Puerto Rico Lost Track Of $10 Million In Federal Grant Money

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Luke Rosiak Investigative Reporter
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Seven years after a Puerto Rico government got $10 million in federal money to build a cemetery and bus station, neither one has been built, and local authorities claim to have no documentation about the projects.

The local government said it has no information about its own decisions, because the only copies of the paperwork are possessed by contractors who are holding it for “ransom.” The contractors say they’re not cooperating because Puerto Rico stiffed them on payment.

In 2007, the Department of Housing and Urban Development gave the Municipality of Toa Alta, Puerto Rico $2 million to create a mausoleum. The money was required to be spent by 2010. This year, construction had not started, because of “problems accessing the project site,” which was on land that had long been owned by the local government itself.

Another $6 million-plus was for construction of a four-story building containing parking and a bus terminal, also distributed in 2007 and to be spent by 2010, and with no changes permitted. By 2015, the abandoned frame of a five-story building sat on the site, with Puerto Rico demanding more federal money to complete the expanded project.

The federal money was supposed to be a loan, but HUD secured no collateral before disbursing the funds, leaving the department with little leverage to prevent an entity from walking away with the money, according to a report this month from the department’s inspector general.

“The records maintained did not properly account for program income, accounts receivable, and capital assets,” the IG audit found. “The municipality did not maintain a general ledger for the Section 108 program. The accounting record maintained was a check register that contained incorrect balances and transactions that were not recorded.”

These examples provide some insight as to why Puerto Rico is $70 billion in debt and seeking to declare bankruptcy to avoid paying its creditors. Democrats in Congress are trying to help them do that.

HUD’s Section 108 program sends money to local governments to help low- and moderate- income people, but governments often use it to build general amenities, saying that low-income people benefit from having them nearby.

Puerto Rico spent some of the money on completely unrelated purposes, but it was unclear where most of the money went. Contractors haven’t been paid, yet the money hasn’t been returned to HUD, either. Local officials also failed to abide by “environmental requirements” on the bus stop’s building frame.

Puerto Rico said its “inspector and supervisor” had been involved in “irregularities,” so their contracts weren’t renewed. The local officials blamed the previous mayor, saying “it is unknown whether the previous municipal administration was involved in this scheme and to what extent.”

The IG said the local government agency responsible for administering the Section 108 program did not have any documentation about it. Contractors “have all the documentation pertaining to the program, but have deliberately refused to provide it to the Municipality.” HUD’s inspector general was not amused, saying the government that received the funds is responsible for documenting its use.

An almost identical situation occurred in Guam, where the feds gave $3 million to renovate a cemetery. Guam officials then claimed not to know what happened to the money and had no records, saying they must have been stolen from the office.

“We did an outstanding job” with the cemetery, the Guam official in charge claimed, “so there shouldn’t be a concern about having to repay the grant,” according to Republican Sen. Jeff Flake’s Wastebook.

The official said he would just apply for another federal grant to finish the cemetery upgrades.

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