More help for low-income residents: Modesto doesn’t have to repay HUD $1.2M, after all

Nearly a year ago, Modesto faced having to repay the U.S. Department of Housing and Urban Development as much as $1.9 million after an audit faulted the city over how it had spent its HUD funding, which helps the poor.

But city officials now say Modesto has some good news: It will not have to repay $1.2 million of the $1.9 million and is working with HUD to resolve the remaining $700,000.

Community and Economic Development Director Jaylen French said in a Tuesday interview that Modesto received an email about two weeks ago from HUD stating it would not have to repay $1.2 million as part of resolving 10 of the audit’s 16 findings.

The audit’s six remaining findings are expected to be resolved within a few months. French said Modesto does not yet know how much it will have to repay, but “we do think and are optimistic it could be lower than the $700,000.”

Ed Cabrera, a spokesman in HUD’s San Francisco office, declined to comment. “The audit is still open, and as such, HUD will not comment on the matter at this time,” he said in a Monday email. “That said, HUD’s Office of Community Planning and Development expects to conclude the audit sometime this summer.”

HUD’s Office of Inspector General released the audit in July of Modesto’s community development block grant program. HUD provides the city with about $1.8 million annually in CDBG money, which the city spends to help low- and moderate-income residents and neighborhoods and for such other purposes as eliminating blight.

The audit was for the 2015-16 and 2016-17 budget years and found, among other things, that the city “did not follow HUD’s and its own requirements for its rental and homeowner rehabilitation projects, ... provided false information to HUD, (and) spent HUD funds inefficiently.”

“These conditions occurred because of the City’s desire to show HUD that it was close to meeting timeliness requirements (for spending money), its disregard for HUD’s and its own requirements, its lack of sufficient knowledge and capacity, and the failure of its policies and procedures to ensure that it monitored all of its recipients of CDBD funds,” according to the audit.

City officials have attributed the audit’s findings to, among other issues, the city restructuring its HUD program, high turnover and vacancies among HUD program staff, and problems with the city’s purchasing administration.

Modesto has completed updating “all policies and procedures to adhere to HUD guidelines,” according to a Community and Economic Development document listing the department’s achievements in the city’s current budget year. The document is part of the proposed budget for the city’s 2019-20 budget, which starts July 1.

Modesto has been working with HUD to resolve the audit’s findings and determine how much it will owe.

The OIG audit recommended Modesto repay HUD nearly $258,000 and explain how it spent an additional $1.69 million or repay that money as well. The $258,000 is part of the $1.2 million Modesto won’t have to repay, said Jessica Narayan, the city’s community development manager, in Tuesday’s interview with city officials.

This story was originally published April 30, 2019 at 2:28 PM.