FEMA’s Administrative Costs Have Doubled, and an Integrated Plan Could Help Meet Its Goals of Reducing and Better Controlling These Costs

		FEMA Administrative Costs

FEMA obligated $12.7 billion from the DRF to cover its administrative  costs for the 650 major disasters declared during fiscal years 2004  through 2013. As shown in figure 3, the $12.7 billion represents 13  percent of the $95.2 billion obligated from the DRF for the 650 major  disasters during this time period. FEMA Has Taken Steps to Better Control and Reduce Administrative Costs, But Lacks An Integrated Plan to Achieve These Goals

As we reported in 2012, FEMA officials said that it was difficult to identify  the principal factors causing increases in administrative costs since fiscal  year 1989 because of the complexities associated with the underlying  factors, particularly in light of the span of time involved. Strategic plan goal. Other ongoing steps to reduce administrative costs. However, despite FEMA’s efforts since  November 2010, FEMA’s average administrative cost percentages have  not significantly decreased. During our  interviews with FEMA officials, they agreed that indentifying agency  officials who will be accountable, and creating a plan, would be beneficial  to reach the agency’s goals to better control and reduce administrative  costs. FEMA Could Better Track and Analyze Administrative Costs by DRF Program

In analyzing FEMA administrative costs, we found that that the agency  does not track or analyze its administrative costs for major disasters by  individual DRF program—including PA, Individual Assistance, and Hazard   For example, FEMA could tell us how much it obligated for its  Mitigation.own administrative costs, in total, for the Hurricane Sandy disaster  response, but not how much it has obligated for its administrative costs  related to each DRF program. FEMA Obligated $1.7 Billion in Administrative Costs to Grantees and Subgrantees during Fiscal Years 2004 through 2013; 2007 Rule Led to Increased Complexity and Workload

		Grantee and Subgrantee Administrative Costs

For the 650 major disasters declared during fiscal years 2004 through  2013, FEMA obligated $1.7 billion to reimburse grantees and subgrantees  for all types of administrative costs associated with PA grants. 2007 Rule Change Led to Increased Workload for FEMA, Grantees, and Subgrantees; FEMA’s Guidance for Direct Administrative Costs Lack Clarity and Specificity

In November 2007, FEMA implemented a rule change that was intended  to simplify and clarify the method it uses to reimburse grantees and  subgrantees for certain costs incurred while administering PA grants. However, according to FEMA officials, the 2007 rule change led to an  unexpectedly high rate of claims for direct administrative costs. Therefore, despite FEMA’s potential new  rule, recovery operations for hundreds of disasters could benefit from  FEMA officials clarifying the agencies’ guidance and minimum  documentation requirements for direct administrative costs claims, which  would help FEMA and its grantees better determine whether  administrative costs are reasonable and potentially help reduce  complexity in the process. Doing so could provide FEMA with information to better  manage these costs. 2. Clarify the agency’s guidance and minimum documentation  requirements for direct administrative costs claims by grantees and  subgrantees of the Public Assistance program. DHS also concurred with our second recommendation that FEMA assess  the costs versus the benefits of tracking FEMA’s administrative costs data  for major disasters by Public Assistance, Individual Assistance, Hazard  Mitigation, and Mission Assignment, and if feasible track this information. Appendix I: Objectives, Scope, and Methodology

This report addresses the following questions: (1) To what extent were  disaster relief funds (DRF) obligated to cover the Federal Emergency  Management Agency’s (FEMA) administrative costs for major disasters  during fiscal years 2004 through 2013, and what steps, if any, has FEMA  taken to control its administrative costs, and (2) To what extent were DRF  funds obligated to cover grantee and subgrantee administrative costs for  Public Assistance (PA) grants, and what has been the impact of FEMA’s  November 2007 regulatory changes on administrative costs reimbursed  to grantees and subgrantees for the PA program. We  reviewed and analyzed FEMA policies, procedures, and guidance specific  to state and local administrative costs, such as its Disaster Assistance  Policy and associated memorandum and evaluated them using practices  for good guidance. The Federal Emergency Management Agency (FEMA) obligates funds  from the Disaster Relief Fund to help jurisdictions respond to and recover  from declared disasters.
Why GAO Did This Study

FEMA leads federal efforts to respond to and recover from disasters, and provides grants to states and localities through the DRF. For each major disaster, funds can be obligated from the DRF to cover administrative costs—the costs of providing and managing disaster assistance—for FEMA, states, tribes, localities, and certain nonprofits, among others. GAO was asked to review these administrative costs along with FEMA policy changes.
This report addresses the extent to which DRF funds were obligated to cover (1) FEMA's administrative costs for major disasters during fiscal years 2004 through 2013, and the steps FEMA has taken to control these costs, and (2) Grantee and subgrantee administrative costs for PA grants, and the impact FEMA's 2007 policy changes had on PA program administrative costs reimbursements. GAO analyzed FEMA's administrative costs data and policies and PA guidance for administrative cost reimbursements; and interviewed FEMA, state, and local officials.

What GAO Found

The Federal Emergency Management Agency (FEMA) obligated $12.7 billion from the Disaster Relief Fund (DRF) for its administrative costs from fiscal years 2004 through 2013 and has taken some steps to reduce and better control these costs. This $12.7 billion represents 13 percent of the $95.2 billion obligated from the DRF for the 650 major disasters declared during this time frame. FEMA's average administrative cost percentages for major disasters during the 10 fiscal years 2004 to 2013 doubled the average during the 10 fiscal years 1989 to 1998. FEMA recognized that administrative costs have increased and has taken steps intended to better control and reduce these costs, such as setting a goal in its recent strategic plan to lower these costs, and creating administrative cost targets. However, FEMA does not require these targets be met, and GAO found that had FEMA met its targets, administrative costs could have been reduced by hundreds of millions of dollars. GAO also found that FEMA lacks an integrated plan with time frames and milestones to hold senior officials accountable for achieving its goals to reduce and more effectively control costs. Such a plan could help FEMA to better oversee and control these costs. In addition, GAO found that FEMA does not track administrative costs by major disaster program, such as Individual or Public Assistance, and has not assessed the costs versus the benefits of tracking such information. Doing so could provide FEMA with better information to manage these costs.
From fiscal years 2004 through 2013, FEMA obligated $1.7 billion to reimburse grantees (states) and subgrantees (localities) for administrative costs related to Public Assistance (PA) grants, and its 2007 policy change has led to additional complexity and workload for FEMA and its grantees. FEMA's 2007 rule was intended to simplify and clarify the method FEMA uses to reimburse grantees and subgrantees for certain costs incurred for administering PA grants. However, according to FEMA, the 2007 rule led to an unexpectedly high rate of claims for direct administrative costs. Grantee, subgrantee, and FEMA officials told GAO that FEMA policies and guidance do not adequately specify the requirements for determining reasonableness, eligibility, and supporting documentation to support reimbursement of direct administrative costs. Clarifying the agency's guidance and minimum documentation requirements would help grantees and subgrantees submit, and FEMA review requests for administrative costs reimbursement.

What GAO Recommends

GAO recommends that FEMA (1) develop an integrated plan to better control and reduce its administrative costs for major disasters, (2) assess the costs versus the benefits of tracking FEMA administrative costs by DRF program, and (3) clarify the agency's guidance and minimum documentation requirements for direct administrative costs. FEMA agreed with the report and its recommendations.