Taxpayers could lose $1 billion that an insurance carrier should pay after future Florida disasters, thanks to unauthorized waivers by federal employees.
The Federal Emergency Management Agency distributed about $4.4 billion in grants to local governments after seven hurricanes and two tropical storms hit Florida in 2004 and 2005. Recipients were required to insure funded projects, according to the Department of Homeland Security Inspector General.
“FEMA has little assurance” that it “required applicants to obtain and maintain insurance for … $1.5 billion awarded …” said the IG report that was released Wednesday. “As a result, FEMA potentially stands to lose up to a billion dollars in future Florida disasters …”
Additionally, though FEMA knew of deficiencies in its insurance reviews, local governments may have received federal funds that duplicated or replaced money that insurance alone should have covered, needlessly costing taxpayers $177 million.
Further, many of the employees that allowed the oversight transitioned to other disasters, including Hurricane Sandy.
“We are concerned that the conditions we identified in this report continue to exist and may be ongoing in some active disasters,” the IG said. The IG didn’t estimate how much the oversight could waste taxpayers nationwide.
Federal regulations clearly state that projects funded by FEMA’s Public Assistance grants must be insured.
“FEMA did not provide an explanation for why the insurance specialists were initiating these waivers,” the report said.
Also, FEMA accepted the claim that $177 million wasn’t covered, despite discrepancies identified by their own employees.
“Rather than simply accepting the insurance company’s position, FEMA should have asked the State Insurance Commissioner for advice,” the report said. “Clearly, FEMA’s insurance review process failed to achieve the intended objectives for the 2004 and 2005 Florida hurricanes.”
In fact, FEMA was missing information, making an accurate review impossible.
“Critical documentation” for the applicants’ insurance policies “was often incomplete,” the report said. As a result, “FEMA could not have completed a valid insurance assessment with the documentation available.”
Despite several years’ awareness of the problem, FEMA allowed deficiencies to continue.
“FEMA has taken no significant actions to address and correct these insurance problems,” the report said.
The IG recommended that FEMA review applicants’ insurance, recover the duplicative benefits and ensure that applicants have received their full insurance benefits.
FEMA did not comment on the IG’s recommendations. The agency has 90 days to respond after the report’s issuance.
