Providence Agency Spent Over $20,000 in Taxpayer Funds on Lunches

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Friday, August 10, 2012

Dan McGowan, GoLocalProv News Editor

The agency that oversees Providence’s small business loan fund spent nearly $25,000 of federal funds on lunches for board members between 2006 and 2011, according to a list of expenses provided to GoLocalProv.

Records show the Providence Economic Development Partnership (PEDP), a quasi-city agency that has come under fire over the last year for dishing out millions of dollars in loans that were later defaulted on, spent $24,808.22 of Community Development Block Grant (CDBG) funds on dozens of lunches during that time span.

The PEDP’s lunch money, most of which ranged from $100 to $300 payments to Pranzi Catering on Chalkstone Ave, is only a small chunk of more than $1.5 million in misspent funds recently highlighted in a report issued by the Department of Housing & Urban Development (HUD).

Of that money, just under $109,000 came under Mayor Angel Taveras’ watch while the rest came during Congressman David Cicilline’s tenure as Mayor. The sitting Mayor serves as chairman of the PEDP’s board of directors.

The HUD report cited the city for lacking “adequate oversight” over the agency in several areas, noting that “the city is unable to ensure that expenditures are eligible, have adequate documentation and prohibit waste and fraud of government funding.”

"As with any expenditure, allowable costs must be supported by specific documentation and be subject to cost reasonableness," the report states. "We reviewed the trial balance, cash disbursements journal and selected several expenditures to review supporting documentation. Cash balances are maintained by PEDP. These expenditures were never reported to HUD as required. Based on the documentation reviewed, we were unable to reconcile the cash disbursements journal to the trial balance. Therefore, we were unable to determine whether all exposures had been properly accounted for."

No Accountability

Last fall, GoLocalProv reported that a quarter of all loans issued by the PEDP were at least 90 days past due, likely leaving Providence on the hook for more than $3.3 million it was owed. In June, 29 loans were written off, which cost the city more than $2 million.

The loans are considered risky by nature, with many applicants having to prove they were denied by two other lenders before they attempt to borrow from the PEDP. But the excessively high default rate (approximately 60 percent) caught the attention of HUD, which found it wasn’t just loan money that was going to waste.

Now the city may be forced back a significant chunk of the $1.5 million in “disallowed” costs highlighted in the report.

“This is just another example of the out of control Cicilline administration arrogantly wasting money with no accountability,” said Tara Pinsky, the chairperson of the city’s Republican Party. “It just seems to be so tone deaf and so out of touch - like Nero playing his fiddle while Rome burned. Former Mayor and now Congressman Cicilline also said the city’s finances were well-managed and in good shape back then – did he not? What a mess he left behind for Providence and now we see ads on TV about how many Rhode Islanders he’s helped? What about the city’s good citizens, pensioners and taxpayers? It doesn’t seem like Mayor Cicilline helped them with their future financial burden at all.”

HUD also Questioned Write-Off Policy

The PEDP now finds itself under new leadership, with the city Economic Development Director James Bennett now serving as executive director. The former director, Thomas Deller, resigned earlier this year and now works for the city of Hartford.

But prior to the 15-member board voting to write off 29 loans in June, HUD also wanted to know whether the agency was properly underwriting loans that it likely had no chance of ever recouping any money from.

“We found no written policies and procedures governing underwriting, loan collection, loan modifications and or write off policies,” HUD said.

In one instance, a company carried a principal balance of $66,240 and was over 4,500 days past due. The report states that over ten years, PEDP collected a net amount of $543 from the company, but it also incurred $7,903 in legal fees. That loan was only written off last month.

“The city has spent an unreasonable amount of legal fees in pursuit of these collections with very little to show for its effort,” the report states.

Doherty Camp: Fiscal Recklessness

Like Pinsky, the campaign for Republican Congressional candidate Brendan Doherty also placed the brunt of the blame on Cicilline.

Doherty spokesperson Ian Prior ripped the Congressman for his handling of the agency and taxpayer money during his time as Mayor of the capital city.

“This kind of fiscal recklessness with taxpayer money should not come as a surprise for anyone that has followed Congressman Cicilline's checkered political career,” Prior said. “He was not a responsible steward of taxpayer money as the Mayor of Providence, he failed to be honest about that irresponsibility, and he is demonstrating the same behavior in Congress where he continues to push the same kind of failed economic policies that nearly bankrupted the city of Providence.”

 

Dan McGowan can be reached at dmcgowan@golocalprov.com. Follow him on Twitter: @danmcgowan.

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