U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF INSPECTOR GENERAL May 2, 2014 MEMORANDUM NO: 2014-PH-1803 Memorandum TO: Jacqueline A. Molinaro-Thompson Director, Office of Public Housing, Pittsburgh Field Office, 3APH //signed// FROM: David E. Kasperowicz Regional Inspector General for Audit, Philadelphia Region, 3AGA SUBJECT: Review of the Housing Authority of the City of Pittsburgh, PA’s Compliance With Federal Lobbying Disclosure Requirements and Restrictions INTRODUCTION We conducted a review of the Housing Authority of the City of Pittsburgh’s compliance with Federal lobbying disclosure requirements and restrictions based on concerns noted during our ongoing internal audit of the U.S. Department of Housing and Urban Development’s (HUD) oversight of public housing authorities’ compliance with Federal lobbying disclosure requirements. Our review objective was to determine whether the Authority complied with Federal lobbying disclosure requirements and restrictions. METHODOLOGY AND SCOPE As part of our ongoing internal audit, we selected the Authority for review as part of a sample of five housing authorities. To accomplish our review objective, we interviewed and held discussions with HUD program officials. In addition, we obtained and reviewed the following: • Lobbying certifications and disclosures relevant to our review for the period January 2004 through December 2006. • Invoices and payments for lobbying noted for one firm, Pugliese Associates, and its subcontractor, American Continental Group, LLC. Office of Audit Region 3 The Wanamaker Building, Suite 10205 100 Penn Square East, Philadelphia, PA 19107-3380 Visit the Office of Inspector General Web site at www.hudoig.gov. • The U.S. Senate Office of Public Records Lobbying Disclosure Act database. Our review covered transactions and events that occurred during the period January 1, 2004, through December 31, 2006. This was a limited scope review. Therefore, it was not performed in accordance with generally accepted government auditing standards. BACKGROUND The U.S. Housing Act of 1937 initiated the Nation’s public housing program. That same year, the City of Pittsburgh established the Housing Authority of the City of Pittsburgh under Pennsylvania laws to address housing issues affecting low-income persons. The Authority’s main administrative office is located at 200 Ross Street, Pittsburgh, PA. The Authority is governed by a seven-member board of commissioners. The board is charged with the task of establishing goals, approving policy and budgets, and providing general direction to the Authority’s staff. The Authority owns and operates 4,000 public housing units and provides oversight of an additional 900 mixed-finance units, serving about 20,000 people in Pittsburgh, PA. The Authority’s current executive director is Caster D. Binion. The executive director of the Authority during the majority1 of our review period was Keith Kinard. The Authority’s fiscal year begins on January 1. The Authority is a participant in HUD’s Moving to Work Demonstration program. In 1996, Congress authorized the Moving to Work Demonstration program as a HUD demonstration program. This program allowed certain housing authorities to design and test ways to promote self-sufficiency among assisted households, achieve programmatic efficiency, reduce costs, and increase housing choice for low-income households. Congress exempted participating housing authorities from much of the Housing Act of 1937 and associated regulations as outlined in the Moving to Work agreements. Participating housing authorities have considerable flexibility in determining how to use Federal funds. In 1999, the Authority was specifically named and authorized by the 1999 appropriations. In January 2009, HUD entered into a new 10-year Moving to Work agreement with the Authority. The expiration date of the Authority’s new agreement is December 2018. The Lobbying Disclosure Act requires lobbyists to register with both Houses of Congress and provide quarterly disclosures on lobbying activities conducted for each client. The Act defines “lobbying activities” as lobbying contacts and efforts in support of such contacts, including preparation and planning activities; research and other background work that is intended, at the time it is performed, for use in contacts; and coordination with the lobbying activities of others. The Act also requires lobbyists and lobbying firms to provide an estimate of the total income received for each client, including payments received from other persons or parties for lobbying activities on behalf of the client. The U.S. Senate Office of Public Records receives, processes, and maintains information reported by lobbyists and makes the information available to the public in its Lobbying Disclosure Act database. 1 January 2004 through June 2006 2 RESULTS OF REVIEW Under the leadership of its former executive director the Authority failed to disclose lobbying activities and engaged in the prohibited practice of using Federal funds for lobbying. The Authority falsely certified on at least two occasions that it had no lobbying activities to disclose. In addition, the Authority falsely certified that it had not spent Federal funds on lobbying. The Authority Failed To Disclose Lobbying as Required The U.S. Senate Lobbying Disclosure Act database showed that American Continental Group, LLC, a government relations consulting firm, reported that it received $80,000 from the Authority during the period September 10, 2004, through December 31, 2005. However, as shown in appendix C, the Authority’s lobbying disclosure forms for that period did not reflect any information on lobbyists or lobbying activities. The disclosure forms were for the Authority’s Low-Income Public Housing program which was under its Moving to Work program. Based on regulations at 24 CFR (Code of Federal Regulations) Part 87, lobbying activities were not prohibited; however, disclosure of lobbying activities was required for lobbying related to Federal programs, and the lobbying expenses had to be paid with non-Federal funds. Therefore, the Authority should have disclosed the lobbying activity performed by American Continental Group. When questioned as to why the Authority had not disclosed the lobbying activity performed by American Continental Group, Authority officials initially stated that they could not find any payments made to the firm based on a review of accounts payable records. However, they later researched additional records and determined that American Continental Group was a subcontractor of Pugliese Associates, a government affairs firm contracted by the Authority to provide government communications and liaison services. The Authority Improperly Used Federal Funds for Lobbying The Authority used Federal funds for lobbying and submitted to HUD false certifications regarding the funds that it used for lobbying. For fiscal years 2004 and 2005, the Authority certified that it had not and would not use Federal funds for lobbying during those periods. However, these certifications (presented in appendix C) were false. Authority officials stated during this review that the Authority paid Pugliese Associates with Federal funds. Pugliese Associates in turn paid American Continental Group for lobbying activities that it performed on the Authority’s behalf; therefore, the Authority paid for lobbying expenses with Federal funds. The Authority was prohibited from using Federal funds for lobbying expenses. According to regulations at 24 CFR Part 87, Federal funds may not be used for lobbying in connection with any Federal contract, grant, loan, or cooperative agreement or the extension, continuation, renewal, amendment, or modification of the same. The regulations also require recipients of more than $100,000 in Federal funds or more than $150,000 in Federal loans to certify that Federal funds will not be used for lobbying related to Federal programs. We reviewed the Authority’s payment register for the period January 1, 2004, through December 31, 2006, and determined that the Authority did not make any direct payments to American Continental Group; however, it paid Pugliese Associates $205,000 during that period. We focused our review on payments made to Pugliese Associates during the period when 3 American Continental Group reported lobbying. American Continental Group registered with the Senate Web site, effective September 10, 2004, and terminated its registration as of December 31, 2005. During that period, the Authority paid Pugliese Associates $100,000 related to four invoices. We reviewed the invoices from Pugliese Associates and determined that it billed for services performed by both itself and American Continental Group. Pugliese Associates submitted invoices for $25,000 to the Authority quarterly. At the end of each quarter, it submitted an activity report to the Authority, which separately identified activities performed at the State and Federal level. The activity reports showed lobbying activities occurred including, among others, communication and coordination with members of Congress to extend the Moving to Work program. Sample excerpts from the activity reports are shown in appendix D. The activity reports did not separate the costs associated with each type of activity; therefore, we determined that potentially $80,000 was related to Federal lobbying activities based on amounts reported on the Senate Web site by American Continental Group. We attempted to obtain documentation from the Authority to determine the source of funds it used to pay Pugliese Associates for the lobbying services that American Continental Group performed on its behalf. The Authority stated that bank statements were not available due to age, and that it paid Pugliese Associates with Federal Moving to Work program funds. Therefore, based on the relationship between Pugliese and American Continental Group, the Authority paid for lobbying activities performed by American Continental Group with Federal funds. RECOMMENDATIONS We recommend that the Director of HUD’s Pittsburgh Office of Public Housing 1A. Require the Authority to provide documentation to show the actual amount it paid to American Continental Group for Federal lobbying activities and reimburse its program that amount from non-Federal funds; or repay its program $80,000 from non-Federal funds, for funds it improperly spent on lobbying activities. 1B. Ensure that responsible Authority officials are formally trained in lobbying disclosure requirements and restrictions. 1C. Ensure that all future HUD monitoring of the Authority covers compliance with Federal lobbying disclosure requirements and restrictions. 4 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS Recommendation Unsupported 1/ number 1A $80,000 1/ 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. 5 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments Comment 1 Comment 2 6 Comment 3 Comment 4 Comments 3 and 5 Comment 6 Comments 3 and 5 7 Comment 6 Comment 7 Comment 7 Comment 7 8 OIG Evaluation of Auditee Comments Comment 1 The Authority stated that the focus of the audit moved from a review of HUD to an audit of the Authority. We did not change the focus of the audit. As stated in the introduction, and explained to Authority officials during the exit conference, the internal audit of HUD is ongoing. However, during the internal audit, we identified violations specifically related to the Authority. Therefore, we deemed it necessary to issue a report to the Authority to provide it an opportunity to formally respond to the findings. Comment 2 The Authority stated that its contract with Pugliese Associates occurred prior to October 1, 2007, which was the beginning date for the audit period related to our internal audit of HUD. We routinely expand the scope of our audits as necessary to address the audit objectives. Although we initially requested documents for the period 2007 through 2012, we expanded the scope for the internal audit to include the period 2002 through 2012. Therefore, the Authority’s September 2003 contract with Pugliese Associates and the related transactions were within the expanded audit scope. Although the Authority executed a contract with Pugliese Associates under the leadership of a former executive director, the Authority failed to comply with Federal lobbying disclosure requirements and restrictions. Comment 3 The Authority stated that it hired Pugliese Associates to provide it with updates on initiatives and regulatory matters at the State and Federal level, and to assist in analyzing such data. The introduction section of the Authority’s contract with Pugliese Associates stated that the Authority required government communications and liaison services. In our opinion, these are services that could include lobbying activities as defined in the Lobbying Disclosure Act. The Act defines lobbying activities as lobbying contacts and efforts in support of such contacts, including preparation and planning activities; research and other background work that is intended, at the time it is performed, for use in contacts; and coordination with the lobbying activities of others. Under the Act, any oral, written, or electronic communication with covered officials regarding the formulation, modification, or adoption of policy or legislation constitutes a lobbying contact. Communications relating to the administration or execution of a Federal program or policy are also included. Covered officials include, among others, members of Congress and executive officials such as agency heads and deputies, and assistant and deputy assistant secretaries. Comment 4 The Authority stated that its contract with Pugliese Associates required it and its subcontractor, American Continental Group, to submit disclosure forms if they engaged in lobbying activities. The Authority further stated that neither the contractor nor the subcontractor completed any such forms to the best of its knowledge. It is not clear where or to whom Pugliese Associates and American Continental Group were to submit the disclosure forms referenced by the Authority. We do not know why they did not complete and submit the disclosure 9 forms. We do know that American Continental Group complied with the Lobbying Disclosure Act and reported to the U.S. Senate, income it received related to lobbying activities that it performed on the Authority’s behalf. Comment 5 The Authority stated that it did not hire Pugliese Associates and American Continental Group to perform lobbying activities. However as detailed in the report, American Continental Group reported that it received income related to lobbying activities that it performed on behalf of the Authority. The Authority received activity reports from Pugliese Associates that described the services American Continental Group provided on its behalf. The activity reports reflected lobbying activities including contacts with covered officials regarding among other things, the extension of the Authority’s Moving to Work program. Therefore, the Authority was aware, or should have been aware, of the lobbying activities that were performed on its behalf. Comment 6 The Authority stated that there was no evidence that $80,000 was the amount associated with the lobbying activities that American Continental Group performed on its behalf. The Authority also stated that the amount reported in the U.S. Senate database reflected rounding to the nearest $20,000. As stated in comment 4 above, American Continental Group complied with the Lobbying Disclosure Act and reported income it received related to lobbying activities that it performed on the Authority’s behalf. This, coupled with information showing that American Continental Group was a subcontractor to Pugliese Associates, and the invoices and activity reports from Pugliese Associates to the Authority constitute evidence that the Authority’s payments to Pugliese Associates paid for lobbying activities. We acknowledge that the $80,000 reported in the U.S. Senate database reflects rounding to the nearest $20,000. However, the $80,000 represents the total from two instances in which American Continental Group reported it received $40,000 for lobbying activities that it performed on the Authority’s behalf; therefore, the actual amount could be between $60,000 to $80,000 or more if American Continental Group rounded down the amounts it received. During the exit conference, we informed the Authority that we would consider any documents or evidence it could provide to challenge the amount American Continental Group reported, and revise our conclusions as appropriate. The Authority did not provide us any additional documents. Nevertheless, we reclassified the $80,000 from ineligible costs to unsupported costs to provide the Authority an opportunity to work with HUD to determine and repay the actual amount related to Federal lobbying activities. Comment 7 The Authority indicated that it is willing to take certain corrective actions in response to our audit report. However, OIG recommendations are addressed to HUD program officials. Therefore, HUD program officials are ultimately responsible for ensuring that corrective actions satisfy the intent of the audit recommendations. 10 Appendix C EXAMPLES OF SIGNED CERTIFICATIONS AND DISCLOSURES Note: This certification included the Authority’s fiscal year beginning January 1, 2004 and ending December 31, 2004. 11 Note: This disclosure included the Authority’s fiscal year beginning January 1, 2004 and ending December 31, 2004. 12 Note: This certification included the Authority’s fiscal year beginning January 1, 2005 and ending December 31, 2005. 13 Note: This disclosure included the Authority’s fiscal year beginning January 1, 2005 and ending December 31, 2005. 14 Appendix D SAMPLE EXCERPTS FROM THE ACTIVITY REPORTS 15 16 17 18 19 20 21 22
Review of the Housing Authority of the City of Pittsburgh, PA's Compliance With Federal Lobbying Disclosure Requirements and Restrictions
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-05-02.
Below is a raw (and likely hideous) rendition of the original report. (PDF)