In a letter dated Aug. 12, HUD said the state's Department of Administration and the Wisconsin Economic Development Corp. had broken state and federal guidelines with community block grant funds.
The Wisconsin State Journal reported Wednesday that HUD spelled out various problems dating back to 2007, including awarding metal fabricating company Kapco a $3 million grant to create 152 jobs, which was $10,000 per job more than the state's own guideline. In addition, it was a forgivable loan handed out with HUD money despite federal guidelines that restrict such generosity except under extraordinary circumstances.
State officials also failed to check the financial soundness of two companies that received grants, claiming in one case that time would not allow for it. In another case state agencies simply failing to file a financial background check that it said was undertaken in spite of HUD's request for the documents.
The letter also says that 11 out of 20 grants awarded since Jan. 1, 2011 were given the status of "forgivable" without justification.
A spokeswoman for the Department of Administration Stephanie Marquis said the agency, "will continue to work collaboratively with HUD and incorporate its feedback about the program."
Marquis also said the state would improve its oversight of financial backgrounds of companies. "Underwriting should be done prior to issuing a grant ... The state has implemented a stringent policy for new project requests."
Last but not least, HUD has asked the state to look into the withdrawal of $8.6 million in community development block grants by an unnamed Wisconsin Economic Development Corp. controller on the last day of employment with the agency.
Marquis said the state is reviewing the withdrawal, which was reportedly used to pay grants that were awarded in 2011, the newspaper said.