oversight

Philadelphia Housing Authority Limited Personnel Review

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-03-26.

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

                                                        U.S. Department of Housing and Urban Development
                                                                           Wanamaker Building, Suite 1005
                                                                                     100 Penn Square East
                                                                              Philadelphia, PA 19107-3380

                                                                          District Inspector General for Audit




March 26, 2002
                                                                                      Audit Memorandum
                                                                                      No. 2002-PH-1803

MEMORANDUM FOR:                  Malinda Roberts, Director, Office of Public Housing, 3APH


FROM:                            Daniel G. Temme, District Inspector General for Audit,
                                 Mid-Atlantic, 3AGA

SUBJECT:                         Philadelphia Housing Authority Limited Personnel Review


In response to an anonymous complaint, we performed a review at the Philadelphia Housing
Authority (Authority). The complaint alleged the Executive Director of the Authority was
unfairly recruiting and promoting individuals he was affiliated with, rather than allow for open
and fair competition. Also, the complaint alleged the Executive Director’s management style was
causing many executive level personnel to leave the Authority.

We found the allegation relating to the Executive Director’s unfair hiring practices at the
Authority had merit. However, as for the second allegation, although there was a general
consensus the Executive Director was a demanding supervisor and a number of executive
personnel left for this reason, we did not find his management style violated any Federal or State
laws. In addition, we noted the Authority violated the conflict of interest provision of its
Consolidated Annual Contributions Contract (ACC) with HUD when it hired the daughter of a
member of the Authority’s Board of Commissioners for a senior management position for which
she was not qualified. Further, we questioned the circumstances relating to the Authority
obtaining the services of the human resource consultant, who drafted the Authority’s personnel
policy that exempted the Executive Director from following the Authority’s prescribed personnel
policies and procedures. The details of our review and recommendations are discussed under the
“Results of Our Review” section of this audit memorandum.

                                            BACKGROUND

The Philadelphia Housing Authority is the fourth largest housing authority in the United States.
According to the Authority’s Annual Plan for fiscal year 2001, it received more than $526
million in financial resources to fund its operations, of which HUD provided more than $345
million. The Authority houses approximately 70,000 residents in 20,000 units and an additional



      Visit the Office of Inspector General’s World Wide Web site at http://www.hud.gov/oig/oigindex.html
12,500 families are provided housing through the Authority’s Section 8 Program. Mr. Carl R.
Greene has been the Executive Director of the Authority since April 1998.

At the time of our review the Authority had approximately 2,600 employees. The selection and
promotion of employees of the Authority were defined under the 1995 Supervisors Manual of
Personnel Policies (1995 Personnel Manual). Based upon the recommendations noted in a
review completed by a legal consulting firm, the Authority updated the 1995 Personnel Manual in
December 1999 and issued the Revised Philadelphia Housing Authority Human Resources
Manual of Policies and Procedures (1999 Personnel Manual). Generally, the Authority states its
personnel policy is to select the person with the strongest combination of qualifications based on
merit without regard to race, color, religion, sex, national origin, age, marital status, etc.

                       OBJECTIVE, SCOPE AND METHODOLOGY

The primary objective of our review was to determine if the complaint had merit. To accomplish
our objective, we selected 46 Authority employees, including 30 employees selected at random,
eight high level executives mentioned in the complaint who allegedly left the Authority due to the
Executive Director’s management style, two of which were in our original sample, and 10
employees who were referred to us during the course of the audit or received rapid promotions
contrary to standard Authority procedures. We reviewed the personnel files for these employees;
interviewed HUD Office of Public Housing staff, both present and past Authority employees, the
Executive Director, members of the current Board of Commissioners, and the outside legal
counsel hired by the Authority. Further, we reviewed the database of the personnel records to
obtain financial information, minutes of the Board of Commissioners meetings, and other
relevant data.

During our review, the Authority obtained the assistance of outside legal counsel to obtain and
provide the records requested by the OIG and act as the audit liaison. The Authority claimed it
needed this special assistance because the personnel files at the Authority were disorganized and
scattered. However, as the audit progressed, it became apparent the Authority’s outside legal
counsel involvement extended well beyond obtaining personnel records. The Authority’s outside
legal counsel insisted on being present at the majority of our interviews with current and former
Authority staff, and the majority of our questions for the Authority’s managers and their
responses were routed through the outside legal counsel. Further, the outside legal counsel
restricted our access to the Authority’s Board of Commissioners. Thus, we did not have full and
free access to all records and Authority staff during our review. In a sense, we conducted our
review through the Authority’s outside legal counsel. These actions prolonged the audit and
often frustrated the auditors in their efforts to complete a thorough review.

The audit generally covered the period of April 1998 through February 2001, but was expanded
when necessary to include other periods. The audit work was conducted from February 2001 to
November 2001 in accordance with Generally Accepted Government Auditing Standards.

We conducted an exit conference with the Board of Commissioners and their outside legal
counsel on March 1, 2002.




                                                2
                                    RESULTS OF OUR REVIEW


A.     Discretionary Hiring Authority of the Executive Director

The Executive Director did not adhere to the Authority’s established written personnel policies
and procedures in hiring and recruiting staff from April 1998 to December 1999

In April 1998, when the Executive Director assumed his role within the Authority the 1995
Personnel Manual was the policy approved by Board of Commissioners (Board) for hiring and
promoting employees. The Authority policy was to select the individuals with the strongest
combination of qualifications for each job without regard to race, color, religion, sex, national
origin, age, physical or mental disability, etc. Further, all employees were to be hired, assigned,
transferred, promoted, upgraded, and compensated to the greatest extent possible based on the
concept of merit. The 1995 Personnel Manual did not provide an exemption for the Executive
Director to deviate from the Authority’s prescribed policies and procedures in recruiting and
hiring Authority staff.

Our review found the Executive Director did not adhere to the established written personnel
policies and procedures from April 1998 to December 1999. Specifically, the Executive Director
hired and promoted staff without providing for open and fair competition. In fact, our review
found there was little to no documentation to support the justification for several staff hires and
promotions.     In our review of 46 employees, we identified eight that were either hired or
promoted contrary to the 1995 Personnel Manual. When we discussed the discretionary hiring
authority with the Authority management, via their outside legal counsel, it was explained that
the Executive Director was just following the standard operating procedures from prior
administrations. Thus, in their opinion, the Executive Director did not violate the Authority’s
Personnel Policies and Procedures.

Authority revises 1995 Personnel Manual to give the Executive Director discretionary hiring
authority without Board of Commissioners approval

In 1998, the Authority followed the advice from a legal consulting firm, and updated the 1995
Personnel Manual. To accomplish this, the Authority hired two consultants to work with
Authority staff. The first was the legal consulting firm that made the original recommendation
and the second was a former employee of the Executive Director from the Detroit Housing
Commission. The former employee was the primary author of the new manual and was later
hired by the Authority to become the General Manager of Human Resources. When we
questioned the Executive Director and other representatives of the Authority as to why the former
employee of the Executive Director was selected as an outside consultant, neither the Executive
Director nor the other Authority representatives would provide any details as to how the
consultant was identified or selected to perform the task. (See
                                                           See Section
                                                                SectionE)E

Overall we noted the 1999 Personnel Manual had incorporated many positive changes with it
sighting specific goals, objectives and standards in the recruitment and promotion of personnel.
Further, the Authority’s personnel policy was more clearly defined. However, we noted the

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1999 Personnel Manual also included several key provisions that exempted the Executive
Director from all of the personnel policies and procedures defined under the new manual.
Specifically, the 1999 Personnel Manual states, “This is the policy and procedure to follow when
filling regular vacant positions within the Authority. This policy does not apply to the Executive
and Department Head Roster positions.” Under the 1999 Personnel Manual, Executive level is
defined as the Executive Director, Executive Deputy Director, Deputy Director, General Counsel,
Chief of Staff, Chief of Police, Inspector General, Directing Counsel, Executive General
Manager, and the Department Heads and their assistants. However, the policy can also be
expanded to include any other positions designated by the Executive Director. Further, the
manual is silent on the procedures to follow when selecting an employee for one of these Head
Roster positions. Thus, under the 1999 Personnel Manual the Executive Director can recruit and
promote individuals at his discretion with no accountability and can change the make-up of the
Head Roster without any checks and balances.

Since these policy changes were not defined under the 1995 Personnel Manual, and the Executive
Director was already recruiting and promoting staff at his discretion before the 1995 Personnel
Manual was revised in December 1999, it appears the new more liberal policies were added
either to legitimize or formalize the practice the Executive Director was already following. In
addition, the Board of Commissioners did not approve the 1999 Personnel Manual; instead, the
Executive Director approved the revised Manual for implementation on December 2, 1999. A
copy of the policy was provided to the Board of Commissioners as an “Informational
Memorandum” on December 16, 1999. The Authority’s Board of Commissioners did not
formally approve or affirm these policy changes until the OIG questioned them in November
2001.

Authority response to OIG’s questions regarding discretionary hiring authority afforded the
Executive Director

When we questioned the Authority’s outside legal counsel on the provision in the revised manual
that exempts the Executive Director from following the prescribed personnel policies and
procedures, we were initially told the 1999 Personnel Manual just puts into writing the policies
and procedures that were already being used at the Authority. Further, the Authority’s outside
legal counsel compared the hiring practices of the Executive Office of the Authority to Schedule
C Federal Government appointees under Office of Personnel Management (OPM), Code of
Federal Regulations (CFR) Title 5, 213.3301 and 213.3302, and to 4 PA Code 91.4(b)(2)(i),
(b)(2)(iii), and (b)(2)(iv) for Pennsylvania State Civil Service Commission (SCSC) hires.

Title 5 CFR 213.3301 and 213.3302 provide for Schedule C categorization of specified positions
that are policy determining or which involve a close and confidential working relationship with
the head of an agency. Appointments to these positions are exempted from the competitive
service. However, 5 CFR 213.3301 identifies clear and specific requirements for Schedule C
hires, and requires specific authorization from the OPM, approval in advance and certification
from the agency on the purpose of the Schedule C position. These hires are extremely controlled
and the hires are transparent. In comparison, the discretionary hires of the Authority do not
require or allow for this control and transparency. In fact, the Authority’s outside legal counsel


                                                4
told the OIG’s office that the Executive Director does not have to document or justify his reasons
for hiring and promoting within the Executive and Department Head Roster positions.

Under 4 PA Code 91.4(b)(2)(i), (b)(2)(iii), and (b)(2)(iv) for Pennsylvania State Civil Service
Commission (SCSC) hires, certain positions, such as department heads, deputy department heads
and their personal aides, are exempt from requiring approval from the SCSC. However, for
positions not specifically identified, the regulation identifies specific requirements to request
exemptions in writing including specific reasons why the position should be exempt from the
classified service. In comparison, the 1999 Personnel Manual gives the Executive Director the
authority to hire and promote any position without any requirement for prior approval,
justification for, or documentation to support the exemption.

The Authority’s outside legal counsel also referred to the “Kroll Report” to support the hiring
discretion of the Executive Director. In August 2001, the Authority hired an outside consulting
firm to conduct a review and assessment of the Human Resources Business Unit Division.
Generally, we found the report, dated September 27, 2001, to be fairly comprehensive in its
review of the overall personnel function of the Authority. However, the Kroll Report was
relatively silent as to the discretionary hiring of Executive and Department Head Roster
positions. The report simply stated the Authority’s policy was consistent with Federal and State
laws and regulations, such as 5 CFR 213.3301 and 3302, and 4 PA Code 91.4.

Authority of Administrative Board to change Personnel Policy questionable

The OIG challenged the Authority’s outside legal counsel on their reference to OPM Schedule C
appointments and 4 PA Code 91 hires as support for the discretionary hiring authority of the
Executive Director. In addition, OIG questioned why the Board of Commissioners never
approved the revised policy through a formal resolution, as was the usual practice of the
Authority. We were then told the 1995 Personnel Manual had a provision that allowed for an
Administrative Board, which had the authority to develop, review and approve the revised
personnel policies and procedures without the Board of Commissioners approval.

However, based on the Authority’s own guidelines for the Administrative Board in the 1995
Personnel Manual, we questioned the Authority’s outside legal counsel on the assertion the
Administrative Board had the authority to develop, review, and approve the Authority’s 1999
Personnel Manual without the approval of the Board of Commissioners. As we discuss in detail
below, there was no credible evidence to support the claim that an Administrative Board was
appropriately used to revise and approve the new policies. Further, information provided by the
Authority on the Administrative Board, and the Authority’s own 1995 Personnel Manual that
define the purpose, board make-up, authority and role of the Administrative Board contradicted
the Authority’s assertion that the Administrative Board was a legitimate and appropriate tool for
changing the policies. A detailed discussion of the purpose, board make-up, authority and role of
the Administrative Board, as defined under the 1995 Personnel Manual follows.




                                                5
   Purpose of the Administrative Board

   Section 19.1 of the Authority’s 1995 Personnel Manual states: “The Administrative Board is
   established to provide the mechanism for the Authority to establish and maintain procedures
   and practices to effectively and efficiently implement and support the Personnel Policies.”
   This provision does not provide the Administrative Board the authority to change the
   personnel policy. Rather, its purpose is to develop and maintain procedures that implement
   and support the Authority’s personnel policies. We believe the provision in the 1999
   Personnel Manual that exempts the Executive Director from following the Authority’s
   personnel policies is clearly a change in policy that falls outside the purview of the
   Administrative Board.

   Make-up and Authority of the Administrative Board

   Section 19.2 of the 1995 Personnel Manual states: “The Administrative Board will be
   comprised of at least three members which will be the Executive Director, Deputy Executive
   Director for Operations and Deputy Executive Director for Administration. From time to
   time, the Executive Director may appoint executive management personnel who may act as
   designees for any of the Board’s membership.” We found the make-up and authority of the
   Administrative Board did not meet this requirement. First, the make-up of the Administrative
   Board violated Section 19.2 of the 1995 Personnel Manual. The Authority identified five
   individuals who served on the Administrative Board. Two of the members were outside
   consultants, the former employee of the Executive Director, hired as an outside Human
   Resources consultant, and an attorney from an outside legal consulting firm. The other three
   were Authority employees, including the General Manager and Assistant General Manager of
   Human Resources, and the Authority’s General Counsel.            The only member of the
   Administrative Board that complied with the Section 19.2 requirements was the Authority’s
   General Counsel.

   Further, Section 19.3 states: “The Board will review the procedures developed by the
   functional management of the Human Resources organization to support the Authority’s
   Personnel Policies and authorize their operational application. The Board will establish its
   own operating procedures.” We found that four of the five members the Authority identified
   as serving on the Administrative Board were the same individuals who were assigned the
   responsibility for developing the new policies and procedures.

We made numerous attempts to contact each of the Authority identified Administrative Board
members to determine what their involvement was in reviewing and approving the Authority’s
personnel policies and procedures. The results of our efforts are summarized below.

   1. The Human Resources Consultant, a former employee of the Executive Director at the
      Detroit Housing Commission, drafted the policy. This individual refused to speak with
      OIG. In addition, the Executive Director asserted he had no involvement in bringing this
      individual to the Authority for the purpose of updating the 1995 Personnel Policy. (See
      Section E)E
      Section




                                              6
2. The General Manager of Human Resources acknowledged membership on the
   Administrative Board and assisted in updating the personnel policy. However, she
   explained the Administrative Board never held meetings or approved the 1999 Personnel
   Policy by vote. It was assumed that if the Administrative Board accepted the latest
   version of the draft policy, then the policy was approved. Further, when we asked the
   General Manager about the Board of Commissioners and their responsibility in approving
   the personnel policy, she would not address the issue.

3. The lawyer from the legal consulting firm, who was hired to review the Employment
   Policies and Practices of the Authority, did assist members of the Authority’s Human
   Resource Department in updating the personnel policy. However, he did not know he
   was a member of an Administrative Board until the Authority’s outside legal counsel
   explained it to him. He claimed his approval of the policy was his firms’ acceptance of its
   legality.

4. The Authority’s General Counsel did not return our calls.

5. In an attempt to locate the former Assistant General Manager of Human Resources we
   obtained the last known number from the Authority; however, that number was incorrect.
   In addition, we completed a search on Lexis/Nexis and forwarded letters to two separate
   addresses; however, we were unsuccessful in our search.

Role of the Administrative Board

Section 19.4 of the 1995 Personnel Manual states: “In addition to reviewing and authorizing
operational procedures, the Board may request the development of new personnel policies,
practices and supporting processes, expand or contract their application and otherwise
ensure that these policies, procedures and practices provide the best utility to the Authority,
its employees, residents and other stakeholders.” Although the provision allows for the
Administrative Board to request the development of new personnel policies, it does not
provide it the authority to create and approve new personnel policies. In addition, under the
Authority’s Resolution No. 9302, dated December 21, 1994, the Board of Commissioners
affirmed that a Commissioner’s resolution was needed in order to authorize the updated
Personnel Policies (1995 Manual) to become operationally effective. No resolutions have
been passed since that removes this requirement.

Further, there was no record of any Administrative Board meetings or that the Administrative
Board actually approved the new policy and procedures manual. The Authority’s outside
legal counsel stated that the Administrative Board’s approval of the new Manual was simply
their acceptance of the latest version, and that Authority procedures did not require the
Administrative Board to maintain a written record of their activities. The only formal record
that does exist relating to the authorization of the Authority’s personnel policies and
procedures is the cover memorandum signed by the Executive Director on December 2, 1999
that approved the implementation of the revised 1999 Personnel Manual.




                                            7
Two years after the 1999 Personnel Manual was implemented by the Executive Director, the
Board of Commissioners affirms the approval of the 1999 Personnel Manual

On October 5, 2001, OIG requested a meeting with the Chairman of the Board of Commissioners
to discuss the issues we had identified during our review. Specifically, we wanted to determine if
the Board of Commissioners was aware of the circumstances surrounding the revision of the
Authority’s personnel policy as it related to exempting the Executive Director from following
those policies and procedures. On October 18, 2001, the Authority’s outside legal counsel agreed
to meet with the OIG to discuss in more specific detail the issues we wanted to present to the
Board of Commissioners. However, at the same time we were conducting the meeting, the Board
of Commissioners passed Resolution 10732 that affirmed its approval of the Authority’s 1995
Personnel Manual as restated and re-codified in the 1999 Personnel Manual, dated December 2,
1999, nearly two years after it was implemented. In fact, although the Authority’s outside legal
counsel had actually presented the resolution to the Board of Commissioners just hours before
attending our meeting, he never disclosed this important development to us during the meeting.
Under the resolution, the Board of Commissioners affirmed that an Administrative Board, as
defined under the 1995 Personnel Manual, had the authority to revise and approve the provisions
of the Manual without the Board of Commissioners’ approval and formal resolution. Further, the
Board instructed the Executive Director to continue operations under the revised 1999 Personnel
Manual.

Unfortunately, we believe the Board of Commissioners’ decision to pass the resolution was based
on incomplete information. As we discussed in detail above, the role, purpose, authority, and
make-up of the Administrative Board did not comply with any of the provisions of the 1995
Personnel Manual. Further, the Authority was not able to provide us any credible evidence that
an Administrative Board was actually created and used to review and approve the new policies
and procedures. Thus, it appears the claim by the Authority that the Administrative Board was
the means by which the Authority legitimately revised the Authority’s personnel policies and
procedures was merely another attempt to justify the Executive Director’s actions and/or lack of
oversight by the Authority’s Board of Commissioners.

Through the Authority’s outside legal council, we continued to stress the urgency in meeting with
the Board of Commissioners to discuss our concerns on the discretionary hiring authority of the
Executive Director and the authority of the Administrative Board to make policy changes. We
believe many of the facts on which the Board of Commissioners passed the resolution were
incorrect. In addition, we wanted to discuss two apparent conflict of interest violations of the
ACC that involved one of the members of the Board of Commissioners and the hiring of her
daughter for a top management position in the Authority. (See     Section D)
                                                            See Section     D On November 6,
2001, the Chairman of the Board of Commissioners, one additional Board member, and the
Authority’s outside legal counsel agreed to meet with us.

In the meeting, the Chairman of the Board of Commissioners stated when the Executive Director
was hired in April 1998, it was the Board’s intent to give the Executive Director broad discretion
in running the Authority, including personnel issues. However, neither the Chairman nor the
other Board member would confirm they were aware of the circumstances as to how the 1999




                                                8
Personnel Manual was revised, or of the content of the provision that exempted the Executive
Director from following the Authority’s Personnel policies and procedures. Further, since the
Board of Commissioners never approved the revised policy by resolution, we cannot assume the
Chairman of the Board of Commissioners is speaking for the full Board of Commissioners,
especially in light of the fact the present Board of Commissioners’ membership is different from
that in December 1999.

On March 1, 2002, the Chairman of the Board presented us with a letter that further clarified the
statements he made in our November 6, 2001 meeting. In the memo, the Chairman reiterates,
that the Board of Commissioners directed Mr. Greene to exercise discretion in making executive
level personnel decisions with the intention to give Mr. Greene a broad mandate to take the steps
necessary – consistent with applicable laws and regulations – to implement significant change at
the Authority. As previously stated, the first time the OIG was informed of the Board’s verbal
instructions to the Executive Director was in the November 6, 2001 meeting, a full 10 months
after the start of our review. Up to that point, the Authority’s justification for the hiring practices
used by the Executive Director, as presented by their outside legal counsel, was an evolving
series of explanations that continually changed as we questioned each theory. In fact, when we
questioned the Executive Director in September 2001 concerning the hires and promotions at the
Authority, he never claimed his authority stemmed from instructions he received from the Board
of Commissioners. Rather, the Executive Director consistently responded that the 1999
Personnel Policy allowed him to hire and promote individuals at his discretion. Thus, it appears
the Executive Director’s justification contradicts the statements made by the Chairman of the
Board and, as such, we cannot rely on either statement.

B.     Effects of Discretionary Hiring Authority at the Authority

Executive Director hired and promoted individuals contrary to the Authority’s written
personnel policies and procedures

We reviewed 46 personnel files from more than 300 individuals hired between April 1, 1998 and
February 14, 2001 and found in 11 of the 46 cases, the Executive Director deviated from the
Authority’s standard written personnel policies and procedures to hire and/or promote these
individuals. We also noted many of the Executive Director’s personnel actions took place prior
to the implementation of the 1999 Personnel Manual, which allowed for discretionary hiring
authority and the waiving of the educational and experience requirements.

Our review showed 10 of the 46 employees received promotions and/or pay raises increasing
their salaries from 4 percent to 65 percent in as little as three weeks to eight months after starting
at the Authority. The promotions were offered to the employee without competition or the
position was “reclassified” to a higher position with a pay increase. For the eleventh employee
we had serious concerns regarding her hire as a consultant and then later as a full time Authority
employee. See(See Section
                  Section E)E

For employees hired under the 1995 Personnel Manual a three-month probationary period is
required before they become regular full time employees and thus eligible for promotion.




                                                  9
 Further, the 1999 Personnel Manual requires a six-month probationary period prior to being
 eligible for promotion. However, we found 7 of the 11 employees received their promotions or
 pay raises in violation of the timeframes dictated by the applicable Personnel Policy. Attachment
BB illustrates the promotions that occurred without fair and open competition, the timeframe the
 promotion was received, and the percentage of salary increase.

The following are more detailed examples of questionable hires and/or promotions that have
resulted from the discretionary hiring practices of the Executive Director:

·   In August 1999, the Executive Director waived the educational and experience requirements
    to hire the daughter of a member of the Board of Commissioners. (See         Section D)
                                                                            See Section   D The
    employee hired did not meet the minimum educational requirements as listed on the job
    announcement and her prior experience is also questionable. Within three weeks, the
    employee received a $7,000 annual pay increase. This employee was hired under the 1995
    policy that did not allow the Executive Director to waive educational and experience
    requirements. When we discussed this hire and promotion with the Executive Director, he
    stated that he felt this individual was qualified for the position and the hire was consistent
    with policy.

·   In December 1998, the Executive Director waived the educational requirements to hire an
    Administrative Assistant in the Executive Office. The employee was referred to the
    Executive Director through a mutual acquaintance of both the Executive Director and the
    employee. The Authority personnel qualifications for this position required an individual to
    have a Bachelors Degree; however, the employee did not have a degree and the Executive
    Director waived the requirement. Within seven months this individual was promoted to
    Administrative Officer, an even higher-level position that also required a Bachelors degree.
    Once again this employee was hired and promoted under the 1995 policy that did not allow
    the Executive Director to waive educational and experience requirements.          When we
    discussed this hire and promotion with the Executive Director, he stated that he felt this
    individual was qualified for the position and the hire and promotion were consistent with
    policy.

·   In May 1998, the Executive Director exercised discretionary hiring authority when he
    promoted the Media Specialist to the position of Executive Media Specialist. This promotion
    included a $20,000 pay raise and occurred within two months of the employee starting at the
    Authority. This employee was hired and promoted under the 1995 policy that required a
    three-month probationary period prior to being promoted. When we discussed this promotion
    with the Executive Director, he stated the position was “reclassified” so there was no need for
    competition or for the employee to interview for the promotion.

·   In January 2001, after only seven weeks at the Authority, the General Manager of Contract
    Administration received a promotion to Executive General Manager of Contract
    Administration and a $7,500 raise. In addition, the employee received two additional raises
    increasing her salary by a total of $17,850 within six months of being hired. This employee
    was hired and promoted under the 1999 policy that requires a six-month probationary period




                                                10
     prior to being promoted. We questioned the Authority’s outside legal counsel concerning
    these promotions. He stated that the initial promotion was due to additional duties assumed
    by the employee and the raises were to put her salary inline with other comparable Executive
    General Managers. The promotion was offered without competition.

·   The Executive Director hired an Administrative Officer (assigned to the Executive Office)
    that was previously employed at the Detroit Housing Commission as a typist. The Authority
    more than doubled the Administrative Officer’s salary from $22,000 in Detroit to $47,900 at
    the Authority and within two months of her hire, the Executive Director promoted her to
    Relocation Manager with a $2,400 salary increase. The employee was appointed to the
    position non-competitively. After several months it was determined the employee was “not
    the right fit” for the position and was returned to the original position, without a change in
    salary. Further, the Authority paid $4,266 in relocation expenses to relocate her from Detroit
    to Philadelphia. Although the 1995 Personnel Manual is silent on the matter relating to an
    employee’s relocation expenditures, this type of expense is typically reserved for Executive
    level staff. We found no documentation to show who authorized the relocation expenses.

    Considering the Administrative Officer position is a fairly standard position that would
    normally be filled from a local source, we questioned the Authority’s outside legal counsel
    and Human Resource staff as to the circumstances related to the Authority’s decision to
    recruit this individual from Detroit. The Authority’s outside legal counsel stated a top
    manager at the Authority, who also came from the Detroit Housing Commission, recruited
    this individual. However, the manager did not corroborate the legal counsel’s assertion and
    simply stated she provided the individual a good reference. No other individual at the
    Authority could explain how this individual was hired nor provide documentation to support
    her hire and justify her associated recruitment costs. Further, when we interviewed the
    individual in question, she told us she sent her resume to the Authority because she had heard
    the Executive Director wanted to hire Detroit employees.

    Although this individual worked in the Executive Office of the Detroit Housing Commission
    where the Executive Director served in the same capacity prior to coming to the Philadelphia
    Housing Authority, the Executive Director stated he did not know this individual and she did
    not work directly for him while at Detroit. Further, the Executive Director stated he did not
    interview this individual for the position at the Authority and had no knowledge of the
    Authority paying for the individual’s relocation expenses. In the end, we received no
    definitive explanation on how and why this individual was hired and promoted.

When we asked for documentation to support these hires and promotions, the Authority’s outside
legal counsel stated that the Executive Director does not maintain any type of records to support
his decisions and the 1999 Personnel Manual does not require him to do so. Without providing
some documentation to support the decisions made, the Authority and the Board of
Commissioners cannot be assured that the best-qualified candidates were chosen.




                                               11
Authority had a difficult time quantifying the number of Executive Hires

On October 18, 2001, we requested the Authority’s outside legal counsel provide a complete
listing of employees hired and promoted using the discretionary hiring authority of the Executive
Director. We were told that this would be a difficult task for a number of reasons. According to
the Authority’s outside legal counsel, the Executive Director used his discretionary hiring
authority for a variety of different circumstances. For example, the Executive Director may
waive the educational requirement for one employee, in another case he may eliminate the need
to advertise the position, or he may eliminate the standard waiting period for promotions.
According to the outside legal counsel, these various applications of the discretionary hiring
authority made it difficult to quantify the number of employees who were hired or promoted
under this authority. In addition, the Executive Director can forward this authority to any staff
member he sees fit, thus, making it virtually impossible to know how many staff were hired or
promoted under the discretionary hiring authority.

Another aspect that makes it difficult to quantify the number of hires or promotions under the
discretionary hiring authority is the fact that the Authority’s personnel records and promotional
files were unorganized, incomplete and not centrally located. Original personnel records are
scattered throughout boxes in warehouses and obtaining these documents was time consuming
and in some cases fruitless. The Authority’s outside legal counsel had a difficult time in
reviewing and organizing Authority personnel files and still could not always provide complete
files for the OIG to review. Further, although the 1999 Personnel Manual requires the Authority
to maintain records such as rating sheets, interview notes, the final recommendation memo, and
copies of all correspondence and miscellaneous items in the position-recruiting file, the manual
exempts the Executive and Department Head Roster positions from this policy. When
questioned, the outside legal counsel told us the Executive Director did not feel he needed to
maintain any records or documentation to support his decisions to hire and promote using the
discretionary hiring authority.

On December 7, 2001, the Authority’s outside legal counsel provided us a list of employees
believed to be hired or promoted using the discretionary hiring authority. The list we received
included 54 employees hired since April 1998, 37 of which were hired prior to the
implementation of the 1999 Personnel Manual. Although we were provided a list, we cannot be
sure this list is all-inclusive given the obstacles noted above.

Currently, the Authority is implementing a new Human Resource software program to improve
its record keeping process. Unfortunately, because the records are in such disarray, we believe
data input into the new system will be incomplete at the start.

In summary, we found the Executive Director did not adhere to the Authority’s 1995 Personnel
Manual from April 1998 to December 1999, when he hired and promoted individuals at his
discretion. In December 1999, the Executive Director approved the 1999 Personnel Manual,
which included provisions to exempt the Executive Director from the established Authority
personnel policies and procedures. We raised serious questions relating to the circumstances
surrounding how and who revised the Personnel Manual, and the Board of Commissioners lack




                                               12
of oversight in the matter. For many of the employees we reviewed, there was little question as
to whether they were hired or promoted contrary to the standard Authority personnel policies and
procedures before and after the 1995 Personnel Manual was revised. The Authority and its
outside legal counsel responded by stating the Executive Director had the authority to hire and
promote outside of the policies and procedures as stated under the 1999 Personnel Manual. We
believe these uncontrolled and undocumented recruitment and promotion practices by the
Executive Director lacks accountability and does not offer the Executive Director any defense
against the allegations of favoritism or improper influence.

C.     Executive Director’s Management Style Did Not Violate Federal or State Laws

The second allegation in the complaint alleged that many executive level personnel had resigned
from the Authority because of the Executive Director’s management style. We took into
consideration during the review of this allegation that one’s opinion of another’s management
style is much more subjective than trying to determine if a policy or procedure was violated.
However, we reviewed this allegation to determine if the Executive Director violated any Federal
or State laws along with the Authority’s policies. The complaint specifically names eight
executive level personnel. The positions ranged from Executive Assistant of the Executive
Director to the Deputy Director of the Authority with salaries ranging from $63,000 to $117,500.
We noted that six of the eight were employed by the Authority for two years or less and the
remaining two were employed just over two years.

We reviewed the personnel files of these eight individuals and attempted to contact each of them.
We were successful in speaking with three employees. All three employees felt the Executive
Director was a tough and demanding boss; however, that was not the reason they left the
Authority.

We also selected nine current and former employees to obtain their opinions on the management
style of the Executive Director. These individuals ranged from executive level to administrative
staff. The majority informed us that the work environment at the Authority was extremely
stressful and several of the former employees cited the Executive Director as the reason they left
the Authority. As stated above, we understand that obtaining a person’s opinion on another’s
management style is very subjective, so in order to draw a conclusion we have to determine what
rules were violated. While the Executive Director may have been a tough and demanding
manager, we found no evidence that he violated any relevant Federal or State laws.

D.     Authority Violated Section 19 of its Consolidated Annual Contributions Contract
       With HUD

During our review of the allegations of the complaint, we identified an incident in which the
Authority violated the Conflict of Interest provision under Section 19 (B) of its Consolidated
Annual Contributions Contract (ACC) with HUD. Specifically, in August 1999, the Authority
hired the daughter of one of the members of the Board of Commissioners as the General Manager
for its scattered site program. Besides not receiving the proper waiver for the hiring, we have
serious concerns whether the employee even meets the minimum qualifications for the position.

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                                               13
Conflict of Interest Section 19 of the ACC

Section 19 (B)(1) of the ACC states: “The housing authority may not hire an employee in
connection with a project under this ACC if the prospective employee is an immediate family
member of any person belonging to one of the following classes:” including “(i) any present or
former member or officer of the governing body of the housing authority.” This prohibition shall
remain in effect throughout the class member’s tenure and for one year thereafter. However, the
ACC does allow the Board of Commissioners the opportunity to waive the requirement of
subsection B for good cause provided that State and Local law permit such a waiver. However,
we found the Board of Commissioners did not waive the ACC requirement prior to hiring the
Commissioner’s daughter. The Authority’s outside legal counsel stated that since the Board of
Commissioners were aware of the hiring, they in a sense offered their approval by not speaking
out against it. In fact, the outside legal counsel provided several newspaper articles to support the
fact that the hiring was well publicized. Although the hiring of a member of the Board of
Commissioner’s family was publicized, it does not negate the fact that the Board of
Commissioners and the Authority violated the ACC contract and that the hiring was not properly
authorized.

In addition to the ACC conflict of interest violation, the employee in question did not meet the
educational and/or experience requirements normally required for this position. Specifically, the
position required a college degree and at least 10 years experience in senior management. We
attempted to review the employee’s personnel file to determine if the basic requirements were
met; however, we never obtained this file. In fact, we were told by the Authority’s outside legal
counsel that the personnel file was missing. The only document the outside legal counsel could
provide was the employee’s job application. Upon review of the employee’s application, we
noted no evidence of a college degree and question if a high school diploma was ever received.
In addition, we found no documented evidence to support that the employee had any career
experience that would support this position. When we discussed the educational background
with the employee, she stated she did not have a college degree, but she did graduate from high
school. During the discussion, she agreed to sign a statement stating she had obtained a high
school diploma. However, later when we presented the statement, the Authority’s outside legal
counsel informed us that she would not sign the statement.

The Authority’s outside legal counsel referenced the provision in the 1999 Personnel Manual that
exempted the Executive Director from following the standard personnel policies as the
justification for hiring the employee, even though she lacked the educational qualifications for
the position. However, we noted the employee was hired in August of 1999, and the 1999
Personnel Manual was not approved until December of 1999. The 1995 Personnel Manual does
not allow for the waiving of education or career experience in order to hire an employee;
consequently, the Executive Director violated existing Authority personnel policies to hire this
individual.

In addition, the employee was hired with a starting salary of $80,000 per year and within three
weeks the salary was increased by $7,000. Since this employee was hired under the 1995




                                                 14
 Personnel Manual, a probation period of three months was required to be met before a promotion
or pay raise could be received. Nine months later the employee received an additional $3,000
raise and a large retroactive pay adjustment that effectively put the starting salary at $90,045.

Chairman of the Board acknowledged he was unaware of key ACC provisions in which the
Authority violated its ACC with HUD

On November 6, 2001, we questioned two members of the current Board of Commissioners,
which included the Chairman of the Board, on the apparent conflict of interest violation of the
ACC. Generally, the two Board members stated they supported the hiring of the Board member’s
daughter and the Chairman acknowledged he was not aware of the proper protocol needed to
waive the ACC requirements. Further, the Chairman of the Board suggested the Board entertain
the idea of passing a resolution authorizing the waiver of the ACC requirements for this hire at
the next Board of Commissioners meeting. With limited discussion, on November 15, 2001 the
Board of Commissioners passed a formal resolution that waived the requirements of section 19
(B) of the ACC.

In November 2001 the Board of Commissioners affirmed the 1999 Personnel Manual it just
passed at the October 2001 Board of Commissioners Meeting

In our meeting with the two current Board members on November 6, 2001, the OIG expressed
concern over the fact that when the Board of Commissioners approved the 1999 Personnel
Manual on October 18, 2001 by resolution, the three Board members’ voting included the
member whose daughter directly benefited from this new policy. In fact, this Board member was
the decisive vote in ensuring the resolution was passed, and as such constituted a conflict of
interest. In response to this concern, on November 15, 2001 the Board of Commissioners
presented and passed the resolution again without the vote of the Commissioner whose daughter
was hired by the Authority.

E.   Questionable Circumstances Related to Recruitment of Human Resources Consultant
     to Revise the Personnel Manual

During our personnel review, we found the Authority hired a Human Resource consultant to
update the 1995 Personnel Manual. Although we did not question the Authority’s decision to
hire a consultant to assist them in revising the manual, there were a number of questionable
circumstances as to the hiring and costs associated with the employment. Specifically, we had
questions relating to how and why the consultant was selected for the task, later hired as the
Authority’s Human Resources General Manager, and the costs (salary, relocation, temporary
quarters, etc.) associated with her employment.

When the Authority decided to update its 1995 Personnel Manual it was determined that they
lacked the expertise “in house” so a Human Resource consultant was hired. We noted the
consultant selected was a former employee of the Executive Director where he served in the same
capacity at the Detroit Housing Commission prior to his appointment in Philadelphia. Further,
the consultant was hired under an existing Authority contract for temporary services in

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                                               15
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the Information Systems Management (ISM) department. We reviewed the contract file, but
found no evidence of a change order to allow the contract to cover the services provided by the
Human Resources consultant. In addition, the fees charged for this individual were twice as
much as the highest rate listed on the ISM contract. Specifically, the Authority paid $105 per
hour for the services of the Human Resource Consultant. By comparison, the highest rate listed
on the ISM contract was $52.06. In addition, the Authority paid $12,600 for three weeks
vacation and $33,508 in overtime at $157.50 per hour. In total, the Authority incurred $191,848
for the nine months of services provided by the Human Resource Consultant. The costs of this
contract were not only excessive, but it also violated 24 CFR 85.36(b)(2) which requires
contractors to perform in accordance with the terms, conditions, and specifications of their
contracts. Further, the terms of this contract do not allow for overtime or vacation for any
position under this contract.

In questioning the Executive Director concerning the hire and costs associated with this
individual, he stated he had no knowledge of how the consultant was selected, hired or paid. In
fact, he stated he had no role in updating the personnel policy. We find this lack of knowledge
and denial of involvement on the part of the Executive Director troubling and contradictory to the
information provided by the Authority during our review of the Administrative Board. (See
Section
SectionA)  A As discussed in Section A, under the 1995 Personnel Policy section on the
Administrative Board, the policy states that only the Executive Director had the authority to
appoint additional members to the Administrative Board. In which case, the Executive Director
must have been involved in hiring this individual and assigning them to the Administrative Board
for the purpose of updating the personnel manual. In fact, a letter dated September 20, 2001 sent
to our office from the Authority’s outside legal counsel states: “Pursuant to the 1995 policies
and procedures, the Administrative Board requested that the PHA’s Human Resources
Department develop new personnel policies to improve upon those already in place. The
Executive Director was charged with putting together a group to meet this goal. To this end, the
PHA hired an experienced consultant with over twenty five years experience in the employment
and human resources fields to assist the General Manager of the Human Resources department.”
“The Administrative Board carried out its charge of the 1995 policies and procedures, and the
current PHA policies and procedures are the result of the tireless efforts of the group that the
Executive Director put together.”

The Executive Director was charged with putting together the Administrative Board and, in fact,
was the only person who could designate members. When we asked the Authority for a listing of
Administrative Board members, the Human Resource Consultant was among them. On one hand
the Executive Director stated he played no role in bringing anyone, including the Human
Resource Consultant, in to update the Authority’s Personnel Policies; yet, the Authority’s
procedures and outside legal counsel acknowledge that the Executive Director was responsible
for putting the Administrative Board together. In addition, during several discussions with the
Authority’s outside legal counsel, we were told the Executive Director knew the consultant and
wanted to bring this individual to the Authority.

Since the Executive Director stated he had no knowledge of how this consultant was hired, we
also questioned the former Contracting Officer, former Human Resource manager, and the


                                               16
Temporary Services firm. Both the former Contracting Officer and Human Resource manager
had no knowledge of how this individual was selected or from which contract she was paid. The
former Human Resource manager stated that the hiring of the consultant would have been
handled in the Contracting Department. When we spoke to the Temporary Services firm, we
were told that they were directed by the Authority to seek out and hire this particular individual
for the Human Resource Consultant position. However, the Temporary Services firm said they
did not remember who at the Authority instructed them to do so. Further, after we initially
contacted the Human Resource Consultant, the consultant declined to speak to us without the
Authority’s outside legal counsel being present. We agreed, but when we attempted to contact
the consultant to set up the interview, the consultant did not return the OIG phone calls. Thus,
the interview never took place.

Based upon our review and questions relating to the hiring of this consultant, the Authority’s
outside legal counsel completed a full review of the hiring of the consultant. From that review,
the outside legal counsel recommended the Temporary Services firm pay back a portion of the
contract, while the Authority pay from non-Federal funds the remainder. The Temporary
Services firm paid $76,025 and the Authority paid $115,823 out of the Section 8 Earned
Administrative Reserve, thus $191,848 was paid back to HUD.

Consultant appointed as the General Manager of Human Resources

Three months after the consulting contract was complete, in October 1999, the Authority hired
the consultant as its full time General Manager of Human Resources. Even though the Executive
Director did not approve the 1999 Personnel Policy until December 1999, the employee was
hired using the policy within the 1999 Personnel Manual that allows the Executive Director
discretionary hiring authority. In addition, as the General Manager of Human Resources, this
individual was in charge of implementing the 1999 Personnel Policy. This makes the individual
the author, beneficiary, and manager of the 1999 Personnel Policy.

The consultant was hired as a full time employee with a starting salary of $95,000. During May
2000, after only eight months as an Authority employee, the Authority paid to move the
employee back to Detroit. After this date, the employee received an individual pay raise of
$3,325, an Executive Incentive Bonus of $2,850 and a retroactive pay adjustment totaling $2,237.
According to the 1999 Personnel Manual, the Authority can only allow for one annual pay
increase a year. All three pay changes occurred after the Authority was fully aware of the
employee’s intention to resign from the Authority. In addition, when the employee formally
resigned on August 1, 2000 she continued to receive seven paychecks until the end of September
2000. All seven were explained as vacation time accumulated. Upon review of the 1999
Personnel Manual, we determined that the Authority paid for two extra weeks of vacation for this
employee totaling $3,780.

As part of the Offer of Employment, the Authority paid $205 for a house hunting trip and $4,118
for two months of temporary housing costs until the employee could establish Philadelphia
residency. However, in May 2000 the Authority paid $2,163 to move the employee back to the
Detroit area. The employee remained in her official capacity as the General Manager of Human


                                               17
Resources until August 2000. During the months of June and July, the Authority paid additional
temporary housing costs of $3,031 and at various times during the 10 months of employment the
Authority paid over $329 in airfare for travel between Detroit and Philadelphia. We questioned
the Executive Director and outside legal counsel as to why the Authority paid for the relocation
back to Detroit, the temporary housing, and airfare for a full time Authority employee. The
Executive Director explained that since the Authority did not pay for the employee to move to
Philadelphia, it paid for the move back to Detroit. However, according to the Authority’s outside
legal counsel, the employee only intended to remain at the Authority on a temporary basis until a
permanent replacement could be found, thus the intention was never to relocate to the
Philadelphia area in the first place. This violates both the 1995 and 1999 Personnel Manuals,
which have a residency clause for all Authority employees. In fact, the 1999 Personnel Manual
states: “All applicants for employment are required to be residents of the City of Philadelphia or
must establish residency prior to the extension of an offer of employment.” We received no
explanation for the temporary housing costs paid in June and July or the airfare.

The 1999 Personnel Manual, relocation policy, allows for the transporting of household goods to
a residence in Philadelphia - not Detroit; temporary housing costs up to 60 days beginning with
the first day of employment - not at the end of employment; and travel expenses for one house
hunting trip after acceptance of employment - not travel expenses for the benefit of the employee.
We questioned the Authority staff whether this employee had an employment contract that may
have allowed for this deviation from normal Authority policy or a special waiver to allow for the
added benefits. We were told there was no such contract or anything in writing to justify these
added expenditures. In fact, the Authority’s outside legal counsel informed us the Authority’s
policies and procedures require no explanation or special authorization for such expenditures.

In summary, the circumstances surrounding the hire of this individual are questionable; especially
in light of the fact the employee was a former employee of the Executive Director from the
Detroit Housing Commission and the primary author of the 1999 Personnel Manual that directly
benefited the Executive Director. In addition, while a consultant and full time employee, the
individual received questionable payments in salary and benefits that go beyond those afforded to
a normal employee. Further, the Executive Director’s contradictions over his involvement in
hiring this individual only add to the questionable circumstances.

We presented the draft report to the Office of Public and Indian Housing, the Authority Board of
Commissioners, and the outside legal counsel on February 13, 2002. We received the
Authority’s response from their outside legal counsel on February 28, 2002, and the exit
conference was held on March 1, 2002.

Auditee Comments

The Authority’s response to our audit memorandum was prepared and submitted by its outside
legal counsel. Altogether, the response was 276 pages, including a 45 page narrative section and
46 attachments totaling over 230 pages. Except for our conclusion that we did not find the
Executive Director’s management style violated any Federal or State law, the Authority’s outside
legal counsel objected to the audit memorandum in its entirety and requested that it be


                                               18
withdrawn. Specifically, the outside legal counsel asserted the OIG did not have jurisdiction to
report on matters addressed in the audit memorandum. Further, the outside legal counsel
questioned the OIG’s motive, approach, scope, methodology, and auditors experience in
completing the audit, and with few exceptions, refuted the facts and conclusions presented in the
memorandum as being inaccurate, misleading and unfair.

A redacted version of the narrative portion of the outside legal counsel’s response is attached in
Attachment C.C However, due to the overall volume of the outside legal counsel’s response, the
Attachment
attachments were not included in this audit memorandum. The attachments will be made
available upon request.

OIG Evaluation of Auditee Comments

Except for our concurrence that we did not find the Executive Director’s management style
violated any Federal or State law, we adamantly disagree with the outside legal counsel’s
characterization of the issues, facts and conclusions. Rather than discussing the specific facts
related to the serious issues presented in the memorandum, the outside legal counsel used his
response as a forum to unfairly criticize the OIG for completing the audit and attempted to
discredit the report and the OIG audit staff. We believe this was done to detract from the true
issues in the Audit Memorandum, with the ultimate goal to prevent the issuance of the Audit
Memorandum. In spite of this approach, we objectively evaluated the response to determine if
any changes should be made to the draft memorandum and, as appropriate, modified the report.

A primary issue addressed by the Authority’s outside legal counsel was that the OIG did not have
jurisdiction to report on matters relating to the issues addressed in the Audit Memorandum. We
disagree with this position. The OIG Act of 1978 provides us authorization to conduct audits,
investigations and related activities in connection with the enforcement and administration of all
laws, regulations, orders, contracts, and programs in which the Department of Housing and Urban
Development is a party. With the Authority receiving more than $345 million dollars a year in
HUD funds, we have an obligation to ensure the Authority conducts its business in an efficient
and effective manner and Federal funds are used appropriately. Further, we never questioned the
Board’s authority to establish policy nor have we made any attempt to dictate personnel policy.
In our review, we used the Authority’s own policies and procedures as the benchmark for our
evaluation.

Exit Conference

On March 1, 2002, we conducted an exit conference with the Authority’s Board of
Commissioners and their outside legal counsel. With the exception of the Chairman of the Board,
four of the five Board members attended the meeting. The purpose of an exit conference is to
discuss the findings, conclusions and audit recommendations of the audit, as well as any points of
disagreement and the auditee’s reasons for disagreeing. Since the Authority’s legal counsel
prepared the Authority’s response, and we wanted to ensure the Board members actually read the
response and supported the matters that were presented, we asked the Board members at the start
of the conference if they read the response and fully supported it. The spokesperson for the



                                                19
Board, (Ms. Wilkerson) admitted to reading only part of the response and relied instead, on a
briefing provided by the Authority’s outside legal counsel. When the OIG questioned the
remaining three Board members, the Authority’s outside legal counsel advised them not to
answer, invoking the attorney-client privilege, and instead stated all we needed to know was that
he briefed the Board on the issues.

By accepting the outside legal counsel’s advice to not respond to our question, we were left with
the impression that no one on the Board read the Authority’s response and thus, an informed
discussion could not take place as we would have preferred. In our opinion, the Board’s total
reliance on outside legal counsel indicates the Board was disingenuous in addressing the matters
in the report and appeared to be more preoccupied with justifying what had happened rather than
accepting their oversight role and responsibilities.

Recommendations

We recommend the Office of Public and Indian Housing:

1A. Evaluate whether the conflict of interest constitutes an actionable breach of the
    Consolidated Annual Contributions Contract, and if so, consider and implement appropriate
    action to remedy the breach.

1B. Ensure the Authority repay, with non-Federal funds, relocation expenses of $2,163,
    temporary housing costs of $3,031, and airfare costs of $329, in ineligible costs, paid to or
    on the behalf of an Authority employee.

1C. Ensure the Authority repay, with non-Federal funds unsupported retroactive pay
    adjustments of $2,237 and salary overpayments of $3,780 for the two unsupported
    paychecks received after the employee left the Authority.

Also we recommend the Office of Public and Indian Housing require the Board of
Commissioners to:

1D. Objectively assess whether the actions taken by the Executive Director, as are defined in
    this report, warrant disciplinary action. Specifically, his role in recruiting and use of
    outside consultants, development of Authority personnel policies, violation of 1995
    Personnel Policies and failure to provide auditors with full and free access to authority
    records, files, and personnel as required by the ACC.

1E. Update its 1999 Personnel Manual to clearly define all directions and mandates granted to
    the Executive Director and other Executive Managers on their discretionary hiring
    authority. Also, update the policy to include adequate safeguards to identify, track and
    monitor all discretionary hires.




                                               20
1F. Attend mandatory training to obtain a better understanding of the differences in the roles
    and responsibilities of the Board and the Executive Director, along with obtaining training
    on the provisions and requirements of their Consolidated Annual Contributions Contract
    with HUD.

                                             *****

In addition to this audit memorandum, HUD’s Inspector General issued a separate letter on
March 26, 2002 to the Philadelphia Housing Authority’s Chairman of the Board of
Commissioners. The letter expresses the OIG’s concerns over the use of scarce PHA financial
resources to engage consultants to oversee our audit activities, and to contract for services that
are already covered by our ongoing audit work. Further, the letter instructs the Chairman to
ensure that henceforth, the PHA avoids the purchase of unnecessary services and fully cooperate
with audit activities.




                                               21
                                                                                  Attachment A

                              Schedule Of Questioned Costs

Section Number        Ineligible 1/         Unsupported 2/        Recovered Costs 3/

       E                                                                 $191,848
       E               $2,163
       E               $3,031
       E               $ 329

       E                                           $2,237
       E                                           $3,780
       Totals           $5,523                     $6,017                $191,848

1/ Ineligible costs are costs charged to a HUD program or activity that the auditor believes are
   not allowable by law, contract, or Federal, State, or local policies or regulations.

2/ Unsupported costs are costs charged to a HUD program or activity that the auditor cannot
   find documentation to support the expense.

3/ Recovered costs paid back during the course of the review, based upon questions raised by
   the auditor during the review.




                                              22
                                                                                                      Attachment B

                    Questionable Hires and Promotions Under 1995 Personnel Manual
  Original          Starting       Promoted          Promoted       % Of        Timeframe             Comments
   Position          Salary         Position          Salary       Increase
Media Specialist     $43,630    Executive Media        $63,138         45%      2 months      Position Reclassified/no
                                Specialist                                                    competition for
                                                                                              promotion. Policy
                                                                                              requires 3 months prior to
                                                                                              promotion.
Admin Asst. 2        $43,630    Senior                  $60,000         38%     7 months      Lacks education required
                                Administrative                                                for either position.
                                Officer
Exec Asst. to        $61,000    Senior Counsel          $72,778         19%     8 months      No competition for
Exec Director                                                                                 promotion.
Deputy General       $97,000    General Counsel        $110,000         13%     4 months      No competition for
Counsel                                                                                       promotion.
Executive            $74,654    No change               $83,000         11%     1 ½ months    Policy requires 3 months
Assistant                                                                                     prior to promotion.
General              $80,307    No change               $87,000           8%    3 weeks       Lacks education &
Manager of                                                                                    experience required for
Housing                                                                                       the position. Policy
Operations                                                                                    requires 3 months prior to
                                                                                              promotion.
Admin                $47,900    Relocation              $50,344           5%    2 months.     No competition for
Officer                         Manager                                                       promotion. Policy
                                                                                              requires 3 months prior to
                                                                                              promotion.
Human                $95,000    No change               $98,325           4%    8 months      No competition for hire.
Resource
Manager

                   Questionable Hires and Promotions Under 1999 Personnel Manual
   Original         Starting       Promoted         Promoted       % Of        Timeframe              Comments
   Position          Salary         Position         Salary       Increase
Technical Aide        $25,269   Assistant to the      $41,704          65%     4 months.      No competition for
                                Executive                                                     promotion. Policy calls
                                Director                                                      for 6 months to be eligible
                                                                                              for promotions.
Program               $60,216 Supervisory                $66,642         11% 5 months         No competition for
Manager                           Program                                                     promotion. Requires 6
                                  Manager                                                     months to be eligible for
                                                                                              promotions.
General               $96,000 Exec GM of               $103,500           8% 6 weeks.         No competition for
Manager of                        Contracts                                                   promotion. Policy calls
Contract                          Administration                                              for 6 months to be eligible
Administration                                                                                for promotions.
  The tables show whether the hire/promotion occurred before or after the 1999 Revised HR policy was signed by the
  Executive Director, the change from the original position and salary to the promoted position (if applicable) and
  salary, the percentage of salary increase, the elapsed time between hire and promotion and comments identifying the
  questions related to the hire/promotion.

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                                                           23
                        Attachment C

Auditee Comments




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72
                                                                                 Attachment D

Distribution

Honorable Edward G. Rendall, Esq., 123 South Broad Street, Suite 1827, Philadelphia, PA
     19102
Mr. James Eisenhower, III, Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st
     Floor, Philadelphia, PA 19103-7599
Director, Office of Public Housing, Mid-Atlantic, 3APH
Secretary’s Representatives
Audit Liaison Officer, 3AFI
Acquisitions Librarian Library, AS (Room 8141)
OIG Key Principal Staff Listing
HUD Key Principal Staff Listing
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen
       Senate Office Building, US Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs, 706
       Hart Senate Office Building, US Senate, 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, US GAO, 441 G Street,
       N.W., Room 2474, Washington, DC 20548, Attn: Stanley Czerwinski
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
       Building, House of Representatives, Washington, DC 20515
The Honorable Henry Waxman, Ranking Member, Committee on Government Reform, 2204
       Rayburn Building, House of Representatives, Washington, DC 20515
Ms. Sharon Pinkerton, Deputy Staff Dir, Counsel, Subcommittee on Criminal Justice, Drug
       Policy and Human Resources, B373 Rayburn House Office Building, Wash, DC 20515
Mr. Steve Redburn, Chief, Housing Branch, Office of Management & Budget, 725 17th Street,
       N.W., Room 9226, New Executive Office Building, Washington, DC 20503
Mr. Andrew R. Cochran, Senior Counsel, Committee on Financial Services, U.S. House of
       Representatives, 2129 Rayburn House Office Building, Washington, DC 20515
Mr. Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, 1700 G Street,
     N.W., Room 4011, Washington, DC 20552
Honorable John Street, City of Philadelphia, Office of Mayor, Room 215, Philadelphia, PA
     19107
Jonathan A. Saidel, City Controller, Office of City Controller, 1401 JFK Boulevard, 12th Floor,
     S-1230, Philadelphia, PA 19102-1679




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