June 29, 2011; Source: Paterson Press | The city of Paterson, N.J., has been embroiled in a controversy with HUD over whether the city and a nonprofit called Sheltering Arms ran a homeless shelter and treatment program properly between 1998 and 2008. 

HUD is asking for a cool $3.2 million reimbursement because Sheltering Arms couldn't produce records demonstrating that the people who stayed at the shelter fit the profile of eligible clients — being homeless and having "treatable afflictions like mental illness, addition or AIDS." 

It's not just the nonprofit's problem, but the city's too, because the city was responsible for monitoring the clients.  Paterson sued Sheltering Arms several years ago, HUD joined the case, and now HUD and the city are slugging it out in settlement negotiations. 

Sheltering Arms still operates, though it has shifted to serving homeless families. It would be hard to imagine that the homeless facility didn't serve relatively eligible people, notwithstanding the nonprofit's crummy record-keeping. In a poor city like Paterson, why would HUD chase the city for several years for this money when even if there were some discrepancies, the program served homeless people?—Rick Cohen