Hurricanes Katrina and Rita Disaster Relief
Continued Findings of Fraud, Waste, and Abuse Gao ID: GAO-07-300 March 15, 2007The Federal Emergency Management Agency (FEMA) continues to respond to hurricanes Katrina and Rita. GAO's previous work identified suspected fraud, waste, and abuse resulting from control weaknesses associated with FEMA's Individuals and Households Program (IHP) and the Department of Homeland Security's (DHS) purchase card program. Congress asked GAO to follow up on this previous work to determine whether potentially improper and/or fraudulent payments continued to be made. GAO testified on the results of our audit and investigative efforts on December 6, 2006. This report summarizes the results of our follow-up work.
In our December 6, 2006, testimony, GAO stated that FEMA made tens of millions of dollars of potentially improper and/or fraudulent payments associated with both hurricanes Katrina and Rita. These payments include $17 million in rental assistance paid to individuals to whom FEMA had already provided free housing through trailers or apartments. In one case, FEMA provided free housing to 10 individuals in apartments in Plano, Texas, while at the same time it sent these individuals $46,000 to cover out-of-pocket housing expenses. In addition, several of these individuals certified to FEMA that they needed rental assistance. FEMA made nearly $20 million in duplicate payments to thousands of individuals who claimed damages to the same property from both hurricanes Katrina and Rita. FEMA also made millions in potentially improper and/or fraudulent payments to nonqualified aliens who were not eligible for IHP. For example, FEMA paid at least $3 million to more than 500 ineligible foreign students at four universities in the affected areas. This amount likely understates the total payments to ineligible foreign students because it does not cover all colleges and universities in the area. FEMA also provided potentially improper and/or fraudulent IHP assistance to other ineligible non-U.S. residents, despite having documentation indicating their ineligibility. Finally, FEMA's difficulties in identifying and collecting improper payments further emphasized the importance of implementing an effective fraud, waste, and abuse prevention system. For example, GAO previously estimated improper and potentially fraudulent payments related to the IHP application process to be $1 billion through February 2006. As of November 2006, FEMA identified about $290 million in overpayments and collected about $7 million. Finally, GAO's work on DHS purchase cards showed continuing problems with property accountability, including items GAO investigated that could not be located 1 year after they were purchased.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-300, Hurricanes Katrina and Rita Disaster Relief: Continued Findings of Fraud, Waste, and Abuse
This is the accessible text file for GAO report number GAO-07-300
entitled 'Hurricanes Katrina and Rita Disaster Relief: Continued
Findings of Fraud, Waste, and Abuse' which was released on March 16,
2007.
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Report to the Committee on Homeland Security and Governmental Affairs,
U.S. Senate:
United States Government Accountability Office:
GAO:
March 2007:
Hurricanes Katrina And Rita Disaster Relief:
Continued Findings of Fraud, Waste, and Abuse:
GAO-07-300:
GAO Highlights:
Highlights of GAO-07-300, a report to the Committee on Homeland
Security and Governmental Affairs, U.S. Senate
Why GAO Did This Study:
The Federal Emergency Management Agency (FEMA) continues to respond to
hurricanes Katrina and Rita. GAO‘s previous work identified suspected
fraud, waste, and abuse resulting from control weaknesses associated
with FEMA‘s Individuals and Households Program (IHP) and the Department
of Homeland Security‘s (DHS) purchase card program. Congress asked GAO
to follow up on this previous work to determine whether potentially
improper and/or fraudulent payments continued to be made. GAO testified
on the results of our audit and investigative efforts on December 6,
2006. This report summarizes the results of our follow-up work.
What GAO Found:
In our December 6, 2006, testimony, GAO stated that FEMA made tens of
millions of dollars of potentially improper and/or fraudulent payments
associated with both hurricanes Katrina and Rita. These payments
include $17 million in rental assistance paid to individuals to whom
FEMA had already provided free housing through trailers or apartments.
In one case, FEMA provided free housing to 10 individuals in apartments
in Plano, Texas, while at the same time it sent these individuals
$46,000 to cover out-of-pocket housing expenses. In addition, several
of these individuals certified to FEMA that they needed rental
assistance.
FEMA made nearly $20 million in duplicate payments to thousands of
individuals who claimed damages to the same property from both
hurricanes Katrina and Rita. FEMA also made millions in potentially
improper and/or fraudulent payments to nonqualified aliens who were not
eligible for IHP. For example, FEMA paid at least $3 million to more
than 500 ineligible foreign students at four universities in the
affected areas. This amount likely understates the total payments to
ineligible foreign students because it does not cover all colleges and
universities in the area. FEMA also provided potentially improper
and/or fraudulent IHP assistance to other ineligible non-U.S.
residents, despite having documentation indicating their ineligibility.
Finally, FEMA‘s difficulties in identifying and collecting improper
payments further emphasized the importance of implementing an effective
fraud, waste, and abuse prevention system. For example, GAO previously
estimated improper and potentially fraudulent payments related to the
IHP application process to be $1 billion through February 2006. As of
November 2006, FEMA identified about $290 million in overpayments and
collected about $7 million.
Figure: GAO Improper Payment Estimate and FEMA Reported Overpayments
and Collections:
[See PDF for Image]
[Source: GAO analysis and FEMA data.
[End of figure]
What GAO Recommends:
GAO recommends that DHS direct FEMA to take six actions, including
establishing controls to prevent duplicate housing benefits to FEMA
trailer and apartment residents and duplicate benefit payments for the
same damages. GAO is also recommending that FEMA establish controls to
prevent benefits to nonqualified aliens. FEMA concurred with GAO‘s six
recommendations and outlined actions it has taken or plans to take to
address GAO‘s findings. However, FEMA plans to perform additional
investigations on two of the findings to determine whether problems are
systemic prior to implementing changes.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-300].
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]
Contents:
Letter:
Overview of Testimony:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Testimony on Continued Findings of Fraud, Waste, and Abuse:
Appendix II: Comments from the Federal Emergency Management Agency:
United States Government Accountability Office:
Washington, DC 20548:
March 15, 2007:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Minority Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
On December 6, 2006, we testified before the Senate Committee on
Homeland Security and Governmental Affairs on the continued findings of
fraud, waste, and abuse associated with disaster relief for hurricanes
Katrina and Rita.[Footnote 1] In addition to the December 6 testimony,
in several prior hearings, we testified that significant control
weaknesses in the Federal Emergency Management Agency's (FEMA)
Individuals and Households Program (IHP) and in the Department of
Homeland Security's (DHS) purchase card program left the government
vulnerable to significant fraud, waste, and abuse.[Footnote 2] As we
previously reported, the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (Stafford Act)[Footnote 3] provides the basis
for IHP. IHP is a major component of the federal disaster response
efforts designed to provide financial assistance to individuals and
households that have, as a direct result of a major disaster, necessary
expenses and serious needs that cannot be met through other means. The
Stafford Act allowed registrants to receive financial assistance up to
a cap of $26,200 for disasters occurring in 2005. In early October
2006, FEMA reported to Congress that it had delivered approximately $7
billion in IHP aid for hurricanes Katrina and Rita. This IHP amount
included expedited assistance, temporary housing assistance, repair and
replacement of real and personal property, and other miscellaneous
categories.
Our December 6, 2006, testimony detailed our findings related to
additional work we had performed since June 2006. Specifically, the
testimony addressed our findings related to potentially improper and/or
fraudulent (1) rental assistance payments FEMA made to registrants at
the same time it was providing free housing via trailers and
apartments; (2) duplicate assistance payments to individuals who
claimed damages to the same property for both hurricanes Katrina and
Rita; and (3) IHP payments to nonqualified aliens who did not qualify
for IHP. For purposes of the testimony, potentially improper and/or
fraudulent payments referred to payments made by FEMA based on
potentially improper and/or fraudulent registration data submitted by
IHP registrants. The testimony also discussed (1) the importance of
fraud prevention, and (2) the results of our investigation into
property bought by FEMA using DHS purchase cards, which was
subsequently lost or stolen. This report summarizes the findings
detailed in our December 6, 2006, testimony and makes specific
recommendations for corrective action. Our December 6, 2006, testimony
is reprinted in appendix I.
Overview of Testimony:
In our testimony, we stated that our audit and investigative work on
FEMA disaster relief payments associated with hurricanes Katrina and
Rita identified additional indications of fraud, waste, and abuse.
Specifically, we found that FEMA made nearly $17 million in potentially
improper and/or fraudulent rental assistance payments to individuals
after they had moved into FEMA trailers. For example, after FEMA
provided a trailer to a household--in January 2006--FEMA provided
rental assistance payments to the same household in late January,
February, and April of 2006 totaling approximately $5,500. In addition,
FEMA provided potentially improper and/or fraudulent rental assistance
payments to individuals living in FEMA-provided apartments. For
example, FEMA made nearly $46,000 in rental assistance payments to at
least 10 individuals living in apartments at the same time that the
apartments were being paid for by FEMA through the city of Plano,
Texas. Seven of 10 in this group self-certified to FEMA that they
needed rental assistance, despite the fact that they were living in
rent-free housing. Because of limitations in FEMA data, we were not
able to identify the full extent of potentially improper rental
assistance payments made to individuals in FEMA-provided apartments.
We also found that nearly $20 million in potentially improper and/or
fraudulent payments went to individuals who, using the same property,
registered for assistance for both hurricanes Katrina and Rita. With
few exceptions, FEMA officials explained that victims of both disasters
are entitled to only one set of IHP payments for the same damaged
property. However, FEMA officials told us that to increase the speed
with which FEMA could distribute disaster assistance, they turned off
the system edits that should have identified these types of duplicate
payments. Consequently, FEMA paid over 7,000 individuals IHP assistance
twice for the same property--once for Hurricane Katrina and once for
Hurricane Rita. These individuals received double payments for
expedited assistance, rental assistance, and/or housing replacement.
For example, FEMA records showed that one registrant received two
housing replacement payments of $10,500 each, despite the fact that he
had only one property to replace.
Millions of dollars of improper and potentially fraudulent payments
also went to nonqualified aliens, including foreign students and
temporary workers. For example, FEMA improperly paid at least $3
million in IHP assistance to more than 500 ineligible foreign students
at four universities. Further, FEMA provided IHP payments that included
expedited assistance and personal property totaling more than $156,000
to 25 individuals who claimed to be foreign workers on temporary visas.
FEMA made these payments despite having copies of the work visas for
several individuals, which should have alerted FEMA that the temporary
workers were not eligible for financial assistance. Social Security
Administration records also showed many of the individuals used invalid
Social Security numbers, which could have alerted FEMA about the
individuals' ineligibility. In addition, several students and
university officials stated that FEMA personnel encouraged all
students--including international students who did not qualify for IHP
assistance--that they were eligible for IHP financial assistance.
Because we did not obtain information from all universities in the Gulf
region and because of unavailability of detailed data on other
nonqualified legal aliens, we were not able to determine the magnitude
of improper and/or fraudulent payments in this area.
Our findings also showed that the small amount of money that FEMA has
been able to collect from improper payments further demonstrates the
need to have adequate preventive controls. We previously reported that
inadequate preventive controls related to the IHP application process
resulted in an estimated $1 billion of potentially improper and/or
fraudulent payments through February 2006.[Footnote 4] In contrast, as
of November 2006, FEMA had detected through its own processes about
$290 million in overpayments. This overpayment amount, which FEMA
refers to as recoupments, represents the improper payments that FEMA
had detected and had issued letters requesting repayments. However,
through November FEMA had only collected nearly $7 million. Collection
of only $7 million of an estimated $1 billion of fraudulent and
improper payments clearly supports the basic point we have previously
made[Footnote 5] that fraud prevention is far more efficient and
effective than detection and collection.
With respect to findings regarding the DHS purchase card program, we
found weaknesses and breakdowns in accountability for property items
bought for hurricanes Katrina and Rita relief efforts using government
purchase cards.[Footnote 6] For example, FEMA is still unable to locate
48 of the 143 missing items (e.g., laptop computers, printers, and GPS
units) identified in our July 2006 testimony. Moreover, 37 items were
missing from an additional 103 items that we investigated for the July
testimony. Thus, over a year after they were purchased, FEMA could not
locate 85 of the 246 items (34 percent) that we investigated; we
presume these items are now lost or stolen. Our investigation also
revealed that although FEMA was in possession of 18 of the 20 flat-
bottom boats it had purchased for hurricane relief efforts, FEMA had
not received the title to any of these boats. FEMA could not provide
any information about the location of the remaining two boats.
In response to our December testimony, FEMA acknowledged weaknesses in
the processes and systems that resulted in ineligible individuals
receiving assistance. FEMA stated that in the 15 months since Hurricane
Katrina, FEMA has made great strides in correcting its deficiencies.
Examples of improvements FEMA has informed us that it put into service
include an upgraded registration application that FEMA expects will
prevent duplicate registrations and an identity verification process so
that all registrations for assistance are subjected to the same
stringent criteria. FEMA believes that the stringent controls it
instituted this past year improve its safeguards and will help
eliminate processing errors and fraudulent abuse. FEMA further stated
that it will consider and evaluate any new findings that can assist in
improving its processes and procedures.
Based on the findings in our testimony of December 6, 2006, we are
recommending that the Secretary of Homeland Security direct the
Director of FEMA to take a number of actions to reduce the potential
for fraud and abuse. Recommendations include developing controls to
prevent duplicate rental assistance benefits, increasing controls to
prevent ineligible nonqualified aliens from receiving payments, and
enabling controls to prevent duplicate payments to the same individual
across multiple disasters. FEMA concurred with all recommendations and
responded that it had taken, or is in the process of taking, actions to
implement these recommendations. However, in its response FEMA
indicated that on two of the recommendations it planned to perform
investigations to determine the extent of the problems identified prior
to implementing the recommendations.
Conclusions:
Ineffective preventive controls for FEMA's IHP have resulted in
substantial fraudulent and improper payments. The additional examples
of potentially fraudulent and improper payments, totaling tens of
millions of dollars, that we highlighted in our December 2006 testimony
further show that our estimate of $1 billion in potentially improper
and/or fraudulent payments through February is likely understated. In
addition, we did not include in this total potentially improper and/or
fraudulent payments to individuals who received disaster assistance
from FEMA even though they also received insurance payments for damaged
property. With respect to property bought with government purchase
cards, FEMA's inability to find items 1 year after they were purchased,
including laptop computers, printers, and GPS units, shows that FEMA
property accountability controls are ineffective and possibly resulted
in the loss or theft of government property.
We have previously provided 25 recommendations to DHS and FEMA to
improve management of IHP and the purchase card program. FEMA and DHS
had fully concurred with 19 recommendations, and substantially or
partially concurred with the remaining 6 recommendations. DHS and FEMA
also reported that they have taken actions, or plan to take actions, to
implement all our recommendations. While we have not performed work to
determine whether FEMA's actions adequately address our
recommendations, if properly implemented, our recommendations from
previous and current work should allow DHS and FEMA to rapidly provide
assistance to disaster victims while at the same time providing
reasonable assurance that disaster assistance payments are accurate and
properly authorized. As we have stated in prior reports addressing IHP
improper and fraudulent payments, these recommendations only address
specific weakness identified in this report and are only part of a
comprehensive fraud prevention program that should be in place.
Further, FEMA should ensure that there are adequate manual processes in
place to allow registrants who are incorrectly denied assistance to
expeditiously appeal the decision and receive aid. Also, FEMA should
fully field test all changes to provide assurance that valid
registrants are able to apply for and receive IHP payments.
Recommendations for Executive Action:
We recommend that the Secretary of Homeland Security direct the
Director of FEMA to take the following six actions to address
weaknesses identified in the administration of IHP.
To prevent rental assistance payments from being provided at the same
time that FEMA provides free housing (including trailers, mobile homes,
and apartments), FEMA should:
* develop processes for comparing IHP registrant data with FEMA direct
housing assistance data to prevent IHP registrants from receiving
payments for rental assistance covering the time they are living in
FEMA-provided housing and:
* provide clear guidance to IHP registrants, including rental
assistance registrants, indicating how the payments are to be used.
With respect to duplicate assistance payments across multiple
disasters, FEMA should implement and/or enable controls to prevent
duplicate payments to the same individual from different disasters for
the same damage done to the same address.
To prevent improper payments to nonqualified aliens, FEMA should:
* provide clear guidance and training to FEMA and contractor employees
on the specific types of aliens eligible for financial disaster
assistance, and identify nonqualified aliens, and:
* develop processes to identify and deny assistance to nonqualified
aliens who register for IHP assistance using valid Social Security
numbers through data comparisons with agencies that maintain data on
legal aliens with Social Security numbers.
With respect to property bought with DHS purchase cards, if FEMA cannot
locate this property in a reasonable time period, it should work with
DHS to reconcile its tracking system data and declare these items lost
or stolen.
Agency Comments and Our Evaluation:
On February 15, 2007, FEMA provided written comments on a draft of this
report in which it outlined actions it plans to take or has taken that
are designed to address each of our six recommendations. FEMA's
comments are reprinted in appendix II. FEMA provided examples of
several planned actions to address identified weaknesses. For example,
concerning our recommendation to provide clear guidance to victims
receiving IHP rental assistance on how funds should be used, FEMA
stated that it is conducting a comprehensive review of existing
communications policies and is developing a more effective strategy to
ensure that registrants understand IHP and its purpose. Additionally,
in response to our recommendation to develop processes to identify and
deny assistance to nonqualified aliens who register for IHP assistance,
FEMA stated that it is reaching out to other federal agencies and
commercial vendors in order to enhance FEMA's ability to screen out
applications from nonqualified aliens. FEMA's response indicates that
it is attempting to address problems we identified in IHP. As the
federal government prepares for future disasters, it will be important
for FEMA to establish effective controls to prevent fraudulent and
improper payments before they occur.
However, in its responses to our recommendations concerning actions to
prevent duplicate housing assistance and housing damage repair
assistance, FEMA also stated it planned to perform additional
investigations to confirm that the conditions described in our draft
report are in fact representative of systemic problems before
initiating appropriate corrective actions. Nonetheless, we continue to
believe, as discussed in our testimony (see app. I), that our work
amply demonstrates the systemic nature of the problems identified and
the need for the recommended corrective actions.
Specifically, with respect to our recommendation on preventing
individuals from receiving rental assistance payments while residing in
FEMA-provided housing (apartments and trailers), we continue to believe
our work demonstrates a systemic problem exists. In fact the $17
million in potentially duplicate rental assistance paid to thousands of
IHP registrants is conservative and may even understate the extent of
the problems. In addition, our case studies clearly showed payments
that were at least improper and potentially fraudulent. Further, our
work included steps to minimize the possibility that, as FEMA asserted,
many of these cases could be explained by the fact that rental
assistance payments could have been made retroactively to cover rental
expenses prior to the date of payment. Specifically, in arriving at our
estimate of the extent of a systemic problem in this area, we took the
following steps to ensure that our reported estimate of the extent of
potentially duplicate payments in this area did not overstate the
problem.
* We only included payments as potential duplicates when they were made
to an IHP registrant at the same time that the registrant was residing
in FEMA-provided housing. We did not consider payments made before a
registrant moved in to FEMA-provided housing as duplicates even though
FEMA often makes advance rental assistance payments. For example, FEMA
provided more than $3 million in rental assistance payments to FEMA
trailer registrants in the week before they moved into FEMA trailers.
These payments averaged more than $1,700, which indicates they were
likely for multiple months of rental assistance and could have been
duplicate assistance payments because they would have covered the time
the registrants were in FEMA trailers.
* We conducted field investigations on case studies to ensure that
conclusions reached were accurate.
* We excluded from our analysis any payments made to IHP registrants
living in FEMA-provided apartments. Those payments were excluded from
the analysis because FEMA failed to maintain detailed reliable data on
individuals living in FEMA-provided apartments. Thus there are
potentially millions more in duplicate rental assistance payments
associated with IHP registrants living in FEMA-provided apartments, as
supported by our case study investigations.
As discussed in our testimony, our work also clearly demonstrates a
systemic problem and our recommended corrective action with respect to
controls to prevent duplicate payments to the same individual for the
same damage across multiple disasters. FEMA stated it was unsure
whether all payments we identified as duplicates were in fact duplicate
payments to the same individual for the same damage across multiple
disasters. FEMA stated that some payments could have resulted from
damage from Hurricane Katrina, and then future payments were made based
on different damage caused by Hurricane Rita.
However, this assertion is contrary to representations FEMA made to us
during the course of the audit. Specifically, FEMA told us during the
audit that with few exceptions, registrants would only be entitled to
one payment for each damage and/or need. We acknowledge that a
registrant could have had a house damaged by Hurricane Katrina, and
could have repaired the damage and moved back into the original house-
-only to have it damaged again by Hurricane Rita. However, this it is
an extremely unlikely scenario given the severity of the damage caused
by Hurricane Katrina and the fact that Hurricane Rita occurred shortly
after, leaving very little time for inspectors to inspect and certify
housing damage between storms, especially given there were more than
7,000 registrants we identified. According to our case studies, FEMA
performed the first inspection of the properties in question after both
hurricanes affected the area. Our case studies also showed that FEMA
used two different inspectors to look at damaged properties, once for
Hurricane Katrina and once for Hurricane Rita. Without having an
inspection performed before Hurricane Rita hit, or having the same
inspector review the claim to determine what damage was from Hurricane
Rita and what damage was from Hurricane Katrina, FEMA is not in a
position to know whether it paid for the same damaged items twice.
Therefore, we continue to believe our work demonstrates a systemic
problem for which FEMA should institute our recommendation to institute
controls that prevent duplicate payments to the same individual for the
same damage registered for under different disasters.
We are sending copies of this report to the Secretary of Homeland
Security, and the Director of the Federal Emergency Management Agency.
We will also make copies available to others upon request. In addition,
this report will be available at no charge on the GAO Web site at
http://www.gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. If you or your staffs have questions about this report, please
contact me at (202) 512-7455 or kutzg@gao.gov; or contact John Kelly at
(202) 512-6926 or kellyj@gao.gov. Other individuals who made major
contributions to this report were Gary Bianchi, Jennifer Costello,
Jason Kelly, Barbara Lewis, Jonathan Meyer, Andrew McIntosh, John Ryan,
and Tuyet-Quan Thai.
Signed by:
Gregory Kutz:
Managing Director:
Forensic Audits and Special Investigations:
[End of section]
Appendix I: Testimony on Continued Findings of Fraud, Waste, and Abuse:
This is the accessible text file for GAO report number GAO-07-252T
entitled 'Hurricanes Katrina and Rita Disaster Relief: Continued
Findings of Fraud, Waste, and Abuse' which was released on December 6,
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
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This is a work of the U.S. government and is not subject to copyright
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Testimony:
Before the Committee on Homeland Security and Governmental Affairs,
U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EST:
Wednesday, December 6, 2006:
Hurricanes Katrina And Rita Disaster Relief:
Continued Findings of Fraud, Waste, and Abuse:
Statement of Greg Kutz,
Managing Director:
Forensic Audits and Special Investigations:
John J. Ryan,
Assistant Director:
Forensic Audits and Special Investigations:
GAO-07-252T:
GAO Highlights:
Highlights of GAO-07-252T, a testimony to the Committee on Homeland
Security and Governmental Affairs, U.S. Senate
Why GAO Did This Study:
Hurricanes Katrina and Rita destroyed homes and displaced millions of
individuals. While the Federal Emergency Management Agency (FEMA)
continues to respond to this disaster, GAO‘s previous work identified
significant control weaknesses”specifically in FEMA‘s Individuals and
Households Program (IHP) and in the Department of Homeland Security‘s
(DHS) purchase card program”resulting in significant fraud, waste, and
abuse.
Today‘s testimony will address whether FEMA provided improper and
potentially fraudulent (1) rental assistance payments to registrants at
the same time it was providing free housing via trailers and
apartments; (2) duplicate assistance payments to individuals who
claimed damages to the same property for both hurricanes Katrina and
Rita; and (3) IHP payments to non-U.S. residents who did not qualify
for IHP. This testimony will also discuss (1) the importance of fraud
identification and prevention, and (2) the results of our investigation
into property FEMA bought using DHS purchase cards.
To address these objectives, GAO data mined and analyzed FEMA records
and interviewed city officials, university officials, and foreign
students. GAO also traveled to Louisiana and Texas to inspect selected
property items and to investigate improper housing payments to
individuals living in FEMA-provided housing.
What GAO Found:
FEMA continued to lose tens of millions of dollars through potentially
improper and/or fraudulent payments from both hurricanes Katrina and
Rita. These payments include $17 million in rental assistance paid to
individuals to whom FEMA had already provided free housing through
trailers or apartments. In one case, FEMA provided free housing to 10
individuals in apartments in Plano, Texas, while at the same time it
sent these individuals $46,000 to cover out-of-pocket housing expenses.
In addition, several of these individuals certified to FEMA that they
needed rental assistance.
FEMA made nearly $20 million in duplicate payments to thousands of
individuals who claimed damages to the same property from both
hurricanes Katrina and Rita. FEMA also made millions in potentially
improper and/or fraudulent payments to nonqualified aliens who were not
eligible for IHP. For example, FEMA paid at least $3 million to more
than 500 ineligible foreign students at four universities in the
affected areas. This amount likely understates the total payments to
ineligible foreign students because it does not cover all colleges and
universities in the area. FEMA also provided potentially improper
and/or fraudulent IHP assistance to other ineligible non-U.S.
residents, despite having documentation indicating their ineligibility.
Finally, FEMA‘s difficulties in identifying and collecting improper
payments further emphasized the importance of implementing an effective
fraud, waste, and abuse prevention system. For example, GAO previously
estimated improper and potentially fraudulent payments related to the
IHP application process to be $1 billion through February 2006. As of
November 2006, FEMA identified about $290 million in improper payments
and collected about $7 million
Figure: GAO Improper Payment Estimate and FEMA Reported Overpayments
and Collections:
[See PDF for Image]
Source: GAO analysis and FEMA data.
[End of Figure]
GAO‘s previous work on the DHS purchase cards also showed significant
problems with property accountability. Of 246 items we investigated
that FEMA purchased for hurricane relief efforts using DHS‘s purchase
cards, 85 items”or 34 percent”are still missing and presumed lost or
stolen.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-252T].
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 forensic audit and related
investigations into the Federal Emergency Management Agency's (FEMA)
response to hurricanes Katrina and Rita. In several prior hearings, we
testified that significant control weaknesses in FEMA's Individuals and
Households Program (IHP) and in the Department of Homeland Security's
(DHS) purchase card program have left the government vulnerable to
significant fraud, waste, and abuse. In February 2006,[Footnote 1] we
testified before this Committee that specific control weaknesses in the
IHP program resulted in improper expedited assistance payments and
nonexistent controls left the government vulnerable to substantial
fraud and abuse related to IHP. Several months later, in June
2006,[Footnote 2] we testified on additional work performed whereby we
projected that the weak or nonexistent controls resulted in an
estimated $1 billion dollars in potentially fraudulent and improper IHP
payments.[Footnote 3] Most recently, in July 2006,[Footnote 4] we
testified before this Committee that control weaknesses in DHS's
purchase card program had resulted in fraud, waste, and abuse,
including activity by FEMA related to hurricanes Katrina and Rita. Our
purchase card work also showed that poor controls over property
acquired primarily for hurricanes Katrina and Rita operations,
including laptops, printers, global positioning system (GPS) units, and
flat-bottom boats, resulted in lost, missing, or stolen assets. We have
issued companion reports[Footnote 5] following each of these
testimonies that included numerous recommendations on how to address
the weaknesses identified by our audit and investigative work.
As we previously reported, the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (Stafford Act)[Footnote 6] provides the basis
for IHP. IHP is a major component of the federal disaster response
efforts designed to provide financial assistance to individuals and
households that, as a direct result of a major disaster, have necessary
expenses and serious needs that cannot be met through other means. The
Stafford Act allowed registrants to receive financial assistance up to
a cap of $26,200 for disasters occurring in 2005. In early October
2006, FEMA reported to Congress that it had delivered approximately $7
billion in IHP aid for hurricanes Katrina and Rita. This IHP amount
included expedited assistance, temporary housing assistance, repair and
replacement of real and personal property, and other miscellaneous
categories.
Today's testimony reflects new findings related to additional work we
have performed since June 2006. The testimony will address whether FEMA
provided potentially improper and/or fraudulent (1) rental assistance
payments to registrants at the same time it was providing free housing
via trailers and apartments; (2) duplicate assistance payments to
individuals who claimed damages to the same property for both
hurricanes Katrina and Rita; and (3) IHP payments to nonqualified
aliens who did not qualify for IHP. This testimony will also discuss
(1) the importance of fraud prevention, and (2) the results of our
investigation into property bought by FEMA using DHS purchase cards,
which was subsequently lost or stolen. For purposes of this testimony,
potentially improper and/or fraudulent payments refers to payments made
by FEMA based on potentially improper and/or fraudulent registration
data submitted by IHP registrants.
To address these objectives, we compared information included in FEMA
databases; performed data mining on FEMA databases; and interviewed
officials in selected cities and universities, and foreign students. We
also traveled to Louisiana and Texas to physically inspect selected
items FEMA purchased for hurricane relief efforts. For details on our
scope and methodology, see appendix I. We conducted our audit and
investigations from June 2006 through November 2006. We conducted our
audit work in accordance with generally accepted government auditing
standards and conducted our investigative work in accordance with the
standards prescribed by the President's Council on Integrity and
Efficiency.
Summary:
Our audit and investigative work on controls over FEMA disaster relief
payments associated with hurricanes Katrina and Rita identified
additional potentially improper and/or fraudulent payments, including
the following:
* Nearly $17 million in potentially improper and/or fraudulent rental
assistance payments to individuals while they were living in trailers
also paid for by FEMA. For example, after FEMA provided a trailer to a
household--in January 2006--FEMA provided rental assistance payments to
the same household in late January, February, and April of 2006
totaling approximately $5,500.
* FEMA provided potentially improper and/or fraudulent rental
assistance payments to individuals living in FEMA-paid apartments. For
example, FEMA made nearly $46,000 in rental assistance payments to at
least 10 individuals living in apartments at the same time that the
apartments were being paid for by FEMA through the city of Plano,
Texas. Seven of 10 in this group self-certified to FEMA that they
needed rental assistance, despite the fact that they were living in
rent-free housing. Because of limitations in FEMA data, we were not
able to identify the full extent of potentially improper rental
assistance payments made to individuals in FEMA-paid apartments.
* Nearly $20 million in potentially improper and/or fraudulent payments
went to individuals who registered for both hurricanes Katrina and Rita
assistance using the same property. With few exceptions, FEMA officials
explained that victims of both disasters are entitled to only one set
of IHP payments for the same damaged property. However, FEMA officials
told us that they turned off the system edits that should have
identified these types of duplicate payments to increase the speed with
which FEMA could distribute disaster assistance. Consequently, FEMA
paid over 7,000 individuals IHP assistance twice for the same property-
-once for Hurricane Katrina and once for Hurricane Rita. These
individuals received double payments for expedited assistance, rental
assistance, and/or housing replacement. For example, FEMA records
showed that one registrant received two housing replacement payments of
$10,500 each, despite the fact that he had only one property to
replace.
* Millions of dollars of improper and potentially fraudulent payments
went to nonqualified aliens, including foreign students and temporary
workers. For example, FEMA improperly paid at least $3 million in IHP
assistance to more than 500 ineligible foreign students at four
universities. Further, FEMA provided IHP payments that included
expedited assistance and personal property totaling more than $156,000
to 25 individuals who claimed to be foreign workers on temporary visas.
FEMA made these payments despite having copies of the work visas for
several individuals, which should have alerted FEMA that the temporary
workers were not eligible for financial assistance. Because we did not
obtain information from all universities in the Gulf region and because
of unavailability of detailed data on other nonqualified legal aliens,
we were not able to determine the magnitude of potentially improper
and/or fraudulent payments in this area.
* The small amount of money that FEMA has been able to collect from
improper payments further demonstrates the need to have adequate
preventive controls. We previously reported that inadequate preventive
controls related to the IHP application process resulted in an
estimated $1 billion of potentially improper and/or fraudulent payments
through February 2006. In contrast, as of November 2006, FEMA had
detected through its own processes about $290 million in overpayments.
This overpayment amount, which FEMA refers to as recoupments,
represents the improper payments that FEMA had detected and had issued
letters requesting repayments. However, through November FEMA had only
collected nearly $7 million of the about $290 million identified for
recoupment. Collection of only $7 million of an estimated $1 billion of
fraudulent and improper payments clearly supports the basic point we
have previously made[Footnote 7] that fraud prevention is far more
efficient and effective than detection and collection.
* Regarding the DHS purchase card program, we found overall problems
with property items bought for hurricanes Katrina and Rita relief
efforts using government purchase cards. For example, FEMA is still
unable to locate 48 of the143 missing items (e.g., laptop and printers)
identified in our July 2006 testimony. Moreover, 37 items were missing
from an additional 103 items that we investigated. Thus, over a year
after being purchased, FEMA could not locate 85 of the 246 items (34
percent) that we investigated, and are presumed lost or stolen.
* Our investigation also revealed that although FEMA was in possession
of 18 of the 20 flat-bottom boats it had purchased for hurricane relief
efforts, FEMA had not received the title to any of these boats.
Further, FEMA could not provide any information about the location of
the remaining two boats, although local law enforcement officials
informed us that they found one of the boats in a shed at the house of
its previous owner.
Potentially Improper and/or Fraudulent Housing Assistance Payments
Related to Trailers and Apartments:
We found that FEMA provided nearly $17 million in potentially improper
and/or fraudulent rental assistance payments to individuals already
housed in other accommodations that FEMA provided through other
disaster assistance programs. The Stafford Act prohibits FEMA from
providing rental assistance payments under IHP to an applicant if
temporary housing has been provided by any other source.[Footnote 8]
Despite this prohibition, FEMA did not have an effective process in
place to compare IHP registrant data with data on individuals already
housed in FEMA-purchased trailers and FEMA-provided apartments. FEMA
also failed to adequately advise victims that they were prohibited from
receiving rental assistance for the same period they occupied rent-free
housing. Consequently, FEMA improperly paid nearly $17 million to over
8,600 registrants after they had already moved into FEMA trailers.
While the quality of FEMA data did not allow us to make similar
calculations for the amount and number of individuals receiving rental
assistance payments after they had been housed in FEMA-provided
apartments, the amount could be substantial.
In the aftermath of hurricanes Katrina and Rita, FEMA used various
programs to house displaced victims, including financial assistance for
rent and rent-free housing. Rent-free housing included trailers that
FEMA purchased and apartments that FEMA either paid for directly or
reimbursed state and local governments for after they paid landlords on
behalf of the disaster victims. According to a FEMA official, to
expedite apartment rental assistance, FEMA provided payments to over
100 different state and local governments for the provision of rent-
free apartments.
By comparing information in two of FEMA's databases--the FEMA Response
and Recovery Applicant Tracking System (FRRATS) and the National
Emergency Management Information System (NEMIS)--we calculated that
FEMA improperly made rental assistance payments--intended to cover out-
of-pocket rental expenses--totaling nearly $17 million to over 8,600
individuals after they had moved into FEMA-provided trailers.[Footnote
9] Some received multiple rental assistance payments even after they
moved into free FEMA-provided housing. In some instances, the payments
were made based on potentially fraudulent claims because recipients
typically have to certify to FEMA that they continued to need IHP
rental assistance.
Limitations in FEMA apartment data did not allow us to determine the
magnitude of potentially duplicate rental assistance payment to
individuals housed in rent-free apartments. In contrast to trailer
data, which FEMA maintains in the FRRATS database, we could not
validate accuracy or completeness of apartment data. According to FEMA
officials, the accuracy of apartment data was questionable because it
came from the over 100 state and local authorities who assisted in
delivering housing aid for FEMA. The completeness of data was also at
issue because FEMA did not ask states to collect registration data from
individuals in rent-free apartments until well after the aid was
provided, and therefore individuals who may have left the rent-free
apartments were not included in the data. Table 1 provides illustrative
examples of duplicate rental assistance payments to registrants in FEMA
trailers and rent-free apartments.
Table 1: Examples of Duplicate and Potentially Improper and/or
Fraudulent Housing Assistance Payments Related to FEMA Trailers and
Apartments:
Case: 1;
Amount of duplicate and improper payment: $46,000;
Type/ location of FEMA-provided unit: Apartment/ Plano, TX;
Details:
* 10 residents of an apartment complex applied and received rental
assistance;
* At the same time, FEMA provided rent-free housing at the apartment in
Plano, Texas;
* FEMA records indicated that seven registrants certified to FEMA that
they needed rental assistance, despite the fact that they lived in rent-
free apartments.
Case: 2;
Amount of duplicate and improper payment: 3,600;
Type/ location of FEMA-provided unit: Apartment/ Austin, TX;
Details:
* Registrant received free housing in September 2005 when the
registrant moved into an apartment the city of Austin paid for on
behalf of FEMA;
* FEMA made rental assistance payments in September 2005, February
2006, and May 2006 totaling more than $3,600 at the same time that it
paid $705 per month for the apartment.
Case: 3;
Amount of duplicate and improper payment: 1,700;
Type/ location of FEMA-provided unit: Apartment/ Houston, TX;
Details:
* Registrant received assistance in February and a smaller payment in
May 2006 covering rent from February through May 2006;
* Registrant received a rent-free apartment for the months of February,
April, and May 2006. We were unable to confirm whether the registrant
received rent-free housing in March 2006 due to incomplete data.
Case: 4;
Amount of duplicate and improper payment: 5,400;
Type/ location of FEMA-provided unit: Trailer/ Slidell, LA;
Details:
* Registrant received trailer in mid-March 2006;
* Registrant received two rental assistance payments totaling more than
$5,400 in April and May 2006 for the time the registrant lived in the
trailer.
Case: 5;
Amount of duplicate and improper payment: 5,500;
Type/ location of FEMA-provided unit: Trailer/ Lacombe, LA;
Details:
* Five members of the same household registered and received IHP
assistance using the same damaged address;
* FEMA delivered a trailer to the damaged property in January 2006, but
continued to provide rental assistance to four members of the same
family in January, February, and April 2006;
* One interviewee informed us that the rental receipt that a family
member provided to FEMA was fictitious;
* In addition to the $5,500 in improper duplicative payments for
trailer and rental assistance, the family also received over $6,000 in
potentially improper and/or fraudulent payments by submitting multiple
registrations.
Source: GAO analysis of FEMA's IHP trailer, data and apartment data
from selected cities.
[End of table]
* Case 1 relates to a series of potentially improper and/or fraudulent
IHP rental assistance payments totaling $46,000 made to 10 registrants
already housed in rent-free housing. In this case, FEMA paid nearly
$46,000 in rental assistance to 10 residents of an apartment complex in
Plano, Texas, from September 2005 through June 2006. However, at about
the same time period (October 2005 through March 2006), the city of
Plano made payments totaling more than $74,000 directly to the
apartment, for which it received reimbursements from FEMA. Of the total
amount paid, $46,000 was duplicative and therefore potentially improper
and/or fraudulent. Our review of FEMA records indicated that 7 of the
10 individuals certified to FEMA that they were in need of rental
assistance, even after they had been provided with free housing.
Further, FEMA records showed that 7 provided rental receipts and/or
leases that clearly indicated that the rent was paid by the city of
Plano.
* Case 5 relates to a family of five, all of whom registered for IHP
using the same damaged address. Four registrations were duplicative and
therefore payments on those registrations are potentially improper and/
or fraudulent. Further, despite the fact that FEMA had installed a
trailer on the damaged property in January 2006, FEMA continued to send
rental assistance payments in late January, February, and April 2006
totaling approximately $5,500. Further, a family member informed us
that the family had moved back into the damaged home prior to the
trailer being delivered. Consequently, when the trailer was delivered,
it simply increased the living space for the household, and it was used
by a family member who lived in the house prior to the hurricane.
Further, evidence we gathered during the course of the investigation
indicated that a rental receipt provided to FEMA to justify continued
need for rental assistance was fictitious, and that the family member
who submitted the receipt had never paid rent to the supposed landlord.
In addition to the $5,500 in improper duplicative rental assistance
payments, we found that the family members also received at least
$6,000 in other potentially improper and/or fraudulent IHP payments
arising from the duplicate registrations.
In the course of apartment-related audit and investigative work, we
also identified 14 individuals who improperly received more than
$75,000 in disaster assistance using one apartment building as their
hurricane-damaged address, even though the building had minimal damage
and residents were not forced to evacuate. We provide further details
in appendix II.
Potentially Improper and/or Fraudulent IHP Assistance Payments to
Individuals Claiming Damages from Both Hurricanes:
FEMA made nearly $20 million in duplicate payments to thousands of
individuals who submitted claims for damages to the same primary
residences from both hurricanes Katrina and Rita. With few exceptions,
FEMA officials explained that victims of both disasters should not
receive duplicate benefits for the same necessities and/or damages to
the same property. However, in order to process disaster claims more
quickly, FEMA disabled a system edit check in NEMIS that could have
alerted FEMA officials when the same individual applied for both
disasters using the same identifying information. This system change
resulted in nearly $20 million in duplicate payments being made based
on duplicate registrations for hurricanes Katrina and Rita.
In October 2005, FEMA officials informed us that the small amount of
time between the impact of hurricanes Katrina and Rita had necessitated
the issuance of new policy to prevent duplicate claims for the same
damaged property for both hurricanes. FEMA officials said that, with
few exceptions, the new policy specified that registrants were entitled
to one payment for the same damage and/or need. FEMA explained to us
that this was necessary because most individuals did not have an
opportunity to replace and/or repair damages they incurred from
Hurricane Katrina before Hurricane Rita struck, and because their
displacement was likely caused by both hurricanes. At the time, FEMA
officials informed us that they had available a system edit check in
NEMIS intended to alert FEMA system administrators when the same
individual applies for assistance for both disasters, so that FEMA
personnel could perform a manual review prior to payments being made.
Despite having a control available, we identified through our review of
FEMA's NEMIS that FEMA made payments to about 7,600 individuals who
used the same social security number (SSN) and hurricane-damaged
addresses for their Hurricane Katrina registration that they used for
their Hurricane Rita registration. Subsequently, FEMA officials
informed us that these duplicate payments occurred because FEMA
disabled the system edit check feature. FEMA stated that they
deactivated the system edit check in order to process disaster claims
more quickly, because the manual review process that they had intended
for these duplicate registrations would have held up many eligible
payments. Because of this, FEMA paid nearly $20 million in duplicate
payments to individuals who submitted duplicate registrations using the
same SSNs and damaged addresses. The nearly $20 million includes
duplicate payments for all areas of IHP assistance, including expedited
assistance, rental assistance, housing replacement payments, or a
combination of these. In five of the six cases where we performed
investigative work, the same individual received duplicate payments to
replace the same damaged property. The individuals also failed to
provide FEMA with evidence that they had replaced the items or
conducted repair work after Hurricane Katrina, only to have those items
or that work destroyed again by Hurricane Rita. In all cases, FEMA
performed its first physical inspection of the damaged property after
the passing of both hurricanes.
In addition to other IHP payment types, all six individuals we
investigated also received IHP personal property payments to compensate
them for lost or destroyed household items, twice--once for Hurricane
Katrina and again for Hurricane Rita. In one case, an individual
received multiple payments for more than $27,000--over the $26,200 cap-
-for personal property replacement alone. In total, this individual
received more than $51,800 in IHP assistance, of which at least $25,000
is potentially improper and/or fraudulent. According to FEMA records,
another registrant received two housing replacement payments of $10,500
each, despite the fact that the individual had only one property to
replace.
Potentially Improper and/or Fraudulent Payments to Nonqualified Aliens:
FEMA made at least $3 million dollars of improper and potentially
fraudulent payments to nonqualified aliens who were not eligible for
IHP financial assistance. U.S. law specifically prohibits nonqualified
aliens, such as foreign students and workers on temporary visas, from
receiving financial assistance in case of disaster.[Footnote 10]
However, FEMA did not have implementing controls in place, such as an
agreement in place with other government agencies, such as the Social
Security Administration (SSA), to identify nonqualified aliens and
prevent them from receiving such assistance. Consequently, FEMA paid at
least $3 million to foreign students from four selected universities.
FEMA also made payments to other nonqualified aliens, such as workers
on temporary visas. However, because of a lack of data on other
nonqualified aliens, we were unable determine the magnitude of any such
improper payments. FEMA made such payments even in cases in which FEMA
received information indicating that the alien applying for assistance
was not qualified to receive financial disaster assistance.
IHP Payments to Ineligible International Students:
The destruction caused by hurricanes Katrina and Rita affected
thousands of college students in the fall of 2005. As with other U.S.
citizens and qualified aliens, college students who were able to
demonstrate losses were eligible to receive IHP payments to assist them
in recovering from the disaster. However, U.S. law[Footnote 11] and
FEMA policy specifically prohibits students in the United States on
student visas from receiving IHP assistance. By comparing data provided
by four universities in Louisiana and Texas against registrant
information in NEMIS, we determined that FEMA improperly provided at
least $3 million in financial assistance, in the form of IHP payments,
to more than 500 students in the United States on student visas. This
amount could understate the total payments to ineligible foreign
students because we requested information on international students
from only four of the colleges and universities in the areas affected
by hurricanes Katrina and Rita.
Our interviews of school officials and several of the ineligible
students stated that they received misleading information from FEMA
personnel. Specifically, officials at several universities informed us
that FEMA personnel actively encouraged all students--including
international students--to register for IHP assistance. Despite being
ineligible for financial disaster assistance, many international
students with whom we spoke stated that FEMA officials told them they
were eligible to receive IHP payments and should apply for aid.
We found that FEMA made these payments despite evidence provided to
FEMA by students--specifically their student visas--that indicated that
they were not eligible for cash assistance. Further, consistent with a
finding we reported on previously, FEMA could have identified these
students if it had validated their identities with SSA prior to issuing
IHP payments. In fact, more than 400 of the students reported as
foreign by the four universities were also identified by SSA as non-
U.S. citizens. Table 2 displays some examples of ineligible students
and payments they received.
Table 2: Improper Payments Made to Ineligible International Students:
Case: 1;
Location: Louisiana;
Number of payments/ amount: 6/$25,500;
Type of payments: Expedited assistance, rental assistance,
transportation assistance, and personal property replacement.
Case: 2;
Location: Louisiana;
Number of payments/ amount: 6/$22,500;
Type of payments: Expedited assistance, rental assistance, housing
repair, and personal property replacement.
Case: 3;
Location: Louisiana;
Number of payments/ amount: 3/$17,700;
Type of payments: Rental assistance and personal property replacement.
Case: 4;
Location: Louisiana;
Number of payments/ amount: 4/$16,400;
Type of payments: Expedited assistance, rental assistance, and housing
repair.
Case: 5;
Location: Louisiana;
Number of payments/ amount: 3/$17,000;
Type of payments: Rental assistance and personal property replacement.
Case: 6;
Location: Louisiana;
Number of payments/ amount: 4/$10,900;
Type of payments: Expedited assistance, rental assistance, and
transportation replacement.
Case: 7;
Location: Texas;
Number of payments/ amount: 3/$7,700;
Type of payments: Expedited assistance, rental assistance, and personal
property replacement.
Case: 8;
Location: Louisiana;
Number of payments/ amount: 3/$6,500;
Type of payments: Expedited assistance, rental assistance, and personal
property replacement.
Source: GAO analysis of university data and FEMA IHP data.
[End of table]
* Case 4 concerns a student in New Orleans who received more than
$16,000 in FEMA payments, including payments for expedited assistance,
rental assistance, and personal property replacement. According to
NEMIS data, the student's damaged property was in the hardest-hit area
of the city, and therefore the student's qualification for IHP was
performed through geospatial mapping, while his identity was also
validated through a third-party contractor. The student told us that he
repeatedly informed FEMA personnel that he was an international student
on an F1 visa, and was told each time that he qualified for assistance.
In addition to receiving rental payments from FEMA, the student also
received a trailer in April 2006. The student stated that he received a
letter from FEMA in August 2006 asking for the money back. Further, he
is concerned because a FEMA representative informed him that he was not
immune to legal action for receiving payments he was ineligible for,
despite the fact that he had informed FEMA of his status all along.
* Case 6 involves an international student in New Orleans who received
nearly $11,000 in FEMA payments. The student had a student visa from
Brazil, and stated on his IHP registration that he owned a home in the
New Orleans area. The registrant informed us that he applied via phone,
and that he took care to inform the FEMA personnel that he was an
international student. According to this student, in this and
subsequent conversations with FEMA employees (one of whom was a
supervisor at a relief center he visited), he was repeatedly told that
he qualified for assistance despite his international student status.
Our review of FEMA records confirmed the student's assertion that he
provided FEMA with a copy of his visa. In fact, a copy of his visa was
scanned into NEMIS and had a note next to it stating "Proof of
Qualified Alien," despite the fact that the visa clearly showed he was
an international student and therefore ineligible.
* In case 8, a student in New Orleans at the time of Hurricane Katrina
received three payments totaling $6,500 covering expedited assistance,
rental assistance, and personal property replacement even though he
repeatedly told FEMA representatives that he was an international
student. The student registered for aid via FEMA's Web site using a
valid SSN. The student told us that the SSN was given to him because he
was allowed to work in the United States. He stated that during the
registration process, he did not find any information that made him
aware that he was not eligible for assistance. After registering
online, he stated that he also contacted FEMA call center employees and
made them aware that he was not a U.S. citizen and was in the country
on a student visa, and said he was told by call center employees that
he was eligible. The student informed us that during an inspection
process, the inspector certified that he was a qualified alien even
after he showed the inspector his visa. He subsequently received more
than $2,000 for property replacement based on the inspection. However,
because the student's visa was not scanned into FEMA's system, we could
not corroborate his statement that he repeatedly informed FEMA of his
status.
Payments to Other Nonqualified Aliens:
We also found that weaknesses in FEMA's controls resulted in improper
and/or potentially fraudulent IHP payments being made to other
nonqualified aliens, such as workers in the United States on temporary
work visas. Because of the unavailability of detailed data on other
nonqualified aliens, we were unable to calculate the magnitude of this
problem. However, our investigative work uncovered 25 cases where FEMA
provided improper payments to nonqualified temporary workers.
Specifically, we found that FEMA provided 50 disaster assistance
payments totaling nearly $156,000 to 25 individuals who worked at a
crab processing facility, despite the fact that FEMA records clearly
showed that 11 individuals were in the United States on temporary work
visas, and were therefore ineligible for IHP assistance.[Footnote 12]
These payments included expedited assistance payments of $2,000 and
payments of over $10,000 for replacement of property. Some registrants
received as much as $15,000 in IHP payments. In one instance, the
registrant's file at FEMA contained a copy of a FEMA flier specifically
indicating that aliens in the United States on work visas were not
eligible for IHP. Next to the flier was a copy of the registrant's
temporary work visa. Despite clearly having evidence that he was
ineligible for IHP payments, FEMA paid this registrant more than
$15,000 in IHP assistance.
Although we were not able to validate that all 25 registrants possessed
work visas, we were informed by the registrants' employer that all 25
employees brought their work visa documents with them to FEMA when they
filed the disaster claims. However, data from SSA indicated that only
14 of the 25 employees used valid SSNs on their FEMA
application.[Footnote 13] The remaining 11 individuals provided SSNs to
FEMA that were never issued or belonged to other individuals in order
to get IHP assistance. Payments made to the 11 workers who submitted
fictitious information to FEMA are therefore potentially fraudulent.
Ineffective Detective Controls Point to Need for Better Preventive
Controls:
We previously reported that inadequate preventive controls related to
the IHP application process resulted in an estimated $1 billion of
potentially improper and/or fraudulent payments through February 2006.
As of November 2006, FEMA had detected through its own processes about
$290 million in overpayments and had collected nearly $7 million of the
about $290 million identified as improper. Collection of only $7
million of an estimated $1 billion of potentially improper and/or
fraudulent payments clearly supports the basic point we have previously
made, that fraud prevention is far more effective and less costly than
detection and monitoring.
FEMA's Detection Controls Are Not Effective at Identifying All
Potentially Improper and/or Fraudulent Payments:
In June 2006, we testified that an estimated $1 billion was potentially
improper and/or fraudulent. We derived this estimate from statistical
sampling work we conducted on registrations submitted to FEMA as of mid-
February 2006. We also reported that this estimate potentially
understates the total potentially improper and/or fraudulent payments
because the scope of our statistical sampling work did not include
verifying for insurance or actual property damage, among others things.
As of November 2006, FEMA reported that it had identified about $290
million in overpayments to nearly 60,000 registrants. This overpayment,
which FEMA refers to as recoupments, represents the improper payments
that FEMA reported it had detected and for which it had issued
collection letters. According to FEMA officials, the payments
identified as improper were based on cases referred to the fraud
hotlines and registrations that met specific criteria of being more
likely improper.
Although FEMA had identified about $290 million in overpayments, to
date FEMA had collected nearly $7 million. We did not validate the
potential collection amount. However, the amount that FEMA had
collected on overpayments related to hurricanes Katrina and Rita
supports our prior statements that detective controls, while an
important element of a fraud prevention program, are more costly and
not as effective as preventive controls. As FEMA's historical
experience demonstrated, once a payment had been disbursed because of
weak preventive controls, it is difficult to identify individuals who
received the improper payments, contact those individuals, and collect
on those payments. As discussed previously, when system edit checks
that should occur during the processing of disaster registration are
circumvented, significant improper payments occur that require
extensive data mining and follow-up actions to identify and recover
improper payments.
In addition to the difficulties in collecting overpayments, there are
limitations to the ability of detective controls in identifying all
instances of overpayments. For example, our conversations with several
foreign students indicate that although some have received recoupment
letters, others have not.
FEMA Had Not Issued Recoupment Notice to GAO Registrations:
The limitations of detective controls are demonstrated through GAO's
own experience with the FEMA registration, payment, and recoupment
processes. As we testified previously, GAO submitted a number of
registrations using false identities and fictitious addresses to test
the effectiveness of FEMA's internal controls. We also testified that
we received payments on registrations we submitted. However, to date,
we had not received recoupment notices from FEMA indicating that it had
identified the undercover registrations that GAO submitted. After our
last testimony in June of 2006, we received another payment of more
than $3,200 for rental assistance on a property that did not exist. In
total, we received six payments on five registrations using falsified
information, without receiving any recoupment notices from FEMA.
FEMA Cannot Adequately Track Its Property:
We found weak accountability over FEMA property bought for hurricanes
Katrina and Rita relief efforts using government purchase cards. Our
investigation revealed that DHS overstated the number of items FEMA had
actually located on the day of our July16, 2006, testimony and that
additional items are missing. In total, of the 246 laptops, printers,
flat-bottom boats, and GPS units that we investigated for this
testimony, 85 items are missing and presumed lost or stolen. Moreover,
during the course of our investigation, we found that FEMA did not have
titles to any of the 20 flat-bottom boats it purchased for hurricanes
Katrina and Rita. The fact that FEMA could not locate two of the flat-
bottom boats raises additional concerns about DHS's accountable
property controls.
Missing Items FEMA Purchased for Hurricane Relief:
As part of our July 19, 2006, testimony, we reported that poor controls
over property acquired with DHS purchase cards may have resulted in
lost or misappropriated assets. Specifically, we reported that FEMA
could not account for 143 items purchased in September and October 2005
for Hurricane Katrina and Hurricane Rita relief efforts. On the morning
of the testimony, DHS sent your office an e-mail indicating that 87 of
the 143 items had been found.[Footnote 14] At the hearing, DHS's Chief
Financial Officer reiterated that most of the missing property had been
found, but acknowledged that the items had not yet been physically
verified.
Our investigation revealed that DHS's July 19 e-mail overstated the
number of items FEMA had located. By October 2006, a year after the
property was purchased, we could only account for 79 of the 87 items
that FEMA claimed it had found.[Footnote 15] In addition, of the 143
items that we reported as missing in our July testimony, 48 are still
missing and presumed lost or stolen. Moreover, 37 of items were missing
from an additional 103 new items we investigated. In total, of the 246
items we investigated for this testimony, 85 items (34 percent) are
lost or stolen.[Footnote 16] A November 27 DHS memo supports the
results of this investigation, acknowledging that many items purchased
for hurricane relief efforts are still missing. Figure 1 details the
results of our investigative work as of October 16, 2006.[Footnote 17]
Figure 1: Status of Property as of October 16, 2006:
[See PDF for image]
Source: GAO.
[End of figure]
Title and Location of Flat-Bottom Boats:
In our July 2006 testimony, we also reported on several issues
surrounding the purchase of 20 flat-bottom boats needed for hurricane
relief efforts. Specifically, we found that FEMA paid $208,000--about
twice the retail price--to a broker, who in turn obtained the boats (17
new and 3 used) from several different retailers. Further, although the
broker billed FEMA and was paid for all 20 of the boats, he failed to
pay one retailer that provided 11 of the boats. The retailer
subsequently reported the boats as stolen and did not provide FEMA with
title to the boats. Consequently, in our testimony, we concluded that
FEMA paid for, but did not receive title to, at least 11 of the boats.
However, upon further investigation, we found that FEMA also did not
have title to the remaining 9 boats. Thus, FEMA did not have title to
any of the boats. Specifically, our searches for boat titles found that
no transfer of title and/or registration had taken place on any of the
17 new boats, that is, the serial numbers were "not on file." Of the
remaining 3 used boats, title searches revealed that all 3 remain
registered to their previous owners.
Furthermore, FEMA could not provide us with any information about the
two boats that are still not in its possession as of October 2006.
However, using the serial numbers and manufacturer information on the
make and model, local law enforcement located one of the boats in a
shed at the house of its previous owner. According to the previous
owner, he sold the boat to FEMA and delivered it to the New Orleans
Convention Center in September 2005. In March 2006, he received a call
from the New Orleans Convention Center requesting that he retrieve his
abandoned boat. When he went to retrieve the boat, he found that the
tires on the boat's trailer were flat, the boat's battery had been
removed, and the anchor rope had been cut. This boat is one of the
three still registered under its previous owner's name and no
application for transfer of title has been recorded.
Conclusions:
Ineffective preventive controls for FEMA's IHP have resulted in
substantial fraudulent and improper payments. The additional examples
of potentially fraudulent and improper payments in our testimony today
further show that our estimate of $1 billion in improper and/or
fraudulent payments through February is likely understated. With
respect to property bought with government purchase cards, items not
found 1 year after they were purchased, and over 8 months after we
selected them for investigation, shows that ineffective FEMA property
accountability controls resulted in lost or stolen computers, printers,
and GPS units.
We have provided 25 recommendations to DHS and FEMA to improve
management of IHP and the purchase card program. FEMA and DHS had fully
concurred with 19 recommendations, and substantially or partially
concurred with the remaining 6 recommendations. DHS and FEMA also
reported that they have taken actions, or plan to take actions, to
implement many of our recommendations; however, we have not determined
if these actions adequately address our recommendations. If properly
implemented, our prior recommendations should help to address control
weaknesses identified in this testimony. As with prior work, we will
refer cases we deem to be potentially fraudulent to the Katrina Fraud
Task Force for further investigation.
Madam Chairman and Members of the Committee, this concludes my
statement. Special Agent Ryan and I would be pleased to answer any
questions that you or other Members of the Committee may have at this
time.
Contacts and Acknowledgments:
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. The individuals who made major contributions to
this testimony were Kord Basnight, Gary Bianchi, Matthew Brown, Norman
Burrell, Jennifer Costello, Thomas Dawson, Dennis Fauber, Christopher
Forys, Alberto Garza, Adam Hatton, Christine Hodakievic, Ryan Holden,
Jason Kelly, John Ledford, Barbara Lewis, Jonathan Meyer, Andrew
McIntosh, Kristen Plungas, John Ryan, Viny Talwar, Tuyet-Quan Thai, and
Matthew Valenta.
[End of section]
Appendix I: Scope and Methodology:
To assess whether the Federal Emergency Management Agency (FEMA)
provided potentially improper and/or fraudulent rental payments to
individuals at the same time it was providing the registrant's free
lodging in FEMA trailers and rent-free (i.e., FEMA-provided)
apartments, we interviewed FEMA officials, reviewed Title 8 of the
United States Code, and reviewed the Stafford Act (Pub. L. 93-288) and
its implementing regulations. We obtained the FEMA Individuals and
Households Program (IHP) databases as of June 2006 and data on
individuals residing in FEMA trailers and rent-free apartments. We
performed data reliability assessment for these databases. In addition,
we validated that the FEMA IHP database was complete and reliable by
comparing the total payment against reports FEMA provided to the
Appropriations Committee on hurricanes Katrina and Rita disbursements.
We then compared FEMA paid housing data to IHP registration data to
determine whether FEMA provided duplicate benefits to the same
registrants. We also conducted field visits to Texas and Louisiana to
view the property and interview individuals who received IHP payments
after they had moved into free housing. While we were able to determine
the number of individuals staying in FEMA trailers who received
duplicate housing assistance, the data related to individuals staying
in FEMA-provided apartments were not sufficiently reliable for us to
perform the same analysis.
To determine whether FEMA made duplicate payments to individuals who
claimed damages for both hurricanes Katrina and Rita using the same
damaged addresses, we compared the social security numbers and damaged
addresses maintained in the FEMA databases for hurricanes Katrina and
Rita, and reviewed National Emergency Management Information System
(NEMIS) data on selected individuals.
To determine whether FEMA made potentially improper payments to
ineligible foreign students, we contacted officials at four Louisiana
and Texas universities and obtained the names and identifying numbers
of enrolled foreign students. We compared the listing of students
provided by the universities to FEMA payment data. We also interviewed
foreign students at those four schools receiving IHP assistance in
order to determine what guidance FEMA provided them on eligibility. We
also conducted investigative work to determine whether FEMA made
improper and potentially fraudulent payments to nonqualified aliens,
such as those in the United States on work visas. Because we did not
receive data on all foreign students and nonqualified aliens in the
United States, we were not able to determine the magnitude of
potentially improper and fraudulent payments to these individuals.
Further, because of data availability issues, our work was not designed
to identify illegal aliens receiving improper payments. We also
received FEMA data on its recoupment program, but did not validate data
on identified overpayments and collections provided to us by FEMA
officials.
To conduct our investigation into the Department of Homeland Security
(DHS) purchase card program, we traveled to New Orleans and Baton
Rouge, Louisiana, and Fort Worth, Texas, in September 2006, to
physically inspect selected property. If we could not physically
inspect the property during our visit, we requested that DHS, FEMA, or
the New Orleans Police Department send us a clear photograph of the
property and its serial number as proof of possession. We ultimately
requested that photographic evidence be sent to us no later than
October 16, 2006, nearly a year after most of the property was
acquired.
To obtain information on the case study detailed in appendix II, we
reviewed data from the U.S. Department of the Treasury's Financial
Management Service, FEMA's NEMIS database, the Texas Department of
Motor Vehicles, the Social Security Administration, and the U.S. Postal
Service, and we conducted field investigations.
We conducted our audit and investigations from June 2006 through
November 2006. We conducted our audit work in accordance with generally
accepted government auditing standards and conducted our investigative
work in accordance with the standards prescribed by the President's
Council on Integrity and Efficiency.
[End of section]
Appendix II: Potentially Improper and/or Fraudulent Rental Assistance
Payments Case Study:
When Hurricane Katrina came ashore in late August 2005, 15 of the 16
total units in a single Gulfport, Mississippi, apartment building were
occupied by tenants. The landlord of this building told us that damage
to the apartment building was minimal. Although one apartment had a
broken window and some personal property damage, the only real effect
of the hurricane was water damage from rain and water seepage from
missing roof tiles. The landlord also said that anyone who left after
Hurricane Katrina did so voluntarily, and that they were not required
(e.g., forced) to leave as a result of damage by the storm.
During a visit to the apartment building, we spoke to the landlord
about an individual we identified as receiving potentially improper
rental assistance payments. Subsequently, we conducted additional data
mining on the apartment address to determine whether other tenants
applied for and received FEMA disaster assistance. We found that 8
tenants of this apartment building received FEMA disaster assistance.
The remaining 7 tenants did not file any disaster assistances claims,
as a result of being displaced because of uninhabitable or inaccessible
living quarters as a result of Hurricane Katrina. In addition, we were
able to confirm with the building landlord that 6 additional
individuals who did not live at the apartment building at the time of
hurricane Katrina also made disaster assistance claims. Table 3 lists
14 individuals who improperly received disaster assistance using the
apartment building as their hurricane-damaged address.
Table 3: Apartment Building Tenants Receiving Disaster Assistance:
Individual: 1;
Date applied: 9-6-2005;
Notes: Lived at apartment during storm;
IHP assistance: $4,358.
Individual: 2;
Date applied: 9-6-2005;
Notes: Never lived at address;
IHP assistance: 3,810.
Individual: 3;
Date applied: 9-7-2005;
Notes: Lived at apartment during storm;
IHP assistance: 26,200.
Individual: 4;
Date applied: 9-9-2005;
Notes: Lived at apartment during storm;
IHP assistance: 772.
Individual: 5;
Date applied: 9-9-2005;
Notes: Lived at apartment during storm;
IHP assistance: 1,725.
Individual: 6;
Date applied: 9-10-2005;
Notes: Lived at apartment during storm;
IHP assistance: 7,160.
Individual: 7;
Date applied: 9-12-2005;
Notes: Moved out before storm;
IHP assistance: 4,358.
Individual: 8;
Date applied: 9-12-2005;
Notes: Lived at apartment during storm;
IHP assistance: 4,358.
Individual: 9;
Date applied: 9-14-2005;
Notes: Lived at apartment during storm;
IHP assistance: 2,000.
Individual: 10;
Date applied: 9-16-2005;
Notes: Never lived at address;
IHP assistance: 2,000.
Individual: 11;
Date applied: 9-19-2005;
Notes: Evicted before storm;
IHP assistance: 8,716.
Individual: 12;
Date applied: 9-21-2005;
Notes: Never lived at address;
IHP assistance: 2,000.
Individual: 13;
Date applied: 9-24-2005;
Notes: Moved out before storm;
IHP assistance: 4,358.
Individual: 14;
Date applied: 9-24-2005;
Notes: Lived at apartment during storm;
IHP assistance: 4,358.
Individual: Total;
Date applied: [Empty];
Notes: [Empty];
IHP assistance: $76,173.
Source: GAO analysis of FEMA data.
[End of table]
FOOTNOTES
[1] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-403T (Washington, D.C.: Feb. 13, 2006).
[2] GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
Between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.:
June 14, 2006).
[3] To reach this estimate we followed a probability procedure based on
random selections. Therefore, our sample is only one of a large number
of samples that we might have drawn. Since each sample could have
provided different estimates, we expressed our confidence in the
precision of our particular sample's results as a 95 percent confidence
interval. The 95 percent confidence interval surrounding the estimate
of $1 billion ranges from $600 million to $1.4 billion.
[4] GAO, Purchase Cards: Control Weaknesses Leave DHS Highly Vulnerable
to Fraudulent, Improper, and Abusive Activity, GAO-06-957T (Washington,
D.C.: July 19, 2006). This work was performed jointly with the DHS
Office of Inspector General.
[5] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-655 (Washington, D.C.: June 16, 2006); GAO,
Hurricanes Katrina and Rita: Unprecedented Challenges Exposed the
Individuals and Households Program to Fraud and Abuse; Actions Needed
to Reduce Such Problems in Future, GAO-06-1013 (Washington, D.C.: Sept.
27, 2006); and GAO and DHS Inspector General, Purchase Cards: Control
Weaknesses Leave DHS Highly Vulnerable to Fraudulent, Improper, and
Abusive Activity, GAO-06-1117 (Washington, D.C.: Sept. 28, 2006).
[6] 42 U.S.C. §5121-§5206.
[7] GAO, Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution, GAO-06-954T (Washington, D.C.:
July 12, 2006).
[8] 42 U.S.C. §5155, C.F.R. §206.101.
[9] FEMA officials stated that they did not believe that the initial
rental assistance payment, provided to cover the first few months of
rental housing, should be considered a duplication of benefits if it
was provided to trailer residents. FEMA officials argued that this
amount is designed to assist disaster victims in moving from temporary
emergency housing into a normal apartment or home lease situation. The
United States District Court for the Eastern District of Louisiana
expressed approval when FEMA permitted claimants to reapply for three
months of IHP rental assistance even though they had already received
IHP rental assistance for that period where the claimants certified
that the first IHP rental assistance was used for essential needs other
than lodging and/or that they had not been notified the money could
only be used for lodging. McWaters v. FEMA, Civ. Action. No. 05-5488
(Order and Reasons dated 12/12/05 and 6/16/06). The court also
permitted short term lodging program participants to remain in their
rent free lodging two weeks after receiving their rental assistance or
the disapproval of their claim. Id.
[10] 8 U.S.C. §1611 allows the U.S. government to provide nonfinancial,
in kind emergency disaster relief, including short term shelter to
temporary legal aliens (nonqualified aliens) after a disaster, but
prohibits them from receiving financial assistance.
[11] 8 U.S.C. §1611.
[12] According to the owner of the crab processing facility, the
remaining 14 individuals were also in the United States as temporary
workers, a fact that we were unable to validate. We have referred the
25 individuals to the Katrina Fraud Task Force for further
investigation.
[13] Foreign workers who are admitted legally into the United States
are issued SSNs.
[14] In our testimony, we reported as missing 107 laptop computers, 22
printers, 12 flat-bottom boats, and 2 GPS units. DHS's e-mail claimed
that FEMA found 74 of the 107 missing laptops, all 12 missing flat-
bottom boats, and 1 of the 2 missing GPS units. The e-mail also stated
that FEMA was in the process of locating the missing printers.
[15] Specifically, we found 69 printers and 10 boats.
[16] We were able to locate eight printers because we discovered that
the bar codes FEMA reported as being assigned to the serial numbers on
the printers had actually been affixed to different items.
Consequently, when FEMA staff tried to locate these printers using
their own bar code information, they could not find them--even though
the printers actually were in FEMA's possession.
[17] After October 16, FEMA sent us additional photographs of laptops,
printers, and GPS units. However, because we received this information
after our October 16 deadline, we did not include it as part of our
final property count for the purposes of this testimony.
[End of section]
Appendix II: Comments from the Federal Emergency Management Agency:
U.S. Department of Homeland Security:
500 C street, SW:
Washington, DC 20472:
FEMA:
February 15, 2007:
Mr. Gregory D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
441 G. Street, NW:
Washington, DC 20548:
Dear Mr. Kutz:
The purpose of this letter is to respond to Draft GAO Report GAO-07-
300: Hurricanes Katrina and Rita Disaster Relief Continued Findings of
Fraud, Waste, and Abuse and provide additional insights on the delivery
of disaster assistance for Hurricanes Katrina and Rita and related
fiscal accountability.
It is important to note that Hurricanes Katrina and Rita presented
unprecedented challenges in the delivery of assistance to those
impacted by the disasters. FEMA was faced with striking a fine balance
between providing expeditious assistance through all available means to
a large number of drastically impacted citizens, and assuming higher
risk that some would exploit the system to their undeserved advantage.
FEMA's systems may have room for improvement in order to better manage
this balance, however, the agency's dedication in implementing lessons
learned to provide prompt service while minimizing fraud, waste, and
abuse should not be discounted.
It is also important to understand that the Robert T. Stafford Disaster
Relief and Emergency Assistance Act gives FEMA broad authorities to
provide disaster assistance in keeping with the best interest of
disaster victims. While the 2005 Hurricane Season presented
unprecedented and unparalleled challenges, FEMA made every effort to
optimize its capabilities under the law in order to provide for the
continued housing needs of over 720,000 displaced disaster victims.
Response to Findings Detailed in GAO's Testimony to Congress:
Rental Assistance payments to Registrants in Mobile Homes, Travel
Trailers, and Apartments:
The GAO contends that FEMA controls did not effectively prevent
Individual and Household Program (IHP) registrants from receiving
rental assistance payments while residing in FEMA mobile homes, travel
trailers and short term apartments. This conclusion does not take into
consideration the distinction between housing provided under Section
403 and Section 408 of the Stafford Act.
The Stafford Act authorizes FEMA to provide short-term emergency
shelter to disaster victims under Section 403 and longer-term temporary
housing assistance under Section 408. To ensure maximum flexibility,
FEMA is authorized to provide these types of assistance using various
forms of shelter, and housing. For example, FEMA provided shelter to
Hurricane Katrina evacuees under Section 403 utilizing congregate
shelters, hotels and motels, as well as short-term apartment leases
secured by State and local governments. Under Section 408, FEMA
provided assistance to victims of Hurricane Katrina through rental
assistance payments, as well as direct housing assistance in the form
of mobile homes and travel trailers. As the victims of Hurricanes
Katrina and Rita transitioned from shelters to securing temporary
housing while their homes could be repaired, it is possible that the
date of issuance of the Section 408 assistance overlapped the provision
of Section 403 assistance, as disaster victims moved from one source of
shelter or housing to another to accommodate their own efforts to
recover from the disaster. This would not necessarily constitute a
duplication of benefits if the assistance was used to secure
continuous, but not overlapping, sources of shelter and housing.
Section 408(b)(2)(B) of the Stafford Act clearly authorizes FEMA to
provide multiple - although not overlapping - types of assistance based
on the suitability and availability to meet the needs of the
individuals in a particular disaster situation.
Applicants may also have received rental assistance payments for a
previous month of eligibility at the same time they were living in
manufactured housing. FEMA does not consider this a duplication of
benefits. For example, an applicant may have received a rental
assistance payment on March 14, 2006 after they were leased into a
manufactured housing unit on March 3, 2006. However, the rental
assistance payment on March 14, 2006 was a reimbursement for previous
rent (December 2005 -February 2006). Of note, your staff informed us
during their exit interview that they did not consider the number of
calendar months per payment, or whether that payment was a
reimbursement, when they determined a payment in their sample was
inappropriate. Instead, they looked only at the date the payment was
approved, and no at the particular situation in which the assistance
payment was provided. After several requests, the GAO has refused to
provide FEMA the registration numbers of those applicants they believe
were improperly paid Therefore, FEMA is in the process of querying our
databases to find the cases that you cite in the Statement of Facts
provided during the audit exit conference. The examples provided in the
Statement of Facts arc somewhat vague, so finding the particular cases
in question is proving to be challenging. Once we believe that we have
found the cases in question, FEMA will review them to determine whether
the payments were in error or dictated by the unique circumstances of
this event.
The draft report and GAO testimony also stated that FEMA controls were
not effective in preventing IHP registrants from receiving rental
assistance payments while residing in apartments funded by FEMA.
To address the need.-of individuals living in congregate shelters,
FEMA, with state and local partners, established an apartment program
whereby the Agency reimbursed cities and/or states that allowed
disaster victims to stay in apartments as emergency sheltering. This
was considered a temporary solution to provide hundreds of thousands of
storm victims, many without identification or resources, with shelter
while they determined their next step in securing temporary housing.
Your report claims that some of those who were in apartments were also
receiving rental assistance payments. The Statement of Facts, and
subsequent media reports, seem incredulous that FEMA would consider
providing a rental payment to someone staying in a FEMA-funded
apartment. However, FEMA was also criticized when it suggested that
FEMA would be removing people from FEMA-funded apartments g &r to the
arrival of their rental checks. The question was: How can someone leave
the FEMA-funded apartment and rent an apartment without first having
the financial resources to do so? This situation may very well apply to
cases that you have identified as being improperly paid because they
only focus on the dates the payments were approved. Until you provide
us information on the specific cases in GAO's sample, we cannot make
that determination. In this case, FEMA believes that in order to
provide a full range of housing options to individuals and provide the
tools to set them on the road to recovery and normalcy, it was
imperative to ensure that they were equipped with the resources
necessary to do so.
Alleged Duplicate Assistance Payments for Both Katrina and Rita:
Your report and testimony contend that FEMA controls were not effective
in preventing duplicate benefits from being paid to the same individual
for the same damaged address. Hurricanes Katrina and Rita were two
separate disasters with different incident periods and geographic areas
of impact. FEMA's policy is that individuals whose homes were impacted
by each separate event are eligible to apply and receive assistance to
address the unique damage incurred by each event. By law, an applicant
may receive multiple payments as a result of multiple disasters, as
additional damages could and did occur in certain areas struck by both
storms, and some individuals experienced additional damage to an
already repaired home. An example of this is that a home could have
been flooded by Hurricane Katrina, inspected by a FEMA inspector, and
processed for assistance to repair the flood damage in the lower floors
of the home. Following Hurricane Rita, that same home was impacted, but
this time the roof was damaged by the wind and rain. The damage caused
by the second event was not covered in the initial payment to the
homeowner, therefore, the homeowner is eligible for additional home
repair assistance. Some improper payments may have occurred for an
individual or household that was affected by both Hurricanes Katrina
and Rita, and we welcome the opportunity to review the specific cases
you cite to ensure that any overpayments are recouped:
IHP Payments to Nonqualified Aliens:
The GAO report states that eligibility controls were not effective in
preventing ineligible international students or non-qualified aliens
from receiving IHP payments. FEMA estimates this population to be less
than one tenth of one percent of the number of victims that applied for
assistance following Hurricanes Katrina and Rita. It would have been
impractical to verify the suitability of student visas for federal
assistance prior to disbursing assistance without halting the automated
eligibility determination processes, which was simply not an option due
to the severity of the situation in the Gulf Coast.
During the first two weeks of the disaster event, FEMA coordinated life-
sustaining and life-saving measures for millions of storm victims, many
of whom left home without essentials needed for survival. After the
event, because many areas were still under water, bridges and highways
were washed out, and there was widespread displacement of disaster
victims, expedited assistance and transitional housing assistance was
provided without an inspection and prior to the Declaration and Release
form, FEMA Form 90-69B, being signed and returned. This form is the
applicant's self-declaration that they are lawfully present in the
United States as a citizen or qualified alien.
Importance of Fraud Prevention:
FEMA's traditional system is dependent on an on-site, in person
verification of the applicant and their residency. Given the
displacement of residents and the inability to enter many areas due to
the degree of devastation, FEMA's principal assistance verification
method was not feasible. Adding to this challenge was the knowledge
that the people affected by this terrible event would not be returning
to their homes and communities for months or years to come. FEMA
officials agree that more stringent controls on the front end are
always preferable, however, the sheer magnitude of the event dictated
that the agency proceed in the manner it did because there simply was
no time to develop and test any additional front end controls.
It is important to emphasize that FEMA has already taken steps to
implement new controls to improve its ability to serve disaster victims
while also limiting fraud and abuse. Most notably, FEMA has implemented
an automated identity and occupancy verification system to confirm the
identity and residency of applicants who register with FEMA for
assistance. FEMA also continues to evaluate and strengthen controls
pertaining to identity, residence type, and cross-disaster applicant
checking.
Additional controls implemented include:
* Deployment in October 2005 of a new Internet registration application
that disallows any duplicate registrations;
* Added identity proofing to the call center registration application
beginning in February 2006, so that all Individual and Households
Program (IHP) registrations are subjected to the same stringent
criteria, including verification of social security numbers and
occupancy requirements;
* Amended automated scripts to ensure no scripted payments are sent to
applicants who fail identity proofing;
* Sent all applications taken through the call centers from August 2005
until February 2006 to FEMA's data contractor for identity proofing to
detect any potentially fraudulent applications and route to the DHS-OIG
and/or FEMA recoupment processing as appropriate;
* Data-marking any applications in FEMA's database that fail identity
proofing so they are flagged for manual review and denied automated
payment;
* Real-time interaction between the FEMA Service Representative and the
applicant during registration to ensure that the data entered that
resulted in a failed identity check is correct before accepting the
application;
* Adding verification of Occupancy and Ownership with a data contractor
to the registration process for every disaster victim starting in June
2006. This allows FEMA to ensure that an applicant lives at the address
that they claimed before automating any payments to that address;
* Working with FEMA's data contractor to flag any addresses that are
not residential addresses in order to prevent automated payments
without an on-site inspection verification of address and residency;
* Flagging at-risk social security numbers to identify potential fraud;
and:
* Developing state of the art software that will maintain data on
applicants in mobile homes and communicate real-time data to
caseworkers and the auto-determination system in order to prevent
potential overpayment.
Further, your report and testimony state that FEMA procedures for
recoupment of overpayments are not sufficient to reduce the impact of
potentially improper and/or fraudulent UP payments. The report
concludes that these procedures are ineffective, because FEMA has to
date collected only $9.3 million of the $289 million identified for
recoupment as of November 2006. They further conclude that this
demonstrates the need to have adequate preventive controls on the front
end. FEMA agrees that any measures that can be taken on the front end
of a disaster to reduce the amount of disaster fraud are optimal.
However, by balancing the constriction of the avenues of assistance
against the need to provide assistance expeditiously, FEMA was able to
register more than 2 million disaster victims and process initial
assistance for hundreds of thousands of applications after hurricanes
Katrina and Rita. The magnitude of these disasters required that all
available resources be dedicated toward the provision of initial,
emergency assistance. It was not until January 2006 that FEMA could
reprioritize resources from delivering immediate disaster assistance to
the task of reviewing applications for potential recoupment. Shortly
thereafter, FEMA began notifying applicants to return these funds by
forwarding applicant information to our Disaster Finance Center for
recoupment and sending letters and making phone calls to the applicants
to inform them of the need to return all or portions of their disaster
assistance monies. The Disaster Finance Center coordinated with the
applicants to set up repayment plans that would allow the applicants to
return the inappropriately awarded funds as soon as was feasible for
the applicant based on their financial status. Recoupment efforts
continue to this day.
FEMA's recoupment processes are not new. FEMA routinely reviews
disaster assistance cases and conducts random reviews of cases to
ensure that disaster assistance has been correctly provided. If during
the course of a review, the recoupment process is initiated.
FEMA's process of recoupment is similar to an audit. It is meant to
identify incorrect payments and instances of fraud for recoupment, so
as to discourage future abuses of the system. It is worth noting that
FEMA has been working closely with the Department of Justice (DOJ) in
the prosecution of fraud. FEMA has provided case research and testimony
in several fraud trials that have facilitated the conviction of persons
who attempted to abuse the system and defraud the United States
Government.
To date, FEMA has instituted recoupment on 60,511 applicants for
Hurricanes Katrina and Rita. The GAO's Statement of Facts does not take
into account the agreements FEMA has in place to collect future amounts
of assistance. For example, FEMA is working with the IRS to enable FEMA
to recoup improper assistance payments through garnishing future
federal tax refunds. While this is not the preferred method of
recouping disaster assistance, it has been an effective one to ensure
that individuals repay their debt to the federal government.
Recommendation for Executive Action:
Recommendation:
Develop processes for comparing IHP applicant data with FEMA direct
housing assistance data to prevent IHP applicants from receiving
payments for rental assistance covering the time they are living in
FEMA provided housing.
Response:
FEMA is investigating the cases that are cited in GAO's Statement of
Facts provided during the audit exit conference to determine whether
the payments were in error or dictated by the unique circumstances of
this event. If the investigation reveals that applicants were provided
payments appropriate to the situation, this would indicate there is not
an inherent system problem that requires additional action. If the
findings indicate a systemic problem, FEMA will develop options for
implementing this recommendation. Note, however, that FEMA is already
developing software that will maintain data on applicants in mobile
homes and communicate real-time data to caseworkers and the auto-
determination system in order to prevent potential overpayment.
Recommendation:
Provide clear guidance to IHP payment applicants, including rental
assistance applicants, indicating how the payments are to be used.
Response:
FEMA is currently conducting a comprehensive review and analysis of
existing communications tactics and developing a more effective,
research-based strategy to ensure that applicants and stakeholders
understand FEMA's Individual Assistance program, its purpose, and
requirements.
Recommendation:
FEMA should implement and/or enable controls to prevent duplicate
payments to the same individual from different disasters for the same
damage done to the same address.
FEMA's policy is that individuals whose homes were impacted by separate
and distinct events were eligible to apply for and receive assistance
to address the unique damage incurred by each event. Some improper
payments may have occurred for an individual or household that was
affected by both Hurricanes Katrina and Rita. FEMA welcomes the
opportunity to review the specific cases cited in the GAO report to
ensure that any overpayments are recouped. After this review, if it
appears there is a systematic problem, FEMA will develop program
options for preventing duplicate payments in these situations.
Recommendation:
Provide clear guidance and training to FEMA and contractor employees on
the specific types of aliens eligible for financial disaster
assistance, and identify nonqualified aliens.
Response:
FEMA concurs with this recommendation and believes it is now much
better positioned to have well-trained staff in advance. While FEMA
found that the population in question is less than one tenth of one
percent of the number of victims that applied for assistance, clear
guidance and staff training will improve applicant processing. This
also is one of the items that will be covered in developing new
communications messages and materials mentioned previously.
Recommendation:
Develop processes to identify and deny assistance to nonqualified
aliens who register for IHP assistance using valid SSNs through data
comparisons with agencies who maintain data on legal aliens with SSNs.
Response:
FEMA will reach out to appropriate Federal Agencies to identify data
comparison and data sharing mechanisms, as appropriate, to enhance its
ability to screen applications for non-qualified aliens. FEMA will also
consult commercial vendors who may have this capability.
Recommendation:
With respect to property purchased with DHS purchase cards, if FEMA
cannot locate this property in a reasonable time period, it should work
with DHS to reconcile its tracking system data and declare these items
lost or stolen.
Response:
We concur and a Board of Survey is currently underway. Property
tracking systems will be updated accordingly.
Thank you for the opportunity to comment on this draft report. By
implementing lessons learned based on reports from the GAO, the DHS
Inspector General, and other sources, FEMA has learned how to better
respond - and respond with accountability --to catastrophic disasters
such as Hurricanes Katrina and Rita, Should an event of such magnitude
occur leadership can say with confidence that the Agency will do all it
can under relevant authorities to serve disaster victims in their
greatest time of need, while ensuring FEMA's fiscal integrity and
ability to prevent fraud, waste, and abuse.
Sincerely,
Signed by:
R. David Paulison:
Director:
[End of section]
FOOTNOTES
[1] GAO, Hurricanes Katrina and Rita Disaster Relief: Continued
Findings of Fraud, Waste, and Abuse, GAO-07-252T (Washington, D.C.:
Dec. 6, 2006).
[2] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-403T (Washington, D.C.: Feb. 13, 2006);
Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially
Fraudulent Individual Assistance Payments Estimated to Be Between $600
Million and $1.4 Billion, GAO-06-844T (Washington, D.C.: June 14,
2006); and Purchase Cards: Control Weaknesses Leave DHS Highly
Vulnerable to Fraudulent, Improper, and Abusive Activity, GAO-06-957T
(Washington, D.C.: July 19, 2006). Work on GAO-06-957T was performed
jointly with the DHS Office of Inspector General.
[3] 42 U.S.C. §5121-5206.
[4] To develop this estimate we followed a probability procedure based
on random selections. We express our confidence in the precision of our
particular sample's results as a 95 percent confidence interval. The 95
percent confidence interval surrounding the estimate of $1 billion
ranges from $600 million to $1.4 billion.
[5] GAO, Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution, GAO-06-954T (Washington, D.C.:
July 12, 2006).
[6] These property items were purchased by FEMA between June and
November 2005.
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