Federal watchdogs warn in a new report that a pilot Federal Emergency Management Agency (FEMA) program designed to keep Hurricane Sandy victims in their homes may be highly susceptible to waste, fraud, and abuse.

The administration of FEMA’s Sheltering and Temporary Essential Power (STEP) program “requires increased vigilance to monitor the expenditure of public funds,” according to the agency’s inspector general. The IG announced on Monday that it will conduct a “rapid response” audit of the new program.

FEMA awarded more than $4 million in STEP grants to local New York governments this month, the first round of funding from the pilot program. STEP funds emergency repair and construction work, ideally allowing people to remain in their homes while that construction takes place.

“FEMA’s first priority is getting New Yorkers home,” said FEMA officer Michael Byrne, who is coordinating the STEP program from the federal level.

But FEMA’s IG notes that the program poses heightened risks for misuse of federal taxpayer dollars. “During the implementation of a pilot program such as this one, the risks of fraud, waste, and abuse are exacerbated,” the IG report states.

“Consequently,” it continues, “this pilot program requires increased vigilance in order to monitor the expenditure of public funds, including the need for competitive bidding and for monitoring the costing of single-family and multifamily unit price differentials, quality of workmanship, liability of workmanship, duplication of benefits, and long-term impact.”

The IG notes that it may assess FEMA’s controls over the disbursement of STEP funds in future audit reports.

Read the IG’s full report here:

FEMA STEP report

(Photo credit: Francois Pesant/Polaris)