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untanglingwebs
El Supremo
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HUD sent a monitoring visit letter to Mike Brown in mid June that detailed four findings, three which must be repaid. The monitoring visit was conducted on April 23-26, 2012 by Kathleen Hines, a Community Planning and Development Specialist. The letter stated that HUD found evidence of "noncompliance with CDBG and NSP regulations that will require program modifications and repayment of disallowed costs."
Finding 1- For Profit development of a building for the general conduct of government.
1A-undue enrichment to the developer $550,000
Finding 2- Ineligible activity- Housing counseling services provided by a non_HUD certified housing counseling organization and failure to provide certification to potential homebuyers- $250,000
Finding 3- Failure to properly procure management of the NSP1 Program $244,916
finding 4- Failure to comply with applicable laws, code, and other rquirements relating to housing safety, quality and habitability in competing NSP rehabilitation
Concern 1- unreasonable costs related to homebuyer counseling activities. |
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Fri Jul 20, 2012 1:30 pm |
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untanglingwebs
El Supremo
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The letter also references 4 additional findings from monitoring reports in 2011, of which only one was closed.
NSP3 is in jeopardy as the city agreed to Special Contract Conditions in March 2011 and has yet to meet those conditions. The City must modify its Action plan to meet these conditions which must be completed in order to meet the 50% expenditure deadline of March 2013. Memorandums were sent to the city in January 2012, but as of the date of the letter nothing has been completed..
Of the $3,076,522 budgeted for NSP 3, as of march 31, 2012 no money was expended.
NSP is the neighborhood Stabilization Program.
Last edited by untanglingwebs on Wed Jul 25, 2012 6:10 pm; edited 1 time in total |
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Fri Jul 20, 2012 1:38 pm |
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untanglingwebs
El Supremo
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Page 2 of the letter references previous monitoring that took place April 27-30, 2010 and may 24-27, 2011.
The four findings were:
1, Failure to adhere to rehabilitation standards
2. Lack of oversight of subrecipient monitoring.
3. Failure to follow procurement regulations; and
4. Failure to solicit women and minority owned business enterprises.
" As a reult of the city's lack of progress, an NSP Needs Assessment was completed in 2010 by ICF International but no technical assistance was provided. Along with the NSP3 agreement, special contract conditions were imposed at HUD headquarters. At the time of this writing, the City has been approved for and is receiving NSP Technical Assistance. Emphasis on restoring NSP2 activities will be the primary goal with NSP1 and NSP3 to follow." |
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Fri Jul 20, 2012 1:54 pm |
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untanglingwebs
El Supremo
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PUBLIC FACILITIES AND IMPROVEMENTS
"We sought to determine the eligibility of the project in the city's DRGR Action Plan titles "Acquisition for Redevelopment-Boji." HUD questioned this activity first in October 2011 and this project is the subject of the first finding as an ineligible activity for the city .
The original Boji contract was awarded through the State of Michigan and was for the Department of Human Services. This is the new DHS building constructed on Clio Road near Pierson.
Boji, under the name of MIG Investments, LLC, is a for-profit developer who won the award for the building through a competitive bid process through the State of Michigan.
MIG sought gap financing for this project and was awarded $550,000 in the form of a forgivable loan, with security interest released at the completion of the project.
NSP projects are required to follow CDBG (Community Block Development Grant) rules and this project violated 24 CFR 570.201, 24 CFR 570.207 and OMB Circular A-87 (C)(2). Also Flint did not establish need based on service to low, moderate, middle income residents in the area of greatest need. Simply being located in Flint does not establish need.
In addition, the report cites a resale back to the City as a condition of the State of Michigan award that resulted in the developer's net proceeds including the NSP award in excess of 23% or more than $1 million at closing. "This rate of return is generally considered unreasonable, especially for a project with long term tenants in place prior to construction. The low risk does not justify this rate of return."
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Fri Jul 20, 2012 2:19 pm |
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untanglingwebs
El Supremo
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Hud recognized the significant needs of the City of Flint that these NSP funds could have been used for. Since the project was already planned to be constructed in Flint by the State of Michigan, providing funding to a for-profit builder resulted in less funding for other needs.
Hud states the City must return the $550,000 to the US Treasury. The money, upon repayment, will be in the City's line of credit and must be used for eligible activities. |
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Fri Jul 20, 2012 2:27 pm |
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untanglingwebs
El Supremo
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HOMEBUYER ASSISTANCE
HUD reviewed all records, funding agreements and supporting documentation of the two nonprofit companies used by the City to provide the mandatory homebuyer assistance and counseling in order to determine complaince of all necessary regulations.
The City awarded $400,000 to two organizations, Metro community Development and Circle of Love in Saginaw. These nonprofit organizations were to provide homeowner assistance and counseling prior to receiving a mortgage loan. (75FR 64322 (federal register) October 19, 2010: (1) (3) (b),
Circle of Love was determined not to be a HUD certified counseling agency and all potential homeowners that received services from Circle of Love must re-enroll with a certified agency to receive the proper certification.
Hud determined the City failed to use due diligence when awarding the contract to Circle of Love and all monies paid to this organization must be repaid to HUD from a non-federal source. Once resored to the line of credit, the money must be reallocated to an eligible NSP activity. |
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Fri Jul 20, 2012 2:42 pm |
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untanglingwebs
El Supremo
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SUBRECIPIENT OVERSIGHT
During the 2011 monitoring visit the City had findings on the monitoring of agencies receiving awards through the City of Flint . This year HUD reviewed instances of this subrecipient monitoring.
The City records revealed the City is now following up on past agreements and recommending corrective actions to these nonprofit subrecipients. This prior finding was closed. |
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Fri Jul 20, 2012 2:57 pm |
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untanglingwebs
El Supremo
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Administration and Procurement
Two procurement related findings were made in 2011. As a result HUD reviewed the only procurement after that date, which was the project management contract for CIG.
The City maintains a list of minority and women owned businesses, but HUD was unable to determine id these lists were used to solicit competitive bids.
24 CFR 86.36 (d)(3) states "Procurement by competitive proposals. (ii) Proposals will be solicited from an adequate number of qualified sources.
The City, under Walling and Eason, executed an "accelerated (7 day) Request for Proposals for the management of the City's NSP1 program.
The problem is the city failed ensure there was maximum open and free competition. Hud stated there was no evidence of competition as the city failed to solicit a significant number of qualified sources. |
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Fri Jul 20, 2012 3:32 pm |
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untanglingwebs
El Supremo
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HUD determined the City did not follow their procurement process. HUD further stated that while the city process stipulates they must notify qualified organizations about the bids, they found no evidence that this occurred. While there was criteria for evaluating bids, no evaluation took place.
"Finally, there was no evidence of cost comparison prior to executing the agreement with the management company. It appears that although management firms reside within the city, they were either not provided an opportunity to bid or failed to respond. This became a sole source solicitation without justification." |
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Fri Jul 20, 2012 3:39 pm |
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untanglingwebs
El Supremo
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| The end result is the city must repay all of the disallowed costs because of a failure to follow proper procurement rules. The money must be repaid from a non fedral source and the amount of $244,916 must be reallocated to an eligible activity and spent by March 2013. |
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Fri Jul 20, 2012 3:43 pm |
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untanglingwebs
El Supremo
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ACQUISITION AND REHABILITATION
Salem Housing, a non profit developer sub-contracted their housing rehabilitation services to Operation Unification. Construction Oversight and project management was to be provided by CIG. The housing rehabilitation completed does not meet with the city's houaing code.
There was a stop-work order on 1650 N. Grand traverse because of the improper installation of the roof and incomplete lead based paint abatement.
"In addition, the contractor was paid for the incomplete and unqualified work".
75 FR64322-October 19, 2011 (I) Rehabilitation standards and Omb A-87 (C)(2) was the criteria used.
The report also cited exterior trip hazards in sidewalks and driveways and damaged fence hazrds. This house was older and required significant rehabilitation. |
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Fri Jul 20, 2012 3:54 pm |
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untanglingwebs
El Supremo
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Cause:
"The housing rehabilitation specifications failed to meet the city's code complaiance standards. The developer failed to provide adequate oversight to the project. The property management firm allowed payments for substandard work. The grantee failed to monitor the activities."
Effect:
"Work already paid for will have to be re-done. The house remains incomplete and the budget for the project has doubled without the support of sufficient funing. The contract with the developer has expired without proper completion. Resale cannot occur and affordablehousing will not be provided as specified by NSP. |
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Fri Jul 20, 2012 4:01 pm |
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untanglingwebs
El Supremo
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DEMOLITION AND REDEVELOPMENT
This is primarily an in-house project for the city and the only praise in the report.
"The city's demolition model could be used as an example for other communities facing similar demolition needs. The demolition coordinator maintains records identifying program costs by time distribution records for both the equipment and the operators. The work is identified by program area, census tract address and funding source. All projects are cleared for environmental concerns and those with potential environmental risk is uncertain, the projects are treated as though risk is evident.
The city has completed cost analysiswith private sector demolition contractors to ensure cost reasonableness. Abatement and disposal contractors are provided the federal fund accounts to ensure they are properly invoiced for each property. In addition, all properties are secured with liens for the cost of demolition to ensure the funds are recaptured in the event of sale or change in ownership."
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Fri Jul 20, 2012 4:13 pm |
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untanglingwebs
El Supremo
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RENTAL AND/OR PROPERTY RESALE
HUD visited several properties acquired for rehabilitation by Operation Unification
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"The non-profit developer currently has three completed properties occupied by renters, however we were unable to to document proper lease-to-own and/or an eligible rental structure based on tenant income criteria. The developer explained they sought to lease up completed vacant properties in order to prohibit vandaliam and theft.
The plan for the disposition of the remaining properties remain unclear; the development agreements have since expired without the benefit of project completions. Marketing and resale of the of the NSP homes has not yet been successful. The acquired and rehabbed homes are slowly attracting attention. The genesee County land bank has been assisting the nonprofit developers in marketing the properties by including them in their marketing brochures."
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Fri Jul 20, 2012 4:22 pm |
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untanglingwebs
El Supremo
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Page one of the report under Acquisition, Rehabilitation shows a budget of $1,953,000 and expenditures of $934,492 as of march 31,2012.
The goal was to acquire and rehab 18 homes for resale to qualified homeowners.
The reult is 17 homes were acquired, 3 completed and0 sold.
Is there another payback in our future? |
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Fri Jul 20, 2012 4:26 pm |
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