HUD Inspector General reviewing NC recovery efforts as new report outlines slow, wasteful spending

RALEIGH, N.C. (WBTV) - The Office of Inspector General for the US Department of Housing and Urban Development is conducting a review of North Carolina’s agency that distributes federal aid money intended to help rebuild from hurricanes.

North Carolina has received more than $200 million in federal disaster relief money through a HUD-administered program called Community Development Block Grants-Disaster Recovery. The money is intended to help repair or replace homes damaged by hurricanes in a way that will make them more resilient in future storms.

WBTV first reported the North Carolina had been slow to spend any of the federal money in April of last year, when it uncovered a HUD report that found the state had spent $0 of the grant nearly 18 months after Hurricane Matthew had devastated communities in the eastern NC.

At the time, the report rated North Carolina as a “slow spender.”

On Monday, a new report from the Program Evaluation Division of the North Carolina General Assembly found the state continued to be slow to distribute the hundreds-of-millions of dollars in federal disaster relief money, even a year after the agency said it was working to change that.

Related: NC has spent $0 of $200 million grant to rebuild homes damaged by Hurricane Matthew, report says

The new PED report found that the state had spent just one percent, or $3.4 million, of its funds as of December 2018.

By comparison, the report said, South Carolina, which received CDBG-DR funds at the same time as North Carolina, had spent 22 percent of its block grant money awarded for Hurricane Matthew.

“Among the various entities administering disaster recovery funds for Matthew, CDBG-DR funds have been distributed in the least timely manner,” the PED report found. Specifically, the report listed these points as being causes of the delay:

Non-compliant contracts for implementing CDBG-DR, which resulted in the State spending approximately $3.7 million unnecessarily;
Limited institutional knowledge within state government for implementing CDBG-DR; and
Program design issues and changes in implementation strategies.

WBTV has previously reported on various issues with contracts awarded to administer disaster recovery funds.

Related: State officials tried to alter bid documents for multi-million dollar hurricane contract

On the same day the PED report was released, WBTV confirmed the HUD OIG was in North Carolina to conduct a review of the state’s CDBG-DR recovery efforts, which are now managed by the Office of Recovery and Resiliency.

It was not clear what the scope of the OIG’s review was, according to two sources with direct knowledge of the inquiry, who spoke with WBTV on the condition they not be named to discuss ongoing and sensitive matters.

A spokesman for the HUD OIG did not immediately respond to a request for comment.

Similarly, a spokeswoman for the North Carolina Department of Commerce, which also has a role in administering CBDG-DR funds, did not respond to a request for comment for this story.

Related: People still waiting for help two years after Hurricane Matthew; many hit by Hurricane Florence

In a letter responding to the PED findings, North Carolina Secretary of Public Safety Erik Hooks disputed the PED report’s assertion of the length of time it took to disburse CDBG-DR funds, saying that, for nearly a year, the state was barred from distributing any of the funds it had received.

But Hooks’ letter overlooks the fact that the state could not spend any of that money because it had not successfully completed and submitted environmental impact studies for each out where the money would be spent, which South Carolina had done quickly.

A spokeswoman for the North Carolina Office of Recovery and Resiliency, the new office established to better manage disbursement of CDBG-DR funds, among other recovery tasks, issue the following statement on Tuesday, following the original publication of this story:

"The Office of Inspector General is conducting a routine review of the state’s CDBG-DR program, just as they do with all other states that receive this type of funding. The review was also scheduled to coincide with North Carolina’s request to change the program grantee from the N.C. Department of Commerce to the newly established Office of Recovery and Resiliency, a move that will accelerate the delivery of funds to impacted communities.

The $3.7 million cited in yesterday's report was not spent “unnecessarily.” The funds were used to complete 50 Resilient Redevelopment plans as directed by the legislature, develop the federally mandated grant action plan and establish application intake centers to help survivors seeking assistance. To date, North Carolina has spent $9.3 million of the state’s CDBG-DR funding for Matthew, with additional funds being disbursed every week.

As staffing is finalized in the Office of Recovery and Resiliency, North Carolina will have an experienced team in place to continue the expedited delivery of Matthew funds and build a streamlined framework for delivery of Florence funds when they are made available to the state."

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