Thursday, June 14, 2012

(Santa Barbara) Grand Jury Blasts 'Failure of Oversite'

By Bo Poertner/Associate Editor/

The Santa Barbara County Grand Jury on Wednesday issued a report detailing the failure of Lompoc Housing and Community Development Corp., inadequate government oversight of the nonprofit’s use of public money, and the dire consequences for the community.
Called “A Failure of Oversight,” the 18-page report makes clear the widespread impact of LHCDC’s inadequate operations and the failure of Santa Barbara County and the city of Lompoc in monitoring its financial status.
The Grand Jury, while focusing primarily on improving government operations, documented LHCDC noncompliance with regulations as far back as 2003, how it over-charged low-income tenants for rent and stopped providing financial reports as it tried to control government attempts to monitor its operations.
LHCDC did not cooperate with the investigation, the report noted.
The Grand Jury, which launched its investigation after receiving several complaints from citizens, made four recommendations each for the city and county regarding annual audits and reporting of the findings.
Also, the Grand Jury asked the county Board of Supervisors, the city of Lompoc and the county Auditor-Controller to respond to its report within 90 days.
The report begins with a well publicized public event — the closing of the Bridgehouse and Marks House homeless shelters by LHCDC on a holiday weekend this January.
On the first page , the Grand Jury states, “The most immediate victims of the fall of LHCDC are the homeless who were thrown out of the shelters, the low-income tenants whose homes are in disrepair, and the residents of Lompoc who have to suffer the resulting blight.
“Taxpayers are also victims. Many of the loans given to LHCDC will have to be repaid by the County of Santa Barbara or the City of Lompoc,” the report continues.
The county, as the lead agency in the federal HOME program, invested $2.89 million in LHCDC properties and faces a potential liability of $1.4 million under a recallable loan provision, according to the report.
“Lompoc, at this time, does not know for certain how much it and its Redevelopment Agency loaned LHCDC nor the extent of its losses,” the Grand Jury reported. “As of October 2009, the Redevelopment Agency expenditure was $1.8 million.”
The Redevelopment Agency has since been dissolved as a result of a state Supreme Court decision in December 2011 that eliminated redevelopment agencies across the state.
The Grand Jury noted that the terms and conditions of loan contracts between the county and LHCDC varied from contract to contract over the years, but concluded that “it was the monitoring and enforcement of the loan requirements that ultimately fell short.”
The loan agreements offered many opportunities to demand accountability by LHCDC, but “the (county) Department of Housing and Community Development simply didn’t do its job in seizing the opportunities available in the agreements,” according to the report.
Lompoc also failed to enforce its loan agreements and covenant restrictions “when there was a clear pattern of failing to respond to the agency’s requests,” the report stated.
The city’s Redevelopment Agency loaned LHCDC about $1.7 million while the nonprofit was “technically out of compliance,” according to the report.
Included in the report was extensive correspondence between LHCDC and government overseers that reveals how oversight was delayed. Among the correspondence:
• An exchange between the city and LHCDC Executive Director Sue Ehrlich in April 2009 about required audits that were late.
After being notified on April 6, 2009 that LHCDC’s annual report for a federal CDBG grant program was late per a contractual agreement with the city, Ehrlich, who is not mentioned by name in the report, replied on April 13, 2009: “The 2006 audited financial statements have been delayed ‘for a variety of reasons,’ but will be completed by the end of April 2009. In addition, the 2007 audit will be completed by the end of August 2009 and 2008 will be completed by the end of September 2009.”
That memo contrasts with public statements made by LHCDC officials that audits were not required.
• On April 27, 2009, Santa Barbara County notified LHCDC that the county would conduct an immediate “brief monitoring” in response to an unsolicited comment from a College Park tenant.
Two days later, Ehrlich asked the county to put its plans for monitoring on hold, questioning whether such monitoring was recommended by HUD and questioning the “nature of the survey” and the “methodology to analyze survey responses.”
The outcome of the exchange is unclear.
• On Sept. 25, 2009, per LHCDC’s request, the county postponed a monitoring of all county-funded projects until Oct. 27 and 28. On Oct. 19 that year, LHCDC asked that the inspections be delayed to late November or early December and asked that a “pre-monitoring meeting” be held at least two weeks prior to the monitoring to review the scope of the monitoring and its goals and objectives.
LHCDC’s last audit, submitted in 2006, revealed that all tenants Casa Con Tres Apartments on North L Street in Lompoc were being charged rent that exceeded the maximum allowed by the Redevelopment Agency’s affordability covenant for the property. The city notified LHCDC repeatedly of the correct rent amounts and requested reduction, according to the report.
The county had granted a HOME loan of $157,300 for the same property. Although LHCDC was in noncompliance with the county covenants, the county’s 2006-07 annual audit reported that 17 HOME-funded rental projects managed by four different agencies were monitored and no noncompliance issues were identified, the Grand Jury Report stated.
Carol Benham, who has written extensively about LHCDC in columns that appear in the Lompoc Record, called the report “proof of a massive failure to oversee taxpayer funds and to hold LHCDC accountable for almost anything. LHCDC failed. The county failed. The city failed. And tenants, residents and taxpayers are paying the price.”
“LHCDC overcharged tenants for rent, and when confronted with it, they simply stopped submitting required data. This organization’s arrogance and hubris is boundless. They seem to believe they were accountable to no one,” she said.
Benham said the case should now move from the civil arena to the criminal.
“I believe it’s time to take it to the next step — an investigation by the State Attorney General or the District Attorney into the possible misappropriation of public funds,” she said.

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