<DOC> [109 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:21819.wais] S. Hrg. 109-161 FEMA'S RESPONSE TO THE 2004 FLORIDA HURRICANES ======================================================================= HEARING before the COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIRST SESSION __________ MAY 18, 2005 __________ Printed for the use of the Committee on Homeland Security and Governmental Affairs U.S. GOVERNMENT PRINTING OFFICE 21-819 WASHINGTON : 2005 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas JOHN W. WARNER, Virginia Michael D. Bopp, Staff Director and Chief Counsel Michael L. Stern, Deputy Staff Director for Investigations Joyce A. Rechtschaffen, Minority Staff Director and Counsel Mary Beth Schultz, Minority Counsel Trina D. Tyrer, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Collins.............................................. 1 Senator Lieberman............................................ 5 Senator Coburn............................................... 8 WITNESSES Wednesday, May 18, 2005 Hon. Bill Nelson, a U.S. Senator from the State of Florida....... 8 Richard L. Skinner, Acting Inspector General, U.S. Department of Homeland Security.............................................. 12 Hon. Michael D. Brown, Under Secretary for Emergency Preparedness and Response, U.S. Department of Homeland Security............. 21 Alphabetical List of Witnesses Brown, Hon. Michael D.: Testimony.................................................... 21 Prepared statement........................................... 45 Nelson, Hon. Bill: Testimony.................................................... 8 Prepared statement........................................... 35 Skinner, Richard L.: Testimony.................................................... 12 Prepared statement........................................... 37 APPENDIX Exhibit No. 5, a chart entitled ``Errors Found Through Quality Control Inspections Conducted by PB (389 QC Inspections Total)''....................................................... 75 Exhibit No. 6, ``IHP Daily QC Report''........................... 76 Exhibit No. 7, ``IHP Daily QC Report''........................... 79 Exhibit No. 8, ``IHP Daily QC Report''........................... 86 Exhibit No. 9, ``IHP Daily QC Report''........................... 89 Form Letter from Mr. Brown and Jeb Bush.......................... 90 Hon. Mark Foley, a U.S. Representative from the State of Florida, prepared statement............................................. 92 Hon. E. Clay Shaw, Jr., a U.S. Representative from the State of Florida, prepared statement.................................... 95 Responses to questions for the Record for Mr. Skinner from: Senator Collins.............................................. 97 Questions for the Record for Mr. Brown (responses were not received by press time) from: Senator Collins.............................................. 98 Senator Lieberman............................................ 100 Senator Lieberman on behalf of Senator Sarbanes.............. 106 FEMA'S RESPONSE TO THE 2004 FLORIDA HURRICANES ---------- WEDNESDAY, MAY 18, 2005 U.S. Senate, Committee on Homeland Security and Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 9:32 a.m., in room SD-562, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding. Present: Senators Collins, Coburn, and Lieberman. OPENING STATEMENT OF CHAIRMAN COLLINS Chairman Collins. The Committee will come to order. Good morning. Today, the Committee examines the integrity of the Federal Emergency Management Agency's Disaster Relief Program. Our focus is on FEMA's response to the series of hurricanes that struck southern States last year and the evidence that has emerged of fraudulent claims, wasteful spending, and inefficient management. Disaster assistance programs are vital to those who are the true victims of natural disasters. The critical nature of this assistance makes reports of waste, mismanagement, and outright fraud particularly disturbing. We cannot sweep such allegations under the rug. We must face them head on in order to preserve public confidence in this critical program. Although our focus is on specific events in Florida, this issue has ramifications that are relevant to future disaster relief efforts in all regions of our country. In a span of just 6 weeks in August and September of 2004, Florida was hit by four powerful hurricanes in quick succession. In some parts of Florida, there was tremendous devastation. More than 10 percent of the State's housing stock was damaged or destroyed by the hurricanes, affecting more than 700,000 residents. Property damage exceeded $21 billion, and 117 Floridians lost their lives. A disaster of this scale required a rapid and substantial response. FEMA responded with more than $2 billion in immediate relief to the State. We expect relief in such dire circumstances to be swift and substantial, but we did not expect what came next: No sooner had the 2004 hurricane season ended than Florida newspapers began reporting erroneous payments and widespread fraud in FEMA claims in Miami-Dade County. Nearly 12,600 residents collected more than $31 million in payments from Hurricane Frances, even though that Labor Day storm hit 100 miles to the north. The effect of Frances in Miami-Dade has been described as that of a typical thunderstorm: Some downed trees and power lines. In fact, the Miami-Dade County Office of Emergency Management described the damage from that hurricane as minimal, and the National Weather Service had no reports of flooding. Yet taxpayers bought Miami-Dade residents thousands of television sets, air conditioners and other appliances, from microwave ovens to sewing machines. The taxpayers also bought rooms full of furniture, new wardrobes, and paid to repair or replace nearly 800 cars. It provided rental assistance to people living in undamaged homes. In response to these and other questionable expenditures, the Department of Homeland Security's Office of Inspector General undertook an audit of FEMA's assistance programs in Miami-Dade County for Hurricane Frances. We will hear about that audit later this morning from the acting inspector general, Rick Skinner, and from Michael Brown, the Under Secretary for Emergency Preparedness and Response. This Committee has also been investigating the process by which individual damage claims are evaluated and verified. The IG's audit reaches several disturbing conclusions that confirm the Committee's findings. It is often impossible to determine whether the payments FEMA made were based on actual, disaster-related damages. The verifications of many personal property damages were based solely on undocumented verbal statements. No receipts, no proof of ownership, and in some cases, not even the damaged item to inspect. Similarly, the guidelines for repairing or replacing automobiles were lacking. Rental assistance was provided to applicants who had no apparent need or who had failed to demonstrate eligibility for this assistance. The IG's report identifies a number of significant control weaknesses that create the potential for widespread fraud, erroneous payments and wasteful practices. One of the most troubling findings by the IG is that FEMA inspectors were allowed to record damage to furniture or appliances even though the item allegedly had been thrown away before the inspector arrived. This system is simply an invitation to fraud. The audit also finds substantial deficiencies in the rental assistance program. One example is the Expedited Assistance Program, in which FEMA would send one month's rent to anyone in the disaster area who called and answered certain questions. This was done before any inspector was sent to verify the claim. In essence, it was a pay first, ask questions later approach. Initially, FEMA did not even require the individual to represent that there had been damage to the home. Damage or not, FEMA sent each person a check for $726. More than $9 million in total rental assistance was paid to some 5,000 people in Miami-Dade. The auditors found that this money was paid to people whose homes were declared unsafe by FEMA inspectors for unspecified and in many cases dubious reasons. In addition, there is no evidence that claimants actually used this money for the intended purpose; that is, to live elsewhere while their homes were being repaired. The IG's findings of waste and ineffective controls are supported by the evidence that this Committee has gathered during its own investigation. We have uncovered many instances in which applicants received awards for personal property, rental assistance, or both despite the fact that subsequent quality control inspections showed that there had been no storm-related damage to the home or its contents. For example, last October, FEMA awarded $18,452.37 to a Miami-Dade resident for rental assistance as well as for replacement of clothing, the furnishings in three bedrooms, and a host of appliances. Yet, a subsequent inspection found that the home had suffered no storm-related damage whatsoever. Other errors were caused by FEMA's efforts to further streamline and accelerate the inspection process. FEMA's decision to introduce these new guidelines while thousands of inspectors were already in the field caused considerable confusion, particularly for the new inspectors and led to numerous errors and overpayments. To cite just one example, FEMA records show that an applicant in Miami-Dade was awarded more than $13,000 in personal property losses through what was called an inspector speed estimating error. The IG's report also raises questions about why FEMA paid for funerals when medical examiners reported no storm-related deaths in Miami- Dade. No one contests the need for the Federal Government to provide swift and compassionate assistance to the victims of natural disasters, but when scarce resources are wasted, fraudulent claims are paid, and safeguards are ignored, there are new victims: The taxpayers, and it is a false choice to say that we cannot protect the taxpayers while responding effectively to the urgent needs of disaster victims. [The prepared statement of Senator Collins follows:] OPENING PREPARED STATEMENT OF SENATOR COLLINS Today, the Committee examines the integrity of the Federal Emergency Management Agency's disaster-relief program. Our specific focus is on FEMA's response to the series of hurricanes that struck southern states last year and the subsequent evidence that has emerged of fraudulent claims, wasteful spending and ineffective government management. Although our focus is on specific events in the recent past, this issue has ramifications that are relevant to all regions of the country and to all future disaster-relief needs. In the span of just six weeks in August and September of 2004, Florida was hit by four powerful hurricanes in quick succession: Charley, Frances, Ivan, and Jeanne. More than 10 percent of the state's housing stock was damaged or destroyed by the hurricanes, affecting more than 700,000 residents. Property damage exceeded $21 billion. One hundred seventeen Floridians lost their lives. A disaster of this scale required a rapid and substantial response. FEMA responded with more than $2 billion in immediate relief to Floridians while they rebuilt their battered state. We expect relief in such dire circumstances to be swift and substantial. We did not expect what came next. No sooner had the 2004 hurricane season ended than Florida newspapers began alleging substantial and widespread fraud in FEMA claims based on the fact that nearly 12,600 residents in Miami-Dade County have collected more than $31 million in payments from Hurricane Frances, even though that Labor Day storm hit 100 miles to the north. The effect of Frances in Miami-Dade has been described as that of a typical thunderstorm: Some downed trees and power lines. In fact, the Miami-Dade County Office of Emergency Management described the damage from the hurricane as ``minimal.'' Yet the American taxpayers bought Miami-Dade residents thousands of television sets, air conditioners and other appliances, from microwave ovens to sewing machines. The taxpayers also bought rooms full of furniture and new wardrobes, and paid to repair or replace nearly 800 cars. There are many issues to be explored in this matter, including the extent of fraud and abuse of FEMA's individual assistance program during the 2004 hurricanes. Today our focus will be on a new audit by the Department of Homeland Security's Office of Inspector General. I am pleased that the Acting Inspector General, Rick Skinner, is with us today to discuss this report. We will also be joined by Michael Brown, Under Secretary for Emergency Preparedness and Response, to discuss FEMA's response to this report. This Committee has been investigating the process by which individual damage claims are evaluated and verified. On this point, the audit makes several disturbing findings. It is often impossible to determine whether the payments FEMA made for individual claims were based on actual disaster-related damages. The verifications of many personal-property damages were based solely on undocumented verbal statements: No receipts, no proof of ownership, in some cases, not even a damaged item to inspect. Similarly, the guidelines for repairing or replacing automobiles and other items were lacking. Rental assistance was provided to applicants who had no apparent need or had failed to demonstrate eligibility for such assistance. I should note that the purpose of this audit was not to uncover actual incidents of fraud, but to examine whether FEMA has the proper systems in place to prevent and detect fraud. The report identifies a number of significant control weaknesses that create the potential for widespread waste, fraud, and abuse. One of the most troubling findings by the Inspector General is that FEMA inspectors were allowed to record damage to furniture or appliances even though that item allegedly had been thrown away before the inspector arrived. That is simply an invitation to fraud. The audit also finds substantial deficiencies in the rental assistance program. One example is the Expedited Assistance Program, in which FEMA would send one month's rent to anyone in the disaster area who called and answered certain questions correctly, before any inspector was sent to verify the claim. Initially, FEMA did not even require the individual to represent that there had been damage to the home. Damage or not, FEMA sent each person a check for $726. As for the $9 million in total rental assistance paid to some 5,000 people in Miami-Dade, the auditors found that this money was paid to people whose homes were declared unsafe by FEMA inspectors for unspecific, even dubious, reasons. In addition, there is no evidence that these people actually used the money for its intended purpose: That is, to live elsewhere while their homes were repaired. The OIG's findings of waste and ineffective controls are supported by evidence that this Committee has gathered in its own investigation. We have uncovered many instances in which applicants received awards for personal property, rental assistance, or both, despite the fact that subsequent quality-control inspections showed that there had been no storm-related damage to the home or its contents. For example, on October 11, 2004, FEMA awarded $18,452.37 to a Miami-Dade resident for rental assistance, as well as for the replacement of clothing, the furnishings in three bedrooms, and a host of appliances. A subsequent inspection found that the home had suffered no damage whatsoever. Other errors were caused by FEMA's efforts to further streamline, or accelerate, the inspections process. FEMA's decision to introduce these new guidelines while thousands of inspectors were already in the field caused great confusion, particularly for new inspectors, and led to numerous errors and overpayments. To cite just one example, FEMA records show that an applicant in Miami-Dade was awarded $13,002.06 in personal property losses through an ``inspector speed estimating error.'' Given that no storm-related deaths were reported in Miami-Dade, questions have been raised as to why FEMA paid for several funerals there. The OIG reviewed three cases of funeral payments in Miami-Dade and found that none were disaster-related. In one case FEMA paid for the funeral expenses of a Miami-Dade resident who dies in an automobile accident after Hurricane Frances had passed through the area. Although the crash report said the accident was caused by the victim's excessive speed, FEMA awarded funeral expenses because wet roadways associated with the hurricane ``could have'' contributed to the accident. I would like to thank Senator Nelson for his appearance here today. I would also like to thank Representative Mark Foley, who has submitted a written statement but could not be here today. I would note, too, that Senator Martinez wanted to be here today but could not due to an unavoidable conflict. They were among the first to raise alarms about FEMA's disaster-relief program. They have seen first-hand the devastation these storms brought to their home state of Florida. No one contests the need for the federal government to provide swift and compassionate assistance to the victims of natural disasters. But when scarce resources are wasted, fraudulent claims are paid, and safeguards are ignored, there are new victims: The taxpayers. And it is a false choice to say that we cannot protect taxpayers while responding effectively to the urgent needs of disaster victims. Chairman Collins. I want to recognize the individual who is going to be our first witness today. Senator Bill Nelson has worked very hard on this issue. He was one of the first who raised the alarm about wasteful spending and talked to me about it last year at that time. I told him the Committee would begin its investigation, and I want to recognize his leadership. I also want to recognize the leadership of Representative Mark Foley, who has submitted a written statement but could not be here today. I would also note that Senator Martinez has expressed a great deal of interest in these hearings, but he also had a conflict which prevented him from testifying. But I look forward to hearing the witnesses' testimony today and particularly that of our lead-off witness, Senator Bill Nelson. I would now like to turn to the Committee's Ranking Member, my colleague, Senator Lieberman. OPENING STATEMENT OF SENATOR LIEBERMAN Senator Lieberman. Thank you, Madam Chairman. Let me join you in welcoming our colleague, Senator Nelson here and to thank him for his leadership on this matter. I know he is concerned about the way in which public money has been distributed in disaster cases and whether it has been distributed appropriately, but I also want to thank you, Madam Chairman, because you responded to his request and that of the other members of the Florida delegation to hold this hearing and to commit significant time of both of our staffs to this investigation. But I do believe it is worthwhile. This hearing is called to examine whether adequate controls exist to ensure that vital Federal disaster relief is going to where it is supposed to be going. That seems simple enough, but as you have just made clear, Madam Chairman, the Federal Emergency Management Agency paid thousands of residents of Miami-Dade County millions of dollars in disaster relief, despite the fact that the eye of Hurricane Frances hit about 100 miles north of Miami-Dade County. Many of the people given aid by FEMA neither needed nor deserved the relief. That is not my conclusion; it is the conclusion by the investigation of the Department of Homeland Security's Office of Inspector General. And that circumstance is not only wrong; it is unacceptable. The tradition of Americans helping Americans through their Federal Government in the aftermath of a natural disaster traces back, as far as my staff could find, at least to 1803, when Congress authorized aid to a New Hampshire town that had been devastated by a fire. But this generous tradition will be jeopardized if the American people or we, their representatives in Congress, conclude that their tax dollars are not being spent fairly, efficiently, and responsibly. Madam Chairman, I am going to ask that some considerable amount of the remainder of my statement be included in the record as if read, because it really overlaps with exactly the case that you have just laid out and go on and say this: The IG of the Department of Homeland Security concluded that because the procedures used in Miami- Dade were also used throughout the State of Florida and because most of those procedures were also used throughout the Nation, a shadow has been cast on the appropriateness of FEMA's awards of disaster relief, and that is a shadow that we together must remove. FEMA's mission of responding to natural disasters and providing financial assistance to those harmed by them is an absolutely critical one. None of us question that mission. The question is how the mission is being carried out. In order to fulfill the mission in the best interests of both those hurt by hurricanes, tornadoes, earthquakes, fire, and flood, and those whose taxes support those relief efforts, we have got to make sure that FEMA is following the rules and ensure that relief funds go where they should be going. Again, unfortunately, the IG's investigation as well as the one conducted by our staff--and I thank the bipartisan staff for the high quality work they did on this investigation--both call into serious doubt whether that is happening, whether FEMA is fulfilling its responsibilities. Madam Chairman, the hurricane season will soon be upon us once again. According to researchers at the National Oceanographic and Atmospheric Administration and at Colorado State University, this hurricane season could be another active and destructive season. It is important that this Nation's disaster resources, taxpayer dollars, are used where they are truly needed and that no questions regarding fairness, efficiency or responsibility taint those relief efforts. We can only judge FEMA by how it reacts in emergencies. That is its mandate, its very reason to be, and that is why the investigation that is the topic of this hearing is not only important for what happened in this particular case but it is important overall. Where FEMA is found wanting, we must make changes together with FEMA to ensure that the American people continue to support our tradition of swiftly coming to the aid of our fellow Americans when disaster strikes anywhere in this Nation. Thank you, Madam Chairman. [The opening prepared statement of Senator Lieberman follows:] OPENING PREPARED STATEMENT OF SENATOR LIEBERMAN Thank you Madam Chairman for calling this hearing today to examine whether adequate controls exist to ensure that vital federal disaster relief is going where it is supposed to be going. That seems simple enough. But the question arises over the fact that, last year, the Federal Emergency Management Agency paid thousands of residents of Miami-Dade County, millions of dollars in disaster relief despite the fact that the eye of Hurricane Frances hit about 100 miles North of Miami-Dade County. Many of the people given aid by FEMA neither needed nor deserved it, according to an investigation by the Department of Homeland Security's Office of Inspector General. This is wrong. The tradition of Americans helping Americans in the aftermath of a disaster traces back to 1803, when Congress authorized aid to a New Hampshire town devastated by fire. But this generous tradition will be jeopardized if Americans come to feel their tax dollars are not being spent fairly, efficiently--and with accountability. The problems in Miami-Dade County began with FEMA declaring the county eligible for disaster assistance without assessing the storm's impact or documenting reasons for the declaration. The facts show that the hurricane did not hit Miami-Dade County. Indeed, the IG's investigation determined that the strongest sustained winds were just 47 miles per hour--far below hurricane force--and that the county saw no reports of flooding. While these conditions undoubtedly caused damage, the IG found that FEMA failed to assess and document whether that damage rose to the level requiring federal assistance. Thus, the IG concludes that FEMA mishandled the declaration process--one essential tool FEMA must use to safeguard taxpayer dollars. But by including Miami-Dade County in its disaster declaration, FEMA made millions of people eligible for assistance--stretching its already thin resources even thinner and making its programs ``susceptible to waste, fraud and abuse,'' according to the IG's report. Some small but telling examples, Madam Chairman: <bullet> FEMA awarded rental assistance to people who apparently weren't in need of shelter. For instance, FEMA gave almost $1,500 in rental assistance to one person whose home had sustained just $93 in damage. In other instances, FEMA awarded rental assistance to people who didn't need to leave their homes. This happened because eligibility criteria in some instances failed to require that an applicant's home actually be damaged in order to receive assistance; <bullet> FEMA, in accordance with its own procedures, spent millions replacing items that the household never had; <bullet> FEMA's contract inspectors conducted thousands of inspections of homes within blocks--once a single block--of their own home, which the IG found raises at least the appearance of a conflict of interest; <bullet> FEMA gave Miami-Dade residents whose vehicle had supposedly been destroyed by Frances $6500 for replacement costs even though their vehicle was worth only a fraction of that. Unfortunately, Madam Chairman, FEMA's problems in the way it doled out disaster relief do not stop at the boundaries of Miami-Dade County. The IG concluded that because the procedures used in Miami-Dade County were also used throughout the State of Florida--and because most of those procedures were used throughout the Nation--a shadow is cast on the appropriateness of FEMA's awards of disaster relief to individuals throughout Florida and the rest of the Nation. FEMA's mission of responding to natural disasters and of providing financial assistance to those harmed by them is an absolutely critical one--and one I completely support. That's not what this hearing is about. But in order to fulfill that mission in the best interests of both those hurt by hurricanes, tornadoes, earthquakes, fire and floods--and those whose taxes support the relief efforts--we must make sure that FEMA follows the rules and ensures that relief funds go where they should be going. Unfortunately, the IG's investigation, as well as the one conducted by our staff, call into serious doubt whether that is happening. The start of the hurricane season is almost upon us. According to researchers at the National Oceanic and Atmospheric Administration and Colorado State University, this season could be another active--and possibly destructive--year. It's important that our Nation's disaster resources--our taxpayer dollars--are targeted to where they are truly needed and that no questions regarding fairness, efficiency, need or accountability taint our relief efforts. We can only judge FEMA by how it reacts in emergencies. That is its mandate--its very reason to be. And where FEMA is found wanting, we must make changes to ensure that Americans continue to support our two-century-old tradition of swiftly coming to the aid of our fellow Americans when disaster strikes anywhere in the Nation. Thank you Madam Chairman. Chairman Collins. Thank you very much. I appreciate all your work on this issue, and your full statement will be inserted in the record as if read. Senator Coburn, we are delighted to have you with us today. I know wasteful spending is very high on your radar screen, and we appreciate your joining us. OPENING STATEMENT OF SENATOR COBURN Senator Coburn. Thank you, Madam Chairman, and I appreciate both you and the Ranking Member for holding this hearing. We often hear in Washington that the reason we cannot control our spending is because of mandatory spending, and we are going to have an actual deficit this year of $622 billion. That is the real number. That is not what you will hear most politicians say. But its $622 billion, and this hearing is important because across our government there are ways we can improve spending, we can allocate our resources better, we can more effectively do the jobs that we have been asked to do. So I look forward to the testimony. I will not be able to be here for the entire hearing, and I thank you, Senator Nelson, for bringing this up as well as Senator Martinez. It is important. If we are going to really help people, then we cannot expend resources on those who do not need our assistance when there are others who truly do. Thank you. Chairman Collins. Thank you. Senator Nelson, thank you so much for being here today, and I would ask that you proceed with your statement. TESTIMONY OF HON. BILL NELSON,\1\ A U.S. SENATOR FROM THE STATE OF FLORIDA Senator Nelson. Madam Chairman, your opening statement was so comprehensive that I can short-circuit a lot of my remarks. --------------------------------------------------------------------------- \1\ The prepared statement of Senator Nelson appears in the Appendix on page 35. --------------------------------------------------------------------------- First of all, I want to thank you and Senator Lieberman for taking the initiative to do the investigation. As I came to you with what we were hearing back home, and obviously, something was wrong. You did not hesitate a moment. You first did the investigation by your own staff. It has now augmented, as you have referenced, the IG's report. And thanks to you, you are bringing this into the full light of the sunshine with this hearing. And what we are seeing is a picture that is not a pretty picture, because we appropriated $8.5 billion just to FEMA for these four storms, most of which would be allocated to Florida, because that is where it got the brunt. And in fact, not only are we experiencing the circumstances that you have outlined where payments have gone into Miami-Dade County that the winds did not get up there, and look at what was said right there by the Miami-Dade Emergency Operations Center: Damage and debris from--you are taking it down, and I am reading it. [Laughter.] Damage and debris from Frances is minimal. You have pointed that out. You have pointed out the fact that burials, funerals were paid for when, in fact, many more, in excess of 300, were paid for when the officials had said that the deaths accruing directly according to the storms was somewhere in the range of about 125. You have pointed out that in fact, that those payments were made before a damage assessment was in fact made, and so, you have laid out in your comments here, I think, the essence of what we ought to be looking at. Now, there is an additional thing that I would add. First of all, I want to credit FEMA. We learned some serious lessons after the 1992 monster, Hurricane Andrew. One level of government was not talking to another level. It was chaos. FEMA was not ready. And out of those lessons learned, the immediate aftermath of the storms, there was an excellent response. And FEMA in large part should be given the credit. The State of Florida and its Emergency Operations Center working with FEMA and the local governments; they had everybody talking to each other. FEMA had prepositioned things so that you could begin to get supplies in. There was the National Guard that set up a distribution center at the Lakeland Airport and had all of these convoys that were getting supplies in. It really looked like we had our act together and that we were responding to the lessons that we had learned after that monster hurricane. But then, as time began to wear on, and give credit where credit is due. I mean, who has ever had to respond to four hurricanes in a row within a 6 weeks' period? So FEMA was overwhelmed. But as the time continued to wear on, either there is a problem in a structure of FEMA that the Congress in its oversight capacity should address, or there is poor management, or there is both. And that is my hope, that as a result of the leadership of you two Senators that you are going to be able to help FEMA to help folks like us, because hurricane season is starting on June 1. Now, I just want to show you the path of the four hurricanes. Madam Chairman, this was extraordinary in 6 weeks. In 6 weeks; this is the first one that came in. This is Charlie. Now, the good news about Charlie is that Charlie was a very tight hurricane. It had winds of 145 miles an hour, but those sustained winds were only about 10 miles wide. If it had been a monster like Andrew that was 40, 50 miles wide, you can imagine. The other good news was that Charlie, which, by the way, I was tracking Charlie way down south of Cuba as a hurricane hunter in the NOAA, and I want to commend them for your consideration, too, because they have gotten very sophisticated. On this particular one, we were dropping SONS, which is a loaded instrument package that would fall from 42,000 feet all the way to the ocean, and then, the plane collects the data in real time, beams it by satellite back to the National Hurricane Center, and there, they can get, because of all of these incredible measurements, a better estimate of which way it is heading. Senator Lieberman. Bill, you are the only Member of Congress that I know of who could say at 42,000 feet was not as high as he has been. Senator Nelson. I tell you, it was not quite as fun, either. Originally, we thought Charlie was really going to be the next Andrew, because it was scheduled to skirt the Keys and come right up into Tampa Bay. And you can imagine, if the waters from that counter-clockwise had pushed all of the waters up into Tampa Bay, you would have had a major flooding problem. Instead, Charlie is coming up here; suddenly takes a right turn and comes up Charlotte Bay and hits ground zero at 145 miles an hour, which was Punta Gorda. It continued right on up the central core of Florida, exiting at Daytona Beach; massive destruction all the way that was within the narrow diameter of the hurricane. All right; a few weeks later, here comes Frances; third one, Ivan, that just tore up the Panhandle, particularly Pensacola. The Navy base itself had $750 million of damage. Then, here comes the fourth one, Jeanne, and notice where the three have crossed: This is just south of Lakeland in southeast Polk County. The little rural county to the south of it, Hardy County, has, to date, only 21 percent of its FEMA claims paid. I wanted to bring this to your attention because where three major hurricanes crossed, very near Hardy County, a poor, rural county, you only have 21 percent of their claims paid. This just should not be, and this should be part of the oversight. And so, Madam Chairman, today, I am going to be filing legislation that is going to be referred to your Committee that I would respectfully suggest are some things that you might want to look at. This legislation is going to require preliminary damage assessment before Federal assistance can be paid out, something we have already talked about. It also tightens the rules so that FEMA inspectors can better identify disaster-related losses of household items and document the verbal accounts that they were getting from storm loss instead of just gathering up people down at the local Hardee's and taking their verbal accounts of what the inspectors never saw. For example, in Miami-Dade County, almost $100,000 was paid to residents for destroyed cars, and the IG report said that damage to those vehicles was not verified. Well, under this legislation that I am filing, it is going to require proof. This legislation would also limit funeral assistance to disaster-related deaths, and we have already heard about that, and under this legislation, inspectors would not be able to assess the losses of their neighbors or make purchases from the residents whose homes they have reviewed, which is a clear conflict of interest. This would prevent cases like the one of the FEMA agent who bought an oceanfront home from a 72-year-old woman who sought out agency advice when she became concerned about the mold that was occurring in her home as a result of the storm. It is alleged that she was duped to sell her home for way under the fair market value. This legislation would address that. And this bill toughens penalties for fraud and strengthens the requirements for criminal background checks. The estimates are, Madam Chairman, that up to 22 percent of FEMA inspectors had criminal records, including rap sheets for serious crimes. This just should not be. So I hope you will consider this legislation as you go about your deliberations as to what you want to do. And I hope that your Committee will look beyond the IG report for other ways to improve our Nation's disaster assistance agency. Now, Madam Chairman, I can give you a few places to start: For example, I know many officials in Florida that would love to chat with your staff, including John Booth, the Executive Director of the Palm Beach County Solid Waste Authority, or George Touart, Escambia County Administrator, or Dave Metzger, the Orange County Public Works Director. What in my judgment you all need to do in your oversight capacity is to give FEMA clear, concise procedures for helping local governments pay for doing such things as removing debris from private roads. They have the ability, according to their own regulations, to do this in the interests of public health and safety. But how many times did we hear all the way from the Panhandle down to the southwest coast to the southeast coast of Florida that FEMA said that they were not, even under their own discretion, going to allow under the caveat of public health and safety to remove that debris from a private road. I have worked with county after county in our State, and they have pleaded to get needed help. And many of those counties, though cash-strapped, are footing the vast majority of the bill for the essential cleanup. Madam Chairman, because they are footing the bill for this essential cleanup, their budgets are decimated, and those officials, naturally, are praying that they are going to be spared a hurricane coming in this next hurricane season. So while FEMA needs to do a better job, Congress needs now to act in order to regain the public trust by ensuring that taxpayer money appropriated is spent wisely, Senator Coburn, and that it is spent efficiently to help Americans recover from natural disasters. We owe this not just to the folks who have suffered so much in my State but to the residents of the other hurricane States that are going to get hit in the future. All along the Gulf Coast and the Atlantic Coast, we are in the paths of hurricanes. This is a part of the lifestyle that we have. But you can look to other States: Look at the Californians, who happen to live on a fault line, or look at the Washingtonians, who happen to live in the shadow of Mount Saint Helens, or look at the rural Americans who happen to live near rivers that swell and city dwellers who have to face the constant threat of the turmoil and the tragedy surrounding terrorists. And so, I finish where I started, Madam Chairman: This would not be happening without your and Senator Lieberman's leadership, and I thank you from the bottom of my heart that this issue needs, this story needs to be told, and in so telling this story, I believe that we will get things much more ready to adequately handle these kinds of natural disasters in the future. Thank you. Chairman Collins. Thank you very much for your leadership on this issue. We very much appreciate your bringing these concerns to the Committee's attention. Thank you very much for your testimony. Senator Nelson. Thank you. Chairman Collins. Our next witness today is Richard L. Skinner, the Acting Inspector General of the Department of Homeland Security. Mr. Skinner has vast experience in audit and oversight, which is invaluable to this Committee and to the American people. The audit that Mr. Skinner conducted regarding FEMA's response to the 2004 hurricanes will be the subject of his testimony today. We welcome you and look forward to your testimony. TESTIMONY OF RICHARD L. SKINNER,\1\ ACTING INSPECTOR GENERAL, U.S. DEPARTMENT OF HOMELAND SECURITY Mr. Skinner. Thank you, Madam Chairman. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Skinner appears in the Appendix on page 37. --------------------------------------------------------------------------- As the Hon. Nelson pointed out, your statement was very comprehensive, so I hope what I have to say here does not sound redundant or duplicative of what you have already said, but thank you for the opportunity to be here today to discuss our work on FEMA's Individuals and Households Program (IHP), in the Miami-Dade County area following Hurricane Frances. Our report on this subject is being released to the public today and is included as an attachment to my prepared statement. In 2004, the State of Florida was affected by an unprecedented four hurricanes in 2 months, causing widespread damage and destruction. In addition, during the Florida disasters, FEMA was also delivering aid to individuals and households in 15 other States and two territories. According to FEMA, the upsurge of the disaster activity during that time period proved well above its standing operational capabilities, necessitating the hiring and training of additional staff and contract personnel. We acknowledge the difficult balance that FEMA must strike between speed and stewardship of taxpayer resources, a balance between the need for adequate documentation and the need to expedite assistance to disaster victims. Nevertheless, as our audit concludes, there is considerable room for improvement in the manner in which FEMA administers its disaster relief responsibilities. The inclusion of Florida's Miami-Dade County in the declaration for Hurricane Frances and subsequent awards of about $31 million under the IHP has been the subject of considerable public reporting and concern. As a result, we initiated an audit of the IHP in Miami-Dade County to determine, one, whether FEMA had sufficient evidence to support the county's eligibility for IHP assistance, and two, whether adequate program controls existed to ensure that funds were provided only to eligible applicants for eligible purposes. We found critical shortcomings in both areas. I would like to point out, however, what the audit did not attempt to do. The audit did not attempt to verify claimants' losses or incurred costs, nor did it attempt to determine the extent of fraud in Miami-Dade County. While our audit procedures provided due diligence to situations involving potential fraud, all matters involving fraud are being handled separately by our Office of Investigations in coordination with the U.S. Attorney's office for the Southern District of Florida. While our audit of IHP at Miami-Dade County may be complete, our investigative efforts are still ongoing. Other than to say we still have an aggressive investigative program within the State of Florida, including Miami-Dade County relative to the four hurricanes that hit the State during 2004, it is our policy not to discuss our fraud detection initiatives or our investigations involving fraudulent claims. To date, 14 individuals have been arrested for making false claims. Our audit concluded that FEMA designated Miami-Dade County eligible for IHP without a proper preliminary damage assessment (PDA). FEMA contends that such an assessment is not required under its regulations. Instead, FEMA officials advised us that they relied on their best judgment at the time to amend the President's declaration and add 13 counties for disaster relief under the IHP. However, we believe that, notwithstanding the regulations, a PDA was required by the President's declaration, as I will attempt to explain here. In anticipation of the impact of Hurricane Frances, Florida's Governor submitted a disaster declaration request on September 2, 2004, 2 days before the storm, to FEMA's Region IV, requesting that all 67 counties in the State be declared eligible for public assistance and that 18 counties be declared eligible for the full complement of individual assistance programs, including IHP. The President's declaration, however, dated September 4, 2004, excluded Miami-Dade and another 12 of the 18 counties recommended by the Governor for IHP and stipulated that FEMA could provide assistance beyond the designated areas subject to completion of PDAs. Nevertheless, effective September 5, 1 day later, FEMA amended the President's declaration to make IHP available to residents of Miami-Dade County and the other 12 counties that were initially requested by the Governor but excluded in the President's declaration. FEMA made the decision to add those counties based on the path of Hurricane Frances as it made landfall on September 5, 2005. The decision was not supported by a PDA, however, as required by the President. FEMA notes in its response to our report that a comprehensive door-to-door damage assessment would have unduly delayed FEMA's response efforts. While we believe that a PDA was required to document the impact and magnitude of the hurricane in Miami-Dade, a door-to-door assessment of damages was not necessarily needed nor suggested by our office. Although there is sufficient evidence today after the fact that the county indeed experienced some damages related to Hurricane Frances, it is still unclear, in our opinion, that the extent of the damages would have warranted the inclusion of the county in the Presidential declaration. A PDA, as required by the President, would have eliminated any doubt whether or not the county qualified for IHP assistance. As a result of the declaration for Miami-Dade, residents now not severely affected by the hurricane were eligible to apply for assistance. While FEMA says rightfully residents still had to be found eligible in order to receive such assistance, Hurricane Frances, along with the previous and subsequent disasters, strained FEMA's inspection resources, tested program controls and made the IHP more susceptible to potential fraud, waste, and abuse. Further, as I will attempt to explain in this statement, flaws in the IHP, and the absence of certain internal controls increased the likelihood that funds were not always provided to eligible applicants for eligible expenses. We recommended that for future disasters, FEMA ensure that PDAs are performed to determine the type, extent, and location of disaster-related damages whenever practicable. FEMA asserts that it already does this and that its actions in Miami-Dade were operationally and situationally defensible. We disagree. We continue to believe that a PDA was required by the President and that a PDA would have been both practicable and justifiable, especially in light of the fact that Hurricane Frances made landfall 100 miles north of Miami-Dade County, produced only moderate tropical force winds, and caused no flooding whatsoever. Furthermore, we found no evidence to suggest that the county experienced widespread trauma, that is, loss of life, loss of essential utilities, and other essential services or at least not for a duration that would have justified the inclusion of the county in the President's declaration. I now would like to discuss the major program control weaknesses that we found relative to the IHP itself; first, concerning Other Needs Assistance (ONA). As of February 28, 2005, FEMA provided $18 million in ONA to Miami-Dade County residents in response to Hurricane Frances. We determined that ONA, especially for the repair and replacement of household room items and automobiles, should be more closely aligned to actual losses and that better documentation was needed to support determinations that damages and deaths were directly caused by the storm. For example, FEMA awarded $10.2 million to repair or replace household room items. However, the procedure used by FEMA to replace household room items allowed for funding of all items in what FEMA constituted as a full room, regardless of the actual loss. In other words, a resident may have had a single bed in a room, which was destroyed by the storm. Yet, FEMA would pay the resident the cost of an 11-piece bedroom suite. We recommended this procedure be changed. FEMA agreed with our recommendations and said it is reviewing the use of the generic room concept. FEMA believes that with today's technology, it can increase the specificity of the inspection without substantially increasing the time required to complete the inspection. In addition, according to the State's established replacement value for eligible, disaster-damaged vehicles, FEMA provided $6,500 for each automobile destroyed. For 15 of the automobiles, the retail book value, at least in our sample, totaled $56,000. However, FEMA awarded $97,000 for those automobiles. In our opinion, FEMA should work with the States to establish a more reasonable replacement value for destroyed automobiles. Now, concerning housing, FEMA awarded $13.1 million to Miami-Dade applicants for rental assistance and home repair and replacement. However, the implementation of the housing assistance component of the IHP was hampered by several procedural missions and generally weak guidelines for performing inspections and documenting results. For example, some rental assistance applicants received but may not have had a need for such assistance; while others may simply have not been eligible for the assistance. Finally, FEMA's oversight of inspection needs improvement. Specifically, contractors were not required to review inspection reports prior to their submission to FEMA for payment. Edit checks for inspection errors were made after payments rather than before, and no provisions existed for inspectors who lived in the areas to recuse themselves from inspections that may present possible conflicts of interest. The policies, procedures and guidelines used in Miami-Dade for the IHP were also used throughout the State of Florida. Further, according to FEMA officials, most of the procedures were used for disasters in other States, making our findings and recommendations broadly applicable to FEMA's implementation of the IHP nationwide. FEMA acknowledges that our report identifies several legitimate program flaws in the IHP and has agreed to make the necessary improvements. Madam Chairman, that concludes my prepared remarks. I would be happy to address any questions that you or any of the Members may have. Chairman Collins. Thank you very much, Mr. Skinner, for an excellent presentation. FEMA comments on the audits. When I was looking through the comments that FEMA officials made on your IG report, I was particularly struck by one statement: ``FEMA says we were pleased that the OIG confirmed no widespread or systemic waste or abuse in Miami-Dade County in the wake of Hurricane Frances.'' I must say I am baffled by that statement. Is that a fair reflection of your conclusions that you found no pattern of or widespread waste or abuse? Mr. Skinner. No, not at all. That is not an accurate reflection of our report at all. There are four things I would like to point out here: One, we found some very serious systemic weaknesses and internal control weaknesses with regard to all parts of the IHP program. This, in turn, has consequences; that is, it does, in fact increase the potential for fraud, waste and abuse. Second, I would like to point out that the purpose of this audit, in itself, was not to identify fraud, waste, and abuse per se. We were looking at the processes and procedures in place to determine whether they were adequate enough to ensure that payments were proper to eligible applicants for eligible purposes. Third, we have a very aggressive investigative program that is still ongoing in Miami-Dade. We have already made 14 arrests. It is premature at this time to say that there is no widespread fraud, waste, or abuse while we still have an ongoing investigative program. And finally, the mere fact that we do not find or prosecute everyone that committed fraud or identify all the waste, does not mean that it does not exist. A lot of the fraud is very de minimis, and it is very hard to prosecute. So it could be widespread, just not prosecutable. Chairman Collins. And in fact, I think a more accurate description of your report would be to say that the internal control weaknesses that you identified were prevalent and create, in fact, a strong potential for abuse, wasteful spending, erroneous payments. Is that a fair statement? Mr. Skinner. Absolutely, that is correct, Senator. Chairman Collins. According to the data we have been provided by FEMA, in Miami-Dade, FEMA spent some $17.1 million for personal property awards, $9.3 million for rental assistance, $2.7 million for home repairs and a little more than $1 million for expedited assistance, almost $600,000 for transportation. Did you find weaknesses in the program controls in each of these areas? I am trying to get at the question of whether there was a problem in only one part of the disaster assistance or whether you found weaknesses in all of the areas. Mr. Skinner. The problems that we found were across the board. We found problems in each and every one of the components of the IHP program. For example, funds provided for repairs and replacement of household room items were not based on actual losses. Recipients of rental assistance oftentimes may not have been eligible or may not have even requested rental assistance, but were paid for rental assistance. Guidance and criteria for replacing automobiles and paying for funerals, as you mentioned earlier, were just nonexistent. It was very judgmental. So this was prevalent across all components of the program, the weaknesses that we looked at. Chairman Collins. And that is particularly troubling, because that means that there are systemic weaknesses in FEMA's disaster relief programs that are not unique to what happened in Miami-Dade. The situation there appears to have been worse because there was not an assessment of damages before the designation was made for eligibility, creating all sorts of questions about whether individuals should have been eligible for assistance in the first place. But if these weaknesses are prevalent in all these programs, then, that suggests a potential for similar problems whenever these programs are triggered. Is that fair? Mr. Skinner. Yes, that is correct. These are programmatic, systemwide weaknesses that were not applied just in Miami-Dade. They were applied throughout the State of Florida, and for that matter, these are the same policies, procedures, internal controls, and guidelines that are applied for all disasters nationwide. So what we found here, I think, is just indicative or representative of the problems that we may have on a nationwide basis. Chairman Collins. Thank you. Mr. Skinner, as you are aware, the Committee staff has also been investigating the claims in Florida, and there is a black exhibit binder that I think now is on your table before you. At tabs 6 through 9, you will find that there are four examples of quality control reports performed on claims that were paid by FEMA in Miami-Dade as a result of Hurricane Frances. And I would like to give you a moment to find those, and if we have them on display as well, if we could have those put up. The four claims total approximately $45,000, but what struck me is in each case, the quality control report found no damage to the home whatsoever: No storm-related damage. FEMA awarded money for such things in these four cases as rental assistance, damage to furniture, clothing, televisions, air conditioners, automobiles, telephones, and appliances. In one case, you will see FEMA awarded hundreds of dollars to pay for the repairs to a dryer, and yet, the inspector indicates that there was no dryer. In another case, payment was made for a washer that the applicant did not even own. These examples concern me greatly, because they appear to reflect fundamental problems with the inspection process that was used by FEMA. And the inspectors really are the front lines of defense. They are the ones who are supposed to ensure that money is not wasted and that damage really did occur, and yet, we found widespread problems as we started going through the quality control reports that were taking a look at the decisions made by the inspectors. The Committee staff interviewed several of the quality control inspectors who told us that by and large, these were not close calls, that there was simply no hurricane-related damage. The four examples that I have just discussed and that we have provided to you, are these the types of results that you would expect based on the program control weaknesses that you identified in your audit? Mr. Skinner. Yes, it would. Two things I would like to comment on this or maybe three: It looks like the quality control program is working, to identify something as egregious as this. But first, it is very telling on the quality of the inspections themselves. There is something inherently wrong with the way we did our inspections if we can find examples like this through our quality control program. These inspectors, I believe, who were in Miami-Dade, a good many of them were not only inexperienced, but they were poorly trained and not always adequately supervised. That, coupled with the internal control weaknesses as these inspection reports went through the process, that is, they were not checked before they were sent to FEMA. FEMA's edit checks were done after the payments were made. These issues all contribute to these types of problem cases. So this does not surprise me at all. This is probably somewhat widespread, I would contend. Chairman Collins. It seems to be--based on the separate investigation that the Committee has done. It just is extraordinary that payments were made to individuals who were living in undamaged homes, and in a couple of the cases before you--we are talking about payments of $18,000, $19,000. In addition, these individuals also received rental assistance, and yet, their homes were undamaged. And that is the issue I want to move to next. FEMA paid about $9.3 million in rental assistance to more than 5,000 people in Miami-Dade County; is that correct? Or in the neighborhood? Mr. Skinner. Yes, that is correct. Chairman Collins. So that is almost a third of the money went for this rental assistance. In the sample of files that you and your auditors reviewed, was there any evidence at all that the recipients of rental assistance ever actually moved out of their homes? Mr. Skinner. No, not at all. We did not find any examples where anyone actually moved out of their homes. Chairman Collins. So, yet, people received rental assistance, and yet, they did not leave their dwellings. Mr. Skinner. That is correct. Chairman Collins. And is it your understanding that when FEMA awards rental assistance, it actually has to be spent on rent. Mr. Skinner. That is our interpretation. That is why it is called rental assistance. Chairman Collins. That does seem fairly logical. Mr. Skinner. Yes. Chairman Collins. So does FEMA ever attempt to determine how many people who received rental assistance actually used it for that purpose? Mr. Skinner. As far as I know, no. Chairman Collins. Is this another area where you think that--let me ask you: What do you think needs to be done to tighten up on the rental assistance program? Mr. Skinner. For one thing, what we found was that people-- FEMA's guidelines were very explicit, FEMA's IHP guidelines for rental assistance. That is, if you receive payment for rental assistance, you are, in fact, to use it for rental assistance, and you must maintain receipts for 3 years to support the fact that in fact you used it for rental assistance. However, the inspector guidelines that were passed out to the inspectors actually advised the applicants that no, you in fact did not have to use your rental assistance funds for rental assistance; you could use them for home repairs. It appears to us that the right hand does not know what the left hand is doing. The guidelines need to be very explicit, and the inspectors have to understand, or at least FEMA has to provide clearer guidelines to make it perfectly clear that just because you may be eligible for rental assistance does not mean that you should be entitled to rental assistance. Oftentimes, and this gets back to the quality of the inspections, the inspectors would deem homes unsafe. And oftentimes, many times, we have questioned whether that determination was supportable. But by merely checking that the home was unsafe, these individuals were automatically made eligible for rental assistance and were, in fact, paid for rental assistance, and oftentimes, they did not even ask for rental assistance, but since they were determined eligible by the inspector, they in fact received rental assistance, and I think there is a breakdown in communications, guidelines, and in internal controls. Chairman Collins. So did your inspectors also find that there were cases where homes were declared unsafe when, in fact, they just needed very minor repairs? Mr. Skinner. Oh, yes, as we went through the inspectors' reports, we found many cases in which, for example, a window was missing at a cost of $97. It was declared unsafe. Therefore, they qualified for rental assistance and received rental assistance, although they did not move or did not relocate. Chairman Collins. So you may have cases where an individual has very minor repairs, and it is an actual case where the repairs were $97, and yet, the individual could receive $726 in rental assistance, additional payments for repairs; in other words, payments far exceeding what the minor repairs are and yet never moved out of the house. Mr. Skinner. That is entirely true. That is entirely accurate, yes. Chairman Collins. Could you explain to us more about how the Expedited Assistance Program works? I understand that is a rarely used process, but it was used in Miami-Dade. Mr. Skinner. Yes, it is my understanding as well that it is rarely used. I know it was called something else in other disasters, Fast Track in Northridge and in Andrew. In Miami- Dade, in essence, they opened a door for expedited assistance for rental assistance, and all that was required was a call-in, and you had to meet three criteria or two or three criteria and answer two or three questions to be made eligible. One, you had to attest to the fact that was your primary residence, and two, you needed essential housing needs or, in fact, you were living somewhere else, and that would automatically qualify you for rental assistance. Once was done; the payments were made, and there was no follow-up or any verification that any of those people, in fact, were eligible or entitled to rental assistance. Chairman Collins. Is this done generally just over the telephone, then? Mr. Skinner. Yes. Chairman Collins. Where the applicant calls in, answers a series of questions, but are you telling me there is no verification before the check is sent? Mr. Skinner. That is correct. Chairman Collins. So this is the pay first, ask questions later approach; is that fair? Mr. Skinner. Yes, pay first, verify later; that is absolutely correct. Chairman Collins. I would like to turn to the issue of payments for automobile repairs and replacement. There were some 800 payments for repairs, or I should say there were payments for repair or replacement of some 800 automobiles in the county. I find this very strange, given the minimal damage; there was not flooding; there were not particularly high winds. But there were also issues about how the payment amount is arrived at. Could you elaborate on that? Mr. Skinner. It is my understanding that this is negotiated between the State and FEMA as to what is a fair value for a car. And, in the State of Florida, and I think every State is handled differently, it is not a FEMA standard or a national standard. In the State of Florida, I think they determined that, that is the State, and FEMA accepted their recommendation, that if any cars needed to be replaced that the minimum payment should be around $6,500. Chairman Collins. And is that regardless of what the Blue Book value is for the car? Mr. Skinner. That is correct. Chairman Collins. So you could have and indeed found cases where the Blue Book value of the car might have been $2,000, and yet, a payment of more than $6,000 was made? Mr. Skinner. Yes, in our sample, we found several cases of that. Chairman Collins. I would also like to look at one of the specific automobile cases that you discuss in your report, because it really stood out to me: In this case, FEMA paid $6,500 for a 1998 Toyota Corolla that was supposedly destroyed by an electrical fire, and you note in the report that the inspector provided no explanation of how a hurricane, particularly one that hit 100 miles north, could have contributed to an electrical fire. Do we know if the inspector ever actually saw this car? Mr. Skinner. Well, in this particular case that you are talking about, we did in fact call the former car owner, and that individual advised us that the car had been towed prior to the inspector's arrival. So, therefore, the inspector had to rely entirely on her verbal representation that yes, I had a car, and yes, it was destroyed through an electrical fire, and yes, it has now been discarded. But that was not reflected in the inspector's report. We obtained that information by, in fact, talking to the individual. Chairman Collins. But what happened in this case was that FEMA paid $6,500 to an individual who claimed to have had a car that was destroyed by an electrical fire that was somehow related to the hurricane, but there was no actual car to inspect; is that accurate? Mr. Skinner. That is correct. Chairman Collins. So there is no way to know if there ever was an electrical fire in this car. Mr. Skinner. That is right. Chairman Collins. And there is absolutely no way to determine, assuming there was an electrical fire in the car, that it had anything to do with the hurricane. Mr. Skinner. That is correct. Chairman Collins. And yet, this payment was made. Mr. Skinner. Yes, it was. Chairman Collins. Well, Mr. Skinner, I think you have raised an awful lot of concerns, and I really appreciate all the work that you and your office have done. I want to just end with one final question, and that is in FEMA's response to your report, FEMA suggests that achieving the standards that the IG has said should be achieved to protect the taxpayers is unattainable. That is the word used by FEMA officials. FEMA officials say we are dealing with an emergency situation. We are dealing with urgent claims, and it is impossible for us to guard against the susceptibility to waste, fraud, and abuse and at the same time serve the victims of natural disasters. What is your comment on that? Mr. Skinner. I disagree with that. For one thing, the technology exists today to allow the inspectors to do a better job, technology that did not exist back in the times of Andrew. Second, I think every disaster, every scenario, every situation has to be evaluated on its own. In Punta Gorda, yes, we had clear evidence that the situation was dire so as far as the impact of the storm. But as you get out away from the eye of the storm and into the marginal counties such as Miami-Dade, the delivery of services, yes, we want it to be timely, but we do not want to sacrifice our responsibility to be good stewards of the Federal dollar, and people were not, in Miami-Dade County, they were not living in tents; they were not living in shelters; they did not experience widespread trauma. They did have water. They did have electricity. I think we could have taken greater caution as we proceeded in providing assistance in that type of an environment. Chairman Collins. Thank you so much for your excellent testimony. I certainly agree. I think it is a false choice to say that we cannot serve the victims of natural disasters effectively, compassionately and swiftly without sacrificing the integrity of this program, and indeed, many of the recommendations that you have made would help put in the kinds of controls that would greatly reduce the potential for the kind of erroneous payments, wasteful practices, and indeed, outright fraud that both your auditors and our investigators have documented occurred. So thank you very much for your testimony, and we look forward to working closely with you. Mr. Skinner. Well, thank you, Madam Chairman. Chairman Collins. Thanks. I would now like to call our next witness, Michael D. Brown, the Under Secretary for Emergency Preparedness and Response at the Department of Homeland Security. Secretary Brown is responsible for coordinated Federal disaster relief activities, including the implementation of the Federal Response Plan. Mr. Brown, we very much appreciate your being here today. TESTIMONY OF MICHAEL BROWN,\1\ UNDER SECRETARY FOR EMERGENCY PREPAREDNESS AND RESPONSE, U.S. DEPARTMENT OF HOMELAND SECURITY Mr. Brown. Good morning, Senator, and thank you for having me. I certainly do appreciate it. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Brown appears in the Appendix on page 45. --------------------------------------------------------------------------- I think it is important that we have some perspective of what took place that horrible 6 weeks, so in the vernacular, ``roll the video.'' [Video shown.] Mr. Brown. Madam Chairman, that 2004 hurricane season marked the busiest season in FEMA's history. FEMA responded to 68 declared major and emergency disasters in 2004. Within a span of only 6 weeks, four powerful hurricanes struck Florida, producing widespread damage and causing terrible destruction and displacement. In response to hurricanes spanning both the East and Gulf Coasts, FEMA opened and maintained 27 simultaneous disaster field operations in 15 States and two territories. We registered nearly 1.7 million people for disaster assistance, a record number of open disasters, a record number of registrants. In an average year, just to give you some perspective, FEMA only registers 480,000 people. FEMA quickly expanded our capabilities across the board to meet those challenges. We hired, trained, and fielded thousands of additional phone operators and inspectors as well as thousands of additional community relations workers. But FEMA does not do its work alone. In each of these disasters, we stood shoulder to shoulder with our State partners, our local partners, and indeed, even with our Federal partners. We are now months removed from the immense and daunting challenges we faced during that unusually cruel season, and I want to remind everyone what an extraordinary period we faced. FEMA's response to the hurricanes and the tropical storms last year represented the single largest mobilization of emergency response and recovery resources in the history of this country, surpassing even the response to September 11 and the 1994 Northridge earthquake. It was a massive undertaking and a relief operation for which I am exceptionally proud. It is imperative that we remember and understand the challenges and the complexities that we confronted. In full situational context, before anyone attempts to craft new answers and new procedures which may, on their face, seem reasonable but without closer and more studied scrutiny will have unintended negative consequences. We must never lose the sense of urgency that drives our response to victims and communities in need or be forced to sacrifice that urgency in the pursuit of elusive administrative perfection. Our mission to get help quickly to those who so desperately need it must take priority yet be carefully and always balanced with our obligation to be stewards of the taxpayer dollars. I personally was on the ground in the midst of our response operations, and I was able to judge for myself the urgency of the situation. I can assure you that FEMA was never stampeded into making any decisions. We made informed yet sometimes very difficult choices in order to meet the demands of the extraordinary situations created not just in Florida but all along the Eastern half of the United States. I just want to say publicly that I am proud of FEMA's employees and their accomplishments. Senator there is always room for improvement. Our processes and procedures are not exceptions to that rule. Many of our programs have been refined and updated over the years. Since 1992, when FEMA was very heavily and I think appropriately criticized for its slow response to the victims of Hurricane Andrew, the men and women of FEMA have pursued and implemented changes, efficiencies, and upgrades through the use of new technologies, faster systems, and clearer procedures. During that same time, we have also seen the implementation of a brand new program, the Individuals and Households Program, enacted by you in 2000 under the Disaster Mitigation Act. While I look forward to constructively discussing many ideas for these improvements, I want to remind everyone that our processes and procedures have been forged over countless disasters, through years of experience and have consistently weathered and withstood the test of time and repeated trial. We constantly observe and review our responses after every disaster, not only to identify those things that we did well and can be proud of but also to identify and remediate areas that require our improvement. Four hurricanes impacting 15 States in 6 weeks is an exception to our normal course of business. Those four hurricanes were an anomaly. Yet it is our duty and our mandate to act regardless of the situation. You see, we do not have the luxury of dictating the conditions under which we operate. It is in that very spirit that I look forward to our discussions today. While media and other reports have focused on errors, I would sincerely and respectfully suggest that this hearing, in addition to focusing on the errors, also focus on the hundreds of thousands of people who did receive assistance and on the thousands of inspectors who successfully conducted hundreds of thousands of inspections all across the affected States. I simply do not listen to those who suggest that we should pay excessive scrutiny to one county or to one group of people affected by a disaster and not to others. These storms do not respect geographical boundaries, nor do they respect socioeconomic demographics that would justify in some people's mind a higher level of scrutiny. Unfortunately, I often see competing local agendas. Those with political differences sometimes attempt to cloud our mission to deliver aid and to deliver to those who most need our help. While we and I personally will always strive to strike a proper and defensible balance between timeliness and fiscal surety, you who legislate daily know that these decisions that we make are never black and white. That is why I have tried to provide some necessary post-event context to serve as a setting for continued discussion of the fundamental issues that any large scale event of this type presents. Perspective seems to have been lost in the public discussion. Early concerns were over reports that Miami-Dade County suffered less severe damage from last season's hurricanes than counties to the north, where the eyes of Hurricanes Frances and Jeanne made landfall, and that somehow Miami-Dade received seemingly disproportionate Federal assistance. In fact, I think that those concerns led to this inquiry. But to give a thorough understanding of FEMA programs and procedures and the differences between our individual programs and our government programs, it will become clear that many of those early concerns were misguided. Early press reports and even reports in this hearing today that somehow we should engage in county by county comparisons of total outlays will yield faulty results and incorrect conclusions. In addition to levels of damage, many factors influence the distribution of Individuals and Households Program assistance, including the population, the proportion of insured applicants in counties affected by disasters, and even the income levels. Raw comparisons of the aggregate amounts of disaster assistance delivered in these counties led to starkly skewed comparisons, faulty conclusions and an inaccurate perception. Less than 2.9 percent of the residents in Miami-Dade County received any FEMA aid, an amount that I believe is commensurate with the amount of damage and proportionally much less than the counties at the eye of the hurricanes. FEMA responded aggressively and proactively to the needs of all affected citizens of the State of Florida who were eligible for assistance. The amount of money spent in one county did not reduce the amount of money available to other counties, nor did the money we spent in one area reduce levels available in other areas. With all of the good that has been accomplished in Florida, we know that there was some assistance given incorrectly, through errors of data entry, inspections and, unfortunately, even through fraudulent claims. I make no excuse for those errors, Senator. I am proud of actually the few errors that have been surfaced out of the hundreds of thousands of inspections that were conducted. Our overriding priority in a near-catastrophic incident is to get help quickly to those who need it desperately while continuing to exercise all reasonable diligence over our obligation to continue to be outstanding stewards of taxpayer dollars. That will always be the balance that FEMA strives to meet: The balance between getting aid quickly, effectively to everyone who needs it and balancing the desire to make sure that we are good stewards of taxpayer dollars. That is our mission, Senator. Again, thank you for having me here today. Chairman Collins. Thank you very much, Mr. Brown, for your statement. In response to your opening remarks and the video that you played, I want to emphasize to you that the Members of this Committee very much appreciate and recognize the vital role played by FEMA in helping the victims of natural disasters. It is because of our appreciation for that role that we are particularly concerned about what this Committee's investigation has uncovered. The public is perfectly willing, indeed eager, to help the victims of natural disasters rebuild their lives and their communities, but the public is not willing to see patterns of abuse, wasteful spending, outright fraud, erroneous payments, and that undermines public support for providing that assistance, and that is why this is of great concern to me. If the public feels that millions of dollars are wasted, they are going to be far less likely to support the appropriation of additional funds to help people in future disasters. And that is why this Committee, which has new oversight responsibility for FEMA, is conducting this investigation. In your comments, you said that focusing on one county, Miami-Dade in this case, as the Committee's major focus has been, results in faulty results and incorrect conclusions. Yet the Inspector General said that the systemic weaknesses and the lack of controls that his audit identified could be applied beyond Miami-Dade and, in fact, characterized the provision of assistance in general. Do you disagree with that finding? Mr. Brown. The extrapolation of things that were found in Miami-Dade to other areas of the State, particularly areas of the State that were particularly hard hit, I think does draw incorrect conclusions. The reason for that is this: It is very easy for an inspector to make a determination when he looks at a home and all that is there is a foundation. It is more difficult for an inspector to make a determination of what has really occurred in those marginal areas where it is more difficult to discern, and you have to use judgment as to exactly what occurred, particularly when you are making those discerning kinds of judgments in housing stock that is old and decrepit and--by our standards, by the standards you and I would want to live in--is certainly substandard. And so, to draw the conclusions from those kinds of inspections to all of the programs throughout all of the country, and the State in this case, I think is an incorrect extrapolation. Chairman Collins. Well, let me give you a specific example that the Inspector General identified as an inappropriate process that leads to overpayments. He told us that FEMA inspectors, when they are evaluating a spare bedroom, for example, evaluate it as if it has two twin beds, a chest of drawers, a nightstand, a lamp; in other words, as if it is fully furnished, even if that bedroom, in fact, only contained a single bed. If that is being done in general, why does that not produce overpayments everywhere that procedure is applied and not just in Miami-Dade? Mr. Brown. That is actually an excellent question, and the reason for it is because in most areas it is safe to assume that in the destroyed home that you see--that is the typical middle class home--it is easy to make the assumption that yes, there is that property in the structure. It is more difficult to make that judgment--and I agree with you. I think in those marginal areas, we do need to tighten that up. And so, if there is a way that we can do that tightening up so that in the marginal areas that are not as clear-cut as the destroyed typical middle class home, then, I am willing to do that, and I think that we should do that. But to draw the extrapolation that because we found a situation in one county that may have an unusual situation and extrapolate that to all inspections done all across the State, I do think that is incorrect. Chairman Collins. Do you think that FEMA should be paying for furniture that does not exist? Mr. Brown. We should not be paying for anything that does not exist. Chairman Collins. Well, is that not what happened? Mr. Brown. But Congress told us that we would. But it does in those very marginal cases. And I would like to eliminate those marginal cases. Chairman Collins. If you are using a generic room approach, you are paying for furniture that does not exist. Mr. Brown. That is correct, and I do believe we need to tighten that up in those marginal cases. That is the balancing act that I talk about. We should not require an inspector that is in a neighborhood that you and I could look at and say, it is reasonable to assume that there was the typical furniture in that home, and that home is now demolished; I do not think that either one of us want to be in a position where we are going to delay assistance to that individual while they go out and somehow prove to us that they had a nightstand or two nightstands and a king-size bed versus a double bed. I do not think we want to get into that kind of discriminatory, discerning type of practices. I do agree with you, though, that the other side of the balance is to try to figure out a way where it is in those very marginal cases, how do we in fact do that determination without slowing down the aid so much that that victim who really does need our assistance is now waiting 2, 4, 5, or 7 days for that assistance? That is the balance we are trying to find. Chairman Collins. Do you think FEMA inspectors should be okaying payments for automobiles that have been towed away and cannot be inspected? Mr. Brown. I knew you would ask me about that particular example, and that is a tough example. I was not there, and I did not see, I did not talk to that individual like I would talk to you right now and read your body language and check your sincerity and understand the whole totality of circumstances of what that inspector is seeing on the ground. We have to give the inspectors some latitude to recognize that people's lives have been upended. They are at the worst point in probably their entire lives about how to make a decision. You take a single mother in Miami-Dade County who maybe relied upon that Opel Cadet to get her kids to school or to get to work maybe two or three jobs that she is working. That inspector has to make a judgment call. Yes, we negotiated with the State under the IHP program before we went into the disaster about what we would pay. Our goal is to get that single mother transportation, not to give her $250 or $450 or $2,000 to meet the Blue Book value of her car but to give her reimbursement for the transportation so she can make the decision, get another vehicle, return to work, get those kids back to school. That is the judgment that those inspectors make in the field. Chairman Collins. Mr. Brown, do you disagree with Florida officials who said that the damage from Hurricane Frances in Miami-Dade County was minimal? Do you disagree with the Weather Service assessment that there was no flooding? Mr. Brown. It is not a matter whether I disagree or not. It is what the facts are. The facts are this, Senator: The private insurance companies, who have a vested interest in not paying out claims to the extent that they do not have to have to date paid out $60 million in property damage claims to Miami-Dade County. There was damage in Miami-Dade County. We have also had requests from the County of Miami-Dade for reimbursement of both emergency protective measures and for debris removal. We have paid over $700,000 in Miami-Dade County for debris removal. So all of the premises that so many people have started from that we paid for things in Miami-Dade when the hurricane did not get there, and there was no damage, is just incorrect. Chairman Collins. Well, we all know that insurance claims cover a far broader array of damages than FEMA assistance. Mr. Brown. And that is why I focused---- Chairman Collins. That is totally different. You can have an insurance claim for minor flooding in your cellar as a result of a thunderstorm. We are talking about a hurricane. Mr. Brown. That is correct, and hurricane bands can produce tornadoes. If you are living in substandard housing, sustained winds of 59 miles an hour can make your home uninhabitable. And so, we should not pick on the people of those neighborhoods because they live in unfortunate, substandard housing, and they do not have insurance. We should not pick on them because of that. In Miami-Dade County, the Governor had already ordered a mandatory evacuation. I tried to get into Miami International Airport. It was closed. There were severe rains. There were severe thunderstorms. Frances was still making landfall. This is one of the slowest hurricanes that we have seen in the history of this country. We did not know which direction she was going to turn or what to do. We made the absolute right call in declaring Miami-Dade, because it is my honest and sincere opinion that had we not added Miami-Dade County on to the President's disaster declaration, I would have been hauled up here and been asked why did I not provide aid to those people and those neighborhoods where those tropical force winds either caused damage or caused them to suffer. Chairman Collins. The Presidential declaration said that a preliminary damage assessment should be done before Miami-Dade County was added. Why was that not done? Mr. Brown. If I may, I believe that the Inspector General is just wrong in that regard. The President's letter, and I want to quote it verbatim--I got the wrong page up. I am sorry. The letter is addressed to me.\1\ ``You are authorized to provide individual assistance in the designated areas, assistance for debris removal and emergency protective measures (Category A and B) under the Public Assistance Program in all counties in the State and Hazard Mitigation statewide, and any other forms of assistance under the Stafford Act you deem appropriate subject to completion of Preliminary Damage Assessments.'' --------------------------------------------------------------------------- \1\ The letter referred to appears in the report entitled ``Audit of FEMA's Individuals and Households Program in Miami-Dade County, Florida, for Hurricane Frances,'' Department of Homeland Security, Office of Inspector General, Office of Audits, OIH-05-20, May 2005, on page 34. --------------------------------------------------------------------------- Chairman Collins. Subject to the completion of a PDA. Mr. Brown. Any other assistance other than Categories A and B, which under the FEMA programs would be Categories C through G. If I wanted to provide any of those categories of assistance, the President said before you add those counties and provide that kind of assistance, you must do PDAs. A and B were the exception. That is the way FEMA has always operated. Chairman Collins. In your written statement, you say, ``In normal circumstances, some of the quality control problems we saw in Florida would be unacceptable. Given the context, complexity, and enormity of our operations, their results were far more commendable.'' I would like to refer you to Exhibit No. 5,\2\ in the exhibit book on the table. If we could have the exhibit put up. This exhibit, as you can see, is entitled Errors Found through Quality Control Inspections Conducted by Parsons-Brickerhoff. This chart shows a 37 percent error rate on personal property inspections conducted in Miami-Dade and an 18.5 percent error rate on the home unsafe determinations, a 16 percent error rate on furnishings, 16 percent on clothing and 11.5 on willingness to relocate. Are these the kinds of quality control results that you view as ``commendable''? --------------------------------------------------------------------------- \2\ Exhibit No. 5, a chart entitled ``Errors Found Through Quality Control Inspections Conducted by PB (389 QC Inspections Total)'' appears in the Appendix on page 75 --------------------------------------------------------------------------- Mr. Brown. Yes, and can I explain why? Chairman Collins. Yes, this is very interesting. Mr. Brown. We have within our contracts, which are currently under review to renew, an extraordinarily tight quality control process. So within that 37 percent that you see on personal property errors, there is a list of 65 different items that the quality control people go through and actually nitpick, if I can use that word. They are trying to find errors not just substance but in procedure, in the way the inspector actually dealt with the applicant, things such as did the inspector arrive on time, was the inspector friendly. And so, those kind of things are categorized so that we can take every single one of those 65 items and improve that particular inspector's quality of inspection. So I am not surprised, as long as that 37 percent does not translate into some figure that is an outrageous amount of money that has gone out that should not that we have to now go recoup, that 37 percent figure does not mean anything to me other than that the quality control process was working, and they were doing what they had to do to make that procedure even better. I do not think we can take--what I am trying to drive at is that you cannot take that particular figure and drive that percentage to an amount of money that we have to recoup. Chairman Collins. This is a sampling. To me, it is an alarming sampling. Let me show you some of what we found in our investigation. I would like to refer you to Exhibit No. 9 in the book.\1\ This is a quality control report. Do you see on the far right, the level of damage done? None? We found this over and over again, and yet, in this, thousands of dollars were paid out to individual claimants. The quality control report points out that there was money provided to repair a dryer. There is no dryer. --------------------------------------------------------------------------- \1\ Exhibit No. 9, ``IHP Daily QC Report'' appears in the Appendix on page 76. --------------------------------------------------------------------------- And this is not just a single example. We have many examples. Mr. Brown. And I recognize that in the course of responding to these disasters which, again, just let me give you a little perspective. Take an average, well, there is no average disaster. I have made it a philosophy of mine when I get asked by the news media, well, how does this compare to where you were 2 days ago, I just do not compare one county to another or one State to another. But if you take just some of the disasters that FEMA has dealt with during my tenure, let us take the California wildfires, for example. In the California wildfires, we did 23,398 inspections. In Florida, we did--are you ready for this?--885,744 inspections. That is how much we had to ramp up. So there is no question in my mind that this Committee, the press, myself, my staff, all of us can find documents like this that are going to show where errors were made. That is not acceptable to me. I want to clean that up. I want to fix that process. But to extrapolate from that and say that the quality control process that we have in place which is designed to find these errors is broken I think is incorrect. Chairman Collins. Well, let us talk about the inspection process. FEMA asked each of its contractors to perform 15,000 inspections per day, which is double the maximum number that they were required to perform under the contracts. When FEMA took this step, did you realize that meant that the contractors were going to have to hire thousands of new inspectors? Mr. Brown. I did, and if I can describe the choice that I have to make as the leader of this organization, the choice is this: Florida and these other States have been hit with a near catastrophic event. It is not unlike what a terrorist could have done if a terrorist had been trying to do something. So I make the determination that in trying to reach this balance, I can do one of two things: I can either stop all inspections such as was done in the 1994 Northridge earthquake and just pay money out based on ZIP Codes, or I can ramp up, work with the contractors, do everything I can trying to be a good steward of the taxpayer dollars and get eyes on every claim. My objective was to get eyes on every claim made and not pay things out by ZIP Code. So when you are doing 885,000 inspections, there are going to be errors. I want to clean those up, but I still believe I made the right decision for the taxpayers and the disaster victims of continuing to get aid out to them but not do it on a blanket basis like was done in 1994 on a ZIP Code basis. Chairman Collins. Are you aware that FEMA's preliminary analysis of inspector error rates for all of the Florida disasters shows that new inspectors have an error rate of more than three times that of experienced inspectors? Mr. Brown. I do, and in fact, if you look specifically at Miami-Dade County, which is the impetus for this investigation, you look at the--it is 50-some experienced inspectors had an error rate of something under 2 percent, and the inexperienced inspectors had an error rate somewhere close to 9 percent, 9.8 or something, I believe it was, 9.2. I think what that shows is of those 2,000 inspectors, additional inspectors that we brought on, some of the companies did an excellent job of training them and educating them and limiting what they were able to do until they gained experience. They had kind of an algorithm built in so that a new inspector would go out with another inspector. They would only allow them to do five inspections, bring them back in, check their work, see if they are ready to go back out again; maybe do some more. So we did make that decision to ramp up the inspections, which we knew would cause a higher error rate, but we knew in the long run, that was still the more prudent thing to do to continue to get assistance out as quickly as possible. Chairman Collins. Are you aware that inspectors were deployed to the field before their background checks were completed? Mr. Brown. I am not aware that they were deployed before the background checks were completed. I am aware that background checks are required. Chairman Collins. Are you aware that several of the inspectors had to be removed because they had serious criminal records? Mr. Brown. I am aware that there were some that were removed. We found some on our own that we removed for various reasons, and I do not believe that--and while that is not acceptable to me, I mean, I would prefer to have everyone with a perfect background, I think it is also unfortunate that we lump in some of these folks that maybe had a DUI or maybe had a misdemeanor of some sort that have paid their debt to society, went out and conducted the inspections and that we have had, again, almost a million inspections done and no complaints about anyone with a criminal background doing anything improper. Chairman Collins. No complaints, so those inspection forms where the quality control inspector later found that there was absolutely no damage, you do not think that suggests there was a problem with the inspector who did the original assessment? Mr. Brown. No complaints from those that received the inspection, no complaints from the victims. Chairman Collins. Well, I am not surprised that the victims did not complain. They got checks even though their homes were undamaged. In fact, there is an amazing document attached to one of the quality control reports where it says the applicant called in to find out what is the check to be used for? This is a case where there was no damage. Mr. Brown. Senator, again, with all due respect, that is not acceptable to me. We want to tighten those up, and we want to fix those. We have found examples of that where we tried to fix it. Again, if I put it in the context of what the choice is that we make, we all have choices to make, and in this case, the choice was ramp up the inspections, try to get as many out there so I have eyes on every claim, or just do the blanket ZIP Code. I refuse to do the latter. Chairman Collins. Well, I do not think those are the only choices. I agree with you that you made the right decision in not doing the ZIP Code approach, but I think we could do a lot better. To go back to my generic room example, those problems were first identified back in 1991 by an IG report, and yet, FEMA is still using that approach. I realize that was long before you became head of the agency. Mr. Brown. But that report also recognized that while that approach had flaws, the IG report from Hurricane Andrew also told us to continue to try to find the quickest, the most efficient approach that would get the money out the fastest to individuals. That is the competing interest that we still fight. Chairman Collins. See, this is where you and I have a fundamental disagreement. I do not think there is a tradeoff between responsive, swift assistance to those who are truly victims and protecting taxpayers against waste, fraud, and abuse. I think we can do both, and I think we greatly improve the chances of doing both by implementing procedures and safeguards that will ensure that the money is well spent and by having a system of checks and balances and quality control that would greatly reduce the possibility of erroneous payments or outright fraud. And I do not see this tradeoff. I think it is a false choice. Mr. Brown. But may I explain? Because I think whatever the exhibit was that showed the graphs with the error rates, that shows that the quality control system does work. And ironically, it works both ways. We have found--we are in the process right now in Florida of recouping money from individuals that through our quality control process, we found should not have gone to those people. Now, I would like to tighten that up even more so that at some point, we can narrow that down to where we actually know that before the check goes out, granted. But that quality control process also finds people where the inspectors made the error on the side of the taxpayers, where they were actually eligible for more money that we did not get them. So I think that shows that the quality control process gets, and what you and I are discussing is how can we make that quality control process meet both objectives? How can we have a quality control process that allows us to get eligible victims the money that they deserve that you tell us as Congress we have to give them under the law and at the same time do it in a manner that is fast and efficient so that the taxpayers then do not lose confidence in FEMA because getting the assistance to people takes so long to get it to them. That is the balance we are trying to get to. Chairman Collins. Let me give you another very concrete example: FEMA, in the midst of all these hurricanes, which were putting enormous strains on your resources---- Mr. Brown. Absolutely. Chairman Collins [continuing]. Decided to take steps to expedite inspections by introducing some new guidelines. These guidelines, inspectors have told us, created a great deal of confusion on what the standards were, but they also had another consequence. The change in the guidelines, contractors have told us, forced them to disable their error checking software. So here is a key safeguard built into the system to catch errors, but because of the change in guidelines in the midst of trying to handle all of these hurricanes, that safeguard was taken away. Mr. Brown. That troubles me, but again, let me put it in perspective: It was one level of safeguards taken out. It did not take away all of the safeguards. It did not take, for example, the edit check away from the Palm Pilot that the inspector actually used in the field. It was down the road that it took one level out. The other checks remained in place. Chairman Collins. It is yet another example of a safeguard that was not in place. That is the problem. Mr. Brown. But what I do not want the public or the taxpayers to take from that statement is that all safeguards were then taken away. Chairman Collins. No, but---- Mr. Brown. It was one level of safeguard that, yes, did go away. Chairman Collins. That would have picked up some of the errors. And keep in mind some of the mistakes are mistakes. There are errors. We have other examples of outright fraud. We have examples when you were talking about the inspectors. We have examples of inspectors who have been referred to the Office of Inspector General's criminal investigators because they did no inspections. They never showed up at the houses. They just filled out the forms. Mr. Brown. And in fact, some of those inspectors were actually found by our own quality check system. Chairman Collins. I would say that is a pretty serious problem with inspectors when you are saying---- Mr. Brown. Senator, I do not disagree with you. The fact that we have an inspector who goes out to Burger King and tells people to come by and let me fill out the forms while you are sitting in the Burger King is totally unacceptable to me. But in the context of 7,000 inspectors, do we want to get--I do not think we will realistically ever get to the point where there are no inspector errors or there are no inspectors or individuals, for that matter, receiving our assistance who are not going to try to cheat us. So we have to make certain that we have the right kinds of proper safeguards in place. I think that sometimes, the examples which are egregious, unacceptable to me, they are frankly outrageous; they are just outrageous to me, sometimes causes us to lose sight of those safeguards that are in place that allow my team to actually identify an inspector like that and turn him over to the Inspector General. Chairman Collins. Do the FEMA claim forms have any kind of warning on them to the claimant that false claims will be prosecuted? Mr. Brown. Yes, it is no different than many other government forms that require when you do self-verification that you do it under penalty of perjury, that you do it, that you have told the truth; it has all of those things on there. Chairman Collins. I want to turn now to the issue of rental assistance. As I indicated earlier, more than $9 million was spent on rental assistance in Miami-Dade. That is close to a third of the money that was spent. Do you know how much of that money was actually spent to rent alternative accommodations? Mr. Brown. We do not, and I think that is one area where we can make some improvement. If you look at the 1992 Inspector General's report, it recognized both the validity and the importance of this rental assistance, particularly when it is in the expedited assistance format, and they recommended that we cut that back to 2 months. In this case, we actually cut it back to 1 month. It is only when we go into the second or third months of that expedited assistance that we actually do the verification of the first month, did you actually spend it on that, and I think that is an area where we need to tighten that up. I do not want to get rid of the expedited assistance program, and I would also like to tighten up the rental assistance programs so we can do more verifications of that. Chairman Collins. The Inspector General points out that some 4,300 applicants who received rental assistance did not indicate any need for shelter at the time that they registered. The IG also told us that he believes rental assistance must actually be spent on rent, as he memorably said, that is why it is called rental assistance. Mr. Brown. Right. Chairman Collins. Do you agree with that? Mr. Brown. Absolutely, but what is rent? Rent is a motel. It could be a camper-trailer that you found that someone is going to let you live in for awhile. Sometimes, these are dire straits, and they find whatever they can to rent. I do not want that condition, though, to negate the fact that I agree with you: We need to have a better way of verifying that rental assistance while at the same time making sure that people who have the need to be able to get into a motel or an apartment or whatever that they are indeed able to do that. Chairman Collins. The reason I ask is you have said, ``seeking other accommodations and residing elsewhere are not eligibility criteria for receiving rental assistance.'' You can see why that statement would puzzle me. Mr. Brown. Right. Chairman Collins. So you do believe that it is supposed to be used for rent. Mr. Brown. Yes, but again, not to belabor the point, it can take many forms. It could be that they find some guy who has got four or five camper-trailers, and yes, I know you have lost your home, or you cannot live in your home for whatever reason, and I will rent that to you for awhile. Sure. Chairman Collins. Mr. Brown, let me just ask you one final question, and that is to go back to the declaration process. I want to read you a quote from a memorandum submitted by a FEMA employee. Clay Hale is his name. He said, ``the most significant change that would reduce the amount of inappropriate assistance would be to improve the declaration process.'' Do you agree with that? Mr. Brown. I cannot agree or disagree with that. I do not know in what context he says that, what he means by improving or changing the declaration--I just do not know what he means, Senator, with all due respect. Chairman Collins. Well, I guess, then, my final question to you will be this: What do you think should be done to better administer disaster relief so that we do not have the high incidence of erroneous payments, fraudulent claims, wasteful spending that certainly appears supported by the evidence with regard to Miami-Dade County? Mr. Brown. Every year, every single year in every disaster, because we do play this balancing act, FEMA ends up recouping money from individuals who received money that they should not have received or received more money than they should have received. We also make, through our quality control process, checks where people end up receiving money that they should have received that they did not receive. And so we have to, after every disaster go through and try to find ways that we can tighten up and improve our processes. And to give you just very briefly without going into all the details, because I do not want to bore you with those; we will put those in the record, some of the things that we are doing: We are trying to better define the contract for developing our communications strategy so that county commissioners, for example, better understand what they are getting money for. We want to standardize the PDA process so that the whole desire of doing PDAs, that we have standardized processes for different ways of doing PDAs. We want to develop clear standard operating procedures for interim shelter and necessary support resources; develop comprehensive new management plans for the direct housing opportunities that we pay for. We want to upgrade our technology. We think that with as fast as technology is improving, there are certainly ways that we can do to speed the amount of information that we get in the field and to verify that information. We want to develop some threshold matrices to activate the surge registration intake capabilities. In other words, when we have to ramp up to something where we are typically doing 480,000 registrations a year, and suddenly, we have to do 1.2 million to 1.7 million registrations because of an unusual event, we want to develop the protocols in advance for doing that. We want to take the recommendations the IG had. If you read my response to the IG report, many of those recommendations, we have already started implementing. Some, we want to sit down obviously and have further discussions, but many of those things we are already doing and want to implement. Chairman Collins. I appreciate your testimony here today. It is my conclusion that a great deal of work remains to be done to ensure that in our efforts to deliver swift, compassionate assistance to the disaster victims that we do not compromise the taxpayers' money. I am very concerned about the integrity of this program, and I believe that if we do not take steps to greatly reduce the kinds of problems that the Inspector General and this Committee's investigations revealed that public support for disaster relief will be diminished, and I know that we share a common goal of making sure that disaster victims are served compassionately and quickly. I hope we also share the common goal of making sure that taxpayers' money is not wasted. Mr. Brown. Senator, we share both of those goals. My pledge to you is that we will continue to work with you and the Committee to implement recommendations to find ways that we can meet both of those goals. Chairman Collins. Thank you. The hearing record will remain open for 15 days. I want to thank all of our witnesses today as well as the staff for their work. This hearing is now adjourned. 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