FEMA Has Paid Billions in 

Improper Payments for 

SBA Dependent Other 

Needs Assistance since 

2003 

August 12, 2020 

OIG-20-60 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Washington, DC 20528 / www.oig.dhs.gov 

August 12, 2020 

MEMORANDUM FOR: The Honorable Peter T. Gaynor 

Administrator 

Federal Emergency Management Agency 

FROM: Joseph V. Cuffari, Ph.D. 

Inspector General 

SUBJECT: FEMA Has Paid Billions in Improper Payments for SBA 

Dependent Other Needs Assistance since 2003 

Attached for your action is our final report, FEMA Has Paid Billions in Improper 

Payments for SBA Dependent Other Needs Assistance since 2003. We 

incorporated the formal comments provided by your office. 

The report contains three recommendations that identify actions the Federal 

Emergency Management Agency can take to enhance the program’s overall 

effectiveness. Your office did not concur with any of the three 

recommendations. Based on information in your response to the draft report, 

we consider recommendations 1, 2, and 3 open and unresolved. As prescribed 

by the Department of Homeland Security Directive 077-01, Follow-Up and 

Resolutions for the Office of Inspector General Report Recommendations, within 

90 days of the date of this memorandum, please provide our office with a 

written response that includes your (1) agreement or disagreement, (2) 

corrective action plan, and (3) target completion date for each recommendation. 

Also, please include responsible parties and any other supporting 

documentation necessary to inform us about the current status of the 

recommendation. Until your response is received and evaluated, the 

recommendations will be considered open and unresolved. 

Please send your response or closure request to 

OIGAuditsFollowup@oig.dhs.gov. 

Consistent with our responsibility under the Inspector General Act, we will 

provide copies of our report to congressional committees with oversight and 

appropriation responsibility over the Department of Homeland Security. We 

will post the report on our website for public dissemination. 

Please call me with any questions, or your staff may contact Sondra McCauley, 

Assistant Inspector General for Audits, at (202) 981-6000. 

Attachment 

www.oig.dhs.gov 
 

 

 

 

 

DHS OIG HIGHLIGHTS 

FEMA Has Paid Billions in Improper Payments for 

SBA Dependent Other Needs Assistance since 2003 

August 12, 2020 

Why We Did 

This Audit 

FEMA provides funds 

through its IHP ONA 

program to qualified 

applicants for necessary 

expenses and serious 

needs caused by a 

disaster. FEMA has 

expended $6.4 billion in 

Federal funds through its 

IHP ONA since 2003. Of 

this amount, about 

$5.3 billion, or 83 percent, 

went to the SBA 

Dependent ONA category 

— based on applicants’ 

self-reported income and 

dependent information. 

We performed this audit to 

determine to what extent 

FEMA verifies the accuracy 

of IHP applicants’ selfcertified income. 

What We 

Recommend 

We made three 

recommendations that, 

when implemented, will 

improve program controls 

within IHP SBA Dependent 

ONA. 

For Further Information: 

Contact our Office of Public Affairs at 

(202) 981-6000, or email us at 

DHS-OIG.OfficePublicAffairs@oig.dhs.gov 

What We Found 

The Federal Emergency Management Agency (FEMA) Individuals 

and Households Program (IHP) has no assurance of applicants’ 

eligibility for Small Business Administration (SBA) Dependent 

Other Needs Assistance (ONA) payments. According to Office of 

Management and Budget (OMB) Circular A-123, Appendix C, 

when documentation or verification is non-existent to support an 

eligibility payment decision it must be considered improper. 

FEMA did not collect sufficient income and dependent 

documentation or verify self-reported information to determine 

whether applicants below the income threshold, known as Failed 

Income Test (FIT), were eligible for SBA Dependent ONA 

payments. FEMA believed requiring documentation or 

verification would delay the disbursement of assistance and 

relied on an honor system to make eligibility and payment 

decisions. We determined, according to FEMA-provided data, it 

has paid, and we are questioning, the more than $3.3 billion in 

improper payments to applicants deemed as FIT for SBA 

Dependent ONA since 2003. 

Additionally, FEMA has not evaluated the program risk 

associated with not collecting or verifying income information. 

Per Federal requirements, agencies must conduct risk 

assessments to determine whether programs are susceptible to 

improper payments. Rather, FEMA assessed IHP at the overall 

program level and did not specifically evaluate each IHP form of 

assistance, such as SBA Dependent ONA. These weaknesses 

have allowed applicants self-certifying income and dependent 

information to receive less oversight, despite posing the greatest 

risk for improper payments. As such, FEMA cannot assure 

Congress and taxpayers it is a prudent steward of Federal 

resources and adequately assesses the risks of improper 

payments. 

FEMA Response 

FEMA strongly disagreed with our methodology and resulting 

conclusions. In addition, FEMA did not concur with any of the 

three recommendations in this report. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Background 

The Robert T. Stafford Disaster Relief and Emergency Assistance Act, as 

amended, constitutes the statutory authority for most Federal disaster 

response activities. One such program is the Federal Emergency Management 

Agency’s (FEMA) Individuals and Households Program (IHP), which provides up 

to $34,900, as of fiscal year 2019, in housing assistance for disaster-related 

expenses from damages to an individual’s primary home resulting from a 

declared disaster. In addition, the program provides money to qualified 

applicants for necessary expenses and serious needs caused by the disaster, 

which is referred to as Other Needs Assistance (ONA). This includes assistance 

for funeral, medical, dental, childcare, personal property, moving and storage, 

and transportation expenses, along with other expenses that FEMA approves. 

According to FEMA-provided data, the program provided approximately 

$6.4 billion in ONA from 2003 to 2018. 

Eligibility for some types of ONA depends on eligibility with the U.S. Small 

Business Administration’s (SBA) disaster loan program. SBA provides lowinterest, long-term loans to help individuals and households with personal 

property, transportation, and moving and storage expenses incurred due to a 

declared disaster. ONA is divided into two categories that are either nondependent or dependent on an individual’s or a household’s ability to qualify 

for a SBA disaster loan. 

Non-SBA Dependent ONA – An applicant may be awarded assistance (e.g., for 

help with funeral, medical, dental, childcare expenses) regardless of whether 

the household is eligible for an SBA disaster loan. Of the $6.4 billion in ONA, 

FEMA reported it paid $1.1 billion in Non-SBA Dependent ONA (17 percent of 

total ONA) from 2003 to 2018. 

SBA Dependent ONA – An applicant is awarded assistance (e.g., for help with 

personal property, moving and storage, and transportation expenses) 

depending on whether the household income, along with the number of 

dependents, falls below a threshold provided by SBA (SBA’s Income Test 

Tables). Qualified applicants whose income and number of dependents fall 

below the threshold are classified as Failed Income Test (FIT) and automatically 

receive from FEMA, SBA Dependent ONA, without being referred to SBA for a 

disaster loan. Applicants who fall above the threshold are referred to SBA for 

disaster loans because their income makes them more likely to qualify for a 

loan. If denied SBA-disaster loans, applicants become eligible for SBA 

Dependent ONA given that their credit, debt, or income histories make them 

ineligible to receive disaster assistance from SBA. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Of the $6.4 billion in ONA, FEMA reported it paid approximately $5.3 billion for 

SBA Dependent ONA (83 percent of total ONA) from 2003 to 2018. Further, 

FEMA paid $3.3 billion of the $5.3 billion in SBA Dependent ONA to applicants 

who were deemed FIT. The remaining $2 billion went to applicants who had 

been referred to SBA for loans, but were denied and became eligible to receive 

SBA Dependent ONA. 

In keeping with FEMA’s responsibility to safeguard taxpayer funds, it evaluates 

its programs based on risk. Specifically, FEMA management conducts risk 

assessments to evaluate agency operations that may contribute to significant 

improper payments. Improper payments fall into three broad categories: 

intentional fraud and abuse, unintentional payment errors, and instances 

when documentation supporting a payment is so insufficient that the agency is 

unable to discern whether the payment is proper. 

In disaster situations, fraud risk is greater because the need to provide services 

quickly can negatively affect existing internal control processes, creating 

greater opportunities for fraud or improper payments. Agencies are required to 

conduct risk assessments to determine whether the program is susceptible to 

improper payments. According to Federal requirements, agencies must 

consider the program complexity to determine correct payment amounts and 

the volume of annual payments as risk factors. As such, risk assessments 

take into account vulnerabilities associated with internal control deficiencies 

and risks highlighted in prior audits. If the risk assessment indicates that the 

program is susceptible to significant improper payments, the agency is subject 

to annual improper payments estimation and reporting. Effective risk 

management practices help prevent Federal agencies’ susceptibility to improper 

and fraudulent payments. In doing so, it achieves payment integrity in core 

programs and mission, ensures payments are made to eligible recipients, and 

ensures data integrity risks are managed by reporting results to 

paymentaccuracy.gov. 

We conducted this audit to determine to what extent FEMA verifies the 

accuracy of IHP applicants’ self-certification of income. 

Results of Audit 

FEMA Paid Billions in Improper Payments for IHP SBA 

Dependent ONA 

According to OMB Circular A-123, Appendix C, when supporting 

documentation or verification does not exist to support eligibility decisions 

resulting in a payment, it must be considered improper. FEMA did not collect 

sufficient income and dependent documentation or verify self-reported 

www.oig.dhs.gov 4 OIG-20-60 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

information to ensure applicants classified as FIT were eligible for SBA 

Dependent ONA payments. According to FEMA officials, collecting such 

documentation would delay the disbursement of assistance, and the agency 

relied on an honor system to make eligibility and payment decisions. As a 

result, FEMA paid, and we are questioning, the more than $3.3 billion in 

improper IHP SBA Dependent ONA payments from 2003 to 2018. 

FEMA Did Not Collect Sufficient Documentation to Support Eligibility and 

Payment Decisions 

According to OMB Circular A-123, Appendix C, when an agency’s review is 

unable to discern whether a payment was proper as a result of insufficient or 

lack of documentation, this payment must be considered an improper 

payment. Although not all improper payments are fraudulent, agencies should 

collect documentation to support an applicant’s eligibility for a benefit. 

FEMA’s National Emergency Management 

Information System (NEMIS) did not have 

sufficient documentation to support SBA 

Dependent ONA payments for applicants 

deemed FIT. Specifically, all 300 FIT 

applicant entries in NEMIS from our 

statistical sample for 2017 did not contain 

any documentation to support the applicants’ 

self-reported income or dependent 

information. Based on our analysis, we infer 

that during 2017 as many as 309,664 

applicants received $554 million in improper 

payments. 

FEMA officials do not collect documentation 

because they believe doing so would delay the 

disbursement of assistance to disaster 

applicants. Rather, they accept the risk of not collecting documentation to 

expedite the transmittal of assistance to low-income applicants and reduce the 

administrative burden on FEMA, SBA, and disaster applicants. In contrast, 

FEMA does collect documentation to support income and dependent 

information for other IHP assistance, such as Childcare and Continued Rental 

Assistance. For these forms of assistance, FEMA collects current paystubs, 

W-2 forms, or tax returns from the most recent tax year. Collecting these 

similar types of documentation would help to support eligibility decisions for 

FIT applicants to receive SBA Dependent ONA payments. 

Source: DHS Office of Inspector 

General (OIG) 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

FEMA Did Not Verify Self-Reported Information 

OMB Circular 123, Appendix C notes a failure to verify data is a situation when 

an agency (Federal, state, or local) or another party administering Federal 

dollars fails to verify appropriate data to determine whether a recipient should 

be receiving a payment, even though such data exists in government or thirdparty databases. FEMA does not verify self-reported income and dependent 

information for applicants determined to be FIT. If an applicant has unmet 

needs (unsatisfied necessary expenses and serious needs), FEMA uses the 

individual’s self-reported income and dependent information to determine 

qualification for SBA Dependent ONA. Once FEMA classifies the applicant as 

FIT, the individual becomes eligible to obtain SBA Dependent ONA with no 

verification. This occurs because FEMA relies on an honor system consisting 

of applicants self-certifying their household income and number of dependents 

without verification. 

We collaborated with the Treasury Inspector General for Tax Administration 

(TIGTA) to measure the truthfulness of the self-reported income and dependent 

information for those deemed FIT during 2017. TIGTA found inconsistencies in 

applicant self-reported income and dependent information when compared 

against 2017 Internal Revenue Service (IRS) records. Specifically, TIGTA 

identified the following issues for 71,090 of 309,664 (23 percent) SBA 

Dependent ONA applicants who filed tax returns.1 

x Income Inconsistencies. 97 percent of applicants (68,785) did not 

accurately report their household income within a 5 percent deviation;2 

x Dependent Inconsistencies. 60 percent of applicants (42,744) had 

discrepancies in the numbers of dependents they reported; and 

x Income and Dependent Inconsistencies. 58 percent of applicants 

(41,370) had discrepancies in both gross household income and the 

number of dependents reported. (See Appendix B for the results of 

TIGTA’s data match against tax records.) 

These issues show the extent to which FEMA relies on inaccurate and 

unverified self-reported information for making disaster assistance payments. 

The inaccuracies in reported income are especially significant because income 

and dependent information are the main determinants as to whether 

applicants are deemed FIT. As a result, we question the eligibility of applicants 

1 We could not identify these applicants due to privacy restrictions of Internal Revenue Code 

Section 6103, which generally prohibits the disclosure of tax return information to parties 

outside of the IRS. 

2 We used a 5 percent deviation in accordance with generally accepted accounting principles, 

which is common for establishing financial materiality. 

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OFFICE OF INSPECTOR GENERAL 

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who collectively received more than $554 million in SBA Dependent ONA 

payments during 2017. 

Furthermore, we conducted our own comparison of applicants’ reported 

information using SBA’s income tables. We determined 526 of 309,664 

applicants were incorrectly classified as FIT and received more than 

$1.2 million for SBA Dependent ONA. Of the 526 applicants, 521 reported 

income and dependent information above the SBA threshold and should have 

been referred to the SBA for disaster loans. Further, 5 of the 526 applicants 

reported no income, which should have led to an automatic referral to SBA. 

However, these five applicants were still deemed FIT and received assistance. 

Additionally, the more dependents an applicant claims, the more likely the 

applicant will be eligible for SBA Dependent ONA. Our analysis found that 

853 of 309,664 applicants deemed FIT received more than $1.4 million. Each 

of these applicants reported more than 10 dependents, ranging to as many as 

96 dependents. Although not a requirement, FEMA officials stated applicants 

reporting 10 or more dependents should be further reviewed as a best practice. 

However, FEMA did not verify each applicant’s number of dependents or flag 

applicants reporting more than 10 dependents for further review. Figure 1 

shows the number of applicants who reported more than 10 dependents. 

Figure 1. Total Applicants Who Reported More than 10 Dependents 

300

250

200

150

100

50

0

NUMBER OF DEPENDENTS CLAIMED

Source: DHS OIG analysis of FEMA-provided data 

By verifying information on income and number of dependents for these 

applicants, FEMA can better assess SBA Dependent ONA eligibility. NUMBER OF APPLICANTS

252

224

175

108

58

16 20

TOTAL APPLICANTS

853

TOTAL SBA DEP

PAYOUT

$1,486,804.60

11 to 14 15 to 25 26 to 36 37 to 47 48 to 58 59 to 69 71 to 96

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Unsupported and Unverified Eligibility Determinations Resulted in 

Improper Payments 

Without collecting documentation and verifying its accuracy, FEMA is unable 

to justify its payment decisions for applicants deemed FIT, as required. FEMA 

officials stated this practice of not collecting supporting documentation or 

verifying eligibility decisions for applicants deemed FIT to receive SBA 

Dependent ONA has been in place since 2003. According to FEMA’s data from 

2003 to 2018, approximately 1.4 million applicants received disaster assistance 

totaling more than $3.3 billion. These payments were improper because the 

eligibility determination was unsubstantiated and unverified. 

FEMA Did Not Conduct Improper Payment Risk Assessments 

for SBA Dependent ONA 

According to OMB Circular A-123, Appendix C, Federal agencies must conduct 

improper payment risk assessments for all programs and activities to 

determine whether the program is susceptible to improper payments. In 

conducting these assessments, agencies should consider various risk factors, 

such as the inherent risks of improper payments due to the nature of agency 

operations and significant deficiencies from audit reports of the Inspector 

General or the Government Accountability Office (GAO). Although FEMA 

evaluated certain forms of assistance within IHP, it did not assess improper 

payment risks for SBA Dependent ONA. 

FEMA’s fiscal year 2017 improper payments reduction program comprehensive 

risk assessment for IHP noted frequent assessments of internal controls are 

conducted through numerous internal and external audits and any identified 

deficiencies are handled promptly. However, the 2017 assessment for IHP did 

not include SBA Dependent ONA. Moreover, our review of 13 internal FEMA 

audits conducted from 2014 through 2018 disclosed that FEMA did not assess 

the risk of accepting applicants’ self-reported income and dependent 

information to determine SBA Dependent ONA eligibility. Rather, FEMA 

evaluated IHP at the overall program level for improper payment risks and did 

not look at the program’s individual forms of assistance to determine how well 

risk was managed. 

In addition, the SBA Dependent ONA application process should have been 

continuously reviewed for IHP reporting, as annual disbursements from 

2003 to 2018 were greater than $10 million. In all, these disbursements 

totaled more than $3.3 billion in improper payments. According to OMB 

Circular A-123, Appendix C, FEMA’s unjustified payments exceeding both 1.5 

percent of program outlays and the $10 million threshold identify IHP SBA 

Dependent ONA as susceptible to significant improper payments. Not 

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OFFICE OF INSPECTOR GENERAL 

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assessing SBA Dependent ONA for risks leaves the IHP program exposed to a 

significant amount of improper payments. 

Further, in a prior related report,3 we identified significant weaknesses in 

FEMA’s IHP for home repair, including absence of internal controls and more 

than $3 billion in improper payments for home repair. As a result, we 

recommended the FEMA Administrator include IHP as susceptible to 

significant improper payments, subject to annual improper payments 

estimation and reporting. By identifying significant weaknesses in FEMA’s SBA 

Dependent ONA program, this report increases total IHP risk to more than 

$6.3 billion in improper payments. Without assessing and mitigating risks 

related to SBA Dependent ONA, FEMA is highly vulnerable to significant 

improper payments and IHP remains a high-risk program. 

Recommendations 

Recommendation 1: We recommend the FEMA Administrator, due to the more 

than $3.3 billion in questioned costs throughout a 16-year period, implement a 

process to collect income and dependent documentation on SBA Dependent 

ONA applicants to ensure payments are proper. 

Recommendation 2: We recommend the FEMA Administrator, due to the 

questioned costs in recommendation 1, implement a verification process to 

ensure accuracy of income and dependent information provided by SBA 

Dependent ONA applicants. 

Recommendation 3: We recommend the FEMA Administrator include SBA 

Dependent ONA as susceptible to significant improper payments subject to 

annual improper payments estimation and reporting. 

Management Comments and OIG Analysis 

FEMA strongly disagreed with our methodology for determining the total dollar 

amount of improper payments made from 2003 to 2018 and the resulting 

conclusions in this report. Specifically, FEMA disagreed with our assessment 

that, because some applicants’ income varied from income tax records 

submitted to the IRS, all applicants would have been ineligible for assistance. 

FEMA claimed it cannot verify to what extent these applicants may have 

incorrectly reported income or had changes in income between applying for 

FEMA assistance and filing tax returns. According to FEMA, without detailed 

3 FEMA Has Made More than $3 Billion in Improper and Potentially Fraudulent Payments for 

Home Repair Assistance since 2003, OIG-20-23, April 6, 2020 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

data, it is not possible to accurately assess the economic impact of the income 

reporting deviations. 

Although FEMA strongly disagreed with the draft report, our underlying 

premise remains that FEMA did not develop a process to document and verify 

SBA Dependent ONA applicants’ income — it is not about whether some 

applicants’ income varied from income tax records submitted to the IRS, and 

that all applicants would have been ineligible for assistance. Without a process 

to document and verify applicant eligibility, FEMA has no assurance that 

applicants qualified for assistance, but instead relied on the self-certified 

information applicants provided. This has resulted in more than $3.3 billion in 

improper payments since FEMA’s inception in DHS. Rather than questioning 

our methodology and approach, we strongly urge FEMA to implement a process 

to validate and substantiate its disaster assistance for SBA Dependent ONA. 

Appendix A contains FEMA’s management comments in their entirety. We also 

received technical comments to the draft report and revised the report as 

appropriate. 

FEMA Comments to Recommendation 1: Non-concur. FEMA disagreed with 

the necessity to collect income and dependent documentation to ensure 

application accuracy. In a disaster application, FEMA requires, under penalty 

of perjury, applicants to self-report their income and dependent information. 

SBA also considers additional income factors for loan eligibility. 

In January 2020, FEMA and the SBA created a working group to strengthen 

the SBA Dependent ONA process in which the IRS and the Federal Deposit 

Insurance Corporation also provide feedback. Once the working group 

completes its process review, FEMA will determine which options and actions 

recommended by the workgroup are feasible, and will establish a schedule for 

implementation, as appropriate. However, FEMA believes that any process 

implementation will take several years. Therefore, FEMA requested we 

consider this recommendation resolved and closed. 

OIG Analysis of FEMA Comments: Under Federal requirements, the absence 

of a documentation-based process to determine SBA Dependent ONA eligibility 

results in improper payments. As cited in our report, IRS testing determined 

applicants incorrectly reported their income and dependent information despite 

penalty of perjury. Although SBA may consider other factors beyond income 

for loan eligibility, FEMA solely determines SBA Dependent ONA eligibility 

based on applicants’ self-reported income and dependent information. Without 

strengthening its eligibility determination process, FEMA will continue to make 

improper payments to SBA Dependent ONA applicants. Implementing our 

recommendation will ensure FEMA takes swift action to adhere to Federal 

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OFFICE OF INSPECTOR GENERAL 

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requirements so improper payments do not continue to occur. Therefore, this 

recommendation will remain unresolved and open until FEMA implements a 

process to collect documentation to determine the eligibility of SBA Dependent 

ONA applicants. 

FEMA Comments to Recommendation 2: Non-concur. FEMA Recovery 

Programs Technology Division does not believe it is necessary to verify income 

and dependent documentation. As referenced in the response to 

recommendation 1, SBA considers more factors than income alone for loan 

eligibility. In addition, FEMA and SBA have initiated a working group to 

strengthen the SBA Dependent ONA process. However, this process 

implementation could take several years. FEMA requested we consider this 

recommendation resolved and closed. 

OIG Analysis of FEMA Comments: Under Federal requirements, the absence 

of a verification process to determine SBA Dependent ONA eligibility results in 

improper payments. As noted in our preceding response, FEMA bases SBA 

Dependent ONA determinations solely on applicants’ self-reported income and 

dependent information. Without a verification process, FEMA will continue to 

make improper payments to applicants. Since the inception of the program, 

FEMA has paid more than $3.3 billion in improper payments. Considering this 

amount, we recommend FEMA adhere to Federal requirements so improper 

payments do not continue to occur. As such, this recommendation will remain 

unresolved and open until FEMA implements a process to verify SBA 

Dependent ONA eligibility. 

FEMA Comments to Recommendation 3: Non-concur. FEMA’s Office of 

Chief Financial Officer (OCFO) reported current risk assessments and other 

testing of IHP already meet the intent of this recommendation and requiring 

additional reporting would place an undue burden on FEMA. IHP also 

conducted Improper Payments Elimination and Recovery Act of 2010 (IPERA) 

testing for hurricanes Harvey, Irma, and Maria for fiscal years 2018 and 2019. 

This testing will continue until disbursement amounts are less than $10 

million dollars. IHP was tested under IPERA, and FEMA reported IHP to have 

sound internal controls in place. As a result, FEMA received a test waiver, 

which is continuous until FEMA OCFO considers the program a high risk. 

FEMA requested that we consider this recommendation resolved and closed. 

OIG Analysis of FEMA Comments: Previous IHP risk assessments performed 

by FEMA never assessed SBA internal controls or its associated risks for 

processes to document and verify SBA Dependent ONA eligibility. The SBA 

Dependent ONA application process should be continuously reviewed for IHP 

reporting, as annual disbursements from 2003 to 2018 were greater than 

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$10 million. In all, these disbursements totaled more than $3.3 billion in 

improper payments. According to OMB Circular A-123, Appendix C, FEMA’s 

unjustified payments exceeding both 1.5 percent of program outlays and the 

$10 million threshold identify IHP SBA Dependent ONA as susceptible to 

significant improper payments. In addition, we also previously reported4 

significant internal control weaknesses in FEMA’s IHP. As such, this 

recommendation will remain unresolved and open until FEMA reports SBA 

Dependent ONA as susceptible to significant improper payments subject to 

annual improper payments estimation and reporting. 

Objective, Scope, and Methodology 

Department of Homeland Security Office of Inspector General was established 

by the Homeland Security Act of 2002 (Public Law 107−296) by amendment to 

the Inspector General Act of 1978. Our audit objective was to determine to 

what extent FEMA verifies the accuracy of IHP applicants’ self-certification of 

income. 

We conducted interviews with officials from the FEMA Headquarters Recovery 

Directorate, the Fraud and Internal Investigations Division; FEMA’s Disaster 

Assistance Improvement Program; FEMA’s Policy & Doctrine Unit; and the 

Recovery Programs Technology Division. We met with representatives of 

FEMA’s Individual Assistance Division, as well as program officials from the 

Application Processing Section, the Audit Section, the Office of Counsel, the 

Program Management Section, and the Individual Assistance, Innovations and 

Technology Solutions Program Management Office. We also conducted 

interviews with FEMA and SBA officials with oversight of IHP SBA Dependent 

ONA. 

We reviewed and analyzed IHP ONA guidance, policies, procedures, and 

applicable laws and regulations. We identified and reviewed prior audits and 

reports related to the audit objective, including DHS OIG audits, GAO reports, 

FEMA audit reports, and congressional testimony. We also reviewed and 

analyzed applicable Federal requirements regarding management’s 

responsibility for internal control and managing the risks for fraud and 

improper payments in Federal agencies. Specifically, we reviewed the Robert T. 

Stafford Disaster Relief and Emergency Assistance Act; OMB Circular A-123, 

Appendix C, Requirements for Effective Estimation and Remediation of Improper 

Payments, October 20, 2014; Revised version of OMB Circular A-123, Appendix 

C, Requirements for Payment Integrity Improvement, June 26, 2018; and OMB 

Circular A-123, Management’s Responsibility for Enterprise Risk Management 

and Internal Control, July 15, 2016. 

4 FEMA Has Made More than $3 Billion in Improper and Potentially Fraudulent Payments for 

Home Repair Assistance since 2003, OIG-20-23, April 6, 2020. 

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Department of Homeland Security 

The scope of our review included all Presidentially declared disasters in 

calendar year 2017 that resulted in applicants receiving ONA payments. We 

focused our analysis on applicants FEMA deemed FIT, because we identified 

weaknesses in the SBA Dependent ONA eligibility process. As such, we 

reviewed a population of 309,664 FIT applicants who received $554 million in 

SBA Dependent ONA. We conducted a data reliability assessment to ensure 

the completeness and accuracy of the data in our population. 

We conducted a statistical sample using a 90 percent confidence interval, 

5 percent sampling error, and 50 percent population proportion for all 309,664 

FIT applicants. This resulted in a statistically valid sample size of 300 

applicants deemed FIT for 2017. 

To ensure applicants in our population had received payments for SBA 

Dependent ONA, the 300 applicants were vetted through FEMA’s Integrated 

Financial Management Information System — IFMIS — and determined to have 

received payment for SBA Dependent ONA. 

To evaluate FEMA’s documentation in NEMIS, we reviewed records for the 300 

applicants to ensure there was no supporting documenting or verification 

performed by FEMA of this information Since none of the applicants reviewed 

had sufficient income or dependent supporting documentation or verification, 

we inferred our statistical results to the 309,664 applicants in 2017. 

To verify the accuracy of applicant income and dependent information, we 

collaborated with TIGTA to conduct a data match using 2017 tax information 

provided to the IRS. TIGTA compared applicants’ household income and 

number of dependents against tax records to determine the truthfulness of 

their self-reported income and dependent information. We also replicated SBA 

Income Tables and performed a comparison of all 309,664 applicants deemed 

FIT during 2017 to assess decisions made in NEMIS. Based on our data 

reliability testing, we concluded the data to be sufficiently reliable to support 

our conclusions. 

According to FEMA officials, its SBA Dependent ONA process has been the 

same since 2003. We did not conduct data reliability testing; rather we relied 

on FEMA’s data from 2003 to 2018 to determine the total dollar amount and 

total number of applicants who were deemed FIT without supporting 

documentation and verification. 

We conducted this performance audit between April 2018 and July 2019 

pursuant to the Inspector General Act of 1978, as amended, and according to 

generally accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate evidence to 

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provide a reasonable basis for our findings and conclusions based upon our 

audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based upon our audit objectives. 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

FEMA Comments to the Draft Report 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

www.oig.dhs.gov 16 OIG-20-60 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

Results of TIGTA’s Data Match 

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OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chiefs of Staff 

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Under Secretary, Office of Strategy, Policy, and Plans 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Director, GAO/OIG Audit Liaison Office 

Federal Emergency Management Agency 

Administrator 

Chief of Staff 

Chief Financial Officer 

Office of Response and Recovery 

Office of Policy and Program Analysis 

Office of Chief Counsel 

Individual Assistance Directorate 

Audit Liaison, FEMA 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

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Additional Information and Copies 

To view this and any of our other reports, please visit our website at: 

www.oig.dhs.gov. 

For further information or questions, please contact Office of Inspector General 

Public Affairs at: DHS-OIG.OfficePublicAffairs@oig.dhs.gov. 

Follow us on Twitter at: @dhsoig. 

OIG Hotline 

To report fraud, waste, or abuse, visit our website at www.oig.dhs.gov and click 

on the red "Hotline" tab. If you cannot access our website, call our hotline at 

(800) 323-8603, fax our hotline at (202) 254-4297, or write to us at: 

Department of Homeland Security 

Office of Inspector General, Mail Stop 0305 

Attention: Hotline 

245 Murray Drive, SW 

Washington, DC 20528-0305