in Houston, Texas
Troubled Texas state housing agency faulted by auditors in management of $101 million program to redevelop foreclosed homes
Friday, Aug 24, 2012, 08:35AM CST
By Curt Olson
HUD

A federal audit of a Texas housing agency with a troubled past casts doubt on whether the state properly managed a $101 million Housing and Urban Development program aimed to stabilize neighborhoods hit by foreclosures.

According to a report by the HUD Inspector General, the Texas Department of Housing and Community Affairs improperly obligated $42,182, which HUD’s Fort Worth office has been directed to take back. The IG audit also requires the state agency to provide better documentation of $25 million in spending on the Neighborhood Stabilization Program. The state agency also could not support $8,767 in expenses for businesses and organizations it worked with to complete projects, the HUD audit states.

Read the full audit here.

The program money to the state was part of a $3.9 billion nationwide effort to boost neighborhoods hit hard by foreclosures amid the Great Recession. Only California and Ohio disbursed more money than Texas, the San Antonio Express-News reported. Some Texas cities and counties also oversaw program grants, which were aimed at redeveloping abandoned and foreclosed properties.

The HUD inspector general chastised poor record keeping and staffing at the Texas Department of Housing and Community Affairs. Gerald Kirkland, the regional inspector general for audit, also noted the state agency’s repeated tardiness on quarterly reports showing progress to commit and spend the money.

The inspector general found:

  • The state agency did not have valid contracts or other sufficient documentation for $631,402 in reported obligations.
  • Of 58 agreements with other agencies to carry out work under the program, 38 listed amounts which did not match amounts in other paperwork. The difference amounted to more than $24.7 million in unsupported costs.
  • Of the 58 agreements, 22 showed planned work that didn’t match earlier paperwork. “These differences gave the appearance that the department did not know what activities it was going to pursue,” the audit states.
  • TDHCA entered into agreements with other agencies that did not complete their responsibilities, resulting in $8,767 of unsupported costs.

States and municipalities received money in March 2009, and rules stipulated they obligate the money by September 2010 to rehabilitate abandoned and foreclosed homes. The program’s nature necessitated reporting to the feds. Housing and Community Affairs repeatedly came up short.

“The department did not establish systems and controls for the obligation of (program) funds, which significantly hindered its ability to support its reported obligations,” the audit states.

The state agency failed to have a support system in place to assist the agencies it worked with to carry out the program. Ultimately, Housing and Community Affairs pulled back funding for $21 million in activities it could not complete, the audit states.

No one should be surprised by the results of this audit because the agency has a troubled past. It failed to use Hurricane Ike rebuilding funds and oversaw a faulty stimulus program to fix up low-income homes. Last August, the agency’s leader resigned.

But the signs of trouble in the program targeted in the latest audit were there as early as April 2010.

About six months prior to a deadline to have funds committed, a progress report showed that the state had committed 6.2 percent of its program funds, ranking behind every state but Illinois, the Express-News reported.

Housing and Community Affairs Executive Director Timothy Irvine in his agency response disputes that any funds were improperly spent and that the findings boil down to paperwork problems. He cited limited federal guidance at the outset of the program and problems with a reporting system that HUD used for the program.

Irvine added in his letter to Kirkland:

“We concur that our processes for record-keeping in the initial phase of the program left room for improvement; while we do not agree that our funds were improperly obligated (other than those obligations with which we have been corresponding with HUD over the past nine months), we do agree that they were not well organized.”

“However, in spite of our challenges and lack of ideal systems, we believe that we have source documentation to substantiate TDHCA’s commitments, obligations and decisions. We also are deeply concerned and disappointed with the emotionally charged and pointed language in portions or your report which appear to suggest TDHCA intentionally mismanaged its administration of the Texas NSP. In fact, TDHCA has acted in good faith and has always attempted to administer this program in a manner that complies with all applicable federal requirements and guidance.”

While home sales have improved in some markets nationwide, the New York Times reports that Realtors don’t see signs a full housing recovery anytime soon. That raises the stakes of a program centered on an aspect of the crisis to be managed the right way in Texas.

***
Contact Curt Olson at curt@texaswatchdog.org or 512-557-3800. Follow him on Twitter @olson_curt.

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Photo of the Housing and Urban Development building by flickr user nevermindtheend, used via a Creative Commons license.

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