HUD Inspector Assesses Puerto Rico’s Proposed CDBG-DR Agency

In response to Congressional concerns regarding a new entity that Puerto Rico intends to use to administer the Community Development Block Grant-Disaster Recovery (CDBG-DR) program, HUD’s Office of Inspector General (IG) undertook an assessment of the Office for the Socioeconomic and Community Development (ODSEC). On February 15, 2017, ODSEC became Puerto Rico’s reconstituted state entity responsible for overseeing the regular CDBG program and the CDBG-DR program. The previous entity administering the regular CDBG program, the Office of the Commissioner for Municipal Affairs (OCMA), also administered $30 million in CDBG-DR funds in 2008.

ODSEC proposes to delegate CDBG-DR grant activities to three other state entities: the Puerto Rico Housing Finance Authority would address housing, the Infrastructure Finance Authority would address public facilities, and the Department of Economic Development and Commerce would address business loans and grants.

The IG’s assessment focused on the housing aspects of ODSEC. Thirty-two of ODSEC’s 103 employees transferred from OCMA. HUD had previously given OCMA a “high risk” assessment score of 75 for the regular CDBG program and a “high risk” score of 58 for its handling of the 2008 CDBG-DR program. HUD had previously given the Housing Finance Authority a “medium risk” score of 36.

The IG lists five areas of concern, two of which are:

  1. ODSEC is staffed with former OCMA employees. Previous IG reports found that OCMA made slow progress, that activities did not provide intended benefits, or that they were used for ineligible activities.
  2. Puerto Rico was not able to spend its 2008 CDBG-DR funds in a timely manner. HUD staff indicate that the slow progress was due in part to staff turnover after every election period.

Finally, complicating matters further, on October 28, 2017, Governor Rosselló created the Central Recovery and Reconstruction Office of Puerto Rico (CRRO), which is to be responsible for planning, administering, processing, and overseeing the work of reconstruction paid for with private, state, or federal funds. The IG indicated that ODSEC officials could not explain how CCRO would affect the proposed framework for administering disaster funding or what ODSEC’s role would be.