mitigation on their own property. Many property owners, however, fail to do so because (1) of the availability of subsidized insurance, premiums for which are typically a fraction of those for full risk-based policies; and (2) they know that, if flooded, their property will be repaired or rebuilt without penalty. Continuing to subsidize NFIP premiums fails to encourage owners of flood-prone real estate to move

out of high-risk areas. This is no small problem, as the NFIP pays claims from

floods in the same high-risk areas again and again, yet the policyholders are not

required to pay risk-based premiums or to mitigate repetitive risks. This situation

undermines the financial stability of the insurance program. On the other hand, if

FEMA charged actuarially sound rates, owners could cancel their policies, pay nothing to the government, and rely on Federal disaster assistance after a flood, placing

the recovery burden back on the American taxpayer.

Mitigation is rarely a priority of property owners before a disaster occurs but owners typically rush to have their property restored to its pre-disaster condition after

an event. One of FEMA’s main objectives in the response and recovery period is to

get assistance to flood victims quickly so they can rebuild and get their lives back

to normal. The opportunity to encourage mitigation at this time is usually lost.

FEMA must improve its outreach programs.

About 7 million structures are estimated to be located in special flood-hazard

areas. Less than 35 percent are covered by flood insurance. FEMA needs to maintain a sustained campaign to provide insurance coverage for the millions of uninsured properties still at-risk.

FEMA believes that most communities participating in the NFIP have effective

floodplain-management programs and that new construction is in accordance with

the minimum requirements of the NFIP. FEMA officials told us that communities

participating in the Community Rating System are closely monitored and subject to

periodic inspections.

The OIG issued reports in 2002 that discussed most of the issues noted thus far,

and FEMA is addressing them or planning to do so. Solutions to these matters, however, will not prevent FEMA’s need to address the following difficult future challenges:

• Effective enforcement of compliance with floodplain management criteria as a

condition for maintaining NFIP eligibility,

• Effective monitoring of enforcement of mandatory flood insurance purchase requirements for property owners,

• Effective and reliable performance measurement criteria and information systems used to assess accomplishment of insurance goals and objectives, and

• Appropriate Community Rating System insurance premium discounts based on

conditions in and mitigation actions taken by a community.

Public Building Insurance.—The Stafford Act requires State and local governments, as a condition of receiving Federal assistance, to obtain and maintain insurance coverage on insurable facilities for the life of the facilities. FEMA reviews insurance coverage during the project approval process to ensure that applicants satisfy the requirements.

We noted in a January 2001 OIG report that neither FEMA nor the States consistently maintain sufficient information to support their conclusions about applicants’ insurance status. At the time the report was issued, only 39 percent of the

project files in our sample contained acceptable evidence of insurance. In fact, insurance was not maintained in 34 percent of projects reviewed. We also determined

that insurance reviews are not always timely or complete, and neither FEMA nor

the States regularly monitors public entities that have received previous assistance

to ensure that they are maintaining the required insurance. Keeping abreast of insurance status presents a significant challenge for FEMA.

Determining what constitutes the required ‘‘insurance’’ is another key issue confronting FEMA. The amount of assistance a public entity may receive depends on

FEMA’s definition of insurance. Several public entities seeking disaster assistance

recently challenged successfully FEMA’s interpretations that various reserve or contingency funds did not constitute ‘‘insurance.’’ As a result, a higher percentage of

the repair, restoration, or replacement costs of their damaged facilities became eligible for reimbursement by FEMA. FEMA faces significant hurdles in addressing the

issues of (1) the absence in current regulations of an adequate definition of ‘‘insurance,’’ and (2) incentives for entities to purchase insurance.

Underinsured applicants and regular monitoring of the insurance status of public

entities also present challenges. Some FEMA applicants purchase less insurance

than required or may reduce coverage after an insurance review. The fact of underinsurance may not be known for long periods to FEMA and/or States because they
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do not regularly monitor public entities to ensure the maintenance of insurance on

public buildings.

MANAGEMENT CHALLENGES

Information Technology Management.—FEMA is heavily dependent on information technology (IT) to accomplish its mission. The agency relies on technology for

performing tasks ranging from emergency communications to remote data entry to

automated processing of disaster assistance. Because of IT’s importance, the agency

must maintain secure systems that help to ensure the integrity, confidentiality, and

availability of information FEMA needs to do its job. IT can be expensive and complex, however, so FEMA needs to have in place good capital planning and investment control procedures for managing IT projects. The e-gov initiative under the

President’s Management Agenda encompasses these challenges. Although the Office

of Management and Budget (OMB) scored FEMA’s e-gov status as unsatisfactory,

it also indicated that improvements are underway.

FEMA made progress during fiscal year 2002 toward improving information security, primarily through establishing the Office of Cyber Security, designing an information security program plan, and developing a security certification and accreditation methodology. Much more work lies ahead. Like many other Federal agencies,

FEMA did not receive a passing grade for computer security from the House Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations. FEMA has struggled to ensure that the agency’s information security plan is practiced throughout the agency and applied to individual systems. As

of the end of fiscal year 2002, however, no systems had received formal authorization, required by OMB, to process information, although FEMA’s planned security

certification and accreditation methodology will facilitate the approval process.

FEMA is struggling to build security into its system business plans, also required

by OMB. FEMA must begin to assess the system security controls in place at critical

service-provider points.

FEMA management has acknowledged weaknesses in IT capital planning and investment controls. Improving procedures in these areas were key initiatives of the

reorganization of FEMA’s IT Services Directorate in fiscal year 2002. Improvement

efforts have just begun. In a recent audit report, we recommended that FEMA consistently prepare current benefit-cost and alternative analyses, identify and maintain a current inventory of systems, provide more effective oversight of IT projects,

conduct post-implementation system reviews to identify ‘‘lessons learned,’’ and complete an Information Resources Management Strategic Plan and IT Capital Plan as

required by OMB.

FEMA is working to address the weaknesses in IT management, security, and

other areas. OMB’s most recent scorecard rates other challenges that FEMA faces,

including integrating itself smoothly into the new Department of Homeland Security, implementing its e-government agenda, managing its systems effectively in a

rapidly changing IT environment, and meeting its human capital needs.

Financial Management.—FEMA continues to face significant financial management challenges but, over the past year, has been working very hard to overcome

them. FEMA developed a detailed remediation plan, for example, that it uses regularly to monitor progress in addressing weaknesses we identified in the financial

audit of fiscal year 2001. Although FEMA has not been able to achieve all of its

goals, it has been making progress. FEMA still needs more time and resources and

a continued commitment by management to achieve an appropriate level of financial

management.

Major factors motivating to FEMA’s progress were the qualification of the auditors’ opinion on FEMA’s fiscal year 2001 financial statements, and the auditors’

identification of six material internal control weaknesses. Although the qualified

opinion was disappointing, it helped to focus management’s attention on long-standing problems. We had noted in previous audit reports that FEMA’s financial reporting process was unstable and, in fiscal year 2001, after 3 years of unqualified opinions, the auditors could no longer attest to the accuracy of all balances presented

in the statements. Specifically, the auditors could not verify (1) the reported obligations incurred and unobligated balances (because of an unsupported $77 million reduction to unliquidated obligations), or (2) the reported equipment balance.

The six material internal weaknesses described in our audit report, on which

FEMA’s remediation plan is based, related to information system security, real and

personal property, financial system functionality, financial statement reporting, account reconciliation, and accounts receivable.

• Information System Security.—FEMA has been able to address some of its more

critical system security problems but other weaknesses remain. We again found
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vulnerabilities in FEMA’s internal network environment during our audit of fiscal

year 2002 financial statements. FEMA’s core financial system, the Integrated Financial Management Information System (IFMIS), still needs a back-up administrator,

a contingency plan, policies and procedures for audit trail reviews, and a review of

user access rights (currently underway). Although these issues have not been entirely addressed, FEMA has reported progress. • Real and Personal Property Accounting.—FEMA simply does not have a property management system that supports property accounting requirements. A system

acquisition moratorium due to FEMA’s move to the new Department of Homeland

Security has prevented FEMA from acquiring an acceptable system. As a result,

FEMA has had to rely on inefficient, difficult, manually based processes to account

for its property in fiscal year 2002. • Financial System Functionality.—FEMA recently upgraded IFMIS and expects

significant improvements in financial statement preparation and intragovernmental

reconciliations, although the upgrade remains to be tested as part of the fiscal year

2002 financial statement audit. FEMA reports that it is working on vendor files and

specific system-interface issues, although the interface issues are sometimes dependent on external business partners. FEMA also does not have a cost-accounting system that would allow FEMA managers to more effectively link performance measures and budget execution. • Financial Statement Reporting.—FEMA has made progress in financial reporting by developing standard operating procedures for the preparation of financial

statements. FEMA historically has not had routine procedures to guide production

of the financial statements that link to other policies, procedures, and internal controls. Statements typically were prepared late in the audit process and required several revisions. We will test during the fiscal year 2002 financial statement audit

whether the process has improved. • Account Reconciliation and Accounts Receivable.—FEMA continued to have

problems during the year with timely reconciliation of many accounts and has obtained assistance from a contractor. FEMA has also made improvements in accounts

receivable.

Grants Management.—FEMA awards billions of dollars in grants each year to

State and local governments and may become responsible for additional grants

under the Department of Homeland Security. FEMA grants are used for a myriad

of State and local preparedness, mitigation, and response and recovery projects. Although grant funds are spent at the State or local level, it is ultimately FEMA’s

responsibility to ensure that these funds are spent in accordance with Federal laws

and regulations. To do this, FEMA must have an effective grants management system that fulfills both its program and fiduciary responsibilities and, particularly important, satisfies Government Performance and Results Act (GPRA) requirements.

Not only must FEMA adhere to the procedural and compliance aspects of grants

management, it must also focus on what grantees actually accomplish using FEMA

grant funds. To demonstrate its own program efficiency and effectiveness, FEMA

must require grantees to do the same.

FEMA’s grants management system, prior to fiscal year 1998, did not ensure that

grantees met programmatic and fiduciary responsibilities. We documented waste

and mismanagement at grantee and subgrantee agencies throughout the country

that resulted in the misuse of millions of dollars in Federal funds. FEMA acknowledged that major improvements were needed in its grants management system and

began several initiatives to correct long-standing problems. FEMA created a Grants

Management Office, issued improved policy guidance and standardized procedures,

implemented training and credentialing for grant managers, and formed grant closeout teams to facilitate the timely closeout of grants and to provide technical assistance to regional office personnel in their closeout efforts.

Significant problems still need to be addressed. Our audits of States’ management

of FEMA disaster grants found an alarming number of recurring problems. For example, States often do not (1) monitor and accurately report on subgrantee performance and financial activities, (2) make payments or close out projects in a timely

manner, (3) file accurate or timely financial status reports with FEMA, and (4)

maintain adequate documentation to support their share of disaster costs and other

financial transactions. These problems indicate that FEMA needs to continue to

take the initiative to provide technical assistance and guidance to States to ensure

that they have reliable disaster grants management systems to safeguard FEMA

funds.

Improvements in FEMA’s grants management system also will require resolution

of issues of staffing and automation. FEMA must persist in efforts to ensure that

implementation of its recent initiatives does not lose momentum when the next catastrophic disaster strikes and staff resources are stretched. FEMA recently began
266

to develop an agency-wide Strategic and Tactical Plan for coordinating the automation of its grant programs to comply with OMB’s E-Grants initiative. FEMA plans

to automate many processes by creating a comprehensive grants management system. Successful implementation, however, will require resources and will ultimately

depend on top management’s continued support of the system’s development.

Property Management.—FEMA does not have a property management system that

supports property accounting requirements. FEMA’s primary property management

system is the Logistics Information Management System (LIMS), that is used to

track the location of personal property. LIMS cannot perform accounting functions

and it cannot provide reliable accounting information, such as property values and

acquisition dates. These deficiencies have required FEMA to conduct labor-intensive

inventories and use manual procedures to support personal property accounting balances. FEMA also lacks an automated system to support accounting for real property and deferred maintenance. FEMA recognizes these problems but the systems

moratorium during the transition to the new Department of Homeland Security has

prevented FEMA from acquiring an acceptable system. Instead, FEMA is articulating requirements and options for an Enterprise Resource Planning (ERP) system

that would support FEMA’s property accounting and management needs.

Human Capital Management.—FEMA’s most valuable asset is its human capital.

Maximizing the value of that asset and increasing organizational performance are

significant challenges for FEMA. How FEMA acquires, develops, and deploys its

human capital will determine how effectively its mission will be accomplished.

Through its strategic planning process, FEMA is developing a 5-year, comprehensive, enterprise-wide human capital strategy that can be integrated with FEMA’s

mission, goals, operational requirements, and financial resources. The strategy will

include workforce planning and initiatives to address imbalances between staff talents and skills and agency needs. It will address the anticipated surge of voluntary

retirements over the next 3 to 5 years (FEMA estimates that 70 percent of its workforce is from 40- to 59-years old) and the attrition factors that normally affect the

stability of the workforce. FEMA also analyzed its workforce for OMB. The results

will support decisions about future management reform, budget planning, and performance goals. According to the GAO, FEMA’s fiscal year 2003 performance plan

does not contain performance measures that quantify progress toward achieving

human capital-related goals.

The President has determined that nearly half of all Federal employees perform

tasks that are readily available in the commercial marketplace, and that those tasks

should be subject to competition. Public-private competition will generate savings

and improve performance governmentwide. In fiscal year 2003, agencies will conduct public-private or direct conversion competitions involving 10 percent of the

FTE listed on their Federal Activities Inventory Reform Act inventories above the

number needed to meet fiscal year 2002 competition goals. The sweeping personnel

changes accompanying FEMA’s entry into the Department of Homeland Security

will increase the challenges associated with this increase and with the overall management of FEMA’s human capital.

ATTACHMENT 3.—DEPARTMENT OF HOMELAND SECURITY, OFFICE OF INSPECTOR

GENERAL, WASHINGTON, DC

February 14, 2003

Memorandum for: The Secretary, The Deputy Secretary (Signed)

From: Clark Kent Ervin, Acting Inspector General

Subject: Controls Over Procurements and Grants

Two areas that DHS needs to get control of early to minimize waste and abuse

are the procurement and grant (Federal assistance) management functions. Getting

the right leadership and systems in place for both functions should be made a high

priority. To assist the department in this regard, and per your request, I asked my

audit staff to identify some specific controls and other issues that need to be addressed right away, as follows.

PROCUREMENT MANAGEMENT

DHS will be integrating the procurement functions of many constituent programs

and missions, some lacking important management controls. For example, as reported by GAO, Customs has not begun to establish process controls for determining

whether acquired software products and services satisfy contract requirements before acceptance, nor to establish related controls for effective and efficient transfer
267

of acquired software products to the support organization responsible for software

maintenance. At TSA, the Transportation OIG found that procurements were made

in an environment where there was no pre-existing infrastructure for overseeing

contracts. TSA had to rely extensively on contractors to support its mission, leading

to tremendous growth in contract costs. A recent Transportation OIG review of one

TSA contractor found that, out of $18 million in expenses, between $6 million and

$9 million appeared to be attributed to wasteful and abusive spending practices.

Also, some agencies have major procurement programs under way that need to

be closely managed. For example, Customs’ Automated Commercial Environment

(ACE) project will cost $5 billion, and Coast Guard’s Deepwater Capability Replacement Project will cost $17 billion and take two to three decades to complete. Both

projects will continue to receive OIG and, most likely, GAO attention. GAO identified a performance and accountability challenge of enhancing Coast Guard acquisition management to maximize returns from investments of public funds in large,

complex, high-cost procurements. Further, some contracts, regardless of their earlier

merits, may no longer be necessary in accomplishing DHS’ mission.

Early attention to strong systems and controls for acquisition and related business

processes will be critical both to ensuring success and maintaining integrity and accountability. OIG would suggest the following:

• Review all contracts transferring to DHS to ensure they are relevant to DHS’

mission and, particularly for systems development contracts, will not be affected by

or conflict with DHS systems integration efforts. For example, TSA issued a 7-year,

$1 billion task order to Unisys Corporation for enterprise operations center deployment and field/headquarters infrastructure deployment. Needless to say, close attention must be paid to a contract of this size and scope.

• Ensure that contracting officers and contracting officers’ representatives are

properly warranted, trained, and supervised, and that they maintain proper documentation in the contract files.

• Establish a robust and effective contract oversight function. Construction contracts and contracts for local guard services have been shown to be subject to waste

and abuse if not closely monitored.

• Establish effective systems and controls for managing purchase and travel

cards, including issuance of appropriate written guidance for card use, effective

monitoring of card use and appropriate handling of card abuse, and elimination of

excessive numbers of card holders.

GRANTS (FEDERAL ASSISTANCE) MANAGEMENT

DHS will be inheriting major grant programs from FEMA and Justice. Both agencies’ programs will be problematic.

FEMA plans to award about $7.9 billion in grants this fiscal year. FEMA OIG reports on audits of grantees demonstrate that FEMA has not adequately accounted

for or monitored its grant activities. These reports have identified shortcomings in

the pre-award process, cash management, monitoring, and the grant closeout process. For example, FEMA does not have a comprehensive grants management tracking system, many grantees do not make required cost-share payments and draw

down million of dollars in Federal funds in excess of immediate needs, and some

grantees were not spending mitigation funds according to established time periods.

Grant closeouts are also problematic; for example, FEMA still has a Disaster Field

Office for the 1994 Northridge earthquake.

The DOJ Office of Justice Programs will be transferring the Office of Domestic

Preparedness (ODP) to DHS. ODP is responsible for awarding grants to state and

local governments to prepare for and respond to incidents of domestic terrorism involving chemical and biological agents, radiological and explosive devices, and other

weapons of mass destruction. Between fiscal year 1998 through fiscal year 2001,

ODP was appropriated $243 million to provide these grants. As of March 2002, approximately $141 million still had not been awarded.

In fiscal year 2002, ODP’s appropriation was $651.5 million, but its fiscal year

2003 budget is $3.5 billion, the increase attributable to a new First Responder program. DOJ OIG has reported weak monitoring of grants by the Office of Justice Programs, and the size of the new program will severely test ODP’s grant management

systems.

OIG would suggest early attention to the following key controls:

• A comprehensive grants management system that complies with Grant Financial System Requirements issued by the Joint Financial Management Improvement

Program (JFMIP). The JFMIP document (JFMIP-SR–00–3) provides functional requirements for 11 functions, namely: (1) commitments, (2) de-commitments, (3) obligations, (4) payments, (5) cost accruals, (6) financial reports, (7) interest collections,
268

1The Federal Emergency Management Agency Office of Inspector General transitioned into

the Department of Homeland Security Office of Inspector General on March 1, 2003. 2FEMA’s Delivery of Individual Assistance Programs: New York—September 11, 2001, December 2002.

(8) grant closeout, (9) records retention, (10) general system requirements, and (11)

information technology in the grants process. In addition, DHS must ensure compliance with the Federal Financial Assistance Management Improvement Act of 1999,

which requires, among other things, use of electronic application and reporting by

grantees via the internet (E-Grants).

• Adequate monitoring of and assistance to states and other grantees in all

phases of the grants management life cycle (i.e., from award to closeout)

• Assurance that grant closeouts (and required audits) are within established

time periods, and extensions are adequately justified, approved, and documented.

• Adequate training and supervision of the grants management workforce.

In addition to conducting audits and evaluations of the procurement and grant

functions, OIG would be happy to advise those officials establishing or enhancing

controls in these areas. If you have any questions, or would like to discuss this matter further, please call me at 6–8310, or ask your staff to call J. Richard (Dick) Berman, Acting Assistant Inspector General for Audits, at 6–2125.

RESPONSES BY RICHARD L. SKINNER TO ADDITIONAL QUESTIONS

FROM SENATOR JEFFORDS

Question 1. EPA’s Inspector General initiated an evaluation of the Agency’s response to September 11, reviewing how EPA responded and how it could better respond in the future. The report described lessons that may prove valuable should

such a tragedy happen again. Has the DHS Inspector General conducted a similar

review and if not, will you consider doing so?

Response. The Department of Homeland Security (DHS) Office of Inspector General (OIG) has not conducted a similar review, but we will be looking at the coordination efforts of the Federal Emergency Management Agency (FEMA) and the Environmental Protection Agency (EPA) as part of our assessment of DHS’ ‘‘National Response Plan,’’ which was signed in draft by Secretary Ridge on October 10, 2003.

The FEMA OIG,1 however, also conducted a review of FEMA and EPA’s coordination and delivery of assistance in response to September 11th.2 The FEMA OIG

found that neither FEMA nor EPA traditionally has been involved in testing and

cleaning private residences. Neither agency is specifically authorized to provide such

services. Although FEMA has the responsibility to coordinate recovery from Presidentially declared disasters, FEMA must depend on the particular expertise of EPA

in circumstances involving possible air contaminants or environmental hazards.

EPA must confirm that such hazards constitute a public health and safety threat

before FEMA can provide funding for emergency response. The OIG concluded that

FEMA should be more proactive in requesting EPA to conduct necessary testing or

studies to determine whether a public health or safety threat exists in future, similar disasters so that cleaning efforts can begin much earlier in the recovery phase.

FEMA also should address the roles of State and local agencies in such circumstances, as consultation with these agencies would provide useful information

in review or evaluation.

Question 2. In your testimony, you describe the challenges that arise because the

grant making functions within DHS are distributed throughout several directorates.

Can you articulate some of the challenges that have arisen due to this organizational structure?

Response. Although numerous grant programs are now consolidated within DHS,

their management is divided among various components within the DHS. Preparedness grants for terrorism are in the Border and Transportation Security directorate,

while other preparedness efforts are in the Emergency Preparedness and Response

directorate. This bifurcation will create additional challenges related to inter-departmental coordination, performance accountability, and fiscal accountability. For example, there are several Federal grants programs that fund first responder training,

activities, and equipment to prepare states and local communities better for responding to terrorism incidents, natural disasters, and other emergencies that are

administered by DHS’ State Homeland Security Grant program or the Assistance

to Firefighters Grant program. While these programs reflect different objectives,

both programs allow funding for certain items. There is a potential overlap of 113

distinct items in the areas of personal protective equipment, interoperable commu-
269

nications equipment, detection equipment, and decontamination equipment, which

can result in uncoordinated and overlapping grant decisions.

Close coordination between all programs is essential to ensure that: (1) duplication does not occur; (2) maximum effectiveness of available funding is realized; and

(3) minimum confusion exists at State and local levels of government. Furthermore,

program managers have yet to develop meaningful performance measures necessary

to determine whether the grant programs being absorbed by DHS have actually enhanced State and local capabilities to respond to terrorist attacks and natural disasters.

The DHS OIG addressed these concerns in the early days of the Department’s creation and it is our understanding that this problem is now being addressed legislatively. Further, Secretary Ridge recently announced plans to centralize these programs within a single office of the Department.

STATEMENT OF DALE SHIPLEY, EXECUTIVE DIRECTOR, OHIO EMERGENCY MANAGE- MENT AGENCY, ON BEHALF OF THE NATIONAL EMERGENCY MANAGEMENT ASSOCIA- TION

INTRODUCTION

Thank you Chairman Voinovich, Ranking Member Carper, and distinguished

members of the Subcommittee for allowing me the opportunity to provide you with

testimony on the public assistance program and emergency preparedness issues. My

name is Dale Shipley and I am representing the National Emergency Management

Association (NEMA) as the Vice-Chairman of the Legislative Committee and as a

Past-President of the Association. My daily job is the Executive Director of the Ohio

Emergency Management Agency. In my statement, I am representing the state

emergency management directors in the 50 states, the District of Columbia, and the

U.S. territories who are its core members. NEMA’s members are responsible to their

Governors for emergency preparedness, homeland security, mitigation, response,

and recovery activities.

This is a historic time as the Congress and the Administration have reorganized

to address the Department of Homeland Security, yet it is critical that we remember

that all-hazards disaster preparedness is the basis that we have used to build homeland security preparedness. At no time was this made more apparent than in preparation for Hurricane Isabel last week and as the Mid-Atlantic States begin their recovery from damages caused by this ravaging storm. While focus remains high on

homeland security, we as a Nation cannot forget the key programs related to natural disasters and the carefully crafted authority of the Stafford Act that governs

our mitigation, preparedness, response, and recovery activities. Today, I’d like to tell

you about how the current program is working and offer some suggestions that you

might consider to make our disaster response and recovery program stronger.

FEMA IN THE DEPARTMENT OF HOMELAND SECURITY

NEMA supported efforts by Congress and the Administration to include the Federal Emergency Management Agency (FEMA) in its entirety in the new Department

of Homeland Security. FEMA continues to maintain an all-hazards approach to disasters, which both NEMA and Secretary Ridge vigorously support. State emergency

management agencies continue to interface with FEMA on a regular basis, as was

the case before the Department was created. In Ohio, we have had two Presidential

disaster declarations since March 2003. We have seen no changes in the speed,

availability, or flexibility of assistance since FEMA has become a part of the Department of Homeland Security then we experienced with two Presidential disaster declarations before March 2003.

Certainly the aftermath of Hurricane Isabel has shown that regardless of the new

focus on terrorism, we must continue all-hazards preparedness activities and allhazards programs like the Emergency Management Performance Grant Program

(EMPG). EMPG is the program that enables the emergency management infrastructure to work in state and local governments through its flexibility to address unique

needs in each state. These funds and the requirements associated with them maintain the national system of preparedness and coordination of emergency response

and recovery in the United States.

NEMA understands that in any new Department there is a learning curve and

a meshing of cultures of the various agencies. We hope to continue an open dialog

and good working relationships with key offices such as FEMA in the Department,

as we develop new relationships with other agencies in the Department as they address new ventures.
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PUBLIC ASSISTANCE

After a disaster, the Stafford Act provides for assistance to state and local governments and qualifies certain private non-profit facilities for disaster relief. In particular, public assistance helps to address debris removal, emergency protective

measures, road systems and bridges, water control facilities, public buildings and

their contents, public utilities, and parks and recreational facilities. Public assistance is particularly important for disaster relief because communities need to have

vital functions restored in order to get back on their feet.

Ohio’s current public assistance program addresses disaster impacts on government-related functions. After a disaster, the Ohio public assistance staff coordinates

with FEMA to assist applicants with identifying eligible projects. During the last

Federal fiscal year we had 4 Presidentially declared disasters in Ohio with $49 million of public assistance and 997 applicants.

Ohio has two full-time employees who manage the public assistance program and

act as an interface for governmental entities, all applicants, and the Federal Government. The staff is charged with keeping all records, handling all reporting requirements, closing-out all the projects and disasters, and addressing the 25 percent

cost-shares. The Ohio staff also trains local officials on debris removal, documentation, and damage assessment.

In addition, our staff manages one of the few state public assistance programs financed by state funds. Our public assistance officers handle damage under gubernatorial disaster declarations that are not large enough for Federal declarations. In

the last Federal fiscal year, we have had four of these gubernatorial declarations

amounting to $4.8 million of assistance and 83 applications. Routinely, public assistance reconstruction projects take up to 2 years to complete, so our staff in Ohio is

very busy handling multiple projects and multiple disasters.

This spring, many state and local government had problems getting public assistance beyond categories A and B, which includes debris removal and emergency protection measures, due to the lack of funds in the disaster relief fund. In fact, a number of states are still in the process of receiving funds toward public assistance

projects going back to the President’s Day winter storms in some states. Absent Federal supplemental assistance, which is provided by law, state and local governments

have to come up with other sources of funding to begin and complete these projects.

In the tight fiscal environment, the lack of funding is particularly troubling, as poorer communities cannot afford to front the costs. State and local governments have

had to front funds for projects while waiting until August for additional Federal appropriations for the disaster relief fund.

Appropriations for fiscal year 2003 only included $800 million for the disaster relief fund, while a typical appropriation in previous years has been around $1.8 billion to $2.2 billion, plus supplementals to address disasters. While we appreciate recent efforts of Congress to get disaster relief funds to state and local governments

in August, 2003, we do not support this piecemeal approach to the disaster appropriations process. Assistance for reconstruction projects and for disasters victims

must not be put on hold, since any deferment limits the ability for a community

and of an individual or family to recover from a disaster. Delays in assistance mean

delays in recovery, and overall those delays hamper our national economy.

I want to share with you some couple of examples that illustrate how important

getting public assistance funding to communities.

• Southern Ohio Monroe County received a Presidential disaster declaration

(FEMA disaster declaration 1453) for snow and ice storms in February 2003. The

County had multiple needs for road repairs. The applicant was approved for

$498,729, but Federal funds were not available to draw down for use until September 8, 2003. This same applicant was impacted by storms and flooding included

in FEMA disaster declaration 1484 in August 2003. We have yet to determine if

Federal funds are available for this recent declaration. Monroe County has a population of about 15,000, which is not a very large tax base to be able to front half

a million dollars; and

• The city of Portsmouth in Scioto County.— As a result of an ice storm in which

the city lost thousands of trees, the city was approved for $319,250 for debris removal. FEMA funds were not available for draw down until the last week of August

2003. The state had to help the city get an extension, since the debris removal category funds expire after 6 months.

The advent of terrorism-related attacks that involve the potential use of chemical,

biological, radiological and explosives bring a unique challenge to programs that

were designed to address natural and man-made disasters. Speaking as the Ohio

Director, it may be appropriate to enlarge the scope of eligibility under terrorism

and catastrophic disasters. Obviously, there is currently room for flexibility and ad-
271

justment in the Stafford Act and that flexibility was exercised by Federal officials

following September 11, 2001.

FEMA is looking closely at the public assistance program and is exploring ways

to allow states to manage some aspects of the program. NEMA is participating on

a concept development working group to identify the needs of the public assistance

program in the current environment and when several disasters occur simultaneously within a short-time period such as garden-variety disasters and catastrophic

disasters. One scenario could be allowing states the option of state management of

the public assistance program. My colleagues in Arizona have managed the Federal

public assistance in the last three disasters. One of the things they find difficult is

the lack of funding to maintain continuity and institutional memory for disasters,

since many of these positions are temporary. Conversely, if a state is unable to manage the program it would need to have the option of utilizing FEMA’s resources to

manage the program. Ideally, Federal assistance would contribute toward a Public

Assistance Officer (PAO) in each state who could provide training and awareness

to applicants. Having a dedicated PAO could lead to greater consistency and faster

recovery which could cause a reduction in overall disaster costs.

OTHER ISSUES

In addition to public assistance, there are other key pre- and post-disaster programs for which this committee has oversight that I wish to bring to your attention.

We ask for your assistance to address these issues.

1. Individuals and Households Repair Cap Fix

When the Disaster Mitigation Act of 2000 (DMA2K) was signed into law, a provision was inadvertently changed in the bill that lowered the cap on assistance for

individuals and households to repair damaged residences. This assistance includes

from the cap includes repair of owner-occupied private residences, to a safe and sanitary condition. Repair assistance is used to allow disaster victims to continue living

in damaged residences after a disaster and thus minimizing the overall disaster

costs. Originally, the cap was set at more than $5,000, but could be increased to

as much as $15,000. With DMA2K’s enactment, the cap was lowered to $5,000. We

call on this committee to address this error in correction legislation, so that disaster

victims are not limited to $5,000 when no other assistance is available. We suggest

calling this assistance ‘‘initial’’ and support FEMA’s suggested language to fix the

problem. This spring, many state emergency management directors found this provision hampering when responding to tornadoes and floods. Typically the persons who

have no other means of assistance are those most highly impacted by this provision.

We expect the cap to become an issue in the aftermath of Hurricane Isabel as well.

2. Predisaster Mitigation

NEMA was instrumental in working with this committee during the development

of the legislation that initially authorized a pre-disaster mitigation program through

the Disaster Mitigation Act of 2000 (DMA2K) (P.L. 106–390). Pre-disaster mitigation is essential, but we need to ensure that pre-disaster mitigation corresponds

with DMA2K that was passed overwhelmingly by the House and Senate and signed

into law.

Title I of the DMA2K expires on December 31, 2003. While the House and Senate

have appropriated funds for the program in their own versions of the Department

of Homeland Security appropriations bills at $180 million and $150 million respectively, we need program reauthorization to prevent the program from being forgotten and not funded in future years. NEMA strongly believes that this program, coupled with the Hazard Mitigation Grant Program (HMGP) is effective at reducing the

costs of disasters overall by saving lives and protecting property. Each program has

a specific function that is relative to the environment that exists before a disaster

and after a disaster. For example, it is easier to convince the homeowner of a waterfront property of the need to relocate from the floodplain after a disaster occurs and

the home is filled with mud and water than it would be on a serene sunny day.

Fiscal year 2003, was the first year that FEMA received funding for the national

competitive pre-disaster mitigation program. The funding level was $150 million

and currently state and local governments are working cooperatively to complete

project applications and to submit them to FEMA. As NEMA understand the process, initial reviews will begin in early October and the peer reviews will commence

in late October. The pre-disaster mitigation program is in its infancy, as the first

round of significant funding has only just been made available and not yet awarded.

It would be a shame to let the program die at this time without having been able

to make any demonstrable achievements in mitigation. NEMA believes that the

value of the program will be evidenced after the projects are approved and imple-
272

mented. We therefore are asking this committee to reauthorize the program for 3

years, at which time FEMA should be asked to provide evidence to Congress of the

achievements made as a result of the pre-disaster mitigation program.

Early on, NEMA believed that the pre-disaster mitigation program should not be

a competitive program, however, the Administration’s budget proposals to make the

program competitive were affirmed by Congress in fiscal year 2003. FEMA began

implementing the requirements of DMA2K 2 years ago with the requirement of

state and local multi-hazard mitigation plans (Section 322 plans). With impending

deadlines for these plans on November 1, 2003 and November 1, 2004 many state

and local governments have submitted plans for consideration or are actively involved in developing these mitigation plans, despite the fact that no significant

source of Federal funding was provided to state and local governments to accomplish

this mandate. The 322 plans are essential to identifying key areas where mitigation

resources are needed in each state and will work hand-in-hand with the pre-disaster

mitigation program and the HMGP program. We were a bit surprised by some of

the FEMA guidance on the pre-disaster mitigation program. In particular, NEMA

is worried that the heavy focus of the program on repetitive loss priorities for floods

will deflect from the program’s intended all-hazards approach.

We are also concerned that management costs will not be available to state and

local governments unless a project is approved. This will again place smaller and

less affluent communities at a disadvantage, since they are not able to provide the

costs associated with hiring a consultant to prepare the applications and an engineer necessary for the environmental and historical reviews, as well as the benefitcosts analysis. We suggest that future year programs allow for administrative costs

out of the total program funds at the beginning of the notice of availability of funds.

We also suggest that cost-share requirements may place some communities and

states at a disadvantage and discourage them from applying for the pre-disaster

mitigation program. Waivers in cost-share requirements would be a way to address

this problem in a tough financial environment for state and local governments.

Because NEMA firmly believes in pre-disaster and post-disaster mitigation, we

have re-energized the Stafford Act Coalition. A group of 13 associations representing

a variety of interests, including the American Red Cross, the National Rural Electric

Cooperative, the National League of Cities and the National Association of Counties

have supported both pre-disaster mitigation reauthorization and restoring the

HMGP formula to 15 percent. We believe that such wide and varied support, with

no opposition known, shows the need to reauthorize the pre-disaster mitigation program and to keep the HMGP program in place at the 15 percent level.

3. Hazard Mitigation Grant Program

The Administration’s budget proposal to eliminate the post-disaster Hazard Mitigation Grant Program (HMGP) in favor of funding a competitive pre-disaster mitigation program is wrong. While Federal costs toward disasters remain a concern, significant commitments must be made toward both pre-disaster and a fully funded

post-disaster mitigation in order to lower overall disaster costs in the long run.

Last year, Congress changed the formula for post-disaster mitigation grants from

15 percent to 7.5 percent. This change limits the availability of funds for post-disaster mitigation and prevents the lessons learned from disasters from being immediately incorporated into mitigation projects to prevent losses of life and destruction

of property. State governments no longer can offer buy-outs or mitigation projects

to many disaster victims as a result. The months immediately following disasters

provide unique opportunities to efficiently incorporate risk reduction measures in a

very cost-effective manner, in many cases lowering the overall cost of the project by

leveraging other funding sources including insurance settlements. We appreciate efforts by the Senate and the House to keep the 7.5 percent formula in place in the

House and Senate versions of the Department of Homeland Security appropriations.

NEMA supports keeping the program in place. As authorizers, we ask that you

maintain the program and restore the formula to 15 percent.

The HMGP has proven to be a highly effective tool in steering communities toward risk reduction measures, in many cases breaking repetitive loss cycles that

have cost other Federal disaster relief programs multiple times. Cost-benefit analysis is currently a requirement for pre-disaster mitigation programs. In a purely

competitive grant program, lower income communities, often those most at risk to

natural disaster, will not effectively compete with more prosperous cities. Also, disasters graphically and vividly expose the need for and value of mitigation projects.

We must not lose these opportunities to initiate projects to enhance our communities and reduce future disaster costs. Damage caused by disasters would go largely

unrepaired thereby further impacting the economic and social recovery of particular

areas. There are not enough mitigation dollars available to address all of the
273

vulnerabilities that exist in this country. During Hurricane Isabel, 220 homes in the

Bell Haven, North Carolina (Beaufort County) that were elevated with HMGP funds

after Hurricane Fran in 1996 did not flood, despite significant flooding on the Pungo

River. This example shows that HMGP works.

Making mitigation funds available only in a pre-disaster competitive environment

will set this country’s mitigation efforts back by removing the prime motivation factor, the disaster itself. The HMGP change is perhaps one of the most burning issues

for emergency managers across the country. At this point we have not been able

to quantify which projects were laid aside as a result of the change since HMGP

funds for this year were on hold until additional funds were made available through

a supplemental to the disaster relief fund. However, the program has literally been

cut in half and that significantly reduces mitigation activities after a disaster, when

the opportunity is most ripe for participation. Just imagine the opportunities that

will be lost in the Mid-Atlantic states in the aftermath of the hurricane because of

the formula change.

NEMA calls on Congress to maximize the benefits of both HMGP and pre-disaster

mitigation. NEMA pre-disaster mitigation, but maintains that HMGP should be retained as a separate and fully funded post-disaster program. We need both.

CONCLUSION

As we work to implement a new Federal Department of Homeland Security, we

must not forget about the all-hazards approach to emergency management and the

role it plays in preventing our Nation from losing focus on the daily perils that we

face in addition to new threats.

Whether it is a flood in Ohio, a hurricane in North Carolina, or tornadoes in Kansas, states need a Federal commitment to recognize that each state and local government has unique disaster mitigation, preparedness, response, and recovery needs

that require flexible, predictable, and adequate funding assistance that is coordinated with the state emergency management plan. I thank you for the opportunity

to testify on behalf of NEMA and welcome any questions that you might have. Only

through a partnership of Federal, state, and local governments, can we prevent the

loss of lives and property as a result of all disasters regardless of cause. Thank you

for your consideration and partnership.

Ohio Infrastructure Impacts for Federal FY 2003

Event

No. of

applicantsTotal cost Non-Federal Share

(25%)

Public Assistant Program

DR-1453, Severe winter storm, flooding .............................. 744 $36,552,402.09 $9,138,100.52

DR-1484, Flooding and tornado ........................................... 253 $12,625,000.00 $3,156,250.00

Totals ................................................................................ 997 $49,177,402.09 $12,294,350.52

Event

No. of

applicantsTotal IHP cost Non-Federal Share

(25%)

Individuals and Households Program

DR-1444, Severe Storms and tornadoes .............................. 726 $564,627.00 $69,217.00

DR-1453, Severe winter storm, flooding .............................. 3,026 2,596,111.00 246,908.00

DR-1478, Severe storms and flooding ................................. 2,049 1,918,966.00 123,706.00

DR-1484, Severe storms and flooding ................................. 39,684 38,177,945.00 3,588,351.00

Totals ................................................................................ 45,485 $43,257,649.00 $4,028,182.00
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Ohio Infrastructure Impacts for Federal FY 2003—Continued

Event

No. of

applicantsTotal cost Non-Federal Share

(75%)

State Disaster Relief Program

November 2002, Tornadoes .................................................. 22 1,258,533 $943,899.75

May 2003 flooding ................................................................ 6 1,119,161 $839,370.56

June 2003 flooding ............................................................... 8 1,131,117 848,337.75

July 4, 2003 flooding ............................................................ 47 2,975,369 2,231,526.79

Totals ................................................................................ 83 $6,484,180 $4,863,134.85
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280
281
282
283
284
285
286
287
288
289
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293
294
295
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297
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299
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301
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NATIONAL EMERGENCY MANAGEMENT ASSOCIATION (NEMA), ISSUES AND RECOMMENDATIONS FOR CONGRESS TO CONSIDER FOR AMENDING THE STAFFORD ACT

TO BETTER ADDRESS CATASTROPHIC DISASTERS

At the request of United States Senator, George Voinovich (OH), the National

Emergency Management Association (NEMA) has identified a series of issues and

recommendations for Congress to consider for amending the Stafford Act to better

address catastrophic disasters, including acts of terrorism. NEMA established a

small working group of those entities having experienced terrorist attacks: New

York Oklahoma, Virginia, and the city of New York The State of Ohio was also included in the work group as the home State of Senator Voinovich, and as a State

that has experienced large disasters in recent years.

GENERAL STATEMENT

The focus of any amendments to the Stafford Act should be on catastrophic disasters regardless of cause. The impacts of a major hurricane, earthquake or epidemic

could result in as catastrophic a disaster as a terrorist act.

NEMA believes there should be financial commitments for State and local governments in disaster response and recovery. We are not advocates for increased assistance across the board for those disasters typically addressed through the Stafford

Act. We do feel strongly however, that for catastrophic disasters requiring actions

above and beyond typical disasters there should be triggers or thresholds established for increased assistance to State and local governments. There must also be

statutory authority for the Federal Government to provide increased assistance

without delay.

ISSUES IDENTIFIED AFTER SEPTEMBER 11, 2001 AND LIKELY TO OCCUR AGAIN

Disaster response and recovery needs resulting from the terrorist attacks on September 11, 2001 in New York City and at the Pentagon revealed limitations in the

type and amount of assistance that could be provided to State and local governments through the Stafford Act. The law and the disaster assistance programs it

authorizes had never before been applied in a terrorist incident of this magnitude.

Repeatedly, policy decisions on reimbursement had to be determined by FEMA or

by Congress, outside the parameters of the Stafford Act. FEMA broadly interpreted

its provisions within the Stafford Act, and Congress authorized FEMA to compensate the cities and states for costs that it could not otherwise have funded within

the current Stafford Act.

The following issues were identified from the September 11 terrorist attacks and

will likely occur again in another terrorist attack, or other catastrophic disaster:

• Increased Costs for Security. The Stafford Act lacks provisions for State and

local governments to receive reimbursement for certain costs—including extensive

additional security across a geographic area which may be significantly broader

than the physically impacted disaster site, and security required for a period of time

longer due to ongoing terrorist threat. We know that following a terrorist act, there

will be a need for increased security at critical infrastructure sites, historical sites,

government facilities, along transportation routes, bridges and tunnels, etc. all of

which will result in extraordinary costs to State and local governments.

Recommendation: The Stafford, Act should include increased security as an eligible cost reimbursement for catastrophic disasters.

• Insurance. The availability of liability insurance coverage for cities and contractors as it relates to debris removal is absolutely vital. The appropriate level of coverage for a terrorist incident is not available on the private market and what is

available covers only a fraction of the cost to local government. This issue still

hasn’t been resolved more than 2 years after September 11, 2001.

Recommendation: Congress should provide Federal indemnification for State and

local governments (and their agents) for prudent actions (such as debris removal)

taken in response to a catastrophic or terrorist disaster. This is especially important

in disasters, such as WTC, where there are significant environmental concerns.

• Debris Removal. Currently, debris removal is limited to the impacted area. In

New York City, debris including human remains and dust from the collapse of the

towers was discovered outside the immediate vicinity of Ground Zero.

Recommendation: The removal of any debris such as this, as well as debris that

is potentially hazardous to the public should be reimbursed as long as it is a result

of the catastrophic event.

• Mass Evacuation. The Stafford Act does not provide for post reimbursement for

states and localities outside the declared disaster area. The need for mass evacu-
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ations into other cities, counties and states will continue to be necessary in catastrophic events.

Recommendation: Entities outside the declared disaster area that mobilize to receive and care for evacuees should be eligible for reimbursement. • Lost Government Revenue. New York City estimated losses in tax revenue of al- most $3B in 2002 and 2003 directly attributable to the attack and independent of

the economic slowdown. These losses were due to decreases in city personal income

taxes, business taxes and reduced sales tax. In addition, the destruction of property,

the virtual closing of Lower Manhattan and the significant effect on travel and tourism had a significant impact on tax revenues. The Stafford Act does not allow

FEMA to provide reimbursement for lost tax revenue to local governments. The

Community Disaster Loan Program is capped at only $5M—a fraction of the costs

from a catastrophic disaster. At a minimum, this arbitrary cap should be eliminated

in catastrophic events.

Recommendation: Congress should take into consideration the impact on local

budgets and establish triggers or thresholds at which Federal disaster assistance is

provided for catastrophic events. One approach may be to trigger assistance when

catastrophic disaster costs exceed the local budget by more than 1 percent. Non-Federal cost share requirements should be considered as well and perhaps a sliding

scale created based on the size of the event and the overall impact on State and

local budgets. • Special designations for certain for-profit organizations within the Stafford Act

definition of ‘‘critical facilities’’. For-profit entities are not eligible for Stafford Act

assistance and certain non-profit facilities are eligible for grants for the reconstruction and repair of damaged facilities. The September 11 attacks disrupted services

provided by utilities, transportation, communication, educational and medical care

facilities. Congress later appropriated funds to help meet these costs.

Recommendation: The Stafford Act should allow, in catastrophic events, the flexibility for special designations to be given to certain for-profit entities that provide

government type services for assistance deemed essential. • Individuals and Households Repair Assistance Program. When The Disaster

Mitigation Act of 2000 was signed into law, a provision was inadvertently changed

in the bill that lowered the cap on assistance for individuals and households to repair damaged residences. The assistance under the cap severely limits assistance for

repair of owner-occupied private residences, utilities, and residential infrastructure

damaged by a major disaster to a safe or sanitary living or functioning condition.

Repair assistance is used to allow disaster victims to continue living in damaged

residences after a disaster and thus minimizing the overall disaster costs, especially

rental and transportation assistance, and availability of rental property. Previously,

the cap was set at more than, $15,000, but with DMA2K the cap was lowered to

$5,000 without any avenues for any additional assistance should other assistance

programs fail. Typically the persons who have no other means of assistance are

those most highly impacted by this provision.

Recommendation: Congress should expeditiously address this error in corrective

legislation, so that disaster victims are not limited to $5,000 when no other assistance is available. We suggest calling this assistance ‘‘initial’’ and support FEMA’s

suggested language to increase the cap as appropriate while remaining within the

overall $25,000 limit for assistance to individuals.

• The Mortgage and Rental Assistance Program was eliminated in the Disaster

Mitigation Act of 2000.

Recommendation: Re-instate the Mortgage and Rental Assistance Program under

the Stafford Act.

• Long-term Economic and Societal Recovery. The magnitude of destruction

caused by catastrophic disasters, the losses to the economy and the psychological

impact on individuals and communities requires long-term recovery efforts. In the

area of crisis counseling assistance, only individuals from a declared disaster area

are eligible to receive counseling services and for a short period of time. In catastrophic disasters there may be a need for assistance to be provided to individuals

not only outside the immediate disaster area, but also in other states.

The Stafford Act does not currently provide Federal authorities adequate flexibility to coordinate and monitor Federal rebuilding efforts that may be required

after catastrophic events. In addition, there is no formalized Federal coordination

point to—assist state, and local governments with identifying and accessing all the

assistanoe available to them from the Federal Government. A one-stop-shop approach is needed to assist states with long-term recovery.

Recommendation: FEMA should be held accountable for coordinating assistance

on behalf of all Federal agencies so that State and local governments have a single

point of contact for collecting information and resolving issues.
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Statutory and administrative requirements placed on disaster assistance programs may, at times, delay the delivery of assistance. Congress should provide flexibility for the President or the director of FEMA to waive regulations or extend deadlines for providing assistance in catastrophic situations when economic and societal

impacts require broader provisions of assistance and for longer time periods.

ADDITIONAL ISSUES TO CONSIDER

1. Re-examine Public Assistance Program eligibility requirements of private nonprofit organizations.

2. Ensure a methodology for FEMA to use to address incremental costs to State

and local governments.

3. Clarify agencies’ authorities and ensure immediate environmental hazard assessment, monitoring and reporting to emergency responders.

STATEMENT OF BUD LARSON, ASSOCIATE DIRECTOR, NEW YORK CITY OFFICE

OF MANAGEMENT AND BUDGET

Good Morning Chairman Voinovich, Senator Carper, our own New York Senator,

Senator Clinton, and distinguished Members of the Subcommittee. My name is Bud

Larson, and I am the Associate Director of the New York City Office of Management

and Budget. My responsibilities include, among others, coordinating and processing

all of the FEMA claims by the city of New York, and I am thankful for the opportunity to share the city’s experiences in this process over the last 2 years. In particular, I would like to provide you with some insight on how the city and FEMA

responded to certain limitations in the Stafford Act.

Immediately following the attacks of September 11th, 2001, the President and Congress committed over $20 billion of much needed aid to the city of New York.

This aid included a $5 billion Liberty Zone Tax Incentive Package, over $3 billion

in Community Development Block Grants for economic development, almost $2 billion to the U.S. Department of Transportation for downtown transit upgrades, and

over $8 billion to FEMA for transit improvements, individual and family assistance

grants and the public assistance program. Of these, the city of New York is eligible

to make direct claims for reimbursements of disaster-related costs only through

FEMA’s Public Assistance program. The City’s claims have totaled approximately

$3.5 billion.

Overall, FEMA has been remarkably efficient and flexible in reimbursing the city,

given the constraints of the Stafford Act. Since the 9/11 terrorist attack was the

largest disaster ever in the United Sates, the associated costs borne by the local government was the largest FEMA has ever had to deal with. FEMA recognized very

early on in the process that they had entered into new, un-chartered territory, as

this disaster was unlike any they had ever responded to, and FEMA officials were

willing to work as hard as possible in order to provide the necessary reimbursements to the city of New York.

The City has already received almost 100 percent of all claims filed and currently

eligible to be reimbursed, excluding the $1 billion insurance fund. A large portion

of the balance of Public Assistance funds have been earmarked for transportation

improvements for a new transit hub in Lower Manhattan, and will be provided to

the appropriate entity when the expenses occur. This success is attributable to the

staff at FEMA, the State of New York, all of our City agencies and the assistance

of our congressional delegation, including Senator Clinton.

While we greatly appreciate the work done by the staff at FEMA in providing the

city with appropriate reimbursement, there are a number of limitations in the Stafford Act that did not make this an easy process. If not for congressional action, the

city would still not have received the reimbursement necessary to cover the unique

expenses a local government incurs when responding to a terrorist attack. In fact,

there are some instances where the city will never receive the appropriate reimbursement due to these limitations.

First and foremost, due to the extent of the damages and the destruction of the

financial center of the Nation, the city and State lost a substantial amount of tax

revenue as a direct result of this terrorist attack. The City estimated substantial

losses in tax revenue of almost $3 billion in the 2002 and 2003 City fiscal years directly attributable to the attack and independent of the economic slowdown. These

losses were due to decreases in City personal income taxes, business taxes and reduced sales taxes. In addition, the actual destruction of property, the closure of

Lower Manhattan and the significant effect on travel and tourism to New York in

particular, also had devastating affects on our tax revenues. While some have argued that it is impossible to link the loss of these revenues to the terrorist attack,
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the General Accounting Office issued a report on July 26, 2002 reviewing these estimates and noted that the tax revenue loss estimates for 2002 ‘‘appear to reasonably

approximate the impact of the terrorist attacks on tax revenues’’.

I also want to make it clear that the city did not receive any Federal funds based

on the city’s experiencing a budget shortfall as a result of these lost tax revenues.

Currently the Stafford Act does not allow FEMA to provide any reimbursement

for lost tax revenue to local governments. While a Community Disaster Loan Program currently exists, the loan amount is capped at only $5 million not even a fraction of the costs associated to such a large terrorist attack in a major metropolitan

city. Since the Stafford Act does not accommodate this very real need for disasterstricken local governments, the people of the city and State of New York have been

forced to shoulder these additional financial burdens caused by an act of war.

Another limitation of the Stafford Act is its lack of provisions for local governments to receive reimbursement for unique expenses associated with a terrorist attack. New York City was a direct target as was the Pentagon and the District of

Columbia; and as a direct target, the city needed to take action immediately by

heightening security in all parts of the city. Prudence demanded that the entire City

needed to be shut down, bridges and tunnels into Manhattan needed to be closed,

subway lines and railroads needed to be suspended and security at the United Nations and other key locations was immediately heightened. These costs were incurred directly as a result of the city being a terrorist target. However, the Stafford

Act does not recognize these expenses as eligible reimbursements since these additional expenses did not occur at the actual site of the ‘‘disaster’’. While FEMA

worked to interpret the act as broadly as possible, under the narrow confines of the

Stafford act, FEMA could not grant reimbursement. It took a special act of Congress

to allow FEMA to provide reimbursement to the city of New York for these costs,

which would clearly not have been incurred but for the terrorist attacks. After receiving congressional authorization, FEMA responded diligently and effectively in

processing these new claims. But the fact remains that in any future terrorist attack

there will be significant related costs incurred by local government that will be ineligible for reimbursement under the Stafford Act.

Finally, one of the most complex obstacles to full reimbursement under the Stafford Act encountered by the city involved environmental liability as it relates to debris removal. Immediately after the attacks on September 11th, the city responded

by deploying police officers, firefighters, EMS workers and other employees to the

site for search and rescue. At the same time, the city contacted four construction

companies to begin the process of debris removal. These companies acted with a

sense of patriotism, and worked without contracts, insurance or indemnity. This response by the municipality and its contractors were immediate and necessary, and

both parties took substantial risks. In order to protect against liability for the city

and its contractors, the city sought to obtain insurance on the private market, but

was able to obtain only $79 million of general liability coverage; and even that coverage came with significant exclusions. The City and its contractors accordingly

sought legislation providing for Federal indemnification of these claims, but without

success. Finally, as a result of congressional action, FEMA set aside approximately

$1 billion for an insurance fund to protect the city and its contractors from claims

relating to the debris removal process. While the city and contractors will benefit

from this substantial coverage, the amount of coverage is only a fraction of the $12

billion of damages already claimed against the city.

The creation of this insurance fund was difficult and complex, and this was aggravated because the Stafford Act provided no facility for its funding. In fact, even after

2 years since the attack and 7 months after additional congressional action, this insurance fund has yet to be created and negotiations between FEMA, the city and

its contractors are still ongoing. This is clearly an unfortunate circumstance, and

no one local government or contractor should have to deal with. In fact, this experience may cause governments and others to think twice before responding to a terrorist attack. The Federal Government must address this issue, by either enacting

Federal indemnification or an insurance plan to protect municipalities and their

contractors.

While the city’s experiences with FEMA have not been without some difficulties—

as I just explained—I want to be very clear that this was in no way due to the staff

or mission of the agency. I have the utmost respect for the professionalism and diligence of the people at FEMA. It was the constraints in Federal statute that proved

to be difficult. I urge you to examine these issues and determine the best course

of action, so local governments and taxpayers are protected from the additional financial burdens of a terrorist attack.

I thank you for your patience and would be glad to take any questions.
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RESPONSES BY BUD LARSON TO ADDITIONAL QUESTIONS FROM SENATOR JEFFORDS

Question 1a. The GAO report cites $8.6 million that went to the New York Department of Environmental Protection for exterior building cleaning. Who decided

that New York would take the lead for this function, how were buildings to be

cleaned selected, what precautions were taken to protect the workers conducting

this cleaning, pedestrians, and other people in the area of these clean-ups?

Response. I, Bud Larson, am not the expert and would defer to New York City

Department of Environmental Protection on the following question. The following

answer is provided by NYC Deputy Commissioner Chris Ward:

Question 1b. Who decided that New York would take the lead for this function?

Response. The USEPA and FEMA decided that DEP should retain the contractors

for the exterior building cleaning program after DEP proposed the program in a

multi-agency meeting that had been convened by the EPA in February 2002. NYC

DEP, in coordination with U.S. EPA developed cleaning protocols and it contracted

with qualified firms to undertake the necessary cleaning. This program became part

of a broader, U.S. EPA-lead, effort to take the necessary steps to rid the downtown

area of air quality concerns, which required the cleaning of building interiors.

Question 1c. What precautions were taken to protect the workers conducting this

cleaning, pedestrians, and other people in the area of these clean ups?

Response. All contractors were required to perform cleaning in compliance with

USEPA, OSHA, NYSDOL, NYS DEC, NYCDOS, NYCDOH, and NYCDEP regulations, as well as contractual protocols assuring that all necessary precautions were

put in place to protect those performing the cleaning, and those in the area. For

example, multiple roofs were cleaned simultaneously in order to ensure that one

roof waiting for a clean up would not have wind disperse debris from it onto other

already cleaned rooftops. The Clean-up Program included low-pressure washing and

HEPA vacuuming to remove visible debris.

The DEP applied for permits from the NYC DOT to close streets, or lanes of traffic, and sidewalks as necessary to protect pedestrians and others in the area. Work

was planned to limit impact on the public and to businesses whenever possible.

Some work was only performed on nights and weekends.

All workers were required to wear full coveralls, gloves, and a minimum of halfface air purifying respirators equipped with HEPA filters.

Question 1d. How were the buildings to be cleaned selected?

Response. New York City Department of Environmental Protection field staff with

representatives from the NYS Department of Labor and the United States Environmental Protection Agency inspected 1,073 buildings beginning at ground zero and

proceeding outward. Buildings where WTC debris was observed were identified for

clean up and notices were provided to each building owner. Once the Exterior

Cleaning Program was established, buildings where debris had been observed were

re-inspected. If debris was still present, the owner was offered participation in the

program.

Question 2. The GAO report states that NYC was not required to pay the 25%

cost share that is normally required of communities that receive Federal disaster

assistance. GAO reports that the President capped the spending on this disaster at

$20 billion, rather than using the normal process for disaster spending. GAO also

reports that the President reduced the amount of Hazard Mitigation Grant Program

Funds to 5 percent rather than the standard 15 percent of the amount spent on the

disaster. Do you believe that the city ultimately received less or more Federal assistance than they would have if the normal Stafford Act procedures were followed?

Response. As discussed in my prepared remarks, much of the costs incurred by

the city as a direct result of the disaster were not eligible under normal Stafford

rules. Because Congress and the President authorized FEMA to use a portion of the

capped funds to pay for these Stafford-ineligible costs, the city ultimately received

more FEMA assistance than under normal Stafford Act procedures and rules. The

authority to use funds for Stafford-ineligible costs was necessary because the Stafford act was not and is not designed to respond to a terrorist attack, particularly

on the scale of September 11.

However, because of the $20 billion cap and the prohibition against reimbursing

the city for lost revenues, the reimbursement received was still substantially less

than the true cost to the city of the disaster.

Question 3. The GAO report describes $1.7 to $2 billion of the $4.6 billion in

FEMA and DOT funds for which uses had not been determined as of June 2003.

Potential projects under consideration were improving access to JFK airport and

Long Island, improvements to West Street Route 9A, and a tour bus facility. Have
313

you determined how these funds will be used and if so, what criteria were used to

select those projects that will receive funds?

Response. To date, $2.85 billion has been allocated of the $4.55 billion in FEMA/

DOT funding.

The three projects included in this allocation are the replacement of a commuter

train from New Jersey to Lower Manhattan (the PATH train), a subway hub on

Broadway, and a renovation of the subway station at South Ferry, which was the

first subway station ever built in New York City.

The criteria are improving access to the area, modernizing its transportation facilities, and improving the experience of using Lower Manhattan’s transportation

system.

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