Victory for Affordable Housing; Senate Scales Back Housing Authority Ability to Spend Money on Executive Salaries, Perks

Washington, D.C. – (RealEstateRama) — The Senate Appropriations Committee this week approved language championed by Sen. Chuck Grassley that will ensure transparency and promote accountability in public housing authorities’ use of more than $350 million in federal tax dollars. The Grassley language, which was incorporated into a committee report that accompanies an annual spending bill, will ensure that federal funds transferred to housing authorities will retain their federal designation and be subject to U.S. Department of Housing and Urban Development (HUD) oversight.

Housing authorities receive up to 90 percent of their funding from HUD, and Grassley has long questioned the practice of allowing housing authorities to convert this federal funding into non-federal “fees for service” after it’s transferred into their business accounts. Issues with this practice came to light through a 2014 HUD Inspector General report, which found that the practice lacks transparency and puts taxpayer dollars at risk of fraud, waste, and abuse. Converting the funding has allowed so-inclined housing authorities to evade a federal salary cap for executives and otherwise find ways to spend federal tax dollars on executive perks instead of safe, affordable housing for people in need. Grassley made the following comment on the appropriations language, which was included in the committee report after he wrote to committee leaders to urge that they make this change.

“The committee took the right action. Housing authorities receive billions of dollars from the federal taxpayers to provide safe, affordable housing for people in need. The federal funds aren’t meant to feather the nests of housing authority executives with big salaries and perks like housing and car allowances. But HUD didn’t pay attention and let too many housing authorities get away with wasteful spending. The good news is now we’re on track to stop letting housing authorities convert federal money to non-federal money to exceed the caps. Many housing authorities have long waiting lists. People are waiting for safe, affordable housing. HUD needs to get the most bang for the taxpayer’s buck.”

The report language follows. The full report is available here.

Central Office Cost Center Fees- In 2014, the Office of Inspector General [OIG] released an audit of public housing operating and capital fund central office cost center [COCC] fees. The audit raised concerns about these fees and HUD’s oversight of them. The OIG recommended that the Department: eliminate the asset management fee, revise the asset management policy to `re-federalize’ the fees paid into the COCC, and create policies and procedures for the assessment and monitoring of the fees. HUD disputed the recommendations and has been working with the OIG to resolve these issues. As a result of these discussions and HUD’s demonstration of the need that PHAs have for the asset management fee, OIG agreed not to pursue their recommendation to eliminate asset management fees. In addition, HUD will initiate rulemaking to re-federalize fees paid into the COCC with a goal of implementing a final rule by no later than December 2017. The Committee has decided to take additional action and directs the Department to adhere to the `Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,’ requirements of 2 CFR 200, and to notify the House and Senate Committees on Appropriations quarterly during fiscal year 2017 of any waivers of 2 CFR 200 it requests from the Office of Management and Budget. The Committee shares concerns expressed by HUD’s Inspector General that HUD has failed to fully evaluate its fee for service model for public housing operating and capital funds. Accordingly, and consistent with the June 2014 Office of Inspector General report, HUD is directed to evaluate this model to gauge whether it is actually increasing the overall efficiency and effectiveness of administering the program and that the fee structure is reasonable. The Department is further directed to include any necessary program changes from this evaluation as part of its fiscal year 2019 congressional justifications.