The Times-Picayune - FEMA Waives $94.9 Million in Improper Katrina, Other Disaster Payments

News Article

By Mark Schleifstein

The Federal Emergency Management Agency has waived the repayment of $94.9 million that the agency believed it improperly paid to disaster victims between 2005 and 2010 in the aftermath of disasters including hurricanes Katrina, Rita, Gustav and Ike, according to a report by the Department of Homeland Security Inspector General's office. The agency also denied 1,293 waiver requests, representing $6.3 million in improper payments, and has recouped $1.3 million from applicants who improperly received payments.

The 18,283 waiver cases processed by FEMA represent only 20 percent of those outstanding, which total more than $371 million the agency said should be repaid.

In addition to the money not recovered, implementing the waiver program has cost FEMA $4.8 million so far, and has resulted in the refund of $2.5 million to individuals who repaid their grant money, but were later granted a waiver, according to the report.

"It is too early to determine the cost-effectiveness of the process because waiver requests and reimbursements are still ongoing," the report said.

FEMA is required to liberally grant payment waivers during its review of 91,000 demands for repayment by the Disaster Assistance Recoupment Fairness Act of 2011, which was proposed by U.S. Sen. Mary Landrieu, D-La., and other members of Congress whose constituents had received repayment letters from FEMA.

"I'm encouraged that the recoupment waiver process is moving forward and providing resolution for survivors of Hurricanes Katrina and Rita," Landrieu said Wednesday. "In more than 18,000 cases, Louisianians can now put this part of the recovery in the past and continue rebuilding."

"In more than 18,000 cases, Louisianians can now put this part of the recovery in the past and continue rebuilding," Sen. Landrieu said.

The waiver program involves about 4.6 percent of the more than $8 billion in individual assistance payments FEMA has made between August 2005 and December 31, 2010. Reviews of the payments eligible for waiver found that FEMA had improperly paid some individuals who were ineligible because of manual processing errors, failure of FEMA personnel to include accurate information in its computer system, failure of personnel to verify disaster-related loss or need prior to authorizing payment, or the adoption of new policies in the midst of a disaster. In some cases, the errors resulted in FEMA providing applicants with duplicate payments.

After initial audits in 2006 following hurricanes Katrina, Rita and Wilma in south Florida, FEMA sent out thousands of "recoupment" letters to individuals demanding return of the improper payments. Recoupment is the federal term for identifying and collecting improper payments.

FEMA stopped attempting to collect most of the improper payments in 2007 after U.S. District Court Judge Ginger Berrigan in New Orleans ordered the agency to discontinue its debt-collection activities while revising its recoupment rules.

The order came in a class action lawsuit that challenged FEMA's decision to halt its disaster-related financial housing assistance program and FEMA's attempt to collect housing assistance money that was allegedly improperly paid to some Katrina evacuees. Ironically, the U.S. 5th Circuit Court of Appeals overturned the portion of the suit challenging the collection process, but FEMA kept its suspension in place while it rewrote the program's rules.

In 2011, FEMA published its revised recoupment rules and mailed out nearly 90,000 notices of debt between March and December.

The Recoupment Fairness Act followed, including a provision for the inspector general to issue reports on FEMA's progress in granting waivers every three months. Wednesday's report was the third to be completed.

The law allows the FEMA administrator to waive a debt if the excessive payment was based on FEMA error; there was no fault by the debtor; collection of the debt "is against equity and good conscience;" and the debt did not involve fraud, a false claim or misrepresentation by the debtor or others with an interest in the claim.

Among factors FEMA considers is the financial hardship that repayment might cause recipients, as well as the financial worth of the recipients. Debtors with a 2010 adjusted gross income of up to $90,000 are eligible for a full waiver, while those with income over that amount can receive only a partial waiver.

FEMA granted waivers for $50.4 million, involving 6,697 cases, where duplicate benefits were given to more than one person in a household.

An example cited in the report was of an applicant who registered online on Sept. 6, 2005, after Hurricane Katrina, and received $14,750 for personal property losses, rental assistance and expedited housing assistance. The next day, the applicant's spouse registered with FEMA, using the same address, and received $21,387.

In that case, Inspector General investigators found that a third person at the same address received benefits of $18,330.

"According to FEMA, registrations from the same damaged address were not reviewed for duplication," the report said. "FEMA's records show that both the original applicant and spouse were sheltered inside the Lafayette Cajundome at the time of their applications, but claimed they were unaware of the other's application."

FEMA waived the improper payment to the first applicant because the erroneous payment occurred because of FEMA error, the report said. The second payment to the same family was not in error, and there's no indication in the report as to whether FEMA took action on the third payment, which was caught by the Inspector General's office.

In another duplication of benefits case, an applicant received $6,358 after Katrina, including duplicate $2,000 payments "he was awarded when FEMA relaxed controls to expedite assistance by issuing debit cards."

"When notified of the overpayment, the applicant acknowledged that he received two separate $2,000 payments, and returned that amount to FEMA," the report said. "FEMA again distributed $2,000 to the applicant. The applicant claimed that he did not know it was an overpayment until FEMA notified him of his debt approximately two years later."

Again, FEMA considered the overpayment to be the agency's error.

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