AP analysis: FEMA rejects appeals worth $1.2B over a decade
By DAVID A. LIEB and RYAN J. FOLEY
Oct. 15, 2017
As U.S. communities ravaged by this year's series of intense hurricanes and wildfires clear debris and begin to rebuild, many are counting on the federal government to help cover their costs. They could be in for a frustrating surprise.
If history is any guide, some local governments and nonprofit organizations could get less than they were told to expect from the Federal Emergency Management Agency. Others could be asked years from now to repay some or all of the aid they received, if FEMA concludes the projects failed to comply with its voluminous requirements or decides it shouldn't have approved the payouts in the first place.
Over the past decade, FEMA's denials and reversals have caused uncertainty and anger in some communities, led to long rounds of appeals, strained local budgets, made it hard for some organizations to stay afloat, and occasionally delayed the rebuilding process.
"My word of advice for everybody is document, document, document," warned a frustrated Mayor Orlando Lopez of Sweetwater, Florida. "Cross your t's, dot your i's and back up everything."
On Aug. 15, FEMA denied an appeal from the Miami suburb and said it must repay $2 million it received nearly two decades ago to repair storm damage because it failed to adequately document work done. Lopez called FEMA's actions "completely and utterly unfair." A few weeks after the denial, Sweetwater suffered a fresh round of damage from Hurricane Irma.
For its part, FEMA is legally obligated to look out for the taxpayers' money and guard against misuse and fraud by local governments and organizations that overcharge the federal government or use emergency aid to undertake long-desired improvements they couldn't otherwise afford.
Christopher Logan, FEMA's public assistance director, said in the agency's defense that major disasters can result in "extremely complex, technically complicated projects that span many, many years." But he said the agency has recently taken steps to reduce what he called misunderstandings.
An analysis by The Associated Press found that over the past decade, FEMA headquarters has denied appeals for at least $1.2 billion sought by local governments and nonprofit groups to protect or rebuild communities hit by hurricanes, floods, fires, earthquakes, tornadoes or other major disasters.
The AP reviewed more than 900 final appeal rulings. In one-third of those cases, FEMA granted some or all of the requested funding, totaling about $250 million. Two-thirds of the appeals were rejected, probably totaling well more than the $1.2 billion tallied by the AP because the amounts denied were unclear in FEMA's online records for more than 100 cases.
The money at stake in those cases was just a tiny fraction of the tens of billions of dollars FEMA paid out during that period. Yet the disputes may offer a glimpse of some of the challenges communities struck by Hurricanes Harvey, Irma, Maria and Nate could face in the years and even decades ahead.
The AP's review found that FEMA has argued with local governments and nonprofits — and faced disagreements within its own ranks — over hundreds of matters big and small: whether buildings should be repaired or replaced; whether certain damage was caused by a disaster or by pre-existing problems; even whether tree stumps were the proper size to qualify for removal using federal aid.
Among the appeals squelched by FEMA: Florida's attempt to get $51 million it claimed to have lost by waiving tolls for motorists evacuating from eight hurricanes in 2004 and 2005.
FEMA's final decisions sometimes come long after a disaster has struck, and even well after the money has been spent.
The agency also has repeatedly rejected funding requests based on the applicant's failure to appeal within the required 60 days — even though FEMA acknowledges that it routinely exceeds its own 90-day legal deadline to rule on appeals.
FEMA's Logan said the agency recently overhauled its disaster operations to provide each applicant with a single contact person and more information about the potential pitfalls in seeking federal aid.
The goal, he said, "is to help them understand what we can pay for and what we can't pay for — so that we set the expectations up front so we don't have those kind of misunderstandings."
FEMA officials acknowledge the agency has done a poor job of resolving appeals quickly. In 2014, just 6 percent of appeals to FEMA headquarters were decided within the law's 90-day requirement. That is up to 26 percent this year, agency officials said.
Hurricane Katrina alone accounted for one out every seven appeals over the past decade. The storm illustrates how FEMA's rulings can occasionally be financially devastating to groups and individuals and have long-lasting effects on communities.
"FEMA dropped us like a hot potato," said Dimitre Blutcher of Harvey, Louisiana, former executive director of N'R Peace, a nonprofit organization that helps people with HIV and other sexually transmitted diseases get medical treatment.
Her group's HIV clinic and main office were devastated by flooding and winds from Katrina in 2005. Days after the storm, she said, FEMA asked her to continue providing services to clients. FEMA paid the group $105,600 for its work, which included the long process of reconstructing clients' files after the paper records were destroyed.
Blutcher said FEMA and state officials led her to believe the clinic would qualify for additional money, so she took out a bank loan and line of credit while awaiting reimbursement for her costs, which grew to $280,000.
But FEMA reversed course in 2011, saying it would not provide any more reimbursement and ordering the group to repay the initial $105,600, too. The clinic soon closed its doors.
"They didn't care that they promised us the money and we spent it. They didn't care that I took out a line of credit to keep services going," Blutcher said. "All they cared about was that people with HIV and other diseases got care, and then they refused to pay us several years later. How can any human do that?"
Rejecting the group's final appeal in 2013, a FEMA administrator concluded that the cost of replacing destroyed medical files did not qualify for federal aid. The agency dismissed the group's argument that it shouldn't be punished for an error made by a lower-level FEMA official.
The Northridge earthquake shook Southern California in 1994, setting off a lengthy rebuilding process. Fifteen years later, FEMA headquarters was still deciding about a dozen appeals over funding. In some of those cases, FEMA was seeking to recoup millions of dollars that had been questioned after the fact by the agency's auditors.
Henry Mayo Newhall Memorial Hospital in Santa Clarita, about 35 miles north of Los Angeles, received $21.5 million from FEMA for repairs. But that fell far short of the roughly $35 million the hospital said it needed to fix the two-story facility in line with California's new earthquake codes.
The 217-bed hospital eventually sought bankruptcy protection, blaming the underfunded project. Then in 2004, FEMA asked it to give back $2.1 million, saying the work exceeded the scope of the original agreement or lacked documentation justifying the costs.
The hospital went through the full two rounds of appeals, first at the FEMA regional office, then at FEMA headquarters, and lost. Hospital President and CEO Roger Seaver said it still hasn't repaid FEMA.
"You're struggling, you're putting people on payment plans ... getting new loans at high interest rates, paying the bankruptcy costs," he said. "Then here comes the government back to help us again by taking back money."