GAO-15-404SP: Social services: 24. Disaster Relief Fund Administrative Costs

Social services > 24. Disaster Relief Fund Administrative Costs

Cost savings of millions of dollars could be realized if Federal Emergency Management Agency officials enhance their oversight of the agency’s administrative costs obligated from the Disaster Relief Fund for major disasters.

Why This Area Is Important

Presidents declared 650 major disasters during the 10 fiscal years from 2004 through 2013, which was 32 percent more than the 494 major disasters declared during the preceding 10 fiscal years. This growth in major disaster declarations has led to increased federal obligations, including increased administrative costs from the Federal Emergency Management Agency's (FEMA) Disaster Relief Fund (DRF). For each major disaster, FEMA obligates funds from the DRF to cover its administrative costs—that is, costs that support the delivery of disaster assistance. Examples of FEMA administrative costs include the salary and travel costs for the disaster workforce, rent and security expenses associated with field operation locations, and supplies and information technology for field operation staff. 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.

What GAO Found

In December 2014, GAO reported that FEMA’s average annual administrative cost percentage (i.e., the percentage of total costs devoted to administrative costs) for major disasters had doubled since fiscal year 1989. As shown in the figure below, FEMA’s average administrative cost percentage was 18 percent in fiscal year 2013 compared to an average of 7 percent in fiscal year 1989.[1]

Average Annual Administrative Cost Percentages for 1,332 Major Disasters Declared during Fiscal Years 1989 through 2013

Average Annual Administrative Cost Percentages for 1,332 Major Disasters Declared during Fiscal Years 1989 through 2013

GAO further reported that, since fiscal year 2010, FEMA officials have taken actions intended to better manage and control the agency’s administrative costs for major disasters. For example, in November 2010, the FEMA Administrator issued guidance to managers responsible for overseeing administrative costs that included best practices for determining staffing levels for field operations.[2] However, since fiscal year 2010 there has not been a significant decrease in FEMA’s administrative costs. As discussed below, in past reports GAO identified some steps FEMA officials could take to more efficiently and effectively meet the agency’s goals to reduce and better control administrative costs for major disasters.

Administrative Cost Goals. In September 2012, GAO reported that FEMA’s November 2010 management guide included target ranges for administrative cost percentages—for example, small disasters have an administrative cost percentage target range of 12 percent to 20 percent.[3] However, the agency does not consider the targets formal guidance and does not hold its officials accountable for meeting the targets. FEMA did not require that the targets be met because, according to FEMA officials, the agency’s intent was to provide general guidance rather than to stipulate a prescriptive policy or formula. GAO further reported that, according to FEMA’s strategic plan, the agency’s ability to analyze and evaluate the results of its plans, programs, and organizational initiatives is key to managing its strategic and long-range organizational goals. To help FEMA control its administrative costs, GAO recommended that FEMA implement goals for administrative cost percentages and monitor performance to achieve these goals. In July 2014, FEMA issued its Strategic Plan for 2014-2018, which includes a goal to reduce its average annual percentage of administrative costs, as compared with total program costs, by 5 percentage points, by the end of 2018.  According to FEMA officials, the goal to reduce FEMA’s administrative costs reflects its importance to FEMA.  In February 2015, FEMA reported that they are in the process of implementing GAO’s recommendation and plan to provide GAO an update by March 31, 2015.

Based on GAO’s analyses in December 2014, had FEMA met its target range for the 650 major disasters declared during fiscal years 2004 through 2013, the agency’s administrative cost obligations could have been reduced by between $2.3 billion and $5.1 billion. Had FEMA met its target range for the 209 major disasters declared during fiscal years 2011 through 2013—that is, the period since FEMA created its administrative cost targets—the agency’s administrative cost obligations could have been reduced by between $312 million and $841 million.[4] FEMA did not develop the target ranges until November 2010, and FEMA does not require its officials to stay within or below the target ranges. As a result, these amounts do not indicate the amount that FEMA could have saved during this period. Rather, these amounts can be used as an indication of the magnitude of potential cost savings in the future if the target ranges are met.

Integrated Plan. In December 2014, GAO reported that FEMA officials provided information on several ongoing efforts to reduce and better control its administrative costs, such as the November 2010 management guide. However, according to FEMA officials, they had not at that time developed a plan that integrates the steps they are taking to better control and reduce costs, and that highlights clear roles and responsibilities, performance metrics, milestones, and a monitoring system to assess their progress. According to the Project Management Institute’s A Guide to the Project Management Body of Knowledge, which provides standards for project managers, specific goals and objectives should be conceptualized, defined, and documented in the planning process, along with the appropriate steps, time frames, and milestones needed to achieve those results.[5] Until FEMA creates a plan that integrates its initiatives, FEMA will continue to lack assurance that it has an effective and efficient plan for reaching its goals to better control and reduce costs.

In addition, according to FEMA officials, the agency has not designated an office or senior officials accountable for controlling administrative costs. For example, FEMA officials highlighted that it was unclear who had authority and responsibility to monitor and question staffing levels, even though staffing is the largest driver of administrative costs. According to the Standards for Internal Control in the Federal Government, managers should compare actual performance to planned or expected results throughout the organization and analyze significant differences; it also states that an agency’s organizational structure should clearly define key areas of authority and responsibility and establish appropriate lines of reporting.[6] As part of an integrated plan, designating an office or senior official with sufficient time, responsibility, authority, and resources can help improve FEMA’s accountability and progress.

Tracking Administrative Costs. In December 2014, GAO reported that FEMA does not track or analyze its administrative costs for major disasters by individual DRF program—including Public Assistance, Individual Assistance, and Hazard Mitigation.[7] For example, FEMA could tell GAO how much it obligated for its 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. Without administrative cost data by program, neither GAO nor FEMA can determine whether increases in administrative cost percentages since fiscal year 1989 were greater for one program than for another, or greater for certain components, such as staffing for a particular DRF program.

According to FEMA officials, gathering administrative cost data by DRF program would require additional resources and technical changes; however, the agency has not assessed the costs versus the benefits of tracking the data. FEMA officials stated that assessing the costs and benefits would be helpful, and they agreed that administrative costs should be tracked by program. According to Standards for Internal Control in the Federal Government, program managers need financial data to determine whether they are meeting their goals for accountability for effective and efficient use of resources. Further, FEMA’s 2014-2018 Strategic Plan emphasizes the need for data-driven decision making.[8] By assessing the costs and benefits of tracking administrative cost data by DRF programs, FEMA could determine whether such data could be useful for identifying long-term trends, controlling its administrative costs, and better tailoring its administrative costs to program delivery.



[1] GAO calculated a major disaster’s administrative cost percentage by dividing FEMA’s administrative cost obligations by total obligations for the disaster. The annual average administrative cost percentage is the average of the administrative cost percentages of disasters that were declared during that fiscal year.

[2] FEMA, Achieving Efficient JFO Operations: A Guide for Managing Staffing Levels and Administrative Costs (Washington, D.C.: November 2010).

[3] According to the management guide, FEMA categorizes major disasters using three event levels—essentially small, medium, or large—based on the amount of federal funding obligated for disaster assistance. Large disasters have projected disaster assistance of $500 million to $5 billion, medium disasters have projected disaster assistance from $50 million to $500 million, and small disasters have projected disaster assistance of less than $50 million.

[4] According to the management guide, small disasters have an administrative cost percentage target range of 12 percent to 20 percent. Medium disasters have an administrative cost percentage target range of 9 percent to 15 percent. Large disasters have an administrative cost percentage target range of 8 percent to 12 percent.

[5] Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition (Newtown Square, Pennsylvania: 2013). GAO has used A Guide to the Project Management Body of Knowledge to provide criteria in previous reports, including GAO, Nonproliferation and Disarmament Fund: State Should Better Assure the Effective Use of Program Authorities, GAO‑13‑83 (Washington, D.C.: Nov. 30, 2012).

[7] The Individual Assistance program provides for the necessary expenses and serious needs of disaster victims that cannot be met through insurance or low-interest Small Business Administration loans. For example, FEMA may provide temporary housing assistance, counseling, unemployment compensation, or medical expenses incurred as a result of a disaster. The Public Assistance program provides for debris removal; emergency protective measures; and the repair, replacement, or restoration of disaster-damaged, publicly owned facilities and the facilities of certain private nonprofit organizations that provide services otherwise performed by a government agency. Hazard Mitigation provides additional funds to states to assist communities in implementing long-term measures to help reduce the potential risk of future damages to facilities.

[8] FEMA, FEMA Strategic Plan 2014-2018 (July 2014).

Actions Needed

GAO recommended in September 2012 that the FEMA Administrator take the following action:

  • Implement goals for administrative cost percentages and monitor performance to achieve these goals.

GAO recommended in December 2014 that the FEMA Administrator take the following actions:

  • Develop an integrated plan to better control and reduce FEMA’s administrative costs for major disasters. The plan should include steps the agency will take to reduce administrative costs, milestones for accomplishing the reduction, and clear roles and responsibilities, including the assignment of senior officials or offices responsible for monitoring and measuring performance.
     
  • Assess the costs versus the benefits of tracking FEMA’s administrative cost data for major disasters by Public Assistance, Individual Assistance, Hazard Mitigation, and Mission Assignment, and if feasible, track this information.

FEMA may realize cost savings by increasing the efficiency and effectiveness of processes related to administrative costs for major disasters. However, a precise estimate of cost savings cannot be quantified because GAO’s recommendations provided FEMA discretion in how it implements the recommendations. For example, GAO recommended that FEMA implement goals for administrative cost percentages, but GAO did not recommend specific goals. Therefore, it would be difficult for GAO to quantify potential cost savings from this recommendation.

How GAO Conducted Its Work

The information contained in the analysis is based on findings from products listed in the related GAO products section. GAO obtained and analyzed FEMA’s obligations data for major disasters; interviewed officials from FEMA’s Office of Chief Financial Officer and the Office of Response and Recovery; and obtained and analyzed FEMA policies, procedures, and guidance specific to administrative costs.

Table 18 in appendix V lists the programs GAO identified that might have opportunities for cost savings.

Agency Comments & GAO Contact

In commenting on the December 2014 report on which this analysis is based, FEMA concurred with our recommendations and described planned actions to address them. GAO also provided a draft of this report section to FEMA for review and comment. In commenting on this report, FEMA stated that reducing administrative costs is a priority to the agency as reflected in its Strategic Plan for 2014-2018, and by its actions underway to address GAO’s recommendations.

For additional information about this area, contact Chris Currie at (404) 679-1875 or curriec@gao.gov.

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