DCED questions Shamokin city's grant spending

SHAMOKIN - Where exactly did $130,000 go?

According to the state Department of Community and Economic Development (DCED), "incomplete" and "unorganized" record-keeping by former city officials have led to questions over how grant money was spent.

The $130,000 was allotted to HOME, a program created in 2002 to facilitate affordable home ownership by bringing subpar homes up to minimum property standards and selling them at retail value. But city officials allegedly do not have accurate records for the money, given to them by DCED. And those records can't be found in City Hall.

City officials have until July 23 to answer for several discrepancies identified by the state Department of Community and Economic Development relating to the funds.

HOME and Community Development Block Grant (CDBG) programs in Shamokin have also been under review of the state Auditor General (AG).

Some of the records in question were removed by officials from the AG and a representative from the Labor, Education and Community Services Comptroller's Office in 2007. However, those agencies are still asking for more information, none of which can be found in city hall either, said Dave Kinder, city clerk since 2008.

According to Lynn Dixson, city community development director, state and federal officials spent several months going through records at city hall, beginning July 2007.

Some of the issues identified were addressed in October 2007 by Dixson; however, a 17-page letter from DCED, dated June 8 and received by Kinder, identifies many more questions that require answers.

In addition to Mayor Ronald "Lum" Bradley, the letter was also forwarded to city housing authority executive director, Ronald Miller. The city's housing authority was directly involved in the HOME program.

According to the letter, DCED said records kept from the 2003 HOME program were "unorganized and incomplete."

Since city records for the HOME program were insufficient, a representative from the Labor, Education and Community Services Comptroller's Office had to reconstruct the HOME program expenditures, the letter reads.

These records are the same files that were, prior to the state's investigation, apparently removed from city hall and taken to the office of James Zurick, former city solicitor.

According to Zurick, the city administration at the time changed the locks at city hall and prevented the executive director for the city's Redevelopment Authority (RDA), Brian Jeremiah, from doing his work. At the time, Jeremiah was also the city treasurer, Zurick added.

As a temporary accommodation, Zurick says he allowed representatives from the RDA to use space in his office to work on those files after hours. After Jeremiah was no longer executive director or city treasurer, the records were returned to city hall, Zurick said.

Reached Thursday afternoon, Jeremiah said he was unable to comment.

Dixson, Kinder and city Solicitor Robert Mattis will be meeting early next week to try and answer DCED's inquiries. However, the records are not at city hall, Kinder reiterated.

"We will respond to the best of our ability based on the records we have," Kinder said Wednesday, after the city's regular work session. Council did not discuss DCED's letter at the session.

Authority's job?

Originally, according to DCED, the city's housing authority was to be responsible for rehabilitating homes and providing income verifications to determine eligibility of prospective homebuyers.

It appears DCED is also unsure of the exact role the RDA played in the HOME program. They are requesting documentation clarifying this role.

According to Miller, RDA had the most control over the program. He said Thursday afternoon that he had been cleared by DCED officials for any involvement in the HOME program in April.

DCED issues ...

Between 2003 and 2005, RDA commingled funds from the HOME program with funds used for other commercial rehabilitation projects, such as the Mill Road Square Project.

"The commingling of funds caused much concern because it was extremely difficult to differentiate between purchases for the various projects operated by the RDA including the HOME program," the letter reads.

In addition, some electronic files relating to expenses incurred by the HOME program were obtained from a laptop removed from city hall by DCED officials, with the city's permission.

Those files show some expenses from 2005-06; however, there are no records for 2003-04.

DCED also questioned the income eligibility of HOME program homebuyers. According to the letter, Miller was responsible for verifying their incomes.

The information in the files was not consistent, the letter read. However, Miller maintains he screened all buyers and kept accurate records.

Discrepancies?

Four of the HOME program properties that were examined by DCED were at 818 E. Cameron St., 533 N. Second St., 716 N. Franklin St., and 718 N. Franklin St. DCED summarized the costs spent on each home, noting some discrepancies in the amount of money paid for materials versus the amount paid for labor costs.

The following issues were flagged for each of the homes:

- 818 E. Cameron St.: $5,999.78 spent for materials, $72,028.86 on labor. The property sold for $43,500 on July 21, 2006. The city will need to provide evidence of spending for labor costs.

Files do not contain an application containing household income specifications. However, a representative from the AG's office determined the income for the two occupants was within HUD Section 8 income limits.

- 533 N. Second St.: $13,225.58 spent on materials, $52,090.46 for labor. The property sold for $33,500 on March 30, 2005. DCED questioned labor costs as related to the cost of materials for this property.

The file for the property also did not contain any application containing household income specifications for the homebuyer. However, a representative from the AG's office determined the income for the four occupants was within HUD Section 8 income limits.

- 716 N. Franklin St.: $47,426.68 spent on materials, $60,147.94 in labor. The property sold for $42,500 on May 24, 2007.

The file for this property also did not contain any application containing household income specifications for the homebuyer.

- 718 N. Franklin St.: $65,315.40 spent on materials, $60,147.94 for labor. The property sold for $42,500 on July 7, 2006.

Since the files were incomplete regarding income eligibility for the family that bought the home, DCED is reviewing those requirements at this time. With the total grant amount at $390,080, plus the amount of money received for the cost of the homes, DCED says $130,969.33 in HOME program funding is unaccounted for.

- Money from the HOME program was also used for the following properties: 528 Bear Valley Ave., 137 S. Seventh St., 1001 E. Webster St., and 29 S. Rock St. Officials spent $12,940.45 on all four of these homes and reportedly didn't bring them up to a minimum property standard set by DCED.

- DCED is also questioning $13,000 that was paid to James Zurick, and $14,900 paid to Jeremiah, between 2002 and 2006, from the HOME funds. These funds were administrative costs and DCED is requesting documentation to warrant the expenditures.

Zurick said he was paid a monthly retainer by RDA in the form of a check. The check was work performed for RDA, not specifically the HOME program.

It seems as though Jeremiah was paid twice for the same work multiple times, DCED alleges.

"Due to the general lack of financial documentation and poor record-keeping, DCED cannot justify the full amount of Mr. Jeremiah's administrative payments from HOME program funds. The city must provide documentation to justify the city's apparent double payment for services provided by Mr. Jeremiah," the letter from DCED reads.

DCED review:

- The initial review found $171,245.47 in funds that were unaccounted for, which means there was no documentation to back up the use of those funds. DCED used city banking records to create a list of vendors Shamokin officials paid for services. That list was used to contact the vendors so that invoices could be recreated. The vendors supplied invoices in the amount of $49,299.29, leaving $121,946.18 in unaccounted for funds.

- DCED has questioned the city's use of CDBG funds to pay for Internet services over a 48-month period, amounting to $1,248; month rental fees amounting to $5,642.40; and first-time Homebuyer program charges, $11,000.

According to veteran councilman R. Craig Rhoades, there was no wrongdoing, just shoddy record keeping.

"There were too many hats being worn by the same people at the time," he said, after Wednesday's work session.

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