Federal Audit Rips Spending for Texas Hurricane Cleanup

A scathing audit by the federal Department of Homeland Security questions whether some $45 million in public money was properly spent to remove debris in the cleanup of Chambers County, one of the Southeast Texas counties most devastated by Hurricane Ike two years ago.

The review by the department’s Office of Inspector General recommends that much of the money already paid to contractors and approved by county administrators be disallowed because of non-competitive contracts, shoddy or non-existent record-keeping and ineligible and unsupported costs. The report also is critical of federal and state emergency management agencies.

“The county provided several justifications for not following federal procurement regulations, none of which were sufficient,” the report said.

Chambers County Judge Jimmy Sylvia, the county’s chief administrator, did not immediately return a message left for him by The Associated Press.

Auditors gave federal and state officials until mid-February to advise them whether their recommendations will be accepted.

“What we’re saying is, it’s money they may have to eventually return,” Marta Netelko, a spokeswoman for the inspector general’s office, said from Washington. “I’m not sure how that works. What we do is make that suggestion to FEMA.”

She said the Federal Emergency Management Agency would make the call, and may get “more information down the road from the state or county. It’s really FEMA’s decision whether to follow our recommendations.”

The audit report, dated Dec. 13, said county officials “disagreed with the findings and recommendations.” It said they acknowledged they were not experts on federal regulations so they relied on guidance of a technical assistance contractor deployed by the FEMA who helped them and contractors make day-to-day decisions.

The FEMA assistance person provided inaccurate information, according to the audit report, but the county remained responsible for compliance with federal rules “because FEMA contractors do not have authority to override federal law and FEMA policies.”

Hurricane Ike slammed into the Texas coast near Galveston on Sept. 13, 2008. Although only a Category 2 storm, Ike’s storm surge was the equivalent of a Category 5 and it became the third most expensive hurricane in the nation’s history, with monetary damages topped only by Andrew in 1992 and Katrina in 2005.

Chambers County, across the bay from Galveston along the Gulf of Mexico, was swamped by as much as 17 feet of water 10 miles inland, leaving behind tons of debris that included hazardous materials considered immediate public health and safety threats.

The county eventually received $56.8 million in FEMA money through the Texas Division of Emergency Management. It was part of $2.5 billion FEMA delivered to Texas for the Hurricane Ike response.

The federal audit was requested by Republican U.S. Rep. Ted Poe and covered the period from the day the storm hit through April this year.

Four of the five debris removal contracts totaled $44.6 million in Chambers County. Auditors, who did not identify the recipients of the contracts, questioned all of the expenditures.

They said unreasonably high hourly rates were paid on one contract and FEMA had no assurances that reasonable rates were paid on the other three. It said contracts were awarded non-competitively and neither the county nor FEMA had documentation to support how they determined the hourly rates were reasonable.

The audit found the county didn’t monitor time and material contracts and claimed $4 million in ineligible and unsupported costs.

In one heavy equipment contract worth $16.7 million, FEMA couldn’t have reviewed it “because there was no written contract,” the audit report said. The lack of such a written contract “not only violates federal regulations, it is not prudent because the rights and responsibilities of the parties remain open to dispute and interpretation.”

Federal regulations allow for some flexibility during emergency situations but once immediate threats pass, auditors said non-competitive contracts should be scrapped and competitive bidding resume.

They also said county officials failed to monitor contractors who charged them for downtime while equipment was being repaired or undergoing maintenance, that contractors weren’t held accountable for reporting late or leaving early and that contractors consistently charged for commuting time each day at overtime rates that reached $188 per hour.

Commuting time is not compensated normally, said auditors, who were puzzled how such costs were reasonable when one heavy equipment contractor and his subcontractors lived and worked in the county. They also estimated the heavy equipment operator marked up his direct operating costs by 109 percent.

In addition, the heavy equipment contractor had no written documentation for weekly invoices and instead relied on “his memory, phone calls and his notes” and the county officials “never rejected or corrected” invoices, auditors said.

They said FEMA and state emergency agency officials could have prevented many contract problems by verifying how the county officials awarded the contracts.

State officials told auditors they typically don’t get involved in day-to-day decisions unless counties have questions, but auditors said federal regulations specifically assign the state those responsibilities.

Auditors warned that if state and federal emergency agency managers aren’t more aggressive in future disasters, “problems like the ones described in this report will occur again.”