Improper payment recovery at FEMA so far costs more than collections

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The Federal Emergency Management Agency has targeted $6.25 million worth of disaster assistance grants wrongly paid to disaster survivors for collection--spending $7.29 million to do so, says the Homeland Security Department office of inspector general.

FEMA is undertaking a review of grants to individuals connected to major disasters declared between Aug. 28, 2005 (the day before Hurricane Katrina hit Louisiana) and Dec. 31, 2010 (apparently a convenient cut-off date) following a grant of congressional authority from a December 2011 law (P.L. 112-74) that permits the agency to waive debts arising from improper payments.

During that 5 year period, FEMA disbursed more than $8 billion in individual assistance payments, some to persons who were ineligible or who received duplicate payments, auditors say in a report (.pdf) dated Sept. 21. Improper payments arose in part because FEMA relaxed its internal controls in order to expedite delivery of grants to the needy.

FEMA now says grants worth more than $371 million made to 91,178 recipients are candidates for recoupment. As of Sept. 7, 2012, auditors say FEMA has adjudicated 18,283 cases worth $101.11 million, and granted a debt waiver in 93 percent of those cases.

The agency won't forgive the debts in 1,293 cases worth $6.25 million, and so far has collected $1.3 million.

Review of all the cases has cost FEMA an estimated $7.29 million. Although FEMA so far has spent $1.17 for every $1 targeted for repayment, auditors say it is "too early to determine the cost-effectiveness of the process," because cases are still under review.

FEMA can grant a waiver based on five criteria, including an agency determination that the application received a payment due to a FEMA error.

An example of debt waived on those grounds cited by auditors includes an application who registered as an uninsured property owner following Hurricane Ike in September 2008 and received $12,021 for home repair. In fact, the applicant was not the owner of the house damaged by the storm and had also received $5,019 for rental and other needs assistance. But, a FEMA housing inspector at the time identified the applicant as the residence's owner, and so the agency waived the debt because the inspector did not discover who the true owner was.

For more:
- download the report, OIG-12-127 (.pdf)

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