The U.S. Department of Housing and Urban Development (HUD) is requesting that the “poorly managed” Richmond Housing Authority (RHA) repay more than $2 million in federal funds it allegedly misspent from 2012 to 2015, saying a majority of the funds improperly ended up in the cash-strapped city of Richmond’s coffers.
Along with misspending $2.2 million in HUD funds, RHA also had “$944,910 in unsupported costs and incurred other questionable transactions that unnecessarily limited its resources and effectiveness with its public housing program,” according to the Office of Inspector General (OIG) audit released Friday.
The audit examined RHA’s financial reports from July 2012 to June 2015.
In the second scathing audit of the agency since 2009, the OIG found that RHA habitually breaks HUD rules, lies and misrepresents in its reports to the federal agency and suffers from weak internal controls.
It reiterated findings by a Contra Costa County grand jury last year of mismanagement and lack of oversight. Last year, an FBI investigation was launched after a former RHA manager was accused of improperly steering agency funds toward maintenance projects that were handled by her husband, an unlicensed contractor. Also in the same year, residents of the Hacienda complex were cleared from the building due to the revelation of shoddy living conditions.
The latest audit was launched after allegations surfaced that RHA had submitted falsified documentation to HUD and was charged unreasonably high rents by the city of Richmond for its administration offices. After learning the allegations had merit, auditors took a closer look at RHA’s operations.
The audit found that the RHA had failed to review and approve transactions initiated by the city; had inappropriately paid for city expenses; had overpaid for RHA Executive Director Tim Jones’ salary over a period of months — about $81,000, some of which should have been paid for by the city; that the agency could not trace hundreds of thousands of dollars in expenses; and that it failed to obtain HUD approval for its general liability insurance, among other violations.
Some of the issues stem from RHA’s 2013 sale of the Westridge property, which it had jointly owned with the city. Some of the proceeds in the sale were supposed to pay off debt RHA debt related to questionable costs discovered by the OIG’s earlier audit. In May 2014, RHA submitted documentation to HUD showing it used $2 million in funds provided by the city from the Westridge sale to repay that debt. Four days later, however, unbeknownst to HUD, $2 million had been withdrawn from the HUD program bank account and transferred to the city’s coffers.
The funds were apparently returned to the city in violation of RHA’s agreement with HUD to repay the debt stemming from the audit.
“If the Authority had not transferred the $2 million back, it could have used the funds for operations since its operating expenses exceeded its operating income,” the audit stated.
RHA also wasn’t supposed to incur any additional debt in 2013, and the agency’s officials sent a letter to HUD stating no added debt had been incurred. But the OIG audit found the RHA had in fact racked up more debt.
“The Authority continued to accumulate debt with the City and owed the City more than $4 million as of January 31, 2016,” according to the report.
The audit report also alleges that RHA let the city use a building at 360 S. 27th St. at no cost while it continued to pay for utilities on the property. The RHA never received approval by HUD for that transaction.
“The Authority could have used the funds spent on utilities and received income from the building for operations,” the audit report stated.
RHA also paid for more than half of the $100,000 management and performance audit that should have been paid in full by the city, the report stated.
In terms of the RHA’s apparent inability to trace expenses, the audit found in fiscal year 2013 the Authority failed to record $331,446 in expenses incurred, and another $289,547 in fiscal year 2014.
The audit report recommends that the director of the San Francisco Office of Public Housing require that RHA repay the U.S. Treasury more than $2 million, among other penalties.
Read the full report here.
Correction: This story has been updated to clarify that the city is accused of charging excessive rents for the Richmond Housing Authority’s administrative offices.