Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE

December 16, 2015

Recipients of Federal Disaster Funds Failed to Comply with Program Regulations, Causing the State to Be At Risk of Repaying $1.2 Billion

The state could be on the hook to pay back as much as $1.2 billion in federal housing recovery dollars that it gave out after Hurricanes Katrina and Rita to homeowners who have failed to comply with one or more parts of the agreements they signed to get the money.

A legislative audit released Monday found that, since fiscal year 2007, the Community Development Block Grant (CDBG) Homeowner Assistance Program (HAP) has disbursed more than $8.9 billion to help families to get back in their homes in what is now the largest single housing recovery program in U.S history.

However, for the year ended June 30, 2015, the Division of Administration (DOA), Office of Community Development (OCD) identified $263 million in HAP awards for 7,844 homeowners who did not provide evidence they complied with their covenants to occupy their property within three years of their closing date, maintain homeowners and flood insurance on their property, and ensure that they elevate their homes if required.

Auditors found the state has yet to recover those $263 million dollars. Beyond that, another $798 million remains unrecovered from homeowners found to be noncompliant in previous years.

Another program which provided funding to rental property owners to repair their properties and make units available at affordable rates to low- and moderate-income tenants is called the CDBG Small Rental Property Program (SRPP). During the year ended June 30, 2015, the DOA-OCD identified $18 million in SRPP loans that had been given to 186 rental property owners who have not complied with one or more of their loan agreement requirements. Another $76 million in noncompliant SRPP loans identified in previous years remains outstanding.

Meanwhile, auditors found problems with efforts to recover Hazard Mitigation Grant Program (HMGP) dollars as well. HMGP provides funding to homeowners in coastal Louisiana to protect their homes from damage in future natural disasters by elevating or rebuilding their homes.

For the year ended June 30, 2015, the DOA-OCD identified 279 noncompliant applicants who received a total of $6.3 million in HMGP grants that the state now needs to recover. Another $18 million identified in previous years as noncompliant HMGP grants remains unrecovered.

"Louisiana could be liable to pay nearly $1.2 billion dollars back to the federal government if the federal government decides that these grants were not spent in compliance with the agreements property owners signed to receive these dollars," Legislative Auditor Daryl Purpera said. "The Division of Administration, Office of Community Development should intensify its efforts and work diligently with the appropriate state and federal offices to identify noncompliant property owners and recover awards determined to be noncompliant."

For more information contact:

Legislative Auditor
225.339.3800



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Office of the Louisiana Legislative Auditor | www.LLA.La.gov