Feds Question Use of $10.5M in Iowa Flood Aid

By Justin Foss, Reporter

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By Becky Ogann

Story Created: Mar 12, 2010 at 5:45 PM CST

Story Updated: Mar 12, 2010 at 6:38 PM CST

CEDAR RAPIDS - The state is defending how it spent $10.5 million to help businesses in Cedar Rapids. The money came through forgivable loans, up to $50,000 each, just for flooded small businesses.

This week an audit came out questioning how the money was distributed. (Read the full audit below.)

The Office of Inspector General at HUD released this 33 page audit. Their biggest concern is the safety checks Iowa put in place to make sure the system wasn't abused. And it should be noted, no one is accused of abusing the system.

"This is not a question of use of funds, it has to do with documents," said Jim Prosser, City Manager.

Cedar Rapids city leaders are in the spotlight because they followed orders from the state on how to give small businesses Jumpstart money.

"We believe the state did a good job identifying what the rules were and working that out with HUD. But this still is really an issue between the state and HUD," said Prosser.

A major issue has to do with making sure only flooded businesses got the help. To get the money, the Federal government first wanted businesses to get a disaster loan from a bank. But, the state only made businesses get pre-approved. And the audit said that's not enough of a safeguard to prevent system abuse.

The owner of the Blue Strawberry got some of that money. He says It's a balance between getting enough paperwork and getting money out quick.

"That was a determining factor in many businesses reopening, and I don't think it happened too fast," said Mike Monnahan, Owner of The Blue Strawberry.

Now, the state has to show it did a good enough job in distribution. Otherwise, the federal government says it wants its money back.

The state and HUD are currently working out their differences. And late Friday, Governor Culver said he thinks this will get resolved quickly.

Read the full audit:
Hud Audit

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