Hurricane Katrina Fraud & Connecting the Dots

Stephen DeAngelis

June 28, 2006

There has been a lot of coverage recently concerning alleged fraud connected with assistance provided in the wake of Hurricane Katrina. For example, an MSNBC report [Audits: Millions of dollars in Katrina aid wasted]:

Two audits found that up to 900,000 of the 2.5 million applicants who received aid under FEMA’s emergency cash assistance program — which included the $2,000 debit cards given to evacuees — were based on duplicate or invalid Social Security numbers, or false addresses and names.

The challenge for the government, of course, was enormous. Millions of people displaced from the their homes with information about their whereabouts being gathered and stored by disparate groups. No system was in place that could “connect the dots,” cross check applications, verify Social Security Numbers, compare locations, etc. Such a system would have saved millions of dollars in fraud and waste. I know such a system can be put in place because it would use basically the same architecture Enterra Solutions uses to help companies deal with regulatory compliance. The system can automatically check and compare data bases, alert decision makers to possible discrepancies, and provides a complete audit trail for all transactions. Almost every case of fraud and abuse that I’ve read about could have uncovered had such a system been in place.

The massive abuse that has been discovered may well affect the generosity of taxpayers when the next disaster strikes. That would be tragic since it would punish the innocent for the crimes of the guilty. Nobody appreciates their tax money being given to crooks, but taxpayers also expect their taxes to be used to care for the those who can’t help themselves. Every ethical society deals compassionately with those in need. Implementing a system that increases effectiveness and decreases abuse would be a sound investment for the future — especially since most meteorologists predict a continued cycle of abnormal weather.

I’m not sure how much such a system would cost, but I know it would be pennies on the dollar when compared to the abuse it would prevent. The numbers from Katrina are pretty staggering. The USA Today reports an estimated billion dollars in fraud (out of a total of nearly $85 billion) has been discovered to date. [“FEMA lost $1B to fraud, errors,” by Mimi Hall, 14 June 2006] Among the many examples of waste and fraud cited in a government] report, the article notes:

• Roughly $5.3 million was paid to people who gave only post office boxes as their address. In one case, FEMA sent $2,358 to someone who claimed a damaged house in a New Orleans cemetery; in another, FEMA sent $4,358 to someone who listed his residence as a UPS store.

• Millions more was sent to more than 1,000 people who used names and Social Security numbers of inmates in prisons along the Gulf Coast and across the country. In one case, FEMA sent $4,358 to a Mississippi prisoner who gave officials his correct mailing address — at the prison where he’d been locked up since 2004.

• FEMA reimbursed people for rent at the same time it was paying for them to stay in a hotel. For example, the agency paid $8,000 for someone to stay in a California hotel for five months and also sent that person $6,700 in rental assistance for the same period.

• One person received 26 FEMA payments totaling $139,000 using 13 different Social Security numbers and 13 addresses, eight of which did not exist.

These latest lessons learned from Katrina have to deal with follow-up. A resilient system becomes resilient because it responds appropriately before, during, and after a catastrophic event. I’m sure we’ll continue to learn lessons, but we need to start implementing lessons already learned before we get overwhelmed with a series of natural or man-made disasters.