With total damage  estimated at $14.2 billion, Ivan became the fourth costliest hurricane in U.S.  history through 2005. It was responsible for 13 U.S. deaths,  according to the Red Cross, and 28 U.S. deaths, according to NOAA/NCDC. Known questioned costs are those specifically identified by the auditor. Scope and Methodology

The objectives of our audit were to determine whether (1) FEMA and the  Red Cross established criteria for allowable reimbursable expenses related  to hurricanes Charley, Frances, Ivan, and Jeanne; (2) Red Cross  reimbursements did not duplicate funding paid by other federal programs;  (3) Red Cross reimbursable claims were paid only for services in states and  territories declared eligible for disaster relief; and (4) Red Cross  reimbursable claims were paid only for allowable categories of services  and support and were supported by adequate documentation. The purpose of these meetings was to refine the  criteria to be consistent with FEMA and Red Cross policies and procedures  for disaster relief and Public Law 108-324. Criteria Were Established for Reimbursement

We found that FEMA and the Red Cross had properly established criteria  for Red Cross reimbursement requests through a May 2005 agreement that  identified allowable categories for disaster relief, recovery, and emergency  services associated with hurricanes Charley, Frances, Ivan, and Jeanne. Controls Avoided Duplication of Expenses Reimbursed by Other Federal Funds

Consistent with the law, the May 2005 FEMA/Red Cross agreement  provided that the Red Cross would not seek reimbursement for any  expenses reimbursed by other federal funding sources. We identified about  $0.3 million of FEMA paid transient accommodations and deployment  costs that were properly deducted by the Red Cross from its  reimbursement requests, so as not to duplicate funding by other federal  sources. The Red Cross also deducted from the reimbursements   $60.2 million of private donations designated for disaster relief related to  the four hurricanes. Expenses Were Incurred in Eligible States and Territories

The Red Cross reported $88.6 million of incurred expenses in states and  territories eligible for disaster relief under the four hurricanes in  accordance with the FEMA/Red Cross agreement. From August 11, 2004, through June 30, 2005, the Red Cross reported  incurred expenses of $88.6 million in connection with hurricanes Charley,  Frances, Ivan, and Jeanne. Incurred Expenses Were Generally for Eligible Services and Were Adequately Supported

The Red Cross’s requested reimbursements of $28.1 million related to the  four 2004 hurricanes were included in a schedule of $50.0 million of federal  funds from other programs operated by the Red Cross for the fiscal year  ended June 30, 2005. We concur with that determination. However,  KPMG identified six weaknesses in the Red Cross’s internal controls  related to the reimbursement for the four 2004 hurricanes that it  considered to be reportable conditions. We found that we could rely upon the KPMG audit work. The Red Cross subsequently  reduced its final request to FEMA for the 2004 hurricane reimbursement to  $28.1 million after adjusting for the amount of the bank reporting error.
Why GAO Did This Study

In accordance with Public Law 108-324, GAO is required to audit the reimbursement of up to $70 million of appropriated funds to the American Red Cross (Red Cross) for disaster relief associated with 2004 hurricanes Charley, Frances, Ivan, and Jeanne. The audit was performed to determine if (1) the Federal Emergency Management Agency (FEMA) established criteria and defined allowable expenditures to ensure that reimbursement claims paid to the Red Cross met the purposes of the law, (2) reimbursement funds paid to the Red Cross did not duplicate funding by other federal sources, (3) reimbursed funds assisted only eligible states and territories for disaster relief, and (4) reimbursement claims were supported by adequate documentation. The 2004 hurricane season was one of the most destructive in U.S. history. Fifteen named storms resulted in 21 federal disaster declarations. Four hurricanes affecting 19 states and 2 U.S. territories from August 13 through September 26, 2004, triggered the nation's biggest natural-disaster response up to that time. Over 150 deaths and $45 billion of estimated property damage are attributed to hurricanes Charley, Frances, Ivan, and Jeanne in the United States alone. Through 2005, these four storms rank among the seven costliest in U.S. history.

What GAO Found

The signed agreement between FEMA and the Red Cross properly established criteria for the Red Cross to be reimbursed for allowable expenses for disaster relief, recovery, and emergency services related to hurricanes Charley, Frances, Ivan, and Jeanne. The Red Cross incurred $88.6 million of allowable expenses. Consistent with the law, the agreement explicitly provided that the Red Cross would not seek reimbursement for any expenses reimbursed by other federal funding sources. GAO identified $0.3 million of FEMA paid costs that the Red Cross properly deducted from its reimbursement requests, so as not to duplicate funding by other federal sources. The Red Cross also reduced its requested reimbursements by $60.2 million to reflect private donations for disaster relief for the four hurricanes, for a net reimbursement of 28.1 million. Red Cross expenses were incurred in states and territories eligible for disaster relief associated with the four hurricanes in accordance with the FEMA/Red Cross agreement. The Red Cross requested reimbursement of $28.1 million for the period August 11, 2004, through June 30, 2005, for payment from federal appropriated funds under Public Law 108-324. After review and some retesting, GAO relied upon audit work conducted by the CPA firm of KPMG, LLP, which determined that most Red Cross expenses were incurred for eligible disaster services and were supported by adequate documentation. However, KPMG identified six weaknesses in the Red Cross's internal controls related to expenses incurred for the four hurricanes and reported $712,000 of known questioned costs, with which Red Cross concurred. The Red Cross also concurred with the content of the GAO report.