COR3 confirms it will not disburse pending funds to agencies until they certify they have resolved all of the indications found in audits by the U.S. Office of the Inspector General.
Four Puerto Rico government agencies are experiencing delays in the disbursement of recovery funds related to the aftermath of Hurricanes Irma and María for failing to correct a series of problems related to how they handled money granted by the Federal Emergency Management Agency (FEMA) that the US Department of Homeland Security's Office of the Inspector General (OIG) flagged in audits conducted in 2019.
The Central Office of Recovery, Reconstruction and Resiliency, known as COR3, Executive Director Ottmar Chávez Piñero said the audit's claims do not limit further approvals of recovery funds by FEMA, but they do affect the process of disbursement of these monies to the agencies. COR3 is the entity in charge of channeling FEMA funds to public agencies, municipalities and nonprofit organizations.
“Completing the corrective actions is certainly going to have an impact on the disbursement [of funds]. Within the grant validation process, in terms of compliance, we have to be sure that these agencies abide by the results of the audits, as part of the checklists. If they go uncorrected, they could have an impact on disbursement, ”said Chávez Piñero.
The OIG evaluated the policies of use, contracting, and payroll payments of the departments of Housing Education the Department of Transportation and Public Works (DTOP, in Spanish) and the Puerto Rico Aqueduct and Sewer Authority (PRASA), related to FEMA Public Assistance program funds. The investigations focused on the management of the money assigned under Categories A and B, which includes debris removal and disaster mitigation, for the period from September 2017 to Dec. 14, 2018.
The audits did not establish penalties on the federal and local agencies evaluated. The OIG limited itself to offering recommendations to correct the problems and avoid fraud or misuse of public money in future disbursements.
FEMA had allocated $ 2,072,775,349 in Public Assistance funds to these four agencies through July 20, 2020, according to the COR3 website . Of this money, which corresponds to the work done during the emergency that began almost three years ago, the government has received $ 1,664,726,276, or 80.3%, the majority of which has gone to the Puerto Rico Department of Housing. The remainder has not yet been disbursed due to the planning, development and evaluation process that FEMA ordinarily requires to assign and disburse funds, in addition to compliance with the OIG audit reports that have not yet been fully corrected.
Agencies lacked adequate controls to prevent mismanagement of funds
In audits conducted by Williams, Adley & Company – DC, all four agencies were found to lack adequate controls to prevent fraud or misuse of public money, such as having structured processes to document the use of FEMA Public Assistance program funds.
The findings point to FEMA and COR3 as being responsible for failing to provide adequate technical assistance to local agencies to avoid mismanagement of funds, especially when covering payroll, granting contracts, or procuring services during the recovery process in the months after Hurricane María made landfall in 2017.
Chávez Piñero rejected that claim, stating that COR3 has established you chnical training workshops for subrecipients of FEMA funds.
“Over the past year, our grant division has developed several online training modules for subrecipients on procurement requirements and using the Disaster Recovery System (DRS) tool to initiate the reimbursement request process. This training provided specific guidance on how to present the required documentation to support project costs, including labor costs, ”said Chávez Piñero in a letter sent to FEMA Region II Regional Administrator Thomas Von Essen.
The audit done at the DTOP, for example, found flaws in granting recovery works contracts. The evaluation of 11 contracts awarded by DTOP – worth approximately $ 229 million – found that the contractors were not registered in the U.S. System for Award Management ( SAM.gov ) and excluded a detailed analysis of each applicant's rates.
Similarly, the agreements did not subscribe to the provisions of FEMA's Uniform Rules that establish a series of clauses that must be included in contracts involving federal funds. According to the OIG, those provisions were omitted from three debris removal contracts that the DTOP awarded and totaled $ 500,000.
Secretary of Transportation and Public Works, Carlos Contreras, justified the omission by saying that the contracts were awarded at a time when Puerto Rico was in the midst of the emergency after Hurricane María struck, prompting ordinary procedures not to be followed. In light of the indications, Contreras said “adjustments have been made and processes have been improved” to avoid making this type of mistake in the future. But he did not provide an updated list that shows which of the issues have already been resolved and which have not.
He said he has not received any information about how the warnings could limit the disbursement of remaining recovery funds, as opposed to what the executive director of COR3 told the Center for Investigative Journalism (CPI, in Spanish).
“If funds are limited, then it has an effect. But in the case of the DTOP, nothing has been said that funding may be affected. So, it's a hypothetical situation that I cannot comment on, ”he said.
As of July 20, FEMA has obligated $ 254,895,257 to DTOP under the Public Assistance A and B categories, of which only $ 183,613,827, or 72%, has been disbursed.
The OIG also wanted to evaluate DTOP's payroll management processes. However, the federal agency claims that the DTOP did not provide the information requested and it took three months to respond to the requirements needed to complete the audit.
Specifically, the DTOP did not provide the timesheets of 10 randomly selected employees who were part of the group of 629 workers on payroll between September and December 2017. Furthermore, when the audit was released, the agency still had not claimed the funds to reimburse payroll payments to employees under categories A and B, although more than 18 months had passed since Puerto Rico's disaster declaration.
Contreras declined to comment on allegations from Williams, Adley & Company – DC's auditors about DTOP's poor collaboration with the audit process.
In the case of the Puerto Rico Department of Housing, the audit found that the agency incorrectly entered its employees' overtime timesheets in the payroll system, which caused the additional wages and benefits for some employees to be wrong.
The OIG evaluated the wages that Housing paid 15 employees, and that FEMA would later reimburse through the Public Assistance program. The auditors compared the hours reported with the salaries that the agency paid and found that six of those employees received $ 3,846.60 less than the reported hours. For example, auditors found that one of the workers had accrued a total of $ 3,413.92 in overtime. However, the Department of Housing only paid $ 432.68.
The remaining nine were overpaid, totaling $ 3,650.27 in excess distributed funds. FEMA and COR3 were advised to order Housing to conduct a payroll review for the remaining 123 employees who were paid between September and December 2017.
The recommendation did not specify which actions the agency should take. It was also unclear whether the money owed to underpaid employees would be paid or if overpaid workers should return the amount in question.
The Department of Housing did not respond to the CPI's requests for an interview.
OIG also questions overpayment for power generators at PRASA
The OIG also found that PRASA did not follow established procedures to ensure that each provider had a certificate of eligibility on SAM.gov before granting a contract.
“PRASA did not confirm that suppliers had the appropriate certificate of eligibility in 2017, ”the audit states, which evaluated five of 21 contracts awarded between September and December 2017 estimated at $ 9,687,524 combined.
However, PRASA Executive President Doriel Pagán contested the statement, saying the agency conducts its procurement processes through the General Services Administration of Puerto Rico. She insisted that PRASA “fulfilled all emergency procurement process requirements.”
PRASA was also pointed out for having claimed an additional $ 72,304 in the request for reimbursement of costs for the use of generators. PRASA attributed the problem to the fact that corporation employees incorrectly registered the consumption of the generators instead of using units in kilowatts (KW).
The rest of the claims remain unsolved.