HUD suspends disaster funding to U.S. Virgin Islands housing authority, saying mismanagement has kept $1.3 billion from hurricane survivors

U.S. Housing Secretary Scott Turner said that nine years after the U.S. territory received $1.9 billion in disaster recovery funding, it has spent only $570 million, less than a third of the funds.

He noted that a HUD investigation found “widespread financial mismanagement, inadequate fraud controls, false certifications and improper payments.” The investigation is ongoing.

“This failure has, to date, deprived Virgin Islanders of roughly $1.3 billion worth of assistance that Congress intended them to have,” stated a July 20 letter that HUD sent to the head of the U.S. Virgin Island’s Housing Finance Authority.

The director for the U.S. territory’s housing authority and its spokesperson did not immediately return messages seeking comment. The authority has the right to appeal the suspension by requesting a hearing.

In a post on X, Turner accused officials with the U.S. Virgin Islands’ Housing Finance Authority of prioritizing “kickbacks over helping families recover from disasters.”

The U.S. Virgin Islands was struck by Hurricane Irma, a Category 5 storm, in September 2017. Roughly two weeks later, Hurricane Maria, also a Category 5 storm, struck St. Croix. The U.S. territory is still struggling to recover from the storms.

In a July 20 letter to the head of the U.S. Virgin Islands’ housing authority, HUD said that its “record demonstrates that it is an abysmal steward of taxpayer funds.”

The investigation so far has found that the U.S. Virgin Islands’ housing authority has completed only two of 95 planned single-family rental rehabilitation projects and zero of 329 single and multifamily housing projects.

In addition, the authority had spent only 2% of its electrical grid recovery funding as of May, the investigation found.

Meanwhile, the Virgin Islands housing authority has spent more than half the grant funds slated for administrative costs, according to the letter.

The authority also is accused of seeking $6.2 million in disaster-related funds that the U.S. Federal Emergency Management Agency had already paid.

The U.S. government also noted that the authority’s former chief operating officer who oversaw disaster recovery programs is in federal prison after being convicted on charges including fraud and money laundering.

Turner wrote on X that the former chief operating officer inflated a lumber contract meant to rebuild hurricane-damaged homes from $3 million to $4.5 million and took a $107,000 kickback “and let the lumber rot in the sun, rendering it useless — a waste of taxpayer funds.”

In February, the executive director of the U.S. Virgin Islands’ housing authority resigned as local legislators questioned why some $4.2 million remained idle as a September deadline to use the funds looms.

At the time, Sen. Kurt Vialet accused the former director of “just sitting there with a smug look.”

“The Housing Finance Authority is not building. You can’t be upset at senators being frustrated,” Vialet was quoted as saying by the St. Thomas Source, a local news site.