	FEMA Paid About $1 Billion to Individuals Who Provided Invalid Registration Data

Because of FEMA’s failure to establish basic upfront validation controls  over registrants’ identity and address information, we estimate that FEMA  made approximately $1 billion of improper and potentially fraudulent  payments based on invalid registrations. This represents 16 percent of all  individual assistance payments for hurricanes Katrina and Rita. For example, rental assistance payments were made to registrants that  used a post office box and a cemetery as damaged properties. In fact, as  part of our ongoing forensic audit, FEMA continues to provide rental  assistance to GAO based on registrations that contained fictitious  identities and bogus damaged addresses. In one case, FEMA even sent  GAO a check for expedited assistance after an inspector could not confirm  that the property existed, and FEMA had decided not to provide housing  assistance to this registration. We drew our statistical  sample from a population of 2.6 million payments made in the wake of  hurricanes Katrina and Rita, totaling over $6 billion through mid-February  2006. The 95 percent confidence interval associated with our  estimate of improper and potentially fraudulent registrations ranges from  a low of $600 million to a high of $1.4 billion in improper and potentially  fraudulent payments. These include individuals who had never lived at the  damaged property, did not live at the damaged property at the time of the  disasters, or used bogus property addresses on their registrations. GAO audit and investigative work found no evidence that the individual ever lived at the property. We did not  test whether registrants received duplicate benefits from other FEMA  programs, such as free hotel lodging and trailers, which would have  resulted in FEMA paying duplicate housing benefits to the same registrant. Undercover Investigations and Case Study Examples of Fraudulent and Improper IHP Payments

Given the considerable amount of potentially fraudulent and improper  payments identified in our statistical sample, it is not surprising that FEMA  continued to provide rental assistance payments to GAO investigators  based on bogus registrations. As discussed previously, one statistical sample item we tested related to  an improper and potentially fraudulent payment FEMA made to an  individual who received expedited and rental assistance as a result of  using a post office box as a damaged property address. Registrants Using Prisoner Identities Received Millions in Disaster Assistance Payments

FEMA paid millions of dollars to over 1,000 registrants who used names  and SSNs belonging to state and federal prisoners for expedited and  housing assistance. As a result,  FEMA disbursed about $1.5 million of taxpayer money for over 750 debit  cards that FEMA cannot establish went to disaster victims. Table 5  details some of the debit cards activities we found that are not necessary  to satisfy legitimate disaster needs. Appendix I: Objectives, Scope and Methodology

Our objectives were to (1) provide an estimate of improper and potentially  fraudulent payments related to certain aspects of the disaster  registrations, (2) identify whether FEMA made improper or potentially  fraudulent IHP payments to registrants who were incarcerated at the time  of the disaster, (3) identify whether FEMA provided registrants with rental  assistance payments at the same time it was paying for their hotel rooms,  and (4) review FEMA’s accountability over debit cards and controls over  proper debit card usage. To provide an estimate of improper and potentially fraudulent payments  related to certain aspects of the disaster registrations, we drew a statistical  sample of 250 payments from the Federal Emergency Management Agency  (FEMA)’s Individuals and Households Program (IHP) payments. We also used data mining and forensic audit techniques to  identify registrants who stayed in hotels paid for by FEMA who also  received rental assistance payments through the IHP program.
Why GAO Did This Study

Hurricanes Katrina and Rita destroyed homes and displaced millions of individuals. In the wake of these natural disasters, Federal Emergency Management Agency (FEMA) responded to the need to provide aid quickly through the Individuals and Households Program (IHP) program, which provides housing assistance, real and personal property assistance, and for other immediate, emergency needs. As of February 2006, FEMA made 2.6 million payments totaling over $6 billion. Our testimony today will (1) provide an estimate of improper and potentially fraudulent payments through February 2006 related to certain aspects of the disaster registrations, (2) identify whether improper and potentially fraudulent payments were made to registrants who were incarcerated at the time of the disaster, (3) identify whether FEMA improperly provided registrants with rental assistance payments at the same time it was paying for their lodging at hotels, and (4) review FEMA's accountability over debit cards and controls over proper debit card usage. To estimate the magnitude of IHP payments made on the basis of invalid registrations, we selected a random statistical sample of 250 payments made to hurricanes Katrina and Rita registrants as of February 2006. We also conducted data mining and investigations to further illustrate the effects of control breakdowns.

What GAO Found

We estimate that through February 2006, FEMA made about 16 percent or $1 billion in improper and potentially fraudulent payments to registrants who used invalid information to apply for disaster assistance. Based on our statistical sample, we are 95 percent confident that the range of improper and potentially fraudulent payments is from $600 million to $1.4 billion. In our assessment of whether a payment was improper and potentially fraudulent, we did not test for other evidence of impropriety or potential fraud, such as insurance fraud and bogus damage claims. This means our review potentially understates the magnitude of improper payments made. Examples of fraud and abuse include payments to registrants who used post office boxes, United Parcel Service stores, and cemeteries as their damaged property addresses. Absent proper verification, it is not surprising that FEMA continued to pay fictitious disaster registrations set up by GAO as part of our ongoing forensic audit. In one case, FEMA paid nearly $6,000 to our registrant who submitted a vacant lot as a damaged address. Below is a copy of a rental assistance check sent to GAO after FEMA received feedback from its inspector that the GAO undercover registrant did not live at the damaged address, and after a Small Business Administration inspector reported that the damaged property could not be found. We also found that FEMA provided expedited and housing assistance to individuals who were not displaced. For example, millions of dollars in expedited and housing assistance payments went to registrations containing the names and social security numbers of individuals incarcerated in federal and state prisons during the hurricanes. In addition, FEMA improperly paid individuals twice for their lodging--paying their hotels and rental assistance at the same time. For example, at the same time that FEMA paid $8,000 for an individual to stay in California hotels, this individual also received three rental assistance payments for both hurricane disasters. Finally, we found that FEMA could not establish that 750 debit cards worth $1.5 million went to hurricane Katrina victims. We also found debit cards that were used for a Caribbean vacation, professional football tickets, and adult entertainment.