Money for Nothing

The United States received hundreds of millions in foreign aid last year, after Hurricane Katrina devastated the Gulf Coast. But what happened to the money? One year later, the fate of international disaster assistance has turned into a tale of inept bureaucracy, diplomatic bungling, and unspent cash.

In the weeks after Hurricane Katrina drowned New Orleans last summer, residents of the Big Easy grappled with the sense that their government had abandoned them. They grimly joked that their beloved city should revert back to French rule. After all, France had swiftly come to the citys aid in the aftermath of the storm, dispatching supplies and troops, and expressing solidarity with residents. French attempts to help the city, many argued, were far more substantial than what the United States own Federal Emergency Management Agency (FEMA) did as Americans withered outside the Superdome in the bayou heat, pleaded for rescue from their rooftops, and perished in their attics.

When France and dozens of other countries pledged hundreds of millions of dollars in cash and supplies to the relief effort, their donations should have helped ease the crisis. Instead, one year after Katrina battered the Gulf Coast, none of the money given to the federal government has made its way to evacuees. With debris still choking New Orleans streets, a levee system still in need of basic upgrades (even as another hurricane season is upon us), and tens of thousands of Gulf residents still living in FEMA trailers or scattered around the country, the U.S. government has barely touched the funds donated by foreign governments. Instead, the government has handled the largest influx of foreign aid in memory with foot-dragging, clumsy bureaucracy, and money gone unspent.

When shocking scenes of devastation unfolded on television screens last August, the world was incredulous that the sole superpower could get its own crisis so very wrong. Relief offers poured in from abroad. China chipped in $5 million. Tiny Brunei gave $1 million. Even countries with little to give dug deep. Bangladesh sent $1 million, Rwanda wired $100,000, and Afghanistan coughed up $99,800. The United Arab Emirates was the biggest donor, doling out more than $99 million. By years end, the U.S. State Department had received $126 million from 36 countries and international organizations. (Other countries, such as Canada, India, Kuwait, and Turkey chose to donate directly to the American Red Cross or the Bush-Clinton Hurricane Katrina Fund.)

And it wasnt just cash that poured in. Other countries sent planeloads of tents, blankets, and Meals Ready to Eat, but the United States was ill-prepared to handle the largesse while residents were still trying to evacuate. Some offers were declined. But oftentimes the government accepted supplies like bandages, food, and cots and then allowed them to sit for months in Arkansas warehouses. According to a report by the Government Accountability Office (GAO) released in April, FEMA and the State Department paid tens of thousands of dollars in warehouse storage fees in the months after Katrina to house unused supplies from foreign countries.

The donated cash met a different fate. By late October, the State Department had allocated $66 million of the $126 million in international assistance to FEMA, which then granted it to the United Methodist Committee on Relief (UMCOR), the nonprofit aid arm of the United Methodist Church. With the funds, UMCOR established Katrina Aid Today, a consortium of nine national aid agencies dedicated to case-management work for Katrina evacuees. But to date, only $13 million has actually been disbursed, and it has been allocated almost exclusively to salaries and training for case workers, not to evacuees.

As for the rest of the funds, some $60 million languished for more than six months in a non-interest-bearing account at the U.S. Treasury. Had the money been placed in Treasury securities, the GAO report notes, their value would have increased by nearly $1 million by the end of February. Instead, inflation meant the funds actually decreased in value as the government stalled. In mid-March, the Department of State finally agreed to sign over the remainder to the Department of Education for teacher salaries, books, and new school buildings along the Gulf Coast. But the Department of Education has yet to spend a dime. In response to inquiries from Foreign Policy, a spokesperson said that an announcement will be made this week regarding how the department intends to use the money.

The State Departments ham-handed response to foreign aid has outraged those tracking international assistance. Citizens for Responsibility and Ethics in Washington (CREW), a legal watchdog group, was so disturbed by the governments shoddy reaction that it filed a Freedom of Information Act request to see State Department documents about the disaster relief. When the State Department failed to comply, CREW filed a lawsuit. The diplomatic cables that CREW subsequently received reveal an acute frustration with FEMAs inefficiency from American diplomats stationed overseas. It is getting downright embarrassing here not to have a response to the Estonians on flood relief, wrote one diplomat in an e-mail more than two weeks after Katrina. [A]t this point even a thanks but no thanks is better than deafening silence.

To be fair, the State Department was never designed to distribute supplies and funds domestically, although its swift and generous response in organizing relief for foreign disasters such as the 2004 Asian tsunami shows that it doesnt lack the organizational means. Officials thought that they could accept donations from abroad, and then allocate them to FEMA to handle the logistics. FEMA was a big bottleneck, says Anne Weismann, CREWs chief counsel. Miscommunication and delays in the field got in the way of getting supplies in a timely fashion to the people who needed them. Asked to judge FEMAs performance in handling aid offers, one GAO official could only lamely muster, It wasnt awful.

Today, though most of the Katrina funds donated from abroad havent been spent yet, the State Department has moved on. Nancy Beck, a spokesperson for the department, remarks that because the hurricane hit nearly a year ago, the taskforce established to handle foreign donations had long been disbanded. But what if another disaster should occur? Unfortunately, the State Department remains unprepared to handle another outpouring of international generosity. According to GAO officials who recommended that the State Department and FEMA develop new procedures to handle international aid in the future, new protocol is still only in draft form.

Such news is unlikely to provide solace to the many foreign governments that cut checks, or, more important, to the Gulf Coast residents who are still in need of an actionable plan for rebuilding their lives. I cant believe [the money] is still sitting there, says one foreign diplomatic official who worked on relief efforts in New Orleans shortly after Katrina. Countries gave that money, wanting it to help people affected by the hurricane. Its a shame. A smarter approach, perhaps, would have been to bypass the federal government altogether. Thats what Qatar did in May when it granted $60 million directly to New Orleans universities, hospitals, and charities. With its portion of the cash, Childrens Hospital of New Orleans has already renovated two clinics and picked up the medical bills for hundreds of local children. Perhaps Gulf Coast residents should rid themselves of their reconstruction czar and appoint a reconstruction emir in his place.

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