The United States Department of Housing and Urban Development (HUD) recommended the city return $1.79 million in its final HOME program audit report that found $7.43 million in questionable spending by the city’s Community Development Department from 2010-2013.
The final audit report conducted by the HUD Office of Inspector General on the HOME Investment Partnerships Program (HOME) dated April 30th, 2015, recommends the city reimburse the federal government $948,414 and HUD would recapture another $844,640.
Kenneth Morris, councilman at-large, explained the reimbursed amount will have to come out of the city’s operational budget while the amount to be recaptured will be subtracted from the entitlement money HUD gives to the city.
Morris, chairman of the council’s community development committee, said much of the mess was caused by the previous department director Lanisha Makle. This goes back to the mishandling of those funds by the previous administration, said Morris. “We’re still cleaning up that mess,” he said. “We’re up to our knees in that mess.”
Some of that mess includes:
- $844,640 to an ineligible project just to meet the 2009 deadline to spend the federal funds before July 31, 2011
- $2.6 million for a 10 two-bedroom units when the limit was approximately $1.7 million
- $1.4 million for construction of four zero-bedroom and three three-bedroom rental units when the subsidy limit for seven units should have been $1.2 million
- $592,000 for construction of three two-unit homes when the subsidy limit for three homes should have been $480,636
- $113,849 was drawn down in excess of need for a first-time home buyer and for a homeowner rehabilitation. After the first-time home buyer declined the loan that money was not put back into the city’s U.S. Treasury account for the HOME Investment Trust Fund.
- City did not keep invoices, cancelled checks, and other documentation for $125,810 in HOME drawdowns for three projects
- $1.9 million in HOME funds was provided to three ineligible community housing development organizations (CHDO). Two were not certified as CHDOs.
- $344,776 in HOME assistance provided to five homeowners whose income exceeded the program’s income limit
- $95,781 was disbursed for construction of two new for-sale housing units, but the projects were terminated, and the funds were never returned to the city’s U.S. Treasury account.
- The city did not impose proper deed restriction on six properties it assisted with $1.37 million.
“We attribute these deficiencies to the city officials’ unfamiliarity with the HOME subsidy limit,” reads the audit report. The report states much of the mess was caused by city officials “unfamiliarity” and “misunderstanding” of certain program guidelines.
“I hate to be the one with the dead horse, but if you recall it was only two council people who said this particular individual was not the appropriate for the job,” said Morris of Makle. “She didn’t have the requisite skill sets to do this particular job.”
Makle’s phone number was not available for a call for comments.
“They wouldn’t listen to us,” said David Gilmore, city activist, who repeatedly warned about misdeeds taking place at the department under mayor Jeffery Jones.
Jones could not be reached for comments.
A letter bearing the signature of mayor Jose “Joey” Torres following a March 31st, 2015 draft audit that identified $8.14 million in questionable expenditures mentioned the change in administration, stating the new community development director Barbara Blake-McLennon has much more experience in ensuring better management of federal dollars.
Torres’ letter also mentioned documents submitted HUD resulting in questionable spending reduction from $8.14 million to $7.43. “Since I took office in July 2014, I have implemented a program to ensure these issues are not replicated in the future,” reads Torres’ letter.
His letter states the department has been reorganized and better staff training has been put in place. The letter states a developer that was issued $177,699 for an affordable housing project will reimburse the city $199,572.
The letter also mentions another developer who received $219,769 in excess of subsidy limit. . “To resolve this finding, the city negotiated with the developer of the housing complex to spread the subsidy across ten of the twelve units in the projects thereby reducing the per unit HOME subsidy to below the Home subsidy limit,” reads the letter.
Torres’ letter also states that income subsidy limits will be printed on each application to serve as reminder for staff members. The letter also states that deed restriction documents have been submitted for seven of the eight properties in question.
Blake-McLennon on Tuesday morning said the roughly $1.8 million was recommended by the auditors. She said a forthcoming letter – expected within the next few months — will state the total amount the city must return to the federal government. She’s hoping the swift actions the city took in providing auditors additional documents will reduce the amount HUD decides to take back.
“This is money that could have been ear marked to really help improve the community,” said Morris. “I don’t think we’re done. As we continue to go through the audit internally and externally, we’re going to find other stuff.”
This report has been updated with comments from director Blake-McLennon on Tuesday, May 19th, 2015 at 10:12 a.m.