Audit Report on the Administration of the New York City Build It Back Single Family Program By the Mayor’s Office of Housing Recovery Operations

Audit Report in Brief 

This audit examined whether the Mayor’s Office of Housing Recovery Operations (HRO) had proper controls in place to ensure the appropriate, prompt and efficient delivery of services to applicants for benefits under the New York City Build it Back (BIB) Single Family Program during the period from June 1, 2013, to August 1, 2014.  After Hurricane Sandy, the City launched the BIB program to carry out long-term residential reconstruction proposed as part of the United States Department of Housing and Urban Development Community Development Block Grant–Disaster Recovery initial Action Plan (Action Plan).  Pursuant to the Action Plan, the City proposed using more than one billion dollars in federal funds to pay for the City’s reconstruction initiatives, including the Single Family Program, which was specifically designed to assist owner-occupants of properties with one to four units affected by Hurricane Sandy.  During its open registration period from June 3, 2013, to October 31, 2013, HRO received approximately 19,500 registrations for the BIB Single Family Program.

On July 3, 2013, the City entered into a $50,219,564 contract with Pennsylvania-based consultant Public Financial Management (PFM) under which PFM was to provide oversight and management of BIB subcontractors from June 24, 2013, to June 23, 2015.  PFM’s contract required it to engage the services of three subcontractors who were to carry out the BIB program’s day-to-day operations under PFM’s direction: URS Group, Inc. (URS); Solix, Inc. (Solix); and the Center for New York City Neighborhoods (CNYCN).  Pursuant to the contract with PFM, these three subcontractors would collectively provide applicant/customer support operations, eligibility review, and counseling services, while PFM was responsible for overall project management, subcontractor supervision, billing and reporting to HRO.  HRO terminated PFM as the BIB program project manager on December 16, 2013.

As of March 9, 2015, HRO had approved payments to PFM in the amount of $17,249,281, $4.4 million of which was paid to PFM on behalf of its subcontractors after PFM ceased to function as the project manager.  Also as of March 9, 2015, URS and Solix have submitted an additional $17.6 million in invoices, $4.7 and $12.9 million, respectively, which remain unpaid pending the registration of a contract or assignment covering this work with the Comptroller’s Office.

Audit Findings and Recommendations

HRO failed to implement proper controls to ensure the appropriate, prompt and efficient delivery of services to applicants for benefits under the BIB Single Family Program.  Specifically, HRO failed to effectively monitor the work of the multiple consultant companies hired to carry out the program.  In addition, as HRO repeatedly changed program procedures and policies, it failed to adequately memorialize these changes in contract amendments, assignments or other documents that would ensure that the changes were adhered to and enforceable.  Furthermore, HRO failed to ensure that consultants effectively notified and trained their staffs about program changes, failed to provide quality control over their implementation, and did not track the effects of the changes on the efficiency of the BIB program over time.

As a result, by December 31, 2013, seven months after the program began accepting applications and over a year after the storm devastated homes along the coast of New York City, only 960 of the roughly 20,000 program applicants had met with HRO to discuss the options available to them through the BIB program; and zero applicants had actually received any program benefits.  As of August 1, 2014, nearly two years after the storm hit New York and fifteen months after the BIB program began accepting registrations, only 686 applicants had received any type of benefits.

This audit further found that HRO authorized $6.8 million in payments for work that did not conform to program requirements set out in PFM’s contract with the City, including payment of $3.5 million for initial applicant meetings held without the contractually mandated proof that registrants had provided complete application information and payment of $3.3 million combined to URS and Solix for their respective billings related to incomplete applications that URS prematurely submitted to Solix for eligibility reviews.  In addition, HRO failed to properly review invoices and supporting documentation and approved payments of $1.2 million for “on-demand” staffing¹ where consultants did not submit the detailed weekly activity reports required by PFM’s contract with the City.  We also found that HRO’s failure to properly review invoices led them to approve approximately $245,000 in duplicate payments.

Finally, though many improvements were made to the BIB program after January 2014, numerous critical service problems persisted up to and through our audit period.  As reported by applicants who testified during the Comptroller’s Hurricane Sandy public hearings and by applicants that the Comptroller’s Office interviewed in connection with this audit, delays and inefficiencies continue to frustrate many applicants.  And because HRO has not formally registered any new contracts to regulate the BIB program’s operations since relieving PFM of its duties at the end of 2013, the City remains deprived of its primary means of control over program costs and operations, thereby increasing the risks of higher cost and inefficient service.

Audit Recommendations

This report makes a total of sixteen recommendations to HRO and to the Mayor’s Office, including:

Recommendations to HRO:

• HRO should not solely or primarily delegate responsibility for the oversight and implementation of the BIB program to private consultant companies.  City staff should be actively involved in all aspects of the program to directly monitor services provided to applicants and to ensure the program is carried out appropriately.
• HRO should finalize contract assignments with those consultants that previously operated as subcontractors to PFM and promptly register those contracts with the Comptroller’s Office.
• If and when HRO institutes or changes any BIB program procedures, it should ensure that all staff are adequately trained on the new procedures; that they are reflected in all necessary program documents including applicable forms and Standard Operating Procedures (SOPs); that the BIB program’s data storage case management system, CMS, is modified as necessary to reflect these changes; and that the implementation and effects of the changes are monitored and assessed.
• HRO should review the qualifications of any future hires made by URS and other consultants who work on the BIB program to ensure that candidates meet the educational and experience requirements mandated by their contracts.
• HRO should implement necessary contract amendments and/or SOPs to require URS and Solix to contact applicants within a set time frame after the most recent prior contact and specify whether applicants should be contacted by phone, email, text, or USPS mail, and detail specific measures to ensure that adequate contact efforts are made.
• HRO should ensure that data contained in CMS is accurate, including that each applicant’s status designation is correct and up-to-date.
• HRO should review each application to identify which are inactive, withdrawn, and/or ineligible and expeditiously take appropriate action.
• For any work that is to be paid on a time and materials basis, prior to approving payment, HRO should require the consultants to submit timesheets specifying the hours worked and tasks performed, and to submit any other reasonable supporting documentation.
• HRO should thoroughly review invoices to ensure that HRO does not make duplicate payments to consultants.  In any instances where HRO determines that it has made duplicate payments, HRO should seek to recover overpayments to the consultants immediately.

Recommendations to the Mayor’s Office to Prepare for Future City-Wide Disaster Recovery Operations

• Based on the experience of the City with the Build it Back program and responses undertaken by the City to recent emergencies, the Mayor’s Office should assess the best ways for the City to prepare to address future emergencies and implement any necessary rule changes related to procurement and contract oversight to ensure that contracts for necessary goods and services are in place, that the City gets the best possible prices, and that those contracts are fully enforced.
• The City should explore ways to develop emergency relief capacity to maximize the use of City resources rather than outside consultants for potential City-wide disasters such as Hurricane Sandy.
• Future contracts with consultants to assist in the provision of emergency disaster relief services should state specific deliverables that the consultants are required to provide within specified timeframes.  The consultants should be held accountable for meeting those deliverables.

Agency Response

HRO submitted a written response to our audit Draft Report on March 25, 2015 in which it endorsed recommendations made by the Comptroller and further stated that “[t]he City is generally in agreement with the [Comptroller’s] Findings related to delays, applicant frustration, and the start-up of the Program.”  HRO maintains that it fully implemented six of the Comptroller’s recommendations in 2014 and that it is in the process of implementing the remaining seven and that it had previously dealt with the matters that were the subject of the audit in its 2014 report titled, One City, Rebuilding Together.

We are pleased that HRO has committed itself to implementing all of the audit’s recommendations.  We note that while HRO’s 2014 report touched on many of the problems examined in the audit, unlike the audit, it did not provide a detailed explanation of the causes of these program failures or analyze any of the critical lapses in management that led to them.  The Comptroller’s audit report provides just such detail and in-depth analysis so that the City can understand and address past program failures and be better prepared to respond to future emergency situations.

The full text of HRO’s response to this report and to the thirteen recommendations made to HRO is included in the Addendum to this report.