U.S. GOVERNMENT PUBLISHING OFFICE

30–340 PDF WASHINGTON : 2018

EXAMINING THE COMMUNITY DEVELOPMENT 

BLOCK GRANT-DISASTER RECOVERY PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 1, 2017 

Printed for the use of the Committee on Financial Services 

Serial No. 115–51 

( 

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(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MacARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

KIRSTEN SUTTON MORK, Staff Director 

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(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

ANN WAGNER, Missouri, Chairwoman 

SCOTT TIPTON, Colorado, Vice Chairman 

PETER T. KING, New York 

PATRICK T. MCHENRY, North Carolina 

DENNIS A. ROSS, Florida 

LUKE MESSER, Indiana 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

AL GREEN, Texas, Ranking Member 

KEITH ELLISON, Minnesota 

EMANUEL CLEAVER, Missouri 

JOYCE BEATTY, Ohio 

MICHAEL E. CAPUANO, Massachusetts 

GWEN MOORE, Wisconsin 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

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C O N T E N T S 

Page 

Hearing held on: 

November 1, 2017 ............................................................................................. 1 

Appendix: 

November 1, 2017 ............................................................................................. 29 

WITNESSES 

WEDNESDAY, NOVEMBER 1, 2017 

Albert, Ms. Helen, Acting Inspector General, Office of the Inspector General, 

U.S. Department of Housing and Urban Development ..................................... 5 

APPENDIX 

Prepared statements: 

Albert, Helen ..................................................................................................... 30 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Green, Hon. Al: 

Letter to the Chairman requesting a Hearing ............................................... 51 

Albert, Helen: 

Written responses to questions for the record submitted by Representative Wagner ................................................................................................... 53 

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EXAMINING THE COMMUNITY 

DEVELOPMENT BLOCK GRANTDISASTER RECOVERY PROGRAM 

Wednesday, November 1, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:30 a.m., in room 

2128, Rayburn House Office Building, Hon. Ann Wagner [chairwoman of the subcommittee] presiding. 

Present: Representatives Wagner, Tipton, Ross, Zeldin, Trott, 

Loudermilk, Kustoff, Tenney, Hollingsworth, Green, Cleaver, 

Beatty, and Crist. 

Also present: Representative Velazquez. 

Chairwoman WAGNER. I think some members are still wandering 

in here, but we will get started. The Subcommittee on Oversight 

and Investigations will come to order. 

Today’s hearing is entitled ‘‘Examining the Community Development Block Grant-Disaster Recovery Program.’’ Without objection, 

the chair is authorized to declare a recess of the subcommittee at 

any time. Without objection, all members will have 5 legislative 

days within which to submit extraneous materials to the chair for 

inclusion in the record. And without objection, the members of the 

full committee who are not members of the subcommittee may participate in today’s hearing for the purposes of making an opening 

statement and questioning the witness. 

The chair now recognizes herself for 4 minutes for an opening 

statement. 

When a terrible disaster strikes, the Federal Government plays 

an important role when delivering much-needed emergency aid. Today’s hearing is about a related point upon which we can all, I 

think, agree. 

It is critical to ensure that taxpayer money being spent on disaster relief is spent smartly, efficiently, and effectively. Every disaster relief dollar that is diverted to an inefficient or wasteful use 

is a dollar that is not going to help individuals in need, and that 

is wrong. 

The Community Development Block Grant-Disaster Recovery 

Program is comprised of relief funds which are designated to allow 

communities to start the recovery process by helping those commumcarroll on FSR431 with DISTILLER

2 

nities and neighborhoods with limited resources to rebuild critical 

infrastructure after a catastrophic event. 

Today’s hearing will focus on whether the Department of Housing and Urban Development’s administration of the CDBG-DR program lives up to the ideals I mentioned a moment ago. It will also, 

I hope, initiate a constructive dialog between Congress, HUD, and 

the HUD Office of Inspector General about how this CDBG-DR program can be reformed to increase oversight, to increase accountability, and ensure disaster relief dollars go directly and expeditiously to those who need them the most. 

As we will hear today from our witness, the Acting HUD Inspector General, Helen Albert, the HUD OIG has routinely identified 

serious systemic problems with the CDBG-Disaster Recovery Program. Money appropriated to this program often failed to reach 

those who need it most and instead was diverted to wasteful or inefficient uses. 

As a recent example, a 2017 OIG report on Hurricane Sandy re- vealed $450 million in questionable costs. The HUD OIG’s important work has also documented instances of grantees who regularly 

failed to maintain proper documentation supporting the cost of performed work, as well as awarding duplicate or ineligible assistance. 

HUD OIG’s work also demonstrates that these problems have occurred throughout the Nation. Even in my own home State of Missouri, they have seen misuse of some of these funds. The OIG’s work also reveals another troubling trend: $11.5 billion of CDBG-DR funds appropriated for disasters, going all the 

way back to September 11, remain unspent. 

While rebuilding communities isn’t done overnight and takes 

time, at a certain point it appears that billions of dollars are simply 

sitting lost or forgotten about in grantee bank accounts. When put 

in context with the $7.4 billion Congress recently appropriated to 

HUD in the first relief package for Hurricane Harvey and Irma, 

Congress must do better, a better job, recouping the lost money, so 

to speak, for future disasters. Again, disaster funds should go to 

those who need them most. 

And I am so pleased to see that it is not just the HUD OIG who 

recognizes that the Community Development Block Grant-Disaster 

Recovery Program needs reforms to ensure disaster funds reach 

disaster victims, but Secretary Carson understands these problems 

exist and is open to working to address them. In testimony before 

the full committee just weeks ago, Secretary Carson noted that 

some of the things done through the CDBG-Disaster Recovery Program have been, in his words, questionable. 

Ms. Albert, I look forward to hearing your testimony and recommendations this morning. 

And with that, I yield back the balance of my time. 

I now recognize the gentleman from Texas, Mr. Green, the ranking member, for 5 minutes. 

Mr. GREEN. Thank you, Madam Chair. I thank the witness for 

appearing as well. 

Madam Chair, you can’t be the Secretary of HUD without being 

the Secretary of HUD. Let me explain. 

It is an honor to have the witness before us today who will talk 

to us about some of our needs. She will talk to us about a good 

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many issues related to waste, fraud, and abuse. She will talk about 

procedures and processes. 

But there are some things that we have to talk about that relate 

to policy. As you indicated, the Secretary was here earlier, and he 

made some comments that would lead me to believe that he should 

return. It is my belief that the Secretary should return to this committee and visit with us, be prepared to answer questions about 

certain questionable policies related to HUD. And I hope that he 

will come. 

And such that he will not be surprised, I would like to give some 

indication as to the areas of concern. The areas of concern would 

include options for temporary and long-term housing for victims 

after a national disaster. Types of construction standards we 

should require for public housing in areas where we have a history 

of severe weather or fires. We need to know more about the loss 

of private housing stock as it relates to Section 8 choice vouchers. 

We need to know more about the devastation of the housing 

stock in areas like Puerto Rico and the Virgin Islands where we 

have people who are suffering currently. What is happening in 

Puerto Rico and the Virgin Islands is shameful and sinful. We need 

to know more about this. 

Should low-, moderate-income ratio be waived in the wake of disasters? The LMI is something that is set at 70 percent. Should we 

lower this, given the lawsuits and settlements that we have had in 

this area? 

Protecting the housing of our Nation’s senior citizens when we 

have national disasters. Protecting the housing of the disabled 

when we have national disasters. 

We should talk about providing temporary housing assistance to 

HUD-assisted families that were displaced by storms. 

We should look at the cost, the estimated cost, of HUD properties 

damaged. We need to know what we can do to repair and replace 

properties. 

These are some of the areas of concern that the Secretary should 

be concerned with and should be prepared to address. 

I believe that it is important for us to discuss waste, fraud, and 

abuse, and my hope is that we will have a very fruitful discussion 

today. But I also know that Mr. Long, who is the FEMA Director, 

Mr. Long, Brock Long, FEMA Director, appeared before the Senate 

Homeland Security Committee yesterday for a hearing. And he will 

be appearing tomorrow at the Transportation and Infrastructure 

Committee. 

This is important. There are many things about waste, fraud, 

and abuse associated with FEMA that we can and should discuss, 

and my hope is that they will be discussed in this Congress. 

But I also know that his appearance before these committees has 

much to do with what is happening right now as it relates to the 

storms that we have had to encounter. What happened in Texas 

and Florida and the Virgin Islands and Puerto Rico is of great importance to us. And just as Mr. Brock Long is testifying, the Secretary of HUD should be testifying as well. 

I know that the request was made for this hearing, and it has 

been set for some time. I am OK with that. But I do believe that 

I shall now do something that is important, and that is make a remcarroll on FSR431 with DISTILLER

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quest for us to bring the Secretary of HUD before the committee 

so that the Secretary can give some answers to questions of concern. 

I would also add this, that I would like, without objection, to 

place a letter in the record requesting that the Secretary appear, 

along with some of the areas of concern that we would like for the 

Secretary to address. 

I opened by saying, you can’t be the Secretary of HUD without 

being the Secretary of HUD. This means that you can’t secret yourself someplace at a time when your presence is needed elsewhere. 

You have to appear and let the public know where you stand, 

where HUD stands, and what some of these policies are that we 

need to help you with. 

If there are things that we need to correct, let’s talk about the 

correction process. If there are things that we cannot correct and 

we should eliminate, let’s talk about these things as well. 

But the point to be made is, we need to talk to the Secretary of 

HUD. You can’t be the Secretary of HUD without appearing before 

the Financial Services Committee, which has oversight jurisdiction, 

and this committee, this subcommittee has specific oversight jurisdiction, and we do ask that the Secretary appear. 

I yield back. 

Chairwoman WAGNER. The gentleman yields back. And the gentleman’s letter will be submitted to the record, without objection. 

The chair now recognizes the vice chair of the Oversight and Investigations Subcommittee, the gentleman from Colorado, Mr. Tipton, for 1 minute for an opening. 

Mr. TIPTON. Thank you, Chairman Wagner. 

Providing relief to Americans impacted by natural disaster is a 

critical function of Congress. Disaster relief can help Americans 

and their towns put their lives back on track after what are often 

life-altering disasters. While fulfilling this critical function, however, we must also remember to fulfill another charge: to be good 

stewards of taxpayer dollars. 

In my home State of Colorado, Community Development Block 

Grants for Disaster Recovery have been used for flood and fire recovery programs. These programs addressing housing, infrastructure, planning, and economic development needs have proven to be 

effective tools in responding to the aftermath of a disaster. 

In Colorado, the Department of Local Affairs administers CDBGDR funding. I have confidence in the Department of Local Affairs 

to faithfully distribute these funds. 

I also believe that it is important that HUD have the ability to 

be able to track these dollars down to the local level, whether it 

be independently or working with State agencies. It is crucial that 

taxpayer dollars allocated for disaster relief are used for their intended purpose. And I look forward to learning how Congress can 

create more accountability in these programs here today. 

Thank you. And I yield back. 

Chairwoman WAGNER. The gentleman yields back. 

We now welcome today’s witness, Ms. Helen Albert. Helen Albert 

was appointed as the Acting Inspector General for the U.S. Department of Housing and Urban Development beginning in June 2017. 

Ms. Albert previously served as the Deputy Inspector General at 

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HUD and the Assistant Inspector General for Management and 

Policy. 

Prior to joining HUD, Ms. Albert was Director of External Operations at the Department of Health and Human Services, Office of 

Inspector General, and spent a decade in the U.S. Senate, where 

she served as chief investigator and professional staff for two Senate committees, primarily focusing on counternarcotics and fraudrelated issues. 

Ms. Albert is a native of New York City and received her bachelor of arts from the State University of New York at Binghamton. 

Without objection, the witness’ written statement will be made a 

part of the record following her oral remarks. Once the witness is 

finished presenting her testimony, each member of the subcommittee will have 5 minutes within which to ask questions. 

Ms. Albert, on your table there are three lights. Green means go, 

yellow means you have 1 minute left, and red means your time is 

up. 

With that, the witness will be now be recognized for 5 minutes 

to give an oral presentation of her testimony. 

STATEMENT OF MS. HELEN ALBERT, ACTING INSPECTOR GENERAL, OFFICE OF THE INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Ms. ALBERT. Thank you, Chairman Wagner, Ranking Member 

Green, and members of the subcommittee. I am Helen Albert, the 

Acting Inspector General of the Department of Housing and Urban 

Development. Thank you for the opportunity to highlight our perspectives of HUD’s oversight of disaster assistance funding, particularly in light of the immense challenges faced by this Nation to 

respond to destructive hurricanes and fires. 

This country has never he been hit by multiple hurricanes as 

strong as Harvey, Irma, and Maria, with other hurricanes hitting 

shortly after, in the same season in modern times. This has been 

followed by devastating wildfires, which, like the storms, have 

caused extensive destruction and loss of human life. 

As part of our initial response, our special agents, the Federal 

law enforcement side of our agency, assisted in search-and-rescue 

efforts in Houston, teamed with disaster medical assistant units to 

be the first into the Keys, and helped locate unaccounted-for HUD 

employees in all affected areas, and delivered food and supplies to 

the elderly. 

Additionally, our auditors and evaluators with our agents are 

currently working to conduct quick capacity reviews to determine 

the ability of local entities to administer funds. 

I could not be more proud of the critical work our IG staff is undertaking. 

From 2001 til 2016, Congress appropriated more than $47 billion 

in funding to address long-term recovery to HUD in the wake of 

a wide range of disasters, including the terrorist attacks of 9/11, 

Hurricane Katrina in 2005, Hurricanes Ike and Gustav in 2008, 

Hurricane Sandy in 2012, and Hurricane Matthew in 2016. In comparison, from 1993 to 1999, HUD disaster funding totaled less than 

$1.7 billion. 

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The States primarily use the funding to repair housing, compensate homeowners, repair infrastructure, and provide economic 

development. We note, for the last large disaster, now exactly 5 

years ago, approximately 50 percent of Sandy funds are still unexpended. 

Over the years, HUD has gained more experience and has made 

progress with assisting communities, but faces significant challenges monitoring funds provided to various grantees, including 

States and cities. 

Oversight is made more different due to the diverse nature of 

projects and the fact that some can take 5 to 10 years to complete. 

HUD must be diligent to ensure grantees have identified timelines 

and are keeping up with them and goals are met and expectations 

are achieved. 

But it continues to face the following challenges in administering 

these grants: ensuring that expenditures are eligible and supportive; certifying that grantees are following procurement regulations; addressing concerns that citizens encounter when seeking assistance; and conducting consistent and sufficient monitoring efforts on grants. 

We have developed a series of integrity bulletins aimed at providing the grantees with information to help safeguard program 

funds and to ensure that communities get the full benefit of funding. The benefits were sent to grantees over the last few years and 

are posted on our website. 

We also recently developed a fraud alert for homeowners, which 

we hope that you will pass out to your constituents, on how to 

avoid scams and where to go if they need help. 

Additionally, our work in capacity studies has begun. We are 

conducting these to bring awareness to potential areas of waste, 

fraud, and abuse specific to the environments the Department is 

about to enter. 

Finally, lessons learned from over 15 years of oversight activities 

lead us to an overarching recommendation to suggest codifying a 

single disaster recovery program at HUD in order to ensure a more 

permanent, formal framework, to reduce the volume and provide 

consistency of notices used to provide informal guidance for each 

disaster, and to mitigate time delays in implementing guidance. 

In conclusion, Chairman Wagner, the Department’s role has 

greatly increased, as it has had to deal with unanticipated disasters and economic crises that have, in addition to its other missions, increased its vital role in providing services that impact the 

lives of our citizens. 

My office is strongly committed to working with the Department 

and Congress to ensure that the program operates efficiently and 

effectively and is intended for the benefits of Americans now and 

into the future. 

I look forward to answering all of your questions. 

[The prepared statement of Ms. Albert can be found on page 30 

of the appendix.] 

Chairwoman WAGNER. The chair thanks the witness for her 

opening statement. And the chair now recognizes herself for 5 minutes of questioning. 

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Ms. Albert, I wanted to spend my time discussing action plans 

submitted by States and how changes and revisions to stated 

guidelines invite potential misuse of CDBG-Disaster Recovery 

funds. 

In your written testimony, you note that HUD has issued a number of waivers and accepted an even greater number of amendments or revisions to States’ action plans. What are some of the 

issues with allowing HUD and the States to very easily revise 

plans to provide disaster recovery to victims? 

Ms. ALBERT. The Department under the CDBG program actually 

needs flexibility. It has to have the ability to do things and allow 

localities, depending on the disaster, to be able to react in certain 

ways. 

However, when you allow these waiver upon waivers, and HUD 

has, along with FEMA actually, has waived quite a bit, what happens is, is you lose the intended purpose of the program. 

Chairwoman WAGNER. Can you speak up a little bit? You are 

saying, lose the intended purpose? Yes. 

Ms. ALBERT. The intended purpose of the program. So for instance, in the State of Louisiana there had been a grant program 

that was designed to elevate homes. A worthy program. Moneys 

had already been given out to homeowners to renovate and rebuilt. 

But in the flood zones they wanted those areas to try and elevate 

so that if there was another flood they could withstand it. 

What happened in that instance was we went and did a sample 

audit to see whether the elevation took place. It was about $650 

million that was given for this intended purpose. We did a sample 

of about 199 homes, and when we went, 148 of the homes had not 

been elevated. 

Chairwoman WAGNER. Wow. 

Ms. ALBERT. So we had spoken to HUD and we had asked them 

to actually recapture the funds, because, frankly, it wasn’t for the 

intended purpose. 

HUD cannot recapture, it only can recapture from the States, because it signs an agreement with the grantee. What HUD did in 

that instance was they decided to change the intent of the program. 

So they said: If you can prove to us that you actually rehabilitated 

your home and/or elevated, we will accept that, although the name 

of the program was Home Elevation. 

So then we went back and we said: Then show us the documentation to show that the money was actually used to rehabilitate, because they that received other moneys to do that. They 

could not do that. 

So after a variety of different changing of the intended purposes, 

of waiving what had been put in the action plan to begin with, we 

ended up closing down that evaluation because we could not close 

out the finding and recommendation because it kept changing. 

Chairwoman WAGNER. In your written testimony you note that 

for Hurricanes Katrina and Rita, HUD accepted 66 amendments 

from Louisiana for Hurricane Sandy—yes, for Hurricane Sandy— 

accepted 17 amendments from New York. Are these extreme cases 

or do States so frequently amend their action plans? And how often 

does HUD reject action plans or ask States to revise and resubmit 

them for review? 

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Ms. ALBERT. Sometimes they do reject. In one of the cases that 

I know, Ranking Member Green mentioned, had to do with low and 

moderate income. In the case of Texas, they actually did reject 

southern Texas’ action plan in the valley because it did not meet 

some of the low-and moderate-income requirements. There were 

lawsuits, as he mentioned, and other things that had occurred. 

But they don’t tend to do that often. They tend to accept the 

amendments. They believe that there is something called maximum feasible deference, which means that the locality or the 

grantee or the State, whoever is administering it, has deference to 

do with it pretty much as they think they need to, except in certain 

instances like LMI where they sought action, but that is not typical. 

Chairwoman WAGNER. Ms. Albert, and I have so many more 

questions, I will have to submit some for the record or do it in a 

second round. But let me ask one final question. 

Once a State has submitted an action plan and HUD accepts it, 

should HUD require unused funds under the action plan to be returned rather than have those dollars repurposed or the action 

plan amended to allow for more spending for a new purpose? 

Ms. ALBERT. As a law enforcement agency and an auditing agency, we typically see that it usually takes about 6 to 8 years for redevelopment to take place. As money ages beyond that, that is 

when you start seeing more problems with the funds, more improper uses, more repurposing, finding uses for the money that is 

sitting there. There is $360 million still sitting from 9/11, which is 

now 16 years ago. 

Chairwoman WAGNER. Wow. 

Ms. ALBERT. At some point you have to say what was the intended purpose? And that is a whole other story about the action 

plans, whether HUD is going back and seeing that the expectations 

were actually met. 

But that is a very complicated issue, and we do believe that some 

funding after a certain amount of time should be either recaptured 

or repurposed. 

Chairwoman WAGNER. Recaptured or repurposed. Thank you 

very much. 

The chair now recognizes my friend and the distinguished gentleman from Missouri, Mr. Cleaver, for 5 minutes. 

Mr. CLEAVER. Thank you, Madam Chair. 

Thank you, Ms. Albert. 

My goal today is to hopefully get all of us thinking toward making some corrections and some improvements. And I do think that 

the HUD program for disaster relief has been successful and is 

something that we don’t need to discontinue unless we find something better. 

Here is the problem. When there is a disaster, particularly in the 

Midwest, it is usually going to be a tornado, and in some instances 

the Mississippi or the Missouri will come out of its banks and we 

will have some flooding, nothing like what happened on the Gulf 

Coast or Superstorm Sandy. 

So what happens is that we have all of these nonentitlement cities that will experience a major problem that devastates and decimates the community, and then FEMA can’t step in because the 

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threshold is $8 million. So you get a little town like Orrick, which 

you probably never heard of, which is in my congressional district. 

There are 800 people. You could wipe out the whole town and not 

meet the FEMA threshold. 

So what we have to do then is depend on the State, that the nonentitlement dollars that come to the States would be disbursed. 

That creates a problem if you are talking about trying to respond 

quickly. 

And the other problem is the entitlement cities, Kansas City, 

largest, St. Louis, second, Springfield, Independence, I think those 

are the only entitlement cities in the State. So the money that goes 

to the State in Jefferson City began to dwindle, and they are not— 

the State is not getting the dollars at a level that the cities are getting anyway. So it reduces the opportunity for HUD dollars to be 

used in the other small towns. 

So if you live in a small town, you get slapped with an event, and 

then you get slapped because you have to go to the State. And I 

think that is a problem. I think there is some kind of way FEMA 

and HUD, we need to work this out so that we don’t discriminate 

against small towns, and that is exactly what is happening right 

now. 

Can you fix that? We have 2 minutes for you to fix it. 

Ms. ALBERT. As the Inspector General, I will try to talk about it 

in the framework of what I do. 

It is interesting because Community Development Block Grants 

for disaster recovery actually don’t go to entitlement communities, 

they go to—the normal funding goes to— 

Mr. CLEAVER. Yes, I know that. Maybe I wasn’t clear. I know it 

doesn’t go— 

Ms. ALBERT. Right. 

Mr. CLEAVER. That is not the problem. The entitlement cities, 

they would probably go—as a former mayor, we probably would go 

to our rainy day fund. And if there is some housing issue, we would 

probably go to CDBG. So that is not what I am saying. 

What I am saying is, small towns get hit, if the damage is $5 

million, they are in trouble in terms of some assistance. They have 

to go to the State. If they get the State money it is reducing the 

State pot, which was not designed just for disaster relief. 

Ms. ALBERT. Right. 

Mr. CLEAVER. It is for all CDBG programs, including 108 funds 

and everything else. So small towns get hit. Is this not—do I need 

to fix it some more? 

Ms. ALBERT. Let me say this from the jurisdiction of HUD as it 

relates to FEMA. One of the things that we are advocating is actually a synthesization of more of the program, for at least HUD’s 

perspective, as a statutory codification. And these issues could be 

talked about as HUD makes this a statutory program: What type 

of funding from CDBG should go to what areas? 

So if there is an inequity between small and large and who gets 

more. This is sort of the problem in Puerto Rico right now, that the 

determination has been made that the power goes to the larger cities, and so the smaller areas are not getting it. 

But these are things that Congress can get involved with it if it 

takes up our recommendation, which is to codify the program, put 

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in statute some sort of language from HUD’s perspective, and then 

you can get those issues addressed. 

Mr. CLEAVER. We are on the same page. Maybe we will get it. 

Thank you. I yield back. 

Chairwoman WAGNER. The gentleman yields back. 

The chair now recognizes the vice chair of the Oversight and Investigations Subcommittee, the gentleman from Colorado, Mr. Tipton, for 5 minutes. 

Mr. TIPTON. Thank you, Madam Chair. 

And thank you, Ms. Albert, for taking time to be here. 

I wanted to follow up a little bit on one of the answers that you 

had to Chairman Wagner. You made the comment that HUD likes 

to see if the money was used for the intended purposes. And we 

have noted in the State of Colorado that you have pretty much the 

policy of maximum feasible deference to the State’s interpretation 

of the statutory requirement. 

Would you see a benefit, from HUD’s perspective, in terms of 

being able to establish formal regulations for the CDBG-DR requirements? Would that be helpful to HUD in terms of executing 

the mission when it comes to natural disasters? 

Ms. ALBERT. Absolutely. So at this juncture, after Harvey and 

Irma hit, we really took a sort of a lessons learned inward look, 

and we said this was an unprecedented time as far as disasters, 

three hurricanes, fires, other hurricanes coming that were also destructive, and at this time we felt we really need to assess what 

needs to be done for the future. Because for HUD, when I say it 

is a peripheral mission, I don’t mean that HUD uses it as a peripheral, but it is not part of its core statute and not part of what it 

was founded on in its authorizing language. 

And so what HUD does is it responds to supplementals per each 

disaster and it writes Federal Register notices, and this is because 

Congress hasn’t directed it to do so. For instance, this happens to 

be Sandy’s. There are 30-something Federal Register notices. There 

are a lot of Federal Register notices. It needs to have a codification, 

a core statutory mission. And in that can be described some areas 

that we know have been abusive and that need clarification and 

others where there is a need for flexibility. 

So what we do tend to find is with maximum feasible deference 

there tends to be an overuse of it. And these are things that we 

would hope, as they codify and look to rulemaking, that they try 

to address. We do see that if you do end up codifying the CDBG 

program that you will formalize it, get away from these informal 

guidances, which sometimes are inconsistent from disaster to disaster, and will eliminate some of the delays in implementation. 

The interesting point is, though, that when we did a review, we 

did an audit of Sandy money with the entire IG community that 

has been involved. The top eight IGs came together. It was surprising that HUD actually surpassed FEMA and other departments 

in the amount of money it disbursed. And that being so, it really 

at this juncture needs to codify and to accept the fact that, unfortunately, disasters are here to stay for this Department and its mission. 

mcarroll on FSR431 with DISTILLER

11 

Mr. TIPTON. When you are talking about the money exceeding 

what FEMA had even spent, are you comfortable that the dollars 

were well-spent for the intended purpose? 

Ms. ALBERT. For Sandy money, which is really the last big disaster, which is now 5 years ago almost exactly to this month, we 

note that of the $15.2 billion that HUD received from Congress in 

the supplemental legislation, half is still unexpended. 

So like I said, in the beginning it can take 6 to 8 years to redevelop, but half is a great number. 

Mr. TIPTON. Yes. I believe in the State of Colorado we had $320 

million of moneys that had come in. I believe right now $130 million has been disbursed. They are anticipating that the balance of 

that will be done by 2019. 

I think we probably share—I have a little reluctance to try and 

force it because you made the comment of overuse of dollars. You 

don’t want them to be directed where they shouldn’t be going. 

Can you describe maybe your idea in terms of how we get that 

accountability, make sure the dollars are going where they need to 

and are expended in an appropriate period of time? 

Ms. ALBERT. So I will pick a topic that is important, although I 

don’t seem to have a lot of time, and it is a lengthy topic. Maybe 

we can get it with other members. 

But one of the areas that we tend to see a problem is in procurement. And procurement is a big area when you are delivering moneys out in the supplemental to the States and localities. We tend 

to see abuses with procurement that really need to be fixed as we 

go forward. 

Certainly, the experience that we have all read about in the last 

week with Puerto Rico and the power contract that was given there 

highlights what IGs across the government see. I think without exception the top eight IGs that oversee this program think that procurement in contracting is probably its number 1 topic. 

Mr. TIPTON. Thank you. I yield back, Chair. 

Chairwoman WAGNER. The gentleman yields back. 

The chair now recognizes the gentlewoman from Ohio, Mrs. 

Beatty, for 5 minutes. 

Mrs. BEATTY. Thank you so much, Madam Chairwoman and 

Ranking Member. 

And thank you for being here as our witness today, Ms. Albert. 

We have spent a fair amount of time talking about the disasters, 

and I noticed in the beginning of your written testimony you acknowledge that the United States has never seen a hurricane season like the one we just experienced. 

And for the audience and those who are watching, you are probably making reference to Harvey in Texas, that was a Category 4, 

that was in August; and then Irma, that was a Category 5, that 

was in September, hitting Florida, Georgia, and South Carolina; 

and then Maria, of course, in Puerto Rico and the Virgin Islands, 

Category 4 again, in September, just a couple weeks apart. 

I know in part how devastating that was. Right before Maria hit 

in Puerto Rico, I was there about 10 days before that, having an 

opportunity to be there and see the beauty of that territory. And 

so you can imagine how devastating it was. 

mcarroll on FSR431 with DISTILLER

12 

My executive assistant who works for me in my D.C. office, that 

is his home, his parents are there, his grandparents, his godfather, 

who is the health and human services director there and a surgeon, 

and they have all been devastated by this. And not to mention the 

Members of Congress who live in and have families in those States 

that have been affected by Harvey and Irma and Maria, and then, 

of course, Nate in Mississippi. 

So where I am going with this question, when you talked about 

how devastating financially this is, with that said, do you think 

that HUD has enough resources within the Department to adequately administer the CDBG-Disaster Relief Program, in your 

opinion? 

Ms. ALBERT. No, I don’t think they have enough resources. 

Mrs. BEATTY. So in your role and being part of that team, one 

of the questions when Secretary Carson was here a few weeks ago, 

as you probably are aware, that he did a minus 15 percent reduction request in his budget for this year. So one of the questions I 

asked him—because at that time we knew about Harvey and Irma 

and Maria, so if we don’t have enough money, we have been devastated. 

As a personal note, for me, when I look at the $58 billion that 

we recently passed for Texas, I also feel there are some disparities 

when you start talking about how communities in Puerto Rico and 

the Virgin Islands are being treated with the moneys that are 

there. 

Just this morning I had an opportunity to listen to the mayor of 

San Juan, and she talked a lot about infrastructure and the dollars 

and what they need. So if you, as a part of the team, recognize 

there is not enough money, I am going to be like Congressman 

Cleaver, you have about a minute and a half to tell me how we get 

the money and how we fix it. 

Ms. ALBERT. I think there are certain things that can be done 

first. We talked about the codification, which is an authorizing 

issue, that is not an appropriating issue, and I think that will create some efficiencies that need to be going forward. 

Along with that, once you do authorizing language, which this is 

the committee of authorization, so it would have to come from this 

committee, there will be certain aspects of it as you go to codify the 

program within HUD that can be discussed. Such as we really believe that there needs to be something like a jump team, like something that you see in the military and in law enforcement, where 

a team of HUD officials come in that are dedicated, not from all 

these different organizations, but that are dedicated in HUD to 

going into these localities as these disasters happen. 

There certainly needs to be funding for this. They will be able 

to take some of it from their existing programs and put it into that. 

But if you are going to have an amalgamated team that is available to go at any minute, you will have to discuss, along with that 

authorization, some funding. 

Mrs. BEATTY. But I am hesitant about making HUD pursue this 

codification in the midst of this disaster effort, because I don’t 

know if they have enough resources to accomplish this. 

My time has expired. I yield back. 

Chairwoman WAGNER. The gentlelady yields back. 

mcarroll on FSR431 with DISTILLER

13 

The chair now recognizes the gentleman from Michigan, Mr. 

Trott, for 5 minutes. 

Mr. TROTT. Thank you, Madam Chair. 

And I want to thank the witness for her time this morning. 

And before I get into a few questions, I want to just respond to 

my friend from Texas’ opening remarks regarding Secretary Carson’s appearance before our committee. He was here about 4 hours. 

We have an awful lot of ground to cover. I would agree that we 

need to have him come back. 

But I found his testimony and comments to be some of the more 

productive hearings we have had. He actually listened to the questions and did his best to respond to our questions. So I can’t blame 

the Secretary for the problems we are discussing today necessarily. 

But I think it is important we have this conversation because we 

are talking about a lot of money, these disasters are occurring more 

frequently, and it is almost inevitable that when a disaster does 

strike a community that the response is almost always deemed to 

be inadequate and too slow, certainly by the people that are affected by the disaster. So it is important. 

And with respect to this program, my concern is it is so fragmented and there is a lack of accountability and a lack of transparency. And I wonder preliminarily whether the maximum feasibility deference standard really puts the Department in a position 

where there is no adequate way to review the States’ performance. 

Ms. ALBERT. Let me address the first part of your comment, 

which is fragmentation. I do think that the overall disaster scheme, 

schemata, actually, that has evolved over time with the government response has evolved in a fragmentary manner. It has 

evolved where programs were in the government and therefore it 

was siloed within those programs. 

Now, for instance, FEMA, this is their mission. This is all they 

do. This is disaster response. It is emergency response, emergency 

management. But for the other departments, some of whom actually surpass FEMA in funding, such as HUD—and, believe it or 

not, the Department of Transportation spends more money than 

FEMA and gets supplemental money more than FEMA, at least for 

Sandy it did—these are tangential missions and so they fit within 

the tranches of whatever they come from. 

When you discuss fragmentation, part of the issue is what happens to the homeowner when they have to go to this type of amalgamation and congealing of government agencies, and there is confusion and there are delays. 

For instance, I will give you one example. When you go to a disaster recovery center that FEMA runs and you happen to be a resident who has been flooded, you will get funding from FEMA first— 

food, clothing, repairing your home, at least for you to live in—and 

then you will go to SBA, to the Small Business Administration. 

There is an alphabet soup of government agencies that the residents and homeowners have no idea about. And they then meet 

with SBA. Now, you would think, as I did actually for the longest 

time until my staff actually corrected me, that if you got an SBA 

loan you were a small business. That is not true. You can get a 

homeowner loan from the Small Business Administration. 

mcarroll on FSR431 with DISTILLER

14 

But here is the problem. If you do, you then are not available because there is a sequence that HUD comes to meet the unmet 

needs. You will not be able to get a grant from HUD. And a grant 

is not repayable. 

So there are these confusions that emanate from the fragmentation of how the disaster program was set up, and they really need 

to be addressed going forward. That is not to say that the government hasn’t gotten better at disaster response, it has, compared 

to—I came into HUD from the HHS IG right after 9/11, and compared to even Katrina, it is a lot different now. 

However, there are real confusions and inefficiencies that really 

need to be streamlined and synthesized, because the homeowner 

suffers when that happens. 

Mr. TROTT. So it was a great comment and goes to the heart of 

my concern with this issue as we try and codify a solution. So some 

poor homeowner doesn’t get what they need from HUD, and they 

go to FEMA. FEMA says: It is not our area of responsibility, you 

need to call HUD, or you need to call the SBA. 

And I know one thing from my days in the business world, if you 

have an important project or mission that is critical, you need to 

have someone in charge. At the end of the day, someone needs to 

be coordinating all of the efforts so that people can’t point fingers 

at each other. 

Would you say that is a legitimate concern as we approach this 

problem? Because right now, not only is the poor homeowner confused by the myriad of agencies and departments, but there is no 

one accountable. 

Ms. ALBERT. When you are the homeowner and you go into these 

initial disaster recovery centers—and some of them go early. Sometimes going early, you can be penalized. Sometimes you are better 

off waiting. Because the system right now is not a linear system, 

it is actually a circuitous system. And depending where you enter 

can affect where you end up. And there is a lot of confusion. 

So I think they have gotten better, but there needs to be more 

done. 

Mr. TROTT. I appreciate your comments, and I am out of time. 

But I am interested to hear about any instances of criminality that 

you have discovered in the IG’s office as it relates to fraud. 

But thank you. I yield back. 

Chairwoman WAGNER. The gentleman’s time has expired. 

And the chair now recognizes the gentlelady from New York, Ms. 

Velazquez for 5 minutes. 

Ms. VELAZQUEZ. Thank you, Madam Chair. 

Ms. Albert, in your answer one of the questions that Mrs. Beatty 

posed to you, you said that more resources are needed to HUD. 

What do you mean by that? Do you mean increasing additional 

staffing? 

Ms. ALBERT. Yes. I think if you could codify this program like we 

are recommending—and don’t forget, we have just come to this recommendation. 

Ms. VELAZQUEZ. So it is good enough. So one area where we 

could make an improvement, in terms of your recommendations, is 

increasing the staffing for HUD. 

Ms. ALBERT. For this area. 

mcarroll on FSR431 with DISTILLER

15 

Ms. VELAZQUEZ. For this area. 

Ms. ALBERT. Yes. 

Ms. VELAZQUEZ. So I am a Puerto Rican American and all my 

family is in Puerto Rico. So what is happening in Puerto Rico, 

there is no other way to describe it. I was just there this weekend. 

The Puerto Rico that I know no longer exists. People are dying in 

Puerto Rico because there is no power being restored, 70 percent 

of the hospitals are operating with power generators. 

So my question to you is, I am all for preventing fraud, waste, 

and abuse. I do not support putting people’s lives at risk when natural disaster strikes just for the sake of preventing fraud and 

abuse. They need our assistance. The Federal Government must 

show up. 

So do you think that failure to document or the failure to get an 

independent cost estimate should be justification enough to withhold CDBG-DR funds from the citizens of Puerto Rico, many of 

whom are facing life-threatening conditions, yes or no? 

Ms. ALBERT. No. There has to be some reasonableness on any efforts— 

Ms. VELAZQUEZ. But that is the reality. As of yesterday, the 

money from the supplemental has not been allocated to Puerto Rico 

or Texas or Florida because they haven’t been able to make the estimates regarding Puerto Rico. 

Ms. ALBERT. Right. So when HUD gets its supplemental funding, 

it goes through a calculation of—my understanding, we are not 

part of that, but from my understanding there are internal meetings on how unmet needs are. Because HUD comes after FEMA 

and SBA, it typically isn’t there in the beginning, although it assists, but it really comes into the unmet needs. It will then make 

a determination based on Puerto Rico’s situation on what FEMA 

and the other first responders, in this case SBA, would expend and 

what the disaster is. 

But I want to explain something to you, too. I have staff down 

there. And I have to tell you that it was a very difficult road for 

us as well. Half of my organization is law enforcement and the 

other side are auditors, and I have a presence of both in Puerto 

Rico. 

I spent quite a bit of time the first few weeks getting my staff 

water and getting them food so that they could go out and assess 

the damage for HUD. Because they have law enforcement vehicles, 

they could see what HUD was not able to see. And so they didn’t 

have the basic necessities. 

The other side of my organization in the last few weeks has been 

going out to nursing homes and making sure that the elderly—this 

is an unusual role for the HUD IG. We are doing what we have 

to do because it is for the public good. 

So this situation is a real humanitarian crisis, and I understand 

that more than most because my own staff have been affected by 

it. 

Ms. VELAZQUEZ. It is very easy to come here and make the argument that we must be the steward of taxpayers’ money, but at 

what cost? We should not—the issue is—are we looking to the real 

issues when we are dealing with CDBG-DR? 

mcarroll on FSR431 with DISTILLER

16 

We are using arguments just to cut the funding for an agency 

that has failed American citizens because of the lack of manpower 

to be able to come up with a report and the estimates that we need 

in order to allocate the money that will make the people of Puerto 

Rico whole. That is the real issue here. 

Ms. ALBERT. Yes. And I agree with you, they should not be cut. 

Chairwoman WAGNER. The gentlelady’s time has expired. 

The chair now recognizes the gentleman from Georgia, Mr. 

Loudermilk, for 5 minutes. 

Mr. LOUDERMILK. Thank you, Madam Chair. 

And thank you, Ms. Albert, for being here today. 

And I appreciate the comments of my colleagues from New York. 

I have worked in disaster relief and recovery in a volunteer basis 

for many years. I can’t even imagine—anybody in America imagine—the devastation that Puerto Rico is seeing today. And it is bureaucracy that is clearly in the way of getting the relief to the people. I am working with some nonprofits right now in trying to get 

some relief to Puerto Rico, and because of how things are stalled 

there, it is even hard to get that relief out there. 

On the other hand, without proper oversight also costs lives. We 

have seen it time and time again that when the people that the 

funds are designated to do not receive the funds because it is diverted to another area, it costs lives as well. 

This is an extreme example, but you don’t have to go any further 

than 1993 in Mogadishu when the U.N. was providing food to those 

that are in need, but the warlords were intercepting that food and 

it was never getting to who it needed to, and it resulted in the incident we know as Black Hawk Down. So we have to find that way 

to put that oversight into place. 

I want to make sure I understand this right. So the funds are 

given to a grantee, who may be a State government, a local government, a city government, et cetera. Then they can grant those 

funds to a subgrantee. Who might that be? What type of entity 

might that be? 

Ms. ALBERT. There will be local agencies, developmental authorities typical—for instance, if it is in a city, typical agencies that 

would normally deal with economic development and other things. 

Mr. LOUDERMILK. Is it ever a private entity? I know in Georgia— 

Ms. ALBERT. Could be. 

Mr. LOUDERMILK. It could be, lack of better term, a developer 

who actually builds HUD homes. 

Ms. ALBERT. Could be. Uh-huh. 

Mr. LOUDERMILK. And I know that you have said that the diversity of HUD projects is part of the problem. So these funds could 

be used for any HUD-type project, is that what I am understanding? 

Ms. ALBERT. They are typically for—in a disaster they are typically—because the CDBG program is for an overarching. 

Mr. LOUDERMILK. Right. 

Ms. ALBERT. But this is disaster recovery. They will do home repair, economic development, infrastructure as well. This is typical 

of what HUD does. 

But I do have to mention, though, one thing as you are talking 

about the money flowing down. When HUD, in the disaster recovmcarroll on FSR431 with DISTILLER

17 

ery, signs an agreement with the State or locality and then it goes 

to, as you said, the subgrantee, it then loses the oversight for the 

subgrantee because it signed the agreement with the State or the 

locality. Therefore, it becomes very difficult to monitor the funds 

when it goes to that level. 

Mr. LOUDERMILK. So really the challenge is, you can monitor the 

grantee, but is it the grantee who is responsible to monitor the subgrantee to make sure the work is done? 

Ms. ALBERT. They are. 

Mr. LOUDERMILK. Are they equipped properly to do that in every 

case? 

Ms. ALBERT. No. Not always. And so we have actually made a 

recommendation from our lessons learned. One of the interesting 

scenarios was after 9/11 when lower Manhattan was devastated. 

The city of New York, particularly their Department of Investigations, which is a law enforcement entity, knew that it was going 

to have issues with reconstruction in Lower Manhattan. It was 

very worried about organized crime getting involved in the construction of the World Trade Center. 

And so therefore they had had a history of vendor problems and 

had a problem where they had these independent or integrity monitors, that they were called, inserted, if they were a large enough 

subgrantee, and monitoring. And then they would go back to the 

States and let them know, with eyes on the ground, what they 

were seeing. 

The only issue with that is that then the State or locality gets 

the viewpoint of the integrity and independent monitor, but we in 

the IG and we in HUD lose that. So we want to make sure that 

if you are going to require these independent monitors, which we 

think are a good idea, that we at least get the benefit of knowing 

what problems they are seeing at the subgrantee level. 

Mr. LOUDERMILK. Within the last few seconds, as we move forward to authorize this and put constraints, what else can HUD and 

Congress do besides the monitoring to make sure that the funds do 

go to those who need it and that the proper repair or—the money 

is used for the proper thing? 

Ms. ALBERT. I think we, at our level, should have oversight of 

subgrantees, too. We should have some sort of tie to be able to take 

action if something happens. 

Mr. LOUDERMILK. Thank you. I yield back. 

Chairwoman WAGNER. The gentleman yields back. 

And the chair now recognizes the gentleman from Florida, Mr. 

Crist, for 5 minutes. 

Mr. CRIST. Thank you very much. 

And thank you, Ms. Albert, for being here. 

I would like to talk about duplication of benefits and how a wellintentioned practice can sometimes perhaps disadvantage homeowners. 

As you know, FEMA is often the first place that natural disaster 

survivors turn for assistance. And during discussions with FEMA 

about the options available to them, many homeowners are encouraged to also apply through the Small Business Administration for 

disaster recovery loans. 

mcarroll on FSR431 with DISTILLER

18 

Those who choose to apply, are approved for the loan, can then 

begin the process of rebuilding. Months later, however, that same 

homeowner may see his or her neighbor, who did not seek immediate assistance from the SBA, rebuilding their home with a Community Development Block Grant-Disaster Recovery grant, I 

should say, money that doesn’t require a cost share nor needs to 

be paid back. 

But when the homeowner first tries to get the same funding, 

they are denied due to duplication of benefits. Or worse, they are 

mistakenly approved for CDBG-Disaster Recovery, Grant-Disaster 

Recovery dollars, only to be audited later and forced to repay those 

funds. In both cases, the homeowner is rightfully upset and often 

feels perhaps duped by the Federal Government. 

I fully agree that it is important to guard against waste. I think 

we all would. But this seems inherently unfair to those homeowners who seek early assistance in the rebuilding effort, often at 

the direction of the government. 

You recommend that the Department of Housing and Urban Development generate guidance to help victims better navigate the 

programs available to them following a disaster. But because Community Development Block Grant-Disaster Recovery funding almost always comes after FEMA and Small Business Administration, shouldn’t disaster victims be notified, made aware, if you will, 

of any potential duplication of benefits from FEMA and the SBA 

first? 

Ms. ALBERT. Yes. Easy answer. This issue of the confusion for 

the homeowner is one that we have brought to the staff here right 

after Harvey and Irma, but before Maria. We know that there is 

confusion between particularly the SBA and HUD that needs to be 

deconflicted. There are inequities that come as a result. 

Now, technically the reason that HUD comes after SBA is because SBA loans are supposed to go for higher income who can afford to repay; and the grants, as Ranking Member Green was talking about, are supposed to be given to low and moderate income. 

That doesn’t always happen. They don’t always go to the intended. So you could end up with a HUD grant going to somebody 

who is not low and moderate income, and then the person who 

ended up getting the loan is disadvantaged because somebody else 

got a better situation than they did, which is not to have to repay 

the loan. 

We absolutely agree that this deconfliction and seamless issue 

needs to be addressed as you, as the authorizing committee, go forward with how you see disaster across the government. 

This is a result of what I said is the fragmentation of how the 

disaster program emanated, primarily after 9/11. Whoever had 

what function in what department ended up dealing with their program. Some of them overlapped; some of them didn’t. The government has gotten better at trying to make it more of a seamless scenario. However, like I said, it is not a linear route; it is a circuitous 

route. And when you come into it at different aspects of it, you 

could be disadvantaged, and that is why I think you need to address that. 

Mr. CRIST. We the Congress? 

mcarroll on FSR431 with DISTILLER

19 

Ms. ALBERT. Yes. HUD right now deals, like I said, with it in the 

Federal Register, because it has never been directed in a statute. 

And it will look to the supplemental, and it will look to the guidance that comes from the supplemental. Sometimes it is very broad 

and it is very general. This is why they give the maximum feasible 

deference. They won’t put a lot of specificity in it. 

And so you will end up with the inequities that are already built 

into the system if you don’t have at least the ground rules set out. 

Mr. CRIST. So it is not in statute currently? 

Ms. ALBERT. For HUD. 

Mr. CRIST. Right. It is a reg? 

Ms. ALBERT. It is dealt with by Federal Register notices. 

Mr. CRIST. Could it be fixed there then? 

Ms. ALBERT. I think that the more Federal Register notices you 

use, the more inconsistency you will find from disaster to disaster. 

Mr. CRIST. That is unfortunate. OK. Thank you. 

Chairwoman WAGNER. The gentleman’s time has expired. And it 

is unfortunate. It is no way to govern, by Federal Register, or to 

have oversight. 

The chair now recognizes the gentleman from Tennessee, Mr. 

Kustoff, for 5 minutes. 

Mr. KUSTOFF. Thank you, Madam Chair. 

And thank you, Ms. Albert, for being here this morning. If you 

could I will maybe dial it back a little bit, can you explain the role 

of the CDBG-DR and specifically why the program exists, considering the number of other programs designed to provide similar relief among different agencies? 

Ms. ALBERT. The CDBG program, which has traditionally been 

the HUD program, is the preeminent Community Development 

Block Grant out there. So while FEMA responds to disasters and 

emergency management eventually they leave and it is HUD that 

really stays. So when you talk about the 6 to 8 years of a traditional redevelopment after a disaster, it is really HUD that is 

there, and that is because of the Community Development Block 

Grant which was set to make economic and community development. 

Mr. KUSTOFF. Ms. Albert, are you familiar or can you speak to 

the level of coordination in disaster relief efforts between HUD, 

FEMA, and SBA? 

Ms. ALBERT. Sure. So when a disaster initially hits, FEMA is the 

first in under the Stafford Act, which is the governing statute for 

disasters. And it will come in and it will set up a number of systems: Disaster recovery centers for residents and those affected to 

come into, joint operations command centers, and so forth. 

And it will pull in from the Federal Government staff, which is 

exactly what happened to us in the beginning, because, as I said, 

half my organization is law enforcement. We then fell under the 

public safety and security and did sort of nontraditional IG roles, 

but we were, under the Stafford Act, required to do that. We went 

out and did search and rescue. We did other functions, including 

force protection. So that is initial. 

Then, as time goes on and you get sort of past the immediate 

after effects, other areas start taking over, and that is really where 

HUD comes in. It is the long-term economic development and revimcarroll on FSR431 with DISTILLER

20 

talization of a disaster area. But in the initial stages, it is really 

FEMA; and depending on the various support functions, it is different departments. For instance, under public safety and security, 

which is called ESF 13, which you always have an acronym in the 

government, that is ATF that coordinates for all the Federal. And 

they are set up in various support functions of who takes over and 

what. 

But that is very short-term. Eventually, there is the long-term, 

which is where we are at with Sandy right now, 5 years out, and 

it is really the CDBG that is there. 

Mr. KUSTOFF. Again, along those lines, now, I will tell you I am 

a lawyer, was a lawyer before I was elected to Congress. And in 

legal terms, sometimes you talk about forum shopping, where you 

try to pick a court, a particular court that you think may be better 

inclined to handle your matters. Not that I ever did anything like 

that. 

But do you ever see any forum shopping or venue shopping, if 

you will, between grantees seeking the best deal between these 

various agencies? 

Ms. ALBERT. As a law enforcement agency, we absolutely do see 

fraud, and we see it in a number of different ways. 

First of all, getting to the forms and you saying that you are an 

attorney, one of the things that we really try to insist, it doesn’t 

always happen, but HUD has been very good when we point it out 

to them. We want to make sure that those forms that people sign, 

have the correct certifications on them that actually say that you 

are certifying that what you are signing for is truthful, that you 

are the actual homeowner and so forth. If those certifications aren’t 

in the form, it is very difficult to prosecute later on for actual improper activities. So that is a preventative thing. 

But we do see issues of fraud in a variety of different ways. You 

are not supposed to seek moneys to rebuild if your home is a vacation home, for instance, but yet we have people seeking moneys 

which were supposed to be for low and moderate income who have 

vacation homes and are saying that their home was destroyed and 

they live there year round and they are low and moderate income 

and so forth. Those absolutely do happen. 

Mr. KUSTOFF. Thank you, Ms. Albert. 

Now, I see that my time is expiring. I yield back the balance of 

my time, Madam Chairman. 

Chairwoman WAGNER. The gentleman yields back his time. 

The chair now recognizes the distinguished ranking member Mr. 

Green for 5 minutes. 

Mr. GREEN. Thank you, Madam Chair. 

Again, I would like to thank the witness for appearing. I have 

great respect for this witness, and I greatly appreciate what you 

have done in Puerto Rico. You indicated that you dispatched some 

of your personnel to Puerto Rico to acquire information such that 

HUD could react rapidly. Can you say just a little bit more about 

this? I think it is important for us to know. 

And by the way, before you do, you don’t work for HUD. I think 

the record needs to have a clear indication that you do not. Is that 

a fair statement, you don’t work for HUD? 

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Ms. ALBERT. Yes. Inspector generals are independent entities 

within the executive branch, and we are actually sort of strange 

creatures, because we actually report to Congress. So we sit and reside in the executive branch, but we have a dual responsibility to 

report to Congress. 

Mr. GREEN. Thank you. Now, if you would, Puerto Rico and some 

of the things that you have been able to accomplish. 

Ms. ALBERT. So early on, with the humanitarian crisis that was 

happening in Puerto Rico, we sent—we had a limited staff in Puerto Rico, so, unfortunately, over the years our staff itself has gone 

down and so we have had to diminish some of our actual field offices, and Puerto Rico was one of them, although we still had a 

presence. 

We were trying quickly, because we knew that HUD was not able 

to get around and, frankly, was having a great deal of difficulty 

even finding its own staff. So we would go out in the first days 

after Maria to try and locate HUD staff, let the Department know 

that its staff was OK—many of them were in shelters, they had 

evacuated—and just let them know that they were there and where 

they were. So that was the very, very beginning was actually locating people. 

After that, we went into and did a variety of things. We, along 

with the U.S. Attorney’s Office and the FBI, were part of the 

Viejito task force which tried to deal with the issue of hoarding, 

which always happens in a disaster when there is limited fuel and 

supplies. We went into nursing homes, Section 202 and Section 232 

facilities that are HUD but others as well, to make sure that the 

situation that happened with Irma in Florida where the horrible 

nursing home situation happened didn’t happen in Puerto Rico. 

So we took valued water, supplies, and other things with our 

agents. And we had to go, unfortunately, with our agents, because 

we had to protect the trucks, but not only that, we had to navigate 

the streets, which were dangerous, with downed wires and other 

things, to get those things to the elderly and disabled. 

Mr. GREEN. Let me intercede for just a moment, because your 

list is rather extensive, and I greatly appreciate all that you are 

saying. 

Notwithstanding all that was done, and you have obviously made 

a Herculean effort, but notwithstanding all that is done, we can 

visually see that there is still great work to be done in Puerto Rico. 

I heard General Honore, who was in Louisiana after Katrina, literally was in charge of a good amount of the disaster recovery effort, he indicated that circumstances such as what we see in Puerto 

Rico might require a lot more flexibility. The accountability obviously should be there, but it might require a lot more flexibility. 

Now, he used a term that I am not suggesting that we use, and 

I don’t think he meant it literally. Maybe he did. But he said, listen, let the person who needs to make the request just write it out 

on a piece of paper and just send it in, because of the dire circumstances that are having to be dealt with. 

At some point, in places like Puerto Rico, we have to dispatch 

more of our resources and we have to do it in a much more expeditious fashion. I appreciate greatly what you are trying to do to help 

acquire the intelligence. Somehow, we cannot leave people stranded 

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in the middle of the ocean, as has been called to our attention. We 

really have to find a way to get help in as quickly as possible. 

And on that point of getting help to them, in my district we had 

a town meeting. And for us to explain to my constituents what was 

available, we had to bring in nine people, nine people to explain. 

And at the end, I am convinced that people were thoroughly confused after having all of this siloed information presented. It is just 

overwhelming. And you are trying to get back home. Your kids are 

at someplace where they are probably being kept by someone. 

Somehow we have to do more for Puerto Rico. Can you just 

quickly give some indication, based on your observations, as to how 

we might move expeditiously? 

Ms. ALBERT. So it is always a balancing act. Obviously, there is 

a great humanitarian crisis in Puerto Rico that exists that is 

unique to that area. And getting people just basic necessities—food, 

electricity, water—is paramount. 

By the same token, we also have to look to the fact that the capacity of Puerto Rico to now take the vast amounts of billions of 

dollars that are going to come—that those structures that need to 

be set up—and they do there, because they are in bankruptcy and 

they have some problem agencies—need to be done quickly but 

done well, with good accounting principles and other things. 

So that—just take the lessons learned. Disasters—you don’t need 

to reinvent the wheel—disasters have occurred: 9/11, Katrina, 

Sandy. Take those lessons, make sure that you have the best of 

those and put it in place where you know that there will be capacity issues. 

Chairwoman WAGNER. The gentleman’s time has expired. 

The chair now recognizes the gentlelady from New York, Ms. 

Tenney, for 5 minutes. 

Ms. TENNEY. Thank you, Chairwoman Wagner. 

And I really appreciate the inspector general, Ms. Albert, being 

here today to discuss and examine the Community Development 

Block Grant-Disaster Recovery Program, which is intended to deliver emergency help to communities and neighborhoods with limited resources post-natural disaster to help rebuild their livelihood. 

I just want to make that really clear. Over the last decade, the 

Housing and Urban Development inspector generals audited grantees, which include States and local governments, where they found 

many areas this program can improve on to be run more efficiently. 

And I heard your testimony earlier. Obviously, I have numerous 

sheets of some of the work you have done, which looks very comprehensive, and some issues my colleague mentioned about some of 

the Sandy funding not coming out. I am really happy to report that 

with all the natural disasters, and it is particularly in the flooding 

realm, that there are none of my local communities or anyone in 

my district that has been reported as not getting their funding out. 

But there are a couple things I just wanted to talk to you about 

as the inspector general, and one of them is the thresholds in determining how we get to some of the disaster aid for, especially in 

my community, it seems that the flooding and the natural disasters 

we have almost cruelly go to the poorer areas and the poorer neighborhoods, and they are the ones that need the most resources. And 

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23 

lars where the basements are 5 feet of mud, and these people don’t 

have the resources. 

How do we get around—I don’t want to say get around, but get 

to the threshold so they actually meet—some of them are dollar 

amounts, some are per capita. How would you recommend we actually get to some of these people who are caught without having— 

and especially in an area like mine where our values are much 

lower than, say, New York City or other areas. 

Ms. ALBERT. First of all, to get to your point about that some of 

the poorer communities often flood this, unfortunately, is a reality. 

You saw it with Katrina, New Orleans. Some of the areas that 

have been developed that are the poorer areas were in the ninth 

ward, were flood zones. And this is why they flood, they were built 

in flood zones. We see this, unfortunately, even with public housing, that they are built, some of them, in flood zones, which gets 

to another issue which we have audited, which is that public housing sometimes doesn’t buy flood insurance even though they are in 

a flood zone. 

But as far as the inequities of receiving funding HUD’s allocation 

when it gets a supplemental and it goes to CDBG-R, CDBG is formula-based, but CDBG-R is a whole different allocation. And it 

looks to FEMA and SBA and the first responders and it sees what 

unmet needs are there, and then it makes a decision based on what 

it has determined the destruction has been in a particular area, 

and then it goes into a calculation of what is the unmet need. 

I think that if you feel that there are inequities—again, this is 

not a statutory program. So it is an interpretation by them and 

Federal Register over supplemental language. 

Ms. TENNEY. If I may just say, one of my concerns is that our 

local governments have taken a lot of the burden in my region, and 

some of our local officials have actually become quite knowledgeable on some of the disasters, especially related to flooding. 

And it seems that when the Federal Government comes in, we 

don’t take into account their local knowledge and their ability to 

solve the problem. And I am wondering if that is something the inspector general can dive in and say, look, these guys know what 

is going on, how can we give them the opportunity to provide the 

solutions, and then better spend the money that is coming in. 

And often we find that tens of thousands of dollars come in on 

projects that could have been solved—we have already studied 

these, we have analyzed them, and sometimes our input isn’t taken 

into consideration. Is that something that we can do through your 

office or we can fix? Because it is a huge problem. 

Ms. ALBERT. I think that this is an issue you can discuss when 

you talk about codification in an authorizing language, because 

typically under CDBG disaster recovery funding, it will go to the 

States as opposed to an entitlement community, which could be 

lower, a locality, which is where traditional CDBG goes. 

So this inequity rises because you have different funding streams 

of who gets the money. And maybe this is something that you could 

discuss while you are dealing with your authorizing language. 

Ms. TENNEY. Thank you. Because really, we do need to focus on 

so many of these communities. We know what we should have 

done, could have done. It doesn’t get done. And then we have a few 

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24 

years later a heavy rain, not even a major storm, and we are in 

catastrophic flooding again like we experienced this year in my district on July 1st. And where’s the Federal Government? We are 

still tied up. We are still not responding the way we should be to 

our needy communities. 

And I do thank you. My time has expired, but I thank you very 

much for your great testimony. 

Chairwoman WAGNER. The gentlelady’s time has expired. 

And the chair now recognizes the gentleman from Indiana, Mr. 

Hollingsworth, for 5 minutes. 

Mr. HOLLINGSWORTH. Good morning. Thank you so much for 

being here. And in addition to thanking you for being here, thank 

you for the hard work that you put in every day, you and your 

team. I know that you do that with a great amount of diligence. 

You can see that in your testimony here today and the way that 

you are thoughtfully answering questions and you are focused on 

ensuring not only that we do everything we can to help those that 

need it, but also that we do everything we can to be good, thoughtful stewards of taxpayer dollars. 

From a bigger picture perspective that I wanted to ask about, 

what I kind of heard throughout the course of your testimony today 

and some of the questions my colleagues have been asking is in the 

event that we respond to something like this, ‘‘we’’ being the Federal Government, there are two big risks and concerns, right? 

One is that there is a lot of overlap and duplicative work and resources that are put to the same missions. In other words, the two 

circles of the Venn diagram are too much overlapped, right? But 

then there is also another big risk, right, that those circles don’t 

overlap at all and people fall through the cracks and aren’t able to 

get the resources that they want. 

And you and certainly the Department overall are trying to find 

the place where you can marry those two up at exactly the point 

where there is no overlap, no duplicative waste of resources, but 

also that no one falls through the cracks. 

And so really, what I wanted to ask first was, have you encountered any challenges inside the Department in being able to execute upon your mission of ensuring that there are stewards of taxpayer dollars thinking through at each of these points? Is there 

anything that we need to provide you, resources or tools, to help 

you and your office accomplish their mission more thoroughly 

throughout the Department itself? 

Ms. ALBERT. Thank you for that question. Nobody takes the job 

of an inspector general because they want to win a popularity contest. I will be honest with you. It is maybe one of the toughest jobs 

in government, because you are criticizing programs, but you are 

criticizing them in a way that you hope to make them better. 

Mr. HOLLINGSWORTH. Right. 

Ms. ALBERT. But, of course, the message is not always one that 

is well-received by many. 

From the inspector general’s perspective, it has been a tough 

road for us. Not only have we now had to deal with natural disasters, but, frankly, HUD, during the great economic crisis after 

2011, was, frankly, the major entity supporting the economy 

through housing. I don’t know if people realize that FHA became 

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25 

30 percent of the mortgage industry at that point for new home 

sales. And when you add refinances in, it was as high as 70 percent. 

Concurrently, while it has had to oversee that, for instance, I 

have to oversee a $1.5 trillion FHA fund and a $1.5 trillion Ginnie 

Mae remaining principal balance. That is $3 trillion, including 

HUD’s $48 billion regular appropriation and $47 billion disaster. 

When Sandy started, I had 711 staff. Today, I have 574. So you 

can see that something gives. And while I am very proud of our organization—we have returned more than $60 in the last few years 

to the government for every dollar you spend on us—there is only 

so much we can look at. 

Mr. HOLLINGSWORTH. Is it just a question of resources or do you 

need more of a cultural shift or a push from Congress on how important your role is, how important auditing generally is, how important the inspector general role can be? 

Ms. ALBERT. One thing I have to say about this committee, this 

committee has always been, as our authorizing committee, very 

supportive of the inspector general. We have enjoyed a great relationship as our authorizers. But I think there are more things that 

this committee, as an authorizing committee, could do to help 

maybe alleviate, and certainly in this area, not only just codification, extending our oversight to subgrantees ensuring that procurement rules are met, because we know there can be great abuse in 

procurement. These are really things that could help facilitate us 

and would actually help our dialog with the Department. 

Now, I can say that I meet regularly with the Secretary. As a 

matter of fact, I have a meeting with him tomorrow. And he and 

I have had conversations about the critical juncture we are at right 

now and the need to do something different. 

Mr. HOLLINGSWORTH. I totally agree with that. And I think that 

certainly maybe many people see you and your role as a problem; 

I see it as the key to the solution and ensuring that we accomplish 

the mission that we want, but also do it effectively. 

My good friend and colleague that also sits on this committee, 

not this subcommittee, French Hill, this is a matter of passion for 

him as well. I know that he has done a great amount of work after 

Katrina, as president of the Rotary Club, Cooperative Baptist Fellowship, and ensuring that homes were rebuilt down in Louisiana. 

And he was astounded to see what he felt like was a waste of 

resources and not long-term sustainably helping individuals build 

above the floodplain so they wouldn’t have this issue again. And so 

he and I are going to continue to work together to do everything 

we can to support you in your role and the Department generally 

in accomplishing its mission, but also in being a good steward. 

With that, I yield back. 

Chairwoman WAGNER. The gentleman’s time has expired. 

I am going to take a point of privilege from the chair and recognize my good friend from Missouri, Mr. Cleaver, for a quick follow 

up question, please. 

Mr. CLEAVER. Thank you. Let me thank you, Madam Chair, for 

the hearing, and thank the IG for being here. 

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26 

In many ways, some of the questions, maybe the majority of the 

questions we ask were not what you do. We put you in the position 

in defending HUD. 

But I want to go back to what you might be able to do. You 

talked about the fragmentation, which is what I was trying to talk 

about earlier. Again, if Mayview is hit by a disaster, Mayview, Missouri, in my district, 222 people, if we followed the law of the 

CDBG—I know a little bit about CDBG, so I know the requirements. If we followed the regulations, before Mayview can get Federal assistance, there is supposed to be a Presidential declaration. 

There has not been a Presidential declaration for any of these 

small towns that have had disasters. 

And there is also a requirement, a HUD requirement for a community hearing. And I think you guys probably are the people that 

check up on this. There is supposed to be a community hearing. 

You are supposed to have a written notice of the hearing, and the 

plan is supposed to be presented. None of that happens. 

We have a problem. I have seen it firsthand. I have talked about 

it. I don’t know what we can do. Looking at your recommendations, 

your legislative recommendations, and maybe it is all entangled 

into your recommendations, but there needs to probably be some 

clarity. 

This is a problem, and it is just a matter of time we are going 

to have another situation where in Biloxi, Mississippi, the ranking 

member and I went down there right after Katrina. They had rebuilt a yacht dock for yachts. People—downtown, the windows were 

still out of stores. Anyway, this is frustrating. 

Thank you so much for being here. 

Thank you, Madam Chair, for allowing me to follow up. 

Ms. ALBERT. Can I make one point, though? You are absolutely 

right that for HUD, you have to have a Presidentially declared disaster zone for them to come in, traditionally, after FEMA and SBA. 

FEMA can come in—I don’t know if I have this title correct— 

when there is an emergency zone created, so that they can preposition and get in before the disaster. So like when Harvey was hitting, they would get in there before. 

This is why I am recommending that HUD actually have these 

jump teams, so that they can get in and do what they have to. And 

this may be part of your authorizing languages. When does HUD 

come in? Does it have to wait for the declared zone. 

Chairwoman WAGNER. I thank the gentleman for his secondary 

question. And I thank you, Ms. Albert, for your testimony today 

and the wonderful collaboration between your office and the Oversight and Investigation Committee here of Financial Services. I 

know we have varied in some of our questioning here today with 

you. 

And knowing that Congress thus far in the 115th Congress has 

only authorized and appropriated, in fact, $7.5 billion in Community Development Block Grant-Disaster Recovery funds, and they 

were specifically I know for Harvey and Irma. Many of us spoke 

today about the horrific conditions and tragedy and devastation in 

Puerto Rico. Knowing that there are not specific CDBG-DR funds 

that have been appropriated there yet, I just thank you for your 

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27 

perspective on some of the ways that we can work together to reform the system. 

The ranking member and I are committed to working together to 

come up to some of your recommendations, some of your thoughts 

about how we can streamline this so that in the end, this money 

does, in fact, reach those who need it the most and that we are— 

while remaining good stewards of the taxpayers’ dollars. 

So I thank you, Ms. Albert. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And this hearing is now adjourned. 

[Whereupon, at 12:01 p.m., the subcommittee was adjourned.] 

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(29) 

A P P E N D I X 

November 1, 2017 

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Testimony Before the 

United States House of Representatives 

Committee on Financial Services 

Subcommittee on Oversight and 

Investigations 

Reforming the Community Development Block GrantDisaster Recovery Program 

Testimony of 

Helen M. Albert 

Acting Inspector General 

Office of Inspector General 

U.S. Department of Housing and Urban Development 

November I, 2017 
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Chaim1an Wagner, Vice Chairman Tipton. Ranking Member Green, and Members of the 

Subcommittee, I am Helen M. Albert, Acting Inspector General of the U.S. Department of 

Housing and Urban Development (HUD). Thank you for the opportunity to highlight our 

perspectives on HUD's oversight of disaster assistance funding, particularly in light of the 

unprecedented challenges faced by this Nation to respond to the destructive hurricanes and fires 

that recently hit the United States. The United States has never been hit by multiple hurricanes 

as strong as Harvey in Texas; lnna in Florida. Georgia. South Carolina, and the U.S. Virgin 

Islands; Maria in Puerto Rico and the Virgin Islands; and Hurricane Nate along the coast of 

Mississippi in the same season in modem times. These storms have been followed by 

devastating wildfires in northern and southern California. which have also, like the stom1s. 

caused extensive destruction and loss of human life. 

Almost immediately after Hurricane Harvey. our Office of Inspector General (OIG) staff helped 

to locate unaccounted for I-IUD employees in the affected areas, as well as providing search and 

rescue and first responder assistance. In one case. special agents in the Houston area used boats 

to rescue people stranded in their homes by flood waters (one rescuing nearly 70 individuals over 

3 days). Others came in from Baton Rouge to work midnight shifts in Pasadena to feed local law 

enforcement responders. In another example, under the Stafford Act (Emergency Support 

Function 13, Public Safety and Security), a team of our special agents went to Florida to assist in 

providing force protection for a Disaster Medical Assistance unit. being the first Federal Jaw 

enforcement Quick Response Team into the Keys to assist witb medical missions. 

Between Hurricanes Irma and Maria, our special agents in Puerto Rico flew by military 

helicopter to the Virgin Islands to assess the destroyed public housing. In Puer1o Rico, our 

agents located HUD staff disbursed after the storm and then escorted other HOD employees as 

they together delivered food, water, and supplies to staff so it could be operational. Other agents. 

accompanied hy the Federal Bureau of Investigation and local Puerto Rican law enforcement. 

provided security for trucks and delivered provisions to the elderly and disabled and also 

assessed senior housing and nursing homes for the Department. We have also provided 

transportation and protection to HUD officials as they conducted initial damage assessments. 

Currently, our auditors and agents are quickly assessing the capacity of the Puerto Rican entities 

that will likely receive billions of dollars in Federal assistance shortly. We are also working on 

capacity reviews for other areas that will be receiving disaster recovery funding. J could not be 

more proud of the work our OIG stafThas done in these disaster-a!Tected areas. 

As just one example of exposure to the hurricane devastation. an estimated 213,000 Federal 

Housing Administration (FHA)-insured single-family homes in the area affected by Hurricane 

Harvey lacked flood insurance. although not all were damaged. A media report puts the number 

of homes damaged or destroyed by I Jurricanc l Jarvey at 185.000, with at least 80 percent of 

those lacking flood insurance. All of the islands of Puerto Rico and the U.S. Virgin Islands and 

the States of Florida. Georgia. South Carolina, Mississippi. Texas. and California are in the 

process of fully assessing the massive destruction from the hurricanes and wildfires and the 

recovery eiiorts that will be needed there. The amount of f-IUD funding ultimately needed to 

assist with recovery for these most recent disasters will be enormous. HUD's efforts to provide 

assistance to affected families and communities after the stom1s and wildfires will be essential to 

that recovery. Indeed, if you look to the last hig hurricane. Sandy. BUD was number one in 

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terms of total funds disbursed. The Depattmcnt will continue to have challenges for years to 

come in helping communities in their long-term recovery process. 

Background 

The Department's primary mission is to create strong, sustainable. inclusive communities and 

quality, affordable homes for all. I IUD seeks to accomplish this mission through a wide variety 

of housing and community development grant. subsidy. and loan programs. HUD also has 

responsibility for administering disaster assistance programs, a role that has expanded 

substantially over the years. Congress has provided supplemental appropriations through HUD's 

Community Development Block Grant (CDBG) program to help communities recover from both 

natural and man-made disasters. The CDBG program is flexible and allows CDBG Disaster 

Recovery (CDBG-DR) grants to address a wide range of challenges. Since 2001 (through 20 16). 

Congress has appropriated more than $47 billion in supplemental funding to BUD to address 

long-term recovery in the wake of a wide range of disasters. including the terrorist attacks of 

September 11, 2001; Hurricanes Katrina, Rita. and Wilma in 2005; Hurricanes Ike and Gustav 

and Midwest flooding in 2008: Hurricane Sandy in 2012; and HurTicane Matthew in 2016. We 

note that 5 years after llurricane Sandy, approximately 50 percent of the recovery funds have not 

yet been spent. From 1993 through 1999, HUD disaster funding totaled less than $1.7 billion. 

Historically. CDBG-DR funding was appropriated as ·'no year" funding and is available until 

spent with no time limit. This changed with Hurricane Sandy funding. which had to be obligated 

by the end of fiscal year 2017. However, funding for subsequent years· disasters was again 

appropriated as "no year" funding. 

Management Challenges Faced by HUD in Administering Its Disaster Program 

The Department faces significant challenges in monitoring disaster program funds provided to 

various grantees. including Stales. cities, and local govemments under its purview. This 

challenge is particularly pressing for HUD because of the limited resources to directly perform 

oversight. the broad nature of HUD projects. the length of time needed to complete some of these 

projects, the ability of the Department to waive certain program requirements, and the lack of 

understanding of disaster assistance grants by the grantees. HUD must ensure that the grantees 

complete their projects in a timely manner and that they use the funds for their intended 

purposes. Since HUD disaster assistance may fund a variety of recovery activities. HUD can 

help communities and neighborhoods that otherwise might not recover due to limited resources. 

However. oversight of these projects is made more difficult due to the diverse nature of HUD 

projects and the fact that some construction projects may take between 5 and I 0 years to 

complete. llUD must be diligent in its oversight to ensure that grantees have identified project 

timclines and are keeping up with them. l·llJD also must ensure that grantee goals are being met 

and that expectations are achieved. 

HUD O!G has had extensive audit and investigative experience with the Department's CDBGDR program. most notably with grants relating to recovery after Hurricane Sandy in 2012, 

Hurricane Katrina in 2005. and the terrorist attacks of September 11. 2001. Over the years. HUD 

has gained more experience and made progress in assisting communities recovering from 

disasters, but it continues to face the following challenges in administering these grants: 

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Ensuring that expenditures are eligible and supported. 

Certifying that grantees arc ftlllowing Federal procurement regulations. 

Addressing concerns that citizens encounter when seeking disaster assistance. 

Conducting consistent and sufficient monitoring efforts on disaster grants. 

OIG has completed 38 audits and 4 evaluations as well as extensive investigation-related actions 

relating to CDBG-DR funding ltlf Hurricane Sandy and other eligible events occurring in 

calendar years 2011. 20!2, and 2013. We have identified $1!9.6 million in ineligible or 

unnecessary costs. $465 million in unsupported costs. and $5.3 billion in funds put to better use. 

A number of other audits and evaluations. as well as investigative work, arc currently underway. 

Before Hurricane Sandy, as mentioned above. OIG had extensive audit and investigative 

experience with the CDBG-DR program, most notably with grants relating to recovery after 

Hurricane Katrina. Hurricanes Ike and Gustav. and the terrorist attacks of September 11, 2001. 

While over the years. HUD has gained more experience and made progress in assisting 

communities recovering from disasters. it continues to fi!Ce challenges in administering these 

grants. 

Ensuring That Expenditures Arc Eligible and Supported 

HUD faces a significant management challenge to ensure that funds disbursed for disaster 

recovery programs are used for eligible and supported items. We have highlighted 

several of our rcpo1is that illustrate these challenges for HUD in administering disaster 

recovery programs. 

• In our review of St. Tammany Parish ·s (Louisiana) Disaster Recovery grant 

program.' we determined that the Parish did not ( l) support that it performed an 

independent cost estimate and adequate cost analyses or maintained complete 

procurement Iiles; (2) maintain a complete monitoring policy and finalize and 

fully implement its policy to aid in detecting fraud. waste, and abuse or have an 

internal audit function; or (3) include all required infonnation on its public 

website. As a result of these systemic deficiencies. the Parish could not provide 

reasonable assurance to HUD that it would properly administer, adequately 

safeguard. and spend its remaining $8.67 million allocated for CDBG DR funding 

in accordance with requirements and paid more than $400,000 in questioned 

costs. 

In our report on the City of Springfield, MA's management of its CDBG-DR 

grants.' we f(,und that the City did not always properly procure vendors in 

accordance with Federal requirements and some payments to vendors were not 

adequately supported. The City also did not always properly document the 

duplication of benefits review in accordance with Federal requirements and City 

1 Audit Report 2017-FW-1004, St. Tammany Parish, Mandeville LA. Did Not Always Administer Its CDBG 

Disaster Recovery Grant in Accordance \Vith I IUD Requirements or as Certified, April 6, 2017 

'Audit Report 2017-B0-1002, The CityofSpringtlcld. MA, Needs To Improve Its Compliance With Federal 

Regulations tOr Its Community Development Block Grant Disaster Recovery Assistance Grant. October 17.2016 

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policies. As a result, HUD lacked assurance that $1.9 million in CDBG-DR funds 

was provided for supported, necessary, and reasonable costs. 

• In our review of the City of New York's Build it Back Single Family program.' 

we detennined that City officials did not establish adequate controls to ensure that 

CDBG-DR funds were disbursed in accordance with the HUD-approved action 

plan and to ensure compliance with HUD"s Lead Safe !lousing Rule 

requirements. As a result. the City could not ensure that all eligible homeowners 

received fair and equitable treatment, and it did not show that more than $1 

million disbursed was for lead-safe homes. 

• In our review of the State of Connecticut's management of its Sandy CDBG-DR 

grants, 4 we found that the State did not always comply with the requirements for 

its owner-occupied rehabilitation and reimbursement programs. Specific issues 

included that procurements were not always executed in accordance with HUD 

requirements, environmental reviews were not completed in accordance with 

requirements, and the State did not always support the low- and moderate-income 

national objective. As a result, more than $2.4 million in CDBG-DR funds was 

ineligible, and more than $13.5 million was unsupported. 

We attributed these conditions to the grantees' weaknesses in maintaining supporting 

documentation, unfamiliarity with HUD rules and regulations, inadequate controls over 

its rehabilitation and reimbursement program, noncompliance with existing policies and 

procedures, and failure to follow State and Federal procurement regulations. 

Certifying That Disaster Grantees Are Following Federal Procurement Regulations 

We continue to have concerns about HUD's ability to ensure that disaster grantees are 

following Federal procurement regulations. Under Public Law 1 1 3-2, grant recipients of 

HUD CDBG-DR funds must provide a copy of their procurement standards and indicate 

the sections of their procurement standards that incorporate the Federal standards. States 

and their subgrantces may follow their own Stale and local laws, so long as their 

standards are "equivalent" to the applicable Federal law and standards. Further, a State is 

required to establish requirements f(,r procurement policies and procedures based on full 

and open competition. In addition. all subgrantees of a State are subject to the 

procurement policies and procedures required by the State. so long as the procurements 

conform to applicable Federal laws and standards. 

Our audits of disaster programs funded under Public Law 113-2 found CDBG 

procurement violations and other contracting problems. We issued 15 audit reports on 

disaster grantees with questioned costs totaling more than $391.6 million related to 

procurement. Ten of the reports and more than $371 million of the more than $391.6 

-'Audit Report 2017-NY-100 I, The City ofNew York. NY, Implemented Policies That Did Not Always Ensure 

That Community Development Block Grant Disaster Recovery Funds \Vcrc Disbursed in Accordance With Its 

Action Plan and Federal Requirements. November 2:, 2016 4 Audit Report 2017-B0-1 001. The State of Connecticut, Community Development Block Grant Disaster Recovery 

Assistance Funds, October 12. 2016 

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million involved State grantees. For example, in our audit of the State of New Jersey's 

CDBG-DR-fundcd Sandy Integrated Recovery Operations and Management System, 5 we 

found that the State did not procure services and products for its disaster management 

system in accordance with the Federal procurement requirements in 24 CFR (Code of 

Federal Regulations) 85.36 (b) through (i). Specifically, the State (1) had not prepared an 

independent cost estimate and analysis before awarding the system contract to the only 

responsive bidder. (2) did not ensure that option years were awarded competitively, (3) 

included provisions in its request for quotation that restricted competition, and ( 4) did not 

ensure that software was purchased competitively. The State did not adopt the Federal 

procurement standards but certiiied that its standards were equivalent to the Federal 

procurement standards. OIG concluded that the State's ccrtiiication to HUD that it had 

proiicicnt procurement processes was inaccurate. HUD disagreed. To resolve the 

recommendations from this audit, on January I 0, 2017. I day before her departure. 

HUD's then Deputy Secretary issued a memorandum stating that a State grantee that 

followed its procurement policy was not required to follow the Federal requirements. 

ln another audit ofHUD's controls over its certifications of Stale disaster recovery 

grantee procurement processes, 6 we found that HUD did not always provide accurate and 

supported certifications of State disaster grantee procurement processes. Specifically, 

HUD ( 1) allowed conflicting information on its certification checklists, (2) did not ensure 

that required supporting documentation was included with the cettification checklists, 

and (3) did not adequately evaluate the supporting documentation submitted by the 

grantees. As a result. f!UD did not have assurance that State grantees had proiicient 

procurement processes in place, and the Secretary's certifications did not meet the intent 

of the Disaster Relief Appropriations Act of 2013. HUD again disagreed with the 

recommendations in this audit. It stated that our disagreement regarding the definition of 

a proficient procurement process as it related to State disaster grantees and the meaning 

of"equivalenf' as it related to a State's procurement policies and procedures being 

"equivalent to" or "aligned with" the Federal procurement standards was closed by the 

former Deputy Secretary in her January I 0, 2017. decision regarding the New Jersey 

audit. Based on that decision, HUD believed it was appropriate to close all of the 

recommendations. We disagreed and referred these recommendations to the then Acting 

Deputy Secretary on March 31. 2017. 

Although our audit reports have continued to identify a number of significant 

procurement issues. HUD has failed to make the substantive changes necessary to 

address the concerns. ln fact, while HUD has revised the procurement requirements for 

State grantees, these revisions simply endorsed what the State grantees were already 

doing. For example, under Public Law 113-2, HUD considered that State grantees had a 

proficient procurement process in place if the State's procurement standards were 

equivalent to the Federal procurement standards. However. in June 2016, under Public 

Law I 14-113, HUD considered that State grantees had a prolicient procurement process 

'Audit Report 20! 5-PH-l 003, The State of New Jersey, Trenton. N.l, Community Development Block Grant 

Disaster Recovery-Funded Sandy Integrated Recovery Operations and Management System, June 4, 20!5 6 Audit Report 20 16-PH-0005. HUD Certifications of State Disaster Grantee Procurement Processes. September 29. 

2016 

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in place if the effect of the State's procurement standards was equivalent to the effect of 

the Federal procurement standards, meaning that the standards operate in a manner 

providing fair and open competition. Later, in November 2016 and January 2017, under 

Public Laws J 14-223 and 114-245, respectively, HUD considered that State grantees had 

a proficient procurement process in place if the effect of the State's procurement 

standards was equivalent to the effect of the Federal procurement standards, meaning that 

the standards, while not identical, operate in a manner that provides for full and open 

competition. OlG disagrees with the lower procurement standards and will continue to 

perform audits in this area due to the concerns that we and the Inspector General 

community have in this particular area. OIG believes that Federal procurement is more 

than ensuring full and open competition. It also involves the acquisition of products and 

services at fair and reasonable prices. 

Addressing Concerns That Citizens Encounter When Seeking Disaster Assistance 

In response to a request from HUD, we identified the path and process citizens, 

homeowners, and businesses navigate to obtain disaster recovery assistance and the 

challenges and barriers they may encounter. Citizens may encounter a variety of 

challenges throughout the disaster assistance navigation process. These challenges 

include potential duplication of benefits, slow disbursement of disaster-related funding, 

and delays in funding for low- and moderate-income citizens. Based on our evaluation, 7 

we identified the following challenges citizens may encounter while obtaining such 

assistance: 

• Duplication of bene tits is an inherent risk to disaster recovery funding across the 

govemment. Benefits from multiple sources of Federal aid can result in citizens' 

receiving funds that exceed the need for a particular recovery purpose. In these 

cases, citizens are responsible for repaying any duplicate benefits, which can be a 

burden to the citizen. J\ 2016 Congressional Research Service report noted 

duplication between the Small Business Administration (SBA) Disaster Loan 

Program and the CDBG-DR grant program. Another issue is that SBA disaster 

loans are dispersed more quickly than financial assistance from a CDBG-DR 

grant. As a result, it is possible for some homeowners to receive an SBA disaster 

loan, which would make them ineligible for a CDBG-DR grant Therefore, 

homeowners who sought assistance early on are, in effect, disadvantaged because 

SBA loans must be repaid, while CDBG-DR grants do not have a repayment 

requirement. 

In some cases, the slow disbursement of funding created significant problems for 

citizens navigating the recovery process. For example, in October 2016, the State 

of New Jersey's legislative committee held a hearing in which several citizens 

identified problems they encountered navigating the application process at both 

the Federal and State levels. Almost 4 years after Hurricane Sandy, citizens 

complained of difticulties in rebuilding their homes while fighting foreclosure 

actions, being short-changed by contractors, and receiving little or no help from 

7 Evaluation Report 20 17-0E-0002S. Navigating the Disaster Assistance Process, April 10. 2017 

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the State or Federal agencies disbursing funds to help them recover from the 

ston11. 

• CBDG-DR spending rates, as well as how funds were disbursed, varied 

significantly from State to State, creating inconsistencies in recovery efforts. In 

general, at least half of CDBG-DR funding must benefit low- and moderateincome (LMI) individuals and areas. HUD OIG identified instances in which a 

significant portion ofCDBG-DR funding was not provided to LMI individuals 

and areas. For example, in 2016, IIUD OIG issued a report on the State of 

Connecticut's CDBG-DR funding for Hurricane Sandy, which found that the 

State did not always support the LMI national objective. Such instances put lowincome citizens at risk of not being able to return to a permanent home. 

Conducting Consistent and Sufficient Monitoring Efforts on Disaster Grants 

Another area of concern is HUD's ability to properly monitor all disaster grant recipients. 

Based on our fiscal year 2015 financial statement audit. we communicated to I-IUD that it 

did not always monitor disaster grants in accordance with its policies and procedures. 

Specifically, monitoring reports were not issued in a timely manner, and followup on 

monitoring findings was not performed consistently or promptly. Because of limited 

resources, HUD faces difficulties in performing the oversight of an aggressive monitoring 

schedule for Hurricane Sandy grantees. The inconsistent nature of the disaster recovery 

programs and HUD's intense workload continued to beset its efforts to mitigate its 

challenges and conduct its work in a timely manner. Since IIUD disaster assistance may 

fund a variety of recovery activities. HUD can help communities and neighborhoods that 

otherwise might not recover. However. HUD must be diligent in its oversight duties to 

ensure that grantees have completed their projects efllcicntly and used the funds for their 

intended purposes. Untimely resolution of grantee performance and financial 

management issues increases the programs· susceptibility to instances of fraud. waste, 

abuse. and mismanagement of fimds. 

Lessons Learned From HUn OlG Oversight 

In March 20 I 3, we issued a comprehensive audit assessing the disaster recovery programs for 

hurricanes that hit the Gulf Coast States from August 2005 through September 2008. 8 Our 

objectives were to (I) determine what had heen accomplished using the funding and the funds 

remaining to be spent; (2) compare actual versus projected performance; and (3) identify best 

practices, issues, and lessons to be learned. 

The Gulf Coast States had made progress in recovering from the presidentially declared disasters 

as a result of several hurricanes. As of August 2012, the States had spent more than 87.5 percent 

of the available Katrina, Rita. and Wilma funds and 27.2 percent of the available Gustav and Ike 

funds. Thus, States had received almost $24 billion and disbursed almost $18.4 billion. resulting 

in about $5.6 billion remaining to be spent. Further. of the total $24 billion. the States had not 

budgeted about $1.4 billion to specific programs or activities several years after receiving the 

'Audit Report 2013-FW-0001, Generally, HUD's Hurricane Disaster Recovery Program Assisted the Gulf Coast 

States' Recovery: However, Some Program Improvements Arc Needed, March 28.2013 

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funds, making the need for those funds questionable. Some of the delay in budgeting funds 

could have been attributed to the States' revising their programs, State delays encountered due to 

lawsuits, or HUD's rejection of a State's action plan. The States used the funding primarily to 

assist communities in repairing and rebuilding housing, compensating homeowners. repairing 

infrastructure damage, and providing economic development. The States could improve on 

reporting their activities, as some of their activities had no or nominal progress reported because 

they did not generally report their progress until the projects were complete. In addition, while 

the States generally met the various statutory mandates, at the time of the audit, Texas and 

Louisiana had not yet met two mandates relating to ( l) repairing, rehabilitating, and 

reconstructing aiTordable rental housing stock and (2) benefiting low- and moderate-income 

persons. 

Although the States had made progress. based on our prior audits and a review of the program's 

data, there have been some lessons to be learned regarding deadlines, program guidance, 

information system technology acquisitions. procurements, and homeowners' insurance. While 

HUD was receptive to many of our recommendations and has made some changes, we continue 

to have concerns, most notably with the ability of grantees to spend funds in a timely manner. 

More than 4 years have passed since our report. and significant funds from these disasters remain 

unspent ($494.5 million in Katrina, Rita, and Wilma funds and $852.3 million of the available 

Gustav and Ike funds). Moreover, more than I 0 percent, or $364 million, of HUD funding 

relating to the terrorist attacks of September 11, 200 l, remains unspent 16 years after that 

disaster. While placing a time limit on the Hurricane Sandy funding, HUD intends to grant 

extensions that will extend the expenditure deadline to the end of fiscal year 2022. 

Fraud Schemes Encountered by HUO OIG's Investigative Efforts Relating to Hurricanes 

Katrina and Sandy 

In addition to our audits and evaluations as highlighted above, our office has devoted 

considerable resources to investigate criminal activity that ultimately occurs following disasters 

and the expenditure of funds. Following Hurricanes Katrina and Sandy, Congress recognized the 

need for dedicated oversight and investigative resources targeting HUD's postdisaster and 

reconstruction etTorts. OIG investigations identified unscrupulous contractors and individuals 

preying on a public that was eager to rebuild, only to be taken advantage of and further 

traumatized. Other investigations show homeowners and landlords involved in problematic 

activities. The following is a compilation of the most prevalent fraud schemes identified by OJ(J 

criminal investigators during these two catastrophic events: 

• Restoration contractors defrauding the public by not completing the work they were 

contracted to accomplish. 

• Unscrupulous contractors defrauding homeowners out of disaster assistance targeted for 

rebuilding, resulting in the homeowners being victimized twice. 

• Public corruption connected to State and local officials and contractors performing work. 

• Homeowners fraudulently identifying vacation homes or investment properties as their 

primary residence and receiving individual disaster grants. 

• Homeowners falsely reporting damage to properties that did not sustain damage and 

receiving individual disaster grants. 

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Landlords collecting dual payments from HUD- and f'cderal Emergency Management 

Agency (FEMA)-subsidized rental assistance programs. 

• Sale of the property before the receipt of the homeowner assistance grant. 

Collaboration With Other OIGs 

Tn view of the significance of funding to multiple agencies to address Hurricane Sandy, HUD 

OJG led a joint cross-cutting review with seven other OIGs' to assess participating Federal 

entities' funding, expenditures. and monitoring. Our objective was to identify common concerns 

and make recommendations to improve oversight. enhance collaboration. and report on best 

practices. 

The Disaster Relief Appropriations Act, 2013, allocated $50.5 billion to 19 Federal agencies to 

aid in the recovery from Hurricane Sandy and other disasters. Of the 19 agencies. 8 O!Gs 

participated in the Council of the Inspectors General on Integrity and Efficiency (CTGTE) crosscutting disaster relief review. Congress allocated $46.5 billion of the $50.5 billion to these eight 

agencies. 

We found that the eight agencies had made progress in budgeting, obligating. and spending their 

allocated funds. However. the agencies' progress varied as they had spent only $15 billion, as of 

the time of the review. of the $46.5 billion allocated. In addition, seven of the eight agencies 

requested and received waivers from the Office of Management and Budget for significant 

amounts of their funding, which extended their expenditure deadlines. The eight O!Gs and 

agencies monitored their disaster relief funds and activities. but the extent and type of monitoring 

varied. The review also identified observations and common concerns regarding contracting 

issues, the significant risk of duplicate assistance, and OJG oversight funding. Further, the 

review made suggestions for and noted best practices concerning the need to increase 

coordination, data matching. and the use of analytical tools. 

We recommended that CIGlE and the OlGs work with Congress and the agencies to ensure that 

the remaining funds are budgeted, obligated, and spent in a timely manner. We also 

recommended that CIGIE work with the agencies and Congress to ensure that the agencies, 

grantees, and contractors comply with Federal contracting requirements; the various OIGs 

continue to collaborate to identify and address areas of potential duplication; CIGIE and the 

O!Gs work with Congress to ensure that each OIG receives oversight funding separate from its 

agency for future disaster relief allocations; and the OIGs' oversight funding docs not expire 

before the agencies and their grantees spent all of their funds. 

HUD OIG is partnering in two organizations with CIGIE as it reactivates the Disaster Assistance 

Working Group (DA WG). TheDA WG is chaired by the U.S. Depmtmcnt of Homeland Security 

Inspector General, who has asked HUD OIG to chair the Investigations and Audit subcommittee 

groups. This working group. initially established after Hurricane Katrina, serves to coordinate 

q Tn addition to HUD OIG, OIGs !rom the following agencies are participating: U.S. Department of Homeland 

Security, U.S. Department of Health and Human Services. U.S. Department of Defense, U.S. Department of the 

Interior, U.S. Department of Transportation, Small Business Administration, and Environmental Protection Agency. 

Audit Report 2016-FW-1007. Disaster Relief Appropriations Act 2013. Financial Status. Observations and 

Concems. September 12, 2016 

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and dcconflict Inspector General audit, inspection, and investigative activities. Membership is 

composed of all those Inspectors General whose agencies will be involved in the response and 

recovery effotis. Given the size, magnitude, and geographical impact of Harvey, Irma, and 

Maria, coordination with Federal, State. local, and tribal audit activities will be critical in order 

to provide a broad, yet comprehensive, examination of all phases of response to these storms. 

The working group will give a forum to provide joint coordination of Inspectors General 

activities involved with the response and recovery work. It will also enable all OJGs to jointly 

develop strategies, coordinate efforts, and speak with a unified voice to our stakeholders. 

The National Center for Disaster Fraud (NCDF) is the national coordinating body that has 

responsibility for the intake of disaster fraud complaints and seeks to improve and further the 

detection, prevention, investigation, and prosecution of fraud related to natural and man-made 

disasters and to advocate for the victims of such fraud. The NCDF, located in Baton Rouge, LA, 

reports to the Criminal Division within the U.S. Department of Justice and has been identified by 

the Deputy Attomey General as the entity and mechanism tor receiving disaster-related 

allegations and complaints. I-IUD OlG has been involved with this group since its inception 

following Hurricane Katrina. HUD OJG has opted to have the NCDF refer possible cases 

involving HUD fraud to our HUD OIG hot line. The hotline will then be responsible for 

disseminating those referrals to the respective OIG components for further analysis and 

investigation. 

Duplicate Assistance 

Federal law requires that no person receiving Federal financial assistance receive funds for any 

part of a Joss already paid for by insurance or any other source. FEMA regulations require 

Federal agencies to cooperate to prevent and rectify duplication ofbenetlts. I-IUD's disaster 

recovery grants follow FEMA and SBA programs in the designated sequence of Federal disaster 

assistance. For example, if a homeowner takes out an SBA loan to rebuild after a disaster, that 

person cannot also receive a disaster recovery grant from HUD. 

HUD OJG is now better positioned to assist the Department in looking for instances of duplicate 

disaster payments with the enactment of the Inspector General Empowenncnt Act. That recently 

passed legislation allows Federal O!Gs to conduct data matching more quickly and with fewer 

restrictions to identify improper payments. OIG offers the following observations and 

recommendations, which can help HUD avoid duplication of benefits: 

HUD should develop guidance that helps the public understand its options for assistance 

between HUD grants and SBA loans and how to comply with Federal requirements. 

HUD needs to enhance its coordination with other agencies, such as FEMA and SBA, to 

avoid duplicating assistance. 

• HUD should collect information on applicants tor disaster recovery grants from grantees 

so it can check for duplication of assistance and t!·audulent activities. 

• HUD needs to ensure that its Disaster Information System can identify when duplicate 

assistance or ineligible assistance has been given, but HUD should be proactive to 

prevent such instances. 

• If agencies give disaster assistance based on addresses. HUD should verify that only one 

grant is given per address. 

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Recommended Legislative or Regulatory Changes 

Based upon our years of experience in auditing, investigating. and evaluating HUD disaster 

assistance programs and upon our many work products, we offer the following recommendations 

for consideration: 

HUD has become a primary provider of disaster assistance funding, but it has not 

formally codified its disaster recovery program since it bas not been directed to do so. 

Instead. it currently uses more than 60 Federal Register notices to issue clarifying 

guidance. waivers, and altemative requirements to both its Entitlement and State CDBG 

programs to oversee 113 active disaster recovery grants that have totaled more than $4 7 

billion. Codifying a single disaster recovery program would ensure that a permanent 

formal framework is in place for future disasters, reduce the volume of Federal Register 

notices used and other informal forms of guidance for each disaster. and mitigate time 

delays in implementing assistance for future disasters. 

HUD should work with Congress to include Federal financial management and Federal 

procurement requirements in its disaster recovery grant requirements to help strengthen 

and standardize procurements for all recipients receiving disaster recovery funding. 

I-IUD should work with Congress and SBA to ensure that there is a clear and established 

order of funding priority for recipients (such as where they should go first in order not to 

impact their ability to get other funding) to ensure that disaster assistance funds are 

distributed in a fair and equitable manner. 

HUD needs to address the issue of casualty insurance for homes assisted with disaster 

recovery funds to ensure that the Federal funds invested are protected. The States' 

requirements for homeowner casualty insurance vary from no requirement to strong 

requirements (such as a transferrable covenant that requires insurance at all times or a 

requirement to sign an agreement that if the homeowner did not maintain insurance he or 

she would not be able to obtain future assistance). 

!IUD should work with Congress and suggest reasonable deadlines for future disaster 

recovery funds. According to liU D, disaster recovery activities are largely completed 

after approximately 6 years, yet as noted previously, substantial funds have remained 

unspent for much longer periods. Alternatively, it may want to consider ways to 

potentially recover some of the funds, particularly those that have remained unspent for a 

significant time. 

Consideration should be given to requiring grantees to adopt Federal procurement 

standards, as provided in 2 CFR 200.318 through 200.326.'" and not "'equivalent" 

standards. 

10 Before December 26.2014, the relevant procurement requirements were in 24 CFR 85.36. HUD has since 

transitioned its uniform administrative requirements. cost principles. and audit requirements for Federal awards to 

2 CFR Part 200. 

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Grantees should ensure that all recipients of !IUD disaster funds provide certifications 

acceptable to the Department that the recipients are eligible to receive the funds and will 

comply with Federal grant requirements. 

Subgrantees administering llUD disaster funds should be required to certify that they 

participated in training related to HUD grant obligations when submitting applications for 

subgrants. 

Timeliness of Expenditures 

Below is a chart representing disaster recovery funding (as of September 2017), showing 

available funds still unspent from past disasters from 2001 post-9/11 funding through the 2016 

hurricanes, tornados, and flooding: 

fn our experience, the further out the funds are spent, the greater the potential for waivers and 

action plan revisions that may not meet the original intended goals of the program. One such 

example is the decision to provide a waiver to pay university professors stipends to stay in 

Louisiana post-Katrina, 2 years after the stonn hit, and classifying it as an urgent need activity. 

Another example is in Harrison County, MS, where more than $9.6 million in disaster funds was 

approved for a sewer facility based on an emergency requirement, when the facility did not meet 

the definition of an emergency requirement. Essentially, a sewer system was built for an 

undeveloped area with the idea "if we build it they will come.'' Unfortunately, it did not 

succeed, and it was not an emergency requirement. 

A key example of potential issues with HUD's usc of waivers is found in our work reviewing the 

Louisiana Road Home Elevation Program. We performed two evaluations of the State of 

Louisiana's Road Home Elevation Incentive Program in 2010 and a followup review in 2012. 

This review showcased a situation in which HUD waived the program requirements and then 

retroactively approved the State· s amended action plan after the fact when deficiencies were 

identit1ed. The initial review's objective was to determine whether homeowners used funds to 

elevate their homes as set out in their grant agreements. The review found that 79 percent of the 

homes we inspected in our sample had not been elevated. strongly suggesting that the grant 

program was at risk and could fail to achieve its intended goal of reducing homeowner flood 

risks from future hurricanes. Our followup review 2 years later in 2012 found that the Stale did 

not have conclusive evidence that approximately $698.5 million in CDBG-DR funds provided to 

24,000 homeowners had been used to elevate homes. As an example of a departmental practice 

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to minimize or eliminate original program requirements, I-IUD approved the State's Amendment 

60 on July 26, 2013, which retroactively allowed homeowners who received a grant under the 

Road Home program to prove that they used those funds to "either elevate or rehabilitate" their 

home, although the grant was specifically intended for elevation only. The amendment is 

contrary to the elevation incentive agreement which stated that the funds were intended to assist 

homeowners only to elevate their homes. If the funds were not used for this sole purpose. they 

were to be repaid to the State. 

In August 2015, HUD again unilaterally waived the Road Home program requirements. 

Specifically, HUD, after allowing rehabilitation or elevation, changed its 2013 documentation 

requirement for rehabilitation expenses to permit an atlidavit by the homeowner and a "valuation 

inspection" by the State to detennine the value of home repairs that were previously performed. 

This waiver of requirements was due to the fact that I-IUD was still having difficulty acquiring 

documentation from homeowners as proof of repair. This new approach did not consider 

whether recipients previously received grants or insurance funds for rehabilitation and could 

have resulted in a duplication of benefits. While Congress provided considerable flexibility in 

the use of CDBG-DR funds, it specifically required !-IUD to establish procedures that prevented 

duplication of benefits. I-IUD had not properly enforced the intent of the Road Home program, 

instead opting to change the rules ex post facto so that violations could potentially be excused 

and the necessity for recapturing the funds would be eliminated. 

We have seen multiple examples in which grantees have made numerous action plan changes 

with HUD's approval. For example, the State of Louisiana has had 66 amendments to its action 

plan for llurricanes Katrina and Rita, and New York has had 17 amendments for Hurricane 

Sandy. Our concern is that at the end of the grant. the results may not match the initial action 

plan and in some cases, may not match the purpose of the program. While flexibility is 

important to be able to address a large-scale problem, this flexibility can be particularly 

problematic as the funds age in the unspent category and ways are devised to spend the 

remaining funds. 

The Department's actions and retreat from its position and the original intent of the approved 

State action plans diminishes its ability to properly administer grant agreements and provide 

proper oversight and enforcement when needed and lessens the affected homeowners' trust and 

confidence that the highest standards of efriciency and fairness are maintained in the grant award 

process. 

OIG Collaboration With HUD's Office of Community Planning and Development 

Recently, OJG and I-IUD's Otlice of Community Planning and Development began a joint 

collaboration to assist grantees and subgrantees in the areas in which OIG reported that they 

were most vulnerable. The work group determined that assistance should be provided in the 

following areas: procurement and contracting, subrecipient oversight conflicts of interest, 

internal controls, documentation and reporting, and financial management. In addition, the 

fonner Inspector General last year coauthored a joint letter with the former Principal Assistant 

Secretary to State and local governments, communicating our effort to encourage efficient 

operations and effective accountability for the best use of limited resources. We also developed 

a series of"intcgrity bulletins" aimed at providing the grantees and subgrantees with information 

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to help safeguard program funds and ensure that communities get the full benefit of awarded 

funding. The bulletins were sent to grantees and subgrantees during fiscal years 2016 and 2017 

and are posted on our website at www.hudoig.gov/fraud-prcvention. 

In addition, we have recently posted to our website a fraud alert that we issued with the 

Department on ways to avoid disaster scams and fraud schemes for those homeowners affected 

by Hurricanes Harvey, Irma, and Maria (attached at the end of the testimony). This alert lists 

ways in which individuals can protect themselves from unscrupulous entities that prey on victims 

and where to go and whom to contact if a homeowner has questions or concerns. 

Conclusion 

The Department's role has greatly increased over the last 15 years as it has had to deal with 

unanticipated disasters and significant economic crises that, in addition to its other missions, 

have increased its visibility and reaffirmed its vital role in providing services that impact the 

lives of our citizens. Because of the limited capability of the Department to provide direct 

oversight and Federal budget limitations throughout the government, it is also critically 

important that program participants and beneficiaries take responsibility for the proper oversight 

of their programs. My office is strongly committed to working with the Department and 

Congress to ensure that the CDBG-DR program operates efficiently and effectively and as 

intended for the benefit of the American taxpayers now and into the future. 

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Housing Authority, Estate Tutu Apartments, St. 

image displays damage past-Hurricane Irma 

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elderly and disabled in Puerto Rico and delivered food, 

supplies to a nursing home in the aftermath of Hurricane 
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FRAUD ALERT: 

Harvey, Irma, and Maria Disaster Scams 

TheUS, Department of Housing and Urban Development (HUD) and HUD Office of 

Inspector General everyone arrected by Humcanes Harvey, Irma, and Maria to 

be alert for fraud commonly occur following a disaster. You need to protect 

yourself from fraudsters w'ho \tv'lll take advantage of the confusmg nature of 1nfom1atton after 

a major dtsaster. 

Watch out for scam housing inspectors. Fraudsters may impersonate Inspectors from 

the Federal Emergency Management Agency (FEMA) or the Small Business Admimstration, 

These imposters may ask for bankmg lnfom1atton, ask for money for fees, or attempt to 

steer you to a certam repair firm Others may seeK personal in!ormat•on they will use to 

steal your 1d.ent1ty 

Prot.,ct yourself 

• Real inspectors already have your nine digit registration number and other 

personal information and Vllfl not need to ask for it. 

• Inspectors document the damage to your t1ome: they do not arrange or 

suggest repairs 

-1 Always asK to see government Jdentltic.ation before you share mfom1atron 

Watch o-ut for scam contractors There v.111 be scam contractors rustling to take 

advantage of homeovvners. These scammers often asl< for large upfront payments and 

then do shoddy work or disappear altogether Because these !ly-by-mgllt contractors are 

not local, you Will have no way to find t11em later 1f they do not perform !11e worK promised_ 

They have no permanent address, and they do not answer phone calls Some scammers 

may fow ball their bid and add charges once you have s1gned a contract 

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v" Be very suspioous of contractors knocking on your door see1<.1ng work. This 

IS a common approach used by unestabhshed companies They often 

demond tint you pay the enttre amount upfront soying they need to buy 

matenals. Negot1ate to buy the matenats yourself I! they won·t agree. "alk 

away from the deal 

-" Be suspiCious 1f contr3ctors won't a wntten contract and sny they tmst 

your handshake. Always have a contract that spells out the exact 

work to be done and a payment schedule tha1 1sn 't based on time but r.Jther 

the percentage of work that is done satisfactorily . 

...- Get all job changes 1n wntmg. usually Job changes mean more cost to the 

homeovvner, so be cauttous before agreeing to any changes. If you accept 

the contractors explanation of why the problem and cost were missed 

ong1nally. make sure vou rece1ve ;:m amended contl<lct or a work order that 

you zmd the contractOr Sign_ The work order should describe the problem. the 

solution. the cost of labor and rnatenals, and a rev1sed payment schedule. 

' Be suspiCious 11 a contractor tells you bullding permits are not needed or that 

the c1ty hJ.S waNed them for the disaster. Ensure ihat your contractor obtains 

needed building permitS and that the city conducts any required 1ntenm and 

final inspections on the contractor"s work. Call vour local building department 

or planning office to verify what pem11ts you need . 

., Be suspicious 1f It is a one-ttme offer. avai!al1!e on1~.1 todJy. or a spectal deal 

on materials leftover from another job. These zue pressure tactics to get you 

into the deal . 

...- Be suspiCIOUS 01 very high bids. Scammers will ddim that d!Sdster-related 

costs are going to be high. AIYI'ilYS get another bid or two to protect agalflst 

overpriclflg Although you are eager to get someone in to start reparrs. taking 

the tlme to protect yourself may save you a lot of money <.md frustration in the 

long run 

W:~tch out for f~ke relief programs. Be suspicious of scammers claJmlng to be from the 

government or other relief agencies_ Fake officlols vvJI! ask for appHcat1on payments or tees 

to release grants or loans to you_ Be suspicious of onhne chanties or door-to-door 

solicitations. Hundreds or new webs1res iJddefi rhe weeK Detore struck are 

assoctau:•d ~v1tn potermally bogus ret;et efforts_ These s1tes are not and irs hard 

to know WhiCh are real and \Vhtch may be scams 

Protect yourself 

-./ Government agencies do not charge for applications 

,. Knowmg that Federal and State employees do not asK for or accept money . 

..,., Always asking to see tt1e 1dent1fiCatfon cards. of those clam1mg to be \vith 

90vemment 3genc1es 

19 
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v Check out choritres before 

legitrmacy check it out at Cllonty 

W:~tch out for flooded c;Jrs tor res~le. If you or someone you knmv lost a car to flooding 

and are Jn <J hurry to replace tt. be\vare of scammers Who may cle<:m up previously ftooded 

cars and try to resell them 

Protect yourself 

,., Enter the vehicle ident!ftcation number at\ i~Cikt.K This a free serv1ce from 

the National Insurance Cmne Bureau that could reveal o vehicle's flood 

and prev1ous ownership from a flood locatJon and 

are also good sources . 

..- Do your OVI<TI lnvest!Qi3t!onl 

..- Musty smells indicate mtld€'\V is sttll present. 

" Overpowering fragrances suggest that the seller may be hiding 

someth10g SUSpiCIOUS. 

-/ Watch out for cmpettng tht:Jt looks too nev..-. is discolored, or has \Vater 

sta1ns 

Test electrical systems, check tor water rn lamps and gauges, and look 

for srlt in air vents and other hard to clean places m me car. 

are a victim. suspect a t1ome repair scam, are contacted for unsofictted 

or bef1eve a bus1ness rs pracvcmg pnce gouging. caN 

, me Office or t11e Texas Attorney General at 800-252·8011 or 

,. t'le F!onda Attorney Genera! Fraud Hotfme· 866-966-7226. 

\Vatch out for mortgage rescue scams. Hundreds of thousands of fedemlly~insured 

homes have been damaged and some may not have flood msurtmce. Because many 

homeov.ners may have 3 temporJry or permJnent loss of 1ncome due to the disasters. they 

may find 1t hard to make the!r mortgage payments. In efforts to <WOld foreclosures on the1r 

homes, tt1ese suMvors mtly De targeted for foreclosure or loan modJflcntion rescue scams 

Protect yourself 

8"€. <1\f.'<:lfe that feder<J!!V-IOSUred 

a 90~d3y foreclosure rflor<Jtonum 

1n the drsaster areas are subject to 

a dlsaster 

"' Be susplctous of compames c!a1mlng that they can help you avoid foreclosure 

or get you a loGn mod1frcat1on They usually Charge you a large lee and 

d1sappear with your money 

.,.. Contact your mortgage company io detem1ine options 1f your home does not 

have fiood insurance or if ~/OU are hav1ng proL1Iems keep!ng up Vlitn mortgage 

payments 

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• If you have a mortgage. talk with your loan servicer immediately. If you 

cannot reach a loan servicer, call a HUD couns01or about your options. 

Click or use this link (https://lw;w.hJd.gov/off>oes/hsg/sfh/hoc/fc/). You may be 

eligible to have your mongage payment suspended for 12 months with no 

penalty at the end of that t1me. 

v Call your hazard or homeowners Insurance company !t is important to start 

the paperwork for any coverage you may have 

finally, call FEMA and apply for disaster ald. They have several resources to 

help. CaliS00-621-3362 or vistt Qsas'\erassJstance.go<.: 

Don't Be Persu3ded to Commit Fraud Yourself. As government a:d is released. you may 

have others tell you It !S okay to misrepresent your eliglbllfty or mtsuse the funds you 

recetve. 

Protect yourself 

" Only apply for aid you are eligible to rece1ve 

Do not try to claim a vacation or rental 11ome as a permanent residence, 

Do not claim damages that were preexisting. 

" Do not apply for duplicate benefrts (such as rental vouchers or repair funds) 

from different government agenc1es 

'"'" Do not use repa1r or e1evat1on funds received for other purposes. 

" If you received federal assis1ance for prev1ous dtsasters. and did not maintain 

flood msurance as reqwred afler;vards. you might not be eligible for additional 

relief 

'llolators !tying to defraud aid programs w111 face pnson time andior fines. Be a part of the 

solution. Don't defraud deserving peopte of thelf share. and 11 you see someone scheming 

on other people's misfortune. report tt 

If you suspect fraud, call or write the HUD OIG hotline. 

EMAIL: 

CALL: 

FAX: 

WRITE: 

hotlin.::@hudoig.gov 

1-800-347-3735 

202-708-4829 

HUD Inspector General Hotline (GFI) 

451 7th Street SW 

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COkl!",;l!TTEE ON 

F'!N/.,_\!C!AL SERVICES 

l!miMi\lillf!IOil, IDI!i: 20515-4309 

;\lovemhcr 7, 2017 

The Honorable Jcb Hensarling, Chainnan 

Committee on Financial Services 

2129 Rayburn House Office Building 

Washington, DC 20515 

Dear Chailman Hensarling: 

l am writing to respectfully request that the U.S. Department of Housing and Urban 

Development (BUD) Secretary Ben Carson appear before the Committee on Financial Services 

(the Conunittee) i1m11ediately to discuss cutTen! disaster recovery eft(Hts. As you know, 

Hurricanes Harvey, lnna, and Maria have devastated communities in Texas, Florida, Puerto 

Rico, the U.S. Virgin Islru1ds, Georgia ru1d South Carolina. These hurricanes caused extensive 

damage and destruction to the housing stock in certain impacted areas, as well as to critical 

infrastructure and community services. 

While this Committee recently held a hearing in the Oversight & Investigations Subcommittee 

on HUD's main disaster recovery program, the Community Development Biock Grant Disaster 

Recovery (CDBG-DR) program, that hearing was solely focused retrospectively on past disasters 

and left little opportunity to examine existing needs of disaster-impacted communities from the 

2017 hurricane season. Further, Secretary Carson's recent appearance before the Committee was 

not solely focused on current disaster recovery needs, leaving many important questions 

unanswered. It is extremely important that this Committee hear directly from Secretary Carson 

about the actions of his department to date in supporting the needs of disaster victims, as well as 

his vision for long-term recovery efforts for disaster-impacted communities through the 

administration of the Community Development Block Grant-Disaster Recovery (CDBG-DR) 

progrmn. 

Hurricane Harvey was a Category 4 stonn that hit Texas on August 25, 2017. Harvey caused 

widespread Hooding along the southeastem coast of Texas, including Houston, the fifth largest 

metropolitan area in the country. Harvey resulted in the deaths of over 80 people, displaced more 

than one million people, and damaged roughly 200,000 homes in a path stretching tor more than 

300 miles. Hurricane Irma was a Category 5 storm that skirted Puerto Rico on September 7, 

2017, weakened slightly to a Category 4 storm as it hit Florida on September 10, 2017. It also 
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hit Georgia and South Carolina in the following days, causing severe flooding and several 

deaths. Irma left one million people in Puerto Rico without power. Hurricane Maria was a 

Category 4 storm that hit Puerto Rico and the U.S. Virgin Islands on September 20, 2017,just 13 

days after Irma. Maria has been devastating to Puerto Rico and the U.S.V.I. The storm knocked 

out power to most of Puerto Rico and caused massive power outages in the U.S. Virgin Islands 

as well. Many residents are still without housing, and are at risk of death as food and water 

supplies run low. 

Housing is one of the most important resources that is lost during natural disasters. Without it, 

communities are unable to recover from these catastrophes. Some of the issues that are of interest 

to the American people that can be addressed by Secretary Carson include: 

• The current state of the housing stock, both public and private, in disaster-stricken areas 

such as Texas, Florida, Puerto Rico, the U.S. Virgin Islands, Georgia and South Carolina; 

• Immediate and long-term plans to assist those who are affected by the loss of housing in 

these affected areas; 

• Plans for adequately protecting the housing of seniors and persons with disabilities; 

• What waivers HUD is considering in the CDBG-DR program, including whether and to 

what extent the Department is considering lowering the requirement to serve low and 

moderate income (LMI) households; 

• Plans for providing assistance to homeless persons who are impacted by. a natural 

disaster; 

• Options for mid- and long-term housing for victims after a natural disaster; and 

• Construction standards required for public housing in areas with a history of severe 

weather or fires. 

·Secretary Carson has information that is essential to our continuing effort to support the 

individuals and families who lost their homes due to natural disasters this year. Given that 

millions of people were affected by these storms alone, it is important that the Committee 

exercise its oversight responsibility and conduct hearings on these major events. Thank you for 

your attention to this matter, and I look forward to your prompt response to this request. 

~~I· -tt/~ /~ATERS Member of Congress 

Sincerely, 
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Oversight and Investigation 

Community Development Block Grant-Disaster Recovery Program 

Witness: Acting IG-HUD, Helen Albert 

November 1, 2017 

Rep. Ann Wagner 

Questions for the Record: 

1. Ms. Albert, how do the various agencies providing federal assistance coordinate their 

efforts so that their funding isn't duplicated? For instance, how does HUD know whether 

SBA provided assistance so that it does not duplicate funding? 

FEMA is tasked under the Stafford Act with coordinating federal assistance. ( 44 CFR 

Part 206). This includes issuing mission assignments, also called "mission directives" to each 

relevant agency. These are work orders issued to a Federal agency by the Regional 

Administrator, Assistant Administrator for the Disaster Operations Directorate, or Administrator, 

directing completion by that agency of a specified task and citing funding, other managerial 

controls, and guidance. FEMA regulation, 44 CFR 206.191, which implements the duplication of 

benefits section of the Stafford Act, establishes policies and procedural guidance to ensure 

uniformity in preventing duplication of benefits. The regulation includes a "delivery sequence" 

for the delivery of disaster assistance provided by certain Federal agencies and organizations. 

According to the regulation, the agency or organization that is lower in the delivery sequence 

should not provide assistance that duplicates assistance provided by a higher level agency or 

organization. Both FEMA's Regional Administrator and its designated Federal Coordinating 

Official (CFO) are charged with coordinating all Federal Agency Disaster Relief. 

ln addition, each effected agency was required to adopt procedures, guidance and/or 

regulations that are consistent with FEMA's. In this regard, SBA regulation, 13 CFR 123.10l(c), 

states that applicants are not eligible for a home disaster Joan if their damaged property can be 

repaired or replaced with the proceeds of insurance, gifts or other compensation. These amounts 

must either be deducted from the amount of the claimed losses or, if received after SBA has 

approved and disbursed a loan, must be paid to SBA as principal payments on their loans. 

Guidance provided on HUD's website instructs that grantees could use the CDBG funds 

for housing, economic development, infrastructure and the prevention of further damage to 

affected areas, if such use did not duplicate funding available from FEMA, SBA, and the U.S. 

Army Corps of Engineers. HUD' s policy on its place in the hierarchy of disaster benefits is 

contained in a Federal Register Notice 76 FR 71060. HUD's policy notes that the hierarchy is 

based on which agency has the primary responsibility for providing assistance following a 

disaster, not which agency actually delivers the assistance first. While HUD CDBG-DR funds 

are not specifically referenced in the FEMA regulation, HUD CDBG-DR funding generally 

comes after FEMA and SBA funding in the sequence. HUD policy further notes that CDBG 

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disaster recovery provides long term recovery assistance via supplemental congressional 

appropriations and falls lower in the hierarchy of delivery than FEMA or SBA assistance. The 

Notice further provides that it is intended to supplement rather than supplant these sources of 

assistance. 76 FR 71060. Since 2011, HUD has issued numerous Federal Register Notices 

related to CDBG-DR issues. However, the place that HUD holds in the hierarchy of Federal 

disaster assistance has not changed. 

To receive CDBG benefits, the affected grantees (in this case the states) were required to 

submit to HUD an action plan that described how they planned to use the grant funds and the 

procedures that would be implemented to prevent recipients from receiving duplicate benefits. 

FEMA's regulation provides that disaster assistance by an agency that is lower in the 

delivery sequence, such as HUD in this case, should not be used to duplicate assistance that has 

already been provided by a higher level agency, such as SBA. 

Finally, under FEMA's duplication of benefits regulation, agencies and organizations that 

are considered lower in the delivery sequence are responsible for preventing duplicate benefits. 

Therefore, it is HUD's responsibility to ensure that state action plans that are submitted in order 

to receive CDBG funding appropriately assign responsibility for identifying and recovering 

It is FEMA policy "to coordinate the effort of agencies providing assistance so that each agency 

understands the prevention and remedial policies of the others and is able to fulfill its own 

responsibilities regarding duplication of benefits." [ 44 CFR 206.191 (c)( 4)] Furthermore, 44 CFR 

206.191(e)(3) states that, while each agency is responsible for preventing and rectifying 

duplications, the FEMA Regional Administrator shall examine a random sample of case files and 

document whether duplications occurred. 

However, it is the subordinate source's responsibility to consider what other resources have been 

committed at the time of the award. [44 CFR 206.191(d)(3)(ii)] If assistance was provided outof-sequence, the disrupting agency is responsible for rectifying the duplication. [ 44 CFR 

206.191 (d)(1 )(ii)] 

2. Is there any hierarchical list of funding sources that allows agencies distributing disaster 

aid to know when to provide money and when not to duplicate others' efforts? 

Yes, there is a hierarchical delivery sequence in FEMA regulations and it is found at 44 CFR 

206.191(d)(2): 

i. Volunteer agencies' emergency assistance (except expendable items such as 

clothes, linens, and basic kitchenware); insurance (including flood insurance); 

ii. Housing assistance pursuant to section 408 of the Stafford Act. 

iii. Small Business Administration and Farmers Home Administration disaster 

loans; 

iv. Other Needs assistance, pursuant to section 408 of the Stafford Act or its 

predecessor program, the Individual and Family Grant Program. 

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v. Volunteer agencies' "additional assistance" programs; and 

vi. The "Cora Brown Fund. 

An agency's position in the sequence determines the order in which it should provide 

assistance and what other resources it must consider before it does so. If an agency 

provides assistance out-of-sequence, it must rectify the duplication. [ 44 CFR 206.191 (d)] 

Therefore, the subordinate assistance is considered the duplicate effort regardless of the timing of 

the awards. That makes the question of"when not to duplicate" tricky. For example, a 

homeowner may receive CDBG-DR assistance in March and an SBA loan in April. The timing 

of the SBA loan created a duplication, but since the CDBG-DR award is subordinate [see answer 

#4 below], it is viewed as the duplicative effort and must be recaptured. Furthermore, this 

criteria is an impediment to the idea ofletting SBA borrowers use CDBG-DR grants funds to 

repay their loan; if the victim receives duplicative funding from both sources, he or she must 

return the grant funds while the loan remains in place. 

3. Is there any statutory authority that describes the funding or delivery sequence? 

It was the intent of Congress, through the Stafford Act, 42 USC§ 5121, et. Seq., to 

implement special measures designed to assist the efforts of the affected States in expediting the 

rendering of aid, assistance, and emergency services, and the reconstruction and rehabilitation of 

devastated areas. To accomplish this, the Stafford Act sought to provide an orderly and 

continuing means of assistance by the Federal Government to State and local governments by, 

among other measures, requiring greater coordination and responsiveness of disaster 

preparedness and relief programs. In this regard, the Act established an Interagency Task Force 

(§ 5134), required the creation of Emergency Support Teams(§ 5144), and the development of 

verification measures, including an electronic database, to minimize the risk of duplication and 

fraud.(§ 5174(i). The President was required to implement these measures by prescribing rules 

and regulations through designated federal agencies. 

The purpose of the FEMA regulations establishing the delivery sequence [ 44 CFR 206.191] is to 

implement Section 312 of the Stafford Act, but the statute itself does not identify the sequence. 

Instead, the statute directs the President to establish the necessary procedures "to ensure 

uniformity in preventing duplication of benefits." 

4. Does the regulation identify where in the delivery sequence CDBG-DR funding is? 

HUD CDBG grants are not specifically listed in the delivery sequence. However, 

guidance since issued by FEMA considers these grants to be "other Federal ... funds" that follow 

SBA disaster assistance loans in the sequence of disaster benefits. SBA's Standard Operating 

procedure 50 30 6 reiterates FEMA's delivery sequence, and specifically states that CDBG funds 

are lower than SBA disaster loans in the sequence of delivery. Similarly, HUD policy further 

notes that CDBG disaster recovery provides long term recovery assistance via supplemental 

congressional appropriations and falls lower in the hierarchy of delivery than FEMA or SBA 

assistance. 

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We note that the Federal Register 76 FR 71060 [Vol. 76, No. 221 11/16/2011] identifies CDBGDR funding as lower in the hierarchy than FEMA or SBA assistance 

5. The delivery sequence at the very least appears to be incomplete. Are there instances 

where CDBG-DR funds were found to have duplicated efforts and funding from other 

agencies or sources? 

The delivery sequence could be amended to specifically list HUD CDBG-DR grants, 

although such grants would fall under Other Needs assistance, pursuant to section 408 of the 

Stafford Act. HUD OIG audits and investigations have identified a number of instances of 

duplicated funding. 

We observed duplications involving CDBG-DR and the National Flood Insurance Program. 

Contractors processing the initial NFIP claims after Hurricane Sandy were apparently 

underpaying thousands of households. NFIP reconsidered these claims and provided 

supplemental claims after CDBG-DR funds had been awarded. In September 2015, the HUD 

Deputy Secretary decided it was not in the best interests of the Federal Government to recover 

CDBG-DR duplications of up to $20,000 that were caused by homeowners' receipt of additional 

flood insurance payouts. [Legal Opinion Memo "Duplication of Benefits in Disaster Relief 

Efforts" 6/13/2016] [http://www.app.com/story/newsllocal/monmouth-county/sandyrecovery/20 15/09/16/fema-sandy-insurance-extension/7234 5062/] 

6. Is it difficult for disaster victims, grantees and subgrantees to determine what funding 

source to use to recover from disasters? Whose responsibility is it to tell people 

recovering from disasters what the best program is available for them to use and whose 

should it be? 

FEMA regulations require the appointment of Coordinators for FEMA, the state and 

federal agencies with the FEMA coordinator at the head. The coordinators are part of the team 

that creates the relief plan and application process. FEMA, each federal agency and State and 

local governments as well as private providers are all required to fully inform applicants of the 

availability of assistance. 

It is difficult for victims or potential recipients to navigate the disaster assistance programs and 

determine what source is best suited for their needs. The Stafford Disaster and Emergency 

Assistance Act was intended to bring about an orderly and systematic approach to federal 

disaster assistance with a structure for benefit sequence meant to reduce benefit duplication 

across administering agencies. However the provisions in the Stafford Act and subsequent HUD 

Notices describe the hierarchical sequence of benefit distribution only in the context of benefit 

duplication, not in terms ofbest programs for affected individuals. 

Furthermore, each organization is responsible for delivering assistance without regard to 

duplication later in the sequence (HUD Notice FR-5582-N-01 that references 44 CFR 

206.191). The graphic below shows the codified sequence of benefit delivery; FEMA considers 

CDBG-DR funds as number 4 in the process after FEMA and SBA funds. With this, CDBG-DR 

may be the best program available for an affected individual because this aid tends to be in the 

4 
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form of grants and not loans, but these funds are not a first option due to sequence requirements 

(Congressional Research Service report of July 1, 2016 details these issues). Therefore, benefit 

sequence requirements supersede the consideration of what program is best for affected 

individuals. 

In terms how HUD interacts with grantees; HUD publishes federal Notices that provide 

regulatory guidance for citizen participation requirements in response to public law 

appropriations of federal disaster funds that HUD administers via the Community Planning and 

Development's (CPD) Community Development Fund (CDF). The HUD disaster Notices allow 

for alternative requirements or waivers to quicken the citizen outreach process in order to more 

effectively and efficiently get disaster grant funds available to those affected. A CDBG-DR 

grantee can then utilize its citizen outreach efforts to provide information and get constituent 

feedback on planned projects to assist with those affected. 

7. The delivery sequence described in FEMA' s regulations does not make clear when 

CDBG-DR funds ought not to duplicate other money. Should FEMA update their 

regulations to clarifY and ambiguities? 

This would be consistent with policy options presented in the Congressional Research Service 

report titled "SBA and CDBG-DR Duplication of Benefits in the Administration of Disaster 

Assistance" issued July 1, 2016. 

"As mentioned previously, FEMA's regulations do not specifically mention CDBG-DR funding 

in the delivery sequence. In practice, FEMA considers CDBG-DR funding as assistance that 

follows SBA disaster loans in the delivery sequence. However, leaving CDBG-DR unmentioned 

in FEMA's regulation could lead to confusion as to where CDBG-DR is ranked in the delivery 

sequence. It may also be argued that the omission makes the delivery sequence open to 

interpretation. If Congress is concerned that the omission could lead to confusion or different 

interpretations of code, Congress could require that 44 C.F.R. 206.191 be revised to specifY the 

location ofCDBG-DR within the delivery sequence." 

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[https://www.everycrsreport.com/files/20160701 R44553 b23eldl3aa27b529blbd906cecf607d 

828c30140.pdfj 

8. What can Congress do to ensure CDBG-DR funds aren't duplicating benefits already 

received? What can HUD do? 

Congress should include language in its disaster appropriations that require all federal 

and state agencies to share information. Specific language should be included making this 

sharing exempt from Privacy Act restrictions. HUD can and should pursue MOUs with FEMA, 

and other federal and state entities. 

9. Why is it important to follow Federal procurement standards? 

Basically, it is important to follow Federal procurement standards to ensure that contracts are 

awarded competitively to acquire necessary products and services at fair and reasonable prices. 

10. Are CDBG-DR grantees following Federal procurement standards? 

Under Public Laws 113-2, 114-113, 114-223, and 114-245, CDBG-DR entitlement grantees 

were required to follow Federal procurement standards. Under those same Public Laws, States 

had the option to either (I) adopt the Federal procurement standards or (2) choose to follow their 

own State and local laws, so long as their standards were "equivalent" to the applicable Federal 

standards. 

CDBG-DR grantees are (I) not always following Federal procurement standards and (2) using 

their own standards that are not "equivalent" to the Federal procurement standards. Since March 

2013, we've issued 17 audit reports on disaster grantees with questioned costs totaling nearly 

$391.7 million related to procurement. Of the $391.7 million, $356.2 million lacked an 

independent cost estimate or cost analysis, $21.7 million lacked competition, and $13.8 million 

had other procurement issues. Of the 17 audit reports, 11 were audits of States with questioned 

costs totaling more than $371.1 million and 6 were audits of entitlement grantees with 

questioned costs totaling more than $20.5 million 

11. Have there been cases where CDBG-DR recipients did not follow Federal procurement 

standards? What are some notable cases? 

Yes, there have been notable cases where CDBG-DR recipients did not follow Federal 

procurement standards. 

In June 2015, we issued a report on our audit of the State ofNew Jersey's CDBG-DR-funded 

Sandy Integrated Recovery Operations and Management System. We determined that the State 

did not procure services and products for its system in accordance with Federal procurement and 

cost principle requirements. It did not do so because its procurement process was not equivalent 

to Federal procurement standards. Specifically, it did not prepare an independent cost estimate 

and analysis before awarding the system contract to the only responsive bidder. Further, it did 

not ensure that option years were awarded competitively and included provisions in its request 

6 
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for quotation that restricted competition. Also, the State did not ensure that software was 

purchased competitively and that the winning contractor had adequate documentation to support 

labor costs charged by its employees. As a result, the State did not show that the more than 

$38.5 million contract price and options years totaling nearly $21.7 million were fair and 

reasonable and that the more than $1.5 million it disbursed was adequately supported. 

We reached management decision with HUD on one of the five recommendations included in the 

report. On March 29,2016, we referred the other four recommendations to the Deputy 

Secretary for a decision. On January I 0, 2017, the Deputy Secretary provided a final decision on 

the four recommendations. The Deputy Secretary stated that since the State did not adopt the 

Federal procurement standards and instead followed its own procurement standards, the Federal 

procurement standards did not apply to the State and could not be used as a basis for our findings 

and recommendations. The Deputy Secretary's statements that because all of the 

recommendations cited the Federal procurement standards as their basis, and they were 

inapplicable to the State, there was no basis for our finding and recommendations, and therefore, 

the recommendations warranted no further action other than closing them out. We closed the 

recommendations with disagreement but maintain that the Federal procurement standards applied 

to the State because its procedures needed to be equivalent to those Federal standards and the 

Deputy Secretary's decision did not consider the other bases for the recommendations. 

In March 2012, we issued a report on our audit of the State ofTexas' use of$1.3 billion of State 

CDBG-DR program funds provided for recovery from Hurricane Ike. We determined that the 

State did not follow Federal and State requirements and best practices for its infrastructure and 

revitalization professional services and project management services contracts. It failed to do so 

because it disregarded various requirements. Specifically, the State (l) improperly procured its 

professional services and project management services contracts, (2) improperly increased the 

project management services company's contract, (3) included ineligible contract provisions, (4) 

failed to ensure that the contract payment type was consistent, (5) failed to prevent questionable 

charges, (6) did not ensure that its budgets clearly assigned costs according to HUD CDBG cost 

categories, and (7) did not ensure that its project management services contract contained 

specific and quantifiable performance measures. As a result, the State paid more than $9 million 

in questioned costs. 

HUD originally agreed with our recommendations in July 2012. However, in December 2013, 

HUD submitted revised management decisions that disagreed with these recommendations, and 

it sought to revise the ineligible and unsupported amounts owed to zero and close the 

recommendations. HUD stated that it had consulted with its Office of General Counsel and 

determined that the contract was not a "cost plus a percentage of cost" contract. It also stated 

that it had reviewed the State documentation and found no evidence that any of the costs charged 

by the contractor were ineligible, unnecessary, or unreasonable. After discussions among HUD 

and OIG officials the matter was referred to the Deputy Secretary on March 31,2015. On 

September 30, 2016, the Deputy Secretary provided a final determination. The Deputy Secretary 

concluded that we did not establish that the State's contract violated the prohibition against "cost 

plus percentage of cost" contracts. The Deputy Secretary also determined that the Federal 

Acquisition Regulations did not apply to the contract. We closed the recommendations with 

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disagreement but maintain that the State's contract was a "cost plus a percentage of cost" 

contract and the Federal Acquisition Regulations applied to the audit finding. 

12. What has HUD done in the past to resolve cases where the grantee may have improperly 

certified that their standards were equivalent to the Federal procurement standards? 

We are not aware ofHUD taking any action to resolve cases where grantees have improperly 

certified that their standards were equivalent to the Federal procurement standards. In September 

2016, we issued a report on our internal audit on HUD's controls over its certifications of State 

disaster recovery grantee procurement processes. We found that HUD did not always provide 

accurate and supported certifications of State disaster grantee procurement processes. 

Specifically, it (I) allowed conflicting information on its certification checklists, (2) did not 

ensure that required supporting documentation was included with the certification checklists, and 

(3) did not adequately evaluate the supporting documentation submitted by the grantees. These 

conditions occurred because HUD did not have adequate controls over the certification process. 

Due to the weaknesses identified, HUD did not have assurance that State grantees had proficient 

procurement processes in place and the Secretary's certifications did not meet the intent of the 

Disaster Relief Appropriations Act of 2013. 

The report included five recommendations. For all of the recommendations, HUD stated that our 

disagreement regarding the definition of a proficient procurement process as it relates to State 

disaster grantees and the meaning of"equivalent" as it relates to a State's procurement policies 

and procedures being "equivalent to" or "aligned with" the Federal procurement standards was 

closed by the former Deputy Secretary in her decision regarding resolution of recommendations 

from our audit of New Jersey's Sandy Integrated Recovery Operations and Management System. 

In the January 10, 2017, decision, the Deputy Secretary wrote that the State certified that its 

procurement standards were equivalent to the Federal procurement standards and HUD had also 

certified to the proficiency of the State's policies and procedures. The Deputy Secretary noted 

that two legal opinions from the Office of General Counsel concluded that the Federal 

procurement standards did not apply and, therefore, there was no legal basis for the finding and 

associated recommendations. HUD asserted that the legal opinion for the New Jersey audit 

applied to this audit. Based on this information, HUD believed it was appropriate to close all of 

the recommendations. We disagree with HUD's request to close the recommendations in this 

audit based on the Deputy Secretary's decision to resolve recommendations from our audit of 

New Jersey's Sandy Integrated Recovery Operations and Management System. We have two 

main areas of disagreement with the decision: (I) we continue to assert that the Federal 

procurement standards were applicable to the State because its procedures needed to be 

equivalent to these Federal standards, and (2) we assert that the applicability of the Federal 

procurement standards was not the only basis for the recommendations in the New Jersey audit 

report and believe that the decision failed to consider the other bases of the recommendations. 

Further, the Deputy Secretary's January I 0, 2017 decision did not address all ofthe issues with 

HUD's process for certifying State disaster grantee procurement processes that were identified in 

the internal audit report. On March 31, 2017, we referred these recommendations to the Acting 

Deputy Secretary. 

13. In your testimony, you note that a day before her departure, the former Deputy Secretary, 

Nani A. Coloretti, issued a memorandum that a State grantee following its procurement 

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policy was not required to follow the Federal requirements. What can the Secretary do to 

correct he former Deputy Secretary's action? 

The Secretary has statutory authority to make or change prior policies in effect at HUD. 

All of the statutes that have created HUD programs vest ultimate authority in the Secretary to 

implement that program through regulation and other guidance. A deputy secretary, like all HUD 

officials, operates with delegated authority from the Secretary. As such, the Secretary has 

complete discretion and authority to affirm, revisit or rescind a prior policy decision consistent 

with statutes. 

14. What can HUD do to immediately correct Deputy Secretary Coloretti's opinion? 

The Secretary has statutory authority to make or change prior policies in effect at HUD. 

All of the statutes that have created HUD programs vest ultimate authority in the Secretary to 

implement that program through regulation and other guidance. A deputy secretary, like all HUD 

officials, operates with delegated authority from the Secretary. As such, the Secretary has 

complete discretion and authority to affirm, revisit or rescind a prior policy decision consistent 

with statutes. 

15. How can Congress ensure that states and subgrantees are following Federal procurement 

standards? 

Congress could mandate compliance with Federal grant procurement standards at 2 CFR, 

Part 200; make it clear the mandate overrides existing CPD regulations regarding grant 

procurements with CDBG-DR funds; and prohibit the Secretary from waiving this requirement. 

Congress could also in an appropriation regarding disaster relief, mandate that HUD;s policy of 

providing maximum feasible deference to a State shall not apply to disaster relief. 

16. Should Congress require states to perform a cost or price analysis in connection with 

procurement actions, including contract modifications. Should HUD at least require 

states to perform independent cost estimates before receiving bids or proposals? 

Yes, it would be beneficial if Congress required States to perform a cost or price analysis in 

connection with procurement actions, including contract modifications. Yes, it would also be 

beneficial ifHUD at least required States to perform independent cost estimates before receiving 

bids or proposals. However, the greatest benefit can be derived if either Congress or HUD were 

to require States to (1) perform independent cost estimates before receiving bids or proposals and 

(2) perform a cost or price analysis in connection with procurement actions, including contract 

modifications. Also, consideration should be given to the applicability of the requirement. The 

current Federal procurement standards require a cost or price analysis only in connection with 

procurement actions in excess of the Simplified Acquisition Threshold which is currently set at 

$150,000. 

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17. Should Congress require HUD to define what "equivalent" means across CDBG-DR 

appropriations for purposes of a state that has adopted procurement rules other than those 

specified in the Federal procurement standards? 

Yes, Congress should require HUD to define what "equivalent" means across CDBG-DR 

appropriations for purposes of a State that chosen to use its own procurement standards. 

However, 

• The Department did not define equivalency in the Federal Register notice the 

corresponded to Public Law 113-2. 

• It defined equivalency in the Federal Register notice that corresponded to Public Law 

114-113 as meaning that the standards operate in a manner providing for fair and 

open competition. 

• It defined equivalency in the Federal Register notices that corresponded to Public 

Laws 114-223 and 114-245 as meaning that the standards, while not identical, operate 

in a manner that provides for full and open competition. 

• We believe that the basic definition of equivalency should include full and open 

competition of necessary products and services at fair and reasonable prices. 

While it would seem that having a universal definition of equivalency for CDBG-DR 

appropriations would be efficient and effective, it could cause problems for States that have 

CDBG-DR funds remaining from more than one appropriation to be obligated and spent. For 

example, Texas received more than $50.6 million under Public Law 114-113, $45.2 million 

under Public Law 114-223, and more than $177 million under Public Law 114-245. 

Additionally, Louisiana received more than $64.3 million under Public Law 113-2, $437.8 

million under Public Law 114-223, and more than $1.2 billion under Public Law 114-245. There 

is also another concern. If the procurement requirements for grantees are not consistent across 

the Departments providing disaster recovery funds (i.e. Department of Transportation, FEMA, 

the Department of the Interior, etc.) States would have different requirements for acquiring 

products and services using funds that were made available by the same appropriation. This 

would be burdensome for the States to track. However, since Congress allocated the largest part 

of funds available under Public law 113-2 to HUD's CDBG-DR program and the program is 

expected to have the largest part of future disaster relief funds allocated to it, consideration 

should be given to having the other Departments have the same procurement requirements as 

HUD for their grantees. 

18. Should HUD' s definition of equivalency include full and open competition of necessary 

products and services at fair and reasonable prices? 

Congress could mandate compliance with Federal grant procurement standards at 2 CFR, 

Part 200; make it clear the mandate overrides existing CPD regulations regarding grant 

procurements with CDBG-DR funds; and prohibit the Secretary from waiving this requirement. 

Congress could also in an appropriation regarding disaster relief, mandate that HUD;s policy of 

providing maximum feasible deference to a State shall not apply to disaster relief. If grantees, 

including States, will not be required to comply with Federal procurement procedures, HUD's 

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definition should, at a minimum, require full and open competition of necessary products and 

services at fair and reasonable prices. 

19. Now I know that HUD is responsible for monitoring CDBG-DR grantees to ensure 

performance and compliance with the program, but who is responsible for monitoring 

sub grantees? 

Grantees are responsible for monitoring subgrantees. 

20. Are grantees always equipped to monitor subgrantees? Are there ever any challenges? 

Monitoring of grantees and subgrantees is a concern we share. 

21. What difficulties hamper HUD in monitoring the use ofCDBG-DR funds? 

Monitoring is a concern at all levels. In many cases, grantees lack experience and training in this 

area. 

About how much of the CDBG-DR funds appropriated by Congress does your office 

audit in the course of its work? 

We are currently testing compliance with the 24 month requirement of Sandy. We looking at all 

DRGR vouchers completed as of January 1, 2018, which totaled to more than $8 billion. 

22. Would requiring subgrantee awards to have independent monitors-paid for by CDBGDR money and matching grantee funds-to verify compliance with the CDBG-DR 

program help with ensuring funds are properly spent? 

To comply with Public Laws 113-2, 114-113, 114-223, and 114-245, HUD required grantees to 

establish an internal audit activity. In our work related to Public Law 113-2, we found that 

grantees' implementation of the internal audit requirements varied greatly. Only 1 of 12 grantees 

reviewed complied with all requirements. Four grantees had no traditional internal audit 

function despite the requirement. HUD's guidance for implementing the internal audit 

requirement was vague and its interaction with grantees with regard to the internal audit 

requirement varied. 

Based on our experience, requiring the use of independent monitors would be helpful. However, 

the requirement should also apply to grantees if it's going to apply to subgrantees. Also, 

consideration should be given to establishing a threshold amount. The use of independent 

monitors would be a requirement for those grantees that receive funds above the threshold 

amount and it could be an option for those grantees that receive funds below the threshold 

amount. 

23. Should Congress consider requiring that the same rules and oversight standards for 

grantees also apply to subgrantees, who right now are not subject to direct HUD 

oversight? 

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Yes, the existing regulations generally require the grantees to monitor subgrantees and 

comply with HUD requirements. See: 24 CFR §§ 570.489 (g), (m) and (p); 24 CFR §§ 200.330 

- 200.332. As such, if grantees are required to follow, for example, 2 CFR, Part 200 grant 

procurement requirements, then those would flow down from grantee to the sub grantee. 

24. In an effort to pay for work that was actually performed, should Congress require 

recipients to use escrow accounts to draw down money as allowable expenses are 

approved, rather than pre-fund recipients with money up front? 

This approach could add another layer in terms of money getting to recipients in a 

proficient manner following disaster relief appropriations. However, it is a reasonable approach 

in terms of providing HUD and grantees a means of verifying proper uses of any disaster relief 

funds awarded by HUD to grantees. 

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