    Hurricanes Katrina and Rita Disaster Relief: Continued Findings
    of Fraud, Waste, and Abuse (15-MAR-07, GAO-07-300).

    The Federal Emergency Management Agency (FEMA) continues to
    respond to hurricanes Katrina and Rita. GAO's previous work
    identified suspected fraud, waste, and abuse resulting from
    control weaknesses associated with FEMA's Individuals and
    Households Program (IHP) and the Department of Homeland
    Security's (DHS) purchase card program. Congress asked GAO to
    follow up on this previous work to determine whether potentially
    improper and/or fraudulent payments continued to be made. GAO
    testified on the results of our audit and investigative efforts
    on December 6, 2006. This report summarizes the results of our
    follow-up work.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-300
        ACCNO:   A66870
      TITLE:     Hurricanes Katrina and Rita Disaster Relief: Continued
    Findings of Fraud, Waste, and Abuse
         DATE:   03/15/2007
      SUBJECT:   Accountability
    	     Agency evaluation
    	     Aliens
    	     Data integrity
    	     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
    	     Government agency oversight
    	     Waste, fraud, and abuse
    	     Government Purchase Card Program
    	     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-07-300

         * [1]Overview of Testimony
         * [2]Conclusions
         * [3]Recommendations for Executive Action
         * [4]Agency Comments and Our Evaluation
         * [5]GAO's Mission
         * [6]Obtaining Copies of GAO Reports and Testimony

              * [7]Order by Mail or Phone

         * [8]To Report Fraud, Waste, and Abuse in Federal Programs
         * [9]Congressional Relations
         * [10]Public Affairs

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

    United States Government Accountability Office

    GAO

    March 2007

    HURRICANES KATRINA AND RITA DISASTER RELIEF

    Continued Findings of Fraud, Waste, and Abuse

    GAO-07-300

    Contents

    Letter 1

    Overview of Testimony 2
    Conclusions 5
    Recommendations for Executive Action 6
    Agency Comments and Our Evaluation 7
    Appendix I Testimony on Continued Findings of Fraud, Waste, and Abuse 11
    Appendix II Comments from the Federal Emergency Management Agency 36

    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.

    United States Government Accountability Office

    Washington, DC 20548

    March 15, 2007

    The Honorable Joseph I. Lieberman
    Chairman
    The Honorable Susan M. Collins
    Ranking Minority Member
    Committee on Homeland Security and Governmental Affairs
    United States Senate

    On December 6, 2006, we testified before the Senate Committee on Homeland
    Security and Governmental Affairs on the continued findings of fraud,
    waste, and abuse associated with disaster relief for hurricanes Katrina
    and Rita.^1 In addition to the December 6 testimony, in several prior
    hearings, we testified that significant control weaknesses in the Federal
    Emergency Management Agency's (FEMA) Individuals and Households Program
    (IHP) and in the Department of Homeland Security's (DHS) purchase card
    program left the government vulnerable to significant fraud, waste, and
    abuse.^2 As we previously reported, the Robert T. Stafford Disaster Relief
    and Emergency Assistance Act (Stafford Act)^3 provides the basis for IHP.
    IHP is a major component of the federal disaster response efforts designed
    to provide financial assistance to individuals and households that have,
    as a direct result of a major disaster, necessary expenses and serious
    needs that cannot be met through other means. The Stafford Act allowed
    registrants to receive financial assistance up to a cap of $26,200 for
    disasters occurring in 2005. In early October 2006, FEMA reported to
    Congress that it had delivered approximately $7 billion in IHP aid for
    hurricanes Katrina and Rita. This IHP amount included expedited
    assistance, temporary housing assistance, repair and replacement of real
    and personal property, and other miscellaneous categories.

    ^1GAO, Hurricanes Katrina and Rita Disaster Relief: Continued Findings of
    Fraud, Waste, and Abuse, [11]GAO-07-252T (Washington, D.C.: Dec. 6, 2006).

    ^2GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita:
    FEMA's Control Weaknesses Exposed the Government to Significant Fraud and
    Abuse, [12]GAO-06-403T  (Washington, D.C.: Feb. 13, 2006); Hurricanes
    Katrina and Rita Disaster Relief: Improper and Potentially Fraudulent
    Individual Assistance Payments Estimated to Be Between $600 Million and
    $1.4 Billion, [13]GAO-06-844T  (Washington, D.C.: June 14, 2006); and
    Purchase Cards: Control Weaknesses Leave DHS Highly Vulnerable to
    Fraudulent, Improper, and Abusive Activity, [14]GAO-06-957T  (Washington,
    D.C.: July 19, 2006). Work on [15]GAO-06-957T was performed jointly with
    the DHS Office of Inspector General.

    ^342 U.S.C. S5121-5206.

    Our December 6, 2006, testimony detailed our findings related to
    additional work we had performed since June 2006. Specifically, the
    testimony addressed our findings related to potentially improper and/or
    fraudulent (1) rental assistance payments FEMA made to registrants at the
    same time it was providing free housing via trailers and apartments; (2)
    duplicate assistance payments to individuals who claimed damages to the
    same property for both hurricanes Katrina and Rita; and (3) IHP payments
    to nonqualified aliens who did not qualify for IHP. For purposes of the
    testimony, potentially improper and/or fraudulent payments referred to
    payments made by FEMA based on potentially improper and/or fraudulent
    registration data submitted by IHP registrants. The testimony also
    discussed (1) the importance of fraud prevention, and (2) the results of
    our investigation into property bought by FEMA using DHS purchase cards,
    which was subsequently lost or stolen. This report summarizes the findings
    detailed in our December 6, 2006, testimony and makes specific
    recommendations for corrective action. Our December 6, 2006, testimony is
    reprinted in appendix I.

    Overview of Testimony

    In our testimony, we stated that our audit and investigative work on FEMA
    disaster relief payments associated with hurricanes Katrina and Rita
    identified additional indications of fraud, waste, and abuse.
    Specifically, we found that FEMA made nearly $17 million in potentially
    improper and/or fraudulent rental assistance payments to individuals after
    they had moved into FEMA trailers. For example, after FEMA provided a
    trailer to a household--in January 2006--FEMA provided rental assistance
    payments to the same household in late January, February, and April of
    2006 totaling approximately $5,500. In addition, FEMA provided potentially
    improper and/or fraudulent rental assistance payments to individuals
    living in FEMA-provided apartments. For example, FEMA made nearly $46,000
    in rental assistance payments to at least 10 individuals living in
    apartments at the same time that the apartments were being paid for by
    FEMA through the city of Plano, Texas. Seven of 10 in this group
    self-certified to FEMA that they needed rental assistance, despite the
    fact that they were living in rent-free housing. Because of limitations in
    FEMA data, we were not able to identify the full extent of potentially
    improper rental assistance payments made to individuals in FEMA-provided
    apartments.

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

    Millions of dollars of improper and potentially fraudulent payments also
    went to nonqualified aliens, including foreign students and temporary
    workers. For example, FEMA improperly paid at least $3 million in IHP
    assistance to more than 500 ineligible foreign students at four
    universities. Further, FEMA provided IHP payments that included expedited
    assistance and personal property totaling more than $156,000 to 25
    individuals who claimed to be foreign workers on temporary visas. FEMA
    made these payments despite having copies of the work visas for several
    individuals, which should have alerted FEMA that the temporary workers
    were not eligible for financial assistance. Social Security Administration
    records also showed many of the individuals used invalid Social Security
    numbers, which could have alerted FEMA about the individuals'
    ineligibility. In addition, several students and university officials
    stated that FEMA personnel encouraged all students--including
    international students who did not qualify for IHP assistance--that they
    were eligible for IHP financial assistance. Because we did not obtain
    information from all universities in the Gulf region and because of
    unavailability of detailed data on other nonqualified legal aliens, we
    were not able to determine the magnitude of improper and/or fraudulent
    payments in this area.

    Our findings also showed that the small amount of money that FEMA has been
    able to collect from improper payments further demonstrates the need to
    have adequate preventive controls. We previously reported that inadequate
    preventive controls related to the IHP application process resulted in an
    estimated $1 billion of potentially improper and/or fraudulent payments
    through February 2006.^4 In contrast, as of November 2006, FEMA had
    detected through its own processes about $290 million in overpayments.
    This overpayment amount, which FEMA refers to as recoupments, represents
    the improper payments that FEMA had detected and had issued letters
    requesting repayments. However, through November FEMA had only collected
    nearly $7 million. Collection of only $7 million of an estimated $1
    billion of fraudulent and improper payments clearly supports the basic
    point we have previously made^5 that fraud prevention is far more
    efficient and effective than detection and collection.

    With respect to findings regarding the DHS purchase card program, we found
    weaknesses and breakdowns in accountability for property items bought for
    hurricanes Katrina and Rita relief efforts using government purchase
    cards.^6 For example, FEMA is still unable to locate 48 of the 143 missing
    items (e.g., laptop computers, printers, and GPS units) identified in our
    July 2006 testimony. Moreover, 37 items were missing from an additional
    103 items that we investigated for the July testimony. Thus, over a year
    after they were purchased, FEMA could not locate 85 of the 246 items (34
    percent) that we investigated; we presume these items are now lost or
    stolen. Our investigation also revealed that although FEMA was in
    possession of 18 of the 20 flat-bottom boats it had purchased for
    hurricane relief efforts, FEMA had not received the title to any of these
    boats. FEMA could not provide any information about the location of the
    remaining two boats.

    In response to our December testimony, FEMA acknowledged weaknesses in the
    processes and systems that resulted in ineligible individuals receiving
    assistance. FEMA stated that in the 15 months since Hurricane Katrina,
    FEMA has made great strides in correcting its deficiencies. Examples of
    improvements FEMA has informed us that it put into service include an
    upgraded registration application that FEMA expects will prevent duplicate
    registrations and an identity verification process so that all
    registrations for assistance are subjected to the same stringent criteria.
    FEMA believes that the stringent controls it instituted this past year
    improve its safeguards and will help eliminate processing errors and
    fraudulent abuse. FEMA further stated that it will consider and evaluate
    any new findings that can assist in improving its processes and
    procedures.

    ^4To develop this estimate we followed a probability procedure based on
    random selections. We express our confidence in the precision of our
    particular sample's results as a 95 percent confidence interval. The 95
    percent confidence interval surrounding the estimate of $1 billion ranges
    from $600 million to $1.4 billion.

    ^5GAO, Individual Disaster Assistance Programs: Framework for Fraud
    Prevention, Detection, and Prosecution, [16]GAO-06-954T  (Washington,
    D.C.: July 12, 2006).

    ^6These property items were purchased by FEMA between June and November
    2005.

    Based on the findings in our testimony of December 6, 2006, we are
    recommending that the Secretary of Homeland Security direct the Director
    of FEMA to take a number of actions to reduce the potential for fraud and
    abuse. Recommendations include developing controls to prevent duplicate
    rental assistance benefits, increasing controls to prevent ineligible
    nonqualified aliens from receiving payments, and enabling controls to
    prevent duplicate payments to the same individual across multiple
    disasters. FEMA concurred with all recommendations and responded that it
    had taken, or is in the process of taking, actions to implement these
    recommendations. However, in its response FEMA indicated that on two of
    the recommendations it planned to perform investigations to determine the
    extent of the problems identified prior to implementing the
    recommendations.

    Conclusions

    Ineffective preventive controls for FEMA's IHP have resulted in
    substantial fraudulent and improper payments. The additional examples of
    potentially fraudulent and improper payments, totaling tens of millions of
    dollars, that we highlighted in our December 2006 testimony further show
    that our estimate of $1 billion in potentially improper and/or fraudulent
    payments through February is likely understated. In addition, we did not
    include in this total potentially improper and/or fraudulent payments to
    individuals who received disaster assistance from FEMA even though they
    also received insurance payments for damaged property. With respect to
    property bought with government purchase cards, FEMA's inability to find
    items 1 year after they were purchased, including laptop computers,
    printers, and GPS units, shows that FEMA property accountability controls
    are ineffective and possibly resulted in the loss or theft of government
    property.

    We have previously provided 25 recommendations to DHS and FEMA to improve
    management of IHP and the purchase card program. FEMA and DHS had fully
    concurred with 19 recommendations, and substantially or partially
    concurred with the remaining 6 recommendations. DHS and FEMA also reported
    that they have taken actions, or plan to take actions, to implement all
    our recommendations. While we have not performed work to determine whether
    FEMA's actions adequately address our recommendations, if properly
    implemented, our recommendations from previous and current work should
    allow DHS and FEMA to rapidly provide assistance to disaster victims while
    at the same time providing reasonable assurance that disaster assistance
    payments are accurate and properly authorized. As we have stated in prior
    reports addressing IHP improper and fraudulent payments, these
    recommendations only address specific weakness identified in this report
    and are only part of a comprehensive fraud prevention program that should
    be in place. Further, FEMA should ensure that there are adequate manual
    processes in place to allow registrants who are incorrectly denied
    assistance to expeditiously appeal the decision and receive aid. Also,
    FEMA should fully field test all changes to provide assurance that valid
    registrants are able to apply for and receive IHP payments.

    Recommendations for Executive Action

    We recommend that the Secretary of Homeland Security direct the Director
    of FEMA to take the following six actions to address weaknesses identified
    in the administration of IHP.

    To prevent rental assistance payments from being provided at the same time
    that FEMA provides free housing (including trailers, mobile homes, and
    apartments), FEMA should

               o develop processes for comparing IHP registrant data with FEMA
               direct housing assistance data to prevent IHP registrants from
               receiving payments for rental assistance covering the time they
               are living in FEMA-provided housing and
               o provide clear guidance to IHP registrants, including rental
               assistance registrants, indicating how the payments are to be
               used.

    With respect to duplicate assistance payments across multiple disasters,
    FEMA should implement and/or enable controls to prevent duplicate payments
    to the same individual from different disasters for the same damage done
    to the same address.

    To prevent improper payments to nonqualified aliens, FEMA should

               o provide clear guidance and training to FEMA and contractor
               employees on the specific types of aliens eligible for financial
               disaster assistance, and identify nonqualified aliens, and
               o develop processes to identify and deny assistance to
               nonqualified aliens who register for IHP assistance using valid
               Social Security numbers through data comparisons with agencies
               that maintain data on legal aliens with Social Security numbers.

    With respect to property bought with DHS purchase cards, if FEMA cannot
    locate this property in a reasonable time period, it should work with DHS
    to reconcile its tracking system data and declare these items lost or
    stolen.

    Agency Comments and Our Evaluation

    On February 15, 2007, FEMA provided written comments on a draft of this
    report in which it outlined actions it plans to take or has taken that are
    designed to address each of our six recommendations. FEMA's comments are
    reprinted in appendix II. FEMA provided examples of several planned
    actions to address identified weaknesses. For example, concerning our
    recommendation to provide clear guidance to victims receiving IHP rental
    assistance on how funds should be used, FEMA stated that it is conducting
    a comprehensive review of existing communications policies and is
    developing a more effective strategy to ensure that registrants understand
    IHP and its purpose. Additionally, in response to our recommendation to
    develop processes to identify and deny assistance to nonqualified aliens
    who register for IHP assistance, FEMA stated that it is reaching out to
    other federal agencies and commercial vendors in order to enhance FEMA's
    ability to screen out applications from nonqualified aliens. FEMA's
    response indicates that it is attempting to address problems we identified
    in IHP. As the federal government prepares for future disasters, it will
    be important for FEMA to establish effective controls to prevent
    fraudulent and improper payments before they occur.

    However, in its responses to our recommendations concerning actions to
    prevent duplicate housing assistance and housing damage repair assistance,
    FEMA also stated it planned to perform additional investigations to
    confirm that the conditions described in our draft report are in fact
    representative of systemic problems before initiating appropriate
    corrective actions. Nonetheless, we continue to believe, as discussed in
    our testimony (see app. I), that our work amply demonstrates the systemic
    nature of the problems identified and the need for the recommended
    corrective actions.

    Specifically, with respect to our recommendation on preventing individuals
    from receiving rental assistance payments while residing in FEMA-provided
    housing (apartments and trailers), we continue to believe our work
    demonstrates a systemic problem exists. In fact the $17 million in
    potentially duplicate rental assistance paid to thousands of IHP
    registrants is conservative and may even understate the extent of the
    problems. In addition, our case studies clearly showed payments that were
    at least improper and potentially fraudulent. Further, our work included
    steps to minimize the possibility that, as FEMA asserted, many of these
    cases could be explained by the fact that rental assistance payments could
    have been made retroactively to cover rental expenses prior to the date of
    payment. Specifically, in arriving at our estimate of the extent of a
    systemic problem in this area, we took the following steps to ensure that
    our reported estimate of the extent of potentially duplicate payments in
    this area did not overstate the problem.

               o We only included payments as potential duplicates when they were
               made to an IHP registrant at the same time that the registrant was
               residing in FEMA-provided housing. We did not consider payments
               made before a registrant moved in to FEMA-provided housing as
               duplicates even though FEMA often makes advance rental assistance
               payments. For example, FEMA provided more than $3 million in
               rental assistance payments to FEMA trailer registrants in the week
               before they moved into FEMA trailers. These payments averaged more
               than $1,700, which indicates they were likely for multiple months
               of rental assistance and could have been duplicate assistance
               payments because they would have covered the time the registrants
               were in FEMA trailers.
               o We conducted field investigations on case studies to ensure that
               conclusions reached were accurate.
               o We excluded from our analysis any payments made to IHP
               registrants living in FEMA-provided apartments. Those payments
               were excluded from the analysis because FEMA failed to maintain
               detailed reliable data on individuals living in FEMA-provided
               apartments. Thus there are potentially millions more in duplicate
               rental assistance payments associated with IHP registrants living
               in FEMA-provided apartments, as supported by our case study
               investigations.

    As discussed in our testimony, our work also clearly demonstrates a
    systemic problem and our recommended corrective action with respect to
    controls to prevent duplicate payments to the same individual for the same
    damage across multiple disasters. FEMA stated it was unsure whether all
    payments we identified as duplicates were in fact duplicate payments to
    the same individual for the same damage across multiple disasters. FEMA
    stated that some payments could have resulted from damage from Hurricane
    Katrina, and then future payments were made based on different damage
    caused by Hurricane Rita.

    However, this assertion is contrary to representations FEMA made to us
    during the course of the audit. Specifically, FEMA told us during the
    audit that with few exceptions, registrants would only be entitled to one
    payment for each damage and/or need. We acknowledge that a registrant
    could have had a house damaged by Hurricane Katrina, and could have
    repaired the damage and moved back into the original house--only to have
    it damaged again by Hurricane Rita. However, this it is an extremely
    unlikely scenario given the severity of the damage caused by Hurricane
    Katrina and the fact that Hurricane Rita occurred shortly after, leaving
    very little time for inspectors to inspect and certify housing damage
    between storms, especially given there were more than 7,000 registrants we
    identified. According to our case studies, FEMA performed the first
    inspection of the properties in question after both hurricanes affected
    the area. Our case studies also showed that FEMA used two different
    inspectors to look at damaged properties, once for Hurricane Katrina and
    once for Hurricane Rita. Without having an inspection performed before
    Hurricane Rita hit, or having the same inspector review the claim to
    determine what damage was from Hurricane Rita and what damage was from
    Hurricane Katrina, FEMA is not in a position to know whether it paid for
    the same damaged items twice. Therefore, we continue to believe our work
    demonstrates a systemic problem for which FEMA should institute our
    recommendation to institute controls that prevent duplicate payments to
    the same individual for the same damage registered for under different
    disasters.

    We are sending copies of this report to the Secretary of Homeland
    Security, and the Director of the Federal Emergency Management Agency. We
    will also make copies available to others upon request. In addition, this
    report will be available at no charge on the GAO Web site at
    http://www.gao.gov . Contact points for our Offices of Congressional
    Relations and Public Affairs may be found on the last page of this report.
    If you or your staffs have questions about this report, please contact me
    at (202) 512-7455 or kutzg@gao.gov ; or contact John Kelly at (202)
    512-6926 or kellyj@gao.gov . Other individuals who made major
    contributions to this report were Gary Bianchi, Jennifer Costello, Jason
    Kelly, Barbara Lewis, Jonathan Meyer, Andrew McIntosh, John Ryan, and
    Tuyet-Quan Thai.

    Gregory Kutz
    Managing Director
    Forensic Audits and Special Investigations

    Appendix I: Testimony on Continued Findings of Fraud, Waste, and Abuse

    Appendix II: Comments from the Federal Emergency Management Agency

    (192239)

    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:
    fraudnet@gao.gov Automated answering system: (800) 424-5454 or (202)
    512-7470

    Congressional Relations

    Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 U.S.
    Government Accountability Office, 441 G Street NW, Room 7125 Washington,
    D.C. 20548

    Public Affairs

    Paul Anderson, Managing Director, AndersonP1@gao.gov (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-07-300 .

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact Gregory Kutz at (202) 512-7455 or
    kutzg@gao.gov.

    Highlights of [27]GAO-07-300 , a report to the Committee on Homeland
    Security and Governmental Affairs, U.S. Senate

    March 2007

    HURRICANES KATRINA AND RITA DISASTER RELIEF

    Continued Findings of Fraud, Waste, and Abuse

    The Federal Emergency Management Agency (FEMA) continues to respond to
    hurricanes Katrina and Rita. GAO's previous work identified suspected
    fraud, waste, and abuse resulting from control weaknesses associated with
    FEMA's Individuals and Households Program (IHP) and the Department of
    Homeland Security's (DHS) purchase card program. Congress asked GAO to
    follow up on this previous work to determine whether potentially improper
    and/or fraudulent payments continued to be made. GAO testified on the
    results of our audit and investigative efforts on December 6, 2006. This
    report summarizes the results of our follow-up work.

    [28]What GAO Recommends

    GAO recommends that DHS direct FEMA to take six actions, including
    establishing controls to prevent duplicate housing benefits to FEMA
    trailer and apartment residents and duplicate benefit payments for the
    same damages. GAO is also recommending that FEMA establish controls to
    prevent benefits to nonqualified aliens. FEMA outlined actions it plans to
    take or has taken that are designed to address each of our six
    recommendations. However, FEMA plans to perform additional investigations
    on two of the findings to determine whether problems are systemic prior to
    implementing recommended changes.

    In our December 6, 2006, testimony, GAO stated that FEMA made tens of
    millions of dollars of potentially improper and/or fraudulent payments
    associated with both hurricanes Katrina and Rita. These payments include
    $17 million in rental assistance paid to individuals to whom FEMA had
    already provided free housing through trailers or apartments. In one case,
    FEMA provided free housing to 10 individuals in apartments in Plano,
    Texas, while at the same time it sent these individuals $46,000 to cover
    out-of-pocket housing expenses. In addition, several of these individuals
    certified to FEMA that they needed rental assistance.

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

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

    GAO Improper Payment Estimate and FEMA Reported Overpayments and
    Collections

    Finally, GAO's work on DHS purchase cards showed continuing problems with
    property accountability, including items GAO investigated that could not
    be located 1 year after they were purchased.

    References

    Visible links
      11. http://www.gao.gov/cgi-bin/getrpt?GAO-07-252T
      12. http://www.gao.gov/cgi-bin/getrpt?GAO-06-403T
      13. http://www.gao.gov/cgi-bin/getrpt?GAO-06-844T
      14. http://www.gao.gov/cgi-bin/getrpt?GAO-06-957T
      15. http://www.gao.gov/cgi-bin/getrpt?GAO-06-957T
      16. http://www.gao.gov/cgi-bin/getrpt?GAO-06-954T
      27. http://www.gao.gov/cgi-bin/getrpt?GAO-07-300
    *** End of document. ***