At the same time, the Federal Emergency Management Agency has recovered less than 1 percent of the $1 billion it wasted on fraudulent hurricane assistance after the August 2005 storm, highlighting a need for stronger controls the next time a major hurricane strikes.
The report by the Government Accountability Office paints a picture of an agency still struggling — at significant taxpayer expense — to find the balance between distributing quick aid to those in need while guarding against substantial abuse.
Last week, a federal judge in Washington ordered the Bush administration to resume housing payments for thousands of people displaced by Katrina, criticizing FEMA for a convoluted application process. FEMA is appealing that ruling.
The GAO audit found that numerous aid applicants received duplicate rental aid, with FEMA in one case providing free apartments to 10 people in Plano, Texas, while sending them $46,000 to cover out-of-pocket housing expenses.
Another $20 million was wasted on thousands of individuals who claimed the same property damage from both Hurricanes Katrina and Rita. FEMA also paid at least $3 million to more than 500 ineligible foreign students in the stricken Gulf Coast, the report said.
"Ineffective preventive controls have resulted in substantial fraudulent and improper payments," GAO investigator Gregory Kutz told a Senate hearing. "The additional examples of potentially fraudulent and improper payments in our testimony today show that our estimate of $1 billion in improper and/or fraudulent payments is likely understated."
He described FEMA's approach of "shooting money out the door" and recouping bad payments later as badly misguided since only pennies on the dollar are typically recovered. He estimated that tens of thousands of people sought to defraud the government after Katrina and Rita.
"I hope FEMA has learned the costly lesson," Kutz said.
Responding to the audit, FEMA spokesman Pat Philbin said the agency has sought to eliminate waste in the past year by upgrading the registration process to prevent duplicate payments and strengthening the process for verifying names and addresses.
"FEMA continues to focus our rebuilding efforts to greatly improve our reliability, accuracy and response in providing aid to disaster victims," Philbin said. "The agency will consider and evaluate any new findings that can assist in improving our processes and procedures."
Among the audit's findings:
Sen. Susan Collins, R-Maine, who requested the report, said she is hopeful that her legislation seeking to empower FEMA by giving director David Paulison direct access to the president in a crisis might offer some relief.
Still, FEMA must do more to revamp its disaster aid procedures, said Collins, who chairs the Senate Homeland Security Committee.
"The American people are generous and willingly open their hearts and their wallets to the victims of disasters," she said. "But they expect that their tax dollars will be spent carefully to help storm victims, not be lost to a hurricane of waste, fraud and abuse."
Sen. Joseph Lieberman, D-Conn., who will become committee chairman when Democrats take control of the Senate in January, said the panel will continue to watch FEMA closely so that it improves its practices.
"The record is clear that, going forward, FEMA has much work to do before we can be confident that it is providing assistance to those who are eligible and who need it, while denying it to those who do not," he said.