Explanation
BACKGROUND: The City receives annual grant allocations for the Community Development Block Grant Program (CDBG) from the United States Department of Housing and Urban Development (HUD). In acceptance of this funding, the City is required to comply with the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), as well as requirements for meeting National Objectives according to 24 CFR 570.208). Grant funds are regularly reviewed by City staff and by HUD staff to monitor compliance with applicable regulations, and address any ineligible grant expenditures.
The City operated a revolving economic development loan program beginning in 2004, funded in part with CDBG funds. Ordinance 1053-2015 authorized the continued contracting of loan underwriting and servicing, and ordinances 1811-2015 and 0960-2015 authorized the contracting of administration of revolving loan services with Finance Fund and Economic & Community Development Institute (ECDI), respectively. Small business loans were issued by these agents to four businesses, Java Brava, LLC, Your Just Desserts, LLC, HJ Systems, Inc, and L & E Society Group, LLC, and funded using CDBG funds in fulfillment of HUD’s Low/Mod Jobs Benefit National Objective. This federal standard requires the creation or retention of jobs for low- to moderate-income residents in order to maintain cost eligibility.
Through the City’s regular management of the economic development loan program, it was determined that these four businesses did not meet the job creation requirements of the CDBG funding, making the expenditure of federal funds ineligible. In coordination with field office staff at HUD, City staff within the Department of Finance and Management, Grants Management Section, determined that the appropriate resolution of ineligible expenditures required a return of these revolving loan funds to the Grantee Local Account to make funds avail...
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