oversight

Huracanes de Puerto Rico: Estado de Financiamiento de FEMA, Supervisión y Desafíos de Recuperación

Published by the Government Accountability Office on 2019-03-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office
             Report to Congressional Requesters




March 2019
             PUERTO RICO
             HURRICANES

             Status of FEMA
             Funding, Oversight,
             and Recovery
             Challenges




GAO-19-256
                                            March 2019

                                            PUERTO RICO HURRICANES
                                            Status of FEMA Funding, Oversight, and Recovery
                                            Challenges
Highlights of GAO-19-256, a report to
congressional requesters




Why GAO Did This Study                      What GAO Found
In 2017 two major hurricanes – Irma         The Federal Emergency Management Agency (FEMA) obligated almost $4
and Maria – caused extensive damage         billion in Public Assistance grant funding to Puerto Rico as of September 30,
throughout Puerto Rico. Hurricane           2018 in response to the 2017 hurricanes. FEMA obligated about $3.63 billion for
Maria, a Category 4 hurricane, was the      emergency work—emergency measures such as debris removal and
most intense hurricane to make landfall     generators—and about $151 million for permanent work to repair and replace
in Puerto Rico since 1928, destroying       public infrastructure such as roads (see figure).
roads, buildings, and cutting power and
communication lines, among other
                                            Damaged Segment of Road Near Maricao, Puerto Rico, September 2018
things. Puerto Rico estimates that
$132 billion will be needed to repair
and reconstruct infrastructure and
services. FEMA—a component of the
Department of Homeland Security
(DHS)—is the lead federal agency
responsible for assisting Puerto Rico
as it recovers. FEMA administers the
Public Assistance program in
partnership with Puerto Rico to provide
funds to rebuild damaged infrastructure
and restore critically-needed services.
GAO was asked to review the federal
government’s recovery efforts related
to the 2017 hurricanes. This report,        Puerto Rico established a central recovery office to oversee federal recovery
among other objectives, describes (1)       funds and is developing an internal controls plan to help ensure better
FEMA’s Public Assistance spending in        management and accountability of the funds. In the interim, FEMA instituted a
Puerto Rico and oversight efforts of        manual reimbursement process—requiring FEMA to review each reimbursement
federal recovery funds, and (2) initial     request before providing Public Assistance funds—to mitigate risk and help
challenges with the recovery process.       ensure financial accountability. FEMA officials stated that they will remove this
GAO reviewed Public Assistance
                                            manual process once the agency approves Puerto Rico’s internal controls plan.
program documents; analyzed grant
funding data; and interviewed officials     Officials from FEMA and Puerto Rico’s central recovery office and municipalities
from Puerto Rico and DHS about the          that GAO interviewed reported initial challenges with the recovery process,
Public Assistance program and               including with Public Assistance alternative procedures. Unlike in the standard
recovery efforts, as well as officials      Public Assistance program where FEMA will fund the actual cost of a project, the
from ten municipalities selected on the     Public Assistance alternative procedures allow awards for permanent work
basis of population and Public              projects to be made on the basis of fixed cost estimates to provide financial
Assistance spending.                        incentives for the timely and cost-effective completion of work. Challenges
GAO is not making recommendations           identified included concerns about lack of experience and knowledge of the
at this time, but will continue             alternative procedures being applied in Puerto Rico; concerns about missing,
monitoring the recovery as part of its      incomplete, or conflicting guidance on the alternative procedures; and concerns
ongoing work.                               that municipalities have not been fully reimbursed for work already completed in
                                            the immediate aftermath of the hurricanes, causing financial hardships in some
                                            municipalities.
                                            FEMA officials stated that the agency is taking actions to address reported
View GAO-19-256. For more information,
                                            recovery challenges, such as leveraging existing expertise to train personnel and
contact Chris Currie at (404) 679-1875 or   developing supplemental guidance on alternative procedures and reducing
CurrieC@gao.gov.                            delays in reimbursements. GAO will continue to monitor these issues and plans
                                            to report additional findings and recommendations as appropriate later this year.
                                                                                     United States Government Accountability Office
Contents


Letter                                                                                   1
               Background                                                                4
               FEMA Obligated Almost $4 Billion in Public Assistance Funding,
                 and Puerto Rico and FEMA Have Taken Actions to Provide
                 Oversight of Federal Recovery Funds                                   12
               FEMA, COR3, and Subrecipients Report Initial Challenges with
                 the Recovery Process                                                  21
               Puerto Rico Developed an Economic and Disaster Recovery Plan
                 in Response to the Bipartisan Budget Act of 2018 That
                 Addresses Long- and Short-Term Needs                                  24
               Agency Comments and Our Evaluation                                      29

Appendix I     Comments from the Department of Homeland Security                       32



Appendix II    Comments from the Government of Puerto Rico                             34



Appendix III   GAO Contact and Staff Acknowledgments                                   37



Tables
               Table 1: Federal Emergency Management Agency’s Public
                       Assistance Obligations to Puerto Rico and Expenditures
                       for Hurricanes Irma and Maria by Category of Work, as of
                       September 30, 2018                                              15
               Table 2: Federal Emergency Management Agency (FEMA)’s
                       Public Assistance Obligations to Puerto Rico and
                       Expenditures by Subrecipient (as categorized by FEMA)
                       for Hurricanes Irma and Maria, as of September 30, 2018         18
               Table 3: Categories of “Courses of Action” in Puerto Rico’s
                       Recovery Plan                                                   26

Figures
               Figure 1: The Paths of Hurricanes Irma and Maria                          5




               Page i                                     GAO-19-256 Puerto Rico Hurricanes
Figure 2: Federal Emergency Management Agency (FEMA’s)
         Public Assistance Program Categories of Work                   7
Figure 3: Federal Emergency Management Agency’s Public
         Assistance Obligations to Puerto Rico by Category of
         Work, as of September 30, 2018                                14
Figure 4: Collapsed Segment of Road Near Maricao, Puerto Rico,
         September 2018                                                16
Figure 5: Missing Rail in Public Space Along River’s Edge,
         Maricao, Puerto Rico, September 2018                          17




Page ii                                   GAO-19-256 Puerto Rico Hurricanes
Abbreviations

BBA                        Bipartisan Budget Act of 2018
COR3                       Central Office for Recovery, Reconstruction
                           and Resilience
DHS                        Department of Homeland Security
DRF                        Disaster Relief Fund
EMMIE                      Emergency Management Mission Integrated
                           Environment
FEMA                       Federal Emergency Management Agency
FOMB                       Financial Oversight and Management Board
GAR                        Governor’s Authorized Representative
HSOAC                      Homeland Security Operational Analysis Center
IFMIS                      Integrated Financial Management Information
                           System
NOAA                       National Oceanic and Atmospheric Administration
Stafford Act               Robert T. Stafford Disaster Relief and Emergency
                           Assistance Act




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Page iii                                                GAO-19-256 Puerto Rico Hurricanes
                       Letter




441 G St. N.W.
Washington, DC 20548




                       March 14, 2019

                       Congressional Requesters

                       On September 6, 2017, Hurricane Irma’s eyewall passed 50 nautical
                       miles north of Puerto Rico as a category 5 hurricane, causing severe wind
                       and rain inundation to the main island and significant damage to the
                       island of Culebra. Less than two weeks later, on the morning of
                       September 20, 2017, Hurricane Maria made a direct hit as a category 4
                       storm on the main island of Puerto Rico. 1 Although the storm moved
                       offshore in the early afternoon of September 20, 2017, tropical storm-
                       force winds continued into the late night hours, causing extensive
                       damage to electrical utilities, roads, bridges, and other public
                       infrastructure throughout Puerto Rico. According to the National
                       Hurricane Center, Hurricane Maria was the most intense hurricane to
                       make landfall in Puerto Rico since 1928. In its recovery plan, Puerto Rico
                       estimates that $132 billion in funding from 2018 through 2028 will be
                       needed to repair and reconstruct the infrastructure damaged by the
                       hurricanes. This includes $30 billion to comprehensively modernize
                       Puerto Rico’s energy sector and improve its resiliency, nearly $5 billion to
                       replace Puerto Rico’s drinking water system, and between $8 to $12
                       billion to rehabilitate owner-occupied homes that were substantially
                       damaged by the hurricanes, among other things. 2

                       The Federal Emergency Management Agency (FEMA), a component of
                       the Department of Homeland Security (DHS), leads the federal effort to
                       mitigate, respond to, and recover from disasters, both natural and
                       manmade. 3 Among other responsibilities, FEMA administers the Public
                       Assistance program in partnership with the Government of Puerto Rico
                       (Puerto Rico), providing grant funding for a wide range of response and
                       recovery activities. These activities include, among other efforts, debris

                       1
                        The National Oceanic and Atmospheric Administration (NOAA) measures hurricanes on a
                       scale from 1 to 5 with a Category 1 being the least intense and a Category 5 being the
                       most intense. NOAA defines a Category 4 hurricane as one with winds above 130 miles
                       per hour but less than 157 miles per hour. Hurricane Maria made landfall on Puerto Rico
                       as a Category 4 hurricane.
                       2
                        Central Office for Recovery, Reconstruction and Resiliency, Government of Puerto Rico,
                       Transformation and Innovation in the Wake of Devastation: An Economic and Disaster
                       Recovery Plan for Puerto Rico (August 8, 2018).

                       See 6 U.S.C. § 313
                       3




                       Page 1                                                GAO-19-256 Puerto Rico Hurricanes
removal; life-saving emergency protective measures; and the repair,
replacement, or restoration of disaster-damaged publicly-owned facilities.
In addition, FEMA coordinated with Puerto Rico to submit an economic
and disaster recovery plan to Congress, as required by the Bipartisan
Budget Act of 2018. 4 FEMA also plans to work with Puerto Rico to ensure
that it has effective internal controls in place to oversee federal recovery
funds.

You asked us to review the federal government’s response and recovery
efforts related to the 2017 hurricanes. As part of that effort, we have
several reviews ongoing of FEMA’s and Puerto Rico’s disaster recovery
planning, oversight, and execution efforts in Puerto Rico. This report
provides information on (1) FEMA Public Assistance program spending
and actions FEMA and Puerto Rico have taken to provide oversight of
federal recovery funds, (2) initial challenges identified by officials from
FEMA and Puerto Rico with the recovery process, and (3) Puerto Rico’s
economic and disaster recovery plan.

We have another ongoing review that will examine disaster recovery
efforts in Puerto Rico and we plan to issue that report in 2019. In addition,
we are conducting a broader body of work covering various disaster
response and recovery issues, including disaster recovery in the U.S.
Virgin Islands and impacted states, and will also be reporting on those
issues over the next year.

For this report, we reviewed relevant FEMA Public Assistance program
documentation, and we obtained and analyzed data from FEMA’s
Emergency Management Mission Integrated Environment (EMMIE) and
Integrated Financial Management Information System (IFMIS) databases.
These databases include data on Public Assistance program obligations
and expenditures related to Hurricanes Irma and Maria in Puerto Rico as
of the end of fiscal year 2018. 5 We assessed the reliability of EMMIE and
IFMIS data by reviewing existing information about these systems,

4
 Pub. L. No. 115- 123, § 21210, 132 Stat. 64, 108-09 (2018). Section 21210 requires that
Puerto Rico submit to Congress a report describing Puerto Rico’s 12- and 24-month
economic and disaster recovery plan not later than 180 days after the date of enactment,
February 9, 2018.
5
 These data do not include obligations and expenditures for direct federal mission
assignments, in which a federal agency is tasked with providing eligible emergency work
or debris removal services to a territory or state, or for other categories of mission
assignments.




Page 2                                                GAO-19-256 Puerto Rico Hurricanes
interviewing data users and managers responsible for these data, and
cross-checking data across disparate sources to ensure consistency.
Based on these steps, we determined these data to be sufficiently reliable
for the purposes of describing Public Assistance program obligations and
expenditures for Hurricanes Irma and Maria in Puerto Rico as of the end
of fiscal year 2018. An obligation is a definite commitment that creates a
legal liability of the government for the payment of goods and services
ordered or received. An expenditure is an amount paid by federal
agencies, by cash or cash equivalent, during the fiscal year to liquidate
government obligations. For the purpose of this report, an expenditure
represents the actual spending by Puerto Rico of money obligated by the
federal government.

We interviewed officials from FEMA headquarters, as well as officials
from FEMA Region II, the FEMA regional office with oversight for Puerto
Rico. Further, in May, August, and September of 2018, we conducted site
visits to Puerto Rico to observe hurricane-damaged areas and interview
relevant officials. In Puerto Rico, we interviewed FEMA officials at the
joint recovery office, a multiagency coordination center established in
Guaynabo, Puerto Rico to coordinate major disaster recovery efforts. At
this location, we interviewed the federal coordinating officer for Puerto
Rico, officials from the Public Assistance program, and officials from
FEMA’s finance and administration section to understand FEMA’s
recovery operations in Puerto Rico. In addition, we interviewed Puerto
Rico government officials from the Central Office for Recovery,
Reconstruction and Resilience (COR3) 6 and ten selected municipal




6
 As outlined in the Governor’s order establishing COR3, COR3 will identify, procure, and
administer all federal, territory, and private resources available to Puerto Rico related to
recovery. Additionally, COR3’s Executive Director will act as the Governor’s Authorized
Representative (GAR). The GAR is the designated individual responsible for administering
federal disaster assistance programs on behalf of the state, local, tribal, or territorial
government and ensuring compliance with all applicable laws, regulations, and FEMA
guidance.




Page 3                                                  GAO-19-256 Puerto Rico Hurricanes
             governments throughout Puerto Rico. 7 The results from our interviews
             cannot be generalized to all of Puerto Rico’s 78 municipalities; however,
             they provided important context about the status of recovery efforts in
             various locations throughout Puerto Rico. We spoke with officials from the
             Financial Oversight and Management Board (FOMB), a board established
             in the Puerto Rico Oversight, Management, and Economic Stability Act
             with broad budgetary and financial control over Puerto Rico. 8 We also
             interviewed the comptroller of Puerto Rico to obtain her input on Puerto
             Rico’s government structures and municipal issues. Lastly, we reviewed
             Puerto Rico government documents related to recovery planning and
             internal controls.

             We conducted this performance audit from March 2018 to March 2019 in
             accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             On September 6, 2017, the eye of Hurricane Irma traveled about 50
Background   nautical miles to the north of the northern shore of Puerto Rico as a
             category 5 hurricane. Less than two weeks later, Hurricane Maria made
             landfall as a category 4 hurricane on the main island of Puerto Rico on
             the morning of September 20, 2017 with wind speeds up to 155 miles per
             7
              During an August 2018 trip to Puerto Rico, we met with officials from the municipalities of
             Canóvanas, Cayey, Orocovis, and Toa Baja to gather preliminary information and to
             develop the semi-structured interviews that took place in September 2018. During the
             September 2018 visit, we conducted semi-structured interviews with Puerto Rico’s six
             most populous municipalities and the four municipalities with the highest level of Public
             Assistance spending per capita in each of FEMA’s four administrative branches in Puerto
             Rico. According to 2017 Census estimates, the six most populous municipalities are, in
             order of population: San Juan, Bayamón, Carolina, Ponce, Caguas, and Guaynabo.
             According to FEMA, the four municipalities with the highest level of Public Assistance
             spending per capita per FEMA branch as of August 6, 2018 are: Maricao (Branch I),
             Naranjito (Branch II), Maunabo (Branch III), and Guayanilla (Branch IV).
             8
              The Puerto Rico Oversight, Management, and Economic Stability Act established the
             Financial Oversight and Management Board (FOMB) to provide guidance to Puerto Rico
             in fiscal responsibility. See Pub. L. No. 114-187, 130 Stat. 549 (2016). FOMB is
             responsible for certifying Puerto Rico’s financial plans, approving and monitoring budgets
             and budgetary activities, advising Puerto Rico on financial management, and certifying
             restructuring and approving actions related to debt issuance. FOMB is also responsible for
             certifying Puerto Rico’s economic and disaster recovery plan, released on August 8, 2018.




             Page 4                                                   GAO-19-256 Puerto Rico Hurricanes
                                         hour. The center of the hurricane moved through southeastern Puerto
                                         Rico to the northwest part of the island, as shown in figure 1 below.

Figure 1: The Paths of Hurricanes Irma and Maria




                                         Page 5                                      GAO-19-256 Puerto Rico Hurricanes
                           In response to the request of the Governor of Puerto Rico, the President
                           declared a major disaster the day after each hurricane impacted Puerto
                           Rico. 9 Major disaster declarations can trigger a variety of federal
                           response and recovery programs for government and nongovernmental
                           entities, households, and individuals, including assistance through the
                           Public Assistance program. 10 Under the National Response Framework,
                           DHS is the federal department with primary responsibility for coordinating
                           disaster response, and within DHS, FEMA has lead responsibility. The
                           Administrator of FEMA serves as the principal adviser to the President
                           and the Secretary of Homeland Security regarding emergency
                           management. 11


FEMA’s Public Assistance   FEMA’s Public Assistance program provides funding to state, territorial,
Program                    local, and tribal governments to assist them in responding to and
                           recovering from major disasters or emergencies. 12 As shown in figure 2,
                           Public Assistance program funds are categorized broadly as either
                           9
                            In accordance with the Robert T. Stafford Disaster Relief and Emergency Assistance Act
                           (Stafford Act), as amended, the President of the United States may declare that a major
                           disaster or emergency exists in response to a Governor’s or tribal chief executive’s
                           request if the disaster is of such severity and magnitude that effective response is beyond
                           the capabilities of a state, tribe, or local government and federal assistance is necessary.
                           See 42 U.S.C. § 5170. Prior to a major disaster or emergency declaration, a Preliminary
                           Damage Assessment is typically used to determine the impact and magnitude of damage
                           and the resulting needs of individuals, businesses, the public sector, and the community
                           as a whole. The territory uses the information collected as the basis for the Governor’s
                           request for a major disaster or emergency declaration. However, based on the severity
                           and magnitude of Hurricanes Irma and Maria, the FEMA Regional Administrator upon
                           consultation with Puerto Rico, determined supplemental federal assistance was necessary
                           before joint federal, state, and local government Preliminary Damage Assessments were
                           completed.
                           10
                             See 42 U.S.C. § 5170. Presidential Policy Directive-8: National Preparedness
                           establishes a national preparedness system made of an integrated set of guidance,
                           programs, and processes designed to strengthen the security and resilience of the United
                           States through systematic preparation for the natural and human-caused threats that pose
                           the greatest risk. This system breaks preparedness activities into five different lines of
                           effort—prevention, protection, mitigation, response, and recovery—each of which requires
                           a separate planning framework.

                            6 U.S.C. § 313(c)(4).
                           11



                            The Public Assistance program represents the largest share of the Disaster Relief Fund
                           12

                           (DRF), which is the primary source of federal disaster assistance for state and local
                           governments when a disaster is declared. The DRF is appropriated no-year funding,
                           which allows FEMA to fund, direct, coordinate, and manage response and recovery
                           efforts—including certain efforts by other federal agencies and state and local
                           governments, among others—associated with domestic disasters and emergencies.




                           Page 6                                                  GAO-19-256 Puerto Rico Hurricanes
                                      “emergency work” or “permanent work.” Within those two broad
                                      categories are separate sub-categories. In addition to the emergency
                                      work and permanent work categories, FEMA’s Public Assistance program
                                      includes category Z, which represents indirect costs, administrative
                                      expenses, and other expenses a recipient or subrecipient incurs in
                                      administering and managing projects.

Figure 2: Federal Emergency Management Agency (FEMA’s) Public Assistance Program Categories of Work




                                      Puerto Rico’s agencies, such as the Department of Housing; public
                                      corporations, such the Puerto Rico Electric Power Authority and the
                                      Puerto Rico Aqueduct and Sewer Authority; and Puerto Rico’s 78
                                      municipalities are eligible to apply for the Public Assistance program.
                                      FEMA’s Public Assistance program also provides funding for cost-
                                      effective hazard mitigation measures to reduce or eliminate the long-term




                                      Page 7                                         GAO-19-256 Puerto Rico Hurricanes
                         risk to people and property from future natural and man-made disasters
                         and their effects. 13 Specifically, FEMA provides funding for hazard
                         mitigation measures in conjunction with the repair of disaster-damaged
                         facilities to enhance their resilience during future disasters. For example,
                         a community that had a fire station damaged by a disaster could use
                         Public Assistance funding to repair the facility and incorporate additional
                         measures such as installing hurricane shutters over the windows to
                         mitigate the potential for future damage.

                         In Puerto Rico, the Public Assistance program is administered through a
                         partnership between FEMA and the recipient (Puerto Rico), which
                         provides funding to eligible subrecipients (local or territory-level entities).
                         Under the standard Public Assistance program process, once the
                         President has declared a disaster, Public Assistance staff work with the
                         recipient or subrecipients to help them document damages, identify
                         eligible costs and work, and prepare requests for Public Assistance grant
                         funds by developing project proposals. Officials then review and obtain
                         approval of projects prior to FEMA obligating funds to reimburse
                         recipients or subrecipients for eligible work.


The Use of Alternative   The Sandy Recovery Improvement Act of 2013 authorized the use of
Procedures for Public    alternative procedures in administering the Public Assistance program,
                         thereby providing new flexibilities to FEMA, states, territories, and local
Assistance Projects in
                         governments for debris removal, infrastructure repair, and rebuilding
Puerto Rico              projects using funds from this program. 14 The stated goals of the
                         13
                           FEMA may fund hazard mitigation measures related to the damaged facilities receiving
                         Public Assistance funding pursuant to section 406 of the Stafford Act, as amended. 42
                         U.S.C. § 5172; 44 C.F.R. § 206.226. FEMA Public Assistance policy allows three different
                         methods to test for cost-effective hazard mitigation. First, under the 15 percent rule,
                         hazard mitigation measures may amount up to 15 percent of the total eligible cost of repair
                         work on a project. Second, certain hazard mitigation measures that have been
                         predetermined to be cost-effective may qualify under the 100 percent rule, which permits
                         the hazard mitigation as long as it does not exceed 100 percent of the eligible cost of the
                         repair work on a project. Third, for measures that exceed eligible costs, the territory must
                         demonstrate that the measure is cost effective through an acceptable benefit/cost analysis
                         methodology.
                          The Sandy Recovery Improvement Act of 2013 amended the Stafford Act by adding
                         14

                         Section 428, which authorized FEMA to approve Public Assistance program projects
                         under the alternative procedures provided by that section for any presidentially-declared
                         major disaster or emergency. This section further authorized FEMA to carry out the
                         alternative procedures as a pilot program until FEMA promulgates regulations to
                         implement this section. Pub. L. No. 113-2, div. B, § 1102(2), 127 Stat. 39, amending Pub.
                         L. No. 93-288, tit. IV, § 428 (codified at 42 U.S.C. § 5189f).




                         Page 8                                                  GAO-19-256 Puerto Rico Hurricanes
alternative procedures are to reduce the costs to the federal government,
increase flexibility in the administration of the Public Assistance program,
expedite the provision of assistance under the program, and provide
financial incentives for recipients of the program for the timely and cost-
effective completion of projects. 15

Unlike the standard Public Assistance program where FEMA will fund the
actual cost of a project, the Public Assistance alternative procedures
allow awards for permanent work projects to be made on the basis of
fixed cost estimates to provide financial incentives for the timely and cost-
effective completion of work. 16 Under these procedures, if the actual cost
of the project exceeds the fixed cost estimate agreed upon by FEMA and
the recipient, the recipient or subrecipient is responsible for the additional
costs. However, if the actual cost of completing eligible work for a project
is below the estimate, the recipient or subrecipient may use the remaining
funds for other eligible purposes, such as for additional cost-effective
hazard mitigation measures to increase the resiliency of public
infrastructure. These funds may also be used for activities that improve
the recipient’s or subrecipient’s future Public Assistance operations or
planning. Although FEMA had approved alternative procedure grants in
30 states as of April, 2018, in these cases, alternative procedures were
used on a project-by-project basis. Puerto Rico’s recovery from the 2017
hurricanes is the first recovery to use alternative procedures for all large
permanent work projects.

On October 30, 2017, Puerto Rico requested to use the alternative
procedures process for all large-project funding for Public Assistance
permanent work, categories C through G. 17 According to FEMA guidance,
as part of the alternative procedures process in Puerto Rico, FEMA and
Puerto Rico must agree on a group of personnel with cost estimation
expertise who will serve as part of a center of excellence. This center of

 See 42 U.S.C. § 5189f(c).
15



 Public Assistance Alternative Procedures (Section 428) Guide for Permanent Work
16

FEMA-4339-DR-PR (April, 2018).
17
  According to a November 2017 amendment to Puerto Rico’s major disaster declaration,
due to the extraordinary level of infrastructure damage caused by Hurricane Maria, as well
as the financial status of Puerto Rico, officials chose to use the alternative procedures for
all large-project funding for Public Assistance categories C through G pursuant to section
428 of the Stafford Act. Puerto Rico; Amendment No. 5 to Notice of a Major Disaster
Declaration, 82 Fed. Reg. 53,514 (Nov. 16, 2017). For fiscal year 2018, the large project
threshold is $125,500.




Page 9                                                   GAO-19-256 Puerto Rico Hurricanes
                           excellence will assist FEMA and Puerto Rico in developing cost
                           estimating methodologies to be used for determining fixed cost estimates
                           for Public Assistance permanent work projects. FEMA officials stated that
                           they are in the process of conducting inspections for Public Assistance
                           projects for permanent work and, as of August 2018, had a total list of
                           10,000 site inspections to complete. FEMA officials stated that October
                           2019 is their target date for completing all alternative procedures fixed
                           cost estimates for Public Assistance permanent work. 18 However,
                           pursuant to 428 guidance published in April 2018, this time frame may be
                           adjusted on a project-by-project basis, based on extenuating
                           circumstances.


Puerto Rico’s Central      Amendment 5 to the President’s disaster declaration imposed a number
Recovery Office Oversees   of grant conditions, including that Puerto Rico establish an oversight
                           authority supported by third-party experts. 19 This authority is to act as the
Federal Recovery
                           grant recipient for all Public Assistance and hazard mitigation funding to
Spending                   ensure sound project management and enhanced, centralized oversight
                           over FEMA grant distributions. In October 2017, the Governor of Puerto
                           Rico established COR3, a Puerto Rico government office, to plan, guide,
                           and oversee recovery efforts, including administering and overseeing the
                           Public Assistance program. 20 According to FEMA and COR3 officials,
                           COR3 will fulfill the oversight requirements outlined in Amendment 5.
                           According to COR 3 officials, COR3 was also established to ensure
                           coordination with FEMA. The Executive Director of COR3 will act as the
                           Governor’s Authorized Representative, which is the designated individual




                           18
                             Amendment 5 to the notice of Puerto Rico’s major disaster declaration also directs that
                           estimates for projects exceeding a threshold amount are to be validated by an
                           independent, third-party expert. Puerto Rico; Amendment No. 5 to Notice of a Major
                           Disaster Declaration, 82 Fed. Reg. 53,514 (Nov. 16, 2017). FEMA has determined that
                           this amount will be $5 million.

                            82 Fed. Reg. 53,514.
                           19



                            COR3 has entered into contracts with four management consulting firms (CGI, Deloitte,
                           20

                           ICF, and Navigant) to work on various projects including developing a recovery
                           management plan and internal controls plan, and creating a disaster recovery information
                           web portal, among others. According to COR3, these firms were retained using an open
                           and competitive bid process.




                           Page 10                                                 GAO-19-256 Puerto Rico Hurricanes
                           responsible for administering federal disaster assistance programs on
                           behalf of Puerto Rico. 21 Among other things, COR3 will:

                           •      Identify, procure, and administer all federal, territorial, and private
                                  resources available to Puerto Rico related to recovery;
                           •      Provide oversight of subrecipients using risk-based monitoring; and
                           •      Provide technical assistance and advise Puerto Rico’s governmental
                                  agencies and municipalities regarding any matter related to recovery.
                           •      According to COR3 officials, they will also implement internal controls,
                                  policies, and procedures to appropriately manage recovery funds.

                           COR3 has also launched an online transparency portal intended to
                           provide a breakdown of FEMA Public Assistance and other federal
                           funding made available for disaster recovery in Puerto Rico. 22


Bipartisan Budget Act of   The Bipartisan Budget Act of 2018 (Bipartisan Budget Act) required that
2018 Requirements for      Puerto Rico submit an economic and disaster recovery plan to Congress
                           by August 9, 2018, that defines the priorities, goals, and expected
Puerto Rico and
                           outcomes of Puerto Rico’s recovery related to a number of sectors,
Congressional Oversight    including, among other things, infrastructure, housing, electric power
of Recovery Efforts        systems and grid restoration. 23 The Bipartisan Budget Act also directs the
                           Governor of Puerto Rico to develop the disaster recovery plan in
                           coordination with FEMA, with support and contributions from other federal
                           agencies having designated responsibilities in the National Disaster
                           Recovery Framework.




                           21
                             44 C.F.R. §§ 206.2(a)(13) and 206.41(d). The Governor’s Authorized Representative is
                           the designated individual responsible for administering federal disaster assistance
                           programs on behalf of the state, local, tribal, or territorial government and ensuring
                           compliance with all applicable laws, regulations, and FEMA guidance.
                           22
                               https://www.recovery.pr/
                           23
                             Pub. L. No. 115- 123, § 21210, 132 Stat. 64, 108-09 (2018). Other sectors specified in
                           the Bipartisan Budget Act are: economic issues, including workforce development and
                           industry expansion and cultivation; natural and cultural resources; governance and civic
                           institutions; environmental issues, including solid waste facilities; and other infrastructure
                           systems, including repair, restoration, replacement, and improvement of public
                           infrastructure such as water and wastewater treatment facilities, communications
                           networks, and transportation infrastructure.




                           Page 11                                                   GAO-19-256 Puerto Rico Hurricanes
                       As of June 2015, Puerto Rico had roughly $66.9 billion in outstanding
                       debt. According to the recovery plan, economic contraction in the years
                       prior to the hurricanes contributed to a severe fiscal crisis and Puerto
                       Rico’s credit rating dropped below investment grade in early 2014,
                       followed by a series of defaults on debt payments. In response to Puerto
                       Rico’s financial crisis, Congress passed and the President signed the
                       Puerto Rico Oversight, Management, and Economic Stability Act in June
                       2016, which established the FOMB with broad budgetary and financial
                       control over Puerto Rico. 24 The Bipartisan Budget Act also permits the
                       FOMB to review any federal funds over $10 million that are designated for
                       Puerto Rico’s response to or recovery from Hurricanes Irma or Maria. 25


                       FEMA obligated nearly $4 billion in Public Assistance funds for Puerto
FEMA Obligated         Rico’s emergency work projects, as well as the repair and restoration of
Almost $4 Billion in   its public infrastructure, among other things. In order to provide financial
                       oversight of these funds, Puerto Rico is developing an internal controls
Public Assistance      plan as well as management policies and procedures that will, in part,
Funding, and Puerto    help provide financial monitoring. In the interim, FEMA has instituted a
                       manual reimbursement process to mitigate risk and ensure fiscal
Rico and FEMA Have     accountability.
Taken Actions to
Provide Oversight of
Federal Recovery
Funds




                        See Pub. L. No. 114-187, 130 Stat. 549 (2016).
                       24



                        See Pub. L. No. 115- 123, § 21210(e), 132 Stat. 64, 109 (2018).
                       25




                       Page 12                                               GAO-19-256 Puerto Rico Hurricanes
FEMA Obligated Almost          As shown in figure 3, FEMA has obligated $3.63 billion (93 percent) for
$4 Billion, and Puerto Rico    emergency work (categories A and B), and $151 million (4 percent) for
                               permanent work (categories C through G) in Puerto Rico as of September
Expended Almost $1.7           30, 2018. 26 An additional $136 million (3 percent) was obligated for
Billion in Public Assistance   management and administrative costs.
Funding as of September
2018




                               26
                                 FEMA data presented in this report on obligations and expenditures in Puerto Rico
                               represent funding provided through FEMA’s Public Assistance program. These data do
                               not include obligations and expenditures for, among other things, direct federal mission
                               assignments, in which a federal agency is tasked with providing eligible emergency work
                               or debris removal services to a territory or state, or for other categories of mission
                               assignments.




                               Page 13                                                GAO-19-256 Puerto Rico Hurricanes
Figure 3: Federal Emergency Management Agency’s Public Assistance Obligations to Puerto Rico by Category of Work, as of
September 30, 2018




                                       Note: Numbers might not add up due to rounding. Emergency protective measures include activities
                                       to lessen the immediate threat to life, public health, or safety such as search and rescue operations
                                       and providing medical care and transport. Management costs are indirect costs, administrative
                                       expenses, and other expenses a recipient or subrecipient incurs in administering and managing the
                                       program that are not directly chargeable to a specific project. These data do not include obligations
                                       and expenditures for, among other things, direct federal mission assignments, in which a federal
                                       agency is tasked with providing eligible emergency work or debris removal services to a territory or
                                       state, or for other categories of mission assignments.



                                       As of the end of fiscal year 2018, Puerto Rico expended about $1.7 billion
                                       (about 43 percent) of the almost $4 billion Public Assistance funds
                                       obligated by FEMA. Ninety-eight percent of this amount went toward
                                       emergency work projects in categories A and B. For example, the Puerto
                                       Rico Aqueduct and Sewer Authority expended almost $91 million to cover
                                       the costs of generator usage. Aside from generators, one category B



                                       Page 14                                                        GAO-19-256 Puerto Rico Hurricanes
                                                             project by the Puerto Rico Emergency Management Agency repaired the
                                                             emergency warning system for about $9.4 million. A third project put a
                                                             temporary roof on a Puerto Rico Institute of Culture facility in Vieques for
                                                             $4,000.

                                                             As shown in table 1, the majority of FEMA’s obligations in Puerto Rico as
                                                             of September 30, 2018, have been for emergency work categories
                                                             because these projects began soon after the disasters struck and focused
                                                             on removing debris and providing assistance to address immediate
                                                             threats to life and property.

Table 1: Federal Emergency Management Agency’s Public Assistance Obligations to Puerto Rico and Expenditures for
Hurricanes Irma and Maria by Category of Work, as of September 30, 2018

                                                                                Obligated Amount                       Expended Amount
Public Assistance Work Category                                                        (in millions)                         (in millions)                    Percent Expended
A: Debris Removal                                                                              $576.34                                 $137.50                                     24%
B: Emergency Protective Measures                                                             $3,048.65                              $1,513.76                                      50%
C: Roads and Bridges                                                                           $135.64                                  $32.40                                     24%
D: Water Control Facilities                                                                            —                                       —                                       —
E: Buildings and Equipment                                                                       $15.16                                   $1.24                                        8%
F: Utilities                                                                                       $0.03                                  $0.01                                    29%
G: Parks, Recreational, and Othera                                                                 $0.24                                  $0.04                                    15%
                               b
Z: Management Costs                                                                            $135.95                                    $1.49                                        1%
Total                                                                                        $3,912.01                              $1,686.43                                      43%

Legend: An em dash “—” indicates that zero funding corresponds with that category.
Source: FEMA’s Emergency Management Mission Integrated Environment (EMMIE) and Integrated Financial Management Information System (IFMIS) data as of September 30, 2018 | GAO-19-256

                                                             Note:
                                                             a
                                                              Other refers to infrastructure such as playground equipment, mass transit facilities, piers, ports and
                                                             harbors, and other items that do not fit in categories C-F.
                                                             b
                                                              Management costs represent indirect costs, administrative expenses, or other expenses Puerto Rico
                                                             or a subrecipient incurs in administering and managing the Public Assistance program that are not
                                                             directly chargeable to a specific project. These data do not include obligations and expenditures for,
                                                             among other things, direct federal mission assignments, in which a federal agency is tasked with
                                                             providing eligible emergency work or debris removal services to a territory or state, or for other
                                                             categories of mission assignments.



                                                             In contrast, permanent work projects take time to identify, develop, and
                                                             ultimately complete as they represent the longer-term repair and
                                                             restoration of public infrastructure. Funds expended by Puerto Rico for
                                                             permanent work have been mostly limited to roads and bridges (category
                                                             C) because impassable roads like the one shown in figure 4 below




                                                             Page 15                                                                     GAO-19-256 Puerto Rico Hurricanes
                                       impede the provision of critical services to citizens. They can also get in
                                       the way of other disaster recovery efforts.

Figure 4: Collapsed Segment of Road Near Maricao, Puerto Rico, September 2018




                                       Expenditures for roads and bridges (category C) amount to approximately
                                       $32 million, while expenditures for other permanent work categories (D-
                                       G) total approximately $1 million. According to FEMA officials, Public
                                       Assistance projects in categories D-G are still pending prioritization and



                                       Page 16                                        GAO-19-256 Puerto Rico Hurricanes
                                         formulation. For example, figure 5 below shows a recreational public
                                         space along the edge of a river in Maricao. The dashed line indicates
                                         where the iron railing and concrete paving used to continue, overlooking
                                         the river, before Hurricane Maria. As of September 2018, the municipality
                                         was awaiting FEMA assistance to begin restoration

Figure 5: Missing Rail in Public Space Along River’s Edge, Maricao, Puerto Rico, September 2018




                                         FEMA categorizes Puerto Rico’s subrecipients as commonwealth public
                                         corporations, commonwealth agencies, municipalities, and all other
                                         entities. As shown in table 2 below, 89 percent of obligations, as of the


                                         Page 17                                           GAO-19-256 Puerto Rico Hurricanes
                                                             end of September 2018, for Puerto Rico were awarded to commonwealth
                                                             public corporations and commonwealth agencies, with 47 percent
                                                             awarded to the Puerto Rico Electric Power Authority. Overall, about 43
                                                             percent of obligated funds have been expended.

Table 2: Federal Emergency Management Agency (FEMA)’s Public Assistance Obligations to Puerto Rico and Expenditures
by Subrecipient (as categorized by FEMA) for Hurricanes Irma and Maria, as of September 30, 2018

                                                                                              Percent                                                Percent of           Expended
                                                                                   of All Obligations             Obligated Amount                  Obligations              Amount
Subrecipients                                                                         to Puerto Rico                     (in millions)               Expended            (in millions)
All Commonwealth Public Corporations and                                                              89%                      $3,477.07                       43%         $1,511.82
Commonwealth Agencies
   Puerto Rico Electric Power Authority (PREPA)                                                       47%                      $1,848.72                       51%            $939.70
   Puerto Rico Department of Housing                                                                  17%                        $665.69                       42%            $276.78
   Puerto Rico Department of Transportation and                                                       10%                        $390.05                       12%             $47.65
   Public Works
   Central Recovery and Reconstruction Office (COR3)                                                    3%                       $107.01                         1%              $1.49
   Other Commonwealth Public Corporations and Other                                                   12%                        $465.59                       53%            $246.19
   Commonwealth Agenciesa
Municipalities of Puerto Rico                                                                         11%                        $419.20                       41%            $173.67
Otherb                                                                                                  0%                         $15.75                        6%              $0.95
Total                                                                                               100%                       $3,912.01                       43%         $1,686.43
Source: FEMA’s Emergency Management Mission Integrated Environment (EMMIE) and Integrated Financial Management Information System (IFMIS) data as of September 30, 2018 | GAO-19-256

                                                             Note: Numbers might not add up due to rounding. Subrecipient categories (i.e., Commonwealth
                                                             Public Corporations, Commonwealth Agencies, Municipalities, Other) are as categorized by FEMA.
                                                             Individual entities in this breakdown were selected on the basis that they comprised ten percent or
                                                             more of the total Public Assistance obligations to Puerto Rico. Moreover, COR3 was added as well,
                                                             due to its significant role in Puerto Rico’s disaster recovery and Public Assistance fund administration.
                                                             a
                                                              Other Commonwealth Public Corporations and Commonwealth Agencies as categorized by FEMA
                                                             include entities such as the Puerto Rico Housing Finance Authority, the Puerto Rico Land Authority,
                                                             the Puerto Rico Department of Education, the Puerto Rico National Guard, and many others.
                                                             b
                                                              Other, as categorized by FEMA, include entities such as schools and universities, hospitals,
                                                             community services, and nonprofit organizations. These data do not include obligations and
                                                             expenditures for, among other things, direct federal mission assignments, in which a federal agency
                                                             is tasked with providing eligible emergency work or debris removal services to a territory or state, or
                                                             for other categories of mission assignments.




                                                             Page 18                                                                     GAO-19-256 Puerto Rico Hurricanes
Puerto Rico is Developing   As previously discussed, Puerto Rico designated COR3 to administer and
an Internal Controls Plan   manage the Public Assistance program in coordination with FEMA. As
                            part of COR3’s recovery oversight role, COR3 officials stated that they
and Recovery
                            are developing an internal controls plan and recovery management
Management Policies and     policies and procedures with FEMA. According to COR3, these oversight
Procedures to Provide       documents will provide detailed guidance on grant application,
Oversight of Federal        procurement, payment and cash management, and financial monitoring
Recovery Funds              and reporting, among other things. According to COR3 officials, they have
                            held numerous meetings to coordinate with FEMA and have submitted
                            drafts of the internal controls plan as well as management policies and
                            procedures for FEMA’s consideration. In addition, according to COR3
                            officials, COR3 plans to provide direct technical assistance related to
                            federal grants management to Puerto Rico’s cabinet-level agencies,
                            public corporations, municipalities and other eligible subrecipients. As
                            part of COR3’s advisory role, COR3 is expected to help Puerto Rico’s
                            agencies, public corporations, municipalities, and some nonprofit entities
                            formulate projects, draft cost estimates, and make funding requests,
                            among other things.


FEMA Has Instituted an      Federal grant award regulations allow FEMA to impose additional specific
Interim Manual              grant award conditions in specific circumstances, such as to mitigate risk
                            and ensure fiscal accountability of the recipient or subrecipient. 27
Reimbursement Process
                            According to FEMA, once FEMA obligates funds, the recipient is able to
to Mitigate Risk            expend funds as necessary. However, in November 2017, according to
                            FEMA officials, the agency instituted a manual reimbursement process for
                            subrecipients in Puerto Rico for federal funds, including Public Assistance
                            funds, to mitigate fiduciary risk and decrease the risk of misuse of funds.
                            Specifically, FEMA officials stated that they decided to institute this
                            process because the government of Puerto Rico had expended funds
                            prior to submitting complete documentation of work performed. 28
                            According to FEMA officials, they also decided to institute the manual
                            reimbursement process due to Puerto Rico’s financial situation,


                             See 2 C.F.R. §§ 200.205, 200.207; see generally 2 C.F.R. part 200. These additional
                            27

                            award conditions may include requiring payments as reimbursements rather than advance
                            payments; withholding authority to proceed to the next phase until receipt of evidence of
                            acceptable performance within a given period of performance; requiring additional, more
                            detailed financial reports, among other conditions.
                            28
                              COR3 is responsible for collecting and submitting all documentation requested by FEMA
                            from subrecipients.




                            Page 19                                               GAO-19-256 Puerto Rico Hurricanes
weaknesses in internal controls, and the large amount of recovery funds,
among other things.

This manual reimbursement process requires that COR3 fill out the Office
of Management and Budget’s Standard Form 270 and submit supporting
documentation before obligated funds can be withdrawn by Puerto Rico
through COR3 and reimbursed to subrecipients. 29 Subsequently, FEMA
must review the submitted Standard Form 270 and all project
documentation for completeness, compliance, and accuracy before
disbursing funds to the recipient. In cases where FEMA requires
additional documentation to process a Standard Form 270 request, FEMA
will submit requests for information asking COR3 to supply the
information needed for FEMA to complete the review. 30 FEMA officials
said that they aim to complete the entire process described above within
ten calendar days, or 15-20 calendar days if FEMA needs to request
additional information from COR3. Additionally, FEMA officials stated that
the manual reimbursement process is intended as a temporary measure.
They will cease the process once FEMA has reviewed the operational
effectiveness of COR3’s internal controls and approved the final internal
controls plan, which are under review. 31




 Standard Form 270: Request for Advance or Reimbursement.
29


30
  Additional documentation requested by FEMA to process a Standard Form 270 request
includes, among other things, copies of contracts, cost of labor estimates, bid documents,
and evidence of payment.
31
  As part of our ongoing review, we will continue to monitor COR3’s role in disaster
recovery, the development of its recovery management policies, procedures, and plan,
and FEMA’s review of these efforts.




Page 20                                                GAO-19-256 Puerto Rico Hurricanes
                          FEMA, COR3, and Puerto Rico municipal government officials from ten
FEMA, COR3, and           municipalities we interviewed reported initial challenges with the recovery
Subrecipients Report      process, including with Public Assistance alternative procedures. These
                          concerns included (1) workforce capacity constraints, (2) a need for
Initial Challenges with   additional guidance, (3) delays related to choosing cost estimators, and
the Recovery Process      (4) reimbursement for emergency work. 32

                          Workforce capacity constraints. FEMA and municipality officials cited
                          concerns about FEMA staff turnover and lack of knowledge about how
                          the Public Assistance alternative procedures are to be applied in Puerto
                          Rico. While several municipal officials we spoke to remarked positively on
                          consistent communication with FEMA officials, municipal officials in six
                          municipalities we visited cited high levels of turnover among FEMA staff
                          as a challenge. 33 For example, officials in three municipalities said that
                          discontinuity in FEMA personnel has caused them to have duplicative
                          conversations with FEMA. An official from one municipality described the
                          disruption that had been caused by repeated changes in FEMA
                          personnel, especially when their point of contact at FEMA changed at
                          least six times since the hurricanes.

                          FEMA officials acknowledged that more personnel with expertise in the
                          alternative procedures process are needed to administer the Public
                          Assistance program and assist subrecipients. According to FEMA
                          officials, FEMA has leveraged existing expertise from personnel in the
                          Federal Coordinating Officer Advisory Group to train new employees to

                          32
                            As a part of our ongoing work on the alternative procedures process in Puerto Rico, we
                          plan to conduct interviews with Puerto Rico government agencies in addition to
                          municipalities who have been obligated funds from FEMA through the Public Assistance
                          program. At the time of this report, we met with municipalities only. We chose to initially
                          focus our work on municipalities to learn more about the disaster recovery process at the
                          local government level, where officials are best positioned to speak directly to the impact
                          of the Public Assistance program on the ground. According to the National Disaster
                          Recovery Framework, local governments are primarily responsible for managing local
                          recovery. Puerto Rico’s 78 municipalities are the highest level of local government under
                          the central-level government and each municipality has the legal authority over all matters
                          of a municipal nature. Each municipal government has an executive branch, led by a
                          municipal mayor, and a municipal legislature.
                          33
                            During interviews with officials from 10 selected municipalities, officials identified various
                          challenges during the course of our discussions. When we report the number of
                          municipalities that identified a particular challenge, this does not necessarily mean that the
                          remaining municipalities did not also experience the challenge. It means that those
                          municipalities did not raise the challenge during the course of our interviews.




                          Page 21                                                    GAO-19-256 Puerto Rico Hurricanes
increase workforce capacity. FEMA personnel from this group are rotating
experts assigned to recovery issues to increase institutional
understanding of alternative procedures and train local hires. According to
FEMA officials, these local hires can serve as FEMA staff for up to one
year before they become reservists. 34 In addition, FEMA officials stated
that they have identified contractors with previous experience regarding
alternative procedures to provide additional assistance to subrecipients.

Need for additional guidance. Municipal officials cited concerns about a
lack of comprehensive guidance for the alternative procedures process.
Specifically, officials in eight municipalities we interviewed cited problems
with missing, incomplete, or conflicting guidance from FEMA. In addition,
officials in four municipalities stated that they are waiting on additional
written instructions to establish more clear and consistent guidance.
Officials from one municipality told us that the lack of written guidance
has meant that the municipality has had to re-submit documents to FEMA
multiple times to respond to changing guidance that they have received
verbally. Additionally, four municipalities cited missing, incomplete, or
conflicting guidance from COR3 as a challenge. However, one
municipality noted that the quality of communication with COR3 has
improved over time as COR3 has become more established.

According to FEMA officials, they are drafting supplemental guidance for
the alternative procedures process with the goal of incorporating lessons
learned from prior iterations of the alternative procedures. Similarly,
according to COR3 officials, COR3 is currently developing additional
guidance and standard operating procedures to help subrecipients,
including municipalities and Puerto Rico government agencies, better
understand FEMA Public Assistance grant requirements.

Delays related to choosing cost estimators for Puerto Rico. As
mentioned previously, FEMA’s guidance for alternative procedures
requires that FEMA and Puerto Rico, through COR3, choose personnel
with expertise in cost estimation to serve as a center of excellence, which
will develop a cost estimating methodology. FEMA has chosen personnel
to staff the center of excellence. However, in August 2018, FEMA officials
told us that COR3 had not yet finalized their choice of personnel, which

 Reservists work on an intermittent basis and are deployed as needed. Reservists’
34

activities can include interviewing disaster survivors; conducting and verifying damage
assessments; providing administrative, financial, and logistical support; and performing a
wide variety of other tasks as identified by staffing needs and operational requirements.




Page 22                                                 GAO-19-256 Puerto Rico Hurricanes
had delayed the cost estimation process. Subsequently, COR3 officials
told us that personnel have been identified to serve on the center of
excellence and the final contracting process for these personnel is now in
progress.

Reimbursement for emergency work. Officials in nine municipalities we
spoke to said that they had not been fully reimbursed for emergency work
they completed. Further, officials in five municipalities we interviewed
stated that the lack of full reimbursement has caused financial hardships.
For example, officials in three municipalities said that the lack of full
reimbursement has meant that the municipalities have had to pause or
delay recovery work due to lack of financial resources. A mayor in one
municipality stated that they have scaled back some essential services,
such as the frequency of garbage pick-up, while waiting for full
reimbursement.

According to FEMA officials, delays in providing reimbursement were due
to several factors including a loss in FEMA personnel to process
reimbursement requests and a significant increase in the volume of
reimbursement requests submitted by COR3 to FEMA. FEMA officials
also stated an increasing need to make requests for information to COR3
due to a lack of documentation submitted at the time of the
reimbursement request. In response to these factors, FEMA officials told
us that they have undertaken new procedures with COR3. For example,
according to FEMA officials, COR3 adopted procedures to review the
completeness of documentation prior to submitting a reimbursement
request to FEMA. FEMA officials stated that the agency is also holding
weekly meetings with COR3 to increase coordination, and that FEMA
increased the number of personnel devoted to reimbursement reviews.
According to officials from FEMA and COR3, these steps have
contributed to reduced delays.




Page 23                                      GAO-19-256 Puerto Rico Hurricanes
                        In response to the Bipartisan Budget Act, Puerto Rico submitted an
Puerto Rico             economic and disaster recovery plan (recovery plan) to Congress on
Developed an            August 8, 2018. 35 The recovery plan defines the priorities, goals, and
                        expected outcomes of Puerto Rico’s recovery related to building
Economic and            government capacity for the recovery and strengthening of Puerto Rico’s
Disaster Recovery       infrastructure, among other things. The recovery plan estimates
                        infrastructure repair and recovery costs of $132 billion and total recovery
Plan in Response to     costs of $139 billion for a time period starting in 2018 and ending in 2028.
the Bipartisan Budget   According to the recovery plan, COR3 will guide recovery investment and
                        policy in the months and years ahead and is intended to serve as a focal
Act of 2018 That        point for strategic thought and management of Puerto Rico’s recovery. 36
Addresses Long- and
                        The recovery plan is generally responsive to the directives outlined in the
Short-Term Needs        Bipartisan Budget Act. 37 For example, Puerto Rico submitted the plan to
                        Congress within 180 days of enactment of the Bipartisan Budget Act. The
                        recovery plan defines priorities, goals, and expected outcomes for Puerto
                        Rico’s recovery effort based on damage assessments conducted by
                        sector. As mentioned earlier, Puerto Rico developed the recovery plan in
                        coordination with FEMA and with support of the U.S. Department of
                        Energy, the U.S. Department of Health and Human Services, and other
                        federal agencies with responsibilities outlined in the National Disaster
                        Recovery Framework.

                        Additionally, the FOMB of Puerto Rico certified the recovery plan on
                        August 28, 2018, as directed in the Bipartisan Budget Act, but provided
                        two caveats to its certification. First, FOMB expressed concern that the
                        recovery plan lacks sufficient detail of funding sources and estimates a
                        much greater amount of federal funding than the certified fiscal plan for


                         See Pub. L. No. 115- 123, § 21210, 132 Stat. 64, 108-09 (2018).
                        35


                        36
                           Central Office for Recovery, Reconstruction and Resiliency, Government of Puerto Rico,
                        Transformation and Innovation in the Wake of Devastation: An Economic and Disaster
                        Recovery Plan for Puerto Rico (August 8, 2018).
                        37
                          Because section 21210 of the Bipartisan Budget Act includes directives with future
                        implementation deadlines, we did not evaluate whether the plan is responsive to all
                        directives related to the recovery plan. For example, the Act required Puerto Rico, in
                        coordination with FEMA, to produce a report on the progress of achieving the goals set
                        out in the recovery plan every 180 days after its release. The first such report is expected
                        to be released in February 2019. Additionally, the Act required that FOMB use and
                        incorporate damage assessments into its fiscal plan while the plan is in development and
                        in effect. According to COR3, these damage assessments are not yet finalized.




                        Page 24                                                  GAO-19-256 Puerto Rico Hurricanes
Puerto Rico projects. The recovery plan states that at the time of its
release, Puerto Rico had not undergone eligibility reviews in various
federal funding programs, and therefore the ability to identify accurate
funding sources was limited. COR3 officials confirmed that full recovery
funding needs will not be known until all damage assessments are
complete, and they will continue to identify and leverage all funding
resources as they are made available. Second, FOMB indicated that the
recovery plan does not address oversight of federal funds and the
recovery process. While the Bipartisan Budget Act does not require
specific mechanisms for oversight of federal funding as part of the
recovery plan, according to COR3 officials, they plan to implement
internal controls, policies, and procedures to provide oversight.

Puerto Rico’s recovery plan outlines 276 “courses of action” (actions)—
defined by the plan as “a collection of potential activities, policies, and
other actions that could contribute to recovery”—selected by Puerto Rico
to align with its future recovery vision. As shown in table 3 below, the
actions reflect Puerto Rico’s short-term and long-term recovery vision,
organized into three areas. First, the recovery plan proposes “precursor”
actions—those that serve as a foundation for all future actions—that will
be prioritized for implementation. For example, the recovery plan includes
actions to build capacity of municipalities to secure and manage recovery
funds, and to improve the quality and volume of public data available to
decision makers. Second, the recovery plan proposes a set of actions
that aim to build the infrastructure and systems that support Puerto Rico’s
economy, society, and disaster resiliency, such as addressing
vulnerabilities in Puerto Rico’s electric grid. Finally, the recovery plan
proposes a set of actions that address Puerto Rico’s long-term recovery
goals, such as developing and enhancing Puerto Rico’s visitor economy.




Page 25                                       GAO-19-256 Puerto Rico Hurricanes
Table 3: Categories of “Courses of Action” in Puerto Rico’s Recovery Plan

 “Precursor” Actions                                  Capital Investments                                                         Long-Term Strategic Initiatives
 Actions that aim to set the        Actions to build a strong infrastructure and                                                  Actions to address Puerto Rico’s long-term
 foundation for all other recovery  systems organized into nine areas:                                                            recovery goals in eight areas:
 projects and initiatives in seven  •    Energy                                                                                   •    Ocean Economy
 areas:
                                    •    Telecommunications                                                                       •    Visitor Economy
 •    Building government capacity
      to handle day-to-day business •    Water                                                                                    •    Emergency Services
      and recovery efforts          •    Transportation                                                                           •    Agricultural Modernization and
 •    Availability of high-quality  •    Housing                                                                                       Processing
      data to support decision      •    Public Buildings                                                                         •    Digital Transformation
      making                                                                                                                      •    21st Century Workforce
                                    •    Education
 •    Enhance local capacity to                                                                                                   •    Entrepreneurship
                                    •    Health
      secure and manage recovery
                                         Natural Environment                                                                      •    Advanced Manufacturing
      funds                         •

 •    Maximizing the impact of
      federal funds
 •    Supporting local-level
      planning
 •    Increasing ease of doing
      business in Puerto Rico
 •    Reducing barriers to formal
      work and incentivizing
      workforce training
Source: GAO analysis of Puerto Rico’s recovery plan: Transformation and Innovation in the Wake of Devastation: An Economic and Disaster Recovery Plan for Puerto Rico, Central Office for Recovery,
Reconstruction and Resiliency, Government of Puerto Rico (August 8, 2018). | GAO-19-256




                                                                 Page 26                                                                          GAO-19-256 Puerto Rico Hurricanes
Most individual actions in the recovery plan include initial and recurring
cost estimates for the time period from 2018 through 2028. The recovery
plan describes all cost estimates as preliminary, and says that more
specific cost estimates require completion of damage assessments and
more details about the implementation of actions. 38

To develop Puerto Rico’s disaster recovery plan, FEMA assisted COR3 in
retaining the Homeland Security Operational Analysis Center (HSOAC), a
federally-funded research and development center operated by the RAND
Corporation under contract with DHS. According to FEMA officials, FEMA
provided funding and technical assistance, through contractor support, for
Puerto Rico to develop the recovery plan, but COR3 and Puerto Rico will
be responsible for its implementation. 39 These officials also stated that
Puerto Rico received input and technical assistance from other federal
departments, such as those in the Recovery Support Function Leadership
Group led by FEMA. 40

HSOAC developed the recovery plan in consultation with Puerto Rico by
developing a preliminary sector-by-sector assessment of damages and
needs caused by Hurricanes Irma and Maria across Puerto Rico. In
conjunction with Puerto Rico’s stated vision for the recovery process,
HSOAC’s damage assessment report provided the baseline needed to
define, compare, and prioritize actions.


38
  According to the recovery plan, the methods and information used to develop cost
estimates varied for each action, but wherever possible rough-order-of-magnitude cost
estimates were developed to support high-level planning. Estimates include costs for
repairing damaged assets to pre-hurricane conditions or improving them to meet
environmental and engineering codes and standards, and when cost-effective, improving
their disaster resiliency. Costs are associated with correcting pre-hurricane deficiencies,
as well as addressing hurricane damage. Estimates include incremental operations and
maintenance costs if those costs increased as a result of the hurricanes. Full operations
and maintenance costs were used for facilities that were not being maintained prior to the
hurricanes. Some actions, such as proposed policy changes, did not include cost
estimates, though the plan acknowledged potential administrative costs. Each action
includes a cost range, indicating that estimates will change depending on costs of
equipment or labor, and on policy and implementation decisions.
39
  FEMA awarded HSOAC nearly $27.6 million to assist Puerto Rico in developing its
recovery plan and any associated products.
40
  FEMA chairs the Recovery Support Function Leadership Group, an interagency body
comprised of over 20 other federal agencies that coordinate operational, resource, and
preparedness issues relating to interagency disaster recovery activities at the national
level.




Page 27                                                 GAO-19-256 Puerto Rico Hurricanes
HSOAC worked in teams of sector-specific experts to develop and refine
the actions by reviewing reports, proposals, best practices, and other
literature. For example, in June 2018, the U.S. Department of Energy
released a report on energy resilience for Puerto Rico’s electric grid,
containing recommendations for Puerto Rico to consider when developing
the Recovery Plan. HSOAC sought feedback from various subject matter
experts and stakeholders while developing the recovery plan. According
to FEMA officials, FEMA’s joint recovery office delivered interim drafts of
the recovery plan to federal agency partners and Puerto Rico for
feedback. HSOAC also sought input from local-level stakeholders,
including Puerto Rico’s municipal governments. For example, HSOAC
commissioned a survey of officials from municipalities to gauge the
challenges they faced in the aftermath of the 2017 hurricanes. According
to FEMA and HSOAC officials, the survey, along with other input provided
by mayors led to the development of actions focused on building the
capacity of municipal governments to support recovery efforts.

HSOAC officials noted that while the final recovery plan was submitted to
Congress, they will continue to produce products that will assist Puerto
Rico and their stakeholders in recovery implementation. HSOAC intends
to release updated versions of the recovery plan, including updated
damage and needs assessments. Other expected products include
detailed descriptions and cost estimates for each action and a lessons
learned report. The Bipartisan Budget Act also directs Puerto Rico to
develop a public report on the progress made in achieving the recovery
plan’s goals every 180 days after submission.

FEMA officials explained that the recovery plan serves as a strategic,
direction-setting plan for recovery, and does not provide step-by-step or
site-by-site guidance on the recovery process. FEMA officials also
acknowledged that there may be some overlap between some of the
actions in the recovery plan and some of the permanent work funded
through FEMA’s Public Assistance program, but that it is COR3’s
responsibility to merge and coordinate such recovery efforts.




Page 28                                       GAO-19-256 Puerto Rico Hurricanes
                     We provided a draft of this report to DHS and the government of Puerto
Agency Comments      Rico for review and comment. In its comments, reproduced in appendix I,
and Our Evaluation   DHS summarized the amount of Public Assistance funding provided to
                     Puerto Rico through fiscal year 2018. DHS also described FEMA’s
                     temporary manual reimbursement process instituted to mitigate risk and
                     ensure fiscal accountability of taxpayer dollars, and stated that FEMA is
                     committed to supporting Puerto Rico as it finalizes internal controls,
                     management policies and procedures to oversee disaster recovery funds.
                     DHS also provided technical comments, which we incorporated as
                     appropriate.

                     The government of Puerto Rico provided comments that we reproduced
                     in appendix II. In its comments, the government of Puerto Rico stated that
                     in addition to what was discussed in this report, COR3 achieved progress
                     and faced additional challenges.

                     This report is a part of an ongoing review of disaster recovery efforts in
                     Puerto Rico. The remainder of our ongoing work will continue to examine
                     Puerto Rico’s recovery process, including implementation of the Public
                     Assistance alternative procedures process and efforts by FEMA and
                     Puerto Rico to oversee disaster recovery funds, including the manual
                     reimbursement process.


                     If you and your staff have any questions, please contact me at (404) 679-
                     1875 or curriec@gao.gov. Contact points for our Offices of Congressional
                     Relations and Public Affairs may be found on the last page of this report.
                     GAO staff who made key contributions to this report are listed in appendix
                     II.




                     Chris P. Currie
                     Director, Homeland Security and Justice Issues




                     Page 29                                       GAO-19-256 Puerto Rico Hurricanes
List of Requesters

The Honorable Michael Enzi
Chairman
Committee on the Budget
United States Senate

The Honorable Ron Johnson
Chairman
The Honorable Gary C. Peters
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Rand Paul, M.D.
Chairman
Subcommittee on Federal Spending, Oversight and Emergency
Management
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Maxine Waters
Chairwoman
Committee on Financial Services
House of Representatives

The Honorable Sean Duffy
Ranking Member
Subcommittee on Housing, Community Development, and Insurance
Committee on Financial Services
House of Representatives

The Honorable Al Green
Chairman
Subcommittee on Oversight and Investigations
Committee on Financial Services
House of Representatives

The Honorable Bennie Thompson
Chairman
Committee on Homeland Security
House of Representatives



Page 30                                   GAO-19-256 Puerto Rico Hurricanes
The Honorable Peter T. King
Ranking Member
Subcommittee on Emergency Preparedness, Response, and Recovery
Committee on Homeland Security
House of Representatives

The Honorable Elijah Cummings
Chairman
Committee on Oversight and Reform
House of Representatives

The Honorable Nydia Velázquez
Chairwoman
Committee on Small Business
House of Representatives

The Honorable Peter DeFazio
Chairman
The Honorable Sam Graves
Ranking Member
Committee on Transportation and Infrastructure
House of Representatives

The Honorable Emanuel Cleaver, II
House of Representatives

The Honorable Michael McCaul
House of Representatives

The Honorable Gary Palmer
House of Representatives

The Honorable Ann Wagner
House of Representatives




Page 31                                    GAO-19-256 Puerto Rico Hurricanes
Appendix I: Comments from the Department
             Appendix I: Comments from the Department of
             Homeland Security



of Homeland Security




             Page 32                                       GAO-19-256 Puerto Rico Hurricanes
Appendix I: Comments from the Department of
Homeland Security




Page 33                                       GAO-19-256 Puerto Rico Hurricanes
Appendix II: Comments from the
             Appendix II: Comments from the Government
             of Puerto Rico



Government of Puerto Rico




             Page 34                                     GAO-19-256 Puerto Rico Hurricanes
Appendix II: Comments from the Government
of Puerto Rico




Page 35                                     GAO-19-256 Puerto Rico Hurricanes
Appendix II: Comments from the Government
of Puerto Rico




Page 36                                     GAO-19-256 Puerto Rico Hurricanes
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments


                  Chris Currie, (404) 679-1875 or CurrieC@gao.gov.
GAO Contact
                  In addition to the contact named above, Joel Aldape (Assistant Director),
Staff             Pedro Almoguera, Aditi Archer, Michelle Bacon, Sylvia Bascope, Lilia
Acknowledgments   Chaidez, Taylor Hadfield, Danielle Pakdaman, Lorraine Ettaro, Eric
                  Hauswirth, Heidi Nielson, and Kevin Reeves made key contributions to
                  this report.




103095
                  Page 37                                      GAO-19-256 Puerto Rico Hurricanes
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