Key Federal Agency Doesn’t Have the Staff to Oversee $35B in 2017 Hurricane Recovery Money

A key agency charged with overseeing $35 billion in federal disaster aid Congress appropriated after the record-setting 2017 hurricane season lacks sufficient staff to oversee the funds and is not taking proper precautions against fraud, according to a new report.

A slow start to the Housing and Urban Development Department’s Community Development Block Grant Disaster Recovery program has led to virtually none of the funds being disbursed, despite Congress approving the spending more than a year ago. HUD’s “ad hoc” approach to overseeing and monitoring the funds has created lags in four states and territories—Florida, Texas, Puerto Rico and the U.S. Virgin Islands—providing relief to individuals affected by the hurricanes, the Government Accountability Office found.

Congress typically taps HUD’s CDBG program for disaster relief to assist with losses not met with through insurance and other federal disaster assistance efforts. It focuses on housing, infrastructure and economic revitalization. Congress had filtered disaster money through CDBG due to its flexibility in spending grant money. HUD has never received permanent statutory authority to issue emergency funds, however, meaning it must create new regulatory guidance for each disaster. It took the department five months from the time Congress approved the spending until it issued such guidance, in part leading to the delays that have prevented any of the grant money from actually being spent.

It took HUD an additional six months to reach agreements with the states and territories over their financial controls, implementation plans and action plans. The grantees are therefore still “designing and setting up” the activities that will assist disaster victims, GAO said. In the meantime, the auditors noted that HUD’s inspector general has already identified several issues with the states and territories' controls over the money. GAO also found that HUD does not deploy a uniform assessment of those controls or other key data from the grantees, such as how they estimate their unmet needs. This has led to the current appropriation of $35 billion, most of which will go to Puerto Rico, being insufficient for addressing recovery efforts in the affected areas.

Additionally, GAO said HUD does not know how much staff it will need to oversee the deployment of the funds. It currently has just 24 full-time employees in its Disaster Recovery and Special Issue Division, which has not kept pace with the unprecedented amount of money it will now oversee. The $35 billion it must dole out in response to hurricanes in 2017 matches HUD’s entire budget for fiscal 2018, and GAO said the department now faces “workforce challenges.” It has no workforce plan to address these issues, leading HUD officials to tell GAO throughout its investigation varying numbers of hires they planned.

One official told GAO some hiring had been approved, but another said that figure “seemed high.” As of March 1, HUD had not made any hires related to disaster relief spending. The department had no documentation for what staffing level was sufficient and had made no determination as to whether its existing staff had the skills or knowledge to oversee the program.

Adding to the risks with the spending is HUD’s failure to document issues it identified with grantees' financial controls, GAO said, making it more difficult to follow up on potential problem areas. HUD also did analyze potential pitfalls in giving large grants to entities with no experience with the block grant disaster relief program. The department has not detailed how it will monitor the expenditure of grant money once it is doled out.

“HUD did not have a monitoring plan that reflected the specific risk factors of each grantee and outlined the scope of its monitoring,” GAO said. “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 recommended that Congress pass legislation giving HUD permanent authority to respond to disasters, which would enable it to create broad regulations it can apply quickly to any recovery. Of the 112 active disaster recovery grants HUD currently oversees, it has 61 notices in the Federal Register establishing the rules for those efforts. The auditors noted that HUD’s involvement in such situations is likely to only grow, pointing to studies highlighting climate change’s role in worsening natural disasters.

HUD largely agreed with GAO’s recommendations, though it maintained that some of the alleged shortfalls the auditors pointed to were addressed in specific regulations addressing the disaster relief spending. After GAO issued a draft version of its report, HUD announced that it expected to hire several dozen new employees to support disaster recovery efforts. GAO still cited the department for failing to produce a comprehensive workforce plan.