Feds May Demand Refund From O.C.

A federal report has recommended that Orange County and a coalition of nonprofit groups be required to return $70,000 in federal funds because they spent the money in violation of guidelines.

According to the report issued this week, the Orange County Housing and Community Development Department and the Mercy House Coalition in Santa Ana spent nearly $300,000 of a grant without proving that the expenditures met requirements of a federally funded homeless program.

Mercy House Executive Director Larry Haynes said he and county officials “strongly dispute the findings” and are appealing the results through an internal HUD procedure. “No money is missing. There is no allegation of fraud. What is disputed are small things,” Haynes said.

The report was issued after HUD’s inspector general audited Mercy House, a coalition of four nonprofit organizations that provides services and housing to homeless people, including recovering drug abusers and victims of domestic violence.

The inspector general’s office indicated that it was unlikely there had been any squandering of public money. Officials instead believe Orange County and Mercy House were not following federal rules to the letter.

“It is not common that we ask for reimbursement, but we do come across some of the things we found quite often,” said Mimi Lee, district inspector for audits at HUD. “If they do not have proper accounting in place, they need to fix that. It is not as bad as someone who stole the money.”

Haynes said he did not wish to comment further because he and county officials are disputing the claims to HUD. While the inspector general’s office says its report is final, the county considers it a draft because of its appeal.

Ken Domer, community relations manager for the Orange County Housing and Community Development Department, issued a written statement:

“The county has responded to the draft report, strongly disagrees with the conclusions and we are anxious to work with our HUD representatives on concluding this matter. The Mercy House Coalition is a model organization--as well as one of the oldest--for serving Orange County’s neediest populations. We fully expect that HUD will assist the county in finding a positive resolution in this matter.”

Among the report’s findings and the county’s rebuttals, written in a letter to the inspector general:

* Six program recipients didn’t meet federal guidelines because they already had housing or made too much money. One family, which earned $73,514, was accepted into the program even though they had signed a lease to rent a townhouse. County officials said the wife had just had a stroke and the husband had just lost his job.

* One segment of the Mercy House Coalition didn’t use time sheets and paid staff higher-than-normal rates. The county counters that they were told a monthly activity sheet would suffice.

* Orange County charged the federal government $27,055 for administrative costs but didn’t use the correct formula, a conclusion county officials dispute.

* Mercy House did not meet its goal of assuring that 95% of participants would obtain permanent housing. It reported that 92% met the goal but had no documentation to back that up.