Clark County may have to repay $5M to federal government

Clark County could owe the U.S. Department of Housing and Urban Development nearly $5 million after an inspector general audit questioned how federal grant money was spent.

HUD’s Office of the Inspector General wants the county to repay the Community Development Block Grant program if the county cannot prove the funds were spent on eligible public projects.

Mike Pawlak, director of the county’s Department of Social Service, said he will contest nearly all of the audit’s findings to HUD’s San Francisco Office of Community Planning and Development, which will determine how much the county must repay.

“I don’t anticipate our HUD program people are going to have any issue with us,” Pawlak said. “There’s going to be a very small piece of this audit that will still be unresolved (after we respond).”

In a letter to Tanya Schulze, regional inspector general for audits, Palwak agreed to repay $48,000 that was used to pay wages to a county government employee who did not work on any CDBG program-related activities.

Two projects

The majority of the money the audit calls into question comes from two major projects.

In one instance, the county gave Catholic Charities of Southern Nevada more than $1.6 million of grant funds to improve and expand a food pantry and kitchen. Auditors want more information about the project’s price tag. They also believe the contractor had an unfair advantage in the bidding process.

In 2014, Korte Co. provided the nonprofit a cost estimate for the project based on an architect’s preliminary drawings. Korte won the contract bid two years later.

By the time the project was completed, Korte had reduced the cost by $440,000, but the audit found Catholic Charities did not perform a required cost analysis on the changes.

Pawlak said he’s confident the county can prove the amount paid for the construction was reasonable.

In another instance, the audit faults the county for allowing children with disabilities to use a learning and recreational park at Opportunity Village.

The county used $2 million in grant money funds on Sean’s Park, with the stipulation that the park solely serve adults with disabilities, according to the audit. Pawlak said a small number of children have used the park, which is not open to the public.

He said he expects the auditors’ complaint to be dropped. If not, the county will have to ensure no children use the park so it does not have to return the grant money.

“It’s not a satisfying fix, but we can come into compliance,” Pawlak said.

Lengthy audit

The county receives the funds from HUD every year and uses it as reimbursement for public projects, predominantly for low- and moderate-income people. The county also allocates grant money to local nonprofits and the cities of North Las Vegas, Mesquite and Boulder City.

The inspector general audit covered the period from July 2014 through June 2016, during which the county received $16.7 million in grant money. The county was reviewed due to its “large” grant size, according to the report, which took six months and ended in January.

Schulze concluded that the county did not have appropriate controls in place to ensure the funds it received were spent in accordance with federal requirements.

In addition to repaying HUD, the auditors want the county to update its policies and procedures for monitoring the grant funds.

The audit results come at a time when county commissioners are mulling how to continue funding ongoing CDBG projects that are at risk due to proposed cuts in President Donald Trump’s budget.

Commissioners this month floated the idea of using anticipated bond proceeds to replace an estimated $11.5 million needed to complete projects through 2019. If the county does not finish those projects, it would have to return to the federal government about $1.2 million of CDBG money it already spent on them.

Contact Michael Scott Davidson at sdavidson@reviewjournal.com or 702-477-3861. Follow @davidsonlvrj on Twitter.