FEMA Accused Of Wasting More Katrina Funding
$30 Million Misspent Last Year On Trailers in Miss., GAO Says

By Spencer S. Hsu
Washington Post Staff Writer
Friday, November 16, 2007

The Federal Emergency Management Agency wasted about $30 million last year in maintaining trailers for Hurricane Katrina survivors in Mississippi, according to a new government report. In one case cited, FEMA awarded contracts that could have cost as much as $229,000 to support one family in a single trailer -- roughly the price of a five-bedroom home in Jackson, Miss.

By not awarding work to contractors with the lowest bids, FEMA misspent $16 million, said the Government Accountability Office, Congress's audit arm. The agency misspent an additional $15 million on inspections that it could not prove were performed, preventive maintenance for which contractors falsified documents, and emergency repairs on trailers that FEMA did not own, the GAO said.

"Over 2 years have passed since the storms and FEMA is still wasting tens of millions of taxpayer dollars as a result of poor management and ineffective controls," the GAO concluded in a draft report to be released today. The agency said it would refer apparent criminal conduct it discovered to the Justice Department.

This new listing of oversight failures was bared more than two years after Hurricane Katrina made landfall on the Gulf Coast on Aug. 29, 2005. FEMA has previously come under fire for its handling of the trailers, and last year it rebid parts of four rushed, no-compete contracts worth up to $3.4 billion for housing evacuees.

Lawmakers said the ongoing waste showed that the troubled agency is still bleeding taxpayer dollars despite policy changes. They said FEMA has not completed a new national strategy to house efficiently large numbers of Americans displaced by a major hurricane, earthquake or other catastrophe.

"The American taxpayer should be outraged -- as I am -- that in a six-month period FEMA managed to waste approximately half of the $60 million it spent" on trailers in Mississippi alone, Sen. Joseph I. Lieberman (I-Conn.), chairman of the Senate homeland security committee, said in a statement.

Citing "phony inspections, phantom trailers and rigged contract bids," Sen. Susan Collins (Maine), the panel's ranking Republican added: "It is unacceptable that . . . FEMA still is wasting millions of taxpayer dollars."

FEMA played down the GAO report, which was reported by NBC News on Wednesday night, with a spokesman saying it "does not reveal new issues." In a written response, the agency said it has acknowledged making mistakes during Katrina and has tripled its professional contracting staff from 35 to 118, prepared several hundred work orders for federal agencies to use in future disasters -- including new ones for trailer support -- and awarded housing-related contracts for the next two years.

"This is another look backwards that tries to project the mistakes made in Katrina onto the FEMA of today. We reject that effort," agency spokesman James McIntyre said in the statement.

McIntyre said the $229,000 per-trailer cost GAO calculated for an eight-trailer group site in Bay St. Louis, Miss., was based on the site remaining open until March 2009. In fact, it closed Aug. 31, cutting ongoing costs.

FEMA is trying to close other group sites, acknowledging unhappiness about their high cost, unpopularity in local communities and the potential for social problems among residents. Its current policy is not to develop group sites in the future, partly because of unresolved issues related to findings of high levels of toxic formaldehyde gas in many of the trailers.

Lieberman said FEMA's claims were poor excuses. "These trailer maintenance contracts were awarded in 2006, well after [the hurricane's] landfall, and the contracts remain in place today," he said. "FEMA . . . still has a long way to go."

About 50,000 families still live in FEMA trailers throughout the Gulf Coast, down from a peak of about 120,000. As of August, about 17,000 families remained in trailers in Mississippi.

The GAO report listed numerous examples of rigged bids and overpayments. In one case, FEMA could have spent $32.5 million instead of $48.2 million if it had awarded maintenance work to the five low-bid vendors instead of to all 10 pre-selected contractors, according to the report.

In another case, after FEMA paid a company $1.8 million to clean septic systems for a 61-trailer site, the contractor pocketed $1.5 million in profit and paid $300,000 to a subcontractor to do the work. FEMA did not exercise an option it had to reassign the work to a cheaper company .

FEMA also awarded maintenance contracts to two companies that falsified bid proposals, shared pricing information, and had the same people serving as president and operating officer. In another case, a FEMA officer awarded a $4 million contract for paving a trailer site, which GAO said could have been done for $800,000, one-fifth the cost.

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