DHA makes deal settling 2004 audit debt

Dec. 17, 2013 @ 05:43 PM

The Durham Housing Authority has agreed to pay government $2,960 a month for the next 100 years to settle a debt to the federal government auditors identified in 2004.

Regulators in the U.S. Department of Housing and Urban Development approved the deal earlier this winter. It included a decision by the department to write off part of a debt the 2004 procurement audit said amounted to $6.9 million.

DHA will ultimately pay a bit less than $3.6 million of that.

Authority CEO Dallas Parks said HUD officials tentatively agreed to the write-down and payment plan in February. It received final signoffs from officials in Washington, D.C., in November.

“We’re very pleased HUD and the [department’s inspector general’s unit] accepted this,” as it clears the authority’s books of a problem that could have affected the financing of future redevelopment efforts, Parks said.

The 2004 audit criticized the authority, run until the early summer of 2003 by former Executive Director James Tabron, for failing to follow federal procurement rules.

Auditors found that among other things, DHA had spent $2.3 million on renovations to several housing projects without using a competitive bid process for the work, and $2.5 million on the services of a law firm and temp agency that never receive contracts.

It also didn’t do the right prep work before another $1.2 million in contract awards, causing problems officials had to correct later by issuing “change orders” that eventually increased DHA’s costs.

The debt to HUD came because the problems the auditor identified involved the use of federal public-housing subsidies.

DHA is in essence compensating HUD for the improper use of federal money.

It will have to draw the monthly repayments from what Parks termed “de-federalized funds,” out of its central-office accounts. That generally means using some of the rental revenue that comes in each month from tenants.

But the settlement doesn’t require DHA to send a monthly check to Washington. Instead, in an accounting move in line with the auditors’ initial recommendation, the authority will transfer the money back into operations normally financed by the feds.

The deal requires DHA to submit proof of the transfers each year to HUD’s Greensboro field office, which has responsibility for monitoring its compliance.

Parks, who took over as CEO in 2010, said DHA had argued auditors were “incorrect” in claiming the prospective debt was as large as $6.9 million. The eventual settlement followed negotiations with HUD.

Tabron was forced out in 2003 after officials learned he’d charged personal expenses to an authority credit card.