Economic Development:

Poor Controls Over Federal Aid in Massachusetts After the 1978 Blizzard Caused Questionable Benefit Payments

CED-81-4: Published: Jan 26, 1981. Publicly Released: Feb 2, 1981.

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In February 1978, the President declared eight Massachusetts' counties a major disaster area following the most severe blizzard to strike the Boston metropolitan area in over 100 years. Federal assistance totalled about $180 million to individuals, businesses, and state and local governments. GAO was asked to review: (1) the adequacy of coordination among the federal agencies to prevent duplicative and other erroneous payments; and (2) delays in the processing of some Small Business Administration (SBA) loans in the February 1978 disaster. Specifically, GAO reviewed disaster benefits provided to victims by SBA, the Federal Emergency Management Agency (FEMA), the Department of Housing and Urban Development, the Department of Agriculture, and the Commonwealth of Massachusetts. This assistance included loans and grants for emergency home repairs and other necessary expenses. Also, emergency food stamps were issued.

In its review, GAO disclosed that: (1) as a result of inadequate coordination and other management weaknesses, duplicative and questionable benefits occurred in an estimated 26 percent of the cases sampled; (2) grants were awarded without adequate determination of financial eligibility or in a manner that was not consistent with other disaster programs; and (3) emergency food stamps were issued without evidence of need or sufficient controls. Additionally, GAO doubts that reasonable safeguards were employed to ensure that only proper disaster benefits were provided and that there was a lack of necessary documentation to follow up on certain cases of suspected fraud and abuse.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA should collaborate with the Administrator of SBA and review the benefits provided to all individuals and identify those persons who received improper payments or submitted fraudulent claims. Criminal or civil actions should be pursued where the agencies, including the Department of Justice, deem it warranted. At the least, attempts should be made to recover duplicative or improper benefits.

    Agency Affected: Federal Emergency Management Agency

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA should collaborate with the Administrator of SBA and review the benefits provided to all individuals and identify those persons who received improper payments or submitted fraudulent claims. Criminal or civil actions should be pursued where the agencies, including the Department of Justice, deem it warranted. At the least, attempts should be made to recover duplicative or improper benefits.

    Agency Affected: Federal Emergency Management Agency

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA and the Administrator of SBA should eliminate the use of oral declarations that a loan cannot be repaid as a basis for denying loans, which establishes grant eligibility.

    Agency Affected: Small Business Administration

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA and the Administrator of SBA should eliminate the use of oral declarations that a loan cannot be repaid as a basis for denying loans, which establishes grant eligibility.

    Agency Affected: Small Business Administration

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA and the Administrator of SBA should ensure that federal disaster benefits are provided and spent only for verified losses or needs.

    Agency Affected: Federal Emergency Management Agency

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA and the Administrator of SBA should ensure that federal disaster benefits are provided and spent only for verified losses or needs.

    Agency Affected: Federal Emergency Management Agency

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of FEMA should: (1) issue instructions requiring that, before authorizing grants to purchase replacement vehicles, a determination be made concerning the adequacy of public transportation; (2) stop awarding grants for transportation when a disaster victim has already obtained a disaster loan for the same loss; and (3) generally base grants to purchase replacement vehicles on the average market value of the vehicle claimed as a loss or on a flat amount, whichever is lower.

    Agency Affected: Small Business Administration

 

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