HUD’s Inspector General will probe the city’s use of block grant funds

In response to a letter from South District Councilmember and mayoral candidate Mickey Kearns, US Department of Housing and Urban Development Inspector General Kenneth M. Donohue has pledged to audit Buffalo’s administration of federal anti-poverty funds.

The federal probe will focus on the Buffalo Economic Renaissance Corporation.

In a July 24 letter, Donohue writes, “Based on our review of the HUD Monitoring Report and discussions with the HUD Buffalo Community Planning and Development Director, we have concluded that an audit of the corporation is warranted.”

In March, HUD released a report that recorded 19 “findings”—that is, deficiencies—in the city’s administration of community development block grant funds, based on the federal program’s statutory or regulatory requirements. (We reported about it here.) HUD also recorded two “concerns”—that is, problems based not on any statute or regulation, but sufficiently worrisome to HUD’s monitors to bear mention.

The findings ranged from poor bookkeeping practices to misuse of funds, including $2.6 million used to pay down a $6 million Fannie Mae loan that bankrolled the high-end loft developments in the 800 block of Main Street (the Granite Works) and at 210 Ellicott Street (the Warehouse Lofts). Neither project, according to HUD’s report, seemed to benefit the the CDBG program’s target clientele, which comprises low- and moderate-income residents.

The monitoring report required the city to respond to its findings and concerns and take corrective action on a schedule that ranged from 30 to 90 days. The city filed responses, but it’s not clear what, if any, corrective action has been taken.

BERC has been a font of scandal in the past seven months, most notably for the controversial loans, now in default, made to the restaurant One Sunset, an affair that seems to implicate Ellicott District Councilmember Brian Davis and BERC Vice President Michelle Barron, and threatens to ensnare the mayor’s office as well. Most recently, Mayor Byron Brown forced the resignation of BERC President Brian Reilly, apparently in response to a Buffalo News report that the insurance policy the agency provided Reilly covered his domestic partner. Reilly remains commissioner of economic development, permits, and inspections services.

Donohue anticipates that HUD’s audit will begin in early September. City Comptroller Andy SanFilippo is also pursuing an audit of BERC. The results of that audit are expected soon.

—geoff kelly