The agreement between the Federal Emergency Management Agency (FEMA) and the local government, to delegate to the Central Office for Recovery, Reconstruction and Resiliency (COR3) the approval of reimbursements for mitigation works following the 2017 hurricanes, is a step forward for Puerto Rico.
By entrusting the local government with the final approval to disburse large amounts of money for repairs and other emergency work for damage caused by the hurricanes, the agreement reflect the restoration of confidence in a critical aspect of Puerto Rico´s reconstruction.
Debris removal and other immediate reconstruction works, among others done after the emergency mainly by municipalities will be paid through funds from a $600 million package.
Municipalities were already operating on limited budgets or close to insolvency before the emergency period. Then, the island´s town governments adjusted budget items for services or took steps that further complicated their fiscal situation. Therefore, progress in disbursing the necessary funds will be positive.
FEMA requested an additional procedure known as “Standard Form 270” to review the reimbursement applications, a process that was in the hands of that federal agency. The release of funds has been slow, but the agreement could leave that obstacle behind.
The agreement reflects that the Puerto Rican government managed to convince FEMA that it has the capacity to rigorously manage those pending disbursements. Therefore, local authorities face the responsibility to prove that they can carry out sound and transparent procedures.
We hope that subcontracting Deloitte & Touche, ICF and CSA, that contributed to design internal and reconstruction procedures, strengthens the government's technical capacity to assume such a rigorous responsibility.
According to the agreement, 75 percent for each project or service would be released and the remaining 25 percent would come upon confirmation that the project or service was completed.
This progress in the local government's interaction with FEMA should provide flexibility to other crucial procedures for the island's revitalization through the renewal of its critical infrastructure. This includes the energy reform, as well as improvements to the water system, public health and roads.
A report from the U.S. Accountability Office (GAO) stated that FEMA committed $4 billion for emergency-related spending in Puerto Rico. The funds were set aside mainly for debris removal. A more limited portion was allocated to permanent repair or infrastructure reconstruction works.
In the short term, a rigorous management of the $600 million package, which is part of the largest portion committed to the island´s recovery, could serve to insist on the reconsideration of funds for non-fixed cost permanent works. This lack of flexibility may expose the island to deficiencies in the total payment of works, due to inflation or other factors. In this line, experts argue that, if the initial estimate changes, the government will not receive additional funds to cover the works. Although a staging reimbursement process was suggested, this may be part of pending negotiations with FEMA and other federal agencies.
Execution focused on process compliance and accountability may also help for FEMA to reconsider covering the repair of infrastructure with pre-existing damage not directly related to the hurricane.
The road to adequate funding for Puerto Rico's reconstruction is underway. It is based on rigor, transparency and accountability. With its consistent execution, the island will restore confidence, both from the federal government and from investors.