No-bid Puerto Rico contract reveals troubled FEMA grants

WASHINGTON — The federal agency paying for a controversial no-bid, $300 million contract to rebuild Puerto Rico’s power grid has for years received scathing reports from government auditors for how it oversees the management of similar grants. Members of Congress from both parties have raised questions about the selection last week of Whitefish Energy Holdings LLC to lead the rebuilding of Puerto Rico’s hurricane-ravaged electrical grid. The twoyear-old Montana-based company had just two employees before beginning its work in Puerto Rico.

The contract with the Puerto Rico Electric Power Authority is among the biggest yet awarded in the wake of Hurricane Maria, which slammed the U.S. territory Sept. 20 and knocked out electrical power. PREPA spokesman Carlos Monroig said Whitefish is getting paid through the Federal Emergency Management Agency.

The inspector general of FEMA’s parent agency, the Department of Homeland Security, has repeatedly criticized the agency for lax oversight of grants. The office frequently recommends that FEMA withhold or claw back payments that didn’t follow federal regulations.

FEMA oversees a vast web of disaster relief work: In September, there was $68 billion of ongoing FEMA grants spread across 653,000 projects, and multiple audits and reports by the inspector general show a pattern of problems in how these funds were being spent.

FEMA didn’t respond to requests for comment for this story.

In June, Department of Homeland Security Inspector General John Roth sent a letter to the chairman of the Senate Committee on Homeland Security and Governmental Affairs, Ron Johnson. That letter, which hasn’t previously been reported, warned of FEMA’s “continued failure to manage disaster relief funds adequately.”

Almost one-third of the grants reviewed by Roth’s office were improper, unauthorized or otherwise problematic, indicating “the potential for a much larger problem” with the $10 billion in such assistance that FEMA typically awards each year, Roth wrote.

The letter was the result of “a frustration in our lack of progress in getting FEMA or Congress to pay attention to this,” Roth said in an interview Thursday. The trigger, he said, was FEMA’s decision to give $2.1 billion in grant money to New Orleans, ostensibly to help it recover from hurricanes Katrina and Rita — more than a decade after the fact.

An audit by the inspector general concluded that FEMA shouldn’t have awarded the grants because it was for rebuilding streets and water lines that were degraded by years of neglect, not the hurricanes. FEMA, the inspector general concluded in July, should halt or “disallow” all funding for the work in New Orleans.

FEMA, for its part, disagreed with the finding, arguing that extensive reviews showed the work would repair damage caused by the storms.

In the June letter, Roth painted the picture of an agency that is fundamentally unable to manage grant money, because of “both cultural and structural” problems.

For fiscal year 2015, which the inspector general called representative, 29 percent of the FEMA grants audited by his office showed problems such as “duplicated payments, unsupported costs, improper contract costs, and unauthorized expenditures.”

Since then, audits have found flaws in multiple FEMA-funded projects, large and small. In June, for example, the inspector general recommended FEMA disallow funding for almost half the $3.2 million it approved for Hays County, Texas, to cover damage caused by severe storms and flooding in 2015. The audit found the county secured FEMA funding to remove 20 times as much debris as it actually needed to collect, and didn’t follow federal guidelines for other contracts. FEMA agreed with the findings.