Feds’ letter to DOA suspends block grant program, says WEDC not state agency

UPDATED 2:45pm – see end of blog.

Badger Democracy has obtained a letter from the US Department of Housing and Urban Development Milwaukee Office (HUD) dated May 17, 2012 to Department of Administration (DOA) Secretary Mike Huebsch. HUD was not just critical of DOA/State oversight of the new Wisconsin Economic Development Corporation (WEDC); the federal agency suspended the critical Community Development Block Grant (CDBG) program.

The agency went so far as to state that WEDC is not an “…instrumentality of the state.” The full letter can be found at this link: HUD Letter to WEDC

While local press have given the letter some attention, the broader implications of this communication have been largely ignored. The HUD review of the WEDC  “Administrative Agreement” executed by DOA exposes a negligence in the statutory authorization of WEDC  to act as a state agency. It also underscores growing concern over lack of accountability and oversight of WEDC.

DOA has been aware for this issue for over one year.

On August 25, 2011, HUD informed DOA that the “…administrative role of WEDC (was) limited because the state was unable to provide an Attorney General (AG) opinion certifying the WEDC as a ‘instrumentality of the state.'”

September 20, 2011 HUD held a conference call with DOA staff and “…reiterated (that) absent an AG opinion HUD does not recognize WEDC as an instrumentality of the state…(WEDC) is not authorized to administer the CDGB program.”

On March 14, 2012, DOA sent an “Executed Administrative Agreement” (Agreement) regarding WEDC and its authority to administer the CDBG program. The May letter was a review of this “Agreement” – which HUD found seriously deficient.

In February, the Walker Administration knowingly disregarded the HUD letter and conference call  advising them of HUD’s position on WEDC.

Prior to the “Agreement” execution, WEDC announced awards to Arcadia, Chippewa Falls, Birchwood, Soldier’s Grove, and Mercer on February 20, 2012. From the HUD program director:

WEDC had no legal authority to award or administer CDBG funds.

As of April 12, 2012 WEDC must immediately cease the award and administration of all CDBG funds. Access to the IDIS system is suspended as of April 20, 2012.

In order to reinstate WEDC, HUD set forth a set of sixteen “critical provisions…not included” in the DOA Administrative Agreement. Here are six of the most critical (numbers in parentheses correspond with the document):

1 (1). Since the DOA had already violated CDBG statutes in the February 2012 awards, HUD is rejecting the DOA request to make its Agreement retroactive to 7/1/11. Any agreement would have to be effective the date the order is signed – 3/7/12 in this case.

2 (3). The CDBG program is defined incorrectly under the “Agreement.” Local Governmental Units are not required to pay back grant funds to the state. They are grants. (BD Note – has this been used as a budgeting gimmick by DOA? Accounting for grant “repayments” as revenue?)

3 (5). There is no provision in the “Agreement” requiring DOA (or any other state agency) oversight of WEDC.

4 (9). Article 21 must comply with Federal Statutes prohibiting use of funds for inherently religious purposes. No such clause exists.

5 (11). Provisions must address the issues of “Job Pirating,” Underwriting,” and “Public Benefit.”

6 (16). No “certifying officer” is named in the DOA “Agreement.” One is required under statute.

Badger Democracy has attempted to determine the status of the CDBG program and state access to the IDIS program, beyond DOA comment to media. No reply from DOA has been received.

DOJ has not responded as to whether the AG has submitted a formal opinion on WEDC as an “instrumentality of the state.”

Sernorma Mitchell, program director from HUD – Milwaukee is at a conference today. The Public Affairs officer from HUD has been attempting to reach her this morning for an update on HUD’s position on the CDBG program.

A public official who wished to remain anonymous spoke with Badger Democracy this morning. This official’s community is currently in the process of completing a CDBG award contract, and the named agency on the contract is WEDC. It was this person’s understanding that DOA is now acting as the oversight agency for the program, and the money is coming from WEDC. That could not be confirmed.

The actual program status is unknown at this time. Are we witnessing the unraveling of a “shell game” to operate WEDC as a quasi-governmental agency with no oversight or accountability; investing state funds and resources for private profit at public expense?

Has DOA bypassed the HUD concerns and oversight of WEDC by acting as the “state authority” and virtual rubber stamp for any program administered by WEDC through DOA?

Badger Democracy will update as more information becomes available.

It is apparent that WEDC is a hastily contrived, singular vision agency put together with no consideration for statewide public impact. While it may serve the corporate development elite in the state, it is keeping the general public (which fund its existence) in the dark as to its activities and investments.

The HUD letter raises serious concern as to whether WEDC should continue to be funded by Wisconsin taxpayers.

UPDATE 2:45pm – A HUD official confirmed to Badger Democracy that DOA has not taken the necessary steps to have WEDC recognized as a state agency authorized to administer any federal program. The question of legality of DOA acting as the “front” agency for WEDC in the Block Grant Program was raised, and HUD will be scheduling a press call when the program director is available.

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4 thoughts on “Feds’ letter to DOA suspends block grant program, says WEDC not state agency

  1. It must be easy to have a “low cost per job created” when you only factor in your state budget whilst illegally distributing millions of federal funds.

  2. Hey Badger Democracy writer, whoever you are, nice work. You should ask HUD where the Office of Inspector General is on all this. It seems to me that they should be involved when we start talking about the mismanagement of millions of dollars of federal funds… and since you’re obviously talking to the HUD people, perhaps you could ask??

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