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Using just 2% of CDBG-DR funds shows Puerto Rico gov’t’s slow spending

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By Vanessa Colón-Almenas
Center for Investigative Journalism

Of the $20.2 billion recovery funds allocation granted after Hurricane María through the Community Development Block Grant Disaster Recovery program (CDBG-DR), Puerto Rico has been approved to use only 16%, or, $3.2 billion.

Of the money available, the government had used a mere 2%, as of June 30, the end of fiscal year 2020.

The bureaucratic process and restrictions by the U.S. Department of Housing and Urban Development (HUD), coupled with the government of Puerto Rico’s ongoing staffing and planning changes, influence the delay in the disbursement of money, the Center for Investigative Journalism (CPI, in Spanish) found.

Some $67 million had been disbursed at the end of the fiscal year, on June 30, according to the federal interagency Recovery Support Function Leadership Group (RSFLG), that is, 76% of what was projected by the 2020 Fiscal Plan certified by the Fiscal Control Board.

Some of the recovery projects have been shifted to a different agency in charge; others have been canceled. In 13 of them, barely 2% or none of its budget has been spent, as is the case with the Workforce Training program, first under the Department of Economic Development and Commerce, and now supervised by the Puerto Rico Housing Department (PRHD).

This program — aimed at “[helping] unemployed and underemployed residents find employment by providing job training in skills areas related to recovery efforts” — has a $30 million budget under the first allocation. As of June, a mere $3,671 had been spent.

The search for information on the status of the use of recovery funds on the HUD and RSFLG websites produces different results. But regardless of whether the data is outdated or up-to-date, the verdict is the same: Puerto Rico is classified as a “slow spender” in the use of the first CDBG-DR grant received, for $1.5 billion. This classification first appeared in HUD’s January financial report, two months before the onset of the COVID-19 pandemic.

In the federal lingo, “slow spender” means that it is spending 10% less than the monthly pace required to fully use the grant by the target closeout date of the allocation.

HUD’s website has had technical problems publishing its daily performance reports and has been “under construction” since at least the beginning of July. In addition, it has not published monthly financial reports since March due to the pandemic, agency staff told the CPI.

HUD Secretary Ben Carson announced that the second grant for $8.2 billion in CDBG-DR funds would be distributed with limitations and in tranches. The PRHD had access to only $1.7 billion. As of June, there are no expense reports for this assignment, the RSFLG shows.

“Of those $3.2 billion in funds that have been made available through the first and second allocations, Housing has obligated about $1.1 billion [as of Sept. 2],” PRHD Secretary Luis Fernández-Trinchet told the CPI, who opted to emphasize on money obligated, not on money spent.

“Obligated” funds mean that the government promises to spend them. It does not imply that they have already been spent, but rather that the Puerto Rico government agency commits to spend them.

When asked about the reasons for the delay, Fernández-Trinchet said “the balance of the CDBG-DR grant will not show significant transfers until the houses are finished and the cases have been closed or the grants are used up within the programs.”

A bureaucratic process loaded with technicalities
To access CDBG-DR funds, the government of Puerto Rico has to develop an action plan but cannot do so until HUD publishes notifications of the allocation in the Federal Register.

The notices include guidelines for the use of funds, legal provisions, requirements, approval criteria, and the projects and waivers allowed in the Action Plan.

CDBG-DR funds for Puerto Rico are divided into five grants

A plan is prepared for each grant (and there may be amendments), and public hearings are held. When the draft plan is ready, it is published for citizens and entities to comment on. HUD must approve the plan and then sign a final agreement with the local Housing Department, which is the principal administrator of these funds in Puerto Rico.

Final agreements have already been signed for the first and second grant. HUD approved the plan amendment for the third grant, but the final agreement is yet to be signed. “[The Department of] Housing has not received a copy of such an agreement yet,” the agency told the CPI.

This plan, whose final version has not yet been published, noted that people who do not want to relocate under the Repair, Reconstruction and Relocation (R3) program can defer that assistance to participate in a mitigation program, which would allow them to keep their home in the same community. This was one of the suggestions by Ayuda Legal, a legal aid non-profit headed by Ariadna Godreau-Aubert.

“Anyone who was under threat of being displaced by the policies included in the Action Plan will now be able to have the opportunity to mitigate and keep their property in the same community where they were,” Attorney Paula Fournier del Valle, explained, describing it as an “overwhelming achievement for our advocacy claims at Legal Aid.”

For the fourth grant — the mitigation funds — HUD required a new action plan from the PRHD that must be delivered by December 3, 2020. HUD warned Congress that this grant represents a challenge to manage, not only in the amount, $ 8.2 billion, but because the federal agency has never administered a stand-alone mitigation program.

Public hearings on mitigation funds will be held on September 16 and 18. They will air live at 8 p.m. on WIPR (public television and radio), Facebook and YouTube.

Regarding the fifth grant — funding for the electricity grid — the Housing Secretary said “we haven’t yet received notification from HUD, beyond saying that they’re working on it. At the moment, we don’t know when the guidelines will be published in the Federal Register.”

The CPI asked HUD when it expects the notice to be released, but the federal agency said there is no date required by law.

“HUD is working with the Federal Emergency Management Agency (FEMA) and other interagency partners to release the notice as quickly as possible in a way that will ensure the best use of funds,” it said in written statements.

What was the first grant spent on?
The initial notice of the first $1.5 billion was published on February 1, 2018. The final agreement was signed on September 20, 2018 with HUD Secretary Carson present at La Fortaleza. It was not until February 2, 2019, that HUD authorized Puerto Rico to use the money.

Some $67 million of that first grant has been spent, which is 4% of the $1.5 billion.

The administration component has used the most money, according to reports through June, given that of the $75 million budgeted, 32%, or $24 million, had been spent.

The PRHD stated that it had hired 105 temporary workers and employees in positions of trust to handle CDBG-DR funds, and projected filling another 104 positions. Through July, the Secretary confirmed the hiring process was up to 132 employees.

A little more than $37 million had been disbursed through the R3 program — which has the biggest budget — representing 43% of the $835 million allocated in the first grant. The Housing Secretary said there are 4,500 houses throughout Puerto Rico covered with blue tarps, while there are about 2,600 applications in the R3 program associated with those houses.

There are 18 projects under the first grant. Two of them are for program planning and administration. The remaining 16 are focused on housing, economy, planning for future events, infrastructure and multisectoral.

The Housing Finance Authority, Foundation for Puerto Rico, the University of Puerto Rico, Discover Puerto Rico, Invest Puerto Rico, the Puerto Rico Economic Development Bank and the Puerto Rico Housing Department are the main agencies responsible for the 18 programs. Originally, a six-year period was set — until 2024 — to complete the programs. However, in August, HUD published a notice on the extension of an additional year to spend the funds due to the pandemic.

“Our work schedules haven’t been altered so far, but this notice provides us the flexibility to modify them in the event that the implementation of any of our programs is affected in the long term due to the pandemic. An example of this was the period when the R3 program had to stop construction work due to the ban included in the Executive Order [related to COVID-19],” the PRHD said.


Examples of lost time
The Department of Economic Development and Commerce (DDEC, in Spanish), headed by Manuel Laboy-Rivera, was in charge of the Workforce Training program. However, earlier this year the PRHD took the responsibility away from the DDEC over that and five other CDBG-DR funded projects.

In September 2019, former Secretary of PRHD, Fernando Gil-Enseñat, canceled a request for a proposal by the DDEC for allegedly failing to comply with HUD processes. In a lengthy October letter to Laboy Rivera, Gil-Enseñat explained that the Puerto Rico Housing Department staff learned that a “senior official” from the DDEC gave instructions to re-evaluate the proposal to allow the participation of other proponents. That official, whom Gil-Enseñat did not identify in the letter, was not part of the CDBG-DR working group.

Gil-Enseñat also stated in the letter that the Housing Department held 129 meetings, telephone calls and trainings since July 2018 with DDEC staff to support the process to access CDBG-DR funds. He noted that six of eight members of the DDEC’s CDBG-DR group resigned, were fired, or reassigned.

Laboy Rivera referred Gil-Enseñat to the Department of Justice for “concerns” in the management of CDBG-DR funds. Justice confirmed that it received the “letter” about Gil-Enseñat on Nov. 1, 2019 but does not yet have a report. Acting Justice Secretary Inés Carrau Martínez said in written statements to the CPI that she referred “the matter” to the Division of Public Integrity and Comptroller Affairs.

Now the Puerto Rico Economic Development Bank and the Puerto Rico Housing Department are in charge of economic programs. Gil-Enseñat resigned from his post in January at the request of Gov. Wanda Vázquez-Garced.

Meanwhile, the Office of Socioeconomic and Community Development (ODSEC, in Spanish) no longer appears as the “administering entity” of the Community Resilience Planning Program with the Foundation for Puerto Rico (FPR) to “develop resilience plans.” In 2017, HUD had already raised its concerns about ODSEC’s administrative capacity.

When asked if he is satisfied with the FPR’s work, Housing Secretary Fernández-Trinchet said it is one of the entities that “we’re looking into closely.” As of June, FPR had spent about $600,000 of the $37 million from the first allocation.

“We’ve sat down with them a couple of times and we’re looking closely at what the Foundation is doing. Let’s say that I’m still in an evaluation process,” said Fernández-Trinchet, who was appointed in January after Gil-Enseñat’s exit.

The Puerto Rico Housing Department’s CDBG-DR team also has a new face. Attorney Maretzie Díaz Sánchez served as the program’s interim deputy secretary for three months, after Dennis González resigned on May 31. The Puerto Rico Housing Department said that Díaz Sánchez was formally appointed to the position on August 3.

A year and a half ago, Díaz Sánchez worked in Housing as director of Disaster Recovery, focused on the aspect of compliance, “supervising the legal, purchasing, monitoring and auditing divisions.”

According to his LinkedIn page, Dennis González has been working for three months as a “director” at Hagerty Consulting, a firm that offers disaster planning and recovery services. Brock Long, who received strong criticism as FEMA administrator for the slow response after Hurricane María in Puerto Rico and resigned after allegations of misuse of official vehicles, is the Executive Chairman of Hagerty Consulting. This firm appears as registered in the Puerto Rico State Department’s Registry of Corporations in January 2018.

The mayor of the city of Evanston, Illinois, Steve Hagerty, founded the company in 2001. As acting mayor, Hagerty was in Puerto Rico in March 2018 and visited the mayor of Isabela, Carlos Delgado Altieri, now running for governor.

Several key officials in the management of Puerto Rico recovery funds have resigned from their local and federal government jobs to go to positions in companies that in turn have contracts for recovery work.

Gov. accepted new layers of bureaucracy for 2nd grant
Although HUD approved the Action Plan for the second CDBG-DR grant in late February 2019, it was not until a year later that it signed the final agreement, a month before the pandemic began.

By signing that agreement, the governor accepted HUD’s conditions so that the Puerto Rico Housing Department could access the $8.2 billion, in tranches, and that the next action plans and amendments are reviewed by the Fiscal Control Board and the Federal Financial Monitor, Robert M. Couch.

“The Board doesn’t approve. What it does is that it certifies [what is proposed by Housing] so that it complies with the approved Fiscal Plan and with the government’s budget,” the Housing Secretary said when the CPI asked him about the layers of approvals added to access the funds.

The Board will issue a certification if the Action Plan or the amendments to access more funds “is consistent with the certified budget and with the fiscal plan,” the agreement establishes. In the event that the Board does not issue a certification, HUD may authorize the Puerto Rico Housing Department to access the funds.

When the Board certified the plan to authorize the first $1.7 billion allocation — none of which appeared to have been spent as of June 30 — it recommended that a “certain change” be applied to the Agency Planning Initiatives project, which seeks to identify properties without title deeds and informal or unregistered structures.

The Board also suggested that the Workforce Training program be coordinated with the DDEC. “Apparently the DDEC was not interested. So, what we’ve opted to do is to run the program directly ourselves, in Housing,” Fernández-Trinchet said.

Asked what the DDEC’s reasons were for not “being interested,” the Puerto Rico Housing Department said that “after several informal conversations with the DDEC, each agency’s different plans, and the need to channel the efforts of several CDBG-DR programs as soon as possible, led us to move ahead with developing the program. Right now, the program is reviewing the proposals that have been received.”

The Board certified two amendments to the Housing Action Plan since April that were sent to the Secretary of HUD. It also approved a draft Procurement Manual, which establishes the rules and guidelines for the procurement of goods and services for the CDBG-DR program.

In addition to the intervention of the Board and the federal monitor, HUD’s Office of Community Planning and Development holds weekly meetings with the Puerto Rico CDBG-DR team, Fernández-Trinchet said. They meet with Laura Rivera, who is the assistant director of the Caribbean Region Disaster Recovery and Special Issues Division of HUD’s Puerto Rico office.

HUD’s chief financial officer, Irving L. Dennis, and the federal coordinating officer for Puerto Rico, Rear Admiral Peter Brown, also oversee the program.

“The federal monitor became the filter for the 16 local and federal agencies that supervise us,” the Housing Secretary said. The second agreement states that the monitor must review the disbursements of all CDBG-DR funds.

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This story was written by our staff based on a press release.
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