FEMA watchdog endorses data mining to uncover overpayments

Federal inspectors are calling for the Federal Emergency Management Agency to employ data mining software -- similar to that used by the board monitoring stimulus spending-- for preventing future losses, now that the agency is saddled with recovering about $643 million worth of potential overpayments for housing assistance.

In a new report, Homeland Security Department investigators found that FEMA strengthened efforts to prevent fraud after wrongly compensating phony victims in the aftermath of Hurricane Katrina in 2005, but the agency's ability to identify potential wrongdoing is handicapped by, among other things, a lack of sophisticated computer technology. Specifically, FEMA does not have programs capable of mining public records and law enforcement data to spot patterns of illegal activity among applicants who have filed for disaster relief.

On the other hand, the Recovery Accountability and Transparency Board, which oversees $787 billion in economic stimulus funding, has prevented fraudsters from siphoning tens of millions of dollars from recovery programs since acquiring pattern-detection tools in 2009, according to the board, an independent government body.

FEMA "should adopt the precedent-setting measures used by the RAT Board, such as the fraud-mapping tool, to foster accountability and transparency of FEMA programs and improve internal controls," wrote acting DHS Inspector General Charles Edwards in the report, which was released Wednesday.

The Recovery Operations Center, staffed by computer analysts, uncovered data showing a stimulus recipient slated to receive more than $7 million worth of contracts had been debarred from doing federal business, prompting the government to cancel the awards, board officials said. Encouraged by the center's success, Obama administration officials recently began testing similar software to combat Medicare fraud.

FEMA told investigators that the agency late last year issued a request for information to research systems designed to strengthen controls needed for the "prevention of improper payments as a result of fraud, waste and abuse in government financial and other forms of assistance programs." After Katrina, some aid seekers listed vacant lots, post office boxes and cemeteries as their damaged property addressees, a DHS inspector general testified to Congress in March. Other filers received money by falsifying rental agreements in the disaster area.

In an April 18 letter responding to a draft of the report, FEMA officials concurred with the inspector general's suggestion, but said the agency wanted to examine the recovery board's systems more closely before agreeing to procure similar technology.

"Before FEMA can issue a final position on this recommendation, a more detailed review of the specific technology used by the [board] will need to be conducted," wrote David J. Kaufman, director of FEMA's Office of Policy and Program Analysis.

At the time, the agency had a meeting scheduled with the board to evaluate the software, government databases and information systems that the board analysts are using, he added. "If it appears that the capabilities offered by the cutting-edge technologies (or variations there to) will help FEMA better identify and/or prevent the disbursement of improper and/or fraudulent disaster assistance payments, FEMA will explore those opportunities," Kaufman wrote.

He pointed out that FEMA already has installed a system that checks disaster claims for anomalies based on information from agency and external sources.

In the final report, IG officials said FEMA might have been referencing a new case management system that has some data-gathering features but focuses more on record-keeping and reporting.

This week, recovery board spokesman Ed Pound said his staff on April 5 briefed staff from the FEMA Office of the Chief Security Officer, which houses the fraud division, about the board's analytical tools.

FEMA officials did not respond to requests for clarification on whether the scheduled meeting Kaufman referenced took place.