Puerto Rico

We determined that FEMA followed applicable laws, regulations, and guidance in its efforts to provide funding for reconstruction of the Vieques’ Community Health Center.  FEMA’s assessment of the funding needs for the project is complete and $39,569,695 (Federal share) was obligated on January 21, 2020 for a full facility replacement.  We did not make any recommendations but announced an audit to assess FEMA’s Public Assistance Program Alternative Procedures process for all permanent work projects.

The Federal Emergency Management Agency (FEMA) mismanaged the distribution of commodities in response to Hurricanes Irma and Maria in Puerto Rico.  FEMA lost visibility of about 38 percent of its commodity shipments to Puerto Rico, worth an estimated $257 million.  Commodities successfully delivered to Puerto Rico took an average of 69 days to reach their final destinations.  Inadequate FEMA contractor oversight contributed to the lost visibility and delayed commodity shipments.  FEMA did not use its Global Positioning System transponders to track commodity shipments, allowed the contractor to break inventory seals, and did not ensure documented proof of commodity deliveries.  Given lost visibility and delayed shipments, FEMA cannot ensure it provided commodities to Puerto Rico disaster victims as needed to sustain life and alleviate suffering as part of its response and recovery mission.  In addition, FEMA’s mismanagement of transportation contracts included multiple contracting violations and policy contraventions that ultimately led to contract overruns of about $179 million and at least $50 million of questioned costs.  We made five recommendations that, if implemented, should improve FEMA’s management and oversight of its disaster response activities. FEMA concurred with four of the five recommendations.  Recommendations 1 through 4 are considered open and resolved.  Recommendation 5 is considered resolved and closed

The Puerto Rico Electric Power Authority (PREPA) complied with Federal procurement requirements for its noncompetitive procurement of the Whitefish contract.  However, the contract costs may not have complied with Federal cost principles that costs must be reasonable to be eligible for Federal awards.  PREPA’s oversight of the Cobra contract did not comply with PA program guidelines.  Finally, FEMA’s Public Assistance grant to PREPA for the Cobra contract did not fully comply with PA program guidelines.  We made two recommendations for FEMA to provide technical assistance to Puerto Rico to ensure compliance with Federal regulations and PA program guidelines.  We made two other recommendations for FEMA to develop guidance to verify its subrecipients’ oversight of time and material contracts and determine the reasonableness and eligibility of time and material contract costs.  FEMA concurred with three of the recommendations and did not concur with one recommendation.

Williams-Adley determined that the Federal Emergency Management Agency (FEMA) did not always ensure that Department of Transportation and Public Works (DTOP) established and implemented policies, procedures, and practices to account for and expend PA grant funds according to Federal regulations and FEMA guidance.  Specifically, DTOP did not have (1) an effective grants management process; (2) sufficient internal controls in the procurement process; and (3) sufficient controls over its processes for claiming Force Account Labor costs.  This occurred because FEMA and Central Office of Recovery, Reconstruction and Resiliency (COR3) did not adequately oversee DTOP’s grant management activities.  We made three recommendations to improve COR3’s and DTOP’s management of FEMA Public Assistance funds, ensuring they are expended according to Federal regulations and FEMA guidance.  FEMA concurred with the recommendations.

Williams-Adley determined that the Federal Emergency Management Agency (FEMA) did not ensure the Puerto Rico Central Office of Recovery, Reconstruction, and Resiliency (COR3) and the Puerto Rico Aqueduct and Sewer Authority (PRASA) establish and implement policies, procedures, and practices to account for and expend Public Assistance (PA) grant funds according to Federal regulations and FEMA guidance.  Specifically, PRASA did not follow established policies and procedures for: (1) recording the capacity size and rate of its force account equipment; and (2) ensuring each vendor had a certificate of eligibility before receiving a contract award.  We made two recommendations to improve PRASA’s management of FEMA PA funds, ensuring they are expended according to Federal regulations and FEMA guidance.

Following Hurricane Maria, FEMA did not maximize the use of advance contracts to address identified capability deficiencies and needs in Puerto Rico.  Specifically, we identified 49 of 241 new contracts issued in the aftermath of Hurricane Maria for the same goods or services covered by existing advance contracts.  We attributed FEMA’s limited use of advance contracts to its lack of a strategy and documented planning process for ensuring maximum use of advance contracts. Further, FEMA did not maintain contract files in accordance with Federal acquisition regulations and departmental or its own policy.  This occurred because FEMA’s Office of the Chief Procurement Officer did not have controls in place to ensure contract personnel follow Federal regulations and departmental or its own internal policy.  As a result, FEMA’s ability to hold contractors accountable for deliverables is hindered if contract files are not easily located. We made four recommendations to help FEMA improve its strategy for advance contracts, its process for identifying capability needs and gaps, and its contract file management practices. FEMA concurred with all four recommendations and described corrective actions it plans to take.

Through the TSA program, FEMA provides transitional sheltering in hotels to disaster survivors displaced by emergencies or major disasters. TSA reduces the number of survivors in congregate emergency shelters by providing hotel lodging. During our ongoing audit of the Federal Emergency Management Agency’s (FEMA) Transitional Sheltering Assistance (TSA) program, we determined that FEMA violated the Privacy Act of 19741 and Department of Homeland Security policy2 by releasing to the PII and SPII of 2.3 million survivors of hurricanes Harvey, Irma, and Maria and the California wildfires in 2017.3

Because of the high dollar amount in disaster funds likely awarded and the history of audit questioned costs for FEMA disaster funds, FEMA’s inadequate grant management poses a significant risk to taxpayer dollars. We identified issues in our previous reports that demonstrate FEMA’s ongoing issues with ensuring disaster grant recipients and subrecipients comply with Federal regulations and FEMA guidelines. Specifically, FEMA faces significant challenges in ensuring its grant recipients properly manage FEMA disaster funds. This alert highlights the significant deficiencies with FEMA’s internal controls and its lack of enforcement of Federal requirements. As FEMA moves forward with its recovery efforts, it must hold recipients accountable for proper grant management. FEMA must implement and use effective controls to overcome existing problems with managing and monitoring funds for disaster response and recovery.

This is a Department of Homeland Security Office of the Inspector General (OIG) special report on Federal Emergency Management Agency (FEMA) and FEMA recipient and sub recipient disaster-related procurements. FEMA is currently responding to some of the most catastrophic disasters in U.S. history — Hurricanes Harvey, Irma, Maria, and the October 2017, California wildfires. Because of the massive scale of damage and the large number and high-dollar contracts that will likely be awarded, there is a significant risk that billions of taxpayer dollars may be exposed to waste, fraud, and abuse.

We determined that the Authority did not account for FEMA funds on a project-by-project basis as Federal regulations and FEMA guidelines require.  We also identified $577,959 (Federal share $433,469) of project costs that FEMA should disallow.  We recommended that the Regional Administrator, FEMA Region II disallow the $577,959 of questioned costs.