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Council members blast city savings program

Thursday, January 25, 2018 by Jo Clifton

Members of the City Council Audit and Finance Committee on Wednesday expressed outrage over the lack of oversight exercised by the city’s Neighborhood Housing and Community Development Department in administering a program designed to help low-income residents learn how to handle money.

As reported by the Austin Monitor, the audit performed by the Office of the City Auditor says city employees whose job was to administer the Matched Savings Account program frequently failed to review key supporting documents before releasing money to program participants.

There was also no follow-up to find out whether the program, which was supposed to help low-income residents pay for school, buy a home or start a business, was effective in pulling any of the participants out of poverty. Auditors were particularly critical of procedures relating to helping participants start a business.

After the meeting, Council Member Ellen Troxclair, who chairs the committee, said, “The savings program that we have in place not only has a complete lack of oversight, but we have no idea what kind of results it is getting. So we’re spending $600,000 of taxpayer dollars to basically give away free money.”

Troxclair added, “Someone who saves $500 and puts together a couple of sentences of a business plan, they can receive $4,000.” The city has been offering a match rate of up to 8-to-1 for the program.

The audit says that NHCD staff prioritized providing benefits to participants as opposed to oversight of the program, “resulting in program spending on questionable transactions and potentially ineligible participants.” At the meeting, NHCD staff attempted to answer Council questions, and department Director Rosie Truelove promised greater oversight in the future. Truelove joined the department in 2016, so she was not with the department during most of the time period that was audited, 2013 to 2017.

During that time, the department received approximately $300,000 from the federal government and provided a $300,000 match from the Austin Housing Trust Fund for the program.

Council members all said that they do not expect the city to continue funding the program once it runs out of the federal funds at the end of March. They also told City Auditor Corrie Stokes they would like a follow-up report in six months.

Mayor Pro Tem Kathie Tovo said, “I have a wide range of concerns.” Perhaps her biggest concern, as she explained it, was that when program managers found that they had more money to disperse than perhaps they originally thought, they doubled the amount they could give to each participant rather than increasing the number of participants in the program. “I believe there’s a tremendous need for this kind of program. They should have recruited more individuals and had a more tightly run program.”

Tovo added, “It’s a great program in concept that allows people to expand their business or become homeowners or complete their education, and those are life-changing but this is not the appropriate program for helping small businesses.” She noted that auditors reported that people reviewing the business plans said the plans were incomplete. One of the questions she didn’t get to ask was why there was no follow-up on those comments, Tovo said.

Council Member Leslie Pool told the Monitor that in order to operate a similar type of program, “they would have to show us an antiseptically clean program with tremendous oversight and controls.” She added, “I would not vote to continue” the program, noting that prior to receiving the audit she had no idea that such a program existed.

The federal government has eliminated funding for the program and NHCD has until March 30 to spend the remaining funds, according to Truelove. She said there are still 22 people who have been approved to participate in the program, but the city is not signing up any new participants.

Truelove agreed that a program to help small businesses probably should have been placed in a department that normally deals with helping such businesses.

Pool concluded, “The entire audit is a big concern. The lax oversight, the lack of management controls, the apparent misunderstanding that controls would be necessary – all speak to the culture of missing oversight. I think Director Truelove is the right person to be in that position because she recognizes the serious nature of these omissions, and I have confidence that she will do what it takes to make the necessary improvements.”

Apparently the program did not have residency or citizenship requirements, but department members operated it as if it did. Auditors noted that NHCD should review such citizenship requirements for all of its programs to make sure that those requirements are “based on an accurate understanding of federal legislation.” In its response to the audit, NHCD management said it would continue working with the city’s Law Department to make sure that the program requirements are aligned with federal regulations and with city policy.

Photo by John Flynn.

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