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Housing Authority of the County of Santa Cruz report on investigation into fraud allegations

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Housing Authority of the County of Santa Cruz report on investigation into fraud allegations Powered By Docstoc
					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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