Charities may lose $300,000

Feds say agency overspent for homeowner counseling



The federal government yet again wants money back from Augusta because an agency involved in inner-city revitalization overstepped U.S. Department of Housing and Urban Development regulations.

In other recent cases, the violating agencies have had to pay back the money, but the city's charities could take the hit this time.

Under a settlement proposed by Housing and Community Development Department Director Chester Wheeler, a pot of grant money for groups that work with the elderly, the homeless, the working poor, abused children and battered women, among others, would be almost $300,000 lighter over the next three years.

Rose White, the city department's assistant director over grant programs, said HUD's Atlanta office has already agreed to the terms, but a spokesman said Friday that no final decision has been made and a response should be drafted within the next two weeks.

According to correspondence obtained by The Augusta Chronicle , Wheeler suggested that the city direct less community development block grant money to "public services" expenditures, spreading the reduction out from 2010 to 2012, until the city has made up for misclassifying the work of a Macon, Ga.-based housing counseling firm and blowing past a federally mandated spending cap.

Groups that have benefitted from "public service" grants in the past include Kids Restart, Augusta Urban Ministries, Safehomes of Augusta, and Boys & Girls Club. How allocations would be adjusted hasn't been determined.

"That is such a shame," said Karen Saltzman, the executive director of Hope House, a treatment and housing center for addicted and homeless women and their children, which is receiving $15,000 from the grants this year and has applied for $25,000 in 2011. "Next year's probably going to be a tough year for everybody."

HUD DEMANDED the return of almost $300,000 because that approximate amount was overspent -- according to a HUD audit report -- after the housing department used block grant monies to pay the CSRA Economic Opportunity Authority for homeowner counseling services.

Although the agency was the only bidder when the city solicited proposals in summer 2008, most of the money paid went to Macon-based subcontractor HomeFirst Inc., which neither submitted a bid nor was mentioned as a subcontractor in the EOA's proposal. HomeFirst has earned about $238,000 since opening its Broad Street office in June 2009, according to its executive director.

The chain of events that led to the technical violation reveals the effort the city's housing department expended to bring in HomeFirst, a home-ownership counseling firm that Wheeler worked with in the early 2000s, when he was director of Macon's Economic and Community Development Department.

HomeFirst's executive director, Reginald Bell, also a former employee of Macon's economic development department, said he has known Wheeler for more than 20 years. Macon officials told The Chronicle that under the company's old name, Macon-Middle Georgia Housing Counseling Center, it started contracting with the city in 2002, three years before Wheeler resigned.

Wheeler declined to be interviewed, responding by letter to open records requests and designating White to answer reporters' questions on technicalities.

White said during a Sept. 23 interview that after EOA submitted the only bid, Wheeler told her it wasn't qualified for the job and suggested the agency subcontract with HomeFirst.

Asked under an open records request for correspondence on the need to hire a subcontractor, or to specifically hire HomeFirst, Wheeler responded that the problem with EOA was that its housing counseling experience was "limited to very low income individuals and families" and "the city's goal was to create a housing counseling agency with the focus on a broader clientele."

The agency is a HUD-approved counseling service, however, and according to the Request for Qualifications that Wheeler submitted to the city's Procurement department, his department sought a homeowner counseling agency "specifically targeted for low to moderate income families."

EOA was told to either hire more staff or bring on a partner, Wheeler said, and it was given a list of four agencies with the necessary experience -- Promise Land Community Development Corp., East Central Georgia Partnership, the Augusta Neighborhood Improvement Corp. and HomeFirst.

When The Chronicle asked a second time for any letters, e-mails or memos generated when EOA was informed of this decision or its options, or any documents reflecting the outcome, Wheeler said none exist.

Wheeler also wrote that it was EOA's choice to partner with HomeFirst, and he directed questions about that to Executive Director Gloria Lewis.

Phone messages and an open records request sent Lewis last week were not acknowledged. Though her company is not a government agency, any private organization doing work for a government is required to comply with the state's Open Records law.

Bell, HomeFirst's executive director, told The Chronicle that he wasn't familiar with the entire chain of events but said his company was asked to partner with EOA to provide technical assistance in setting up a one-shop counseling operation.

Bell said that Wheeler had asked HomeFirst to open a satellite office in Augusta three years ago, but the company's board members didn't think they were ready to branch out. When HomeFirst was approached again in 2008, it agreed to step in, with EOA taking the lead.

All of the agencies on Wheeler's list of options except HomeFirst all are based in Augusta.

ANIC's director, Robert Cooks, said his inclusion makes no sense. He said he doesn't know what special expertise ANIC possesses -- or the other two Augusta agencies -- in working with middle- to upper-income clientele that EOA doesn't have. Counseling people with more disposable income is easier because they can better fix their problems.

"The criteria's all the same for everybody," Cooks said. "Under fair housing, it has to be."

In summer 2008 ANIC submitted a bid for the housing counseling job that was rejected on a technicality. When the job was bid a second time, Cooks said, he considered teaming up with EOA, but that didn't work out.

He said he had no idea ANIC was considered after another company was awarded the job.

Donna Lovelace, of the 1st East Central Georgia Partnership, said she knew her all-volunteer group was being considered. She and her president met with Wheeler and Bell, of HomeFirst, about the possibility, she said.

OTHER ACCOMMODATIONS were made for HomeFirst.

Wheeler authorized a $30,000 interest-free loan for startup costs using block grant money, allowing HomeFirst to set up, furnish and staff its downtown office. Bell said that was done before he became involved.

Though the services were considered a component of the 50-year inner city revitalization plan funded through the same hotel fee that's constructing a new trade, exhibit and event center, Housing and Community Development opted to pay for the contract with federal funds. The department consulted with HUD on how to deem the work eligible, according to the audit report.

The department labeled HomeFirst's work "Special Activities by Community-Based Development Organizations." But HUD, after reviewing the city's books and the details of the counseling service during a monitoring visit in May, said the department erred.

Wheeler's response letter said the violation boiled down to EOA and HomeFirst taking in clients from all over the city, as opposed to staying within Laney-Walker and Bethlehem, causing Augusta to overshoot its public services spending cap by $286,151 -- the amount the federal government wants back.

White said the housing department told HomeFirst to only work with clients who live in those neighborhoods or were planning to buy houses in them. But of 742 people counseled in 2009, only 81 were from Laney-Walker or Bethlehem, according to Wheeler's letter.

Bell said he doesn't recall being told to counsel within a certain geographic area. He said that would violate HUD rules.

The housing department and Bell said they're unsure whether the counseling program can continue without HUD funds.

The federal monitors also took issue with the $30,000 loan. The agency said it was unsure whether such a use of money violated the rules. It dropped the matter, however, because the money had already been repaid. Records show that after EOA received its first check from the city -- $66,335 -- on July 23, 2009. The loan was repaid the next month.

BECAUSE ALMOST $100,000 in public services funds went unspent in 2008, White said, she hopes the city's nonprofits will not be hit so hard by the way Wheeler wants to repay the federal government.

Kids Restart, near the fairgrounds on Hale Street, received $23,000 in public services block grant funds in 2009 but only $10,000 this year, almost all of which is spent, said Director Daniela Whitaker. She said she was hoping to get at least $10,000 in 2011 for parenting classes.

Kids Restart provides supervised visitation for biological parents accused of abuse or neglect.

"We would hope that we wouldn't get cut any more than we already have been," Whitaker said. "Honestly, every penny counts here."

Augusta Urban Ministries, also on Hale Street, got $11,000 in block grant money this year and applied for $20,000 next year. The money goes toward the furniture bank, Executive Director Rick Herring said, which gives beds, sofas, tables, stoves and other household items to families trying to lift themselves out of poverty.

"It sounds like it's going to have a negative impact on us and others," Herring said of the reduction. "So we're being penalized for something that happened over there.

"More good news on top of more good news."

Anatomy of a HUD infraction

Why the city's use of federal Community Development Block Grant funds to pay for CSRA Economic Opportunity Authority's and HomeFirst housing counseling services violated federal regulations:

A federal monitoring report obtained by The Chronicle shows the city consulted with the U.S. Department of Housing and Urban Development, looking for a way to make the contract expenses eligible without affecting a federally mandated cap on "public services" expenditures.

At issue initially was whether to use block grants or HOME Investment Partnerships Program funds. Under the latter, counseling services would have to be tied to specific homes or living units, such as when Promise Land Community Development Corp. counsels a family, then puts them in a home it built. HomeFirst would be doing broad-based counseling, advertising its services to the general public.

There was a problem on the block grant side, too, in that if the counseling service couldn't be tied to specific units, it would be considered "public services." HUD regulations place a 15 percent cap on public service spending, meaning those expenditures can be no more than 15 percent of a city's total block grant allocations and previous year's interest earnings -- which in Augusta's case was a figure of $2.4 million in 2009.

The city thought that if it designated the EOA/HomeFirst project "Special Activities by Community-Based Development Organizations," the spending wouldn't count toward the cap. The problem, however, was that to be exempt, the organization would have to work within a Neighborhood Revitalization Strategic Area, in this case Laney-Walker and Bethlehem. Of 742 people EOA/HomeFirst counseled in 2009, only 81 were from those neighborhoods.

Augusta received a $410,000 grant for EOA, covering 2009 and half of 2010, but only paid the company $296,310 during that period with that money. If HUD credits the city $45,100 for the 81 clients who were eligible, that reduces the figure to $364,900 -- all of it now being put toward the public services cap. Add that amount to the $282,106 spent on public services in other ways, such as grants to local charities, and the amount is $647,006, putting Augusta at 26.9 percent of its cap. The difference between that amount and 15 percent -- or $360,855 -- is $286,151, the amount owed back.

Without the homeownership counseling snafu, Augusta would have been at just 11.7 percent of its cap.

Source: Correspondence between Augusta Housing and Community Development Director Chester Wheeler and U.S. Department of Housing and Urban Development Atlanta Office of Community Planning and Development Director Mary Presley; Housing and Community Development Assistant Director of Programs Rose White

Proposed grant reductions

Housing and Community Development Director Chester Wheeler has proposed the following reductions to the city's Community Development Block Grant "public services" expenditures.

2010: $127,594

2011:  $132,500

2012: $26,057

Source: Correspondence between Augusta Housing and Community Development Director Chester Wheeler and U.S. Department of Housing and Urban Development Atlanta Office of Community Planning and Development Director Mary Presley

Who is HomeFirst?

HomeFirst Augusta, in an office on the 900 block of Broad Street, has been working with potential homebuyers since early 2009, teaching them about the responsibilities of homeownership and pre-qualifying them for bank loans. Though their work was conceived as being part of the Laney Walker/Bethlehem revitalization plan tied to the new trade, event and exhibit center, it was being paid for with federal funds. HomeFirst is technically a subcontractor of the Augusta-based CSRA Economic Opportunity Authority, though it apparently garnered the majority of the approximately $300,000 paid on the contract.

The company, a branch of HomeFirst Housing Resource Services of Macon, Ga., has also been holding workshops open to the general public -- usually for registration fees of $30 per person or $50 per couple, though the most recent workshop was free. With HomeFirst's counseling, clients also earn certificates needed to obtain down payment assistance.

Other violations, other ways to pay 

Another violation cited in the U.S. Department of Housing and Urban Development's review involved the fence surrounding ANIC's privately developed Enclave apartment complex on James Brown Boulevard. The Augusta Housing and Community Development gave the Augusta Neighborhood Improvement Corp. $69,407 in block grant funds to pay for it. The city assumed this was an eligible use because the development will improve a blighted area, the audit report says, but HUD disagrees.

Rose White, the housing department's assistant director over grant programs, said ANIC will have to pay back the money.

ANIC Director Robert Cooks questioned why his agency must pay for the oversight when the problem created by CSRA Economic Opportunity Authority and HomeFirst is being passed on to charities.

Two Community Housing Development Organizations, or CHDOs, involved in inner-city revitalization have also been told to return federal funds over technical errors, saving the city from doing so. In July, the Augusta Commission voted to make Laney-Walker Development Corp. pay back $84,000 and Promise Land Community Development Corp., pay back $10,751.

In both cases HUD ruled that the CHDOs sold houses to people who weren't poor enough to qualify for assistance.