Seward Neighborhood Group reaches settlement with NRP over misspent housing funds


Seward Neighborhood Group (SNG) took a significant step toward re-establishing a neighborhood housing improvement loan program when its board of directors voted in October to approve a settlement between the organization and the Neighborhood Revitalization Program (NRP) over housing funds SNG inappropriately expended several years ago.

The roughly $135,000 in misallocated housing funds stems from expenditures made about five years ago, though both SNG and NRP Director Bob Miller said the transgressions weren’t as egregious as they might sound. Even Miller acknowledged if plan modifications had been made, the expenditures would have been seen as legitimate costs.

The problem, according to Miller, was that the organization made the changes without ever notifying NRP.
At a mid-October SNG executive committee meeting attended by Miller, where the proposed settlement was hashed out, several executive committee members, including Board President Sheldon Mains and Secretary Charlie Hoffman argued the board wasn’t even made aware of the problem by NRP until several years after the fact.

Mains said at SNG’s Oct. 29 board meeting that NRP has allowed retroactive plan modifications for other neighborhood organizations in the past, up to a year after such changes were made, adding that if it took several years for NRP to notify the board of the problem, the one-year period for submitting retroactive plan modifications might still apply.

In an interview with The Bridge, Miller said NRP had problems obtaining the neighborhood group’s balance sheets for a couple years, and as soon as it received the information, SNG was notified of the problem.

Though Miller acknowledges retroactive plan modifications have been allowed, in some instances up to a year after the fact, in this case, he said, it came down to the fact that SNG’s board failed to uphold its fiduciary responsibility. Had the issue not been raised by NRP, he said, the plan modifications still would not have been made. Miller said in the past Seward had an “excellent housing program,” calling it “one of the best NRP had.” He said things just got a little out of control.

Plan includes re-establishment of housing program

The settlement negotiated by the SNG executive committee and Bob Miller, and approved by the SNG board will come in three parts.

First, NRP will transfer $45,023.01 from the Seward Phase I NRP plan to the NRP general fund. SNG will then work with NRP to develop a home improvement loan program in Seward, select an appropriate third party vendor to manage the program, and authorize an NRP contract that obligates a minimum of $90,046.02 of Seward Phase I NRP funds.

For the first five years of the program, the vendor will be required to accumulate and hold all program income up to a sum of $45,023.01 for transfer into the NRP general fund on the fifth anniversary of the execution of the contract. (If a sum of less than $45,023.01 is available at that time, the available program income will be transferred immediately, and the vendor will be required to continue to accumulate and transfer, on an annual basis, additional program income until the sum of $45,023.01 is reached.)

After the full transfer (in the previous phase) has been achieved, the vendor will be required to accumulate and hold additional program income up to a sum of $45,023.01 for transfer into the NRP general fund. NRP may consider forgiveness of all, or part, of this final transfer of funds to the NRP general fund, based on SNG’s record of performance on its NRP-funded activities and the overall financial and programmatic management of the organization.

While Hoffman acknowledged SNG will have to pay the first third of the settlement, he said he hoped that having a well-run housing program in the future would give SNG leverage in negotiations when it comes to the second and third phases of repayment.

While the third part of the written settlement includes possible forgiveness of the final transfer of funds under certain conditions, there is not a similar “forgiveness” clause written into the second part, according to the document distributed at the October board meeting. Miller confirmed this fact in a November interview with The Bridge.

Hoffman said that, five years from now, the organization doesn’t necessarily know who will “be on the other side of the table,” referring to the elimination of the existing NRP structure, and what SNG might be able to negotiate. “To some degree, we’re taking a risk here,” Hoffman said.

Miller told The Bridge that, regardless of NRP’s future, he’d expect that the terms of the settlement would be followed, adding that even with a new city department for neighborhood and community relations, there would still be accountability. “There’s still going to be an agreement signed off by both SNG and us,” Miller said. In fact, Miller said if anything, he’d expect a city department would offer less flexibility than NRP, though admitted he has his own bias. (Miller’s interview with The Bridge coincided with his announcement that he will run for mayor in 2009.)

Miller went on to commend SNG’s leadership during the last year and also extended his thanks to former Board President Jean Johnstad for her efforts to “start looking hard at the numbers.”

Executive Committee Member Anne Cronmiller told the board, having sat in on the discussion with Miller, the proposed settlement reflects some middle ground. She also expressed relief that such a settlement would get “this big limbo chunk taken care of,” in reference to the organization’s bookkeeping.

Mains said a necessary community meeting to discuss major changes to SNG’s NRP plan would probably be scheduled for early 2009. A subcommittee of SNG’s Community Development Committee will likely be charged with designing the program, Mains said.

Hoffman, who chairs the Community Development Committee, told board members in late October, “Our goal has been to get this resolved so we can start a housing program this spring.”