City says it may take 2 weeks for CEBO to regain funds HUD reverses itself, tells city it can fund the business group.

May 06, 1991|By Joan Jacobson | Joan Jacobson,Evening Sun Staff

Baltimore housing officials estimate it may take two weeks for the troubled Council for Equal Business Opportunity to regain its financing, now that the federal government has reversed itself and given the city a conditional go ahead to fund the minority business group.

CEBO, a private, non-profit organization which has existed for more than two decades almost exclusively on government funds, had its federal grant of more than $600,000 a year cut off last November by the U.S. Department of Housing and Urban Development.

HUD found that CEBO could not prove the money provided permanent jobs for low- to moderate-income people, as required by federal regulations. HUD also criticized CEBO for helping out-of-town businesses and for making loans to a member of its board.

A confidential report obtained by The Evening Sun indicates the XTC organization has $1.4 million in bad loans, with many loan records missing. Although CEBO's mandate is to advise and loan money to Baltimore minority businesses, several people from outside the city defaulted on loans and several others defaulted on more than one loan.

CEBO has also violated federal regulations by borrowing $347,000 from its loan fund to finance its day to day operations, according to other documents. City officials say CEBO has repaid only $50,000, but CEBO says it has repaid $170,000.

HUD reversed itself last week after CEBO hired a lawyer and, and using the Maryland congressional delegation, lauched a lobbying effort at HUD's central office in Washington.

The reversal was made before HUD officials could review the confidential loan report, which was sent from CEBO to the city in March. But the city has yet to send the report on to HUD, a HUD official said last week.

The latest decision came in a May 2 letter to Rep. Kweisi Mfume D-Md. from HUD Assistant Secretary Anna Kondratas in HUD's central office in Washington, essentially overturning last year's findings by HUD officials in Baltimore.

City housing spokesman Bill Toohey said his office estimates it will take about two weeks to meet HUD's latest conditions before CEBO will get its money.

He also said CEBO's grant will be adjusted by the end of this fiscal year (June 30) to account for the money CEBO borrowed from the loan fund, but has failed to repay.

Last week's reprieve is the second time in three years that HU officials have reversed themselves after pressure from politicians.

In 1988, Mayor Kurt L. Schmoke tried to cut CEBO off under orders from HUD, but CEBO board members and politicians lobbied a HUD official who changed the agency's position, according to Schmoke.

Last week's letter comes down hard on Baltimore's Department of Housing and Community Development for failing to monitor CEBO and other operations funded with federal Community Development Block Grant money.

Kondratas wrote, "The problems with the City's [block grant] program are much larger in scope than those related to CEBO. . . . HUD has serious concerns about the city's ability to manage its (block grant) program. . . ."

Her letter also blames the city for failing to correct the problems at CEBO, then states, "HUD does not wish to unduly penalize CEBO for the problems that have been found, particularly in light of the recent efforts made to bring change to its program."

CEBO has proposed to revamp its programs for minority businsses to focus on neighborhood revitalization projects in order to qualify for federal funds.

The approval of CEBO's funds is conditional on HUD OK'ing the new contract agreement between Baltimore and CEBO: HUD's approval of CEBO staff's timekeeping system for their daily work and on the city's proof to HUD that it will adaquately monitor CEBO's activities to help minority businesses.

The letter indicates that the city could release funds for CEBO business loans even before a monitoring system is in place if the city approves all documents for each loan in advance.

Mfume said last week he worked for the last two months, trying to get CEBO's funds restored, since HUD ordered the city to cut off the organization last November.

Mfume, when asked, said he had no knowledge of CEBO's loan report showing missing records, or of CEBO's practice of borrowing money from the loan fund without paying it back.

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