FEMA is lowering the boom on Louisiana for refusing to pay its $338 million
share of a federal program that bought goods and services ranging from chainsaws
to dental care for hurricane victims.
On July 22, FEMA started assessing interest of $14,308.22 for each day the state doesn’t pay. If the bill isn’t paid by Oct. 20, FEMA will add penalties — retroactive to July 22 — of $55,723.11 per day.
Louisiana’s legislative auditor claims FEMA hasn’t provided enough information to allow the state to determine whether the money was spent on legitimate needs for people who truly were victims. The Legislative Auditor’s Office notes that state lawmakers passed a measure requiring such a review before FEMA is paid.
“Nothing has been paid on any of the bills,” said Daryl Purpera, assistant legislative auditor and director of the Compliance Audit Division. “They can’t be paid until the audit is complete.”
But the Federal Emergency Management Agency insists that under an agreement with Louisiana, the state has no right to audit the federal payments and notes it recently gave the legislative auditor more specific billing information.
FEMA’s chief financial officer, Margaret Young, laid out the consequences of nonpayment in an Aug. 22 letter to state Attorney General Charles Foti. Young said the state can’t appeal the decision, adding that FEMA expects “a prompt remittance” of the payment. She also pointed out that the state owes an additional $32 million for its share of Other Needs Assistance Program payments made by FEMA in May and June. That bill, which was due Sept. 6, has not been paid.
FEMA started billing Louisiana in December for the state’s 25 percent share of the $1.3 billion FEMA paid to victims of hurricanes Rita and Katrina under the program. “Other needs” include chain saws, generators, burials, cars, health care, dental care, furniture and anything else victims of a catastrophe might require.
State lawmakers approved nearly $500 million to cover the bills, said Legislative Auditor Steve Theriot, but set the money aside in a separate fund until the audit is completed.
“Our biggest problem was we wanted to know whether we were reimbursing FEMA for fraudulent benefits they may have paid,” he said. “And FEMA wasn’t sending us detailed information we could use for an audit.”
In her letter to Foti, Young says the state has no “entitlement” to audit FEMA. She also insists FEMA “is actively assessing whether improper payments have occurred” and is taking steps to recoup any such money.
Every state facing a disaster has the option of administering the Other Needs Assistance Program itself or having FEMA administer it for the state.
“We chose a number of years ago to allow the feds to distribute these funds on behalf of the state,” Theriot said. “Quite frankly, because of the enormity of this disaster, it would have been difficult had the state undertaken it on its own. Just to get the staffing to do it would have been an enormous task.” Young cites that decision by the state in demanding immediate payment.
“FEMA did not obligate itself to cover 100 percent of payments made in error,” she wrote, “nor to pay 100 percent of all payments until such time as the state agrees to every payment.” Louisiana has been given extensions on due dates, but those have expired, Young wrote. She said other states affected by the hurricanes have not been given extensions, and interest and penalties were not waived for them. “Mississippi has paid its share plus accrued interest, and Alabama paid its portion prior to interest accruing,” she wrote.
While FEMA said the state has no right to audit it, about two weeks ago the agency gave state auditors access to its National Emergency Management Information System, which contains some information on people who received assistance. Purpera said the state is doing a “sample audit” with the new information. “We will use a selected sample of items paid by FEMA and verify the eligibility of those payments and the residency of the occupants who received the money and things like that,” he said. “In some cases, we’ll have to go to the clerk’s office to confirm who was living at an address. It’s a very manual and tedious job.” He said about 25 state auditors worked through Labor Day weekend hurrying to complete the process. He said the job might be finished later this week. “We have every intention of meeting the Oct. 20 deadline,” he said.
In the dark
In the days before the storm, Theriot said, a flurry of documents were signed between state officials and FEMA. One is simply known as the FEMA/State agreement, which allowed FEMA to administer the Other Needs Program. That document was signed by the governor, and Theriot has reviewed that agreement. But attachments to the agreement also contain critical information, he said. “One of the attachments, which we think is Attachment D, contained the agreed-upon prices for goods,” Theriot said. “I think it’s a standardized agreement that FEMA has used in other disasters. We also believe there are other addendums and revisions that were made to that agreement.”
But Attachment D is missing, along with the other addendums. “We’ve asked FEMA and our state officials for them,” Theriot said.” So far, we’ve gotten nothing.”
Who signed Attachment D and the addendums?
“We’re still asking that question,” Theriot said. “We just can’t get our hands on them.” The information in those documents is crucial, he said.
“We need to know what the state agreed to pay and how much they agreed to pay,” he said. “We don’t want to pay the proverbial $300 for a hammer.” For example, Theriot said, FEMA paid some victims for automobiles that were uninsured and reportedly destroyed in the storm. “We’ve been told FEMA paid up to $4,500 for automobiles,” he said. “We have no idea what criteria they were using to reimburse people. Were these people Louisiana residents and taxpayers? And did they really own an automobile that was registered in the state before the storm? And was it destroyed?”
Stories about reimbursements for generators have made their way back to the auditor’s office. “Again, because we have no paperwork, we don’t know what happened. But we’ve been told that FEMA paid about $791 for each generator,” Theriot said. One person may have paid $300 for a generator, he noted, and another $500.
“Let’s say the person who spent $500 on the generator sent FEMA a receipt for it,” Theriot said. “FEMA would have sent them $500. But the person who bought the $300 generator didn’t produce a receipt. So FEMA apparently paid them $791 because that’s what FEMA paid for generators.”
In many cases, Theriot said, FEMA got rid of receipts, an action that causes auditors to shudder.
At the very least, Theriot said, he wants the document that shows the state agreed to pay $791 for generators. And then there’s furniture, kitchen appliances and even beds that FEMA apparently purchased for victims. “We’ve been told FEMA bought things like beds and bedding,” Theriot said.
Theriot notes agencies such as the Red Cross gave people beds and bedding. One of FEMA’s mandated jobs, he said, was to coordinate with relief agencies.
“FEMA is supposed to ensure that people do not double dip,” Theriot said. “But because of the magnitude of this disaster, I don’t think FEMA was able to coordinate these efforts very well.”
Emotions have run high as the federal and state agencies try to piece together what should have been paid, he said. “It’s been frustrating for FEMA and it’s been frustrating for us because this event is unprecedented in size,” Theriot said. “The amount of individual assistance paid was unprecedented. But we do know some of it was necessary because of the broad breadth of destruction that occurred here. But the question is how much.”
FEMA claims no other state has tried to make the agency prove the benefits it paid were legitimate, Theriot said.
“They’re upset with us because we’re asking for so much proof about what they paid,” he said.
But the state’s share is likewise an unprecedented amount, Theriot said.
“We want to see receipts, dates of things and verify victims’ residencies,” he said. “That’s a key factor. We want to make sure they were occupying a home in the disaster area. We want to verify they had a loss. We want to make sure the money wasn’t going to prison inmates. We want to make sure the recipients were alive.”
No regrets
Several state legislators say they stand by their decision to request the audit even though FEMA is charging them more than $14,000 a day in interest. State Rep. John A. Alario Jr., D-Westwego and chairman of the House Appropriations Committee, said the state deserves an explanation from FEMA. “What happened is FEMA simply sent us a two-page bill that looks like a light bill with a coupon on the bottom,” he said. “And it was for $139 million.” He said FEMA “doesn’t need to get upset” because the state hasn’t paid the bills. “All FEMA needs to do is tell us what they spent the money on,” he said. “I hope they didn’t just pull it out and say, ‘We’re going to bill them $500 million.’ I hope they have some backup documents that show how they spent it.”
Alario said he is not concerned that FEMA is charging the state interest. “I’m sure our treasurer invested the money we set aside for paying these bills,” he said. “It will be interesting to see how much we’ve earned on our money. Hopefully, it will offset what FEMA is charging us.”
Sen. Francis C. Heitmeier, D-New Orleans and chairman of the Senate Finance Committee, said FEMA should have provided itemized statements with the bills. “Those bills were crazy,” Heitmeier said. “I don’t believe that FEMA would have paid a bill if we had sent them a bill like we were receiving.” He said he knows that FEMA is upset with the state over its refusal to pay until the audit is complete. “FEMA was getting mad, and we’re sorry,” Heitmeier said. “We’re not trying to jack FEMA around. We need them to help us, but we can’t write checks until we know what we’re paying for. We’re accountable to our taxpayers for every penny we spend.”
State Rep. Don Cazayoux, D-New Roads, said legislators were concerned that FEMA might have problems with “accounting and checks and balances.” “It wasn’t a punitive idea,” Cazayoux said of asking for the audit. “We’re happy that FEMA has done as much for Louisiana as they have. But we still want to make sure that our percentage of those expenses were prudent expenses.” He said he isn’t surprised auditors had a hard time getting detailed information from FEMA. “FEMA operates off of different rules than everyone else,” he said. “I didn’t expect it to be easy.”
Story originally published in The Advocate
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