Improprieties within Pine Bluff’s Department of Economic and Community Development made 2013 a costly year for the city.

Improprieties within Pine Bluff’s Department of Economic and Community Development made 2013 a costly year for the city.

The U.S. Department of Housing and Urban Development in June contended that during its 2012 program year, the city agency misspent $199,907.89 and failed to provide documentation on an additional $279,161.23 in HUD-related expenditures.

HUD officials advised that the city would have to repay the initial amount of have it cut from its 2013 federal funding. The same arrangement would apply to any remaining funds on which necessary credentials could not be produced.

In short, Pine Bluff faced a $479,069.12 debt.

The development was voted the No. 2 local news story of the year by The Commercial’s newsroom staff.

Soon after the disclosure, Mayor Debe Hollingsworth said she had requested HUD’s audit in March after she and her chief aide — Evelyn Horton — had uncovered information that caused concern.

"I’m saddened that this has occurred," Hollingsworth said when the discrepancies, outlined in a HUD memo, were announced. "The citizens of Pine Bluff deserve better from the city and its community development department."

Local and federal officials reviewed the findings, and Hollingsworth said last month that the city is weighing its options after being told by HUD that most of the stated debt is still expected to be satisfied.

PBECD had responded to HUD’s initial report with an internal investigation that PBECD Interim Director Larry Matthews described in an August letter to HUD as "extensive and thorough."

"We look forward to the final resolution of these findings, in partnership with your office," Matthews wrote to Clinton E. Johnson, chief of planning and development in HUD’s Little Rock office. "As stated in your monitoring letter, HUD’s objectives are to improve performance, ensure proper management of federal funds, evaluate the effectiveness of the city’s programs, and determine the need for technical assistance. We also look forward to working closely with your office to achieve these objectives."

Among HUD’s primary, preliminary findings were that PBECD:

• Did not adequately track and categorize its administrative expenditures and improperly characterized CDBG (community development block grant) administrative activities as technical assistance to businesses, although some of the work performed by PBECD provided aid to area businesses. The city wound up exceeding its 20-percent regulatory ceiling for CDBG administrative expenditures. The questioned amount was $121,018.81.

• Acquired a building at 1101 Main Street — at a cost of $50,110 — for the purpose of serving as a center for CDBG, HOME and Supportive Housing programs, but never utilized the location in such a manner.

• Did not follow applicable HUD guidelines in charging $28,779.08 in expenditures for administrative costs to support operations at its 716 George Street office in 2009 and 2010.

• Failed to maintain a required project file on a $150,000 award to CASA (Committee Against Spouse Abuse) to assist with construction of its new shelter, paid in $50,000 increments over three years.

• Did not receive bids on a work contract and then disbursed $83,423.97 to two contractors who performed the project.

• Acquired outside parameters of an eligible homeowner rehabilitation program and guidelines listed in a local plan several properties selected for rehabilitation or reconstruction. The questioned amount was $45,738.26.

Other findings were that the city:

• Did not have adequate procedures to ensure that it complied with a minimum HOME investment requirement.

• Lacked a system ensuring that "related soft costs" for project delivery representing "staff and overhead costs" are directly related to carrying out projects as required by HUD guidelines, possibly resulting in administrative staff being "erroneously charged" as project expenses.

• Did not have a written policies and procedures manual for management of the Homebuyer Assistance Program, resulting in findings of non-compliance with "prevailing regulations."

• Failed to disburse program income to pay program costs before making cash withdrawals from the U.S. Treasury, and lacked "internal controls" over the design and use of documents and records to provide "reasonable assurance" on the development and maintenance of "transactions and events," and that it was unclear in relating that all personnel were responsible for "communicating upward" operating problems and non-compliance with laws and regulations.

Among settlement possibilities offered to HUD by the city was repayment of some questioned amounts with non-federal funds.