Washington, DC – Senators Susan Collins (R-ME) and Joseph Lieberman (D-CT) have made recommendations to the Federal Emergency Management Agency (FEMA) to improve the safeguards of its disaster relief program in order to help prevent fraud, waste, and abuse. Senators Collins and Lieberman also released findings of an investigation by the Senate Homeland Security and Governmental Affairs Committee into FEMA’s administration of its disaster relief program during the 2004 Florida Hurricane Season. Senators Collins and Lieberman led a Committee investigation to examine weaknesses in the program that made it susceptible to waste, fraud, and abuse. In May, the Committee held a hearing that exposed fraudulent claims, wasteful spending, and ineffective government management in FEMA’s response to the 2004 Florida Hurricanes.

In a letter to FEMA Director Michael Brown, Senators Collins and Lieberman offered extensive comments and 19 specific recommendations aimed at improving the safeguards in FEMA’s program. Senator Collins is the Chairman and Senator Lieberman is the Ranking Member of the Committee, which has jurisdiction over FEMA as part of the Department of Homeland Security.

“We must ensure fairness, accountability, and transparency in the administration of FEMA’s disaster relief programs,” said the Senators in a joint statement. “With the right safeguards, management practices, and oversight in place, we should be able to deliver necessary aid quickly to victims of natural disasters, and also prevent waste, fraud, and abuse.”

The following is the text of the letter that Senators Collins and Lieberman sent Friday to Director Brown:

Dear Under Secretary Brown:

Thank you for testifying at the Homeland Security and Governmental Affairs Committee’s May 18, 2005, hearing regarding FEMA’s response to the 2004 Hurricane season. While the Committee will continue to review the matter and looks forward to receiving your responses to the post-hearing questions, at this time we want to share with you some preliminary conclusions and recommendations we feel are necessary to ensure fairness, accountability, and transparency in the administration of disaster relief programs.

As you know, the Committee conducted an extensive investigation of FEMA’s response to the 2004 Florida hurricane season. Our staff interviewed over 40 witnesses and obtained over 50,000 pages of documents. The Committee’s investigation found serious shortcomings at key stages of FEMA’s program – the points where FEMA initially designated areas as eligible for disaster relief and later added-on areas as eligible for relief, and the point where FEMA contractors inspected individual claimants’ damages and FEMA made awards. These serious shortcomings allowed taxpayer dollars to be wasted. FEMA’s administration of the Individual and Households Program (IHP) needs improvement, and FEMA needs to put controls in place to ensure that assistance is provided to only eligible disaster-related needs. After a brief summary of some highlights of the Committee’s initial findings, we will describe improvements we believe FEMA must make.

Designation of Areas Eligible for Disaster Relief

Florida began to feel some effects of Hurricane Frances on September 3, 2004. According to the National Oceanic and Atmospheric Administration’s National Weather Service, Miami Dade County did not incur any hurricane force winds, tornadoes, or other adverse weather conditions that would cause widespread damage during Frances’ visit to Florida. National Weather Service data indicates that Miami Dade experienced only tropical storm force winds, with the strongest gust reported at 47 mph. It also recorded rain fall accumulation for September 3 5, 2004, to be 3.77 inches. The Miami-Dade Emergency Operations Center reported that damage from Frances was minimal. Nevertheless, FEMA designated Miami-Dade County eligible for Individual Assistance programs without first conducting, as it should have, a damage assessment to determine whether federal assistance was warranted.

Although Miami-Dade residents did sustain some level of damage, it was not necessarily enough to warrant federal assistance. Assessing damage is a critical function and component in determining whether an area should be designated as eligible for individual assistance disaster relief. Without such a damage assessment, the designation of Miami-Dade County as eligible for relief was questionable. This designation made millions more individuals eligible for assistance, further straining FEMA’s limited inspection resources and making the program more susceptible to potential fraud, waste, and abuse.

Our investigation demonstrates that this problem extended well beyond the designation of Miami-Dade County as eligible for disaster relief. Committee staff interviewed FEMA’s Director of Recovery, who stated that he made both the decisions on which counties to recommend for initial designation as eligible for assistance and which to recommend for later add-on designation chiefly based on weather maps. For the initial designation he recommended counties that were directly affected by the initial impact of the storm, and he then recommended counties to be added-on to the declaration where the weather maps showed the county had sustained at least tropical storm force winds.

Committee staff found that FEMA files generally did not contain adequate documentation – if they contained documentation at all – to support initial recommendations for counties eligible for assistance or to support counties that were later added-on as eligible for assistance. Indeed, even though the Director of Recovery admitted he based his county eligibility recommendations on weather maps, the files did not contain the supporting weather maps. In many instances, the information submitted by the State of Florida in support of designating counties as eligible for disaster assistance appear to fall short of regulatory guidelines, which require such requests to be accompanied by appropriate verified assessments. Our investigation has also shown that FEMA does not follow clear or consistent policies and does not always apply factors laid out in federal regulations when making initial county designation decisions or add-on county designation decisions.

Such inadequacies leave the process through which initial county eligibility decisions and add-on county eligibility decisions are made potentially subject to abuse and unfairness and waste of taxpayer dollars.

Inspections and Awarding of Damages

Our investigation also found several serious inadequacies in FEMA’s distribution of aid under the IHP. Because the policies, procedures, and guidelines used in Florida were for the most part used throughout the nation, we are deeply concerned about the appropriateness of IHP awards nationwide.

Among the many problems found with the inspection and award granting process by the Committee staff and/or the Inspector General were: (1) funds provided for repair and replacement of household items were based on what FEMA considered to be the value of a fully furnished room, regardless of the actual losses sustained by the applicant; (2) inaccurate awards were made for personal and real property damage because of inspector errors in assessing damages; (3) in many instances damages were awarded based solely on applicants’ verbal representations of losses; (4) FEMA failed to provide sufficient guidance for authorizing assistance to replace or repair automobiles and to require validation of damages to vehicles; (5) FEMA failed to provide replacement value for automobiles based on the actual value of the damaged vehicle and instead gave $6500 for each destroyed vehicle, regardless of the actual value of the vehicle; (6) FEMA failed to establish and apply sufficient criteria to determine when a death directly resulted from the disaster and thus was eligible for funeral expenses; (7) there was a general failure to require an applicant to establish that an item was purchased for a disaster-related need; (8) FEMA’s inspection guidelines contained confusing criteria that inspectors failed to properly apply which resulted in inspection errors, (e.g., the “home unsafe” determination was often inappropriately and inconsistently applied); (9) inspector training was inadequate; (10) delays in quality control inspections allowed inspector errors to be repeated without correction; (11) FEMA did not adequately oversee its inspection contracts and performance incentives in the contract did not put enough weight on making sure inspections correctly assessed damages; (12) FEMA placed too much weight on increasing the speed and volume of inspections without adopting any corresponding safeguards to ensure quality or attempting to prioritize inspections in any way; (13) some computer edit checks were disabled and other error checking systems were run only after payments were issued; and (14) FEMA failed to have adequate criteria to apply to determine when expedited rental assistance was warranted and failed to properly administer the program.

Necessary Improvements

Based on the Committee’s investigation and the report of the Inspector General entitled “Audit of FEMA’s Individual and Households Program in Miami-Dade County, Florida, for Hurricane Frances,” which was released at the May 18 hearing, we believe that the following improvements, as well as the recommendations listed in the Inspector General’s report, are necessary to ensure fairness, accountability, and transparency in the administration of the IHP program:

1. Modify and clarify regulations, procedures, and policies regarding the initial designation of counties eligible for individual assistance and the subsequent designation of counties as eligible for individual assistance. This should include: (a) clarifying under what conditions the “unusual severity and magnitude” exception applies to the otherwise required preliminary damage assessment; (b) designating the FEMA official(s), if any, authorized to apply criteria to determine when the exception applies; and (c) clarifying documentation and procedures required for initial and add-on designations of counties eligible for assistance.

2. Review and revise criteria for determining that a home is “unsafe” or “uninhabitable” to provide for more objective and consistent determinations by inspectors and to prevent minor repairs from resulting in a “home unsafe” determination. FEMA should also require inspectors to record deferred maintenance.

3. Take steps to ensure that recipients of funds provided for rental assistance know that such funds are for the intended purpose of securing alternative accommodations and, if they are not used for such purpose, they should be returned to the federal government, and take steps to help ensure such funds are actually used for their intended purpose.

4. Identify and review those types of claims that are particularly vulnerable to fraud, including personal property losses based on verbal representations and “power surge” claims for appliances, and consider additional safeguards to prevent program abuse. One potential safeguard would be requiring that inspectors document the specific item in question and the evidence relied upon to substantiate the loss.

5. Take steps to limit excessive personal property awards for furnishings. Excessive awards can result from the use of the “generic room” concept, which permits applicants to receive awards for furnishings that they never had, and from the use of the “X” level of damage, which enables applicants to receive awards for furnishings that in some instances have not been significantly damaged.

6. Establish minimum qualification and training requirements for inspectors, and require that the training include how to detect and report fraud.

7. Review and consider modifications to inspection guidelines to require that inspectors better document the types of disaster damages they find so as to enable more meaningful review of initial inspections by FEMA and contractor quality control personnel.

8. Review and consider modifications to inspection guidelines to require inspectors to justify that funding recommendations for miscellaneous items, such as generators, chainsaws and dehumidifiers, are based upon disaster-related needs.

9. Develop criteria and guidelines for determining that a death is disaster-related, including a requirement that FEMA document each request for funeral expense assistance in order to support its approval or disapproval.

10. Review and improve inspection guidelines and eligibility criteria for determining the need to repair or replace automobiles, including provisions to ensure adequate verification of a disaster-related need.

11. Modify guidelines to establish a reasonable replacement value for destroyed vehicles, taking into consideration the cost of acquiring a comparable vehicle.

12. Review use in response to the 2004 Florida hurricanes of the “expedited assistance” program, in which FEMA provided one month of rental assistance to applicants based on information the applicants provided during registration, prior to any inspection or verification. FEMA should consider ways in which this program, if used for future disasters, can be better targeted toward those with a genuine disaster-related need for housing, and develop criteria to identify those situations, if any, under which the program can be used.

13. Modify performance incentives under the contract with the inspecting companies to ensure the companies have adequate financial incentives to accurately assess damages and conduct high quality inspections.

14. Institute mechanisms, including improved and expanded edit checking capabilities, to ensure, to the maximum extent feasible, that inspector work is reviewed prior to processing payments to applicants.

15. Review and, if necessary, modify current contract requirements regarding criminal background checks for inspectors to ensure that background checks are completed prior to deployment of inspectors and that disqualification standards used by the contractors are adequate to protect the public safety.

16. Establish standards to ensure the independence of inspectors and require that inspectors recuse themselves from inspections that present a reasonable possibility of an appearance of a conflict of interest.

17. Consider the feasibility of prioritizing inspections so that applicants or areas with heavy damage are given priority over those with minimal or marginal damage.

18. Review and revise criteria under which clothing awards are made so that awards are made only for eligible needs.

19. Take measures to increase oversight of the performance of inspection contracting companies.

While we recognize the importance of getting aid quickly to victims of natural disasters, we do not believe that there is any conflict between achieving that vital goal and implementing safeguards against waste, fraud and abuse. On the contrary, implementing prudent changes in the areas identified above will benefit both the real victims of disasters and the taxpayers who fund disaster relief efforts.

We would appreciate hearing from you within 30 days on how you are addressing and will address our recommendations, as well as the recommendations of the Inspector General.