Stark Metropolitan Housing Authority Violated HUD Requirements

 Based on a previous audit and on an anonymous complaint received by the Office of Inspector General’s hotline, HUD audited the Stark Metropolitan Housing Authority’s public housing program.

The auditors found that the authority, under the direction of its former executive directors, inappropriately used more than $6.3 million in public housing operating and capital funds to pay ineligible expenses for its commercial development, Metropolitan Centre, and two nonprofit developments, Ruthe and Isadore Freed Housing Corporation and Stark Metropolitan Federal Credit Union.

Further, the authority did not: (1) provide documentation to support that nearly $4.2 million in public housing operating and capital funds used to pay expenses such as salaries, utilities, and maintenance costs for its developments was from fees earned by its cost center for managing its projects or engaging in business activities; (2) charge and collect more than $263,000 in appropriate market rent from its developments; and (3) ensure that it obligated more than $57,000 in capital funds for eligible expenditures.

As a result of the authority’s noncompliance, HUD and the authority lacked assurance that more than $10.5 million in public housing operating and capital funds was used to benefit low- and moderate-income residents and more than $320,000 was available for eligible public housing purposes.

Additionally, the auditors found that the authority inappropriately executed an oil and gas lease with Chesapeake Exploration that encumbered project assets without HUD’s approval. It received more than $356,000 in proceeds from the agreement. Further, HUD lacked assurance that its interests in the authority’s project assets were protected.

The auditors recommended that the Director of HUD’s Cleveland Office of Public Housing require the authority to: (1) reimburse its operating and capital fund more than $6.3 million from nonfederal funds; (2) provide support or reimburse its operating and capital fund nearly $4.2 million from nonfederal funds; (3) charge and collect more than $263,000 in appropriate market rent; (4) de-obligate more than $57,000 in capital funds; and (5) provide support that more than $356,000 in proceeds was not derived from the encumbrance of public housing property. The auditors also recommended that HUD consider a declaration of substantial default based on the issues cited in the audit report.

• HUD Audit Report 2013-CH-1003: Stark Metropolitan Housing Authority, Canton, OH (6/15/13)