[Senate Hearing 109-161]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-161
 
             FEMA'S RESPONSE TO THE 2004 FLORIDA HURRICANES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION




                               __________

                              MAY 18, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs


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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
       Michael L. Stern, Deputy Staff Director for Investigations
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Mary Beth Schultz, Minority Counsel
                      Trina D. Tyrer, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Lieberman............................................     5
    Senator Coburn...............................................     8

                               WITNESSES
                        Wednesday, May 18, 2005

Hon. Bill Nelson, a U.S. Senator from the State of Florida.......     8
Richard L. Skinner, Acting Inspector General, U.S. Department of 
  Homeland Security..............................................    12
Hon. Michael D. Brown, Under Secretary for Emergency Preparedness 
  and Response, U.S. Department of Homeland Security.............    21

                     Alphabetical List of Witnesses

Brown, Hon. Michael D.:
    Testimony....................................................    21
    Prepared statement...........................................    45
Nelson, Hon. Bill:
    Testimony....................................................     8
    Prepared statement...........................................    35
Skinner, Richard L.:
    Testimony....................................................    12
    Prepared statement...........................................    37

                                APPENDIX

Exhibit No. 5, a chart entitled ``Errors Found Through Quality 
  Control Inspections Conducted by PB (389 QC Inspections 
  Total)''.......................................................    75
Exhibit No. 6, ``IHP Daily QC Report''...........................    76
Exhibit No. 7, ``IHP Daily QC Report''...........................    79
Exhibit No. 8, ``IHP Daily QC Report''...........................    86
Exhibit No. 9, ``IHP Daily QC Report''...........................    89
Form Letter from Mr. Brown and Jeb Bush..........................    90
Hon. Mark Foley, a U.S. Representative from the State of Florida, 
  prepared statement.............................................    92
Hon. E. Clay Shaw, Jr., a U.S. Representative from the State of 
  Florida, prepared statement....................................    95
Responses to questions for the Record for Mr. Skinner from:
    Senator Collins..............................................    97
Questions for the Record for Mr. Brown (responses were not 
  received by press time) from:
    Senator Collins..............................................    98
    Senator Lieberman............................................   100
    Senator Lieberman on behalf of Senator Sarbanes..............   106


             FEMA'S RESPONSE TO THE 2004 FLORIDA HURRICANES

                              ----------                              


                        WEDNESDAY, MAY 18, 2005

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:32 a.m., in 
room SD-562, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Coburn, and Lieberman.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    Good morning. Today, the Committee examines the integrity 
of the Federal Emergency Management Agency's Disaster Relief 
Program. Our focus is on FEMA's response to the series of 
hurricanes that struck southern States last year and the 
evidence that has emerged of fraudulent claims, wasteful 
spending, and inefficient management.
    Disaster assistance programs are vital to those who are the 
true victims of natural disasters. The critical nature of this 
assistance makes reports of waste, mismanagement, and outright 
fraud particularly disturbing. We cannot sweep such allegations 
under the rug. We must face them head on in order to preserve 
public confidence in this critical program.
    Although our focus is on specific events in Florida, this 
issue has ramifications that are relevant to future disaster 
relief efforts in all regions of our country. In a span of just 
6 weeks in August and September of 2004, Florida was hit by 
four powerful hurricanes in quick succession. In some parts of 
Florida, there was tremendous devastation. More than 10 percent 
of the State's housing stock was damaged or destroyed by the 
hurricanes, affecting more than 700,000 residents. Property 
damage exceeded $21 billion, and 117 Floridians lost their 
lives.
    A disaster of this scale required a rapid and substantial 
response. FEMA responded with more than $2 billion in immediate 
relief to the State. We expect relief in such dire 
circumstances to be swift and substantial, but we did not 
expect what came next: No sooner had the 2004 hurricane season 
ended than Florida newspapers began reporting erroneous 
payments and widespread fraud in FEMA claims in Miami-Dade 
County. Nearly 12,600 residents collected more than $31 million 
in payments from Hurricane Frances, even though that Labor Day 
storm hit 100 miles to the north.
    The effect of Frances in Miami-Dade has been described as 
that of a typical thunderstorm: Some downed trees and power 
lines. In fact, the Miami-Dade County Office of Emergency 
Management described the damage from that hurricane as minimal, 
and the National Weather Service had no reports of flooding. 
Yet taxpayers bought Miami-Dade residents thousands of 
television sets, air conditioners and other appliances, from 
microwave ovens to sewing machines. The taxpayers also bought 
rooms full of furniture, new wardrobes, and paid to repair or 
replace nearly 800 cars. It provided rental assistance to 
people living in undamaged homes.
    In response to these and other questionable expenditures, 
the Department of Homeland Security's Office of Inspector 
General undertook an audit of FEMA's assistance programs in 
Miami-Dade County for Hurricane Frances. We will hear about 
that audit later this morning from the acting inspector 
general, Rick Skinner, and from Michael Brown, the Under 
Secretary for Emergency Preparedness and Response. This 
Committee has also been investigating the process by which 
individual damage claims are evaluated and verified.
    The IG's audit reaches several disturbing conclusions that 
confirm the Committee's findings. It is often impossible to 
determine whether the payments FEMA made were based on actual, 
disaster-related damages. The verifications of many personal 
property damages were based solely on undocumented verbal 
statements. No receipts, no proof of ownership, and in some 
cases, not even the damaged item to inspect.
    Similarly, the guidelines for repairing or replacing 
automobiles were lacking. Rental assistance was provided to 
applicants who had no apparent need or who had failed to 
demonstrate eligibility for this assistance.
    The IG's report identifies a number of significant control 
weaknesses that create the potential for widespread fraud, 
erroneous payments and wasteful practices. One of the most 
troubling findings by the IG is that FEMA inspectors were 
allowed to record damage to furniture or appliances even though 
the item allegedly had been thrown away before the inspector 
arrived. This system is simply an invitation to fraud.
    The audit also finds substantial deficiencies in the rental 
assistance program. One example is the Expedited Assistance 
Program, in which FEMA would send one month's rent to anyone in 
the disaster area who called and answered certain questions. 
This was done before any inspector was sent to verify the 
claim. In essence, it was a pay first, ask questions later 
approach. Initially, FEMA did not even require the individual 
to represent that there had been damage to the home. Damage or 
not, FEMA sent each person a check for $726. More than $9 
million in total rental assistance was paid to some 5,000 
people in Miami-Dade. The auditors found that this money was 
paid to people whose homes were declared unsafe by FEMA 
inspectors for unspecified and in many cases dubious reasons. 
In addition, there is no evidence that claimants actually used 
this money for the intended purpose; that is, to live elsewhere 
while their homes were being repaired.
    The IG's findings of waste and ineffective controls are 
supported by the evidence that this Committee has gathered 
during its own investigation. We have uncovered many instances 
in which applicants received awards for personal property, 
rental assistance, or both despite the fact that subsequent 
quality control inspections showed that there had been no 
storm-related damage to the home or its contents. For example, 
last October, FEMA awarded $18,452.37 to a Miami-Dade resident 
for rental assistance as well as for replacement of clothing, 
the furnishings in three bedrooms, and a host of appliances. 
Yet, a subsequent inspection found that the home had suffered 
no storm-related damage whatsoever.
    Other errors were caused by FEMA's efforts to further 
streamline and accelerate the inspection process. FEMA's 
decision to introduce these new guidelines while thousands of 
inspectors were already in the field caused considerable 
confusion, particularly for the new inspectors and led to 
numerous errors and overpayments. To cite just one example, 
FEMA records show that an applicant in Miami-Dade was awarded 
more than $13,000 in personal property losses through what was 
called an inspector speed estimating error. The IG's report 
also raises questions about why FEMA paid for funerals when 
medical examiners reported no storm-related deaths in Miami-
Dade.
    No one contests the need for the Federal Government to 
provide swift and compassionate assistance to the victims of 
natural disasters, but when scarce resources are wasted, 
fraudulent claims are paid, and safeguards are ignored, there 
are new victims: The taxpayers, and it is a false choice to say 
that we cannot protect the taxpayers while responding 
effectively to the urgent needs of disaster victims.
    [The prepared statement of Senator Collins follows:]

             OPENING PREPARED STATEMENT OF SENATOR COLLINS

    Today, the Committee examines the integrity of the Federal 
Emergency Management Agency's disaster-relief program. Our specific 
focus is on FEMA's response to the series of hurricanes that struck 
southern states last year and the subsequent evidence that has emerged 
of fraudulent claims, wasteful spending and ineffective government 
management. Although our focus is on specific events in the recent 
past, this issue has ramifications that are relevant to all regions of 
the country and to all future disaster-relief needs.
    In the span of just six weeks in August and September of 2004, 
Florida was hit by four powerful hurricanes in quick succession: 
Charley, Frances, Ivan, and Jeanne. More than 10 percent of the state's 
housing stock was damaged or destroyed by the hurricanes, affecting 
more than 700,000 residents. Property damage exceeded $21 billion. One 
hundred seventeen Floridians lost their lives.
    A disaster of this scale required a rapid and substantial response. 
FEMA responded with more than $2 billion in immediate relief to 
Floridians while they rebuilt their battered state.
    We expect relief in such dire circumstances to be swift and 
substantial. We did not expect what came next.
    No sooner had the 2004 hurricane season ended than Florida 
newspapers began alleging substantial and widespread fraud in FEMA 
claims based on the fact that nearly 12,600 residents in Miami-Dade 
County have collected more than $31 million in payments from Hurricane 
Frances, even though that Labor Day storm hit 100 miles to the north.
    The effect of Frances in Miami-Dade has been described as that of a 
typical thunderstorm: Some downed trees and power lines. In fact, the 
Miami-Dade County Office of Emergency Management described the damage 
from the hurricane as ``minimal.'' Yet the American taxpayers bought 
Miami-Dade residents thousands of television sets, air conditioners and 
other appliances, from microwave ovens to sewing machines. The 
taxpayers also bought rooms full of furniture and new wardrobes, and 
paid to repair or replace nearly 800 cars.
    There are many issues to be explored in this matter, including the 
extent of fraud and abuse of FEMA's individual assistance program 
during the 2004 hurricanes. Today our focus will be on a new audit by 
the Department of Homeland Security's Office of Inspector General. I am 
pleased that the Acting Inspector General, Rick Skinner, is with us 
today to discuss this report. We will also be joined by Michael Brown, 
Under Secretary for Emergency Preparedness and Response, to discuss 
FEMA's response to this report.
    This Committee has been investigating the process by which 
individual damage claims are evaluated and verified. On this point, the 
audit makes several disturbing findings. It is often impossible to 
determine whether the payments FEMA made for individual claims were 
based on actual disaster-related damages. The verifications of many 
personal-property damages were based solely on undocumented verbal 
statements: No receipts, no proof of ownership, in some cases, not even 
a damaged item to inspect. Similarly, the guidelines for repairing or 
replacing automobiles and other items were lacking. Rental assistance 
was provided to applicants who had no apparent need or had failed to 
demonstrate eligibility for such assistance.
    I should note that the purpose of this audit was not to uncover 
actual incidents of fraud, but to examine whether FEMA has the proper 
systems in place to prevent and detect fraud. The report identifies a 
number of significant control weaknesses that create the potential for 
widespread waste, fraud, and abuse.
    One of the most troubling findings by the Inspector General is that 
FEMA inspectors were allowed to record damage to furniture or 
appliances even though that item allegedly had been thrown away before 
the inspector arrived. That is simply an invitation to fraud.
    The audit also finds substantial deficiencies in the rental 
assistance program. One example is the Expedited Assistance Program, in 
which FEMA would send one month's rent to anyone in the disaster area 
who called and answered certain questions correctly, before any 
inspector was sent to verify the claim. Initially, FEMA did not even 
require the individual to represent that there had been damage to the 
home. Damage or not, FEMA sent each person a check for $726.
    As for the $9 million in total rental assistance paid to some 5,000 
people in Miami-Dade, the auditors found that this money was paid to 
people whose homes were declared unsafe by FEMA inspectors for 
unspecific, even dubious, reasons. In addition, there is no evidence 
that these people actually used the money for its intended purpose: 
That is, to live elsewhere while their homes were repaired.
    The OIG's findings of waste and ineffective controls are supported 
by evidence that this Committee has gathered in its own investigation. 
We have uncovered many instances in which applicants received awards 
for personal property, rental assistance, or both, despite the fact 
that subsequent quality-control inspections showed that there had been 
no storm-related damage to the home or its contents.
    For example, on October 11, 2004, FEMA awarded $18,452.37 to a 
Miami-Dade resident for rental assistance, as well as for the 
replacement of clothing, the furnishings in three bedrooms, and a host 
of appliances. A subsequent inspection found that the home had suffered 
no damage whatsoever.
    Other errors were caused by FEMA's efforts to further streamline, 
or accelerate, the inspections process. FEMA's decision to introduce 
these new guidelines while thousands of inspectors were already in the 
field caused great confusion, particularly for new inspectors, and led 
to numerous errors and overpayments. To cite just one example, FEMA 
records show that an applicant in Miami-Dade was awarded $13,002.06 in 
personal property losses through an ``inspector speed estimating 
error.''
    Given that no storm-related deaths were reported in Miami-Dade, 
questions have been raised as to why FEMA paid for several funerals 
there. The OIG reviewed three cases of funeral payments in Miami-Dade 
and found that none were disaster-related. In one case FEMA paid for 
the funeral expenses of a Miami-Dade resident who dies in an automobile 
accident after Hurricane Frances had passed through the area. Although 
the crash report said the accident was caused by the victim's excessive 
speed, FEMA awarded funeral expenses because wet roadways associated 
with the hurricane ``could have'' contributed to the accident.
    I would like to thank Senator Nelson for his appearance here today. 
I would also like to thank Representative Mark Foley, who has submitted 
a written statement but could not be here today. I would note, too, 
that Senator Martinez wanted to be here today but could not due to an 
unavoidable conflict. They were among the first to raise alarms about 
FEMA's disaster-relief program. They have seen first-hand the 
devastation these storms brought to their home state of Florida.
    No one contests the need for the federal government to provide 
swift and compassionate assistance to the victims of natural disasters. 
But when scarce resources are wasted, fraudulent claims are paid, and 
safeguards are ignored, there are new victims: The taxpayers. And it is 
a false choice to say that we cannot protect taxpayers while responding 
effectively to the urgent needs of disaster victims.

    Chairman Collins. I want to recognize the individual who is 
going to be our first witness today. Senator Bill Nelson has 
worked very hard on this issue. He was one of the first who 
raised the alarm about wasteful spending and talked to me about 
it last year at that time. I told him the Committee would begin 
its investigation, and I want to recognize his leadership.
    I also want to recognize the leadership of Representative 
Mark Foley, who has submitted a written statement but could not 
be here today. I would also note that Senator Martinez has 
expressed a great deal of interest in these hearings, but he 
also had a conflict which prevented him from testifying. But I 
look forward to hearing the witnesses' testimony today and 
particularly that of our lead-off witness, Senator Bill Nelson.
    I would now like to turn to the Committee's Ranking Member, 
my colleague, Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thank you, Madam Chairman.
    Let me join you in welcoming our colleague, Senator Nelson 
here and to thank him for his leadership on this matter. I know 
he is concerned about the way in which public money has been 
distributed in disaster cases and whether it has been 
distributed appropriately, but I also want to thank you, Madam 
Chairman, because you responded to his request and that of the 
other members of the Florida delegation to hold this hearing 
and to commit significant time of both of our staffs to this 
investigation. But I do believe it is worthwhile.
    This hearing is called to examine whether adequate controls 
exist to ensure that vital Federal disaster relief is going to 
where it is supposed to be going. That seems simple enough, but 
as you have just made clear, Madam Chairman, the Federal 
Emergency Management Agency paid thousands of residents of 
Miami-Dade County millions of dollars in disaster relief, 
despite the fact that the eye of Hurricane Frances hit about 
100 miles north of Miami-Dade County.
    Many of the people given aid by FEMA neither needed nor 
deserved the relief. That is not my conclusion; it is the 
conclusion by the investigation of the Department of Homeland 
Security's Office of Inspector General. And that circumstance 
is not only wrong; it is unacceptable. The tradition of 
Americans helping Americans through their Federal Government in 
the aftermath of a natural disaster traces back, as far as my 
staff could find, at least to 1803, when Congress authorized 
aid to a New Hampshire town that had been devastated by a fire.
    But this generous tradition will be jeopardized if the 
American people or we, their representatives in Congress, 
conclude that their tax dollars are not being spent fairly, 
efficiently, and responsibly. Madam Chairman, I am going to ask 
that some considerable amount of the remainder of my statement 
be included in the record as if read, because it really 
overlaps with exactly the case that you have just laid out and 
go on and say this: The IG of the Department of Homeland 
Security concluded that because the procedures used in Miami-
Dade were also used throughout the State of Florida and because 
most of those procedures were also used throughout the Nation, 
a shadow has been cast on the appropriateness of FEMA's awards 
of disaster relief, and that is a shadow that we together must 
remove.
    FEMA's mission of responding to natural disasters and 
providing financial assistance to those harmed by them is an 
absolutely critical one. None of us question that mission. The 
question is how the mission is being carried out. In order to 
fulfill the mission in the best interests of both those hurt by 
hurricanes, tornadoes, earthquakes, fire, and flood, and those 
whose taxes support those relief efforts, we have got to make 
sure that FEMA is following the rules and ensure that relief 
funds go where they should be going.
    Again, unfortunately, the IG's investigation as well as the 
one conducted by our staff--and I thank the bipartisan staff 
for the high quality work they did on this investigation--both 
call into serious doubt whether that is happening, whether FEMA 
is fulfilling its responsibilities.
    Madam Chairman, the hurricane season will soon be upon us 
once again. According to researchers at the National 
Oceanographic and Atmospheric Administration and at Colorado 
State University, this hurricane season could be another active 
and destructive season. It is important that this Nation's 
disaster resources, taxpayer dollars, are used where they are 
truly needed and that no questions regarding fairness, 
efficiency or responsibility taint those relief efforts.
    We can only judge FEMA by how it reacts in emergencies. 
That is its mandate, its very reason to be, and that is why the 
investigation that is the topic of this hearing is not only 
important for what happened in this particular case but it is 
important overall. Where FEMA is found wanting, we must make 
changes together with FEMA to ensure that the American people 
continue to support our tradition of swiftly coming to the aid 
of our fellow Americans when disaster strikes anywhere in this 
Nation.
    Thank you, Madam Chairman.
    [The opening prepared statement of Senator Lieberman 
follows:]

            OPENING PREPARED STATEMENT OF SENATOR LIEBERMAN

    Thank you Madam Chairman for calling this hearing today to examine 
whether adequate controls exist to ensure that vital federal disaster 
relief is going where it is supposed to be going.
    That seems simple enough.
    But the question arises over the fact that, last year, the Federal 
Emergency Management Agency paid thousands of residents of Miami-Dade 
County, millions of dollars in disaster relief despite the fact that 
the eye of Hurricane Frances hit about 100 miles North of Miami-Dade 
County.
    Many of the people given aid by FEMA neither needed nor deserved 
it, according to an investigation by the Department of Homeland 
Security's Office of Inspector General.
    This is wrong.
    The tradition of Americans helping Americans in the aftermath of a 
disaster traces back to 1803, when Congress authorized aid to a New 
Hampshire town devastated by fire.
    But this generous tradition will be jeopardized if Americans come 
to feel their tax dollars are not being spent fairly, efficiently--and 
with accountability.
    The problems in Miami-Dade County began with FEMA declaring the 
county eligible for disaster assistance without assessing the storm's 
impact or documenting reasons for the declaration.
    The facts show that the hurricane did not hit Miami-Dade County. 
Indeed, the IG's investigation determined that the strongest sustained 
winds were just 47 miles per hour--far below hurricane force--and that 
the county saw no reports of flooding.
    While these conditions undoubtedly caused damage, the IG found that 
FEMA failed to assess and document whether that damage rose to the 
level requiring federal assistance.
    Thus, the IG concludes that FEMA mishandled the declaration 
process--one essential tool FEMA must use to safeguard taxpayer 
dollars.
    But by including Miami-Dade County in its disaster declaration, 
FEMA made millions of people eligible for assistance--stretching its 
already thin resources even thinner and making its programs 
``susceptible to waste, fraud and abuse,'' according to the IG's 
report.
    Some small but telling examples, Madam Chairman:

      FEMA awarded rental assistance to people who apparently 
weren't in need of shelter. For instance, FEMA gave almost $1,500 in 
rental assistance to one person whose home had sustained just $93 in 
damage. In other instances, FEMA awarded rental assistance to people 
who didn't need to leave their homes. This happened because eligibility 
criteria in some instances failed to require that an applicant's home 
actually be damaged in order to receive assistance;

      FEMA, in accordance with its own procedures, spent 
millions replacing items that the household never had;

      FEMA's contract inspectors conducted thousands of 
inspections of homes within blocks--once a single block--of their own 
home, which the IG found raises at least the appearance of a conflict 
of interest;

      FEMA gave Miami-Dade residents whose vehicle had 
supposedly been destroyed by Frances $6500 for replacement costs even 
though their vehicle was worth only a fraction of that.

    Unfortunately, Madam Chairman, FEMA's problems in the way it doled 
out disaster relief do not stop at the boundaries of Miami-Dade County.
    The IG concluded that because the procedures used in Miami-Dade 
County were also used throughout the State of Florida--and because most 
of those procedures were used throughout the Nation--a shadow is cast 
on the appropriateness of FEMA's awards of disaster relief to 
individuals throughout Florida and the rest of the Nation.
    FEMA's mission of responding to natural disasters and of providing 
financial assistance to those harmed by them is an absolutely critical 
one--and one I completely support. That's not what this hearing is 
about.
    But in order to fulfill that mission in the best interests of both 
those hurt by hurricanes, tornadoes, earthquakes, fire and floods--and 
those whose taxes support the relief efforts--we must make sure that 
FEMA follows the rules and ensures that relief funds go where they 
should be going.
    Unfortunately, the IG's investigation, as well as the one conducted 
by our staff, call into serious doubt whether that is happening.
    The start of the hurricane season is almost upon us. According to 
researchers at the National Oceanic and Atmospheric Administration and 
Colorado State University, this season could be another active--and 
possibly destructive--year.
    It's important that our Nation's disaster resources--our taxpayer 
dollars--are targeted to where they are truly needed and that no 
questions regarding fairness, efficiency, need or accountability taint 
our relief efforts.
    We can only judge FEMA by how it reacts in emergencies. That is its 
mandate--its very reason to be.
    And where FEMA is found wanting, we must make changes to ensure 
that Americans continue to support our two-century-old tradition of 
swiftly coming to the aid of our fellow Americans when disaster strikes 
anywhere in the Nation.
    Thank you Madam Chairman.

    Chairman Collins. Thank you very much. I appreciate all 
your work on this issue, and your full statement will be 
inserted in the record as if read.
    Senator Coburn, we are delighted to have you with us today. 
I know wasteful spending is very high on your radar screen, and 
we appreciate your joining us.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Thank you, Madam Chairman, and I appreciate 
both you and the Ranking Member for holding this hearing.
    We often hear in Washington that the reason we cannot 
control our spending is because of mandatory spending, and we 
are going to have an actual deficit this year of $622 billion. 
That is the real number. That is not what you will hear most 
politicians say. But its $622 billion, and this hearing is 
important because across our government there are ways we can 
improve spending, we can allocate our resources better, we can 
more effectively do the jobs that we have been asked to do.
    So I look forward to the testimony. I will not be able to 
be here for the entire hearing, and I thank you, Senator 
Nelson, for bringing this up as well as Senator Martinez. It is 
important. If we are going to really help people, then we 
cannot expend resources on those who do not need our assistance 
when there are others who truly do. Thank you.
    Chairman Collins. Thank you.
    Senator Nelson, thank you so much for being here today, and 
I would ask that you proceed with your statement.

TESTIMONY OF HON. BILL NELSON,\1\ A U.S. SENATOR FROM THE STATE 
                           OF FLORIDA

    Senator Nelson. Madam Chairman, your opening statement was 
so comprehensive that I can short-circuit a lot of my remarks.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Nelson appears in the 
Appendix on page 35.
---------------------------------------------------------------------------
    First of all, I want to thank you and Senator Lieberman for 
taking the initiative to do the investigation. As I came to you 
with what we were hearing back home, and obviously, something 
was wrong. You did not hesitate a moment. You first did the 
investigation by your own staff. It has now augmented, as you 
have referenced, the IG's report. And thanks to you, you are 
bringing this into the full light of the sunshine with this 
hearing.
    And what we are seeing is a picture that is not a pretty 
picture, because we appropriated $8.5 billion just to FEMA for 
these four storms, most of which would be allocated to Florida, 
because that is where it got the brunt. And in fact, not only 
are we experiencing the circumstances that you have outlined 
where payments have gone into Miami-Dade County that the winds 
did not get up there, and look at what was said right there by 
the Miami-Dade Emergency Operations Center: Damage and debris 
from--you are taking it down, and I am reading it. [Laughter.]
    Damage and debris from Frances is minimal. You have pointed 
that out. You have pointed out the fact that burials, funerals 
were paid for when, in fact, many more, in excess of 300, were 
paid for when the officials had said that the deaths accruing 
directly according to the storms was somewhere in the range of 
about 125. You have pointed out that in fact, that those 
payments were made before a damage assessment was in fact made, 
and so, you have laid out in your comments here, I think, the 
essence of what we ought to be looking at.
    Now, there is an additional thing that I would add. First 
of all, I want to credit FEMA. We learned some serious lessons 
after the 1992 monster, Hurricane Andrew. One level of 
government was not talking to another level. It was chaos. FEMA 
was not ready. And out of those lessons learned, the immediate 
aftermath of the storms, there was an excellent response. And 
FEMA in large part should be given the credit. The State of 
Florida and its Emergency Operations Center working with FEMA 
and the local governments; they had everybody talking to each 
other. FEMA had prepositioned things so that you could begin to 
get supplies in. There was the National Guard that set up a 
distribution center at the Lakeland Airport and had all of 
these convoys that were getting supplies in. It really looked 
like we had our act together and that we were responding to the 
lessons that we had learned after that monster hurricane.
    But then, as time began to wear on, and give credit where 
credit is due. I mean, who has ever had to respond to four 
hurricanes in a row within a 6 weeks' period? So FEMA was 
overwhelmed. But as the time continued to wear on, either there 
is a problem in a structure of FEMA that the Congress in its 
oversight capacity should address, or there is poor management, 
or there is both. And that is my hope, that as a result of the 
leadership of you two Senators that you are going to be able to 
help FEMA to help folks like us, because hurricane season is 
starting on June 1.
    Now, I just want to show you the path of the four 
hurricanes. Madam Chairman, this was extraordinary in 6 weeks. 
In 6 weeks; this is the first one that came in. This is 
Charlie. Now, the good news about Charlie is that Charlie was a 
very tight hurricane. It had winds of 145 miles an hour, but 
those sustained winds were only about 10 miles wide. If it had 
been a monster like Andrew that was 40, 50 miles wide, you can 
imagine.
    The other good news was that Charlie, which, by the way, I 
was tracking Charlie way down south of Cuba as a hurricane 
hunter in the NOAA, and I want to commend them for your 
consideration, too, because they have gotten very 
sophisticated. On this particular one, we were dropping SONS, 
which is a loaded instrument package that would fall from 
42,000 feet all the way to the ocean, and then, the plane 
collects the data in real time, beams it by satellite back to 
the National Hurricane Center, and there, they can get, because 
of all of these incredible measurements, a better estimate of 
which way it is heading.
    Senator Lieberman. Bill, you are the only Member of 
Congress that I know of who could say at 42,000 feet was not as 
high as he has been.
    Senator Nelson. I tell you, it was not quite as fun, 
either.
    Originally, we thought Charlie was really going to be the 
next Andrew, because it was scheduled to skirt the Keys and 
come right up into Tampa Bay. And you can imagine, if the 
waters from that counter-clockwise had pushed all of the waters 
up into Tampa Bay, you would have had a major flooding problem. 
Instead, Charlie is coming up here; suddenly takes a right turn 
and comes up Charlotte Bay and hits ground zero at 145 miles an 
hour, which was Punta Gorda.
    It continued right on up the central core of Florida, 
exiting at Daytona Beach; massive destruction all the way that 
was within the narrow diameter of the hurricane. All right; a 
few weeks later, here comes Frances; third one, Ivan, that just 
tore up the Panhandle, particularly Pensacola. The Navy base 
itself had $750 million of damage.
    Then, here comes the fourth one, Jeanne, and notice where 
the three have crossed: This is just south of Lakeland in 
southeast Polk County. The little rural county to the south of 
it, Hardy County, has, to date, only 21 percent of its FEMA 
claims paid. I wanted to bring this to your attention because 
where three major hurricanes crossed, very near Hardy County, a 
poor, rural county, you only have 21 percent of their claims 
paid. This just should not be, and this should be part of the 
oversight.
    And so, Madam Chairman, today, I am going to be filing 
legislation that is going to be referred to your Committee that 
I would respectfully suggest are some things that you might 
want to look at. This legislation is going to require 
preliminary damage assessment before Federal assistance can be 
paid out, something we have already talked about. It also 
tightens the rules so that FEMA inspectors can better identify 
disaster-related losses of household items and document the 
verbal accounts that they were getting from storm loss instead 
of just gathering up people down at the local Hardee's and 
taking their verbal accounts of what the inspectors never saw.
    For example, in Miami-Dade County, almost $100,000 was paid 
to residents for destroyed cars, and the IG report said that 
damage to those vehicles was not verified. Well, under this 
legislation that I am filing, it is going to require proof. 
This legislation would also limit funeral assistance to 
disaster-related deaths, and we have already heard about that, 
and under this legislation, inspectors would not be able to 
assess the losses of their neighbors or make purchases from the 
residents whose homes they have reviewed, which is a clear 
conflict of interest.
    This would prevent cases like the one of the FEMA agent who 
bought an oceanfront home from a 72-year-old woman who sought 
out agency advice when she became concerned about the mold that 
was occurring in her home as a result of the storm. It is 
alleged that she was duped to sell her home for way under the 
fair market value. This legislation would address that. And 
this bill toughens penalties for fraud and strengthens the 
requirements for criminal background checks.
    The estimates are, Madam Chairman, that up to 22 percent of 
FEMA inspectors had criminal records, including rap sheets for 
serious crimes. This just should not be. So I hope you will 
consider this legislation as you go about your deliberations as 
to what you want to do. And I hope that your Committee will 
look beyond the IG report for other ways to improve our 
Nation's disaster assistance agency.
    Now, Madam Chairman, I can give you a few places to start: 
For example, I know many officials in Florida that would love 
to chat with your staff, including John Booth, the Executive 
Director of the Palm Beach County Solid Waste Authority, or 
George Touart, Escambia County Administrator, or Dave Metzger, 
the Orange County Public Works Director.
    What in my judgment you all need to do in your oversight 
capacity is to give FEMA clear, concise procedures for helping 
local governments pay for doing such things as removing debris 
from private roads. They have the ability, according to their 
own regulations, to do this in the interests of public health 
and safety.
    But how many times did we hear all the way from the 
Panhandle down to the southwest coast to the southeast coast of 
Florida that FEMA said that they were not, even under their own 
discretion, going to allow under the caveat of public health 
and safety to remove that debris from a private road. I have 
worked with county after county in our State, and they have 
pleaded to get needed help. And many of those counties, though 
cash-strapped, are footing the vast majority of the bill for 
the essential cleanup.
    Madam Chairman, because they are footing the bill for this 
essential cleanup, their budgets are decimated, and those 
officials, naturally, are praying that they are going to be 
spared a hurricane coming in this next hurricane season. So 
while FEMA needs to do a better job, Congress needs now to act 
in order to regain the public trust by ensuring that taxpayer 
money appropriated is spent wisely, Senator Coburn, and that it 
is spent efficiently to help Americans recover from natural 
disasters.
    We owe this not just to the folks who have suffered so much 
in my State but to the residents of the other hurricane States 
that are going to get hit in the future. All along the Gulf 
Coast and the Atlantic Coast, we are in the paths of 
hurricanes. This is a part of the lifestyle that we have. But 
you can look to other States: Look at the Californians, who 
happen to live on a fault line, or look at the Washingtonians, 
who happen to live in the shadow of Mount Saint Helens, or look 
at the rural Americans who happen to live near rivers that 
swell and city dwellers who have to face the constant threat of 
the turmoil and the tragedy surrounding terrorists.
    And so, I finish where I started, Madam Chairman: This 
would not be happening without your and Senator Lieberman's 
leadership, and I thank you from the bottom of my heart that 
this issue needs, this story needs to be told, and in so 
telling this story, I believe that we will get things much more 
ready to adequately handle these kinds of natural disasters in 
the future. Thank you.
    Chairman Collins. Thank you very much for your leadership 
on this issue. We very much appreciate your bringing these 
concerns to the Committee's attention. Thank you very much for 
your testimony.
    Senator Nelson. Thank you.
    Chairman Collins. Our next witness today is Richard L. 
Skinner, the Acting Inspector General of the Department of 
Homeland Security. Mr. Skinner has vast experience in audit and 
oversight, which is invaluable to this Committee and to the 
American people. The audit that Mr. Skinner conducted regarding 
FEMA's response to the 2004 hurricanes will be the subject of 
his testimony today.
    We welcome you and look forward to your testimony.

 TESTIMONY OF RICHARD L. SKINNER,\1\ ACTING INSPECTOR GENERAL, 
              U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Skinner. Thank you, Madam Chairman.
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    \1\ The prepared statement of Mr. Skinner appears in the Appendix 
on page 37.
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    As the Hon. Nelson pointed out, your statement was very 
comprehensive, so I hope what I have to say here does not sound 
redundant or duplicative of what you have already said, but 
thank you for the opportunity to be here today to discuss our 
work on FEMA's Individuals and Households Program (IHP), in the 
Miami-Dade County area following Hurricane Frances.
    Our report on this subject is being released to the public 
today and is included as an attachment to my prepared 
statement. In 2004, the State of Florida was affected by an 
unprecedented four hurricanes in 2 months, causing widespread 
damage and destruction. In addition, during the Florida 
disasters, FEMA was also delivering aid to individuals and 
households in 15 other States and two territories.
    According to FEMA, the upsurge of the disaster activity 
during that time period proved well above its standing 
operational capabilities, necessitating the hiring and training 
of additional staff and contract personnel. We acknowledge the 
difficult balance that FEMA must strike between speed and 
stewardship of taxpayer resources, a balance between the need 
for adequate documentation and the need to expedite assistance 
to disaster victims.
    Nevertheless, as our audit concludes, there is considerable 
room for improvement in the manner in which FEMA administers 
its disaster relief responsibilities. The inclusion of 
Florida's Miami-Dade County in the declaration for Hurricane 
Frances and subsequent awards of about $31 million under the 
IHP has been the subject of considerable public reporting and 
concern. As a result, we initiated an audit of the IHP in 
Miami-Dade County to determine, one, whether FEMA had 
sufficient evidence to support the county's eligibility for IHP 
assistance, and two, whether adequate program controls existed 
to ensure that funds were provided only to eligible applicants 
for eligible purposes.
    We found critical shortcomings in both areas. I would like 
to point out, however, what the audit did not attempt to do. 
The audit did not attempt to verify claimants' losses or 
incurred costs, nor did it attempt to determine the extent of 
fraud in Miami-Dade County. While our audit procedures provided 
due diligence to situations involving potential fraud, all 
matters involving fraud are being handled separately by our 
Office of Investigations in coordination with the U.S. 
Attorney's office for the Southern District of Florida.
    While our audit of IHP at Miami-Dade County may be 
complete, our investigative efforts are still ongoing. Other 
than to say we still have an aggressive investigative program 
within the State of Florida, including Miami-Dade County 
relative to the four hurricanes that hit the State during 2004, 
it is our policy not to discuss our fraud detection initiatives 
or our investigations involving fraudulent claims. To date, 14 
individuals have been arrested for making false claims.
    Our audit concluded that FEMA designated Miami-Dade County 
eligible for IHP without a proper preliminary damage assessment 
(PDA). FEMA contends that such an assessment is not required 
under its regulations. Instead, FEMA officials advised us that 
they relied on their best judgment at the time to amend the 
President's declaration and add 13 counties for disaster relief 
under the IHP. However, we believe that, notwithstanding the 
regulations, a PDA was required by the President's declaration, 
as I will attempt to explain here.
    In anticipation of the impact of Hurricane Frances, 
Florida's Governor submitted a disaster declaration request on 
September 2, 2004, 2 days before the storm, to FEMA's Region 
IV, requesting that all 67 counties in the State be declared 
eligible for public assistance and that 18 counties be declared 
eligible for the full complement of individual assistance 
programs, including IHP.
    The President's declaration, however, dated September 4, 
2004, excluded Miami-Dade and another 12 of the 18 counties 
recommended by the Governor for IHP and stipulated that FEMA 
could provide assistance beyond the designated areas subject to 
completion of PDAs.
    Nevertheless, effective September 5, 1 day later, FEMA 
amended the President's declaration to make IHP available to 
residents of Miami-Dade County and the other 12 counties that 
were initially requested by the Governor but excluded in the 
President's declaration. FEMA made the decision to add those 
counties based on the path of Hurricane Frances as it made 
landfall on September 5, 2005. The decision was not supported 
by a PDA, however, as required by the President.
    FEMA notes in its response to our report that a 
comprehensive door-to-door damage assessment would have unduly 
delayed FEMA's response efforts. While we believe that a PDA 
was required to document the impact and magnitude of the 
hurricane in Miami-Dade, a door-to-door assessment of damages 
was not necessarily needed nor suggested by our office.
    Although there is sufficient evidence today after the fact 
that the county indeed experienced some damages related to 
Hurricane Frances, it is still unclear, in our opinion, that 
the extent of the damages would have warranted the inclusion of 
the county in the Presidential declaration. A PDA, as required 
by the President, would have eliminated any doubt whether or 
not the county qualified for IHP assistance.
    As a result of the declaration for Miami-Dade, residents 
now not severely affected by the hurricane were eligible to 
apply for assistance. While FEMA says rightfully residents 
still had to be found eligible in order to receive such 
assistance, Hurricane Frances, along with the previous and 
subsequent disasters, strained FEMA's inspection resources, 
tested program controls and made the IHP more susceptible to 
potential fraud, waste, and abuse. Further, as I will attempt 
to explain in this statement, flaws in the IHP, and the absence 
of certain internal controls increased the likelihood that 
funds were not always provided to eligible applicants for 
eligible expenses.
    We recommended that for future disasters, FEMA ensure that 
PDAs are performed to determine the type, extent, and location 
of disaster-related damages whenever practicable. FEMA asserts 
that it already does this and that its actions in Miami-Dade 
were operationally and situationally defensible. We disagree. 
We continue to believe that a PDA was required by the President 
and that a PDA would have been both practicable and 
justifiable, especially in light of the fact that Hurricane 
Frances made landfall 100 miles north of Miami-Dade County, 
produced only moderate tropical force winds, and caused no 
flooding whatsoever.
    Furthermore, we found no evidence to suggest that the 
county experienced widespread trauma, that is, loss of life, 
loss of essential utilities, and other essential services or at 
least not for a duration that would have justified the 
inclusion of the county in the President's declaration.
    I now would like to discuss the major program control 
weaknesses that we found relative to the IHP itself; first, 
concerning Other Needs Assistance (ONA). As of February 28, 
2005, FEMA provided $18 million in ONA to Miami-Dade County 
residents in response to Hurricane Frances. We determined that 
ONA, especially for the repair and replacement of household 
room items and automobiles, should be more closely aligned to 
actual losses and that better documentation was needed to 
support determinations that damages and deaths were directly 
caused by the storm.
    For example, FEMA awarded $10.2 million to repair or 
replace household room items. However, the procedure used by 
FEMA to replace household room items allowed for funding of all 
items in what FEMA constituted as a full room, regardless of 
the actual loss. In other words, a resident may have had a 
single bed in a room, which was destroyed by the storm. Yet, 
FEMA would pay the resident the cost of an 11-piece bedroom 
suite. We recommended this procedure be changed. FEMA agreed 
with our recommendations and said it is reviewing the use of 
the generic room concept. FEMA believes that with today's 
technology, it can increase the specificity of the inspection 
without substantially increasing the time required to complete 
the inspection.
    In addition, according to the State's established 
replacement value for eligible, disaster-damaged vehicles, FEMA 
provided $6,500 for each automobile destroyed. For 15 of the 
automobiles, the retail book value, at least in our sample, 
totaled $56,000. However, FEMA awarded $97,000 for those 
automobiles. In our opinion, FEMA should work with the States 
to establish a more reasonable replacement value for destroyed 
automobiles.
    Now, concerning housing, FEMA awarded $13.1 million to 
Miami-Dade applicants for rental assistance and home repair and 
replacement. However, the implementation of the housing 
assistance component of the IHP was hampered by several 
procedural missions and generally weak guidelines for 
performing inspections and documenting results. For example, 
some rental assistance applicants received but may not have had 
a need for such assistance; while others may simply have not 
been eligible for the assistance.
    Finally, FEMA's oversight of inspection needs improvement. 
Specifically, contractors were not required to review 
inspection reports prior to their submission to FEMA for 
payment. Edit checks for inspection errors were made after 
payments rather than before, and no provisions existed for 
inspectors who lived in the areas to recuse themselves from 
inspections that may present possible conflicts of interest.
    The policies, procedures and guidelines used in Miami-Dade 
for the IHP were also used throughout the State of Florida. 
Further, according to FEMA officials, most of the procedures 
were used for disasters in other States, making our findings 
and recommendations broadly applicable to FEMA's implementation 
of the IHP nationwide. FEMA acknowledges that our report 
identifies several legitimate program flaws in the IHP and has 
agreed to make the necessary improvements.
    Madam Chairman, that concludes my prepared remarks. I would 
be happy to address any questions that you or any of the 
Members may have.
    Chairman Collins. Thank you very much, Mr. Skinner, for an 
excellent presentation.
    FEMA comments on the audits. When I was looking through the 
comments that FEMA officials made on your IG report, I was 
particularly struck by one statement: ``FEMA says we were 
pleased that the OIG confirmed no widespread or systemic waste 
or abuse in Miami-Dade County in the wake of Hurricane 
Frances.'' I must say I am baffled by that statement. Is that a 
fair reflection of your conclusions that you found no pattern 
of or widespread waste or abuse?
    Mr. Skinner. No, not at all. That is not an accurate 
reflection of our report at all.
    There are four things I would like to point out here: One, 
we found some very serious systemic weaknesses and internal 
control weaknesses with regard to all parts of the IHP program. 
This, in turn, has consequences; that is, it does, in fact 
increase the potential for fraud, waste and abuse.
    Second, I would like to point out that the purpose of this 
audit, in itself, was not to identify fraud, waste, and abuse 
per se. We were looking at the processes and procedures in 
place to determine whether they were adequate enough to ensure 
that payments were proper to eligible applicants for eligible 
purposes.
    Third, we have a very aggressive investigative program that 
is still ongoing in Miami-Dade. We have already made 14 
arrests. It is premature at this time to say that there is no 
widespread fraud, waste, or abuse while we still have an 
ongoing investigative program.
    And finally, the mere fact that we do not find or prosecute 
everyone that committed fraud or identify all the waste, does 
not mean that it does not exist. A lot of the fraud is very de 
minimis, and it is very hard to prosecute. So it could be 
widespread, just not prosecutable.
    Chairman Collins. And in fact, I think a more accurate 
description of your report would be to say that the internal 
control weaknesses that you identified were prevalent and 
create, in fact, a strong potential for abuse, wasteful 
spending, erroneous payments. Is that a fair statement?
    Mr. Skinner. Absolutely, that is correct, Senator.
    Chairman Collins. According to the data we have been 
provided by FEMA, in Miami-Dade, FEMA spent some $17.1 million 
for personal property awards, $9.3 million for rental 
assistance, $2.7 million for home repairs and a little more 
than $1 million for expedited assistance, almost $600,000 for 
transportation. Did you find weaknesses in the program controls 
in each of these areas? I am trying to get at the question of 
whether there was a problem in only one part of the disaster 
assistance or whether you found weaknesses in all of the areas.
    Mr. Skinner. The problems that we found were across the 
board. We found problems in each and every one of the 
components of the IHP program. For example, funds provided for 
repairs and replacement of household room items were not based 
on actual losses. Recipients of rental assistance oftentimes 
may not have been eligible or may not have even requested 
rental assistance, but were paid for rental assistance. 
Guidance and criteria for replacing automobiles and paying for 
funerals, as you mentioned earlier, were just nonexistent. It 
was very judgmental. So this was prevalent across all 
components of the program, the weaknesses that we looked at.
    Chairman Collins. And that is particularly troubling, 
because that means that there are systemic weaknesses in FEMA's 
disaster relief programs that are not unique to what happened 
in Miami-Dade. The situation there appears to have been worse 
because there was not an assessment of damages before the 
designation was made for eligibility, creating all sorts of 
questions about whether individuals should have been eligible 
for assistance in the first place. But if these weaknesses are 
prevalent in all these programs, then, that suggests a 
potential for similar problems whenever these programs are 
triggered. Is that fair?
    Mr. Skinner. Yes, that is correct. These are programmatic, 
systemwide weaknesses that were not applied just in Miami-Dade. 
They were applied throughout the State of Florida, and for that 
matter, these are the same policies, procedures, internal 
controls, and guidelines that are applied for all disasters 
nationwide. So what we found here, I think, is just indicative 
or representative of the problems that we may have on a 
nationwide basis.
    Chairman Collins. Thank you. Mr. Skinner, as you are aware, 
the Committee staff has also been investigating the claims in 
Florida, and there is a black exhibit binder that I think now 
is on your table before you.
    At tabs 6 through 9, you will find that there are four 
examples of quality control reports performed on claims that 
were paid by FEMA in Miami-Dade as a result of Hurricane 
Frances. And I would like to give you a moment to find those, 
and if we have them on display as well, if we could have those 
put up.
    The four claims total approximately $45,000, but what 
struck me is in each case, the quality control report found no 
damage to the home whatsoever: No storm-related damage. FEMA 
awarded money for such things in these four cases as rental 
assistance, damage to furniture, clothing, televisions, air 
conditioners, automobiles, telephones, and appliances. In one 
case, you will see FEMA awarded hundreds of dollars to pay for 
the repairs to a dryer, and yet, the inspector indicates that 
there was no dryer. In another case, payment was made for a 
washer that the applicant did not even own.
    These examples concern me greatly, because they appear to 
reflect fundamental problems with the inspection process that 
was used by FEMA. And the inspectors really are the front lines 
of defense. They are the ones who are supposed to ensure that 
money is not wasted and that damage really did occur, and yet, 
we found widespread problems as we started going through the 
quality control reports that were taking a look at the 
decisions made by the inspectors.
    The Committee staff interviewed several of the quality 
control inspectors who told us that by and large, these were 
not close calls, that there was simply no hurricane-related 
damage. The four examples that I have just discussed and that 
we have provided to you, are these the types of results that 
you would expect based on the program control weaknesses that 
you identified in your audit?
    Mr. Skinner. Yes, it would. Two things I would like to 
comment on this or maybe three: It looks like the quality 
control program is working, to identify something as egregious 
as this. But first, it is very telling on the quality of the 
inspections themselves. There is something inherently wrong 
with the way we did our inspections if we can find examples 
like this through our quality control program.
    These inspectors, I believe, who were in Miami-Dade, a good 
many of them were not only inexperienced, but they were poorly 
trained and not always adequately supervised. That, coupled 
with the internal control weaknesses as these inspection 
reports went through the process, that is, they were not 
checked before they were sent to FEMA. FEMA's edit checks were 
done after the payments were made. These issues all contribute 
to these types of problem cases. So this does not surprise me 
at all. This is probably somewhat widespread, I would contend.
    Chairman Collins. It seems to be--based on the separate 
investigation that the Committee has done. It just is 
extraordinary that payments were made to individuals who were 
living in undamaged homes, and in a couple of the cases before 
you--we are talking about payments of $18,000, $19,000. In 
addition, these individuals also received rental assistance, 
and yet, their homes were undamaged. And that is the issue I 
want to move to next. FEMA paid about $9.3 million in rental 
assistance to more than 5,000 people in Miami-Dade County; is 
that correct? Or in the neighborhood?
    Mr. Skinner. Yes, that is correct.
    Chairman Collins. So that is almost a third of the money 
went for this rental assistance. In the sample of files that 
you and your auditors reviewed, was there any evidence at all 
that the recipients of rental assistance ever actually moved 
out of their homes?
    Mr. Skinner. No, not at all. We did not find any examples 
where anyone actually moved out of their homes.
    Chairman Collins. So, yet, people received rental 
assistance, and yet, they did not leave their dwellings.
    Mr. Skinner. That is correct.
    Chairman Collins. And is it your understanding that when 
FEMA awards rental assistance, it actually has to be spent on 
rent.
    Mr. Skinner. That is our interpretation. That is why it is 
called rental assistance.
    Chairman Collins. That does seem fairly logical.
    Mr. Skinner. Yes.
    Chairman Collins. So does FEMA ever attempt to determine 
how many people who received rental assistance actually used it 
for that purpose?
    Mr. Skinner. As far as I know, no.
    Chairman Collins. Is this another area where you think 
that--let me ask you: What do you think needs to be done to 
tighten up on the rental assistance program?
    Mr. Skinner. For one thing, what we found was that people--
FEMA's guidelines were very explicit, FEMA's IHP guidelines for 
rental assistance. That is, if you receive payment for rental 
assistance, you are, in fact, to use it for rental assistance, 
and you must maintain receipts for 3 years to support the fact 
that in fact you used it for rental assistance.
    However, the inspector guidelines that were passed out to 
the inspectors actually advised the applicants that no, you in 
fact did not have to use your rental assistance funds for 
rental assistance; you could use them for home repairs. It 
appears to us that the right hand does not know what the left 
hand is doing. The guidelines need to be very explicit, and the 
inspectors have to understand, or at least FEMA has to provide 
clearer guidelines to make it perfectly clear that just because 
you may be eligible for rental assistance does not mean that 
you should be entitled to rental assistance.
    Oftentimes, and this gets back to the quality of the 
inspections, the inspectors would deem homes unsafe. And 
oftentimes, many times, we have questioned whether that 
determination was supportable. But by merely checking that the 
home was unsafe, these individuals were automatically made 
eligible for rental assistance and were, in fact, paid for 
rental assistance, and oftentimes, they did not even ask for 
rental assistance, but since they were determined eligible by 
the inspector, they in fact received rental assistance, and I 
think there is a breakdown in communications, guidelines, and 
in internal controls.
    Chairman Collins. So did your inspectors also find that 
there were cases where homes were declared unsafe when, in 
fact, they just needed very minor repairs?
    Mr. Skinner. Oh, yes, as we went through the inspectors' 
reports, we found many cases in which, for example, a window 
was missing at a cost of $97. It was declared unsafe. 
Therefore, they qualified for rental assistance and received 
rental assistance, although they did not move or did not 
relocate.
    Chairman Collins. So you may have cases where an individual 
has very minor repairs, and it is an actual case where the 
repairs were $97, and yet, the individual could receive $726 in 
rental assistance, additional payments for repairs; in other 
words, payments far exceeding what the minor repairs are and 
yet never moved out of the house.
    Mr. Skinner. That is entirely true. That is entirely 
accurate, yes.
    Chairman Collins. Could you explain to us more about how 
the Expedited Assistance Program works? I understand that is a 
rarely used process, but it was used in Miami-Dade.
    Mr. Skinner. Yes, it is my understanding as well that it is 
rarely used. I know it was called something else in other 
disasters, Fast Track in Northridge and in Andrew. In Miami-
Dade, in essence, they opened a door for expedited assistance 
for rental assistance, and all that was required was a call-in, 
and you had to meet three criteria or two or three criteria and 
answer two or three questions to be made eligible. One, you had 
to attest to the fact that was your primary residence, and two, 
you needed essential housing needs or, in fact, you were living 
somewhere else, and that would automatically qualify you for 
rental assistance. Once was done; the payments were made, and 
there was no follow-up or any verification that any of those 
people, in fact, were eligible or entitled to rental 
assistance.
    Chairman Collins. Is this done generally just over the 
telephone, then?
    Mr. Skinner. Yes.
    Chairman Collins. Where the applicant calls in, answers a 
series of questions, but are you telling me there is no 
verification before the check is sent?
    Mr. Skinner. That is correct.
    Chairman Collins. So this is the pay first, ask questions 
later approach; is that fair?
    Mr. Skinner. Yes, pay first, verify later; that is 
absolutely correct.
    Chairman Collins. I would like to turn to the issue of 
payments for automobile repairs and replacement. There were 
some 800 payments for repairs, or I should say there were 
payments for repair or replacement of some 800 automobiles in 
the county. I find this very strange, given the minimal damage; 
there was not flooding; there were not particularly high winds. 
But there were also issues about how the payment amount is 
arrived at. Could you elaborate on that?
    Mr. Skinner. It is my understanding that this is negotiated 
between the State and FEMA as to what is a fair value for a 
car. And, in the State of Florida, and I think every State is 
handled differently, it is not a FEMA standard or a national 
standard. In the State of Florida, I think they determined 
that, that is the State, and FEMA accepted their 
recommendation, that if any cars needed to be replaced that the 
minimum payment should be around $6,500.
    Chairman Collins. And is that regardless of what the Blue 
Book value is for the car?
    Mr. Skinner. That is correct.
    Chairman Collins. So you could have and indeed found cases 
where the Blue Book value of the car might have been $2,000, 
and yet, a payment of more than $6,000 was made?
    Mr. Skinner. Yes, in our sample, we found several cases of 
that.
    Chairman Collins. I would also like to look at one of the 
specific automobile cases that you discuss in your report, 
because it really stood out to me: In this case, FEMA paid 
$6,500 for a 1998 Toyota Corolla that was supposedly destroyed 
by an electrical fire, and you note in the report that the 
inspector provided no explanation of how a hurricane, 
particularly one that hit 100 miles north, could have 
contributed to an electrical fire. Do we know if the inspector 
ever actually saw this car?
    Mr. Skinner. Well, in this particular case that you are 
talking about, we did in fact call the former car owner, and 
that individual advised us that the car had been towed prior to 
the inspector's arrival. So, therefore, the inspector had to 
rely entirely on her verbal representation that yes, I had a 
car, and yes, it was destroyed through an electrical fire, and 
yes, it has now been discarded. But that was not reflected in 
the inspector's report. We obtained that information by, in 
fact, talking to the individual.
    Chairman Collins. But what happened in this case was that 
FEMA paid $6,500 to an individual who claimed to have had a car 
that was destroyed by an electrical fire that was somehow 
related to the hurricane, but there was no actual car to 
inspect; is that accurate?
    Mr. Skinner. That is correct.
    Chairman Collins. So there is no way to know if there ever 
was an electrical fire in this car.
    Mr. Skinner. That is right.
    Chairman Collins. And there is absolutely no way to 
determine, assuming there was an electrical fire in the car, 
that it had anything to do with the hurricane.
    Mr. Skinner. That is correct.
    Chairman Collins. And yet, this payment was made.
    Mr. Skinner. Yes, it was.
    Chairman Collins. Well, Mr. Skinner, I think you have 
raised an awful lot of concerns, and I really appreciate all 
the work that you and your office have done. I want to just end 
with one final question, and that is in FEMA's response to your 
report, FEMA suggests that achieving the standards that the IG 
has said should be achieved to protect the taxpayers is 
unattainable. That is the word used by FEMA officials.
    FEMA officials say we are dealing with an emergency 
situation. We are dealing with urgent claims, and it is 
impossible for us to guard against the susceptibility to waste, 
fraud, and abuse and at the same time serve the victims of 
natural disasters. What is your comment on that?
    Mr. Skinner. I disagree with that. For one thing, the 
technology exists today to allow the inspectors to do a better 
job, technology that did not exist back in the times of Andrew. 
Second, I think every disaster, every scenario, every situation 
has to be evaluated on its own. In Punta Gorda, yes, we had 
clear evidence that the situation was dire so as far as the 
impact of the storm.
    But as you get out away from the eye of the storm and into 
the marginal counties such as Miami-Dade, the delivery of 
services, yes, we want it to be timely, but we do not want to 
sacrifice our responsibility to be good stewards of the Federal 
dollar, and people were not, in Miami-Dade County, they were 
not living in tents; they were not living in shelters; they did 
not experience widespread trauma. They did have water. They did 
have electricity. I think we could have taken greater caution 
as we proceeded in providing assistance in that type of an 
environment.
    Chairman Collins. Thank you so much for your excellent 
testimony. I certainly agree. I think it is a false choice to 
say that we cannot serve the victims of natural disasters 
effectively, compassionately and swiftly without sacrificing 
the integrity of this program, and indeed, many of the 
recommendations that you have made would help put in the kinds 
of controls that would greatly reduce the potential for the 
kind of erroneous payments, wasteful practices, and indeed, 
outright fraud that both your auditors and our investigators 
have documented occurred.
    So thank you very much for your testimony, and we look 
forward to working closely with you.
    Mr. Skinner. Well, thank you, Madam Chairman.
    Chairman Collins. Thanks. I would now like to call our next 
witness, Michael D. Brown, the Under Secretary for Emergency 
Preparedness and Response at the Department of Homeland 
Security. Secretary Brown is responsible for coordinated 
Federal disaster relief activities, including the 
implementation of the Federal Response Plan. Mr. Brown, we very 
much appreciate your being here today.

 TESTIMONY OF MICHAEL BROWN,\1\ UNDER SECRETARY FOR EMERGENCY 
PREPAREDNESS AND RESPONSE, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Brown. Good morning, Senator, and thank you for having 
me. I certainly do appreciate it.
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    \1\ The prepared statement of Mr. Brown appears in the Appendix on 
page 45.
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    I think it is important that we have some perspective of 
what took place that horrible 6 weeks, so in the vernacular, 
``roll the video.''
    [Video shown.]
    Mr. Brown. Madam Chairman, that 2004 hurricane season 
marked the busiest season in FEMA's history. FEMA responded to 
68 declared major and emergency disasters in 2004. Within a 
span of only 6 weeks, four powerful hurricanes struck Florida, 
producing widespread damage and causing terrible destruction 
and displacement. In response to hurricanes spanning both the 
East and Gulf Coasts, FEMA opened and maintained 27 
simultaneous disaster field operations in 15 States and two 
territories.
    We registered nearly 1.7 million people for disaster 
assistance, a record number of open disasters, a record number 
of registrants. In an average year, just to give you some 
perspective, FEMA only registers 480,000 people. FEMA quickly 
expanded our capabilities across the board to meet those 
challenges. We hired, trained, and fielded thousands of 
additional phone operators and inspectors as well as thousands 
of additional community relations workers.
    But FEMA does not do its work alone. In each of these 
disasters, we stood shoulder to shoulder with our State 
partners, our local partners, and indeed, even with our Federal 
partners. We are now months removed from the immense and 
daunting challenges we faced during that unusually cruel 
season, and I want to remind everyone what an extraordinary 
period we faced.
    FEMA's response to the hurricanes and the tropical storms 
last year represented the single largest mobilization of 
emergency response and recovery resources in the history of 
this country, surpassing even the response to September 11 and 
the 1994 Northridge earthquake. It was a massive undertaking 
and a relief operation for which I am exceptionally proud.
    It is imperative that we remember and understand the 
challenges and the complexities that we confronted. In full 
situational context, before anyone attempts to craft new 
answers and new procedures which may, on their face, seem 
reasonable but without closer and more studied scrutiny will 
have unintended negative consequences. We must never lose the 
sense of urgency that drives our response to victims and 
communities in need or be forced to sacrifice that urgency in 
the pursuit of elusive administrative perfection.
    Our mission to get help quickly to those who so desperately 
need it must take priority yet be carefully and always balanced 
with our obligation to be stewards of the taxpayer dollars. I 
personally was on the ground in the midst of our response 
operations, and I was able to judge for myself the urgency of 
the situation. I can assure you that FEMA was never stampeded 
into making any decisions. We made informed yet sometimes very 
difficult choices in order to meet the demands of the 
extraordinary situations created not just in Florida but all 
along the Eastern half of the United States. I just want to say 
publicly that I am proud of FEMA's employees and their 
accomplishments.
    Senator there is always room for improvement. Our processes 
and procedures are not exceptions to that rule. Many of our 
programs have been refined and updated over the years. Since 
1992, when FEMA was very heavily and I think appropriately 
criticized for its slow response to the victims of Hurricane 
Andrew, the men and women of FEMA have pursued and implemented 
changes, efficiencies, and upgrades through the use of new 
technologies, faster systems, and clearer procedures. During 
that same time, we have also seen the implementation of a brand 
new program, the Individuals and Households Program, enacted by 
you in 2000 under the Disaster Mitigation Act.
    While I look forward to constructively discussing many 
ideas for these improvements, I want to remind everyone that 
our processes and procedures have been forged over countless 
disasters, through years of experience and have consistently 
weathered and withstood the test of time and repeated trial. We 
constantly observe and review our responses after every 
disaster, not only to identify those things that we did well 
and can be proud of but also to identify and remediate areas 
that require our improvement.
    Four hurricanes impacting 15 States in 6 weeks is an 
exception to our normal course of business. Those four 
hurricanes were an anomaly. Yet it is our duty and our mandate 
to act regardless of the situation. You see, we do not have the 
luxury of dictating the conditions under which we operate. It 
is in that very spirit that I look forward to our discussions 
today. While media and other reports have focused on errors, I 
would sincerely and respectfully suggest that this hearing, in 
addition to focusing on the errors, also focus on the hundreds 
of thousands of people who did receive assistance and on the 
thousands of inspectors who successfully conducted hundreds of 
thousands of inspections all across the affected States.
    I simply do not listen to those who suggest that we should 
pay excessive scrutiny to one county or to one group of people 
affected by a disaster and not to others. These storms do not 
respect geographical boundaries, nor do they respect 
socioeconomic demographics that would justify in some people's 
mind a higher level of scrutiny.
    Unfortunately, I often see competing local agendas. Those 
with political differences sometimes attempt to cloud our 
mission to deliver aid and to deliver to those who most need 
our help. While we and I personally will always strive to 
strike a proper and defensible balance between timeliness and 
fiscal surety, you who legislate daily know that these 
decisions that we make are never black and white. That is why I 
have tried to provide some necessary post-event context to 
serve as a setting for continued discussion of the fundamental 
issues that any large scale event of this type presents.
    Perspective seems to have been lost in the public 
discussion. Early concerns were over reports that Miami-Dade 
County suffered less severe damage from last season's 
hurricanes than counties to the north, where the eyes of 
Hurricanes Frances and Jeanne made landfall, and that somehow 
Miami-Dade received seemingly disproportionate Federal 
assistance. In fact, I think that those concerns led to this 
inquiry. But to give a thorough understanding of FEMA programs 
and procedures and the differences between our individual 
programs and our government programs, it will become clear that 
many of those early concerns were misguided.
    Early press reports and even reports in this hearing today 
that somehow we should engage in county by county comparisons 
of total outlays will yield faulty results and incorrect 
conclusions. In addition to levels of damage, many factors 
influence the distribution of Individuals and Households 
Program assistance, including the population, the proportion of 
insured applicants in counties affected by disasters, and even 
the income levels.
    Raw comparisons of the aggregate amounts of disaster 
assistance delivered in these counties led to starkly skewed 
comparisons, faulty conclusions and an inaccurate perception. 
Less than 2.9 percent of the residents in Miami-Dade County 
received any FEMA aid, an amount that I believe is commensurate 
with the amount of damage and proportionally much less than the 
counties at the eye of the hurricanes.
    FEMA responded aggressively and proactively to the needs of 
all affected citizens of the State of Florida who were eligible 
for assistance. The amount of money spent in one county did not 
reduce the amount of money available to other counties, nor did 
the money we spent in one area reduce levels available in other 
areas.
    With all of the good that has been accomplished in Florida, 
we know that there was some assistance given incorrectly, 
through errors of data entry, inspections and, unfortunately, 
even through fraudulent claims. I make no excuse for those 
errors, Senator. I am proud of actually the few errors that 
have been surfaced out of the hundreds of thousands of 
inspections that were conducted.
    Our overriding priority in a near-catastrophic incident is 
to get help quickly to those who need it desperately while 
continuing to exercise all reasonable diligence over our 
obligation to continue to be outstanding stewards of taxpayer 
dollars. That will always be the balance that FEMA strives to 
meet: The balance between getting aid quickly, effectively to 
everyone who needs it and balancing the desire to make sure 
that we are good stewards of taxpayer dollars. That is our 
mission, Senator.
    Again, thank you for having me here today.
    Chairman Collins. Thank you very much, Mr. Brown, for your 
statement.
    In response to your opening remarks and the video that you 
played, I want to emphasize to you that the Members of this 
Committee very much appreciate and recognize the vital role 
played by FEMA in helping the victims of natural disasters. It 
is because of our appreciation for that role that we are 
particularly concerned about what this Committee's 
investigation has uncovered.
    The public is perfectly willing, indeed eager, to help the 
victims of natural disasters rebuild their lives and their 
communities, but the public is not willing to see patterns of 
abuse, wasteful spending, outright fraud, erroneous payments, 
and that undermines public support for providing that 
assistance, and that is why this is of great concern to me.
    If the public feels that millions of dollars are wasted, 
they are going to be far less likely to support the 
appropriation of additional funds to help people in future 
disasters. And that is why this Committee, which has new 
oversight responsibility for FEMA, is conducting this 
investigation.
    In your comments, you said that focusing on one county, 
Miami-Dade in this case, as the Committee's major focus has 
been, results in faulty results and incorrect conclusions. Yet 
the Inspector General said that the systemic weaknesses and the 
lack of controls that his audit identified could be applied 
beyond Miami-Dade and, in fact, characterized the provision of 
assistance in general. Do you disagree with that finding?
    Mr. Brown. The extrapolation of things that were found in 
Miami-Dade to other areas of the State, particularly areas of 
the State that were particularly hard hit, I think does draw 
incorrect conclusions. The reason for that is this: It is very 
easy for an inspector to make a determination when he looks at 
a home and all that is there is a foundation. It is more 
difficult for an inspector to make a determination of what has 
really occurred in those marginal areas where it is more 
difficult to discern, and you have to use judgment as to 
exactly what occurred, particularly when you are making those 
discerning kinds of judgments in housing stock that is old and 
decrepit and--by our standards, by the standards you and I 
would want to live in--is certainly substandard.
    And so, to draw the conclusions from those kinds of 
inspections to all of the programs throughout all of the 
country, and the State in this case, I think is an incorrect 
extrapolation.
    Chairman Collins. Well, let me give you a specific example 
that the Inspector General identified as an inappropriate 
process that leads to overpayments. He told us that FEMA 
inspectors, when they are evaluating a spare bedroom, for 
example, evaluate it as if it has two twin beds, a chest of 
drawers, a nightstand, a lamp; in other words, as if it is 
fully furnished, even if that bedroom, in fact, only contained 
a single bed. If that is being done in general, why does that 
not produce overpayments everywhere that procedure is applied 
and not just in Miami-Dade?
    Mr. Brown. That is actually an excellent question, and the 
reason for it is because in most areas it is safe to assume 
that in the destroyed home that you see--that is the typical 
middle class home--it is easy to make the assumption that yes, 
there is that property in the structure. It is more difficult 
to make that judgment--and I agree with you. I think in those 
marginal areas, we do need to tighten that up. And so, if there 
is a way that we can do that tightening up so that in the 
marginal areas that are not as clear-cut as the destroyed 
typical middle class home, then, I am willing to do that, and I 
think that we should do that. But to draw the extrapolation 
that because we found a situation in one county that may have 
an unusual situation and extrapolate that to all inspections 
done all across the State, I do think that is incorrect.
    Chairman Collins. Do you think that FEMA should be paying 
for furniture that does not exist?
    Mr. Brown. We should not be paying for anything that does 
not exist.
    Chairman Collins. Well, is that not what happened?
    Mr. Brown. But Congress told us that we would. But it does 
in those very marginal cases. And I would like to eliminate 
those marginal cases.
    Chairman Collins. If you are using a generic room approach, 
you are paying for furniture that does not exist.
    Mr. Brown. That is correct, and I do believe we need to 
tighten that up in those marginal cases. That is the balancing 
act that I talk about. We should not require an inspector that 
is in a neighborhood that you and I could look at and say, it 
is reasonable to assume that there was the typical furniture in 
that home, and that home is now demolished; I do not think that 
either one of us want to be in a position where we are going to 
delay assistance to that individual while they go out and 
somehow prove to us that they had a nightstand or two 
nightstands and a king-size bed versus a double bed.
    I do not think we want to get into that kind of 
discriminatory, discerning type of practices. I do agree with 
you, though, that the other side of the balance is to try to 
figure out a way where it is in those very marginal cases, how 
do we in fact do that determination without slowing down the 
aid so much that that victim who really does need our 
assistance is now waiting 2, 4, 5, or 7 days for that 
assistance? That is the balance we are trying to find.
    Chairman Collins. Do you think FEMA inspectors should be 
okaying payments for automobiles that have been towed away and 
cannot be inspected?
    Mr. Brown. I knew you would ask me about that particular 
example, and that is a tough example. I was not there, and I 
did not see, I did not talk to that individual like I would 
talk to you right now and read your body language and check 
your sincerity and understand the whole totality of 
circumstances of what that inspector is seeing on the ground.
    We have to give the inspectors some latitude to recognize 
that people's lives have been upended. They are at the worst 
point in probably their entire lives about how to make a 
decision. You take a single mother in Miami-Dade County who 
maybe relied upon that Opel Cadet to get her kids to school or 
to get to work maybe two or three jobs that she is working. 
That inspector has to make a judgment call.
    Yes, we negotiated with the State under the IHP program 
before we went into the disaster about what we would pay. Our 
goal is to get that single mother transportation, not to give 
her $250 or $450 or $2,000 to meet the Blue Book value of her 
car but to give her reimbursement for the transportation so she 
can make the decision, get another vehicle, return to work, get 
those kids back to school. That is the judgment that those 
inspectors make in the field.
    Chairman Collins. Mr. Brown, do you disagree with Florida 
officials who said that the damage from Hurricane Frances in 
Miami-Dade County was minimal? Do you disagree with the Weather 
Service assessment that there was no flooding?
    Mr. Brown. It is not a matter whether I disagree or not. It 
is what the facts are. The facts are this, Senator: The private 
insurance companies, who have a vested interest in not paying 
out claims to the extent that they do not have to have to date 
paid out $60 million in property damage claims to Miami-Dade 
County. There was damage in Miami-Dade County. We have also had 
requests from the County of Miami-Dade for reimbursement of 
both emergency protective measures and for debris removal. We 
have paid over $700,000 in Miami-Dade County for debris 
removal. So all of the premises that so many people have 
started from that we paid for things in Miami-Dade when the 
hurricane did not get there, and there was no damage, is just 
incorrect.
    Chairman Collins. Well, we all know that insurance claims 
cover a far broader array of damages than FEMA assistance.
    Mr. Brown. And that is why I focused----
    Chairman Collins. That is totally different. You can have 
an insurance claim for minor flooding in your cellar as a 
result of a thunderstorm. We are talking about a hurricane.
    Mr. Brown. That is correct, and hurricane bands can produce 
tornadoes. If you are living in substandard housing, sustained 
winds of 59 miles an hour can make your home uninhabitable. And 
so, we should not pick on the people of those neighborhoods 
because they live in unfortunate, substandard housing, and they 
do not have insurance. We should not pick on them because of 
that.
    In Miami-Dade County, the Governor had already ordered a 
mandatory evacuation. I tried to get into Miami International 
Airport. It was closed. There were severe rains. There were 
severe thunderstorms. Frances was still making landfall. This 
is one of the slowest hurricanes that we have seen in the 
history of this country. We did not know which direction she 
was going to turn or what to do. We made the absolute right 
call in declaring Miami-Dade, because it is my honest and 
sincere opinion that had we not added Miami-Dade County on to 
the President's disaster declaration, I would have been hauled 
up here and been asked why did I not provide aid to those 
people and those neighborhoods where those tropical force winds 
either caused damage or caused them to suffer.
    Chairman Collins. The Presidential declaration said that a 
preliminary damage assessment should be done before Miami-Dade 
County was added. Why was that not done?
    Mr. Brown. If I may, I believe that the Inspector General 
is just wrong in that regard. The President's letter, and I 
want to quote it verbatim--I got the wrong page up. I am sorry. 
The letter is addressed to me.\1\ ``You are authorized to 
provide individual assistance in the designated areas, 
assistance for debris removal and emergency protective measures 
(Category A and B) under the Public Assistance Program in all 
counties in the State and Hazard Mitigation statewide, and any 
other forms of assistance under the Stafford Act you deem 
appropriate subject to completion of Preliminary Damage 
Assessments.''
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    \1\ The letter referred to appears in the report entitled ``Audit 
of FEMA's Individuals and Households Program in Miami-Dade County, 
Florida, for Hurricane Frances,'' Department of Homeland Security, 
Office of Inspector General, Office of Audits, OIH-05-20, May 2005, on 
page 34.
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    Chairman Collins. Subject to the completion of a PDA.
    Mr. Brown. Any other assistance other than Categories A and 
B, which under the FEMA programs would be Categories C through 
G. If I wanted to provide any of those categories of 
assistance, the President said before you add those counties 
and provide that kind of assistance, you must do PDAs. A and B 
were the exception. That is the way FEMA has always operated.
    Chairman Collins. In your written statement, you say, ``In 
normal circumstances, some of the quality control problems we 
saw in Florida would be unacceptable. Given the context, 
complexity, and enormity of our operations, their results were 
far more commendable.'' I would like to refer you to Exhibit 
No. 5,\2\ in the exhibit book on the table. If we could have 
the exhibit put up. This exhibit, as you can see, is entitled 
Errors Found through Quality Control Inspections Conducted by 
Parsons-Brickerhoff. This chart shows a 37 percent error rate 
on personal property inspections conducted in Miami-Dade and an 
18.5 percent error rate on the home unsafe determinations, a 16 
percent error rate on furnishings, 16 percent on clothing and 
11.5 on willingness to relocate. Are these the kinds of quality 
control results that you view as ``commendable''?
---------------------------------------------------------------------------
    \2\ Exhibit No. 5, a chart entitled ``Errors Found Through Quality 
Control Inspections Conducted by PB (389 QC Inspections Total)'' 
appears in the Appendix on page 75
---------------------------------------------------------------------------
    Mr. Brown. Yes, and can I explain why?
    Chairman Collins. Yes, this is very interesting.
    Mr. Brown. We have within our contracts, which are 
currently under review to renew, an extraordinarily tight 
quality control process. So within that 37 percent that you see 
on personal property errors, there is a list of 65 different 
items that the quality control people go through and actually 
nitpick, if I can use that word. They are trying to find errors 
not just substance but in procedure, in the way the inspector 
actually dealt with the applicant, things such as did the 
inspector arrive on time, was the inspector friendly.
    And so, those kind of things are categorized so that we can 
take every single one of those 65 items and improve that 
particular inspector's quality of inspection. So I am not 
surprised, as long as that 37 percent does not translate into 
some figure that is an outrageous amount of money that has gone 
out that should not that we have to now go recoup, that 37 
percent figure does not mean anything to me other than that the 
quality control process was working, and they were doing what 
they had to do to make that procedure even better.
    I do not think we can take--what I am trying to drive at is 
that you cannot take that particular figure and drive that 
percentage to an amount of money that we have to recoup.
    Chairman Collins. This is a sampling. To me, it is an 
alarming sampling. Let me show you some of what we found in our 
investigation. I would like to refer you to Exhibit No. 9 in 
the book.\1\ This is a quality control report. Do you see on 
the far right, the level of damage done? None? We found this 
over and over again, and yet, in this, thousands of dollars 
were paid out to individual claimants. The quality control 
report points out that there was money provided to repair a 
dryer. There is no dryer.
---------------------------------------------------------------------------
    \1\ Exhibit No. 9, ``IHP Daily QC Report'' appears in the Appendix 
on page 76.
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    And this is not just a single example. We have many 
examples.
    Mr. Brown. And I recognize that in the course of responding 
to these disasters which, again, just let me give you a little 
perspective. Take an average, well, there is no average 
disaster. I have made it a philosophy of mine when I get asked 
by the news media, well, how does this compare to where you 
were 2 days ago, I just do not compare one county to another or 
one State to another.
    But if you take just some of the disasters that FEMA has 
dealt with during my tenure, let us take the California 
wildfires, for example. In the California wildfires, we did 
23,398 inspections. In Florida, we did--are you ready for 
this?--885,744 inspections. That is how much we had to ramp up. 
So there is no question in my mind that this Committee, the 
press, myself, my staff, all of us can find documents like this 
that are going to show where errors were made.
    That is not acceptable to me. I want to clean that up. I 
want to fix that process. But to extrapolate from that and say 
that the quality control process that we have in place which is 
designed to find these errors is broken I think is incorrect.
    Chairman Collins. Well, let us talk about the inspection 
process. FEMA asked each of its contractors to perform 15,000 
inspections per day, which is double the maximum number that 
they were required to perform under the contracts. When FEMA 
took this step, did you realize that meant that the contractors 
were going to have to hire thousands of new inspectors?
    Mr. Brown. I did, and if I can describe the choice that I 
have to make as the leader of this organization, the choice is 
this: Florida and these other States have been hit with a near 
catastrophic event. It is not unlike what a terrorist could 
have done if a terrorist had been trying to do something. So I 
make the determination that in trying to reach this balance, I 
can do one of two things: I can either stop all inspections 
such as was done in the 1994 Northridge earthquake and just pay 
money out based on ZIP Codes, or I can ramp up, work with the 
contractors, do everything I can trying to be a good steward of 
the taxpayer dollars and get eyes on every claim.
    My objective was to get eyes on every claim made and not 
pay things out by ZIP Code. So when you are doing 885,000 
inspections, there are going to be errors. I want to clean 
those up, but I still believe I made the right decision for the 
taxpayers and the disaster victims of continuing to get aid out 
to them but not do it on a blanket basis like was done in 1994 
on a ZIP Code basis.
    Chairman Collins. Are you aware that FEMA's preliminary 
analysis of inspector error rates for all of the Florida 
disasters shows that new inspectors have an error rate of more 
than three times that of experienced inspectors?
    Mr. Brown. I do, and in fact, if you look specifically at 
Miami-Dade County, which is the impetus for this investigation, 
you look at the--it is 50-some experienced inspectors had an 
error rate of something under 2 percent, and the inexperienced 
inspectors had an error rate somewhere close to 9 percent, 9.8 
or something, I believe it was, 9.2.
    I think what that shows is of those 2,000 inspectors, 
additional inspectors that we brought on, some of the companies 
did an excellent job of training them and educating them and 
limiting what they were able to do until they gained 
experience. They had kind of an algorithm built in so that a 
new inspector would go out with another inspector. They would 
only allow them to do five inspections, bring them back in, 
check their work, see if they are ready to go back out again; 
maybe do some more. So we did make that decision to ramp up the 
inspections, which we knew would cause a higher error rate, but 
we knew in the long run, that was still the more prudent thing 
to do to continue to get assistance out as quickly as possible.
    Chairman Collins. Are you aware that inspectors were 
deployed to the field before their background checks were 
completed?
    Mr. Brown. I am not aware that they were deployed before 
the background checks were completed. I am aware that 
background checks are required.
    Chairman Collins. Are you aware that several of the 
inspectors had to be removed because they had serious criminal 
records?
    Mr. Brown. I am aware that there were some that were 
removed. We found some on our own that we removed for various 
reasons, and I do not believe that--and while that is not 
acceptable to me, I mean, I would prefer to have everyone with 
a perfect background, I think it is also unfortunate that we 
lump in some of these folks that maybe had a DUI or maybe had a 
misdemeanor of some sort that have paid their debt to society, 
went out and conducted the inspections and that we have had, 
again, almost a million inspections done and no complaints 
about anyone with a criminal background doing anything 
improper.
    Chairman Collins. No complaints, so those inspection forms 
where the quality control inspector later found that there was 
absolutely no damage, you do not think that suggests there was 
a problem with the inspector who did the original assessment?
    Mr. Brown. No complaints from those that received the 
inspection, no complaints from the victims.
    Chairman Collins. Well, I am not surprised that the victims 
did not complain. They got checks even though their homes were 
undamaged. In fact, there is an amazing document attached to 
one of the quality control reports where it says the applicant 
called in to find out what is the check to be used for? This is 
a case where there was no damage.
    Mr. Brown. Senator, again, with all due respect, that is 
not acceptable to me. We want to tighten those up, and we want 
to fix those. We have found examples of that where we tried to 
fix it. Again, if I put it in the context of what the choice is 
that we make, we all have choices to make, and in this case, 
the choice was ramp up the inspections, try to get as many out 
there so I have eyes on every claim, or just do the blanket ZIP 
Code. I refuse to do the latter.
    Chairman Collins. Well, I do not think those are the only 
choices. I agree with you that you made the right decision in 
not doing the ZIP Code approach, but I think we could do a lot 
better. To go back to my generic room example, those problems 
were first identified back in 1991 by an IG report, and yet, 
FEMA is still using that approach. I realize that was long 
before you became head of the agency.
    Mr. Brown. But that report also recognized that while that 
approach had flaws, the IG report from Hurricane Andrew also 
told us to continue to try to find the quickest, the most 
efficient approach that would get the money out the fastest to 
individuals. That is the competing interest that we still 
fight.
    Chairman Collins. See, this is where you and I have a 
fundamental disagreement. I do not think there is a tradeoff 
between responsive, swift assistance to those who are truly 
victims and protecting taxpayers against waste, fraud, and 
abuse. I think we can do both, and I think we greatly improve 
the chances of doing both by implementing procedures and 
safeguards that will ensure that the money is well spent and by 
having a system of checks and balances and quality control that 
would greatly reduce the possibility of erroneous payments or 
outright fraud. And I do not see this tradeoff. I think it is a 
false choice.
    Mr. Brown. But may I explain? Because I think whatever the 
exhibit was that showed the graphs with the error rates, that 
shows that the quality control system does work. And 
ironically, it works both ways. We have found--we are in the 
process right now in Florida of recouping money from 
individuals that through our quality control process, we found 
should not have gone to those people.
    Now, I would like to tighten that up even more so that at 
some point, we can narrow that down to where we actually know 
that before the check goes out, granted. But that quality 
control process also finds people where the inspectors made the 
error on the side of the taxpayers, where they were actually 
eligible for more money that we did not get them. So I think 
that shows that the quality control process gets, and what you 
and I are discussing is how can we make that quality control 
process meet both objectives? How can we have a quality control 
process that allows us to get eligible victims the money that 
they deserve that you tell us as Congress we have to give them 
under the law and at the same time do it in a manner that is 
fast and efficient so that the taxpayers then do not lose 
confidence in FEMA because getting the assistance to people 
takes so long to get it to them. That is the balance we are 
trying to get to.
    Chairman Collins. Let me give you another very concrete 
example: FEMA, in the midst of all these hurricanes, which were 
putting enormous strains on your resources----
    Mr. Brown. Absolutely.
    Chairman Collins [continuing]. Decided to take steps to 
expedite inspections by introducing some new guidelines. These 
guidelines, inspectors have told us, created a great deal of 
confusion on what the standards were, but they also had another 
consequence. The change in the guidelines, contractors have 
told us, forced them to disable their error checking software. 
So here is a key safeguard built into the system to catch 
errors, but because of the change in guidelines in the midst of 
trying to handle all of these hurricanes, that safeguard was 
taken away.
    Mr. Brown. That troubles me, but again, let me put it in 
perspective: It was one level of safeguards taken out. It did 
not take away all of the safeguards. It did not take, for 
example, the edit check away from the Palm Pilot that the 
inspector actually used in the field. It was down the road that 
it took one level out. The other checks remained in place.
    Chairman Collins. It is yet another example of a safeguard 
that was not in place. That is the problem.
    Mr. Brown. But what I do not want the public or the 
taxpayers to take from that statement is that all safeguards 
were then taken away.
    Chairman Collins. No, but----
    Mr. Brown. It was one level of safeguard that, yes, did go 
away.
    Chairman Collins. That would have picked up some of the 
errors. And keep in mind some of the mistakes are mistakes. 
There are errors. We have other examples of outright fraud. We 
have examples when you were talking about the inspectors. We 
have examples of inspectors who have been referred to the 
Office of Inspector General's criminal investigators because 
they did no inspections. They never showed up at the houses. 
They just filled out the forms.
    Mr. Brown. And in fact, some of those inspectors were 
actually found by our own quality check system.
    Chairman Collins. I would say that is a pretty serious 
problem with inspectors when you are saying----
    Mr. Brown. Senator, I do not disagree with you. The fact 
that we have an inspector who goes out to Burger King and tells 
people to come by and let me fill out the forms while you are 
sitting in the Burger King is totally unacceptable to me. But 
in the context of 7,000 inspectors, do we want to get--I do not 
think we will realistically ever get to the point where there 
are no inspector errors or there are no inspectors or 
individuals, for that matter, receiving our assistance who are 
not going to try to cheat us.
    So we have to make certain that we have the right kinds of 
proper safeguards in place. I think that sometimes, the 
examples which are egregious, unacceptable to me, they are 
frankly outrageous; they are just outrageous to me, sometimes 
causes us to lose sight of those safeguards that are in place 
that allow my team to actually identify an inspector like that 
and turn him over to the Inspector General.
    Chairman Collins. Do the FEMA claim forms have any kind of 
warning on them to the claimant that false claims will be 
prosecuted?
    Mr. Brown. Yes, it is no different than many other 
government forms that require when you do self-verification 
that you do it under penalty of perjury, that you do it, that 
you have told the truth; it has all of those things on there.
    Chairman Collins. I want to turn now to the issue of rental 
assistance. As I indicated earlier, more than $9 million was 
spent on rental assistance in Miami-Dade. That is close to a 
third of the money that was spent. Do you know how much of that 
money was actually spent to rent alternative accommodations?
    Mr. Brown. We do not, and I think that is one area where we 
can make some improvement. If you look at the 1992 Inspector 
General's report, it recognized both the validity and the 
importance of this rental assistance, particularly when it is 
in the expedited assistance format, and they recommended that 
we cut that back to 2 months. In this case, we actually cut it 
back to 1 month. It is only when we go into the second or third 
months of that expedited assistance that we actually do the 
verification of the first month, did you actually spend it on 
that, and I think that is an area where we need to tighten that 
up. I do not want to get rid of the expedited assistance 
program, and I would also like to tighten up the rental 
assistance programs so we can do more verifications of that.
    Chairman Collins. The Inspector General points out that 
some 4,300 applicants who received rental assistance did not 
indicate any need for shelter at the time that they registered. 
The IG also told us that he believes rental assistance must 
actually be spent on rent, as he memorably said, that is why it 
is called rental assistance.
    Mr. Brown. Right.
    Chairman Collins. Do you agree with that?
    Mr. Brown. Absolutely, but what is rent? Rent is a motel. 
It could be a camper-trailer that you found that someone is 
going to let you live in for awhile. Sometimes, these are dire 
straits, and they find whatever they can to rent. I do not want 
that condition, though, to negate the fact that I agree with 
you: We need to have a better way of verifying that rental 
assistance while at the same time making sure that people who 
have the need to be able to get into a motel or an apartment or 
whatever that they are indeed able to do that.
    Chairman Collins. The reason I ask is you have said, 
``seeking other accommodations and residing elsewhere are not 
eligibility criteria for receiving rental assistance.'' You can 
see why that statement would puzzle me.
    Mr. Brown. Right.
    Chairman Collins. So you do believe that it is supposed to 
be used for rent.
    Mr. Brown. Yes, but again, not to belabor the point, it can 
take many forms. It could be that they find some guy who has 
got four or five camper-trailers, and yes, I know you have lost 
your home, or you cannot live in your home for whatever reason, 
and I will rent that to you for awhile. Sure.
    Chairman Collins. Mr. Brown, let me just ask you one final 
question, and that is to go back to the declaration process. I 
want to read you a quote from a memorandum submitted by a FEMA 
employee. Clay Hale is his name. He said, ``the most 
significant change that would reduce the amount of 
inappropriate assistance would be to improve the declaration 
process.'' Do you agree with that?
    Mr. Brown. I cannot agree or disagree with that. I do not 
know in what context he says that, what he means by improving 
or changing the declaration--I just do not know what he means, 
Senator, with all due respect.
    Chairman Collins. Well, I guess, then, my final question to 
you will be this: What do you think should be done to better 
administer disaster relief so that we do not have the high 
incidence of erroneous payments, fraudulent claims, wasteful 
spending that certainly appears supported by the evidence with 
regard to Miami-Dade County?
    Mr. Brown. Every year, every single year in every disaster, 
because we do play this balancing act, FEMA ends up recouping 
money from individuals who received money that they should not 
have received or received more money than they should have 
received.
    We also make, through our quality control process, checks 
where people end up receiving money that they should have 
received that they did not receive. And so we have to, after 
every disaster go through and try to find ways that we can 
tighten up and improve our processes. And to give you just very 
briefly without going into all the details, because I do not 
want to bore you with those; we will put those in the record, 
some of the things that we are doing: We are trying to better 
define the contract for developing our communications strategy 
so that county commissioners, for example, better understand 
what they are getting money for.
    We want to standardize the PDA process so that the whole 
desire of doing PDAs, that we have standardized processes for 
different ways of doing PDAs. We want to develop clear standard 
operating procedures for interim shelter and necessary support 
resources; develop comprehensive new management plans for the 
direct housing opportunities that we pay for. We want to 
upgrade our technology. We think that with as fast as 
technology is improving, there are certainly ways that we can 
do to speed the amount of information that we get in the field 
and to verify that information.
    We want to develop some threshold matrices to activate the 
surge registration intake capabilities. In other words, when we 
have to ramp up to something where we are typically doing 
480,000 registrations a year, and suddenly, we have to do 1.2 
million to 1.7 million registrations because of an unusual 
event, we want to develop the protocols in advance for doing 
that.
    We want to take the recommendations the IG had. If you read 
my response to the IG report, many of those recommendations, we 
have already started implementing. Some, we want to sit down 
obviously and have further discussions, but many of those 
things we are already doing and want to implement.
    Chairman Collins. I appreciate your testimony here today. 
It is my conclusion that a great deal of work remains to be 
done to ensure that in our efforts to deliver swift, 
compassionate assistance to the disaster victims that we do not 
compromise the taxpayers' money. I am very concerned about the 
integrity of this program, and I believe that if we do not take 
steps to greatly reduce the kinds of problems that the 
Inspector General and this Committee's investigations revealed 
that public support for disaster relief will be diminished, and 
I know that we share a common goal of making sure that disaster 
victims are served compassionately and quickly. I hope we also 
share the common goal of making sure that taxpayers' money is 
not wasted.
    Mr. Brown. Senator, we share both of those goals. My pledge 
to you is that we will continue to work with you and the 
Committee to implement recommendations to find ways that we can 
meet both of those goals.
    Chairman Collins. Thank you.
    The hearing record will remain open for 15 days. I want to 
thank all of our witnesses today as well as the staff for their 
work. This hearing is now adjourned.
    [Whereupon, at 11:29 a.m., the Committee adjourned.]


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