State report says Cedar Rapids business-recovery program, which moved this week to new contractor, has had ‘deficiencies’

CEDAR RAPIDS – A seven-page, state of Iowa report documents deficiencies and errors in a city of Cedar Rapids business disaster-recovery program the day-to-day operation of which the city handed over to a different contract firm this week.

In announcing the change this week in program management, City Hall made no mention of problems in the program or in its contract with Transitions Made Better Inc. of Cedar Rapids. Instead, the city said it was transferring administration to ProSource Technologies, a Minneapolis, Minn., firm which is administering other disaster programs for the city, to allow Theresa Bornbach, owner of Transitions Made Better, to focus on another of her businesses.

The state report, authored by Peggy Russell, program manager for the Iowa Department of Economic Development's Disaster Recovery Office, identified four findings of deficiency in the city's business disaster program, three concerns of deficiency and no “observations” of exemplary practice.

Russell's report is dated March 3, 2011.

The report raises issues about the program's financial management, the city's administration of the program and the procedure the city used to hire Transitions Made Better.

Such reports come in a context: Several times in the last year, City Hall has said it expects federal and state monitors and auditors to identify errors in the city's delivery of complicated, documentation-heavy, rule-changing, flood-recovery programs.

City Hall did not comment Friday on whether the state agency's monitoring report factored in the city's decision to end its contract with Transitions Made Better.

The program's Bornbach did.

She said Transitions Made Better and the city of Cedar Rapids had recently and successfully completed “a thorough review of every single invoice that her program had submitted.”

“We've complied with all the documentation requirements that they request of us. … We've provided everything the city has asked us to provide,” she said.

She said she had never seen the state agency's monitoring report until Friday afternoon, when she asked the city for a copy of it. She expressed “surprise” and took exception to its points.

At the same time, Bornbach acknowledged receipt of a shorter report, which she said was labeled as a synopsis of a monitoring visit from March 21to 25, 2011, by the U.S. Housing and Urban Development. HUD provides the funds for the business-disaster programs.

In that synopsis, Bornbach said it states: “The outstanding audits' findings demonstrate a lack of capacity by TMB to administer business programs.”

She interpreted that to mean she did not have enough employees – Transitions Made Better employed 21, she said – to administer the program.

In the hiring of Transitions Made Better, the city issued a request for proposals on Aug. 5, 2009, with a deadline for submittals of Aug. 25, 2009. Only Bornbach, who had been administering a different business-recovery contract for the Cedar Rapids Area Chamber of Commerce Foundation, submitted a proposal. On Sept. 9, 2009, the City Council authorized the city manager to execute a contract with her Transitions Made Better the next day.

Bornbach on Friday said the funding program was called the state's Jumpstart 1 program during her work as a contractor with the Chamber Foundation and was called the state's Jumpstart 2 program with the city contract. Overall, about $60 million in federal funds are involved in the programs, she said.

The state report of March 3 documents examples of problems over the life of the city contract.

For instance, the report states that the city did not determine if the administrative fees to be charged by Transitions Made Better met a federal requirement that the fees be “allowable and reasonable.” The report gave the city a deadline of March 31, 2011, to issue a formal request for information in an effort to obtain fee comparisons. The city has issued that request, Cassie Willis, the city's spokeswoman, said Friday. Bornbach said the city has produced documentation to support the program's administrative fees.

Additionally, the Iowa Department of Economic Development states it had decided not to process further invoices from Transitions Made Better until the city conducted a pre-audit of the invoices “due to the number of errors” found in the firm's invoices. The city's Willis said the pre-audit has been done.

The report states that Transitions Made Better's invoices submitted for its administrative services “do not contain adequate documentation to substantiate the charges.” Invoice information, the report states, is presented in “a complicated manner which cannot be reconciled without the city or IDED manually recreating the information presented in the invoices.

“This has resulted in delays in identifying billing errors and delays in reimbursing administrative funds to the city. To date, IDED has not reimbursed the city for administrative funds associated with TMB invoices.”

In addition, the report notes an instance of “overbilling” and another in which Transitions Made Better billed for services related to checks on duplication of benefits for businesses which hadn't been completed.

In one example, an invoice in April 2010, which billed the city $350 each for 273 businesses, found in a review of the first 15 businesses that 13 had not had a completed analysis for duplication of benefits. In response, the city has set a date of March 15, 2011, to resolve the matter, the report notes. The report states that this has necessitated the city to send a new round of forms to affected businesses.

In another example, the report states that Transitions Made Better overbilled the city $122,500 for intake sessions with businesses. The “overbilling and errors” were not caught nor corrected in a timely manner, the report states.

Bornbach on Friday said she believed that the city decided to move its business-recovery contract from Transitions Made Better to ProSource to consolidate its program delivery in one place.

Bornbach acknowledged that administering disaster-recovery programs for a disaster the size of the June 2008 flood in Cedar Rapids is not a simple job.

“There's no rule book for these disaster programs,” she said. “Anytime you're creating anything new … there will always be challenges until it gets refined. I would agree it's a challenge. You're blazing new ground.”

Doug Schumacher, a founding member of Cedar Rapids Small Business Recovery, said this week that Bornbach was “almost single-handedly responsible for bringing a lot of these funds into town.”

The Cedar Rapids Area Chamber of Commerce, in a prepared statement, also expressed gratitude for Bornbach's work.

Bornbach has other business endeavors, which include Corridor Co-Works, a downtown work space company.