Some Katrina victims must pay back grants

NEW ORLEANS - Imagine that your home was reduced to mold-covered wood framing by Hurricane Katrina.

Desperate for money to rebuild, you engage in a frustrating bureaucratic process, and, after months of living in a government-provided trailer that gives off formaldehyde fumes, you finally win a federal grant.

Then a collector announces that you have to pay back thousands of dollars.

Thousands of Katrina victims may be in that boat.

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in its rush to deliver aid to homeowners in need, some people got too much. Now it wants to hire a separate company to collect millions in grant overpayments.

The contractor, ICF International of Fairfax, Va., revealed the extent of the overpayments when it issued a March 11 request for bids from companies willing to handle "approximately 1,000 to 5,000 cases that will necessitate collection effort."

The bid invitation said: "The average amount to be collected is estimated to be approximately $35,000, but in some cases may be as high as $100,000 to $150,000."

The biggest grant amount allowed by the Road Home program is $150,000, so ICF apparently believes it paid some recipients the maximum when they should not have received a penny. If ICF's highest estimate of 5,000 collection cases - overpaid by an average of $35,000 - proves to be true, that means applicants will have to pay back a total of $175 million.

One-third of qualified applicants for Road Home help had yet to receive any rebuilding check as of last week. The program, which has come to symbolize the lurching Katrina recovery effort, has $11 billion in federal funds.

ICF spokeswoman Gentry Brann said in an e-mail Friday the overpayment recovery effort was made inevitable when insurance and other aid to Katrina victims was eventually measured against what an applicant received from the Road Home program.

Brann said there was a sense of urgency in paying Road Home applicants, and ICF knew applicants might eventually have to return some money.

"The choice was either to process grants immediately or wait until the March 2008 deadline [for submitting Road Home applications] before disbursing any funds," Brann said in her e-mail.

Brann pointed out that 5,000 collections cases would represent a 4 percent error rate for the Road Home, which is "quite good for large federal programs."

Frank Silvestri, cochair of the Citizen's Road Home Action Team, a group that formed out of frustrations with ICF, sees it differently.

"They want people to pay for their incompetence and their mistakes. What they need to be is aggressive about finding the underpayments," he said. "People relied, to their detriment, on their [ICF's] expertise and rebuilt their houses, and now they want to squeeze this money back out of them."

Upon receiving money from Road Home, grantees sign forms that say they must refund any overpayments.

The prospect of Road Home grant collections comes less than two weeks after the Louisiana inspector general and the legislative auditor said they were investigating why former Gov. Kathleen Blanco paid ICF an extra $156 million in her waning days in office to administer the program. With the increase, ICF stands to earn $912 million to run Road Home, a contract that also sweetened its initial public stock offering, helped it buy out four other companies, and enter government contracting in national defense and the environment.

Paul Rainwater, executive director of the Louisiana Recovery Authority, the state body that asked for the Blanco-ICF investigations, acknowledged the collections could be painful for applicants, many of whom used up their savings to rebuild.

"The state must walk a fine line of treating homeowners who have been overpaid with fairness and compassion and ensuring that all federal funds are used for their intended purpose," said Rainwater, an appointee of new Gov. Bobby Jindal.