HUD to Continue Monitoring Providence Loan Program
Wednesday, October 24, 2012
The Department of Housing and Urban Development (HUD) will continue to approve all expenditures by the Providence Economic Development Partnership (PEDP) until HUD approves a corrective action plan to address what Mayor Angel Taveras called “serious issues” raised about the quasi-public agency.
During a meeting held Tuesday, PEDP board members also learned that HUD plans to bring in a $375,000 “technical assistance team” to consult with the agenecy as it develops the appropriate policies and procedures required for recipients of federal funds, according Stuart MacDonald, the PEDP’s assistant director
“Policies and procedures were in place, they just weren’t documented,” MacDonald said.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe board meeting was called to address questions raised in HUD report earlier this year. HUD cited the city for a lack of “adequate oversight” over the agency, which ran up an “approximately 60 percent” default rate from 2001 to 2011. Records also show that of the 32 loans offered between 2006 and 2007, 22 recipients either defaulted or now have their loan being questioned by HUD.
Because the loans come in part from Community Development Block Grant funds, HUD requires recipients to prove that “low and moderate” income people are being hired. Records show that between July 2001 and June 2011, the PEDP dished out $14.8 million in loans, 52 of which were “provided on the basis of job creation or retention.” For every $35,000 in funding, those loans were supposed to create at least one full-time job.
“Seventeen of 52 loans which provided $2,990,000.00 in CDBG funds did not create or retain any jobs for low and moderate income people,” the report stated. “Of the files reviewed, documentation of job creation or retention were either lacking or missing. As a result, these loans were used to benefit businesses without demonstrating that they also provided the intended benefits to low and moderate income people.”
The report also questions several instances where loan recipients may have not actually been eligible to receive federal dollars. In one case, the city loaned $400,000 to the nonprofit Black Repertory Theater for “working capital and staff salaries.” HUD claims the company should not have received those funds and has raised questions about 11 additional nonprofits that received a combined $3.2 million in loans.
The board approved a corrective action plan, but it remains unclear whether the PEDP will be expected to reimburse HUD for questionable administrative expenses.
MacDonald said the technical assistance team work with the PEDP for between 1,500 and 1,800 man hours to help address the program’s deficiencies.
As of Oct. 16, one in three PEDP loans worth more than $1.2 million were in default and another $2.1 million written were written off last May.