Federal audit questions NC contracts used to help rebuild after Hurricane Matthew, says $2.5 million in funds unaccounted for
A new federal audit questions how the state agreed to contracts worth millions of dollars intended to help with hurricane relief.
Much of the criticism from state lawmakers recent years has been North Carolina is too slow in getting federal funds out the door to help rebuild hurricane damaged homes. This new audit instead calls out the state for a lack of documentation for money it did spend.
The audit from the U.S. Office of Inspector General and said North Carolina couldn't provide assurance that $2.5 million of federal funds were spent on disaster relief.
In total, North Carolina was given more than $236.5 million in federal funds after Hurricane Matthew in 2016, the audit says.
The inspector general report said that the state did not follow proper guidelines when obtaining state contracts to distribute that money.
The federal government said much of the discrepancy in documentation appears to come from a misunderstanding of federal regulations by the state.
The current director of the state's office of Recovery and Resiliency, Laura Hogshead, said that these issues took place prior to her tenure.
"This points to the fact that you need an office to handle this," Hogshead said. "This is sort of the reason we were created. The state did not have folks who were used to dealing with these funds and so there were some initial missteps."
The U.S. Inspector General recommended that North Carolina provide documentation to support where $2.5 million of its money went. If the state cannot provide this documentation, it must return the funds back to the federal government using state money.
Hogshead, however, said that officials with U.S. Department of Housing and Urban Development assured her that the paperwork would be resolved and the state wouldn't have to pay these funds back to the federal government.
According to the federal audit, none of the three major N.C. contracts reviewed by the inspector had proper documentation.
The audit says the state did not provide paperwork that showed that the "cost reasonableness was properly addressed" and in one instance, North Carolina did not "perform a timely review" of the contractor to ensure that they weren't on a list of organizations excluded from receiving funds.
That contractor was for construction management and received more than $16 million in federal funds.
According to the federal government's database, the contractor was eligible to receive funds, but North Carolina needed to follow federal guidelines to "[avoid] the risk of awarding a contract to ineligible vendors."
Once the federal government looked into that contract, they determined that the contract price could not be justified. In fact, the state's estimate shows that the cost for construction management should have only been around $5 million.
The state says, according to the audit, that the cost disparity is because it "had underestimated the needed number of hours under the contract, resulting in its low cost estimate."
"Although the [state] estimate was lower, there was a significant difference in the number of hours estimated by the state and the winning contractor," according to the audit.
According to the inspector general, North Carolina leaders "disagreed" with its assessment about the construction contractor.
