Feds order Fayetteville Housing Authority to pay off debt

FAYETTEVILLE — The Housing Authority wants clarification on how much money the federal government claims was misspent and has to pay back.

The authority owes its development nonprofit more than $164,000, according to a division of the US Department of Housing and Urban Development. Board members say the amount is more like $9,000.

Federal investigators also found supporting documents were missing for more than $56,000 of expenses.

The authority also spent more than $22,000 in 2019 from a federal grant to renovate a property it purchased with its nonprofit, according to a study released in March.

The review outlines seven corrective actions that the authority should take. It does not set any deadlines or impose any punitive measures on the Housing Authority.

The review is the result of a request for records from the HUD Departmental Enforcement Center made in August. Investigators reviewed financial records, real estate transactions, service contracts and compliance with rules and regulations and also interviewed former and current employees. The survey was conducted remotely from August 16 to November 29, covering activities from January 2019 to August.


Investigators say the authority’s nonprofit, FHA Development, Inc., owes the regular agency $164,287 because the agency used public housing money on residential properties owned by the non-profit organization that did not have social housing.

The non-profit development board is the same as the regular housing authority board.

Chair Melissa Terry told other board members at a meeting on April 28 that she believed the amount did not represent a $155,000 payment the nonprofit development organization made last year. last to the ordinary housing agency. An auditor hired by the authority said the payment was made after the end of the federal government’s fiscal year and is expected to be reflected in next year’s audit.

If the $155,000 payment is included, that would reduce the amount to be reimbursed for the renovations to $9,832. The $155,000 came from a construction loan to renovate an apartment complex owned by the development nonprofit at 12th Street and South Washington Avenue.

The review notes $305,059 in reimbursements that the development nonprofit made to the Ordinary Housing Authority from September 2019 to June.

“However, most payments came from construction loans or other government funding sources,” according to the study.

It does not specify whether the use of loans and government sources is permitted, nor does it provide a detailed statement of accrued expenses that contributed to the outstanding debt of $164,287.

Terry said the agency is seeking clarification from the federal government on the amount.

A media phone number for a HUD regional office in Texas went to a full voicemail. A text message to the number did not respond on Thursday or Friday.

The review also looked at 12 check payments totaling $700,272 that presented a potential conflict of interest or were unusual or questionable. Supporting documentation was found for $644,197 of expenses.

The Housing Authority must either provide supporting documentation for the remaining $56,075 or refund the money to the federal government, depending on the review.

The authority received a $3.8 million emergency grant from the federal government in 2017 to replace air conditioning units and water and sewage pipes in its Hillcrest Towers public housing complex. He used $22,961 from the grant to renovate the former Hi-Way Inn, which the nonprofit development purchased and used to temporarily house some Hillcrest residents in 2019.

The grant did not cover the Hi-Way Inn’s preparation costs for residents, according to the review. The review states that the authority must reimburse HUD for any remaining grant money in accordance with the grant requirements, but does not specify a dollar amount. The Authority Development nonprofit sold the Hi-Way Inn in December for $900,000.

The authority also failed to comply with federal regulations, government procurement law, HUD requirements or its own purchasing policy regarding service contracts, according to the review.

The review covered seven procurements involving 30 contracts totaling over $3.7 million. Four of the contracts were over $20,000 and required the authority to seek competitive bids, which was not the case, the review says.

The other three were under the $20,000 threshold, but “the FHA was still required to ensure competition to the extent possible,” and it did not, according to the review.

The review also requests documents explaining $1.5 million the authority received from Washington County in emergency rental assistance during the pandemic. The authority said in a response to the review that it has the necessary documents.

The final three remedies call for the authority to train its staff in the use of public housing money, HUD grants, and contracting regulations. The authority has already started training and updated its own procurement policies.

Stabilization of the operation

The authority operates under the direction of an acting assistant director, Audra Butler. He searched for a permanent executive director for months and made an offer to Marc Starling, who turned down the job, according to an April 12 letter to the authority. The board agreed on April 28 to republish the job posting.

HUD ordered the authority in May 2021 to stop using public housing money for the FHA development operation. The federal government sent another letter two months later asking the authority to have the Housing Authority reimbursed by its non-profit organization. Two days later, the board formalized a management agreement between the regular authority and the development association.

The council hired a consultant in August to help stabilize the authority. However, HUD told the board a month later that it could not hire the consultant because it had not solicited offers or quotes before proceeding with the hiring. The consultant, Gerald Turner of HEAL Collective, ended up volunteering for the authority for about three months, Terry said.

Terry said the effort to stabilize the agency has proven successful. All positions except the finance director and a custodian are being filled after a number of staff resigned last fall, she said. The agency will be interviewing candidates for the CFO position this week, and a job posting is being posted for the custodian position.

The nonprofit development association ultimately sold four of the five properties it purchased or leased between 2019 and 2020. It still owns the 12th Street and South Washington Avenue apartment complex after selling it placed on the market and declined an offer.

Board members agreed to put all the properties on the market last summer, saying bank financing had failed and many tenants were unable to pay rent due to the covid-19 pandemic.

The council planned to use money from property sales and rent collected in arrears under the emergency rental assistance program administered by Washington County during the pandemic to pay the amount the agency non-profit development needs to regular authority.

Terry said the authority will develop a plan to pay its debts once it gets clarification from the federal government on the amount owed.

“We need to know the number so we can figure out how much to pay,” she said.

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