Disaster Assistance:

FEMA Can Improve Its Cost-Effectiveness Determinations for Mitigation Grants

T-RCED-99-274: Published: Aug 4, 1999. Publicly Released: Aug 4, 1999.

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Judy A. England Joseph
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Pursuant to a congressional request, GAO discussed how the Federal Emergency Management Agency (FEMA), in conjunction with the states, ensures the cost-effectiveness of projects funded under the Hazard Mitigation Grant Program.

GAO noted that: (1) the states and FEMA work together, using different approaches, to help ensure that hazard mitigation grants are awarded for cost-effective projects; (2) the states in GAO's review established procedures and priorities for identifying and selecting mitigation projects; (3) however, not all of them conducted formal analyses of their projects' cost effectiveness before submitting applications for their projects to FEMA; (4) FEMA uses benefit-cost analysis as its primary approach for ensuring that mitigation projects submitted by the states are cost-effective; (5) however, FEMA also exempts certain types of hazard mitigation projects from benefit-cost analysis, including projects that fund the removal of certain structures from floodways and floodplains and mitigation planning efforts; (6) FEMA officials stress a need for flexibility in assessing these projects, suggesting that benefit-cost analysis does not always apply to all mitigation projects, because of difficulties in quantifying the benefits of some projects and the time needed to gather data for conducting the analyses; (7) GAO's review of $20.1 million in funding for hazard mitigation projects in four states found that projects receiving the majority of this funding were considered cost-effective on the basis of the benefit-cost analyses conducted; (8) however, the best available information--such as flood damage information available from past insurance claims and updated information on flood hazards--was not always used in conducting the analyses; (9) GAO's review also found that projects receiving over one-third of the funding were exempt from benefit-cost analysis, even though no established analytical basis supported the exemption of the majority of these projects; (10) FEMA officials explained that some projects were difficult to evaluate against traditional quantitative benefit-cost criteria and the exemptions were meant to speed the delivery of grants to the states; and (11) establishing the basis for exempting these acquisition projects and reviewing the cost-effectiveness of other exempt projects after they have been implemented would help FEMA better ensure that these mitigation projects are cost-effective.

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