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Hurricane Katrina: Ineffective FEMA Oversight of Housing Maintenance Contracts in Mississippi Resulted in Millions of Dollars of Waste and Potential Fraud

GAO-08-106 Published: Nov 16, 2007. Publicly Released: Nov 16, 2007.
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Hurricane Katrina destroyed or damaged 134,000 homes and 10,000 rental units in Mississippi alone. The Federal Emergency Management Agency (FEMA) in part responded by providing displaced individuals with temporary housing in the form of mobile homes and travel trailers, placed on both private property and at FEMA-constructed group sites. In 2006, FEMA awarded 10 contracts in Mississippi to maintain and deactivate (MD) the housing units and 5 for group site maintenance (GSM). GAO was asked to investigate whether there were indications of fraud, waste, and abuse related to FEMA's oversight of these 15 contracts. GAO analyzed FEMA's issuance of task orders, tested a representative sample of monthly maintenance inspections payments, prepared case studies detailing the costs related to trailers placed at group sites, and investigated improper activity related to the contracts.

FEMA's ineffective oversight resulted in an estimated $30 million in wasteful and improper or potentially fraudulent payments to the MD contractors from June 2006 through January 2007 and likely led to millions more in unnecessary spending beyond this period. For example, FEMA wasted as much as $16 million because it did not issue task orders to the contractors with the lowest prices. In addition, GAO estimates that FEMA paid the contractors almost $16 million because it approved improper or potentially fraudulent invoices. This amount includes about $15 million spent on maintenance inspections even though there was no evidence that inspections occurred and about $600,000 for emergency repairs on housing units that do not exist in FEMA's inventory. Furthermore, FEMA's placement of trailers at group sites is leading to excessive costs. FEMA will spend on average about $30,000 on each 280 square foot trailer at a private site through March 2009, the date when FEMA plans to end temporary housing occupancy. In contrast, expenses for just one trailer at the Port of Bienville Park case study site could escalate to about $229,000---the same as the cost of a five bedroom, 2,000 square foot home in Jackson, Mississippi. Part of the reason for this expense is that FEMA placed only eight trailers at the Bienville site. FEMA wastes money when it operates sites with such a small number of trailers because GSM costs are fixed whether a site contains 1 or 50 trailer pads. At Bienville, FEMA spends over $576,000 per year--$72,000 per trailer--just for grounds maintenance and road and fence repair. GAO also found evidence of improper activity related to the contract award process. For example, FEMA awarded GSM contracts to two companies that did not appear to have submitted independent bids, as required. These companies shared pricing information prior to submitting proposals to FEMA and also shared the same president and accountant. Personnel at both companies also misrepresented their job titles and functions, a potential violation of the False Statements Act. In another case, FEMA's contracting officer awarded a $4 million contract to make the temporary housing units disabled-accessible; the contracting officer allegedly had a previous relationship with the awardee's subcontractor. GAO licensed engineers estimated that the work should have only cost about $800,000, or one-fifth of what FEMA ultimately paid.


Recommendations for Executive Action

Agency Affected Recommendation Status
Federal Emergency Management Agency With regard to the 10 maintenance and deactivation (MD) and 5 group site maintenance (GSM) contracts in Mississippi that we investigated for this report, FEMA should assess whether the contractors were overpaid and, if so, establish procedures to collect overpayments or offset future payments.
Closed – Implemented
FEMA concurred with the recommendation and in June 2013 told us that the agency had developed a plan to assess contractor overpayment, started the collection process in December 2008, and completed its assessment. According to FEMA, the agency's Office of the Chief Financial Officer monitors the invoicing process to ensure overpayments are identified and that funding streams are recaptured through other efforts, such as the de-obligation of funds and prompt cancellation of contracts.
Federal Emergency Management Agency For the current MD and GSM contracts in Mississippi and for any temporary housing unit contracts arising from future disasters, FEMA should place a greater emphasis on issuing task orders to the companies with the capability to perform the most work at the lowest cost.
Closed – Implemented
FEMA concurred with our recommendation and stated that it reallocated work under the GSM contracts on a "low price basis per site" and under the MD contracts on a "best value basis." In January 2008, FEMA told us that it had issued a Task Order Proposal Request to each of the five contractors referred to in the recommendation who were awarded GSM contracts for a base period and four 1-year options. Towards the end of the base period of performance and in following years, FEMA conducted a re-compete. FEMA said it also awarded six task order contracts to design, install, maintain, manage and deactivate housing units or group housing sites on a full and open competitive basis. In December 2013, FEMA indicated it no longer uses the contracts referenced in our report.
Federal Emergency Management Agency For the current MD and GSM contracts in Mississippi and for any temporary housing unit contracts arising from future disasters, FEMA should conduct a complete inventory of mobile homes and trailers, create a comprehensive database, and establish procedures to link work assigned to the contractors with specific unit barcodes to provide reasonable assurance that work is being performed on FEMA-owned housing units.
Closed – Implemented
In July 2014, FEMA told us that its Logistics Management Directorate maintains comprehensive inventory accountability of manufactured housing units, including barcodes. Although maintenance is manually documented, FEMA said it plans to transition to an automated process in the near future. According to FEMA, upon deployment in a disaster, the housing units are overseen by the appropriate Joint Field Office and are documented by barcode in an automated system that tracks and manages the relationship between applicants and temporary housing units.
Federal Emergency Management Agency For the current MD and GSM contracts in Mississippi and for any temporary housing unit contracts arising from future disasters, FEMA should design and implement internal control procedures to enforce the existing payment and invoice review process to provide reasonable assurance that payments are being made for work actually performed.
Closed – Implemented
In January 2008, FEMA reported implementing a number of controls to address acquisition, such as establishing an Acquisition Program Management Office (PMO) that is charged with developing standard procedures for the receipt of goods and services and the payment of invoices; conducting multiple training courses on proper invoicing and appropriate documentation for receipt of goods and services; and improving and automating the invoice approval and payment process. In May 2014, FEMA officials provided additional documentation to support these actions.
Federal Emergency Management Agency To alleviate the excessive costs associated with maintaining travel trailers at group and commercial sites, FEMA should reevaluate the allocation of trailers and work at the sites to determine whether any savings can be achieved and explore creating permanent partnerships with other agencies, such as the current partnership with the Department of Housing and Urban Development, to determine whether there are less expensive housing options that meet the needs of disaster victims.
Closed – Implemented
In January 2008, FEMA reported that it has partnered with the Department of Housing and Urban Development to transition FEMA's rental assistance caseload to HUD's Disaster Housing Assistance Program (DHAP). The agencies entered into an Interagency Agreement (IAA) establishing DHAP, a temporary housing rental assistance and case management program for identified individuals and households displaced by Hurricanes Katrina and Rita. The IAA was renewed in March 2013. FEMA also implemented the Alternative Housing Pilot Program in four Gulf States (Alabama, Mississippi, Louisiana, and Texas) to explore alternative forms of disaster housing, and established an IAA with HUD for this program.
Federal Emergency Management Agency As previously indicated, we have referred all the alleged criminal matters identified in our report to the Department of Justice and the DHS IG for further investigation and we have notified the Katrina Fraud Task Force about our findings. For these cases, FEMA should consider the suspension or debarment of any contractor found to have committed fraud or otherwise violated the law.
Closed – Implemented
The Department of Justice and DHS IG followed up on our referrals but did not pursue legal action and consider these cases closed. Because the contractors were not found to have committed fraud or otherwise violated the law, this recommendation is closed.

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