	Cash Donation Management Policies, Procedures, and Plans Were Not in Place

In the absence of international cash donation management policies,  procedures, and plans, DOS developed an ad hoc process to manage the  cash donations flowing to the U.S. government from other countries for  Hurricane Katrina relief efforts. In October 2005,  $66 million of the $126 million donated had been accepted by FEMA under  the Stafford Act and used for a Hurricane Katrina relief grant. As of March  16, 2006, the other $60 million from international donations remained  undistributed. We were  told that the NSC-led interagency working group did not transfer the funds  to FEMA because it wanted to retain the flexibility to spend the donated  funds on a wider range of assistance than is permitted under the Stafford  Act. By September 21, 2005, about $115 million in foreign cash  donations had been received. In the case of Hurricane Katrina, while the NSC-led  interagency working group reviewed various proposals on the use of the  remaining $60 million, DOS held the funds in an account at the U.S.  Treasury that did not earn interest. The Administration’s report, The Federal Response To Hurricane  Katrina: Lessons Learned, released on February 23, 2006, recognized that  there was no pre-established plan for handling international donations and  that implementation of the procedures developed was a slow and often  frustrating process. If the goal is to maintain both purchasing power and flexibility,  then among the options to consider are seeking statutory authority for  DOS to record funds in a Treasury account that can pay interest similar to  donations accepted under the Stafford Act pending decisions on how the  funds would be used, or to allow DOS to deposit the funds in an existing  Treasury account of another agency that can pay interest pending  decisions on how the funds would be used. Lack of Guidance Regarding the Accountability for International In-Kind Assistance

In the absence of guidance, we found a lack of accountability in the  management of the in-kind assistance. Specifically, FEMA did not have a  process in place that confirmed that the in-kind assistance sent to  distribution sites was received. Also, the ad hoc procedures created to manage foreign military  donations allowed for confusion about which agency—FEMA or DOD— should accept and be responsible for oversight of such donations. Without these controls in place to ensure accountability for the  assistance, FEMA does not know if all or part of these donations were  received at FEMA distribution sites. Inadequate Guidance, Information, and Coordination Resulted in the Arrival of Food and Medical Items That Could Not Be Used

We noted that the guidance the agencies created did not include policies  and procedures to help ensure that food and medical supplies that the U.S.  government agreed to receive and came into the United States met U.S.  standards. The lack of guidance, inadequate information up-front about  the nature and content of foreign offers of in-kind assistance, and  insufficient advance coordination with regulatory agencies before agreeing  to receive them, resulted in food and medical items, such as MREs and  medical supplies, that came into the United States even though they did  not meet USDA or FDA standards and thus could not be distributed in the  United States. Policies and Procedures Were Lacking in the Oversight of Foreign Military Donations

In the absence of policies and procedures, DOS, FEMA, and DOD created  ad hoc policies and procedures to manage the receipt and distribution of  foreign military goods and services. In closing, since the U.S. government had never before received such  substantial amounts of international disaster assistance, we recognize that  DOS, FEMA, USAID/OFDA, and DOD created ad hoc procedures to  manage the receipt, acceptance, and distribution of the assistance as best  they could.
Why GAO Did This Study

In response to Hurricane Katrina, countries and organizations donated to the United States government cash and in-kind donations, including foreign military assistance. The National Response Plan establishes that the Department of State (DOS) is the coordinator of all offers of international assistance. The Federal Emergency Management Agency (FEMA) within the Department of Homeland Security (DHS) is responsible for accepting the assistance and coordinating its distribution. GAO's testimony covers (1) the amount and use of internationally donated cash and (2) the extent to which federal agencies with responsibilities for international in-kind assistance offered to the United States had policies and procedures to ensure the appropriate accountability for the acceptance and distribution of that assistance.

What GAO Found

Because the U.S. government had not received such substantial amounts of international disaster assistance before, ad hoc procedures were developed to accept, receive and distribute the cash and in-kind assistance. Understandably, not all procedures would be in place at the outset to provide a higher level of accountability. The Administration recognized the need for improvement in its recent report on lessons learned from Hurricane Katrina. GAO was able to track the cash donations received to designated U.S. Treasury accounts or disbursed. In the absence of policies, procedures, and plans, DOS developed an ad hoc process to manage $126 million in foreign cash donations to the U.S. government for Hurricane Katrina relief efforts. As cash donations arrived, a National Security Council (NSC)-led interagency working group was convened to make policy decisions about the use of the funds. FEMA officials told GAO they had identified and presented to the working group a number of items that the donated funds could be spent on. The NSC-led interagency working group determined that use of those donated funds, once accepted by FEMA under the Stafford Act, would be more limited than the wider range of possible uses available if the funds were held and then accepted under the gift authorities of other agencies. In October 2005, $66 million of the donated funds were spent on a FEMA case management grant, and as of March 16, 2006, $60 million remained undistributed in the DOS-designated account at the Treasury that did not pay interest. Treasury may pay interest on funds accepted by FEMA under the Stafford Act. According to DOS, an additional $400 million in international cash donations are likely to arrive. It is important that cash management policies and spending plan options are considered and in place to deal with the forthcoming donations so that the purchasing power of the donated cash is maintained for relief and reconstruction. FEMA and other agencies did not have policies and procedures in place to ensure the proper acceptance and distribution of in-kind assistance donated by foreign countries and militaries. In-kind donations included food and clothing. FEMA and other agencies established ad hoc procedures. However, in the distribution of the assistance to FEMA sites, GAO found that no agency tracked and confirmed that the assistance arrived at their destinations. Also, lack of procedures, inadequate information up front about the donations, and insufficient coordination resulted in the U.S. government agreeing to receive food and medical items that were unsuitable for use in the United States and storage costs of about $80,000. The procedures also allowed confusion about which agency was to accept and provide oversight of foreign military donations. DOD's lack of internal guidance regarding the DOS coordinating process resulted in some foreign military donations that arrived without DOS, FEMA, or DOD oversight.