Feds find aiding city is risky business

HUD deems City Hall a "high risk" recipient, orders changes aimed at cleaning up chronic problems

Federal housing officials are tightening the screws on City Hall over its chronic mismanagement of anti-poverty funds.

A series of critical reports and audits have documented problems dating back to the Griffin-era, but meaningful sanctions to this point have been few and far between. But the U.S. Department of Housing and Urban Development is now moving on three fronts to force compliance from City Hall in how it spends about $18 million a year – three-quarters of it block grant aid that is the primary pool of money used to combat poverty in one of the nation’s poorest cities.

HUD, according to correspondence obtained under the Freedom of Information Law and interviews, has:

  • Designated Buffalo an “at risk” recipient of federal funds. This is the first time Buffalo has been slapped with the dubious designation, despite its history of problems. The city is one of only a “handful” of the 1,249 recipients across the nation currently categorized as high risk, according to William O’Connell, director of community planning and development in HUD’s Buffalo office.
  • Conditioned future aid to the city meeting requirements that go above and beyond what the federal government usually requires of aid recipients. O’Connell said the specific terms have not been set. But given the past problems cited by HUD, federal authorities are believed to be keenly interested in improving financial oversight and monitoring  programs to ensure they operate in line with regulations.
  • Informed the city it will no longer deposit federal aid with the Buffalo Urban Renewal Agency, which has been the longtime steward of the money. The agency – headed by the mayor, who appoints a majority of its board members – has been criticized for poor financial oversight of block grant funds. Instead, HUD has ordered the city to set up its own accounts to accept the money. Doing so would make the funds subject to greater scrutiny by the city comptroller and Common Council.

Why is HUD taking a tougher line with the city?

Federal reviews and audits have found fault with the city’s use of block grant and other funding dating back to when James Griffin was mayor. Problems persisted during the administration of Anthony Masiello, when HUD suspended a city-administered program intended to promote home ownership in the inner-city. HUD has found problems have persisted under Brown and the tone of federal reviews have grown more critical of late.

Three years ago. HUD found 19 serious problems with the city’s administration of block grant funds. Problems included sloppy record keeping, spending on ineligible projects and the improper use of funds to cover employee salaries and benefits.

“Less than 50 percent of every [block grant] dollar spent results in projects that directly benefit low-and moderate-income residents,” the report concluded.

Then, in March 2011, the HUD inspector general reported that the city had mismanaged economic development programs that were funded in part by the federal government. The audit also found the city failed to follow regulations or adequately document spending and that Buffalo was slow to spend millions of dollars in aid.

Auditors recommended the city repay nearly $500,000 in funds. O’Connell said about $100,000 has since been returned by the city and the balance is the subject of ongoing review.

O’Connell said the problems identified in the inspector general’s report have not been corrected, which was a major factor in HUD deciding to designate the city as a high-risk recipient.

City Comptroller Mark Schroeder said the continuing problems are “obviously concerning,” noting the $17.9 million is “a great sum of money” that is central to the city’s efforts to deal with poverty.

Although his office would presumably be involved in establishing city accounts to receive federal funding, Schroeder said he has not been contacted by Brown or members of his administration. In fact, Brown has yet to forward Schroeder the April 30 letter from HUD informing the city that had been designated a high risk recipient. He received a subsequent June 21 letter sent by HUD only because federal officials sent him a copy.

Brown’s office failed to respond to two phone calls and an e-mail from Investigative Post seeking comment.

Community Development Block Grant funds account for $13.3 million of the $17.9 million in federal aid that’s at issue. The balance is earmarked for three programs that promote housing rehabilitation and home ownership, homelessness and services for people with AIDS.

A Buffalo News investigation in 2003 found Buffalo received more block grant money per capita than all but one city in the nation. The city had received $556 million to that point. But The News found City Hall had squandered much of the funding through parochial politics and bureaucratic ineptitude.

More than half went to “soft costs” that included covering bad business loans, paying City Hall salaries and subsidizing an overblown network of neighborhood agencies, The News reported.

Federal aid through HUD to Buffalo has fallen the past decade, as it has across the nation. This year’s allocation of $17.9 million ranks it No. 51 among recipients, in line with its population rank in the United States.