FEMA overpaid $177M on hurricanes

FEMA overpaid $177M on hurricanes

The federal government overpaid by hundreds of millions of dollars for disaster recovery around the time of Hurricane Katrina, according to a new report from the Department of Homeland Security's Office of Inspector General released Wednesday.

During 2004-2005, the Federal Emergency Management Agency (FEMA) failed to have those affected by seven separate hurricanes, including Katrina, maximize their own private insurance before receiving federal funds, potentially costing taxpayers upwards of $177.2 million, the report found.

FEMA's Florida-based emergency management department, which handled the disaster claims, did an "inadequate" job reviewing insurance plans, providing funds for damages "that insurance should have covered," according to the report. 

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Moreover, "FEMA’s Florida Recovery Office knew about these deficiencies in its insurance review process but did not correct them," the audit found, adding that "since 2010, FEMA management had been aware of potentially significant issues with insurance adjustments relating to disaster assistance in 2004 and 2005."

The new report follows a pair of complaints from early 2011 indicating duplication of benefits and damages that insurance should have covered. Assistant Inspector General John V. Kelly noted that three previous audits of the department "raised similar concerns."

The federal government paid $4.4 billion in assistance following seven hurricanes in Florida over the two years, the report found. Katrina was responsible for less than 5 percent of the money paid out. Hurricane Wilma in October 2005 was by far the costliest, at about $1.5 billion.

Auditors looked at $177.2 million that FEMA approved for 2,088 projects deemed "high risk."

It is unclear if FEMA could recoup the funds given the amount of time since the claims were filed, though the watchdog suggests the department try.

For example, this month FEMA sent letters to nearly 250 people in Colorado who suffered from floods last year, demanding repayment for funds deemed nonessential, Fox News reported.

Additionally, in Florida, the report found that "FEMA’s insurance specialists routinely waived the requirement to obtain and maintain insurance for future disasters, even though they did not have the authority to take such action."

As a result, FEMA could lose up to $1 billion from future disasters in Florida "because many Florida communities may not have adequate insurance coverage for future disasters such as those" in 2004 and 2005, the report said.

The watchdog also suggests that such practices could be happening in other states, because some of the insurance specialists who worked in Florida transitioned to work on disasters such as 2012’s Hurricane Sandy, which battered much of New Jersey and parts of New York, among other states.