The US Federal Emergency Management Agency (Fema), widely criticised over Hurricane Katrina, should be replaced by a new body, a Senate inquiry said.
Fema was severely criticised for its handling of Hurricane Katrina
The new agency would operate under the Department of Homeland Security, but be able to communicate directly with the president during major emergencies.
It would handle responses to natural disasters and possible terror attacks.
The Bush administration has rejected calls for Fema's closure, as the president tours New Orleans.
Fran Townsend, homeland security adviser to the president, said it was not the right time to make changes.
"As we're heading into this hurricane season, now is not the time to really look at moving organizational boxes," she said.
The president has been viewing reconstruction work in New Orleans
President Bush toured reconstruction projects in New Orleans and said his government would improve its response to future natural disasters.
"All of us in positions of responsibility appreciate those who are helping us to understand how to do our jobs better," he said.
Debris from last year's hurricane and temporary shelters for the homeless surrounded partially-restored houses in the New Orleans neighbourhoods visited by the president.
'Start from scratch'
The bi-partisan Senate Homeland Security and Governmental Affairs Committee concluded after a long investigation that under-funding and failed leadership have left Fema beyond repair.
Starting a new agency, the National Preparedness and Response Authority, from scratch would be the better option, the panel concluded.
"We propose to abolish Fema and build a stronger, more capable structure within (the Department of Homeland Security)," the report was quoted as saying.
"It will be an independent entity within DHS, but will draw on the resources of the department and will be led and staffed by capable, committed individuals."
The proposed new agency's director would report to the DHS head, but crucially, in an emergency be able to speak directly to the US president and have the "political authority" to command federal employees outside of the agency, the panel said.
It would receive its funding through the DHS, but any cuts in its budget would have to be approved by Congress, the committee said.
The committee's findings will be formally released on Thursday.
The report is the latest in a string of critical judgements on the response to the hurricane which hit last August, killing about 1,300 people.
All have accused Fema of a slow and inadequate response, particularly highlighting poor communication between varying federal agencies.
Michael Brown, who was head of Fema at the time of the storm, resigned during the initial crisis.