HUD audit finds city misuse of housing funds

September 22, 1994|By This article was written and reported by Sun staff writers Melody Simmons, Eric Siegel and Scott Higham.

A $25 million no-bid repair program run by the city's Housing Authority spent more than twice the going rate to fix apartments for the poor, paid contractors for work that was never done, and gave millions to firms run by relatives of managers, according to a federal audit.

The audit, a draft copy of which was obtained by The Sun, cites problems in almost every area of the authority's operations. It provides fresh details about a program in which employees apparently inflated cost estimates for repairs to coincide with proposals by the no-bid contractors, and then failed to check to see if the work was ever done.

Authority managers purchased Chevy Blazers for their personal use, the audit says. They paid for stoves and refrigerators that were never installed. They bought doors and windows that were never hung. They purchased electrical wiring for outlets and switches that never existed.

Federal inspectors also found that the authority knowingly exposed families to dangerous levels of lead paint and dust. In one apartment, contamination levels were nearly 19 times higher than federal standards, the audit says.

In the end, the no-bid repair program -- the focus of a federal grand jury probe -- failed to meet the authority's basic mission: renovating buildings and increasing apartment space in the poorest sections of Baltimore, according to the audit.

Last night, the nation's top housing official, Henry G. Cisneros, issued a statement saying the authority's practices were intolerable. "The findings raised in this report are serious," he said. "Misuse of federal funds -- particularly with respect to funds that are intended to help the poorest of families -- cannot be tolerated."

Mr. Cisneros, who heads the U.S. Department of Housing and Urban Development, pledged to work with the city's mayor and housing officials to ensure that the audit findings will be "fully and promptly addressed."

The audit was compiled after a seven-month probe by HUD's regional Inspector General. Investigators started to examine the authority in December after contractors called a federal hot line to complain they had been frozen out of the no-bid program.

A final copy of the audit is expected to be released tomorrow.

Executive Director Daniel P. Henson III criticized the draft report yesterday. He said it misinterpreted regulations, and misstated or ignored relevant facts. He said some of the findings would be modified in the final report.

Mr. Henson provided The Sun with his 39-page response to the draft report. He accused the auditors of "simplistic second-guessing" of the no-bid program. "This is a cheap shot," he said. "This is very sloppily done."

Funded by federal subsidies and monthly rents, the Housing Authority is responsible for managing 18,000 publicly owned apartments and single-family homes in Baltimore.

The draft report portrays the Housing Authority as an agency run amok. It could not account for more than $700,000 in lost inventory. Its reserve fund fell to dangerously low levels. It hired maintenance workers with no skills. It signed a contract with a security firm that employed felons. It spent more than $370,000 on a security system that didn't work.

One of the few positive audit findings for the authority: It collected rent on time.

No-bid program

Much of the 45-page report focuses on the no-bid repair program. Mr. Henson started the no-bid program last year, shortly after Mayor Kurt L. Schmoke appointed him to head the Housing Authority. Mr. Henson claimed there were 2,400 vacant, rundown apartments that needed quick repairs to create housing for the poor.

To speed up the repairs, Mr. Henson declared a housing emergency in the city -- a move that he said allowed him to bypass federal rules and award contracts without competitive bids. He said the no-bid program would shorten the list of 18,000 families waiting for places to live.

But the auditors said the authority failed to get approval from HUD, and never explained why the work couldn't have been performed with competitive bids.

In all, the authority renovated 1,136 apartments under the no-bid program. When it was over, Mr. Henson failed to accomplish his goal -- creating more public housing for the poor, the audit says.

The auditors found that the program was flawed from the start. It began as a small, $1 million project that was supposed to spend $10,000 on repairs for each apartment. But it quickly grew into a $25 million program that spent as much as $95,000 for one unit.

The average sale price of a single-family home in Baltimore is $75,319.

Twice the rate

Auditors said the no-bid contractors charged more than twice the amount as contractors who performed work for the authority under competitive bids. The auditors said that the authority also apparently inflated its own cost estimates to coincide with the higher proposals submitted by the no-bid contractors.

"Work was overpriced and incomplete," the audit says.

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