[StBernard] Billions in federal aid stuck in system

[Westley Annis]

Billions in federal aid stuck in system
Money must trickle through bureaucracy 
Wednesday, August 23, 2006
By Bill Walsh
Washington bureau 

WASHINGTON -- When Congress allocated more than $110 billion for hurricane
recovery along the Gulf Coast, some lawmakers worried it would be misspent,
with one senator memorably comparing Louisiana's "culture of corruption" to
that of Iraq. 

And congressional investigators have unearthed some eye-popping instances of
fraud, especially in the chaotic weeks after the Aug. 29 storm. But a year
after Hurricane Katrina, the biggest money concern in the disaster zone
isn't misspending or overspending, but whether recovery money is being spent
quickly enough. 

According to figures compiled by the Bush administration, only about 40
percent of the money available -- or about $45 billion -- has been doled out
by the federal government. And the bulk of that money has gone for the
initial rescue efforts, debris removal and the emergency repairs to New
Orleans' ruptured levees, proving that even in Louisiana water flows faster
than money. 

Meanwhile, signs of storm blight remain: Debris is still piled on sidewalks,
tens of thousands of displaced residents are living out of temporary FEMA
trailers, businesses are shuttered, hospitals are closed and violent crime
is on the upswing. 

"It's slow and it's been frustrating," Sen. Mary Landrieu, D-La., said. "We
are grateful at the generosity of Congress, the administration and the
American people. $110 billion is a huge amount of money. But it's more than
just about the number. It's the quality of the programs, the efficiency that
is used in getting it out to the people who need it." 

Administration officials put the onus on the locals, who are responsible for
developing detailed recovery plans before checks can be cut. With
fundamental decisions about the future of the region still up in the air,
federal officials say it doesn't make sense to hand over money until locals
decide what they want their communities to look like. 


'Tell us' the needs 

Of the $110.6 billion allocated by Congress, about $33 billion remains
"un-obligated," waiting for state and local officials to claim it, said
Donald Powell, chairman of the Gulf Coast recovery effort. 

"They have to tell us what the needs are. Those needs need to be reduced to
paper and verified," Powell said. "If you look at the entire scheme of
things, I think there has been a lot of progress made in one year." 

As successes, Powell pointed to the Army Corps of Engineers' repair of 220
miles of levees around New Orleans in time for this year's hurricane season,
the cleanup of 100 million cubic yards of hurricane debris and nearly $17
billion sent to Louisiana and Mississippi for housing assistance. 

Yet getting the money can be painfully slow. Those seeking federal grants,
including local governments, hospitals, churches and nonprofit agencies,
have to complete a "project worksheet," explaining what the money is for and
how it will be spent. Any proposal of more than $1 million has to be
approved by the Department of Homeland Security in Washington, where
Louisiana officials said some have stalled for 50 days or more. 

Once the federal agency decides to "obligate" or "earmark" the money, it is
up to the state to review the project and write a check. In Louisiana alone,
there have been about 17,000 project worksheets filed since Katrina, ranging
from a few thousand dollars to tens of millions. The applications are in a
third-floor office in Baton Rouge where 60 grant managers handle 20 to 25
proposals each. The state is in the process of hiring more managers. 


Checking for fraud 

Art Jones, Louisiana's chief of disaster recovery, said he understands
people's impatience with an application process that he said averages about
six weeks -- and can sometimes stretch much longer. But he said the state
has a responsibility to make sure the money isn't misspent. 

"Obviously people would just like to ask for X amount of money and get it
the next day," Jones said. "With all of the approvals required, that's not
reasonable. . . . Before money goes out the door we want to make sure it is
good money." 

Already, highly publicized instances of fraud have tainted the rebuilding
effort. In June, the Government Accountability Office reported that FEMA had
wasted as much as $1.4 billion on individual assistance payments to
hurricane evacuees or people claiming to be. The GAO discovered that
FEMA-issued debit cards were used to buy Dom Perignon champagne, admission
to strip clubs and season tickets to the New Orleans Saints. In some cases,
the GAO found, people who didn't evacuate were able to collect the $2,000 in
financial aid, and some who did evacuate collected more than once. 

The government's post-disaster contracting practices also have been a source
of concern. While $3.6 billion has been spent cleaning up hurricane debris,
some lawmakers have questioned whether the bill would have been as high had
FEMA not approved the contracts without competitive bidding. 


SBA delays 

Meanwhile, money is stuck in the pipeline at the Small Business
Administration. The agency boasts that it has approved $10.4 billion in
low-interest loans to businesses and individuals along the Gulf Coast since
Hurricanes Katrina, Rita and Wilma. But only $2.5 billion has gotten into
peoples' hands, according to records provided by the Senate Small Business
Committee, whose ranking member, Sen. John Kerry, D-Mass., has been a
frequent critic of the agency. 

Carol Chastang, an SBA spokeswoman, said the money is available for
borrowers to claim. But, she said, with shifting circumstances and so many
unanswered questions about the future of the region, many aren't sure they
want to do. 

"The massive increase in the cost of construction, new flood insurance
requirements, new building codes, have overwhelmed many borrowers who are
still trying to decide if rebuilding is worth it," Chastang said. 

But critics, such as Kerry, say long delays in processing loans by SBA have
only complicated the lives of borrowers. New Orleanian Roland Hymel said he
waited six months after his SBA loan was approved in February to receive the
money. While he waited, Hymel took out personal loans from private banks at
exorbitant rates so he could fix up his Canal Street building in New Orleans
for rent to local police and the FBI. 

"What if I didn't have my own money to afford to do that?" Hymel asked. "I
feel sorry when I drive down Canal Street and see all those other businesses
that aren't opening up again. Things are going so slow it's unreal." 


Home-front financing 

One of the most anticipated infusions of money along the Gulf Coast is for
displaced homeowners. Mississippi has begun paying homeowners for housing
repairs, and those in Louisiana hope to see the money begin flowing in the
next few weeks. 

In July, Congress approved $4.2 billion to finance Louisiana's "Road Home"
housing program, which had received $6.2 billion in December. The block
grant program will pay flooded-out homeowners up to $150,000 to rehabilitate
their property or move elsewhere. Unlike in Mississippi, where the grants
will go directly to homeowners, in Louisiana they will be placed in escrow
accounts that will disburse money as necessary, a process that is likely to
cut down on fraud and abuse but will further delay money getting into the
hands of disaster victims. 

In at least one instance, FEMA said it probably has more money than it
needs. After Katrina, the agency earmarked $6.4 billion for manufactured
housing for hurricane evacuees. As of last week, FEMA had spent $4.8 billion
of it and will probably return some. 

Powell urged patience, given the scope of the disaster and the awesome job
involved with rebuilding a disaster zone the size of Great Britain from the
ground up. 

"There is always a tension between getting money out fast and getting it out
responsibly fast," Powell said. "I have a sense of urgency all the time. But
it doesn't serve anyone to be sloppy and haphazard." 

. . . . . . . 

Bill Walsh can be reached at bill.walsh at newhouse.com or (202) 383-7817.