Federal Auditors Uncover Millions in Katrina, Rita Fraud

U.S. government auditors have identified millions of wasteful and fraudulent dollars paid by FEMA for relief in the wake of hurricanes Katrina and Rita.

The Federal Emergency Management Agency (FEMA) continues to respond to hurricanes Katrina and Rita, two storms which laid waste to the U.S. Gulf Coast in 2005.

In one case, FEMA provided free housing to 10 individuals in apartments in Plano, Texas, while at the same time it sent these individuals $46,000 to cover out-of-pocket housing expenses. In addition, several of these individuals certified to FEMA that they needed rental assistance, according to a recent report by the Government Accountability Office (GAO).

GAO is the nonpartisan watchdog agency of Congress.

FEMA made nearly $20 million in duplicate payments to thousands of individuals who claimed damages to the same property from both hurricanes Katrina and Rita. FEMA also made millions in potentially improper and/or fraudulent payments to nonqualified aliens who were not eligible for FEMA’s Individuals and Households Program (IHP).

For example, FEMA paid at least $3 million to more than 500 ineligible foreign students at four universities in the affected areas. This amount likely understates the total payments to ineligible foreign students because it does not cover all colleges and universities in the area. FEMA also provided potentially improper and/or fraudulent IHP assistance to other ineligible non-U.S. residents, despite having documentation indicating their ineligibility.

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

GAO recommends that DHS direct FEMA to take six actions, including establishing controls to prevent duplicate housing benefits to FEMA trailer and apartment residents and duplicate benefit payments for the same damages. GAO is also recommending that FEMA establish controls to prevent benefits to nonqualified aliens.

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