state of connecticut

State Audit Finds DOH Paid ‘Unreasonable and Excessive' Fees to Fund Discontinued Program

NBC 5 News

Connecticut's Department of Housing (DOH) spent hundreds of thousands of dollars on a program that ultimately ended due to a lack of demand, according to a recently released audit from the 2016-2017 fiscal year.

This came as an effort to provide coastal communities with resources to protect their homes during hurricane season.

The DOH established the Shoreline Resiliency Loan Fund in 2014 under former Governor Dannel Malloy with the intention of supplying vulnerable coastal residents with low-interest loans they could use to protect their homes in the wake of Superstorm Sandy.

Using state bonds, the program aimed to provide over 200 loans to shoreline residents but only secured 12 – allotting the “Housing Development Fund” in Stamford, its lending partner, approximately $58,300 per loan, according to the audit.

The loans could be utilized for protective measures, like elevating homes in flood zones to protect them from storm surge.

According to the Office of the State Comptroller, the fund gave a total of $700,000 in administrative fees to the Housing Development Fund to launch and operate the program.

“The Department of Housing should ensure that administrative expenses to establish and operate its programs are reasonable,” the audit states. “The department should ensure that all program contracts protect it from excessive administrative costs.”

The Housing Development Fund retained roughly $18,000 of loan interest as part of the program's payment structure. The lending partner also received over $20,000 as part of a 1% origination fee from borrowers to administer the program, according to the audit.

 The DOH said it “partially” agrees with the audit's finding, but that the majority of administrative and startup costs should have been expected upon launch of the new program.

“The initial projected number of borrowers in this program was significantly higher than the actual,” the DOH said. “The total administrative costs with this program, however, were in line with the proposed initial budget and, as such, were reasonable based on the original projected number of loans to be serviced by this lending partner.”

The auditors said the DOH should have “gauged demand” for the program before providing funds to the Housing Development Fund.

The DOH did not respond to NBC Connecticut's request for comment.

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