Controller laments poor oversight; program director calls audit incomplete
Blasting a program that has been touted as a way to revive decaying commercial corridors, often in predominantly Black neighborhoods, City Controller Alan Butkovitz this week released a report critical of the Commerce Department’s oversight of the $135.5 million program.
“Although these funds had the laudable goal of increasing citizen exposure to the arts and business communities, it is highly questionable as to whether taxpayer funds were spent in the most economical and effective manner possible,” said Butkovitz in a statement included in his office’s audit. “Funding agreements with award recipients did not contain requirements to properly safeguard the public funds.”
The program, called the Cultural and Commercial Corridors Program, was funded by a 2006, $135.5 million bond issue. Those funds were devoted to the revitalization of the city’s commercial and cultural corridors.
Deputy Mayor for Economic Development Alan Greenberger, in a written response, said the audit was incomplete and full of innuendo.
“Though the headings and the tone of the report infer accusations of poor handling of funds, a statement of actual misuse of funds is not to be found anywhere in the report,” Greenberger wrote, in the department’s response to the audit.
He added that Commerce Department officials would “present a full picture of the program and its accomplishments to date.”
But, according to Butkovitz, the city has not provided adequate safeguards to make sure the money is being properly spent, or set the standards needed to make sure the program is actually working.
Butkovitz said that the Commerce Department did not properly scrutinize the documentation supporting the expenditures of funds; failed to provide sufficient data to determine whether the expenditure was appropriate for the project; and failed to follow city bidding procedures for 30 streetscape projects.
Citing one example, Butkovitz’s office examined a $3 million grant to the New Freedom Theatre. Of that total, the theater paid $1.5 million on outstanding debt, $307,000 to the IRS, $65,00 to PECO, $40,000 to PGW, $16,000 to the water department and $280,000 to the NonProfits Assistance Fund.
“Our review indicated that there were no plans, agreements, or other evidence indicating how the theater intended to avoid future financial difficulties,” noted the report. “Or, for that matter, who the Commerce Department was going to measure the ongoing viability of the theater.”
Though the theater was slated to receive $3 million, in the end it only got $2.2 million because, according to the report, the theater had not accounted for its use of the money in a timely manner.
The controller’s office laid out a series of recommendations that Butkovitz said would provide more transparency and accountability for future projects. Among them, he suggested the Commerce Department establish performance measures for each project, require competitive bidding, publicly advertise grant projects, conduct site visits on each project and require recipients to keep and maintain documentation supporting their expenditures.
The Cultural and Commercial Corridors Program was created to improve and enhance the city’s cultural and commercial corridors for the benefits of city residents. Interest rates on the bonds ranged from 4.00 to 5.17 percent.
The Commerce Department was responsible for the oversight of the Program.
Cultural corridors were defined as the areas near the Avenue of the Arts, the Benjamin Franklin Parkway, the Centennial District, the Historical District and Centro de Oro. Commercial corridors were less rigidly defined but the city has use the program in West Philadelphia along the 52nd Street corridor and along Germantown Avenue.
“Taxpayers will be paying for the projects through debt service payments over a 25-year period, and better oversight and monitoring was needed to ensure that public funds were properly safeguarded,” said Butkovitz. “We hope that when the city issues bonds in the future, it will put such safeguards in place.”