oversight

Hotline Allegations � District of Columbia Housing Authority

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-04-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

 Telephone: (202) 501-1330           http://www.hud.gov/ oig/oigindex.html         Fax: (202) 501-1315



                                        U.S. Department of Housing and Urban Development
                                        Office of District Inspector General for Audit
                                        Capital District
                                        800 North Capitol Street, N. W.
                                        Suite 500
                                        Washington, DC 20002



                                                                                     Audit Memorandum
                                                                                     00-AO-202-1801

                                            April 4, 2000


MEMORANDUM FOR: Lee A. Palman, Director, Office of Public Housing,
                    District of Columbia Field Office, 3GPH


FROM: Saundra G. Elion, District Inspector General for Audit, Capital District, 3GGA


SUBJECT: Hotline Allegations – District of Columbia Housing Authority


We reviewed the District of Columbia Housing Authority (DCHA) in response to a complaint to
the Department of Housing and Urban Development (HUD) Hotline. The complainant alleged that
the DCHA improperly used public funds while in Puerto Rico, mismanaged the Occupied Unit
Rehabilitation Program, and used questionable hiring practices.

We concluded that the DCHA improperly used $82,714 of public funds to pay salary and travel
costs to Puerto Rico for its staff members. The salary and travel costs are ineligible because they
are not consistent with the DCHA jurisdictional authority. Specifically, District of Columbia law
empowers the DCHA to operate only within the District of Columbia. We also concluded that the
DCHA Internal Audit Office has identified and addressed many of the issues pertaining to the
allegations of mismanagement of the Occupied Unit Rehabilitation Program and the questionable
hiring practices.

Within 60 days, please give us a status report on each recommendation made in the report. The
status report should include the corrective action taken, the proposed corrective action and the date
to be completed, or why the action is considered unnecessary. Also, please give us copies of any
correspondence or directives issued because of this review.
 Telephone: (202) 501-1330          http://www.hud.gov/ oig/oigindex.html      Fax: (202) 501-1315


SCOPE AND METHODOLOGY

In conducting our review, we:

         •    Reviewed applicable laws and regulations;

         •    Reviewed DCHA documents, including vendor invoices, accounts payable files, and
              internal audit reports;

         •    Interviewed the DCHA Receiver, Chief of Staff, and the Director of the Internal Audit
              Office; and

         •    Obtained a legal opinion from our OIG Counsel on the District of Columbia Housing
              Authority’s use of Section 8 Administrative Fee Reserve funds.

BACKGROUND

On May 3, 1995, the Superior Court of the District of Columbia appointed a Receiver to manage
the DCHA. By Court Order, the Receiver is to transform the DCHA into a public housing
authority that provides decent, safe, and sanitary housing to all people the DCHA is meant to
serve.

On September 24, 1998, the President declared Puerto Rico a major disaster area and made
millions of dollars in Federal aid available to help the Commonwealth of Puerto Rico and its
people recover from severe damage caused by Hurricane Georges. HUD’s portion of the
assistance included almost $39 million in new emergency grants to the Puerto Rico Public Housing
Authority. Other HUD assistance to Puerto Rico included sending disaster recovery specialists to
Puerto Rico to help speed up rebuilding efforts.

At the verbal request of the Mayor of Las Res, Puerto Rico, the DCHA Receiver sent 25
employees to Puerto Rico to help with the disaster relief mission. The DCHA Receiver granted
administrative leave to employees who volunteered to participate in the disaster relief mission.
This volunteer staff consisted of 11 administrative staff persons, including the Chief of Staff, and
13 skilled crafts persons. The volunteers contributed 259 staff-days to the relief effort. The salary
cost was based on yearly wages that ranged from $21,070 for a skilled craftsworker to $93,995
for a senior administrator.

REVIEW RESULTS

The DCHA incurred $43,319 of salary cost and $39,395 of travel cost to assist the Commonwealth
of Puerto Rico with the clean-up effort that resulted from Hurricane Georges. These were
ineligible program costs, because by District of Columbia law, the DCHA is only authorized to
operate within the District of Columbia. As a result, the DCHA used $82,714 of funds that could
have been used for other critical District of Columbia housing needs.

The DCHA charged $35,311 of the $43,319 of salary cost to the Comprehensive Grant Program.
Through the Comprehensive Grant Program, HUD makes funds available to help public housing
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    Telephone: (202) 501-1330          http://www.hud.gov/ oig/oigindex.html            Fax: (202) 501-1315


agencies correct physical and management deficiencies and to keep housing units safe and
desirable places to live. HUD uses a formula to determine the amount of assistance that the
housing agency will receive from the Comprehensive Grant Program. This formula considers
factors such as backlogs and the accrual of modernization needs.

The DCHA charged $5,393 of the $43,319 salary cost to the annual operating subsidy. HUD
makes annual contributions to public housing agencies for the operation of low-income housing
projects. HUD uses a formula to determine the amount of the operating subsidy. This formula
considers the monthly cost to operate a housing unit, local inflation factors, and other income.
HUD includes the provisions for the annual contributions in a contract (Annual Contribution
Contract) guaranteeing their payments subject to the availability of funds.

The DCHA charged $2,615 of the $43,319 of salary cost to the Section 8 Program. HUD makes
Section 8 tenant-based assistance payments to housing agencies under the rental voucher and rental
certificate programs. Under these programs, HUD provides rent subsidies so eligible families can
afford rent for decent, safe, and sanitary housing.

Also, the DCHA charged the entire $39,395 of travel cost to the Section 8 Administrative Fee
Reserve. Under the Section 8 Program, HUD provides funds to a housing authority for program
administration costs. HUD requires housing authorities that receive Section 8 Program assistance
to maintain an administrative fee reserve for the program. The reserve is the total of the
administrative fees HUD pays a Housing Authority minus the incurred administrative expenses for
the fiscal year, plus any interest earned on the reserve.

If the Housing Authority does not need the administrative fee reserve funds to cover current
administrative expenses, HUD allows the Housing Authority to use the reserve for “other housing
purposes.” The HUD guidance did not define or provide specific examples of “other housing
purposes;" however, the guidance does require that State and local law must permit the use of
funds for “other housing purposes.” At the time of our review, the DCHA had accumulated
approximately $6 million in the administrative fee reserve account.

The funds that the DCHA used to assist the Commonwealth of Puerto Rico with the clean-up effort
were ineligible costs because by District of Columbia law, the DCHA is only authorized to
operate within the District of Columbia. The Counsel to the Inspector General1 believes that the
trips to Puerto Rico to help alleviate deteriorating living conditions caused by a natural disaster
can qualify as “other housing purposes” under Section 8 Administrative Fee Reserve. However,
Counsel had to also consider whether the District of Columbia law allowed the expenditures.

Counsel concluded that the DCHA’s use of the Comprehensive Grant Program, Annual
Contribution for Operating Subsidy, Section 8 Program, and the Section 8 Administrative Fee
Reserve to assist a local government in Puerto Rico was not consistent with the DCHA’s
jurisdictional authority. Specifically, the District of Columbia law empowers the DCHA to
operate only within the District of Columbia. The statutory authority for the establishment of the
DCHA, 3A D.C. Code § 5-122, Subsection (b), contains an explicit restriction on DCHA’s
jurisdiction. The code states that, “The Authority [DCHA] shall govern public housing and
1
 This is an opinion of the Counsel to the Inspector General and does not represent HUD’s official position. The
Office of the General Counsel is responsible for issuing opinions that set forth HUD’s official legal position.
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 Telephone: (202) 501-1330                http://www.hud.gov/ oig/oigindex.html             Fax: (202) 501-1315


implement the United States Housing Act of 1937 (42 U.S.C. § 1401 et seq.) in the District of
Columbia.” Furthermore, Counsel did not find any extraterritorial statement of jurisdiction that
explicitly grants the DCHA jurisdiction to operate outside of the District of Columbia. The only
exception found was that the District of Columbia could enter into agreements with other states for
mutual benefits such as the orderly removal of disabled vehicles from bridges over the Potomac.
No agreements could be located that provided another state with disaster relief.

DCHA used $43,319 from various program accounts and $39,395 from its Section 8
Administrative Fee Reserve to fund salary and travel cost to Puerto Rico. Although it is laudable
that the DCHA provided humanitarian assistance to Puerto Rico, District of Columbia law does
not provide DCHA with the jurisdictional authority to do so. As a result, the DCHA used $82,714
of funds to support other jurisdictions that could have been used for other critical District of
Columbia housing needs. The following table is a summary of the ineligible travel cost.

                                      Summary of Ineligible Travel Cost


                             Ineligible Cost                                      Amount

                             Airfare                                              $13,442
                             Lodging                                                8,100
                             Rental Cars                                            5,761
                             Meals                                                  7,464
                             Miscellaneous:
                              Phone & Pager                   $1,012
                              T-Shirts                           577
                              Memorabilia                        215
                              Equipment Shipment                 470
                              Promotional Items                  790
                              Labor & Materials                  532
                              Other                            1,032               4,628

                             Total Ineligible Cost                                $39,395


RECOMMENDATIONS

We recommend that you:

1A. Require the DCHA to reimburse $35,311 to the Comprehensive Grant Program for salary
    cost associated with the trip to Puerto Rico.

1B. Require the DCHA to reimburse $5,393 to the Annual Contribution Operating Subsidy (Low
    Rent Programs) for salary cost associated with the trip to Puerto Rico.

1C. Require the DCHA to reimburse $2,615 to the Section 8 Program for salary cost associated
    with the trip to Puerto Rico.

1D. Require the DCHA to reimburse $39,395 to the Section 8 Administrative Fee Reserve for
    ineligible travel cost used on the trip to Puerto Rico.
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 Telephone: (202) 501-1330     http://www.hud.gov/ oig/oigindex.html   Fax: (202) 501-1315




Appendix A -- Distribution


Mr. David Gilmore, Receiver, District of Columbia Housing Authority, 1133 North Capitol
 Street, NE, Suite 133, Washington, DC 20002 (2)
Secretary’s Representative, 3AS, HUD Philadelphia Office, The Wanamaker Building,
 100 Penn Square, East, Philadelphia, PA 19107-3380 (2)
Director, Office of Public Housing, 3GPH (2)
Audit Liaison Officer, Public and Indian Housing, PF (2)
Audit Liaison Officer, Philadelphia, 3AFI (2)
Assistant Deputy Secretary for Field Policy and Management, SDF, Room 7108 (2)
Departmental Audit Liaison Officer, FM, Room 2206 (2)
Acquisitions Librarian, Library, AS, Room 8141
Director, Office of Troubled Agency Recovery, PB, (Room 4112) (2)
Real Estate Assessment Center, The Portal Building, 1280 Maryland Avenue SW,
 Suite 800, Washington, DC 20024
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen
 Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs,
 706 Hart Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
 Building, House of Representatives, Washington, DC 20515
Mr. Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204 Rayburn
 Building, House of Representatives, Washington, DC 20515
Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neil
 House Office Building, Washington, DC 20515
Director, Housing and Community Development Issue Area, United States General
 Accounting Office, 441 G Street, NW, Room 2474, Washington, DC 20548
 ATTN: Judy England-Joseph
Steve Redburn, Chief, Housing Branch, Office of Management and Budget, Room 9226
 725 17th Street, NW, New Executive Office Building, Washington, DC 20503




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