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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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 [email protected] or Greg Kutz at (202) 512-7455 or
[email protected] 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 ( [email protected] ) and Greg Kutz, Managing Director, GAO
Forensic Audits and Special Investigations, (202) 512-7455 ( [email protected]
)

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. ***