Philadelphia Housing Authority spent millions improperly

Introduction

The agency in charge of low-income housing for Philadelphia paid $30.5 million to outside law firms over a three-year period and couldn’t fully explain what the money paid for, according to a new audit.

The Housing and Urban Development inspector general said the Philadelphia Housing Authority, which made payments to 15 law firms between April 2007 and April 2010, failed to provide auditors with basic information such as what the money was for and who would be performing the services. Additionally, the audit found that the authority made “unreasonable and unnecessary” payments to outside attorneys with the goal of obstructing similar audits from the IG.

The IG’s office inspected only $4.5 million of the overall spending, but it found enough flaws to “raise questions about the propriety of the remaining $26 million in payments that” were not reviewed.

“This is one of the strongest inspector general audits in memory,” Sen. Chuck Grassley, R-Iowa, told the Center in a statement. “Taxpayers can’t be on the hook for a blank check to law firms.”

The findings of the audit echo a report put out by the Center for Public Integrity and ABC News earlier this year. That report uncovered how HUD has struggled with theft, corruption, and mismanagement at more than 3,000 public housing agencies across the country.

Philadelphia’s Housing Authority is the fourth largest public housing authority in the country, operating more than 14,000 affordable housing units. Its annual budget of roughly $345 million covers 1,200 employees, with most of that funding coming directly from HUD.

In addition to questions about whether the expenditures were necessary, the audit found there was a conflict of interest with at least one law firm that “employed an immediate family member of the chairman of [the Authority’s] board of commissioners.” Approximately $7 million went to the law firm in question. The report also goes into detail on how the Authority failed to provide basic documents to auditors and used outside counsel to block the progress of the investigation. When documents were furnished, they were often incomplete.

The IG recommended that HUD to require the Authority to provide total documentation for the $4.5 million inspected in the audit, and to do an audit of the remaining $26 million if it found costs that couldn’t be justified.

Grassley called on Housing Secretary Shaun Donovan to take action, warning that “If changes aren’t made, the housing authority will continue to pay ‘enormous sums’ for legal work that is ‘unsupported, unreasonable, and unnecessary.’ I’d add untenable.”