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DHS IG Finds Substantial Abuse of FEMA Grant by Houston Hospital

A $32.4 million Federal Emergency Management Agency (FEMA) grant made to a Houston, Texas hospital to repair damages from Hurricane Ike in 2008 was grossly mismanaged and misued, according to a new Department of Homeland Security (DHS) Inspector General (IG) audit report.

The IG’s audit report, FEMA Should Recover $32.4 Million in Grant Funds Awarded to Riverside General Hospital, Houston, Texas, also cites lax monitoring of hospital officials’ use of the taxpayer-funded grant awarded by the Texas Division of Emergency Management, a FEMA grantee.

The IG’s audit, undertaken at FEMA’s request, examined 100 percent of the grant award. The DHS Inspector General found “Riverside officials blatantly misspent disaster recovery funds on day-to-day operations of the hospital and on legal fees, insurance, gift cards, as collateral for loans, and on other unverifiable items with no connection to the damages caused by Hurricane Ike’”

“This is an unconscionable misuse of Federal disaster resources,” said Inspector General John Roth. “The entire amount of this grant should be recovered to protect these funds from further abuse.”

FEMA “officials generally agreed” with the IG’s recommendation that FEMA should disallow $17.6 million and deobligate the remaining $14.8 million in grant funds.

Furthermore, the IG stated, “FEMA and Texas should suspend all grant activities until Riverside can account for its expenditures. Texas should also strengthen its oversight of public assistance grant recipients.”

The IG report that, “Riverside’s misuse of federal funds did not end in 2012 with the indictment and departure of its Chief Executive Officer and others on charges of bilking Medicare out of $158 million.”

“Following the indictments,” the IG concluded, “Riverside’s remaining management continued to misuse and mismanage federal funds – this time FEMA funds.”

By 2013, the IG said “Texas had advanced $17.6 million of the $32.4 million FEMA grant to Riverside. Riverside alleged that it spent $13.2 million of the $17.6 million received for disaster expenses.”

However, DHS’s Inspector General found “Riverside completely disregarded federal grant requirements, and Texas did not adequately monitor Riverside’s grant activities. In fact, Riverside spent $7.9 million to fund its hospital operations and other unverifiable items.”

“Further,” the IG found, “Riverside awarded $12.2 million in disaster-related contracts without competition and did not always account for or support the grant funds. Therefore, we question the entire $32.4 million grant award, including $17.6 million in advanced funds and $14.8 million in unused funds.”

In 2014, opposing parties in a civil suit agreed that an appointed committee would operate the hospital. Riverside closed its last two facilities in late 2014 and surrendered its operating licenses.

As of April, Riverside was no longer operational and did not employ any staff.

The revelation comes on the heels of DHS’s Inspector General having issued numerous audit reports in which the IG’s audits found many millions in FEMA Public Assistance Grant Funds awarded for Hurricane Katrina damages were improper … and improperly used and should be recovered by FEMA.

Despite FEMA’s decade of progress after Hurricane Katrina, millions in public assistance grants were misspent, DHS’s IG concluded.

Moreover, the Government Accountability Office (GAO) concluded in a new 93-page audit report that there is no comprehensive, strategic approach to identifying, prioritizing and implementing investments for disaster resilience, which increases the risk that the federal government and nonfederal partners will experience lower returns on investments or lost opportunities to strengthen key critical infrastructure and lifelines.

Despite the Post-Katrina Emergency Management Reform Act that gave FEMA clear guidance on its mission and priorities and provided the legislative authorities needed to better partner with state, local, tribal and territorial governments before, during and after disasters, the IG recently concluded that FEMA should recover more than $52 million that was awarded in Public Assistance Grant Funds that were improperly used.

For example, $4.9 Million of $87.7 million in Public Assistance Grant Funds awarded to the Hancock County, Mississippi Board of Supervisors for Hurricane Katrina damages should be recovered by FEMA, the IG determined.

The IG also determined:

FEMA should recover $1.3 million of Public Assistance Grant Funds awarded to Desire Street Ministries, New Orleans, for Hurricane Katrina.

FEMA should recover $8.0 Million of $26.6 million in Public Assistance Grant Funds Awarded to St. Stanislaus College Preparatory in Mississippi for Hurricane Katrina.

FEMA should recover $1.7 million of Public Assistance Grant Funds Awarded to the City of Waveland, Mississippi for Hurricane Katrina.

FEMA should recover $8.2 million of the $14.9 million of Public Assistance Grant Funds Awarded to the Harrison County School District, Mississippi for Hurricane Katrina.

FEMA should recover $5.3 million of the $52.1 million of Public Assistance Grant Funds awarded to the Bay St. Louis Waveland School District in Mississippi for Hurricane Katrina.

FEMA should recover $3.5 million of Public Assistance Grant Funds awarded to the City of Gautier, Mississippi for Hurricane Katrina.

FEMA should recover $3.2 million of Public Assistance Grant Funds awarded to the Moss Point School District for Hurricane Katrina.

FEMA should recover $8.5 million of Public Assistance Grant Funds that were awarded to the City of Gulfport, Mississippi for debris removal and emergency protective measures following Hurricane Katrina.

FEMA should also recover another $1.9 million of Public Assistance Grant Funds awarded to the Hancock County Utility Authority for Hurricane Katrina.

FEMA should recover another $894,764 of Public Assistance Grant Funds that were awarded to the Town of Dauphin Island, Alabama for Hurricane Katrina.

Finally, the IG found FEMA should recover $5.3 million of Public Assistance Grant Funds awarded to the University of Southern Mississippi for Hurricane Katrina.

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The Government Technology & Services Coalition's Homeland Security Today (HSToday) is the premier news and information resource for the homeland security community, dedicated to elevating the discussions and insights that can support a safe and secure nation. A non-profit magazine and media platform, HSToday provides readers with the whole story, placing facts and comments in context to inform debate and drive realistic solutions to some of the nation’s most vexing security challenges.

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