This is the accessible text file for GAO report number GAO-05-514 
entitled 'Federal Emergency Management Agency: Crisis Counseling Grants 
Awarded to the State of New York after the September 11 Terrorist 
Attacks' which was released on July 1, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, such 
as text descriptions of tables, consecutively numbered footnotes placed 
at the end of the file, and the text of agency comment letters, are 
provided but may not exactly duplicate the presentation or format of 
the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Requesters: 

May 2005: 

Federal Emergency Management Agency: 

Crisis Counseling Grants Awarded to the State of New York after the 
September 11 Terrorist Attacks: 

GAO-05-514: 

GAO Highlights: 

Highlights of GAO-05-514, a report to congressional requesters: 

Why GAO Did This Study: 

To help alleviate the psychological distress caused by the
 September 11, 2001, attacks the Federal Emergency Management Agency 
(FEMA) awarded the state of New York two grants totaling $154.9 million 
to provide crisis counseling and public education. Because of questions 
about whether the program, called Project Liberty, had spent all the 
funds it received from the federal government, GAO was asked to 
determine (1) the extent to which the program expended the funds 
awarded from the federal government, (2) whether the federal government 
had an effective process in place to determine the amount of funds to 
provide the program, (3) whether the federal government had adequate 
financial oversight of the program, and (4) steps taken by the federal 
government and New York State to assess the program’s effectiveness.

What GAO Found: 

For the period September 11, 2001, through September 30, 2004, Project 
Liberty reported that it had expended approximately $121 million, or 
three-quarters of the $154.9 million in grants awarded by FEMA, leaving 
a remaining balance of $33.9 million. The majority of the remaining 
balance, approximately $32 million, related to unresolved issues 
involving the adequacy of supporting documentation for the New York 
City Department of Education’s (NYC DOEd) expense claims. As of March 
31, 2005, city and state officials told GAO they had accepted 
alternative forms of supporting evidence related to $5.2 million in NYC 
DOEd expenses; however, this alternative evidence provides only limited 
assurance of the propriety of the claimed amounts. It is unclear 
whether similar alternative sources of evidence will be accepted for 
the remaining $26.8 million in NYC DOEd expense claims.

FEMA assisted state officials in developing estimated funding needs for 
Project Liberty immediately after the terrorist attacks. By necessity, 
these initial budgets were developed using estimates established during 
the initial stages of the disaster. However, FEMA never required 
Project Liberty to prepare adjusted budgets to reflect new information 
or subsequent changes to the program. As a result, FEMA did not have 
realistic budget information to assess how city and state officials 
were planning to spend Project Liberty grant funds.

FEMA assigned primary responsibility for oversight and monitoring to 
the Substance Abuse and Mental Health Services Administration (SAMHSA) 
through an interagency agreement. Although SAMHSA had procedures in 
place to monitor Project Liberty’s delivery of services, it performed 
only limited monitoring of financial information reported by Project 
Liberty about the cost of those services. For example, while SAMHSA 
received periodic financial reports from Project Liberty, it did not 
perform basic analyses of expenditures in order to obtain a specific 
understanding of how the grant funds were being used and, as noted 
above, did not have updated budget information to gauge how actual 
spending compared to budgets. As a result, SAMHSA was not in a position 
to exercise a reasonable level of oversight to ensure that funds were 
being used efficiently and effectively in addressing the needs of those 
affected by the September 11 attacks.

Both the state of New York and the federal government have taken steps 
to assess how Project Liberty delivered services. These assessments 
were ongoing as of March 2005. FEMA plans to consider lessons learned 
from Project Liberty when conducting its own internal review of the 
crisis counseling program.

What GAO Recommends: 

GAO makes eight recommendations to (1) help ensure proper and timely 
expenditure of the remaining grant funds, (2) strengthen federal 
financial oversight of future crisis counseling program grants, and 
(3) help ensure that lessons learned from Project Liberty will be used 
to help improve future crisis counseling programs. FEMA and SAMHSA 
generally concurred with GAO’s recommendations, but took issue with our 
characterization of SAMHSA’s oversight.

www.gao.gov/cgi-bin/getrpt?GAO-05-514.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Linda Calbom at (202) 512-
8341 or calboml@gao.gov.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

Remaining Grant Funds Primarily Relate to Unresolved Issues at NYC 
DOEd: 

Improvements Needed in the Process for Determining Federal Funding: 

Federal Oversight of Project Liberty's Financial Information Was 
Limited: 

Assessments of Project Liberty Ongoing: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Organizations Contacted: 

Appendix II: Comments from the Department of Homeland Security: 

Appendix III: Comments from the Substance Abuse and Mental Health 
Services Administration: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Reported CCP Grant Activity for Project Liberty from September 
11, 2001, through September 30, 2004: 

Table 2: Comparison of Project Liberty's RSP Reported Expenditures to 
Budget from June 14, 2002, through September 30, 2004: 

Figures: 

Figure 1: New York Areas Serviced by Project Liberty: 

Figure 2: Organizational Structure of Project Liberty: 

Figure 3: Key Milestones for Project Liberty: 

Figure 4: Flow of Funds for Project Liberty: 

Figure 5: Claim Review and Approval Process for Project Liberty: 

Figure 6: Project Liberty's Total CCP Grant Awards and Reported 
Expenditures for the Period September 11, 2001, through September 30, 
2004: 

Figure 7: ISP and RSP Application Processes for Project Liberty: 

Abbreviations: 

CCP: Crisis Counseling Assistance and Training Program: 

CMHS: Center for Mental Health Services: 

DHS: Department of Homeland Security: 

FEMA: Federal Emergency Management Agency: 

HHS: Department of Health and Human Services: 

ISP: Immediate Services Program: 

NCPTSD: National Center for Post-Traumatic Stress Disorder: 

NYAM: New York Academy of Medicine: 

NYC DOEd: New York City Department of Education: 

NYC DOHMH: New York City Department of Health and Mental Hygiene: 

NYS OMH: New York State Office of Mental Health: 

RFMH: Research Foundation for Mental Hygiene, Inc. 

RSP: Regular Services Program: 

SAMHSA: Substance Abuse and Mental Health Services Administration: 

Letter May 31, 2005: 

The Honorable Christopher Shays: 
Chairman, Subcommittee on National Security, Emerging Threats and 
International Relations: 
Committee on Government Reform: 
House of Representatives: 

The Honorable Carolyn B. Maloney: 
House of Representatives: 

To help alleviate the psychological distress in the New York City area 
caused by terrorist attacks on September 11, 2001, the Federal 
Emergency Management Agency (FEMA)[Footnote 1] awarded the state of New 
York two grants totaling $154.9 million to provide crisis counseling 
and public education services.[Footnote 2] Specifically, FEMA awarded 
the state of New York $22.7 million for an Immediate Services Program 
(ISP) on September 24, 2001,[Footnote 3] with subsequent amendments 
bringing the ISP total to $22.8 million. In addition, FEMA awarded the 
state of New York $132.1 million for a Regular Services Program (RSP) 
on June 14, 2002. 

The state of New York operated the crisis counseling and public 
education program under the name Project Liberty. Project Liberty was 
funded under FEMA's Crisis Counseling Assistance and Training Program 
(CCP), which is an individual assistance program authorized by the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act 
(Stafford Act).[Footnote 4] The CCP is administered by FEMA and its 
federal partner, the Substance Abuse and Mental Health Services 
Administration (SAMHSA), an agency of the Department of Health and 
Human Services (HHS) responsible for improving the quality and 
availability of mental health services. Although all crisis counseling 
services for the general public had been phased out by December 31, 
2003, Project Liberty continued to provide these services to New York 
City firefighters and schoolchildren through December 31, 2004. 

Because of concerns that Project Liberty may be discontinuing services 
without having spent all of the funds it received from the federal 
government to assist in providing crisis counseling and public 
education following the September 11 terrorist attacks, you requested 
that we review and report on the use of funds given to the state of New 
York by the federal government for crisis counseling services. In 
response to this request, we reviewed the use of funds given to the 
state of New York by the federal government by determining (1) the 
extent to which Project Liberty expended the funds awarded from the 
federal government, (2) whether the federal government had an effective 
process in place to determine the amount of funds to provide Project 
Liberty, (3) whether the federal government had adequate financial 
oversight of Project Liberty, and (4) steps taken by the federal 
government and the state of New York to assess the effectiveness of the 
program in meeting stated objectives and the results of these 
assessments. 

To address these objectives, we (1) reviewed documentation relating to 
the expenditure of Project Liberty funds through September 30, 2004, 
the most recent data available as of March 31, 2005, the end of our 
fieldwork, and found it sufficiently reliable for the purpose of this 
report; (2) reviewed the grant applications and correspondence used to 
determine funding; (3) assessed the sufficiency of the federal 
government's financial oversight of Project Liberty in light of GAO's 
Standards for Internal Control in the Federal Government;[Footnote 5] 
and (4) reviewed assessments of Project Liberty. We performed our work 
from July 2004 through March 2005 in accordance with generally accepted 
government auditing standards. Our scope and methodology are discussed 
in greater detail in appendix I. 

We requested written comments on a draft of this report from the 
Secretary of Homeland Security. We received written comments from DHS. 
The DHS comments (reprinted in appendix II) incorporate by reference a 
letter from SAMHSA to FEMA commenting on the draft (reprinted in 
appendix III). We also provided excerpts of a draft report for 
technical comment to the New York State Office of Mental Health (NYS 
OMH), the New York City Department of Health and Mental Hygiene (NYC 
DOHMH), and the New York City Department of Education (NYC DOEd). NYS 
OMH technical comments and the coordinated NYC DOHMH and NYC DOEd 
technical comments were incorporated as appropriate. 

Results in Brief: 

For the period September 11, 2001, through September 30, 2004, Project 
Liberty reported that it had expended[Footnote 6] approximately $121 
million, or three-quarters of the $154.9 million in grants awarded by 
FEMA, leaving a remaining balance of $33.9 million. The majority of the 
remaining balance, approximately $32 million, related to unresolved 
issues involving the adequacy of supporting documentation for NYC 
DOEd's expense claims. According to NYS OMH, NYC DOEd had not been 
fully reimbursed for the Project Liberty expenses it incurred 
throughout the program because NYC DOEd had not been able to provide 
support for these expenses that met the CCP documentation standards for 
reimbursement under federal grants. NYS OMH has been working with NYC 
DOEd to develop alternative forms of support, including internal 
control summary memos prepared by NYC DOEd, as a basis to pay NYC 
DOEd's expense claims. As of March 31, 2005, NYS OMH had paid $5.2 
million of NYC DOEd expense claims based on such alternative support. 
However, this type of indirect supporting evidence provides only 
limited assurance of the propriety of claimed amounts, and it is 
unclear whether it will also be used to justify payment for the 
remaining NYC DOEd expense claims. 

FEMA had processes in place to assist New York in preparing its grant 
applications and determining the level of funding for Project Liberty 
immediately after the September 11 terrorist attacks. Because FEMA's 
processes for determining funding are designed to be implemented 
quickly after a presidential disaster declaration, the state of New 
York's ISP and RSP grant applications were developed during the initial 
dynamic stage of the recovery effort when damage reports were 
continuing to be updated and response plans were still being 
formulated. The budgets included in the grant applications were 
developed using estimates established during the initial stages of the 
disaster. Although the budgets submitted with the grant applications 
were revised by the grantee to satisfy certain conditions of grant 
award, FEMA and SAMHSA never required Project Liberty to formally 
submit revised budget requests to reflect new information and 
subsequent changes to the program. As a result, FEMA and SAMHSA did not 
have realistic budget information that could be used to effectively 
assess how city and state officials were planning to spend Project 
Liberty grant funds. 

While SAMHSA did have procedures in place to monitor Project Liberty's 
delivery of services, it did not have procedures in place to 
effectively monitor financial information reported by Project Liberty 
about the cost of those services. SAMHSA's limited financial oversight 
of Project Liberty was driven in part by its assessment that the 
program was not high risk, but this assessment did not fully consider 
the magnitude, complexity, and unique nature of the program and was not 
revisited even after significant program changes occurred. As a result, 
SAMHSA was not in a position to exercise a reasonable level of 
oversight to ensure that funds were used efficiently and effectively in 
addressing the needs of those affected by the September 11 terrorist 
attacks. 

Both the state of New York and the federal government have taken steps 
to assess how Project Liberty delivered services. NYS OMH undertook its 
own assessment of Project Liberty and partnered with the New York 
Academy of Medicine (NYAM) to obtain information from telephone 
surveys. SAMHSA contracted with the National Center for Post-Traumatic 
Stress Disorder (NCPTSD), a center within the Department of Veterans 
Affairs, to conduct a case study of New York's response to the 
terrorist attacks on September 11, with a primary focus on Project 
Liberty. Both NYS OMH and NCPTSD's overall assessments of the program 
were ongoing as of March 2005. FEMA plans to consider lessons learned 
from NYS OMH and NCPTSD when conducting its own internal review of the 
CCP. 

To improve accountability for federal grant funds, this report makes 
recommendations for FEMA to work with SAMHSA to (1) help ensure proper 
and timely expenditure of the remaining grant funds, (2) strengthen 
federal financial oversight of future CCP grants, and (3) help ensure 
that lessons learned from Project Liberty will be used to improve 
future programs funded by the CCP. 

In commenting on a draft of this report, DHS and SAMHSA generally 
agreed with our recommendations. However DHS stated that we should give 
more weight to the unprecedented conditions that led to Project 
Liberty, and that it was these unique circumstances that led to our 
findings and recommendations. SAMHSA took issue with our 
characterization of SAMHSA oversight and stated that overall, the 
federal oversight of Project Liberty was appropriate, reasonable, and 
responsive to state and local needs. Our report clearly acknowledges 
the unprecedented circumstances that led to the establishment of 
Project Liberty--it was these very circumstances that led us to 
conclude that Project Liberty required a higher level of federal 
oversight than was provided by SAMHSA. 

Background: 

Following the terrorist attacks on September 11, 2001, the President 
signed under the authority of the Stafford Act a major disaster 
declaration for the state of New York. The presidential declaration 
allowed the state of New York to apply for federal assistance to help 
recover from the disaster. FEMA was responsible for coordinating the 
federal response to the September 11 terrorist attacks and providing 
assistance through a variety of programs, including the CCP. The CCP 
was authorized in section 416 of the Stafford Act to help alleviate the 
psychological distress caused or aggravated by disasters declared 
eligible for federal assistance by the President. Through the CCP, FEMA 
released federal grant awards to supplement the state of New York's 
ability to respond to the psychological distress caused by the 
September 11 terrorist attacks through the provision of short-term 
crisis counseling services to victims and training for crisis 
counselors. 

FEMA relied on SAMHSA to provide expertise related to crisis counseling 
and public education for Project Liberty. FEMA assigns SAMHSA's 
responsibilities for the CCP through an annual interagency agreement. 
These responsibilities included, among other things, providing 
technical assistance, monitoring the progress of programs conducted 
under the CCP, and performing program oversight. Within SAMHSA, the 
Center for Mental Health Services (CMHS) carried out these 
responsibilities for Project Liberty. CMHS received support from 
SAMHSA's Division of Grants Management, which provides grant oversight. 

NYS OMH established Project Liberty under the CCP to offer crisis 
counseling and public education services throughout the five boroughs 
of New York City and 10 surrounding counties free of charge to anyone 
affected by the World Trade Center disaster and its aftermath. The 
areas served by Project Liberty are shown in the shaded areas of figure 
1. 

Figure 1: New York Areas Serviced by Project Liberty: 

[See PDF for image] 

[End of figure] 

The state of New York's primary role was to administer, oversee, and 
guide Project Liberty's program design, implementation, and evaluation 
and pay service providers, but not to provide services itself. New York 
City and the surrounding counties contracted with over 200 service 
providers and were responsible for overseeing day-to-day activities. 
Figure 2 shows the organization structure of Project Liberty at the 
federal, state, and local levels. 

Figure 2: Organizational Structure of Project Liberty: 

[See PDF for image] 

[End of figure] 

Under the CCP, Project Liberty's goal was to serve New York City and 
the 10 surrounding counties by assisting those affected by the 
September 11 terrorist attacks to recover from their psychological 
reactions and regain predisaster level of functioning. The CCP supports 
services that are short-term interventions with individuals and groups 
experiencing psychological reactions to a presidentially declared 
disaster and its aftermath. Crisis counseling services were primarily 
delivered to disaster survivors through outreach, or face-to-face 
contact with survivors in familiar settings (e.g., neighborhoods, 
churches, community centers, and schools). Although the CCP does not 
support long-term, formal mental health services such as medications, 
office-based therapy, diagnostic services, psychiatric treatment, or 
substance abuse treatment, FEMA approved an enhanced services program 
for Project Liberty. This enhanced services program allowed for an 
expansion of services, including enhanced screening methods; a broader 
array of brief counseling approaches; and additional training, 
technical assistance, and supervision to a set of service providers. 
These enhanced services were intended to address the needs of 
individuals who continued to experience trauma symptoms and functional 
impairment after initial crisis counseling but did not need long-term 
mental health services. 

Project Liberty was funded through two separate, but related, grant 
programs: the ISP and RSP. The ISP grant was designed to fund Project 
Liberty for the first 60 days following the disaster declaration. 
Because there was a continuing need for crisis counseling services, the 
ISP was extended to last about 9 months, until the RSP began. The RSP 
grant was awarded and was designed to continue to provide funding for 
an additional 9 months of crisis counseling services, but was extended 
to last for 2 ½ years.[Footnote 7] Figure 3 shows key milestones for 
Project Liberty. 

Figure 3: Key Milestones for Project Liberty: 

[See PDF for image] 

[A] According to SAMHSA officials, there have been discussions about 
extending the closeout for Project Liberty through September 30, 2005. 

[End of figure] 

For the approved ISP application, FEMA made funds available directly to 
the state. Under the RSP, after approval, funds were transferred from 
FEMA to SAMHSA, which awarded the grant to the state of New York 
through SAMHSA's grants management process. The state of New York, in 
turn, disbursed funds to the service providers and local governments 
through the Research Foundation for Mental Hygiene, Inc. (RFMH), a not- 
for-profit corporation affiliated with the state of New York that 
assists with financial management of federal and other grants awarded 
to NYS OMH. Figure 4 shows the flow of funds for Project Liberty's ISP 
and RSP. 

Figure 4: Flow of Funds for Project Liberty: 

[See PDF for image] 

[End of figure] 

Service providers were required to submit claims and supporting 
documentation to receive reimbursement for expenses incurred to provide 
services. As shown in figure 5, these claims were to have multiple 
levels of review to determine whether the expenses claimed were 
allowable under the CCP's fiscal guidelines. This review structure, 
which placed primary responsibility for reviewing claims on the local 
government units, was based on the state of New York's existing grant 
management policies. Additional controls for Project Liberty included 
(1) NYS OMH site visits to service providers in New York City and 
surrounding counties; (2) closeout audits by independent auditors of 
certain New York City service providers to test whether claims were 
documented and allowable; and (3) annual audits of New York City and 
surrounding counties conducted under the Single Audit Act,[Footnote 8] 
which requires independent auditors to provide an opinion on whether 
the financial statements are fairly presented, a report on internal 
control related to the major programs, and a report on compliance with 
key laws, regulations, and the provisions of the grant 
agreements.[Footnote 9]

Figure 5: Claim Review and Approval Process for Project Liberty: 

[See PDF for image] 

[End of figure] 

Our publication, Standards for Internal Control in the Federal 
Government, provides a road map for entities to establish control for 
all aspects of their operations and a basis against which entities can 
evaluate their control structures.[Footnote 10] The five components of 
internal control are as follows: 

* Control environment. Creating a culture of accountability within the 
entire organization--program offices, financial services, and regional 
offices--by establishing a positive and supportive attitude toward the 
achievement of established program outcomes. 

* Risk assessment. Identifying and analyzing relevant problems that 
might prevent the program from achieving its objectives. Developing 
processes that can be used to form a basis for measuring actual or 
potential effects of these problems and manage their risks. 

* Control activities. Establishing and implementing oversight processes 
to address risk areas and help ensure that management's decisions-- 
especially about how to measure and manage risks--are carried out and 
program objectives are met. 

* Information and communication. Using and sharing relevant, reliable, 
and timely information on program-specific and general financial risks. 
Such information surfaces as a result of the processes--or control 
activities--used to measure and address risks. 

* Monitoring. Tracking improvement initiatives over time and 
identifying additional actions needed to further improve program 
efficiency and effectiveness. 

SAMHSA and FEMA were responsible for providing oversight to ensure that 
the state of New York had a reasonable level of controls in place. 
Although FEMA retained responsibility for providing leadership and 
direction for Project Liberty, it assigned primary responsibility to 
SAMHSA for oversight and monitoring through an interagency agreement. 

Remaining Grant Funds Primarily Relate to Unresolved Issues at NYC 
DOEd: 

Approximately $121 million, more than three-quarters of the $154.9 
million in federal funds provided to Project Liberty, were reported as 
expended as of September 30, 2004, leaving a remaining balance of $33.9 
million. About $32 million of the $33.9 million pertain to unresolved 
NYC DOEd expense claims. According to NYS OMH, NYC DOEd had not been 
reimbursed for the Project Liberty expenses it incurred throughout the 
program because NYC DOEd had not been able to provide support for these 
expenses that met the CCP documentation standards for reimbursement 
under federal grants. NYS OMH began considering alternative indirect 
forms of evidence, including internal control summary memos prepared by 
NYC DOEd, to begin paying NYC DOEd's expense claims. As of March 31, 
2005, NYS OMH had accepted alternative forms of supporting evidence to 
pay $5.2 million of NYC DOEd expense claims; however, this type of 
alternative evidence provides only limited assurance of the propriety 
of the claimed amounts. NYS OMH was not sure when and how the remaining 
NYC DOEd expense claims would be resolved. 

Timing of Reported Expenditures: 

For the period September 11, 2001, through September 30, 2004,[Footnote 
11] Project Liberty reported that it had expended all of the $22.8 
million ISP grant and about $98.2 million of the $132.1 million RSP 
grant for total reported expenditures of approximately $121 million, 
leaving a remaining balance $33.9 million. Although crisis counseling 
services had been phased out as of December 31, 2004, Project Liberty 
will continue to use the remaining grant funds to process claims for 
reimbursement of program-related expenses incurred through December 31, 
2004, and to cover administrative expenses during the closeout period, 
which at the end of our fieldwork, was scheduled to end on May 30, 
2005. Table 1 and figure 6 show the timing and amount of expenditures 
reported by Project Liberty for the ISP and RSP grants by quarter 
through September 30, 2004, compared to the total CCP grant awards for 
Project Liberty. 

Table 1: Reported CCP Grant Activity for Project Liberty from September 
11, 2001, through September 30, 2004: 

Dollars in thousands. 

CCP grant funds awarded: 

September 2001 - ISP[A]: $22,777. 
June 2002 - RSP[B]: 132,148. 
Subtotal: $154,925. 

Project Liberty reported expenditures: September 11, 2001, through 
September 30, 2004: 

ISP - amounts per RFMH: 

12/14/2001[C]: $$6,056. 
03/14/2002: $7,995. 
06/14/2002[D]: $8,726. 
Subtotal: $22,777. 

RSP - amounts per quarterly reports: 

09/14/2002: $24,217. 
12/14/2002: $7,739. 
03/14/2003: $6,454. 
06/14/2003: $10,264. 
09/14/2003: $18,618. 
12/14/2003: $11,754. 
03/14/2004: $8,813. 
06/14/2004: $7,389. 
09/30/2004[E]: $2,961. 
Subtotal: $98,209. 

Total reported expenditures: $120,986. 

Remaining grant funds as of September 30, 2004: $33,939. 

Source: GAO analysis of FEMA, NYS OMH and RFMH data. 

Note: All amounts are reported in nominal dollars: 

[A] The ISP award of $22.7 million was made on September 24, 2001, with 
subsequent adjustments bringing the ISP total to about $22.8 million. 

[B] The RSP award was made on June 14, 2002. 

[C] Includes expenditures from September 11, 2001, through December 14, 
2001. 

[D] Includes ISP expenditures incurred after June 14, 2002, and 
reductions for expenditures transferred to the RSP. 

[E] Project Liberty modified its reporting period to include 
expenditures incurred through September 30, 2004. 

[End of table]

Figure 6: Project Liberty's Total CCP Grant Awards and Reported 
Expenditures for the Period September 11, 2001, through September 30, 
2004: 

[See PDF for image] 

[A] Includes expenditures from September 11, 2001, through December 14, 
2001. 

[B] Includes ISP expenditures incurred after June 14, 2002, and 
adjustments for expenditures transferred to the RSP. 

[C] Project Liberty modified its reporting period to include 
expenditures incurred through September 30, 2004. 

[End of figure] 

According to NYS OMH officials, the expenditures reported by Project 
Liberty from September 11, 2001, through September 30, 2004, included 
expenses incurred as well as amounts advanced to service providers. 
During the RSP, Project Liberty made advances to 109 service providers, 
for a total of about $25.8 million. As of September 30, 2004, the 
outstanding advance balance was $5.8 million; however, according to an 
NYS OMH official, the balance had been reduced to $1.2 million as of 
March 31, 2005.[Footnote 12]

NYC DOEd Expense Claims Not Fully Resolved: 

The vast majority of remaining Project Liberty funds related to 
unresolved expense claims of NYC DOEd. As of March 31, 2005, NYS OMH 
officials told us that NYC DOEd had submitted claims for a portion of 
the $32 million that was budgeted to NYC DOEd to provide crisis 
counseling services to New York City school children, and planned to 
ultimately submit claims for the full amount. 

NYS OMH and NYC DOHMH had not approved the majority of NYC DOEd claims 
for reimbursement incurred during the RSP because NYC DOEd had not 
provided support for these expenses that met the CCP documentation 
standards for reimbursement under federal grants. These standards 
require that the expenditure of grant funds be supported by detailed 
documentation, such as canceled checks, paid bills, time and attendance 
records, and contract and subgrant award documents. According to NYC 
DOEd officials, they could not meet the documentation standards 
established by NYS OMH because (1) NYC DOEd reorganized on July 1, 
2003, which coincided with the delivery of crisis counseling services 
under the Project Liberty grant, resulting in significant loss of 
staff, loss of institutional knowledge, and therefore lost or 
diminished ability to retrieve supporting documentation, and (2) NYC 
DOEd's complex financial systems cannot produce the type of transaction-
specific documentation required by NYS OMH and makes the process of 
retrieving supporting documentation unwieldy and administratively 
burdensome. 

A SAMHSA official told us SAMHSA was aware of issues involving the 
supporting documentation for the NYC DOEd expense claims; however, 
because officials viewed it as a grantee issue, they have had limited 
involvement with NYS OMH's efforts to resolve these issues. NYS OMH 
decided to consider alternative evidence, including supplemental 
supporting documentation in the form of internal control summary memos 
prepared by NYC DOEd that describe the controls over payments for 
personnel, other-than-personnel, and community-based organization 
expenses.[Footnote 13] Personnel expenses include NYC DOEd workers 
while the other-than-personnel expenses include other costs incurred 
directly by NYC DOEd. The community-based organization expenses are 
those incurred by other service providers on behalf of NYC DOEd. 

Although NYC DOEd's Chief Financial Officer has signed an attestation 
stating that the controls described in the summary memos for personnel 
and other-than-personnel expenses were in place and working during 
Project Liberty, the level of assurance provided by these internal 
control summary memos is limited for several reasons. First and 
foremost, the memos do not provide the type of supporting documentation 
necessary to verify the validity of the claimed expenses as required by 
the federal documentation standards. Second, the memos are not 
certified by an external source, such as an independent auditor. Third, 
the memos were prepared solely to support NYC DOEd's Project Liberty 
expenses and may not represent written policies and procedures that 
existed during the time the claimed expenditures were incurred. And 
lastly, the memos were prepared toward the end of the program by 
officials who did not, in all cases, have firsthand knowledge of the 
controls that existed during the program. 

As of March 31, 2005, NYS OMH and NYC DOHMH had reviewed and accepted 
internal control summary memos that describe the controls over payments 
for personnel and other-than-personnel expenses, and NYS OMH had used 
these memos and other alternative forms of evidence to reimburse NYC 
DOEd for $5.2 million in expense claims. These other forms of evidence 
included observations of services being provided during site visits, 
the existence of encounter logs evidencing that some services had been 
provided, and general familiarity with service providers. NYS OMH 
officials were not sure when they would complete the review of the memo 
covering the controls over payments for community-based organization 
expenses and how this memo, along with other alternative forms of 
evidence, would be used to resolve the remaining $26.8 million in NYC 
DOEd expense claims. 

As part of its approval process for expense claims, NYS OMH relied upon 
NYC DOHMH to certify that the claims submitted were valid and met the 
CCP documentation requirements. However, because NYC DOEd did not 
provide the required supporting documentation, NYC DOHMH could not 
perform the same level of review as it did for the claims of the other 
Project Liberty service providers.[Footnote 14] Further, although NYC 
DOHMH contracted with independent auditors to perform audits of expense 
claims of certain service providers[Footnote 15] for Project Liberty, 
there were no audits performed of NYC DOEd claims, which are expected 
to total approximately $32 million. 

At the end of our audit fieldwork, it was not clear when and how the 
remaining expense claims would be resolved. However, if the internal 
control summary memos and other alternative evidence continue to be the 
primary supporting documentation for $32 million in NYC DOEd expense 
claims, the federal government will have only limited assurance that 
these payments are an appropriate use of Project Liberty grant funds. 

Improvements Needed in the Process for Determining Federal Funding: 

FEMA's process for determining funding is designed to be implemented 
quickly after a state requests federal assistance to recover from a 
presidentially declared disaster. The state of New York's grant 
applications for Project Liberty were developed during the initial 
dynamic stages of the recovery effort when damage reports and response 
plans were subject to frequent change. The budgets submitted with the 
grant applications were revised by the grantee to satisfy certain 
conditions of grant award. However, we found that although the budgets 
were developed using estimates established during the initial stages of 
the disaster, FEMA and SAMHSA never required the state of New York to 
formally submit revised budget requests to reflect new information and 
significant changes to the program that occurred as the needs of the 
affected population became better identified. As a result, FEMA and 
SAMHSA did not have realistic budget information that could be used to 
effectively assess how responsible city and state officials planned to 
spend Project Liberty grant funds. 

Federal Assistance Application Process: 

The grant applications that the state of New York submitted to FEMA for 
Project Liberty were prepared with assistance from FEMA and SAMHSA and 
included a needs assessment, plan of services, and budget. The needs 
assessment, which was based on a formula developed by SAMHSA, was the 
state's estimate of the number of people who would need crisis 
counseling. The plan of services described the state's plan for 
treating the identified population, including segments of the 
population needing special services or outreach methods such as 
counseling and training in various languages. The budget was developed 
based on the estimated cost to treat the population identified in the 
needs assessment through the program outlined in the plan of services. 

FEMA and SAMHSA provided the state of New York the flexibility to 
submit grant applications that reflected its identified and estimated 
needs, which were based on information available at the time. In 
preparing the budget, the state of New York relied on SAMHSA's Budget 
Estimating and Reporting Tool, which was designed to assist states in 
developing budgets consistent with FEMA guidelines. The state of New 
York took two different approaches in constructing the ISP and RSP 
budgets for Project Liberty. The ISP budget used estimates of 
administrative costs and a simple direct services cost calculation. The 
direct services costs were based on the estimated number of people 
needing crisis counseling services, the estimated average length of 
treatment each person would need, the estimated hourly rate for crisis 
counselors, and the estimated length of the ISP. The RSP budget, on the 
other hand, was prepared by the state of New York based on estimates 
provided by NYS OMH, each of the New York City boroughs, and the 10 
surrounding counties eligible for CCP grant funding. 

Once the state of New York submitted its ISP and RSP grant 
applications, FEMA had processes in place to review and approve them. 
Although the processes differed, both shared common elements. The first 
step for both applications was a technical review conducted by the FEMA 
regional office with jurisdiction over the state of New York to ensure 
that the applications had a direct link to the September 11 terrorist 
attacks. Once this technical review was completed, the applications 
were sent to FEMA headquarters and to SAMHSA for review and comment. In 
addition, the RSP was reviewed by a panel of mental health 
professionals who had experience with CCP grants. The ISP and RSP 
review processes also differed in that FEMA's regional office had final 
decision authority for the ISP application while FEMA headquarters had 
final decision authority for the RSP application. Figure 7 shows the 
application processes for the ISP and RSP. 

Figure 7: ISP and RSP Application Processes for Project Liberty: 

[See PDF for image] 

[End of figure] 

After the reviews conducted by FEMA and SAMHSA were completed, FEMA 
awarded the state of New York $22.7 million for the ISP on September 
24, 2001,[Footnote 16] with subsequent amendments bringing the ISP 
total to $22.8 million. In addition, FEMA awarded the state of New York 
$132.1 million for the RSP immediately after the ISP ended on June 14, 
2002. 

Budgets Were Not Adjusted to Reflect New Information or Program 
Changes: 

Because FEMA's process for determining funding is designed to be 
implemented quickly after presidential disaster declarations and 
official loss numbers were not known at the time the Project Liberty 
applications were prepared, the state of New York used estimates of the 
number of people who would need crisis counseling services, the length 
of the program, and the services that would be provided. However, FEMA 
and SAMHSA never required the budgets to be modified to reflect new 
information or significant changes to the program. 

The estimates used by the state of New York to develop its initial 
needs assessment, or number of people it believed would need crisis 
counseling services, included several risk factors and loss categories. 
In keeping with existing CCP policy, FEMA and SAMHSA encouraged the 
state of New York to modify the needs assessment formula by adjusting 
the loss categories of affected persons and the risk factors for each 
of those loss categories to better reflect the situation in New York. 
The state of New York also estimated the number of direct victims in 
each loss category because official numbers were not available. For 
example, the official number of deaths was not known until more than 2 
years after the disaster. As a result of these estimates, the needs 
assessment for the state of New York's ISP application determined that 
2.3 million people would need crisis counseling services as a result of 
the terrorist attacks on September 11, 2001. With the RSP application, 
the needs assessment formula was modified to estimate the pervasive 
reactions to the disaster and to update the loss category numbers, such 
as the number of people dead, missing, or hospitalized. These 
modifications increased the estimate of the people who would need 
crisis counseling to 3.4 million. 

We found that based on the approved budgets for the ISP and RSP, 
Project Liberty estimated that it would need $154.9 million to provide 
crisis counseling and public education to the estimated 3.4 million 
people and training for Project Liberty staff who would be delivering 
these services, at a cost of approximately $46 per person. In its 
report for the period ending September 30, 2004, Project Liberty 
estimated that it had provided crisis counseling to 1.5 million people 
at a cost of $121 million, or approximately $83 per person. 

Another estimate used in preparing the grant applications was the 
length of time needed to carry out the services identified in the plan 
of services. The state of New York used the maximum length of service 
provision allowed by FEMA regulations in its ISP and RSP applications, 
60 days and 9 months, respectively. However, crisis counseling services 
were actually provided for approximately 9 months under the ISP and 
over 30 months under the RSP. 

In addition, the state of New York initially understood that crisis 
counseling and public education services offered by Project Liberty 
would be limited to the services normally allowed by the CCP, such as 
short-term individual and group crisis counseling, community outreach, 
and training for crisis counselors. However, in August 2002, Project 
Liberty was authorized to adjust the program to include enhanced 
services and began providing these services in May 2003. 

Other significant changes, which were not reflected in Project 
Liberty's budget, included a reallocation from New York City's budget 
to the NYC DOEd, which increased NYC DOEd's budget from $8.9 million to 
$40 million and subsequent reductions of NYC DOEd's budget to $32 
million. Despite these major changes in the program, FEMA and SAMHSA 
did not require and Project Liberty did not prepare adjusted budgets to 
reflect their revised plans for meeting the needs of the victims of 
September 11. Therefore, New York State and City officials did not have 
realistic budget information to use as a tool to manage program funds, 
and FEMA and SAMHSA were not in a position to effectively assess the 
planned use of the funds. 

Federal Oversight of Project Liberty's Financial Information Was 
Limited: 

While SAMHSA provided oversight of Project Liberty's delivery of 
services, it provided only limited oversight of financial information 
reported by Project Liberty about the cost of those services. SAMHSA 
received periodic financial reports but did not perform basic analyses 
of expenditures to obtain a specific understanding of how Project 
Liberty was using federal funds. In addition, as discussed above, 
budget information was outdated and therefore an ineffective tool to 
monitor actual expenditures. SAMHSA's limited level of oversight over 
Project Liberty's financial information was driven in part by its 
assessment that the program was not high risk, but this assessment did 
not fully consider the magnitude, complexity, and unique nature of the 
program and was not revisited even after significant program changes 
occurred. As a result, SAMHSA was not in a position to exercise a 
reasonable level of oversight to ensure that funds were used 
efficiently and effectively in addressing the needs of those affected 
by the September 11 terrorist attacks. 

SAMHSA's oversight for Project Liberty included review of service 
delivery information and identification of unusual items included in 
Project Liberty's program reports, eight site visits, and routine 
communication with NYS OMH and FEMA. These oversight activities helped 
SAMHSA gain assurance that NYS OMH was delivering appropriate services. 
However, SAMHSA's oversight of these services did not directly link 
with, and therefore did not provide assurance related to, financial 
information reported by Project Liberty. In addition to requiring 
Project Liberty to submit budgets to show how it planned to use federal 
funds, FEMA regulations also required Project Liberty to periodically 
submit financial reports to show how funds were actually spent. 
Required financial reports included quarterly expenditure reports, a 
final accounting of funds, and a final voucher. SAMHSA officials told 
us they did some high-level review of the financial information 
provided to determine how quickly the program was using grant funds and 
when the grant funds should be made available to NYS OMH. However, they 
did not perform basic analyses of expenditures to obtain a specific 
understanding of how Project Liberty was using federal funds. 

We found that SAMHSA did not use financial information submitted by 
Project Liberty to conduct basic analytical reviews of how funds were 
being spent and whether this spending was consistent with the budgeted 
program expenditures. Table 2 illustrates a basic analysis we performed 
of Project Liberty's reported and budgeted expenditures for the period 
June 14, 2002, through September 30, 2004, which identified significant 
differences by category between reported expenditures and budget. 

Table 2: Comparison of Project Liberty's RSP Reported Expenditures to 
Budget from June 14, 2002, through September 30, 2004: 

Dollars in thousands. 

Category: Personnel; 
Reported expenditures (6/14/2002 through 9/30/2004): $25,942; 
RSP budget [A]: $93,489; 
Difference--reported expenditures (under)/over budget: ($67,547); 
Difference as a percentage of budget: (72%). 

Category: Office space; 
Reported expenditures (6/14/2002 through 9/30/2004): $2,245; 
RSP budget [A]: $674; 
Difference--reported expenditures (under)/over budget: $1,571; 
Difference as a percentage of budget: 233%. 

Category: Consulting/contracts; 
Reported expenditures (6/14/2002 through 9/30/2004): $5,527; 
RSP budget [A]: $10,884; 
Difference--reported expenditures (under)/over budget: ($5,357); 
Difference as a percentage of budget: (49%). 

Category: Media; 
Reported expenditures (6/14/2002 through 9/30/2004): $9,347; 
RSP budget [A]: $8,887; 
Difference--reported expenditures (under)/over budget: $460; 
Difference as a percentage of budget: 5%. 

Category: Crisis counseling; 
Reported expenditures (6/14/2002 through 9/30/2004): $47,912; 
RSP budget [A]: $15,809; 
Difference--reported expenditures (under)/over budget: $32,103; 
Difference as a percentage of budget: 203%. 

Category: Advances; 
Reported expenditures (6/14/2002 through 9/30/2004): $5,798; 
RSP budget [A]: 0; 
Difference--reported expenditures (under)/over budget: $5,798; 
Difference as a percentage of budget: >100%. 

Category: Other expenses; 
Reported expenditures (6/14/2002 through 9/30/2004): $1,438; 
RSP budget [A]: $2,405; 
Difference--reported expenditures (under)/over budget: ($967); 
Difference as a percentage of budget: (40%). 

Total; 
Reported expenditures (6/14/2002 through 9/30/2004): $98,209; 
RSP budget [A]: $132,148; 
Difference--reported expenditures (under)/over budget: ($33,939); 
Difference as a percentage of budget: (26%). 

Source: GAO analysis of FEMA, HHS, and Project Liberty data. 

[A] Reflects revisions made to the budget by the grantee to satisfy 
conditions of the grant award. 

[End of table]

Notwithstanding the fact that budgets were not updated for major 
program changes, several of these differences should have raised 
questions about whether Project Liberty was using federal funds within 
allowable categories and within its approved budget. For example, the 
Project Liberty personnel budget was over $93 million; however, as of 
September 30, 2004, over 26 months into the program that was initially 
planned for completion in 9 months, it had reported personnel 
expenditures of only about $26 million, for a difference of about $67 
million. A SAMHSA official said that because of the way Project Liberty 
reported its expenditures, SAMHSA officials could not track its 
financial reports to its budget. As a result, we found that SAMHSA was 
not aware of the significant variations between Project Liberty's 
reported expenditures and budget and did not make inquiries of Project 
Liberty officials to obtain an understanding of why these variations 
were occurring. Some of the differences between reported and budgeted 
expenditures may have resulted from the fact that Project Liberty was 
not required to formally adjust the initial program budget to reflect 
significant changes. However, the differences may also have raised 
questions about whether SAMHSA's understanding of how the program was 
planning to spend funds was consistent with actual spending patterns. 
Comparisons between Project Liberty's reported budget and expenditures 
could have helped SAMHSA better assess the status of the program to 
allow it to take effective action to ensure that Project Liberty was 
using federal funds to provide the most value for victims of the 
September 11 terrorist attacks. 

The differences between Project Liberty's reported budget and 
expenditures may also have been caused by inconsistencies in financial 
information submitted by Project Liberty. FEMA and SAMHSA did not 
provide detailed guidance on how to classify CCP expenditures but 
instead left Project Liberty to interpret how expenditures should be 
classified. We found that Project Liberty expenditures were not always 
consistently reported to FEMA and SAMHSA. For example, Project Liberty 
did not consistently classify evaluation expenditures. If an NYS OMH 
employee was evaluating the program, the expenditure was classified as 
personnel, but if the work was contracted to someone outside of NYS 
OMH, the expenditure was classified as evaluation. As a result, SAMHSA 
could not reliably use Project Liberty's financial reports to determine 
how much it cost to evaluate the program. By obtaining a better 
understanding of how federal funds were spent by Project Liberty, 
SAMHSA would have improved its ability to determine whether funds were 
used most efficiently and effectively in carrying out the objectives of 
the program. 

SAMHSA's limited oversight of Project Liberty's financial information 
was driven in part by its own assessment that the program was not high 
risk.[Footnote 17] SAMHSA's oversight of Project Liberty included an 
initial assessment of the risk associated with the grantee. SAMHSA 
applied risk factors identified in HHS regulations regarding 
grants,[Footnote 18] including financial management issues, such as 
financial stability and experience in handling federal grants, to RFMH, 
the fiscal agent for NYS OMH responsible for making payments to service 
providers. For example, SAMHSA reviewed the result of RFMH's fiscal 
year 2001 financial audit that was required by the Single Audit Act and 
found that RFMH received an unqualified audit opinion while handling a 
total of about $62 million in federal funds. SAMHSA concluded that RFMH 
had a strong track record for handling federal funds and classified 
RFMH as not high risk. Based in part on this risk assessment, SAMHSA 
officials told us staff with financial backgrounds were not actively 
involved in the oversight of Project Liberty. 

However, we found that SAMHSA's risk assessment only considered risks 
associated with RFMH and did not consider other potential risks 
associated with the Project Liberty grant. For example, the assessment 
did not consider all significant interactions in the complex federal, 
state, and local government environment that existed for Project 
Liberty; the amount of the RSP grant award, which was the largest RSP 
grant[Footnote 19] ever made by FEMA; or the geographic complexities of 
the program, including the size of the area affected and the diversity 
of the community being served. In addition, SAMHSA did not revisit its 
initial risk assessment even after the program encountered significant 
changes and challenges, including the design of the first-ever enhanced 
services program and the documentation issues with NYC DOEd expenses, 
which have yet to be resolved. As a result, SAMHSA's level of oversight 
was not in line with the challenges and complexities that increased the 
risks associated with Project Liberty. 

Based in part on its risk assessment process, SAMHSA's oversight of 
Project Liberty was primarily carried out by its programmatic staff who 
focused on activities that did not directly link to the financial 
information being reported by NYS OMH. Without useful financial 
information, including updated budgets, and without analyses of the 
financial information Project Liberty was reporting, SAMHSA was not in 
a position to exercise a reasonable level of oversight to ensure that 
grant funds were effectively used to address the needs of those 
affected by the September 11 terrorist attacks. 

Assessments of Project Liberty Ongoing: 

Both the state of New York and the federal government have taken steps 
to assess how Project Liberty delivered services. NYS OMH is conducting 
its own assessment of Project Liberty and partnered with NYAM to obtain 
information from telephone surveys. SAMHSA contracted with NCPTSD, a 
center within the Department of Veterans Affairs, to conduct a case 
study of New York's response to the terrorist attacks on September 11, 
with a primary focus on Project Liberty. Both NYS OMH and NCPTSD's 
overall assessments of the program were ongoing as of March 2005. FEMA 
plans to consider lessons learned from NYS OMH and NCPTSD when 
conducting its own internal review of the CCP. 

NYS OMH is conducting an evaluation of Project Liberty, which includes 
designated funding for program evaluation. This nonstatistical 
evaluation consists of several components, including analysis of data 
collected by service providers documenting services delivered through 
encounter data forms, recipient feedback through written questionnaires 
and telephone surveys,[Footnote 20] provider feedback through written 
reports and staff surveys,[Footnote 21] and other initiatives. The data 
collected by service providers was the primary method used to assess 
the services delivered by the program.[Footnote 22] Based on these 
data, NYS OMH preliminarily found that Project Liberty had reached a 
large number of people affected by the September 11 terrorist attacks 
and that it was successful in reaching many diverse communities. NYS 
OMH reported that 95 percent of providers who responded to its surveys 
rated the overall quality of services provided as good or excellent. 
NYS OMH also reported that the majority of respondents to its recipient 
surveys indicated that they have returned to their predisaster mental 
health condition, a goal of Project Liberty. However, according to NYS 
OMH, the recipient surveys were made available beginning in July 2003 
to organizations providing crisis counseling for distribution to 
individuals receiving services and therefore may not be representative 
of all Project Liberty recipients. NYS OMH did not report the number of 
providers who received surveys and reported a low response 
rate[Footnote 23] for recipients. Because the number of surveys offered 
to providers was not disclosed and because of low response rates for 
the recipient surveys, we were unable to determine the level of 
coverage provided by these surveys. 

NYS OMH also partnered with NYAM, a not-for-profit organization 
dedicated to enhancing public health through research, education, 
public policy, and advocacy. NYAM conducted nonstatistical telephone 
surveys in 2001 and 2002 of New Yorkers to assess the magnitude and 
duration of the mental health effects of the terrorist 
attacks.[Footnote 24] NYS OMH worked with NYAM to assess the reach and 
recognition of Project Liberty by adding questions to NYAM's ongoing 
September 11 telephone surveys. NYAM and NYS OMH reported that 24 
percent of the respondents interviewed were aware of Project 
Liberty[Footnote 25] and, among respondents who had heard of the 
program, 67 percent had a good impression of the program.[Footnote 26] 
However, because the sampling methodology for the NYAM phone surveys 
was not disclosed and because of low response rates, we were unable to 
determine the survey coverage. 

Based on these evaluation activities, as well as their own experience 
with Project Liberty, NYS OMH officials have begun to identify lessons 
to be learned. For example, they found that emergency mental health 
plans and resources in place prior to September 11 were insufficient to 
fully respond to the mental health impact of the terrorist attacks. 
Much of the infrastructure needed to implement Project Liberty, such as 
data collection procedures and public education materials, had to be 
developed in the immediate aftermath of the terrorist attacks. In 
addition, NYS OMH found that the services covered by the CCP were not 
sufficient to meet the mental health needs of the minority of 
individuals who developed severe and persistent symptoms that 
substantially interfered with day-to-day functioning. Although the 
state of New York was given permission to develop and implement an 
enhanced services program to meet the needs of the more severely 
affected individuals, similar intensive interventions are not currently 
routinely included as part of the FEMA CCP. NYS OMH officials told us 
that when their evaluation is completed, they expect that they will 
have comprehensively identified best practices and obstacles 
encountered and that they will make recommendations to FEMA and SAMHSA 
for actions needed to better organize a mental health response to 
future disasters funded by the CCP. 

SAMHSA entered into an interagency agreement with NCPTSD, a center 
within the Department of Veterans Affairs, to conduct a case study of 
New York's response to the September 11 terrorist attacks. The primary 
purpose of the NCPTSD case study was to identify lessons to be learned 
from New York's experience that could be useful to other communities 
that might have to respond to major disasters, including acts of 
terrorism. As part of its study, NCPTSD interviewed 103 individuals, 
including service providers and management from 50 public and private 
provider organizations in New York City and the surrounding 
counties.[Footnote 27] NCPTSD used a qualitative methodology to analyze 
the data to develop findings and recommendations. According to SAMHSA, 
the NCPTSD report is expected to be issued as soon as all stakeholders' 
comments have been received and considered. 

FEMA officials told us they plan to consider lessons learned from the 
NCPTSD and NYS OMH assessments of Project Liberty through FEMA's 
internal review of the CCP that was ongoing as of March 2005.[Footnote 
28] This internal review is being conducted in partnership with SAMHSA 
and, according to FEMA, will consider whether aspects of FEMA's CCP, 
including its regulations and guidance, need to be improved. For 
example, FEMA plans to work with SAMHSA to consider the extent to which 
the enhanced services should be included as a permanent part of the 
CCP. FEMA officials told us that the internal review will have to be 
completed in conjunction with their primary work responding to 
disasters; therefore, they have not established a timetable to complete 
this review. Given that Project Liberty was awarded the largest RSP 
grant in the history of FEMA's CCP and that FEMA provided funding to 
the state of New York to evaluate Project Liberty, the timely 
assessment of lessons learned from this program would be beneficial to 
future CCPs. 

Conclusions: 

FEMA and SAMHSA's limited oversight of the planned and actual spending 
of Project Liberty impeded their ability to monitor whether the grant 
funds were being used in the most efficient and effective way to meet 
the needs of those affected by the terrorist attacks of September 11, 
2001. Further, until recently, FEMA and SAMHSA had limited involvement 
in efforts to resolve issues surrounding the outstanding NYC DOEd 
expense claims; additional oversight in this area could help bring 
appropriate and timely resolution to these issues. FEMA will have an 
opportunity to address these oversight issues, as well as lessons 
learned identified by NYS OMH and NCPTSD, as part of its ongoing 
internal review of its CCP. 

Recommendations for Executive Action: 

In order to address the issues identified in our report, we recommend 
that the Secretary of Homeland Security direct the Under Secretary of 
Emergency Preparedness and Response to take the following eight 
actions: 

To help ensure proper and timely expenditure of the remaining Project 
Liberty funds, FEMA should work with SAMHSA to: 

* provide assistance to New York City and State officials in 
appropriately resolving issues surrounding the NYC DOEd expense 
reimbursements and: 

* determine whether an independent review of the propriety of the use 
of funds for payments to the NYC DOEd is needed. 

To strengthen federal financial oversight of future CCP grants, FEMA 
should work with SAMHSA to: 

* require the recipients of CCP grants to submit updated budgets to 
reflect approved changes to the program;

* revise the current risk assessment process to comprehensively 
identify and assess risks associated with CCP grants;

* establish a process to update the risk assessment for significant 
program changes;

* consider developing formal requirements for consistent 
classifications of expense data; and: 

* develop formal procedures to perform more detailed analyses of 
financial reports, including comparing actual expenditures and budgets 
to identify variations and obtain an understanding of the reasons for 
any unusual variations. 

To help ensure that the lessons learned from Project Liberty will be 
used to help improve future programs funded by the CCP, FEMA should 
establish a clear time frame to complete its internal review of the CCP 
as expeditiously as possible. 

Agency Comments and Our Evaluation: 

We received written comments on a draft of this report from DHS who 
generally concurred with our recommendations but expressed reservations 
regarding our assessment of the adequacy of FEMA and SAMHSA oversight. 
SAMHSA in a separate comment letter to FEMA, did not object to our 
recommendations but did take issue with our assessment of its 
oversight, particularly given the unprecedented circumstances that led 
to the establishment of Project Liberty. SAMHSA also provided 
additional information on the NYC DOEd claim issue. DHS's comment 
letter (reprinted in appendix II) incorporates by reference SAMHSA's 
letter (reprinted in appendix III). We also received technical comments 
from NYS OMH, NYC DOHMH, and NYC DOEd on excerpts of the report, which 
we incorporated as appropriate. 

DHS stated that our report should give more weight to the unprecedented 
conditions that led to Project Liberty, and that it was these unique 
circumstances that led to our findings and were the basis for our 
recommendations. It further stated that our recommendations primarily 
relate to the use of grant funds by NYC DOEd, and that no similar 
issues were identified with respect to the use of funds by other 
program subgrantees. 

Our report clearly acknowledges the unique and unprecedented 
circumstances that led to the establishment of Project Liberty. These 
unique circumstances were largely the basis for our conclusion that 
Project Liberty required a high level of federal oversight. A number of 
red flags signaled the need for a heightened federal role, including: 
the RSP grant was the largest such grant ever made by FEMA; the program 
initially designed to last about a year is now over 3 ½ years old and 
still ongoing, with an extension being considered to September 30, 
2005; and reimbursements for approximately $32 million, representing 
over 20 percent of the total federal funds awarded, remained unresolved 
as of May 2005. The fact that the level of federal oversight was not 
commensurate with the unprecedented circumstances surrounding Project 
Liberty was what led us to our findings and recommendations in this 
area. 

Five of our eight recommendations relate to strengthening federal 
financial oversight of future CCP grants; two of the recommendations 
specifically address the NYC DOEd use of grant funds; and the remaining 
recommendation calls for ensuring that lessons learned from Project 
Liberty will be used to improve future programs funded by the CCP. 
Thus, DHS was incorrect in stating that our recommendations primarily 
relate to the NYC DOEd issues. 

As to FEMA's statement that we did not identify any other issues about 
the use of grant funds, the scope of our work included determining the 
extent to which Project Liberty expended grant funds and whether the 
federal government had adequate financial oversight of Project Liberty. 
Our work did not address whether payments made, including those made by 
NYC DOEd, were a valid use of federal resources. We have no basis for 
reaching the conclusion suggested by FEMA. 

SAMHSA's letter also discussed the unprecedented conditions surrounding 
Project Liberty and, as discussed below, strongly disagreed with our 
assessment that SAMHSA's financial oversight was limited. SAMHSA also 
stated that during a recent site visit, NYC DOEd's Chief Financial 
Officer indicated that documentation was available to support claims as 
necessary. SAMHSA further stated that it will be recommending that the 
NYS OMH conduct an independent audit of these claims as one of the 
conditions of approving an extension of the grant to September 30, 
2005. During our fieldwork, we were consistently told by NYC DOHMH 
officials that NYC DOEd had not been able to produce documentation for 
the majority of expenses it incurred on behalf of Project Liberty that 
met the documentation standards for reimbursement under federal grants. 
Given ongoing questions about the existence of documentation supporting 
NYC DOEd claims, the sufficiency of this documentation, or both, we 
agree that an independent audit is appropriate. 

SAMHSA stated that overall, the federal oversight of Project Liberty 
was appropriate, reasonable, and responsive to state and local needs. 
SAMHSA outlined several factors to support this statement, including 
that it received financial data from the state of New York on a routine 
basis and monitored the allocability, allowability, and reasonableness 
of project expenditures. While SAMHSA acknowledged that project budget 
data were not updated comprehensively, it stated that it did request 
and receive updated budget information in several instances, 
particularly in conjunction with project extensions. SAMHSA further 
stated that we had not cited any problems with program expenditures but 
instead seemed to focus on differences between classification of 
budgeted and reported expenditures. SAMHSA acknowledged that the budget 
was not prepared in the same format as reported expenditures, and 
stated that inconsistent categorization of expense accounts were 
largely the reason for the classification discrepancies we highlighted 
in our report. 

Our conclusion that SAMHSA's oversight of Project Liberty's financial 
information was limited was based in large part on the fact that the 
SAMHSA did not have a basis to reliably monitor how Project Liberty was 
using federal funds, since, as SAMHSA acknowledged, it did not have 
updated budget information and the reported expenditure data were not 
accurate due to classification discrepancies. At the time of our 
review, SAMHSA was not aware of these discrepancies because it had not 
been conducting basic analyses, such as comparisons between Project 
Liberty's budgeted and reported expenses. Further, there were no staff 
with financial backgrounds involved with the oversight of Project 
Liberty expenditures. SAMHSA's limited oversight was based in part on 
the fact that it did not deem the project high risk from a financial 
standpoint, despite the complex federal, state, and local environment, 
the fact that this was by far the largest RSP grant ever awarded by 
FEMA, the size and diversity of the community being served, and the 
overall challenging and changing circumstances of September 11. 
Overall, we found that SAMHSA's level of oversight was not in line with 
these challenges and complexities associated with Project Liberty. 

SAMHSA went on to state that in its opinion, classification of Project 
Liberty as high risk simply based on total estimated project 
expenditures would be inappropriate. It further noted that there is no 
regulatory mechanism allowing SAMHSA to assess risk on a complex 
federal, state, and local government environment as was specified in 
our report. 

We did not suggest that the risk classification should simply be based 
on total estimated project expenditures. As discussed above, our report 
clearly delineates a number of different risk factors that should have 
been considered in the risk classification. Further, we disagree that 
the current regulatory mechanism would not allow SAMHSA to consider 
these risk factors in making its risk assessment of Project Liberty. 
While current regulations do not require SAMHSA to consider 
programmatic factors in its risk assessment, they do not prevent SAMHSA 
from considering risk factors other than those delineated in its 
regulations in its overall assessment of the program and its 
operations. As noted by SAMHSA in its written comments, Project Liberty 
was by far the largest and most complex effort in the 30-year history 
of the CCP and presented unique and unprecedented challenges for 
government authorities at all levels. We believe these should have been 
key factors in SAMHSA's risk assessment and should have triggered 
heightened financial oversight of Project Liberty. 

As agreed with your offices, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
from its date. At that time, we will send copies to appropriate House 
and Senate committees; the Secretary of Homeland Security; the Under 
Secretary of Homeland Security for Emergency Preparedness and Response; 
the Administrator, Substance Abuse and Mental Health Services 
Administration; the Director, Office of Management and Budget; and 
other interested parties. We will make copies available to others upon 
request. In addition, the report will be available at no charge on the 
GAO Web site at http://www.gao.gov. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-8341 or calboml@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Major contributors to this report are 
listed in appendix IV. 

Signed by: 

Linda M. Calbom:
Director, Financial Management and Assurance: 

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

To determine the extent to which Project Liberty spent the Immediate 
Services Program (ISP) and Regular Services Program (RSP) grant funds 
received from the Federal Emergency Management Agency (FEMA), we did 
the following: 

* Reviewed various documents, including quarterly RSP expenditure 
reports for the first (June 15, 2002, through September 14, 2002) 
through the ninth (June 15, 2004, through September 30, 2004) quarters; 
a detailed listing of the outstanding advance balances as of September 
30, 2004, obtained from the Research Foundation for Mental Hygiene, 
Inc. (RFMH); a summary of expense claims submitted by the New York City 
Department of Education (NYC DOEd) as of March 2005; internal control 
summaries prepared by NYC DOEd for its personnel and other-than- 
personnel expenses; a draft internal control summary prepared by NYC 
DOEd for its community-based expenses; Crisis Counseling Assistance and 
Training Program (CCP) guidance on appropriate uses of grant funds; and 
FEMA and Department of Health and Human Services (HHS) regulations 
pertaining to the CCP. 

* Interviewed officials from FEMA's headquarters and finance office, 
the Substance Abuse and Mental Health Services Administration's 
(SAMHSA) Center for Mental Health Services (CMHS), the New York State 
Office of Mental Health (NYS OMH), RFMH, the New York City Department 
of Health and Mental Hygiene (NYC DOHMH), and NYC DOEd. 

* Determined that the total expenditures data obtained from RFMH and 
Project Liberty's quarterly expenditure reports were sufficiently 
reliable for the purposes of this report by the following: 

* Obtaining and reviewing a copy of the independent auditor's report of 
RFMH's financial statements for fiscal years ending March 31, 2004 and 
2003, and Report on Compliance and on Internal Control Over Financial 
Reporting Based on an Audit of Financial Statements Performed in 
Accordance with Government Auditing Standards as of March 31, 2004. We 
determined that RFMH received a clean opinion on its fiscal year 2004 
and 2003 financial statements. In addition, the auditor concluded that 
its tests of RFMH's compliance with certain provisions of laws, 
regulations, contracts, and grants did not disclose any instances of 
noncompliance that are required to be reported under Government 
Auditing Standards. Finally, the auditor's consideration of internal 
control over RFMH's financial reporting did not identify any matters 
involving the internal control over financial reporting and its 
operation that it considered to be material weaknesses. 

* Analyzing a database obtained from RFMH of the payments made on 
behalf of Project Liberty for the ISP and RSP from the first payment 
made on September 25, 2001, through September 30, 2004, including 
advances made to service providers. 

* Determining that the amount of the payments included in the database 
was consistent with the total reported expenditures in the ISP final 
report and the RSP quarterly expenditure reports that were prepared by 
Project Liberty and submitted to SAMHSA and FEMA. 

* Comparing the Project Liberty expenditures as reported by RFMH to 
drawdowns reported by SAMHSA on Project Liberty's RSP grant award. 

* Obtaining a written certification of data completeness from the 
Managing Director of RFMH that the expenditures reported in the 
database were complete and accurate for all payments made for, or on 
behalf of, Project Liberty for the ISP and the RSP through September 
30, 2004. 

* Reviewing Single Audit Act reports for fiscal years 2003 and 2002 of 
New York City and surrounding counties. 

To determine whether the federal government had an effective process in 
place to determine the amount of funds to provide to Project Liberty, 
we: 

* interviewed officials from FEMA headquarters, SAMHSA's CMHS, NYS OMH, 
and RFMH;

* reviewed various documents, including the state of New York's ISP and 
RSP grant applications, the ISP and RSP grant awards, and federal 
guidance for the CCP, including the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act and FEMA and HHS regulations; and: 

* reviewed correspondence between officials from FEMA, SAMHSA's CMHS, 
NYS OMH, and RFMH. 

To assess federal oversight over Project Liberty's expenditures, we: 

* obtained an understanding of CCP oversight roles and responsibilities 
by reviewing FEMA and HHS regulations, FEMA and SAMHSA's fiscal year 
2004 interagency agreement, CCP fiscal guidelines, HHS's grants 
management manual, summary documents of the CCP's oversight structure 
prepared by SAMHSA, and GAO reports;

* reviewed available documentation of oversight performed for Project 
Liberty, including Project Liberty's financial reports and 
documentation of site visits conducted by FEMA and SAMHSA;

* analyzed Project Liberty's financial reports and compared them to 
initial grant budgets;

* designed our work to assess the effectiveness of federal oversight 
and therefore considered but did not assess the controls over Project 
Liberty payments implemented at the state and local levels;

* interviewed officials from FEMA headquarters and the FEMA regional 
office that serves New York, SAMHSA's CMHS, SAMHSA's Division of Grants 
Management, NYS OMH, and RFMH to identify policies and procedures for 
overseeing Project Liberty; and: 

* reviewed and used Standards for Internal Control in the Federal 
Government as criteria. 

To identify the steps that have been taken by the federal government in 
partnership with the state of New York to assess Project Liberty, we: 

* reviewed documentation of assessments performed, including a draft of 
the National Center for Post-Traumatic Stress Disorder case study of 
Project Liberty, NYS OMH summaries of survey results, an article 
written by the Deputy Commissioner of NYS OMH on lessons learned about 
the mental health consequences of the September 11 terrorist attacks, 
articles published by the New York Academy of Medicine, and 
documentation from FEMA related to its internal review of the CCP;

* reviewed various documents related to Project Liberty including the 
grant applications and the response to conditions of the grant award 
set out by FEMA and SAMHSA;

* reviewed GAO and FEMA Office of Inspector General reports to 
determine whether the CCP was evaluated; and: 

* interviewed officials from FEMA headquarters, SAMHSA's CMHS, and NYS 
OMH. 

We requested written comments on a draft of this report from the 
Secretary of Homeland Security. We received written comments from DHS. 
The DHS comments (reprinted in app. II) incorporate by reference a 
letter from SAMHSA to FEMA commenting on the draft (reprinted in app. 
III). We also provided excerpts of a draft for technical comment to NYS 
OMH, NYC DOHMH, and NYC DOEd. NYS OMH technical comments and the 
coordinated NYC DOHMH and NYC DOEd technical comments are incorporated 
as appropriate. 

We performed our work from July 2004 through March 2005 in accordance 
with generally accepted government auditing standards. 

Organizations Contacted: 

Federal Agencies: 

Department of Homeland Security, Federal Emergency Management Agency: 
* Headquarters: 
* New York Regional Office: 
* Finance Office: 

Department of Health and Human Services, Substance Abuse and Mental 
Health Services Administration: 
* Center for Mental Health Services: 
* Division of Grants Management: 

State of New York: 

New York State Office of Mental Health: 
Research Foundation for Mental Hygiene, Inc. 

New York City: 

New York City Department of Health and Mental Hygiene: 
New York City Department of Education: 

[End of section]

Appendix II: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528: 

May 25, 2005: 

Ms. Linda M. Calbom: 
Director, Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G St., NW: 
Washington, D.C. 20548: 

Dear Ms. Calbom: 

Thank you for the opportunity to review and provide comments on the 
Government Accountability Office (GAO) draft report entitled, "Crisis 
Counseling Grants Awarded to the State of New York after the September 
11 Terrorist Attacks," (GAO-05-514). We generally concur with your 
recommendations and look forward to incorporating your recommendations 
while monitoring the fiscal closeout of Project Liberty, as well as in 
preparation for future Crisis Counseling Assistance and Training 
Programs (CCP). 

Given the devastating circumstances surrounding the September 11 
terrorist attacks on the World Trade Center, we respectfully request 
that you give considerably more weight to the unique and unprecedented 
conditions that led to the subsequent establishment of the Project 
Liberty Program. It was these unique circumstances that led to your 
findings and were the basis for the recommendations made in your 
report. 

The report's recommendations relate primarily to the use of CCP funds 
by one sub-grantee, the New York City Department of Education. No 
similar issues are identified, with respect to the use of CCP funds, 
with other program sub-grantees. The final report should indicate this 
in order to provide a more accurate reflection of the entire program. 

Through FEMA, we will continue to consult with the Substance Abuse and 
Mental Health Services Administration (SAMHSA) in the incorporation of 
lessons learned from the terrorist events of September 11, 2001 
throughout Federal Emergency Management Agency's (FEMA) internal review 
of the CCP. FEMA and SAMHSA will revise CCP guidance to require updated 
needs assessments and budgets to reflect new information or significant 
changes to individual programs. We will work together with SAMHSA to 
implement procedures to obtain more accurate classifications of expense 
data for future CCP projects; therefore ensuring consistent reporting 
to FEMA and SAMHSA. In addition, concrete timelines for program review 
completion will be established. 

I have enclosed SAMHSA's comments to the draft report, which elaborate 
our response. Thank you again for the opportunity to provide comments 
to the draft report. 

Sincerely,

Signed by: 

Steven J. Pecinovsky: 
Director, Departmental GAO/OIG Liaison: 
Office of the Chief Financial Officer: 
U.S. Department of Homeland Security: 

[End of section]

Appendix III: Comments from the Substance Abuse and Mental Health 
Services Administration: 

DEPARTMENT OF HEALTH & HUMAN SERVICES: 
Substance Abuse and Mental Health Services Administration: 
Center for Mental Health Services: 
Center for Substance Abuse Prevention: 
Center for Substance Abuse Treatment: 
Rockville MD 20857: 

MAY 23 2005: 

Mr. Daniel A. Craig: 
Director, Recovery Division: 
Federal Emergency Management Agency: 
U.S. Department of Homeland Security: 
500 C Street, SW: 
Washington, D.C. 20472: 

Dear Mr. Craig: 

Thank you for the opportunity to provide comments from the Substance 
Abuse and Mental Health Services Administration (SAMHSA) on the 
Government Accountability Office (GAO) draft report on Crisis 
Counseling Grants Awarded to the State of New York after the September 
11 Terrorist Attacks (GAO-05-514). We welcome the opportunity to review 
program accomplishments and challenges in order to assure 
accountability in the fiscal close out of Project Liberty as well as to 
prepare for future disaster crisis counseling needs. 

We have reviewed the GAO assessment as well as the recommendations in 
the report. Based on our review of the draft document, the GAO has 
identified concerns with the claims process within the New York City 
Department of Education as well as concerns with SAMHSA's oversight of 
budget adjustments. After a brief background on the project, we have 
addressed each area of GAO concern separately, followed by our proposed 
actions in response to GAO recommendations. 

Background on Project Liberty: 

New York's crisis counseling response to the September 11 terrorist 
attacks, known as Project Liberty, was by far the largest and most 
complex effort in the 30-year history of the Crisis Counseling 
Assistance and Training Program. The project presented unique and 
unprecedented challenges for government authorities at all levels. 
While the administrative challenges associated with mobilizing this 
large scale effort were immense, on balance the record of Project 
Liberty is one of remarkable achievement. 

Given the scope and scale of this major effort, it is also not 
surprising that there have been administrative and programmatic issues 
that have challenged our grants processes. Our priority has been to 
assure that services were delivered in a timely and effective manner 
while assuring accountability for Federal funds. Overall, we believe 
that Federal oversight of Project Liberty has been appropriate, 
reasonable, and responsive to State and local needs. 

Prior to September 11, 2001, there had never been a Federal Emergency 
Management Agency (FEMA) Crisis Counseling Program grant for services 
in New York City. In fact, the State of New York's experience with the 
Crisis Counseling Program prior to September 11, 2001, had been limited 
to two small grants in 1996 for flooding in areas north of New York 
City. The New York State Office of Mental Health was engaged in 
significant disaster preparedness efforts prior to September 11, 2001, 
but the World Trade Center attacks impacted the entire metropolitan 
region of New York on a scale and level of severity that were 
unprecedented. 

In the aftermath of the attacks, Federal, State, city and county 
governments combined efforts to mobilize an outreach and counseling 
effort involving 10 county governments, two major government 
departments within the City of New York, and 210 community-based 
organizations. Project Liberty's success in mobilizing outreach and 
counseling on such a large scale is notable considering the 
extraordinary circumstances in which the project was developed. During 
the chaotic aftermath of the terrorist attacks, fiscal and 
administrative staff were reassigned from other program areas (often as 
in-kind contributions), new staff were hired, and fiscal and 
administrative systems were developed to implement a major new program 
effort within a matter of weeks. Throughout the program implementation, 
the project has made quality assurance adjustments to ensure 
accountability of funds, responsiveness to changing needs and high 
quality of services. 

The accomplishments of Project Liberty are truly noteworthy. As noted 
in project reports, Project Liberty providers have delivered nearly 
812,000 individual or family crisis counseling sessions to 
approximately 527,000 individuals. An additional 223,000 persons 
participated in one or more of the 69,000 group crisis counseling 
sessions held and more than 738,000 people attended one of the nearly 
42,000 group public education sessions offered by crisis counseling 
providers in New York City and in the ten county disaster area. 
Approximately 453,000 people received one-on-one education about 
program offerings, common reactions to a disaster, and general disaster 
mental health topics either in person or over the telephone. Over 19.7 
million pieces of educational materials were distributed. Overall, 
nearly 1.5 million people have been served through face-to-face 
counseling and group public education. [NOTE 1]

Working with researchers and noted clinical professionals, the project 
has also created important new models of crisis counseling service 
delivery that help bridge the gap between immediate crisis response and 
more intensive clinical services. Even as the project closes down its 
operations, we are continuing to receive results from State and Federal 
evaluation efforts, which will help us prepare for future disasters and 
acts of mass violence. 

Response to GAO Concerns about New York City Department of Education 
Claims: 

The draft report describes challenges with the process of reimbursing 
claims from the New York City Department of Education for services 
delivered to children and youth. Specifically, the GAO report raises 
questions about the veracity of the New York City Department of 
Education's Chief Financial Officer's attestation that internal 
controls were in place for payments for personnel, other-than- 
personnel, and community-based organization expenses. In order to 
answer the questions raised by the GAO report, SAMHSA is recommending 
that the New York State Office of Mental Health conduct an independent 
project audit of these claims. SAMHSA does support the reimbursement of 
the New York City Department of Education for all supported claims for 
service delivery. Project Liberty data indicate that approximately 
408,000 individuals have been served through face-to-face counseling or 
public education through the Department of Education. [NOTE 2] During a 
recent site visit, the New York City Department of Education's Chief 
Financial Officer indicated that documentation was available to support 
all claims and that the Department of Education would prepare 
documentation to support claims as necessary. 

Response to GAO Assessment of SAMHSA Oversight: 

The draft report states that "SAMHSA was not in a position to exercise 
a reasonable level of oversight to ensure that funds were used 
efficiently and effectively in addressing the needs of those affected 
by the September 11 terrorist attacks." The report states that "while 
SAMHSA provided oversight of Project Liberty's delivery of services, it 
provided only limited oversight of financial information reported by 
Project Liberty about the cost of those services." We disagree strongly 
with both of these statements. 

While the challenges of Federal oversight for Project Liberty have been 
daunting, it is our position that both FEMA and SAMHSA have, in fact, 
exercised careful stewardship of Federal funds under extraordinarily 
challenging circumstances. Our oversight has been consistent with the 
existing legal and regulatory framework for the program, Federal grants 
management policies and procedures, and existing fiscal and 
administrative systems at the local and State levels. 

In order to oversee a project of this scale, it has been critical to 
build an oversight and monitoring partnership with the New York State 
Office of Mental Health. SAMHSA staff worked intensively at the outset 
to help design a project structure that would assure accountability and 
appropriate oversight at each level of government while also allowing 
flexibility to address changing circumstances and needs. As noted 
earlier in this letter, Project Liberty involved 10 county governments, 
two major government departments within the City of New York, and 210 
community-based organizations. It is neither reasonable nor appropriate 
for the Federal Government to exercise direct financial control of 
budget adjustments within each of these jurisdictions and subproviders. 

The State of New York did provide financial data on a routine basis for 
review. Financial reporting has been provided in the SF-269 Financial 
Status Report format, consistent with standard grants reports, as well 
as in more detailed fiscal reports. The SF-269 format, which is the OMB 
approved format for financial reports from grantees, does not include 
categories that compare to original budgets. In order to provide FEMA 
and SAMHSA with additional information on the financial status of the 
project, the State of New York provided additional financial updates on 
a routine basis. SAMHSA monitored the allocability, allowability and 
reasonableness of project expenditures. 

We acknowledge that the revised budget summarized in the GAO report was 
not updated comprehensively after the State responded to the conditions 
of the original award, but we would note that SAMHSA did request and 
receive updated budget information from the State in several instances, 
particularly during the period of project extensions. The Regular 
Services Program (RSP) budget included in the GAO report is not 
comparable to reported expenditures in part because if expense 
classification differences. We note that the GAO did not cite problems 
with actual program expenditures. Instead, concern appears to center on 
differences between the classification of budgeted and reported 
expenditures. 

The budget referred to by GAO was not prepared in the same format as 
reported expenditures, which were intended to provide a rapid update to 
the Federal Government on the status of expenditures while contracts 
and vouchers were still in process. Based on our discussions with the 
New York State Office of Mental Health, we believe that inconsistent 
categorization of expenses accounts in large part for the 
classification discrepancies in the reporting noted in Table 2. 
Comparison of Project Liberty's RSP Reported Expenditures to Budget 
from June 14, 2002 through September 30, 2004. For example, based on 
our discussions with State staff, the budget line item "crisis 
counseling," which was originally approved in order to allow 
implementation of a fee-for-service outreach approach reflects service 
contracts reported by the New York City Department of Health and Mental 
Hygiene and includes personnel services. 

At several points in the project, the New York State Office of Mental 
Health has requested approval for major budget adjustments and has 
provided revised budget documentation in response to SAMHSA requests. 
Our review of project paperwork disclosed classification 
inconsistencies. We have discussed the inconsistencies in the 
classification of expenses with the State and are requesting a review 
of all expense classifications in preparation for the final report and 
fiscal close-out of the project. 

As noted in the GAO report, SAMHSA reviewed State single audit reports 
performed on an annual basis in accordance with OMB Circular A-133. The 
FY 2001, 2002 and 2003 audits disclosed unqualified audit opinions over 
both financial statements and the State's administration of Federal 
programs. The reports cite no reportable conditions and no material 
weaknesses. Results of the single audits are one of the tools SAMHSA 
uses to assess project and grantee risk. Results of these audits 
disclose no risk with this grantee. 

Classification as high risk simply on the basis of total estimated 
project expenditures would, in our opinion, be inappropriate. It should 
be noted that Federal regulations assign responsibility for monitoring 
sub-awards to the grant recipient. There is no current regulatory 
mechanism allowing SAMHSA to assess risk on a "complex Federal, state 
and local government environment" as specified in the GAO report. 

SAMHSA Response to Recommendations in Draft GAO Report: 

The draft report includes recommendations specifically related to 
Project Liberty, as well as general recommendations related to the 
Crisis Counseling Assistance and Training Program. 

Recommendations Regarding Project Liberty: 

The GAO report recommends that to ensure proper and timely expenditure 
of remaining Project Liberty funds, FEMA should work with SAMHSA to: 

* Provide assistance to New York City and State officials in 
appropriately resolving issues surrounding the New York City Department 
of Education expense reimbursements; and,

* Determine whether an independent review of the propriety of the use 
of funds for payments to the New York City Department of Education is 
needed. 

SAMHSA Response: 

SAMHSA has no objections to these specific recommendations related to 
the close-out monitoring of Project Liberty. SAMHSA is prepared to work 
with FEMA to determine whether an independent review of the propriety 
of the use of funds for payments to the New York City Department of 
Education is needed. 

FEMA and SAMHSA are currently in the process of reviewing an 
administrative extension of the RSP grant to New York that supports 
Project Liberty. SAMHSA has proposed conditions that will help address 
concerns raised in the GAO draft report. Based on recent site visits 
and plans presented in the State extension request, we expect that 
remaining fiscal close-out issues involving the New York City 
Department of Education can be addressed between now and the proposed 
extension date of September 30, 2005. 

The proposed conditions of the extension are as follows: 

1. The State of New York must conduct an independent project audit of 
claims made by the New York City Department of Education. 

2. The State must provide bi-weekly written updates on the process of 
fiscal close-out, with particular emphasis on progress in completing 
the process of certification and reimbursement of claims by the New 
York City Department of Education, as well as updates on the process of 
audits and audit recoveries among other service providers. 

3. By July 1, 2005, the State shall provide an estimate to SAMHSA of 
all remaining funds required for program close-out so that SAMHSA can 
recommend and FEMA can release all necessary remaining funds by 
September 30, 2005. 

4. In reviewing program documentation, SAMHSA has noted that although 
the State submitted a revised budget in response to original award 
conditions, the classifications of budget categories have not been 
consistent with the major budget categories of the SF-424. For example, 
personnel expenditures by subcontract agencies are most appropriately 
classified under the heading of subcontracts for the purpose of State 
budgets. The State must review expense classification to ensure 
consistency with the classifications of the SF-424. SAMHSA's Office of 
Grants Management is available to provide guidance on appropriate 
documentation according to the SF-424 categories. In preparation for 
program close-out and the final program report, the State must evaluate 
the classification of its expenditures for the project and report on 
expenditures using categories from the originally approved budget 
appropriately classified within the SF-424 categories. 

Recommendations Regarding Oversight of Future Crisis Counseling Program 
Grants: 

To strengthen Federal financial oversight of future Crisis Counseling 
Program (CCP) grants, the GAO report recommends that FEMA should work 
with SAMHSA to: 

- Require the recipients of CCP grants to submit updated budgets to 
reflect approved changes to the program;

- Revise the current risk assessment process to comprehensively 
identify and assess risks associated with CCP grants;

- Establish a process to update the risk assessment for significant 
program changes;

- Consider developing formal requirements for consistent 
classifications of expense data; and,

- Develop formal procedures to perform more detailed analyses of 
financial reports, including comparing actual expenditures and budgets 
to identify variations and obtain an understanding of the reasons for 
any unusual variations. 

In addition, the GAO recommends that FEMA should establish a clear time 
frame to complete its review of the CCP as expeditiously as possible to 
ensure that the lessons learned from Project Liberty will be used to 
help improve future programs funded by the CCP. 

SAMHSA Response: 

SAMHSA has no objections to the general recommendations regarding the 
Crisis Counseling Program, but we would note that these recommendations 
would need careful consideration to ensure appropriate implementation. 
Because the Project Liberty response to the September 11 attacks was 
dramatically different in scale and complexity than most FEMA Crisis 
Counseling Program grants, FEMA and SAMHSA must consider potential 
thresholds (e.g., size of grant, scope of impact) that may trigger more 
intensive processes of review and oversight, as well as more intensive 
Federal technical assistance. At the same time, we must recognize that 
State grant recipients, especially in the early stages of grant 
implementation, are likely to be overwhelmed. We must maintain high 
standards of accountability while being careful not to overburden State 
systems faced with the challenge of organizing service delivery in 
emergency situations. 

SAMHSA concurs that administering the September 11 grant will provide 
valuable experience for future projects. As part of an overall program 
review, SAMHSA staff will work with FEMA to develop more formalized 
processes for budget modification, particularly for large or unusual 
programs with multiple extension requests or major program 
modifications. Likewise, SAMHSA will work with FEMA to formalize 
requirements for consistent classifications of expense data. 

As we have noted in meetings with GAO staff, FEMA and SAMHSA are 
currently engaged in a comprehensive review of program procedures to 
assure Federal monitoring and technical assistance efforts within the 
Crisis Counseling Assistance and Training program are of high quality. 
We are proud of our record of service to communities impacted by the 
September 11 attacks and will work with FEMA to strengthen the 
program's ability to meet future challenges. 

Sincerely, 

Signed by: 

Charles G. Curie, M.A., A.C.S.W.
Administrator: 

NOTES: 

[1] FEMA-1391-DR-NY Tenth Quarterly Report, received by SAMHSA May 10, 
2005. 

[2] FEMA-1391-DR-NY Tenth Quarterly Report.

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Linda Calbom, (202) 512-8341. 

Acknowledgments: 

Robert Owens (Assistant Director), Donald Neff (Auditor-in-Charge), 
Lisa Crye, Edward Tanaka, and Brooke Whittaker made key contributions 
to this report. 

(190128): 

FOOTNOTES

[1] In March 2003, FEMA became part of the Department of Homeland 
Security. Most of FEMA--including its disaster assistance efforts--is 
now part of the department's Emergency Preparedness and Response 
Directorate; however, it has retained its name and individual identity 
within the department. We therefore simply refer to FEMA in this 
report. 

[2] In the past, only individuals from a declared disaster area were 
eligible to receive counseling services. However, because of the broad 
impact of the September 11 terrorist attacks, residents from New 
Jersey, Connecticut, Massachusetts, and Pennsylvania were also eligible 
to receive services from Project Liberty. 

[3] Although the ISP grant was awarded to Project Liberty on September 
24, 2001, the grant gave Project Liberty the authority to reimburse 
service providers for services they began to provide immediately after 
the terrorist attacks on September 11, 2001. 

[4] Pub. L. No. 93-288, 88 Stat. 143 (1974), as amended. The Stafford 
Act authorizes the public assistance program that gives FEMA authority 
to provide assistance, defines basic program criteria and eligibility, 
and authorizes FEMA to publish regulations. 

[5] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999), which can be 
found at www.gao.gov. 

[6] Reported expenditures represent amounts included in periodic 
financial reports submitted by the grantee, NYS OMH, to the federal 
government. According to Project Liberty officials, reported 
expenditures include program expenditures that have been paid, amounts 
advanced to service providers, and certain accrued but unpaid expenses. 
As of the end of our fieldwork in March 2005, the latest expenditure 
report submitted was for the period ending September 30, 2004. 

[7] At the time of the RSP grant award for Project Liberty, FEMA's 
regulations provided for a maximum grant term of 9 months with one 
extension of 90 days. FEMA amended the regulations effective March 3, 
2003, to allow for extensions for more than 90 days for disasters of a 
catastrophic nature when in the public interest. See 44 C.F.R. 
206.171(g)(4)(2004). 

[8] The Single Audit Act of 1984, as amended (31 U.S.C. § 7502 (a)), 
required that nonfederal entities that spend $300,000 or more in 
federal funding under more than one program undergo single audits. In 
2003, the threshold was raised to $500,000 for fiscal years ending 
after December 31, 2003. 

[9] New York City's Single Audit Act audit for fiscal years 2002 and 
2003 resulted in unqualified opinions for the city's financial 
statements, no reported weaknesses in internal control, and no reported 
instances of noncompliance. 

[10] Internal controls are an integral component of an organization's 
management that provide reasonable assurance that the organization 
achieves its objectives of (1) effective and efficient operations, (2) 
reliable financial reporting, and (3) compliance with laws and 
regulations. For more information on internal controls, see GAO/AIMD- 
00-21.3.1, which can be found at www.gao.gov. 

[11] Project Liberty's ninth quarterly report, which includes reported 
expenditures through September 30, 2004, was the last report issued by 
the end of our fieldwork on March 31, 2005. 

[12] In providing technical comments on a draft of this report, NYS OMH 
officials told us the balance had been reduced to $483,000 as of May 
13, 2005. 

[13] The internal control memos use the terms personal services, other- 
than-personal services, and community-based organization to denote the 
categories of expenses. 

[14] In providing technical comments on a draft of this report, NYS OMH 
officials told us that they plan to rely on NYC DOHMH to certify that 
the NYC DOEd claims are valid and meet the FEMA fiscal guidelines and 
documentation standards. Further, subsequent to completion of our audit 
fieldwork in March 2005, NYC DOHMH developed a random sampling 
methodology that will be used to sample 20 percent of provider claims 
for each of the NYC DOEd school years. 

[15] According to RFMH, as of April 28, 2005, audits of 92 providers of 
service had been completed and 7 were in process. RFMH further stated 
that these audits will cover approximately $50.5 million, or 42 
percent, of total reported expenses for Project Liberty of $121 million 
through September 30, 2004. NYC DOEd, the New York City Fire 
Department, and certain other organizations were not selected for audit 
by NYC DOHMH. 

[16] The ISP grant was awarded to Project Liberty on September 24, 
2001, and authorized Project Liberty to reimburse service providers for 
expenses it incurred beginning immediately after the terrorist attacks 
on September 11, 2001. 

[17] SAMHSA classifies grantees as either high risk or not high risk. 

[18] See 45 C.F.R. § 92.12 (2004). 

[19] The RSP grant award for Project Liberty of $132.1 million almost 
equaled the total amount of RSP grant awards by FEMA for crisis 
counseling in the history of the program. 

[20] NYS OMH contracted with researchers at the Mount Sinai School of 
Medicine to pilot methodologies for obtaining feedback from service 
recipients. These methodologies included written surveys and telephone 
interviews. According to NYS OMH, individuals who participated in the 
written surveys and telephone interviews were representative of those 
served by Project Liberty in terms of gender, age, race/ethnicity, and 
preferred language. The written survey that had been piloted was 
provided to all of Project Liberty's crisis counseling programs for 
distribution. The written surveys asked service recipients about the 
Project Liberty services they used, their opinions of the services, and 
their reactions to the terrorist attacks on September 11. In February 
2004, NYS OMH reported results from its recipient surveys based on a 
total of 357 surveys collected. 

[21] In August of 2003, NYS OMH distributed 1,500 surveys to all 
organizations providing crisis counseling. Each organization's director 
was asked to give a survey to each staff member. Staff members were 
asked to rate Project Liberty using a four-point scale (poor, fair, 
good, or excellent). NYS OMH reported results from its survey based on 
a total of 265 surveys that were returned. 

[22] According to NYS OMH officials, service providers' staffs were 
responsible for completing encounter log forms documenting their 
encounters with service recipients and providing this information to 
NYS OMH for analysis. NYS OMH's data collection efforts were 
supplemented with site visits to service providers, which covered the 
use of encounter logs. 

[23] According to NYS OMH, this low response rate resulted, in part, 
because of the challenge in obtaining feedback from recipients, who 
were anonymous as required by the CCP. 

[24] NYAM conducted two telephone surveys. The sampling frame for the 
first survey was adult residents of Manhattan living closest to the 
World Trade Center, and the sampling frame for the second survey 
included all adults in New York City with an oversampling of residents 
of Manhattan living closest to the World Trade Center to permit 
comparison between the two surveys. Both surveys used random-digit 
dialing. NYAM reported that 988 individuals responded to its first 
survey, and 2,001 responded to its second survey. 

[25] According to NYS OMH, NYAM conducted a third survey, which showed 
that the percentage of respondents who were aware of Project Liberty 
increased from January 2002 through September 2002, from 24 percent to 
53 percent. 

[26] Sasha Rudenstine and others, "Awareness and Perceptions of a 
Communitywide Mental Health Program in New York City After September 
11," Psychiatric Services, vol. 54, no. 10 (2003). 

[27] According to NCPTSD, it chose the interview subjects based on 
input from NYS OMH management. 

[28] In 2002, we reported that FEMA and SAMHSA had not evaluated the 
effectiveness of the disaster crisis counseling program and recommended 
that the Director of FEMA work with the Administrator of SAMHSA to 
evaluate the effectiveness of the program. See GAO, Mental Health 
Services: Effectiveness of Insurance Coverage and Federal Programs for 
Children Who Have Experienced Trauma Largely Unknown, GAO-02-813 
(Washington, D.C.: Aug. 22, 2002). 

GAO's Mission: 

The Government Accountability Office, the investigative arm of 
Congress, exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548: 

To order by Phone: 

Voice: (202) 512-6000: 

TDD: (202) 512-2537: 

Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director,

NelliganJ@gao.gov

(202) 512-4800

U.S. Government Accountability Office,

441 G Street NW, Room 7149

Washington, D.C. 20548: