Audit Says Louisiana May Owe Feds for Misspent Storm Aid

Louisiana may owe the federal government more than $115 million for disaster relief aid that was misspent or awarded to ineligible recipients after hurricanes Katrina and Rita, a state audit said Monday.

The legislative auditor office’s review of the Office of Community Development covers spending through the fiscal year that ended June 30. The OCD oversees the Homeowner Assistance Program, the Small Rental Property Loan Program and the Hazard Mitigation Grant Program – which received a total of $9.3 billion in federal funds.

In response to the 2005 hurricanes, the state was awarded $8.5 billion in federal dollars to administer the Homeowner Assistance Program as part of the Road Home program.

State officials say $58 million of that money went to 1,142 homeowners who were not eligible for the program. An additional $1.3 million was awarded to 21 homeowners who have failed to provide evidence of compliance with the program’s rules, the audit reports.

The review by Legislative Auditor Daryl Purpera’s office said auditors found similar compliance shortcomings in a previous audit. The review said the OCD wasn’t aggressive enough in recovering money from ineligible recipients or ensuring that recipients meet program requirements in a timely manner, particularly under Road Home.

The Road Home program awarded grants of as much as $150,000 to recipients who were required to follow certain guidelines. Recipients who didn’t follow the rules could be required to pay the money back.

The audit said the compliance problems included failure to provide proof a home had been repaired and reoccupied by the owner or failure to show proof of homeowner’s insurance.

“Although the department is actively working with HUD to resolve compliance issues, we would like to reemphasize that the longer program regulations are modified and enforcement actions delayed, the less chance the state has to recover award payments from recipients that did not spend the money appropriately, and the state could be liable to repay those funds to the federal government,” the audit states.

In a response letter to state auditors, OCD executive director Patrick Forbes wrote that his department is being “aggressive” in recovering money from suspected fraud cases or duplicated benefits. However, Forbes wrote that the department’s priority was to help people meet the guidelines and to recover from the storm, and not to make them repay the grant money for noncompliance.

Forbes wrote that federal officials support his department’s strategy and have not issued a deadline for collecting those funds.

The audit also said that the Office of Community Development was attempting to recover money from ineligible property owners with $33 million in Small Rental Property Program loans. However, auditors said their review found an additional 24 ineligible property owners with loans totaling $567,044 that the state was not pursuing.

The loans were designed to help property owners get their rental properties repaired and available to low and moderate-income tenants. The program was awarded $361 million in federal funds.

Under the Hazard Mitigation Grant Program, the audit stated that the OCD identified $22.8 million awarded to 801 applicants that may need to be repaid based on noncompliance or ineligibility. The hazard mitigation program seeks to help homeowners stormproof their houses, such as elevating it, to prevent damage in future storms. The state received $446 million in federal funds for this program.