Another Botched Government Handout Could Cost Taxpayers Millions
Policy + Politics

Another Botched Government Handout Could Cost Taxpayers Millions


The federal government has a pretty embarrassing track record when it comes to administering financial relief in the wake of major disasters like hurricanes and floods. 

The Federal Emergency Management Administration has taken plenty of heat for routinely botching disaster relief –and doling it out to the wrong people.   

Related: FEMA Still Doesn’t Know Where Its Money Is Going 

Seriously, as of last year, the agency was still trying to recoup millions of dollars from people who accidentally received disaster relief grants in the wake of Hurricane Katrina back in 2005. 

Likewise, FEMA is currently in the process of collecting nearly $5.8 million in improper payments it gave out during Hurricane Sandy. The Associated Press reported that the agency wasn’t above asking poor, disabled people to return the money, which many of them had spent two years ago. 

Sure enough, when it comes to disaster relief, examples of government incompetence aren’t hard to come by—and they aren’t limited to FEMA. 

A new report from the Small Business Administration’s inspector general reveals that the agency gave out at least $18 million in disaster loans to Hurricane Sandy victims without actually verifying the eligibility of the people and businesses receiving that money.

Related: Auditors Still Finding Misused FEMA Katrina Funds 

The IG said in total, the SBA gave out $234.4 million in loans to storm victims—with at least $18 million going to people who may not be able to pay back the loan. The investigators only reviewed a random sample of the 2,531 loans and concluded that at least 500 weren’t properly vetted. 

“We found that loan officers did not have guidance for performing the financial analysis to determine whether Hurricane Sandy business loan applicants had repayment ability,” the report said.

The auditors added that because the SBA didn’t have guidance in place to assure that borrowers could pay back the loans, many of them risk default. They recommended that the SBA establish “clear, written policies and procedures for analyzing the repayment ability of disaster business loan applications,” the report said.

The SBA, for its part, concurred with the recommendation, but disputed the $18 million figure the auditors claimed went to people who weren’t properly vetted.

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