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
August 14, 1998 Audit Related Memorandum
No. 98-PH-201-1804
MEMORANDUM FOR: Edward J. Palombizio, Director, Multifamily Division,
Pittsburgh Area Office, 3EHM
FROM: Edward F. Momorella, District Inspector General for Audit, Mid-Atlantic
District, 3AGA
SUBJECT: Northside Tenants Reorganization (NTR)
Resident Management Corporation - Security Funding
Pittsburgh, Pennsylvania
Based on a request from the Office of Inspector General for Investigations, we reviewed the
security funding received by NTR to determine whether the expenditures were necessary, eligible,
and properly supported.
We found NTR did not maintain records evidencing project security was provided and at least
$360,00 of security funds were misspent. The owners of Northside Properties and the Housing
Authority of the City of Pittsburgh (Authority) each suggested security funds were misspent,
indicating it was each other’s responsibility to monitor the funding. Your attention is required to
ensure scarce Section-8 funding is not abused while responsible parties argue over monitoring
responsibility.
We interviewed Multifamily Housing Division (HUD) staff, reviewed field office files and NTR’s
latest IPA report. We visited the Housing Authority of the City of Pittsburgh (Contract
Administrator) interviewed the staff, and reviewed records. We visited North Side Associates
(Owners) and interviewed their staff. We also interviewed staff and reviewed records at NTR.
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Visit the Office of Inspector General’s World Wide Web site at http://www.hud.gov/oig/oigindex.html
Background
Northside Tenants Reorganization (NTR) was formed for the purpose of improving the living
conditions of residents of Northside Properties by implementing a program of tenant management
to achieve a decent, safe, and wholesome environment. Specific objectives of NTR included
establishing a security program that provided protection for Northside Properties tenants. In
October, 1992, the project owners entered into an agreement with NTR for dual management of
the project. However, the agreement did not mention a security program.
Northside Properties is a 333-unit HUD Section-8 scattered site project in Pittsburgh,
Pennsylvania. The project owners have entered into a HUD Section-8 contract with the Housing
Authority of the City of Pittsburgh (Authority). The Authority’s role as Contract Administrator is
to execute an Annual Contributions Contract (ACC) with the project owners and oversee the
administrative requirements to include remitting rents to the owners, and ensuring units meet
HUD’s housing quality standards. HUD reviews the project operating budget and authorizes
project rent increases.
In July 1992, at the urging of NTR, HUD approved a substantial rent increase which required the
owners of Northside Properties to provide security. According to the HUD Field Office,
Northside Properties was in an area where security needed to be provided in order to protect the
project. At the request of NTR, Northside Properties entered into a contract with the Nation of
Islam (NOI) to provide security. However, Northside Properties threatened to terminate the NOI
security contract since the rent increase was not sufficient to adequately maintain the project and
implement the NOI security contract. In order to maintain the security NTR made arrangements
with the Authority to receive the security funds directly.
The Owners stated that they were required by HUD and the Authority to include security in their
1992 budget and the HUD Field Office files seem to support this position. Specifically, Pittsburgh
field office documents show that the Owners were in jeopardy of rent reductions if they tried to
eliminate security. The Chief of Pittsburgh’s HUD Multifamily Housing Division stated that
requiring the owners to include security as part of their budget “may have been a stretch”
according to HUD’s Section-8 Housing Assistance Program Guidelines. In our opinion, NTR’s
ability to effectively provide and account for a security program for a scattered site property with
over 300 units spread over a four mile radius should have been considered before committing
scarce Section-8 funding.
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Results of Review
Our review disclosed the Housing Authority of the City of Pittsburgh provided NTR over $1
million without any assurance that funds were used to provide security to Northside Properties as
required. Contrary to the terms of its ACC and concerns expressed by the owners of Northside
Properties, the Authority incorporated NTR’s funding as part of Northside Properties overall
Section-8 operating budget, and then provided the security funds directly to NTR. NTR was not
required to provide the Authority with any documentation evidencing security services were
provided and funds were used as intended. As a result, there is no assurance project security was
actually provided, and much of the funding was misappropriated.
Paragraph 1.2 of Part I of the Annual Contributions Contract (ACC) authorizes the Authority to
(a) enter into an Agreement, (b) enter into a Contract, (c) make housing assistance payments on
behalf of the families, and (d) take other necessary actions, all in accordance with the forms,
conditions, regulations, and requirements prescribed or approved by HUD.
Paragraph 1.8 states: “The PHA as Contract Administrator (CA) is primarily responsible for
administration of the Contract in accordance with this ACC and HUD regulations and
requirements, subject to the review and audit by HUD.
Between August 1993 and January 1997 the Authority has provided security funds of $1,034,584
directly to NTR. The Authority did not require NTR to sign a contract designating how the
security funds were spent and did not monitor the activities of NTR in a timely manner. Funds
were provided directly to NTR when the owners of Northside Properties expressed concerns over
the accountability of funds and the level of service provided. Furthermore, the project owner
signed an authorization that stated “all accounting and responsibility for the administration of
these payments and services shall be solely that of the Housing Authority of the City of
Pittsburgh” (Contract Administrator).
The Authority stated that it was the responsibility of the project owners to monitor NTR’s use of
the funding. However, the project owners clearly indicated they had concerns over the funding
provided to NTR and would not accept responsibility for the payment or accountability of funds
provided to NTR. Furthermore, the Authority did eventually exercise their control over the funds
when they discontinued funding NTR based on their September 1996 audit.
Our review disclosed NTR did not use its security funding for the intended purpose. Specifically,
NTR submitted budgets indicating funding would be used to provide for security personnel and
related expenses at North Side Properties. However, it appears the level of security provided
continued to decrease as funds were used to support NTR’s overall administrative costs, which
were largely comprised of salary and related expenses for NTR’s Executive Director and family
members. Furthermore, the Executive Director and her son and daughter (employees of NTR)
were not residents of the project.
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Reduction in Security Personnel
NTR went from contracting security services with an outside vendor to providing its own
security force. Between January 1996 and January 1997 NTR continued to receive
$24,609 per month even though their security payroll was only $4,717. NTR employed as
many as 25 security employees in fiscal year 1994. In 1996 and 1997 NTR only employed
four and two security employees, respectively. One of the two remaining security guards
was the Executive Director’s son who was himself reported to be involved in two separate
arrest incidents. Subsequently, NTR continued to employ and pay the related legal costs
for this individual.
NTR can not document that security was performed or that it was effective because they
did not keep security logs, vehicle logs, or shift duty reports. NTR also claimed that time
cards were destroyed by water damage.
Salary Increases/ Employee Advances
The Executive Director’s salary increased from $43,000 to $56,000 between 1994 and
1996. Additionally, the Executive Director employed her sister and daughter in
administrative positions and her son as head of security. As of June 1997 the Executive
Director had outstanding employee advances of $12,223. As stated earlier the Executive
Director’s commitment to the prosperity of the tenant association is questionable since she
is not even a resident of the project.
Excessive Per Diem
NTR paid their employees per diem of $95 or more then twice the federal government
maximum rate of $42. This was in addition to NTR paying the hotel and registration
costs, and other travel related expenses. Between June 1993 and July 1997, NTR paid per
diem of $10,259.
* * * *
In summary, the Authority’s failure to require NTR to spend funds for project security and lack of
timely monitoring resulted in the misuse of Section-8 operating funds. Based on the Authority’s
own audit, NTR misappropriated $360,521 that was earmarked for project security.
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Recommendations
We recommend you require the Authority:
1A. Repay HUD the $360,521 which NTR received but did not use for security related
purposes.
1B. Implement procedures to ensure funds disbursed to grantees are supported by contracts
detailing contract requirements and timely monitoring.
The results of the survey were discussed with NTR’s staff and your staff.
If you have any questions, please contact Allen Leftwich, Assistant District Inspector General for
Audit at (215) 656-3401.
Attachment - Distribution
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Attachment
DISTRIBUTION
Secretary’s Representative, Mid-Atlantic, 3AS
Internal Control & Audit Resolution Staff, 3AFI
Housing, Comptroller, HF (Room 5132)
Director, Multifamily Division, Pittsburgh Area Office, 3EHM
Director, Administrative Service Center, 2AA
Director, Field Accounting Division, 6AF
Pittsburgh Area Coordinator, 3ES
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Chief Financial Officer, F (Room 10164)
Deputy Chief Financial Officer for Finance, FF (Room 10164)
Associate General Counsel, Office of Assisted Housing and Community Development,
CD (Room 8162)
Comptroller, Public and Indian Housing, PF (Room 5156)
Director, Office of Public Housing, Pittsburgh Area Office, 3EPH
Director, Office of Budget, FO (Room 3270)
Deputy Assistant to the Secretary for Labor Relations, SLD (Room 7118)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street,
NW, Room 2474, Washington, DC 20548 Attn: Judy-England Joseph
The Honorable John Glenn, Ranking Member, Committee on Governmental Affairs,
United States Senate, Washington, DC 20515-4305
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
United States Senate, Washington, DC 20515-4305
Mr. Pete Sessions, Government Reform and Oversight Committee, Congress of the
United States, House of Representatives, Washington, DC 20510-6250
Ms. Cindy Sprunger, Subcommittee on Oversight and Investigations Room 212 O’Neil
House Office Building Washington, DC 20515
Honorable Dan Burton, Chairman, Committee on Government Reform and Oversight,
House of Representatives Washington, DC 20515-6143
Northside Tenants Reorganization (NTR) - Security Funding Pittsburgh, PA
Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-08-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)