U.S. Housing and Urban Development Secretary Shaun Donovan testifies during...

U.S. Housing and Urban Development Secretary Shaun Donovan testifies during a hearing before the Subcommittee on Emergency Management, Intergovernmental Relations, and the District of Columbia of Senate Homeland Security and Governmental Affairs Committee on Capitol Hill in Washington, D.C. (Nov. 6, 2013) Credit: Getty Images

WASHINGTON -- Don't blame federal law if you took out a Small Business Administration disaster loan and now can't get a federal Community Development Block Grant to pay for superstorm Sandy damage, Housing and Urban Development Secretary Shaun Donovan said Wednesday.

Donovan said it's up to local governments to set rules for awarding CDBG funds for Sandy recovery, though he conceded that his agency advises them not to award grant money to those who can afford loans.

Donovan, who serves as the president's point man on Sandy recovery, made the comments in response to a question by Sen. Kirsten Gillibrand (D-N.Y.) at a Senate hearing on Sandy one year after the storm.

Prompted by complaints to her office -- and recent rallies on Long Island -- Gillibrand questioned Donovan.

"A number of my constituents were dismayed to learn that because they accepted a Small Business Loan, they are now ineligible for CDBG funding," she said. "What are the options for families that accepted SBA loans?"

Donovan said, "Our guidance to communities is that if somebody can afford a loan, then grant money is precious, and you ought to direct it to the people who really can't pay."

He added, "But that's not a federal law. It's up to the community that they assess the need and determine that. What's clearly not flexible is you can't get paid twice for the same thing."

Many Long Island homeowners complain they took out SBA loans to cover the difference between their homeowners insurance and repair or rebuilding costs, and now they can't get grant money.

Local officials, including state Sen. Phil Boyle (R-Bay Shore), blamed federal law for barring overlapping assistance from federal agencies.

After the hearing, Donovan denied there was a blanket ban on someone getting both the SBA loan and CDBG funds.

He said CDBG funds could be granted to homeowners or businesses rejected from an SBA loan because they can't afford it, or if they could only afford a loan for part of the cost and need help to cover the rest.

"Sometimes the confusion is that they're saying, 'I've got a loan. I've got to pay back interest and somebody down the street got a grant. That's not fair. I'd rather get a grant,' " he said. "I do hear that a lot."

At the hearing, Sen. Charles Schumer (D-N.Y.) hailed the progress so far in the use of the $60.4-billion Sandy aid package he helped shape and pass earlier this year. "It's taken longer than we'd like," he said about recovery funding, but he added, "It will be better used than in any major disaster in this country."

But Kathleen Tighe, who chairs the Recovery Accountability and Transparency Board that oversees Sandy aid, complained that it's difficult for her panel of inspectors general to obtain accurate and complete Sandy aid spending records.

While contracts are identified as Sandy aid, grant and loans are not, she said, "making it problematic to accurately extract and analyze Hurricane Sandy awards."

Meanwhile, for Sen. Cory Booker (D-N.J.), the hearing was the first he has attended since being sworn in as senator last week after winning an election to replace the late Sen. Frank Lautenberg.

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