A Congressional investigation found that the Federal Emergency Management Agency paid out an estimated $1 billion inappropriately after Hurricanes Katrina and Rita, but to date has recovered less than one percent of that amount.

Government Accountability Office investigators testified (PDF) at a hearing Wednesday that in addition, FEMA is still sending out tens of millions of dollars in inappropriate aid payments through its Individuals and Households Program, which provides rental assistance to people displaced due to natural disasters.

“These payments include $17 million in rental assistance paid to individuals to whom FEMA had already provided free housing through trailers or apartments,” GAO managing director Greg Kutz testified before the Senate Committee on Homeland Security and Governmental Affairs. In addition, “FEMA made nearly $20 million in duplicate payments to thousands of individuals who claimed damages to the same property from both hurricanes Katrina and Rita. FEMA also made millions in potentially improper and/or fraudulent payments to nonqualified aliens who were not eligible for IHP.”

FEMA has so far identified $290 million in fraudulent and inappropriate payments that it intends to have paid back, but so far has only collected $7 million of that amount. GAO found that FEMA had never contacted many of the people who had received inappropriate payments, including its own undercover registrations.

“Collection of only $7 million of an estimated $1 billion of potentially improper and/or fraudulent payments clearly supports the basic point we have previously made, that fraud prevention is far more effective and less costly than detection and monitoring,” Kutz said.

FEMA says that it has implemented fraud prevention controls, but GAO’s investigation shows that they were ineffective. GAO had not received recoupment notices for any of its five undercover registrations, and recently received yet another $3,200 check for rental assistance on a nonexistent property.

“The stringent controls instituted this past year by FEMA will dramatically improve safeguards and help eliminate processing errors and fraudulent abuse,” Pat Philbin, an agency spokesman, said in a written statement.

But the Government Accountability Office report made it clear that the inappropriate payments continued into this year. For example, 10 residents of an apartment complex in Plano, Tex., collected $46,000 in rental assistance from FEMA through June, even though the City of Plano was paying their rent, with money from the federal agency. — New York Times

So if FEMA isn’t going after individuals to get the money back, who is it going after? Why, the state of Louisiana, of course.

FEMA wants Louisiana to repay a disputed $60 million in money under an assistance program where states reimburse the federal government for part of “other needs assistance,” which provides disaster victims assistance with expenses such as transportation, dental care and funeral expenses. But Louisiana has filed suit in federal court, saying it shouldn’t have to repay the amount because FEMA paid out the money fraudulently. The court will hear arguments in the case Monday.

Louisiana was billed about $384 million and has paid about $320 million. It has deposited the disputed $60 million into a court account.

The disputed figure includes $45 million withheld because the state estimates that about 12 percent of FEMA’s other needs spending went to people who were probably not eligible for it. The estimate is based on a sample of payments examined by the office of Steve J. Theriot, Louisiana’s legislative auditor. The auditor’s office found problem payments among 425 cases it reviewed, according to its Oct. 17 report to the Legislature. . . .

The rest of the contested money, about $15 million, is the state’s share of money that FEMA paid to reimburse people who bought generators. The federal agency says the state approved such payments; the state says it did not. . . .

“Why should we pay 25 cents on the dollar,” he asked, “for errors from making payments to noneligible recipients?” — New York Times

One way or another, we all pay for this fiasco. It makes you wonder if perhaps Wal-Mart could have done better.