National Flood Insurance Program: Financial Challenges Underscore Need for Improved Oversight of Mitigation Programs and Key Contracts
Published: 2008-06-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Federal Emergency Management Agency (FEMA) and its contractors administer and implement the National Flood Insurance Program (NFIP). GAO designated NFIP as a high-risk area in March 2006, and as of December 2007, FEMA owed more than $17.3 billion to the Treasury for hurricane-related losses. Concerns have been raised about the financial condition of NFIP and FEMA's efforts to mitigate losses and monitor NFIP contractors. This report (1) describes statistical and financial trends for NFIP from 1997 through 2006, (2) assesses the extent to which flood-damaged properties were purchased to mitigate risk, and (3) evaluates procedures for monitoring NFIP-related contracts. For this study, GAO analyzed financial and statistical data on the NFIP and its mitigation programs, reviewed documentation of contract monitoring activities, and interviewed FEMA officials and contractors.
section_title: What GAO Found
paragraphs: The number of federal flood insurance policies in force nationwide increased 36 percent from 1997 through 2006, but most homeowners at risk of flooding still lacked such insurance. While average insurance amounts (per policy) increased 78 percent from 1997 through 2006--consistent with rising home values--the average premium decreased 3 percent from 1997 through 2006, likely driven in part by the increase in policies sold in moderate- to low-risk areas. Conversely, loss amounts fluctuated by year, peaking at more than $17.7 billion in 2005. Seventy-nine percent of the funds paid out through NFIP from 1997 through 2006 were for hurricane-related claims, but the percentages in individual years varied widely (correlating with hurricane activity). Finally, the extent of claim payments attributed to repetitive loss properties (those with two or more claims in a rolling 10-year period) increased from 1997 through 2006, from $3.7 billion to nearly $8 billion, with the most significant increases resulting from the 2005 Gulf Coast hurricanes. Because of data limitations, GAO was not able to determine the actual number of properties acquired through FEMA mitigation programs, which are intended to minimize the damage and financial impact of floods. Information on completed mitigation projects (which encompass multiple properties) indicates that about one-third of properties approved for acquisition from 1997 to 2006 were acquired. However, these data are limited because they do not include a count of properties acquired in ongoing projects. Projects may take several years to complete, and FEMA does not report properties acquired until a project is complete. Further, FEMA collected property acquisition data (for completed projects) in an ad hoc manner because FEMA's grants management system lacks the capability to record acquisition data. As a result, FEMA cannot readily determine the extent to which flood-damaged and repetitive loss properties have been acquired through its mitigation programs. Lack of monitoring records, inconsistent application of procedures, and lack of coordination have diminished the effectiveness of FEMA monitoring of NFIP-related contracts. While federal internal control standards state that records should be properly maintained, FEMA did not consistently follow its monitoring procedures for preparing or maintaining monitoring reports and was unable to provide copies of the majority of monitoring reports GAO requested. Further, FEMA offices did not coordinate information and actions relating to contractor deficiencies and payments. In some cases, key officials were unaware of decisions on contractor performance. As a result, FEMA cannot consistently ensure adherence to contract requirements and lacks information critical for effective oversight of key contractors. Given the reliance of NFIP upon contractors, it is important that FEMA have in place adequate controls that are consistently applied to all contracts.

section_title: Letter
paragraphs: Following the signing of the Bunning-Bereuter-Blumenauer Flood  Insurance Reform Act of 2004, which reauthorized the National Flood  Insurance Program (NFIP) through September 30, 2008, the United States  experienced back-to-back catastrophic hurricane seasons and experienced  nearly $20 billion in flood-insurance losses. Because NFIP premium rates  have been set to cover losses in an average year (that is, based on “average  historical losses”), the program has been unable to set aside sufficient  funds to meet future expected losses. According to the Federal  Emergency Management Agency (FEMA) of the Department of Homeland  Security (DHS), which administers NFIP, claims from Hurricane Katrina  alone have totaled in excess of $16.3 billion, as of October 2007. The  Katrina-related claims represent more than eight times the amount for  claims in 2004 and surpass (by more than $1 billion) the aggregate amount  of all claims previously paid in the nearly 40-year history of NFIP.
In response to the magnitude and severity of losses from the 2005  hurricanes, Congress increased NFIP’s borrowing authority from the  Department of the Treasury (Treasury) to $20.8 billion. As of December  2007, FEMA owed more than $17.3 billion to Treasury, an amount the  program is unlikely to be able to repay while paying future claims with its  current premium income of about $2 billion annually. We designated NFIP  as a high-risk area in March 2006 because the program likely will not  generate sufficient revenues to repay the billions it borrowed from the  Treasury to cover flood claims from the 2005 hurricanes. In addition, it is  unlikely that NFIP—a key component of the federal government’s efforts  to minimize the damage and financial impact of floods—could cover  catastrophic losses in future years. The insufficient revenues highlight  structural weaknesses in how the program is funded, and Congress is  considering a number of legislative changes to improve NFIP’s financial  solvency.
NFIP was created in 1968 in part to provide some insurance protection for  flood victims because private insurers were (and largely still are) unwilling  to bear the economic risks associated with the potentially catastrophic  impact of flooding. NFIP also provides incentives for communities to  adopt and enforce floodplain management regulations to reduce future  flood damage. Such incentives include mitigation programs that provide  grants to acquire and demolish flood-prone structures that NFIP insures  and perform other activities (such as elevating buildings) to reduce or  eliminate flood losses and insurance claims. Floods are the most common  and destructive natural disasters in the United States. According to NFIP  statistics, 90 percent of all natural disasters in the United States involve  flooding. In previous work, we reported that between 1980 and 2005, about  97 percent of the U.S. population lived in a county that had at least one  declared flood disaster, and 45 percent lived in a county that had six or  more flood disaster declarations. Under NFIP, federally backed flood  insurance is available to homeowners and other property owners in  communities that adopt and enforce local floodplain ordinances. Finally,  FEMA makes extensive use of contractors to implement NFIP. For  example, about 68 FEMA employees, assisted by about 170 contract  employees, manage and oversee NFIP.
As agreed with your staff, this report    describes trends for NFIP policies, insurance amounts, premiums, and  losses from 1997 through 2006, and the extent to which NFIP losses  were attributable to hurricanes and repetitive loss properties;    assesses how the amounts available for the purchase of flood-damaged  and repetitive loss properties changed over time, and the extent to  which FEMA purchased flood-damaged and repetitive loss properties;  and    evaluates the extent to which FEMA followed its procedures for  monitoring selected NFIP-related contracts.
To address these objectives, we analyzed data on NFIP policies, insurance  amounts, premiums, and losses for calendar years 1997 through 2006 and  assessed the reliability of these data. In addition, we analyzed available  data on funds available for three NFIP-funded mitigation programs and  properties purchased in connection with two of these programs. We  reviewed monthly contractor monitoring reports and documentation of  contract-specific monitoring policies and procedures at FEMA. We also  assessed the extent to which these procedures were followed for two of  the largest NFIP-related contracts—the Bureau and Statistical Agent  (BSA) and Direct Servicing Agent (DSA) contracts—upon which FEMA  relies to collect all financial and statistical data related to NFIP and  directly sell and service flood insurance policies. Finally, we interviewed  FEMA officials in Washington, D.C., and Virginia and NFIP contractors  based in Kansas and Maryland. Appendix I provides more information on  our scope and methodology. We conducted this performance audit from  March 2007 to June 2008 in accordance with 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 on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: NFIP was established in the National Flood Insurance Act of 1968 to  provide policyholders with some insurance coverage for flood damage, as  an alternative to disaster assistance, and to try to reduce the escalating  costs of repairing flood damage. NFIP has mapped flood risks, assigning a  flood zone designation based on the risk level for flooding (see table 1 for  examples), which is a factor in determining premium rates.
To participate in NFIP, communities agree to enforce regulations for land  use and new construction in high-risk flood zones. As of May 2007, more  than 20,300 communities across the United States and its territories  participated in NFIP by adopting and agreeing to enforce state and  community floodplain management regulations to reduce future flood  damage. Although community participation in the program is voluntary,  homeowners with mortgages from federally regulated lenders on  properties in special high-risk, flood hazard areas are required to purchase  flood insurance on their dwellings for at least the outstanding mortgage  amount, up to the maximum policy limit of $250,000. Optional, lower-cost  coverage also is available under NFIP to protect homes in areas of  moderate- to low-risk. In addition, owners of properties built before NFIP  officially mapped a community (known as pre-FIRM properties, referring  to the Flood Insurance Rate Map) pay premiums that do not reflect their  true risk because Congress authorized subsidized insurance rates to be  made available for policies covering certain structures to encourage  communities to join the program. To insure other personal property items  against flood damage, homeowners may purchase separate NFIP personal  property (or “contents”) coverage, up to the maximum coverage limit of  $100,000.
In addition to mapping and categorizing flood risk zones, FEMA also has  developed two estimates of potential losses to help set rates and develop  information relating to losses. FEMA introduced the concept of the  average historical loss year—the purpose of which is to estimate the  amount of premium that would be sufficient to pay for losses resulting  from the type of loss years that previously occurred. According to FEMA,  this estimate is used as one indicator in setting subsidized premium rates.  FEMA also prepares a catastrophic loss year estimate, usually every other  year, to provide Congress with an informal guide on the losses that could  occur in the event of a storm that would have 0.1 percent chance of  occurring in a given year (a 1 in a 1,000 year event).
For more than a decade, FEMA has pursued a variety of strategies to  reduce the number of repetitive loss properties, which are insurable  buildings for which NFIP paid two or more claims of more than $1,000  within any rolling 10-year period. For example, NFIP funds three  mitigation programs, the FMA program, the RFC program, and the SRL  pilot program. The purpose of the FMA program is to fund activities that  reduce or eliminate the long-term risk of flood damage to buildings and  other structures insured by NFIP, such as property acquisition. The FMA  program requires applicants to provide a portion of the funds for the  proposed mitigation activities. If the applicant cannot secure funding for  the proposed activities, FEMA may contribute 100 percent of the funding  through the RFC program, which is specifically designed to mitigate  repetitive loss properties (structures insured by NFIP that have had one or  more claim payments for flood damages). Finally, the SRL program is  designed for repetitive loss properties that have at least four claim  payments of more than $5,000 each. See table 2 for more information on  these mitigation programs.
NFIP staff are located at FEMA headquarters in Washington, D.C., and 10  regional offices. Their functions include tasks for administering mitigation  grant programs such as processing applications for grant funds and  distributing the funds to eligible applicants. While FEMA establishes  policies and procedures for NFIP, and has some staff dedicated to the  management of the program, FEMA relies on contractors to administer  key aspects of the program. Contractors collect NFIP data, market the  program, and sell specific flood-insurance policies. Private insurance  companies that participate in FEMA’s Write Your Own (WYO) program  largely are responsible for insurance sales and claims adjustment.
At the time of our work, there were four major ongoing contracts in place  for NFIP, two of which we reviewed in this report. For example, FEMA  awards a contract for a BSA, which is responsible for conducting financial  and statistical reporting based upon data submissions from the 92 WYO  companies, developing forms and information related to NFIP, and  providing various data analyses. The BSA contract that was effective  from September 2005 through December 2007 was valued at $38 million.  FEMA also awards a contract for a DSA, which is responsible for selling  and servicing standard and group insurance for policies that are not sold  through WYOs. For that agent, the value of the contract in effect from  September 2003 to September 2008 is $26.5 million.
Two offices in FEMA are responsible for contracts and contract oversight  (see fig. 1). A Contracting Officer in the Acquisition Operations Branch  awards contracts related to NFIP and has responsibility for determining  the adequacy of a contractor’s performance. The Program Management  Office also has responsibilities for overseeing each contractor’s  performance. A COTR is assigned to each contract. The COTR is  authorized to act on behalf of the Contracting Officer to monitor the  contract. However, the COTR is not authorized to make any contractual  commitments or contractual changes on behalf of FEMA; any changes that  the contractor deems may affect the contract, price, terms, or conditions  are referred to the Contracting Officer in the Acquisition Operations  Branch for action. Each COTR is assisted by monitors, who review and  report on technical aspects of the contractor’s performance such as  compliance with specific contract terms.
section_title: Policies and Insurance Amounts Increased, Premiums Decreased, and Losses Fluctuated from 1997 through 2006 with Hurricane Activities
paragraphs: Overall, data relating to the number of NFIP policies and amount of  insurance coverage indicated upward trends for the period we reviewed  and most losses were paid for hurricane-related claims, primarily due to  losses from the 2005 hurricane season. The number of policies in force  increased 36 percent and the average amount of coverage increased 78  percent from 1997 through 2006, consistent with average rising home  values. The average premium per flood-insurance policy decreased 3  percent, but when analyzed by flood risk zone, average premiums  increased in the high-risk coastal flood zone, from about $1,039 in 1997 to  more than $1,400 in 2006. Over this period, total losses fluctuated from a  low of $302 million in 2000 to a high of $2 billion in 2004 before reaching  more than $17.7 billion in 2005. In 5 of the 10 years reviewed, less than 10  percent of losses paid out were linked to hurricane-related damage, and  over the 10-year period cumulative losses for repetitive loss properties  increased from $3.7 billion to $7.9 billion. FEMA’s estimates for average  historical loss and catastrophic loss increased over this 10-year period.  Finally, analysis by occupancy type shows more than 90 percent of  policyholders owned residential properties (single and two-four family  homes) or condominiums, and the majority of these properties were found  in zones that FEMA designated as high risk. For additional statistical and  trend data, see appendixes II-VI.
subsections: section_title: Policies in Force and Average Insurance Amounts Increased, and Average Premiums Decreased
paragraphs: The number of federal flood insurance policies in force increased from  3.96 million in 1997 to 5.40 million at the end of 2006, an increase of 36  percent. The number of policies increased from 1 to 6 percent each year  from 1997 through 2005, but increased 12 percent the year after the Gulf  Coast hurricanes (see fig. 2). While the number of policies in force has  increased, a 2006 study commissioned by FEMA estimated that about half  of the single-family homes in special flood hazard areas nationwide do not  have flood insurance policies. Moreover, the study estimated that market  penetration outside of special flood hazard areas is about 1 percent.
The average amount of insurance coverage per policy in force increased  from about $158,000 in 1997 to almost $214,000 at the end of 2006, an  increase of 78 percent (see table 3). While we did not attempt to  determine the reason that the average amount of insurance purchased  increased, we note that this increase coincides with the increase in  average home values over this period.
The average annual premium per policy in force decreased from $489 in  1997 to $475 at the end of 2006, a decrease of almost 3 percent (see table  3). According to FEMA, the average premium has been influenced by  changes in two types of flood zones. First, the average premium has been  strongly influenced by changes in the moderate- to low-risk flood zones,  where policies as a percentage of the total policies in force have increased  greatly primarily due to increased sales of Preferred Risk Policies, FEMA’s  lowest-cost flood insurance policy. Second, average annual premium per  policy has been influenced by the steep increase in the average premium  of high-risk coastal zone policies, but because they make up a smaller  percent of policies in force, this increase did not drive up the average  policy premium. As figure 3 illustrates, the average premium increased in  the high-risk coastal zone the most (41 percent), from about $1,039 in 1997  to more than $1,400 at the end of 2006.
section_title: Total Losses Fluctuated in the Period We Reviewed, and the Majority of Losses Were Attributable to Hurricanes
paragraphs: With the exception of 2005, the amount that FEMA paid out in losses over  the 10- year period fluctuated between a low of $302 million in 2000 and a  high of $2 billion in 2004 (see fig. 4). Losses refer to the amount that  FEMA paid to settle flood insurance claims and are recorded for the year  in which the loss occurred. For example, if a flood damaged an insured  property in 2005, but the claim was not paid until 2006, the amount paid  out would be recorded as a 2005 loss. For 2005, as a result of the Gulf  Coast hurricanes, FEMA paid out more than $17.7 billion in losses.
From 1997 through 2006, 79 percent of the funds paid out in losses were  for hurricane-related claims, but the percentages in individual years varied  widely (correlating to hurricane activity). As shown in figure 5, in five of  the years reviewed, less than 10 percent of losses were attributable to  hurricanes, and in four other years, more than 60 percent of losses were  attributable to hurricanes. In 2005, the Gulf Coast hurricanes accounted  for 97 percent of all losses paid. Moreover, the 2005 hurricanes accounted  for 65 percent of the losses paid during the 10-year period we reviewed. As  we have previously reported, it is highly unlikely that NFIP, as currently  funded, could generate revenues to repay the amount borrowed from  Treasury to pay for claims from the 2005 hurricane season.
From 1997 through 2006, the net cumulative amount that FEMA paid to  settle claims filed for repetitive loss properties increased from $3.7 billion  to $7.9 billion. Congress has noted that repetitive loss properties  constitute a significant drain upon NFIP. While FEMA has tried to  decrease the portfolio of repetitive loss properties, during this same  period, the net cumulative number of repetitive loss properties increased  approximately 64 percent, from 76,000 to 125,000 (see fig. 6). Clearly,  repetitive loss properties continue to be a problem for NFIP. While these  repetitive loss properties account for about 1 percent of NFIP-insured  properties, they account for between 25 and 30 percent of all flood claims.  We could not determine the extent to which losses paid in a given year  were attributable to repetitive loss properties because FEMA collects net  cumulative, not annual, data on such losses. However, as shown in figure  6, the cumulative totals have continued to increase, in particular in the  past 3 years, as the number of repetitive loss properties has increased.
section_title: FEMA’s Average Historical Loss and Catastrophic Loss Estimates Increased from 1997 through 2005
paragraphs: FEMA’s average historical loss estimate increased from $622 million in  1997 to $1 billion in 2005, or about 62 percent. As previously noted, FEMA  uses this estimate to calculate the premium that would be sufficient to pay  for the average level of losses that occurred in past years and help set the  rate level for subsidized flood insurance policies. The estimate is also part  of the calculation that FEMA uses to determine the minimum subsidy  price that should be charged for pre-FIRM flood insurance policies. When  this calculation is used, it ensures that sufficient premiums are collected,  in aggregate, to cover at least the average annual loss as determined by  historical data (see app. II). This estimate increased from 1997 to 2005  because it is annually updated with the previous years’ flooding activity.  To date, FEMA has not determined how it will use the 2005 catastrophic  losses from Hurricanes Katrina, Rita, and Wilma in its 2006 or subsequent  average historical loss year calculations.
FEMA’s estimates (in ranges) for probable maximum loss in the event of a  catastrophic loss year gradually increased from $6–9 billion in 1998 (the  first year the estimate was made) to $8–11 billion in 2000, $9–12 billion in  2002, and to $11–15 billion in 2005. According to FEMA, the estimate  increased over this period due to inflation and the increased policyholder  base. Estimates of a catastrophic loss year are designed to provide  Congress with an informal guide on the loss potential of a catastrophic  event—an event that has a 0.1 percent chance of occurring in any given  year. According to FEMA, these estimates generally are done every other  year due to the slow growth in policies in force, limited actuarial staff, and  the imprecision of such estimates.
section_title: More Than 90 Percent of Policies Were for Residences (Single and Two-Four Family) and Condominiums, with Coverage and Premiums Higher for Residences Than for Condominiums
paragraphs: Analysis of policies in force, average insurance per policy, average  premium per policy, and losses by two occupancy types—residential and  condominium—from 1997 through 2006 indicates the following:  More than 90 percent of the insured properties annually were residential  (single- and two-four family) or condominium properties from 1997  through 2006. Specifically, more than 70 percent of the insured properties  were residential properties, and more than 20 percent were  condominiums.
For residential properties, the average amount of insurance purchased per  flood insurance policy ranged from about $170,000 in 1997 to about  $235,000 in 2006. For condominiums, the average amount of flood  insurance per policy increased from about $98,000 in 1997 to $121,000 in  2006. As mentioned previously, this is consistent with the increase in  house values during this period.
For residential properties, the average premium decreased from about  $522 in 1997 to about $494 in 2006. For condominiums, the average  premium decreased from about $216 in 1997 to $201 in 2006. Premiums  may have decreased because the number of policies in the moderate- and  low-risk zones, which have more affordable premiums, have increased at a  greater rate than in other zones—even though the average amount of  insurance was increasing.
Residential and condominium losses accounted for 82.5 percent and 3  percent, respectively, of all flood insurance losses that occurred from 1997  through 2006. Losses paid out for residential properties ranged from a low  of $185 million in 2000 to a high of $15.5 billion in 2005, a result of the Gulf  Coast hurricanes. Losses paid out for condominiums ranged from $6.6  million in 2002 to $395 million in 2004, which were largely driven by the  2004 Florida hurricanes. The average loss per claim (for building-only,  contents-only, and building and contents policies) was higher for  condominiums than for residential properties because the data for  condominium includes losses for entire condominium structures, not just  individual units. For example, if an insured condominium building flooded,  the (building) claim amount would be for the whole building and not for  the average amount per unit.
See appendix IV for additional detail about policies in force by dwelling  type, amount of insurance purchased, average premium, and losses by  occupancy type.
section_title: Funding for Mitigation Programs Has Increased, but FEMA Cannot Readily Track Real-time Property Acquisitions
paragraphs: Funding for NFIP mitigation programs that can be used to acquire  properties that are at risk of repetitive flooding has increased from 1997  through 2006, but FEMA’s ability to track the effectiveness of these  programs is limited because it does not track property acquisitions real  time. As we mentioned earlier, property acquisition is one of the tools that  FEMA uses to reduce losses from flood-damaged and repetitive loss  properties. FEMA acquires these properties out of funds appropriated for  mitigation programs. Three of these programs are funded by the NFIP:  the FMA program, the RFC program, and the SRL pilot program. Since  1997, annual funding for FMA more than doubled, while funding for the  RFC program and the SRL pilot program remained the same from 2006, the  first year of funding, to 2007. While overall funding for mitigation has  increased, the total number of properties that have been acquired through  the mitigation programs that have expended funds—the FMA and RFC  programs—is unknown. As a result, FEMA’s ability to evaluate the  effectiveness of the programs, such as the extent to which repetitive loss  properties have been acquired, is limited. For the FMA and RFC programs,  FEMA does not have real-time property acquisition data because the  agency does not require its regional staff to report the status of individual  property-level acquisitions to headquarters before a project closes—a  process that can take several years—and its current grants management  system does not have the capability to capture and track such data. As a  result, FEMA management cannot readily access information on the  current status of property acquisitions, limiting their ability to evaluate the  effectiveness of these programs on a real-time basis.
subsections: section_title: Funds for One Mitigation Program Increased, While Funds for Two Other Mitigation Programs Only Have Been Available Since 2006
paragraphs: The purpose of the FMA program is to fund activities that reduce or  eliminate the long-term risk of flood damage to buildings and other  structures insured by NFIP. FEMA data shows that, for the FMA program,  funding increased from $12.5 million in fiscal year 1997 to $31 million in  fiscal year 2007 (see table 4). During this period, nearly $229 million was  appropriated to reduce or eliminate the long-term risk of flood damage to  buildings, manufactured homes, and other structures insured under NFIP.
For each of fiscal years 2006 and 2007, Congress appropriated $50 million  for the RFC and SRL programs. In fiscal year 2006, Congress apportioned  $10 million specifically for the RFC program and $40 million for the SRL  pilot program. For fiscal year 2007, Congress appropriated a sum of $50  million for the two programs, which FEMA apportioned the same way.  RFC funds are intended to assist states and communities in reducing flood  damages to insured properties that have had one or more claims of more  than $1,000 to NFIP. While funding for the SRL pilot program has been  made available since 2006, the application period did not open until  January 2008 when program guidance was published. The purpose of the  SRL program is to provide grant funds for mitigation projects that reduce  or eliminate the long term risk of flood damage to severe repetitive loss  residential structures insured under NFIP.
section_title: Lack of Current Property- Level Information Limits FEMA’s Ability to Accurately Account for Property Acquisitions
paragraphs: According to FEMA data, the FMA program acquired 35 percent of the  properties approved for acquisition from fiscal years 1997 through 2007,  and the RFC program acquired 19 percent of the properties approved for  acquisition from 2006 through 2007. However, FEMA headquarters cannot  readily account for the actual number of properties acquired through each  of these programs because it does not require real-time reporting of  individual acquisitions, and its grant management system does not record  purchase information. According to FEMA data, as of October 2007, FEMA  approved the acquisition of 980 properties through the FMA program from  1997 through the end of fiscal year 2007. However, FEMA does not  routinely track how many of these properties have been acquired until a  project closes, which can take several years. According to FEMA’s  records, 342 of the 980 properties (35 percent) approved through the FMA  program have been acquired through acquisition-only projects, or mixed  mitigation projects, which involve acquisition and at least one other type  of mitigation, such as relocation, elevation, or floodproofing.
Of the 980 properties FEMA approved for acquisition, 952 were approved  as acquisition-only projects. As of October 2007, 331 of the 952 properties  approved for acquisition were recorded as acquired. However, this number  is likely understated because FEMA does not account for property  acquisitions until the projects are closed, and no projects have been  recorded as closed since 2003 (see table 5). Based on FEMA data provided  on properties acquired through the FMA program, the average acquisition  amount for acquisition-only projects was more than $55,000.
According to FEMA, the remaining 28 of 980 properties approved through  the FMA program were approved as mixed mitigation projects. Of the 28  properties approved since 1997, 11 were recorded as acquired (see table  6). However, FEMA headquarters cannot reliably account for the actual  number of properties acquired because it does not collect data on  individual acquisitions until a project closes, and no mixed mitigation  projects have been reported as closed since 1999.
FEMA has approved the acquisition of 79 properties through the RFC  program since 2006. As of October 2007, FEMA regional offices  confirmed that mitigation activities for 15 properties (19 percent) were  completed, although none of these projects have been closed officially.
According to FEMA officials, the data on property acquisitions are limited  because they include only data for completed, or closed, projects. The  completion of a mitigation project, which can include mitigation activities  for multiple properties, may take several years. The officials stated that a  variety of factors can slow or hinder property acquisitions including  historic preservation concerns or environmental issues. However, FEMA  officials stated that the agency does not require FEMA regional offices to  record property acquisitions until an entire project closes. Internal control  standards for the federal government direct that transactions be promptly  recorded to maintain their relevance and value to management in  controlling operations and making decisions. While FEMA guidance for  mitigation programs requires grantees to submit quarterly performance  reports on significant activities, whether work will be completed within  the performance period, and cost information, this guidance does not  explicitly require the reporting of property acquisitions. The lack of an  explicit requirement for FEMA regional offices to record property  acquisitions data in a consistent and timely manner hinders FEMA’s ability  to account for the extent to which flood-damaged and repetitive loss  properties have been acquired through its mitigation programs (thereby  decreasing the inventory of these properties).
In addition to lacking a requirement to record acquisition data promptly, the  information system that FEMA currently uses for the NFIP mitigation  programs does not record property acquisition data at all. Prior to 2004,  FEMA regional staff recorded data on properties acquired through closed  projects into FEMA’s National Emergency Management Information System  (NEMIS). In 2004, FEMA transitioned from NEMIS to the Electronic Grants  Management System (eGrants) in an effort to meet the intent of the  Electronic Government (eGovernment) initiative. While eGrants was  envisioned to help manage all phases of grants, the system currently assists in  the front end of the grant life cycle by providing grant applicants the ability to  electronically search and apply for grants. The eGrants system does not have  the capability to capture any acquisition data. That is, eGrants records neither  ongoing nor completed property acquisition data for FEMA’s mitigation  programs. According to FEMA officials, FEMA is in the process of  consolidating all nondisaster grants into one information system that will  support the entire grants life cycle from solicitation through closeout. The  enhanced information system will track property acquisitions in real-time and  will have project closeout capabilities; however, this information system is  not scheduled to be completed until 2010. Until the nondisaster grants  management system is developed, FEMA will continue to manage grants  using eGrants, despite its limited capabilities.
While FEMA’s headquarters officials explained that, since 2004 their  regional staff have used paper files and electronic spreadsheets to  maintain information on property acquisitions for closed projects, FEMA  did not provide information on project closures that have occurred since  2004 for the FMA program because they could not easily collect the  information from their regional offices. Specifically, when we requested  property acquisition data for the 10-year period of our review, FEMA was  able to provide data on closed projects for 1997 through 2003 (6 of 10  years) for the FMA program, and for 2006, the first year of the RFC  program. FEMA had to collect data from at least two information systems  for the FMA program and from paper files for the RFC program. GAO has  previously reported on the continued lack of standardization and other  inefficiencies in grant administration across agencies, including not  aligning federal grant processes with typical grantees’ business processes,  inadequate advance information on potential grant availability, and  unexplained delays in grant awards. However, a lack of standardization  does not preclude FEMA from having a mechanism that allows it to  effectively track real-time property acquisition data.
As a result of the limitations of eGrants in capturing property acquisition  data, FEMA cannot readily determine the extent to which NFIP-funded  mitigation programs have been reducing or eliminating the risk of losses  from repetitive loss properties, a key measure needed to determine the  effectiveness of the program. Coupled with lack of a requirement for staff  to consistently and promptly record acquisitions data, the lack of  comprehensive data impedes FEMA’s ability to account for the properties  acquired through its mitigation programs and hinders its ability to provide  Congress with timely information with which to assess the impact of these  programs on mitigating losses to NFIP and ensure that limited resources  are appropriately allocated.
section_title: FEMA’s Oversight of Contractor Activities Lacked Consistency, Documentation, and Coordination
paragraphs: FEMA makes extensive use of contractors who perform critical functions  to implement the NFIP. Contractors perform functions such as the  collection and reporting of all financial and statistical data and the selling  and servicing of some flood insurance policies. While FEMA relies upon  contractors to implement the NFIP, our review of FEMA’s monitoring  documentation for the BSA contract showed that FEMA did not  consistently follow its own monitoring procedures for preparing,  maintaining, and reviewing monitoring reports, and was unable to provide  copies of the majority of the monitoring reports we requested. Moreover,  key FEMA offices that have responsibilities for addressing contractor  deficiencies did not coordinate information and actions related to  deficiencies identified for the BSA and DSA contractors. As a result, FEMA  could not ensure adherence to contract requirements and lacked  information critical for effective oversight on key NFIP contractors.
subsections: section_title: FEMA Staff Responsible for Regularly Monitoring BSA Performance Areas Did Not Clearly or Consistently Follow Monitoring Procedures
paragraphs: Our review found that FEMA staff did not consistently follow monitoring  procedures related to the submission, documentation, and review of  monitoring reports for the BSA contract. In assessing the extent to which  FEMA staff followed their contract-specific procedures, we focused on  monitoring of the BSA contractor, which is responsible for all financial  and statistical reporting related to NFIP.
FEMA lacked comprehensive monitoring policies and procedures for all  NFIP-related contracts during the period of our review; instead, FEMA’s  procedures were summarized in individual contracts, and, for the BSA  contract we reviewed, in a “surveillance plan” that specified monitoring  roles and responsibilities. According to the BSA contract, in effect from  October 2005 through December 2007, FEMA monitors were to review the  BSA’s performance in 10 specific performance areas. FEMA assigned five  monitors including a COTR to the BSA contract, and each was required to  prepare monitoring reports containing the results of their specific  surveillance activities. The reports were to indicate clearly the  performance area monitored and whether the performance standard was  met, according to an official from the Program Management Office. The  surveillance plan also specified that reports were to be submitted in a  timely fashion to the COTR and maintained by the COTR for the life of the  contract in a quality assurance file. Both the COTR and the Program  Management Office were supposed to review the monitoring reports.
In March 2008, FEMA provided GAO with a set of contract monitoring  procedures that are applicable to all Risk-Insurance NFIP contracts that  have performance requirements. However, these procedures were not  scheduled to be implemented until May 1, 2008.
subsections: section_title: FEMA Lacks Records for Most Monitoring Reports We Requested, and Available Reports Were Not Clearly Linked to Performance Requirements
paragraphs: FEMA did not clearly or consistently follow the requirements to submit a  monitoring report as specified in both the BSA contract and the surveillance  plan. Seven of these performance areas were to be monitored monthly, one  was to be monitored quarterly, and two were to be monitored annually. For  the time period we reviewed (from October 2005 through May 2007), FEMA  monitors should have produced 380 monthly monitoring reports. In response  to our request for all of these monitoring reports, FEMA made 145 available  for our review. While monitors stated that some of the missing reports were  submitted to either the COTR or the Program Management Office, the  monitor, COTR, and the Program Management Office were not able to  produce evidence of these reports or their findings. FEMA officials stated that  many reports were not prepared because most monitors were detailed to  assist with recovery efforts following Hurricane Katrina. However, our  analysis shows the majority of the monthly monitoring reports that were  required to be prepared throughout 2006 apparently were not.
Further, more than 70 percent of the 145 monthly reports we reviewed did  not specify the performance areas to which they related (see table 7). For  example, some monitoring reports described the contractor’s activities,  without specifying what performance area was being reviewed or an  assessment of the performance. Because some monitors were responsible  for reporting on multiple performance areas, and did not specify the areas  on which they were reporting, we could not consistently determine the  performance area(s) that the reports were intended to address.
Many of the monthly reports were not clearly linked to contract-specified  requirements because they used performance area names and numbers  that were inconsistent with names and numbers in the BSA contract.  When asked about the lack of a direct link to specific performance areas,  as listed in the BSA contract, most of the BSA monitors we interviewed  stated that they did not know the “number” of the performance area they  were to monitor but knew the general areas. When we brought this issue  to the attention of FEMA’s Program Management Office in August 2007, it  determined that the numbering of performance areas was inconsistent in  the BSA contract and the surveillance plan. As a result, the office revised  the surveillance plan to make numbering of performance areas consistent  with the contract. The surveillance plan also was modified to include the  specific names of the monitors responsible for each performance area.
FEMA’s inability to provide documentation that clearly indicated how  contractor performance linked to contract standards indicates that  records had not been properly managed and maintained in accordance  with internal control standards for the federal government. FEMA  management acknowledged the problem when we presented a preliminary  analysis of performance reports and performance standards. While we did  not become aware of any significant performance problems with the BSA  contractor during the course of our review, our results are inconclusive  because most of the monitoring reports were not documented. Given  FEMA’s extensive use of contractor’s to implement the NFIP, it is vital that  FEMA maintain internal controls, which are critical to ensuring that  contractors are performing as required. The lack of documentation and  linkages between performance reports and performance areas and the  extent to which FEMA effectively monitored the BSA contract revealed  weaknesses that could adversely impact the functioning of the NFIP.
section_title: For Most of Available Reports, We Found Little Evidence of Required Timely Submission or Systematic Review and Maintenance of Documentation
paragraphs: The majority of the 145 monthly monitoring reports that we reviewed were  not date stamped or otherwise annotated to reflect the date they were  submitted to either the COTR or the Program Management Office.  Moreover, an official from the Program Management Office was unable to  provide evidence that her office tracked the dates on which monitoring  reports were received from each monitor.
In response to our and other queries about the timeliness with which  monitoring reports were submitted to the Program Management Office, in  July 2007, the office directed monitors to submit their monthly monitoring  reports to the COTR on the fifth of each month. The COTR was then  directed to review these reports and provide the Program Management  Office with a summary of the findings by the tenth of each month. While  we did not evaluate monitoring reports submitted after May 2007, these  contract-specific policies are a step in the right direction for ensuring that  monitoring reports are collected and reviewed in a timely manner.
In addition, the COTR and the Program Management Office appeared not  to have consistently reviewed the monitoring reports. For example,  according to the COTR, the Program Management Office directed  monitors to send their monitoring reports directly to the Program  Management Office. The COTR did not begin to receive them until July  2007, 21 months into the 27-month BSA contract. Therefore, it was not  until July 2007 that the COTR began maintaining a quality assurance file  for the BSA contract. While FEMA provided documentation of a portion of  the required monitoring reports, FEMA could not provide evidence that  they were reviewed systematically by the COTR or the Program  Management Office. Internal control standards for the federal government  provide that ongoing monitoring that occurs in the normal course of  operations is performed continually and is ingrained in the agency’s  operations. Moreover, these standards call for clear areas of authority  and appropriate lines of reporting. While the surveillance plan established  that the COTR had responsibility for collecting monitoring reports from  each monitor and maintaining them in a quality assurance file, he was not  a part of the process for reviewing monitoring reports until July 2007.
As a result of these conditions, the extent to which monitoring reports  were being reviewed appropriately and in a timely fashion was unclear.  Such conditions could allow performance problems to go unnoticed and  potentially worsen, thereby affecting the quality of NFIP. In addition, the  failure of the COTR to begin maintaining a quality assurance file until July  2007 meant that a complete file of monitoring reports could not be  provided to the Contracting Officer for consideration during contract  renewal negotiations. Although the BSA contract was awarded to a  different contractor in January 2008, the Contracting Officer would have  been unable to determine whether the original contractor had a record of  performance problems, potentially useful information to consider when  deciding whether to renew a contract.
In March 2008, FEMA provided GAO with monitoring procedures that  established a clear process through which monitoring reports should be  submitted to the COTR and the Program Management Office, and the  review steps that should be taken by the COTR. However, these  procedures do not specify the role of the Program Management Office in  reviewing monitoring reports, or its broader responsibilities for the  implementation of the contract monitoring procedures. Again, such  conditions could allow performance problems to go unnoticed and  potentially worsen, thereby affecting the quality of NFIP.
section_title: FEMA’s Handling of BSA and DSA Contractor Deficiencies Was Not Coordinated and Was Poorly Documented
paragraphs: Analysis of FEMA’s efforts to address performance deficiencies for two major  NFIP contractors—the BSA and DSA—indicates a lack of coordination  between key FEMA officials and a failure to properly document decisions and  actions associated with performance problems. Of the 38 monitoring reports  that FEMA provided in relation to the BSA contract, and that could be linked  to specific performance areas, 2 indicated that performance standards were  not met. While no discrepancy reports (which FEMA requires the Contracting  Officer to issue when contractors fail to meet specified performance  standards) were written as a result of the BSA deficiencies, 18 discrepancy  reports were issued for the DSA contract.
subsections: section_title: While Monitoring Reports Noted Some BSA Deficiencies, FEMA Staff Did Not Issue Discrepancy Reports or Inform the Contracting Officer of Deficiencies
paragraphs: Two of the 38 BSA monthly monitoring reports that could be clearly linked  to performance standards indicated that a performance standard was not  met (see table 8). In both cases, one of which involved the failure of the  BSA’s computer security system to meet performance standards, and the  other related to the contractor’s failure to submit a deliverable to FEMA  on time, the COTR determined that a discrepancy report was not  necessary and did not inform the Contracting Officer of the contractor’s  failure to meet its performance standards. According to the COTR, a  discrepancy report was not necessary in the first case because the  computer security standards were relatively new at the time and have  been updated since. The COTR stated that, in the second case, he used his  discretion to determine that a discrepancy report was not necessary and  resolved the issue through discussions with the contractor.
While only a few deficiencies were identified, the monthly monitoring  reports that we reviewed most often found that the performance  requirement was met. In two instances, they revealed a lack of  coordination between the BSA COTR and the Contracting Officer. The  BSA contract stated that if a performance standard was not met, the  Contracting Officer was to issue a discrepancy report to which the  contractor had to respond. Upon evaluation of the contractor’s response,  the Contracting Officer would determine whether a deduction in payment  to the contractor was appropriate. The failure of the COTR to share his  assessment may be due to the lack of written policies and procedures  specifying how such assessments should be shared with the Contracting  Officer. While FEMA developed guidance in July 2007 specifying when and  how the COTR should communicate discrepancies with the Contracting  Officer, this guidance is specifically for the BSA contract. Federal  standards for internal control call for appropriate documentation of  significant events. Because the COTR did not document and inform the  Contracting Officer of his assessment, FEMA management was unaware of  the contractor’s failure to meet a performance requirement; the contractor  was not penalized financially.
section_title: FEMA’s Handling of Discrepancy Reports for the DSA Contract Was Uncoordinated and Hampered by Lack of Guidance
paragraphs: Our analysis of the actions taken in connection with the 18 discrepancy  reports written from September 2004 through May 2007 on the DSA  contract also found that FEMA offices did not coordinate in preparing,  documenting, and reviewing these determinations. Specifically, the COTR  for the DSA contract, FEMA’s Program Management Office, and FEMA’s  Contracting Officer did not coordinate to address the failure of the DSA to  meet contract-specified performance standards. Generally, the DSA  received discrepancy reports for not processing NFIP policy documents,  such as renewals and applications, within required time frames. According  to the COTR, these types of deficiencies had minimal negative effects  because, in some cases, the universe of documents the contractor  processed was so small that the failure to process 10-20 documents in a  timely manner resulted in a discrepancy report. But, interviews with the  FEMA offices responsible for processing discrepancy reports revealed that  FEMA’s Contracting Officer was unaware that the COTR for that contract  had sent 18 discrepancy reports to the DSA. According to the Contracting  Officer, her office became aware that discrepancy reports had been sent to  the DSA in June 2007 during the course of our review.
In addition to a lack of communication about the discrepancy reports,  some reports lacked required signatures, or evidence that different offices  had reviewed the contractor’s responses and determined what, if any,  actions would be taken. The discrepancy report is to contain a signature  from FEMA’s Contracting Officer; a response from the contractor; FEMA’s  subsequent evaluation of the contractor’s response; and the resulting  action, such as a payment reduction. While discrepancy reports were to be  signed by the Contracting Officer, none of the reports we reviewed had the  signatures. The lack of signatures by the Contracting Officer suggests that  this officer was unaware of the performance problems associated with the  DSA and potentially could have renewed the contract without complete  information about the contractor’s performance.
Our review also showed a failure to consider the contractor’s written  response to the report. According to the DSA contract, FEMA’s  determination of payment changes is to be based on consideration of the  contractor’s response to the discrepancy report. Neither the contract nor  the discrepancy reports specify how the Contracting Officer was to be  made aware of contractor performance problems; that is, whether and  how either the COTR or the Program Management Office was responsible  for informing the Contracting Officer of contractor performance problems.  Six reports contained a written response from the contractor, yet none of  the reports contained information on FEMA’s assessment of the  contractor’s response or its subsequent actions (for example, payment  reductions). According to the COTR for the DSA contract, if a contractor  did not meet a performance standard, the COTR would arrange for  deductions, regardless of the contractor’s stated or written response.
Moreover, we found that the 18 discrepancy reports called for a total of  more than $55,000 in financial disincentives for the DSA. However, FEMA  had not debited nearly $19,000 in financial disincentives from the  contractor’s invoices as of January 2008. According to the COTR, the  disincentives that had not been debited had been assessed in 6  discrepancy reports prepared from 2005 through 2006. The COTR never  gave 2 of these discrepancy reports to FEMA’s accounting department for  processing, and the accounting department did not process the remaining  4. According to the COTR, all 6 discrepancy reports were not properly  processed due to human error. The COTR said that FEMA had no process  by which he could be informed that a financial penalty had been processed  as a result of the discrepancy reports. In addition to the 6 unprocessed  reports that assessed disincentives, FEMA did not process 2 other reports  because they were drafted within the first 6 months of the contract.  According to the COTR, the contractor had a 6-month “grace period” for  meeting its performance standards; therefore, no financial disincentives  were either calculated or applied for these discrepancy reports. However,  such a grace period is not specified in the DSA contract. The lack of clear,  written policies and procedures regarding the specific roles of various  FEMA offices in processing discrepancy reports and ensuring the  appropriate application of financial disincentives resulted in the failure of  FEMA to process financial disincentives.
In the monitoring procedures that FEMA provided to GAO in March 2008,  the role of the COTR in identifying deficiencies and communicating them  with a representative of the Contracting Officer is specified. However, the  procedure does not explain how the Program Management Office will be  involved, or how the agency will ensure that financial disincentives are  appropriately applied.
section_title: Conclusions
paragraphs: Various statistical trends reveal that while NFIP is growing and becoming  more widely purchased enabling it to more widely diversify its risks,  FEMA continues to face a number of challenges in managing this program  including a growing number of claims on repetitive loss properties,  insufficient information to readily track the property acquisitions of its  mitigation programs, inconsistent application of contract monitoring  procedures, and inconsistent documentation and coordination of  contractor oversight. The ability of FEMA officials to effectively monitor  the effectiveness of its flood mitigation programs, as well as its NFIP  contractors, is essential to the effective implementation of NFIP.
Floods impose an enormous financial burden on the nation’s flood insurer,  the federal government. Consequently, FEMA management, Congress, and  the public need accurate and timely information to assess the  effectiveness of programs designed to mitigate flood-related damages,  particularly for repetitive loss properties that account for a significant  portion of claims paid under NFIP. We found that FEMA does not have  specific written policies for the timely recording of property acquisition  data in its mitigation programs. By developing such policies and guidance,  FEMA could improve its ability to produce, analyze, and report on  property acquisitions and thus improve its ability to assess the operations  and effectiveness of these programs. In addition to not requiring the timely  recording of acquisition data, since 2004 when FEMA began using eGrants  as its grants management system, FEMA has been unable to use this grants  management system to record such information. The eGrants system can  process “front-end” processes (such as accepting applications) but not  subsequent grants management processes (such as project closures). Not  having an end-to-end grant management capability makes it particularly  challenging for grant management staff to oversee the grant process  across their organization. Grant management systems were intended to  enhance the ability of federal managers and grant-making agencies to  readily collect, analyze, and report information. With its current system  limitations, FEMA cannot accurately assess or report the extent to which  its mitigation programs are reducing the number of flood-damaged and  repetitive loss properties.
Deficiencies in FEMA processes relating to NFIP data and performance  extend to oversight of contractors responsible for supporting NFIP. For  instance, we were unable to link a substantial number of monitoring  reports to contract-specified performance areas and were unable to  determine, based upon available documentation, the extent to which  monthly monitoring reports were submitted on time, systematically  reviewed by appropriate officials and offices, and the associated  documentation properly filed and maintained. The lack of a framework to  ensure that essential oversight and control functions were completed  could allow performance problems to go unnoticed or worsen.  Furthermore, the lack of documentation to determine the extent to which  specific performance standards were met makes it appear that FEMA was  not effectively monitoring its contractors, diminishes its ability to  determine if and when problems occurred, and may have led the agency to  not apply specific financial incentives or disincentives per contract terms  (such as when the BSA COTR independently determined that discrepancy  reports were not necessary). Given the reliance of NFIP upon contractors,  poor contractor performance could diminish the overall quality of program  operations and management.
In addition to enhancing its management and oversight of its contractors,  FEMA also has an opportunity to improve internal operations and  communication as they relate to contract oversight functions. Our review  indicated a lack of overall contract-monitoring guidance and consequently  conflicting understandings of procedures, responsibilities, and authority  for addressing contractor deficiencies among FEMA officials and offices.  While FEMA developed guidance during the course of our review for all  Risk-Insurance NFIP-related contracts that have performance  requirements, in part as a result of issues that we identified during our  work, revised monitoring procedures were not scheduled to be  implemented until May 2008, which was after the period of our analysis.
section_title: Recommendations for Executive Action
paragraphs: To more accurately track the extent to which flood-prone properties are  acquired, we recommend that the Secretary of Homeland Security take the  following two actions:    Establish written guidance for FEMA regional offices to better ensure  consistent and timely recording of property acquisition data.
Establish a means to track real-time property acquisitions for NFIP-funded  mitigation programs.
To ensure more effective oversight of contractors performing key NFIP  data collection, reporting, and insurance functions, we also recommend  that the Secretary of Homeland Security take the following three actions:  Implement a process to ensure that monitoring reports are submitted on  time and systematically reviewed by the COTR and the Program  Management Office and copies of monitoring reports are retained in a  quality assurance file, as directed by the contract.
Ensure that FEMA staff clearly monitor each performance standard that  the contractor is required to meet in the time frames required by contract  and that FEMA staff clearly link monitoring reports and performance  areas.
Ensure implementation of written guidance for all NFIP-related contracts  on how to consistently handle the failure of a contractor to meet standards  in performance areas and establish written policies and procedures about  the coordination between FEMA officials and offices (including the COTR,  the Program Management Office, and the Contracting Officer) when  addressing contractor deficiencies, including determining whether and  under what circumstances to issue discrepancy reports, and ensuring that  financial disincentives are appropriately and consistently applied.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on the draft of this report from the Secretary of  Homeland Security.  The Assistant Administrator, Mitigation Directorate,  FEMA, provided written comments that are reprinted in appendix VIII.   FEMA’s written response also included technical comments, which we  incorporated as appropriate. In its written comments, FEMA generally  concurred with our recommendations and noted that the agency has taken  actions to address the recommendations related to oversight of  contractors performing key data collection, reporting, and insurance  functions. In particular, the agency stated that it has  implemented a procedure whereby monitors will provide a monthly  status report to the COTR using a specific format to ensure monitoring  is performed in a consistent manner across all contracts; and    developed written procedures on monitoring reporting requirements  and conducted a training session with all monitors.
In commenting on our presentation of information related to mitigation  programs that can be used to acquire properties, FEMA headquarters  agreed that the agency does not track property acquisition data in real  time; that is, between review of project applications and closeout. FEMA  stated that it would be inefficient for headquarters to collect real-time data  from regional, state, and local partners, and asserted that the added value  of such data was unclear.
We agree that FEMA lacks an efficient process for collecting data on the  extent to which properties have been acquired before a project is closed  out and, therefore, recommend that FEMA establish written guidance for  FEMA regional offices to better ensure consistent and timely recording of  property acquisition data. We disagree that the value of collecting real- time property acquisition data at the headquarters level is unclear. Real- time data would improve FEMA headquarters’ ability to produce, analyze,  and report information on ongoing operations and thus improve its ability  to assess the effectiveness of its mitigation programs. For example, FEMA  headquarters would be able to more accurately assess the rate at which  properties are acquired and thus pinpoint within a shorter time frame the  extent to which mitigation programs were reducing the number of flood- damaged and repetitive loss properties.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution of this report until 30  days from the report date. At that time, we will provide copies to the  Chairman, Senate Banking, Housing and Urban Affairs Committee; the  Chairman and Ranking Member of the Senate Committee on Homeland  Security and Governmental Affairs; the Chairman and Ranking Member of  the House Committee on Financial Services; the Chairman and Ranking  Member of the House Committee on Homeland Security; and other  interested committees. We are also sending a copy of this report to the  Secretary of Homeland Security and other interested parties. We also will  make copies available to others upon request. In addition, the report will  available at no charge on our Web site at http://www.gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report.
If you or your staff has any questions about this report, please contact me  at (202) 512-8678 or williamso@gao.gov. GAO contact and staff  acknowledgments are listed in appendix IX.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to (1) describe trends for National Flood Insurance  Program (NFIP) policies, insurance amounts, premiums, and losses from  1997 through 2006 and the extent to which NFIP losses were attributable  to hurricanes and repetitive loss properties; (2) assess how the amounts  available for the purchase of flood-damaged properties changed over time,  and the extent to which the Federal Emergency Management Agency  (FEMA) purchased flood-damaged properties; and (3) evaluate the extent  to which FEMA followed its procedures for monitoring selected NFIP- related contracts.
subsections: section_title: Description of NFIP Trends
paragraphs: To describe overall NFIP statistics, we obtained data from FEMA on  policies in force and claims made. We obtained data as of December 31 for  each year of the period from calendar year 1997 through calendar year  2006 on policies in force, average insurance per policy in force, and  average premium per policy in force. For the claims data, we obtained  information (as of May 31, 2007) about the claim dates of losses incurred  between January 1, 1997, and December 31, 2006. For all monetary data  obtained, we adjusted dollar amounts to 2006 constant dollars using the  Shelter Total formulas found in the Consumer Price Index.
To describe statistics by flood zone, we first determined in which flood  zones the majority of flood insurance policies were located by analyzing  the data using SAS software version 9.1. FEMA has mapped flood risks in  the United States and in most flood-prone areas has assigned a flood zone  designation based on the level of flood risk. Although FEMA uses 12 types  of flood zones (see appendix VII), we combined these into four flood zone  designations based on risk levels—moderate- to low-risk (Zones B, C, and  X); high-risk (Zone A); high-risk coastal (Zone V); and undetermined risk  (Zone D). FEMA officials agreed with the way these were combined. In  appendix III we also present data on Zone “O” (Other), which is not an  official flood zone; rather, FEMA’s contractor uses the designation for  coding purposes to indicate missing values or incorrect codes. Less than 1  percent of all policies and less than .5 percent of all losses fell under Zone  “O.” In addition, in appendix III we present data on Zone “E” (Emergency  Program), which indicates policies in the Emergency Program, which does  not assign flood-risk zone designations. Communities participating in NFIP  initially enter the Emergency Program. We determined that, for the 10-year  period of our review, 99 percent of policies in force were located in the  high-risk, high-risk coastal, and moderate- to low-risk zones. We,  therefore, reported on these in the body of the report, and provided data  on the remaining zones (undetermined risk and Emergency Program) in  appendix III. For all flood zones, we obtained data on policies in force,  annual average amount of flood insurance purchased, annual average  premium, and losses.
To describe statistics by occupancy type, we first determined which  occupancy types represented the majority of policies in force. We  determined that, for the period of our review, residential (single-family  and two-four family) properties generally accounted for more than 70  percent of policies in force each year, and condominiums accounted for  more than 20 percent of policies in force each year. We reported  information on these occupancy types in the body of the report and  provided data on the remaining occupancy types (other residential and  nonresidential) in appendix IV.
We conducted electronic testing of FEMA’s data to identify outliers and  missing data elements. We also cross-checked various tables to assess the  consistency of the data provided. For example, we compared data on  overall losses with the losses reported by flood zone to ensure that the  losses reported each year were consistent. According to our electronic  testing and cross-checking, we determined that these data were  sufficiently reliable for the purposes of this report.
We obtained data on FEMA’s average historical loss estimate (the purpose  of which is to estimate the amount of premium that would be sufficient to  pay for the average level of losses that occurred in past years) for calendar  years 1997 through 2006 from FEMA’s Chief Actuary. We interviewed  FEMA officials about the basis for the average historical loss estimate,  reviewed FEMA’s white paper on the estimate, and reviewed FEMA’s 2006  Actuarial Rate Review for additional information about this estimate. We  also obtained data on FEMA’s estimates of catastrophic loss years from  FEMA’s Chief Actuary. FEMA prepares the catastrophic loss year  estimate, usually every other year, to indicate the maximum amount that  NFIP would have to expend during a catastrophic loss year. That is, the  estimate is designed to provide Congress with an informal guide on the  losses that could occur in the event of a storm that has a 0.1 percent  chance of occurring. We did not assess FEMA’s methodology for either of  these estimates.
To evaluate the extent to which flood-related damages exceeded flood  insurance limits, we requested and obtained data from FEMA on flood- insurance policies that were purchased for coverage at the maximum limit  for building-only coverage and contents-only coverage for calendar years  1997 through 2005. For policies that contained both building and contents  coverage, we obtained data on policies where the maximum insurance  limit was purchased for either the building or contents coverage (or both)  for calendar years 1997 through 2005. We excluded group flood insurance  policies because they have coverage limits that differ from other flood  insurance policies. We obtained data on the number of claims that were  paid for the resulting subset of flood-insurance policies and the number of  claims for which damage data were available. We then identified the  number of claims for which flood-related damages exceeded the maximum  amount of insurance available and the losses associated with these claims.  We presented the data for 1997–2004 and 2005 separately due to the high  number of claims that occurred in 2005. For more information, see  appendix VI. In conjunction with this work, we also reviewed parts of the  2006 study commissioned by FEMA.
To evaluate the extent to which flood-related damages were greater than  the amount of insurance purchased, we obtained data on flood insurance  policies that were purchased for coverage below the maximum limit for  contents coverage, and below the maximum limit for building coverage,  for calendar years 1997 through 2005. For policies that contained both  building and contents coverage, we obtained data on policies where less  than the maximum insurance limit was purchased for either the building  or contents coverage (or both) for calendar years 1997 through 2005. We  excluded group flood insurance policies because they have coverage limits  that differ from other flood insurance policies. We obtained data on the  number of claims that were paid for the resulting subset of flood insurance  policies and the number of claims for which damage data were available.  We then identified the number of claims for which flood-related damages  exceeded the amount of insurance purchased and the losses associated  with these claims. We presented the data for 1997-2004 and 2005  separately due to the high number of claims that occurred in 2005.
To describe the extent to which losses were attributable to repetitive loss  properties, we obtained data from FEMA on the net cumulative number of  claims filed for repetitive loss properties and the amount of losses FEMA  paid out for these properties as of December 31 for each calendar year  from 1997 through 2006. We obtained net cumulative data because this is  the only way that FEMA collects data on repetitive loss properties. We  also obtained data on the net cumulative number of repetitive loss  properties for calendar years 1997–2006. According to FEMA officials, the  number of repetitive loss properties represents a snapshot in time of the  number of insured repetitive loss properties as of the end of each calendar  year. The number of claims and amount of losses paid out on repetitive  loss properties represents the net cumulative total of all dollars paid out.  As a result, based upon the configuration of the available data, we were  unable to calculate the average loss paid out to repetitive loss properties.
To describe the extent to which losses were paid out for hurricane- damaged properties, we requested information on hurricane-related claims  from FEMA for calendar years 1997 through 2006. According to FEMA  officials, claims are not coded or notated as being hurricane-related.  However, FEMA does maintain a list of “significant events.” To provide  GAO data on hurricane-related claims, FEMA identified claims that were  associated with significant events, then identified those events that were  hurricanes. We did not verify FEMA’s categorizing of claims as being  “hurricane-related.”
section_title: Analysis of Amounts Available for Property Acquisition and Extent of Property Acquisition
paragraphs: To assess how the amounts available for the purchase of flood-damaged  properties have changed over time, we obtained data from FEMA on  funding appropriations, obligation authority brought forward, and funding  available for the three NFIP-funded mitigation programs. For the Flood  Mitigation Assistance (FMA) program, we obtained data for fiscal years  1997 through 2007. For the Repetitive Flood Claims (RFC) program and  the Severe Repetitive Flood (SRL) pilot program, we obtained data for  fiscal years 2006 and 2007, as both programs were unfunded until 2006. To  assess the extent to which flood-damaged properties have been acquired,  we also obtained data from FEMA on the number of projects and  properties approved for acquisition and the number of properties actually  acquired through the FMA and RFC programs, but not the SRL program  because guidance for this program was not published until January 2008.  FEMA officials informed us that the most reliable information that they  could provide on property acquisitions was at the project level. FEMA  officials also stated that because not all properties approved for  acquisition are ultimately acquired, it may take several years for a project  to close. Because FEMA’s grant management system does not track  project closures or property acquisitions in real time, the data we report is  likely an undercount of the actual number of properties that have been  acquired through the FMA and RFC mitigation programs.
For the FMA program, FEMA officials obtained data on property  acquisitions (for closed projects) that occurred from 1997 through 2003  from FEMA’s Enterprise Data Warehouse. According to FEMA officials,  the warehouse data are extracted from the National Emergency  Management Information System (NEMIS), the information system FEMA  used to manage the FMA program until 2003. In 2004, FEMA transitioned  from NEMIS to the Electronic Grants Management System (eGrants) to  manage the FMA program. eGrants does not have project closure  capabilities; therefore, FEMA was unable to provide any data on property  acquisitions for FMA projects that may have closed from 2004 through  2007. While we did not attempt to verify the reliability of this information,  we did look for inconsistencies between the number of properties  approved for acquisition and the number actually acquired and followed  up with FEMA officials for an explanation of any differences.
The property acquisition data FEMA provided for the FMA program  differentiated acquisition-only projects, and mixed mitigation projects, or  projects that mitigate flood-prone properties through acquisition and  additional mitigation strategies, such as property elevation. We did not  attempt to verify the categorization of acquisition-only or mixed mitigation  projects but presented them as provided by FEMA.
For the RFC program, which started in 2006, FEMA provided data on  properties acquired (through closed projects) from regional FEMA offices,  which keep such data in electronic spreadsheets or paper files. We did not  attempt to verify the accuracy of this information.
section_title: Analysis of Extent to Which FEMA Followed Monitoring Procedures for Selected NFIP Contracts
paragraphs: To obtain information on the procedures FEMA uses to monitor its NFIP- related contracts, we reviewed contracts awarded in support of NFIP,  federal acquisition regulations, a surveillance plan, performance  standards, and the template for discrepancy reports (which FEMA requires  a Contracting Officer to issue when a contractor fails to meet its  performance standards). For selected contracts, we interviewed FEMA  officials and staff with responsibility for issuing and overseeing  contracts—the Contracting Officer, the manager of FEMA’s Program  Management Office, the Contracting Officer’s Technical Representatives  (COTR) for each contract we reviewed, and monitors—as well as  contractors.
To determine how effectively FEMA followed its monthly monitoring  procedures, we focused upon the contract for FEMA’s Bureau and  Statistical Agent (BSA), which is responsible for collecting and reporting  on financial and statistical data for the NFIP. First, we collected  documentation of monthly monitoring reports for the period from October  2005 through May 2007 to determine if the reports were submitted by  monitors to the appropriate office in a timely manner. We then compared  these reports with the contract-specified performance standards to see if  FEMA reported on each standard and to assess the extent to which FEMA  determined whether the contractor met performance standards. We asked  FEMA officials to provide an explanation of missing reports and explain  why discrepancy reports were not required when performance standards  were not met. In August 2007, we were provided with a Contract  Administration Plan for the BSA contract, dated July 25, 2007 (nearly 22  months after the contract award date) that documented the contract  administration process.
During the course of our work, we learned the NFIP’s Direct Servicing  Agent (DSA) contractor had received multiple discrepancy reports from  FEMA. To determine if FEMA had followed its stated policies and  procedures for addressing deficiencies identified through monitoring, we  obtained copies of the discrepancy reports written for the DSA contractor,  documentation of the contractor’s responses to the reports, and  documentation of financial penalties made against the contractor. We also  interviewed the Contracting Officer, the manager of FEMA’s Program  Management Office, the COTRs for each contract we reviewed – as well as  contractors.
We conducted this performance audit in Atlanta, Georgia; Lanham,  Maryland; and Washington, D.C., from March 2007 to June 2008 in  accordance with 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 on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: National Flood Insurance Program Statistics, 1997–2006
paragraphs: Under the NFIP, homeowners with mortgages from federally regulated  lenders on property in communities identified to be in high-risk flood  zones are required to purchase flood insurance for at least the outstanding  mortgage amount, up to the maximum policy limit of $250,000. NFIP  covers both residential and commercial properties. However, residential  (defined as single- and two-four family dwellings) and condominium  properties account for more than 90 percent of all policies in force.  Optional, lower-cost coverage also is available under NFIP to protect  homes in zones designated as moderate- to low-risk. In addition to  building coverage, NFIP offers policies to protect personal property  (“contents”) against flood damage, up to a maximum of $100,000.
The tables and figures in this appendix provide selected information for  the period we analyzed on    policies in force,   insurance coverage amounts,    premiums,    claims, and  losses by calendar year.
Tables and figures (see tables 9, 10, 11, 12, 13, 14, 15, and 16 and figures 7  and 8) in appendix II include all data unless specified otherwise. In  addition, we provide data on estimates for historical loss years. The  estimates are used as one indicator to help set annual premiums in NFIP  that would be sufficient to pay for the average level of losses that occurred  in past years.
Both the average loss per policy and the average loss per claim fluctuated  from 1997 through 2006 (See figure 8 and table 13). The average loss per  flood insurance claim is the amount that NFIP pays to settle the average  claim. The loss per claim (for all flood insurance policy types) averaged  around $19,000 from 1998 through 2000, but fluctuated more widely since  2001, with peaks in 2001 as a result of Tropical Storm Allison and in 2005  (at more than $84,000) as a result of the Gulf Coast Hurricanes.
According to FEMA, from 2000 through 2004 the average loss per flood  insurance policy in force varied from about $82 to about $567. The average  annual loss per policy increased significantly in 2005 as a result of the Gulf  Coast Hurricanes to $4,189 (See table 14).
As shown in table 16, the average historical loss year estimates has  increased each year except 2001 and 2003.
section_title: Appendix III: National Flood Insurance Program Statistics by Flood Zone, 1997–2006
paragraphs: FEMA’s NFIP studies and maps flood risks, assigning 12 flood zone  designations based on the risk level for flooding. We combined FEMA’s  flood zone designations into four groups relating to risk levels (see   table 17). FEMA agreed with the way we combined the designations.
NFIP incorporates the flood zones into Flood Insurance Rate Maps— which also show land elevations and floodplain boundaries—and uses the  maps to manage flood risks and help set insurance rates. More specifically,  more than 20,300 communities participating in NFIP adopt and enforce the  program’s minimum building standards for new construction within  identified floodplains; NFIP also uses the maps to help set flood insurance  policy rates for properties in a given area based on the designated flood  risks. Further, federally regulated mortgage lenders use the maps to  identify those property owners who are required to purchase federal flood  insurance.
To present additional detailed information on NFIP trends, we collated our  analyses of policies in force, insurance amounts, premiums, losses, and  other information by flood zone in this appendix. For the purposes of our  analysis, the tables and figures in this appendix also include the  Emergency Program as a zone. The Emergency Program is the initial  phase of a community’s participation in the NFIP and was designed to  provide a limited amount of insurance at less than actuarial rates. A  community participating in the Emergency Program either does not have  an identified and mapped flood hazard or has been provided with a Flood  Hazard Boundary Map. According to FEMA officials, flood zone  designations are not assigned to policyholders that are in the Emergency  Program. As a result, FEMA captures data on these policies by referring to  their Emergency Program status. Additionally, the FEMA contractor  responsible for collection and analysis of NFIP data uses a coding  designation of Zone “O” for policies for which flood zone information is  missing or erroneous. That is, Zone “O” is not a FEMA flood zone but  rather is used to help code data. The tables and figures in this appendix  include Emergency Program and Zone O data unless otherwise indicated.
The number of policies in force increased to the greatest extent (64  percent) in the moderate- to low-risk flood zone and to the least extent (24  percent) in the high-risk. More specifically, policies in force increased  steeply in the moderate- to low-risk flood zone following the Gulf Coast  hurricanes in 2005 (see fig. 9 and table 18) as more property owners  purchased flood policies. However, as mentioned earlier, a FEMA  commissioned study found the penetration rate outside of the high-risk  areas to be about 1 percent.
The average amount of flood insurance purchased gradually increased in  the high risk and moderate- to low-risk zones from 1997 through 2006 (see  fig. 10 and table 19). Flood-insurance policyholders in the moderate- to  low-risk flood zones consistently purchased on average a higher amount of  flood insurance than policyholders in the high-risk and high-risk coastal  flood zones. As we mentioned previously, premiums in this zone tend to  be more affordable and FEMA has been marketing in these areas through  its FloodSmart program (see table 20).
Approximately 73 percent of the $26 billion in losses paid from 1997  through 2006 were for properties in the high-risk flood zone, followed by  24 percent in moderate- to low-risk zones, and 3 percent for properties in  the high-risk coastal zones. Over time, losses consistently were highest in  the high-risk zone. As figure 11 illustrates, for all three of the flood zones  analyzed, losses peaked in 2005 as a result of the Gulf Coast hurricanes.  See table 21 for supporting data.
For single- and two-four family homes, average losses per claim were  generally highest in the high-risk zone from 1997 to 2006 (see fig. 12 and  table 22). For all three of the flood zones analyzed average losses peaked  in 2005.
section_title: Appendix IV: National Flood Insurance Program Statistics by Occupancy Type, 1997–2006
paragraphs: Policies under the NFIP insure buildings categorized into five different  occupancy types: single-family, two-four family unit, condominium, other  residential, and nonresidential. Other residential includes long-stay hotels  or motels and rooming houses. Nonresidential includes small businesses,  churches, schools, warehouses, short-stay hotels and motels, and nursing  homes. We focused our analysis on the residential (single- and two-four  family units) and condominium occupancy types because more than 90  percent of the policies in force each year (from 1997 through 2006) were  for those occupancy types. Both the owners of units and condominium  associations can take out policies. That is, while a condominium unit  owner may purchase flood insurance for the unit, a condominium  association could purchase coverage for all of the units in a condominium  community.
To present additional detailed information on NFIP policy trends, we  collated our analysis of policies in force, insurance amounts, premiums,  and losses by occupancy type. In this appendix, residential includes all  single- and two-four family residences, excluding condominiums.  Condominium includes policies that are purchased by condominium  associations, which may cover all residential units within that association,  as well as policies purchased by individual unit owners. The Emergency  Program is separated out, or excluded, in some tables since it is through  this program that properties enter NFIP, and participation in this program  is temporary. Statistics by occupancy type are presented in tables 23, 24,  25, 26, and 27 and figures 13 and 14.
section_title: Appendix V: National Flood Insurance Program Statistics for Hurricane-Related Losses and Repetitive Loss Properties
paragraphs: This appendix presents statistics related to the percentage of losses under  the program attributable to hurricanes (see table 28), as well as certain  properties insured under NFIP of FEMA (see table 29). Repetitive loss  properties are those with two or more flood insurance claims filed against  them in a 10-year period. FEMA does not collect annual data on the  number of repetitive loss properties, the number of losses paid out on  repetitive loss properties, or the total amount paid out on repetitive loss  properties. Rather, FEMA data on repetitive loss properties are  cumulative. For every loss that NFIP pays out, information is collected on  the reason for the flood loss, including whether the loss was related to a  significant flooding event. To determine whether losses were related to a  hurricane, FEMA’s BSA (the contractor responsible for collecting,  analyzing, and reporting NFIP financial and statistical data) identified the  significant flooding events that were hurricanes from 1997 through 2006.
section_title: Appendix VI: Flood-Related Damages
paragraphs: Under NFIP flood insurance can be purchased through policies with  building-only coverage, contents-only coverage, or both building and  contents coverage. For each coverage type, a policyholder can purchase  up to the maximum amount of coverage, depending on the type of  structure that they are insuring, and whether it is in the Emergency or  Regular Program. NFIP also offers group flood insurance policies to  recipients of disaster assistance (generally low-income persons), which  provide coverage for 3 years following a flood loss. We excluded data on  these policies from our analysis because they have coverage limits that  differ from other flood insurance policies.
According to FEMA information, data on the amount of flood-related  damages that insured properties received are available for more than 99  percent of all claims filed from 1997 through 2004, and 97 percent of all  claims filed in 2005 for policies that were purchased at the insurance limit.  However, the reliability of available damage data is uncertain. According  to FEMA guidance found in the NFIP Transaction Record Reporting and  Processing (TRRP) Plan for the Write Your Own (WYO) Program, WYO  insurers are required to report “Total Building Damages” and “Total  Content Damages” to NFIP. Furthermore, FEMA guidance states that the  amounts WYO insurers report to NFIP are not limited to the amount of  insurance coverage on the property. However, a 2006 report that FEMA  commissioned on NFIP states that in cases where the amount of flood  insurance carried was less than the amount of damages, adjusters did not  determine losses above the limit. Rather, the adjusters only recorded the  losses needed to reach the limit. Therefore, the use of FEMA data to  determine the number of claims and the dollars by which damages exceed  the insurance limit (tables 30 to 37) is likely to result in an undercount.
For single- and two-four family flood insurance policies with building-only,  or both building and contents coverage that were purchased at the  insurance limit, damage data were available (see table 30) for more than  99 percent of claims filed from 1997 through 2004 and damage data was  available for about 98 percent of claims filed for policies with contents- only coverage. For policies with building-only, or both building and  contents coverage, damage data were available (see table 31) for almost all  claims filed in 2005, damage data was available for about 33 percent of the  claims filed with contents-only coverage.
For single- and two-four family flood insurance policies with building-only,  or both building and contents coverage (see table 32) that were purchased  at less than the insurance limit, damage data were available for more than  99 percent of claims filed from 1997 through 2004 and damage data was  available for about 98 percent of claims filed for policies with contents- only coverage. For policies with building-only coverage, or both building  and contents coverage (see table 33), damage data were available for  almost all claims filed in 2005, damage data was available for 39 percent of  the claims filed with contents-only coverage.
According to NFIP data, properties insured for the maximum flood  insurance available and with damage claims that exceeded the insurance  maximum represented from 0 to 17 percent of claims filed from 1997  through 2004 (see table 34), and from 1 to 57 percent of claims filed in  2005 (see table 35), depending upon the type of flood insurance coverage  and the type of structure insured.
Similarly, properties insured for less than the maximum flood insurance  available and with damage claims that exceeded the amount of insurance  purchased represented from less than 1 to more than 27 percent of claims  filed from 1997 through 2004 (see table 36), and from 5 to 71 percent of  claims filed in 2005 (see table 37), depending upon the type of flood  insurance coverage and the type of structure insured.
section_title: Appendix VII: Definitions of Flood Zones
paragraphs: Zone V: Areas along coasts subject to inundation by the 1-percent-annual- chance flood event with additional hazards associated with storm-induced  waves. Because detailed hydraulic analyses have not been performed, no  Base Flood Elevations (BFE) or flood depths are shown. Mandatory flood  insurance purchase requirements apply.
Zones VE and V1-V30: Areas along coasts subject to inundation by the 1- percent-annual-chance flood event with additional hazards due to storm- induced velocity wave action. BFEs derived from detailed hydraulic  analyses are shown within these zones. Mandatory flood insurance  purchase requirements apply. (Zone VE is used on new and revised maps  in place of Zones V1-V30.)
Zone A: Areas subject to inundation by the 1-percent-annual-chance flood  event. Because detailed hydraulic analyses have not been performed, no  BFEs or flood depths are shown. Mandatory flood insurance purchase  requirements apply.
Zones AE and A1-A30: Areas subject to inundation by the 1-percent- annual-chance flood event determined by detailed methods. BFEs are  shown within these zones. Mandatory flood insurance purchase  requirements apply. (Zone AE is used on new and revised maps in place of  Zones A1-A30.)
Zone AH: Areas subject to inundation by the 1-percent-annual-chance  shallow flooding (usually areas of ponding) where average depths are  between 1 and 3 feet. BFEs derived from detailed hydraulic analyses are  shown in this zone. Mandatory flood insurance purchase requirements  apply.
Zone AO: Areas subject to inundation by the 1-percent-annual-chance  shallow flooding (usually sheet flow on sloping terrain) where average  depths are between 1 and 3 feet. Average flood depths derived from  detailed hydraulic analyses are shown within this zone. Mandatory flood  insurance purchase requirements apply.
Zone A99: Areas subject to inundation by the 1-percent-annual-chance  flood event, but which will ultimately be protected upon completion of an  under-construction federal flood protection system. These are areas of  special flood hazard where enough progress has been made on the  construction of a protection system, such as a dikes, dams, or levees, to  consider it complete for insurance rating purposes. Zone A99 may only be  used when the flood protection system has reached specified statutory  progress toward completion. No BFEs or flood depths are shown.  Mandatory flood insurance purchase requirements apply.
Zone AR: Areas that result from the decertification of a previously  accredited flood protection system that is determined to be in the process  of being restored to provide base flood protection. Mandatory flood  insurance purchase requirements apply.
Zones AR/AE, AR/AH, AR/AO, AR/A1-A30, AR/A: Dual flood zones  that, because of the risk of flooding from other water sources that the  flood protection system does not contain, will continue to be subject to  flooding after the flood protection system is adequately restored.  Mandatory flood insurance purchase requirements apply.
Zones B, C, and X: Areas identified in the community Flood Insurance  Study (FIS) as areas of moderate or minimal hazard from the principal  source of flood in the area. However, buildings in these zones could be  flooded by severe, concentrated rainfall coupled with inadequate local  drainage systems. Local stormwater drainage systems are not normally  considered in the community’s FIS. The failure of a local drainage system  creates areas of high flood risk within these rate zones. Flood insurance is  available in participating communities but is not required by regulation in  these zones. (Zone X is used on new and revised maps in place of Zones B  and C.)
Zone D: Unstudied areas where flood hazards are undetermined, but  flooding is possible. No mandatory flood insurance purchase requirements  apply, but coverage is available in participating communities.
In addition, the FEMA contractor responsible for collection and analysis of  NFIP data uses two additional designations when collecting and reporting  data by flood zone.  Zone “O” (Other) is not a flood zone designation;  rather it is used to indicate missing or erroneous data for policies.  Policies  under FEMA’s Emergency Program, which is the program through which  communities enter NFIP, also do not have designated flood zones.   Instead, the FEMA contractor captures data on the policies by using their  Emergency Program status.
section_title: Appendix VIII: Comments from the Federal Emergency Management Agency
section_title: Appendix IX: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Lawrence Cluff, Assistant  Director; Verginie Amirkhanian; Crystal Swain-Bates; William (Rudy)  Chatlos; May Lee; Lisa Moore; Barbara Roesmann; Christine San; Paul  Thompson; Shamiah Woods; and William T. Woods made significant  contributions to this report.