Federal Disaster Assistance: Improved Criteria Needed to Assess a Jurisdiction's Capability to Respond and Recover on Its Own
Published: 2012-09-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The growing number of disaster declarations--a record 98 in fiscal year 2011 compared with 65 in 2004--has contributed to increased federal disaster costs. FEMA leads federal efforts to respond to and recover from disasters and makes recommendations to the President, who decides whether to declare a disaster and increase the usual federal cost share of 75 percent. This report addresses (1) the number of declarations requested and approved from fiscal years 2004-2011 and associated DRF obligations; (2) the criteria FEMA used to recommend a declaration for PA, and the extent that FEMA assessed whether an effective response to a disaster was beyond the capabilities of state and local governments; (3) how FEMA determined whether to recommend cost share adjustments, and their costs; and (4) FEMA's administrative cost percentages for declarations. GAO reviewed declaration data for fiscal years 2004-2011 and conducted site visits in 2011 to the two FEMA regions with the highest DRF obligations. The results are not generalizable, but provide insights.
section_title: What GAO Found
paragraphs: During fiscal years 2004-2011, the President received governors' requests for 629 disaster declarations and approved 539, or 86 percent, of which the Federal Emergency Management Agency (FEMA) reported 71 percent were for severe storms. For these 539 declarations, FEMA obligated $80.3 billion, or an average of about $10 billion a year, from the Disaster Relief Fund (DRF), as of January 31, 2012. Almost half of the obligations were for Hurricane Katrina; excluding obligations for Hurricane Katrina, FEMA obligated $40.6 billion, or an average of about $5 billion a year. As of January 31, 2012, FEMA anticipated that when all 539 declarations are closed, total DRF obligations will be about $91.5 billion. GAO's analysis shows that FEMA primarily relied on a single criterion, the per capita damage indicator, to determine whether to recommend to the President that a jurisdiction receive public assistance (PA) funding. However, because FEMA's current per capita indicator, set at $1 in 1986, does not reflect the rise in (1) per capita personal income since it was created in 1986 or (2) inflation from 1986 to 1999, the indicator is artificially low. The indicator would be $3.57 in 2011 had it been adjusted for increases in per capita income and $2.07 in 2012 had it been adjusted for inflation from 1986 to 1999, rather than its current $1.35. GAO's analysis of FEMA's anticipated obligations for 508 declarations with PA during fiscal years 2004-2011 shows that 44 percent and 25 percent would not have met the indicator if it had been adjusted for increases in personal income and inflation, respectively, since 1986. Further, the per capita indicator does not accurately reflect a jurisdiction's capability to respond to or recover from a disaster without federal assistance. GAO identified other measures of fiscal capacity, such as total taxable resources, that could be more useful in determining a jurisdiction's ability to pay for damages to public structures. Developing a methodology to more comprehensively assess state capabilities and reexamining the basis for the indicator could help FEMA more accurately determine a jurisdiction's capacity to respond without federal assistance. FEMA recommends raising the usual 75 percent federal share for PA to 90 percent when federal obligations, excluding FEMA administrative costs, meet a qualifying threshold. However, FEMA has no specific criteria for assessing requests to raise the federal share for emergency work to 100 percent, but relies on its professional judgment. For the 539 disaster declarations during fiscal years 2004-2011, governors made 150 requests to adjust the federal cost share to 90 or 100 percent; 109, or 73 percent, were approved or statutorily mandated, mostly for hurricanes. Without specific criteria for 100 percent cost share, FEMA risks making inconsistent or inequitable recommendations to the President. GAO's analysis of administrative costs for 539 disaster declarations during fiscal years 2004-2011 shows that administrative cost percentages frequently exceeded FEMA's targets, although FEMA does not require that they be met. GAO's analysis of 1,221 disaster declarations shows that average administrative costs doubled from 9 to 18 percent during fiscal years 1989-2011, the time period for which FEMA has data available. FEMA is working on short- and long-term actions to improve efficiencies in delivering disaster assistance, but the agency does not plan to set goals or track performance for administrative costs. Until this happens, it will be difficult for FEMA to ensure assistance is being delivered in an efficient manner.
section_title: What GAO Recommends
paragraphs: GAO recommends, among other things, that FEMA develop a methodology to more accurately assess a jurisdiction's capability to respond to and recover from a disaster without federal assistance, develop criteria for 100 percent cost adjustments, and implement goals for and track administrative costs. FEMA concurred with the first two, but partially concurred with the third, saying it would conduct a review before taking additional action.

section_title: Letter
paragraphs: The growing number of major disaster declarations has contributed to an  increase in federal expenditures for disaster assistance. For example,  during the 8 fiscal years from 2004 through 2011, Presidents declared 26  percent more major disaster declarations than during the preceding 8  fiscal years from 1996 through 2003. The Federal Emergency  Management Agency (FEMA), a component of the Department of  Homeland Security (DHS), leads the federal effort to mitigate, respond to,  and recover from disasters, both natural and man-made. Disaster  declarations can trigger a variety of federal response and recovery  assistance for government and nongovernmental entities, households,  and individuals. FEMA’s disaster assistance programs include Individual  Assistance (IA) and Public Assistance (PA), which provide financial  assistance to individuals and jurisdictions, respectively. Typically, FEMA  pays 75 percent of the PA costs for disaster declarations, and state and  local governments pay the other 25 percent. However, governors can  request that the President approve an adjustment to the cost share, so  that state and local governments would pay less than 25 percent.
No-year funds are available for obligation without fiscal year limitation. An obligation is a  definite commitment that creates a legal liability of the government for the payment of  goods and services ordered or received, or a legal duty on the part of the United States  that could mature into a legal liability by virtue of actions on the part of the other party  beyond the control of the United States. Payment may be made immediately or in the  future. An agency incurs an obligation, for example, when it places an order, signs a  contract, awards a grant, purchases a service, or takes other actions that require the  government to make payments to the public or from one government account to another.  GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP  (Washington, D.C.: September 2005).
FEMA to temporarily halt funding on long-term recovery projects and  focus on immediate needs. According to the FEMA Administrator,  because of the shortage of available balances in the DRF, FEMA  accelerated its efforts to recover previously obligated funds from states  for completed projects that had unexpended balances. During fiscal year  2011, FEMA deobligated and recovered $2.2 billion from prior disaster  declarations.
In 2001, we reported on the need for improvements to the criteria and  eligibility procedures that FEMA used to make recommendations to the  President for disaster declaration requests. In 2012, we reiterated the  need for FEMA to, among other things, reexamine the criteria FEMA  primarily uses to make recommendations to the President for disaster  declaration requests. Furthermore, we have identified as a 21st century  challenge the determination of costs to be borne by federal, state, and  local governments or the private sector in preparing for, responding to,  and recovering from disasters of all types.
This report provides the results of our review of federal disaster  assistance efforts by addressing the following questions: (1) For each  fiscal year from 2004 through 2011, how many disaster declaration  requests did FEMA receive, how many were approved, for which types of  disasters, and how much were the associated obligations from the DRF?  (2) What criteria has FEMA used to recommend to the President that a  disaster declaration is warranted for PA, and to what extent does FEMA  assess whether an effective response to a disaster is beyond the  capabilities of state and local governments? (3) How does FEMA  determine whether a cost share adjustment recommendation for PA is  warranted and how much additional federal assistance did jurisdictions  receive during fiscal years 2004 through 2011 because of cost share  adjustments? (4) What were FEMA’s administrative cost percentages for  disaster declarations during fiscal years 2004 through 2011, how have  they changed over time, and what actions is FEMA taking, if any, to  reduce the costs of delivering disaster assistance?
To determine how many disaster declaration requests FEMA received,  how many were approved, for which types of disasters, and how much  the associated obligations were from the DRF, we obtained and analyzed  data for each disaster declaration approved during fiscal years 2004  through 2011. We focused on this time frame because it contains the  most current data for disaster declarations. It also comprises the time  period after FEMA was merged into the newly created DHS, on March 1,  2003, and predates Hurricane Katrina in 2005. We focused primarily on  fiscal years 2004 through 2011; however, to provide historical context and  to compare results across similar periods, we also reviewed obligations  data during fiscal years 1989 through 2011. In addition, to provide further  historical perspective, we include information on the number of disaster  declarations by jurisdiction from the first presidential disaster declaration  in fiscal year 1953 through fiscal year 2011 in appendix I. FEMA provided  data to us from its National Emergency Management Information System  (NEMIS) and Integrated Financial Management Information System  (IFMIS). To assess the reliability of these data, we reviewed the data that  FEMA officials provided and discussed data quality control procedures  with them. We determined that the data we used from these systems  were sufficiently reliable for the purposes of this report.
To determine the criteria that FEMA used to recommend to the President  that a disaster declaration was warranted for PA, and to what extent  FEMA assessed whether an effective response to a disaster was beyond  the capabilities of jurisdictions, such as state and local governments, we  examined FEMA policies, regulations, and other documents related to the  disaster declaration process. We also interviewed FEMA officials in  headquarters and 2 of 10 FEMA regions as well as officials in two state  emergency management agencies. In addition, to determine the  probability that a state was granted PA if the related damage estimate  met or exceeded the PA per capita indicator, we obtained and analyzed  data within Preliminary Damage Assessments (PDA) from fiscal years  2008 through 2011.the data that FEMA officials provided and discussed data quality control  procedures with them. We determined that the PDA data were sufficiently  reliable for the purposes of this report.
To assess the reliability of these data, we reviewed  To determine how FEMA evaluated whether a cost share adjustment  recommendation was warranted and how much additional federal  assistance jurisdictions received during fiscal years 2004 through 2011  because of the adjustments, we obtained and reviewed relevant laws,  regulations, and policies. We also reviewed Standards for Internal Control  in the Federal Government to assess FEMA’s process for making  recommendations to the President on the need for cost share   We also obtained and analyzed the cost share  adjustments.adjustments and types requested, approved, and denied during fiscal  years 2004 through 2011. We interviewed FEMA officials who process  cost share adjustment requests and participate in making  recommendations to the President as to whether the requests should be  approved or denied. To assess the reliability of these data, we reviewed  the data that FEMA officials provided and discussed data quality control  procedures with them. We determined that the cost share adjustment  data were sufficiently reliable for the purposes of this report.
To determine what FEMA’s administrative cost percentages were for  disaster declarations, we obtained DRF obligations, projected obligations,  and related data for 1,221 disaster declarations during fiscal years 1989  through 2011. The projected obligations were FEMA’s estimates, as of  April 30, 2012, of the anticipated total obligations—actual to date and  estimated—for each disaster eligible to receive federal disaster  assistance after April 30, 2012. We compared FEMA’s administrative  cost percentages for each disaster declaration from fiscal years 2004  through 2011 with FEMA’s administrative cost percentage target ranges  and FEMA’s administrative cost percentages for disaster declarations  from fiscal years 1989 through 2003. We used these time periods  because they provide larger sample sizes and an opportunity to assess  potential trends over a longer period of time. In addition, we included  projected obligations in our analysis because FEMA officials told us that  administrative costs are typically higher as a percentage of assistance  costs in the early months following a disaster. By including projected  obligations, we were able to analyze disaster obligations—actual and  estimated—for the entire time period that disaster declarations were in  the following three levels of status: programmatically open, closed, and  reconciled. To assess the reliability of these data, we reviewed the data  that FEMA officials provided and discussed data quality control  procedures with them. We determined that the DRF data were sufficiently  reliable for the purposes of this report. To determine what actions FEMA  is taking, if any, to reduce the costs of delivering disaster assistance, we  reviewed relevant FEMA documents and briefings, and interviewed FEMA  officials.
We conducted this performance audit from July 2011 through September  2012 in accordance with generally accepted government auditing  standards. 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. For more  information on our scope and methodology, see appendix II.
subsections: section_title: Background
paragraphs: During this time, we reported preliminary observations on opportunities to reduce the  costs to the federal government related to major disaster declarations. See  GAO-12-342SP. 321-328. governments, tribes, and certain nonprofit organizations and individuals.
In addition to its central role in recommending to the President whether to  declare a disaster, FEMA has primary responsibility for coordinating the  federal response when a disaster is declared as well as recovery, which  typically consists of providing grants to assist state and local governments  and certain private nonprofit organizations to alleviate the damage  resulting from such disasters.
FEMA’s disaster declarations process is implemented by FEMA  headquarters as well as its 10 regional offices. FEMA’s Administrator, in  accordance with the Post-Katrina Emergency Management Reform Act of  2006 (Post-Katrina Act), appoints a Regional Administrator to head each  regional office. and tribal governments, and other nongovernmental organizations— oversee emergency management activities within their respective  geographical area. Joint Field Offices (JFO) are temporary FEMA  offices established to respond to declared disasters and are headed by  Federal Coordinating Officers (FCO) who, among other things, coordinate  the activities of the disaster reserve workforce deployed for a particular  disaster. Once a disaster is declared, FEMA deploys Disaster Assistance  Employees and any other employees needed to the affected  jurisdiction(s). FEMA provides assistance through the PA, IA, and  Hazard Mitigation programs as well as through Mission Assignments. For  instance, some declarations may provide grants only for IA and others  only for PA. Hazard Mitigation grants, on the other hand, are available for  all declarations if the affected area has a FEMA-approved Hazard  Mitigation plan.
6 U.S.C. § 317.
subsections: section_title: The Changing Disaster Declaration Environment
paragraphs: According to FEMA, the agency is evolving from originally focusing on  grants management to being an organization implementing increasingly  more complex programs, with an increasingly sophisticated and  specialized workforce and procedures in response to changing  circumstances and expectations. As illustrated by figure 1, the number of  disaster declarations has significantly increased since 1953, when the  first presidential disaster declaration was issued. See appendix I for  more information about the number of disaster declarations.
Various factors have contributed to the increase in disaster declarations.  Population growth has occurred in U.S. geographic areas that are  vulnerable when a disaster hits, such as those near coastlines. FEMA  officials also cited more active weather patterns as a factor. FEMA  guidance to states and localities and the enhanced capabilities and  professionalization of state and local emergency management personnel  have also been factors. For example, in 1999, FEMA published a list of  factors that it considers when evaluating disaster declaration requests.  According to FEMA and state emergency management officials from two  states, the guidance, along with state and local emergency management  officials’ additional knowledge about the process and the enhanced  transparency of the process for federal disaster declarations, has helped  state and local officials better justify a request for federal disaster  assistance. Increased media attention on disasters, especially those in  which there have been casualties or deaths, has also been a factor,  according to FEMA and state emergency management officials for two  states.
section_title: Disaster Declaration Process
paragraphs: The disaster assistance process generally starts at the local level,  proceeds to the county and state levels, and then to the federal level. The  Stafford Act states that the governor of the affected state shall request a  declaration by the President that a disaster exists. FEMA is the primary  federal disaster assistance agency, but others can have major roles, such  as the U.S. Army Corps of Engineers, which can provide engineering and  contracting support to FEMA.
As part of the request to the President, a governor must affirm that the  state’s emergency plan has been implemented and the situation is of  such severity and magnitude that effective response is beyond the  capabilities of the state and the affected local governments and that  federal assistance is necessary, among other things.
Before a governor  asks for federal disaster assistance, state and local officials typically  conduct an initial PDA to identify the amount of damage and determine if  the damage exceeds their capability to respond and recover without  federal assistance. Based on the initial PDA findings, a joint PDA, in  which FEMA participates, may be requested by the governor. FEMA  uses the joint PDA in its evaluation of the state’s need for federal  assistance and makes a recommendation to the President as to whether  the request for a disaster declaration should be approved or denied. Later  in this report, we discuss in more detail how FEMA evaluates the need for  PA. To evaluate the need for IA, FEMA considers various factors,  including insurance coverage; the extent to which volunteer agencies and  state or local programs can meet the needs of disaster victims;  concentration of damages due to the disaster; number of deaths and  injuries; amount of disruption to normal community services; amount of  emergency needs, such as extended or widespread loss of power or  water; and special populations, such as elderly or low-income people.  Figure 2 shows the basic process that is followed from the time a disaster  occurs until the President approves or denies a governor’s disaster  declaration request.
section_title: Over 500 Disasters Were Declared during Fiscal Years 2004 through 2011 with Total Obligations of Over $90 Billion Anticipated
paragraphs: During this period, FEMA received 629 disaster declaration requests and  approved 539 of them. Most disaster declarations were for severe storms.  FEMA anticipates that when all disasters declared during fiscal years  2004 through 2011 are closed, its total obligations for these disasters will  exceed $90 billion.
subsections: section_title: Most Declarations for Severe Storms, Highest in Southeast and Central Midwest
paragraphs: The President received requests from governors during fiscal years 2004  through 2011 for 629 disaster declarations and approved 539 of them, or  86 percent, as shown in table 1.
Governors can appeal a decision when the President initially denies a  disaster declaration request. During fiscal years 2004 through 2011,  governors made 629 requests for disaster declarations, and the President  ultimately denied 90 of them, or 14 percent.
FEMA has 10 regions throughout the United States that, among other  things, provide technical assistance to state and local officials and make  recommendations to FEMA headquarters as to whether a disaster  declaration is warranted. Individual FEMA regions had varying numbers  of disaster declarations during fiscal years 2004 through 2011. The two  FEMA regions that had the most disaster declarations were Region IV in  the Southeast and Region VII in the central Midwest, which together  accounted for 163, or 30 percent, of the 539 declarations. The two FEMA  regions that had the fewest declarations were Regions IX and X along the  west coast, including Alaska, which together accounted for 71  declarations, or 13 percent. See appendix I, figure 10, for a map that  shows the number of declarations by FEMA region.
During fiscal years 2004 through 2011, the average number of disaster  declarations was 9.3 for each of the 58 jurisdictions—that is, the 50  states, the District of Columbia, 5 territories, and 2 Freely Associated  States. However, our analysis shows that some jurisdictions had over  20 disaster declarations, while other jurisdictions had 3 or fewer disaster  declarations during this period. For example, Oklahoma had the most  disaster declarations at 25, while Colorado and Guam had 1 each and the  Marshall Islands did not have any. In addition, the 5 jurisdictions with the  highest number of disaster declarations accounted for 105, or 19 percent,  of the 539 declarations during fiscal years 2004 through 2011, whereas  the 4 jurisdictions with the lowest number of disaster declarations  accounted for 4, or less than 1 percent. See figure 3 for the number of  disaster declarations for each jurisdiction.
As reported by FEMA, severe storms accounted for 71 percent of  declarations during fiscal years 2004 through 2011. According to FEMA  officials, a disaster is classified as a severe storm when multiple storm- related incidents (for example, floods or heavy rains) affect a jurisdiction,  but no single incident type is responsible for the majority of the damage.
See appendix I, table 11, for the number and percentage for each of the  incident types that occurred during fiscal years 2004 through 2011.
For each disaster declaration, various types of assistance can be  approved. For example, the President can approve PA only, IA only, or  PA and IA for each declaration. As shown in figure 4, during fiscal years  2004 through 2011, 6 percent of the declarations were awarded for IA  only, while a total of 94 percent of declarations were awarded for either  PA only or IA and PA.
Through January 31, 2012, FEMA obligated $80.3 billion, or an average  of about $10 billion a year, from the DRF for 539 disasters declared  during fiscal years 2004 through 2011; and FEMA anticipates that when  all 539 declarations are closed, obligations will be about $91.5 billion.  Thirteen of these declarations had incurred obligations of over $1 billion  each. Almost half of the $80.3 billion in obligations was for Hurricane  Katrina. Excluding obligations of $39.7 billion for Hurricane Katrina, FEMA  obligated $40.6 billion for the other disaster declarations during fiscal  years 2004 through 2011, or an average of about $5 billion a year. Total  obligations are higher for fiscal years 2004, 2005, and 2008 than for the  remaining 5 years primarily because of hurricanes that occurred with  more frequency or force during those years. For example, over half of the  $8.8 billion for disasters declared in fiscal year 2004 was due to four  hurricanes, over half of the $44.9 billion for disasters declared in fiscal  year 2005 was for Hurricane Katrina, and about half of the $10.3 billion  for disasters declared in fiscal year 2008 was for Hurricanes Ike and  Gustav. Table 2 shows the obligations by fiscal year.
Obligations for disaster declarations during fiscal years 2004 through  2011 varied greatly by FEMA region and jurisdiction. FEMA Region VI  had the highest obligations at $40.0 billion. However, when excluding  obligations from all FEMA regions due to Hurricane Katrina, FEMA  Region IV had the highest obligations at $13.2 billion. FEMA Region X  had the lowest obligations at $0.6 billion. As shown in figure 5, the  amount of obligations also varied greatly by jurisdiction for disasters  declared during fiscal years 2004 through 2011. For example, Louisiana  had the highest obligations, at $32.3 billion, but after excluding obligations  for Hurricane Katrina, Florida had the highest obligations, at $9.3 billion,  while for the jurisdictions with the lowest obligations, Guam had $1.9  million and the Marshall Islands did not have any. As a comparison, the  nationwide average obligations per jurisdiction were $1.38 billion, and  decreased to $700 million when obligations for Hurricane Katrina were  excluded. Appendix I, figure 10, shows the obligations by FEMA region  for fiscal years 2004 through 2011.
Furthermore, obligations for individual disaster declarations declared  during fiscal years 2004 through 2011 varied greatly. For example, as of  January 31, 2012, FEMA had obligated $28.5 billion for Louisiana’s fiscal  year 2005 Hurricane Katrina disaster declaration compared with about  $803,000 for a South Dakota disaster declaration during that same fiscal  year. Disaster declarations can take over a decade to close; therefore, to  obtain a more comprehensive and longer-term perspective, we analyzed  obligations for 811 disaster declarations during fiscal years 1989 through  2011 that had been closed as of January 31, 2012. Of the 811 closed  declarations, we found that 440, or 54 percent, had obligations of less  than $10 million (see table 3).
For those disaster declarations approved during fiscal years 2004 through  2011, we analyzed the total obligations as of April 30, 2012, for closed  disasters, and the total projected obligations—actual to date and  estimated—for those declarations that remained open as of April 30,  2012. Specifically, for open declarations as of April 30, 2012, instead of  analyzing how much FEMA had obligated as of that date, we analyzed  the amount FEMA had obligated plus the amount FEMA anticipated it  would obligate from the time a declaration was approved through its  closure. On the basis of our analysis, when all 539 declarations that were  declared during fiscal years 2004 through 2011 are eventually closed,  FEMA anticipates that 193, or 36 percent, will have total obligations of  less than $10 million, thus signifying that these were relatively small  disasters (see table 4).
section_title: Eligibility for Assistance Is Primarily Determined Using a Damage Estimate Indicator
paragraphs: The per capita damage indicator FEMA uses to assess a jurisdiction’s  eligibility for PA is the primary factor on which disaster declaration  decisions are based. However, the per capita damage indicator is  artificially low. In addition, FEMA’s process to determine eligibility for  federal assistance does not comprehensively assess a jurisdiction’s  capability to respond to and recover from a disaster on its own.
subsections: section_title: FEMA Relies Almost Exclusively on a Single Indicator
paragraphs: According to FEMA and state emergency management officials, FEMA  has primarily relied on a single indicator, the statewide per capita damage  indicator, to determine whether to recommend that a jurisdiction receive  PA funding. In fiscal year 2012, the per capita indicator is $1.35. Thus, a  state with 10 million people would generally have to incur $13.5 million in  estimated eligible disaster damages to public structures for FEMA to  recommend that a disaster declaration for PA is warranted. However,  other factors could also influence the recommendation, such as whether a  jurisdiction has incurred multiple disasters within a short period of time. Of  the 58 jurisdictions for fiscal year 2012, based on population, California  has the highest statewide indicator total, at $50.3 million, while Wyoming  has the lowest amount at $760,895.total PA per capita indicator amounts for each of the 58 jurisdictions.
See appendix III, table 15, for the  FEMA’s method to determine the affected jurisdictions’ capabilities to  respond without federal assistance relies on a governor’s certification and  damage estimates. The Stafford Act requires that a governor’s request for  a disaster declaration be based on a finding that the disaster is of such  severity and magnitude that an effective response is beyond the  capabilities of the jurisdiction and that federal assistance is necessary.  FEMA officials stated that governors must certify in their letter to the  President requesting a disaster declaration that the disaster is beyond the  capabilities of the jurisdiction. FEMA regulations list quantitative and  qualitative factors, such as recent disasters within the same jurisdiction  that the agency considers when determining whether a disaster  declaration is warranted. However, in describing the declarations  process, FEMA and emergency management officials in two states said  that FEMA uses the statewide per capita indicator as the primary  determining factor for PA funding. This damage indicator, which FEMA  has used since 1986, is essentially a proxy fiscal measure of a state’s  capacity to respond to and recover from a disaster, rather than a more  comprehensive assessment of a state’s fiscal capacity.
According to our analysis of readily available indicator data, as well as  officials in two FEMA regions and state emergency management officials  in two states, the principal factor used to determine eligibility for a disaster  declaration was whether the damage estimate exceeded the PA per  capita indicator. Our analysis of 246 disaster declarations during fiscal  years 2008 through 2011 identified the PA per capita indicator as having  been the primary determining factor—essentially being used as an  eligibility threshold. Specifically, 244 of the 246 approved disaster  declarations that we reviewed, or 99 percent, had PA damage estimates  that met or exceeded the PA per capita indicator in effect in the year in  which the disaster was declared. Seven gubernatorial requests for a  disaster declaration during fiscal years 2008 through 2011 had a damage  estimate higher than the PA per capita indicator yet were denied for  various reasons, such as the damage being a result of multiple storms or  the normal depreciation of structures rather than a single disaster.
section_title: FEMA’s Per Capita Indicator Used to Assess Eligibility Is Artificially Low
paragraphs: Because FEMA’s current per capita indicator does not reflect the rise in  (1) per capita personal income since it was created in 1986 or (2) inflation  from 1986 to 1999, the indicator is artificially low. In 1986, FEMA  proposed a $1.00 per capita indicator for PA as a means of gauging a  jurisdiction’s fiscal capacity. The indicator was based on the 1983 per  capita personal income nationwide, then estimated at $11,667. Current  FEMA officials were unable to explain how per capita personal income  was used to establish the indicator level at $1.00. However, FEMA  documentation noted that the agency thought it reasonable that a state  would be capable of providing $1.00 for each resident of that state to  cover the damage from a disaster. While the proposed rule was not  codified in 1986, FEMA began to use the $1.00 per capita indicator  informally as part of its preliminary damage assessment efforts and did  not adjust the indicator annually for either inflation or increases in national  per capita income. In 1998, FEMA considered adjusting the PA indicator  to $1.51 to account for inflation since 1986, but because of input from  state emergency management officials, FEMA decided not to do so.
In 1999, FEMA issued a rule codifying the per capita indicator at $1.00,  which was stipulated to include an annual adjustment for inflation, but the  rule was silent on whether the indicator would continue to be based on  nationwide per capita personal income. As a result, the indicator has  risen 35 percent from $1.00 to $1.35 in the 13 years since FEMA began  its annual inflationary adjustments. Figure 6 shows the actual increases in  the per capita indicator for PA from 1986 to 2010 compared with the  increases that would have occurred if FEMA had adjusted the indicator  for inflation or the increase in per capita personal income during this  period.
FEMA officials stated that the rise in construction and other costs to  respond to and recover from disasters have outpaced the rise in the per  capita indicator. In jurisdictions with smaller populations, damage to a  single building or facility, such as a water treatment facility, could result in  a damage estimate sufficient to meet the per capita damage threshold  and warrant a disaster declaration. For example, the damage from  Hurricane Katrina to a single water treatment facility in Carrollton,  Louisiana, exceeded Louisiana’s 2005 per capita threshold. In addition,  the Washington National Cathedral incurred approximately $15 million of  damage during the August 23, 2011, earthquake in Washington, D.C.,  which has a per capita damage indicator threshold of less than $1  million.
The Stafford Act requires that conditions due to a disaster be beyond a  jurisdiction’s (state and local) capability to respond effectively before  disaster assistance from the federal government is warranted. however, prohibits FEMA from denying federal assistance solely by virtue  of an arithmetic formula or sliding scale based on income or population.  According to Standards for Internal Control in the Federal Government,  activities should be established to monitor indicators and controls should  be aimed at validating the propriety and integrity of such indicators. Had  the indicator been adjusted for inflation beginning when FEMA started  using it in 1986, the indicator would have risen more than 100 percent,  from $1.00 to $2.07 in 2012. Had the indicator been adjusted for  increases in per capita personal income since 1986, the indicator would  have risen over 250 percent, from $1.00 to $3.57 in 2011, based on 2011  national per capita personal income of $41,663.
42 U.S.C. § 5170.
Our analysis included FEMA’s projected obligations as of April 30, 2012, for only those  508 disaster declarations that had received PA and had been declared during fiscal years  2004 through 2011. We did not analyze the 31 disaster declarations that received IA only.  We analyzed obligations instead of PDA damage estimates for PA because FEMA  officials stated that estimating the damage from a disaster is sometimes stopped when the  estimate equals or exceeds the PA per capita indicator. Therefore, we concluded that  conducting the analysis using projected obligations would be more accurate than using  incomplete PDA damage estimates for PA. of the 508 disaster declarations would not have met the PA per capita  indicator if adjusted for inflation since 1986. Thus, had the indicator been  adjusted annually since 1986 for personal income or inflation, fewer  jurisdictions would have met the eligibility criteria that FEMA primarily used  to determine whether federal assistance should be provided, which would  have likely resulted in fewer disaster declarations.
In discussions with FEMA officials about raising the per capita damage  indicator, they noted that updating the indicator completely in a single  year could create problems for jurisdictions, which, in response, may  need to increase their rainy day fund or take other actions to adjust to the  change. However, FEMA officials stated that adjusting the indicator in a  phased approach over several years would be more feasible for  jurisdictions. The current annual inflation adjustment generally increases  the damage indicator incrementally. However, were the “catch-up”  inflation adjustment (from $1.35 to $2.07) implemented in a single year,  the increase would be considerably more than the annual inflation  adjustments since 1999. For example, for a jurisdiction with a population  of 5 million, fully implementing the catch-up adjustment for inflation would  raise the damage indicator from $6.75 million to $10.35 million. Adjusting  the indicator in phases over several years could help FEMA examine  future requests for disaster declarations in a manner that reflects changes  in per capita income or inflation since 1986 and provide jurisdictions more  time to plan for and adjust to the change.
section_title: FEMA’s Eligibility Process Does Not Comprehensively Assess a Jurisdiction’s Capability to Respond and Recover
paragraphs: Reliance on the PA per capita indicator to determine a jurisdiction’s  eligibility for federal assistance—whether the indicator is artificially low or  adjusted for increases in personal income or inflation—does not provide  an accurate measure of a jurisdiction’s capability to respond to or recover  from a disaster without federal assistance. Determining a jurisdiction’s  fiscal capacity is important because a jurisdiction with greater resources  should be able to more easily recover in the aftermath of a disaster than a  jurisdiction with fewer resources. Further, a jurisdiction’s fiscal capacity is  an important component of the jurisdiction’s overall response and  recovery capability.
In 1999, when the rule was codified to set the per capita indicator at  $1.00, FEMA stated that it recognized that a straight per capita figure may  not be the best measurement of a state’s capability, but that it provided a  simple, clear, consistent, and long-standing means of measuring the  severity, magnitude, and impact of a disaster while at the same time  ensuring that the President can respond quickly and effectively to a  governor’s request for assistance. As we reported in 2001, per capita  personal income is a relatively poor indicator of a jurisdiction’s fiscal  capacity because it does not comprehensively measure all income  potentially subject to jurisdiction taxation and is not necessarily indicative  of jurisdiction or local capability to respond effectively without federal  assistance. For example, it does not include income produced in a  jurisdiction unless it is received as income by a jurisdiction resident. Thus,  profits retained by corporations for business investment, though  potentially subject to jurisdiction taxation, are not included in a jurisdiction  per capita income measure because they do not represent income  received by jurisdiction residents. In 2001, we recommended that FEMA  consider alternative criteria. FEMA’s response noted that we provided  valuable input for the FEMA team that was reviewing the disaster  declaration process and the criteria used to assess jurisdiction damages.  According to FEMA, in 2001, the President’s budget for fiscal year 2002  included a provision for the development of improved guidelines for  disaster assistance that provided jurisdictions with meaningful criteria that  must be met to become eligible for federal disaster assistance. FEMA  undertook a review of disaster declaration guidelines; however, no  changes to the established declaration guidelines were adopted, and  ultimately, FEMA did not change its reliance on the per capita indicator.
The Post-Katrina Act required FEMA to develop a set of preparedness  metrics that could be used to assess operational preparedness  capability. Also, Presidential Policy Directive-8 (PPD-8), issued in March  2011, required the Secretary of Homeland Security to develop a national  preparedness system to, in part, define existing capabilities and capability  gaps, and drive investments to close those gaps across the nation’s  federal, state, local, tribal, and territorial governments. Much of the growth  in disaster declarations has occurred at the same time (that is, since the  terrorist attacks of September 11, 2001) that the federal government has  provided more than $37 billion to state and local governments to enhance  their preparedness to protect against, respond to, and recover from  disasters of all types. However, FEMA has not yet finished developing  metrics to assess state preparedness capability, a fact that limits its ability  to comprehensively assess jurisdictions’ disaster preparedness and  capabilities.
GAO, Federal Emergency Management Agency: Continuing Challenges Impede  Progress in Managing Preparedness Grants and Assessing National Capabilities,  GAO-12-526T (Washington, D.C.: Mar. 20, 2012).
FEMA officials, FEMA does not have any plans or policies in place to use  preparedness data to inform its recommendations regarding presidential  disaster declarations. Metrics to assess a jurisdiction’s disaster  preparedness and capabilities could augment the PA per capita indicator,  and other relevant information, to provide a more comprehensive  understanding of a jurisdiction’s capacity to respond to and recover from  a disaster without federal assistance.
The 2011 state preparedness reports provide some potentially useful  information to understand a state’s response capabilities. However,  FEMA does not use these reports or an assessment of a jurisdiction’s  response capabilities to determine eligibility for disaster assistance, and  the FEMA Administrator stated that state and local governments are  capable of handling much of the workload related to responding to a  declared disaster, which has allowed FEMA to mostly focus on recovery  efforts. Recovery refers to efforts aimed at restoring an area to its prior  status, including the reconstruction of damaged structures, including its  housing stock, business establishments, public facilities, and the  environment. The availability of funds is critical to these efforts; however,  FEMA does not conduct an assessment of a jurisdiction’s fiscal capacity  to fund a recovery effort without federal assistance before determining  whether to award federal assistance.
GAO-01-837. jurisdiction’s fiscal capacity, adjustments for TTR growth would vary by  jurisdiction. FEMA could also use other measures of fiscal capacity, such  as state personal income or gross state product, to more accurately  determine a jurisdiction’s ability to pay for damages to public structures  without federal assistance. Table 5 describes three potential  approaches to measure a jurisdiction’s fiscal capacity. Federal  departments and agencies have used some of these approaches to help  determine a jurisdiction’s fiscal capacity and the extent to which a  jurisdiction should be eligible for federal assistance. For example, the  Department of Health and Human Services’ Substance Abuse and Mental  Health Services Administration’s block grant program and Community  Mental Health Service use TTR. Also, personal income is used by many  federal grant programs.
Without an accurate assessment of a jurisdiction’s capabilities to respond  to and recover from a disaster without federal assistance, including a  jurisdiction’s preparedness capabilities and fiscal capacity, FEMA runs  the risk of recommending that the President award federal assistance to  jurisdictions that have the capability to respond and recover on their own.  Reexamining the basis for the PA indicator and the usefulness of  preparedness metrics and jurisdiction fiscal capacity could help FEMA  more accurately determine whether a jurisdiction should be eligible for  federal assistance. In appendix IV, we provide additional information  about the three approaches to measure a jurisdiction’s fiscal capacity as  well as examples of how these fiscal measures could assist FEMA in  more accurately determining whether the magnitude of damage is beyond  the capacity of the jurisdiction.
section_title: FEMA Does Not Have Specific Criteria to Evaluate Some Cost Share Adjustment Requests and Does Not Track Additional Costs for All Adjustments
paragraphs: According to the Stafford Act, the usual cost share arrangement for  disaster declarations calls for the federal government to pay not less than  75 percent of the eligible PA costs of a disaster and nonfederal entities  (that is, state and local governments) to pay the remaining 25 percent; at  a governor’s request, the President can adjust this cost share. FEMA  has specific criteria to evaluate a request to adjust the federal share from  75 percent to 90 percent, but does not have specific criteria to evaluate a  request to adjust the federal share to 100 percent. Adjusting the federal  share to 100 percent is typically done for emergency work such as life-  saving activities and debris removal projects through FEMA’s PA  program. In addition, FEMA does not know the additional costs (that is,  the costs of paying an additional 15 or 25 percent) associated with either  type of cost share adjustment because the agency does not track these  costs.
Governors can request that the President reduce the 25 percent cost share  for nonfederal governments to 10 percent or 0 percent. FEMA generally follows the same process to evaluate a request from a governor for a cost  share adjustment as it follows to evaluate a request for a disaster  declaration, according to FEMA officials. FEMA makes a recommendation  to the President as to whether the request for a cost share adjustment  should be approved or denied and the President makes the decision.
For the 539 disaster declarations during fiscal years 2004 through 2011,  governors requested that the President adjust the usual federal/nonfederal  (that is, state and local government) cost share 150 times. As shown in  table 6, 109 of the 150 requests, or 73 percent, were approved during this  period. However, 23 of the 109 cost share adjustments were required by  provisions in law; therefore, FEMA’s recommendation was not a factor in  whether these cost share adjustment requests were approved or denied.  For example, 10 of the 23 cost share adjustments required by law were for  Hurricanes Katrina, Wilma, Dennis, and Rita.
Our analysis shows that 64 of the 109 cost share adjustments during  fiscal years 2004 through 2011 were for the following six disasters: 23 for  Hurricane Katrina, 11 for Hurricane Rita, 9 for Hurricane Ike, 8 for  Hurricane Ivan, 7 for midwest flooding in fiscal year 2008, and 6 for  Hurricane Dennis. Furthermore, 34 of the 109 cost share adjustments  involved a single adjustment, whereas 23 cost share adjustments  involved multiple adjustments. FEMA officials explained this by stating  that a 100 percent cost share adjustment could be approved for a 72-hour  period and the governor could subsequently request another 100 percent  cost share adjustment for another 72-hour period, which the President  could approve. For example, the disaster declaration in Louisiana in fiscal  year 2005 for Hurricane Katrina had 8 cost share adjustments and the  disaster declaration in Mississippi in fiscal year 2005 for Hurricane Katrina  had 9 cost share adjustments.
According to FEMA officials, although the process is similar, the agency  uses different criteria to evaluate a request from a governor to increase  the federal government share for PA up to 90 percent than it does for  requests up to 100 percent. Specifically, FEMA may recommend to the  President that the federal cost share be increased up to 90 percent when  a disaster is so extraordinary that actual federal obligations, excluding  FEMA administrative costs, meet or exceed a qualifying threshold. To  determine the threshold, the jurisdiction population is multiplied by a per  capita amount, which is $135 for calendar year 2012 (or 100 times the  2012 per capita damage indicator of $1.35). Forty-one of the 109 cost  share adjustments increased the federal cost share to 90 percent and  reduced the nonfederal share to 10 percent. According to FEMA’s  regulations, if warranted by the needs of the disaster, FEMA may  recommend up to 100 percent federal funding for emergency work, such  as debris removal and emergency protective measures, for a limited  period in the initial days of the disaster irrespective of the per capita  amount.federal cost share to 100 percent.
Sixty-eight of the 109 cost share adjustments increased the  Unlike its evaluation of a request that the federal share be increased from  75 percent up to 90 percent, FEMA does not use specific criteria to  evaluate requests to adjust the federal cost share up to 100 percent.  FEMA officials stated that a recommendation to the President for up to a  100 percent cost share adjustment is based on a subjective assessment  of the jurisdiction’s needs and that it is usually pretty obvious when a  jurisdiction needs debris removal and emergency protective measures,  although the officials acknowledged that FEMA’s recommendation is a  judgment call. According to FEMA, it does not use the same criteria to  evaluate a request for a 100 percent cost share adjustment as it uses for  a 90 percent cost share adjustment because the criteria for the 90  percent adjustment are based on actual federal obligations. FEMA  officials explained that they would not be able to apply those criteria for  the 100 percent adjustment in the initial days of a disaster because there  would not be much, if any, funding obligated at that point. However,  criteria for assessing a request for a 100 percent cost share adjustment  for PA (that is, emergency work) do not have to be the same criteria  FEMA uses to assess requests for 90 percent cost share adjustments.  For example, FEMA’s IA grant program uses multiple factors to determine  whether to recommend to the President that a jurisdiction be granted IA.
We have previously reported that clear criteria are important for  controlling federal costs and helping to ensure consistent and equitable  eligibility determinations. For example, if a 100 percent cost share  adjustment is approved, the federal government could pay millions of  dollars more than it ordinarily would for a single disaster declaration.  Furthermore, Standards for Internal Control in the Federal Government  state that internal control activities help ensure that management’s  directives are carried out and that actions are taken to address risks.
Moreover, internal control standards state that control activities should be  an integral part of an entity’s accountability for stewardship of government  resources. Without such activities, FEMA is at risk that its  recommendations related to 100 percent cost share adjustments may not  be justified. Further, relying on professional judgment only, FEMA is at  risk of making inconsistent, and potentially inequitable, recommendations  to the President about whether to grant 100 percent cost share  adjustments.
In addition, FEMA officials stated that they do not know the costs  associated with the 109 cost share adjustments because the agency does  not track the costs for all cost share adjustments, although on rare  occasions, at the request of congressional staff, FEMA officials have  identified the costs associated with cost share adjustments, such as those  for Hurricane Katrina. The officials stated that they have not routinely  tracked the additional costs associated with cost share adjustments  because they did not see a need for this information. According to  Standards for Internal Control in the Federal Government, program  managers need financial data to determine whether they are meeting  their goals for accountability for effective and efficient use of resources.  Financial information is needed for both external and internal uses, and  on a day-to-day basis to make operating decisions, monitor performance,  and allocate resources. Pertinent information should be identified,  captured, and distributed in a form and time frame that permits people to  perform their duties efficiently. Because FEMA does not track the costs  associated with cost share adjustments, FEMA does not know the  financial impact of its recommendations to the President on whether to  increase the federal cost share for PA. Understanding the financial impact  of FEMA’s recommendations to the President for cost share adjustments  would enable FEMA to make more informed recommendations and  estimate the impact of the adjustments on available DRF balances.
section_title: Costs of Providing Disaster Assistance Have Increased, but FEMA Is Working to Reduce Costs
paragraphs: FEMA’s administrative cost percentages have often surpassed its targets  for all sizes of disasters and have doubled in size since fiscal year 1989.  FEMA provided guidance for administrative cost targets but does not  assess how well the targets were achieved. The agency is working on  three short- and long-term initiatives to deliver disaster assistance in a  more efficient manner.
subsections: section_title: Administrative Cost Percentages Often Exceeded FEMA’s Targets and Have Doubled since Fiscal Year 1989
paragraphs: Our analysis of the 539 disaster declarations during fiscal years 2004  through 2011 shows that 37 percent of the declarations exceeded  administrative cost percentage targets established in guidance prepared  by FEMA in 2010. Administrative cost percentages varied widely among  disaster declarations that required a similar amount of federal financial  assistance, suggesting that certain declarations may have been  administered more efficiently than others. In addition, FEMA’s average  administrative cost percentage for disaster declarations has doubled  since fiscal year 1989.
FEMA’s administrative costs relate to the delivery of disaster assistance  programs, such as the PA or IA programs, and are primarily obligated  from the DRF. Examples of administrative costs include the salary and  travel costs for the disaster reserve workforce, rent and security expenses  associated with JFO facilities, and supplies and information technology  support for JFO staff. According to FEMA officials, the agency’s  administrative costs are primarily due to activities at JFOs; however,  administrative costs can also be incurred at FEMA regional offices,  headquarters, and other locations.
We analyzed actual administrative costs for disaster declarations that  were closed as of April 30, 2012, and, for declarations that were still open  as of April 30, 2012, we analyzed actual obligations as of April 30, 2012,  plus the amount that FEMA projected to obligate in the future until the  declarations are eventually closed. FEMA categorizes disaster declarations using three event levels, essentially small, medium, or large  based on the amount of federal funding obligated for the disaster, and  has established target ranges for administrative cost percentages for  each. Our analysis shows that FEMA frequently exceeded the  administrative cost percentage targets established by FEMA guidance for  all three sizes of disaster declarations during fiscal years 2004 through  2011. Specifically:
For small disaster declarations (total obligations of less than $50  million), the target range for administrative costs is 12 percent to 20  percent; for the 409 small declarations that we analyzed, 4 out of  every 10 had administrative costs that exceeded 20 percent.
For medium disaster declarations (total obligations of $50 million to  $500 million), the target range for administrative costs is 9 percent to  15 percent; for the 111 declarations that we analyzed, almost 3 out of  every 10 had administrative costs that exceeded 15 percent.
For large disaster declarations (total obligations greater than $500  million to $5 billion), the target range for administrative costs is 8  percent to 12 percent; for the 19 large declarations that we analyzed,  over 4 out of every 10 had administrative costs that exceeded 12  percent.
For small declarations that we analyzed, administrative cost percentages  averaged 20 percent and ranged from less than 1 percent to 73 percent.  Thus, on average, small disaster declarations were within the upper limit of  FEMA’s target range. However, 12 small declarations had administrative  cost percentages greater than 50 percent, which means that FEMA  obligated more for administrative costs than for disaster assistance. For example, if FEMA required $6 million to deliver $4 million in disaster  assistance to a jurisdiction, then the related administrative cost percentage  would be 60 percent of the total DRF obligations of $10 million. For medium  declarations that we analyzed, administrative cost percentages averaged  12 percent and were, therefore, in the middle of the target range. However,  administrative cost percentages for medium declarations ranged from less  than 1 percent to 55 percent and, for 1 medium declaration, FEMA  obligated more for administrative costs than for disaster assistance. For  large declarations that we analyzed, administrative cost percentages  averaged 13 percent—slightly above the upper limit of the target range— and ranged from 3 percent to 25 percent; therefore, none of the large  declarations we analyzed had obligations for administrative costs higher  than disaster assistance.
FEMA’s administrative cost percentages also differed significantly  depending on the type of assistance delivered to a jurisdiction. For  example, for disaster declarations during fiscal years 2004 through 2011,  the average administrative cost percentage for disaster declarations that  involved only IA was 34 percent, while the average was less than half of  that, at 16 percent, for declarations with only PA. Disaster declarations  that included both IA and PA had an average administrative cost  percentage of 18 percent.
According to FEMA, incidents of similar size and type have witnessed  growing administrative costs since 1989. medium, and large disaster declarations during fiscal years 1989 through  2011 confirms this increase. As discussed in more detail later in this  report, administrative costs have increased dramatically because of a  number of factors, including the number of staff deployed to a disaster,  which tripled during fiscal years 1989 through 2009. Since fiscal year  1989, the average administrative cost percentage for the 1,221 disaster  declarations doubled from 9 percent in the 1989-to-1995 period to 18  percent in the 2004-to-2011 period as shown in table 7.
section_title: Conclusions
paragraphs: Disaster declarations have increased over recent decades, and FEMA  has obligated over $80 billion in federal assistance for disasters declared  during fiscal years 2004 through 2011, highlighting the importance of  FEMA’s assessment of jurisdictions’ capabilities to respond and recover  without federal assistance. The PA per capita indicator is artificially low  because it does not reflect the rise in per capita personal income since  1986 or 13 years of inflation from 1986, when the indicator was set at  $1.00 and adopted for use, to 1999. By primarily relying on an artificially  low indicator, FEMA’s recommendations to the President are based on  damage estimates and do not comprehensively assess a jurisdiction’s  capability to respond to and recover from a disaster on its own. For  example, on the basis of FEMA’s actual and estimated disaster  assistance obligations, more than one-third of the 539 major disasters  declared during fiscal years 2004 through 2011 are expected to have total  DRF obligations of less than $10 million, and more than 60 percent are  expected to have total obligations of less than $25 million. Therefore,  many of these declarations were for relatively small disasters. At a  minimum, adjusting the existing PA per capita indicator fully for changes  in per capita income or inflation could ensure that the per capita indicator  more accurately reflects changes in U.S. economic conditions since 1986,  when the indicator was adopted. Making the appropriate inflation  adjustment to the indicator would raise it from $1.35 to $2.07. A change of  this size in 1 year could present challenges for jurisdictions, which could  find that disasters with PA damage estimates that would now qualify for  PA would no longer qualify. Thus, phasing in the adjustment over several  years could provide jurisdictions time to take actions, such as increasing  any rainy day funds, to adjust to the effects of higher qualifying indicators.
A more comprehensive approach to determine a jurisdiction’s capabilities  to respond to a disaster would be to replace or supplement the current  indicator with more complete data on a jurisdiction’s fiscal resources,  such as TTR, and would be informed by data on a jurisdiction’s response  and recovery assets and capabilities. Because FEMA’s current approach  of comparing the amount of disaster damage with the PA per capita  indicator does not accurately reflect whether a jurisdiction has the  capabilities to respond to and recover from a disaster without federal  assistance, developing a methodology that provides a more  comprehensive assessment of jurisdictions’ response and recovery  capabilities, including a jurisdiction’s fiscal capacity, could provide FEMA  with data that are more specific to the jurisdiction requesting assistance.  For example, developing preparedness metrics in response to the Post- Katrina Act and Presidential Policy Directive-8 could provide FEMA with  readily available information on jurisdictions’ response and recovery  capabilities. Without an accurate assessment of jurisdictions’ capabilities  to respond to and recover from a disaster, FEMA runs the risk of  recommending to the President that federal disaster assistance be  awarded without considering a jurisdiction’s response and recovery  capabilities or its fiscal capacity. As we recommended in 2001, we  continue to believe that FEMA should develop more objective and specific  criteria to assess the capabilities of jurisdictions to respond to a disaster.  Given the legislative and policy changes over the past decade, we believe  that including fiscal and nonfiscal capabilities, including available  preparedness metrics in its assessment, would allow FEMA to make  more informed recommendations to the President when determining a  jurisdiction’s capacity to respond without federal assistance.
Making informed recommendations to the President about whether cost  share adjustments should be granted is important for FEMA and the  requesting jurisdictions because every cost share adjustment has  financial implications for both entities. A specific set of criteria or factors to  use when considering requests for 100 percent cost share adjustments  would provide FEMA a decision-making framework and enable more  consistent and objectively based recommendations to the President. Also,  when FEMA recommends that a cost share adjustment be approved and  the President approves it, the federal government assumes the financial  burden of paying 15 percent or 25 percent more in PA, which could total  millions of dollars. Tracking the additional costs to the federal government  because of cost share adjustments would allow FEMA to better  understand the financial implications of its recommendations to the  President.
FEMA’s average administrative costs as a percentage of total DRF  disaster assistance obligations have risen for disasters of all sizes. The  agency recognized that delivering assistance in an efficient manner is  important and published guidance to be used throughout the agency to  help rein in administrative costs. However, FEMA has not implemented  the goals and does not track performance against them. Over time,  reducing administrative costs could save billions of dollars—dollars that  could be used to fund temporary housing, infrastructure repairs, and other  disaster assistance. Therefore, incentivizing good management over  administrative costs by adopting administrative cost percentage goals and  measuring performance against these goals would help provide FEMA  with additional assurance that it is doing its utmost to deliver disaster  assistance in an efficient manner.
section_title: Recommendations for Executive Action
paragraphs: To increase the efficiency and effectiveness of the process for disaster  declarations, we recommend that the FEMA Administrator take the  following four actions:  1.  Develop and implement a methodology that provides a more  comprehensive assessment of a jurisdiction’s capability to respond to  and recover from a disaster without federal assistance. This should  include one or more measures of a jurisdiction’s fiscal capacity, such  as TTR, and consideration of the jurisdiction’s response and recovery  capabilities. If FEMA continues to use the PA per capita indicator to  assist in identifying a jurisdiction’s capabilities to respond to and  recover from a disaster, it should adjust the indicator to accurately  reflect the annual changes in the U.S. economy since 1986, when the  current indicator was first adopted for use. In addition, implementing  the adjustment by raising the indicator in steps over several years  would give jurisdictions more time to plan for and adjust to the  change.  2.  Develop and implement specific criteria or factors to use when  evaluating requests for cost share adjustments that would result in the  federal government paying up to 100 percent of disaster declaration  costs.  3.  Annually track and monitor the additional costs borne by the federal  government for the cost share adjustments.  4.  Implement goals for administrative cost percentages and monitor  performance to achieve these goals.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS for comment. We received  written comments from DHS on the draft report, which are summarized  below and reproduced in full in appendix V. DHS concurred with three  recommendations and partially concurred with the fourth  recommendation.
Regarding the first recommendation, that FEMA develop and implement a  methodology that provides a more comprehensive assessment of a  jurisdiction’s capability to respond to and recover from a disaster without  federal assistance, DHS concurred. DHS stated that a review of the  criteria used to determine a state’s response, recovery, and fiscal  capabilities is warranted and that such a review would include the need to  update the per capita indicator as well as a review of alternative metrics.  DHS stated that any changes would need to be made through the notice  and comment rulemaking process and that, if changes are made to the  per capita indicator, FEMA’s Office of Response and Recovery will review  the feasibility of phasing them in over time. However, the extent to which  the planned actions will fully address the intent of this recommendation  will not be known until the agency completes its review and implements a  methodology that provides a more comprehensive assessment of a  jurisdiction’s capability to respond and, if the per capita indicator  continues to be used, adjusts the per capita indicator to accurately reflect  annual changes in the U.S. economy since 1986. We will continue to  monitor DHS’s efforts.
Regarding the second recommendation, that FEMA develop and  implement specific criteria or factors to use when evaluating requests for  cost share adjustments that would result in the federal government paying  up to 100 percent of disaster declaration costs, DHS concurred with the  recommendation and stated that FEMA’s Office of Response and  Recovery will review specific cost share factors or criteria and develop  guidelines to support decision making. These actions, if implemented  effectively, should address the intent of the recommendation.
DHS concurred with the third recommendation, to track and monitor the  additional costs associated with cost share adjustments, and stated that  FEMA’s Office of Response and Recovery will be responsible for tracking  these costs on an annual basis. DHS stated that such actions would  provide valuable information for budgetary purposes and for decision  makers who consider requests for cost share adjustments. We agree.  Thus, these actions, if implemented effectively, should address the intent  of the recommendation.
DHS partially concurred with the fourth recommendation, to implement  goals for administrative cost percentages and monitor performance to  achieve these goals. Specifically, DHS stated that it agrees that setting  goals and monitoring performance for achieving these goals is a good  practice in any program and can help ensure more effective and efficient  operations. However, DHS stated that it plans to conduct a review to  better understand and describe its current measures. DHS stated that a  number of factors affect administrative costs, which can present  difficulties when trying to implement a simple measure of percentage of  administrative costs to total costs. For example, DHS noted that the types  of assistance provided and the location of the JFO would affect the  percentage of administrative costs. DHS also stated that establishing  meaningful administrative cost percentage goals will be challenging  because of the many factors involved and that a suite of measures to  track administrative cost percentages could help ensure more effective  and efficient operations. Thus, DHS is pursuing development of such a  suite of measures. We agree that a number of factors affect the  percentage of administrative costs and that establishing meaningful  administrative cost percentage goals can be challenging. In developing a  suite of measures, it is important that FEMA’s leadership be able to use  them to effectively monitor a disaster declaration’s overall administrative  costs in addition to the factors that affect administrative costs. If these  measures allow FEMA to monitor overall administrative costs as well as  the factors that affect such costs, then development and implementation  of such measures should meet the intent of the recommendation.
DHS also provided technical comments, which we incorporated, as  appropriate.
We will send copies of this report to the Secretary of Homeland Security,  the FEMA Administrator, and appropriate congressional committees. If  you or your staffs have any questions about this report, please contact  me at (202) 512-8777 or JenkinsWO@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Other key contributors to this report are listed  in appendix VI.
section_title: Appendix I: GAO Analyses of the Number of Disaster Declarations and Amount of Obligations
paragraphs: Disaster declarations can take a decade or more to close because of a  number of factors, including the Federal Emergency Management  Agency’s (FEMA) reimbursement process for Public Assistance (PA)  infrastructure projects, which can take a long time to finish. In addition,  some projects are delayed because of disagreements, and sometimes  litigation, over the appropriate amount that should be obligated, according  to FEMA officials. As shown below in table 9, the oldest open disaster  dates back to 1992, making it 20 years old, and only 54 percent of  disaster declarations from fiscal year 2001 were closed as of January 31,  2012. All disaster declarations prior to fiscal year 1992 are closed. Table  9 shows the number of major disaster declarations by fiscal year that  were open as of January 31, 2012, and the percentage of declarations  that have been closed for each year since fiscal year 1992.
Fifty-nine jurisdictions received major disaster declarations during fiscal  years 1953 through 2011. Texas had the most, with 86 declarations, while  Palau had 1. Wyoming, Utah, and Rhode Island had the fewest  declarations for a state, each with 9 declarations. Table 10 identifies the  number of disaster declarations for all jurisdictions during fiscal years  1953 through 2011.
The number of major disaster declarations and total obligations varied  among FEMA regions during fiscal years 2004 through 2011. For  example, FEMA Region X had 32 declarations, while FEMA Region IV  had 87. In addition, obligations for FEMA Region VI during this time,  which was affected by Hurricane Katrina, reached nearly $40 billion, while  FEMA Region X had obligations of $647 million. See figure 10 for more  information.
FEMA classifies major disaster declarations by incident type, and these  types include floods, tornadoes, and hurricanes, among other types of  disasters—both natural and man-made. As shown in table 11, the most  frequent type of incident was, according to FEMA data, severe storms,  which accounted for 71 percent of the declarations during fiscal years  2004 through 2011.
FEMA obligates funds from the Disaster Relief Fund (DRF) to help  jurisdictions respond to and recover from declared disasters. FEMA  classifies these funds into five categories: PA, Individual Assistance,  Hazard Mitigation, Mission Assignments, and Administration. Table 12  shows the obligations for each category by jurisdiction.
Obligations on a per person basis varied for disasters declared during  fiscal years 2004 through 2011. For example, including Hurricane Katrina,  Louisiana had the highest per capita obligations at $7,236, but excluding  obligations for Hurricane Katrina, American Samoa had the highest  obligations at $3,795 per person. For the lowest obligations per person,  Colorado had 81 cents and the Marshall Islands had zero. See tables 13  and 14 for obligations on a per person basis for all 58 jurisdictions when  including and excluding obligations for Hurricane Katrina, respectively.
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report addresses the following questions: (1) For each fiscal year  from 2004 through 2011, how many disaster declaration requests did  FEMA receive, how many were approved, for which types of disasters,  and how much were the associated obligations from the DRF? (2) What  criteria has FEMA used to recommend to the President that a disaster  declaration is warranted for PA, and to what extent does FEMA assess  whether an effective response to a disaster is beyond the capabilities of  state and local governments? (3) How does FEMA determine whether a  cost share adjustment recommendation for PA is warranted and how  much additional federal assistance did jurisdictions receive during fiscal  years 2004 through 2011 because of cost share adjustments? (4) What  were FEMA’s administrative cost percentages for disaster declarations  during fiscal years 2004 through 2011, how have they changed over time,  and what actions is FEMA taking, if any, to reduce the costs of delivering  disaster assistance funds?
To determine how many disaster declaration requests FEMA received,  how many were approved, for which types of disasters, and how much  the associated obligations were from the DRF, we obtained data for each  disaster declaration approved during fiscal years 2004 through 2011. We  focused on this time frame because it contains the most current data for  disaster declarations. It also comprises the time period after FEMA was  merged into the newly created DHS, on March 1, 2003, and predates  Hurricane Katrina in 2005. We focused primarily on fiscal years 2004  through 2011; however, to provide historical context and to compare  results across similar periods, we also reviewed obligations data from  fiscal years 1989 through 2011. In addition, to provide further historical  perspective, we include information on the number of disaster  declarations by jurisdiction from the first presidential disaster declaration  in fiscal year 1953 through fiscal year 2011 in appendix I. FEMA provided  data to us from its National Emergency Management Information System  (NEMIS) and Integrated Financial Management Information System  (IFMIS). To determine whether the data were reliable, we reviewed the  data that FEMA officials provided and discussed data quality control  procedures to ensure the integrity of the data with them. We determined  that the data we used from these systems were sufficiently reliable for the  purposes of this report.
To determine the criteria that FEMA used to recommend to the President  that a disaster declaration was warranted for PA, and to what extent  FEMA assessed whether an effective response to a disaster was beyond  the capabilities of jurisdictions, such as state and local governments, we  examined FEMA policies, regulations, and other documents related to the  disaster declarations process. To determine the probability of a disaster  declaration request being approved for PA if the Preliminary Damage  Assessments (PDA) met or exceeded the PA per capita indicator, we  obtained and analyzed data on FEMA’s PDAs from fiscal years 2008  through 2011. For this analysis, we used 4 years of data (fiscal years  2008 through 2011) instead of 8 years of data (fiscal years 2004 through  2011) that we used for other analyses because FEMA did not have data  for fiscal years 2004 through 2007 in an electronic format. We believe that  our analysis of 4 years of data is sufficient for purposes of this report.  Specifically, we analyzed 246 disaster declarations during fiscal years  2008 through 2011, and excluded 293 declarations during fiscal years  2004 through 2007 because FEMA had readily available data only for  PDAs for fiscal years 2008 through 2011. For each of the 246 disaster  declarations, we reviewed the PDAs to determine whether a state  requested PA, whether the President approved it, and the extent to which  the PA damage estimate exceeded the PA per capita indicator.
In addition, we conducted an analysis to determine whether disaster  declarations from 2004 through 2011 would have met the PA per capita  indicator if adjusted for the change in per capita personal income since  1986. Our analysis included FEMA’s projected obligations as of April 30,  2012, for only those 508 disaster declarations that had received PA and  had been declared during fiscal years 2004 through 2011. We did not  analyze the 31 disaster declarations that only received IA. We analyzed  obligations instead of PDA damage estimates for PA because FEMA  officials stated that estimating the damage from a disaster is sometimes  stopped when the estimate equals or exceeds the PA per capita indicator.  Therefore, we concluded that conducting the analysis using projected  obligations would be more accurate than using incomplete PDA damage  estimates for PA. In addition, we separately analyzed actual obligations  for 144 closed disaster declarations because closed declarations would  be either complete or very close to being complete. To determine whether  the data were reliable, we reviewed the data that FEMA officials provided  and discussed data quality control procedures to ensure the integrity of  the data with them. We determined that the data we used from PDAs  were sufficiently reliable for the purposes of this report.
To determine how FEMA evaluated whether a cost share adjustment  recommendation was warranted and how much additional federal  assistance states received during fiscal years 2004 through 2011  because of the adjustments, we obtained and reviewed relevant laws,  regulations, and policies. We also obtained and analyzed the cost share  adjustments and types requested, approved, and denied during fiscal  years 2004 through 2011. In addition, we interviewed FEMA officials who  process cost share adjustment requests and participate in making  recommendations to the President as to whether the requests should be  approved or denied. We also reviewed internal control standards for the  federal government related to ensuring management directives are  carried out and that actions are taken to address risks. To determine  whether the data were reliable, we reviewed the data that FEMA officials  provided and discussed data quality control procedures to ensure the  integrity of the data with them. We determined that the cost share  adjustment data were sufficiently reliable for the purposes of this report.
To determine FEMA’s administrative cost percentages for disaster  declarations, we obtained DRF actual obligations, projected obligations,  and related data for all 1,221 disaster declarations from fiscal years 1989  through 2011. While the focus of our objective was fiscal years 2004  through 2011, we obtained obligations data back to fiscal year 1989 to  assess potential trends over time because FEMA only maintains  obligations data since then. To assess FEMA’s current practices, we  compared FEMA’s administrative cost percentages for disaster  declarations during fiscal years 2004 through 2011 with FEMA’s target  ranges for administrative cost percentages. To identify potential trends  over time, we compared FEMA’s administrative cost percentages during  fiscal years 1989 through 2003 with FEMA’s administrative cost  percentages during fiscal years 2004 through 2011 and with FEMA’s  target ranges. According to FEMA officials, administrative costs are  typically higher in the early months of a declaration, typically decreasing  as the declaration matures (that is, as labor-intensive response activities  decline). In order to ensure the results of both analyses were not skewed  by declarations that had not yet matured and whose administrative costs  were high, we analyzed actual administrative costs for disaster  declarations that were closed as of April 30, 2012. For declarations that  were still open as of April 30, 2012, we analyzed actual obligations as of  April 30, 2012, plus the amount that FEMA projected to obligate in the  future until the declarations are eventually closed. To determine whether  the data were reliable, we reviewed the data that FEMA officials provided  and discussed data quality control procedures to ensure the integrity of  the data with them. We determined that the DRF data were sufficiently  reliable for the purposes of this report. To determine what actions FEMA  is taking, if any, to reduce the costs of delivering disaster assistance, we  interviewed FEMA officials and reviewed relevant policies, documents,  and briefings.
In addition to conducting interviews with officials in FEMA headquarters  for all four objectives, we conducted site visits to two FEMA regions— Regions IV and VI, which had the highest total obligations during fiscal  years 2004 through 2011. The regional administrative offices were  located in Atlanta, Georgia, and Denton, Texas, respectively. At each  region, we interviewed the Regional or Deputy Administrator and various  other personnel. In addition, we visited the emergency management  agencies for Georgia and Oklahoma—one state within each of the two  FEMA regions. We selected the two state emergency management  agencies—Georgia and Oklahoma—based on their respective proximity  to FEMA’s regional offices, their high level of experience with disasters,  and their availability for a visit during September 2011. We wanted to  avoid states that were actively responding to a disaster during that time.  While the information we obtained on these site visits is not generalizable,  the visits provided important insights into the disaster declaration process.
We conducted this performance audit from July 2011 through September  2012 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix III: Total Public Assistance Indicator Amount for Fiscal Year 2012, by Jurisdiction
paragraphs: FEMA uses a PA per capita indicator to help determine a jurisdiction’s  need for federal assistance in the wake of a disaster. Table 15 shows  how the indicator is calculated for each jurisdiction. FEMA multiplies the  2010 population for each jurisdiction by the PA per capita indicator for the  fiscal year in which the disaster occurs. In fiscal year 2012, the PA per  capita indicator is $1.35. The results of these calculations are the total  indicator amounts in table 15. If the PA damage estimate exceeds the  total indicator amount, a jurisdiction is likely to receive a major disaster  declaration.
section_title: Appendix IV: Description of Three Approaches to Measure a Jurisdiction’s Fiscal Capacity
paragraphs: The Stafford Act requires that a governor’s request for a major disaster  declaration be based on a finding that the disaster is of such severity and  magnitude that an effective response is beyond the capabilities of the  jurisdiction and that federal assistance is necessary. In the wake of a  disaster, FEMA prepares dollar estimates of the damage to public  infrastructure incurred in an area that would be eligible for federal  assistance under a federal major disaster declaration. Currently the key  metric for determining eligibility for federal disaster assistance is a “per  capita indicator,” which, since 1999, has been adjusted annually for  inflation. For 2012, the indicator is $1.35 per capita (that is, total  estimated damages eligible for federal PA divided by the jurisdiction’s  population equals $1.35 or more). Damage estimates in excess of this  number typically result in FEMA recommending that the President issue a  major disaster declaration, which makes jurisdictions eligible for federal  reimbursement of at least 75 percent of certain repair and replacement  costs. The per capita indicator FEMA currently uses is not a measure of a  jurisdiction’s fiscal capacity to address the damages caused by a disaster.  Rather, there is an assumption that generally jurisdictions are unable  without federal major disaster assistance to rectify damages that equal or  exceed $1.35 per capita.
Jurisdictions’ abilities to finance their own disaster relief and recovery  vary with their fiscal capacity, among other factors. A jurisdiction’s fiscal  capacity is defined as the ability of a government to raise revenue from its  own sources, by taxes, license fees, user charges, and public enterprises,  among other devices. Fiscal capacity is usually expressed as a  percentage of the national average for the 50 states plus the District of  Columbia, in the form of an index number. For example, if a jurisdiction’s  capacity is equal to 100 percent or 90 percent of the national average, its  index number would be 100 or 90, respectively. In general, the ability of  jurisdictions to pay for public services increases with the size of their  economies. The simplest application of fiscal capacity criteria to disaster  assistance is an adjustment of the per capita indicator for every  jurisdiction. “Richer” jurisdictions—those above the national average— would have a higher level, reflecting their greater ability to pay, while  “poorer” jurisdictions would have a lower level. The fiscal capacity index  could be converted into a percentage (for instance, 110 = 110 percent or  90 = 90 percent) and applied to each jurisdiction’s per capita indicator  ($1.35 times the population) to get an adjusted indicator. For example, a  jurisdiction with a population of 10 million would have a per capita  indicator of $13.5 million dollars ($1.35 times its 10 million population). If  the jurisdiction’s capacity index was 100 percent, its capacity threshold  would be the same as the current indicator—$13.5 million. However, if the  jurisdiction’s fiscal capacity index was 110 (indicating a fiscal capacity  index 10 percent above the national average), its damage threshold  would be $14.85 million—$13.5 million plus 10 percent of $13.5 million.  The variation in the results could be narrowed, if desired, by setting upper  and lower limits to the adjustments, among other possible methods.  However, adjusting the per capita indicator according to a jurisdiction’s  fiscal capacity would not necessarily reduce total federal spending. It is  possible that disaster assistance adjusted by fiscal capacity, and focused  on jurisdictions with below-average fiscal capacity, could increase total  federal spending. How total annual spending is affected would depend on  the specific disasters taking place for that year, as well as the affected  jurisdictions.
In addition to the theoretical aspects of comparing and contrasting various  measurements of fiscal capacity, there are other matters to consider.  Specifically, there are certain attributes that are desirable in a fiscal  capacity measure. These attributes could help FEMA determine the  extent to which the agency could use measurements of jurisdiction fiscal  capacity when determining a jurisdiction’s eligibility for federal assistance.  These attributes include the following:  Simple and easy to calculate: For political acceptance and analytical  ease, the methodology of measurement should be as simple as possible.  For practicality and transparency, a measure should be easy and  inexpensive to calculate.
Convenient, available, and timely: Ideally the data for a measure would  be routinely collected, checked, and published by a government agency  on a timely basis. For example, the measurement should be possible on  an annual basis with as little a time lag as possible, in order to provide the  most timely indicator of jurisdictions’ capacities.
Comprehensive: A measure should be comprehensive with respect to the  implementation of its approach. Incompleteness could bias results.
Analytically sound: The principal analytical choice in capacity  measurement is between economic measures that aim for  comprehensive measurement free of double-counting, and tax base  measures that in some way take account of governments’ choices in how  to tax. There is debate among economists as to which type of  measurement (economic or tax base) is more analytically sound.
Does not affect or is not affected by any individual jurisdiction’s fiscal  choices: Capacity measures should not be affected by or affect a  jurisdiction’s actual fiscal choices, in terms of what to tax, how to tax, or  how much to tax. In principle a government’s fiscal behavior could affect  its own tax bases. No capacity measure makes any adjustments based  on the impact of taxes on a state’s economy because of the extreme  difficulty of arriving at a simple method of making such adjustment that  would earn political consensus.
subsections: section_title: Fiscal Capacity Measurements
paragraphs: The three fiscal capacity measures discussed below provide various  methods that can be used to determine a jurisdiction’s fiscal capacity.  Each of these measures has benefits and potential shortcomings  regarding the extent to which they measure a jurisdiction’s fiscal capacity.
State personal income (PCI): As a measurement of a jurisdiction’s fiscal  capacity, state personal income is simple, available, and timely. The  personal income of all residents of a jurisdiction consists of labor  earnings, proprietors’ and partnership income, rent, interest, dividends,  and transfers (public cash benefits). It is the most commonly used  measure in the United States for federal grants. PCI is simple and familiar  to most people, and it is routinely calculated and published by the federal  government on a jurisdiction-by-jurisdiction basis. More local measures of  personal income are less comprehensive, for lack of data. Some  jurisdictions may choose to tax only part of income, or not to tax it at all.
PCI aims to be a comprehensive measure of residents’ personal income,  without regard to how they are taxed.
PCI is not a comprehensive measure of a jurisdiction’s fiscal capacity and  is affected by a jurisdiction’s fiscal choices. The principal shortcoming of  PCI is its failure to reflect a jurisdiction’s ability to raise tax revenue from  nonresidents, also known as tax exporting. For example, a jurisdiction  government may tax nonresident commuters, property owners, shoppers,  and tourists. The ability to export taxes varies sharply across jurisdictions.  Also, data on one component of personal income, accrued capital gains,  is not available. More generally, changes in asset values are not captured  in any fiscal capacity measures, because of lack of data. Another missing  element in PCI is the net income of a jurisdiction’s government  enterprises. An example is state-owned liquor stores, whose profits never  pass through private hands. Another example is royalties paid to  governments by extractive industries, such as oil, gas, and uranium.  These scenarios amount to income received by a jurisdiction’s residents,  through their government. In one state (Alaska), a share of such  revenue—a “bonus” payment—is paid directly to state residents, which  would appear as part of PCI. To a limited extent, PCI is biased to the  extent to which a jurisdiction government finances transfer payments with  taxes on income, since this income is counted twice, once by source and  the second time by receipt.
Gross state product (GSP): As a measure of a jurisdiction’s fiscal  capacity, GSP is simple, available, timely, and not affected by a  jurisdiction’s fiscal choices. Also called gross domestic product by state,  GSP consists of all income “produced” in a state. It includes labor  earnings of those who work in a jurisdiction, irrespective of their  residence, the net income of business firms operating in a jurisdiction,  indirect business taxes paid to the governments of the jurisdiction, and  the output of the public sector (in national income accounting,  government output is valued at cost). GSP partially captures the ability of  a jurisdiction to export taxes, since it includes income received by  nonresidents and by the residents’ own governments directly. As with  PCI, with the benefit of government publication, the data are available on  a timely basis and are easily converted into a fiscal capacity index. It is  less affected by a jurisdiction’s fiscal choices than PCI because it does  not double-count income.
Similar to PCI, GSP is not a comprehensive measure of a jurisdiction’s  fiscal capacity. More specifically, PCI includes income received by a  jurisdiction’s residents, but not income generated in a jurisdiction but  received by nonresidents. GSP does not include income received by a  jurisdiction’s residents that originates elsewhere.
Total taxable resources (TTR): As a measure of a jurisdiction’s fiscal  capacity, TTR is comprehensive, available, and not affected by  jurisdictions’ fiscal choices. According to the Department of the Treasury  (Treasury), the object of TTR is to capture the unduplicated sum of PCI  and GSP that is susceptible to taxation by a jurisdiction’s government.  By this means the entirety of income potentially exposed to taxation is  measured. In practice the calculation is relatively simple. A jurisdiction’s  GSP is supplemented with income received by jurisdiction residents that  originated in other jurisdictions. This would include the labor earnings of  residents who commute to jobs in other jurisdictions, and the capital  income (mainly interest, dividends, rent, and capital gains) of all  jurisdiction residents due to asset holdings in other jurisdictions. It  excludes indirect business taxes paid to the federal government (such as  the payroll tax and federal excises). TTR is used in two grant programs— the Department of Health and Human Services’ Substance Abuse and  Mental Health Services Administration’s block grant program and  Community Mental Health Service—and is calculated by Treasury.
TTR is a complex measure of a jurisdiction’s fiscal capacity and is not as  timely as other measures. A crude measure of TTR is obtained by simply  averaging a jurisdiction’s PCI and GSP. This was done for official TTR  estimates between 1992 and 1997. Subsequently the calculations were  based more closely on the original conceptual framework for TTR. At  present there is a 2-year lag in the publication of TTR estimates by  Treasury. As of May of 2012, the most recent year available is 2009. The  primary reason for the delay in publishing TTR estimates is the need to  wait for federal excise tax revenues and nontax liabilities, and federal  civilian enterprise surpluses, to become available. These data are  provided to Treasury in August or September for the year ending 20  months prior. According to the Chief of the Regional Product Branch,  Regional Product Division, at the Bureau of Economic Analysis, it could  be possible to speed up the availability of TTR by 2 or 3 months. In  addition, TTR is less transparent than PCI or GSP. It relies on  approximations of capital income (dividends, interest, and rent), since  such quantities are not reported by place of origination. It does not  discriminate among income flows according to the degree of susceptibility  to taxation.
section_title: Examples of Fiscal Measures Applied to the Per Capita Indicator
paragraphs: Each of these three measures of a jurisdiction’s fiscal capacity to respond  to and recover from a disaster without federal assistance has its  limitations and can affect each jurisdiction somewhat differently,  compared with using the current $1.35 per capita damage estimate  indicator. FEMA’s current per capita indicator is simple and easy to  understand, but it is not a measure of a jurisdiction’s fiscal capacity. Nor  does FEMA have a useful measure of a jurisdiction’s response  capabilities. All current measures of those capabilities are jurisdictions’  self-reported data without reference to common metrics for assessing  capability. Because FEMA’s per capita indicator does not  comprehensively assess a jurisdiction’s response and recovery  capabilities, including a jurisdiction’s fiscal capacity, some combination of  these measures could provide a more robust and useful assessment of a  jurisdiction’s capability to respond to and recover from a disaster without  federal assistance, or with minimal federal assistance. This could include  exploring the usefulness of supplementing the current damage indicator  (which does not fully reflect changes in inflation since its adoption in  1986) with other measures of a jurisdiction’s fiscal capacity and response  capability.
For example, one potential alternative methodology could involve  adjusting the per capita indicator for each jurisdiction based on a measure  of jurisdiction fiscal capacity. If FEMA were to adjust the PA indicator for  inflation, the adjusted PA indicator for fiscal year 2011 would be $2.07.  Beginning with the adjusted PA indicator of $2.07, each jurisdiction’s PA  indicator could then be adjusted based on that jurisdiction’s fiscal  capacity. For example, if the $2.07 base were adjusted for “jurisdiction A,”  which has a 2009 TTR index of 71.8, jurisdiction A’s PA indicator would  be $1.49. If the $2.07 base were adjusted for “jurisdiction B’s” 2009 TTR  index of 149, jurisdiction B’s PA indicator would be $3.08 (see table16).  The variation in jurisdiction A’s $1.49 indicator and jurisdiction B’s $3.08  indicator represents the difference in the two jurisdiction’s fiscal capacities  in accordance with each jurisdiction’s TTR. In making any changes or  enhancements to the methods used to assess a jurisdiction’s fiscal  capacity, policymakers would need to consider the relative priority of key  attributes, as previously discussed, and the benefits and costs of  developing and implementing such changes.
section_title: Appendix V: Comments from the Department of Homeland Security
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Leyla Kazaz (Assistant Director),  David Alexander, Lydia Araya, Peter DelToro, Joseph E. Dewechter,  Jeffrey Fiore, Carol Henn, R. Denton Herring, Tracey King, Linda Miller,  Max Sawicky, and Jim Ungvarsky made key contributions to this report.