Audit says Katrina aid may have been misspent

Federal investigators said Wednesday that as much as $700 million in federal aid intended to help some 24,000 Louisiana families elevate their homes after Hurricanes Katrina and Rita in 2005 may have been misspent.

A report by the Housing and Urban Development Department's inspector general said some homeowners who got grants of up to $30,000 used the money for something else, and that others didn't provide sufficient documents to state officials to show that the work was done.

"The state did not have conclusive evidence" that $698.5 million in disaster recovery aid was used to elevate homes, the auditors wrote.

In response, HUD officials said the state is responsible for making sure the money was spent properly. But after seeing similar results in previous audits, department officials helped Congress put tighter reins on the program in distributing aid to victims of last fall's Superstorm Sandy in the Northeast.

"In the years since Hurricane Katrina, HUD has already implemented a number of the recommendations made by the inspector general, including additional controls to ensure recovery funds are used appropriately," department spokesman Jason Kravitz said.

He said the Obama administration fought for wording to be included in the Sandy aid measure to require enhanced reviews and internal controls on all money made available by HUD and other agencies for superstorm relief and recovery.

President Barack Obama in January signed the $50.5 billion measure, which Congress approved the measure despite opposition from conservatives. They said there should have been more time to debate such a large spending bill and to provide tighter spending controls.

"I commend HUD for discovering that millions of dollars that were intended to elevate homes along the Gulf Coast were either pocketed or squandered," said Sen. Tom Coburn, R-Okla., a frequent critic of government spending. "As the federal government prepares to spend nearly $16 billion on recovery efforts related to Sandy this is a mistake taxpayers, and citizens affected by the storm, can't afford to see repeated."

The measure was aimed primarily at helping residents and businesses as well as state and local governments rebuild from the storm.

The biggest chunk of money in the Sandy bill was $16 billion for HUD community block grants. Of that, about $12.1 billion will be shared among Sandy victims as well as those from other federally declared disasters in 2011-13. The remaining $3.9 billion was solely for Sandy-related projects.

Those grants can pay for rebuilding roads and hospitals, other public works projects, helping small businesses reopen, restoring utilities and providing rental subsidies. The grants are popular with state and local governments because of their flexibility on how the money is spent.