[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
EVALUATING PUBLIC HOUSING IN THE U.S.: REINING IN WASTE, FRAUD, ABUSE
AND MISMANAGEMENT AT PUBLIC HOUSING
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MAY 22, 2014
__________
Serial No. 113-113
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Operations
JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan GERALD E. CONNOLLY, Virginia
MICHAEL R. TURNER, Ohio Ranking Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina
C O N T E N T S
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Page
Hearing held on May 22, 2014..................................... 1
WITNESSES
Mr. David Montoya, Inspector General, U.S. Department of Housing
and Urban Development
Oral Statement............................................... 8
Written Statement............................................ 10
Mr. Cecil House, General Manager, New York City Housing Authority
Oral Statement............................................... 25
Written Statement............................................ 27
Mr. Kelvin Jeremiah, President and CEO, Philadelphia Housing
Authority
Oral Statement............................................... 31
Written Statement............................................ 34
APPENDIX
Sanford Housing Authority Timeline and Pictures, submitted by
Chairman Mica.................................................. 62
EVALUATING PUBLIC HOUSING IN THE U.S.: REINING IN WASTE, FRAUD, ABUSE
AND MISMANAGEMENT AT PUBLIC HOUSING AUTHORITIES
----------
Thursday, May 22, 2014,
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:04 a.m. in
room 2154, Rayburn House Office Building, the Honorable John L.
Mica [chairman of the subcommittee], presiding.
Present: Representatives Mica, Connolly and Issa.
Also present: Representative Maloney.
Staff Present: Melissa Beaumont, Majority Assistant Clerk;
Molly Boyl, Majority Deputy General Counsel and
Parliamentarian; Katelyn E. Christ, Majority Professional Staff
Member; John Cuaderes, Majority Deputy Staff Director; Mark D.
Marin, Majority Deputy Staff Director for Oversight; Matt
Mulder; Majority Counsel; Laura Rush, Majority Deputy Chief
Clerk; Andrew Shult, Majority Deputy Digital Director; Aryele
Bradford, Minority Press Secretary; Adam Koshkin, Minority
Research Assistant; and Lucinda Lessley, Minority Policy
Director.
Mr. Mica. Good morning.
I would like to call to order the Subcommittee on
Government Operations, a subcommittee of the Government
Oversight and Reform Committee. I welcome you to today's
hearing.
The title of today's hearing is Evaluating Public Housing
in the U.S.: Reining in Waste, Fraud, Abuse and Mismanagement
at Public Housing Authorities. Let me explain the order of
business.
First, members of the panel will be recognized for opening
statements and then we will go to our witnesses. We have three
witnesses this morning. We will hear their testimony and then
get into questions.
I see we are joined by our colleague from the full
committee, Mrs. Maloney. Mr. Connolly is recognized for a
motion.
Mr. Connolly. Mr. Chairman, I would ask unanimous consent
that our colleague, Mrs. Maloney, be allowed to participate as
a member of the subcommittee.
Mr. Mica. Without objection, so ordered. She, of course, is
most welcome this morning.
I will begin with my opening statement.
Last night, I spent some time reviewing some of the
material that been prepared for the hearing. Sometimes it makes
it difficult to sleep at night when you read accounts of public
funds and public endeavors to try and assist people that aren't
working well.
We have all been shocked by what have seen at the Veterans
Administration. Last night, I was shocked by what I saw in
regard to waste, fraud and abuse. Mr. Issa always starts the
hearing with a little statement that the purpose of our
committee is oversight and making certain the taxpayers' money
is properly spent. This is what we are going to do with this
hearing today. It is an important function.
I will begin with an opening statement and yield to other
members as we move forward this morning.
Today, we are going to look at how we can best improve the
administration of public housing and low cost rental assistance
programs, particularly with the U.S. Department of Housing and
Urban Development, commonly known as HUD.
We will do so by examining some of the expenditures of
taxpayer funds made by public housing authorities, also using
the acronym PHAs.
Unfortunately, all too often these housing authority
executives seem to be taking advantage of the system by paying
themselves expensive and excessive salaries and benefits, by
not distributing funds properly, and at times, we have
documented cases of defrauding taxpayer money.
Today's hearing will examine how to best put a stop to some
of these problems in mismanagement. HUD spends about $6 to $7
billion a year in capital operating funds for about 1.2 million
public housing units which house about 2.7 million people.
Through its largest rental assistance program, the Section
8 program, a voucher program that HUD uses private sector
market rentals for some 2.2 million low income households at a
cost of about $20 billion a year.
According to HUD, the average annual cost per unit for the
HUD voucher program in 2013 was $7,800, not an enormous amount
of money but significant. Together, HUD's provision of all
public housing and rental assistance programs accounted for
nearly 60 percent of its total budget in 2013. In testimony
last month, Secretary Donovan stated this figure increased over
84 percent in HUD's 2015 budget request.
Strengthening the integrity and soundness of the Nation's
public housing system is absolutely critical to safeguarding
public funds. Unfortunately, the public housing system in the
United States also suffers from a large capital backlog, high
vacancy rates in some places and many units are in desperate
need of reconstruction.
HUD released a study in mid-2011 finding the backlog of
capital needs in public housing at that point stood at $2.7
billion and annual needs are accruing at a rate of some $3.4
billion a year.
According to HUD, 478 total developments are currently
considered failing. As of March 31, 2014, there were 10,258
public housing units that had been approved for and awaiting
demolition and 23,524 currently under review for removal by
HUD.
Nationwide, a system of approximately 4,000 quasi-
governmental housing authorities exist and have administered
public housing and rental assistance on behalf of HUD for the
past 80 years. Unfortunately, problems with some of the housing
authority finances are all too common.
As of the second quarter of fiscal year 2014, 49 housing
authorities were designated as very high risk, 38 housing
authorities were also designated as troubled and assigned
additional monitoring through HUD's public housing assessment
system. Eight housing authorities are also under some type of
receivership or falling into default in their contracts with
HUD.
Unfortunately, misuse of taxpayer money by some of these
housing authority executives is very common. Taxpayer money is
being spent with little oversight and housing authority
executives are oftentimes unethically dispensing funds on
initiatives unrelated to public housing.
Since the start of fiscal 2012, the Office of Inspector
General of HUD has issued 75 audits related to housing
authorities reporting about $225 million in questionable costs
and about $24 million in funds to be put to better use,
according to his report.
Today, the Inspector General is here to discuss these
audits and the substantial work that has been conducted to date
on these issues. We will also hear testimony from officials
from some of the Country's largest housing authorities.
Mr. Kelvin Jeremiah has been President and CEO of the
Philadelphia Housing Authority for little over a year, since
March 14, 2013. The HUD IG has found some serious problems with
the Philadelphia Housing Authority which is the fourth largest
housing authority in the United States.
Notably, Senator Chuck Grassley said, one of the strongest
audits he had ever seen was released by HUD in March of 2011.
That report found that the Philadelphia housing authority paid
$30 million to 15 law firms from 2007 to 2010 and could not
fully explain what the money went for.
The Philadelphia Housing Authority also made unreasonable
and unnecessary payments of $1.1 million to outside attorneys
to obstruct the progress of HUD OIG audits.
Mr. Cecil House, General Manager of the New York City
Housing Authority, is also here to testify today. That Housing
Authority is the largest in the Country.
The HUD OIG recently released two audits criticizing that
authority's administration of its Section 8 vouchers. The first
audit questioned $1.16 billion in disbursed housing assistance
payments. The second audit determined that 99 of the 119 units
inspected at that housing authority did not meet HUD's housing
quality standards; and 24 of these 99 units were in material
noncompliance with HUD standards which could cost the New York
Housing Authority $148 million next year alone.
Mismanaging public housing funds is not relegated to the
largest housing authorities. Let me tell you a quick story
about my experience. I represent central Florida's small
community to the north, Sanford, Florida. Ever since almost the
day I took office, I have had nothing but problems with that
particular housing authority.
It actually has never been in my district. It is adjacent
and has been very close to my district. The first experience I
had was the housing authority director coming to my office with
a list of charges by the State's attorney of offenses she had
committed and asking me to help her. I tried to help her out
the door of my office after I read what was going on.
I have been working on that issue, that project, this is a
very small housing authority, not like the big ones we have
here. My goal has been to ensure that taxpayer money is being
expended in a transparent and efficient manner and also provide
public housing or affordable housing to people who need it.
Unfortunately, the Sanford Housing Authority mismanagement,
fraud and other problems go on and on like a nightmare. In
October 2011, an OIG audit found that $1.2 million in funds
given to the Sanford Housing Authority starting in 2007 were
``abusive or ineligible, not reasonable or not properly
supported.''
Specifically, the OIG uncovered over $50,000 in credit card
and leave abuses, including $16,000 in unofficial travel by the
former housing authority executive, I will put his name in the
record; ``$481,000 in public assistance funds was not budgeted
or eligible. Mr. Toot also spent $1.1 million for services
provided by three firms without support that he acquired
services in compliance with HUD and SHA's procurement
requirements.''
As a result of this and prior mismanagement, HUD was
obligated to spend more than $9 million to relocate tenants and
are going to demolish 374 of 480 public housing units owned and
managed in six developments in Sanford that might otherwise
have been preserved.
Unfortunately, today the mayor of Sanford was not able to
be here so I am taking a couple minutes to go into what he
would have told you.
Earlier this year, the Orlando Sentinel reported that the
Sanford Housing Authority expects to spend $1 million on
operating expenses even though only six families are living in
the public housing run by the authority. They had an over
$100,000 water bill for six families probably because nobody
turned off the water and the public is paying for it. It is
just outrageous.
I was quoted after I did a review saying we could put
people up in the Ritz Carlton cheaper than the money we spent
in this mess. In the past, I have actually written and had that
authority taken over by HUD which you can do. I didn't know you
could do that but they informed me after.
Tenants brought rats they captured in a cage to my office
and no one would do anything about it. We took over, they spent
millions of dollars getting it back and they put this guy in
who ran away with taxpayer supported money, money that was
supposed to be for people who need it for low cost housing.
HUD may argue that because public housing authorities are
State and local government entities, there is no reason to
conduct meaningful oversight of them at the congressional
level. However, expenditure of all taxpayer money deserves our
full attention and we will provide that proper oversight with
this and other hearings as necessary.
At this hearing, we will start the conversation into how we
can improve public housing, reining in the corruption, fraud
and abuse that undermine the ability of scarce public housing
funds to reach individuals and families most in need of that
help.
Mr. Mica. That was a long opening statement. I want to
thank the staff; they have done a great job in researching some
of this.
I had to make up a history of my housing authority. I
calculated the millions of dollars that have been wasted,
abused and stolen. This is the story and I want that a part of
the record. Without objection, Mr. Connolly asked it be made a
part of the record.
Mr. Mica. It is just a nightmare. I apologize for taking
more time. I have taken the time the mayor would have had.
I recognize Mr. Connolly for his opening remarks.
Mr. Connolly. Thank you, Mr. Chairman.
The story you described is very sobering. Housing is a
complex subject. The experiences vary obviously region to
region. I am very interested in hearing more about the troubles
and experiences in this hearing today.
I do want to talk about my own experience, however. Until I
came to Congress, I was the Chairman of Fairfax County, one of
the largest counties in the United States in suburban
Washington.
I was chairman for five years. I started as one of my major
priorities an affordable housing initiative, working with our
Redevelopment and Housing Authority. The goal was to try to
preserve, among other goals, 1,000 units for four years because
we were rapidly losing affordable housing in our community.
We, in fact, preserved outright, that we purchased, 2,400
units. It is a very successful program. In fact, for 15
consecutive years, HUD has designated us as a high performer,
the highest designation a housing authority can get. We have
also been designated as a moving to work agency by HUD, one of
only 39 in the United States. There are successful models.
Also, as part of that affordable housing initiative, we
focused on workforce housing because our police, firefighters
and teachers couldn't afford to live in the communities they
served. We also focused on homeless in ten years because
transitional housing is the key to achieving that kind of goal.
Since I started that initiative, we are the only major
jurisdiction in metropolitan Washington that has seen any
decrease in its homeless population. We have consistently seen
a decrease every year such that we have reduced our homeless
population by over one-third. I think that is a pretty good
accomplishment.
We dedicated a penny in our tax rate to affordable housing.
We had public support for it. A penny was about $22-$24 million
a year. It was the first time in our history we had ever
dedicated a penny on the tax rate for any purpose. We did it
for affordable housing.
We were trying to deal with a crisis where housing prices
were going through the roof before the bubble burst and the
people that served our economy could not afford to live in our
community and created enormous congestion.
It has actually been a kind of success story. We have had
some bumps along the way. We have a single residency occupancy
facility that is very successful in helping single folks in
transitional housing get back on their feet.
We have a very vibrant partnership with the non-profit and
faith communities, everything from a hyperthermia program in
the winter that actually successfully allowed us to reduce the
number of hyperthermia deaths in the winter to zero for the
first time in our history and get people back on their feet.
We opened some family shelters to make sure we could keep
families together and not disperse kids into government foster
care that broke them up and had a discontinuous impact on their
education.
There are other models but you have to have a clean
government, people committed to the mission, there had to be
real clarity about what we wanted to accomplish, you have to
have metrics and you have to have rigorous examination and zero
tolerance for people who cheat. If people are gaming the
system, they are going to be booted out of affordable housing.
The goal here is to use those taxpayer dollars in a wise
fashion. So there are models of success. I humbly submit my
community as one of them, but there are also, unfortunately, as
the Chairman pointed out, a myriad of examples where we fall
far short.
I think today's hearing is designed to try to better
understand what the elements for success are, what elements
have led to less than success and how can we, working together
at the federal and local levels, overcome those obstacles so we
can have more success stories.
Thank you, Mr. Chairman, for holding this hearing.
Mr. Mica. Thank you.
I might also say I have in my locale, a few miles away, a
county housing authority that operates in an exemplary way. We
changed out in my previous district pre-World War II housing in
Daytona Beach, in Palatka and West Augustine.
I have always said the Federal Government should not be a
slum lord and that we should be responsible. Unfortunately,
today we will hear some of the examples of problems that need
to be addressed but there are some authorities that do
incredible work. I am glad to hear your story.
I will yield for five minutes to the gentlelady from New
York, Mrs. Maloney. Welcome, and you are recognized.
Mrs. Maloney. Thank you so much for including me in this
hearing.
Public housing is critically important in our Nation. Mr.
Connolly, the Ranking Member, and I share your concerns over
waste, fraud and abuse that undermines the support of public
housing and affordable housing that is so desperately needed in
our Country.
I want to compliment Mr. Connolly on your innovative story
on housing. I guess it is Arlington, right?
Mr. Connolly. Fairfax County.
Mrs. Maloney. Fairfax County. To have raised the money for
affordable housing with the penny tax code is a very innovative
and great idea.
I thank you for including me in today's hearing.
I want to welcome the New York City Housing Authority
general manager, Cecil House, who will be testifying. NYCHA
provides vital services to my constituents and so many others
throughout New York City. It is the largest public housing
authority in North America. NYCHA houses so many people that if
it were a city, it would rank 23rd in population size in the
United States.
More than 400,000 New Yorkers reside in NYCHA's 334 public
housing developments around our five boroughs. It is hugely
important to housing needs in New York City.
Another 235,000 receive subsidized rental assistance in
private homes through the NYCHA-administered Section 8 leased
housing program and NYCHA public housing represents 8.2 percent
of the city's rental apartments and is home to over 4 million
or 4.8 percent of the city's population.
More 76,000, roughly 20 percent, of residents are seniors
and I thank the more than 11,000 NYCHA employees who work to
support New York City's housing needs.
Public housing provides a real service to our communities
which is why it is so important that they are well run and uses
taxpayer dollars effectively. It is in huge demand in New York.
When I was a city council member, the waiting list was over
900,000 people.
I join many of my New York federal and local colleagues in
calling for a top to bottom forensic audit of how NYCHA is
using its dollars. I look forward to seeing that report later
this year so that we know best how to streamline NYCHA and
preserve our public housing lifeline.
Affordable housing in New York is very hard to come by. Our
new mayor has announced his plan to build and preserve 200,000
safe and affordable housing units in New York City. I look
forward to working with Mayor de Blasio and NYCHA to achieve
this goal to see the city's housing needs met.
We all know this requires critical investment. I am deeply
committed to maintaining the quality of public housing in New
York City and around the Country. I look forward to today's
testimony and the way to best preserve it, in my opinion, is to
make sure there is no waste, fraud and abuse so that the public
support in tax dollars is there.
I thank all of you testifying today and especially my
colleagues.
Thank you and I yield back.
Mr. Mica. Thank you, Mrs. Maloney, and thank you for
participating.
I had some pictures of my housing authority in Sanford put
up. I guess I should make these pictures a part of the record.
Mr. Mica. This is where people should live and have public
housing. You see where we have vacant lots where we have torn
down the units. This is boarded-up public housing, and that is
some we had rehabbed and now they are being demolished. This
picture is where they demolished some of the units.
Now we are having a debate as to whether to have the
housing authority continue. I would like to see them
consolidate with the other housing authority in town or in our
community. The administration costs of two housing authorities
closely aligned geographically makes no sense.
Let me mention to the witnesses this is an investigative
hearing. I will swear you in in a minute. There are other
members not here today. Members may have seven days to submit
opening statements for the record.
I will recognize our panel composed of: David Montoya,
Inspector General, U.S. Department of Housing and Urban
Development; Cecil House, General Manager, New York City
Housing Authority; and Kelvin Jeremiah, President and CEO,
Philadelphia Housing Authority.
I want to welcome our witnesses. As I said, this is an
investigative hearing and we do swear in our witnesses. Please
stand and raise your right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Mr. Mica. Thank you.
Let the record reflect that the witnesses answered in the
affirmative.
Welcome to each of you. I don't know if you have testified
before us before. We would like for you to summarize your
testimony in five minutes so we can have questioning and
exchange of information. If you have additional information,
testimony or data you would like submitted to the record, just
make that request and we will comply.
First, let me welcome Mr. David Montoya, the Inspector
General of the U.S. Department of Housing and Urban
Development. You are recognized. Welcome, sir.
WITNESS STATEMENTS
STATEMENT OF DAVID MONTOYA
Mr. Montoya. Chairman Mica, Ranking Member Connolly and
members of the subcommittee, I am David Montoya, Inspector
General for the Department of Housing and Urban Development.
I thank you for the opportunity to highlight our
perspective on waste, fraud, abuse and mismanagement in public
housing authorities or PHAs and our work over the years.
Public housing was established to provide decent and safe
rental housing eligible for low income families, the elderly
and persons with disabilities. It is the role of HUD's Office
of Public and Indian Housing to not only safeguard is but to
create opportunities for residents' self sufficiency, economic
independence and to assure integrity by all program
participants.
There are approximately 1.1 million households living in
public housing units which are managed by over 3,000 PHAs.
Approximately 2,300 PHAs also locally administer HUD's Section
8 Housing Choice Voucher Program which is the department's
principal program for assisting eligible families obtain
housing in the private market. This program provides rental
assistance to approximately 2.2 million families.
Oversight of HUD's public housing programs continues to be
a priority for my office. Since the beginning of 2012, we have
issued 75 audits related to PHAs, recording roughly $225
million in questioned costs and approximately $24 million in
funds to be put to better use. Our investigative activity also
continues to be significant as we have completed a total of 216
administrative and civil actions and 121 criminal actions.
In order to better synthesize and highlight the continuing
problems we have identified in this area, we are assessing our
lengthy history of work for continuing patterns of practice
that negatively affect PHAs.
This effort is intended to focus the department's attention
on problem areas that we and others have reported on over many
years and to set about to develop and recommend an array of
strategies for consideration by the department and Congress on
ways to address and correct longstanding problems.
We have found that PHAs often operate with little oversight
and too often we see executive directors and PHA boards or
commissions exercising little or no oversight of their own. Too
often these officials have few or no qualifications to
effectively discharge their responsibilities. Certification and
accreditation of key personnel associated with running of a PHA
are missing links in mitigating opportunities for mismanagement
and poor governance.
These vulnerabilities are magnified when one considers that
HUD relies a great deal on electronic recording through PHAs
for self assessments and through other self reported
information collected in HUD's information systems as its
primary form of oversight.
Until HUD is able to modernize its outdated systems and
more effectively target its resources, it will continue to be
constrained in inadequate oversight.
This is further exacerbated by programs designed to loosen
oversight of funding and reporting which we believe are
counterintuitive to the many problems we and GAO have reported
on over the years. It is my contention that cities, counties
and States should do more to share in the burden and
responsibility for the management, operation and oversight of
their public housing authorities and programs.
While HUD is responsible for overseeing PHAs, it has
limited resources which are easily overwhelmed by the magnitude
of the program and requirements. In order to address recurrent
systemic problems, we have issued several broad prevention
materials including integrity bulletins and posted them on our
website.
These are designed to showcase abuses as well as to educate
PHA staff, local and State officials and the public on better
ways to avoid mismanagement and fraud.
The department's role and mission has greatly increased
over the last decade, including spearheading redevelopment in
post-9/11 lower Manhattan, the devastated post-Katrina Gulf
Coast, the economic crisis caused by the sub prime mortgage
collapse and the recent Hurricane Sandy disaster response.
Because of the limited capability of the department to
provide direct oversight, it is critically more important than
ever that program participants, beneficiaries and local and
State authorities take on more responsibility for proper
administration and oversight of PHAs.
My office is strongly committed to working with the
department and Congress to ensure that these important programs
operate efficiently, effectively and as intended.
This concludes my oral testimony and I would be pleased to
answer your questions.
[Prepared statement of Mr. Montoya follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. Thank you for your testimony. We will go to
questions after we have heard from the other witnesses.
Let me now recognize Cecil House, General Manager of the
New York Housing Authority. Welcome. You are recognized.
STATEMENT OF CECIL HOUSE
Mr. House. Thank you, Chairman Mica, Ranking Member
Connolly and members of the subcommittee.
I am Cecil House, General Manager, New York City Housing
Authority or NYCHA, as we call it, the largest public housing
agency in the United States.
NYCHA is committed to fulfilling its mandate under federal
law to provide safe, decent and affordable housing to over
630,000 low and moderate income Americans. To provide a sense
of scale, as Congresswoman Maloney indicated, if the population
of NYCHA was a city unto itself, it would be the Nation's 23rd
largest city, comparable in size to the City of Boston.
Our public housing program encompasses over 178,000
apartments in over 2,600 buildings located throughout New York
City with more than 31,000 private landlords participating in
our Housing Choice Voucher Program. The Authority also provides
housing assistance to an additional 225,000 individuals.
I have been at the helm of the Authority's day to day
operations for the past 20 months and can say our new
administration under the leadership of Mayor Bill de Blasio and
NYCHA Chair and CEO Shola Olatoye is determined to ensure that
NYCHA is a successful practitioner of good management and a
provider of quality services to the working families, elderly
and disabled citizens and veterans who rely on our programs for
their housing, assistance in entering the workforce,
educational opportunities and the stability of our communities.
We are committed to preserving every unit of public housing
in New York City, to strengthening our Housing Choice Voucher
Program, and to ensuring that NYCHA is a responsible guardian
of these public assets which will play an important role in the
Mayor's new housing plan to build or preserve over 200,000 safe
and affordable housing units in New York City.
We at NYCHA believe that ensuring public dollars are being
well spent on providing housing assistance to the most
vulnerable in our society is critical. We systematically review
our operations to improve the quality of life of NYCHA
residents and to increase the efficiency and productivity in
the management of our programs.
NYCHA is restructuring operations, reducing administrative
overhead, modernizing our business systems and implementing
data driven managerial controls to better monitor the
performance of essential functions. We are working hard to
implement cost savings in order to return the best value to the
taxpayers for every public dollar allocated.
At the managerial level, the Authority has implemented a
hiring freeze and has reduced its total employee head count by
over 16 percent since 2004. We are relying on constantly
updated metrics to derive efficiencies from a wide spectrum of
functions resulting in improved service levels, for apartment
maintenance and repair rates, heat and hot water complaints,
elevator up times, Section 8 recertification and inspection
rates, rent collection and delinquency rates and apartment prep
turnaround time, among other essential markers.
Our backlog, for open maintenance and repair work tickets
in particular has been dramatically reduced. Our public housing
assessment system and Section 8 management assessment program
scores are trending upward.
Procurement is another area in which NYCHA is bringing best
practices from the private sector to bear on our operations
with a continued focus on reducing costs. Following a thorough
review, NYCHA is streamlining and updating our inventory
systems. We have consolidated 14 procurement offices into a
single department resulting in better internal controls,
improved reliability and greater leveraging of our
expenditures.
No managerial objective is more critical than the fiscal
responsibility and transparency the Authority owes to the
public. NYCHA has implemented a rigorous, structured and
thoughtful finance and budgeting process designed to deliver
the greatest value for the limited resources that we have.
The Authority publishes our annual budget online and meets
regularly with residents and stakeholders to discuss the
allocation of resources. NYCHA also maintains an audit
department to provide assessment of the efficiency of the
Authority's operations, the adequacy of internal controls, the
accuracy of financial data, and compliance with applicable
laws, regulations and procedures.
Beyond NYCHA's own efforts, the City of New York maintains
a robust anti-fraud, waste, theft and corruption infrastructure
in the form of its Department of Investigations. Fundamental to
ensuring that the highest standards are provided by NYCHA in
the expenditure of public funds is the NYCHA Office of the
Inspector General, a 50-member unit within the Department of
Investigations working independently of the Housing Authority's
leadership and reporting directly to the Department of
Investigations Commissioner.
Specific IG teams are dedicated to monitoring the
Authority's activities in regard to contracting, construction
management, labor and other key areas.
The Authority faces great challenges in attempting to meet
the need for affordable housing in New York City which far
exceeds supply and is seeking to maintain a large portfolio of
aging residential buildings in an era when federal commitment
to public housing has dramatically receded and the Authority
burden has grown.
Mr. Connolly. Excuse me. We are over time and with the
Chairman's permission, I am going to ask the gentleman to
summarize because we have votes. We probably won't be coming
back after the votes because there will be around eight votes.
We want to have the chance to dialogue.
Mr. Mica. If you could begin to conclude, please.
Mr. House. I would be pleased to respond to any questions
you have.
[Prepared statement of Mr. House follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. Thank you.
Our next witness is Mr. Kelvin Jeremiah, President and CEO
of the Philadelphia Housing Authority. Welcome and you are
recognized.
STATEMENT OF KELVIN JEREMIAH
Mr. Jeremiah. Good morning, Chairman Mica, Ranking Member
Connolly and members of the subcommittee.
I am Kelvin Jeremiah, the President and CEO of the
Philadelphia Housing Authority.
PHA was established in 1937 as a municipal corporation
organized under the statutes of the Commonwealth of
Pennsylvania to provide safe and decent housing to low and
moderate income individuals in the City of Philadelphia.
PHA is primarily funded and is accountable to the United
States Department of Housing and Urban Development, its board
of commissioners, the Mayor, the City Council and the citizens
of the City of Philadelphia.
As such, PHA employees, residents and contractors hold a
significant position of public trust. The public therefore has
a right to expect PHA's employees, contractors and those doing
business with PHA to perform their responsibilities honestly
and with integrity.
Thank you for the opportunity to highlight my perspective
on waste, fraud and abuse and mismanagement of housing
authority programs and appropriations.
PHA is the fourth largest housing authority in the United
States and the largest landlord in Pennsylvania. PHA is also
one of a select group of housing authorities across the Country
that has attained movement to work status. This designation
allows PHA to spend its $375 million annual budget in a more
flexible manner, strategically allocating resources on housing
and self sufficiency programs to residents that best fits the
local environment.
Financial support for PHA's operations and capital needs
comes primarily from rent payments and subsidies provided by
HUD. More specifically, approximately 93 percent of PHA's
revenues comes from the Federal Government in the form of
subsidies for affordable housing. Only 6 percent of our revenue
comes from tenant rents. The balance comes from grants from the
city, the commonwealth and other sources.
Approximately 75 percent or three quarters of PHA's budget
is dedicated to its core mission, funding the actual provision,
protection, creation and maintenance of housing for low income
individuals.
With a staff of 1,300 full time employees, PHA provides
housing assistance to nearly 80,000 people in its two main
housing programs, the Public Housing Program and the Housing
Choice Voucher Program.
In the Public Housing Program, low income persons pay a set
percentage below 30 percent of their income to PHA to rent PHA-
owned units. As of the close of fiscal year 2014, PHA served
over 13,000 households while maintaining a 93 percent occupancy
rate. PHA has a public housing wait list of nearly 28,000
households. On average, PHA's public housing families have an
average household income of $10,645 and pay $267 in monthly
rent.
In the HCV Program, formerly known as Section 8, low income
persons receive a voucher to subsidize their rent to private
landlords in units of their choosing. There are also variations
of the program such as the VASH Program which exclusively
serves homeless veterans referred to the housing authority by
the local Veterans Administration.
PHA is very proud of its efforts in this area and has set a
model of efficiency in meeting the housing needs of this
population, managing 460 VASH vouchers and is one of 25 cities
nationally participating in the HUD, VA and U.S. Interagency
Council on Homelessness collaborative effort to end chronic
homelessness amongst veterans by 2018.
As of the close of fiscal year 2014, PHA managed 19,073
vouchers with a utilization rate of 84 percent. PHA's HCV
waitlist is 34,000 households long. On average, PHA's families
have an average household income of $10,061 and pay a monthly
rent of $288.
It is widely known, Mr. Chairman, that wasteful spending is
present throughout government institutions, including the one I
am privileged to head. It is my understanding that you and the
members of this subcommittee have raised valid questions and
concerns regarding fraud, waste and corruption in public
housing and have been strong advocates for rigorous oversight
that safeguard public resources from waste and mismanagement.
I share your concerns and have spent my professional career
bringing about positive changes in the integrity, efficiency
and effectiveness of public housing programs. My experience
over the past decade is one I am very proud of, Mr. Chairman.
More importantly, I have been focused on building trust and
restoring public confidence in public housing.
I have seen firsthand the deleterious impact of corruption,
fraud and waste which undermine scarce resources from reaching
the individuals who need them most. It limits the number of
eligible tenants' ability to access limited funding and
increases the cost of projects which in turn increases the cost
to the agency.
It is for those reasons that my tenure at PHA has been
focused on accountability, transparency and making data driven
decisions.
I joined PHA in 2011 as the Director of the newly
established Office of Audit and Compliance, a robust watchdog
office focused on eliminating waste, fraud and abuse.
Mr. Chairman, over the last two years PHA with the Office
of Audit and Compliance has established strong collaborative
partnerships with several federal, State and local enforcement
agencies in an effort to protect the integrity of PHA and to
further hold individuals who commit fraud accountable.
We have conducted over 700 investigations, substantiated
299 cases and referred 32 for further criminal prosecution
working with our OIG partners and other city, State and local
officials.
Mr. Chairman, it is the consistent demand for affordable
housing as evidenced by our waitlist of over 62,000 applicants,
many of which wait on average ten years to be housed, reaffirms
the critical importance of our mission, this demand, coupled
with the shrinking federal resources, which makes it critical
that public administrators take an active role in preventing
and deterring corruption, fraud and waste in addition to taking
a more innovative approach to this improvement.
Mr. Mica. If you can conclude, Mr. Jeremiah.
Mr. Jeremiah. Change and improvement in management
operations, accountability and transparency will ultimately
improve the lives of the people who benefit from the programs
we administer.
I appreciate the opportunity to testify before the
subcommittee today. I would be happy to answer your questions.
[Prepared statement of Mr. Jeremiah follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. Thank you. We will get right to questions.
First of all, Mr. Montoya, we appreciate your work. How
many people do you have working under your Inspector General
operation for HUD?
Mr. Montoya. Currently our staffing is about 615, that is
the entire office.
Mr. Mica. Is that adequate?
Mr. Montoya. I would be remiss if I said--it is never going
to be adequate. We are about 100 people down over the last two
and a half years with budget cuts.
Mr. Mica. With budget cuts?
Mr. Montoya. Yes.
Mr. Mica. First, I think we need to make certain you have
the resources to do the job to conduct the oversight. HUD gave
us HUD by the Numbers. It says, Public Housing by the Numbers
under the HUD publication, where the money goes, 29 percent for
administration. That to me seems very, very high and 33 percent
for maintenance. You have a lot of old structures. I can see
that.
I have been in the rental business and I never pay more
than 10 percent to manage anything. Have you looked at these
figures for administration within HUD? The money going out, I
guess this is both operation of HUD and money for public
housing authorities? Would you know if that is correct?
Mr. Montoya. I don't know that. Is that 33 percent within
HUD that goes to administration?
Mr. Mica. Thirty-three percent, that is where the money
goes overall that HUD is spending. I believe 29 percent for
administration. Most of HUD in Washington is administration
which is probably very high. How many people are there in HUD
in Washington?
Mr. Montoya. I couldn't tell you in Washington, 1,000
total, quite a few nationwide, quite a few in D.C. I don't know
the exact number.
Mr. Mica. Again, it is a high number. If we could turn this
over to private sector, I am sure management companies would
chomp at the bit to get 29 percent of billions of dollars going
out. That is a lot of money for administration.
Mr. Montoya. What I would add is that yes, the
administration portion of public housing authorities is quite
high. The administration of public housing authorities is quite
high. They recently established this Cost Office Center to
manage the overall administration of these housing authorities.
They are allowed to take a percentage of certain projects,
so they are taking federal money, taking a certain percentage
of that on certain projects as an administrative fee to cover
their overhead.
HUD gave them a blanket pass on about 10 percent of their
capital fund. They can take 10 percent of their capital funds
and make it administrative fees. Once these fees are earned,
per se, they become non-federalized.
We think de-federalizing these administrative funds doesn't
appear to be reasonable, especially in light of the fact that
they are fully supported by grants and subsidies, a direct
grant to begin with.
When these funds become de-federalized, they can virtually
use these funds for anything they want. That then goes to the
issue of high salaries. They can actually use de-federalized
funds to pay some of these high salaries we have seen because
it doesn't fall into the category of reporting what federal
money you spent on a salary.
Mr. Mica. They are wasted to reduce this. If I was looking
at this from a business standpoint, first, I would pass a law
that did away with the administrative staff, re-contract this
out with a limit and the cost of administration. There are
hundreds of thousands of management real estate folks who could
properly manage this.
We haven't talked about salaries of some of these. I know
there are some caps put on the executive positions within the
housing authorities. Isn't there a federal cap currently of
$155,000?
Mr. Montoya. It is a little over with the increase in
salaries that the Administration approved but it is not
$155,000.
Mr. Mica. Mr. House, what is your salary?
Mr. House. My salary is $195,000.
Mr. Mica. Mr. Jeremiah, what is your salary?
Mr. Jeremiah. My salary is $225,000.
Mr. Mica. Sounds like you are getting screwed, Mr. House,
but that isn't the question at hand. The question at hand is
how do they get to that number and we have a cap? Aren't they
subject to that cap?
Mr. Montoya. I tell you, they both make more than I do, Mr.
Chairman. Having said that, I would say there is a way around
that cap.
Mr. Mica. They both make more than we do too. They are not
Mickey Mouse operations. Those are huge operations and maybe to
find the right talent, you have to pay more. I have advocated
for the Federal Government to pay to get the best expertise we
can to operate systems and manage operations, attract them and
reward people who do a good job.
We have a law. How do they get around that?
Mr. Montoya. The law says that only $155,000 of Federal
money can be paid. We have an initiative that we will be
talking to Congress and the department about with regards to
the definition of salary. Salary doesn't include such things as
bonuses, PHA vehicles, benefits like retirement, life and
medical insurance. These things aren't covered.
Mr. Mica. You two are relatively new in your positions, is
that correct? Mr. House, how long?
Mr. House. Twenty-two months and two days.
Mr. Mica. You have been eligible for a bonus. Do you get a
bonus?
Mr. House. Absolutely not.
Mr. Mica. You need to talk to some folks there. Of course
it depends on your performance, that should be the criteria.
Mr. Jeremiah?
Mr. Jeremiah. I am coming up in two years.
Mr. Mica. Have you gotten a bonus?
Mr. Jeremiah. Yes, I have.
Mr. Mica. How much was that?
Mr. Jeremiah. Ten thousand dollars.
Mr. Mica. Not a king's ransom but significant. Not to pick
on you two, we appreciate your coming to testify because you
have two of the largest housing authorities in the Country.
Every time I try to get some decision made, Mr. Montoya, on
moving forward with some alternatives, for example, I don't
want to replace a ghetto with a ghetto, all I get is HUD will
not permit this or HUD will not permit that.
Have you any recommendations, for example, on replacement
of some of these units? The worst place you would want to put
an investment for real estate would be back into some public
housing authority. Unfortunately, too our public housing
authorities, where the public housing location is, if you talk
to the sheriffs, the police chiefs and other law enforcement
people, sort of the center of all kinds of difficult community
crime issues.
Do we have enough alternatives? I don't like just replacing
units with units. Do we have enough alternatives to allow
variations, for example, bringing in the private sector to
produce housing, come in with replacement projects?
I have done Hope 6, or whatever we had, projects and other
replacement projects for public housing? Have you looked at
this at all, Mr. Montoya?
Mr. Montoya. No, sir, we have not. While I couldn't speak
to that, I think from what we have seen, certainly not speaking
with regards to the two gentlemen beside me because they seem
to have a very good background and experience, we consistently
see in these PHAs executive directors and boards or commissions
who really don't have the background and experience to run
these PHAs. Some are running multimillion dollar programs.
We feel that accreditation, certification or something on
that order of these directors and boards would help.
Mr. Mica. The one we got from HUD--I did everything I could
after we had that taken over by HUD and another Congressman
called me and said the guy they are sending over there is
horrible. I could not get them to not employ him. These are
people HUD is sometimes recommending. It was so offensive.
Within seven or eight years, he ran it into the ground and ran
off with money.
The other thing too is you do criminal referrals?
Mr. Montoya. Yes, sir, we do.
Mr. Mica. I have been trying to find out what a criminal
referral is. If I went in with a gun and a mask and robbed
people of a fraction of this money, I would be in the slammer.
I have written you all. Is it public knowledge when you do a
criminal referral or do you have to keep it confidential?
Mr. Montoya. Generally, we don't speak to it.
Mr. Mica. If a member of Congress asks you, I have a
specific case?
Mr. Montoya. Yes, sir.
Mr. Mica. You call the Department of Justice and they won't
say anything. I can see that because of the proceedings they
are involved in. Do you know anything about it?
Mr. Montoya. In your case, we had criminal referrals to the
Department of Justice. They were declined.
Mr. Mica. They were declined by the Department of Justice?
Mr. Montoya. Yes, sir, they were.
Mr. Mica. I did not know that. That just burns me. That is
unbelievable. I want staff to look at that. I would like to see
what the basis is or what they have to do. Do they have to use
a gun or knife? The previous executive director stole a fortune
and did all kinds of abusive things and got probation.
People who do violate federal law can still be subject to
prosecution under State law, is that right, in these cases?
Mr. Montoya. Yes, sir.
Mr. Mica. I may pursue that too.
We have case after case of problems. I want to give credit
because you have good operations. Mr. Connolly cited one. I
have five or six great operations, but there are some
consistently poor performers.
Why has the East St. Louis Housing Authority been under
government receivership for almost 30 years? Any idea what is
going on there?
Mr. Montoya. The last we had done with regard to that was I
think HUD's failure to properly plan for the management of that
program.
Mr. Mica. In the past, I wrote a letter with one specific
housing authority I thought should be taken over. Can a member
of Congress request that of any of these operations?
Mr. Montoya. I wouldn't see why not, sir.
Mr. Mica. If I do my own review, I might be giving you a
list. I have a lot to do. It is amazing. You can see poor
performers one or twice. Of course, some of them, like Sanford,
have gone on for two decades. Here we have St. Louis for 30
years.
Mr. Montoya. In regard to your situation, sir, I couldn't
agree with you more that this gentleman should never have been
allowed in your housing authority. He had previously been fired
from one and asked to resign or face firing from two others. We
consistently see this.
We consistently see bad actors who either were under
investigation or had questionable activity, moved from PHA to
PHA and it exacerbates these problems we continue to see. When
you say you see a lot of the same actors.
Mr. Mica. Is there a suggestion today on a certification or
some type of validation? Staff, let's see if we can't come up
with something. Maybe you would join me, Mr. Connolly? We need
to put some measures in place to bring some of this to a halt.
I don't want to take all the time. I tried to but I can't.
I must yield now to our Ranking Member, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman. I would be glad to
join with you because I think you have put your finger on
something. I guess I am dismayed, the most mild word I could
use to describe, at the lack of professional criteria for
running huge enterprises in some cases.
The fact that you have someone who is a repeatedly bad
actor, who somehow nonetheless gets hired--I have hired a lot
of executives in local government. You have to check
references, you have to Google them, you have look up their
record, and you have to check around for their reputations in
the localities in which they worked. That is just part of your
due diligence. It is shocking to me
Let me ask you, Mr. Montoya, let's refer to someone as a
bad actor or someone with a very spotty record that is clear,
by innuendo the record is clear, does HUD have the ability to
tell a PHA we won't reimburse you for any part of that salary
if you hire that person?
Mr. Montoya. HUD has quite a lot of latitude with regard to
this, so I don't know about that specifically but I would
imagine the latitude they have in providing funding, they could
do that. I don't know.
I would like to say thank you to Congress. It wasn't until
the recent appropriations that Congress mandated HUD to work
with my office to incorporate some training on fraud awareness
and the problems we have consistently seen.
It has only been recently within the last month that we
have been contacted by the assistant secretary for a PIH and
some of the associations for these housing authorities in order
to do that. I don't believe it would have happened without
Congress' support. I appreciate that. We hope to take that
further and time will tell.
Mr. Connolly. It seems to me, Mr. Chairman, that in
addition to the whole certification thing, which I think is
long overdue, there ought to be a training and certification
program for managers and boards that oversee these enterprises.
That is not a new concept; it is done in many other fields and
is long overdue here.
It seems to me we ought to also explore what authorities
HUD has and can and should be using since it pays up to
$150,000 per your previous question--I think you said $150,000?
Mr. Montoya. Yes, $155,000, that is what we will pay in
Federal funds.
Mr. Connolly. I know but if you get a bad actor with a bad
history, presumably you have the power to say to a local PHA,
you can hire that person but we are not going to reimburse you.
It is on your watch, because they are on our list and have
three strikes and they are out.
When was HUD founded, Mr. Montoya?
Mr. Montoya. I couldn't tell you off the top of my head.
Mr. Connolly. Roughly in 1965, so it is coming up to its
50th anniversary.
I am reading your testimony and you said in your testimony
that the department ought to develop a physical inspection
system for the HCV program. The HCV Program is the?
Mr. Montoya. The Housing Choice Option Program.
Mr. Connolly. How long has the HCV Program been in
existence?
Mr. Montoya. You mean the program or housing quality
standards?
Mr. Connolly. I am reading your testimony. You refer to the
HCV Program. What do you mean by the HCV Program and how old is
it?
Mr. Montoya. The Housing Choice Option Program is really
Section 8 housing. It has been around probably as long as HUD.
Mr. Connolly. We are just now talking about a physical
inspection program at HUD?
Mr. Montoya. We are talking about a physical inspection
program with regards to the housing quality standards. If you
were paying housing choice vouchers for units, units that
should be inspected for housing quality, it has been about six
years that we recommended to HUD that they institute a better
mechanism to do these inspections and they have yet to complete
that.
Mr. Connolly. When did we adopt common standards at HUD for
Section 8--here are the standards you really ought to be
meeting?
Mr. Montoya. With regard to Section 8, it has been around
as long as the program, I believe. With regard to their
inspections of these things, not quite sure.
Mr. Connolly. Standards first. The standards are not new is
my point?
Mr. Montoya. That is correct, sir.
Mr. Connolly. We are just now talking about maybe we should
inspect some of them after 50 years? Then when HUD has
inspected, reading again from your testimony, of the 119 units
inspected, 99 didn't meet the standards?
Mr. Montoya. That is correct.
Mr. Connolly. That is just a sample. So 99 out of 119
sounds close to 90 percent.
Mr. Montoya. Out of about 12,000 I think the universe is
made up.
Mr. Connolly. Twenty-four of the 99 that didn't meet the
standards were in material noncompliance.
Mr. Montoya. Those have been longstanding issues that
should have been corrected some time before.
Mr. Connolly. I find that astounding. We have been in
existence for 50 years, our mission is not new, the apparatus
is not new, the bureaucracy is not new. This isn't rocket
science, it is housing. Standards of quality for clients who
live in this housing, hopefully we are not in the tenements of
the Bowery in 1900, we have higher standards in 2014 and one,
HUD isn't even inspecting them and we are still talking about
maybe we ought to physically inspect.
Does HUD delegate that responsibility to local PHAs like
Mr. House and Mr. Jeremiah?
Mr. Montoya. Yes, sir. In the case of NYCHA, yes, it is
delegated.
Mr. Connolly. How good a job do they do?
Mr. Montoya. Part of our report suggested there is no
consistency in how those inspections are conducted.
Mr. Connolly. That tells me HUD doesn't manage it.
Mr. Montoya. The other concern we saw in the report was a
requirement--I think it is a performance issue--a requirement
that 25 be inspected a day. We think this high level of measure
is really driving bad behavior.
Our inspectors could, at best, get to five or six a day and
that was doing a full inspection to include driving between the
boroughs. I think a performance measure of 25 is driving some
bad behavior there.
Mr. Connolly. Good point. And it is a double standard. We
don't hold ourselves to that but we ask them to do it.
Mr. Montoya. Correct.
Mr. Connolly. You are absolutely right, that is bound to
get someone to say check because I don't want to look bad. I
got to 18 but I couldn't get to 25, so the other 7 are roughly
okay and maybe they are not. Yes, we have to look at that.
I think there are some real fairly obvious, low-hanging
fruit management improvements HUD could make itself that would
have a positive impact on local housing authorities. After 50
years, it is inexplicable why they haven't been adopted. To me,
it is inexplicable.
I have run a large government and I would never tolerate
what you just described. That is the tip of the iceberg; there
are all kinds of other aspects we could look at. I think HUD is
going to have to clean up its act if we are going to have a
positive impact on local PHAs and a whole bunch of standards.
Mr. Jeremiah, you talked about 700-plus investigations for
malfeasance, corruptions, mismanagement and the like, correct?
Mr. Jeremiah. That is correct.
Mr. Connolly. You said 299 were referred for criminal
prosecution?
Mr. Jeremiah. Two hundred ninety-nine cases were
substantiated; 32 were referred for criminal prosecution.
Mr. Connolly. By the way, why only 32?
Mr. Jeremiah. Two hundred ninety-nine were substantiated. A
lot of these cases, quite frankly, are cases that are under
$50,000 and there is reluctance on the part of prosecutors to
prosecute those cases. We often have to enter into repayment
agreements with them.
Mr. Connolly. How often does that happen?
Mr. Jeremiah. Quite often.
Mr. Connolly. That would be buried in the 299?
Mr. Jeremiah. That would be buried in the 299.
Mr. Connolly. Do you have any idea how many of the 299
involves settlements, payback settlements?
Mr. Jeremiah. I don't have that specific number with me.
Mr. Connolly. So 32 were referred for prosecution or for
further action by the prosecutor?
Mr. Jeremiah. Yes, for prosecution.
Mr. Connolly. How many of the 32 were in fact prosecuted?
Mr. Jeremiah. Of the 32 cases that were referred, we have
had 10 arrests thus far and 5 are pending. The rest have not
yet been acted upon.
Mr. Connolly. Any trials?
Mr. Jeremiah. Generally, no; they are usually pleas.
Mr. Connolly. The Chairman made reference to a housing
authority in his district where we have had consecutive
executive directors who apparently absconded with money. You
would think having been burned once, you would be real careful
about who you hired to replace that person.
I guess what troubles me about these statistics is I
understand we are always going to narrow down and we certainly
want to be fair to everyone but if you want to deter theft and
corruption, one good way to do it is to prosecute and
incarcerate.
Mr. Jeremiah. I agree with you entirely.
Mr. Connolly. In fact, I would argue that white collar
crime is precisely the crime you want to have jail time because
them's the folks that will really get the message--I don't want
to do that. They are often the ones exempted, unfortunately.
People who may be tempted or yield to temptation are going
to calculate, what chance have I got of: one, getting caught;
two, anything happening even if I am; and three, ever going to
trial or even plea bargaining with some kind of serious
consequence. Obviously the odds are pretty good if my intent is
not a good one.
I think we have to ramp up--as the Chairman suggested--more
referrals both at the local level and the federal level, get
tough about it and get the Justice Department and our local
prosecutors to get tough about it.
I understand the standard of $50,000 but I am not sure that
is a good message either. It is not okay to be pilfering even
sort of modest amounts relative to grand larceny. That can
create a culture that undermines the mission and the faith of
the public in the mission of the agency--it is all corrupt,
they are all on the take and nobody does anything about it.
You don't want that reputation, you don't want that
perception. I think this is a very serious part of what we are
doing to sort of get ourselves, where we have had problems,
back on track in trying to win back the confidence of the
public in our mission, what we do.
Mr. Jeremiah. Mr. Connolly, there is a perception that the
crimes that are committed as it relates to fraud and corruption
are sometimes victimless crime. I attend every sentencing in a
case involving the PHA. I had the opportunity to deliver a
victim impact statement which are often taken into account by
the judge.
There are those occasions when the judge does not take that
into account. I can tell you that we have had some incredible
successes working with our local and federal partners to hold
people accountable but there have been a number of cases where
folks got off on probation, where they only got six months.
For example, one case involving the theft of construction
materials, well over $400,000 in construction materials, one of
the defendants got six months in jail. There are kickback cases
where we saw a very good result where that defendant got 50
months in jail. It does run the gamut.
I believe that it is important in terms of deterring fraud
and corruption that we hold those folks accountable but I will
add that even when the system does not, PHA has taken a very
aggressive stance in holding them accountable. We do that by
forfeiting their pensions.
Mr. Connolly. Good. I would just say to you, as someone who
spent 14 years in local government, the key to success is you
have the public with you. They have confidence in the
organization, in the machinery, in the people and the
leadership.
If they don't, your mission is in trouble. The notion of
victimless crime, fair enough, it is not someone who has been
violent and has physically hurt someone else but if you are
responsible for eroding confidence in such an important subject
area, affordable housing, so the public no longer has any
confidence at all in what you are doing, so resources decline,
fewer families are assisted, they are victims, through no fault
of their own, because of some venality or mendacity by an
employee, or a contractor or whoever it may be.
That needs to be taken into account because the erosion of
confidence is not a trivial matter.
Look at Mr. House of New York, you came from the Bloomberg
administration but you are now in the de Blasio administration.
Mayor de Blasio set a breathtaking, to me, goal of 200,000
affordable housing units in New York City. That is astounding.
My jurisdiction is about one-eighth the size and we
couldn't believe we would have 2,400 units in four years.
Multiply by eight, maybe you could do 17,000 but 200,000 is
going to be an extraordinary feat if it can be accomplished.
If the public has no confidence in you to begin, you are
never going to reach it. You are not even going to get a
fraction of it. It is critical that if we are all going to get
behind that goal in New York, we have to have confidence in
you, Mr. House, and in the people who run that organization
that they can get it done.
That is what is so insidious about corruption, even petty
corruption. I think we have to weed it out and we need HUD to
double down on it because it is insidious.
Mr. House, I want to give you an opportunity to respond and
then I am done, Mr. Chairman. Thank you for your indulgence.
Mr. House. I think the Mayor's housing plan as you have
recognized is a very ambitious goal but there is a very
critical and necessary need in New York City. Housing costs
have gone up significantly and there is a need to have this
additional affordable housing across our city.
If you look at the individuals that live in public housing,
a good portion of them work with our Department of Education,
with our health and hospital industries. Those are critical
human resources to make our city work as we move forward. We
need to provide housing similar to what you have done in
Fairfax County and we need to do that in New York City.
It is just a matter of scale. New York City is so much
larger and the need is, as a result, so much greater.
Mr. Mica. Thank you, Mr. Connolly.
I didn't put this up before but I just want to show you,
Mr. Montoya. The Sanford Housing Authority is not in my
district and has never been in my district. It is adjacent to
my district. This is part of my file on this little housing
authority that has gone wild and the problems we have had.
That brings to mind the expenditure cited by the Inspector
General on legal costs for the Philadelphia Housing Authority.
Thirty million over three years is ten million a year. Was some
of this money spent going after people and if so, how much? I
read there were 15 law firms that were employed. How do you
incur that kind of legal bill?
Mr. Jeremiah. Let me first say that was before Kelvin
Jeremiah came to town, for the record. The report is about
three years old. Since then we have cut our legal expenditures
significantly. Last year alone, it was about $900,000 down from
that $10-million plus a year.
I couldn't begin to justify what was done in the past but
why there would be such an incredible need for what I would
consider--I do share the IG's comments that it is excessive.
Mr. Mica. You investigated that but you couldn't get
documentation on what justified that $10 million a year
average?
Mr. Montoya. We looked at a portion of it, sir. Out of the
$30 million, we looked at a representative sample of that, a
little over $4.5 million. You are correct, of the amount we
looked at, there was no real justification for the expenditure.
Mr. Mica. The problem is there is $30 million over three
years. He has gone to $900,000 and they were spending $10
million for 15 firms, so it is money just gone.
Mr. Montoya. Right. We basically extrapolated the entire
$30 million being questioned and out of all of that, $1.1
million was specifically spent to obstruct our audits. Again,
this was not under the purview of Mr. Jeremiah.
They did things like having three attorneys with each of
our folks when we did interviews. They had to look at every
record before they turned it over to us. These are the things
that, as the IG, we have a right and responsibility to oversee.
Mr. Connolly. Mr. Chairman, can I interject on that?
Mr. Mica. Yes.
Mr. Connolly. Aren't there laws against that? Were they
using federal money?
Mr. Montoya. Yes, sir, it was federal money.
Mr. Mica. They were using Federal money.
Mr. Connolly. Don't you have some redress, both criminal
and civil?
Mr. Montoya. We ended up getting what we needed.
Mr. Connolly. That is not my question. Listen, if someone
is investigating and you even lie to the FBI, it is a crime. To
actually spend money from legal resources to deliberately
obstruct and IG report involving federal money--adding insult
to injury--using Federal money to obstruct, that has to be a
crime and prosecutable. What happened?
Mr. Montoya. What I would say is we are not done. If I can
just leave it at that, we are not done.
Mr. Mica. I just discussed with staff making certain that
you have the resources to pursue some of this. What I have read
and what I have heard is just astounding. Again, when you come
to obstruction of your work and using taxpayer monies to
obstruct, we are reaching about the limits. Somehow we have to
drill down on this and go after these folks.
We will see what we can do to give you the resources.
Mr. Montoya. We appreciate your support.
Mr. Mica. Unfortunately in my community, central Florida,
about 25 percent of the homeless are veterans. Mr. House, was
it you who said you had 460 homeless veterans?
Mr. Jeremiah. That was me.
Mr. Mica. Mr. Jeremiah. How many total units do you have
for your whole housing authority?
Mr. Jeremiah. We have approximately 13,000.
Mr. Mica. Thirteen thousand does not sound like a big
number.
Mr. Jeremiah. It does not.
Mr. Mica. Is there a limit on the program or is that a
limit on your effort or what?
Mr. Jeremiah. There have been some structural issues with
our housing authority making units available.
Mr. Mica. Do veterans get a preference for housing when
they are homeless?
Mr. Jeremiah. They do.
Mr. Mica. They would naturally come to the top of the list.
You have a waiting list?
Mr. Jeremiah. Yes, we do. The waiting list generally
wouldn't apply to homeless vets.
Mr. Mica. How big is your waiting list?
Mr. Jeremiah. It is about 60,000.
Mr. Mica. A good number of those would be veterans. They
don't get a preference in being first up?
Mr. Jeremiah. A good number of those would not be veterans.
Mr. Mica. The ones that are identified, they apply and they
list they are a veteran, do they do that?
Mr. Jeremiah. They do but they would be redirected into the
VASH Program.
Mr. Mica. I know but 460 is small and 13,000 units?
Mr. Jeremiah. We do.
Mr. Mica. You have 60,000 plus. It would be my preference
to give those who served the Country an opportunity to have the
first show at whatever is available. Is that the way you are
doing it?
Mr. Jeremiah. Yes, they do. Once they have indicated they
are a veteran, they would be removed from the 60,000 plus.
Mr. Mica. And given first preference?
Mr. Jeremiah. They would be given first preference.
Mr. Mica. What is the acronym for the program?
Mr. Jeremiah. The Veterans Administration.
Mr. Mica. VASH?
Mr. Jeremiah. Yes.
Mr. Mica. Are you only assisting those to the limits of
that program funding availability or are you going beyond that
and prioritizing those folks so they get first up?
Mr. Jeremiah. We are doing both.
Mr. Mica. That was my question.
Mr. Connolly. Just to be fair, Mr. Chairman, just real
quick I want to get some stuff in the record.
Mr. Mica. Go right ahead.
Mr. Connolly. If one only heard our previous exchange, one
might think we are still in the middle of this so I want to be
fair. Obviously the events we were describing in terms of the
obstruction of the IG's investigation was not on your watch,
Mr. Jeremiah, is that correct?
Mr. Jeremiah. That is absolutely correct. I would also
remind the members that prior to coming to the Philadelphia
Housing Authority, I was an IG so I understand all too well.
Mr. Connolly. You are a recovering IG.
It is also important to get in the record, correct me if I
am wrong, your predecessor was debarred in part because of his
attempts to obstruct the IG report, is that correct?
Mr. Jeremiah. That is not quite correct. The debarment
related to the failure to file certain lobbying disclosures.
Mr. Montoya. That is correct. We also found they had been
using federal money to lobby.
Mr. Connolly. Which is illegal.
Mr. Montoya. Right.
Mr. Connolly. In March 2011, the entire board of the
Philadelphia Housing Authority resigned?
Mr. Jeremiah. That is correct.
Mr. Connolly. So you have a new board?
Mr. Jeremiah. We do.
Mr. Connolly. You went into receivership at that time under
HUD control. Are you still under receivership?
Mr. Jeremiah. No, we are one year out of receivership.
Mr. Connolly. Have you closed all of the recommendations
made by the HUD IG?
Mr. Jeremiah. We have, including a reimbursement to the
program of about $8.2 million for the legal services that we
collectively determined were not necessary or appropriate.
Mr. Connolly. Thank you. I want to be fair and not leaving
it hanging because that is not the case. There is a new guy in
town, a new board and hopefully we can make sure we try to
learn from the terrible mistakes of the past.
Thank you, Mr. Chairman.
Mr. Mica. Those are very good points. We appreciate the
cooperation of both of you. Both of you are fairly new.
Mr. House, after you learned how much the guy next to you
is making and how many more units he has, you can have a little
talk. You have a lot of important responsibilities.
This is a very important subject. I don't know of too many
hearings that have gone into this depth, at least from our
investigative standpoint. We would like to follow up because
you do have a lot of people who need housing assistance and
affordable housing and we need to make certain we have the
alternatives.
We have to take a real look at the administrative costs
overall and see what we can do to bring that down. I don't mind
paying to help people who need housing help but 29 percent
premium on administration seems over the top. We will look at
that further.
I want to thank the New York and Philadelphia directors for
being here. I salute you, Mr. Montoya on your work and the
information you brought to the committee and Congress today.
We will leave the record open for a period of seven days,
without objection. We may have additional questions we didn't
have time to get into because votes have been called.
We thank you so much for being with us and participating in
this enlightening hearing. We thank Mr. Connolly and Mrs.
Maloney who are gone. We will continue to get the facts and
hopefully improve the expenditure of public funds. It is such
an important area.
There being no further business before the subcommittee,
this hearing is adjourned.
[Whereupon, at 10:33 a.m., the subcommittee was adjourned.]
APPENDIX
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