The loss of access already has had financial consequences: Last year the city wasn’t reimbursed nearly $140,000 it paid for HOME projects.
The U.S. Department of Housing and Urban Development oversees the program that seeks to expand and improve affordable housing. The city recently has received around $1.1 million in HOME funds annually.
Mayor Nan Whaley sent a letter this week to U.S. Rep. Mike Turner, R-Dayton, detailing the corrective actions the city has taken and asking him to encourage HUD to lift its restrictions on the city, according to documents obtained by the Dayton Daily News.
Turner has been critical of the city’s handling of the federal housing program.
“Eighteen months ago, I raised with the mayor my concern that Dayton risked losing millions in critical neighborhood development funds,” Turner said in a statement Friday. “The mayor has indicated she has been working with Sens. Portman and Brown’s offices, and I look forward to working with HUD, our senators and the city to determine how to preserve these funds, if possible.”
City Manager Shelley Dickstein said Dayton has gone to great lengths to correct the compliance issues and improve oversight. That included replacing leadership, providing training, and hiring an outside firm to do an audit, which found no evidence of fraud.
“If we do not get our access to (the system) by June 30, then the city of Dayton and its citizens will lose $750,000,” she said.
RELATED: Turner says Dayton mismanaged federal funds, wants detailed plan
HUD gives recipients five years from when the grant agreements were executed to spend the money, said Erin Jeffries, Dayton’s division manager of community development.
When the city is awarded a HUD grant, she said it pays for eligible projects using its own money and is then reimbursed.
The city has money sitting in its line of credit in the payment system, she said, and the deadline to draw down funds from 2014 is the end of June.
If the city is not granted access to the system soon, HUD could return that funding to the U.S. Treasury, Jeffries said, and the city won’t be repaid.
The city already lost $140,000 in grant funding it spent on eligible projects because HUD would not give the city access to the repayment system, she said.
HUD’s enforcement arm, the Department Enforcement Center, came to Dayton for on-site monitoring of the city’s HOME program in December 2017.
That happened just months after the Dayton Daily News learned the city forfeited nearly $477,000 in HOME funds for missing key deadlines.
RELATED: Dayton forced to give up $477k for missing deadline
HUD was concerned about the significant number of voucher revisions in the city’s program, which the agency feared suggested possible fraud, city officials said. Vouchers are how the federal funds are requested.
The enforcement center produced a report after several days in Dayton reviewing records that recommended the city repay $166,145 to HUD for “unallowable” costs.
The center also said it identified about $502,100 in questionable costs that the city should justify with supporting documentation or repay as well. The center said the city had an “extensive pattern” of revising vouchers to direct money to other projects and failed to maintain documentation that expenses were eligible.
The city disputes some of the center’s conclusions. It hired the outside firm GBQ Consulting to do a forensic audit, as HUD recommended.
The forensic audit found the amounts the city requested from HUD were the same amounts recorded in the city’s accounting system, with five exceptions. The unidentified vouchers, totalling $466,000, were created between 1999 and 2004, records indicate.
RELATED: City of Dayton responds to Turner’s allegations HUD funds mismanaged
The five vouchers of concern were created before Dayton’s leaders were in their current roles, Dickstein said.
“However, we are and remain concerned about the operational compliance for this really important grant program,” she said.
GBQ Consulting found that many voucher revisions in the city’s system were attempts to satisfy changes to HUD’s accounting preferences and policies, Jeffries said.
“No money had moved in our system — it had already been paid to the proper vendors, the proper subrecipients, and everything was in line,” she said.
GBQ looked at the city’s vouchers in the program that had 242 revisions from 1998 to the end of 2017 and any corresponding and supporting documentation, Jeffries said.
But GBQ found the revisions did not lead to the city receiving any additional funds. The firm said the city required “numerous” levels of review and approval before payments were made to HOME partners and vendors.
The firm also said supporting documents for contracts, activities and payments were missing. Some vouchers date back nearly 20 years, which is well past the time periods specified in the city’s record retention policies, the firm said.
Some of the vouchers are so old that supporting documentation is incomplete, city officials said.
The city replaced leadership in the planning and community department in charge of HOME, created a new position to oversee the program, and hired a firm to review the city’s practices and policies, officials said.
The director of the department and executive secretary resigned after being put on paid leave in mid-2017.
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