Unsupported Payments Made to Policyholders Who Participated in the Hurricane Sandy Claims Review Process

We determined that FEMA established the Sandy Claims Review Process (SCRP) in response to negative publicity and pressure from Members of Congress following Hurricane Sandy. In doing so, FEMA did not rely upon certain legislatively mandated internal controls designed to ensure appropriate payments for flood victims. Additionally, during the formation and operation of the SCRP, FEMA failed to establish contractor expectations or provide consistent guidance and oversight related to Hurricane Sandy claims. These omissions resulted in policyholders receiving unsupported additional payments, excessive costs to operate the SCRP, and time delays processing the claims. We made seven recommendations to FEMA, which emphasize the importance of FEMA communicating clear guidance to adjusters, and identifying and implementing better methods to inform policyholders of flood coverage limitations. FEMA concurred with all seven of our recommendations and has already begun implementing corrective actions.