oversight

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)

                                              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



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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.




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                                   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.




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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.



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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.




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Appendix D

   SAMPLE EXCERPTS FROM THE ACTIVITY REPORTS




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