Federal government takes over Slidell Housing Authority
The U.S. Department of Housing and Urban Development took possession of the Slidell Housing Authority, which administers federally funded affordable housing programs for the city, after finding the agency in “substantial default” of its federal contract, HUD spokesperson Scott Hudman confirmed Tuesday (Canva image)
NEW ORLEANS – Federal authorities have taken over the city of Slidell’s beleaguered housing authority, accusing local officials of blocking access to finances and records, skirting a subpoena and violating other parts of its federal contract.
The U.S. Department of Housing and Urban Development took possession of the Slidell Housing Authority — which administers federally funded affordable housing programs for the city — in November after finding the agency in “substantial default” of its federal contract, HUD spokesperson Scott Hudman confirmed Tuesday (Jan. 10).
It’s unclear how the legal and bureaucratic turmoil is affecting services to the low-income residents who depend on the agency for help in finding and acquiring affordable housing.
The takeover is the latest setback for the Housing Authority of the City of Slidell, which has a 55-year history punctuated by periods of scandal. Two high-level officials have been caught spending agency funds for private use since the 1990s, in one instance prompting the mayor of Slidell to fire the authority’s entire governing board. And for years, the authority struggled to keep up with regular audits as it dealt with financial and management issues.
HUD’s possession of the authority is tied to a series of disputes in recent years during which the authority sued HUD, accusing the federal agency of withholding money the housing authority said it needed to manage and maintain its public housing developments.
An October letter sent by HUD warning Slidell’s housing authority of the imminent takeover cited its failure to turn over books and records the federal housing agency said it needed to properly oversee the authority and ensure its regulatory compliance for the programs it operates with federal funds. HUD also accused the authority of ignoring a subpoena related to a probe of its local accounting firm.
Weeks later, on Nov. 9, HUD made it official, dissolving the housing authority’s local governing board and removing executive director Shelia Danzey.
Efforts to reach Danzey, who was appointed director in 2010, were unsuccessful.
According to HUD, the housing authority has other longstanding issues that prompted the takeover, including a “lack of effective and responsible leadership” that failed to follow HUD requirements to access funding for capital improvements to its ailing public housing projects, among other missteps.
“HUD is unable to rely on the integrity and trustworthiness of HACS’ Executive Director as well as its Board of Commissioners,” wrote Dominique Blom, HUD’s general deputy assistant secretary for Public and Indian Housing. “As a result, HUD funds and the welfare of HACS’ residents are in jeopardy. The persons responsible for overseeing the affairs of the Housing Authority have engaged in years-long delay that has prevented HUD from reviewing documents that HUD is entitled to review.”
Representatives with HUD’s Office of Inspector General — which conducts financial audits and investigations for the agency — were present at the authority’s Slidell headquarters in November as Danzey was placed on administrative leave; HUD gave Danzey a stop work order on her contract, the future of which is “still pending,” Hudman said.
HUD can declare a public housing authority to be “in substantial default” when the authority violates federal statutes or regulations, or terms of its HUD contract. HUD can then give the authority a chance to fix its problems or offer technical assistance. Housing authorities can go under HUD’s control, or be forced into a receivership by a court. Federal control can last for years, as was the case with the Housing Authority of New Orleans, which was under federal receivership from 2002 to 2014.
Patricia Dearing, who was until recently a commissioner on the Slidell Housing Authority’s governing board, disputed HUD’s allegations. In an interview, she said the authority’s small staff made good-faith efforts to produce voluminous, often redundant sets of documents repeatedly requested by local and regional HUD officials over the years.
“The only thing we were guilty of was not producing paper,” said Dearing, who was appointed to the board in 2011.
A ‘bureaucratic nightmare’
Slidell’s housing authority has frequently been under federal scrutiny for alleged mismanagement in the years following Hurricane Katrina in 2005, as it regularly missed or submitted late audit reports.
In 2010, findings by HUD prompted the removal of executive director Marvin Butler and the firing of the entire authority board. Butler was discovered to have misused agency funds by giving himself a $10,000 raise and $6,000 car allowance; using an agency credit card for personal expenses for years without board approval; and living in one of the authority’s units rent- and utilities-free.
The agency’s independent watchdog also probed the Slidell authority in 2013, when it found some problems with the authority’s administration of the Section 8 program.
Danzey took over the agency shortly after Butler’s firing. It was the second time the authority had hired Danzey to step in after an official was caught spending agency funds for personal use. In 1996, the authority’s board first tapped Danzey, a former HUD staffer who also briefly ran the Housing Authority of New Orleans in the 1990s, following another scandal in which one official was alleged to have embezzled thousands of dollars for car down payments and gas for those cars, according to newspaper reports.
More recently, HUD has also gone after the authority’s contracted financial auditor in New Orleans, the accounting firm Bruno & Tervalon — seeking to ban the firm from federally connected work — an effort connected to a 2019 lawsuit the authority filed against HUD over funding issues.
That year, the Slidell authority sued HUD in the U.S. Court of Federal Claims, alleging the federal agency had violated Slidell’s funding contract by forcing it to seek approval before spending federal funds it received through HUD’s grants disbursement system.
In the lawsuit, the housing authority’s lawyers said its most recent set of problems began after a 2016 computer crash wiped out its accounting program, requiring the authority to reconstruct all of its financial records. That caused the authority to submit a late financial report, resulting in a low score on a regular HUD assessment that placed the authority on “troubled” status.
The only thing we were guilty of was not producing paper.
– Patricia Dearing, former Slidell Housing Authority commissioner
Though the authority successfully appealed that designation and raised its scores in the subsequent years, HUD’s field and regional offices still limited its ability to draw down funds. And even though four separate financial audits conducted in 2017 found no evidence of fraud or misappropriation of funds, according to the suit, HUD also subjected the authority to burdensome audits and paperwork requirements in what its lawyers called a “bureaucratic nightmare.”
HUD said in court filings that the agency had in 2017 begun requiring the Slidell authority to seek HUD authorization to spend the operating funds it receives because of “continuous noncompliance with HUD regulations,” citing audits and compliance reviews from 2015–2017 that showed “significant deficiencies and material weaknesses as it relates to the internal control over financial reporting and major programs” and a failure to follow a procurement process.
“Instead of addressing the numerous documented deficiencies in the financial management of its housing program, [the Slidell Housing Authority] instead filed this suit requesting access to its grant assistance,” attorneys for HUD wrote in a 2020 court filing.
But the federal judge assigned to the case expressed skepticism over HUD’s arguments, and the parties settled the suit in July 2021. HUD agreed to remove the “zero-threshold status” requiring HUD to greenlight all expenditures, the housing authority said in its 2022 financial audit. By summer 2022, HUD had paid out operating subsidies it had been withholding from 2017 to 2021 — about $1 million — and $20,000 in legal fees, according to that report.
According to the Oct. 2022 HUD letter, the authority’s claims of having clean audits led HUD to scrutinize the work of Bruno & Tervalon, which had done the audit. A HUD review alleged that the company’s audits of the authority were “materially deficient.” HUD proceeded to seek “government-wide debarments” of the company, which would prevent it from doing work for the federal government or federally funded programs, through an administrative process, though Bruno & Tervalon appealed.
Representatives with Bruno & Tervalon — which has performed financial audits for local housing authorities and municipal agencies throughout the state, as well as for a number of New Orleans charter schools — did not immediately respond to a request for comment.
Dearing, the former commissioner, said the subpoena HUD accused the authority of ignoring was tied to HUD’s inquiry into Bruno & Tervalon, which conducted the authority’s 2016 and 2017 audits following the loss of financial records in the 2016 computer crash.
The authority’s most recent, July 2022 audit by Bruno & Tervalon found that the authority “complied, in all material respects” with requirements for its major programs.
‘I don’t think the tenants even know what’s happening‘
Most top current and former officials with the authority have remained quiet in the two months since HUD took over.
Ronald Frazier, promoted from deputy director to the authority’s interim executive director as a result of the takeover, didn’t respond directly to a call or text message. An unsigned agency response to a reporter’s emailed inquiry directed all questions to HUD.
Recent commissioners other than Dearing didn’t respond to or declined requests for comment. The board’s vice president, Carol Broussard, said she couldn’t answer questions about the takeover because she doesn’t remember details and isn’t articulate.
“How did I learn about it? If you knew how bad my memory is and how foggy I am. … It was unexpected and I probably got a call,” Broussard said. “I’m not going to say anything else.”
Slidell City Attorney Thomas Schneidau also declined to comment. Though the housing authority functions independently of the city, the mayor appoints its board. And Mayor Greg Cromer was copied on the recent correspondence from HUD.
An agenda for a December board meeting shows HUD had already appointed two recovery administrators, Brian Gage and Jeni Webb, and planned to confirm Frazier, then the authority’s deputy director, as interim director.
Since it assumed control of the authority’s day-to-day operations, HUD has reopened the authority’s Slidell offices, drafted two agency plans, begun new procurement actions and started holding regular public meetings, according to Hudman.
Amythist Kearney, an attorney with Southeast Louisiana Legal Services who has represented the housing authority’s clients, said she learned of the news — which came as a surprise to her — in late December, when she called the authority and reached Frazier.
“I don’t think the tenants even know what’s happening,” Kearney said of the takeover.
Created in 1967, the housing authority currently manages about 125 public housing units and 600 Section 8 vouchers, according to recent HUD data.
This article first appeared on Verite and is republished here under a Creative Commons license.
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