To safeguard the assets, agencies can use the Comptroller General’s  Standards for Internal Controls in the Federal Government. The  administration released its report, The Federal Response To Hurricane  Katrina: Lessons Learned, on February 23, 2006. Foreign Countries Donated Millions in Cash, But Policies, Procedures, and Plans Were Not in Place

In the absence of policies, procedures, and plans, DOS developed an ad hoc  process to manage the cash donations flowing to the U.S. government from  other countries to address Hurricane Katrina relief efforts. Through this  process, $126 million was donated to the U.S. government which DOS  recorded in a designated account at the U.S. Treasury to hold the funds. An  NSC-led interagency working group was established to make policy  decisions about the use of the funds. FEMA officials told us they had  identified and presented to the working group a number of items that the  donated funds could be spent on. As of March 16,  2006, $60 million remained undistributed in the DOS-designated account at  the Treasury that does not pay interest. Because DOS expects  additional cash donations to be received, it is important that cash  management policies and spending plans are in place to deal with the  forthcoming donations so that the purchasing power of the donated cash is  maintained. In  October 2005, $66 million of the donated funds had been accepted by  FEMA under the Stafford Act and used for a Hurricane Katrina relief grant. We were told that the NSC-led interagency  working group determined that use of those 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 until their ultimate use was  determined and then accepted under the gift authorities of other agencies. While the NSC-led interagency working group was reviewing various  proposals on the further use of the funds beyond the initial $66 million, the  remaining $60 million was being held in a DOS account at the U.S. Treasury  that does not pay interest. Policies and Procedures Were Lacking in the Acceptance and Distribution of in-Kind Donations, Including Foreign Military Donations

The agencies having responsibilities regarding international assistance did  not have policies and procedures in place to ensure the acceptance and  distribution of in-kind donations, including foreign military donations,  received from 43 countries and international organizations. Also, the ad hoc procedures allowed for  confusion about which agency—FEMA or DOD—accepted and was  responsible for oversight of foreign military donations. Figure 2 below shows the process developed for accepting, receiving, and  distributing in-kind donations. Lack of Guidance Resulted in the Arrival of Food and Medical Items that Could Not be Used

The lack of guidance, inadequate information up front about foreign offers  of in-kind assistance and insufficient advance coordination before agreeing  to receive it, resulted in food and medical items, such as MREs and medical  supplies, that came into the United States and did not meet USDA or FDA  standards and thus could not be distributed in the United States. Conclusions

We recognize that since the United States government had never before  received such substantial amounts of international disaster assistance,  DOS, FEMA, OFDA, and DOD needed to create ad hoc procedures to  manage the acceptance and distribution of the assistance as best they  could. Scope and Methodology

To meet our objectives for this report we relied on information gathered  through our visits and interviews with key personnel within the  Department of State’s (DOS) Hurricane Katrina Task Force; Office of the  General Counsel for the DOS; Department of Homeland Security (DHS)  Inspector General; Office of the General Counsel for Federal Emergency  Management Agency (FEMA); FEMA Response Division; FEMA Recovery  Division; Office of the Chief Financial Officer for FEMA; FEMA/Financial  and Acquisitions Management Division; FEMA/Grants Management  Division; United States Agency for International Development  (USAID)/Office of Foreign Disaster Assistance (OFDA); OFDA/Response  Alternatives for Technical Services; Office of the Assistant Deputy Under  Secretary of Defense; Office of the Assistant Secretary of Defense;  Northern Command (NORTHCOM)/ Joint Staff Logistics; NORTHCOM/  Joint Staff Civil Affairs; NORTHCOM/Political Advisor; Department of  Treasury (Treasury)/Cash Accounting; Treasury/Chief Systems Integrity  Division; Food and Drug Administration (FDA); and United States  Department of Agriculture (USDA)/Food Safety and Inspection Service. To determine the amount of cash that was donated by foreign countries and  the extent to which it has been used to assist hurricane victims, we  gathered information from interviews with DOS, FEMA, and Treasury.
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. In light of widespread congressional and public interest in U.S. agencies' accountability in receiving and distributing assistance to hurricane victims, this report is one of several initiated under the authority of the Comptroller General to review the federal government's response to Hurricane Katrina. It examines (1) the amount and use of internationally donated cash, and (2) the extent to which federal agencies have adequate policies and procedures to ensure proper 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 could 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.