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Five Rivers must repay HUD funds

The U.S. Department of Housing and Urban Development has told Five Rivers Community Development Corp. that it must repay $418,180 from a grant the Georgetown-based nonprofit agency was supposed to use to help build a community center for low-income residents.

The community center never was built and Five Rivers now has until the end of this year to repay the money, according to a letter HUD sent on Nov. 30 to Dayo Smith, the nonprofit's chief financial officer.

"We expect repayment within 30 days," HUD spokesman Brian Sullivan said Thurs day. "Should that not happen, all enforcement options are on the table."

Five Rivers executives could face criminal charges if the money isn't repaid, according to penalties outlined in the HUD grant application.

Smith and her mother, Beulah White, the agency's executive director, could not be reached for comment Thursday.

Five Rivers closed its Front Street office a month ago and no longer is in business.

It is not clear how much money is left from more than $5 million in grants and donations Five Rivers received since it was founded in 1995. The nonprofit's July bank statement, the most recent one available, shows a negative balance of $25,177.

In an Oct. 16 memo to the nonprofit's board of directors, Smith said Five Rivers does "not have any visible means of support."

Smith also said in that memo that she and White are personal guarantors for all of Five Rivers' debts except a $30,000 mortgage on land the agency was buying.

"This puts us personally in dire financial straits because if the agency defaults on the loans and debts, the creditors can attach our personal assets," Smith said. "Our lives hang in the balance."

HUD wants its money back because White and Smith spent it on management and other costs, such as salaries, instead of construction.

Five Rivers received a $994,100 grant from HUD in 2004 for construction of a community center. The nonprofit could spend up to 20 percent of that money on planning and administrative costs, according to terms of the grant and federal law.

Five Rivers had spent $617,000 of that grant when HUD asked in October to review the nonprofit's financial records. That review showed all $617,000 had been spent on planning and administrative costs, according to HUD.

The $418,180 that must be repaid is what is left after the allowable 20 percent in administrative costs is subtracted from the total amount Five Rivers spent.

"They far exceeded their planning and administrative costs, which is in violation of the law," Sullivan said.

Five Rivers executives do not have access to the $377,100 that remains from the grant because HUD has frozen the account.

Sullivan said it is premature to speculate about what might happen if Five Rivers does not repay the money.

HUD reviewed Five Rivers' documents after learning about questionable financial and management practices at the nonprofit from a series of reports in The Sun News.

Those questionable practices include salaries that far exceed the state average, reimbursements for travel apparently unrelated to the nonprofit's purpose and no independent oversight of expenses.

Five Rivers' 2005 tax return, for example, shows the agency received $1.13 million in state and federal grants and other contributions that year but gave just $4,008 to low- and middle-income participants in the agency's programs.

Another $467,090 was spent on salaries, travel, health and other insurance for the agency's executives, a leased Volvo automobile for White and other administrative costs.

Five Rivers also is the focus of a criminal investigation by the 15th Circuit Solicitor's office, which is reviewing financial records to see if the nonprofit's executives misspent public money. That investigation is in its early stages, said Solicitor Greg Hembree.

Five Rivers' community center project ran into trouble in January 2005 when the S.C. Department of Transportation refused to give the nonprofit a construction permit for land along S.C. 521 near the intersection of U.S. 17 Alternate.

For more than a year after the permit was denied, White and Smith told HUD in semiannual progress reports that construction was about to begin. Earlier this year, Five Rivers blamed "poor weather and a backup of current county projects" for construction delays at the S.C. 521 site.

Five Rivers continued to withdraw money from the grant even though it did not have a construction permit, taking $200,000 in February 2005 and another $417,000 over the next 16 months.

The nonprofit's board of directors gave White and Smith a vote of confidence during an Aug. 29 meeting and then resigned Oct. 18, saying the two women had been spending the agency's money and selling assets without board approval.

"They don't want to adhere to the wishes of the board, so they don't need a board," former board President Sam Livingston said when he resigned.

"They are running the agency the way they want to run it, and they want to continue running it their way. The board is not going to be a part of that foolishness."

HUD also reviewed how Five Rivers spent a $357,660 grant it received in 2003.

That grant was supposed to be used for affordable housing and job programs that benefit Georgetown County's low- to moderate-income residents, and there was no restriction on how much money could be spent on administrative costs, such as salaries.

Five Rivers spent all of that money in one year, according to HUD records.

Documents show more than half of the 2003 grant - $180,500 - went toward salaries for White, Smith and other Five Rivers employees. Another $75,000 was spent on employee benefits, insurance, training and office costs.

On the Net

To read the Investigating Five Rivers series, go to www.MyrtleBeachOnline.com

Coming Sunday

Family members benefited from Five Rivers Community Development Corp.'s lack of financial oversight.

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