The Colorado Division of Housing must return $1.7 million to the federal government after spending grant money inappropriately.
The state won’t lose the money, however. It will be returned to the housing division’s line of credit for future spending.
The money represents about 11 percent of the housing division’s current annual budget.
The U.S. Department of Housing and Urban Development audited the housing division early last year and issued its report Sept. 23.
HUD found that the division distributed Community Development Block Grant (CDBG) money to ineligible organizations in 2006 and 2007. Among those were homeless shelters in the Denver area and a Denver housing agency that runs the Colorado Foreclosure Hotline.
CDBG funding is intended for use by communities for a variety of needs, but it comes with restrictions that have made it difficult for the division of housing to successfully spend.
The state is allowed to distribute CDBG money only to programs outside metropolitan areas, or specifically, in cities with populations of less than 50,000. Larger cities receive CDBG money directly from HUD.
“They used money on things they were not supposed to use that money on,” said Ronald Hosking, the regional HUD inspector general who conducted the audit. “It was a compliance issue. They used money for programs that didn’t qualify.”
State officials did not dispute the report.
“The Department of Local Affairs concurs with all findings … and the department is working diligently with HUD to address all issues raised in the report,” said Susan Kirkpatrick, executive director of the department, which oversees the housing division.
Kathi Williams, director of the housing division, wasn’t available for comment.
The division will repay the grants with $1.1 million from its own housing-development program, which is state-funded, and $600,000 of the original federal money that wasn’t spent, said division spokesman Ryan McMaken.
The division also must improve its controls and provide HUD with documentation supporting its spending of an additional $2.8 million in CDBG money on “questionable projects,” according to the audit report. HUD questioned whether the division used the money for projects that sufficiently benefited low- and moderate-income people.
The state has assured HUD it spent the money properly and plans to provide documentation, said Sharon Jewell, acting director in Denver of HUD’s regional office of community planning and development.
As a result of the audit, HUD will monitor the division more closely to ensure it is spending grant money appropriately, Jewell said.
Colorado is No. 49 among all states in terms of per-capita CDBG funding. That’s because the state has relatively few households living below the poverty line and a newer stock of housing, Williams said in an April presentation.
Still, the division has a hard time finding takers for the limited CDBG grants it does receive for small cities. In April the state had a $10.5 million surplus of CDBG funds. McMaken said demand for the money is on the rise.
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
