Improper payments

We determined DHS did not comply with Payment Integrity Information Act of 2019 (PIIA)  in fiscal year 2020 because it did not achieve and report an improper payment rate of less than 10 percent for 2 of 12 programs reported in its FY 2020 Agency Financial Report.  DHS complied with Executive Order 13520 by properly compiling and making available to the public its FY 2020 Quarterly High-Dollar Overpayment reports.  We made two recommendations to DHS to follow Office of Management and Budget requirements and ensure the Federal Emergency Management Agency continues its remediation process to reduce improper payments.  DHS concurred with both recommendations. 

The Federal Emergency Management Agency’s (FEMA) Individuals and Households Program (IHP) has no assurance of applicants’ eligibility for Small Business Administration (SBA) Dependent Other Needs Assistance (ONA) payments.  According to OMB Circular A-123, Appendix C, when documentation or verification is non-existent to support eligibility payment decisions it must be considered improper.  FEMA did not collect sufficient income and dependent documentation or verify self-reported information to determine whether applicants below the income threshold, known as Failed Income Test (FIT), were eligible for SBA Dependent ONA payments.  FEMA believed requiring documentation or verification would delay the disbursement of assistance and relied on an honor system to make eligibility and payment decisions.  We determined, according to FEMA-provided data, it has paid, and we are questioning, the more than $3.3 billion in improper payments to applicants deemed as FIT for SBA Dependent ONA since 2003.  Additionally, FEMA has not evaluated the program risk associated with not collecting or verifying income information.  Per Federal requirements, agencies must conduct risk assessments to determine whether programs are susceptible to improper payments.  Rather, FEMA assessed IHP at the overall program level and did not specifically evaluate each IHP form of assistance, such as SBA Dependent ONA.  These weaknesses have allowed applicants self-certifying income and dependent information to receive less oversight, despite posing the greatest risk for improper payments.  FEMA cannot assure Congress and taxpayers it is a prudent steward of Federal resources, and adequately assesses the risks of improper payments.  FEMA did not concur with all three report recommendations.  Therefore, these recommendations are considered unresolved and open.

DHS complied with the Improper Payments Elimination and Recovery Act (IPERA) in fiscal year 2019 by meeting all six of the IPERA requirements.  DHS also complied with Executive Order 13520, Reducing Improper Payments.  Additionally, we reviewed DHS’ processes and procedures for estimating its annual improper payment rates.  Based on our review, we determined DHS did not provide adequate oversight of the components’ improper payment testing and reporting.  We made one recommendation to DHS’ Risk Management and Assurance Division to properly follow the requirements in the DHS Improper Payment Reduction Guidebook. 

The Federal Emergency Management Agency’s (FEMA) Individuals and Households Program (IHP) has a robust process for collecting and verifying information provided by underinsured disaster applicants.  However, FEMA does not collect sufficient supporting documentation or verify applicants claiming to have no insurance are eligible for home repair assistance.  Rather, according to FEMA, it relies on applicant self-certifications because no comprehensive repository of homeowner’s insurance data exists, and any additional verification processes would delay home repair payments.  As a result, FEMA made and we are questioning, more than $3 billion in improper and potentially fraudulent payments to individuals since 2003.  Additionally, FEMA did not properly assess and report improper payment risks within IHP because it disregarded significant internal control deficiencies and prior audit findings when it evaluated program risks.  Therefore, IHP applicants who claimed no homeowner’s insurance received less oversight even though they posed the greatest risk for improper and fraudulent payments.  Without implementing changes to its home repair assistance processes, FEMA cannot ensure it is being a prudent steward of Federal resources and adequately assessing its risks of improper payments and fraud.  We made two recommendations to FEMA to improve its IHP home repair documentation, verification, and risk management processes.  FEMA non-concurred with the two report recommendations, resulting in both recommendations being unresolved and open.