HUD orders housing authority to repay nearly $108,000
The Fayette County Housing Authority must repay nearly $108,000 to the federal government for contracts improperly awarded to relatives of the agency’s executive director, according to a new edict from the U.S. Department of Housing and Urban Development. HUD’s Pittsburgh office, which has been investigating the matter for nearly a year, issued its ruling after examining the authority’s response to its initial finding that several contract-related policies were violated.
HUD concluded that the authority, among other things, entered into “inappropriate agreements” that failed to meet federal requirements, restricted competition in several ways and ignored an apparent conflict of interest involving its top administrator.
HUD official James D. Cassidy, director of the Pittsburgh Office of Public Housing, on June 10 gave the authority 45 days to repay the money from its nonfederal funds. The money includes $85,951 paid to Chestnut Ridge Communications for telephone system work and $21,886 paid to Niche Networks for computer system work.
The telephone firm employed the brother-in-law of Executive Director Thomas L. Harkless at the time it did business with the authority, while his niece owned the computer firm.
Harkless also serves as the authority’s contracting officer, a title that gives him ultimate responsibility for making sure that contracts are properly administered.
Cassidy detailed numerous problems with how the authority procured business with both firms. While noting that the authority’s performance “has improved significantly” in this area since HUD’s initial finding in July 2002, Cassidy detailed serious contract administration problems regarding Chestnut Ridge and Niche Networks.
These include violating federal provisions with the Chestnut Ridge contract in the following ways:
n Never entering into a signed agreement, as required by federal rules.
n Not conducting a cost estimate prior to soliciting bids, as required by federal rules.
n Not establishing a schedule of payments, as required by the HUD procurement handbook. Instead, the authority billed Chestnut Ridge by invoice for labor and materials, resulting in authority payments of $63,312 to the firm when its sealed bid contract was only for $48,481.
n Paying twice for the same services at Belle Vernon Apartments, where the authority issued a $2,705.98 check on Dec. 27, 2001, and a $2,605.98 check on Jan. 1, 2002. Cassidy also noted that the services at the Belle Vernon housing complex were “beyond the scope” of the original bid specification.
Regarding how the authority dealt with both firms, Cassidy said that the authority restricted competition by breaking up work into smaller chunks in order to bypass the sealed bid requirement – a violation of federal regulations.
Put another way, by parceling out the work in amounts less than $10,000, the authority sidestepped the requirement that any contract over that amount be competitively bid.
Cassidy also found that the authority restricted competition by permitting Chestnut Ridge to prepare the bid specifications for the contract on which it was then allowed to submit a sealed bid.
Further, Cassidy noted that the authority erred by allowing Chestnut Ridge to do extra work that was awarded using noncompetitive procedures – work that was not justified by documentation and for which no contract change orders were on file.
In yet another way that the authority limited competition, Cassidy said that Chestnut Ridge submitted offers to provide service s that were not in response to any solicitation by the authority – a practice prohibited by the HUD handbook.
Additionally, even though those service contracts to Chestnut Ridge each fell under $10,000, Cassidy noted that the authority did not conduct price estimates, did not solicit three price quotes and did not determine that the prices paid were reasonable – all of which are federal requirements for such small purchases.
In the conflict of interest area, Cassidy said that federal regulations explain that “no employee, officer or agent of the authority shall participate in the selection, award or administration of a contract supported by federal funds if a conflict of interest, real or apparent, would be involved.”
The HUD official added, “Based on information available to us, the award of contracts to Niche and CRC (Chestnut Ridge) represented a prohibited apparent conflict of interest.”
Cassidy went on to note that federal regulations hold a housing authority accountable for “maintaining standards of conduct governing the performance of employees engaged in the award or administration of contracts.”
Cassidy said that those standards “should include penalties, sanctions or other disciplinary actions for violations.”
He added that it is HUD’s understanding that the housing authority board of directors addressed the cited conflicts with Harkless during an executive session held approximately one year ago.
Housing authority board member Angela M. Zimmerlink last year formally requested that HUD look into the questionable contracts after she became convinced that the local five-member board wasn’t pursuing the matter aggressively enough.
Board member Beverly Beal initially brought the alleged improprieties to the board’s attention, and has said she remains very concerned over possible adverse ramifications.
Board chairman Kenneth L. Johnson has said it’s important to wait until HUD’s final ruling, following the established procedure for such matters, before taking any remedial action.
The other board members are Nancy Sutton and James V. Bitonti, who is a relative newcomer to the board.
Housing authority sources say the Harkless matter has already been added to the agenda for the board’s June 26 meeting, as an executive session topic.