FEMA pledges better disaster relief fund payouts

The Federal Emergency Management Agency’s poor use of information technology and lack of management controls were directly to blame for rampant fraud that led to as much as $1.4 billion of hurricane relief funds being misspent, according to the Government Accountability Office.

GAO drew that conclusion in a June 14 report that estimated the cost to taxpayers at $600 million to $1.4 billion. The costs, uncovered through data mining and database matching techniques, are mostly associated with questionable or fraudulent assistance claims from individuals who were in the path of hurricanes Katrina and Rita in 2005.

FEMA officials condemned the mistakes and abuse and vowed that the agency’s overhauled systems will end them.

“The level of processing error and fraud associated with FEMA’s programs are intolerable,” said Aaron Walker, a FEMA spokesman.

About 16 percent of the disaster assistance claims FEMA paid were dubious, GAO said.

Members of Congress, FEMA and outside interest groups discussed the report and steps for reducing false payments at a hearing last week.

The agency’s poor use of IT included over-reliance in some cases and failure to use it at all in others. In one instance that GAO documented, FEMA relied on geospatial mapping to support a claim of $4,706 in rental assistance to undercover GAO inspectors who listed their address as a vacant lot. In that case, FEMA could have sent someone to the site to verify the authenticity of the claim, GAO concluded.

At the same time, the agency unknowingly paid millions of dollars to federal and state prisoners and people staying on the federal dime in hotels while collecting rent reimbursements, the report states. The agency could not prove that 750 debit cards worth $1.5 million went to people qualified to receive Katrina assistance.

There was little, if any, verification of the names, addresses and Social Security numbers of applicants registering for federal disaster assistance, said Rep. Michael McCaul (R-Texas), chairman of the House Homeland Security Committee’s Investigations Subcommittee.

“FEMA’s fraud detection and prevention controls were so weak or nonexistent that these fraudulent applications were never detected, let alone prevented,” McCaul said.

For the 2006 hurricane season, FEMA has upgraded its online registration system to prevent duplicate registrations and identify duplicate Social Security numbers at registration, Walker said.

FEMA has also hired the data broker ChoicePoint to verify the identities and Social Security numbers of all registrants for the agency’s Individuals and Households Program (IHP), which offers housing, real and personal property replacement, and other emergency services, Walker said. In addition, FEMA has altered its automated processes to block payments to applicants whose identities cannot be verified.

The agency has tightened fraud controls in its transitional housing and expedited assistance programs, Walker said. FEMA is providing each registrant a unique authorization code to prevent duplicate payments, he said. And unlike last year, FEMA won’t issue debit cards for expedited assistance cases and will instead issue checks or use electronic funds transfers.

Despite the severity of some of the instances of fraud, several disaster recovery experts said the agency did the best it could. Some fraud was unavoidable as FEMA rushed to deliver services after acting too slowly in the first days after Katrina, said John Copenhaver, a former FEMA regional director for Alabama, Mississippi and Florida. He is now president and chief executive officer of Disaster Recovery Institute International, which provides business continuity and emergency preparedness certifications.

To keep track of registrants in the future, FEMA could create a new database or use DHS’ existing resources to do background checks, said Jeff Vining, vice president of homeland security and law enforcement at Gartner. If FEMA created its own database, however, it could face a backlash from a public stung by the recent privacy breaches at the Veterans Affairs and Energy departments, he said.