With the ubiquitous discussion as to the fate of the colossal federal funding currently being disbursed by the Federal Emergency Management Agency and the $8 billion-plus CDBG-DR funds by U.S. Housing and Urban Development, the court of public opinion has already placed warnings on the recipient, the government of Puerto Rico. But in all fairness, they are not completely to blame.
The reality is that both sides have their fair share of
responsibility that stems from poor federal grants management. My experience
indicates that both parties are failing at, what a blogger for the prestigious Grantsmanship
center calls, the 4 C’s of grants
management; poor communication, lack of coordination, inadequate cooperation
and in-consistency. Without any perseverance or agreement to improve
performance on these four unheeded areas, little improvement can be
In addition, both parties have been timid in tapping local
expertise and companies to lead the recovery and ensure that such a massive
investment stays on the island. As highlighted in this publication, big
mainland U.S. consulting companies have trumped
local firms clearly violating the Stafford Act. Above all these firms do
not demonstrate a commitment to Puerto Rico’s economic future and very few
local companies are being subcontracted.
In the case of the government of Puerto Rico, as a recipient or
grantee, and other entities that are eligible as sub-recipients (or
sub-grantees) it becomes ever more important not to be engrossed by the perceived
prospect of easy money.
Consistently, recipients of federal grant money in Puerto Rico fail to understand the restrictions placed by the direct mandate from an act of Congress, which is at the heart of past performance failures.
In other words, these legal restrictions placed on the recipient
or grantees are specific responsibilities, which are explicitly contained in
the grant award document. Whatever area
not covered in the grant award binds the agreement under the provisions of title
2 of the Code of Federal Regulations, part 200, known as the Uniform Administrative
Requirements, Cost Principles and Audit Requirements for Federal Awards or
Now, it is the responsibility of the government of Puerto Rico to
provide assurances to the federal government in response to the increasing
pressure to prevent fraud, waste, and abuse.
In determining risk, the federal government will evaluate the
recipient’s history of performance, the quality of its management structure,
past audits results and overall capacity to comply with program
In that regard and as a whole, Puerto
Rico has not fared well in efficient grant management particularly as
governments and organizations fail to appoint or consult experienced managers,
do not have clear written policies and procedures, and do not maintain adequate
communication with the funding officers.
If Puerto Rico cannot manage or plan for its own risk, be
completely transparent in their execution, the federal government will not
eliminate the reimbursement restrictions that are currently curtailing the flow
Furthermore, state agencies and municipal governments must ensure
that their policies and procedures are up to date (and with a recommended
available version crafted in English) and that their full-time staff has the knowledge
and competency to follow standard operating procedures.
At the federal government side there are significant challenges in
the grants management process and oversight, which are evident in how it is
handling the Puerto Rico recovery.
This matter had been examined by a report
from the General Accounting Office (GAO), which reveals that grant-making
agencies must consider the current and future fiscal condition of state and
local recipients, to determine how federal spending can help to address key
problems. In the case of FEMA, GAO has consistently sought such oversight and performance
The aforementioned report is so poignant that below I quote some
of its key findings for the readers’ reference:
overall processes. When grants management requirements are duplicative,
unnecessarily burdensome, and conflicting, agencies must direct resources
toward meeting them — which can make the agency’s programs and services less
cost effective. Streamlining
and simplifying grants management processes is critical to ensuring
that federal funds are reaching the programs and services Congress intended.
grantee performance. Effectively tracking and reporting on grant performance is
critical for agencies to determine whether their program goals are being
achieved and for ensuring transparency and accountability for federal grant
spending. However, the lack
of a consistent approach to verifying data could lead to collecting
erroneous performance data.
federal grants management. GAO’s audit of the federal government’s financial statements
identified a significant deficiency in internal control related to managing
grants at certain federal entities. Primarily, there were deficiencies in
monitoring grant activities and accounting for formula grants. These internal
control deficiencies could adversely affect the federal government’s ability to
provide reliable financial statements as well as reasonable assurance that
grants are awarded properly, recipients are eligible, and federal grant funds
are used as intended.
evidence to assess the effectiveness of federal grants. In
recent years, federal agencies have been encouraged to consider evidence-based
practices in managing their grant programs. Pay for Success is one
such practice whereby private investors provide up-front funding for programs
and the federal government repays these investors when there are demonstrated
Pay for Success offers potential benefits, but federal government
involvement in such projects has been limited. OMB should establish a means for
federal agencies to collaborate on Pay for Success with access to leading
practices. Other evidence-based issues include tiered evidence grants and
the capacity needed to use them and the benefits and challenges of using
For the sake of Puerto Rico’s recovery, both parties must
negotiate in good faith to reach a reasonable process to spur a much-needed
injection to the local economy. But
above that, both parties need to tap in the local resources that can bridge
what is an unspoken organizational culture divide.
In this unequal relationship, Puerto Rico has the most to lose.