More CDBG funding suspended as HUD continues review of city’s process

Last year, concerns over conflict of interest issues plagued the city’s Community Development Block Grant allocation process.

Those concerns were raised by staff members, City Commissioners and members of the public.

The issues rose to a level that the U.S. Department of Housing and Urban Development got involved. HUD oversees the CDBG program.

Earlier this month, the city received another letter from HUD with their findings related to conflict of interest in the city process and indicates that an independent audit is unnecessary. According according to city officials, HUD verbally instructed the city to conduct the audit, which cost the city $7,500 to $10,000.

City staff proposing major changes to CDBG process; HUD looking at additional potential conflicts

The audit was completed and submitted to the city in January.

City Commission to consider agreement for additional audit services for CDBG complaints

Due to the conflict of interest concerns, funding that had been allocated last year for NeighborWorks Great Falls, Habitat for Humanity, Rural Dynamics and Great Falls Development Authority have been suspended.

That includes:

  • $65,000 for Habitat for Humanity, which was planned for infrastructure improvements for two home to include concrete work, sidewalks, site excavation and water/sewer connections, with the remainder going toward the purchase of lots to build future homes.
  • $82,903 to Neighborhood Housing Services, or NWGF, for the construction of high school homes with Great Falls High and C.M. Russell High School.
  • $11,250 for Rural Dynamics, Inc. for the rent reporting program, which provides grants to assist renters in raising their credit scores through rent reporting, financial coaching and education.
  • $40,000 to Great Falls Development Authority to expand the revolving loan fund to provide gap financing to existing and start-up businesses to create new jobs for persons from low to moderate income households.

HUD also declined to fund the $27,927 that had been allocated to Paris Gibson Square.

HUD declines funding for Paris Gibson Square in controversial CDBG process

All of those funds go back into the city’s CDBG pot for allocation to other organizations for future projects, according to Craig Raymond, city planning director.

The city’s Community Development Council has been the group responsible for reviewing CDBG applications and making funding recommendations to the City Commission. Seats on the CDC are open to residents to apply and members are appointed by the commission. Members of the CDC have long included those involved in local nonprofits, which has been a concern to city staff for years since nonprofits are generally the groups applying for the grant funds.

In most cases, CDC members have recused themselves from discussion and votes related to an application from a group they’re associated with but last year, one CDC member did not disclose a past conflict with Paris Gibson Square and ranked the organization’s application low among the other applicants, resulting in no funding for PGS.

Conflict of interest concerns plague this year’s CDBG allocation decisions

Whether that ranking was intentional is unclear, but PGS director Tracy Houck, who was also a City Commissioner at the time, took issue with the lack of funding for her organization and sent a letter to Raymond and other city staffers complaining about the conflict of interest issue. The CDC reconvened without the member who ranked PGS poorly and ultimately funding was recommended for PGS.

The letter created a larger conflict of interest issue and prompted then Commissioner Fred Burow to state his concerns with the funding award and he voted against the PGS grant.

Commission rescinds, votes again on CDBG funding

As that discussion was playing out, other community members again raised concerns over Commissioner Bill Bronson’s ties to NWGF since his wife works there, though he maintains that she works in a different department than those impacted by CDBG funds.

In their February letter, HUD officials wrote that in their broad view, the city’s CDBG process includes violations of the HUD conflict of interest rules.

City staff propose changes to ethics policies, creation of ethics board in response to conflict of interest issues

Under HUD rules, “no person in a position to either exercise decision-making authority or to gain inside information may obtain a financial benefit. The regulations cover any ’employee, agent, consultant, officer or elected official or appointed official of the recipient, or of any designated public agencies, or of subrecipients that are receiving funds.'”

[Full HUD letter]

In their letter, HUD officials wrote, “We emphasize the broad scope, interpretation and application of the conflicts of interest rules; the purpose is to avoid the appearance of impropriety in the CDBG funding process. Note that a subrecipient organization must also abide by the conflict regulations. While a subrecipient organization may receive funding from multiple sources, the aggregate funding allows the organization to function as a whole. HUD will not trace specific budget allocations in determining whether a conflict exists. If an individual with access to the CDBG funding decision-making process works with a subrecipient, there is a conflict.”

But, those rules don’t necessarily preclude those with an apparent conflict from participating and agencies can request exceptions from the HUD rules.

In the letter, HUD officials wrote that a waiver could be considered related to Bill and Carol Bronson and “that her responsibilities and wages are not associated with CDBG activities will be significant and useful information to consider in a request for a conflict of interest exception.”

The city could request exceptions to the conflict of interest rules to proceed with the funding to Habitat, RDI, NWGF and GFDA, but Raymond said the city was not going to request a waiver or fight HUD’s findings at this point, though the city disagrees with some of those findings. City Attorney Sara Sexe is, however, following up in regards to her comments during a commission meeting.

Raymond said that during the CDC meetings, the members related to those groups recused themselves from discussions and votes related to funding their groups.

After the initial issues raised with Houck and Bronson’s conflicts last year, HUD broadened their review to look at funding from 2012 to 2017.

During that time, the city identified 14 people who served on the Commission or CDC and also had ties to agencies receiving funding. During that time, $522,252 was awarded by commissioners to agencies with which those 14 people had ties, according to HUD’s letter.

“At a minimum, these actions create the appearance of impropriety in the CDBG funding process, as well as actual conflicts of interest in some cases,” HUD officials wrote.

HUD is requiring that the city take corrective action to develop a new project selection process, citizen participation and conflict of interest policies and procedures for the CDBG program.

Survey is first step in city’s revamped CDBG process

City staff has already proposed a revamped CDBG process and is currently accepting surveys from citizens on how they think the funds should be used. The Commission has also adopted changes to the ethics policy, added additional training and created an ethics committee.