New report says FEMA paid $643 million in bogus Katrina claims

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A report issued Monday by the Department of Homeland Security’s inspector general Richard Skinner, said that the Federal Emergency Management Agency improperly paid out $643 million in claims to 160,000 applicants and should immediately move to recoup the monies before it’s too late.

The amount represents about 9 percent of the $7 billion paid to victims of recent federally-declared disasters, primarily hurricanes Katrina and Rita. Once a federal disaster is declared, victims may apply for federal assistance for medical care and property damage.

The monies were disbursed as a result of fraud, human error, poor departmental oversight and internal controls. FEMA officials vowed to make an effort to collects the money, but it’s unclear how successful they might be.

Officials said that payments were made for fraudulent claims in which phony names and addresses were used, while some of the payments were to claimants that unintentionally “double-dipped.” Those claimants received payments from FEMA immediately after the hurricanes, and subsequently received monies from their insurance companies for the claims, not understanding that they weren’t legally permitted to be paid twice for the same claim.

The report said that FEMA paid some $17 million in rental assistance payments to applicants that had been provided free-of-charge trailers by the agency. FEMA also distributed about $20 million for claims that were submitted twice- once for each hurricane disaster, but covering the same loss on the same property.

FEMA was barred from pursuing the collection of improper payments by a federal court order in 2007. The ruling required FEMA to revise its collection procedures before it could resume its collection effort. The U.S. 5th Circuit Court of Appeals overturned the part of the court order requiring FEMA to redo its collection procedures, but the agency hasn’t yet re-started the process.

New procedures have been in place since 2008, but neither Bush administration officials nor current FEMA head, Craig Fugate, have approved them.

A spokesperson for the agency, Rachel Racusen, said “at FEMA, we are committed to being responsible stewards of taxpayer dollars, and not only do we agree with the inspector general’s recommendation to recoup disaster assistant payments that were improperly disbursed to individuals in recent years, but we are and have been actively working with state and local leadership and other stakeholders to finalize plans to recoup misspent funds, while continuing to support Gulf Coast communities as they recover.”

The agency says that the approval of the new procedures should begin soon, but didn’t provide a date. Some of the changes in the new procedures include a second review of improper payments and a clear explanation of the appeal process in the initial demand letter sent to recipients of the improper payments.

Summing up the report, Skinner wrote, “Further delays only make aging debts more difficult to collect.”

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