FEMA Leaves Two Thirds of Money It's Owed for Improper Payments on the Table

One of POGO's areas of concern is the recovery of "improper payments." Many agencies have collected only a small percentage of the taxpayer money they have wrongly spent through overpayments, duplicate payments, payments for services not actually rendered, payments to the incorrect person or group, and payments to vendors that do not even exist. POGO looked into the Federal Emergency Management Agency’s (FEMA) improper payment record and found that FEMA has dished out millions of dollar to the wrong people since 2005, but has only recovered roughly one third of it.

POGO submitted a Freedom of Information Act (FOIA) request seeking information about payments owed to and actually collected by FEMA as restitutions “by individuals or groups found guilty of fraud relating to private-sector and government efforts to help victims of Hurricanes Katrina, Rita, and Wilma from 2005 to 2010.” FEMA disclosed that only 34 percent of payments deemed improper by courts have been recovered between fiscal years (FY) 2005 and 2010:

Just after Hurricane Katrina in September 2005, FEMA provided more than $7 billion in individual assistance payments to victims. A Department of Homeland Security (DHS) Inspector General (IG) report speculated that $643 million of the $7 billion was improperly spent (FEMA is within the DHS). Based on FEMA’s numbers, of the estimated $643 million in improper spending, $16.5 million had been subject to a finding of fraud, with only $5.5 million collected.

To address this issue, United States Attorney General Alberto R. Gonzales established the Hurricane Katrina Fraud Task Force. The Task Force published a 2007 report describing its mission of “deterring, detecting, and prosecuting unscrupulous individuals who try to take advantage of the Hurricanes Katrina, Rita, and Wilma disasters.” Gonzales said the overall goal was to “stop people who seek to illegally take for themselves the money that is intended for the victims of the hurricanes” and give back the taxpayers’ money. As FEMA’s 34 percent return rate suggests, however, more work needs to be done recovering improper expenditures.

POGO also requested “FEMA’s process and methods for collecting reparations owed to them by convicted offenders, including procedure manuals, instructions, correspondence, memoranda, emails, etc.” Based on FEMA’s response, POGO found that FEMA has no standard process for following up and collecting these receivables. The aforementioned DHS IG report said that since June 2007, “FEMA has not attempted to recoup these improper payments or those from any subsequent disaster.” Instead of using its own recoupment process, we were told “FEMA does not collect ‘reparations” and that instead “[t]he Department of Justice has a statutory duty to enforce and collect restitution judgments on behalf of the United States.” FEMA responded that it plans to “send demand letters and follow processes as outlined in the United States Attorney’s Manual (USAM), Title 3 EOUSA.” An inside source told POGO that there are currently thousands of open restitution cases in limbo.

There have been some major accomplishments in the effort to reduce improper payments across the federal government. According to the Government Accountability Office (GAO), federal agencies reported approximately $115.3 billion in improper payments in FY 2011. While this was a $5.3 billion decrease from FY 2010, GAO acknowledges that 10 programs, including Medicare Fee-For-Service, Medicaid, and the Earned Income Tax Credit, account for $107 billion, or 93 percent, of the total.

The $5.3 billion decrease is due to decreases in outlays for the Unemployment Insurance program, decreases in reported error rates for the Earned Income Tax Credit program, and decreases in error rates for the Medicare Advantage program, according to GAO. The government’s efforts to cut back on these programs’ improper payments seems to be more effective than FEMA’s recovering tactics, or lack thereof.

President Obama has also attempted to reduce federal improper payments—and claims to have cut over $20 billion in improper payments since 2009. POGO wrote about President Obama’s oversight efforts to end improper payments and attended the signing into law of the Improper Payments Elimination and Recovery Act of 2010 (IPERA). Obama directed federal agencies to find “ways in which information sharing may improve eligibility verification and prepayment scrutiny” and initiated a “Do Not Pay List”. The list, while incomplete, is designed to act as a “single point of entry” through which agencies can access relevant payment data before determining eligibility for benefits or other federal funding.

POGO acknowledges legislative accomplishments and improvements, like IPERA and recent improper payment reductions. Yet, POGO reiterates the need for agencies, especially FEMA, to implement prevention mechanisms, because when they try to recover taxpayers’ money after it’s already out the door, they may end up empty-handed.