FEMA:

Action Needed to Improve Administration of the National Flood Insurance Program

GAO-11-297: Published: Jun 9, 2011. Publicly Released: Jun 9, 2011.

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The National Flood Insurance Program (NFIP) has been on GAO's high-risk list since March 2006 because of concerns about its long-term financial solvency and related operational issues. Significant management challenges also affect the Federal Emergency Management Agency's (FEMA) ability to administer NFIP. This report examines (1) the extent to which FEMA's management practices affect the administration of NFIP; (2) lessons learned from the cancellation of FEMA's attempt to modernize NFIP's insurance management system; and (3) limitations on FEMA's authority that could affect NFIP's financial stability. To do this work, GAO reviewed internal control standards and best practices, analyzed agency documentation, reviewed previous work, and interviewed relevant agency officials.

FEMA faces significant management challenges in areas that affect NFIP, including strategic and human capital planning; collaboration among offices; and records, financial, and acquisition management. For example, because FEMA has not developed goals, objectives, or performance measures for NFIP, it needs a strategic focus for ensuring program effectiveness. FEMA also faces human capital challenges, including high turnover and weaknesses in overseeing its many contractors. Further, FEMA needs a plan that would ensure consistent day-to-day operations when it deploys staff to federal disasters. FEMA has also faced challenges in collaboration between program and support offices. Finally, FEMA lacks a comprehensive set of processes and systems to guide its operations, in particular a records management policy and an electronic document management system. FEMA has begun to address some of these challenges, including acquisition management, but the results of its efforts remain to be seen. Unless it takes further steps to address these management challenges, FEMA will be limited in its ability to manage NFIP's operations or better ensure program effectiveness. FEMA also faces challenges modernizing NFIP's insurance policy and claims management system. After 7 years and $40 million, FEMA ultimately canceled its latest effort (NextGen) in November 2009 because the system did not meet user expectations. As a result, the agency continues to rely on an ineffective and inefficient 30-year old system. A number of acquisition management weaknesses led to NextGen's failure and cancellation, and as FEMA begins a new effort to modernize the existing legacy system, it plans to apply lessons learned from its NextGen experience. While FEMA has begun implementing some changes to its acquisition management practices, it remains to be seen if they will help FEMA avoid some of the problems that led to NextGen's failure. Developing appropriate acquisitions processes and applying lessons learned from the NextGen failure are essential if FEMA is to develop an effective policies and claims processing system for NFIP. Finally, NFIP's operating environment limits FEMA's ability to keep the program financially sound. NFIP assumes all risks for its policies, must accept virtually all applicants for insurance, and cannot deny coverage for high-risk properties. Moreover, additional external factors--including lapses in NFIP's authorization, the role of state and local governments, fluctuations in premium income, and structural and organizational changes--complicate FEMA's administration of NFIP. As GAO has previously reported, NFIP also faces external challenges that threaten the program's long-term health. These include statutorily required subsidized premium rates, a lack of authority to include long-term erosion in flood maps, and limitations on FEMA's authority to encourage owners of repetitive loss properties to mitigate. Until these issues are addressed, NFIP's long-term financial solvency will remain in doubt. GAO makes 10 recommendations to improve the effectiveness of FEMA's planning and oversight efforts for NFIP; improve FEMA's policies and procedures for achieving NFIP's goals; and increase the usefulness and reliability of NFIP's flood insurance policy and claims processing system. GAO also presents three matters for congressional consideration to improve NFIP's financial stability. DHS concurred with all of GAO's recommendations.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: As Congress considers NFIP reforms and reauthorization, it may wish to consider ways to better ensure the long-term financial stability of the program, such as 1) allowing NFIP to charge full-risk premium rates to all property owners and providing assistance to some categories of owners to pay those premiums; 2) authorizing NFIP to account for long-term flood erosion in its flood maps; and 3) clarifying and expanding FEMA's ability to increase premiums or discontinue coverage for owners of repetitive loss properties who do not mitigate their properties or refuse FEMA's mitigation offers.

    Status: Closed - Implemented

    Comments: In 2012 Congress passed the Biggert-Waters Flood Insurance Reform and Reauthorization Act that among other things, took steps to betterd ensure the long-term financial stability of the program. These steps included requiring that FEMA use accepted actuarial principles in determining premium rates, eliminating subsidized premium rates for most property owners, allowing FEMA to account for long-term flood erosion, and creating a catastrophic loss reserve fund. While the ultimate effect of these changes is not yet known, they should improve NFIP's financial stability.

    Recommendations for Executive Action

    Recommendation: To improve strategic planning, performance management, and program oversight within and related to NFIP, the Secretary of DHS should direct the FEMA Administrator to provide strategic direction and guidance to the process for developing a comprehensive strategy for FIMA operations; establish a firm timeframe for and complete the development of this strategy; and take steps to ensure that this strategy has appropriate performance goals and measures to track NFIP's progress.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: In November 2012 FEMA completed a multi-year planning document for the Flood Insurance and Mitigation Administration (FIMA), which administers NFIP. This document lays out FEMA's strategic direction and how FIMA's strategic goals will be incorporated within FEMA's goals. It also sets specific expectations for the completion and regular updating of FIMA's strategic planning documents, including peformance goals.

    Recommendation: To improve strategic planning, performance management, and program oversight within and related to NFIP, the Secretary of DHS should direct the FEMA Administrator to develop a comprehensive workforce plan according to PKEMRA that identifies agency staffing and skills requirements, addresses turnover and staff vacancies, and analyzes FEMA's use of contractors.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: According to FEMA officials, as of July 2013 FEMA's Office of the Chief Component Human Capital Officer has begun an initiative to align FEMA's human capital strategy with the Quadrennial Homeland Security Review. FEMA expects this effort to enable them to meet the requirements set forth in the Post Katrina Emergency Management Reform Act, and expects the effort to be completed in October 2014.

    Recommendation: To improve strategic planning, performance management, and program oversight within and related to NFIP, the Secretary of DHS should direct the FEMA Administrator to direct the FEMA Administrator to develop guidance for continuing operations when staff are deployed to respond to federal disasters and direct FIMA Acting Assistant Administrator to develop such a plan.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: As part of the development of FIMA's 2012 Continuity of Operations (COOP) Implementation Plan, FIMA has identifed critical staff as well as the key operations that need to continue when staff are deployed in response to a federal disaster and how operations will continue during such periods.

    Recommendation: To improve strategic planning, performance management, and program oversight within and related to NFIP, the Secretary of DHS should direct the FEMA Administrator to direct the FIMA Acting Assistant Administrator and the FEMA Mission Support Associate Administrator to develop protocols to encourage and monitor collaboration between FIMA and relevant support offices, including those for information technology, acquisition management, and financial management.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: FEMA officials stated that, as of July 2013, the Mission Support Bureau has an ongoing effort to meet with the FEMA program offices to better understand the needs of their customers and ecourage collaboration between the Bureau and these offices. FEMA expects to have completed meetings with all relevant offices by the end of the first quarter of fiscal year 2014.

    Recommendation: To improve FEMA's policies, procedures, and systems for achieving NFIP's program goals, the Secretary of DHS should direct the FEMA Administrator to consider the costs and benefits of implementing an interim system for FEMA and updating its document management policies and procedures while waiting for DHS to implement an agencywide electronic document management system.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: FEMA officials stated that, as of July 2013, FEMA is in the process of updating existing and records management policies, and when they are approved, they will be issued FEMA-wide. FEMA expects to complete this effort in the first quarter of fiscal year 2014. FEMA officials stated they are continuing to provide interim guidance while awaiting the implementation of a DHS-wide records management system.

    Recommendation: To improve FEMA's policies, procedures, and systems for achieving NFIP's program goals, the Secretary of DHS should direct the FEMA Administrator to ensure that FEMA regularly reviews unliquidated obligations within NFIP-related funds.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: FEMA officials provided docmentation of revised guidance for managing open obligations and evidence that the new guidance is being followed.

    Recommendation: To improve FEMA's policies, procedures, and systems for achieving NFIP's program goals, the Secretary of DHS should direct the FEMA Administrator to establish timelines for and complete the development and implementation of FEMA's revised acquisition process, in line with the DHS Acquisition Directive 102-01, including a rollout process with staff training and a mechanism to better ensure that all acquisitions undergo the necessary reviews.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: FEMA officials stated that, as of July 2013, they have made progress in the area of acquisistion management, and believeve that by October 2014 they will have taken the steps outlined in the recommendation. Officials stated that progress includes filling the majority of positions for a team of qualified acquisition personnel, beginning the pilot phase of an electronic contract filing and monitoring system, and making progress in hiring experienced contracting officers to work at disaster sites.

    Recommendation: To improve FEMA's policies, procedures, and systems for achieving NFIP's program goals, the Secretary of DHS should direct the FEMA Administrator to ensure that FEMA Mission Support's business process improvement efforts are expeditiously completed.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: According to FEMA officials as of July 2013, the FEMA Mission Support Bureau's Process Impovement Office has incorporated some lesson learned into its day to day operations. Other efforts, such as fact finding interviews and the development of a Financial Resource and Talent Management Process and the development of some criteria for successful operations, are underway but yet to be completed.

    Recommendation: To improve the usefulness and reliability of NFIP's flood insurance policy and claims processing system, the Secretary of DHS should direct the DHS Deputy Secretary, as the Chair of DHS's Acquisition Review Board (ARB), to provide regular oversight of FEMA's next attempt to modernize this system.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: FEMA has established an NFIP steering committee that has the responsibility of overseeing FEMA's next attempt to modernize it's policy and claims processing system. Members of this committee include the DHS Chief Information Officer, the FEMA Deputy Administrator, teh FIMA Acting Associate Administrator, the FEMA Chief Procurement Officer, the FEMA Chief Financial Officer, and the FEMA Chief Information Officer. The steering committee meets regulaly to discuss the current status of the legacy system as well as modernization efforts.

    Recommendation: To improve the usefulness and reliability of NFIP's flood insurance policy and claims processing system, the Secretary of DHS should direct the FEMA Administrator to ensure that FEMA's Chief Information Officer (CIO) applies lessons learned from the NextGen experience to the next modernization attempt. At a minimum, this effort should ensure that (1) all levels of system requirements are complete and clear and that key stakeholders are adequately involved in requirements development and management, (2) key test events are effectively planned and executed and problems identified during testing effectively managed, (3) project risks are proactively identified and mitigated, and (4) project office staffing needs are properly assessed and met.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: According to FEMA officials, FEMA has taken multiple steps to ensure that lessons learned from the failed implementation of the NextGen system are applied to future modernization efforts. These steps include: 1) Creating clear system requirements and involving key stakeholders in the evaluation of systems on an ongoing basis. There will be a formal signoff process for FEMA management team members. 2) Documenting requirements for key test events and creating a template for documenting test results. Business process owners will be involved in the creation and execution of the tests. 3) Creating a process for identification and mitigation of project risks. This includes regular briefings of the executive steering committee. 4) Creating an NFIP IT project management office, which was staffed with two deputy program executives hired form the private sector, each with significant IT experience. Additional staff have been added as workloads have increased.

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