oversight

Texas Tenant's Union Incorporated Outreach and Training Assistance Grants and Public Entity Grant Dallas, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-08-21.

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

                                                    U.S. Department of Housing and Urban Development
                                                    Region 6, Office of Inspector General
                                                    819 Taylor Street, Room 13A09
                                                    Fort Worth, Texas 76102

                                                    (817) 978-9309 FAX (817) 978-9316
                                                     http://www.hud.gov/oig/oigindex.html



August 21, 2002                                     2002-FW-1805


MEMORANDUM FOR:              Charles H. Williams
                             Director
                             Office of Multifamily Housing Assistance Restructuring, HY

              /SIGNED/
FROM:         D. Michael Beard
              Regional Inspector General for Audit, 6AGA

SUBJECT:      Texas Tenant’s Union Incorporated
              Outreach and Training Assistance Grants and Public Entity Grant
              Dallas, Texas


We performed an audit of Texas Tenant’s Union’s two Outreach and Training Assistance Grants
(OTAG) and a Public Entity Grant.1 Congress required our office to audit each provision of
technical assistance obligated under the requirements of Section 514 of the Multifamily Assisted
Housing Reform and Affordability Act of 19972 over the last 4 fiscal years.3 Under Section 514,
HUD provided the funding for the Texas Tenant’s Union grants that we audited.

Our objectives were to determine whether the Texas Tenant’s Union used its grant funds for only
eligible activities and to determine whether it expended the funds for any lobbying activities.

To accomplish our objectives we interviewed the Texas Tenant’s Union’s Executive Director,
reviewed bank statements, performed bank reconciliations, reviewed grant draw requests,
reviewed supporting documentation for draw requests, and reviewed activity reports.

Overall, the Texas Tenant’s Union used its grants for eligible activities. However, the Texas
Tenant’s Union supported the National Alliance of HUD Tenants by attending annual
conferences. Although the National Alliance of HUD Tenants provided training opportunities it
also performed lobbying activities. Also, the Texas Tenant’s Union inadvertently claimed a
minimal amount in ineligible and unsupported costs.

We provided a draft of the memorandum to the Texas Tenant’s Union and HUD’s Office of
Multifamily Assistance Restructuring on July 22, 2002. We held an exit conference with the
Texas Tenant’s Union on August 6, 2002. The Texas Tenant’s Union provided its response on

1
  Grant numbers FFOT98027TX and FFOT0038TX.
2
  Public Law 105-65
3
  1998 through 2002
                                                                                               2


August 9, 2002. In its response, the Texas Tenant’s Union generally agreed with the
memorandum. It believed the National Alliance of HUD Tenants provided benefits to residents
that exceeded its lobbying efforts.

Due to the materiality of the ineligible and unsupported costs and the commitment by the Texas
Tenant’s Union, we are not making any recommendations. Please furnish us copies of any
correspondence or directives issued because of this audit. The Texas Tenant’s Union stated they
would deduct most of the unsupported and ineligible costs from its next reimbursement request.

If you have any questions contact William W. Nixon, Assistant Regional Inspector General for
Audit, at 817-978-9309.

Attachment
                                                                                                                    3


                                                                                                 ATTACHMENT

Background

History of Texas Tenants Union, Inc.

The Texas Tenant’s Union, Inc. incorporated in the State of Texas in 1979.4 Its purpose is to
promote the empowerment of tenants through education and organizing, build a tenants'
movement in Texas, fight displacement in communities, support equal housing for all people,
seek and assist others in the formation of Tenant's Unions, especially in minority and low income
communities, and to promote decent, safe, and affordable housing.

The Texas Tenant’s Union was one of several nonprofit organizations selected to receive
Outreach and Training Assistance Grants (OTAG) from HUD, which were available to resident-
controlled or community-based nonprofit organizations with experience in resident education and
organizing.

Texas Tenant’s Union Grants.

The Texas Tenant’s Union received an OTAG award5 in the amount of $250,000 over 3 years on
September 30, 1998.

The Texas Tenant’s Union received another OTAG6 in the amount of $450,000 on January 8,
2001. On March 18, 2002, HUD notified the Texas Tenant’s Union that HUD was accepting
invoices for work performed under the 2001 OTAG grant up to a maximum of $270,000. As of
May 31, 2002, the Texas Tenant’s Union expended $36,185 from this grant.

Also, Texas Tenant’s Union received a $20,000 Public Entity Grant7 from the Low Income
Housing Fund8 on August 9, 2000. The grant was made under the authority of the Intermediary
Technical Assistance Grant Agreement9 (ITAG) between the Low Income Housing Fund and
HUD pursuant to the Fiscal Year 1998 HUD Appropriations Act.




4
  The group began in 1973 as the East Dallas Tenants Alliance. In 1979, Texas Tenant’s Union was formed when
  the East Dallas Alliance merged with tenant groups from Fort Worth and Austin.
5
  FFOT98027TX
6
  FFOT0038TX
7
  The ITAG provides technical assistance grants through intermediaries to subrecipients consisting of public entities
  to carry out Mark-to-Market activities.
8
  The Low Income Housing Fund is a not-for-profit entity that HUD selected to receive ITAG funding.
9
  FFIT98003LFM
                                                                                                                       4


Mark-to-Market

HUD housing subsidy contracts10 are expiring on thousands of privately owned multifamily
properties with federally insured mortgages. Many of these contracts set rents at amounts higher
than those of the local market. As these subsidy contracts expire, the Mark-to-Market Program
will reduce rents to market levels and may restructure existing debt to levels supportable by these
rents.

The Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) established
the Office of Multifamily Housing Assistance Restructuring (OMHAR) to administer the Mark-
to-Market Program. OMHAR has been extended for 3 years to September 30, 2004, and the
Mark-to-Market Program will continue for a 2 more years to September 30, 2006. OMHAR
works with property owners, Participating Administrative Entities, tenants, lenders, and others
with a stake in the future of affordable housing.

MAHRA authorizes HUD’s Secretary to establish procedures to provide an opportunity for
tenants of the project and other affected parties to participate effectively and on a timely basis in
the restructuring process established by MAHRA.

Objectives, Scope, and Methodology

Our objectives were to determine whether Texas Tenant’s Union used its grant funds for only
eligible activities and to determine whether it expended its funds for any lobbying activities.

To accomplish our objectives we interviewed the Texas Tenant’s Union’s Executive Director,
reviewed bank statements, reviewed bank reconciliations, reviewed grant draw requests and
related supporting documentation, and reviewed activity reports.

Our audit scope included draws from January 1998 through May 2002. We performed our
fieldwork from May 20, 2002, through June 18, 2002. We performed our audit in accordance
with generally accepted governmental auditing standards.

Criteria

The 1998 Notice of Fund Availability (NOFA) refined, through nine detailed examples, the
eligible activities for which the Texas Tenant’s Union could use OTAG funds. The purpose of
the OTAG was to provide technical assistance to tenants of eligible Mark-to-Market properties so
that the tenants could: (1) participate meaningfully in the Mark-to-Market Program and (2) affect
decisions about the future of their housing.

In addition, the 1998 NOFA provided specific guidance on the ITAG including detailing the
eligible ITAG activities. Specifically, the ITAG Program provided technical assistance grants

10
     A housing subsidy is paid to the landlord on behalf of the participating family. The housing subsidy equals the
     difference between the amount the family pays, based upon their income, and the determined market rent of the
     unit.
                                                                                                               5


through intermediaries to subrecipients consisting of: (1) resident groups or tenant affiliated
community-based nonprofit organizations in properties that are eligible under the Mark-to-
Market Program to help tenants participate meaningfully in the Mark-to-Market process, and
have input into and set priorities for project repairs or (2) public entities to carry out Mark-to-
Market related activities for Mark-to-Market eligible projects throughout its jurisdiction.

The law prohibited funds being used directly or indirectly to pay for any personal service,
advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or
designated to influence in any manner a Member of Congress, to favor or oppose, by vote or
otherwise, any legislation or appropriation by Congress.11

OMB Circular A-122 required the Texas Tenant’s Union to adequately document costs.

Texas Tenant’s Union performed eligible activities with OTAG funds.

Overall, the Texas Tenant’s Union performed eligible activities with its OTAG funds. It had
controls in place to ensure it expended grant funds in accordance with applicable requirements.
Specifically, the Texas Tenant’s Union provided outreach to apartment complexes affected by
Section 8 opt-outs, prepayments, or Mark-to-Market. At these properties the Texas Tenant’s
Union held meetings to inform the tenants of their rights under Mark-to-Market. The Texas
Tenant’s Union also attended the two meetings held by the Participating Administrative Entities
and reviewed the Physical Condition Assessment or Preliminary Underwriting Plan12 for the
affected properties. However, the Texas Tenant’s Union did charge a minimal amount of
ineligible and unsupported costs to these grants.13 It appears the Texas Tenant’s Union
inadvertently made these charges from its grants. In its response, the Texas Tenant’s Union
agreed to deduct the majority of this amount from its next reimbursement request. We suggest
the Texas Tenant’s Union work with HUD to ensure the amount is properly deducted.

Texas Tenant’s Union expended funds to promote and support the National Alliance of HUD
Tenants.

The Texas Tenant’s Union used its grant funds to promote and support the National Alliance of
HUD Tenants (NAHT).14 Specifically, the Texas Tenant’s Union spent 4 percent of its budget
sending its employees to the annual NAHT conferences including an employee who is a NAHT
Board Member. This Board Member also attended the annual NAHT planning session. Travel
expenses and training fees were paid for in the most part with grant funds. Also, the Texas
Tenant’s Union passed out NAHT’s newsletter at properties it visited.

During a February 2000 NAHT conference call, NAHT informed OTAG recipients that they
could apply for funds to send HUD tenants to its National Conference. Afterwards, the Texas
Tenant’s Union applied for an ITAG, the majority of which it expended on NAHT’s national

11
   Section 514(f)(3)(C) of Public Law 105-65.
12
   Both reports were prepared by the Participating Administrative Entities.
13
   The total amount was $146.
14
   On December 3, 1999, HUD issued a letter allowing grant funds to be used for Mark-to-Market training purposes.
                                                                                                6


conference. Further, NAHT’s call agenda stated it would increase the cost of the conference by
$100 for groups with access to grant funds or resident owned buildings. NAHT knew grant
funds would be available for its conference because it asked and received a HUD legal opinion in
June 1999 stating it would be acceptable to use grant funds to pay for its conference.

HUD allowed grant recipients to use grant funds to send people to the NAHT national
conference. At the conference, NAHT did provide Mark-to-Market training. However, it also
performed a day of lobbying.15 As a consequence of HUD’s decision, HUD indirectly allowed
grant funds to support NAHT’s lobbying efforts.

As additional evidence that HUD grant funds were not only utilized by grant recipients, but also
by NAHT, The National Tenants Voice16 stated NAHT was adversely affected when HUD halted
funding because it did not receive income from contracts and fees.

When Texas Tenant’s Union employees visited properties, the employees distributed NAHT’s
newsletter. In addition to articles on maintaining affordable housing and organizing tenant
groups, the newsletter also promoted NAHT's special interests. For instance, the Spring 2002
newsletter stated a national advocacy campaign led by NAHT restored some funds to area-wide
tenant organizing groups and state housing coalitions. The article continued to state at NAHT’s
June conference, tenants across the country would meet with their elected representatives to urge
support for various measures that NAHT supports.

In its response, the Texas Tenant’s Union maintains that NAHT provides excellent training and
the lobbying is a small part of the organization. Further, the Texas Tenant’s Union believes
NAHT provides a mechanism for residents of HUD properties to voice their concerns.
Nevertheless, NAHT did perform lobbying activities and benefited from these HUD grants.




15
     Texas Tenant’s Union did not seek reimbursement for this day training.
16
     The NAHT’s newsletter, Spring 2002.
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                                      DISTRIBUTION

Texas Tenant’s Union, Inc.
Dallas, Texas

The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs

The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs

Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human
Resources

Andy Cochran, House Committee on Financial Services

Clinton C. Jones, Senior Counsel, Committee on Financial Services

Kay Gibbs, Committee on Financial Services

Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. GAO

Steve Redburn, Chief Housing Branch, Office of Management and Budget

Linda Halliday, Department of Veterans Affairs, Office of Inspector General

William Withrow, Department of Veterans Affairs, OIG Audit Operations Division

George Reeb, Assistant Inspector General for Health Care Financing Audits

The Honorable Dan Burton, Chairman
Committee on Government Reform, 2185 Rayburn Building
House of Representatives, Washington, D.C. 20515

The Honorable Henry A. Waxman, Ranking Member
Committee on Government Reform, 2204 Rayburn Building,
House of Representatives, Washington, DC 20515