There were several interesting findings which only once again support the need to revise the Stafford Act and the National Response Plan.
This is a bit complicated but still very timely and a rewarding read for appreciating your gubmint at work… First–as of a year agothe federal government could have earned $1 million in interest had a portion of that foreign aid been put in an interest bearing account and second– the aid ran smack dab into the contentious 10% federal match requirement of the Stafford Act. Here is a summary of the background info to understand…
Over $400 million in cash was pledged by foreign countries. In the end $126 million was received. $66 million was accepted by FEMAunder the Stafford Act (important later) and spent on a case management grant awarded to the United Methodist Committee on Relief to help Katrina affected households ID needs and assisstance. Thus $60 million remained.
The National Response Plan (NRP) states the Department of State (DOS) coordinates offers of international assistance. So their Katrina Task Force evaluated foreign aid offers of cash and if it accepted an offer they told donor countries to “wire transfer the funds to a designated Department of the Treasury account maintained at the Federal Reserve Bank of New York specifically for DOS.”
Here’s where it gets complicated. Though the NRP designates DOS to coordinate, the plan also outlines that issues of policy adjudication or anything out of the normal purview of relevant agencies, acts or directives is elevated for resolution to the National Security Council (NSC). So the NSC “convened an interagency working group to decide how the donated funds would be used.” Under consensus from the NSC group, FEMA got the $66 million mentioned above. But the NSC group had other plans for the remaining $60 million so it could not earn interest because the Treasury could pay interest on funds FEMA accepted under the Stafford Act but it did not have statutory authority to otherwise pay interest on the DOS account where the remainder waited. And important to note…”The U.S. government would be responsible for paying the interest if these funds were held in an account at the Treasury that can earn interest.”
The Remaining $60 Million
The NSC working group decided it wanted the remaining $60 million to go to “bricks and mortar” projects, namely schools. But under the Stafford Act FEMA can only repair schools and not rebuild them.
And here is where we meet the 10% matching requirement. From the GAO report…
Also, according to a DHS official, the Act would have required that receiving entities match FEMA funds for these purposes.However, because of the devastation, the entities would have difficulty matching FEMA funds, which in essence limited FEMA from doing these types of projects. According to DHS, FEMA considered whether it would be useful for donated funds to contribute to the non-federal share for applicants having trouble meeting the non-federal share, but would need legislative authority to use it to match federal funds. We contacted NSC to further discuss these matters; however, NSC did not respond to our requests for a meeting. On March 16, 2006, DOS and the Department of Education signed a Memorandum of Agreement regarding the use of $60 million of the international cash donations. We did not review the details of this agreement. (my emphasis)
This is quite incredible and goes to the heart of the problem with the matching requirement of the Stafford Act. Not only do we see predicted what has been painfully born out…that local and state entities would have trouble matching funds but further, because of that fact, the matching requirement in effect stood in the way of FEMA doing recovery projects. It’s your classic chicken and egg conundrum.
It looks as though FEMA wanted that $60 million to go to state and locals to use for the required match requirement, a requirement still in contention, one which Bush will not waive and one that we NOW see has been a major obstacle to the Gulf Coast recovery. So give FEMA some credit on this one.
On the other hand the question remains of why legislative authority
was not pursued? It would be interesting to know more about the role of
the mum NSC group in this.
As for the $60 million?WaPo reported only $10.4 million has made its way to Gulf Coast schools.
And what was happening with the money all this time? Well last year the GAO reported it sat in a State Department account earning no interest…
the NSC-led interagency working group was reviewing various proposals
on the further use of the funds beyond the initial $66 million, the
remaining $60 million was being held in a DOS account at the U.S.
Treasury that does not pay interest.
Had the foreign monetary donations been placed in Treasury securities, we estimate that by February 23, 2006, the remaining funds for relief efforts would have increased by nearly $1 million.
Although Treasury lacks the authority to invest the foreign monetary
donations received by DOS, the FEMA account does permit the government
to protect the purchasing power of foreign monetary donations. (my
I don’t know if it still sits in a non
interest bearing account (bets anyone) with State or DoE or who but if
so I wonder how much more interest would have been gained this past
Of course GAO recommends among other things the following for executive (ie Bush our “MBA president”) action …
policies, procedures, and plans to help ensure international cash
donations for disaster relief and assistance are accepted and used
appropriately as needed.
management options as discussed in the conclusions section above and
place international cash donations in an account that would pay
interest while decisions are pending on their use to maintain the
purchasing power of those donations.
have a show of hands of those who think that $60 million would have
moved faster out of the federal pipeline had the feds had to pay
interest on it.