Homeland Security: DHS Improved its Risk-Based Grant Programs' Allocation and Management Methods, But Measuring Programs' Impact on National Capabilities Remains a Challenge
Published: 2008-03-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 2002, the Department of Homeland Security (DHS) has distributed over $19 billion in homeland security grants to enhance the nation's preparedness and response capabilities. The Federal Emergency Management Agency (FEMA) is responsible for all preparedness efforts including allocating and managing these grants. This testimony examines (1) the process and methods to allocate homeland security grants to state and local governments, (2) how DHS communicates with states and localities in making grant allocation decisions, (3) what challenges affect the expeditious spending of DHS grant funds by states and localities; and (4) the extent that DHS measured program outcomes as part of its efforts to monitor the expenditure of grant dollars. GAO's testimony is based on products issued from April 2005 through July 2007 on DHS's grant management system, and on GAO's ongoing mandated work related to FEMA's risk-based grant distribution processes for fiscal years 2007 and 2008. To conduct this work, GAO reviewed relevant documents on FEMA's risk analysis model and interviewed agency officials.
section_title: What GAO Found
paragraphs: DHS uses an evolving risk-based methodology to identify the urban areas eligible for homeland security grants and the amount of funds states and urban areas receive. DHS designed the methodology to measure the relative risk of a given state or urban area using a risk analysis model that defined Risk as the product of Threat times Vulnerability and Consequences (R = T * (V & C)). Given the uncertainties inherent in risk assessment, the methodology uses a combination of empirical data (e.g., population, asset location) and policy judgment (e.g., the nature of the threat for specific areas and the weights to be assigned to specific variables in the model such as critical infrastructure, population, and population density). According to FEMA officials and GAO's review of homeland security grant assistance documents, FEMA communicates with its state and local stakeholders by (1) providing individual threat assessments that DHS is using for its risk analysis model to each state and urban area, (2) validating the nonpublic national infrastructure data that are also part of the risk analysis model, (3) reviewing states' and urban areas' draft investment proposals that are later submitted and rated during DHS's effectiveness assessment process, (4) providing technical assistance as states and urban areas prepare grant applications, and (5) holding post-award conferences to solicit stakeholder feedback. In April 2005, GAO reported that the ability of states and localities to spend grant funds expeditiously was complicated by the need to fulfill legal and procurement requirements, which in some cases added months to the purchasing process. GAO also reported a variety of steps that had been taken by states, DHS, and the Congress to streamline the expenditure of grant funds. However, GAO was unable to examine trends in obligations and expenditures for grant programs across fiscal years because the budget data FEMA provided did not specify grant expenditures by fiscal year and reporting categories were not consistent across fiscal years. Although DHS has taken some steps to establish goals, gather information, and measure progress, its monitoring of homeland security grant expenditures does not provide a means to measure the achievement of desired program outcomes. FEMA's current efforts do not provide information on the effectiveness of those funds in improving the nation's capabilities or reducing risk. DHS leadership has identified this issue as a high priority, and is trying to develop a more quantitative approach to accomplish the goal of using this information for the more strategic purpose of monitoring the achievement of program goals, according to FEMA officials.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss the allocation and use of federal  grants to enhance the nation’s preparedness for and response to major and  catastrophic disasters. The goal of disaster preparedness and response is  easy to state but difficult to achieve and can be stated as follows:  To prevent where possible, prepare for, mitigate, and respond to  disasters of any size or cause with well-planned, well-coordinated, and  effective actions that minimize the loss of life and property and set the  stage for a quick recovery.
Achieving this goal for major and catastrophic disasters is a difficult task.  It takes hard work, attention to details, and effective pre- and postdisaster  coordination and cooperation among different levels of government,  nongovernmental organizations, and the private sector. Individuals can  also contribute to success through such things as knowing evacuation  routes, complying with evacuation orders, and having a family and  individual disaster preparation plan and supplies.
Homeland security grants are the federal government’s primary tool for  enhancing state, local, and tribal governments’ emergency preparedness  and response capabilities. Since 2002, the Department of Homeland  Security (DHS) has distributed over $19 billion in federal funding for  planning, equipment, and training to enhance the nation’s capabilities to  respond to terrorist attacks and, to a lesser extent, natural and accidental  disasters. The Post-Katrina Emergency Management Reform Act places  responsibility for allocating and managing DHS grants with the Federal  Emergency Management Agency (FEMA). Prior to the act, the  organization within DHS principally responsible for administering such  grants had no operational responsibilities for disaster response. The act  also includes provisions to strengthen FEMA’s organizational capacity to  coordinate with states and localities in preparing for and responding to  major and catastrophic disasters regardless of cause by consolidating  federal emergency preparedness and response responsibilities and  authorities within FEMA. Now that FEMA has the consolidated  responsibilities and associated authorities for national emergency  preparedness, the agency has a unique opportunity to evaluate how it can  most effectively target the grants by viewing the grant programs  collectively, rather than only in terms of the individual programs’  objectives.
My statement describes GAO’s past work as well as ongoing work on  DHS’s grant management system, specifically, the grant management  efforts that are now the responsibility of FEMA and addresses the  following questions:   (1) What methods does DHS use to allocate homeland security  grants to state and local governments?  (2) How does DHS communicate with states and localities in  making federal grant allocation decisions?   (3) What are the challenges that affect the expeditious spending of  DHS grant funds by states and localities?  (4) To what extent does DHS measure program outcomes as part  of its efforts to monitor the expenditure of grant dollars?
My comments are based on GAO’s historical body of work on DHS grants  management, including prior reviews of DHS’s (1) risk management  efforts, (2) methodology for allocating Urban Area Security Initiative  (UASI) grants for fiscal years 2006 and 2007, (3) processes for managing  their state homeland security and transportation sector-specific grants,  and (4) preparedness for disasters, including FEMA’s reorganization based  on the Post-Katrina Reform Act. In addition, my comments are based on  our ongoing mandated work examining the risk-based grant distribution  processes used by FEMA to distribute the fiscal year 2008 Homeland  Security Grant Program (HSGP). This program includes the UASI grants as  well as the State Homeland Security Program (SHSP) which provides  funding for state, local, and tribal governments. For our ongoing work, we  analyzed DHS documents including the fiscal years 2007 and 2008 risk  analysis models, grant guidance, and presentations, and interviewed DHS  officials about the HSGP grant determination process in fiscal year 2007 as  well as any changes to the fiscal year 2008 process. We conducted this  work according to generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based 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: Risk management has been endorsed by the Congress, the President, and  Secretary of DHS as a way to direct finite resources to those areas that are  most at risk of terrorist attack under conditions of uncertainty. The  purpose of risk management is not to eliminate all risks, as that is an  impossible task. Rather, given limited resources, risk management is a  structured means of making informed trade-offs and choices about how to  use available resources effectively and monitoring the effect of those  choices. Thus, risk management is a continuous process that includes the  assessment of threats, vulnerabilities, and consequences to determine  what actions should be taken to reduce or eliminate one or more of these  elements of risk. Risk management includes a feedback loop that  continually incorporates new information, such as changing threats or the  effect of actions taken to reduce or eliminate identified threats,  vulnerabilities, and/or consequences. Because we have imperfect  information for assessing risks, there is a degree of uncertainty in the  information used for risk assessments (e.g., what the threats are and how  likely they are to be realized). As a result, it is inevitable that assumptions  and policy judgments must be used in risk analysis and management. It is  important that key decision makers understand the basis for those  assumptions and policy judgments and their effect on the results of the  risk analysis and the resource decisions based on that analysis.
Since fiscal year 2006, DHS has applied a three-step process which  incorporates analyses of risk and effectiveness, to select eligible urban  areas and allocate UASI and SHSP funds (see fig. 1):  1.  Implementation of a risk analysis model to calculate scores for states  and urban areas, defining relative Risk, as the product of Threat,  Vulnerability, and Consequences.  2.  Implementation of an effectiveness assessment, including a peer  review process, to assess and score the effectiveness of the proposed  investments submitted by the eligible applicants.  3.  Calculation of a final allocation of funds based on states’ and urban  areas’ risk scores as adjusted by their effectiveness scores.
As a result of the Post-Katrina Emergency Reform Act, FEMA is now  responsible for the nation’s homeland security preparedness effort to  define what needs to be done, where, and by whom (roles and  responsibilities); how it should be done; and how well it should be done— that is, according to what standards. This is a complex but critically  important responsibility. The principal national documents designed to  address each of these are, respectively, the National Response Framework  (and its associated annexes), the National Incident Management System,  and the National Preparedness Guidelines. To develop preparedness goals  and determine the tasks and capabilities needed by first responders on a  nationwide basis, DHS used an approach known as capabilities-based  planning to develop the national Target Capabilities List. The list includes  specific goals, requirements, and metrics for 36 capabilities needed at the  local, state, or federal level to prepare for, respond to, and recover from  natural or man-made disasters. DHS defined these capabilities generically  and expressed them in terms of desired operational outcomes and  essential characteristics, rather than dictating specific, quantifiable  responsibilities to the various jurisdictions. Because no single jurisdiction  or agency would be expected to perform every task, possession of a target  capability could involve enhancing and maintaining local resources,  ensuring access to regional and federal resources, or some combination of  the two. The original list has since been refined, and FEMA released the  most recent version of the list, with 37 capabilities, in September 2007.
The Implementing Recommendations of the 9/11 Commission Act (9/11  Act) of 2007 further defined FEMA’s role and coordination processes for  working with states and urban areas in awarding homeland security  grants. For example, the 9/11 Act requires FEMA to provide eligible  metropolitan areas with the opportunity to submit relevant information  prior to FEMA’s initial assessment of the relative threat, vulnerability, and  consequences each area faces from acts of terrorism. This opportunity is  to allow potential grantees to correct any erroneous or incomplete  information that will be the basis of FEMA’s initial assessment.
section_title: DHS Has Used an Evolving Risk-Based Methodology to Allocate Federal Grant Funds
paragraphs: DHS has used an evolving risk-based methodology to identify the states  and urban areas eligible for HSGP grants and the amount of funds they  receive. For example, the fiscal year 2005 risk analysis model largely relied  on measures of population and population density to determine the  relative risk of potential grant recipients. The fiscal year 2006 process  introduced assessments of threat, vulnerability and consequences of a  terrorist attack in assessing risk. The fiscal year 2006 risk analysis model  estimated relative risk from two perspectives—asset-based and  geographic—then combined the assessments, assigning twice as much  weight to geographic as asset-based risk. In DHS’s view, asset-based and  geographic risks are complementary and provide a “micro- and macro-”  perspective of risk, respectively. In calculating these relative risk scores  and addressing the uncertainties in estimating relative risk, policy and  analytic judgments were required. For example, according to DHS  officials, DHS made the judgment to assign geographic risk a weight of 1.0  and asset-based risk a weight of 0.5, since a potential loss of lives within  an area would contribute to how geographic risk is assessed. Some of the  factors used in the fiscal year 2006 risk analysis model included: the  number of specific types of reports or events, such as reports of  suspicious incidents; the number of visitors a state or urban area received  from countries of interest; and population. In addition to modifications to  DHS’s risk analysis model, DHS adopted an effectiveness assessment for  fiscal year 2006 to determine the anticipated effectiveness of the various  risk mitigation investments urban areas proposed, which affected the final  amount of funds awarded to eligible areas.
The risk analysis method for fiscal year 2007—which is largely unchanged  for fiscal year 2008, according to our ongoing work—was changed  substantially from the fiscal year 2006 process, and further exemplifies the  continuing evolution in DHS’s approach to its risk methodology for grant  allocation. Given the uncertainties inherent in risk assessment, the  methodology uses a combination of empirical data (e.g., population, asset  location) and policy judgment (e.g., the nature of the threat for specific  areas and the weights to be assigned to specific variables in the model  such as critical infrastructure, and population and population density).  According to DHS officials, the fiscal year 2007 risk analysis model  integrates the separate analyses for asset-based and geographic-based risk  used in fiscal year 2006, and includes more sensitivity analysis in  determining what the final results of its risk analysis should be. DHS  officials said the primary goal was to make the process more transparent  and more easily understood, focusing on key variables and incorporating  comments from a variety of stakeholders regarding the fiscal year 2006  process. Figure 2 provides an overview of the factors included in the risk  analysis model for fiscal year 2007 and, according to our ongoing work, for  fiscal year 2008 and their relative weights. The maximum relative risk  score possible for a given area was 100. The Threat Index accounted for 20  percent of the total risk score; Vulnerability and Consequences accounted  for 80 percent. For the purposes of the model, DHS considered all areas of  the nation equally vulnerable to attack and assigned every state and urban  area a vulnerability score of 1.0. Thus, as a practical matter, the final risk  score for fiscal years 2007 and 2008 is determined by the threat and  consequences scores.
Threat: The Threat Index accounted for 20 percent of the total risk score,  which was calculated by the intelligence community by assessing threat  information for multiple years (generally, from 9/11 forward) for all  candidate urban areas and categorizing urban areas into one of four tiers.  Tier I included those at highest threat, relative to the other areas, and tier  IV included those at lowest threat relative to the others. DHS’s Office of  Intelligence and Analysis performed this review and provided these threat  assessments and corresponding threat values for each urban area. In  contrast, for the 2006 grant cycle, DHS used total counts of threats and  suspicious incidents and incorporated these into its model. The final threat  assessments are approved by the intelligence community—the Federal  Bureau of Investigation, Central Intelligence Agency, National Counter- Terrorism Center, and the Defense Intelligence Agency—along with the  DHS Under Secretary for Intelligence & Analysis and the Secretary of DHS,  according to DHS officials.
Vulnerability and Consequences: Vulnerability and Consequences  accounted for 80 percent of the total risk score and were represented by  the following four indices:     Population Index (40 percent): This variable included nighttime  population and military dependant populations for states and urban  areas, based upon U.S. Census Bureau and Department of Defense  inputs. In addition, for urban areas, population density, commuters,  and visitors were also factored into this variable, using data from  private entities.
Economic Index (20 percent): This variable considered the  economic value of the goods and services produced in either a state  or an urban area. For states, this index was calculated using U.S.  Department of Commerce data on their percentage contribution to  Gross Domestic Product. For UASI urban areas, a parallel  calculation of Gross Metropolitan Product was incorporated.
National Infrastructure Index (15 percent): This variable focused on  over 2,000 Tier I and Tier II critical infrastructure/key resource  assets that were identified by DHS’s Office of Infrastructure  Protection. Tier I assets or systems are those that if attacked could  trigger major national or regional impacts similar to those  experienced during Hurricane Katrina or 9/11. Tier II assets are  other highly consequential assets with potential national or regional  impacts if attacked.
National Security Index (5 percent): This variable considered the  presence of three key national security factors: whether military  bases are present in the state or urban area; how many critical  defense industrial base facilities are located in the state or urban  area; and the total number of people traversing international  borders. Information on these inputs comes from the Department of  Defense and DHS.
To assess vulnerability and consequences, DHS specifically wanted to  capture key land and sea ports of entry into the United States and the  location of defense industrial base facilities and nationally critical  infrastructure facilities. For fiscal year 2007 and, according to our  ongoing work, for fiscal year 2008, DHS considered most areas of the  country equally vulnerable to a terrorist attack, given freedom of  movement within the nation; and focused on the seriousness of the  consequences of a successful terrorist attack. Nationwide more than 2,000  critical infrastructure assets were included in the risk model and selected  on the basis of analysis by DHS infrastructure protection analysts, sector- specific federal agencies, and the states. According to DHS, these critical  infrastructure assets were grouped into two tiers: Tier 1 assets  encompassed those that if attacked could cause major national or regional  impacts similar to those from Hurricane Katrina or 9/11, while Tier 2  assets were those with potential national or regional impacts if attacked.  On the basis of DHS’s Office of Infrastructure Protection analysis, Tier I  assets were weighted using an average value three times as great as Tier II  assets. According to DHS officials, defense industrial base assets were  included in the national security index and all other assets in the national  infrastructure index.
Effectiveness Assessment Used to Adjust Risk Scores  Since fiscal year 2006, DHS has also implemented an Effectiveness  Assessment to assess and score the effectiveness of the proposed  investments submitted by grant applicants in addition to determining  relative risk using the risk analysis model. This effectiveness assessment  process has remained largely unchanged since it was first introduced by  DHS. To assess the anticipated effectiveness of the various risk mitigation  investments that states and urban areas proposed, DHS required states  and urban areas to submit investment justifications as part of their grant  application. The investment justifications included up to 15 “investments”  or proposed solutions to address homeland security needs, which were  identified by the states and urban areas through their strategic planning  process. DHS used subject-matter experts as peer reviewers to assess  these investment justifications. The criteria reviewers used to score the  investment justifications included the following categories: relevance to  the National Preparedness Guidance and to state and local homeland  security plans, anticipated impact, sustainability, regionalism, and the  implementation of each proposed investment. Reviewers on each panel  assigned scores for these investment justifications, which according to  DHS officials were averaged to determine a final effectiveness score for  each state and urban area applicant. DHS then used these effectiveness  assessment scores to calculate the final allocation of funds to states and  urban areas.
section_title: DHS Has a Variety of Mechanisms in Place to Communicate with States and Localities about Grant Allocation Decisions
paragraphs: According to DHS officials and HSGP grant assistance documents we  reviewed, DHS communicates with its state and local stakeholders by: (1)  providing to each state and urban area the individual threat assessments  that DHS is using to calculate the risk analysis model’s Threat Index; (2)  validating the nonpublic, critical infrastructure assets that comprise the  risk analysis model’s National Infrastructure Index; (3) providing midpoint  reviews of states’ and urban areas’ draft investment justification proposals  that are later reviewed during DHS’s effectiveness assessment process; (4)  providing technical assistance as states and urban areas prepare the  documentation for their grant applications; and (5) convening conferences  to solicit stakeholder feedback.
DHS provides threat assessments for state and urban areas. DHS’s  Office of Intelligence and Analysis (I&A) officials said they develop and  provide threat assessments to the states’ and urban areas’ grant applicants  prior to the grant application process for their review. State and urban  area strategic planning and grant planning officials use this information to  develop their grant investment justifications, according to DHS officials.  I&A officials said they provide secret and nonsecret versions of the  information so that state or urban area officials who do not have the  appropriate clearances required to view the secret version of their threat  assessments will still have access to some of the threat information. They  said they are working with local law enforcement agencies on a way to  address such clearance issues.
DHS validates the nonpublic, critical infrastructure assets used in  the risk analysis model. DHS officials also said that the agency uses a  collaborative, multistep process to create a list of national critical  infrastructure assets for use in the National Infrastructure Index, one of  the four indices that comprise the Vulnerability and Consequences  component of the risk analysis model. According to DHS officials, they use  a step-by-step process to identify the nation’s Tier 1 and Tier 2 critical  infrastructure assets. First, DHS’s Office of Infrastructure Protection (OIP)  works with sector-specific agencies to develop criteria used to determine  which assets should be placed in a threat tier. Second, private-sector  companies vet the criteria through sector-specific councils that review the  criteria and provide feedback to DHS OIP. Third, the infrastructure office  finalizes the criteria list and provides the list to the sector-specific  agencies and asks states to nominate assets within their jurisdictions that  match the criteria. Finally, the infrastructure office and the sector-specific  agencies review nominated assets to decide which assets comprise the  final Tier 1/Tier 2 list. In 2007, DHS began to allow sector-specific agencies  to resubmit for reconsideration assets that are not initially selected for the  list to ensure the consideration of potential critical infrastructure assets in  future years.
Enacted in August 2007, the 9/11 Act required DHS to provide eligible  metropolitan areas with the opportunity to submit information that they  believe to be relevant to the determination of the threat, vulnerability, and  consequences they face from acts of terrorism, prior to FEMA conducting  each initial assessment, so that any erroneous or incomplete information  can be corrected. According to FEMA officials, DHS implemented this  provision mainly through the outreach and communication efforts  described above.
DHS provides midpoint reviews of states’ and urban areas’  investment proposals. FEMA officials said that, for the fiscal year 2007  effectiveness assessment process, DHS offered a midpoint technical  review of states’ and urban areas’ draft 2007 Investment Justifications  prior to the formal submission of these proposals to FEMA’s peer review  process. DHS officials said that they performed an after-action analysis of  this effort and found states and urban areas that made use of the midpoint  reviews had effectiveness scores that on average were 6 percent higher  than those for states and urban areas that did not take advantage of this  DHS service.
DHS provides technical assistance as states and urban areas  prepare investment documentation. DHS also provides Program  Management Technical Assistance, and Investment Planning Technical  Assistance workshops to assist states and urban areas. For example, the  Program Management Technical Assistance service is designed to help the  State Administrative Agency with day-to-day program management in  planning, managing, and evaluating state programs in the context of the  National Preparedness Guidance, according to DHS. They said Program  Management Technical Assistance helps state administrators use DHS’s  Program Management Handbook to manage programs that span agencies,  jurisdictions, and disciplines, including the private sector. DHS also offers  guidance on how to enhance existing state and urban area Homeland  Security Strategies and Enhancement Plans.
DHS convenes conferences to solicit stakeholder feedback. Finally,  DHS has convened conferences in an effort to solicit stakeholder feedback  after the fiscal years 2006 and 2007 grants were awarded. In July 2006,  DHS convened a Homeland Security Grant Program After-Action  conference to gather feedback on the UASI grant award process. DHS also  assembled working groups to discuss and assess homeland security  planning, the HSGP guidance and application, the risk assessment, and the  effectiveness assessment. DHS officials told us that the conference  provided a feedback loop intended to bolster stakeholder support and  promote transparency. The state and local partners who participated in  the working groups at the conference developed 32 recommendations to  improve the HSGP process. For example, one of the risk assessment  working group’s recommendations was that DHS should provide detailed  briefings to state and local partners on the core components of the risk  methodology used in the fiscal year 2006 process as one step to improve  the transparency of the risk analysis process. DHS also convened a similar  after-action conference in early August 2007 to solicit stakeholder  feedback on the fiscal year 2007 HSGP and hosted three regional  conferences in the fall of 2007 to foster collaboration among regional  partners and seek additional feedback.
section_title: Prior DHS Efforts Improved the Timeliness of Transferring Grant Funds to States and Localities
paragraphs: From fiscal years 2002 through 2007, DHS obligated about $19.6 billion in  grants, the purpose of which was to strengthen the capabilities of state,  local, and tribal governments and others to prepare for and respond to  major disasters of any type or cause. About $7 billion of this total was  unexpended as of January 2008. As might be expected, the more recent the  fiscal year, the higher the unexpended balance (see fig. 3). For example,  the Homeland Security and UASI grant awards are announced in May or  June of each year—or about 3 to 4 months before the end of the fiscal  year. The awards for fiscal year 2007 were announced in May 2007. Thus,  one would expect large unexpended balances for the most recent fiscal  year because the grant recipients would have had only a few months to  use their funds prior to the end of the fiscal year.
In 2005, we reported on DHS’s efforts to distribute grants and found that  the Congress, DHS, states, and localities had acted to expedite grant  awards and distribution by setting time limits for the grant application,  award, and distribution processes and by instituting other procedures.  We concluded that the ability of states and localities to spend grant funds  expeditiously was complicated by the need to fulfill state and local legal  and procurement requirements, which in some cases added months to the  purchasing process. We also reported that some states had modified their  procurement practices and DHS was identifying best practices to aid in the  effort, but challenges remained, such as continuing legal and procurement  requirements that slowed the process. For example, once the grant funds  are awarded to the states and then subgranted to the local jurisdictions or  urban areas, certain legal and procurement requirements may have to be  met, such as a city council’s approval to accept grant awards. Or, if the  state legislature must approve how the grant funds will be expended and is  not in session when the grant funds are awarded, it could take as long as 4  months to obtain state approval to spend the funds. We reported a variety  of steps that had been taken by states, DHS, and the Congress to  streamline the expenditure of grant funds. For example:    Some states, in conjunction with DHS, had modified their  procurement practices to expedite the procurement of equipment  and services by establishing centralized purchasing systems that  allow equipment and services to be purchased by the state on behalf  of local jurisdictions, freeing them from some local legal and  procurement requirements. Several states had developed statewide  procurement contracts that allow local jurisdictions to buy  equipment and services using a prenegotiated state contract.
DHS had enhanced equipment procurement options through  agreements with the U.S. Department of Defense’s Defense  Logistics Agency and the Marine Corps Systems Command, to allow  state and local jurisdictions to purchase equipment directly from  their prime vendors. These agreements provide an alternative to  state and local procurement processes and, according to DHS, often  result in a more rapid product delivery at a lower cost.
The fiscal year 2005 DHS appropriations legislation included a  provision that exempted formula-based grants (e.g., the State  Homeland Security Grant Program grants) and discretionary grants,  including the Urban Areas Security Initiative and other grants, from  requirements in the Cash Management Improvement Act that  provide for reimbursement to states and localities only after they  have incurred an obligation, such as a purchase order, to pay for  goods and services. Subsequent DHS guidance allowed states and  localities to draw down funds up to 120 days prior to expenditure.
We do not know the extent to which the actions that states and localities  have taken to address the obstacles that affected their ability to use funds  expeditiously (but effectively) have succeeded. We were unable to  examine trends in expended and unexpended obligations for individual  grants across fiscal years due to limitations in the budget data provided by  FEMA for this hearing. For example, we were unable to track HSGP  funding data across multiple fiscal years, such as the amount of fiscal year  2005 funds that were expended in fiscal years 2005, 2006, and 2007. In  addition, we found that reporting categories were not consistent across  fiscal years. Grant program data were collapsed in one fiscal year and  compiled differently in another year. According to one DHS official, while  the consolidation of all DHS grant programs into FEMA provides FEMA  with an opportunity to standardize and enhance its management of grant  allocation and distribution, this administrative transition has also resulted  in some reorganization of accounting functions, and institutionalizing the  maintenance of grant funding data is still being addressed at this time.  Whatever the cause, the inconsistency in reporting on grant expenditures  across fiscal years could hinder FEMA’s ability to provide the Congress  with information on trends in expenditures over time for specific grants.  As part of our ongoing work in reviewing DHS grant allocation and  management efforts, we plan to determine whether the data FEMA  maintains on grant expenditures across fiscal years allows FEMA to  analyze trends in grant obligations and expenditures.
section_title: DHS Does Not Yet Have a Means to Measure Program Outcomes to Further the Nation’s Homeland Security Preparedness Goals
paragraphs: While DHS has distributed over $19 billion in federal emergency  preparedness funding to states, localities, and territories since fiscal year  2002, and taken steps to gather information, establish goals and measures,  and measure progress, we still know little about how states have used  federal funds to build their capabilities or reduce risks. Nor do we know  how effective this national investment has been because DHS’s monitoring  of homeland security grant expenditures does not provide a means to  measure the achievement of desired program outcomes to strengthen the  nation’s homeland security capabilities. In March 2007, we testified before  this Committee that a comprehensive and in-depth oversight agenda  requires assessing state and local capabilities and the use of federal grants  in building and sustaining those capabilities. However, all levels of  government are still struggling to define and act on the answers to basic— but hardly simple—questions about emergency preparedness and  response: What is important (that is, what are our priorities)? How do we  know what is important (e.g., risk assessments, performance standards)?  How do we measure, attain, and sustain success? On what basis do we  make necessary trade-offs, given finite resources? DHS has limited  information on which to base the answers to these questions.
We have identified the need for such capabilities-based assessment and  reporting of the effectiveness of federal grant investments in several DHS  grant programs. For example, in our review of cargo tanker emergency  response in December 2007, we recommended that the Secretary of  Homeland Security work with federal, state, and local stakeholders to  develop explicit performance measures for emergency response  capabilities and use them in risk-based analyses to set priorities for DHS  grant programs in acquiring needed response resources. DHS responded  that it was taking the recommendation under advisement and was  exploring approaches to address our recommendation. Similarly, in our  review of DHS’s efforts to improve interoperable communications in April  2007, we reported that no process has been established for ensuring that  states’ grant requests are consistent with their statewide plans and long- term objectives for improving interoperability. We recommended that  DHS assess how states’ grant requests support their statewide  communications plans and include the assessment as a factor in making  DHS grant allocation decisions. Although DHS did not comment on this  recommendation at the time, in August 2007 DHS officials told us they  were working to ensure that all grant funding is tied to statewide  interoperable communications plans.
In a May 2007 testimony, we noted that more immediate congressional  attention might focus on evaluating the construction and effectiveness of  the National Preparedness System, which is mandated under the Post- Katrina Reform Act. DHS has taken steps to develop and issue key  components of the system, including a national domestic all-hazards  preparedness goal and readiness metrics and standards for preparedness  in the form of target capabilities. Specifically, in September 2007, DHS  issued a goal for national preparedness, now referred to as the National  Preparedness Guidelines. According to DHS, the guidelines establish “a  vision for national preparedness and provide a systematic approach for  prioritizing preparedness efforts across the Nation,” and generally define a  goal for the National Preparedness system. The guidelines are based on a  capability-based planning process that identified target capabilities that  are to be then used to establish measures for preparedness.
According to DHS officials, one way DHS is attempting to monitor the  development of emergency preparedness capabilities is through the  Effectiveness Assessment described above, that began as part of DHS’s  fiscal year 2006 HSPG grant guidance. According to program requirements,  eligible recipients must provide an “investment justification” with their  grant application that links their investments to the initiatives outlined in  their state’s Program and Capability Enhancement Plan. DHS officials have  said that they cannot yet assess how effective the actual investments from  grant funds are in enhancing preparedness and mitigating risk because  they do not yet have the metrics to do so and there is insufficient historical  information from the grant monitoring process to assess the extent to  which states and urban areas are building capabilities.
The Post-Katrina Reform Act established a requirement to create another  source of information on state capabilities. The act calls for an annual  preparedness report from all states by January 4, 2008, and annually  thereafter, but FEMA has extended the deadline for this requirement. In  December 2007, FEMA extended the State Preparedness Report deadline  from January 4 to March 31, 2008 and requested that each state  administrative agency submit a brief letter providing a status update on its  State Preparedness Report by early this year. The state reports are to  include assessments of:    State compliance with the national preparedness system, the  National Response Framework, the National Incident Management  System, and other related plans and strategies.
Current capability levels and a description of target capability  levels.
Resource needs to meet the preparedness priorities established in  conjunction with the Target Capabilities List, including (1) an  estimate of the amount of expenditure required to attain the  preparedness priorities, and (2) the extent to which the use of  federal assistance during the preceding fiscal year achieved the  preparedness priorities.
Beginning in October 2007, DHS is also responsible for an annual federal  preparedness report that is to include, among other things, an assessment  of the extent to which the use of federal assistance during the preceding  fiscal year achieved the preparedness priorities established under the act.
Since 2005, DHS has produced an Annual Report on Preparedness  Funding, which includes data on the obligation, expenditure status, and  use of funds for all major federal preparedness grants—including non-DHS  grants—awarded to states, localities, and other nonfederal entities.  According to DHS, this effort is designed to provide decision makers with  critical preparedness funding information as they determine how to best  allocate resources to achieve target levels of capability to prevent,  prepare, respond to, and recover from major events, especially terrorism.  However, the report notes the information is of limited usefulness because  federal departments and agencies interpret and define the terms  obligation, expenditure status, and use of funds differently. The report  provides a national-level summary of the use of grant funds such as  equipment or training, rather than an assessment of state capability  enhancements provided as a result of federal grant funding. According to  DHS, subsequent reports may provide more detailed analysis and findings,  as consistent procedures and definitions are implemented across grant  programs and departments.
section_title: Conclusions
paragraphs: The task of enhancing first responder capabilities across the nation is a  complex and daunting one. DHS must continue to support FEMA’s efforts  to work with state, local, and tribal governments, and the private sector on  the tasks it has begun. At the same time, these stakeholders must  recognize that the process is iterative, will include periodic adjustments  and refinements, and that risks are not equally distributed across the  nation. As the principal federal agency now responsible for preparedness  and response, FEMA has a unique opportunity to evaluate how it can most  effectively target and integrate grants with its other efforts to enhance the  nation’s all-hazard disaster preparedness and response system. This can  best be done by viewing these grants collectively, rather than individually.  It is also important that FEMA and grant recipients be able to assess and  report on how the grants have been used to enhance emergency  preparedness and response capabilities and reduce risk.
We look forward to working constructively with this Committee, FEMA,  and DHS in the future to continue to build a national emergency  preparedness system that we all want and our nation deserves.
Mr. Chairman, this concludes my statement. I would be pleased to answer  any questions that you or other members of the Subcommittees may have  at this time.
section_title: Contacts and Staff Acknowledgments
paragraphs: For further information about this statement, please contact William O.  Jenkins Jr., Director, Homeland Security and Justice Issues, on (202) 512- 8777 or jenkinswo@gao.gov.
In addition to the contact named above, the following individuals from  GAO’s Homeland Security and Justice Team also made major contributors  to this testimony: Chris Keisling, Assistant Director; John Vocino, Analyst- in-Charge; Michael Blinde, Analyst; and Linda Miller, Communications  Analyst.
section_title: Related GAO Products
paragraphs: Department of Homeland Security: Progress Report on Implementation of  Mission and Management Functions. GAO-07-454. Washington, D.C.:  August 17, 2007.
Homeland Security: Observations on DHS and FEMA Efforts to Prepare  for and Respond to Major and Catastrophic Disasters and Address Related  Recommendations and Legislation. GAO-07-1142T. Washington, D.C.: July  31, 2007.
Homeland Security: Observations on DHS and FEMA Efforts to Prepare  for and Respond to Major and Catastrophic Disasters and Address Related  Recommendations and Legislation, GAO-07-835T  Washington, D.C.: May  15, 2007.
Homeland Security: Observations on DHS and FEMA Efforts to Prepare  for and Respond to Major and Catastrophic Disasters and Address Related  Recommendations and Legislation. GAO-07-835T. Washington, D.C.: May  15, 2007.
First Responders: Much Work Remains to Improve Communications  Interoperability, GAO-07-301  Washington, D.C.: Apr. 2, 2007.
Homeland Security: Preparing for and Responding to Disasters. GAO-07- 395T. Washington, D.C.: March 9, 2007.
Passenger Rail Security: Federal Strategy and Enhanced Coordination  Needed to Prioritize and Guide Security Efforts. GAO-07-583T.  Washington, D.C.: March 7, 2007.
Homeland Security: Applying Risk Management Principles to Guide  Federal Investments. GAO-07-386T. Washington, D.C.: February 7, 2007.
Homeland Security Grants: Observations on Process DHS Used to Allocate  Funds to Selected Urban Areas. GAO-07-381R. Washington, D.C.: February  7, 2007.
Homeland Security First Responder Grants: Cash Management  Improvement Act Exemption and Cash Advance Funding Require  Additional DHS Oversight. GAO-07-68. Washington, D.C.: December 22,  2006.
Emergency Preparedness and Response: Some Issues and Challenges  Associated with Major Emergency Incidents. GAO-06-467T. Washington,  D.C.: February 23, 2006.
Homeland Security: Managing First Responder Grants to Enhance  Emergency Preparedness in the National Capital Region. GAO-05-889T.  Washington, D.C.: July 14, 2005.
Homeland Security: DHS’ Efforts to Enhance First Responders’ All- Hazards Capabilities Continue to Evolve. GAO-05-652. Washington, D.C.:  July 11, 2005.
Homeland Security: Management of First Responder Grant Programs and  Efforts to Improve Accountability Continue to Evolve. GAO-05-530T .  Washington, D.C.: April 12, 2005.
Homeland Security: Management of First Responder Grant Programs Has  Improved, but Challenges Remain. GAO-05-121. Washington, D.C.:  February 2, 2005.
Homeland Security: Effective Regional Coordination Can Enhance  Emergency Preparedness. GAO-04-1009. Washington, D.C.: September 15,  2004.
Homeland Security: Federal Leadership Needed to Facilitate Interoperable  Communications Between First Responders. GAO-04-1057T . Washington,  D.C.: September 8, 2004.
Homeland Security: Coordinated Planning and Standards Needed to Better  Manage First Responder Grants in the National Capital Region. GAO-04- 904T. Washington, D.C.: June 24, 2004.
Homeland Security: Management of First Responder Grants in the  National Capital Region Reflects the Need for Coordinated Planning and  Performance Goals. GAO-04-433. Washington, D.C.: May 28, 2004.
Emergency Preparedness: Federal Funds for First Responders. GAO-04- 788T. Washington, D.C.: May 13, 2004.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.