Report: FEMA Hasn't Tried to Recoup $643 Million

By Michael Kunzelman | January 3, 2011 | 6:00 PM EST

New Orleans (AP) - The Federal Emergency Management Agency hasn't tried to recoup about $643 million in improper payments made to victims of Hurricane Katrina and other disasters in the wake of a judge's order more than three years ago, according to a government audit issued Monday.

The improper payments have gone uncollected for more than three years because FEMA hasn't given its final approval to a new process for recovering the money, auditors found in a report by the Department of Homeland Security's inspector general's office.

The federal agency has distributed more than $7 billion in disaster assistance payments since hurricanes Katrina and Rita struck the Gulf Coast in 2005. An estimated 160,000 applicants received about $643 million in improper payments resulting from fraud, FEMA errors or other mistakes.

In June 2007, a federal judge in New Orleans ordered FEMA to halt its debt collection activities until the agency made certain changes to its collection process. Government lawyers drafted a new process designed to comply with standards set by DHS, but the audit says FEMA's chief hasn't signed off on the plan yet.

A new process for recovering improper payments has been awaiting the approval of FEMA's administrator since late 2008. Current Administrator Craig Fugate was confirmed by the Senate in May 2009.

"Further delay only makes aging debts more difficult to collect," Inspector General Richard Skinner wrote in a letter to Fugate dated Dec. 10.

FEMA spokeswoman Rachel Racusen said the agency is "committed to being responsible stewards of taxpayer dollars" and is completing plans to recoup misspent funds.

"FEMA is legally required to recover any improper payments," she said in a statement. "A 2007 lawsuit challenging the recoupment process established under previous administrations, required us to suspend these efforts, and we have been working in the years since to rectify these problems."