The city Board of Estimates has approved a $50,000 federal grant for the Council for Equal Business Opportunity even though federal housing officials ordered the city not to award any more federal money to the non-profit group.
In November, the U.S. Department of Housing and Urban Development ordered the city to stop awarding federal money to CEBO because it was not being spent in accordance with federal guidelines.
Those guidelines say the money should be used to create permanent jobs or to eliminate urban blight. CEBO is a private organization that provides loans and financial advice to small, minority-owned businesses.
The city is preparing a response to HUD's November report, which singled out CEBO for improperly spending $2 million of block-grant money in the last few years.
HUD criticized CEBO for giving loans to contractors for working capital, rather than using it to create permanent jobs for low- and moderate-income people.
HUD also determined that the city was giving money to CEBO to help businesses outside Baltimore and that $600,000 in federal money was lent to a member of CEBO's board of directors for working capital for his construction business.
After the Board of Estimates approved the $50,000 grant earlier this week, a city spokesman said the money would not be given to CEBO until the dispute with HUD is resolved.
William Toohey, spokesman for the city's Department of Housing and Community Development, said a city official got a verbal assurance from HUD that the city could approve the funds in advance of settling the dispute over CEBO.
He said the federal grant needed approval because it was part of a larger package of money -- which included city funds -- that the city wanted to give to CEBO.
But Rheba Gwaltney, HUD's spokeswoman in Baltimore, said HUD officials were unaware that the Board of Estimates had approved the money for CEBO.
Yesterday, City Council President Mary Pat Clarke defended CEBO, and the board's action this week.
"I raised a lot of questions about CEBO from the perspective of how the review was going and I'm very supportive of CEBO because they've been so active bringing economic development in during the last few months," said Clarke, who chairs the Board of Estimates.
"I feel CEBO is on sound footing. We cannot allow HUD to grind our development to a halt while we jot down what we're doing every 15 minutes," said Clarke.