The city-parish could be forced to repay as much as $2.2 million in federal money because auditors say they can’t tell it was used as intended for services to help the poor or meet other program objectives.
An auditor with the U.S. Department of Housing and Urban Development cited “sloppy” record keeping by poorly trained staff at the East Baton Rouge Parish Office of Community Development for the problems.
In a recent audit, HUD inspectors said they weren’t able to find documents that showed the Community Development Office was spending Community Development Block Grant money appropriately. They questioned, for example, the use of nearly $400,000 to build a bike path along the Mississippi River.
The grants are supposed to be used for one of three national objectives — to benefit low- and moderate-income people; to aid in preventing or eliminating slums or blight; or for an urgent need to address a condition that threatens the community’s health and welfare.
Auditors questioned $2.2 million in expenditures, saying that will have to be repaid unless the city-parish can produce records showing the funds were used for appropriate purposes and that contractors were paid the correct amount for their work.
Incompetence, rather than thievery, seems to be the problem with the local office, said auditor Jerry Kirkland, of HUD’s Office of the Inspector General.
“It’s really about being sloppy, not keeping records, not knowing how to do something,” he said in an interview.
The audit states that “staff members did not know their roles and responsibilities” in certain areas and recommends that the Community Development Office retrain its staff and develop new policies.
The audit also quotes from workers in the local Community Development Office who told auditors that the office is understaffed and has a high turnover rate.
Asked for comment on the HUD audit, Brad Sweazy, the director of the local office, deferred to a spokesman for Mayor-President Kip Holden.
“We take the comments from HUD OIG very serious,” Holden responded in a written statement. “The city will work with HUD to make improvements in the areas identified in the report; therefore, it is premature to discuss the return of funding at this time.”
The regional HUD office in New Orleans has about four months to decide how to proceed, and the city likely will have up to a year to either turn over paperwork justifying the questioned expenses or give back some portion of the $2.2 million, Kirkland said.
HUD spokeswoman Patricia Campbell said Thursday that the department has contacted the city but that the two sides were still early in the proceedings and hadn’t yet made any decisions.
Specifically, HUD wants to determine whether the Community Development Office spent money in ways that directly help low- and moderate-income households. The city spent HUD money on job training, building rehabilitation and construction, and prescription medication, but auditors said they never saw certain records showing that those programs helped poor people.
The city also spent $396,836 of HUD money on a bike path on the Mississippi River, and investigators had several questions about how that helped low-income people. Kirkland, the auditor, said he didn’t know the details of that project.
The audit doesn’t specify the part of the bike path the HUD money was used for, but city-parish officials said in March 2015 that they were using federal funds for an unfinished, 6.6-mile section of the levee bike path between BREC’s Farr Park and Ben Hur Road.
HUD’s audit also raises more specific administrative concerns over whether the city was dedicating earmarked funds for the specific projects they were pledged to pay for. The city used grant money to pay expenses for other programs, such as Section 8 housing and a housing program for people with AIDS, the audit states. The money appears to have been used to pay staff, and the auditors noted that the city’s payroll system has a “limited capacity to charge hours to multiple program accounts.”
The Community Development Office also got dinged for its dealings with private businesses. In a review of 69 construction contracts, auditors found that 64 were incomplete. The biggest problems were a lack of records to indicate that the city allowed firms to competitively bid on projects and a lack of records showing the city performed cost estimates so it would know how much to expect to be charged.
Auditors reviewed the files and the private companies and don’t have any reason to believe a particular contractor was getting a sweetheart deal or charging unreasonable rates, Kirkland said. Nevertheless, if the city doesn’t prove the contracts were above-board, it stands to lose that money — about $678,000.
The auditor said his team didn’t find any evidence of malfeasance, just missing paperwork to prove everything in the Community Development Office was done correctly.
“It is largely documentation issues … just poor accounting,” he said.
Community development staff actually may have the records but not submitted them to auditors or understood how the process works, Kirkland said. If they can show HUD their programs were a benefit to poor residents, they won’t be forced to return the money, but Kirkland said he could not estimate how much money the city may lose.
Follow Steve Hardy on Twitter, @SteveRHardy.