"Not allowable expenditures."
All but one of the 17 expenses listed in the state Department of Community and Economic Development's (DCED) fiscal monitoring review, outlining how a $500,000 anchor building grant was spent on the Allegheny Center for the Arts (ACA) project on Liberty Street, indicate that money from the grant was spent contrary to the original contract.
A copy of the review was provided to the Times Observer on Monday by Warren City Councilman John Lewis after Right to Know requests were rejected by both the City of Warren and DCED since the report's release to city council in May.
The review indicates that, of the $500,000, relatively little was actually spent on the ACA construction.
An itemized listing of how the money was spent, contained in the report, indicates that a $12,000 payment was made to Eriez Construction for "renovations made to the property located at 225-227 Liberty Street." However, the report also indicates that "only $7,943 was used to bills associated with the renovations."
The report offers a scathing criticism in its review of the city's oversight of the project. "The City of Warren was not monitoring its sub-contractors," the report said. "Subcontractor monitoring is not a requirement or condition of the contract between the City of Warren and DCED, however good internal controls suggest that a grantee provide sub-contractor monitoring so it can provide guidance and ensure the funds provided were expended in accordance with the contract."
Further, the city could be on the hook for the entire amount of the loan. "If the City chooses not to complete the renovation of the Allegheny Center for the Arts located at 225-227 Liberty Street in Warren, Pennsylvania and replenish the revolving loan account, then based on the findings outlined in this report, the City of Warren will be required to return the $500,000 to DCED."
The report includes three recommendations to the city: development of a plan for completion the ACA, a plan for how the city will replenish the revolving loan account and develop "procedures for sub-recipient monitoring."
The review notes that Eriez Construction, Inc., the contractor on the project "had invoiced GRO-Warren renovation expenditures totaling $174,976 for the project."
Eriez Construction, Inc. has since filed a mechanics lien on the property, owned by Main Street/Warren Business District Coalition, after payment for work provided was in arrears in an amount surpassing $300,000.
GRO-Warren Executive Director Chris Cheronis resigned in July 2011, citing lack of pay as the reason. The GRO-Warren board dissolved last November.
The city's response, a Comprehensive Response Plan approved by city council at its July 16 meeting and released to the Times Observer that night, states, "In order to accomplish completion of the Anchor Building Project, the City would be committing to substantial additional taxpayer dollars. The City does not find this to be an economically valuable solution to the problem."
However, the city does outline a plan through which it would pay itself to replenish the revolving loan account. "The City recognizes and accepts its responsibility to replenish the revolving loan account. Therefore, the City proposes a twenty-year payment period and schedule...Monthly payments shall be in the amount of $3,029.90 which includes principal and interest. The City is prepared to begin making these payments at the start of the City's 2013 fiscal year and contingent upon DCED's acceptance of the Comprehensive Response Plan."