Wasteful FEMA Spending Topped $9 Billion During the Pandemic

It’s been nearly five years, and the total cost of wasteful COVID-era spending is still being realized. A recent Department of Homeland Security’s Office of Inspector General (OIG) report illuminates several examples of waste, fraud, and abuse at the Federal Emergency Management Agency (FEMA). 

The OIG found the agency overobligated “at least $1.5 billion in funds for one state’s medical staffing grant.” Additionally, FEMA failed to properly vet funding to the state, leading to $8.1 billion of questionable spending.

During the pandemic, FEMA developed a streamlined process to award reimbursements through its Public Assistance Program. Instead of awarding funding to a project based on actual costs that were comparable to current market rates, the agency offered reimbursements based on cost estimates. The new process, designed to get disaster funding out of the door faster, generated less oversight and more fraudulent spending. 

The state, which the OIG does not name, received about $853 million from FEMA in September 2020 to address staffing shortages at over 200 health care facilities statewide. Over the next year, FEMA incrementally increased funding, eventually awarding over $9 billion, which the state did not need. From May 2021 to April 2023, unspent grant funds reached $4 billion, before falling to $1.5 billion. FEMA was unaware of this until April 2023, when an OIG investigation was conducted. The agency subsequently de-obligated $500 million of the state’s funding. 

FEMA did not “validate cost estimates or determine cost reasonableness before obligating funds,” according to the OIG. One of the cost estimates, which totaled $1.1 billion, was supported by one sheet of paper, which did not include itemized costs and was not conducted by a “cost-estimating professional” (which is required under FEMA guidelines). 

The OIG also found that FEMA failed to determine cost allowability for $8.1 billion of the nearly $9.1 billion awarded to the state. In August 2021, FEMA began to review a 2020 award totaling $1.3 billion to determine if the project’s expenses were appropriately documented and the project’s funding was justified. As of April 2024, the agency had not completed its review for this amount or any money it had awarded to the state. The lack of documentation has led the OIG to question $8.1 billion in FEMA spending. 

On top of the billions of dollars in unsupported spending, the OIG investigated a random sample of 20 other FEMA grants and found the agency awarded over $32 million worth of improper payments. Six of these projects “did not have the required supporting documentation to validate completion of the work and actual costs incurred before project award and reimbursement,” according to OIG. The report also found three FEMA staff members were instructed in 2020 to not conduct “deep dives” when reviewing project eligibility. 

The OIG has offered seven recommendations to FEMA, which include conducting an audit of the state’s health care staffing program and ensuring project costs are sufficiently documented and reviewed before disbursements are given. Of the seven recommendations, OIG considers five to be “open and resolved” and two to be “open and unresolved.” 

From the Paycheck Protection Program riddled with fraud to unnecessary bailouts for local and state governments, the full cost of the government’s spending during the pandemic may never be known with certainty. FEMA’s mismanagement is just another drop in an extremely large bucket. 

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