    Hurricanes Katrina and Rita: Unprecedented Challenges Exposed the
    Individuals and Households Program to Fraud and Abuse; Actions
    Needed to Reduce Such Problems in Future (27-SEP-06,
    GAO-06-1013).

    In 2005, Hurricanes Katrina and Rita caused unprecedented damage.
    The Federal Emergency Management Agency's (FEMA's) Individuals
    and Households Program (IHP), provides direct assistance
    (temporary housing units) and financial assistance (grant funding
    for temporary housing and other disaster-related needs) to
    eligible individuals affected by disasters. Our objectives were
    to (1) compare the types and amounts of IHP assistance provided
    to Hurricanes Katrina and Rita victims to other recent
    hurricanes, (2) describe the challenges FEMA faced by the
    magnitude of the requests for assistance following Hurricanes
    Katrina and Rita, and (3) determine the vulnerability of the IHP
    program to fraud and abuse. GAO determined the extent to which
    the program was vulnerability to fraud and abuse, by conducting
    statistical sampling, data mining and undercover operations.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-1013
        ACCNO:   A61467
      TITLE:     Hurricanes Katrina and Rita: Unprecedented Challenges
    Exposed the Individuals and Households Program to Fraud and
    Abuse; Actions Needed to Reduce Such Problems in Future
         DATE:   09/27/2006
      SUBJECT:   Comparative analysis
    	     Data collection
    	     Disaster recovery
    	     Disaster recovery plans
    	     Disaster relief aid
    	     Federal aid programs
    	     Fraud
    	     Hurricane Katrina
    	     Hurricane Rita
    	     Hurricanes
    	     Internal controls
    	     Natural disasters
    	     Program abuses
    	     Program evaluation
    	     Program management
    	     Questionable payments
    	     Individuals and Households Program
    	     SBA Disaster Loan Program

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    GAO-06-1013

         * Results in Brief
         * Background
         * IHP Assistance to Victims of Hurricanes Katrina and Rita Far
              * IHP Applications, Benefits and Related Inspection Workload W
              * Victims of Hurricanes Katrina and Rita Seek Housing Assistan
              * Percentage of SBA Disaster Applicants Sent Back to FEMA's ON
         * FEMA Responded to the Challenges of Hurricanes Katrina and R
              * FEMA Used New Approaches to Address Hurricanes' Unprecedente
              * Despite New Approaches, Reported Ongoing Management Challeng
              * Initiatives to Improve IHP Are Ongoing, but Their Impact Is
         * GAO Audit and Investigative Work Reveals Potential for Fraud
              * Invalid Applications Provide the Potential for $1 Billion in
              * Duplicative Housing Assistance
              * Lack of Accountability over Debit Cards
         * Conclusions
         * Recommendations for Executive Action
         * Agency Comments and Our Evaluation
              * FEMA's IHP is Part of Overall Federal Disaster Assistance
              * FEMA's IHP Provides Housing and Other Needs Assistance to Di
              * FEMA's Decentralized Structure for Implementing the IHP Reli
              * FEMA's Process for Providing IHP Benefits
              * FEMA Provides Disaster Victims with Multiple Means to Apply
         * GAO Contacts
         * Acknowledgments
              * Dental Expenses
              * Direct Assistance
              * Expedited Assistance
              * Funeral Expenses
              * Home Replacement Grant
              * Home Repair Grant
              * IHP Other Needs Assistance Categories
              * Lodging Expenses
              * Medical Expenses
              * Moving & Storage Expenses
              * Necessary Expense
              * Other Needs Expenses
              * Personal Property Expenses
              * Preliminary Disaster Assessment
              * Rental Assistance
              * Serious Need
              * Transitional Housing Assistance
              * Transportation Expenses
         * GAO's Mission
         * Obtaining Copies of GAO Reports and Testimony
              * Order by Mail or Phone
         * To Report Fraud, Waste, and Abuse in Federal Programs
         * Congressional Relations
         * Public Affairs

    United States Government Accountability Office

    Report to Congressional Committees

    GAO

    September 2006

    HURRICANES KATRINA AND RITA

    Unprecedented Challenges Exposed the Individuals and Households Program to
    Fraud and Abuse; Actions Needed to Reduce Such Problems in Future

    GAO-06-1013

    Contents

    Letter 1

    Results in Brief 3
    Background 6
    IHP Assistance to Victims of Hurricanes Katrina and Rita Far Surpassed
    Assistance to Victims of 2003 and 2004 Hurricane Seasons 12
    FEMA Responded to the Challenges of Hurricanes Katrina and Rita with New
    Approaches, yet Reported Ongoing Management Challenges Hindered
    Implementing IHP 23
    GAO Audit and Investigative Work Reveals Potential for Fraud and Abuse
    Related to IHP Applications and Debit Card Use 33
    Conclusions 37
    Recommendations for Executive Action 38
    Agency Comments and Our Evaluation 41
    Appendix I Scope and Methodology 47
    Appendix II Comments from the Department of Homeland Security 50
    Appendix III Federal Disaster Assistance and Individuals and Households
    Program Benefits, Structure and Processes 54
    Appendix IV Issues Reported Related to FEMA's IHP Disaster Assistance
    Provided for Katrina 67
    Appendix V GAO's June 14, 2006 Testimony on Fraud and Abuse of FEMA's
    Individual Assistance program 69
    Appendix VI GAO Contact and Staff Acknowledgments 99
    Glossary 100
    Related GAO Products 103

    Tables

    Table 1: IHP Disaster Assistance Benefits 9
    Table 2: Comparison of Applications (as of September 2006), Approvals and
    Grant Awards for Hurricanes Katrina and Rita and Named Hurricanes That
    Came Ashore in the United States in 2004 (as of August 2006) and 2003 (as
    of April 2006) 13
    Table 3: Total Number of IHP Applicants Approved, Ineligible, Pending and
    Applicant Filing Appeals for Named Hurricanes That Came Ashore in 2003 (as
    of April 2006), 2004, and Hurricanes Katrina,and Rita in 2005 (as of
    August 2006) 18
    Table 4: IHP Challenges and New Approaches 24
    Table 5: IHP Challenges and Adaptations of Traditional Approaches 25
    Table 6: Recent Assessments of FEMA's Performance in Response to
    Hurricanes Katrina and Rita 26

    Figures

    Figure 1: Disaster Recovery Center Where Disaster Victims Apply for
    Individual and Households Program Benefits, St. Bernard Parish, Louisiana
    10
    Figure 2: FEMA Individuals and Households Program Inspection Notice on a
    Home in St. Bernard Parish Damaged by Hurricane Katrina 11
    Figure 3: FEMA's Expenditures for IHP Housing Assistance Grant Awards for
    Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004, and
    Hurricanes Katrina and Rita in 2005 (as of August 2006) 15
    Figure 4: FEMA's Expenditures for IHP Other Needs Assistance Grant Awards
    for Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004,
    and Hurricanes Katrina and Rita in 2005 (as of August 2006) 16
    Figure 5: Total Number of Inspections Completed and the Total Cost of the
    Inspections for Named Hurricanes That Came Ashore in 2003 (as of April
    2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August 2006)
    20
    Figure 6: Number and Percentage of FEMA Referrals to SBA for Disaster
    Loans and the Number of SBA Disaster Loan Applicants Sent Back to FEMA for
    ONA for the Named Hurricanes That Came Ashore in 2003 (as of April 2006),
    2004, and Hurricanes Katrina and Rita in 2005 (as of August 2006) 22
    Figure 7: Conceptual Framework for FEMA's Individuals and Households
    Program as Part of Federal Disaster Assistance 54
    Figure 8: Disaster Declaration Process 62
    Figure 9: Cover of FEMA's Applicant's Guide to the Individuals and
    Households Program 64

    Abbreviations

    DHS Department of Homeland Security

    EP&R Emergency, Preparedness and Response

    FEMA Federal Emergency Management Agency

    HUD Department of Housing and Urban Development

    IHP Individuals and Households Program

    NPSC National Processing Service Center

    ONA Other Needs Assistance

    SBA Small Business Administration

    SSN Social Security Number

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    its entirety without further permission from GAO. However, because this
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    separately.

    United States Government Accountability Office

    Washington, DC 20548

    September 27, 2006

    Congressional Committees

    Making landfall in late August 2005, Hurricane Katrina was the costliest
    hurricane, and one of the deadliest, in U. S. history. In its May 2006
    Report, the Senate Committee on Homeland Security and Governmental Affairs
    estimated Hurricane Katrina was responsible for over $150 billion in
    damages and over 1,500 deaths, with thousands more reported missing.
    Hurricane Katrina devastated much of the Gulf Coast; the storm surge
    caused major or catastrophic damage along the coastlines of Alabama,
    Mississippi, and Louisiana. About 80 percent of New Orleans, the largest
    city affected, was flooded when levees protecting the city broke.
    Hurricane Katrina ultimately affected 90,000 square miles, an area almost
    as large as the United Kingdom.

    Hurricane Rita caused further devastation, making landfall on the Gulf
    Coast in September 2005. The most intense Gulf of Mexico hurricane ever
    recorded, Rita caused an estimated $9.4 billion in damages-making it the
    ninth costliest storm in the U.S. history. The storm killed 7 people
    directly, and at least another 55 during evacuations and from indirect
    effects, such as carbon monoxide poisoning.

    The Robert T. Stafford Disaster Relief and Emergency Assistance Act1 ("the
    Stafford Act") grants the principal authority for the President to provide
    assistance in mitigating, responding to, and preparing for disasters and
    emergencies such as earthquakes, hurricanes, floods, tornadoes, and
    terrorist acts. The mission of the Federal Emergency Management Agency
    (FEMA), within the Department of Homeland Security (DHS), which
    administers the Stafford Act, is to reduce loss of life and property and
    protect the nation from all types of hazards, through a comprehensive,
    risk-based emergency management program. Section 408 of the Stafford Act,
    42 U.S.C. S: 5174, is the general authority for the President to provide
    assistance to individuals and households. This section encompasses housing
    assistance as well as "other needs" assistance, which includes medical,
    dental, funeral, personal property, transportation, and other financial
    assistance for certain needs arising from a major disaster. These two
    types of assistance are administered by FEMA under the Individuals and
    Households Program (IHP). The IHP provides housing and "other needs"
    assistance (ONA) in the forms of direct assistance (the provision of
    temporary housing units) and financial assistance (grant funding for
    temporary housing and other disaster-related needs) to eligible disaster
    victims. Before providing assistance, FEMA is to conduct inspections of
    disaster victims' homes to verify damage, ownership, and occupancy. As
    part of the application process, FEMA refers disaster victims who apply
    for assistance and meet established income levels to the Small Business
    Administration (SBA). SBA's Disaster Loan Program is intended to be a
    primary resource available to aid in disaster victims' recovery.
    Applicants who are denied loan assistance by SBA or have remaining unmet
    needs are sent back to FEMA for an assistance determination of their
    eligibility for certain types of other needs assistance.

    1 42 U.S.C. S:S: 5121-5206.

    In light of widespread congressional and public interest in U.S. agencies'
    performance in providing assistance to hurricane victims, we prepared this
    report under the Comptroller General's authority to conduct evaluations on
    his own initiative to review the events and aftermath surrounding
    Hurricanes Katrina and Rita. This report discusses (1) how the types and
    amounts of assistance provided to victims of Hurricanes Katrina and Rita
    through the IHP compare to other recent hurricanes, (2) the challenges
    posed by the magnitude of the requests for assistance following Hurricanes
    Katrina and Rita and FEMA's response to these challenges, and (3) the
    vulnerability of the IHP to fraud, and abuse, in the wake of Hurricanes
    Katrina and Rita.

    To describe the types and amounts of benefits FEMA provided to victims of
    Hurricanes Katrina and Rita through IHP in comparison to assistance
    provided in other hurricane disasters, we interviewed agency officials and
    obtained and analyzed data provided by FEMA's National Processing Service
    Center in Winchester, Virginia. We compared IHP disaster assistance
    provided under Hurricanes Katrina and Rita to assistance provided after
    other hurricane-related disaster declarations occurring in calendar years
    2003 through 2005, to the extent data were available. We selected
    hurricane disaster declarations that occurred either in a single state or
    in multiple-states simultaneously since IHP was implemented in fiscal year
    2003 and determined that the data were sufficiently reliable for the
    purposes of our review.

    To determine the challenges FEMA faced and the actions FEMA took to
    respond to these challenges, we interviewed FEMA officials and reviewed
    and analyzed federal legislation and regulations applicable to FEMA
    disaster assistance programs and relevant FEMA policies, guidance, and
    processes including changes to existing IHP processes, procedures, and
    assistance during and after the hurricanes. We also analyzed IHP budgets,
    staffing, and performance measures, and prior audit reports and
    assessments.

    To determine the vulnerability of the program to problems of fraud and
    abuse, our investigators conducted statistical sampling, data mining2 and
    undercover operations. We interviewed FEMA officials and observed contract
    inspectors assessing damaged residential properties in New Orleans. We
    reviewed IHP processes and procedures for determining applicant
    eligibility for specific types of IHP assistance. Although we did identify
    potentially fraudulent, improper, and abusive IHP applications, our work
    was not designed to identify, and we cannot determine, the full extent of
    fraudulent, improper, and abusive IHP registrations. We conducted our
    audit work between January 2006 and September 2006 in accordance with
    generally accepted government auditing standards. We conducted our
    investigative work between October 2005 and September 2006 in accordance
    with the standards prescribed by the President's Council on Integrity and
    Efficiency. Our scope and methodology are discussed in greater detail in
    appendix I.

                                    Results in Brief

    For Hurricanes Katrina and Rita, FEMA received more than 2.4 million
    applications for housing and other needs assistance and awarded $7.0
    billion in financial assistance to applicants, as compared to the 2004
    hurricane season when FEMA received 1.4 million applications and awarded
    $1.4 billion in total grants. Two categories of assistance-temporary
    housing assistance and expedited assistance accounted for much of the
    significant increase in IHP expenditures for Hurricanes Katrina and Rita
    as compared to prior years. FEMA also provided a much greater amount of
    assistance for Hurricanes Katrina and Rita than in prior years for
    specific types of ONA benefits that are primarily provided only after
    applicants apply for and are denied an SBA disaster loan, indicating that
    the percentage of lower income applicants may have been a significant
    portion of total applicants. While the approval rate for housing
    assistance was greater than in previous years, the approval rate for ONA
    was notably lower for Hurricanes Katrina and Rita than the two previous
    hurricane seasons; 41 percent as compared to 65 percent in 2003 and 50
    percent in 2004.

    2 Data mining involves obtaining large databases of transactions and
    related activity and using software to search or "mine" data looking for
    suspicious transactions or patterns of activity.

    Hurricanes Katrina and Rita posed numerous, unprecedented challenges to
    IHP implementation. These challenges related to the sheer volume of
    applications combined with the temporary relocation of hurricane victims.
    FEMA responded to the challenges of Hurricanes Katrina and Rita by
    developing new approaches and adapting existing approaches to implement
    IHP. For example, FEMA used a new approach to provide Public Assistance
    funding to transition victims from short-term lodging, including shelters,
    hotels and motels to travel trailers and mobile homes, and finally to
    apartments to address longer-term housing needs until it could develop a
    strategy for implementing its Individual Assistance program. FEMA also
    provided transitional housing (financial) assistance for the first time
    that was intended to advance an amount equal to 3 months of housing costs
    calculated using the national average fair market rent for a two-bedroom
    apartment. To provide more access to disaster victims dispersed across the
    United States, FEMA enhanced its existing Internet systems capacity,
    doubling the number of applicants who could be on line simultaneously and
    opened additional call centers by working with the Internal Revenue
    Service and the private sector, among others. Despite these and other
    initiatives to address challenges in the aftermath of the hurricanes,
    reported ongoing management challenges and limitations hindered FEMA's
    implementation of the IHP. We, as well as six federal reports we reviewed,
    identified a lack of planning and trained staff to process initial
    applications, respond to applicant questions, and conduct inspections, as
    well as programmatic restrictions on the uses of funds that limited FEMA's
    flexibility in using IHP assistance in the most efficient and effective
    manner. In May 2006, FEMA announced a number of initiatives to address
    some of its ongoing management challenges, but it is too early to
    determine whether these efforts will effectively address these concerns.

    The unprecedented challenges posed by Hurricanes Katrina and Rita exposed
    the IHP to fraud and abuse. The results of our investigative work,
    conducted between October 2005 and September 2006, found that flaws
    existed in the applications process for disaster victims, which left the
    federal government vulnerable to potentially significant fraud and abuse
    of IHP expedited assistance payments. We estimated that, as of February
    2006, 16 percent, or approximately $1 billion, in FEMA IHP payments were
    improper and potentially fraudulent due to invalid application data such
    as Social Security Numbers and addresses. The 95 percent confidence
    interval associated with our estimate of improper and potentially
    fraudulent registrations ranges from a low of $600 million to a high of
    $1.4 billion in improper and potentially fraudulent payments. In addition,
    duplicate payments were made to individuals in the same household and
    concurrent payments were made for lodging (i.e., FEMA IHP paid both for
    rental and hotel lodging for the same household). Furthermore, FEMA lacked
    accountability over $2,000 debit cards that were given to disaster victims
    to provide immediate disaster assistance. FEMA also lacked controls over
    proper debit card usage. For example, we found that debit cards were used
    for items or services such as a Caribbean vacation, professional football
    tickets, and adult entertainment. Finally, FEMA had not developed a
    comprehensive strategy for identifying and recouping improper payments.

    Based on the findings in our testimony of June 14, 2006,3 we are
    recommending that the Secretary of DHS direct the Director of FEMA to take
    a number of actions to address the potential for fraud and abuse in the
    IHP, including implementing changes to its systems and processes to
    reject, and immediately inform applicants of, damaged addresses that are
    PO boxes and to identify damaged addresses that are not primary
    residences; establishing address verification procedures to validate that
    the address an applicant claimed as damaged was the applicant's primary
    residence at the time of the disaster and deal with applications where
    FEMA or other inspectors have concluded that the damaged address was
    bogus; establishing procedures to provide reasonable assurance that
    individuals staying in FEMA or other paid for hotel rooms are not also
    provided IHP rental assistance payments for the time they are in the paid
    for hotel rooms; and augmenting procedures for future disasters to provide
    reasonable assurance of accountability over debit card distribution. FEMA
    fully concurred with 9 of our 13 recommendations, and responded that it
    had taken, or is in the process of taking, actions to implement these
    recommendations. Although FEMA stated that it only partially concurred
    with the remaining 4 recommendations related to hotel reimbursements to
    the Red Cross and debit card accountability, FEMA's responses indicate
    that it substantially agreed with the key objectives of the 4
    recommendations.

    3 GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
    Potentially Fraudulent Individual Assistance Payments Estimated to Be
    Between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.: June
    14, 2006).

    While FEMA substantially agreed with our recommendations, FEMA questioned
    the validity of our statistical sampling and resulting projection of
    fraudulent and improper payments. Specifically, FEMA disagreed with our
    estimate that $600 million to $1.4 billion-or 10 to 22 percent-of
    individual assistance payments through February of 2006 were associated
    with potentially fraudulent and improper registrations. FEMA responded
    that it disagreed with our estimate because it was substantially larger
    than FEMA's historical average of 1 to 3 percent of program fraud.
    However, FEMA's reported fraud rate of 1 to 3 percent is not based on an
    independent, comprehensive statistical sample of the entire population of
    individual assistance payments; instead, the 1 to 3 percent FEMA estimate
    is simply the amount of overpayments that it identifies based on its own
    internal processes and procedures. GAO's estimate of 16 percent-or $1
    billion-was based on an independent, random statistical sample of all 2.6
    million claims, totaling $6.3 billion, through February of 2006.

    FEMA's written comments are presented in appendix II.

                                       Background

    The purpose of the Stafford Act is to provide an orderly and continuing
    means of assistance by the federal government to state and local
    governments in carrying out their responsibilities to alleviate the
    suffering and damage which results from disasters. The Stafford Act
    originally was enacted in 1974 and amended in 1988, 1993, and 2000. The
    Disaster Mitigation Act of 20004 established the IHP by combining two
    previous disaster grant programs - - the Temporary Housing Assistance and
    Individual Family Grant programs. Under the IHP, these programs were
    replaced by Housing Assistance and Other Needs Assistance. Looking
    specifically at the Housing Assistance component of the IHP, section 408
    of the Stafford Act authorizes five types of assistance, of which four are
    relevant to disaster victims of Hurricanes Katrina and Rita: 5

    4 Pub. L. No. 106-390.

    5 The fifth form of assistance is permanent housing construction in
    insular and other remote areas. Section 408 of the Stafford Act authorizes
    direct assistance to disaster victims to construct permanent housing in
    insular areas and other remote locations, i.e., the Virgin Islands,
    American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
    and in Puerto Rico and other remote locations. This form of housing
    assistance is explicitly limited to insular and other remote areas where
    no alternative housing resources are available and the other forms of
    authorized temporary housing assistance are "unavailable, infeasible, or
    not cost effective."

    (1) Financial assistance to rent temporary housing. FEMA may provide
    financial assistance to individuals or households to rent alternative
    housing accommodations, existing rental units, manufactured housing,
    recreational vehicles, or other readily fabricated dwellings.6

    (2) "Direct" temporary housing assistance. FEMA may provide temporary
    housing units (e.g., mobile homes and travel trailers), acquired by
    purchase or lease, directly to disaster victims, who, because of a lack of
    available housing resources, would be unable to make use of financial
    assistance to rent alternate housing accommodations. In other words,
    direct assistance would be available in situations where rental
    accommodations are not available. By statute, direct assistance is limited
    to an 18-month period, after which FEMA may charge fair market rent for
    the housing unless it extends the 18-month free-of-charge period due to
    extraordinary circumstances.7

    (3) Repair assistance. Under this authority, FEMA may provide financial
    assistance for the repair of owner-occupied private residences, utilities,
    and residential infrastructure damaged by a major disaster. However, the
    maximum amount of repair assistance provided to a household is limited to
    $5,000, adjusted annually to reflect changes in the CPI.8

    (4) Replacement assistance. This form of housing assistance authorizes
    funding to replace owner-occupied private residences. The amount of
    replacement assistance FEMA may provide to a household is limited to
    $10,000, adjusted annually to reflect changes in the CPI.9 For a victim to
    receive this assistance, there must have been at least $10,000 of damage
    to the dwelling. The victim may use the assistance toward replacement
    housing costs.10

    6 42 U.S.C. S: 5174(c)(1)(A).

    7 42 U.S.C. S: 5174(c)(1)(B).

    8 42 U.S.C. S: 5174(c)(2)(C). In 2005, the maximum was $5,200. For 2006,
    the maximum is $5,400.

    9 42 U.S.C. S: 5174(c)(3)(B). In 2005, the maximum was $10,500. For 2006,
    the maximum is $10,900.

    As of September 25, 2006, proposed legislation was pending before Congress
    that would, among other things, eliminate the cap on home repair and
    replacement assistance. 11

    FEMA may provide ONA grant funding for public transportation expenses,
    medical and dental expenses, and funeral and burial expenses. ONA grant
    funding may also be available to replace personal property, repair and
    replace vehicles, and reimburse moving and storage expenses under certain
    circumstances. The maximum financial amount of housing and other needs
    assistance that an individual or household may receive is capped at
    $25,000, adjusted annually to reflect changes in the Consumer Price
    Index.12 Eligibility for IHP assistance is determined when an individual
    or household applies with FEMA and is based on the amount of property
    damage resulting from the disaster.

    For disaster victims with financial resources, SBA's Disaster Loan Program
    is intended to be a primary resource available to aid in their recovery.
    FEMA refers disaster victims who apply for assistance and meet established
    income levels to SBA. Applicants who are denied loan assistance by SBA or
    have remaining unmet needs are sent back to FEMA for an assistance
    determination of their eligibility for certain types of ONA grant funding.
    (We reported on SBA's efforts to provide disaster loans in response to the
    2005 hurricanes in July 200613 and expect to issue another report on SBA's
    response later this year.) Table 1 provides an overview of IHP benefits
    and identifies the ONA benefits that are subject to SBA disaster loan
    eligibility.

    10 44 C.F.R. S: 206.117(b)(3).

    11 On July 27, 2006, the Senate Homeland Security and Governmental Affairs
    Committee approved and reported a bill (S. 3721) that, among other things,
    would make amendments to Section 408(c) of the Robert T. Stafford Disaster
    Relief and Emergency Assistance Act (42 U.S.C. 5174(c)) to eliminate the
    maximum amounts of assistance available under the IHP for home repair or
    replacement. This legislation has not yet been approved by the full
    Congress.

    12 In 2005, the maximum was $26,200. For 2006, the maximum is $27,200.

    13 GAO, Small Business Administration: Actions Needed to Provide More
    Timely Disaster Assistance, GAO-06-860 (Washington, D.C.: July 28, 2006).

    Table 1: IHP Disaster Assistance Benefits

                                                         Amount (maximum amount
                                                         of IHP financial
                                                         assistance is $27,200,
    Individuals &                                     adjusted to reflect
    Households Program                                changes in the CPI for
    components         Types of benefits available    2006)
    Housing Assistance Rental Assistance funds        Based on area fair
                                                         market rent
                          Repair Assistance funds
                                                         Maximum: $5,400
                          Replacement Assistance funds
                                                         Maximum: $10,900 Does
                          Direct assistance              not apply toward
                          (manufactured housing, mobile  financial assistance
                          homes, or travel trailers      limit.
                          provided directly to disaster
                          victims)
    Other Needs        Moving and Storagea            Maximums subject to
    Assistance                                        total IHP benefit limit
                          Personal Property Repair or    of $27,200
                          Replacement (furniture,
                          clothing, appliances and       The state establishes
                          essential tools)a              ONA award levels related
                                                         to vehicle repairs,
                          Transportation                 vehicle replacement, and
                                                         funeral grants Maximum
                             o  Repairing or replacing   $500c
                             vehiclesa
                             o  Financial assistance for
                             public transportation and
                             any other transportation
                             related costs or services

                          Expedited Assistance fundsb

    Source: GAO generated based on FEMA data.

    aFEMA may provide ONA grant funding for these expenses if an applicant is
    ineligible for a Small Business Administration (SBA) disaster loan.

    bThe expedited assistance process is not specifically authorized in the
    Stafford Act. However, FEMA previously has asserted, and we have agreed,
    that it has legal authority under the Act to implement expedited, or fast
    track, procedures. On July 24, 2006, FEMA changed the administration of
    expedited assistance to under the provisions of the ONA component. Prior
    to the change, expedited assistance was under the provisions of the
    housing assistance component.

    cFEMA changed the maximum from $2,000 to $500 on July 24, 2006.

    FEMA manages the IHP primarily through a decentralized structure of
    permanent and temporary field offices staffed mostly by contract and
    temporary employees. The offices include permanent locations at the FEMA
    Recovery Division in FEMA Headquarters, regional offices, National
    Processing Service Centers, and temporary locations at Joint Field
    Offices, Area Field Offices, and Disaster Recovery Centers. Once the
    President declares a major disaster that is eligible for federal
    assistance, victims in declared counties must first apply for it with
    FEMA, by phone, over the Internet, or in person at a disaster recovery
    center. Figure 1 shows disaster victims waiting to speak with temporary
    disaster staff in October 2005 at a Disaster Recovery Center in St.
    Bernard Parish, Louisiana.

    Figure 1: Disaster Recovery Center Where Disaster Victims Apply for
    Individual and Households Program Benefits, St. Bernard Parish, Louisiana

    Once a FEMA representative records personal information from a disaster
    application and provides the applicant with a FEMA application number,
    FEMA's National Emergency Management Information System automatically
    determines potential eligibility for designated categories of
    assistance.14 FEMA refers disaster victims who apply for moving and
    storage, personal property repair or replacement, and/or vehicle repair or
    replacement related grant funding assistance and meet established income
    levels to SBA. Applicants who are denied loan assistance by SBA or have
    remaining unmet needs are sent back to FEMA for an assistance
    determination of their eligibility for certain types of ONA grant funding.
    To confirm that the home and personal property sustained damages as
    reported in a disaster assistance application, FEMA is to meet with
    disaster victims at their homes to conduct individual inspections to
    verify, ownership, occupancy, and damage. Figure 2 shows a FEMA inspection
    notice on a home in St. Bernard Parish damaged by Hurricane Katrina.

    14 The National Emergency Management Information System also interfaces
    with SBA's information systems to refer applicants (based on self-declared
    income and number of individuals in household) to SBA for loans.

    Figure 2: FEMA Individuals and Households Program Inspection Notice on a
    Home in St. Bernard Parish Damaged by Hurricane Katrina

    Based on the results of the inspection and determinations made by staff at
    the National Processing Service Centers, FEMA approves or denies housing
    and/or other needs assistance. (Applicants may be eligible for either or
    both types of assistance.) If the applicant qualifies for a grant, FEMA
    sends the applicant a check by mail or deposits the grant funds in the
    applicant's bank account. If an applicant is denied, he or she may appeal
    the decision by contacting a service center and providing additional
    information or clarification. Recipients of IHP assistance must recertify
    their continuing need for assistance every 30 to 90 days, depending on the
    type of assistance. Additional details about federal disaster assistance
    and IHP including the types of and eligibility for benefits, how the
    program is structured and implemented and the process for applying for and
    receiving program assistance are provided in appendix III.

         IHP Assistance to Victims of Hurricanes Katrina and Rita Far Surpassed
                Assistance to Victims of 2003 and 2004 Hurricane Seasons

    Because of the magnitude of the hurricanes and the extent of the resulting
    damage, the total number of applications for, and benefits provided
    through IHP in 2005 for Hurricanes Katrina and Rita far exceeded the
    combined total of the 2 years since the program was established in 2003.15
    Two categories of assistance-temporary housing assistance and expedited
    assistance---- accounted for much of the significant increase in IHP
    expenditures for Hurricanes Katrina and Rita as compared to prior years.
    FEMA also provided a much greater amount of assistance for Hurricanes
    Katrina and Rita, than in prior years, for specific types of ONA benefits
    that are primarily provided only after applicants apply for and are denied
    an SBA disaster loan, indicating that the percentage of lower income
    applicants may have been a significant portion of total applicants. While
    the approval rate for housing assistance was greater than in previous
    years, the approval rate for ONA was notably lower for Hurricanes Katrina
    and Rita than the 2 previous hurricane seasons; 41 percent as compared to
    65 percent in 2003 and 50 percent in 2004. Accordingly, the percentage of
    applicants FEMA identified as ineligible for housing assistance was lower
    while the percentage of ineligible applicants for ONA was higher for
    Hurricanes Katrina and Rita (44 percent) than for named hurricanes that
    came ashore in 2004 (31 percent). To establish a basis for eligibility,
    FEMA had to conduct a much greater number of inspections and accordingly,
    the related cost of those inspections were greater with Hurricanes Katrina
    and Rita than in 2003 and 2004 combined. Although FEMA referred more
    applicants to SBA for disaster loans for Hurricanes Katrina and Rita than
    in the prior 2 years, SBA returned about the same percentage of disaster
    loan applicants to FEMA for ONA consideration.

    15 GAO selected hurricane disaster declarations based on the criteria of
    (1) the disaster occurring since IHP was implemented in fiscal year 2003
    and (2) the disaster declaration occurred either in a single state or in
    multiple-states simultaneously.

    IHP Applications, Benefits and Related Inspection Workload Were Greater for
    Hurricanes Katrina and Rita than in 2 Preceding Years

    FEMA received far more IHP applications, approved more requests for
    Housing and Other Needs Assistance, and awarded more grant money in
    2005-2006 for Hurricanes Katrina and Rita than for all the hurricanes that
    resulted in a disaster declaration in 2004 (Ivan, Charley, Frances, and
    Jeanne) and 2003 (Isabel and Claudette) combined. Table 2 shows the number
    of applicants approved for both categories of IHP assistance and the grant
    award totals-as of August 2006, for Hurricanes Katrina and Rita and named
    hurricanes that came ashore in the United States in 2004.16 The table also
    shows the number of applications received by FEMA-as of September 2006.
    The number of applicants and both categories of IHP assistance for the
    2003 named hurricanes were provided by FEMA as of April 2006.17

    Table 2: Comparison of Applications (as of September 2006), Approvals and
    Grant Awards for Hurricanes Katrina and Rita and Named Hurricanes That
    Came Ashore in the United States in 2004 (as of August 2006) and 2003 (as
    of April 2006)

                                                       Housing              Total
                       Total applications for FEMA  assistance        ONA   grant
                                        assistance  approvalsb approvalsb  awards
    Hurricanes                      2.4 million 1.3 million    556,000    $7.0
    Katrina and                                                        billion
    Ritaa
    2004                            1.4 million     382,000    495,000     1.4
                                                                          billion
    2003                                179,000      45,000     45,000     158
                                                                          million

    Source: GAO analysis based on FEMA data.

    aIn 2005, FEMA authorized Individual Assistance for disaster declarations
    in Alabama and Florida for Hurricane Dennis; Alabama, Mississippi and
    Louisiana for Hurricane Katrina; Louisiana and Texas for Hurricane Rita;
    and Florida for Hurricane Wilma.

    bIndividual IHP applicants can be eligible for more than one type of
    Housing Assistance or ONA category; therefore, some individuals may be
    counted under both assistance categories.

    16 Hurricanes Katrina and Rita accounted for about 80 percent of the over
    3 million applications received and about 95 percent of the total IHP
    assistance distributed for all named hurricanes that came ashore in 2005.

    17 FEMA data from its National Emergency Management Information System was
    provided for the 2003 named hurricanes through April 24, 2006. FEMA data
    was provided for the 2004 and 2005 named hurricanes through September 6,
    2006. According to a FEMA official, changes, if any, to the data for the
    named hurricanes in 2003 from April to August 2006 would be minor enough
    to prove statistically insignificant.

    FEMA data as of August 2006, shows that two categories of
    assistance-temporary housing assistance and expedited assistance18
    accounted for much of the significant increase in IHP expenditures for
    Hurricanes Katrina and Rita as compared to prior years, as shown in figure
    3. FEMA specifically established a new transitional housing assistance
    allowance, as part of temporary housing assistance, to advance to Katrina
    disaster victims an amount equal to the initial 3 months of rental
    payments based on the national average rent for a 2-bedroom apartment.
    Expedited assistance is a pre-inspection disbursement of funds to disaster
    victims based on specific criteria such as the severity of the damage.
    (See glossary for definitions of all housing and other needs assistance
    categories.) Transitional housing assistance that was authorized
    exclusively for Hurricane Katrina, was estimated at about $1.3 billion
    while expedited assistance for both Hurricanes Katrina and Rita totaled an
    about $2.3 billion. By comparison, about $59 million was approved for
    hurricanes in 2004, while no expedited assistance was approved for
    hurricanes in 2003.

    18 On July 24, 2006, FEMA changed the administration of expedited
    assistance to be under the provisions of the ONA component. Prior to the
    change, expedited assistance was under the provisions of the housing
    assistance component.

    Figure 3: FEMA's Expenditures for IHP Housing Assistance Grant Awards for
    Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004, and
    Hurricanes Katrina and Rita in 2005 (as of August 2006)

    aTemporary housing assistance includes lodging expenses reimbursement and
    rental assistance. Transitional housing assistance is a component of
    rental assistance.

    bExpedited assistance was not authorized for hurricanes in 2003. On July
    24, 2006, FEMA changed the administration of expedited assistance to under
    the provisions of the ONA component. Prior to the change, expedited
    assistance was under the provisions of the housing assistance component.

    In terms of ONA, figure 4 shows that FEMA provided a much greater amount
    of income dependent assistance for Hurricanes Katrina and Rita in 2005
    than in prior years. Income dependent assistance requires that eligible
    applicants initially apply for and be denied assistance from the SBA
    Disaster Loan Program19 and includes expenses for personal property,
    moving and storage, and vehicle repair and replacement expenses. For
    Hurricanes Katrina and Rita, personal property assistance accounted for
    the majority of the income dependent assistance, about $1.8 billion. In
    comparison, for the hurricanes in 2003 and 2004, the combined total
    income-dependent assistance approved was less than $495 million. Lower
    income applicants may have made up a significant portion of those
    receiving ONA benefits because income dependent assistance in the form of
    personal property assistance was nearly 87 percent of the ONA approved for
    victims of hurricanes Katrina and Rita.

    19 SBA applicants may also be referred for ONA if they demonstrate that
    the SBA assistance provided is insufficient to meet all essential disaster
    related expenses and needs.

    Figure 4: FEMA's Expenditures for IHP Other Needs Assistance Grant Awards
    for Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004,
    and Hurricanes Katrina and Rita in 2005 (as of August 2006)

    aNon-Income dependent assistance categories include medical, dental,
    funeral and other expenses.

    bIncome dependent assistance categories include personal property, moving
    and storage, and vehicle repair and replacement expenses.

    Victims of Hurricanes Katrina and Rita Seek Housing Assistance in Numbers
    Greater than Those for Other Needs Assistance

    As of August 2006, FEMA data shows that for Hurricanes Katrina and Rita
    nearly 2 million applicants applied for Housing Assistance while 1.3
    million applicants requested ONA. About 67 percent of applicants for
    Housing Assistance were approved versus an estimated 41 percent of
    applicants approved for ONA. Although during Hurricanes Katrina and Rita
    more applicants were approved for ONA, the percentage of approved
    applicants was less than for hurricanes in the prior 2 years, whose
    approval rates were higher than 50 percent in each year. Accordingly, the
    percentage of applicants FEMA identified as ineligible for housing
    assistance was lower while the percentage of ineligible applicants for ONA
    was higher for Hurricanes Katrina and Rita (44 percent) than for named
    hurricanes that came ashore in 2004 (31 percent).

    Table 3 shows, by IHP assistance category, the number and percentage of
    applicants FEMA considered for IHP assistance as of August 2006 for
    hurricanes in 2004 and Hurricanes Katrina and Rita, and for hurricanes in
    2003 as of April 2006. In addition, the table shows the number and percent
    of approved, ineligible, and pending IHP applicants. It also shows the
    number and percent of applicants that appealed FEMA decisions regarding
    their IHP assistance, for Hurricanes Katrina, Rita and named hurricanes
    that came ashore in 2003 and 2004. The table does not show the number of
    IHP applicants who withdrew their application during the evaluation
    process.20

    20 The number of applicant cases withdrawn from the IHP consideration is
    not included in the table totals; therefore, the table percentages will
    not equal 100 percent.

    Table 3: Total Number of IHP Applicants Approved, Ineligible, Pending and
    Applicant Filing Appeals for Named Hurricanes That Came Ashore in 2003 (as
    of April 2006), 2004, and Hurricanes Katrina,and Rita in 2005 (as of
    August 2006)

                        Housing Assistancea                 ONA Assistancea
                                        Hurricanes                        Hurricanes
                                           Katrina                           Katrina
                  Hurricanes Hurricanes   and Rita  Hurricanes Hurricanes   and Rita
                       2003b      2004c      2005d       2003b      2004c      2005d
    Number of
    applicants
    referred
    by FEMA to
    IHP            99,754  1,017,610  1,989,871      91,136    762,786  1,349,865
    Number of
    applicants
    Approved       45,856    382,069  1,333,738      45,298    495,938    556,109
    Percentage
    of
    referred
    applicants
    approved
    for
    assistance        46%        38%        67%         50%        65%        41%
    Number of
    ineligible
    Applicants     48,243    582,015    520,385      43,055    234,340    595,213
    Percentage
    of
    referred
    applicants
    ineligible
    for
    assistance        48%        57%        26%         47%        31%        44%
    Number of
    pending
    applicants          2          8         70           2         60      2,383
    Percentage
    of
    referred
    pending
    applicants     0.002%     0.001%     0.004%      0.002%     0.008%     0.002%
    Number of
    applicant
    appealse       23,219    183,338    182,990       4,624     60,941     92,642
    Percentage
    of
    referred
    applicants
    appealing
    assistance
    decision          23%        18%         9%          5%         8%         7%

    Source: GAO analysis based on FEMA data

    aIndividual IHP applicants can eligible for assistance from more than one
    type of IHP category; therefore, some individuals may be counted under
    both assistance categories.

    bCalculations based on data for Hurricanes Isabel and Claudette.

    cCalculations based on data for Hurricanes Ivan, Charley, Frances, and
    Jeanne.

    dCalculations based on data for Hurricanes Katrina and Rita.

    eApplicants who appealed IHP eligibility decisions were counted in
    approvals, ineligible, or withdrawn application totals but not in the
    pending application category.

    In order to provide the unprecedented level of disaster assistance, FEMA
    had to significantly increase its number of home inspections. As of August
    2006, data reported by FEMA indicates that after Hurricanes Katrina and
    Rita, about 1.9 million inspections21 were completed at a cost of
    approximately $179.6 million, or about $92 per inspection. For the
    hurricanes in 2003 and 2004, FEMA completed about 108,000 and 1.0 million
    inspections at a cost of about $8.0 million and $70.3 million or about $74
    and $75 per inspection, respectively. In August 2006, FEMA reported the
    average time required for completing inspections-the time between the
    application for assistance until submission of an inspection report-after
    Hurricanes Katrina and Rita was about 33 days and 25 days respectively.
    The average time for completing inspections for the hurricanes in 2003 was
    1 to 2 days and in 2004 the average was 4 to 5 days. A FEMA official
    stated that the goal for conducting inspections is a 3-day turnaround
    time. Figure 5 compares the number of inspections completed by contractors
    and the cost of the inspections for the named hurricanes in our review.

    21 For Hurricane Katrina, about 154, 000 inspections were conducted using
    geospatial technology. In lieu of standard inspections, FEMA used
    satellite images and geospatial mapping to determine the depth of water in
    specific areas in Louisiana and Mississippi.

    Figure 5: Total Number of Inspections Completed and the Total Cost of the
    Inspections for Named Hurricanes That Came Ashore in 2003 (as of April
    2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August 2006)

    According to a FEMA official, the following factors had an impact on the
    higher per inspection costs for Hurricanes Katrina and Rita:

               o  Both of FEMA's inspection contractors had automatic annual
               increases on a per inspection basis built into their contract.

               o  Automatic annual increases from 2004 to 2005 for maintaining
               on-call availability were also included in the contracts.

               o  For 2005, FEMA added a new requirement for inspectors to
               photograph disaster damage that added to the cost per inspection.

               o  The contractors increased the per inspection cost in December
               2005 when FEMA extended the contract beyond the initial 5-year
               period of performance.

    Percentage of SBA Disaster Applicants Sent Back to FEMA's ONA for Hurricanes
    Katrina and Rita Was Comparable to Those after Hurricanes in 2003 and 2004

    For Hurricanes Katrina and Rita, FEMA referred about 2.5 million
    applicants to SBA for assistance through its Disaster Loan Program.22 For
    hurricanes in 2003 and 2004, FEMA referred fewer applicants-about 107,000
    and 1.3 million applicants respectively, to the SBA. As of August 2006,
    data reported by FEMA show that nearly 10 percent of applicants were sent
    back to FEMA from SBA for ONA consideration. In comparison, during
    hurricanes in 2003 and 2004, SBA sent back to FEMA a comparable percentage
    of applicants-about 12 percent and 10 percent respectively, which
    indicates that SBA's loan denial rate was relatively consistent although
    more applicants were referred for Hurricanes Katrina and Rita than in the
    prior 2 years. Figure 6 shows the number of applicants referred to the SBA
    for loan assistance and the number of applicants the SBA sent back to FEMA
    for ONA in 2003, 2004, and for Hurricanes Katrina and Rita in 2005.

    22 As of June 2006, SBA data shows that about $7.3 billion in disaster
    home loans were approved for Hurricanes Katrina and Rita, of which nearly
    $6.6 billion was attributable solely to Hurricane Katrina.

    Figure 6: Number and Percentage of FEMA Referrals to SBA for Disaster
    Loans and the Number of SBA Disaster Loan Applicants Sent Back to FEMA for
    ONA for the Named Hurricanes That Came Ashore in 2003 (as of April 2006),
    2004, and Hurricanes Katrina and Rita in 2005 (as of August 2006)

        FEMA Responded to the Challenges of Hurricanes Katrina and Rita with New
    Approaches, yet Reported Ongoing Management Challenges Hindered Implementing IHP

    Faced with unprecedented challenges in the aftermath of Hurricanes Katrina
    and Rita, FEMA devised new approaches and adapted pre-existing ones to
    administer the IHP. However, our work and six federal reports we reviewed
    pointed to ongoing management challenges which hindered IHP
    implementation. These management challenges included a lack of planning
    and trained staff, and programmatic restrictions on the uses of IHP funds
    that limited FEMA's flexibility in using IHP assistance in the most
    efficient and effective manner. In May 2006, FEMA announced initiatives to
    address the problems and recommendations cited in the various reports.
    However, it is too early to assess the success of these initiatives.

    FEMA Used New Approaches to Address Hurricanes' Unprecedented Challenges

    Hurricanes Katrina and Rita posed numerous unprecedented challenges for
    FEMA's administration of the IHP. These challenges arose from the sheer
    number of victims seeking assistance, including many who had lost key
    financial, residential, and other documentation in the storms, and the
    dispersal of these victims throughout the United States. As a result, FEMA
    was also challenged to conduct an unprecedented number of housing
    inspections, often with limited or no access to individuals or, in many
    cases, to the affected homes. To provide benefits quickly to eligible
    victims, communicate with about 2 million applicants scattered across the
    country and conduct inspections, FEMA developed a number of new
    approaches, as summarized in table 4.

    Table 4: IHP Challenges and New Approaches

    Challenge                     New Approach
    Provide shelter and housing   FEMA initially used Public Assistance
    assistance to an              funding until it could develop a longer term
    unprecedented number of       strategy for implementing its Individual
    disaster victims quickly      Assistance program to transition victims
                                     from short-term lodging, including shelters,
                                     hotels and motels to travel trailers and
                                     mobile homes, and finally to apartments to
                                     address longer-term housing needs.a

                                     For Katrina, for the first time, FEMA
                                     provided $2,000 debit cards in a pilot
                                     distribution to approximately 11,000
                                     disaster victims in three shelters with
                                     large numbers of disaster victims.
    Provide assistance to         FEMA created new IHP procedures to allow
    disaster victims dispersed    multiple household members separated by the
    across the United States (to  disaster to receive rental assistance. As a
    provide application and       result of Hurricanes Katrina and Rita,
    eligibility information)      thousands of families evacuated to locations
                                     across the country and in some circumstances
                                     required families to temporarily separate.
                                     As a result, providing assistance to
                                     multiple household members was warranted,
                                     according to FEMA.

                                     For the first time, FEMA established a
                                     program to relocate out-of-state disaster
                                     victims to find temporary housing or reunite
                                     with family members sheltered in another
                                     state, according to FEMA.

                                     FEMA used new methods such as automated
                                     dialing with recorded messages and having
                                     disaster assistance employees go door to
                                     door to communicate with disaster victims.

                                     FEMA worked with the post office to
                                     establish mail offices in shelters with
                                     large numbers of disaster victims.
    Conduct inspections for a     FEMA used remote sensing (satellite
    large number of homes, with   technology or airplane flyovers) to complete
    limited or no access, and for inspections in areas that were not
    homeowners who may not be     accessible in five Louisiana Parishes and
    available during the          three Mississippi Counties.b
    inspection.
                                     FEMA established a third party inspection
                                     option allowing individuals who could not
                                     return home to designate a representative to
                                     meet with a FEMA inspector on their behalf.

                                     FEMA established a procedure to provide
                                     personal property assistance when (1) the
                                     exterior damage clearly indicated the
                                     residence was uninhabitable (2) the
                                     applicant was unable to return to the area
                                     to meet with the inspector and (3) there was
                                     no available designee for a third party
                                     inspection.

    Source: GAO analysis of data from FEMA Recovery Division.

    aFEMA was still providing short-term lodging assistance to some disaster
    victims in Texas under the Public Assistance program as of August 2006,
    according to FEMA's Acting Deputy Director for the Recovery Division. In
    most circumstances, manufactured housing, including mobile homes, travel
    trailers and modular housing are primarily funded under IHP.

    bSatellite technology was used to conduct inspections in Orleans,
    Jefferson, St. Bernard, St. Tammany, and Plaquemines parishes in
    Louisiana; and Jackson, Harrison, and Hancock counties in Mississippi.
    This technology was also used in lieu of on-site inspections to expedite
    payments for about 10 percent of the flood insurance claims for Katrina
    victims.

    In addition, FEMA adapted several of its traditional approaches to respond
    to Hurricanes Katrina and Rita, according to FEMA, as summarized in table
    5.

    Table 5: IHP Challenges and Adaptations of Traditional Approaches

    Challenge                      Adaptation to Traditional Approach
    Provide shelter and housing    FEMA deployed contract inspectors and
    assistance to an unprecedented computer equipment to facilitate the
    number of disaster victims     applications of disaster victims in mass
    quickly                        shelters, in addition to traditional
                                      locations at temporary disaster relief
                                      centers.

                                      FEMA contracted for expanded mail
                                      processing functions to keep pace with the
                                      volume of incoming and outgoing mail and to
                                      ensure that documents needed to complete
                                      case processing were scanned and indexed
                                      into applicant files in a timely manner.

                                      FEMA revised its procedures to provide
                                      financial housing assistance in advance for
                                      multiple months (rather than on a
                                      month-by-month basis)-referred to as
                                      transitional housing assistance-that was
                                      intended to represent 3 months of housing
                                      costs calculated using the national average
                                      fair market rent for a two-bedroom
                                      apartment, according to FEMA.
    Provide assistance to victims  FEMA doubled its existing Internet systems
    dispersed across the United    capacity related to the number of
    States (to provide application applicants that could be on line at the
    and eligibility information)   same time.

                                      FEMA opened additional call centers by
                                      working with Internal Revenue Service and
                                      the private sector, among others.

                                      FEMA added options to its Interactive Voice
                                      Recognition system to allow victims to get
                                      information without speaking to a caller
                                      agent, according to FEMA.

                                      FEMA extended its tele-registration and
                                      call center operations for more than 176
                                      days after Hurricane Katrina struck,
                                      considerably longer than prior disasters,
                                      according to FEMA.
    Conduct inspections for a      FEMA doubled its normal contract inspection
    large number of homes, with    workforce, using all of its approximate
    limited or no access, and for  4,000 contract inspectors for Hurricanes
    homeowners who may not be      Katrina and Rita.
    available during the
    inspection.

    Source: GAO analysis of data from FEMA Recovery Division.

    Despite New Approaches, Reported Ongoing Management Challenges Hindered
    Implementing IHP

    Each of the assessments of the federal government's response to Hurricanes
    Katrina and Rita we reviewed identified problems in FEMA's implementation
    of IHP during and after the storms. Our review and our assessment of these
    reports showed that the agency's efforts to implement the IHP were
    hindered by a lack of planning, trained staff, and program limitations,
    despite its new and revised approaches for implementing the program. A
    list of these assessments is provided in table 7. In addition, a summary
    of Katrina- and Rita-issues related to the IHP addressed in these reports
    is identified in appendix IV.

    Table 6: Recent Assessments of FEMA's Performance in Response to
    Hurricanes Katrina and Rita

    Date           Title                            Source
    November 15,   Performance and Accountability   Department of Homeland
    2005           Report Fiscal Year 2005          Security
    February 13,   DHS/FEMA Initial Response        Department of Homeland
    2006           Hotwash: Hurricane Katrina in    Security
                      Louisiana
    February 15,   A Failure of Initiative: Final   House of Representatives
    2006           Report of the Select Bipartisan
                      Committee to Investigate the
                      Preparation for and Response to
                      Hurricane Katrina
    February 23,   The Federal Response to          The White House
    2006           Hurricane Katrina: Lessons
                      Learned
    March 31, 2006 A Performance Review of FEMA's   Department of Homeland
                      Disaster Management Activities   Security Office of
                      in Response to Hurricane Katrina Inspections and Special
                                                       Reviews
    May 2006       Hurricane Katrina: A Nation      Report of the Committee on
                      Still Unprepared                 Homeland Security and
                                                       Governmental Affairs

    Source: GAO based on cited reports.

    Regarding planning, the DHS Inspector General reported in March 2006 that
    FEMA lacked final plans that specifically addressed the types of
    challenges the agency could be expected to face in catastrophic
    circumstances. 23 For example, because FEMA was unable to immediately
    implement IHP assistance to provide funds to transition victims from
    short-term lodging, including shelters, hotels and motels to longer-term
    housing alternatives such as mobile homes or apartments, FEMA officials
    used Public Assistance funds. Normally, public assistance is provided
    (under section 403 of the Stafford Act)24 only for immediate emergency
    sheltering efforts to get assistance to individuals and households
    quickly. Under normal circumstances, IHP funds provided under Section 408
    of the Act are intended to accommodate the longer-term housing needs of
    evacuees up to 18 months. FEMA officials said that many applicants would
    have waited months to receive their initial assistance if FEMA had
    followed normal IHP processes and procedures under Section 408 and had to
    wait until inspections were completed and IHP information and assistance
    could be communicated to disaster victims who were dispersed to all 50
    states. However, this use of Public Assistance funds was problematic,
    according to the DHS Inspector General's report. Because application for
    assistance is not a requirement for the provision of Public Assistance
    under section 403 of the Stafford Act, FEMA did not know whether disaster
    victims were actually eligible for assistance as a direct result of the
    disaster. This increased the potential for duplication with other
    assistance programs since there was no internal mechanism to determine
    whether an evacuee had received assistance from the IHP when interim
    housing may have already been provided. The interim housing assistance
    funded under section 403 was only phased out after FEMA was able to
    identify that an evacuee had received IHP funds.

    23 Department of Homeland Security Inspector General, A Performance Review
    of FEMA's Disaster Management Activities in Response to Hurricane Katrina,
    OIG-06-32 (Washington, D.C.: Mar. 31, 2006).

    24 42 U.S.C. S: 5170b.

    FEMA was aware it needed to plan for large disasters but had problems
    getting necessary funding, according to the Senate Homeland Security and
    Governmental Affairs Committee's Katrina Report.25 FEMA requests for $100
    million for catastrophic planning and an additional $20 million for
    catastrophic housing planning in fiscal year 2004 and fiscal year 2005,
    respectively, were denied by DHS. Our review of FEMA's implementation of
    IHP showed that FEMA's reactive approach to planning and implementing the
    IHP on a disaster-by-disaster basis is inadequate to deal with the
    short-term and long-term needs of affected communities, particularly for
    catastrophic disasters when the agency's resources and staff are strained.
    For example, FEMA failed to pre-identify workable sites and land and take
    advantage of available housing units from other federal agencies,
    according to a February 2006 White House report.26 We have ongoing work
    focusing on the federal role in providing housing assistance in response
    to Hurricanes Katrina and Rita.

    In terms of trained staff, FEMA lacked the surge capacity to effectively
    manage the disaster assistance process. Specifically, according to the
    March 2006 DHS Inspector General report, additional trained staff were
    needed to (1) provide initial application services at Disaster Recovery
    and Call/Processing Centers, (2) process applications and respond to
    questions at the National Processing Service Centers, and (3) conduct
    inspections.27 First, according to the DHS Inspector General, disaster
    victims experienced delays when they contacted Call Centers or were not
    able to speak with anyone. Second, disaster victims experienced delays in
    obtaining their eligibility determination, according to FEMA officials
    responsible for managing the IHP. Third, inspections were delayed, in
    part, because FEMA lacked enough contract inspectors to perform
    inspections, according to FEMA. Our analysis found, for example, that
    inspection times for Katrina and Rita took an average of two to five times
    longer compared to named hurricanes in 2004. FEMA uses inspectors that
    have a construction, real estate, or appraisal background, but it is not
    required, according to a FEMA Inspection Services Manager. FEMA requires
    that each inspector be trained on FEMA standards and policies regarding
    program eligibility and that new inspectors undergo background checks. In
    most conventional disasters, experienced inspectors are to accompany new
    inspectors in the field to ensure that they are meeting FEMA standards
    before they are allowed to complete inspections on their own. We have work
    underway assessing trends in FEMA's resources, including staffing, and
    their impact on FEMA's capacity to conduct operations and plan to report
    on FEMA's workforce management efforts later this year.

    25 Senate Homeland Security and Governmental Affairs Committee, Hurricane
    Katrina: A Nation Still Unprepared (Washington, D.C.: May 2006).

    26 The White House, The Federal Response To Hurricane Katrina: Lessons
    Learned (Washington, D.C.: Feb. 23, 2006).

    27 OIG-06-32; 35, 49 and 50.

    According to the March 2006 DHS Inspector General report,28 FEMA was not
    able to dedicate its full staffing strength to Hurricane Katrina for three
    primary reasons. First, at the time of the disaster, FEMA had personnel
    assigned to 38 other disasters not related to Hurricane Katrina. For
    example, Hurricane Ophelia in the Carolinas, Hurricane Rita in the Gulf
    Coast region, and flooding in the Northeast were declared disasters and
    required FEMA resources. Second, an average of 30 percent of FEMA Disaster
    Assistance Employees reported they were unavailable to respond to Katrina
    or any other disaster during the August 24, 2005 - September 30, 2005 time
    frame. (Disaster Assistance Employees may be unavailable for such issues
    as health or family concerns.) Third, FEMA officials said, although FEMA
    was authorized 2,445 staff in August 2005, 389 positions were vacant and
    many of these were key leadership positions. The DHS Inspector's report
    included recommendations that FEMA (1) develop a more comprehensive
    program to recruit, train, and retain local hires for use in augmenting
    FEMA's Disaster Assistance Employees and permanent staff, (2) provide
    training to additional NPSC staff and contractors to enhance FEMA's
    capability to perform evacuee assistance and case management activities,
    and (3) develop a disaster workforce plan for permanent, temporary, and
    reserve staff that is scalable events regardless of cause, size, or
    complexity.29 FEMA concurred with the recommendations.

    28 OIG-06-32, 88.

    Throughout our review FEMA officials cited their concerns regarding the
    lack of agency and contractor staffing resources needed to effectively
    implement the program during a catastrophic event. Concerns regarding
    training and staffing for disaster response management are long-standing.
    In 2003, in our report on major performance and accountability challenges
    for FEMA,30 we noted that FEMA faced challenges to enhance its disaster
    assistance training and resource planning. According to the report, FEMA
    developed a program in 1999 for evaluating the knowledge, skills, and
    abilities of its staff-both permanent and temporary-who are deployed to
    respond to a disaster. FEMA expected the program would ensure its
    employees would have basic qualifications to perform their jobs, but,
    according to FEMA officials, the program was not implemented because of
    budget constraints. We also reported that 48 percent of FEMA's workforce
    would be eligible to retire in the next 5 years and this would pose a
    challenge for having staff with the skills needed to perform core
    functions.

    Finally, FEMA officials cited legislative and regulatory limitations that
    restricted FEMA's flexibility in implementing the IHP in the aftermath of
    Hurricane Katrina. For example,

               o  FEMA's Federal Coordinating Officer for Louisiana cited the
               statutory program's maximum of $5,000 for home repair as one
               limitation, noting that if the $5,000 is not sufficient to fix the
               home, then FEMA may have to provide a trailer for temporary
               housing. He testified that manufactured housing is not
               cost-effective and can cost up to $90,000 to $100,000 per mobile
               home for a group site (including total costs for site preparation,
               hauling and installation, and cost of home). He suggested that in
               some situations if FEMA were able to give disaster victims the
               maximum amount of IHP financial assistance,31 it would be more
               cost-effective because it would allow many of these families to
               find permanent housing. However, the Acting Deputy Director for
               FEMA's Recovery Division told us that FEMA only uses manufactured
               housing as a last resort, and in the post-Katrina and Rita
               environment, housing and the infrastructure that supports the
               community was destroyed. As a result, FEMA did not have any
               alternative other than to provide manufactured housing.

               o  FEMA officials were unable to use a large supply of federally
               controlled housing units that could have been made available for
               occupancy by disaster victims with only minor repairs because
               reimbursement for repairs to existing available housing units are
               not authorized under the current program regulations, according to
               the White House report on Hurricane Katrina.32 As a result, FEMA
               had to provide alternative temporary housing such as trailers and
               other manufactured housing units, at considerably greater cost,
               while leaving other potentially available housing vacant.

    29 OIG-06-32; 81 and 82.

    30 GAO, Major Management Challenges and Program Risks: Federal Emergency
    Management Agency, GAO-03-113 (Washington, D.C.: Jan. 2003).

    31 The maximum amount of housing and other needs assistance that an
    individual or household may receive is statutorily capped at $25,000, and
    is adjusted annually to reflect changes in the Consumer Price Index (CPI).
    The 2006 maximum is $27,200.

    A bill, the Natural Disaster Housing Reform Act of 2006, was introduced
    May 16, 2006, in the House of Representatives that would provide the
    federal government with more flexibility in the provision of short- and
    long-term housing after a major disaster. 33 For example, the bill would
    allow the President to offer disaster victims manufactured modular housing
    under the IHP if it could be provided at a lower cost than other readily
    fabricated dwellings. It would also extend repair assistance under the
    IHP, currently available only for owner-occupied residences, so that
    renters could repair existing rental units to make them habitable as
    alternate housing accommodations. The bill also proposes that the
    President may provide financial assistance or direct assistance to
    individuals or households to construct permanent or semi-permanent housing
    in any area in which the President declared a major disaster or emergency
    in connection with Hurricane Katrina of 2005 during the period beginning
    on August 28, 2005, and ending on December 31, 2007. Under the IHP,
    permanent housing construction is only available for disaster victims who
    reside in insular areas or other remote locations.34

    32White House report (Washington, D.C.: 2006), 117.

    33 H.R. 5393.

    34 See 42 U.S.C. S: 5174(c)(4).

    Initiatives to Improve IHP Are Ongoing, but Their Impact Is Unknown

    In an effort to address the problems and recommendations cited in the
    various reports, FEMA announced plans on May 24, 2006, to implement a
    number of new approaches to enhance logistics, emergency communications,
    situational awareness, housing and victim management. According to FEMA,
    the improvements related to IHP include plans to increase the number of
    trained staff and revise new policies and procedures. However, at the time
    of our review, many of these initiatives were in the planning or at the
    early implementation stage. As a result, it was too early to assess their
    potential impact on future program implementation. Specifically, FEMA
    reported plans to:

               o  Hire a training coordinator to develop a more comprehensive
               training program to prepare existing and new personnel for
               Disaster Recovery Center assignments. According to FEMA's Acting
               Deputy Director for the Recovery Division, they were still
               searching for qualified applicants for the training coordinator
               position as of August 2006.

               o  Train 3,000 disaster "generalist" surge cadre employees for
               ready deployment during the height of the 2006 hurricane season
               and increase its capacity to deploy and communicate with the
               increased number of disaster employees. According to FEMA, these
               surge employees are to form a "generalist" pool of disaster
               workers and be trained in a number of basic functions cutting
               across traditional program areas including Community Relations,
               Individual Assistance, Public Assistance and Logistics. As of
               August 2006, FEMA said approximately 1,836 employees had completed
               the training.35

               o  Develop greater contract and contingency surge capabilities to
               expand application intake capacity of up to 200,000 per day
               (during the weeks following Hurricanes Katrina and Rita, FEMA
               recorded more than 100,000 applications a day) and expand its
               Internet-based application capability by improving accessibility
               to reduce application wait times and FEMA Helpline information
               delays following a major disaster. According to FEMA officials,
               the objective of expanding its capabilities is to have
               private-sector contracts in place and resources ready to handle
               calls within 48 hours of a disaster declaration. In the past, FEMA
               had to augment its application intake surge capabilities each
               hurricane season especially during 2004 and 2005 a step usually
               taken under urgent and compelling needs, through emergency
               contracts, and by using Internal Revenue Service personnel. FEMA
               plans to award the contract for this initiative in 2007 and, in
               the interim period, plans to continue to utilize IRS personnel and
               redirect existing FEMA staff to augment application intake
               capabilities.

               o  Implement a pilot program in the 2006 hurricane season to use
               Mobile Registration Intake Centers that can be deployed to
               emergency shelter locations or impacted neighborhoods without
               power or phone service and provide on-site capability to quickly
               apply for FEMA assistance. These units would be capable of
               providing the public access to the FEMA disaster assistance
               program via phone and the internet. FEMA currently has five
               vehicles each equipped with 20 telephones and 20 personal
               computers. As of August 2006, FEMA was in the planning stage of
               upgrading each vehicle's capacity to support 40 telephones and 40
               personal computers and has the ability to expand this effort by
               using tents with tables and equipment set up near the vehicles.
               FEMA's intention is to evaluate the pilot program at the end of
               the 2006 hurricane season to determine if they should expand this
               capability.

               o  Increase contractor staffing capacity for housing inspections
               from 7,500/per day/per contractor to 20,000/per day/per
               contractor. FEMA anticipates that this added capacity will
               increase the speed and accuracy of home inspections. FEMA intends
               to implement the related requirements with the award of its new
               inspection contracts tentatively scheduled for the end of December
               2006.

               o  Clarify program policies on the appropriate use and
               authorization of emergency sheltering funds (Stafford Act, section
               403 assistance) and individual housing assistance funds (Stafford
               Act, section 408 assistance) for the disaster victims. As part of
               this initiative, FEMA plans to have a draft policy in place for
               issuing authorization codes to evacuees for lodging and hotels for
               the 2006 hurricane season. In addition, FEMA plans to have a
               policy for Expedited Assistance that defines the conditions that
               must be met before initiating the program. FEMA issued a strategy
               for mass sheltering and housing assistance on July 24, 2006, and
               plans to develop more detailed policies and procedures to
               implement the strategy.36

    35According to FEMA, approximately 1,000, of the 3,000 disaster employees
    were lost through attrition, but FEMA was attempting to recruit additional
    employees.

    36 Federal Emergency Management Agency, Mass Sheltering and Housing
    Assistance, July 24, 2006, Recovery Strategy RS-2006-1.

     GAO Audit and Investigative Work Reveals Potential for Fraud and Abuse Related
                         to IHP Applications and Debit Card Use

    As we recently reported, 37 one of the major challenges FEMA faced after
    Hurricanes Katrina and Rita was balancing the need to quickly deliver
    benefits and services to needy and eligible victims while minimizing
    occurrences of fraud and abuse. As we testified in June 2006, an estimated
    16 percent, or approximately $1 billion, in FEMA IHP payments were
    improper and potentially fraudulent due to invalid application data.38 (A
    copy of our testimony is provided in app. IV.) Additionally, we found that
    FEMA made improper or potentially fraudulent IHP payments to applications
    containing names and Social Security Numbers of individuals who were
    incarcerated at the time of disaster, and paid hotel room charges for
    applicants who were also receiving rental assistance concurrently. We also
    determined that FEMA had little accountability over debit card
    distribution and lacked proper controls over debit card usage.

    Invalid Applications Provide the Potential for $1 Billion in Potentially
    Improper Payments

    An estimated 16 percent of payments totaling approximately $1 billion were
    improper and potentially fraudulent due to invalid applications. The
    95-percent confidence interval surrounding the estimate of 16 percent
    ranges from 12 percent to 21 percent. The 95-percent confidence interval
    surrounding the estimate of $1 billion ranges from $600 million to $1.4
    billion.39 The estimated amount included payments for expedited
    assistance, rental assistance, housing and personal property repair and
    replacement, and other necessary and emergency expenses. These payments
    were made to (1) applications containing Social Security Numbers (SSN)
    that were never issued or belonged to other individuals, (2) applicants
    who used bogus damaged addresses, and (3) applicants who had never lived
    at the declared damaged addresses or did not live at the declared damaged
    address at the time of disaster. These payments were also made to
    applications containing information that was duplicative of other
    applications already recorded in FEMA's system. The duplicative payment
    failures refer to instances where FEMA made payments to more than one
    application with the same damaged property and current addresses, and the
    payment selected was associated with the second or later application. For
    example, one applicant submitted an application for the same current and
    damaged address that was used on another application, and both received
    payments for $2,358 of rental assistance on each application in September
    2005. Effective preventive controls for duplicate applications would have
    detected that the two applications shared the same damaged and current
    address and acted to prevent the duplicate payments.

    37 GAO, Catastrophic Disasters: Enhanced Leadership, Capabilities, and
    Accountability Can Improve the Nation's Preparedness, Response, and
    Recovery, GAO-06-618 (Washington, D.C.: Sept. 6, 2006).

    38 GAO-06-844T , p. 4

    39 Because we followed a probability procedure based on random selections,
    our sample is only one of a large number of samples that we might have
    drawn. Since each sample could have provided different estimates, we
    express our confidence in the precision of our particular sample's results
    as a 95 percent confidence interval (e.g., plus or minus 5 percentage
    points). This is the interval that would contain the actual population
    value for 95 percent of the samples we could have drawn. As a result, we
    are 95-percent confident that each of the confidence intervals in this
    report will include the true values in the study population. Also, the 16
    percent of payments that was improper and potentially fraudulent excluded
    payments that were returned to the U.S. government by the time of our
    review.

    Our projection likely understated the total amount of improper and
    potentially fraudulent payments because our work was limited to issues
    related to misuse and abuse of identity, damaged property address
    information, and duplicate payments. Our estimate did not account for
    improper and potentially fraudulent payments related to issues such as
    identity theft, and whether the applicants received rental assistance they
    were not entitled to, received housing and other assistance while
    incurring no damage to their property, and/or received FEMA assistance for
    the same damages already settled through insurance claims.

    Our forensic audit and investigative work found that improper and
    potentially fraudulent payments occurred mainly because FEMA did not
    validate the identity of all applicants, the physical location of the
    declared damaged address, and ownership and occupancy of all applicants at
    the time of application. For example, in one case an applicant received
    $7,328 for expedited and rental assistance even though the applicant had
    moved out of the house a month prior to Hurricane Katrina. Examples of
    other improper and potentially fraudulent payments included a FEMA payment
    of $2,000 to an individual who provided a damaged address that did not
    exist, and payment of $2,358 in rental assistance to another individual
    who claimed his damaged property was inside a cemetery. We also found that
    FEMA made approximately $5.3 million in payments to applicants who
    provided a post office box address as their damaged residence. For
    example, FEMA paid an applicant $2,748 who had listed a post office box in
    Alabama as the damaged property. Follow-up work with local postal
    officials revealed that the post office box listed on the application had
    been used by individuals linked to other potential fraud schemes.

    Our undercover work provided further evidence of the weaknesses in FEMA's
    management of the disaster assistance process. For example, FEMA provided
    nearly $6,000 in rental assistance to one of GAO's undercover applicants
    who had applications that declared a bogus property as the damaged
    address. These payments continued to be provided even though verification
    with third-party records indicated that the GAO undercover applicant did
    not live at the damaged address, and after the Small Business
    Administration had reported that the damaged property could not be found.
    In another example, a FEMA inspector assigned to inspect a bogus property
    was not able to find the house despite numerous attempts to verify the
    address through the phone book, the post office, and a physical
    inspection. Nevertheless, in early 2006 FEMA provided GAO a check for
    $2,000 for presumed losses sustained by this property.

    Without verifying the identity and primary residence of applicants prior
    to IHP payments, it is not surprising that FEMA also made expedited and
    rental assistance payments totaling millions of dollars to over 1,000
    applications containing information belonging to prison inmates. In other
    words, payments were made to applications using the names and SSNs of
    individuals who were not displaced as a result of the hurricanes, but
    rather were incarcerated at state prisons of the Gulf Coast states (that
    is, Louisiana, Texas, Florida, Georgia, Mississippi, and Alabama), or in
    federal prisons across the United States when the hurricanes hit the Gulf
    Coast. For example, FEMA paid over $20,000 to an inmate who had used a
    post office box as his damaged property.

    Duplicative Housing Assistance

    Our data mining work also found potentially wasteful and improper rental
    assistance payments to individuals who were staying at hotels paid for by
    FEMA. In essence, the government paid twice for these individuals'
    lodging-first by providing a hotel at no cost and, second, by making
    payments to reimburse these individuals for out-of-pocket rent. For
    example, FEMA paid an individual $2,358 in rental assistance, while at the
    same time paying about $8,000 for the same individual to stay 70 nights-at
    more than $100 per night-in a hotel in Hawaii. In this particular case,
    the duplicate payments were not only wasteful, but they were improper
    because the applicant did not live at the damaged property at the time of
    the hurricane. Another applicant stayed more than 5 months-at a cost of
    $8,000-in hotels paid for by FEMA in California, while also receiving
    three rental assistance payments for the two separate disasters totaling
    more than $6,700.

    These instances occurred because FEMA did not require hotels to collect
    FEMA application numbers and SSNs from residents staying in FEMA-paid for
    rooms. Without this information, FEMA could not verify if the applicants
    were staying in government provided hotels before sending them rental
    assistance. Without the ability to identify all IHP applicants who had
    already received hotel lodging, FEMA provided duplicate housing benefits
    to a number of applicants. Because the hotels and FEMA did not collect
    application identification numbers, we were unable to quantify the
    magnitude of individuals who received these duplicate benefits. However,
    the tens of thousands of dollars that were wasted in the previous examples
    are illustrative of the wasteful spending we found through data mining.

    Lack of Accountability over Debit Cards

    Finally, we found that FEMA did not institute adequate controls to ensure
    accountability over the debit cards. Specifically, FEMA initially paid
    $1.5 million for over 750 debit cards that the government could not
    determine actually went to help disaster victims. Based on our numerous
    inquiries, upon identification of several hundred undistributed cards J.P.
    Morgan Chase refunded FEMA $770,000 attributable to the undistributed
    cards. Further, we continued to find that debit cards were used for items
    or services such as a Caribbean vacation, professional football tickets,
    and adult entertainment, which do not appear to be necessary to satisfy
    disaster-related needs as defined by FEMA regulations.40 In commenting on
    our draft report, FEMA partially concurred with our recommendation to
    increase accountability over debit cards, acknowledging the challenges
    inherent in the use of debit cards and stating that the agency has no
    current plans to use debit cards. FEMA said the agency will continue to
    evaluate the report's recommendations to determine whether any further use
    may be warranted.

    Fraud and error in this program is not new and FEMA has struggled for some
    time with the issue of balancing expeditious assistance with minimizing
    fraud and improper payments. For example, FEMA's and later DHS Office of
    Inspector General reported problems with the FEMA's previous disaster
    assistance program -the Individual and Family Grants program-in 2001 and
    2004.41 These previous reports identified problems related to a lack of
    inspections to verify property damage, relaxed requirements to document
    whether an applicant was eligible for advance payment of a grant,
    increasing the likelihood of fraud for the program. More recently, in May
    2005, DHS's Office of Inspector General reported shortcomings in FEMA's
    administration of IHP and its oversight of inspections in response to
    Hurricane Francis.42 For example, FEMA designated a county eligible for
    Individual Assistance programs without a proper preliminary damage
    assessment and FEMA's contractors were not required to review inspections
    prior to submission.

    40 44 C.F.R.P: 206.111.

                                      Conclusions

    Katrina and Rita were two of the most intense hurricanes ever recorded
    during the Atlantic hurricane season. The widespread devastation they
    wrought presented unprecedented challenges to all levels of government and
    voluntary organizations to help the hundreds of thousands of victims
    evacuate, relocate, and get food, shelter, medical care, and other
    assistance. As we and others have reported, the unprecedented geographic
    scope of the damage, the number of victims who had to be relocated, and
    the extent of the devastation clearly overwhelmed both government and
    nongovernment relief agencies, resulting in widespread dissatisfaction
    with the effectiveness of the preparation and response to the disaster.

    FEMA's processes and systems for registering hurricane victims for
    assistance, determining eligibility for IHP assistance, and managing the
    IHP were simply overwhelmed, and FEMA was unable to effectively manage the
    enormous challenge that the disasters posed for the IHP. GAO's audit and
    that of others found a number of problems with the program, including a
    lack of appropriately trained personnel that limited FEMA's effective
    surge capacity, an inability to effectively identify ineligible and
    duplicate applications, and consequently the payment of millions of
    dollars of assistance to ineligible persons. GAO's audit and investigative
    work found that FEMA did not have an effective fraud prevention program in
    place prior to the landfall of Hurricanes Katrina and Rita. The
    consequences were that tens of thousands of individuals received an
    estimated $600 million to $1.4 billion in potential improper or fraudulent
    payments through February 2006. The actual amount may be higher because
    our work excluded such issues as identify theft, insurance fraud, and
    individuals who had no uninsured losses who may have received benefits.

    41 FEMA Office of Inspector General Inspections Division, FEMA's Delivery
    of Individual Assistance Programs New York- September 11, 2001
    (Washington, D.C.; Dec. 2002); DHS Office of Inspector General Office of
    Audits, The Federal Emergency Management Agency's Individual and Family
    Grant Program Management at the World Trade Center Disaster, OIG-04-449
    (Washington, D.C.: Sept. 2002).

    42 DHS Office of Inspector General Office of Audits, Audit of FEMA's
    Individuals and Households Program in Miami-Dade County, Florida, for
    Hurricane Frances, OIG-05-20 (Washington, D.C.: May 2005).

    In any major disaster FEMA faces the demand to get assistance to eligible
    victims, many of whom may have lost everything, expeditiously while also
    ensuring that assistance does not go to those who are ineligible. FEMA
    recognizes that the problems it encountered in managing the IHP in the
    wake of Hurricanes Katrina and Rita need to be addressed and has announced
    several initiatives to address those problems. The effect of those efforts
    cannot yet be determined, and not all of them were scheduled to be in
    effect for the 2006 hurricane season. We believe it is possible to have
    effective fraud prevention controls in place while also getting money to
    eligible victims quickly. Such controls are far more effective in ensuring
    that IHP funds are used properly than efforts to recoup funds paid to
    those who were ineligible for assistance. Recoupment actions are expensive
    and may recover only pennies on the dollar because the assistance has
    already been spent.

                          Recommendations for Executive Action

    We recommend that the Secretary of the Department of Homeland Security
    (DHS) direct the Director of FEMA to take the following actions to address
    the improper and potentially fraudulent payments within the IHP based on
    the findings in our testimony of June 14, 2006. Many of the
    recommendations below are preventive and thus, are intended for the 2007
    hurricane season and other future disasters that include IHP assistance
    payments. However, whenever appropriate, we have identified
    recommendations we believe should also be implemented for the remaining
    aspects of assistance for Hurricanes Katrina and Rita.

    For all recommendations below, FEMA should fully field test all changes to
    provide assurance that all valid applicants are able to apply for and
    receive IHP payments. Also, for all recommendations, FEMA must ensure that
    there are adequate manual processes in place to allow applicants who are
    incorrectly denied assistance to appeal the decision and receive aid. In
    addition, we are reemphasizing the importance of implementing the six
    recommendations we made previously in our June report.43 The
    recommendations in this report are designed to prevent further payments
    from being made on improper and potentially fraudulent Katrina and Rita
    applications, to the extent possible recoup Katrina and Rita payments
    already identified as fraudulent and improper, and address weaknesses so
    that, in future disasters, FEMA can identify fraudulent and improper
    applications prior to making payments.44

    To obtain reasonable assurance that applicants are prevented from
    receiving assistance based on invalid damaged addresses, we recommend that
    the Secretary of Homeland Security direct the Director of FEMA to take the
    following three actions:

               o  Implement changes to its systems and processes to reject
               damaged addresses that are PO boxes.
               o  Provide applicants immediate feedback that PO boxes are not
               valid damaged addresses.
               o  Implement a process to identify damaged addresses that are not
               primary residences, such as commercial mail drops.

    To provide reasonable assurance that payments are only made based on a
    valid damaged address that was the applicant's primary residence, we
    recommend that the Directors of DHS and FEMA take the following two
    actions:

               o  Include, in the design of the address verification process
               recommended in our prior report, procedures to validate that the
               address an applicant claimed as damaged was the applicant's
               primary residence at the time of the disaster.

               o  Develop and implement processes and procedures to deal with
               applications where FEMA or other inspectors have concluded that
               the damaged address was bogus. Within this process, FEMA should

                            o  Develop timely information sharing procedures
                            between inspectors working for FEMA and other
                            agencies to provide assurance that applicants who
                            submitted damaged addresses that inspectors
                            identified as bogus are not provided disaster
                            assistance.

    43 GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
    FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
    Abuse, GAO-06-655 (Washington, D.C.: June 2006).

    44 Because we have not tested all aspects of potential fraud, waste and
    abuse related to the IHP, the recommendations in this and our prior report
    do not represent a comprehensive fraud prevention program.

    To prevent and/or detect prisoners from improperly receiving IHP payments
    in the future we recommend that the Director of FEMA explore information
    sharing agreements with federal and state officials in charge of
    maintaining custody over prisoners that could be used to identify
    ineligible applications.

    To reduce duplicate payments, we recommend that FEMA

               o  Expand the data fields used in the duplicate detection process
               at the time of application to restrict applications to one per
               eligible household, unless warranted by other circumstances, such
               as households displaced to separate locations.

    To prevent concurrent payments for lodging (i.e., rental assistance,
    hotels, etc.) for which FEMA is financially responsible, we recommend that
    the Director of FEMA take the following two actions:

               o  Establish procedures requiring that individuals apply with FEMA
               prior to receiving no cost disaster lodging accommodations from
               federal agencies or the Red Cross.
               o  Develop procedures to provide reasonable assurance that
               individuals staying in FEMA or other no cost lodging are not also
               provided IHP rental assistance payments for the time they are in
               the paid for hotel rooms.

    To increase accountability over debit cards, we recommend that the
    Director of FEMA take the following three actions:

               o  Finalize a full reconciliation to link each issued Katrina
               debit card recorded by the bank (JP Morgan Chase) to a specific
               IHP application,
               o  Require that the bank refunds the government for any
               unaccounted for funds related to distribution of Katrina-related
               debit cards, and
               o  Augment procedures for future disasters to provide reasonable
               assurance that accountability over debit card distribution occurs
               at each custody transfer in the distribution process.

    To identify and recoup payments based on improper and potentially
    fraudulent Katrina and Rita applications, we recommend that the Director
    of FEMA develop a comprehensive strategy-for current and future
    disasters-to identify the types of improper applications discussed in this
    report and refer them for either collections or additional investigations.

                           Agency Comments and Our Evaluation

    On September 18, 2006, FEMA provided written comments on a draft of this
    report (see appendix II). FEMA fully concurred with 9 of 13
    recommendations, and substantially concurred with the remaining 4
    recommendations. However, FEMA disagreed with our estimate of fraudulent
    and improper payments. FEMA noted that our estimate of 16 percent was
    substantially higher than their historical estimate of 1 to 3 percent.
    However, FEMA's reported fraud rate of 1 to 3 percent is not based on an
    independent, comprehensive statistical sample of the entire population of
    individual assistance payments; instead, the 1 to 3 percent FEMA estimate
    is simply the amount of overpayments that it identifies based on its own
    internal processes and procedures.

    FEMA fully agreed with 9 of the 13 recommendations, and stated that it had
    taken or plans to take actions to specifically respond to these 9
    recommendations. While we did not evaluate the extent to which the
    implementation of these changes would address the weaknesses we identified
    with FEMA's oversight of IHP payments, if they are properly implemented
    the changes should address our concerns. FEMA also partially concurred
    with four recommendations related to debit cards and hotel accommodations.
    Regarding our 3 recommendations on debit cards, FEMA stated that the
    agency has no current plans to use debit cards and will continue to
    evaluate the report's recommendations to determine whether any further use
    may be warranted. In response to our recommendation that FEMA establish
    procedures requiring that individuals apply with FEMA prior to receiving
    no cost disaster lodgings accommodations from federal agencies or the Red
    Cross, FEMA stated that the agency has implemented a protocol to ensure
    that disaster victims register and obtain an authorization code as a
    prerequisite for the use of hotels/motels as transition shelters. While
    FEMA cannot impose this protocol on the Red Cross, FEMA stated that it
    planned to affirm eligibility prior to reimbursing the Red Cross. Our
    objective in making this recommendation is to prevent duplicate housing
    benefits from being provided to registrants. Thus, if FEMA's new process
    affirms the eligibility of registrants prior to reimbursing Red Cross,
    FEMA's processes would address the objective of this recommendation.

    While FEMA substantially agreed with our recommendations, it disagreed
    with the methodology we used to conduct our work, which formed the basis
    for many of the 13 recommendations. Specifically, in light of FEMA's
    repeated representations that 1 to 3 percent of its IHP payments are
    fraudulent or improper, FEMA took exception to our estimate that 10 to 22
    percent of the payments were based on registrations containing fraudulent
    or inaccurate information. However, it is important to note that FEMA's
    estimate of 1 to 3 percent fraud is not based on an independent,
    comprehensive statistical sample of the entire population of individual
    assistance payments; instead, it is based on the historical amount of IHP
    payments that FEMA places in its internal recoupment process, which
    includes overpayments identified through case reviews, system checks, and
    hotline tips. FEMA officials have acknowledged that their estimate is not
    based on an in-depth statistical analysis for eligibility or any other
    type of fraud.

    Further, our estimate is likely understated because it only focused on
    payments made to invalid registrations. Our estimate excluded substantial
    potential fraudulent and improper payments caused by such actions as
    identity theft, insurance fraud, duplicate government payments for
    lodging, or payments without evidence of property damage. In responding to
    our draft report, FEMA also commingled the results of our statistical
    sampling with other findings of fraudulent and improper payments that were
    not included in our estimate. For example, the reported fraudulent and
    improper payments related to individuals who stayed at FEMA-paid hotels
    and received rental assistance payments were not included in our
    statistical sample and resultant estimate of 16 percent of fraudulent and
    improper payments.

    FEMA also questioned whether some payments we categorized in our
    statistical sample results as potentially fraudulent and improper, such as
    those relating to separated households, were in fact valid payments.
    Specifically, FEMA stated  that without a "knowledgeable" case by case
    analysis, our estimate was not accurate. We disagree. We were aware of
    FEMA's separated household's policy and did not count any payments as
    duplicates if they related to families that were displaced to different
    locations. In addition, for our statistical sample we performed a detailed
    case by case analysis on sample items that included using all available
    audit and investigative tools, background information, and NEMIS data to
    ensure conclusions reached were accurate. For example, we visited damaged
    addresses and spoke with IHP applicants, landlords, neighbors, and postal
    officials.

    FEMA also stated that it has been unable to validate our results because
    we had not provided evidence related to our estimate for their review. We
    have not provided details of our sample failures to FEMA because the cases
    of fraudulent and improper payments are in the process of being referred
    to the Katrina Fraud Task Force for investigation and potential
    prosecution, as has been the standard process for other fraud cases
    identified though data mining. Based on agreements with the Katrina Fraud
    Task Force, which includes the Department of Homeland Security Inspector
    General, all fraud cases will continue to be referred directly to the
    Katrina Fraud Task Force to ensure investigations and prosecutions are not
    jeopardized.

    FEMA also raised concerns with the registrants we reported who had
    received duplicate lodging assistance. FEMA commented that such a
    determination can only be made after a knowledgeable case by case analysis
    determined the appropriateness of payments. Our methodology used to
    identify data mined examples of the duplicate lodging payments consisted
    of comparing hotel receipt information and FEMA's own payment data to
    confirm that the subject received multiple rental assistance payments at
    the same time FEMA paid for their hotel room.

    We are sending copies of this report to the Secretary of the Department of
    Homeland Security, and the Director of Federal Emergency Management
    Agency. We will make copies available to others upon request. In addition,
    the report will be available at no charge on the GAO Web site at
    http://www.gao.gov. Please contact either William Jenkins at (202)
    512-8757 or jenkinswo@gao.gov or Greg Kutz at (202) 512-7455 or
    kutzg@gao.gov if you or your staffs have any questions concerning this
    report. Key contributors to this report are listed in appendix VI. Contact

    points for our Offices of Congressional Relations and Public Affairs may
    be found on the last page of this report.

    William O. Jenkins, Jr. Director, Homeland Security and Justice

    Greg D. Kutz Managing Director Forensic Audits and Special Investigations

    List of Congressional Committees

    The Honorable Susan M. Collins

    Chairman

    The Honorable Joseph I. Lieberman

    Ranking Minority Member

    Committee on Homeland Security and Governmental Affairs

    United States Senate

    The Honorable Tom Davis

    Chairman

    The Honorable Henry A. Waxman

    Ranking Minority Member

    Committee on Government Reform

    House of Representatives

    The Honorable Michael G. Oxley

    Chairman

    The Honorable Barney Frank

    Ranking Minority Member

    Committee on Financial Services

    House of Representatives

    The Honorable Harold Rogers

    Chairman

    The Honorable Martin Olav Sabo

    Ranking Minority Member

    Subcommittee on Homeland Security

    Committee on Appropriations

    House of Representatives

    The Honorable Michael McCaul

    Chairman

    The Honorable Bob Etheridge

    Ranking Minority Member

    Subcommittee on Investigations

    Committee on Homeland Security

    House of Representatives

    The Honorable Don Young

    Chairman

    Committee on Transportation and Infrastructure

    House of Representatives

    The Honorable Bill Shuster

    Chairman

    Subcommittee on Economic Development, Public Buildings and Emergency
    Management

    Committee on Transportation and Infrastructure

    House of Representatives

    The Honorable Michale G. Oxley

    Chairman

    The Honorable Barney Frank

    Ranking Minority Member

    Committee on Financial Services

    House of Representatives

    The Honorable Anthony Weiner

    House of Representatives

    Appendix I: Scope and Methodology

    To evaluate the Federal Emergency Management Agency's (FEMA) disaster
    assistance provided in response to Hurricanes Katrina and Rita through the
    Individuals and Households Program (IHP), we assessed (1) how the types
    and amounts of assistance provided to victims of Hurricanes Katrina and
    Rita compare to other recent hurricanes, (2) the challenges posed by the
    magnitude of the requests for assistance following Hurricanes Katrina and
    Rita, and FEMA's response to these challenges, and (3) the vulnerability
    of the IHP to fraud and abuse and management issues in the wake of
    Hurricanes Katrina and Rita and FEMA's reported actions to address any
    identified problems.

    To describe the type and amount of IHP assistance FEMA provided for
    Hurricanes Katrina and Rita in comparison to assistance provided in other
    hurricane disasters, we interviewed agency officials. We obtained and
    analyzed data provided by officials from FEMA's National Processing
    Service Center in Winchester, Virginia, and compared IHP disaster
    assistance provided under Hurricanes Katrina and Rita to assistance
    provided after other hurricane-related disaster declarations occurring in
    calendar years 2003 through 2005, to the extent information was available
    from FEMA's National Processing Service Center's National Emergency
    Management Information System. (FEMA provided data for IHP benefits paid
    as of August 2006, and for IHP applications received as of September 2006
    for both the named hurricanes that came ashore in 2004 and Hurricanes
    Katrina and Rita. The 2003 named hurricane data was provided by FEMA as of
    April 2006. A FEMA official told us that changes to the data for named
    hurricanes in 2003 from April to August 2006 would be minor enough to
    prove statistically insignificant.) We selected these hurricanes for
    comparison because they constituted a cross section of disaster
    declarations that (1) occurred within the period in which IHP was
    implemented, and (2) represented hurricane disaster declarations that
    occurred in a single state and those that occurred in multiple states
    simultaneously. We assessed the accuracy and reliability of the system by
    interviewing agency officials knowledgeable about the data system and by
    obtaining from the agency written responses regarding (1) the agency's
    methods of data collection and quality control reviews, (2) practices and
    controls over data entry accuracy, and (3) any limitations of the data. We
    determined that the data were sufficiently reliable for the purposes of
    our engagement.

    To determine the programmatic challenges FEMA faced during Hurricanes
    Katrina and Rita and agency efforts to address those challenges, we
    interviewed FEMA headquarters officials from the Recovery Division and
    staff from the agency's Individual Assistance and Public Assistance
    Branches, FEMA staff from the National Processing Service Center and
    contract Inspection Services located in Virginia, and Joint Field Office
    officials in New Orleans, Louisiana. We observed contract inspectors
    assessing damaged residential properties in New Orleans. We also reviewed
    and analyzed federal legislation and regulations that are applicable to
    FEMA disaster assistance programs prior to and after the implementation of
    IHP and relevant FEMA policies, guidance, and processes. We reviewed and
    analyzed the agency's IHP budget, staffing, and performance measures. We
    also reviewed prior audit reports and assessments related to FEMA's
    implementation of the IHP.

    To assess the vulnerability of the IHP to fraud and abuse and management
    issues in the wake of Hurricanes Katrina and Rita and FEMA's reported
    actions to address any identified problems, we estimated the number of
    improper and potentially fraudulent payments based on statistical sampling
    of payments to examine whether the associated applications contained
    invalid Social Security Numbers (SSN), bogus addresses, invalid primary
    residence, and duplicate information with another application. Invalid
    SSNs refer to instances where the SSNs did not match with the name
    provided; the SSNs belonged to deceased individuals; or the SSNs had never
    been issued. Bogus addresses refer to instances where audit and
    investigative work we performed indicate that the damaged address did not
    exist. Invalid primary residences are related to applications where the
    applicant had never lived at the damaged address, or did not live at the
    damaged address at the time of the hurricanes. Duplicate information
    refers to instances where the applications contained information that is
    duplicative of another application that received a payment and was earlier
    recorded in FEMA's system. Because we followed a probability procedure
    based on random selections, our sample is only one of a large number of
    samples that we might have drawn. Since each sample could have provided
    different estimates, we express our confidence in the precision of our
    particular sample's results as a 95-percent confidence interval (e.g.,
    plus or minus 5 percentage points). This is the interval that would
    contain the actual population value for 95-percent of the samples we could
    have drawn. As a result, we are 95-percent confident that each of the
    confidence intervals in this report will include the true values in the
    study population. Also, the 16 percent of payments that was improper and
    potentially fraudulent excluded payments that were returned to the U.S.
    government by the time of our review. We also reviewed IHP processes and
    procedures for determining applicant eligibility for specific types of IHP
    assistance and analyzed prior audit reports and assessments. We also
    obtained information from FEMA's Acting Deputy Director of Recovery on the
    status of FEMA's efforts to address the problems identified. Because we
    have not tested all aspects of potential fraud, waste and abuse related to
    the IHP, the recommendations in this and our prior report do not represent
    a comprehensive fraud prevention program.

    We conducted our audit work between January 2006 and September 2006 in
    accordance with generally accepted government auditing standards. We
    conducted our investigative work between October 2005 and September 2006
    in accordance with the standards prescribed by the President's Council on
    Integrity and Efficiency.

    Appendix II: Comments from the Department of Homeland Security

    Appendix III: Federal Disaster Assistance and Individuals and Households
    Program Benefits, Structure and Processes

    FEMA's IHP is Part of Overall Federal Disaster Assistance

    Federal assistance takes many forms-including the direct provision of
    goods and services, financial assistance (through insurance, grants,
    loans, and direct payments), and technical assistance-and can come from
    various sources. The Individuals and Households Program (IHP) is one of
    these individual assistance programs funded through the Stafford Act's
    Disaster Relief Fund, as illustrated in the conceptual framework for
    federal disaster assistance in the figure 7.

    Figure 7: Conceptual Framework for FEMA's Individuals and Households
    Program as Part of Federal Disaster Assistance

    Congress may provide funding for federal disaster assistance to specific
    agencies for areas in which they retain expertise. For example, the
    Department of Housing and Urban Development administers funds for economic
    redevelopment and infrastructure restoration, the Department of
    Transportation provides assistance for road restoration, and other
    agencies provide assistance for activities such as providing small
    businesses disaster assistance loans and public health or medical services
    that may be needed in the affected area.

    With respect to Stafford Act activities, FEMA administers the Disaster
    Relief Fund, which provides for three major categories of aid under the
    Stafford Act-assistance to state and local governments through public and
    hazard mitigation assistance programs and assistance to individuals and
    households.

               o  FEMA's Public Assistance program provides grants to eligible
               state and local governments and specific types of private
               nonprofit organizations that provide services of a governmental
               nature, such as fire departments, emergency and medical
               facilities, and educational institutions, to help cover the costs
               of emergency response efforts and work associated with recovering
               from the disaster. Public Assistance is typically the most costly
               disaster assistance provided.1

               o  FEMA's Hazard Mitigation Grant Program provides grants to
               states, local governments, and Indian tribes for long-term hazard
               mitigation projects after a major disaster declaration. The
               purpose of the program is to reduce the loss of life and property
               in future disasters by funding mitigation measures during the
               recovery phase of a natural disaster.

               o  FEMA's Individual Assistance Program includes among other
               things, a crisis counseling program, disaster legal services, and
               direct and financial assistance through the IHP. The purpose of
               the crisis counseling program is to help relieve any grieving,
               stress, or mental health problems caused or aggravated by the
               disaster or its aftermath. FEMA also provides free legal
               counseling through an agreement with the Young Lawyers Division of
               the American Bar Association for low-income individuals regarding
               cases that will not produce a fee.2 FEMA provides direct
               (temporary housing units) and financial assistance (grant funding
               for temporary housing and other disaster-related needs) to
               individuals and households through the IHP to meet necessary
               expenses and serious needs of eligible disaster victims who, as a
               direct result of a major disaster, have uninsured or under insured
               necessary expenses and serious needs and are unable to meet such
               needs through other means.

    1 The Stafford Act sets the federal share for the public assistance
    program at no less than 75 percent of eligible costs of a disaster, with
    state and local governments paying for the remaining portions. FEMA may
    determine that a higher federal percentage would be provided, as was the
    case of Hurricanes Katrina and Rita.

    FEMA's IHP Provides Housing and Other Needs Assistance to Disaster Victims Who
    Meet Eligibility Requirements

    Under the IHP, there are two programs which are referred to as the Housing
    Assistance program and the Other Needs Assistance (ONA) program. The
    Housing Assistance program provides financial assistance for such things
    as rental housing, home repair assistance (up to $5,000), and home
    replacement assistance (up to $10,000).3 In addition, for disaster victims
    for whom rental accommodations are not available under the Housing
    Assistance program, FEMA may provide "direct assistance" in the form of
    temporary housing units (e.g., mobile homes and travel trailers), that
    FEMA has acquired by purchase or lease. The ONA program also includes
    financial assistance for medical, dental, funeral, personal property,
    transportation, and other disaster-related expenses that are not
    compensated by other means. The IHP is not intended to fully compensate
    disaster victims for all losses from damage to real and personal property
    that resulted from the disaster or to provide sufficient funds to restore
    damaged property to its condition before the disaster. Rather, IHP is
    intended to provide assistance in covering expenses not covered by other
    means, such as insurance claims and payments or the victim's own savings
    and resources. The maximum amount that an individual or household may
    receive is statutorily capped at $25,000, adjusted annually to reflect
    changes in the Consumer Price Index.4 In addition to the financial cap,
    IHP assistance is also limited to 18 months beginning on the date the
    President declares a major disaster.5 However, the President may extend
    this 18-month period if the President determines that due to extraordinary
    circumstances an extension would be in the public interest.6

    2 Cases that may generate a fee are turned over to the local lawyer
    referral service.

    3 These individual statutory caps-$5,000 for home repair assistance and
    $10,000 for home replacement assistance- are adjusted annually to reflect
    changes in the Consumer Price Index.

    4 In 2005, the maximum was $26,200. For 2006, the maximum is $27,200.

    5 42 U.S.C. S: 5174(c)(1)(B)(ii). See also 44 C.F.R. S: 206.110(e).

    Eligibility for IHP assistance is determined when an individual or
    household applies with FEMA and is based on the amount of property damage.
    To qualify for Housing Assistance, a disaster victim must:

               o  have experienced losses in an area that has been declared a
               disaster by the President;
               o  have uninsured (or underinsured) needs that cannot be met
               through other means; 7
               o  be a citizen of the United States, a non-citizen national, or a
               qualified alien, or have a qualifying individual who lives with
               the disaster victim;
               o  have been living or usually live in the home in the disaster
               area at the time of the disaster; and
               o  be unable to live in the home, cannot get to their home due to
               the disaster, or the home requires repairs because of damage from
               the disaster.

    If a disaster victim is eligible for housing assistance from FEMA based
    upon the above criteria, grant funds can be used for housing assistance
    purposes. Individuals or households who receive the assistance may be
    asked to show receipts to prove that it was used for eligible housing
    expenses. If an individual is unable to find a rental house or apartment
    within a reasonable commuting distance of their damaged home, FEMA may
    provide direct assistance in the form of a travel trailer or mobile home.
    Direct or financial housing assistance from FEMA does not require that an
    applicant file for an Small Business Administration (SBA) disaster loan
    and is 100 percent federally funded and administered by the federal
    government. While the financial housing assistance is subject to the
    $25,000 cap, the cost of direct housing assistance is not subject to the
    cap.

    In contrast, ONA grants are provided in a cost-shared partnership between
    FEMA and the state. As part of this partnership, FEMA and the state engage
    in annual coordination efforts to determine how the ONA will be
    administered in any presidentially-declared disaster in the coming year.
    For example, the state establishes award levels related to vehicle
    repairs, vehicle replacement, and funeral grants. States may choose the
    level of involvement of state officials in administering the program and
    assume complete, partial, or no responsibility for administering the
    program. Whichever option a state chooses, FEMA provides 75 percent of the
    grant funds, and the state is obligated to provide the balance of ONA
    grant funds.

    6 Ibid.

    7 Loans from the Small Business Administration are considered to be the
    primary means of disaster assistance for disaster victims who have the
    financial ability to repay such loans. For some IHP benefits, FEMA may
    refer applicants above a certain income threshold to first apply to the
    Small Business Administration for disaster loan assistance.

    To receive ONA grant funds, an applicant must generally meet the
    eligibility requirements for housing assistance, must have necessary
    expenses or serious needs because of the disaster, and must first apply to
    the SBA Disaster Loan Program and either be declined for assistance, or
    demonstrate that SBA disaster assistance is insufficient to meet all
    disaster-related necessary expenses and serious needs. Applicants who do
    not meet a certain income threshold may be excused from the requirement to
    complete the SBA disaster loan application. For example, in 2005, a
    household of four with an income less than $24,188 would not be required
    to complete the SBA loan application.

    The types of assistance that may be provided depending on the level of the
    applicant's income are for personal property, transportation, and
    moving/storage expenses. Eligibility for medical, dental, funeral and
    other/miscellaneous expenses is not dependent on an applicant's income;
    for these categories applicants are referred directly to ONA for
    assistance. Specifically, FEMA may provide ONA grant funding to replace
    personal property, repair and replace vehicles, and reimburse moving and
    storage expenses if an applicant is ineligible for an SBA disaster loan.
    To receive ONA grants, for public transportation, medical and dental, and
    funeral and burial expenses, disaster victims are not required to apply
    for an SBA loan to be eligible and income levels are not subject in
    determining eligibility.

    FEMA's Decentralized Structure for Implementing the IHP Relies Primarily on
    Contract and Temporary Employees

    FEMA manages the IHP primarily through a de-centralized structure of
    permanent and temporary field offices staffed primarily by contract and
    temporary employees. The offices include the FEMA Recovery Division in
    FEMA Headquarters, regional offices, National Processing Service Centers,
    Joint Field Offices, Area Field Offices, and Disaster Recovery Centers.
    The Stafford Act authorizes FEMA to draw upon temporary personnel for
    disaster operations.

    FEMA's Recovery Division in Washington, D.C., manages the IHP and as of
    August 2006 had about 15 people to develop and issue policies and
    procedures for implementing the individual assistance programs. Eight
    members of that staff are specifically responsible for managing the IHP.
    In FEMA's 10 regional offices, one or two full-time employees manage
    individual assistance programs. The regional office staff may participate
    in the preliminary disaster assessment after a disaster to determine what
    individual assistance is needed.

    FEMA's National Processing Service Centers (NPSC) provide centralized
    disaster application service to FEMA customers and help coordinate with
    other assistance programs. The centers are to provide an automated
    "teleregistration" service-a toll-free phone bank through which disaster
    victims apply for IHP assistance and through which their applications are
    processed and their questions answered. The NPSCs are also to assist with
    referrals to other assistance programs, process appeals, recertify
    existing rental assistance, assist with recovering funds, and respond to
    congressional inquiries. As of August 2006, a total of 13 permanent FEMA
    employees were working at the NPSCs in the United States and were
    supported by several hundred temporary employees (whose numbers can be
    increased by 2,000 to 3,000 additional temporary employees for application
    processing after a disaster), as well as contract employees. FEMA operates
    four NPSCs in Denton, Texas; Puerto Rico; Winchester, Virginia; and
    Hyattsville, Maryland.

               o  The Texas NPSC is in charge of caller services including call
               centers, and the agency's quality control program. (Although all
               NPSCs have call centers within their offices, the Texas NPSC is in
               charge of the general policies and procedures for those call
               centers, and also sets up arrangements with the IRS and private
               companies when FEMA needs to handle added call volume.)
               o  The Puerto Rico NPSC is also a call center, with a specialty in
               handling calls from Spanish speaking applicants. This center has
               oversight from the Texas NPSC.
               o  The Virginia NPSC is the central point of contact for the
               National Emergency Management Information System, the main
               database/automated processing system for IHP application and
               benefits determination and processing, the NPSC Coordination Team,
               and the Inspection Management contracts.
               o  The Maryland NPSC is responsible for oversight of all mail
               operations and receives management oversight from the Virginia
               NPSC.

    At FEMA's Inspections Services Section, located in the Virginia NPSC, as
    of August 2006, one permanent and approximately 35 to 40 temporary FEMA
    employees oversee the work of two firms with standing contracts to perform
    inspection services. Each firm has about 2,000 inspectors who visit
    applicants' homes to verify disaster-related damages to real and personal
    property.

    Temporary FEMA field locations are established after a disaster occurs.
    FEMA deploys about 600-700 "reservists" or disaster assistance employees
    who are deployed at field offices at the state and local levels to augment
    full time FEMA staff temporarily re-assigned from FEMA headquarters and
    regional offices.

               o  The Joint Field Office is to serve as the temporary
               headquarters for disaster response and recovery efforts and is
               typically located in the capital of the state where a disaster
               occurred or in the high impact area. The joint office houses FEMA,
               state partners, other federal agencies, and voluntary agencies.
               Two key FEMA joint field office officials direct and coordinate
               disaster response and recovery operations for program
               implementation at the local level. The Federal Coordinating
               Officer is responsible for assessing disaster needs, establishing
               the joint office and Disaster Recovery Centers and other possible
               disaster facilities, and coordinating the administration of
               disaster relief. The FEMA operations section chief's
               responsibilities include managing the Human Services Branch that
               oversees provision of mass care and food, individual assistance,
               the coordination of voluntary agency contributions, and donations.
               The role of regional coordinating structures varies depending on
               the situation. Many incidents may be coordinated by regional
               structures primarily using regional assets. Larger, more complex
               incidents may require direct coordination between the joint office
               and the national level, with regional structures continuing to
               play a supporting role. The focal point for coordination of
               federal support is the joint field office.

               o  FEMA may also establish Area Field Offices whose staff and
               organization is to mirror the joint field office and provide
               similar coordination and oversight in support of the joint office
               at the local level. The area office reports to the joint office.
               The area office's operational responsibilities are to be
               delineated by the joint office which may establish as many area
               filed offices as deemed necessary and efficient to the response.

               o  FEMA Disaster Recovery Centers are offices where applicants may
               go for information about FEMA and other disaster assistance
               programs. Recovery center locations are usually announced in local
               newspapers and on local television and radio stations and are
               established close to the disaster area, often in schools or
               armories to be readily accessible to those in need of assistance.
               The centers are temporary facilities jointly operated by the state
               and FEMA where representatives of federal agencies, local and
               state governments, and voluntary relief organizations provide
               guidance regarding disaster recovery and literature on services
               available, including housing assistance and individual and
               household grants information, educational materials, crisis
               counseling, assistance in completing applications and answers to
               questions, resolution to problems, and referrals to agencies that
               may provide further assistance. The number of centers depends on
               the magnitude of the disaster and the size of the area included in
               the declaration.

    FEMA's Process for Providing IHP Benefits

    Under the Stafford Act, the federal government provides disaster
    assistance after a presidential disaster declaration. A presidential
    disaster declaration results from a legal process involving specific steps
    taken by local, state, and federal governments as generally shown in
    figure 8.

    Figure 8: Disaster Declaration Process

    After a disaster occurs and the state determines that effective response
    may exceed both state and local resources, a state is to first request a
    preliminary damage assessment.8 Teams are assembled from individuals from
    FEMA, the Small Business Administration, state emergency management, and
    the local jurisdiction who are to (1) assess the types of dwellings
    affected, (2) assess the probable insurance and income levels of
    residents, and (3) estimate the number of individuals affected to
    determine potential funding requirements. After the assessment is
    complete, the Governor is to determine if federal disaster assistance is
    needed and, if it is, he or she is to submit a request to the President
    through the FEMA Regional Director who reviews and communicates the
    request to FEMA's Headquarters within the Emergency Preparedness and
    Response Directorate. The Directorate's Undersecretary is to then make a
    recommendation to the President, who makes the final decision to declare a
    major disaster, an emergency, or deny the request for federal assistance.

    FEMA Provides Disaster Victims with Multiple Means to Apply for Assistance

    Once the President declares a disaster and decides to provide federal
    disaster assistance, disaster victims in declared counties must first
    apply for assistance with FEMA, by phone, in person at a disaster recovery
    center, or over the Internet. Typically, an application period is closed
    60 days following the date of the disaster declaration.9 During the
    application process, an individual provides personal information including
    Social Security number, current and pre-disaster address, a telephone
    number, insurance information, total household annual income, and a
    description of losses caused by the disaster. After the submission of an
    application, FEMA provides applicants with a copy of their application and
    a program guide, "Help After a Disaster: Applicant's Guide to the
    Individuals and Households Program." The document, whose cover is shown in
    figure 9, is also available on the Internet.

    8 The requirement for a joint preliminary damage assessment may be waived
    for those incidents of unusual severity and magnitude that do not require
    field damage assessments to determine the need for supplemental federal
    assistance under the Stafford Act, or in such other instances determined
    by the Regional Director upon consultation with the State. It may be
    necessary, however, to conduct an assessment to determine unmet needs for
    managerial response purposes.

    9 The Regional Director or his/her designee may extend the application
    period when the State requests more time to collect applications from the
    affected population. The Regional Director or his/her designee may also
    extend the standard application period when necessary to establish the
    same application deadline for contiguous counties or states.

    Figure 9: Cover of FEMA's Applicant's Guide to the Individuals and
    Households Program

    Once a FEMA representative records personal information from a disaster
    application and provides the applicant with a FEMA application number,
    FEMA's National Emergency Management Information System automatically
    determines potential eligibility for designated categories of assistance.

    To confirm that damages occurred to the home and personal property as
    reported in disaster assistance applications, FEMA is to conduct
    individual inspections to verify damage, ownership, and occupancy.
    Contract inspectors are to schedule damage inspection appointments with
    applicants. The inspections usually take about 30 to 60 minutes, according
    to FEMA. Homeowners are not required to be at home at the time of the
    inspection, but a designated representative generally must be present and
    the applicant must be able to provide proof of ownership and occupancy to
    the inspector. This assessment provides a basis to determine how much
    assistance an individual/household should receive for housing repair and
    replacement and for other needs. If an applicant's home or its contents
    were damaged and the applicant has insurance, they must provide FEMA with
    a letter from the insurance company regarding the settlement of the claim
    before FEMA issues its inspection report. (If the damages are caused by
    flooding and the applicant has flood insurance, FEMA will issue an
    inspection report before receiving a copy of the applicant's flood
    insurance decision letter because temporary living expenses are not
    covered by flood insurance.)

    According to FEMA, the system reportedly determines eligibility for about
    90 percent of applicants requesting housing assistance, usually within 10
    days of application. FEMA caseworkers are to process the remaining
    applications that cannot be automatically processed, to determine an
    applicant's eligibility for disaster assistance based on additional
    documentation, for example, documentation of insurance payment; these
    applications may take longer to process.10 If the applicant qualifies for
    a grant, FEMA sends the applicant a check by mail or deposits the funds
    granted in the applicant's bank account. FEMA will also send a letter
    describing how the applicant is to use the money (for example; repairs to
    their home or to rent another house while the applicant makes repairs).
    Recipients of IHP assistance must recertify their continuing need for
    assistance every 30 to 90 days, depending on the individual circumstances.
    FEMA uses three criteria to recertify the applicant.

               o  First, FEMA may provide continued housing assistance (travel
               trailers or rental assistance) during the period of assistance,
               based on need, and generally only when adequate, alternate housing
               is not available.
               o  Second, for rental assistance, the applicant must show that he
               or she used the previous rental assistance to pay rent by sending
               copies of receipts.11

               o  Third, the applicant must show he or she is working to find
               permanent housing that the applicant can afford. For example, FEMA
               is to require applicants to show they are actively seeking
               affordable housing, maintain a list of addresses they looked at,
               including the landlord's name and phone number, and specify the
               reason(s) for not renting the units. A FEMA Housing Adviser may
               verify with landlords that a contact was made by an applicant
               seeking a rental unit.

    10 The National Emergency Management Information System also interfaces
    with SBA's information systems to refer applicants (based on self-declared
    income and number of individuals in household) to SBA for loan purposes.

    Conversely, if FEMA determines that the applicant does not qualify for an
    IHP grant, it is to send the applicant a letter explaining why the
    applicant was turned down and gives the applicant a chance to appeal the
    decision. Applicants who are denied housing and other needs assistance
    under IHP have 60 days from the date that FEMA notifies the applicant to
    appeal the decision. According to FEMA, common reasons for denial include:

               o  Adequate insurance coverage.
               o  Damage to secondary home, not a primary residence.
               o  Duplicate applications made from the same address.
               o  Inability to prove occupancy or ownership.
               o  More information is needed before the analysis can be
               completed.

    11 For Hurricanes Katrina and Rita, a process was established to allow the
    first $2,358 rental assistance award to be spent on essential needs if the
    applicant filled out the Declaration of Use of Funds.

    Appendix IV: Issues Reported Related to FEMA's IHP Disaster Assistance
    Provided for Katrina

                                              White      DHS
                            DHS /    House    House   Inspector Senate
                    GAO      FEMA    Report   Report   General  Report  GAO   GAO   GAO
                  February February February February   March    May   June  June  July
    Issue          2006a    2006b    2006c    2006d     2006e   2006f  2006g 2006h 2006i
    Planning
    Inadequate                X                 X         X       X
    planning
    Lack of          X                                                   X     X
    guidance/
    procedures
    Inadequate       X                                    X       X      X     X     X
    internal
    controls
    Inability to                       X
    track
    evacuees
    Inefficient                        X                          X
    method for
    procuring
    manufactured
    housing
    Inadequate                                            X
    contractor
    oversight
    Need to                   X        X                  X
    coordinate
    with other
    agencies
    Trained staff
    Insufficient              X                           X       X
    staffing
    Inadequate                X                           X
    training
    Program
    structure
    Reimbursement                               X
    for repairs
    to existing
    housing units
    not
    authorized.
    Program is                                            X
    cumbersome,
    confusing,
    and not
    easily
    administered,
    subject to
    funding caps,
    cost share
    requirements,
    and time
    limitations.
    Long term                                             X
    needs not
    addressed

    Source: GAO analysis of assessments cited.

    aGAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
    FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
    Abuse, GAO-06-403T (Washington, D.C.: Feb. 13, 2006).

    bDHS/FEMA, Initial Response Hot Wash Hurricane Katrina In Louisiana,
    DR-1603-LA (New Orleans, Louisiana: Feb. 13, 2006).

    cU.S. House of Representatives, A Failure of Initiative: Final Report of
    the Select Bipartisan Committee to Investigate the Preparation for and
    Response to Hurricane Katrina (Washington, D.C.: February 15, 2006)

    dThe White House, The Federal Response To Hurricane Katrina: Lessons
    Learned (Washington, D.C.: Feb. 15, 2006).

    eDepartment of Homeland Security Inspector General, A Performance Review
    of FEMA's Disaster Management Activities in Response to Hurricane Katrina,
    OIG-06-32 (Washington, D.C.: Mar. 31, 2006).

    fUnited States Senate Committee on Homeland Security and Governmental
    Affairs, Hurricane Katrina: A Nation Still Unprepared (Washington, D.C.,
    May 2006).

    gGAO, Hurricanes Katrina And Rita Disaster Relief: Improper and
    Potentially Fraudulent Individual Assistance Payments Estimated to Be
    between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.: June
    14, 2006).

    hGAO, Expedited Assistance for Victims of Hurricanes Katrina And Rita:
    FEMA's Control Weaknesses Exposed the Government to Significant Fraud And
    Abuse, GAO-06-655 (Washington, D.C.: June 16, 2006).

    iGAO, Individual Assistance Programs: Framework for Fraud, Prevention,
    Detection, and Prosecution, GAO-06-954T (Washington, D.C.: July 12, 2006).

    Appendix V: GAO's June 14, 2006 Testimony on Fraud and Abuse of FEMA's
    Individual Assistance program

    Appendix VI: GAO Contact and Staff Acknowledgments

    GAO Contacts

    William Jenkins, Director, Homeland Security & Justice Issues (202)
    512-8757 ( jenkinswo@gao.gov ) and Greg Kutz, Managing Director, GAO
    Forensic Audits and Special Investigations, (202) 512-7455 ( kutzg@gao.gov
    )

    Acknowledgments

    In addition to the contacts named above, the following individuals from
    GAO's Forensic Audits and Special Investigations and GAO's Homeland
    Security and Justice Team also made contributions to this report: Kord
    Basnight, James Berry Jr., Gary Bianchi, Valerie Blyther, Matthew Brown,
    Norman Burrell, Willie Commons, Jennifer Costello, Christine Davis,
    Katherine Davis, Paul Desaulniers, Steve Donahue, Dennis Fauber,
    Christopher Forys, Adam Hatton, Aaron Holling, William O. Jenkins Jr.,
    Chris Keisling, Jason Kelly, John Kelly, Sun Kim, Stan Kostyla, Crystal
    Lazcano, Tram Le, John Ledford, Jennifer Leone, Barbara Lewis, Gary M.
    Malavenda, Marvin McGill, Jonathan Meyer, Gertrude Moreland, Richard
    Newbold, Kristen Plungas, Jennifer Popovic, John Ryan, Sidney Schwartz,
    Robert Sharpe, Gail Spear, Tuyet-Quan Thai, Patrick Tobo, Matthew Valenta,
    Tamika Weerasingha, and Scott Wrightson.

    Glossary

    Dental Expenses

    Financial assistance to address the dental costs.

    Direct Assistance

    Financial assistance to address the cost of funeral services, burial,
    cremation, and other funeral expenses related to a death caused by the
    disaster.

    Expedited Assistance

    Expedited assistance provides fast track money in the form of $2,000 in
    expedited payments to eligible disaster victims to help with immediate,
    emergency needs of food, shelter, clothing and personal necessities. FEMA
    changed the maximum amount from $2,000 to $500 on July 24, 2006.

    Funeral Expenses

    Money to address the cost of funeral services, burial, cremation, and
    other funeral expenses related to a death caused by the disaster.

    Home Replacement Grant

    Financial assistance provided to replace the primary residence of an
    owner-occupied dwelling if the dwelling was damaged by the disaster and
    there was at least $10,000 of damage (as adjusted annually to reflect
    changes in the CPI). The applicant may either replace the dwelling in its
    entirety for $10,000 (as adjusted annually to reflect changes in the CPI)
    or less, or may use the assistance toward the cost of acquiring a new
    permanent residence that is greater in cost than $10,000 (as adjusted
    annually to reflect changes in the CPI).

    Home Repair Grant

    Financial assistance provided for the repairs of uninsured
    disaster-related damages to an owner's primary residence. The funds are to
    help return owner-occupied primary residences to a safe and sanitary
    living or functioning condition. Repairs may include utilities and
    residential infrastructure damaged by a major disaster.

    IHP Other Needs Assistance Categories

    The ONA Program is designed for those with serious needs who have no other
    source of assistance. The program covers necessary expenses such as
    uninsured personal property, medical and dental expenses and funeral
    expenses.

    Lodging Expenses

    Expenses for reasonable short-term accommodations that individuals or
    households incur in the immediate aftermath of a disaster. Lodging
    expenses may include but are not limited to the cost of brief hotel stays.

    Medical Expenses

    Financial assistance to address the cost of medical treatment or the
    repair or replacement of medical equipment required as a result of the
    disaster.

    Moving & Storage Expenses

    Financial assistance to address necessary expenses and serious needs
    related to moving and storing personal property to avoid additional
    disaster damage.

    Necessary Expense

    The cost associated with acquiring an item or items, obtaining a service,
    or paying for any other activity that meets a serious need.

    Other Needs Expenses

    Financial assistance to address the cost of other specific
    disaster-related necessary expenses and serious needs of individuals and
    households.

    Personal Property Expenses

    Financial assistance to address the cost of repairing and/or replacing
    disaster damaged items, such as furniture, bedding, appliances, and
    clothing.

    Preliminary Disaster Assessment

    A mechanism used to determine the impact and magnitude of damage and the
    resulting unmet needs of individuals, businesses, the public sector, and
    the community as a whole.

    Rental Assistance

    As part of IHP housing assistance, rental assistance funds address the
    cost renting another place to live. For homeowners, this money may be
    provided in addition to home repair, if needed.

    Serious Need

    The requirement for an item, or service, that is essential to an
    applicant's ability to prevent, mitigate, or overcome a disaster-related
    hardship, injury or adverse condition.

    Transitional Housing Assistance

    Transitional Housing Assistance is a cash grant of up to $2,358 per
    household intended to cover an initial 3 months of rental payments for
    eligible applicants. Transitional Housing Assistance is a form of rental
    assistance and was implemented for the first time in selected disaster
    areas in Louisiana and Mississippi during Hurricane Katrina.

    Transportation Expenses

    Financial assistance for public transportation and any other
    transportation related costs or expense and the cost of repairing and/or
    replacing a disaster damaged vehicle that is no longer usable because of
    disaster-related damage.

    Related GAO Products

    Small Business Administration: Actions Needed to Provide More Timely
    Disaster Assistance. GAO-06-860 . Washington, D.C.: July 28, 2006.

    Individual Disaster Assistance Programs: Framework for Fraud Prevention,
    Detection, and Prosecution. GAO-06-954T . Washington, D.C.: July 12, 2006.

    Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
    Control Weaknesses Exposed the Government to Significant Fraud and Abuse.
    GAO-06-655 . Washington, D.C.: June 16, 2006.

    Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially
    Fraudulent Individual Assistance Payments Estimated to Be Between $600
    Million and $1.4 Billion. GAO-06-844T . Washington, D.C.: June 14, 2006.

    Hurricanes Katrina and Rita: Coordination between FEMA and the Red Cross
    Should Be Improved for the 2006 Hurricane Season. GAO-06-712 . Washington,
    D.C.: June 8, 2006.

    Hurricane Katrina: Improving Federal Contracting Practices in Disaster
    Recovery Operations. GAO-06-714T . Washington, D.C.: May 4, 2006.

    Hurricane Katrina: Planning for and Management of Federal Disaster
    Recovery Contracts. GAO-06-622T . Washington, D.C.: April 10, 2006.

    Hurricane Katrina: Comprehensive Policies and Procedures Are Needed to
    Ensure Appropriate Use of and Accountability for International Assistance.
    GAO-06-460 . Washington, D.C.: April 6, 2006.

    Hurricane Katrina: Policies and Procedures Are Needed to Ensure
    Appropriate Use of and Accountability for International Assistance.
    GAO-06-600T . Washington, D.C.: April 6, 2006.

    Agency Management of Contractors Responding to Hurricanes Katrina and
    Rita. GAO-06-461R . Washington, D.C.: March 15, 2006.

    Hurricane Katrina: GAO's Preliminary Observations Regarding Preparedness,
    Response, and Recovery. GAO-06-442T . Washington, D.C.: March 8, 2006.

    Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
    Control Weaknesses Exposed the Government to Significant Fraud and Abuse.
    GAO-06-403T . Washington, D.C.: February 13, 2006.

    Statement by Comptroller General David M. Walker on GAO's Preliminary
    Observations Regarding Preparedness and Response to Hurricanes Katrina and
    Rita. GAO-06-365R . Washington, D.C.: February 1, 2006.

    Hurricanes Katrina and Rita: Provision of Charitable Assistance.
    GAO-06-297T . Washington, D.C.: December 13, 2005.

    Hurricanes Katrina and Rita: Preliminary Observations on Contracting for
    Response and Recovery Efforts. GAO-06-246T . Washington, D.C.: November 8,
    2005.

    (440473/192191)

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    Highlights of GAO-06-1013 , a report to congressional committees

    September 2006

    HURRICANES KATRINA AND RITA

    Unprecedented Challenges Exposed the Individuals and Households Program to
    Fraud and Abuse; Actions Needed to Reduce Such Problems in Future

    In 2005, Hurricanes Katrina and Rita caused unprecedented damage. FEMA's
    Individuals and Households Program (IHP), provides direct assistance
    (temporary housing units) and financial assistance (grant funding for
    temporary housing and other disaster-related needs) to eligible
    individuals affected by disasters. Our objectives were to (1) compare the
    types and amounts of IHP assistance provided to Hurricanes Katrina and
    Rita victims to other recent hurricanes, (2) describe the challenges FEMA
    faced by the magnitude of the requests for assistance following Hurricanes
    Katrina and Rita, and (3) determine the vulnerability of the IHP program
    to fraud and abuse. GAO determined the extent to which the program was
    vulnerability to fraud and abuse, by conducting statistical sampling, data
    mining and undercover operations.

    What GAO Recommends

    GAO is recommending that FEMA address the potential for fraud and abuse in
    the IHP by ensuring that payments go to recipients at valid addresses;
    establishing procedures to avoid duplicate lodging payments; increasing
    accountability over debit cards; and identifying and recouping payments
    based on improper and potentially fraudulent applications. FEMA
    substantially agreed with our recommendations; however DHS disagreed with
    our estimate of the extent of improper and potentially fraudulent
    payments.

    For Hurricanes Katrina and Rita, FEMA received more than 2.4 million
    applications for IHP assistance and distributed $7.0 billion as compared
    to the six hurricanes that hit the United States in the prior two years
    and totaled about 1.5 million applications and about $1.5 billion in
    assistance, respectively. Temporary housing assistance and expedited
    assistance accounted for much of the increase in IHP expenditures as
    compared to prior years. Overall, however, although the number of
    applications was much higher, the percentage approved for non-housing
    assistance was notably lower for Hurricanes Katrina and Rita than in 2003
    and 2004.

    The magnitude of Hurricanes Katrina and Rita posed challenges in providing
    assistance to an unprecedented number of victims many of whom were widely
    dispersed across the country. To address these challenges, FEMA developed
    new approaches and adapted existing approaches to quickly provide
    assistance and improve communication with victims. Despite these efforts,
    management challenges in staffing and training and program restrictions
    limited the effectiveness and efficiency of the disaster assistance
    process. FEMA has proposed a number of initiatives to address these
    problems, but it is too early to determine whether these efforts will
    effectively address the problems identified.

    GAO identified the potential for significant fraud and abuse as a result
    of FEMA's management of the IHP in response to Hurricanes Katrina and
    Rita. Flaws in the registration process resulted in what GAO estimated to
    be between $600 million and $1.4 billion in improper and potentially
    fraudulent payments due to invalid registration data. In addition,
    duplicate payments were made and FEMA lacked accountability over $2,000
    debit cards that were given to disaster victims.

    Disaster Recovery Center where disaster victims applied for Individual and
    Households Program benefits after Hurricane Katrina in St. Bernard Parish,
    Louisiana.
    *** End of document. ***