Disaster Discourse: The Hagerty Blog

Perspectives on Disaster Recovery: How Blockchain Technology Can Make the Delivery of FEMA Public Assistance More Effective

Matthew Hochstein

Matthew Hochstein
Director of Client Delivery

Recently, Beth Zimmerman weighed in on a recent Department of Homeland Security Office of the Inspector General (OIG) recommendation to claw back a $2 billion agreement between the Federal Emergency Management Agency (FEMA) and the city of New Orleans to repair Hurricane Katrina related damages.  Having facilitated OIG audits initiated well after projects have allocated funding, I sympathize with Ms. Zimmerman’s plea. However, the question to me is why are we doing these audits after funding has been awarded projects have­ been completed?  I do not question the OIG’s mission, nor do I doubt the necessity to provide oversight to ensure that public funding is spent efficiently and effectively. I question the timing.

Concurrence on recovery strategy and resulting financial commitment should come in parallel, rather than after the fact.  Recommending a $2 billion claw back after work has already been performed does little to enhance taxpayer return on investment. It simply shifts the burden to the local jurisdiction. As an alternative, the OIG should assist and strengthen the project during formulation with those resources.  With the recent Harvey Relief Bill and recovery decisions being made now, the more we can share to inform those decisions, the stronger the recovery for the affected communities.  Enter the Blockchain and smart contracts.

Using Blockchain Technology to Increase Transparency in the Public Sector

No, this isn’t a post about bitcoin and the other cryptocurrencies which have dominated recent financial news.  This is about real use cases of blockchain technology.  UNICEF recently became one of the first public facing entities to embrace the Ethereum platform and the transparency it affords in asset transfers.  To address the corruption and management issues associated with tracking international grants, UNICEF is testing blockchain technology to securely and publicly track the status of those transfers.  No more “he said, she said.”  The transfer is logged into the blockchain, validated and stored in an open setting.  It cannot be altered or corrupted after validation as any change to the record would require a second validation.

How Can FEMA Use Blockchain Technology to Improve Program Delivery?

The FEMA Public Assistance (PA) program is incredibly complex and the political pressure that follows to rebuild from large disasters pushes decision making.  This pressure can force financial decisions before consensus on approach is formed as well as management systems to track the strategic decisions and resulting financial management.  As FEMA begins to modernize its own grant program, the PA program should consider evaluation blockchain as a use case.  Here’s why:

  • Ethereum provides a public blockchain capability with smart contract functionality. The Smart Contract can be scripted to mirror FEMA policy, the requirements of the disaster and enable all stakeholders to agree on funding and milestones – A smart contract gets the handshake early in the recovery and transparent to the public.  Damage can be logged, costs can be estimated and locked in the contract early in the recovery process.
  • Funding is dispersed based upon contract enabled milestones. All are now incentivized to managed the contract parameters, execute projects quickly and within budget and push the recovery forward.  Payment is made to service providers based on the smart contract milestones and after validation of those milestones.   Responsibility in overruns are shared by all, not a few and payment is based upon performance of agreed upon requirements.
  • The Blockchain requires multi-party validation. With blockchain, all stakeholders can validate the parameters have been met as the project progress.  While the application of Moore’s Law is in question, there is no debate that computing speed has advanced decision making in many industries to real time.  The effectiveness and value of an oversight committee performing an audit, sometimes years later, lessens by the day.  Oversight can occur in parallel as the project progresses through the Blockchain, and thus, strengthening the effectiveness of the oversight informing project management.  The feedback can be used to get projects back on track and lessen any further waste.

The Department of Homeland Security’s Science and Technology Directorate is on the right track.  Recently awarding over $1.3 million in grants to explore blockchain technology through their Small Business Innovation Research program.  This is a great first step to get familiar with the power of the Blockchain, however, more can be done.  FEMA should push their parent Department to spend less resources on ineffective oversight audits and more on enabling the Public Assistance to be more effective and efficient.