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Breakdowns in FEMA’s Invoice Review Process Led to about $16 Million in Improper or Potentially Fraudulent Payments

five companies with the least expensive bids, the total cost for phase in would have been over $3.2 million.

$930,000 on unit deactivations. FEMA spent just over $7 million on about 10,000 deactivations from June 2006 through January 2007. If FEMA had awarded the MD contracts to the least expensive companies, the cost for these deactivations would have been approximately $6.1 million.

$620,000 in after-hours emergency repairs. FEMA spent almost $2.2 million on emergency after hour service calls. If FEMA awarded the contract to the five most inexpensive companies, it would have spent approximately $1.6 million.

$690,000 in septic cleaning costs. FEMA spent almost $4 million on septic cleanings from June 2006 through January 2007, but would have spent about $3.3 million if it had awarded the contracts to the less expensive companies.

In addition to having the lowest prices, these five contractors also had the ability to maintain more than the 3,000 trailers they were originally assigned. Specifically, FEMA required companies to submit bids for the MD contracts based on the premise that they could each be assigned about 6,700 units that could have been located throughout the entire state. Prior to awarding the contracts, FEMA determined that each of these five companies did in fact have the technical ability to maintain at least 6,700 temporary housing units. Therefore, these five would have been capable of collectively performing maintenance for the estimated 30,000 trailers and mobile homes in Mississippi at the time of the award.

From June 2006 through January 2007, we estimate that FEMA made approximately $16 million in improper or potentially fraudulent payments to the MD contractors based on invoices that should not have been approved, according to its own payment process. This amount includes about $15 million in payments made for preventative maintenance—which includes a required monthly inspection—and over $600,000 in payments for emergency after-hours repairs. With regard to preventative maintenance, we estimate that FEMA paid the MD contractors about $15 million even when the trailers being inspected could not be located in FEMA’s own databases, the supporting inspection documentation required by the contract did not exist, or the documentation showed that the contractor did not perform a complete inspection. This $15 million

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GAO-08-106 Hurricane Katrina

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