Panel blasts FEMA over new, higher fraud estimate

The Federal Emergency Management Agency faced renewed bipartisan criticism at a House hearing Wednesday, in response to an updated government report estimating that the agency misspent more than $1 billion in victim assistance after hurricanes Katrina and Rita.

Despite assurances from a FEMA official that the agency is improving its systems, Republicans and Democrats blasted the agency's leaders for not having better protections in place before the storms, particularly since similar misspending was found after previous disasters. They appeared set on moving legislation imposing stronger internal controls at the embattled agency.

"The situation has gotten worse," said Homeland Security Investigations Subcommittee Chairman Michael McCaul, R-Texas, referring to a just-released Government Accountability Office report that found far more extensive fraud than previous inquiries, including examples of prison inmates repeatedly bilking the system to get checks and of aid recipients using their money to buy a Caribbean vacation and a $200 bottle of champagne at a Hooters restaurant.

With tight budgets, McCaul said, "we can't afford as a nation to have $1 billion in fraud."

Lawmakers also expressed frustration that FEMA Director David Paulison declined to testify at the hearing, instead sending an acting deputy director, Donna Daniels, to face difficult questioning.

"I personally think you've been put under the bus by being brought here," Homeland Security ranking member Bennie Thompson, D-Miss., told Daniels, saying that Paulison and Homeland Security Secretary Michael Chertoff "are absolutely the ones who should be held accountable for this."

Exacerbating their frustration was that Daniels said she was prepared to provide testimony regarding only an earlier, more limited GAO report released in February.

She said FEMA had not had time to respond to the new findings, which it received last week. McCaul said the agency knew the report was coming and had plenty of time to address it. Other lawmakers said the lack of response followed a pattern at FEMA.

"It [always] seems like you're a day late and a dollar short," said Rep. Ginny Brown-Waite, R-Fla. "I think the lack of responsiveness should be of concern to every member here."

Rep. Christopher Shays, R-Conn., accused the agency of trying to downplay the findings. "I am less comfortable than when I came ... I still see pushback from FEMA," he said.

In their report, GAO investigators said FEMA had little if any controls for preventing dishonest citizens from cheating the system. As a result, individuals from across the country won claims for rental assistance, hotel vouchers, debit cards and aid checks by providing false names, Social Security numbers or addresses, often repeating their fraud again and again.

Gregory Kutz, a GAO investigator, expressed surprise that the agency did not appear to be conducting simple checks such as address verifications, which could have prevented cases where con artists submitted claims using post office boxes, vacant lots and cemeteries as their home addresses.

"That's fraud-prevention 101," Kutz said. "It seems so basic, but for some reason they were not doing it."

The $1 billion in misspending represents about 16 percent of the agency's overall assistance in response to the hurricanes. But Kutz said that figure probably underestimates the scale of the problem, which the report said could be as high as $1.4 billion.

Daniels said FEMA traditionally has held its waste and fraud rate to between 1 percent and 3 percent. But Katrina overwhelmed the agency's systems and procedures, she said, and FEMA leaders made the decision to meet victims' needs as quickly as possible, often using new and untested methods.

"FEMA has gone to great lengths to make sure it is a good steward of taxpayer dollars," she said, while balancing those safeguards with the immediate needs of victims in a crisis.