The NFIP seeks to minimize human suffering and flood-related property losses by making flood insurance available on reasonable terms and encouraging its purchase by people who need flood insurance protection—particularly those living in flood-prone areas known as special flood hazard areas (SFHA). Prior to the flood insurance program’s inception, private insurance companies generally did not offer coverage for flood disasters because of the high risks involved, such as high-risk homeowners being more likely to purchase flood insurance. The National Flood Insurance Act of 1968 (P.L. 90-448) established the program to identify SFHAs, make flood insurance available to property owners living in communities that joined the program, and encourage floodplain management efforts to mitigate flood hazards and thereby reduce federal expenditures on disaster assistance. In order for a community to join the program, any structures built within an SFHA after it has been identified as such are required to be built to the program’s building standards, which are aimed at minimizing flood losses. FEMA estimates that its implementation of the program’s standards for new construction is now saving about $1 billion annually in flood damage avoided. The 1973 Flood Disaster Protection Act (P.L. 93-234) required flood insurance for borrowers whose mortgages are on structures located in SFHAs in participating communities and are originated, guaranteed, or serviced by federal agencies or federally regulated institutions.Subsequently, the National Flood Insurance Reform Act of 1994 (P.L. 103- 325) directed federal regulators of lending institutions to assess penalties on any regulated lending institution found to have a pattern or practice of violating the act. Violations include failing to require flood insurance coverage for properties in SFHAs used to secure mortgage loans. In addition, the act mandated that regulated lenders (1) purchase flood insurance for borrowers who are required to have it but fail to purchase it and (2) escrow funds for flood insurance premiums if other funds are also escrowed. The owners of properties in SFHAs with no mortgages or properties with mortgages held by unregulated lenders are not legally required to buy flood insurance. Because risk levels are the same for homeowners in SFHAs regardless of whether flood insurance is required, FEMA encourages all homeowners residing in SFHAs to buy flood insurance. FEMA’s Mitigation Directorate maintains and updates flood insurance rate maps (FIRM), which identify the geographic boundaries of SFHAs. FIRMs are derived from base maps, which show the basic geographic and political boundaries of a community. Various mapping technologies are used to establish flood elevations on FIRMs and to delineate the boundaries of SFHAs. Base maps are generally obtained from local communities or the U.S. Geological Survey (USGS). While flood maps should be updated as necessary to remain accurate, approximately 63 percent of the nation’s 100,000 flood maps are at least 10 years old. Consequently, the Mitigation Directorate has developed a Flood Map Modernization Plan to update the maps and convert them to a digital format. Digital mapping processes, along with other technologies, will improve the collection of data on structures in SFHAs and allow for the electronic distribution of these data through the Internet and on CD-ROM. In accordance with the Government Performance and Results Act (GPRA), FEMA has established various goals and strategies to determine the success of the NFIP in fulfilling its mission to minimize property losses after flood disasters and to reduce losses from future disasters. According to FEMA officials, these goals allow the agency to monitor its progress in meeting its performance goals and address key outcomes. While the results achieved under these goals—increasing the number of insurance policies in force and reducing flood-related losses—provide valuable insights into how well the NFIP’s mission is being accomplished, they do not gauge participation in the program by the most vulnerable residents—those living in SFHAs. Participation rates—the percentage of structures in SFHAs that are insured—are an effective way to measure the results of the NFIP because they are objective, measurable, and quantifiable. By using participation rates to measure performance, FEMA could assess other program results, such as the extent to which the most vulnerable residents are participating in the program; determine whether the financial risk to the government from floods is increasing or decreasing; and focus marketing and compliance activities to maximize program participation in SFHAs. Like other federal agencies, FEMA is mandated under GPRA to develop annual performance plans that link the agency’s long-term strategic planning to its daily activities. FEMA established three performance goals that pertain to the flood insurance program. These goals include reducing flood losses, increasing the number of flood insurance policies sold, and improving the program’s financial status. These endeavors are part of FEMA’s mission to protect lives and reduce losses from future disasters through insurance and mitigation efforts. Table 1 describes FEMA’s fiscal year 2002 Performance Plan goals for the NFIP and the strategies by which the agency intends to accomplish these goals. In developing annual performance goals, agencies should focus on the results they expect their programs to achieve—the differences the programs will make in people’s lives. The three NFIP performance goals address the program’s objectives of minimizing human suffering and property losses caused by floods. However, opportunities are developing for FEMA to obtain valuable information about the program’s success through analysis of the rate of participation for those communities involved in the program. The participation rate is obtained by dividing the number of properties located in SFHAs with flood insurance by the total number of properties in these SFHAs. This information would allow FEMA to assess whether the program is penetrating those areas most at risk of flooding, determine whether the financial risks to the government in these areas are increasing or decreasing, and better target marketing efforts to increase participation. In other words, through analysis of participation rates, FEMA would be better able to maximize the effectiveness and efficiency of the program in protecting lives and reducing financial losses. FEMA currently collects data on the number of active flood insurance policies. Its goal is to increase the number of NFIP policies in force by 5 percent annually. While FEMA tracks the growth in the number of active policies, its estimates of the number of households located in SFHAs without flood insurance coverage vary. A DeKalb County, Georgia, study illustrates why participation-rate data can be a more useful measure of the program’s success than a tally of policies in force. According to the study, the number of policies in force in DeKalb County grew from the previous year by 13 percent in 1998 and by 17 percent in 1999 but fell to 3 percent in 2000. In fiscal year 1999, DeKalb County officials conducted a study of NFIP participation. This study was initiated to provide information about flood hazards, prevention, and mitigation. Local officials made flood-zone determinations on every structure in the county using FIRMs, tax maps, and limited geographic information system technology. This effort resulted in the creation of an electronic database of the addresses of all structures in the SFHAs. According to the data collected, there were 17,078 buildings in the SFHAs, of which 3,145, or 18 percent, had flood insurance. Thus, while an analysis of the number of policies in force showed significant growth in 1998 and 1999, these data did not capture the fact that fewer than 20 percent of the homeowners in DeKalb County’s SFHAs had flood insurance. FEMA’s policy growth target also does not take into account whether the policy growth is greater or less than the population change in DeKalb County’s SFHAs. For example, a 5-percent increase in the number of policies at a time when the SFHA’s population is increasing by 20 percent may not represent program success for DeKalb County or any other community participating in the NFIP. Nor does the policy growth target take into account changes that occur when flood maps are updated, which could result in the addition of some structures to an SFHA. Such information is important for communities like DeKalb County, where new maps took effect this month. Knowledge of DeKalb County’s participation rate would also help FEMA better market its flood insurance program there. As noted in table 1, marketing and educational outreach efforts are two of FEMA’s strategies to increase the number of policies in force. A 5-percent increase in the number of policies might lead to the erroneous conclusion that DeKalb County did not need additional marketing or outreach campaigns to increase public awareness of flood insurance. A participation rate of 18 percent, however, might indicate that, among other things, additional marketing and educational outreach was necessary for DeKalb County residents. Increasing the share of structures in SFHAs with flood insurance would provide added income to the NFIP’s insurance fund and decrease the financial burden that flooding places on the federal government and the citizens who are victims of floods when uninsured structures suffer flood damage and may qualify for other forms of federal disaster relief. Moreover, increased participation would provide a broader base of policyholders so that the primary objective of insurance—the pooling of risk—would be more fully realized. FIA officials agree that program participation rates are a useful measure that can provide insights for measuring the program’s success, including the effectiveness of marketing. The data currently available to determine flood insurance participation rates within SFHAs are not always accurate or complete. While FIA maintains data on the number of flood insurance policies, the information it has on the total number of structures within SFHAs is poor, according to FIA’s Acting Administrator. FIA acknowledges weaknesses in its estimates of the total number of structures within SFHAs nationwide and is taking steps to obtain more accurate data. New technologies are also becoming available that may be used to estimate the number of structures within floodplains, thereby increasing the reliability of the data needed to determine participation rates.