An independent audit of programs in the Niagara Falls Department of Community Development has turned up questions about how the city handled reporting requirements, in 2019, for tracking and supervising expenditures in the Community Development Block Grant, Home Investment Partnership and Section 8 Housing programs.
A separate review of Community Development spending, between 2014 and 2019, conducted by city administrators, has reportedly uncovered an estimated $2.6 million in overspending on projects approved by the Falls City Council and “close to half a million dollars” in spending on projects not approved by the council.
Mayor Robert Restaino said the review of 2014-2019 spending, which took place under the administration of former Mayor Paul Dyster and former Community Development Director Seth Piccirillo, was triggered by a number of unpaid contractor invoices that were discovered in January and February of this year.
Restaino defeated Piccirillo in the 2019 mayoral race.
On Wednesday, Piccirillo declined to comment on either the audit or the administration review of his department’s 2014-2019 spending.
“I left city employment over a year ago,” Piccirillo said. “This is the first I’m hearing of this. I’ll take a look at the (audit and review), but I don’t have a comment on it right now.”
Restaino said city officials, including Niagara Falls Housing Authority Executive Director Cliff Scott, who is currently supervising the Department of Community Development under a shared services agreement with the city, have been meeting with officials in the Buffalo Office of the federal Department of Housing and Urban Development to resolve the issues raised in the independent audit and the internal review.
The auditors offered a “qualified opinion” on the Department of Community Developments financial processes in 2019.
“The qualified opinion is a red flag (for HUD),” City Controller Daniel Morello told city council members during their Wednesday night meeting. “Additional testing will be done by the auditors for the next few years.”
Morello said the audit results mark the department of community development as “a high risk” and “going forward could effect (federal) funding.”
The auditors report, prepared by the accounting firm of FreedMaxick CPAs, noted eight separate findings that failed to follow guidance from the federal office of Management and Budget (OMB). Auditors noted insufficient documentation to determine how much time employees of the department spent working on Community Development Block grant, Home Investment Partnership and Section 8 housing programs.
They also found a lack of sufficient documentation or controls for receiving, recording and reporting CDBG and Home Investment Partnership program income.
The independent auditors also raise concerns about a failure of the city to spend CDBG funds in 2019 in “a timely manner.” They noted that “the city’s Department of Community Development did not have an established internal control process to appropriately monitor the timeliness requirement and ensure compliance. The city exceeded the allowable balance in its line-of-credit ... resulting in noncompliance with this period of performance requirement.”
In the block grant program, the auditors found the department failed to meet financial and performance reporting requirements. The auditors warned that “noncompliance could have funding implications in the future.”
In the Home Investment Partnership program, auditors questioned the lack of effective controls and monitoring to perform risk assessments and ongoing monitoring activities over sub-recipients of program funds. They again noted that “noncompliance could have funding implications in the future.”
In the Section 8 housing program, auditors found deficiencies in supervisory reviews of eligibility determinations. Auditors also found a failure to conduct necessary reporting and testing requirements for the program.
“The slipshod, reckless and undisciplined performance of that department will shock you out of your seats,” Restaino told the council members, some of whom the mayor said were serving on the Council and had oversight responsibilities for the Department of Community Development during the 2014-2019 time period.
When administrators began finding what they have characterized, in payment requests to the council, as “unpaid invoices for services” in the Department of Community Development, Restaino said they become concerned and began a review of spending from 2014 to 2019.
“We have found that (the Department of Community Development) overspent about $2.6 million on projects (in the 2014-2019 time period),” the mayor said. “And they spent nearly half a million dollars (during that time) without council authorization.”
Council Member Andrew Touma called the revelations “appalling” and asked the mayor if there was a potential for “criminal charges.”
Restaino said he was “not pursing” that, but said the city would cooperate in any investigation that might be launched by federal authorities.
“To me, this is a matter of making sure we right the ship at that department,” the mayor said.