Audit reveals housing authority misused stimulus funds

An federal audit of the Philadelphia Housing Authority shows that millions in funds from the 2009 economic stimulus were improperly used and lacked any documentation to determine how the money was spent.  

In a report released Tuesday, the Office of Inspector General for the Department of Housing and Urban Development (HUD) determined that the authority failed to provide adequate documentation supporting the "validity, accuracy, necessity and reasonableness of almost $1 million in funds provided by the stimulus" to rehabilitate its low-income housing projects, according to the report. 

The authority received $31.5 million in stimulus formula grant funds and spent $27.4 million between March 2009 and June 2010, which were designated for the rehabilitation of 340 of the authority’s portfolio of approximately 7,300 scattered-site units. 

An inspection of 10 of those unit found that the authority couldn't fully account for $958,000 in funds raising concerns about the $27.4 million already spent, the report said. 

The analysis also showed that the housing authority paid far above the maximum amount for at least three of the units and it was estimated that even if the properties had been gutted and completely rehabilitated, which the appraiser said didn't happen, the authority spent up to $20,000 more than it should have needed for each property.

"While we do not question whether rehabilitation work was performed, we do question whether the payments were supported, necessary, and reasonable for these properties as well as the units we did not inspect," the report said. 

The audit comes two days after a Washington Post investigation revealed alleged misuse of funds throughout the system. 

During the past eight months, Sen. Chuck Grassley (R-Iowa), ranking member on the Senate Judiciary Committee, has written several letters to HUD Secretary Shaun Donovan pressing for more information about the operations of the housing authority in Philadelphia and in other areas around the country.

Grassley said he's been tracking wasteful spending at public housing authorities including those in Philadelphia, Los Angeles and Puerto Rico.  

"This audit is the latest example of the Philadelphia Housing Authority’s, and ultimately HUD’s, failure to protect residents and taxpayers," Grassley said in a statement.  

"The housing authority has been a Bermuda Triangle for tax dollars," he said. "The primary people being helped are shady developers and law firms.  It’s frustrating to see such blatant abuse of tax dollars."

The audit was spurred by a complaint alleging misuse of funds by the largest housing authorities in the region and one of the biggest in the country. 

The report makes several recommendations for HUD, which took control of the housing authority in March amid growing problems, including requiring the the authority to provide adequate documentation for not only the $1 million but for the total spent -- $27.4 million. 

It also calls for the authority to reimburse the programs from non-federal funds for any costs that it cannot support, implement adequate procedures and controls to ensure that its payments comply with relevant laws and regulations and develop and implement controls to ensure that invoices for the housing rehabilitation are verified. 

The report also recommends that HUD direct the authority to ensure compliance with applicable laws, ordinances, codes, rules and regulations and requires periodic audits.