U.S. GOVERNMENT PUBLISHING OFFICE

32–368 PDF WASHINGTON : 2018

HUD OFFICE OF INSPECTOR GENERAL 

REPORT: HUD’S OVERSIGHT OF THE 

ALEXANDER COUNTY (IL) HOUSING AUTHORITY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND INSURANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 25, 2018 

Printed for the use of the Committee on Financial Services 

Serial No. 115–117 

( 


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(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MACARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

SHANNON MCGAHN, Staff Director 


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SUBCOMMITTEE ON HOUSING AND INSURANCE

SEAN P. DUFFY, Wisconsin, Chairman 

DENNIS A. ROSS, Florida, Vice Chairman 

EDWARD R. ROYCE, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

KEITH J. ROTHFUS, Pennsylvania 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

THOMAS MACARTHUR, New Jersey 

TED BUDD, North Carolina 

EMANUEL CLEAVER, Missouri, Ranking 

Member 

NYDIA M. VELA ́ ZQUEZ, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

BRAD SHERMAN, California 

STEPHEN F. LYNCH, Massachusetts 

JOYCE BEATTY, Ohio 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

RUBEN KIHUEN, Nevada 


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(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 25, 2018 .......................................................................................... 1 

Appendix: 

September 25, 2018 .......................................................................................... 17 

WITNESSES 

TUESDAY, SEPTEMBER 25, 2018 

Bost, Hon. Mike, U.S. House of Representatives .................................................. 4 

Duckworth, Hon. Tammy, U.S. Senate .................................................................. 5 

Kirkland, Jeremy, Acting Deputy Inspector General, Office of Inspector General, U.S. Department of Housing and Urban Development ............................ 6 

APPENDIX 

Prepared statements: 

Bost, Hon. Mike ................................................................................................ 18 

Duckworth, Hon. Tammy ................................................................................. 20 

Kirkland, Jeremy .............................................................................................. 22 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Duckworth, Hon. Tammy: 

Letter to the Department of Housing and Urban Development ................... 50 

Letter from the Department of Housing and Urban Development .............. 51 

Letter to the Office of Inspector General ........................................................ 53 


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HUD OFFICE OF INSPECTOR 

GENERAL REPORT: HUD’S 

OVERSIGHT OF THE ALEXANDER 

COUNTY (IL) HOUSING AUTHORITY 

Tuesday, September 25, 2018 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING

AND INSURANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 4:05 p.m., in room 

2128, Rayburn House Office Building, Hon. Sean P. Duffy [chairman of the subcommittee] presiding. 

Present: Representatives Duffy, Ross, Rothfus, Zeldin, Cleaver, 

and Beatty. 

Also present: Representative Green. 

Chairman DUFFY. The Subcommittee on Housing and Insurance 

will come to order. 

Today’s hearing is entitled, ‘‘HUD Office of Inspector General Report: HUD’s Oversight of the Alexander County, Illinois, Housing 

Authority.’’ 

Without objection, the Chair is authorized to declare a recess of 

the subcommittee at any time. Without objection, all Members will 

have 5 legislative days within which to submit extraneous materials to the Chair for inclusion in the record. Without objection, 

Members of the full committee who are not Members of this subcommittee may participate in today’s hearing for the purpose of 

making an opening statement and questioning our witnesses. 

The Chair now recognizes himself for 5 minutes for an opening 

statement. 

Now, I first want to thank our first panel of witnesses who are 

here today that are going to be introduced in just a moment, but 

Congressman Bost and Senator Duckworth, welcome back to the 

House side. It is good to have you. We appreciate your testimony 

and appreciate the testimony of our IG. 

Today we will be examining issues related to the Alexander 

County Housing Authority, ACHA, and their role in allowing living 

conditions in both the Elmwood and McBride housing developments deteriorate to such that HUD (U.S. Department of Housing 

and Urban Development) had to demolish both of them and has 

taken over possession of the ACHA. 

Due to the actions of the ACHA, nearly 200 families will have 

to uproot their lives and move from Cairo, Illinois, to another city, 


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hopefully in Illinois, but somewhere else. In addition to Elmwood 

and McBride, now we have come to find out that two additional 

ACHA housing developments will be closed due to the cost of rehabilitation. And so more families might have to leave Cairo for another community. 

Having served as Chairman of this subcommittee for the 115th 

Congress, the conclusion of the HUD IG’s report on the ACHA is 

disgusting, at a minimum, and possibly criminal with those who 

were involved in the ACHA. What is even more frightening is this 

could just be the tip of the iceberg around the country. 

Fifty other PHAs, public housing authorities, have been designated as troubled, according to the HUD IG report. The ACHA’s 

activities are a prime example of abuse of government funds by a 

PHA. 

Now, it is my understanding that the IG will be limited in his 

questions, that he will be answering to some of the specifics in regard to individuals involved in fraud and potential abuse at the 

ACHA. We are going to do our best to respect that as there is an 

ongoing investigation. 

I will try to be respectful, again, if the IG feels like he can’t answer specific questions from me or the panel. We do support the 

rule of law and the presumption of innocence. 

To be candid, though, I think the recommendations made by the 

IG are what should be done, at a minimum. This is a floor of recommendation, and we very well may need to do more. 

I don’t want to get into much of Mr. Kirkland’s testimony for 

him. We want to hear from him himself, so I don’t want to say too 

much about that. But the disarray of the ACHA, and these units 

in particular, were first discovered in 2010. Incredibly problematic, 

incredibly disturbing. And to think that these are the families that 

we are here to help who are living in these kinds of conditions, 

again, I think every American would be outraged that this is how 

we house people or help house people and how we spend the Federal taxpayers’ money. 

Based on the IG’s report and my assessment of it, maybe PHAs 

should be under more scrutiny, and provisions of funds should be 

conditional once a PHA has been identified as having negative findings. I believe HUD is working to address some of the issues identified by the IG report, but we might need to look further at HUD’s 

recovery and sustainability protocols when it comes to PHA. We 

have to scratch and dig, I think, deeper. 

The fact that these families, again, lived in deplorable conditions 

for 6 years before HUD finally took over the ACHA is just fundamentally inexcusable. To add on top of that, the ACHA clearly 

misused Federal funds and violated the Civil Rights Act via racial 

segregation and employment discrimination. What? This is unbelievable that in 2018 this is actually happening. 

Right now, about 1.2 million reside in public housing developments that are operated by around 3,300 PHAs. HUD provides 

about $4 billion in operating subsidies and awards about another 

$2 billion to PHAs to maintain those public housing properties. I 

believe we have good PHAs out there, but come to find out that 

there is abuse in at least one and possibly more. We have an opportunity to make sure all 3,300 PHAs comply with HUD’s policies 


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and address health and safety hazards before another situation like 

Cairo pops up. 

I just want to note that if you watch this committee, and I say 

this often, and it is a testament to Mr. Cleaver, we always don’t 

agree. We always don’t get along. But in this space you find bipartisan support. You don’t see light between either side of the aisle 

and either party on these issues. This is about families. This is 

about dignity. And this is about America standing together to make 

sure people have a safe, livable home in which to reside. 

My time has expired. And now I will recognize the Ranking 

Member, the gentleman from Missouri, Mr. Cleaver, for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

My opening comments will be brief primarily because you have 

stated very clearly and eloquently what I wish to express. I think 

that originally there was interest by Senator Durbin and Senator 

Duckworth, the Senators from Illinois. And the troublesome thing 

for me, and I will move on and wait until the questioning, I actually grew up in the projects, and we had the Black public housing 

developments, there were two, and then we had the White. There 

was no pretense of trying to say that they were the same, that it 

was everybody in town knew it, and there was nothing ever done 

about it. 

I thought that those days had ended a long time ago. And to 

imagine that, after all these years, we are still experiencing that 

same kind of stupid conduct on the part of people who are really 

being paid by the United States Federal Government, by the taxpayers. And that makes it even worse. 

And so, Mr. Chairman, I appreciate the hearing. I don’t want 

anybody to come to the conclusion that other people are not interested. This is a fly-in day, as the Congressman knows, and so a lot 

of people are still trying to get to Washington for 6:30 votes. And 

then we have some other weather-related problems. 

But this is, nonetheless, an extremely important issue. And I 

worked on myself before I came in here so that I would not become 

emotional or loud, because this is very, very personal to me. And 

when I get off—when we get through with the committee, I am 

calling my dad to talk to him about this. At age 96, he will be 

stunned. He probably thought that 30 years ago this was over. So 

I want to talk with him about today’s hearing. And then I know 

he will also calm me down. 

Right now, the calmtivity—there is no such word, but I feel like 

I can make up some words for this. The calmtivity is not as strong 

as I need. But I will restrain myself just to make sure. I am extremely angry, and it is personal. 

Thank you very kindly. 

Chairman DUFFY. The gentleman yields back. 

I now want to welcome our witnesses. Our first witness, Congressman Mike Bost, from the 12th District of Illinois, approached 

me on the floor a year ago, wanted a hearing. I told him we can’t. 

We wanted to wait for the IG report to come out. Pushed us to 

have a hearing, and we wanted to make sure we got it in as quickly as possible. 

Congressman Bost, welcome. And thank you for your advocacy on 

this issue. 


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I want to thank Senator Duckworth for being here. We sprung 

this at her, and she has a busy schedule and was able to move her 

schedule around to be here as the Senator from Illinois. I know 

that Senator Durbin wanted to be here as well, and he was not 

able to move his schedule. But I thank the both of you as representatives of Illinois and of this location for being here and willing to testify. 

In a moment, both witnesses will be recognized for 5 minutes for 

an oral presentation of their written testimony. Without objection, 

their written statements will be made part of the record following 

their oral remarks. 

Representative Bost, you are now recognized for 5 minutes. 

STATEMENT OF THE HON. MIKE BOST 

Mr. BOST. Thank you, Chairman Duffy, and thank you, Ranking 

Member Cleaver. I appreciate the opportunity to appear before you 

and the subcommittee. 

Today’s hearing is about government’s failure to protect its most 

vulnerable of us. Most of you have never heard of Cairo, Illinois. 

Matter of fact, if you saw it, you would say Cairo. And unless you 

are from this district, you would actually—that is when you pronounce it as Cairo. But it is time that you have heard about it, 

time you should hear about it. 

Cairo is a small town in my district that was once a roaring city 

on the banks of the Mississippi and Ohio Rivers. It shares a story 

that is similar to many across the country, perhaps similar to those 

in your districts. 

As the 20th century rolled on, Cairo’s population dwindled due 

to changes in transportation, community strife, a lack of service, 

and downright neglect. But many families stayed, proud of their 

city, honoring their heritage. Most of these families live in public 

housing units under the control of Alexander County Housing Authority. 

Many of us first learned the extent of the problems in Cairo 

through reports in The Southern Illinoisan newspaper. The paper 

exposed unsafe living conditions that included units infested with 

mold, insects, and other vermin. Many had no appliances, heating, 

or air conditioning. One mother was forced to spray insect killer 

around her young son’s bed each night due to infestation in her 

unit. 

After my Illinois colleagues and I requested a Federal investigation, HUD placed the housing authority in receivership. The buildings were beyond repair. 185 families were forced to leave a city 

they called home for generations. 

The cause of this tragedy comes down to two words: Greed and 

neglect. Over many years, the local housing authority used Federal 

funds as their personal piggybank. Funding intended for maintenance was used for personal travel and other perks. The executive 

director at the time admitted to fraud. He said: We lived it up too 

good, and we didn’t even see this coming, and we thought it would 

last forever. 

Then there is the issue of neglect, which I believe should be the 

main focus of this hearing. Issues with Cairo Housing Authority 

were known to HUD for years, but little was done. It is my belief 


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that had HUD taken these issues more seriously, we may not be 

here today. The Federal Government must do a better job of conducting oversight, especially when it involves the health and safety 

of people in need. 

Where was the ball dropped on Cairo? How did things fall 

through the cracks? And where is it happening in other public 

housing around America? And how do we prevent this from happening again? 

While I may not be a Member of this committee, I want to work 

with you, Republicans and Democrats, to ensure that reform is implemented. I also want those who created this crisis to be held accountable. It is frustrating to me and the people of my district that 

these officials have not been charged for their alleged crimes. 

The people of Cairo and surrounding areas deserve justice. I hope 

today is a big step in making that happen. And, once again, I 

thank you for holding this hearing. 

With that, I yield back. 

[The prepared statement of Mr. Bost can be found on page 18 of 

the Appendix.] 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentlelady, the Senator from Illinois, Senator Duckworth, for 5 minutes. 

And, again, welcome back, Senator. Nice of you to come over to 

our side of the Capitol. 

STATEMENT OF THE HON. TAMMY DUCKWORTH 

Senator DUCKWORTH. Yes. Yes. And I used to be just down the 

hall in OIG, so not too far away. 

It is good to be back. And I do miss my colleague Representative 

Cleaver’s daily affirmations and thoughts that he would give us 

every day as we proceeded to do the people’s business here in the 

House of Representatives. 

Chairman Duffy, Ranking Member Cleaver, thank you for holding this important meeting. 

In February 2016, as the continued instances of mismanagement, 

willful neglect of resident safety, and both improper and illegal 

policies at the local level, I stress illegal policies at the local level, 

HUD took into receivership the Alexander County Housing Authority, ACHA. 

By this report’s own conclusion, HUD was aware of these problems as early as 2010, but hesitated to exercise its authority to 

bring ACHA into compliance. In fact, the ACHA has failed HUD’s 

physical assessment tool used to determine if a unit is habitable 

since 2012. 

Senator Durbin and I solely requested this HUD OIG report to 

get to the bottom of how HUD failed these residents. And following 

the reports released in July, we wrote to Secretary Carson urging 

quick implementation of the IG’s recommendations. Yesterday, we 

finally received the response to our letter in which HUD agreed to 

implement these recommendations and provide timelines for that 

implementation. 

With the permission of the Chairman and Ranking Member, I 

would like to submit for the record the letter Senator Durbin and 

I sent, as well as the response we received from HUD. I am also 


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submitting written testimony from both Senator Durbin and myself 

regarding today’s hearing. 

Chairman DUFFY. Without objection. 

Senator DUCKWORTH. Thank you. 

I have seen firsthand the conditions these residents live in. I visited the facilities. I talked to the residents. And, in fact, I continue 

to speak with the residents, telephoning key community leaders 

from time to time. 

They face mismanagement, and they continue to have to recover 

from this mismanagement. Many families are now split apart, living in separate counties, without support of their loved ones. And 

so we must continue to listen to these residents and hold accountable the officials who failed them and created this crisis in Cairo. 

In addition, I hope we can all work together to provide these residents and similar communities with the resources they need to restore their public housing stock and guarantee safe, healthy, and 

affordable housing. 

I appreciate the opportunity to join this committee and raise 

awareness for the people of Cairo. I am here on behalf of both Senator Durbin and myself. He is on the Judiciary Committee on the 

Senate side, so he is a little bit busy this week. 

Thank you again, Chairman Duffy and Ranking Member Cleaver, for having this. And from both Senator Durbin and I, thank you 

for bringing this to your attention. 

Thank you. I yield back. 

[The prepared statement of Senator Duckworth can be found on 

page 20 of the Appendix.] 

Chairman DUFFY. Thank you, Senator. 

And I just want to thank the both of you for your testimony and 

for your bipartisan effort to improve the conditions. 

And it is common practice, for Members of Congress and Senators, that the panel does not ask you questions. So at this point, 

you are excused. And I want to thank you for your testimony. 

If you all would just wait one moment as we do a transition to 

our second panel, we will switch out over the next minute or two. 

Chairman DUFFY. And now for our second panel, a witness of 

one, I want to welcome Mr. Jeremy Kirkland, the Acting Deputy 

Inspector General for HUD. We appreciate you being here. 

Without objection, the witness’ written statement will be made 

part of the record following his oral remarks. Once the witness has 

finished presenting his testimony, each Member of the subcommittee will have 5 minutes within which to ask him questions 

on the report and his statement. 

I would just note that on your table you have three lights. Green 

means go, yellow means you have 1 minute left, and red means 

that your time is up. It is pretty obvious. The microphone is sensitive, so please make sure you turn it on and speak directly into 

it. 

Mr. Kirkland, you are now recognized for 5 minutes. 

STATEMENT OF JEREMY KIRKLAND 

Mr. KIRKLAND. Chairman Duffy, Ranking Member Cleaver, and 

Members of the subcommittee, I am Jeremy Kirkland, and I am 

the Acting Deputy Inspector General for HUD’s Office of the InVerDate Sep 11 2014 07:04 Nov 27, 2018 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-25 HI CAIRO 

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spector General. Thank you for the opportunity to share with you 

today the results of our evaluation and HUD’s oversight of the Alexander County Housing Authority, or ACHA. 

HUD OIG examined the allegations of misuse of Federal funds 

following a referral from HUD. My testimony will focus on the evaluation of HUD’s oversight of ACHA following multiple congressional requests. The evaluation identified what could be systemic 

issues which plague many similarly situated public housing agencies. The Office of Public and Indian Housing (PIH) operates HUD’s 

public housing program and is responsible for monitoring PHAs 

and ensuring effective controls are in place to prevent problems. 

HUD provides approximately $4 billion in operating subsidies to 

assist PHAs annually and approximately $2 billion to PHAs annually to develop, modernize, and maintain public housing properties. 

PHAs are entities authorized by the State to be caretakers of public housing funds and must ensure that the funds are properly 

managed. 

In the past, HUD OIG identified that a significant cause of the 

deficiencies included that executive directors and boards of commissioners at PHAs either ignored requirements or lacked sufficient 

knowledge to properly administer the program. ACHA is a moderate-sized PHA with nearly 500 units in its inventory. 

As part of our evaluation, we conducted 24 interviews with current and former HUD officials and collected documentation addressing HUD’s actions to oversee ACHA. A combination of poor 

local management and ineffective oversight resulted in approximately 200 children, along with their families, living in units with 

pest infestations, including roaches, rodents, and bedbugs; inoperable appliances and electrical breakers; obstructed accessibility 

routes, among other health and safety issues. 

We found that HUD knew about the negative conditions at 

ACHA since at least 2010. We found that HUD identified weaknesses in ACHA’s financial condition as early as Fiscal Year 2013. 

And we found that HUD identified issues with ACHA’s governance, 

including misuse of funds, conflicts of interest, and failure to comply with HUD policies and Federal civil rights laws. 

While HUD has the authority to determine that financial, physical, management, and ethical problems cannot be remedied 

through the PHA recovery and sustainability, or the PHARS protocol and, therefore, HUD could rule the PHA and substantial default without requiring a 2-year cure period, our report identified 

that HUD officials did not understand that flexibility existed. 

On February 19, 2016, HUD finally did declare ACHA in substantial default of its contract with HUD, removed its board, and 

took possession of the housing authority in a process called receivership. We also found that HUD initially hesitated to exercise its 

authority to place ACHA into receivership. 

A key takeaway for me is HUD officials used policy infrequently 

and incorrect understanding or interpretation of policy to justify inaction. As such, it appears that PIH may have failed to use some 

tools available. 

Our recommendations to HUD were to look to identify early 

when cross-programmatic reviews and enforcement actions against 

PHAs are required; that HUD train PIH officials on the authorities 


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and processes for identifying, declaring, and managing PHAs in 

substantial default; that PIH update and strengthen the training 

program for HUD receivers of PHAs; and that PIH update procedures for receiverships. 

HUD OIG remains concerned that without additional oversight, 

engagement, and outreach by PIH, there remains increased risk of 

fraud, waste, abuse, and gross mismanagement within these PHAs. 

At this time, I am open to any questions you might have about 

the report and the work on ACHA. 

[The prepared statement of Mr. Kirkland can be found on page 

22 of the Appendix.] 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes himself for 5 minutes for questioning. 

I think anybody who hears about the conditions are outraged. 

And I want to thank you, Mr. Kirkland, for your report and your 

investigation in helping bring this to light in the Congress. 

It is fair to say that HUD knew there were problems in the 

ACHA. Fair enough? 

Mr. KIRKLAND. That is correct. 

Chairman DUFFY. And they knew back in 2010, but that is—we 

only use 2010 because that is as far as we asked you to look back, 

But they probably knew before 2010. Is that a fair assessment? 

Mr. KIRKLAND. We did not look past 2010, but the conditions 

seem obvious that they didn’t start overnight. 

Chairman DUFFY. Right. So it is fair to say that 2010 was not 

a magic year that things started to deteriorate. It has probably 

been happening for some time. 

Mr. KIRKLAND. That is likely the case. 

Chairman DUFFY. And where does the buck stop? How high do 

these things go? Who is responsible? Who do we look to say, you 

know what, there is mismanagement underneath you, but the buck 

stops with you? Who do we look to say whoa, whoa, whoa, whoa? 

It is— 

Mr. KIRKLAND. Ultimately, as has been pointed out, I think this 

has been an absolute failure at every level. But every level failed 

the residents in Alexander County miserably. 

Chairman DUFFY. Does it go to the HUD Secretary? 

Mr. KIRKLAND. Ultimately— 

Chairman DUFFY. Does it go that high? 

Mr. KIRKLAND. Ultimately, we all have a responsibility to ensure 

these residents have safe— 

Chairman DUFFY. I am going to be—and I am not asking—I 

don’t care about politics. I am not trying to—I am not trying to 

point fingers at anybody. This is a really bipartisan effort. I just 

want to know—and by the way, I would just note that there are 

a lot of problems in HUD, and there are hearings that we can 

throw barbs at both sides of the political aisle. I am not asking you 

for that reason. I want to know how high does it go? Should the 

HUD Secretary know about this and give demands or recommendations to fix it? Is that fair? Or is it someone below the Secretary? 

Mr. KIRKLAND. Ultimately, this should have gone to the HUD 

Secretary’s attention, and ultimately the HUD Secretary should 

have acted. 

Chairman DUFFY. Should have acted. 


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And in 2010, HUD’s PIH identified issues at the ACHA. You 

mentioned that during a review. But nothing was done, right? 

Mr. KIRKLAND. That is correct. 

Chairman DUFFY. So what do we do? What does this committee 

do? Because, again, these are not partisan issues. We have bipartisan failures within HUD that affect people’s lives. What does this 

committee do? What does this Congress do to makes things actually work and improve people’s lives and make sure our taxpayers’ 

money is spent well to improve people’s lives and living conditions? 

Mr. KIRKLAND. I think the circumstances of beginning to address 

this problem start with the recommendations in our evaluation. I 

do believe those fundamental flaws that reared their head in Alexander County are not going to go away unless we begin to collectively figure out a path forward on these types of issues. And it is 

not going to take one individual stepping in. It is not going to take 

one group stepping in. It is ultimately going to take a fundamental 

change in the approach that we take to public housing. 

Chairman DUFFY. Should we review the structure of the PIH in 

terms—should it be reorganized? 

Mr. KIRKLAND. While we have not looked at that issue, obviously, 

that is a question that I think HUD should answer and can answer. 

Chairman DUFFY. OK. So quickly, this was not an issue of 

money, though. Did we not send enough money to make sure people don’t live in these conditions? And if we did, what was— 

Mr. KIRKLAND. There was obviously a lot of money sent to Alexander County to— 

Chairman DUFFY. And money didn’t solve the problem, did it? 

Mr. KIRKLAND. And money didn’t solve the problem. 

Chairman DUFFY. It is mismanagement. 

And I don’t want to ask you about specifics of liability. But if we 

look at this as a whole, and if this is not the only scenario that is 

out there in our PHAs, should there be other kind of liability for 

boards that run these PHAs? 

Mr. KIRKLAND. I absolutely believe— 

Chairman DUFFY. Criminal? 

Mr. KIRKLAND. Boards should be held accountable. Executive directors should be held accountable. 

Chairman DUFFY. Civilly and criminally? 

Mr. KIRKLAND. Civilly and criminally. 

Chairman DUFFY. And I bet if we held people criminally liable 

for their work on these boards, one, you would get good people who 

know what they are doing, and they would make sure they do their 

job, because they don’t want to go to jail or prison because of mismanagement. And, frankly—and I am not—I look at—people 

should be held accountable for the money that was spent and the 

conditions that people are living in. Unacceptable. 

I look forward to continuing to work with you on what this committee should do on how we should evaluate, do further hearings, 

potentially legislate changes to make sure this doesn’t happen 

again. 

With that, my time is expired. 

I yield to the Ranking Member, Mr. Cleaver, for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 


nshattuck on FSR297 with DISTILLER
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Let me first of all say I have been on the committee for 14 years, 

so I have been through a lot and heard a lot and participated in 

a lot. The only time I have been more upset is in the aftermath 

of the 2008 economic crisis. Greed brought the world to the very 

brink of an economic cataclysm. And as of today—I will check when 

I go back to the office, as of today, nobody has been indicted. And 

it was as clear as day. I think most of the people up here are attorneys except for me and Mrs. Beatty, but for even a layperson, it 

was as clear as day that some people broke laws and did just about 

everything conceivably possible, and nobody, as of today, went to 

jail. 

My son saw that movie they did, with my wife and me. We 

walked out of the movie theater. He wouldn’t even speak to me. He 

is a young kid. He is just angry. He said, nobody’s been charged 

with anything? 

And that is how I feel about this issue. If some of the kids who 

lived in public housing had broken into the PHA office and stolen 

a computer, they would be in jail. A $500 computer, they would be 

in jail. These greedy people—is your report going to be sent to the 

Justice Department? 

Mr. KIRKLAND. I can confirm that we have referred this matter 

to the U.S. Attorney in the southern district of Illinois. And that 

matter has been accepted for criminal and civil prosecution. 

Mr. CLEAVER. OK. I feel better. Not a lot, because people are still 

hurting. 

But that brings me to the other point. I think you requested the 

emails in November and you received them in June, something 

like—I may have that turned around a little. 

In your report, you said that depending on what you find, you 

would have—might have additional information. I am wondering if 

you have any idea when the analysis of those 50 gigabytes of 

emails you have received will be available? 

Mr. KIRKLAND. We have received almost 16,000 emails. So far, 

we have reviewed about 6,000 of those emails. We do have—the 

team that completed this report is a fairly small but nimble team. 

They are working very, very hard to work through those emails, 

and we do intend to produce them as quickly as possible. We do 

recognize the importance of those issues. 

I will say, to date, the emails have confirmed and actually enhanced or bolstered our assessment of that. 

My bad. We got 600,000 emails, and only 16,000— 

Mr. CLEAVER. Oh, jeez. 

Mr. KIRKLAND. —have been reviewed. 

And I will say that one of the concerns—and obviously there was 

a lot of time from our request for these emails and the actual production of those emails. And recognizing that we have raised concerns on the process in which HUD produces those emails, there 

is a fundamental concern that we at the OIG have with the fact 

that we don’t have immediate access to this type of information. 

Mr. CLEAVER. Yes, 7 months. 

Mr. KIRKLAND. IG should have immediate access to that type of 

information. 


nshattuck on FSR297 with DISTILLER
11 

Mr. CLEAVER. Yes, I agree. Seven months. When I saw that, I 

thought, what in the world. What could they have possibly done in 

a 7-month period? 

My other question is whether or not there is some kind of interest being given to those individuals who were moved out of those 

housing units? Is there any follow up—do you know if there has 

been any follow up to make sure that all of the individuals who 

have been moved are, in fact, in a decent housing unit someplace 

in Cairo? 

Mr. KIRKLAND. I do not know the answer to that. That would be 

a question that I would think HUD should and could answer and 

should be able to answer. 

Mr. CLEAVER. In 7 months. 

Mr. KIRKLAND. Yes. 

Mr. CLEAVER. They should be able to answer in 7 months. OK. 

I will ask the question. 

Thank you, Mr. Chairman. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus, for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. Kirkland, what should be the process to prevent the type of 

deplorable conditions that were witnessed by HUD officials out at 

the ACHA? 

Mr. KIRKLAND. I think it is a cascading effect. But I do think, 

when HUD finally engaged in a cross-programmatic review of what 

was going on at ACHA, you finally saw action by HUD. I think it 

took a collective effort on HUD’s part to ensure that action could 

be taken. I think the recommendations within our report, specifically the one for HUD to view that more cross-programmatically, 

allows it more tools in the toolbox. 

Mr. ROTHFUS. Can you tell me what ultimately caused HUD to 

place the ACHA in administrative receivership? What was the final 

straw? 

Mr. KIRKLAND. I think there were no alternatives. I do think, as 

the report revealed, when the FHEO forced the hand of PIH, that 

that ultimately caused the steps to be taken. 

Mr. ROTHFUS. Going back to 2010, when HUD’s Public and Indian Housing identified issues at ACHA during a review but closed 

the findings, why did PIH close out its findings after identifying 

possible issues within the housing authority in its governance? 

Mr. KIRKLAND. They said that the responses were acceptable 

and—but we did not find any documentation or really any one that 

could support that they determined ACHA’s responses in 2013 were 

acceptable. 

Mr. ROTHFUS. Could several of the violations outlined in your 

July 2018 report have been avoided if HUD had followed through 

on its findings in 2010? 

Mr. KIRKLAND. We really didn’t look specifically at the timeframe 

of that. But I will say, obviously, the earlier HUD would have engaged in a process, I do think these families would have been able 

to find a better situation sooner if HUD had engaged earlier. 


nshattuck on FSR297 with DISTILLER
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Mr. ROTHFUS. Let’s see. The HUD OIG mentioned in its report 

that, although it may be too late to save the ACHA as of June 

2018, 50 other PHAs were designated as troubled. 

What procedures does PIH have in place to prevent housing authorities from becoming troubled? 

Mr. KIRKLAND. So PIH has identified that they go through this 

PHARS (Public Housing Authority Recovery and Sustainability) 

protocol, which is the protocol that we highlighted. We do think 

PIH has more flexibility than always sending a troubled housing 

authority through this PHARS protocol. I will say we have also, at 

HUD OIG, noted that we are willing to engage in a process where 

we are going to put boots on the ground at some of these troubled 

housing authorities. We are going to send resources to address 

some of these troubled housing authorities. 

Mr. ROTHFUS. Can you cite examples where HUD has been successful in pulling back an agency that has been troubled? 

Mr. KIRKLAND. I do not know any off the top of my head. 

Mr. ROTHFUS. But we currently have 50 that are out there right 

now. 

Mr. KIRKLAND. And there are currently four PHAs in administrative receivership. Obviously, three others on top of Alexander 

County. 

With the 50, I can say that there is one that has been troubled 

since 2003. As was indicated, many of these troubled housing authorities are supposed to only be allowed, even in the PHARS protocol, a 2-year cure period. And that is not even required under 

PIH requirements, but— 

Mr. ROTHFUS. With any of these troubled housing agencies, how 

confident are you that there are not facilities there that would be 

in the same condition as Elmwood and McBride? 

Mr. KIRKLAND. I am absolutely sure there are other facilities out 

there like Elmwood and McBride. 

Mr. ROTHFUS. And what is the Department doing about that? 

Mr. KIRKLAND. I do believe the recommendations that we made 

are a start. But, once again, it is only a start. It is going to take 

a more collective effort on the part of all of us. And as I indicated, 

HUD OIG is prepared to be an independent voice and I think a 

necessary independent voice in that process. 

Mr. ROTHFUS. I yield back. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentlelady from Ohio, Mrs. Beatty, 

for 5 minutes. 

Mrs. BEATTY. Thank you to Chairman Duffy and to Ranking 

Member Cleaver and to you, Mr. Kirkland. 

I echo all the comments of my colleagues. And certainly the 

Chairman is correct; there is enough blame to go around. As I sat 

here and thought about going back beyond 2010 and 2000, we probably had an equal number of Democrat and Republican HUD directors, because we know this doesn’t happen overnight. 

This is very troublesome for me. I spent 20 years of my life as 

a relocation consultant with PHAs. And I have been in facilities 

that look like that. So I am sure you are correct that there are 

more than the surface four or five that you mentioned, because as 

great as my State and my district is, I can remember walking in 


nshattuck on FSR297 with DISTILLER
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a facility and thinking, someone’s mother and grandmother lives in 

this facility, and no one would want to have someone here with 

mold and rodents. And the story ends well. We moved all of those 

individuals out, tore down that public housing and rebuilt it, and 

moved many of them back into Jenkins Terrace, or 1100, in Columbus, Ohio. 

This is very disturbing to me as I sit here, and I—I think about, 

not the bricks and mortar, but the people. What was the process? 

Can you explain to the committee the level or mode of communication with the tenants through this process? Was HUD keeping 

them—updating or informing them what was occurring with their 

housing authority? 

Mr. KIRKLAND. I do think as far as looking back on the effort to 

address the tenants and the tenants’ concerns, I do think that was 

a huge overlooked process in all of this. And I don’t know what all 

contributed to it. Obviously, there was engagement with the tenants. There was an opportunity to hear the tenants. But, obviously, 

something didn’t register, because the concerns that were being 

raised, the concerns that were brought forward by the tenants—to 

have tenants who are having to spray bug spray on their children 

so they can sleep at night, that is something that should register 

a problem. 

Mrs. BEATTY. Sure. Let me ask you what you think about this. 

I have been on both sides. I started early in my professional career 

being a housing inspector in public housing, and that is what led 

me later to make it part of my company when I became a consultant. 

Earlier this year, Congress passed legislation that would reduce 

the frequency of public housing inspections at small rural agencies 

to every 3 years. I oppose that legislation. So I guess my question 

to you is, if these buildings are inspected less frequently, would 

that increase the risk that HUD would fail to identify some of 

these deteriorating conditions until it is too late? 

If I start having a leak in my kitchen, or any of our kitchens or 

in our basement and you catch it in the first year. But if we have 

now changed it—and that did not sit well with me because of the 

many years that I have spent working and involved in public housing authorities. 

So can you address that when we talk about that? That is something we did right here. And I just couldn’t support it, because I 

think we needed to be in there more often doing this. 

Mr. KIRKLAND. I believe— 

Mrs. BEATTY. Do you believe that we should go 3 years, or should 

we go back to inspecting it every year? 

Mr. KIRKLAND. I believe our report highlighted the importance of 

the inspection process. The inspection process is important to this 

overall process to ensure— 

Mrs. BEATTY. But inspection 3 years or 1 year? Now seeing what 

you have seen and what you have written, we have heard Democrats and Republicans both talking about this just didn’t start in 

1 year, but would you think, if you are seeing something in the 

first year or you wait until the third year and you have these conditions— 


nshattuck on FSR297 with DISTILLER
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Mr. KIRKLAND. I will say our overall body of work has identified 

a concern overall with the inspection process. It is not consistently 

applied, to begin with. And that was indicated, even in Alexander 

County, just to have a score go from, I think, 42 to 82 and then 

back down to an even lower number than the 2012 number, I think 

the inspection process is a valuable process. We haven’t looked at 

specifically what is the right amount of time. But it has got to be 

a necessary process to include. 

Mrs. BEATTY. Thank you, Mr. Chairman. I yield back. 

Chairman DUFFY. The gentlelady yields back. 

The Chair now recognizes the gentleman from Texas, Mr. Green, 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. I thank the witness for 

appearing as well. 

Please allow me to ask a few questions about some of the circumstances that caused this condition to manifest itself. 

Is it true that between 2010 and 2016 the Budget Control Act 

caused cuts of about $1.6 billion in funding to housing? 

Mr. KIRKLAND. I would have to check those numbers, but I know 

there were substantial cuts. 

Mr. GREEN. Does substantial mean more than a billion dollars? 

Mr. KIRKLAND. Yes. 

Mr. GREEN. OK. Thank you. 

And is it true that, as a result of this, we are losing about 10,000 

public housing units per year due to disrepair? 

Mr. KIRKLAND. I am not exactly sure of the number, but we are 

losing a good number of public housing units. 

Mr. GREEN. Is it fair to say that we are losing a good number 

because of disrepair? 

Mr. KIRKLAND. That would—we have not looked at what has 

been the cause of that, but I think that is a big cause. 

Mr. GREEN. That is a big cause? 

Mr. KIRKLAND. Yes. 

Mr. GREEN. I will accept that terminology. 

And is it true that, notwithstanding the lack of maintenance at 

these projects, that this level of disrepair, some of it associated 

with the big cuts, is something that we are seeing in many other 

housing projects across the country? 

Mr. KIRKLAND. I am not sure that we—we have looked at the 

connection there, but— 

Mr. GREEN. Is that a fair inference? 

Mr. KIRKLAND. That could certainly be a fair inference. 

Mr. GREEN. The reason I brought this up is because I agree with 

what was said earlier and I would even add more to it. And I am 

going to circle around and come back to where I am now. 

But I agree that based on what was said about the employment 

discrimination, civil rights violations, management was uncooperative, mismanagement, $400,000 in misuse of funds, 

misadministration of contracts, properties beyond rehabilitation, 

$720,000 in civil penalties, $188,000 in assessments based on false 

claims, and nepotism, all that is bad. So we have that now to put 

aside. 

But circling back to where I was, I mention this because my dear 

friend made the comment that money wasn’t the problem. And 


nshattuck on FSR297 with DISTILLER
15 

money is a problem. Let’s move this—all these issues aside. Money 

is still a problem, is it not? 

Mr. KIRKLAND. I would say there are many contributing factors. 

Obviously— 

Mr. GREEN. Wouldn’t you say that money is one of the contributing factors? 

Mr. KIRKLAND. There are resource issues and— 

Mr. GREEN. Can we define resource as money? 

Mr. KIRKLAND. Money would be one of the resource issues, but 

there are many contributing problems to the problem. 

Mr. GREEN. There are many. But what we don’t want to do is 

minimize the impact of over a billion dollars in cuts. We don’t want 

to minimize the impact that that billion dollars can have as resources on these projects. Is that a fair statement? 

Mr. KIRKLAND. Money can definitely have an impact on the resources—on these projects. 

Mr. GREEN. OK. All right. Well, listen, I do appreciate your appearing today. And I just want us to think about, not only this 

laundry list that I have called to your attention, but also about 

what are we going to do to preserve housing for people who really 

need it in this country. 

And I see that you want to respond. I will yield to you to respond, and then I will take about 15 seconds to wrap up. 

Go ahead, sir. 

Mr. KIRKLAND. I will note as well that, in the process of all of 

this time that ACHA has been on this downward spiral, a substantial amount of money has been spent and wastefully spent, unfortunately, because the oversight was not there to do— 

Mr. GREEN. All right. I accept that, but before I lose my time, 

is it also true that there are other circumstances where properties 

are in disrepair due to a lack of funds? 

Mr. KIRKLAND. Absolutely. 

Mr. GREEN. OK. So we want to take care of this. And, by the 

way, I think somebody should go to jail as well. But I also think 

that we have to look at these problems in a sober fashion when we 

are talking about the remedy. 

And I thank you for your testimony. 

I yield back. 

Chairman DUFFY. The gentleman yields back. 

I want to thank Mr. Kirkland for his testimony. And you may get 

some follow up questions. I would ask you to answer those in a 

prompt fashion, whether, in this situation, it is a money problem 

versus a waste of money problem, to be clear. 

I don’t want to do a second round. We do have votes tonight; otherwise I would go into that. But, again, I want to thank you for 

your testimony. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

Thank you for your testimony. And this hearing is adjourned. 


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[Whereupon, at 4:57 p.m., the subcommittee was adjourned.] 


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(17) 

A P P E N D I X 

September 25, 2018 


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Testimony of the Honorable Mike Bost of the 12th Congressional District of Illinois 

Hearing Before the House Financial Services Subcommittee on Housing and Insurance 

"HUD Office oflnspector General Report: HUD's Oversight of the Alexander County (IL) 

Housing Authority" 

September 25, 2018 

Thank you Chairman Duffy and Ranking Member Cleaver. I appreciate the opportunity to 

appear before the Subcommittee. 

Today's hearing is about government's failure to protect the vulnerable among us. Most of you 

have never heard of Cairo, Illinois- but it's time you had. Cairo is a small town in my district 

that was once a roaring city on the banks where the Mississippi and Ohio rivers meet. It shares a 

story that is similar to many across the country --perhaps in your own districts. 

As the 20th Century rolled on, Cairo's population dwindled due to changes in transportation, 

community strife, a lack of services, and downright neglect. But many families stayed. Proud of 

their city. Honoring their heritage. This includes families living in public housing units under 

the control of the Alexander County Housing Authority. 

Many of us first learned the extent of the problems at the public housing authority in Cairo 

through reports in the Southern Illinoisan newspaper. The paper exposed unsafe living 

conditions that included units infested with mold, insects and other vermin. Many had no 

appliances, heating, or air conditioning. One mother was forced to spray insect killer around her 

young son's bed each night due to an infestation in her unit. 

After my Illinois colleagues and I requested a federal investigation, HUD placed the housing 

authority into receivership. The buildings were beyond repair. 185 families were forced to leave 

a city that they called home for generations. 

The cause of this tragedy comes down to two words: greed and neglect. Over many years, the 

local housing authority used federal funds as their personal piggy bank. Funding intended for 

maintenance was used for personal travel and other perks. The Executive Director at the time 
19 


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admitted to the fraud. He said, "We lived it up too good. And we didn't see this coming and we 

thought it would last forever. .. " 

Then there is the issue of neglect, which I believe should be the main focus of this hearing. 

Issues with Cairo's housing authority were known to HUD for years, but little was done. It is my 

belief that had HUD taken these issues more seriously, we may not be here today. The federal 

government must do a better job of conducting oversight, especially when it involves the health 

and safety of people in need. Where was the ball dropped on Cairo? How did things fall through 

the cracks? Where is it happening in other public housing around America? And how do we 

prevent this from happening again? 

While I may not be a member of this committee, I want to work with you, Republicans and 

Democrats, to ensure that reforms are implemented. I also want those who created this crisis to 

be held accountable. It is frustrating to me and the people of my district that these officials have 

not yet been charged for their alleged crimes. The people of Cairo and the surrounding areas 

deserve justice. I hope today is a big step in making that happen. Once again, thank you for 

holding this hearing. 
20 


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September 25, 2018 

Representative Sean P. Duffy 

Chaim1an 

Subcommittee on Housing and Insurance 

House Committee on Financial Services 

2129 Rayburn House 0111ce Building 

Washington, DC 20515 

Representative Emanuel Cleaver 

Ranking Member 

Subcommittee on Housing and Insurance 

House Committee on Financial Services 

2129 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Du!Ty and Ranking Member Cleaver: 

Thank you for holding today's hearing on the findings of the U.S. Department of Housing 

and Urban Development (BUD) Inspector General (IG) July 2018 report detailing the results of 

its evaluation into HUD's oversight of Alexander County Housing Authority (ACHA). The IG 

commenced this evaluation at our request made in a letter sent in May 2017. We appreciate the 

opportunity to share our views on this report with the Committee. 

Public housing authorities (PHA) across the country have a responsibility to provide safe, 

healthy, and affordable housing to their residents. However, it is HUD that has the responsibility 

to oversee PHAs to ensure they are meeting their obligations to our nations' most vulnerable 

residents. As the IG report that is the subject oftoday's hearing reveals. despite having early 

knowledge of serious issues related to the physical, financial, and managerial health of ACHA, 

HUD failed to effectively oversee the agency. Hundreds of families were left to languish in 

uninhabitable living conditions as a result. That any community should have its access to safe 

and healthy housing threatened as a result of HUD's inaction is unacceptable, and HUD must 

work to implement the IG report's recommendations and improve its oversight of PHAs. 

By the time HUD took ACHA in administrative receivership in February 2016, 185 

lamilies-including around 200 children-were living in t\VO 1940s-era housing complexes in 

Cairo, Illinois, ovemm with rodents, bed bugs. roaches, crime, mold, asbestos, and lead. The 

deterioration of these housing complexes wa~ so severe that in April 2017, HUD announced that 

185 families would be forced to relocate from their homes and find alternative housing. In 

February 2018, HUD announced that more than 30 families from two additional aging housing 

complexes in nearby Thebes, Illinois, also would be forced to relocate due to deteriorating 

conditions. 

While relocation for these families has meant being able to move to safe and healthy 

housing, for too many of these families. the limited local housing stock also meant having to 

leave their beloved tight-knit community and the only place they have ever called home. The 

effects of this relocation have been felt by the families and community alike as the Cairo school 

district enrollment is dO\>n nearly 30 percent this year. 

While there were many factors that contributed to the housing crisis in Cairo. Illinois, 

including the severe mismanagement and alleged misappropriation of federal funds by tormer 
21 


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ACHA officials that is still under investigation by the HUD IG, the IG report concludes that 

HUD "could and should have done more to oversee'' ACHA. 

As the IG report details, HUD was aware of negative conditions at ACHA since at least 

2010, yet chose not to exercise its full authority to intervene earlier. The report notes that despite 

having early knowledge ofACHA's deteriorated physical condition, significant governance and 

financial management issues. violations ofHUD polices and civil rights laws, and 

noncooperation with federal officials, it was hesitant to take ACBA into receivership. 

In examining HUD's hesitancy to take ACBA into receivership, the IG report highlighted 

a prevailing misunderstanding by HUD staff of BUD's own emergency authority to intervene in 

a PHA if conditions warrant-as the IG report found ACHA conditions warranted. Additionally, 

the report cited HUD officials" lear of'·political repercussions"' !rom taking a PHA into 

receivership as a factor contributing to HUD's hesitancy to act. Further, the report warned that 

HUD "may avoid taking PHAs into receivership when it is necessary and may oversee PHAs in 

receivership improperly or inadequately" due to the ·'small pool of experienced receivers, 

inadequate guidance, and outdated training'" on HUD administrative receivership. The report 

contained four recommendations to improve and clarify its procedures governing administrative 

receivership, as well as strengthen staff training. 

Following the release of the IG report in July 2018, we wrote to BUD Secretary Carson 

urging HUD to quickly implement the report's recommendations to improve HUD's oversight of 

public housing authorities and requested an update on the Department's plan to implement those 

recommendations. On September 24,2018. HlJD responded to our letter indicating the 

Department agreed to implement the IG report's recommendations and outlined implementation 

timelines for each of the report's recommendations. We look forward to continuing to work with 

BUD throughout the implementation process to ensure HUD is capable of executing its oversight 

responsibility. 

We cannot allow the severe mismanagement-both federally and locally-that enabled 

the housing crisis in Alexander County, Illinois, to be repeated in any other community. 

Ensuring HtJD is capable and effective in its role overseeing public housing authorities in 

meeting their obligations to provide safe, healthy. and atTordable housing is essential to this goal 

and restoring public housing residents' faith and confidence in our government. 

I commend the Committee for holding this hearing and bringing awareness to the housing 

crisis that continues to impact Alexander County residents and the local community in Cairo, 

Illinois. HUD must hold pnblic housing authorities accountable and ensure they are meeting 

their responsibilities to provide our most \'ulnerable residents safe and alTordable housing. 

Sincerely, 

~Ck.~ Ric ard 1. Durbm 

U.S. Senator 
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To: Dominique Blom 

MEMORANDUM 

July 24, 2018 

General Der.u ssistant Secretary, Office of Public and Indian Housing, P 

I From: 

Subject: Final Evaluation Report- HUD's Oversight ofthe Alexander County Housing 

Authority, 2017-0E-0014 

Please see the attached final report on our evaluation of the U.S. Department of Housing and 

Urban Development's (HUD) oversight of the Alexander County Housing Authority in Cairo, 

IL. It contains three findings and four recommendations. The report will be posted to our 

website within 3 days. 

In your response to our draft report, you agreed with our findings and recommendations. Your 

response, along with our comments to it, arc included in our report. Based on your response, we 

consider recommendations 1, 2, 3, and 4 "unresolved-open." We will contact your office within 

90 days to begin discussing your proposed management decisions. 

I appreciate the assistance you, your staff, and staff throughout HUD provided throughout the 

evaluation. If you have any questions, please contact Director Paul Bergstrand at (202) 402-

2728. 

Attachment 

cc 

Unabyrd Wadhams, Former Deputy Assistant Secretary for Field Operations, PQ 

Donald Lavoy, Deputy Assistant Secretary for the Real Estate Assessment Center, PX 

Kelley Lyons, Regional Public Housing Director for Chicago Hub, Office of Public and Indian 

Housing, 5FPH 

Daniel Sherrod, Director, Chicago Hub, Office of Public and Indian Housing, 5APH 

Peter Schrniedel, Financial Management Specialist, Office of Public and Indian Housing, PCE 

Rochelle Katz, Assessment Manager, Office of Public and Indian Housing, PG 

James Cunningham, Deputy Regional Administrator, Office of Field Policy and Management, 

5AMA 

Bryan Greene, General Deputy Assistant Secretary, Office of Fair Housing and Equal 

Opportunity, El 

TerriL. Wanzer, Management Analyst, Ofllce of Fair Housing and Equal Opportunity, EGP 

Charles M. Montgomery Ill, Director, Office of Fair Housing and Equal Opportunity, EGP 

Craig T. Clemmensen, Director, Departmental Enforcement Center, CACB 

Office of lnspt>ctor General 

Office of Evaluation 

451 ?~'Street SW, Washington, DC20410 

Phone (202) 708-0430, Fax (202) 401-2505 

www.hudoi" "01 
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HUD's Oversight of the Alexander County Housing Authority 

July 24, 2018 

Frieda Edwards, Director, Office of General Counsel, CAGB 

Patrice Mitchell, Management Analyst, Office of General Counsel, CAGB 
24 


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U.S. Department of Housing and Urban Development 

Office of Inspector General 

Evaluation 

HUD's Oversight of the Alexander 

County Housing Authority 

Program Evaluations Division 

Washington, DC Report Number: 2017-0E-0014 July 24, 2018 
25 


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Executive Summary 

HUD's Oversight of the Alexander County Housing Authority 

2017-0E-0014 July 24, 2018 

Results of Evaluation 

HUD had been aware of negative conditions at ACHA since at least 2010. HUD 

identified issues with ACHA's governance, including the misuse of funds, 

conflicts of interest, and a failure to comply with HUD policies and Federal civil 

rights laws. Further, about 200 children and their families lived in units with 

peeling paint; graffiti; pest infestations; and other health and safety hazards, such 

as inoperable appliances and obstructed accessibility routes. 

Despite HUD's attempts to bring ACHA into compliance, its efforts did not 

resolve the negative conditions at ACHA. Residents continued to live in 

deplorable conditions as ACHA languished, and ACHA officials were generally 

uncooperative in addressing the negative conditions HUD identified. Since 

2010, PIH had used several oversight tools to identify issues at the ACHA, but 

major enforcement action against ACHA occurred only after HUD assembled a 

cross-programmatic team. HUD hesitated to take ACHA into possession in part 

because PlH officials believed that they had to allow ACHA an opportunity to 

improve instead of declaring it in substantial default. Additionally~ HUD 

guidance and expertise on receiverships were limited. 

On February 19,2016, HUD declared ACHA in substantial default of its 

contract with HUD, removed its board, and took possession of it. At that time, 

HUD assumed the role of administrative receiver of ACHA. 

Recommendations 

Conditions at ACHA had deteriorated over a decade or more, and two housing 

developments there, Elmwood and McBride, are scheduled for demolition, 

Since we concluded our fieldwork, HUD decided that two additional ACHA 

housing developments (Sunset Terrace and Mary Alice Meadows in Thebes, IL) 

will also be closed as necessary repairs there are too expensive, further reducing 

available affordable housing stock for low-income residents. While local 

officials are responsible for the daily administration of ACHA, HUD could and 

should have done more to oversee it. Although it may to be too late to save 

ACHA, as of June 2018, 50 other PHAs were designated as troubled. Therefore, 

we offer four recommendations to improve PIH's administration and oversight of 

troubled PHAs. PIH agreed with each of our recommendations. The status of 

each reconuncndation will remain "unresolved-open" until we receive further 

documentation outlining PIH's proposed management decision to address each 

recommendation. 
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Table of Contents 

Introduction ..... 

Objective .. 

Background ... 

Scope and Methodology .. 

A Primer: HUD's Oversight of ACHA .. 

Findings .. 

.. ........... 2 

........... 2 

.. ......... 2 

.. ............ 4 

........................................... 5 

.. .................. 6 

PIH Used Several Oversight Tools To Identify Issues at ACHA, but Negative Conditions 

Persisted.. .. ................. 6 

Only After HUD Assembled a Cross-Programmatic Team Did It Take Major Enforcement 

Action Against ACHA.. ... 9 

HUD Hesitated To Exercise Its Authority To Take ACHA Into Receivership ................. 12 

Recommendations.. .. ............. 17 

1. Create Agreements and Strategies With Other Program Offices That Describe When 

Cross-Programmatic Reviews and Enforcement Actions Against PHAs Are Required .... 17 

2. Train PIH Officials on the Authority and Processes for Declaring PHAs in Substantial 

Default and for Taking PH As Into HUD Possession. ... 17 

3. Update and Strengthen the Training Program for HUD Receivers of PHAs ............ 18 

4. Update Procedures for Receiverships To Include Specific Guidance on When 

Initiating a Receivership May Be Appropriate. .. .... 18 

Agency Comments and OIG Response .. 

Summary of PIH's Comments .. 

OIG Response to PIH's Comments . 

PIH Comments to the Draft Report .... 

Appendixes .. 

Appendix A- Acknowledgements .. 

Appendix B -Acronyms .. 

List of Figures 

.. ........................ 19 

. ... 19 

. ......... 19 

. .......... 20 

.......... 22 

.. ... 22 

. ....................................... 23 

Figure 1 Timeline of HUD's oversight of ACHA... . ...... 5 

Figure 2- ACHA housing developments' physical conditions scores from FY 2012 to 2013 9 

Figure 3- FHEO findings of racially segregated housing developments at ACHA ............. 10 

Figure 4- ACHA's overall PHAS scores from FY 2010 to 2016.. .. ...... 14 
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Introduction 

Objective 

To assess the U.S. Department of Housing and Urban Development's (HUD) oversight of the 

Alexander County Housing Authority (ACHA). 

Background 

Overview of the Public Housing Program and Public Housing Agencies 

The Office of Public and Indian Housing (PlH) operates HUD's public housing programs. 

Public housing's mission is to provide safe, decent, and affordable rental housing for eligible 

low-income families, the elderly, and persons with disabilities. Nationwide, approximately 1.2 

million families reside in public housing developments that are owned and operated by about 

3,300 local public housing agencies (PHA). HUD provides Federal aid to PHAs, which in tum 

manage public housing for eligible residents at rents they can afford. Additionally, HUD 

furnishes technical and professional assistance to PH As for planning, development, and 

management. Each year, HUD provides approximately $4 billion in operating subsidies to assist 

PHAs in running their public housing programs. HUD also awards approximately $2 billion to 

PHAs annually to develop, modernize, and maintain public housing properties. 

A PHA is a legal entity authorized by a State to develop or administer low-rent public housing. 

PH As are the "caretakers" of public housing funds and must ensure that the funds arc properly 

managed. The PHA's executive director, board, or commission operates and manages the PHA. 

PH As arc responsible for operating their housing developments to ensure that the PHA complies 

with its annual contributions contract. This contract is an agreement between the PHA and 

HUD, which outlines the applicable regulations and procedural requirements that PHAs must 

abide by to receive Federal funding. The contract also outlines HUD funds available for a 

PHA's use for that year. ACHA is a moderate-size PHA in Cairo, IL, with nearly 500 units in its 

inventory. 

HUD's Oversight ofPHAs 

The Housing Act of 1937 requires that HUD establish rules and provide fw1ding for PHAs to 

manage their own housing programs. The intent of the Act is to give as much flexibility and 

responsibility to the State and its units oflocal government as possible. In turn, HUD is to 

ensure that PHAs meet performance requirements and provide technical assistance, with the goal 

of safeguarding both public investment and resident quality of life. 

HUD's objective is to identify endangered funds and assist PHAs in correcting deficiencies it 

identifies while monitoring PHAs. Field offices monitor PHAs remotely from the field office or 

onsite at the PHA. A field office generally does not perform onsite monitoring of a PHA unless 

it knows of performance or compliance problems. Field offices may focus efforts on PHAs that 

are determined to be in the greatest need of attention. To identify those in greatest need of 

attention, PlH uses a risk-based monitoring approach that accounts for a PHA's risk in five areas. 

These five areas are (I) organization, management, and personnel; (2) facilities management; (3) 

2 
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finance and budget; (4) marketing, leasing, and management; and (5) community relations and 

involvement. 

In addition to the field offices' monitoring activities, PIH's Real Estate Assessment Center 

(REAC) inspects HUD properties to ensure that units are decent, safe, sanitary, and in good 

repair. REAC uses a uniform physical inspection protocol with an intent to ensure that the 

inspections of I-IUD properties are as uniform and objective as possible. REAC examines four 

indicators about the PHA: its physical condition, financial condition, management operations, 

and Public Housing Capital Fund program. Inspectors submit inspection data to REAC, which 

REAC checks and analyzes. A PHA's physical conditions indicator score affects the frequency 

of its inspection cycle, with poorly performing PHAs requiring inspection more frequently. 

REAC compiles each of the four indicators into an overall score using a scale of 0 to 100. This 

score helps HUD identify PHAs with performance issues using its Public Housing Assessment 

System (PHAS). Using this PHAS score, PIH designates the PHA as a high, standard, 

substandard, or troubled performer. A PHA that achieves au overall PHAS score of less than 60 

percent would be designated as a troubled perfonncr. 

PIH policy requires that the field office initiate the PHA Recovery and Sustainability (PHARS) 

protocol for PHAs designated as troubled.' In 2011, PIH launched the PHARS protocol as a 

four-phased approach to recover PHAs. HUD created this protocol as a holistic approach to 

solving and remediating systemic issues at PHAs. \Vhen a PHA is found to be troubled~ the 

regional director usually assigns a PHARS team to lead in the recovery effort of that PHA. This 

team is composed of staff from the Office of Field Policy and Management (FPM), PIH, and the 

Departmental Enforcement Center (DEC). The PHARS team performs a preliminary financial 

management and governance assessment of the PHA. The PHARS team (1) works with troubled 

PHAs to assess the underlying systemic issues causing the PHA ·s troubled status, (2) creates 

recovery agreements, and (3) implements action plans that will ensure the sustainability of 

successful PHA performance. It also continues to monitor the PHA and provide support during 

the implementation and cure period. 

Although HUD generally follows the PHARS protocol to remedy negative conditions at PHAs, 

HUD also has the authority to declare a PHA in substantial default in emergency situations. In 

these cases, the PHA is not provided an opportunity to respond or cure negative conditions when 

HUD detennines that conditions exist that pose an imminent threat to the life, health, or safety of 

public housing residents or residents of the surrounding neighborhood or (2) the events or 

conditions precipitating the default are determined to be the result of criminal or fraudulent 

activity. 2 HUD may also determine that PHAs with serious financial, physical, management, or 

ethical problems that cannot be remedied through the PHARS protocol are in substantial default 

of their contract with HUD. When a PHA is found in substantial default, HUD temporarily takes 

possession of the PHA to correct identified problems through a process known as administrative 

receivership. 3 HUD views administrative receivership as a last resort for assisting PHAs with the 

most severe problems. In extreme cases, HUD may also suspend or debar PHA officials as an 

administrative remedy to address longstanding performance issues at the PHA. PHI's Office of 

1 During fieldwork, a HUD official told us that the procedures had changed and HUD may now initiate this process 

for substandard performer PHAs as well. 

~ 24 CFR (Code of Federal Regulations) 907.5(d) 1 Administrative receiverships may include PHAs under settlement agreements. PHAs under cooperative endeavor 

agreements, possession and control ofPHAprojects, and HUD "Secretary in possession" ofPHAs. 

3 
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Receivership Oversight is responsible for providing day-to-day oversight and direction for 

receiverships. If the PHA's improvement is sustained, the PHA may be returned to local control, 

and PIH's local field office resumes oversight and monitoring of the PHA. Otherwise, H UD 

maintains control of the PHA through the receivership process. 

Scope and Methodology 

We completed this evaluation under the authority of the Inspector General Act of 1978 as 

amended and in accordance with the Quality Standards for Inspection and Evaluation, issued by 

the Council of the Inspectors General on Inteh>rity and Efficiency (January 2012). 

Scope 

We performed fieldwork for this evaluation between August and December 2017. This 

evaluation covered operations within six HUD programs offices~ PIH, DEC, the Otlice of Fair 

Housing and Equal Opportunity (FHEO), FPM, the Office of General Counsel (OGC), and the 

Office of Davis-Bacon and Labor Standards (Labor Standards). We assessed HUD's oversight 

of ACHA since 2010 to determine what HUD knew about ACHA, when it knew those facts, and 

what steps it took to correct identified deficiencies. We did not assess ACHA. except as it 

related to interactions with the above-named HUD program offices. We did not include in our 

scope a comparison of ACHA to other PHAs and their receiverships. 

Methodology 

To address our objective, we conducted 24 interviews with current and former HlTD officials 

identified in our scope. Through these interviews and other documentation collected during our 

evaluation, we learned what actions HUD took in an attempt to identify and address deficiencies 

at ACHA. We also identified the roles and responsibilities of personnel involved in the 

monitoring and oversight of ACHA. We reviewed relevant statutes, regulations, and other 

documentation to determine criteria for the monitoring and oversight of PHAs. 

Limitations 

On November 22,2017, we sent HUD a request for several HUD officials' emails to determine 

what they knew and communicated about ACHA at the time the issues occurred. HUD produced 

the requested emails and provided them to us in June 2018. 4 We received nearly 50 gigabytes of 

email data, which we will review following the release of this report. If our findings or 

recommendations are substantially affected by new infonnation1 we will communicate that 

information in an appropriate format. 

4 In December 2017, we issued a report finding that OGC's collection of electronically stored information, including 

emails, does not meet customer demand because processing these requests takes too long to meet each program 

office's needs. 
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On February 19,2016, HUD declared ACHA in substantial default of its contract with HUD, 

removed its board, and took possession of it. In Apri12017, HUD announced its plan to relocate 

about 400 residents, including 200 children, from two ACHA housing developments, Elmwood 

and McBride. 5 Those developments wiH be demolished. According to news reports, residents 

remain angry and frustrated with HUD' s decision. The city of Cairo has insufficient housing 

stock for these displaced families, so almost 200 families will have to move out of the city. A 

HUD spokesperson said that HUD was "stunned ... at what we saw, not just in terms of the 

deplorable living conditions that we encountered but at the poor, even absent record keeping, the 

staggering backlog of critical repairs, all of this going to the very health and safety of the 

residents living there." However, the deplorable conditions at ACHA did not occur overnight. 

HUD had been aware of negative conditions at ACHA since at least 2010. Over the span of6 

years, HUD performed multiple assessments and reviews of ACHA. Figure 1 below outlines the 

steps HUD had taken since 2010 in an attempt to address the negative conditions. 

Figure 1 - Timeline of HUD's oversight of ACHA 

• PIH conducted • Due to the • HUD conducted • FHEO issued a • HlJD took the 

an onsite review Authority's fY* voluntary Authority into 

of the Authority, 2012 programmatic compliance receivership. 

which produced substandard review, which a&,rreement to the 

negative physical produced Authority to 

findings. conditions score, negative address its civil 

PIH conducted findings. rights violations. 

an onsite review 

of the Authority, 

which produced 

negative 

findings. 

* FY = fiscal year 

• HUD began the 

process of 

relocating 

residents from 

two Authority 

housing 

developments 

scheduled for 

demolition. 

• HUD debarred 

some Authority 

executives. 

HUD had failod ACHA in every physical condition indicator since fiscal year (FY) 2012 and 

identified weaknesses with its financial condition as early as FY 2013. ACHA was generally 

uncooperative in addressing the negative conditions identified by HUD's assessments and 

reviews. Despite HUD's attempts to bring ACHA into compliance, the negative conditions 

remained. In June 2017, DEC and OGC issued an indefinite debarment from participating in 

government programs for two former ACHA executives and a 3-year debarment for a board 

member. This action resulted from many violations of HUD regulations and the contract, such 

as deplorable physical conditions, severe misuse of Federal funds, civil rights violations, leadbased paint violations, and other issues. 

5 Since we concluded our fieldwork, HUD decided that two additional ACHA housing developments (Sunset 

Terrace and Mary AJice Meadows in Thebes, IL) will also be closed as necessary repairs there are too expensive for 

ACHA to cover. Some of the residents relocated from the Elmwood and McBride developments ended up at the 

Thebes developments, so they will have to relocate again. 

5 
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Findings 

PIH Used Several Oversight Tools To Identify Issues at ACHA, but 

Negative Conditions Persisted 

Since 2010, HUD6 had performed multiple assessments and reviews of ACHA, which 

highlighted issues with its governance, including the misuse of funds, conflicts of interest, and a 

failure to comply with HUD policies and Federal civil rights laws. Despite HUD's attempts to 

bring ACHA into compliance, the negative conditions remained. ACHA was generally 

uncooperative in addressing the negative conditions HUD identified during its assessments and 

reviews. On February 19, 2016, HUD removed ACHA's board and took possession of ACHA, 

declaring it in substantial default of its contract with HUD. 

PIH Identified Issues at ACHA During a Review in 2010, but Closed the Findings 

In keeping with routine oversight practices, the Chicago field office assigned a team to monitor 

and oversee ACHA. This team was assi,b'Tied to ensure that ACHA complied with HUD rules 

and regulations and to provide technical assistance to ACHA as needed. The team was 

composed of an engineer, a financial analyst, and a public housing revitalization specialist. In 

March 2010, this team completed a review of ACHA, which identified improper payments and 

other high-risk clements. 7 During this review, the team conducted tenant file reviews to 

determine whether ACHA calculated rents accurately and reviewed its compliance with HUD 

policies. 

The team made nine findings and four observations, one of which indicated that there was a 

conflict of interest among the board of conunissioners, the president of the resident council, and 

ACHA. PIH records and the team leader of the review confirmed that the field office closed the 

findings. 

The Field Office Conducted Onsite and Remote Assessments of ACHA in 2012 and 2013, 

but ACHA Did Not Correct Identified Negative Conditions 

For FY 2012, REAC scored ACHA as a substandard physical performer due to the poor physical 

conditions of its buildings. A team member assigned to ACHA told us that the substandard score 

required the field office to conduct an onsite review. Before the onsite review, this team member 

perfonned a remote assessment of ACHA. He said that during the remote assessment, he 

identified several issues unrelated to ACHA 's physical conditions score, such as inappropriate 

procurement practices and nepotism, stating that ACHA 's organization chart looked like a 

"'family tree." After completing the remote assessment, he issued a letter to ACHA, stating his 

findings, and asked for a response and for ACHA's plans to address the findings before the 

upcoming onsite review. In response, ACHA provided an action plan, which the team member 

believed did not sufficiently address the concerns in the findings letter. Accordingly, this 

6 When "HUD" is used, officials or actions from more than one program office are being cited. When Pili is used, 

we are referring only to PlH officials or actions. 7 HUD completed a Consolidated Tier II review. Consolidated Tier I or Tier II reviews were a type of onsite review 

of PHA.s, which Pili no longer perfonns. 

6 
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response required the field office to continue its onsite review of ACHA. ln May 2013, the 

National Association for the Advancement of Colored People also sent BUD a letter alleging 

discriminatory conditions at ACHA, which reinforced the need for the onsite review. 

The field office conducted the onsite review of ACHA from September 4 through 13, 2013. A 

team member who participated in the review told us that ACHA personnel were very 

uncooperative during the visit. For example, one team member told us that several members of 

the ACHA staff attempted a "sick-ouf' to avoid being interviewed. Team members also 

observed serious civil rights violations during the review, such as segregated housing and 

segregated staffing. One team member said the team conducted physical inspections of all of the 

ACHA housing developments, during which it reviewed the building interiors and exteriors and 

inspected a sample of units. He said, in total, these physical inspections took about a half day. 

This team member also said that the poor physical condition of the properties was obvious, even 

from the outside. However, when the team members went inside the properties, one team 

member said that he observed broken and outdated appliances and pest infestations in housing 

developments occupied by African" Americans. 

On November 1, 2013, following the onsite review, the field office issued a letter to ACHA, 

which detailed concerns related to its finances, operations, and procurement practices. In total, 

the field office made 9 findings related to the physical condition of ACHA's properties and 20 

findings related to its overall management Major findings included that 

• The McBride and Elmwood housing developments had ongoing security issues. 

• The plumbing at the McBride housing development was deteriorated and in need of 

rehabilitation. 

• The former executive director improperly procured a consultant services contract for 

himself. 

• ACHA awarded retirement packages and offered part-time employment to specific 

employees with no documented or defined formula or eligibility requirements. 

• ACHA's nepotism policy was inadequate. 

• An ACHA board member had a nephew and grandson employed by the PHA. 

• The executive director's son-in-law and the assistant executive director's husband were 

maintenance workers at ACHA. 

ln December 2013, ACHA provided an action plan to address the issues identified during the 

onsite review, in which it generally disagreed with the field office's findings and observations. 

Field office staff members told us and documentation confirms that they found ACHA's 

response insufficient. Field office staff members also told us that they informed regional PIH 

leadership about issues pertaining to ACHA. Around this time, the field office staff also 

approached HUD's Region V Administrator. The Administrator is responsible for engaging with 

local officials and acting as a liaison for HUD field offices and programs. As such, he was 

positioned to engage with ACHA and Cairo, IL, officials. 

7 
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REAC Routinely Inspected ACHA, but Physical Inspection Scores Did Not Always 

Accurately Reflect ACHA 's Conditions 

As discussed earlier, REAC scored ACHA as a substandard physical performer for FY 2012 due 

to the physical conditions of the Elmwood and McBride housing developments. 8 The FY 2012 

inspection report continuously indicated the presence of peeling paint; graffiti; deteriorated caulk 

and sealants; and the presence of insects, such as bed bug and live roach infestations, among 

other issues. It also noted health and safety hazards, such as inoperable electrical breakers and 

appliances and obstructed accessibility routes. 

Despite these findings, in FY 2013, ACHA 's REAC scores indicated that the physical conditions 

had improved dramatically. Field office staff members were concerned that the FY 2013 

physical condition scores did not reflect the actual conditions at ACHA. One remarked that he 

was shocked by the inflated score. At this time, ACHA's budget showed that only two major 

capital improvements had been undertaken. PIH's practice was to wait to initiate the PHARS 

protocol until it had designatc:d a PHA as troubled. Without a score low enough to consider 

ACHA troubled, PIH was unable to initiate the PHARS protocol, which aims to recover PHAs 

by solving and remediating systemic issues. 9 As a result, in April 2014, field office staff 

requested that REAC rescore the housing developments off cycle and immediately release the 

scores. The field office staff continued to request updates on the status of the rescore request, 

and in August 2014, REAC confirmed that ACHA would be reinspected. 

REAC began the FY 2013 rescore for the housing developments in November 2014 and 

completed it by February 2015. According to a REAC official, a number of factors can delay 

REAC inspections of PHAs and 95 to 99 percent of the time those delays arc related to procuring 

contract inspectors to perform the inspections. Further, documents showed that holidays and 

HUD staffs' use of"usc or lose leave" contributed to delays as well. 

REAC's revised scores showed that conditions had deteriorated since FY 2012 and not improved 

as the original FY 2013 score indicated. For two housing developments, the score was lowered 

by more than 50 points. The score for the Elmwood and McBride housing developments, which 

are now scheduled for demolition, were lowered by 54 points. Figure 2 below provides the 

physical conditions scores in FYs 2012 and 2013 and the rescores for FY 2013. 

8 ACHA has several housing developments that receive individual physical conditions scores during the inspection 

process. 

9 During the interim period, PIH field offices also have the ability to implement a zero threshold review of capital 

fund grants. However, this is not a sanction. This action requires PIH field office staff to review and approve all 

draws a PHA wants to make from its Capita! Fund. 

8 
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Figure 2- ACHA housing developments' physical conditions scores from FY 

2012 to 2013 

The revised FY 2013 inspection report for the Elmwood and McBride housing developments 

showed that there were 112 health and safety deficiencies and concluded that if all buildings and 

units were inspected, 1,134 health and safety deficiencies would be found, 10 REAC decertified 

and dismissed the contract inspectors who performed the initial FY 2013 inspections for not 

following REAC's inspection protocoL It,IJ 

Only After HUD Assembled a Cross-Programmatic Team Did It Take 

Major Enforcement Action Against ACHA 

After PIH field office staff approached him with concerns about ACHA, the Region V 

Administrator assembled a cross-programmatic review team in early 2014 to review ACHA. 

The Administrator, who is part ofFPM, served as the lead on this team. The team consisted of 

Region V staff from the following HUD program offices: Pili, FHEO, DEC, and Labor 

Standards. Each participating program office focused on its respective programmatic 

jurisdiction. 

HUD Conducted a Cross-Programmatic Review of ACHA in 2014, Which Resulted in 

Negative Findings Against ACHA 

Several cross-programmatic review team members stated that this type of review was uncommon 

and that they had not seen so many program offices work collectively to review a single PHA. 

The onsitc portion of the cross-programmatic review occurred from June 24 through 26,2014. 

Patticipating team members reviewed ACHA documents, conducted interviews, and inspected 

low-rent housing properties. Unlike its response to PIH's 2013 reviews, HUD staff told us that 

ACHA was relatively cooperative as the team carried out its cross-programmatic review. 

10 The inspections examine a sample of units at a given PHA and not every unit. 11 This protocol refers to the standard set of rules and procedures for inspectors to follow on all in~'Pections. The 

purpose of the physical inspection process is to provide IIUD with the ability to assess whether its properties are in a 

safe, decent, and sanitary condition and in good repair. 12 In response to a congressional mandate, REAC released a report, entitled "Efforts and Progress Made to Improve 

Inspection Processes and Protocols," on February 23,2018. Within the report, REAC stated that its physical 

inspection process has declined over time due to a number of reasons, including competing demands of Federal 

inspection staff, a shifting quality environment, and external pressures. However, most notably, REAC stated that it 

also faced challenges in acquiring contract inspectors that met HUD's quality inspection standards in the 

performance of duties. To address issues highlighted in the report, REAC stated that, as of June 2017, it had 

identified and implemented 86 process improvements in an effort to enhance its inspection process. 

9 
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PIH, DEC, and Labor Standards made several significant findings on ACHA's noncompliance 

with several HUD rules and regulations, which included mismanagement of ACHA, misuse of 

Federal funds, misadministration of contracts subject to Davis-Bacon and related acts, and 

governance issues. In July 2014, ahead of releasing its official findings, PIH field office staff 

issued a memorandum to ACHA which placed its Capital Fund under zero threshold review, 

which required PIH field office staff to review and approve all draws ACHA wanted to make 

from its Capital Fund. ln November 2014, PIH issued a memorandum to ACHA, which 

documented its official cross-programmatic review findings of ACHA noncompliance with 

several Federal, State housing, and labor laws. 

During this review, DEC also identified an issue that inappropriately benefited ACHA's 

financial condition score used for PHAS. DEC found a significant deficiency in ACHA 's 

internal control over financial reporting and compliance when it borrowed funds in a manner not 

permissible under the HUD Financial Management Handbook or Office of Management and 

Budget Circular A-133. ACHA borrowed more than $400,000 from the Elmwood and McBride 

operating fund to cover the central office cost center's deficit, which resulted from the cost 

center's failure to charge fees to any of ACHA's three housing developments. ACHA's method 

for recording the transaction made the financial condition appear better than it was and, hence, 

inappropriately benefited its financial condition score. A DEC official stated that had ACHA 

recorded the transaction properly, the PHAS financial condition score would have declined from 

"satisfactory" to "unsatisfactory." As a result of this issue, the original financial condition score 

was reduced from 18 to 10. This score revision and the revised physical conditions scores 

(released in 2015) resulted in HUD's changing ACHA's overall perfonnancc designation for FY 

20!3 to troubled. 

However, FHEO made the most significant fmdings of the cross-programmatic review. FHEO 

issued its findings to ACHA in a separate memorandum, dated September 30,2014. FHEO 

found that ACHA violated rules under Title VI of the Civil Rights Act 13 for its racial segregation 

ofpublie housing and employment discrimination on the basis of race. Additionally, FHEO 

found that the Elmwood and McBride housing developments, where heads of household were 

96.8 percent African-American, were older and more poorly maintained than other ACHA 

housing developments. Figure 3 below provides a summary of FHEO findings of racially 

segregated housing in the housing developments at ACHA. 

Figure 3- FHEO findings of racially segregated housing developments at ACHA 

In its findings, FHEO also noted that ACHA had a documented history of discriminating against 

African-American employees. FHEO found that the highest paid ACHA maintenance 

l3 Title VI of the Civil Rights Act states, "No person in the United States shall, on the ground of race, color or 

national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under 

any program or activity receiving Federal financial assistance" (42 U.S. C. (United States Code) 2000d). 

10 
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technicians were what FHEO referred to as white employees and that those employees' seniority 

had no direct correlation to their pay rates compared to their African-American peers. For 

example, ACHA contracted two white retirees for part-time work at a pay rate of more than $20 

per hour, whereas a part-time African-American retiree, not under contract, received a pay rate 

of just under $16 per hour for the same position. In another example, ACHA employed four fulltime maintenance employees in September 2013. Two were white and two were AfricanAmerican. The white employees had 8 and 4 years of job experience, respectively, and earned 

an equal or higher rate of pay compared to the two African-American employees who had 28 and 

4 years of job experience, respectively. FHEO also found that African-Americans typically 

serviced the Elmwood and McBride housing developments (identified as racially segregated) 

instead of other ACHA housing developments. 

FHEO and other HUD officials said that PIH senior officials were reluctant to move quickly 

against ACHA on the cross-programmatic findings. 14 Some officials attributed this delay to 

different causes, such as the disagreement over programmatic jurisdiction (FHEO's versus 

PIH's). When asked about their reaction to the cross-programmatic review, some PIH senior 

officials, including the PIH Region V Director at the time, said that they were unaware of it or its 

findings. However, field office staff and the Region V Administrator claimed that they met with 

the PIH Region V Director and discussed this topic in August 2014. 

Following the Cross-Programmatic Review Findings, FHEO Entered Into an Agreement 

With ACHA, Which ACHA Violated 

FHEO ollicials said that FHEO's authorities enable it to act more quickly than other HUD 

program offices. Therefore, FHEO could act as the "tip of the spear" to get ACHA to comply 

with public housing rules and regulations. Once FHEO makes a finding of noncompliance at a 

PHA, the PHA is required to review the finding within a 30-day window and enter into a 

voluntary compliance agreement to remedy the identified negative conditions. Additionally, 

FHEO officials said that PIH generally requires a much more lengthy remedial process for PHAs 

and that PlH's remedial process, the PHARS protocol, could take up to l year or more. 

ACHA entered into the agreement with HUD in Au&'l!St 2015. It required ACHA to comply with 

provisions related fair housing, security of housing, and equal employment opportunity. For 

example, to ensure fair hiring practices, the agreement required ACHA to obtain prior HUD 

review and approval before hiring a new execut-ive director. Among other things, it also required 

that ACHA develop a public housing waiting list to provide residents in the Elmwood and 

McBride housing developments the opportunity to relocate to a more racially integrated housing 

development. 

FHEO officials said that ACHA officials violated the agreement and the violations were 

deliberate and serious. For example, ACHA unilaterally hired a new executive director, and 

FHEO officials considered this violation to also be a breach of its contract with HUD. FHEO 

and PIH officials disagreed about the extent to which this provision of the agreement was 

permissible and enforceable. In January 2016, the Region V Director ofFHEO issued a 

memorandum to the PIH field office director formally challenging ACHA's compliance with the 

14 The terrn PIH "senior officials" refers to PIH staff at the regional public housing director level and above. We 

choose to refer to this group as "PIH senior otlicials" because of the many staffing changes that occurred within PIH 

from 2010 to the present, with some individuals occupying more than one senior position at different time..'>. 

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contract FHEO officials said that this memorandum forced PIH to take action on ACHA. The 

violation of the agreement became the basis for finding ACHA in substantial default of its 

contract with HUD. On February ! 9, 20! 6, HUD removed ACHA's board and took possession 

of ACHA, declaring it in substantial default of the contract. 

Despite ACHA's limited cooperation in addressing PIH-identified deficiencies over time, PIH 

did not feel that it could take more aggressive action against ACHA. Without a score low 

enough to consider ACHA troubled, PIH was unable to initiate the PHARS protocol, which aims 

to recover PHAs by solving and remediating systemic issues. However, the cross-programmatic 

approach, led by FPM, empowered BUD to use alternative means of enforcement against 

ACHA. Specifically, FHEO's involvement enabled HUD to leverage different authorities that 

would have required ACHA to remedy issues more quickly. When ACHA did not remedy the 

deficiencies within this period, HUD was empowered to take swifter action against it. Without 

FHEO's involvement, negative conditions at ACHA may have persisted longer before HUD took 

it into receivership. Involving several parts ofHUD, such as FHEO or DEC, may improve PIH's 

oversight of uncooperative PHAs like ACHA. 

HUD Hesitated To Exercise Its Authority To Take ACHA Into 

Receivership 

HUD temporarily takes possession of a PHA to correct identified problems through a process 

known as administrative receivership. HUD views administrative receivership as a last resort for 

assisting PHAs with the most severe problems. Residents at ACHA continued living in 

deplorable conditions as ACHA languished, and HUD hesitated to take ACHA into receivership. 

Despite negative conditions at ACHA, HUD did not take it into receivership earlier for several 

reasons; namely, 

• PIH officials initially allowed ACHA several opportunities to improve instead of using 

HUD's authority to declare it in substantial default and take possession of it. In our 

discussions with PIH officials, they did not seem to be aware ofHUD's authority to take 

possession of ACHA without first offering it an opportunity to cure deficiencies. 

• ACHA's official performance scores were not initially low enough to initiate the PHARS 

protocol. 

• PIH officials disagreed about the extent to which ACHA 's actions and existing 

documentation were sufficient to place it into receivership. 

• HUD officials claimed that receiverships were costly to administer and could attract 

negative attention to the agency. 

• HUD guidance and expertise on receiverships were limited at the time. 

PIH Officials May Not Have Been Aware ofHUD's Authority To Declare PHAs in 

Substantial Default 

HUD has the authority to declare a PHA in substantial default of its contract with HUD in 

emergency situations. In these cases, HUD is not required to provide the PHA with an 

opportunity to respond to or cure negative conditions when (1) HUD determines that conditions 

exist that pose an imminent threat to the life, health, or safety of public housing residents or 

residents of the surrounding neighborhood or (2) the events or conditions precipitating the 

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default are determined to be the result of criminal or fraudulent activity. 15 Although this 

authority allows PHI to declare a PHA in default of its contract before the maximum 2-year cure 

period ends, PJH headquarters and field officials emphasized during interviews the necessity to 

use the PHARS protocol and allow PHAs the full 2 years to cure negative conditions. The living 

conditions at ACHA posed an immediate threat to its residents and we believe PIH should have 

exercised this authority sooner. We are concerned that the PIH officials we spoke with may not 

have been aware ofHUD's authority to declare substantial default and take PHAs into 

possession in emergency situations. IfPIH officials are not aware of this authority or prepared to 

use it, uncooperative PHAs with similar issues may languish without adequate corrective action 

at the expense of housing development residents, as ACHA did. 

ACHA's Official Performance Scores Were Not Initially Low Enough To Trigger the 

PHARS Protocol 

As discussed earlier, HUD designates PHAs as high, standard, substandard, or troubled 

performers based on their performance. Once a PHA is designated as troubled, HUD initiates 

the PHARS protocoL A troubled PHA is given a maximum of 2 years to cure negative 

conditions. 16 If the PHA cannot cure its issues within 2 years, this condition should trigger a 

referral for administrative receivership. 17 However, PIH has not enforced this referral procedure 

uniformly. Given this lack of uniformity, the Office of Receivership Oversight has begun 

developing protocols and a standardized process for assessing PHAs that have not met their 1- or 

2-year recovery goals and for making referrals. At the conclusion of our fieldwork, this process 

had not been completed or implemented. 

ACHA's performance scores were not initially low enough to trigger the PHARS protocol, 

which is a process of enhanced oversight meant to help a PHA solve and remediate systemic 

issues or later receivership action. Until FY 2013, ACHA scored substandard or better on all of 

its PHAS assessments. As discussed earlier, REAC did not revise ACHA 's FY 2013 physical 

conditions score or its financial conditions score until much later. which resulted in HUD's 

changing ACHA's overall performance designation to troubled for FY 2013. Pili's practice was 

to wait to initiate the PHARS protocol until it designated a PHA as troubled. One HUD official 

told us that at the time, there was no formal remedial process for substandard PHAs (such as 

ACHA) as there was for troubled ones. A PIH employee told us that he suggested placing 

ACHA into the PHARS protocol in 2013, although it was not yet officially designated troubled, 

but that management opposed this approach. A PHI senior official said that if a substandard 

PHA remained uncooperative about addressing identified issues, it would continue to decline 

until it reached troubled status. Conditions at ACHA continued to decline this way over time. 

Figure 4 below lists ACHA's performance scores from FY 2010 to 2016. 

15 24 CFR 907.5(d) 16 During this period, the PHA has 1 year to raise its PHAS score to at least 50 percent of the difference between its 

poor PHAS score and the current score and a maximum of2 years to raise it to at least 60 percent overalL HUD 

takes incremental steps to work with the PHA to cure the conditions during that 2-year period. 17 However, the recovery process is not limited to administrative receivership. There arc two basic types of 

receiverships: administrative and judiciaL Judicia! receiverships are established, monitored, and supervised by 

Federal courts. 

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Figure 4- ACHA's overall PHAS scores from FY 2010 to 2016 

FY Total score 

PIH Officials Disagreed About the Extent to Which ACHA 's Actions and Existing 

Documentation Were Sufficient To Place It Into Receivership 

HUD officials told us that there was a major emphasis on developing an action plan and 

continuing to work with ACHA officials to remedy the negative conditions there. Records 

showed that field office staff began working to develop an action plan as early as October 2013. 

ACHA submitted its action plan to PIH in December 2013. The action plan refuted PIH's results 

and determinations and stated that ACHA personnel were not willing to cooperate to remedy the 

negative conditions PIH had identified. Several field oiftce staff members also told us that 

ACHA personnel were uncooperative. However, we were told that PIH senior officials 

encouraged the field office to continue to work with ACHA officials to remedy the conditions at 

the local level despite their lack of cooperation. 

Once HUD has decided to take a PHA into receivership, HUD gathers substantial documentation 

to show the necessity for the receivership. PHI senior officials were generally unsatisfied with 

the existing administrative record and encouraged field office staff to document the negative 

conditions at ACHA. PIH senior officials also told us that there was a major emphasis on 

gathering documentation to substantiate the need for taking the PHA into receivership, which 

resulted in delays. We heard that this documentation was critical for establishing a clear 

administrative record of the negative conditions. This record could be necessary if ACHA 

attempted to challenge a receivership decision in court 

Personnel disagreed about the extent to which the existing action plan and corresponding 

documentation were sufficient to warrant receivership. Field office staff members told us that 

they requested that Pili senior officials take action against ACHA and they were frustrated with 

senior leadership's inaction. They argued that such action would help ensure that the decision to 

take ACHA into receivership was sound and defensible if ACHA appea1ed. PIH senior officials 

consulted OGC staff about the sufficiency of the administrative record. According to OGC staff, 

consultations began on February 4, 2016, approximately 2 weeks before HUD issued the 

substantial default letter to take ACHA into receivership. 
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HUD Officials Claimed That Receiverships Were Costly To Administer and Could Attract 

Negative Attention 

During interviews, HUD officials told us that taking a PHA into receivership was very costly, so 

HUD was not inclined to initiate receiverships. PIH's Deputy to the Deputy Assistant Secretary 

for the Office of Field Operations stated that a receivership can take many years to execute, 

require the labor of four to five full-time employees, and cost more than $5 million. Other HUD 

officials said that there were concerns about not having the necessary funding for executing a 

receivership of ACHA. Field office staff told us that the Region V Director commented in 2014 

that there were no funds available to take ACHA into possession. 

HUD officials added that the agency must consider the political repercussions from taking a 

PHA into receivership. These concerns contributed to HUD's hesitation to take ACHA into 

receivership. 

HUD Guidance and Expertise on Receivership, Due in Part to a Lack of Training, Were 

Initially Limited and Could Still Be Improved 

HUD officials told us that an administrative record to justify receivership must include an onsite 

review of a PHA, its results, and follow~up activity with the PHA. One of the officials told us 

that it takes years to build such a record. However, that official also said that the receivership 

process "'isn't too mapped out," and another told us that he was unsure of what precisely ttiggers 

a receivership. 

From 1985 to 2015, HUD initiated administrative receiverships of20 PHAs without a 

receivership manual. 18 At the time HUD took ACHA into receivership in 2016, HUD was in the 

process of creating such a manual. As a result, there was no systematic process for executing 

receiverships when HUD initiated the receivership of ACHA or the 20 other PHAs taken into 

administrative receivership before that. 

HUD developed a Power Point training presentation for receivers in March 2013. However, two 

PIH staff members who served as n "Ceivers, .. including the one assigned to ACHA, told us that 

they did not attend fonnal training on receivership. One of the receivers told us that he relied on 

his institutional knowledge from previously working at PHAs. Multiple officials told us that a 

limited number of HUD staff members had the expertise to fulfiU this role. 

HUD did not publish its Internal Procedures Manual for HUD Receiverships until April2017, 

approximately 14 months after HUD took ACHA into receivership. HUD has also not updated 

its Power Point training for receivers to align with the Internal Procedures Manual released in 

2017. Although the Internal Procedures Manual for HUD Receiverships outlines post 

receivership actions HUD officials should take when executing an administrative receivership, it 

does not provide guidance to HUD officials or circumstances in which initiating a receivership 

may be appropriate. 

The small pool of experienced receivers, inadequate guidance, and outdated training pose 

18 HUD has taken the Lafayette Housing Authority in Layfette, LA, into administrative receivership twice since 

1995. 

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organizational risks that could negatively affect HUD's oversight ofPHAs over time. Without 

these elements, HUD may avoid taking PI·IAs into receivership when it is necessary and may 

oversee PHAs in receivership improperly or inadequately. 

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Recommendations 

Conditions at ACHA had deteriorated over a decade or more, and two housing developments 

there, Elmwood and McBride, are scht.--duled for demolition. Since we concluded our fieldwork, 

HUD decided that two additional ACHA housing developments (Sunset Terrace and Mary Alice 

Meadows in Thebes, IL) will also be closed as necessary repairs there are too expcnsive, 1Q further 

reducing available, affordable housing stock for low-income residents. While local officials are 

responsible for the daily administration of ACHA, HUD could and should have done more to 

oversee it. Although it may be too late to save ACHA, as of June 2018, 50 other PHAs were 

designated as troubled. Therefore, we recommend that the General Deputy Assistant Secretary 

of Public and Indian Housing: 

1. Create Agreements and Strategies With Other Program Offices 

That Describe When Cross-Programmatic Reviews and 

Enforcement Actions Against PH As Are Required 

Considering ACHA's limited cooperation in addressing PHI-identified deficiencies over time, 

we arc concerned that the PHARS protocol does not enable Pill to address issues at 

uncooperative PHAs in a timely manner. Although PIH has strategies to engage some HUD 

offices, such as DEC, when it encounters serious perfOrmance issues at PHAs, the crossprogrammatic approach led by FPM empowered HUD to use alternative means of enforcement 

against ACHA. Specifically, FHEO's involvement enabled HUD to leverage different 

authorities that required ACHA to remedy issues more quickly. Involving several parts ofHUD, 

such as FHEO or Labor Standards, may improve PIH's oversight of uncooperative PHAs like 

ACHA so that conditions can be improved more quickly. 

2. Train PIH Officials on the Authority and Processes for Declaring 

PHAs in Substantial Default and for Taking PH As Into HUD 

Possession 

The living conditions at ACHA posed an immediate threat to its residents, and we believe PIH 

should have exercised its authority to declare it in substantial default sooner. PIH headquarters 

and field officials emphasized during interviews the necessity to use the PHARS protocol and 

allow troubled PHAs the full2 years to cure negative conditions. This interpretation ofHUD's 

authority and process may enable uncooperative PHAs like ACHA to languish at the expense of 

housing development residents. PIH should train its officials at all levels to identify when a cure 

period is not appropriate. This includes emergency situations in which conditions exist that pose 

an imminent threat to the life, health, or safety of public housing residents or residents of the 

surrounding neighborhood. PIH should also train PIH officials at all levels about the process for 

expediently exercising the authority to declare a substantial default without a cure period. 

19 The housing developments will be removed from public housing inventory. However, IIUD has not decided how 

the housing developments will be removed. They will be either demolished or sold, 

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3. Update and Strengthen the Training Program for HUD Receivers of 

PH As 

Pill's expertise on receiverships was limited at the time of ACHA's receivership and could still 

be improved. PIH should update its training for receivers to align with the Internal Procedures 

Manual released in 2017. 

4. Update Procedures for Receiverships To Include Specific Guidance 

on When Initiating a Receivership May Be Appropriate 

While PIH has released its Internal Procedure..<:; Manual for HUD Receiverships, guidance and 

policy on when initiating receivership may be appropriate are not included. The limited BUD 

guidance and expertise on receiverships present organizational risks that could negatively affect 

HUD's oversight ofPHAs over time. 

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~g-~_ncy Comments and OIG Re_s__,p_o_n_s_e ___ ~ 

Summary of PIH's Comments 

PIH agreed with each of our four recommendations. However, PIH stated that although it agreed 

in concept with recommendation 1 and that requiring cross-programmatic reviews was 

inappropriate, it requested that the recommendation be reworded. In its comments, PIH stated 

that PHAs face "varying circumstances and challenges," which requires PIH to have flexibility in 

addressing issues at PHAs. PIH further stated that agreements and strategies should outline 

when cross-programmatic reviews are appropriate. For recommendations 2, 3, and 4, PIH stated 

that it would address the recommendations when it submitted its proposed management decision 

fOr each recommendation within 120 days of final report issuance. 

OIG Response to PIH's Comments 

Based on PIH's response, we consider recommendations 1, 2, 3, and 4 "unresolved-open." With 

regard to recommendation 1 and PIH's request to reword the recommendation, we agree that 

cross-programmatic reviews and enforcement actions may not be required in every instance. 

Therefore, we changed the language to make it clear that the agreements and strategies with 

other program offices should describe when cross-programmatic reviews and enfOrcement 

actions are n oquired. ... We will reevaluate the status of recommendations 2, 3, and 4 upon receipt 

of documentation detailing PIH 's proposed management decision, along with target dates for 

completing corrective actions to address our recommendations. 

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Comments to the Draft Report 

MEMOR,'\NDUM FOR: 

FROM: 

SUBJECf: 

liS.IJ£PAitTMENTOF HOUSNG A:0.1l URBANDEVFLO!'MENT 

JUUS 10\S 

BrianT. Pattison, Assistant Inspector General for Evaluation, G 

ni Blom~sisuntSecretaryforPublic and In ia Housing, P 

Re~ponse to Discussion Draft Audit Report- HUD's Oversight of 

the Alexander County Housing Authority (ACHA) in Cairo, 

fllioois: OIG Audit Report 2017-0E-0014 

Thank you for conductmg a thorough rev1ew and making recommendations that can help 

the Office of Public and Indian Housing (Plli) improve its oversight of troubled agencies. Pili 

appreciates the collabocative discussions held during this audit 11nd during the Exit Conference 

held -on May 3, 2018. Many of the commen!s and feedback provided on the working draft report 

were considered and lncoqXlrated into the draft report. We have reviewed the draft report and 

our suggestions for the findings and recommendations are outlined below. 

IG Recommendation: Create Agreements (!Jld Strategies with other Progrnrn Offices 

and require Cross-Programmatk Reviews and Enforcement Actions against PH As. 

PIH Recommendation: We request that this recommendation be reworded as Creare Agreemel!fs ami Strategtes with other Program Offices that !ncludt! Cw:rs·Programmalic 

Reviews and Enforcement Adions Againn PHA.~. 

Justification: Pffi agrees with this recommendation in concept but believes "requiring" 

revtews is inappropriate. As discussed during the Exit Conference, each PHA has varying 

circumstances and challenges which require fle~ibility ln addressing. The agroomenls and 

strategies should outline when cross-programmatic reviews are appropriate. 

JG Recommendation: Train Plli Officials on the Authority and Processes for Declaring 

PH.t\.s in Substantial Default and for Taking PHAs into HOD's Pos~ssion. 

PIH Recommendation: Plll agrees with this recommendation and will address the 

recommendation when subm:ttmg rhe Pwposed Management Decision within 120 days of 

issuanceofthefinalreport, 

IG Re.romrnendathm: Update and Strengthen the Training Program for HUD Receivers 

ofPHAs. 

PIH Rerommendation: Pili agrees with this recommendation and will address the 

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recommendation when submitting the Proposed Management Deci<iion within 120 days of 

issuance of the final report. 

IG Recommendation: Update Procedures for Receivership.<; to Include Spectfic 

Guidance on when Initiating a Receivership may be Appmpriate 

Pill Recommendation: Pill agrees with this recommendation and wilt address the 

recommendation when submitting the Proposed Management Decision within 120 days of 

issuanccofthefinalreport 

PfH also wishes to r10te the accomplishments. made at the Alexander County Housing 

Authority since possession on February 22. 20!6, to correct deficiencies, substantially reduce the 

administration costs that threatened to bankrupt the agency and reposition the assets. 

SpecJficaHy: 

Physical assessment<;. of four properties (containing 324 units) contributed 10 the 

determination that demolition was the best coun;e of action due to rehabilitation costs in 

ex. cess of $5lM and SViM necessary for the correction of health and safety deficiene~es. 

Pill has approved the demohtioo for the Elmwood and McBride properttes, and the 

applications for Mary Alice Meadows and Sunset TernK"e are in process. 

As of June29. 20J8,!65ofthe \85 families at Elmwood and McBride have movedro 

decent and safe housing. Five of the 31 families at Mal)· Alice Meadows and Sunset 

Terrace have tel()(;ated. Relocation and mobility ~crviccs pre- and post-move continue 

for an families. 

ACHA has developed a plan for addressing the capita! needs of Ute remaining 155 units 

m the inventory and developed and implemented standard operating practices. inc!udmg 

ones to stabilize the maintenance and management operations. It has made investments in 

n:dueingtherodentandinl'.eetinfestations. 

A Voluntary Compliance Agreement required ACHA to address numerous dvll tights 

violation~. Staff have worked with the Office of Fair Housing and Equal Opponunity to 

make substantia! progress towards re.wlving the.w violalions 

ACHA has taken steps to reduce its operating expenses by abrogating the inflated 

Colla-:tlve Bargaming Agreement, negotiating a flat rate to reduce utility and trash 

payments, and significantly reduced maintenance coots. lnsura.'lce premiums, and other 

operating costs 

Thank you for your continued pannership. We look forward to working with yoll to 

implement the re,;;ommendations. 

If you have any questions, plea.~e do not hesitate to contact my office at 202-402+4100. 

21 
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Appendixes 

Appendix A- Acknowledgements 

This report was prepared under the direction of BrianT. Pattison, Assistant Inspector General for 

Evaluation, Paul H. Bergstrand, Director of the Program Evaluations Division, and Lindsay K. 

Clarke Brubaker, Supervisory Evaluator. The Office of Evaluation staff members who 

contributed are recognized below. 

Major Contributors 

Josh Rowell, Senior Evaluator (team lead) 

Christa Kidd, Senior Evaluator 

Sonia Pena, Senior Forensic Auditor 

Other Contributors 

Angelina Johnston, Senior Evaluator 

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Appendix B -Acronyms 

23 
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The Office of Inspector General is an independent and objective oversight 

agency within the U.S. Department of Housing and Urban Development. 

We conduct and supervise audits, evaluations, and investigations relating 

to the Department's programs and operations. Our mission is to promote 

economy, efficiency, and effectiveness in these programs, while preventing 

and detecting fraud, abuse, and mismanagement. 

Report fraud, waste, and rn!smanagemcnt in HUD programs and operations by 

Completing this online form: https://www.hudoiq.gov/report-fraud 

Emailing the OIG hotline: hotline@hudoig.gov 

Faxing the OIG hotline: (202) 708-4829 

Sending 1..-vritten information to 

U.S. Department of Housing and Urban Development 

Office of Inspector General Hotline (GFI) 

451 7th Street SW, Room 8254 

Washington, DC 20410 

Whist!eblowers are protected by law. 

https://www.hudoiq.gov/fraud-prevention/whistleblower-protection 

Website 

https://www.hudoig.gov/ 

OFFICE OF EVALUATION 

Program Evaluations Divlsion 
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tinitcd ~ll1trs ~cnatc 

The Honorable Benjamin Carson, Jr. 

Secretary 

WASHINGTON. DC 20510 

July 27.2018 

U.S. Department of Housing and Urban Development 

451 7m Street, SW 

Washington, DC 20410 

Deat Secretary Carson: 

We urge the Department of Housing and Urban Development (HUD) to quickly implement the 

HUD Inspector General's (lG) recommendations to improve HUD's oversight and administration 

of public housing authorities as outlined in the report we first called for in May 2017 to evaluate 

HUD's oversight of Alexander County Housing Authority (ACHA). 

While acknowledging the role played by ACHA ofticials in contributing to the housing crisis 

currently facing residents in Alexander County, the IG report concludes that HUD "could have 

and should have done more to oversee" ACHA. The report reveals HUD had knowledge of 

negative living conditions at ACHA since at least 2010. but chose not to exercise its fu!I 

authority to intervene-as residents continued to be subjected to unsafe and unsanitary living 

conditions. Further, it reveals that contributing to HUD's hesitancy to take ACHA into 

receivership was a prevailing misunderstanding by HUD staff of HUD' sown authority to act. 

The report makes a number of recommendations to improve and clarify its procedures related to 

taking public housing authorities into receivership, as well as strengthening staff training. 

BUD's failure to effectively oversee ACHA has contributed to the public housing crisis that has 

subjected hundreds of residents to unthinkable living conditions and to reed many out of their 

homes and their beloved community. No community should have its access to safe and healthy 

housing threatened as a result ofHUD's inaction. 

We urge HUD to quickly implement the report's recommendations to improve its oversight of 

public housing authorities and request that HUD provide us with an update ofits plan to 

implement these recommendations by no laterthan September 27, 2018. 

We look forward to continuing to work \Vith you to ensure that residents of Alexander County 

are provided with the full assistance ofHUD as their lives continue to be impacted by a crisis 

HUD played a role in creating. 

j).u!Lj)~ Richard J. Durbin 

United States Senator 

Sincerely, 
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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

WASHINGTON, DC 20410-1000 

ASSIST ANT SECRETARY FOR CONGRESSIONAL 

AND INTERGOVERNMENTAL RELATIONS 

The Honorable Tammy Duckworth 

United States Senate 

Washington, DC 20510-1309 

Dear Senator D11ckworth: 

On behalf of Secretary Benjamin S. Carson, Sr., thank you for your letter regarding the 

Department of Housing and Urban Development's (HUD) implementation of the Inspector 

General's (IG) recommendations to improve HUD's oversight and administration of public housing 

authorities (PHAs) as outlined in their report-a review initiated at your request in May 2017. The 

Department is committed to improving policies and procedures to ensure effective oversight of 

PHAs and concurs with the IG's recommendations outlined in the report. The following 

information is from HUD's Office of Public and Indian Housing (PIH). 

In your letter, you urged the Department to quickly implement the report's 

recommendations to improve HUD's oversight ofPHAs and you requested an update on the 

Department's plan to implement the recommendations. Specifically, HUD has identified tasks and 

timelines to immediately begin implementing the following recommendations: 

• Create agreements and strategies with other program offices that describe when 

cross-programmatic reviews and enforcement actions against PHAs are required. 

During September 2018, PIH began reaching out to program partners, including the 

Departmental Enforcement Center and the Office of Fair Housing and Equal Opportunity, to 

discuss strategies for cross-programmatic collaboration, including when reviews and 

enforcement actions are appropriate. From October 2018 to January 2019, agreements will 

be drafted and negotiated with the program partners. Final execution of all agreements is 

targeted for completion in February 2019. 

• Train PIH officials on the authority and processes for declaring PHAs in substantial 

default and for taking PHAs into HUD possession. 

In October, PIH will work with the Office of General Counsel (OGC) to review the 

substantial default criteria and options that exist for taking PHAs into possession. OGC 

will assist with finalizing the training materials and conducting the training to PIH senior 

leadership including the Deputy Assistant Secretaries at headquarters and the public 

housing directors in HUD's field offices. The training logistics will be announced in 

October with the training conducted in November 2018. 

www .hud.gov espanol.hud.gov 
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• Update procedures for receiverships to include specific guidance on when initiating 

a receivership may be appropriate. 

2 

Although a current internal procedures manual for receiverships exists, a complete review 

of the document will be completed to incorporate more specific guidance on when and 

how to initiate action for receivership. Review and editing of the existing 176-page 

document will occur between October 2018 and January 2019. The completed draft 

document will include review and concurrence by OGC and other program offices, with 

completion targeted for February 2019. 

• Update and strengthen the training program for HUD receivers of PHAs. 

After completion of the updated internal procedures manual in February 2019, PIH will 

update the existing training materials and conduct training for HUD receivers, recovery 

administrators and staff assisting at receivership PHAs. The training is scheduled for 

completion in April2019. 

The Department is committed to implementing the IG recommendations within the 

identified timelines and these efforts will improve policies and procedures for more effective 

oversight of public housing authorities. Thank you for working with HUD to address your 

concerns. 

Assistant Secretary for Congressional 

and Intergovernmental Relations 
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ilnitcd ~tares ~matt WASHINGTON, DC 20510 

The Honorable David A. Montoya 

Inspector General 

Office of Inspector General 

U.S. Department of Urban Development 

451 Seventh Street, SW 

Washington D.C. 20410 

Dear Inspector Montoya: 

May25,2017 

As your agency works to complete its investigation into the mismanagement and alleged 

misappropriation of federal funds by former Alexander County Housing Authority (ACHA) 

officials, we ask that you conduct an evaluation of the Department of Housing and Urban 

Development's (HUD) oversight of the ACHA from 2010 to the present. 

The HUD recently conducted a financial assessment of the Alexander County Housing Authority 

(ACHA) where it found that the ACHA is insolvent and is unable to pay its bills due to exposure 

from litigation claims and settlements, high utility costs, and the ACHA's governance and 

financial management practices, which your agency is currently investigating. While we believe 

that former ACHA officials should be held responsible for apparent abuses of power, fraud, and 

negligence. based on HUD's recent financial assessment it is clear that HUD shares 

responsibility for the gross mismanagement that created the current federal public housing crisis. 

The report, as well as assessments and evaluations conducted by HUD over the past six years, 

repeatedly highlighted concerns with the governance of the ACHA, including improper 

payments, conflict of interests, unauthorized use of funds, failure to comply with HUD policies 

and federal civil rights laws, and generous employment and benefit contracts. According to the 

recent report, ACHA was designated as a "troubled performer" in 2013, has failed HUD's 

physical assessment tool used to determine the habitability of public housing units since 2012, 

and has failed HUD's financial indicator every year since 2013. Based on these findings, it is 

clear that HUD had knowledge of the mismanagement of the ACHA, misuse of federal funds, 

and the deteriorating conditions of ACHA housing. Despite HUD's claims that it repeatedly 

pushed local authorities to fix the well documented problems at the ACHA, it did little to 

intervene until it took over the ACHA in February 2016. At that time, the damage had been done 

and options to adequately address the situation were few. 

HUD's negligent oversight of the ACHA is inexcusable and its actions warrant a comprehensive 

review to make certain that those responsible are held accountable and the necessary reforms are 

implemented to prevent this from happening at other housing authorities. 

We appreciate your continued support assistance in this matter and await your timely response. 
54 

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nshattuck on FSR297 with DISTILLERInsert offset folio 37 here 32368.037

If you have questions or need assistance, please contact Lakecia Foster on Sen. Durbin's staff at 

202-224-2152 or Erika Moritsugu on Sen. Duckworth's staff at 202- 224-2854. 

Richard J. Durbin 

United States Senator 

Sincerely, 

~ United States Senator