Massive Waste and Fraud in Post-Katrina Spending

Investigations reveal “one of the most extraordinary displays of scams, schemes and stupefying bureaucratic bungles in modern history.” Up to $2 billion has been lost in fraud and waste, representing 11 percent of the $19 billion spent on Hurricanes Katrina and Rita as of mid-June 2006. This compares with typical excessive payments of 1-3 percent of emergency aid distributed, a portion of which is subsequently retrieved.

Aside from fraudulent claims, there are a number of bureaucratic bungles. For instance, the Federal Emergency Management Agency FEMA ordered about 20,000 trailers for temporary housing, worth $860 million. Nearly half of them remain unused at an airfield in Arkansas, where FEMA is paying $250,000 per month to store them.

Eric Lipton, “’Breathtaking’ Waste and Fraud in Hurricane Aid,” New York Times, 27 June 2006.