Over the last several years, the Congress has expressed concern over the number and costs of disaster declarations. GAO has also identified the cost of disaster assistance as one of FEMA’s major management challenges. Figure 1 depicts the number of major disasters declared since fiscal year 1991 and FEMA’s share of the Public Assistance program costs for projects associated with them. The Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), as amended, establishes the process for states to request a presidential disaster declaration. The Stafford Act requires that “requests for a declaration by the President that a major disaster or emergency exists shall be made by the Governor of the affected state.” 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.” Before a governor asks for disaster assistance, federal, state, and local officials normally conduct a joint preliminary damage assessment. FEMA is responsible for recommending to the President whether to declare a disaster and trigger the availability of funds as provided for in the Stafford Act. FEMA uses the damage assessment data in preparing its recommendation to the President. When an obviously severe or catastrophic event occurs, a disaster may be declared before the preliminary damage assessment is completed. In response to a governor’s request, the President may declare that a major disaster or emergency exists. This declaration activates numerous assistance programs from FEMA and may also trigger programs operated by other federal agencies, such as the Departments of Agriculture and Labor, the Federal Highway Administration, the Small Business Administration, and the U.S. Army Corps of Engineers, to assist a state in its response and recovery efforts. The federal disaster assistance provided under a major disaster declaration has no dollar limit. FEMA provides assistance through one or more of the following grant programs: Public Assistance provides aid to state government agencies; local governments; Indian tribes, authorized tribal organizations, and Alaskan Native villages; and private nonprofit organizations or institutions that provide certain services otherwise performed by a government agency. Assistance is provided for projects such as debris removal, emergency protective measures to preserve life and property, and repair and replacement of damaged structures, such as buildings, utilities, roads and bridges, recreational facilities, and water-control facilities (e.g., dikes and levees). Individual Assistance provides for the necessary expenses and serious needs of disaster victims that cannot be met through insurance or low- interest Small Business Administration loans. FEMA provides temporary housing assistance to individuals whose homes are unlivable because of a disaster. Other available services include crisis counseling to help relieve any grieving, stress, or mental health problems caused or aggravated by the disaster or its aftermath. FEMA provides unemployment compensation and can cover a percentage of the medical, dental, and funeral expenses that are incurred as a result of a disaster. The Hazard Mitigation Program provides additional funding (currently up to 15 percent of total federal aid for recovery from the disaster) to states to assist communities in implementing long-term measures to help reduce the potential risk of future damages to facilities. Figure 2 shows the obligations for each of these three general programs for fiscal years 1991 through 2000. As this figure indicates, the Public Assistance program is the largest of the three grant categories, in terms of dollars expended. Not all programs are activated for every disaster. The determination to activate a program is based on the needs identified during the joint preliminary damage assessment. For instance, some declarations may provide only Individual Assistance grants and others only Public Assistance grants. Hazard Mitigation grants, on the other hand, are available for most declarations. 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. Typically, this response consists of providing grants to assist state and local governments and certain private nonprofit organizations to alleviate the damage resulting from such disasters. Once a federal disaster is declared, FEMA usually establishes a field office at or near the disaster site. This office is generally staffed with a crew of permanent, full-time FEMA employees; a cadre of temporary reserve staff, also referred to as disaster assistance employees; and the state’s emergency management personnel. Damage estimates for each project, known as project worksheets, can be prepared either by FEMA staff or by personnel from applicants, such as state agencies, communities and certain nonprofit organizations. Full-time FEMA staff then review these project worksheets for final approval. To facilitate their review, approval, and funding, projects are divided into two groups. Projects are considered small if their estimated cost does not exceed $50,600. If a FEMA employee or state representative prepares a worksheet for a small project and it passes all appropriate reviews, it is funded according to its estimated costs. However, if an applicant prepares a project worksheet, FEMA or state officials may verify the accuracy of the claims by validating the project’s cost and eligibility. Typically, officials validate a sample of an applicant’s small projects before approving the funding for them. Large disaster projects, whose estimated costs exceed $50,600, are funded incrementally as work on each phase is completed. In all cases, the states, as the grantees, are responsible for disbursing FEMA funds to the applicants and for certifying that all costs were appropriate and that work on the project was completed in accordance with the approved project estimates. The Stafford Act sets the federal share for the Public Assistance program at no less than 75 percent of eligible costs of a disaster. The President can increase the federal share for the Public Assistance program if it is determined that the disaster costs greatly exceed a state’s financial capabilities. The federal share can sometimes reach 100 percent for emergency work, for limited periods, if it is deemed necessary to prevent further damage, protect human lives, or both. FEMA officials indicated they are reluctant to recommend a 100-percent federal share for projects because this percentage provides no incentives for the states to control costs. To better use disaster resources and devolve major management responsibility for the Public Assistance program to the states, the Director of FEMA implemented a pilot project in 2000 to allow those states that have the capability to do so to manage the Public Assistance segment of their own small disasters. Under this Public Assistance pilot project, the states and affected communities make all project eligibility determinations and ensure that all disaster projects comply with current codes and standards, as well as with federal laws, regulations, and FEMA policies. To participate in this pilot project, a state must, in FEMA’s view, be capable of managing its own disaster recovery program, have a sound financial accounting system to track disaster projects, and enter into an operational agreement with FEMA that defines its roles and responsibilities. In 1999, FEMA published its criteria for evaluating a governor’s request for a disaster declaration. For the Public Assistance program, FEMA identified two specific financial thresholds, as well as several other less specific criteria, such as severe local impact, previous actions taken that helped mitigate the disaster damages, and the overall impact of multiple recent disasters in the state. Any or all of these, as well as “other relevant information,” can be used to determine whether a disaster declaration should be recommended under the Public Assistance program. FEMA’s explicit financial thresholds are less accurate measures of a state’s true ability to respond effectively to a disaster than other available financial measures. In responding to congressional interest in more objective disaster declaration criteria, FEMA set two financial thresholds to be considered in evaluating when a disaster has exceeded a state’s capacity to respond without federal assistance. First, it estimates the per- capita impact of the disaster damages in the state through the preliminary damage assessment process. In 1999, FEMA set a figure of $1.00 per capita as a critical threshold that might warrant federal assistance. This figure, which is currently $1.04, is adjusted annually for inflation. Secondly, it set a $1 million threshold for statewide Public Assistance damages. This threshold, however, is not adjusted for inflation. In 1986, FEMA proposed the $1.00-per-capita threshold as a means of gauging state fiscal capacity. The measure was based on the 1983 per- capita personal income nationwide, then estimated at $11,667. FEMA thought it reasonable “that a State would be capable of providing $1.00 for each resident of that State to cover the costs of State efforts to alleviate the damage which results from a disaster situation,” inasmuch as this amount was roughly equivalent to 0.1 percent of estimated General Fund expenditures by states. FEMA proposed to adjust this figure each year by the ratio of each state’s personal income to the nationwide average, thus making it more sensitive to interstate differences over time. This proposal met with opposition from state and local officials and resulted in a provision in the Stafford Act that prohibited denying federal disaster assistance “solely by virtue of an arithmetic formula or sliding scale based on income or population.” Nevertheless, the unadjusted $1.00-per-capita threshold continued to be used informally as part of FEMA’s preliminary damage assessment efforts. In 1998, FEMA submitted a concept paper for consideration by state emergency managers. In the paper, the agency recommended that the per- capita threshold be set at $1.51. This figure accounted for inflation since 1986, but was no longer linked to average state tax expenditures as the 1986 threshold had been. In response to comments from state emergency management officials, FEMA used the $1.00-per-capita threshold when it published its formal criteria in 1999. It further provided that adjustments based on annual inflation be made and applied uniformly to states.