Homeland Security Grants:

Observations on Process DHS Used to Allocate Funds to Selected Urban Areas

GAO-07-381R: Published: Feb 7, 2007. Publicly Released: Feb 7, 2007.

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In fiscal year 2006, the Department of Homeland Security (DHS) provided approximately $1.7 billion in federal funding to states, localities, and territories through its Homeland Security Grant Program (HSGP) to prevent, protect against, respond to, and recover from acts of terrorism or other catastrophic events. The Urban Areas Security Initiative (UASI) is a discretionary grant under this program, and since fiscal year 2003, Congress has directed DHS to target UASI funding to high-threat, high-density urban areas to assist in building capacity. To meet this requirement and inform funding decisions, DHS developed a method to estimate the relative risk of terrorist attacks to urban areas. From fiscal year 2003 through 2005, DHS used a number of risk indicators such as population density and threat to allocate UASI funds. UASI funding increased during this period from about $96 million to $830 million, while the number of urban areas that received grants grew from 7 to 43. In fiscal year 2006, DHS awarded approximately $711 million in UASI grants--a 14 percent reduction in funds from the previous year--while the number of eligible urban areas identified by the risk assessment decreased to 35. For fiscal year 2006, DHS made several changes to the grant allocation process, including modifying its risk assessment methodology, introducing an assessment of the anticipated effectiveness of investments, and combining the outcomes of these two assessments to inform funding decisions. The results of the UASI eligibility and funding allocations in fiscal year 2006 raised congressional questions and concerns about DHS's methods in making UASI determinations. Several congressional members requested that we examine aspects of DHS's UASI funding process, and the fiscal year 2007 DHS Appropriations Act directed us to examine the validity, relevance, reliability, timeliness, and availability of the risk factors (including threat, vulnerability, and consequence) used by the Secretary of Homeland Security for the purpose of allocating discretionary grants. On November 17, 2006, we responded to the mandate and the request by briefing congressional staff on the results of this review. We specifically examined (1) DHS's method of estimating relative risk of terrorism in fiscal year 2006; (2) DHS's process for assessing the effectiveness of the various risk mitigation investments submitted in UASI applications; (3) how DHS used estimated relative risk scores and assessments of effectiveness to allocate UASI grant funds in fiscal year 2006; and (4) what changes, if any, DHS plans to make in its UASI award determination process for fiscal year 2007.

In fiscal year 2006, DHS used its risk assessment to identify urban areas that faced the greatest potential risk, which made them eligible to apply for the UASI grant, and based the amount of awards to all eligible areas primarily on the outcomes of the risk assessment and a new effectiveness assessment. DHS enhanced its risk assessment by including three components--threat, vulnerability, and consequences--to estimate the relative risk of successful terrorist attacks to urban areas. The risk assessment was used to inform DHS's selection of eligible urban areas. DHS also implemented a competitive process to evaluate the anticipated effectiveness of proposed investments to address homeland security needs by using peer reviewers, who were homeland security professionals from fields such as law enforcement and fire service. The peer reviewers scored the investments using criteria, such as regionalization, sustainability, and impact. According to DHS, it combined the outcomes of the risk and effectiveness assessments to inform the funding allocation decisions in fiscal year 2006, but the Secretary of Homeland Security made the final UASI grant decisions. Officials also reported no significant changes to the risk assessment process for next year's grant cycle, but other decisions, such as the identification of eligible urban areas through the risk assessment and how much weight risk and effectiveness will be given in determining amounts, have yet to be made. For the first time since the inception of the program, DHS required urban areas to submit investment justifications as part of their grant application, so it could assess the anticipated effectiveness of the various risk mitigation investments urban areas proposed. The investment justifications included up to 15 "investments" or proposed solutions to address homeland security needs, identified by the states and urban areas through their strategic planning process. DHS used peer reviewers to assess the investments submitted by the 46 urban areas. DHS and the states collaborated to identify and select these peer reviewers who were homeland security professionals and managers from disciplines such as law enforcement, fire service, and emergency communications. According to DHS, it arranged 17 peer review panels that included reviewers from a variety of professions, all levels of government, and representatives from different regions of the country and from both large- and small-population states. These reviewers evaluated, discussed, and scored the urban areas' investment justifications, initially on an individual basis, then in panels. The risk and effectiveness scores did not automatically translate into funding amounts, but rather, the scores informed funding decisions, according to DHS. While all eligible urban areas that applied for UASI grants would receiving funding, DHS had to prioritize how funds would be allocated. DHS prioritized those areas estimated to have the highest risk of a successful terrorist attack, while still rewarding those areas that proposed ways to address homeland security needs that were anticipated to be effective. DHS used the combined scores to assign the 46 eligible urban areas into four categories. DHS officials said that they made the decision to give Category I the highest funding priority and Category IV the lowest funding priority. Once the amounts for each category were decided, DHS used a formula to determine the grant award for each urban area, giving the risk score a weight of 2/3 and the effectiveness score a weight of 1/3. According to DHS, these weights reflect its decision to prioritize risk over effectiveness. DHS officials reported presenting funding options to the Secretary of Homeland Security, who made the final decision about funding allocations. The final funding decision resulted in 70 percent of UASI funding going to "higher risk" candidates in Categories I and II.

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