The Howard County Housing Commission is financially sound, but an audit found "seriously deficient" accounting practices in the year that included a sudden change in leadership.
The review was ordered one year ago, several months after newly elected County Executive Ken Ulman fired Director Leonard S. Vaughan, who had been in the position for 16 years, and deputy Neil Gaffney. Ulman hired Thomas Carbo as deputy director before bringing on Stacy L. Spann as director.
"It's fair to say that right after taking office - even before that - it became clear to me that we needed to make a change at the Housing Commission," Ulman said yesterday. He did not detail his reasons but said the department suffered from "lax management."
The commission owns and manages the county's stock of public housing and administers subsidized housing programs.
Ulman said that part of the reason his administration has not been faster in creating new housing programs and opportunities is that "the books were in such bad shape."
"This audit is a guide for steps we've been taking and will be taking to make sure the commission is functioning in a way to allow it to do its mission," Ulman said. "We don't want to race forward on new initiatives until our house was in order."
Ulman added seven workers to the commission's staff this year, including two finance people, and Spann said he is asking for 10 more next fiscal year.
In a cover letter attached to the audit, which was delivered to the County Council on Monday, Spann listed six problems the review found. The issues ranged from a "lack of trained personnel" to a failure to keep adequate records and have enough safeguards to prevent fraud.
Yet the audit determined that the commission is on solid financial footing, with $22.1 million in assets.
Vaughan said that if Ulman had allowed time for a smoother transition, some of the questions about accounting problems might have been resolved. The change was sudden, and he was not consulted by the auditors or Spann, he said.
"I'm not sure what materials they were shown and what they were not shown," he said, noting that he and Gaffney were gone during the latter part of the audit period, which ended June 30, 2007. They left the department in December 2006.
"A one-week transition would have been enough to turn over the keys and codes to the systems - how to access material on the computer," he said. "They chose to do it the way they chose to do it."
Vaughan said the commission's records were audited annually while he was director, both by county auditors and outside auditors, without major problems turning up.
"The bottom line is we operated with the best we had," he said. "There were no issues with funds or missing funds."
Sharon Greisz, the county finance director, confirmed that there was no contact with Vaughan, but she said the annual audits were not as thorough as this one. Spann discounted the idea that a longer transition would have been beneficial.
"I'm not sure how helpful that would have been," Spann said.
In his cover letter, Spann said that "even before the audit was completed, commission staff members began correcting many of the deficiencies ultimately detailed in the report."
The $27,500 audit was done by Clifton Gunderson LLC, which specializes in examining public housing authorities, Spann said.
According to the audit, the commission:
Did not have enough trained people to segregate accounting duties, "resulting in a high risk of errors or misappropriation."
Did not update its database properly, with one person handling financial records, access to the database and relations with the [database] vendor.
Was unable to provide support and explanations of account balances.
Had more than 20 cash bank accounts and "failed to properly maintain many of them."
"Failed to draw down HUD funds in a timely manner and granted only one staff member access to the draw system."
"Failed to keep adequate records" of office equipment.
Left $3.7 million in commission cash in bank accounts unprotected by bank securities or by the Federal Deposit Insurance Corp.
Vaughan said he had to make do with the staff he had.
"We weren't at liberty to spend the kind of money they're spending now," he said.