The federal audit – performed by the inspector general at the Department of Homeland Security – charges the administration of then-County Executive Joel A. Giambra with grossly violating the rules governing the awarding of cleanup contracts.
Auditors criticize the county for awarding those contracts solely to local companies rather than seeking the lowest bid, but County Executive Mark C. Poloncarz and Rep. Brian Higgins cited laws that indicate the county did nothing improper.
“It's wrong,” Poloncarz said of the audit results. “It's just factually and legally incorrect.”
The audit said the Federal Emergency Management Agency should try to recover most of the $53 million it sent the county after the storm.
Auditors said Giambra violated federal rules by insisting on hiring local contractors to remove vegetative debris and fallen trees and to supervise that work.
The Buffalo News first revealed Giambra's insistence on using local contractors in a November 2006 story that showed the county paying 50 to 85 percent more than some suburban communities paid for the same cleanup tasks.
“Contrary to federal procurement regulations, the county executive directed the county Purchasing Department to award contracts giving preference to local contractors, thus improperly limiting the competitive pool the county's Purchasing Department could use to award contracts,” the auditors said. “Despite the apparent desire to keep this work local, the local contractors then subcontracted with contractors from outside of the area.”
Poloncarz disputed that finding, saying that two changes to federal law – one signed in April 2006 and another signed in October 2006, eight days before the storm – specifically allowed local officials to give preference for hiring local businesses in federally declared disasters.
The first, signed by President George W. Bush in response to Hurricane Katrina, specifically authorized set-asides for major disasters for businesses “that reside or primarily do business in the area affected by the disaster or emergency.”
The second, included in a Homeland Security Department appropriations bill signed in October 2006, directs that preference be given to local vendors for federal funds spent on debris clearance, according to the county.
Both provisions, county officials believe, supersede the rules the federal auditor used as the basis of the report.
“I find it shocking as an attorney and as former comptroller that an audit would be issued which completely ignores the pertinent law,” Poloncarz said. “And it actually is a very bad audit, to put it mildly.”
Local members of Congress agreed that the inspector general had gone too far.
Rep. Chris Collins, R-Clarence, said he understood why Giambra moved to quickly hire local contractors.
“It was a natural disaster,” said Collins, who succeeded Giambra as county executive. “You did need to get things cleaned up.
Collins said he planned to work with Higgins and Poloncarz to fight the audit's findings – which, Higgins said, were confusing.
“It seems the essential finding of the audit is wrong,” he said. “It conflicts with the law.”
Higgins has written to the inspector general and to W. Craig Fugate, the FEMA administrator, to dispute the audit's findings.
Officials at the Inspector General's office did not return a phone call seeking comment.
But in the audit, they said the county justified its reliance on local contractors only by saying that FEMA officials had told them they could do so – which is not enough justification.
“A FEMA representative cannot nullify federal rules and regulations verbally or in writing,” the auditors' report said, adding: “The county provided no documentation of meetings with FEMA representatives.”
For his part, though, Giambra defended his use of local contractors.
“I will never apologize for putting Western New York jobs first,” he said. “When the federal government provides aid to localities, it should always be spent with local employers and local workers to the greatest practical extent.”
Giambra said that after the storm, the county had to quickly mobilize contractors for the cleanup work.
“What do you tell the local contractors who are sitting there that have all this equipment ready to be deployed?” Giambra said. “People can't get to their houses, are we supposed to say we have to wait?”
Yet the inappropriate use of local contractors was just one of the problems that the inspector general found.
In addition, the auditors said the county claimed $9 million in unsupported, undocumented cleanup costs. County officials told the auditors that the records documenting those costs had been lost, but the inspector general said records were required to justify those expenses.
“Because federal cost principles state that a cost must be adequately documented to be allowable under federal awards, the county will have to provide invoices and canceled checks to document that it incurred and paid the costs it claimed,” the auditors wrote. “If the county can produce records documenting the amounts in question, the costs could be allowable.”
Poloncarz said the county had located those records, further buttressing its case that it not have to pay back any money.
“It would be silly for the county to pay back the county $48 million when we followed the law,” Poloncarz said.
The audit leaves the issue of recovering the $48.5 million in the hands of FEMA's Region II headquarters in New York City. Don Caetano, external affairs officer at that office, said the agency had not yet decided whether to pursue the funds from Erie County.
“Region II is currently reviewing the Office of the Inspector General audit findings, and its response will be due to the OIG within 90 days of the final report,” Caetano said.
Having to pay back $48.5 million would greatly reduce the amount of money the county has set aside for unexpected expenses and put pressure on a county budget that, according to Poloncarz and the Erie County Fiscal Stability Authority, already faces gaps. Last year, the county had $83 million set aside in unrestricted reserves.
County Comptroller Stefan Mychajliw said he would urge the county administration and the Legislature to jointly seek relief from having to pay the money back.
Higgins said he didn't think county taxpayers would be punished.
Noting that he and other local officials had successfully fought off an attempt by FEMA to reclaim disaster aid from the City of Buffalo and also got the agency to change South Buffalo flood maps that had improperly required people to buy flood insurance, Higgins said: “We've fought them before and we're 2-and-0. I plan to be 3-and-0.”
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