WESLACO, RGV – The Office of Inspector General at HUD wants the State of Texas to pay back $1.6 million that it believes was used to repair 15 homes that were not eligible for Hurricane Dolly disaster assistance.

The General Land Office disputes the findings in the OIG’s report and says it does not expect to pay back any money.

“No ineligible homes were repaired under this program – none,” GLO press officer Jim Suydam told the Guardian. “The findings in this report don’t stand up to a further review of the facts. All of the homes repaired under this program were damaged by hurricanes Ike or Dolly. We don’t expect to have to pay back any money.”

The OIG audited the State of Texas’ Community Development Block Grant Disaster Recovery Program based on a hotline complaint, which alleged mismanagement of the Lower Rio Grande Valley Development Council’s Disaster Recovery housing program. The complainant also made allegations concerning excessive home costs and ineligible homeowners.

Weslaco-based LRGVDC is the official Council of Government for Hidalgo, Cameron and Willacy counties. It was awarded $186 million in federal disaster relief funding to repair homes damaged by Hurricane Dolly. Of this, $64 million is being used on regional drainage projects. The rest of the money was allocated for housing repairs. URS Corp. won the contract to oversee the project and is getting ten percent of the $122 million in administration fees.

Eddy Gonzalez, mayor pro-tem of Edcouch, spoke about the IOG report at last month’s LRGVDC board meeting. Gonzalez is on the group’s housing subcommittee. “I am pleased to say the COG was not cited in any critical way in the OIG report. We got a clean bill of health,” Gonzalez told the Guardian afterwards. He added that it is very frustrating for the COG to be associated with the disaster relief program because it has no say in the operations at all. “We put in a lot of hours of hard work at our meetings, we fret and worry about the program and, yet, at the end of the day we have zero say in the decision-making. Everything is decided in Austin,” Gonzalez said.

The IOG’s report is 32 pages long. The audit objectives were to determine whether the State (1) ensured that the contractor limited the award of Disaster Recovery grant funds to eligible homeowners and homes, (2) ensured that the contractor met critical performance benchmarks in the Development Council’s housing programs, and (3) adequately monitored the Development Council’s housing programs.

“We recommend that HUD’s Acting Director of the Disaster Recovery and Special Issues Division require the State to repay $1.6 million for homes not eligible for assistance, ensure that the contractor adequately inspects for and documents Hurricane Dolly damage, monitor its contractor, and continue to withhold payments until the contractor meets benchmarks.”

The OIG report states that except for assisting ineligible homes, its inspectors could not substantiate the allegations of the complainant. “The State, the Development Council, and its contractor generally ensured that homeowners met most eligibility requirements, and they supported the homes’ costs.”

However, the IOG report stated, “Our testing showed the State’s contractor did not adequately document Hurricane Dolly damages for 15 assisted homes costing $1.6 million. The contractor’s 15 inspections did not clearly show the damage or identify the repairs needed related to Hurricane Dolly as required. This condition occurred because the State prioritized the funding to affirmatively further fair housing and did not adequately monitor the contractor.”

In addition, the OIG report stated, “the contractor did not perform its inspections in a timely manner, performed the inspection as the last step in the eligibility process, and did not use the Federal Emergency Management Agency or other sources to verify Hurricane Dolly damage.”

Projecting the results of the IOG’s statistical sample to the 700 homes that the State expects to complete by December 31, 2014, showed that the State “could fund at least 84 ineligible home owners, costing at least $8.6 million, if its contractor does not correct the inspection process,” the report said.

The IOG report also said the State of Texas did not ensure URS met critical performance benchmarks. “This condition occurred because the State did not establish a policy for implementing the program in a timely manner and its contract lacked penalty provisions. In addition, the contractor appeared to have capacity issues, and its subcontractor did not appear to adequately staff the program.”

As a result, the IOG report said, “the contractor had missed all of its benchmarks, and it had constructed only 137 (17 percent) of the 815 estimated homes required to be completed.”

Jorge Ramirez, senior director of the disaster recovery program for the GLO, strongly disagreed with the findings of the IOG report. A June 27 letter he sent to Gerald R. Kirkland, regional inspector general for auditing at HUD, has been added as an addendum to the IOG report.

“The Land Office strongly disagrees with the OIG’s Finding that its contractor performed inadequate hurricane damage inspections, and consequently with the OIG’s recommendations. The OIG’s Finding hinges on the inadequacy of the inspections and/or our damage assessment process. The Land Office believes that its process is much more than adequate; it exceeds all regulations or guidance provided by HUD. Further, we believe that OIG came to its conclusion of inadequacy based on invalid assumptions,” Ramirez wrote.

Ramirez listed the complaints the OIG made in the report: that the GLO failed to use FEMA data to verify damage; that the GLO’s pictures were inconclusive and failed to prove damage; that the GLO’s process was not conducted in a timely manner; and that the GLO failed to attribute damage to a specific disaster.

Ramirez countered that there are no federal guidelines for assessing and documenting damage caused by a disaster. “The Land Office uses a belts and suspenders approach to assess hurricane damage. To determine damage, we utilize multiple tools when demonstrating connections between the natural disaster and the impacted homeowners,” he wrote.

Ramirez said LRGVDC had nearly 3,000 applicants for disaster relief but would only serve 877. He added that the GLO is always looking for ways to improve its disaster recovery program. “Although we disagree with the OIG’s finding and the recommendations, we do want to inform the OIG that we are further improving our monitoring plan. This is not based on any current weaknesses but because of our policy of continuous and systematic improvement. In addition, we will work with our sub-recipients and grant administrators to provide oversight guidance based on our updated monitoring plan.”

As for Finding 2, that the GLO did not ensure that URS met critical performance benchmarks, Ramirez wrote: “The OIG’s finding is based on original Land Office contractual benchmarks that have been revised and are no longer applicable.”

Click here to read the Office of Inspector General report.