Elon Musk’s team is known for identifying inefficient government expenditure and influencing the authorities to stop such spending. Recipients who were counting on these funds are often left stranded. For instance, last week, a funding scheme run by the Federal Emergency Management Agency (FEMA), devoted to aiding local municipalities and non-profit organizations to manage the immigrant crisis affecting multiple cities across the U.S., has faced a similar fate.
This program, dedicated to supporting those dealing with the aftermath of a large influx of migrants crossing the U.S.-Mexico border, was abruptly inhibited. The financial repercussions have fallen on the city of New York, a substantial beneficiary of the program that even had to return roughly $80 million that has already been allocated. This leaves the future of the program shrouded in ambiguity.
The catalyst behind this controversy was the revelation by Musk’s team of an alleged $59 million payment from FEMA towards the New York City government, out of the funds designated by the Congress under the Shelter and Services Program (SSP). The acting head of FEMA under the Trump administration, Cameron Hamilton, expressed his gratitude towards Musk for spotlighting the issue and pledged to halt the funding while promising to hold the responsible personnel accountable.
President Trump echoed the sentiments of Musk about the alleged misappropriation of the SSP funds, claiming it was used for funding luxurious hotel stays in the city. On the other hand, New York city officials contended that a fraction of the recouped funds, amounting to $19 million and an additional $67 million of the total $200 million received for the fiscal years 2023 and 2024, were assigned towards hotel expenditure.
Expanding on the financials, the city has reportedly exhausted over $7 billion during the past three years on shelter and services for the flood of 230,000 migrants who have sought haven in the city since 2022, as per the city’s comptroller. The comptroller deemed the unexpected retraction of $80 million by the Trump administration from the funds already secured by the city as an outrageous act, comparable to ‘highway robbery’. Furthermore, he emphasized that the city is entitled to an additional $37 million in SSP funds over and above the $200 million it has already procured.
Musk, on his part, raised allegations about the city being a victim of opportunistic hotel owners charging double the usual rates in view of a 100% occupancy rate, calling the situation a ‘racket’. The city, while conceding waste and oversight issues in its migrant response, maintained that their hotel program was subject to a competitive bidding process.
Whether the city’s hotel contracting decisions were prudent or not, it is clear that the federal dollars have failed to cover the full costs of hotel accommodations. The program includes stringent rules about the expenses eligible for reimbursement, which could be granted to cities and non-profits. Notably, the program stipulates a $12.50 daily cap per migrant for hotel stay reimbursements.
Even with these restrictions, disciplinary action was taken against four FEMA employees, including its chief financial officer, in connection with this alleged misappropriation. While the details were not extensively disclosed, the administration indicated that the employees had acted disobediently.
The Department of Homeland Security (DHS) spokeswoman mentioned that the employees ‘circumvented leadership and unilaterally made this payment,’ coming out strongly against their action. It remains unclear as to when the directive to suspend SSP payments to New York was issued by the top bosses at DHS and FEMA.
DHS Secretary Kristi Noem had earlier issued a memo on January 28, barring disbursements to non-profit organizations dealing with immigration, unless mandated by ‘controlling legal authority’. This memo predates the temporary restraining orders imposed by two federal judges to halt the administration’s push to freeze government-wide federal assistance.
Based on the latest public statements by Hamilton and internal FEMA correspondence, it seems that the instructions to halt SSP payments were issued only last week. This raises questions, as the disputed payments to New York would likely have been made before the directive came into effect.