City responds to findings in HUD audit

Pine Bluff’s Economic and Community Development Department has completed an internal investigation on 14 findings and two concerns revealed in a U.S. Department of Housing and Urban Development monitoring review letter dated June 4. PBECD is proposing alternatives to a number of HUD-recommended corrective actions resulting from the audit of the city’s 2012 CDBG (community development block grant) and HOME programs.

HUD originally contended that the local agency “improperly spent” $199,907.89 and must repay that amount or have it cut from its 2013 federal funding. Additionally, HUD said the city would also be required to provide documentation for another $279,161.23 or that sum must be paid or forfeited from 2013 funding as well.

Altogether, the city is facing a possible loss of of more than $479,000.

In an Aug. 30 response letter to Clinton E. Johnson, chief of planning and development in HUD’s Little Rock office, PBECD Interim Director Larry Matthews described the internal investigation as “extensive and thorough” and said it involved analysis and review.

“We look forward to the final resolution of these findings, in partnership with your office,” Matthews wrote. “As stated in your monitoring letter, HUD’s objectives are to improve performance, ensure proper management of federal funds, evaluate the effectiveness of the city’s programs, and determine the need for technical assistance. We also look forward to working closely with your office to achieve these objectives.”

With the local agency’s partial responses following, highlighted primary HUD findings stated that PBECD:

• Failed to maintain a required project file on a $150,000 award to CASA (Committee Against Spouse Abuse) to assist with construction of its new shelter, paid in $50,000 increments over three years. If the city can’t substantiate “file maintenance documentation,” the $150,000 must be repaid or deleted from the current year’s grant.

PBECD is asking that the CDBG program instead be reimbursed from the city’s general fund sources in the 2014 program year.

• Did not adequately track and categorize its administrative expenditures and improperly characterized general CDBG administrative activities as technical assistance to businesses, although some of the work performed by its community development department provided aid to area businesses. The city wound up exceeding its 20-percent regulatory ceiling for CDBG administrative expenditures. HUD’s proposed corrective action is repayment of $121,018.81 or corresponding grant reduction.

PBECD is asking that it instead be allowed to make adjustments to “correct entries and draws for economic development activity,” which if approved would leave the city owing $6,255.95 “for excess CDBG administrative costs.”

• Did not receive bids on a work contract and then disbursed $83,423.97 to two contractors who performed the project. The city must provide a justification in such matters, and minus such must repay the amount to its HOME program account. Any unsupported costs determined to be ineligible should be reimbursed from non-federal funds.

“Extenuating circumstances” contributed to this situation, says PBECD, which maintains it followed proper procurement processes. HUD has been asked to re-evaluate the matter and waive repayment. If the justification is rejected, the city is asking that the amount due be “net of program income received for the project.”

Acquired a building at 1101 Main Street — at a cost of $50,110 — for the purpose of using it to house CDBG, HOME and Supportive Housing programs, but never used the building for such purpose. Reimbursement or grant reduction is required.

Two alternatives are being proposed by the city. The first is that HUD reconsider the acquisition’s legality under current guidance since the property wasn’t purchased with an intention of serving as a “building for the general conduct of government.” The second is that HUD allow land costs of $19,500, with the remaining funding being repaid from sales proceeds. The city has received authorization to accept a purchase offer of $45,000 on the property.

• Did not follow applicable HUD guidelines in charging $28,779.08 in expenditures for administrative costs to support operations at its 716 Georgia Street community development office in 2009 and 2010. HUD’s rulings on these separate findings was that the city repay the full, combined amount or agree to grant reduction.

PBECD is requesting that these costs be permitted as it can says it can provide documentation that qualify the expenditures as allowable.

Efforts to determine if a deadline exists for HUD’s replies on PBECD’s responses and suggested alternative corrective actions were not immediately successful as telephone calls to Matthews and the mayor were not returned.