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Sandy Oversight Proposal 7.27.13

Sandy Oversight Proposal 7.27.13

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Published by Scott Stringer
Sandy Oversight Proposal 7.27.13
Sandy Oversight Proposal 7.27.13

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Published by: Scott Stringer on Jul 29, 2013
Copyright:Attribution Non-commercial


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On October 29, 2012, Hurricane Sandy dealt a devastating blow to New YorkCity, leaving behind a tally of destruction unlike any storm we have everseen – 43 residents killed, millions forced to suffer without heat or electricity,a submerged subway system, and billions in additional damages. Ninemonths later, the winds have subsided but a new challenge now confrontsour city – the process of rebuilding, and making sure that every tax dollardevoted to strengthening our infrastructure and returning families to theirhomes is spent wisely and efficiently.New York City is expected to receive at least $15 billion in Sandy recoveryfunds in the coming years from the federal government – the first $1.8 billionwas just approved for release in May 2013 – while the Metropolitan Transportation Authority (MTA) will receive an additional $5 billion. Thismoney will have a profound effect, not only on the lives of homeowners andbusiness people whose lives were turned upside down by Sandy, but also onhow the City prepares itself for the storms of the coming century.However, as with any great disaster that involves a large influx of government dollars, the potential for waste and fraud is high.
As Comptroller, Scott M. Stringer will establish a dedicated unitwithin the Audit Bureau to track the flow of Sandy dollars in New York City, to ensure that businesses and families hurt by thehurricane get the aid they deserve, and to monitor the scores of planned public works projects designed to harden the city’sinfrastructure and protect our shoreline communities. This unit willwork in conjunction with the Comptroller’s Budget Bureau and itsBureau of Contract Administration to ensure comprehensiveanalysis of all projects and expenditures.
An essential component of the effort will be a dedicated onlineresource, The Sandy Tracker, that will allow New Yorkers to followhow the City is spending its storm-related dollars, much as City Halldeveloped the NYC Stimulus Tracker to track federal dollars afterthe passage of the American Recovery and Reinvestment Act of 2009.
To date, the city’s Stimulus Tracker has provided details onsome $9 billion in spending by city agencies.Stringer will also establish a dedicated, 24-hour hotline fortaxpayers to report instances of Sandy-related fraud or abuse, incollaboration with the city’s Department of Investigation.
History’s Lessons: 9/11, Katrina and Beyond
 The Comptroller of the City of New York is the City’s chief financial watchdog,empowered to audit every city agency, register every contract and signevery check. As such, the office is uniquely suited to track Sandy-relatedspending and to put in place proper protocols to ensure that every dollar isspent efficiently and transparently.Unfortunately, we don’t have to look far for examples of waste, fraud, andabuse in the wake of major disasters, especially once federal dollars begin toflow.In the wake of the 9/11 attacks, the City put in place a monitoring system tooversee the recovery, cleanup, and reconstruction of Ground Zero – an effortthat many believe saved New York City tens of millions of dollars.
Thelessons learned from that experience remain relevant today to understandthe scope and scale of an effective oversight mechanism, especially inrelation to large construction projects. To oversee work at Ground Zero, the city initially divided the 16-acre World Trade Center site into four quadrants. A construction manager was retainedfor each of the four quadrants and an Integrity Monitor appointed by DOI tooversee the work of each of the four construction management companies. The integrity monitors had the authority to review and audit all of the booksand records of the contractors working at the site and to maintain a physicalpresence at the site.
http://www.gpo.gov/fdsys/pkg/CPRT-109HPRT20452/html/CPRT-109HPRT20452.htm; Hearntold Congress “In total, we have estimated that based on their extensive work and forensicanalysis, the integrity monitors recommended in excess of $47 million in cost savings andthat their very presence on the Ground Zero site and their frequent audits producedadditional significant savings that cannot be quantified.”
In addition, DOI required the monitors to establish a hotline number whereanyone could call with concerns or information and reported directly to DOIon all contractor activities. As a result, DOI Commissioner Rose Gill Hearnstated, “the integrity monitors scrutinized the contractors' activities in realtime and functioned as the city's eyes and ears.”
Monitoring Sandy expenditures is, in many ways, a more complicated task.While the World Trade Center site was and remains enormously complex, itis a single, 16-acre site where much of the work was in the hands of ahandful of large contractors. The destruction wrought by Sandy was much more sprawling. Sandysubmerged over 16% of NYC’s landmass, flooding over 75,000 buildingsacross on all five boroughs. As a result, it will require a different approach—marshalling the kind of broad, multiple-agency oversight that only theComptroller can offer.Still, the lessons of Ground Zero remain instructive. Indeed, despite rigorousprotocols, fraudsters and con-artists were still able to exploit the situation inthe years after the attacks. Some of the scams uncovered included:
A man collected nearly $300,000 in Federal loans after claiming histwo telecommunications companies, which moved out of the World TradeCenter in July 2001, sustained physical damage in the attacks
 Two employees of the New York City Medical Examiner's Office wereaccused of embezzling Federal funds intended to help identify victims’remains
FEMA paid for free air conditioners and other clean-air devices for tensof thousands of New Yorkers who lived nowhere near Ground Zero or thetoxic plume from the World Trade Center
Millions of dollars in small business grants went to at least 28 Fortune500 companies and several hundred other multibillion-dollar firmsFurthermore, a 2006 report by the U.S. Small Business Administration (SBA)(which was responsible for providing loans to businesses affected by theattacks) found that in a whopping 85 percent of cases, auditors were unableto determine whether the borrowers were adversely affected by the9/11attacks and their aftermath, based on lenders’ loan files and discussionwith borrowers.
While this does not mean that 85 percent of loans were, infact, fraudulent, the failure to prepare adequate justifications and obtainsupporting documentation to determine eligibility left the door open tocriminals who would seek to profit off of the tragedy of 9/11.

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