Disaster Recovery: FEMA's Public Assistance Grant Program Experienced Challenges with Gulf Coast Rebuilding
Published: 2008-12-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The devastation caused by the 2005 Gulf Coast hurricanes presented the nation with unprecedented rebuilding challenges. The Federal Emergency Management Agency's (FEMA) Public Assistance (PA) grant program is a key tool for providing funds to support recovery, including rebuilding public schools, roads, and utilities. GAO was asked to examine the amount of PA grants FEMA has provided for rebuilding the Gulf Coast; challenges in the day-to-day operation of the PA program; and human capital challenges; as well as actions taken to address them. Toward this end, GAO reviewed relevant laws, PA regulations and procedures, and analyzed data from FEMA's National Emergency Management Information System. GAO also interviewed federal officials from FEMA and the Department of Homeland Security's (DHS) Office of the Federal Coordinator for Gulf Coast Rebuilding as well as more than 60 officials from state government and eight localities in Louisiana and Mississippi.
section_title: What GAO Found
paragraphs: Funding for PA grants related to the 2005 Gulf Coast hurricanes is already more than $11 billion, surpassing that of any previous disaster, and will likely be higher than FEMA's total cost estimate of $13.2 billion. About 90 percent of these funds have gone to the states of Louisiana and Mississippi, about half of which have passed from the states to grant applicants to date. GAO identified challenges in the following broad areas, many of which contributed to slowing down rebuilding projects. (1) Project Development: Challenges in the development of PA projects included difficulties determining the amount of damage that was disaster-related, using PA program flexibilities to rebuild in a way that meets postdisaster needs, assessing project scope including whether to repair or replace damaged structures, estimating project costs, and having sufficient resources to initiate projects. For example, assessing the damage to New Orleans's water and sewer system was complicated by the difficulty distinguishing disaster-related from preexisting damage. Estimating the cost of PA projects presented special challenges because of unusual market conditions for labor and materials in the postdisaster economy. (2) Information Sharing and Tracking: GAO identified challenges in sharing information among federal, state, and local participants in the PA process as well as in tracking the status of projects. For example, in Louisiana, information sharing was made more difficult in the absence of an effective document-sharing system and because key FEMA and state officials who review PA applications are located in different cities. (3) Project Approvals and Appeals: FEMA's approval decisions on some projects were reversed after applicants had already moved ahead with construction. In addition, decisions on appeals were often not made within required time frames due to the large number of rebuilding projects. (4) Human Capital: Human capital challenges at all levels of government underlie many of the above challenges and also slowed rebuilding projects. Shortages of experienced and knowledgeable staff were particularly problematic during the initial stages of rebuilding. FEMA's early reliance on temporary rotating staff did not provide the level of continuity needed for the complex demands of Gulf Coast rebuilding. Among the actions DHS has taken to address these challenges are the finalization of a PA catastrophic disaster recovery concept plan that recognizes the need to more easily tailor projects to meet postdisaster conditions; the development of new management information systems to better track and manage projects and increase the transparency of PA funding; and the creation of a credentialing program for employees.

section_title: Letter
paragraphs: The size and scope of the devastation caused by the 2005 Gulf Coast  The size and scope of the devastation caused by the 2005 Gulf Coast  hurricanes presented the nation with unprecedented rebuilding  hurricanes presented the nation with unprecedented rebuilding  challenges, and an example of how catastrophic events can overwhelm the  challenges, and an example of how catastrophic events can overwhelm the  capacity of federal, state, and local resources in both response and  capacity of federal, state, and local resources in both response and  recovery. More than 3 years after the disaster and as the Gulf Coast again  recovery. More than 3 years after the disaster and as the Gulf Coast again  undertakes recovery efforts in the wake of Hurricanes Ike and Gustav,  undertakes recovery efforts in the wake of Hurricanes Ike and Gustav,  critical aspects of recovery, such as rebuilding the infrastructure of state  critical aspects of recovery, such as rebuilding the infrastructure of state  and local schools, roads, and utilities, continue to require federal, state,  and local schools, roads, and utilities, continue to require federal, state,  and local government involvement.  and local government involvement.
You asked us to examine the federal government’s support of state and  You asked us to examine the federal government’s support of state and  local efforts to restore Gulf Coast public infrastructure and facilities  local efforts to restore Gulf Coast public infrastructure and facilities  through the Federal Emergency Management Agency’s (FEMA) Public  through the Federal Emergency Management Agency’s (FEMA) Public  Assistance (PA) grant program. The PA program funds both emergency  Assistance (PA) grant program. The PA program funds both emergency  work projects, such as debris removal, and permanent work projects, such  work projects, such as debris removal, and permanent work projects, such  as the restoration of damaged buildings, roads, and public utilities. In  as the restoration of damaged buildings, roads, and public utilities. In  response to your request, we report on: (1) the amount of PA grants FEMA  response to your request, we report on: (1) the amount of PA grants FEMA  has provided, or plans to provide, for rebuilding the Gulf Coast; (2)  has provided, or plans to provide, for rebuilding the Gulf Coast; (2)  challenges federal, state, and local governments experienced in the day-to- challenges federal, state, and local governments experienced in the day-to- day operation of the PA program, especially in developing projects,  day operation of the PA program, especially in developing projects,  sharing and tracking project information, and making key project  sharing and tracking project information, and making key project  decisions, and the actions that have been taken to address these  decisions, and the actions that have been taken to address these  challenges; and (3) the human capital challenges and successes federal,  challenges; and (3) the human capital challenges and successes federal,  state, and local governments experienced with the program during Gulf  state, and local governments experienced with the program during Gulf  Coast rebuilding and the actions taken to address them.  Coast rebuilding and the actions taken to address them.
To conduct our review we obtained and reviewed PA regulations and  To conduct our review we obtained and reviewed PA regulations and  procedures and interviewed federal officials from FEMA, the Department  procedures and interviewed federal officials from FEMA, the Department  of Homeland Security’s (DHS) Office of the Inspector General, and Office  of Homeland Security’s (DHS) Office of the Inspector General, and Office  of the Federal Coordinator for Gulf Coast Rebuilding. We also obtained  of the Federal Coordinator for Gulf Coast Rebuilding. We also obtained  and analyzed PA data from FEMA’s National Emergency Management  and analyzed PA data from FEMA’s National Emergency Management  Information System (NEMIS) providing information on projects including  Information System (NEMIS) providing information on projects including  cost estimates, status of projects, and project location. Further, to obtain  cost estimates, status of projects, and project location. Further, to obtain  information on the experiences of state and local officials involved in the  implementation of the PA program, we interviewed more than 60 state and  local officials from eight localities in Louisiana and Mississippi. These two  states were most affected by the 2005 Gulf Coast hurricanes and were the  focus of our review. We interviewed and obtained information from key  state grantees and local applicants who had knowledge of, experience  with, or a leadership role in the PA program in these two states. For more  information on our scope and methodology see appendix I. We conducted  this performance audit from August 2007 through November 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: The Stafford Act defines FEMA’s role during response and recovery after a  major disaster. One of the principal programs that FEMA operates to  fulfill its role is the PA program. Under the program, FEMA provides  grants to state and local government agencies, Indian tribes, authorized  tribal organizations, and specific types of nonprofit organizations. In this  process, one of FEMA’s key objectives is to maintain proper management  controls, thereby creating a climate of stewardship and accountability in  the use of federal funds.
As in the case of many federal grant programs, FEMA provides funds to a  state government, which, in turn, passes these funds along to a local grant  applicant. Unlike a typical federal grant program, there are no caps on the  amount of funding an applicant can receive under the PA program as long  as the project meets eligibility requirements. The PA program categorizes  funds into broad groups: emergency work (such as debris removal or  emergency protective measures to preserve life and property) and  permanent work (such as repairing and replacing damaged buildings,  utilities, roads and bridges, recreational facilities, and water-control  facilities).
PA is a complex and multistep grant program administered through a  partnership between FEMA and the state grantee. In Gulf Coast recovery,  the role of Louisiana’s state grantee was initially carried out by the  Governor’s Office of Homeland Security and Emergency Preparedness  (GOHSEP). In January 2008, Louisiana’s Governor assigned the Louisiana  Recovery Authority as the lead state agency working with FEMA on  recovery operations. In Mississippi, this role is carried out by the  Mississippi Emergency Management Agency (MEMA).  The program is  structured to provide financial assistance while ensuring a high level of  accountability and control over spending. Thus, it entails an extensive  paperwork and review process based upon a number of specific eligibility  rules that outline the types of damage that can be reimbursed by the  federal government and steps that federal, state, and local governments  must take in order to document eligibility.
After a disaster, FEMA typically works with the affected state government  to set up a field office at or near the disaster site to administer PA grants.  FEMA staffing usually consists of (1) permanent full or part-time  employees, (2) nonpermanent reserve staff, and (3) technical-assistance  contractors. In addition, the field office is staffed by the affected state’s  emergency management personnel. In general, the majority of FEMA staff  assigned to the field office consists of nonpermanent reserve staff and can  be used in any capacity, depending upon their skills, and are typically  deployed for shorter-term assignments (i.e., 90 to 120 days). Technical- assistance contractors typically provide assistance in specialized areas  such as structural, mechanical, and civil engineering.
Federal, state, and local officials each play a significant role in carrying  out many of the steps of the PA funding process (see fig. 1). In this  process, the state is the official “grantee,” while the local government or  equivalent entity is the “subgrantee” or “applicant” that ultimately receives  the funding. After a disaster is declared, FEMA and state representatives  brief applicants on the program, and FEMA assigns a Public Assistance  Coordinator as well as Project Officers and technical specialists to assist  the applicant through the PA funding process. After determining that the  applicant and type of facility are eligible for funding, FEMA, the state, and  the applicant work together to develop a project worksheet describing the  scope of work and estimated cost. As part of FEMA’s approval process,  the agency also conducts historical and environmental reviews.
FEMA generally defines a project in its 2007 Public Assistance Guide as a  logical grouping of work that will be funded as a unit. Under this  definition, a project may cover work for one damage site (e.g., all of the  damage to a single school) or for similar types of damage that one  contractor may repair at various locations (e.g., all sewer pump stations in  a city). The Stafford Act provides a simplified procedure for smaller  projects whose cost estimate is under a certain dollar threshold.
After FEMA approves a project, funds are obligated—that is, they are  made available—to the state grantee, which, in turn, passes the funds  along to applicants. For large projects, funds are generally distributed to  applicants on a reimbursable basis after project work is completed,  although PA program rules allow applicants to receive PA funds from  states earlier under certain conditions. For small projects, funds are  provided up front to the applicant based on FEMA’s approval of the  project’s cost estimate.
The cost estimate or scope of work may change after project approval  when new information comes to light. For example, if an applicant  discovers that the actual costs for a project are higher than FEMA’s  estimate, the applicant may apply to FEMA for additional funds. However,  if the actual cost is lower than FEMA’s estimate, the applicant will receive  only the actual costs incurred. In another example, FEMA may approve  the scope of work for repairing damage to part of a wall or ceiling, but  when an applicant seeks bids to repair the damage a contractor might  conclude the entire wall or ceiling must be replaced in order to maintain  the integrity of the building. Under these circumstances, a scope of work  and cost adjustment might be approved by FEMA.
In October 2006 Congress passed the Post-Katrina Emergency  Management Reform Act of 2006 (PKEMRA) which, among other changes,  reorganized FEMA, elevated FEMA’s position within DHS, and increased  FEMA’s independence. PKEMRA gave FEMA new human capital  authorities and responsibilities, including requiring FEMA to develop a  strategic plan on human capital, authorizing recruitment and retention  bonuses for difficult-to-fill positions, and providing for the professional  development of FEMA employees through rotations within DHS. Further,  FEMA was to establish a Surge Capacity Force of trained individuals  prepared to respond to disasters. PKEMRA also made specific changes to  the Public Assistance program such as authorizing incentives for the  timely closing of PA projects and making educational nonprofit facilities  eligible for PA funds. PKEMRA also authorizes FEMA to conduct a PA  pilot program intended to reduce the cost, increase the flexibility, and  expedite the provision of assistance. FEMA established new procedures  under the pilot program and waived certain Stafford Act provisions and PA  regulations for the purposes of the program.
To respond to the 2005 Gulf Coast hurricanes the federal government has  already committed a historically high level of resources—more than $126  billion as of August 2008. More than half of this assistance was directed to  emergency assistance and meeting shorter-term needs arising from the  hurricanes, such as relocation assistance, emergency housing, immediate  levee repair, and debris removal efforts. FEMA’s PA grant program is a  significant federal tool to support longer-term recovery efforts. One year  after the disaster, the Brookings Institution estimated that approximately  $35 billion of the federal resources had been provided to support longer- term rebuilding efforts. In addition to the PA program, other examples of  federal longer-term rebuilding assistance include the U.S. Department of  Housing and Urban Development’s Community Development Block Grant  program primarily to help rebuild homes and apartments; the U.S.  Department of Transportation’s funding for roads, bridges, and aviation  facilities; U.S. Small Business Administration’s low-cost disaster loan  program; and tax incentives and relief for hurricane victims and small  businesses through the Gulf Opportunity Zone Act.
section_title: Cost and Scope of PA for Gulf Coast Rebuilding Is Very Large and Will Likely Increase
paragraphs: Federal funding for the PA program in the Gulf Coast has already  surpassed that of any previous disaster, and the total cost will likely be  higher than FEMA’s estimate. Costs are likely to increase because the  agency’s estimate of the total PA cost does not reflect additional projects  that have yet to be approved or the final costs for already-approved  projects, which may be higher than FEMA’s original estimates. In addition,  FEMA’s estimates do not include its own administrative costs for the PA  program. As in the case of costs, the number of PA projects in the Gulf  Coast is unprecedented but FEMA’s reporting to Congress and the public  on the number of total projects may have been misleading. As of  September 2008, about 90 percent of PA funding made available to the  Gulf Coast states has gone to Louisiana and Mississippi primarily for large  permanent rebuilding projects. Within these two states, about half of this  funding has been provided to local PA applicants to date. This is because  many large projects take several years to complete and PA generally  reimburses applicants after work is complete, as well as the challenges  that will be discussed later in this report.
subsections: section_title: Cost for the PA Program in the Gulf Coast Has Surpassed Any Previous Disaster, and Is Likely to Increase Further
paragraphs: As of September 2008, FEMA had made $11.1 billion available to PA  applicants in the Gulf Coast. FEMA estimates that PA funding in the Gulf  Coast will reach approximately $13.2 billion, surpassing all previous  disasters, but final costs will likely be even higher. The PA program  accounts for a substantial amount of the federal assistance committed to  longer-term rebuilding efforts in the Gulf Coast region. Already, FEMA’s  estimate for the PA program in the Gulf Coast has greatly surpassed PA  funding for any prior disaster, including the $4.8 billion of federal PA funds  spent for the 9/11 terrorist attacks on the World Trade Center (see fig. 2).  Furthermore, total PA funding will likely be higher than FEMA’s estimate  because: (1) some projects, not yet approved, are not reflected in FEMA’s  total; and (2) the cost of some projects already reflected in FEMA’s recent  estimate may turn out to be higher once FEMA has refined the scope and  costs of these projects. For example, FEMA has already significantly  increased its estimate of total cost from its projections of July 2007, when  it estimated total spending of $10.3 billion. The gap between this estimate  and FEMA’s September 2008 estimate of $13.2 billion indicates that  anticipated PA funding increased by $2.9 billion in the intervening 14  months.
In order to understand the entire cost of the PA program to the federal  government, it is necessary to account for administrative costs as well.  FEMA’s estimate captures some of the administrative costs incurred by  applicants and states. However, for a full accounting, it is also necessary  to consider the cost to FEMA for its administration of the program. Given  the large number of contract staff and FEMA employees involved in  administering the program, these expenses are likely extensive. For  example, during 2006, staffing for field locations in Louisiana and  Mississippi exceeded 3,500 staff. FEMA provided us with the cost for  contractors supporting the administration of the PA program in the Gulf  Coast as $1.7 billion through April 2008. However, other administrative  expenses such as FEMA salaries, travel allowances, and overhead are  unknown because the agency estimates such costs centrally, rather than  by program.
section_title: Large Rebuilding Projects in Louisiana and Mississippi Account for the Vast Majority of PA Funds Made Available to Gulf Coast States
paragraphs: As of September 2008, the states of Louisiana and Mississippi have  received about 90 percent of all PA funds distributed to the four Gulf  Coast states. Specifically, Louisiana and Mississippi have received $7.2  billion and $2.9 billion respectively, while Texas has received $919 million  and Alabama has received $116 million. (See fig. 3 for dollars made  available to Louisiana and Mississippi for each PA category of damage.)  The vast majority of the funding in Louisiana and Mississippi has gone  toward large projects, even though small projects greatly outnumber  larger projects. For instance, there were 23,886 projects in Louisiana and  Mississippi funded for less than $55,600 whose total value equaled $222  million. On the other hand, 321 projects funded for $5 million or more had  a total value of $5.2 billion.
Of the four states affected by the 2005 Gulf Coast hurricanes, Louisiana  and Mississippi have disbursed relatively the least amount of funding for  projects (51 percent and 53 percent respectively). However, they are also  the states with the largest amount of funding going toward permanent  rebuilding projects, which can take several years to complete, and thus  reimburse. For example, in Louisiana, PA applicants have received 77  percent of the $3.2 billion made available to the state for emergency work,  while they have only received 29 percent of the $3.8 billion made available  to the state for permanent rebuilding. Mississippi has a similar distribution  of funds (see fig. 4). While there has been some concern about why more  of these funds have not been distributed to applicants, there are at least  two key reasons for this distribution of funds. Since the bulk of PA  program dollars are distributed as reimbursements to the applicant, the  applicant typically does not receive full funding for projects until costs  have been incurred—even though FEMA has already made these funds  available to the state. Most funds for emergency projects have already  been passed along to applicants. However, permanent rebuilding projects  can take several years to complete, so a significant portion of funds for  these projects have not been passed on to applicants. Additional factors  contributing to this gap include some of the operational challenges that we  identify later in this report.
section_title: Number of PA Projects in the Gulf Coast Is Very Large, but FEMA’s Reporting of This May Be Misleading
paragraphs: As in the case of overall costs, the number of PA projects in the Gulf Coast  is very large. The number of projects in the Gulf Coast, as reported by  FEMA, is projected to be more than 81,000, with Louisiana alone  accounting for more than 44,000. According to FEMA, the average number  of projects for major disasters occurring between October 1998 and  January 2007 was just over 700.
Although there is no question that the number of Gulf Coast rebuilding  projects is very large, the figure reported by FEMA in its status report to  Congress and the public may be misleading. This is because the figure  does not represent the number of unique PA projects, but rather, includes  the number of changes (or “versions”) that have been made to project  worksheets. Our analysis of the number of projects in Mississippi and  Louisiana—the two states with the vast majority of projects—showed that  in arriving at its total number of projects, FEMA often counted projects 2  or 3 times and in some cases project were counted as many as 11 times.  Overall, FEMA’s decision to include multiple versions in its external  reports roughly doubled the total number of projects (see table 1).
FEMA officials acknowledged that reporting on the total number of  project changes might be misleading but noted that this can be a useful  measure of FEMA workload because it captures the effort involved in  preparing multiple versions. In addition, FEMA officials noted that they  were reluctant to change reporting metrics because they believed such a  change might confuse users of the reports. We agree with FEMA that  continued reporting of the total number of project changes can be useful— both as a measure of the projects being processed by the agency and to  provide continuity with previous data reports. However, it is not clear why  it is necessary to continue reporting this figure under the potentially  misleading label of “number of projects,” nor why information on the  actual number of unique projects is not also provided in the agency’s  regular PA data reports. As of November 2008, these reports only included  the total number of project versions and not the number of unique  projects.
section_title: Challenges in the Day- to-Day Operation of the PA Program Slowed Rebuilding
paragraphs: Federal, state, and local officials experienced a variety of challenges in the  day-to-day operation of the PA program in rebuilding the Gulf Coast.  These included challenges in developing projects, sharing and  communicating project information, and making and appealing project  decisions. These challenges resulted in slowing rebuilding progress. These  difficulties were exacerbated by the amount of damage from the 2005 Gulf  Coast hurricanes and the sheer number of rebuilding projects initiated in  their wake.
subsections: section_title: Challenges with Developing Projects Slowed Rebuilding and, at Times, Increased Costs
paragraphs: Rebuilding projects faced significant challenges during project  development and start up, which slowed down rebuilding projects and, at  times, increased costs. A critical step in the PA process is the completion  of a project worksheet, which documents eligible work and estimated  cost. Large rebuilding projects typically involve some modifications in  finalizing the scope of eligible work and determining related costs through  the creation of subsequent “versions” of the original project worksheet.  For example, modifications resulting in a new version may occur when,  after initial building repairs begin, additional damage is discovered. In the  Gulf Coast large PA projects faced several challenges during the project  development and start up process including difficulties in: (1) determining  how much of the damage was disaster related, (2) assessing project scope  including the decision to repair or replace structures, (3) estimating  project costs in the postdisaster environment, (4) using program  flexibilities to rebuild to post disaster needs, and (5) obtaining resources  to initiate projects. Sometimes several of these challenges were  encountered in a single project, thereby magnifying their effect. In  response to some of these challenges, FEMA, the Office of the Federal  Coordinator for Gulf Coast Rebuilding and the states of Louisiana and  Mississippi have taken a variety of actions and plan to do more.
subsections: section_title: Difficulties Determining Disaster-Related Damage
paragraphs: For many rebuilding projects on the Gulf Coast, it took time to make  determinations regarding the amount of damage structures received as a  direct result of the 2005 Gulf Coast hurricanes and distinguishing this from  nondisaster related damage. This task has been complicated by a number  of factors including the overall scope of the damage caused by the  hurricanes, the large number of rebuilding projects, and the fact that some  applicants lacked records to document the predisaster condition of  buildings and infrastructure. The PA program will not reimburse  applicants for damage to buildings or infrastructure that was the  responsibility of the applicant to repair prior to a disaster (such as  deferred maintenance) or protect against after a disaster (such as the  failure to patch a damaged roof to prevent further damage to a building’s  interior).
Identifying the amount of damage that already existed before the  hurricanes has been especially difficult, particularly for large  infrastructure projects such as roads and water lines. FEMA officials  noted that water lines were particularly difficult to assess because much  of the damage was underground. FEMA conducted extensive inspections  in order to make eligibility determinations for many of these projects, and  these determinations took time to work through. In addition,  disagreements between applicants and FEMA, as well as changes to  project scope decisions contributed to slowing down project development.  For example, although much of the New Orleans water and sewer system  sustained damage as a result of the disaster, FEMA and city officials had  difficulty agreeing on the amount of damage due to the storm as opposed  to that due to deferred maintenance. New Orleans officials stated they had  valid records on the condition of the city’s water and sewer lines up to  January 2005—approximately 9 months before the Hurricane Katrina.  Given this gap in records, FEMA began a review of the entire system for  disaster-related damage and inspected roughly 46,000 leaks by July 2007.  The agency funded the installation of flow meters and data-logging devices  to assist in determining the location of leaks. FEMA concluded that in  about 80 percent of the cases, it could not determine whether a leak had  existed prior to the 2005 Gulf Coast hurricanes or whether it was caused  by the hurricanes. In an effort to resolve this issue, FEMA, the state, and  the New Orleans Sewer and Water Board entered into a memorandum of  understanding agreeing to engage a third-party contractor to perform a  damage assessment and propose restoration alternatives. According to  FEMA officials, the agency has since reimbursed the applicant for those  leaks that were identified as being caused by the hurricanes.
Postdisaster damage also complicated project development. Under the PA  program, in order for postdisaster damage to be covered it must be  directly related to the disaster, such as damage to roads from heavy trucks  hauling away debris, or certain cases of mold in buildings. In addition,  reasonable protective measures by the applicant could not have prevented  this damage from occurring. Therefore, decisions on project eligibility  took additional time to sort out poststorm-related damage. For example,  PA inspectors sought to determine whether applicants protected their  buildings well enough to secure them from poststorm damage such as rain  or from thieves who stole copper pipes for their salvage value.
In St. Bernard Parish, roughly 2 years passed before FEMA and parish field  inspection teams completed identification of PA-eligible damage to  approximately 2,500 blocks of local streets. The parish had no records to  document the condition of its streets prior to the 2005 Gulf Coast  hurricanes, so according to state officials, FEMA inspections were  performed on each parish street in an attempt to distinguish predisaster  damage from that caused directly as a result of the hurricanes. In addition,  FEMA and St. Bernard Parish officials disagreed over the standards FEMA  used to determine eligibility, which further prolonged the project- development process. In contrast, Jefferson Parish did not encounter  similar challenges with distinguishing predisaster damage from damage  directly related to the hurricanes. This is because the parish maintained a  road repair-management information system (including a road- maintenance plan) prior to the disaster that enabled the parish to identify  preexisting road conditions to FEMA officials, thereby helping to expedite  their road-repair projects.
section_title: Difficulties Using Program Flexibilities to Rebuild in a Way That Meets Postdisaster Needs
paragraphs: The PA program typically provides funds to restore buildings, equipment,  or infrastructure back to their condition, location, and function before the  disaster. The program does permit changes from how things were prior to  the disaster—through alternate and improved projects—but these  approaches typically come with restrictions in funding. Since many PA  applicants in the Gulf Coast found that the population of their  neighborhoods changed significantly from pre-Katrina levels, it was  important for their rebuilding projects take into account the new  conditions. In order to do this, localities often needed time to develop and  obtain agreement on broader recovery plans, which provide a coordinated  approach to rebuilding their communities. According to FEMA officials,  the Stafford Act was not designed for the level of project reconfiguration  necessary for post-Katrina rebuilding.
For example, given postdisaster population changes and educational  needs, Louisiana’s Recovery School District officials sought flexibility in  rebuilding schools as well as the number of students attending each  school. Typically, the approval for an alternate or improved project  designation is done on a site-by-site basis. Accordingly, FEMA officials  initially sought rebuilding decisions from the school district on a campus- by-campus basis to move ahead with project development. However, it  took time for school district officials to devise a plan for rebuilding its  large school system given the changing demographic pattern of returning  school age children and the need to consider community input. These  officials also wanted to consider how much money FEMA would allow for  damages when making its final planning decisions. However, FEMA could  not determine how much PA money would be available until they were  informed of the school district’s project development decisions. Recovery  School District officials devised an interim short-term plan to help ensure  that school campuses opened as quickly as possible. These challenges,  coupled with pressures to open schools in time for the school year, led to  FEMA funding approximately $70 million in temporary modular facilities.  FEMA and school district officials ultimately are working together to  resolve differences in developing the project by moving towards a  systemwide approach to rebuilding schools to address Louisiana’s  postdisaster needs rather than developing projects on a campus-by- campus basis.
St. Bernard Parish government also faced challenges with replacing  equipment to address postdisaster needs. The parish lost almost all of its  vehicles and equipment as a result of the disaster, but local officials  reported that state PA officials only allowed one-for-one and in-kind  replacements. For example, St. Bernard Parish officials claimed that the  state required them to replace one of their damaged 1988 Ford Crown  Victoria police cruisers with the same make, model, and year. Instead, the  officials wanted to use the total value of the damaged equipment to  purchase a smaller number of vehicles appropriate for their current and  future needs. It took many months to work through the applicable rules in  order to address the parish’s concerns. FEMA officials told us that they  ultimately utilized the PA program’s improved-project option to provide  funds from the replacement value of older vehicles toward the purchase of  new vehicles.  As part of this process, the Office of the Federal  Coordinator for Gulf Coast Rebuilding entered into a correspondence with  St. Bernard Parish officials in fall 2007 with the intent of expediting project  development offering a dedicated team to provide specialized assistance  to resolve this issue. This effort was part of a broader initiative by the  Federal Coordinator, along with FEMA, to reach out to local officials in  selected hard-hit areas to identify their top five priority PA projects.
FEMA plans to incorporate some project development flexibilities into its  regular practices. For instance, FEMA’s Public Assistance Catastrophic  Disaster Recovery Concept Plan, finalized in May 2008, recognizes the  need for PA regulations to allow applicants to more easily tailor projects  to meet postdisaster needs. In September 2008, FEMA officials informed  us that policies to address this issue as well as a range of other initiatives  related to the plan are in development and are expected to be complete by  March 2009.
section_title: Difficulties Assessing Project Scope, Including Whether to Repair or Replace Damaged Structures
paragraphs: Under PA rules, if a facility is 50 percent or more damaged, the program  will fund its replacement value. This “50 percent rule” is important  because the applicant stands to receive significantly more money when  this damage threshold is crossed. Because of the size and complexity of  the damage caused by the 2008 Gulf Coast hurricanes, making the  determination to repair or replace could be particularly difficult. This  challenge was more evident in Louisiana as FEMA and state officials noted  that the damage generally involved flooding and wind damage so that most  buildings were not completely destroyed, as was the case with much of the  damage in Mississippi.
In St. Bernard Parish local officials had plans to consolidate its seven  separate wastewater (and sewer) treatment plants prior to the 2005 Gulf  Coast hurricanes in order to meet EPA compliance rules, among other  things. When parish officials developed project worksheets for the  wastewater treatment plants, they wanted to structure the projects so that  PA funds could be used to accomplish this goal, rather than rebuilding a  system that they planned to decommission. Although the parish plan to  consolidate its wastewater treatment plants was not contingent upon  whether the individual plants qualified for replacement rather than repair,  these decisions affected whether the parish would receive enough funding  to build the consolidated wastewater treatment facility. Initial assessments  led FEMA to determine that the facilities were not sufficiently damaged to  qualify for funds to pay for the replacement of the plants, but just for their  repair. According to parish officials, the parish sought a reassessment of  the damage and after FEMA recalculated costs, they determined that two  out of the seven water treatment sites were, in fact, eligible for full  replacement, while the other five qualified for the cost of repairs. As  project issues were being discussed, heavy trucks were used to pump and  haul sewage as an interim measure until the system was repaired. These  trucks were needed to operate for a much longer-than-expected period of  time resulting in a considerable cost as well as damage to the parish’s  roads. These temporary measures have already cost the federal  government more than $60 million. St. Bernard Parish officials estimate  that, had they been able to move ahead with their original plans, it would  have taken about 1½ years for the new consolidated facility to become  operational. More than 2 years have passed since the project was  proposed and rebuilding has not yet begun.
Another example of the challenges related to difficulties in determining  whether to repair or replace damaged structures involves New Orleans’s  public schools. Over 3 years after the disaster, damaged school buildings  under Louisiana’s Recovery School District agency are still being assessed  to determine whether they qualify for replacement funding. According to  Recovery School District officials, in some cases, this determination was  reached after the school district already paid for architectural plans to  renovate rather than replace the school facility, thereby incurring extra  expenses and further slowing rebuilding. School district officials told us  that working through repair versus replacement eligibility for the 122  school campuses under their control will be a very long process if delays  in assessment continue. For example, the Fannie C. Williams Elementary  School in New Orleans was initially assessed by FEMA as being less than  50 percent damaged, therefore not qualifying it for replacement. After the  Recovery School District hired an architectural and engineering firm to  reassess the damage, FEMA agreed to change its original determination  and the school qualified for replacement funding.
section_title: Difficulties Estimating Project Costs
paragraphs: During Gulf Coast recovery, state and local officials reported that FEMA’s  cost-estimating methods often undervalued the cost of rebuilding, and, in  many cases project estimates were conducted very early in the project- development process before knowing the full extent of the damage.  Developing accurate cost estimates is particularly important for alternate  and improved projects. This is because these projects rebuild the structure  to be different from its predisaster condition, but project payouts are  capped at an amount estimated to restore the structure to its predisaster  condition. In contrast, in projects that ultimately restore structures to  predisaster conditions there is no funding cap because the actual costs of  rebuilding will be funded, if reasonable.
According to federal and state officials, it was difficult to develop  rebuilding estimates because of uncertain labor and material costs after  the storms. To better address these types of situations FEMA developed a  methodology called Cost Estimating Format. This methodology provides a  uniform method of estimating costs for permanent large projects and  includes consideration of both direct costs (i.e., materials) and indirect  costs (i.e., safety and security measures, storage and staging, insurance,  and other overhead). However, according to senior FEMA officials, many  agency staff had not been trained to use this methodology in the aftermath  of the 2005 Gulf Coast hurricanes. A study contracted by FEMA of major  disasters occurring between April and October 2007 found that about 70  percent of FEMA staff and 50 percent of technical assistance contractors  were not trained on the Cost Estimating Format that FEMA recommended  for use in developing estimates for projects.
In addition, FEMA, state, and local officials reported that cost estimates  were often made very early in the project-development process before  knowing the full extent of the damage. FEMA officials noted that the  earlier in the process that a cost estimate is developed, the greater the  likelihood that the estimate will be inaccurate since these early estimates  may not factor in all of the damage that exists. These officials told us that  early estimates typically cover only obvious damage since conducting  detailed investigations of damage shortly after a major disaster can be  difficult. For example, upon further investigation of a roof, damage to the  underlying flashing and underpinnings may be discovered that was not  recognized during FEMA’s initial inspection. FEMA officials stated that  project officers were focused on developing as many project worksheet  estimates as they could to facilitate the project development process.  There were trade-offs, however, in developing early estimates.
Applicants reported that low cost estimates, resulting from challenges  cited above, contributed to delays in project development until these  estimates were revised. According to testimony by the former Acting  Director of the Louisiana GOHSEP before the Subcommittee on Disaster  Recovery in July 2007, many PA rebuilding projects were underestimated  by millions of dollars. For example, out of the 23 cases he cited, the  estimated amount was less than the lowest bid that the applicant received  for the work by a factor of 1.5 to 10 times.
Because of low cost estimates, applicants were sometimes hesitant to  move forward on projects for fear that they may owe more than FEMA  would ultimately reimburse them for, despite the fact that PA rules allow  for reimbursements for large projects to be above the original estimates if  costs are reasonable. When FEMA agrees that actual repair or rebuilding  costs would significantly vary from their original estimate, the agency  updates the project scope or estimated cost by creating a new version of  the project worksheet. However, state and local officials reported that it  sometimes took several months for FEMA to make agreed-upon changes  to project worksheets—including revised cost estimates—and applicants  were responsible for covering these costs in the meantime.
Louisiana applicants faced an additional challenge with moving forward  on projects because they reported that state law requires that applicants  identify 100 percent of their funding for projects before they can enter into  contracts to rebuild. These applicants reported that gaps between PA  estimates and contractor bids delayed rebuilding projects since they were  not able to identify 100 percent the project’s funding. FEMA officials in  Mississippi noted that they increased project worksheet cost estimates by  about 20 percent to compensate for low project cost estimates.
FEMA’s PA Catastrophic Disaster Recovery Concept Plan proposes that  the agency, the state, and the applicant take steps to more effectively  develop comprehensive damage descriptions in order to reduce conflicts  regarding project cost estimates later in the process. Toward this end, the  plan acknowledges the importance of deploying sufficient resources to  promote rapid completion of damage assessments including funding for  technical assistance to applicants. According to FEMA officials, some  steps related to improving damage assessments, such as developing a  catalog of assessment methodologies, have been completed. However, an  additional task relating to this issue is still underway, and other follow-on  activities relating to the plan have yet to start.
section_title: Insufficient Resources to Initiate Projects
paragraphs: State and local officials in Louisiana and Mississippi told us that factors  such as insufficient resources for up-front project costs and contractors  delaying work until they were paid also led to project delays. Some of  these challenges have been addressed during the course of recovery.
Applicants reported challenges in covering substantial up-front costs for  project development such as the costs of hiring architectural and  engineering firms and associated human capital costs to prepare  documentation for PA requirements. Local officials told us that they often  needed to hire an architectural and engineering firm to document the  scope of damage and subsequent work to fully justify funding of projects.  However, in some cases, applicants did not have the resources to hire an  architectural and engineering firm without first obtaining initial PA  funding for the project. Also, some applicants reported that they lacked  funds to pay for staff to prepare PA documents needed to request PA  funding. Local officials noted that provisions in the PA program that  provide up-front funding can be quite burdensome to applicants.  According to FEMA officials, FEMA designed an initiative to fund  professional technical resources to support local recovery efforts.
Initiating projects was a special challenge in Louisiana. For example, New  Orleans city officials reported that their economy was stagnant for weeks  after the storm, which led to reduced city revenues. Furthermore, their  ability to raise money was limited due to low credit ratings, and they were  unable to borrow funds to cover the costs of maintaining the city’s staff or  paying for expenses such as architecture and engineering activities as  cited above. As a result, many critical rebuilding projects were not started  for several months. In another example, a senior St. Bernard Parish official  reported facing delays until the parish identified funding provided from  other recovery funding sources to cover architecture and engineering  costs for PA projects. Specifically, the officials reported using $8.9 million  that they received from insurance refunds to pay for some of the  architecture and engineering work necessary to initiate critical PA  projects, such as the sewer system.
In addition, officials in Louisiana reported that applicants were concerned  about their ability to afford PA cost-share requirements when this  requirement was still in place, contributing to project delays. The PA  program typically requires a 75 percent federal and 25 percent state cost  share. Shortly after the storms the federal government adjusted this  match for the Gulf Coast states to 90 percent federal and 10 percent state  for Gulf Coast recovery, and this matching requirement was removed in  2007—15 months after the disaster was declared. Having enough  resources to cover PA cost-share requirements was less of a challenge in  Mississippi as officials in that state reported that state legislation allowed  the state to bond up to $200 million for three coastal counties. As a result,  applicants were better able to move forward with rebuilding without  hesitations associated with their inability to meet PA cost-share  obligations.
Further, officials from several parishes reported that due to their reliance  on state reimbursements—which some claimed were slow—they did not  have the resources to pay contractors, some of whom threatened to sue  for nonpayment. FEMA officials stated that PA rules are flexible enough to  provide some funding up front, if the state chooses to do so, and states can  make arrangements to pay for phases of projects, as they are completed,  rather than being reimbursed for the completed project at the end.  Further, in February 2008, Louisiana initiated a program to streamline  payments to applicants to provide more rapid disbursement of PA funds.  Louisiana’s “Express Pay System” allows an applicant to submit a  reimbursement request with the required supporting documentation and  receive payment within 10 to 14 business days, rather than 45 to 60  business days as was the case for the previous process.
We found that applicants from Mississippi used some of PA’s funding  flexibilities, which state and local officials said were critical to their ability  to move ahead on projects without delay. Senior officials from MEMA and  the Governor’s Office of Recovery and Renewal said that the state’s  approach to providing up-front funding was possible because state laws  allow them to advance up to 75 percent of PA project funds to applicants,  and FEMA worked with the state to advance funding. In addition,  according to a state official, Mississippi law does not prevent local  governments from bidding out projects before they have identified or  received 100 percent of their funding. As a result of the funding flexibility  that Mississippi had, MEMA and FEMA established an agreement for the  state to provide funding for initiating projects and reimbursement  throughout the phases of rebuilding work. As an example, MEMA paid  applicants 90 days before their next contractor payment was due for  phases of rebuilding. Using this method, MEMA funded up to the first 85  percent of the project’s cost, while applicants were responsible for funding  the remaining 15 percent until they received full FEMA reimbursement.
More recently, in 2008, Louisiana began to implement similar PA funding  flexibilities. Specifically, the state initiated a revolving fund for the City of  New Orleans that can be used by applicants to fund initial PA project  costs. While applicants reported that this initiative has improved their  ability to move projects along, this initiative began 2½ years after recovery  started, and the revolving fund only provides assistance to New Orleans.
Finally, in June 2007 FEMA began implementation of a pilot program,  required by PKEMRA, which provides participants with funding up front  rather than through the reimbursement of actual costs. This program is not  available for recovery projects relating to the 2005 Gulf Coast hurricanes.  Applicants participating in the pilot receive payment for the entire  estimated cost of the project, up to $500,000, for either emergency or  permanent work projects. If the actual cost of the project is lower than  this amount, the applicant may keep the extra funds for other projects or  approved uses. If the actual cost is higher, the applicant must pay the  difference.
After being in operation for over a year, FEMA officials told us that  participants have been reluctant to use the program for permanent work  projects. Out of 2,725 projects in the pilot as of September 2008 only 140,  or less than 1 percent, were coded as being for permanent work. These  officials attributed this to reluctance on the part of participants to having  to make up the difference if their project comes in higher than originally  estimated, and to giving up their right to appeal, which they are required to  do under the terms of the pilot. While these terms also apply to emergency  work projects participating in the pilot, this was thought to be less of a  concern because such projects were generally more straight-forward and  presented fewer uncertainties than large permanent work projects.  PKEMRA requires FEMA to submit a report to Congress on the results of  the pilot by March 31, 2009.
section_title: Challenges in Sharing and Tracking Project Information
paragraphs: Because the PA process is complex and requires collaboration among  federal, state, and local officials, effective sharing of project information is  particularly important. We identified challenges to sharing project  information between federal, state, and local officials during project  development, and limitations in tracking the status of projects. Challenges  in the first area were more prevalent in Louisiana than in Mississippi  because of the information-sharing strategies used. Taken together,  limitations in these areas slowed PA project development and contributed  to additional human capital burdens for local governments. In response,  FEMA has taken several steps to improve sharing information and project  tracking.
subsections: section_title: Barriers to Sharing Project Information among Federal, State, and Local Officials
paragraphs: In Louisiana, federal, state, and local officials involved in the PA program  reported facing challenges in effectively sharing critical operational  information about projects including documents used to support scope  and cost estimates, such as receipts, invoices, and facility assessments.  This situation was made worse because key federal and state officials  responsible for reviewing and approving documentation were not  primarily located in the same place. Typically, FEMA colocates with state  grantees in order to facilitate information sharing. In Louisiana, FEMA had  some staff located in important areas throughout the state. However, we  found that the state grantee conducted its work primarily from Baton  Rouge while FEMA’s Transitional Recovery Office was based in New  Orleans—approximately 80 miles away. Given that key staff from FEMA  and the state were located in different cities, it was particularly important  for them to ensure effective sharing of project information. Although  Louisiana and FEMA employed the use of a Web-based system to track the  status of PA project funding, it did not facilitate the day-to-day exchange  of documents related to project development.
Due to this lack of effective information-sharing, some local officials told  us that they had to frequently submit the same documentation to the state  of Louisiana and FEMA because it was not shared between the agencies.  In some cases, this slowed project development because applicants  needed to reproduce critical project documents. Federal and state officials  acknowledged that they faced difficulties in sharing project information  and that documents were sometimes lost during the exchange between  their agencies.
In Mississippi, federal, state, and local officials adopted strategies that  helped to facilitate the sharing of PA project information. For example,  following the disaster, FEMA’s Mississippi Transitional Recovery Office  and the state grantee were located in the same office complex in Biloxi,  Mississippi, and officials from these agencies were are also positioned  throughout the state. They reported that this colocation had multiple  benefits for information sharing and exchange, including the timely  sharing of critical documents and facilitation of daily meetings on project- development issues. In addition to colocating, FEMA and Mississippi state  officials used PA funding to secure an on-line accounting system that  made operational documents associated with projects readily available to  all parties. According to state and local officials, the state contracted with  an accounting firm that worked hand-in-hand with applicants to regularly  scan and transmit documentation on architecture and engineering  estimates, contractor receipts, and related materials from this Web-based  system. As a result, FEMA and the state had immediate access to key  documents that helped them to make project approval decisions. Further,  local officials reported that this information-sharing tool, along with  contractor staff from an accounting firm, helped to relieve the  documentation and resulting human capital burdens that applicants faced  during project development.
section_title: Limitations in Tracking of Project Status
paragraphs: Typically, FEMA only tracks the status for rebuilding projects up to when  the agency makes funds available to the state and at the end of the  process, when FEMA reconciles approved cost estimates with an actual  project’s cost. While we recognize that this approach toward tracking PA  projects may be appropriate for most disasters, the high level of interest  from Congress and the public regarding the status of Gulf Coast  rebuilding—including information on the construction of specific  projects—highlights the need for this type of information.
Providing such information on project status presented FEMA with two  challenges. First, information on rebuilding status between the point when  funds are made available to the state and cost reconciliation is not tracked  by FEMA’s NEMIS database. NEMIS data are derived from information  collected in project worksheets, which capture the estimates for individual  rebuilding projects. Second, FEMA does not track information by specific  rebuilding site, but rather, by project worksheet, which may encompass  multiple buildings or partial rebuilding sites. Because of this there was no  easy way to provide updates on specific PA projects, such as a school or  police station, to interested parties.
To address the first challenge, FEMA and state officials in Mississippi and  Louisiana have made efforts to more effectively gather and report on the  status of PA projects. They developed databases to maintain more  complete information on the status of PA projects. Although this effort has  been labor-intensive because of the need to use multiple information  sources, these officials said that they have been able to generate reports  on whether applicants have received PA funds that were made available to  the state as well as on the status of construction for PA projects. The latter  involves tracking construction bids, groundbreaking, and other stages of  rebuilding. As a result, PA managers reported that they have been able to  respond to stakeholder and applicant requests for information on project  status.  For example, FEMA reported that it developed a separate  database, which provided FEMA and state officials with visibility on  flexible funding PA grant options used by applicants—such as alternate or  improved projects—in order to keep applicants informed of FEMA and  GOHSEP activities and decisions related to these types of projects.    According to FEMA officials, these types of tools may not be necessary in  smaller disasters, but have proved to be useful in tracking long-term  rebuilding efforts in the Gulf Coast.
To address the second challenge, the Office of the Federal Coordinator for  Gulf Coast Rebuilding, working with FEMA, established a transparency  initiative in February 2008. This Web-based information sharing effort  provides detailed information about selected buildings and types of  projects in the Gulf Coast receiving PA funds and makes this information  available to the public by sector. For example, the Web site provides  information on whether specific New Orleans schools are open or closed  and how much federal funding is available for each school site. To do this,  FEMA and the Office of the Federal Coordinator worked with the state  and local applicants as well as spreadsheets maintained by PA project  officers in the field to obtain the necessary data. Although labor-intensive,  these officials said it has been very useful to a wide range of stakeholders  including the general public.
FEMA officials told us they are taking steps that will improve national data  collection. For example, FEMA has piloted a new information  management system, called the Emergency Management Mission  Integrated Environment (EMMIE), which, according to agency officials,  will provide better tracking and management of PA projects. According to  these officials, the agency has incorporated stakeholder feedback into  system development to respond to some of the data-collection challenges  faced in Gulf Coast rebuilding. EMMIE will allow FEMA staff, state  grantees, and applicants to perform PA grant-management activities  online, including allowing applicants to apply for, view the status of, and  manage their grants. Although EMMIE promises considerable additional  functionality, its use by state and local governments is optional. FEMA  plans to convert NEMIS information on the 2005 Gulf Coast hurricanes  into EMMIE once the system is fully deployed in 2009.
section_title: Challenges Involving Key Project Decisions Contributed to Delays in Moving Projects Forward
paragraphs: PA applicants rely on FEMA project-approval decisions to make key repair  or rebuilding decisions of their own; however, both applicants and FEMA  officials told us that the agency’s decisions were occasionally reversed.  This led to hesitancy on the part of some applicants in moving forward on  other projects. In addition, some applicants expressed concerns about the  timeliness of FEMA’s appeal process and that it was not perceived as  being independent.
subsections: section_title: Project Approval Decisions Were Sometimes Reversed
paragraphs: On some occasions, FEMA changed project-approval decisions after  applicants moved ahead on their projects based on these decisions,  resulting in additional expenses for the applicant. According to a senior  FEMA official, both program staff and auditors from the Office of  Inspector General may change project approval decisions if they  determine that an earlier decision was incorrect, that is, if the project  funding decision was legally ineligible. A senior FEMA official told us that,  in these cases, the agency has no choice but to change its funding  decision. In other situations, decisions were changed because a FEMA  official later disagreed with an earlier interpretation of a PA program rule  by another FEMA representative. These decisions were in areas that  FEMA had some discretion, that is, when FEMA rules allowed for more  than one rule interpretation. The official noted that this happened more  during the recovery from the 2005 Gulf Coast hurricanes than in other  disasters. According to the official there were cases when FEMA staff  made incorrect project-scope or cost-estimating decisions for which  applicants were ultimately held responsible. In these cases FEMA may  deobligate funding even after construction had started. For example, there  were cases when FEMA changed its decision on whether a building  qualified for replacement funding rather than repair funding, to the  detriment of the applicant. FEMA and local officials reported that as a  result of occasional reversals of FEMA decisions and guidance, applicants  were sometimes hesitant to move forward on other projects.
section_title: Lack of Timeliness and Perceived Independence of Appeals Process
paragraphs: State and local officials in Louisiana and Mississippi expressed concern  about the timeliness and perceived independence of the project appeals  process. Applicants may appeal project decisions if they disagree with  FEMA’s decisions on project eligibility, scope of damage, or cost  estimates. FEMA regulations outline the time frame for applicants to file  an appeal and for the state and FEMA to respond to applicant appeals (see  fig. 5). However, applicants reported that project appeal decisions were  often not made within the time frames required under the Stafford Act.  FEMA officials told us that the extraordinary large numbers of PA projects  led to a large number of applicant appeals. Also, some applicants said that  they were not provided with information on the status of their appeal from  either the state or FEMA. Finally, applicants also expressed concerns  about the independence of FEMA officials making appeals determinations  since in Louisiana appeals were reviewed by the same office that made the  decision being appealed in the first place—which some applicants  perceived to be a conflict of interest.
FEMA has taken steps to improve the timeliness of appeal decisions as  well as perceptions about the lack of independence in FEMA’s appeal  process. Specifically, in March 2006 the FEMA region responsible for  settling appeals from Louisiana designated a special team of dedicated  staff to help address the backlog of appeals. In addition, FEMA has made  changes to the appeals process within Louisiana so that an applicant’s  appeal is not reviewed by the same office that made the project decision in  the first place, but rather by an independent appeals team outside of the  agency’s Louisiana office. According to FEMA officials, appeals following  most disasters are not reviewed by the same office that made the decision  about the project in the first place, but rather by the FEMA regional office  responsible for the disaster. These officials told us that because of the size  of the Louisiana Transitional Recovery Office and the number of projects  it handled, the agency had initially tasked this office with the appeals  review function rather than the regional official located in Texas.
section_title: Human Capital Challenges Contributed to Delays
paragraphs: Human capital challenges at the federal, state, and local level underlie  many of the operational difficulties faced during Gulf Coast rebuilding.  During the initial phases of rebuilding, shortages of staff with the right  skills and abilities, as well as the lack of continuity among rotating staff,  contributed to delays in developing PA projects in Louisiana and  Mississippi.
subsections: section_title: Federal Human Capital Challenges
paragraphs: It is not surprising that a disaster with the effect of the 2005 Gulf Coast  hurricanes would strain the PA program’s human capital capacity. We  have previously reported that FEMA did not have the human capital  capacity it needed to implement PA in the wake of the 1989 Loma Prieta  earthquake, which was considerably smaller in size and scope than the  2005 hurricanes. In the Gulf Coast, FEMA’s human capital challenges  included not initially having enough staff to effectively implement the PA  program and, then, when the programs was staffed up, not having staff  with the right experience, knowledge, and abilities. The agency has taken  some steps to address these challenges, which state and local officials told  us have resulted in improvements.
It took time for FEMA to provide sufficient numbers of PA staff to meet  the large need in the wake of the 2005 Gulf Coast hurricanes. According to  FEMA officials, their staffing approach is generally adequate for most  disasters, which typically require 75-100 staff. However, given the  unprecedented size and scope of the damage caused by the 2005 storms,  FEMA needed to deploy a far larger number of people to administer the  PA program than it typically used. For example, during 2006, the year with  largest number of PA staff assigned to Louisiana and Mississippi, the  agency deployed more than 3,500 people. FEMA had not previously staffed  its transitional recovery offices at such high levels.
According to senior FEMA officials, even when FEMA’s staff levels were  sufficient, their inexperience and limited training presented significant  challenges to their ability to effectively administer the program in Gulf  Coast. Many of the more-experienced FEMA staff were still actively  working on recovery efforts related to the 2004 Florida hurricanes, or  needed time off after recently working on other disasters. Senior FEMA  officials told us that at least 50 percent of FEMA staff working in the Gulf  Coast, especially technical assistance contractors, did not have any PA  program experience or adequate training prior to being assigned to the  Gulf Coast. These officials stated that, as a cost-benefit decision, FEMA  does not require its contractors to take PA training prior to a disaster, but  the agency typically provides some training on the PA program to staff  right before they are deployed to a specific disaster. In addition, the  agency lacked sufficient numbers of experienced PA employees to fully  review all of the project decisions made by less-experienced staff,  especially early in the recovery. Senior FEMA officials involved in the  administration of the program noted that closer supervision of these  inexperienced staff might have reduced the number of problems  encountered later on, but conditions after the 2005 Gulf Coast hurricanes  made such supervision difficult.
We have previously identified insufficient training of PA staff as a  challenge and have reported on the importance of having FEMA  employees appropriately trained in the application of relevant PA policies  and information systems. We recommended that FEMA implement a  credentialing program to help ensure that staff who make program and  cost eligibility decisions meet minimum standards. Recently, FEMA  adopted an agencywide credentialing program that would identify the  skills and abilities needed for key positions as well as the amount of  training, mentoring, and experience necessary to obtain proof of these  skills. In December 2008, FEMA officials reported that they completed  development of this program and expect to conduct field testing in early  fiscal year 2009.
Federal, state, and local officials reported that FEMA’s use of  inexperienced staff resulted in changing or inaccurate decisions that  slowed down the project development process, especially during early  recovery efforts. For example, FEMA officials reported that inexperienced  staff sometimes misinterpreted PA program rules, such as promising that  the agency would fund the replacement of a fleet of vehicles under  conditions not allowed under the Stafford Act. Further, some staff also  lacked experience and training in technical subjects that were important  during project development, including how to assess certain types of  damage requiring specialized skills such as road and water system  damage. Officials from almost all of the localities included in our review  reported that advice provided by FEMA staff was, at times, changed or  incorrect, and that this not only contributed to slower project  development, but sometimes resulted in applicants spending funds on  projects that FEMA later determined would not be reimbursed.
According to federal, state, and local officials many of the human capital  challenges experienced in the earlier days after the 2005 Gulf Coast  hurricanes have improved. However, lessons learned in the aftermath of  these storms provide an opportunity for a discussion of the appropriate  resource level and staff capacity in the event of a future catastrophic  disaster. In this regard, FEMA’s Strategic Human Capital Plan, issued in  May 2008, sets a goal to determine the proper number and type of  employees required to staff FEMA’s various organizations, including the  directorate in charge of the PA program.
section_title: State and Local Human Capital Challenges
paragraphs: Given the intergovernmental nature of the PA program, FEMA relies on  state and local efforts for its successful implementation. As such, having  adequate human capital capacity at the state and local level also plays a  key role in successfully developing rebuilding projects. However, as was  the case with the federal government, Louisiana and Mississippi initially  lacked the human capital capacity to administer the PA program during  recovery from the 2005 Gulf Coast hurricanes. In addition, local applicants  initially lacked the staff to fully participate as partners in the program. As  with FEMA’s challenges, it is understandable that state and local entities  would not have the human capital capacity to address this disaster given  the sheer number of rebuilding projects. Early on, Louisiana and  Mississippi state offices administering the PA program had insufficient  staff to carry out their respective roles; however, later the states obtained  the assistance that they needed from various sources. As with the federal  experience, staff had to be quickly trained, resulting in some staff not  having the expertise to effectively assist applicants. Further, local  governments in Louisiana and Mississippi reported that their own human  capital resources were limited because of the disaster, thus, further  constraining their ability to fully participate in the PA process.
In Louisiana, officials from GOHSEP reported that they only had four staff  to administer the program when Hurricane Katrina occurred. As a result,  they hired contractors to process grants and obtained support from  Louisiana’s Office of the Legislative Auditor to assist in conducting up- front document and eligibility reviews. Although the Office of Legislative  Auditor established a dedicated team to assist the state with PA project  reviews, the office only consisted of a small number of staff to review  thousands of project worksheets.
Similarly, Mississippi officials reported facing staff shortages until they  received contractor assistance using PA funds. A senior official from  MEMA reported that they only had eight state employees dedicated to  their initial response to the 2005 Gulf Coast hurricanes. According to the  official, the state received federal PA funding in order to hire qualified PA  contract staff and an accounting firm to assistant applicants through the  complex PA process since state staff alone could not effectively  administer the program. Officials from MEMA and the Mississippi  Transitional Recovery Office reported that state contractors were  knowledgeable about disaster recovery, but inexperienced with PA  program rules. Therefore, they had to be trained quickly before going into  the field.
Local officials reported that their own human capital resources were also  limited because of the disaster, contributing to challenges in moving  through the PA funding process. Local governments in Mississippi and  Louisiana reported that they laid off many of their staff immediately after  the hurricanes, which made it difficult to provide enough staff to assist  FEMA in surveying all of the damage sites as well as respond to the  significant documentation requirements during project development. For  example, according to New Orleans officials, because the city was severely  cash-strapped after the disaster, many employees, including capital- projects staff, were laid off. This compromised the ability of the city to  provide staff to effectively survey the damage to all city buildings,  including the architectural and engineering staff needed to assess damage  and oversee projects. Other local governments in Louisiana and  Mississippi described similar challenges with addressing extensive project- management duties that applicants are required to fulfill under PA  program rules. Federal officials agreed that limitations in applicants’  human capital capacity were a major challenge during the PA funding  process. They highlighted that when any level of government can not  adequately fulfill its role within the PA process, the associated projects  almost always have difficulties.
section_title: Lack of Continuity during Project Development
paragraphs: The lack of staff continuity during project development also contributed to  rebuilding delays. According to several federal, state, and local officials, a  succession of FEMA staff were involved in the preparation of many of  these projects and faced difficulties with sharing project information as  they rotated on and off a project, resulting in a lack of continuity. Officials  from all of the localities with whom we spoke noted that FEMA staff  assigned to assist them rotated frequently (e.g., every 60 or 90 days) often  without providing advance notice that they were leaving. GAO analysis of  NEMIS data supports the idea that a succession of staff were often  involved in the development of large PA projects (see table 2). This  situation, especially early-on in the recovery effort, resulted in a loss of  knowledge of project-specific information because of a lack of effective  strategies to share this information. For example, because rotating staff  did not always document FEMA’s decisions or advice or share project- specific information with staff taking their place, applicants often had to  restart negotiations about project eligibility and cost determinations with  their new FEMA representative. In many cases, applicants reported that  replacement staff changed agreements that previous staff had made with  them or requested information that had previously been provided.  However, many applicants noted that this issue has improved recently and  that staff were working with them for longer periods of time. In addition,  FEMA officials told us that have developed ways to share project  information among rotating staff.
State and local officials reported that the lack of continuity in FEMA  staffing resulted in delays and changing project decisions. This was due to  two reasons: (1) applicants had to spend additional time familiarizing the  new FEMA staff with the project, and (2) FEMA staff rotating onto the  project sometimes provided different interpretations of program rules. For  example, according to a senior Plaquemines Parish official, parish staff  spent a significant amount of time familiarizing 10 different FEMA PA  representatives with project details—7 during the first several months of  recovery—and replacement staff differed in their interpretations of PA  processes and procedures.
The lack of continuity was further complicated by challenges with  information and document sharing among FEMA staff rotating on and off  projects. Federal, state, and local officials reported that there was a lack of  documentation of the rationale behind project decisions, further  contributing to continuity problems. One FEMA official told us that part of  the challenge with maintaining continuity was due to difficulties staff  encountered when trying to access the case-management files used to  track information about projects from a remote location. In the absence of  reliable electronic access to the case management files, this official  suggested that staff could maintain notebooks on applicant projects and  pass them on to replacement staff.
Several local officials also reported that there was often no notice of when  a new FEMA PA representative was assigned to their projects and no  “hand off” meeting with all parties present to share project information.  These officials said that such a meeting could have saved time and effort  that federal, state, and local officials spent on readdressing issues, and  may have reduced the number of times previously agreed-upon decisions  were changed. Difficulties ensuring continuity during disaster recovery  efforts are not new. We have previously reported that the lack of  continuity presented challenges to the effectiveness of the PA program  during recovery efforts following the Loma Prieta earthquake of 1989.
FEMA officials acknowledged that lack of continuity, especially in the first  year after the disaster, caused some project disruptions but these were  unavoidable given the magnitude of the event. According to these officials,  insufficient numbers of experienced staff necessitated the rotation of  FEMA personnel. In addition, FEMA transferred staff who were otherwise  willing to continue working with the same communities on the Gulf Coast  in order to avoid subjecting them to possible income tax increases that  would affect personnel deployed for a year or more under the federal tax  code. FEMA officials told us that, in Louisiana, they are taking steps  toward providing additional continuity in PA staffing. For example,  FEMA’s Transitional Recovery Office has started to employ a team  approach to help address this issue so that no individual staff person is the  only one responsible for retaining knowledge about a specific project.  Further, the officials reported that they have implemented changes during  recovery from the 2005 Gulf Coast hurricanes, which they recently  institutionalized during the recovery of Hurricanes Gustav and Ike.  These  changes included recruiting and hiring more long-term staff to function as  a single point of contact for these disasters, resulting in what they believe  is greater accountability for staff, reductions in rotations and roll-offs, and  sustained institutional knowledge among resident policy and decision  makers.  While increasing the stability of staff is a very important step in  addressing limitations in project continuity, it is also important for FEMA  to develop methods to more effectively share important project  information between staff whenever staff rotation is necessary and to  communicate expectations about staff rotations with applicants.
section_title: Conclusions
paragraphs: The huge size and unprecedented scope of the devastation caused by  Hurricanes Katrina and Rita created very difficult conditions for all  involved in the recovery of the Gulf Coast, and the challenges described in  this report must be understood in this context. Since the storms, FEMA  has approved tens of thousands of PA grants making available more than  $11 billion for the rebuilding and repair of public buildings and physical  infrastructure—a scale of assistance unmatched by any previous U.S.  disaster. Given this level of assistance, FEMA plays an important role in  helping to ensure fiscal accountability to the American taxpayer.
FEMA has faced a wide range of challenges in administering PA grants  including difficulties related to developing projects, barriers to sharing  information, and shortcomings in some of its project decision processes.  For example, we found cases where PA information was not effectively  shared among federal, state, and local entities directly involved in the  process as well as others including Congress and the public. Furthermore,  when FEMA reverses a key decision it has previously made, such as the  approval to rebuild instead of repair a structure, it can have a negative  effect on an applicant who may have already moved forward on the  project. Human capital limitations at the federal, state, and local level  underlie many of these operational difficulties as well as present  challenges of their own. For example, while it may have been impossible  to avoid rotation of FEMA staff given the magnitude of the 2005 Gulf Coast  hurricanes, the agency did not take sufficient steps to ensure that  continuity of knowledge about projects was maintained as staff came and  went.
Some of these challenges were familiar to FEMA, having been identified  by us and others in the past, but often the magnitude of the 2005 Gulf  Coast hurricanes considerably worsened their effect. In addition, FEMA  has encountered a whole set of new challenges related to applying the PA  program to a catastrophic disaster and the unique needs associated with  rebuilding entire communities in the wake of such an event. For example,  the agency has wrestled with how to adapt a program traditionally focused  on restoring buildings and infrastructure back to predisaster conditions, to  circumstances on the Gulf Coast where the reality of significant  demographic change may have fundamentally changed the need for such  structures in those locations.
In order to operate, the PA program relies on a partnership involving  FEMA, state governments, and local entities. Therefore, it is critical for the  agency to look for ways to foster constructive and collaborative  relationships with other key participants. We found that some of FEMA’s  policies and practices—particularly reversal of project decisions and the  lack of transparency in FEMA’s decisions—may work against efforts to  achieve effective collaboration. Because of the active role that state and  local governments must play in the PA process, it is also important for  states and locals to have the capacity needed to carry out their role in the  process. Similar to the federal experience, state and local governments in  both Louisiana and Mississippi initially lacked the necessary human  capital capacity to administer the program. Given the significant human  capital challenges involved in rebuilding after a major disaster, it would  benefit state and local governments to now consider approaches to help  ensure that they have, or have plans to develop or access, staff with the  right mix of skills needed to carry out their role in the PA process.
Some of the rebuilding challenges encountered following the 2005 Gulf  Coast hurricanes may be faced again as Texas, Louisiana, and Alabama  recover from the recent devastation caused by Hurricanes Ike and Gustav.  Accordingly, opportunities exist now to take steps to further refine the PA  program to better address these challenges as the current recovery  continues on the Gulf Coast and in advance of future disasters. FEMA has  already taken steps toward this end, which state and local officials report  are improving the implementation of the program in the Gulf Coast. It is  important that FEMA continues to institutionalize these lessons by taking  action to ensure that changes are made to program polices and  procedures, and then appropriately disseminated. The challenges faced by  the PA program in the Gulf Coast also highlight some broader issues  regarding the way the federal government approaches rebuilding. At your  request, we are beginning a review of these issues including whether there  may be a need for more fundamental changes to the Stafford Act when  providing funds to help communities rebuild after catastrophes. This is  among the many issues that face Congress as the nation works to  strengthen the United States’ ability to recover from the next catastrophic  event.
section_title: Recommendations for Executive Action
paragraphs: To help DHS improve the operation of the PA grant program and build on  some of the actions taken to date, we recommend that the Secretary of  Homeland Security direct the Administrator of FEMA to take the following  four actions:  Improve PA reporting by better defining information presented in FEMA’s  periodic reports to Congress and the public; specifically provide the  number of unique PA projects in addition to figures that include changes  to projects.
Improve information sharing within the PA process by identifying and  disseminating practices that facilitate more effective communication  among federal, state, and local entities, including the development of tools  that promote document sharing such as Mississippi’s online accounting  system.
Strengthen continuity among staff involved in administering the PA    developing protocols to improve information and document sharing  among FEMA staff, such as requiring that staff maintain a record of  project decisions to share with rotating staff, or by more broadly  adopting a team approach so that more than one individual is aware of  the details of specific projects, and    communicating the timing of expected FEMA staff rotations to  applicants directly affected by those staffing changes.
section_title: Agency Comments
paragraphs: On October 29, 2008, we provided a draft of this report to the Secretary of  Homeland Security for comment.  We received written comments on  December 11, 2008.  In its written comments, which appear in appendix II,  DHS generally agreed with our recommendations.  In addition, the  department provided technical clarifications that we incorporated where  appropriate.  We also provided drafts of relevant sections of this report to  state and local officials involved in the specific PA examples cited in this  report. We incorporated their comments as appropriate.
We will provide copies of this report to other interested congressional  committees, the Secretary of Homeland Security, the FEMA Administrator,  and state and local officials we contacted for this review.  In addition, this  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you have any questions about this report, please contact me on (202)  512-6806 or at czerwinskis@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We focused our review on Louisiana and Mississippi because these two  states accounted for 90 percent of all Public Assistance (PA) funding made  available to Gulf Coast states. We selected localities within these two  states based upon (1) the amount of PA funding they were expected to  receive, (2) whether local officials reported experiencing challenges or  successes during PA program implementation, or (3) whether the locality  had been identified by others as experiencing significant challenges or  successes during PA program implementation. Accordingly, we included  the following localities from Louisiana in our review: the City of New  Orleans, St. Bernard Parish, Plaquemines Parish, and Jefferson Parish.  Similarly, we included the following localities from Mississippi in our  review: Waveland, Bay St. Louis, Gulfport, and D’Iberville.
To address our first objective, we obtained and analyzed funding data  from September 2005 though September 2008 from the Federal Emergency  Management Agency’s (FEMA) Global Reports on Public Assistance in the  Gulf Coast, and for September 2005 though July 2008 from FEMA’s  National Emergency Management Information System (NEMIS). NEMIS  data included project information on project cost, the status of project  development, and project type and location. We assessed the reliability of  the data by performing standard electronic testing of the data, comparing  published funding reports to raw data from the NEMIS database, as well as  interviewing FEMA officials with responsibility for both data sources.  Where we identified discrepancies in the sources of data, we note this in  our report. However, we found that the data sources were comparable and  sufficiently reliable for our purposes. We did not independently verify the  validity of these data.
To address objectives two and three, we relied primarily on interviews  with key officials and corroborated this evidence with NEMIS data,  documents provided by PA applicants, the states of Louisiana and  Mississippi, and FEMA. Further, we obtained and reviewed FEMA  documents such as FEMA guidance for applicants and staff, the Robert T.  Stafford Disaster Relief and Emergency Assistance Act (Stafford Act),  regulations, policies, and procedures and observed damaged sites in  several locations in Louisiana and Mississippi. We also reviewed past GAO  and Department of Homeland Security Inspector General reports on the  PA program or Gulf Coast recovery. As our primary source of evidence,  we interviewed and obtained information from a variety of sources in the  Gulf Coast and Washington, D.C. At the federal level, we interviewed  officials and obtained information from FEMA, the Department of  Homeland Security’s Office of the Inspector General, and the Office of the  Federal Coordinator for Gulf Coast Rebuilding. We also interviewed and  obtained documentation from state and local officials in Louisiana and  Mississippi. We did not choose a representative sample of officials to  interview, but rather, chose individuals based upon their knowledge,  experience, or leadership role in the PA program in these two states. We  did not observe the PA funding processes in operation.
In Louisiana, at the state level, we interviewed and obtained  documentation from officials in the Governor’s Office of Homeland  Security and Emergency Preparedness (GOHSEP), which was the official  PA grantee for the state, with responsibility for partnering with FEMA to  administer the grant to local entities. We also interviewed and obtained  information from the Louisiana Recovery Authority, which was the policy  advisor for Gulf Coast rebuilding and, as of January 2008, became the  state’s lead agency working with FEMA on recovery operations, including  PA; the Office of the Legislative Auditor, which assisted in the reviewing of  PA grant applications; and the State Department of Education, which was  a major applicant in the PA process. At the local level, we interviewed and  obtained documentation from PA applicants from the City of New Orleans  and from St. Bernard, Plaquemines, and Jefferson Parishes.
In Mississippi, at the state level, we spoke with the Mississippi Emergency  Management Agency (MEMA), which was the official PA grantee for the  state, with responsibility for partnering with FEMA to administer the grant  to local entities; the Governor’s Office of Recovery and Renewal, which  acted as a policy advisor on Gulf Coast rebuilding; and the Joint  Committee on Performance and Evaluation and Expenditure Review,  which is an audit organization of the Mississippi state legislature that has  previously assessed implementation of the PA program. At the local level,  we spoke with city officials who were PA applicants in the cities of Bay St.  Louis, Gulfport, Waveland, and D’Iberville.
We conducted this performance audit from August 2007 through  November 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. We requested  comments on a draft of this report from the Department of Homeland  Security, which are reprinted in appendix II.  We also provided drafts of  relevant sections of this report to state and local officials involved in the  specific PA examples cited in this report, and incorporated their  comments as appropriate.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: Major contributors to this report were Peter Del Toro, Assistant Director;  Latesha Love; and Robert Yetvin. Tyler Duffy, Cynthia Grant, Adam  Shifriss, A.J. Stephens, and Kate Wulff also made key contributions.