Mismanagement Cited at Housing Division : Audit: County office is criticized for apparent conflict of interest and questionable loans.
A county housing office that administers $500,000 in federal funds a year is riddled with mismanagement and has appropriated money in a haphazard way, possibly to building contractors unqualified for financial help, an audit has concluded.
The highly critical review of the housing and community development division of the county’s Environmental Management Agency details a host of problems ranging from suspected conflicts of interest to poor enforcement of eligibility requirements for loans.
“Significant improvement in the overall control system is needed in order for the risk of errors or irregularities to be adequately reduced,” the audit concluded.
The Housing and Community Development Division lends money at favorable terms to low-income property owners who are rehabilitating single-family homes or apartments and to community projects seeking to upgrade blighted communities. Funding comes from the U.S. Department of Housing and Urban Development and the federal Community Development Block Grant program.
The audit released Thursday was done by the county auditor-controller’s office in Santa Ana. It covered business conducted by the agency from Jan. 1, 1991, to March 31, 1991. Reviewers criticized the division as being “materially weak” and recommended about 30 improvements.
“We take the audit seriously, and we will try to examine it as much as we can to improve the system,” said Dhongchai (Bob) Pusavat, the housing and redevelopment director for the Environmental Management Agency. “But there are many things we don’t agree with, and we want to discuss them with the auditors.”
Among other things, the review found that the agency did not thoroughly investigate grant applicants, that funds might have been granted to officials of community projects who had a financial interest in those projects, and that favoritism was shown to certain building contractors, some of whom did not provide the lowest bid.
Pusavat said the Housing and Community Development Division deals with thousands of cases and that auditors spent an excessive amount of time tracking down single, exceptional cases. He defended the selection of building contractors who did not offer the lowest bids, noting that their superior performance ended up saving money for the agency.
The audit reported that the division failed to ascertain that all recipients met the requirement of having assets worth less than $75,000. Reports on investment and bank account balances were sometimes overlooked for applicants, and reported incomes were not verified with employers or taxing authorities.
While some exceptions to the requirements can be made for health and safety reasons, the report discovered that the office lacked clear criteria for those cases. In one example, a recipient who exceeded the salary limitation was granted money to paint a house for health and safety reasons.
The report also criticized the lack of documentation to prevent conflicts of interest among employees. They recommended that the agency’s staff, including construction coordinators and cost estimators, file conflict-of-interest statements that list their real estate interests.
A policy to document in detail the basis for awarding contracts to other than the lowest qualified bidder did not exist, the review discovered. Contractors often were selected by word of mouth or client recommendations. In some cases, builders whose contracting licenses had expired were selected for grants, the audit found.
