Dozens of Detroit entrepreneurs have launched small businesses with grants from Motor City Match, a City of Detroit economic development program using federal money. But a larger number of beneficiaries wound up closing or never opened, prompting an 18-month review and critical findings by an independent city agency.
A 22-page report issued late Monday by Inspector General Ellen Ha says startups the program assisted had a 77-percent failure rate, an outcome the city disputes.
The inquiry, covering October 2014 to April 2018, found excessive spending, lax oversight and loose payment controls by administrators at Detroit Economic Growth Corporation (DEGC), which oversees the grants and a related storefront upgrade program called Motor City Re-Store.
"The investigation revealed requests for payments were paid without proper review, even after an employee of [the Office of Development and Grants] expressed concerns with the payments and questioned whether the payments aligned with [federal] HUD requirements," the new document says.
Other portions note: "More money was spent on advertising, implementing and administering the programs than on direct assistance to the businesses. ... The programs provided assistance to business owners outside of the city, creating a disallowed expense when the businesses failed to open."
Detroit News coverage has this context:
The investigation stemmed from a May 2019 complaint over the administration of the program from now ex-employee Kennedy Shannon, who argued practices for the federal grant-funded program didn't comply with U.S. Department of Housing and Urban Development rules. ...
The inspector general's office said it substantiated allegations made by Shannon that her concerns about the program were ignored by managers. Shannon also, the report notes, brought her worries to HUD, resulting in a federal review of the program.
Shannon was fired and has since filed a whistleblower lawsuit against the city. ...
Motor City Match is one of two programs lauded by Duggan that are under investigation by the Michigan Attorney General's Office.
Attorney General Dana Nessel's Public Integrity Unit has reviewed claims tied to Motor City Match, as well as allegations of preferential treatment by the city to the nonprofit Make Your Date, an effort to combat premature births.
The paper quotes a statement from Donald Rencher, director of the city's Housing and Revitalization Department, who says Ha's claim that nearly 77% of Motor City Match recipients failed is "flat out wrong." He tells The News that 119 commercial storefront small businesses began because of the program and only eight of those failed.
Ten grants totaling $350,000 were given last February in the 17th round of Motor Motor City Match awards. Among recipients were Crème Brulee beauty salon on Woodward Avenue in New Center ($40,000), 44 Burrito ("Mexican cuisine with soul") on Woodward ($60,000), Toss 'n Sauce pizza restaurant on Livernois Avenue ($60,000), Sugah Please Coffee House on East Jefferson Avenue ($20,000), a cheesecake bakery on West McNichols Road ($25,000) and an audio recording service on Woodward ($20,000).
When it began in 2014, the small-business incentive program earned national attention as a trailblazing revitalization effort in a city fresh out of bankruptcy and ripe for rebuilding. Joe Biden, the vice president then, came to promote the innovation.
The inspector general's office describes itself as "an independent agency that is charged with ensuring honesty and integrity in the city. Our jurisdiction is limited by the charter to investigate matters concerning abuse, waste, fraud and corruption."