United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Management, 

Integration, and Oversight, Committee on 

Homeland Security, U.S. House of 

Representatives

INDIVIDUAL DISASTER 

ASSISTANCE PROGRAMS 

Framework for Fraud 

Prevention, Detection, and 

Prosecution 

Statement of Gregory D. Kutz, Management Director 

Forensic Audits and Special Investigations 

For Release on Delivery

Expected at 2:00 p.m. EST 

Wednesday, July 12, 2006

 

GAO-06-954T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 12, 2006

INDIVIDUAL DISASTER ASSISTANCE 

PROGRAMS 

Framework for Fraud Prevention, 

Detection, and Prosecution 

Highlights of GAO-06-954T, a testimony 

before the Subcommittee on 

Management, Integration, and Oversight, 

Committee on Homeland Security, U.S. 

House of Representatives

Federal agencies spend billions of 

dollars annually to aid victims of 

natural and other disasters and acts 

of terrorism. Managers of federal 

disaster assistance programs face a 

dual challenge—delivering aid as

quickly as possible while at the

same time ensuring that relief 

payments go only to those who are 

truly in need. Due to the very 

nature of the government’s need to

quickly provide assistance to 

disaster victims, federal disaster 

relief programs are vulnerable to

significant risk of improper

payments and fraudulent activities. 

On February 13, 2006, and on June 

14, 2006, GAO testified concerning

extensive fraud, waste, and abuse 

in the Individuals and Household 

Program (IHP), a component of the 

Federal Emergency Management 

Agency’s (FEMA) disaster 

assistance programs. GAO 

identified significant internal

control weaknesses that resulted in

FEMA making tens of thousands of

Expedited Assistance payments 

that were based on bogus 

registration data. GAO also found

numerous other internal control 

failures in FEMA’s IHP disaster 

assistance program, resulting in an 

estimate that FEMA made $600 

million to $1.4 billion in improper

and potentially fraudulent 

payments to registrants. The 

purpose of this testimony is to 

establish a framework for

preventing, detecting, and 

prosecuting disaster assistance 

fraud. 

 

Recent GAO audits have illustrated the importance of an effective fraud, 

waste, and abuse prevention system in federal disaster assistance programs. 

GAO’s Standards for Internal Control in the Federal Government provide a

framework for internal control that can be used to minimize fraudulent, 

wasteful, and abusive activity regardless of whether dealing with the effects 

of natural disasters like hurricanes Katrina and Rita, or coping with the 

destruction left by the terrorist attacks of September 11, 2001. 

The figure below illustrates that a well-designed fraud prevention system

should consist of three crucial elements: (1) upfront preventive controls, (2) 

detection and monitoring, and (3) investigations and prosecutions. The 

figure also shows that upfront preventive controls can help screen out the 

majority of fraud, and are the most effective and efficient means to minimize

fraud, waste, and abuse. Detection and monitoring, and aggressive 

prosecution of individuals committing fraud, while also crucial elements of 

an effective system, are less effective and generally cost more. 

Program Designed to Minimize Fraud, Waste, and Abuse 

Audit work has long confirmed that upfront preventive controls are most 

effective when they require validation of data provided by disaster 

registrants against other government or third-party sources, and physical 

inspections when possible. Preventive controls should also include 

procedures designed to identify problem registrants prior to payments. 

Training personnel on fraud awareness and potential fraud schemes is also 

an integral component in preventive controls. Collectively, these preventive 

controls can help improve program integrity and safeguard tax dollars. 

An effective fraud deterrence program must also include resources to 

continually monitor and detect potential fraud, and aggressively investigate 

and prosecute individuals who received assistance fraudulently. Monitoring 

and detection include data-mining for suspicious registrations and payment 

usage, and setting up fraud hotlines. Finally, program integrity is enhanced 

by investigating and prosecuting individuals who take advantage of program 

weaknesses. However, the high costs of prosecutions highlight our 

conclusion that upfront preventive controls are most effective in preventing 

fraud, and that lessons learned from detection and prosecutions should be 

used to improve preventive controls. 

www.gao.gov/cgi-bin/getrpt?GAO-06-954T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory Kutz at 

(202) 512-7455 or kutzg@gao.gov. 
Mr. Chairman and Members of the Committee: 

Thank you for the opportunity to discuss fraud prevention and detection

related to the federal government’s efforts to provide assistance to 

individuals and households in the aftermath of disasters.1

 Effective fraud 

prevention in relief programs is an important issue, regardless of whether 

dealing with the effects of natural disasters like hurricanes Katrina and 

Rita, or coping with the destruction left by the terrorist attacks of 

September 11, 2001. Agencies are faced with many challenges in the 

aftermath of a disaster and must devote resources not only to distributing 

money and relief quickly to victims, but must also minimize fraud, waste, 

and abuse to ensure only legitimate victims receive assistance.

On February 13, 2006,2

 and then again on June 14, 2006,

3

 we testified 

concerning extensive fraud, waste, and abuse related to hurricanes Katrina 

and Rita in the Individuals and Household Program (IHP), a component of 

the broader disaster assistance program from the Federal Emergency

Management Agency (FEMA). The February testimony focused on control 

weaknesses that resulted in FEMA making tens of thousands of Expedited 

Assistance (EA) payments that were based on bogus registration data. Our 

June 14, 2006, testimony discussed breakdowns in internal controls, in 

particular the lack of controls designed to prevent bogus registrations, 

which resulted in an estimated $600 million to $1.4 billion in improper and 

potentially fraudulent payments. Based on these findings we have made 

recommendations to FEMA to develop effective systems and controls to 

minimize the opportunity for fraud, waste, and abuse when FEMA decides 

to provide assistance in the future. Crucial internal controls and control 

weaknesses we identified during our work on hurricane disaster relief, and 

 1

 In the aftermath of a disaster, the federal government typically activates numerous 

programs to help disaster victims. Examples of programs include individual assistance, 

public assistance, and hazard mitigation. Individual assistance provides financial and other 

direct assistance to individuals and households. Public assistance provides grants to states, 

local governments, and non profit organizations to provide services such as debris removal

and housing accommodations to disaster victims. Hazard mitigation provides grants for 

long-term hazard mitigation projects. 

2

 GAO, Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA’s

Control Weaknesses Exposed the Government to Significant Fraud and Abuse, 

GAO-06-403T, (Washington, D.C.: Feb. 13, 2006). 

3

 GAO, Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially

Fraudulent Individual Assistance Payments Estimated to Be Between $600 Million and 

$1.4 Billion, GAO-06-844T, (Washington, D.C.: June. 14, 2006). 

Page 1 GAO-06-954T 
requirements in the Comptroller General’s Standards for Internal Control 

in the Federal Government,4

 are directly relatable to controls over any 

individual assistance program, regardless of the cause of the disaster. My 

testimony today will focus on the importance of fraud prevention controls, 

fraud detection efforts, and the aggressive pursuit and prosecution of 

individuals who commit fraud against the government in a time of disaster. 

The establishment of effective fraud prevention controls over the 

registration and payment process, fraud detection and monitoring 

adherence to those controls throughout the entire program life, and the 

aggressive pursuit and prosecution of individuals committing fraud are 

crucial elements of an effective fraud prevention program over any 

assistance programs with defined eligibility criteria, including disaster 

assistance programs. The very nature of the government’s need to quickly 

provide assistance to individuals adversely affected by disasters makes 

assistance payments more vulnerable to applicants attempting to obtain 

benefits that they are not entitled to receive. However, it is because of 

these known vulnerabilities that the federal government, and more 

specifically FEMA, needed to have had effective controls in place to 

minimize the opportunities for individuals to defraud the government. 

Figure 1 provides an overview of how prevention controls help to screen

out the majority of fraud, waste and abuse, and how detective controls and 

prosecution can help to further minimize the extent to which a program is 

vulnerable to fraud. 

Summary 

 4

 The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) required that GAO issue 

standards for internal control in government resulting in the issuance of Internal Control:

Standards for Internal Control in the Federal Government, GAO/AIMD-98-21.3.1,

(Washington, D.C.: November, 1999). 

Page 2 GAO-06-954T 
Figure 1: Program Designed to Minimize Fraud, Waste and Abuse

The results of our work serve to emphasize the fundamental concept that

fraud prevention is the most effective and efficient means to minimize 

fraud, waste, and abuse. Preventive controls should be designed to 

include, at a minimum, a requirement that data provided by registrants be 

validated against other government or third-party sources to determine 

whether registrants provided accurate information on their identity and

place of residence. Inspections and physical validation processes should 

also be conducted whenever possible to confirm registration information 

prior to payment. System edit checks designed to identify problem 

registrants and claims (e.g., duplicates) before payments are made are also

critical. Finally, providing training on fraud awareness and potential fraud 

schemes to all key government and contractor personnel is important in 

stopping fraud before it gets into the program. Prior to implementing any 

new controls, and well in advance of any disaster, agencies must 

adequately field test the new controls to ensure that controls are operating

as intended and that legitimate victims are not denied benefits. In addition, 

as fraud prevention controls are increased, agencies must provide safety

precautions to assist any disaster victims who are inappropriately denied 

relief due to preventive controls. 

Although more costly and less effective than preventive controls, fraud 

detection and monitoring after payments have been made is also critical. 

Key elements of the detection process include data-mining for fraudulent 

and suspicious registrants, reviews to establish the accountability of 

funds, and the establishment of hotlines to receive tips of potentials fraud. 

For example, after the initial registration process, agencies need a control 

Page 3 GAO-06-954T 
system that includes continual monitoring, to include data-mining 

registrations—similar to the data-mining we conducted—to identify 

potentially fraudulent registrations in their claim system. Also, control 

weaknesses identified through detection and monitoring should be used to 

make improvements to preventive controls to reduce the risk for fraud, 

waste, and abuse in the future. 

Another element of a fraud prevention program is the aggressive 

investigation and prosecution of individuals who committed fraud against

the federal government. The deterrent value of prosecuting those who 

commit fraud sends the message that the government will not tolerate 

individuals stealing assistance money, serving as a preventive measure for 

future disasters. For hurricanes Katrina and Rita the Justice Department 

has set up the Katrina Fraud Task Force, which has investigated and 

convicted numerous individuals who received assistance fraudulently 

from FEMA. Further, schemes identified through investigations and 

prosecution can be used to improve the fraud prevention program. 

Prevention is the most effective and efficient way to minimize fraud, 

waste, and abuse in any federal program, including disaster assistance, 

and is also a key element described in the Standards for Internal Control in 

the Federal Government.5

 The most crucial element of fraud prevention is 

to substantially diminish the opportunity for fraudulent access into the 

system through front end controls. Figure 2 displays how preventive

controls fit within a larger fraud, waste, and abuse prevention program. 

Fraud, Waste, and 

Abuse Prevention 

Controls

 5 GAO/AIMD-98-21.3.1. 

Page 4 GAO-06-954T 
Figure 2: Preventive Controls 

Fraud prevention can be achieved by requiring that registrants provide 

information in a uniform format, and validating that information against 

external sources. In the current environment, agencies have at their 

disposal a large number of data sources that they can use to validate the 

identity and address of registrants. However, our work related to FEMA’s 

management of the IHP program for hurricanes Katrina and Rita found 

that their limited use of a third-party validation process left room for 

substantial fraud. Effective fraud prevention controls require that agencies 

enter into data-sharing arrangements with organizations to perform 

validation. System edit checks are also key to identifying and rejecting 

fraudulent registrations before payments are disbursed. In addition, an 

effective fraud prevention system is not complete without adequate fraud

awareness training of all personnel involved in the distribution of relief. 

Finally, any new systems or processes need to be field tested to ensure 

that the system is working properly prior to implementation.

Data Validation Prior to a disaster registrant gaining access to relief payments, key 

registrant information must be validated. For this program, data such as 

names, social security numbers (SSN), primary residences, citizenship 

status, and any other information which determines eligibility must be 

validated upfront, prior to agencies accepting the registration, or at least 

prior to disbursements being made. Obtaining releases from registrants 

which allow an agency to validate data with other sources such as social 

security records, tax records, and other information is an important step 

that can facilitate effective validation of data. 

Page 5 GAO-06-954T 
Depending on the turnaround time needed for a payment, agencies can 

chose to validate records with federal government databases, or validate

information with third-party contractors who can confirm key information 

with publicly available data from credit reports and other sources almost 

instantaneously. When using these third-party sources it is also important

to at least periodically authenticate6

 the data within the program with the 

source of the information such as Social Security Administration (SSA) or 

Internal Revenue Service (IRS) records. Regardless of the sources used, all 

key data concerning a registration has to be validated to minimize the risks 

to acceptable levels prior to the registrant being accepted in the program. 

For example, because FEMA lacked basic identity validation controls, they

accepted thousands of IHP registrations from registrants who provided 

social security numbers that had never been issued or belonged to 

deceased individuals. In addition, because FEMA failed to validate 

damaged address information, we found thousands of dollars were paid to

individuals for bogus damaged addresses. 

For data to be properly validated, it should be recorded in a uniform 

format. Once key data elements relating to disaster relief eligibility are 

determined, our work has shown that it is important to record the 

information in a format that will facilitate data validation with external 

sources. Otherwise, agencies may be faced with thousands or tens of 

thousands of registrations being rejected or placed in a manual review 

status because data was not recorded accurately. This is also particularly 

important when recording names, identity information, and addresses in 

order to prevent registrants from getting multiple payments by changing 

the spelling of their address or name. For example, data collected by 

hotels providing lodging that was paid for by FEMA did not record 

occupant’s SSN or FEMA registration ID numbers. Thus, there were no 

common data elements that could be used to ensure people already 

staying at FEMA paid hotels did not also improperly receive rental 

assistance. 

Within the federal government, many organizations such as SSA, United 

States Postal Service (USPS), and IRS maintain information on disaster 

assisted registrants. These are all data sources that we have used in prior 

 6

 For purposes of this testimony, data validation refers to the process of comparing data 

provided by a registrant with publicly available data (e.g., credit reports) or government

databases to ensure accuracy. Data authentication refers to the process of periodically 

authenticating data that have been validated by third-party contractors with source

databases such as SSA or Internal Revenue Service records. 

Page 6 GAO-06-954T 
forensic work to identify fraudulent and improper payments. However, 

proactive actions are necessary on the part of agencies responsible for 

providing disaster assistance to enter into data-sharing agreements with 

organizations that own the data. Agreements have to be in place prior to 

any disaster occurring for agencies to take advantage of data-validation 

sources. Also for tax information, consent must be requested from the 

registrant at the time of registration. 

Finally, whenever possible, registration data and specific loss claims 

should be validated by a physical inspection of the disaster damage prior 

to payment. In some cases, as with the massive destruction caused by

Hurricane Katrina, physical inspections in a timely manner are not 

possible, and therefore acceptance of data must be done through 

electronic verification. However, within the FEMA IHP program we found 

significant fraud related to expedited assistance payments that were made 

prior to any physical inspection being performed. In the cases we found, 

many fraudulent registrations could have been identified and rejected if 

inspections were performed because they would have seen that properties 

did not even exist, as we found when performing our own inspections. For 

example, FEMA failed to perform physical inspections on our undercover 

registrations, which used completely bogus property addresses and vacant

lots. Had a physical inspection been performed, FEMA could have 

identified the fraudulent information and denied the expedited and rental 

assistance payments. 

System Edit Controls Disaster relief programs must also have a network of system pre-payment

edit checks in place to ensure that obviously false or duplicate information 

is not used to receive disaster relief payments. System edit checks can be 

performed before or after a registration is accepted into the system, but to 

be an effective preventive control, they must be performed prior to the 

distribution of a payment. Edit checks should include items such as 

ensuring that the same SSN was not used on multiple registrations, or that 

the registrant provides a verifiable physical address for which the disaster 

damaged is based on. In the case of FEMA’s IHP program, we found the 

lack of effective system edit checks allowed numerous individuals to 

fraudulently register numerous times and receive multiple payments using 

the same name, social security number, or address. In one case, the lack of

controls allowed an individual to register eight times using the same name 

and SSN and receive multiple disaster assistance payments. In addition, 

accepting applications with obviously inaccurate data exposed FEMA to 

the risk that disbursements would be made based on obviously false data. 

For example, we found during our work that FEMA paid millions of 

Page 7 GAO-06-954T 
dollars in IHP payments to individuals who used a Post Office Box as their 

damaged physical address in order to receive assistance. In those cases 

system edits should have identified the Post Office Box as an invalid 

physical address and forced the applicant to provide a valid street address 

for the damage property in order to be considered for disaster assistance. 

Results of our work also showed that agencies must follow through and 

accurately implement—and not short-change—existing system edit checks 

to provide assurance that the program is protected. We found in the 

course of our work that FEMA had designed controls that may have 

prevented some fraudulent payments. However, our work also indicated

that these controls were circumvented, for example, when FEMA designed 

scripts to override system edit checks that had identified registrations as 

potential duplicates, in an effort to disburse funds as quickly as possible. 

Adhering to existing control procedures is therefore also crucial when 

maintaining effective fraud prevention. 

Fraud Training and Field 

Testing

Beyond the uniform recording and validation of data, other controls, 

including a well-trained work force that is aware of the potential for fraud, 

can help prevent fraud. Personnel involved in a disaster program, 

including government employees and call center and inspection 

contractors, should receive training about the potential for fraud within 

the program and the likely types of fraud they could encounter. Fraud 

awareness training with frontline personnel is crucial because they are 

part of the first line of defense and therefore play a key role in fraud 

prevention. If the personnel accepting registrations and performing 

physical inspections of properties and documents are aware of fraud 

indicators and suspicious activities, they will help to identify potentially 

fraudulent activity as soon as it occurs. Where possible, incentives can be

provided to contractors not just to process registrations and claims 

quickly, but also to prevent fraud. 

In addition, when implementing any new controls, it is important to field 

test all systems prior to putting them in place. As stated in a recent 

testimony on the IHP program, FEMA acknowledged that they had 

instituted several new processes that had not been tested. Weaknesses in 

these new processes, including the lack of validation controls over key 

data elements, resulted in our findings of approximately $1 billion dollars 

in potential fraud in the IHP program. On top of reducing the risk of 

untested controls allowing substantial fraud, field-testing also helps to 

ensure that new controls do not improperly deny benefits to valid 

registrants. A safety net for those registrants who are wrongly denied 

Page 8 GAO-06-954T 
disaster relief due to preventive controls should always be in place to

ensure they receive assistance. This process should include staff who are 

adequately trained to expeditiously handle exceptions. 

Even with effective preventive controls, there is substantial residual risk 

that fraudulent registrants are likely to gain access to a disaster relief 

program and begin to receive payments. Therefore, after a registrant has 

successfully passed through upfront controls and begun to receive 

payments, our work at FEMA illustrated that agencies must continue their 

efforts to monitor the execution of the disaster relief program. Detection 

and monitoring efforts are addressed in the Standards for Internal Control 

in the Federal Government7

 and include such activities as data-mining 

registrations, which have received payments, ensuring accountability over 

funds and monitoring how the disaster assistance is being spent, and 

establishing mechanisms to identify the existence of fraud. Figure 3 

provides a perspective on how these controls fit into an overall fraud 

prevention program. 

Detection and 

Monitoring 

Figure 3: Detection and Monitoring Controls 

Data-mining of registration data within the program should be done to 

look for suspicious information after payments have been made. Along 

with data-mining efforts, proper accountability controls over the 

distribution of funds and the monitoring of fund usage is key to obtaining 

 7 GAO/AIMD-98-21.3.1. 

Page 9 GAO-06-954T 
reasonable assurance that relief payments are being used to mitigate the 

effects of a disaster. Also, setting up hotlines to identify potential frauds is

an important activity that should be in place when distributing disaster 

funds. Finally, any lessons learned from detection and monitoring efforts 

should be used to improve preventive controls to reduce the risk for fraud, 

waste, and abuse in the future. 

Data-mining Despite effective preventive controls, there is still risk for fraud, waste, 

and abuse within disaster programs once payments are made. Therefore, it 

is important that program managers continuously data mine registrations 

for suspicious activity. A robust data-mining program can include many 

different efforts. Examples of fraud indicators include but are not limited

to searching for anomalies like those found at FEMA, including multiple 

payments sent to the same address or bank account. Abnormalities such 

as numerous residents in a damaged apartment building all relocating to

the same location may also suggest fraud. Comparing recipient data 

against other government assistance programs such as databases 

containing information on Red Cross or FEMA paid for hotel rooms can 

help to identify duplication of benefits between programs. However, due 

to the difficulties of collecting overpayments, system edit checks that 

occur prior to payments being made are preferable to data-mining after 

payments have occurred.

The data-mining we performed on FEMA’s IHP program showed how 

important constant monitoring and detection can be. We searched for and

found examples where the same individual received several rental 

assistance checks from FEMA while at the same time residing in a hotel 

room paid for by FEMA. We also found instances where multiple family 

members from the same household registered numerous times and 

received duplicate payments. Using external databases of federal and state 

prisoners, we found instances where prisoners had fraudulently registered 

for and received disaster relief payments while incarcerated. As shown by 

our examples, data-mining efforts should be done in a manner that uses 

creative solutions to search for potential fraud using all available data

sources. To the extent that data-mining identifies systematic fraud, that 

intelligence should be fed back into the fraud prevention process and 

system edits so that for future disasters the fraud is detected before money 

is disbursed. 

Page 10 GAO-06-954T 
When part of the disaster assistance comes in the form of cash or a cash 

equivalent such as a debit card, our work at FEMA shows that it is crucial 

for agencies to maintain strict accountability over who has received the 

assistance. This can be achieved by obtaining signatures of release from an 

agency official and, if appropriate, from the issuing bank official, along 

with a signature of acceptance from the relief recipient. Agencies should 

also be able to link each distribution of cash to a specific applicant. In the 

case of FEMA and their distribution of debit cards, adequate 

accountability was not maintained, resulting in more than $1 million worth 

of debit cards being distributed without a record of who received them. 

In addition, depending on the type of assistance provided and the means in 

which the assistance was distributed, it can be important for an agency to 

monitor the usage of disaster relief funds. Our review of FEMA’s IHP 

program found that almost all money was distributed via check or EFT, 

which did not allow us to review whether the money was spent on 

disaster-related needs. A small amount, approximately $80 million, of IHP 

money was distributed via debit cards, which allowed us to see whether 

funds were being used appropriately. In this case, the vast majority of 

debit card money was still withdrawn as cash, but the remaining amount 

appeared to have been used for disaster-related needs. However, we did 

find a small number of purchases for nondisaster items such as football 

tickets, alcohol, massage parlor services, and adult videos. By monitoring 

these types of uses and contacting and possibly penalizing those who 

misuse funds, agencies may be able to ensure that disaster funds are used 

to help mitigate losses and not for inappropriate items. 

Accountability and Proper 

Use of Relief Payments 

Fraud Hotlines To detect existing fraud and prevent new cases in the future, agencies 

should also set up mechanisms to identify and investigate existing cases. 

The use of hotlines where individuals can anonymously call and report 

potential fraud can provide valuable investigation leads. The Department 

of Homeland Security (DHS) Office of Inspector General set up one such 

hotline specifically dedicated to fraud related to hurricanes Katrina and 

Rita. Similar hotlines are useful within any disaster relief program to help

identify any fraudulent activity not caught by controls. In conjunction with 

fraud identified through data-mining or hotline tips, agencies should have 

in place teams ready to investigate leads, not only for future prosecution, 

but also to provide suggestions for how the fraud can be prevented in the 

future. 

Page 11 GAO-06-954T 
Investigations and 

Prosecution of 

Offenders 

The final aspect of a program designed to reduce fraud in a disaster 

assistance program is the investigation and aggressive prosecution of 

individuals who have fraudulently received disaster assistance. Suspicious 

cases identified through preventive, detective, and monitoring controls, 

along with hotline tips, should be referred to investigators for further 

review. In the course of our work performed on IHP fraud for hurricanes 

Katrina and Rita, we identified tens of thousands of potentially fraudulent 

registrations. We have already referred thousands of those cases to FEMA 

and the Katrina Fraud Task force for further investigation and expect to 

refer others for additional investigation and possible prosecution. While 

the criminal investigative process is general a lengthy process, we are 

aware that several individuals that we referred have already been indicted. 

This included one individual indicted for fraudulently obtaining over 

$25,000 from FEMA based on bogus registrations. Figure 4 displays how 

investigations and prosecutions fit into an overall fraud prevention 

program. 

Figure 4: Investigations and Prosecutions

While investigations and prosecution can be the most visible means to deal 

with fraudsters, they are also the most costly and should not be used in 

place of other more effective controls. Instead, agencies need to focus on

prevention before money is spent. Still, by successfully prosecuting 

fraudsters, agencies can deter others who are thinking of taking advantage 

of disaster programs. In the end, investigations and prosecutions are a 

necessary part of an overall fraud prevention and deterrence program, but 

should be a last resort when all other controls have failed. In addition, 

knowledge from these investigations and prosecutions should be fed back 

Page 12 GAO-06-954T 
into the fraud prevention process to better handle future disasters and 

enhance existing fraud prevention and detection programs. 

Managers of federal disaster assistance programs face a dual challenge—

delivering aid as quickly as possible while at the same time ensuring that 

relief payments go only to those who are truly in need. To meet this dual 

challenge, managers must recognize that fraud prevention and the rapid 

distribution of assistance are not conflicting mandates; instead, both can

be accomplished if effective controls are in place and operating as 

intended. Of the controls discussed today, fraud prevention controls are 

the most useful and cost-effective means of reducing the loss of money 

due to fraud, because payments, once out the door, have proven extremely 

difficult to recover. Implementing an effective system of fraud prevention

controls including upfront controls, post payment detection and 

monitoring, and prosecuting those who have exploited control weaknesses 

are crucial to building the American taxpayer’s confidence that federal 

disaster assistance is given to those in need. 

Mr. Chairman and members of the Committee, this concludes my 

statement. I would be pleased to answer any questions that you or other 

members of the Committee have at this time. 

For further information about this testimony please contact Gregory Kutz 

at (202) 512-7455 or kutz@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this testimony. 

Concluding 

Comments 

Contacts and 

Acknowledgements 

Major contributors to this testimony include Jennifer Costello, Jason Kelly,

John Kelly, Sun Kim, John Ledford, Jennifer Leone, Barbara Lewis, 

Jonathan Meyer, John Ryan, and Tuyet-Quan Thai 

Page 13 GAO-06-954T (192218) 
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