New Orleans did not adequately monitor its procurement process or consistently follow proper federal guidelines and regulations when awarding contracts for disaster recovery work following Hurricane Isaac, the Office of the Inspector General for the U.S. Department of Housing and Urban Development said in a report released this week.
The findings come as the result of an audit of the spending of the $6 million in Community Development Block Grant Disaster assistance HUD awarded to New Orleans after the August 2012 storm.
The audit covered the city’s grant period from Aug. 1, 2012, through Oct. 31, 2014. It included three of the five contracts the Landrieu administration awarded for using the disaster grant funds. The contracts were for drain cleaning, demolition and grant management services.
The audit found that the city did not always prepare independent cost estimates or cost analyses before bidding out work. It also did not always have documentation to support expenditures, such as contract modifications, according to the report.
The city also was criticized for not submitting projections of its expenditures to HUD within the 90-day window HUD allows. The information was submitted six months late, despite several warnings from HUD that it was due, the report said.
“Because of the city’s inability to provide the information in a timely (manner), it could not assure HUD that it had adequate controls to properly implement and administer its grant,” the report said.
The report also said the city’s website lacked sufficient information about its procurement policies and procedures.
The city either disregarded or did not understand the federal requirements regarding written documentation of its disaster grant spending, the audit said. “As a result, it could not show that costs were reasonable, adequately support its contract costs or ensure that it received the greatest overall benefit from more than $2.5 million paid to its contractors,” the report said.
It said the city also could not provide “reasonable assurance” to HUD that its procurement and financial controls were in appropriate shape to spend the grant dollars. “Thus, its remaining $4.5 million in (disaster) grant funds was at risk of mismanagement.”
In the city’s official response, Office of Community Development Director Ellen Lee disagreed with the findings, writing that the city’s procurement process and financial controls had been certified as proficient by HUD before the grant money was released.
At no point “was the city notified in any manner that there were compliance concerns identified by HUD,” Lee said. She said the city worked closely with HUD to determine how it would use the funds.
“The city believes the manner in which the audit was conducted led to an environment of confusion where clear and concise requests for documentation or clarification were not received,” Lee wrote in the city’s response. She said the city will work with HUD to “ensure access is granted to any and all documentation required to resolve these (findings).”
The auditors, however, disagreed with the city’s interpretation.
“The confusion and several requests for documentation resulted from the city’s lack of understanding and disregard of HUD and (disaster grant) requirements,” the HUD Inspector General’s Office wrote.
The report recommends that the city either provide documentation to support the more than $2.5 million in spending or use nonfederal funds to repay the money. It also recommends that the city identify how it has corrected any oversights in its procurement process and financial management system.
The OIG also recommends other reporting improvements and says the city should get training in procurement and federal disaster grant requirements.