The city also is accused of not complying with record keeping requirements and failing to have a system in place to ensure compliance with HOME program procedures and policies.
HUD says failure to provide evidence may require the city to repay its HOME account $3.2 million or more. Repayment would have to be with non-federal dollars.
It is the latest setback for the city’s already beleaguered HOME program.
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The city consistently received clean monitoring reports from HUD and was not aware of any deficiencies until July 27, Dickstein said, adding that once made aware, the city worked to implement many of the suggested corrective actions.
“Given our existing documentation, we do not believe the city is subject to a repayment of $3.2 million,” Dickstein said. “We will be submitting our detailed response to each finding within the 30-day time frame.”
The city’s HOME program has been in HUD’s cross hairs for more than a year and a half. In 2017, the Daily News revealed that the city forfeited about $477,000 in HOME funds for missing important deadlines.
Later that year, inspectors with HUD’s enforcement arm visited the city to review its administration of the affordable housing program.
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In mid-2018, the Departmental Enforcement Center issued a report saying the city should have to repay $166,000 in federal funds spent on “unallowable” costs and show how it spent an additional $502,000 or repay those dollars as well.
The report also indicated there were $647,000 in additional questionable costs. The city disputed some of the numbers and said more accurate information would be available after a follow-up HUD visit.
That took place in July 2018, when staff with HUD’s Columbus field office and its main Office of Affordable Housing Programs came to Dayton for on-site monitoring of its HOME program.
Representatives evaluated program performance by reviewing operations, written agreements and file documentation and by interviewing city staff.
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Nearly a year later, on June 6, HUD sent the city its monitoring report, summarizing its findings and required corrective actions.
In a 22-page letter, HUD reported three findings:
- The city failed to comply with HOME program regulations related to the management of funds.
- The city lacked internal controls and a financial management system that accurately identified costs paid for HOME funds for each project.
- The city did not maintain records that demonstrated the eligibility or costs of each project funded by HOME.
Dayton is the lead entity of the Dayton-Kettering Consortium, making it responsible for HOME program compliance. The cities submit a joint application for HUD funds.
The Dayton-Kettering Consortium had at least 10 years of noncompliance, and Dayton failed to manage HOME program funds in a way that met basic grant administration and financial management requirements, the HUD monitoring summary states.
HUD said the city had a pattern of not complying with program and regulatory requirements and lacked documentation demonstrating compliance.
Over more than 10 years, the city revised 240 vouchers tied to nearly $8.5 million in HOME funds, the report states.
Vouchers are requests for payment in the grant funding system, and when vouchers are revised in the system, specific amounts of funds are reassigned to new HOME projects.
The city did not maintain project records and revised vouchers without supporting documentation, HUD states. The city allegedly did not report program income for multiple years.
“The city cannot explain the reason for numerous voucher revisions or demonstrate that alteration of HOME draws through voucher revisions correspond to a repayment of HOME funds or the use for eligible HOME project costs,” says the monitoring report, signed by Stanley Gimont, HUD’s deputy assistant secretary for grant programs.
The city failed to review the performance and compliance of Kettering or take action to address noncompliance of its consortium member, the report states.
The city set up projects incorrectly for Kettering in the system and Dayton drew down funds to pay Kettering that did not correspond with its projects and itemized expenditures, the report states.
“The city entered false information into IDIS (the grant system) by drawing HOME funds for homebuyer new construction and rental projects under IDIS activities corresponding to different project types,” the report states.
HUD says Dayton must repay the money or provide documents that support how funds were spent and how activities were eligible for federal dollars.
For instance, the city is being asked to provide documents and evidence demonstrating that Dayton did not draw down more HOME funds than what was requested by the city of Kettering. There was about $1.75 million drawn from the system for Kettering projects.
To show millions of dollars in projects were eligible for federal funds, the city will have to produce documents related to income determinations; income eligibility; residency, resale or recapture requirements and restrictions; and written agreements for homebuyers for rental affordability requirements.
The city of Dayton is the focus of the HUD monitoring report, and it was Dayton’s responsibility to administer the program, said Stacy Schweikhart, Kettering’s community information manager.
“The city of Dayton holds full responsibility for appropriately entering eligible Kettering projects, for implementing the processes necessary to monitor compliance and for fund reporting to HUD,” she said.
Kettering will comply with the requests in the HUD monitoring report related to records for eligible Kettering projects, city officials said.