NEW ORLEANS -- A footnote at the end of a Sewerage & Water Board committee meeting Monday revealed that the beleaguered agency will begin the new year with a major project: accounting for how it spent hundreds of millions in federal money after Hurricane Katrina.

The audit, which will be conducted by the U.S. Department of Homeland Security Inspector General, comes after WWL-TV began to question how the S&WB spent hundreds of millions of dollars it received since the August 2005 flood.

Untapped cash: S&WB's federal funds mostly unspent 10 years after Katrina

In a letter sent to the S&WB, John McCoy, II, the deputy director of audits for the IG, said "Our objective is to determine whether the Sewage and Water Board of New Orleans accounted for and expended FEMA funds according to Federal regulations and FEMA guidelines.

The Department of Homeland Security oversees FEMA, which administered the funds. DHS's inspector general will begin its probe on Jan. 5.

A city staffer announced the planned audit at a S&WB Finance and Administration Committee meeting Monday. Katie Dignan said the IG informed the state Department of Homeland Security in early December that they would dig into S&WB federal spending.

Despite the hundreds of millions set aside for repairs, the S&WB's aging power and drainage systems continue to limp along.

WWL-TV's "Down the Drain" investigation found that millions in FEMA Hazard Mitigation Grant Program funds have been spent on trying – and failing – to fix 100-year-old power equipment used to run the drainage pumps.

Most staggeringly, FEMA and state officials declared a management fee the S&WB agreed to pay for the project "not reasonable" and refused to pay any more FEMA funds for the fees after they reached $7 million. In spite of that, the S&WB has continued to approve increases to the fees, and Colorado-based CH2M Hill now stands to collect more than $28 million.

Much of the $500 million FEMA and HUD approved for the S&WB after Hurricanes Katrina, Gustav and Isaac remains in Washington, D.C. That money was specifically for drainage, power and pumps. A little more than one-third of it has been spent.

Some of that money was only to repair broken infrastructure and return it to its pre-storm condition, but the Hazard Mitigation grants allowed the S&WB to make improvements or purchase new equipment.

Instead, the S&WB has ignored expert recommendations and put most of the money into refurbishment projects that now cost more than brand-new equipment. FEMA and HUD also combined to grant New Orleans nearly $300 million for green infrastructure projects, such as storm-water retention ponds, bioswales and other "living-with-water" initiatives. Less than $10 million of that has been spent.

Even the money to fix broken drainage infrastructure has been held up. It took almost 10 years for the city's Department of Public Works and the S&WB to work out an agreement with FEMA to let the two agencies share an additional $2 billion for street repairs, which would include work on drainage lines and catch basins. But in the year-and-a-half since that agreement, the agencies have spent just $1 million -- or half of 1 percent of the grant.

The S&WB finance committee meeting began Monday with board members questioning how a project to repair Katrina damage caused to the city's water mains in the French Quarter and Central Business District could have stretched on for four years, with 51 contract change orders added to increase the cost of the repairs.

"Change orders constitute the bulk of our meetings sometimes," said S&WB apointee Stacy Horn Koch.

The audit was announced by the project manager for the combined effort to repair roads and utility lines damaged by Katrina, called the Joint Infrastructure Recovery Program, a $2 billion FEMA-funded project.

"The City will work with Sewerage and Water Board to ensure full compliance with any and all requests," said Landrieu's Senior Communications Manager Craig Belden.

He went on to say that audits have already been conducted on much of the money given to New Orleans by HUD and FEMA.

11.13.17 - DHS Letter - FEMA Audit