A city program geared to help small and minority businesses has been suspended after a report showed $932,000 sat on the shelf for years because of government mismanagement.
The report, released Tuesday by the city Office of Inspector General, was a review of the “Access to Capital” program created a decade ago.
The city, independent authorities and lending institutions contributed money to the program’s loan pool, which was then underwritten and managed by the nonprofit leg of Essential Capital.
In all, the program has provided more than $2.7 million in capital since 2005.
Of those loans, less than $139,000 defaulted.
However, the program hasn’t made any loans since July 2012 because there haven’t been any requests, according to statements made by an Essential Capital employee.
Additionally, city responsibility and oversight for the program shifted several times since 2005 — from the ombudsman to the Equal Business Opportunity Office to the Office of Economic Development — during reorganizations.
It was the Office of Economic Development’s responsibility the past several years, but officials within that department said they were unaware of that duty. Instead, they believed it was still the responsibility of the city ombudsman.
According to the report, there’s been no oversight for the program since November 2012.
That led to further complications when Essential Capital in March 2013 informed the city it wanted to terminate its involvement.
Its principal, Cleve Warren, was taking a job at Florida State College at Jacksonville and his company was getting out of the loan business. It wasn’t until June when the economic development office sent him a termination letter requiring signature.
The $932,000-plus remaining in the $1.2 million loan pool was wired back to the city in July and August of 2014, but placed in an “unidentified remittance liability account,” where it’s since remained. While there, it has been unavailable for its intended purpose.
A treasury employee told the inspector general she had been awaiting direction from the economic development office since July 2014 on how to code the money.
In February of this year, the economic development office sent a letter to the independent authorities asking for a recommitment to the program. Instead, the four authorities over the next several months asked for their money back.
In all, a $1.2 million loan pool within the program was funded by the city ($500,000), JEA ($75,000), Jacksonville Transportation Authority ($75,000), Jacksonville Aviation Authority ($100,000), Jacksonville Port Authority ($50,000) and First Coast Micro Loan Inc. ($415,000) — the nonprofit side of Essential Capital — through contributions from financial institutions.
The report concluded the city should determine whether to continue the program and, if so, should address the distribution of funding.
Mayor Lenny Curry’s spokesman Bill Spann in a statement said the administration will reorganize the program “in a way that works for small businesses and independent authorities.” And the reorganization in the coming months will address “this type of mismanagement and lack of procedural controls” from former Mayor Alvin Brown’s administration.
“The end result will protect the taxpayers,” Spann said.
Inspector General Tom Cline said the inquiry began before he started the job, but he was impressed with the work and the “appropriate response” by city officials.
“For much of its life, it’s been a good program for the city and for vendors,” Cline said. “It just went awry.”
Cline said there will be a follow up on the recommendations at a later date.
The inspector general report stemmed from a whistleblower complaint in December 2014 alleging the $1.2 million within the loan pool was unaccounted for. But, after coordinating a review with the State Attorney’s Office, it was discovered the remaining portion of the loan pool had been returned to the city.
The management review began after, starting in April, and led to Tuesday’s report.
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