oversight

The Housing Authority of the City of Terre Haute, Indiana, Failed to Follow Federal Requirements and Its Employment Contract Regarding Nonprofit Development Activities

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-07-31.

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

                                                                   Issue Date
                                                                                July 31, 2009
                                                                   Audit Report Number:
                                                                            2009-CH-1011




TO:         Thomas S. Marshall, Director of Public Housing Hub, 5DPH


FROM:       Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The Housing Authority of the City of Terre Haute, Indiana, Failed to Follow
           Federal Requirements and Its Employment Contract Regarding Nonprofit
           Development Activities

                                     HIGHLIGHTS

 What We Audited and Why

             We audited the Housing Authority of the City of Terre Haute’s (Authority)
             nonprofit development activities. The review of public housing authorities’
             development activities is set forth in our annual audit plan. We selected the
             Authority because it had high-risk indicators of nonprofit development activity.
             Our objective was to determine whether the Authority diverted or pledged resources
             subject to its annual contributions contract (contract), other agreement, or regulation
             for the benefit of non-U.S. Department of Housing and Urban Development (HUD)
             developments.

 What We Found

             Under the direction of the former executive director and board of commissioners,
             the Authority diverted assets subject to its contract, other agreements, or HUD’s
             regulations for the benefit of Terre Haute Housing Authority Development
             Corporation (nonprofit), the Authority’s nonprofit entity. The Authority’s 21
             properties, valued at more than $1 million, were used to support the activities of its
             nonprofit. As a result, HUD lacked assurance that the disposition of the 21
             properties served the best interests of the Authority and its residents.
         The Authority violated its contract with HUD when it provided $33,000 to its
         nonprofit to finance preconstruction costs for its nonprofit’s housing units and did
         not maintain complete and accurate books of record. As a result, HUD lacked
         assurance that the Authority used HUD funds in accordance with specific program
         requirements and that these funds were not used for non-HUD development
         activities.

         The Authority’s former executive director created a conflict-of-interest relationship
         as the Authority’s executive director/resident agent for its nonprofit developments.
         As a result, the Authority and HUD lack assurance that the former executive
         director performed his official duties for the benefit of HUD, the Authority, and its
         residents.

         We informed the Authority’s executive director and the Director of HUD’s
         Cleveland Office of Public Housing of minor deficiencies through a memorandum,
         dated July 31, 2009.

What We Recommend


         We recommend that the Director of HUD’s Cleveland Office of Public Housing
         require the Authority to (1) transfer the 21 properties, valued at more than $1
         million, back to the Authority and secure deeds of trust or provide documentation to
         show that HUD funds were not used to acquire and/or rehabilitate the properties and
         (2) improve its existing procedures and controls to ensure that Authority assets are
         safeguarded against mismanagement. These procedures and controls should
         include but are not limited to maintaining pertinent records and providing training
         to its staff to ensure compliance with HUD’s requirements.

         We also recommend that the Director require the Authority to (1) reimburse the
         applicable HUD program $33,000 from nonfederal funds for the improper payments
         cited in this report or provide documentation to show that HUD funds were not
         used, (2) implement adequate procedures and controls to ensure compliance with its
         contract with HUD regarding the general fund account, (3) continue restructuring
         its books of record to adequately identify the source and application of its funds,
         and (4) reimburse its low-rent housing program $136,500 from nonfederal funds for
         the former executive director’s payments as the resident agent of the nonprofits in
         addition to his salary.

         For each recommendation without a management decision, please respond and
         provide status reports in accordance with HUD Handbook 2000.06, REV-3. Please
         furnish us copies of any correspondence or directives issued because of the audit.




                                           2
Auditee’s Response

           We provided our discussion draft audit report to the Authority’s executive director,
           its board chairperson, and HUD’s staff during the audit. We held an exit
           conference with the executive director on July 8, 2009.

           We asked the Authority’s executive director to provide comments on our discussion
           draft audit report by July 13, 2009. The executive director provided written
           comments, dated July 9, 2009. The executive director generally agreed with our
           findings and recommendations except for our recommendation regarding the
           reimbursement of payments to the former executive director as the resident agent of
           the nonprofits. The complete text of the written comments, except for one exhibit
           that included two pages that were not necessary to understand the executive
           director’s comments, along with our evaluation of that response, can be found in
           appendix B of this report. We provided the Coordinator of HUD’s Indianapolis
           Office of Public Housing Program Center with a complete copy of the Authority’s
           written comments plus the one exhibit.




                                             3
                             TABLE OF CONTENTS

Background and Objective                                                            5

Results of Audit
      Finding 1: The Authority’s Properties Were Used to Benefit Its Nonprofit      6

      Finding 2: The Authority Violated Its Contract with HUD When It Provided
                 $33,000 to Its Nonprofit and Failed to Maintain Complete and
                 Accurate Records                                                   8

      Finding 3: The Authority’s Former Executive Director Created a Conflict of
                 Interest as the Resident Agent for the Nonprofit Developments     11

Scope and Methodology                                                              13

Internal Controls                                                                  14

Appendixes
   A. Schedule of Questioned Costs                                                 16
   B. Auditee Comments and OIG’s Evaluation                                        17
   C. Federal Requirements and the Authority’s Employment Contract                 19




                                              4
                       BACKGROUND AND OBJECTIVE

The Housing Authority of the City of Terre Haute (Authority), Indiana, was established on April
28, 1960, as a municipal corporation under Section 36-7-18-4 of the Indiana Code to provide
decent, safe, and sanitary housing to low-income families under the United States Housing Act of
1937. The Authority is governed by a seven-member board of commissioners appointed by the
mayor of Terre Haute to four-year terms. The board serves in a fiduciary relationship with the
Authority and governs the business, policies, and transactions of the Authority. The executive
director has the overall responsibility for carrying out the board’s policies and managing the
Authority’s day-to-day operations. The Authority's books and records are located at 2001 North
19th Street, Terre Haute, Indiana. As of June 2009, the Authority had 868 low-rent housing units
and 916 Section 8 voucher units.

The Authority created the Elderly Housing Corporation of Terre Haute, Indiana, on July 7, 1977,
and the Terre Haute Housing Authority Development Corporation on June 6, 1979, as 501(c)(3)
nonprofit developments. The Elderly Housing Corporation of Terre Haute, Indiana’s mission is to
provide affordable residential dwelling accommodations for elderly or handicapped families and
persons of low income. The Terre Haute Housing Authority Development Corporation’s mission
is to provide dwellings for elderly or handicapped families and persons of low income. In 1995,
the Authority also formed two nonprofit corporations, HIGH I Incorporated and HIGH II
Incorporated, which are wholly owned subsidiaries of the Terre Haute Housing Authority
Development Corporation. HIGH I and HIGH II Incorporated created two for-profit
developments, HIGH I Limited Partnership and HIGH II Limited Partnership, respectively. As of
June 2009, the Authority was the management agent for the developments.

Our objective was to determine whether the Authority diverted or pledged resources subject to its
annual contributions contract, other agreement, or regulation for the benefit of non-HUD
developments without specific HUD approval.




                                                5
                              RESULTS OF AUDIT

Finding 1: The Authority’s Properties Were Used to Benefit Its Nonprofit
Twenty-one properties deeded to the Authority were used to support the activities of the Terre
Haute Housing Authority Development Corporation (nonprofit). The Authority had title to the
properties, but they were recorded on the financial records of the nonprofit. The ownership
discrepancy occurred because the Authority’s former executive director was also a paid resident
agent for the nonprofit and its former board of commissioners did not provide adequate oversight
to ensure that the Authority’s assets were separate and properly identifiable from the nonprofit’s
assets (see finding 2). As a result, the Authority and HUD lack assurance that the disposition of
the properties served the best interests of the Authority and its residents.



 Ownership of the Properties
 Was in Question

               In June 1979, the Authority created the nonprofit to provide dwellings for elderly
               and/or handicapped families and persons of low income. The nonprofit claimed to
               own 42 properties; however, 21 properties, valued at nearly $1.1 million, were titled
               to the Authority. According to county records, 15 of the 21 properties were
               purchased from private owners, and the remaining six properties were provided by
               the City of Terre Haute’s Department of Redevelopment (City).

               According to the City, although only six properties were identified on county
               records as redevelopment properties, the City was involved with the acquisition
               and/or rehabilitation of 20 of the 21 properties. Additionally, those 20 properties
               should have been titled to the nonprofit, and discrepancies with the titles for these
               properties were the result of data entry mistakes.

               Further, according to the City, the nonprofit received a mixture of HUD’s
               Community Development Block Grant and HOME Investment Partnerships
               Program funds in addition to funds from a local bank to purchase and/or rehabilitate
               the properties. For the remaining property, the City was not involved with the
               acquisition.

               Although the City stated that 20 of the 21 properties belonged to the nonprofit, it
               did not provide supporting documentation to substantiate its claims regarding
               ownership of the properties or the sources of funds used to rehabilitate the
               properties. The Authority also was unable to provide documentation supporting the
               rightful owner of the properties.




                                                  6
Authority Needs to Improve Its
Procedures and Controls

             The Authority needs to improve its procedures and controls regarding its assets.
             The problem occurred because the former executive director was a paid resident
             agent for the nonprofit development, creating a conflict-of-interest relationship (see
             finding 3). Therefore, the Authority’s and developments’ business
             activities/operations were commingled. The Authority’s former board also did not
             provide adequate oversight to ensure that Authority assets were separated and
             properly identifiable from the nonprofits’ and for-profits’ assets (see finding 2).
             Further, the Authority failed to maintain complete and accurate records (see finding
             2) to fully determine whether the titles to these properties were accurately recorded
             and/or low-rent housing funds were used to purchase or rehabilitate the properties.

Conclusion


             Since neither the Authority nor the City provided sufficient documentation to
             dispute the ownership of the 21 properties and the funds that were used to purchase
             and/or rehabilitate the properties, HUD and the Authority could not be assured that
             the disposition of these properties served the best interest of the Authority and its
             residents since these properties were titled to the Authority.

Recommendations

             We recommend that the Director of HUD’s Cleveland Office of Public Housing
             require the Authority to

             1A.    Provide documentation to show that HUD funds were not used to acquire
                    and/or rehabilitate the 21 properties or require its nonprofit to transfer the
                    properties valued at $1,057,800 back to the Authority and secure deeds of
                    trust.

             1B.    Improve its existing procedures and controls to ensure that Authority assets
                    are safeguarded against mismanagement. These procedures and controls
                    should include but are not limited to maintaining pertinent records and
                    providing staff training to ensure compliance with HUD’s requirements.




                                                7
Finding 2: The Authority Violated Its Contract with HUD When It
 Provided $33,000 to Its Nonprofit and Failed to Maintain Complete and
                           Accurate Records
The Authority violated its contract with HUD when it provided $33,000 to its nonprofit to finance
the preconstruction costs for the nonprofit’s housing units and failed to maintain complete and
accurate books of record. The problems occurred because the Authority lacked adequate
procedures and controls to ensure accountability of funds and related expenses and to ensure that it
complied with its contract with HUD. As a result, HUD lacked assurance that its funds were used
in accordance with specific program requirements and additional funds were not used for non-
HUD development activities.


 The Authority Provided $33,000
 to Its Nonprofit Development


               In 2006, the Authority provided $33,000 from its general fund to its nonprofit to
               finance the preconstruction costs of nonprofit housing units without HUD’s approval.
               The Authority paid the funds to LB Homes, Incorporated on behalf of its nonprofit as
               a downpayment for four of the nonprofit’s properties. However, it could not provide
               documentation indicating the source of the funds.

 The Authority Failed to
 Maintain Complete and
 Accurate Records


               During our audit period October 1, 2006, to June 30, 2008, the Authority pooled
               funds from its nonprofit development activities in its general fund and did not
               maintain sufficient records that identified the source and use of the funds. It used
               its general ledger to maintain records of income and expenditures from its low-rent
               housing and Section 8 programs in addition to its development activities. However,
               the general ledger was not segregated by program/project to clearly identify the
               income from various sources and its related uses.

               Further, the funds received from the Authority’s nonprofit development activities
               were not properly accounted for and recorded on its general ledger. The Authority
               deposited funds from its nonprofit development activities into its general fund but
               did not record these transactions when they occurred. Instead, it made interfund
               transfer entries to its general ledger months later, which could not be reconciled
               with the deposited amounts.

               Contrary to its contract with HUD, the Authority did not maintain complete and
               accurate books of record. While HUD permits the pooling of funds, the Authority



                                                 8
             did not maintain records that clearly identified the source and application of funds
             maintained in its general fund.

             The Authority’s former director of finance said that deposits into the general fund
             were reconciled to the bank statements but bank deposits from non-HUD programs
             were not recorded on the general ledger when they were received. These deposits
             were identified as interfund transfers and recorded on the general ledger when the
             accounts payable account needed to be cleared. Further, she said that the amount of
             the interfund transfers did not reconcile to the amounts deposited in the bank. The
             Authority’s director of finance resigned in August 2008, one month after our audit
             began.

The Authority Obtained the
Services of a Fee Accountant

             Due to the condition of its financial records, the Authority’s current executive
             director obtained the services of Hawkins, Ash, Baptie & Company, Limited
             Liability Partnership (HABCO), a public accounting firm, to assist with organizing
             and reconstructing its accounting records. According to HABCO, the Authority’s
             accounting records were in such disarray that it was difficult to determine which
             funds belong to the Authority and which funds belonged to its development
             activities. Additionally, the records were not reliable. HABCO used the bank
             statement balances as of October 2007 to recreate the financial records and
             indicated that to recreate prior years’ records would be time consuming and too
             costly due to the amount of work involved. Documentation to support the
             accounting entries made by the Authority could not be found.

Procedures and Controls Were
Inadequate

             The problems occurred because the Authority lacked adequate procedures and
             controls to ensure accountability of funds and related expenses and compliance with
             its contract with HUD. Additionally, the former board did not provide adequate
             oversight and monitoring of the Authority’s operations. According to the board’s
             former chairperson, the board was unaware of its role and responsibilities about
             providing guidance and direction for the Authority’s operations, including its
             finances; therefore, it did not properly oversee the former executive director’s
             administration of the Authority’s programs.

Conclusion


             Because of the Authority’s lack of procedures and controls regarding the
             accountability of funds and its failure to fully comply with its contract with HUD,



                                               9
          the Authority and HUD lacked assurance that HUD funds were used in accordance
          with program requirements and additional funds were not used for non-HUD
          development activities.

Recommendations

          We recommend that the Director of HUD’s Cleveland Office of Public Housing
          require the Authority to

          2A.     Provide documentation showing that HUD funds were not used for the
                  improper payments cited in this finding or reimburse its low-rent housing
                  program $33,000 from nonfederal funds.

          2B.     Implement adequate procedures and controls to ensure compliance with its
                  contract with HUD regarding the general fund account.

          2C.     Continue restructuring its books of record as of October 2007 to adequately
                  identify the source and application of funds to ensure compliance with its
                  contract with HUD.




                                           10
Finding 3: The Authority’s Former Executive Director Created a
Conflict of Interest as the Resident Agent for the Nonprofit Developments
The Authority’s former executive director created a conflict-of-interest relationship as the
Authority’s executive director and resident agent for its nonprofit developments. The problem
occurred because the Authority’s former board of commissioners did not provide adequate
oversight and monitoring of its operations. As a result, the Authority and HUD could not be
assured that the former executive director performed his official duties in the interests of HUD, the
Authority, and its residents.



 There Was a Conflict of
 Interest

               The Authority’s former executive director created a conflict of interest relationship
               as the Authority’s executive director and resident agent for its nonprofit
               developments. The former chairperson of the Terre Housing Authority
               Development Corporation issued a memorandum, dated January 1, 1994,
               authorizing the former executive director to receive $3,000 annually as the resident
               agent. The payments eventually increased from $3,000 to $5,000. In addition, the
               former executive director began receiving annual payments from the other three
               nonprofits, HIGH I Incorporated, HIGH II Incorporated, and the Elderly Housing
               Development Corporation, in 1996, 1998, and 2000, respectively, which ranged
               from $2,000 to $5,000. For the period 1994 through 2007, the former executive
               director received a total of $136,500 as the resident agent for the nonprofit
               developments.


 Conclusion

               The problem occurred because the Authority’s former board of commissioners did
               not provide adequate oversight and monitoring of its operations. As a result, the
               Authority and HUD could not be assured that the former executive director
               performed his official duties in the interests of HUD, the Authority, and its residents
               (see findings 1 and 2).

 Recommendation

               We recommend that the Director of HUD’s Cleveland Office of Public Housing
               require the Authority to




                                                 11
3A.   Reimburse its low-rent housing program $136,500 from nonfederal funds
      for the former executive director’s payments as the resident agent of the
      nonprofits in addition to his salary.




                               12
                          SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

•   Applicable laws, regulations, the Authority’s contract with HUD, and HUD program
    requirements at 24 CFR (Code of Federal Regulations) 85.20.

•   The Authority’s financial and accounting records, annual audited financial statements from
    2006 through 2008, general ledgers from 2006 through 2008, bank statements and cancelled
    checks, by-laws, policies and procedures, board meeting minutes, organizational chart,
    correspondence with HUD, annual plans for fiscal years 2000 through 2007, development
    activity documentation, and the County of Vigo, Indiana’s records.

•   The nonprofits’ articles of incorporation, by-laws, and records.

•   The for-profits’ board meeting minutes, financial statements, and bank statements.

•   HUD’s files for the Authority.

We also interviewed the Authority’s current and former employees and commissioners, HUD staff,
and City officials.

We performed our on-site audit work between July 2008 and February 2009. The audit covered
the period October 1, 2006, through June 30, 2008. We extended this period as necessary.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.




                                                 13
                                     INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are achieved:

   •   Program operations,
   •   Relevance and reliability of financial reporting,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its mission,
goals, and objectives. They include the processes and procedures for planning, organizing,
directing, and controlling program operations as well as the systems for measuring, reporting, and
monitoring program performance.


 Relevant Internal Controls

               We determined that the following internal controls were relevant to our audit
               objective:

               •      Program operations - Policies and procedures that management has
                      implemented to reasonably ensure that a program meets its objectives.

               •      Validity and reliability of data - Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

               •      Compliance with laws and regulations - Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

               •      Safeguarding resources - Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded against
                      waste, loss, and misuse.

               We assessed the relevant controls identified above.

               A significant weakness exists if internal controls do not provide reasonable
               assurance that the process for planning, organizing, directing, and controlling
               program operations will meet the organization’s objectives.




                                                 14
Significant Weakness


           Based on our review, we believe that the following item is a significant weakness:

           •      The Authority lacked adequate procedures and controls to ensure that it
                  complied with its contract and/or HUD’s regulations regarding the disposal
                  of real property, maintenance of its general fund account and pooling of
                  funds, maintaining complete and accurate records, and conflict-of-interest
                  relationships (see findings 1, 2, and 3).




                                             15
                                    APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                   Recommendation         Ineligible 1/     Unsupported
                       number                                   2/
                         1A                                 $1,057,800
                         2A                                     33,000
                         3A                $136,500
                        Totals             $136,500          $1,090,800


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured 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 those costs charged to a HUD-financed or HUD-insured program or
     activity when we cannot determine eligibility at the time of the audit. Unsupported costs
     require a decision by HUD program officials. This decision, in addition to obtaining
     supporting documentation, might involve a legal interpretation or clarification of
     departmental policies and procedures.




                                             16
Appendix B

         AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation                Auditee Comments




Comment 1




Comment 2



Comment 3




                        OIG’s Evaluation of Auditee Comment    




                                        17
                         OIG’s Evaluation of Auditee Comments

Comment 1   The Authority agrees with the finding; however, it contends that the properties
            should be properly transferred to the nonprofit or alternatively the nonprofit be
            allowed to convert back to an instrumentality. The Authority should consult with
            HUD regarding the appropriate course of action regarding the disposition of the
            properties.

Comment 2   The Authority disagrees that it should reimburse the payments paid to the former
            executive director from nonfederal funds. We disagree. Although the Authority
            provided a board resolution that showed the approval of the payments to the former
            executive director, the Authority’s contract with HUD states that neither the
            Authority nor any of its contractors or their subcontractors may enter into any
            contract, subcontract, or arrangement in connection with a project under in which
            any of the following classes of people has an interest, direct or indirect, during his
            or her tenure or for one year thereafter, unless this requirement is waived by HUD.
            The Authority did not provide any documentation to support that HUD waived this
            requirement; therefore, the Authority violated its contract with HUD.

Comment 3   The Authority should consult with HUD regarding the appropriate course of action
            to pursue collection of the payments made to the former executive director. The
            payments violated the conflict of interest clause in its contract with HUD; therefore,
            the payments were not appropriate and should be reimbursed.




                                              18
Appendix C

       FEDERAL REQUIREMENTS AND THE AUTHORITY’S
                EMPLOYMENT CONTRACT

Finding 1

Section 308(A) of its 1969 contract with HUD states that the Authority at any time may determine
any personal property, and, with the approval of the government, any real property, constituting a
part of any project, which is no longer real property, constituting a part of any project, which is no
longer useful or necessary to the development or operation of such project, to be excess to the
needs of such project. Section 308(B) of the contract states that excess real property shall be sold
as soon as practicable at public sale for not less than the fair value unless other disposition or
method of disposition is approved by the government.

HUD’s requirements at 24 CFR 970.1 state that when HUD approves the disposition of real
property of a project, in whole or in part, the authority shall dispose of it promptly by public
solicitation of bids for not less than fair market value, unless HUD authorizes negotiated sale for
reasons found to be in the best interest of the authority and the federal government.

Finding 2

Section 5 of its 1996 contract with HUD states that the Authority shall develop and operate all
projects covered by this contract in compliance with all of the provisions of this contract and all
applicable statutes, executive orders, and regulations issued by HUD, as they shall be amended
from time to time, including but not limited to those regulations promulgated by HUD Title 24 of
the Code of Federal Regulations, which are hereby amended from time to time. The Authority
shall also ensure compliance with such requirements by any contractor or subcontractor engaged in
the development or operation of a project covered under this contract.

Section 9(C) of the contract with HUD states that the Authority shall maintain records that identify
the source and application of funds in such a manner as to allow HUD to determine that all funds
are and have been expended in accordance with each specific program regulation and requirement.
The Authority may withdraw funds from the general fund only for (1) the payment of costs of
developments and operations of the projects under contract with HUD, (2) the purchase of
investment securities as approved by HUD, and (3) such other purposes as may be specifically
approved by HUD.

Section 10 of the contract with HUD states that the Authority may deposit into an account covered
by a general depository agreement, by lump sum transfer of funds from depositories of other
projects or enterprises in which HUD has no financial interest, amounts necessary for current
expenditures of items chargeable to all projects and enterprises of the Authority.




                                                  19
HUD’s regulations at 24 CFR 85.20 require the following:

(1) Financial reporting. Accurate, current, and complete disclosure of the financial results of
financially assisted activities must be made in accordance with the financial reporting requirements
of the grant or subgrant.

(2) Accounting records. Grantees and subgrantees must maintain records, which adequately
identify the source and application of funds provided for financially assisted activities. These
records must contain information pertaining to grant or subgrant awards and authorizations,
obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income.

(6) Source documentation. Accounting records must be supported by such source documentation
as cancelled checks, paid bills, payroll time and attendance records, contract and subgrant award
documentation, etc.

Finding 3

Section 14 of the Authority’s employment contract with its former executive director, dated
October 27, 2003, states that the director shall devote all professional time, effort, skill, and ability
to the Authority described in the contract. During the term of this contract, the director shall not
be engaged in any other housing, professional, or business activity whether or not such housing,
professional, or business activity is pursued for gain, profit, or other pecuniary advantage without
the express written consent of the Authority.

Section 19(A)(1) of its 1996 contract with HUD states that neither the Authority nor any of its
contractors or their subcontractors or their subcontractors may enter into any contract, subcontract,
or arrangement in connection with a project under this contract in which any an interest, direct or
indirect, during his or her tenure or for one year thereafter.




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