Audit: Houston hospital misused $17.6M in hurricane recovery grant funds

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Houston-based Riverside General Hospital mismanaged Federal Emergency Management Agency grant funds it received for damages resulting from Hurricane Ike in September 2008, according to a report released Wednesday by the Department of Homeland Security's Office of Inspector General.

In June, the former president of Riverside General, Earnest Gibson III, was sentenced to 45 years in prison and ordered to pay nearly $46.8 million in restitution for his role in a $158 million Medicare fraud scheme. Although Mr. Gibson was removed from his post as the hospital's leader in 2012, the federal audit shows gross mismanagement continued after his departure.    

Riverside General closed in April, and the DHS' OIG now wants to recover $17.6 million in FEMA grant money that was dispersed to the facility before its closure as part of a $32.4 million award from the Texas Division of Emergency Management. In its 27-page report, the agency identified specific examples of how the funds were misused, including $7.9 million used to pay operating expenses and other unverifiable items with no connection to the disaster.

Although Riverside reimbursed some of the misused funds back into its FEMA accounts, the hospital asserted it only spent $13.2 million of the $17.6 million it received on disaster-related costs. Based on that information, the agency concluded Riverside received more than $4 million in excess of its alleged disaster-related expenses.

The hospital also couldn't account for a portion of the $13.2 million it claimed to spend on disaster-related expenses, which means Riverside may have received up to $9 million in unneeded advanced FEMA funds from Texas, according to the audit.

Based on its audit findings, the agency made four recommendations to FEMA, including to disallow as ineligible the $17.6 million in advanced funds and to deobligate the remaining grant balance.

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