HUD Inspector General Will Audit NJ Tourism Marketing Campaign in Response to Pallone Letter

Jan 13, 2014 Issues: Hurricane Sandy, New Jersey

Washington, DC – Congressman Frank Pallone, Jr. announced today that the Office of the Inspector General at the U.S. Department of Housing and Urban Development (HUD) will audit the State of New Jersey’s use of $25 million of Sandy aid funds for a marketing campaign to promote tourism at the Jersey Shore.  At issue is the bidding process for the campaign and released documents which raise questions as to why the state chose to award the contract to a firm that charged the state over $2 million more than a comparable bid for similar work.

When drafting its Community Development Block Grant Disaster Recovery (CDBG-DR) Action Plan, the State of New Jersey requested a waiver to spend $25 million of its CDBG award on a marketing campaign to promote the Jersey Shore and encourage tourism, to which HUD agreed.  In a letter sent August 8, 2013, Congressman Pallone wrote to HUD Inspector General David A. Montoya to request an investigation into the utilization of this federal funding and whether it was spent appropriately. 

“I commend the HUD Office of the Inspector General for investigating whether the state properly utilized taxpayer funds for this marketing campaign,” Pallone said.  “Working with my New Jersey colleagues, we had to fight hard to get the Sandy aid package passed by assuring others in Congress the funding was desperately needed and would be spent responsibly.  I also raised concerns that Governor Christie and his family appeared in taxpayer-funded advertisements during an election year.”

Last year, in response to Pallone’s letter, HUD’s Office of the Inspector General conducted a survey, or basic review, of the matter in order to determine if an audit of the State of New Jersey's actions was warranted.  Last week, the Inspector General’s office notified Pallone that they have found enough evidence to justify a full-scale audit of the state’s usage of the federal funds.  The audit will be complete in several months at which time an official report will be issued. 

Following is the full text of Pallone’s August 2013 letter:

 

August 8, 2013

David A. Montoya

Inspector General

U.S. Department of Housing and Urban Development

451 7th Street, SW

Washington, DC 20410 

 

Dear Inspector General Montoya,

            I write to you today regarding the State of New Jersey’s Community Development Block Grant Disaster Recovery (CDBG-DR) Action Plan. The Department of Housing and Urban Development (HUD) provided a waiver for the state to spend $25 million of its CDBG award on a marketing campaign to promote the Jersey Shore and encourage tourism.  While promoting tourism at the Jersey Shore in the wake of Hurricane Sandy is certainly a worthy endeavor, recent reports have led me to believe that the state has irresponsibly misappropriated funding allocated by Congress from the Sandy aid package and taken advantage of this waiver for political purposes.  I respectfully request that you review and investigate the contract, bidding process utilized by the State of New Jersey, and appropriateness of the content of this marketing campaign. 

            Recently released documents relating to the bidding process and contract award for this marketing campaign show that the contract was awarded to a firm that is charging over $2 million more than the next lowest bidder to develop the marketing plan.  The winning firm is being paid $4.7 million for their work, while a comparable firm proposed billing the state $2.5 million for similar work.  This large discrepancy between the competing proposals raises concerns as to whether these federal funds are being spent in the most cost effective manner, and should be reviewed by your office. 

            I am also concerned that the winning bid proposed including Governor Chris Christie in the advertisements, while the lower cost proposal that was not selected did not.  As you know, the Governor is running for reelection this year in a high profile race.  It is inappropriate for taxpayer-funded dollars that are critical to our state’s recovery from this natural disaster to fund commercials that could potentially benefit a political campaign.  In these sensitive circumstances, even the appearance of a conflict of interest should be avoided.

The fact that this particular proposal was chosen despite an obvious conflict of interest, in addition to the higher costs, raises serious concerns with the entire process.  I fought hard for passage of the Sandy aid package in Congress by assuring my colleagues that this funding was critical to our recovery and that it would be spent responsibly without waste, fraud and abuse.  Many in Congress objected to this funding precisely because of concerns their citizens’ tax dollars would be misspent.  In that regard, the state’s mismanagement of taxpayer funds for this marketing campaign is extremely troubling, especially when there are so many New Jersey residents still in need of assistance to recover and rebuild from this historic storm.

            Once again, I ask that you investigate the state’s actions regarding this contract selection process, the appropriateness of the Governor appearing in taxpayer-funded advertisements in an election year, and report back to Congress with your findings.  We must ensure all taxpayer funds from the Sandy aid package are being spent appropriately.  Thank you for your attention to this important matter. 

 

                                                                          Sincerely,

 

                                                                          FRANK PALLONE, JR.                                          

                                                                          Member of Congress