Testimony 

Before the Subcommittee on Clean Air, 

Climate Change, and Nuclear Safety, 

Committee on Environment and Public 

Works, U.S. Senate 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 9:00 a.m. EST 

Wednesday, September 24, 2003 DISASTER ASSISTANCE

Federal Aid to the New 

York City Area Following 

the Attacks of September 

11th and Challenges 

Confronting FEMA 

Statement of JayEtta Z. Hecker, Director Physical 

Infrastructure Issues 

GAO-03-1174T 
Page 1 GAO-03-1174T 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to be here to discuss issues related to the 

federal government’s response to recovery efforts regarding to the 

September 11, 2001, terrorist attacks, particularly the role of the Federal 

Emergency Management Agency (FEMA), as well as management 

challenges facing FEMA as the agency adjusts to its transfer to the 

Department of Homeland Security (DHS). The terrorist attacks resulted in 

one of the largest catastrophes this country has ever experienced. The 

federal government has been a key participant in the efforts to provide aid 

after the attacks, and it has been providing the New York City area with 

funds and other forms of assistance. The magnitude of the disaster in New 

York and the size and scope of the federal government’s response in aiding 

the city has generated significant interest in the nature and progress of this 

federal assistance. 

In my testimony today, I will focus on (1) how much and what types of 

assistance the federal government provided to the New York City area 

following the September 11 terrorist attacks, (2) how the federal 

government’s response to this disaster differed from previous disaster 

response efforts, and (3) the ongoing challenges FEMA faces as it, and its 

mission, are subsumed into the Department of Homeland Security. My 

comments will be based on the following GAO work on FEMA issues, 

including our January 2003 Performance and Accountability Reports that 

highlighted both FEMA and DHS management challenges and program 

risks1

 and our August 2003 report on FEMA public assistance we issued to 

the Full Senate Committee on Environment and Public Works, as well as 

ongoing work we are conducting for the Committee on the overall federal 

assistance to the New York City area in the wake of September 11. (See 

appendix 1 for further discussion of the objectives, scope, and 

methodology.) 

The President pledged, and the Congress authorized an estimated $20 

billion in assistance to the New York City area following the terrorist 

attacks.2

 Many agencies of the federal government were involved in 

 1

U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Homeland Security, GAO-03-102 (Washington, D.C.: January 2003) and 

Major Management Challenges and Program Risks: Federal Emergency Management 

Agency, GAO-03-113 (Washington, D.C.: January 2003). 

2

The $20 billion in federal assistance does not include the Victim’s Compensation Fund or 

income tax deferrals. 
Page 2 GAO-03-1174T 

administering this funding, but most of the federal aid—96 percent—has 

been provided through four sources: FEMA, the Department of Housing 

and Urban Development (HUD), the Department of Transportation (DOT), 

and the Liberty Zone tax benefits3. The assistance provided through these 

sources targeted different aspects of the response and recovery efforts, 

and in our work for the Committee, we have found that it is useful to 

discuss the federal aid to the New York City area in terms of four broad 

types of assistance instead of by each federal source of assistance. 

Consequently, I will discuss the aid in the following four broad categories: 

• Initial response efforts, which include activities to save lives, recover 

victims, remove debris, and restore basic functionality to city services; 

• Compensation for disaster-related costs and losses, which includes 

compensation for losses incurred by individuals, businesses, and 

governments; 

• Infrastructure restoration, which includes efforts to restore and enhance 

infrastructure that was severely destroyed by the collapse of the World 

Trade Center towers and the subsequent response efforts; and 

• Economic revitalization, which includes activities to help improve the 

lower Manhattan economy that was harmed by the disaster. 

In summary, 

 3

The Liberty Zone tax benefits are benefits primarily targeted to the area of New York City 

damaged on September 11, designated as the New York Liberty Zone 
Page 3 GAO-03-1174T 

• As of June 30, 2003, an estimated $20 billion of federal assistance has been 

committed to the New York City area, primarily through FEMA, DOT, 

HUD, and the Liberty Zone tax benefits. Figure 1 shows the amount of 

assistance in each of the four broad categories. 

Figure 1: Primary Purpose and Amount of Disaster Assistance Committed By 

FEMA, HUD, DOT, and Liberty Zone Tax Benefits 

a

HUD’s plans for $1.16 billion have not been finalized. These funds are not included in the purposes 

listed above and according to HUD will mostly likely be directed to either infrastructure restoration or 

economic revitalization. 

The $2.55 billion for initial response efforts included numerous assistance 

programs, such as search and rescue operations, debris removal 

operations, emergency transportation measures, and emergency utility 

service repair. FEMA provided the bulk of the federal funds for initial 

response efforts—$2.20 billion—but DOT and HUD also provided funds. 

Compensation for disaster-related costs and losses totaled about $4.81 

billion. This funding, provided by FEMA and HUD, compensated state and 

local organizations, individuals, and businesses for disaster-related costs, 

such as mortgage and rental assistance to individuals and grants to 

businesses to cover economic losses. The amount committed for 

infrastructure restoration and improvement efforts is $5.57 billion. The 

majority of this funding is a combination of FEMA and DOT funds to 

rebuild and enhance the lower Manhattan transportation system, including 

the construction or repair of roads, subways, ferries, and railroads. HUD is 

funding efforts to improve utility infrastructure. Efforts to revitalize the 

economy in lower Manhattan include the Liberty Zone tax benefit plan—
Page 4 GAO-03-1174T 

an estimated benefit of $5.03 billion4—and $515 million in HUD funding for 

business attraction and retention programs. Once the city, state, and HUD 

finalize plans for the remaining $1.16 billion, these funds will most likely 

be directed to infrastructure restoration and improvements and/or 

economic revitalization. 

• The $20 billion to assist the New York City area differed from previous 

disaster response efforts in that it was the first time in which the amount 

of federal disaster assistance to be provided was set early in the response 

and recovery efforts, which resulted in two major changes to the federal 

approach. First, the specified level of funding for the entire federal 

response to this disaster changed the traditional approach to 

administering FEMA funds. In an effort to ensure that all FEMA funds 

were expended for this disaster, FEMA broadly interpreted its provisions 

within the Stafford Act, and the Congress authorized FEMA to compensate 

the city and state for costs such as increased security that it could not 

otherwise have funded within provisions of the Stafford Act. Secondly, 

this specific level of funding for the disaster prompted Congressional 

appropriations that authorized numerous forms of non-traditional 

assistance by agencies other than FEMA, such as the Liberty Zone tax 

benefit plan and improvements to the transportation infrastructure that 

exceeded normal replacement cost. 

• Simultaneous to FEMA’s efforts to assist the New York City area’s 

recovery from September 11, FEMA faced the challenge of being 

transferred into the newly formed DHS. As we previously reported in our 

2003 Performance and Accountability Series, FEMA faces ongoing 

management challenges resulting from its transfer into DHS, and DHS 

itself faces the daunting challenge of combining FEMA and 21 other 

agencies with various missions into an effective and collaborative agency. 

Recognizing the magnitude of the overall challenge in establishing DHS, 

GAO has designated the implementation and transformation of the 

department as high-risk. Several of the specific challenges that FEMA 

faces include the need to (1) ensure effective coordination of 

preparedness and response efforts, (2) enhance provision and 

management of disaster assistance for efficient and effective response, 

and (3) reduce the impact of natural hazards by improving the efficiency 

of mitigation and flood programs. We have ongoing work that is focusing 

 4

The Liberty Zone tax benefits are benefits targeted primarily to the area of lower 

Manhattan damaged on September 11, designated as the New York Liberty Zone. The 

amount of the tax benefit is an estimate prepared by the Joint Committee on Taxation. 
Page 5 GAO-03-1174T 

on FEMA’s challenges in each of these areas and will be reporting on these 

efforts in the near future. 

After a disaster, the federal government, in accordance with provisions of 

the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the 

Stafford Act)5

,assists state and local governments with costs associated 

with response and recovery efforts that exceed a state or locale’s 

capabilities. FEMA is the agency responsible for coordinating federal 

disaster response efforts under the Federal Response Plan, an agreement 

among 27 agencies and the Red Cross to deliver federal disaster 

assistance. FEMA was established in 1978 to consolidate and coordinate 

emergency management functions in one agency. In November 2002, the 

Congress enacted legislation establishing DHS in an effort to consolidate 

numerous homeland security functions in a single entity, which involved 

subsuming 22 agencies, including FEMA. FEMA’s primary functions have 

remained intact and have been placed primarily in DHS’ Emergency 

Preparedness and Response Directorate. 

FEMA not only coordinates the federal disaster response, it also provides 

significant assistance through a variety of programs funded through its 

Disaster Relief Fund. This assistance is provided when disaster costs 

exceed state and local government capabilities to respond and insurance 

damage proceeds. These programs include FEMA’s individual assistance 

program that provides aid to victims affected by a disaster and its hazard 

mitigation program that provides funds to state and local governments to 

reduce the risk of damage from future disasters. However, FEMA’s public 

assistance program is typically the largest source of disaster relief. It is 

designed to provide grants to eligible state and local governments and 

specific types of private non-profit organizations that provide services of a 

governmental nature, such as utilities, fire departments, emergency and 

medical facilities, and educational institutions, to help cover the costs of 

emergency response efforts and work associated with recovering from the 

disaster. 

Many other agencies play active roles in federal disaster relief. For 

example, the Federal Highway Administration (FHWA), an agency of DOT, 

has existing authority to assist in disaster relief. FHWA can provide up to 

$100 million in emergency relief funding for each natural disaster or 

 5

Pub. L. No. 93-288, 88 Stat. 143 (1974), as amended. 

Background 
Page 6 GAO-03-1174T 

catastrophic failure event that is found eligible within the provisions of the 

Emergency Relief Program. Other agencies within DOT, such as the 

Federal Transit Administration (FTA) and the Federal Railroad 

Administration, also have had roles in previous disaster relief efforts. 

HUD, which has had authority to assist in disaster relief efforts at different 

times in the last few decades, once again became actively involved in 

providing disaster recovery assistance following Hurricane Andrew in 

1992. Since that disaster occurred, the Congress has made available more 

than $5.7 billion in 15 supplemental appropriations to HUD for disaster 

assistance.6

 Typically, HUD awards funds to the affected state or local 

government, and then the funds are administered at the state or local level. 

The President’s declaration of September 11 as a federal disaster activated 

27 agencies, including the American Red Cross in response and recovery 

efforts. On September 12, 2001, President Bush pledged to commit at least 

$20 billion to help the New York City area recover. The President sent a 

letter to the Speaker of the House requesting that the Congress pass 

emergency appropriations to provide immediate resources. Over the next 

11 months, the Congress enacted three emergency supplemental 

appropriation acts that provided more than $15 billion in direct federal 

assistance as well as an estimated $5 billion economic stimulus package 

for the New York City area. 

The greatest role in providing federal assistance fell to FEMA, HUD, and 

DOT. The funds appropriated to these agencies, along with the Liberty 

Zone tax benefits, constitute over 96 percent of all federal assistance 

designated to the New York City area. FEMA, the largest single provider of 

assistance, was appropriated $8.80 billion for debris removal, rescue 

efforts, and other assistance. Congress appropriated HUD $3.48 billion to 

provide the New York City area assistance to aid businesses and 

individuals and spur economic revitalization. DOT received $2.37 billion to 

assist in the restoration and enhancement of the transit system in the New 

York City area. The Liberty Zone tax benefits is estimated by the Joint 

Committee on Taxation to reduce federal tax revenue—and in turn 

increase the funds retained by taxpayers—by $5.03 billion. An additional 

$0.82 billion in assistance to the New York City area has been appropriated 

to 15 other agencies to conduct numerous activities, such as 

environmental studies and federal building restoration. Figure 2 shows the 

 6

All dollars are in nominal terms. 

Federal Disaster 

Assistance to the New 

York City Area 
Page 7 GAO-03-1174T 

amount of federal assistance, in both amount and percentage, committed 

to the New York City area by the federal government. 

Figure 2: Federal Assistance to the New York City Area by the Federal Government 

Note: Numbers do not total 100 percent due to rounding. 

As the large majority of federal assistance to the New York City area is 

primarily through FEMA, DOT, HUD, and the Liberty Zone tax benefits, 

I would now like to discuss the assistance these sources did, or will, 

provide in the four board categories I discussed earlier: (1) initial response 

efforts, (2) compensation for disaster-related costs and losses, 

(3) infrastructure restoration, and (4) economic revitalization. 

Initial response assistance in New York City began immediately after the 

hijacked aircraft collided with the World Trade Center towers and totaled 

$2.55 billion. This assistance was predominately funded by FEMA. Figure 3 

shows the amount each agency funded in this category of assistance. 

Initial Response Activities 

Totaled $2.55 Billion 
Page 8 GAO-03-1174T 

Figure 3: Amount of Assistance Committed to Initial Response Activities, by 

Agency 

a

HUD’s plans for $1.16 billion have not been finalized. These funds are not included in the purposes 

listed above, and according to HUD, will most likely be directed to either infrastructure restoration or 

economic revitalization. 

Initial response activities included urban search and rescue; debris 

removal operations; emergency transportation measures; other initial 

response assistance by FEMA, such as cleaning buildings; and emergency 

and temporary utility service. 

The terrorist attacks of September 11 prompted the largest search and 

rescue operation in U.S. history, a $22 million effort. FEMA oversees 28 

national Urban Search and Rescue Task Forces across the country and 20 

were activated to respond to the attacks in New York. The teams operate 

under FEMA authority and were deployed as part of the National Urban 

Search and Rescue Response System. Almost 1,300 members of the Urban 

Urban Search and Rescue 

Operations 
Page 9 GAO-03-1174T 

Search and Rescue teams and 80 dogs worked at the World Trade Center 

site. 

Immediately after the World Trade Center towers collapsed, the debris 

removal operation began in order to help workers look for survivors. The 

effort eventually transformed to a victim and evidence recovery operation 

as well as a clean-up site. Debris removal operations totaled $1.70 billion, 

although over one-half of those funds—$1 billion dollars—is to be used to 

establish an insurance company with the intended purpose of covering the 

City and its contractors for potential claims resulting from debris removal 

at the World Trade Center site. The New York City Department of Design 

and Construction and the New York City Department of Sanitation 

completed the daunting task of removing debris piled from several stories 

below street level to 11 stories above ground and weighing nearly 

1.6 million tons, with support from FEMA, the Federal Highway 

Administration, and the U.S. Army Corps of Engineers. FEMA provided 

$630 million to reimburse the city for the costs associated with removal of 

the debris from the World Trade Center site and barge it to a landfill on 

Staten Island, New York, for screening, sorting, and disposal. Initial 

estimates projected that the recovery effort and cleanup would take two 

years and cost $7 billion; however, the effort was completed substantially 

below these time and cost estimates. As of September 3, 2003, FEMA had 

obligated $1 billion for the insurance program; however, no funds will be 

disbursed until details for the establishment of the dedicated insurance 

company are finalized. 

The collapse of the World Trade Center buildings and subsequent recovery 

efforts wreaked havoc on lower Manhattan’s transportation system: 

subway stations and the PATH commuter rail terminal were destroyed, 

sections of local roads became impassable due to damage or recovery 

efforts, and subways and ferries were overcrowded as commuters 

returned to work using different means or routes of transportation. FEMA 

and DOT coordinated with a variety of transportation, public works, 

public safety, and utility providers to plan emergency/interim projects to 

address issues such as shifts in travel demand after September 11, capacity 

issues, and system delays associated with revised travel patterns.7

 Overall, 

 7

As debris removal efforts were completed, FEMA and FTA released the “Emergency/ 

Interim Transportation Disaster Recovery Plan” in spring 2002, which identified 100 

projects proposed by local agencies to use available FEMA and FTA funds. 

Debris Removal Operations, 

Including Liability Insurance 

Coverage 

Emergency Transportation 

Measures 
Page 10 GAO-03-1174T 

FEMA and DOT provided approximately $299 million for emergency 

transportation measures, including: 

• Clean-up and emergency repair of local roads and tunnels, 

• Construction of a temporary PATH terminal, 

• Expanded ferry service, and 

• Capital projects to improve commuter transportation. 

FEMA provided $285 million for other initial response assistance. For 

example, as authorized by the Congress, FEMA entered into an 

interagency agreement with the Department of Health and Human 

Services to conduct a project to screen and monitor emergency services 

personnel for long-term health effects of work at the World Trade Center 

site.8

 In addition, FEMA worked with EPA officials to conduct clean-up 

efforts that included vacuuming streets, parks, and other areas covered by 

dust from debris and fires and in conjunction with New York City officials 

conducted an indoor cleaning and testing program at private residences. 

The collapse of the World Trade Center buildings and subsequent debris 

removal efforts resulted in widespread damage to the energy and 

telecommunications utility infrastructure. Utility firms worked to provide 

service for rescue operations in the days immediately following the 

disaster and to stabilize delivery of service to lower Manhattan, including 

the reopening of the New York Stock Exchange 6 days after the attacks. 

The Congress appropriated $250 million to HUD to reimburse utility 

companies for uncompensated costs associated with restoring service. 

Eligible firms will be reimbursed up to 100 percent of actual, incurred, 

uncompensated, and documented costs. These funds have not been 

disbursed to utility companies; however, HUD approved a city plan for 

distributing these funds on September 15, 2003, and HUD officials expect 

funds to begin being obligated. 

Approximately $4.81 billion in federal assistance is committed to 

compensating state and local organizations, individuals, and businesses 

for disaster-related costs and losses. The majority of the assistance 

provided under this category was provided by FEMA. Figure 4 shows how 

much each agency has committed to compensate for disaster-related costs 

and losses. 

 8

P.L. 108-7. 

Other FEMA Initial Response 

Assistance 

Emergency and Temporary 

Utility Service 

Compensation for 

Disaster-Related Costs and 

Losses Totaled $4.81 

Billion 
Page 11 GAO-03-1174T 

Figure 4: Amount of Assistance Committed to Compensate Disaster-Related Costs 

and Losses, by Agency 

a

HUD’s plans for $1.16 billion have not been finalized. These funds are not included in the purposes 

listed above, and according to HUD, will most likely be directed to either infrastructure restoration or 

economic revitalization. 

Note: Numbers do not equal total due to rounding. 

FEMA provided funds through its Public Assistance Program, as 

congressionally authorized, non-traditional assistance to New York City 

and State; under its Hazard Mitigation Grant Program; Mortgage and 

Rental Assistance Program, Crisis Counseling Assistance Program, 

Individual and Family Grant Program, and also through a variety of other 

assistance efforts. HUD provided assistance under its residential grant 

program and business assistance programs. 
Page 12 GAO-03-1174T 

FEMA reimbursed New York State, City, and other organizations about 

$1.49 billion through its public assistance program to compensate for 

disaster-related costs and losses. Of this funding, $643 million was 

provided to the New York City Police and Fire Departments to pay 

benefits and wages to emergency workers during response and recovery 

efforts and to replace vehicles and other equipment. As first responders, 

these departments suffered heavy casualties and damages and received 

compensation for overtime costs, death benefits, and funeral costs. FEMA 

also reimbursed costs to the City to relocate several agencies’ offices; 

establish a Family Assistance Center; reschedule elections that were being 

held on September 11 and replace damaged voting equipment; and pay for 

instructional time for students who missed school due to closures, delayed 

openings, and school relocations.9

FEMA also provided assistance to other entities, including the Port 

Authority, counties, and private nonprofit organizations; and it also 

provided funds to the state of New Jersey. The Port Authority was 

reimbursed for costs to replace equipment it lost when its World Trade 

Center facilities were destroyed and for office relocation costs. Additional 

assistance was provided to all New York counties for cancelled election 

costs and to some private-non-profits, such as Pace University, for 

temporary relocation. FEMA additionally provided $88 million to New 

Jersey for emergency protective measures. 

In addition to the traditional public assistance FEMA provided to city and 

state agencies, the Congress also authorized FEMA to provide funding to 

the city and state for expenses associated with the disaster, but were 

unreimbursable under the Stafford Act. The legislation ensured that FEMA 

would be authorized to spend the entirety of the appropriated assistance 

for New York recovery efforts—$8.80 billion—by allowing the city and 

state to be provided reimbursement for disaster-related costs that FEMA 

otherwise could not have funded. Non-traditional assistance that FEMA 

was authorized to fund included reimbursements for heightened security 

in the aftermath of the terrorist attacks and cost-of-living adjustments to 

the pensions of survivors of firefighters and police officers killed in the 

line of duty in the attacks. In order for FEMA to determine how much 

funding was available for non-traditional assistance, FEMA officials 

implemented an expedited close-out process, identifying and deobligating 

any funds unspent as of April 30, 2003. These funds—totaling over $1 

 9

 House Report 107-593. 

Public Assistance to New York 

State, City, and Other 

Organizations 

Congressionally Authorized 

Non-traditional Assistance to 

New York City and State 
Page 13 GAO-03-1174T 

billion—were just recently provided to both the city and state and they 

will ultimately have discretion to use the funds as they deem suitable. 

FEMA also provided $377 million in hazard mitigation grants to New York 

State. Created in 1988 by the Stafford Act, the Hazard Mitigation Grant 

Program provides funds to states affected by major disasters to undertake 

mitigation measures. At the time of the New York disaster, FEMA could 

provide mitigation grants in an amount up to 15 percent on top of the total 

amount of other assistance provided.10 However, in the New York recovery 

effort, the President limited mitigation funds to 5 percent of the funds 

appropriated within the total amount of funds. According to FEMA 

officials, the agency reduced the percentage of hazard mitigation grant 

funds available to New York initially because it was unclear how much the 

disaster would actually cost in FEMA funds, and public assistance funds 

were being provided at 100 percent Federal share. According to FEMA 

officials, as a result of the broadened authority authorized in the 

Consolidated Appropriations Resolution, New York has requested less for 

the Mitigation Grant program—which contains a state and/or local 

matching requirement—so that it could use funds to reimburse other 

disaster-related costs. 

Individuals suffering financial hardships as a result of September 11 could 

obtain mortgage and rental assistance from FEMA. Prior to September 11, 

FEMA had provided a total of $18 million in mortgage and rental 

assistance grants in all previous disasters, which provided rent or 

mortgage payments to individuals in danger of losing their homes through 

foreclosure or eviction as a result of a major disaster. In the wake of 

September 11, this program increased tremendously, as FEMA provided 

nearly $200 million in this type of assistance for the New York City area. 

Initially, applicants were eligible if they resided in certain zones around 

the World Trade Center site. FEMA, as directed by the Congress, extended 

assistance to those working anywhere in Manhattan and to those whose 

employers were not located in Manhattan but were economically 

dependent on a Manhattan firm; and anyone living in Manhattan who 

commuted off the island and who suffered financially because of postSeptember 11 disruptions. The Mortgage and Rental Assistance program 

 10The Disaster Mitigation Act of 2000 increases this amount to 20 percent of total estimated 

federal assistance for states that meet enhanced planning criteria. For states without an 

approved enhanced plan, the Consolidated Appropriations Resolution of 2003 reduces the 

amount available for mitigation grants to 7.5 percent of the other assistance provided. 

However, neither of these provisions were applicable on September 11, 2001. 

Hazard Mitigation Grant 

Program 

Mortgage and Rental 

Assistance Program 
Page 14 GAO-03-1174T 

closed on January 31, 2003, and as of August 5, 2003, $194 million had been 

disbursed of the $200 million available. FEMA officials expect all funds to 

be disbursed as applicants receive monthly assistance.11

The Crisis Counseling Assistance Program, funded by FEMA, led to the 

creation of “Project Liberty.” Project Liberty, administered by the New 

York State Office of Mental Health, provides short-term outreach, 

education, referrals to mental health services, and a Regular Services 

Program to provide support to individuals with longer-term issues. In the 

past, only individuals from a declared disaster area were eligible to receive 

counseling services; however, because of the broad impact of the disaster, 

grants for this program were also provided to eligible individuals in New 

Jersey, Connecticut, Massachusetts, and Pennsylvania. FEMA provided 

more than $166 million for crisis counseling; this sum is more than all 

previous counseling grants since 1974 combined. Of these funds, $99 

million has been obligated and disbursed. 

FEMA is authorized by the Stafford Act to provide individual and family 

grants for individuals’ necessary expenses related to disasters that were 

not covered through insurance, other federal assistance, or voluntary 

programs. For the September 11 disaster, FEMA’s Individual and Family 

Grant Program provided eligible residents of New York City assistance for 

home repairs, replacement of personal property, reimbursement for air 

quality products, and repair or replacement of air conditioners. The New 

York State Department of Labor was tasked with implementing and 

administering the program. The Individual and Family Grant program 

closed on November 30, 2002. As of August 5, 2003, $97 million had been 

disbursed of the $110 million available through this program. 

In addition to Mortgage and Rental Assistance and Individual and Family 

Grants, FEMA also provided other temporary housing assistance, 

including Minimal Home Repair and Transient Accommodations programs 

totaling $34 million. Both programs address short-term needs such as 

lodging expenses and temporary housing repairs. In addition, the Stafford 

Act authorizes FEMA to provide unemployment assistance to individuals 

who are unemployed as a result of the disaster but not eligible for regular 

State Unemployment Insurance. For the New York City area, FEMA 

provided $17 million for disaster unemployment insurance administered 

by the State of New York. 

 11Eligible applicants received up to 18 months of assistance as part of this program. 

Crisis Counseling Assistance 

Program 

Individual and Family Grant 

Program 

Other FEMA Assistance 
Page 15 GAO-03-1174T 

In addition to FEMA assistance programs, $281 million in HUD funds were 

used for the administration of the Residential Grant Program to provide 

compensation to those affected by the disaster who remained in the area, 

address the vacancy rate increases, and provide incentives to attract 

residents to the area.12 The program consisted of three different grants—a 

two-year commitment grant, a September 11 resident’s grant, and a family 

grant. Applicants could apply for all three types of grants; each grant’s 

value depended on the applicant’s location and housing/rental costs. The 

Residential Grant Program closed on May 30, 2003. As of June 30, 2003, 

over 31,000 applications totaling $172 million were approved and $106 

million had been disbursed in grants.13

In addition, HUD funds were used for a variety of business assistance 

programs, such as recovery grants and loans to compensate for economic 

losses and recovery efforts. Almost 18,000 businesses in New York City, 

representing approximately 563,000 employees, were disrupted or forced 

to relocate as a result of the terror attacks. Approximately 30 million 

square feet of commercial space was damaged or destroyed. While 

businesses near the World Trade Center site suffered physical damage, 

businesses all across the city felt the economic impact of the disaster. The 

Empire State Development Corporation (ESDC), as a grantee for HUD 

funds, administered five programs in cooperation with New York City to 

compensate businesses for economic losses and to assist in their recovery. 

HUD funds provided $683 million for business assistance programs, and as 

of June 30, 2003, $510 million had been disbursed. The Business Recovery 

Grant Program, HUD’s largest September 11 business assistance program, 

closed December 31, 2003, and provided $488 million to over 14,000 

businesses in lower Manhattan as of June 30, 2003.14 Other programs that 

are still available include a $33 million plan to provide assistance to 

businesses that lost a disproportionate amount of workforce due to the 

disaster, and a $41 million Business Recovery Loan Program. 

 12Although the Residential Grant program and its incentives helped to revitalize the 

economy of lower Manhattan, we categorized it as compensation for disaster-related losses 

because of its short-term nature and intended affect on the City in terms of restoring predisaster occupancy rates. 

13In July 2003, HUD officials announced that $50 million unallocated from the Residential 

Grant Program would be used for an affordable housing initiative in lower Manhattan. 

14ESDC provided funds to small and large businesses through its recovery grant program. 

In August 2003, HUD approved allocation of additional funds to allow full disbursement of 

these programs, for a total of $578 million. 

HUD Funded Residential Grant 

Program 

HUD Funded Business 

Assistance Programs 
Page 16 GAO-03-1174T 

The terrorist attacks at the World Trade Center severely damaged the 

public transportation system that was used by more than 85 percent of 

commuters to lower Manhattan—the highest percentage of people 

commuting to work by public transit of any commercial district in the 

nation. About $5.57 billion has been committed for projects to restore and 

enhance infrastructure in lower Manhattan and the amount of assistance 

each agency has committed is shown in figure 5. 

Figure 5: Amount of Assistance Committed for Infrastructure Restoration and 

Improvement, by Agency 

a

HUD’s plans for $1.16 billion have not been finalized. These funds are not included in the purposes 

listed above, and according to HUD, will most likely be directed to either infrastructure restoration or 

economic revitalization. 

Infrastructure efforts being funded by FEMA, DOT, and /or HUD include 

restoration and enhancement of the lower Manhattan transportation 

system, including a new Port Authority Trans-Hudson (PATH) terminal 

and new subway stations; permanent utility infrastructure repairs and 

About $5.57 Billion Has 

Been Committed for 

Projects to Restore and 

Enhance Infrastructure 

Source: GAO.

$4.81

Billion

$5.54a

Billion

Compensation

for losses

Economic

revitalization

Total funds committed to specific projects.

$2.55

Billion

Initial

response

$5.57a

Billion

Infrastructure

restoration

FEMA - $2.75 Billion

HUD - $0.58 Billion

DOT - $2.24 Billion
Page 17 GAO-03-1174T 

improvements; and short-term capital projects, such as parks and open 

space enhancements. 

The Congress has appropriated a total of $4.55 billion for transit projects, 

including $1.80 billion in Capital Investment Grants to FTA for replacing, 

rebuilding, or enhancing the public transportation systems serving 

Manhattan,15 and $2.75 billion in FEMA funds. Under an August 2002 

Memorandum of Agreement between FTA and FEMA, FTA was designated 

the lead federal agency in charge of administration and oversight. The 

three largest projects identified are the restoration and improvement of 

the PATH Transit Terminal, and the enhancements of the Fulton Street 

Transit Center and South Ferry Subway Station. 

• PATH Transit Terminal—The PATH commuter rail terminal, located 

underneath the World Trade Center site, was completely destroyed in the 

terrorist attacks. The Port Authority is requesting $1.4 billion to $1.7 

billion to build a permanent PATH terminal that Port Authority officials 

report will be a substantial improvement over the destroyed World Trade 

Center terminal. This terminal will serve PATH commuter trains and four 

subway lines and is to be completed in the 2007 to 2008 timeframe. 

• Fulton Street Transit Center—The current Fulton Street—Broadway 

Nassau Subway Station Complex provides access to the most heavily used 

subway lines in lower Manhattan and lies one block east of the World 

Trade Center site. The complex is comprised of four separate subway 

stations that serve nine subway lines and 62,000 riders during weekday 

peak periods. The complex was not damaged on September 11, but 

according to FTA and Metropolitan Transit Authority (MTA) officials, it is 

difficult to navigate and not easily accessible. The MTA is planning a $750 

million project to improve the existing Fulton Street—Broadway Nassau 

Subway Station Complex to create a Fulton Transit Center designed to 

have a visible street level entrance pavilion, improved intermodal 

connectivity, expanded platforms and mezzanines, and new underground 

pedestrian concourses. The project is estimated for completion in 

December 2007. 

• South Ferry Subway Station—The South Ferry subway station, which 

is located a half-mile from the World Trade Center site, was not damaged 

on September 11; however, according to MTA officials, the South Ferry 

station is outmoded: only five cars of a ten-car subway train can open onto 

 15PL 107-206. 

Projects Planned to Restore 

and Enhance the Lower 

Manhattan Transportation 

System 
Page 18 GAO-03-1174T 

the platform at one time; the tunnel is curved in such a fashion that trains 

have to slow down substantially to negotiate it; and it has no direct 

passenger connections to nearby subway stations. MTA is planning to 

improve the South Ferry subway station so that it would accommodate the 

length of a standard ten-car subway train and would provide connection to 

the Whitehall Street station that serves two other subway lines. FTA 

officials anticipate that the project will cost $400 million and be completed 

in the 2007/2008 timeframe. 

The permanent PATH terminal, the Fulton Transit Center, and the South 

Ferry station account for $2.55 billion to $2.85 billion of the $4.55 billion 

designated for lower Manhattan transit projects. At this time, projects to 

be funded with the remaining $1.7 billion to $2 billion have yet to be 

determined. In April 2003, various New York City and State agencies16

released a report entitled Lower Manhattan Transportation Strategies that 

identified priority transportation projects. However, the total cost of these 

projects far exceeds the remaining federal transportation assistance funds. 

High priority projects highlighted in the report include access to JFK 

Airport and Long Island, enhancement of West Street, construction of a 

tour bus facility, and construction of World Trade Center underground 

infrastructure. To date no decisions have been made on which of these 

projects will be funded within the $4.55 billion cap. A portion of remaining 

$1.16 billion in HUD funds will most likely be directed to infrastructure 

improvement activities depending on the results of on-going studies. 

In addition to the transit system, the Congress appropriated $442 million 

for restoration and improvements to the local roads and enhancements to 

ferry terminals and railroad tunnels. The Federal Highway Administration 

is overseeing plans for $242 million in resurfacing and reconstructing 

lower Manhattan streets through the Emergency Relief program. These 

streets were damaged by the direct impact of the collapsed World Trade 

Center buildings as well as wear and tear from response vehicles and 

debris removal activities, and from emergency telecommunications 

repairs. Ferry terminals were not damaged on September 11; however, 

FHWA was appropriated $100 million in Miscellaneous Highway funds for 

ferry and ferry facility construction projects.17 Various ferry terminals are 

under consideration for significant enhancements in both New York and 

 16LMDC, Port Authority of New York and New Jersey, Metropolitan Transit Authority, the 

New York State Department of Transportation and the City of New York. 

17PL 107-117. 
Page 19 GAO-03-1174T 

New Jersey. Further, the Federal Railroad Administration was 

appropriated $100 million to renovate the New York rail tunnels. The 

funds are to be used by Amtrak to modernize ventilation systems, install 

communication systems, improve emergency exits from the tunnels, and 

structurally rehabilitate four East River tunnels, two Hudson River 

tunnels, and the subterranean section of Penn Station. 

The Congress also appropriated HUD funds to provide assistance to utility 

firms as they complete permanent repairs and improvements to the 

damaged infrastructure around the World Trade Center site. In addition to 

the $250 million for emergency repairs previously discussed, the Congress 

appropriated $500 million to HUD to provide funds to affected utility firms 

for permanent repairs and rebuilding. The goals of the permanent repair 

program are to prevent businesses and residences from bearing the cost of 

rebuilding and to enhance the redevelopment of lower Manhattan by 

supporting investment in energy and telecommunication infrastructure. 

New York State officials worked with utility firms, and state and local 

agencies to develop the program in order to help utility firms while 

developing an improved system to attract new businesses to the area. 

Applicants will have until December 31, 2007, to apply for certain 

programs.18

A New York State Agency worked with community groups, local 

businesses, and city and state governments to select short-term capital 

projects for HUD funding as part of its effort to improve the accessibility 

and appearance of lower Manhattan. A plan submitted to HUD was 

approved on August 6, 2003, detailing $68 million of proposed projects that 

could be completed within one year of approval, such as parks and open 

space enhancements, West Street pedestrian connections, building and 

streetscape improvements, and a new school, Millennium High School. In 

addition, a portion of these funds will be used to conduct an outreach 

campaign to keep residents informed of rebuilding efforts. 

The terrorist attacks of September 11 disrupted New York City’s economy 

and resulted in billions in lost [or forgone] income and tax revenues. The 

attacks caused tens of thousands of job losses and severely impacted 

lower Manhattan’s commercial and retail sectors. In response, the 

Congress enacted the Liberty Zone tax benefits, estimated by the Joint 

 18HUD approved the utility plan September 15, 2003. 

Permanent Utility 

Infrastructure Repairs and 

Improvements 

Short-term Capital Projects 

Efforts to Revitalize the 

New York Economy 

Include Tax Benefits and 

Assistance to Businesses 
Page 20 GAO-03-1174T 

Committee on Taxation to be $5.03 billion in lost federal revenue, and 

appropriated funds to HUD, of which $515 million will aid in revitalizing 

the lower Manhattan economy. Figure 6 shows a breakdown of economic 

revitalization assistance. 

Figure 6: Estimated Amount of Assistance Committed for Economic Revitalization, 

by HUD and Liberty Zone Tax Credits 

a

HUD’s plans for $1.16 billion have not been finalized. These funds are not included in the purposes 

listed above, and according to HUD, will most likely be directed to either infrastructure restoration or 

economic revitalization. 

Note: Numbers do not equal total due to rounding. 

In Title III of the Job Creation and Worker Assistance Act of 200219, 

Congress instituted tax benefits primarily targeted to the Liberty Zone, the 

 19Job Creation and Worker Assistance Act of 2002 (Public Law 107-147) 

Liberty Zone Tax Benefits 
Page 21 GAO-03-1174T 

area of New York City most severely impacted by the terrorist attacks, as 

shown in figure 7. 

Figure 7: New York Liberty Zone 

The amount of benefits to New York that will result from the Liberty Zone 

tax provisions is unclear and likely to remain unknown. Before the Job 

Creation and Worker Assistance Act was passed, the Joint Committee on 

Taxation estimated the amount of tax revenue projected to be lost to the 

U.S. Treasury from the Liberty Zone provisions. However, an estimate of 

potential lost revenue is not the same as an estimate of the benefits 

received by taxpayers. Furthermore, there are uncertainties with any 

estimate. As with many tax benefits, usage of the Liberty Zone tax benefits 

will depend on a variety of difficult to predict economic factors that can 

influence the magnitude of the benefits. For example, an economic 

downturn could slow rebuilding efforts in the New York City area, 

reducing the use of benefits such as depreciation allowances. Conversely, 

an economic upturn could increase benefit usage above existing estimates. 

Additionally, information on usage of most Liberty Zone tax benefits is not 

being collected or reported by federal, state or local agencies, and the total 

amount of the benefits accruing to New York is likely to remain unknown. 

Liberty Zone

Canal St.

Source: GAO.

ge

WTC site
Page 22 GAO-03-1174T 

In addition to the Liberty Zone tax benefits, the Congress appropriated 

funds to HUD to revitalize lower Manhattan. New York State agencies are 

administering $515 million to provide programs to attract and retain 

businesses to the area and for other projects to revitalize lower Manhattan. 

Damage around the World Trade Center site displaced an estimated 1,025 

firms employing more than 75,000 workers, and many more were 

displaced by subsequent recovery efforts. Of the $515 million committed 

for a variety of economic revitalization efforts, $475 million is provided to 

create incentives for existing small and large businesses to remain in the 

area and to attract new businesses to lower Manhattan. As of June 30, 

2003, $161 million had been disbursed for these programs, providing 

assistance for 985 businesses. An additional $40 million had also been 

committed to help plan and coordinate rebuilding and revitalization efforts 

In its effort to provide assistance to the New York City area following the 

terrorist attacks, the federal government provided aid in all categories of 

assistance—initial response efforts, compensation for disaster-related 

costs and losses, infrastructure restoration and improvements, and 

economic revitalization—that differed from that provided in any previous 

disaster. However, the most significant difference in the federal 

government’s response to this disaster was the designation of a specific 

level of funding for disaster assistance. The designation of $20 billion to 

assist the New York City area was the first time in which the total amount 

of federal disaster assistance was set early in the response and recovery 

efforts, and resulted in two major changes to the federal approach to this 

disaster. 

• Designating a specific level of funding for the entire federal response to 

this disaster changed the traditional approach to administering FEMA 

funds. 

• This specific level of funding for the entire disaster prompted 

Congressional authorization of numerous forms of non-traditional 

assistance to be provided by other agencies. 

The specific level of funding that was targeted by the President and passed 

by the Congress changed the traditional approach taken to administer 

FEMA funds. Ordinarily, FEMA assistance has no dollar limit . When a 

qualifying disaster event occurs, the President declares that a major 

disaster or emergency exists. This declaration activates numerous FEMA 

disaster assistance programs. The funding for responding to a specific 

disaster is not set; instead, the only factor limiting the amount of 

assistance for response and recovery efforts is reimbursement eligibility 

HUD Business Assistance 

Programs and Planning for 

Rebuilding and Permanent 

Memorial 

The Designation of a 

Specific Level of 

Assistance 

Contributed to a 

Unique Federal 

Government 

Response for this 

Disaster 

Designation of a Specific 

Level of Funding Altered 

the Traditional FEMA 

Disaster Assistance 

Process 
Page 23 GAO-03-1174T 

under the Stafford Act. Historically, FEMA approves all applications for 

grants and other assistance if—and only if—the applications meet the 

program requirements under the act. For example, compensation to 

rebuild a public road would be an eligible project, but compensation to 

improve a public road would not be. Economic losses to a city from 

reduced tourism associated with a disaster would not be eligible. Further, 

as some projects can be long term and are reimbursed upon completion, it 

may take years to fully reconcile how much assistance was provided for 

certain disasters. 

In responding to September 11, however, this traditional practice was not 

followed, as the President pledged at least $20 billion in federal assistance 

to New York, and subsequent to that pledge, the Congress, in authorizing 

this specific level of federal assistance, appropriated over $8.80 billion to 

FEMA—the first time that a specified amount of funds had been 

designated to FEMA to respond to a disaster. Consequently, FEMA 

officials viewed the amounts legislated as the amount of money to be 

spent in responding to the disaster and administered their programs 

accordingly to ensure that this amount of funding was provided to the 

New York area. 

In addition, in order to respond to the amount of damage resulting from 

the attacks and to provide the entire appropriated amount for this disaster, 

FEMA expanded eligibility guidelines for many of its programs. FEMA 

officials said that they broadly interpreted the Stafford Act to provide 

public assistance for several projects. For example, FEMA—in 

conjunction with DOT—provided funds for lower Manhattan 

transportation system improvements. Previously, FEMA only provided 

funds to restore damaged infrastructure to its pre-disaster condition. In 

recognizing the interdependence of lower Manhattan’s transportation 

system, FEMA officials reported that they interpreted their guidelines to 

allow maximum flexibility to permit the rebuilding of the transportation 

system as a whole instead of only what was damaged. Another example of 

the broadened guidelines FEMA followed in this case is its determination 

that costs associated with an EPA program to clean the interior of private 

residences—the first of its kind—were eligible for reimbursement under 

the Stafford Act. In this instance, FEMA determined that the dust 

associated with the collapse of the World Trade Center towers was a type 

of debris, and therefore costs associated with interior cleaning could be 

reimbursed. 

Further, the Congress reinforced FEMA’s flexible approach to eligibility 

for assistance in two ways. First, the Congress authorized FEMA to 
Page 24 GAO-03-1174T 

expand the eligibility guidelines of certain programs due to the unique 

circumstances of the disaster and the unprecedented amounts of 

assistance available for response and recovery efforts.20 For example, 

nearly a year after September 11, Congress authorized FEMA to make the 

Mortgage and Rental Assistance program more broadly available and 

directed FEMA to review applications that had been previously denied. 

With these new eligibility requirements, FEMA provided funds to 

individuals working anywhere in Manhattan and to those whose employers 

were not located in Manhattan, but who were economically dependent on 

a Manhattan firm. Further, the Congress authorized FEMA to establish an 

insurance company to manage a $1 billion insurance fund and to settle 

claims filed by, among others, city and contractor workers who suffered ill 

health effects as a result of working on debris removal operations.21

Although FEMA regularly reimburses applicants for insurance costs that 

are part of a contract for services, FEMA has never reimbursed for 

insurance to cover a city for suits brought by its own employees. 

Second, despite FEMA’s broadened eligibility guidelines interpretation and 

the Congress’ authorization of certain activities, there were still not 

enough projects eligible within the authority provided by the Stafford Act 

for which the New York City area could be reimbursed to reach the $8.80 

billion target level for FEMA assistance. As a result, the Congress passed 

the Consolidated Appropriations Resolution that ensured that FEMA 

would spend the entirety of the FEMA-appropriated assistance for New 

York by authorizing the agency to reimburse costs that it otherwise could 

not have funded. This is the first time that FEMA has been given such 

expansive authority to fund projects outside of provisions of the Stafford 

Act. New York officials believe this was necessary because the Stafford 

Act was too restrictive for responding to a major terrorist event, as it does 

not allow FEMA to reimburse affected communities for many costs 

directly related to the disaster. With the authority granted by the 

Consolidated Appropriations Resolution, FEMA adapted its programs and 

conducted an expedited close-out process that allowed for disbursement 

of remaining funds to New York years sooner than in past disasters. As 

part of the expedited closeout process, FEMA provided funds for projects 

that the city or state had already completed and paid for. New York City 

and State officials will ultimately have discretion to use these federal 

 20Further discussion and additional examples of public assistance projects that we 

identified as non-traditional can be seen in GAO-03-926. 

21Public Law 108-7. 
Page 25 GAO-03-1174T 

funds as they deem appropriate, in contrast to the established process 

under which FEMA officials oversee distribution of federal funds to assure 

that only projects eligible within the provisions of the Stafford Act are 

funded. The expedited close-out resulted in FEMA reconciling the most 

expensive public assistance disaster in its history years before the process 

is typically accomplished. 

As a result of the different approach taken to respond to this disaster, 

FEMA recently initiated an effort to develop a concept for redesigning its 

public assistance program. As we noted in our August 2003 report on 

FEMA’s public assistance program efforts in New York, a working group 

of the Public Assistance Program Redesign Project was formed at the 

request of the director of FEMA’s Recovery Division, and held its first 

meeting in May 2003.22 Members included FEMA public assistance and 

research and evaluation staff and state program managers to provide a 

broader perspective on the issues and concerns. The project was 

established to suggest proposals to improve the public assistance program 

and make it more efficient and capable of meeting community needs for all 

types and sizes of disasters, including those resulting from terrorism. 

Among other things, the project seeks to transform the program to one 

that is flexible enough to meet the demands of disasters of all types and 

sizes and eliminate redundancies in decision-making and processes. The 

working group will examine potential options for redesigning the program 

that include an annual block grant program managed by the states, a 

disaster-based state management program, and a capped funding amount. 

The working group plans to develop a basic design concept for revising 

the program by September 30, 2003. 

Not only was FEMA’s traditional disaster response effort changed in 

assisting the New York area, but the specific level of funding that was 

targeted by the President and passed by the Congress also spurred 

authorization of other forms of non-traditional assistance for the New 

York City area. The most notable of these is the Liberty Zone tax benefits. 

To address the economic impact of the September 11 attacks on New 

York, Congress passed the estimated $5.03 billion New York Liberty Zone 

tax benefit package.23 This was a unique way for the Congress to provide 

assistance for the area affected by the disaster as, according to IRS 

 22GAO-03-926. 

23Job Creation and Worker Assistance Act of 2002 (PL 107-147) 

Designation of a Specific 

Level of Assistance 

Spurred Congressional 

Appropriation and 

Authorization of Other 

Forms of Non-Traditional 

Disaster Assistance 
Page 26 GAO-03-1174T 

officials, the Congress has never before passed a tax benefits package in 

response to a disaster. Further, this tax package was targeted to a 

geographic area, which has not generally occurred in the past. 

Additionally, DOT was authorized to fund transportation projects to 

improve the overall transportation system substantially beyond predisaster condition. In most disasters, DOT is authorized to provide funds 

only to rebuild or restore damaged infrastructure back to its pre-disaster 

condition. However, in response to September 11, the Congress authorized 

DOT not only to restore transportation infrastructure directly damaged in 

the disaster, but also to enhance the overall lower Manhattan 

transportation system. 

Further, the Congress also directed HUD to compensate businesses for 

economic losses—the first time its funds have been used for this purpose. 

In previous disasters, HUD funds were typically provided to address longterm effects of the disaster, including economic redevelopment efforts. 

However, after September 11, the Congress directed HUD to focus on 

different aspects of relief efforts than in previous disasters, such as 

compensating businesses and individuals for economic losses and funding 

programs to promote tourism initiatives in lower Manhattan, which had 

not been done before, according to HUD officials. 

The integration of FEMA into DHS, a department whose focus is on 

security against terrorism, while maintaining FEMA’s current roles is likely 

to present both FEMA and DHS officials with major challenges. In January 

of this year, we published the 2003 Performance and Accountability 

Series24 that focused on major management challenges and program risks 

facing the federal government. In that series, we published reports on 

challenges to both FEMA and DHS. In our report on DHS, we noted that 

the creation of DHS, involving the integration of FEMA and 21 other 

agencies specializing in various disciplines, is a daunting challenge; yet 

only through the effective integration and collaboration of entities can the 

synergy expected of the department be achieved. Recognizing the 

magnitude of the overall challenge in establishing DHS, we designated the 

implementation and transformation of the department as high-risk. Our 

 24U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Homeland Security, GAO-03-102 (Washington, D.C.: January 2003) and 

Major Management Challenges and Program Risks: Federal Emergency Management 

Agency, GAO-03-113 (Washington, D.C.: January 2003). 

FEMA Faces Major 

Management 

Challenges While 

Making the Transition 

to the Department of 

Homeland Security 
Page 27 GAO-03-1174T 

Performance and Accountability report on FEMA pointed to specific areas 

where its homeland security and non-homeland security missions were 

being transferred to separate DHS directorates. This divisional separation 

could complicate FEMA’s historical all-hazards approach—a 

comprehensive approach focused on preparing for and responding to all 

types of disaster, either natural or man-made. The separation of disaster 

and emergency responsibilities across two directorates of the new 

department will present coordination challenges for the appropriate 

Undersecretaries within DHS. 

Our FEMA Performance and Accountability report noted a number of 

other challenges. These include: 

• Enhancing the provision and management of disaster assistance for 

efficient and effective response. FEMA has demonstrated its ability to 

quickly get resources to stricken communities and disaster victims, but 

has had problems ensuring the effective use of such assistance, according 

to the Office of Management and Budget (OMB). Among other things, 

FEMA will be challenged to (1) improve its criteria for determining state 

and local eligibility to receive federal disaster assistance, (2) assess the 

extent of and approach to assistance for future major disasters based on 

the recovery efforts undertaken in the New York City area, (3) enhance 

disaster assistance staff training and resource planning, and (4) improve 

its existing information system before it is used as a building block for a 

multi-agency disaster management website. 

• Reducing the impact of natural hazards by improving the efficiency 

of mitigation and flood programs. For many years, FEMA has focused 

increased emphasis on reducing the impact of natural hazards, not only to 

lessen the impact to property and individuals, but also to reduce federal 

disaster costs. Two of the agency’s major efforts in this regard have been 

its mitigation programs and the National Flood Insurance Program. These 

programs seek to strengthen structures against the effects of hazards or 

remove them from harm’s way and to minimize the need for future FEMA 

disaster assistance. However, concerns exist in both these efforts that may 

limit their effectiveness in achieving these objectives. Moreover, the 

placement of FEMA within DHS represents a substantially changed 

environment in which FEMA will conduct its missions in the future, and 

missions that focus on reducing the impacts of natural hazards, such as 

hazard mitigation and flood insurance, may receive decreased emphasis. 

Sustained attention to these programs will be needed to ensure they 

maintain or improve their effectiveness in protecting the nation against, 

and reducing federal costs associated with, natural disasters. 
Page 28 GAO-03-1174T 

We continue to view these areas as challenges for FEMA and expect to 

assist the Congress in its efforts to examine these challenges. In this 

regard, we have a number of assignments ongoing or planned that address 

many of these issues, and we will be reporting on these in the near future. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 

answer any questions you or Members of the Subcommittee may have. 

For further information on this testimony, please contact JayEtta Z. 

Hecker at (202) 512-2834 or William O. Jenkins at (202) 512-8777. 

Individuals making key contributions to this testimony include Kevin F. 

Copping, Matthew F. Ebert, Kara A. Finnegan-Irving, John T. McGrail, and 

John R. Schulze. 
Page 29 GAO-03-1174T 

The Subcommittee on Clean Air, Climate Change, and Nuclear Safety, 

Senate Committee on Environment and Public Works, asked us to 

describe the federal government’s response and recovery efforts to New 

York City and how the federal government’s response to this disaster 

differed from previous disasters. Additionally, we were asked to describe 

the management challenges FEMA faces as it integrates into the 

Department of Homeland Security (DHS). 

In addressing the first and second objective, we limited our work to the 

four federal sources of assistance that comprise 96 percent of the $20 

billion in aid pledged by the President to help the New York City area 

response to and recover from the terrorist attacks. We used information in 

our August 29, 2003 report on the Federal Emergency Management 

Agency’s Public Assistance Program and our ongoing work on the overall 

federal response to the New York City area that we are conducting for the 

Senate Committee on Environment and Public Works. To develop the 

information for our ongoing work that we used in this statement, we 

reviewed relevant legislation and obtained and reviewed information from 

the appropriate budget documents, funding plans, status reports and other 

documents from the respecting agencies. We also reviewed available 

Executive Orders, Presidential correspondence, Office of Management and 

Budget reports, and Congressional Budget Office reports related to federal 

response and recovery efforts for New York City. We interviewed federal 

officials from the Office of Management and Budget, FEMA, the 

Department of Housing and Urban Development, the Federal Transit 

Administration, the Federal Highway Administration, the Federal Railroad 

Administration, and the Internal Revenue Service to get their perspectives 

on to what purposes the assistance has been and will be used. We also 

obtained pertinent documents from and interviewed officials with New 

York State and New York City agencies, including the Lower Manhattan 

Development Corporation, the Empire State Development Corporation, 

the New York State Department of Transportation, the Metropolitan 

Transit Administration, and Port Authority of New York and New Jersey. 

We also interviewed officials from nonprofit planning and research 

organizations in New York to gain their perspectives on use of the funding 

in the city’s redevelopment process. We reviewed relevant agency 

documentation of program plans and execution including budget 

documents and databases. We also compared agency historical data to 

documentation from the New York response and recovery. 

To address management challenges facing FEMA as it transfers to the 

Department of Homeland Security, we used information from two reports 

from GAO’s Performance and Accountability Series. These were Major 

Appendix I: Objectives, Scope, and 

Methodology 
Page 30 GAO-03-1174T 

Management Challenges and Program Risks: Federal Emergency 

Management Agency (January 2003 GAO-03-113) and Major Management 

Challenges and Program Risks: Department of Homeland Security

(January 2003 GAO-03-102.) 

The work we drew upon for this statement was conducted from July 2002 

through September 2003 in accordance with generally accepted 

government accounting standards. 

(544083) 
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