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Independent review finds gaps in HCD ERA accounting; commissioners ask legal review before potential referrals
Summary
An independent review of Housing & Community Development ERA funds found pooled accounts, inconsistent ledgers and insufficient transaction-level evidence for some expenditures; commissioners asked city legal and auditors to identify what additional documentation or investigatory steps would be required before any referral to investigators.
An independent accounting review presented to the Commission on March 9 found systemic weaknesses in Housing & Community Development (HCD) grant accounting that undermined the department’s ability to trace Emergency Rental Assistance (ERA) funds to specific expenditures.
Bonnie Cox of Cherry Bekaert told the Finance Committee and the full Commission that Cherry Bekaert identified nine detailed findings covering cash segregation, inconsistent general-ledger versions and journal control weaknesses. The firm said $13.3 million of ERA-related spending (largely pass-through payments to United Way) was traceable and supportable, but that transaction-level evidence was incomplete for other disbursements and that the pooling of ERA receipts in a single HCD account made program-level tracing difficult.
“Pooling of cash, inconsistent recording and absence of standardized procedures prevented the department from tracing ERA funds to specific expenditures or determining the extent to which excess drawdowns were used to support non‑ERA activities,” Cox said in a prepared conclusion shared with the commission.
Commissioners pressed the presenter and the administration for specifics on unaccounted funds and whether the report showed criminal wrongdoing. Cox declined to offer a legal assessment but said the audit revealed ‘‘significant internal-control weaknesses, which equate to financial mismanagement’’ and that the firm found instances where source documentation was missing or inconsistent with recorded transactions.
Administrator Allen said the administration has engaged firms to assist with financial controls and the city is working to complete the 2024 schedule of expenditures of federal awards (SEFA) and the citywide audit. Several commissioners urged the law department to work with Cherry Bekaert and the administration to identify any gaps that would be relevant to investigators. City Attorney Plunkett said the law department would convene with accounting staff and return with a recommendation on whether to refer matters to investigative authorities and what additional evidence would be required.
What was quantified: The auditors reconciled bank cash totals and identified about $3.5 million in additional federal-grant draws (non-ERA programs) that were allowable; they confirmed $13.3 million of ERA pass-through expenditures. Some deposits and disbursements could be identified in bank records but could not be traced in detail to ERA program coding in the general ledger because of inconsistent or missing supporting documentation.
What happens next: Attorney Plunkett proposed two weeks for a focused legal-accounting review to identify the kind of documentation a prosecutor or investigator would require. Commissioners indicated they expect a transparent follow-up for the public and asked administration to prioritize measures that restore controls and public trust.
Why it matters: ERA funds were intended to provide emergency rental support during the COVID-19 pandemic; incomplete documentation or control failures can trigger federal audit findings, repayment obligations and reputational damage. Several commissioners cited the need for accountability and possible referral if evidence supports it.
