Are FEMA Debt Collectors Too Easy on the Big Easy?

One of the priorities of the Obama Administration has been the recovery of improper payments in federal programs. Every year, the federal government wrongly disburses billions of taxpayer dollars to contractors, grantees, and entitlement and aid recipients, whether through bureaucratic error or recipient fraud. One agency that has received special scrutiny for its improper-payment recovery efforts is the Federal Emergency Management Agency (FEMA), which disburses billions of dollars in disaster relief every year.

Federal debt collection laws require FEMA to recoup improper federal disaster assistance payments, or money that was disbursed to individuals who were ineligible or who received duplicate payments or overpayments. However, the Disaster Assistance Recoupment Fairness Act of 2011 (DARFA) gives FEMA the authority to waive the collection of improper payments in cases where the payment was not due to fault or fraud on the part of the recipient and repayment would be too burdensome or unfair.

Between August 2005 and December 2010, FEMA disbursed more than $8 billion in disaster relief. In a report released last month, the Department of Homeland Security Office of Inspector General (DHS IG) estimates that FEMA made $621.6 million in improper payments during that time. Of that amount, FEMA has determined that $371 million—paid to 91,178 recipients—should be recouped. As for the other quarter-billion dollars, FEMA claims there was sufficient justification to waive the debt obligation and not recoup payment.

However, in its report, DHS IG found that FEMA did not always properly grant those waivers. Specifically, it found that about 30 percent of the cases it reviewed did not have adequate support for those waivers.

“For cases that lacked adequate support,” the report says, “we are not categorically stating that FEMA should have denied the applicant’s request; rather, our review of FEMA’s decisions did not find sufficient information in these case files to meet the criteria set forth in either DARFA or FEMA’s implementing regulations to justify the waiver.”

In some cases, FEMA waived repayment despite evidence of fault or fraud by the recipient, such as making false or misleading statements or material omissions during the application process. DHS IG found cases where one household received duplicate payments and applicants who falsely claimed home ownership received thousands of dollars in home repair assistance.

This comes as no surprise to POGO, which blogged last year about FEMA’s improper disaster relief payment recoupment efforts. As the result of a Freedom of Information Act (FOIA) request, we discovered that, between fiscal years 2005 and 2010, FOIA recovered only about one-third of the $16.5 million in improper payments made to recipients found guilty of fraud relating to Hurricanes Katrina, Rita, and Wilma recovery.

The current DHS IG report found that FEMA granted waivers for applicants approximately 86 percent of the time. One reason for this unusually high approval rate is that FEMA relaxed its internal controls in order to expedite the delivery of relief, particularly after Hurricanes Katrina and Rita in 2005. The other reason is FEMA’s relatively liberal interpretation of DARFA and willingness to give recipients the benefit of the doubt when making waiver determinations.

DARFA requires DHS IG to periodically report on FEMA’s efforts to recoup improper payments. December’s report is the fourth in a series of six that will be issued every three months until this June (the reports are posted here). The final two reports will discuss the overall cost-effectiveness of FEMA’s efforts and set forth recommendations. We hope those recommendations address two of the more glaring flaws in FEMA’s procedures: first, the loss of millions of taxpayer dollars through bureaucratic error; second, the loss of millions more in cases where FEMA waived repayment despite evidence of recipient fault or fraud.