CAO chief: HUD audit expensive

Published 12:00 am Tuesday, November 11, 2003

It has been a long time coming, but the Ironton-Lawrence County Community Action Organization is ready to close the door on the U.S. Department of Housing and Urban Development's audit - and the mountains of paperwork that came with it.

HUD's Office of Community Planning and Development sent the city of Ironton and the CAO an Oct. 28 letter stating that the audit was officially closed in August 2003 and that both were cleared of all allegations of funding misuse.

CAO Executive Director Keith Molihan and other agency representatives wanted to explain the entire four-and-a-half year process to the public so it can move forward.

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Molihan called the entire audit a waste of time and money.

"The biggest thing with the whole issue is that it is upsetting when someone questions your integrity.. . . I was just damn furious," Molihan said. "I was ready to sue someone over statements made in the newspaper."

The only positive of the whole thing was that the CAO went through an extensive audit and was totally exonerated, Molihan said.

"The thing we need to convey is if someone has questions, they should raise them," he said. "But, if they have been provided with documented proof, they should accept it and move on."

Betty Adams, fiscal officer for the CAO's Community Development department agreed.

"We were not innocent until proven guilty," she said. "We were assumed guilty and had to prove our innocence."

In August of 1999,

HUD officials received an anonymous complaint alleging the city and the CAO, who administered the funds, misused Community Development Block Grant money. The complaint was based on information that came from HUD's Internet map that identified projects in inaccurate areas throughout the city.

HUD sent a letter in late August of that year stating that neither city officials nor the CAO

was responsible for the map information that HUD meant only to be as a general areas, not precise locations, said Ralph Kline,

community development director for the CAO.

Later that month, HUD investigators began a 8-month on-site audit that actually lasted more than four years.

The audit required paperwork that dated back to 1992 and beyond.

In November of 2000, the audit findings were released.

The original audit had five areas of findings - that the CAO did not assure that the units met residential rehabilitation standards after HUD assistance, that the assistance went to households that exceeded income guidelines or did not have documentation, that the CAO did not safeguard assistance, that there was a lack of control in preventing a conflict of interest on jobs and that the city and the CAO needs to improve its contracting process.

Each category was addressed and resolved, mostly by finding the proper paperwork and providing the proper documentation, Kline said.

The city and CAO had until February 2001 to respond and the issue continued to go back and forth with reviews, correspondence and documentation for the next three years until it was closed in August.

Kline said that the audit showed that there was some disagreement over standards and the documentation process. However, all were clarified or resolved showing that the CAO did nothing wrong but did have areas where it could improve its documentation.

Essentially, the final resolution was that all funds were accounted for and all issues were satisfied, so that no repayment was required by the CAO or city, Kline said.

Though the audit originally indicated that the city could be liable to reimburse more than $250,000, this turned out to be untrue, Kline said.

"It was very quickly established in the audit that all the funds were accounted for," Kline said. "It just came down to the technical portions of the programs."

Also, this figure was overly inflated because the way that HUD calculated it. As an example, the CAO spent $23,620 on one home. Because of four areas of concern, HUD considered this project to have $73,485 in question.

So a few discrepancies could quickly add up to far more than was actually spent on the project. The problems were easily corrected for the most part, Kline said.

The worst part of the whole experience was that, it was not the city or the CAO that were hurt the most, but the people who need housing assistance and the residents who want to see improvements in the city, Adams said.

Molihan said that it is impossible to tell how much money the city and CAO spent and also lost in grant funding during the four and a half years that the audit went on.

Kline said he could only guess how much was spent in terms of paying the CAO employees during the investigation but that it was probably more than $100,000, not to mention all the federal tax dollars that were spent to pay the inspector generals staff, the consultation fees and the state and area HUD office work hours.

The CAO was unable to work on grant projects which caused the city to lose thousands more in funding, Kline said.

As a comparison, in 1999, the CAO worked with the city to provide $1.45 million in grants and private sector funding. In 2000 while the audit was in full investigation, the CAO only worked with the city to provide $64,600 in funding and lost a minimum of $500,000 that year.