Expedited Assistance for Victims of Hurricanes Katrina and Rita
FEMA's Control Weaknesses Exposed the Government to Significant Fraud and Abuse Gao ID: GAO-06-403T February 13, 2006As a result of widespread congressional and public interest in the federal response to hurricanes Katrina and Rita, GAO conducted an audit of the Individuals and Households Program (IHP) under Comptroller General of the United States statutory authority. Hurricanes Katrina and Rita destroyed homes and displaced millions of individuals. In the wake of these natural disasters, FEMA faced the challenge of providing assistance quickly and with minimal "red tape," while having sufficient controls to provide assurance that benefits were paid only to eligible individuals and households. In response to this challenge, FEMA provided $2,000 in IHP payments to affected households via its Expedited Assistance (EA) program. Victims who received EA may qualify for up to $26,200 in IHP assistance. As of mid-December 2005, IHP payments totaled about $5.4 billion, with $2.3 billion provided in the form of EA. These payments were made via checks, electronic fund transfers, and a small number of debit cards. GAO's testimony will provide the results to date related to whether (1) controls are in place and operating effectively to limit EA to qualified applicants, (2) indications exist of fraud and abuse in the application for and receipt of EA and other payments, and (3) controls are in place and operating effectively over debit cards to prevent duplicate EA payments and improper usage.
We identified significant flaws in the process for registering disaster victims that leave the federal government vulnerable to fraud and abuse of EA payments. For Internet applications, limited automated controls were in place to verify a registrant's identity. However, we found no independent verification of the identity of registrants who registered for disaster assistance over the telephone. To demonstrate the vulnerability inherent in the call-in applications, we used falsified identities, bogus addresses, and fabricated disaster stories to register for IHP. We also found that FEMA's automated system frequently identified potentially fraudulent registrations, such as multiple registrations with identical social security numbers (SSN) but different addresses. However, the manual process used to review these registrations did not prevent EA and other payments from being issued. Other control weaknesses include the lack of any validation of damaged property addresses for both Internet and telephone registrations. Given the weak or non existent controls, it is not surprising that our data mining and investigations to date show the potential for substantial fraud and abuse of EA. Thousands of registrants misused SSNs, i.e., used SSNs that were never issued or belonged to deceased or other individuals. Our case study investigations of several hundred registrations also indicate significant misuse of SSNs and the use of bogus damaged property addresses. For example, our visits to over 200 of the case study damaged properties in Texas and Louisiana showed that at least 80 of these properties were bogus--including vacant lots and nonexistent apartments. We found that FEMA also made duplicate EA payments to about 5,000 of the nearly 11,000 debit card recipients--once through the distribution of debit cards and again by check or electronic funds transfer. We found that while debit cards were used predominantly to obtain cash, food, clothing, and personal necessities, a small number were used for adult entertainment, bail bond services and weapons purchase, which do not appear to be items or services that are essential to satisfy disaster related essential needs.
GAO-06-403T, Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's Control Weaknesses Exposed the Government to Significant Fraud and Abuse
This is the accessible text file for GAO report number GAO-06-403T
entitled 'Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse' which was released on February 13, 2006.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Senate Committee on Homeland Security and Governmental
Affairs:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10 a.m. EST:
Monday, February 13, 2006:
Expedited Assistance for Victims of Hurricanes Katrina and Rita:
FEMA's Control Weaknesses Exposed the Government to Significant Fraud
and Abuse:
Statement of Gregory D. Kutz, Managing Director, Forensic Audits and
Special Investigations:
GAO-06-403T:
GAO Highlights:
Highlights of GAO-06-403T, a testimony before the Senate Committee on
Homeland Security and Governmental Affairs:
Why GAO Did This Study:
As a result of widespread congressional and public interest in the
federal response to hurricanes Katrina and Rita, GAO conducted an audit
of the Individuals and Households Program (IHP) under Comptroller
General of the United States statutory authority.
Hurricanes Katrina and Rita destroyed homes and displaced millions of
individuals. In the wake of these natural disasters, FEMA faced the
challenge of providing assistance quickly and with minimal ’red tape,“
while having sufficient controls to provide assurance that benefits
were paid only to eligible individuals and households. In response to
this challenge, FEMA provided $2,000 in IHP payments to affected
households via its Expedited Assistance (EA) program. Victims who
received EA may qualify for up to $26,200 in IHP assistance. As of mid-
December 2005, IHP payments totaled about $5.4 billion, with $2.3
billion provided in the form of EA. These payments were made via
checks, electronic fund transfers, and a small number of debit cards.
GAO‘s testimony will provide the results to date related to whether (1)
controls are in place and operating effectively to limit EA to
qualified applicants, (2) indications exist of fraud and abuse in the
application for and receipt of EA and other payments, and (3) controls
are in place and operating effectively over debit cards to prevent
duplicate EA payments and improper usage.
What GAO Found:
We identified significant flaws in the process for registering disaster
victims that leave the federal government vulnerable to fraud and abuse
of EA payments. For Internet applications, limited automated controls
were in place to verify a registrant‘s identity. However, we found no
independent verification of the identity of registrants who registered
for disaster assistance over the telephone. To demonstrate the
vulnerability inherent in the call-in applications, we used falsified
identities, bogus addresses, and fabricated disaster stories to
register for IHP. Below is a copy of one of the $2,000 checks that we
received to date for our bogus telephone applications.
[See PDF for image]
[End of figure]
We also found that FEMA‘s automated system frequently identified
potentially fraudulent registrations, such as multiple registrations
with identical social security numbers (SSN) but different addresses.
However, the manual process used to review these registrations did not
prevent EA and other payments from being issued. Other control
weaknesses include the lack of any validation of damaged property
addresses for both Internet and telephone registrations.
Given the weak or non existent controls, it is not surprising that our
data mining and investigations to date show the potential for
substantial fraud and abuse of EA. Thousands of registrants misused
SSNs, i.e., used SSNs that were never issued or belonged to deceased or
other individuals. Our case study investigations of several hundred
registrations also indicate significant misuse of SSNs and the use of
bogus damaged property addresses. For example, our visits to over 200
of the case study damaged properties in Texas and Louisiana showed that
at least 80 of these properties were bogus”including vacant lots and
nonexistent apartments.
We found that FEMA also made duplicate EA payments to about 5,000 of
the nearly 11,000 debit card recipients”once through the distribution
of debit cards and again by check or electronic funds transfer. We
found that while debit cards were used predominantly to obtain cash,
food, clothing, and personal necessities, a small number were used for
adult entertainment, bail bond services and weapons purchase, which do
not appear to be items or services that are essential to satisfy
disaster related essential needs.
www.gao.gov/cgi-bin/getrpt?GAO-06-403T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory Kutz at (202) 512-
7455 or kutzg@gao.gov.
[End of section]
Chairman and Members of the Committee:
Thank you for the opportunity to discuss our ongoing forensic audit and
related investigations of assistance provided to individuals and
households related to hurricanes Katrina and Rita. The Individuals and
Households Program (IHP), a major component of the federal disaster
response efforts established under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (Stafford Act),[Footnote 1] is
designed to provide financial assistance to individuals and households
who, as a direct result of a major disaster, have necessary expenses
and serious needs that cannot be met through other means. As of mid-
December 2005, the Federal Emergency Management Agency (FEMA) had
distributed nearly $5.4 billion in IHP assistance on more than 1.4
million registrations. Hurricanes Katrina and Rita destroyed homes and
displaced individuals across the gulf coast region. In the wake of
these massive natural disasters, FEMA faced the formidable challenge of
providing at least some initial assistance to over a million
registrants quickly with minimal "red tape," while having sufficient
controls in place to provide assurance that benefits were paid only to
eligible individuals and households.
Disaster relief covered by IHP includes temporary housing assistance,
real and personal property repair and replacement, and other necessary
expenses related to a disaster. IHP assistance is generally delivered
after an inspection has been conducted to verify the extent of loss and
determine eligibility. Because of the tremendous devastation caused by
hurricanes Katrina and Rita, FEMA activated expedited assistance to
provide fast track money[Footnote 2]--in the form of $2,000 in
expedited assistance payments--to eligible disaster victims to help
with immediate, emergency needs of food, shelter, clothing, and
personal necessities. This swift response was vital in helping victims
of hurricanes Katrina and Rita. FEMA specified that expedited
assistance payments were to be provided only to individuals and
households who, as a result of hurricanes Katrina and Rita, were
displaced from their predisaster primary residences and were in need of
shelter. Typically a household[Footnote 3] can only receive one
expedited assistance payment. Exceptions are made in situations where
household members are displaced to separate locations, in which case
more than one member of the household may be eligible for payments.
FEMA provided expedited assistance payments related to hurricanes
Katrina and Rita predominantly through electronic funds transfer (EFT)
and checks sent to the registrants' current addresses.[Footnote 4] In
addition, FEMA provided a limited amount of expedited assistance via
debit cards[Footnote 5] distributed at three locations in Texas.
As of mid-December 2005, FEMA data showed that the agency had delivered
44 percent ($2.3 billion) of the $5.4 billion in IHP aid through
expedited assistance to hurricanes Katrina and Rita registrants across
at least 175 counties in 4 different states. Almost $1.6 billion went
to individuals with damaged addresses in Louisiana, more than $400
million to individuals in Texas, and over $300 million to individuals
in Alabama and Mississippi. Registrants determined to be eligible for
expedited assistance may also be eligible to receive additional IHP
payments up to the overall IHP cap of $26,200.
Our current audit and investigation is being performed under the
statutory authority given to the Comptroller General of the United
States. Our audit and investigation is conducted under the premise that
while the federal government needs to provide swift and compassionate
assistance to the victims of natural disasters, public confidence in an
effective disaster relief program that takes all possible steps to
minimize fraud, waste, and abuse needs to be preserved. Today, we will
summarize the results from our ongoing forensic audit and related
investigations of the IHP program.[Footnote 6] This testimony will
provide the results of our work related to whether (1) controls are in
place and operating effectively to limit expedited assistance to
qualified registrants, (2) indications exist of fraud and abuse in the
registration for and receipt of expedited assistance and other
payments, and (3) controls are in place and operating effectively over
debit cards to prevent duplicate payments and improper usage. We plan
to issue a detailed report with recommendations on the results of our
audit.
Thus far, our work has focused primarily on the IHP registration
process because individuals whose registrations are approved have
access to expedited assistance payments and subsequently the full range
of IHP benefits. To assess the design of controls, we performed
walkthroughs of FEMA's processes for accepting registrations and
awarding expedited assistance funds. To determine whether indications
existed of fraud and abuse in expedited assistance and other
disbursements, we provided FEMA data to the Social Security
Administration (SSA) to verify against their records of valid social
security numbers (SSNs), and reviewed the FEMA database of IHP
registrations for other anomalies using data mining techniques. To
determine whether registrations resulted in potentially fraudulent or
improper payments, we selected a nonrepresentative selection of 248
registrations from our data mining results for further investigations.
The 248 registrations represented 20 case studies--some involving
multiple registrants--that we linked together through identical names,
SSNs, damaged addresses and/or current addresses. Our analysis of
potentially fraudulent use of SSNs and other data mining efforts are
ongoing, and we plan to report on additional results in the future. For
purposes of this testimony, we did not conduct sufficient work to
project the magnitude of potentially fraudulent and improper IHP
payments. We also proactively tested the adequacy of controls over the
registration process for disaster assistance by submitting claims for
relief using falsified identities, bogus addresses, and fabricated
disaster stories. These tests were performed before FEMA provided us
any information related to the processes used to screen IHP
registrations and preclude some fraudulent registrations. Additional
details on our scope and methodologies are included in appendix I.
In the course of our work, we made numerous written requests for key
documents and sets of data related to the IHP, most dating back to
October 2005. While FEMA officials promptly satisfied one key part of
our request--databases of IHP registrants and payments--the majority of
what we requested has not been provided. On January 18, 2006, the
Department of Homeland Security (DHS)[Footnote 7] Office of General
Counsel did provide us with well less than half of the documents that
were requested. While the database and other data provided by FEMA
enabled us to design procedures to test the effectiveness of FEMA's
system of internal controls, it did not enable us to fully determine
the root causes of weak or non-existent controls and formulate detailed
recommendations. For example, as will be discussed later, FEMA and the
DHS had not provided us documentation to enable us to conclusively
determine the reason that FEMA submitted some registrations, and did
not submit other registrations, to identity validation prior to issuing
expedited assistance payments.
We conducted our audit and investigations from October 2005 through
January 2006. Except for restrictions discussed previously related to
the limitations that DHS placed on the scope on our audit work, we
conducted our audit work in accordance with generally accepted
government auditing standards and conducted investigative work in
accordance with the standards prescribed by the President's Council on
Integrity and Efficiency. Our findings today focus primarily on the
results to date from of our data mining and investigative techniques.
Summary:
We found weaknesses in the process that FEMA used to review
registrations for disaster relief and approve assistance payments.
These weaknesses leave the government vulnerable to fraud and abuse.
Our work indicates that FEMA put in place limited procedures designed
to prevent, detect, and deter certain types of duplicate and
potentially fraudulent disaster registrations. However, FEMA did not
apply these limited procedures to most registrations, thus leaving a
substantial number of registrations without any protection against
fraud and abuse. Specifically, individuals could apply for disaster
assistance via the Internet or telephone. FEMA subjected Internet
registrations to a limited verification process whereby a FEMA
contractor used credit and other information to validate the identity
of registrants. Those who failed the Internet verification process were
advised to contact FEMA via telephone to reregister. However, FEMA did
not apply the identity validation process to any of the 1.5 million
registrants who contacted FEMA and applied for assistance over the
telephone. Our data mining and investigations confirmed FEMA's
representation. For example, using falsified identities, bogus
addresses, and fabricated disaster stories, we applied for disaster
assistance over the telephone and obtained $2,000 expedited assistance
payments.
Other control weaknesses further increased the government's exposure to
fraud and abuse. We found that FEMA instituted automated checks that
flagged hundreds of thousands of potentially duplicate registrations in
the computer system FEMA used to process and approve IHP registrations
for payments. FEMA officials informed us that these flagged
registrations were subjected to additional reviews to conclude whether
they were, in fact, duplicates. However, while the additional review
process may have prevented many potentially fraudulent and improper
payments, it did not prevent what appear to be other potentially
fraudulent and improper payments based on duplicate registrations. We
also found that FEMA did not implement procedures to validate whether
damaged addresses used to register for assistance were bogus, for
either Internet or telephone registrations.
With limited or nonexistent validation of registrants' identities and
damaged addresses, it is not surprising that our data mining and
investigations found substantial indicators of potential fraud and
abuse related to false or duplicate information submitted on disaster
registrations. For example, according to SSA data, FEMA made millions
of dollars in payments to thousands of registrants who submitted SSNs
that have not been issued or belonged to deceased individuals. Our data
mining also detected that FEMA made tens of thousands of payments to
registrants who provided other false or duplicate information on their
registrations. Specifically, in the 20 case studies we investigated, a
majority--165 of 248--of registrations contained SSNs that according to
the SSA were never issued, belonged to deceased individuals, or did not
match the name provided. In addition, about 80 of the over 200 alleged
disaster addresses that we attempted to validate were bogus addresses.
Also, our case study registrants did not live in many of the remaining
valid addresses. In one specific case example, 17 individuals, some of
whom shared the same last name and current addresses, used 34 different
SSNs that did not belong to them and addresses that were bogus or not
their residences to receive more than $103,000 in FEMA payments. In
addition, because the hurricanes had destroyed many homes, we could not
determine if approximately 15 of the alleged disaster addresses had
ever existed.
Similar to the control weaknesses over expedited assistance payments
distributed through checks and electronic funds transfers, we found
that FEMA did not validate the identities of debit card recipients at
three relief centers in Texas who registered via the telephone.
Consequently, FEMA issued $2,000 debit cards to over 60 registrants who
provided SSNs that were never issued or belonged to deceased
individuals. We also found that FEMA made multiple expedited assistance
payments to over 5,000 of the 11,000 debit card recipients. That is,
FEMA provided the registrant both a $2,000 debit card and a $2,000
check or electronic fund transfer. Further, at the time of debit card
issuance, unlike the recipients who received expedited assistance
payments via checks or EFTs, FEMA did not issue specific instructions
to debit card recipients on the use of the cards. We found that debit
cards were used predominantly to obtain cash and thus are unable to
determine how the money was actually used. The majority of the
remaining debit card purchases were for food, clothing, and personal
necessities. However, in isolated instances, a few debit cards were
used for to pay for items or services that, on their face, do not seem
essential to satisfy disaster related needs. For example, these debit
cards were used in part to purchase adult entertainment, a .45 caliber
hand gun, jewelry, bail bond services, and to pay for prior traffic
violations.[Footnote 8]
FEMA's Controls to Prevent Potentially Fraudulent Payments Were Not
Effective:
We found weak or nonexistent controls in the process that FEMA used to
review disaster registrations and approve assistance payments that
leave the federal government vulnerable to fraud and abuse. In the
critical aftermath of hurricanes Katrina and Rita, FEMA moved swiftly
to distribute expedited assistance payments to allow disaster victims
to mitigate and overcome the effects of the disasters. In this context,
the establishment of an effective control environment was a significant
challenge. Specifically, we found that FEMA had implemented some
controls prior to the disaster to provide automated validation of the
identity of registrants who applied for assistance via the Internet.
Our work thus far indicates that this resulted in FEMA rejecting some
registrants who provided names and SSNs that did not pass the
validation test. However, FEMA did not implement the same preventive
controls for those who applied via the telephone. Our use of fictitious
names, bogus addresses, and fabricated disaster stories to obtain
expedited assistance payments from FEMA demonstrated the ease with
which expedited assistance could be obtained by providing false
information over the telephone. Because expedited assistance is a
gateway to further IHP payments (up to $26,200 per registration),
approval for expedited assistance payments potentially exposes FEMA,
and the federal government, to more fraud and abuse related to
temporary housing, home repair and replacement, and other needs
assistance.
Pressure to Swiftly Deliver Aid Led to Approval of Expedited Assistance
Payments with Minimal Verification:
During the course of our audit and investigation, FEMA officials stated
that they did not verify whether registrants had insurance and whether
registrants were unable to live in their home prior to approving
expedited assistance payments. According to FEMA officials, the
unprecedented scale of the two disasters and the need to move quickly
to mitigate their impact led FEMA to implement expedited assistance.
Expedited assistance differs from the traditional way of delivering
disaster assistance in that it calls for FEMA to provide assistance
without requiring proof of losses and verifying the extent of such
losses. Consequently, FEMA implemented limited controls to verify
eligibility for the initial expedited assistance payments. According to
FEMA officials, these controls were restricted to determining whether
the damaged residence was in the disaster area and limited validation
of the identity of registrants who used the Internet. Registrants who
FEMA thought met these qualifications based on their limited
assessments were deemed eligible for expedited assistance.
FEMA Did Not Validate Identity of Registrants Who Applied for
Assistance via Telephone:
FEMA implemented different procedures when processing disaster
registrations submitted via the Internet and telephone calls. Of the
more than 2.5 million registrations recorded in FEMA's database, i.e.,
registrations that were successfully recorded--60 percent (more than
1.5 million) were exempt from any identity verification because they
were submitted via the telephone. Prior to sending out expedited
assistance payments, FEMA did not have procedures in place for Internet
or telephone registrations that screened out registrations where the
alleged damaged address was a bogus address. The lack of identity
verification for telephone registrations and any address validation
exposed the government to fraud and abuse of the IHP program.
For registrations taken through FEMA's Web site, registrants were
required to first provide a name, SSN, and date of birth. This
information was immediately provided (in electronic format) to a FEMA
contractor to compare against existing publicly available records.
While registrants were waiting on the Internet, the FEMA contractor
took steps to verify registrants' identities. The verification steps
involved confirming that the SSN matched with a SSN in public records,
that the name and SSN combination matched with an identity registered
in public records, and that the SSN was not associated with a deceased
individual. The FEMA contractor was responsible for blocking any
registrations for which any of these three conditions was not met.
Additionally, registrants who passed the first gate had to provide
answers to a number of questions aimed at further corroborating the
registrants' identities. Registrants who were rejected via the Internet
were advised to contact FEMA via telephone. Our audit and investigative
work indicated that this verification process helped deter obviously
fraudulent Internet registrations using false names and SSNs. However,
FEMA kept no record of the names, SSNs, and other information related
to the rejected registrations, and no record of the reasons that the
FEMA contractor blocked the registration from going forward. FEMA
acknowledged that it was conceivable that individuals who were rejected
because of false information submitted via the Internet could get
expedited assistance payments by providing the same false information
over the telephone.
Although the identity verification process appeared to have worked for
most Internet registrations, it did not identify a small number of
registrations with invalid SSNs. According to information we received
from the SSA, nearly 60 Internet registrants who received FEMA payments
provided SSNs that were never issued or belonged to individuals who
were deceased prior to the hurricanes. Results indicate that these
individuals may have passed the verification process because public
records used to verify registrants' identities were flawed. For
example, one credit history we obtained indicated that a registrant had
established a credit history using an invalid SSN.
Unlike the Internet process, FEMA did not verify the identity of
telephone registrants who accounted for over 60 percent of disaster
registrations recorded in FEMA's system. For registrants who registered
only via telephone, or registrants who called FEMA subsequent to being
denied on the Internet, FEMA did not have controls in place to verify
that the SSN had been issued, that the SSN matched with the name, that
the SSN did not belong to a deceased individual, or whether the
registrants had been rejected on prior Internet registrations. Because
the identity of telephone registrants was not subjected to basic
verification, FEMA did not have any independent assurance that
registrants did not falsify information to obtain disaster assistance.
According to FEMA officials, FEMA had a request in place to modify its
computer system to allow for identity verification for telephone
registrations similar to those used for the Internet. FEMA also
represented to us that due to budget constraints and other
considerations, the change was not implemented in time to respond to
hurricanes Katrina and Rita. However, to date we have not received
documentation to validate these representations.
Control Weaknesses Enabled GAO to Obtain $2,000 Expedited Assistance
Checks:
The lack of identity verification of phone registrants prior to
disbursing funds makes FEMA vulnerable to authorizing expedited
assistance payments based on fraudulent information submitted by
registrants. Prior to obtaining information on the control procedures
FEMA used to authorize expedited assistance payments, we tested the
controls by attempting to register for disaster relief through two
portals: (1) the Internet via FEMA's Web site and (2) telephone calls
to FEMA. For both portals, we tested FEMA's controls by providing
falsified identities and bogus addresses. In all instances, FEMA's Web
site did not allow us to successfully finalize our registrations.
Instead, the Web site indicated that there were problems with our
registrations and advised us to contact the FEMA toll-free numbers if
we thought that we were eligible for assistance. This is consistent
with FEMA's representation that Internet registrations were compared
against third-party information to verify identities.
Our investigative work also confirmed that the lack of similar controls
over telephone registrations exposed FEMA to fraud and abuse.
Specifically, in instances where we submitted via the telephone the
same exact information that had been rejected on the Internet, i.e.,
falsified identities and bogus addresses, the information was accepted
as valid. Subsequently, the claims were processed and $2,000 expedited
assistance checks were issued. Figure 1 provides an example of an
expedited assistance check provided to GAO.
Figure 1: $2,000 Expedited Assistance Check Provided to GAO Based on
Bogus Registration:
[See PDF for image]
[End of figure]
Additional case study investigations, which we discuss later, further
demonstrated that individuals not affected by the disasters could
easily provide false information to obtain expedited assistance and
other IHP payments from FEMA. Convictions obtained by the Department of
Justice also show that others have exploited these control weaknesses
and received expedited assistance payments. For example, one individual
in a College Station, Texas relief center pleaded guilty to false
claims and mail fraud charges related to IHP and expedited assistance.
Despite never having lived in any of the areas affected by the
hurricane, this individual registered for and received $4,358 ($2,000
in expedited assistance and $2,358 in rental assistance) in hurricane
Katrina IHP payments.
Other Control Weaknesses Exacerbated Government Exposure to Fraud and
Abuse:
We also found that FEMA instituted limited pre-payment checks in the
National Emergency Management Information System (NEMIS) to automate
the identification of duplicate registrations. However, the subsequent
review process used to resolve these duplicate registrations was not
effective in preventing duplicate and potentially fraudulent payments.
We also found that FEMA did not implement procedures to provide
assurance that the disaster address was not a bogus address, either for
Internet or telephone registrations.
FEMA's controls failed to prevent thousands of registrations with
duplicate information from being processed and paid. Our work indicates
that FEMA instituted limited automated checks within NEMIS to identify
registrations containing duplicate information, e.g., multiple
registrations with the same SSNs, duplicate damaged address telephone
numbers, and duplicate bank routing numbers. Data FEMA provided enabled
us to confirm that NEMIS identified nearly 900,000 registrations--out
of 2.5 million total registrations--as potential duplicates. FEMA
officials further represented to us that the registrations identified
as duplicates by the system were "frozen" from further payments until
additional reviews could be conducted. The purpose of the additional
reviews was to determine whether the registrations were true
duplicates, and therefore payments should continue to be denied, or
whether indications existed that the registrations were not true
duplicates, and therefore FEMA should make those payments. It appeared
from FEMA data that the automated checks and the subsequent review
process prevented hundreds of thousands of payments from being made on
duplicate registrations. However, FEMA data and our case study
investigations also indicate that the additional review process was not
entirely effective because it allowed payments based on duplicate
information.
We also found that FEMA did not implement effective controls for
telephone and Internet registrations to verify that the address claimed
by registrants as their damaged address existed. As will be discussed
further below, many of our case studies of potential fraud show that
payments were received based on claims made listing bogus damaged
addresses. Our undercover work also corroborated that FEMA provided
expedited assistance to registrants with bogus addresses.
Potentially Fraudulent Activities Resulting from Weak or Nonexistent
FEMA IHP Controls:
With limited or nonexistent validation of registrants' identities and
the reported damaged addresses, it is not surprising that our data
mining and investigations found substantial indicators of potential
fraud and abuse related to false or duplicate information submitted on
disaster registrations. Our audits and investigations of 20 cases
studies comprising 248 registrations that received payments, and the
undercover work we discussed earlier, clearly showed that individuals
can obtain hundreds of thousands of dollars of IHP payments based on
fraudulent and duplicate information.[Footnote 9] These case studies
are not isolated instances of fraud and abuse. Rather, our data mining
results to date indicate that they are illustrative of the wider
internal control weaknesses at FEMA--control weaknesses that led to
thousands of payments made to individuals who provided FEMA with
incorrect information, e.g., incorrect SSNs and bogus addresses, and
thousands more made to individuals who submitted multiple registrations
for payments.
Case Study Examples Show That Control Weaknesses Have Been Exploited:
Our audits and investigations of 20 case studies demonstrate that the
weak or nonexistent controls over the registration and payment
processes have opened the door to improper payments and individuals
seeking to obtain IHP payments through fraudulent means. Specifically,
a majority of our case study registrations--165 of 248--contained SSNs
that were never issued or belonged to deceased or other individuals.
About 20 of the 248 registrations we reviewed were submitted via the
Internet. Further, of the over 200 alleged damaged addresses that we
tried to visit, about 80 did not exist. Some were vacant lots, others
turned out to be bogus apartment buildings and units. Because the
hurricanes had destroyed many homes, we were unable to confirm whether
about 15 additional addresses had ever existed. We also identified
other fraud schemes unrelated to the weak and nonexistent validation
and prepayment controls previously discussed, such as registrants who
submitted registrations using valid addresses that were not their
residences.
In total, the case study registrants of whom we conducted
investigations have collected hundreds of thousands of dollars in
payments based on potentially fraudulent activities. These payments
include money for expedited assistance, rental assistance, and other
IHP payments. Further, as our work progresses, we are uncovering
evidence of larger schemes involving multiple registrants that are
intended to defraud FEMA. We found these schemes because the
registrants shared the same last names, current addresses, and/or
damaged addresses--some of which we were able to confirm did not exist.
While the facts surrounding the case studies provided us with
indicators that potential fraud may have been perpetrated, further
testing and investigations need to be conducted to determine whether
these individuals were intentionally trying to defraud the government
or whether the discrepancies and inaccuracies were the results of other
errors. Consequently, we are conducting further investigations into
these case studies. Table 1 highlights 10 of the 20 case studies we
identified through data mining that we investigated. In addition, some
individuals in the cases cited below submitted additional registrations
but had not received payments as of mid December 2005.
Table 1: Examples of Potential Fraudulent and Duplicate Registrations
That Received FEMA Payments:
Case: 1;
Number of Registrations with Payments/SSNs: 36/36;
Payments Received[A]: $103,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 10;
Case Details:
* Seventeen individuals received payments on 36 registrations using 34
SSNs that were not theirs;
* Of the 17 addresses we visited, 13 were from the same apartment
building, of which 6 did not exist;
* 4 additional addresses were also invalid;
* Payments included 31 expedited assistance payments totaling $62,000,
and 18 in other payments, including rental payments.
Case: 2;
Number of Registrations with Payments/SSNs: 15/15;
Payments Received[A]: $41,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 8;
Case Details:
* One individual received payments on 15 different SSNs--only one of
which belonged to that person;
* Investigative work also showed that 3 addresses were valid but were
not addresses of the registrant;
* Payments included 13 expedited assistance payments totaling $26,000
and $15,000 in other assistance, including housing;
* The individual may have committed bank fraud by using an invalid SSN
to open an account;
* The individual had established credit using 2 SSNs that did not
belong to the individual.
Case: 3;
Number of Registrations with Payments/SSNs: 8/1;
Payments Received[A]: $16,000;
Number of Bogus Properties Used to Receive Payments[B]: None;
Case Details:
* One individual received 8 expedited assistance payments using the
same name, SSN, and current address;
* Of the 8 addresses declared as damaged, two appeared to belong to the
individual;
* FEMA's automated edits identified at least 7 registrations as
duplicates, nevertheless payments were issued.
Case: 4;
Number of Registrations with Payments/SSNs: 23/23;
Payments Received[A]: $46,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 14;
Case Details:
* Two individuals received expedited assistance payments on 23 SSNs -
21 of which were not theirs;
* Public records indicate that the individuals did not live at any of
the 9 valid addresses;
* Payments included 22 expedited assistance payments and 1 housing
assistance payment.
Case: 5;
Number of Registrations with Payments/SSNs: 38/38;
Payments Received[A]: $76,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 10;
Case Details:
* Six individuals received 38 payments on different SSNs--only 1 of
which was traced back to them;
* Payments included 37 expedited assistance payments totaling $74,000
and over $2,000 in other assistance.
Case: 6;
Number of Registrations with Payments/SSNs: 18/18;
Payments Received[A]: $36,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 12;
Case Details:
* Individual received 18 expedited assistance payments using the same
name and 18 different SSNs--only 1 of which belonged to the person;
* Investigative work and public records also indicate that the
individual had never lived at any of the 6 remaining valid addresses.
Case: 7;
Number of Registrations with Payments/SSNs: 31/30;
Payments Received[A]: $92,000;
Number of Bogus Properties Used to Receive Payments[B]: At least 22;
Case Details:
* A group of 8 individuals received payments on 31 registrations using
26 SSNs that did not belong to them;
* 22 of the registrations were for addresses that did not exist. The
remaining addresses were not validated;
* Payments include 32 payments for expedited assistance and over
$28,000 for other assistance including housing assistance.
Case: 8;
Number of Registrations with Payments/SSNs: 6/6;
Payments Received[A]: $23,000;
Number of Bogus Properties Used to Receive Payments[B]: None;
Case Details:
* Six apparent members of the same household registered 6 times using
the same damaged addresses;
* Five of the 6 individuals also shared the same current address;
* Payments included 5 expedited assistance payments and $13,000 in
other payments including housing assistance.
Case: 9;
Number of Registrations with Payments/SSNs: 7/7;
Payments Received[A]: $15,000;
Number of Bogus Properties Used to Receive Payments[B]: None;
Case Details:
* Seven apparent members of the same household received payments using
the same damaged address;
* One family member used a SSN that did not belong to the family
member;
* Six of the 7 individuals also shared the same current address;
* Payments included 7 payments for expedited assistance.
Case: 10;
Number of Registrations with Payments/SSNs: 7/7;
Payments Received[A]: $80,000;
Number of Bogus Properties Used to Receive Payments[B]: None;
Case Details:
* Seven apparent members of the same household registered using the
same damaged address;
* Payments included 6 expedited assistance payments and $68,000 in
other assistance.
Source: GAO analysis and investigation of FEMA data.
[A] Amount reflects total payments for IHP, which includes expedited
assistance, temporary housing assistance, payments for repair and
replacement of real and personal property, and payments for other needs
such as medical, transportation, and other necessities.
[B] One address could be associated with multiple registrations.
[End of table]
The following provides illustrative detailed information on several of
the cases.
* Case number 1 involves 17 individuals, several of whom had the same
last name, who submitted at least 36 registrations claiming to be
disaster victims of both Katrina and Rita. All 36 registrations were
submitted through the telephone, using 36 different SSNs and 4
different current addresses. These individuals used their own SSNs on 2
of the registrations, but the remaining 34 SSNs were never issued or
belonged to deceased or other individuals. The individuals received
over $103,000 in IHP payments, including $62,000 in expedited payments
and $41,000 in payments for other assistance, including temporary
housing assistance. Our analysis shows that the individuals claimed 13
different damaged addresses within a single apartment building, and 4
other addresses within the same block in Louisiana. However, our
physical inspection of these addresses revealed that 10 of the
addresses were bogus addresses. Further audit and investigative work
also shows that these individuals may not have lived at any of the
valid disaster addresses at the time of hurricanes Katrina and Rita. We
are conducting additional investigations on this case.
* Case number 2 involves an individual who used 15 different SSNs--one
of which was the individual's own--to submit at least 15 registrations
over the telephone. The individual claimed a different damaged address
on all 15 registrations, and used 3 different current addresses--
including a post office box, where the individual received payments.
The individual received 16 payments totaling over $41,000 on 15 of the
registrations. In all, the individual received 13 expedited assistance
payments, 2 temporary housing assistance payments, and another payment
of $10,500. Further investigative work disclosed that the individual
may have committed bank fraud by using a false SSN to open a bank
account. Other publicly available records indicate that the individual
had used 2 SSNs that were issued to other people to establish credit
histories.
* Case number 3 relates to a group of 8 registrations that resulted in
8 payments totaling $16,000. According to FEMA data, an individual
registered for Rita disaster assistance at the end of September 2005.
About 10 days later, the same individual submitted at least 7
additional registrations claiming 7 different disaster addresses, 2 of
which we were able to confirm belonged to the individual and may be
rental properties that the individual owns. However, because the FEMA
database showed that these addresses were entered as the individual's
primary residence--a primary requirement for IHP--the individual
received 8 expedited assistance payments instead of just the one that
he may have qualified for. We also found that the automated edits
established in NEMIS identified these registrations as potential
duplicates. In spite of the edit flags, FEMA cleared the registrations
for improper expedited assistance payments.
* Case number 4 involves 2 individuals who appear to be living together
at the same current address in Texas. These 2 individuals received
payments for 23 registrations submitted over the telephone using 23
different SSNs--two of which belonged to them--to obtain more than
$46,000 in disaster assistance. The information the registrants
provided related to many of the disaster addresses appeared false. The
addresses either did not exist, or there was no proof the individuals
had ever lived at these addresses.
* Case number 8 relates to 6 registrants with the same last name who
registered for disaster assistance using the same damaged address, with
5 of the 6 using the same current address. FEMA criteria specify that
individuals who reside together at the same address and who are
displaced to the same address are entitled to only one expedited
assistance payment. However, all 6 possible family members received 12
payments totaling over $23,000--$10,000 in expedited assistance and
more than $13,000 in other assistance, including rental assistance.
Data Mining Indicates Potential Fraud and Abuse Beyond Our Case
Studies:
The case studies we identified and reported are not isolated instances
of potential fraud and abuse. Rather, our data mining results show that
they are indicative of fraud and abuse beyond these case studies, and
point directly to the weaknesses in controls that we have identified.
The weaknesses identified through data mining include ineffective
controls to detect (1) SSNs that were never issued or belonged to
deceased or other individuals, (2) SSNs used more than once, and (3)
other duplicate information.
Misuse of Social Security Numbers on Registrations:
Our data mining and case studies clearly show that FEMA's controls over
IHP registrations provided little assurance that registrants provided
FEMA with a valid SSN. Under 42 U.S.C. § 408, submitting a false SSN
with the intent to deceive in order to obtain a federal benefit or
other payment is a felony offense. Based on data provided by the SSA,
FEMA made expedited assistance payments to thousands of registrants who
provided SSNs that were never issued or belonged to deceased
individuals. Further, SSA officials who assisted GAO in analyzing
FEMA's registrant data informed us that tens of thousands more provided
SSNs that belonged to other individuals. This problem is clearly
illustrated in case 2, where FEMA made payments totaling over $41,000
to an individual using 15 different SSNs. According to SSA records, the
individual received payments on 4 SSNs that belonged to deceased
individuals and 10 SSNs that did not match with the names provided on
the registrations. As previously discussed, further testing and
investigations need to be conducted to determine whether this
individual was intentionally trying to defraud the government or
whether the discrepancies and inaccuracies were the results of other
errors.
Same Social Security Numbers Used on Multiple Registrations:
Our data mining and case studies clearly show that FEMA's controls do
not prevent individuals from making multiple IHP registrations using
the same SSN. We found thousands of SSNs that were used on more than
one registration associated with the same disaster. Because an
individual can receive disaster relief only on his or her primary
residence and a SSN is a unique number assigned to an individual, the
same SSN should not be used to receive assistance for the same
disaster. This problem is illustrated in case 3 above, where an
individual registered for IHP 8 times using the same name, same SSN,
and same current address--and thus could have qualified for only 1
expedited assistance payments--but instead received expedited
assistance payments of $2,000 for 8 different registrations.
Multiple Payments Made to Different Registrations Containing the Same
Key Information:
Our data mining and case studies also show that the IHP controls to
prevent duplicate payments did not prevent FEMA from making payments to
tens of thousands of different registrants who used the same key
registration information. FEMA's eligibility criteria specify that
individuals who reside together at the same address and who are
displaced to the same address are typically entitled to only one
expedited assistance payment. FEMA policy also provides for expedited
assistance payments to more than one member of the household in unusual
circumstances, such as when a household was displaced to different
locations. However, both our investigations and data mining found
thousands of instances where FEMA made more than one payment to the
same household that shared the same last name and damaged and current
addresses. As illustrated in case 8, 5 of 6 individuals with the same
last name, the same damaged address, and the same current address
received multiple expedited assistance payments, instead of just one
for which they qualified. While not all of the registrations that used
the same key information were submitted fraudulently, additional
investigations need to be conducted to determine whether or not the
entire family was entitled to expedited and other IHP assistance.
Similarly, our data mining also determined that FEMA made payments to
tens of thousands of IHP registrants who provided different damaged
addresses but the same exact current address. As shown in case study 4
above, some registrations that fell into this category contained bogus
addresses or addresses that were not the registrants' residences. Under
18 U.S.C. § 1001, a person who knowingly and willfully makes any
materially false, fictitious, or fraudulent statement or representation
shall be fined or imprisoned up to 5 years, or both.
Our data mining also found that FEMA made duplicate expedited
assistance payments to tens of thousands of individuals for the same
FEMA registration number. FEMA policy states that registrants should
only receive one expedited assistance payment. However, in some cases,
FEMA paid as many as four $2,000 expedited assistance payments to the
same FEMA registration number. As discussed later, we also found that
FEMA issued expedited assistance payments to more than 5,000
registrants who had already received debit cards. FEMA officials
represented to us that they traced some of these obviously duplicate
payments to a computer error that inadvertently caused the duplicate
payments. However, they provided no supporting documentation.
Controls over Debit Cards Were Ineffective in Preventing Duplicate
Payments and Improper Use:
In the days following hurricane Katrina, FEMA experimented with the use
of debit cards to expedite payments of $2,000 to about 11,000 disaster
victims at three Texas shelters[Footnote 10] who, according to FEMA,
had difficulties accessing their bank accounts. Figure 2 is an example
of a FEMA debit card.
Figure 2: FEMA Debit Card:
[See PDF for image]
[End of figure]
The debit card program was an effective means of distributing relief
quickly to those most in need. However, we found that because FEMA did
not validate the identity of debit card recipients who registered over
the telephone, some individuals who supplied FEMA with SSNs that did
not belong to them also received debit cards. We also found that
controls over the debit card program were not effectively designed and
implemented to prevent debit card recipients from receiving duplicate
expedited assistance payments, once through the debit card and again
through check or EFT. Finally, unlike the guidance provided to other
IHP registrants, at the time FEMA distributed the debit cards, FEMA did
not provide instructions informing them that the funds on their cards
must be used for appropriate purposes.
Debit Cards Issued to Individuals Providing Invalid Social Security
Numbers:
As discussed previously, FEMA did not verify the identity of
individuals and/or households who submitted disaster registrations over
the telephone. This weakness occurred in the debit card program as
well. FEMA required the completion of a disaster registration prior to
a household or individual being able to receive a debit card. According
to FEMA officials, registrants at the three centers applied for
assistance via the telephone and Internet. Therefore, to the extent
that registrations for the debit card were taken over the telephone,
FEMA did not subject the identity of the registrants to a verification
process. Consequently, we identified 50 debit cards issued to
registrants listing SSNs that the SSA had no record of issuing, and 12
cards issued to registrants using SSNs belonging to deceased
individuals. For example, one registrant used an invalid SSN to receive
a $2,000 debit card and used about $500 of that money to pay prior
traffic violations to reinstate a driver's license. In another case, a
registrant used the SSN of an individual who died in 1995 to receive a
$2,000 debit card. FEMA subsequently deposited an additional $7,554 in
IHP payments to that debit card account for additional claims submitted
by that individual. This registrant withdrew most of the $9,554
deposited into the debit card account by obtaining ATM cash
withdrawals.
Thousands of Debit Card Recipients Received Multiple Expedited
Assistance Payments:
Based on a comparison of FEMA's IHP payments and the list of debit card
recipients, we found that over 5,000 of the 11,000 debit card
recipients received more than one $2,000 expedited assistance payment
because they received a debit card and another form of payment (check
or EFT). According to FEMA officials, they were aware that several
individuals had already registered for IHP assistance and that some
payments had already been made prior to issuance of a debit card.
However, FEMA officials stated that individuals in the three shelters
in Texas would not have access to their home addresses or bank accounts
and therefore needed immediate assistance in the form of debit cards.
Our review of FEMA data disproved FEMA's belief that only a few
individuals who received debit cards also received other disaster
assistance payments. Instead, thousands, or nearly half, of the
individuals who received debit cards also received checks or EFTs that
were made several days after the debit cards had been issued. The
result was that FEMA paid more than $10 million dollars in duplicate
expedited assistance payments to individuals who had already received
their $2,000 of expedited assistance.
FEMA Debit Card Transactions:
In general, once FEMA receives a disaster registration, FEMA sends a
package containing IHP information and detailed instructions, including
instructions on how to follow up on benefits, how to appeal if denied
benefits, and the proper use of IHP payments. However, FMS and FEMA
officials informed us that FEMA did not specifically provide
instructions on how the debit cards should only be used for necessary
expenses and serious needs related to the disasters at the same time
the debit cards were distributed. We found that in isolated instances,
debit cards were used for adult entertainment, to purchase weapons, and
for purchases at a massage parlor that had been previously raided by
local police for prostitution.
Our analysis of debit card transaction data provided by JP Morgan Chase
found that the debit cards were used predominantly to obtain cash which
did not allow us to determine how the money was actually used. The
majority of the remaining transactions was associated with purchases of
food, clothing, and personal necessities. Figure 3 shows a breakdown of
the types of purchases made by cardholders.
Figure 3: Breakdown of Purchases Made with FEMA Debit Cards:
[See PDF for image]
[End of figure]
We found that in isolated instances, debit cards were used to purchase
goods and services that did not appear to meet serious disaster related
needs as defined by the regulations. In this regard, FEMA regulation
provides that IHP assistance be used for housing-related needs and
items or services that are essential to a registrant's ability to
overcome disaster related hardship. Table 2 details some of the debit
cards activities we found that did not appear to be for essential
disaster related items or services.
Table 2: Purchases that Did Not Appear Necessary to Satisfy Immediate
Emergency Needs:
Vendors: Elliot's Gun Shop;
Location: Jefferson, LA;
Nature of Transaction: .45 caliber pistol;
Amount: $1,300.
Vendors: D Houston;
Location: Houston, TX;
Nature of Transaction: Gentlemen's club;
Amount: 1,200.
Vendors: Friedman's Jewelers;
Location: Plano, TX;
Nature of Transaction: Diamond engagement ring;
Amount: 1,100.
Vendors: Argosy Casino;
Location: Baton Rouge, LA;
Nature of Transaction: 7 ATM withdrawals within one day at a gambling
institution;
Amount: 1,000.
Vendors: Tim Fanguy Bail Bonds;
Location: Houma, LA;
Nature of Transaction: Partial bail bond payment;
Amount: 1,000.
Vendors: Department of Public Safety;
Location: Baton Rouge, LA;
Nature of Transaction: Payment of prior traffic violations for driver's
license reinstatement;
Amount: 700.
Vendors: Cat Tattoo;
Location: Addison, TX;
Nature of Transaction: Tattoo on arm;
Amount: 450.
Vendors: Swedish Institute;
Location: Irving, TX;
Nature of Transaction: Massage parlor;
Amount: 400.
Vendors: Tiger Beer and Wine;
Location: Dallas, TX;
Nature of Transaction: Alcohol beverages;
Amount: 200.
Vendors: Condoms To Go;
Location: Dallas, TX;
Nature of Transaction: Adult erotica products;
Amount: 150.
Source: GAO analysis of debit card transactions and additional
investigations.
[End of table]
Conclusions:
FEMA has a substantial challenge in balancing the need to get money out
quickly to those who are actually in need and sustaining public
confidence in disaster programs by taking all possible steps to
minimize fraud and abuse. Based on our work to date, we believe that
more can be done to prevent fraud through validation of identities and
damage addresses and enhanced use of automated system verification
intended to prevent fraudulent disbursements. Once fraudulent
registrations are made and money is disbursed, detecting and pursuing
those who committed fraud in a comprehensive manner is more costly and
may not result in recoveries. Further, many of those fraudulently
registered in the FEMA system already received expedited assistance and
will likely receive more money, as each registrant can receive as much
as $26,200 per registration.
Another key element to preventing fraud in the future is to ensure
there are consequences for those that commit fraud. For the fraud cases
that we are investigating, we plan to refer them to the Katrina Fraud
Task Force for further investigation and, where appropriate,
prosecution. We believe that prosecution of individuals who have
obtained disaster relief payments through fraudulent means will send a
message for future disasters that there are consequences for defrauding
the government.
Madam Chairman and Members of the Committee, this concludes my
statement. I would be pleased to answer any questions that you or other
members of the committee may have at this time.
Contacts and Acknowledgements:
[End of section]
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-7455 or kutzg@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this testimony.
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To assess controls in place over the Federal Emergency Management
Agency (FEMA)'s Individuals and Households Program (IHP), we
interviewed FEMA officials and performed walkthroughs at the National
Processing Service Center in Winchester, Va. We reviewed the Stafford
Act, Pub. L. 93-288, the implementing regulations, and FEMA's
instructions to disaster registrants available via the Internet. In
addition, to proactively test controls in place, we applied for
assistance using falsified identities, bogus addresses, and fictitious
disaster stories to determine if IHP payments could be obtained based
on fraudulent information. Because of several key unanswered requests
for documentation from the Department of Homeland Security (DHS),
information needed to fully assess the expedited assistance program was
limited. For example, FEMA and DHS had not provided us documentation to
enable us to conclusively determine the reason that FEMA submitted some
registrations, and did not submit other registrations, to identity
validation prior to issuing expedited assistance payments.
Consequently, our work was limited to our analysis of the FEMA
databases, investigations we conducted, data widely available to the
public via the Internet, and information FEMA officials orally provided
to us.
To determine the magnitude and characteristics of IHP payments, we
obtained the FEMA IHP database as of December 2005. We validated that
the database was complete and reliable by comparing the total
disbursements against reports FEMA provided to the Senate
Appropriations Committee on Katrina/Rita disbursements. We summarized
the amounts of IHP provided by type of assistance and by location of
disaster address.
To determine whether indications existed of fraud and abuse in
expedited assistance and other disbursements, we provided FEMA data to
the Social Security Administration (SSA) to verify against their
records of valid social security numbers (SSNs). We also used data
mining and forensic audit techniques to identify registrations
containing obviously false data, such as multiple registrations
containing the same name, same current or damaged address, but
different SSNs, and registrations containing duplicate information,
such as duplicate names and SSNs. To determine whether registrations
from our data mining resulted in potentially fraudulent and/or improper
payments, we used a nonrepresentative selection of 248 registrations
representing 20 case studies (case studies included multiple
individuals and registrations) for further investigation. We restricted
our case studies to registrations that received payments as of mid-
December 2005, and noted that some registrants within our case studies
also submitted additional registrations--for which they may receive
future payments. We also identified instances where groups of
registrants may have been involved in schemes to defraud FEMA. We found
these schemes because the registrants provided the same SSNs, last
names, current addresses, and/or damaged addresses on their
registrations. Our macro analysis of potentially fraudulent use of SSNs
and other data mining are ongoing, and we plan to report additional
results at a future date. For purposes of this testimony, we did not
conduct sufficient work to project the magnitude of potentially
fraudulent and improper payments of IHP. We also visited over 200 of
the claimed damaged addresses related to our case studies to determine
whether or not the addresses were valid.
To assess the types of purchases made with FEMA debit cards distributed
at relief centers, we reviewed a database of transactions provided by
JP Morgan Chase, the administrating bank for the debit cards. SSA also
assisted us to compare cardholder data with SSA records to determine
whether registrants receiving debit cards had provided valid
identities. We performed data mining on debit card transactions to
identify purchases that did not appear to be indicative of necessary
expenses as defined by the Stafford Act's implementing regulations.
Finally, we validated specific transactions identified in the database
by obtaining information on actual items purchased from the vendors.
In the course of our work, we made numerous written requests for key
documents and sets of data related to the IHP, most dating back to
October 2005. While FEMA officials promptly complied with one key part
of our request--that is FEMA made available databases of IHP
registrants and payments--the majority of items requested have not been
provided. On January 18, 2006, the Department of Homeland Security
Office of General Counsel provided us with well less than half of the
documents that were requested. For example, FEMA and the DHS had not
provided us documentation to enable us to conclusively determine the
reason that FEMA submitted some registrations, and did not submit other
registrations, to identity validation prior to issuing expedited
assistance payments. While the database and other data provided by FEMA
enabled us to design procedures to test the effectiveness of the FEMA's
system of internal controls, it did not enable us to comprehensively
determine the root causes of weak or non-existent controls.
During the course of our audit work, we identified multiple cases of
potential fraud. For cases that we investigated and found significant
evidence of fraudulent activity, we plan to refer our cases directly to
the Hurricane Katrina Fraud Task Force. Except for scope limitations
due to a lack of documentation provided by DHS, we performed our work
from October 2005 through January 2006 in accordance with generally
accepted government auditing standards and quality standards for
investigations as set forth by the President's Council on Integrity and
Efficiency.
FOOTNOTES
[1] Pub. L. 93-288, 88 Stat. 143 (1974) (amended 2000).
[2] The expedited assistance process is not specifically authorized in
the Stafford Act. However, FEMA previously has asserted, and we have
agreed, that it has legal authority under the act to implement
expedited, or fast track, procedures. Disaster Assistance: Guidance
Needed for FEMA's "Fast Track" Housing Assistance Process, GAO-RCED-98-
1 (Washington, D.C.: Oct. 1997).
[3] The Act's implementing regulations define a household as all
persons (including adults and children) who lived in the predisaster
residence, as well as any other persons not present at the time but who
are expected to return during the assistance period. 44 C.F.R. §
206.111.
[4] Current address refers to the address at which the disaster victim
is currently residing. Damaged addresses are the addresses which were
affected by the hurricanes.
[5] The debit card program is a pilot program implemented primarily to
provide expedited assistance to individuals and households housed at
three Texas shelters. The debit cards, which resemble credit cards and
bear the MasterCard logo, can be used at ATMs and at any commercial
outlet that accepts MasterCard.
[6] We are also releasing today the results of our limited
investigation into allegations that Military Meals, Ready-To-Eat
rations intended for use in the hurricane relief efforts were instead
sold to the public on the Internet auction site eBay. See GAO,
Investigation: Military Meals, Ready-To-Eat Sold on eBay, GAO-06-410R
(Washington, D.C.: Feb. 13, 2006).
[7] In 2002, FEMA became part of the Department of Homeland Security
(DHS). DHS officials required GAO to submit written requests for all
documentation to DHS Office of General Counsel.
[8] Under the Act's implementing regulations, FEMA may recover funds
that it determines were provided erroneously, that were spent
inappropriately, or were obtained through fraudulent means. 44 C.F.R. §
206.116 (b)
[9] We used various indicators such as identical names, SSNs, damaged
addresses, and current addresses to link multiple registrations
together into the 20 case studies.
[10] The shelters were located in Dallas, Houston, and San Antonio.
