Study Details Amount Of Waste In FEMA Payments

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Millions, perhaps billions of dollars in federal aid doled out to victims of Hurricane Katrina were wasted either through fraud or plain incompetence, a new government audit disclosed last week.

Emergency assistance provided by the Federal Emergency Management Agency in the days and weeks following the massive hurricane was used for things such as $438-a-day lodging in New York City, adult entertainment, gambling, a $450 tattoo and a $1,100 diamond engagement ring, according to the General Accountability Office, which conducted the audit for Congress.

In providing homes for nearly a million displaced residents of New Orleans and the other Gulf states, FEMA bought too many temporary structures-way too many, according to the GAO. As many as 11,000 of the 26,000 temporary homes purchased by FEMA are sitting empty, sinking in mud, in Hope, Ark.

Millions, if not billions of dollars of relief paid to affected homeowners were sent to individuals whose property was not, in fact, destroyed or even damaged by the massive storm, the GAO said.

The temporary cash assistance program launched by FEMA, in which Katrina victims were each given $2,000 in immediate spending money to be cashed at credit unions and banks or ATMs, was filled with fraud. FEMA distributed more than $5.4 billion in emergency assistance through the program, the largest disaster relief ever distributed at once. The funds were delivered one of three ways: through electronic transfer; check or voucher; or debit card.

As many as 900,000 of the 2.5-million people who received the payments provided by FEMA were based on duplicate or invalid Social Security numbers, or false addresses and names. As many as 5,000 of the $2,000 debit cards distributed were duplicate payments.

The GAO even showed a $2,000 emergency relief check it was able to obtain through FEMA by applying under a phony name and address.

The U.S. Justice Department said last week it has brought charges against 212 people accused of scams in the hurricane relief, but thousands more will go unprosecuted, the DOJ conceded.

The study was released last week as Congress was holding testimony of the emergency response to Hurricane Katrina and the following disasters. FEMA officials said last week that despite the audit's findings the vast majority of Hurricane relief has been received by legitimately needy victims. And in launching the biggest rescue operation ever in the history of the U.S. many of the initiatives were launched for the first time, like the $2,000 debit card program.

Release of the GAO audit also comes as Congress is debating how to add to the $85-million in disaster relief already passed last year in the wake of the mighty storm. In the next few weeks Congress will be asked to devote as much as $7-million more to fund loans through the Small Business Administration, and as much as $10- million more to pay for flood claims through FEMA's National Flood Insurance Program. The latest figures project that as much as $25 billion in claims will be made to pay for Hurricane Katrina damage.

But the biggest tab has yet to come, and that's to rebuild the city of New Orleans. President Bush and the White House have already rejected a proposal by Louisiana's U.S. Rep. Richard Baker to create a bailout agency, like the Resolution Trust Corp., that would issue tax-exempt bonds to finance a multi-billion rebuilding of the city.

One of the issues involved in resolving the New Orleans disaster is how to compensate the property owners who were not insured for flood losses. In Mississippi the state has begun distributing funds from a Community Development Block Grant to pay uninsured homeowners. But there are only expected to be about 35,000 claims in Mississippi, enough for the state to pay for with its $5 billion federal grant. In New Orleans, there could be as many as 200,000 uninsured property owners. And who holds the liens on most of those properties? Why, your local bank or credit union, that's who.

Ed Roberts can be reached at eroberts

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