A Follow-up Audit Report on Hurricane Recovery Funds Administered by the Department of Housing and Community Affairs and the Office of Rural Community Affairs
August 2009
Report Number 09-048
Overall Conclusion
The Department of Housing and Community Affairs and the Office of Rural Community Affairs are responsible for administering a total of $517,439,236 in funds dedicated to the recovery from Hurricane Katrina and Hurricane Rita. In October 2007, the State Auditor's Office made recommendations regarding each agency's administration of hurricane recovery funds. A summary of each agency's implementation of those recommendations is presented below.
Department of Housing and Community Affairs
The Department of Housing and Community Affairs (Department) has fully or substantially implemented 12 recommendations the State Auditor's Office made in October 2007; however, as of June 5, 2009, the Department had spent $135,012,143 (31 percent) of the $440,364,797 in hurricane recovery funds made available to it. Specifically, the councils of governments with which the Department has contracted, as well as the Department's primary contractor, report that:
- As of June 5, 2009, a total of 558 applicants for Round 1 of federal Community Development Block Grant Program funds had been approved to receive assistance. Of those 558 approved applicants, 479 (86 percent) had completed homes and 10 (2 percent) had homes with construction in progress. The councils of governments had received 4,701 applications for Round 1. In addition to the 558 applications approved, 93 applicants withdrew their applications, 257 applicants were not eligible for the program, 13 were in processing, and 3,780 were transferred to the Department's primary contractor for processing under Round 2. Round 1 funds totaling $42,378,185 became available in May 2006.
- As of June 5, 2009, 1,449 applicants for Round 2 of federal Community Development Block Grant Program funds had been approved to receive assistance. Of those 1,449 approved applicants, 48 (3 percent) had completed homes and 412 (28 percent) had homes with construction in progress. The Department's primary contractor received 6,383 applications for Round 2, which included 3,780 applications transferred from the councils of governments. In addition to the 1,449 applications approved, 1,479 applicants withdrew their applications, 278 applicants were not eligible for the program, 2,853 were pending processing, 255 were on hold with the contractor, and 21 applicants were on a waiting list. Round 2 funds totaling $384,571,849 became available in April 2007 and August 2007.
Auditors reviewed housing application data provided by the Department's primary contractor for administration of the Round 2 Community Development Block Grant Program funds. The applications were dated between April 2005 and April 2009. Based on analysis of this data, it takes the Department's primary contractor an average of 4 months to determine applicant eligibility, 3 months to process an application for an eligible homeowner, and 2.5 months to complete a home.
The Department asserts that delays in obtaining proof of property ownership from applicants, obtaining environmental clearances, and checking for duplication of benefits have affected the rate at which hurricane recovery funds have been spent. The Department has begun to monitor funds, but it should continue to work toward addressing delays that have affected the rate at which Community Development Block Grant Program hurricane recovery funds have been spent. It will be important for the Department to address these delays because the Department will be responsible for a portion of the $1,314,990,193 in federal funds the State has received for recovery costs arising from Hurricane Ike.
Auditors also identified other less significant issues that were communicated separately in writing to the Department.
Office of Rural Community Affairs
The Office of Rural Community Affairs (Office) has fully implemented 4 (80 percent) of 5 recommendations the State Auditor's Office made in October 2007. The Office received a total of $77,074,439 in hurricane recovery funds. Of that amount, the Office awarded $73,367,198 (95 percent) to local organizations and allocated the remaining $3,707,241 (5 percent) to administration. As of June 5, 2009, $44,691,557 (58 percent) of the hurricane recovery funds had been spent. These funds are for projects such as infrastructure repair, debris removal, drainage systems, and repairs to water facilities.
The Office asserts that external factors, such as environmental permit requirements and cost certification requirements, affect the ability of several contracted organizations to spend the funds for Community Development Block Grant Program Round 2. It will be important for the Office to address these delays because the Office will be responsible for a portion of the $1,314,990,193 in federal funds the State has received for recovery costs arising from Hurricane Ike.
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