HUD questions 'resolved' on administrative fees in Cedar Rapids buyout program, city flood-recovery chief reports

CEDAR RAPIDS - Federal officials have signed off on some $12 million in fees paid to two contract administrators, fees which federal auditors had questioned last fall after a review of the city's $125-million-plus, flood-recovery buyout program, reports Joe O'Hern, the city's flood-recovery chief.

O'Hern told the City Council's Flood Recovery Committee on Thursday that the U.S. Department of Housing & Urban Development has reviewed the questions raised by HUD's Office of Inspector General and has concluded that the buyout program's administrative fees were justified and that the city has managed the buyout program well.

O'Hern and the council committee members, Don Karr, Justin Shields and Ann Poe, singled out Rita Rasmussen, the city's senior real estate officer, for her work in overseeing the property buyout program.

To date, some 1,300 flood-damaged properties have been bought out and the large majority of them have been demolished.

In its audit report released in October, HUD's Office of Inspector General concluded that the city “generally expended its CDBG (Community Development Block Grant) Disaster Recovery grant funds for property acquisition” in accord with federal regulations.

“So you have a program, well over $100 million, and after all the work by the auditors, that's their determination,” City Manager Jeff Pomeranz said in October. “There is no fraud,” Mayor Ron Corbett emphasized.

Corbett was responding to the allegation by a citizen to a HUD “hotline” that the city's buyout program was rife with fraud, an allegation that federal auditors noted when they arrived in Cedar Rapids earlier in 2012 to conduct the audit.

Pomeranz and the city's finance director, Casey Drew, noted that federal audits are part of administering a program as large as the city's buyout program.

The auditors' central criticism faulted the city for not ensuring the “reasonableness” of the costs paid to two private administrators handling the city's contracts in the buyout program.

O'Hern said that HUD now agrees that the city acted appropriately. The matter has been resolved, he said.