International Journal of Government Auditing – October 2013
editor's note: At the May 2013 meeting of the Working Group on Accountability for and Audit of Disaster-related Aid, participants suggested that the Board of Audit of Japan share with the broader INTOSAI community some insights gained in its audits of disaster relief efforts following the March 2011 earthquake and tsunami that devastated Japan.
Since October 2011, the Board of Audit of Japan (BOA) has been conducting audits focused on various projects to promote rehabilitation and reconstruction following the great east Japan earthquake that occurred in March 2011. In the annual audit report for fiscal year 2011, published in November 2012, the BOA reported on seven audit cases related to the earthquake. This article describes two of those cases, based on the results of on-site field audits in the disaster-affected areas.
The Ministry of Health, Labor and Welfare (MHLW) granted subsidies to the seven disaster-affected prefectures to provide emergency temporary housing to victims of the earthquake who had lost their houses. The total subsidies amounted to US$4.28 billion as of March 31, 2012.
The MHLW bulletin that stipulates standards for disaster relief states that emergency temporary housing is to be provided as follows:
The bulletin also states that prefectural governors may rent houses from private owners to accommodate victims rather than constructing emergency temporary housing. Also, if it is difficult for prefectural governors to provide proper relief in accordance with the standards set out in the MHLW bulletin, they are empowered to set the level, measures, and term of relief with the consent of the minister. As a result, any expenses that a prefecture paid for constructed houses with the consent of the minister could be covered by the subsidy.
According to the Disaster Relief Act, a prefecture may also pay cash to victims in need of disaster relief if a prefectural governor deems it necessary, However, according to the MHLW circular that stipulates procedures, disaster relief should in principle be given by payment in kind, and payment in cash should be restricted to cases where it is truly necessary and considered to be most effective.
As of March 31, 2012, 116,170 units of emergency temporary housing had been provided in the seven disaster-affected prefectures. This included 52,858 constructed houses and 57,697 rented houses, which together accounted for 95.2 percent of the total.
Constructed houses took much more time to provide than rented houses due to the need to secure construction sites and carry out construction work. Since rented houses could be provided more quickly, they could contribute to the early dissolution of emergency evacuation areas.
In regard to expenses, the cost, as of March 31, 2012, to provide constructed houses was US$62,800 per unit, versus US$18,300 per unit for rented houses for two years. The expenses for constructed houses exceeded the cost limits because of the need to develop construction sites and build joint septic tanks. The expenses for constructed houses will increase even more due to the cost of removing them and reinstating construction sites. As it is more economical to provide rented rather than constructed houses, rented houses can help reduce the expenses for emergency temporary housing.
Additional concerns were identified for constructed houses: (1) they might occupy the expected construction sites for future permanent housing for reconstruction, and (2) vacant rooms were observed in housing complexes where a large number of constructed houses were provided at one time.
In principle, disaster relief should be given by payment in kind. When providing rented houses, the prefectures first gave houses to victims by using information about available private houses for rent provided by real estate vendors based on an agreement for disaster situations. Then the prefectures made contracts with the house owners of those houses and, as a lessee, sublet the houses to the victims.
The MHLW circular stipulates that for a house rented under a contract made in the name of a disaster victim, the rent and other costs could be covered by the subsidy if the lessee’s name is changed from the victim to the prefecture. In accordance with this circular, the prefectures retroactively rewrote the rental contracts for houses that the victims had already rented in their names. As a result, in many cases the prefectures had to shoulder a heavy administrative burden for making contracts and changing lessees’ names. If the victims had already moved to rented houses, the prefectures not only paid brokerage fees to intermediate brokers, but also compensated the victims for the brokerage fees which they had paid when they had made initial contracts.
The BOA observed that MHLW should actively utilize rented houses in providing emergency temporary housing after major disasters to speed up the provision of emergency temporary housing and reduce related expenses. When using rented houses, MHLW needs to consider whether prefectures can deviate in part from the principle of payment in kind where prefectures make rental contracts and sublet to victims. That is, MHLW needs to consider whether prefectures can give payments in cash for the rent and brokerage fees borne by victims by, for example, directly paying house owners the rent for the houses for which victims had made rental contracts by themselves.
The earthquake generated an estimated 21.62 million tons of disaster waste in 13 prefectures, and the tsunami deposited an estimated 9.59 million tons of earth and sand in coastal areas after the earthquake. Disposing of the disaster waste and tsunami deposits has been a pressing issue for the disaster-affected prefectures. In the three most heavily-affected prefectures (Iwate, Miyagi, and Fukushima), disaster waste and tsunami deposits were estimated at 29.74 million tons, or 95.3 percent of the total estimated 31.21 million tons.
In May 2011, the Ministry of the Environment (MOE) formulated a master plan to implement proper and efficient disposal of disaster waste and tsunami deposits. The MOE assigned the roles of the state, prefectures, and municipalities in implementing the disposal process and set the end of March 2014 as the deadline for completion.
Iwate and Miyagi Prefectures, two of three severely disaster-affected prefectures, lacked the capacity for disposal within the prefectures and needed to seek outside disposal. The MOE developed an April 2012 bulletin stipulating standards for accepting disaster waste for disposal in a wider area, processing the waste, and checking for safety in order to promote the disposal process with a proper understanding of the municipalities and residents who accepted the waste.
The MOE granted a subsidy for disposal projects carried out by municipalities. The MOE determined that the disposal project might include dismantling of damaged houses and that the subsidy could be disbursed in part in advance or in full by rough estimate.
Because disposal projects contribute to developing a sustainable society and generating employment, the MOE also granted a subsidy to prefectures, including severely disaster-affected municipalities, to promote disposal of disaster waste carried out by those municipalities. The prefectures established funds from the subsidy and disbursed them to the disposal projects that the municipalities carried out.
Since radioactive substances were emitted in Fukushima Prefecture after the nuclear power plant accident caused by the earthquake, the MOE decided to implement a project to dispose of disaster waste contaminated by radioactive substances in designated areas in the prefecture. In fiscal year 2011, the budget for the above-mentioned disposal projects came to US$7.65 billion.
As of July 31, 2012, the 13 prefectures had disposed of an average of 21 percent of the disaster waste. The three severely disaster-affected prefectures (Iwate, Miyagi, and Fukushima) had disposed of an average of 17.7 percent of the waste.
The audit identified a delay in budget execution. Budget amounts disbursed against the total fiscal 2011 budget for subsidies totaled 55 percent for disposal projects and 74.9 percent for disposal promotion. This was caused by the MOE’s procedure for advance payment by rough estimate; furthermore, the municipalities took additional time to prepare or correct the application for subsidies during the turmoil immediately following the disaster.
The audit case in Iwate Prefecture included the following phases for disposal of disaster waste:
In the four municipalities where the BOA conducted field audits, the progress rate for disaster waste in fiscal 2011 was only 10.4 percent because these municipalities had just begun to transport disaster waste from the disaster-affected areas to temporary placement sites before final disposal.
In Iwate Prefecture, 510,000 tons of disaster waste were disposed of in fiscal 2011. Of this amount, 300,000 tons (59.2 percent) were processed into construction materials such as concrete gravel; 40,000 tons (7.8 percent) were processed into raw cement fuel; 70,000 tons (13.5 percent) were recycled metal materials; and 100,000 tons (19.5 percent) were incinerated or disposed of outside the prefecture.
Thus, 80.5 percent of the disaster waste disposed of in fiscal 2011 was reused or recycled. According to the Iwate Prefecture disposal plan, disaster waste is to be reused as much as possible for building materials for reconstruction, while the remaining disaster waste is to be disposed of at incineration facilities or final disposal sites. Because the number of final disposal sites is very limited, the plan’s policy aims to reduce the amount of waste disposed of at those sites.
The BOA observed some uncertainties related to the implementation of the Iwate and Miyagi Prefecture disaster waste disposal plans, which are to be completed by the end of March 2014. These uncertainties include (1) the disposal of incombustibles within the period of the plans, (2) the demand for reconstruction materials in public works, (3) securing municipalities to accept disposal outside the prefectures, and (4) securing final disposal sites inside the prefectures.
Disposal of disaster waste outside the prefectures required further arrangements with accepting municipalities for 320,00 tons for Iwate Prefecture and one million tons for Miyagi Prefecture. There are also many challenges to identifying final disposal sites inside the prefectures. Therefore, issues such as disposal outside the prefectures and final disposal sites require continual support by the state.
Providing emergency temporary housing includes the use of both constructed houses and rented houses, and each of these has both merits and demerits. To avoid the disadvantages of constructed houses, the government should actively utilize rented houses in providing emergency temporary housing to speed up the provision of emergency temporary housing and to reduce related expenses.
Also, disposing disaster waste is a pressing issue in heavily-affected prefectures, where the number of final disposal sites that can dispose of a large amount of disaster waste may be limited. In that case, the government should advise the prefectures to reuse or recycle disaster waste as much as possible and to support disposal outside of the prefectures in order to accelerate the disposal of disaster waste.
The BOA has continued to conduct audits focusing on various projects for promoting reconstruction from the earthquake. In those audits, attention has focused on whether each project contributes to the rebuilding of society and to the economy in the disaster-affected areas. The results of these audits will be published this November in the annual Audit Report for fiscal year 2012.