Hurricanes Katrina and Rita Disaster Relief: Continued Findings  
of Fraud, Waste, and Abuse (06-DEC-06, GAO-07-252T).		 
                                                                 
Hurricanes Katrina and Rita destroyed homes and displaced	 
millions of individuals. While the Federal Emergency Management  
Agency (FEMA) continues to respond to this disaster, GAO's	 
previous work identified significant control			 
weaknesses--specifically in FEMA's Individuals and Households	 
Program (IHP) and in the Department of Homeland Security's (DHS) 
purchase card program--resulting in significant fraud, waste, and
abuse. Today's testimony will address whether FEMA provided	 
improper and potentially fraudulent (1) rental assistance	 
payments to registrants at the same time it was providing free	 
housing via trailers and apartments; (2) duplicate assistance	 
payments to individuals who claimed damages to the same property 
for both hurricanes Katrina and Rita; and (3) IHP payments to	 
non-U.S. residents who did not qualify for IHP. This testimony	 
will also discuss (1) the importance of fraud identification and 
prevention, and (2) the results of our investigation into	 
property FEMA bought using DHS purchase cards. To address these  
objectives, GAO data mined and analyzed FEMA records and	 
interviewed city officials, university officials, and foreign	 
students. GAO also traveled to Louisiana and Texas to inspect	 
selected property items and to investigate improper housing	 
payments to individuals living in FEMA-provided housing.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-252T					        
    ACCNO:   A63926						        
  TITLE:     Hurricanes Katrina and Rita Disaster Relief: Continued   
Findings of Fraud, Waste, and Abuse				 
     DATE:   12/06/2006 
  SUBJECT:   Accountability					 
	     Agency evaluation					 
	     Aliens						 
	     Disaster relief aid				 
	     Erroneous payments 				 
	     Federal property management			 
	     Fraud						 
	     Housing allowances 				 
	     Hurricane Katrina					 
	     Hurricane Rita					 
	     Internal controls					 
	     Overpayments					 
	     Program abuses					 
	     Program evaluation 				 
	     Rental housing					 
	     Strategic planning 				 
	     Individuals and Households Program 		 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-07-252T

   

     * [1]Summary
     * [2]Potentially Improper and/or Fraudulent Housing Assistance Pa
     * [3]Potentially Improper and/or Fraudulent IHP Assistance Paymen
     * [4]Potentially Improper and/or Fraudulent Payments to Nonqualif

          * [5]IHP Payments to Ineligible International Students
          * [6]Payments to Other Nonqualified Aliens

     * [7]Ineffective Detective Controls Point to Need for Better Prev

          * [8]FEMA's Detection Controls Are Not Effective at Identifying A
          * [9]FEMA Had Not Issued Recoupment Notice to GAO Registrations

     * [10]FEMA Cannot Adequately Track Its Property

          * [11]Missing Items FEMA Purchased for Hurricane Relief
          * [12]Title and Location of Flat-Bottom Boats

     * [13]Conclusions
     * [14]Contacts and Acknowledgments
     * [15]Appendix I: Scope and Methodology
     * [16]Appendix II: Potentially Improper and/or Fraudulent Rental A

          * [17]Order by Mail or Phone

Testimony

Before the Committee on Homeland Security and Governmental Affairs, U.S.
Senate

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EST

Wednesday, December 6, 2006

HURRICANES KATRINA AND RITA DISASTER RELIEF

Continued Findings of Fraud, Waste, and Abuse

Statement of Greg Kutz, Managing Director

Forensic Audits and Special Investigations

John J. Ryan, Assistant Director

Forensic Audits and Special Investigations

GAO-07-252T

Chairman and Members of the Committee:

Thank you for the opportunity to discuss our forensic audit and related
investigations into the Federal Emergency Management Agency's (FEMA)
response to hurricanes Katrina and Rita. In several prior hearings, we
testified that significant control weaknesses in FEMA's Individuals and
Households Program (IHP) and in the Department of Homeland Security's
(DHS) purchase card program have left the government vulnerable to
significant fraud, waste, and abuse. In February 2006,^1 we testified
before this Committee that specific control weaknesses in the IHP program
resulted in improper expedited assistance payments and nonexistent
controls left the government vulnerable to substantial fraud and abuse
related to IHP. Several months later, in June 2006,^2 we testified on
additional work performed whereby we projected that the weak or
nonexistent controls resulted in an estimated $1 billion dollars in
potentially fraudulent and improper IHP payments.^3 Most recently, in July
2006,^4 we testified before this Committee that control weaknesses in
DHS's purchase card program had resulted in fraud, waste, and abuse,
including activity by FEMA related to hurricanes Katrina and Rita. Our
purchase card work also showed that poor controls over property acquired
primarily for hurricanes Katrina and Rita operations, including laptops,
printers, global positioning system (GPS) units, and flat-bottom boats,
resulted in lost, missing, or stolen assets. We have issued companion
reports^5 following each of these testimonies that included numerous
recommendations on how to address the weaknesses identified by our audit
and investigative work.

^1GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
Abuse, [18]GAO-06-403T (Washington, D.C.: Feb. 13, 2006).

^2GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
Between $600 Million and $1.4 Billion, [19]GAO-06-844T (Washington, D.C.:
June 14, 2006).

^3 To reach this estimate we followed a probability procedure based on
random selections. Therefore, our sample is only one of a large number of
samples that we might have drawn. Since each sample could have provided
different estimates, we expressed our confidence in the precision of our
particular sample's results as a 95 percent confidence interval. The 95
percent confidence interval surrounding the estimate of $1 billion ranges
from $600 million to $1.4 billion.

^4GAO, Purchase Cards: Control Weaknesses Leave DHS Highly Vulnerable to
Fraudulent, Improper, and Abusive Activity, [20]GAO-06-957T (Washington,
D.C.: July 19, 2006). This work was performed jointly with the DHS Office
of Inspector General.

As we previously reported, the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (Stafford Act)^6 provides the basis for IHP. IHP
is a major component of the federal disaster response efforts designed to
provide financial assistance to individuals and households that, as a
direct result of a major disaster, have necessary expenses and serious
needs that cannot be met through other means. The Stafford Act allowed
registrants to receive financial assistance up to a cap of $26,200 for
disasters occurring in 2005. In early October 2006, FEMA reported to
Congress that it had delivered approximately $7 billion in IHP aid for
hurricanes Katrina and Rita. This IHP amount included expedited
assistance, temporary housing assistance, repair and replacement of real
and personal property, and other miscellaneous categories.

Today's testimony reflects new findings related to additional work we have
performed since June 2006. The testimony will address whether FEMA
provided potentially improper and/or fraudulent (1) rental assistance
payments to registrants at the same time it was providing free housing via
trailers and apartments; (2) duplicate assistance payments to individuals
who claimed damages to the same property for both hurricanes Katrina and
Rita; and (3) IHP payments to nonqualified aliens who did not qualify for
IHP. This testimony will also discuss (1) the importance of fraud
prevention, and (2) the results of our investigation into property bought
by FEMA using DHS purchase cards, which was subsequently lost or stolen.
For purposes of this testimony, potentially improper and/or fraudulent
payments refers to payments made by FEMA based on potentially improper
and/or fraudulent registration data submitted by IHP registrants.

^5GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
Abuse, [21]GAO-06-655 (Washington, D.C.: June 16, 2006); GAO, Hurricanes
Katrina and Rita: Unprecedented Challenges Exposed the Individuals and
Households Program to Fraud and Abuse; Actions Needed to Reduce Such
Problems in Future, [22]GAO-06-1013 (Washington, D.C.: Sept. 27, 2006);
and GAO and DHS Inspector General, Purchase Cards: Control Weaknesses
Leave DHS Highly Vulnerable to Fraudulent, Improper, and Abusive Activity,
[23]GAO-06-1117 (Washington, D.C.: Sept. 28, 2006).

^642 U.S.C. S5121-S5206.

To address these objectives, we compared information included in FEMA
databases; performed data mining on FEMA databases; and interviewed
officials in selected cities and universities, and foreign students. We
also traveled to Louisiana and Texas to physically inspect selected items
FEMA purchased for hurricane relief efforts. For details on our scope and
methodology, see appendix I. We conducted our audit and investigations
from June 2006 through November 2006. We conducted our audit work in
accordance with generally accepted government auditing standards and
conducted our investigative work in accordance with the standards
prescribed by the President's Council on Integrity and Efficiency.

Summary

Our audit and investigative work on controls over FEMA disaster relief
payments associated with hurricanes Katrina and Rita identified additional
potentially improper and/or fraudulent payments, including the following:

           o Nearly $17 million in potentially improper and/or fraudulent
           rental assistance payments to individuals while they were living
           in trailers also paid for by FEMA. For example, after FEMA
           provided a trailer to a household--in January 2006--FEMA provided
           rental assistance payments to the same household in late January,
           February, and April of 2006 totaling approximately $5,500.

           o FEMA provided potentially improper and/or fraudulent rental
           assistance payments to individuals living in FEMA-paid apartments.
           For example, FEMA made nearly $46,000 in rental assistance
           payments to at least 10 individuals living in apartments at the
           same time that the apartments were being paid for by FEMA through
           the city of Plano, Texas. Seven of 10 in this group self-certified
           to FEMA that they needed rental assistance, despite the fact that
           they were living in rent-free housing. Because of limitations in
           FEMA data, we were not able to identify the full extent of
           potentially improper rental assistance payments made to
           individuals in FEMA-paid apartments.

           o Nearly $20 million in potentially improper and/or fraudulent
           payments went to individuals who registered for both hurricanes
           Katrina and Rita assistance using the same property. With few
           exceptions, FEMA officials explained that victims of both
           disasters are entitled to only one set of IHP payments for the
           same damaged property. However, FEMA officials told us that they
           turned off the system edits that should have identified these
           types of duplicate payments to increase the speed with which FEMA
           could distribute disaster assistance. Consequently, FEMA paid over
           7,000 individuals IHP assistance twice for the same property--once
           for Hurricane Katrina and once for Hurricane Rita. These
           individuals received double payments for expedited assistance,
           rental assistance, and/or housing replacement. For example, FEMA
           records showed that one registrant received two housing
           replacement payments of $10,500 each, despite the fact that he had
           only one property to replace.

           o Millions of dollars of improper and potentially fraudulent
           payments went to nonqualified aliens, including foreign students
           and temporary workers. For example, FEMA improperly paid at least
           $3 million in IHP assistance to more than 500 ineligible foreign
           students at four universities. Further, FEMA provided IHP payments
           that included expedited assistance and personal property totaling
           more than $156,000 to 25 individuals who claimed to be foreign
           workers on temporary visas. FEMA made these payments despite
           having copies of the work visas for several individuals, which
           should have alerted FEMA that the temporary workers were not
           eligible for financial assistance. Because we did not obtain
           information from all universities in the Gulf region and because
           of unavailability of detailed data on other nonqualified legal
           aliens, we were not able to determine the magnitude of potentially
           improper and/or fraudulent payments in this area.

           o The small amount of money that FEMA has been able to collect
           from improper payments further demonstrates the need to have
           adequate preventive controls. We previously reported that
           inadequate preventive controls related to the IHP application
           process resulted in an estimated $1 billion of potentially
           improper and/or fraudulent payments through February 2006. In
           contrast, as of November 2006, FEMA had detected through its own
           processes about $290 million in overpayments. This overpayment
           amount, which FEMA refers to as recoupments, represents the
           improper payments that FEMA had detected and had issued letters
           requesting repayments. However, through November FEMA had only
           collected nearly $7 million of the about $290 million identified
           for recoupment. Collection of only $7 million of an estimated $1
           billion of fraudulent and improper payments clearly supports the
           basic point we have previously made^7 that fraud prevention is far
           more efficient and effective than detection and collection.

           o Regarding the DHS purchase card program, we found overall
           problems with property items bought for hurricanes Katrina and
           Rita relief efforts using government purchase cards. For example,
           FEMA is still unable to locate 48 of the143 missing items (e.g.,
           laptop and printers) identified in our July 2006 testimony.
           Moreover, 37 items were missing from an additional 103 items that
           we investigated. Thus, over a year after being purchased, FEMA
           could not locate 85 of the 246 items (34 percent) that we
           investigated, and are presumed lost or stolen.

           o Our investigation also revealed that although FEMA was in
           possession of 18 of the 20 flat-bottom boats it had purchased for
           hurricane relief efforts, FEMA had not received the title to any
           of these boats. Further, FEMA could not provide any information
           about the location of the remaining two boats, although local law
           enforcement officials informed us that they found one of the boats
           in a shed at the house of its previous owner.

^7GAO, Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution, [24]GAO-06-954T (Washington, D.C.:
July 12, 2006).

Potentially Improper and/or Fraudulent Housing Assistance Payments Related to
Trailers and Apartments

We found that FEMA provided nearly $17 million in potentially improper
and/or fraudulent rental assistance payments to individuals already housed
in other accommodations that FEMA provided through other disaster
assistance programs. The Stafford Act prohibits FEMA from providing rental
assistance payments under IHP to an applicant if temporary housing has
been provided by any other source.^8 Despite this prohibition, FEMA did
not have an effective process in place to compare IHP registrant data with
data on individuals already housed in FEMA-purchased trailers and
FEMA-provided apartments. FEMA also failed to adequately advise victims
that they were prohibited from receiving rental assistance for the same
period they occupied rent-free housing. Consequently, FEMA improperly paid
nearly $17 million to over 8,600 registrants after they had already moved
into FEMA trailers. While the quality of FEMA data did not allow us to
make similar calculations for the amount and number of individuals
receiving rental assistance payments after they had been housed in
FEMA-provided apartments, the amount could be substantial.

In the aftermath of hurricanes Katrina and Rita, FEMA used various
programs to house displaced victims, including financial assistance for
rent and rent-free housing. Rent-free housing included trailers that FEMA
purchased and apartments that FEMA either paid for directly or reimbursed
state and local governments for after they paid landlords on behalf of the
disaster victims. According to a FEMA official, to expedite apartment
rental assistance, FEMA provided payments to over 100 different state and
local governments for the provision of rent-free apartments.

^842 U.S.C. S5155, C.F.R. S206.101.

By comparing information in two of FEMA's databases--the FEMA Response and
Recovery Applicant Tracking System (FRRATS) and the National Emergency
Management Information System (NEMIS)--we calculated that FEMA improperly
made rental assistance payments--intended to cover out-of-pocket rental
expenses--totaling nearly $17 million to over 8,600 individuals after they
had moved into FEMA-provided trailers.^9 Some received multiple rental
assistance payments even after they moved into free FEMA-provided housing.
In some instances, the payments were made based on potentially fraudulent
claims because recipients typically have to certify to FEMA that they
continued to need IHP rental assistance.

Limitations in FEMA apartment data did not allow us to determine the
magnitude of potentially duplicate rental assistance payment to
individuals housed in rent-free apartments. In contrast to trailer data,
which FEMA maintains in the FRRATS database, we could not validate
accuracy or completeness of apartment data. According to FEMA officials,
the accuracy of apartment data was questionable because it came from the
over 100 state and local authorities who assisted in delivering housing
aid for FEMA. The completeness of data was also at issue because FEMA did
not ask states to collect registration data from individuals in rent-free
apartments until well after the aid was provided, and therefore
individuals who may have left the rent-free apartments were not included
in the data. Table 1 provides illustrative examples of duplicate rental
assistance payments to registrants in FEMA trailers and rent-free
apartments.

^9FEMA officials stated that they did not believe that the initial rental
assistance payment, provided to cover the first few months of rental
housing, should be considered a duplication of benefits if it was provided
to trailer residents. FEMA officials argued that this amount is designed
to assist disaster victims in moving from temporary emergency housing into
a normal apartment or home lease situation. The United States District
Court for the Eastern District of Louisiana expressed approval when FEMA
permitted claimants to reapply for three months of IHP rental assistance
even though they had already received IHP rental assistance for that
period where the claimants certified that the first IHP rental assistance
was used for essential needs other than lodging and/or that they had not
been notified the money could only be used for lodging. McWaters v. FEMA,
Civ. Action. No. 05-5488 (Order and Reasons dated 12/12/05 and 6/16/06).
The court also permitted short term lodging program participants to remain
in their rent free lodging two weeks after receiving their rental
assistance or the disapproval of their claim. Id.

Table 1: Examples of Duplicate and Potentially Improper and/or Fraudulent
Housing Assistance Payments Related to FEMA Trailers and Apartments

               Amount of                                                      
           duplicate and Type/ location of                                    
Case improper payment FEMA-provided unit  Details                          
1             $46,000 Apartment/ Plano,      o 10 residents of an          
                         TX                     apartment complex applied and 
                                                received rental assistance.   
                                                o At the same time, FEMA      
                                                provided rent-free housing at 
                                                the apartment in Plano,       
                                                Texas.                        
                                                o FEMA records indicated that 
                                                seven registrants certified   
                                                to FEMA that they needed      
                                                rental assistance, despite    
                                                the fact that they lived in   
                                                rent-free apartments.         
2               3,600 Apartment/ Austin,     o Registrant received free    
                         TX                     housing in September 2005     
                                                when the registrant moved     
                                                into an apartment the city of 
                                                Austin paid for on behalf of  
                                                FEMA.                         
                                                o FEMA made rental assistance 
                                                payments in September 2005,   
                                                February 2006, and May 2006   
                                                totaling more than $3,600 at  
                                                the same time that it paid    
                                                $705 per month for the        
                                                apartment.                    
3               1,700 Apartment/ Houston,    o Registrant received         
                         TX                     assistance in February and a  
                                                smaller payment in May 2006   
                                                covering rent from February   
                                                through May 2006.             
                                                o Registrant received a       
                                                rent-free apartment for the   
                                                months of February, April,    
                                                and May 2006. We were unable  
                                                to confirm whether the        
                                                registrant received rent-free 
                                                housing in March 2006 due to  
                                                incomplete data.              
4               5,400 Trailer/ Slidell,      o Registrant received trailer 
                         LA                     in mid-March 2006.            
                                                o Registrant received two     
                                                rental assistance payments    
                                                totaling more than $5,400 in  
                                                April and May 2006 for the    
                                                time the registrant lived in  
                                                the trailer.                  
5               5,500 Trailer/ Lacombe,      o Five members of the same    
                         LA                     household registered and      
                                                received IHP assistance using 
                                                the same damaged address.     
                                                o FEMA delivered a trailer to 
                                                the damaged property in       
                                                January 2006, but continued   
                                                to provide rental assistance  
                                                to four members of the same   
                                                family in January, February,  
                                                and April 2006.               
                                                o One interviewee informed us 
                                                that the rental receipt that  
                                                a family member provided to   
                                                FEMA was fictitious.          
                                                o In addition to the $5,500   
                                                in improper duplicative       
                                                payments for trailer and      
                                                rental assistance, the family 
                                                also received over $6,000 in  
                                                potentially improper and/or   
                                                fraudulent payments by        
                                                submitting multiple           
                                                registrations.                

Source: GAO analysis of FEMA's IHP trailer, data and apartment data from
selected cities.

           o Case 1 relates to a series of potentially improper and/or
           fraudulent IHP rental assistance payments totaling $46,000 made to
           10 registrants already housed in rent-free housing. In this case,
           FEMA paid nearly $46,000 in rental assistance to 10 residents of
           an apartment complex in Plano, Texas, from September 2005 through
           June 2006. However, at about the same time period (October 2005
           through March 2006), the city of Plano made payments totaling more
           than $74,000 directly to the apartment, for which it received
           reimbursements from FEMA. Of the total amount paid, $46,000 was
           duplicative and therefore potentially improper and/or fraudulent.
           Our review of FEMA records indicated that 7 of the 10 individuals
           certified to FEMA that they were in need of rental assistance,
           even after they had been provided with free housing. Further, FEMA
           records showed that 7 provided rental receipts and/or leases that
           clearly indicated that the rent was paid by the city of Plano.

           o Case 5 relates to a family of five, all of whom registered for
           IHP using the same damaged address. Four registrations were
           duplicative and therefore payments on those registrations are
           potentially improper and/or fraudulent. Further, despite the fact
           that FEMA had installed a trailer on the damaged property in
           January 2006, FEMA continued to send rental assistance payments in
           late January, February, and April 2006 totaling approximately
           $5,500. Further, a family member informed us that the family had
           moved back into the damaged home prior to the trailer being
           delivered. Consequently, when the trailer was delivered, it simply
           increased the living space for the household, and it was used by a
           family member who lived in the house prior to the hurricane.
           Further, evidence we gathered during the course of the
           investigation indicated that a rental receipt provided to FEMA to
           justify continued need for rental assistance was fictitious, and
           that the family member who submitted the receipt had never paid
           rent to the supposed landlord. In addition to the $5,500 in
           improper duplicative rental assistance payments, we found that the
           family members also received at least $6,000 in other potentially
           improper and/or fraudulent IHP payments arising from the duplicate
           registrations.

In the course of apartment-related audit and investigative work, we also
identified 14 individuals who improperly received more than $75,000 in
disaster assistance using one apartment building as their
hurricane-damaged address, even though the building had minimal damage and
residents were not forced to evacuate. We provide further details in
appendix II.

Potentially Improper and/or Fraudulent IHP Assistance Payments to Individuals
Claiming Damages from Both Hurricanes

FEMA made nearly $20 million in duplicate payments to thousands of
individuals who submitted claims for damages to the same primary
residences from both hurricanes Katrina and Rita. With few exceptions,
FEMA officials explained that victims of both disasters should not receive
duplicate benefits for the same necessities and/or damages to the same
property. However, in order to process disaster claims more quickly, FEMA
disabled a system edit check in NEMIS that could have alerted FEMA
officials when the same individual applied for both disasters using the
same identifying information. This system change resulted in nearly $20
million in duplicate payments being made based on duplicate registrations
for hurricanes Katrina and Rita.

In October 2005, FEMA officials informed us that the small amount of time
between the impact of hurricanes Katrina and Rita had necessitated the
issuance of new policy to prevent duplicate claims for the same damaged
property for both hurricanes. FEMA officials said that, with few
exceptions, the new policy specified that registrants were entitled to one
payment for the same damage and/or need. FEMA explained to us that this
was necessary because most individuals did not have an opportunity to
replace and/or repair damages they incurred from Hurricane Katrina before
Hurricane Rita struck, and because their displacement was likely caused by
both hurricanes. At the time, FEMA officials informed us that they had
available a system edit check in NEMIS intended to alert FEMA system
administrators when the same individual applies for assistance for both
disasters, so that FEMA personnel could perform a manual review prior to
payments being made.

Despite having a control available, we identified through our review of
FEMA's NEMIS that FEMA made payments to about 7,600 individuals who used
the same social security number (SSN) and hurricane-damaged addresses for
their Hurricane Katrina registration that they used for their Hurricane
Rita registration. Subsequently, FEMA officials informed us that these
duplicate payments occurred because FEMA disabled the system edit check
feature. FEMA stated that they deactivated the system edit check in order
to process disaster claims more quickly, because the manual review process
that they had intended for these duplicate registrations would have held
up many eligible payments. Because of this, FEMA paid nearly $20 million
in duplicate payments to individuals who submitted duplicate registrations
using the same SSNs and damaged addresses. The nearly $20 million includes
duplicate payments for all areas of IHP assistance, including expedited
assistance, rental assistance, housing replacement payments, or a
combination of these. In five of the six cases where we performed
investigative work, the same individual received duplicate payments to
replace the same damaged property. The individuals also failed to provide
FEMA with evidence that they had replaced the items or conducted repair
work after Hurricane Katrina, only to have those items or that work
destroyed again by Hurricane Rita. In all cases, FEMA performed its first
physical inspection of the damaged property after the passing of both
hurricanes.

In addition to other IHP payment types, all six individuals we
investigated also received IHP personal property payments to compensate
them for lost or destroyed household items, twice--once for Hurricane
Katrina and again for Hurricane Rita. In one case, an individual received
multiple payments for more than $27,000--over the $26,200 cap--for
personal property replacement alone. In total, this individual received
more than $51,800 in IHP assistance, of which at least $25,000 is
potentially improper and/or fraudulent. According to FEMA records, another
registrant received two housing replacement payments of $10,500 each,
despite the fact that the individual had only one property to replace.

Potentially Improper and/or Fraudulent Payments to Nonqualified Aliens

FEMA made at least $3 million dollars of improper and potentially
fraudulent payments to nonqualified aliens who were not eligible for IHP
financial assistance. U.S. law specifically prohibits nonqualified aliens,
such as foreign students and workers on temporary visas, from receiving
financial assistance in case of disaster.^10 However, FEMA did not have
implementing controls in place, such as an agreement in place with other
government agencies, such as the Social Security Administration (SSA), to
identify nonqualified aliens and prevent them from receiving such
assistance. Consequently, FEMA paid at least $3 million to foreign
students from four selected universities. FEMA also made payments to other
nonqualified aliens, such as workers on temporary visas. However, because
of a lack of data on other nonqualified aliens, we were unable determine
the magnitude of any such improper payments. FEMA made such payments even
in cases in which FEMA received information indicating that the alien
applying for assistance was not qualified to receive financial disaster
assistance.

IHP Payments to Ineligible International Students

The destruction caused by hurricanes Katrina and Rita affected thousands
of college students in the fall of 2005. As with other U.S. citizens and
qualified aliens, college students who were able to demonstrate losses
were eligible to receive IHP payments to assist them in recovering from
the disaster. However, U.S. law^11 and FEMA policy specifically prohibits
students in the United States on student visas from receiving IHP
assistance. By comparing data provided by four universities in Louisiana
and Texas against registrant information in NEMIS, we determined that FEMA
improperly provided at least $3 million in financial assistance, in the
form of IHP payments, to more than 500 students in the United States on
student visas. This amount could understate the total payments to
ineligible foreign students because we requested information on
international students from only four of the colleges and universities in
the areas affected by hurricanes Katrina and Rita.

^108 U.S.C. S1611 allows the U.S. government to provide nonfinancial, in
kind emergency disaster relief, including short term shelter to temporary
legal aliens (nonqualified aliens) after a disaster, but prohibits them
from receiving financial assistance.

^118 U.S.C. S1611.

Our interviews of school officials and several of the ineligible students
stated that they received misleading information from FEMA personnel.
Specifically, officials at several universities informed us that FEMA
personnel actively encouraged all students--including international
students--to register for IHP assistance. Despite being ineligible for
financial disaster assistance, many international students with whom we
spoke stated that FEMA officials told them they were eligible to receive
IHP payments and should apply for aid.

We found that FEMA made these payments despite evidence provided to FEMA
by students--specifically their student visas--that indicated that they
were not eligible for cash assistance. Further, consistent with a finding
we reported on previously, FEMA could have identified these students if it
had validated their identities with SSA prior to issuing IHP payments. In
fact, more than 400 of the students reported as foreign by the four
universities were also identified by SSA as non-U.S. citizens. Table 2
displays some examples of ineligible students and payments they received.

Table 2: Improper Payments Made to Ineligible International Students

                  Number of payments/                                         
Case Location               amount Type of payments                        
1    Louisiana           6/$25,500 Expedited assistance, rental            
                                      assistance, transportation assistance,  
                                      and personal property replacement       
2    Louisiana           6/$22,500 Expedited assistance, rental            
                                      assistance, housing repair, and         
                                      personal property replacement           
3    Louisiana           3/$17,700 Rental assistance and personal property 
                                      replacement                             
4    Louisiana           4/$16,400 Expedited assistance, rental            
                                      assistance, and housing repair          
5    Louisiana           3/$17,000 Rental assistance and personal property 
                                      replacement                             
6    Louisiana           4/$10,900 Expedited assistance, rental            
                                      assistance, and transportation          
                                      replacement                             
7    Texas                3/$7,700 Expedited assistance, rental            
                                      assistance, and personal property       
                                      replacement                             
8    Louisiana            3/$6,500 Expedited assistance, rental            
                                      assistance, and personal property       
                                      replacement                             

Source: GAO analysis of university data and FEMA IHP data.

           o Case 4 concerns a student in New Orleans who received more than
           $16,000 in FEMA payments, including payments for expedited
           assistance, rental assistance, and personal property replacement.
           According to NEMIS data, the student's damaged property was in the
           hardest-hit area of the city, and therefore the student's
           qualification for IHP was performed through geospatial mapping,
           while his identity was also validated through a third-party
           contractor. The student told us that he repeatedly informed FEMA
           personnel that he was an international student on an F1 visa, and
           was told each time that he qualified for assistance. In addition
           to receiving rental payments from FEMA, the student also received
           a trailer in April 2006. The student stated that he received a
           letter from FEMA in August 2006 asking for the money back.
           Further, he is concerned because a FEMA representative informed
           him that he was not immune to legal action for receiving payments
           he was ineligible for, despite the fact that he had informed FEMA
           of his status all along.

           o Case 6 involves an international student in New Orleans who
           received nearly $11,000 in FEMA payments. The student had a
           student visa from Brazil, and stated on his IHP registration that
           he owned a home in the New Orleans area. The registrant informed
           us that he applied via phone, and that he took care to inform the
           FEMA personnel that he was an international student. According to
           this student, in this and subsequent conversations with FEMA
           employees (one of whom was a supervisor at a relief center he
           visited), he was repeatedly told that he qualified for assistance
           despite his international student status. Our review of FEMA
           records confirmed the student's assertion that he provided FEMA
           with a copy of his visa. In fact, a copy of his visa was scanned
           into NEMIS and had a note next to it stating "Proof of Qualified
           Alien," despite the fact that the visa clearly showed he was an
           international student and therefore ineligible.

           o In case 8, a student in New Orleans at the time of Hurricane
           Katrina received three payments totaling $6,500 covering expedited
           assistance, rental assistance, and personal property replacement
           even though he repeatedly told FEMA representatives that he was an
           international student. The student registered for aid via FEMA's
           Web site using a valid SSN. The student told us that the SSN was
           given to him because he was allowed to work in the United States.
           He stated that during the registration process, he did not find
           any information that made him aware that he was not eligible for
           assistance. After registering online, he stated that he also
           contacted FEMA call center employees and made them aware that he
           was not a U.S. citizen and was in the country on a student visa,
           and said he was told by call center employees that he was
           eligible. The student informed us that during an inspection
           process, the inspector certified that he was a qualified alien
           even after he showed the inspector his visa. He subsequently
           received more than $2,000 for property replacement based on the
           inspection. However, because the student's visa was not scanned
           into FEMA's system, we could not corroborate his statement that he
           repeatedly informed FEMA of his status.

Payments to Other Nonqualified Aliens

We also found that weaknesses in FEMA's controls resulted in improper
and/or potentially fraudulent IHP payments being made to other
nonqualified aliens, such as workers in the United States on temporary
work visas. Because of the unavailability of detailed data on other
nonqualified aliens, we were unable to calculate the magnitude of this
problem. However, our investigative work uncovered 25 cases where FEMA
provided improper payments to nonqualified temporary workers.
Specifically, we found that FEMA provided 50 disaster assistance payments
totaling nearly $156,000 to 25 individuals who worked at a crab processing
facility, despite the fact that FEMA records clearly showed that 11
individuals were in the United States on temporary work visas, and were
therefore ineligible for IHP assistance.^12 These payments included
expedited assistance payments of $2,000 and payments of over $10,000 for
replacement of property. Some registrants received as much as $15,000 in
IHP payments. In one instance, the registrant's file at FEMA contained a
copy of a FEMA flier specifically indicating that aliens in the United
States on work visas were not eligible for IHP. Next to the flier was a
copy of the registrant's temporary work visa. Despite clearly having
evidence that he was ineligible for IHP payments, FEMA paid this
registrant more than $15,000 in IHP assistance.

Although we were not able to validate that all 25 registrants possessed
work visas, we were informed by the registrants' employer that all 25
employees brought their work visa documents with them to FEMA when they
filed the disaster claims. However, data from SSA indicated that only 14
of the 25 employees used valid SSNs on their FEMA application.^13 The
remaining 11 individuals provided SSNs to FEMA that were never issued or
belonged to other individuals in order to get IHP assistance. Payments
made to the 11 workers who submitted fictitious information to FEMA are
therefore potentially fraudulent.

Ineffective Detective Controls Point to Need for Better Preventive Controls

We previously reported that inadequate preventive controls related to the
IHP application process resulted in an estimated $1 billion of potentially
improper and/or fraudulent payments through February 2006. As of November
2006, FEMA had detected through its own processes about $290 million in
overpayments and had collected nearly $7 million of the about $290 million
identified as improper. Collection of only $7 million of an estimated $1
billion of potentially improper and/or fraudulent payments clearly
supports the basic point we have previously made, that fraud prevention is
far more effective and less costly than detection and monitoring.

^12According to the owner of the crab processing facility, the remaining
14 individuals were also in the United States as temporary workers, a fact
that we were unable to validate. We have referred the 25 individuals to
the Katrina Fraud Task Force for further investigation.

^13Foreign workers who are admitted legally into the United States are
issued SSNs.

FEMA's Detection Controls Are Not Effective at Identifying All Potentially
Improper and/or Fraudulent Payments

In June 2006, we testified that an estimated $1 billion was potentially
improper and/or fraudulent. We derived this estimate from statistical
sampling work we conducted on registrations submitted to FEMA as of
mid-February 2006. We also reported that this estimate potentially
understates the total potentially improper and/or fraudulent payments
because the scope of our statistical sampling work did not include
verifying for insurance or actual property damage, among others things.

As of November 2006, FEMA reported that it had identified about $290
million in overpayments to nearly 60,000 registrants. This overpayment,
which FEMA refers to as recoupments, represents the improper payments that
FEMA reported it had detected and for which it had issued collection
letters. According to FEMA officials, the payments identified as improper
were based on cases referred to the fraud hotlines and registrations that
met specific criteria of being more likely improper.

Although FEMA had identified about $290 million in overpayments, to date
FEMA had collected nearly $7 million. We did not validate the potential
collection amount. However, the amount that FEMA had collected on
overpayments related to hurricanes Katrina and Rita supports our prior
statements that detective controls, while an important element of a fraud
prevention program, are more costly and not as effective as preventive
controls. As FEMA's historical experience demonstrated, once a payment had
been disbursed because of weak preventive controls, it is difficult to
identify individuals who received the improper payments, contact those
individuals, and collect on those payments. As discussed previously, when
system edit checks that should occur during the processing of disaster
registration are circumvented, significant improper payments occur that
require extensive data mining and follow-up actions to identify and
recover improper payments.

In addition to the difficulties in collecting overpayments, there are
limitations to the ability of detective controls in identifying all
instances of overpayments. For example, our conversations with several
foreign students indicate that although some have received recoupment
letters, others have not.

FEMA Had Not Issued Recoupment Notice to GAO Registrations

The limitations of detective controls are demonstrated through GAO's own
experience with the FEMA registration, payment, and recoupment processes.
As we testified previously, GAO submitted a number of registrations using
false identities and fictitious addresses to test the effectiveness of
FEMA's internal controls. We also testified that we received payments on
registrations we submitted. However, to date, we had not received
recoupment notices from FEMA indicating that it had identified the
undercover registrations that GAO submitted. After our last testimony in
June of 2006, we received another payment of more than $3,200 for rental
assistance on a property that did not exist. In total, we received six
payments on five registrations using falsified information, without
receiving any recoupment notices from FEMA.

FEMA Cannot Adequately Track Its Property

We found weak accountability over FEMA property bought for hurricanes
Katrina and Rita relief efforts using government purchase cards. Our
investigation revealed that DHS overstated the number of items FEMA had
actually located on the day of our July16, 2006, testimony and that
additional items are missing. In total, of the 246 laptops, printers,
flat-bottom boats, and GPS units that we investigated for this testimony,
85 items are missing and presumed lost or stolen. Moreover, during the
course of our investigation, we found that FEMA did not have titles to any
of the 20 flat-bottom boats it purchased for hurricanes Katrina and Rita.
The fact that FEMA could not locate two of the flat-bottom boats raises
additional concerns about DHS's accountable property controls.

Missing Items FEMA Purchased for Hurricane Relief

As part of our July 19, 2006, testimony, we reported that poor controls
over property acquired with DHS purchase cards may have resulted in lost
or misappropriated assets. Specifically, we reported that FEMA could not
account for 143 items purchased in September and October 2005 for
Hurricane Katrina and Hurricane Rita relief efforts. On the morning of the
testimony, DHS sent your office an e-mail indicating that 87 of the 143
items had been found.^14 At the hearing, DHS's Chief Financial Officer
reiterated that most of the missing property had been found, but
acknowledged that the items had not yet been physically verified.

Our investigation revealed that DHS's July 19 e-mail overstated the number
of items FEMA had located. By October 2006, a year after the property was
purchased, we could only account for 79 of the 87 items that FEMA claimed
it had found.^15 In addition, of the 143 items that we reported as missing
in our July testimony, 48 are still missing and presumed lost or stolen.
Moreover, 37 of items were missing from an additional 103 new items we
investigated. In total, of the 246 items we investigated for this
testimony, 85 items (34 percent) are lost or stolen.^16 A November 27 DHS
memo supports the results of this investigation, acknowledging that many
items purchased for hurricane relief efforts are still missing. Figure 1
details the results of our investigative work as of October 16, 2006.^17

14In our testimony, we reported as missing 107 laptop computers, 22
printers, 12 flat-bottom boats, and 2 GPS units. DHS's e-mail claimed that
FEMA found 74 of the 107 missing laptops, all 12 missing flat-bottom
boats, and 1 of the 2 missing GPS units. The e-mail also stated that FEMA
was in the process of locating the missing printers.

^15Specifically, we found 69 printers and 10 boats.

Figure 1: Status of Property as of October 16, 2006

^16We were able to locate eight printers because we discovered that the
bar codes FEMA reported as being assigned to the serial numbers on the
printers had actually been affixed to different items. Consequently, when
FEMA staff tried to locate these printers using their own bar code
information, they could not find them--even though the printers actually
were in FEMA's possession.

^17After October 16, FEMA sent us additional photographs of laptops,
printers, and GPS units. However, because we received this information
after our October 16 deadline, we did not include it as part of our final
property count for the purposes of this testimony.

Title and Location of Flat-Bottom Boats

In our July 2006 testimony, we also reported on several issues surrounding
the purchase of 20 flat-bottom boats needed for hurricane relief efforts.
Specifically, we found that FEMA paid $208,000--about twice the retail
price--to a broker, who in turn obtained the boats (17 new and 3 used)
from several different retailers. Further, although the broker billed FEMA
and was paid for all 20 of the boats, he failed to pay one retailer that
provided 11 of the boats. The retailer subsequently reported the boats as
stolen and did not provide FEMA with title to the boats. Consequently, in
our testimony, we concluded that FEMA paid for, but did not receive title
to, at least 11 of the boats.

However, upon further investigation, we found that FEMA also did not have
title to the remaining 9 boats. Thus, FEMA did not have title to any of
the boats. Specifically, our searches for boat titles found that no
transfer of title and/or registration had taken place on any of the 17 new
boats, that is, the serial numbers were "not on file." Of the remaining 3
used boats, title searches revealed that all 3 remain registered to their
previous owners.

Furthermore, FEMA could not provide us with any information about the two
boats that are still not in its possession as of October 2006. However,
using the serial numbers and manufacturer information on the make and
model, local law enforcement located one of the boats in a shed at the
house of its previous owner. According to the previous owner, he sold the
boat to FEMA and delivered it to the New Orleans Convention Center in
September 2005. In March 2006, he received a call from the New Orleans
Convention Center requesting that he retrieve his abandoned boat. When he
went to retrieve the boat, he found that the tires on the boat's trailer
were flat, the boat's battery had been removed, and the anchor rope had
been cut. This boat is one of the three still registered under its
previous owner's name and no application for transfer of title has been
recorded.

Conclusions

Ineffective preventive controls for FEMA's IHP have resulted in
substantial fraudulent and improper payments. The additional examples of
potentially fraudulent and improper payments in our testimony today
further show that our estimate of $1 billion in improper and/or fraudulent
payments through February is likely understated. With respect to property
bought with government purchase cards, items not found 1 year after they
were purchased, and over 8 months after we selected them for
investigation, shows that ineffective FEMA property accountability
controls resulted in lost or stolen computers, printers, and GPS units.

We have provided 25 recommendations to DHS and FEMA to improve management
of IHP and the purchase card program. FEMA and DHS had fully concurred
with 19 recommendations, and substantially or partially concurred with the
remaining 6 recommendations. DHS and FEMA also reported that they have
taken actions, or plan to take actions, to implement many of our
recommendations; however, we have not determined if these actions
adequately address our recommendations. If properly implemented, our prior
recommendations should help to address control weaknesses identified in
this testimony. As with prior work, we will refer cases we deem to be
potentially fraudulent to the Katrina Fraud Task Force for further
investigation.

Madam Chairman and Members of the Committee, this concludes my statement.
Special Agent Ryan and I would be pleased to answer any questions that you
or other Members of the Committee may have at this time.

Contacts and Acknowledgments

For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-7455 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this testimony. The individuals who made major contributions to this
testimony were Kord Basnight, Gary Bianchi, Matthew Brown, Norman Burrell,
Jennifer Costello, Thomas Dawson, Dennis Fauber, Christopher Forys,
Alberto Garza, Adam Hatton, Christine Hodakievic, Ryan Holden, Jason
Kelly, John Ledford, Barbara Lewis, Jonathan Meyer, Andrew McIntosh,
Kristen Plungas, John Ryan, Viny Talwar, Tuyet-Quan Thai, and Matthew
Valenta.

Appendix I: Scope and Methodology

To assess whether the Federal Emergency Management Agency (FEMA) provided
potentially improper and/or fraudulent rental payments to individuals at
the same time it was providing the registrant's free lodging in FEMA
trailers and rent-free (i.e., FEMA-provided) apartments, we interviewed
FEMA officials, reviewed Title 8 of the United States Code, and reviewed
the Stafford Act (Pub. L. 93-288) and its implementing regulations. We
obtained the FEMA Individuals and Households Program (IHP) databases as of
June 2006 and data on individuals residing in FEMA trailers and rent-free
apartments. We performed data reliability assessment for these databases.
In addition, we validated that the FEMA IHP database was complete and
reliable by comparing the total payment against reports FEMA provided to
the Appropriations Committee on hurricanes Katrina and Rita disbursements.
We then compared FEMA paid housing data to IHP registration data to
determine whether FEMA provided duplicate benefits to the same
registrants. We also conducted field visits to Texas and Louisiana to view
the property and interview individuals who received IHP payments after
they had moved into free housing. While we were able to determine the
number of individuals staying in FEMA trailers who received duplicate
housing assistance, the data related to individuals staying in
FEMA-provided apartments were not sufficiently reliable for us to perform
the same analysis.

To determine whether FEMA made duplicate payments to individuals who
claimed damages for both hurricanes Katrina and Rita using the same
damaged addresses, we compared the social security numbers and damaged
addresses maintained in the FEMA databases for hurricanes Katrina and
Rita, and reviewed National Emergency Management Information System
(NEMIS) data on selected individuals.

To determine whether FEMA made potentially improper payments to ineligible
foreign students, we contacted officials at four Louisiana and Texas
universities and obtained the names and identifying numbers of enrolled
foreign students. We compared the listing of students provided by the
universities to FEMA payment data. We also interviewed foreign students at
those four schools receiving IHP assistance in order to determine what
guidance FEMA provided them on eligibility. We also conducted
investigative work to determine whether FEMA made improper and potentially
fraudulent payments to nonqualified aliens, such as those in the United
States on work visas. Because we did not receive data on all foreign
students and nonqualified aliens in the United States, we were not able to
determine the magnitude of potentially improper and fraudulent payments to
these individuals. Further, because of data availability issues, our work
was not designed to identify illegal aliens receiving improper payments.
We also received FEMA data on its recoupment program, but did not validate
data on identified overpayments and collections provided to us by FEMA
officials.

To conduct our investigation into the Department of Homeland Security
(DHS) purchase card program, we traveled to New Orleans and Baton Rouge,
Louisiana, and Fort Worth, Texas, in September 2006, to physically inspect
selected property. If we could not physically inspect the property during
our visit, we requested that DHS, FEMA, or the New Orleans Police
Department send us a clear photograph of the property and its serial
number as proof of possession. We ultimately requested that photographic
evidence be sent to us no later than October 16, 2006, nearly a year after
most of the property was acquired.

To obtain information on the case study detailed in appendix II, we
reviewed data from the U.S. Department of the Treasury's Financial
Management Service, FEMA's NEMIS database, the Texas Department of Motor
Vehicles, the Social Security Administration, and the U.S. Postal Service,
and we conducted field investigations.

We conducted our audit and investigations from June 2006 through November
2006. We conducted our audit work in accordance with generally accepted
government auditing standards and conducted our investigative work in
accordance with the standards prescribed by the President's Council on
Integrity and Efficiency.

Appendix II: Potentially Improper and/or Fraudulent Rental Assistance
Payments Case Study

When Hurricane Katrina came ashore in late August 2005, 15 of the 16 total
units in a single Gulfport, Mississippi, apartment building were occupied
by tenants. The landlord of this building told us that damage to the
apartment building was minimal. Although one apartment had a broken window
and some personal property damage, the only real effect of the hurricane
was water damage from rain and water seepage from missing roof tiles. The
landlord also said that anyone who left after Hurricane Katrina did so
voluntarily, and that they were not required (e.g., forced) to leave as a
result of damage by the storm.

During a visit to the apartment building, we spoke to the landlord about
an individual we identified as receiving potentially improper rental
assistance payments. Subsequently, we conducted additional data mining on
the apartment address to determine whether other tenants applied for and
received FEMA disaster assistance. We found that 8 tenants of this
apartment building received FEMA disaster assistance. The remaining 7
tenants did not file any disaster assistances claims, as a result of being
displaced because of uninhabitable or inaccessible living quarters as a
result of Hurricane Katrina. In addition, we were able to confirm with the
building landlord that 6 additional individuals who did not live at the
apartment building at the time of hurricane Katrina also made disaster
assistance claims. Table 3 lists 14 individuals who improperly received
disaster assistance using the apartment building as their
hurricane-damaged address.

Table 3: Apartment Building Tenants Receiving Disaster Assistance

Individual Date applied Notes                           IHP assistance 
1          9-6-2005     Lived at apartment during storm         $4,358 
2          9-6-2005     Never lived at address                   3,810 
3          9-7-2005     Lived at apartment during storm         26,200 
4          9-9-2005     Lived at apartment during storm            772 
5          9-9-2005     Lived at apartment during storm          1,725 
6          9-10-2005    Lived at apartment during storm          7,160 
7          9-12-2005    Moved out before storm                   4,358 
8          9-12-2005    Lived at apartment during storm          4,358 
9          9-14-2005    Lived at apartment during storm          2,000 
10         9-16-2005    Never lived at address                   2,000 
11         9-19-2005    Evicted before storm                     8,716 
12         9-21-2005    Never lived at address                   2,000 
13         9-24-2005    Moved out before storm                   4,358 
14         9-24-2005    Lived at apartment during storm          4,358 
Total                                                          $76,173 

Source: GAO analysis of FEMA data.

(192226)

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
[email protected] Automated answering system: (800) 424-5454 or (202)
512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548

Public Affairs

Paul Anderson, Managing Director, [email protected] (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548

www.gao.gov/cgi-bin/getrpt?GAO-07-252T .

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact Gregory Kutz at (202) 512-7455 or
[email protected].

Highlights of [32]GAO-07-252T , a testimony to the Committee on Homeland
Security and Governmental Affairs, U.S. Senate

December 6, 2006

HURRICANES KATRINA AND RITA DISASTER RELIEF

Continued Findings of Fraud, Waste, and Abuse

Hurricanes Katrina and Rita destroyed homes and displaced millions of
individuals. While the Federal Emergency Management Agency (FEMA)
continues to respond to this disaster, GAO's previous work identified
significant control weaknesses--specifically in FEMA's Individuals and
Households Program (IHP) and in the Department of Homeland Security's
(DHS) purchase card program--resulting in significant fraud, waste, and
abuse.

Today's testimony will address whether FEMA provided improper and
potentially fraudulent (1) rental assistance payments to registrants at
the same time it was providing free housing via trailers and apartments;
(2) duplicate assistance payments to individuals who claimed damages to
the same property for both hurricanes Katrina and Rita; and (3) IHP
payments to non-U.S. residents who did not qualify for IHP. This testimony
will also discuss (1) the importance of fraud identification and
prevention, and (2) the results of our investigation into property FEMA
bought using DHS purchase cards.

To address these objectives, GAO data mined and analyzed FEMA records and
interviewed city officials, university officials, and foreign students.
GAO also traveled to Louisiana and Texas to inspect selected property
items and to investigate improper housing payments to individuals living
in FEMA-provided housing.

FEMA continued to lose tens of millions of dollars through potentially
improper and/or fraudulent payments from both hurricanes Katrina and Rita.
These payments include $17 million in rental assistance paid to
individuals to whom FEMA had already provided free housing through
trailers or apartments. In one case, FEMA provided free housing to 10
individuals in apartments in Plano, Texas, while at the same time it sent
these individuals $46,000 to cover out-of-pocket housing expenses. In
addition, several of these individuals certified to FEMA that they needed
rental assistance.

FEMA made nearly $20 million in duplicate payments to thousands of
individuals who claimed damages to the same property from both hurricanes
Katrina and Rita. FEMA also made millions in potentially improper and/or
fraudulent payments to nonqualified aliens who were not eligible for IHP.
For example, FEMA paid at least $3 million to more than 500 ineligible
foreign students at four universities in the affected areas. This amount
likely understates the total payments to ineligible foreign students
because it does not cover all colleges and universities in the area. FEMA
also provided potentially improper and/or fraudulent IHP assistance to
other ineligible non-U.S. residents, despite having documentation
indicating their ineligibility.

Finally, FEMA's difficulties in identifying and collecting improper
payments further emphasized the importance of implementing an effective
fraud, waste, and abuse prevention system. For example, GAO previously
estimated improper and potentially fraudulent payments related to the IHP
application process to be $1 billion through February 2006. As of November
2006, FEMA identified about $290 million in improper payments and
collected about $7 million.

GAO Improper Payment Estimate and FEMA Reported Overpayments and
Collections

GAO's previous work on the DHS purchase cards also showed significant
problems with property accountability. Of 246 items we investigated that
FEMA purchased for hurricane relief efforts using DHS's purchase cards, 85
items--or 34 percent--are still missing and presumed lost or stolen.

References

Visible links
  18. http://www.gao.gov/cgi-bin/getrpt?GAO-06-403T
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-06-844T
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-06-957T
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-06-655
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1013
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1117
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-06-954T 
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-07-252T
*** End of document. ***