Where did all the money go? How $700 million in Katrina relief money went missing

Jeff Zeleny, Richard Coolidge, and Jordyn Phelps
Power Players

Power Players

Where did all the money go?

“Your guess is as good as mine,” David Montoya, the inspector general of the Department of Housing and Urban Development, says of $700 million in missing taxpayer money that Louisiana homeowners were given in the wake of Hurricane Katrina to elevate and protect their homes from future storms.

A new report released from the inspector general’s office shows that more than 24,000 homeowners who received grants of up to $30,000 to elevate their homes either misspent or pocketed the money.

“The fact of the matter is that the money they received was for a specific purpose and the specific purpose was to elevate these homes to avoid future catastrophes,” Montoya tells Power Players.

He rates the home elevation program as little more than a complete failure.

“Considering there was just under $1 billion earmarked for this particular program and there's $700 million that wasn't used for that, I’d give it a very low D,” he says.

But the lessons learned from the failed home elevation project provides a useful roadmap as Congress moves to offer recovery funds to victims of Hurricane Sandy.

“Clearly, to give money out on the front end right after a disaster, when many of these people lost everything, with a promise to do something down the road, I think is counterproductive to what the program was designed to do,” says Montoya.

Montoya says his office will recommend that, for future disaster relief programs, funds are disbursed to individuals only after the project has been completed.

Read more: $700 Million in Katrina Relief Missing, Report Shows

To hear more of the interview with the inspector general, including his explanation of why the government likely will never get the money back, check out this episode of Power Players.

ABC's Avery Miller, Robin Gradison, Eric Wray, Alexandra Dukakis, Hank Disselkamp, and John Knott contributed to this episode.