HUD’s Departmental Enforcement Center also identified another $647,000 in questionable costs, but Dayton officials said those were preliminary estimates that were part of a draft report, noting a final report with updated and more accurate lower figures is expected to be released soon.
MORE: Dayton forced to give up $477K for missing HUD deadline
The city of Dayton had an “extensive pattern” of revising vouchers related to the federal Home program to direct funds to other projects, altering project records and failing to maintain documentation to support whether the costs were allowable, according to an Aug. 13 letter HUD sent to Dayton City Manager Shelley Dickstein.
“We acknowledge that there were some things we had to do differently and own and improve upon,” Dickstein told the Dayton Daily News. “The first thing we did was replace the leadership.”
The HUD reviews showed no signs that money was fraudulently used, city officials said.
The August letter, from a HUD community planning and development manager in Ohio, said HUD intends to reject the Dayton-Kettering Consortium’s fiscal year 2018 Home program certification and action plan, which city officials say could delay receipt of funding.
The city of Dayton typically has received $1.1 million to $1.5 million annually in Home funds, which can be used for activities that promote affordable housing, including housing rehab, construction, homebuyer assistance and tenant-based rental assistance.
RELATED: HUD has ‘significant’ concerns about Dayton’s handling of federal funds
The city has and will continue to work closely with HUD to review, strengthen and take corrective action related to its records, processes and procedures around the Home program, Dickstein said.
HUD’s inspection took place late last year, months after this newspaper learned that the city of Dayton had forfeited nearly $477,000 in federal Home dollars after missing a key deadline.
The director and executive secretary of the department that oversaw the Home program resigned last year after being placed on administrative leave.
RELATED: Two Dayton officials resign after being put on leave
HUD’s Departmental Enforcement Center reviewed Dayton’s Home program during a December on-site visit and primarily focused on 240 voucher revisions in the city’s system between 1997 and 2015, according HUD records obtained by this newspaper.
Inspectors said they examined a sample of records: 141 revisions related to 18 separate vouchers between 2002 and 2012.
Vouchers are how funds are requested in the Home program system. The city pays vendors out of its funds and then reimburses itself through a drawdown in the Home program system.
The city was unable to explain why vouchers were revised and funds were reassigned from one activity to another, states a snapshot review report by the Departmental Enforcement Center dated June 21.
Many voucher revisions were completed by Aaron Sorrell, the city’s former planning and community development director, who resigned in June 2017. Sorrell worked for the city for 17 years, starting in July 2000.
“For reasons unknown to current city staff, Mr. Sorrell executed revisions to these vouchers by repeatedly reassigning dollar amounts to the new activity numbers,” the review states.
Attempts to reach Sorrell for comment on this story were unsuccessful.
The city could not provide documentation supporting any pattern or rationale for the amounts reassigned, and one voucher was revised 32 times by Sorrell, and the full amount was reallocated to five new activities, the review states.
In one case, contractor Improved Solutions for Urban Systems started the construction of three new homes in 2009, but then went bankrupt and the homes were abandoned, the review states.
The properties were boarded up and sat unfinished for four years, which should have required the city to repay $166,145 in Home funds, the review states.
But in June 2014, the city agreed to a $250,000 contract with HomeStart Inc. to finish two of the homes that Improved Solutions began.
The second contractor began work on the project four years after the first contractor’s exit, resulting in questionable costs to the Home program, the review states.
MORE: Turner says Dayton mismanaged federal funds, wants detailed plan
In the June report, the Departmental Enforcement Center recommended the city repay $166,145 in unallowed costs and provide HUD with documentation in how it spent $502,072 in other costs.
The center also said HUD should examine $647,000 in “questionable” costs to determine if they were allowable, reasonable and necessary.
The numbers were preliminary and likely have changed since July, when HUD representatives from the Columbus field office visited the city for an on-site monitoring visit, Dayton officials said.
The June report was not a complete look at the Home program and the city’s operations, and the city was able to produce more documentation and records related to some of the costs in question during the more in-depth visit by Columbus HUD officials, the city said.
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On Aug. 21, the city sent a letter to HUD saying it would full comply with Home program regulations and best practices, and though the city’s past administration of the program fell short of federal expectations, significant changes have been made to demonstrate its commitment to compliance.
The letter states that two Dayton staff members were relieved of their Home program responsibilities and a new position was created to solely oversee the program.
Sorrell and Shannon Hughes, the executive secretary of Dayton’s department of planning and community development, both resigned after being placed on administrative leave in May 2017.
Earlier this year, the city of Dayton hired Todd Kinskey to be the director of planning and community development. His previous experience includes serving as the planning and development director for Hamilton County and executive director of the Hamilton County Regional Planning Commission.
The city’s fiscal year 2018 Home funds are not at risk, and the Home program rejection would not impact other HUD grants the city receives, including Community Development Block Grants and emergency solutions funds, said Erin Jeffries, Dayton’s division manager for community development.
"We are here to meet HUD's expectations," said Jeffries, who was appointed to her position several months ago.
Dayton has taken this very seriously, and city management has taken appropriate steps to change leadership and improve the organization, said Dayton Mayor Nan Whaley.
“We know this is serious,” Whaley said.
The Home issues date back 17 years, Whaley said, which is many mayors and city managers ago, and the city wants to ensure that moving forward it does things the correct way.
The voucher revisions suggest that money was redirected from small projects that did not move forward to ones that were viable and were completed without communicating the changes to HUD, city officials said.
City officials noted the data reporting system has changed considerably over the years as the program requirements have changed.
“There have been dramatic changes to the rules for the Home program,” said Kinskey, planning and community development director.
The HUD documents obtained by this newspaper indicate that the city’s record keeping has been unable to match specific expenditures with particular addresses and projects, which is generally required of projects using federal grant money.
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