FEMA gave out $3.7 billion in ‘potentially fraudulent’ payments through COVID-19 aid program: IG report

FIRST ON FOX: The Federal Emergency Management Agency distributed more than $3.7 billion in improper and potentially fraudulent payments through an aid program for state workforce agencies during the COVID-19 pandemic, the inspector general for the Department of Homeland Security found.

DHS Inspector General Joseph Cuffari found that FEMA “did not implement controls to prevent” the billions of dollars in improper payments from the agency’s Lost Wages Assistance (LWA) program.

FEMA implemented the $44 billion program in August 2020 to ease the economic burden for people who lost work due to the coronavirus pandemic. Under the program, which was active for six weeks, 53 state workforce agencies offered funds from the program to their residents.

Cuffari’s office found during an audit that 21 state workforce agencies (SWAs) had distributed more than $3.3 billion in “potentially fraudulent payments,” $21.6 million in overpayments, and $403 million in payments made without obtaining claimants’ required self-certifications of eligibility for the program.

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“This occurred because FEMA launched the LWA program in 11 days, in response to the unprecedented pandemic, without developing and implementing clear guidance for the program or verifying and monitoring the SWAs’ controls to ensure they prevented and mitigated proper payments,” the inspector general’s report said.

Instead, FEMA integrated these payments with unemployment insurance, and said the agency did not have “sufficient controls to prevent fraudulent activities or overpayments, and they relied on self-certifications.”

“Despite repeated warnings from the Department of Labor and our office that self-certifications are not reliably accurate and may lead to improper payments, FEMA did not require controls to mitigate the unreliability of self-certifications to determine claimants’ eligibility,” the report said.

The inspector general’s office said that FEMA had “lost an opportunity to safeguard $36.5 billion” in disbursed funds, “directly affecting its ability to respond to future emergencies and disasters.”

“By relying on states’ UI programs to distribute LWA funds, FEMA lost an opportunity to solidify controls over a multi-billion-dollar program that was already susceptible to fraud,” the inspector general found. “FEMA also did not protect the Disaster Relief Fund from improper payments.”

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In a response to the report, FEMA said that leadership disagreed with the conclusion that it hadn’t implemented proper guidance and controls to prevent such payments and disagreed with the OIG’s extrapolation that the agency had allowed $3.7 billion in improper payments.

The FEMA response noted guidance that reminds states and territories of their obligations to investigate and report fraud, waste and abuse, while also claiming it was “proactive in mitigating risks associated with potential fraud related to LWA.”

The response notes instances of coordination between agencies, including the Department of Labor, and other fraud-mitigation efforts.

“FEMA remains committed to helping people before, during, and after disasters. Leadership believes the LWA program represents a powerful example of FEMA’s ability to provide critical aid to survivors during a national emergency,” it said. “FEMA’s successful implementation of this program within days of authorization ensured tens of millions of people adversely affected by the COVID-19 pandemic were able to receive much-needed financial assistance.”