Quin Lucie is a Disaster Assistance Employee Attorney with the Federal Emergency Management Agency’s Office of Chief Counsel. He received his undergraduate degree from Illinois State University and his law degree from Southern Illinois University. He received his officer’s commission from the U.S. Marine Corps in 1999 and served as judge advocate until entering private practice. He began his service with FEMA in 2006 and has since been deployed to Louisiana; Washington, DC; Mississippi; and New York. The views of the author do not necessarily represent those of the FEMA Office of Chief Counsel, FEMA, or the Department of Homeland Security.

Introduction

In October 2006, Congress passed a law requiring that the Administrator of FEMA ensure that all programs within FEMA administering federal disaster relief assistance develop and maintain proper internal management controls to prevent and detect fraud, waste, and abuse.¹ In addition, Congress mandated that FEMA develop and implement a program to provide training on the prevention of waste, fraud, and abuse of federal disaster relief assistance relating to the response to or recovery from natural disasters and acts of terrorism or other man-made disasters, and to find ways to identify such potential waste, fraud, and abuse.²

One year later, FEMA still had no scalable, integrated plan to combat fraudulent disaster assistance claims and the external misuse, waste, and abuse of its property during disaster operations and while providing assistance. These fraudulent and wasteful activities have now become commonly known as “FEMA fraud” (fraud, waste and abuse of federal property and funds as recognized under federal and state criminal and civil statutes, along with payments improperly made under FEMA’s own administrative processes; fraud, waste, and abuse committed by FEMA or other federal employees are another issue).

Various Government Accountability Office (GAO) reports estimate the amount of fraudulent or improper federal disaster payments after the 2005 Gulf Coast hurricanes under the Individual and Households Program alone at about $1 billion.³ This does not include fraudulent property claims or damage to FEMA-provided property by authorized and unauthorized occupants; those costs could drive this figure up significantly. A CNN report filed June 12, 2007, using on-camera interviews with FEMA personnel in Houston, placed the number of FEMA travel trailers rendered completely unusable by their occupants at roughly 10%. Using the approximate cost of $20,000 per trailer, this amount of damage, if accurate across the Gulf Coast, could reach $200 million. There is currently no process within FEMA to prosecute those responsible and receive restitution for this damage to federal property.

By creating an integrated plan to combat FEMA fraud, reductions in the amount of fraudulent and improper payments under the Individual Assistance Program alone, for a disaster on the scale of Hurricane Katrina (approximately 2.5 million applications for individual assistance), could save FEMA and U.S. taxpayers hundreds of millions of dollars. Current efforts to combat FEMA fraud have focused only on making it more difficult for future applicants to file fraudulent or improper claims.

FEMA’s only current significant internal controls to identify fraud once it occurs rests within the recoupment efforts of the FEMA National Coordination Team (NCT). No internal FEMA-wide communication and information sharing exists among departments to combat FEMA fraud, and there is no coordinated process for FEMA to communicate identified FEMA fraud to federal and state law enforcement agencies or to assist them in their investigations.

FEMA’s efforts to prosecute FEMA fraud have been limited to strictly ad hoc efforts with the exception of the process instituted by the Litigation Section of FEMA’s Office of Chief Counsel (OCC) in its continuing review of over 7,000 Department of Homeland Security Office of Inspector General (DHS OIG) Hurricane Katrina Fraud Hotline complaints. Using this process, this office has identified as much as $10 million in fraudulent and improper payments and has sent nearly 250 cases to federal investigators for prosecution. Additional successes have occurred at the FEMA Florida Transitional Recovery Office (TRO), where its Fraud Prevention Unit (FPU) has created a process to work in coordination with the local DHS OIG Field Office.

A fully integrated antifraud plan will require the cooperation of various segments of FEMA, including OCC, the NCT, and the Disaster Assistance Directorate, coordinated with the DHS OIG, the Department of Justice (DOJ), FBI, and state and local prosecutors. FEMA must create a single FEMA point of contact (POC) for both communicating potential fraud, waste, and abuse to the DHS OIG and assisting in the investigations of external fraud by either creating a new FEMA headquarters office or by assigning these tasks to an existing headquarters element. This headquarters POC would also assist FEMA elements in establishing and refining coordinated preventive and reactive antifraud plans as well as educating them in how to discover and report possible fraud, waste, and abuse. These functions should also be replicated at FEMA Joint Field Offices (JFOs) and TROs using the template established by the FPU at the FEMA Florida TRO. To properly carry out these functions, it is absolutely imperative that standard operating procedures be established using FEMA’s already existing directions, instructions, and manuals system. Without categorized standard operating procedures, these new processes will lack scalability (specifically the ability to grow quickly in size) and across-the-board consistency, and any resulting improvements and lessons learned will invariably disappear through employee turnover and the passage of time.

Significant savings to FEMA may come from these and other areas:

1. Efficient use of DHS OIG hurricane fraud hotline reports (savings estimated at $10 million to $20 million)
2. Improved education and use of the FEMA field cadre and JFO/TRO staff to identify FEMA fraud in the field
3. Coordinated efforts for criminal prosecution and restitution, or administrative recoupment of damaged or destroyed federal property
4. Deterrent effects of increased prosecution for FEMA fraud through streamlined prosecution practices and more timely reporting

The Current Situation

In the wake of the 2005 Gulf Coast hurricanes, the GAO estimated that approximately 16% of the $6.3 billion in Individual and Households Program payments made by FEMA for Hurricanes Katrina and Rita as of mid-February 2006 were improper or fraudulent. The GAO estimated with 95% confidence that the total amount of improper or fraudulent payments was between $600 million and $1.4 billion.⁴ The GAO study did not include all areas of improper payments and fraud, specifically including those payments that were received by those who were not entitled to rental assistance and those who received assistance even though their property was not damaged. Independently, through its own recoupment process, FEMA had identified $290 million in improper payments as of November 2006.⁵

Currently there is no FEMA-wide process to manage both proactive fraud prevention and denial along with reactive fraud processes. Recent efforts have focused primarily on improving the ability of the FEMA Individual and Households Program registration process to weed out fraudulent claims as they are presented by disaster aid applicants. This has been done through a variety of means, including the use of Choicepoint to verify intended aid recipients as well as reductions in the Expedited Assistance program budget, which can be targeted very easily and is one of the hardest programs to defend against fraud. To maximize the effectiveness of these fraud prevention and denial processes, and to capture those fraudulent acts that manage to evade these barriers, FEMA must implement a process to combat these acts after they occur in order to protect federal assistance funds for their intended use to help disaster victims.

For example, in September 2006, FEMA OCC began a comprehensive program to review the over 7,500 DHS OIG complaints and reports that have been referred to FEMA since Hurricane Katrina. Well over 90% of these complaints are direct referrals from the DHS OIG Katrina Fraud Hotline. Despite the fact that most complaints were over a year old, this program reviewed over 5,000 complaints and reports, identified over $10 million in possibly fraudulent or improper payments, and referred nearly 250 cases to law enforcement authorities. These referrals led directly to numerous indictments that have so far involved over $150,000 in fraudulent payments and should continue to grow as investigations carry on.

Anecdotal evidence suggests that if a comprehensive program incorporating the assistance of the DHS OIG and FEMA programs had been in place before August 2005, these numbers could more than double, the most glaring example being the ability to investigate fraudulent claims for personal belongings in as near to real time as possible. However, the review of DHS OIG hotline complaints is only one of five identified “inputs” that can potentially identify fraud in the performance of duties. To respond to these pressures, it is imperative that FEMA create an integrated proactive and reactive antifraud plan for funds distributed under the authority of the Stafford Act and as otherwise dispersed by FEMA, including the participation of the DHS OIG, FEMA OCC, Individual Assistance, Public Assistance, NCT (Individual Assistance), Security, JFOs, TROs, and various grants and mitigation programs.

Concept of Operations

Fraud Identification

Five potential sources or inputs have been identified that may uncover evidence of FEMA fraud:

1. DHS OIG Hotline complaint
2. Information developed independently by law enforcement authorities, including the DHS OIG, FBI, and state and local law enforcement
3. Information developed by the FEMA field cadre located at JFOs and TROs
4. FEMA’s NCT during intake, review, and inspection of disaster assistance applications
5. Other FEMA headquarters elements

A process needs to be developed to address fraud identified by each of these inputs, resulting in either civil recoupment or criminal restitution of those funds fraudulently or improperly paid.

Building Blocks

Three building blocks already operating within FEMA have been identified as having functions consistent with a comprehensive antifraud plan:

1. FEMA OCC Litigation Section, DHS OIG Complaint and Reports Review Unit.
2. FEMA NCT’s review of disaster assistance applications, the National Emergency Management Information System management, and supervision of contracted disaster housing inspectors.
3. The FPU located at the Florida Long-Term Recovery Organization (LTRO) in Orlando. Other building blocks may exist within FEMA, such as the OIG-GAO liaison and the newly created Law Enforcement Liaison, both located in the Office of the Director. The operations of these building blocks must be transparent to provide a fully integrated fraud prevention and prosecution policy.

Tasks

1. DHS OIG Hotline complaints. One of the fraud control measures used by the DHS OIG is a hotline to report fraud, waste, and abuse. DHS OIG hotline(s) currently allow for the submission of complaints via phone, email, and fax. At some point after their receipt, the complaints are reviewed by the DHS OIG, and each is assigned a control number and given a cover sheet.

Before the 2005 Gulf Coast hurricanes, it is believed, the DHS OIG received around 50 complaints per month that would be eventually forwarded to FEMA. After the hurricanes, the average number of complaints soared; in July 2006, FEMA OCC received over 1,000 complaints forwarded by the DHS OIG. Now it appears that the number of complaints sent to FEMA averages around 250 per month. The thoroughness and exact process of DHS OIG review of these hotline complaints is unknown; however, of the more than 5,000 complaints reviewed by FEMA OCC from August 2006 to May 2007, approximately one-fourth appeared to have enough merit to require FEMA recoupment or criminal prosecution for FEMA fraud.

In response to the marked increase in volume of complaints forwarded to FEMA, OCC instituted a process to review each complaint. Each was initially logged and given a quick preliminary screening to see whether it involved possible employee misconduct or excessive amounts of FEMA fraud. Complaints were then reviewed in the chronological order they were received. Using the National Emergency Management Information System, Lexis/Nexis people search, Internet search engines such as Google and Yahoo, and occasionally phone interviews with the complainants, FEMA OCC was able to determine whether the complaints had merit. Using one attorney with a part-time administrative assistant, this process can average as many as 80 complaints per day while maintaining an acceptable level of review.

Besides the need to thoroughly review each complaint, timeliness is a significant issue. The average time between the receipt of these hotline complaints by FEMA DHS and their eventual passage to FEMA OCC was approximately 3 to 6 months after the 2005 hurricanes. A significant number of these reports were a year or more old. This lag time resulted in a significant number of complaints being discarded from further review because of their staleness.

The most common category of these complaints alleged that disaster assistance applicants used preexisting, nonexistent, or self-inflicted damage to make property damage claims to FEMA. The prosecution or recoupment of this type of FEMA fraud is perishable, and only by immediate review and field inspection can the complaints be adequately investigated. It is believed that if complaints alleging fraudulent property claims could be forwarded to FEMA within a week of their initial receipt by the DHS OIG, a significant amount of FEMA fraud could be prevented, recouped, or prosecuted. Anecdotal review of the initial 5,000 complaints reviewed by FEMA OCC after the 2005 hurricanes shows that an additional $1 million to $4 million in property claims might have merited recoupment or criminal prosecution.

These complaints have proven to be a treasure trove of information, and the review of the first 5,000 identified over $10 million in federal disaster assistance that may have been improperly paid to applicants. However, through additional improvements in the review process, this amount could increase by as much as $10 million per 5,000 complaints.

First, if the DHS OIG is unable to contribute the current level of review performed by FEMA OCC within a week of the complaints’ receipt, they should be immediately referred to FEMA OCC. During this period of one to seven days, the DHS OIG would have some level of immediate review to screen out reports of internal fraud and other complaints for which it wished to retain jurisdiction.

Second, to prevent duplicative investigation, those complaints retained for investigation by the DHS OIG would not be forwarded to FEMA OCC until after their conclusion. Currently, this is not always the case, and several times FEMA OCC has investigated complaints only to determine that the DHS OIG or other federal authorities were already investigating the complaint. For those complaints that the DHS OIG is investigating, that information could be reflected on the cover sheet attached to every complaint. Cover sheets currently have a “Box 1—Complaint being investigated” and “Box 3—Complaint forwarded for agency review,” but on multiple occasions it has been determined that complaints with box 3 marked were in fact being investigated.

Third, a comprehensive POC for prosecuting FEMA fraud must be developed for FEMA by the DHS OIG and the DOJ and local U.S. attorneys. Conversely, FEMA needs to have its own single headquarters POC to communicate with counterparts. In the case of large-scale disasters this might entail a POC for federal law enforcement agencies within a standalone task force set up to prosecute fraud out of a single disaster or series of disasters, as was done after Hurricanes Katrina and Rita. For all other disasters, a generic POC for one or all of these law enforcement agencies needs to be established. One solution would be to have a single POC within the DHS OIG dedicated to FEMA who could serve as a conduit for FEMA fraud uncovered by the agency. This POC would then contact the relevant U.S. attorneys or state district attorney to prosecute the case. Another solution would be for a POC to be designated in each DHS OIG Field Office. For instance, if a complaint that resulted from a flood in Illinois was determined to merit prosecution, FEMA OCC would contact the relevant POC in the DHS OIG Chicago Field Office, who would then be responsible for contacting the office of the local U.S. attorneys or for requesting additional investigative resources. These POCs could be used to implement the proposed plan to establish single POCs for FEMA JFOs and TROs and DHS OIG Field Offices.

Since FEMA has no official law enforcement or investigative ability, all complaints forwarded for prosecution require a formal investigation by either the DHS OIG or another federal enforcement arm. FEMA can only identify FEMA fraud on its own, and it requires the active participation of the DHS OIG, the DOJ and occasionally state prosecutors to close the loop.

Fourth, law enforcement and investigative authorities need to provide FEMA OCC feedback on those complaints forwarded for possible prosecution. Without continued communication, FEMA OCC will not be able to further refine its review process and be able to fully determine the efficiency of its review and whether it is forwarding cases appropriate for criminal prosecution as opposed to possible administrative recoupment by the FEMA NCT.

2. Information developed independently by law enforcement authorities, including the DHS OIG, the FBI, and state and local law enforcement. The majority of FEMA fraud is reported to or uncovered by federal and state law enforcement authorities. FEMA has two roles it must fulfill to fully support the investigations developed by these authorities.

First, it must have a single POC to respond to requests for information. Having a single POC within FEMA at headquarters will prevent duplication of efforts and engender more efficient communication. This same conduit should also be used for fraud uncovered by FEMA to be reported to the DHS OIG.

Second, for those cases investigated by law enforcement authorities and not prosecuted but appear to meet an administrative level of enforcement—that is, the FEMA NCT’s recoupment process—there needs to be a line of communication between these enforcement agencies and FEMA to ensure that these cases are not lost once the appropriate enforcement agencies determine that criminal prosecution is not appropriate. This process could mirror or piggyback on the current provision of hotline complaints from the DHS OIG to FEMA but with improved response times of less than a week, once a decision had been made by the DHS OIG not to forward the case for prosecution.

To establish inter-governmental communication is just as important as to support independent investigations. For example, shortly after Hurricane Rita, a senior Army non-commissioned officer discovered that one of his soldiers had fraudulently received nearly $800 in federal disaster assistance even though he had been living in base housing at Fort Polk. After Army attorneys advised the officer to seek federal assistance in prosecuting the soldier, the officer was unable to find a direct line of communication to either the DHS OIG or another law enforcement agency. Ultimately he was directed by the local FEMA Area Field Office to file a complaint with the OIG Hurricane Fraud Hotline in January 2006. It was not until May 2007 that OCC was able to review the complaint, contact the acting sergeant major for the army hospital at Fort Polk, and determine that not only was OCC still interested in assisting with any prosecution of the soldier but had never been contacted by any federal agency.

There must be a single POC within FEMA or within DHS OIG for FEMA fraud, reachable by other government agencies without going through a generic hotline. Not surprisingly, the DHS OIG’s own auditing staff attached to the FEMA NCT through the spring of 2006 had no direct line to their own investigative staff, and they too were directed to send their information to the Hurricane Fraud Hotline, where it appears that few of their complaints were adequately reviewed. By establishing a direct line of communication between single POCs for FEMA, the DHS OIG, and possibly the DOJ, these cracks in the system can be sealed.

Finally, state, and local law enforcement agencies need to be educated about FEMA’s various assistance programs to allow them to prosecute individuals as necessary. Numerous state prosecutors have prosecuted not just FEMA fraud, but other ancillary crimes such as identity theft. It is recommended that ultimately federal law enforcement agencies need to determine which types of FEMA fraud and related criminal cases are best prosecuted by local authorities and to educate these authorities as to what they are. These state prosecutors should receive the same support and FEMA POC as federal prosecutors. A FEMA headquarters POC could provide these agencies with the educational tools and resources to both educate prosecutors at the state and federal levels and to assist them in their prosecution of FEMA fraud.

3. Information developed by the FEMA field cadre located at JFOs and TROs. During their lifespan, JFOs, TROs, and LTROs invariably uncover instances of FEMA fraud that result in the waste and abuse of federal resources and property—for example, the improper use of, damage to, or even outright theft of travel trailers provided by FEMA. DHS OIG Instruction 0810.1 requires FEMA elements who uncover instances of fraud, waste, or abuse to provide this information to the DHS OIG. There is currently no formal process within FEMA for field assets to report this type of information. However, in the past year, FEMA’s Florida LTRO has created an FPU run by a retired law enforcement officer; the LTRO has created a template that might significantly improve the use of this information. If an FPU had been a part of the initial response to Hurricanes Katrina and Rita in Louisiana, it likely would have prevented an incident such as the one at the Fort Polk Army Hospital.

The Florida LTRO has created the FPU to educate and work with elements of the LTRO to discover external fraud, waste, and abuse in cooperation with the local DHS OIG Field Office. In addition, with the approval of the DHS OIG Field Office, the FPU has pursued initial investigations into reported fraud. This has created a two-way relationship that allows the FPU to provide direct support to the DHS OIG and gives the LTRO a direct conduit to report potential fraud, waste, and abuse to the federal officers with the jurisdiction and assets to respond to such reports. FPU operations in the past year have either prevented the ineligible disbursement of, or targeted for recoupment, $4.5 million in disaster assistance funds.

This integrated FPU and DHS OIG Field Office team has been a force multiplier for FEMA. The DHS OIG Field Office knows who it needs to contact for all assistance and information requests, and the JFO has the ability to make real-time reports of fraud, waste, and abuse. In addition, members of the JFO now have a ready resource in the FPU to report questionable activities or to refer questions about fraud, waste, and abuse and receive an immediate response without tying up DHS OIG resources. With proper education, instead of limiting fraud detection to a few members of the DHS OIG, FEMA fraud detection now has the eyes of the entire LTRO.

The template created by the Florida FPU also has the advantage of scalability. The FPU’s functions can be recreated for both larger and smaller disasters. For instance, after a small flood with a few hundred or few thousand applicants, the establishment of a standalone FPU may not be an economical use of assets. However, the FPU functions can be assigned to a member of the JFO as a collateral duty. The OCC field attorney cadre, FEMA security, or the Office of the Chief of Staff are normally staffed with individuals who have the background and skills to perform the tasks of the FPU.

In small disasters, the FPU’s functions could be accomplished by assigning one person, such as the FEMA JFO Security Officer or an assigned OCC field attorney, who (upon deployment) would contact the local DHS OIG Field Office and explain the liaison and detection role. Concurrently, the same person would make sure of JFO-wide visibility to guarantee that members of the JFO know who the POC should be for reporting all incidents of external fraud, waste, and abuse. In a large-scale disaster involving millions of individual applicants and thousands of public assistance applicants, the FPU can become a standalone unit and receive additional staffing to accomplish its functions under the increased workload. This unit could report to the established OCC or FEMA Security Field Office or directly to the JFO Chief of Staff.

Besides cooperating with each other, the JFO FPU and the local DHS OIG Field Office should have their corresponding headquarters fraud POC. This would complete the integrated loop between FEMA and the DHS OIG and presumably create a structure for FEMA to work with and through the OIG counterpart to access state and federal prosecutors.

4. FEMA’s NCT during the intake and review of disaster assistance applications. Currently the NCT has come the closest to creating an integrated antifraud program. Recent changes implemented by the Disaster Assistance Directorate have reduced the amount of funds most likely to be targeted by fraud and have closed many of the loopholes that allowed many ineligible persons to receive FEMA funds. However, improvements can be made to create a truly comprehensive antifraud process. For FEMA to maximize the amount of resources it can provide to eligible disaster applicants, it is impossible to create a system that will prevent every ineligible or fraudulent applicant from receiving assistance. Therefore there is an ongoing need for an established and continuing comprehensive antifraud program.

First, NCT needs to establish a way to measure the success and efficiency of its recent improvements to prevent fraudulent or unauthorized payments. For example, the OCC Litigation Section DHS OIG Complaint and Reports Review Unit, in conjunction with the DHS OIG Field Office, discovered a FEMA fraud ring responsible for approximately 95 fraudulent applications for disaster assistance. Fortunately, only about 43 applications actually received assistance. If the NCT could determine why they were able to successfully stop about half of this fraud ring from receiving assistance, they could update their processes, including the use of scripts to scrub disaster applications entered in the National Emergency Management Information System, so as to further improve their efficiency in future disasters. One possibility would be to create a way to identify suspicious correlations between a group of specific disaster addresses and a specific group of applicant addresses (in the above case, all of the “applicants” used false addresses on the same street in New Orleans, and all had current addresses in a major city). This ability to measure its current efforts could also lead to more efficient ways to test the system’s ability to prevent fraudulent or ineligible payments in future disasters.

Second, like the rest of FEMA, the NCT needs to have a direct reporting mechanism when it identifies FEMA fraud. Before the creation of the OCC Litigation Section DHS OIG Complaint and Reports Review Unit, the NCT had no direct way to report FEMA fraud. Reports were either forwarded to their attached OIG Audit staff and emailed to the Katrina Fraud Hotline, or emailed directly by the team. Clearly, FEMA fraud discovered by the NCT or other government agencies is much more likely to pan out than that reported by the general public for reasons such as the government’s greater awareness of FEMA programs and activities. The NCT needs to have a fixed POC to report FEMA fraud immediately to maximize FEMA’s ability to restore disaster funds that were incorrectly paid out to ineligible applicants.

Third, the NCT needs to make greater use of its role in supervising its field inspector cadre. FEMA-contracted field inspectors are likely the only realistic option in identifying fraudulent property claims. Due to the perishable nature of fraudulent property claims, time is of the essence in identifying them. For instance, one hotline report reviewed by the OCC Litigation Section DHS OIG Complaint and Reports Review Unit alleged that one person used a forklift to overturn a dilapidated mobile home after Hurricane Katrina in order to receive additional FEMA assistance. Since the report was reviewed a year after the incident allegedly occurred, there was no reasonable chance of verifying its veracity. However, if the DHS OIG were able to send reports such as this one to FEMA within days of their receipt, the OCC Litigation Section DHS OIG Complaint and Reports Review Unit could forward the information to the NCT. The NCT could then, through a National Emergency Management Information System entry or some other means, alert field staff to the alleged actions. In this case it would have been likely that tracks leading to the mobile home and other marks could have been identified within a certain time after the disaster. Housing recertification teams could also perform a similar role.

5. Other FEMA headquarters elements. Individual assistance is not the only FEMA program that is subject to fraud, waste, and abuse. The review of DHS OIG hotline complaints has included inquiries by the OCC Litigation Section DHS OIG Complaint and Reports Review Unit to FEMA grant programs, Mitigation, and the Public Assistance Directorate. Simply put, any FEMA activity that provides assets or funds to individuals or public entities, or requires the acquisition of services and infrastructure, is potentially subject to fraud, waste, or abuse by external parties. This is why it is crucial that FEMA have a single headquarters POC for such cases: to prevent stovepiping within various FEMA entities.

Should these other FEMA elements discover or have questions about possible fraud, waste, and abuse, they would have a corresponding POC in FEMA headquarters. Further, should these other headquarters elements have persons who are assigned outside of FEMA headquarters and are not part of an organization with its own FPU or person assigned those tasks, a possible example being FEMA Regional Offices, they would be able to report questionable conduct or questions to their own headquarters staff, who could then alert their headquarters fraud counterpart.

Finally, each distinct FEMA element should develop its own preventive and reactive fraud plan in conjunction with the single FEMA headquarters fraud POC. The headquarters POC could provide education and assistance in creating these plans and could provide feedback on their effectiveness.

Enhancement of Abilities

To carry out a comprehensive proactive and reactive antifraud program, a number of processes must be implemented to support and carry out its assigned functions. The guiding principle behind these enhancements is “Behind every short-term fix is a long-term solution.”

1. Use of FEMA’s Internal Directives System 5100.1. To carry out a comprehensive antifraud plan within FEMA, it is absolutely imperative that its functions be memorialized and updated through use of FEMA Directive 5100.1. A comprehensive FEMA-wide antifraud program cannot adequately function without its wholehearted implementation. FEMA’s mission is open-ended; in other words, as an organization, it has no final end state. Disasters, both natural and manmade, will continue to affect the United States. Accordingly, personnel will both enter and exit FEMA through its continuing operation. If their knowledge is not captured in a systematic way that can be easily accessed and updated, then their resident knowledge will leave FEMA with them. Implementing wide-scale use of the Internal Directives System will allow FEMA employees to create a freestanding knowledge system that will survive their attrition and turnover.

Second, the Internal Directives System promotes consistency of action. By having a single, current, updated source of direction, disparate FEMA elements around the country will have the ability to make decisions based on the same criteria. This would create savings in time spent coordinating actions and provide fewer chances for outside legal intervention against FEMA for purportedly providing different answers for issues that appear to be essentially the same.

Third, it creates a knowledge platform that can readily accept lessons learned from ongoing operations. Once issues have been addressed and processes established to deal with their reoccurrence, the applicable category established in the directives systems can be located and either updated or expanded. An example would be the establishment of a field manual for all FEMA personnel or contractors who operate disaster housing sites. Within this field manual would be a section setting forth what actions to take if unauthorized persons were found to be living in FEMA housing. Another section could detail what actions should be taken when damage to units is discovered. The actions detailed in this manual would be scrubbed by OCC to ensure that their implementation would maximize the chance for monetary recovery of damages and to support criminal prosecution if warranted.

Fourth, it promotes the interagency exchange of information and coordination of efforts. By requiring all parts of FEMA to follow the same knowledge platform through the directives system, it will allow multi-disciplinary portions of FEMA (OCC, for example), to quickly access information on other FEMA operations without having to gain unique knowledge about how each FEMA program stores and disseminates its established information for their operation. It would also improve the transparency of operations among FEMA programs.

2. A consolidated education program targeting the identification and prosecution of FEMA fraud. With the assistance of the Emergency Management Institute and likely the DOJ and the DHS OIG, FEMA needs to establish a program to educate relevant persons about how to spot, investigate, and prosecute FEMA fraud. The target audience would include

1. All FEMA personnel, with particular importance placed on field personnel and field inspectors, including contracted personnel
2. State emergency management personnel
3. Federal law enforcement agencies
4. State law enforcement agencies
5. Federal prosecutors
6. State prosecutors
7. The general public

Education for each target class would be specialized. For instance, federal law enforcement and prosecutors already know the nuts and bolts of what leads to successful prosecution for fraud against the government. However, FEMA has the expertise on what constitutes valid assistance as provided under the Stafford Act and other statutes implementing its operations, and thus it can help inform prosecutors of FEMA programs and operations. This would be of even more assistance for state and local prosecutors and law enforcement officials who may rarely come across FEMA programs until they are directly affected by a disaster. Further, this would provide the opportunity for state and federal prosecutors to determine how best to divide up the prosecution of FEMA fraud, creating a combined FEMA-DHS OIG-DOJ policy on integrating the use of state and local prosecutors and assets for this purpose.

The Emergency Management Institute would provide the framework to offer these classes. The institute could also provide workshops and forums bringing together these target audiences to promote the exchange of ideas on how best to combat FEMA fraud and allow these groups to learn both the abilities and limitations of each. FEMA Public Affairs could also assist in educating the general public by increasing the awareness of FEMA programs; invoking the general citizenship aspect of reporting fraud, waste, and abuse; and publicizing FEMA’s successes at identifying and rooting out fraud, waste, and abuse, which has the additional function of deterring future FEMA fraud.

3. A formal eviction and termination program to limit the use of FEMA-provided housing to authorized persons. FEMA has avoided creating a formal policy on the eviction of and termination of assistance to authorized occupants who subsequently violate FEMA regulations, as well as unauthorized occupants. A formal process would require a standardized system to determine what violations require the termination of housing assistance to occupants and to determine who is an unauthorized occupant. Second, it would require the incorporation of federal and possibly local law enforcement and judicial authorities to carry out these terminations and evictions. This issue is particularly amenable to standardized processes, as similar problems will continue to arise in numbers that could eventually reach thousands of cases. It is essential to have a standard process that integrates the use of local U.S. attorneys and FEMA OCC attorneys as special assistant U.S. attorneys to bring cases to court. Special assistant U.S. attorneys are already used with great success by the Defense Department at military installations worldwide, and there is no compelling reason why this program could not be replicated by FEMA and the DOJ.

Once court orders were issued for eviction, coordination with federal law enforcement (for example, the U.S. Marshals Service) would form the linchpin of an integrated system. Creating an integrated system using all these assets would likely allow FEMA to perform dozens or even hundreds of evictions at a time if necessary. It is also likely that if such an integrated system were created, it would rapidly create a deterrent effect that would result in far fewer court-ordered evictions. Creating a standard process would also give FEMA the best chance of surviving legal challenges to this process and enable it to incorporate any court-ordered changes or modifications to its methods. Such a program could substantially reduce losses due to damage to housing units provided by FEMA (a number that likely reaches into the hundreds of millions after Hurricanes Katrina and Rita) and provide increased safety to authorized occupants of FEMA housing units.

4. Formal implementation of the Program Fraud Civil Remedies Act (PFCRA). For FEMA fraud cases that are not criminally prosecuted or pursued by civil action in Federal courts by the DOJ, and in which the perpetrator has a significant amount of assets, use of PFCRA may be justified. For instance, hotels and other businesses that overbill FEMA, or professionals such as doctors and attorneys who have an ability to pay the large judgments available under PFCRA, may justify the additional resources needed to implement a successful PFCRA prosecution.

To carry out PFCRA, OCC will need to arrange the use of one or more administrative law judges (likely through the use of a memorandum of agreement with another federal agency), obtain the necessary delegations of authority from DHS and the DHS Office of General Counsel, obtain the cooperation of the DHS OIG as required under PFCRA, and make the necessary logistical preparations required for PFCRA hearings held around the country. Standard operating procedures and instructions consistent with PFCRA implementation by FEMA would also be necessary. Currently, the only federal agency that makes regular use of PFCRA is Housing and Urban Development; however, its limited activities bring in well over $1 million per year. It is believed that if FEMA fully implemented PFCRA for a Katrina-sized disaster, FEMA could return far in excess of $1 million in disaster funds and penalties that would not normally be recovered by other means.

Administration and Logistics

The actual cost of implementing a comprehensive plan would likely be minimal. The essence of a comprehensive antifraud plan is that it is a force multiplier, and it brings efficiency and direction to already existing elements to obtain results. The single headquarters POC could be created using existing personnel in a small standalone office, certainly using a half dozen persons or fewer. The largest cost to FEMA would be in the time devoted to the antifraud program in the added functions and responsibilities given to existing departments and programs. However, it is anticipated that the savings to FEMA in time, money, and good press obtained by implementing a comprehensive program would far outweigh the additional time and resources devoted to it. Additional costs could arise from dedicating personnel at the Emergency Management Institute to implementing FEMA fraud education programs. In fact, it is probable that such a plan would pay for itself. The efforts of the OCC Litigation Section DHS OIG Complaint and Reports Review Unit and the FPU, assigned only three persons, have now identified as much as $15 million in ineligible, fraudulent, or potential payments.

JFOs and TROs would have additional functions and responsibilities under an antifraud plan. These functions would need to be carried out by existing personnel or by new personnel as in the FPU in Florida.

Command and Responsibility

Ultimately, responsibility for a comprehensive FEMA wide antifraud plan must lie within FEMA headquarters. The two most likely candidates for receiving this responsibility would be the Chief Counsel or a new FEMA Antifraud Coordinator who would be a member of the Office of the Administrator. Other possible candidates would be the Office of the Law Enforcement Advisor to the Administrator or the FEMA Headquarters OIG/GAO Liaison.

Once the responsibility for FEMA’s antifraud efforts has been established, reporting chains of command will also have to be created. These reporting chains will not only have to incorporate programs and directorates within FEMA, including FEMA headquarters, regions, and JFOs and TROs, but also agencies external to FEMA, such as the DHS OIG and the DOJ.

Finally, established reporting processes and chains must be established between these disparate elements. Specifically, a reporting process needs to be formalized for each of the five identified fraud inputs and any other input that is discovered through the implementation of a comprehensive FEMA-wide antifraud plan.

References

Click on an end note number to return to the article.

1. 6 U.S.C. §795.

2. 6 U.S.C. §797.

3. U.S. Government Accountability Office, “Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially Fraudulent Individual Assistance Payments Estimated to Be Between $600 Million and $1.4 Billion,” statement of Gregory D. Kutz, Managing Director, Forensic Audits and Special Investigations, and John J. Ryan, Assistant Director, Forensic Audits and Special Investigations, testimony before the U.S. House of Representatives Subcommittee on Investigations, Committee on Homeland Security, June 14, 2006, GAO-06-844T.

4. GAO, “Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially Fraudulent Individual Assistance Payments Estimated to Be Between $600 Million and $1.4 Billion.”

5. U.S. Government Accountability Office, “Hurricanes Katrina and Rita Disaster Relief: Continued Findings of Fraud, Waste, and Abuse,” statement of Greg Kutz, Managing Director, Forensic Audits and Special Investigations and John J. Ryan, Assistant Director, Forensic Audits and Special Investigations, testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs, GAO-07-252T, December 6, 2006.