FEMA Has Paid Billions in Improper Payments for SBA Dependent Other Needs Assistance since 2003
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.