Summary

This report formally transmits the briefing in response to P.L. 110-329, the Consolidated Security, Disaster Assistance and Continuing Appropriations Act, that required GAO for the fourth year to review the methodology the Department of Homeland Security (DHS) and the Federal Emergency Management Agency (FEMA) use to allocate Homeland Security Grant Program (HSGP) grants, including the risk assessment methodology they use to determine which urban areas are eligible to apply for grants. HSGP includes the State Homeland Security Program (SHSP) and Urban Areas Security Initiative (UASI) grants. Our objective was to identify any changes in the methodology for risk assessment and grant allocation for 2009 and to assess the reasonableness of the methodology. We analyzed DHS and FEMA documents including the fiscal year 2008 and 2009 risk analysis models and grant guidance and interviewed DHS and FEMA officials about the changes in the 2009 model. We did our work between October and December 2008 in accordance with generally accepted government auditing standards. We briefed the mandated reporting committees with two briefings in November 2008 and December 2008 on the results of our analysis.

DHS has adopted a process of continuing improvement in its methods for assessing risk and measuring grant applicants' effective use of resources. SHSP and UASI grant allocations continue to be based on a three-step process: (1) risk assessments to determine areas eligible to apply for grants, (2) effectiveness assessments of the grant applicants' investment justifications, and (3) final grant allocations. The methodology is described in detail in our 2008 report. There were minor changes in the risk assessment for 2009 and no changes in the process used for the effectiveness assessment and final grant allocations. Generally, we found that DHS has constructed a reasonable methodology to assess risk and allocate funds. DHS uses empirical risk analysis and policy judgments to select the urban areas eligible for grants (all SHSP grantees are guaranteed a specified minimum percentage of available grant funds) and to allocate SHSP and UASI funds. DHS continued to include three basic variables in its risk assessment--threat, vulnerability, and consequences. For fiscal year 2009, DHS changed some elements of the inputs used for the threat, economic, and national security indexes used in the model. The value of each of these indices is given a specific weight in the risk assessment (for example, the threat index is weighted at 20 percent and the population index at 40 percent of the final risk score). DHS continued to consider all areas of the nation equally vulnerable to a successful terrorist attack and assigned every state and urban area a vulnerability score of 1.0 in the risk analysis model. Thus, as a practical matter, the final risk scores are determined by the threat and consequences scores. The result of the UASI risk assessment is a list of UASI jurisdictions eligible for grants. A total of 62 urban areas were eligible for grants in 2009 (60 were eligible in 2008). In response to grantee feedback, in 2009, DHS for the first time provided each eligible State and UASI area its estimated target grant allocation in the Fiscal Year 2009 Homeland Security Grant Program Guidance and Application Kit. FEMA believes this change will enable grantees to better target their investment justifications in their grant applications as the amounts requested should more closely match final actual allocations. Applicants may submit applications for up to 110 percent of their targeted allocation. Final 2009 allocations will be based on the targeted allocations as adjusted by applicants' effectiveness scores, up to a maximum of plus or minus 10 percent of their targeted allocation. As in 2008, the seven urban areas with the highest risk scores (Tier I) will be collectively allocated 55 percent of total available fiscal year 2009 funds and the remaining 55 urban areas (Tier II) will be collectively allocated 45 percent.