The U.S. Department of Housing and Urban Development’s Office of Inspector General says the city of Albuquerque may have to repay about $3 million in grant funds due to sloppy record keeping and staff who are out of their depth.
The scathing audit of the city’s Community Development Block Grant program was issued last month.
“These conditions occurred because the city did not have the capacity to implement an effective grant administration,” the report states.
The city’s Department of Family and Community Services administers Albuquerque’s CDBG program, which brought in a combined $11.7 million in additional funding to the city between 2013 and 2015, the period covered by the audit.
“As director of the department, I can assure the public that we take the findings and recommendations of this report seriously and use them as an opportunity to make improvements and create a CDBG program the community deserves,” Douglas Chaplin said in an emailed statement.
The OIG had initially planned to ask HUD officials to suspend the city’s CDBG program funds “until the city shows that it has the capacity to implement an effective program in compliance with all requirements and all recommendations in this report are met.”
But at the city’s request and after consulting with HUD officials, the OIG agreed to change its recommendation. It is now asking that the local HUD office extend the city’s designation as a “high risk grantee for an additional year to allow the city the opportunity to continue administering its CDBG program to Albuquerque residents.”
The local HUD office has about six months to respond to the recommendations.
HUD initially declared the city a “high-risk grantee” in October and asked it to repay $1.4 million in grant funds over deficiencies in its record keeping, oversight and administration of federal money for housing programs that help low-income people. According to the city, that $1.4 million is separate from the current audit.
Among the findings in the new audit is that the city contracted with a higher bidder, paying 28 percent more than what the lowest bidder had proposed and that the city used nearly $573,000 in CDBG funds to acquire a building that was also going to be used for non-CDBG activities.
The OIG report pinpoints $1.83 million in ineligible costs it says must be repaid and an additional $1.1 million that will have to be repaid if the city is unable to provide required documentation. The city is contesting $1.1 million of that and notes that any funding the city repays will be available for future CDBG projects that will benefit the Albuquerque community.
Conflicts of interest
A key finding in the report is that the city failed to properly identify or document two conflicts of interest.
In one instance, City Councilor Klarissa Peña, who serves on the council’s Finance and Government Operations Committee, was also employed as vice president of communications and government relations for Youth Development Inc., a contractor that received CDBG funds.
According to the report, YDI received CDBG money from the city to serve as a fiscal agent for its eviction prevention program. The city argued that a signed conflict-of-interest certification wasn’t required for city councilors, but when a conflict was perceived, councilors would recuse themselves from voting on the matter.
“The city did not provide information showing that the councilor had recused herself,” the report states, and regulations required that a non-federal entity disclose in writing any potential conflict of interest if he or she had a real or apparent conflict of interest.
Peña, who no longer works at YDI, said she was always upfront about her connection to YDI and followed the advice of city legal counsel on how she should handle any matter coming before the council that were related to her employer. And she said she didn’t vote on the matter.
In the second case, Chaplin failed to identify or disclose a conflict of interest until after a contract had been awarded.
“The city issued a request for proposal in March 2014 to redevelop a city site with CDBG-Recovery Act funds,” the report states. “The director’s brother-in-law was a board member of the developer who was awarded the contract.”
Chaplin contends that he didn’t participate in the selection or evaluation process but accepted the ad hoc committee’s recommendation. He also instructed his staff to negotiate an agreement with the developer. He signed that agreement on July 26, 2016, but didn’t complete the city’s conflict-of-interest certification until eight months later.
Among the other findings in the OIG report:
• The city did not follow procurement requirements. Specifically, it procured residential rehabilitation contracts totaling about $569,000 without independent cost estimates or properly executed contracts.
• The city spent $998,000 for projects for which the environmental records were not completed correctly and lacked supporting documentation.
• The city failed to ensure that expenditures were reasonable, eligible and adequately supported.
• The city did not maintain required documentation to support that three projects totaling nearly $498,000 benefited low- and moderate-income people, as required.
Chaplin said the city strives to fully comply with federal requirements.
“We acknowledge that adjustments must be made to our technical processes, procedures and personnel to improve our execution of these federal grants,” he said. “Working in collaboration with the local HUD Office, we have begun to implement these changes to ensure compliance and funding for current and future CDBG projects.”