The city has approved a $25,000 emergency appropriation for the Council for Equal Business Opportunity, a private non-profit group whose federal funding was frozen after U.S. officials questioned $2 million of the group's expenditures.
CEBO was created to provide loans and financial advice to small, minority-owned businesses.
But last November, the U.S. Department of Housing and Urban Development ordered the city to cut off CEBO's federal grant of more than $600,000 because CEBO could not prove the money was being used to help low- to moderate-income people or to eliminate urban blight, as required by HUD regulations.
Mayor Kurt Schmoke said the city's emergency appropriation will allow CEBO to operate for "two weeks" which should be enough time for HUD officials to determine whether CEBO will be eligible for federal Community Development Block Grant money. CEBO has depended heavily on block grant money during its 20-year history.
"Our congressional delegation is meeting with [HUD Secretary Jack Kemp] on the matter," Schmoke said. "CEBO has asked us to continue their funding for two weeks. . . . We've gone this far with CEBO. So we're willing to go two more weeks."
"We don't want to close them down before they have an opportunity to have their issues addressed by HUD," said Harold Perry, a deputy commissioner with the Department of Housing and Community Development, the city agency charged with monitoring CEBO.
CEBO has received about $11 million in federal and city funds in recent years, said Perry.
In the current city budget, Perry said, $680,500 in block grant money was earmarked for CEBO, plus an additional $164,222 in city funds -- including Wednesday's appropriation, which was approved by the Board of Estimates.
"The reason for keeping them open is that they have restructured their operation and they believe this makes them eligible for block grant funds," Schmoke said. "That determination will be made in a week or two. Because of the importance of CEBO historically, they ought to be kept in operation."
Schmoke explained that over the years, CEBO "really has helped the economic development of Baltimore's African-American community."
Perry said that the emergency appropriation will allow time for HUD to separate two issues now confronting CEBO -- its eligibility for future federal block grant money and the November monitoring letter questioning $2 million in CEBO expenditures between 1987 and 1990.
That letter has led to the freezing of $454,000 in federal money that remained from this year's grant.
HUD's November report criticized CEBO for improperly spending $2 million of block-grant money in the last few years. HUD ordered the city to repay the $2 million, but the money has not been repaid, according to federal officials.
HUD also criticized CEBO for giving loans to contractors for working capital that did not create permanent jobs for low- and moderate-income people.
In response to the HUD report, the city has proposed an overhaul of CEBO's programs to comply with federal regulations calling for the creation of permanent jobs.
City Council President Mary Pat Clarke said HUD's actions were part of the federal government's "policy of budget-cutting by audit exception."
Clarke said that CEBO should receive the emergency appropriation. "Give them enough money to survive," she said. "They are our best hope to make some successes out of that endangered species: small, minority-owned businesses."