City expects to pay back government $65K

By: Alicia Petska | The News & Advance
Published: March 25, 2009

The city expects it will have to pay the federal government more than $65,000 in refunds for the mishandling of two grant programs meant to support community revitalization initiatives.

The refund stems from an earlier report issued by the Department of Housing and Urban Development, which cited the city for failing to comply with federal regulations in its management of the grant funding.

Among the concerns raised was the possibility the city awarded grants to nonprofits, which in turn spent them on activities not condoned by the strict guidelines attached to the money.

Federal inspectors initially suggested the city might have to return as much as $221,866 — although that figure has been lowered considerably following months of investigation and explanation on the part of city staff.

In a report filed earlier this month, the city conceded it owed the government a refund of $65,363. HUD has not yet responded to that assessment.

The Community Development Block Grant and HOME programs are at the center of this trouble. Both are federal endeavors that provide Lynchburg with a lump sum of cash each year to apply to local projects.

CDBG money can be used for a broad range of community initiatives, including neighborhood revitalization and economic development. The HOME program is focused strictly on creating and supporting low-income housing.

City officials are responsible for divvying the money up among specific projects, as well as monitoring those chosen projects to ensure they remain in compliance with HUD rules.

It is not immediately clear where any required refund money would come from. Local staffers briefed City Council on the situation Tuesday and suggested the burden of repaying the money might best be placed on the nonprofits that made the invalid purchases.

One group has already repaid close to $5,000. That money has since been remitted to HUD and was not included in the refund estimate presented Tuesday.

Officials said talks with the remaining nonprofits involved are ongoing.