FEMA’s Failure to Track $66 Billion in Funds Puts Long-Term Disaster Recovery Efforts at Risk

With $66 billion dollars in obligated disaster funds in question after the Federal Emergency Management Agency (FEMA) failed to track costs and performance data for its long-term recovery offices, FEMA is at risk of mismanaging disaster relief funds, according to a recent audit by the Office of Inspector General of the US Department of Homeland Security (DHS OIG).

“FEMA risks mismanaging disaster relief funds because it does not track costs or performance data and has not created and implemented standardized policies, procedures and performance measures for long-term recovery offices,” the DHS OIG report stated.

Similarly, Homeland Security Today reported last month that another OIG audit found significant flaws in FEMA’s $247 million disaster relief system that may hamper an effective response to a catastrophic disaster.

In July, Homeland Security Today reported that 58 management and disaster relief fund audit reports by DHS’s Inspector General identified $88.6 million in questioned costs, and $8.9 million in funds that could be put to better use.

For example, an OIG audit found FEMA officials did not correctly apply their own disaster relief guidelines in response to the catastrophic 2008 flooding in Cedar Rapids, Iowa, resulting in a loss to taxpayers of more than $12 million.

Between 1994 and 2013, FEMA’s long-term recovery offices were responsible for 26 major disaster declarations totaling $66 billion in obligated funds. Without tracking costs, FEMA could not evaluate the cost-effectiveness of the long-term recovery offices.

Long-term recovery offices are established in cases where state and local community officials, businesses and citizens need additional recovery assistance. These offices are generally opened in the case of a major disaster that overwhelms the FEMA Regional Office.

To maintain accountability, The Federal Managers’ Financial Integrity Act of 1982 requires federal agencies to properly account for revenues and expenditures applicable to agency operations. While FEMA tracked overall disaster costs, it failed to track costs by location.

The OIG indicated FEMA must track the costs for each long-term recovery office, stating, “Without tracking costs or data, FEMA cannot determine whether these offices are cost effective."

With the federal costs associated with Hurricane Sandy—the most destructive hurricane of the 2012 Atlantic hurricane season, as well as the second-costliest hurricane in United States history— likely to surpass all disasters except Hurricane Katrina, the OIG emphasized the importance of implementing new tracking policies.

The audit also found FEMA needs standardized policies, procedures and performance measures for their long-term recovery offices. Without standardized policies, opening and closing long-term recovery offices is left up the discretion of FEMA officials.

The audit report further stated that, “FEMA officials said that the key decision point for establishing and closing a Long Term Recovery Office rests on the regional officials’ ‘disaster knowledge’ for determining the need, operation, and closure of these offices. FEMA also said the ability and desire of the affected State to close out disaster recovery work quickly affects the operations and closure of the Long Term Recovery Offices.”

The subjective decision-making process, according to the OIG, has resulted in long-term recovery offices being open for inconsistent timeframes. Without the proper controls in place, FEMA risks the mismanagement of disaster funds for Hurricane Sandy.

“As of January 2014, FEMA had already obligated nearly $7 billion in disaster funds for Hurricane Sandy in New York and New Jersey and employed over 700 staff for Long Term Recovery Offices in those two States,” the report stated.

DHS’s OIG provided two recommendations to FEMA to assist the agency in managing long-term recovery offices more consistently and effectively. First, FEMA must identify, track and report costs and performance data that show cost effectiveness for long-term recovery offices. Second, the agency should implement standardized policies, procedures, and performance measures to establish, operate, and close these offices.

FEMA concurred with the OIG’s recommendations and is currently “documenting the process, procedures, performance measures, lessons learned, and best practices used to scope and establish the Sandy Recovery Office.”

In addition, several FEMA officials have begun sharing their practices and knowledge with each other. The OIG classified both of their recommendations as resolved and open, pending another audit in March 2015.

“Correcting these deficiencies will provide FEMA the information and guidance it needs to determine whether Long Term Recovery Offices are cost effective,” DHS OIG concluded.

Earlier, a Government Accountability Office (GAO) audit found that DHS—and, specifically, FEMA—needs to more accurately account for federal funding provided to fusion centers.

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