A Review of Expenditures Related to Hurricane Ike at the University of Texas Medical Branch at Galveston
April 2009
Report Number 09-034
Overall Conclusion
The University of Texas Medical Branch at Galveston (Medical Branch) was closed to students on September 10, 2008, and patients were evacuated on September 11, 2008, in preparation for Hurricane Ike. The storm surge flooded the Medical Branch on September 12, 2008. In addition to sustaining damage to buildings and equipment, the Medical Branch also suffered business operating losses.
The Medical Branch's Estimate of Losses
The Medical Branch estimates that its losses from Hurricane Ike will total $1.36 billion, which includes $831.8 million in emergency work and permanent work costs, $438.0 million in construction costs for a new hospital tower, and $93.2 million in business operating losses before depreciation. It expects to recover $899.3 million from external funding sources-$592.6 million from the Federal Emergency Management Agency (FEMA), $106.7 million from insurance proceeds, and $200.0 million from the Sealy Smith Foundation-resulting in a $463.8 million cost to the State.
However, these estimates are not the Medical Branch's final cost estimates; Medical Branch management stated that the cost estimation process may not be complete until December 2009. The Medical Branch has requested that the 81st Legislature appropriate $300.0 million under House Bill 4586 to help pay for losses that will not be reimbursed by external sources. Included in that request is $150.0 million: $141.0 million to help pay for the construction of the new hospital tower and $9.0 million for repairs to the John Sealy Hospital.
Auditors' Review of Estimated Losses
Auditors determined that the Medical Branch was unable to produce a completely reliable estimate of its losses because of the large scale of damage caused by Hurricane Ike to its campus; of the Medical Branch's more than 180 buildings, an estimated 76 were flooded and 110 suffered wind damage. These same factors prevented auditors from determining whether the Medical Branch's estimate of total losses was accurate or reasonable. In addition, the Medical Branch lacked sufficient data to support the estimated costs of permanent work, which accounts for 52 percent of the Medical Branch's estimated losses. The estimated cost for permanent work totals $709.8 million and includes repairs to equipment and buildings, including some historical buildings. The total cost for permanent work does not include $438.0 million for the new hospital tower. Auditors could not independently verify these cost estimates.
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