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the Individuals and Households Program to Fraud and Abuse; Actions
Needed to Reduce Such Problems in Future' which was released on
September 27, 2006.
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United States Government Accountability Office:
Report to Congressional Committees:
GAO:
September 2006:
Hurricanes Katrina And Rita:
Unprecedented Challenges Exposed the Individuals and Households Program
to Fraud and Abuse; Actions Needed to Reduce Such Problems in Future:
Federal Emergency Management Agency:
GAO-06-1013:
GAO Highlights:
Highlights of GAO-06-1013, a report to congressional committees
Why GAO Did This Study:
In 2005, Hurricanes Katrina and Rita caused unprecedented damage.
FEMA’s Individuals and Households Program (IHP), provides direct
assistance (temporary housing units) and financial assistance (grant
funding for temporary housing and other disaster-related needs) to
eligible individuals affected by disasters. Our objectives were to (1)
compare the types and amounts of IHP assistance provided to Hurricanes
Katrina and Rita victims to other recent hurricanes, (2) describe the
challenges FEMA faced by the magnitude of the requests for assistance
following Hurricanes Katrina and Rita, and (3) determine the
vulnerability of the IHP program to fraud and abuse. GAO determined the
extent to which the program was vulnerability to fraud and abuse, by
conducting statistical sampling, data mining and undercover operations.
What GAO Found:
For Hurricanes Katrina and Rita, FEMA received more than 2.4 million
applications for IHP assistance and distributed $7.0 billion as
compared to the six hurricanes that hit the United States in the prior
two years and totaled about 1.5 million applications and about $1.5
billion in assistance, respectively. Temporary housing assistance and
expedited assistance accounted for much of the increase in IHP
expenditures as compared to prior years. Overall, however, although the
number of applications was much higher, the percentage approved for non-
housing assistance was notably lower for Hurricanes Katrina and Rita
than in 2003 and 2004.
The magnitude of Hurricanes Katrina and Rita posed challenges in
providing assistance to an unprecedented number of victims many of whom
were widely dispersed across the country. To address these challenges,
FEMA developed new approaches and adapted existing approaches to
quickly provide assistance and improve communication with victims.
Despite these efforts, management challenges in staffing and training
and program restrictions limited the effectiveness and efficiency of
the disaster assistance process. FEMA has proposed a number of
initiatives to address these problems, but it is too early to determine
whether these efforts will effectively address the problems identified.
GAO identified the potential for significant fraud and abuse as a
result of FEMA’s management of the IHP in response to Hurricanes
Katrina and Rita. Flaws in the registration process resulted in what
GAO estimated to be between $600 million and $1.4 billion in improper
and potentially fraudulent payments due to invalid registration data.
In addition, duplicate payments were made and FEMA lacked
accountability over $2,000 debit cards that were given to disaster
victims.
Figure: Disaster Recovery Center where disaster victims applied for
Individual and Household Program benefits after Hurricane Katrina in
St. Bernard parish, Louisiana:
[See PDF for Image]
Source: GAO.
[End of Figure]
What GAO Recommends:
GAO is recommending that FEMA address the potential for fraud and abuse
in the IHP by ensuring that payments go to recipients at valid
addresses; establishing procedures to avoid duplicate lodging payments;
increasing accountability over debit cards; and identifying and
recouping payments based on improper and potentially fraudulent
applications. FEMA substantially agreed with our recommendations;
however DHS disagreed with our estimate of the extent of improper and
potentially fraudulent payments.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-1013].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William Jenkins (202) 512-
5555 jenkinswo@gao.gov and Greg Kutz, (202)512-7455 kuntzg@gao.gov.
[End of Section]
Contents:
Letter1:
Results in Brief:
Background:
IHP Assistance to Victims of Hurricanes Katrina and Rita Far Surpassed
Assistance to Victims of 2003 and 2004 Hurricane Seasons:
FEMA Responded to the Challenges of Hurricanes Katrina and Rita with
New Approaches, yet Reported Ongoing Management Challenges Hindered
Implementing IHP:
GAO Audit and Investigative Work Reveals Potential for Fraud and Abuse
Related to IHP Applications and Debit Card Use:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Homeland Security:
Appendix III: Federal Disaster Assistance and Individuals and
Households Program Benefits, Structure and Processes:
Appendix IV: Issues Reported Related to FEMA's IHP Disaster Assistance
Provided for Katrina:
Appendix V: GAO's June 14, 2006 Testimony on Fraud and Abuse of FEMA's
Individual Assistance program:
Appendix VI: GAO Contact and Staff Acknowledgments:
Glossary:
Related GAO Products:
Tables:
Table 1: IHP Disaster Assistance Benefits:
Table 2: Comparison of Applications (as of September 2006), Approvals
and Grant Awards for Hurricanes Katrina and Rita and Named Hurricanes
That Came Ashore in the United States in 2004 (as of August 2006) and
2003 (as of April 2006):
Table 3: Total Number of IHP Applicants Approved, Ineligible, Pending
and Applicant Filing Appeals for Named Hurricanes That Came Ashore in
2003 (as of April 2006), 2004, and Hurricanes Katrina,and Rita in 2005
(as of August 2006):
Table 4: IHP Challenges and New Approaches:
Table 5: IHP Challenges and Adaptations of Traditional Approaches:
Table 6: Recent Assessments of FEMA's Performance in Response to
Hurricanes Katrina and Rita:
Figures:
Figure 1: Disaster Recovery Center Where Disaster Victims Apply for
Individual and Households Program Benefits, St. Bernard Parish,
Louisiana:
Figure 2: FEMA Individuals and Households Program Inspection Notice on
a Home in St. Bernard Parish Damaged by Hurricane Katrina:
Figure 3: FEMA's Expenditures for IHP Housing Assistance Grant Awards
for Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004,
and Hurricanes Katrina and Rita in 2005 (as of August 2006):
Figure 4: FEMA's Expenditures for IHP Other Needs Assistance Grant
Awards for Named Hurricanes That Came Ashore in 2003 (as of April
2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August
2006):
Figure 5: Total Number of Inspections Completed and the Total Cost of
the Inspections for Named Hurricanes That Came Ashore in 2003 (as of
April 2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of
August 2006):
Figure 6: Number and Percentage of FEMA Referrals to SBA for Disaster
Loans and the Number of SBA Disaster Loan Applicants Sent Back to FEMA
for ONA for the Named Hurricanes That Came Ashore in 2003 (as of April
2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August
2006):
Figure 7: Conceptual Framework for FEMA's Individuals and Households
Program as Part of Federal Disaster Assistance:
Figure 8: Disaster Declaration Process:
Figure 9: Cover of FEMA's Applicant's Guide to the Individuals and
Households Program:
Abbreviations:
DHS: Department of Homeland Security:
EP&R: Emergency, Preparedness and Response:
FEMA: Federal Emergency Management Agency:
HUD: Department of Housing and Urban Development:
IHP: Individuals and Households Program:
NPSC: National Processing Service Center:
ONA: Other Needs Assistance:
SBA: Small Business Administration:
SSN: Social Security Number:
United States Government Accountability Office:
Washington, DC 20548:
September 27, 2006:
Congressional Committees:
Making landfall in late August 2005, Hurricane Katrina was the
costliest hurricane, and one of the deadliest, in U. S. history. In its
May 2006 Report, the Senate Committee on Homeland Security and
Governmental Affairs estimated Hurricane Katrina was responsible for
over $150 billion in damages and over 1,500 deaths, with thousands more
reported missing. Hurricane Katrina devastated much of the Gulf Coast;
the storm surge caused major or catastrophic damage along the
coastlines of Alabama, Mississippi, and Louisiana. About 80 percent of
New Orleans, the largest city affected, was flooded when levees
protecting the city broke. Hurricane Katrina ultimately affected 90,000
square miles, an area almost as large as the United Kingdom.
Hurricane Rita caused further devastation, making landfall on the Gulf
Coast in September 2005. The most intense Gulf of Mexico hurricane ever
recorded, Rita caused an estimated $9.4 billion in damages--making it
the ninth costliest storm in the U.S. history. The storm killed 7
people directly, and at least another 55 during evacuations and from
indirect effects, such as carbon monoxide poisoning.
The Robert T. Stafford Disaster Relief and Emergency Assistance
Act[Footnote 1] ("the Stafford Act") grants the principal authority for
the President to provide assistance in mitigating, responding to, and
preparing for disasters and emergencies such as earthquakes,
hurricanes, floods, tornadoes, and terrorist acts. The mission of the
Federal Emergency Management Agency (FEMA), within the Department of
Homeland Security (DHS), which administers the Stafford Act, is to
reduce loss of life and property and protect the nation from all types
of hazards, through a comprehensive, risk-based emergency management
program. Section 408 of the Stafford Act, 42 U.S.C. § 5174, is the
general authority for the President to provide assistance to
individuals and households. This section encompasses housing assistance
as well as "other needs" assistance, which includes medical, dental,
funeral, personal property, transportation, and other financial
assistance for certain needs arising from a major disaster. These two
types of assistance are administered by FEMA under the Individuals and
Households Program (IHP). The IHP provides housing and "other needs"
assistance (ONA) in the forms of direct assistance (the provision of
temporary housing units) and financial assistance (grant funding for
temporary housing and other disaster-related needs) to eligible
disaster victims. Before providing assistance, FEMA is to conduct
inspections of disaster victims' homes to verify damage, ownership, and
occupancy. As part of the application process, FEMA refers disaster
victims who apply for assistance and meet established income levels to
the Small Business Administration (SBA). SBA's Disaster Loan Program is
intended to be a primary resource available to aid in disaster victims'
recovery. Applicants who are denied loan assistance by SBA or have
remaining unmet needs are sent back to FEMA for an assistance
determination of their eligibility for certain types of other needs
assistance.
In light of widespread congressional and public interest in U.S.
agencies' performance in providing assistance to hurricane victims, we
prepared this report under the Comptroller General's authority to
conduct evaluations on his own initiative to review the events and
aftermath surrounding Hurricanes Katrina and Rita. This report
discusses (1) how the types and amounts of assistance provided to
victims of Hurricanes Katrina and Rita through the IHP compare to other
recent hurricanes, (2) the challenges posed by the magnitude of the
requests for assistance following Hurricanes Katrina and Rita and
FEMA's response to these challenges, and (3) the vulnerability of the
IHP to fraud, and abuse, in the wake of Hurricanes Katrina and Rita.
To describe the types and amounts of benefits FEMA provided to victims
of Hurricanes Katrina and Rita through IHP in comparison to assistance
provided in other hurricane disasters, we interviewed agency officials
and obtained and analyzed data provided by FEMA's National Processing
Service Center in Winchester, Virginia. We compared IHP disaster
assistance provided under Hurricanes Katrina and Rita to assistance
provided after other hurricane-related disaster declarations occurring
in calendar years 2003 through 2005, to the extent data were available.
We selected hurricane disaster declarations that occurred either in a
single state or in multiple-states simultaneously since IHP was
implemented in fiscal year 2003 and determined that the data were
sufficiently reliable for the purposes of our review.
To determine the challenges FEMA faced and the actions FEMA took to
respond to these challenges, we interviewed FEMA officials and reviewed
and analyzed federal legislation and regulations applicable to FEMA
disaster assistance programs and relevant FEMA policies, guidance, and
processes including changes to existing IHP processes, procedures, and
assistance during and after the hurricanes. We also analyzed IHP
budgets, staffing, and performance measures, and prior audit reports
and assessments.
To determine the vulnerability of the program to problems of fraud and
abuse, our investigators conducted statistical sampling, data
mining[Footnote 2] and undercover operations. We interviewed FEMA
officials and observed contract inspectors assessing damaged
residential properties in New Orleans. We reviewed IHP processes and
procedures for determining applicant eligibility for specific types of
IHP assistance. Although we did identify potentially fraudulent,
improper, and abusive IHP applications, our work was not designed to
identify, and we cannot determine, the full extent of fraudulent,
improper, and abusive IHP registrations. We conducted our audit work
between January 2006 and September 2006 in accordance with generally
accepted government auditing standards. We conducted our investigative
work between October 2005 and September 2006 in accordance with the
standards prescribed by the President's Council on Integrity and
Efficiency. Our scope and methodology are discussed in greater detail
in appendix I.
Results in Brief:
For Hurricanes Katrina and Rita, FEMA received more than 2.4 million
applications for housing and other needs assistance and awarded $7.0
billion in financial assistance to applicants, as compared to the 2004
hurricane season when FEMA received 1.4 million applications and
awarded $1.4 billion in total grants. Two categories of assistance--
temporary housing assistance and expedited assistance accounted for
much of the significant increase in IHP expenditures for Hurricanes
Katrina and Rita as compared to prior years. FEMA also provided a much
greater amount of assistance for Hurricanes Katrina and Rita than in
prior years for specific types of ONA benefits that are primarily
provided only after applicants apply for and are denied an SBA disaster
loan, indicating that the percentage of lower income applicants may
have been a significant portion of total applicants. While the approval
rate for housing assistance was greater than in previous years, the
approval rate for ONA was notably lower for Hurricanes Katrina and Rita
than the two previous hurricane seasons; 41 percent as compared to 65
percent in 2003 and 50 percent in 2004.
Hurricanes Katrina and Rita posed numerous, unprecedented challenges to
IHP implementation. These challenges related to the sheer volume of
applications combined with the temporary relocation of hurricane
victims. FEMA responded to the challenges of Hurricanes Katrina and
Rita by developing new approaches and adapting existing approaches to
implement IHP. For example, FEMA used a new approach to provide Public
Assistance funding to transition victims from short-term lodging,
including shelters, hotels and motels to travel trailers and mobile
homes, and finally to apartments to address longer-term housing needs
until it could develop a strategy for implementing its Individual
Assistance program. FEMA also provided transitional housing (financial)
assistance for the first time that was intended to advance an amount
equal to 3 months of housing costs calculated using the national
average fair market rent for a two-bedroom apartment. To provide more
access to disaster victims dispersed across the United States, FEMA
enhanced its existing Internet systems capacity, doubling the number of
applicants who could be on line simultaneously and opened additional
call centers by working with the Internal Revenue Service and the
private sector, among others. Despite these and other initiatives to
address challenges in the aftermath of the hurricanes, reported ongoing
management challenges and limitations hindered FEMA's implementation of
the IHP. We, as well as six federal reports we reviewed, identified a
lack of planning and trained staff to process initial applications,
respond to applicant questions, and conduct inspections, as well as
programmatic restrictions on the uses of funds that limited FEMA's
flexibility in using IHP assistance in the most efficient and effective
manner. In May 2006, FEMA announced a number of initiatives to address
some of its ongoing management challenges, but it is too early to
determine whether these efforts will effectively address these
concerns.
The unprecedented challenges posed by Hurricanes Katrina and Rita
exposed the IHP to fraud and abuse. The results of our investigative
work, conducted between October 2005 and September 2006, found that
flaws existed in the applications process for disaster victims, which
left the federal government vulnerable to potentially significant fraud
and abuse of IHP expedited assistance payments. We estimated that, as
of February 2006, 16 percent, or approximately $1 billion, in FEMA IHP
payments were improper and potentially fraudulent due to invalid
application data such as Social Security Numbers and addresses. The 95
percent confidence interval associated with our estimate of improper
and potentially fraudulent registrations ranges from a low of $600
million to a high of $1.4 billion in improper and potentially
fraudulent payments. In addition, duplicate payments were made to
individuals in the same household and concurrent payments were made for
lodging (i.e., FEMA IHP paid both for rental and hotel lodging for the
same household). Furthermore, FEMA lacked accountability over $2,000
debit cards that were given to disaster victims to provide immediate
disaster assistance. FEMA also lacked controls over proper debit card
usage. For example, we found that debit cards were used for items or
services such as a Caribbean vacation, professional football tickets,
and adult entertainment. Finally, FEMA had not developed a
comprehensive strategy for identifying and recouping improper payments.
Based on the findings in our testimony of June 14, 2006,[Footnote 3] we
are recommending that the Secretary of DHS direct the Director of FEMA
to take a number of actions to address the potential for fraud and
abuse in the IHP, including implementing changes to its systems and
processes to reject, and immediately inform applicants of, damaged
addresses that are PO boxes and to identify damaged addresses that are
not primary residences; establishing address verification procedures to
validate that the address an applicant claimed as damaged was the
applicant's primary residence at the time of the disaster and deal with
applications where FEMA or other inspectors have concluded that the
damaged address was bogus; establishing procedures to provide
reasonable assurance that individuals staying in FEMA or other paid for
hotel rooms are not also provided IHP rental assistance payments for
the time they are in the paid for hotel rooms; and augmenting
procedures for future disasters to provide reasonable assurance of
accountability over debit card distribution. FEMA fully concurred with
9 of our 13 recommendations, and responded that it had taken, or is in
the process of taking, actions to implement these recommendations.
Although FEMA stated that it only partially concurred with the
remaining 4 recommendations related to hotel reimbursements to the Red
Cross and debit card accountability, FEMA's responses indicate that it
substantially agreed with the key objectives of the 4 recommendations.
While FEMA substantially agreed with our recommendations, FEMA
questioned the validity of our statistical sampling and resulting
projection of fraudulent and improper payments. Specifically, FEMA
disagreed with our estimate that $600 million to $1.4 billion--or 10 to
22 percent--of individual assistance payments through February of 2006
were associated with potentially fraudulent and improper registrations.
FEMA responded that it disagreed with our estimate because it was
substantially larger than FEMA's historical average of 1 to 3 percent
of program fraud. However, FEMA's reported fraud rate of 1 to 3 percent
is not based on an independent, comprehensive statistical sample of the
entire population of individual assistance payments; instead, the 1 to
3 percent FEMA estimate is simply the amount of overpayments that it
identifies based on its own internal processes and procedures. GAO's
estimate of 16 percent--or $1 billion--was based on an independent,
random statistical sample of all 2.6 million claims, totaling $6.3
billion, through February of 2006.
FEMA's written comments are presented in appendix II.
Background:
The purpose of the Stafford Act is to provide an orderly and continuing
means of assistance by the federal government to state and local
governments in carrying out their responsibilities to alleviate the
suffering and damage which results from disasters. The Stafford Act
originally was enacted in 1974 and amended in 1988, 1993, and 2000. The
Disaster Mitigation Act of 2000[Footnote 4] established the IHP by
combining two previous disaster grant programs - -the Temporary Housing
Assistance and Individual Family Grant programs. Under the IHP, these
programs were replaced by Housing Assistance and Other Needs
Assistance. Looking specifically at the Housing Assistance component of
the IHP, section 408 of the Stafford Act authorizes five types of
assistance, of which four are relevant to disaster victims of
Hurricanes Katrina and Rita: [Footnote 5]
(1) Financial assistance to rent temporary housing. FEMA may provide
financial assistance to individuals or households to rent alternative
housing accommodations, existing rental units, manufactured housing,
recreational vehicles, or other readily fabricated dwellings.[Footnote
6]
(2) "Direct" temporary housing assistance. FEMA may provide temporary
housing units (e.g., mobile homes and travel trailers), acquired by
purchase or lease, directly to disaster victims, who, because of a lack
of available housing resources, would be unable to make use of
financial assistance to rent alternate housing accommodations. In other
words, direct assistance would be available in situations where rental
accommodations are not available. By statute, direct assistance is
limited to an 18-month period, after which FEMA may charge fair market
rent for the housing unless it extends the 18-month free-of-charge
period due to extraordinary circumstances.[Footnote 7]
(3) Repair assistance. Under this authority, FEMA may provide financial
assistance for the repair of owner-occupied private residences,
utilities, and residential infrastructure damaged by a major disaster.
However, the maximum amount of repair assistance provided to a
household is limited to $5,000, adjusted annually to reflect changes in
the CPI.[Footnote 8]
(4) Replacement assistance. This form of housing assistance authorizes
funding to replace owner-occupied private residences. The amount of
replacement assistance FEMA may provide to a household is limited to
$10,000, adjusted annually to reflect changes in the CPI.[Footnote 9]
For a victim to receive this assistance, there must have been at least
$10,000 of damage to the dwelling. The victim may use the assistance
toward replacement housing costs.[Footnote 10]
As of September 25, 2006, proposed legislation was pending before
Congress that would, among other things, eliminate the cap on home
repair and replacement assistance.[Footnote 11]
FEMA may provide ONA grant funding for public transportation expenses,
medical and dental expenses, and funeral and burial expenses. ONA grant
funding may also be available to replace personal property, repair and
replace vehicles, and reimburse moving and storage expenses under
certain circumstances. The maximum financial amount of housing and
other needs assistance that an individual or household may receive is
capped at $25,000, adjusted annually to reflect changes in the Consumer
Price Index.[Footnote 12] Eligibility for IHP assistance is determined
when an individual or household applies with FEMA and is based on the
amount of property damage resulting from the disaster.
For disaster victims with financial resources, SBA's Disaster Loan
Program is intended to be a primary resource available to aid in their
recovery. FEMA refers disaster victims who apply for assistance and
meet established income levels to SBA. Applicants who are denied loan
assistance by SBA or have remaining unmet needs are sent back to FEMA
for an assistance determination of their eligibility for certain types
of ONA grant funding. (We reported on SBA's efforts to provide disaster
loans in response to the 2005 hurricanes in July 2006[Footnote 13] and
expect to issue another report on SBA's response later this year.)
Table 1 provides an overview of IHP benefits and identifies the ONA
benefits that are subject to SBA disaster loan eligibility.
Table 1: IHP Disaster Assistance Benefits:
Individuals & Households Program components: Housing Assistance;
Types of benefits available:
* Rental Assistance funds;
* Repair Assistance funds;
* Replacement Assistance funds;
* Direct assistance (manufactured housing, mobile homes, or travel
trailers provided directly to disaster victims);
Amount (maximum amount of IHP financial assistance is $27,200, adjusted
to reflect changes in the CPI for 2006): Based on area fair market
rent;
Maximum: $5,400;
Maximum: $10,900
Does not apply toward financial assistance limit.
Individuals & Households Program components: Other Needs Assistance;
Types of benefits available:
* Moving and Storage[A;
* Personal Property Repair or Replacement (furniture, clothing,
appliances and essential tools)[A];
* Transportation; Repairing or replacing vehicles[A]; Financial
assistance for public transportation and any other transportation
related costs or services;
* Expedited Assistance funds[B];
Amount (maximum amount of IHP financial assistance is $27,200, adjusted
to reflect changes in the CPI for 2006): Maximums subject to total IHP
benefit limit of $27,200; The state establishes ONA award levels
related to vehicle repairs, vehicle replacement, and funeral grants
Maximum $500[C].
Source: GAO generated based on FEMA data.
[A] FEMA may provide ONA grant funding for these expenses if an
applicant is ineligible for a Small Business Administration (SBA)
disaster loan.
[B] The expedited assistance process is not specifically authorized in
the Stafford Act. However, FEMA previously has asserted, and we have
agreed, that it has legal authority under the Act to implement
expedited, or fast track, procedures. On July 24, 2006, FEMA changed
the administration of expedited assistance to under the provisions of
the ONA component. Prior to the change, expedited assistance was under
the provisions of the housing assistance component.
[C] FEMA changed the maximum from $2,000 to $500 on July 24, 2006.
[End of table]
FEMA manages the IHP primarily through a decentralized structure of
permanent and temporary field offices staffed mostly by contract and
temporary employees. The offices include permanent locations at the
FEMA Recovery Division in FEMA Headquarters, regional offices, National
Processing Service Centers, and temporary locations at Joint Field
Offices, Area Field Offices, and Disaster Recovery Centers. Once the
President declares a major disaster that is eligible for federal
assistance, victims in declared counties must first apply for it with
FEMA, by phone, over the Internet, or in person at a disaster recovery
center. Figure 1 shows disaster victims waiting to speak with temporary
disaster staff in October 2005 at a Disaster Recovery Center in St.
Bernard Parish, Louisiana.
Figure 1: Disaster Recovery Center Where Disaster Victims Apply for
Individual and Households Program Benefits, St. Bernard Parish,
Louisiana:
[See PDF for image]
Source: GAO.
[End of figure]
Once a FEMA representative records personal information from a disaster
application and provides the applicant with a FEMA application number,
FEMA's National Emergency Management Information System automatically
determines potential eligibility for designated categories of
assistance.[Footnote 14] FEMA refers disaster victims who apply for
moving and storage, personal property repair or replacement, and/or
vehicle repair or replacement related grant funding assistance and meet
established income levels to SBA. Applicants who are denied loan
assistance by SBA or have remaining unmet needs are sent back to FEMA
for an assistance determination of their eligibility for certain types
of ONA grant funding. To confirm that the home and personal property
sustained damages as reported in a disaster assistance application,
FEMA is to meet with disaster victims at their homes to conduct
individual inspections to verify, ownership, occupancy, and damage.
Figure 2 shows a FEMA inspection notice on a home in St. Bernard Parish
damaged by Hurricane Katrina.
Figure 2: FEMA Individuals and Households Program Inspection Notice on
a Home in St. Bernard Parish Damaged by Hurricane Katrina:
[See PDF for image]
Source: GAO.
[End of figure]
Based on the results of the inspection and determinations made by staff
at the National Processing Service Centers, FEMA approves or denies
housing and/or other needs assistance. (Applicants may be eligible for
either or both types of assistance.) If the applicant qualifies for a
grant, FEMA sends the applicant a check by mail or deposits the grant
funds in the applicant's bank account. If an applicant is denied, he or
she may appeal the decision by contacting a service center and
providing additional information or clarification. Recipients of IHP
assistance must recertify their continuing need for assistance every 30
to 90 days, depending on the type of assistance. Additional details
about federal disaster assistance and IHP including the types of and
eligibility for benefits, how the program is structured and implemented
and the process for applying for and receiving program assistance are
provided in appendix III.
IHP Assistance to Victims of Hurricanes Katrina and Rita Far Surpassed
Assistance to Victims of 2003 and 2004 Hurricane Seasons:
Because of the magnitude of the hurricanes and the extent of the
resulting damage, the total number of applications for, and benefits
provided through IHP in 2005 for Hurricanes Katrina and Rita far
exceeded the combined total of the 2 years since the program was
established in 2003.[Footnote 15] Two categories of assistance--
temporary housing assistance and expedited assistance----accounted for
much of the significant increase in IHP expenditures for Hurricanes
Katrina and Rita as compared to prior years. FEMA also provided a much
greater amount of assistance for Hurricanes Katrina and Rita, than in
prior years, for specific types of ONA benefits that are primarily
provided only after applicants apply for and are denied an SBA disaster
loan, indicating that the percentage of lower income applicants may
have been a significant portion of total applicants. While the approval
rate for housing assistance was greater than in previous years, the
approval rate for ONA was notably lower for Hurricanes Katrina and Rita
than the 2 previous hurricane seasons; 41 percent as compared to 65
percent in 2003 and 50 percent in 2004. Accordingly, the percentage of
applicants FEMA identified as ineligible for housing assistance was
lower while the percentage of ineligible applicants for ONA was higher
for Hurricanes Katrina and Rita (44 percent) than for named hurricanes
that came ashore in 2004 (31 percent). To establish a basis for
eligibility, FEMA had to conduct a much greater number of inspections
and accordingly, the related cost of those inspections were greater
with Hurricanes Katrina and Rita than in 2003 and 2004 combined.
Although FEMA referred more applicants to SBA for disaster loans for
Hurricanes Katrina and Rita than in the prior 2 years, SBA returned
about the same percentage of disaster loan applicants to FEMA for ONA
consideration.
IHP Applications, Benefits and Related Inspection Workload Were Greater
for Hurricanes Katrina and Rita than in 2 Preceding Years:
FEMA received far more IHP applications, approved more requests for
Housing and Other Needs Assistance, and awarded more grant money in
2005-2006 for Hurricanes Katrina and Rita than for all the hurricanes
that resulted in a disaster declaration in 2004 (Ivan, Charley,
Frances, and Jeanne) and 2003 (Isabel and Claudette) combined. Table 2
shows the number of applicants approved for both categories of IHP
assistance and the grant award totals--as of August 2006, for
Hurricanes Katrina and Rita and named hurricanes that came ashore in
the United States in 2004.[Footnote 16] The table also shows the number
of applications received by FEMA--as of September 2006. The number of
applicants and both categories of IHP assistance for the 2003 named
hurricanes were provided by FEMA as of April 2006.[Footnote 17]
Table 2: Comparison of Applications (as of September 2006), Approvals
and Grant Awards for Hurricanes Katrina and Rita and Named Hurricanes
That Came Ashore in the United States in 2004 (as of August 2006) and
2003 (as of April 2006):
Hurricanes Katrina and Rita[A];
Total applications for FEMA assistance: 2.4 million;
Housing assistance approvals[B]: 1.3 million;
ONA approvals[B]: 556,000;
Total grant awards: $7.0 billion.
2004;
Total applications for FEMA assistance: 1.4 million;
Housing assistance approvals[B]: 382,000;
ONA approvals[B]: 495,000;
Total grant awards: 1.4 billion.
2003;
Total applications for FEMA assistance: 179,000;
Housing assistance approvals[B]: 45,000;
ONA approvals[B]: 45,000;
Total grant awards: 158 million.
Source: GAO analysis based on FEMA data.
[A] In 2005, FEMA authorized Individual Assistance for disaster
declarations in Alabama and Florida for Hurricane Dennis; Alabama,
Mississippi and Louisiana for Hurricane Katrina; Louisiana and Texas
for Hurricane Rita; and Florida for Hurricane Wilma.
[B] Individual IHP applicants can be eligible for more than one type of
Housing Assistance or ONA category; therefore, some individuals may be
counted under both assistance categories.
[End of table]
FEMA data as of August 2006, shows that two categories of assistance--
temporary housing assistance and expedited assistance[Footnote 18]
accounted for much of the significant increase in IHP expenditures for
Hurricanes Katrina and Rita as compared to prior years, as shown in
figure 3. FEMA specifically established a new transitional housing
assistance allowance, as part of temporary housing assistance, to
advance to Katrina disaster victims an amount equal to the initial 3
months of rental payments based on the national average rent for a 2-
bedroom apartment. Expedited assistance is a pre-inspection
disbursement of funds to disaster victims based on specific criteria
such as the severity of the damage. (See glossary for definitions of
all housing and other needs assistance categories.) Transitional
housing assistance that was authorized exclusively for Hurricane
Katrina, was estimated at about $1.3 billion while expedited assistance
for both Hurricanes Katrina and Rita totaled an about $2.3 billion. By
comparison, about $59 million was approved for hurricanes in 2004,
while no expedited assistance was approved for hurricanes in 2003.
Figure 3: FEMA's Expenditures for IHP Housing Assistance Grant Awards
for Named Hurricanes That Came Ashore in 2003 (as of April 2006), 2004,
and Hurricanes Katrina and Rita in 2005 (as of August 2006):
[See PDF for image]
Source: GAO analysis of NEMIS data.
[A] Temporary housing assistance includes lodging expenses
reimbursement and rental assistance. Transitional housing assistance is
a component of rental assistance.
[B] Expedited assistance was not authorized for hurricanes in 2003. On
July 24, 2006, FEMA changed the administration of expedited assistance
to under the provisions of the ONA component. Prior to the change,
expedited assistance was under the provisions of the housing assistance
component.
[End of figure]
In terms of ONA, figure 4 shows that FEMA provided a much greater
amount of income dependent assistance for Hurricanes Katrina and Rita
in 2005 than in prior years. Income dependent assistance requires that
eligible applicants initially apply for and be denied assistance from
the SBA Disaster Loan Program[Footnote 19] and includes expenses for
personal property, moving and storage, and vehicle repair and
replacement expenses. For Hurricanes Katrina and Rita, personal
property assistance accounted for the majority of the income dependent
assistance, about $1.8 billion. In comparison, for the hurricanes in
2003 and 2004, the combined total income-dependent assistance approved
was less than $495 million. Lower income applicants may have made up a
significant portion of those receiving ONA benefits because income
dependent assistance in the form of personal property assistance was
nearly 87 percent of the ONA approved for victims of hurricanes Katrina
and Rita.
Figure 4: FEMA's Expenditures for IHP Other Needs Assistance Grant
Awards for Named Hurricanes That Came Ashore in 2003 (as of April
2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August
2006):
[See PDF for image]
Source: GAO analysis of NEMIS data.
[A] Non-Income dependent assistance categories include medical, dental,
funeral and other expenses.
[B] Income dependent assistance categories include personal property,
moving and storage, and vehicle repair and replacement expenses.
[End of figure]
Victims of Hurricanes Katrina and Rita Seek Housing Assistance in
Numbers Greater than Those for Other Needs Assistance:
As of August 2006, FEMA data shows that for Hurricanes Katrina and Rita
nearly 2 million applicants applied for Housing Assistance while 1.3
million applicants requested ONA. About 67 percent of applicants for
Housing Assistance were approved versus an estimated 41 percent of
applicants approved for ONA. Although during Hurricanes Katrina and
Rita more applicants were approved for ONA, the percentage of approved
applicants was less than for hurricanes in the prior 2 years, whose
approval rates were higher than 50 percent in each year. Accordingly,
the percentage of applicants FEMA identified as ineligible for housing
assistance was lower while the percentage of ineligible applicants for
ONA was higher for Hurricanes Katrina and Rita (44 percent) than for
named hurricanes that came ashore in 2004 (31 percent).
Table 3 shows, by IHP assistance category, the number and percentage of
applicants FEMA considered for IHP assistance as of August 2006 for
hurricanes in 2004 and Hurricanes Katrina and Rita, and for hurricanes
in 2003 as of April 2006. In addition, the table shows the number and
percent of approved, ineligible, and pending IHP applicants. It also
shows the number and percent of applicants that appealed FEMA decisions
regarding their IHP assistance, for Hurricanes Katrina, Rita and named
hurricanes that came ashore in 2003 and 2004. The table does not show
the number of IHP applicants who withdrew their application during the
evaluation process.[Footnote 20]
Table 3: Total Number of IHP Applicants Approved, Ineligible, Pending
and Applicant Filing Appeals for Named Hurricanes That Came Ashore in
2003 (as of April 2006), 2004, and Hurricanes Katrina,and Rita in 2005
(as of August 2006):
Number of applicants referred by FEMA to IHP;
Housing Assistance[A]: Hurricanes 2003[B]: 99,754;
Housing Assistance[A]: Hurricanes 2004[C]: 1,017,610;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 1,989,871;
ONA Assistance[A]: Hurricanes 2003[B]: 91,136;
ONA Assistance[A]: Hurricanes 2004[C]: 762,786;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 1,349,865.
Number of applicants Approved;
Housing Assistance[A]: Hurricanes 2003[B]: 45,856;
Housing Assistance[A]: Hurricanes 2004[C]: 382,069;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 1,333,738;
ONA Assistance[A]: Hurricanes 2003[B]: 45,298;
ONA Assistance[A]: Hurricanes 2004[C]: 495,938;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 556,109.
Percentage of referred applicants approved for assistance;
Housing Assistance[A]: Hurricanes 2003[B]: 46%;
Housing Assistance[A]: Hurricanes 2004[C]: 38%;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 67%;
ONA Assistance[A]: Hurricanes 2003[B]: 50%;
ONA Assistance[A]: Hurricanes 2004[C]: 65%;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 41%.
Number of ineligible Applicants;
Housing Assistance[A]: Hurricanes 2003[B]: 48,243;
Housing Assistance[A]: Hurricanes 2004[C]: 582,015;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 520,385;
ONA Assistance[A]: Hurricanes 2003[B]: 43,055;
ONA Assistance[A]: Hurricanes 2004[C]: 234,340;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 595,213.
Percentage of referred applicants ineligible for assistance;
Housing Assistance[A]: Hurricanes 2003[B]: 48%;
Housing Assistance[A]: Hurricanes 2004[C]: 57%;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 26%;
ONA Assistance[A]: Hurricanes 2003[B]: 47%;
ONA Assistance[A]: Hurricanes 2004[C]: 31%;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 44%.
Number of pending applicants;
Housing Assistance[A]: Hurricanes 2003[B]: 2;
Housing Assistance[A]: Hurricanes 2004[C]: 8;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 70;
ONA Assistance[A]: Hurricanes 2003[B]: 2;
ONA Assistance[A]: Hurricanes 2004[C]: 60;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 2,383.
Percentage of referred pending applicants;
Housing Assistance[A]: Hurricanes 2003[B]: 0.002%;
Housing Assistance[A]: Hurricanes 2004[C]: 0.001%;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 0.004%;
ONA Assistance[A]: Hurricanes 2003[B]: 0.002%;
ONA Assistance[A]: Hurricanes 2004[C]: 0.008%;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 0.002%.
Number of applicant appeals[E];
Housing Assistance[A]: Hurricanes 2003[B]: 23,219;
Housing Assistance[A]: Hurricanes 2004[C]: 183,338;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 182,990;
ONA Assistance[A]: Hurricanes 2003[B]: 4,624;
ONA Assistance[A]: Hurricanes 2004[C]: 60,941;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 92,642.
Percentage of referred applicants appealing assistance decision;
Housing Assistance[A]: Hurricanes 2003[B]: 23%;
Housing Assistance[A]: Hurricanes 2004[C]: 18%;
Housing Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 9%;
ONA Assistance[A]: Hurricanes 2003[B]: 5%;
ONA Assistance[A]: Hurricanes 2004[C]: 8%;
ONA Assistance[A]: Hurricanes Katrina and Rita 2005[D]: 7%.
Source: GAO analysis based on FEMA data:
[A] Individual IHP applicants can eligible for assistance from more
than one type of IHP category; therefore, some individuals may be
counted under both assistance categories.
[B] Calculations based on data for Hurricanes Isabel and Claudette.
[C] Calculations based on data for Hurricanes Ivan, Charley, Frances,
and Jeanne.
[D] Calculations based on data for Hurricanes Katrina and Rita.
[E] Applicants who appealed IHP eligibility decisions were counted in
approvals, ineligible, or withdrawn application totals but not in the
pending application category.
[End of table]
In order to provide the unprecedented level of disaster assistance,
FEMA had to significantly increase its number of home inspections. As
of August 2006, data reported by FEMA indicates that after Hurricanes
Katrina and Rita, about 1.9 million inspections[Footnote 21] were
completed at a cost of approximately $179.6 million, or about $92 per
inspection. For the hurricanes in 2003 and 2004, FEMA completed about
108,000 and 1.0 million inspections at a cost of about $8.0 million and
$70.3 million or about $74 and $75 per inspection, respectively. In
August 2006, FEMA reported the average time required for completing
inspections--the time between the application for assistance until
submission of an inspection report--after Hurricanes Katrina and Rita
was about 33 days and 25 days respectively. The average time for
completing inspections for the hurricanes in 2003 was 1 to 2 days and
in 2004 the average was 4 to 5 days. A FEMA official stated that the
goal for conducting inspections is a 3-day turnaround time. Figure 5
compares the number of inspections completed by contractors and the
cost of the inspections for the named hurricanes in our review.
Figure 5: Total Number of Inspections Completed and the Total Cost of
the Inspections for Named Hurricanes That Came Ashore in 2003 (as of
April 2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of
August 2006):
[See PDF for image]
Source: GAO analysis based on NEMIS data.
[End of figure]
According to a FEMA official, the following factors had an impact on
the higher per inspection costs for Hurricanes Katrina and Rita:
* Both of FEMA's inspection contractors had automatic annual increases
on a per inspection basis built into their contract.
* Automatic annual increases from 2004 to 2005 for maintaining on-call
availability were also included in the contracts.
* For 2005, FEMA added a new requirement for inspectors to photograph
disaster damage that added to the cost per inspection.
* The contractors increased the per inspection cost in December 2005
when FEMA extended the contract beyond the initial 5-year period of
performance.
Percentage of SBA Disaster Applicants Sent Back to FEMA's ONA for
Hurricanes Katrina and Rita Was Comparable to Those after Hurricanes in
2003 and 2004:
For Hurricanes Katrina and Rita, FEMA referred about 2.5 million
applicants to SBA for assistance through its Disaster Loan
Program.[Footnote 22] For hurricanes in 2003 and 2004, FEMA referred
fewer applicants--about 107,000 and 1.3 million applicants
respectively, to the SBA. As of August 2006, data reported by FEMA show
that nearly 10 percent of applicants were sent back to FEMA from SBA
for ONA consideration. In comparison, during hurricanes in 2003 and
2004, SBA sent back to FEMA a comparable percentage of applicants--
about 12 percent and 10 percent respectively, which indicates that
SBA's loan denial rate was relatively consistent although more
applicants were referred for Hurricanes Katrina and Rita than in the
prior 2 years. Figure 6 shows the number of applicants referred to the
SBA for loan assistance and the number of applicants the SBA sent back
to FEMA for ONA in 2003, 2004, and for Hurricanes Katrina and Rita in
2005.
Figure 6: Number and Percentage of FEMA Referrals to SBA for Disaster
Loans and the Number of SBA Disaster Loan Applicants Sent Back to FEMA
for ONA for the Named Hurricanes That Came Ashore in 2003 (as of April
2006), 2004, and Hurricanes Katrina and Rita in 2005 (as of August
2006):
[See PDF for image]
Source: GAO analysis of NEMIS data.
[End of figure]
FEMA Responded to the Challenges of Hurricanes Katrina and Rita with
New Approaches, yet Reported Ongoing Management Challenges Hindered
Implementing IHP:
Faced with unprecedented challenges in the aftermath of Hurricanes
Katrina and Rita, FEMA devised new approaches and adapted pre-existing
ones to administer the IHP. However, our work and six federal reports
we reviewed pointed to ongoing management challenges which hindered IHP
implementation. These management challenges included a lack of planning
and trained staff, and programmatic restrictions on the uses of IHP
funds that limited FEMA's flexibility in using IHP assistance in the
most efficient and effective manner. In May 2006, FEMA announced
initiatives to address the problems and recommendations cited in the
various reports. However, it is too early to assess the success of
these initiatives.
FEMA Used New Approaches to Address Hurricanes' Unprecedented
Challenges:
Hurricanes Katrina and Rita posed numerous unprecedented challenges for
FEMA's administration of the IHP. These challenges arose from the sheer
number of victims seeking assistance, including many who had lost key
financial, residential, and other documentation in the storms, and the
dispersal of these victims throughout the United States. As a result,
FEMA was also challenged to conduct an unprecedented number of housing
inspections, often with limited or no access to individuals or, in many
cases, to the affected homes. To provide benefits quickly to eligible
victims, communicate with about 2 million applicants scattered across
the country and conduct inspections, FEMA developed a number of new
approaches, as summarized in table 4.
Table 4: IHP Challenges and New Approaches:
Challenge: Provide shelter and housing assistance to an unprecedented
number of disaster victims quickly;
New Approach: FEMA initially used Public Assistance funding until it
could develop a longer term strategy for implementing its Individual
Assistance program to transition victims from short-term lodging,
including shelters, hotels and motels to travel trailers and mobile
homes, and finally to apartments to address longer-term housing
needs.[A]; For Katrina, for the first time, FEMA provided $2,000 debit
cards in a pilot distribution to approximately 11,000 disaster victims
in three shelters with large numbers of disaster victims.
Challenge: Provide assistance to disaster victims dispersed across the
United States (to provide application and eligibility information);
New Approach: FEMA created new IHP procedures to allow multiple
household members separated by the disaster to receive rental
assistance. As a result of Hurricanes Katrina and Rita, thousands of
families evacuated to locations across the country and in some
circumstances required families to temporarily separate. As a result,
providing assistance to multiple household members was warranted,
according to FEMA; For the first time, FEMA established a program to
relocate out-of-state disaster victims to find temporary housing or
reunite with family members sheltered in another state, according to
FEMA; FEMA used new methods such as automated dialing with recorded
messages and having disaster assistance employees go door to door to
communicate with disaster victims; FEMA worked with the post office to
establish mail offices in shelters with large numbers of disaster
victims.
Challenge: Conduct inspections for a large number of homes, with
limited or no access, and for homeowners who may not be available
during the inspection;
New Approach: FEMA used remote sensing (satellite technology or
airplane flyovers) to complete inspections in areas that were not
accessible in five Louisiana Parishes and three Mississippi
Counties.[B]; FEMA established a third party inspection option allowing
individuals who could not return home to designate a representative to
meet with a FEMA inspector on their behalf; FEMA established a
procedure to provide personal property assistance when (1) the exterior
damage clearly indicated the residence was uninhabitable (2) the
applicant was unable to return to the area to meet with the inspector
and (3) there was no available designee for a third party inspection.
Source: GAO analysis of data from FEMA Recovery Division.
[A] FEMA was still providing short-term lodging assistance to some
disaster victims in Texas under the Public Assistance program as of
August 2006, according to FEMA's Acting Deputy Director for the
Recovery Division. In most circumstances, manufactured housing,
including mobile homes, travel trailers and modular housing are
primarily funded under IHP.
[B] Satellite technology was used to conduct inspections in Orleans,
Jefferson, St. Bernard, St. Tammany, and Plaquemines parishes in
Louisiana; and Jackson, Harrison, and Hancock counties in Mississippi.
This technology was also used in lieu of on-site inspections to
expedite payments for about 10 percent of the flood insurance claims
for Katrina victims.
[End of table]
In addition, FEMA adapted several of its traditional approaches to
respond to Hurricanes Katrina and Rita, according to FEMA, as
summarized in table 5.
Table 5: IHP Challenges and Adaptations of Traditional Approaches:
Challenge: Provide shelter and housing assistance to an unprecedented
number of disaster victims quickly;
Adaptation to Traditional Approach: FEMA deployed contract inspectors
and computer equipment to facilitate the applications of disaster
victims in mass shelters, in addition to traditional locations at
temporary disaster relief centers; FEMA contracted for expanded mail
processing functions to keep pace with the volume of incoming and
outgoing mail and to ensure that documents needed to complete case
processing were scanned and indexed into applicant files in a timely
manner; FEMA revised its procedures to provide financial housing
assistance in advance for multiple months (rather than on a month-by-
month basis)--referred to as transitional housing assistance--that was
intended to represent 3 months of housing costs calculated using the
national average fair market rent for a two- bedroom apartment,
according to FEMA.
Challenge: Provide assistance to victims dispersed across the United
States (to provide application and eligibility information);
Adaptation to Traditional Approach: FEMA doubled its existing Internet
systems capacity related to the number of applicants that could be on
line at the same time; FEMA opened additional call centers by working
with Internal Revenue Service and the private sector, among others;
FEMA added options to its Interactive Voice Recognition system to allow
victims to get information without speaking to a caller agent,
according to FEMA; FEMA extended its tele-registration and call center
operations for more than 176 days after Hurricane Katrina struck,
considerably longer than prior disasters, according to FEMA.
Challenge: Conduct inspections for a large number of homes, with
limited or no access, and for homeowners who may not be available
during the inspection;
Adaptation to Traditional Approach: FEMA doubled its normal contract
inspection workforce, using all of its approximate 4,000 contract
inspectors for Hurricanes Katrina and Rita.
Source: GAO analysis of data from FEMA Recovery Division.
[End of table]
Despite New Approaches, Reported Ongoing Management Challenges Hindered
Implementing IHP:
Each of the assessments of the federal government's response to
Hurricanes Katrina and Rita we reviewed identified problems in FEMA's
implementation of IHP during and after the storms. Our review and our
assessment of these reports showed that the agency's efforts to
implement the IHP were hindered by a lack of planning, trained staff,
and program limitations, despite its new and revised approaches for
implementing the program. A list of these assessments is provided in
table 7. In addition, a summary of Katrina-and Rita-issues related to
the IHP addressed in these reports is identified in appendix IV.
Table 6: Recent Assessments of FEMA's Performance in Response to
Hurricanes Katrina and Rita:
Date: November 15, 2005;
Title: Performance and Accountability Report Fiscal Year 2005;
Source: Department of Homeland Security.
Date: February 13, 2006;
Title: DHS/FEMA Initial Response Hotwash: Hurricane Katrina in
Louisiana;
Source: Department of Homeland Security.
Date: February 15, 2006;
Title: A Failure of Initiative: Final Report of the Select Bipartisan
Committee to Investigate the Preparation for and Response to Hurricane
Katrina;
Source: House of Representatives.
Date: February 23, 2006;
Title: The Federal Response to Hurricane Katrina: Lessons Learned;
Source: The White House.
Date: March 31, 2006;
Title: A Performance Review of FEMA's Disaster Management Activities in
Response to Hurricane Katrina;
Source: Department of Homeland Security Office of Inspections and
Special Reviews.
Date: May 2006;
Title: Hurricane Katrina: A Nation Still Unprepared;
Source: Report of the Committee on Homeland Security and Governmental
Affairs.
Source: GAO based on cited reports.
[End of table]
Regarding planning, the DHS Inspector General reported in March 2006
that FEMA lacked final plans that specifically addressed the types of
challenges the agency could be expected to face in catastrophic
circumstances. [Footnote 23] For example, because FEMA was unable to
immediately implement IHP assistance to provide funds to transition
victims from short-term lodging, including shelters, hotels and motels
to longer-term housing alternatives such as mobile homes or apartments,
FEMA officials used Public Assistance funds. Normally, public
assistance is provided (under section 403 of the Stafford Act)[Footnote
24] only for immediate emergency sheltering efforts to get assistance
to individuals and households quickly. Under normal circumstances, IHP
funds provided under Section 408 of the Act are intended to accommodate
the longer-term housing needs of evacuees up to 18 months. FEMA
officials said that many applicants would have waited months to receive
their initial assistance if FEMA had followed normal IHP processes and
procedures under Section 408 and had to wait until inspections were
completed and IHP information and assistance could be communicated to
disaster victims who were dispersed to all 50 states. However, this use
of Public Assistance funds was problematic, according to the DHS
Inspector General's report. Because application for assistance is not a
requirement for the provision of Public Assistance under section 403 of
the Stafford Act, FEMA did not know whether disaster victims were
actually eligible for assistance as a direct result of the disaster.
This increased the potential for duplication with other assistance
programs since there was no internal mechanism to determine whether an
evacuee had received assistance from the IHP when interim housing may
have already been provided. The interim housing assistance funded under
section 403 was only phased out after FEMA was able to identify that an
evacuee had received IHP funds.
FEMA was aware it needed to plan for large disasters but had problems
getting necessary funding, according to the Senate Homeland Security
and Governmental Affairs Committee's Katrina Report.[Footnote 25] FEMA
requests for $100 million for catastrophic planning and an additional
$20 million for catastrophic housing planning in fiscal year 2004 and
fiscal year 2005, respectively, were denied by DHS. Our review of
FEMA's implementation of IHP showed that FEMA's reactive approach to
planning and implementing the IHP on a disaster-by-disaster basis is
inadequate to deal with the short-term and long-term needs of affected
communities, particularly for catastrophic disasters when the agency's
resources and staff are strained. For example, FEMA failed to pre-
identify workable sites and land and take advantage of available
housing units from other federal agencies, according to a February 2006
White House report.[Footnote 26] We have ongoing work focusing on the
federal role in providing housing assistance in response to Hurricanes
Katrina and Rita.
In terms of trained staff, FEMA lacked the surge capacity to
effectively manage the disaster assistance process. Specifically,
according to the March 2006 DHS Inspector General report, additional
trained staff were needed to (1) provide initial application services
at Disaster Recovery and Call/Processing Centers, (2) process
applications and respond to questions at the National Processing
Service Centers, and (3) conduct inspections.[Footnote 27] First,
according to the DHS Inspector General, disaster victims experienced
delays when they contacted Call Centers or were not able to speak with
anyone. Second, disaster victims experienced delays in obtaining their
eligibility determination, according to FEMA officials responsible for
managing the IHP. Third, inspections were delayed, in part, because
FEMA lacked enough contract inspectors to perform inspections,
according to FEMA. Our analysis found, for example, that inspection
times for Katrina and Rita took an average of two to five times longer
compared to named hurricanes in 2004. FEMA uses inspectors that have a
construction, real estate, or appraisal background, but it is not
required, according to a FEMA Inspection Services Manager. FEMA
requires that each inspector be trained on FEMA standards and policies
regarding program eligibility and that new inspectors undergo
background checks. In most conventional disasters, experienced
inspectors are to accompany new inspectors in the field to ensure that
they are meeting FEMA standards before they are allowed to complete
inspections on their own. We have work underway assessing trends in
FEMA's resources, including staffing, and their impact on FEMA's
capacity to conduct operations and plan to report on FEMA's workforce
management efforts later this year.
According to the March 2006 DHS Inspector General report,[Footnote 28]
FEMA was not able to dedicate its full staffing strength to Hurricane
Katrina for three primary reasons. First, at the time of the disaster,
FEMA had personnel assigned to 38 other disasters not related to
Hurricane Katrina. For example, Hurricane Ophelia in the Carolinas,
Hurricane Rita in the Gulf Coast region, and flooding in the Northeast
were declared disasters and required FEMA resources. Second, an average
of 30 percent of FEMA Disaster Assistance Employees reported they were
unavailable to respond to Katrina or any other disaster during the
August 24, 2005 - September 30, 2005 time frame. (Disaster Assistance
Employees may be unavailable for such issues as health or family
concerns.) Third, FEMA officials said, although FEMA was authorized
2,445 staff in August 2005, 389 positions were vacant and many of these
were key leadership positions. The DHS Inspector's report included
recommendations that FEMA (1) develop a more comprehensive program to
recruit, train, and retain local hires for use in augmenting FEMA's
Disaster Assistance Employees and permanent staff, (2) provide training
to additional NPSC staff and contractors to enhance FEMA's capability
to perform evacuee assistance and case management activities, and (3)
develop a disaster workforce plan for permanent, temporary, and reserve
staff that is scalable events regardless of cause, size, or
complexity.[Footnote 29] FEMA concurred with the recommendations.
Throughout our review FEMA officials cited their concerns regarding the
lack of agency and contractor staffing resources needed to effectively
implement the program during a catastrophic event. Concerns regarding
training and staffing for disaster response management are long-
standing. In 2003, in our report on major performance and
accountability challenges for FEMA,[Footnote 30] we noted that FEMA
faced challenges to enhance its disaster assistance training and
resource planning. According to the report, FEMA developed a program in
1999 for evaluating the knowledge, skills, and abilities of its staff-
-both permanent and temporary--who are deployed to respond to a
disaster. FEMA expected the program would ensure its employees would
have basic qualifications to perform their jobs, but, according to FEMA
officials, the program was not implemented because of budget
constraints. We also reported that 48 percent of FEMA's workforce would
be eligible to retire in the next 5 years and this would pose a
challenge for having staff with the skills needed to perform core
functions.
Finally, FEMA officials cited legislative and regulatory limitations
that restricted FEMA's flexibility in implementing the IHP in the
aftermath of Hurricane Katrina. For example,
* FEMA's Federal Coordinating Officer for Louisiana cited the statutory
program's maximum of $5,000 for home repair as one limitation, noting
that if the $5,000 is not sufficient to fix the home, then FEMA may
have to provide a trailer for temporary housing. He testified that
manufactured housing is not cost-effective and can cost up to $90,000
to $100,000 per mobile home for a group site (including total costs for
site preparation, hauling and installation, and cost of home). He
suggested that in some situations if FEMA were able to give disaster
victims the maximum amount of IHP financial assistance,[Footnote 31] it
would be more cost-effective because it would allow many of these
families to find permanent housing. However, the Acting Deputy Director
for FEMA's Recovery Division told us that FEMA only uses manufactured
housing as a last resort, and in the post-Katrina and Rita environment,
housing and the infrastructure that supports the community was
destroyed. As a result, FEMA did not have any alternative other than to
provide manufactured housing.
* FEMA officials were unable to use a large supply of federally
controlled housing units that could have been made available for
occupancy by disaster victims with only minor repairs because
reimbursement for repairs to existing available housing units are not
authorized under the current program regulations, according to the
White House report on Hurricane Katrina.[Footnote 32] As a result, FEMA
had to provide alternative temporary housing such as trailers and other
manufactured housing units, at considerably greater cost, while leaving
other potentially available housing vacant.
A bill, the Natural Disaster Housing Reform Act of 2006, was introduced
May 16, 2006, in the House of Representatives that would provide the
federal government with more flexibility in the provision of short-and
long-term housing after a major disaster. [Footnote 33] For example,
the bill would allow the President to offer disaster victims
manufactured modular housing under the IHP if it could be provided at a
lower cost than other readily fabricated dwellings. It would also
extend repair assistance under the IHP, currently available only for
owner-occupied residences, so that renters could repair existing rental
units to make them habitable as alternate housing accommodations. The
bill also proposes that the President may provide financial assistance
or direct assistance to individuals or households to construct
permanent or semi-permanent housing in any area in which the President
declared a major disaster or emergency in connection with Hurricane
Katrina of 2005 during the period beginning on August 28, 2005, and
ending on December 31, 2007. Under the IHP, permanent housing
construction is only available for disaster victims who reside in
insular areas or other remote locations.[Footnote 34]
Initiatives to Improve IHP Are Ongoing, but Their Impact Is Unknown:
In an effort to address the problems and recommendations cited in the
various reports, FEMA announced plans on May 24, 2006, to implement a
number of new approaches to enhance logistics, emergency
communications, situational awareness, housing and victim management.
According to FEMA, the improvements related to IHP include plans to
increase the number of trained staff and revise new policies and
procedures. However, at the time of our review, many of these
initiatives were in the planning or at the early implementation stage.
As a result, it was too early to assess their potential impact on
future program implementation. Specifically, FEMA reported plans to:
* Hire a training coordinator to develop a more comprehensive training
program to prepare existing and new personnel for Disaster Recovery
Center assignments. According to FEMA's Acting Deputy Director for the
Recovery Division, they were still searching for qualified applicants
for the training coordinator position as of August 2006.
* Train 3,000 disaster "generalist" surge cadre employees for ready
deployment during the height of the 2006 hurricane season and increase
its capacity to deploy and communicate with the increased number of
disaster employees. According to FEMA, these surge employees are to
form a "generalist" pool of disaster workers and be trained in a number
of basic functions cutting across traditional program areas including
Community Relations, Individual Assistance, Public Assistance and
Logistics. As of August 2006, FEMA said approximately 1,836 employees
had completed the training.[Footnote 35]
* Develop greater contract and contingency surge capabilities to expand
application intake capacity of up to 200,000 per day (during the weeks
following Hurricanes Katrina and Rita, FEMA recorded more than 100,000
applications a day) and expand its Internet-based application
capability by improving accessibility to reduce application wait times
and FEMA Helpline information delays following a major disaster.
According to FEMA officials, the objective of expanding its
capabilities is to have private-sector contracts in place and resources
ready to handle calls within 48 hours of a disaster declaration. In the
past, FEMA had to augment its application intake surge capabilities
each hurricane season especially during 2004 and 2005 a step usually
taken under urgent and compelling needs, through emergency contracts,
and by using Internal Revenue Service personnel. FEMA plans to award
the contract for this initiative in 2007 and, in the interim period,
plans to continue to utilize IRS personnel and redirect existing FEMA
staff to augment application intake capabilities.
* Implement a pilot program in the 2006 hurricane season to use Mobile
Registration Intake Centers that can be deployed to emergency shelter
locations or impacted neighborhoods without power or phone service and
provide on-site capability to quickly apply for FEMA assistance. These
units would be capable of providing the public access to the FEMA
disaster assistance program via phone and the internet. FEMA currently
has five vehicles each equipped with 20 telephones and 20 personal
computers. As of August 2006, FEMA was in the planning stage of
upgrading each vehicle's capacity to support 40 telephones and 40
personal computers and has the ability to expand this effort by using
tents with tables and equipment set up near the vehicles. FEMA's
intention is to evaluate the pilot program at the end of the 2006
hurricane season to determine if they should expand this capability.
? Increase contractor staffing capacity for housing inspections from
7,500/per day/per contractor to 20,000/per day/per contractor. FEMA
anticipates that this added capacity will increase the speed and
accuracy of home inspections. FEMA intends to implement the related
requirements with the award of its new inspection contracts tentatively
scheduled for the end of December 2006.
* Clarify program policies on the appropriate use and authorization of
emergency sheltering funds (Stafford Act, section 403 assistance) and
individual housing assistance funds (Stafford Act, section 408
assistance) for the disaster victims. As part of this initiative, FEMA
plans to have a draft policy in place for issuing authorization codes
to evacuees for lodging and hotels for the 2006 hurricane season. In
addition, FEMA plans to have a policy for Expedited Assistance that
defines the conditions that must be met before initiating the program.
FEMA issued a strategy for mass sheltering and housing assistance on
July 24, 2006, and plans to develop more detailed policies and
procedures to implement the strategy.[Footnote 36]
GAO Audit and Investigative Work Reveals Potential for Fraud and Abuse
Related to IHP Applications and Debit Card Use:
As we recently reported, [Footnote 37] one of the major challenges FEMA
faced after Hurricanes Katrina and Rita was balancing the need to
quickly deliver benefits and services to needy and eligible victims
while minimizing occurrences of fraud and abuse. As we testified in
June 2006, an estimated 16 percent, or approximately $1 billion, in
FEMA IHP payments were improper and potentially fraudulent due to
invalid application data.[Footnote 38] (A copy of our testimony is
provided in app. IV.) Additionally, we found that FEMA made improper or
potentially fraudulent IHP payments to applications containing names
and Social Security Numbers of individuals who were incarcerated at the
time of disaster, and paid hotel room charges for applicants who were
also receiving rental assistance concurrently. We also determined that
FEMA had little accountability over debit card distribution and lacked
proper controls over debit card usage.
Invalid Applications Provide the Potential for $1 Billion in
Potentially Improper Payments:
An estimated 16 percent of payments totaling approximately $1 billion
were improper and potentially fraudulent due to invalid applications.
The 95-percent confidence interval surrounding the estimate of 16
percent ranges from 12 percent to 21 percent. The 95-percent confidence
interval surrounding the estimate of $1 billion ranges from $600
million to $1.4 billion.[Footnote 39] The estimated amount included
payments for expedited assistance, rental assistance, housing and
personal property repair and replacement, and other necessary and
emergency expenses. These payments were made to (1) applications
containing Social Security Numbers (SSN) that were never issued or
belonged to other individuals, (2) applicants who used bogus damaged
addresses, and (3) applicants who had never lived at the declared
damaged addresses or did not live at the declared damaged address at
the time of disaster. These payments were also made to applications
containing information that was duplicative of other applications
already recorded in FEMA's system. The duplicative payment failures
refer to instances where FEMA made payments to more than one
application with the same damaged property and current addresses, and
the payment selected was associated with the second or later
application. For example, one applicant submitted an application for
the same current and damaged address that was used on another
application, and both received payments for $2,358 of rental assistance
on each application in September 2005. Effective preventive controls
for duplicate applications would have detected that the two
applications shared the same damaged and current address and acted to
prevent the duplicate payments.
Our projection likely understated the total amount of improper and
potentially fraudulent payments because our work was limited to issues
related to misuse and abuse of identity, damaged property address
information, and duplicate payments. Our estimate did not account for
improper and potentially fraudulent payments related to issues such as
identity theft, and whether the applicants received rental assistance
they were not entitled to, received housing and other assistance while
incurring no damage to their property, and/or received FEMA assistance
for the same damages already settled through insurance claims.
Our forensic audit and investigative work found that improper and
potentially fraudulent payments occurred mainly because FEMA did not
validate the identity of all applicants, the physical location of the
declared damaged address, and ownership and occupancy of all applicants
at the time of application. For example, in one case an applicant
received $7,328 for expedited and rental assistance even though the
applicant had moved out of the house a month prior to Hurricane
Katrina. Examples of other improper and potentially fraudulent payments
included a FEMA payment of $2,000 to an individual who provided a
damaged address that did not exist, and payment of $2,358 in rental
assistance to another individual who claimed his damaged property was
inside a cemetery. We also found that FEMA made approximately $5.3
million in payments to applicants who provided a post office box
address as their damaged residence. For example, FEMA paid an applicant
$2,748 who had listed a post office box in Alabama as the damaged
property. Follow-up work with local postal officials revealed that the
post office box listed on the application had been used by individuals
linked to other potential fraud schemes.
Our undercover work provided further evidence of the weaknesses in
FEMA's management of the disaster assistance process. For example, FEMA
provided nearly $6,000 in rental assistance to one of GAO's undercover
applicants who had applications that declared a bogus property as the
damaged address. These payments continued to be provided even though
verification with third-party records indicated that the GAO undercover
applicant did not live at the damaged address, and after the Small
Business Administration had reported that the damaged property could
not be found. In another example, a FEMA inspector assigned to inspect
a bogus property was not able to find the house despite numerous
attempts to verify the address through the phone book, the post office,
and a physical inspection. Nevertheless, in early 2006 FEMA provided
GAO a check for $2,000 for presumed losses sustained by this property.
Without verifying the identity and primary residence of applicants
prior to IHP payments, it is not surprising that FEMA also made
expedited and rental assistance payments totaling millions of dollars
to over 1,000 applications containing information belonging to prison
inmates. In other words, payments were made to applications using the
names and SSNs of individuals who were not displaced as a result of the
hurricanes, but rather were incarcerated at state prisons of the Gulf
Coast states (that is, Louisiana, Texas, Florida, Georgia, Mississippi,
and Alabama), or in federal prisons across the United States when the
hurricanes hit the Gulf Coast. For example, FEMA paid over $20,000 to
an inmate who had used a post office box as his damaged property.
Duplicative Housing Assistance:
Our data mining work also found potentially wasteful and improper
rental assistance payments to individuals who were staying at hotels
paid for by FEMA. In essence, the government paid twice for these
individuals' lodging--first by providing a hotel at no cost and,
second, by making payments to reimburse these individuals for out-of-
pocket rent. For example, FEMA paid an individual $2,358 in rental
assistance, while at the same time paying about $8,000 for the same
individual to stay 70 nights--at more than $100 per night--in a hotel
in Hawaii. In this particular case, the duplicate payments were not
only wasteful, but they were improper because the applicant did not
live at the damaged property at the time of the hurricane. Another
applicant stayed more than 5 months--at a cost of $8,000--in hotels
paid for by FEMA in California, while also receiving three rental
assistance payments for the two separate disasters totaling more than
$6,700.
These instances occurred because FEMA did not require hotels to collect
FEMA application numbers and SSNs from residents staying in FEMA-paid
for rooms. Without this information, FEMA could not verify if the
applicants were staying in government provided hotels before sending
them rental assistance. Without the ability to identify all IHP
applicants who had already received hotel lodging, FEMA provided
duplicate housing benefits to a number of applicants. Because the
hotels and FEMA did not collect application identification numbers, we
were unable to quantify the magnitude of individuals who received these
duplicate benefits. However, the tens of thousands of dollars that were
wasted in the previous examples are illustrative of the wasteful
spending we found through data mining.
Lack of Accountability over Debit Cards:
Finally, we found that FEMA did not institute adequate controls to
ensure accountability over the debit cards. Specifically, FEMA
initially paid $1.5 million for over 750 debit cards that the
government could not determine actually went to help disaster victims.
Based on our numerous inquiries, upon identification of several hundred
undistributed cards J.P. Morgan Chase refunded FEMA $770,000
attributable to the undistributed cards. Further, we continued to find
that debit cards were used for items or services such as a Caribbean
vacation, professional football tickets, and adult entertainment, which
do not appear to be necessary to satisfy disaster-related needs as
defined by FEMA regulations.[Footnote 40] In commenting on our draft
report, FEMA partially concurred with our recommendation to increase
accountability over debit cards, acknowledging the challenges inherent
in the use of debit cards and stating that the agency has no current
plans to use debit cards. FEMA said the agency will continue to
evaluate the report's recommendations to determine whether any further
use may be warranted.
Fraud and error in this program is not new and FEMA has struggled for
some time with the issue of balancing expeditious assistance with
minimizing fraud and improper payments. For example, FEMA's and later
DHS Office of Inspector General reported problems with the FEMA's
previous disaster assistance program --the Individual and Family Grants
program--in 2001 and 2004.[Footnote 41] These previous reports
identified problems related to a lack of inspections to verify property
damage, relaxed requirements to document whether an applicant was
eligible for advance payment of a grant, increasing the likelihood of
fraud for the program. More recently, in May 2005, DHS's Office of
Inspector General reported shortcomings in FEMA's administration of IHP
and its oversight of inspections in response to Hurricane
Francis.[Footnote 42] For example, FEMA designated a county eligible
for Individual Assistance programs without a proper preliminary damage
assessment and FEMA's contractors were not required to review
inspections prior to submission.
Conclusions:
Katrina and Rita were two of the most intense hurricanes ever recorded
during the Atlantic hurricane season. The widespread devastation they
wrought presented unprecedented challenges to all levels of government
and voluntary organizations to help the hundreds of thousands of
victims evacuate, relocate, and get food, shelter, medical care, and
other assistance. As we and others have reported, the unprecedented
geographic scope of the damage, the number of victims who had to be
relocated, and the extent of the devastation clearly overwhelmed both
government and nongovernment relief agencies, resulting in widespread
dissatisfaction with the effectiveness of the preparation and response
to the disaster.
FEMA's processes and systems for registering hurricane victims for
assistance, determining eligibility for IHP assistance, and managing
the IHP were simply overwhelmed, and FEMA was unable to effectively
manage the enormous challenge that the disasters posed for the IHP.
GAO's audit and that of others found a number of problems with the
program, including a lack of appropriately trained personnel that
limited FEMA's effective surge capacity, an inability to effectively
identify ineligible and duplicate applications, and consequently the
payment of millions of dollars of assistance to ineligible persons.
GAO's audit and investigative work found that FEMA did not have an
effective fraud prevention program in place prior to the landfall of
Hurricanes Katrina and Rita. The consequences were that tens of
thousands of individuals received an estimated $600 million to $1.4
billion in potential improper or fraudulent payments through February
2006. The actual amount may be higher because our work excluded such
issues as identify theft, insurance fraud, and individuals who had no
uninsured losses who may have received benefits.
In any major disaster FEMA faces the demand to get assistance to
eligible victims, many of whom may have lost everything, expeditiously
while also ensuring that assistance does not go to those who are
ineligible. FEMA recognizes that the problems it encountered in
managing the IHP in the wake of Hurricanes Katrina and Rita need to be
addressed and has announced several initiatives to address those
problems. The effect of those efforts cannot yet be determined, and not
all of them were scheduled to be in effect for the 2006 hurricane
season. We believe it is possible to have effective fraud prevention
controls in place while also getting money to eligible victims quickly.
Such controls are far more effective in ensuring that IHP funds are
used properly than efforts to recoup funds paid to those who were
ineligible for assistance. Recoupment actions are expensive and may
recover only pennies on the dollar because the assistance has already
been spent.
Recommendations for Executive Action:
We recommend that the Secretary of the Department of Homeland Security
(DHS) direct the Director of FEMA to take the following actions to
address the improper and potentially fraudulent payments within the IHP
based on the findings in our testimony of June 14, 2006. Many of the
recommendations below are preventive and thus, are intended for the
2007 hurricane season and other future disasters that include IHP
assistance payments. However, whenever appropriate, we have identified
recommendations we believe should also be implemented for the remaining
aspects of assistance for Hurricanes Katrina and Rita.
For all recommendations below, FEMA should fully field test all changes
to provide assurance that all valid applicants are able to apply for
and receive IHP payments. Also, for all recommendations, FEMA must
ensure that there are adequate manual processes in place to allow
applicants who are incorrectly denied assistance to appeal the decision
and receive aid. In addition, we are reemphasizing the importance of
implementing the six recommendations we made previously in our June
report.[Footnote 43] The recommendations in this report are designed to
prevent further payments from being made on improper and potentially
fraudulent Katrina and Rita applications, to the extent possible recoup
Katrina and Rita payments already identified as fraudulent and
improper, and address weaknesses so that, in future disasters, FEMA can
identify fraudulent and improper applications prior to making
payments.[Footnote 44]
To obtain reasonable assurance that applicants are prevented from
receiving assistance based on invalid damaged addresses, we recommend
that the Secretary of Homeland Security direct the Director of FEMA to
take the following three actions:
* Implement changes to its systems and processes to reject damaged
addresses that are PO boxes.
* Provide applicants immediate feedback that PO boxes are not valid
damaged addresses.
* Implement a process to identify damaged addresses that are not
primary residences, such as commercial mail drops.
To provide reasonable assurance that payments are only made based on a
valid damaged address that was the applicant's primary residence, we
recommend that the Directors of DHS and FEMA take the following two
actions:
* Include, in the design of the address verification process
recommended in our prior report, procedures to validate that the
address an applicant claimed as damaged was the applicant's primary
residence at the time of the disaster.
* Develop and implement processes and procedures to deal with
applications where FEMA or other inspectors have concluded that the
damaged address was bogus. Within this process, FEMA should:
- Develop timely information sharing procedures between inspectors
working for FEMA and other agencies to provide assurance that
applicants who submitted damaged addresses that inspectors identified
as bogus are not provided disaster assistance.
To prevent and/or detect prisoners from improperly receiving IHP
payments in the future we recommend that the Director of FEMA explore
information sharing agreements with federal and state officials in
charge of maintaining custody over prisoners that could be used to
identify ineligible applications.
To reduce duplicate payments, we recommend that FEMA:
* Expand the data fields used in the duplicate detection process at the
time of application to restrict applications to one per eligible
household, unless warranted by other circumstances, such as households
displaced to separate locations.
To prevent concurrent payments for lodging (i.e., rental assistance,
hotels, etc.) for which FEMA is financially responsible, we recommend
that the Director of FEMA take the following two actions:
* Establish procedures requiring that individuals apply with FEMA prior
to receiving no cost disaster lodging accommodations from federal
agencies or the Red Cross.
* Develop procedures to provide reasonable assurance that individuals
staying in FEMA or other no cost lodging are not also provided IHP
rental assistance payments for the time they are in the paid for hotel
rooms.
To increase accountability over debit cards, we recommend that the
Director of FEMA take the following three actions:
* Finalize a full reconciliation to link each issued Katrina debit card
recorded by the bank (JP Morgan Chase) to a specific IHP application,
* Require that the bank refunds the government for any unaccounted for
funds related to distribution of Katrina-related debit cards, and:
* Augment procedures for future disasters to provide reasonable
assurance that accountability over debit card distribution occurs at
each custody transfer in the distribution process.
To identify and recoup payments based on improper and potentially
fraudulent Katrina and Rita applications, we recommend that the
Director of FEMA develop a comprehensive strategy--for current and
future disasters--to identify the types of improper applications
discussed in this report and refer them for either collections or
additional investigations.
Agency Comments and Our Evaluation:
On September 18, 2006, FEMA provided written comments on a draft of
this report (see appendix II). FEMA fully concurred with 9 of 13
recommendations, and substantially concurred with the remaining 4
recommendations. However, FEMA disagreed with our estimate of
fraudulent and improper payments. FEMA noted that our estimate of 16
percent was substantially higher than their historical estimate of 1 to
3 percent. However, FEMA's reported fraud rate of 1 to 3 percent is not
based on an independent, comprehensive statistical sample of the entire
population of individual assistance payments; instead, the 1 to 3
percent FEMA estimate is simply the amount of overpayments that it
identifies based on its own internal processes and procedures.
FEMA fully agreed with 9 of the 13 recommendations, and stated that it
had taken or plans to take actions to specifically respond to these 9
recommendations. While we did not evaluate the extent to which the
implementation of these changes would address the weaknesses we
identified with FEMA's oversight of IHP payments, if they are properly
implemented the changes should address our concerns. FEMA also
partially concurred with four recommendations related to debit cards
and hotel accommodations. Regarding our 3 recommendations on debit
cards, FEMA stated that the agency has no current plans to use debit
cards and will continue to evaluate the report's recommendations to
determine whether any further use may be warranted. In response to our
recommendation that FEMA establish procedures requiring that
individuals apply with FEMA prior to receiving no cost disaster
lodgings accommodations from federal agencies or the Red Cross, FEMA
stated that the agency has implemented a protocol to ensure that
disaster victims register and obtain an authorization code as a
prerequisite for the use of hotels/motels as transition shelters. While
FEMA cannot impose this protocol on the Red Cross, FEMA stated that it
planned to affirm eligibility prior to reimbursing the Red Cross. Our
objective in making this recommendation is to prevent duplicate housing
benefits from being provided to registrants. Thus, if FEMA's new
process affirms the eligibility of registrants prior to reimbursing Red
Cross, FEMA's processes would address the objective of this
recommendation.
While FEMA substantially agreed with our recommendations, it disagreed
with the methodology we used to conduct our work, which formed the
basis for many of the 13 recommendations. Specifically, in light of
FEMA's repeated representations that 1 to 3 percent of its IHP payments
are fraudulent or improper, FEMA took exception to our estimate that 10
to 22 percent of the payments were based on registrations containing
fraudulent or inaccurate information. However, it is important to note
that FEMA's estimate of 1 to 3 percent fraud is not based on an
independent, comprehensive statistical sample of the entire population
of individual assistance payments; instead, it is based on the
historical amount of IHP payments that FEMA places in its internal
recoupment process, which includes overpayments identified through case
reviews, system checks, and hotline tips. FEMA officials have
acknowledged that their estimate is not based on an in-depth
statistical analysis for eligibility or any other type of fraud.
Further, our estimate is likely understated because it only focused on
payments made to invalid registrations. Our estimate excluded
substantial potential fraudulent and improper payments caused by such
actions as identity theft, insurance fraud, duplicate government
payments for lodging, or payments without evidence of property damage.
In responding to our draft report, FEMA also commingled the results of
our statistical sampling with other findings of fraudulent and improper
payments that were not included in our estimate. For example, the
reported fraudulent and improper payments related to individuals who
stayed at FEMA-paid hotels and received rental assistance payments were
not included in our statistical sample and resultant estimate of 16
percent of fraudulent and improper payments.
FEMA also questioned whether some payments we categorized in our
statistical sample results as potentially fraudulent and improper, such
as those relating to separated households, were in fact valid payments.
Specifically, FEMA stated that without a "knowledgeable" case by case
analysis, our estimate was not accurate. We disagree. We were aware of
FEMA's separated household's policy and did not count any payments as
duplicates if they related to families that were displaced to different
locations. In addition, for our statistical sample we performed a
detailed case by case analysis on sample items that included using all
available audit and investigative tools, background information, and
NEMIS data to ensure conclusions reached were accurate. For example, we
visited damaged addresses and spoke with IHP applicants, landlords,
neighbors, and postal officials.
FEMA also stated that it has been unable to validate our results
because we had not provided evidence related to our estimate for their
review. We have not provided details of our sample failures to FEMA
because the cases of fraudulent and improper payments are in the
process of being referred to the Katrina Fraud Task Force for
investigation and potential prosecution, as has been the standard
process for other fraud cases identified though data mining. Based on
agreements with the Katrina Fraud Task Force, which includes the
Department of Homeland Security Inspector General, all fraud cases will
continue to be referred directly to the Katrina Fraud Task Force to
ensure investigations and prosecutions are not jeopardized.
FEMA also raised concerns with the registrants we reported who had
received duplicate lodging assistance. FEMA commented that such a
determination can only be made after a knowledgeable case by case
analysis determined the appropriateness of payments. Our methodology
used to identify data mined examples of the duplicate lodging payments
consisted of comparing hotel receipt information and FEMA's own payment
data to confirm that the subject received multiple rental assistance
payments at the same time FEMA paid for their hotel room.
We are sending copies of this report to the Secretary of the Department
of Homeland Security, and the Director of Federal Emergency Management
Agency. We will make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov. Please contact either William Jenkins at (202)
512-8757 or jenkinswo@gao.gov or Greg Kutz at (202) 512-7455 or
kutzg@gao.gov if you or your staffs have any questions concerning this
report. Key contributors to this report are listed in appendix VI.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report.
Signed by:
William O. Jenkins, Jr.
Director, Homeland Security and Justice:
Signed by:
Greg D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
List of Congressional Committees:
The Honorable Susan M. Collins:
Chairman:
The Honorable Joseph I. Lieberman:
Ranking Minority Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Tom Davis:
Chairman:
The Honorable Henry A. Waxman:
Ranking Minority Member:
Committee on Government Reform:
House of Representatives:
The Honorable Michael G. Oxley:
Chairman:
The Honorable Barney Frank:
Ranking Minority Member:
Committee on Financial Services:
House of Representatives:
The Honorable Harold Rogers:
Chairman:
The Honorable Martin Olav Sabo:
Ranking Minority Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives:
The Honorable Michael McCaul:
Chairman:
The Honorable Bob Etheridge:
Ranking Minority Member:
Subcommittee on Investigations:
Committee on Homeland Security:
House of Representatives:
The Honorable Don Young:
Chairman:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Bill Shuster:
Chairman:
Subcommittee on Economic Development, Public Buildings and Emergency
Management:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Anthony Weiner:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To evaluate the Federal Emergency Management Agency's (FEMA) disaster
assistance provided in response to Hurricanes Katrina and Rita through
the Individuals and Households Program (IHP), we assessed (1) how the
types and amounts of assistance provided to victims of Hurricanes
Katrina and Rita compare to other recent hurricanes, (2) the challenges
posed by the magnitude of the requests for assistance following
Hurricanes Katrina and Rita, and FEMA's response to these challenges,
and (3) the vulnerability of the IHP to fraud and abuse and management
issues in the wake of Hurricanes Katrina and Rita and FEMA's reported
actions to address any identified problems.
To describe the type and amount of IHP assistance FEMA provided for
Hurricanes Katrina and Rita in comparison to assistance provided in
other hurricane disasters, we interviewed agency officials. We obtained
and analyzed data provided by officials from FEMA's National Processing
Service Center in Winchester, Virginia, and compared IHP disaster
assistance provided under Hurricanes Katrina and Rita to assistance
provided after other hurricane-related disaster declarations occurring
in calendar years 2003 through 2005, to the extent information was
available from FEMA's National Processing Service Center's National
Emergency Management Information System. (FEMA provided data for IHP
benefits paid as of August 2006, and for IHP applications received as
of September 2006 for both the named hurricanes that came ashore in
2004 and Hurricanes Katrina and Rita. The 2003 named hurricane data was
provided by FEMA as of April 2006. A FEMA official told us that changes
to the data for named hurricanes in 2003 from April to August 2006
would be minor enough to prove statistically insignificant.) We
selected these hurricanes for comparison because they constituted a
cross section of disaster declarations that (1) occurred within the
period in which IHP was implemented, and (2) represented hurricane
disaster declarations that occurred in a single state and those that
occurred in multiple states simultaneously. We assessed the accuracy
and reliability of the system by interviewing agency officials
knowledgeable about the data system and by obtaining from the agency
written responses regarding (1) the agency's methods of data collection
and quality control reviews, (2) practices and controls over data entry
accuracy, and (3) any limitations of the data. We determined that the
data were sufficiently reliable for the purposes of our engagement.
To determine the programmatic challenges FEMA faced during Hurricanes
Katrina and Rita and agency efforts to address those challenges, we
interviewed FEMA headquarters officials from the Recovery Division and
staff from the agency's Individual Assistance and Public Assistance
Branches, FEMA staff from the National Processing Service Center and
contract Inspection Services located in Virginia, and Joint Field
Office officials in New Orleans, Louisiana. We observed contract
inspectors assessing damaged residential properties in New Orleans. We
also reviewed and analyzed federal legislation and regulations that are
applicable to FEMA disaster assistance programs prior to and after the
implementation of IHP and relevant FEMA policies, guidance, and
processes. We reviewed and analyzed the agency's IHP budget, staffing,
and performance measures. We also reviewed prior audit reports and
assessments related to FEMA's implementation of the IHP.
To assess the vulnerability of the IHP to fraud and abuse and
management issues in the wake of Hurricanes Katrina and Rita and FEMA's
reported actions to address any identified problems, we estimated the
number of improper and potentially fraudulent payments based on
statistical sampling of payments to examine whether the associated
applications contained invalid Social Security Numbers (SSN), bogus
addresses, invalid primary residence, and duplicate information with
another application. Invalid SSNs refer to instances where the SSNs did
not match with the name provided; the SSNs belonged to deceased
individuals; or the SSNs had never been issued. Bogus addresses refer
to instances where audit and investigative work we performed indicate
that the damaged address did not exist. Invalid primary residences are
related to applications where the applicant had never lived at the
damaged address, or did not live at the damaged address at the time of
the hurricanes. Duplicate information refers to instances where the
applications contained information that is duplicative of another
application that received a payment and was earlier recorded in FEMA's
system. Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95-percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95-percent of the samples we could have
drawn. As a result, we are 95-percent confident that each of the
confidence intervals in this report will include the true values in the
study population. Also, the 16 percent of payments that was improper
and potentially fraudulent excluded payments that were returned to the
U.S. government by the time of our review. We also reviewed IHP
processes and procedures for determining applicant eligibility for
specific types of IHP assistance and analyzed prior audit reports and
assessments. We also obtained information from FEMA's Acting Deputy
Director of Recovery on the status of FEMA's efforts to address the
problems identified. Because we have not tested all aspects of
potential fraud, waste and abuse related to the IHP, the
recommendations in this and our prior report do not represent a
comprehensive fraud prevention program.
We conducted our audit work between January 2006 and September 2006 in
accordance with generally accepted government auditing standards. We
conducted our investigative work between October 2005 and September
2006 in accordance with the standards prescribed by the President's
Council on Integrity and Efficiency.
[End of section]
Appendix II: Comments from the Department of Homeland Security:
Under Secretary:
U.S. Department of Homeland Security:
500 C Street, SW:
Washington, DC 20472:
FEMA:
September 18, 2006:
Mr. William Jenkins:
Director:
Homeland Security and Justice Issues Team:
U.S. Government Accountability Office:
441 G Street N. W.
Washington, DC 20548:
Dear Mr. Jenkins:
Re: Draft Report GAO-06-1013, Hurricanes Katrina and Rita-Unprecedented
Challenges Exposed the Individuals and Household Program to Fraud and
Abuse; Actions Needed to Reduce Such Problems in the Future.
Thank you for the opportunity to review the draft report. We begin our
remarks by noting the provocative title of the report itself provides
important context to all the findings and recommendations that follow.
As some of the most severe disasters in American history, the impact of
Hurricanes Katrina and Rita did present unprecedented challenges and
imposed unfathomed and long-lasting pain and misery on disaster
victims. The overwhelming magnitude of the challenge and graphic impact
on disaster victims also presented an unsavory dilemma: constrain the
pace and avenues of assistance to ensure absolute verified eligibility,
or provide expeditious assistance through available means accepting
higher risk that some would exploit the system to their undeserved
advantage. While not discounting that FEMA's systems should have had a
greater capacity to better manage that dilemma, the FEMA people who
employ those systems have nevertheless responded with a determined
sense of purpose to employ lessons learned and better position the
agency to now provide expeditious service while minimizing fraud and
improper payments.
The recommendations in the current report are helpful, and in some
cases. FEMA has already been able to implement them in part or in
whole. As noted in your report, FEMA's work in many of these areas was
current as of one month ago. FEMA now provides the following updates
made on each of the recommendations listed.
* Implement changes to its systems and processes to reject damaged
addresses that are P.O. boxes. FEMA concurs. This change has been
accomplished. The NEMIS processing system no longer accepts a Post
Office Box as the address for a damaged dwelling.
* Provide applicants immediate feedback that PO boxes are not valid
damaged addresses. FEMA concurs. This change has been accomplished.
When a Post Office Box address is entered for the damaged dwelling, the
phone agent collecting the information receives a message that it is
not a valid entry, and is able immediately to verify the address with
the applicant.
* Implement a process to identify damaged addresses that are not
primary residences. FEMA concurs. FEMA continues to work on this
process improvement. We are engaging with a number of database services
in order to identify databases that capture this type of information.
* Include, in the design of the address verification process
recommended in GAO's prior report, procedures to validate that the
addresses the applicants claimed as damaged were the applicant's
primary residence at the time of the disaster. FEMA concurs. This
change has been accomplished. During the registration process, the
damaged dwelling address provided is transmitted to a service that
accesses several publicly available databases to confirm that the
applicant lives at this address and that it is a valid address in the
disaster impacted area.
* Develop and implement processes and procedures to deal with
applications where FEMA or other inspectors have concluded that the
damaged address was bogus. Within this process, FEMA should develop
timely information-sharing procedures between inspectors working for
FEMA and other agencies to provide assurance that applicants who
submitted damaged addresses that inspectors identified as bogus are not
provided disaster assistance. FEMA concurs. FEMA will discuss this
requirement with the SBA to explore a range of information sharing
alternatives.
* To prevent and/or detect prisoners from improperly receiving IHP
payments in the future, GAO recommends that FEMA explore information
sharing agreements with federal and state officials in charge of
maintaining custody over prisoners that could be used to identify
ineligible applications. FEMA concurs. As a practical matter, FEMA
believes an agreement with the Department of Justice on behalf of all
federal prisons is achievable. We will consider options for agreements
with individual State and local prison authorities as part of our
future planning for large disaster events based on the Katrina
experience.
* Expand the data fields used in the duplicate detection process at the
time of application to restrict applications to one per eligible
household, unless warranted by other circumstances. FEMA concurs. In
addition to the several NEMIS data points already utilized for
identifying duplicate registrations in a household, we are exploring
the use of damaged dwelling addresses as a further way of flagging
duplicates.
* Establish procedures requiring that individuals apply with FEMA prior
to receiving no cost disaster lodging accommodations from federal
agencies or the Red Cross. FEMA partially concurs. FEMA has implemented
a Strategy for Mass Sheltering and Housing Assistance which contains,
in part, a Transition Sheltering Protocol. This Protocol will ensure
that disaster victims register and obtain an authorization code as a
prerequisite for the use of hotels/motels as transition shelters. While
FEMA cannot impose this protocol on the Red Cross, we will affirm
eligibility prior to reimbursing the Red Cross.
* Develop procedures to provide reasonable assurance that individuals
staying in FEMA or other no cost lodging are not also provided IHP
rental assistance payments for the time they are in paid for hotel
rooms. FEMA concurs. This is not an automated process in NEMIS and
requires manual casework to transition the applicant from no cost
lodging to IHP. However, this casework approach provides reasonable
assurance that upon receiving additional rental assistance, the rental
assistance will not be provided for the period of time the applicant
was in a FEMA-subsidized hotel room. A system change in NEMIS to track
this automatically will be incorporated in the future.
* Recommendations on debit cards. FEMA MA partially concurs. FEMA
acknowledges the challenges inherent in the use of debit cards and has
no current plans to use debit cards. FEMA will continue to evaluate the
Report's recommendations to determine whether any further use may be
warranted.
* To identify and recoup payments based on improper and potentially
fraudulent Katrina and Rita applications, GAO recommends that FEMA
develop a comprehensive strategy - for current and future disasters -
to identify the types of improper applications discussed in this report
and refer them for either collections or additional investigations.
FEMA concurs. Initiating reviews of assistance provided and recouping
improper payments is a standard operating procedure following every
disaster. FEMA is continuing to refine this process and will make use
of the applications identified and corrective actions recommended in
this report as part of that effort.
While we find agreement with many of your findings, we are skeptical of
the Report's finding regarding the estimated levels of improper and
potentially fraudulent IHP payments. Though certainly headline
grabbing, the 95 percent confidence level associated with the estimate
of improper and potentially fraudulent registrations that ranges from a
low of $600 million (about 10 percent) to a high of $1.4 billion (about
22 percent) looms well above the historical average of one to three
percent of FEMA's IHP program under past disasters. Since the Report's
authors were not able to share with us the identity of the specific
cases selected for analysis, FEMA is unable to assess whether those
payments were in fact improper. Our experience suggests some number of
the problems cited as questioned payments could easily be eligible for
payment. For example, where the Report cited duplicate payments made to
individuals in the same household as a potential problem, FEMA's
"Separated Households" policy established for hurricanes Katrina and
Rita may render these "problems" to be eligible payments. The Report
also questioned households receiving duplicate payments for rental and
hotel lodging. Yet absent a specific review, it is not possible to
determine whether the household received the rental payment in order to
obtain housing as the applicant was transitioned out of the hotel
accommodations. These are but two of the types of issues that can only
be resolved by a knowledgeable case-by-case analysis to determine the
appropriateness of payments. Accordingly, we think it unlikely the
level of improper payments will actually fall within the Report's
estimated range. We expect this view to be validated upon completion of
an ongoing FEMA audit of the applicants receiving assistance for these
disasters.
As we have noted at some length, FEMA has taken significant strides to
address the many issues raised in this Report. In addition to the
actions already noted. FEMA will continue to refine the Ongoing
Initiatives that are mentioned in the report. These include:
* Hiring a Training Coordinator to develop a more comprehensive
training program;
* Training "generalists" within the surge cadre to be ready for
deployment;
* Expanding our application intake capacity to accommodate up to
200,000 applications per day;
* Deploying Mobile Registration Units to emergency shelters and
impacted communities;
* Increasing staffing to accomplish 20,000 housing inspections per day;
and
* Developing detailed policies and procedures to implement the new
Strategy for Mass Sheltering and Housing Assistance.
FEMA appreciates the opportunity to comment on this report. Katrina and
Rita presented challenges on a massive scale. But the more significant
challenge was to the States and people who resided within the
communities battered by these storms. It is our collective purpose,
FEMA and our partner agencies, that the suffering of these people will
motivate a greater level of preparedness to provide assistance to
disaster victims while providing sound stewardship of our resources.
Signed by:
R. David Paulison:
Under Secretary for Federal Emergency Management:
[End of section]
Appendix III: Federal Disaster Assistance and Individuals and
Households Program Benefits, Structure and Processes:
FEMA's IHP is Part of Overall Federal Disaster Assistance:
Federal assistance takes many forms--including the direct provision of
goods and services, financial assistance (through insurance, grants,
loans, and direct payments), and technical assistance--and can come
from various sources. The Individuals and Households Program (IHP) is
one of these individual assistance programs funded through the Stafford
Act's Disaster Relief Fund, as illustrated in the conceptual framework
for federal disaster assistance in the figure 7.
Figure 7: Conceptual Framework for FEMA's Individuals and Households
Program as Part of Federal Disaster Assistance:
[See PDF for image]
Source: GAO.
[End of figure]
Congress may provide funding for federal disaster assistance to
specific agencies for areas in which they retain expertise. For
example, the Department of Housing and Urban Development administers
funds for economic redevelopment and infrastructure restoration, the
Department of Transportation provides assistance for road restoration,
and other agencies provide assistance for activities such as providing
small businesses disaster assistance loans and public health or medical
services that may be needed in the affected area.
With respect to Stafford Act activities, FEMA administers the Disaster
Relief Fund, which provides for three major categories of aid under the
Stafford Act--assistance to state and local governments through public
and hazard mitigation assistance programs and assistance to individuals
and households.
* FEMA's Public Assistance program provides grants to eligible state
and local governments and specific types of private nonprofit
organizations that provide services of a governmental nature, such as
fire departments, emergency and medical facilities, and educational
institutions, to help cover the costs of emergency response efforts and
work associated with recovering from the disaster. Public Assistance is
typically the most costly disaster assistance provided.[Footnote 45]
* FEMA's Hazard Mitigation Grant Program provides grants to states,
local governments, and Indian tribes for long-term hazard mitigation
projects after a major disaster declaration. The purpose of the program
is to reduce the loss of life and property in future disasters by
funding mitigation measures during the recovery phase of a natural
disaster.
* FEMA's Individual Assistance Program includes among other things, a
crisis counseling program, disaster legal services, and direct and
financial assistance through the IHP. The purpose of the crisis
counseling program is to help relieve any grieving, stress, or mental
health problems caused or aggravated by the disaster or its aftermath.
FEMA also provides free legal counseling through an agreement with the
Young Lawyers Division of the American Bar Association for low-income
individuals regarding cases that will not produce a fee.[Footnote 46]
FEMA provides direct (temporary housing units) and financial assistance
(grant funding for temporary housing and other disaster-related needs)
to individuals and households through the IHP to meet necessary
expenses and serious needs of eligible disaster victims who, as a
direct result of a major disaster, have uninsured or under insured
necessary expenses and serious needs and are unable to meet such needs
through other means.
FEMA's IHP Provides Housing and Other Needs Assistance to Disaster
Victims Who Meet Eligibility Requirements:
Under the IHP, there are two programs which are referred to as the
Housing Assistance program and the Other Needs Assistance (ONA)
program. The Housing Assistance program provides financial assistance
for such things as rental housing, home repair assistance (up to
$5,000), and home replacement assistance (up to $10,000).[Footnote 47]
In addition, for disaster victims for whom rental accommodations are
not available under the Housing Assistance program, FEMA may provide
"direct assistance" in the form of temporary housing units (e.g.,
mobile homes and travel trailers), that FEMA has acquired by purchase
or lease. The ONA program also includes financial assistance for
medical, dental, funeral, personal property, transportation, and other
disaster-related expenses that are not compensated by other means. The
IHP is not intended to fully compensate disaster victims for all losses
from damage to real and personal property that resulted from the
disaster or to provide sufficient funds to restore damaged property to
its condition before the disaster. Rather, IHP is intended to provide
assistance in covering expenses not covered by other means, such as
insurance claims and payments or the victim's own savings and
resources. The maximum amount that an individual or household may
receive is statutorily capped at $25,000, adjusted annually to reflect
changes in the Consumer Price Index.[Footnote 48] In addition to the
financial cap, IHP assistance is also limited to 18 months beginning on
the date the President declares a major disaster.[Footnote 49] However,
the President may extend this 18-month period if the President
determines that due to extraordinary circumstances an extension would
be in the public interest.[Footnote 50]
Eligibility for IHP assistance is determined when an individual or
household applies with FEMA and is based on the amount of property
damage. To qualify for Housing Assistance, a disaster victim must:
* have experienced losses in an area that has been declared a disaster
by the President;
* have uninsured (or underinsured) needs that cannot be met through
other means; [Footnote 51]
* be a citizen of the United States, a non-citizen national, or a
qualified alien, or have a qualifying individual who lives with the
disaster victim;
* have been living or usually live in the home in the disaster area at
the time of the disaster; and:
* be unable to live in the home, cannot get to their home due to the
disaster, or the home requires repairs because of damage from the
disaster.
If a disaster victim is eligible for housing assistance from FEMA based
upon the above criteria, grant funds can be used for housing assistance
purposes. Individuals or households who receive the assistance may be
asked to show receipts to prove that it was used for eligible housing
expenses. If an individual is unable to find a rental house or
apartment within a reasonable commuting distance of their damaged home,
FEMA may provide direct assistance in the form of a travel trailer or
mobile home. Direct or financial housing assistance from FEMA does not
require that an applicant file for an Small Business Administration
(SBA) disaster loan and is 100 percent federally funded and
administered by the federal government. While the financial housing
assistance is subject to the $25,000 cap, the cost of direct housing
assistance is not subject to the cap.
In contrast, ONA grants are provided in a cost-shared partnership
between FEMA and the state. As part of this partnership, FEMA and the
state engage in annual coordination efforts to determine how the ONA
will be administered in any presidentially-declared disaster in the
coming year. For example, the state establishes award levels related to
vehicle repairs, vehicle replacement, and funeral grants. States may
choose the level of involvement of state officials in administering the
program and assume complete, partial, or no responsibility for
administering the program. Whichever option a state chooses, FEMA
provides 75 percent of the grant funds, and the state is obligated to
provide the balance of ONA grant funds.
To receive ONA grant funds, an applicant must generally meet the
eligibility requirements for housing assistance, must have necessary
expenses or serious needs because of the disaster, and must first apply
to the SBA Disaster Loan Program and either be declined for assistance,
or demonstrate that SBA disaster assistance is insufficient to meet all
disaster-related necessary expenses and serious needs. Applicants who
do not meet a certain income threshold may be excused from the
requirement to complete the SBA disaster loan application. For example,
in 2005, a household of four with an income less than $24,188 would not
be required to complete the SBA loan application.
The types of assistance that may be provided depending on the level of
the applicant's income are for personal property, transportation, and
moving/storage expenses. Eligibility for medical, dental, funeral and
other/miscellaneous expenses is not dependent on an applicant's income;
for these categories applicants are referred directly to ONA for
assistance. Specifically, FEMA may provide ONA grant funding to replace
personal property, repair and replace vehicles, and reimburse moving
and storage expenses if an applicant is ineligible for an SBA disaster
loan. To receive ONA grants, for public transportation, medical and
dental, and funeral and burial expenses, disaster victims are not
required to apply for an SBA loan to be eligible and income levels are
not subject in determining eligibility.
FEMA's Decentralized Structure for Implementing the IHP Relies
Primarily on Contract and Temporary Employees:
FEMA manages the IHP primarily through a de-centralized structure of
permanent and temporary field offices staffed primarily by contract and
temporary employees. The offices include the FEMA Recovery Division in
FEMA Headquarters, regional offices, National Processing Service
Centers, Joint Field Offices, Area Field Offices, and Disaster Recovery
Centers. The Stafford Act authorizes FEMA to draw upon temporary
personnel for disaster operations.
FEMA's Recovery Division in Washington, D.C., manages the IHP and as of
August 2006 had about 15 people to develop and issue policies and
procedures for implementing the individual assistance programs. Eight
members of that staff are specifically responsible for managing the
IHP. In FEMA's 10 regional offices, one or two full-time employees
manage individual assistance programs. The regional office staff may
participate in the preliminary disaster assessment after a disaster to
determine what individual assistance is needed.
FEMA's National Processing Service Centers (NPSC) provide centralized
disaster application service to FEMA customers and help coordinate with
other assistance programs. The centers are to provide an automated
"teleregistration" service--a toll-free phone bank through which
disaster victims apply for IHP assistance and through which their
applications are processed and their questions answered. The NPSCs are
also to assist with referrals to other assistance programs, process
appeals, recertify existing rental assistance, assist with recovering
funds, and respond to congressional inquiries. As of August 2006, a
total of 13 permanent FEMA employees were working at the NPSCs in the
United States and were supported by several hundred temporary employees
(whose numbers can be increased by 2,000 to 3,000 additional temporary
employees for application processing after a disaster), as well as
contract employees. FEMA operates four NPSCs in Denton, Texas; Puerto
Rico; Winchester, Virginia; and Hyattsville, Maryland.
* The Texas NPSC is in charge of caller services including call
centers, and the agency's quality control program. (Although all NPSCs
have call centers within their offices, the Texas NPSC is in charge of
the general policies and procedures for those call centers, and also
sets up arrangements with the IRS and private companies when FEMA needs
to handle added call volume.)
* The Puerto Rico NPSC is also a call center, with a specialty in
handling calls from Spanish speaking applicants. This center has
oversight from the Texas NPSC.
* The Virginia NPSC is the central point of contact for the National
Emergency Management Information System, the main database/automated
processing system for IHP application and benefits determination and
processing, the NPSC Coordination Team, and the Inspection Management
contracts.
* The Maryland NPSC is responsible for oversight of all mail operations
and receives management oversight from the Virginia NPSC.
At FEMA's Inspections Services Section, located in the Virginia NPSC,
as of August 2006, one permanent and approximately 35 to 40 temporary
FEMA employees oversee the work of two firms with standing contracts to
perform inspection services. Each firm has about 2,000 inspectors who
visit applicants' homes to verify disaster-related damages to real and
personal property.
Temporary FEMA field locations are established after a disaster occurs.
FEMA deploys about 600-700 "reservists" or disaster assistance
employees who are deployed at field offices at the state and local
levels to augment full time FEMA staff temporarily re-assigned from
FEMA headquarters and regional offices.
* The Joint Field Office is to serve as the temporary headquarters for
disaster response and recovery efforts and is typically located in the
capital of the state where a disaster occurred or in the high impact
area. The joint office houses FEMA, state partners, other federal
agencies, and voluntary agencies. Two key FEMA joint field office
officials direct and coordinate disaster response and recovery
operations for program implementation at the local level. The Federal
Coordinating Officer is responsible for assessing disaster needs,
establishing the joint office and Disaster Recovery Centers and other
possible disaster facilities, and coordinating the administration of
disaster relief. The FEMA operations section chief's responsibilities
include managing the Human Services Branch that oversees provision of
mass care and food, individual assistance, the coordination of
voluntary agency contributions, and donations. The role of regional
coordinating structures varies depending on the situation. Many
incidents may be coordinated by regional structures primarily using
regional assets. Larger, more complex incidents may require direct
coordination between the joint office and the national level, with
regional structures continuing to play a supporting role. The focal
point for coordination of federal support is the joint field office.
* FEMA may also establish Area Field Offices whose staff and
organization is to mirror the joint field office and provide similar
coordination and oversight in support of the joint office at the local
level. The area office reports to the joint office. The area office's
operational responsibilities are to be delineated by the joint office
which may establish as many area filed offices as deemed necessary and
efficient to the response.
* FEMA Disaster Recovery Centers are offices where applicants may go
for information about FEMA and other disaster assistance programs.
Recovery center locations are usually announced in local newspapers and
on local television and radio stations and are established close to the
disaster area, often in schools or armories to be readily accessible to
those in need of assistance. The centers are temporary facilities
jointly operated by the state and FEMA where representatives of federal
agencies, local and state governments, and voluntary relief
organizations provide guidance regarding disaster recovery and
literature on services available, including housing assistance and
individual and household grants information, educational materials,
crisis counseling, assistance in completing applications and answers to
questions, resolution to problems, and referrals to agencies that may
provide further assistance. The number of centers depends on the
magnitude of the disaster and the size of the area included in the
declaration.
FEMA's Process for Providing IHP Benefits:
Under the Stafford Act, the federal government provides disaster
assistance after a presidential disaster declaration. A presidential
disaster declaration results from a legal process involving specific
steps taken by local, state, and federal governments as generally shown
in figure 8.
Figure 8: Disaster Declaration Process:
[See PDF for image]
Source: GAO analysis of FEMA information.
[End of figure]
After a disaster occurs and the state determines that effective
response may exceed both state and local resources, a state is to first
request a preliminary damage assessment.[Footnote 52] Teams are
assembled from individuals from FEMA, the Small Business
Administration, state emergency management, and the local jurisdiction
who are to (1) assess the types of dwellings affected, (2) assess the
probable insurance and income levels of residents, and (3) estimate the
number of individuals affected to determine potential funding
requirements. After the assessment is complete, the Governor is to
determine if federal disaster assistance is needed and, if it is, he or
she is to submit a request to the President through the FEMA Regional
Director who reviews and communicates the request to FEMA's
Headquarters within the Emergency Preparedness and Response
Directorate. The Directorate's Undersecretary is to then make a
recommendation to the President, who makes the final decision to
declare a major disaster, an emergency, or deny the request for federal
assistance.
FEMA Provides Disaster Victims with Multiple Means to Apply for
Assistance:
Once the President declares a disaster and decides to provide federal
disaster assistance, disaster victims in declared counties must first
apply for assistance with FEMA, by phone, in person at a disaster
recovery center, or over the Internet. Typically, an application period
is closed 60 days following the date of the disaster
declaration.[Footnote 53] During the application process, an individual
provides personal information including Social Security number, current
and pre-disaster address, a telephone number, insurance information,
total household annual income, and a description of losses caused by
the disaster. After the submission of an application, FEMA provides
applicants with a copy of their application and a program guide, "Help
After a Disaster: Applicant's Guide to the Individuals and Households
Program." The document, whose cover is shown in figure 9, is also
available on the Internet.
Figure 9: Cover of FEMA's Applicant's Guide to the Individuals and
Households Program:
[See PDF for image]
Source: FEMA.
[End of figure]
Once a FEMA representative records personal information from a disaster
application and provides the applicant with a FEMA application number,
FEMA's National Emergency Management Information System automatically
determines potential eligibility for designated categories of
assistance.
To confirm that damages occurred to the home and personal property as
reported in disaster assistance applications, FEMA is to conduct
individual inspections to verify damage, ownership, and occupancy.
Contract inspectors are to schedule damage inspection appointments with
applicants. The inspections usually take about 30 to 60 minutes,
according to FEMA. Homeowners are not required to be at home at the
time of the inspection, but a designated representative generally must
be present and the applicant must be able to provide proof of ownership
and occupancy to the inspector. This assessment provides a basis to
determine how much assistance an individual/household should receive
for housing repair and replacement and for other needs. If an
applicant's home or its contents were damaged and the applicant has
insurance, they must provide FEMA with a letter from the insurance
company regarding the settlement of the claim before FEMA issues its
inspection report. (If the damages are caused by flooding and the
applicant has flood insurance, FEMA will issue an inspection report
before receiving a copy of the applicant's flood insurance decision
letter because temporary living expenses are not covered by flood
insurance.)
According to FEMA, the system reportedly determines eligibility for
about 90 percent of applicants requesting housing assistance, usually
within 10 days of application. FEMA caseworkers are to process the
remaining applications that cannot be automatically processed, to
determine an applicant's eligibility for disaster assistance based on
additional documentation, for example, documentation of insurance
payment; these applications may take longer to process.[Footnote 54] If
the applicant qualifies for a grant, FEMA sends the applicant a check
by mail or deposits the funds granted in the applicant's bank account.
FEMA will also send a letter describing how the applicant is to use the
money (for example; repairs to their home or to rent another house
while the applicant makes repairs). Recipients of IHP assistance must
recertify their continuing need for assistance every 30 to 90 days,
depending on the individual circumstances. FEMA uses three criteria to
recertify the applicant.
* First, FEMA may provide continued housing assistance (travel trailers
or rental assistance) during the period of assistance, based on need,
and generally only when adequate, alternate housing is not available.
* Second, for rental assistance, the applicant must show that he or she
used the previous rental assistance to pay rent by sending copies of
receipts.[Footnote 55]
* Third, the applicant must show he or she is working to find permanent
housing that the applicant can afford. For example, FEMA is to require
applicants to show they are actively seeking affordable housing,
maintain a list of addresses they looked at, including the landlord's
name and phone number, and specify the reason(s) for not renting the
units. A FEMA Housing Adviser may verify with landlords that a contact
was made by an applicant seeking a rental unit.
Conversely, if FEMA determines that the applicant does not qualify for
an IHP grant, it is to send the applicant a letter explaining why the
applicant was turned down and gives the applicant a chance to appeal
the decision. Applicants who are denied housing and other needs
assistance under IHP have 60 days from the date that FEMA notifies the
applicant to appeal the decision. According to FEMA, common reasons for
denial include:
* Adequate insurance coverage.
* Damage to secondary home, not a primary residence.
* Duplicate applications made from the same address.
* Inability to prove occupancy or ownership.
* More information is needed before the analysis can be completed.
[End of section]
Appendix IV: Issues Reported Related to FEMA's IHP Disaster Assistance
Provided for Katrina:
Planning:
Issue: Inadequate planning;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: X;
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: X;
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: X;
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Lack of guidance/ procedures;
GAO February 2006[A]: X;
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: [Empty];
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: X;
GAO June 2006[H]: X;
GAO July 2006[I]: [Empty].
Issue: Inadequate internal controls;
GAO February 2006[A]: X;
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: X;
GAO June 2006[G]: X;
GAO June 2006[H]: X;
GAO July 2006[I]: X.
Issue: Inability to track evacuees;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: X;
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: [Empty];
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Inefficient method for procuring manufactured housing;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: X;
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: [Empty];
Senate Report May 2006[F]: X;
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Inadequate contractor oversight;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Need to coordinate with other agencies;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: X;
House Report February 2006[C]: X;
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Trained Staff:
Issue: Insufficient staffing;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: X;
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: X;
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Inadequate training;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: X;
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Program Structure:
Issue: Reimbursement for repairs to existing housing units not
authorized;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: X;
DHS Inspector General March 2006[E]: [Empty];
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Program is cumbersome, confusing, and not easily administered,
subject to funding caps, cost share requirements, and time limitations;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Issue: Long term needs not addressed;
GAO February 2006[A]: [Empty];
DHS / FEMA February 2006[B]: [Empty];
House Report February 2006[C]: [Empty];
White House Report February 2006[D]: [Empty];
DHS Inspector General March 2006[E]: X;
Senate Report May 2006[F]: [Empty];
GAO June 2006[G]: [Empty];
GAO June 2006[H]: [Empty];
GAO July 2006[I]: [Empty].
Source: GAO analysis of assessments cited.
[A] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-403T (Washington, D.C.: Feb. 13, 2006).
[B] DHS/FEMA, Initial Response Hot Wash Hurricane Katrina In Louisiana,
DR-1603-LA (New Orleans, Louisiana: Feb. 13, 2006).
[C] U.S. House of Representatives, A Failure of Initiative: Final
Report of the Select Bipartisan Committee to Investigate the
Preparation for and Response to Hurricane Katrina (Washington, D.C.:
February 15, 2006):
[D] The White House, The Federal Response To Hurricane Katrina: Lessons
Learned (Washington, D.C.: Feb. 15, 2006).
[E] Department of Homeland Security Inspector General, A Performance
Review of FEMA's Disaster Management Activities in Response to
Hurricane Katrina, OIG-06-32 (Washington, D.C.: Mar. 31, 2006).
[F] United States Senate Committee on Homeland Security and
Governmental Affairs, Hurricane Katrina: A Nation Still Unprepared
(Washington, D.C., May 2006).
[G] GAO, Hurricanes Katrina And Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.:
June 14, 2006).
[H] GAO, Expedited Assistance for Victims of Hurricanes Katrina And
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud And Abuse, GAO-06-655 (Washington, D.C.: June 16, 2006).
[I] GAO, Individual Assistance Programs: Framework for Fraud,
Prevention, Detection, and Prosecution, GAO-06-954T (Washington, D.C.:
July 12, 2006).
[End of table]
[End of section]
Appendix V: GAO's June 14, 2006 Testimony on Fraud and Abuse of FEMA's
Individual Assistance program:
Testimony:
Before the Subcommittee on Investigations, Committee on Homeland
Security, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 11:00 a.m. EST:
Wednesday, June 14, 2006:
Hurricanes Katrina And Rita Disaster Relief:
Improper and Potentially Fraudulent Individual Assistance Payments
Estimated to Be Between $600 Million and $1.4 Billion:
Statement of Gregory D. Kutz, Managing Director:
Forensic Audits and Special Investigations:
John J. Ryan, Assistant Director:
Forensic Audits and Special Investigations:
GAO-06-844T:
GAO Highlights:
Highlights of GAO-06-844T, a testimony before the Subcommittee on
Investigations, Committee on Homeland Security, House of
Representatives.
Why GAO Did This Study:
Hurricanes Katrina and Rita destroyed homes and displaced millions of
individuals. In the wake of these natural disasters, Federal Emergency
Management Agency (FEMA) responded to the need to provide aid quickly
through the Individuals and Households Program (IHP) program, which
provides housing assistance, real and personal property assistance, and
for other immediate, emergency needs. As of February 2006, FEMA made
2.6 million payments totaling over $6 billion.
Our testimony today will
(1) provide an estimate of improper and potentially fraudulent payments
through February 2006 related to certain aspects of the disaster
registrations, (2) identify whether improper and potentially fraudulent
payments were made to registrants who were incarcerated at the time of
the disaster, (3) identify whether FEMA improperly provided registrants
with rental assistance payments at the same time it was paying for
their lodging at hotels, and (4) review FEMA’s accountability over
debit cards and controls over proper debit card usage.
To estimate the magnitude of IHP payments made on the basis of invalid
registrations, we selected a random statistical sample of 250 payments
made to hurricanes Katrina and Rita registrants as of February 2006. We
also conducted data mining and investigations to further illustrate the
effects of control breakdowns.
What GAO Found:
We estimate that through February 2006, FEMA made about 16 percent or
$1 billion in improper and potentially fraudulent payments to
registrants who used invalid information to apply for disaster
assistance. Based on our statistical sample, we are 95 percent
confident that the range of improper and potentially fraudulent
payments is from $600 million to $1.4 billion. In our assessment of
whether a payment was improper and potentially fraudulent, we did not
test for other evidence of impropriety or potential fraud, such as
insurance fraud and bogus damage claims. This means our review
potentially understates the magnitude of improper payments made.
Examples of fraud and abuse include payments to registrants who used
post office boxes, United Parcel Service stores, and cemeteries as
their damaged property addresses.
Absent proper verification, it is not surprising that FEMA continued to
pay fictitious disaster registrations set up by GAO as part of our
ongoing forensic audit. In one case, FEMA paid nearly $6,000 to our
registrant who submitted a vacant lot as a damaged address. Below is a
copy of a rental assistance check sent to GAO after FEMA received
feedback from its inspector that the GAO undercover registrant did not
live at the damaged address, and after a Small Business Administration
inspector reported that the damaged property could not be found.
We also found that FEMA provided expedited and housing assistance to
individuals who were not displaced. For example, millions of dollars in
expedited and housing assistance payments went to registrations
containing the names and social security numbers of individuals
incarcerated in federal and state prisons during the hurricanes. In
addition, FEMA improperly paid individuals twice for their
lodging—paying their hotels and rental assistance at the same time. For
example, at the same time that FEMA paid $8,000 for an individual to
stay in California hotels, this individual also received three rental
assistance payments for both hurricane disasters. Finally, we found
that FEMA could not establish that 750 debit cards worth $1.5 million
went to hurricane Katrina victims. We also found debit cards that were
used for a Caribbean vacation, professional football tickets, and adult
entertainment.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-844T.
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.
[End of Section]
Mr. Chairman and Members of the Subcommittee,
Thank you for the opportunity to discuss our ongoing forensic audit and
related investigations of disaster relief assistance provided to
individuals and households for hurricanes Katrina and Rita. In a
hearing held in February 2006[Footnote 1] before the Senate Committee
on Homeland Security and Governmental Affairs to discuss results of
ongoing work, we testified that significant flaws in the process for
registering disaster victims left the federal government vulnerable to
substantial fraud and abuse related to expedited assistance payments.
Due to the magnitude of potential fraud and abuse we observed in our
February 2006 testimony, we plan to issue a report containing
recommendations to Department of Homeland Security (DHS) and Federal
Emergency Management Agency (FEMA) to improve internal controls over
the Individuals and Households Program (IHP). This testimony reflects
additional findings from the work we have performed since February. We
plan to continue reviewing other aspects of IHP.
As we previously reported, expedited assistance--a component of the IHP
program for hurricanes Katrina and Rita--took the form of $2,000
payments provided to disaster victims to help with the immediate,
emergency needs for food, shelter, clothing, and personal necessities.
Individuals and/or households who received expedited assistance may
also be eligible to receive other IHP payments for temporary housing
assistance, real and personal property repair and replacement, and
other necessary expenses related to a disaster--up to a cap of
$26,200.[Footnote 2] As of mid-February 2006, FEMA data showed that the
agency had delivered about $6.3 billion in IHP aid for hurricanes
Katrina and Rita.[Footnote 3] Thirty seven percent (approximately $2.3
billion) of this amount was delivered through expedited assistance (EA)
to hurricanes Katrina and Rita registrants. Of the remaining payments,
about $2 billion was delivered through temporary housing assistance,
and another approximately $2 billion was for repair and replacement of
real and personal property, and for other miscellaneous categories.
As we previously testified, the need to provide assistance quickly led
FEMA to issue payments to hurricanes Katrina and Rita registrants
without first validating the identity and damaged property addresses of
all registrants and without first verifying that the registrants
incurred losses and had needs related to the hurricanes. However, with
limited exceptions,[Footnote 4] FEMA policy required that subsequent
payments for temporary housing assistance, real and personal property
repair and replacement, and other miscellaneous expenses be made only
after FEMA had conducted an inspection and determined that the extent
of loss merited further assistance. Addresses that were exempt from
inspections had to go through an electronic verification of ownership
and occupancy with a third-party contractor prior to FEMA providing
registrants in those areas with rental assistance and/or other
nonexpedited assistance payments.
Today's testimony summarizes the results from our ongoing forensic
audit and investigative work reviewing the type and extent of fraud and
abuse for the IHP program. This testimony will (1) provide an estimate
of improper and potentially fraudulent payments related to certain
aspects[Footnote 5] of the disaster registrations, (2) identify whether
FEMA made improper or potentially fraudulent IHP payments to
registrants who were incarcerated at the time of the disaster, (3)
identify whether FEMA provided registrants with rental assistance
payments at the same time it was paying for their lodging at hotel
rooms, and (4) review FEMA's accountability over debit cards and
controls over proper debit card usage.
To estimate the magnitude of IHP payments made on the basis of invalid
registrations, we selected a random sample of 250 payments of the 2.6
million IHP payments made to hurricanes Katrina and Rita registrants as
of February 2006. We excluded 3 of the 250 payments from our analysis
because these payments had been returned to the U.S. Government at the
time of our review, and the U.S. Government was therefore not
susceptible to potential fraud for them. We derived our estimate of
improper and potentially fraudulent payments by summing the dollars
associated with improper and potentially fraudulent payments in our
sample and multiplying that sum by a weighting factor to project the
total from the sample to the population. The weighting factor we used
was the number of payments "represented" by each of our randomly
sampled payments, namely, the number of payments in the population
divided by the number of payments we sampled. To validate sample
registration data, we used a combination of site visits, comparisons
with publicly available data and Social Security Administration (SSA)
data, interviews with residents and their neighbors, interviews with
local postal officials, and duplicate registration analysis. We also
data mined IHP registration data to identify case studies of
registrants who provided invalid and potentially fraudulent
information.
To further illustrate the effects of control breakdowns, we continued
our undercover operations with bogus registrations to obtain additional
IHP payments beyond the original expedited assistance. To identify IHP
registrants who were prisoners, we obtained a database of federal
inmates as well as databases of inmates at state prisons in and around
the areas affected by hurricanes Katrina and Rita. We then compared
prisoner data to IHP registration data to identify registrations
containing prisoner names and SSNs. To identify case studies of
individuals who received rental assistance at the same time that they
were housed in government-paid for hotels, we compared the IHP
registration data to information provided by the hotels, e.g. driver's
licenses. However, because data provided on hotel residents did not
contain FEMA registration numbers, we were unable to determine the
magnitude of duplicate payments.
To assess accountability over FEMA debit cards, we interviewed
officials from FEMA, Department of Treasury's Financial Management
Service (FMS), and JPMorgan Chase. To assess the usage patterns of FEMA
debit cards, we data mined debit card purchases and identified
transactions that appeared to be unrelated to emergency disaster needs.
Further details on our scope and methodology can be found in appendix
I.
We conducted our audit and investigations from February 2006 through
June 8, 2006. We conducted our audit work in accordance with generally
accepted government auditing standards and conducted investigative work
in accordance with the standards prescribed by the President's Council
on Integrity and Efficiency.
Summary:
We estimate that 16 percent of payments, totaling approximately $1
billion, were improper and potentially fraudulent because of invalid
registrations.[Footnote 6] This amount includes payments for expedited
assistance, rental assistance, housing and personal property repair and
replacement, and other necessary and emergency expenses. These payments
were made to (1) registrations containing Social Security Numbers
(SSNs) that were never issued or belonged to other individuals, (2)
registrants who used bogus damaged addresses, (3) registrants who had
never lived at the declared damaged addresses or did not live at the
declared damaged address at the time of disaster, and/or (4)
registrations containing information that was duplicative of other
registrations already recorded in FEMA's system. Our projection likely
understates the total amount of improper and potentially fraudulent
payments because our work was limited to issues related to misuse and
abuse of identity, damaged property address information, and duplicate
payments. Our estimate does not account for improper and potentially
fraudulent payments related to issues such as whether the applicants
received rental assistance they were not entitled to, received housing
and other assistance while incurring no damage to their property, and/
or received FEMA assistance for the same damages already settled
through insurance claims.
Our forensic audit and investigative work showed that improper and
potentially fraudulent payments occurred mainly because FEMA did not
validate the identity of the registrant, the physical location of the
damaged address, and ownership and occupancy of all registrants at the
time of registration. For example, in one case a registrant received
$7,328 for expedited and rental assistance even though the registrant
had moved out of the rented house a month prior to hurricane Katrina.
FEMA also paid $2,000 to an individual who provided a damaged address
that did not exist, and paid $2,358 in rental assistance to another
individual who claimed his damaged property was inside a cemetery.
Our work also confirmed that the processes that FEMA used to detect and
prevent duplicate registrations were not effective. Through sample
testing and data mining, we also found that FEMA made about $5.3
million in payments to registrants who provided a post office box as
their damaged residence. For example, FEMA paid a registrant $2,748 who
listed a post office box in Alabama as the damaged property. Follow-up
work with local postal officials revealed that the post office box
listed on the registration had been used by individuals linked to other
potential fraud schemes. While not all payments made to post office
boxes are improper or potentially fraudulent, the number of potentially
fraudulent payments could be substantially reduced if FEMA put in place
procedures to instruct disaster recipients to provide actual street
addresses of damaged property when claiming disaster assistance. In
addition, our undercover work provided further evidence of the
weaknesses in FEMA's management of the disaster assistance process. For
example, FEMA provided nearly $6,000 in rental assistance to one of
GAO's undercover registrations using a bogus property as the damaged
address. These payments came even though verification with third-party
records by FEMA indicated that the GAO undercover registrant did not
live at the damaged address, and after the Small Business
Administration reported that the damaged property could not be found.
GAO has not cashed these checks and plans to return the checks to the
Department of Treasury upon the conclusion of our work.
Without verifying the identity and primary residence of registrants
prior to IHP payments, it is not surprising that FEMA also made
expedited and rental assistance payments totaling millions of dollars
to over 1,000 registrations made using information belonging to prison
inmates. In other words, payments were made to registrations using the
names and SSNs of individuals who were not displaced as a result of the
storm but rather were incarcerated at state prisons of the Gulf Coast
area (that is, Louisiana, Texas, Florida, Georgia, Mississippi, and
Alabama), or federal prisons across the United States at the time of
the hurricanes. FEMA criteria specified that expedited assistance be
provided only to individuals who were displaced due to the disaster and
therefore were in need of shelter, and further specified that FEMA may
provide additional assistance to individuals for the purpose of renting
accommodations.[Footnote 7] For example, FEMA paid over $20,000 to an
inmate who used a post office box as his damaged property.
We also found potentially wasteful and improper rental assistance
payments to individuals who were staying at hotels paid for by FEMA. In
essence, the government paid twice for these individuals' lodging--
first by providing a hotel at no cost and, second, by making payments
to reimburse these individuals for out-of-pocket rent. For example,
FEMA paid an individual $2,358 in rental assistance, while at the same
time paying about $8,000 for the same individual to stay 70 nights--at
more than $100 per night--in a hotel in Hawaii. This registrant did not
live at the damaged property at the time of the hurricane. Another
registrant stayed more than 5 months--at a cost of $8,000--in hotels
paid for by FEMA in California, while also receiving three rental
assistance payments for the two separate disasters totaling more than
$6,700. These instances occurred because FEMA did not require hotels to
collect FEMA registration numbers and SSNs from residents staying in
FEMA-paid for rooms. Without this information, FEMA did not verify if
the registrants were staying in government provided hotels before
sending them rental assistance. As a result, FEMA made rental
assistance payments which covered the same period of time that the
registrant was staying at a FEMA-paid hotel. Because the hotels and
FEMA did not collect registration identification numbers, we were
unable to quantify the magnitude of individuals who received these
duplicate benefits.
We found that FEMA did not institute adequate controls to ensure
accountability over the debit cards. Specifically, FEMA initially paid
$1.5 million for over 750 debit cards that the government could not
determine actually went to help disaster victims. Based on our numerous
inquiries, upon identification of several hundred undistributed cards
JPMorgan Chase refunded FEMA $770,000 attributable to the undistributed
cards. Further, we continued to find that debit cards were used for
items or services such as a Caribbean vacation, professional football
tickets, and adult entertainment, which do not appear to be necessary
to satisfy disaster-related needs as defined by FEMA
regulations.[Footnote 8]
FEMA Paid About $1 Billion to Individuals Who Provided Invalid
Registration Data:
Because of FEMA's failure to establish basic upfront validation
controls over registrants' identity and address information, we
estimate that FEMA made approximately $1 billion of improper and
potentially fraudulent payments based on invalid registrations.
[Footnote 9] This represents 16 percent of all individual assistance
payments for hurricanes Katrina and Rita.[Footnote 10] The improper and
potentially fraudulent payments included cases where individuals and
households used invalid SSNs, used addresses that were fictitious or
not their primary residence, and for submitted earlier registrations.
These improper payments based on phony or duplicate registration data
were not only restricted to the initial expedited assistance payments
that we previously reported on, but also included payments for rental
assistance, housing repair, and housing replacement. For example,
rental assistance payments were made to registrants that used a post
office box and a cemetery as damaged properties. In fact, as part of
our ongoing forensic audit, FEMA continues to provide rental assistance
to GAO based on registrations that contained fictitious identities and
bogus damaged addresses. In one case, FEMA even sent GAO a check for
expedited assistance after an inspector could not confirm that the
property existed, and FEMA had decided not to provide housing
assistance to this registration. Our projection likely understates the
total amount of improper and potentially fraudulent payments since our
examination of sample payments focused only on invalid registrations
and did not include other criteria, such as insurance policies, which
may make registrants ineligible for IHP payments.
Statistical Sample Results Indicate About $1 Billion in Potentially
Fraudulent and Improper IHP Payments:
Based on our statistical sample we estimate that 16 percent of all
payments were based on invalid registrations. We considered a
registration invalid if it contained an invalid identity, invalid
address information, or was paid from duplicate registration
information. Some registrations failed more than one attribute. We drew
our statistical sample from a population of 2.6 million payments made
in the wake of hurricanes Katrina and Rita, totaling over $6 billion
through mid-February 2006. Based on these results, we project that FEMA
made about $1 billion in assistance payments based on improper or
potentially fraudulent registrations. The 95 percent confidence
interval associated with our estimate of improper and potentially
fraudulent registrations ranges from a low of $600 million to a high of
$1.4 billion in improper and potentially fraudulent payments. Table 1
shows the attributes we tested, the estimated failure rate in each
attribute, and the overall projected failure amount.
Table 1: Results of Statistical Sampling and Estimate of Potentially
Improper and Fraudulent Payments:
Reason Why Payment Was Not Valid: Invalid primary residence (properties
which could not be a primary residence and properties that the
registrant did not live in at the time of the disaster);
Number of Failures: 26;
Percent Failure/ Estimated Amount: [Empty];
Reason Why Payment Was Not Valid: Payments based on duplicate
registration data (registration containing same SSN, damaged property
address, and/or current address as an earlier registration in FEMA's
system);
Number of Failures: 12;
Percent Failure/ Estimated Amount: [Empty];
Reason Why Payment Was Not Valid: Bogus properties used[A] (addresses
did not exist);
Number of Failures: 3;
Percent Failure/ Estimated Amount: [Empty];
Reason Why Payment Was Not Valid: Invalid SSN used (SSN never issued or
belonging to other individuals);
Number of Failures: 2;
Percent Failure/ Estimated Amount: [Empty];
Reason Why Payment Was Not Valid: Total failures;
Number of Failures: 39[B];
Percent Failure/ Estimated Amount: 16 percent;
Reason Why Payment Was Not Valid: Estimate of Improper and Potentially
Fraudulent Payments;
Reason Why Payment Was Not Valid: Point estimate;
Number of Failures: [Empty];
Percent Failure/ Estimated Amount: $1.0 billion[C];
Reason Why Payment Was Not Valid: 95 percent confidence interval;
Number of Failures: [Empty];
Percent Failure/ Estimated Amount: $600 million to $1.4 billion[C];
Source: GAO.
[A] Registrations containing bogus damaged property addresses also fail
the invalid primary residence attribute.
[B] Some registrations failed more than one attribute;
therefore, the total number of failures is less than the sum of the
attribute totals.
{C] Rounded to the nearest $10 million.
[End of table]
Payments to Registrants Whose Damaged Property Address Was Not Their
Primary Residence - Twenty six payments failed the primary residence
test. These include individuals who had never lived at the damaged
property, did not live at the damaged property at the time of the
disasters, or used bogus property addresses on their registrations. We
made these determinations after reviewing publicly available records,
conducting site visits, and interviewing current residents and/or
neighboring residents. We provide additional details related to
failures in this attribute in table 2.
Table 2: Selected Payments in Statistical Sample That Failed the
Primary Residence Attribute:
Case: 1;
Amount: $19,636;
Case Details: * Registrant received $2,000 in expedited assistance,
$2,358 in rental assistance, and more than $15,000 in personal property
replacement;
* Registrant originally claimed damage at a street address several
houses away from the damaged property address currently in FEMA's
database. At some point in the disaster assistance process, the
registrant made changes to the damaged property address;
* No physical inspection occurred at the damaged property. Personal
property payment was based on geospatial data due to the level of
devastation in the area;
* GAO reviews of publicly available information and credit report data
showed that the registrant had never lived at the damaged property
address for which she was paid.
Case: 2;
Amount: 14,750;
Case Details: * Registrant used valid physical property as damaged
address to receive three payments for expedited assistance, rental
assistance, and personal property replacement;
* GAO audit and investigative work found no evidence that the
individual ever lived at the property. After receiving the payments,
the registrant withdrew the application without ever having a physical
inspection performed or returning the disaster payments to FEMA.
Case: 3;
Amount: 7,328;
Case Details: * Registrant used damaged property in Kenner, Louisiana,
as primary residence to qualify for one expedited assistance payment
and two rental assistance payments;
* Registrant did not live at property at the time of disaster;
* Owner of the property told us that the registrant had moved out of
the damaged property a month prior to hurricane Katrina.
Case: 4;
Amount: 6,161;
Case Details: * Registrant used damaged property as primary residence
to receive one expedited assistance and two rental assistance payments;
* Residents at the property had never heard of the registrant.
Case: 5;
Amount: 2,784;
Case Details: * Registrant used post office box in McIntosh, Alabama,
as the damaged property address to receive expedited assistance and
rental assistance;
* The local postal inspector stated that the post office box was linked
to other individuals associated with known fraudulent activity.
Source: GAO analysis and investigation of FEMA data.
[End of table]
Payments to Duplicate Registrations--12 other payments in our sample
failed because they were made to registrants whose damaged property
addresses and current addresses had previously been submitted under
other registrations and had received payments on those previous
registrations. For example, one sample registrant submitted a
registration containing the same damaged and current property addresses
as those used previously by another registrant. Both registrations
received payments for rental assistance for $2,358 in September 2005.
Payments to Registrations with Bogus Property Addresses - Three
payments in our sample were made to registrations containing bogus
property addresses. For example, we found that one individual used
several pieces of bogus information to receive expedited assistance.
Specifically, the registrant used a SSN that was valid but the name did
not match the name in records maintained by the Social Security
Administration. The registrant also used a damaged property address in
the 3000 block that was determined to be invalid through our on-site
inspection, as street numbers on that street only went up to the 1000s.
After the initial payment, the registration was withdrawn voluntarily
by the registrant. In effect, this registrant was able to use
completely bogus information to receive $2,000 from FEMA and then
withdraw the registration to avoid further scrutiny.
Payments to Registrations Containing Invalid Social Security Numbers -
-Two of the payments in the sample were made to individuals that used
invalid SSNs (e.g., SSNs that have never been issued or SSNs that did
not match the name provided on the registration). For example, one
individual used a SSN that had never been issued to receive FEMA
payments for expedited and rental assistance.
Overall, we observed that 17 of our sample failures (44 percent) were
related specifically to expedited assistance payments. The high level
of expedited assistance-related failure was expected because these
payments needed to be made quickly and, typically, prior to a physical
inspection of the damaged property. However, we found that the other 22
failures (56 percent) were related to rental assistance and personal
and real property repair and replacement payments. In its response to a
draft GAO report, FEMA represented to us that all nonexpedited
assistance payments, including the $2,358 in housing assistance
payments, were subject to much more stringent requirements.
Specifically, FEMA represented that the registrants had to demonstrate
that they occupied the damaged property at the time of the disaster.
However, the 22 failures we found indicate that these requirements were
not effective in preventing improper and potentially fraudulent
registrations from receiving nonexpedited assistance payments.
Sample Testing Understates Improper and Potentially Fraudulent
Payments:
Our estimate likely understates the total amount of improper and
potentially fraudulent payments because we did not test our samples for
all potential reasons why a disaster assistance payment could be
fraudulent or improper. For example, our testing criteria did not
include reviewing whether registrants had insurance policies that
covered hurricane damages, which may have made them ineligible for IHP
payments. We also did not test whether FEMA inspectors accurately
assessed the damage to each sampled damaged property, or whether the
registrants were displaced from their homes, an eligibility factor for
rental assistance.
During the course of our work, we found that these problems affected
some of our sampled payments and, therefore, these payments may be
improper or potentially fraudulent. However, because the problems did
not relate to identity and address information, they passed our testing
criteria. For example, an individual in our statistical sample provided
a valid SSN and lived in a declared disaster area. However, the
individual informed GAO that he did not incur any hurricane-related
damage. Despite this fact, the individual received $2,000 in expedited
assistance. We did not test whether registrants received duplicate
benefits from other FEMA programs, such as free hotel lodging and
trailers, which would have resulted in FEMA paying duplicate housing
benefits to the same registrant. Later in this testimony, we provide
examples where registrants received from FEMA free hotel rooms in
addition to rental assistance. Finally, our estimate would include
payments FEMA has identified for potential recoupment.
Undercover Investigations and Case Study Examples of Fraudulent and
Improper IHP Payments:
Given the considerable amount of potentially fraudulent and improper
payments identified in our statistical sample, it is not surprising
that FEMA continued to provide rental assistance payments to GAO
investigators based on bogus registrations. In one instance, rental
assistance was made even after a FEMA inspector was unable to find the
damaged property. Similarly, our sample testing and data mining work
also identified additional examples of payments made on the basis of
bogus information.
In our previous testimony,[Footnote 11] we reported that we were able
to obtain $2,000 expedited assistance checks from FEMA using falsified
identities, bogus property addresses, and fabricated disaster stories.
FEMA has continued to provide us with additional disaster-related
assistance payments even after FEMA received indications from various
sources that our registrations may be bogus. GAO has not cashed these
checks and plans to return the checks to the Department of Treasury
upon the conclusion of our work. The following provides details of two
of our undercover operations:
* Case #1 relates to a registration submitted by GAO for hurricane Rita
that cited a bogus address in Louisiana as the damaged property. In
October 2005, GAO received notice that the inspector assigned to
inspect the property was not able to find the house despite numerous
attempts to verify the address with the phone book, post office, and
with a physical inspection. The registration was subsequently returned
to FEMA by the inspector and coded as withdrawn because no contact was
made with the registrant. Even though GAO never met with the inspector
to prove that the damaged property existed, FEMA sent GAO a check for
$2,000 in early 2006.
* Case # 2 relates to a GAO disaster registration for an empty lot in
Louisiana for hurricane Katrina. Although the damaged property address
was bogus, FEMA notified GAO that an inspection was performed and
confirmed that the property was damaged.[Footnote 12] However, FEMA
stated that the registration could not be processed because FEMA was
unable to corroborate that the GAO lived at the damaged property. GAO
subsequently submitted a fictitious driver's license that included the
bogus address, which FEMA readily accepted. Based on the fictitious
driver's license, FEMA issued GAO a $2,358 rental assistance check, as
shown in figure 1. Subsequent to FEMA issuing the $2,358 check, a Small
Business Administration (SBA) inspector who was responsible for
inspecting the damaged property in evaluation of a potential SBA
loan[Footnote 13] reported that the property did not exist. Although
SBA discovered that the property was bogus, FEMA issued another rental
assistance check to GAO, bringing the total rental assistance on this
bogus registration to about $6,000. We found that the discrepancy
between FEMA's result (which confirmed that the property existed), and
SBA's result (which showed that the property did not exist) occurred
because FEMA did not conduct a physical inspection on the property but
instead used geospatial mapping to determine losses.
Figure 1: Rental Assistance Check Issued to GAO:
[See PDF for image]
[End of figure]
Data Mining Continued to Find Other Illustrative Examples of Improper
and Potentially Fraudulent Payments:
We have previously testified regarding potentially fraudulent case
studies we uncovered through data mining and investigative techniques.
The potential fraud in those cases was hundreds of thousands of
dollars. We have continued our data mining work find additional
examples where FEMA made payments, sometimes totaling over $100,000, to
improper or potentially fraudulent registrations, including payments
made to registrants where cemeteries and post office boxes were claimed
as damaged property addresses. Table 3 provides several additional
examples of improper and potentially fraudulent payments.
Table 3: Examples of Payments Made to Improper and Potentially
Fraudulent Registrations:
Case: 1;
Amount: $109,708;
Case Details: * 8 individuals submitted 8 registrations using their own
SSNs;
* All 24 payments were sent to a single apartment;
* 4 individuals were members of the same household who were displaced
to the same location. However, these individuals each received an
expedited assistance and a rental assistance payment. According to
public records, the other 4 individuals were not living at the damaged
property at the time of the hurricane.
Case: 2;
Amount: 139,000;
Case Details: * Individual received 26 payments using 13 different
SSNs--only 1 of which belonged to the person;
* Public records indicate that the individual did not reside at any of
the 13 addresses claimed as damaged property addresses;
* Public records also indicate that 8 of the 13 addresses did not exist
or have public ownership records.
Case: 3;
Amount: 4,358;
Case Details: * Registrant claimed a UPS store address as damaged
property address to qualify for 2 payments for expedited assistance and
rental assistance.
Case: 4;
Amount: 2,358;
Case Details: * Registrant used an address in Greenwood Cemetery, New
Orleans, as the damaged property address to qualify for one rental
assistance payment.
Case: 5;
Amount: 2,000;
Case Details: * Registrant used a New Orleans cemetery as the damaged
property address to obtain one expedited assistance payment.
Source: GAO analysis and investigation of FEMA data.
[End of table]
The following provides illustrative information for three of the cases.
* Case number 1 involves 8 individuals who claimed several different
damaged property addresses, but the same current address which is a
single apartment. Public record searches also determined that only 2 of
the 8 individuals actually lived at the current address. Four
individuals were members of the same household who shared the same
damaged property address. However, the 4 individuals each received one
expedited and one rental assistance payment. FEMA criteria specified
that members from the same household who were displaced to the same
location should be entitled to only one IHP payment. According to
public records, the other 4 individuals were not living at the address
claimed as damaged at the time of the hurricane.
* Case number 2 involves an individual who used 13 different SSNs--
including one of the individual's own--to receive payments on 13
registrations. The individual claimed 13 different damaged property
addresses and used one single current address to receive FEMA payments.
According to publicly available records, this individual had no
established history at any of the 13 properties in Louisiana,
Mississippi, and Alabama, which the individual claimed as damaged. The
individual received approximately $139,000 consisting of 8 expedited
assistance payments, 4 rental assistance payments, and 14 other
payments, including 3 payments of $10,500 each, and 3 payments ranging
from over $12,000 to over $17,000 for personal property replacement.
Further audit and investigative work indicates that 8 of the 13
addresses did not exist or do not have public ownership records.
* Case number 4 involves a registrant who used the address of a
cemetery to make an IHP claim. Specifically, the registrant used a
damaged property address located within the grounds of Greenwood
Cemetery, in New Orleans, Louisiana, to request disaster assistance
from FEMA. Public records show no record of the registrant ever living
in New Orleans. Instead, public records indicate that for the past five
years, the registrant has resided in West Virginia at the address
provided to FEMA as the registrant's current address.
As discussed previously, one statistical sample item we tested related
to an improper and potentially fraudulent payment FEMA made to an
individual who received expedited and rental assistance as a result of
using a post office box as a damaged property address. According to the
Postal Inspector, this post office box was also linked to individuals
that are associated with fraudulent activity. In total, we found that
FEMA made over 2,000 payments totaling about $5.3 million to
registrants who provided a post office box as their damaged residence.
While not all payments made to post office boxes are improper or
potentially fraudulent, the number of potentially fraudulent payments
could be substantially reduced if FEMA put in place procedures to
instruct disaster recipients to provide actual street addresses of
damaged property when claiming disaster assistance.
Registrants Using Prisoner Identities Received Millions in Disaster
Assistance Payments:
FEMA paid millions of dollars to over 1,000 registrants who used names
and SSNs belonging to state and federal prisoners for expedited and
housing assistance.[Footnote 14] FEMA guidelines specify that
eligibility for disaster assistance is predicated on the registrant
being displaced from their primary residence due to the disaster, thus
having need for shelter. These eligibility criteria should have
generally excluded prisoners incarcerated throughout the disaster
period. Given the weaknesses we identified earlier related to the
number of individuals who claimed damages based on invalid property
addresses, we can not ascertain whether FEMA properly verified that
these registrations were valid, and therefore deserving of IHP
payments. The following are three cases where prisoner identities were
used to improperly receive IHP payments.
* Case 1 involves a convicted felon, housed in a Louisiana prison from
April 2001 to the present, who registered for IHP assistance by
telephone. The registrant made a FEMA claim using a post office box
address in Louisiana as his damaged property address to qualify for IHP
payments for expedited assistance, rental assistance, and personal
property replacement. Two of these payments were made via checks sent
to the address he falsely claimed as his current residence, and the
final payment was sent via electronic funds transfer (EFT) to someone
who also listed the same current address on the checking account. FEMA
paid over $20,000 to the registrant even though the damaged property
address on the registration was a post office box address and the
registrant was incarcerated throughout the disaster period.
* Case 2 involves a registrant who has been incarcerated in a Louisiana
state penitentiary since February 2005. Several weeks after the
disaster, the registrant applied by telephone for individual disaster
relief assistance claiming a Louisiana address. Based on his
registration information, FEMA paid the inmate over $14,000 in checks
mailed to an address in Texas that he listed as his current address,
and an EFT was sent to his checking account. Payments included
expedited assistance, rental assistance, and personal property
replacement funds.
* Case 3 involves a registrant who has been incarcerated in a
Mississippi correctional facility since 2004. The registrant used his
name and SSN over the telephone to apply for and receive $2,000 in
expedited assistance and $2,358 in rental assistance. The individual
listed his correct current address, at the prison, to receive these
payments.
Rental Assistance Payments Sent to Individuals Living in FEMA-Paid-For
Hotels:
Following hurricane Katrina, FEMA undertook massive efforts to house
individuals and households who were displaced by the hurricane. Among
other efforts, FEMA provided hotel accommodations to individuals who
were at that time displaced across the United States.[Footnote 15] We
found that although FEMA was responsible for paying hotel costs, FEMA
did not require hotels to collect registration information (such as
FEMA registration identification numbers or SSN) on individuals to whom
it provided hotel accommodations. Without this information, FEMA was
not able to identify individuals who were housed in hotels, and, thus,
FEMA was unable to determine whether rental assistance should be
provided to individuals to whom the federal government was providing
free lodging. As a result, FEMA made rental assistance payments which
covered the same period of time that the registrant was staying at a
FEMA-paid hotels.[Footnote 16] Table 4 provides examples of some of
these cases.
Table 4: FEMA Registrants Receiving Rental Assistance and FEMA Paid
Hotels:
Case: 1;
Hotel Name (Location): Quality Inn (Carson, Calif.);
Extended Stay America (Sacramento, Calif.);
Rental Assistance Payments: $6,734;
Total Hotel Payments[A]: $ 8,000;
Details: * Registrant stayed at two hotels from September 2005 to
February 2006 at a cost of $50 to $60 per night;
* FEMA paid registrant rental assistance for both Katrina and Rita in
October 2005 and again in December 2005 for Katrina.
Case: 2;
Hotel Name (Location): Motel 6 (Port Allen, La.);
Rental Assistance Payments: 5,602;
Total Hotel Payments[A]: 7,000;
Details: * Registrant stayed at hotels from October 2005 to February
2006 at cost of $36 to $56 per night;
* While at the hotel, registrant submitted self-certification forms
stating he required housing assistance as a result of both disasters;
* FEMA paid registrant two rental assistance payments for Rita in
November 2005 and two rental assistance payments for Katrina in
December 2005 and January 2006.
Case: 3;
Hotel Name (Location): Marriott Courtyard (Lafayette, La.);
Rental Assistance Payments: 5,208;
Total Hotel Payments[A]: 18,000;
Details: * Registrant stayed at hotel from September 2005 to February
2006 at a cost of $109 to $122 per night;
* FEMA paid registrant two rental assistance payments in September 2005
and December 2005.
Case: 4;
Hotel Name (Location): Marriott Cypress Harbour (Orlando, Fla.);
Rental Assistance Payments: 4,386;
Total Hotel Payments[A]: 12,000;
Details: * Registrant stayed at the vacation resort hotel from
September to November 2005 at a cost of $154 to $249 per night;
* In November 2005, the registrant moved to a FEMA-paid trailer;
* FEMA made two rental assistance payments to the registrant in October
2005.
Case: 5;
Hotel Name (Location): Days Inn (Monroe, La.);
Rental Assistance Payments: 4,386;
Total Hotel Payments[A]: 8,000;
Details: * Registrant stayed at hotel from October 2005 to January 2006
at a cost of $69 to $79 per night;
* FEMA paid registrant two rental assistance payments in September 2005
and December 2005;
* FEMA inspector notes indicate registrant did not live at the damaged
address at time of the hurricane.
Case: 6;
Hotel Name (Location): Intercontinental (New Orleans, La.);
Days Inn (Metairie, La.);
Best Western French Quarter Landmark (New Orleans, La.);
Rental Assistance Payments: 4,056;
Total Hotel Payments[A]: 14,000;
Details: * Registrant stayed at three hotels from November 2005 to
February 2006 at a cost of $119 to $260 per night;
* FEMA paid registrant rental assistance payments in November 2005 and
January 2006.
Case: 7;
Hotel Name (Location): Ramada Plaza Hotel (Corona, N.Y.);
Rental Assistance Payments: 2,358;
Total Hotel Payments[A]: 31,000;
Details: * Registrant stayed at hotel from September 2005 to March 2006
at a cost of $149 per night;
* FEMA paid registrant rental assistance in September 2005.
Case: 8;
Hotel Name (Location): Pagoda Hotel (Honolulu, Hawaii);
Rental Assistance Payments: 2,358;
Total Hotel Payments[A]: 8,000;
Details: * Registrant stayed at hotel from October to December 2005 at
a cost of $110 to $115 per night;
* FEMA paid the registrant rental assistance in November 2005 and
another rental assistance payment for $2,988 in January 2006;
* Our investigation and public records indicate that the registrant did
not live at the damaged property address in New Orleans at the time of
the hurricane but instead resided in North Carolina.
Case: 9;
Hotel Name (Location): French Quarter Suites (New Orleans, La.);
Old Towne Inn (New Orleans, La.);
Rental Assistance Payments: 2,358;
Total Hotel Payments[A]: 8,000;
Details: * Registrant stayed at two hotels from November 2005 to
January 2006 at a cost of $100 to $136 per night;
* FEMA paid registrant rental assistance in November 2005;
* Registrant was evicted from second hotel for violating hotel rules.
Case: 10;
Hotel Name (Location): Days Inn (Monroe, La.);
Rental Assistance Payments: 2,028;
Total Hotel Payments[A]: 8,000;
Details: * Registrant stayed at hotel from October 2005 to January 2006
at a cost of $61 to $79 per night;
* FEMA paid the registrant rental assistance in December 2005.
Source: GAO analysis and investigation of FEMA and hotel data.
[A] Rental assistance payments were made prior to February 13 while
these recipients were staying in the FEMA-paid hotels. Total hotel
payments are rounded to the nearest $1,000.
[End of table]
Because the hotels were not required to collect identification numbers,
we were unable to determine the magnitude of individuals who received
these duplicate benefits. However, as illustrated in table 4, our data
mining identified a number of individuals housed in FEMA-paid for
hotels who have received more than one rental assistance payment.
Without an effective means of reconciling individuals in FEMA hotels
with those individuals receiving rental assistance payments, FEMA may
have wasted taxpayer dollars by paying twice for housing assistance to
hurricane victims.
FEMA Lacked Controls over Accountability and Use of Debit Cards:
FEMA did not establish proper accountability for debit cards. As a
result, FEMA disbursed about $1.5 million of taxpayer money for over
750 debit cards that FEMA cannot establish went to disaster victims. In
addition, as reported previously, we continued to find cases where
recipients purchased goods and services that did not meet serious
disaster related needs as defined by federal regulations.[Footnote 17]
Control Weaknesses over Accountability of FEMA Debit Cards:
FEMA lacked controls for accounting for debit cards issued, resulting
in the loss of accountability for over 750 debit cards valued at about
$1.5 million. The lack of controls over debit cards is particularly
troubling given that debit cards are, in essence, cash that can be used
to purchase goods and services. In September 2005, JPMorgan Chase was
initially paid approximately $22.7 million for about 11,374 cards that
the bank believed were issued to FEMA registrants. However, prior to
our inquiries beginning in November 2005, we found that neither FEMA
nor the bank had reconciled the actual number of cards distributed with
the number of cards for which payment was made. From our numerous
inquiries, both JPMorgan Chase and FEMA began to reconcile their
records to the debit cards issued. As a result,
* JPMorgan Chase performed a physical count of cards remaining to
identify the number of cards distributed. This resulted in JPMorgan
Chase determining that it distributed 10,989 cards, not 11,374 cards.
Upon identification of the 385 undistributed debit cards, JPMorgan
Chase refunded to FEMA $770,000 attributable to these undistributed
debit cards.
* FEMA attempted to perform a reconciliation of the distributed cards
to the cards recorded in its disaster recipient database. As of May 26,
2006, FEMA can only account for 10,608 cards of the 10,989 cards
JPMorgan Chase claimed that it has distributed.[Footnote 18] As a
result, FEMA cannot properly account for 381 debit cards, worth about
$760,000.
Lack of Guidance for Proper Use of Debit Cards:
Since initially paying JPMorgan Chase $22.7 million, FEMA has expanded
the use of debit cards as a payment mechanism for future IHP payment
for some registrants. Through this process, FEMA made about $59 million
in additional payments of rental assistance and other benefits. As of
March 2006, over 90 percent of money funded to the debit cards has been
used by recipients to obtain cash and purchase a variety of goods and
services. Our analysis of data provided by JPMorgan Chase found that
the debit cards were used predominantly to obtain cash[Footnote 19]
which did not allow us to determine how the money was actually used.
The majority of the remaining transactions was associated with
purchases of food, clothing, and personal necessities.
Similar to findings in our February 13, 2006, testimony, we continue to
find some cases where cardholders purchased goods and services that did
not appear to meet legitimate disaster needs. In this regard, FEMA
regulations provide that IHP assistance be used for items or services
that are essential to a registrant's ability to overcome disaster-
related hardship. Table 5 details some of the debit cards activities we
found that are not necessary to satisfy legitimate disaster needs.
Table 5: Examples of Questionable Use of Debit Cards:
Vendor: Jewelz;
Location: Arlington, Tex;
Nature of Transaction: Diamond jewelry including watches, earrings, and
a ring;
Amount: $3,700.
Vendor: Vacation Express;
Location: Atlanta, Ga;
Nature of Transaction: All inclusive 1 week Caribbean vacation resort
in Punta Cana, Dominican Republic;
Amount: 2,200.
Vendor: Lesea Broadcasting;
Location: South Bend, Ind;
Nature of Transaction: Donations to a faith based charity;
Amount: 2,000.
Vendor: New Orleans Saints;
Location: New Orleans, La;
Nature of Transaction: 5 New Orleans Saints football season tickets;
Amount: 2,000.
Vendor: Mark Lipkin;
Location: Houston, Tex;
Nature of Transaction: Divorce lawyer services;
Amount: 1,000.
Vendor: Legends;
Location: Houston, Tex;
Nature of Transaction: Gentleman's club;
Amount: 600.
Vendor: The Pleasure Zone;
Location: Houston, Tex;
Nature of Transaction: Adult erotica products;
Amount: 400.
Vendor: Hooters;
Location: San Antonio, Tex;
Nature of Transaction: Alcoholic beverages including $200 bottle of Dom
Perignon champagne;
Amount: 300.
Vendor: GGW Video;
Location: Santa Monica, Calif;
Nature of Transaction: Girls Gone Wild videos;
Amount: 300.
Vendor: Alamo Fireworks;
Location: San Antonio, Tex;
Nature of Transaction: Fireworks;
Amount: 300.
Source: GAO analysis of debit card transactions and additional
investigations.
Note: Total transaction amounts are rounded to the nearest $100.
[End of table]
Concluding Comments:
FEMA faces a significant challenge in ensuring that IHP relief payments
are only sent to valid registrants while also distributing those relief
payments as fast as possible. To ensure the success of the program,
FEMA must build the American taxpayers confidence that federal disaster
assistance only goes to those in need, and that adequate safeguards
exist to prevent assistance from going to those who submit improper and
potentially fraudulent registrations. To that effect, FEMA must develop
and strengthen controls to validate information provided at the
registration stage. As we have stated in prior audit work, and as FEMA
had learned from prior experience, pursuing collection activities after
disaster relief payments have been made is costly, time-consuming, and
ineffective. Upfront controls are all the more crucial given the
estimated $1 billion dollars that had gone to improper and potentially
fraudulent registrations related to hurricanes Katrina and Rita. It is
key that FEMA address weaknesses in its registration process so that it
can substantially reduce the risk for fraudulent and improper payments
before the next hurricane season arrives.
In addition, to help deter future fraudulent registrations, FEMA must
ensure there are consequences for those who commit fraud. We plan to
refer potentially improper payments to FEMA for further review, and
hope that FEMA will take the necessary recoupment actions. Further, we
have referred, and plan to refer additional cases of potential fraud to
the Katrina Fraud Task Force for further investigations and, if
warranted, indictments. Finally, we plan to issue a report in the
future with recommendations for addressing problems identified in this
testimony.
Mr. Chairman and Members of the Committee, this concludes our
statement. We would be pleased to answer any questions that you or
other members of the committee may have at this time.
Contacts and Acknowledgement:
For further information about this testimony, please contact Gregory
Kutz at (202) 512-7455 or kutzg@gao.gov, John Kelly at (202) 512-6926
or kellyj@gao.gov.
Major contributors to this testimony include Kord Basnight, James Berry
Jr., Gary Bianchi, Valerie Blyther, Matthew Brown, Norman Burrell,
Jennifer Costello, Paul Desaulniers, Steve Donahue, Dennis Fauber,
Christopher Forys, Adam Hatton, Aaron Holling, Jason Kelly, Sun Kim,
Crystal Lazcano, Tram Le, John Ledford, Jennifer Leone, Barbara Lewis,
Jonathan Meyer, Gertrude Moreland, Richard Newbold, Kristen Plungas,
John Ryan, Sidney Schwartz, Robert Sharpe, Gail Spear, Tuyet-Quan Thai,
Patrick Tobo, Matthew Valenta, Tamika Weerasingha, and Scott Wrightson.
[End of section]
Appendix I: Objectives, Scope and Methodology:
Our objectives were to (1) provide an estimate of improper and
potentially fraudulent payments related to certain aspects of the
disaster registrations, (2) identify whether FEMA made improper or
potentially fraudulent IHP payments to registrants who were
incarcerated at the time of the disaster, (3) identify whether FEMA
provided registrants with rental assistance payments at the same time
it was paying for their hotel rooms, and (4) review FEMA's
accountability over debit cards and controls over proper debit card
usage.
To provide an estimate of improper and potentially fraudulent payments
related to certain aspects of the disaster registrations, we drew a
statistical sample of 250 payments from the Federal Emergency
Management Agency (FEMA)'s Individuals and Households Program (IHP)
payments. Three of the 250 were considered out of scope for our study
because the payment has been returned to the U.S. government by the
time of our review. Therefore, our review examined 247 payments for
which the government was subject to financial loss. Potentially
fraudulent and invalid payments are claims that contained (1) bogus
identities, (2) addresses that did not exist, (3) addresses where there
was no evidence that the address was the primary residence of the
registrant at the time of the disaster, and (4) addresses that had been
previously registered using duplicate information (such information
would include same SSNs, same damaged address, and/or same current
address). We conducted searches of public records, available FEMA data,
and/or made physical inspections of addresses to determine if
registrations were improper and/or potentially fraudulent.
Because we followed a probability procedure based on random selections,
our sample is only one of a large number of samples that we might have
drawn. Since each sample could have provided different estimates, we
express our confidence in the precision of our particular sample's
results as a 95 percent confidence interval (e.g., plus or minus 5
percentage points). This is the interval that would contain the actual
population value for 95 percent of the samples we could have drawn. As
a result, we are 95 percent confident that each of the confidence
intervals in this report will include the true values in the study
population.
To identify whether FEMA made improper or potentially fraudulent IHP
payments to registrants who were incarcerated at the time of the
disaster, we obtained the FEMA IHP database as of February 2006. We
obtained databases containing state prisoner data since August 2005,
including releases and new incarcerations, from the states of
Louisiana, Texas, Mississippi, Alabama, Georgia, and Florida. We also
obtained federal prisoner data since August 2005, including releases
and new incarcerations, from the Department of Justice. We validated
the databases were complete by comparing totals against available
public information on prisoner populations. We compared these databases
against the population of IHP payments to identify prisoner SSN/name
combinations that received payments from FEMA. We restricted this
comparison to prisoners who were in state or federal prisons at the
time of the disasters. We also interviewed prisoners who registered for
disaster relief and prison officials to determine if prisoners were
incarcerated at the time of the disaster.
To identify whether FEMA improperly provided registrants with rental
assistance payments at the same time it was paying for their hotel
rooms, we reviewed FEMA policies and procedures to determine how FEMA
administered its hotel program, and obtained FEMA data on its hotel
registrants. We also used data mining and forensic audit techniques to
identify registrants who stayed in hotels paid for by FEMA who also
received rental assistance payments through the IHP program. To
determine whether registrations from our data mining resulted in
duplication of housing benefits, we used a selection of 10 case studies
for further investigation. We obtained documentation from hotel
officials to substantiate that case study registrants stayed at hotels
paid for by FEMA. We also gathered available FEMA data on case study
registrations that received multiple rental assistance payments to
determine what information they had provided FEMA in order to receive
additional rental assistance.
To review FEMA's accountability over debit cards and controls over
proper debit card usage, we reviewed databases of transactions and
accounts provided by JPMorgan Chase, the administering bank for the
debit cards, as well as FEMA's database of debit card accounts. We
interviewed bank, FEMA, and Treasury officials regarding the
reconciliation of debit card accounts against IHP registrants and
reviewed documentation related to the payment flow of debit cards. We
also performed data mining on debit card transactions to identify
purchases that did not appear to be indicative of necessary expenses as
defined by the Stafford Act's implementing regulations.
During the course of our audit work, we identified multiple cases of
potential fraud. For cases that we investigated and found significant
evidence of fraudulent activity, we plan to refer our cases directly to
the Hurricane Katrina Fraud Task Force. We performed our work from
February 2006 through June 8, 2006 in accordance with generally
accepted government auditing standards and quality standards for
investigations as set forth by the President's Council on Integrity and
Efficiency.
Data Reliability:
To validate that the National Emergency Management Information System
database was complete and reliable, we compared the total disbursements
against reports FEMA provided to the Senate Appropriations Committee on
Katrina/Rita disbursements. We also interviewed FEMA officials and
performed electronic testing of the database on key data elements.
FOOTNOTES
[1] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-403T, (Washington, D.C.: Feb. 13, 2006).
[2] Pursuant to 42 U.S.C. § 5714, assistance for real property repair
and replacement is capped at $5,200 and $10,500, respectively. There
are no financial caps for housing assistance and other necessary
expenses.
[3] As of mid-May 2006, FEMA reported that IHP payments for Katrina and
Rita totaled slightly over $6.7 billion. Data we analyzed as of
February 2006 represented more than 90 percent of this amount.
[4] Exceptions were made for areas in Louisiana and Mississippi where
damages were widespread and extensive. For these areas, FEMA exempted
properties from an actual inspection prior to providing occupants in
these areas with rental assistance. FEMA also used geospatial imaging
to determine the level of real and personal property repair and
replacement on properties where FEMA could not conduct visual
inspections.
[5] For the purpose of this testimony, our estimate of improper and
potentially fraudulent payments is based on a statistical sample of
payments in which we examined whether the associated registrations
contained invalid Social Security Numbers (SSNs), bogus addresses,
invalid primary residence, and/or duplicate information. Invalid SSNs
refer to instances where the SSNs did not match with the name provided;
the SSNs belong to the deceased;
or the SSNs had never been issued. Bogus addresses refer to instances
where the damaged address did not exist. Invalid primary residences are
related to registrations where the registrant had never lived at the
damaged address, or did not live at the damaged address at the time of
the hurricanes. Duplicate information refers to instances where the
registrations contained information that is duplicative of another
registration that received a payment and was earlier recorded in FEMA's
system.
[6] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn. The 95 percent confidence interval surrounding the estimate of
16 percent ranges from 12 percent to 21 percent. The 95 percent
confidence interval surrounding the estimate of $1 billion ranges from
$600 million to $1.4 billion.
[7] 44 CFR 206.117.
[8] 44 CFR 206.112.
[9] All dollar estimates from this sample of FEMA disaster payments
have 95 percent confidence intervals of within plus or minus $400
million of the estimate itself, unless otherwise noted.
[10] All percentage estimates from this sample of FEMA disaster
payments have 95 percent confidence intervals of within plus or minus 5
percentage points of the estimate itself, unless otherwise noted.
[11] GAO-06-403T .
[12] Follow-up work indicates that because the address fell in an area
with tremendous devastation, FEMA used geospatial mapping in lieu of a
physical inspection to identify the level of damage and calculate the
amount of assistance.
[13] Individuals and households who met a certain income threshold were
referred to SBA for a loan consideration.
[14] FEMA paid registrants who used names and SSNs belonging to inmates
in the Gulf Coast region (that is, Louisiana, Texas, Alabama,
Mississippi, Georgia, and Florida) or federal prison institutions and
whose application was made at the time of incarceration. Most of these
prisoners are still incarcerated. These numbers do not include
prisoners who submitted false identities or false addresses on their
registrations, prisoners who were free at the time of the hurricanes,
received rental assistance, and were later incarcerated (meaning they
received rental assistance covering periods of incarceration) or
prisoners who used other schemes to collect FEMA benefits, such as
identity theft. The average amount FEMA paid to a prisoner for
expedited assistance and rental assistance was over $3,000.
[15] Immediately after hurricane Katrina, the Red Cross moved to
provide hurricane victims with housing in hotels through its Special
Transient Accommodations Program. On October 25, 2005, FEMA took over
the management of this program. FEMA subsequently reimbursed Red Cross
for expenditures Red Cross incurred for its program.
[16] On November 23, 2005, FEMA issued a policy memo for Katrina
stating that rental assistance payments for the first 3 months ($2,358)
are not considered a duplication of benefits for individuals staying at
FEMA paid hotels. FEMA made the policy retroactive and applied it to
all rental assistance payments provided prior to the policy being
issued. We do not believe that this retroactive policy determination
eliminates the fact FEMA effectively provided some evacuees with two
forms of lodging benefits at the same time, resulting in a waste of
government funds.
[17] 44 CFR 206.110.
[18] Based on the electronic data provided to us, we were not able to
corroborate 400 of the 10,608 cards FEMA stated that they were able to
identify. According to a FEMA official, FEMA identified these
recipients utilizing data mining activities and a manual review process
of the recipient files. However, the FEMA official stated that no hard
copies of the recipient files were made and, thus, we are not able to
conclude whether these additional cards were, in fact, linked to a
recipient who received a debit card.
[19] Over 70 percent of debit card dollars were cash withdrawals.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contacts:
William Jenkins, Director, Homeland Security & Justice Issues (202) 512-
8757 (jenkinswo@gao.gov) and Greg Kutz, Managing Director, GAO Forensic
Audits and Special Investigations, (202) 512-7455 (kutzg@gao.gov):
Acknowledgments:
In addition to the contacts named above, the following individuals from
GAO's Forensic Audits and Special Investigations and GAO's Homeland
Security and Justice Team also made contributions to this report: Kord
Basnight, James Berry Jr., Gary Bianchi, Valerie Blyther, Matthew
Brown, Norman Burrell, Willie Commons, Jennifer Costello, Christine
Davis, Katherine Davis, Paul Desaulniers, Steve Donahue, Dennis Fauber,
Christopher Forys, Adam Hatton, Aaron Holling, William O. Jenkins Jr.,
Chris Keisling, Jason Kelly, John Kelly, Sun Kim, Stan Kostyla, Crystal
Lazcano, Tram Le, John Ledford, Jennifer Leone, Barbara Lewis, Gary M.
Malavenda, Marvin McGill, Jonathan Meyer, Gertrude Moreland, Richard
Newbold, Kristen Plungas, Jennifer Popovic, John Ryan, Sidney Schwartz,
Robert Sharpe, Gail Spear, Tuyet-Quan Thai, Patrick Tobo, Matthew
Valenta, Tamika Weerasingha, and Scott Wrightson.
[End of section]
Glossary:
Dental Expenses: Financial assistance to address the dental costs.
Direct Assistance: Financial assistance to address the cost of funeral
services, burial, cremation, and other funeral expenses related to a
death caused by the disaster.
Expedited Assistance: Expedited assistance provides fast track money in
the form of $2,000 in expedited payments to eligible disaster victims
to help with immediate, emergency needs of food, shelter, clothing and
personal necessities. FEMA changed the maximum amount from $2,000 to
$500 on July 24, 2006.
Funeral Expenses: Money to address the cost of funeral services,
burial, cremation, and other funeral expenses related to a death caused
by the disaster.
Home Replacement Grant: Financial assistance provided to replace the
primary residence of an owner-occupied dwelling if the dwelling was
damaged by the disaster and there was at least $10,000 of damage (as
adjusted annually to reflect changes in the CPI). The applicant may
either replace the dwelling in its entirety for $10,000 (as adjusted
annually to reflect changes in the CPI) or less, or may use the
assistance toward the cost of acquiring a new permanent residence that
is greater in cost than $10,000 (as adjusted annually to reflect
changes in the CPI).
Home Repair Grant: Financial assistance provided for the repairs of
uninsured disaster- related damages to an owner's primary residence.
The funds are to help return owner-occupied primary residences to a
safe and sanitary living or functioning condition. Repairs may include
utilities and residential infrastructure damaged by a major disaster.
IHP Other Needs Assistance Categories: The ONA Program is designed for
those with serious needs who have no other source of assistance. The
program covers necessary expenses such as uninsured personal property,
medical and dental expenses and funeral expenses.
Lodging Expenses: Expenses for reasonable short-term accommodations
that individuals or households incur in the immediate aftermath of a
disaster. Lodging expenses may include but are not limited to the cost
of brief hotel stays.
Medical Expenses: Financial assistance to address the cost of medical
treatment or the repair or replacement of medical equipment required as
a result of the disaster.
Moving & Storage Expenses: Financial assistance to address necessary
expenses and serious needs related to moving and storing personal
property to avoid additional disaster damage.
Necessary Expense: The cost associated with acquiring an item or items,
obtaining a service, or paying for any other activity that meets a
serious need.
Other Needs Expenses: Financial assistance to address the cost of other
specific disaster- related necessary expenses and serious needs of
individuals and households.
Personal Property Expenses: Financial assistance to address the cost of
repairing and/or replacing disaster damaged items, such as furniture,
bedding, appliances, and clothing.
Preliminary Disaster Assessment: A mechanism used to determine the
impact and magnitude of damage and the resulting unmet needs of
individuals, businesses, the public sector, and the community as a
whole.
Rental Assistance: As part of IHP housing assistance, rental assistance
funds address the cost renting another place to live. For homeowners,
this money may be provided in addition to home repair, if needed.
Serious Need: The requirement for an item, or service, that is
essential to an applicant's ability to prevent, mitigate, or overcome a
disaster- related hardship, injury or adverse condition.
Transitional Housing Assistance: Transitional Housing Assistance is a
cash grant of up to $2,358 per household intended to cover an initial 3
months of rental payments for eligible applicants. Transitional Housing
Assistance is a form of rental assistance and was implemented for the
first time in selected disaster areas in Louisiana and Mississippi
during Hurricane Katrina.
Transportation Expenses: Financial assistance for public transportation
and any other transportation related costs or expense and the cost of
repairing and/ or replacing a disaster damaged vehicle that is no
longer usable because of disaster-related damage.
[End of section]
Related GAO Products:
Small Business Administration: Actions Needed to Provide More Timely
Disaster Assistance. GAO-06-860. Washington, D.C.: July 28, 2006.
Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution. GAO-06-954T. Washington, D.C.:
July 12, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and
Abuse. GAO-06-655. Washington, D.C.: June 16, 2006.
Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially
Fraudulent Individual Assistance Payments Estimated to Be Between $600
Million and $1.4 Billion. GAO-06-844T. Washington, D.C.: June 14, 2006.
Hurricanes Katrina and Rita: Coordination between FEMA and the Red
Cross Should Be Improved for the 2006 Hurricane Season. GAO-06-712.
Washington, D.C.: June 8, 2006.
Hurricane Katrina: Improving Federal Contracting Practices in Disaster
Recovery Operations. GAO-06-714T. Washington, D.C.: May 4, 2006.
Hurricane Katrina: Planning for and Management of Federal Disaster
Recovery Contracts. GAO-06-622T. Washington, D.C.: April 10, 2006.
Hurricane Katrina: Comprehensive Policies and Procedures Are Needed to
Ensure Appropriate Use of and Accountability for International
Assistance. GAO-06-460. Washington, D.C.: April 6, 2006.
Hurricane Katrina: Policies and Procedures Are Needed to Ensure
Appropriate Use of and Accountability for International Assistance. GAO-
06-600T. Washington, D.C.: April 6, 2006.
Agency Management of Contractors Responding to Hurricanes Katrina and
Rita. GAO-06-461R. Washington, D.C.: March 15, 2006.
Hurricane Katrina: GAO's Preliminary Observations Regarding
Preparedness, Response, and Recovery. GAO-06-442T. Washington, D.C.:
March 8, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and
Abuse. GAO-06-403T. Washington, D.C.: February 13, 2006.
Statement by Comptroller General David M. Walker on GAO's Preliminary
Observations Regarding Preparedness and Response to Hurricanes Katrina
and Rita. GAO-06-365R. Washington, D.C.: February 1, 2006.
Hurricanes Katrina and Rita: Provision of Charitable Assistance. GAO-
06-297T. Washington, D.C.: December 13, 2005.
Hurricanes Katrina and Rita: Preliminary Observations on Contracting
for Response and Recovery Efforts. GAO-06-246T. Washington, D.C.:
November 8, 2005.
FOOTNOTES
[1] 42 U.S.C. §§ 5121-5206.
[2] Data mining involves obtaining large databases of transactions and
related activity and using software to search or "mine" data looking
for suspicious transactions or patterns of activity.
[3] GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and
Potentially Fraudulent Individual Assistance Payments Estimated to Be
Between $600 Million and $1.4 Billion, GAO-06-844T (Washington, D.C.:
June 14, 2006).
[4] Pub. L. No. 106-390.
[5] The fifth form of assistance is permanent housing construction in
insular and other remote areas. Section 408 of the Stafford Act
authorizes direct assistance to disaster victims to construct permanent
housing in insular areas and other remote locations, i.e., the Virgin
Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana
Islands, and in Puerto Rico and other remote locations. This form of
housing assistance is explicitly limited to insular and other remote
areas where no alternative housing resources are available and the
other forms of authorized temporary housing assistance are
"unavailable, infeasible, or not cost effective."
[6] 42 U.S.C. § 5174(c)(1)(A).
[7] 42 U.S.C. § 5174(c)(1)(B).
[8] 42 U.S.C. § 5174(c)(2)(C). In 2005, the maximum was $5,200. For
2006, the maximum is $5,400.
[9] 42 U.S.C. § 5174(c)(3)(B). In 2005, the maximum was $10,500. For
2006, the maximum is $10,900.
[10] 44 C.F.R. § 206.117(b)(3).
[11] On July 27, 2006, the Senate Homeland Security and Governmental
Affairs Committee approved and reported a bill (S. 3721) that, among
other things, would make amendments to Section 408(c) of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5174(c)) to eliminate the maximum amounts of assistance available under
the IHP for home repair or replacement. This legislation has not yet
been approved by the full Congress.
[12] In 2005, the maximum was $26,200. For 2006, the maximum is
$27,200.
[13] GAO, Small Business Administration: Actions Needed to Provide More
Timely Disaster Assistance, GAO-06-860 (Washington, D.C.: July 28,
2006).
[14] The National Emergency Management Information System also
interfaces with SBA's information systems to refer applicants (based on
self-declared income and number of individuals in household) to SBA for
loans.
[15] GAO selected hurricane disaster declarations based on the criteria
of (1) the disaster occurring since IHP was implemented in fiscal year
2003 and (2) the disaster declaration occurred either in a single state
or in multiple-states simultaneously.
[16] Hurricanes Katrina and Rita accounted for about 80 percent of the
over 3 million applications received and about 95 percent of the total
IHP assistance distributed for all named hurricanes that came ashore in
2005.
[17] FEMA data from its National Emergency Management Information
System was provided for the 2003 named hurricanes through April 24,
2006. FEMA data was provided for the 2004 and 2005 named hurricanes
through September 6, 2006. According to a FEMA official, changes, if
any, to the data for the named hurricanes in 2003 from April to August
2006 would be minor enough to prove statistically insignificant.
[18] On July 24, 2006, FEMA changed the administration of expedited
assistance to be under the provisions of the ONA component. Prior to
the change, expedited assistance was under the provisions of the
housing assistance component.
[19] SBA applicants may also be referred for ONA if they demonstrate
that the SBA assistance provided is insufficient to meet all essential
disaster related expenses and needs.
[20] The number of applicant cases withdrawn from the IHP consideration
is not included in the table totals; therefore, the table percentages
will not equal 100 percent.
[21] For Hurricane Katrina, about 154, 000 inspections were conducted
using geospatial technology. In lieu of standard inspections, FEMA used
satellite images and geospatial mapping to determine the depth of water
in specific areas in Louisiana and Mississippi.
[22] As of June 2006, SBA data shows that about $7.3 billion in
disaster home loans were approved for Hurricanes Katrina and Rita, of
which nearly $6.6 billion was attributable solely to Hurricane Katrina.
[23] Department of Homeland Security Inspector General, A Performance
Review of FEMA's Disaster Management Activities in Response to
Hurricane Katrina, OIG-06-32 (Washington, D.C.: Mar. 31, 2006).
[24] 42 U.S.C. § 5170b.
[25] Senate Homeland Security and Governmental Affairs Committee,
Hurricane Katrina: A Nation Still Unprepared (Washington, D.C.: May
2006).
[26] The White House, The Federal Response To Hurricane Katrina:
Lessons Learned (Washington, D.C.: Feb. 23, 2006).
[27] OIG-06-32; 35, 49 and 50.
[28] OIG-06-32, 88.
[29] OIG-06-32; 81 and 82.
[30] GAO, Major Management Challenges and Program Risks: Federal
Emergency Management Agency, GAO-03-113 (Washington, D.C.: Jan. 2003).
[31] The maximum amount of housing and other needs assistance that an
individual or household may receive is statutorily capped at $25,000,
and is adjusted annually to reflect changes in the Consumer Price Index
(CPI). The 2006 maximum is $27,200.
[32] White House report (Washington, D.C.: 2006), 117.
[33] H.R. 5393.
[34] See 42 U.S.C. § 5174(c)(4).
[35] According to FEMA, approximately 1,000, of the 3,000 disaster
employees were lost through attrition, but FEMA was attempting to
recruit additional employees.
[36] Federal Emergency Management Agency, Mass Sheltering and Housing
Assistance, July 24, 2006, Recovery Strategy RS-2006-1.
[37] GAO, Catastrophic Disasters: Enhanced Leadership, Capabilities,
and Accountability Can Improve the Nation's Preparedness, Response, and
Recovery, GAO-06-618 (Washington, D.C.: Sept. 6, 2006).
[38] GAO-06-844T , p. 4
[39] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn. As a result, we are 95-percent confident that each of the
confidence intervals in this report will include the true values in the
study population. Also, the 16 percent of payments that was improper
and potentially fraudulent excluded payments that were returned to the
U.S. government by the time of our review.
[40] 44 C.F.R.¶ 206.111.
[41] FEMA Office of Inspector General Inspections Division, FEMA's
Delivery of Individual Assistance Programs New York-September 11, 2001
(Washington, D.C; Dec. 2002); DHS Office of Inspector General Office of
Audits, The Federal Emergency Management Agency's Individual and Family
Grant Program Management at the World Trade Center Disaster, OIG-04-449
(Washington, D.C.: Sept. 2002).
[42] DHS Office of Inspector General Office of Audits, Audit of FEMA's
Individuals and Households Program in Miami-Dade County, Florida, for
Hurricane Frances, OIG-05-20 (Washington, D.C.: May 2005).
[43] GAO, Expedited Assistance for Victims of Hurricanes Katrina and
Rita: FEMA's Control Weaknesses Exposed the Government to Significant
Fraud and Abuse, GAO-06-655 (Washington, D.C.: June 2006).
[44] Because we have not tested all aspects of potential fraud, waste
and abuse related to the IHP, the recommendations in this and our prior
report do not represent a comprehensive fraud prevention program.
[45] The Stafford Act sets the federal share for the public assistance
program at no less than 75 percent of eligible costs of a disaster,
with state and local governments paying for the remaining portions.
FEMA may determine that a higher federal percentage would be provided,
as was the case of Hurricanes Katrina and Rita.
[46] Cases that may generate a fee are turned over to the local lawyer
referral service.
[47] These individual statutory caps--$5,000 for home repair assistance
and $10,000 for home replacement assistance--are adjusted annually to
reflect changes in the Consumer Price Index.
[48] In 2005, the maximum was $26,200. For 2006, the maximum is
$27,200.
[49] 42 U.S.C. § 5174(c)(1)(B)(ii). See also 44 C.F.R. § 206.110(e).
[50] Ibid.
[51] Loans from the Small Business Administration are considered to be
the primary means of disaster assistance for disaster victims who have
the financial ability to repay such loans. For some IHP benefits, FEMA
may refer applicants above a certain income threshold to first apply to
the Small Business Administration for disaster loan assistance.
[52] The requirement for a joint preliminary damage assessment may be
waived for those incidents of unusual severity and magnitude that do
not require field damage assessments to determine the need for
supplemental federal assistance under the Stafford Act, or in such
other instances determined by the Regional Director upon consultation
with the State. It may be necessary, however, to conduct an assessment
to determine unmet needs for managerial response purposes.
[53] The Regional Director or his/her designee may extend the
application period when the State requests more time to collect
applications from the affected population. The Regional Director or
his/her designee may also extend the standard application period when
necessary to establish the same application deadline for contiguous
counties or states.
[54] The National Emergency Management Information System also
interfaces with SBA's information systems to refer applicants (based on
self-declared income and number of individuals in household) to SBA for
loan purposes.
[55] For Hurricanes Katrina and Rita, a process was established to
allow the first $2,358 rental assistance award to be spent on essential
needs if the applicant filled out the Declaration of Use of Funds.
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