Homeland Security: Management of First Responder Grant Programs Has Improved, but Challenges Remain
Released: 2005-03-03T00:00:00

Letter

Background

When DHS was created in March 2003, ODP was transferred from the Justice Department’s OJP to DHS’s Directorate of Border and Transportation Security. In March 2004, the Secretary of Homeland Security consolidated ODP with the Office of State and Local Government Coordination to form the Office of State and Local Government Coordination and Preparedness (SLGCP). In addition, other preparedness grant programs from agencies within DHS were transferred to SLGCP. SLGCP, which reports directly to the Secretary, was created to provide a “one-stop shop” for the numerous federal preparedness initiatives applicable to state and local first responders. As shown in figure 1, while SLGCP/ODP has program management and monitoring responsibility for domestic preparedness grants, it relies upon the Justice Department’s Office of the Comptroller (OC) for grant fund distribution and assistance with financial management support, which includes financial monitoring.

Within ODP, the Preparedness Programs Division (formerly the State and Local Program Management Division) is specifically tasked with enhancing the capability of state and local emergency responders to prevent, deter, respond to, and recover from terrorist attacks involving the use of chemical, biological, radiological, nuclear, or explosive (CBRNE) weapons. For these purposes, ODP provides grant funds to the 50 states, the District of Columbia, the Commonwealths of Puerto Rico and the Northern Mariana Islands, American Samoa, the Virgin Islands, Guam, and selected urban areas. In addition to this grant funding for specialized equipment and other purposes, ODP provides direct training, exercises, technical assistance, and other counterterrorism expertise.

Program Funding and Allocation for Fiscal Years 2002 and 2003

During fiscal years 2002 and 2003, ODP managed 25 grant programs totaling approximately $3.5 billion. About $2.98 billion (85 percent) of the total ODP grant funds for both years was for statewide grants—the State Domestic Preparedness Program (SDPP), which is a predecessor grant program to SHSGP, and SHSGP I and II—and grants targeted at selected urban areas (UASI I and II). The SDPP/SHSGP grant funds accounted for about 68 percent ($2.38 billion) and the UASI I and II grant funds about 17 percent ($596 million). Table 1 shows the amounts provided for these and other ODP grants.

See appendix II for the SDPP/SHSGP grant funding awarded in fiscal years 2002 and 2003 and the UASI I and II grant funding awarded in fiscal year 2003.

The SDPP/SHSGP grant programs expanded from funding equipment, exercises, and administrative activities in fiscal year 2002 to include, in fiscal year 2003, the cost of planning and training. The SDPP generally provided funding for advanced equipment, exercises, and administrative activities. The SHSGP I provided, among other things, funding for specialized equipment, exercises, training, and planning and administrative costs. From a separate appropriation, the SHSGP II supplemented funding available through SHSGP I for basically the same purposes, but included separate funding for critical infrastructure protection. The SDPP/SHSGP grant funds were distributed using a base amount of 0.75 percent of the total allocation to each state, the District of Columbia, and the Commonwealth of Puerto Rico, and 0.25 percent of the total allocation to the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, and the Virgin Islands, with the balance being distributed on a population-share basis. The UASI I grant funds were provided directly to seven selected urban areas to address the unique equipment, training, planning, and exercise needs of large high-threat urban areas and specifically, to assist in building an enhanced and sustainable capacity to prevent, respond, and recover from threats or acts of terrorism. From a separate appropriation, UASI II provided funding through the states (not directly) to 30 selected urban areas for basically the same purposes. The UASI grant funds were awarded on the basis of the following factors: population density, critical infrastructure, and current threat estimates. (See appendix II for the urban areas that received UASI I and II grant funds.) Table 2 shows the funding authority for these grant programs.

ODP Established Grant Award Procedures for States and Localities That Support Efforts to Improve Accountability in State Preparedness Planning

Over time, ODP has developed and modified its procedures for awarding grants to states, governing how states distribute funds to local jurisdictions, and facilitating reimbursements for states and localities purchasing first responder equipment and services. ODP also developed requirements intended to hold states and localities accountable for how grant expenditures were planned, justified, expended, and tracked. These accountability-related requirements evolved over time. For instance, prior to fiscal year 2004, the states were primarily required to provide information on the specific items they and localities planned to purchase on the basis of ODP’s evolving authorized equipment lists. In fiscal year 2004, to better determine the impact of expenditures on preparedness efforts, ODP began placing more emphasis on results-based reporting of planned and actual grant expenditures. ODP instituted new state and local reporting requirements aimed at ensuring that grant expenditures would align with goals and objectives contained in state and urban area homeland security strategies. ODP also, over time, has stepped up its state grant-monitoring activities.

ODP Gave States Flexibility in Administering and Distributing Grants

For fiscal years 2002 and 2003, ODP developed procedures and guidelines for awarding SDPP/SHSGP and UASI grants to states that enabled states to distribute grant funds and states and localities to expend funds and seek reimbursement for first responder equipment or services they purchased directly. After enactment of appropriations for the grant programs, ODP developed and made available program guidelines including the grant application for each grant program. With the exception of UASI I, once a grant application was submitted to and approved by ODP, ODP awarded grant funds directly to each state, which was required to designate a state administrative agency to administer the grant funds. States in turn transferred or subgranted the funds to local jurisdictions or urban areas, with a designated core city and county/counties. For UASI I grants, ODP awarded grant funds directly to selected urban areas (i.e., selected cities). Figure 2 illustrates the main steps involved in the SDPP/SHSGP and UASI II grant cycle.

For SDPP/SHSGP grant programs, ODP allowed the states flexibility in deciding how the grant programs were structured and implemented in their states. In general, states were allowed to determine such things as the following: the formula for distributing grant funds to local jurisdictional units; the definition of what constitutes a local jurisdiction eligible to receive funds, such as a multicounty area; the organization or agency that would be designated to manage the grant program; and whether the state or local jurisdictions would purchase grant-funded items for the local jurisdictions.

UASI I grantees, for the most part, have had flexibilities similar to those of the states and could, in coordination with members of the Urban Area Working Group, designate contiguous jurisdictions to receive grant funds. For UASI II, while the states subgranted the grant funds to selected urban areas, states retained responsibility for administering the grant program. The core city and county/counties worked with the state administrative agency to define the geographic borders of the urban area and coordinated with the Urban Area Working Group.

Once the grant funds were awarded to the states and then subgranted to the local jurisdictions or urban areas, certain legal and procurement requirements had to be met, such as a city council needing to approve acceptance of grant awards. Once these requirements were satisfied, states, local jurisdictions, and urban areas could then obligate their funds for first responder equipment, exercises, training, and services. Generally, when a local jurisdiction or urban area directly incurred an expenditure for first responder equipment, it submitted related procurement documents, such as invoices, to the state. The state would then draw down the funds from the Justice Department’s OJP. According to OJP, funds from the U.S. Treasury were usually deposited with the states’ financial institution within 48 hours. The states, in turn, provided the funds to the local jurisdiction or urban area.

States Updated Homeland Security Strategies to Guide Grant Spending, and ODP Revised Grant Reporting and Monitoring Procedures

In addition to the guidelines ODP developed for the grant award, distribution, and reimbursement process, ODP developed separate guidance that required every state to develop a homeland security strategy as a condition of receiving grant funds. Specifically, ODP required states to develop homeland security strategies that would provide a roadmap of where each state should target grant funds for fiscal years 1999 to 2001 (subsequently extended to fiscal year 2003). To assist the states in developing these strategies, state agencies and local jurisdictions were directed to conduct needs assessments on the basis of their own threat and vulnerability assessments. The needs assessments were to include related equipment, training, exercise, technical assistance, and research and development needs. In addition, state and local officials were to identify current and required capabilities of first responders to help determine gaps in capabilities.

ODP directed the states in fiscal year 2003 to update their homeland security strategies to better reflect post-September 11 realities and to identify progress on the priorities originally outlined in the initial strategies. As with these initial strategies, the updated strategies included goals and objectives the states wanted to achieve to meet homeland security needs, such as upgrading emergency operations centers and command posts. As directed by statute, ODP required completion and approval of these updated strategies as a condition for awarding fiscal year 2004 grant funds. As of July 2004, ODP had approved or conditionally approved all state strategies and awarded all fiscal year 2004 SHSGP funds. Figure 3 shows an overview of the state homeland security assessment and strategy development process in place for fiscal years 1999 through 2003.

In conjunction with the development of the states’ updated homeland security strategies, ODP revised its approach to how states and localities reported on grant spending and use. Specifically, ODP took steps to shift the emphasis away from reporting on specific items purchased and toward results-based reporting on the impact of states’ expenditures on preparedness. ODP maintains a list of authorized items that all states and localities were required to use as a guideline for making purchases. This evolving list, comprising hundreds of first responder items, is arranged by category, such as personal protection equipment; explosive device mitigation and remediation equipment; CBRNE search and rescue equipment; interoperable communications equipment; and more. Under this arrangement, states and localities consulted ODP’s authorized equipment list and selected the equipment and quantity they planned to purchase—including such diverse items as personal protection suits for dealing with hazardous materials and contamination, bomb response vehicles, and medical supplies. This information is in turn listed on itemized budget detail worksheets that localities submitted to states for their review. Prior to the fiscal year 2004 grant cycle, states submitted the worksheets to ODP. States also compared purchased items against these worksheets when approving reimbursements to localities.

According to ODP, this list-based reporting method made it difficult to track the cumulative impact of individual expenditures on the goals and objectives in a state’s and urban area’s homeland security strategy. While the budget detail worksheets reflected the number and cost of specific items that states and localities planned to purchase, neither states nor ODP had a reporting mechanism to specifically assess how well these purchases would, in the aggregate, meet preparedness planning needs or priorities, or the goals and objectives contained in state or urban area homeland security strategies. To help remedy this situation, ODP revised its approach for fiscal year 2004. Rather than being required to submit budget detail worksheets to ODP, states, urban areas, and local jurisdictions were required instead to submit new Initial Strategy Implementation Plans (ISIP). These ISIPs are intended to show how planned grant expenditures for all funds received are linked to one or more larger projects, which in turn support specific goals and objectives in either a state or urban area homeland security strategy. The state administrative agency is responsible for submission of all ISIPs to ODP within 60 days of the state’s grant award. The final submission is to include one ISIP from the state administrative agency if the agency retains a portion of the funding, and one ISIP for every local jurisdiction, state agency, or nongovernmental organization receiving grant funds. ODP said that almost all of the states have submitted their ISIPs.

In addition to the ISIPs, ODP now requires the states to submit biannual strategy implementation reports showing how the actual expenditure of grant funds at both the state and local levels was linked by projects to the goals and objectives in the state and urban area strategy. According to ODP, this reporting process is intended to better enable states and ODP to track grant expenditures from all funding sources against state and urban area homeland security strategies as well as collect critical project output and performance data. The first biannual strategy implementation reports covering the 6-month period ending December 31, 2004, were due to ODP on January 31, 2005. At the time of our review, it was too early to determine whether the new approach would improve expenditure tracking and performance reporting.

ODP, State, and Local Officials Expressed Concerns about the 2003 Needs Assessments

While progress has been made in updating state homeland security strategies and planned improvements for reporting and tracking grant- related expenditures are under way, some federal, state, and local officials expressed concerns about the accuracy of the needs assessments on which the state strategies were based. When ODP instructed states and local jurisdictions to update their fiscal year 1999 needs assessments in fiscal year 2003, the agency told them not to constrain their estimates of needs to a specific period of time or take potential sources of funding into account. At the same time, ODP instructed states to review and analyze local jurisdictions’ needs assessments and the aggregated results before submitting their needs assessment data to ODP. The needs assessments for equipment received by ODP from 56 states and territories as a result of this process totaled $352.6 billion. By contrast, the funding available for SHSGP I and II in fiscal year 2003 totaled roughly $2.1 billion.

State and local officials in three of the five states we visited cited concerns about the accuracy of the needs assessments for their individual states. For example, the needs assessment for one state we reviewed amounted to about $11.8 billion—nearly 300 times the $39.5 million in total state homeland security grant funds awarded to the state in fiscal year 2003.

Grant managers in this state said that they had reviewed the local jurisdictions’ threat estimates and determined that, because of a misinterpretation of the term “threat” by local officials, the number of critical assets needing protection was higher than estimated by the state. In their opinion, the local jurisdictions included items in their needs assessments that were not needed to protect the state’s critical assets. Nevertheless, state officials did not revise the aggregated needs assessment estimates included in their state strategy. ODP conditionally approved the strategy for this state, noting, among other things, a “disconnect” between the state’s mission and goals and that time lines were “too broad” and “not realistic.” Grant managers in a second state said that the state did not base its strategy on the needs assessments prepared by the local jurisdictions, in part, because they judged the unconstrained assessments for equipment to be unrealistically high— approximately $13 billion over an open-ended, multiyear period. While the state submitted the total of these local assessments to ODP; it submitted a strategy on the basis of its own planning procedures for 1 year only, resulting in a $92 million estimate of needs. After discussions with ODP, the state later submitted a broader, multiyear $9.6 billion needs assessment for equipment.

ODP has taken steps to address its concerns, and some states’ concerns, related to the estimates included in the needs assessments. In a conference held with state officials in March 2004, ODP personnel discussed concerns that arose from their review of aggregated needs assessment data and identified some possible sources of the problems. They determined that, before submitting their fiscal year 2003 needs assessments to ODP, states might not have adequately considered such factors as mutual aid agreements for first responder assistance within jurisdictions or whether jurisdictions within a region could share resources, rather than submit separate or overlapping requests for first responder equipment. In response, ODP requested the states to validate and revise, if necessary, the needs assessment data to take these factors into account and to resubmit their assessments. States were to submit their validated assessments to ODP by October 15, 2004. According to an ODP document, ODP is currently completing its analysis of the assessment data.

ODP Has Begun Drafting National Preparedness Standards to Better Assess First Responder Needs

In addition to the issues raised about the accuracy of the fiscal year 2003 needs assessments, other factors may affect ODP’s and states’ abilities to identify and assess first responder needs and priorities. For example, according to some state officials we interviewed as well as recent reports by DHS’s Office of Inspector General (IG) and the House Select Committee on Homeland Security, efforts by state and local jurisdictions to prioritize expenditures to enhance first responder preparedness have been hindered by the lack of clear guidance in defining the appropriate level of preparedness and setting priorities to achieve it.

Additionally, in our recent report on the management of first responder grants in the National Capital Region, we reported that the lack of national preparedness standards that could be used to assess existing first responder capacities (such as the number of persons per hour that could be decontaminated after a chemical attack), identify gaps in those capacities, and measure progress in achieving specific performance goals was a challenge. We also reported that effectively managing federal first responder grant funds requires the ability to measure progress and provide accountability for the use of public funds. This required a coordinated strategic plan for enhancing preparedness, performance standards to guide how funds are used to enhance first responder capacities and preparedness, and data on funds available and spent on first responder needs.

National performance standards for assessing domestic preparedness capabilities and identifying gaps in those capabilities that reflect post- September 11 priorities are being developed. ODP has submitted to the Secretary of DHS a definition of a national preparedness goal that is intended to provide assurance of the nation’s capability to prevent, prepare for, respond to, and recover from major events, especially terrorism. ODP plans call for achieving the full capability needed to sustain the preparedness levels required by the new national standards by September 2008. In order to develop performance standards that will allow ODP to measure the nation’s success in achieving this goal, ODP is using a capabilities-based planning approach—one that defines the capabilities required by states and local jurisdictions to respond effectively to likely threats. These capability requirements are to establish the minimum levels of capability required to provide a reasonable assurance of success against a standardized set of 15 scenarios for threats and hazards of national significance.

ODP’s efforts to develop national preparedness standards are, in part, a response to Homeland Security Presidential Directive-8 (HSPD-8), issued by the President in December 2003. HSPD-8 called for a new national preparedness goal and performance measures, standards for preparedness assessments and strategies, and a system for assessing the nation’s overall preparedness. The directive required the DHS Secretary to submit the new national preparedness goal to the President through his Homeland Security Council for review and approval prior to, or concurrently with, DHS’s fiscal year 2006 budget submission to the Office of Management and Budget in September 2004. HSPD-8 also requires the preparation and approval of statewide, comprehensive all-hazards preparedness strategies in order to receive federal preparedness assistance at all levels of government, including grants, after fiscal year 2005.

As part of the HSPD-8 implementation process, ODP plans to develop a list of capability requirements by the end of January 2005 in keeping with the fiscal year 2005 DHS appropriations act. To help define the capabilities that jurisdictions should set as targets, ODP first drafted a list of tasks required to prevent or respond to incidents of national consequence. They include such generic tasks as integrating private-sector entities into incident response activities or coordinating housing assistance for disaster victims. The list of target capabilities includes the policies, procedures, personnel, training, equipment, and mutual aid arrangements needed to perform the tasks required to prevent or respond to the national planning scenarios. ODP further plans to develop performance measures, on the basis of the target capability standards that define the minimal acceptable proficiency required in performing the tasks outlined in the task list. ODP plans to complete initial development of the performance measures by March 2005 and to refine them subsequently. According to ODP’s plan, the measures will allow the development of a rating methodology that incorporates preparedness resources and information about overall performance into a summary report that represents a jurisdiction’s or agency’s ability to perform essential prevention, response, or recovery tasks. The office acknowledges that this schedule may result in a product that requires future incremental refinements but has concluded that this is preferable to spending years attempting to develop a “perfect” process. ODP held a workshop in mid-October 2004 to obtain input from representatives from states, national associations, and other federal departments and agencies regarding the implementation of HSPD-8. At the workshop, some participants voiced concerns that the process, among other things, was moving too fast and did not consider the state and local needs assessments that had already been done. In addition, some participants believed that better communication and a more collaborative process was needed. ODP officials promised to address the participants’ concerns and asked for additional input on how ODP could better implement the process and work better with state and local jurisdictions.

ODP Increased Grant Monitoring Activities for Fiscal Year 2004 but Did Not Meet Its Monitoring Goal for All States

ODP has taken steps to improve its oversight procedures with respect to state, urban area, and local grantees. ODP is responsible for ensuring administrative and programmatic compliance with relevant statutes, regulations, policies, and guidelines of the grants it manages. ODP also monitors the progress that states make toward the goals and objectives contained in their homeland security strategies. Prior to September 11, 2001, ODP formally monitored grantees through such activities as office- based reviews at ODP of grantees’ financial reports and other documents, followed by on-site visits to state grant officials. Office-based reviews entail a review of grant files to ensure that all grant documentation is complete and up-to-date and that any apparent problems are addressed through follow-up telephone or e-mail contact with the state or urban area. Upon completion of an office-based review, an ODP preparedness officer prepares a memorandum for the file. This review usually takes place before an on-site visit is scheduled, according to ODP. During an on-site visit, an ODP preparedness officer is to discuss administrative and financial issues and programmatic issues such as whether the state or urban area is meeting the goals and objectives in the homeland security strategies. The ODP preparedness officer is to prepare a monitoring report for each on-site visit.

ODP officials told us that formal on-site monitoring visits were temporarily discontinued after September 11, 2001, because of a high volume of work. For fiscal years 2002 and 2003, ODP did not set formal monitoring goals, such as a specific number of on-site visits to be made in a given year. ODP officials said they continued to maintain active, almost daily contact with the states by telephone, e-mail, and regular correspondence and through informal visits to monitor programmatic and financial aspects of the grants; however, no memorandums or formal site-visit reports were filed during that period. In fiscal year 2004, ODP updated its grant-monitoring guidance and established new monitoring goals. According to the guidance, at least one office file review and one on-site visit—resulting in a monitoring visit report—should be completed for each state (inclusive of urban area grantees) each fiscal year. As of September 30, 2004, ODP had completed 44 office file reviews and 44 on-site visits for the 56 states and territories. According to ODP, of the remaining 12 reviews and visits for the fiscal year 2004 monitoring cycle, 8 have been conducted as of December 2004. ODP officials said that these reviews and visits were delayed, in part, because of turnover in preparedness officer positions and scheduling problems. These on-site monitoring visits are a principal tool for, among other things, ascertaining a grantee’s progress on its strategy implementation, and noting problems with implementing the grant program and the steps the grantee and ODP will take to resolve them. These on-site visits are needed to track whether and how grantees are managing their program funds.

ODP and Some State and Local Jurisdictions Cite Staffing Challenges

ODP cited staffing challenges that have affected its grant management in general. ODP has made progress in filling authorized staff positions, but vacancies remain. ODP had 146 full-time equivalent positions authorized for fiscal years 2003 and 2004, 30 of which were preparedness officers. As of September 2004, ODP had filled 138 of these positions compared with 63 filled positions at the end of fiscal year 2003. Of the eight vacancies remaining, five were preparedness officer positions. In addition to performing office-based and scheduled on-site monitoring, these officers serve as day-to-day liaisons to designated states. According to ODP, the ODP preparedness officers currently have responsibility for one to five states each, depending on the state’s population.

ODP officials told us that, in hiring staff, they face challenges shared by other agencies. ODP has acknowledged that it experienced significant staffing shortages in fiscal years 2002 and 2003 because of a hiring freeze. In addition, officials cited other factors, including staff turnover, the lack of recruitment and relocation bonuses, the high cost of living in the Washington metropolitan area, and competition with other DHS entities and contracting firms for high-quality candidates. These officials also said that the lengthy federal hiring process is further extended by the need to conduct security clearances for job candidates. To deal with some staff shortages, ODP has relied on outside contractors and temporary employees, but they are not working directly with states and local jurisdictions on grants, and none are ODP preparedness officers.

State and local officials in two of the five states visited also cited a lack of sufficient state and local personnel to administer and manage their grant programs. While the fiscal years 2002 and 2003 grants provided funding that states and local jurisdictions could use to administer the grants, these officials said that the 3 percent limit on grant management and administrative costs imposed by ODP in the fiscal year 2003 SHSGP II was not sufficient to cover the grant administrative costs needed to administer and manage the grants. This allowance can be used at the state and/or local levels, but the combined allowance cannot exceed 3 percent of the total first responder preparedness grant funds for each state. For SHSGP II first responder preparedness grant funds, the allowable administrative costs ranged among all states from a low of about $102,000 to a high of about $3.1 million per state. Some officials said they have not been able to hire the personnel necessary to administer and manage the grant programs, in part, because of the limit on funds used for administrative costs. DHS’s IG and Homeland Security Advisory Council Task Force also cited similar reports from state and local officials they spoke with. In responding to DHS’s IG report, ODP said that the homeland security grant programs allow for the hiring of both full- and part-time personnel and contractors to implement the program and that this option could be more widely used by states to address the issue of inadequate staffing. ODP officials recently told us that the fiscal year 2005 grant guidelines allow states to retain 3 percent of the total grant award and local jurisdictions to use 2.5 percent of their grant allocation for management and administrative purposes. According to these officials, this change should alleviate some of the staffing issues.

Congress, ODP, States, and Localities Have Acted to Expedite Grant Awards, but Challenges Remain

Statutory Deadlines Were Imposed to Expedite the Grant Award and Distribution Process

Congress, the Conference of Mayors, some state and local officials, and others expressed concerns about the time ODP was taking to award grant funds to states and for states to transfer grant funds to local jurisdictions. For SDPP and SHSGP I grants, ODP was not required to award grant funds to states within a specific time frame. During fiscal year 2002, ODP took 123 days to make the SDPP grant application available to states and, on average, about 21 days to approve states’ applications after receipt. For SHSGP II, however, the appropriations statute required that ODP make the grant application available to states within 15 days of enactment of the appropriation and approve or disapprove states’ applications within 15 days of receipt. According to ODP data for SHSGP II, ODP made the grant application available to states within the required deadline and awarded over 90 percent of the grants within 14 days of receiving the applications. For SHSGP II, the appropriations statute also mandated that states submit grant applications within 30 days of the grant announcement. According to ODP data, all states met the statutory 30-day mandate. For SHSGP II, the average number of days from grant announcement to application submission declined from about 81 days in fiscal year 2002 to about 23 days.

To expedite the transfer of grant funds from the states to local jurisdictions, ODP program guidelines and subsequent appropriations acts imposed additional deadlines on states. For SDPP, there were no mandatory deadlines or dates by which states should transfer grant funds to localities. One of the states we visited, for example, took 91 days to transfer the SDPP grant funds to a local jurisdiction while another state we visited took 305 days. In addition, a DHS IG report found that for SDPP, two of the states it visited took 73 and 186 days, respectively, to transfer funds to local jurisdictions. Beginning with SHSGP I, ODP required in its program guidelines that states transfer grant funds to local jurisdictions within 45 days of the grant award date. Congress subsequently included this requirement in the appropriations statute for SHSGP II grant funds. To ensure compliance, ODP required states to submit a certification form indicating that all awarded grant funds had been transferred within the required 45-day period. States that were unable to meet the 45-day period had to explain the reasons for not transferring the funds and indicate when the funds would be transferred. According to ODP, for SHSGP I and II, respectively, 33 and 31 states certified that the required 45-day period had been met.

To further assist states in expediting the transfer of grant funds to local jurisdictions, ODP also modified its requirements for documentation to be submitted as part of the grant application process for fiscal years 2002 and 2003. In fiscal year 2002, ODP required states to submit budget detail worksheets and program narratives indicating how the grant funds would be used for equipment, exercises, and administration—and have them approved. If a state failed to submit the required documentation, ODP would award the grant funds, with the special condition that the state could not transfer, expend, or draw down any grant funds until the required documentation was submitted and approved. In fiscal year 2002, ODP imposed special conditions on 37 states for failure to submit the required documentation and removed the condition only after the states submitted the documentation. The time required to remove the special conditions ranged from about 1 month to 21 months. For example, in one state we reviewed, ODP awarded SDPP grant funds and notified the state of the special conditions on September 13, 2002; the special conditions were removed about 6 months later on March 18, 2003, after the state had met those conditions.

However, in fiscal year 2003, ODP allowed states to move forward more quickly, by permitting them to transfer grant funds to local jurisdictions before all required grant documents had been submitted. If a state failed to submit the required documentation for SHSGP I, ODP awarded the grant funds and allowed the state to transfer the funds to local jurisdictions. While the state and local jurisdictions could not expend—and the state could not draw down—the grant funds until the required documentation was submitted and approved, they could plan their expenditures and begin state and locally required procedures such as obtaining approval of the state legislature or city council to use the funds. For SHSGP I, ODP imposed special conditions on 47 states for failure to submit the required documentation and removed the condition only after the states submitted the documentation. The special conditions were removed approximately 1 month to 15 months after the grant funds were awarded to the states. For the SHSGP II grant cycle, in order to further expedite the award process and availability of fiscal year 2003 funds for expenditure, ODP no longer required states to submit the budget detail worksheets and certain other documents as part of the grant application process. Rather, these documents could be submitted later with the state’s biannual progress report. Thus, states were able to transfer, expend, and draw down grant funds immediately after ODP awarded the grant funds. (See appendix III for grant award and distribution timelines for selected state and local grantees.)

Some States Have Revised Procurement Requirements Affecting Grant Time Lines, and ODP Is Developing Related Best Practices

Despite congressional and ODP efforts to expedite the award of grant funds to states and the transfer of those funds to localities, some states and local jurisdictions could not expend the grant funds to purchase equipment or services until other, nonfederal requirements were met. Some state and local officials’ ability to spend grant funds was complicated by the need to meet various state and local legal and procurement requirements and approval processes, which could add months to the process of purchasing equipment after grant funds had been awarded. For example, in one state we visited, the state legislature must approve how the grant funds will be expended. If the state legislature is not in session when the grant funds are awarded, it could take at least 4 months to obtain state approval to spend the funds. In another state we visited, a city was notified on July 17, 2003, that SHSGP I grant funds were available for use, but the city council did not vote to accept the funds until almost 4 months later. A 2004 report by the House Select Committee on Homeland Security also cited instances of slowness at the state and local government levels in approving the acceptance and expenditure of grant funds. For example, according to the committee report, one county took about 7 months after receiving its SHSGP I grant award to get authorization to spend the grant funds. Some state and local officials we talked with said that complying with their normal procurement regulations could also take months. They said that these regulations require, among other things, competitive bidding for certain purchases—a frequently lengthy process in their view.

Some states, in conjunction with DHS, have modified their procurement practices to expedite the procurement of equipment and services. Officials in two of the five states we visited told us they established centralized purchasing systems that allow equipment and services to be purchased by the state on behalf of local jurisdictions, freeing them from some local legal and procurement requirements. As reported by the House Select Committee on Homeland Security in April 2004, many states were looking to move to a centralized purchasing system for the same reason. In addition, the DHS’s Homeland Security Advisory Council Task Force reported that several states developed statewide procurement contracts that allow local jurisdictions to buy equipment and services using a prenegotiated state contract. According to DHS, it has offered options for equipment procurement, through agreements with the U.S. Department of Defense’s Defense Logistics Agency and the Marine Corps Systems Command, to allow state and local jurisdictions to purchase equipment directly from their prime vendors. DHS said that these agreements provide an alternative to state and local procurement processes and often result in a more rapid product delivery at a lower cost. For example, one state we visited is using a Defense Logistics Agency prime vendor to make equipment purchases. Local jurisdictions can order the equipment without having to go through their own locally based competitive bidding process.

Congress has also taken steps to address a problem that some states and localities cited concerning a federal policy that provides reimbursement to states and localities only after they have incurred an obligation, such as a purchase order, to pay for goods and services. Until fiscal year 2005, after submitting the appropriate documentation, states and localities could receive federal funds to pay for these goods and services several days before the payment was due so that they did not have to use their own funds for payment. However, according to DHS’s Homeland Security Advisory Council Task Force, many municipalities and counties had difficulty participating in this process either because they did not receive their federal funds before payment had to be made or their local governments required funds to be on hand before commencing the procurement process. Officials in one city we visited said that, to solve the latter problem, the city had to set up a new emergency operations account with its own funds. The task force recommended that for fiscal year 2005, ODP homeland security grants be exempt from the Cash Management Improvement Act to allow funds to be provided to states and municipalities up to 120 days in advance of expenditures. The fiscal year 2005 DHS appropriations legislation includes a provision that exempts formula-based grants (SHSGP) and discretionary grants, including UASI and other ODP grants, from the act's requirement that an agency schedule the transfer of funds to a state so as to minimize the time elapsing between the transfer of funds from the U.S. Treasury and the state’s disbursement of the funds for program purposes.

In addition, DHS efforts are under way to identify and disseminate best practices, including how states and localities manage legal and procurement issues that affect grant distribution. DHS’s Homeland Security Advisory Council Task Force stated in a June 2004 report that some jurisdictions have been “very innovative” in developing mechanisms to support the procurement and delivery of emergency-response-related equipment. For example, one state cited in the report was in the process of forming a procurement working group to address issues as they arise. The report also cited that several states have developed statewide procurement contracts that allow municipal government units to buy first responder equipment and services. One state created a password- protected Web site that allowed local jurisdictions to view their allocation balance and place orders for equipment up to their funding allocation limit. According to the task force, these efforts substantially reduced the time it takes for localities to purchase and receive their equipment. The task force recommended that, among other things, DHS should, in coordination with state, county, and other governments, identify, compile, and disseminate best practices to help states address grant management issues. According to ODP, in an effort to complement and reinforce the task force’s recommendations, in partnership with the National Criminal Justice Association, it established a new Homeland Security Preparedness Technical Assistance Program service to enhance the grant management capabilities of state administrative agencies. In an August 30, 2004, Information Bulletin, ODP requested that state administrative agencies complete a survey designed to gather information on their grant management technical needs and best practices related to managing and accounting for ODP grants, including the procurement of equipment and services at the state and local levels. The information that ODP is gathering is to serve as a foundation for the development of a tailored, on- site assistance program for states to ensure that identified best practices are implemented and critical grant management needs and problems are addressed. According to ODP, this program will be operational in December 2004.

Despite efforts to streamline local procurement practices, some challenges remain at the state and local levels. An ODP requirement that is based on language in the appropriations statute could delay procurements, particularly in states that have a centralized purchasing system. Specifically, for the fiscal 2004 grant cycle, states are required by statute to pass through no less than 80 percent of total grant funding to local jurisdictions within 60 days of the award. In order for states to retain grant funds beyond the 60-day limit, ODP requires states and local jurisdictions to sign a memorandum of understanding (MOU) indicating that states may retain—at the local jurisdiction’s request—some or all funds in order to make purchases on a local jurisdiction’s behalf. The MOU must specify the amount of funds to be retained by the state. A state official in one state we visited said that, while the state’s centralized purchasing system had worked well in prior years, the state has discontinued using it because of the MOU requirement, since establishing MOUs with every locality might take years. The state transferred the fiscal year 2004 grant funds to local jurisdictions so they can make their own purchases. In another state, officials expressed concern that this requirement would negatively affect their ability to maintain homeland security training provided to local jurisdictions at state colleges that had been previously funded from local jurisdictions’ grant funds. In a June 23, 2004, ODP Information Bulletin, ODP strongly recommended that states retaining funds at the state level on behalf of local jurisdictions have the MOUs reviewed by DHS’s Office of General Counsel to ensure that the MOUs meet the requirements of the appropriation language and ODP program guidelines. ODP officials told us that they were assisting states to adapt to the new requirement.

Concluding Observations

The terrorist attacks of September 11, 2001, forced the nation to reexamine its requirements for domestic safety, including the capacity and resources that would be needed at the state and local levels to prevent, prepare for, respond to, or recover from potential future threats from terrorists and minimize their impact. Congress addressed this concern in the months after the attacks, in part by increasing the grant funds that states would receive to enhance their emergency first responder and public health and safety capabilities to deal with terrorist attacks involving CBRNE weapons. Not surprisingly, the enormous effort required to bolster first responder capacity nationwide posed challenges for government administrators at the federal, state, and local levels. A major challenge in administering first responder grants is balancing two goals: minimizing the time it takes to distribute grant funds to state and local first responders, and ensuring appropriate planning and accountability for the effective use of grant funds. ODP’s approach to striking this balance has been evolving from experience, congressional action, and feedback from states and local jurisdictions.

Over the last 2 years, working in concert with state governments and others, DHS has made progress, through ODP, in managing its state homeland security grant programs. ODP has addressed management problems regarding how grants were awarded and funds distributed, which arose following the dramatic increase in federal funding for first responders after September 11. While some localities continue to face legal and procurement challenges that can tie up access to grant funds, ODP is taking steps to provide technical assistance that will, among other things, give state and local officials access to best-practice information on how other jurisdictions have successfully addressed procurement challenges.

As ODP continues to administer its state and urban first responder grant programs, it will likely face new challenges. In particular, as DHS and ODP work to develop national preparedness standards, it will be important to listen and respond fully to the concerns of states, local jurisdictions, and other interested parties about, among other things, the planned time frames for implementing the new standards. It will also be important to ensure that there is adequate collaboration and guidance for moving forward. Effective collaboration among ODP, states, and others in developing appropriate preparedness performance goals and measures will be essential to ensuring that the nation’s emergency response capabilities are appropriately identified, assessed, and strengthened.

Agency Comments and Our Evaluation

DHS generally agreed with the report’s findings. In particular, the agency concurred that it faced a number of challenges related to effectively managing first responder grants and highlighted the progress it has made in addressing them. The agency expressed the view, however, that the progress already achieved in meeting these challenges was not appropriately reflected in the title of the report. We disagree. As DHS notes, our report acknowledges the efforts the agency has made in revising grant procedures to expedite awards while maintaining accountability. Nevertheless, not all of the agency’s efforts have gone smoothly, as attested, for example, by the problems that DHS and the states experienced in realistically defining first responder equipment needs in 2003. In view of the concerns recently expressed by state and other officials, DHS may, in our view, continue to face significant challenges in meeting its time tables to develop realistic capability requirements and performance measures for first responders. DHS also provided further details on some grant management issues we raised in the report. We have revised the report as appropriate to include these and other technical comments provided.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from its issue date. At that time, we will send copies of this report to relevant congressional committees and subcommittees, the Secretary of Homeland Security, and to other interested parties. We will also make copies available to others upon request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you have any questions about this report or wish to discuss it further, please contact me at (202) 512-8777 or jenkinswo@gao.gov. Key contributors to this report are listed in appendix VI.

Appendix I: Scope and Methodology

We initially addressed our researchable questions regarding the Office for Domestic Preparedness’s (ODP) structure and processes for program and financial management of its grants and its monitoring policies and processes in a briefing to the Subcommittee on Homeland Security of the House Committee on Appropriations. In addressing those questions, we identified 25 domestic preparedness programs managed by ODP in fiscal years 2002 and 2003. For this report, we selected the five largest programs in terms of federal funding provided to state and local jurisdictions for our detailed review. Three of the five programs that addressed state and local preparedness issues were basically for the same purposes but received funding from separate appropriations. These were the fiscal year 2002 State Domestic Preparedness Program (SDPP) and the fiscal year 2003 State Homeland Security Grant Programs (SHSGP) I and II. The other two programs were awarded to selected urban areas. These were the fiscal year 2003 Urban Areas Security Initiatives (UASI) I and II grant programs.

We also selected Arizona, California, Florida, Missouri, and Pennsylvania and 19 local jurisdictions within those states: The cities of Phoenix and Pima and Maricopa and Coconino Counties in Arizona.

The cities of Los Angeles and Sacramento and the County of Los Angeles in California.

The city of Miami, Miami-Dade County, and the Miami and Tallahassee Regional Domestic Security Task Forces in Florida.

The city of St. Louis, St. Louis and Franklin Counties, and the rural cities of Jackson and Sikeston in Missouri.

The city of Philadelphia and the Southeastern and South Central Regional Terrorism Task Forces in Pennsylvania.

The five states were selected on the basis of the amount of ODP grant funding received, population size, and other factors. The local jurisdictions were selected on the basis of a mix of urban and rural locations to include cities and counties that received UASI funding.

To determine how SHSGP and UASI were administered in fiscal years 2002 and 2003 so that ODP could ensure that grant funds were spent in accordance with grant guidance and state preparedness planning, we interviewed ODP officials and homeland security and grant management officials and first responders in the five selected states and from selected local jurisdictions within those states. We also obtained and reviewed related ODP policy guidance and program guidelines for the SDPP/SHSGP and UASI grant programs. We also obtained and reviewed documentation on grant awards to state and local jurisdictions. We spoke with ODP officials about their grant monitoring and reporting processes and obtained and reviewed related ODP grant-monitoring guidance and monitoring reports for fiscal year 2004. We also obtained and analyzed data on the number of office-based and on-site-monitoring reviews conducted in fiscal year 2004. We reviewed these data for obvious inconsistency errors and completeness and compared these data with on- site-monitoring reports prepared by ODP. On the basis of these efforts, we determined that the monitoring review data were sufficiently reliable for the purpose of this report. In addition, we spoke with ODP and state and local officials about staffing issues that affect grant management. We also interviewed ODP and state and local officials and reviewed documentation about ODP’s state homeland security needs assessment and strategy development process and the similar needs assessment and strategy development process for selected urban areas. In addition, we obtained and reviewed the state domestic preparedness strategies for the selected five states. In conjunction with this effort, we also obtained information about the steps that ODP is taking to implement Homeland Security Presidential Directive-8 regarding national preparedness goals and performance standards. We also reviewed relevant reports on homeland security and domestic preparedness that discuss the development of national performance standards.

To determine the time frames for awarding and distributing SHSGP and UASI grants established by ODP grant guidance or by law, and how these time frames affected the grant cycle, we obtained and analyzed appropriations acts and program guidelines for the grant programs. We also met with ODP officials and state homeland security and grant management officials, and local grant managers and first responders in the selected states and local jurisdictions to discuss how the time lines affected the grant cycle. We obtained and analyzed data on the time frames associated with the grant award and distribution processes. We reviewed these data for obvious inconsistency errors and completeness and compared these data with hard-copy documents we obtained for these states. When we found discrepancies, we brought them to the attention of ODP and state and local officials and worked with them to correct the discrepancies before conducting our analyses. On the basis of these efforts, we determined that the time-frame data were sufficiently reliable for the purpose of this report. We also obtained information about local procurement policies and practices. In addition, we reviewed recent reports and studies on issues related to federal funding and oversight of grants for first responders. We also obtained grant funding and expenditures as of July 31, 2004, for the 56 states and territories and the urban areas. Given that the grant funding and expenditure data are used for background purposes only, we did not assess the reliability of these data. We also obtained and analyzed key dates associated with the grant award, distribution, and reimbursement processes for selected states and local jurisdictions. We conducted this work from November 2003 through November 2004 in accordance with generally accepted government auditing standards.

Appendix II: Fiscal Years 2002 and 2003 SDPP/SHSGP and UASI Funding and Draw Downs by State

Given that these grant-funding and drawn-down amounts are used for background purposes only, we did not assess the reliability of these data.

Appendix III: Grant Award, Distribution, and Reimbursement Process for Selected States and Local Jurisdictions

Appendix III: Grant Award, Distribution, and Reimbursement Process for Selected States and Local Jurisdictions SAA officially notifies County A that it will receive $119,202 in SDPP funding for equipment.

County A's local emergency planning notifies County A that it 2002 SDPP program guidelines to states. applications for grant funding; an equipment list is sent to SAA for approval. and exercises.

County A for SDPP funds. with SDPP funds.

SDPP purchase. 2/18/03 County A's Board of Supervisors approves agenda item to accept funding to ODP.

SDPP funds for equipment. agenda item to County A's Board of Supervisors to accept in SDPP funding.

SDPP funds for equipment.

State A for SDPP funds.

County A's first responder grant applications are due.

County A’s local emergency planning committee sends grant application forms to all county first responder agency administrators.

County's $1,383,000 grant share, and approves will be spent by local jurisdictions and state agencies. appropriation adjustments to county departmental budgets receiving grant funds.

A SAA expenditure report shows that application to state. $25,733 of the total $3,705,921 awarded SDPP funding for the operational area had been expended.

SAA posts local grant guide to its Web site.

ODP awards State B $24,831,000 in SDPP funding, but imposes special conditions. grant items.

12/12/03 City B's Controller releases fund to emergency management grant administrators for grant uses.

SAA approves County B's grant purchase orders. application to ODP. $3,705,921 in SDPP funding for by the county.

City B's funds into an emergency operations fund and approves the City draw down.

Council's decision to accept the city's grant share ($1,139,241). The Mayor also authorizes the purchase of approved equipment with funds from the emergency operations fund.

City B's City Council approves the acceptance of its $1,139,241 available for draw down. grant share, and approves the transfer of city funds to an emergency operations fund to support grant purchases.

6/11/03 State B's ESO approves County B's grant application and awards grant totaling $9,491,596 for the entire area emcompassed by the county.

County B's Board of Supervisors accepts county's $3,923,000 grant share.

12/15/03 City B begins issuing purchase orders.

6/23/03 ODP sends written correspondence to State B inquiring about the state's progress toward complying with the grant guidance requirement to obligate funds to local communities within 45 days of receiving the grant award. 7/15/03 City B's City Council approves the acceptance of $2,738,053 grant share, and the transfer of city funds to an emergency operations fund to support grant purchases.

A State B ESO expenditure report shows that $100,947 of the total $9,491,596 for all jurisdictions in the county had been expended. 8/01/03 City B's Chief Administrative Officer issues notice to exempt grant purchases from freeze on equipment purchases imposed because of city budget constraints. 7/23/03 City B's Mayor concurs with City Council's acceptance of $2,738,053 grant share.

State B submits its application to ODP.

7/21/03 Formal ODP Grant Adjustment Notice removing most of the special conditions that prohibited the expenditure or draw down of funds for equipment and training. The restrictions on $1,495,000 in equipment funds remain in effect until detailed equipment budget worksheets are submitted and approved by ODP. application to state.

7/09/03 State B's SAA transmits to ODP a form certifying that State B has obligated all SHSGP I funds within the required 45 days.

1/28/04 County B expenditure report shows that $123,144 of the total $9,491,596 grant award had been expended by all jurisdictions in the county.

County B notifies City B that it may begin purchasing approved grant items.

8/06/03 City B's grant administrators instructed to create a new account to receive funds from emergency operations account to purchase grant items.

County B notifies City B that grant-approved items.

City B's Controller releases funds to grant use. orders.

8/08/03 State B's SAA approves County B's grant application and awards a grant totaling $22,421,072 for the entire area encompassed by the county.

A State B ESO expenditure report shows that $98,865 of the total $22,505,947 awarded to County B had been expended.

County's $9,824,000 share, and approves obligated all SHSGP II funds within the required 45-days. departmental budgets receiving grant funds.

SHSGP I funding. grant were removed.

7/11/03 SAA notifies ODP that State C has obligated all SHSGP I funds within the required 45-day period. orders for equipment on regional task force behalf.

Counties that comprise the regional task 12/17/03 Equipment purchased by the state for the regional task force is shipped to County C.

State C submits its application to ODP. to SAA for approval. task force.

County C's Board of Commissioners approves SHSGP I funds for expenditure on planning, training, exercises, and program administration. The board also approves funds for equipment purchases 7/31/03 SAA submits additional information to ODP to remove special conditions.

Formal ODP Grant Adjustment Notice removing most of by the state for the regional task force. the special conditions.

State C SAA. task force; all purchase orders made by the state for the regional task force are released. $18,570,000 in SHSGP I funding, with special conditions. force equipment list.

Appendix IV: Comments from the Department of Homeland Security

Appendix V: Related GAO Products

Homeland Security: Effective Regional Coordination Can Enhance Emergency Preparedness. GAO-04-1009. Washington, D.C.: September 15, 2004.

Homeland Security: Federal Leadership Needed to Facilitate Interoperable Communications between First Responders. GAO-04- 1057T. Washington, D.C.: September 8, 2004.

Homeland Security: Federal Leadership and Intergovernmental Cooperation Required to Achieve First Responder Interoperable Communications. GAO-04-740. Washington, D.C.: July 20, 2004.

Homeland Security: Federal Leadership and Intergovernmental Cooperation Required to Achieve First Responder Interoperable Communications. GAO-04-963T. Washington, D.C.: July 20, 2004.

Homeland Security: Coordinated Planning and Standards Needed to Better Manage First Responder Grants in the National Capital Region. GAO-04-904T. Washington, D.C.: June 24, 2004.

Homeland Security: Management of First Responder Grants in the National Capital Region Reflects the Need for Coordinated Planning and Performance Goals. GAO-04-433. Washington, D.C.: May 28, 2004.

Emergency Preparedness: Federal Funds for First Responders. GAO-04- 788T. Washington, D.C.: May 13, 2004.

Homeland Security: Challenges in Achieving Interoperable Communications for First Responders. GAO-04-231T. Washington, D.C.: November 6, 2003.

Homeland Security: Reforming Federal Grants to Better Meet Outstanding Needs. GAO-03-1146T. Washington, D.C.: September 3, 2003.

Appendix VI: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to those persons mentioned above, David Alexander, Leo Barbour, Amy Bernstein, Mona Nichols Blake, Laura Helm, Carlos Garcia, Jessica Kaczmarek, and Katrina Moss made key contributions to this report.