Consider it a case of good taxpayer dollars literally being blown away: The Federal Emergency Management Agency spent more than $177 million on hurricane repairs in Florida that should have been paid by private insurance, a new watchdog report has found.
In response to hotline complaints from whistleblowers, the Department of Homeland Security’s inspector general conducted an audit and concluded that FEMA not only overpaid for 2004-2005 hurricane damage in Florida, it also left the government liable for another $1 billion in future disaster costs due to lax insurance reviews.
The report, which was released to the public on New Year’s Eve, found that officials at FEMA had been aware of the insurance discrepancies since 2010 but had done nothing to fix them.
“FEMA’s apparently intentional wastefulness in this case shows a disrespect for taxpayer dollars beyond the general inefficiency that plagues government,” Douglas Kellogg of the National Taxpayers Union told The Washington Times.
Furthermore, investigators cautioned in the report that the issue might not be isolated to Florida.
“FEMA told us that, due to the nature of disaster recovery response, some of the insurance specialists who worked on the Florida disasters transitioned to other disasters, including Hurricane Sandy,” investigators wrote.
“We are concerned that the conditions we identified in this report continue to exist and may be ongoing in some active disasters.”
For failing to hold private insurance companies responsible for disaster relief and knowingly throwing taxpayer dollars to the wind, FEMA wins this week’s Golden Hammer, a distinction from The Times highlighting examples of wasteful or undisciplined government spending.
“Given that taxpayer funds were cynically used when private insurers should have been footing the bill, there should be plenty of bipartisan outrage. And FEMA has no excuse not [taking] action and avoid[ing] potentially up to a billion dollars in further waste,” Mr. Kellogg said.
The Sunshine State experienced catastrophic hurricanes Charley and Katrina in 2004 and 2005, respectively. In total, seven hurricanes hit the state over the two years, causing $45 billion in damages and resulting in roughly $4.5 billion in public assistance funding, according to the report.
In many cases FEMA officials incorrectly determined that insurance was not available to cover rebuilding costs even when the applicant had a policy that did cover the damage.
Auditors reviewed 78 cases while conducting their review. FEMA concluded that 38 of those cases — 49 percent — did not have insurance coverage and therefore provided federal grants.
But the inspector general found that only three of the 38 “no insurance” cases actually had proof that insurance would not cover the rebuilding costs.
Investigators found that costs funded by FEMA might have been duplicated by insurance companies as well.
Critical insurance documentation was missing for several of the cases auditors reviewed. Investigators concluded that FEMA could not have completed valid insurance assessments with missing information, and determined that insurance potentially covered about 91 percent of the FEMA-approved funding.
FEMA also did not dispute insurance companies’ claims over what damage they did and did not cover. Investigators wrote that FEMA should have sought a second opinion from the state insurance commissioner before granting funding.
In addition to the unsupported rebuilding costs, FEMA could be responsible for up to $1 billion in future Florida disasters, because insurance specialists routinely waived the requirement for residents to obtain and maintain insurance for future disasters, even when they did not have the authority to do so.
According to the report, many Florida communities may not have sufficient insurance coverage for future natural disasters like the hurricanes that ravaged the state in 2004 and 2005 because of the insurance waivers.
“The audit report was received on December 19, 2014, and is under review. Our response to the report is due in March 2015, and it would be premature to comment on any actions we may take in response to the report at this time,” a FEMA spokeswoman told The Times in an email.
The inspector general made five recommendations to FEMA, including an order to recover the $177.2 million from private insurance.
This week hasn’t been a good one for FEMA. On Wednesday, the same day the IG report was released, Sen. Tom Coburn, Oklahoma Republican, released his own report detailing outdated FEMA rules that have led to a dramatic increase in disaster recovery spending.
“The current trend, in which the federal government has assumed increasing responsibility for funding disaster recovery, is simply unsustainable,” Mr. Coburn said. “In the past, states have considered the federal government a last resort in the wake of catastrophic events, relied on only under circumstances in which their recovery capacities were truly overwhelmed.”
A review of FEMA’s process for determining when the president should declare a disaster found that, in many cases, bureaucracy and politics, not Mother Nature, were largely responsible for the increasing frequency of declared disasters, according to the report.