Federal audit finds much work remains in Puerto Rico's hurricane and earthquake recovery process

SAN JUAN, Puerto Rico — Puerto Rico is pushing ahead with reconstruction work after two devastating hurricanes and a series of powerful earthquakes, spending less than 10% of more than $23 billion in available federal funds, according to a U.S. government report released Tuesday. .

A review by the US Government Accountability Office found that the US territory has a “significant amount” of permanent projects that remain on hold as their costs rise and threaten to halt rebuilding work.

“More than six years after Hurricanes Irma and Maria, Puerto Rico’s recovery continues,” the report stated.

The GAO report also noted a series of earthquakes that struck the island's southern region in December 2019 and January 2020, causing millions of dollars in damage.

The report found that more than $11 billion of the $23.4 billion awarded by the US Federal Emergency Management Agency in the wake of hurricanes and earthquakes still needs to be approved by the agency before Puerto Rico's government can spend it.

It was not clear why the regional government had not yet taken the steps required to obtain the funds. A spokesperson for Puerto Rico's Office of Recovery, Reconstruction and Resilience, which receives and awards federal grant money, did not immediately return a message seeking comment.

However, documents show that Puerto Rico's energy company, the Department of Education, and the Aqueduct and Sewer Authority expect to apply for the funds by 2030 or later.

Federal funds are supposed to finance more than 9,300 permanent projects, including more than $13 billion for public facilities and $7 billion for public buildings and equipment.

However, rising costs posed a challenge, according to a GAO review that ran from November 2021 to February 2024.

The GAO noted that the cost of the water treatment plant exceeded its original estimate by more than 40%, while the cost of parts needed for the power plant rose from $9 million to $12 million.

The report said rising costs were of “particular concern” because of their cumulative effect.

“For example, officials from the Puerto Rico Aqueduct and Sewer Authority said they expect they will only be able to complete about half of the agency’s planned projects,” the report said.

Contributing to the delay were interruptions in the global supply chain that increased the delivery time for construction materials needed by Puerto Rico's energy company from six months to up to three years, the audit found. Meanwhile, chronic power outages continue to plague the island.

Another challenge is the shortage of workers ranging from architects to construction contractors, the report said.

In a formal response to the audit findings, the Puerto Rican government requested more flexibility in financing and noted that labor shortages in the local construction industry were an “important factor” affecting recovery efforts.

The government also cited “significant reductions” in insurance coverage for many projects, as well as lengthy litigation over damage claims between recipients of federal funds and their insurers.

“This restriction forces them to prioritize a select number of development projects until insurance settlements are reached,” the government’s response letter said.

It also warned that when Hurricane Fiona hit Puerto Rico in September 2022, the storm caused additional damage indistinguishable from the damage caused by Hurricane Maria in September 2017 because “many subprojects had not yet been formulated.”

Other challenges include the ongoing financial and economic crisis, with Puerto Rico recently emerging from the largest U.S. municipal bankruptcy in history.

The Government Accountability Office recommended that FEMA develop a risk management plan, which it said the agency plans to do this month.

It also found that FEMA has successfully monitored Puerto Rico's use of public funds through an audit system, with the island improving its ability to manage those funds, at least from 2018 to 2020. Some audits in recent years are still pending.

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