Summary
The Cerro Grande Fire Assistance Act mandated that GAO annually audit all claim payments made to compensate the victims of the Cerro Grande Fire in northern New Mexico. For this second report on this topic, GAO determined whether the Federal Emergency Management Agency (FEMA), which is now a part of the Department of Homeland Security, (1) had revised its policies and procedures to address prior GAO recommendations and processed and paid claims consistent with that guidance and (2) properly reported such payments to the Congress.
FEMA implemented corrective actions to address the recommendations from GAO's prior report to strengthen its policies and procedures. GAO found that claims were processed, approved, and paid in accordance with FEMA's established applicable guidelines, providing adequate supporting documentation and evidence of supervisory reviews. However, as discussed below, claimed amounts approved for payment but not paid were not properly tracked in the Office of Cerro Grande Fire Claims' (OCGFC) payment approval system. FEMA's report to the Congress included somewhat overstated claim payment information. The report used claimed amounts approved by OCGFC for payment, rather than amounts actually paid by FEMA. This occurred because FEMA had not reconciled the approved amounts from its payment approval system to amounts paid per its accounting system and was not aware of the differences, which amounted to about $12 million, or 3 percent of total reported payments, as of September 7, 2002. FEMA is currently attempting to reconcile the approved amounts with the paid amounts. This difference resulted because approved amounts that were not paid when claims were delayed for appeal or cancelled for other reasons were not removed from or adjusted in the payment approval system. As a result, the claim payment information reported to the Congress does not provide a completely accurate picture of OCGFC claim payments. This information was also used by FEMA to determine its request for additional funding. Since FEMA received less than it requested, this error likely did not result in an appropriation in excess of amounts needed to pay claims. During its review, GAO also noted that FEMA's estimate of its unfunded claims liability increased by $91 million from September 30, 2001, to October 2, 2002. While FEMA's external auditors found that FEMA used a reasonable methodology to calculate the most recent estimate, they were unable to explain the reason for the increase in the estimate. This occurred because FEMA changed the methodology used but did not provide a crosswalk between the two approaches. In April 2003, FEMA officials stated that they planned to contract for an analysis to be performed to determine the effect that the change in methodology and other factors had on the calculation of the estimated liability.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: The Secretary of the Department of Homeland Security should direct the Emergency Preparedness and Response Directorate to complete the reconciliation of the amounts approved for payment in its payment approval system to amounts actually paid in FEMA's accounting system and correct all identified errors in its payment approval system.
Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response
Status: Implemented
Comments: On July 2, 2003, OCGFC provided its corrective action plan, which states that it had implemented an automated research of partial and final payments which resulted in successful reconciliation of approximately 90 percent of all payments from the program inception to the project target date of February 19, 2003. OCGFC staff manually researched claimant records and investigative items for those payments that could not be reconciled automatically. As of February 19, 2003, the reconciliation was complete for all but approximately $5,000 out of $426.3 million approved in the payment approval system and paid in FEMA's accounting system. As part of its fiscal year 2003 annual audit, GAO will perform testwork to follow-up on the status of the reconciliation.
Recommendation: The Secretary of the Department of Homeland Security should direct the Emergency Preparedness and Response Directorate to perform monthly reconciliations of the approved claim amounts in its payment approval system with the actual amounts reported in its accounting system as paid by DFC for as long as both systems are used to track and report paid amounts or request additional funding.
Agency Affected: Department of Homeland Security: Directorate of Emergency Preparedness and Response
Status: Implemented
Comments: In OCGFC's action plan, submitted to GAO on July 2, 2003, OCGFC stated that due to the magnitude of the initial reconciliation (from program inception to February 19, 2003), reconciliation of claims approved and paid between February 19, 2003, and April 30, 2003, is in progress and is nearly complete. Reconciliation of claims approved and paid between May 1, 2003, and May 31, 2003, will occur in July. Monthly reconciliations will follow for each succeeding month until program closeout. As part of its fiscal year 2003 annual audit testwork, GAO will follow-up on the status of the monthly reconciliations.
