Montebello Records ‘Absolutely Lacking,’ Say HUD Officials

By Elizabeth Hsing-Huei Chou, EGP Staff Writer

A report released last month indicates Montebello kept almost no records during the last five years on projects and programs funded by grants from the federal housing authority.

A U.S. Department of Housing and Urban Development, HUD, spokesperson said their auditors were “amazed” by the city’s handling of its HOME and CDBG funded programs.

Read this story IN SPANISH: Funcionarios de HUD Destacan ‘Ausencia de Registros’ en Montebello

“Records are absolutely lacking,” said HUD spokesperson Gene Gibson. “There’s a lack of checks and balances to make sure the documentation was accurate. The sub-recipients, the entities doing the development for the city, they were not monitored.”

Officials performing a routine “on-site” review this past April of Montebello’s HUD programs were taken aback. Their report sent to the city on June 16 cited 31 violations and two concerns, many of which involved “negligence” in recording and monitoring how federal housing funds were used.

Where there should have been invoices, contracts, and reports kept on file for programs and other activities over the last five years, there often were none to be found.

HUD officials “don’t see this very often” and were “surprised by the broad range of non-compliance,” Gibson said.

Meanwhile, the FBI last month issued a subpoena requesting the HUD-related records that do exist in the city as part of a possible investigation.

Montebello’s record keeping habits and its handling of federal housing funds could also prove costly, because the city is required to repay any money it cannot back up with supporting documents.

The cost is estimated at around $5 million, but city officials are in talks with HUD and have an opportunity to produce information that may not have been considered before.

“People have been batting around some numbers, but no one can know” how much the city would have to pay back until they do some more work, said Interim City Administrator Larry Kosmont.

“The problem in Montebello is they don’t have the money to pay,” said Gibson. HUD officials are working with the city to come up with more manageable ways for the city to deal with any potential costs, including giving the city less HUD money in the future.

Montebello officials say they are studying each of HUD’s findings carefully. “It cannot happen again,” Kosmont said.

“We are working on figuring out how to remediate these things. We all want the HUD funds to be managed well… the people of Montebello deserve to have their CDBG funds spent properly on their behalf,” he told EGP.

Federal housing funds are typically used by cities for neighborhood revitalization, home-owner assistance, affordable housing, homelessness, and community development programs.

A 2006-2008 census survey counted 12 percent of white residents and 23 percent of Hispanic residents in Montebello as earning incomes below the poverty level. The city had an unemployment rate of 13.4 percent in 2009, up from 6.4 percent in 2000.

In Montebello, HUD funds have been allocated for summer youth employment, senior housing, code enforcement, homeless shelters, home loan, infrastructure and community center upgrade programs, as well as for program administrator salaries, as part of a stated mission of “maximizing the use of available resources in order to assure the availability of safe, decent, and affordable housing, creating a suitable living environment, and expanding economic opportunities for the entire community.”

HUD officials are considering debarring the city’s last consultant. They found a “prior consultant” to be “pretty unresponsive, not competent,” Kosmont said, so in order to keep working with HUD, he said Montebello will need a “qualified consultant” that will “really help us on a go forward basis.”

Montebello’s city council was scheduled to consider hiring a new consultant to handle its HUD programs at Wednesday night’s city council meeting.

“We are unable to determine if it is plain incompetence” or if there is a “cover-up” or something illegal was going on, Gibson said. HUD only has the authority to get the city to pay the money back, she said, while the FBI looks into whether there was criminal activity.

This report and a previous one released by HUD’s Office of the Inspector General seem to have prompted the FBI to look into the city’s HUD-funded dealings, she said.

City officials have been silent on the specifics of what led to the lack of record keeping. Kosmont said they are under “strict supervision” not to have “conversations about the investigation” because of the FBI subpoena.

The HUD’s review focused on programs active in the 2009-2010 year, but in the process they found the record keeping deficiencies went back as far as five years.

Former Councilwoman Kathy Salazar said while she was indeed one of the people overseeing city business at the time, as members of the council, “we’re part-time people” and “not one of us can go in and micromanage.”

Full-time staff including the city administrator were the most familiar with how HUD programs were run on a day-to-day basis. “Who do developers talk to? They talk to staff,” she said.

But if she had tried looking into every little detail, “I wouldn’t know where even to start,” she said. “I talk to the city administrator. If city administrator says things are going [as they should], I have to believe what he’s telling me.”

Salazar said she did not suspect that the city administrator or any of the staff they retained had been doing a poor job of recording and monitoring the city’s HUD programs, and says the results of HUD review is a surprise to her.

“They should have been keeping very accurate records. You have to keep those records. I never knew that they didn’t. This is all now coming out,” she said.

Former long-time Montebello City Administrator Richard Torres said he was not alerted to deficiencies in how staff and consultants were managing their HUD funds.

“While I was there, I wasn’t aware of anything being done incorrectly,” he told EGP.

While there were issues he worked closely on, such as labor negotiations and the budget, Torres pointed to the size and scope of a city government, and said the management of HUD funds had been delegated to others.

He had no reason to audit or request the day-to-day files of the department handling HUD funds, he said. “I’ve been there for most of 20 years in that office. I understand that. It’s not a centralized system… but there shouldn’t be any errors. When you find errors, you need to correct them.”

Other former long-time council members contacted by EGP did not respond by press time. Councilman William Molinari, the only member of the current city council who was also in office at the time of the alleged mishandling of the HUD funds, did not respond to EGP’s request for comment.

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July 14, 2011  Copyright © 2012 Eastern Group Publications, Inc.

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