HUD audit fails city's Section 8

Rent program found to have misspent, forfeited millions

`Not serving the people'

Thousands languish needlessly on home waiting lists

March 31, 2001|By Neal Thompson | Neal Thompson,SUN STAFF

Baltimore's Section 8 rent-subsidy program is a "barely functional" mess of an operation that misspent at least $1 million in public funds and forfeited $124 million in federal money that could have been used to place poor families in affordable housing, according to a scathing federal audit released yesterday.

The audit, prepared by the U.S. Department of Housing and Urban Development's Office of Inspector General, reveals years of waste and neglect and suggests a possible federal takeover of the city's Section 8 program, which provides rental assistance vouchers to low-income families.

Some records were so incomplete and inaccurate that they couldn't even be audited, and auditors said the amount of wasted money could be much higher than anyone will ever be able to document.

The program was in such disarray from 1997 to 2000, the years covered in the audit, that Section 8 managers didn't even know how many people they had on their payroll or how many rental units they were subsidizing. Officials usually guessed at how many units they had, and their estimates were frequently off by 1,000. Furthermore, the program wasted more than $730,000 by reimbursing some landlords five times what they were owed, the audit found.

The mismanagement caused up to 2,500 families eligible for subsidized housing to be kept on a long and growing waiting list - now at around 16,000 - instead of being placed in affordable housing.

And of the 7,000 or so housing units rented to low-income families, many were improperly inspected and found to be substandard. Auditors conducted a sample inspection of 37 units and failed 35 of the units because they were unsanitary, contaminated with lead paint or structurally unsound.

The audit recommends that Baltimore return $1 million in questionable expenses that HUD had reimbursed the city and forfeit $50 million in unused federal funds. Also, because the city flouted HUD guidelines and defaulted on its contract with HUD, the audit suggests immediate "administrative action" - a step that could include a federal takeover of the city program and assets.

While some of the Section 8 program's woes are well-known - such as manual bookkeeping because of a failed computer system - the audit disclosed much deeper levels of dysfunction and mismanagement.

Among the findings was that the Housing Authority of Baltimore City (HABC), which runs Section 8, used only $42.7 million of the $167 million HUD had allocated to the city between July 1, 1998, and June 30, 2000. The rest of the money sits unused in an account or has been returned to HUD.

"Consequently, thousands of eligible families unnecessarily remained on HABC waiting lists instead of being provided the opportunity to find affordable, decent, safe and sanitary housing," the audit said.

Daniel G. Temme, the district inspector general who signed the audit, said yesterday that Baltimore "is not serving the people they're there to serve."

The 53-page audit triggered some harsh reactions from housing advocates and public officials.

"I'm deeply disturbed to see the findings of this report," U.S. Sen. Barbara A. Mikulski, a Maryland Democrat who sits on a Senate subcommittee that oversees appropriations to HUD. The audit also castigated the city for knowing about its Section 8 problems but doing nothing to fix them. The report pointed out that many of the problems with the program occurred during the administration of former Mayor Kurt L. Schmoke, and credited Mayor Martin O'Malley with hiring Paul T. Graziano to serve as his housing commissioner.

Graziano responded to a draft of the audit with a three-page letter to HUD on March 19. The letter stated that Graziano agreed with HUD's findings - "your report certainly reinforces the view which I already held" - and provided 16 corrective steps that his office has begun taking.

HUD officials said such agreement was rare. But equally rare was the level of dysfunction in one of the country's larger public housing agencies.

In an interview, Graziano said the audit confirmed problems that he was already aware of and was working to correct. Two weeks ago he dismissed two top Section 8 managers and replaced them.

Graziano said he's confident of his ability to avoid a takeover by turning around Baltimore's program the way he has in other cities.

"I've been through this in other places and cleaned up other programs," said Graziano, who led New York's housing authority and Boston's Section 8 program. "I've spent a lot of my career dealing with Section 8 issues."

Graziano said his department is working on an interim solution to its lack of a full computer system, which now requires data to be tracked by hand. He said he's dissatisfied with the contractor that had been working on a new system, Signature Systems Inc., and ordered the company to stop work. He said a temporary system should be in place by May.

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