Katrina victims may have to repay money

updated 8:01 p.m. ET March 29, 2008

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.

For thousands of Katrina victims, this may be a reality.

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in the 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 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.

'Finding the underpayments'
One-third of qualified applicants for Road Home help had yet to receive any rebuilding check as of this past 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 that 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 that is "quite good for large federal programs."

Frank Silvestri, co-chair of the Citizen's Road Home Action Team, a group that formed out of frustrations with ICF, sees it far 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 (ICFs) expertise and rebuilt their houses and now they want to squeeze this money back out of them."

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