Federal Auditors Cite City Housing Authority

October 27, 2005
By JEFFREY B. COHEN, Courant Staff Writer

Federal auditors at the Department of Housing and Urban Development have cited the city and the Hartford Housing Authority for spending more than $5 million in federal money on ineligible projects.

The department has recommended imposing financial sanctions on both the city and the authority. It also is calling on both entities to revamp their internal monitoring procedures in order to prevent future mishaps.

In the hopes of tempering those sanctions, however, both the authority and the city are working to provide more documentation to federal officials in response to the audits, officials said.

"It's my expectation that when we provide [more information to the department], that there will be big changes to the final outcome of this process," said Mayor Eddie A. Perez, adding that this audit is taking part in "a kind of hairsplitting ... that hasn't gone on for 30 years."

One audit, released this month, found that over a two-year period the city used more than $1 million in federal Community Development Block Grant funds for ineligible projects.

The other audit, released in September, found that the housing authority improperly used more than $3.7 million in public housing money over two years to balance its books and to pay for state public housing projects.

Courtney Anderson, chairman of the housing authority's board of commissioners, said that $2 million of that $3.7 million can be attributed to a misunderstanding of protocol.

The housing authority, he said, spent its own money on programs first, then drew down federal funds - the opposite of what the federal government requires, he said. That money, he said, was all spent on valid federal programs.

The balance, $1.7 million, was spent on state housing programs at Westbrook Village and Bowles Park, the audit found. The authority has jurisdiction over both state and federal housing projects, but they are funded through different sources.

"If there's a situation where we don't get enough rent in from the tenants, because their income is too low, we don't have enough money in the books to sustain those developments," Anderson said. "So, it had been a practice to use money that we had as an alternative to shutting developments down and evicting."

But Julie Fagan, the HUD department's field office director for the state, said there should have been no confusion about these rules.

"Congress appropriates federal funds for their use, the state legislature appropriates state funds for their use," she said. "They cannot use federal dollars to maintain and support their state public housing."

The authority is now working with the Connecticut Housing Finance Authority to secure a loan to help pay back the $1.7 million to the federal government. "It looks very promising," Anderson said.

Meanwhile, the city is continuing to work with HUD in a bid to resolve the issues in the audit, officials said. According to the report, the city paid more than $1 million in ineligible block grant activities between July 1, 2002, and June 30, 2004.

The audit also found that the city planned to fund almost $400,000 to ineligible projects for the year beginning July 1, 2005. The city has since taken corrective action to stop that.

Block grants to municipalities under the public facilities and improvement categories may be used for acquisition, construction, reconstruction, rehabilitation, or installation of public improvements or facilities, according to the audit. They cannot be used, though, for the costs of improvements or the operating and maintenance of public facilities.

So, for example, the city paid Riverfront Recapture Inc. money the organization used for personnel and administrative expenses. Such payments are ineligible, the audit says.

In a lengthy September response to the initial audit, Perez took issue with several of the auditor's comments.

"For the past thirty-one program years, through the guidance, assistance and support of the HUD-Hartford Field Office, the City of Hartford has successfully administered and managed in excess of $173 million in CDBG funds," Perez wrote. "It is therefore surprising that the Auditor-in-Charge has determined five long-standing CDBG activities are now deemed ineligible."

In an interview Wednesday, Perez was equally adamant.

"These are activities we have shared with the HUD program staff, they've been part of providing technical assistance ... and if they're going to change the rules, they should change the rules going forwards, not going backwards," he said.

When asked to respond, Fagan said that the scrutiny of the auditors exceeded the typical departmental review the agency performs, but that its recommendations are nevertheless valid.

She stressed, though, that new information provided by the city and the authority could change the audit's recommendations.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.