HUD auditors in Cedar Rapids to take a look at flood buyout program

CEDAR RAPIDS - City Manager Jeff Pomeranz on Friday said the Office of the Inspector General at the U.S. Department of Housing and Urban Development is auditing the administration of the city's $100-million-plus, flood-recovery buyout program.

The program has largely been paid for with federal Community Development Block Grant funds.

Pomeranz called the audit “expected” and “routine” and one of a series from the state of Iowa, the federal government and the city's own outside firm.

“We see it as a positive,” Pomeranz said. “We work hard to do the right thing, to follow the guidelines of the state and federal government. And it's our job now to undergo scrutiny, and we look forward to guidance from our auditors.”

Mayor Ron Corbett on Friday said the small HUD audit team, which arrived here this week, had planned to come to Cedar Rapids anyway. However, the team did note that it was looking into a citizen complaint about the city's buyout program. Corbett said he understood the complaint related to property demolitions, and he said it may have come from a subcontractor who might not have gotten a job.

“It's a routine audit,” Corbett said. “It isn't an investigation under a cloud of misappropriation or misuse of money as some may try to to insinuate.”

The city employs ProSource Technologies Inc., which has a headquarters in Minneapolis, Minn., and an office in Cedar Rapids, to help administer the buyout program.

Joe O'Hern, Cedar Rapids' flood recovery and reinvestment coordinator, on Friday said the city's contract with the state and federal governments is making between $150 million and $160 million available for property buyouts and for their dispersal.

“It's a large program,” O'Hern said, adding that it's surely the largest of any buyout program that stemmed from 2008's natural disasters in the United States.

To date, the city has spent about $100 million on the program, with the purchase of about 1,200 properties. There are another 170 or so properties still in the buyout process, the city said Friday.

O'Hern said state regulators repeatedly have reviewed the city's buyout program over the life of its existence. The HUD audit team is expected to complete work by May if not sooner, he said.

Corbett and City Council member Justin Shields both said that a committed handful of City Hall critics spend time calling an assortment of federal and state government entities to suggest that officials have misused money and worse.

“The FBI, the CIA, the national defense people. Anybody with a phone number they've turned us into,” Shields said.

Pomeranz said the city got high marks in a just-completed annual audit, conducted by McGladrey & Pullen LLP. Michelle Horaney, a partner at McGladrey, characterized the report last month as “quite an accomplishment” given the huge amount of federal and state disaster dollars that have come into and are coming through the city's budget.

HUD's Office of Inspector General found documentation problems two years ago in a grant program for Cedar Rapids small businesses through Iowa's Jumpstart Business Assistance Program. The city had contracted with the Cedar Rapids Area Chamber of Commerce to oversee the program, and a local business ran the program for the chamber.

Then-City Manager Jim Prosser called the HUD findings “glitches” in a “complicated” federal program that was never designed for disaster relief.

“I'll just warn you, you're going to see more of this stuff,” Prosser said in March 2010.

He noted that one of the complaints after the Hurricane Katrina disaster in 2005 was the lack of care and oversight in the spending of federal disaster dollars. As a result, the federal government has taken steps to increase oversight, he said.

“You have a real strong desire to make sure there is accountability for how these moneys are going to be spent,” Prosser said. “We've forecast that from the beginning.”