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Disaster Assistance: Opportunities to Improve Cost-Effectiveness Determinations for Mitigation Grants

RCED-99-236 Published: Aug 04, 1999. Publicly Released: Aug 04, 1999.
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Pursuant to a legislative requirement, GAO reviewed 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, focusing on: (1) the approaches FEMA and the states use to ensure that program grants are targeted to cost-effective mitigation projects; and (2) whether the approaches ensure that the mitigation measures are cost-effective.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Directorate of Emergency Preparedness and Response To ensure that only cost-effective projects are funded through the Hazard Mitigation Grant program, the Director, FEMA, should establish an analytical basis supporting the cost-effectiveness of acquiring substantially damaged properties in floodplains.
Closed – Implemented
The Federal Emergency Management Agency (FEMA) now requires that mitigation grant applicants use FEMA-approved methodologies and software to demonstrate the cost-effectiveness of their projects to ensure that the calculations and methods are standardized, facilitating the project evaluation process. FEMA has developed a suite of Benefit-Cost Analysis (BCA) software for a range of major natural hazards: earthquake, fire (wildland/urban interface fires), flood (riverine, coastal A-Zone, Coastal V-Zone), Hurricane Wind (and Typhoon), and Tornado. Version 3.0 of the Mitigation Benefit-Cost Analysis (BCA) Toolkit Compact Disk (CD) was released in July 2006 and the BCA Toolkit is available through FEMA's Benefit-Cost Analysis Technical Assistance Helpline. In addition, on November 26, 2008, FEMA issued a memorandum establishing "Guidance for 2009 Alternative Determination of Cost Effectiveness for Eligible Insured Repetitive Loss Properties" that described how to use alternative methodologies to determine the cost-effectiveness of applicable mitigation projects.
Directorate of Emergency Preparedness and Response To better ensure the cost-effectiveness of other types of projects exempted from benefit-cost analysis, the Director, FEMA, should conduct periodic reviews of the FEMA projects after they have been implemented to determine whether they were cost-effective.
Closed – Implemented
The Federal Emergency Management Agency (FEMA) requested that the Multihazard Mitigation Council of the National Institute of Building Sciences conduct a study that applied cost-benefit analysis methodologies to a national statistical sample of FEMA mitigation activities over a ten-year period for earthquake, flood, and wind hazards. On January 24, 2006, council members issued a report, Benefit-Cost Analysis of FEMA Hazard Mitigation Grants, that summarized the results of their study and indicated that the overall benefit-cost ratio for FEMA mitigation grants for the period examined was about 4 to 1, though the ratio varied according to hazard and mitigation type.
Federal Emergency Management Agency To provide the best available data for analyzing the cost-effectiveness of proposed flood hazard mitigation projects, the Director, FEMA, should conduct postdisaster verifications of flood hazards for use in evaluating and possibly revising flood hazard map information.
Closed – Implemented
In its November 10, 1999, letter to the Chairman, Subcommittee on Oversight, Investigations, and Emergency Management, FEMA stated that it concurred with this recommendation. The specific steps it was taking to address the recommendation included two initiatives to improve the quality of the Flood Insurance Rate Maps (the Map Modernization Program and Cooperating Technical Communities). In addition, since 1999, FEMA has conducted 16 disaster flood verification projects that have helped assess flood mapping needs in these areas.
Federal Emergency Management Agency To provide the best available data for analyzing the cost-effectiveness of proposed flood hazard mitigation projects, the Director, FEMA, should make the agency's information on past insurance claims more readily available for FEMA staff conducting benefit-cost analyses.
Closed – Implemented
On February 9, 2000, FEMA issued a Memorandum to all Regional Office Mitigation Directors notifying them of the availability, via FEMA's internal network, of historical National Flood Insurance Program claims data for individual properties. As a result, staff conducting benefit-cost analyses now have information more readily available on past insurance claims.

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Cost effectiveness analysisDisaster relief aidEmergency managementEmergency preparednessFederal aid to statesstate relationsFlood controlFloodsGrants to statesRelief agencies