Department of Homeland Security
 

FEMA’s Process for Tracking Public 


Assistance Insurance Requirements 


OIG-12-18 December 2011
 
Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528 

Homeland 

Security 

DEC 1 6 2011 

Preface 

The Department of Romeland Security (DRS) Office of Inspector General (OIG) was 

established by the Homeland Security Act of2002 (Public Law 107-296) by amendment 

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and 

special reports prepared as part of our oversight responsibiUties to promote economy, 

efficiency, and effectiveness within the Department. 

This report addresses the strengths and weaknesses of the Federal Emergency 

Management Agency's process for tracking public assistance insurance requirements. It 

is based on interviews with employees and officials of relevant agencies and institutions, 

direct observations, and a review of applicable documents. 

The recommendations herein have been developed to the best knowledge available to our 

office, and have been discussed in draft with those responsible for implementation. We 

trust this report will result in more effective, efficient, and economical operations. We 

express our appreciation to all of those 

J;:;t!rwho contributed to the preparation of this report. 

Acting Assistant Inspector General 

Office of Emergency Management Oversight 
Executive Summary.............................................................................................................1
 

Background..........................................................................................................................2
 

Results of Review ................................................................................................................5
 

Compliance With Insurance Requirements ...................................................................5
 

Recommendation ...........................................................................................................6
 

Management Comments and OIG Analysis ..................................................................7
 

Tracking Insurance Requirements in FEMA Databases................................................7
 

Recommendations........................................................................................................10
 

Management Comments and OIG Analysis ................................................................11
 

Insurance Guidance......................................................................................................11
 

Recommendations........................................................................................................13
 

Management Comments and OIG Analysis ................................................................14
 

Appendices 

Appendix A: Purpose, Scope, and Methodology.......................................................15
 

Appendix B: Management Comments to the Draft Report .......................................16
 

Appendix C: Previous Inspector General Reports on Public Assistance Insurance..20
 

Appendix D: Major Contributors to this Report........................................................21
 

Appendix E: Report Distribution ..............................................................................22
 

Abbreviations 

ADAMS Automated Disaster Assistance Management System
 

CFR Code of Federal Regulations
 

DHS Department of Homeland Security
 

EDW Enterprise Data Warehouse
 

EMMIE Emergency Management Mission Integrated Environment
 

FEMA Federal Emergency Management Agency
 

FY fiscal year
 

GPS global positioning system
 

NEMIS National Emergency Management Information System
 

OIG Office of Inspector General
 

PA Public Assistance
 

PNP private nonprofit
 

Table of Contents/Abbreviations 
 

OIG
 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

The Federal Emergency Management Agency’s (FEMA) Public 

Assistance Grant Program provides assistance to state, tribal, and 

local governments and certain types of private nonprofit 

organizations so that communities can quickly respond to and 

recover from major disasters or emergencies. As a condition of 

receiving federal disaster assistance, Public Assistance applicants 

are required to obtain and maintain insurance in order to protect 

facilities against future loss to property from the types of hazard 

that caused the damages. Some recipients do not comply with this 

requirement. Improvements can be made in the monitoring and 

oversight activities of states and FEMA to ensure that recipients 

satisfy this requirement and do not receive financial aid for 

damages that are, or should be, covered by insurance. 

Even though the Robert T. Stafford Disaster Relief and Emergency 

Assistance Act, as amended, encourages states and local 

governments to obtain insurance to supplement or replace 

government assistance, FEMA’s program provides a disincentive 

to carry insurance and is silent on a number of important policy 

issues. FEMA has been aware of these issues for more than 10 

years; however, progress in addressing these issues has been slow. 

Improvements can be made to the automated systems that FEMA 

uses to manage grant programs in order to provide a reliable 

method of monitoring insurance requirements and to easily 

determine if a current applicant received financial assistance in a 

previous disaster. Without a reliable system to track insurance 

information, the federal government is at risk of providing 

duplicate assistance. 

We are making six recommendations to improve FEMA’s 

management and oversight of public assistance insurance 

requirements. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 1 
 

Background 

Under the authority of the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act, as amended (Stafford Act), 42 U.S.C. 

5121, et seq., and implementing regulations, FEMA provides aid to 

states and communities to recover from presidentially declared 

disasters as quickly as possible. 1 As a condition of receiving 

federal disaster assistance to repair property damaged by the same 

type of hazard that previously damaged the property during a 

major disaster, applicants must protect facilities by obtaining and 

maintaining insurance. Insurance reviews are conducted during 

the project approval process to ensure that applicants have satisfied 

any insurance requirements that may have existed as a result of 

receiving financial aid for damages in a prior disaster. Applicants 

agree to maintain insurance for the life of the facility and must 

provide evidence that they have obtained sufficient insurance to 

satisfy the grant requirements and the law. 

The Public Assistance Program 

FEMA provides federal disaster grant assistance to state, tribal, 

and local governments and certain private nonprofit (PNP) 

organizations through the Public Assistance (PA) program. Two 

types of work are eligible for reimbursement through a PA grant: 

emergency work and permanent work. These types are further 

divided into categories based on the activity being performed for 

emergency work, or the type of facility repaired for permanent 

work. Table 1 summarizes the categories. 

Table 1. Categories of Disaster-Related Work 

Type of Work Categories 

Emergency Work A 

B 

Debris removal 

Emergency protective measures 

Permanent Work C Road systems and bridges 

D Water control facilities 

E Buildings, contents, and equipment 

F Utilities 

G Parks, recreational, and other 

FEMA managed more than 197,000 PA grant projects, totaling 

more than $10 billion, for all disasters declared between 2007 and 

2010. This report focuses on Category E work, which includes 

1 Implementing regulations concerning FEMA and the Stafford Act are in the Code of Federal Regulations 

(C.F.R.) Title 44, Part 206. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 2 
 

facilities owned by state, tribal, and local governments, as well as 

PNP organizations. More than 22,000 Category E projects totaling 

more than $1.3 billion associated with disasters were declared 

between 2007 and 2010. 

The PA program is administered through a coordinated effort 

among FEMA, its grantees, and subgrantees, each with different 

responsibilities. In most cases, states are the grantees that manage 

and distribute grant funds, whereas tribal and local governments 

and eligible PNP organizations are the subgrantees that receive the 

funds. 

The Insurance Purchase Requirement 

Federal legislation and regulations encourage states and local 

governments to obtain insurance to supplement or replace federal 

assistance, and require that an applicant seeking a PA grant to 

repair damage to a facility commit to obtain and maintain 

insurance to protect against future damage, in the amount of the 

eligible damage that was incurred as a result of the disaster.2 

Applicants that fail to obtain and maintain insurance are not 

eligible to receive disaster assistance. 

The Stafford Act and its implementing regulations provide more 

direction with respect to insurance requirements: 

1.	 Disaster assistance provided by FEMA is intended to 

supplement financial assistance from other sources. 

Disaster assistance will not be provided for damage or 

losses covered by insurance. Insurance coverage must be 

subtracted from all applicable PA grants in order to avoid 

duplication of financial assistance. If PA funds are 

obligated for work that is subsequently determined to be 

covered by insurance, FEMA must deobligate the funds. 

2.	 The applicant must obtain insurance on damaged insurable 

facilities (buildings, equipment, contents, and vehicles) as a 

condition of receiving PA grant funding. In addition, the 

applicant must maintain insurance on those facilities to be 

eligible for PA funding in future disasters. 

2 The Stafford Act, as amended, 42 U.S.C. §§ 5121(b)(4), 5154(b), and 44 C.F.R. § 206.253. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 3 
Furthermore, FEMA program guidance requires that— 

•	 Applicants or subgrantees comply with federal laws, 

regulations, and policies and complete projects in 

accordance with the approved scope of work. Applicants 

are responsible for identifying all damages and any 

insurance that was in place, and providing all pertinent 

insurance information to the State Public Assistance 

Officer. 

•	 States monitor the process to ensure that applicants comply 

with program requirements and complete work within 

regulatory timeframes. States are responsible for notifying 

FEMA of any insurance proceeds and settlements for 

damaged facilities, and for ensuring that subgrantees have 

obtained and maintained insurance on facilities that 

received PA funding. 

•	 FEMA ensures that applicants that previously received 

disaster assistance have obtained and maintained insurance, 

and reduces the PA grants when damages are covered by 

insurance. FEMA’s program managers are responsible for 

monitoring progress to ensure that work is completed 

within regulatory timeframes and in accordance with the 

Stafford Act, federal regulations, and all related policies. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 4 
Results of Review
 

In January 2001, the FEMA OIG issued a report3 that identified concerns with 

applicant compliance with insurance requirements, insurance reviews, and FEMA 

and state monitoring of insurance requirements, among other issues. More than 

10 years later, concerns remain, particularly in the following areas: 

•	 Compliance with insurance requirements; 

•	 Tracking insurance requirements in FEMA databases; and 

•	 Insurance guidance. 

Compliance With Insurance Requirements 

Since fiscal year (FY) 2009, we have issued 19 financial assistance grant 

reports (see appendix C for complete list) that have included findings 

pertaining to PA insurance requirements, and brought the following 

conditions to FEMA’s attention: 

•	 Ten reports identified situations categorized as “duplicate 

benefits,” where subgrantees received federal financial assistance 

and received insurance proceeds for the same damages or where 

damages paid with federal financial aid should have been covered 

by insurance. 

•	 Six reports identified situations categorized as “incomplete 

insurance review,” where the final insurance settlement had not 

been reconciled against the funded project costs. 

•	 Three reports identified situations in which the applicant either did 

not obtain adequate insurance or did not file an insurance claim. 

Although these reports were issued in FYs 2009–2011, they addressed 

financial assistance grant awards for disasters that were declared between 

2003 and 2005. Projects routinely stay open for years before insurance 

verification or final grant reconciliation occurs. In fact, the above 19 audit 

reports were issued, on average, 60 months after the disaster declaration, 

even though regulations implementing the Stafford Act call for large 

projects to be completed within 18 months, unless extenuating 

circumstances or unusual project conditions exist. 

States are responsible for ensuring that applicants comply with the 

program’s insurance requirements. Furthermore, states are required to 

3 Compliance with Public Assistance Program’s Insurance Purchase Requirements (I-01-01), January 

2001. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 5 
submit quarterly reports as part of their grants management 

responsibilities.4 However, FEMA officials said that the quarterly reports 

focus primarily on project costs and not on compliance or insurance 

issues. 

State and local governments are often overwhelmed following a major 

disaster, and management activities are further hampered by personnel 

shortages. Nevertheless, five years is more than ample time for applicants 

to comply with the insurance requirements of the Stafford Act, and for the 

state and FEMA to monitor and oversee projects. 

Leaving open insurance matters unresolved has additional financial 

implications. Delaying the closeout of PA grants and disasters results in 

additional administrative costs to FEMA, and any unliquidated obligation 

balances are not available for other uses.5 

Conclusion 

The findings reported in the 19 OIG reports demonstrate the need for 

improved monitoring by the state and increased oversight by FEMA. 

Unresolved and uncompleted insurance reviews increase the likelihood of 

FEMA providing unnecessary or even duplicate assistance. This, in turn, 

results in inefficiencies in the use of government funds and lost 

opportunities to use unliquidated obligations more effectively. More 

consistent and timely monitoring and oversight can reduce these risks. 

Recommendation 

We recommend that the Associate Administrator, Response and 

Recovery: 

Recommendation #1: Work with FEMA regional personnel to 

evaluate the process of insurance reviews to determine how to 

complete these reviews earlier in the project formulation process. 

4 SOP9570.14, FEMA Program Management and Grant Closeout Standard Operating Procedure, Paragraph 

5.2 – Grantee Responsibilities.
 5 Opportunities to Improve FEMA’s Disaster Closeout Process (OIG-10-49), January 2010.
 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 6 
Management Comments and OIG Analysis
 

In summary, FEMA concurred with Recommendation 1, and stated 

that it is currently coordinating with the regional offices in 

conducting a revised insurance review procedure that is designed 

to streamline the process. We will determine the status of this 

recommendation once we receive the detailed corrective action 

plan in FEMA’s 90-day letter. 

Tracking Insurance Requirements in FEMA Databases 

PA grant recipients are required to protect facilities from future damages 

by obtaining and maintaining insurance as a condition of receiving federal 

assistance for damages caused by the same type of hazard. One of the 

objectives of this review was to determine whether facilities that were 

required to maintain insurance received assistance a second time without 

meeting the insurance requirement. FEMA officials acknowledged that 

such duplicate benefits may have been awarded, but they could not cite a 

specific instance because they do not have the tools and resources to 

identify these conditions. 

During the project approval process, one of FEMA’s roles is to conduct 

insurance reviews to determine if the grant applicant previously received 

assistance for the damaged facility. To review historical assistance 

information, it is often necessary to query three databases that span several 

decades. The earliest is the Automated Disaster Assistance Management 

System (ADAMS), followed by the National Emergency Management 

Information System (NEMIS) and the Emergency Management Mission 

Integrated Environment (EMMIE6

). The systems do not reliably indicate 

whether FEMA provided assistance to repair or replace a specific facility 

in a prior disaster. Moreover, FEMA does not have a tool to 

simultaneously compare fields in ADAMS with either NEMIS or EMMIE, 

and there is no reliable way to search based on facility location or name 

across NEMIS and EMMIE. Figure 1 summarizes the process of 

validating insurance considerations during project formulation. 

6 FEMA began the EMMIE pilot on select disasters between December 18, 2007, and July 14, 2008, and 

used it for all disasters starting with disaster declaration number 1778, declared on July 24, 2008. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 7 
Figure 1: Validating insurance considerations (Source: OIG analysis of 

FEMA data) 

FEMA established the Enterprise Data Warehouse (EDW) to enable it to 

simultaneously query fields within both NEMIS and EMMIE. However, 

data reliability and functionality issues significantly hamper the usefulness 

of these queries. The most reliable way to determine if FEMA has 

provided disaster assistance for a damaged facility is by matching global 

positioning system (GPS) coordinates. FEMA has increased the use of 

GPS coordinates to identify a facility’s location—more than 90% of the 

facilities receiving disaster assistance after October 1, 2006, are identified 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 8
 
 

by GPS coordinates—but the majority of the facilities receiving disaster 

assistance before that date were not identified by GPS coordinates. 

Another alternative is to match the fields containing descriptive 

information on the damaged facility’s physical location. EMMIE contains 

three sets of fields that identify the physical location—the Project 

Location field, the Location field, and the Facility Name, Address, City, 

and ZIP fields. Of the 19,312 specific locations in EMMIE, 12,285 (64%) 

do not contain any information in the Address field. We randomly 

sampled 250 specific location records to determine if there was enough 

information in any of the three location fields to establish where the 

damaged facility was located. Of these, 26% did not contain enough 

information to determine the location of a damaged facility. Fields were 

either blank or contained generic information such as “District Wide” or 

“See site sheets.” Without specific and searchable location information, it 

is difficult to use the information in EMMIE to identify instances of 

duplicate benefits. 

Furthermore, some insurance information cannot be easily retrieved 

because it is entered incorrectly into the database. For example, insurance 

information was sometimes found in “general comments” rather than in 

the designated insurance fields. Such incorrect entries make it difficult to 

review details efficiently and accurately. Similarly, insurance cost 

information was not always coded correctly. Instead of using insurance 

cost codes, insurance costs were sometimes entered in the databases with a 

generic code. In fact, FEMA Regions rely on stand-alone internally 

developed spreadsheets to overcome some of these deficiencies. 

A recent OIG audit7 reviewed FEMA’s efforts to provide the information 

systems needed to support its disaster response mission operations. The 

report concluded that FEMA’s existing technology systems do not support 

disaster response activities effectively: The systems are not integrated, do 

not meet user requirements, and do not provide the information 

technology capabilities that agency personnel and external partners need 

to carry out disaster response and recovery operations in a timely or 

effective manner. Although FEMA is evaluating plans for upgrading and 

replacing NEMIS and EMMIE, concrete plans have not been announced. 

7 Federal Emergency Management Agency Faces Challenges in Modernizing Information Technology 

(OIG-11-69), April 2011. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

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Conclusion 

The current system has data reliability, functionality, and data integration 

problems that hamper the management and verification of insurance data. 

Without a reliable system to track insurance information, FEMA is at risk 

of providing duplicate assistance in violation of the Stafford Act. 

Recommendations 

We recommend that the Associate Administrator, Response and 

Recovery: 

Recommendation #2: Implement a quality control process to 

ensure that all pertinent insurance information, including insurance 

and location data, is entered into the correct fields and in the 

correct format. 

Recommendation #3: Modify EMMIE or EDW so that FEMA 

can use the data stored in EMMIE to determine if an applicant 

previously received disaster assistance for a damaged facility. 

Management Comments and OIG Analysis 

In summary, FEMA concurred with Recommendation 2, and stated 

that it currently implements quality control procedures in two 

stages: (1) during the Project Worksheet review at the Joint Field 

Office, and (2) during project close-out at the Regional office. 

FEMA concurred with Recommendation 3, and stated that it is 

working on improving its capability to access needed information 

through a plan to migrate data from NEMIS into EMMIE. The 

date of migration is dependent on funding availability. We will 

determine the status of these recommendations once we receive the 

detailed corrective action plan in FEMA’s 90-day letter. 

Recommendation 

We recommend that the Associate Administrator, Response and 

Recovery: 

Recommendation #4: Review and evaluate NEMIS and EMMIE 

data fields and update any location and insurance fields that are 

blank or contain erroneous information. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 10 
Management Comments and OIG Analysis 

FEMA partially concurred with Recommendation 4 as it pertains 

to updating location and insurance fields as they become known in 

the process going forward in future disasters. FEMA stated that it 

would be infeasible in cost and labor to update the database 

retroactively. 

We encourage FEMA to provide information comparing the cost 

of the recommended corrective action to estimated improper 

payments. Absent evidence that the cost to update NEMIS and 

EMMIE location and insurance data fields with accurate and 

complete information exceeds the improper payments that would 

be avoided, we continue to believe that updating NEMIS and 

EMMIE with complete and accurate information is in the best 

interest of the taxpayer. 

We will determine the status of this recommendation once we 

receive the detailed corrective action plan in FEMA’s 90-day 

letter. 

Insurance Guidance 

The Stafford Act encourages individuals, states, and local governments to 

protect themselves by obtaining insurance coverage to supplement or 

replace government assistance, and requires applicants to obtain and 

maintain insurance to protect against future loss of the same type and 

extent as a condition of receiving a public assistance grant. Yet FEMA’s 

PA program provides disincentives for applicants to carry insurance. For 

example, the PA program pays for building repair costs following a first 

disaster. This effectively eliminates any incentive to purchase insurance 

before a disaster occurs. In addition, FEMA reimburses deductible 

amounts in insurance policies, regardless of the amount of the deductible. 

By reimbursing the applicant for the portion of loss not covered by 

insurance, the program creates disincentives to carry low or moderate 

deductibles. As a result, the program is not equitable to applicants who 

pay to carry insurance or choose reasonable deductibles. 

FEMA has been aware of these and other equity and disincentive 

problems for more than a decade. In the February 23, 2000, Federal 

Register (65 FR 8927), FEMA published an advance notice of proposed 

rulemaking concerning insurance requirements, procedures, and eligibility 

criteria with respect to buildings under the PA program. The notice 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 11 
 

 

discussed the discord between the congressional intent behind the Stafford 

Act and certain of the program’s policies, including the following: 

•	 Paying for building repair costs whether or not the building was 

insured at the time of the disaster. It is advantageous to building 

owners not to pay insurance premiums when they know that 

FEMA will cover the cost when a disaster occurs. FEMA reported 

that applicants were asking, “Why carry insurance on our buildings 

when we know that FEMA will be there to pick up the costs when 

the disaster hits?” Conversely, applicants who have maintained 

insurance not only are disadvantaged because they have been 

paying for insurance over time, but also because they will be 

reimbursed only for the portion of loss not covered by insurance. 

•	 Reimbursing a disaster assistance applicant for that portion of the 

loss that is not covered by insurance, including any deductibles, 

regardless of the amount of the deductible. This tends to 

encourage high deductibles for those insured. This FEMA policy 

is a disincentive to insure adequately and is not equitable to those 

who choose to insure. 

•	 Providing assistance to the extent that insurance does not. 

Applicants who have maintained insurance coverage and paid 

premiums for years can expect to receive federal assistance only to 

the extent that the costs are not covered by their insurance policy. 

They are at a disadvantage compared to applicants who do not 

have insurance and who will therefore receive all eligible repair 

costs from FEMA. Risk managers and other stakeholders raised 

this issue of inequity. 

In this same Federal Register notice, FEMA identified the following other 

important issues that its regulations failed to adequately address: 

•	 Defining insurance and quantifying what is acceptable to meet 

the insurance purchase requirement; 

•	 Identifying which type of insurance—replacement cost value 

or actual cost value—is needed to satisfy the insurance 

purchase requirement; 

•	 Indicating whether federal assistance will be provided for 

insured losses that fall within the deductible limits of a policy, 

and if so, up to what limits, if any; 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 12 
 

•	 Explaining whether a local government or PNP organization 

could qualify as a self-insurer for the purposes of meeting the 

insurance purchase requirement; and 

•	 Providing policy and guidance regarding the state insurance 

commissioners’ determination under the Stafford Act that 

insurance is not reasonably available. 

The Federal Register advance notice discussed possible options, solicited 

ideas and comments about how to improve the program, and posed 

specific questions about the approach it outlined in detail. 

FEMA addressed the written comments it received in a subsequent notice 

of findings published in the Federal Register (65 FR 58720) on October 2, 

2000. FEMA concluded that additional study of the issues was needed. 

At the time of our fieldwork, FEMA had not issued a final rule addressing 

the identified deficiencies. FEMA explained that action on these issues 

has not occurred because regulatory review and rulemaking involving 

other programs have taken precedence. Consequently, the pertinent PA 

regulations continue to present the same disincentives and equity issues, 

and do not provide adequate guidance to those involved in receiving, 

granting, or overseeing PA grants. 

Conclusion 

Even though the Stafford Act encourages state and local governments to 

obtain insurance to supplement or replace government assistance, FEMA’s 

PA program creates a disincentive to carry insurance and is silent on a 

number of other important policy issues. FEMA has been planning to 

address these issues for more than a decade, but no action has been taken. 

FEMA needs to provide clear and complete guidance to those involved in 

receiving, granting, and overseeing PA grants. 

Recommendations 

We recommend that the Associate Administrator, Response and 

Recovery: 

Recommendation #5: Complete the rulemaking process begun in 

2000 and issue a final rule that resolves the longstanding problems 

with PA insurance regulations, including the topics of deductibles, 

self-insurance, and state insurance commissioners’ determinations 

of reasonably available insurance, among others. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 13 
 

Recommendation #6: Prepare and issue additional revised PA 

insurance policy and guidance to address definitions of insurance, 

deductibles, and self-insurance, and clarify issues that include, 

among other topics, deductibles, self-insurance, and state insurance 

commissioners’ impact on the PA insurance requirement. 

Management Comments and OIG Analysis 

In summary, FEMA concurred with Recommendation 5, and stated 

that it is in the process of examining its PA insurance regulations 

and evaluating necessary changes. FEMA stated that, given the 

nature of the rulemaking process, it could not comment more 

specifically at this time. 

FEMA concurred with Recommendation 6, and stated that it is 

currently in the process of preparing additional insurance policy 

and guidance, in conjunction with the issuance of a final rule. 

Among the forthcoming policy and guidance are revised Fact 

Sheets for applicants and field personnel that clarify PA insurance 

issues. 

We will determine the status of recommendations 5 and 6 once we 

receive the detailed corrective action plan in FEMA’s 90-day 

letter. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 14 
 

Appendix A 

Purpose, Scope, and Methodology 

The purpose of this audit was to determine (1) the extent to which 

FEMA and the states monitor PA insurance requirements and 

(2) whether facilities that were required to maintain insurance, but 

did not, received assistance a second time. 

We interviewed officials from FEMA headquarters and Regions 

concerning the insurance requirements. We also performed a 

forensic analysis on FEMA systems to determine whether there is 

an effective and efficient approach to identify facilities that 

received prior assistance or were required to carry insurance. 

We reviewed OIG reports issued since FY 2009 for audits and 

reviews that included PA insurance within their scopes of work. 

We researched federal laws, regulations, policies, guidance, and 

other information related to FEMA’s PA program, with an 

emphasis on Category E and its insurance requirements. 

We conducted this performance audit between February and May 

2011 pursuant to the Inspector General Act of 1978, as amended, 

and according to generally accepted government auditing 

standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based upon our 

audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based upon our 

audit objectives. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 15 
Appendix B 

Management Comments to the Draft Report 

U.S. I)cp:lrlmcnl or lIoml'I:lIul Sl'curil), 

500 C S1n:~ . SW 

WllshinglOn. DC 20472 

MEMORANDUM FOR: Malt Jadueki 

Assistant Inspector General 

Office of InSjll!C~ General 

~ ,v,,-

FROM: David 1. Kaufinan / 

Director 

Office of Policy and Program Analysis 

SUBJECT: FEMA Response to OIG Draft Report, FEMA 's Process 

for Tracking Public AssiS/(IlIce IlIsllrance Requirements 

The Department of Homeland Security's Federal Emergency Management Agency (FEMA) 

appreciates the opportunity to review and respond to the Office of Inspector General (OIG) Draft 

Report: FEMA 's Process/or Tracking Public Assistance Insurance Requirements (OIG Project 

Number 08- 145-EMO-FEMA). FEMA is actively working to resolve the issues identified in the 

audit. 

It should be noted that sections of the report do not fully reflect FEMA's efforts to improve the 

efficiency of the Public Assistance (PA) insurance review process and accessing stored insurance 

infonnation. Additionally, the report docs not accurately recognize the relationship between the 

time necessary for project development and completion. and reconciling project costs with 

insurance proceeds that an applicant has received or may receive. 

The main areas of findings that the report cites as problematic include: (1) improving monitoring 

and oversight by ensuring that insurance infonnation is properly recorded in FEMA's databases; 

(2) ensuring that this infonnation is accessible within FEMA's databases; and (3) publishing an 

insurance regulation that addresses specific insurance issucs. FEMA has takcn a multi-faceted 

approach to addressing these issues. At the Joint Field Office (JFO) and Regional levels, FEMA 

uses multiple levels of review for accuracy and quality in the project fonnulation and closeout 

processes. Further, FEMA has developed more streamlined and comprehensive databases for 

storing disaster data, including insurance infonnation. Previous disaster data will be migrated 

into the newer system, and this system will be rcgularly maintained and adjusted to incorporate 

more efficient mechanisms for housing disaster data. The date for this migration is currently 

--

unknown and depcndent upon available funding. FEMA is also evaluating its insurance 

regulations and policics, and detennining the most efficient ways to implement clarifications or 

changes. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 16
 
Appendix B 

Management Comments to the Draft Report 

2 

The OlG makes 6 recommendations in its draft report. FEMA's responses to those 

recommendations follow: 

Recommendation #1: Work with FEMA regional personnel to evaluate the process of insurance 

reviews to detennine how to complete these reviews earlier in the project fannulation process. 

FEMA Response: FEMA concurs with this recommendation. 

FEMA regularly engages with Regional personneilo evaluate ways to improve efficiency in 

program implementation. In recent disaster operations, FEMA has initiated efforts to centralize 

insurance reviews by consolidating the insurance review processes related to a multi-state 

impact. Typically, insurance review is conducted at each JFO for a disaster, and FEMA is 

currently testing a process by which insurance reviews for multiple disasters are being done at a 

centralized processing office. Following this trial at the disasters for which this is currently 

being implemented, FEMA will evaluate this experience with Regional and other field personnel 

to determine its effect on streamlining the insurance review process. 

Regarding the requirement for providing insurance information to FEMA, the grantee bears this 

responsibility pursuant to 44 CFR 206.252(c) and 44 CFR 206.253(a), and must provide this 

information to FEMA before FEMA is able to approve a project. This occurs at the beginning of 

the project formulation process. 

Regarding the requirement to obtain and maintain insurance, the applicant is required to do SO in 

the amount of the eligible damage that was incurred to the damaged facility as a result of the 

major disaster pursuant to 44 CFR 206.253(bXI), or in the amount of eligible disaster assistance 

pursuant to 44 CFR 206.252(d). Due to the nature of disaster recovery, identifying eligible 

damage, and completing projects, some flexibility in this process is required to ensure that 

Fedemlly-funded projects are completed as efficiently and responsibly as possible. At project 

close out, FEMA reconciles final project costs, including insurance requirements and 

compliance, in order to have a more final and aecurate representation of the project costs and 

requirements. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

Recommendation #2: Implement a quality control process to ensure that all pertinent insurance 

information, including insurance and location data, is entered into the correct fields and in the 

correct format. 

FEMA Response: FEMA concurs with this recommendation. 

FEMA implements quality control at two stages of project review. At the JFO level, FEMA 

employs a Quality Assurance/Quality Control stage in the Project Worksheet (PW) review 

process to identify any sueh errors or omissions in the PW formulation. At the Regional level, 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 17
 
Appendix B 

Management Comments to the Draft Report 

3 

FEMA staff responsible for project closeout performs a final review of the project, including 

compliance with insurance requirements. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

Recommendation #3: Modify EMMIE or EDW so that FEMA can use the data stored in 

EMMIE to dctennine if an applicant previously received disaster assistance for a damaged 

facility. 

FEMA Response: FEMA concurs with this recommendation. 

Both EMMIE and EDW currently have the capability to provide this information. EMMIE 

allows searching for an applicant, and contains any information available for an applicant if they 

received or were considered for disaster assistance after July I, 2008. The data in the National 

Emergency Management Information System (NEMIS) will he migrated into EMMIE, creating a 

more robust centralized source for verification of insurance infonnation. FEMA recognizes that 

the efficiency of the system can be improved, and is working on improving the capability to 

access this infonnation. The date of migration is dependent on the availability of funding, and 

the viability of this project will be evaluated in FY2012 based on funding availability. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

OIG Recommendation #4: Review and evaluate NEMIS and EMMIE data fields and update 

any location and insurance fields that are blank or contain erroneous infonnation. 

FEMA Response: FEMA partially concurs with this recommendation. 

FEMA agrees to update any location and insurance fields that are blank or contain erroneous 

infonnation as they become known in the process going forward in future disasters. To do so 

retroactively would be an infeasible cost and personnel burden. EMMIE fields are quality 

reviewed at two stages 10 correct such errors. This combined with an applicant's duty to provide 

insurance infonnation make retroactive application to these databases unnecessary. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

OIG Recommendation #S: Complete the rulemaking process begun in 2000 and issue a final 

rule that resolves Ihe longstanding problems with Public Assistance insurance regulations, 

including the topics of deductibles, self-insurance, and slate insurance commissioners' . 

determination of reasonably available insurance, among others. 

FEMA Response: FEMA concurs with this recommendation. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 18
 
Appendix B 

Management Comments to the Draft Report 

4 

FEMA is in the process of examining its P A insurance regulations and evaluating necessary 

changes. Given the nature of the rulemaking process, FEMA cannot comment more specifically 

at this time. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

Recommendation #6: Prepare and issue additional revised Public Assistance insurance policy 

and guidance to address definitions of insurance, deductibles, and self-insurance, and clarify 

issues that include, among other topics, deductibles, self-insurance, and state insurance 

commissioners' impact on the PA insurance requirement. 

FEMA Response: FEMA concurs with this recommendation. 

FEMA is currently in the process of preparing additional insurance policy and guidance, in 

conjunction with the issuance of a final insurance rule. Among the forthcoming policy and 

guidance, are revised Fact Sheets for applicants and field persoJUlel that clarify the above P A 

insurance issues. 

FEMA believes this satisfies the intent of the recommendation and requests that this 

recommendation be resolved and closed. 

Again, we thank you for the opportunity to review and provide our comments to your 

recommendations contained in your draft report. Should you have further questions regarding 

our response, please do not hesitate to call FEMA's Chief Audit Liaison, Brad Shefka, at 202· 

646·1308. 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 19
 
Appendix C 

Previous Inspector General Reports on Public Assistance Insurance 

DHS Office of Inspector General 

DHS OIG PA Insurance Reports by Finding and Report Number 

Finding Fiscal 

Year Report Title Report Number 

Duplicate Benefits 2009 Hurricanes Ivan, Dennis, and Katrina Activities for 

Baldwin County, Alabama 

DA-09-03 

2009 Hurricane Katrina Activities for the Catholic Diocese of 

Biloxi, Mississippi 

DA-09-08 

2009 Seminole Tribe of Florida - Activities for 2004 and 2005 

Florida Hurricanes 

DA-09-16 

2009 Hurricane Wilma Activities for Town of Davie, Florida DA-09-17 

2009 Hurricane Georges Activities for Puerto Rico Electric and 

Power Authority 

DA-09-21 

2010 City of Memphis, Tennessee DA-10-02 

2010 Ernest N. Morial Exhibition Hall Authority DD-10-02 

2010 City of Hialeah, Florida DA-10-12 

2010 Hancock County School District, Mississippi DA-10-14 

2011 Beauvoir - Jefferson Davis Home and Presidential Library DA-11-10 

Incomplete Insurance 

Review 

2010 Town of Vinton, Louisiana DD-10-06 

2011 City of West Palm Beach, Florida DA-11-01 

2011 County of Ventura, California DS-11-03 

2011 Chennault International Airport Authority, Lake Charles, 

Louisiana 

DD-11-07 

2011 City of Port Arthur, Texas DD-11-10 

2011 Roman Catholic Church of the Archdiocese of New Orleans 

Funding of Permanent Work 

DD-11-11 

Insufficient Insurance 

Coverage 

2010 Orleans Levee District DD-10-12 

2011 Lafon Nursing Facility of the Holy Family DD-11-02 

Applicant Did Not 

File Insurance Claim 

2011 Broward Sheriff’s Office - Disaster Activities Related to 

Hurricane Wilma 

DA-11-08 

FEMA Office of Inspector General 

Compliance with Public Assistance Program’s Insurance Purchase Requirements 

(I-01-01), January 2001 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 20 
Appendix D 

Major Contributors to this Report 

Kaye McTighe, Director 

John McPhail, Supervisory Program Analyst 

John Meenan, Auditor in Charge 

Julie Wong, Auditor 

Kimberly Letnaunchyn, Program Analyst 

Joshua Wilshere, Forensics Specialist 

FEMA’s Process for Tracking Public Assistance Insurance Requirements 

Page 21 
Appendix E 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Federal Emergency Management Agency 

Administrator 

Chief of Staff 

Associate Administrator, Response and Recovery 

Chief Financial Officer 

FEMA Audit Liaison, (Project Code –08-145-EMO-FEMA) 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as 

appropriate 

FEMA’s Process for Tracking Public Assistance Insurance Requirements
 

Page 22
 
 

 

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