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2931 MISSION STREET, SANTA CRUZ, CALIFORNIA 95060 Wait List Information: (831) 454-5950 Telephone: (831) 454-9455 Fax: (831) 469-3712 TDD: (831) 469-0122 Website: www.hacosantacruz.org Report on Investigation into Allegations of Manipulation of Waiting List Process and Rent Holds on Foreclosed Properties February 22, 2012 Timeline October 24, 2011 Housing Authority receives notification from Santa Cruz Sentinel regarding an anonymous letter alleging in the first part that an employee of the Housing Authority was overheard boasting of manipulation of Housing Authority waiting list process to move friends up on the list. In the second part the same employee is allegedly overheard as to having placed some landlord Housing Assistance Payments “on hold” in an effort to take advantage of the landlord’s resulting financial crisis. Ken Cole, Executive Director of the Housing Authority of the County of Santa Cruz, contacts Office of the Inspector General (OIG) to acknowledge receipt of the allegations; announce the beginning of our investigation, and to assure full cooperation with any OIG investigation. Phase one of investigation begins. November 7, 2011 Housing Authority meets with OIG agents to discuss progress of investigation. OIG requests additional information. Phase two of investigation begins. November 21, 2011 Housing Authority submits all data requested by OIG. December 7, 2011 Update on investigation presented in closed session to the Housing Authority Board of Commissioners. No action taken as the investigation is ongoing. Phase three of investigation begins. January 2012 Employee named in the complaint interviewed. Review of the Housing Assistance Payment “holds” on foreclosed properties conducted. February 10, 2012 DRAFT of Investigation Report submitted to OIG. February 22, 2012 Investigation Report presented to the Housing Authority Board of Commissioners. BOARD OF COMMISSIONERS KEN COLE Jan Karwin, Vice Chairperson Executive Director Aurelio Gonzalez Owen Lawlor Ron Pomerantz Richard Schmale Bud Winslow Phase One The Housing Authority of the County of Santa Cruz began the first phase of our investigation immediately upon receipt of the allegations. Based on the details of the allegations which, in part, allege that an employee manipulated the rate at which applicants are determined eligible to advance the application of a friend, we focused the first stage of our investigation on the period of time between the date an applicant submits a completed initial application and the voucher issuance date. To begin the investigation, we reviewed a tracking spreadsheet that includes data for everyone who began the initial eligibility process from January 1, 2010 through the current date. We calculated the number of days from the receipt of their completed application to the date that they received their voucher to look for outliers and to specifically look for instances where households moved through the application process quickly. The spreadsheet contained entries for 1,394 households that reached the top of the waiting list from January 1, 2010 through the current date. For those who had since received vouchers, the number of days between receipt of the completed application and issuance of a voucher was calculated. In 15 cases, households had a relatively short period of time (less than six months) between the receipt of their application and the issuance of their voucher. Each of these 15 cases were examined and the information on the spreadsheet was reconciled to more detailed records contained within the applicant file. In each case, several different staff members worked on the various processes including initial placement on waiting list, mailing the various letters, mailing out initial application packet, receiving the initial applications, review of initial application and documentation, follow up requests for information, scheduling of initial interview appointment, determination of eligibility and scheduling appointment for the briefing to receive the voucher. Nothing in the processing of these files seemed to be out of the ordinary or raised any suspicions. It appears that these households got through the application and eligibility process faster simply because they provided all of the required documentation in a very timely fashion. These files have since been provided to OIG for additional review. Phase Two Two representatives from OIG met with us on November 7, 2011 to discuss the status and scope of the investigation. We provided OIG with a memo detailing the methodology and findings of the investigation to date. At that time, OIG requested some additional information, with an emphasis on audit tracking reports to detail any changes made to key waiting list data. The Housing Authority conducts routine backups of all waiting list data on a weekly basis and secures this data so that it cannot be edited. For the purposes of this reporting, we copied all of the data from the first backup in 2010 and all of the data from the last backup prior to our software conversion and imported it into a database for comparison. Please note that this includes all records present in the waiting list module of the software (all active records and all inactive records), regardless of the status of the applicant. Over 30,000 unique records were included in the comparison. All changes to key waiting list data, such as names, social security numbers, and application dates were examined. In each case, the changes were supported by appropriate documentation. Based on this review we are very confident in the accuracy of our waiting list data, and we see absolutely no evidence that any data has been tampered with or manipulated. The mere fact that out of a universe of over 30,000 records, so few records had actually changed in this nearly two year time period is itself a demonstration of the security and stability of this data, and reinforces the extent to which technical safeguards and good administrative policies were (and are) in place. The records that did change all reflect valid corrections that are supported by appropriate documentation. Although our previous software had very limited audit tracking features, the software we have selected and are currently using offers much better audit tracking reports. At this time, the WinTen2 software tracks each and every change made in the waiting list module, and reports are now available to document exactly what changed, how it changed, who changed it, and when it was changed. These reports are already being used as a management tool to further enhance the security of the data in the waiting list and ensure that families are selected in the correct order. Phase Three On January 18, 2012 the employee whose first name only was given in the anonymous complaint letter was interviewed. Ken Cole, Executive Director and Linda Igarta, Administrative Services Director met with the employee. The interview lasted approximately 25 minutes and only general questions relating to the details of the complaint were used. The employee gave what appeared to be thoughtful, sincere and concerned replies. The employee maintained they have always strictly followed Housing Authority policies and that all of the employees in the Property Management Department and the Department Director Mark Failor do so. Anytime something occurs that is “outside of the norm” the situation is looked into immediately and resolved. The employee maintained he/she never discuss the details of his/her work with friends or family and never has conversations about work in public places. The employee denied ever having manipulated the waiting list data or processes to advance any applicants. The employee maintained to having never purchased foreclosed properties or to having friends, relatives or acquaintances that do so. The employee’s answers did not seem rehearsed and no defensiveness was noted. Ken Cole and Linda Igarta both concurred, after the interview, that no further investigation of the employee seems warranted at this time. A more detailed record of this interview was sent to the Office of the Inspector General. During the month of January the second part of the allegations, regarding Section 8 rental properties going through foreclosures, was examined. The letter contained very few details of this issue. It was maintained that the same Housing Authority employee named in the first part of the letter was putting Housing Assistance Payments (HAP) on hold in an attempt to force property owners into a foreclosure and allow the employee time to alert a friend in the real estate business of the property addresses in order for their friend to take advantage of the owner’s financial distress. The records of properties where HAP payments were put on hold and where the property was known to have had an ownership change during calendar year 2010 were examined. Forty-seven properties were identified fitting these criteria. The employee in question handled about 33 of these cases as was typical for the work flow and job duties at that time. During the review no unusual patterns of property ownership changes were noted and no Housing Authority employee names turned up as the new owners of the properties in question. Also it was noted that at no time has the Housing Authority ever received a complaint of this kind from an owner participating in the voucher program. In addition, it was and remains an agency policy and practice to take the HAP payment off hold the moment the owner demonstrates that they are still the owner of record. It is worth noting that the Housing Authority has no information regarding the legal and financial status of a property that isn’t already public record. For example, foreclosure notices are routinely printed in local newspapers and the Housing Authority staff doesn’t monitor or track these notices. We only initiate a hold on a HAP payment when an owner or tenant alerts us to a situation that warrants such an action on our part. Conclusion This investigation began on October 24, 2011 following the receipt by the Housing Authority of the County of Santa Cruz of an anonymous letter alleging that an employee of the agency was manipulating two key parts of our program operations for financial gain. The letter writer shared details regarding the allegations which were said to be overheard in a public location. The specific allegations included how the employee was to have manipulated the agency process in which applicants receive housing choice vouchers by moving selected cases ahead of others, and purportedly to having placed Housing Assistance Payments to landlords “on hold” in an effort to force them into foreclosure allowing time for a friend in the real estate business to take advantage of the owner’s plight for financial gain. The Board of Commissioners, management and staff of the Housing Authority of the County of Santa Cruz consider any manipulation of our policies and practices to be abhorrent and completely contrary to our mission as a public housing agency. Although we would have preferred to have been able to interview the person making the complaint we were not hindered in our investigation by the complaint having been anonymous. We encourage any program participant or member of the public to provide us with any concerns or information they may have which indicates any kind of problem with our agency and to do so without fear of any kind of retaliation. In the case of these allegations we have thoroughly reviewed all of the available records, as described in this report, and we can find no facts that support the assertions made in the letter. We feel that this investigation has demonstrated that our existing program safeguards are working and would prevent the kind of manipulation described in the complaint. Although the allegations were detailed in nature the letter writer maintained that they did not overhear the last names of the people who allegedly conspired and benefitted from the employee’s actions, which left our agency no specific cases to investigate. If at any time in the future we are provided with any additional details regarding these allegations we will immediately reopen our investigation.
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