Hurricane Katrina: Ineffective FEMA Oversight of Housing Maintenance Contracts in Mississippi Resulted in Millions of Dollars of Waste and Potential Fraud
Published: 2007-11-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Hurricane Katrina destroyed or damaged 134,000 homes and 10,000 rental units in Mississippi alone. The Federal Emergency Management Agency (FEMA) in part responded by providing displaced individuals with temporary housing in the form of mobile homes and travel trailers, placed on both private property and at FEMA-constructed group sites. In 2006, FEMA awarded 10 contracts in Mississippi to maintain and deactivate (MD) the housing units and 5 for group site maintenance (GSM). GAO was asked to investigate whether there were indications of fraud, waste, and abuse related to FEMA's oversight of these 15 contracts. GAO analyzed FEMA's issuance of task orders, tested a representative sample of monthly maintenance inspections payments, prepared case studies detailing the costs related to trailers placed at group sites, and investigated improper activity related to the contracts.
section_title: What GAO Found
paragraphs: FEMA's ineffective oversight resulted in an estimated $30 million in wasteful and improper or potentially fraudulent payments to the MD contractors from June 2006 through January 2007 and likely led to millions more in unnecessary spending beyond this period. For example, FEMA wasted as much as $16 million because it did not issue task orders to the contractors with the lowest prices. In addition, GAO estimates that FEMA paid the contractors almost $16 million because it approved improper or potentially fraudulent invoices. This amount includes about $15 million spent on maintenance inspections even though there was no evidence that inspections occurred and about $600,000 for emergency repairs on housing units that do not exist in FEMA's inventory. Furthermore, FEMA's placement of trailers at group sites is leading to excessive costs. FEMA will spend on average about $30,000 on each 280 square foot trailer at a private site through March 2009, the date when FEMA plans to end temporary housing occupancy. In contrast, expenses for just one trailer at the Port of Bienville Park case study site could escalate to about $229,000---the same as the cost of a five bedroom, 2,000 square foot home in Jackson, Mississippi. Part of the reason for this expense is that FEMA placed only eight trailers at the Bienville site. FEMA wastes money when it operates sites with such a small number of trailers because GSM costs are fixed whether a site contains 1 or 50 trailer pads. At Bienville, FEMA spends over $576,000 per year--$72,000 per trailer--just for grounds maintenance and road and fence repair. GAO also found evidence of improper activity related to the contract award process. For example, FEMA awarded GSM contracts to two companies that did not appear to have submitted independent bids, as required. These companies shared pricing information prior to submitting proposals to FEMA and also shared the same president and accountant. Personnel at both companies also misrepresented their job titles and functions, a potential violation of the False Statements Act. In another case, FEMA's contracting officer awarded a $4 million contract to make the temporary housing units disabled-accessible; the contracting officer allegedly had a previous relationship with the awardee's subcontractor. GAO licensed engineers estimated that the work should have only cost about $800,000, or one-fifth of what FEMA ultimately paid.

section_title: Letter
paragraphs: In August 2005, Hurricane Katrina caused catastrophic damage to the Gulf  Coast, killing over 1,000 people and obliterating homes and entire towns  through wind and rain damage, flooding, and the destruction of roads,  bridges, and water and sewer lines. In Mississippi alone, reports estimate  that Katrina destroyed or damaged approximately 134,000 homes and  10,000 rental units. As part of the federal response, the Federal  Emergency Management Agency (FEMA) provided many of these  displaced individuals with temporary housing in the form of travel trailers  and mobile homes. According to FEMA, 17,608 households in Mississippi  were still residing in travel trailers and mobile homes as of August 2007.  These households will be allowed to continue this occupancy through  March 2009.
In the aftermath of the storm, FEMA placed the temporary housing units  on private properties where individuals were rebuilding their homes. For  predisaster renters, FEMA also placed housing units at preexisting  commercial sites (e.g., trailer parks) and at FEMA-constructed group sites  at leased locations, such as stadium grounds and school fields. To support  the temporary housing, FEMA originally awarded sole source contracts to  four major firms and paid these firms billions of dollars to set up and  maintain the units and sites. According to FEMA, it awarded these  contracts noncompetitively because of the urgent need for a rapid  emergency response. After much public criticism and investigations of the  costs claimed by the four contractors, FEMA solicited proposals for new  contracts for the maintenance and deactivation (MD) of mobile homes and  trailers and for group site maintenance (GSM). The MD contracts are  primarily for monthly preventative trailer maintenance, emergency repairs,  and unit deactivation and removal, while the GSM contracts cover  maintenance of the grounds facilities at the site, lawn care, and road and  fence repair. In Mississippi, FEMA awarded 10 MD contracts in May 2006  to maintain approximately 30,000 housing units and 5 GSM contracts in  September 2006 to maintain 39 group sites.
Both the MD and GSM awards have a 5-year term and FEMA guaranteed  each contractor a minimum amount for the first year: $50,000 for MD  contracts and $100,000 for GSM contracts. FEMA has subsequently  decided to issue task orders under only five of the MD contracts for the  second year; however, the 5 remaining contractors are still eligible to have  task orders issued against their existing contracts. According to FEMA, it  paid the 10 MD contractors almost $63 million from May 2006 through May  2007 and paid the 5 GSM contractors about $9 million from September  2006 through May 2007. In addition, FEMA data shows it has spent over  $13 million on site leases, $6.5 million for security services at the sites, and  $4.4 million on utilities. FEMA data also shows it spent over $4 million to  lay asphalt around 150 travel trailers in group sites to make them  accessible to disabled individuals in compliance with Uniform Federal  Accessibility Standards (UFAS).
You asked us to investigate whether there were indications of fraud,  waste, and abuse related to FEMA’s oversight of the 10 MD and 5 GSM  contracts in Mississippi. We focused our efforts on investigating   (1) FEMA’s issuance of task orders to the MD contractors and (2) FEMA’s  invoice review process. We also prepared case studies to assess the costs  associated with the placement of travel trailers at group sites and  investigated allegations of criminal and improper activity related to the  contracts.
To conduct our investigation, we analyzed FEMA’s issuance of task orders  under the contracts and the costs associated with the most expensive  contract line items from June 2006 through January 2007. In addition, we  selected and tested a representative sample of payments made to the MD  contractors for monthly preventative maintenance inspections from June  2006 to January 2007. To prepare our case studies, we reviewed specific  costs associated with a nonrepresentative selection of 3 group sites and 1  commercial site in Mississippi. We did not conduct a comprehensive  evaluation of whether FEMA adhered to its own solicitation requirements  and other laws or regulations when awarding the 10 MD and 5 GSM  contracts. However, our interviews with FEMA officials, contractor  personnel, and confidential informants led us to identify potentially  improper activity associated with the award process. To further  investigate this activity, we reviewed and compared the contract  proposals, total bid prices, line item bids, and government estimates for  work. We conducted our work from October 2006 to September 2007. We  conducted our investigative work in accordance with the standards  prescribed by the Presidents Council on Integrity and Efficiency and  conducted our audit work in accordance with generally accepted  government auditing standards. For more information on our scope and  methodology, see appendix I.
subsections: section_title: Background
paragraphs: Under the Stafford Act, FEMA may provide temporary housing units (such  as travel trailers and mobile homes) directly to disaster victims who are  unable to make use of financial assistance to rent alternate housing  accommodations because of a lack of available housing resources. The act  limits this direct assistance to an 18-month period, after which FEMA may  charge fair market rent for the housing unless it extends the 18-month  free-of-charge period due to extraordinary circumstances. To manage this  post-disaster housing, FEMA typically has in place a contingency technical  assistance contract. However, when Katrina made landfall in August 2005,  FEMA was in the process of competing this contract—bids had been  solicited and evaluated, but no contract was in place. Therefore, FEMA  awarded “no-bid” contracts to four major engineering firms (Bechtel  Corporation, Fluor Corporation, the Shaw Group Incorporated, and CH2M  Hill Incorporated) for, among other things, the support of staging areas for  housing units, installation of housing units, maintenance and upkeep, site  inspections and preparations, site restoration, group site design, group site  construction, site assessments, property and facility management, as well  as housing unit deactivation and rehabilitation. In total, FEMA made  almost $3 billion in payments to Bechtel, Fluor, Shaw, and CH2M Hill from  September 2005 to January 2007. After much public criticism and  investigations of the costs claimed by the four contractors, FEMA  solicited proposals for new contracts for the maintenance and  deactivation (MD) of mobile homes and trailers and for group site  maintenance (GSM).
Mississippi Maintenance and Deactivation Contracts: In November  2005, FEMA posted two solicitations indicating its intent to award multiple  contracts for the maintenance and deactivation of manufactured homes  and travel trailers. One solicitation was set aside for small businesses and  the other was designated for 8(a) business development concerns (small  businesses owned by socially and economically disadvantaged  individuals). The solicitations for the small business and 8(a) awards were  essentially the same, with each requiring prospective bidders to submit a  technical and a business proposal listing their price for each of 37 contract  line items. Additionally, in order to provide preference to local businesses,  FEMA notified bidders that the proposed total price for any nonlocal  business would be increased by 30 percent for price evaluation purposes.  In May 2006, FEMA awarded five contracts to small businesses and five to  8(a) business development concerns. Each award was an indefinite  delivery/indefinite quantity fixed price type contract with a 5-year term  and each had a guaranteed minimum of $50,000 and a maximum funding  limitation of $100 million. In total, nine businesses received these awards  because one business received two awards–one as a small business and  one as an 8(a) business concern. In addition, of the 10 awards, 8 went to  businesses classified as local for price competition purposes and 2 went to  companies that FEMA deemed nonlocal. FEMA also awarded similar  maintenance and deactivation contracts in Louisiana, Alabama, and Texas.
In May 2006, following award of the Mississippi MD contracts, FEMA  issued two task orders to each of the 10 awardees. The initial task order  for each contractor initiated a phase-in period for contract ramp-up. The  cost of each contractor’s phase-in period was based on the amount agreed  to in their contract. FEMA obligated the amount for the initial phase-in  cost proposed by each MD contractor, which ranged from a low of $23,220  to a high of $6,111,000. The second task order provided an estimated  quantity and projected dollar amount for each of the contract line items  for the first 11 months of performance. Those task orders stated that the  estimated usage was a “good faith estimate on the part of the government  and was developed solely to arrive at an estimated total for the task  order.” The amount obligated for each of those “good faith estimates” was  between $19.2 million and $20.6 million, for a total obligation amount of  over $200 million. FEMA elected not to compete the task orders among the  10 contractors nor did they consider price or cost under each task order as  a factor in their source selection decision. However, both the MD contract  and the FAR state that a contracting officer must provide each contractor  with a fair opportunity to be considered for each order issued under  multiple task order contracts. The FAR further states that the contracting  officer may exercise “broad discretion” in developing task order issuance  procedures, as long as these procedures are fair, included in the  solicitation, and factor in price or cost.
Mississippi Group Site Maintenance Contracts: In May 2006, FEMA  posted its intent to award multiple contracts for group site maintenance.  These contracts were set aside exclusively for service disabled veteran- owned small businesses and were further limited to proposing firms  residing in or primarily doing business in Mississippi. The solicitation  required each submitter to provide a price for maintaining group sites at  various threshold sizes, including sites with less than 50 trailer pads, 51 to  100, 101 to 300, 301 to 600, and 601 or more. FEMA awarded these  contracts in September 2006 and also awarded similar group site  maintenance contracts in Louisiana.
Temporary Housing Occupancy Extension: In April 2007, FEMA  extended the temporary housing assistance program for hurricane victims  living in trailers and mobile homes until March 2009. Beginning in March  2008, individuals residing in these units will pay a portion of the cost for  rent, which will begin at $50 per month and incrementally increase each  month thereafter until the program concludes on March 1, 2009. FEMA  also began allowing residents of its mobile homes and travel trailers to  purchase their dwellings at a fair and equitable price; however, on August  1, 2007, FEMA temporarily suspended sales while the agency works with  health and environmental experts to assess health-related concerns raised  by occupants.
section_title: FEMA’s Issuance of Task Orders under MD Contracts Resulted in as Much as $16 Million in Waste
paragraphs: FEMA wasted as much as $16 million because it did not allocate task  orders under the MD contracts to the companies with the lowest prices.  Despite extraordinary pricing differences for the same services among the  10 MD contractors, FEMA issued task orders to all 10, spending   $48.2 million from June 2006 through January 2007 on the five contract  line items that generate the most cost. If FEMA had instead issued task  orders to only the five contractors with the lowest overall bid prices, it  would have only spent an estimated $32.5 million on these five line items.
The scope of the work under the MD contracts primarily covered monthly  trailer preventative maintenance, emergency repair, and unit deactivation  and removal. Further, as stipulated in the contracts, each company  receiving an award “must be prepared to perform th work anywhere in  the region.” In response to FEMA’s solicitations, the contractors provided  a wide range of price proposals for identical services—from about   $90 million to $300 million—as shown in table 1.
FEMA issued task orders to all 10 contractors for the first year of the  contract, assigning each about 3,000 trailers. FEMA paid these 10  contractors about $51.2 million from June 2006 through January 2007,  spending 94 percent of that amount—-$48.2 million—-on just five of the 37  line items in the contract. These line items include monthly preventative  maintenance, contractor phase-ins, deactivations, emergency after-hours  repairs, and septic cleaning services. The contractors’ bids for these  specific line items also varied widely. Table 2 shows the high and low bids  for each line item.
Despite these extreme price variances, FEMA did not establish procedures  for the most cost-efficient distribution of work. Both the MD contract and  the FAR state that a contracting officer must provide each contractor with  a fair opportunity to be considered for each order issued under multiple  task order contracts. The FAR further states that the contracting officer  may exercise “broad discretion” in developing task order issuance  procedures, as long as these procedures are fair, included in the  solicitation, and factor in price or cost. According to the MD solicitation  and contract, FEMA considered “geographic locations and transportation  concerns” when assigning work, but FEMA did not include procedures for  factoring in cost in either of these documents. We asked FEMA to provide  us with more detail about their task issuance procedures, but they did not  respond, except to reiterate during an interview that it was were primarily  concerned with who was already performing the work (some of the MD  contractors had previously subcontracted with the original four firms) and  the contractors’ transportation issues and office locations.
Absent any other information from FEMA regarding the procedures it used  to issue task orders to the 10 MD contractors, we concluded that FEMA  did not adequately consider cost, resulting in as much as $16 million in  waste. As shown in figure 1, if FEMA had instead issued task orders to the  five contractors with the lowest overall bid prices, it would only have  spent about $32.5 million on the five most expensive line items. Because  FEMA did not reassign task orders under the MD contracts until June  2007—the second year of the contract, it likely wasted millions more on  these line items from February through May 2007.
As detailed in the figure, had FEMA made contract awards to only the five  lowest bidders, it could have saved as much as    $10.2 million in preventative maintenance costs. FEMA spent about  $28.5 million for preventative maintenance on all the units in  Mississippi from June 2006 through January 2007. If FEMA had  awarded the MD contracts to the five companies with the lowest  overall bid price, the cost for trailer and mobile home maintenance  would have been approximately $18.3 million.    $3.2 million on phase-in costs. FEMA spent $6.5 million on one-time  phase-in costs for all 10 MD contracts. However, if FEMA used only the  five companies with the least expensive bids, the total cost for phase in  would have been over $3.2 million.   $930,000 on unit deactivations. FEMA spent just over $7 million on  about 10,000 deactivations from June 2006 through January 2007. If  FEMA had awarded the MD contracts to the least expensive  companies, the cost for these deactivations would have been  approximately $6.1 million.   $620,000 in after-hours emergency repairs. FEMA spent almost $2.2  million on emergency after hour service calls. If FEMA awarded the  contract to the five most inexpensive companies, it would have spent  approximately $1.6 million.   $690,000 in septic cleaning costs. FEMA spent almost $4 million on  septic cleanings from June 2006 through January 2007, but would have  spent about $3.3 million if it had awarded the contracts to the less  expensive companies.
In addition to having the lowest prices, these five contractors also had the  ability to maintain more than the 3,000 trailers they were originally  assigned. Specifically, FEMA required companies to submit bids for the  MD contracts based on the premise that they could each be assigned about  6,700 units that could have been located throughout the entire state. Prior  to awarding the contracts, FEMA determined that each of these five  companies did in fact have the technical ability to maintain at least 6,700  temporary housing units. Therefore, these five would have been capable of  collectively performing maintenance for the estimated 30,000 trailers and  mobile homes in Mississippi at the time of the award.
section_title: Breakdowns in FEMA’s Invoice Review Process Led to about $16 Million in Improper or Potentially Fraudulent Payments
paragraphs: From June 2006 through January 2007, we estimate that FEMA made  approximately $16 million in improper or potentially fraudulent payments  to the MD contractors based on invoices that should not have been  approved, according to its own payment process. This amount includes  about $15 million in payments made for preventative maintenance—which  includes a required monthly inspection—and over $600,000 in payments  for emergency after-hours repairs. With regard to preventative  maintenance, we estimate that FEMA paid the MD contractors about $15  million even when the trailers being inspected could not be located in  FEMA’s own databases, the supporting inspection documentation required  by the contract did not exist, or the documentation showed that the  contractor did not perform a complete inspection. This $15 million  includes $2.2 million identified through a review of contractor billing  records and $13 million identified through estimates calculated from a  statistical sample. With regard to emergency after-hours repairs, we found  that FEMA spent over $600,000 on these repairs even though the invoices  should not have been approved because the housing units do not exist in  FEMA’s inventory. We could not conduct any additional tests concerning  the validity of payments FEMA made for these emergency repairs because  the data we received were incomplete.
subsections: section_title: FEMA Improperly Paid Contractors about $15 Million for Preventative Maintenance Inspections
paragraphs: Because of FEMA’s failure to adequately review inspection documentation  submitted by the MD contractors, we estimate that about 50 percent of the  $28.5 million in payments FEMA made for preventative maintenance were  based on improper or potentially fraudulent invoices that should not have  been approved. Specifically, based on a review of contractor billing  records, we found that FEMA spent $2.2 million for preventative  maintenance even though there was no documentation to support that the  required monthly inspections had occurred. Further, as a result of our  testing of a statistical sample of inspection documentation associated with  the remaining $26 million in payments, we estimate that FEMA spent an  additional $13 million based on invoices that should not have been  approved. We also confirmed allegations that contractors received  payments for monthly preventative maintenance even though their  inspectors falsified inspection documentation.
subsections: section_title: FEMA Requires Monthly Inspections and Documentation of Work Performed
paragraphs: According to the terms of the contract and inspection forms provided by  FEMA, MD contractors are responsible for routine repairs and for  inspecting interior and exterior unit components. These components  include the plumbing, electrical, and heating and cooling systems; panels,  siding, windows, screens, and doors; and all appliances. According to  FEMA, MD contractors must perform one preventative maintenance  inspection per month in order to submit a valid invoice for unit  maintenance. Furthermore, as specified by the terms of the contract,  contractors must maintain records to document that the inspection was  performed. After the contract awards, FEMA provided the contractors  with a temporary housing unit inspection sheet (see app. II). Once  completed, this inspection sheet should contain the following:    The trailer’s FEMA-issued barcode (noted as “temporary housing unit  no.” on the form). It should be noted that MD contractors told us that  the barcode information they received from the original contractors  was incomplete and they had trouble figuring out which trailers they  were assigned.
A checklist of interior components inspected.
A checklist of exterior components inspected.
The trailer occupant’s signature verifying that both interior and  exterior inspection occurred. According to our discussions with FEMA,  if a unit occupant is not home to sign the inspection sheet (and  therefore the inspector does not have access to the interior  components of the unit), the inspector is required to make at least two  additional attempts to conduct a complete inspection. If the occupant  is still not available to sign the inspection sheet or allow access to the  interior of the unit, the inspector must note on the sheet that three  attempts were made to complete the work in order to submit a valid  invoice for payment. All of the contractors confirmed that FEMA told  them to make three attempts to inspect a unit prior to submitting an  invoice for payment, even though this requirement is not stated in the  contract.
section_title: FEMA’s Reported Payment Process Requires Review of Invoices and Supporting Documentation
paragraphs: As shown in figure 2, FEMA’s payment process is well designed and, if  followed, provides reasonable assurance that payments are being made for  work actually performed.
As detailed in the figure, the Contracting Officer’s Technical  Representative (COTR) is supposed to check the accuracy of both the  contractors’ calculations and the supporting documentation associated  with a “random sample” of barcodes. If the COTR finds any errors as a  result of this sample, he or she must conduct accuracy checks on all of the  invoices submitted by the contractor for that particular line item. Prior to  submitting the invoice to FEMA’s Disaster Finance Center for processing,  the COTR is to check for duplicate billings and verify that work was not  performed on trailers that had been deactivated. During the course of our  investigation, we found instances where FEMA’s COTRs adhered to this  process and did not approve payments because they identified inaccurate  calculations or duplicate invoices. However, our review of contractor  billing records and testing of a statistical sample of inspections also shows  that FEMA paid the MD contractors even though there was insufficient  documentation that work had been performed, making it difficult to  believe that the COTRs were consistently conducting the accuracy checks  specified in figure 2.
subsections: section_title: Review of Contractor Billing Records Reveals $2.2 Million in Improper or Potentially Fraudulent Maintenance Payments
paragraphs: From June 2006 through January 2007, available records indicate that  FEMA made about $28.5 million in preventative maintenance payments for  over 180,000 inspections. Based on our initial analysis of billing records  related to 12,000 of these inspections, we confirmed that FEMA should not  have approved about $2.2 million in payments. Specifically, we reviewed  approximately 90 preventative maintenance invoices submitted by the MD  contractors from June 2006 through January 2007. Most of these invoices  contained approximately 1,000 to 3,000 monthly inspection billings. As a  result of this review, we identified billings for about 12,000 inspections  that did not contain any documentation to support that an inspection had  actually occurred. Despite this lack of supporting documentation, FEMA  paid the contractors for these inspections. Using the contractors’ pricing  information, we determined that the payments for these 12,000 inspections  totaled approximately $2.2 million.
section_title: Statistical Sample Results Indicate about $13 Million in Improper or Potentially Fraudulent Preventative Maintenance Payments
paragraphs: Based on our testing of a statistical sample of the remaining $26 million in  preventative maintenance payments, we estimate that FEMA made   $13 million in payments even though the trailer barcode listed on the  inspection sheet did not match a barcode listed in FEMA’s tracking system  or the required inspection sheet did not exist. This amount also includes  payments for incomplete inspections, i.e., when the inspection sheet did  not contain the trailer occupant’s signature to document that an interior  and exterior inspection had been performed or the sheet showed no  indication that the contractor had made three attempts to perform a  complete inspection. We analyzed a statistical sample of 250 from a  population of about 170,000 inspections submitted by the MD contractors  and paid for by FEMA from June 2006 through January 2007. Table 3  shows the results of our sample.
Even if payments were supported by proper inspection documentation, we  found indications that the paid-for inspections were not always performed.  As shown by the following three cases, we confirmed allegations that  inspectors performed impossibly large numbers of inspections in 1 day or  otherwise falsified maintenance inspection documentation. We have  referred all three of these matters to the Department of Justice and the  DHS IG for further investigation and we have notified the Katrina Fraud  Task Force about our findings.
Case 1: We confirmed that inspectors for one contractor billed and were  paid for excessive numbers of inspections that supposedly took place  during the course of 1 work day. As previously stated, MD contractors are  responsible for interior and exterior unit inspections. These inspections  include checking the plumbing, electrical, and heating and cooling  systems; panels, siding, windows, screens, and doors; and all appliances.  According to several contractors we interviewed, the number of  inspections that an inspector can reasonably complete during the course  of 1 day is about 25—-approximately 1 every 20 minutes during an 8-hour  work day. This number assumes that the units are in good condition,  located fairly close together, and that the inspector does not have to make  any repairs or experience any other delays related to occupant issues.  However, we identified numerous cases where individual inspectors billed  for around 50 inspections during the course of 1 day. In order to complete  50 inspections during an 8 hour work day, these inspectors would have  had to perform one inspection every 10 minutes, without factoring in  driving time, meals, or restroom breaks. In another case, an inspector  claimed to have conducted 80 inspections in 1 day, or the equivalent of 1  inspection every 6 minutes. When we interviewed the contractor, he  acknowledged that that were “many problems” with the subcontractor  who performed these excessive inspections and he also stated that he  fired this subcontractor. At the time of our interview, this contractor had  not returned to FEMA any of the payments he received for these  inspections.
Case 2: Another MD contractor’s inspectors falsified inspection reports by  signing for work they had not completed. Three inspectors employed by  this contractor told our investigators that their supervisor asked them to  fill out or sign blank inspection forms. According to the inspectors, their  supervisor told them that the inspections had actually been performed, but  that the paperwork documenting the inspections needed to be redone.  However, the inspectors told our investigators that they had not  performed the work on any of the inspections. When we spoke with the  attorney representing the contractor about these claims, he stated that  there were about 30 trailers that were inspected but no documentation had  been filled out at the time of the inspection. He then admitted that some  inspectors had been asked to recreate this documentation. During the  course of our interview with the attorney, he also claimed that FEMA  instructed his client to bill for the number of trailers that they had been  assigned, regardless of whether an inspection had been performed. None  of the other contractors stated that they billed for units assigned instead of  work performed. When we asked the contracting officer in charge of the  Mississippi MDs about this issue, she told us that a contractor must  perform at least one preventative inspection per month on each trailer that  it has been assigned in order to submit a valid bill for preventative  maintenance.
Case 3: An inspector employed by a different MD contractor told our  investigators that she left the company after finding several maintenance  inspections that had her name signed to them by another employee. The  inspector provided our investigators with three inspection sheets that she  insisted she did not sign. When our investigators confronted the supervisor  with these allegations, she admitted that she had forged the inspection  sheets.
section_title: FEMA Improperly Paid Contractors over $600,000 for After-Hours Emergency Repairs
paragraphs: Although we initially intended to test the $2.2 million in payments FEMA  made for after-hours emergency repairs, we could not conduct this work  because the data we received concerning these calls did not contain  complete information. However, we were able to determine that FEMA  spent over $600,000 for emergency repairs even though the invoices for  these repairs should not have been approved because the housing units do  not exist in FEMA’s databases.
FEMA’s records show that it paid for 12,045 after-hours emergency calls  on 7,310 housing units from June 2006 to January 2007, for a total of   $2.2 million in emergency repair payments. As part of our work, we  attempted to test whether these payments were made for valid  emergencies. To qualify as an emergency during the period of our review,  a call had to have been received by FEMA’s call center between 5:00 p.m.  and 8:00 a.m. Monday through Friday or on weekends.  In addition,  according to the FEMA call center instructions, emergency maintenance  involves, but is not limited to, requests to repair gas leaks, major water  leaks, sewage leaks, major electrical malfunctions, lack of heat when the  outside temperature is under 50 degrees, or lack or air conditioning when  the outside temperature is over 85 degrees. The call center was supposed  to document relevant requests, verify the emergency, and then forward the  request to the MD contractor responsible for the unit. However, when we  reviewed the call center data, we found that the records related to  emergency calls were not complete and therefore we could not determine  whether the contractors submitted billings for valid emergency calls or  whether FEMA made payments for calls that met its emergency criteria.  Specifically, FEMA’s database did not identify  the time and date the call was received. Although FEMA’s call center  received 46,000 emergency calls from June 2006 through January 2007,  over 21,000 of these call records lacked a time designation. Therefore,  we could not ascertain whether calls should have been billed and paid  for as emergency repairs.   which contractor was assigned the call and which calls resulted in  billable services. Although FEMA’s call center received 46,000  emergency calls, data we received from the contractors show that they  only billed FEMA for about 12, 045 emergency repairs. Therefore,  although we have FEMA’s records on calls received and payments  made, we cannot reconcile this payment information with the  contractors’ invoices.
Despite these discrepancies, we were able to determine that FEMA spent  over $600,000 for emergency after-hours repairs on units that cannot be  found in FEMA’s inventory. As previously stated, FEMA paid for 12,045  after-hours emergency calls on 7,310 housing units from June 2006 through  January 2007. When we compared the unit barcodes associated with these  7,310 units with the barcodes listed in FEMA’s main database for tracking  the assignment and location of mobile homes and trailers, we were unable  to identify records for 1,732 of the 7,310 units. Records show that FEMA  made 2,780 improper or potentially fraudulent emergency repair payments  related to these 1,732 trailers. Using the contractors pricing information,  we calculated that these 2,780 payments totaled over $600,000.
section_title: Case Studies Illustrate Excessive Costs at Group and Commercial Sites
paragraphs: Our four case studies show that FEMA’s placement of travel trailers at  group and commercial sites can lead to excessive costs. FEMA placed the  temporary housing units on private properties to shelter individuals who  were rebuilding their homes; at FEMA-constructed group sites at leased  locations, such as stadium grounds and school fields; and at preexisting  commercial sites (e.g., trailer parks). With regard to the private sites,  FEMA only has to pay for installation, maintenance, and deactivation; the  trailer can be hooked up to the property’s existing utilities, so no trailer  pad is required. With regard to the group sites, FEMA understandably has  had to pay extra for site construction and maintenance, security, leases,  and utilities. However, our case studies show that these expenses are  exacerbated by the fact that FEMA did not allocate work at the sites in a  cost-effective manner and has not reevaluated this allocation since the  sites were established. With regard to the commercial sites, FEMA has not  incurred the same operational expenses that it has at the group sites  because FEMA did not have to pay for pad construction and design and  does not have to pay the GSM contractors for site maintenance. However,  we found that FEMA’s mismanagement of the commercial site we  investigated has lead to substantial waste.
The majority of FEMA housing units in Mississippi are located on private  properties where individuals are rebuilding their homes. According to  FEMA, almost 14,000 of the 17,608 units currently in Mississippi are  located on private sites, while the remainder are located at group or  commercial sites. We estimate that, on average, FEMA will spend  approximately $30,000 for the life cycle of a trailer placed at one of these  private sites. As shown in figure 3, FEMA paid about $14,000 to purchase  each 280 square foot trailer and $12,000 to haul the trailer to the site and  install it, and will spend an additional $4,000 to maintain a private site  trailer through the March 2009 temporary housing occupancy extension.  Our estimate is likely understated because we did not have access to the  trailer maintenance and group site maintenance payments made to the  original four contractors. We also could not calculate MD phase-in costs,  nor could we project deactivation expenses because it is not certain which  of the current MD contractors will be responsible for deactivating the  trailers in 2009.
In contrast, as shown in table 4 and the subsequent figures, FEMA could  spend from about $69,000 to $229,000 for trailers at the three group sites  we investigated, when factoring in all known expenses, including costs  incurred by the original four contractors for site design and construction  and unit installation. Part of the reason for these extreme expenses is that  FEMA failed to efficiently allocate work at the sites. For example, FEMA  wasted about $800,000 by inefficiently allocating trailers and pads and also  could not explain why it spent over $204,000 per year to lease one group  site when most of the other parks only cost about $30,000 per year to  lease.
However, because data provided by FEMA contained numerous  discrepancies, we could not account for all the expenses incurred at these  sites. In particular, although we were able to determine the number of  trailer pads at each site, FEMA could not provide us with an accurate  trailer count. For purposes of our analysis, we assumed that the parks  were operating with a trailer on each available pad. We also did not have  accurate information about utility payments FEMA made for these specific  sites and the trailers. As with the trailers at the private sites, our estimate  is likely understated because we did not have access to the trailer and site  maintenance payments made to the original four contractors and because  we could not calculate MD phase-in and deactivation expenses. In  addition, we do not know how much it will cost to return the group sites  to their original condition, as required by the terms of the group site  leases.
Port of Bienville Industrial Park in Hancock County: Figure 4 shows  the breakdown of expenses per trailer at this park through March 2009.
Because there are only eight pads at Bienville, FEMA will spend about  $229,000 for each trailer at the park through the March 2009 occupancy  extension. Group site maintenance costs are dependent on the size of  the site—”small” sites contain 50 trailer pads or less. In other words,  FEMA wastes money by operating sites with very few pads because the  GSM costs will be the same if a park has 1 trailer pad or 50. In this case,  FEMA spends over $576,000 per year—$72,000 per trailer—for site  maintenance. To save on this expense, FEMA could have assigned this  park to the GSM contractor with the lowest bid price to service a small  park. This contractor would only have charged FEMA about $76,000  per year to service Bienville—$9,500 per trailer. When we asked FEMA  officials about the distribution of work at the sites, they told us that  they “grasped” what pads they could get in the aftermath of the storm.  FEMA did not indicate that it has reevaluated the distribution of work  at the sites since that time.
Sunset Ingalls Park in Jackson County: Figure 5 shows the breakdown  of expenses per trailer at this park through March 2009.
Sunset Ingalls has 102 trailer pads and is therefore classified as a large  park (101 to 300 pads) for GSM purposes. FEMA pays the GSM  contractor about $500,000 per year for maintenance at a large park, as  opposed to $244,000 to service a medium sized park with 100 pads or  less. Therefore, the additional two pads increase the GSM costs for this  park by almost $260,000 per year. To save on this yearly cost, FEMA  could have originally placed these two pads at another site with  available space—-there are five group sites and one commercial site  located near Sunset Ingalls. When we asked FEMA officials about the  distribution of work at the sites, they told us that they “grasped” what  pads they could get in the aftermath of the storm. FEMA did not  indicate that it has reevaluated the distribution of work at the sites  since that time.
Ellzey Parcel in Harrison County: Figure 6 shows the breakdown of  expenses per trailer at this park through March 2009.
FEMA pays the landowner $17,000 per month, or $204,000 annually, to  lease the property for this large group site, which contains 170 trailer  pads. This lease amount is significantly higher than at the other 38  group sites, which typically range in cost from $250 to $7,500 per  month. We asked FEMA why they were spending so much to lease  this property in comparison to the other sites, they told us that did not  evaluate costs associated with group site leasing because the General  Services Administration (GSA) set up the leases. When we asked  representatives from GSA about the Ellzey lease, they told us that  $204,000 per year was a reasonable price because the site was located  on industrial property, but they could not tell us if a less expensive  option was considered.
With regard to the commercial sites, table 5 shows the estimated cost  per trailer at one commercial park in Mississippi. FEMA could have  saved $1.5 million at this site if it had exercised an option to reassign or  contract separately for septic cleaning services.
McLeod Water Park in Hancock County: Figure 7 shows the  breakdown of expenses per trailer at this park through March 2009.
The MD contractor at this park charged FEMA $245 per septic service,  or more than 500 percent of what FEMA could have paid, to provide  septic cleanings to the approximately 61 trailers at the park. In total,  FEMA paid the contractor about $1.8 million for this service because  the cleanings were provided 3 times per week per trailer over the  course of a year. However, this contractor made a profit of almost   $1.5 million on these cleanings because it paid a subcontractor just   $45 per cleaning to actually perform the work. FEMA could have saved  this $1.5 million by awarding a separate contract for the septic cleaning  services with the less expensive subcontractor; the septic bladder line  item specifies that “FEMA reserves the right to use other sources to  complete the work.” However, FEMA did not exercise this option.  When we asked the MD contractor about this high profit margin, he  said that officials from FEMA were aware of the situation but told him  they “did not care about the profit margin.”
According to an August 2007 report, FEMA’s current “exit strategy” for  residents at the group and commercial sites involves partnering with the  Department of Housing and Urban Development (HUD) to assist in  locating rental properties for applicants through HUD’s National Housing  Locator System (NHLS). In addition, Congress has provided $400 million  for the Alternative Housing Pilot Program (AHPP) to develop and evaluate  alternatives to travel trailers and mobile homes. However, it is still  uncertain what will happen to those residents who continue to need  housing assistance beyond the March 2009 trailer and mobile home  occupancy extension.
section_title: Evidence of Improper Activity Related to Contract Award Process
paragraphs: During the course of our work on the MD and GSM contracts, we found  that FEMA awarded GSM contracts to two companies that did not appear  to have submitted independent bids and also made false statements on  proposals submitted to FEMA. We also found that a FEMA contracting  officer may have improperly awarded the UFAS contract to make the  housing units accessible to individuals with disabilities, resulting in   $3 million in unnecessary expenses. We have referred both of these  matters to the Department of Justice and the DHS IG for further  investigation and we have notified the Katrina Fraud Task Force about our  findings.
subsections: section_title: FEMA Awarded GSM Contracts to Companies That May Not Have Bid Independently
paragraphs: FEMA awarded GSM contracts to two companies that did not appear to  have submitted independent bids and that also made false statements on  proposals submitted to FEMA. As previously discussed, FEMA awarded  five GSM contracts in Mississippi. In reality, FEMA awarded one business  two contracts: one contract as a “single entity” and one as part of a “joint  venture” with another firm. Although making this type of award is not  prohibited, the circumstances surrounding this case merit further  investigation. Specifically, both the “single entity” and the “joint venture”  are required to adhere to the Certificate of Independent Price  Determination, as set forth in the contract solicitation. By signing the  certificate, each bidder affirms that it has arrived at its price independently  and has not disclosed its bid to competitors. Despite the fact that the  single entity and the joint venture both signed this certification, our  evidence shows that the companies may not have been truly independent,  as might be expected given their common employees and business  relationships. We also found that key personnel at both companies  admitted to misrepresenting their job titles and functions in final offers  submitted to FEMA, a potential violation of the False Statements Act,   18 U.S.C. §1001. Details of the case follow:    Both proposals contained identical language. We found that both  companies hired the same individual to prepare their proposals. This  individual admitted that he “cut and pasted” language between the two  submissions and also that he provided the single entity a copy of the  joint venture’s bids prior to the submissions to FEMA. In addition, the  joint venture’s chief operating officer admitted that he discussed the  joint venture’s bids with the president of the single entity prior to  submission.
The single entity and the joint venture submitted line items bids that  were frequently identical or within a few hundred dollars.
In their initial proposals, the single entity and the joint venture  provided organizational charts with nearly identical personnel. For  example, both companies had the same president, executive vice  president, and accountant. After FEMA received the initial proposals,  the contracting officer told both companies that he was concerned with  the overlapping personnel and the similar pricing in the submissions. In  their best and final offers, the companies submitted new organizational  charts on which the president and executive vice president roles were  now filled by different people. However, the president of the single  entity admitted that she was president of both companies, despite  being removed from the joint venture’s initial organizational chart. In  addition, the individual listed as “operations manager” for the single  entity admitted that he does not really act in that capacity and then  remarked to our investigator that, with regard to the new  organizational structure, “it’s obvious that we just reshuffled the deck.”
The contracting officer stated that the submission of the new  organizational charts in the best and final offers submitted by the  companies allayed his concerns about whether the companies were  operating independently. He also indicated that it is not FEMA’s job to  “police” whether organizational charts are accurate or to investigate  whether companies adhered to the certificate of independent price  determination.
In response to our referral, Justice has decided to open an investigation  of this matter.
section_title: FEMA’s Potentially Improper Award of UFAS Contract Results in $3 Million of Unnecessary Expenses
paragraphs: We found that one of FEMA’s contracting officers may have improperly  awarded the UFAS contract to lay asphalt to make the travel trailers  accessible to individuals with disabilities, leading to over $3 million in  unnecessary expenses. FEMA was required to make the trailers accessible  as part of a September 2006 settlement agreement stemming from a  lawsuit brought by disabled trailer occupants. Unlike the MD and GSM  contracts, the FEMA contract officer set aside this UFAS contract for sole- source negotiation with a local 8(a) firm. At the time of the UFAS award  process, 8(a) contracts could be awarded without competition if the  anticipated total value of the contract was less than $3 million. According  the Federal Acquisition Regulations (FAR), an 8(a) contract may not be  awarded if the cost to the agency exceeds a fair market price. Further, the  FAR provides that prior to making sole-source 8(a) awards, a contracting  officer must estimate and justify the fair market value of the contract,  using cost analyses or other available data. The FAR also states that the  appearance of conflicts of interest in government-contractor relationships  should be avoided. Given these criteria, the contracting officer may have  improperly awarded the contract, costing taxpayers over $3 million in  unnecessary expenses.
The government estimate to complete the UFAS asphalt work for about  150 trailers was $2.99 million, just under the $3 million threshold for  awarding 8(a) contracts noncompetitively. In response to our request  for additional information, FEMA said that it was not able locate any  documentation to support how this estimate was derived. Therefore,  we asked GAO engineers with over 30 years experience to estimate the  costs associated with laying asphalt at the sites. Although they did not  visit these sites, the engineers used the information available from the  contractor’s price proposals, to estimate that, in the Biloxi, Mississippi,  region, this work should have only cost about $800,000.
The company’s initial bid, submitted on October 4, 2006, was around  $3.2 million, just over the 8(a) competitive threshold and four times the  expert estimate of what the work should have cost. FEMA awarded the  contract the very same day for $2.9 million; it appears that the  contracting officer deleted 4 of the 33 bid items in order to keep the  award amount under $3 million. Then, on November 1, 2006, less than a  month after the award, the contracting officer modified the contract to  add back one of the dropped line items and to increase the total award  by almost $750,000, 25 percent of the total value. Two more  modifications followed, on December 21, 2006, and January 31, 2007.  The total value of the contract ultimately reached just over $4 million,  five times the expert estimate to perform the work. Figure 9 shows the  timeline for the initial award and subsequent modifications.
section_title: Conclusion
paragraphs: Due to the unprecedented nature of the disasters resulting from the 2005  gulf coast hurricanes, it was understandable that FEMA did not  immediately have effective systems in place to efficiently allocate work or  to track the invoices submitted by the contractors for maintaining  thousands of mobile homes and travel trailers. However, over 2 years have  passed since the storms and FEMA is still wasting tens of millions of  taxpayer dollars as a result of poor management and ineffective controls.  It is critical that FEMA address weaknesses in its task order issuance and  invoice review processes so that it can reduce the risk for wasteful and  potentially fraudulent expenses and provide assurance that the  government is getting what it pays for. Finally, while the placement of  travel trailers at group and commercial sites might be necessary in the  immediate aftermath of a disaster, going forward, FEMA needs to  minimize the expenses associated with this type of temporary housing and  to develop strategies to transition disaster victims into more permanent  housing.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Homeland Security direct the  Director of FEMA to take the following six actions. With regard to the 10  MD and 5 GSM contracts in Mississippi that we investigated for this report,  FEMA should assess whether the contractors were overpaid and, if so,  establish procedures to collect overpayments or offset future payments.
For the current MD and GSM contracts in Mississippi and for any  temporary housing unit contracts arising from future disasters, FEMA  should    place a greater emphasis on issuing task orders to the companies with  the capability to perform the most work at the lowest cost.   conduct a complete inventory of mobile homes and trailers, create a  comprehensive database, and establish procedures to link work  assigned to the contractors with specific unit barcodes to provide  reasonable assurance that work is being performed on FEMA-owned  housing units.   design and implement internal control procedures to enforce the  existing payment and invoice review process to provide reasonable  assurance that payments are being made for work actually performed.
To alleviate the excessive costs associated with maintaining travel trailers  at group and commercial sites, FEMA should reevaluate the allocation of  trailers and work at the sites to determine whether any savings can be  achieved and explore creating permanent partnerships with other  agencies, such as the current partnership with the Department of Housing  and Urban Development, to determine whether there are less expensive  housing options that meet the needs of disaster victims.
As previously indicated, we have referred all the alleged criminal matters  identified in our report to the Department of Justice and the DHS IG for  further investigation and we have notified the Katrina Fraud Task Force  about our findings. For these cases, FEMA should consider the suspension  or debarment of any contractor found to have committed fraud or  otherwise violated the law.
section_title: Agency Comments and Our Evaluation
paragraphs: FEMA provided written comments on a draft of this report in which it  concurred with all six of our recommendations and outlined actions it has  taken that are designed to address each of these recommendations. As  part of its response, FEMA also provided background of the events leading  up to the award of the MD and GSM contracts and detailed some of the  overall improvements the agency stated it has made since Hurricane  Katrina. These comments are reprinted in appendix III.
Concerning our recommendation to collect overpayments from the  contractors, FEMA stated that it intends to assess whether it made  overpayments and, if so, plans to assert claims against the contractors for  the appropriate amount. In response to our recommendation to issue task  orders to companies at the lowest cost, FEMA stated that has reallocated  work under the GSM contracts on a “low price basis per site” and under  the MD contracts on a “best value basis.” In response to our  recommendation to inventory mobile homes and trailers, create a  database, and link work assigned to the contractors with specific unit  barcodes, FEMA states that it began an invoice-matching project in March  2007 and is in the process of completing an inventory count to ensure that  all the temporary housing units at the sites are recorded in the agency’s  existing management system. Concerning our recommendation that FEMA  enforce the existing payment and invoice review process, FEMA states  that it has established an Acquisition Program Management Office (PMO)  that is in charge of enforcing the process. In addition, FEMA notes that the  PMO has developed guidance and training on what constitutes proper  invoice documentation and has also obtained the services of a contractor  to automate the payment process to provide automatic calculation checks  and line item tracking. FEMA states that it is also implementing a COTR  training program and initiatives aimed at converting from paper to  electronic files, developing a COTR program policy, and creating a  comprehensive database of COTR information. With regard to our  recommendation to evaluate the allocation of trailers and work at the  groups sites in order to achieve savings, FEMA states that it is working to  close and consolidate the sites and that it has reallocated work under both  the GSM and MD contracts.
Finally, concerning our recommendation that FEMA create permanent  partnerships with other agencies to determine whether there are less  expensive options that meet the needs of disaster victims, FEMA states  that it has established a task force called the Joint Housing Solutions  Group to evaluate other methods of housing disaster victims. In addition,  as indicated in our report, FEMA states that it has implemented the  Alternative Housing Pilot Program and has also entered into an  interagency agreement with HUD establishing a temporary housing rental  assistance and case management program for individuals displaced by the  hurricanes. According to FEMA, the program will be administered though  HUD and will include a needs assessment and individual development plan  for each family.
We are sending copies of this report to the Secretary of Homeland Security  and the Director of Federal Emergency Management Agency. We will  make copies available to others upon request. In addition, the report will  be available at no charge on the GAO Web site at http://www.gao.gov.
Please contact me at (202) 512-6722 or kutzg@gao.gov if you have any  questions concerning this report. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this testimony. Key contributors are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objective of our investigation was to determine whether there were  indications of fraud, waste, and abuse related to Federal Emergency  Management Agency (FEMA) oversight of the 10 MD and 5 GSM contracts  in Mississippi. We focused our efforts on investigating (1) FEMA’s  issuance of task orders to the MD contractors and (2) FEMA’s invoice  review process. We also prepared case studies to determine the costs  associated with the placement of travel trailers at group sites and  investigated allegations of criminal and improper activity related to the  contracts.
To investigate FEMA’s issuance of task orders to the MD contractors, we  assessed whether the agency issued the task orders in a cost-effective  manner. We analyzed the costs associated with the five most expensive  contract line items. We analyzed MD contractor invoices and FEMA  receiving reports from June 2006 through January 2007 to find the total  number of units paid for by FEMA. For each of the 10 contractors, we  totaled the number of units paid for by FEMA for the preventative  maintenance, phase in, deactivation, septic bladder pumping, and  emergency after-hours repairs contract line items. We then totaled the  number of units and amount paid to all contractors for all listed contract  line items. To determine the five least expensive contractors, we divided  the total number of units for each line item by five, and then multiplied  that total by each contractor’s line item cost. By adding up the cost of all  line items for each contractor, we were able to determine the five least  expensive contractors. Using these five contractors, we determined what  the total cost for each line item would have been if FEMA had awarded  these five the MD task orders. We then compared the new cost to the  original FEMA payments to figure potential savings for the line items.
To investigate FEMA’s invoice review process, we reviewed invoices and  backup documentation associated with the $28.5 million in payments  FEMA made for monthly preventative maintenance and the $2.2 million in  payments FEMA made for emergency after-hours repairs. With regard to  monthly preventative maintenance, we initially reviewed approximately 90  preventative maintenance invoices submitted by the MD contractors from  June 2006 through January 2007. Each of these invoices contained  approximately 1,000 to 3,000 monthly inspection billings. As a result of this  review, we identified billings for 12,000 inspections, totaling $2.2 million,  that did not contain any documentation to support that an inspection had  actually occurred.
To provide an estimate of improper or potentially fraudulent payments  related to the remaining $26 million in preventative maintenance payments  FEMA made to the MD contractors, we drew a statistical sample of 250  units that were paid for by FEMA as receiving a preventative maintenance  inspection. We constructed the population of preventative maintenance  inspections using contractor back-up invoice documentation and monthly  contract status reports as well as FEMA receiving reports confirming  FEMA payments for unit maintenance from June 2006 through January  2007. We acquired preventative maintenance inspection forms from the  MD contractors and FEMA. Improper or potentially fraudulent payments  for unit maintenance include cases where the payment was made (1) for  preventative maintenance inspections on units not identified in FEMA’s  database, (2) based on preventative maintenance inspection forms that did  not exist, and (3) based on inspection forms that did not contain an  occupant’s signature denoting a full inspection occurred or that three  attempts to conduct an inspection were made. To assess the reliability of  the preventive maintenance inspections documentation from June 2006  through January 2007, we (1) reviewed existing documentation related to  the data sources and (2) examined the data to identify obvious problems  with completeness, accuracy, or duplicates. We determined that the data  were sufficiently reliable for the statistical sample. Because we followed a  probability procedure based on random selections, our sample is only one  of a large number of samples that we might have drawn. Since each  sample could have provided different estimates, we express our  confidence in the precision of our particular sample’s results as a   95 percent confidence interval (e.g., plus or minus 5 percentage points).  This is the interval that would contain the actual population value for   95 percent of the samples we could have drawn. As a result, we are   95 percent confident that each of the confidence intervals in this report  will include the true values in the study population.
With regard to emergency after-hours calls, we could not test the   $2.2 million in payments FEMA made because the data we received  concerning these calls did not contain complete information. To determine  whether FEMA made emergency after-hours repair payments for units that  do not exist in its inventory records, we compared the barcodes on the  7,310 housing units that received emergency repairs from June 2006 to  January 2007 with the barcodes listed in FEMA’s main database for  tracking the assignment and location of mobile homes and trailers. We  were unable to identify records for 1,732 of these 7,310 units. Using  FEMA’s payment records, we then determined that FEMA made 2,780  improper or potentially fraudulent emergency repair payments related to  these 1,732 trailers.
To prepare case studies, we calculated the expenses associated with a  nonrepresentative selection of three group sites and one commercial site  in Mississippi. We used cost information issued by FEMA to calculate  expenses associated with trailer purchase, site design and construction,  and trailer installation. To identify the specific trailer barcodes located at  each case study site, we searched several databases provided by FEMA, as  well as data provided by the contractors for park address or occupant  name matches. Because FEMA could not provide us with a definitive  number of trailers at each site, for purposes of our analysis, we assumed a  best case scenario for FEMA: that the parks were operating with a trailer  on each available pad. Using the list of trailer barcodes we identified, we  analyzed the invoices submitted by the MDC contractor responsible for  each site, and the accompanying FEMA receiving reports to determine the  number and type of services performed on each trailer and paid for by  FEMA. The charges cover the period of June 2006 through January or  February 2007, depending upon each contractor’s available data. We also  added in the following costs as provided by FEMA: group site contractor  costs for each site, including a portion of their phase-in cost, and monthly  security costs and monthly lease costs, if applicable. The one-time and  recurring costs were combined for each park, resulting in a total cost for  each park. To provide a general lifecycle cost for a FEMA trailer, we  estimated these totals through March 2009, which is the date FEMA stated  the travel trailer rental assistance program will end. To determine the  general costs for a FEMA trailer located on a private site, we identified  trailers noted as “private” in the FEMA databases, and selected the first  three for each MDC contractor. We then searched the contractor invoices,  covering the period of June 2006 through January 2007 and recorded and  totaled the charges for each barcode. The resulting totals were projected  for 1 year, and used as an estimate of the annual costs for maintaining a  trailer on a private site. We also projected the costs for these trailers  through March 2009.
Our estimates are likely understated because did not have access to trailer  maintenance and group site maintenance payments made to the original  four contractors. We also could not calculate MD phase-in costs, nor could  we calculate deactivation expenses because it is not certain which of the  current MD contractors will be responsible for deactivating the trailers in  2009. In addition, we do not know how much it will cost to return the  group sites to their original condition, as required by the terms of the  group site lease. Results from nonprobability samples (case studies)  cannot be used to make inferences about a population, because in a  nonprobability sample, some elements of the population have no chance  or an unknown chance of being selected as part of the sample. Our  findings cannot be generalized to all sites, but when coupled with our  other results they do provide useful insight into FEMA’s expenses.
Finally, our interviews with FEMA officials, contractor personnel, and  confidential informants led us to identify improper activity associated with  the contract award process. To further investigate this activity, we  reviewed and compared the contract proposals, total bid prices, line item  bids, and government estimates for work. It is important to note that we  did not conduct a comprehensive evaluation of whether FEMA adhered to  its own solicitation requirements and other laws or regulations when  awarding the 10 MD or 5 group site maintenance contracts.
We conducted our work from October 2006 through July 2007. We  conducted our investigative work in accordance with the standards  prescribed by the Presidents Council on Integrity and Efficiency and  conducted our audit work in accordance with generally accepted  government auditing standards.
section_title: Appendix II: FEMA Preventative Maintenance Inspection Sheet
paragraphs: .
section_title: Appendix III: Comments from FEMA
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, the following made key  contributions to this report: Gary Bianchi, Bruce Causseaux, Jennifer  Costello, Randy Cole, George Depaoli, Terrell Dorn, Craig Fischer, Janice  Friedeborn, Matthew Harris, Adam Hatton, Brad James, Jason Kelly, John  Kelly, Barbara Lewis, James Madar, Megan Maisel, Lisa Mirel, John Ryan,  Barry Shillito, Nathaniel Taylor, and Quan Thai.