Puerto Rico needs to have a better system for requesting and monitoring federal grants to rebuild after Hurricane Maria — but Texas and Florida had similar issues and their funds were not held up after natural disasters, a new government report found.
According to an audit published this week by the Office of Inspector General of the Department of Housing and Urban Development, Puerto Rico’s housing department should improve its financial and procurement controls, increase its staff and develop processes to prevent duplication of benefits in order to effectively manage billions in federal disaster grants after Hurricane Maria in 2017.
However, audits on Texas and Florida's capacity to manage disaster grants after Hurricanes Harvey and Irma show they also have issues with procurement, financial controls, insufficient staffing and duplication of benefits as well. And yet, their notices to start the process of accessing some federal funds were issued on time, while Puerto Rico's was published two months ago.
Jeremy Kirkland, counsel to HUD’s inspector general, initially teased the report's findings in October 2019 during a congressional hearing in which two top HUD officials cited Puerto Rico's "issues with procurement and other issues around financial controls" as justifiable reasons to delay the funding process.
HUD’s chief financial officer, Irv Dennis, and David Woll, the department's principal deputy assistant secretary for community planning and development, told lawmakers the agency knowingly missed a congressionally mandated deadline to issue a notice by Sept. 4, 2019, in order to kick off a monthslong process to help Puerto Rico get billions in mitigation funds allocated by Congress through HUD's Community Development Block Grant-Disaster Recovery Program (CDBG-DR).
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Secretary Ben Carson defended HUD's actions on Puerto Rico before Congress last year, saying "a lot of what we do is dictated by common sense."
Only 8 percent ($1.5 billion) of the nearly $20 billion in recovery funds allocated to Puerto Rico have been disbursed to the island for hurricane recovery efforts such as rebuilding tens of thousands of homes with damaged roofs, according to data from FEMA's Recovery Support Function Leadership Group.
Texas and Florida were allocated $10.1 billion and $1.9 billion, respectively, and have seen about half of the money distributed.
"Almost three years since Maria, 20,000 people are still living under blue tarps," Miguel Soto-Class, founder and president of the Center for a New Economy, a nonpartisan think tank, told NBC News. "Not one single new house has been built with the CDBG-DR money."
Flaws managing disaster funds at all levels
Puerto Rico's housing department, a first time CDBG-DR grantee, failed to follow its own procurement requirements as well as federal ones in awarding contracts and purchase orders, the audit found.
"As a result, HUD had no assurance that purchases totaling $416,511 were reasonable, necessary and allowable," the Office of Inspector General said, adding that such deficiencies occurred because Puerto Rico lacked appropriate procedure guidelines to execute an effective procurement process.
The Texas General Land Office, which has been in charge of managing the state's CDBG-DR funds for at least a decade, had previously failed to show HUD whether their procurement process was consistent with federal standards. While the Office of Inspector General said Texas "took corrective actions to address" the flaws, it still needs to strengthen its capacity to regulate contract negotiations involving CDBG-DR funds, according to the latest audit.
The Office of Inspector General found that the Florida Department of Economic Opportunity needs to strengthen "its capacity to administer disaster grants," in order to spend CDBG-DR money in accordance with applicable requirements by implementing "adequate financial controls to ensure that its disaster funds are properly classified and allocated to the correct grant."
The recommendation came after Florida drew down more funds than it expended while administering prior CDBG-DR grants, resulting in an excess draw of at least $28,348 on administrative and planning costs and misclassified at least $30,000 in grant money.
After the audits were completed, the Government Accountability Office found that HUD does not have a monitoring plan that reflects "the specific risk factors of each grantee."
"A comprehensive monitoring plan would help HUD ensure that its oversight of grantees’ compliance with grant requirements focused on grantees’ areas of greatest risks," GAO wrote in a report last year.
But overall, "CDBG-DR has proven to be slow for HUD and grantees," because it spends too much time in its planning phase instead of speeding up the process to make funding available to disaster-affected communities for needs "that are not met by other federal and private sources," the GAO added.
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