Fraudulent Katrina aid may exceed $1 billion
GAO revises its estimate of improper payments in FEMA disaster assistance program upward, to as much as $1.4 billion.
New investigative findings that the Federal Emergency Management Agency's disaster assistance program made up to $1.4 billion in improper payments after Hurricane Katrina are spurring a senior Republican lawmaker to put legislation to overhaul the program on a fast track.
House Homeland Security Investigations Subcommittee Chairman Michael McCaul, R-Texas, said in an interview Tuesday that he is drafting legislation that would provide better fraud prevention and verification controls in FEMA's individual and household disaster assistance program.
"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," Government Accountability Office investigators said in a new report. It will be released Wednesday at a hearing McCaul called to examine waste and fraud in the hurricane recovery effort.
GAO had previously estimated in February that the cost of benefits fraud was probably tens or hundreds of millions of dollars, but said the exact total would not be known until a fuller examination was conducted.
According to the report, which was obtained by CongressDaily, investigators found federal and state prisoners were able to receive tens of millions of dollars in improper payments. Other people received assistance by using fake Social Security numbers.
Among damaged property that FEMA improperly paid for were post office boxes, a vacant lot and a cemetery. And some individuals used their assistance to pay for trips to Hawaii, a Caribbean vacation, football tickets and adult entertainment, investigators found.
"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," GAO added. "This means our review potentially understates the magnitude of improper payments made."
McCaul said his subcommittee this week referred 7,000 cases of fraudulent payments to the Justice Department for prosecution.
"We were appalled at the magnitude of the fraud," he said. "The controls, or lack thereof, were obviously not adequate enough to catch them."
McCaul said he is not convinced FEMA is making the necessary changes to prevent such fraud and abuse from reoccurring, especially now that the new hurricane season has started.
"I think these controls are needed as soon as possible," he said. "I'd love to see them unilaterally put these controls in place but until it happens we're prepared to move forward with legislation."
McCaul also plans to look at other forms of fraud in the wake of Hurricane Katrina, especially in government contracting.
"We're going to be looking at the contract fraud issues, which could be a much greater amount," he said. "It's an affront to the American taxpayer."