Disaster Program Issues Loom Over Future Aid

WASHINGTON - As lawmakers shuttle multiple supplemental spending packages through Congress to address the devastation from one of the worst hurricane seasons on record, federal audit reports show major ongoing problems with federal agencies' ability to ensure money is spent correctly.

Tens of billions of dollars are expected to flow from two major sources: the Federal Emergency Management Agency's Disaster Relief Fund and the Community Development Block Grant program, administered by the Department of Housing and Urban Development. But multiple federal watchdog reports demonstrate that lawmakers are in some cases funding repairs with little ability to ensure the work complies with federal law.

Preliminary estimates by federal agencies suggest rebuilding areas after these disasters will be exceptionally costly. The Department of Homeland Security's Office of Inspector General noted FEMA's estimates just for Hurricane Harvey showed total damages could exceed $100 billion.

The DHS inspector general is already sounding alarm bells about potential problems with hurricane recovery funds in Texas, according to a management alert warning issued Sept. 29. Officials warned that the federal government's agreement with Texas to provide federal housing assistance in the wake of Hurricane Harvey didn't "clearly identify basic controls to ensure (housing assistance) funds are spent according to Federal regulations."

FEMA estimated at the time of the report that direct housing program costs would reach $1 billion, the OIG said. But FEMA has yet to develop "policies and procedures to provide regions with a framework to follow" on how to spend the money.

Inspectors general from across the federal government have flagged potential non-compliance with federal requirements when states spend funds to recover from disasters.

"Non-compliance with Federal procurement standards often result in high-risk contracts that can, in turn, lead to excessive and ineligible costs ultimately borne by U.S. taxpayers," the DHS OIG noted in its Sept. 29 alert.

The questions don't end with housing assistance.

FEMA is years late in coming up with a congressionally-mandated plan for how to deal with its staggering debt load under the National Flood Insurance program. A House-passed supplemental disaster aid bill - awaiting likely approval from the Senate early this week - may offer significant relief for the short term, providing $16 billion in debt forgiveness. But the Government Accountability Office confirmed Thursday that FEMA has yet to deliver the repayment plan, initially due in January 2013.

Meanwhile, FEMA and the DHS OIG disagree over what kind of damage is eligible for disaster money. The DHS OIG said in a July report that FEMA should "disallow" $2.04 billion in grant awards to New Orleans and its water and sewer board to rebuild from Hurricane Katrina because "the infrastructure was old and in poor condition even before the hurricanes." Such a conclusion could have repercussions for Puerto Rico, since the U.S. territory's electric grid is in a shambles and its power utility had already filed for bankruptcy before the storm.

"This massive investment - representing almost $5,200 for every man, woman, and child in New Orleans - while perhaps sorely needed, is not eligible for a FEMA disaster grant because there is no evidence that the damage was caused as a direct result of the storms," auditors wrote. FEMA disagreed with the findings.

Speed is also an issue. A drawdown of funds for the last major disaster response effort in 2013 was slow, and agencies had varying controls over spending. The HUD inspector general produced a Sept. 2016 audit report as part of an eight-agency review. By 2016, the OIGs found of the eight agencies audited - HUD, DHS, the Small Business Administration, the Environmental Protection Agency and the Departments of Defense, Transportation, Health and Human Services and Interior - "the agencies' progress varied as they had expended only $15 billion of the $46.5 billion allocated" from a 2013 disaster aid package. Such findings raise questions about how quickly states affected by this year's storms will be able to spend the money.

What's more, HUD hasn't adequately monitored state compliance with the Community Development Block Grant program. In another report released in July, the HUD OIG audited controls over state block grant programs and found that HUD "cannot be assured that its field offices correctly identified the high-risk grantees or conducted adequate monitoring to mitigate risk." OIG looked into the issue after a previous audit found HUD's Community Planning and Development office, which oversees the state block grant programs, had stopped monitoring the State of Oklahoma's compliance with federal requirements after fiscal 2011, triggering a broader review. In an audit of the 50 state block grant entities HUD oversees from October 2014 through September 2016, officials found HUD had conducted a monitoring review of only 21 states, only eight of which contained findings.

Still, with FEMA flood insurance funds set to run dry as early as next week and Puerto Rico's cash crunch leaving the territorial government on the verge of a shutdown, lawmakers are under intense pressure to move more funds quickly. But it may be that with more money in the bank, the agencies responsible for expending the disaster money will find their activities under increased scrutiny when appropriators turn to annual funding bills and the next White House supplemental request, due next month.