State hurricane recovery agency acknowledges accounting errors on work in Eastern North Carolina

State government has unpaid bills of more than $37 million for completed projects rebuilding the homes of Eastern North Carolina hurricane survivors, newly released records show.

The leader of the state’s Office of Recovery and Resiliency addressed the unpaid bills on Monday when she testified before state lawmakers, explaining that without new funding from lawmakers, money would have to be transferred from other commitments to cover them.

“We simply were not watching carefully enough,” Laura Hogshead said when pressed about why the money was unavailable. “We were going fast and not watching carefully enough on the encumbrances,” or pledges to pay contractors.

North Carolina lawmakers convened to question the leadership of the state agency responsible for rebuilding efforts after hurricanes Florence and Matthew. They sought details on how much additional funding the agency needs to rebuild survivors’ homes and why it is facing a budget shortfall.

It remains unclear after the hearing whether the GOP-led legislature, which meets Tuesday, will provide any additional funding. Lawmakers are expected to allocate additional money for recovery efforts from Hurricane Helene, whose remnants struck Western North Carolina in September.

The state is also expected to receive federal money in the future to rebuild homes damaged by Helene. Lawmakers expressed concern with NCORR, also known as Rebuild NC, the agency tasked with Eastern North Carolina hurricane rebuilding efforts, taking on this new role.

Funding request

NCORR received about $779 million in funding for Florence and Matthew from the U.S. Department of Housing and Urban Development. This funding for recovery efforts for both hurricanes is spread out among programs, with most allocated to the program for rebuilding homes.

The agency has faced criticism for delays in getting residents of Eastern North Carolina back into their homes. Scrutiny intensified recently after the agency announced a $175 million shortfall in funding. Following this announcement, state lawmakers, through a bill funding Hurricane Helene recovery efforts, provided an additional $30 million for NCORR.

On Monday, Hogshead, chief operating officer of NCORR, and Pryor Gibson, deputy legislative counsel to Democratic Gov. Roy Cooper, clarified their funding needs before a subcommittee of the legislature’s Joint Legislative Commission on Governmental Operations.

Known as Gov Ops, the committee is chaired by Senate leader Phil Berger and House Speaker Tim Moore. NCORR was created by the legislature but is overseen by Cooper.

Documents on the subcommittee webpage, uploaded after a request from The News & Observer, show that the state’s Office of State Budget and Management (OSBM) estimates approximately $324.3 million is needed to complete and pay all amounts owed for projects. However, since the estimate is based on past data, costs may differ in reality, the documents say.

One of the documents, referenced in the meeting as having been shared by NCORR with lawmakers, shows that the agency will need $264 million in funding from the legislature without reallocating other funds and without considering contingencies to complete the homeowner recovery program. The file also indicates that the funding need would rise to $289 million if contingencies are accounted for.

Gibson said Monday, “What we’re asking the General Assembly to at least do — if you can — is (provide) about $40 million a month for the next three months.” He said this funding would cover necessities and help NCORR catch up on arrears.

However, Hogshead said the “worst-case scenario” funding needed by NCORR would total about $265 million.

Gibson, a former state representative assigned to assist NCORR in January, said “I’m of the opinion that (the work) can be done for substantially less than the $265 (million), but quite frankly, we’ve already used up our welcome, and we don’t deserve the confidence that we can do it for what we say we do. We have to tell this legislature what the outside limit is.”

Accounting errors

Robeson County Republican Sen. Danny Britt said during the hearing that some contractors in his district had told him they had not been paid for completed work.

When asked how many contractors are currently owed money, Hogshead said the state is working with 57 general contractors and “most of them have an invoice in with us,” adding: “We have slowed down payments” but “we are continuing to make payments.”

NCORR has about $37.6 million in unpaid project costs for completed projects, the documents uploaded to the website show.

The documents also reveal that NCORR has a plan to add $44.2 million to its budget through an upcoming “Substantial Action Plan Amendment” to its HUD grant. This amendment would reallocate funding from “Planning, Strategic Buyout, Public Housing Recovery, and Infrastructure.”

Rep. Sarah Stevens, a Mount Airy Republican, questioned Hogshead on how much money NCORR has obligated.

Hogshead said the agency had $981 million across its grants and had obligated all but $44 million. She said that obligated funds are those committed to a project, and NCORR encumbers (or pledges) funds when it signs contracts with general contractors.

Stevens cited the documents, telling Hogshead, “you said that there was $37.6 million not available to pay for things that have already been built.”

Hogshead said the $37.6 million figure represents outstanding invoices submitted over the past few months.

Stevens pressed further, asking why, if NCORR encumbered the money upon signing contracts, the $37.6 million was unavailable.

That’s when Hogshead described “going fast” and “not watching carefully enough.”

She said the program had money to cover the obligations but would need to shift funds and “break commitments.” So far, she said, the agency has avoided doing that.

“We clearly need to do a better job in having conversations between — the communication between budget and program areas needs to be strengthened going forward, so that we understand what and when we’re making these commitments,” she said.

When questioned by Sen. Brent Jackson, co-chair of the committee, about when the agency could complete the remaining homes if it received the requested funding, Hogshead said they could be finished by next fall.

The two-hour hearing ended without a clear resolution.

Rep. Brenden Jones, a Republican from Columbus County who chaired the committee, closed by saying, “It’s going to be hard for this committee” to “go back to our respective chambers and ask for this money.”

“I hope you can come back with something that’s realistic that we can put our arms around,” he said.

Jones also asked Hogshead if she accepted responsibility for agency woes. She answered yes. He then asked if she would turn her “resignation in today.” She replied that she would not.

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