Report says government wasted $1 billion of hurricane aid

WASHINGTON – The government is squandering tens of millions of dollars in Hurricane Katrina disaster aid, in some cases doling out housing payments to people living rent-free, investigators said Wednesday.

The Federal Emergency Management Agency has recouped less than 1 percent of the $1 billion that investigators contend it squandered on fraudulent assistance, according to the Government Accountability Office.

Its report shows the disaster relief agency’s struggles, one year after the deadly storm, to rush aid to those in need while also preventing abuse.

Last week, a federal judge in Washington ordered the Bush administration to resume housing payments for thousands of people displaced by Katrina. The ruling, which FEMA is appealing, cited a convoluted process for applying for help.

“Our work shows for individual assistance payments, at least tens of thousands of individuals took the opportunity to commit fraud,” said Gregory Kutz, who works for Congress’ investigative arm. He said his previous $1 billion estimate of wasted aid was now “likely understated.”

“I hope FEMA has learned the costly lesson and will make reforms for future disasters,” Kutz said at a Senate hearing.

In its latest report, the GAO found that numerous applicants received duplicate rental aid. In one case, FEMA provided free apartments to 10 people in Plano, Texas, while sending them $46,000 for out-of-pocket housing expenses.

FEMA arranged a free trailer for a family in Lacombe, La., in January, yet kept providing monthly rental payments in late January, February and April totaling $5,500 – a mistake resulting from poor communication within the agency, according to the report.

In addition, $20 million was wasted on thousands of people who claimed the same property damage from two hurricanes, Katrina and Rita. FEMA paid at least $3 million to more than 500 ineligible foreign students in the stricken Gulf Coast, the report said.

FEMA spokesman Pat Philbin did not challenge the findings. He did say the agency has sought to upgrade the registration process and strengthen its procedures for verifying names and addresses.

“FEMA continues to focus our rebuilding efforts to greatly improve our reliability, accuracy and response in providing aid to disaster victims,” Philbin said. “The agency will consider and evaluate any new findings.”

Among the audit’s findings:

. Even though the GAO found at least $1 billion in disaster aid waste, FEMA has identified about $290 million in improper payments and recouped just $7 million.

“Absent effective fraud prevention, once money is improperly disbursed, the government can only hope to collect pennies on the dollar,” Kutz said in criticizing FEMA’s “shoot money out the door” approach.

. FEMA could not find dozens of laptops, printers and other items that employees purchased with government-issued credit cards for Katrina disaster work. In one case, FEMA purchased 20 flat-bottom boats, but could not find two of them and lacked the legal titles to any of them.

Sen. Susan Collins, who heads the Senate Homeland Security and Governmental Affairs Committee, lamented the waste.

“Just think of the additional relief and rebuilding that could be accomplished with the money lost to fraud, mismanagement and poor decision-making,” said Collins, R-Maine.

“We can’t wait for yet another disaster to hit and yet another round of investigations and hearings to spotlight once again the lack of safeguards and internal controls,” she said.

Connecticut Sen. Joseph Lieberman, who will become committee chairman when Democrats take control of the Senate in January, said FEMA will be watched closely for signs of improvement.

“The record is clear that, going forward, FEMA has much work to do before we can be confident that it is providing assistance to those who are eligible and who need it, while denying it to those who do not,” he said.