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Essex County agrees to repay $1.4M for expenses on loans to businesses
Fri, 03/05/2010 - 16:45 — admin
By Philip Read/The Star-Ledger
March 02, 2010, 7:38PM
ESSEX COUNTY -- Essex County has agreed to repay $1.44 million over five years to compensate for what federal officials deemed were unreasonable administrative expenses to provide loans to businesses.
The settlement, sparked by a 2009 federal audit, was struck in December between the county and the U.S. Department of Housing and Urban Development and approved by Essex County Executive Joseph DiVincenzo Jr. and the freeholder board.
It requires the county to make five annual payments of $289,267 to an account the county can use for expenditures allowed by the Community Development Block Grant program, according to the settlement, obtained under the Freedom of Information Act.
HUD sought the settlement after the county’s Economic Development Corp. — or EDC — spent $1.67 million in administrative costs to deliver 19 loans totaling $770,942. The federal government allows municipalities no more than 30 percent of the grant amount for administrative costs.
In this case, CDBG officials estimated the EDC should have spent no more than $232,000 to loan out the grant money, according to county documents. The difference between what the EDC spent and what it should have spent is the $1.44 million the county is now reimbursing, according to the settlement.
Joyce Wilson Harley, an administrator at the EDC, said the settlement was not "punitive" and defended the agency’s record and methodology of delivering loans intended, in part, to create jobs.
"We didn’t do anything wrong," Harley said.
"In order to make a loan to one business, you have to speak to four or five businesses. You need to analyze their financials. We have staff doing that work," she said. "The goal is to loan money, but we want to make sure we get paid back, and we’ve had no delinquencies, no defaults."
As part of the settlement, Essex County also agreed to discontinue funding the EDC with CDBG funds, to return $662,182 from a revolving loan fund and to reimburse $133,000 to the CDBG account for making ineligible and duplicate loans, according to the settlement.
The agreement comes nearly a year after a 31-page audit took aim at practices at the EDC, which offers technical assistance and access to loans to spur job creation by businesses. The audit, by HUD’s Office of the Inspector General, painted a portrait of an ineffective agency.
The administrator who oversaw the county’s grant program, E. Michael Taylor, director of the division of housing and community development, has been reassigned and now serves as the confidential assistant to the division director at the Essex County Department of Corrections. But Harley said the change in jobs had nothing to do with the audit.
"He headed it up, but we felt his skill set was better suited at the correctional facility," she said. "He has a very strong technically driven skill set. ... We move people around all the time."
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