FTA’s Limited Oversight of Grantees’ Compliance With Insurance Requirements Puts Federal Funds and Hurricane Sandy Insurance Proceeds at Risk

Proceeds at Risk

What We Looked At
After Hurricane Sandy hit in October 2012, the Federal Transit Administration (FTA) awarded approximately $5.03 billion in grant funding to 14 grantees through 2017 for response, recovery, and rebuilding projects. Our prior audits supporting oversight of this funding, as mandated by the Disaster Relief Appropriations Act of 2013, found that FTA established formal reporting and tracking procedures for grantees’ receipt of insurance proceeds to help prevent the Agency from funding project expenses for which a recipient already received insurance proceeds. However, we could not assess implementation of these oversight procedures at the time, because grantees faced years of ongoing monitoring before reaching settlements with the insurance companies. Now that grantees have begun to receive insurance settlements and develop plans for applying them, we initiated this audit to assess FTA’s oversight of its Hurricane Sandy grantees’ compliance with insurance requirements. Specifically, we assessed FTA’s oversight of Hurricane Sandy recovery grantees’ compliance with requirements for (1) carrying required insurance, (2) reporting on insurance proceeds, and (3) applying insurance proceeds.

What We Found
We found that FTA has not verified that grantees have required flood insurance for Hurricane Sandy damages and its other Federal transit investments. This is in part because FTA relies on grantees to self-certify that they have the requisite insurance coverage, does not require the grantees to produce the necessary data to support their certifications, and lacks procedures to confirm that grantees carry flood insurance when required. As a result, FTA cannot conclusively determine whether its grantees are eligible for the full amount of funding they received for Hurricane Sandy grants or a portion of the billions in Federal transit investments it funds annually. Further, FTA lacks procedures to follow up with grantees that do not submit Insurance Proceeds Reports, which may diminish its ability to eliminate duplication between Federal funds and insurance proceeds, as well as to ensure proceeds are properly allocated. Lastly, FTA has failed to hold Hurricane Sandy grantees accountable for timely or completely applying their over $1 billion in insurance proceeds, in some cases years after they received them. Consequently, we found over $982.8 million in insurance proceeds could be put to better use.

Our Recommendations
We made eight recommendations to improve FTA’s oversight of its Hurricane Sandy grantees’ compliance with insurance requirements. FTA concurred with three, partially concurred with two, and did not concur with three. In response, we requested that FTA clarify and reconsider its actions.

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