Department of Homeland Security 

Office of Inspector General 

Assessment of FEMA’s 
 

Fraud Prevention Efforts 
 

OIG-11-84 May 2011 
 

Office ofInspector General

U.S. Department of Homeland Security

Washington. DC 20528

Homeland

Security

Preface

The Department ofRomeland Security (DRS) Office ofInspector General (OIG) was

established by the Homeland Security Act of2002 (Public Law 107-296) by amendment

to the Inspector General Act of1978. This is one of a series of audit, inspection, and

special reports prepared as part of our oversight responsibilities to promote economy,

efficiency, and effectiveness within the department.

This report addresses the strengths and weaknesses ofthe Federal Emergency

Management Agency's efforts to prevent fraud. It is based on interviews with employees

and officials ofrelevant agency units, direct observations, and a review of applicable

documents.

The recommendations herein have been developed to the best knowledge available to our

office, and have been discussed in draft with those responsible for implementation. We

trust this report will result in more effective, efficient, and economical operations. We

express our appreciation to all ofthose who contributed to the preparation ofthis report.

IA...AM-'_ J:: L'::~ arle K. Edwards

Acting Inspector General

May 19, 2011
Executive Summary .............................................................................................................1
 


Background..........................................................................................................................2
 


Results of Review ................................................................................................................5

 Identifying and Reporting Potential Fraud ...................................................................5

 Recommendations .........................................................................................................9

 Management Comments and OIG Analysis .................................................................9

 Fraud Prevention Awareness ......................................................................................11

 Recommendations .......................................................................................................19

 Management Comments and OIG Analysis ...............................................................19

 Developing and Maintaining Internal Controls ..........................................................20

 Recommendations .......................................................................................................24

 Management Comments and OIG Analysis ...............................................................24

 Improper Payment Recoupment Process ....................................................................25

 Recommendation ........................................................................................................30

 Management Comments and OIG Analysis ...............................................................31
 


Table of Contents/Abbreviations 

Appendixes 

Appendix A: Purpose, Scope, and Methodology.......................................................32 
 

Appendix B: Management Comments to the Draft Report .......................................33 
 

Appendix C: Fraud Prevention and Investigation Branch Case Flowchart ...............38 
 

Appendix D: January 2011 Administrator Fraud Prevention Memorandum ............39 
 

Appendix E: Major Contributors to this Report........................................................40 
 

Appendix F: Report Distribution ..............................................................................41 
 

Abbreviations 

CFO Chief Financial Officer
 


CORE Cadre of On-Call Reserve Employees
 


DHS Department of Homeland Security 
 

FEMA Federal Emergency Management Agency 
 

FLTRO Florida Long-Term Recovery Office 
 

FPIB Fraud Prevention and Investigation Branch 
 

FTE full-time equivalent 
 

FY fiscal year 
 

GAO Government Accountability Office 
 

IHP Individuals and Households Program 
 

INV Office of Investigations of DHS OIG 
 
IPIA Improper Payments Information Act 

IT information technology 

NEMIS National Emergency Management Information System 

NPSC National Processing Service Center 

OCSO Office of the Chief Security Officer 

OIG Office of Inspector General 

OMB Office of Management and Budget 

P.L. Public Law 

RAT Board Recovery Accountability and Transparency Board 

Recovery Act American Recovery and Reinvestment Act 

Stafford Act Robert T. Stafford Disaster Relief and Emergency Assistance Act 

TXNPSC Texas National Processing Service Center 
OIG
 


Department of Homeland Security 

Office of Inspector General 

Executive Summary 

This report provides our assessment of the Federal Emergency 

Management Agency’s fraud prevention efforts. Through its 

Individuals and Households Program, FEMA quickly disburses 

billions of dollars to disaster survivors. The program’s 

susceptibility to fraud, waste, and abuse requires increased vigilance 

in order for the agency to be a better steward of taxpayer money. 

The Federal Emergency Management Agency’s Fraud Prevention 

and Investigation Branch assists in identifying and reporting 

potential fraud in agency programs. However, more can be 

accomplished with an agency-wide mandate, a reallocation of 

resources and staff, and access to the latest fraud prevention tools. 

The agency strives to provide assistance to disaster survivors 

quickly, but also needs to ensure that assistance is provided only to 

eligible recipients and for the proper amount. Agency leaders must 

take visible, substantive, and continual steps to demonstrate the 

importance of fiscal responsibility and program integrity. 

Increasing the visibility of the Fraud Branch and mandating fraud 

prevention training for all employees will help the agency increase 

attention to fraud prevention and deterrence. 

The agency has improved its internal controls since hurricanes 

Katrina and Rita. However, the Office of Inspector General and 

Government Accountability Office reviews, as well as agency 

assessments, continue to identify needed improvements in internal 

controls in assistance programs. Implementation of these controls 

will deter fraud and reduce the risk of issuing improper payments. 

Approximately $643 million in potential improper Individuals and 

Households Program payments have been identified since 

Hurricane Katrina. Recently, the agency restarted a recoupment 

process that had been halted since 2007. The recoupment process 

should continue until all cases are resolved. 

This report contains eight recommendations that, when 

implemented, will improve fraud prevention efforts. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 1 
Background 

In responding to natural or manmade emergencies, current policy 

provides that the government agencies and organizations most 

local to the situation act as first responders. When state and local 

governments become overwhelmed by the size or scope of a 

disaster, state officials may request assistance from the federal 

government, so federal agencies must always be prepared to 

provide support when needed. In 1979, President Carter issued an 

Executive Order that created the Federal Emergency Management 

Agency (FEMA) and merged many of the federal government’s 

separate disaster-related functions. Following the terrorist attacks 

of September 11, 2001, the Homeland Security Act of 2002 

(Public Law [P.L.] 107-296) realigned FEMA and made it part of 

the newly formed Department of Homeland Security (DHS). 

FEMA’s statutory authority to provide disaster assistance comes 

from the Robert T. Stafford Disaster Relief and Emergency 

Assistance Act, as amended (P.L. 100-707) (Stafford Act), which 

was signed into law in 1988 and amended the Disaster Relief Act 

of 1974 (P.L. 93-288). To access federal assistance under the 

Stafford Act, generally, states must make an emergency or major 

disaster declaration request that FEMA reviews for presidential 

approval. Section 408 of the Stafford Act permits the President to 

provide financial assistance and, if necessary, direct services, to 

individuals and households in the state who, as the direct result of 

a major disaster, are unable to meet necessary expenses and 

serious needs through other means.1 Figure 1 shows the 

devastation brought on by the North Dakota flooding in 2009. 

Figure 1. North Dakota Flooding, 2009 

Source: FEMA Photo Library; photographer, Patsy Lynch. 

1

 Section 408, Federal Assistance to Individuals and Households (42 U.S.C. 5174). 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 2 
Immediately after the President declares a disaster, affected 

individuals may apply for assistance from the Individuals and 

Households Program (IHP) in person, by calling a toll-free 

telephone number, or through the Internet. Registrants provide 

FEMA with a variety of information, including name, Social 

Security number, address and telephone number of the damaged 

property, current address and telephone number, insurance 

information, and a description of losses incurred. IHP assistance 

may include temporary housing (rent and lodging expenses) and 

home repair or replacement. 

FEMA administers IHP disaster assistance through the National 

Emergency Management Information System (NEMIS), and uses 

a contractor to validate identity, occupancy, ownership, and other 

information provided by registrants during the registration 

process. The contractor validates this information by comparing 

the registrant’s name with the Social Security number, address, 

and other information provided. In addition, FEMA uses edit 

checks in NEMIS to identify duplicate registrations and to prevent 

duplicate payments to registrants who have provided invalid or 

fraudulent information when registering for assistance. 

As part of the registration process, a FEMA contractor performs a 

physical inspection of the residence. The inspector: 

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Meets with a registrant and reviews documentation to 

validate the registrant’s identity, occupancy of the 

damaged address, and if applicable, the registrant’s 

ownership of the damaged address; 

Inspects the address to determine what physical damage 

was sustained during the disaster; 

Records the validation of a registrant’s documentation and 

the damage caused by the disaster on a FEMA-provided 

computer; and 

Uploads this information to NEMIS. 

Once these tasks are completed, FEMA determines the type and 

amount of assistance for which the registrant is eligible. 

In 2004, Florida was hit by four hurricanes, and FEMA disbursed 

nearly $209 million in IHP assistance. Concerned with an 

increase in fraudulent claims for assistance, a DHS Office of 

Inspector General (OIG) proposal resulted in the establishment by 

the director of the Florida Long-Term Recovery Office (FLTRO) 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 3 
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of a fraud prevention unit. 2 (A recent FEMA reorganization 

placed the unit under the Fraud and Internal Investigation 

Division in the Office of the Chief Security Officer (OCSO) in 

FEMA headquarters and renamed the unit the Fraud Prevention 

and Investigation Branch (FPIB).) FPIB’s mission includes 

identifying, mitigating, and preventing fraudulent losses of federal 

funds and assets through agency fraud awareness training and 

recoupment of losses in partnership with the DHS OIG. (It is 

important to note that although FPIB has “Investigations” in its 

name, it does not conduct criminal investigations.) 

One of FPIB’s responsibilities is to identify best practices to 

prevent and deter fraud, waste, and abuse in FEMA’s delivery of 

disaster assistance. Agencies such as FEMA seek ways to better 

achieve their missions and program results; a key factor in 

achieving such outcomes is implementing appropriate internal 

controls. Figure 2 illustrates the objectives of internal control. 

Figure 2. Internal Control Objectives 

Internal Control 

An integral component of an organization’s management that 

provides reasonable assurance that the following objectives are 

achieved: 

Effectiveness and efficiency of operations; 

Reliability of financial reporting; and 

Compliance with applicable laws and regulations. 

Source: Government Accountability Office (GAO). 

Internal controls are the plans, methods, and procedures that an 

agency uses to meet missions, goals, and objectives that support 

performance-based management and serve as the first line of 

defense in safeguarding assets and preventing and detecting errors 

and fraud.3 Figure 3 illustrates the important role of internal 

controls in fraud prevention. 

2

 Instruction Number 1251, Operations of the Florida Long-Term Recovery Office Fraud Prevention and 
 

Investigation Unit, Florida Long-Term Recovery Office, November 16, 2007. 
 3 Standards for Internal Control in the Federal Government (GAO/AIMD-00-21.3.1), November 1999. 
 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 4 

 

Figure 3. Using Internal Controls to Prevent Fraud 

Source: GAO. 

Results of Review 

FEMA has identified and reported potential fraud to OIG, but more can be done 

with additional staffing and analytical tools, and by providing FPIB with agencywide authority to change program processes and procedures. FEMA has made 

progress in preventing fraudulent losses of federal funds, but challenges remain 

in developing, establishing, and enhancing proper internal controls and 

recouping improper disaster assistance payments. 

Identifying and Reporting Potential Fraud 

FPIB was created to assist in identifying and reviewing potentially 

fraudulent and otherwise improper disaster assistance payments. Although 

FPIB has identified and reported potential fraud to OIG, its impact has 

been limited because of the branch’s insufficient authority and resources. 

Potential Fraud Identified and Reported to OIG 

FPIB has identified and reported to OIG potential fraud in 

FEMA’s individual assistance programs, including IHP (see 

Figure 4). It has also reported cases of potential fraud in FEMA’s 

Public Assistance and Mitigation programs. 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 5 

Figure 4. FPIB Activities From FY 2007 Through FY 2010 

IndividualAssistance,PublicAssistance,andMitigationPrograms

NumberofCases

3,500

3,000

2,500

2,000

1,500

1,000

500

0

3,108

2,413 2,352

Reviewed ReferredtoOIG ForwardedforRecoupment

Note:Thetotalvalueofcasesforwardedforrecoupmentis:$14.5million.

Source: OIG analysis of FEMA data. 

FPIB conducts data analysis to examine information contained in 

disaster assistance applications to identify and prevent losses of 

federal disaster funds. FPIB reports evidence of fraudulent 

FEMA assistance claims to DHS OIG for investigation. Based on 

lessons learned from its review of disaster assistance applications 

and data analysis, FPIB has made suggestions to lessen fraud, 

waste, and abuse. Appendix C depicts FPIB’s case flowchart. 

FPIB assesses and validates allegations and claims referred from 

the Office of Investigations of DHS OIG (INV), developed inhouse, or received from external parties. From January 2010 to 

February 2011, INV referred 292 FEMA fraud complaints to 

FPIB, 141 (48%) of which contained evidence of fraud, which 

INV opened for investigation. 

FPIB Resources and Authority 

FPIB’s impact on fraud prevention activities in FEMA is limited 

by inadequate resources and insufficient authority over program 

staff and processes. In FY 2010, FPIB’s budget for salaries 

totaled $537,000. Figure 5 reflects FPIB’s declining budget. 

Assessment of FEMA’s Fraud Prevention Efforts 


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Figure 5. Fraud Prevention and Investigation Branch Budgets 

Budget Allocation 

1.4 

Amounts ($M) 1.2 

1 

0.8 

0.6 

0.4 

0.2 

0 

1.16 

0.81 0.72 

0.537 

FY07 FY08 FY09 FY10
 


Salaries only; benefits and other operational costs excluded
 


Source: FEMA. 

In FY 2010, FPIB was authorized nine full-time equivalents 

(FTEs), but only six are on board.4 Figure 6 shows how the 

staffing level has declined over the past 3 years. This is an 

additional indication of FEMA’s need to improve its commitment 

to fraud prevention and awareness efforts. 

Figure 6. Fraud Prevention and Investigation Branch FTEs 

FTE Allocation 

16 

21 

12 

9 

0 

5 

10 

15 

20 

25 

FY07 FY08 FY09 FY10 

Authorized Positions 

Source: FEMA. 

With greater resources, FPIB will be able to review more of the 

hundreds of thousands of applications for assistance that FEMA 

services annually in its Individual Assistance, Public Assistance, 

and Mitigation programs, including the National Flood Insurance 

Program. 

4

 The current FPIB employees are FTE Cadre of On-Call Reserve Employees (CORE). CORE positions 

are temporary, excepted service appointments with specific “Not to Exceed” dates. The appointments are 

2- and 4-year terms and are typically renewed if there is ongoing disaster work and funding is available. 

Assessment of FEMA’s Fraud Prevention Efforts 


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As important as the need for additional resources is the need to 

establish FPIB as a FEMA-wide organization with authority to 

require changes in program processes and procedures across 

FEMA. Instruction Number 1251 established FPIB to focus its 

attention on activities in Florida. FPIB review activities are 

limited to— 

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Complaints and reports of reviews referred to FLTRO 

from the OIG; 

Complaints of fraud, waste, and abuse sent directly to 

FLTRO; and 

Fraud, waste, and abuse uncovered by FPIB and FLTRO 

employees during FLTRO operations. 

A FEMA management directive should be issued establishing FPIB 

as a FEMA-wide entity with authority to review all FEMA-funded 

programs nationwide and recommend improvements to internal 

controls to deter and prevent fraud, waste, and abuse. FPIB’s 

scarce resources also limit its ability to obtain and use the latest 

fraud prevention tools and sources to identify and report potential 

fraud. 

The Recovery Accountability and Transparency Board 

The Recovery Accountability and Transparency Board (RAT 

Board) was established in 2009 to ensure transparency in the 

expenditure of American Recovery and Reinvestment Act of 2009 

(Recovery Act)5 funds. To minimize fraud, waste, and abuse in 

Recovery Act activities, the board established the Recovery 

Operations Center, which uses numerous data sources and cuttingedge technology to ensure proper accountability and transparency 

in the expenditure of government funds. Contracts with third 

parties provide the center with access to millions of public records 

that are updated daily, as well as law enforcement databases. 

In June 2010, Vice President Biden announced the RAT Board’s 

expansion of a cutting-edge fraud-mapping tool that gathers large 

quantities of information in real time, analyzes the data, and helps 

“connect the dots” to identify indicators of possible fraud or error. 

FPIB should adopt the precedent-setting measures used by the 

RAT Board, such as the fraud-mapping tool, to foster 

accountability and transparency of FEMA programs and improve 

internal controls. 

5

 P.L. 111-5. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 8 
In November 2010, FEMA’s Disaster Operations & IT Section 

posted a Request for Information as part of market research for a 

“systematic solution to strengthen controls for prevention of 

improper payments as a result of fraud, waste, and abuse in 

government financial and other forms of assistance programs.” 

We hope that FEMA is able to acquire this type of advanced 

technological tool to assist the assistance programs and FPIB. 

Conclusion 

The Fraud Prevention and Investigation Branch has identified and 

reported to OIG potential fraud in FEMA’s Individual Assistance, 

Public Assistance, and Mitigation programs. However, its 

activities have been hampered by insufficient resources, limited 

authority over FEMA program offices and staff, and the 

unavailability of the latest technology to detect and deter fraud. 

Recommendations 

We recommend that the Administrator, Federal Emergency 

Management Agency: 

Recommendation #1: Reallocate resources to increase the staff 

and budget of the Fraud Prevention and Investigation Branch. 

Recommendation #2: Issue a Federal Emergency Management 

Agency Directive that establishes the Fraud Prevention and 

Investigation Branch as the agency-wide office with the authority 

to: (1) review all claims of potential fraud, waste, and abuse for 

fact-finding and referral to appropriate entities for action; 

(2) proactively review disaster assistance payments; and 

(3) recommend improvements to internal controls. 

Recommendation #3: Adopt cutting-edge technology similar to 

that used by the Recovery Accountability and Transparency 

Board. 

Management Comments and OIG Analysis 

FEMA provided written comments. Below is a summary of the 

agency’s responses to our recommendations and our analysis of 

those responses. After a review of FEMA’s response, we agreed 

to withdraw what was labeled Recommendation #7 in our draft 

Assessment of FEMA’s Fraud Prevention Efforts 

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report, which dealt with FEMA’s information technology 

systems. We note in the conclusion of our recently released 

report, Federal Emergency Management Agency Faces 

Challenges in Modernizing Information Technology (OIG-11-69), 

that the agency’s existing information technology (IT) systems do 

not support disaster assistance response activities effectively. A 

copy of the agency’s response to the draft recommendations is 

included in Appendix B. 

FEMA concurs with Recommendation #1 and states that, as a 

result of a review of FPIB staffing levels, it plans to increase the 

CORE staffing levels by 50% in FY 2011 and another 50% in FY 

2012. We consider this recommendation resolved and open. At 

the close of FYs 2011 and 2012, we will verify the FPIB staffing 

levels. 

FEMA concurs with Recommendation #2, but we are concerned 

with the specifics of its concurrence. FEMA states that the Office 

of the Chief Security Office will draft an agency-wide directive 

on FPIB and its responsibilities. However, we would like 

assurance that this directive will be signed by the Administrator 

and provide FPIB with the authority to: (1) review all claims of 

potential fraud, waste, and abuse; and (2) require changes in 

program processes and procedures across FEMA. The directive 

should reference the FPIB/INV collaboration, which can then be 

formalized in a cooperative agreement between the parties. We 

consider this recommendation unresolved and open until the 

necessary directive is issued. 

We also take this opportunity to respond to a portion of the second 

paragraph of FEMA’s comment letter (Appendix B). FEMA 

implies that the objectivity of this report is in question because 

FPIB has a “close, direct working relationship” with OIG. The 

opinions, conclusions, judgments, and recommendations in this 

report are impartial and solely based on the information gathered 

during this review. The audit organization and individual auditors 

were independent. They exercised professional judgment in the 

performance of their work and preparation of this report, as 

required by government auditing standards. 

FEMA concurs with Recommendation #3, but says that it needs to 

do a more detailed review of the RAT Board technology before a 

final position on the recommendation can be reached. FEMA 

states that it has already deployed a new IT system for FPIB that 

is designed to, among other things: (1) integrate with the agency 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 10 
IT systems, and using internal and external data, conduct data 

mining; (2) provide a risk-mapping tool to identify risk; and (3) 

serve as a case management system for collecting and tracking 

investigative activities and analysis involving disaster fraud. 

We are not recommending that FEMA adopt the exact technology 

used by the RAT Board, but rather that FEMA adopt technology 

that uses the latest tools for detecting and deterring fraud. We are 

unclear as to what new IT system FEMA refers. FEMA has a 

pilot program using VANTOS, which was described to us as a 

case management system. Although VANTOS has some datagathering capability, it appears to emphasize record-keeping and 

reporting. 

Additionally, FEMA issued a Request for Information in late 2010 

as part of market research for a systematic solution to strengthen 

internal controls for prevention of improper payments as a result of 

fraud, waste, and abuse. This market research appears to be the 

first step in acquiring technology capable of conducting data 

mining, risk mapping, and other fraud prevention activities. We 

consider this recommendation unresolved and open. 

Fraud Prevention Awareness 

FEMA’s disaster assistance programs are susceptible to fraud, waste, and 

abuse. The agency culture promotes prompt assistance to disaster 

survivors, without an equal emphasis on financial responsibility. To 

emphasize the importance of fraud prevention in FEMA’s mission, the 

Fraud Branch should report directly to the Office of the Administrator, 

and all employees should receive annual fraud prevention training. 

FEMA’s Programs Susceptible to Fraud, Waste, and Abuse 

Despite a history of abuse in its disaster assistance programs, 

FEMA has not established an environment in which employees 

understand fraud prevention to be an integral part of the agency’s 

mission. 

The Federal Managers’ Financial Integrity Act of 1982 requires 

that each executive agency establish internal accounting and 

administrative controls that safeguard funds against waste, loss, 

unauthorized use, or misappropriation.6

 Office of Management 

and Budget (OMB) Circular A-123 states, “Management has a 

6 P.L. 97-255 (codified as amended at 31 U.S.C. §3512). 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 11 
fundamental responsibility to develop and maintain effective 

internal control. The proper stewardship of Federal resources is an 

essential responsibility of agency managers and staff.... Programs 

must operate and resources must be used consistent with agency 

missions, in compliance with laws and regulations, and with 

minimal potential for waste, fraud, and mismanagement.”7 

Despite these requirements, FEMA’s programs remain susceptible 

to waste, fraud, and abuse. The GAO testified in June 2006 that 

as of February 2006, about 16% of FEMA payments to applicants 

for individual assistance following hurricanes Katrina and Rita 

were improper and potentially fraudulent.8 DHS’ in-house 

analysis reported an estimated improper payment rate of 8.56% 

through March 1, 2006, and could not explain the discrepancy 

between its and GAO’s assessments.9

 In December 2006, GAO 

testified that “FEMA continued to lose tens of millions of dollars 

through potentially improper and/or fraudulent payments” and 

that “FEMA’s difficulties in identifying and collecting improper 

payments further emphasized the importance of implementing an 

effective fraud, waste, and abuse prevention system.”10 DHS and 

FEMA stated in the DHS Annual Financial Report for FY 2008 

that the IHP was known to be at “high risk” for improper 

payments. 

Improper payments did not begin with catastrophic storms that 

struck the Gulf Coast in 2005. The U.S. Senate Committee on 

Homeland Security and Governmental Affairs (Senate 

Committee) uncovered payments for fraudulent claims, wasteful 

spending, and ineffective management and internal controls 

following the four hurricanes that struck Florida in 2004.11 

FEMA staff said that individual assistance is a complicated 

program, made more difficult by pressures imposed by politics 

and senior officials. Business rules are set for each disaster, and 

fraud is minimized when these rules and normal procedures are 

followed. However, staff told us that after disasters strike, they 

often receive instructions from senior management to change the 

7

 OMB Circular A-123, Management’s Responsibility for Internal Controls, I. Introduction. 
 8 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), June 2006. 
 9

 DHS Performance and Accountability Report, FY 2006. 
 10 Hurricanes Katrina and Rita Disaster Relief: Continued Findings of Fraud, Waste, and Abuse (GAO­


07-252T), December 2006. 


11 Hurricane Katrina: A Nation Still Unprepared, Special Report of the Committee on Homeland Security 
 

and Governmental Affairs, United States Senate, S. Rept. 109-322, 2006.
 


Assessment of FEMA’s Fraud Prevention Efforts 

Page 12 
agreed-upon rules for the event or establish new procedures, 

resulting in employee mistakes and an increased risk of fraud. 

Improper payments result from fraud, human error (e.g., data 

entry errors by FEMA employees), mistake (e.g., recipient is 

ineligible because of insurance, or the damaged home is not the 

recipient’s primary residence), and inadequate internal controls 

(e.g., recipient’s ownership of home is not verified). 

Agency Culture Promotes Assistance 

We interviewed more than 20 mid-level and senior managers at 

FEMA. They uniformly described the “FEMA culture” as one in 

which the mission was to get assistance to people as quickly as 

possible. Staffers told us: 

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�	 

�	 

�	 

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“The focus is to get money out to people who need it;” 

“The culture is to tout how many dollars have been given 

out;” 

“The FEMA attitude is to simply pay the people;” 

“The FEMA philosophy is to accept and encourage all 

applicants;” and 

“FEMA begs people to call and apply, even if they are not 

sure they are eligible.” 

Employees involved in the individual assistance programs have 

not been instructed to be alert to fraud. One employee who 

assisted applicants for assistance sometimes made telephone calls 

to verify suspicious information provided by applicants. Her 

supervisor told her to stop looking for fraud. Other interviewees 

confirmed that it was not the caseworker’s job to look for fraud 

when reviewing information provided by applicants. 

Some senior officials assert that FEMA cannot quickly assist 

disasters survivors and be fiscally responsible. The Senate 

Committee quotes Michael Brown, then the Director of FEMA, 

saying in 2005, “Among the many challenges we face when 

responding to disasters, the most difficult often involves 

balancing the tradeoff between ensuring a timely and effective 

response to those in need, and the responsibility to protect the 

fiscal responsibility of the program. It is a classic competing 

tension between the provision of immediate disaster assistance 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 13 
and administrative perfection. As you move closer to one, you 

move farther away from the other.”12 

When we were engaged in fieldwork on another report in early 

2010, a senior Individual Assistance official told us that there 

were three ways to do things—“quick, right, and cheap”—and 

that FEMA could do only two at a time. 

In its report, the Senate Committee rejected the position that the 

government cannot both protect taxpayers and respond effectively 

to the urgent needs of disaster victims. We agree with the Senate 

Committee’s assessment. 

Fraud Prevention Must Become Part of FEMA’s Mission 

FEMA’s leaders must take visible, substantive, continual steps to 

demonstrate the importance of fiscal responsibility and program 

integrity. “Instilling a strong ethical culture and setting the 

correct tone at the top are essential elements in preventing 

fraud.”13 

FEMA’s Chief Financial Officer (CFO) told us that “the test for 

success shouldn’t be ‘get the money out the door.’” He stated that 

the Administrator does not believe that mission focus and 

financial accountability are mutually exclusive, and asserted that 

senior leadership understand the importance of financial 

accountability. The challenge will be to communicate this 

message throughout FEMA, which will require a sustained, longterm effort. 

According to one official, a July 2009 memo from the FEMA 

Administrator to senior management emphasizing the need to 

improve internal controls had no tangible effect on disaster 

assistance programs, but did lead to placing FPIB under the 

Office of the Chief Security Officer. 

Senior officials advised us that another memorandum was being 

prepared for the Administrator’s signature that would stress the 

importance of FEMA-wide antifraud efforts. This memo was 

12 Written statement of Michael Brown, then-Director, FEMA, for the U.S. Senate, Committee on 

Homeland Security and Government Affairs, hearing on FEMA’s Response to the 2004 Florida 

Hurricanes: A Disaster for Taxpayers?, May 18, 2005, pp. 5–6. (The title of the head of FEMA was 

changed from “Director” to “Administrator” in the Post-Katrina Emergency Management Reform Act of 

2006, 6 U.S.C.§701.) 13 Institute of Internal Auditors, International Professional Practices Framework. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 14 
presented to us as an important piece of an effort to increase fraud 

prevention throughout the agency. However, the brief memo, 

issued on January 7, 2011, fails to mention FPIB, FEMA’s history 

of improper payments, or the susceptibility of FEMA’s programs 

to fraud. The memorandum is attached as Appendix D. 

FEMA fraud prevention activities to date include: 

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A briefing for the Administrator on fraud prevention plans; 

A briefing by the Administrator to regional directors about 

FPIB; 

The reorganization of the Office of the Chief Security 

Officer, which now includes a Fraud & Internal 

Investigation Division; and 

Weekly Administrator briefings by the Chief Security 

Officer, which include discussions of fraud issues. 

FY 2011 FEMA fraud prevention plans include: 

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Meeting with division directors about the importance of 

combating fraud in their programs; 

Meeting with National Processing Service Center (NPSC) 

leaders on increasing fraud prevention and deterrence 

activities; 

Increasing the visibility of fraud prevention efforts; and 

Carrying out an initiative to evaluate each FEMA program 

to enhance antifraud measures. 

Alignment of the Fraud Branch 

FPIB now reports to the OSCO; however, the Chief Security 

Officer does not report directly to the Administrator. Figure 7 

depicts the current FEMA organizational chart and FPIB’s 

placement within the agency. Other federal agencies that provide 

direct benefits to individuals have established offices with the task 

of preventing fraud in their agency’s programs that report directly 

to the program administrator. FEMA should follow their example. 

For example, the Department of Health and Human Services has 

established a Center for Program Integrity that reports directly to 

the office of the Administrator of the Centers for Medicare and 

Medicaid Services, and whose head is a deputy administrator and 

director. The Center for Program Integrity is the focal point for 

all Medicare and Medicaid program integrity, fraud and abuse 

issues, and performs the following functions: 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 15 
�	 

�	 

�	 

�	 

�	 

Identifies and monitors program vulnerabilities; 

Recommends modifications to programs and works with 

program officials to affect changes; 

Collaborates with the legislative office on the 

development and advancement of initiatives and 

improvements to deter, reduce, and eliminate waste, fraud, 

and abuse; 

Oversees all interactions and collaboration with key 

stakeholders relating to program integrity for the purposes 

of detecting, deterring, monitoring, and combating fraud 

and abuse; and 

In collaboration with others in the Department of Health 

and Human Services, develops and implements a strategic 

plan to carry out the program integrity mission and ensure 

that program vulnerabilities are identified and resolved. 

At the Department of Labor, an Internal Control Office, which 

reports directly to the Deputy CFO, performs annual assessments 

of internal controls for financial systems, and reports on improper 

payments. At the Small Business Administration, the Offices of 

Internal Control and Performance Management report to the CFO. 

The Social Security Administration Office of Quality 

Performance reports to the Office of the Administrator, and the 

Office of Quality Review within the Office of Quality 

Performance evaluates the quality of Social Security 

Administration operations with emphasis on preventing program 

and systems abuse, eliminating waste, and increasing efficiency. 

FEMA officials have been resistant to program changes because 

changes may interfere with their ability to promptly provide 

assistance to disaster survivors. Though we acknowledge their 

concerns, FEMA must do more to deter and prevent fraud and 

reduce the risk of improper payments. Realigning FPIB to report 

directly to the Office of the Administrator will demonstrate a 

renewed commitment to fraud prevention agency-wide. 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 16 

Figure 7. FEMA Organizational Chart 

Source: OIG analysis of FEMA data. 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 17
 

Fraud Prevention Training Program Needed 

The Post-Katrina Emergency Management Reform Act of 2006 

states, “The Administrator shall develop and implement a 

program to provide training on the prevention of fraud, waste, and 

abuse of Federal disaster relief assistance relating to the response 

to or recovery from natural disasters and acts of terrorism or other 

man-made disasters and ways to identify such potential waste, 

fraud, and abuse.”14 Four years have passed, and FEMA has not 

planned or implemented a program to train employees on the 

prevention of fraud, waste, and abuse in disaster assistance 

programs. Only ad hoc training has occurred. 

The FPIB branch chief has provided fraud prevention training to 

some Individual Assistance personnel and External Affairs 

officials deployed in the field, as well as field office and law 

enforcement personnel, but this training has generally been 

limited to the Florida area (where FPIB is located). Additionally, 

NPSC employees are being taught how to identify fraud. The 

DHS OIG Office of Investigations is working with NPSC 

management to identify fake documents, such as leases that 

contain rental dates after occurrence of the applicable disaster. 

These lessons are then passed on to employees who work directly 

with applicants. Supervisors are alerted when an employee has 

made an improper payment so the employee can be counseled, 

avoiding a repeat of the mistake. The Office of the Chief Security 

Officer is considering putting fraud prevention training online, 

making it available to all FEMA employees. 

Conclusion 

FEMA needs to better balance mission focus and fiscal 

responsibility. Agency employees’ duty to provide prompt 

assistance to disaster survivors should include a duty to pay 

eligible individuals in the proper amounts. Instilling fraud 

prevention awareness through an organizational change that 

elevates the authority of the Fraud Prevention and Investigation 

Branch and mandating annual fraud prevention training for all 

employees should result in fewer instances of improper disaster 

assistance payments. 

14 6 U.S.C. §797. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 18 
Recommendations 

We recommend that the Administrator, Federal Emergency 

Management Agency: 

Recommendation #4: Realign the Fraud Prevention and 

Investigation Branch to report directly to the Office of the 

Administrator. 

Recommendation #5: Require annual fraud prevention training 

for all employees commencing with fiscal year 2011. 

Management Comments and OIG Analysis 

FEMA does not concur with Recommendation #4. The agency 

does not believe that realigning FPIB will increase its visibility or 

operational efficiency. We recommended this realignment 

because: 

�	 

�	 

�	 

�	 

�	 

A fraud prevention office reporting directly to the 

Administrator would symbolize the importance FEMA 

places on fraud prevention efforts; 

FEMA managers not directly involved with FPIB were 

unaware of its existence or responsibilities; 

FPIB is located outside any FEMA facility; 

Offices of security in the government generally focus on 

personnel badging and facility and IT security matters 

rather than program integrity; and 

Other federal benefit agencies have internal control and 

program integrity offices reporting directly to agency 

leaders. 

Throughout this report, we have recommended other actions that 

officials should take in order to make agency-wide fraud 

prevention efforts more visible, meaningful, and effective. FEMA 

has concurred with these recommendations. Specifically, FEMA 

has agreed to: (1) increase the staff and budget of FPIB; (2) train 

employees annually to identify and prevent fraud; (3) issue a 

FEMA management directive establishing the authority of FPIB; 

(4) acquire the latest technological tools to assist FPIB in 

preventing, detecting, and deterring fraud; and (5) continue to 

improve internal controls. (Additionally, the Office of the Chief 

Security Office, to which FPIB reports, is now led by a Senior 

Executive Service official.) When these actions have begun to be 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 19 
implemented, we will reassess the need to realign FPIB. Until such 

reassessment, this recommendation is unresolved and open. 

FEMA concurs with Recommendation #5, but provided no 

timetable for completion. This recommendation is unresolved 

and open until a fraud awareness training course is created and all 

FEMA employees are mandated to take such course annually. 

Developing and Maintaining Internal Controls 

FEMA needs to further develop and maintain proper internal management 

controls to prevent and detect fraud, waste, and abuse. Prior OIG and 

GAO reviews have shown that FEMA has made some improvements in 

internal controls but that challenges remain. 

Prior Reviews of FEMA Internal Controls 

In June 2009, GAO reported that FEMA had significantly 

improved its fraud prevention controls regarding disaster 

assistance. For example, FEMA conducted identity and address 

verification on all applications and required inspections before 

approving rental assistance for hurricanes Ike and Gustav. FEMA 

also had taken steps to flag and cancel duplicate registrations for 

the same disaster. However, GAO identified flaws in FEMA’s 

controls by submitting fabricated documents to prove identity or 

address, and as a result, obtained housing assistance. GAO also 

received duplicate payments for bogus hotel expenses. FEMA 

failed to properly inspect a false address GAO used to apply for 

assistance, and as a result, GAO received multiple checks for 

thousands of dollars in rental assistance. FEMA officials 

commented that they would establish random checks to assess the 

validity of supporting documentation submitted by applicants to 

verify identity and address.15 

In September 2009, we reported that FEMA showed substantial 

improvements in internal controls, resulting in fewer instances of 

payments made to registrations with duplicate and invalid key 

data. However, FEMA was not fully using its validity checks for 

key registration data, and payments were made to thousands of 

registrants who failed key checks for identity, occupancy, or 

15 FEMA Strengthened Its Fraud Prevention Controls, but Customer Service Needs Improvement (GAO-09-671), 

June 2009. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 20 
ownership. FEMA officials indicated that corrective actions 

would be initiated to resolve the recommendations.16 

Suggestions to Enhance Internal Controls and Combat Fraud 

The FEMA Administrator is required to develop and maintain 

proper internal management controls to prevent and detect fraud, 

waste, and abuse in disaster assistance relief programs.17 

Various FEMA 
 Improper Payment Case Study 

groups with 
 Jane Doe applied for assistance after Hurricane Katrina. responsibility to A FEMA caseworker noticed a link between Doe and 

lessen instances of other applicants, who listed Doe as the owner or property 

fraud, waste, and manager of their rented properties. An FPIB review 

determined that Doe and 12 cohorts, in applying for abuse in the IHP 

assistance after hurricanes in Florida and Louisiana, a have made tornado in Kansas, and a fire in California, provided recommendations nonexistent addresses, falsely claimed to have lived at 

to further enhance certain addresses, supported residency at these addresses 

internal controls. with fake documents, and directed assistance to go to 

bank accounts controlled by Doe. These schemes netted For example, FPIB more than $130,000 in assistance. officials have 
 

suggested:
 


�	 

�	 

�	 

�	 

�	 

Expanding the capability of NEMIS to identify duplicate 

registrations to include slight variations in disaster 

addresses; 

Requiring follow-up with applicants who claimed to have 

insurance to ensure that they reimburse FEMA after their 

insurance settlement; 

Adding a red fraud warning banner to the top of FEMA’s 

disaster assistance registration website to alert applicants 

that committing fraud is a federal offense; 

Having NEMIS send an alert to FPIB when certain fraud 

indicators are encountered; and 

Including a telephone “hold” fraud warning message when 

applicants seeking assistance are on hold. 

After incidents of employee fraud and applicant fraud were 

brought to the attention of senior management, FEMA established 

an internal Fraud Task Force to make recommendations to protect 

FEMA from similar incidents in the future. Its 2010 

16 Improvements to Internal Controls for FEMA’s Individuals and Households Program Registration Process (OIG­


09-110), September 2009.


17 6 U.S.C. §795(a)(1). 
 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 21 
 

recommendations were forwarded to the Response and Recovery 

Directorate and include the following: 

�	 

�	 

�	 

In coordination with FPIB, begin development of 

analytical reports on activity that is suspicious, using 

NEMIS data; 

Increase fraud briefings for all employees who have access 

to personally identifiable information; and 

Include fraud awareness scenarios in the existing Internal 

Control Awareness training module. 

The Office of the CFO, in partnership with DHS’ Office of 

Management, conducted an annual assessment on IHP payments 

in compliance with the Improper Payments Information Act of 

2002 (IPIA).18 A sample of FY 2009 IHP payments was tested, 

resulting in an estimate of improper payments of $22.9 million or 

an error rate of 2.72%. Identified improper payments included the 

following: 

�	 

�	 

�	 

�	 

�	 

Duplication of benefits – a second inspection review 

resulted in a caseworker paying for the same line item 

twice; 

Overlapping assistance – applicants received improper 

payments resulting from payments that fully or partially 

overlapped with other payment types; 

Ineligible applicant – applicant did not meet all eligibility 

qualifications; 

Case processing errors – applicants received payments 

where they did not supply necessary documentation (e.g., 

receipts) or owing to inaccurate analysis of the case; and 

Calculation errors – applicants received improper 

payments resulting from incorrect calculations or 

applications of the fair market value formula. 

The FY 2010 IPIA assessment made the following 

recommendations to address these errors: 

�	 

�	 

FEMA should work to improve caseworker guidance for 

types of payments identified as being at a higher risk for 

improper payments; 

FEMA should perform follow-up internal audits of 

manually approved home repair assistance; and 

18 P.L. No. 107-300, 116 Stat. 2350 (November 26, 2002), as amended by the Improper Payments 

Elimination and Recovery Act of 2010, P.L. No. 111-204, 124 Stat. 2224 (July 22, 2010). 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 22 
�	 FEMA should develop better tools to ensure accurate 

processing of awards generated by multiple inspections. 

The 2010 assessment also noted that some recommendations from 

the FY 2009 IPIA assessment were not implemented. 

Additionally, our Forensics Division recently performed a limited 

review of NEMIS eligibility and insurance data from hurricanes 

Gustav and Ike for evidence of assistance paid to individuals who 

indicated they had homeowners insurance during the registration 

process. FEMA approved more than $23 million in non-floodrelated IHP assistance that exceeded the likely insurance 

deductible to about 6,400 registrants who claimed they had 

insurance and whose homes suffered damage caused by 

something other than flooding. As FEMA does not track whether 

these registrants ultimately received a settlement from their 

insurance company, it is likely that some or all of them received 

assistance from FEMA and an insurance settlement for the same 

damages. 

Even if a recommendation to enhance internal controls is 

approved for implementation, changes to NEMIS typically take 

up to 2 years; however, a high-priority change can be made in 

6 months. Normally, FEMA officials told us it can take 6 months 

to finalize change requirements; the change request is then put in 

a queue with other recommendations, subject to funding limits 

and higher-priority changes. Then, system testing takes an 

additional 6 months. During this 2-year period, a “workaround” 

is established to immediately curtail the automatic process that is 

allowing improper payments. 

FEMA Internal Control Board 

In a July 2009 memorandum, the FEMA Administrator established 

the FEMA Internal Control Board, co-chaired by the Deputy 

Administrator and the CFO, to assess and govern internal controls 

across FEMA, and to identify and implement improvements on a 

continuous basis. 

In the memorandum, the Administrator expressed dissatisfaction 

with the state of FEMA’s internal controls. He indicated that he 

is committed to establishing a necessary level of financial 

stewardship and program accountability within FEMA. However, 

the Internal Control Board has not assessed and governed internal 

controls across FEMA. Instead, in the three meetings held to 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 23 
 

date, its focus has been on grants, and the intent is to focus on 

specific rather than enterprise-wide issues. 

Conclusion 

Although FEMA has made some improvements to internal 

controls, more needs to be done. We, as well as GAO and FEMA 

itself, continue to identify needed improvements in internal 

controls. Various FEMA groups have suggested ways to combat 

fraud and enhance internal controls. FEMA needs to strengthen 

internal controls in its IHP program to ensure that only eligible 

applicants receive assistance. FEMA is at high risk for issuing 

improper payments if internal controls are not strengthened and 

corrective actions are not implemented in a timely manner. 

Recommendations 

We recommend that the Administrator, Federal Emergency 

Management Agency: 

Recommendation #6: Develop, implement, and maintain proper 

internal management controls to prevent and detect fraud, waste, 

and abuse in disaster assistance relief programs as required by 

statute. 

Recommendation #7: Require the Internal Control Board to 

assess and govern internal controls across the Federal Emergency 

Management Agency, including all Individual Assistance, Public 

Assistance, and Mitigation Programs, and to identify and 

implement improvements on a quarterly basis. 

Management Comments and OIG Analysis 

FEMA concurs with Recommendation #6, but its response does 

not make clear that it understands that additional internal controls 

are needed. In its response to Recommendation #7, FEMA cites a 

GAO report that “FEMA has significantly improved its fraud 

prevention controls over disaster assistance.” However, that same 

report notes that fraudsters can bypass FEMA’s controls using 

fabricated documents, and FEMA has begun recouping improper 

assistance payments made only months ago in connection with a 

2010 flood event in Chicago. Thus, it is clear that more can be 

done to improve internal controls. FEMA also states that 

assistance is based on verifiable documentation provided by the 

applicant. But FEMA does not verify the documentation by 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 24 
calling landlords, checking banking records, reviewing property 

records, or the like. FEMA also resists adding inexpensive controls 

such as a fraud prevention banner on the webpage containing its 

online application for financial assistance and an anti-fraud 

message applicants applying by telephone would hear. This 

recommendation is unresolved and open. 

FEMA concurs with Recommendation #7, but the response does 

not clearly state that the Internal Control Board will assess 

internal controls across the agency or ensure that improvements 

are implemented quarterly, where possible. This recommendation 

is unresolved and open. 

Improper Payment Recoupment Process 

From June 2007 through January 2011, FEMA had not attempted to recoup 

improper disaster assistance payments, and past and current Administrators 

have been hesitant to restart the recoupment process. As a result, 

$643 million in potentially improper payments disbursed since Hurricane 

Katrina had gone uncollected for several years. 

FEMA Debt Goes Uncollected for Years 

Executive agencies are required by law to collect debts of the U.S. 

government.19 If a nontax debt owed to the United States is 

delinquent for a period of 180 days, the head of the agency that 

administers the program that gave rise to the debt transfers the 

debt to the Secretary of the Treasury for collection.20 

As of October 2006, FEMA reported it had disbursed 

approximately $7 billion in IHP disaster assistance payments 

related to hurricanes Katrina and Rita.21 Figure 8 illustrates 

assistance being provided to applicants as a result of Hurricane 

Ike. 

19 31 U.S.C. §3711(a)(1). 20 31 U.S.C. §3711(g)(1)(A). 21 Hurricanes Katrina and Rita Disaster Relief: Prevention Is the Key to Minimizing Fraud, Waste, and 

Abuse in Recovery Efforts (GAO-07-418T), January 2007. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 25 
Figure 8. Hurricane Ike Disaster Recovery Center 

Source: FEMA Photo Library; photographer, Greg Henshall. 

According to FEMA records, more than $621.6 million of 

potentially improper IHP disaster assistance payments have been 

identified in response to hurricanes Katrina and Rita, and an 

additional $21.7 million of potentially improper IHP payments 

have been identified in response to subsequent disasters. 

FEMA officials involved in the recoupment process believe the 

main reasons for the potentially improper payments were 

(1) overpayment for damages, (2) payments made despite 

unproven residency or payments made for secondary residences, 

(3) inadequate identification verification of the recipient, and 

(4) expedited payments ($2,000 each) sent to ineligible parties. 

Prior to 2008, FEMA had a recoupment process to collect 

improper payments, but it was complex and difficult to apply 

consistently. 

Recoupment Stopped 

In 2007, as a result of a lawsuit challenging, among other things, 

FEMA’s process for recouping improper disaster assistance 

payments made in the aftermath of hurricanes Katrina and Rita,22 a 

federal district court judge issued an injunction ordering FEMA to 

discontinue its debt collection activities until certain changes were 

made in its recoupment process. FEMA was prohibited from 

terminating or discontinuing Section 408 assistance without— 

22 Ridgely v. FEMA, 2007 U.S. Dist. LEXIS 43002 (E.D. La. June 13, 2007). 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 26 
�	 

�	 

�	 

�	 

Prior written notice of the reasons for the termination or 

discontinuance; 

An opportunity for an appeal hearing; 

A written decision on the appeal; and 

Adequate written notice of the basis for any demand for 

repayment of disaster relief assistance. 

This court order, along with regulations established by DHS in 

2007, led FEMA to suspend the recoupment process. FEMA 

suspended the process in a September 2008 Federal Register 

notice, where it announced that it was terminating its recoupment 

of all Section 408 assistance payments made to Katrina and Rita 

applicants, and that previous notices sent to applicants were 

withdrawn.23 This announcement did not cancel the valid debts; 

it terminated the procedure under which the debts were recouped. 

FEMA also announced that it would reexamine the files of every 

applicant, and where such review determined that recoupment 

was still warranted, a new recoupment proceeding and a new 

notice of debt would be initiated. Based on this announcement, 

the court dissolved the preliminary injunction as it related to 

recoupment. 

New Recoupment Process Drafted 

FEMA’s Office of Chief Counsel, in cooperation with the 

Individual Assistance Office and the FEMA Finance Center, 

developed a new recoupment process which, in the Counsel’s 

opinion, meets the district court’s concerns and complies with 

DHS’ debt collection standard. (Figure 9 is a flowchart of the 

new recoupment process.) The new process had existed in draft 

form and awaited approval by the Administrator since late 2008. 

The Training, Applicant Support, and Communication unit at the 

Texas National Processing Service Center (TXNPSC) is 

responsible for carrying out the new recoupment process. As 

agreed, a de novo review of the approximately 167,000 cases began 

in November 2010. A review strategy is in place; cases in which 

the debt was already paid in full, the debtor has since died, or 

applicants returned or never received checks will be dealt with first. 

If a reviewer agrees with the original decision to recoup and agrees 

with the recoupment amount, the recoupment process may begin. 

23 FEMA stopped attempting to recoup all improper payments that resulted from hurricanes Katrina and 

Rita and subsequent disasters until the new recoupment process was approved. 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 27 
New Process Awaits Approval 

Discussions about restarting the process were held with a previous 

Administrator and administration. More recently, presentations 

regarding the debt were made to the current Administrator and 

administration. 

FEMA officials are concerned about collecting this debt. 

Memories of FEMA’s inadequate response to hurricanes Katrina 

and Rita will be revived, and people struggling in a sluggish 

economy will be asked to return money they spent years ago. 

Suggestions to “forgive” the debts resulting from hurricanes 

Katrina and Rita, or to establish a threshold below which the debt 

would be forgiven, were made in the past. However, OMB has 

advised FEMA that it has no authority to forgive debts. 

TXNPSC personnel are ready to proceed. Fourteen staffers are 

assigned to the recoupment process, and when a go-ahead is 

received, the other available employees of TXNPSC will be asked 

to assist. FEMA intends to collect the more recent debt first, then 

pursue debts of $10,000 and more related to hurricanes Katrina 

and Rita, and last collect Katrina and Rita debt less than $10,000. 

Challenges will arise once the process begins. Some debtors 

provided false names, and some addresses will no longer be valid, 

or debtors may be able to provide documentation to resolve their 

debts. TXNPSC staff must be alert to fake documents that may 

be presented to prove eligibility for assistance. The staff is 

working with OIG’s Office of Investigations on this issue and will 

validate submitted documentation. 

The FEMA Finance Center’s antiquated IT systems continue to 

slow productivity. Currently, TXNPSC has 100,000 cases with 

no payment information because the IT system the FEMA 

Finance Center uses to track recoupment cases does not integrate 

with the data system used by TXNPSC.24 Updated IT systems for 

the FEMA Finance Center have been requested, but necessary 

funding has not been provided. 

24 6 U.S.C. §795(a)(4) says that, “The Administrator shall ensure that the databases used to collect 

information from applications for such assistance must be integrated with disbursement and payment 

records.” 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 28 
Figure 9. FEMA’s New Recoupment Process Flowchart 

Source: FEMA. (FFC refers to the FEMA Finance Center.) 

Assessment of FEMA’s Fraud Prevention Efforts 

Page 29 
OIG Management Advisory Published 

After determining the size of the uncollected debt, the delay in 

attempting to recoup it, and FEMA’s legal obligation to collect it, 

OIG issued a three-page management advisory report directed to 

the FEMA Administrator, Recoupment of Improper Disaster 

Assistance Payments (OIG-11-21), on December 10, 2010. The 

report recommended that the FEMA Administrator promptly take 

action to initiate the recoupment process. 

In December, a knowledgeable FEMA official told us the current 

plan was to restart the process in February 2011; in January 2011, 

a FEMA spokeswoman, in response to the management advisory 

report, reportedly told CNN that FEMA did not yet have a date 

for restarting the recoupment process. 

Recent Activity 

At a congressional hearing on March 17, 2011, 1 day after a draft 

of this report was transmitted to FEMA for comment, a FEMA 

official testified that the agency had published a notice in the 

Federal Register announcing the restart of the agency’s 

recoupment process, and mailings of Notices of Debt had begun, 

starting with the most recent debt first. 

Conclusion 

FEMA has a legal obligation to collect debts resulting from 

improper disaster assistance payments. The Administrator should 

ensure that the recoupment process continues until all cases are 

resolved through collection, suspension, termination, or transfer 

of debt to the Department of the Treasury. 

Recommendation 

We recommend that the Administrator, Federal Emergency 

Management Agency: 

Recommendation #8: Ensure that the process to recoup 

$643 million in potentially improper Individuals and Households 

Program payments continues until all cases are resolved. 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 30 

Management Comments and OIG Analysis 

In the draft report, Recommendation #8 called on the 

Administrator to order the recoupment of improper payments that 

had been on hold for several years. In its response, FEMA 

concurred with this recommendation and asked that it be closed 

because the Administrator had ordered the recoupment in the 

interim. However, we have revised the recommendation in this 

final report to ensure that FEMA pursues collection of the 

improper payments. This recommendation is resolved and open. 

We will seek periodic progress reports on the status of the 

recoupment process and will close this recommendation when 

FEMA has made significant progress toward resolving the 

approximately 167,000 cases. 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 31 

Appendix A 

Purpose, Scope, and Methodology 

We performed an inspection of FEMA’s Fraud Prevention and 

Investigation Branch. The objectives of the inspection were to 

determine the effectiveness of the Fraud Branch by assessing 

whether this organization has (1) achieved the desired outcomes of 

identifying and reporting to Inspector General officials potentially 

fraudulent disaster payments; (2) worked across FEMA to develop, 

maintain, and enhance proper internal management controls to 

prevent fraud, waste, and abuse; and (3) prevented fraudulent 

losses of federal funds through agency awareness, comprehensive 

research, coordination, and internal investigation. 

We interviewed FEMA headquarters officials; the chief of the 

Fraud Branch; employees of the Winchester, VA, and Denton, TX, 

National Processing Service Centers, and the FEMA Finance 

Center; and a FEMA employee with experience as a disaster 

assistance agent. Our fieldwork was conducted in the District of 

Columbia, Florida, and Virginia. 

We reviewed federal laws, regulations, executive guidance, 

published reports, and other information related to FEMA’s Fraud 

Prevention and Investigation Branch. 

We conducted our review between September 2010 and January 

2011 pursuant to the Inspector General Act of 1978, as amended, 

and according to the Quality Standards for Inspections issued by 

the Council of the Inspectors General on Integrity and Efficiency. 

Major OIG contributors to the review are identified in Appendix E. 

FEMA’s technical comments have been incorporated, as 

appropriate. 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 32 

U.S. Dep:Jrtment of Homeland Security

Washington. DC 20472

APR 18 2011

MEMORANDUM FOR: Charles K. Edwards

Acting Inspector General

Department ofHomeland Security .

I\.n;')

FROM: ('81 David J. Kaufman "'i':'fi~

! ; . Director, Office ofPolicy and Program Analysis l·

SUBJECT: FEMA Response to OIG Draft Report: Assessment ofFEMA 's Fraud

Prevention Efforts

OIG Project No. JO-J46-EMO-FEMA

Thank you for the opportunity to review and comment on the Office ofInspector General's (OIG's)

subject draft audit report. As the Federal Emergency Management Agency (FEMA) works toward

refining its programs, the OIG's independent analy~is of program performance greatly benefits our,

abilitY to continuously improve our activities. FEMA has reviewed this repOit and concurs with,

recommendations 1,2,3,5,6,8, and 9, and non-concurs with recommendations 4 and 7. In addition,

we are requesting closure for recommendatioil 9 as the, recoupment ofimproper disaster assistance

,payments has already started. '

FEMA has one overarching concern with the subject report. orG maintains a close, direct working ,

relationship with FEMA's Fraud Prevention and Investigation Branch (FP&IB). FP&IB staff

members often fi.mctlon as an extension of OIG's investigative workforce, enabling OIG to reduce

its own investigative workload. FEMA is concerned that the close, direct working relationship may

have affected the analytical objectivity ofthe subject report, specifically with respect to

Recommendation 4.' orG recommends that FP&IB be elevated to a higher profile within the

,Agency, while not articulating a probable direct linkage between the desired substantive impact and

the recommended action. FEMA contends that the desired substantive impact, specifically

demonstration of "renewed commitment to fraud-preven'tion agency-wide," is not solely achievable

, through the recommended structural change, as other mechanisms can be used to elevate' its profile.,

FEMA's response to each ofthe report's nine recommendations follows:

Recommendation 1: Reallocate resources to increase the staff and budget ofthe Fraud Prevention

.and Investigation Branch. I

'1 FEMA response: FEMA concurs with the recommendation. FEMA has conducted a review ofits

FP&IB staffing levels, and, as a result ofthis review, FEMA plans to increase FP&IB Cadre of OnCall Reserve Employee (CORE) staffing levels by 50 percent in FYI 1; and another 50 percent in

FYI2. This increase will significantly enhance FEMA's investigative operations, analysis of

disaster fraud, and further agency-wide fraud awareness training initiatives.

Appendix B 

Management Comments to the Draft Report 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 33
 

Page2

Recommendation 2: Issue a Federal Emergency Management Agency Directive that establishes the .

Fraud Prevention and Investigation Branch as the agency-wide office with the authority to

investigate all claims ofpotential fraud, waste, and abuse, proactively review disaster assistance

payments, and recommend improvements to internal controls.

FEMA response: FEMA concurs with the recommendation. The Office ofthe ChiefSecurity

Officer will draft, coordinate, and issue an agency-wide directive on FP&IB and its responsibilities

to investigate all claims ofpotential fraud, waste and abuse, proactively review disaster assistance

payments, and recommend improvements to internal controls.

Recommendation 3: Adopt similar cutting-edge technology used by the Recovery Accountability

,and Transparency (RAT) Bo!U'd.

FEMA response: Concur, but before FEMA can issue a final position on this recommendation, a

more detailed review ofthe specific technologies used by the Recovery Accountability and

Transparency Board will. need to be conducted. As such, FEMA has scheduled a meeting with the

RAT Board to review and evaluate the software tools, government databases, and open-source

information systems they employ to ensure proper accountability and transparency in the

expenditure ofGovernment funds. Ifit appears that the capabilities offered by these cutting-edge

technologies (or variations thereto) will help FEMA better identify and/or prevent the disbursement

ofimproper and/or fraudulent disaster assistance payments, FEMA will explore those opportunities.

However, please note that FEMA has already deployec;l a new IT system for the FB&IB that is

designed to: .

Integrate with agency IT systems and, using internal and external data, develop filters and

algorithms for data mining ofdisaster claims to search for and detect anomalies.

Provide a risk-mapping tool to help identify risk and document appropriate risk-interdiction

strategies.

Serve as a case management system for collecting and tracking investigative activities and

analysis involving disaster fraud.

Provide FEMA with a consistent, repeatable, auditable, defensible system ofrecords to

support FEMA's response to disasterfraud.

Be portable, integrative, and expandable..

Provide FEMA with the flexibility and tools to address current FEMA disaster fraud

investigations and anticipated disaster fraud schemes.

Recommendation 4: Realign the Fraud Prevention and Investigation Branch to report directly to

the Office ofthe Administrator.

FEMA response: FEMA non-concurs with the recommendation. While FEMA certainly shares the

OIG's appreciation for the important role exercised by the FP&IB, that role is no more or less

critical than any other ofnumerous key functional activities assigned to units within our Agency.

FEMA contends that the desired substantive impact, specifically demonstration of"renewed

commitment to fraud-prevention agency-wide," is not solely achievable through the recommended

structural change. FEMA feels the FP&IB is properly situated within the Office ofthe ChiefSecurity

Officer (the principal ofwhich was recently upgraded to a Senior Executive Service position) and

changing its location would in no way improve its operational efficacy. .

Appendix B 

Management Comments to the Draft Report 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 34
 

Page 3

Recommendation 5: Require annual fraud prevention training for all employees commencing with

fiscal year (FY) 2011.

FEMA response: FEMA concurs with the recommendation. The Office ofthe ChiefSecurity

Officer will collaborate with FEMA's Emergency Management Institute to implement an agencywide web based employee-training program on Fraud Prevention Awareness.

Recommendation 6: Develop, implement, and maintain proper internal management controls to

prevent and detect fraud, waste and abuse in disaster assistance reliefprograms as required by

statute.

FEMA response: FEMA concurs with this recommendation. We have established proper internal

management controls and use a variety oftools to prevent fraud, waste and abuse during our routine

business practices. These controls include: '

• All applicants will go through our identity verification process and are restricted from

receiving assistance until they verify their identity. .

• All rental, repair, replacement and personal property assistance is currently based on an onsite verification, by a field inspector, of all claimed losses.

• All othertypes of assistance are based on verifiable documentation provjded by the applicant,

and scanned and stored in National El!lergency Management Information System (NEMIS).

• The National Processing Service Center (NPSC) Operations Audit Section assesses random

samples of cases throughout the year to identify, and recommend process improvements to

further limit waste.

• The Enterprise Coordination and Information Management (ECIM) Section maintains the

ability to mine data and provide reports on potentially improper payments, and provides

exception ( "Cleanup" ) reports to the National Coordination Team on a regular basis.

• "The AppealslRecoupment Department iil the Training, Applicant Support and

Communications Section was established in 2010 to process claims for additional assistance

in a consistent and controlled process. Those assigned to Recoupment are responsible for

identifying recoupment cases ~d beginning collection 'ofimproper payments.

'. The Individual and Households Program (lHP) Assistance Group was established in 2008 to

provide an internal helpline for our casework staff who may have questions regarding IHP

case processing procedures, thereby driving increased consistency on even more complicated

casework.

• In 2010, our caseworker guidance was collected into the Processing Procedures Manual

(PPM). The PPM is a website organized to provide guidance and job aids to caseworkers for

all standard cases. The PPM is extensively version-controiled and managed in order to ensure

that the latest guidance is always available.

• Our Housing Inspection Services Contract Management Section has achieved ISO

(International Organization for Standards) 9001·2000 certification for their quality

management system and the National Coordination Team is in the process ofreceiving such

certification. These certifications indicate that the NPSC enterprise is committed to ensuring

that our quality systems are designed to prevent waste, fraud and abuse in delivery ofIHP

assistance.

Appendix B 

Management Comments to the Draft Report 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 35
 

Page 4

Recommendation 7: Require implementation ofinternal control improvements to the National

Emergency Management Information System on a quarterly basis to prevent potential fraud, waste,

abuse, and improper payments.

FEMA response: FEMA non-concurs with this recommendation. A quarterly schedule for

implementation improvements to the National Emergency Management Information System

(NEMIS) is not appropriate. Extensive experience with developing additional controls within

NEMIS had led to the development of a bi-annual schedule for major releases as the most efficient

and least disruptive deployment approach. The reasons for this approach are as follows:

Time and overhead associated with NEMIS releases

NEMIS is a complicated set ofdatabases and applications. Each NEMIS release is a costly endeavor

involving coordination across numerous Directorates and Divisions within the Agency. This includes.

Public Assistance, Mitigation, OCFO, and OCIO in addition to NPSC staff. Even partial NEMIS

changes that involve delivery ofIHP assistance require module testing from other groups such as

.Public Assistance or Mitigation to ensure theirsystems are not affected by changes in the Individual

Assistance module.. Other offices or Divisions within the Agency do not have dedicated full time

staffto test the system, and must rely on staffdiverted from other projects. Moreover, many changes

within IHP to control fraud or waste are highly complicated, particularly when changes deal with our

automation business rules. It is not feasible or cost effective to develop, test and deploy many

business rules or other processing changes more often than twice a year.

Disruption ofdisaster processing activities

Due to the complexity ofNEMIS, each release usually requires significant downtime (at leas·t a

weekend) during which all disaster processing activity ceases. In order to minimize disruptions,

FElylA attempts to schedule releases in December or January, and June, in order to avoid our peak

activity periods. Historically, August through mid November (hurricanes) and February through

May.(flooding and tornadoes) are high activity periods. Quarterly releases would naturally occur

during those active times. Bi-annual releases allow us to avoid those peak periods, ensuring disaster

survivors are served as quickly as possible.

NEMIS provides a great deal offlexibility in preventing fraud without implementing upgrades

Although we agree that FEMA should act as quickly as possible to remedy weaknesses that

potentially expose IHP assistance to fraud, waste and abuse, NEMIS already offers a number oftools

.that make it flexible, even without a major release. In theNEMIS administrative module, we have

the ability to implement 'special handling' queries, which remove cases that meet certain criteria ..

from our automated business rule processing. For instance, ifwe were to find an error in a business

rule, we can readily implement special handling to ensure that a caseworker reviews the case to fix it

manually. Tllis can be done within hours ofidentifying a potential issue. This special handling

capability can also be used to flag cases that present a special risk for fraud, waste or abuse.

NEMIS also allows us to add "data markings" to applicants meeting a certain criteria. For example,

ifwe learned that a group of applicants were being assisted by another agency, we can quickly add a

data marker to them, and subsequently use the marker to prevent potentially duplicative assistance.

Additionally, we have the ability to implement emergency fixes to implement new programs or

provide critical updates outside ofthe typical six month schedule, particularly when such changes do

.i1ot alter existing rules and processes. For instance, during Hurricanes Gustav and Ike, we deployed a

technical solution to implement the new Transitional Sheltering Assistance program in a ~atter of

weeks. The technical solution included (I) business rule logic to determine program eligibility, (2) .

Appendix B 

Management Comments to the Draft Report 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 36
 

Page 5

procedures for adding information to NEMIS for caseworkers to view, (3) procedures to export data

to our vendor; (4) import procedures for data returning from the vendor, and (5) changes to our

Interactive Voice Response (IVR) system to help applicants through our selfservice module.

Because these processes were largely done outside ofthe existing NEMIS architecture, we were able

to deploy the changes rapidly and without the disruptions noted above.

Based on the above factors, we believe the implementation ofquarterly releases would be

unnecessarily disruptive and would add costs without significantly improving our already

strengthened position to prevent waste, fraud and abuse. Since Hurricanes Katrina and Rita, we have

implemented a significant number ofcontrols, as noted by GAO in Final Report 09-671 on Fraud

Prevention Efforts in Hurricanes Gustav and Ike, in which GAO stated that 'FEMA has significantly

improved itsfraud prevention controls over disaster assistance.•

Recommendation 8: Require the Internal Control Board to assess and govern internal controls

across FEMA, including all Individual Assistance, Public Assistance, and Mitigation Programs, and

to identify and implement improvements on a quarterly basis.

FEMA response: FEMA concurs with the recommendation. The Internal Control Board (ICB) cochaired by the Deputy Administrator and the CFO is scheduled to meet quarterly in FY 2011. The

ICB has focused. on Grant Management. Additionally, the ICB has discussed and been provided

updates on the Improper Paynient Information Act (IPIA) requirements which test improper

payments. The IPIA testing is beginning to move towards quarterly testing ofseveral ofits

programs and will eventually test all payments quarterly. The ICB has also been updated on CFO

efforts to establish a consistent InternalControl process that supports the Agency's Assurance

Statement memorandum. .

Recommendation 9: Order the recoupment ofimproper disaster assistance payments to begin no

later than April I, 2011.

FEMA response: FEMA concurs with the recommendation and requests that it be closed. FEMA

has started its new recoupment process. On March 15,2011 FEMA published the intent to proceed

with recoupments in the Federal Register at http://edocket.access.gpo.gov/201l/2011-6036.htrn. On

March 16, 2011, FEMA commenced recoupment by sending out notices of debt letters (NODs),

starting with the most recent debt first.

Appendix B 

Management Comments to the Draft Report 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 37
 

Appendix C 

Fraud Prevention and Investigation Branch Case Flowchart 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 38
 

u.s. Dtpon",.a' of IhHI.d••d S.n,lty

Wuhi.gIOn. DC 20528

G:PEMA

January 7, 2011

MEMORANDUMfCBOR: . I FEMA Employees

FROM: . Craig Fugate

t\dministrator

SUBJECf: FEMA's Efforts to Combat Disaster Fraud

On July 22, 201 0, President Obama signed into law the Improper Paymellt Elimillatioll alld

Recovery Act, which is aimed at intensifying efforts to eliminate payment error, waste, fraud, and

abuse in major programs administered by the Federal Government by $50 billion between now and

2012. The Federal Emergency Management Agency (FEMA) provides disaster relief to families and

communities to rebuild from a disaster; however, it must be limited to those who have truly suffered

losses. Fraudulent claims take taxpayer money away from those truly in need of assistance and

weaken the Federal Govenunent's ability to provide support.

As an Agency, we are making progress in detecting and preventing disaster fraud through our fraud

prevention training and strengthening of our program controls. However, we still have more work to

do. It is the responsibility of every member ofthe FEMA team to be vigilant in preventing and

reporting improper payments and other fonns of waste, fraud, and abuse. Our good stewardship of

taxpayer dollars will ensure that we can be fully responsive to the needs ofthe American people

before, during, and after a disaster.

Infonnation on additional fraud prevention training will be forthcoming.

For additional infonnalion or to report fraud, waste, or abuse, email sto(lfemafraudrii1dhs.gov or call

FEMA's Fraud Hotline number at 1.866.223.0814.

Appendix D 

January 2011 Administrator Fraud Prevention Memorandum 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 39
 

Appendix E 

Major Contributors to this Report 

Donald Bumgardner, Director 

Philip McDonald, Audit Manager 

Madhuri Edwards, Supervisory Program Analyst 

Polin Cohanne, Senior Program Analyst 

Assessment of FEMA’s Fraud Prevention Efforts 


Page 40 

Appendix F 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Under Secretary for Management 

FEMA Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as 

appropriate 

Assessment of FEMA’s Fraud Prevention Efforts 
 

Page 41
 

ADDITIONAL INFORMATION AND COPIES 

To obtain additional copies of this report, please call the Office of Inspector General (OIG) at (202) 254-4100, 

fax your request to (202) 254-4305, or visit the OIG web site at www.dhs.gov/oig. 

OIG HOTLINE 

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal or noncriminal 

misconduct relative to department programs or operations: 

• Call our Hotline at 1-800-323-8603; 

• Fax the complaint directly to us at (202) 254-4292; 

• Email us at DHSOIGHOTLINE@dhs.gov; or 

• Write to us at: 

DHS Office of Inspector General/MAIL STOP 2600, 

Attention: Office of Investigations - Hotline, 

245 Murray Drive, SW, Building 410, 

Washington, DC 20528. 

The OIG seeks to protect the identity of each writer and caller.