POINT TOWNSHIP - The state may have left Point Township off the hook over its handling of a $381,000 state grant, but the federal government says the state has to pay the money back.

In this latest development in the ongoing housing grant investigation, the U.S. Department of Housing and Urban Development (HUD) said the state Department of Community Economic Development (DCED) didn't take "appropriate action to recapture the federal funds" when it confirmed there was a problem.

What role if any the township will play to satisfy that repayment is not yet known.

DCED investigated claims the township didn't adequately track spending of the grant and originally ordered the township to pay back the money. In August 2012, however, it reversed course and said the township wouldn't have to pay.

HUD, through which DCED received and then distributed the grant, got involved, however, and now says DCED must pay up.

Under legal review

A letter dated Sept. 19 from Nadab Bynum, HUD's director of Community Planning and Development in the Philadelphia office, to Edward Geiger, DCED's director of the Center of Community Financing in Harrisburg, was obtained Wednesday from DCED through a Right To Know Request submitted by The News-Item.

In the letter, Bynum said, "We are requiring that the commonwealth repay all funds associated with this activity, including any program income. The deadline to pay is Aug. 30, 2014."

He said this case highlights additional concerns about the state's oversight of HUD-funded programs.

Edward Jordan, press aide for DCED, said Tuesday the department has not yet determined its next step.

"We are unable to comment any further as this matter is still under legal review," he said.

Despite its earlier conclusion that the money would not have to be paid back, DCED in June said the township's decision to allow the developer, The Yoder Group, Turbotville, to build and sell fewer qualifying units than originally proposed would be addressed, and that its investigation was continuing.

The problem was chalked up by township supervisors to a lack of paperwork by the builder; when they produced the necessary documents to the state, they were excused from responsibility of any repayment.

Yoder will at some point, at DCED's instruction, have to build more homes, the number not yet being clear, and offer them to low- to moderate-income buyers, which was supposed to happen with the original grant. Yoder won't get any more grant money toward that new construction.

Failed to monitor

In HUD's letter, Bynum said Freedom of Information Act requests were made on April 5 and May 1 to obtain information about the use of federal funds in the township project. As a result of those inquiries, the Philadelphia office requested additional information from DCED on April 17.

Upon reviewing the information, Bynum said DCED entered into the contract with the township for $500,000 to construct 16 units on July 30, 2004, and 14 units were to be sold to qualified low- and moderate-income homebuyers.

The amount of $381,256.86 was drawn down by the township from the Integrated Disbursement and Information System (IDIS) on Aug. 18, 2005, with no documentation of a contract or the eligibly of the costs incurred, which violated HOME regulations, he said.

The state failed to monitor the project until November 2010 and did not issue a report until July 2011, Bynum said. Once it confirmed that Point Township had failed to enter into a contract with the developer "in direct violation of the HOME program regulations," Bynum said, DCED failed to act.

Bynum said DCED could seek a voluntary grant reduction in lieu of repayment if the department can demonstrate that it has financial hardship that prevents it from using non-federal funds to repay the HOME account.

To be considered for a voluntary grant reduction, Gov. Tom Corbett must make the request in writing to the Philadelphia office.

As to the other concerns about the state's handling of HUD funding, Bynum said in a July 2012 monitoring, the state was cited for failure to adequately monitor its HOME, Community Development Block Grant (CDBG) and Neighborhood Stabilization Program (NSP).

HUD informed DCED that it is requiring the state department to put appropriate financial controls in place within 45 days of the letter to prohibit a grantee from drawing funds without a contract and confirm the eligibility of costs incurred against HUD grants.

These "weaknesses," said Bynum, were cited in audits from 2011 and 2012.

County involved

The Point Township issue became entangled in Northumberland County politics when Commissioners Stephen Bridy and Vinny Clausi forced the ouster of township supervisor Montie Peters from the county planning board, citing a "major leadership failure" related to the township grant.

On Wednesday, Clausi issued a statement calling the grant payback issue a "disgrace" that hurts the taxpayers.

"In the end, I know the Point Township taxpayers will suffer the most and have to ultimately pay this misused money back," he said. "I still don't understand how you can give away $381,000 without any sort of contract."

With an obvious slight toward Rick Shoch, Point Township's solicitor and a fellow county commissioner with whom Clausi has been at odds for two years, he concluded, "What attorney would ever allow their client to do such a thing?"

Shoch, along with township supervisor Chairman Randy Yoxheimer, said Tuesday they were aware of the letter, but directed questions to DCED. At this point, nothing is being demanded of Point Township, Shoch said.

By Wednesday evening, with the HUD letter now in public circulation and comments being made, Shoch issued a statement.

"Anyone who can read and is capable of rational thought can see that the HUD letter to DCED neither states nor implies any of the wild assertions that Mr. Bridy and Mr. Clausi are making," Shoch said via email Wednesday night.

"The public can be assured there were no abuses or cover-ups in Point Township, as Bridy and Clausi assert, by virtue of the fact that the township unilaterally handed over copies all of their records regarding this matter to the Federal Bureau of Investigation well over a year ago, with a request that the agency please feel free to investigate the matter.

"They also invited that agency, and the Investigative Division of HUD's Office of Inspector General, to come to the township offices to review any other records they deemed fit," Shoch wrote.

"This was done to ensure that the public could have faith that their local municipal government was not hiding anything," he said.

Bridy, who contacted The News-Item Wednesday, said he was glad HUD sent the letter.

"They (Point Township) might be able to get it over on the state, but the federal government finally found the truth and is doing what's right," he said.

Bridy said he was asked by township residents to look into the township's grant problems, and he sent Freedom of Information Act requests to HUD.

So did Mark Heintzelman, a former Point Township zoning board member. He said Wednesday news of the payback justifies the efforts he's made to expose the problem, for which he said he has been attacked "over and over again."

"Maybe people will start understanding what's been happening to me," he said.

Bridy criticized Shoch for using local elected officials to "cover up for party mistakes," referencing a meeting that Shoch, state Rep. Lynda Schlegel Culver (R-108), state Rep. Kurt Masser (R-107) and state Sen. John R. Gordner (R-27) had with DCED representatives in November 2012 that seemed to solve the township's problems.

Bridy has forwarded HUD's letter to the state inspector general and requested an investigation.

Culver said in February the township was able to provide the necessary information to DCED.

In response to Bridy and Clausi's past comments, Point Township officials reflected the criticism when the county's handling of DCED's Homelessness Prevention and Rapid Re-Housing Program (HPRP), funded by HUD, was also botched. HUD is asking the county to possibly pay back $215,000 for failing to provide proper documentation to determine client eligibility, although that investigation continues.

Bridy said Wednesday the county is awaiting a report from DCED.