National Flood Insurance Program: Financial Challenges Underscore Need for Improved Oversight of Mitigation Programs and Key Contracts
GAO-08-437
Published: Jun 16, 2008. Publicly Released: Jul 16, 2008.
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Highlights
The Federal Emergency Management Agency (FEMA) and its contractors administer and implement the National Flood Insurance Program (NFIP). GAO designated NFIP as a high-risk area in March 2006, and as of December 2007, FEMA owed more than $17.3 billion to the Treasury for hurricane-related losses. Concerns have been raised about the financial condition of NFIP and FEMA's efforts to mitigate losses and monitor NFIP contractors. This report (1) describes statistical and financial trends for NFIP from 1997 through 2006, (2) assesses the extent to which flood-damaged properties were purchased to mitigate risk, and (3) evaluates procedures for monitoring NFIP-related contracts. For this study, GAO analyzed financial and statistical data on the NFIP and its mitigation programs, reviewed documentation of contract monitoring activities, and interviewed FEMA officials and contractors.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Homeland Security | To more accurately track the extent to which flood-prone properties are acquired, the Secretary of Homeland Security should establish written guidance for FEMA regional offices to better ensure consistent and timely recording of property acquisition data. |
Closed – Implemented
In July 2013, FEMA issued guidance for its regional offices to help ensure the consistent and timely recording of property acquisition data. This guidance became effective in January 2014 and was updated in April 2015. In December 2015, FEMA provided documentation that this guidance was being implemented. Specifically, FEMA provided examples of quarterly reports submitted by the regions, demonstrating adherence to the acquisition recording requirement.
|
| Department of Homeland Security | To more accurately track the extent to which flood-prone properties are acquired, the Secretary of Homeland Security should establish a means to track real-time property acquisitions for NFIP-funded mitigation programs. |
Closed – Implemented
In July 2013, FEMA issued guidance that stated that property acquisition information should be reported to FEMA through quarterly performance reports. The requirement for FEMA's regional offices to follow this procedure became effective in January 2014. In June 2014, we requested that FEMA provide information on whether the agency had established a means to track the property acquisition data being collected through quarterly reports. In February 2015, FEMA noted that regional offices should use a system called Portfolio Manager to store and track this information. In December 2015, FEMA provided documentation that regional offices are updating acquisition data in Portfolio Manager on a quarterly basis.
|
| Department of Homeland Security | To ensure more effective oversight of contractors performing key NFIP data collection, reporting, and insurance functions, the Secretary of Homeland Security should implement a process to ensure that monitoring reports are submitted on time and systematically reviewed by the Contract Officer's Technical Representative (COTR) and the Program Management Office and copies of monitoring reports are retained in a quality assurance file, as directed by the contract. |
Closed – Implemented
In April 2012, FEMA officials provided documentation showing they implemented a process to collect and review monthly contract monitoring reports. Officials also provided documentation of the current roles and responsibilities of the Contracting Officer's Technical Representative (COTR) and the Program Management Office (PMO)in submitting and reviewing these reports. Further, GAO staff physically observed FEMA officials demonstrating the functionality of an information system that retains the reports.
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| Department of Homeland Security | To ensure more effective oversight of contractors performing key NFIP data collection, reporting, and insurance functions, the Secretary of Homeland Security should ensure that FEMA staff clearly monitor each performance standard that the contractor is required to meet in the time frames required by contract and that FEMA staff clearly link monitoring reports and performance areas. |
Closed – Implemented
FEMA officials provided evidence that FEMA staff are clearly monitoring each performance standard for selected NFIP contracts. The monitoring reports provided to GAO indicate that the FEMA officials with responsibility for monitoring contracts are completing monitoring reports and uploading them into an information system in a timely manner. In addition, the monitoring reports explicitly indicate whether specific performance standards were met. GAO staff physically viewed the information system, and verified that monitoring reports are uploaded and maintained in this system.
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| Department of Homeland Security | To ensure more effective oversight of contractors performing key NFIP data collection, reporting, and insurance functions, the Secretary of Homeland Security should ensure implementation of written guidance for all NFIP-related contracts on how to consistently handle the failure of a contractor to meet standards in performance areas and establish written policies and procedures about the coordination between FEMA officials and offices (including the COTR, the Program Management Office, and the Contracting Officer) when addressing contractor deficiencies, including determining whether and under what circumstances to issue discrepancy reports, and ensuring that financial disincentives are appropriately and consistently applied. |
Closed – Implemented
FEMA officials provided documentation of their current Discrepancy Reporting Procedures, dated September 2011. The officials also provided evidence of following these procedures. Specifically, they provided documentation of a contract discrepancy, having appropriate officials complete and sign-off as required by reporting procedures, and taking actions (implementing a financial penalty) based upon contractual agreements.
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Claims processingClaims settlementContract oversightContractorsData integrityFlood insuranceFloodsHurricanesInformation managementInsurance claimsInsurance premiumsInternal controlsMonitoringNatural disastersPerformance measuresPolicy evaluationProcurement policyProcurement regulationsProgram evaluationProgram managementProperty damage claimsProperty lossesRecords managementRisk managementDisaster mitigationContract mismanagementPolicies and procedures