Hancock County

Diamondhead utility should repay $20M in Katrina aid, federal report says

The Diamondhead water tower looms over the community in 2013.
The Diamondhead water tower looms over the community in 2013. Sun Herald file

The U.S. Office of Inspector General says FEMA should force the Diamondhead Water and Sewer District to repay $20.4 million in Hurricane Katrina recovery grant money.

But Lee Smithson, director of the Mississippi Emergency Management Agency, called the report "yellow journalism" and "sensationalism" by OIG based on a partial audit.

"I feel very confident FEMA will go in and examine things and not recommend the money be de-obligated," Smithson told the Clarion Ledger. "... It's frustrating. Nowhere is the $20.4 million specifically questioned in the (OIG) report, yet they recommend it be deobligated."

Diamondhead Water and Sewer District Chairman David Boan did not immediately return a call for comment late Thursday.

It's relatively common for OIG, which is under the Department of Homeland Security, to issue reports calling for repayment to FEMA or a halt in disaster spending. Often FEMA delves further into the books, works with the state or local agency in question, and determines the agency either owes no money or owes far less than the amount OIG questions in its initial findings.

However, FEMA does sometimes — even years after approving federal disaster spending — come back and determine projects shouldn't have been approved or didn't comply with its reams of red tape and order repayment. This has brought complaints that federal disaster programs cause fear and uncertainty for state and local governments and delay recovery.

Smithson points to issues the city of Louisville has had after a 2014 tornado destroyed much of the town. The city was granted nearly $52 million. But the city determined the recovery work would cost less, about $47 million. But FEMA didn't formally approve the change in plans or complete a new environmental impact study on the amended plans. So OIG issued a report saying the project was ineligible. Smithson said that once the paperwork is sorted out, it's likely Louisville will not have to repay the $25.4 million an OIG report headline called for.

But another Katrina case is more troubling for the state. In 2016, FEMA agreed with OIG and halted $29.9 million in reimbursements to the state for retrofitting homes after Katrina. FEMA said the state failed to provide documentation, overspent and appeared to have lax oversight over the program.

Smithson, who has stressed the program and actions in question predate his tenure at MEMA, said one problem was that the retrofit program "never had an internal audit until after I came in." Still, Smithson and Gov. Phil Bryant have voiced optimism that things will work out and the state won't have to pay back $30 million, or hopefully anything for the program.

"It's still being audited," Smithson said. "... It's about half way through, and so far no irregularities have been found. But I can't say for sure. We expect it to be complete by the end of June, and we will turn it over to FEMA, and be releasing it to the public."

  Comments