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Thursday, June 13, 2024

GAO says FEMA can’t control fraud, waste

With hurricane season approaching, FEMA is destined to repeat million-dollar mistakes of disaster aid waste and fraud unless it can quickly establish controls for verifying names and addresses, congressional investigators say.

With hurricane season approaching, FEMA is destined to repeat million-dollar mistakes of disaster aid waste and fraud unless it can quickly establish controls for verifying names and addresses, congressional investigators say.

Gregory Kutz, managing director of special investigations for the Government Accountability Office, said he has little confidence that FEMA will be ready by June 1 to safeguard taxpayer dollars should a major disaster like Hurricane Katrina strike again.

“They’re not close to where they need to be,” Kutz said this week in a telephone interview that previewed a GAO report. The report, which covers FEMA’s $2,000 debit cards and other emergency cash assistance, is to be released next month.

“There’s a lot of heavy lifting required to put an effective fraud prevention system in place by this summer. It will take years,” said Kutz, who is heading the audit. “You need to have a mechanism in place and field test it. FEMA doesn’t have one.”

Responding to the audit, FEMA spokesman Aaron Walker said Wednesday that FEMA officials have been working hard to improve and tighten controls in their disaster aid program. It also is working closely with law enforcement officials to prosecute those who commit fraud.

Offering the aid “was a calculated risk taken in a catastrophic situation where many people were forced from their homes, often without any identification or basic necessities,” Walker said. “It was the right thing to do.”

As to FEMA’s internal controls, the agency has said it would be “extremely disingenuous” to suggest aid is distributed without housing inspections and several other layers of verification. “We are confident in our ability to verify disaster victims’ identities,” Walker said.

The GAO’s recommendations include:

_Install a reliable system to match Social Security numbers with names of people who apply for aid over the phone and Internet.

In a preliminary audit released in February, the GAO found that up to 900,000 of the 2.5 million applicants who received aid under the emergency cash assistance program after Katrina hit Aug. 29 were based on duplicate or invalid Social Security numbers, or false addresses and names.

Kutz said the GAO’s review determined the contractor hired by FEMA to verify identities _ ChoicePoint Inc. of Alpharetta, Ga. _ was ineffective. That was partly because its system didn’t keep track of people who applied over the Internet with false information and were rejected, allowing many of them to try again and get the aid when they applied over the phone.

Responding to the GAO, ChoicePoint spokesman Matt Furman said his company’s contract is limited to verifying applications over the Internet and not by telephone. “That criticism should not be directed toward us,” he said.

_Establish a system that can quickly and effectively verify property addresses to see if they match up with the accompanying name and Social Security number as well as whether they fall within the disaster-stricken area. In several cases, individuals applied for Katrina aid under several different bogus addresses to fraudulently obtain multiple payments.

_Provide instructions and guidelines to recipients who receive aid through debit cards on how the money should be used. Such information is already provided with the traditional form of aid payment through checks, according to the GAO.

The GAO’s previous audit found that recipients improperly used their debit cards intended for food and shelter for $400 massages, a $450 tattoo, a $1,100 diamond engagement ring and $150 worth of products at “Condoms to Go.”

In recent weeks, FEMA has sought to crack down on those who received erroneous payments, sending letters to thousands of Gulf Coast residents demanding repayment of amounts ranging from $2,000 to $26,200 for aid that it said was excessive or unjustified.

While Kutz praised the move, he said efforts to recoup the money are no substitute for internal controls since they generally recover no more than 1 percent to 2 percent of the wasted aid. He said the agency must first identify the fraudulent payments, then locate the recipients and hope they do the right thing and return the money.

In the coming months, the GAO plans to expand its waste review to FEMA’s housing assistance as well as aid improperly paid out for damage already covered by property insurance. He believes millions of dollars of additional waste have yet to be found.

In February, the GAO estimated the waste so far in roughly $7 billion in disaster aid alone could be in the hundreds of millions of dollars.

“Any projection we make will probably understate the actual waste,” Kutz said.


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