FEMA Should Recover $32.4 Million in Grant Funds Awarded to Riverside General Hospital, Houston, Texas

Riverside General Hospital (Riverside) received a $32.4 million award from the Texas Division of Emergency Management (Texas), a Federal Emergency Management Agency (FEMA) grantee, for damages resulting from Hurricane Ike in September 2008. At FEMA’s request, we audited $32.4 million, or 100 percent of the grant award. 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, Riverside’s remaining management continued to misuse and mismanage Federal funds—this time, FEMA funds. By 2013, 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, 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, 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.