Watchdog Warns Uncorrected Mistakes Risk Billions During Disaster Recovery

A watchdog agency is warning about potential fraudulent spending by the federal government in the wake of several major natural disasters this year as local officials from affected regions pledged full transparency on their recovery spending at a congressional hearing on Tuesday.

The Federal Emergency Management Agency has failed to address recommendations made by the Homeland Security Department’s inspector general over the last five years to mitigate waste, fraud and mismanagement in providing disaster relief, the auditors said in a special report this week. More than three-dozen reports led to 40 recommendations and identified $322 million in questionable spending, mistakes the IG said FEMA would probably repeat.

“FEMA will likely face similar challenges pertaining to insurance during recovery from Hurricanes Harvey, Irma, and Maria, and the October 2017 California wildfires,” the IG said.

The largest recurring issues included FEMA paying duplicate benefits to individuals seeking reimbursement for costs already covered by insurance, paying disaster assistance to individuals who are unqualified due to inadequate insurance and cases in which funds did not go to FEMA projects.

“FEMA will be at risk of exposing billions of dollars of taxpayer funds to potential fraud, waste or mismanagement if it does not conduct adequate and thorough insurance reviews during the project approval process and final project reviews,” the IG said.

At a hearing before the Senate Committee on Natural Resources, Puerto Rico Gov. Ricardo Rosselló said he was working the Office of Management and Budget and other parts of the Trump administration to ensure proper oversight of federal funds that are currently being poured into the island as it attempts to recover from Hurricane Maria.

“We are full and willing participants in that process,” Rosselló said.

Puerto Rican officials defended the contract with Whitefish Energy to restore the island’s electric grid, which the territory’s government has since terminated due to its controversial origins, provisions and reimbursement rates. Ricardo Ramos, the executive director of the Puerto Rican utility that signed the contract, said his options were limited and Whitefish accommodated the power authority’s dire financial conditions.

“I chose to contract with Whitefish because they provided immediate services that we desperately needed,” Ramos said.

Sen. Mike Lee, R-Utah, said the contract was a function of larger corruption in the territory.

“It doesn’t take a biologist to see that a Whitefish doesn’t swim alone,” Lee said.

FEMA has delivered mixed messages as to whether any federal funds have or will go toward the Whitefish contract, denying it publicly but reportedly conceding to lawmakers behind closed doors that some federal assistance funds could go toward reimbursement to the company.