The review of federal flood insurance claims after 2012’s Hurricane Sandy lacked oversight, cost $150 million more than estimated and resulted in duplicate payments, the Homeland Security Department Inspector General found in a Jan. 24 audit reported by Emergency Management Feb. 7.
The inspector general’s report, conducted from September 2016 to December 2017, tagged the program for being sloppily run.
“In early 2015, FEMA faced intense scrutiny from the media and Members of Congress regarding the handling of Hurricane Sandy NFIP claims,” said the audit. “As a result, FEMA embraced a ‘survivor-centric’ approach to flood insurance.” Under that approach, FEMA ultimately offered to review all claims filed by National Flood Insurance Program policyholders after Sandy ravaged the East Coast. FEMA received 19,464 eligible requests for review, and, as of Dec. 1, offered an additional $270 million in payments to the claimants, an average of $12,300 more per claim than originally paid.
FEMA originally estimated the claims review program would cost $37 million and be finished by the end of 2015. Now in its third year and not yet completed, the program had cost more than $196 million as of December. The IG ascribed the length and cost of the claims review to “FEMA’s failure to establish contractor expectations, and provide consistent guidance and oversight.”
For example, the audit found claims that included payments for sales taxes to which FEMA added duplicate sales tax amounts upon review. FEMA also paid a second time for equipment already covered in initial claims payments, and did not require claimants to document all claimed costs..
“For example, on one claim the insurance provider had paid $8,300 for a water heater and boiler on a supplemental claim supported by a paid receipt. However, the [claims review program] paid the policyholder an additional $9,900 for the same items,” according to the audit. “In another claim, the insurance provider paid the policyholder $2,800 to remove and replace copper wiring in a crawlspace of a home. The [program] paid an additional $3,100 to replace the residential electric.”
FEMA concurred with the IG’s findings and is conducting a review of the program.