WASHINGTON – There were accusations of an executive slush fund, financial shenanigans and dictatorial management. But it was the $900,000 in secret sexual harassment payments that got the head of the nation's fourth-largest housing authority fired and had the mayor asking how the housing board missed it all.
Yet Philadelphia's isn't even close to the worst of dysfunctional housing agencies across the country that operate with no budgets, untrained staff and shoddy record-keeping, according to a review by The Associated Press of inspection and audit records of 146 housing authorities that the government considered the most troubled.
The documents show the U.S. spends hundreds of millions of dollars each year on housing authorities that don't follow financial rules or, worse, lack even the most basic policies for spending petty cash or using government credit cards.
"How is it possible that you didn't know?" Philadelphia Mayor Michael Nutter asked as his city became a high-profile symbol of scandal and mismanagement in the nation's public housing system. "It defies logic and credibility that all of these things could be kept away from the board for so long a period of time."
Actually, it doesn't.
The AP's review found that federal money intended for one program occasionally gets used for others. Contracts are signed without bidding or approval. In New London, Conn., housing officials had no written contracts at all.
Yet Washington's hands are largely tied since the threat of withholding or reducing funding to punish irresponsible housing authorities ultimately would in effect penalize poor tenants for the mismanagement of their landlords.
All of this is supposed to be audited, but sometimes that either doesn't get done or there's no paperwork on file to prove it. Early this year, federal officials were still trying to resolve problems with 2006 and 2007 audits from Highland Park, Ill.
Meanwhile, waiting lists for getting into public housing are often ignored. And once tenants are in, landlords frequently don't know whether they're charging the right rent. In Dallas, housing employees made income calculation errors in the files of two out of every three tenants.
Philadelphia is not the worst-managed housing authority in the country. Not even close. The Department of Housing and Urban Development has identified 146 housing authorities as having major problems, and flagged them as "troubled."
The AP requested under the Freedom of Information Act all inspection and review documents related to the most troubled agencies. The Obama administration turned over thousands of pages of sometimes haphazard and incomplete reports and said they were the only documents available at headquarters. To get a clearer picture of a troubled housing authority, officials in Washington would have to gather information from regional offices.
The documents the AP reviewed showed a housing system in which agencies must become nearly insolvent before the federal government steps in. And even when Washington does intervene, the mismanagement can continue for years while the U.S. continues subsidizing the housing agency.
The U.S. public housing system is a bureaucratic labyrinth of local, state and federal governments and nonprofit, quasi-government housing agencies. Housing budgets are typically controlled by housing boards, separate from city budgets. Depending on the city, mayors and city councils may or may not have a say in how the boards are run.
Some boards don't meet regularly. Or if they do, they don't keep minutes of their meetings. Benton Harbor, Mich., is home to what federal regulators described as an "unmotivated board."
That leads to situations like the one in Philadelphia, where the mayor wants the authority to appoint more members of the housing board. In Garrison, Texas, where the housing authority has been cited for overspending and poor money management, the federal government's improvement plan included asking the mayor to appoint someone with financial experience to the board.
Sen. Charles Grassley, R-Iowa, who is investigating HUD for subsidizing housing for thousands of sex offenders, said it's up to the Obama administration to fix these problems.
"It's an understatement that too many public housing authorities operate poorly," Grassley said.
But such problems have existed for decades, making HUD a target of criticism through Democratic and Republican administrations.
"A lot of people assume that HUD can snap its fingers and make it all better," said Sandra Henriquez, assistant secretary for Indian and public housing. "We are asset managers. We are not responsible for the direct day-to-day operation of any housing authority."
Housing authorities draw most of their money from the $26 billion budget of HUD's Office of Public and Indian Housing. But that money doesn't buy Washington control of the nation's 3,300 housing authorities.
It's not hard for local housing officials to keep problems under wraps, or at least make them appear manageable, particularly in smaller communities that aren't scrutinized as big cities. Often, by the time Washington gets wind of problems, the housing authority's balance sheet is full of negative numbers.
"Since we're the regulator, the compliance monitor, people will do anything to keep HUD out of their business, and therefore aren't forthright and get too far down the road before they ask for help," Henriquez said.
Once a housing authority is in trouble, finding someone to fix the problem can be difficult. New housing executives often don't know what they're up against until they walk in the door and discover years of mismanagement.
"When you open a file and you see nothing on the financial side has been done, it gets awfully scary. You don't know where to start," said Joe Torres, the acting housing director in Willacy County, Texas. Torres is the fourth person to occupy the job since mid-2008. The county is still looking for a permanent replacement.
Haphazard record keeping can extend to policies, too. Housing authorities in Royal Oak Township, Mich., New Britain, Conn., and Lackawanna, N.Y., have been cited for having inadequate or nonexistent policies for writing checks, dipping into petty cash, swiping government credit cards or using government vehicles.
With so much federal money coming in and such lax policies about how to spend it, the potential for misuse is great.
For years, Doris Marie Abeyta wrote checks to her family from the Alamosa, Colo., housing authority accounts. It wasn't difficult: Board members regularly signed blank checks and relied on employees to fill them out.
The executive director, Patricia Martinez, didn't mind. She was embezzling, too. By the time they got caught, Abeyta had taken more than $400,000, Martinez nearly $1.3 million.
Prosecutors said the two began dipping into the accounts in 1998, stopped when HUD audited the housing authority in 2006, then started up again in 2007. Both pleaded guilty to embezzlement and are serving prison terms.
If things go really wrong at a housing authority, Washington can put its organization in receivership, essentially seizing control. There are six local housing authorities under HUD receivership. Taking control of all 146 troubled housing authorities would be a huge new federal expense.
"The biggest stick we have is to shut off funding. We'll turn off the money until you say, 'OK, OK, OK,'" Henriquez said. "But what that really does, that punishes the people who need the subsidy. That punishes the residents who need the service."
So, while some housing authorities make progress, others have problems year after year. In mid-2008, federal officials cited Corsicana, Texas, for its long delays in filling vacant apartments. It shouldn't take much more than a month to fill a vacancy, HUD said. In Corsicana, it took an average of five months. The report noted that Corsicana had unnecessarily long delays in 2005, 2006 and 2007.
"It takes housing authorities a while to get into noticeable, demonstrable trouble," Henriquez said. "However long it took them to get into trouble, it will take them at least that long if not longer to get out of it."
Henriquez said the Obama administration wants to have another option, a threat that housing authorities would take seriously but wouldn't amount to widespread eviction. She also said she'd like HUD to replace the single housing authority audit with more focused reviews that would help HUD spot problems sooner.
Both of those changes could require congressional approval.
When stories like the Alamosa embezzlement case or the Philadelphia scandal emerge, there's a temptation to put new regulations in place, said Michael Liu, who served as President George W. Bush's first head of Public and Indian Housing. But often that just means more paperwork and more headaches for local officials, raising the likelihood that they'll cut more corners.
For now, the system clunks along. Names come off the troubled list and are replaced by new ones. The size of the list changes some, but it hovers at around 4 percent of the nation's housing authorities. For some, the black mark prods them to make changes quickly.
For others, like the housing authority in Winter Haven, Fla., years pass with little improvement. The organization has been labeled troubled since 2003. Five years later, an inspector found the housing authority was not preparing monthly budget analyses, its staff and managers were inadequately trained, and the board's monitoring and accountability were inadequate.
Today, seven years after it first appeared on the list, Winter Haven remains troubled.