The Coast Guard has made adjustments to its claims processing procedures for disasters of the scope of the Deepwater Horizon oil spill and it intends to finalize those new procedures in official guidance next week, according to congressional investigators.
While the Federal Emergency Management Agency (FEMA) is known as the primary disaster relief funding agency, the US Coast Guard has responsibility for processing damages from oil spills at sea through its National Pollution Fund Center (NPFC). In a report released Monday, the Coast Guard told the Government Accountability Office (GAO) that it would finalize changes to the standard operating procedures of its NPFC Claims Adjudication Division to spell out specific steps for processing claims connected to an oil spill of national significance by Oct. 31.
"The Coast Guard's operating practices in these areas have changed to reflect the largely unprecedented size and evolving scope of the Deepwater Horizon incident. It has updated its cost reimbursement procedures to incorporate lessons learned from the initial response to this spill and although it has not yet updated its procedures for processing claims from spills of national significance to reflect lessons learned from its experiences processing Deepwater Horizon claims, it has plans to do so," said the GAO report, Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving but Uncertain Federal Financial Risks.
GAO studied claims and most of the resulting cost reimbursements from the Coast Guard NPFC for the Deepwater Horizon oil spill through April 30, 2011. Investigators found that the Coast Guard's processing of claims by individuals and businesses followed established policies and procedures.
Established policies and procedures for such claims include their submission in writing for a fixed amount and required information on claimants, requirements for verifying damages, and adjudication within prescribed timeframes, among other requirements.
The NPFC followed established procedures, only accepting cost reimbursement packages from government agencies that only had appropriate agreements in place for Deepwater Horizon response costs, determining that the federal on-scene coordinator certified goods and services received, and ensuring the submission of appropriate cost documentation, among other requirements.
But Coast Guard must ensure that it carries through some of the changes in procedures that it initiated to deal with an oil spill the size of the Deepwater Horizon spill, GAO cautioned.
"NPFC has strengthened its cost reimbursement guidance to reflect lessons learned from experiences during the initial Deepwater Horizon oil spill response, and officials told us they planned to take similar steps to update its claims processing guidance. Updating NPFC's claims procedures to fully reflect Deepwater Horizon lessons learned will be critical should another spill of national significance occur," the report read.
While NPFC updated its cost reimbursement procedures manual for spills of national significance in April, it has not yet finalized its claims processing procedures. Changes to its cost reimbursement procedures manual include guidance on the management of finances, specifying cost documentation requirements, for example.
But its claims processing procedures have been adjusted as well. On average, NPFC received less than 300 claims per year in each of the last 10 years before the Deepwater Horizon spill.
"However, in light of the dramatic increase in the number of Deepwater Horizon oil spill claims received, NPFC refined its practices to augment its claims processing capacity. These practices included using contractors, Coast Guard reservists and, as needed, reassigning other NPFC staff," the GAO report said.
The NPFC Claims Adjudication Division must update its standard operating procedures, which have remained unchanged since April 2004, to include practices that account for a large increase in claims submitted. In the case of the Deepwater Horizon spill, NPFC practices involved new performance indicators, past experience metrics, and updates on statistics to determine the scope of resources required to process claims.
The explosion onboard the Deepwater Horizon oil rig leased by BP America on April 20,2010 resulted in the largest oil spill in US history. BP set up a trust of $20 billion to pay for claims and government expenses related to the spill. GAO examined 60 out of 432 Deepwater Horizon claims processed through April 30, 2011, for a third and final report in a series on the oil spill.
The Department of Homeland Security (DHS) inspector general is also performing an audit to ensure that the Coast Guard has good policies and procedures to capture costs associated with the Deepwater Horizon spill, GAO reported.
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