Lax oversight by NC agency overseeing millions in hurricane recovery, audit says
The state agency responsible for overseeing Hurricane Florence recovery funds failed to ensure millions of dollars provided to various state agencies were spent properly or achieved intended results, according to a new state audit.
This is not the first time North Carolina auditors have raised concerns about oversight of the disaster recovery funds.
The findings announced Thursday come as lawmakers have appropriated just over $900 million for recovery efforts following Hurricane Helene, whose remnants struck Western North Carolina in late September, devastating the region and generating damage estimated in the high billions.
Florence recovery funding and oversight requirements
After Florence struck the state in 2018, lawmakers created the Florence Disaster Recovery Fund, allocating $942.4 million for recovery efforts.
Administration of the fund was assigned to the Office of State Budget and Management (OSBM), which delegated responsibility to the Department of Public Safety (DPS). Lawmakers required all appropriated state and federal money to be accounted for, and they mandated financial audits by the state auditor.
The legislature also established the North Carolina Office of Recovery and Resiliency (NCORR) under DPS to manage federal disaster recovery funds.
NCORR, which has faced heavy criticism for its handling of recovery efforts for hurricanes Florence and Matthew, was tasked with reporting to lawmakers on the use of disaster recovery funds. The agency is also responsible for general disaster coordination. In late November, NCORR said its chief operating officer, Laura Hogshead, was no longer with the agency. This followed a legislative hearing that raised questions about how NCORR had exhausted federal funds allocated for Florence and Matthew recovery efforts and failed to pay contractors following accounting errors.
The state’s Department of Public Safety is led by Secretary Eddie Buffaloe Jr., who is part of Democratic Gov. Roy Cooper’s cabinet.
More details on audit findings
The audit released Thursday focused on state money appropriated under the Florence Disaster Recovery Fund, excluding federal disaster recovery funds and other state funds from different sources.
It also focused on whether — following the earlier audit in 2022 — DPS made changes to make sure that money was spent properly.
The audit from Thursday found that between Feb. 1, 2021, and Dec. 31, 2023, the department distributed:
- $18 million in Hurricane Florence Disaster Recovery Funds to external recipients with limited monitoring. Limited monitoring referred to DPS not independently verifying recipient spending by comparing documentation such as income and payroll records to expenditures reported.
- $94 million without ensuring all recipients had a method to measure results.
“As a result, there was an increased risk recipients could have misused funds without the misuse being detected and then corrected in a timely manner,” and DPS “was limited in its ability to determine whether funds were achieving legislatively intended results,” according to the audit.
According to the report, recipients of the state recovery funds included state agencies such as the Department of Agriculture and Consumer Services and the Department of Public Instruction, institutions of higher education, and The Golden LEAF Foundation, a nonprofit organization.
The audit in 2022 found that between Nov. 1, 2018, and Jan. 31, 2021, DPS distributed $502 million in Florence disaster recovery funds to recipients with limited monitoring.
The audit Thursday says that this means that the total is now more than $520 million.
An additional $785 million was distributed without ensuring recipients had methods to measure results, the 2022 audit found.
The audit from Thursday says that DPS management stated that the agency did not conduct independent verification or ensure recipients had a method to measure results because legislation “did not specifically require or provide DPS with the authority.”
The report says that while legislation did not “explicitly” require this, DPS was required to “administer” the fund and to carry out the provisions laid out in legislation. It also says that state law required DPS to report on results achieved.
Buffaloe said in a response to Holmes attached to the audit that he disagreed with the findings. He said DPS agrees with the need for legislation that outlines “articulated outcome goals and measurable directives,” but that “often in natural disaster situations, specific needs are not clear to the General Assembly at the time they must act on a bill.”
He said that in the absence of specific directives, DPS relies on documents in which recipients outline a plan for how they intend to spend funds, along with a projected budget and quarterly progress reports.
A DPS spokesperson said the department declined to provide comment beyond what was included in the audit.
Recommendations
The audit released Thursday recommended that DPS monitor recipients’ spending of funds in a timely manner and develop policies and procedures to ensure all recipients establish objectives and benchmarks for the use of money. The audit also suggested lawmakers consider additional monitoring requirements for disaster recovery and other emergency relief funds.
“Corrective measures should be executed by the Department and legislature to ensure current and future hurricane relief funds are appropriately monitored and distributed in a timely manner,” state Auditor Jessica Holmes, a Democrat, said in a letter to Cooper, leaders within the Department of Public Safety and lawmakers.
Holmes was appointed as state auditor by Cooper to complete former Auditor Beth Wood’s term. She lost her bid for reelection to Republican Dave Boliek.
