U.S. Funds Misused by Housing Agency, Santa Ana Alleges

The City of Santa Ana alleged Tuesday that a nonprofit housing agency under contract to the city misused $73,500 in federal grant funds and, in a separate development, the housing agency’s board of directors has threatened its executive director with dismissal.

Because of the alleged misuse of funds, the city’s administrative staff has recommended that the entire $264,000 in federal grant funds requested by the agency for the 1985-86 fiscal year be withheld.

An internal audit completed last month contends that Santa Ana Neighborhood Housing Services Inc. violated its contract with the city by using money for salaries and other administrative expenses instead of using the money for low-cost home improvement loans, City Manager Robert C. Bobb said Tuesday.

The misuse of funds is one of several concerns that the agency’s board has about Executive Director Jose E. Rivera, board President Mary Silva said.

Issues Called ‘Serious’

Silva called the other issues “much more serious,” but she refused to disclose their exact content or nature, describing them only as “confidential personnel matters.”

City Manager Bobb confirmed that there are “other complicating issues at (the housing agency) that go beyond this particular issue,” but he refused to elaborate.

Michael Heumann, an attorney retained by the agency’s directors, said the board sent Rivera a letter of intent to terminate him last month, and that Rivera responded in writing to “a series of very serious concerns.”

Heumann said the board “apparently had some serious questions with respect to (Rivera) and the performance of his duties.”

A meeting is scheduled Thursday at which Rivera will have the opportunity to explain his position in person, Heumann said. At that time, depending on Rivera’s explanations, a decision on whether to fire him is scheduled to be made.

Attorney’s Comment

Rivera, whose annual salary is $26,400, could not be reached for comment Tuesday. But his attorney, Rudolfo Ginez Jr., said the board’s “very serious charges have affected my client emotionally quite a bit (and) could be injurious to his reputation.”

Because of its large low-income population, Santa Ana receives Orange County’s largest share of federal block grants. For the coming budget year, the city will get more than $4.5 million, which it will then divide among various interests. Thus far, Santa Ana has received requests totaling almost $10 million from agencies and programs that want to be included in the grant allocations.

The Santa Ana City Council is now considering the 1985-86 allocations and is expected to make a final decision in two weeks. The housing agency received $157,000 for fiscal year 1984-85, which will end June 30.

Neighborhood Housing Services’ request for $264,000 in 1985-1986 grants includes $100,000 for its revolving loan fund.

Bobb said that, although the agency should not expect any federal grant funds this year, “that doesn’t mean we wouldn’t recommend them for funds in the future when the revolving loan fund is repaid.”

Bobb added that “outside of this particular issue,” the housing agency “appears to have had a positive influence in its target area.” The agency’s projects in general have proven to be “excellent programs in cities where they’ve been implemented,” he said.

The federal government gives the funds to the city to allocate as it sees fit.

Agency Founded in 1978

Santa Ana’s Neighborhood Housing Services was founded in 1978, when the city pumped $35,000 into its program to promote neighborhood rejuvenation. Since then, the agency has received almost $500,000 in federal grant money, funneled through the city.

La Habra operates the only other Neighborhood Housing Services program in Orange County, but there are about 170 nationwide . Each is supported by a congressionally chartered nonprofit organization called Neighborhood Reinvestment Corp. that channels money from the Department of Housing and Urban Development and other federal agencies into the local Neighborhood Housing Services’ revolving loan funds.

The agency’s contract with Santa Ana expressly calls for the federal money to be used only for low-interest loans to repair houses in a targeted, central-city area. The Community Development Block Grant money was allocated for a revolving fund from which low-interest loans could be made, but instead the money was removed from the fund and used to pay operational expenses, officials said.

“The amount remains unpaid,” Bobb said Tuesday. He said the city is “taking immediate action to rectify the situation.”

Audit Completed Last Month

Lawrence Shaffer, Santa Ana’s finance director, completed the audit last month of the agency’s contract with the city. The audit covered the period from March, 1980, through December, 1984. Shaffer said he is continuing to review the agency’s finances.

“I suspect we’ll have to (continue the review),” he said, noting that the city’s investigation is limited to the “utilization of loan funds for operations.” Shaffer said Santa Ana is “merely reviewing (the agency’s) compliance with the city’s contract.”

Heumann said the housing agency’s directors retained him in late January “to advise the board on how it should seek to address the (agency’s) lack of funds, particularly as they pertain to labor relations.”

The corporation found itself without operating funds, and since then the staff has been laid off, Heumann said.

Early Warning Claimed

Ginez, Rivera’s attorney, said that “Mr. Rivera was telling them all along that the ship was going down and they didn’t do anything about it.”

Board member Danny Siler, an accountant, said he is “not surprised” that city staff members are recommending that no block grant funds be allocated to the housing agency for the coming budget year, in part because the agency still has money in its revolving fund from previous years.

Siler said the board’s threat to dismiss Rivera came after board discussions that spanned “hours and hours and hours.” He said the directors “agreed that was something we needed to do.”

The decision was based on “several reasons,” all of them “confidential information,” he added.

Following those discussions, the board members sent Rivera “a letter of intent to dismiss or terminate with cause.”

“They intended to discharge the executive director unless he were able to respond with a satisfactory, proper explanation for each concern,” Heumann said.