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89–352 PDF 2015

S. HRG. 113–351

SUPERSTORM SANDY RECOVERY: ENSURING

STRONG COORDINATION AMONG FEDERAL,

STATE, AND LOCAL STAKEHOLDERS

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING, TRANSPORTATION, AND COMMUNITY 

DEVELOPMENT

OF THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED THIRTEENTH CONGRESS

SECOND SESSION

ON

ASSESSING THE STATUS OF RECOVERY AND REBUILDING WORK FROM 

THE DEVASTATION OF SUPERSTORM SANDY AND THE STATE OF THE 

COMMUNITIES AFFECTED

MARCH 12, 2014

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

Available at: http://www.fdsys.gov/


BANKI-41578DSA with DISTILLER
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

KAY HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

MIKE CRAPO, Idaho 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada

CHARLES YI, Staff Director 

GREGG RICHARD, Republican Staff Director

DAWN RATLIFF, Chief Clerk 

TAYLOR REED, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor

SUBCOMMITTEE ON HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT

ROBERT MENENDEZ, New Jersey, Chairman 

JERRY MORAN, Kansas, Ranking Republican Member 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

SHERROD BROWN, Ohio 

JEFF MERKLEY, Oregon 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

BOB CORKER, Tennessee 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada 

RICHARD C. SHELBY, Alabama

BRIAN CHERNOFF, Subcommittee Staff Director

WILLIAM RUDER, Republican Subcommittee Staff Director

(II)


BANKI-41578DSA with DISTILLER
CONTENTS

WEDNESDAY, MARCH 12, 2014

Page

Opening statement of Chairman Menendez .......................................................... 1

WITNESSES 

Shaun Donovan, Secretary, Department of Housing and Urban Development . 2

Prepared statement .......................................................................................... 36

Matthew J. Doherty, Mayor, Belmar, New Jersey ................................................ 18

Prepared statement .......................................................................................... 41

Adam Gordon, Staff Attorney, Fair Share Housing Center ................................. 20

Prepared statement .......................................................................................... 44

Janice Fine, Ph.D., Associate Professor, Rutgers School of Management and 

Labor Relations .................................................................................................... 22

Prepared statement .......................................................................................... 47

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Screenshots of the New Jersey Department of Community Affairs RREM 

Website in English and Spanish submitted by Senator Menendez ................. 55

(III)


BANKI-41578DSA with DISTILLER

BANKI-41578DSA with DISTILLER
(1)

SUPERSTORM SANDY RECOVERY: ENSURING 

STRONG COORDINATION AMONG FEDERAL, 

STATE, AND LOCAL STAKEHOLDERS 

WEDNESDAY, MARCH 12, 2014

U.S. SENATE, SUBCOMMITTEE ON HOUSING, 

TRANSPORTATION, AND COMMUNITY DEVELOPMENT, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Subcommittee met at 10:00 a.m., in room SD–538, Dirksen 

Senate Office Building, Hon. Robert Menendez, Chairman of the 

Subcommittee, presiding. 

OPENING STATEMENT OF SENATOR ROBERT MENENDEZ 

Senator MENENDEZ. This hearing of the Senate Banking, Housing, and Urban Affairs, Subcommittee on Housing, Transportation, 

and Community Development will come to order. I am pleased to 

welcome two panels this morning and to have the chance to hear 

from the Secretary of Housing and Urban Development, Shaun 

Donovan. Mr. Secretary, welcome and thank you for joining us. 

Today’s hearing will focus on the ongoing and often unmet needs 

of the people devastated by Superstorm Sandy. It has now been almost a year and a half since the storm made landfall on the Jersey 

coast and wreaked havoc throughout the region. Since the storm, 

the people of New Jersey and other affected States have worked 

hard to rebuild. But for too many, that recovery is not as far along 

as it should be, and too many families are frustrated with the administration of some of the disaster funds meant to help them rebuild from this tragic storm. 

With grantees now preparing action plans for the second round 

of community development block grant disaster funding, we are at 

a critical moment. Clearly we need to consider lessons learned from 

the first round so States do not make the same mistakes in the second round. And it is my hope that we will avoid repeating the same 

problems that, frankly, never should have happened in the first 

place. 

When the storm struck and we began to secure the necessary 

funding and assistance, I confess that I thought it was a good idea 

to give States the flexibility and discretion that seemed reasonable, 

assuming we would all rise to the occasion. And now, frankly, I 

question the wisdom of that assumption. 

I say this because, for the last year and a half, I have heard 

story after story from family after family, business owners, homeowners, renters, local officials, I have heard from constituents at 


BANKI-41578DSA with DISTILLER
2

roundtables to emails and heart-wrenching telephone calls to my 

office about their shared experiences that have led us here today. 

I have heard of paperwork being lost time and time and time 

again; a lack of clear criteria for awarding assistance; people who 

have been left waiting and waiting and waiting for permission to 

start rebuilding. 

There has been confusion about how to apply for State-run programs. There has been a clear lack of transparency about the status of applications, incorrect denials of funding, and lack of transparency about the reasons for denial and how applicants can appeal those denials. There have been reported problems with the 

Spanish language Web site and allegations that minorities are 

being rejected at disproportionately higher rates. 

People simply feel the major State programs are not being run 

fairly or competently, and from what I have heard, I am inclined 

to say they have cause for concern. 

Bottom line, some have chosen to point the blame at the Federal 

Government. But I believe it is time to stop fingerpointing and get 

the job done. We need solutions, not more of the same blame game 

that has led to delay after delay in helping the people of my State 

and other States recover. We need greater transparency, clear 

standards, and responsibility and accountability. I do not think 

that is too much to ask. 

So let me be clear. This is now the third hearing this Subcommittee has held on Sandy recovery, and I will hold a hundred 

more if that is what it is going to take to get the answers we need 

and get it right for the people whose lives have been devastated by 

the storm. 

So, Mr. Secretary, we look forward to some of the insights that 

you can share with us so that the people of my State and every 

State that has suffered extraordinary damage can finally get their 

life underway. 

We want to be clear about what is working well and how we 

build on those successes as well as what is going wrong and where 

the delays are in order to fix the problems quickly and effectively. 

And in the interest of time, I will ask unanimous consent that the 

rest of my statement be included in the record. 

Senator MENENDEZ. With that, we welcome the Secretary of 

HUD, Shaun Donovan. Mr. Secretary, your full statement will be 

included in the record. We would ask you to synthesize it in 5 minutes or so, but if it is important, if you need a little more time, go 

ahead. And the floor is yours. 

STATEMENT OF SHAUN DONOVAN, SECRETARY, DEPARTMENT 

OF HOUSING AND URBAN DEVELOPMENT 

Mr. DONOVAN. Thank you, Mr. Chairman, and thank you for inviting me to testify here today and for your focus on this critical 

issue. 

As you know, in addition to my concern as a citizen and a member of the Administration, Hurricane Sandy was personal to me. As 

you often remind me, I married up, a Jersey girl, and because of 

my deep roots in the region as a New Yorker as well, I remain concerned with the devastation that Sandy has caused, and I am espeVerDate 0ct 09 2002 21:41 Feb 28, 2015 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\DOCS\89352.TXT SHERYL

BANKI-41578DSA with DISTILLER
3

cially honored to have the opportunity to help with recovery efforts 

across the region. We both remember the devastation this storm caused: $65 billion 

in damage and economic loss, 9 million lost power, 650,000 homes 

that were damaged or completely destroyed. And it was clear to all 

of us that the road to recovery would be long and difficult. 

So we began immediately helping communities put their lives 

back together, and President Obama quickly pledge his support of 

these local efforts in order to ensure a full recovery. He created the 

Hurricane Sandy Rebuilding Task Force to maximize Cabinet-level 

coordination in support of the work to rebuild this region. I have 

been proud to chair this effort as we work to achieve two basic 

goals: one, to get assistance to communities as quickly as possible 

to meet the immediate needs of the region; and, two to ensure that 

the region builds stronger and smarter than before so that it is better equipped to deal with future storms. 

Let me start with the work of getting assistance to communities 

quickly and efficiently. As you well know, in January 2013, President Obama, working with you and other Members of Congress, 

fought tirelessly to get $50 billion in Sandy supplemental funding 

in order to aid victims of the storm. And ever since, it has been a 

priority to get these dollars into communities. That is why we 

thought it was critical to include several measures in the supplemental that facilitated more efficient spending of the dollars, for 

example, giving HUD the authority to reduce duplicative environmental reviews. 

As a result of these and other measures, we have made great 

progress. More than 265,000 people and small businesses have received direct assistance; more than 99 percent of Sandy-related 

flood insurance claims have been paid; 97 percent of public beaches 

were open by Memorial Day of last year; and as of the end of January, HUD has announced more than $11 billion and paid out nearly $1 billion through our CDBG–DR program. 

I would note that this pace of spending is 48 percent faster than 

after Hurricane Katrina and more than 2 1⁄2 times faster than after 

Hurricane Ike. When you include flood insurance payments, we 

have allocated nearly $41 billion in total, with roughly $15.5 billion 

of this already paid out. 

So relief is getting to communities, but as you well said, Senator, 

we know it can never be fast enough, and that is why we have been 

looking at creative ways to expedite the rebuilding process—faster 

approvals from SBA during this process; the alignment of FHA and 

FHFA foreclosure prevention policies to keep homeowners in their 

homes; streamlined permitting that has cut times for approval of 

large infrastructure projects; and at your urging, work to make 

sure that we would not hurt homeowners who may have applied or 

been awarded SBA funds; and for the very first time, allowing 

homeowners to receive reimbursements through CDBG funds. 

We will continue to look for ways—and I am sure we will discuss 

that here at the hearing—to remove unnecessary barriers and 

headaches, ensuring that the billions that flow into the region are 

put to use as quickly and efficiently as possible. 

This, of course, complements our other goal of rebuilding stronger and smarter so that the region is better prepared to withstand 


BANKI-41578DSA with DISTILLER
4

future storms. On August 19, the task force released our rebuilding 

strategy for the region which included 69 recommendations to help 

do just that. 

For example, one of the most critical concerns we heard from our 

local partners was that they needed clear, accessible information 

about current and future flood risk. We have provided exactly that 

with our new sea level tool. And we have established for the first 

time a uniform minimum Flood Risk Reduction Standard across 

the Federal Government to have a single, simplified standard. 

We have also worked to connect communities with the most innovative engineering, planning, and design ideas from around the 

world through an international competition called ‘‘Rebuild By Design.’’

Investing in projects that will make our communities more resilient is vital to their safety, but it is also good for our economy because we know that for every dollar we spend in mitigation, we 

save $4 in avoided costs in the future. 

Finally, Mr. Chairman, I want to be clear that I and my Department will be accountable to the region and to you to see this process through. Every recommendation in the task force rebuilding 

strategy has a detailed implementation plan, and we are on track. 

While we continue working with Federal partners, we are also 

committed to overseeing CDBG–DR funds that are being distributed by grantees, and I take our role as a steward of Federal dollars very seriously. HUD is working closely with these grantees 

through weekly conference calls to answer any questions or concerns they may have. We also have twice-a-year onsite monitoring 

and twice-a-year onsite technical assistance for New York State, 

New York City, and New Jersey. We completed our first round of 

onsite monitoring last August. We completed our first round of onsite technical assistance in December. And right now we are going 

through our second cycle of onsite monitoring. We have completed 

our second onsite review of New York State. We are literally this 

week completing our second review of New Jersey. And we will be 

conducting our second review of New York City by the end of 

March. And we will stay on it for as long as it takes, knowing that 

eventually we will emerge stronger and more vibrant than before. 

The reality of these storms is that the recovery can never happen 

fast enough for the Americans that have been affected, but we are 

making significant progress. Communities are turning the page 

and looking toward the future with new hope. But we all know, as 

you have eloquently said, that more work needs to be done. All of 

us in the Obama administration are committed to working with 

local partners, Members of Congress, and other stakeholders to get 

assistance to those in the process of rebuilding, ensure the region 

is better prepared to withstand future extreme weather events, and 

work to improve our recovery efforts across the Nation. 

I look forward to working with the Committee on those goals. 

Thank you. 

Senator MENENDEZ. Well, thank you, Mr. Secretary. 

Let me get into some specifics here. As you know, CDBG funds 

are meant to help States and communities fill needs that are 

unmet by other sources of funding. In my State of New Jersey, the 

State allocated about half of its funding under the first CDBG 


BANKI-41578DSA with DISTILLER
5

tranche to homeowner assurance, with the largest share going to 

what is called the ‘‘Reconstruction, Rehabilitation, Elevation, and 

Mitigation program,’’ or RREM. 

Now, some of the State’s programs using CDBG funding may be 

working well, but as I hope you will become aware, the RREM program has not been one of them. Some initial disorganization may 

be expected in standing up a completely new program of the scale 

on a short time line in the aftermath of a major natural disaster. 

But the problems here have been much larger, lasted much longer 

than the people of New Jersey should have to accept. 

Major issues have been reported with the outreach, application, 

intake process, as well as customer service, application review, and 

appeals. In this century where we are at the cutting edge of innovation, I heard story after story of people having their applications 

handwritten and then lost multiple times. You would think there 

would be a central data base that is computerized so that any entity across the spectrum who is engaged in providing relief would be 

able to do so. 

And one of the biggest obstacles still facing many people whose 

homes were damaged in the storm is the inability to start construction almost 15 months later—15 months later. Because they have 

not been able to start repairs, many of these families are still displaced. 

As I understand it, about 12,000 applicants received preliminary 

clearance into the RREM program. Of these, about 7,000 are now 

on a waiting list while about 5,000 have been told they are in line 

to receive funding pending further reviews. 

Of the 5,000, only about 2,700 have been told they can start construction. The rest, almost 10,000 people, have been told they cannot start construction without losing their eligibility for reimbursement. 

Now, the storm hit in October of 2012. The RREM program started accepting applications in May of 2013, closed in August, and 

now it is March of 2014. And almost 10,000 people have been told 

not to start rebuilding their homes or else they will lose eligibility 

for reimbursement. And to me that is simply unacceptable. 

Now, there has been a lot of misinformation, misunderstanding, 

and fingerpointing over the causes of this delay, so I hope you will 

be able to help us set the record straight here. 

State officials have recently been saying that the main cause of 

the delay is what they call burdensome red tape of federally required environmental and historical preservation reviews. It is my 

understanding, though, that HUD and the State’s Department of 

Environmental Protection have worked hard to streamline and expedite these reviews to the point where they take on average about 

2 to 4 weeks. The longest I have been told is that they take at most 

6 to 8 weeks. 

So question number one, is that your understanding as well as 

to how long these reviews are taking to complete on average? 

Mr. DONOVAN. You are exactly right, Senator. In fact, our most 

recent information is that the typical review is now down to about 

2 weeks and that the most complex ones are now down to about 

6 weeks. 


BANKI-41578DSA with DISTILLER
6

Senator MENENDEZ. OK. So 2 weeks on the typical and 6 weeks 

on the max. Now, this accounts for only a few weeks out of the 

many months that people have been waiting since the RREM program was supposed to start processing applications. Is it correct 

that once a homeowner gets these environmental and historical 

preservation reviews completed, they can start or continue to rebuild their home without jeopardizing their eligibility for Federal 

reimbursement? 

Mr. DONOVAN. You are correct, Senator, and I would add that 

you raised this concern with us early on. We have never before allowed that sort of reimbursement to happen. But because of your 

advocacy, we did make that available in this case after Sandy. 

Senator MENENDEZ. So if the State is requiring homeowners to 

submit other documentation such as ‘‘substantial damage letter’’ 

that may be taking a long time to obtain or is taking a long time 

to process their applications to decide how much funding they will 

receive, the homeowner can start rebuilding while all of this is 

going on as long as they have completed the environmental and 

historical preservation reviews, which take, as you say, normally 2 

weeks, a maximum of 6 weeks. Is that a fair statement? 

Mr. DONOVAN. That is correct. 

Senator MENENDEZ. So right now I understand the State is not 

even starting environmental reviews for people until it has—my 

time is not up yet. 

[Laughter.] 

Senator MENENDEZ. That is one of the benefits of being the 

Chairman. I understand the State is not even starting environmental reviews for people until it has completed and signed off on 

all other documentation, a process that for many people has been 

taking months. I am told that some parts of this process, such as 

determining the scope of work, may be necessary for some environmental reviews. But these steps do not seem to be the biggest 

sources of delay. 

Wouldn’t it be a better idea to have the environmental and historic preservation reviews happening as early as possible in the 

process so that people can start rebuilding rather than making 

them complete the most time-consuming steps first when these 

steps are not even necessary for environmental reviews? 

Mr. DONOVAN. That is certainly an option that is available. 

There is no restriction at the Federal level from them doing that. 

The only risk from that perspective is that you might end up paying for an environmental for a family that is later determined to 

be eligible—to be ineligible, excuse me. 

Senator MENENDEZ. All right. So let us go to that. So, in other 

words, it is not the environmental or historical preservation requirements that are slowing things down, because if it was just 

those, people’s wait time would be 2 to 6 weeks, not 7 to 10 months 

and counting. The bigger problem seems to be making people complete other time-consuming steps first. 

So in this regard, my office has been in contact with State officials about this issue, and the State has told us that they are 

afraid to go ahead with environmental and historical preservation 

reviews until they have completed all other steps, including making 

a final determination that a homeowner is both eligible for funding 


BANKI-41578DSA with DISTILLER
7

and that the State has funding available for the homeowner. They 

said they are afraid that if they pay for environmental and historical preservation reviews for homeowners that ultimately do not receive funding for other reasons, they are afraid that HUD might 

penalize them or make them repay the money. 

Are the State’s concerns legitimate? Would you penalize the 

State for front-loading the environmental and historical reviews for 

preliminarily approved applicants so they could start rebuilding 

again? 

Mr. DONOVAN. There is no restriction on making that choice by 

the State. That is a program design issue. The risk for them is that 

they may end up performing environmental reviews for families 

that are determined later to be ineligible. We would allow them to 

cover those costs, but instead of being taken out of the project delivery costs, they would be required to pay them out of the program 

administration costs, which are capped at 5 percent of the total 

award. So that is the risk to——

Senator MENENDEZ. And even those 5 percent are Federal dollars, are they not? 

Mr. DONOVAN. That is correct. 

Senator MENENDEZ. So the bottom line is I am being told—and 

I listen to family after family—that, you know, the State will not 

do the environmental and historical review, which your testimony 

says is 2 weeks, average, 6 weeks, you know, in the more extensive 

context, and that they will not do it because they are afraid of 

being penalized—although I think the universe of how many people 

they would find in that is relatively small. And your testimony is 

they would not be penalized, they would just have to take it from 

an administrative pot versus a program pot. Is that a fair statement? 

Mr. DONOVAN. If there were funding available there. There is a 

cap of 5 percent on that pot. 

Senator MENENDEZ. OK. So the bottom line is, well, you know, 

I guess—well, I guess maybe we should not do any more advertising and look toward the next round of tranche and say that we 

need to ultimately buildup the overall amount so that the 5 percent 

is bigger. 

You know, the bottom line is there are people who have been out 

of their house for a year and a half—a year and a half—and many 

who have applied for this program 10 months ago and had to start 

rebuilding when they submitted their application and who have 

since been penalized only because they applied as early as possible. 

So I hope that we can—and I know that your rebuilding strategy 

task force report, which you testified about in this Subcommittee 

last September, included as one of its most important recommendations finding ways to improve Federal, State, and interagency cooperation, and to streamline and harmonize review processes like 

this to cut red tape and unnecessary delays. I think this is a prime 

example of an opportunity to cut red tape that can have a tangible 

impact of making people’s lives better, because there is no reason 

to take the one item that is essential to be eligible, which is the 

environmental and historical review, and back-end it instead of 

front-end it and be able ultimately to have the wherewithal to 

know that you can move forward. So I hope that this record makes 


BANKI-41578DSA with DISTILLER
8

it very clear to the State that it is their choice in their program 

design. 

One other issue before—I see Senator Schumer has arrived, so 

I have a whole bunch of issues, but let me just go to this one. How 

are we going to review as we look at this next tranche—you know, 

as one of the Members here who fought in the midst of a fiscal cliff, 

the end of a congressional session, in the midst of the worst natural disaster at least my State ever had, to get the money, I look 

at this issue of how the State spends it as an important one, and 

I look at what the State did with a vendor called HGI. When people 

whose homes were destroyed do not understand how to apply or 

what documentation to provide and had a very hard time getting 

helpful answers when they had questions, they went to intake centers that the State created. They faced a disorganized process 

where even after they submitted the correct documents and had 

verification that they submitted the documents, the contractors 

hired to process them often entered their information incorrectly or 

misplaced their documents multiple times—multiple times. 

When homeowners reached the application review stage, they 

were unable to get information as to the status of their application. 

For example, waiting weeks or months in limbo, only to find the 

review of their applications had not even started because it was 

missing documents the homeowner did not know they needed to 

provide. 

An independent assessment of the State’s data revealed in January that far too many homeowners were being incorrectly rejected. 

Of the thousands or so who were denied and appealed, 80 percent 

had their denials overturned—80 percent. More than 2,000 people 

did not appeal and may have been incorrectly left out. 

It is my understanding that the State contracted out almost the 

entirety of the problematic RREM program to a company called 

Hammerman & Gainer, Incorporated, or HGI. And after months of 

what I will term as ‘‘gross mismanagement,’’ during which time the 

State denied the existence of many of these problems, the State finally terminated HGI’s contract without public notice in December 

of last year. For less than 8 months of work, HGI has reportedly 

billed the State for $51 million of $68 million it was supposed to 

be paid over 3 years. Twelve percent of the way through the contract, the contractor had burned 75 percent of its funding, with an 

abysmal performance. 

Now, my question is: Are you aware of the State’s contract with 

HGI and the scope of the contract? Combined, the two programs 

run by HGI were responsible for distributing almost half of the 

State’s first tranche of CDBG funding? 

Mr. DONOVAN. Yes, I am. 

Senator MENENDEZ. And did the State make clear to HUD the 

full scope of how much responsibility they had intended to 

outsource to HGI? 

Mr. DONOVAN. We were not notified in the action plan or in other 

discussions of the precise scope of the contract. We were aware that 

they planned to contract out portions of the work, but we did not 

have advance knowledge of the specific work that HGI would be 

performing. 


BANKI-41578DSA with DISTILLER
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Senator MENENDEZ. Do you think the State acted quickly enough 

to identify the problems in HGI’s work and appropriately remedy 

them? 

Mr. DONOVAN. Given that we are literally as we speak performing a review that includes looking at that issue, I am not prepared to say, to give a definitive answer on that. I will say, Senator, that the State did set up integrity monitoring. They did find 

a number of problems relatively early on that I believe led to the 

concerns and changes that were made in the program. But I do not 

at this point have a clear answer that I can give you on whether 

that was sufficient——

Senator MENENDEZ. Well, as HUD is reviewing now—and then 

I will turn to Senator Schumer—its second tranche, you know, the 

law that appropriated the Sandy CDBG funding requires HUD to 

‘‘require grantees in contracting or procuring these funds to incorporate performance requirements and penalties into any such contracts or agreements.’’ So my question, which we asked you to review, is: Did the State officially comply with this requirement? Do 

you think the State has sufficiently monitored and enforced the applicable performance requirements and penalties with respect to 

HGI? And, finally, the Sandy recovery appropriation legislation requires the Secretary of Housing and Urban Development to certify 

in advance that a Sandy CDBG grantee, such as the State of New 

Jersey, has in place proficient financial controls and procurement 

processes. A report co-authored last week by Dr. Janice Fine of 

Rutgers University, who is testifying on our second panel today, 

identifies serious flaws in the State’s processes for contractor hiring 

and oversight that may have contributed to the problems with 

HGI. 

So I look at this, and, yes, it is a mess that affected people in 

a way that they should not have been affected. But before we let 

that second tranche go out—and I certainly want it to go, but I 

want it to go not to end up with the same results—I hope that 

HUD is going to review whether the State if going to again hire 

a contractor. What is the nature of that contractor? What is the 

quality of that contractor? I am told that this HGI contractor had 

a checkered past in other disaster recovery situations. And if the 

State is not going to hire a contractor, are they going to hire up 

to do what is necessary for this? Because, otherwise, this tranche 

of money that we fought so hard for is not getting to the people 

who need relief. 

So can I elicit from you a commitment to review both what happened here, because it involves Federal money, and also moving 

forward, before this tranche moves forward, at least in a New Jersey context, that we are going to have a process that ultimately is 

going to give greater streamlining and responsiveness to people 

who are suffering? 

Mr. DONOVAN. Senator, you have my assurance that, as we complete this review, we will come back to you with our full determinations about that process. But I would go one step further. Even 

though those reviews are not complete, we identified enough concerns with the work of the contractor and the oversight of the State 

that we have worked with them and they have given us assurance 

that, as part of the second tranche, they will take additional steps 


BANKI-41578DSA with DISTILLER
10

to reach families that may have been left out of eligibility of being 

able to get funding using that second tranche. We will be following 

up with you in the next few weeks to give you details of exactly 

what steps those will be, depending on the specifics of the report, 

but I have that assurance from the State, and you can rely on my 

oversight to make sure that we follow through on that. 

Senator MENENDEZ. Well, I would like to follow up on that, but 

let me turn to Senator Schumer. 

Senator SCHUMER. Well, thank you, Senator Menendez. Thank 

you for calling this hearing, which is so important that we continue 

to do oversight of Sandy. It was a huge amount of money. It was 

well thought out. But obviously when that happens, there are 

things that you have to do oversight with because there are 

glitches all over the place. 

Let me start with Bay Park. As you know, FEMA and Nassau County agreed to an $810 million package for the reconstruction of 

the largest sewage treatment plant project on Long Island. It is 

also the largest reimbursement for a sewer project in FEMA’s entire history. But there are two missing pieces that are really vital 

that have not been part of the agreement as of yet. This includes 

the funding for necessary nitrogen removal and, of great importance, an ocean outfall pipe. Because if the raw sewage, when 

things overflow through storms, goes into the ocean, it is a lot better than going into the Great South Bay. It hurts recreation, it 

hurts pollution, it hurts fishing, and everything else. And my constituents strongly believe that reconstruction of this plant must include these two areas, and obviously there are CDBG and EPA 

loans that could help Nassau pay for these costs. But at the moment we have not gotten a commitment from the State or localities 

about how the costs are being paid for, even though it is Federal 

money, obviously. My view is this has to be funded federally. The 

locality cannot afford it, and it is a large amount. I do not think 

the State can afford it either. 

So could you please tell me what you are doing to coordinate the 

Federal, State, and local agencies to use all Federal Sandy relief 

resources so that we can get full Federal funding from the Sandy 

money of both nitrogen removal and particularly the ocean outfall 

pipe? 

Mr. DONOVAN. So, Senator, first of all, thank you for your advocacy——

Senator SCHUMER. And I neglected to thank you. I think you are 

doing a great job. I am glad you are there. You are on top of it. 

You care, you know the areas. We could not have a better person 

doing it, so thank you. I neglected to say that in my excitement 

about the outfall pipe. 

[Laughter.] 

Mr. DONOVAN. I appreciate that, Senator. What I will tell you is 

with your urging, we have been working very closely with FEMA 

and EPA. We have brought them all together to work closely with 

the State to try to investigate what exactly can and should be done. 

We have made very clear that our CDBG notice and requirements, 

based on the work of the Sandy Task Force, will ensure that work 

gets done with greater resilience and a focus on environmental 

quality. 


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And as I think you also know, we expect to get within the next 

couple weeks the final request for our plan for the second tranche, 

and we are certainly hopeful that we will see reflected in that potential funding for those issues. 

Senator SCHUMER. I hope you will let the State and localities 

know how important it is. I can tell you, as the author of the bill 

here in the Senate, along with Senators Menendez, Gillibrand, 

and—is there another Senator? 

Senator MENENDEZ. Lautenberg. 

Senator SCHUMER. Lautenberg—Frank at the time. We miss 

him—that this is just the type of project we envisioned, a large essential public works project, susceptible to major flooding where 

the localities could never afford to step in on their own because it 

is so vital. So I hope you will push all of them to make this request, 

and I hope you would grant that request. I hope they fully fund it. 

Do you agree with that? 

Mr. DONOVAN. We certainly are working with them closely and 

are hopeful that these will be—these issues will be included. 

Senator SCHUMER. OK, great. 

Second question: Rebuild By Design, one of the things—I think 

we have done really good at creating a plan for Suffolk County, 

God forbid the next Sandy occurs, the $700 million of FIMP money, 

long awaited. I met with the Army Corps of Engineers yesterday, 

in fact, on this, Colonel Owens; talked, in fact, to Congressman 

Bishop yesterday; and we are making good progress on getting that 

money available. 

But, of course, Nassau County is also susceptible. We have good 

plans for Long Beach, which is one of the barrier islands, you 

know, going from Point Lookout to East Atlantic Beach. But we do 

not yet have a plan in place for the rest of Nassau County. The Rebuild By Design, which I think was excellent and, as you know, I 

urged that one of the plans at least be chosen that included a plan 

for Nassau County, Great South Bay, all the problems that occurred throughout the area, you know, all you have to do is go to 

places like Freeport or Massapequa and see the damage that occurred. 

Can you tell me the status of the selection project for the 10 

projects? Are you weighing in to make sure a protect Nassau County piece is done? If each little locality does their own piece, we will 

still have Nassau County susceptible to another, God forbid, big 

storm like Sandy. So we need a Nassau County plan. You were 

good enough to help us at least see that one of the Rebuild By Design plans included that. What is the status? How are we going to 

make sure that some of this Rebuild By Design money goes to protecting the Nassau County southern front the way we have done 

it in Suffolk County? 

Mr. DONOVAN. So briefly, Senator, on the overall Rebuild By Design process, final proposals will be completed by the end of this 

month. We are going to convene a jury that I will lead in the first 

week of April, and we are hopeful to make not just decisions about 

the competition but funding allocations for those by the end of 

April. 

Specifically on Nassau, again, at your urging we have brought together not just the State but also Long Beach and other localities 


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to make sure that this is a comprehensive plan and that we are 

getting very specific input from the local——

Senator SCHUMER. Good. Are you optimistic we will get some—

I mean, we do have a plan, as I said, for Long Beach. We have a 

plan for Jones Beach, in that area. But we do not for the Great 

South Bay, and that is where all the people are. So are you optimistic that we can get something to protect that area, a comprehensive plan to cover that? 

Mr. DONOVAN. I am optimistic that the team is working closely 

to get a good plan. I honestly cannot tell you without seeing the 

final plan what their chances are in the competition. 

Senator SCHUMER. All I can tell you is I will be deeply disappointed if we do not have a Nassau County plan. That is, again, 

what the Sandy money was entitled for. We do want to help each 

little area do their own thing, but without a major plan protecting 

Nassau County, it will be vulnerable and all the little stuff could 

get washed away. OK? 

Mr. DONOVAN. Understood. 

Senator SCHUMER. So do whatever you can to make sure—I 

mean, maybe even look at that Nassau County plan now, have your 

people look, and see, if it is not quite up to snuff, what can be done 

to bring it up to snuff so we do not hear on April 30th, well, not 

a good enough plan. OK? 

Mr. DONOVAN. Absolutely. 

Senator SCHUMER. Very important. OK, next, another question 

for you. Small business. Now, this is really disappointing, one of 

the areas where Sandy money has not worked very well, and that 

is in the loans to our businesses. In HUD’s latest quarterly grant 

report, the reimbursements for small business repair program were 

$1.5 million out of a projected $37.5 million. Despite these funds 

being categorized as urgent need, the progress narrative states that 

the majority of funds were used for marketing and program delivery costs. 

It has been over 18 months since Sandy. I have heard from small 

business owners who want these loans and are not getting them, 

and you are not the SBA, but you are the czar, so you have got 

the clout. In places like Freeport, Mastic Beach, Lindenhurst, Long 

Beach, Baldwin, Bay Park, Brooklyn, Queens, they are not getting 

much help here and they need it. What can be done to prevent 

more delays and to see that the money goes maybe in tranche two 

or elsewhere so that these small businesses have access to programs to build back their small businesses? I visited Island Park 

awhile back. Sixty percent of the businesses were wiped out on 

Main Street because of the flooding, and they need help for all the 

reasons—my dad was a small business man. He was an exterminator. I know how they struggle. And they do not have resources. 

They cannot build it back on their own most of the time, unless 

they have got a rich uncle or something. 

So could you comment on that, please? 

Mr. DONOVAN. Absolutely. First of all, with your advocacy and 

also Senator Menendez’s, we did obviously allow businesses to be 

eligible even if they had not applied for SBA loans or if they had 

gotten an award from SBA and their circumstances had changed. 

And I will be honest, I have been surprised at the limited number 


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of businesses that have come in and applied for the programs, not 

only in New York but also in New Jersey. 

We are looking at that. Specifically Mayor de Blasio is reviewing 

the programs now to look at whether there are additional things 

that can be done on economic development, and I think this is also 

a question of making sure, as we do the monitoring reviews that 

I spoke about earlier, that we are making sure that there is adequate outreach done on that front. So those are the areas that we 

are looking at. 

Senator SCHUMER. OK. One final—is that all right, Mr. Chairman? 

Senator MENENDEZ. Yes. 

Senator SCHUMER. Thank you. This is speeding up the flow of 

money to homeowners. OK? I am concerned about the speed of 

money flowing to New York City. New York State has done a better 

job here, and about $330 million for housing rehab and construction has been disbursed. That is not close to all the money, but 

homeowners on Long Island, Nassau, Suffolk, are beginning to tell 

us that they are getting the money both for reimbursement and 

others, and I want to make sure they all get it, you know, even if 

their incomes are, you know, middle class. Nice middle-class incomes, we promised them that they would get money, and that was 

the intention of the bill. 

Unfortunately, while $330 million from New York State has been 

disbursed, the non-New York City parts, zero dollars has been disbursed in New York City. And to be honest, I am a great fan of 

Mayor Bloomberg, and he is a good friend, but in this area, in my 

view, their attitude about the housing money was not robust 

enough. 

I have talked to Mayor de Blasio, and he does not have his people in place yet. We intend to meet to discuss this to improve the 

money that flows to homeowners. 

But, in your view, why is there such a great disparity in getting 

the money out the door to the city homeowners? What kind of technical support and specific recommendations can HUD exercise to 

streamline the city process? And is there any specific instruction 

HUD can offer to grantees to adjust their program to minimize further delays? 

Mr. DONOVAN. So, Senator, I share your concern in this area——

Senator SCHUMER. Zero dollars for New York City makes you 

scratch your head and wonder if something is wrong with the way 

they set it up. 

Mr. DONOVAN. And as you stated, correctly, this is a concern that 

I have shared for some time now. In fact, I have spoken directly 

to the mayor a couple times about this, including this week. He has 

assured me that his team is looking comprehensively at this process, that they will have recommendations for changes to speed up 

the process within the next few weeks. 

Obviously, a transition to a new mayor has meant that, as you 

said, he needs to get his team in place, but I have expressed my 

concern that we need to move this as quickly as possible because 

the money is not getting out fast enough. 

Senator SCHUMER. Good. And will you work with him? I think we 

are going to——


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Mr. DONOVAN. Absolutely. 

Senator SCHUMER.——need some modifications in the actual New 

York City program. You obviously want to see the money only go 

to people who need it and deserve it. You do not want to see duplication of dollars. If people had $80,000 of damage and got $70,000 

from their insurance company, the only amount we want them to 

get is $10,000. 

So these are all concerns, but if you make the program so onerous and you have got to dot the ‘‘I’’ and cross the ‘‘t’’ 48 times before you get a nickel, something is wrong. And I suspect something 

is wrong not just in the execution but in the way the city set up 

the program. Would you be willing to work with us to try to modify 

it so we get a careful balance here, not wasting any money but getting the money out to the homeowners? 

Mr. DONOVAN. We are doing weekly calls with the grantees to 

provide technical assistance. I will say on this, we do not have any 

pending requests for waivers or other changes. 

Senator SCHUMER. I know. 

Mr. DONOVAN. I believe this really is about program design and 

getting—just getting it done on execution. I do not think the problems here are red tape or regulations standing in the way. It is 

about execution. 

Senator SCHUMER. OK. Well, that is a little encouraging to hear. 

I talked to Mayor de Blasio within the last hour about this. He 

called me, which shows his concern, which I appreciate. And we are 

going to get together to figure this out. And as always, I know we 

will have your cooperation. 

Mr. DONOVAN. He has assured me his focus is on this as well, 

as I am sure he——

Senator SCHUMER. One more quick question, with my Chairman’s indulgence, and please give a short answer, because he has 

more to say. No, very serious. When is tranche three coming? What 

can we expect for New York State and New York City? And are you 

contemplating any local sub-allocations? You can answer that 

quickly. 

Mr. DONOVAN. Long story short, we are finalizing data from 

other places around the country. We want to see remaining unmet 

needs that we will get in the next few weeks from the grantees in 

their second action plans. And my hope is that we can make final 

allocations by the end of April. 

Senator SCHUMER. Thank you. 

Thank you, Mr. Chairman, for your indulgence. 

Senator MENENDEZ. Thank you. 

Mr. Secretary, there are votes going on, but I would like to get 

in a couple of questions before so that we can hopefully excuse you 

and then move to the next panel after the votes. 

Going back, just to finish on HGI, you know, I hope that HUD 

is going to require or encourage the State to seek recovery for HGI 

from the problems and delays that it caused. Canceling the contract is not enough here. The programs HGI was hired to manage 

are at the heart of the State’s efforts to help homeowners in New 

Jersey. And administering close to $1 billion worth of recovery 

money is too significant to be treated like some small boilerplate 

contract. 


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So it would be mind-boggling that the company could walk away, get $51 million, you know, 75 percent of its contract, which is supposed to last over 3 years, mess it up so badly that it hurt people, 

and then at the end of the day, you know, we just cancel the contract and that goes good-bye. That cannot be the case. I assure you 

that will not be the case. So I hope that HUD in its review here 

is going to urge the State, because I just do not know how we can 

do that. So when you have your review, I will look forward to seeing whether or not there is going to be any urging of the State to 

go after the contract here based upon a horrendous condition. 

Three final questions. I heard from everybody, you know, that I 

have listened to, homeowners who are still trying to get in, they 

do not know where they are on the list. If I am number 5,000 on 

the list, no matter how much money there is, I might say, ‘‘You 

know what? I am never going to get it, so I am going to have to 

make a determination of what I do with my life.’’

But why the secrecy of not knowing where you are on the list unless you want to play with the list? So can we get the State to just 

tell somebody they are number 2,000 on the list? There should be 

transparency. 

Mr. DONOVAN. The State has assured us that they are now providing information to homeowners about their place on the list, so 

what I would suggest, if you have specific——

Senator MENENDEZ. Not the case. Not the case. I do not care 

what the State is telling you, because when I listen to something 

so many times, I know it just cannot be one person just happens 

to be misinformed. They tell them in tranches, ‘‘You are between 

2,000 and 3,000.’’ I want to know if I am 2,500. I want to know 

if I am 2,000. I would love to know who the first hundred are on 

the list. I would like to see where the list was supposedly randomized. What is random? Is it mostly from certain parts of the State? 

Is it truly randomized in a place in which the universe is spread 

all over those who were affected by Sandy? I do not know what is 

the big deal. Let us publish the list. No personal information other 

than a name and address. This way we can determine the 

geographics of this, and everybody knows what their standing is. 

Mr. DONOVAN. Senator, I share your interest in making sure 

homeowners have the information that they need to move on with 

their lives, and——

Senator MENENDEZ. Isn’t that something you can require? 

Mr. DONOVAN. We do not require exactly how they design their 

programs in that way, but we can work with you to encourage 

them to make this information in a way that is useful to homeowners. 

Senator MENENDEZ. The list needs transparency. It is basic fundamental fairness to give people, first of all—and a sense of how 

the list came about, right? If it is randomized, how did you randomize it? Because if everything is, for example, one county or two 

counties, to the exclusion of all the counties that were affected, 

something is wrong with that. 

Speaking about challenges, I mean, you know, as you know, 

HUD is required by Executive order to work to ensure that recipients of Federal financial assistance provide meaningful access to 

applicants and beneficiaries with limited English proficiency. 


BANKI-41578DSA with DISTILLER
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Now, New Jersey’s CDBG action plan says the State will make 

key documents available in both English and Spanish, but we have 

seen specific evidence to the contrary. Of particular concern is the 

State’s Spanish language Web site which failed to provide the same 

information—the same information—about accessing assistance to 

Spanish speakers as to English speakers. 

For example, you will see from the screen shots that we have 

here—which I am submitting for the record, without objection. 

The New Jersey Department of Community Affairs’ Spanish Web 

site was never updated to advise people about the extended August 

1st deadline by which applications could be filed for the RREM program. And the Spanish Web site is entirely missing information 

about how to appeal a rejection. 

Unfortunately, it is not just the Web site that has prevented people with limited English proficiency from accessing recovery programs. Earlier this week I met with Angel Mejia who lives in Ironbound in Newark with his wife and children. He went to the Recovery Assistance Center in Newark. There was not one Spanishspeaker who could help him. The only available person who could 

communicate was a secretary who was not trained in the details 

of the program. A year and a half later, he is still awaiting an 

award for his property. And that is just one of many stories. 

So it is my understanding that a complaint has been filed with 

HUD’s Office of Fair Housing and Equal Opportunity alleging unequal access for victims with limited English proficiency. Is HUD 

investigating this complaint? 

Mr. DONOVAN. We are. We do have a formal complaint, and we 

are investigating, and I expect that investigation to be completed 

in the next few weeks. 

Senator MENENDEZ. And can I have your commitment to keep 

the Committee informed as to the results of that? 

Mr. DONOVAN. Absolutely, and, Senator, I would go farther than 

that. As I said earlier, between our monitoring review and the review we have been doing on the fair housing complaint, we do have 

concerns, and the State has assured us through the second action 

plan that they will take steps to reach homeowners and businesses 

that may have been left out because of language access issues or 

steps of the contractor. 

Senator MENENDEZ. All right. Then, finally, I hope in HUD’s review there are—the second panel will have studies that suggest 

that people from minority communities, citizens from minority communities—African Americans, Latinos, and others—have a disproportionate rejection rate and a whole host of challenges, even 

though they already started a challenge with what Sandy did to 

them. I hope that there will be a review of that as well. We need 

to make this program efficient, transparent, fair, and equitable for 

everyone. And I know that is your intention. It certainly is the 

Chair’s intention, and we are not going to be happy until we get 

there. So I hope you will instruct your Department to have a review of that as well. 

Mr. DONOVAN. I can assure we are looking at that in great detail, 

and I want to thank you for your leadership on this issue, not just 

around Sandy but more broadly. 


BANKI-41578DSA with DISTILLER
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Senator MENENDEZ. Mr. Secretary, thank you for your testimony 

here today. We look forward to following up with you on a host of 

these issues. And with that, I appreciate your time. The Secretary 

is excused. 

Mr. DONOVAN. Thank you. 

Senator MENENDEZ. The next panel is going to be held right after 

these votes, which, unfortunately, unless they are mitigated, there 

are about 45 minutes’ worth of votes. So the Committee will stand 

in recess subject to the call of the Chair, at which time we will convene the second panel, which is testimony that we desperately 

want to hear. 

The Committee stands in recess. 

[Recess.] 

Senator MENENDEZ. This hearing will come back to order. 

First of all, let me give my apologies to this panel. I do not control when votes take place here in the Senate—at least not yet. 

[Laughter.] 

Senator MENENDEZ. And we had a series of votes on nominees 

that went on until right now, so I appreciate your willingness to 

hang in there with us because I think your testimony, based upon 

reading your written testimony, is very important, and I would like 

to get some of that on the record orally as well as have some conversation with you. 

Second, I failed at the opening remarks to say that I did invite 

the State of New Jersey and the Department of Community Affairs 

commissioner to join us at this hearing, and that offer was rejected 

by the State. So I do not want anybody to think that I did not give 

the State an opportunity to make its own presentation here, which 

I did. 

We now have three very important witnesses: Mayor Matt 

Doherty, the Mayor of Belmar, New Jersey, who had significant 

damage done to his community, and who has worked to rebuild it 

with a fair degree of success, but still faces challenges on behalf of 

some of his citizens. And so we look forward to hearing from him 

as the perspective of one of our mayors. 

Adam Gordon, who is the Staff Attorney at the Fair Share Housing Center, which has done some very significant work in an analysis of some of these programs and what it meant to citizens or 

where they have fallen short and raised some serious questions 

about its effect. And so we appreciate your willingness to be here. 

And Dr. Janice Fine, who is an Associate Professor of labor studies and employment relations at the Rutgers School of Management and Labor Relations, who I referred to earlier when the Secretary was here about a study that she did about some of the contracting and procurement processes here and the importance of 

having a greater transparency as well as standards. 

So as I said to the Secretary, all of your testimony will be fully 

included in the record, without objection. I would ask you to summarize in about 5 minutes or so, so that we can enter into some 

dialog on these issues. 

We will start in the order that I introduced you. Mayor Doherty, 

you will be first. And if you would put your microphone on, press 

the red button. 

Mr. DOHERTY. My first time doing this. 


BANKI-41578DSA with DISTILLER
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Senator MENENDEZ. That is OK. 

STATEMENT OF MATTHEW J. DOHERTY, MAYOR, BELMAR, 

NEW JERSEY 

Mr. DOHERTY. I want to thank you for the opportunity to share 

with you some of the experiences we have had in Belmar, New Jersey. Based on conversations with other Jersey Shore mayors, it 

seems that our experiences are similar to what other communities 

are going through as well. 

I want to first thank you and the Members of the Committee and 

the rest of the Senate and the House of Representatives for appropriating financial resources to both Belmar and the rest of the Jersey Shore since Sandy ravaged our communities on October 29, 

2012. I know that while there were some Members who opposed 

helping us, as a collective body you supported us and for that we 

are grateful. I would also like to take an opportunity to thank New 

Jersey’s congressional delegation for all of their hard work in securing much needed aid, particularly Senator Bob Menendez, Congressman Frank Pallone, Congressman Bill Pascrell, and Congressman Chris Smith. Having gone through this experience, I can tell 

you that without Federal assistance both my community, and the 

rest of the Jersey Shore, would be at risk of becoming a relic of the 

past. No State, county, or municipality could come back from a terrible hit like the one our communities absorbed without Federal assistance. 

I also think it is worth noting that there is no private sector solution to recovery and rebuilding from a storm like Sandy. It is Government, and Government alone, that makes recovery from a storm 

like Sandy possible. 

Sandy destroyed town infrastructure, businesses, and residential 

properties. I would like to take this opportunity to share with you 

our experience of working with families that have been hardest impacted. In addition, I would like to humbly offer suggestions for the 

future allocation for Federal resources for Sandy recovery based on 

my experiences as the mayor of a town that was hit particularly 

hard. 

We found through this process that businesses seemed to recover 

rather quickly, far more quickly than residential properties. We are 

finding that residents affected by Sandy are the ones having the 

most difficult time recovering. While FEMA and SBA were both on 

the ground after the storm for 4 months, it is the long-term process 

of recovery for many families that has proved to be problematic. In 

many communities along the Jersey Shore, there are still families 

that have been displaced. As of today, they have been displaced for 

500 days—500 days of stress on families; 500 days of living in multiple places; 500 days of living on someone’s couch; 500 days of 

driving children to school 17 miles a day just so they have some 

semblance of normalcy in their young lives; 500 days of struggling 

through bureaucratic rules and regulations; 500 days of not knowing when, or even if, they will ever get back home again. 

In our small town alone, we have 90 families that have applied 

for the Reconstruction, Rehabilitation, Elevation, and Mitigation, 

also known as the RREM grant. Only one in five were approved 

and funded. The rest are either wait-listed or ineligible. I cannot 


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stress how difficult this is on these families when all they want to 

do is get back home. 

I would like to share a couple examples. The first one is Frank 

Murphy and his wife who had twin babies a couple of months before Sandy destroyed their home. They applied for the RREM program and were told that once they applied, they must stop all construction or they will receive nothing. They were denied the grant 

and began rebuilding their house as they appealed their denial. 

Over time, their denial was reversed, and they were told that their 

grant for $30,000 would be funded. But now, since they started to 

rebuild to get back home, even though their grant was funded and 

they are eligible, they will receive nothing. No one from the State 

ever told them that during the appeal process they could not work 

on their house. How long should they be forced to wait to work on 

their home, particularly after being denied and subsequently given 

no timeframe for when they would hear on their appeal? The fact 

of the matter is that the Murphys are not looking to blame someone for the wrongful denial of their grant application; they just 

need the resources so they can get back home. 

Another example is Krista Sperra. She is a graphic designer who 

both lives in Belmar and has her business in Belmar. She is married with two children in grammar school. She and her husband 

paid premiums on their flood insurance every year, for over 10 

years, before Sandy hit. Sandy brought water that engulfed 

Krista’s home and surrounded her neighborhood and those of her 

neighbors for several days. After the water resided, she had a 

structural engineer look at her foundation. Like many in Belmar, 

Krista owns an old house with a foundation made of brick and mortar. The engineer told her that she needed a new foundation and 

that she could not do any work above the foundation until it was 

completed. She brought this information to her insurance company. 

They sent someone out to look at it, and they told her that all she 

needed to do was replace some of the mortar in between the bricks 

and she would be fine. They gave her $600 and told her that would 

be sufficient for the mortar. She consulted another engineer, and 

he told her the same as the first engineer: The entire foundation 

needed to be replaced. 

Krista is now suing her insurance company, displaced from her 

home and living in the third house since Sandy hit and now needs 

to find another place to live as her family will be moving out by 

the end of May. Five hundred days she and her family have been 

displaced, and she is now suing her insurance company as she 

looks for a new place to stay. All she wants to do is get herself and 

her family back home. 

These are just two of the countless stories at the Jersey Shore 

today. But I think they are both indicative of the fact that people 

are generally not interested in moving anywhere else. They do not 

want to give up on their communities; rather, they want to stay 

and rebuild. Again, they simply want to get back home. 

From these experiences and many others, I would like to offer a 

few suggestions on how additional Federal resources could be allocated for the maximum benefit to communities and families still recovering from Sandy. 


BANKI-41578DSA with DISTILLER
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First, while communities are waiting for Federal funding, allow 

them to begin projects they need to recover from the storm and reimburse them later. This follows the current FEMA model. 

Second, relax rules that would make it difficult for families that 

did work on their homes right away to receive funding simply because they wanted to get their families back home. This will eliminate the disincentive for being aggressive about getting back home. 

People should still receive their funding, even if they did the work 

after the application date. 

Third, compel the National Flood Insurance Program to settle 

with clients through arbitration as opposed to forcing these residents to sue their insurance company. Many of these people have 

been paying premiums on their insurance for years in order to have 

help during such an emergency, and they should not have to sue 

for that coverage. 

Fourth, increase the appropriation for housing and infrastructure 

for Sandy-impacted communities. As we come to the end of the 

community development block grant allocation, I believe there will 

be a need for additional financial resources to assist families to 

fully recover. 

Fifth, and last, let us not get caught up in the blame game. Let 

all of the elected officials from the Federal, State, county, and municipal level work together to help middle-class families during this 

time of ongoing trouble. We have all done a lot these past 500 days, 

and now is the time to rededicate ourselves to ensuring that everyone gets back home. 

Thank you again for this opportunity to come speak before this 

Committee and share my experiences and suggestions. 

Senator MENENDEZ. Thank you, Mayor. 

Mr. Gordon. 

STATEMENT OF ADAM GORDON, STAFF ATTORNEY, FAIR 

SHARE HOUSING CENTER 

Mr. GORDON. Thank you, Chairman Menendez. My name is 

Adam Gordon. I am a Staff Attorney with Fair Share Housing Center, and since Sandy hit, we have worked with impacted organizations, communities, and individuals to make sure that Federal 

funds for rebuilding are distributed fairly and effectively. 

It has been nearly a year and half—as the mayor said, 500 

days—since Sandy. But for too many people, it is as if Sandy just 

happened yesterday. According to a recent poll by Monmouth University, three-quarters of people impacted by Sandy in New Jersey 

say that the State’s recovery process does not care about people 

like them. 

At a recent meeting on the next set of Federal funds, a veteran 

whose home was devastated by Sandy said that dealing with the 

State has been harder for him than fighting was in Afghanistan. 

It is an absolutely critical time for this hearing. As we heard earlier this morning, New Jersey is about to receive another $1.4 billion in Federal funds, and that allocation provides a singular opportunity—and for many people impacted perhaps the last opportunity—to get this recovery on track and help people rebuild. 

We appreciate the Secretary this morning announcing that there 

are going to be some important changes, which I will talk about in 


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more detail later, to make sure that people who did not have an 

opportunity will be able to apply, and we really want to make sure 

that—with your help, Senator Menendez, you know, make sure 

that the details on that get nailed down and that this becomes effective and HUD completes its investigation and changes as soon 

as possible, because people cannot wait any longer and we do not 

want all the money to be allocated or spent without a fair process 

being put in place. 

I am going to touch on three main areas: 

First, we have talked a lot about the RREM and resettlement 

programs, and I am going to talk about both the problems with 

those programs and the disparities in those programs that we have 

already heard a little bit about this morning; 

I am going to talk about renters impacted by Sandy and how 

they have been largely left out of rebuilding; 

And, finally, making sure that the money really does focus on the 

hardest-hit communities, places like Belmar. 

First, on RREM and resettlement, as we have already heard a 

lot about, these programs are just not working the way they should 

be. We had to sue the State of New Jersey for access to basic documents under our freedom of information law, and only after that 

lawsuit did we find out that the State and HGI unfairly rejected 

thousands of applicants for both of these programs. In fact, as we 

already discussed and, Senator Menendez, as you brought up this 

morning, 80 percent of people who appealed their denials won. 

These problems hit people of every racial and ethnic group and 

all incomes. But they hit African Americans and Latinos especially 

hard. African Americans were rejected from these programs at two 

and a half times as often as white applicants, and Latinos at one 

and a half times the rate of white, non-Latino applicants, even 

when you look within the same community. 

As we have already talked about, the whole program was shoddily run. Walk-in centers were located far from damaged communities to save on rent. In Monmouth County, the center was in 

Freehold which is nowhere near the areas of the shore that were 

impacted. Call centers were told to get people off the phone as 

quickly as possible instead of helping them solve their problems. 

Here is what needs to change. First——

Senator MENENDEZ. Sorry, what did you say? Call centers were 

told——

Mr. GORDON. Call centers were told, actually given instructions 

to get people off the phone as quickly as possible and say that they 

were helping their neighbors, even though in many cases there was 

not actually anyone on hold. That is in a document that we received through our litigation. 

So here is what needs to change to fix this mess. 

First, we know that 80 percent of the people who appealed actually were eligible, but we also know that most people, and especially most African Americans and Latinos, did not appeal. What 

the State needs to do is go back and review every single person 

who was rejected and find out if they were eligible. People should 

not have to go through further paperwork and further bureaucracy. 

When you are wrong four out of the five times, it should be on the 


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State and not on people who have already suffered so much to go 

through that process. 

Second—and we already heard positive news on this from HUD 

this morning—the people who were given the wrong information, 

told that they did not qualify, people given the wrong information 

on the Web site who spoke Spanish and were told about the wrong 

deadlines or that they could not appeal, we need a resolution to 

this. And we are glad to hear that HUD is saying this process is 

going to be reopened. We need those details to happen, and we 

need that to happen soon, because a lot of people are giving up 

hope because they were given the wrong information, were basically told the wrong information, especially if they spoke Spanish. 

And, finally, on this, the State promised a grant, 60 percent of 

Resettlement funds and 70 percent of RREM funds, to low- and 

moderate-income homeowners. Those targets have not been met, 

and they need to be because they are the people with the greatest 

need. 

While programs for homeowners are not working well or fairly, 

in many cases renters have not gotten any money at all. Forty percent of all families impacted by Sandy in New Jersey are renters. 

Roughly two-thirds of African Americans, Latinos, and low-income 

people impacted are renters. But so far only a quarter of the money 

from the housing programs have gone to renters. We hear from 

people living in isolated areas in campers, doubled up with relatives, sleeping on couches, and they have no idea where they are 

going to be a few months from now. And we need to make sure everyone is treated fairly, renters and homeowners, based just on 

damage. 

And, finally, related to that, we are very concerned particularly 

for the rental programs that the two hardest-hit counties, Ocean 

and Monmouth, had between them most of the damage from the 

storm, but in the main rental rebuilding program, those two counties have only received about a fifth of the money to date. Much 

of that scarce money has gone to communities with little or no 

damage from the storm, places like Belleville instead of Belmar, 

which makes people actually impacted by the storm very angry. 

We know when we talk to landlords and developers they are 

quite willing to invest in those areas, but they need to be told by 

the State if those areas will be prioritized, and that is just not happening, and we need to make sure for the next $1.4 billion we are 

focusing on the areas that were hit the hardest first. 

The time to act is now. As I noted before, the next $1.4 billion 

for many people may be the last chance. And absent that critical 

action to make sure the State actually changes things now, too 

many New Jerseyans will just never have a chance to rebuild and 

move back to their communities. 

Thank you very much for your time and inviting me today. 

Senator MENENDEZ. Thank you. 

Dr. Fine. 

STATEMENT OF JANICE FINE, PH.D., ASSOCIATE PROFESSOR, 

RUTGERS SCHOOL OF MANAGEMENT AND LABOR RELATIONS 

Ms. FINE. Hello, Senator Menendez. Thank you for inviting us. 


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I would like to first introduce Patrice Mareschal, who is my coinvestigator from Camden, Rutgers. Thanks for all your help at 

Rutgers. 

So one thing we know, after studying the State’s oversight policies and practices for close to 3 years, is that this is not an isolated 

problem due to emergency circumstances but, rather, a consequence of a deep, systemic problem many years in the making. 

If the system is already broken, it is only going to be worse in a 

State of emergency than it already is. So with my brief time, what 

I want to do is summarize some of the best practices in contracting, 

what we found to be some of the major issues, then describe the 

problems with how the State of New Jersey conducted contracting 

in the aftermath of Sandy. 

I will not use this time to make recommendations, but I want to 

say I have some to offer and would like to have that opportunity. 

So in a nutshell, the key to contract oversight is, first, well-written contracts that adequately define the responsibilities of the contractors and the protections of the State; and, second, strong, experienced, well-trained managers with a deep knowledge of the activities they are monitoring and time to do the job well; and, third, 

data systems that make the process more efficient and more transparent. 

Unfortunately, between 2004 and 2011, the size of the State 

workforce in New Jersey shrank by about 36,319, while the total 

value of contracts held steady, and in some years, especially in 

2013, increased quite significantly. 

In all circumstances, good oversight requires strong, overarching 

institutions. The laws, regulations, and policies governing the process provide the foundation for oversight. The need for strong institutions is especially acute in emergencies because they exacerbate 

the already significant challenges of contract administration. So 

creating strong institutions involves: laws ensuring that contracts 

are managed by qualified individuals with sufficient capacity to engage intimately and over and in real time with the time with the 

contractor; meta oversight of the contracting process by the State, 

not just at the agency level but at the top of the State; appropriations for integrated and standardized data systems; and transparency, including the publication of all key documents and details. 

Prior to Sandy, we had concluded that lack of oversight had already had significant consequences for vulnerable people and for 

New Jersey taxpayers and was placing precious Garden State assets at risk. So it is not surprising to us that the State struggled 

to handle the massive relief program. 

On the surface, the State’s Action Plan and Executive Order 125 

signed by Governor Christie appeared to enhance oversight under 

special circumstances. However, our findings and the stories that 

are now coming to light suggest that these paper requirements 

were insufficient, not followed well, or both. 

Executive Order 125 offered three potential enhancements to the 

existing requirements: 

First, it mandated that the comptroller preclear all RFPs prior 

to bidding. We do not know if any additional capacity, however, 

was created in the comptroller’s office. 


BANKI-41578DSA with DISTILLER
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The second enhancement was the appointment of accountability 

officers in each unit responsible for Sandy relief contracts. The 

qualifications and specific duties of these officers, however, are not 

specified. Likewise, there is no indication that these would be new 

staff positions rather than just titles added to already swamped 

staff members, which was what we found very often in our study. 

Finally, Executive Order 125 had a transparency provision that 

required the creation of a Web site to post contract information on 

all Sandy contracts. This Web site does, in fact, exist and it provides both contract documents and some nominal aggregate data, 

although I must say I learned a great deal more from Fair Share 

Center’s Web site. 

The HGI contract is available on the Sandy Web site; however, 

when searching the site for the contract manager, clicking on the 

HGI contract link leads to an error page. 

New Jersey’s Action Plan promised further enhancements. Two 

keys were the creation of a special division to manage the grant 

and the use of a special audit plan by the DCA’s internal auditor. 

The special division was created, and some documents suggest it 

may have as many as 95 employees. What is not clear, however, 

is what roles they are tasked with. Moreover, even if they were all 

newly hired contract managers, given the sheet complexity and the 

size of many of the contracts, HGI’s contract being a prime example, it would seem that no one contract manager could have adequately handled the process alone. 

There is little readily available information on the internal auditor. We do not know how many audits were conducted. We do not 

know how diligently they were done. We do not know what was 

found. We do not know the consequences. These are key questions. 

The State’s response to Hurricane Sandy required the coordinated actions of various organizations who needed to be properly 

vetted to ensure they had the expertise, capacity, and legitimacy to 

support the State and recovery efforts. Certainly best practices suggest that contracting units must perform their due diligence and 

gather information on a contractor’s previous record to serve as a 

basis for contracting decisions and to ensure that they do not have 

a prior history of poor performance. 

Again, on the face of it, New Jersey appeared to have made this 

part of the RFQ process, but media reports show that the State of 

New Jersey did not thoroughly vet HGI’s performance during Hurricane Katrina. Nine years later, after Hurricane Katrina devastated New Orleans, claims and issues from HGI’s services remain 

unresolved. 

Successful contract monitoring, the bottom line is the oversight 

requires significant managerial aptitude, including the ability to 

assess costs, identify needs, and critically analyze vendor 

strengths. No organizational chart is available on the Sandy Recovery Division’s Web site. Therefore, we cannot determine whether 

the 95 staff were actually hired, whether they are contract managers, and what their qualifications and experiences are. 

We can surmise that the division is still without the required 

oversight capacity given the numerous employment vacancies at 

the department. From what we see, all of the current vacancies in 

the Sandy Recovery Division are for compliance and monitoring poVerDate 0ct 09 2002 21:41 Feb 28, 2015 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 S:\DOCS\89352.TXT SHERYL

BANKI-41578DSA with DISTILLER
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sitions—for example, chief financial officer and assistant director of 

compliance and monitoring. 

Our review of the RFQ for the management and other related 

services program indicates that the State is developing an MIS system. It remains unclear if the MIS system has been adequately developed and if personnel have been trained on the system. This is 

particularly important to aid in monitoring and compliance since 

contractors were required to have data collection and storage systems that were compatible with the States. 

To bolster State capacity to oversee contracts, the State enacted 

the Oversight Monitor Act in order to prevent, detect, and remediate waste, fraud, and abuse. However, the State says that it 

spent 10 months training the monitors, and to date, no reports on 

the work of these integrity monitors are publicly available. 

Additionally, although the State required Sandy contractors in 

its RFQ to submit weekly reports on their progress, and HGI promised it would generate and submit a weekly report and also provide 

a monthly program status report, it did not do so for 8 months. 

When copies of the reports promised in the bid were requested, 

Fair Share attorneys were advised by the State that they did not 

exist. These were essential tools necessary for the State to engage 

in oversight, and they were ignored. We still do not know how or 

why this happened. 

Despite the deeply flawed service being provided in less than 8 

months, we now know that HGI billed the State over $51 million, 

although it had proposed a 3-year contract for a total of $67 million. There is an ongoing dispute over at least $18 million that HGI 

claims it owed but the State has not paid. This number may, in 

fact, grow significantly. HGI claims that the State demanded far 

more work than the contract originally anticipated, but the lack of 

reporting makes all of this extremely difficult to assess. 

Overall, our analysis suggests that New Jersey lacked the capacity to oversee the contracts involved in such a large and complex 

natural disaster recovery program. This lack of capacity was compounded by a lack of transparency. 

Thank you. I will be glad to answer questions. 

Senator MENENDEZ. Thank you. Thank you all for your testimony. It raises many questions. 

I would throw this out to any one of the panel who feels that 

they can answer it. I see that as we were conducting this hearing, 

the State of New Jersey announced some change, which from my 

perspective is welcome but nowhere near resolution of the core 

issue I was raising with the Secretary about environmental and 

historical reviews as a precedent to get people cleared and moving 

on to reconstruction. 

So as I understand this change—I do not know if any of you have 

had the opportunity to see the announcement—RREM grant 

awardees—these are already people, obviously, who have been decided that they have qualified and they are awarded—who are 

using their own contractor can request an advance payment for 50 

percent of their RREM grant. And it goes on to talk about what 

else they can do. But that is already for someone who, as I understand it, has worked through the process, gotten their clearances, 


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and have been an awardee. That does not deal with the 10,000 people I was referring to who have not been clear. 

Is that a fair statement? Has anybody been able to look at it? 

Mr. DOHERTY. I looked at the same statement, yes, Senator, and 

it is a step in the right direction. However, it still does not address 

those families that started work prior to that, you know, to the 

award. So they applied for the award. Some of them may have been 

rejected. While they appealed, they started working on their house 

because they did not know when the appeal period would be over. 

They were granted their appeal and said, you know, their rejection 

at first was wrong. But since they started their work after that application date, they are no longer eligible. 

So they are funded, but as the example I use, they will never receive their money because they violated that principle of doing 

work after the application date. 

Senator MENENDEZ. That is one universe which is clearly a problem. 

Mr. Gordon, do you have any sense of t his? 

Mr. GORDON. Yes, Senator, I would agree that while it is certainly a positive step, it does not address thousands of people who 

are not in that narrow situation. I mean, you have to be already 

approved and you have to be using your own contractor, which is 

just a fraction of the people that you and the Secretary were discussing this morning. And we would agree that we really should—

it is a much better use of a lot of these administrative funds to do 

those environmental assessments and get the ball rolling. And I 

think it is part of a troubling pattern overall. There is kind of a 

hiding of information by the State. Then when it comes to light, 

there is sort of a begrudging acknowledgment and addressing a 

very small piece of the problem, but not really addressing the full 

scope of the problem and coming up with a comprehensive solution 

that actually addresses the needs of everybody as opposed to a tiny 

fraction. I think that is true of the 80 percent rejections as well, 

that they have announced kind of after that came to light, 6 

months after they knew about it, and instead of them saying, ‘‘We 

knew that we were rejecting people wrongly,’’ they hid it until we 

had to sue to get the information. And then afterwards, what they 

said is, ‘‘Well, people can, you know, submit another appeal if they 

want.’’ Well, again, if you are wrong 80 percent of the time, or in 

this case—I agree with the mayor—if you are wrongly advised—did 

not advise people of the program requirements, it should be on the 

State to fix that and to figure out a way to comprehensively fix it 

for everyone instead of just, you know, carving up tiny slices of the 

people who are eligible. 

Senator MENENDEZ. It would seem to me that those who were 

foreclosed as a result of lack of knowledge from an appeal should 

be allowed to appeal at this point or have their files reviewed prospectively. 

Mr. GORDON. Senator——

Senator MENENDEZ. Or not prospectively. Should have the file reviewed by the State retrospectively as it relates to what they had 

filed in making a determination under the guidelines that obviously produced an 80-percent default rate. 


BANKI-41578DSA with DISTILLER
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Mr. GORDON. Senator, I would agree with that. I think that the 

State should start by reviewing every one of those files and basically rerunning those applications. If at that point people then get 

a denial and want to appeal it, then they should have that right 

as well. But it should not be in the first instance on people to file 

an appeal, which, you know, for many people, especially lower-income people, especially people with limited English proficiency, can 

be a daunting process. It should really be on the State to re-review 

those applications. 

Senator MENENDEZ. Now, Mayor, you mentioned in your testimony that business recovered more quickly than residential properties. Give us an insight as to why you feel that happened. 

Mr. DOHERTY. You know, in our case, after the storm, we worked 

very closely with FEMA. We had a real partnership with FEMA. 

And one of the things we were able to do was rebuild——

Senator MENENDEZ. I do not know. Are you going to give me a 

good-news story about FEMA? 

[Laughter.] 

Senator MENENDEZ. It is not the new ‘‘F’’ word? 

Mr. DOHERTY. Well, I would tell you this: If it was not for FEMA, 

towns like ours and the rest of the Jersey Shore would have a virtually impossible time cleaning up and rebuilding what was there 

before. So in our case, the important thing for our town was to rebuild our boardwalk and, you know, you were able to be there for 

our grand opening just before Memorial Day. By being able to rebuild our infrastructure, we knew that tourists were going to come 

for the summer season. So it incentivized business owners who 

worked with the SBA and also had insurance money through business interruption insurance to get back on their feet. 

So we had the same amount of businesses in our community for 

Memorial Day as we did the day before Sandy struck. So all the 

ones that were devastated were able to get back. They were 

incentivized through the work we were able to do because of FEMA 

and also because, you know, as you know, Senator, at the Jersey 

Shore virtually all the businesses are small business owners. This 

is how they make their livelihood. There are no large corporations 

outside of Atlantic City. So if they were not up and running for a 

summer season, it would have been devastating to their financial 

situation, which ultimately would have led to, you know, a deterioration in the community as businesses would fail and you would 

have more vacant stores down the road. 

Senator MENENDEZ. One other question for you. Do you believe 

that the way the CDBG funding has been prioritized meets the 

needs of your constituents? Or are there some needs that you are 

afraid may not be met or you have a different idea beyond obviously you have made a very clear point about those who started 

and got denied and should be eligible? Is there any other universe 

of CDBG as we look at the second tranche of money that should 

be considered. 

Mr. DOHERTY. There are two. And to separate them, one is for 

infrastructure, municipal infrastructure, government buildings, and 

the other one is for housing, for individual residential properties. 

For the first one, our concern is because of the LMI requirement 

that some of that money will not actually go to towns like Belmar 


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or Sea Bright or Seaside that are not LMI areas, up on the 

beachfront. So where the waves actually came ashore, where they 

destroyed pavilions and other infrastructure, that those dollars will 

actually go westward, off the short, to LMI census tract communities. So that is on the community side. 

On the residential side, our fear is that the money is going to run 

out before the residents who were directly impacted are able to get 

back home. You know, that is not as much of an LMI concern. It 

is just the fact that the appropriation that came out, as large as 

it was, was spread over multiple storms. It was not just spread 

over the impact of Sandy, particularly in New Jersey. So one of our 

suggestions, which I know it is very difficult to do in today’s political environment, would be an additional appropriation through 

CDBG for residential properties, particularly those folks that are 

on the wait list, that may be on a wait list a year from now. And, 

again, remember, the way the guidelines work is if you are on the 

wait list and you start work on your home, you are no longer eligible for that. And, again, we are on Day 500 of this storm, and some 

people have not started working on their home at all. 

Senator MENENDEZ. Well, that will be a challenge, although 

maybe one we will consider undertaking, but we are going to have 

to get it right for the money that exists before we can make the 

case for the next tranche of money beyond the $1.4 billion. 

Mr. Gordon, as you stated in your testimony, your organization 

had to sue the State for access to data on recovery programs, and 

you made that determination that almost 80 percent of the people 

who appealed had their rejections overturned. The State contends 

that for the 80 percent that won their appeals, this problem has 

been corrected and people were not substantially harmed. What are 

your thoughts on that assessment? 

Mr. GORDON. Two responses, Senator. I think the first is that, 

you know, as you actually mentioned before in the colloquy with 

the Secretary, we are concerned about people are prioritized in 

RREM. We are concerned about why people are 1st or 1,000th or 

7,000th on the wait list. And one of the things that we are looking 

into now is whether people who appealed were put back in the 

same place that they would have been if not for the State’s error 

or whether they are going to the bottom of the pile. 

It is very hard to determine that when people do not even know 

where they are on the list, so it is kind of a chicken-and-the-eggtype analysis. But it is a concern that they may have been disadvantaged in some way because the State unfairly rejected them. 

But the broader point is that only about a third of the people 

who were rejected appealed. Two-thirds of the people did not appeal, and that number is even higher for African Americans and 

Latinos who appealed, and lower-income people, all of whom appealed at lower rates. Not surprising for Latinos given that there 

is no information on the Spanish language Web site about appealing at all. 

And so we really are particularly concerned, and, again, I think 

the solution is for the State to affirmatively re-examine every rejected application, that that did not actually help most of the people who were denied. 


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Senator MENENDEZ. Do you believe that the appeal process was 

clear and easy for people to understand? 

Mr. GORDON. No. There were a number of problems with the appeal process. Again, if you were looking at a Spanish language Web 

site, you did not even know that there was an appeal process. But 

people were bewildered by the appeal process because, again, with 

the lack of transparency, people did not even know why they were 

denied. And so they were asked to submit information about why 

the decision was wrong when they did not even know what the decision was. And so people were very much perplexed by this process. 

Another real problem that we saw was that there actually are a 

number of things that you can appeal. It is not just whether you 

are accepted or denied. It is also the amount of the award. We hear 

a lot of complaints from people who say the RREM award—‘‘We 

really need $100,000 to rebuild,’’ and they are saying, ‘‘We can only 

give you $20,000.’’ The State, until last month, after we publicized 

it, never put on their Web site that there is an appeals process for 

other issues like that. And so they only put an appeals process 

there for whether you were rejected. And so there is a lot of information—a lot of other things about appeals that the State did not 

even tell people were possible. 

Senator MENENDEZ. And one more line on this line of questioning. Can you talk a little bit about your efforts to gather information on this effort about how we minimize the gap in appeal 

rates between homeowners? Particularly you mentioned the disproportionate reality among Latinos and African Americans. Can 

you talk a little bit about your efforts to gather information on the 

program and whether or not this was an open and transparent 

process? And what—well, let us start there. 

Mr. GORDON. Well, Senator, as you have already referred to, we 

did have to sue in order to get this information, and that is particularly disturbing in light of how quickly this process is moving and 

how urgent people’s needs are. 

You know, we initially asked for this basic information on July 

31st. The State asked for a 30-day extension. We had not gotten 

it at the end of that process, and they asked for even more time. 

And so at that point we sued, and we filed our lawsuit in early 

September, and we did not get the information until late in November. So that was 4 months from asking for the information to getting it. 

And then based on what we saw there, there was subsequent information that we then had to additionally request and required 

additional extensions and threats of lawsuit. 

So it has been a very untransparent process, and, you know, if 

you think about how hard it is for a legal organization to get this 

information with being able to sue and so on, how much harder it 

is for individual people who have been displaced, who cannot find 

out even basic information like where they are on the wait list, 

why it is that they are that sort of number, why haven’t they gotten any money. So I think it is——

Senator MENENDEZ. Am I missing something? Maybe to you and 

Dr. Fine, am I missing something here? Why is it such a big deal 

to have the transparency of having the list published or available 


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or online and you go and you find out, I am Joe Schmo and here 

is my number on the list? Is there some harm that is created by 

that process? 

Mr. GORDON. Absolutely not. And I think more generally it is incredible how there is nothing online or easily available through a 

phone. 

Another thing, with those call center records, people were actively told who worked at the call centers not to tell people their 

application status when they called in. 

Senator MENENDEZ. How do you know that? 

Mr. GORDON. We got it through the litigation, the instructions 

that were given to people working in the call centers. 

Senator MENENDEZ. This is HGI? 

Mr. GORDON. From HGI, yes. And one of the things they said is 

that, ‘‘You have something in front of you on the screen that says 

the application status. Do not give that to the person who is calling 

in.’’

And so not only you could not call, you could not go online and 

find out where your application stood, it still is the case that you 

cannot really get that information. And I see—what you suggested 

before, I mean, even if there were privacy issues with listing people’s names, there is a unique application identification number 

that is private for everybody. You could just post a list from 1 to 

7,000 or whatever of those people, of people’s application numbers. 

I do not know why that is so hard. 

Senator MENENDEZ. It is pretty amazing to me. 

I want to turn to Dr. Fine, but I have one final question for you. 

I understand your organization’s analysis of the State data found 

that, as we have talked about, African Americans and Latinos 

being rejected from the largest program at disproportionate rates. 

I also understand while you controlled the data for geography, your 

analysis does not necessarily control for every factor that would explain some other disparity, such as an individual’s level of damage 

suffered by each applicant. And these initial findings certainly, at 

least to me, suggest a need for further investigation. Even if there 

was no intent to discriminate, a disparate impact could still be 

cause for concern. 

Has the State provided to you additional data needed to complete 

a deeper analysis? 

Mr. GORDON. We have recently, Senator, gotten some additional 

data from the State, and we have used, as you mentioned, that 

data to look at geographic concerns. And even when you are in the 

same municipality—we looked at Atlantic City, for example, a very 

hard hit, very diverse municipality. And even within Atlantic City, 

there is a very large disparity. You see these disparities persist in 

the same place. 

I also think that there is a problem—if you match up the State 

saying things like, well, you cannot control for the damage data, 

and this came from disparities in damage data; but then they have 

also admitted that the data they were relying upon was incorrect. 

And so I think there is a link between those two things, between 

the 80-percent appeal success rate and the differences in rejections. 

I think for some reason that damage data was particularly faulty 

in Latino and African American communities. Why that is I think 


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we still have not quite gotten to the bottom of, and we are still 

going to be requesting even more information from the State and 

hopefully HUD through its review that it discussed this morning. 

Senator MENENDEZ. Have you shared your initial findings with 

HUD for their review? 

Mr. GORDON. We have shared our initial findings in the data 

that we reviewed with HUD, and we hope that they will review 

those and require significant changes to address those problems. 

Senator MENENDEZ. OK. And one last—I keep saying ‘‘one last 

question,’’ but I just want to make this record as replete as possible 

so I can have action items to follow up on. 

Is the State aware of your overarching list of recommendations? 

And have they indicated any willingness to address those concerns? 

Mr. GORDON. The State should be aware because we released 

them publicly in a report on January 15th. We also submitted extensive comments with over 70 other groups, such as the Latino 

Action Network, NAACP, Housing and Community Development 

Network, a number of faith-based organizations and communities 

that are impacted, a wide range of groups. We submitted those 

comments to the State earlier this month, and so we have been 

very public about what our recommendations are. Unfortunately, 

we have not gotten a response to that from the State, and generally 

we have found it to be very difficult to get any kind of response 

for the State. 

Senator MENENDEZ. Have you had any sit-downs with any of the 

State officials? 

Mr. GORDON. We have, but it has been quite a while since that 

has happened. 

Senator MENENDEZ. OK. Dr. Fine, let us start with a series of 

things I want to ask you about. Number one, based upon the standards you described should exist in your testimony, evidently those 

standards were not—HGI was not held to those standards. Is that 

a fair assessment? 

Ms. FINE. Yes, I think so. 

Senator MENENDEZ. And do you believe that it was a lack of enforcement of standards or a lack of personnel, which you also described as a challenge to pursue the enforcement of those standards? What would you say—I know you are not privy to all the information on HGI, but from what we know publicly, what would 

you ascribe to some of the challenges of having a contractor that 

was administering nearly $1 billion of program money, the overwhelming majority, gets $50-some-odd million up front for 7 

months worth of work when the whole contract was going to be a 

little over $60 million for 3 years, and then gets fired? Evidently 

something in the process here went wrong. 

Ms. FINE. That is true. So I guess what we would say is, the first 

problem we would say is the State did not perform adequate due 

diligence. The RFQ called for contractors to have a history of successful professional engagements in disaster recovery. This was not 

the case with HGI whose handling of Katrina in New Orleans drew 

significant negative press and public discontent. 

Problem two, the State did not have a process to ensure weekly 

and monthly reports were submitted. We do not know why that is, 

but HGI should not have been allowed to operate for 8 months 


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without submitting weekly or monthly reports. The State continued 

to allow HGI to operate unmonitored during what has been described as a critical period. This is particularly problematic because 

the State essentially could not correct early implementation and 

execution flaws, which eventually led to widespread systemic failure in the recovery programs. 

Problem three, either the RFQ did not adequately specify the 

scope of work to be performed, or HGI did not fully comprehend the 

contracting unit’s requirement. Either way, there seems to have 

been a total and complete breakdown in communication between 

the contracting unit and HGI. This could have been prevented with 

a more relational contracting approach, which basically means that 

you have got to be in real-time, regular relationship and communication with your contractor. Someone has got to be—you know, 

just when the State contracts—when the State lets a contract, it 

does not absolve itself of responsibility to manage the contract. 

Senator MENENDEZ. That is a point I wanted to get to. So while 

we can have a debate about privatizing any service, even if you 

choose to privatize that service——

Ms. FINE. That is right. 

Senator MENENDEZ.——as you did with HGI, it does not absolve 

the State of oversight responsibility since the entity receiving the 

money from the Federal Government is the State of New Jersey, 

not HGI. 

Ms. FINE. Exactly. Exactly right. 

Senator MENENDEZ. So you said you had a list of recommendations to make that you did not get to in your oral testimony. 

Ms. FINE. Yes. 

Senator MENENDEZ. I would be happy to entertain some of those 

now. 

Ms. FINE. OK. So the overarching lessons is that these grants 

represent enormous increases in the expenditures of relevant State 

agencies, because so much of the services are carried out by contractors, they will dramatically increase the burden on States’ existing oversight capacity. So I just want to make this clear, that 

when we let a contract, we build in the cost of the contract itself, 

but we do not think about the cost to the existing State agency that 

is going to have to oversee the contract. This is an endemic problem. This is what we found across the board in New Jersey, and 

it was absolutely critical here, right, that if you are going to all of 

a sudden get this huge raft of money at a really incredible difficult 

moment, you have got to make sure that you shore up the agencies 

that are going to be responsible. In this case, that was DCA. 

So because so much of the services are carried out by contractors, 

you have got to make sure that the State’s existing oversight capacity is increased. So if you want to make sure Federal resources are 

not wasted and citizens are not harmed, you have got to make sure 

the State ramps up oversight. 

So here is just five quick things that we would suggest to HUD 

in terms of requiring of New Jersey’s kind of next phase. 

One is they have to have a showing of sufficient resources, which 

would mean three things: the existence of enough contract managers to properly manage all the contracts. There is a really good 

OMB standard for how many contractors—how many personnel 


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you need to manage contract personnel. So we know some of that, 

and it is actually in my testimony. I would be happy to talk to you 

more about it. So the existence of enough contract managers to 

properly manage them; detailed qualifications about those managers, demonstrating their substantive expertise; and, the existence 

of systems that will be used to allocate managers and facilitate contract management. 

All contract managers should be civil servants and cannot be 

subordinate to the contractors. New Jersey’s Action Plan is not 

clear on all these points. The mention of 50 employees in DCA’s 

new division would not be sufficient as it does not demonstrate 

what they will be doing or what their qualifications are. So that is 

the first thing. 

And we would add, we should have whistleblower protections 

for—we are recommending at the State level that anybody who is 

managing these contracts, anybody who works for the contractor, 

more importantly, anybody who works for a State agency who is 

managing a contract should be covered by whistleblower requirements, also for quality of service. Right now in the State of New 

Jersey, only nurses, if they complain about the quality of service, 

are protected by our SEPA. It should be all employees. And, again, 

we say this in our study, and I would be happy to talk to you more 

about it. 

So the second is transparency, that States should be required to 

show in detail how they make critical information beyond just the 

contract documents and broad, aggregate metrics publicly available. Let me just say again, some of the Web sites, both on Sandy 

and in general in the State of New Jersey, they look good, but 

when you dig deeper, they are all aggregate statistics. You cannot 

really use them unless you can do what Fair Share did, right? Unless you can just keep coming back over and over again, suing over 

and over again. A lot of the data is not there. So it needs to show 

how grant funds will be allocated for data colleague management 

and publication. The transparency needs to be improved. 

The third is voice. Information will be more meaningful if it is 

actionable. It will also be more available if parties with knowledge 

feel comfortable disclosing what they know. So the first piece is 

whistleblower protection, as I mentioned. 

And the other thing I wanted to say is I do not believe hotlines 

are sufficient because that is for individuals. I also think that we 

need to have strong voice provision through the establishment of 

community-based oversight committees, right? So that you bring 

stakeholders together and give them a voice and make them feel 

like they could ask questions. I mean, we know that people are 

more likely to step forward with problems if they feel they have an 

option to do that in a group, not as an individual. So some kind 

of community oversight committee. 

Next is meta oversight. The State should be required to identify 

clearly how it will handle the complexity of the process. It cannot 

be enough to say that there will be a new office within the executive branch or that watchdogs will look at all contracts. The plan 

must be clear, specific, and comprehensive, and take into account 

the increased burden imposed by emergency grant distribution. 


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And, finally, you spoke earlier in this process about how do we 

recover what we have already lost. Right? So what do we do about 

the $51 million? How do we recover? So one of the things that we 

looked at was that in the contract with HGI, ‘‘The agency shall retain 10 percent of each invoice submitted’’ is weak language. We 

need strong language about how the State can claw back funds 

from contractors when those funds are not—you know, when they 

are mismanaged. So in our overall review, in our review of Sandy, 

the State’s inability, incapacity, or unwillingness to recover lost or 

wasted funds was a key problem. States should be required to demonstrate: 

One, that they have given themselves maximal legal authority to 

recover funds from underperforming or fraudulent contractors; 

Two, that they have people and systems in place to do it. An example would be the specific language that will be included in an 

RFP or an RFQ: to allow the State to withhold payment or require 

a performance bond rather than having to litigate to recover money 

after the fact. Provisions are not sufficient, however, which is why 

the people and systems have to be in place. 

Senator MENENDEZ. Well, I appreciate those recommendations. 

We will be looking at them and seeing how we can implement some 

of this as we look at the next tranche of money. 

One final question for you. There is an indication now—I do not 

know if this is fact yet, but there is an indication that the State 

may now move not to a contractor but to do it themselves. If that 

is the case, then I assume that your statements about personnel 

will be even more significant if they are looking to do it themselves. 

Ms. FINE. You know, I will just say that in the 3 years that we 

did this study, one of the things that was so striking and so inspiring is that when you—at one point I did a whole bunch of interviews with New Jersey Turnpike workers, and this was at a time 

when, you know, the toll collectors were being beaten up and, you 

know, the turnpike, there was all this discussion about privatization. And one of the things that was so striking was these people 

woke up every morning worrying about the turnpike. On a snowstorm day, they knew every exit, they knew every toll, they knew 

every booth. You know, that is what we want, right? We have had 

enormous attrition of people who are deeply committed to the Garden State and to excellence and who know their area really well—

ecologists who got turned on in the 1970s and then went into DEP 

and care about, you know, preserving native species, right? 

What we had was a State full of people like that, and what we 

have got now is a State that has been—you know, where the attrition has just decimated these civil servants, and we need to rebuild 

a core of State contract managers. We need to lift them up. We 

need to be proud of them. We need to ensure they get the training 

they need. And this is an opportunity to start to rebuild that core. 

This is an opportunity to take some of the best and brightest that 

are coming out of Rutgers and other schools, to hire some of the 

people, to move some of the people up who are already there, who 

know their area. Right? It is not enough to say, ‘‘Oh, well, let us 

get people who know contract management.’’ We need people who 

know contract management and know these substantive areas. We 

once had them. We need to have them again. 


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So the idea of doing this directly through the State—you know, 

it never made sense to me. We could not understand when we were 

studying this, we could not understand why the State had not considered managing some of these programs themselves, right? Or 

contracting out less and doing more inside. And, you know, we believe there are perfectly appropriate moments for contracting, 

right? And certainly all of this work could not have been done internally. But there was never a serious consideration and a serious 

cost accounting done of what it would cost to expand the State’s inhouse capacity to do it versus to do it outside, right? 

And what studies show frequently is that the reason why so 

much insourcing is happening at the municipal level is because the 

quality of service went down, right? That one of the major reasons 

mayors bring work back in-house that they had contracted out was 

because of quality of service, among other reasons. 

So we know this from the municipal experience, and yet it seems 

that at the State level we have to learn it all over again, which 

should not be the case. 

Senator MENENDEZ. Well, I guess it does not take a rocket scientist to figure out that if you are going to now perform the same 

functions that you gave a contracting company $50-some-odd million to do and you are going to do it in-house, that you are going 

to have to have the human capital in order to do that that can execute well. 

I appreciate all of your testimony and answers to questions. It 

has been incredibly helpful as we devise what I expect will be both 

follow-up and an action plan. 

This record will remain open until the close of business tomorrow, and with the gratitude of the Committee, this hearing is adjourned. 

[Whereupon, at 1:10 p.m., the hearing was adjourned.] 

[Prepared statements and additional material supplied for the 

record follow:]


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PREPARED STATEMENT OF SHAUN DONOVAN

SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

MARCH 12, 2014

Chairman Menendez, Ranking Member Moran, and Members of the Subcommittee, thank you for the opportunity to testify today regarding the ongoing effort to recover and rebuild in the region impacted by Hurricane Sandy in October 

2012, including efforts to ensure strong coordination among Federal, State, and 

Local stakeholders. 

Because Sandy was one of the most devastating and costly natural disasters in 

our history, the President recognized that the response required an additional focus 

on rebuilding efforts coordinated across Federal agencies and State, local, and Tribal 

governments to effectively address the enormous range of regional issues. 

On November 15, 2012, President Obama announced that I would lead the coordination of Federal support to the long-term rebuilding effort. The President issued 

Executive Order 13632 on December 7, 2012, establishing the Hurricane Sandy Rebuilding Task Force, and appointed me to serve as its chair. Executive Order 13632 

charged the Task Force to ‘‘work to ensure that the Federal Government continues 

to provide appropriate resources to support affected State, local, and Tribal communities to improve the region’s resilience, health, and prosperity by building for the 

future.’’

My responsibilities in this role occurred in concert with the National Disaster Recovery Framework (NDRF) and involved coordinating closely with the Federal 

Emergency Management Agency (FEMA) and the other agencies involved in recovery efforts. 

Sandy and the Nor’easter that followed had immense impacts across much of the 

eastern United States, with damage most severe in New York, New Jersey, Connecticut, Rhode Island, and Maryland. Within the United States, the storm caused 

over 150 fatalities, major flooding, structural damage, and power loss to over 8.5 

million homes and businesses, directly affecting more than 17 million people as far 

south as Puerto Rico, and as far north as Maine. 

Sandy caused tens of billions of dollars in damage and is estimated to be the second most costly storm in American history. Thousands of businesses and more than 

650,000 homes were damaged or destroyed. State, local, and Tribal governments are 

addressing damage to roads, bridges, mass transit, and other essential infrastructure, including electrical and water treatment facilities, public hospitals, and shorelines. 

As I have previously explained to this Committee, in addition to my concern as 

a citizen and as a member of this Administration, this is personal to me. I grew 

up in the region. I was born and raised in New York and worked on housing issues 

there, including serving as Mayor Bloomberg’s Commissioner of the New York City 

Department of Housing Preservation and Development. I also worked on housing 

issues for Prudential Mortgage Capital in New Jersey, and my wife is originally 

from New Jersey. Many of my friends have been directly affected by the storm’s devastation. In light of my deep roots in the region, I am particularly concerned with 

the devastation that Sandy has caused, and I am especially honored to have the opportunity to help with recovery and rebuilding efforts. 

I have seen much of the damage first-hand, talked with State and local officials 

and citizens living with the aftermath of the storm, had discussions with Senators 

and Representatives from the area, and have met with other Federal officials working on the recovery effort. Everyone involved in the recovery and rebuilding has 

demonstrated extraordinary dedication and courage. 

Just as remarkable are the actions by average people I have spoken with—individuals who have demonstrated a different brand of heroism by simply reaching out 

to help their neighbors, even as they were facing their own losses. I have seen bravery and determination that inspires me and my colleagues to work even harder, respond quicker, and develop more creative solutions. 

With that mission in mind my testimony today will cover: 1) Ongoing response 

and recovery efforts; 2) A brief background on the formation and role of the Hurricane Sandy Rebuilding Task Force; 3) The role of the supplemental Community Development Block Grant Disaster Recovery (CDBG–DR) funding provided by Congress; and 4) HUD’s continuing role with respect to that funding and an assessment 

of the ongoing recovery efforts. 

Ongoing Response and Recovery Efforts 

It is important to note the unprecedented cooperation that has been taking place 

since Sandy struck among Federal, State, local, and Tribal authorities. HUD, FEMA 

and other parts of the Department of Homeland Security (DHS), as well as the DeVerDate 0ct 09 2002 21:41 Feb 28, 2015 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 S:\DOCS\89352.TXT SHERYL

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partments of Transportation, Health and Human Services, Interior, Commerce, and 

Agriculture, plus the Small Business Administration (SBA) and the U.S. Army 

Corps of Engineers (USACE) and other agencies are all working together. For example, as a result of coordination under the National Response Framework (NRF), 

within a week after Sandy hit there were almost 11,000 National Guard and 17,000 

Federal responders on the ground from FEMA, the Department of Defense, USACE, 

HUD, Department of Transportation, Department of Energy, and HHS, as well as 

tens of thousands of utility workers from across the Nation. The Federal Housing 

Administration and Federal Housing Finance Agency worked to protect thousands 

of families who, through no fault of their own, were at risk of home foreclosure as 

a result of Sandy—first by putting in place a foreclosure moratorium, and then by 

cutting red tape to offer families streamlined home loan modification. 

Another example is HUD and FEMA coordination to address past environmental 

permitting and review inefficiencies in disaster recovery. In developing our response 

to Sandy, HUD and FEMA recognized that a single Federal review, sufficient for 

both agencies, could expedite the review of housing recovery projects. To that end, 

HUD, FEMA, and their local counterparts in New Jersey and New York State 

worked together to find efficiencies in environmental review requirements associated with housing recovery projects that leveraged both HUD and FEMA funds. 

These efforts resulted in a process available to expedite recovery reviews across the 

Sandy-affected region that could otherwise be delayed by sequential and redundant 

review of housing projects. 

As of January 2014, FEMA and the SBA have served over 250,000 households and 

individuals and more than 13,000 businesses. Additionally, 99.5 percent of Sandyrelated National Flood Insurance Policy claims totaling over $7.9 billion have been 

paid out to the more than 143,000 policyholders who filed claims. Based on grantee 

reports as of January 31, we know that more than 19,000 households have already 

been assisted through CDBG housing programs across the region, with an estimated 

pay out of more than $478 million to beneficiaries. 

While substantial recovery efforts have been implemented across the spectrum of 

needs, recovery can never be fast enough for affected families, homeowners, and 

other victims of this terrible storm. And because so much of the recovery from 

Sandy involves long-term construction and infrastructure projects, work will continue for years to come. More needs to be done at every level. But important 

progress has clearly been made. 

The Role of the Hurricane Sandy Rebuilding Task Force 

The Administration recognized that the Federal Government’s performance during 

Hurricane Katrina and other disasters highlighted the need for additional guidance, 

structure, and support to improve how we as a Nation address disaster-related recovery and rebuilding challenges. In September 2009, the Homeland Security Secretary and I were charged with establishing a Long Term Disaster Recovery Working Group, composed of more than 20 Federal agencies. 

HUD, DHS, and the Working Group consulted closely with State, local and Tribal 

governments as well as experts and stakeholders, and they worked to improve the 

Nation’s approach to disaster recovery and to develop operational guidance for recovery efforts. 

As a result, in September 2011, FEMA published the NDRF. The NDRF addresses 

the short, intermediate, and long-term challenges of managing disaster-related recovery and rebuilding. It sets forth flexible guidelines that enable Federal disaster 

recovery managers to operate in a unified and collaborative manner with State, 

local, Tribal, and territorial governments. The Sandy Task Force has operated within that framework. 

On August 19, 2013, the Task Force released its Hurricane Sandy Rebuilding 

Strategy. The strategy was designed to help communities rebuild for the future and 

to ensure that we evaluate future vulnerabilities and risk. This means building to 

address expected sea levels, storm surges and extreme heat and precipitation, which 

pose risks to the Nation. Many elements of that strategy are being incorporated in 

HUD’s ongoing work with CDBG–DR grantees to expedite and ensure a more resilient recovery. 

The work of the Task Force ended on September 30, 2013, on time and significantly under budget. Going forward, HUD, FEMA and other agencies that perform 

Recovery Support Functions will continue the Federal rebuilding coordination efforts. There are three primary lessons that are guiding our efforts to support local 

community rebuilding efforts. 

First, it is important that both near and long-term recovery and rebuilding efforts 

start immediately following a disaster and that the Federal Government takes a coordinated regional approach to the delivery of assistance to its State and local partVerDate 0ct 09 2002 21:41 Feb 28, 2015 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 S:\DOCS\89352.TXT SHERYL

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ners. To ensure that this happens, HUD and FEMA are leading regional coordination efforts in coordination with the Federal Disaster Recovery Coordinators under 

the NDRF. 

Second, this must be an ‘‘All-of-Nation’’ approach to rebuilding. While the Federal 

Government has a key role to play in recovery, State, local, and Tribal governments 

must be the leaders in this effort. To ensure the Task Force’s efforts maintained a 

local focus, we quickly established an Advisory Group composed of 37 elected officials from the Sandy affected region. We were also in constant contact with other 

State and local officials—which gave us real-time information about the rebuilding 

challenges communities faced. Now that the Task Force has ended, FEMA and HUD 

are co-leading the Sandy Regional Infrastructure Resilience Coordination group 

(SRIRC), supported by dedicated staff at the Sandy Recovery Office (SRO) in 

Queens, representing a range of Federal agencies. Since January, the SRIRC has 

commenced monthly meetings with the States of New York, New Jersey and Connecticut and the city of New York to coordinate on issues, and has established 10 

interagency Technical Coordination Teams that will focus on implementing projects 

within 10 areas the group has identified as the most critical infrastructure priorities, from waste water treatment facilities to transportation to coastal protection. 

In addition, the Sandy teams at the SRO and at HUD are in daily contact with the 

State and City grantees. 

Third, the recovery effort must include rebuilding in a more resilient fashion rather than simply recreating what was already there so that we are prepared for future 

disasters. One of the most critical concerns we heard from our local partners was 

that communities needed clear, accessible information about current and future 

flood risk. In order to gather the best information on the risks the region faces, 

FEMA, the National Oceanic and Atmospheric Administration and the Army Corps 

of Engineers developed a tool which allows local planners and decisionmakers to 

click on a map and see projections of the impacts of rising sea levels as much as 

a century into the future. To ensure this science would be put into practice, the Administration established a single Flood Risk Reduction Standard that applied to all 

rebuilding projects funded by Sandy-Supplemental dollars. 

But we have not just armed communities with the best available data—we have 

also worked to connect communities with the most innovative engineering, planning 

and design ideas from around the world. That’s why HUD launched Rebuild By Design, a multi-stage regional design competition, specifically to develop innovative 

projects to protect and enhance Sandy-affected communities. I expect the RBD process to come to fruition this spring and the resulting projects will encourage new 

ideas for resilient recovery. 

We have solid evidence that the risk of large scale disasters and catastrophic 

losses is increasing due to increasing development along our coasts and changes in 

demographics and climate. Investing in mitigation is critical not only for the future 

of our communities—it is also cost effective. The National Institute for Building 

Safety’s Multi-hazard Mitigation Council has estimated that for every dollar invested in hazard mitigation, a savings of four dollars is achieved. Homeowners, businesses and other entities recovering from a disaster currently have access to 

FEMA’s Hazard Mitigation Grant Funds in coordination with their State and local 

hazard mitigation plans, to assist in taking protective mitigation actions against future events. Such investments are critical in a time of constrained resources. In addition, it is critical to maximize the impact of every dollar of supplemental funding. 

To that end, the Sandy Rebuilding Strategy has outlined a process for coordinating infrastructure projects across the entire region by bringing all of the relevant 

Federal, State and local players to the table to discuss those projects and map connections and interdependencies between them. This process will help us save money, 

improve the effectiveness of these projects and accelerate the pace at which they’re 

built. As noted previously, all major CDBG–DR funded infrastructure projects will 

be included in this process. The Strategy also highlights how the alignment of Federal funding and increased leverage of non-Federal funds for infrastructure projects 

are important to the success of disaster recovery in the Sandy-affected region. 

The Role of CDBG–DR Funding 

On January 29, 2013, President Obama signed the Disaster Relief Appropriations 

Act (DRAA) of 2013. The supplemental funding bill included funds for FEMA and 

USACE projects and activities, needs of the Department of Transportation including 

the Federal Transit Administration, support for the Small Business Administration 

and its disaster loan program, Community Development Block Grant-Disaster Recovery (CDBG–DR), and funding for a range of other critical priorities. 

The DRAA provided $16 billion in CDBG–DR funding, reduced to $15.2 billion 

due to FY 2013 sequestration, to address Sandy and other qualifying disaster events 


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in 2011, 2012, and 2013. The Department has aggressively implemented the law 

and is ensuring that its requirements are met. Of the amount appropriated, more 

than $10.5 billion has been allocated to Sandy grantees through December 2013, 

and more than $2.8 billion has been obligated, and more than $1 billion has been 

disbursed to those grantees as of March 6, 2014. HUD also has allocated an additional $642 million to other State and local governments to assist in their recovery 

from other major disasters in 2011, 2012, and 2013. 

Specifically, on February 6, 2013—eight days following the President’s signature— I announced the first allocation of $5.4 billion of CDBG–DR funds under the Act, 

to five States and the city of New York to support their efforts to recover from the 

damage caused by Sandy. This represented the fastest ever allocation of CDBG–DR 

funds following the signing of a disaster appropriations bill. 

With this first allocation, the Department and our grantees took important first 

steps toward ensuring a more resilient and sustainable recovery. Grantees, for example, are now incorporating green building features in the replacement and construction of new housing. In the construction or substantial improvement of structures, grantees must also meet the elevation requirements of the Flood Risk Reduction Standard to reduce risk in the face of future sea level rise and other factors. 

This requirement addresses projected sea level rise, which is not considered in current FEMA maps and National Flood Insurance Program premiums, while acknowledging that those premiums may increase once FEMA issues Flood Insurance Rate 

maps that account for Hurricane Sandy. 

On October 28, 2013, I announced an additional $5.1 billion in CDBG–DR grants 

for the Sandy-affected region, bringing the total CDBG–DR funding available there 

to $10.5 billion. Again, the Department published a Federal Register Notice that 

builds upon the Notice for the initial allocation but which also addresses grantee 

infrastructure investments critical to recovery. Consistent with the recommendations of the Hurricane Sandy Rebuilding Strategy, the Department’s guidance gives 

emphasis to making resilient investments, by requiring grantees to identify and implement resilience standards in their infrastructure projects, including factors such 

as rising sea levels and future extreme events. We are also working closely with 

Sandy grantees to ensure that resulting projects are the product of coordinated regional planning efforts, meet needs identified by the grantees through comprehensive risk assessments, and recognize the importance of both natural and built infrastructure. 

The Department is well aware of the frustration voiced by many communities and 

residents over the pace at which CDBG–DR funds have been distributed by our 

grantees. However, we are seeing the pace of expenditures increase and it is important to understand both the timeline as well as what it takes to implement programs of this scale. 

With respect to the timeline, 3 months elapsed between the onslaught of Sandy 

and enactment of the supplemental appropriation on January 29, 2013. HUD allocated funds to Sandy grantees within days following enactment of the appropriation 

and issued guidelines governing the use of those funds on March 5, 2013. Grantees, 

however, had to develop plans for using the funds and submit them to HUD for approval. The three major grantees submitted their plans to HUD by May 2 and HUD 

approved them not later than June 6. Grant agreements were immediately offered 

by HUD upon approval of the plans to enable grantees to access their funds. To 

date, some grantees have been more aggressive in accessing their CDBG funds than 

others. 

With respect to implementation it is important to note that while preparing recovery plans, grantees had to simultaneously build the ‘‘back of the house’’ infrastructure to implement programs on a scale and at a pace they had not previously experienced. For example, in developing a single family housing rehabilitation program, 

the grantee must develop policies and procedures to implement the program, advise 

the public of how to apply for the assistance, open the application window for an 

adequate period of time, and then move to evaluating those applications and making 

funding decisions. Only after these processes occur can the grantee proceed to closing and begin to distribute funds to homeowners. Similar issues arise in implementing housing buyout programs, business assistance programs, public service programs and other innovative initiatives undertaken by grantees. 

HUD’s Continuing Role and Ongoing Efforts 

HUD continues to play a significant role in the recovery effort across the Administration. Since the sunset of the Task Force on September 30, my staff has worked 

closely with the Task Force agencies to ensure implementation of the 69 recommendations in the Rebuilding Strategy. We are coordinating on a daily basis with 

our partner agencies in Washington as well as with their teams on the ground in 


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1Link here: http://www.recovery.gov/Sandy/whereisthemoneygoing/maps/Pages/HudPmo

.aspx.

the region, and we have reporting and accountability mechanisms in place to track 

both implementation of the recommendations and the pace of spending. Further, on 

a quarterly basis, we convene the Sandy Principals to review and assess progress, 

ensuring that the highest level of leadership remains focused on the region’s recovery and on better preparing us for the next storm. 

Collectively, and as a result of these efforts, we’ve accomplished a great deal, and 

implementation of the Rebuilding Strategy is on track, with nearly a third of the 

work we set out to achieve already complete, and much more in progress. To be 

clear, much of the work of implementing the Sandy Rebuilding Strategy is long term 

in nature, but we’re making significant strides: laying the groundwork for more resilient infrastructure and establishing new mechanisms for coordination both across 

Federal agencies and with State and local governments. 

To improve transparency about the pace of spending, we recently announced that, 

in partnership with the Recovery Accountability and Transparency Board, HUD is 

now publishing State-level data on the status of Sandy funds across the Federal 

Government. This data will be updated monthly and is available in the form of a 

map and downloadable data files on the Sandy section of Recovery.gov.1 The map 

is shaded to reflect the aggregate value of awards to primary recipients in each 

State, and users will be able to click on each State to see the total awards and payments from each agency to recipients within that State. 

CDBG–DR funds are currently being invested in communities working toward 

long-term recovery. As noted above, more than 19,000 households have already been 

assisted through CDBG housing programs across the region, with an estimated pay 

out of more than $478 million to beneficiaries. In January, for example, the State 

of New York provided more than 2,400 homeowners on Long Island with nearly $83 

million in assistance for house rehabilitation and repair, while New Jersey reported 

an expenditure of more than $166 million for residents assisted through the State’s 

Homeowner Resettlement program. With grantee long-term recovery programs now 

in place, the pace of recovery dollar expenditures can be expected to increase dramatically in the coming months. 

Grantees are obligating funds once they’ve made the determination that they will 

be able to expend those funds within 2 years for specific activities and programs. 

While the Act provides a means for obtaining a waiver of the 2-year expenditure 

deadline, to date the Department has received no such requests from grantees, but 

stands ready to work with grantees to overcome any obstacles they may encounter 

to achieving their recovery goals. As I stated, recovery will never be fast enough for 

affected families, homeowners, and other victims of this terrible storm. And because 

so much of the recovery from Sandy involves long-term construction and infrastructure projects, funds will continue to be spent for years to come. But receiving the 

supplemental appropriation from the Congress has been critical for planning and 

commitment of funds for significant recovery projects to move forward. 

The Department takes very seriously its role as a steward of Federal dollars provided for long-term recovery efforts. HUD has scheduled routine onsite monitoring 

and onsite technical assistance at least twice every calendar year for New York, 

New York City and New Jersey, the three largest recipients of CDBG–DR recovery 

funds for Hurricane Sandy. The Department always has the right to supplement 

this schedule to address emerging issues as appropriate. In addition to these visits, 

HUD works closely with grantees on the implementation and expenditures of funds 

and convenes weekly teleconferences with grantees to discuss any issues or concerns 

that may arise. HUD is using well established practices in monitoring these funds, 

including using a risk analysis process to identify areas of concern that may warrant more attention. 

The DRAA also provided critical administrative funds to the Department to implement the law, positioning the Department to strengthen its monitoring of grantees’ 

use of CDBG–DR funds and to provide enhanced levels of technical assistance to 

each Sandy grantee. To date, the Department has hired an additional nine term employees to support the administration of Sandy CDGB–DR funds. This funding has 

also allowed the Department to commit to an aggressive schedule of monitoring and 

technical assistance for each of our largest grantees on a quarterly basis. 

It is common that concerns are expressed as initiatives of the scale and scope of 

New Jersey’s Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) program, the State’s largest CDBG–DR funded housing program, are developed and implemented. The Department uses its established monitoring and review processes to 

examine the facts and sort out the reality of claims. The Department initially monitored New Jersey’s CDBG–DR program in July 2013 and issued one actionable 


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finding related to the use of CDBG–DR funds as matching funds to certain FEMA 

programs. This finding has been resolved. HUD is undertaking a regularly scheduled monitoring review this week. This review will focus on the State’s RREM program, economic development programs, use of CDBG–DR for tourism support and 

financial management. As a preface to the regularly scheduled review, HUD recently conducted a supplemental review of the RREM and Homeowner Resettlement 

programs. The Department is in the process of finalizing conclusions from that supplemental review and expects to provide feedback to the State shortly. 

The above mentioned reviews are carried out by HUD’s Office of Community Planning and Development which has management responsibilities for the CDBG program and, hence, CDBG–DR funding. There are also other parts of the Department 

that have distinct roles as well. The Office of Fair Housing and Equal Opportunity 

(FHEO) has separate review and enforcement responsibilities related to fair housing, civil rights and related statutes and FHEO staff have been actively reviewing 

and analyzing the performance of Sandy grantees, including New Jersey. The Department’s Office of Inspector General (OIG) was provided $10 million in additional 

funding under the Disaster Relief Appropriations Act, 2013 (Public Law 113–2) to 

review Sandy grantees and they have a multi-faceted review plan that includes both 

audits and investigations, and the Department has sought input from OIG in our 

efforts to develop policies on the front end to avoid fraud, waste, and abuse. 

With regard to technical assistance, CPD has provided grantees with a wide range 

of resources to assist in the design and implementation of their recovery programs. 

For example, in March 2013, HUD convened a 3-day training session for grantees 

receiving funds under the Act. Through HUD’s OneCPD Technical Assistance Initiative, HUD has deployed technical assistance providers, who are subject matter experts, to work with grantees on such tasks as developing appropriate safeguards to 

help ensure that HUD funds are being used to address unmet needs that have not 

been addressed by other sources of funding. HUD also convenes hour-long weekly 

calls with each of our largest grantees to address ongoing challenges and questions 

that arise in program implementation. 

With regard to New Jersey’s proposed action plan for the second tranche of $1.463 

billion in CDBG–DR funds, the State issued the draft action plan for public comments on February 3, 2014, and is expected to formally submit that plan to HUD 

for consideration within the next 2 weeks. Given that the Department must approve 

the plan, we will carefully review the State’s submission against the requirements 

of the applicable Federal Register Notices and in light of information gathered during monitoring reviews and technical assistance visits. A key aspect of this review 

will be an interagency review process focused on major infrastructure projects. To 

ensure a thorough and complete analysis, HUD is permitted to take up to 60 days 

to review the plans. To the extent that HUD identifies deficiencies in any action 

plan for these CDBG–DR funds, we have a range of options for addressing those 

concerns—ranging from informal consultations with grantees to clarify and resolve 

issues to not approving the plan and requiring revisions consistent with statutory 

and regulatory guidelines. 

Thank you again for the opportunity to testify today. I am happy to answer any 

questions you may have. 

PREPARED STATEMENT OF MATTHEW J. DOHERTY

MAYOR, BELMAR, NEW JERSEY

MARCH 12, 2014

Thank you for this opportunity to share with you some of the things we experienced in Belmar, NJ as a result of Sandy. Based on conversations with other Jersey 

Shore Mayors, it seems that our experiences are similar to what other communities 

are going through as well. 

I want to first thank you, all of the Members of this Committee, and the rest of 

the Senate and House of Representatives for appropriating financial resources to 

both Belmar and the rest of the Jersey Shore since Sandy ravaged our communities 

on October 29, 2012. I know that, while there were some Members who opposed 

helping us, as a collective body you supported us and for that we are grateful. I 

would also like to take an opportunity to thank New Jersey’s Congressional delegation for all of their hard work in helping to secure much-needed aid, particularly 

Senator Bob Menendez, Congressman Frank Pallone, Congressman Bill Pascrell and 

Congressman Chris Smith. Having gone through this experience I can tell you that 

without Federal assistance both my community, and the rest of the Jersey Shore, 

would be at risk of becoming a relic of the past. No State, county, or municipality 


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could come back from a terrible hit like the one our communities absorbed without 

Federal assistance. 

I also think that it is worth noting that there is no private sector solution to recovery and rebuilding from a storm like Sandy. It is government, and government 

alone, that makes recovery from a storm like Sandy possible. 

Sandy destroyed town infrastructure, businesses and residential properties. I 

would like to take this opportunity to share with you our experience of working with 

the Federal Government and the State government in these three areas. In addition, 

I would like to humbly offer suggestions for the future allocation for Federal resources for Sandy recovery based on my experiences as the mayor of a town that 

was hit particularly hard. 

The day after Sandy stuck our community, we immediately began cleaning up. We 

started pumping water out of our town at a top rate of 60,000 gallons of water a 

minute and it took 6 days to complete. In addition, we brought in outside contractors to begin to remove the debris from town, including 1.2 miles of boardwalk and 

5 pavilions on the beach front. There was also a tremendous amount of debris that 

came out of people’s homes and businesses. We made a concerted effort to remove 

the household debris as soon as possible for both health reasons and psychological 

reasons. We found that beginning the process of recovery as quickly as possible had 

the positive impact of bringing our residents closer together and the thousands of 

people who came to help volunteer only served to further expand the larger sense 

of community. 

Through all of this, we worked with the Federal Emergency Management Agency 

(FEMA) on a daily basis. They developed project work sheets so that we would be 

eligible for reimbursement of 90 percent of all the debris removal expenses and they 

helped guide us through what could have been a very difficult and convoluted process. Even while we were in the process of cleaning up the devastating effects of the 

storm we began to aggressively plan to rebuild our boardwalk with a goal of being 

completed in time for the summer in order to try and salvage our tourist season 

and pump needed tourism dollars into our community. We began to rebuild the 

boardwalk on January 9, 2013 and completed the project by the end of April, with 

a Grand Opening just days before Memorial Day Weekend. 

Both Senator Bob Menendez and Governor Chris Christie joined us for our Grand 

Opening. Not completing this project in a timely fashion would have risked the future of our 140 small businesses in town. Like most towns along the Jersey Shore, 

all of Belmar’s businesses are small businesses owned by middle class families. By 

completing the boardwalk on time we were able to set the tone that our town would 

be open for business for the summer which, in turn, helped encourage local business 

owners to be open as well. Because of their hard work and determination, we had 

the same number of businesses open for Memorial Day as we did the day before 

Sandy. Similar to the efforts on debris removal, we worked with FEMA on a weekly 

basis and looked at them as a partner. They produced the project work sheets that 

made the rebuilding of the boardwalk eligible for 90 percent reimbursement and, 

again, offered us necessary guidance. 

Again, without FEMA, our town, and the rest of the Jersey Shore would have a 

very difficult time advancing toward recovery. In fact, without their help it is possible that vast middle class areas may have remained permanently stagnant, so I 

want to reiterate how important FEMA has been to our recovery. 

We found through this process that businesses seem to recover rather quickly, far 

more quickly than residential properties. This seems to owe to a few different factors. As I mentioned before, most of the businesses at the Jersey Shore are small 

businesses owned by middle class families. In most instances, these businesses are 

the sole means of income for these families. If they were unable to be open for the 

summer months, it would be devastating to their financial situation and would 

begin to negatively impact the rest of the community. Failed businesses and vacant 

store fronts lead to the deterioration of a community. Another factor in the timely 

recovery for small businesses in our community was the Small Business Administration (SBA). The SBA was quick to establish itself in the shore area (just like FEMA) 

and assisted small business owners and several business owners were eligible for 

grants to help them restock their inventory for the summer. An additional factor 

was the insurance that many businesses had, particularly business interruption insurance. Last, in order to save their businesses, many small businesses owners 

emptied out their savings, borrowed money from friends and family, and did whatever it took to get open for the summer. 

Unfortunately, we are finding that residents affected by Sandy are the ones having the most difficult time with recovery. While FEMA and SBA were both on the 

ground after the storm for 4 months, it is the long-term process of recovery for many 


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families that has proved to be problematic. In many communities along the Jersey 

Shore there are still families that have been displaced, as of today, for 500 days. 

500 days of stress on families. 500 days of living in multiple places. 500 days of living on someone’s couch. 500 days of driving children to school 17 miles a day just 

so they have some semblance of normalcy in their young lives. 500 days of struggling through bureaucratic rules and regulations. 500 days of not knowing when, 

or even if, they will ever get back home again. 

In our small town alone we have 90 families that have applied for the Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM) grant and only 1 in 5 were 

approved and funded. The rest are either waitlisted or ineligible. I cannot stress 

how difficult this is on these families when all they want to do is go back home. 

I would like to share a couple examples, Frank Murphy and his wife had twin 

babies a couple of months before Sandy destroyed their home. They applied for the 

RREM program and where told that once they apply, they must stop all construction, or they will receive nothing. They were denied the grant and began building 

their house as they appealed their denial. Over time, their denial was reversed and 

they were told that their grant for $30,000 would be funded. But now, since they 

started to rebuild to get back home, even though their grant was funded, and they 

are eligible, they will receive nothing. No one from the State told them that during 

the appeal process they could not work on their house. How long should they be 

forced to wait to work on their home, particularly after being denied and subsequently given no timeframe for when they would hear on their appeal? The fact of 

the matter is that the Murphy’s aren’t looking to blame someone for the wrongful 

denial of their grant application, they just need the resources so they can get back 

home. 

Another example is Krista Sperra. She is a graphic designer who both lives in 

Belmar and has her business in Belmar. She is married with two children in grammar school. She and her husband paid premiums on their flood insurance every 

year, for over 10 years, before Sandy hit. Sandy brought water that engulfed 

Krista’s home and surrounded her home, and those of her neighbors, for several 

days. After the water resided, she had a structural engineer look at her foundation. 

Like many in Belmar, Krista owns an old house with a foundation made of brick 

and mortar. The engineer told her that she needed a new foundation and that she 

could not do any work above the foundation until it was completed. She brought this 

information to her insurance company, they sent someone out to look at it, and they 

told her that all she needed to do was replace some of the mortar in between the 

bricks and she would be fine. They gave her $600 and told her that would be sufficient for the mortar. She consulted another engineer and he told her the same as 

the first engineer, the entire foundation needed to be replaced. 

Krista is now suing her insurance company, displaced from her home and living 

in the third house since Sandy hit and needs to find another place for her family 

by the end of May (her fourth place since Sandy). 500 days she and her family have 

been displaced and she is now suing her insurance company as she looks for a new 

place to stay. All she wants to do is get herself and her family back home. 

These are just two of countless stories at the Jersey Shore today. But I think they 

are both indicative of the fact that people are generally not interested in moving 

somewhere else, they do not want to give up on their community. Rather, they want 

to stay and rebuild. They want to get back home. 

From these experiences, and many others, I would like to offer a few suggestions 

on how additional Federal resources could be allocated for the maximum benefit to 

communities still recovering from Sandy. 

First, while communities wait for Federal funding, allow them to begin projects 

they need to recover from the storm, and reimburse them later. This follows the current FEMA model. 

Second, relax rules that make it difficult for families that did work on their homes 

right away to receive funding simply because they wanted to get their families back 

home. This will eliminate the disincentive for being aggressive about getting back 

home. People should still receive their funding, even if they did work after the application date. 

Third, compel the National Flood Insurance Program (NFIP) to settle with clients 

through arbitration, as opposed to forcing these residents to sue their insurance 

company. Many of these people have been paying premiums on their insurance for 

years in order to have help during just such an emergency and they should not have 

to sue for that coverage. 

Fourth, increase the appropriation for housing and infrastructure for Sandy impacted communities. As we come to the end of the Community Development Block 

Grant (CDBG) allocation, I believe there will be a need for additional financial resources to assist families and communities to fully recover. 


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Fifth, and last, let us not get caught up in the blame game. Let all of the elected 

officials from the Federal, State, county and municipal level work together to help 

middle class families during this time of ongoing trouble. We have all done a lot 

these past 500 days, and now is the time to rededicate ourselves to ensuring that 

everyone gets back home. 

Thank you again for the opportunity to come speak before this Committee and 

share my experiences and suggestions. 

PREPARED STATEMENT OF ADAM GORDON

STAFF ATTORNEY, FAIR SHARE HOUSING CENTER

MARCH 12, 2014

Good morning, Chairman Menendez, Ranking Member Moran, and Members of 

the Committee. Thank you for convening this morning’s hearing. My name is Adam 

Gordon and I am a Staff Attorney with Fair Share Housing Center, which works 

throughout New Jersey to ensure that people of every race, ethnicity, and income 

level, including families, seniors, and people with special needs, can live near their 

schools, jobs, and families. Since Sandy hit, we’ve worked with a broad range of 

community groups and individuals impacted by the storm to ensure that the rebuilding process, including Federal money available for rebuilding, is distributed 

fairly to everyone impacted by Sandy. We run a hotline for people impacted by 

Sandy and provide rebuilding information on our Web site and through partnerships 

with local community groups. 

It has now been nearly a year and half since Superstorm Sandy devastated communities throughout New Jersey, from Moonachie in Bergen County to Ocean City 

in Cape May County. For too many people in New Jersey, it is still as if Sandy happened yesterday. There are places in our State where street after street sits with 

half-destroyed homes or homes filled with mold, with the people who live there unsure what comes next for them and their families. With tens of thousands of renters 

and homeowners still displaced and wondering if they will ever be able to move 

home, many people are asking: ‘‘Couldn’t the recovery be going better?’’ In fact, according to a recent Monmouth University poll, three-quarters of people impacted by 

Sandy believe that the recovery is not helping people like them. Some of the stronger complaints that we’ve heard include the veteran who said dealing with the State 

has been harder than fighting in Afghanistan and the local community leader who 

compared the programs to a shady used car salesman trying to figure out how to 

get away with providing as little aid as possible. 

We agree with something Senator Menendez said earlier this week: the most important thing at this point is not to assign blame, but rather to chart a path forward 

that fixes the problems. This hearing comes at a critical time: when New Jersey is 

about to receive $1.4 billion in additional Federal funds. The allocation of these 

funds provides a singular opportunity—for many people impacted by Sandy perhaps 

the last opportunity—to get this recovery on track and help people rebuild. 

Today, we’ll describe program and policy changes we and others have proposed 

to make the recovery stronger, fairer, and more transparent. These proposals come 

from us and a broad range of other groups, including people impacted by Sandy, 

civil rights groups such as the NAACP and Latino Action Network, business groups 

such as housing developers, the nonprofit Housing and Community Development 

Network, and to faith-based organizations and congregations throughout New Jersey. We described many of these recommendations in a report in January available 

on our Web site, and have submitted them as comments to both State and Federal 

officials. 

We’re going to focus on three main areas: first, fixing the two main New Jersey 

homeownership programs, RREM and Resettlement, which have been plagued by 

widespread problems in implementation that have hit lower-income people, African 

Americans, and Latinos the hardest, but have more generally not worked well 

enough for everyone impacted by Sandy. Second, making sure that renters impacted 

by Sandy are not left out. And finally, targeting scarce Federal funds to the hardest 

hit areas. 

First, the State’s main programs for rebuilding for homeowners, the Reconstruction, Rehabilitation, Elevation, and Mitigation, or RREM, program, which helps 

with structural rebuilding, and the Resettlement program, which helps with shortterm grants, simply are not working the way they should be. That’s true for everyone, but especially true for lower-income people, African Americans, and Latinos hit 

hard by the storm. 


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It recently came to light, only after we had to sue the State for access to documents under our freedom of information law, that the State and its contractors unfairly rejected thousands of applicants for both of these programs. We’d hear the stories day after day—people who had four feet of flooding would call us and say they 

got a letter that they did not have enough damage to qualify. And it turns out that 

the data that the State relied upon was systemically flawed. In fact, when people 

appealed their denials, nearly 80 percent of people appealing won. That means that 

when the State reviewed denials for funding, four out of five times they got it 

wrong. But most people didn’t appeal—they trusted in the process, even though it 

turns out the process was fundamentally flawed. 

These problems hit people of every racial and ethnic group, and all incomes. But 

they hit African Americans and Latinos particularly hard. African Americans were 

rejected from these programs at 2.5 times the rate of white applicants, and Latinos 

at 1.5 times the rate of white, non-Latino applicants. Yet for people who appealed 

denials, approval rates in the RREM program were similar—over 75 percent for people of all races and ethnicities—in fact Latinos had the highest approval rate of any 

group. And even when you isolate applications by zip code—thus looking at people 

with similar levels of damage—the disparities persist. 

We still don’t know the full story of how this happened, but we have some clues. 

The State frequently provided incorrect information in Spanish. There was no information for months on the appeals process or the date applications were due on the 

Spanish language Web site, when that information was readily available in English. 

When Spanish-speaking applicants went to in-person application centers, they often 

found nobody who could help them, even in heavily Spanish-speaking areas. And 

many people in African American and Latino communities did not know about the 

programs at all due to poor publicity and outreach. One particularly troubling example is in the heavily Latino community of Moonachie, where some applicants were 

told, incorrectly, that the mobile homes they lived in did not qualify for the program 

and it was for the ‘‘big houses in the center of town’’; out of hundreds of mobile 

homes damaged there have been only 10 grants that we know of to mobile homeowners. The whole program was shoddily run. Walk-in centers were located far from damaged communities to save on rent. Call centers were told to get people off the phone 

as quickly as possible instead of helping them solve their problems. To its credit, 

the State has now fired the contractor running the program, HGI, though it hid that 

decision for 6 weeks until a reporter uncovered it and it is unclear who is now running the show. 

The main problems now are that while everyone agrees the program wasn’t working, there is an attitude of defensiveness about the debacle that transpired. Instead 

of working together to fix the problems, the State has consistently hid information, 

failing to respond to public records requests, and only reacting after litigation and 

severe pressure from the media and angry homeowners. 

The fixes in many cases are obvious. Here’s a few:

• As I noted, denials were wrong 80 percent of the time. Yet most people didn’t 

appeal the denials because they didn’t know about the process, were concerned 

about the potential costs or bureaucracy involved, or didn’t think it mattered—

in fact fewer than 1 in 3 people rejected appealed, and African Americans and 

Latinos appealed at particularly low rates. The State should affirmatively review every denial and see if in fact the applicant was eligible. Instead, the State 

is requiring people to go through a complex appeals process. When you’re wrong 

4 out of 5 times, it’s on you to fix the problem, not people impacted by the 

storm.

• Too many people were wrongly told they didn’t qualify, or provided the wrong 

information, whether mobile home owners or people using the Spanish language 

Web site. The Latino Action Network filed a Federal complaint in response to 

the Spanish language Web site problems, which included incorrect information 

about the appeals date and location of the centers, and asking for the lists to 

be reopened. That complaint, 5 months later, remains unanswered by either the 

State or HUD. The State needs to reopen the application process given these 

widespread failures, which it has to date refused to do.

• The State promised to grant 60 percent of Resettlement funds and 70 percent 

of RREM funds to low and moderate income homeowners. They have not met 

those targets because they claim there were not enough qualified applicants. We 

now know that many of the people the State found unqualified in fact were 

qualified—so it’s time to make sure that these promises are kept.

• We need to make sure this money gets out efficiently and effectively, and people 

know where they stand. We hear from people all of the time that they are told 


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different things about whether they will get money or not, and confusing information about their place in the wait list. We need a plan to fairly treat everyone who qualifies based on need and damage alone.

Second, while programs for homeowners are not working well or fairly, in many 

cases renters have it even worse and aren’t eligible for funding at all. An analysis 

that I worked on with the Furman Center for Real Estate and Urban Policy at New 

York University, where I am a nonresident fellow, showed that 40 percent of all 

families impacted by Sandy in New Jersey are renters. About two-thirds of the lowest-income people hit by Sandy in New Jersey, those families earning less than 

$30,000 per year, are renters. In addition, over two-thirds of African Americans and 

Latinos impacted by Sandy in New Jersey are renters. 

So far, only 25 percent of housing funds made available from the Federal Community Development Block Grant have gone to renter programs, despite renters constituting 40 percent of the damage. In particular, New Jersey has made very little 

money available directly to help renters impacted by the storm. While homeowners 

have been eligible for over $200 million of Resettlement grants of $10,000 in immediate funds to help people get back on their feet, the State has only just now proposed a $15 million program for renters. Meanwhile, as rents skyrocket due to the 

damage to housing stock and new competition in the rental market from displaced 

owners, families have to split up or are being displaced from their home communities. In many areas, rents have gone up by 20 percent or more due to a lack of 

housing supply; vacancy rates in some counties fell after the storm to under 1 percent. We hear from people living in isolated areas in campers, doubled up with relatives, or having to leave because their rents are going up—with no idea of where 

they will be even a few months from now. 

Long-term rebuilding efforts are also severely underfunded and, as I’ll discuss 

next, are being funded in areas with little or no damage from Sandy far from where 

most people displaced by the storm live. Our second recommendation is to increase 

funding available to renters to both meet immediate needs and long-term rebuilding, so it is proportional to the damage from the storm. 

Finally, we are very concerned that the money there is for renters isn’t actually 

going to where the damage from the storm was. The two hardest hit counties, Ocean 

and Monmouth, had 52.5 percent of major and severe rental damage. However, 

these two counties have received only 21.7 percent of the funds in the main rental 

rebuilding program to date, the Fund for Restoration of Multi-Family Housing. In 

contrast, the eligible county with the least damage, Essex, which is about 60 miles 

from Monmouth and Ocean Counties, had just 1 percent of major and severe rental 

damage—or less than one fiftieth of the damage in Monmouth and Ocean Counties. 

However, that single county has received 16.1 percent of funding for the main rental 

rebuilding program to date—nearly as much as Monmouth and Ocean County combined—including in municipalities such as Belleville that had little or no damage 

from the storm. I can’t overemphasize how much we hear from people who are 

angry about this. They ask why Belleville could get money, but there is no money 

for people to relocate to replacement homes in their communities. 

The potential is there. We hear from landlords and developers that they are quite 

willing to invest in rebuilding in the hardest hit areas and would like to do so. However, the State’s programs are not structured in a way that sets clear rules to target 

the funding to the places with the most impact. As such, developers have no incentive to deal with the regulatory tangle that inevitably comes with developing in a 

disaster area, if they can more easily get Federal funds in areas that were barely 

hit. It isn’t right, but it is how the State’s incentives are structured, and it is not 

realistic to expect private market actors to invest a lot of time and money in the 

areas truly hit by Sandy if they won’t get funding at the end of the day. 

What impact does that have on families? Let me put it in the context of a few 

of the Members of the Committee’s States that I have the pleasure to have visited. 

Senator Toomey, it’s like telling someone displaced from a disaster in Reading that 

they have to move to Harrisburg if they want recovery money; Senator Warren, it’s 

like telling someone hit with a disaster in Boston that they have to move somewhere 

out past Worcester if they want relief. It’s wrong to use Federal disaster money in 

a way that severs people from their communities, and forces them to choose between 

moving far away and getting to rebuild. Especially when we have heard from the 

development community that they are willing to rebuild in storm-impacted areas if 

the State prioritizes those areas. Our final recommendation is that for the next $1.4 

billion the State needs to put the hardest hit areas first. 

I’ll conclude by noting that both the State and HUD have known about the problems I have identified for many months, yet we have not seen any significant action 

to address them. While HUD was helpful in requiring changes of the State nearly 


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1 Colleen O’Dea, ‘‘Botched Process Denied NJ Residents Millions in Sandy Relief,’’ NJ Spotlight, Feb. 7, 2014. 2Matt Katz, ‘‘NJ Quietly Fires Second Contractor Hired to Help Sandy Victims,’’ NJ Spotlight,

Feb. 14, 2014. 3Fair Share Housing Center, et al., ‘‘The State of Sandy Recovery: Fixing What Went Wrong 

with New Jersey’s Sandy Programs to Build a Fair and Transparent Recovery for Everyone,’’ 

Housing and Community Development Network of New Jersey, January 2014, http://

www.hcdnnj.org/assets/documents/report%20state%20of%20sandy.pdf. (accessed Feb. 2014). 4 Van Slyke, David M. ‘‘The mythology of privatization in contracting for social services,’’ Public Administration Review 63, no. 3 (2003): 296–315. 5Despite our best efforts to arrive at comprehensive numbers, we have only been able to obtain figures regarding Department of Purchasing and Property contracts. The State Office of 

Management and Budget generally estimates that these contracts account for approximately 50 

percent of all State contracts. We have no data about the other 50 percent, which includes all 

human service contracts. 

a year ago in the first Action Plan to shift more money to renters impacted by 

Sandy, since that time we have seen too little action to ensure that these Federal 

funds are spent fairly. Given the magnitude of the problems on the ground in New 

Jersey and the urgent needs of people impacted by Sandy that are going unmet, 

HUD needs to take a leadership role in making sure that these problems are corrected. 

The time to act is now. As I noted before, the next $1.4 billion from HUD is critical. If we don’t make sure these funds are spent fairly—fixing the broken RREM 

and Resettlement process, addressing the needs of both renters and owners, and targeting the people and areas hardest hit—it will be lights out for too many New 

Jerseyans trying to rebuild. Unfortunately, absent a strong course correction 

through a partnership between the Federal and State governments and impacted 

communities, too many people will not be able to rebuild. We want a better result 

for our State that uses these scarce Federal funds fairly and effectively. Thank you 

for your time. 

PREPARED STATEMENT OF JANICE FINE, PH.D.

ASSOCIATE PROFESSOR, RUTGERS SCHOOL OF MANAGEMENT AND LABOR RELATIONS

MARCH 12, 2014

State Oversight of Hurricane Sandy: Some Problems and Questions 

Introduction 

In December 2013, the Christie Administration terminated the largest contractor 

hired to provide Hurricane Sandy relief services, HGI (Hammerman & Gainer) 

which had a 3 year, $67.5 million contract to manage the Renovation, Reconstruction, Elevation and Mitigation (RREM) program,1 and more recently, the URS Cor- poration, which had a $20 million contract to supervise the rebuilding of homes destroyed in the hurricane.2 What went wrong? 

These companies, that were awarded multi-million dollar contracts and charged 

with administering millions in Sandy Recovery funds, were supposed to be overseen 

by the Department of Community Affairs (DCA). Their failures have had far-reaching consequences for Sandy victims. Recovery centers frequently lost applications or 

provided misleading advice on what documentation was needed. Ultimately thousands of homeowners were wrongly found to be ineligible and the process they could 

utilize to appeal these decisions was also poorly publicized.3 Documents released by 

the Fair Share Housing Center paint a disturbing portrait of what happens when 

oversight is neglected. From what we have come to understand after studying the 

State’s oversight policies and practices for close to 3 years, this was not an isolated 

problem due to emergency circumstances but rather a consequence of a deep, systemic problem many years in the making. 

While many State governments are actively engaging in government contracting, 

research strongly suggests that government capacity to provide adequate and effective oversight has dwindled—and New Jersey is no exception.4 The two keys to contract oversight are (1) well-written contracts adequately defining the responsibilities 

of the contractor and the protections of the State and (2) strong, experienced, well 

trained managers with a deep knowledge of the activities they are monitoring and 

time to do the job well. Unfortunately, between 2004 and 2011, the size of the State 

workforce in New Jersey shrank by 36,319 while the total value of contracts held 

steady and in some years especially 2013, increased quite significantly.5

Contract management involves both people who maintain relationships with contractors and clients, and systems that facilitate the work of those people. Our reVerDate 0ct 09 2002 21:41 Feb 28, 2015 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 S:\DOCS\89352.TXT SHERYL

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6Weil, The Fissured Workplace, 59. 7 Ibid., 63–73.

search project looked at the capacity of the current State workforce to conduct contract oversight and analyzed the overarching institutions—laws, regulations and 

policies—governing the entire contracting process. Below we summarize best practices in contracting as documented in scholarly literature on public administration 

and supply chain management. Next we describe how the State of New Jersey conducted contracting in the aftermath of Hurricane Sandy. We conclude with a discussion of the consequences of New Jersey’s approach to contracting and oversight and 

provide a list of questions that merit further investigation. 

Best Practices 

When employment is shifted to another party that is paid to provide services, the 

lead employer is simply ‘‘less able to monitor performance, since those doing the 

work are now potentially hidden within another organization.’’6 Best practices in the 

business literature 7 suggest that lead firms maintain quality in services delivered 

by their subcontractors, by providing for 3 things: 

• Clear and explicit guidance on what is expected

• A system of monitoring and auditing to ensure that those standards are followed

• Significant penalties in the face of failure to meet goals

In terms of conducting oversight, best practices therefore include thorough contract costing and design, transparent and competitive bidding, and strong performance management. The latter involves ongoing communication and cooperation between contract managers and contractors and strategic contract monitoring with 

clear performance requirements and standards. These in turn require adequate 

staffing and training of contract managers who are responsible for the process. The 

challenges ordinarily posed by contracting to provide services are exacerbated in 

emergencies, which can dramatically increase the demand for oversight in a very 

short period of time. Details regarding the three best practices are summarized 

below, including qualifications relating to emergency relief. 

1—Thorough Contract Costing and Design -> Transparent and Competitive 

Bidding 

Typically, the contracting process proceeds in three stages: RFP generation, bidding, and contract management. The RFP generation stage is critical because it is 

here that the terms of the contract are created. Prospective contractors bid on the 

RFP and the terms of that RFP largely become the terms of the contract between 

the State and the winning bidder. Given that the RFP essentially becomes the contract, it also effectively defines what the State can demand of the contractor and 

what remedies are available if the contractor fails to live up to its duties. Best practices suggest that contract design and contract oversight are closely linked and contracting units should develop and communicate, during the RFP process, clear and 

detailed performance measures, specifications and contract monitoring requirements. 

The bidding process offers another opportunity to exercise control over contractors. This is where the State gets to choose its partners. However, for the State to 

have a choice, and for bidders to have an incentive to maximize quality and minimize cost, there must be multiple bidders who compete on a level playing field. Information is key to this competition. The more information the State has on what 

is being offered, the better a consumer the State can be. Likewise, transparency 

helps level the playing field by offering competitors and other interested parties the 

information needed to hold the State accountable for its decisions. 

As these practices suggest, the process is very intensive and can be extremely 

time consuming. It is difficult under the best of circumstances. In emergencies—including one of the most destructive natural events to hit New Jersey—temporarily 

relaxing some best practices relating to contract creation and bidding is understandable. It provides the State flexibility to immediately respond to human needs. The 

increased flexibility is exemplified by DCA using the less detailed RFQ process as 

opposed to the more extensive RFP process. This does not, however, absolve the 

State of all due diligence in designing contracts or choosing contractors. The State 

can, for example, identify obvious flaws in past performance and conduct desk reviews of capacity and competence. Moreover, strongly institutionalized oversight—

discussed further below—can make it far easier to conduct these analyses on short 

notice. 


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2—Contract Management 

Expediency cannot justify a complete relaxation of contract management best 

practices. On the contrary, less stringent contract creation and bidding procedures 

impose a heightened burden on the contract management process to compensate for 

any increased scope for abuse. Best practices suggest that States should have:

• a corps of highly qualified contract managers with the expertise and resources 

to engage intimately with the contractor

• systems, and especially data systems, that make the process more efficient and 

more transparent 

3—Strong Institutions 

In all circumstances, good oversight requires strong overarching institutions. The 

laws, regulations and policies governing the process provide the foundation for oversight. The need for strong institutions is especially acute in emergencies because 

they exacerbate the already significant challenges of contract administration. Strong 

institutions ensure that the State has the capacity and competence to handle ordinary oversight and absorb sudden spikes in demand that come with emergencies. 

Creating strong institutions involves the following:

• Laws ensuring that contracts are managed by qualified individuals with sufficient capacity to engage intimately with the contractor

• Laws providing mandates and resources for meta-oversight of the contracting 

process

• Laws requiring and providing appropriations for integrated and standardized 

data systems and regulations detailing technical requirements to ensure compatibility across units

• Laws making transparency, including the publication of all key documents and 

details, non-negotiable and providing mechanisms for interested citizens to act 

on that information 

How New Jersey Responded to Hurricane Sandy: 

In our in-depth review of New Jersey’s capacity to oversee its contractors, we 

found significant issues that may provide insight into why the State has struggled 

to handle the contracts associated with Sandy Relief. In general, where legal and 

administrative structures for contract oversight exist, they are not being effectively 

implemented. Where they do not exist, people and systems are not sufficient to compensate. Our brief review of Sandy relief suggests that both issues may be at play. 

In particular, there are executive orders and documented plans that on their face 

should have enhanced oversight. How they were executed in practice may be one 

key to the failure of oversight. Similarly, despite the additional orders and plans, 

they were not likely sufficient to fill the existing holes in New Jersey’s oversight 

capacity. 

New Jersey has significant structural and practical flaws that make it extremely 

difficult for it to conduct ordinary oversight, let alone handle the sharp increase in 

demand created by the administration of a massive disaster-relief grant. In particular we found large institutional deficiencies and significant neglect of on-theground oversight. These led predictably to significant consequences for taxpayers 

and clients. 

Many of the most significant oversight decisions and processes are subject to few 

if any formal rules. Only the bidding process is well-regulated and only for about 

half of all State contracts. There are few central institutions governing contracts for 

services provided directly to residents. 

There are no institutionalized mechanisms within State government to ensure that 

sufficient resources exist so that individuals responsible for the majority of oversight 

are able to do the job well. Simply put, the budgetary process does not build in the 

cost of oversight of contractors at individual State agencies. 

There does not appear to be any agency within the State with the capacity or competence to monitor the overall efficiency or effectiveness of resources allocated to contractors. OSC and the Office of Management and Budget (OMB) are prime candidates, with relevant competencies, but neither currently has a mandate or the resources to do so. 

Attrition is a predominant problem, depriving every contracting unit we studied of 

practical expertise while simultaneously increasing the burdens on those workers that 

remain. This is not surprising, given the structural lack of priority given to oversight. It occurred in all four of the departments for which we were able to obtain 

such information. 


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No contract costing and minimal specification of contract terms prior to the 

issuance of RFP’s. Every official we asked confirmed that, to their knowledge, costing was not done in any systematic way. 

Contract Managers are not always qualified or properly trained to fulfill their roles 

effectively. According to officials from every department studied, there are not 

enough human resources being assigned to oversight and effective oversight is not 

being fulfilled by many of the individuals who are being designated as contract managers. 

Contracts had weak performance requirements and standards. Only a minority of 

contracts had outcome-based performance measures and there was little evidence of 

performance targets being integrated into a comprehensive oversight system. Only 

the Department of Mental Health Services (DMHS) had clear, outcome-based performance measures in contracts combined with a comprehensive system of oversight. 

Very few contracts required specific data collection and reporting, outcomes-based 

benchmarks with clear performance measures and milestones tied to payment despite 

these being widely accepted best practices. Similarly, very few contracts had automatic sunset provisions and requirements that contractors would have to reapply 

in a competitive bidding process. 

There are substantial impediments to transparency. The biggest of these is that 

data for many contracts is simply not kept in any systematic way. As a result, it 

is nearly impossible to gather and analyze information. 

Prior to Sandy, lack of oversight had already had significant consequences for vulnerable people and for New Jersey taxpayers and was continuing to place assets at 

risk

• A lack of contract monitoring at DCF’s Division of Child Protection and Permanency (DCPP) leaves children vulnerable to being served by inadequate providers

• Lack of oversight at DHS’s Department of Developmental Disabilities led to 

substantial waste of taxpayer money with little assurance that services for 

which the State has contracted are being provided

• Lack of oversight at DOC’s Residential Community Release Program (RCRP) 

led to assaults and deaths in the facilities as well as in communities

• businesses

Given our findings regarding the State’s lack of capacity to oversee ordinary contracts, it is not surprising that it has struggled to handle the massive relief program. The State’s response required the coordinated action of various organizations, 

each providing services to New Jersey citizens and each with long lists of detailed 

responsibilities. On the surface, the State’s Action Plan and Executive Order 125—

signed by Governor Christie appear to enhance oversight under special circumstances. However, our prior findings and the stories that are now coming to 

light suggest that these paper requirements were insufficient, not followed well, or 

both. 

The core of New Jersey’s effort to enhance oversight capacity to handle the demands of Sandy relief are Executive Order 125, the creation of a special management Division within DCA and the use of an Internal Auditor within DCA. The latter two come directly from New Jersey’s Action Plan. 

Executive Order 125 offered three potential enhancements to the existing systems 

and requirements. First, it mandated that the Comptroller pre-clear all RFP’s prior 

to bidding. This effectively subjects all 100+ contracts to the process that was already in place within the Department of Public Purchasing (DPP) for contracts in 

excess of $10,000,000. However, it requires only that the Comptroller ensure that 

all laws are followed and therefore would not necessarily enhance programmatic review. Moreover, insofar as it would impose a much greater burden on Comptroller 

staff, to be effective it should come with an increase in staff or some reallocation. 

We do not know if any additional capacity within the Comptroller’s office was created.

The second enhancement of E.O. 125 was the appointment of Accountability Officers in each unit responsible for Sandy relief contracts. The qualifications and specific duties of these officers, beyond liaising with the Governor’s office to ensure success, are not specified. Likewise, there is no indication that these would be new staff 

positions, rather than just titles added to already swamped staff members. If our 

research is any indication, the latter is far more likely to have occurred. 

Finally, E.O.125 had a transparency provision that required the creation of a Web 

site to post contract information on all Sandy contracts. This Web site does in fact 

exist and provides both contract documents and some nominal aggregate data. The 


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8State law requires the assignment of a contract manager to every contract let through DPP. 

However, we found that in general, State contract managers were employees with other primary 

duties assigned as State contract managers merely to meet this requirement. The specialized 

training required to manage contracts came down to a 3-hour Web tutorial. 9 Haddon, Heather, Sandy Contractor Draws Fine in Home-Reconstruction Effort, Wall Street 

Journal, NY Region, September 22, 2013, http://online.wsj.com/news/articles/SB100014241

27887323808204579087420937630290. (accessed Mar. 2014) 10See Sclar, Elliott D. You don’t always get what you pay for: The economics of privatization.

Cornell University Press, 2001. 11State of New Jersey Department of Community Affairs, Sandy Recovery Division, CDBG 

Disaster Recovery Action Plan and Reports, ‘‘Superstorm Sandy Performance Reports 4Q 2013,’’

p. 6, http://www.state.nj.us/dca/divisions/sandyrecovery/pdf/4th%20Qtr%202013%20Submit

ted%20QPR%20Submitted%20for%20Approval.pdf. (accessed Mar, 2014). 12See Brown, Trevor, and Matt Potoski. ‘‘Contracting for management: Assessing management 

capacity under alternative service delivery arrangements.’’ Journal of Policy Analysis and Management 25, no. 2 (2006): 323–346; Romzek, Barbara S., and Jocelyn M. Johnston. ‘‘Effective contract implementation and management: A preliminary model.’’ Journal of Public Administration 

Research and Theory 12, no. 3 (2002): 423–453; Chen, Yu-Che, and James Perry. ‘‘Outsourcing 

for e-government: Managing for success.’’ Public Performance & Management Review (2003): 

404–421. 

HGI contract is available on the Sandy Web site, however, when searching the site 

for the contract manager, clicking on the HGI contract link leads to an error page. 

New Jersey’s Action Plan promised further enhancements. Two keys were the creation of a 50+ person special division to manage the grant and the use of a special 

audit plan by the DCA’s Internal Auditor. The special division was created and 

some documents suggest it may have as many as 95 employees. It is not clear, however, what roles they are tasked with. Moreover, even if they were all newly hired 

contract managers,8 each one would be responsible for more than one contract. 

Given the sheer complexity and size of many of the contracts, the HGI contract 

being a prime example, it would seem that no one contract manager could have adequately handled the process alone. 

There is little readily available information on the Internal Auditor. We do not 

know how many audits were conducted, by whom, how diligently they were done, 

what they found, or whether there were consequences. These are key questions. 

The State’s response to Hurricane Sandy required the coordinated action of various organizations, and these organizations needed to be properly vetted to ensure 

they had the expertise, capacity and legitimacy to support the State in recovery efforts. Certainly best practices suggest that contracting units must perform their due 

diligence and gather information on contractor past activities to serve as a basis for 

contracting decisions and to ensure that potential contractors do not have a prior 

history of poor performance. Again, on the face of it, New Jersey appeared to have 

made this part of the RFQ process. For example the State’s solicitation to 

Hammerman and Gainer (HGI), specifically states the ‘‘bidder should have significant proven experience and a history of successful professional engagements in disaster recovery’’ (RFQ774882S, p. 33). Media reports suggest however,9 that the 

State of New Jersey did not thoroughly vet HGI’s performance during Hurricane 

Katrina. Nine years after Katrina devastated New Orleans claims and issues from 

HGI’s services remain unresolved. 

Moreover, best practices literature 10 stresses that contracting units compare potential contractor costs with the cost of providing the service in-house. In the context of Sandy Recovery efforts, it is unclear if the State engaged in this comparative 

process. We cannot determine from available records if State contracting units found 

that it was not in their best interest to ramp up internal H.R. capacity to hire additional staff and therefore chose to rely on private contractors instead. For example, 

the State should have compared the internal costs for managing the Superstorm 

Sandy Housing Incentive Program, with the proposal submitted by Hammerman & 

Gainer, Inc. Similarly, it is not clear how the State determined that 95 staff could 

adequately handle the work for the Sandy Recovery Division.11

Successful contract monitoring and oversight requires significant managerial competence and aptitude,12 including ability to assess costs and benefits, identify needs, 

and critically analyze vendor strengths. No organizational chart is available on the 

Sandy Recovery Division’s Web site, therefore we cannot determine whether the 95 

staff were actually hired, whether they are contract managers and what their qualifications and experience are. We can surmise that the Division is still without the 

required oversight capacity given the numerous employment vacancies at the department. From what we can see, all of the current vacancies in the Sandy Recovery 

Division are for compliance and monitoring positions. These include: Chief Financial 


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13 Ibid., p. 27 14State of New Jersey, Department of Community Affairs, Reconstruction, Rehabilitation, Elevation and Mitigation Program and Procedures (RREM), 2013, Number 2.10.36, p. 6. 15State of New Jersey, Division of Purchase and Property, Request for Quote for Management 

of the Reconstruction, Rehabilitation, Elevation and Mitigation Program (‘‘RREM’’) for the State 

of New Jersey Department of Community Affairs, 2013, RFQ775040S, p. 53. 16 New Jersey Department of Community Affairs, ‘‘RREM Program and Procedures,’’ 2013, p. 

6. 

Officer, Assistant Director of Compliance and Monitoring, Administrative AnalystProcurement, Program Specialist, and Network Administrator. 

Our review of RFQ 774882S for the Management & Other Related Services of the 

‘‘SSHIP’’ program indicates that the State is ‘‘developing an MIS system and related 

interface for DCA for aggregating data for financial management, production reporting, compliance reporting and auditing.’’ It remains unclear if the MIS system has 

been adequately developed and if personnel have been trained on the system. This 

is particularly important to aid in monitoring and compliance, since contractors 

were required, per the RFP, to have data collection and storage systems that were 

compatible with the State’s MIS and SSHIP HP–CMIS systems.13

To bolster State capacity to oversee contracts, on March 27, 2013, The Integrity 

Oversight Monitor Act (P.L.2013, Chapter 37) was enacted. This legislation authorized the deployment of oversight monitors in the implementation of recovery and rebuilding contracts, resulting from Superstorm Sandy and other major storms in NJ, 

in order to prevent, detect, and remediate waste, fraud, and abuse. However, the 

State spent 10 months training the monitors and to date no reports on the work of 

integrity monitors are publicly available. A companion bill (A61) that would have 

strengthened oversight by requiring the State to ‘‘maintain a public Web site dedicated to the dissemination and transparent administration of Hurricane Sandy recovery funding’’ was approved by both the Assembly and the Senate but was vetoed 

by the Governor who contended it would, ‘‘produce unnecessary redundancies and 

waste government resources’’ (http://www.njleg.state.nj.us/2012/Bills/A0500/

61lV2.PDF).

Additionally, although the State required Sandy contractors in its RFP to submit 

weekly reports on their progress toward recovery response and HGI promised it 

would ‘‘generate and submit a weekly report’’ and also provide a monthly ‘‘Program 

Status Report’’ which would provide ‘‘an accounting of progress toward major Program milestones,’’ it did not do so for 8 months. When Fair Shar Housing requested 

copies of the reports promised in the bid they were advised by the State that they 

do not exist. These were essential tools necessary for the State to engage in oversight and they were ignored. As Fair Share has pointed out, along with the failure 

to provide the integrity monitors required by State law, allowing HGI not to submit 

reports amounted to another major missed opportunity to correct mistakes before 

they led to widespread systemic failure of the State’s recovery programs. 

A key component of the RREM program, is the establishment of two categories 

of contractors—those who administer the program and those who monitor the program.14 Even though the RFQ for the management of the RREM Program states 

that the State Contract Manager is responsible for the overall management and administration of the contract,15 RREM contractors are required to ‘‘perform management, file review, reporting and document management for compliance with all program policies and procedures. File documentation, document management, quality 

control, reporting, program and Federal compliance, and issue tracking are also embedded requirements for this functional area’’ (RFQ for the Management of the 

RREM Program, 2013, p. 25). This ultimately means that RREM contractors remained at the forefront of contract monitoring and compliance. The DCA did identify an internal monitoring agent.16 However it is unclear if the internal monitoring 

agent was provided with the requisite training, financial resources, and additional 

staff required to engage in effective contract oversight. 

Finally, the partitioning of the RREM program into two categories of contractors—those who administer the program and those who monitor the program further distanced the DCA from the service being provided. The DCA’s ability to monitor and oversee the performance of a contractor is directly related to their ability 

to identify the actor who is responsible. Similar to a situation where a contractor 

subcontracts a service, DCA’s already limited capacity to monitor contractors was 

further strained. In this context, DCA essentially outsourced a core governmental 

function—contract monitoring and oversight. 

Consequences and Questions for Further Investigation: 

Contracting out under emergency circumstances is challenging and complex, but 

there must be protocols in place to ensure that those at risk are treated carefully 


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17Fair Share Housing Center, et al., ‘‘The State of Sandy Recovery,’’ 2014, p. 8. 18 Ibid. 19Katz Matt, New Jersey Quietly Fires Second Contractor Hired to Help Sandy Victims, NJ 

Spotlight, February 14, 2014, http://www.njspotlight.com/stories/14/02/13/amid-criticism-njquietlyfires-2nd-sandy-contractor. (accessed Feb. 2014). 20State of New Jersey, Department of Community Affairs, CBDG Disaster Recovery Action 

Plan, 2014, p. 6–12. 21 ‘‘Documents Obtained from Christie Administration Through Litigation Raise Questions of 

Mismanaged Sandy Relief Funds’’, Fair Share Housing, press release, November, 2013, on the 

Fair Share Housing Web site, http://fairsharehousing.org/media/ (accessed Feb. 2014). 

and equitably. A 2014 analysis by the Fair Share Housing Center found that 79 percent of residents who appealed denials of funds for housing recovery were successful 

which raises questions about how well the firm hired to determine eligibility did its 

job. The report also found troubling racial and ethnic disparities. African Americans 

were rejected for RREM and resettlement grants at two and a half times the rate 

of whites. Latinos were also disproportionately rejected.17 Moreover, numerous 

media reports suggest that those applying for, or those in the process of receiving, 

RREM funding lacked access to the feedback mechanisms required to voice their 

concerns and issues.18 19 All of these problems are in direct contradiction to the 

process stated in the DCA’s Community Development Block Grant Action Plan.20 Finally, documents analyzed by the Fair Share Housing Center suggest that even 

after contracts were let, program details and policies continued to be amended without going out for public comment.21 Worse, in many cases, there were no policies 

in place until after the program started. 

Despite the deeply flawed service being provided, in less than 8 months, we now know that HGI billed the State over $51 million—although it had proposed a 3-year 

contract for a total of $67 million. There is an ongoing dispute over at least $18 million that HGI claims it is owed, but the State has not paid; this number may grow 

significantly depending on the payments HGI claims are due between the December 

6 termination and the January 20 date when all of HGI’s activities ceased. While 

HGI claims that the State demanded far more work than the contract originally anticipated and that it received ‘‘express representations from State contracting officials that HGI would be paid for the work,’’ the lack of reporting makes all of this 

extremely difficult to assess. There were also apparently no written amendments to 

the contract to account for the additional costs, which again raises troubling questions about how the State managed this contract and led to the current dispute. 

Overall, our analysis suggests that New Jersey lacked the capacity to oversee the 

contracts involved in such a large and complex natural disaster recovery program. 

This lack of capacity was compounded by a lack of transparency. In other words, 

we don’t have adequate staffing to ‘‘police’’ the contracts and citizen watch dogs cannot obtain the information necessary to sound the ‘‘fire alarm.’’ We conclude here 

with a list of questions that merit further investigation. 

Questions 

1. Who are the State contract managers assigned to each contract? How many 

contracts are they responsible for? Are they specially qualified or just allocated 

from other staff as we found in general? A look at any one contract, for example the HGI contract, highlights the enormity of the task facing even a highly 

qualified individual.

2. Who are the accountability monitors (required under E.O. 125)? Are they qualified? Do they have real knowledge of contractor performance? How are they integrated with other staff responsible for oversight?

3. The State action plan involved the creation of a new division within DCA with 

50 staff to administer the program. The State Web site mentions 95 employees. 

What are their job descriptions? To what extent has that division fully staffed 

up? Are they State contract managers? What do the staff do? There are current 

postings for CFO and Assistant Director positions. Were these ever filled? Are 

they open because of the fallout from press.

4. E.O. 125 adds a requirement that all RFQs be pre-cleared by OSC. That effec- tively has every Sandy Contract treated like a $10,000+ contract. There are 

over 100 contracts over a short period of time. Did OSC increase staff to handle 

the dramatic increase in workload? What was the review process to determine 

compliance ‘‘with all applicable public laws, etc.’’ To the extent that the laws 

were relaxed, how meaningful was it really?

5. Who is responsible for ensuring contractors provide reports and for reviewing 

the quality of those reports? Contracts such as the HGI contract grant the contractor millions ($3,006,864) for internal oversight. Who ensures that the State 


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gets anything out of this? [Note that this is mainly for fraud by program participants, not the program administrator. ]

6. The Action Plan (s6.6.5) refers to DCA’s Internal Audit office and several procedures that it will conduct to ensure compliance. To what extent were these 

procedures actually followed. Was the Internal Audit office staffed up to handle 

this?


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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD


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