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Over the past week there has been considerable media attention regarding a so-called “raise” supposedly received by ICF for its administration of the Road Home program. Articles also characterized the funding increase as something the previous administration pushed through without the legislature’s knowledge and implied that ICF was profiting despite lack of progress on the Road Home.
These reports are simply incorrect in every important respect and we believe it is important that you have the facts.
The Funding Increase
- Toward the end of last year, it became clear that with over 60,000 more applicants than originally anticipated by the State—about a 50 percent increase—the original budget for the Road Home program was inadequate to meet homeowner needs. Up to that point the homeowner’s program had been running within its original budget.
State of Louisiana Office of Community Development (OCD), Louisiana Recovery Authority (LRA), and ICF all agreed that up to $156 million might be required to manage the additional work. Specifically, to ensure that the larger number of homeowners could be served, an increase in the budget ceiling for program delivery was required to provide “unit price” services to the additional homeowner applicants (such as home evaluations, appraisals, title searches, and closings).
- There is no price increase or pay raise of any kind. The services performed under the higher ceiling are reimbursed at the rates previously established under the contract.
- These services are charged as a fixed price per activity and are performed by closing companies, title companies, appraisers, home evaluators, and other firms, largely based in Louisiana. They represent costs that homeowners normally pay in a real estate transaction but have been covered by the Road Home program for all applicants. and they must be paid regardless of whether the applicant ultimately closes.
- Virtually all of the additional funding would be devoted to additional unit price services that are performed by subcontractors. This amount represents an expenditure of 5-6 percent of the additional grant money to be delivered, versus 9-10 percent for the original program. Both of these levels of delivery costs are low by large government program standards. The lower 5-6 percent level in this phase is achieved because of the investment the original program has already made in facilities, systems, and core staff.
- The amount of the potential funding increase represents a ceiling, not necessarily the amount that the contractor will receive to pay the service providers. The actual amount of additional funding could be lower if the actual number of homeowners who pass through the stages of the application process is lower than the current projection, or if other savings are achieved. It was understood among all parties that the amount could indeed come in lower, but they wanted to set an adequate ceiling should a high percentage of the applicants go to closing.
The Process
- Key legislators, members of the administration, the LRA staff, and the Legislative Auditor were briefed in this process, and it is our understanding that the administration took all necessary steps to ensure that established procedures were followed.
- The U.S. Department of Housing and Urban Development (HUD) was also fully informed of the need for using additional funds to handle the expanded size of the program and has formally approved that some of the additional federal money provided to The Road Home program could be applied to these costs.
Current Status of the Program
We completely understand that no program could have worked fast enough in the wake of the greatest natural disaster ever on U.S. soil. However, these are facts:
- The State did not complete the design or contract for the program until one year after the hurricanes. The Road Home did not begin the operations phase until October 2006, as per the contract with the State.
- Despite the program’s unprecedented size, scope, and complexity, the Road Home program has now distributed $6 billion to more than 100,000 homeowners—already the largest amount for housing reconstruction in U.S. history.
- The program is nine months ahead of the schedule originally planned by the State and within the budget set by the State.
- We have completed work on 78 percent of the applications that we now estimate will be closed.
- The original program size was projected to be 123,000 applicants and 100,000 closings. Those were the estimates used to establish the budget for the homeowners program in the ICF contract. Yet, to date, over 166,000 homeowners have held initial appointments. More than 159,000 home evaluations have been completed and nearly 150,000 award letters have been sent to homeowners. If the program size were as originally projected, it would now be virtually finished (there are 103,000 closings completed) versus the original projection of finishing at the end of 2008.
Conclusion
We would also like to emphasize that we have enormous respect and deep concern for the people of Louisiana and we truly regret any perception to the contrary. Recently a statement that appeared in the press was attributed to us, but it was a statement that we did not and would never make. We attempted vigorously to have this corrected. The vast majority of us are Louisianans. We will continue to work long and hard to constantly accelerate and improve the Road Home process so that the people of Louisiana can receive the funds delivered with the dignity they deserve.
As noted above, we recognize that no program could have been fast enough in the wake of the devastation brought about by the hurricanes. We also recognize that in such a complex program we have to work hard to continually improve many aspects every single day. Nevertheless, we believe criticism of our performance should at least recognize that $6 billion has been distributed, in accordance with the schedule we were asked to meet, and should also be grounded in accurate information.
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