FEMA lost over $3.7 billion in fraudulent COVID relief payouts, fed watchdog report

The Federal Emergency Management Agency did not implement controls that may have stopped over $3.7 billion in fraudulent COVID-19 relief payouts, according to a new federal watchdog report. 

FEMA distributed about $30 billion in Lost Wages Assistance through 21 state workforce agencies over six weeks in 2020 to assist those who had lost work due to the pandemic, the new Department of Homeland Security inspector general report found. 

The report, issued last week, shows that about $3.3 billion in possible fraudulent payments, more than $21 million in overpayments and over $400 million in payments given without having required documentation of eligibility. This means over 12% of payments in the nearly two dozen state agencies were potentially wasted.

Under federal law, FEMA failed to "institute adequate policies and internal controls to prevent waste, fraud, and abuse before approving applications for Other Needs Assistance programs" as required, the report stated.

"FEMA lost an opportunity to solidify controls over a multi-billion-dollar program that was already susceptible to fraud," the report also states. "Recovering these funds may be difficult, directly affecting FEMA’s ability to respond to future emergencies and disasters."

The inspector general made seven recommendations in the report, and the emergency agency disagreed with four of them, citing limited resources and that it is already taking the proper precautions against fraud. 

"Senior FEMA leadership believes FEMA currently has sufficient internal controls to support fraud prevention and detection," the agency responded to one recommendation.

FEMA agreed with the other three recommendations, including one to recover any money that may have gone to fraud.

Up to $100 billion was lost due to fraud during the COVID pandemic, according to federal officials.