Disaster Discourse: The Hagerty Blog

Making FEMA Disaster Recovery More Efficient

Making FEMA Disaster Recovery More Efficient: How the Disaster Assistance Reform Act of 2015 Streamlines Administrative Requirements

Disasters that cause widespread damage make headlines.  Due to the need to save lives and the associated costs, the immediate response and subsequent long-term recovery receives significant media coverage, too.  And these issues are typically the first to be addressed by officials from affected communities or emergency management professionals.

But there’s a critical aspect of response and recovery that is often overlooked: who pays for the cost of administering federal recovery programs?

The costs of administering federal disaster recovery programs are not trivial.  The Government Accountability Office (GAO), Congress’s non-partisan watchdog agency, found that between 2004 and 2013, states and local communities recovering from a disaster spent $1.7 billion on administering the FEMA Public Assistance (PA) program – about 4 percent of the $45.3 billion awarded during that period.

On July 15th, Hagerty Consulting posted a piece that highlights some key features of the FEMA Disaster Assistance Reform Act of 2015.  Specific provisions in the Act will change the way local governments claim and are awarded funds to cover FEMA PA Direct Administrative Costs (DAC).

PA Chart

One change which may have immediate effect on applicants is the establishment of fixed reimbursement rates for the costs of administering the program. When compared to the current system in which local jurisdictions are required to track administrative expenses to specific tasks associated with individual grants (referred to as Project Worksheets or PWs), the change may remove some of this administrative burden on communities administering a recovery. Let us explain.

Administering a Disaster Recovery

Recovering from a disaster incurs significant expense, time, and administrative resources as states and jurisdictions address the complexities of long term recovery. Additionally, initiating the disaster recovery process doesn’t absolve a municipal government from carrying out normal responsibilities and functions that citizens expect and depend on daily.  A few examples of those critical services: police departments need to provide regular patrols, public works departments need to maintain roads and bridges and ongoing projects, and central administrative offices need to monitor payroll and overtime, approve expense budgets, and monitor capital spending.

Major disasters disrupt the systems that we depend on as citizens, result in rapid increases in spending to protect life, health, and public safety and repair damaged public infrastructure. To help offset these costs not typically incorporated into state and local budgets and assist in the strengthening the long term recovery, the federal government provides supplemental funding through the FEMA PA program to subsidize these costs, but this funding does not come without additional oversight requirements, including compliance burdens that do not apply to non-federally funded projects and administrative, monitoring, and reporting requirements for grantees and sub-grantees that are specific to disaster recovery grants. These requirements can place stress on the resources of local governments as they continue delivering public services. All too often, these stresses result in disaster recovery taking a backseat.

FEMA allows for reimbursement of the administrative costs associated with administering the PA program through a mechanism referred to as Direct Administrative Costs (DAC).  These are costs associated with standing up and administering a recovery program. These costs can include:

  • Hiring additional staff on a temporary basis to provide administrative support,
  • Working with contracted subject matter expertise to prepare grants and assist in compliance and monitoring, and
  • Buying or leasing equipment to increase an office’s capacity.

If you have experience working and/or managing a disaster recovery, you know the difficultly in complying with the requirements of current FEMA policy. While oversight is necessary to protect taxpayers, tracking costs at the individual grant level places a huge burden on local jurisdictions and requires strategy and planning to navigate that burden.

The result that we see from our experience assisting states and jurisdictions navigate administrative cost tracking is that local governments seeking reimbursement through the PA program simply forgo some eligible reimbursement due to the administrative burden, which limits the overall financial benefit.

As written, the Reform Act establishes fixed rates to reimburse PA eligible applicants for the costs of administering the program. Under this act, states will be reimbursed 10 percent of the value of total eligible damage for administrative costs, with up to 6 percent going to the state as the grantee and no less than 4 percent being passed on to local jurisdictions as sub-grantees. Rather than attempting to track every expense to the level required under current policy, this reform moves towards the use of a fixed rate to cover administrative costs.

Returning to the GAO’s study cited above, between 2008 and 2013, FEMA obligated over $18.6 billion in Public Assistance grants to state, local, and tribal governments. In total, in that same period of time, FEMA only obligated $132 million in DAC, or 0.7 percent of the total amount of obligated funds, to offset increased burden for communities administering the PA program. Had the proposed DAC solution been in place, over $1.8 billion would have been available for administrative costs with up to $744 million going to local governments.

By making it less burdensome to claim DAC, state and local governments will have the necessary resources to increase staff to administer the PA program and to enter contracts with specialized consultants to acquire subject matter expertise in disaster recovery. Not only is this solution more equitable for state and local governments than current policy, we believe it will lead to better outcomes by allowing communities recovering from a disaster to focus on the recovery projects that matter while continuing to deliver public services as expected by their citizens.

What’s Next for the Disaster Assistance Reform Act?

The Disaster Assistance Reform Act was passed by the House of Representatives in February 2016, but it has yet to pass the Senate. Until the Senate moves on this bill, the reforms will not take effect. In a time of increasing partisanship, the Disaster Assistance Reform Act is a bipartisan measure that would greatly improve the effectiveness and efficiency of disaster recovery for state, local, and federal entities.  Please, take a moment to contact your Senator and let them know that the Disaster Assistance Reform Act is a priority for you. Ask them to place the needs of communities recovering from disaster first and pass this bill.