In September 2017, two Category 5 hurricanes struck the USVI, causing catastrophic damage across the entire territory and neighboring Caribbean islands. On September 6, 2017, Hurricane Irma struck St. Thomas and St. John and on September 19, 2017, Hurricane Maria struck St. Croix (see fig. 1). The storms severely damaged the territory’s critical infrastructure, devastating more than 90 percent of aboveground power lines and shutting down electricity and telecommunications for months. Further, 52 percent of the territory’s housing units were damaged, ports and airports were closed for weeks, and hundreds of thousands of tons of debris were generated, often blocking roads and making transportation hazardous. In addition, according to a September 2018 report from the USVI Hurricane Recovery and Resilience Task Force, the territory’s economic activity— especially tourism—was severely reduced in the months following the storms, leading to job losses and a total estimated economic impact of $1.54 billion. In response to the request of the Governor of the USVI, the President declared a major disaster the day after each hurricane struck the territory. Major disaster declarations can trigger a variety of federal response and recovery programs for government and nongovernmental entities and households and individuals, including assistance through the Public Assistance program. Under the National Response Framework and National Disaster Recovery Framework, DHS is the federal department with primary responsibility for coordinating disaster response and recovery, and within DHS, FEMA has lead responsibility. The Administrator of FEMA serves as the principal adviser to the President and the Secretary of Homeland Security regarding emergency management. FEMA’s Public Assistance program provides funding to state, territorial, local, and tribal governments as well as certain types of private nonprofit organizations to assist with responding to and recovering from major disasters or emergencies. As shown in figure 2, Public Assistance program funds are categorized broadly as “emergency work” or “permanent work.” Within these broad categories are separate subcategories. In addition to the emergency work and permanent work categories, the program includes category Z, which represents indirect costs, administrative expenses, and other expenses a recipient or subrecipient incurs in administering and managing the Public Assistance program that are not directly chargeable to a specific project. FEMA’s Public Assistance program also provides funding for cost- effective hazard mitigation measures to reduce or eliminate the long-term risk to people and property from future natural and man-made disasters and their effects. Specifically, FEMA provides funding for hazard mitigation measures in conjunction with the repair of disaster-damaged facilities to enhance their resilience during future disasters. For example, a community that had a fire station damaged by a disaster could use Public Assistance funding to repair the facility and incorporate additional measures such as installing hurricane shutters over the windows to mitigate the potential for future damage. Once the President has declared a disaster, FEMA, the state or territorial government (the recipient), and local or territorial entities (the subrecipient) work together to develop damage assessments and formulate project worksheets for eligible projects. Project worksheets detail the scope of work and estimated cost for repairing or replacing disaster-damaged infrastructure as well as any hazard mitigation measures that may help to increase the resilience of this infrastructure during future disasters. After a project has completed FEMA’s review process and is approved, FEMA obligates funding for the project by placing money into an account where the recipient has the authority to draw down—or withdraw—funding to pay the subrecipient for eligible work upon completion (see fig. 3). In addition, a state or territorial governor may designate a governor’s authorized representative (GAR) to oversee all aspects of disaster assistance, including Public Assistance funding. Specifically, the GAR is responsible for ensuring compliance with program requirements by providing oversight into how goods and services are procured for projects, such as construction materials or modular school units. The GAR also confirms that subrecipients submit complete documentation demonstrating that all work completed is in accordance with a project’s approved scope of work and Public Assistance program requirements. The GAR then approves the paperwork and the recipient can draw down funding from the account holding the obligations to reimburse subrecipients for completed work. When a project has been completed, FEMA conducts a close-out process to certify that all work has been completed and reconciles the actual cost incurred. If the actual cost of the completed work is greater than the amount of money FEMA obligated for the project, FEMA will reimburse the subrecipient for these additional costs. The Sandy Recovery Improvement Act of 2013 authorized the use of alternative procedures in administering the Public Assistance program, thereby providing new flexibilities to FEMA, states, territories, and local governments for debris removal, infrastructure repair, and rebuilding projects using funds from this program. Unlike in the standard Public Assistance program where FEMA will fund the actual cost of a project, the Public Assistance alternative procedures allow awards for permanent work projects to be made on the basis of fixed-cost estimates to provide financial incentives for the timely and cost-effective completion of work. Under these procedures, if the actual cost of the project exceeds the fixed-cost estimate agreed upon by FEMA and the recipient, the recipient or subrecipient is responsible for the additional costs at the time of the close-out process. However, if the actual cost of completing eligible work for a project is below the estimate, the recipient may use the remaining funds for additional cost-effective hazard mitigation measures to increase the resilience of public infrastructure. In addition, these funds may also be used for activities that improve the recipient’s or subrecipient’s future Public Assistance operations or planning. As of October 1, 2018, FEMA had obligated more than $1.4 billion through the standard Public Assistance program for 475 projects across the USVI. As shown in figure 4, FEMA obligated funding for both emergency work and permanent work projects. As of October 1, 2018, of the more than $1.4 billion FEMA obligated, the USVI had expended approximately $586.9 million—about 41 percent of total Public Assistance program obligations to the USVI—to reimburse subrecipients for completed work. Of this $586.9 million, the USVI had expended about $532.8 million (91 percent) for emergency work projects in categories A and B and $49.1 million (8 percent) for permanent work projects in categories C through G. The majority of FEMA’s obligations and the funding the USVI expended as of October 1, 2018, are for emergency work because these projects began soon after the disasters struck and focused on debris removal and providing assistance to address immediate threats to life and property. In contrast, permanent work projects take time to identify, develop, and ultimately complete as they represent the longer-term repair and restoration of public infrastructure. Emergency work. Of the more than $1.4 billion FEMA had obligated as of October 1, 2018, about $873.8 million (60 percent) was obligated for 322 emergency work projects in Public Assistance categories A and B. Category A: Debris Removal. FEMA obligated about $94.0 million for 71 projects focused on debris removal activities across the territory. For example, FEMA obligated $45.0 million to the USVI Department of Public Works for territorywide debris removal efforts and $39.1 million to the USVI Water and Power Authority for these activities in St. Croix (see fig. 5). Of the $94.0 million FEMA obligated for debris removal, the USVI had expended about $54.6 million (58 percent) as of October 1, 2018. Category B: Emergency Protective Measures. FEMA obligated about $780 million for 251 projects focused on emergency measures. For example, FEMA obligated about $187 million for the Sheltering and Temporary Essential Power program, which is intended to provide essential repairs or restore power to private residences to allow affected individuals to return or remain in their homes, thereby reducing the demand for other shelter options. In addition, FEMA obligated approximately $101 million for the purchase and installation of modular units to be used as temporary classrooms and other facilities while permanent school buildings are repaired or replaced (see fig. 6). Of the $780 million FEMA obligated for emergency protective measures, the USVI had expended about $478 million (61 percent) as of October 1, 2018. Permanent work. Of the more than $1.4 billion in Public Assistance funding FEMA had obligated as of October 1, 2018, about $516.3 million (36 percent) was obligated for 153 permanent work projects across categories C through G. These permanent work projects include about $349.4 million for cost-effective hazard mitigation measures aimed at reducing the future risk of disaster-damaged facilities in conjunction with their repair. Further, of the $516.3 million FEMA obligated for permanent work in the USVI, approximately $500.4 million—or 97 percent of all permanent work obligations—was obligated to the USVI Water and Power Authority for the permanent repair of electrical distribution systems and other utilities across the territory. Category C: Roads and Bridges. FEMA obligated about $5.2 million for 35 projects focused on repairing roads and bridges in the territory, 18 of which included hazard mitigation measures totaling about $1.5 million. For example, FEMA obligated about $410,000 for one project to repair a road on St. Thomas damaged by floodwaters. This project included approximately $227,000 for hazard mitigation measures, such as replacing the damaged road surface with reinforced concrete and building a retaining wall. As of October 1, 2018, the USVI had not expended funding in this category. Category D: Water Control Facilities. As of October 1, 2018, FEMA did not have any projects in this category. According to FEMA officials, the USVI does not have water control infrastructure that would fall under category D, such as dams, levees, or berms. Category E: Buildings and Equipment. FEMA obligated $6.0 million for 77 projects focused on repairing and rebuilding damaged buildings and equipment, 16 of which included hazard mitigation measures totaling about $1.8 million. For example, FEMA obligated about $1.5 million to repair damage to the airport terminal building in St. Thomas—a project where hazard mitigation measures comprised 87 percent of the project’s total cost (see fig. 7). These measures include replacing the terminal’s roof with materials designed to withstand higher wind speeds to increase the building’s resilience during future storms. Of the $6.0 million FEMA obligated for category E, the USVI had expended about $148,000 (2.5 percent) as of October 1, 2018. Category F: Utilities. Of the $516.3 million FEMA obligated for permanent work projects, $502.2 million (97 percent) was obligated for 15 projects focused on repairing utilities, 7 of which included hazard mitigation measures totaling about $346.0 million. For example, FEMA obligated $286.1 million and $50.2 million for permanent electrical distribution system repairs in St. Croix and St. John, respectively. This includes replacing damaged wooden utility poles with more resilient composite fiberglass poles that can withstand 200 mile per hour winds as well as power transmission lines and transformers (see fig. 8). Of the $502.2 million FEMA obligated for category F, the USVI had expended about $49.0 million (10 percent) as of October 1, 2018. Category G: Parks, Recreational, and Other Facilities. FEMA obligated about $2.9 million for 26 projects focused on repairing parks, playgrounds, and other recreational facilities, 1 of which included hazard mitigation measures. Specifically, FEMA obligated about $453,000 to repair the Lindbergh Park and Water Playground in St. Thomas—a project that included about $18,000 for hazard mitigation measures. As of October 1, 2018, the USVI had not expended funding in this category. Future projects. In addition to the more than $1.4 billion in Public Assistance funding FEMA had obligated as of October 1, 2018, FEMA expected to review an additional 900 future projects for eligibility representing an estimated $779.4 million in potential funding. Of this estimated total amount, FEMA anticipates $128.5 million (16 percent) in costs for future emergency work projects and $650.9 million (84 percent) in costs for future permanent work projects. In July 2018, FEMA approved a June 2018 request from the Governor of the USVI to transition to using the Public Assistance alternative procedures program for permanent work in the territory. The alternative procedures provide new flexibilities to FEMA and the USVI that are not available through the standard Public Assistance program. In September 2018, FEMA issued the Public Assistance Alternative Procedures Permanent Work Guide for the USVI to provide guidance on the implementation of the program in the territory. FEMA and USVI officials stated that a section of the Bipartisan Budget Act of 2018 and the flexibilities provided by the program itself influenced the USVI’s decision to transition to using the alternative procedures. First, Section 20601 of the Bipartisan Budget Act of 2018 authorized FEMA, when using the Public Assistance alternative procedures, to provide assistance to fund the replacement or restoration of disaster- damaged infrastructure that provide critical services to industry standards without regard to pre-disaster condition. FEMA and USVI officials told us that the territory therefore has a valuable opportunity to use the alternative procedures to repair and rebuild its critical services infrastructure—including the USVI’s education system, electrical grid, and emergency medical care system, among others—so it is in a better condition than it was prior to the 2017 hurricanes. Second, USVI officials stated that under the standard Public Assistance program currently being used in the USVI, the territorial government is responsible for providing the initial funding to reimburse subrecipients for completed work prior to drawing down funds from the account holding the FEMA- obligated amounts of money for each project. They explained that because of the financial liquidity challenges facing the territory, this process was problematic and required USVI officials to prioritize projects based on the availability of the territory’s funding. USVI officials stated that the Public Assistance alternative procedures will help to address this challenge by providing the territory with more flexibility regarding when and how to fund projects. For example, in certain cases, the USVI is able to consolidate permanent work projects approved under the alternative procedures and share obligated funding across these projects. In addition, the USVI is able to use any excess funds for cost-effective hazard mitigation measures or for activities that improve the recipient’s or subrecipient’s future Public Assistance operations or planning. As of November 2018, FEMA and USVI officials stated they were working to identify and develop permanent work projects using the Public Assistance alternative procedures and discussing the process for developing the fixed-cost estimate for each project. Specifically, unlike in the standard Public Assistance program where FEMA will fund the actual cost of a project, the Public Assistance alternative procedures use a fixed-cost estimate which is agreed to prior to obligation and the USVI will be financially responsible for any actual costs that exceed this amount. Given the USVI’s difficult fiscal situation, FEMA and USVI officials stated that ensuring these fixed-cost estimates are as accurate as possible will be critical. However, FEMA officials also noted that if FEMA and the territory cannot come to an agreement on a fixed-cost estimate for any given project, the USVI does have the option to move forward through the standard Public Assistance program. According to FEMA’s Public Assistance Alternative Procedures Permanent Work Guide for the USVI, all cost estimates for projects using these procedures must be finalized by March 2020. We will continue to monitor the USVI’s plans for using the alternative procedures as part of our broader work assessing disaster recovery efforts in the USVI and will issue a follow-on report later this year. We provided a draft of this report to DHS and the USVI government. We requested comments from DHS and the USVI government, but none were provided. DHS did provide technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Administrator of FEMA, the USVI government, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you and your staff have any questions, please contact me at (202) 512- 8777 or curriec@gao.gov. GAO staff who made key contributions to this report are listed in appendix II. Chris Currie, 202-512-8777 or curriec@gao.gov. In addition to the contact named above, Joel Aldape (Assistant Director), Bryan Bourgault, Leanna Diggs, Aaron Gluck, Eric Hauswirth, Brian Lipman, Amanda Miller, Heidi Nielson, and Kevin Reeves made key contributions to this report.

Summary: In September 2017, two major hurricanes—Irma and Maria—struck the USVI, causing billions of dollars in damage to its infrastructure, housing, and economy. FEMA—a component of the Department of Homeland Security—is the lead federal agency responsible for assisting the USVI as it recovers from these natural disasters. Among other responsibilities, FEMA administers the Public Assistance program in partnership with the USVI territorial government, providing the USVI grant funding for response and recovery activities, including debris removal efforts, life-saving emergency protective measures, and the repair, replacement, or restoration of public infrastructure. GAO was asked to review the federal government's response and recovery efforts related to the 2017 hurricanes. This report describes (1) the status of FEMA's Public Assistance program funding provided to the USVI in response to the 2017 hurricanes as of October 1, 2018, and (2) the USVI's transition to implementing the Public Assistance alternative procedures in the territory. GAO reviewed program documents and data on obligations and expenditures as of October 1, 2018, and interviewed officials from FEMA and the USVI regarding the Public Assistance program specifically and disaster recovery efforts more generally. GAO also conducted site visits to the USVI islands of St. Croix, St. Thomas, and St. John. GAO is not making any recommendations in this report, but will continue to monitor the progress of the USVI's recovery as part of its ongoing work. The Federal Emergency Management Agency (FEMA) obligated more than $1.4 billion in grant funding for Public Assistance projects in the U.S. Virgin Islands (USVI) as of October 1, 2018, in response to the 2017 hurricanes. FEMA obligated about $873.8 million for emergency work—debris removal activities and emergency measures to lessen the immediate threat to life, public health, and safety—and about $516.3 million for permanent work—including the repair or replacement of public infrastructure such as roads, electrical utilities, and schools. For example, FEMA obligated about $101 million for the purchase and installation of modular units to be used as temporary classrooms and other facilities while permanent school buildings are repaired or replaced. FEMA's obligations for permanent work also included funding for hazard mitigation measures to reduce the risk of damage during future storms—for example, by replacing wooden utility poles with composite fiberglass poles (see figure). FEMA and the USVI are transitioning from using the standard Public Assistance program in the territory to using the Public Assistance alternative procedures program. Unlike in the standard Public Assistance program where FEMA will fund the actual cost of a project, the alternative procedures allow awards to be made on the basis of fixed-cost estimates to provide financial incentives for the timely and cost-effective completion of permanent work projects. FEMA and USVI officials stated that the alternative procedures will give the USVI more flexibility in determining when and how to fund projects and provide an opportunity to repair and rebuild the USVI's critical services infrastructure—such as its education system and electrical grid—so it meets industry standards without regard to pre-disaster condition. As of November 2018, FEMA and USVI officials were discussing the process for developing projects under the Public Assistance alternative procedures. GAO will continue to monitor the USVI's plans for using the alternative procedures as part of its broader review assessing the USVI's disaster recovery efforts and will issue a follow-on report later this year.