IEM Insights: The basics of the Disaster Relief Fund, or DRF, for those of us who aren’t Stafford Act experts or former FEMA CFO

IEM Insights: The basics of the Disaster Relief Fund, or DRF, for those of us who aren’t Stafford Act experts or former FEMA CFOThe Disaster Relief Fund (DRF), administered by the Federal Emergency Management Agency (FEMA), is the primary federal government’s funding source for general disaster relief programs and reimbursing States, Local governments, Tribes and Territories (SLTTs) for their response, recovery, and mitigation costs. The DRF has been in the news recently due to COVID-19 but, before we consider questions like “What will the DRF fund” or “Is there enough money in the DRF to cover the pandemic and all types of natural disasters?”, let’s look at some of the basics.  When discussing money, especially federal money, it is important to understand the fundamentals – where the money comes from and how is it being spent.

How does money get into the DRF?

Congress ultimately appropriates or sets aside funding to the DRF in their final approved (enacted) Annual Budget.[1] Funding for the DRF is included within FEMA’s annual budget, which is part of the Department of Homeland Security’s (DHS) Appropriations Bill approved by Congress for each fiscal year.

For any new catastrophic events (estimated at $500 million or more) that occur during the fiscal year, Congress has historically passed a supplemental appropriation to cover the response and the estimated recovery and mitigation costs for that year.  And as disaster recovery typically takes years, future costs beyond the current fiscal year are included in subsequent fiscal year annual budget requests.[i]

Which agency manages the DRF?

FEMA is fundamentally responsible for managing every penny obligated from the DRF to pay for Stafford Act eligible items.  The Stafford “Disaster Relief and Emergency Assistance” Act, as amended, is the legal authority for DRF expenditures, also known as allowable “eligible” costs.

What expenses are covered by the DRF?

Eligible activities funded under the DRF include FEMA’s disaster response, recovery and mitigation efforts as defined by the Stafford Act, for both emergency declarations and major disaster declarations. DRF eligible activities fall in to five categories:

  • Activities following a major disaster declaration – the majority of DRF spending, includes FEMA’s “Direct Disaster programs”, such as Individual Assistance (IA), Public Assistance (PA), and the Hazard Mitigation Grant Program (HMGP) programs;
  • Pre-declaration surge activities – such as deploying response teams or prepositioning equipment, as well as activities carried out before an emergency or disaster occurs to help prepare for and mitigate the impact;
  • Activity pursuant to an emergency declaration – any supplemental assistance to or by SLTTs for disaster response and recovery efforts to help protect life, property, public health and safety or lessen the threat of a disaster;
  • Fire Management Assistance Grants (FMAGs) for large wildfire – used to mitigate, prevent, manage, and control any fires on public (not federal) or private lands that could potentially result in a major disaster declaration; and
  • Disaster Readiness and Support (DRS) activities – ongoing, recurring activities that help ensure availability and readiness of the delivery of FEMA’s disaster response, operations, and oversight functions.

After a SLTT receives a declaration from the President, their eligible costs for disaster response, recovery and mitigation can be reimbursed from the DRF with a cost-share burden assumed by the SLTT (e.g., typically 25 percent, or less if approved by the President based on total per capita costs of the disaster). While FEMA estimates the cost of a disaster and allocates (“sets asides”) funds for that disaster, DRF funds are not restricted to a specific disaster and are available for any eligible expense.

Does the DRF expire?

DRF is “no year” money, meaning it does not expire or revert back to Treasury if not spent in the fiscal year appropriated by Congress (by September 30th). Consequently, unused funds carry-forward into the new fiscal year and are added to new Congressional appropriations based on the DRF formula[2] and updated estimates.  The fund was set-up this way because recovery and mitigation take years to accomplish, and even a response can cross-over fiscal years.  Congress also wanted to ensure FEMA is able to respond to any new threats with initial funding being available while Congress evaluates a need for a supplemental appropriation.

Can the DRF run out of money?

Yes, if it all the DRF monies are obligated or reserved for a particular expense, which would cause FEMA to shut down or severely limit operations. However, before the DRF is fully expended, two actions would occur:  (1) FEMA would institute “Immediate Needs Funding”, or INF, which would prioritize funding to the most critical needs of the Agency and SLTTs, and defer actions (e.g., Disaster recovery or State reimbursements) until new funds were available; and (2) FEMA would submit a supplemental request to Congress for additional DRF funds, which could take months to enact.

While the DRF has never completely run dry, it has come very close.

In early September 2011, the DRF balance was approximately $200 million, which proved to be insufficient when Hurricane Irene and a multitude of other natural disasters occurred before the fiscal year ended. Congress made a special appropriation to the DRF account to keep FEMA able to respond. Also, notably in 2017, the DRF was running very low as Hurricane Harvey was impacting Texas followed right behind by Hurricanes Irma and Maria, in late August and early September. Congress appropriated additional money to the DRF to ensure response and recovery needs were met for the effected states and territories.

How much money is in the DRF?

As of the end of August 2020, the DRF has about $14 billion available for needs through the end of FY 2020 – FEMA has already set-aside $44 billion for the Administrations COVID-19 “loss wages program under DRF “other needs assistance”. For FY 2020, the DRF started out with an appropriation of $17.9 billion with a carryover balance of $29.4 billion and anticipated $1.7 billion pulled back from previous disasters (total of $48.9 billion).  Congress also appropriated an additional $45 billion in COVID-19 supplementals to cover FEMA and SLTT expenses.

Since the Budget Control Act (BCA) of 2011 (P.L. 110-25), the annual enacted DRF budget has been about $6-7 billion based on a specific formula and past disaster “set asides”.

Before COVID-19 and other recent disasters (e.g., Hurricane Laura, wildfires), the Administration requested only $5 billion for the DRF in FY 2021. This was based on an anticipated large carryover balance of $35 billion from FY 2020.  However, given current conditions, Congress will likely enact more than the requested budget in FY 2021 as the larger balance is needed to continue to address COVID-19 and past disasters[3].

Every year, with more and more declared severe disasters, the DRF formula will continue to be adjusted and DRF funds will hopefully grow to meet anticipated, historical needs.

How is funding from DRF reserved or obligated?

After a disaster is declared, FEMA partners with the state to write up projects to be reimbursed using the DRF. Only approved projects and expenses are obligated from the DRF. This process can take years to finalize. For large disaster recoveries that are expected to be in the billions of dollars, they may be covered by several years of DRF funds. Once a project is approved by FEMA, that money is obligated (as a grant) and is reserved to pay the state after it produces the required reimbursement paperwork.

Who monitors FEMA’s DRF obligations?

The DRF balance – including obligations – is monitored by the U.S. Congress, the Office of Management and Budget (OMB), DHS’s Office of the Inspector General (OIG), the Government Accountability Office (GAO), and other interested parties.  By law, FEMA publishes a monthly DRF status report to highlight the Fund’s balances and how they have been used and are planned to be used.  And all of these entities have, and will continue, to raise questions and demand timely data on all disaster spending.

Insights By:

Elizabeth Zimmerman, IEM’s Senior Executive Advisor; former FEMA Associate Administrator for Response and Recovery and Director of Disaster Operations

Edward Johnson, IEM’s Senior Advisor for Homeland Security and Emergency Management; former FEMA Chief Financial Officer (CFO) and Senior Advisor to the Chief of Staff

[1] If there are delays in enacting final annual appropriations, then a Continuing Resolution (CR) is passed to avoid a shut-down in the government, with funding typically provided at the previous fiscal year’s funding levels.

[2] The “DRF formula” basically takes a ten-year average (less the high and low) to estimate the annual funding needed for all DRF needs EXCEPT for funding needed for “catastrophic disasters” (past and future) – over $500 million.  For past catastrophic disasters (e.g., Hurricane Maria), the budget includes an annual estimate to complete work for that fiscal year (i.e., new or continuing Projects) and in the case of future catastrophic disasters, Congress expects DHS/FEMA to request additional funds (via a Supplemental appropriations) to cover estimated costs.

[3] Given the many recent storms (e.g., Hurricanes Isaias, Laura, and Sally, the Midwest Derecho), the wildfires in the West, the ongoing COVID-19 Pandemic, and the likelihood of more disasters before the end of FY 2020 (on September 30, 2020), it is imperative that the Administration immediately amend its FY 2021 budget request of $5.1 billion, which is now considered inadequate (even with the current projected carryover of $14 billion from FY 2020) to fully fund all the anticipated FY 2021 needs. Otherwise, Congress needs to include more funds in its final FY 2021 appropriations.  The good news is that under a FY 2021 Continuing Resolution, the DRF will initially receive the FY 2020 appropriations of $17.4 billion unless modified.