Hurricanes Katrina and Rita Disaster Relief: Continued Findings of Fraud, Waste, and Abuse
Published: 2006-12-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Hurricanes Katrina and Rita destroyed homes and displaced millions of individuals. While the Federal Emergency Management Agency (FEMA) continues to respond to this disaster, GAO's previous work identified significant control weaknesses--specifically in FEMA's Individuals and Households Program (IHP) and in the Department of Homeland Security's (DHS) purchase card program--resulting in significant fraud, waste, and abuse. Today's testimony will address whether FEMA provided improper and potentially fraudulent (1) rental assistance payments to registrants at the same time it was providing free housing via trailers and apartments; (2) duplicate assistance payments to individuals who claimed damages to the same property for both hurricanes Katrina and Rita; and (3) IHP payments to non-U.S. residents who did not qualify for IHP. This testimony will also discuss (1) the importance of fraud identification and prevention, and (2) the results of our investigation into property FEMA bought using DHS purchase cards. To address these objectives, GAO data mined and analyzed FEMA records and interviewed city officials, university officials, and foreign students. GAO also traveled to Louisiana and Texas to inspect selected property items and to investigate improper housing payments to individuals living in FEMA-provided housing.
section_title: What GAO Found
paragraphs: FEMA continued to lose tens of millions of dollars through potentially improper and/or fraudulent payments from both hurricanes Katrina and Rita. These payments include $17 million in rental assistance paid to individuals to whom FEMA had already provided free housing through trailers or apartments. In one case, FEMA provided free housing to 10 individuals in apartments in Plano, Texas, while at the same time it sent these individuals $46,000 to cover out-of-pocket housing expenses. In addition, several of these individuals certified to FEMA that they needed rental assistance. FEMA made nearly $20 million in duplicate payments to thousands of individuals who claimed the damages to the same property from both hurricanes Katrina and Rita. FEMA also made millions in potentially improper and/or fraudulent payments to nonqualified aliens who were not eligible for IHP. For example, FEMA paid at least $3 million to more than 500 ineligible foreign students at four universities in the affected areas. This amount likely understates the total payments to ineligible foreign students because it does not cover all colleges and universities in the area. FEMA also provided potentially improper and/or fraudulent IHP assistance to other ineligible non-U.S. residents, despite having documentation indicating their ineligibility. Finally, FEMA's difficulties in identifying and collecting improper payments further emphasized the importance of implementing an effective fraud, waste, and abuse prevention system. For example, GAO previously estimated improper and potentially fraudulent payments related to the IHP application process to be $1 billion through February 2006. As of November 2006, FEMA identified about $290 million in improper payments and collected about $7 million. GAO's previous work on the DHS purchase cards also showed significant problems with property accountability. Of 246 items we investigated that FEMA purchased for hurricane relief efforts using DHS's purchase cards, 85 items--or 34 percent--are still missing and presumed lost or stolen.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our forensic audit and related  investigations into the Federal Emergency Management Agency’s (FEMA)  response to hurricanes Katrina and Rita. In several prior hearings, we  testified that significant control weaknesses in FEMA’s Individuals and  Households Program (IHP) and in the Department of Homeland Security’s  (DHS) purchase card program have left the government vulnerable to  significant fraud, waste, and abuse. In February 2006, we testified before  this Committee that specific control weaknesses in the IHP program  resulted in improper expedited assistance payments and nonexistent  controls left the government vulnerable to substantial fraud and abuse  related to IHP. Several months later, in June 2006, we testified on  additional work performed whereby we projected that the weak or  nonexistent controls resulted in an estimated $1 billion dollars in  potentially fraudulent and improper IHP payments. Most recently, in July  2006, we testified before this Committee that control weaknesses in DHS’s  purchase card program had resulted in fraud, waste, and abuse, including  activity by FEMA related to hurricanes Katrina and Rita. Our purchase  card work also showed that poor controls over property acquired  primarily for hurricanes Katrina and Rita operations, including laptops,  printers, global positioning system (GPS) units, and flat-bottom boats,  resulted in lost, missing, or stolen assets. We have issued companion  reports following each of these testimonies that included numerous  recommendations on how to address the weaknesses identified by our  audit and investigative work.
As we previously reported, the Robert T. Stafford Disaster Relief and  Emergency Assistance Act (Stafford Act) provides the basis for IHP. IHP  is a major component of the federal disaster response efforts designed to  provide financial assistance to individuals and households that, as a direct  result of a major disaster, have necessary expenses and serious needs that  cannot be met through other means. The Stafford Act allowed registrants  to receive financial assistance up to a cap of $26,200 for disasters  occurring in 2005. In early October 2006, FEMA reported to Congress that  it had delivered approximately $7 billion in IHP aid for hurricanes Katrina  and Rita. This IHP amount included expedited assistance, temporary  housing assistance, repair and replacement of real and personal property,  and other miscellaneous categories.
Today’s testimony reflects new findings related to additional work we  have performed since June 2006. The testimony will address whether  FEMA provided potentially improper and/or fraudulent (1) rental  assistance payments to registrants at the same time it was providing free  housing via trailers and apartments; (2) duplicate assistance payments to  individuals who claimed damages to the same property for both  hurricanes Katrina and Rita; and (3) IHP payments to nonqualified aliens  who did not qualify for IHP. This testimony will also discuss (1) the  importance of fraud prevention, and (2) the results of our investigation  into property bought by FEMA using DHS purchase cards, which was  subsequently lost or stolen. For purposes of this testimony, potentially  improper and/or fraudulent payments refers to payments made by FEMA  based on potentially improper and/or fraudulent registration data  submitted by IHP registrants.
To address these objectives, we compared information included in FEMA  databases; performed data mining on FEMA databases; and interviewed  officials in selected cities and universities, and foreign students. We also  traveled to Louisiana and Texas to physically inspect selected items FEMA  purchased for hurricane relief efforts. For details on our scope and  methodology, see appendix I. We conducted our audit and investigations  from June 2006 through November 2006. We conducted our audit work in  accordance with generally accepted government auditing standards and  conducted our investigative work in accordance with the standards  prescribed by the President’s Council on Integrity and Efficiency.
subsections: section_title: Potentially Improper and/or Fraudulent Housing Assistance Payments Related to Trailers and Apartments
paragraphs: We found that FEMA provided nearly $17 million in potentially improper  and/or fraudulent rental assistance payments to individuals already  housed in other accommodations that FEMA provided through other  disaster assistance programs. The Stafford Act prohibits FEMA from  providing rental assistance payments under IHP to an applicant if  temporary housing has been provided by any other source. Despite this  prohibition, FEMA did not have an effective process in place to compare  IHP registrant data with data on individuals already housed in FEMA- purchased trailers and FEMA-provided apartments. FEMA also failed to  adequately advise victims that they were prohibited from receiving rental  assistance for the same period they occupied rent-free housing.  Consequently, FEMA improperly paid nearly $17 million to over 8,600  registrants after they had already moved into FEMA trailers. While the  quality of FEMA data did not allow us to make similar calculations for the  amount and number of individuals receiving rental assistance payments  after they had been housed in FEMA-provided apartments, the amount  could be substantial.
In the aftermath of hurricanes Katrina and Rita, FEMA used various  programs to house displaced victims, including financial assistance for  rent and rent-free housing. Rent-free housing included trailers that FEMA  purchased and apartments that FEMA either paid for directly or  reimbursed state and local governments for after they paid landlords on  behalf of the disaster victims. According to a FEMA official, to expedite  apartment rental assistance, FEMA provided payments to over 100  different state and local governments for the provision of rent-free  apartments.
By comparing information in two of FEMA’s databases—the FEMA  Response and Recovery Applicant Tracking System (FRRATS) and the  National Emergency Management Information System (NEMIS)—we  calculated that FEMA improperly made rental assistance payments— intended to cover out-of-pocket rental expenses—totaling nearly $17  million to over 8,600 individuals after they had moved into FEMA-provided  trailers. Some received multiple rental assistance payments even after  they moved into free FEMA-provided housing. In some instances, the  payments were made based on potentially fraudulent claims because  recipients typically have to certify to FEMA that they continued to need  IHP rental assistance.
Limitations in FEMA apartment data did not allow us to determine the  magnitude of potentially duplicate rental assistance payment to  individuals housed in rent-free apartments. In contrast to trailer data,  which FEMA maintains in the FRRATS database, we could not validate  accuracy or completeness of apartment data. According to FEMA officials,  the accuracy of apartment data was questionable because it came from the  over 100 state and local authorities who assisted in delivering housing aid  for FEMA. The completeness of data was also at issue because FEMA did  not ask states to collect registration data from individuals in rent-free  apartments until well after the aid was provided, and therefore individuals  who may have left the rent-free apartments were not included in the data.  Table 1 provides illustrative examples of duplicate rental assistance  payments to registrants in FEMA trailers and rent-free apartments.
Case 1 relates to a series of potentially improper and/or fraudulent IHP  rental assistance payments totaling $46,000 made to 10 registrants  already housed in rent-free housing. In this case, FEMA paid nearly  $46,000 in rental assistance to 10 residents of an apartment complex in  Plano, Texas, from September 2005 through June 2006. However, at  about the same time period (October 2005 through March 2006), the  city of Plano made payments totaling more than $74,000 directly to the  apartment, for which it received reimbursements from FEMA. Of the  total amount paid, $46,000 was duplicative and therefore potentially  improper and/or fraudulent. Our review of FEMA records indicated  that 7 of the 10 individuals certified to FEMA that they were in need of  rental assistance, even after they had been provided with free housing.  Further, FEMA records showed that 7 provided rental receipts and/or  leases that clearly indicated that the rent was paid by the city of Plano.
Case 5 relates to a family of five, all of whom registered for IHP using  the same damaged address. Four registrations were duplicative and  therefore payments on those registrations are potentially improper  and/or fraudulent. Further, despite the fact that FEMA had installed a  trailer on the damaged property in January 2006, FEMA continued to  send rental assistance payments in late January, February, and April  2006 totaling approximately $5,500. Further, a family member informed  us that the family had moved back into the damaged home prior to the  trailer being delivered. Consequently, when the trailer was delivered, it  simply increased the living space for the household, and it was used by  a family member who lived in the house prior to the hurricane. Further,  evidence we gathered during the course of the investigation indicated  that a rental receipt provided to FEMA to justify continued need for  rental assistance was fictitious, and that the family member who  submitted the receipt had never paid rent to the supposed landlord. In  addition to the $5,500 in improper duplicative rental assistance  payments, we found that the family members also received at least  $6,000 in other potentially improper and/or fraudulent IHP payments  arising from the duplicate registrations.
In the course of apartment-related audit and investigative work, we also  identified 14 individuals who improperly received more than $75,000 in  disaster assistance using one apartment building as their hurricane- damaged address, even though the building had minimal damage and  residents were not forced to evacuate. We provide further details in  appendix II.
section_title: Potentially Improper and/or Fraudulent IHP Assistance Payments to Individuals Claiming Damages from Both Hurricanes
paragraphs: FEMA made nearly $20 million in duplicate payments to thousands of  individuals who submitted claims for damages to the same primary  residences from both hurricanes Katrina and Rita. With few exceptions,  FEMA officials explained that victims of both disasters should not receive  duplicate benefits for the same necessities and/or damages to the same  property. However, in order to process disaster claims more quickly,  FEMA disabled a system edit check in NEMIS that could have alerted  FEMA officials when the same individual applied for both disasters using  the same identifying information. This system change resulted in nearly  $20 million in duplicate payments being made based on duplicate  registrations for hurricanes Katrina and Rita.
In October 2005, FEMA officials informed us that the small amount of time  between the impact of hurricanes Katrina and Rita had necessitated the  issuance of new policy to prevent duplicate claims for the same damaged  property for both hurricanes. FEMA officials said that, with few  exceptions, the new policy specified that registrants were entitled to one  payment for the same damage and/or need. FEMA explained to us that this  was necessary because most individuals did not have an opportunity to  replace and/or repair damages they incurred from Hurricane Katrina  before Hurricane Rita struck, and because their displacement was likely  caused by both hurricanes. At the time, FEMA officials informed us that  they had available a system edit check in NEMIS intended to alert FEMA  system administrators when the same individual applies for assistance for  both disasters, so that FEMA personnel could perform a manual review  prior to payments being made.
Despite having a control available, we identified through our review of  FEMA’s NEMIS that FEMA made payments to about 7,600 individuals who  used the same social security number (SSN) and hurricane-damaged  addresses for their Hurricane Katrina registration that they used for their  Hurricane Rita registration. Subsequently, FEMA officials informed us that  these duplicate payments occurred because FEMA disabled the system  edit check feature.  FEMA stated that they deactivated the system edit  check in order to process disaster claims more quickly, because the  manual review process that they had intended for these duplicate  registrations would have held up many eligible payments. Because of this,  FEMA paid nearly $20 million in duplicate payments to individuals who  submitted duplicate registrations using the same SSNs and damaged  addresses. The nearly $20 million includes duplicate payments for all areas  of IHP assistance, including expedited assistance, rental assistance,  housing replacement payments, or a combination of these. In five of the  six cases where we performed investigative work, the same individual  received duplicate payments to replace the same damaged property. The  individuals also failed to provide FEMA with evidence that they had  replaced the items or conducted repair work after Hurricane Katrina, only  to have those items or that work destroyed again by Hurricane Rita. In all  cases, FEMA performed its first physical inspection of the damaged  property after the passing of both hurricanes.
In addition to other IHP payment types, all six individuals we investigated  also received IHP personal property payments to compensate them for lost  or destroyed household items, twice—once for Hurricane Katrina and  again for Hurricane Rita. In one case, an individual received multiple  payments for more than $27,000—over the $26,200 cap—for personal  property replacement alone. In total, this individual received more than  $51,800 in IHP assistance, of which at least $25,000 is potentially improper  and/or fraudulent. According to FEMA records, another registrant  received two housing replacement payments of $10,500 each, despite the  fact that the individual had only one property to replace.
section_title: Potentially Improper and/or Fraudulent Payments to Nonqualified Aliens
paragraphs: FEMA made at least $3 million dollars of improper and potentially  fraudulent payments to nonqualified aliens who were not eligible for IHP  financial assistance. U.S. law specifically prohibits nonqualified aliens,  such as foreign students and workers on temporary visas, from receiving  financial assistance in case of disaster. However, FEMA did not have  implementing controls in place, such as an agreement in place with other  government agencies, such as the Social Security Administration (SSA), to  identify nonqualified aliens and prevent them from receiving such  assistance. Consequently, FEMA paid at least $3 million to foreign  students from four selected universities. FEMA also made payments to  other nonqualified aliens, such as workers on temporary visas. However,  because of a lack of data on other nonqualified aliens, we were unable  determine the magnitude of any such improper payments. FEMA made  such payments even in cases in which FEMA received information  indicating that the alien applying for assistance was not qualified to  receive financial disaster assistance.
subsections: section_title: IHP Payments to Ineligible International Students
paragraphs: The destruction caused by hurricanes Katrina and Rita affected thousands  of college students in the fall of 2005. As with other U.S. citizens and  qualified aliens, college students who were able to demonstrate losses  were eligible to receive IHP payments to assist them in recovering from  the disaster. However, U.S. law and FEMA policy specifically prohibits  students in the United States on student visas from receiving IHP  assistance. By comparing data provided by four universities in Louisiana  and Texas against registrant information in NEMIS, we determined that  FEMA improperly provided at least $3 million in financial assistance, in  the form of IHP payments, to more than 500 students in the United States  on student visas. This amount could understate the total payments to  ineligible foreign students because we requested information on  international students from only four of the colleges and universities in the  areas affected by hurricanes Katrina and Rita.
Our interviews of school officials and several of the ineligible students  stated that they received misleading information from FEMA personnel.  Specifically, officials at several universities informed us that FEMA  personnel actively encouraged all students—including international  students—to register for IHP assistance. Despite being ineligible for  financial disaster assistance, many international students with whom we  spoke stated that FEMA officials told them they were eligible to receive  IHP payments and should apply for aid.
We found that FEMA made these payments despite evidence provided to  FEMA by students—specifically their student visas—that indicated that  they were not eligible for cash assistance. Further, consistent with a  finding we reported on previously, FEMA could have identified these  students if it had validated their identities with SSA prior to issuing IHP  payments. In fact, more than 400 of the students reported as foreign by the  four universities were also identified by SSA as non-U.S. citizens. Table 2  displays some examples of ineligible students and payments they received.
Case 4 concerns a student in New Orleans who received more than  $16,000 in FEMA payments, including payments for expedited  assistance, rental assistance, and personal property replacement.  According to NEMIS data, the student’s damaged property was in the  hardest-hit area of the city, and therefore the student’s qualification for  IHP was performed through geospatial mapping, while his identity was  also validated through a third-party contractor. The student told us that  he repeatedly informed FEMA personnel that he was an international  student on an F1 visa, and was told each time that he qualified for  assistance. In addition to receiving rental payments from FEMA, the  student also received a trailer in April 2006. The student stated that he  received a letter from FEMA in August 2006 asking for the money back.  Further, he is concerned because a FEMA representative informed him  that he was not immune to legal action for receiving payments he was  ineligible for, despite the fact that he had informed FEMA of his status  all along.
Case 6 involves an international student in New Orleans who received  nearly $11,000 in FEMA payments. The student had a student visa from  Brazil, and stated on his IHP registration that he owned a home in the  New Orleans area. The registrant informed us that he applied via  phone, and that he took care to inform the FEMA personnel that he  was an international student. According to this student, in this and  subsequent conversations with FEMA employees (one of whom was a  supervisor at a relief center he visited), he was repeatedly told that he  qualified for assistance despite his international student status. Our  review of FEMA records confirmed the student’s assertion that he  provided FEMA with a copy of his visa. In fact, a copy of his visa was  scanned into NEMIS and had a note next to it stating “Proof of  Qualified Alien,” despite the fact that the visa clearly showed he was an  international student and therefore ineligible.
In case 8, a student in New Orleans at the time of Hurricane Katrina  received three payments totaling $6,500 covering expedited assistance,  rental assistance, and personal property replacement even though he  repeatedly told FEMA representatives that he was an international  student. The student registered for aid via FEMA’s Web site using a  valid SSN. The student told us that the SSN was given to him because  he was allowed to work in the United States. He stated that during the  registration process, he did not find any information that made him  aware that he was not eligible for assistance. After registering online,  he stated that he also contacted FEMA call center employees and made  them aware that he was not a U.S. citizen and was in the country on a  student visa, and said he was told by call center employees that he was  eligible. The student informed us that during an inspection process, the  inspector certified that he was a qualified alien even after he showed  the inspector his visa. He subsequently received more than $2,000 for  property replacement based on the inspection. However, because the  student’s visa was not scanned into FEMA’s system, we could not  corroborate his statement that he repeatedly informed FEMA of his  status.
section_title: Payments to Other Nonqualified Aliens
paragraphs: We also found that weaknesses in FEMA’s controls resulted in improper  and/or potentially fraudulent IHP payments being made to other  nonqualified aliens, such as workers in the United States on temporary  work visas. Because of the unavailability of detailed data on other  nonqualified aliens, we were unable to calculate the magnitude of this  problem. However, our investigative work uncovered 25 cases where  FEMA provided improper payments to nonqualified temporary workers.  Specifically, we found that FEMA provided 50 disaster assistance  payments totaling nearly $156,000 to 25 individuals who worked at a crab  processing facility, despite the fact that FEMA records clearly showed that  11 individuals were in the United States on temporary work visas, and  were therefore ineligible for IHP assistance. These payments included  expedited assistance payments of $2,000 and payments of over $10,000 for  replacement of property. Some registrants received as much as $15,000 in  IHP payments. In one instance, the registrant’s file at FEMA contained a  copy of a FEMA flier specifically indicating that aliens in the United States  on work visas were not eligible for IHP. Next to the flier was a copy of the  registrant’s temporary work visa. Despite clearly having evidence that he  was ineligible for IHP payments, FEMA paid this registrant more than  $15,000 in IHP assistance.
Although we were not able to validate that all 25 registrants possessed  work visas, we were informed by the registrants’ employer that all 25  employees brought their work visa documents with them to FEMA when  they filed the disaster claims. However, data from SSA indicated that only  14 of the 25 employees used valid SSNs on their FEMA application. The  remaining 11 individuals provided SSNs to FEMA that were never issued  or belonged to other individuals in order to get IHP assistance. Payments  made to the 11 workers who submitted fictitious information to FEMA are  therefore potentially fraudulent.
section_title: Ineffective Detective Controls Point to Need for Better Preventive Controls
paragraphs: We previously reported that inadequate preventive controls related to the  IHP application process resulted in an estimated $1 billion of potentially  improper and/or fraudulent payments through February 2006. As of  November 2006, FEMA had detected through its own processes about $290  million in overpayments and had collected nearly $7 million of the about  $290 million identified as improper. Collection of only $7 million of an  estimated $1 billion of potentially improper and/or fraudulent payments  clearly supports the basic point we have previously made, that fraud  prevention is far more effective and less costly than detection and  monitoring.
subsections: section_title: FEMA’s Detection Controls Are Not Effective at Identifying All Potentially Improper and/or Fraudulent Payments
paragraphs: In June 2006, we testified that an estimated $1 billion was potentially  improper and/or fraudulent. We derived this estimate from statistical  sampling work we conducted on registrations submitted to FEMA as of  mid-February 2006. We also reported that this estimate potentially  understates the total potentially improper and/or fraudulent payments  because the scope of our statistical sampling work did not include  verifying for insurance or actual property damage, among others things.
As of November 2006, FEMA reported that it had identified about $290  million in overpayments to nearly 60,000 registrants. This overpayment,  which FEMA refers to as recoupments, represents the improper payments  that FEMA reported it had detected and for which it had issued collection  letters. According to FEMA officials, the payments identified as improper  were based on cases referred to the fraud hotlines and registrations that  met specific criteria of being more likely improper.
Although FEMA had identified about $290 million in overpayments, to date  FEMA had collected nearly $7 million. We did not validate the potential  collection amount. However, the amount that FEMA had collected on  overpayments related to hurricanes Katrina and Rita supports our prior  statements that detective controls, while an important element of a fraud  prevention program, are more costly and not as effective as preventive  controls. As FEMA’s historical experience demonstrated, once a payment  had been disbursed because of weak preventive controls, it is difficult to  identify individuals who received the improper payments, contact those  individuals, and collect on those payments. As discussed previously, when  system edit checks that should occur during the processing of disaster  registration are circumvented, significant improper payments occur that  require extensive data mining and follow-up actions to identify and  recover improper payments.
In addition to the difficulties in collecting overpayments, there are  limitations to the ability of detective controls in identifying all instances of  overpayments. For example, our conversations with several foreign  students indicate that although some have received recoupment letters,  others have not.
section_title: FEMA Had Not Issued Recoupment Notice to GAO Registrations
paragraphs: The limitations of detective controls are demonstrated through GAO’s own  experience with the FEMA registration, payment, and recoupment  processes. As we testified previously, GAO submitted a number of  registrations using false identities and fictitious addresses to test the  effectiveness of FEMA’s internal controls. We also testified that we  received payments on registrations we submitted. However, to date, we  had not received recoupment notices from FEMA indicating that it had  identified the undercover registrations that GAO submitted. After our last  testimony in June of 2006, we received another payment of more than  $3,200 for rental assistance on a property that did not exist. In total, we  received six payments on five registrations using falsified information,  without receiving any recoupment notices from FEMA.
section_title: FEMA Cannot Adequately Track Its Property
paragraphs: We found weak accountability over FEMA property bought for hurricanes  Katrina and Rita relief efforts using government purchase cards. Our  investigation revealed that DHS overstated the number of items FEMA had  actually located on the day of our July16, 2006, testimony and that  additional items are missing. In total, of the 246 laptops, printers, flat- bottom boats, and GPS units that we investigated for this testimony, 85  items are missing and presumed lost or stolen. Moreover, during the  course of our investigation, we found that FEMA did not have titles to any  of the 20 flat-bottom boats it purchased for hurricanes Katrina and Rita.  The fact that FEMA could not locate two of the flat-bottom boats raises  additional concerns about DHS’s accountable property controls.
subsections: section_title: Missing Items FEMA Purchased for Hurricane Relief
paragraphs: As part of our July 19, 2006, testimony, we reported that poor controls  over property acquired with DHS purchase cards may have resulted in lost  or misappropriated assets. Specifically, we reported that FEMA could not  account for 143 items purchased in September and October 2005 for  Hurricane Katrina and Hurricane Rita relief efforts. On the morning of the  testimony, DHS sent your office an e-mail indicating that 87 of the 143  items had been found. At the hearing, DHS’s Chief Financial Officer  reiterated that most of the missing property had been found, but  acknowledged that the items had not yet been physically verified.
Our investigation revealed that DHS’s July 19 e-mail overstated the number  of items FEMA had located. By October 2006, a year after the property was  purchased, we could only account for 79 of the 87 items that FEMA  claimed it had found. In addition, of the 143 items that we reported as  missing in our July testimony, 48 are still missing and presumed lost or  stolen. Moreover, 37 of items were missing from an additional 103 new  items we investigated. In total, of the 246 items we investigated for this  testimony, 85 items (34 percent) are lost or stolen. A November 27 DHS  memo supports the results of this investigation, acknowledging that many  items purchased for hurricane relief efforts are still missing. Figure 1  details the results of our investigative work as of October 16, 2006.
section_title: Title and Location of Flat- Bottom Boats
paragraphs: In our July 2006 testimony, we also reported on several issues surrounding  the purchase of 20 flat-bottom boats needed for hurricane relief efforts.  Specifically, we found that FEMA paid $208,000—about twice the retail  price—to a broker, who in turn obtained the boats (17 new and 3 used)  from several different retailers. Further, although the broker billed FEMA  and was paid for all 20 of the boats, he failed to pay one retailer that  provided 11 of the boats. The retailer subsequently reported the boats as  stolen and did not provide FEMA with title to the boats. Consequently, in  our testimony, we concluded that FEMA paid for, but did not receive title  to, at least 11 of the boats.
However, upon further investigation, we found that FEMA also did not  have title to the remaining 9 boats. Thus, FEMA did not have title to any of  the boats. Specifically, our searches for boat titles found that no transfer  of title and/or registration had taken place on any of the 17 new boats, that  is, the serial numbers were “not on file.” Of the remaining 3 used boats,  title searches revealed that all 3 remain registered to their previous  owners.
Furthermore, FEMA could not provide us with any information about the  two boats that are still not in its possession as of October 2006. However,  using the serial numbers and manufacturer information on the make and  model, local law enforcement located one of the boats in a shed at the  house of its previous owner. According to the previous owner, he sold the  boat to FEMA and delivered it to the New Orleans Convention Center in  September 2005. In March 2006, he received a call from the New Orleans  Convention Center requesting that he retrieve his abandoned boat. When  he went to retrieve the boat, he found that the tires on the boat’s trailer  were flat, the boat’s battery had been removed, and the anchor rope had  been cut. This boat is one of the three still registered under its previous  owner’s name and no application for transfer of title has been recorded.
section_title: Conclusions
paragraphs: Ineffective preventive controls for FEMA’s IHP have resulted in  substantial fraudulent and improper payments. The additional examples of  potentially fraudulent and improper payments in our testimony today  further show that our estimate of $1 billion in improper and/or fraudulent  payments through February is likely understated. With respect to property  bought with government purchase cards, items not found 1 year after they  were purchased, and over 8 months after we selected them for  investigation, shows that ineffective FEMA property accountability  controls resulted in lost or stolen computers, printers, and GPS units.
We have provided 25 recommendations to DHS and FEMA to improve  management of IHP and the purchase card program. FEMA and DHS had  fully concurred with 19 recommendations, and substantially or partially  concurred with the remaining 6 recommendations. DHS and FEMA also  reported that they have taken actions, or plan to take actions, to  implement many of our recommendations; however, we have not  determined if these actions adequately address our recommendations. If  properly implemented, our prior recommendations should help to address  control weaknesses identified in this testimony. As with prior work, we  will refer cases we deem to be potentially fraudulent to the Katrina Fraud  Task Force for further investigation.
Madam Chairman and Members of the Committee, this concludes my  statement. Special Agent Ryan and I would be pleased to answer any  questions that you or other Members of the Committee may have at this  time.
section_title: Contacts and Acknowledgments
paragraphs: For further information about this testimony, please contact Gregory D.  Kutz at (202) 512-7455 or kutzg@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this testimony. The individuals who made major contributions to this  testimony were Kord Basnight, Gary Bianchi, Matthew Brown, Norman  Burrell, Jennifer Costello, Thomas Dawson, Dennis Fauber, Christopher  Forys, Alberto Garza, Adam Hatton, Christine Hodakievic, Ryan Holden,  Jason Kelly, John Ledford, Barbara Lewis, Jonathan Meyer, Andrew  McIntosh, Kristen Plungas, John Ryan, Viny Talwar, Tuyet-Quan Thai, and  Matthew Valenta.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess whether the Federal Emergency Management Agency (FEMA)  provided potentially improper and/or fraudulent rental payments to  individuals at the same time it was providing the registrant’s free lodging  in FEMA trailers and rent-free (i.e., FEMA-provided) apartments, we  interviewed FEMA officials, reviewed Title 8 of the United States Code,  and reviewed the Stafford Act (Pub. L. 93-288) and its implementing  regulations. We obtained the FEMA Individuals and Households Program  (IHP) databases as of June 2006 and data on individuals residing in FEMA  trailers and rent-free apartments. We performed data reliability  assessment for these databases. In addition, we validated that the FEMA  IHP database was complete and reliable by comparing the total payment  against reports FEMA provided to the Appropriations Committee on  hurricanes Katrina and Rita disbursements. We then compared FEMA paid  housing data to IHP registration data to determine whether FEMA  provided duplicate benefits to the same registrants. We also conducted  field visits to Texas and Louisiana to view the property and interview  individuals who received IHP payments after they had moved into free  housing. While we were able to determine the number of individuals  staying in FEMA trailers who received duplicate housing assistance, the  data related to individuals staying in FEMA-provided apartments were not  sufficiently reliable for us to perform the same analysis.
To determine whether FEMA made duplicate payments to individuals who  claimed damages for both hurricanes Katrina and Rita using the same  damaged addresses, we compared the social security numbers and  damaged addresses maintained in the FEMA databases for hurricanes  Katrina and Rita, and reviewed National Emergency Management  Information System (NEMIS) data on selected individuals.
To determine whether FEMA made potentially improper payments to  ineligible foreign students, we contacted officials at four Louisiana and  Texas universities and obtained the names and identifying numbers of  enrolled foreign students. We compared the listing of students provided by  the universities to FEMA payment data. We also interviewed foreign  students at those four schools receiving IHP assistance in order to  determine what guidance FEMA provided them on eligibility. We also  conducted investigative work to determine whether FEMA made improper  and potentially fraudulent payments to nonqualified aliens, such as those  in the United States on work visas. Because we did not receive data on all  foreign students and nonqualified aliens in the United States, we were not  able to determine the magnitude of potentially improper and fraudulent  payments to these individuals. Further, because of data availability issues,  our work was not designed to identify illegal aliens receiving improper  payments. We also received FEMA data on its recoupment program, but  did not validate data on identified overpayments and collections provided  to us by FEMA officials.
To conduct our investigation into the Department of Homeland Security  (DHS) purchase card program, we traveled to New Orleans and Baton  Rouge, Louisiana, and Fort Worth, Texas, in September 2006, to physically  inspect selected property. If we could not physically inspect the property  during our visit, we requested that DHS, FEMA, or the New Orleans Police  Department send us a clear photograph of the property and its serial  number as proof of possession. We ultimately requested that photographic  evidence be sent to us no later than October 16, 2006, nearly a year after  most of the property was acquired.
To obtain information on the case study detailed in appendix II, we  reviewed data from the U.S. Department of the Treasury’s Financial  Management Service, FEMA’s NEMIS database, the Texas Department of  Motor Vehicles, the Social Security Administration, and the U.S. Postal  Service, and we conducted field investigations.
We conducted our audit and investigations from June 2006 through  November 2006. We conducted our audit work in accordance with  generally accepted government auditing standards and conducted our  investigative work in accordance with the standards prescribed by the  President’s Council on Integrity and Efficiency.
section_title: Appendix II: Potentially Improper and/or Fraudulent Rental Assistance Payments Case Study
paragraphs: When Hurricane Katrina came ashore in late August 2005, 15 of the 16 total  units in a single Gulfport, Mississippi, apartment building were occupied  by tenants. The landlord of this building told us that damage to the  apartment building was minimal. Although one apartment had a broken  window and some personal property damage, the only real effect of the  hurricane was water damage from rain and water seepage from missing  roof tiles. The landlord also said that anyone who left after Hurricane  Katrina did so voluntarily, and that they were not required (e.g., forced) to  leave as a result of damage by the storm.
During a visit to the apartment building, we spoke to the landlord about an  individual we identified as receiving potentially improper rental assistance  payments. Subsequently, we conducted additional data mining on the  apartment address to determine whether other tenants applied for and  received FEMA disaster assistance. We found that 8 tenants of this  apartment building received FEMA disaster assistance. The remaining 7  tenants did not file any disaster assistances claims, as a result of being  displaced because of uninhabitable or inaccessible living quarters as a  result of Hurricane Katrina. In addition, we were able to confirm with the  building landlord that 6 additional individuals who did not live at the  apartment building at the time of hurricane Katrina also made disaster  assistance claims. Table 3 lists 14 individuals who improperly received  disaster assistance using the apartment building as their hurricane- damaged address.