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WASTE AND FRAUD IN THE AFTERMATH OF

HURRICANE KATRINA

HEARING

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS

OF THE

COMMITTEE ON HOMELAND SECURITY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 14, 2006

Serial No. 109–82

Printed for the use of the Committee on Homeland Security 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html
COMMITTEE ON HOMELAND SECURITY

PETER T. KING, New York, Chairman 

DON YOUNG, Alaska 

LAMAR S. SMITH, Texas 

CURT WELDON, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN LINDER, Georgia 

MARK E. SOUDER, Indiana 

TOM DAVIS, Virginia 

DANIEL E. LUNGREN, California 

JIM GIBBONS, Nevada 

ROB SIMMONS, Connecticut 

MIKE ROGERS, Alabama 

STEVAN PEARCE, New Mexico 

KATHERINE HARRIS, Florida 

BOBBY JINDAL, Louisiana 

DAVE G. REICHERT, Washington 

MICHAEL MCCAUL, Texas 

CHARLIE DENT, Pennsylvania 

GINNY BROWN-WAITE, Florida 

BENNIE G. THOMPSON, Mississippi 

LORETTA SANCHEZ, California 

EDWARD J. MARKEY, Massachusetts 

NORMAN D. DICKS, Washington 

JANE HARMAN, California 

PETER A. DEFAZIO, Oregon 

NITA M. LOWEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

ZOE LOFGREN, California 

SHEILA JACKSON-LEE, Texas 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, U.S. Virgin Islands 

BOB ETHERIDGE, North Carolina 

JAMES R. LANGEVIN, Rhode Island 

KENDRICK B. MEEK, Florida

SUBCOMMITTEE ON INVESTIGATIONS

MICHAEL T. MCCAUL, Texas, Chairman 

CHRISTOPHER SHAYS, Connecticut 

DANIEL E. LUNGREN, California 

DAVE G. REICHERT, Washington 

GINNY BROWN-WAITE, Florida 

PETER T. KING, New York (Ex Officio) 

BOB ETHERIDGE, North Carolina 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, U.S. VIRGIN

ISLANDS

BENNIE G. THOMPSON, MISSISSIPPI (EX

OFFICIO)

(II) 
(III)

C O N T E N T S

Page 

STATEMENTS

The Honorable Michael T. McCaul, a Representative in Congress From the 

State of Texas, and Chairman, Subcommittee on Investigations .................... 1

The Honorable Bob Etheridge, a Representative in Congress From the State 

of North Carolina, and Ranking Member, Subcommittee on Investigations .. 3

The Honorable Bennie G. Thompson, a Representative in Congress From 

the State of Mississippi, and Ranking Member, Committee on Homeland ..... 5 

The Honorable Charlie Dent, a Representative in Congress From the State 

of Pennsylvania .................................................................................................... 85

The Honoralbe Sheila Jackson-Lee, a Representative in Congress From the 

State of Texas ....................................................................................................... 78

The Honorable Bill Pascrell, Jr., a Representative in Congress From the 

State of New Jersey ............................................................................................. 74

The Honorable Stevan Pearce, a Representative in Congress From New 

Mexico ................................................................................................................... 81 

The Honorable Christopher Shays, a Representative in Congress From the 

State of Connecticut ............................................................................................. 75

The Honorable Gene Taylor, a Representative in Congress From the State 

of Mississippi ........................................................................................................ 83

The Honorable Ginny Brown-Waite, a Representative in Congress From the 

State of Florida ..................................................................................................... 71 

WITNESSES

Mr. Joseph Becker, Senior Vice President for Preparedness and Response, 

The American National Red Cross: 

Oral Statement ..................................................................................................... 52

Prepared Statment ............................................................................................... 55

Ms. Donna M. Dannels, Acting Deputy Director of Recovery, Federal 

Emergency Management Agency, Department of Homeland Security: 

Oral Statement ..................................................................................................... 47

Prepared Statement ............................................................................................. 49

Mr. Gregory D. Kutz, Managing Director, Forensic Audits and Special 

Investigations, Government Accountability Office: 

Oral Statement ..................................................................................................... 6

Prepared Statement ............................................................................................. 8

Accompanied by: 

Special Agent John J. Ryan, Assistant Director, Forensic Audits and Special 

Investigations, Government Accountability Office ............................................ 62

APPENDIX

FOR THE RECORD

Responses From Ms. Donna M. Dannels ............................................................... 89

(1)

WASTE AND FRAUD IN THE 

AFTERMATH OF HURRICANE KATRINA 

Wednesday, June 14, 2006

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON HOMELAND SECURITY, SUBCOMMITTEE ON INVESTIGATIONS, Washington, DC. 

The subcommittee met, pursuant to call, at 11:19 a.m., in Room 

311, Cannon House Office Building, Hon. Michael T. McCaul 

[chairman of the subcommittee] presiding. 

Present: Representatives McCaul, Shays, Reichert, Brown-Waite, 

Etheridge, Pacrell, Christensen, Thompson (Ex Officio), Pearce, 

Dent, Jackson-Lee and Taylor. 

Mr. MCCAUL. The Homeland Security subcommittee on investigations will come to order. With the concurrence of the ranking minority member, pursuant to committee rule 2(d)1, I ask unanimous 

consent to waive the notice requirement for the announcement of 

this hearing. Hearing no objection, so ordered. 

I also ask unanimous consent that Congressman Pearce, who sits 

on the full committee, be permitted to sit and question during the 

hearing today. Hearing no objection, so ordered. 

Good morning. I want to thank all of you for being here today 

for this important Homeland Security Investigations Subcommittee 

hearing. The purpose of today’s hearing is to examine the fraud, 

waste and abuse in the Federal disaster assistance programs administered by FEMA in the aftermath of Hurricanes Katrina and 

Rita. 

The Government Accountability Office is conducting an ongoing 

investigation into these crimes and the Individual and Household 

Program. The GAO first testified before the Senate in February of 

this year where they stated that the full extent of the fraud was 

unknown but may reach tens to hundreds of millions of dollars. 

The GAO testified that this disaster assistance money was used to purchase items such as a $450 tattoo, $400 massages, a $1,100 

engagement ring, a $1,300 handgun, $150 of products at Condoms 

To Go, gambling, bail bond services and adult entertainment, just 

to name a few. 

The GAO also testified that FEMA paid for hotel rooms for $438 per night in New York City and $375 per day for beachfront accommodations in Panama City, Florida. 

I have spent the last six months working with Federal investigators through this subcommittee to uncover waste, fraud and abuse 

at the Federal level. As part of this investigation, the GAO conducted undercover tests on FEMA’s disaster assistance application 
2

systems to determine the adequacy of their fraud prevention controls. The GAO found no meaningful controls to detect or prevent 

fraud. 

What is most troubling is that this lack of protection has exposed 

the FEMA programs to substantial waste, fraud and abuse. The 

GAO’s investigation determined there was little if any verification 

of the names, addresses or Social Security numbers of applicants 

registering for Federal assistance. This resulted in thousands of 

benefit checks being issued to applicants with duplicate or false information. 

Today the GAO will testify that 173 Federal prisoners received expedited and rental assistance in payments that totaled $800,000, 

and that more than a thousand State prisoners received expedited 

and rental assistance payments that totaled $10 million; $5.5 million was paid on applications using a P.O. box as the damaged address. Benefits were paid on an application where a cemetery was 

used as a damaged address. 

As the GAO dug further, investigators continued to find purchases which were far from essential to disaster assistance. Such 

purchases included a $200 bottle of Dom Perignon purchased at a 

Hooters restaurant, adult entertainment, tax payments, a $2,000 

Caribbean vacation, $5,000 for a divorce attorney, season tickets 

for the New Orleans Saints and a down payment on a house in 

Georgia. 

Furthermore, the GAO uncovered and found that FEMA continued to pay for deluxe accommodations and rental assistance totaling $20,000 for resort accommodations in Hawaii and Orlando. 

Applicants registered for the Federal disaster assistance and 

used damaged property addresses which did not exist, including addresses where they did not live at the time of the hurricanes. Likewise, Social Security numbers were used which were never issued 

or belonged to deceased individuals. 

Yet FEMA’s fraud detection and prevention controls were so 

weak or nonexistent that these fraudulent applications were never 

detected, let alone prevented. Unfortunately, the situation has gotten worse. The GAO now estimates that the extent of the fraud in 

the Individual and Household Program exceeds $1 billion, not the 

original estimate of tens to hundreds of millions. The bad news 

continues as we realize investigators are only in the beginning 

stages of their ongoing comprehensive investigation. 

This is an affront to the American taxpayer who has been fleeced 

by the actions of these criminals and by lack of FEMA fraud prevention. It is my intention today to make sure that this never happens again, particularly as we enter into another hurricane season. 

While I appreciate Acting Deputy Director Dannels being here, 

I invited FEMA Director Paulison to testify before this committee, 

yet he is not here today. Given the lack of management controls 

at FEMA and the obvious need for reform, it is unfortunate that 

he is not here to help us fix this problem. He is the leader of this 

agency and the only one with the power to mandate the changes 

needed which can end this obscene squandering of the taxpayers’ 

money. 

I pledge to continue to hold FEMA accountable for this unacceptable mismanagement of taxpayer funds and to continue to conduct 
3

hearings into this waste, fraud and abuse until FEMA has adequate fraud prevention and detection controls in place. 

To date, as a result of this investigation conducted by these Federal investigators and this subcommittee, more than 7,000 cases 

have been referred to the Justice Department for prosecution, and 

I expect this number to increase as these investigations continue. 

Furthermore, this hearing is a clear message to potential criminals and fraudsters looking to exploit any future natural disaster 

and steal from the American taxpayers. Several Federal investigative agencies will be watching you closely. Criminals will be detected, they will be prosecuted and punished to the full extent of 

the law. 

As a former Federal prosecutor, I will not stand by and allow 

this situation to persist. I am currently working on legislation from 

this committee to address these egregious flaws in the FEMA disaster assistance registration process and plan to introduce legislation to make sure that these mistakes never happen again. 

The Chair now recognizes the ranking minority member of the 

committee, the gentleman from North Carolina, Mr. Etheridge, for 

any statement he may have. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank the 

witnesses for being here today. Even as we have the first tropical 

storm of the season approaching or actually on the east coast right 

now and probably pounding my home State of North Carolina, the 

people of my State of North Carolina as well as those in the southeast in the gulf coast await each year the hurricane season with 

a mixture of trepidation and resolve. They have been through it before. We know that one or more storms will affect our State sometime during the 6-month period of hurricane season. We know that 

one or more of these storms will cause storm surge, flooding, beach 

erosion and wind damage. And we know that, as individuals and 

families, we must be protected or be prepared to protect our families, our homes and our property as best we can. 

Unfortunately, after witnessing the horrors of Hurricane Katrina 

as it wrought its damage on the Gulf Coast and FEMA’s bungling 

response which accelerated the danger and misery of storm victims, 

the people of my State and the rest of the country do not know if 

this Federal Government will be ready to provide the support and 

resources our States may need in the event of a bad storm this 

year. 

Every hurricane, natural disaster or terrorist attack provides an 

often tragic lesson to local, State and Federal emergency responders, and we rely on them to learn from those experiences. In North 

Carolina, Hurricane Hugo, Fran, Floyd and others taught us that 

storms don’t always stop at the beach’s edge, but they quickly come 

inland and wreak havoc on towns and villages hundreds of miles 

inland. 

Hurricane Floyd is an example. It provided a stark reminder that 

the majority of the casualties and the damages and deaths from a 

hurricane are wrought hundreds of miles inland, and this is true 

across the gulf coast. Last year, we saw that even in a minor hurricane like Ophelia in North Carolina that wrecked homes and destroyed businesses. 
4

In North Carolina our State department of emergency management uses every storm to identify weaknesses, and they use every 

storm to further improve their preparedness and their response capabilities. However, despite years of experiences and many storms, 

it appears that FEMA never learns and at least can’t remember 

what they do one year from the next. 

Today we are going to focus on the waste, fraud and abuse that 

occurred in the aftermath of Hurricane Katrina and Rita. I fully 

understand that it was a chaotic time and the storms effects and 

scopes were unprecedented in American history. I also understand 

that FEMA, the Red Cross and other support organizations were 

under tremendous pressure to register storm victims as quickly as 

possible so that they could receive assistance. However, that is no 

excuse for the lack of preparation, the lack of internal controls and 

the lack of decisive and professional leadership at all levels of the 

Federal Government. 

Between 1991 and 2004, 23 hurricanes struck the United States 

mainland, including the top 11 most costly storms in the history of 

this country that affected millions of people. Last May, the Department of Homeland Security Inspector General released an audit report of FEMA individuals and household programs problems in 

Florida after Hurricane Francis. 

Let me just show what that report said. That report outlined a 

number of problems with fraud and abuse that permeated the Federal assistance programs. Specifically, on page 4 of that report, it 

reported, and I quote, funds provided for repair and replacements 

of household items were not based on actual disaster related damages or loss. 

We are revisiting it again today. 

A south Florida newspaper, Sun Sentinel, reported that FEMA 

paid $31 million in Hurricane Francis aid to residents of Miami 

even though Francis never hit south Florida. 

This past week, we received the GAO report on FEMA’s control 

problems with the expedited assistance program that has cost taxpayers now we are learning hundreds of millions of dollars. Let me 

just quote from that report. The Office of Inspector General for the 

Department of Homeland Security in regard to DHS’s fiscal 2005 

financial statements, and I quote, unfortunately, the Department 

made little or no progress in improving its overall financial reporting during fiscal year 2005. JPMT, the audit firm, was unable to 

provide an opinion on the Department’s balance sheet. The taxpayers of America are appalled and should be when a Federal 

agency can’t have their report audited. 

Unfortunately, these are the people who take advantage of catastrophic events to exploit FEMA’s weaknesses and internal controls 

to steal funds that should rightfully go to true disaster victims as 

we have talked about. Some of these people fraudulently registered 

for individual assistance and other fraudulent things that affected 

the taxpayers of America. We need to find out all—who all these 

thieves and prosecute them to the full extent of the law. 

But, more importantly, FEMA and the other assistance groups 

need to learn from these experiences and institute robust internal 

controls, verification systems that dissuade would-be criminals and 
5

ensure that legitimate victims receive assistance as quickly as possible and the taxpayers’ funds are protected. 

I hope our witnesses will be able to show that we have learned 

something from these past disasters and all the mistakes. I also 

ask the Chairman that we continue this line of questioning with 

more hearings that focus on the larger, more expansive problems 

of fraud, waste and abuse as it relates to contracting. I hope, Mr. 

Chairman, that will be the subject of another hearing because it is 

a critical hearing that we need to get into. 

I hope I never see Americans trapped, hungry and fearing for 

their lives in the aftermath of a disaster because local, State and 

Federal officials did not learn from past mistakes, and they have 

to suffer. 

Thank you and I yield back. 

Mr. MCCAUL. Let me say, we do intend to have hearings in the 

future on this issue. 

The Chair now recognizes the ranking member of the full committee, the gentleman from Mississippi, Mr. Thompson, for any 

statement he may have. 

Mr. THOMPSON. Thank you very much, Mr. Chairman. I appreciate the opportunity to participate in these hearings. 

I thank the ranking member for also making the hearings happen. 

We are here today to talk about fraud, waste and abuse. After 

every disaster, there are some who seek to turn a national catastrophe into personal gain. Katrina was no different. Some of these 

people wore jeans and sneakers and cheated the government out of 

thousands of dollars, and some of these people wore suits and dress 

shoes and cheated the government out of millions of dollars. 

Mr. McCaul was dead on when he said that this kind of fraud 

is an assault on the American taxpayer, which is why I am glad 

we are here today. That is why it is important that we understand 

that our work is not done today because the fraud in the individual 

assistance program pales in comparison to FEMA’s contracting follies. 

It is important that we realize that what happened after Katrina 

was not itself a disease. Instead, the frauds we will talk about were 

symptoms of a much larger illness. The lack of controls that allowed some individuals to fraudulently receive individual assistance was just a symptom. The hundreds of millions of dollars of 

trailers that FEMA bought and cannot use was just a symptom. 

The layered contracts where subcontractor upon subcontractor 

takes a cut while the men and women who do the actual work on 

the ground got paid less than $0.07 on the dollar was just a symptom. The rush to rent massive cruise ships that ultimately went 

largely unused by actual hurricane victims was just a symptom. 

We are going to talk about symptoms, but I want to talk about 

the diseases, too. The disease is an agency that for 5 years was 

weakened by poor leaders, leaders who were chosen based on who 

they knew and not what they knew. The disease is an agency that 

had only 36 employees in its procurement office while senior leadership at the Department of Homeland Security knew that the office needed as many as 125 to carry the workload. 
6

The disease is an agency that issues sole source contracts to politically connected companies instead of using competition to get 

the best deals and the best products. The disease is an agency that 

for years could not get the administration to fund a Hurricane Pam 

exercise and then only got part of it funded. 

In short, the disease is an administration that for years shortchanged FEMA and short-changed catastrophic planning. So while 

I want to talk about the things that happened after Katrina, I also 

want to talk about why they happened. I don’t want to do too much 

over the symptoms without looking to the disease. 

But, Mr. Chairman, before I yield back, I want to take a moment 

to thank the countless first responders, emergency managers, line 

level FEMA employees and volunteers on the ground who worked 

tirelessly and often on their own to help Katrina’s victims. 

I want to make clear that my comments should in no way be 

taken to disparage their efforts; that they performed heroically in 

the face of leadership vacuums at all levels in Washington is a testament to their dedication and professionalism. 

Some of these people made tough decisions during an impossibly 

tough time. We do not want to second guess tough decisions made 

on the ground, chest deep in water, with thousands in need and in 

the face of unprecedented devastation. 

Today we will hear some harsh truths about their leaders and 

the policies of the administration, but we should never forget or diminish their efforts. Nothing we say here today should stop them 

from making the tough decisions necessary when the next disaster 

happens. 

Mr. Chairman, I also want to say I was happy to hear you say 

that we will have additional hearings broadening the scope of this 

review. This is just the beginning, and I look forward to this hearing, and I yield back the balance of the time. 

Mr. MCCAUL. The ranking member is recognized. 

Mr. ETHERIDGE. I ask unanimous consent Ms. Jackson-Lee be 

able to sit in. She is a member of the full committee. 

Mr. MCCAUL. Without objection, so ordered. 

Let me remind members that under our committee rules, opening 

statements are limited to the Chair and ranking members. However, all members are entitled to submit written opening remarks 

for the record, and due to our time constraints today, we will need 

to move immediately to the testimony from our witnesses. 

Mr. MCCAUL. The chair now recognize Mr. Greg Kutz, Managing 

Director, Forensic Audits and Special Investigations for the GAO to 

testify. Mr. Kutz is accompanied by Special Agent John Ryan, Forensic Audits and Special Investigations, Government Accounting 

Office. 

Mr. KUTZ. 

STATEMENT OF GREGORY D. KUTZ 

Mr. KUTZ. Mr. Chairman and members of the subcommittee, 

thank you for the opportunity to discuss fraud and abuse related 

to Hurricanes Katrina and Rita. In February, I testified that weak 

or nonexistent controls left the government vulnerable to substantial fraud and abuse for individual assistance payments. At that 
7

hearing and subsequently, I frequently have been asked, how big 

is this problem? My testimony is intended to answer that question. The bottom line of my testimony today is that we estimate $1 billion of fraudulent and improper payments related to Hurricanes 

Katrina and Rita. 

My testimony has three parts: first, our estimate of fraud and 

abuse; second, examples of fraud and abuse; and third, usage of 

debit cards. 

First, we estimate that 16 percent or $1 billion of individual assistance payments were fraudulent and improper. Our estimate is 

based on a statistical sample of the 2.6 million payments made totaling $6.3 billion through February of 2006. A statistical sample 

means that we randomly selected 247 payments from this population of 2.6 million payments. 

We believe our estimate understates the magnitude of the problem because it includes only issues related to the application process. 

Out of 247 sample items, at least 39 represent invalid claims. 

Any cases that were not clearly invalid, we gave the benefit of the 

doubt. For each sample item, we used all of the audit and investigative tools that we had available. Our work included visiting 

damaged property addresses, speaking to the neighbors, visiting 

the post office and reviewing credit reports. 

The 39 sample failures related to the following four problems: 

first, use of invalid Social Security numbers; second, bogus damaged property addresses; third, invalid primary residence, meaning 

the individual did not live there at the time of the hurricane; and 

fourth, duplicate registrations. 

As my second point, I would like to highlight examples of the 

fraud and abuse starting with our own undercover operation. In 

prior testimony, I highlighted the $2,000 expedited assistance 

checks we received for applications using false identities and bogus 

property addresses. We have continued to test the system. The poster board to my left shows the $2,358 rental assistance 

payment that we received. The next poster board shows the bogus 

damaged property address that we used to receive this check. It 

also shows a letter from FEMA saying that their inspection showed 

damage to our home and personal property. However, the picture 

clearly shows this is a vacant lot. 

Other people were more creative than we were. The next poster 

board shows an example of this. As you can see, FEMA paid this 

fraudster from West Virginia for an address that was actually an 

above-ground cemetery in New Orleans. 

FEMA also paid millions of dollars to prisoners incarcerated at 

the times of Hurricane Katrina and Rita. Given that State and 

Federal Governments are already paying for these prisoners’ housing, the $4 million paid to them for expedited and rental assistance 

is clearly improper. 

The poster board shows one of the inmates who was willing to 

pose for this picture. We blurred the picture to protect his identity. 

Notice that he is holding in his hands his $2,000 expedited assistance check and his $2,358 rental assistance check. 

FEMA also made rental assistance payments to individuals staying at hotels paid for by FEMA. Similar to paying for the inmates 
8

twice, the government paid twice for these individuals’ lodging, 

first, by paying for their hotel and, second, by sending them rental 

assistance money. This happened because FEMA did not collect 

registration information for people staying at these hotels. Thus, 

FEMA dispersed rental assistance without first checking to see 

who was staying at the FEMA-paid hotels. 

Let me give you a few examples of what we found. One individual stayed at a vacation resort in Orlando from September 05 

to November of 05. The total cost to FEMA was $12,000 or up to 

$249 per night. This individual also received rental assistance of 

over $4,000. 

Another individual stayed at a hotel in Honolulu, Hawaii, from 

October to December of 05. The total cost to FEMA was $8,000 or 

up to $115 per night. This individual also received over $5,000 of 

rental assistance. Another indication of fraud for this case is that 

the individual appears to have actually lived in North Carolina at 

the time of the hurricane. 

Moving on to my third point, thousands of debit cards were 

handed out for disaster assistance at three relief centers in Texas. 

I have one of these debit cards in my hand that was used by FEMA 

for these hurricanes. The poster board also shows you an example 

of what these debit cards look like. 

Most of the debit card money was withdrawn at ATM machines, 

and thus we cannot tell you how it was spent. The remainder was 

used primarily for food, clothing and personal necessary items. 

However, we continue to find purchases that are clearly not essential to meet serious disaster needs. Examples include an all-inclusive vacation trip to a Caribbean beach resort in July—that is next 

month—of 2006; five New Orleans Saints 2006 season tickets; a 

$200 bottle of Dom Perignon champagne purchased at Hooters Restaurant; and Girls Gone Wild videos. 

In conclusion, the good news is that the vast majority of individual assistance money did go to qualified individuals. However, 

our testimony shows that a substantial number of individuals took 

advantage of the opportunity to commit fraud. Their victim, the 

American taxpayer. 

We believe that FEMA should have an effective fraud prevention 

program that protects all taxpayers at the same time that it provides assistance quickly to those that are truly in need. 

Mr. Chairman, this ends my statement. Special Agent Ryan and 

I are happy to answer your questions. 

[The statement of Mr. Kutz follows:]
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Mr. MCCAUL. Thank you, Mr. Kutz. 

The Chair now recognizes Ms. Donna Dannels, Acting Deputy Director, Office of Recovery for FEMA. 

STATEMENT OF DONNA M. DANNELS 

Ms. DANNELS. Good morning, Chairman McCaul, Ranking Member Etheridge, and committee members. My name is Donna Marie 

Dannels, and I am the acting deputy director of recovery at FEMA. 

I am here representing Secretary Chertoff and Director Paulison. 

It is an honor to appear before this subcommittee to discuss our 

individual assistance program and FEMA’s efforts to provide assistance to individuals and families affected by Hurricanes Katrina 

and Rita. 

Before I begin, may I request that my entire statement be added 

to the record? 

Mr. MCCAUL. Without objection, so ordered. 

Ms. DANNELS. FEMA appreciates the opportunity presented by 

this subcommittee to discuss the changes which FEMA has already 

implemented in delivering grant assistance. Like the suggestions of 

the Inspector General, our own reviews and those which came out 

of a similar hearing 4 months ago in the Senate, several issues 

have been raised which should be addressed to strengthen the individual assistance program. 

FEMA identified many of these issues soon after the implementation of expedited assistance and has already taken steps to correct them. While the Government Accountability Office is just releasing its final report on expedited assistance, the issues are not 

new. FEMA, as the program owner, is extremely concerned about 

the issues in providing expedited assistance which is why we have 

initiated and are currently carrying out a number of improvements. 

Katrina and Rita tested our programs and processes as never before. Yet these same programs and processes have provided nearly 

$7.3 billion to over 3 million victims of the 2005 hurricane season. 

Even as we prepare for the upcoming hurricane season and respond to the over 40 declared major disasters that have impacted 

the country since last September, FEMA continues to fund and facilitate an aggressive recovery strategy and work with our partners 

to rebuild the gulf coast. 

FEMA appreciates the efforts of the Inspector General and GAO 

to help us identify control weaknesses so that we can continue to 

improve delivery of our programs while remaining effective stewards of taxpayer funds. While we welcome having this dialog, it is 

important that we remember the situation we faced in the days immediately following landfall. 

In the immediate aftermath of Hurricane Katrina, hundreds of 

thousands of people were displaced from their homes. Family members were separated or missing, and an entire metropolitan area 

had suffered from one of the greatest natural disasters in the history of the United States. 

It was in this environment that FEMA was faced with providing 

assistance to individuals to meet their basic emergency needs for 

lodging, clothing, medication and fuel, while at the same time 

working with our Federal, tribal, State and local private sector 

partners to meet longer-term needs. 
48

In Katrina, we were presented with a population that had in a 

matter of hours lost nearly everything. People were being rescued 

from rooftops and showing up in shelters sometimes without even 

a shirt on their back and without identification of any kind. 

In Rita, we were presented with a geographic area that had just 

suffered through two massive hurricanes. 

The primary focus of GAO’s report is expedited assistance or EA. 

EA is an accelerated method of dispersing initial individual and 

household disaster assistance programs to meet immediate emergency needs. EA has previously only been used in a very limited 

number of disaster situations, primarily where the need for immediate assistance surpassed the capabilities to provide that assistance and when it was clear victims could not return to their homes 

immediately following the disaster. 

One of FEMA’s top priorities is the quick and efficient delivery 

of assistance to as many eligible victims as possible. However, in 

meeting that goal, we realize that some individuals may receive assistance in error or, unfortunately, because they have intentionally 

tried to defraud the American people. 

As part of our recruitment process, FEMA and in this case the 

Inspector General review grant awards. FEMA makes every effort 

to recover overpayments, and if fraud is suspected, FEMA refers 

the case to the appropriate authorities for prosecution. 

In reviewing the GAO report on EA, it is significant to note that 

many of GAO’s findings were already uncovered by FEMA’s internal review and our review at the Office of Inspector General. 

FEMA in fact has gone to great lengths to ensure that it is a good 

steward of the taxpayers’ dollars by deterring fraud while still allowing applicants who are in serious need of assistance to receive 

it quickly and appropriately. That is the balance we have to strike. 

Our efforts of proper stewardship of public funds continue this 

day. FEMA has already made significant improvements in our delivery processes to prevent fraud, waste and abuse and is well into 

the recruitment phase for the improper payments made to Hurricanes Katrina and Rita victims. Because of the immediacy of the 

crisis caused by Katrina and Rita, time was of the essence in getting emergency assistance to victims. For all other payments, however, FEMA took more time to ensure that eligibility requirements 

were made, including verifying occupancy of the damaged dwelling 

at the time of the disaster. Any additional IHP assistance was then 

provided only after an in-person inspection was performed and an 

actual address or the applicant’s occupancy was verified by a data 

verification contractor and additional documents were verified by 

FEMA and signed by the applicant. 

Even though these measures were intended to minimize overpayments due to fraud and errors, we are aware they were not successful in every case. We continue to evaluate the systems and 

processes put in place for the very first time in this unprecedented 

event in order to make further improvements. 

The GAO report references isolated incidents where EA debit 

cards were used to purchase goods and services that did not appear 

to meet serious disaster-related needs. While we are similarly concerned by the inappropriate use of these funds, these purchases 

represent a fraction of the overall assistance provided. 
49

These questionable purchases in GAO’s review total just under 

$8,000 or two one-hundredths of a percent of nearly $39 million in 

debit card transactions. 

Through effective planning, enhanced internal controls and a 

more systematic use of technology, FEMA can limit waste, fraud 

and abuse. FEMA recognizes that even with the controls in place, 

there is room for improvement. 

During the 2005 hurricane season, FEMA was proactively implementing more stringent controls concerning fraud and identity 

verification. With these new processes in place, we still need to 

take into consideration those families and individuals that may not 

have traditional means of identity and occupancy verification. For 

those applicants that required additional review and resolution, 

there were significant delays in FEMA providing any assistance. 

Such delays of course can seriously impact victims who have lost 

all possessions. 

FEMA’s challenge is again to find the appropriate balance of providing timely assistance while taking the necessary precautions to 

ensure against fraud, waste and abuse. 

We appreciate the time and the effort that GAO staff has put 

into this report. The investigative research they conducted and the 

resulting suggestions not only serve as a guide to us to continue 

to improve our processes but have also helped to highlight the 

value and types of assistance FEMA provides to applicants following disasters. 

FEMA remains committed to ensuring fiscal integrity and will do 

all we can to ensure the effective and efficient use of the taxpayers’ 

dollars and protect against fraud while performing our agency’s 

critical missions to our citizens at their time of need. Thank you 

again for opportunity to appear. I am prepared to answer any questions you might have. 

[The statement of Ms. Dannels follows:]

PREPARED STATEMENT OF DONNA M. DANNELS

Good morning Chairman McCaul, Ranking Member Etherege, and Committee 

Members. 

My name is Donna Marie Dannels, and I am the Acting Deputy Director of Recovery at FEMA. I am here representing Secretary Chertoff and Director Paulison. It 

is an honor to appear before this subcommittee to discuss our individual assistance 

program and FEMA’s efforts to provide assistance to individuals and families affected by Hurricanes Katrina and Rita. 

FEMA appreciates the opportunity presented by this subcommittee to discuss the 

changes which FEMA has already implemented in delivering grant assistance. Like 

the suggestions of the Inspector General, our own reviews, and those which came 

out of a similar hearing four months ago in the Senate, several issues have been 

raised which should be addressed to strengthen the Individual Assistance program. 

FEMA identified many of these issues soon after the implementation of expedited 

assistance, and has already taken steps to correct them. While the Government Accountability Office (GAO) is just releasing its final report on Expedited Assistance, 

the issues are not new. FEMA, as the program owner, is extremely concerned about 

the issues in providing expedited assistance, which is why we have initiated and are 

currently carrying out a number of improvements. These include the implementation of identity verification for phone registrations, a reduction of the dollar amount 

of expedited assistance, and an elimination of the use of debit cards. 

Katrina and Rita tested our programs and processes as never before. Yet, these 

same programs and processes have provided nearly $7.3 billion to over 3 million victims of the 2005 hurricane season. Even as we prepare for the upcoming hurricane 

season and respond to the over 40 declared major disasters that have impacted the 
50

country since last September, FEMA continues to fund and facilitate an aggressive 

recovery strategy and work with our partners to rebuild the Gulf Coast. 

FEMA consistently strives to assess and improve its performance and delivery of 

assistance in disasters. We appreciate the efforts of the Inspector General and GAO 

to help us identify control weaknesses, so that we can continue to improve delivery 

of our programs, while remaining effective stewards of taxpayer funds. 

While we welcome having this dialogue it is important that we remember the situation we faced in the days immediately following landfall. In the immediate aftermath of Hurricane Katrina, hundreds of thousands of people were displaced from 

their homes, family members were separated or missing and an entire metropolitan 

area had suffered from one of the greatest natural disasters in the history of the 

United States. 

It was in this environment that FEMA was faced with providing assistance to individuals to meet their basic emergency needs for lodging, clothing, medication, and 

fuel, while at the same time, working with our Federal, tribal, State, local and private sector partners to meet longer-term needs. In Katrina, we were presented with 

a population that had, in a matter of hours, lost nearly everything. People were 

being rescued from rooftops and showing up in congregate shelters, sometimes without even a shirt on their back, and without identification of any kind. In Rita, we 

were presented with a geographic area that had just suffered through two massive 

hurricanes that overwhelmed our nation’s disaster response system. 

As was the case with these hurricanes, when the magnitude of a disaster is so 

severe that normal recovery processes cannot immediately get underway, FEMA can 

activate a policy under the Individual and Households Program (IHP) to provide 

emergency assistance to accelerate the disbursement of disaster assistance for immediate sheltering and emergency needs. 

Expedited assistance provided under the IHP is made available only for a short 

period of time following the disaster to meet immediate needs. This emergency assistance allows for a pre-inspection disbursement of funds to an individual household, based on information gathered from the applicant during the registration process that meets the following criteria: 

• the registration must be for the primary residence only; 

• the registrant must be displaced due to the disaster; and 

• the registrant is in need of shelter. 

If these criteria are met, emergency assistance is provided when the magnitude 

of the event demands it. It is normally not implemented under the Individual and 

Households Program. Hurricanes Katrina and Rita, however, were catastrophic 

events that prompted FEMA to authorize $2,000 in assistance to eligible households 

to be used for emergency purchases until normal recovery programs became operable. This amount of assistance was authorized for all eligible households that met 

the criteria within the declared states where EA was implemented. For Hurricane 

Katrina, EA was activated in the States of Louisiana on September 7, 2005, Mississippi on September 8, 2005, and Alabama on September 9, 2005. It was deactivated in all states on September 26, 2005. As of June 9, 2006, 47 percent of Hurricane Katrina registered households received EA. Following Hurricane Rita, EA was 

activated in the States of Louisiana and Texas on September 27, 2005, and deactivated on October 21, 2005. As of June 9, 2006, 42 percent of the registered Hurricane Rita households received EA. Applicants receiving EA in Hurricane Katrina 

were ineligible for EA in Hurricane Rita. In total, 45 percent of the Hurricane 

Katrina and Rita applicants received expedited assistance. 

EA is an accelerated method of dispersing initial IHP disaster assistance to meet 

immediate emergency needs. When an individual or household receives EA funding, 

it counts against the maximum IHP cap of $26,200 that they may receive. 

EA has previously only been used in a very limited number of disaster situations, 

where the need for immediate assistance surpassed the in-place and surge capabilities to provide assistance, and when it was clear victims could not return to their 

homes immediately following the disaster. It was first used in 1992 in response to 

Hurricane Andrew and was also implemented during the 1994 Northridge earthquake, which, prior to the hurricanes of 2004, had been FEMA’s largest disaster in 

terms of the number of applicants. 

One of FEMA’s top priorities is the quick and efficient delivery of assistance to 

as many eligible victims as possible. However, in meeting that goal, we realize that 

some individuals may receive assistance in error, or unfortunately, because they 

have intentionally tried to defraud the American people. As a part of our 

‘‘recoupment’’ process, FEMA, and in this case, the Inspector General review grants 

awards. FEMA makes every effort to recover overpayments and if fraud is suspected 

FEMA refers the case to the appropriate authorities for prosecution. 
51

At this point, excluding prosecutions carried out by the Department of Justice, 

FEMA has determined that 6,110 Katrina and Rita applications are undergoing 

recoupment actions, although not all of these are based on fraud. Additionally there 

are another nearly 40,000 cases under review for potential recoupment. In reviewing 

the GAO report on EA, it is significant to note that many of GAO’s findings were 

already uncovered by FEMA’s internal review and our review with the Office of Inspector General. FEMA, in fact, has gone to great lengths to ensure that it is a good 

steward of the taxpayers’ dollar by deterring fraud, while still allowing applicants 

who are in serious need of assistance to receive it quickly and appropriately. Our 

efforts at proper stewardship of public funds continue to this day. FEMA has already made significant improvements in our delivery processes to prevent fraud, 

waste and abuse and is well into the recoupment phase for the improper payments 

made to Hurricanes Katrina and Rita victims. 

In addition, to put GAO’s report on Expedited Assistance into context, the committee must understand that GAO utilized a non-random sample of 248 registrations from applicants with duplicate registrations and those that received multiple 

payments. Since the vast majority of our applicants were not duplicates, GAO’s sample is not representative of the implementation of the IHP or the EA program. It 

is also worth noting that for Hurricane Katrina and Rita, FEMA took more than 

2.5 million registrations; therefore, GAO’s sample of 248 is only .01 percent of the 

total applications received. Further, what may appear to GAO as duplicative payments under IHP, may in fact be authorized payments under the ‘‘separated households’’ policy for Hurricanes Katrina and Rita. Because of the widespread dispersion 

of individuals and families across many states, FEMA instituted the separated 

household policy where more than one member of the household could receive expedited and or rental assistance to meet their needs while they were separated. In our 

view, this was a more humane way of treating these victims and ensuring that individuals who had lost everything were not penalized simply because they could not 

be geographically situated with their immediate family members. 

The GAO report indicates that all applicants eligible for the $2,000 in EA are also 

eligible for up to $26,200 under IHP. GAO describes expedited assistance as a ‘‘gateway to further IHP payments’’. This is an overstatement. 

Applicants for EA had to provide answers to specific questions concerning their 

disaster-related needs, as well as state that their damaged residence was located in 

the disaster area and damaged by the disasters in accordance with State and Federal laws. Because of the immediacy of the crisis caused by Katrina and Rita, time 

was of the essence in getting emergency assistance to the victims. For all other payments, however, including the $2,358 transitional housing payments, geospatial payments, and traditional IHP payments, FEMA took more time to ensure that eligibility requirements were met including verifying occupancy of the damaged dwelling 

at the time of the disaster. Any additional IHP assistance was then provided only 

after an in-person inspection was performed at an actual address or the applicant’s 

occupancy was verified by a data verification contractor, and additional documents 

were verified by FEMA and signed by the applicant. Even though these measures 

were intended to minimize overpayment due to fraud and errors, we are aware they 

were not successful in every case. We continue to evaluate the systems and processes put in place for the first time in this unprecedented event in order to make 

further improvements. 

The GAO report references ‘‘isolated incidents’’ where EA debit cards were used 

to purchase goods and services that did not appear to meet serious disaster-related 

needs. While we are similarly concerned by the inappropriate use of these funds, 

these purchases represent a fraction of the overall assistance provided. These questionable purchases in the GAO review total just under $8,000, or 0.02%, of nearly 

$39 million in transactions processed by one bank. These purchases represent questionable judgment on the part of the recipient; however, by highlighting those limited expenditures, GAO suggests flaws in FEMA’s controls in providing expedited 

assistance. In fact, FEMA continues to develop guidance and control measures to 

prevent the inappropriate use of all of its funds, including expedited assistance. Efforts to completely prevent misuse should be properly balanced against the need to 

provided assistance to the truly needy. 

Through effective planning, enhanced internal controls and a more systematic use 

of technology, FEMA can limit waste, fraud, and abuse. FEMA recognizes that even 

with the controls in place, there is room for improvement. During the 2005 hurricane season, FEMA was proactively implementing more stringent controls concerning fraud and identity verification, including: 

• in October 2005, launching a new internet registration application that disallows any duplicate registrations; 
52

• in February 2006, adding identity proofing to the call center registration application that will insure that all IHP 

registrations are subjected to the same criteria as the online application. This includes social security number verification. 

• amending systems to ensure no automated payments are sent to applicants 

who failed the identity proofing process; 

• sending all applications taken over the phone, from August 2005 until February 2006 to FEMA’s data contractor for identity proofing and reviewing those 

that failed for possible recoupment or referral to the Office of the Inspector General; 

• data-marking any applications in NEMIS that fail identity proofing so they 

may be flagged for review and denied automated payment; 

• introducing real-time interaction between the FEMA service representative 

and the applicant during registration to ensure that the data are entered correctly before accepting the application. 

With these new processes in place, we still need to take into consideration those 

families and individuals that may not have traditional means of identity and occupancy verification. For those registrations sent to a ‘‘duplicate investigation queue’’ 

for additional review and resolution, there were significant delays in FEMA providing expedited assistance. Such delays, of course, can seriously impact victims 

who have lost all possessions. FEMA strives to find the appropriate balance of providing timely assistance while taking the necessary precautions to ensure against 

fraud, waste, and abuse. 

Additional changes were and continue to be made to the NEMIS software, that 

include: 

• not allowing any registration to be accepted when a registrant has the same 

social security number as another registrant in the same disaster, and 

• in addition to identity verification, verifying ownership and occupancy 

through FEMA’s data during the registration process. 

We appreciate the time and effort the GAO staff has put into this report. The investigative research they have conducted and the resulting suggestions not only 

serves as a guide for us to continue to improve our processes, but have also helped 

to highlight the value and the types of assistance FEMA provides to applicants following disasters. FEMA remains committed to ensuring fiscal integrity and will do 

all we can to ensure the effective and efficient use of the taxpayer’s dollar and protect against fraud, while performing our agency’s critical missions to our citizens at 

their time of need. 

Thank you again for the opportunity to appear before you. I am prepared to answer any questions you may have.

Mr. MCCAUL. Thank you, Ms. Dannels. 

The chair now recognizes Mr. Joseph Becker, senior vice president for preparedness and response, American Red Cross. 

STATEMENT OF JOSEPH BECKER 

Mr. BECKER. My name is Joe Becker, and I lead the American 

Red Cross’s disaster relief. I thank you for the invitation to be 

here. I appreciate the chance to share with you some of our experience of Hurricane Katrina. 

I was asked to speak on three topics: to provide an overview of 

what we do for victims of disasters; to share what we did during 

Hurricane Katrina, what problems we encountered and what we 

learned from that experience; and to discuss what improvements 

we have put in place going forward. 

My written testimony submitted for the record outlines these topics in detail. I will speak to each of these three briefly now. 

What does the Red Cross do in times of disaster? We serve victims of disaster every day, about 70,000 a year, from a house fire 

to today and yesterday’s flooding, from Alberto to the largest disasters. We meet people’s immediate emergency needs. We shelter, 

that is giving people a place to stay out of danger. We feed. We 

partner with a lot of other organizations to feed people with fixed 
53

sites, and we drive meals through neighborhoods. We distribute. 

We give out the supplies that people need; water, toiletries, things 

to clean up their houses. We provide a small amount of financial 

assistance to help people with things, with needs that are better 

met with cash instead of things, that next set of clothes or a pair 

of shoes, gas for the car. We provide mental health counseling, and 

we help families with information to unite them with lost family 

members. 

Your focus today is on one part of what I just described, our providing financial assistance. We have provided this assistance in one 

form or another since our earliest days. Mr. Etheridge spoke about 

the Florida storms, the four storms that hit Florida in 2004. That 

was the largest natural disaster the Red Cross had ever responded 

to. We fed millions, sheltered hundreds of thousands, but we gave 

that financial assistance to about 73,000 families, one at a time, 

with a volunteer typically in a high school gym serving the family. 

After the storms of 2004, we then tested our systems to a capacity of a 100,000 families. We wanted to make sure we were ready 

for something even bigger. And then Katrina hit. In the days after 

the storm, we knew we didn’t have 73,000; we knew we didn’t have 

100,000. Our earliest data said that we could have a million families that would require Red Cross assistance. We knew our current 

systems would not work. If we had volunteers in high school gyms 

providing financial assistance, we would be there for months trying 

to meet immediate emergency needs. So we created new ways to 

provide that financial assistance as we went. 

We created call centers for financial assistance. We used a software company. When the client called the call center, they were 

asked a series of questions that the call agent new the answer to: 

Where did you live before this? What’s your rent payment? And if 

they answered the questions correctly, then we knew that they 

were who they said they were. 

We used Western Union. We thought, who could move money 

around the country on a scale like nobody else, and we worked with 

them to partner where people would call the call center and then 

go to their local Western Union with an ID number to receive 

funds. 

We used a lot of other methods. We used Wal-Mart gift cards, 

preloaded debit cards. But the system that we were putting that 

data into was a common system to keep track of who we gave what 

to. 

We had a tough choice in those earliest days of the disaster: Do 

we delay helping people until we can build entirely new ways to 

do this to a scale where we could take care of everybody, or do we 

proceed with what we had and serve people and build it as we 

went? 

We chose to serve quickly. Yes, we had long lines. We had very 

long waits on the phone. Our biggest problem, frankly, was that 

our IT system couldn’t handle the volume that we were dealing 

with. After about a 100,000 or 120,000 cases, our IT system started 

to bog down. At that point, we knew that people could game our 

system. They could go to more than one place to receive financial 

assistance, and they might be able to get it. But we knew that we 
54

could find out who they were. It might take us weeks, might take 

us months, but we would find out who they were. 

Mr. BECKER. We ended up serving about 1.4 million families with financial assistance at an average of about $1,000 a family. It cost 

us about $1.5 billion. 

Before Katrina, we had developed good technology, but Katrina 

was about 20 times the number of families that we had served in 

our biggest disaster. We failed to think big enough with our systems. As I said, we had a tension at the beginning. Do we wait 

until the systems are built, or do we move quickly? And we decided 

to move quickly. 

I mentioned that people could game the system if they figured 

out that there was a lag time between when we gave them assistance and when we entered their case into our data files, but we 

also knew that we could find out who they were, and that is what 

we have done since last fall. 

We have had a team of paralegals and investigators dedicated to 

uncovering fraud in our financial assistance. They have gone 

through case by case, and where appropriate, they worked with law 

enforcement to prosecute the folks who did wrong. They look at all 

the allegations. They have also studied the data. The addresses 

that we served, all the different ways you could give your name to 

the Red Cross. To quantify it, we have about 7,100 cases that 

might be fraud out of our 1.4 million families we served. If they 

all end up being fraud, that is about $9.5 million. As of May, we 

have received back about $2.3 million from people who took advantage of us, and where necessary, we are referring those matters to 

law enforcement for prosecution, and we have had great cooperation from law enforcement to prosecute even though the dollars involved are below their thresholds to prosecute. 

So what we have put in place going forward, we have a long list 

of projects completed or nearing completion, covering a lot of aspects of how we respond to disasters. But to this specific issue, we 

have rebuilt our IT systems that are now able to handle 2 million 

families. A year from now, it may be able to handle 10 million families. And we will know if we have served you before we talk to you. 

We have over a million debit cards in stock and ready to go, and 

we have call centers ready to go that can handle a 100,000 families 

a day or serve a million families over 10 days. 

And we are moving very quickly to have all of our chapters adopt 

this technology. By July 1, we will have almost all of our chapters 

there. We only anticipate using these call centers in the very catastrophic disasters. We still want our primary way of serving to be 

a volunteer in a community building, not just bringing money to a 

client but all the other services, the mental health services, our 

nurses with health services. We bring other nonprofits together to 

make sure we are all there offering our assistance to the client. 

We will not be perfect this fall. The system will continue to develop, but we will have a much greater capacity to serve, and we 

will have even higher level of controls around the service. Unscrupulous people will always take advantage of disasters. Our job is 

to have the best systems in place and to keep a vigilant eye out 

for those who might do wrong. We learned a lot last fall. We saw 

again that our volunteers can do amazing work. This year we are 
55

ready to support them with systems on a scale that Katrina taught 

us that we need. We don’t want to fail to think big enough again. 

Thank you very much. 

[The statement of Mr. Becker follows:]

PREPARED STATEMENT OF JOSEPH C. BECKER

Good morning Mr. Chairman, Members and staff of the Committee. The topic of 

this hearing—waste, fraud and abuse—is a very serious topic for the American Red 

Cross and for those who support our charitable mission. We appreciate the opportunity to share our story with you this morning. 

It is appropriate to begin by giving you some background of our individual assistance efforts over the last years, including the recent evolution of our client assistance program. 

After that, I can speak to our most recent experiences in the 2004 Florida hurricanes and the important lessons that guide our improvements after the 2005 season. 

I will conclude by sharing the latest news on the controls and procedures that we 

have already implemented that will assist us in guarding against waste, fraud and 

abuse as we move deeper into the 2006 hurricane season. 

But before I start, on behalf of my colleagues and friends at the American Red 

Cross, allow me to begin by saying this: 

The American Red Cross is ready for the 2006 hurricane season. Over the past 

six months, we have reviewed the things we did well in the 2004 and 2005 seasons 

and improved upon those successes. We have also taken a hard look at those areas 

where we must improve our response and we’ve addressed our shortcomings. 

The American people can continue to rely upon the Red Cross to deliver our promise of neighbor helping neighbor. Our legendary corps of volunteers is ready. We are 

working closer today with our colleagues in the nonprofit, charitable and faith-based 

communities to improve our reach. We are better coordinating with Federal, state 

and local officials. And, we are pre-positioning more supplies and building greater 

capacity in key states before the storms hit. 

I am very pleased to share with you today our plans for the coming season as 

we address our goals. For as we all know, the next disaster may not show up with 

advance warning on our weather radar screens. We do not simply wait for June 1 

to be ready for disaster response. For the American Red Cross, we respond each day, 

every day.

The Red Cross and Individual Assistance: A Background 

First and foremost, it is important to understand the elements of Red Cross assistance and how they work together to serve our clients as well as integrate with 

the assistance of state and federal programs. Our first priority is to ensure that 

those affected by disaster have a safe shelter and are provided with the basic necessities of life. In addition to shelter, we strive to provide first aid and nursing support, food, toiletries, bedding and other essential items of health and welfare. 

The next priority is to then assist families to take the first steps toward recovery. 

This is the purpose and concern that individual client assistance is designed to 

serve. It has long been the case that while shelter, feeding and the distribution of 

critical items are sufficient to stabilize individuals and families, it is not sufficient 

to meet all short term emergency needs necessary for disaster victims to begin their 

individual road to recovery. Critical items of assistance such as resources for food, 

changes of clothing and bedding bridge the gap between mass care activities and 

the receipt of state and federal recovery assistance. This allows a family a modicum 

of independence and a flexible resource for the types of essential items mentioned 

above. Ultimately, within the framework of disaster assistance provided by other 

agencies, as well as state and federal programs, individual client assistance helps 

bridge the gap between mass care activities and loans, temporary housing, and 

other needs assistance. 

To properly understand the challenges and successes of individual client assistance, it may be necessary to review a bit of the background. 

Individual assistance to disaster victims is one of the cornerstones of the American Red Cross Disaster Services program, beginning with Clara Barton at the 

Michigan Forest Fires of 1881. Throughout history, individual assistance has 

evolved to meet the ever changing needs of those affected by disaster events. The 

fundamental drivers of change in this program have been consistent over time and 

include the needs of victims, the existence of or changes to state and federal programs, and the evolving nature of disaster (such as terrorism and mass casualty 

events). However, certain principles have remained consistent—that disaster relief 

is based on verified need; that such assistance should mitigate suffering; that simi-
56

lar needs should be met with similar resources; and that clients are ultimately responsible for their own recovery. Red Cross programs are fundamentally based on 

these principles. 

Historically, Red Cross individual assistance consisted of items to repair homes, 

furniture, clothes, etc. Prior to the advent of governmental programs, the Red Cross 

often dealt with the entire range of response and recovery needs—food, clothing, and 

other essential items to home repair, occupational supplies, medical needs, and income-related support such as cloth, sewing machines, seed, and livestock. 

The ongoing need for flexibility to adapt continues. More recently, the Oklahoma 

City Bombing and Terrorist Attacks of 9/11 found victim’s verified needs related to 

loss of loved ones and economic survival pending receipt of benefits, not loss of their 

personal possessions. Individual assistance was quickly adjusted to ensure survivors 

emotional needs were met with extensive mental health support and continued financial assistance, in order to enable them to maintain their homes pending receipt 

of government and personal assistance. 

While individual needs change over the years or by the type of disaster, standardization of assistance to meet the verified basic needs of disaster victims remains 

constant. In essence, similar needs are addressed with similar assistance. This application of the intent of the policy and charter are applied daily, disaster by disaster. Assistance has continually been updated to avoid duplication as government 

assistance and assistance from partner agencies and organizations has increased. In 

fact, referral to the programs of other organizations and assistance in connecting 

with these providers is a fundamental part of the Red Cross program. 

Assistance has been provided in multiple ways, depending on what is needed and 

available in the area of the disaster event. Individual assistance for essential items 

was originally provided in cash or a credit with a store. This was followed by checks, 

and then by disbursing orders (which are similar to purchase orders). Today, financial assistance is most often provided with debit cards. Other vehicles such as gift 

cards, disbursing orders, and checks, are used as back up mechanisms or when 

power is out for extensive periods of time. How the individual assistance is actually 

provided is based on the infrastructure in the disaster area and the conditions of 

merchants and stores. If electricity is not available, debit cards are not a viable option. 

To enhance the dignity of our clients, reduce administrative costs occurred by the 

organization, and provide for greater oversight, debit cards are now used as the primary form of assiststance. These cards are easy to use, can be replenished, carry 

no stigma, and make disaster clients indistinguishable from other consumers. These 

cards are intended for food, clothing, bedding and other essential items, and they 

allow clients to take responsibility for their recovery. 

While our fundamental commitment to meeting the emergency needs of disaster 

victims remains constant, the range of events to which we respond demands that 

we have more than a single model of service delivery. Given that our organization 

has now experienced the differing demands of terrorist / mass casualty type events 

(9/11) as well as catastrophic natural disasters (Katrina) and is currently challenged 

by the possibility of pandemic disaster (Avian Flu), it is clear that a single service 

delivery model or program is no longer sufficient to meet the demands and risks 

of our current environment. A large part of the Red Cross success in Katrina was 

the ability to adapt and adjust our assistance to meet individual and basic needs 

immediately. Moving forward, the American Red Cross will continue to develop a 

small number of standard models for use in our most likely scenarios, and will prepare ourselves to execute the model or models most appropriate to the event.

Katrina: Lessons Learned 

Mr. Chairman, the Red Cross provided aid and comfort to over 1.4 million families 

after the storms of last year. 

Thanks to the generosity of the American people, we provided an average 

$1019.00 per family in emergency financial assistance. This is not money provided 

to replace all that was lost—but to address urgent need. 

We provided shelter to nearly 500,000 hurricane survivors (3.4 million shelter 

nights) in nearly 1,100 shelters in 27 states and the District of Columbia. And we 

served 68 million meals and snacks. 

A Herculean challenge was getting financial assistance as quickly as possible to 

an unprecedented number of people who left their homes with little or nothing and 

in many cases would have no homes to which they could return. As stated previously, the largest number of families to which the Red Cross had ever provided 

assistance was approximately 73,000—those served during the four back-to-back 

hurricanes in 2004. By contrast, demographic and census information from the area 

affected by Katrina led us to estimate that more than one million families, most of 
57

whom were bereft of all of their traditional social support systems, would need financial assistance. 

The challenge of raising enough money to provide assistance to an estimated one 

million families was, frankly, daunting. Initial disaster assessments and demographic information led us to estimate that, with average assistance of about $1,000 

per family, we were facing financial assistance expenses of approximately $1 billion. 

We had to make the difficult determination whether we would—or could—provide 

this magnitude of financial assistance. Red Cross leadership, together with our 

Board of Governors, rapidly decided that the tremendous needs of the evacuees demanded that we act. Soon, it became clear that dollars were going out at a fast rate. 

We had to either suspend our emergency financial assistance or borrow funds. We 

chose to borrow the money—over $300 million—with the confidence that the American public would see our efforts as worthy and support the work we were doing. 

This has proven to be the case. 

The mechanisms for getting the financial assistance to the people who needed it 

without delay posed an additional set of challenges. During traditional responses, 

trained American Red Cross volunteers and staff, conduct disaster damage assessments, meet with survivors to determine their needs and provide assistance accordingly. We often do home visits to confirm damage and determine necessary assistance. This type of detailed assessment would clearly be impossible for many months 

after Katrina and Rita. We had to choose between two options: we could attempt 

to verify damage house by house and thereby delay assistance to those who so urgently needed it, or we could utilize the best information available regarding damaged areas and speed the provision of our assistance. By choosing the latter option, 

we knew that we ran the risk of putting assistance in the hands of potentially unscrupulous individuals not affected by the hurricanes; we concluded that it was a 

reasonable business risk and mitigated the risks as possible. We considered the 

need to help the vast numbers of families in desperate and legitimate need without 

delay. Using satellite images and fly-over photographs, we determined specific ZIP 

codes where the devastation was obvious and began to disburse the maximum assistance to these families based on family size. It was our goal to get money in the 

hands of survivors as quickly as possible. The fact that fraudulent claims for assistance could occur was to be addressed with an aggressive ‘‘no tolerance’’ fraud enforcement policy which we discussed with federal and state law enforcement authorities. 

Another hurdle was the logistics of getting cash into the hands of so many people 

spread across so many states. Methods used in the past would not accommodate the 

unique aspects of this epic disaster. We set up an 800 number and call centers 

around the country and partnered with Western Union to provide immediate cash 

assistance. A critical moment came when we realized that it could take days and 

weeks to bring these systems up to a scale that could accommodate the number of 

families in need of assistance. That left us with another difficult choice: delay assistance to every disaster victim until we had the capacity to effectively serve them all, 

or proceed with the capacity we had, getting funds into the hands of thousands of 

families right away and working diligently to add to those numbers as quickly as 

we could scale up our systems. We chose to help those whom we could without 

delay, while striving to serve all who needed us. We sincerely regret that there were 

long lines and a lot of busy signals, but we believe that we made the right choice. 

In the six weeks following landfall, the Red Cross put over one billion donated dollars into the hands of families who desperately needed it without delay. 

As part of our lessons learned process, we are striving to ensure that we will 

eliminate long lines and mitigate fraud and abuse moving forward. Our Client Assistance System (CAS) software has been modified to provide a single system of 

record to support the deliver of assistance to those in need. Enhancements to CAS 

and an upgraded information technology infrastructure will allow the Red Cross to 

speed emergency assistance to one million affected families within a 10-day period, 

with the capacity to process a total of two million cases over the long term. We have 

pre-stocked one million cash enabled client assistance cards (CAC) so that the cards 

can be efficiently distributed to families displaced by large-scale disasters. 

Soon after Katrina’s landfall, the Red Cross expanded an existing Special Transient Housing Accommodations Program, in cooperation with the Federal Emergency Management Agency (FEMA) and Corporate Lodging Consultants (CLC). This 

program covered the cost of storm victims requiring emergency assistance staying 

in motels or hotels where other accommodations were not available. Over its duration, this program housed more than 700,000 evacuees in every state in the nation. 

This innovation alone provided critical and immediate shelter in addition to the 

hundreds of traditional congregate care shelters established across the nation. As 
58

agreed at the inception of the program, the Red Cross transferred administration 

of the program to FEMA on October 24, 2005. 

The American public is the client to whom the Red Cross ultimately delivers services. The monumental challenge of providing immediate relief and initial recovery 

assistance in the wake of the devastating 2005 hurricane season tested the spirit, 

determination and cooperation of America. In the face of incredible demands, the 

American Red Cross and the American people rose to the occasion and provided care 

and comfort to millions of people with nowhere else to turn.

Fraud, Waste and Abuse 

The Red Cross treats its obligation to deter and detect fraud or abuse with the 

utmost seriousness and where appropriate seeks prosecution of fraudulent activity 

to the fullest extent of the law. To stop those that attempt to cheat the system, the 

Red Cross participates in the Department of Justice’s Hurricane Katrina Fraud 

Task Force, which also includes members from the FBI, the United States Secret 

Service, the Federal Trade Commission, the Postal Inspector’s Office, and the Executive Office of the United States Attorneys, among others. The Red Cross is assisting in hundreds of investigations now in progress. Every resource, whether in-kind, 

financial or people, is precious to the Red Cross and we are taking every measure 

to aggressively pursue any illegal activity. To date, there have been 76 indictments 

and 55 convictions. 

At this time, we are investigating 7,109 cases of suspected and actual fraud. 

These represent a combination of cases turned over to law enforcement and cases 

being investigated internally. We estimate the potential of some $9.5 million in 

cases stemming from this fraud. While we recognize that these numbers are very 

high, it is important that we put them into context. While no misuse or waste of 

donated dollars can be tolerated, fraudulent activity will likely be less than one-half 

of one percent (0.5%) of total operational costs. It is important, however, that this 

is put in the appropriate context. To add further context, a 2005 report by the Association of Certified Fraud Examiners entitled ‘‘National Occupational Fraud and 

Abuse’’ cited the industry fraud average at 6% of revenue collected. 

Additionally, there were instances where individuals or families received duplicative assistance that was neither fraud nor abuse on behalf of our clients, but rather 

a simple oversight or human error. I am pleased to report to this Committee today 

that as of May 1, 2006, the American Red Cross had collected $2.3 million in returned assistance from clients who had received duplicate payments.

American Red Cross: Ready for 2006

To better prepare for the coming season, and to mitigate fraud, waste and abuse, 

we have undertaken a long list of projects. For this hurricane season, we have created: • Client Assistance System (CAS) software and reporting enhancements to provide a single system of record to support the delivery of assistance to those in 

need. Enhancements to CAS and an upgraded information technology infrastructure will allow the Red Cross to speed emergency assistance to one million 

affected families within a 10-day period, with the capacity to process a total of 

two million cases over the long term. 

• Cash-enabled client assistance cards (CAC), which can be used as a vehicle 

for providing emergency assistance. One million National Headquarters CAC 

cards will be pre-stocked so that the cards can be efficiently distributed to families displaced by large-scale disasters. 

• Emergency assistance call centers that can be used during large-scale events 

to handle a capacity of one million cases in 10 days, or 100,000 completed cases 

per day. 

• A web-based shelter management application based on the Coordinated Assistance Network (CAN), developed in conjunction with FEMA and the Department of Homeland Security. When fully implemented, we will have the ability 

to track shelter inventory, facility survey data, and population counts of the 

shelter population nationwide. 

• Fourteen dedicated Red Cross staff to coordinate closely with state emergency 

management agencies in high-risk areas, including the states of Louisiana, California, Mississippi, Alabama, Florida, Tennessee, Georgia, Maryland, Virginia, 

North Carolina, South Carolina, New York, Arkansas, and Texas. 

• Increased stockpiling of supplies (food, cots, blankets, comfort kits, etc.) in key 

risk states to enable the Red Cross to serve one million meals a day and to shelter 500,000 people per day in the initial days after a disaster strikes. 

• Improvements to the Disaster Services Human Resources (DSHR) system to 

track in real-time staff assigned to relief operations and strengthen the process 

used for registering spontaneous volunteers. The DSHR system software is also 
59

being modified to accommodate DSHR ID Smart Card technology. These improvements will provide better information about available resources. 

• Addition of six on-staff disaster relief operation directors to provide leadership 

to major relief operations as well as mentor and coach chapter and multi-chapter relief operation directors. This will improve the skill sets of administrators 

and managers in the DSHR system. 

• Development of national partnerships that chapters can implement on a local 

level to engage underserved groups in their communities. 

• Delivery of ‘‘Introduction to Disaster’’ training to over 400 members across six 

NAACP conferences. 

• A ‘‘Disaster Welfare Information’’ system for chapters to provide ‘‘safe and 

well’’ status information to the families and loved ones of disaster victims. 

• Response Center Network expansion for a group of chapters that staff the 1–

866–GET–INFO line. We will have 250 simultaneous workers in chapters nationwide supporting the information center’s work. 

• An enhanced Volunteer Match Portal to help manage expectations of large 

numbers of spontaneous volunteers and provide updated guidance. 

• Improved chapter advance procedures and new monitoring and control processes to support the use of the CAC. 

• A national Disaster Field Supply Center warehousing system with increased 

capacity and more critical supplies. We are greatly expanding our warehouse 

space from about 300,000 square feet to over 1,000,000 square feet (new warehouses are located in Montgomery, AL; Reserve, LA; Charlotte, NC; Pensacola, 

FL; Reno, NV; Atlanta, GA; Richmond, VA; and Hattiesburg, MS). 

• Pre-positioned redundant communications equipment such as phones, computers, radios, and satellite equipment in 21 cities in nine coastal states.

Closing Remarks 

In summary, despite the problems that challenged us all last year, I am extremely 

proud of the actions of the more than 225,000 American Red Cross workers in responding to the devastating effects of Katrina, Rita, and Wilma. 

I am confident that the actions we have taken internally and in conjunction with 

our federal, state, local, other NGO, and private sector partners will result in an 

even better response for the next disaster. 

Thank you for your time and attention.

APPENDIX A: High-level Chronology of Events 

Year Event Outcome/Results 

1881 Michigan Forest Fires Clara Barton provides food, clothing, medical 

supplies, and lumber for disaster victims.

1905 Congressional Charter Charter recognized the role of the Red Cross in 

disaster relief ‘‘to continue and carry on a system of 

national and international relief in times of peace 

and apply same in mitigating the sufferings caused 

by pestilence, famine, fire, floods, and other great 

national calamities, and to devise and carry on 

measures for preventing the same.’’

1906 San Francisco Earthquake ARC provides loans to victims. Court decision found 

against the Red Cross stating that loaning money 

which had been donated for relief was ‘‘improper’’. 

BoG adopted a policy making only grants, not loans 

to disaster victims.
60

APPENDIX A: High-level Chronology of Events—Continued

Year Event Outcome/Results 

1906–1913 50 domestic disasters ARC assisted with emergency needs, repairing and 

rebuilding homes, providing household furniture and 

rehabilitating small businesses. Policies and 

program guidance continued to evolve and included: 

• Whatever is done to meet family needs advance 

the welfare of both the individual and the 

community. 

• Relief is proportioned to need, not loss. 

• The Red Cross should make greatest possible use 

of community resources.

1918 Influenza Epidemic ARC adjusted the disaster program and recruited 

18,000 nurses, furnished equipment and supplies for 

hospitals, convalescent homes and convalescent 

kitchens.

1919+ Local disasters Disaster preparedness committees formed and 

program expands to chapters providing assistance to 

local calamities. Affected chapters established local 

advisory committees to help ARC carry out its relief 

obligations.

1930–1933 Depression ARC responds to President’s request and participates 

in drought relief by distributing excess government 

foods and supplies and acting as a government 

agent through the signing of the Agency Service 

Agreement.

1964 Alaskan Earthquake First individual government assistance provided to 

disaster victims.

1965 Hurricane Betsy Government individual assistance expanded. ARC 

chapters authorized to provide relief assistance 

during civil disorders, if necessary.

1968 Civil Disorders NHQ suggested that chapters plan for civil disorders 

as part of their emergency relief function.

1969 Hurricane Camille Disaster Relief Act of 1969 expands the scope of 

federal individual assistance, adds grants, food 

stamps, unemployment compensation.

1976 E. Mississippi Tornadoes and 

Typhoon Pamela 

ARC resumes its additional assistance role 

(rehabilitation work) as federal individual assistance 

is not timely. 

BoG establishes a special Disaster Services program 

review subcommittee to determine if the program 

was adequate for the immediate future and how it 

would be financed.

1982–1983 Unprecedented disaster activity $33 million exhausts Disaster Services budget and 

Disaster Revolving Fund.

1995 Oklahoma City Bombing Red Cross response includes creation of a long term 

mental health counseling and referral program for 

victims’ families and local residents. In addition, we 

created an off-site mental health recovery zone for 

workers and first-responders.
61

APPENDIX A: High-level Chronology of Events—Continued

Year Event Outcome/Results 

2001 September 11 Terrorist Attacks Provided financial assistance to victims families and 

to those affected economically. Post-event review led 

to establishment of greater transparency in 

accounting practices and changes in our fundraising 

approach to communicate needs more clearly and 

immediately to the public.

Mr. MCCAUL. Thank you, Mr. Becker. 

The chair now recognizes the ranking member. 

Mr. ETHERIDGE. Mr. Chairman, I ask unanimous consent that 

Mr. Taylor, whose State was hard hit in this, be allowed to sit in 

the panel with us. 

Mr. MCCAUL. Without objection, so ordered. 

Let me say, first, I recognize the magnitude of the challenges 

these hurricanes presented, and I applaud the good work that was 

done in terms of assistance. My home State of Texas was indirectly 

impacted by Katrina and directly impacted by Rita, and I understand the need that was there to respond quickly with assistance. 

Where I have an issue is the accountability in the system and the 

lack of controls. 

I think one of the points of this hearing is, looking forward, what 

can we do to prevent this from happening again as we enter into 

another hurricane season? So I do applaud you for what was done, 

the Red Cross and FEMA. 

At the same time, I want to applaud Mr. Kutz and Special Agent 

Ryan for the work that they did. In working with me and the subcommittee, they disclosed and uncovered something that may never 

have been uncovered, and that is a billion dollars, possibly more, 

of these benefits were fraudulently obtained, and I think that is 

important for the American people to know that. 

I agree with you, Mr. Kutz, the ultimate victim in this case was 

the taxpayers. At a time where we are cutting Homeland Security 

grants by 50 percent, we can’t afford as a Nation to have a billion 

dollars of fraud, and then we don’t even know how much more, just 

the magnitude of the fraud that is out there. So it is important that 

we in the Congress fix this problem. It is important that FEMA 

fixes this problem. 

And when I look at, you know, these—this FEMA letter from the 

director and from Governor Blanco saying, inspection was done on 

their home, the inspection showed damage to your home and personal property, and I see a vacant lot, and then I see a check from 

my hometown of Austin, Texas, going to the applicant for this 

empty lot—worse yet, when I see a Federal prosecutor—a Federal 

prisoner holding benefit checks that he received and applied for 

while he was in prison at the time of Katrina, I am appalled at 

this. And I want something done about it, and I think the American people do as well. And then when I look at a cemetery that 

was used as a damaged property, when the person didn’t even live 

in the State of Louisiana, and he is receiving money at the taxpayers’ expense; I have got to tell you, this has to stop. I don’t even 

know where to start with all this. I think I have done a fairly succinct job giving you an overview of my concerns with this. 
62

And Ms. Dannels, I want to hear from you directly. First, how 

did this happen? And what are you doing to prevent this from happening again? Because if you don’t fix it, if FEMA doesn’t fix it, 

Congress will. 

And then I would like to hear from the GAO and their response. 

Ms. DANNELS. Thank you. And I do want to talk about some of 

the specific things that we have done and that were in process 

when Hurricane Katrina struck. First, though, I would like to say 

that every organization, whether it is private industry, Federal 

Government, whether it is producing a product or delivering a service, is designed to a particular level of capability, and that principle 

agrees to us as well. There is no question that the hurricanes of 

2004 tested and in some instances overwhelmed our systems and 

processes and clearly, in 2005, overwhelmed our processes in many, 

many, many respects. Because of that, we were in a position—and 

it again goes back to my statement of striking a balance of how—

between having complete accuracy and fraud prevention, and having expediency and delivering assistance. We were in the position, 

I think, as Mr. Thompson said, of making some very tough decisions during some impossible times, and we were faced with our capabilities, our systems and processes, how we traditionally do business, not being able to meet the catastrophic event that we experienced, and we did in fact put in place never before used and untested processes and methodologies that clearly, because they were 

untested, were more subject to error and fraud. We are in the process of reviewing them. We welcome the GAO reviewing them. 

I would also say that, because we knew what we were facing, we 

had the Office of Inspector General embedded with us from nearly 

day one, looking at these situations with us so that we could have 

the benefit of their advice and expertise in determining how best 

to try to approach the impossible situations that we found ourselves in. 

Mr. MCCAUL. Thank you. If I could just comment, as we in the 

Congress appropriate billions of dollars towards this disaster relief 

assistance, and as we, even this week, look at this issue, we and 

the American taxpayer want to know that it is being spent wisely. 

And I think, anytime you have that kind of money thrown out 

there, there are people who are going to milk the system. There are 

bad actors, but I don’t think it has to be a choice between fraud 

prevention and expediting claims. I don’t think it has to be either/

or. I think we can have both, and I think that is what the American people deserve, and that is what we want to get after this 

hearing. 

I would like to hear from Special Agent Ryan if that would be 

okay. 

Mr. RYAN. That is fine. Thank you, Mr. Chairman. 

In this particular case, when we started looking at this problem, 

we wanted to know what had been done prior to us getting involved. We wanted to know if they did in-depth audits, in-depth investigations. We didn’t find a lot of that. So we decided to test the 

system. We wanted to see what upfront controls were going to be 

in place to stop us from being able to get into the system and have 

an opportunity to commit fraud. Fraud is a crime of opportunity. 

If given the opportunity and the upfront controls aren’t in place, 
63

you are going to have people that are going to take advantage of 

the situation. And that is what we did to test the system. I believe 

that if you are going to go ahead and deal with the taxpayers’ 

money, you have to learn from your mistakes. You need to debrief 

as to what went right, what went wrong, and you have to prepare 

going forward. You have to practice what you are going to put into 

place if you don’t have something to fall back on, and know where 

the weaknesses are and where you need your manpower if you 

have a problem going forward. And I think that is exactly what 

happened in this situation. 

Mr. MCCAUL. Mr. Kutz, do you have any comments? 

Mr. KUTZ. Yes, I would agree with you on the choice issue. I 

don’t think our Nation’s fiscal condition allows us a choice between 

allowing a billion or so dollars in fraud and getting money out 

quickly. I think FEMA needs to protect all taxpayers at the same 

time as they take care of disaster victims. We are very sympathetic 

to that issue. 

A couple of points, I don’t think Ms. Dannels’ opening statement 

addressed anything from my testimony today. Her opening statement addresses a report we are issuing related to our February testimony before Senator Collins and Lieberman related to expedited 

assistance. I think our testimony today shows the problems are 

much, much broader than what she discussed in her opening statement. So I would be interested in knowing what they are going to 

do about the new issues today. I think putting in place—she mentioned putting in place untested methods, and some of the recommendations we have related to our prior work talk about—I 

think Mr. Ryan alluded to this—is that you have to field test these 

controls and not wait until a disaster happens to test them because 

that is a recipe for disaster. 

So whatever fraud prevention controls they put in place for this 

disaster season related to identities and damaged property addresses and other types of upfront controls do need to be tested before 

they are implemented to see if they work because the other risk 

here of tightening controls is legitimate victims not getting disaster 

assistance. 

Mr. MCCAUL. Thank you. And I think what I was most appalled 

with is not only the magnitude of the amount of money, the fraud, 

but where it was spent, and it would be the goal of this subcommittee and the full committee to get recommendations as to 

how to fix the system. 

The Chair now recognizes the Ranking Member. 

Mr. ETHERIDGE. Thank you Mr. Chairman. You know, as has already been stated, everyone here today is focused on waste, fraud 

and abuse, which, unfortunately, as we have heard today is a problem after every disaster. But I want you to know that the career 

employees of FEMA and the Red Cross and the thousands of volunteers that help out in every disaster, they do a magnificent job. 

They did a magnificent job with Katrina and Rita, and we thank 

them for that. 

But that being said, that is no excuse for the people who steal, 

whoever they are, whether they wear suits and ties or blue jeans. 

And I think the most tragic aspect of this disaster is the effort of 

the career employees of FEMA and all the volunteers of the Red 
64

Cross, a lot of their good effort got frittered away because of a few 

political appointees who had no experience in disasters. And then 

they want to pass it down to career employees who come before 

this committee and answer the questions. 

I hope, Mr. Chairman, we get the political appointees to come before this committee and answer the questions, because I think that 

is important. 

Ms. Dannels, I understand that you are a career employee with 

FEMA, and many of your coworkers praise your experience and 

your dedication, and we thank you for that. 

And as you know, fraud, in the aftermath of this disaster or 

other disasters, is nothing new. However, as I said before, there is 

no excuse for having it. The Department of Homeland Security’s Inspector General has reported that, as I have said earlier, the south 

Florida residents got millions of dollars, and they weren’t even in 

the hurricane’s path and weren’t affected by it. Today you have told 

us about some of the steps FEMA has taken to address those issues 

for the 2006 hurricane season. What I want to know is: steps, number one, taken sooner, and was it a leadership issue? Was it a 

budgetary issue? Or was it a staffing issue? 

Ms. DANNELS. Thank you. And there are a number of questions 

on the table for me to address, and I will try to get to all of them. 

I appreciate your comments about the career employees. In fact, 

I have been with FEMA for 23 years, and I have been through several pendulum swings, and I have a great deal of history and perspective on what has happened before and what we are going 

through now. 

I would like to also address Mr. Kutz. You are correct, my testimony has to do with the expedited assistance which was what we 

were under the impression this hearing was about. We received 

your statement of fact on Thursday afternoon. Our testimony was 

due prior to that, and we, of course, since Friday, have been involved with Tropical Storm Alberto. However, I am more than 

happy in my questions and answers to address your statement of 

fact. 

On the Florida situation, 2004, Mr. Etheridge, in fact, we have 

implemented a great number of the recommendations in that IG report, and we were in the process of continuing that when Hurricane Katrina struck. That report was issued in May 2004—2005. 

And we had accomplished a number of those recommendations, and 

they in fact did strengthen a lot of the processes that had been 

identified as weak during the 2004 hurricane. That does not—and 

I understand, and in no way do I mean to imply that FEMA is asking for a pass on any fraud that took place, in no way am I suggesting that. But I think that we do have to put this in some sort 

of context that we have systems and resources in place, and I, as 

a career person, can’t debate whether they are at the appropriate 

level, why they are, or why they are not, but the fact remains that 

we have a certain level of capability in place. And when that is exceeded, as it was this year, we are faced with doing things and 

going back. 

And I also would suggest, Mr. Ryan, that he is saying that at the 

point that they started looking to see if we were doing anything 

about some of those new technologies and processes we used, we 
65

were operating 24/7 until March; we were—I worked seven days a 

week until May 1. We have been very operational with the size of 

this event, and we are now looking at a great number of those 

things and have been working with EIG in looking at these things. 

Again, we welcome those reviews. We find them very valuable, and 

we will continue to make process improvements. 

We have in place now one of the recommendations that the IG 

or that the GAO made back in their earlier expedited assistance report. We, in fact, did put in place the identity verification not only 

on their online registration but also on our 1–800 registration so 

that many of the things that occurred that they have talked about 

in their report cannot happen now; those Social Security numbers 

that were invalid would be caught. 

We are not doing debit cards this year. We did that in a very—

I don’t want to call it a pilot, but we did it in a very confined fashion last year because we knew that we were at risk and that it was 

vulnerable that we had not tested it, and we only distributed I believe 10,000 of those cards out of those—of the number of people 

who had registered, and we did it on a very small scale. We will 

go back and look at that. We are not going to do debit cards this 

year. We also, on expedited assistance, we have used them on six 

occasions— 

Mr. ETHERIDGE. That is good. 

Ms. DANNELS. Six occasions, and it was never at $2,000. It had 

always been at $500. We will go back to a more conservative 

amount. However, again, our systems were overwhelmed. People 

could not get through on our 1–800 number, much of what was occurring with Joe Becker and the Red Cross. So we just made the 

calculated decision that we were going to help as many people as 

we could, and that we would have to go back and identify those 

people who we either paid in error or that were—defrauded us and 

deal with that. 

I would also mention, in the 2004 hurricane season, we were concerned that some of what we had done, what the IG had uncovered, 

had put us at risk, and we implemented under the Improper Payments Act a review and found out that in fact our overpayments 

still fell below that threshold that was acceptable. We have already 

implemented this year a review under the Improper Payments Act 

via a contractor to come in and look at all of those payments, identify in our systems where were the weaknesses and vulnerabilities, 

make those recommendations so that we can mitigate future risks. 

Mr. ETHERIDGE. Thank you. 

Thank you, Mr. Chairman. I have a follow up if we have another 

round. I just want to get my question in before— 

Mr. MCCAUL. Chair now recognizes the sherriff from Washington 

State, my colleague, Mr. Reichert. 

Mr. REICHERT. Thank you, Mr. Chairman. 

First, I want to talk about what we are going to do. I think we 

are going to try and help you. We are from the Federal Government, and we are here to help. Last month, Chairman McCaul and 

I and our friends on the other side of the aisle, Mr. Thompson, Mr. 

Pascrell and Mr. Etheridge, have been working on a bill. We 

passed this bill through the full committee, and this legislation 

deals with waste, fraud and abuse, and some of the things that we 
66

are going to be helping you with are developing and maintaining 

proper internal management controls, mandates that databases collect information from applicants. And I understand from today’s 

testimony that that is a process that has already started, but now 

it will be a part of legislation. 

We will have the security inspector general review such databases and payment systems, evaluate the existence of and implementation of internal controls. Directs the Secretary to certify annually to Congress that proper internal controls are in place and 

operating. I just wanted to throw that out there. This is the National Emergency Management Reform Enhancement Act of 2006. 

It has been passed through the full committee, and hopefully, in 

the next 2 weeks, you will see this on the floor of the House of Representatives so that we can be of some help to you. 

I want to focus—I was the sheriff of Seattle for 8 years and 33 

years in law enforcement prevention. I mean, that is just the bottom line on anything, prevention and then enforcement. Who has 

the primary—this is my first question. Who has the primary responsibility for enforcement in this area, investigative authority for 

waste, fraud and abuse when it comes to FEMA? 

Mr. Ran. 

Mr. RYAN. Under the situation that we are presently in right 

now, there was an agreement that they would form a task force 

which the Attorney General was going to head. Alice Fisher was 

put in charge of it. David Dugas, who is the U.S. Attorney from 

Louisiana, is someone that I speak to on a regular basis about him 

heading up the task force. 

There is a multi-agency task force, which we are dealing with on 

a regular basis. I might add that the postal inspectors have been 

absolutely wonderful in regard to pursuing cases. The DHSIG is involved, the Social Security IG, and along with a lot of other inspector generals. So it is something that Justice has recognized. They 

have identified a zero tolerance policy, and also being in law enforcement for 30 years, I understand exactly what you are saying, 

who is going to do what? 

Mr. REICHERT. Gets you fired up a little bit; doesn’t it? 

Mr. RYAN. It does primarily because law enforcement gets 

blamed for not doing enough at the end when people are stealing 

it. And my problem is, I think there needs to be more done with 

the upfront controls. 

Mr. REICHERT. Yes. 

Mr. RYAN. If you take away the opportunity to commit fraud, you 

are going to cut down the number of cases you have to refer. 

Mr. REICHERT. Right. 

Mr. RYAN. If you talk about the money that’s going to prosecute 

somebody for $2,000 when you could have put controls in place to 

stop that, I think we could utilize the law enforcement personnel 

in a different way. 

Mr. REICHERT. So we are following up on these cases that these 

crooks ripped off the American public. 

Mr. RYAN. Yes, sir. 

Mr. REICHERT. We are also looking at some employees? 

Mr. RYAN. I think that is a question that needs to be addressed 

in regards to being able to get the data on employees. 
67

Mr. REICHERT. Okay. I just want to ask another question about 

what—what happened prior to September 11? Did you have these 

sorts of things happening, on a much smaller scale obviously, but 

were these things happening, fraud, abuse and waste, before September 11? And the answer is—

Ms. DANNELS. Are you addressing me, sir? 

Mr. REICHERT. Yes, ma’am. 

Ms. DANNELS. Our fraud rate and, what I would say, our overpayment rate is typically very low. We do a review process after 

every single disaster. I would say it ranges between 1 and 3 percent. That is not just fraud. That is simply overpayments. 

Mr. REICHERT. But you have experienced the fraud, waste and 

abuse prior to September 11. It happens when you go into an area 

and you try to help people. Some people are there to take advantage of the system. 

Ms. DANNELS. I think it is inevitable. Our job is to minimize it. 

Mr. REICHERT. Have you ever experienced bad Social Security 

numbers being presented to your office before? Have you ever experienced bogus addresses before? Have you ever experienced invalid 

primary addresses before? Have you ever experienced duplicative 

registrations before? I imagine the answer would be yes. I compare 

this to—and I know this is an extreme, extreme situation when you 

look at Katrina. I was involved in an investigation. The largest serial murder investigation in this Nation’s history. We had things 

in place before this investigation began that we broadened out and 

used and knew could support a larger event. We knew these things 

might happen as we went into this investigation. Did you not know 

that as you went into Katrina, as you went into Rita, that these 

things that you had experienced before—because you talked about, 

we had a choice to make? Did you not know already those things 

were going to happen and you could build that system around what 

you already did pre-September 11? 

Ms. DANNELS. Sir, I don’t think that we did know that the levies 

would break, and there would be hundreds of thousands of people 

who would be airlifted from rooftops without any identification and 

would be displaced and living all over the country and not be able 

to return to their homes for months at a time. That, in fact, had 

we had the opportunity and the time to develop— 

Mr. REICHERT. The question that I wanted answered, please, 

was, you had systems in place before September 11, is that not 

true, to address some of the issues that we just talked about? 

Bogus addresses, the Social Security numbers. 

Ms. DANNELS. We have those systems in place. They continue to 

be improved upon, and they generally work very well. Again, the 

level of overpayments is 1, 2 or 3 percent in a disaster. 

Mr. KUTZ. Congressman, can I clarify something there? Because 

you have a big reconciliation problem. She is saying 1 to 2 to 3 percent, which is what they have testified before, as their fraud rate 

for this disaster, not prior ones. I am talking about this disaster. 

I have just testified to you that the rate is 16 percent. There is a 

huge reconciliation problem we have to explain here. We did a random statistical sample of the entire population and projected our 

sample items to the population. So ours is a valid fraud projection. 

I don’t believe this is an apples and apples discussion. They are 
68

talking about recoupment after the fact. Not going out and doing 

systemically— 

Mr. REICHERT. Yes. 

Mr. KUTZ. So I think we need to clarify the prior fraud rates if 

we are talking about the same things for prior disasters. That 

would not represent a fraud rate for prior disasters. 

Mr. REICHERT. Mr. Chairman, if I could just follow up very 

quickly. 

Sir, you mentioned call centers and Western Union and new innovative ideas and new ways you wanted to help individuals. Did 

you not think, though, as you put these systems in place some of 

the issues that might occur regarding fraud, waste and abuse, before you put these systems in place, and begin to work on solving 

those problems before they even occurred? 

Mr. BECKER. Yes, sir, we did, and the conversations that we had 

in the earliest days to deliver service, we were focused on that 

issue. And we knew that for us to move as fast as those people expected us to move, we had some exposure. Our exposure was a little bit different. Our exposure was, you might be able to go to multiple places and receive assistance before we figured out that you 

did that, and what we knew at the earliest was that was a possibility where people could take advantage of us, so we would put a 

robust system in place to comb the data, and we had each client 

sign, I have only received this assistance for the first time; I understand that I received assistance to meet these needs. And what we 

then did was put a team together of paralegals and investigators 

to go back and go through all the cases and figure out who actually 

got assistance that shouldn’t have, and we have had pretty good 

success with that. 

And we have also had great success working with the task force 

that Mr. Ryan referred to in getting prosecutions where people did 

take advantage of us. 

Mr. REICHERT. Thank you. 

Mr. MCCAUL. Thank you. 

I would say, the submitted 16 percent equals $1 billion or more 

dollars to the taxpayers, 7,000 cases referred for prosecution. Out 

of this investigation, and we are just getting started, I submit we 

could have a more robust system. 

I now would like to recognize the gentleman from Mississippi, 

the Ranking Member, Mr. Thompson. 

Mr. THOMPSON. Thank you very much, Mr. Chairman. 

Ms. Dannels, I personally think you have been put under the bus 

by being brought here. We absolutely need, at a minimum, the 

FEMA director, and optimally, we need the Secretary to answer 

these questions. They absolutely are the ones who should be made 

accountable for this. 

You made the point that, up until May 1, you worked 7 days a 

week. Last week, I met with the chief human capital officer, who, 

by the way, is gone. And he said that FEMA is still only up to 82 

percent staffing. How can we adequately respond to the issues of 

waste, fraud and abuse or anything else with only 82 percent of our 

staff in place, or do you think we can adequately respond to waste, 

fraud and abuse being short-staffed? 
69

Ms. DANNELS. I think that we are making great strides on—I am 

sorry. I don’t remember who made the comment about lack of internal controls. We have had a contract, looking at all of our internal 

controls; again, making recommendations. There is a matrix that 

is developed with follow up where we are implementing corrective 

actions, and so we are taking many steps— 

Mr. THOMPSON. I recognize you are under the bus. So now you 

know— 

Ms. DANNELS. So now you are going to drive a little faster. I understand. 

Mr. THOMPSON. Yes. Do you think we can do it with 82 percent 

staffing? Yes or no? 

Ms. DANNELS. I don’t know the answer to that question. 

Mr. THOMPSON. Well, I am going to have to speed up on the bus 

then. 

Ms. DANNELS. You are going to put it in reverse. I can tell. 

Mr. KUTZ. Congressman, can I make one point on that just—and 

I think Ms. Dannels could probably add to this. A lot of the fraud 

prevention efforts are also provided for by contracts. 

Mr. THOMPSON. I am coming to that. 

Mr. KUTZ. All right. 

Mr. THOMPSON. We have a contract. Did you participate in the 

contracting that is presently in force? 

Ms. DANNELS. We have a great number of contracts. 

Mr. THOMPSON. ChoicePoint. 

Ms. DANNELS. ChoicePoint, yes. 

Mr. THOMPSON. You did. 

Ms. DANNELS. Yes. 

Mr. THOMPSON. Any reason that was a sole source contract? 

Ms. DANNELS. That was my understanding while I participated— 

Mr. THOMPSON. What was the reaction now for it being a sole 

source contract rather than competitively bid? 

Ms. DANNELS. My understanding is we accessed that from a 

schedule where DHS already had that under contract. So we were 

leveraging something that was already in place, and it was not a 

sole source contract, is my understanding, but we can certainly 

get— 

Mr. THOMPSON. How is it not a sole source contract? Was it competitively bid? 

Ms. DANNELS. The Department of Homeland Security used a 

schedule that was in place that allows—my understanding is that 

there is qualifying that is done in advance, and it is there specifically so that we can make— 

Mr. THOMPSON. Why did we pick ChoicePoint if—were there any 

other people on the schedule? 

Ms. DANNELS. That was already in place in DHS. We simply 

used what was in place. FEMA used what was in place at DHS, 

so I don’t know the answer as to how DHS selected ChoicePoint. 

Mr. THOMPSON. So you see—you are still under the bus. Can you 

tell me if it is in place with this contract that if they perform poorly 

and we identify a 16 percent fraud rate, can we recoup our money 

based on this contract? 

Ms. DANNELS. I don’t know the answer to that question, but the 

16 percent doesn’t relate back to ChoicePoint either. 
70

Mr. THOMPSON. You mean to tell me, if we hire a contractor— 

Ms. DANNELS. That was not—that contract was not completely in 

place. It was in place only on Internet registrations and not those 

on the 800 number at the time that they had done this work. 

Mr. KUTZ. Congressman, I think that is an important point because ChoicePoint had a menu of options for them to pick that included many more comprehensive controls than just the Internet 

validation of identities, and they did not pick all of them. Again, 

I don’t know who is responsible for deciding to pick one small aspect of a bigger menu, but one of the fundamental problems here 

is they didn’t effectively use ChoicePoint. So that is one of the key 

issues. 

Mr. THOMPSON. Can you tell me why we didn’t exercise the menu 

before us, Ms. Dannels? 

Ms. DANNELS. I have to ask Mr. Kutz for clarification on the 

menu. Are you referring to not doing it on the 800 number? 

Mr. KUTZ. No. Also, they have, address validation is another 

menu item. The identity validation, she is correct; I mean, they 

have hired them to do it just on the Internet, not for the call-ins, 

but they also have services where they have postal addresses, information and other things that they purchased; they have a database of insurance information so they can check for insurance 

fraud. So there is a whole choice of things ChoicePoint actually 

sells. 

Ms. DANNELS. We now have home ownership occupancy with 

ChoicePoint also in place. The reason we did not before is because 

we accomplished that at the point of an onsite inspection, and so 

we felt that we didn’t need it. Clearly, we have learned that we 

cannot always do an onsite inspection, as was the case with hundreds of thousands of homes in inundated areas last year. 

Mr. THOMPSON. Last question, Mr. Chairman. 

Ms. Dannels, can you tell me how many people have been terminated for approving vouchers for payment or anything like that 

consistent with what has been exposed here today? 

Ms. DANNELS. Are you talking about Federal employees? People 

terminated— 

Mr. THOMPSON. Well, if somebody inspected a cemetery and said 

that that cemetery met the criteria for payment, somebody should 

have been fired. 

Ms. DANNELS. First of all, I can’t address the specific situations 

that are in their statement of fact. Again, we received it just 

Thursday. What I would go back to, again, is that the—some of the 

new processes and technologies we used opened us up to this. This 

may have done—been done through geospatial work and satellite 

imagery that we use where we could not go in and inspect. So we 

identified, those five parishes in three counties in Mississippi, 

those most affected areas, identified those addresses. We matched 

them with the registrations that we had, and then we ran them 

through a verification like ChoicePoint to validate their identity. 

Clearly, some of those failed. So this may not be an inspector went 

out and did something wrong. 

Mr. THOMPSON. Well, the only thing I am saying is, we have testimony that somebody certified that an inspection had occurred, 

that approved the payment. 
71

Ms. DANNELS. That may have been done through technology and 

not an inspector onsite, which we do not normally do. That is a 

new technology we used this year, and we are reviewing that, looking for improvements. 

Mr. THOMPSON. And if you would bear with me, Mr. Chairman, 

can the GAO people explain? 

Mr. KUTZ. There may not have been a physical inspection of that 

cemetery. I think one of the cemeteries received expedited assistance. Another one received rental assistance. So there should have 

been, for rental assistance, some additional validation, and obviously, it was not effective. 

Ms. DANNELS. We will go back and look at each and every one 

of these cases with them to determine what went wrong and improve those processes. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. MCCAUL. Thank you. 

I would also like to indicate to the ranking member that we did 

invite Director Paulison to testify, and he declined. 

As a former career guy, I respect what you are doing, and understand the notion of not wanting to be thrown under the bus. 

So, having said that, I would like to ask unanimous consent that 

my colleague from Pennsylvania, Mr.Dent be allowed to participate 

in this hearing. Without objection, so ordered. 

Mr. SHAYS. He has a right to object. 

Mr. MCCAUL. So ordered. 

The Chair now recognizes the gentlelady from Florida, Ms.Ginny 

Brown-Waite. 

Ms. BROWN-WAITE. Thank you very much. 

Ms. Dannels, when I first heard your testimony, I was a little 

concerned that maybe your staff hadn’t properly briefed you on 

what this meeting was all about. And you certainly have a very, 

very difficult task. But if I read this correctly, you are acting deputy. Is that correct? 

Ms. DANNELS. That would be of the recovery programs, not the 

agency. 

Ms. BROWN-WAITE. Okay. Well, this hearing has been noticed as 

a hearing on fraud, waste and abuse in the aftermath of Katrina, 

and my concern is that you really weren’t addressing that, but 

rather the February report. I mean, clearly, the GAO presentation 

was about rental assistance and hotel costs and repairs. Knowing 

that the GAO report was out there, it almost seems like you were 

a day late and a dollar short, with all due respect. And I keep hearing that we are reviewing that. 

As somebody whose district dodged the bullet again because of 

the hurricane that came onshore yesterday at Cedar Key, I have 

many, many concerns about what is going on in the agency, and 

can you help me to understand why you didn’t know this hearing 

was about fraud, waste and abuse? 

Ms. DANNELS. Yes. I did know it was about fraud, waste and 

abuse. What was just shared with us on Thursday was the statement of fact, GAO statement of fact, which has been the basis of 

their testimony. We did not have that until Thursday afternoon. So 

I was not aware that they had another preliminary report of find-
72

ings they were releasing. They met with us and delivered that to 

us Thursday. 

Ms. BROWN-WAITE. Did you have a draft of what they were doing 

before that? 

Ms. DANNELS. No. 

Ms. BROWN-WAITE. Well, knowing what— 

Ms. DANNELS. However, I am prepared to talk about more of 

what is in that statement of fact. I welcome the opportunity to talk 

about some of their conclusions and concerns on the hotels. 

Ms. BROWN-WAITE. Well, submitted your testimony in advance, 

it just seems to me, as if knowing it is really about fraud, waste 

and abuse, the entire testimony that you had prepared could have 

been submitted to the record, and then you could have updated it. 

And I think the lack of responsiveness to the topic of waste, fraud 

and abuse should be of concern to every member here. 

Let me ask a question. When any checks are sent out or debit 

cards, is there any sort of accompanying warning in the application 

process even that, if any sort of fraudulent information is submitted, that restitution and/or prosecution will be pursued? And I 

don’t care who answers it. 

Ms. DANNELS. I will gladly answer that question. Before I do, we 

will gladly update the testimony. Again, we were busy with Tropical Storm Alberto this weekend and really didn’t have the time or 

opportunity to update it. 

Your question is that, yes, people are told. They are told in a 

number of fashions, and they have to—they are advised of that in 

writing, and they have to sign something to us that also states that 

they have to be truthful and what they are saying is correct and 

use the funds appropriately, and if they don’t, that we will take action against them. So the answer to that is, yes. 

On the debit cards, again, I would say that that was one of those 

things that we did that was not used before. It was untested. We 

had—it was not well developed. I think that we will gladly acknowledge that. We are not going to use it this year, and it did not 

work particularly well in some respects. Apparently, there was not 

guidance that was provided to people when they received those 

debit cards. 

However, we don’t intend to use them this year, and we do think 

the debit cards are a valuable tool to have in our toolbox, but we 

will not use them until we develop a well thought out program that 

will ensure that we don’t have some of the errors that we had last 

year. 

Ms. BROWN-WAITE. Thank you. 

Mr. Kutz, how long ago did FEMA meet with you about your report? 

Mr. KUTZ. The final testimony meeting was last week. But we 

have ongoing discussions with them about various aspects of what 

we are doing. They grant us access to their database which is 

where we look for examples on all of the statistical samples, so 

they have known from the beginning we were going to do a statistical sample. We didn’t have time to get it done by February of 

2006, so this was the earliest we could actually do a comprehensive 

statistical sample. So, again, we have tried to do ongoing briefings, 
73

which is the biggest part of this testimony that is new, and so they 

got the final results last week. 

Ms. BROWN-WAITE. But they were aware that it was ongoing? 

Mr. KUTZ. I believe they were, yes, and they may have been confused about what that was, but yes, we have told them very clearly 

we were going to do a statistical sample, it was ongoing, and they 

did grant us access to the system for us to look at all 247 of our 

sample items. 

Ms. BROWN-WAITE. Two other quick questions. WhoRt those 

checks away from this convicted person in prison? 

Mr. RYAN. Actually, those checks were cashed. Those are copies. 

In order for us to find out exactly where the funds went, we needed 

to go to Financial Management Services Treasury to get copies of 

those checks and then track down where those checks were cashed 

and who signed them. So those are actually copies of checks that 

have already been cashed and negotiated. 

Ms. BROWN-WAITE. So will the person who is in jail get additional jail time for this fraudulent act? 

Mr. RYAN. It will be 1 of 6,000 to 7,000 cases we will be referring 

to the Department of Justice for action, yes. 

Ms. BROWN-WAITE. My understanding is there was also fraud at 

the call centers where there was collusion between some of the employees at the call center and people who were calling in. What 

steps were taken to ensure that that doesn’t happen again? 

Ms. DANNELS. GAO has not shared those findings with us. So I 

am not sure that we can respond specifically to what you have an 

understanding from them on. 

However, last year, as with other systems that were overwhelmed, our security background check process was as well. We 

have in place this year requirements on all contracts that fingerprints be done through the FBI process and do a full background 

check before anyone has access to a FEMA facility or a FEMA information system. Last year, because there was the desire to have 

people available to take registrations, we used the—and I am sorry 

I don’t remember what the acronym stands for NCIC, national 

agency— 

Ms. BROWN-WAITE. NCIS? 

Mr. RYAN. Yes. 

Ms. DANNELS. Check first to give them limited access, and then 

after the fingerprint check was adjudicated, we would make a final 

determination. We will not be doing that this year, which I am assuming will address some of what they have expressed to you. 

Again, I am not aware of the details. They have not discussed it 

with me. 

Ms. BROWN-WAITE. Ms. Dannels, please do update your response 

to the GAO report. I yield back the balance of my time. 

Mr. MCCAUL. I would like to make a correction to the record that 

I know personally that FEMA was not blindsided last Thursday, 

but rather, there has been an ongoing dialogue between the GAO 

investigators and FEMA on this issue. And I believe that the response is to the February report, not to this report that just came 

out, and I would hope that the director would see the magnitude 

of this issue and the importance of it and attend and testify during 

the next hearing. 
74

With that, I am going to go ahead and yield to the gentleman 

from New Jersey, Mr. Pascrell. 

Mr. PASCRELL. Mr. Chairman, from what I have heard so far 

today, reinforces my thoughts about this being a pervasive situation not only in FEMA but beyond. There is a pattern here. In 

many instances, we talk about a lack of preparation and a lack—

we have poor intelligence of what is coming, what is happening. 

And I am thinking of all those people who have been hurt down 

in the gulf area, either because we did not prepare properly or I 

can imagine them listening to this hearing. I can picture it. It is 

clear. 

And Mr. Chairman, you have done a great thing bringing us together today. I believe we are going to have to use subpoena powers on this issue. We are talking about a lot of money here. We are 

not even talking about contractual fraud yet. Wait until we get into 

that. We contracted out, the Federal Government, if I am not mistaken—Mr. Kutz, I mean, I am looking at your testimony. These 

are estimates here. We are dealing with individuals. What about 

all the fraud dealing with the contracts that were let by FEMA before and after Katrina hit? Am I correct in saying that? 

Mr. KUTZ. You are correct. 

Mr. PASCRELL. Correct. 

Mr. KUTZ. We’re not addressing fraud today on the contracts. 

Mr. PASCRELL. Thank you. 

The GAO reports, your agency, that four of the 24 Federal agencies have issued disclaimers on their agency’s fiscal year 2005 financial statements. The Inspector General of the Department of 

Homeland Security, for the Department of Homeland Security, in 

regard to that fiscal year 2005 financial report, financial statement, 

stated this: Unfortunately, the Department of Homeland Security 

made little or no progress to improve its overall financial reporting 

in fiscal year 2005. KPNG, contractor, was unable to provide an 

opinion on the Department of Homeland Security’s balance sheet, 

unquote. 

Is that accurate, Mr. Kutz? 

Mr. KUTZ. Yes. They are one of the four agencies that have disclaimers. 

Mr. PASCRELL. We have not only a pervasive mix with the entire 

Department but many other Departments we are not discussing 

today. We are not just talking about FEMA here because FEMA is 

under an umbrella— 

Mr. KUTZ. Correct. 

Mr. PASCRELL. Put there by yours truly around this table, and 

that is a fact of life. We are talking about the inability of the Federal Government to stay on top of those people who had the authority to give out checks and to pay other people. That is what we are 

talking about. Not very good in terms of accountability here. Who 

is accountable? 

Ms. Dannels, we know and with all due respect, ‘‘you’’ did cause 

this mess, but it is a mess, but it goes far beyond you, and it goes 

far beyond the entire Department of Homeland Security. This is 

not just a FEMA issue. But I have some questions to ask you, if 

I may. 
75

Fraud in the aftermath of a disaster is deplorable. We saw it 

after the four Florida hurricanes in 2004, and we have seen it after 

other disasters. Yet when Katrina struck, FEMA did not have appropriate safeguards in place even to do the most basic checks on 

telephone applicants. 

Today you have told us about some of the steps that FEMA is 

taking for this hurricane season. In fact, you gave me the impression that you were making improvements. I must tell you, I believe 

you, but I don’t believe there is any improvement. So I don’t know 

who is telling you there is improvement. 

First of all, why weren’t these steps taken sooner? And was it a 

leadership issue? Was it a budgetary issue? Yes, this is like the 

question, did you stop beating your wife? But I would like the response. What is it? Is it a leadership issue? Is it a budgetary issue, 

or is it a staffing issue? I’ve covered the gamut of folks. I have 

asked you already. Which is it? 

Ms. DANNELS. I would say it has now become a fleet of buses. 

I would say that there are a large number of things that contribute. 

Mr. PASCRELL. Ms. Dannels, which is it, a leadership issue, a 

budgetary issue or a staffing issue? 

Mr. Chairman, the question is clear. 

Ms. DANNELS. Sir, I think that is a very difficult question to ask 

a career person. 

Mr. PASCRELL. I think you have answered the question. My final 

question, if I may—Mr. Chairman, do I have time? 

Mr. MCCAUL. Well, you don’t, but I will give it to you. 

Mr. PASCRELL. Thank you. Very good. 

Mr. MCCAUL. Keep it short. 

Mr. PASCRELL. I want to finish with this point by GAO. I like 

GAO. I like the work you do. We don’t follow up because we don’t 

really mean what we say. Twenty five billion—billion dollars of taxpayer money went unaccounted for in fiscal year 2004. That would 

fund the entire Department of Justice. What did we do, Mr. Lutz, 

what did the government do? I know what you did. What did the 

government do to act upon your findings? 

Mr. KUTZ. Could you explain the $25 billion? Is that related to 

the financial statements of the Federal Government? Is that what 

you are talking about? 

Mr. PASCRELL. Yes. 

Mr. KUTZ. Yes, that is a problem with the government not being 

able to reconcile its checkbook, basically. That would be an example, if your checkbook was, in fact, out by $25 billion. 

Mr. PASCRELL. Minor problem. 

Mr. KUTZ. Minor problem, yes. You know, with a budget of $1.6 

trillion, you could say that is still significant. 

Mr. PASCRELL. Well, these things contribute to the $8.3 trillion 

debt we have, too. 

Mr. KUTZ. True. 

Mr. MCCAUL. The Chair now recognizes the gentleman from Connecticut, Mr. Shays. 

Mr. SHAYS. Thank you all for being here. In my capacity as 

Chairman of the National Security Subcommittee of Government 

Reform, we have oversight over Defense, State Department and the 
76

Department of Homeland Security. And this obviously is an issue 

that a lot of committees are looking at. Also, I was on the Select 

Committee to look at FEMA and the Department of Homeland Security and the White House—and, and, and—about Katrina. We 

determined that the White House was in a fog as it related to 

Katrina. We determined that DHS, particularly Mr. Chertoff, was 

missing in action. And we determined that Mr. Brown was derelict. 

I mean, that was our conclusion. 

And there is no way that you, Ms. Dannels, should have to take 

the heat for a storm of almost biblical proportions. I will tell you, 

though, where I am getting troubled—and I also realize that there 

is no way that it is fair to ask a career employee whether their political appointees have done their job. I mean, we can ask it, but 

it is just not something that you can be honest about because you, 

in fact, have to let us come to that conclusion. That is not your conclusion. But what troubles me is that I feel like you are—because 

of this and because no one should take the burden of what happened with Katrina. I mean, it was an absolute disaster all the way 

around. I am troubled that you haven’t readily agreed with GAO’s 

report, because it is accurate; that you haven’t said, we have a 

huge challenge to deal with. And I feel like there is an effort to try 

to minimize it. 

My understanding is, the GAO continually interacts with the Department—that 19 years of seeing them operate, and they warn 

you, and they tell you, this is what we are concluding and so on. 

Was there anything about their report you found shocking or surprising? 

Ms. DANNELS. First, let me tell you, if I in any way have given 

the impression that I am trying to minimize it or the agency is, 

that is not the case at all. I have said more than once, we welcome 

their involvement. We are. 

Mr. SHAYS. That is not—welcoming involvement doesn’t go half 

the way. 

Ms. DANNELS. We are anxious to have their recommendations. 

Mr. SHAYS. That doesn’t cover it either. 

Let me ask you this, do you believe the GAO report is accurate? 

Ms. DANNELS. While you can say that they have interacted with 

us over a period of months, that may be true, but they have also 

interacted with probably 200 different people. 

Mr. SHAYS. Finish your sentence. The statement of fact. 

Ms. DANNELS. The statement of fact I received on Thursday. We 

have not had an opportunity— 

Mr. SHAYS. That is not what I am even asking you about. 

Ms. DANNELS. I don’t know whether 16 percent is reasonable not, 

whether a billion dollars is accurate or not. Any amount is unacceptable. 

Mr. SHAYS. That is true, but that doesn’t get at it. My view is 

you would be way up here with me if you basically said the report 

is accurate because it is—secondly, it is accurate logically because 

we don’t have any mechanism to prevent the fraud, which you 

don’t. We just gave out checks all the way around. 

So there is nothing surprising about this report. It is just kind 

of distasteful for us to have to come to grips with the amount. You 
77

don’t have in FEMA the kind of controls that would have prevented 

this. 

Ms. DANNELS. I will go back to an earlier statement, that some 

of the untested technologies and processes that we used this time 

because our systems were exceeded absolutely did not have those 

controls in place. 

Mr. SHAYS. Is that a yes? 

Ms. DANNELS. I knowledge that. However, I think it is also apparent—and Mr. Kutz himself said that he can’t testify that that 

cemetery had an eyes-on inspection, that eyes-on inspection and 

adequate control. 

Mr. SHAYS. I am giving you an opportunity to not have to take 

the blame for this. All I am asking you is the following: You are 

acknowledging—I don’t want you to sound like a bureaucrat, and 

a bureaucrat is I am going to go to my last statement and so on. 

I would feel better and I would be willing as a Member of Congress, because I think we take some blame here as well, to share 

in this blame. But, to me, if we haven’t reached you, who is in 

charge, then we have further to go than we need to. 

The GAO report is pretty basic. It is pretty clear. There aren’t 

many refutable facts to it. They are saying it is statistical. It could, 

in fact, be more. 

So it would strike me what you would say is the GAO report is 

alarming but not surprising. We don’t have the kinds of controls in 

place to prevent it, and we all know we need to get on with it and 

deal with it. That, to me, would be the most comforting thing. 

Is there anything that I just said that you would find untrue? 

Ms. DANNELS. Absolutely not. We have been completely cooperative with them; and, again, we look forward to the recommendation 

so we can make those improvements. 

Mr. KUTZ. Congressman, can I say one thing? I think you came 

in after we had the discussion. FEMA has also testified, Mr. 

Paulison, that the actual fraud rate is 2 to 3 percent. That is their 

own numbers, and they represent that on 

Mr. SHAYS. I was here. 

Mr. KUTZ. I think there is a real problem with them digesting 

and understanding the bigger number, because they have always 

gone out and said it is 2 to 3 percent, and they did not do a representative, statistical sample to come to that conclusion. 

Mr. SHAYS. You just gave my summary point. It might have been 

more effective if I had done it, since you are basically talking about 

yourself. I was here when you made the point, and I think that is 

the point I want to leave. I am less comfortable than when I came 

because the report still stands, it is valid, but I still see push-back 

from FEMA, and until we stop getting the push-back, then we will 

start to see that we are going to solve this problem. 

Ms. DANNELS. Could I just say that I don’t know what context 

Director Paulison said the 2 to 3 percent for this particular event. 

In my opinion, we don’t yet know what it is. And the real indication, initial indication that we have had was the statement of fact 

that we had Thursday as far as the magnitude of it. 

From my perspective, I think we absolutely expected it to be 

higher than traditionally it has been because of the untested technologies that we did use. So I am not surprised by it. I am certainly 
78

displeased by it. And we are committed to following up, doing our 

evaluations, working with the IG and GAO to take corrective actions. 

Mr. SHAYS. I am going to conclude by saying that I still don’t 

think you are hearing me. The amount of fraud that was outlined 

in this report is pretty, pretty clear. I don’t think it is refutable. 

I think that you had been notified before that this report had these 

kinds of numbers, and I would just say that what would have been 

most comforting is to say the report stands. 

The issue is how we deal with it, and we will work with GAO 

to make sure that we do our best to prevent it in the future. That, 

to me, is the comment that should be made. 

Thank you. 

Mr. MCCAUL. To exercise the privilege of the Chair and follow up 

on the gentleman’s comments, I think you are absolutely on point. 

The problem I see with this hearing is there has been absolutely—

FEMA has wholly failed to respond to the GAO report that just 

came out. And last Thursday—your testimony about last Thursday, 

in my view, my personal view, based on experiences, that is incorrect, as they had been working with FEMA since February on this. 

Perhaps we need another hearing to hear what FEMA’s response 

is to the report. 

With that, I will—the Chair will recognize the gentlelady from 

Texas, Ms. Jackson-Lee. 

Ms. JACKSON-LEE. Let me thank the chairman and the ranking 

member, Mr. Etheridge, very much for this hearing and the opportunity to participate in this hearing as well. 

To all of the panel, you might recognize that Congress tries not 

to use the words angry and frustrated, but there is a great deal of 

anger and frustration and concern, and, obviously, there is also a 

great deal of recognition of the responsibilities of Congress. 

Tomorrow, we will be debating the question of the Iraq war; and 

I frankly think that many will accept the fact that Congress in 

some instances failed there as well. With that in mind, it means 

that there is a heavy burden for Congress to try and fix some of 

these problems. 

I will say to you, Ms. Dannels, that I worked alongside of some 

very dedicated and committed FEMA workers. Most people don’t 

realize a lot of these people are, if you will, part-time or hurricane 

by hurricane and leave their families and go to places way beyond 

their home residence to try to be of help. Coming from Houston, I 

saw a lot of that; and I applaud it. 

At the same time, you have to accept the complete outrage on a 

billion dollars, as the GAO has determined. So to give us a sense 

that you are going to get to it is what really causes the rising tide. 

I just want to, in addition to the billion dollars, just put into the 

record something that—because I saw the desperation. Because in 

walking through the Reliant Arena, where I saw thousands of evacuees, I know that you could argue that the bulk of your work treated people who did leave without any means of identification and 

were sincerely devastated. At the same time, you seem to be defending ChoicePoint and maybe some others that were on the list, 

and I don’t think we need to do things the same way when we are 

in the midst of the crisis. 
79

I would associate myself with my colleagues to say more so than 

Director Paulison, who was interim for a period of time, but Secretary Chertoff was right at the seat of action; and I would hope 

that he would get a message that we need to have the Secretary 

front and center to respond directly to the GAO’s work. You can’t, 

because policy determines whether or not we begin to overhaul the 

financial structure of FEMA. 

So let me just say that some poor soul was at the Pagoda Hotel 

in Honolulu, Hawaii; and no one could find the fact that they were 

not legitimate from October to December. That is a good time to 

be in Hawaii. I guess my question is, desperate as this person is, 

they were able to get across oceans of water to Hawaii, desperate 

as they were. And not only that, they stayed not weeks but months. 

So there is either a basic disregard—and October to December, 

albeit we were still in crisis with dealing with people, it was after 

the immediacy of the moment. So we should have been getting our 

thoughts together and our orderly process together. 

Let me just ask Mr. Kutz, what do you think about that? Was 

there a moment that they could have gotten themselves together? 

You realize the hurricane came at the end of August, the levees 

broke. I see my good friend from Mississippi. There is no detailing 

how enormous the disaster was. 

This person lived in North Carolina. Was there a moment they 

could have begun to look toward not only serving but making sure 

that these abuses were not happening? 

Mr. KUTZ. There are two things I would say. There was probably 

moments after the immediate crisis, but the real effective way to 

do fraud prevention is before the storm. So I think the real issue 

is, FEMA has been around for a while. Why weren’t these controls 

in place in 2004, 2003, 2002? Some of it is very, very basic. Making 

sure that the people that register have valid Social Security numbers, that is really, as I said in the Senate, that is Fraud Prevention 101. That seems so basic, but that is something that they were 

not doing. 

Same thing with addresses. Is the address in the affected area 

and did the person live there? That is very, very basic. 

So I think there was probably a time after the immediate issues 

they could have done better. 

I will use the hotels as an example, because I think they inherited some of the hotel issues from the Red Cross or took it over 

from the Red Cross at some point in time. But they could have 

started requiring people to give Social Security numbers or registrations so they could have been able to check to make sure that 

the people that got the free hotels didn’t also get money for outof-pocket rental that they weren’t incurring. 

Ms. JACKSON-LEE. My last question, Mr. Chairman. 

Ms. Dannels, would more money have helped you? 

Mr. Becker, could you have used more local people rather than 

what you came and did as a Red Cross, which you know is one of 

the arguments we have made, that the Red Cross did not work 

with the local community as it should have. 

Ms. Dannels, could you have used more money, as Mr. Kutz has 

said, beforehand? Even at your level, could you have used more 

money to put systems in place? 
80

Ms. DANNELS. Systems were not in place. 

Ms. JACKSON-LEE. Would that have taken some resources? 

Ms. DANNELS. It would have. 

There is something very important, a point to make here, and 

that is the Red Cross—and I am not throwing my good friend, Mr. 

Becker, here under the bus, but the Red Cross did in fact place the 

people in hotels. It did not go through any of FEMA systems. 

Then we assumed responsibility for that contract in October. We 

were, in fact, trying to end that program and assure we did not duplicate that assistance and identify every person that was in every 

hotel room so that we could get exactly to these points when a class 

action lawsuit was filed against the agency and we were compelled 

by the court to suspend all of our activities to, A, identify people 

in those hotels and, B, end any of that assistance. 

Ms. JACKSON-LEE. I understand that you said you needed more 

resources, and I understand that it was a contract with Red Cross. 

I have already said to Mr. Becker—one of his issues was that he 

came in on the national level and didn’t engage in any of the local 

entities, any of the local organizations, at least initially. We now 

know that you are reassessing what your situation is. 

More resources, and I don’t know—Mr. Becker, this is my last 

question. 

Mr. BECKER. I would agree with your assessment. One of the big 

learnings we had in Hurricane Katrina was partnerships can’t happen in the middle of a disaster. They need to be there, solid and 

done well in advance. 

One of our big organizational-changing strategies going forward 

is not just partnering but reaching out to the right community 

partners, offering to train, offering to equip, and in fact, in time of 

disaster, offering to financially support them if they are feeding 

and sheltering and doing our work. That is what we have been 

about since last fall, try to, with our local chapters, create those 

partners. People from another community serving here don’t know 

the people as well as the people right here in the community, and 

we need to become better at that. 

Ms. JACKSON-LEE. Mr. Chairman, I hope you will persist, and 

the ranking member, on securing the Secretary of Homeland Security if we are to go forward and fix what I think is an embarrassment. Not because they haven’t tried to serve people, not because 

people in Houston are still suffering and need your services, but because we want to do better at this. 

I thank you very much. I yield back. 

Ms. DANNELS. May I also just quickly add for the record that we 

do have a process in place now that would prevent that from happening again. The people, before they go into a hotel, they have to 

go through us. They have to register with us. We have to validate 

their identity, and the hotel will not be paid unless they have that 

authority from us in advance. So we have this in place right now, 

all of the processes and systems to prevent that from happening 

again. 

Ms. JACKSON-LEE. Taking into consideration that some people 

may not have identification because they have been so devastated, 

you do have that part in place as well? 

Ms. DANNELS. Yes. 
81

Ms. JACKSON-LEE. Thank you. Thank you very much. 

Mr. MCCAUL. We may have votes as early as 1:30, so I would like 

to move forward. 

Recognizing the gentleman from New Mexico, Mr. Pearce. 

Mr. PEARCE. Thank you, Mr. Chairman. 

Mr. Kutz, FEMA has testified that they think the fraud is in the 

range of 2 to 3 percent. You all are saying basically 16 percent. 

Just a yes or no, because I have got a lot of questions. Is it a possibility that your method of sampling and the attributing of fraud 

across different classes of payments has contributed to an overestimation on y’all’s part? Are you willing to get in front of the railroad train and lay on the tracks based on your 16 percent? 

Mr. KUTZ. I have done dozens of samples before. I am pretty confident that the statistics are— 

Mr. PEARCE. Thank you. You are embedded from day one, GAO. 

That is what Ms. Dannels testified. 

Ms. DANNELS. That would have been the OIG, Inspector General. 

Mr. PEARCE. I am sorry. Did the OIG ever bring to your attention, Ms. Dannels, there are things that are happening that maybe 

should not be happening? 

Ms. DANNELS. I am sure—we spent hours together. I am sure 

that there were many things brought to our attention. 

Mr. PEARCE. They didn’t send formal memos? 

Ms. DANNELS. I can’t guarantee that, because I can’t guarantee 

I would have necessarily seen them all. They have brought things 

to our attention, and we have started taking action on them, yes. 

There is an ongoing process with the IG, yes. 

Mr. PEARCE. So if we looked at a continuum of problems from the 

beginning to the end, that continuum of problems, Mr. Kutz, started out huge and decreased down. Or some of the more offensive 

things that you testified today, were they occurring deep into the 

timeline? 

Mr. KUTZ. Yes, they were deep in the timeline. 

Mr. PEARCE. So, Ms. Dannels, with all due respect, you testified 

that many of your problems came because you were kind of overwhelmed with the flood and overwhelmed. At some point, the system should begin to catch up. Mr. Kutz is saying that the system 

was not catching up, that the mistakes were just as deep right at 

the end of the measurement period as early on. Is that something 

you would affirm? 

Ms. DANNELS. I would say that it does take more time than a 

matter of 1 month, 2 months or 3 months to make some of the systems corrections that are required. 

Mr. PEARCE. What systems corrections are required, Ms. 

Dannels, for— doesn’t someone have to approve or disapprove payments? You have got this— 

Ms. DANNELS. A lot of that is done via automated business rules. 

Those are the systems I am talking about. The system that is in 

place had to go through a complete acceptance testing process that 

at that time included general counsel, financial folks. 

Mr. PEARCE. I understand that, but my question is a little bit different. You get someone who has got to key in things for the computer to even measure it, for the automation to measure, is that 

right? Somebody has got to key in these requests. For that pay-
82

ment for the Dom Perignon at the Hooter’s, it has got to be keyed 

in by somebody. 

Mr. KUTZ. That was a preloaded card. Once they got the card, 

they could spend the money however they wanted. 

Mr. PEARCE. Are there any instances where things are not preloaded, where they had to request a payment? 

Mr. KUTZ. Yes, everything else. The debit cards were preloaded, 

but all the rental assistance, personal property repair— 

Mr. PEARCE. So people were keying in rental assistance from the 

guys from prison, and I suspect somebody— 

Ms. DANNELS. Actually, I suspect that the rental assistance—

again, we need to go back and look at these specific cases, but the 

rental assistance for the prisoners and I suspect for the people with 

the cemetery addresses were done not with on-site inspections but 

were done all with technology which was the geospacial imagery. 

I suspect that is what we would find. That was a brand-new, untested technology that we acknowledged did not have adequate controls; and we are addressing that. 

Mr. PEARCE. Do you think there is any sloppy work on the behalf 

or have you detected any sloppy work on the behalf of people or is 

it all systems? 

Ms. DANNELS. No, I suspect there is sloppy work, also. 

Again, we hired people and put them into doing jobs that ideally 

would have had more training than they would have had the opportunity to receive. Again, a matter of our systems and resources 

being overwhelmed; and we are taking corrective actions. 

Mr. RYAN. If I could add something to this. We talked about 

these up-front controls. The problem is that they were not applied 

equally. You have a situation in which we attempted to use the 

Internet. Once we couldn’t get into the Internet, the system told us 

to go by phone. So we used the same information that we were 

going to put on the Internet, and we used it on the phone and got 

through. As a result, we were able to get EA payments. We were 

able to get rental payments. Even after we received a letter from 

the SBA asking us to apply for a loan, in which we filled out the 

documents, we gave them permission to look at our tax records, 

which we obviously knew they weren’t going to find any because 

we never filed, we actually got a call from the SBA inspector that 

says, hey, we can’t find your property. It doesn’t exist. 

Shortly thereafter, we get a letter from FEMA saying that they 

inspected our property and that everything is fine. Got not only one 

rental check but two rental checks. 

So the point is that if you are going to put controls in place, they 

have to apply both ways. You can’t have a weakness at one end. 

You talk about up-front controls, these up-front controls of Social 

Security numbers, using P.O. boxes as damage addresses, these 

should be system changes that don’t allow to you do that. I don’t 

think anything of this was done or thought of; and I don’t even 

know, based on the previous audits, if they did any—if these things 

were even taken into consideration. 

Mr. PEARCE. Thank you, Mr. Chairman. I see my time has expired. 
83

Mr. MCCAUL. The Chair recognizes the gentleman who knows 

more about this subject matter than any Member, the gentleman 

from Mississippi Mr. Taylor. 

Mr. TAYLOR. Thank you, Mr. Chairman, for letting me participate today. 

I do appreciate the panel. I appreciate the Red Cross’s generosity. I very much regret that people misused it. I appreciate 

FEMA’s generosity and, again, I regret that there were some people who misused it, but that includes corporate America. 

I was wondering if, in the course of your investigation, you 

looked into the whole FEMA trailer fiasco, where one company, 

Bechtel, was given a noncompete cost plus contract for 38,000—I 

am sorry, 35,000 trailers. Every mistake they made, the taxpayer 

paid for; every new cost they wanted to throw in there, the taxpayer paid for. 

I am still wondering—I remember one day walking on their property and finding 50 what had been brand-new trailers that had 

been cannibalized. You pull a window out of this one to fix that 

one; you leave the trailer open to the elements. You pull the air 

conditioner off, which is rooftop, take it off to stick it on another 

one; you leave that space open. Within a couple of rain storms, that 

particle board floor in the travel trailer is now a piece of sponge 

and that approximately 14 to $19,000 trailer is a piece of junk. 

The first question is, did you look into that? 

Mr. KUTZ. That was Inspector General Skinner, so that was the 

DHS Inspector General. 

Mr. TAYLOR. I would very much like to see that report, because 

I think we as a Nation were taken for a lot of money on that. 

The second one is even bigger fraud, though; and it goes back to 

the National Flood Insurance Program, what is referred to as the 

Write Your Own Insurance. We as a Nation when we started the 

National Flood Insurance Program turned the day-to-day activities 

of that over to the private sector. We were going to back those 

claims, but we count on Allstate or State Farm and Nationwide to 

write the policy. But, much more foolishly, we count on that same 

company to adjudicate the claim. 

Now let’s walk through this. Mr. Dent is not a Member of Congress but an upcoming executive with one of these three insurance 

companies, and we sent him out as a claims adjuster. He is going 

to walk into what is now a slab close to Mississippi or Louisiana. 

There is nothing left. And he is in a position to say, well, it could 

be wind damage, which means it might not look good on my next 

promotion. My employee stock owner plan will be hit for that 

claim. The shareholders who pay my salary may not be happy with 

my performance. Or I can say it was all flood and stick it to the 

taxpayer. 

Now two things happen there. In thousands of instances, claims 

adjusters who were shown bits of roof up in trees that flew there 

or bits of roofs a quarter of a mile from a person’s house that flew 

there ignored all that evidence and assigned all of the claim to 

flooding. That does a couple of things. For the individual, most individuals had a lot more wind insurance than flood insurance. You 

are maxed out at $250,000 on your flood insurance. Even if you had 

a million dollar house, you can only insure it up to $250,000. But 
84

you can buy all the wind insurance you wanted, up to the value 

have your home. 

So if they blame it all on flooding, they have told the individual 

you are only going to get part of your money back. So that hurt 

the individual. But they stuck it to the taxpayer. 

Mr. Chairman, I truly believe that we as a Nation will have let 

the citizens of this Nation down if we don’t have an Inspector General of Homeland Security look into that whole process of letting 

a private-sector company decide whether their company is going to 

pay this claim or whether they are going to stick it to the taxpayer. 

Mr. Ryan, I am going to quote you a thousand times in the next 

year. When you say fraud is a crime of opportunity, I agree entirely. We have created an opportunity where the insurance industry can create a fraud of a billion dollar level and stick it to the 

taxpayer, hurt the individual and walk away from it. Because, at 

the moment, it is apparently perfectly legal; and we as a Nation 

don’t even bother to look over their shoulder. We don’t even, as a 

Nation, look over that claims adjuster’s shoulder and say, wait a 

minute, maybe there was some wind damage. Maybe half of this 

ought to be paid by the insurance company and half of it by the 

flood company. 

We assume those guys are shooting straight with us every single 

time, and—correct me if I am wrong—there is no one in our Nation 

that bothers to check to see if even one of those claims was wrong. 

Now something is weird here. 

You have got a U.S. Senator by the name of Trent Lott, five Federal judges who are suing their insurers just in south Mississippi—

I don’t even know what is going on in Louisiana—because they feel 

like they were abused by their insurance industry when they assigned all the blame to water, when we know from the Navy 

Oceanographic Lab there was 6 to 8 hours of hurricane-force winds 

before the water ever got there. But because the water destroyed 

the evidence, they were in a position to say it was all water. 

Mr. Chairman, again, you are very kind to even let me sit in 

here. You are particularly kind to let me say my piece. But I would 

really hope if we are sincere— 

I do appreciate these guys going after the people who bilk the 

citizens out of 1,000 or 15,000 or 20,000. That is wrong. But if you 

want to look into the biggest fraud of all in Hurricane Katrina, look 

into that. Because we will find that the taxpayers got stuck for not 

thousands, not hundreds of thousands, not millions, my gut tells 

me the taxpayers were stuck for billions of dollars. 

The next couple of weeks we are going to have a vote on the 

House floor to pump about 20 additional billion dollars into the National Flood Insurance Program because we had that many more 

claims than what the premiums are going to pay for. And I am convinced, having seen what I saw of the insurance industry in south 

Mississippi, that one of the reasons we have to pump so much taxpayer money into this is because of claims that should have been 

paid by State Farm, by Allstate, by Nationwide, by other companies out there were stuck to the taxpayer. 

Thank you very much. 

Mr. MCCAUL. The Ranking Member and I visited your State on 

a delegation and saw the devastation, which was horrible, and the 
85

lack of coverage, which ultimately the taxpayer does have to pick 

up the tab. I appreciate your comments; and I would like to now 

recognize the gentleman, from Pennsylvania Mr. Dent. 

Mr. DENT. Thank you, Mr. Chairman; and I thank you for holding this hearing. 

Sometimes—I have been in the political business now for a long 

time, and it can make you a little cynical, and I thought nothing 

would ever surprise me anymore. But as I was brushing my teeth 

this morning I had the TV on, and I heard on the news talk show 

people talking about somebody had used Katrina relief dollars for 

a sex change operation, for going to Hooters and buying—I guess 

it was—Dom Perignon and things like; and I almost swallowed my 

toothbrush. 

My point is this, these FEMA recovery problems are not new. 

The Tribune did an extensive series on waste, fraud and abuse 

with respect to the aftermath of various hurricanes over the past 

several years and other weather incidents. I recall one up in Michigan, in Detroit, where there was all kind of fraud. I remember 

reading stories about communities or counties not declared a state 

of emergency where somehow claims were being made. 

So this is not a new problem, and I guess my first question to 

GAO would be that I suspect you had done reports on these previous weather incidents in the past, is that true? 

Mr. KUTZ. Not with respect to this program. This is the first time 

we have looked at this program. 

Mr. DENT. I guess the question that I have for the GAO is that 

I would like you to discuss the recommendations that I believe you 

will be making very shortly with respect to the massive amounts 

of fraud that has occurred down there. And I guess what really 

bothers me is, when you see somebody like Mr. Taylor over here 

who, along with thousands of his constituents who have suffered 

terribly—that every dollar that is wasted, that is spent for something it ought not to be spent on, is one less dollar going to somebody who is truly out there in need and in dire need of assistance. 

So I guess the question is, could you please discuss those recommendations and what do you recommend that we do about this 

problem? Because it is not a new problem, and with Katrina I suspect it is a bigger problem because there is more damage and more 

false claims than we have seen in recent years. 

Mr. KUTZ. The primary recommendations relate to the up-front 

validation process, the identity validation and damaged property 

address validation and a combination of making sure that the person actually lived at that address at the time of the hurricane. 

That is what I think Ms. Dannels’ has talked about. They have 

taken some action to try to improve that and have a broader swath 

of Internet and telephone coverage and damage address coverage. 

I do think, though, that this is going to take some time. Because 

the depth and breadth of the problem is significant, and there are 

a lot of people that are going to get through regardless. So they 

probably have to take a top-to-bottom look at all the aspects of control, whether it be inspection process, the phone centers or whatever the case may be. 

Our recommendation is primarily identity validation, damaged 

property, looking into arrangements to have data sharing with So-
86

cial Security and the Postal Service. And I think they have said 

they are not going to hand out debit cards, but if they do—and, 

again, I want to clarify I don’t see anything wrong with the debit 

card. It is how it was managed. The debit card has some effective 

way to disperse money, and they have used it for other things like 

the census, so it has been used effectively before. 

So that is the kind of nature of some of the recommendations we 

have on record. 

Also, she has addressed one of the other ones as part of additional recommendations in the future, keep track of who is actually 

checking into the hotels and making sure you don’t send them rental assistance payments if you are already paying for their hotel 

room. That is something she has talked about they are trying to 

put in place for the next set of disasters. 

Ms. DANNELS. We have put in place. 

Mr. DENT. I guess I would like to see what changes we have 

made or are making now in response to Katrina versus what 

changes we made in response to the previous weather incidents. I 

realize that we are using new technologies and methods of distributing money that you probably didn’t use in previous situations, 

but I think we need to understand that as a committee. 

Finally, I don’t know what you can say about this, but it really 

irks me. How could somebody pay for a sex change operation? 

There has got to be some kind of control. Can anybody comment 

on that? 

Ms. DANNELS. What I would say and one of the reasons we are 

not doing debit cards again this year is we don’t have a program 

that has enough adequate controls. When we do roll it out, which 

will be sometime in the future, not in the immediate future, we will 

block certain codes. He tells me MCC codes. We will block certain 

purchases so that people simply can’t have those things. 

Mr. DENT. Was that purchase made out of housing assistance or 

IHP program? 

Ms. DANNELS. That would have been out of IHP. That is correct. 

Mr. DENT. That would have been considered a medical service, 

clearly not hotel or some kind of temporary residence. I just don’t 

understand how this could have happened. 

Mr. RYAN. When they get these checks, they can spend it for 

whatever they want as long as they cash it. They can use it for 

that. They can use it to go on vacations. They can use it to gamble. 

It is a matter that the Government has dispersed the funds. FEMA 

has determined that they are entitled to the funds. They can either 

get a check or EFT transfer; and, after that, there is no visibility 

what they are doing with the spending of the cash. 

In a lot of the cases that we are talking about, in the fraud cases, 

they use multiple names, multiple Social Security numbers, multiple damage addresses. But one of the common denominators is 

they all have the money sent to the same place. So it was a good 

start for us to work on these investigations. 

But in interviewing the people or talking to the people on the 

street that are actually doing the investigations, a lot of the postal 

inspectors, the money is spent on almost anything. So that is what 

they are doing. 
87

Ms. DANNELS. Mr. Dent, I would like to also mention to you and 

the rest of the committee that the hearing that we had with the 

GAO before the Senate in February, they had some initial findings 

there. We acted on those and had implemented many of the recommendations of their report which was issued in June, prior to 

their report ever having been issued. 

If you go back and look at the IG—you asked if they had done 

other investigations with us, and they have not on natural disaster 

events. The IG has done many. I think if we go back and look at 

those reports and the recommendations you will see an excellent 

track record of FEMA taking those recommendations very seriously, following up and implementing them. We are committed to 

this. 

Mr. DENT. Thank you. 

It gets a little depressing. Because, on the one hand, we want to 

be compassionate and help the people like Mr. Taylor and his constituents. When you hear these stories, it just makes you question 

what you are doing sometimes. 

Thank you, and I yield back. 

Mr. MCCAUL. Thank you. 

I want to thank the witnesses for your testimony. We are going 

to keep this hearing open for 10 days, allow the members to ask 

questions in writing. 

I have a request to make as Chairman, that FEMA provide a 

full, fair and honest response to the GAO report. 

I would also like from all the panelists recommendations for legislation on the issue of waste, fraud and abuse so this will never 

happen again. 

Thank you so much; and, without objection, the committee 

stands— 

Mr. ETHERIDGE. Mr. Chairman, I think the issue that Mr. Taylor 

raised is important to this committee; and I would hope in the near 

future we invite the IG of Homeland Security here so we can talk 

about that. Because that is a huge transfer of dollars from the taxpayer to somebody else, and we ought to at least get an answer on 

it. 

Mr. MCCAUL. Without objection, the committee stands adjourned. 

[Whereupon, at 1:32 p.m., the subcommittee was adjourned.] 

(89)

A P P E N D I X 

FOR THE RECORD 

QUESTIONS FROM THE HONORABLE MICHAEL MCCAUL FOR DONNA DANNELS

RESPONSES

Question: 1. Describe the forensic audits conducted by FEMA in order to 

determine internal control weaknesses in benefit disbursement systems. 

In the aftermath of Hurricane Katrina, DHS and FEMA undertook an effort to 

conduct an internal controls assessment related to processes surrounding certain 

areas of the Disaster Relief Fund (DRF) and the National Response Plan (NRP) Financial Management Support Annex. The purpose was to perform an analysis to determine if the design of the stated controls addressed significant risks as well as 

complied with Federal regulations surrounding the Individuals & Households Program (IHP). The assessment was conducted by a contractor from November 16, 2005 

to January 19, 2006, in accordance with OMB Circular A–123, Management’s Responsibility for Internal Controls. As a result of this assessment FEMA is implementing corrective action plans designed to fix weaknesses in its benefit disbursement systems.

Question: 2. What process is FEMA using to detect and prevent fraud in 

benefit disbursement systems? 

In order to effectively respond to the unprecedented disaster activity and severity 

of the 2004 and 2005 hurricane seasons, FEMA revised its existing disaster assistance processing procedures. The importance of verifying applicants? identities outside the traditional method of an on-site inspection became a priority. 

Identity Proofing: In June 2005, FEMA implemented Identity Proofing for its 

Internet registration intake application. Identity verification is intended to guarantee that the individual applying for assistance is a ‘real’ person. FEMA employs 

the following checks of an individual’s Social Security Number (SSN) during the 

identity verification process: 

• The submitted SSN is valid based on SSA algorithms. 

• The submitted SSN matches the applicant name. 

• The submitted SSN does not belong to a deceased individual. 

• The submitted SSN is not associated with multiple individuals. 

In February 2006, FEMA implemented identity verification for applicants registering via the FEMA call centers, thereby subjecting ALL FEMA disaster assistance applicants to the identity verification process. Additionally, all applicants from 

the Hurricane Katrina disaster forward who had not previously been subjected to 

identity verification were subsequently verified. 

Owner / Occupancy Verification: Traditional FEMA processing involves an inspector visiting an applicant’s damaged home or residence address and verifying 

ownership and occupancy first hand. For many Katrina and Rita victims, on site inspections were not possible. For the 2005 hurricane season, FEMA implemented an 

interface with an outside vendor to verify ownership and occupancy for identified 

groups of applicants whose residences could not be inspected. In June 2006, a real 

time interface with FEMA’s identity verification vendor was implemented for ALL 

disaster applicants to confirm owner / occupancy status making the information 

available for any necessary future award decisions. 

In addition, FEMA continues to strengthen its internal controls and work closely 

with the DHS Office of Inspector General and other Government oversight/investigative elements to limit the risk of fraud in its benefit disbursement systems. 

TThis past spring, FEMA engaged a contractor to conduct a formal assessment of 

the Hurricane Katrina DRF IHP payments to identify improper payments, assess 

the reasons for them, and to develop corrective action plans to mitigate the risk of 

future occurrences of erroneous payments. This effort is ongoing and includes DRF 
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IHP payments valued at approximately $5.3 billion made during the time period 

September 1, 2005 through March 1, 2006. 

Duplicate Payment Prevention: During hurricanes Katrina and Rita, the 

NEMIS system cross checked for registrations with the same SSN, EFT, or Damaged Phone between Katrina and Rita to prevent EA from going to the same person 

for both events. Traditional NEMIS controls to prevent duplication within the same 

disaster check for these same matching data points in order to prevent payment 

without a manual case review to determine which person(s) in the household is eligible for payment. In October of 2005, the Internet registration application was updated so that applications with any duplicate criteria listed above would be refused. 

In June of 2006, FEMA removed the manual override feature in the call center application for applicants applying with the same SSN, thereby eliminating duplicate 

applications in the same disaster with the same SSN. In August of 2006, the call 

center application was updated to also show the registrar when an applicant was 

using the same damaged address as another applicant in the same disaster. The 

registrar is still able to accept the new application based on additional interview 

questions with the potential applicant.

Question: 3. What internal controls have historically been in place to prevent fraud? What controls have been put in place in the aftermath of 

Katrina and Rita? 

In the past, FEMA controls on fraud included—

• Duplicate application checks (within the same disaster) on applicant social security number, co-registrant social security number, electronic funds transfer 

information, and damaged dwelling phone number. Duplicate applications identified during the registration process generated advisory popup messages to attempt to guide registrars to not complete exact duplicate applications. Additionally, an application could not be processed for payment until a caseworker reviewed the case and determined that the application was not an exact duplicate 

with another application and was potentially eligible for payment. 

• An automated check against National Flood Insurance Program data to identify insured applicants who did not report flood insurance when they registered. 

• Inspector onsite verification of losses including photographic evidence of damage. 

• Verification of receipts for reimbursement of disaster related expenses. 

• Applicant identity verification on Internet registrations.

Since Katrina and Rita, the following additional steps have been implemented: 

• Applicant identity verification is applied to all call center registrants. 

• External vendors are used to assist the agency in verifying ownership and occupancy claims of applicants. 

• Enhanced checks for duplicate applications have been implemented. Exact duplicates on registrant social security, banking information or phone numbers are 

now blocked on the Internet (as of October 2005) and call center (as of June 

2006). Warning ‘‘pop-ups’’ during the call center registration process will allow 

the registrars to prevent more duplicate registrations.

Question: 4. Does Choice Point capture data on Internet registrations 

that fail? 

No. ChoicePoint stores the inquiry and the input data provided to process the 

transaction. The information is accessed for customer service purposes by authorized 

personnel only according to ChoicePoint’s information security and privacy policies. 

This information is not stored on the FEMA side for Internet registrations. 

ChoicePoint has indicated that they have the capability to incorporate advanced 

analytics and ‘‘alerts’’ to notify FEMA of any fraudulent patterns associated with the 

use of identity information. This capability is under consideration.

Question: 5. What field tests were run or are being run to verify the accuracy/efficacy of Choice Point? 

FEMA staff tested the identity verification process by entering accurate personal 

information to confirm whether they were identified as valid. Fictional information 

was also entered to confirm that the registration was identified as invalid. Information for deceased individuals was also entered to validate that portion of the 

ChoicePoint check. Additionally, field inspectors are instructed to confirm the identity of individuals who receive a housing inspection. This information then can be 

compared to ChoicePoint verifications. Some analysis has been done to compare the 

Ownership and Occupancy verification rates between the on-site inspectors and 

FEMA’s data vendor on those applications that had both verifications performed. 

The overall accuracy rate between the two verification mechanisms exceeds 90%.
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Question: 6. What data points are used by Choice Point to verify identity 

of applicants for federal disaster assistance? 

FEMA sends ChoicePoint the following applicant information: First Name, Last 

Name; Social Security Number; Phone Number; Address: Street, City, State, 

Zip; Date of Birth (DOB)(month, day, year). ChoicePoint uses a broad range of 

sources to verify identity, including credit headers, driver’s license records, vehicle 

registration records, real property records, utility records, phone records and others.

Credit header information is the single most comprehensive source of identity 

verification information. Credit headers do not contain credit information. In addition to being used for identity verification and authentication, credit headers are 

used to prevent and detect fraud and in law enforcement investigations.

Question: 7. In the aftermath of Katrina did Choice Point or FEMA capture registrations that failed on the internet? Were these failures used to 

reject phone registrations? 

No, this information from online registrations was not able to be cross referenced 

with registrations taken by phone on the 800#. The intent was to deploy the identify 

verification capability to registrations taken by phone which would have rendered 

such a cross reference unnecessary. The information technology (IT) development resources required to build the cross reference capability into the system would have 

detracted from other high priority system changes. Unfortunately, the volume from 

Hurricanes Katrina and Rita created demands on the processing system for several 

months, which prevented the deployment of several system changes (such as ID 

proofing on the 800#). 

Identity verification failure is not used to block or reject registrations altogether, 

since individuals who fail identity proofing may fail for valid reasons not related to 

fraud. For example, someone who just turned 18 years old and has had very few 

public records created may not have sufficient information available to verify his or 

her identity. Another example is someone who recently married and may not have 

sufficient information available under the new last name. Rather than block these 

types of applications, they are sent for inspection and a field inspector performs an 

‘‘eyes on’’ identity verification. Applicants who fail identity verification are not eligible for payment without documentation and manual review.

Question: 8. What was the fraud percentages of applications taken 

through the internet as compared to the fraud experienced with applications taken over the phone? 

FEMA receives raw data from the OIG on fraud cases, but has not conducted an 

analysis to determine the percentage of fraud committed via internet versus telephone registration. The lack of front-end identity verification controls on telephone 

registrations contributing to fraud was apparent. Analysis was not necessary to understand what actions needed to be taken. FEMA has implemented a number of improved identity and occupancy verification controls. 

The GAO has produced a number of reports and statements of fact on the Individual and Household Program. In May of 2006, GAO conducted a broad data sweep 

of NEMIS Katrina and Rita payments and provided FEMA with an extensive list 

of potential duplicate and/or improper payments. GAO did not, however, indicate 

which of these payments represented the fraudulent cases cited as part of GAO Report 07–300. Although FEMA has made several requests for more specific information related to GAO 07–300, GAO has refused to provide FEMA with additional information. If FEMA had received the requested data, it may very well have proven 

to be helpful in conducting post-disaster analysis to determine what improvements 

could be made to our systems and processes to minimize fraudulent disaster claims.

Question: 9. How are duplicate registrations for federal disaster assistance being prevented? Describe how this has been field tested. 

Registrants that match a previous registrant’s social security number in the same 

disaster are prevented altogether. If, during registration, a co-registrant is entered, 

and their social security number matches a previous registrant or co-registrant, the 

registration intake agent taking the call is directed to identify the possible duplicate, and to determine whether the application should be completed. Even if the 

agent does continue, the completed registration will be flagged for further investigation and resolution prior to provision of any financial assistance. Duplications of social security numbers, banking information, and telephone numbers are rejected on 

the Internet application altogether and the person must register by phone. 

Regarding field testing, FEMA is testing hardware, software, and re-engineered 

procedural processes prior to their release and implementation to end-users in the 

production environment to ensure effectiveness. Additionally, we are completing val-
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idation analysis throughout the course of testing to confirm that requirement compliance is fulfilled and is traceable to system specifications.

Question: 10. Describe the background checks in place, during the aftermath of Katrina, on those taking registrations over the phone. Describe the 

background checks in place now. 

During Katrina, the individual’s information was submitted to the National Crime 

Information Center (NCIC) for a preliminary background check. At the same time, 

fingerprints were obtained and FEMA then processed the fingerprints through the 

FBI Criminal History system. 

For contractors, should negative information or history come back from the NCIC 

check, the contractor was advised that access to FEMA facilities or information systems could not be granted. Only favorable NCIC checks would allow these individuals to receive FEMA contractor badges and begin working. Fingerprints returned 

from the FBI would be adjudicated and a favorable or unfavorable decision for continued employment was made. 

NCIC checks are no longer being used as an interim step. The contractor is required to have fingerprints taken, sent to the FBI Criminal History system, returned and adjudicated by FEMA Security prior to beginning work with the Agency.

Question: 11. Provide the following background information on the Expedited Assistance program. 

When was it created? ‘‘Fast Track’’, the predecessor to Expedited Assistance, 

was first used in 1992 in response to Hurricane Andrew and was also implemented 

during the 1994 Northridge earthquake, which prior to the hurricanes of 2004 and 

2005 had been FEMA’s largest disaster in terms of the number of applicants. In 

1998, FEMA issued Response and Recovery Directorate Policy No. 4430 A/C which 

formally codified Expedited Assistance. 

What is the legal basis for the program? Expedited Assistance (EA) is simply 

the name given to supplying assistance otherwise available under Section 408 of the 

Stafford Act (42 U.S.C. § 5174) in an expedited manner. It is not a separate program. In our view, this provision of the Stafford Act is sufficiently flexible to permit 

the provision of EA in a situation such as Katrina and Rita where FEMA is unable 

to provide shelter as quickly as it is needed and where impacted individuals and 

households are able to find housing on a temporary basis themselves. EA may also 

be used to provide Other Needs Assistance (ONA) under section 408(e) for ‘‘other 

expenses.’’

What was the programmatic justification for the program? The General Accountability Office (GAO) concluded in its October 1997 report (GAO/RCED–98–1) 

that the legal authority for expediting disaster assistance is implicit in the Stafford 

Act and that FEMA has the discretion to expedite the delivery of disaster assistance 

in order to ‘‘assist the largest number of disaster victims in the shortest possible 

amount of time.’’ FEMA issued the EA policy in January 1998, in coordination with 

FEMA’s Office of General Counsel. FEMA’s Inspector General also endorsed the 

need for an expedited approach of this nature in the review of the Federal response 

to Hurricane Andrew in 1992 in its January 1993 report titled FEMA’s Disaster 

Management Program: A Performance Audit After Hurricane Andrew (H–01–93).

Provide the legal memo authorizing its creation; please provide any documents in support of your answers. A copy of the 1997 GAO report and 1998 

FEMA original EA policy is attached.

Question: 12. How many times has EA been used historically? Please provide: the number of disasters and description of each; the disaster location; 

the total amount of the Expedited Assistance paid; the number of recipients of Expedited Assistance; description and information on forensic audits of the program each time it was used.
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Following is the EA Report for specific disasters. 

Dstr 

mon/yy

of

Decl 

ST Incident EA Recipients 

EA

Amount

Per

Recipient 

EA Award Amt Valid Registrations 

% of EA

Recipients to

Total Valid

Registrations 

1401 Feb ‘02 OK Ice 2,472 $300 $741,600.00 26,786 9.2%1402 Feb ‘02 KS Ice 1,065 $300 $319,500.00 10,457 10.2%1403 Feb ‘02 MO Ice 3,128 $300 $938,400.00 19,422 16.1%1422 Jun ‘02 AZ Fire 60 $503 $30,180.00 8,207 0.7%1545 Sep ‘04 FL Hurricane 38,233 $569 $21,772,274.60 457,010 8.4%1548 Sep ‘04 LA Hurricane 744 $530 $394,515.00 9,345 8.0%1549 Sep ‘04 AL Hurricane 16,007 $418 $6,694,064.34 165,332 9.7%1551 Sep ‘04 FL Hurricane 20,715 $472 $9,774,234.76 146,317 14.2%1552 Sep ‘04 PR Hurricane 4,021 $384 $1,542,894.20 196,429 2.0%1553 Sep ‘04 NC Hurricane 757 $398 $301,121.00 7,696 9.8%1554 Sep ‘04 GA Hurricane 297 $653 $193,928.00 2,674 11.1%1555 Sep ‘04 PA Svre Storm 69 $435 $30,002.00 1,440 4.8%1556 Sep ‘04 OH Svre Storm 1,405 $381 $534,652.00 8,986 15.6%1557 Sep ‘04 PA Svre Storm 3,549 $494 $1,752,276.00 37,105 9.6%1558 Sep ‘04 WV Svre Storm 1,143 $367 $418,916.00 7,240 15.8%1561 Sep ‘04 FL Hurricane 36,073 $551 $19,889,827.60 356,506 10.1%1563 Oct ‘04 NJ Hurricane 48 $909 $43,644.00 734 6.5%1565 Oct? 04 NY Hurricane 41 $512 $20,990.00 1,151 3.6%1603 Aug ‘05 LA Hurricane 618,754 $2,020 $1,249,575,377.00 1,077,673 57.4%1604 Aug ‘05 MS Hurricane 161,555 $2,001 $323,229,566.00 515,808 31.3%1605 Aug ‘05 AL Hurricane 22,856 $2,000 $45,715,296.40 112,702 20.3%1606 Sep ‘05 TX Hurricane 210,131 $2,000 $420,278,933.00 476,206 44.1%1607 Sep ‘05 LA Hurricane 141,391 $2,000 $282,804,839.00 316,689 44.6%
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The above chart does not include statistics on ‘‘fast track’’ housing assistance that 

was used on a limited basis in the aftermath of Hurricane Andrew and the 

Northridge Earthquake. Both disasters displaced hundreds of thousands of people, 

compelling FEMA to expedite housing assistance (termed fast track at the time) to 

individuals to meet their emergency housing needs, as the traditional methods for 

providing such assistance were inadequate to meet such a high demand. At this 

time applications for disaster assistance were taken on paper, and the average time 

to complete and process an inspection in many cases was 21 to 30 days. 

FEMA targeted the highest impacted areas and provided one month of rental assistance to individuals applying from zip codes located in these areas. This assistance was tagged and paid from the rental assistance funds allocated in each of these 

disasters. The system used for processing disaster assistance during each of these 

events (ADAMS) is a legacy DOS based program that would only give us information as to the number of individuals paid rental assistance. As a result, it is not 

possible to separate out ‘‘fast track’’ payments from standard rental assistance paid 

post housing inspection. The only historical information we were able to find in reference to ‘‘fast track’’ assistance was in relation to Northridge. Specifically, a 1997 

FEMA OIG memo to Senator John McCain, which indicated that 48,302 Northridge 

applicants received ‘‘fast track’’ payments totaling $143 million.

Provide description and information on forensic audits of the program 

each time it was used. 

Regarding information on audits of the EA program, there is no distinction between program close-out for an individual disaster and EA. As a result, no specific 

audit information on EA is available.

13. How many people received EA during Katrina? 

803,165 Katrina registrants received EA.

14. Questions regarding FEMA’s recoupment efforts. . .

Please provide an overview of FEMA’s recoupment effort. 

As part of its mission to maintain close oversight on the distribution of disaster 

assistance, FEMA is performing a detailed review of applications and awards, and 

where appropriate, notifying individuals by letter about necessary repayments, payment plan options and the appeals process. 

FEMA’s recoupment effort begins with the identification of applicants that need 

additional review to determine if a recoupment action is appropriate. This identification of applications comes from a wide range of sources to include but not limited 

to referrals from other Agencies, caseworker identification upon additional review 

of an individual’s case, and performing searches for overpayments through NEMIS 

reports. 

Upon identification that an applicant may need additional review for possible 

recoupment action, the case is reviewed by a caseworker trained to process these 

types of cases. Additionally, if the determination is made that a recoupment is appropriate for the individual, the case is forwarded to a secondary review for concurrence. Once the determination is made that the applicant has to return funds, the 

recoupment letter is sent to the applicant and the case is referred to Disaster Finance. 

As in all housing determinations, individuals who have been notified that they are 

in recoupment status have the right to contact FEMA to further discuss their case, 

request information from their file, or appeal FEMA’s determination. Instructions 

are provided to individuals in their letter outlining the recoupment and appeals 

process, as well as information on setting up repayment plans.

How much money has been recouped to date for Hurricanes Katrina and 

Rita? As of 6/9/2006, over $770,000 has been recouped.

How many recoupment actions have been initiated for Katrina and Rita?

As of 5/11/2006, 5,450 Katrina and Rita applicants have been approved for 

recoupment; in each of these, the Collection Disaster Housing (CDH) letter was sent 

and their files were transmitted to FEMA’s Disaster Finance Center.

How many recoupment letters have been sent? As of 5/11/2006, 5,450 CDH 

letters have been sent. 

What is the response rate of the effort?—Response rate data is unavailable 

at this early stage in the recoupment effort. FEMA could provide a status update 

in the coming months as it becomes available.

How many recoupments have been initiated in relation to EA? A total of 

1,457 recoupment actions (Katrina only) have been initiated due to either multiple 

payments or overpayments of EA for.
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How much money has been recouped? As of 6/9/2006, over $770,000 has been 

recouped.

15. Please provide any and all historical data on recoupment efforts, by 

disaster.

Apps Assisted APPS Recoup Initiated 

• DR–1539–FL (2004) 139,392 1,422 • DR–1545–FL (2004) 277,537 2,054 • DR–1551–FL (2004) 100,447 1,268

• DR–1561–FL (2004) 227,732 3,170

For additional information, please reference FEMA recoupment reports which are 

currently submitted to the IG, GAO, and DOJ on a monthly basis.

16. Questions related to FEMA work with other departments with regard 

to background/identity verification checks. . .

Describe the work FEMA is doing to work with other Departments/ agencies with regard to background/identity verification checks. 

FEMA continues to work closely with Federal agencies to detect fraud. We have 

put in place a Memorandum of Agreement (MOA) with the Katrina Fraud Task 

Force (Fraud Task Force), headed by the U.S. Department of Justice’s (DOJ) Criminal Division and the Assistant United States Attorneys, which consists of numerous 

Federal agency Offices of Inspector General (OIGs). FEMA has trained and granted 

authorized Fraud Task Force employees limited access to FEMA’s Privacy Act ‘‘Disaster Recovery Assistance Files’’ (‘‘Disaster Assistance’’) system of records for the 

purpose of identifying and investigating fraud cases. FEMA is also currently working closely with the U.S. Department of Housing and Urban Development (HUD) 

and has entered into a Matching Agreement that has been published in the Federal 

Register to help identify FEMA applicants who may also be receiving a duplication 

of disaster housing benefits from both FEMA and HUD and for fraud purposes. Because the information and the records sought by other Federal agencies are ‘‘individually identifiable information’’ of applicants to FEMA for Disaster Assistance protected by the Privacy Act of 1974, FEMA is obligated to protect the privacy of each 

Katrina and Rita disaster victim. In addition, FEMA is required to follow all of the 

Privacy Act requirements, as mandated by the Office of Management and Budget 

and can therefore release records only as permitted by the Privacy Act. FEMA is 

permitted to share each disaster victim’s personal information only to other parties 

who demonstrate a legitimate, statutory need to obtain FEMA’s information that 

conforms with the Privacy Act. Because all Federal agencies are charged with this 

responsibility, most understand the Privacy Act’s requirements and the necessity to 

articulate their legitimate need and legal authority to obtain FEMA’s information 

on Katrina and Rita disaster victims.

When did FEMA begin this work? 

FEMA began working with these agencies in the immediate aftermath of the 2005 

Hurricane season; however, the agreements with these agencies were formalized 

on—

March 1, 2006—for the Katrina Fraud Task Force 

June 21, 2006—for the HUD Matching Agreement

Which Departments/agencies has FEMA contacted? 

FEMA’s Recovery Division has been working closely with the FEMA Office of 

Chief Counsel (OCC) on the Memoranda of Agreement and Matching Agreement due 

to the complex legal requirements. After meeting and discussing with the Federal 

agencies, FEMA’s Recovery Division has worked very closely with not only FEMA 

OCC, but also with the FEMA Chief Information Officer (CIO) to address system 

technical and security access issues that may arise from other Federal agencies’ access to information. Outside of FEMA, agencies include DOJ, HUD, and OIGs, based 

on the description above.

When will the Department/agency agreements be finalized? 

The agreements with these agencies were formalized on—

March 1, 2006—for the Katrina Fraud Task Force 

June 21, 2006—for the HUD Matching Agreement 

As indicated above, the Recovery Division works very closely with FEMA OCC to 

ensure that we are proactive in efforts to prevent fraud, waste, and abuse. FEMA 

welcomes the opportunity to work closely with other agencies to utilize various Federal agency’s systems and processes to proactively address potential fraud. It is dif-
96

ficult to estimate the date upon which agreements will be finalized as several steps 

and requirements remain: 

Review and concurrence from each agency’s Offices of General Counsel; 

• Review and concurrence by each agency’s Data Integrity Boards; 

• Approval by the Office of Management and Budget; 

• Publication in the Federal Register for a period of 40 calendar days before 

the Matching Agreement goes into effect as required by the Privacy Act; and 

• Notification to Congress.

17. What employee/contractor training related to fraud prevention is provided? 

All call center and processing staff (whether FEMA or contract employees) are 

provided clear instruction during training classes on how to report suspected fraud 

by applicants or by FEMA/contract staff. The suspected fraud may be reported to 

them by the public or the staff may suspect it as a result of their phone discussions 

with an applicant or their work with an applicant’s case. Instructions are also given 

to members of the public wishing to report suspected fraud directly to the OIG. Refresher and updated information and reminders are provided periodically during inperson pre-shift meetings and issued in bulletins. 

The contract housing inspection staff is often in the best position to detect applicant fraud. Inspector trainers discuss possible fraud in the areas where the opportunities are most prevalent so that the inspectors are more sensitive to recognizing 

potential fraud. For example, identifying deferred maintenance and pre-existing conditions the applicant claims as disaster damage as well as simple applicant exaggeration; awareness is emphasized in the training when the covering Occupancy and 

Ownership verification; Personal Property ‘‘Verbal Unable to Verify’’ (the applicant 

has already disposed of damaged items); and actually testing appliances the applicant claims were damaged. The Fraud Hotline number and instructions for reporting suspected are provided to inspectors during training. FEMA audits the contractor training classes to ensure appropriate training is conducted, including fraud 

detection discussions. Additionally, FEMA in coordination with OIG is developing a 

specific module to include in FEMA’s training for inspectors under the new contracts to be awarded this summer. 

After inspectors are deployed to a disaster area, the detection and reporting of 

fraud are specifically emphasized during the field briefings as they begin conducting 

the actual inspections.

The contract requirements related to fraud prevention which are covered in training include—

• Inspectors photograph damaged dwelling (currently 2 photos; new contract 

will require 5) 

• Inspectors verify addresses onsite. 

• Inspectors verify ownership and occupancy at the time of the inspection. 

• Inspectors verify applicant’s identity at the time of the inspection. 

• Inspectors are now required to list in comments which personal property 

items the applicant is claiming as damaged when the item wasn’t present at 

the time of the inspection. 

• Inspectors are required to test appliances before recording damage to them. 

• Inspectors are required to identify categories of deferred maintenance (DF). 

Identifying DF is a factor that makes the inspectors distinguish true disasterrelated damage vs. something the applicant has not maintained. 

• Inspectors are required to support their decision when the home needs repairs. They must record the categories of damage that made the home unsafe; 

i.e. roof, electrical, windows. 

• Inspectors are required to identify what caused the disaster-related damage 

to vehicles; i.e. wind blew tree onto car. 

• Inspectors now view receipts for generators and chainsaws verifying date of 

purchase to coincide with FEMA’s eligibility timelines. 

• Inspectors must recuse themselves from an inspection if there is a conflict of 

interest; e.g., inspector’s relative owns damaged dwelling. 

• Inspectors suspecting fraud must call OIG Fraud Hotline, or their Field Supervisor, who then provides information to the OIG at the Joint Field Office.

18. Ms. Dannels testified on June 14, 2006 that FEMA is adopting ‘‘a more 

systematic use of technology’’ to prevent fraud. Describe such technology 

and how it will prevent and detect fraud. Has this technology been field 

tested? Please describe such field testing. 

FEMA’s focus on more stringent policy enforcement for applicants who cannot 

substantiate their identity, along with enhancements for identity verification and 
97

authentication, will prevent and detect fraud. Our response to Question #2 includes 

specific criteria utilized for identity verification. 

The following safeguards have been proposed and are undergoing analysis of feasibility, desirability, and cost-benefit to the agency. Some projects are waiting funding and software development; others are currently under development and will be 

deployed as soon as feasible. These improvements include— • Enhancing services and data sharing from government and commercial data 

providers. 

• Implementing additional verification measures before providing Expedited Assistance. 

• Implementing new system constraints to prevent inaccurate or over-payments. 

• Integrating voluntary, local and government assistance data to ensure that 

the FEMA IHP is not duplicating benefits with other parts of the organization 

or other agencies. 

Regarding field testing, FEMA is testing hardware, software, and re-engineered 

procedural processes prior to their release and implementation to end-users in the 

production environment to ensure effectiveness. Additionally, we are completing validation analysis throughout the course of testing to confirm that requirement compliance is fulfilled and is traceable to system specifications.

19. In FEMA’s May 19, 2006, response to the GAO draft report, with regard to rental assistance, the letter stated ‘‘$2,358 was provided to those 

registrants that lived in one of the 5 hardest hit LA parishes or 3 counties 

in MS. Verification of occupancy at a valid address was established by utilizing a FEMA contractor.’’ If verification of occupancy at a valid address 

was established before benefits were disbursed, then explain how each of 

the registration scenarios below took place:

a. thousands of federal and state prisoners apply for and received benefits; 

Some applicants provided their pre-incarceration residential address and the 

FEMA mail was forwarded to them. Any assistance provided under these means 

would not prove that the pre-incarceration residence was not their primary address or that they did not own the residence. For applicants who did provide 

prison addresses, our address correction and existing data sources did not automatically identify the applicant as a federal or state prisoner; only that the applicant had a valid address. FEMA is working with its data vendor to provide 

flags as to the type of address (residence, business, prison, etc.) so that FEMA 

may limit payments to only those addresses that are primary residential addresses.

b. how an applicant using a cemetery as a damaged address received 

benefits; 

FEMA’s address correction and existing data sources did not identify the address as belonging to a cemetery; only that it was for a valid address. There 

are times when a cemetery address is a valid registration address. For example, 

if a cemetery caretaker is affected by a disaster, he/she may register for assistance using the cemetery address. However, FEMA is working with its data vendor to provide flags as to the type of address (residence, business, prison, etc.) 

so that FEMA may limit payments to only those addresses that are primary 

residential addresses.

c. how a vacant lot used by GAO as the damaged address receive benefits; 

FEMA’s address correction and existing data sources did not provide that an address was for a vacant lot; only that it was for a valid address. FEMA is working with its data vendor to provide flags as to the type of address (residence, 

business, prison, etc.) so that FEMA may limit payments to only those addresses that are primary residential addresses. This should include vacant lot information, as the vendor can tell whether taxes were paid on a lot or structure 

or both. 

d. how PO Boxes used as damaged addresses receive $5.5 million in 

benefits? 

FEMA’s address correction and existing data sources did not provide that an address was for a PO Box; only that it was for a valid address. Since August 2006, 

the FEMA registration system no longer allows PO Boxes as a damaged address 

during the registration.

20. What controls has FEMA put in place to prevent such fraud in future 

disasters? Describe how these controls have been field tested. 
98

• Coordination is underway to obtain data verifications for individuals that are 

incarcerated. 

• Coordination is underway to obtain data verifications for locations that are 

not residential. 

• PO Box addresses will no longer be accepted as valid for a Damaged Dwelling 

address. 

Regarding field testing, FEMA is testing hardware, software, and re-engineered 

procedural processes prior to their release and implementation to end-users in the 

production environment to ensure effectiveness. Additionally, we are completing validation analysis throughout the course of testing to confirm that requirement compliance is fulfilled and is traceable to system specifications.

21. The May 19, 2006 letter states that changes are being made to the 

NEMIS software. In particular, ‘‘NEMIS will conduct verification of ownership and occupancy through FEMA’s data contractor during the application process.? Describe what is done to verify ownership and occupancy. 

Have these procedures been field tested? 

In February 2006, FEMA implemented identity verification for applicants registering via the FEMA call centers, thereby subjecting all FEMA disaster assistance 

applicants to the identity verification process. Additionally, all applicants from the 

Hurricane Katrina disaster forward who had not previously been subjected to identity verification were verified in April 2006. 

Identity Authentication: Identity authentication takes the verification process 

a step further and ensures that the person presenting the credentials is the actual 

‘‘owner’’ of the data. This is accomplished by presenting the applicant with a set of 

personal questions only they should be able to answer based on the demographic 

information they have submitted. Currently, FEMA requires identity authentication 

only for individuals who request an account to access their data via the Internet. 

Owner / Occupancy Verification: Traditional FEMA processing involved an inspector visiting an applicant’s damaged address and verifying ownership and occupancy first hand. For many Katrina and Rita victims, on site inspections were not 

possible. For the 2005 hurricane season, FEMA implemented an interface with an 

outside vendor to verify ownership and occupancy for identified groups of applicants 

who could not be inspected. In June 2006, a real time interface with FEMA’s identity verification vendor was implemented for ALL disaster applicants to confirm 

owner / occupancy status, making the information available for any necessary future 

award decisions. 

Regarding field testing, FEMA is testing hardware, software, and re-engineered 

procedural processes prior to their release and implementation to end-users in the 

production environment to ensure effectiveness. Additionally, we are completing validation analysis throughout the course of testing to confirm that requirement compliance is fulfilled and is traceable to system specifications.

22. The May 19, 2006 letter states ‘‘FEMA continues to develop guidance 

and control measures to prevent the inappropriate use of these funds.’’ Describe guidance and control measures that FEMA is developing. Also describe the field tests conducted on these guidance and control measures. 

Existing controls in damage assessments performed by trained inspectors use 

commercial and insurance industry standard protocols to review and record disaster-related damages. Only those applicants suffering damage related to a Presidentially declared disaster are eligible for payment. As a result of investigations 

from the 2004 hurricane season, inspectors now are required to photograph each 

home they visit depicting the extent of damage and the house street number to validate against the registration address data. Inspection contractors are required to review these photographs as a part of their Quality Control process. 

Inspectors are also required to view and record information on any insurance the 

applicant has, specifically those coverages relating to home, personal property, and 

vehicle damages. Applicants are also asked about insurance coverage during the 

Registration process. Based on the damages incurred and the type of insurance on 

the home, NEMIS will disallow any payment that is potentially duplicative of insurance benefits. Caseworkers follow the same guidelines upon an appeal by the applicant. Additional automated insurance checking is a priority for future development. 

In all flooding events, FEMA uses an automated interface with the National Flood 

Insurance Program (NFIP) database to determine if an applicant has flood insurance coverage on the home that they are registering. If a policy is found, the NEMIS 

database is updated with this information and the applicant is deemed insured for 

flood damages, whether or not the applicant listed this insurance during the registration process. 
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Internal reviews are also performed when applicants request additional assistance. When an applicant requests additional rental assistance, the applicant is required to submit rent receipts/substantiation that funds have been exhausted and 

used appropriately. If there has been a misuse of funds, the applicant is not eligible 

for further housing assistance and his or her case may be sent to Recoupment for 

recovery of funds if warranted.

23. The May 19, 2006 letter states ‘‘Based on the address provided, NEMIS 

will ‘correct’ it to the most acceptable form based on USPS data.’’ Explain 

what ‘‘correct’’ means. 

NEMIS utilizes GEOSTAN software that provides an ‘‘address correction’’ or ‘‘address matching’’ capability and geo-coding. Address correction/matching is the process of matching an input address against a postal or geo-coding database. Most address matching solutions work by breaking an address into components such as 

street name and street type to find a close match to the data source. The returned 

information identifies the accurate damaged dwelling and mailing address as it is 

recorded with USPS. Geo-coding is the process of appending the longitude and latitude to an address.

24. FEMA’s June 14, 2006 testimony states Expedited Assistance program 

‘‘allows for a pre-inspection disbursement of funds to an individual household, based on information gathered from the applicant during the registration process that meets the following criteria: the registration must be 

for the primary residence only; the registrant must be displaced due to the 

disaster; and the registrant is in need of shelter.’’ Describe the fraud detection and prevention controls FEMA uses to verify such information. 

At the time of implementation, FEMA had to balance the requirements of preventing fraud with those of assisting hundreds of thousands of evacuees with immediate and essential needs in a timely manner. The only way to ensure both requirements were being met to the best of our abilities was to tie the eligibility criteria 

for EA outlined by the Recovery Division Director, to specific questions on the disaster application. An applicant’s affirmative response to these questions resulted in 

immediate, automated Expedited Assistance awards. If an application was found eligible for EA, it was then run through existing NEMIS business rules (Duplicate Investigation) to prevent multiple payments to the same individual or household. For 

purposes of preventing as many inappropriate payments as possible, the specific 

questions triggering EA were never publicized to individuals either within or outside 

the agency.

25. FEMA’s June 14, 2006 testimony states ‘‘FEMA, in fact, has gone to 

great lengths to ensure they are good stewards of the taxpayers’ dollar by 

deterring fraud, while still allowing applicants who are in serious need of 

assistance to receive it quickly and appropriately.’’ Describe FEMA’s efforts 

to deter fraud. 

• In June 2005 FEMA added Identity Authentication to the Internet Applicant 

Inquiry application in order to protect applicant data and ensure that the person logging in was the ‘‘owner’’ of that data. 

• In June 2005, FEMA implemented identity proofing to the Internet registration application. 

• In October 2005, FEMA launched a new internet registration application that 

disallows any duplicate registrations; 

• In February 2006, FEMA added identity proofing to the call center registration application to ensure all IHP Registrations are subjected to the same criteria as online applications. 

• FEMA amended systems to ensure no automated payments are sent to applicants who failed the identity proofing process; 

• FEMA began sending all applications taken over the phone from August 2005 

until February 2006 to FEMA’s data contractor for identity proofing and reviewing those that failed for possible recoupment or referral to the DHS Office of 

the Inspector General; 

• FEMA began data-marking any applications in NEMIS that fail identity 

proofing so they may be flagged for review and denied automated payment; 

• FEMA has implemented enhanced processes related to real-time interaction 

between the FEMA service representative and the applicant during registration 

to ensure data is entered correctly before accepting the application. 

• In June 2006, FEMA implemented Occupancy and Ownership verification 

during the registration process. 

• FEMA is working with a data vendor to flag addresses that are not residential so that they may be reviewed prior to payment. 
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• In August 2006, the registration module started preventing applicants from 

using a PO Box address as a damaged address.

26. Describe the ‘‘significant improvements,’’ as stated in the June 14, 

2006 testimony, FEMA has made to its delivery process to prevent fraud, 

waste and abuse. See response to question #25.

27. FEMA’s June 14, 2006 testimony states ‘‘Through effective planning, enhanced 

internal controls and a more systematic use of technology, FEMA can limit waste, 

fraud, and abuse.’’ Specifically, describe in detail the effective planning methods, enhanced internal controls and the systematic use of technology FEMA is employing 

to detect and prevent waste, fraud, and abuse in federal disaster assistance programs. See response to question #25; also—

INFORMATION DATABASE: The following changes are being made to FEMA’s 

processing software and have been made available for the start of the 2006 hurricane season: 

• No registration will be accepted when that registrant has the same SSN as 

another registrant in the same disaster

EXPEDITED ASSISTANCE: Hurricanes Katrina and Rita presented FEMA with 

extraordinary circumstances, where it was critical to answer the call of hundreds 

of thousands of individuals who often had no identification, money or even clothes 

on their backs. In this instance, the Expedited Assistance (EA) program served as 

an appropriate tool to provide assistance to victims who had been displaced by the 

catastrophic event. Although there were problems within the EA program during 

the 2005 hurricane season, FEMA has already taken steps—and continues to do 

so—to limit waste, fraud and abuse should this program be used for future disasters 

including reducing the amount of assistance provided in this initial payment, providing the assistance under the ‘‘other needs’’ category which allows for a federal/

state cost share, and eliminating the use of debit cards.

RECOUPMENTS: Starting in March 2006, FEMA began the review process to recoup any disaster relief money that was inappropriately awarded following the 2005 

hurricane season and as such has already recouped more than $770,000. As part 

of its mission to maintain close oversight on the distribution of disaster assistance, 

FEMA performs detailed reviews of applications and awards, and where appropriate, notifies individuals by letter about necessary repayments, payment plan options and the appeals process, and refers cases of suspected fraud to the DHS Office 

of the Inspector General.

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