HUD’s new report on the city’s community development block grant pogram describes missing paperwork, deficiencies in management, questionable use of funds, and wasted opportunities.

For all the paperwork City Hall demands of city residents, you’d think it would do a better job managing its own.

On Wednesday, the Department of Housing and Urban Development released a new report monitoring the city’s uses and abuses of federal community development block grant money.

Or, rather, the report documents HUD’s attempts to monitor the city’s CDBG program. Time and again, HUD inspectors found the city’s paperwork on how the money is spent and tracked to be inconsistent, incomplete, and sometimes nonexistent.

Last April, AV’s Peter Koch wrote a scathing report on the city’s administration of CDBG money (“Blockheads,” Artvoice v7n19). Koch’s story, based on HUD’s review of the Brown administration’s 2008-2012 plan for the CDBG program, was published shortly before HUD began a four-phase monitoring regimen. The report issued Wednesday summarizes the results so far of that review, which entailed nine HUD employees working nearly full-time on the case between June and October of last year.

In that time, HUD recorded 19 “findings”—that is, deficiencies in the city’s performance as measured by the CDBG program’s statutory or regulatory requirements. HUD also recorded two “concerns”—that is, deficiencies based not on any statute or regulation, but sufficiently worrisome to HUD’s monitors to bear mention.

No apparent method to the madness

Several of these findings describe an often dysfunctional system of directing and monitoring the use of CDBG money.

“Normally you go into a city and there’s a clear line of communication and responsibility,” says Steve Banko, HUD’s regional director. “I defy anyone to understand what happens in Buffalo’s City Hall.”

Banko says his inspectors found responsibilities for various aspects of the program were not written into job descriptions but rather allocated by custom or by default. A person might be designated by the mayor as in charge of entitlement programs and yet never communicate with HUD, which funds those programs. Some folks in City Hall wear several hats, he says, and don’t seem to know their responsibilities in regard to the CDBG program.

HUD found that the city’s approach to running the CDBG program is determined by a jury-rigged collection of draft memos, informal procedures, and guides generated within numerous individual departments that in some way or another have their hand in this pot of money.

There’s no single handbook, no consistent means of tracking money and results. There’s a monitoring system required by the CDBG program called the Integrated Disbursements and Information System (IDIS), but it’s used in tandem with other tracking systems that don’t cooperate with it or with each other.

HUD found that the IDIS database was not updated consistently. In addition, BURA—which, along with the Office of Strategic Planning, runs the CDBG program—also maintains another database called The Office Manager, or TOM. When HUD’s inspectors compared data on the same projects entered separately into the two systems, they found completely different sets of numbers. “Specifically,” the report reads, “contract obligations in the two systems did not match and a majority of contracts recorded in IDIS were below the funding level approved by the City and recorded in the TOM system.”

When HUD’s inspectors could not find adequate information in the IDIS system, city employees referred them to the TOM system. But IDIS exists specifically for monitoring CDBG money, and HUD isn’t really interested in any other means of accounting for its money.

“It’s hard to envision any legitimate circumstance in which you would want to maintain two systems,” Banko says. “We don’t encounter that anywhere else in the 48 counties that we oversee.”

Basically, there are no standards, and that makes it difficult for the city—or for an outside agency like HUD—to be sure its programs are complying with regulations and yielding satisfactory results. “HUD reviewers found that records were maintained in an inconsistent manner,” the report reads, “and the quality and level of detail ranged from program files that were fully documented and compliant with a national objective which supported an eligible activity to no records or documentation for activities funded such as City-wide demolitions.”

Worse, in many cases, HUD inspectors could not find information at all.

“If you can’t organize your organization,” Banko says, “how can you organize how you spend the money?”

Spending in City Hall vs. spending on the streets

HUD’s monitors found numerous examples of CDBG money spent in ways that are inappropriate and possibly illegal.

For example: Every other week, BURA draws $120,000 from CDBG funds to pay salaries for city employees working on all sort of projects—some of them federally funded, some of them not; some of them CDBG-related, some of them not. The employees are supposed to fill out biweekly forms indicating how many hours they’ve spent on a particular project and the project’s funding source.

Paying everyone for everything from the CDBG account is largely a matter of convenience for BURA. But it’s a serious violation of HUD’s regulations, and might be illegal.

“That’s a serious breach of the program,” Banko says. “That is totally unacceptable. It’s never okay to do that.”

BURA irregularly replenishes the CDBG pot for salaries that are not eligible for funding out of the CDBG money. But even if BURA were consistent in paying back the money its borrowing from CDBG, it would still be a violation. Banko says his inspectors indicated they’d never seen anything like this practice anywhere else.

“Salary costs for programs other than CDBG are ineligible expenditures under the CDBG program,” the report reads. “Periodic salary reimbursements are made. It is unclear if all ineligible expenditures were returned to the CDBG line of credit.”

Elsewhere, HUD found $392,025.19 in staff costs charged to the CDBG program between 2004 and 2007 that the report describes as “questionable.” Specifically, the money was used “to supplement City salary costs for general paid leave categories.” In the report, HUD instructs the city to stop doing that, and to repay that $392,025.19 to the CDBG account.

HUD found that about 80 city employees were drawing some or all of their salaries or wages from CDBG funds. HUD’s inspectors estimated that less than 50 percent of every CDBG dollar spent benefits its intended beneficiaries: low- and moderate-income city residents living in blighted neighborhoods. The majority pays salaries, either in City Hall or in the community and housing organizations that actually deliver programs.

As a rule, HUD says only 20 percent of CDBG funds should be used for personnel. There are some legitimate reasons for a slightly higher percentage, but 50 percent is through the roof.

“Any money that’s used for personnel is money that’s not being used for programs,” Banko says. “And right now there’s just way too much money that is not getting out on the street to people who need it.”

Millions spent inappropriately, thousands stranded

HUD inspectors have serious questions about some major expenditures, as well. For example, they identified $1.4 million in CDBG funds used to demolish approximately 90 properties. Demolitions are potentially a valid use of CDBG funds, inasmuch as they address blight, but HUD’s inspectors say the city “failed to produce any records to support an eligibility determination. The only documentation provided was financial in nature.”

In other words, the city failed to provide HUD with a plan to rationalize the use of CDBG money: Why these properties? How would the demolitions be used leverage other anti-blight programs? What would become of the vacant lots afterward?

Where, says Banko, is the plan? “There’s no communication. That’s their attitude: ‘We’ll use the money, don’t worry your tedious little head about how we do it.’”

Lack of justifying documentation also dogs $1.1 million BURA spent between 2005 and 2007 to acquire and/or maintain numerous pieces of property—about 280 addresses in total. BURA has been holding on to some of these properties for decades, with no apparent strategy for disposing of or using them in a way that would meet the goals of the CDBG program that is paying for their maintenance. HUD inspectors report that they were offered insufficient rationale for their inclusion in the CDBG program.

Finally, there’s $2.6 million the city spent under the auspices of its Livable Communities Initiatives. This money was spent to pay down a $6 million Fannie Mae loan that bankrolled the high-end loft developments in the 800 block of Main Street (the Granite Works) and at 210 Ellicott Street (the Warehouse Lofts). Neither project can be said to benefit HUD’s target clientele, which comprises low- and moderate-income residents. If that $6 million was supposed to pay for some low- to moderate-income housing to balance the high-end lofts, that part of the project didn’t come off, and HUD wants the city to justify the expenditure within 30 days or give the money back.

Meantime, about $608,000 in what ought to be CDBG money sits stranded in the accounts of five neighborhood housing services. That money is the proceeds of a revolving loan program, funded by CDBG, that stopped loaning money in 2000. But those who took loans are still paying them off, and the money is accumulating in the accounts of the Black Rock-Riverside, Broadway-Fillmore, Kensington-Bailey, South Buffalo, and West Side NHS’s. The city would like the money back, of course, but seems unwilling to codify some arrangement with the housing agencies, which must have some sort of agreement in place before they return the money—and who would probably like to be compensated for servicing these loans for the past nine years.

The Broadway-Fillmore NHS wouldn’t cooperate with HUD’s monitors. “One of the guys told us, ‘Get the hell out of here, we’re not telling you how much money we have and you don’t have a right to know,’” Banko says.

Income generated by the city’s investment of CDBG funds often goes unused, according to the report. The CDBG program requires the city to use any income generated by its activities—in the form of loan repayments, for example—before it dips into new allocations. HUD inspectors reviewed the program’s income and fund balances between 2004 and 2007 and were confounded by what they saw: “…receipts were recorded in IDIS in March 2007, April 2007, and June 2007 with the next entry April 2008. Based on the City’s records, HUD reviewers were unable to reconcile the amount of program income reported in IDIS with the amount reported in the City’s account.”

Basically, BURA is not doing a good job tracking program income. As a result, it’s spending down its new funds before using cash on hand.

“This ought to be astonishing to anyone who cares how the money is spent. To have 19 findings? The last time we had that many findings on a monitoring report was on the city’s HOME program,” Banko says, referring to the city’s poor management of the federally funded Housing Opportunities Made Equal program. HUD wrested control of that program from the city when the city failed to address HUD’s concerns adequately.

“Before that HOME report, no one in New York State ever had 19 findings,” Banko says.

The whole report is available online at AV Daily at Artvoice.com. There you’ll also find reports received by the Common Council on Wednesday regarding the finances of BURA, BERC, and other city agencies that use CDBG funds.