A recent government audit has found that New York City officials misspent $183 million in Hurricane Sandy relief funds, using the money to cover salaries and fringe benefits for hospital employees — some of whom weren’t even working.
The funds, dispersed as part of a $4.2 billion disaster relief package passed in 2013, were given to the city-run nonprofit Health and Hospitals Corporation. In its own words, HHC operates the “public safetynet healthcare system of New York City.”
The audit, conducted by the Housing and Urban Development Department’s Office of the Inspector General, found that HHC spent the money on ineligible “salary, fringe benefits, and utility expenses incurred by Bellevue and Coney Island Hospitals,” both of which closed for significant periods of time after the storm.
Thus, some of the salaries paid went to employees who weren’t even working, or whose work was unrelated to disaster relief activity. One employee who received disaster relief funds was on extended sick leave for an injury entirely unrelated to the storm.
HHC also used $4.4 million of the funds to cover utility expenses for the two hospitals while they were closed. (RELATED: Audit Exposes Millions In Unaccounted For FEMA Spending)
As the audit explains, “to be allowable under federal rewards, costs must be necessary and reasonable for proper and efficient performance. … The costs charged to the grant for employees who could not return to work due to the closure of the two hospitals and utility costs did not appear to be a reasonable cost for the disaster assistance grant.” (RELATED: FEMA Wasted Millions Replacing Buildings That Only Needed Repairs)
“We are accountable for what we do and how we do it,” HHC’s website boasts. “We look for ways to save money; use time, effort, and materials wisely; and work efficiently. To sustain the mission of HHC, we make every dollar count; we think about the cost consequences of our decisions.”
The inspector general accused HHC of essentially gaming the grant system to make up for revenue lost during the closures, which the city vehemently denied — a denial seemingly undermined by HHC’s own president, Dr. Ram Raju.
“We remain very concerned, however, about roughly $180 million dollars in lost revenue incurred during this period when our Bellevue and Coney Island facilities were fully or partially closed,” he wrote in HHC’s 2013 year-end report, “as these losses are not Federal Emergency Management Agency (FEMA) reimbursable. If not addressed, this loss will severely destabilize our finances going into next fiscal year. We remain hopeful that a portion of the several billion dollars appropriated by Congress recently in storm related Community Development Block Grant funds can be tapped to cover these losses.”
Raju was recently lauded by Modern Healthcare Magazine, which selected him as one of “2014’s Top 25 Minority Executives in Healthcare” — an award he also received in 2012.
The audit also found that city officials didn’t monitor HHC’s spending, approving invoices without substantiating the costs, which allowed the corporation to misuse the money, and even distributed federal funds to the hospitals despite concerns raised by HUD months in advance. (RELATED: HUD Official Pleads Guilty To Stealing $843,000 In Taxpayer Funds)
“These deficiencies were attributed to weaknesses in the City’s financial management controls over its disbursement process and monitoring procedures and City officials’ failure to follow the requirements of the City’s grant agreement with HUD,” the audit concluded. “As a result, City officials could not assure HUD that $183 million in [Community Development Block Grant Disaster Recovery Assistance] funds was disbursed for eligible, reasonable, and necessary program expenses in compliance with HUD rules and regulations.” (RELATED: Investigation Reveals Massive Fraud In Texas Public Housing Program)
The inspector general recommended that city officials “provide documentation” justifying the $183 million in spending, and that it be repaid to the federal government if they do not. (RELATED: NOLA Affordable Housing Director Sentenced To Prison For Massive Kickback Scheme)
In its response to the audit, the city’s Office of Management and Budget disagreed with the assessment, saying that it already did provide adequate cost justification and documentation, and points out that it “continuously consulted with HUD concerning HHC’s fiscal and programmatic activities with respect to the claim amount.”
HUD countered that “the documentation provided did not sufficiently show that the employees whose salaries were charged to the CDBG-DR grant actually performed work related to the grant.”
“The audit’s conclusions are unwarranted and unexpected,” HHC spokeswoman Ana Marengo told Capital New York. “HHC employees worked selflessly through Hurricane Sandy, and Bellevue and Coney Island hospitals were able to serve their communities even through the subsequent recovery period.”