Report shows FEMA failed to recoup $643 million

Posted Jan. 05, 2011, at 7:06 a.m.

WASHINGTON – The Federal Emergency Management Agency hasn’t recouped about $643 million in federal disaster relief funds that were potentially distributed to about 160,000 victims of Hurricane Katrina and other natural disasters improperly, according to a watchdog report.

The report released late Monday by the Department of Homeland Security’s inspector general urges FEMA to promptly authorize the collection of the funds.

Sen. Susan Collins, R-Maine, who spearheaded investigations into FEMA’s distribution of disaster aid after Katrina, called the report’s findings “unacceptable and truly disturbing given the difficult economic climate our nation is facing.”

Delays in recouping the payments stem from a June 2007 federal court ruling that ordered FEMA to stop collection activities until it revised its collection process. New procedures have been awaiting approval since 2008, but neither FEMA Administrator Craig Fugate nor his predecessors from the George W. Bush administration approved the plans, according to the audit.

Collins called on Fugate to quickly approve the new plans. “With millions of tax dollars at stake, inaction is simply not an option,” she said.

“Further delay only makes aging debts more difficult to collect,” Homeland Security Inspector General Richard Skinner wrote in his report.

FEMA is concurrently reviewing the changes to the collection process and the 160,000 cases in question, according to spokeswoman Rachel Racusen. Fugate is expected to approve the changes early this year, she said.

“It takes time to do both and make the meaningful changes needed to fix this process so that it is fair and transparent for both disaster survivors and taxpayers,” Racusen said in an e-mail.

Once a president declares a federal disaster, storm survivors can apply for financial assistance, including reimbursement for home repairs, medical needs and storage. FEMA has distributed more than $7 billion in payments to about 5.5 million survivors of disasters since hurricanes Katrina and Rita, although most went to survivors of the two storms, according to the agency.

Multiple congressional and watchdog investigations published since the storms ravaged the Gulf Coast in 2005 detail hundreds of millions of dollars in potentially improper payments paid out in the rush to assist storm survivors. More than 1,800 people died in Katrina.

FEMA paid nearly $17 million in rental assistance to storm survivors living in agency-funded trailers, according to a 2006 Government Accountability Office report. The agency also distributed about $20 million to survivors who cited the same property when seeking assistance after both Katrina and Rita, despite federal rules that prohibit survivors from making multiple disaster requests for the same property.

The amounts in question, although significant, are just a fraction of the hundreds of billions of dollars the federal government improperly distributes annually to fraudulent beneficiaries and delinquent government contractors. The Obama administration made about $125 billion in improper payments during fiscal 2010, due mostly to increased unemployment insurance and Medicaid payments, administration officials said in November.

In recent months, the White House and Congress have taken steps to stop such payments. Legislation that President Barack Obama signed in July requires agencies and departments to spend at least $1 million annually to recoup improper payments. The Improper Payments Elimination and Recovery Act of 2010, which passed with bipartisan support, also orders agencies to reduce overpayment errors and sets penalties for agencies that fail to comply.

The report comes as congressional Republicans prepare to more forcefully investigate allegations of federal waste and mismanagement. Rep. Darrell Issa, R-Calif., incoming chairman of the House Oversight and Government Reform Committee has promised to focus on the “institutionalized culture of waste, fraud and abuse” within the federal bureaucracy, according to his spokesman.

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