Hosing Housing

While those projects garnered attention, Stevens was every bit as instrumental in reshaping the way the city doles out housing assistance, in particular about $10 million in so-called HOME grants the city receives from HUD every year.

In December 1995 City Council awarded a contract to Housing Opportunities of Houston to process applications from eligible home buyers for down payment and closing-cost assistance. A month later, the city awarded a $3.15-million contract to HHFC to provide an identical service to home buyers in certain geographic areas of the city. Under that contract, HHFC was allowed up to $300,000 for administrative expenses, which would be reimbursed with federal funds by the city. HUD guidelines require that city housing contractors submit a cost-allocation plan that documents projected costs. HHFC, however, never submitted such a plan, and city housing officials never asked for one.

Apparently there was a good reason: HHFC was incurring little, if any, administrative costs. On March 7, 1996, city attorneys told housing officials in a letter that HHFC had "assigned away" all its duties under the city contract, except one: to "promote" Homes for Houston.

"If HHFC is unwilling or unable to perform its duties," the legal department wrote, then the city should "terminate the contract with HHFC for nonperformance." Less than a month later, on April 1, 1996, a second letter from the legal department again advised housing officials that HHFC was "in contravention" of its contract with the city.

At this point, say HUD auditors, Bingham, Stevens and the rest of HHFC's board of directors fashioned a subcontract, "without city legal counsel's knowledge," that assigned the bulk of the duties -- counseling home buyers, receiving and processing applications, determining eligibility and securing a mortgage lender -- to Housing Opportunities of Houston, a nonprofit formed in 1990 to help bring together lower-income home buyers and mortgage lenders.

HUD criticized Bingham for allowing the subcontract, even after she was informed by the city legal department that the arrangement would not be in the best interests of her employer, the City of Houston.

"Since the city's own legal department objected to the subcontracting of HHFC's duties," the auditors reported, "we maintain that the services were improperly contracted out and the contracts with HHFC were unnecessary."

Auditors also determined that Bingham made "substantial revisions" to the contract that appear to favor HHFC without City Council approval. First, Bingham eliminated HHFC's requirement that it limit its assistance to the purchase of homes in certain geographic areas of the city. The city housing director also appeased Stevens by eliminating the need for HHFC to document its costs. Instead, HHFC was paid a flat fee of $630 for each loan processed. HHFC would then pay Housing Opportunities, which did the actual processing, $272 per loan.

Through last August the city had paid HHFC more than $422,000. But, auditors say, nearly $219,000 of that total is ineligible duplicate payments for services the city had already paid Housing Opportunities of Houston to carry out. HUD was unable to determine whether the remaining $203,000 was proper, because HHFC was not required to document its expenses prior to being reimbursed by the city.

"Because HHFC was reimbursed on a flat-fee basis, the city cannot support the administrative fees paid to HHFC," the audit states. "To be eligible, costs must be documented and conform to federal cost principles."

Loftin says there was no duplication of effort, and that, in fact, HHFC was instrumental in making the home-buyers assistance program a success by "coordinating" a massive effort to educate and provide counseling for low-income home buyers.

"There was a need to pull together a master education coordination process," Loftin says. "That means a hot line, getting people's name on a list, getting them through X-number of hours of orientation. We needed to make sure there was an organized way to get people from the start to the finish, so you have some efficiency in the matter."

But, according to the audit report, the city's home-buyers assistance program was far from efficient. For example, out of 105 cases examined by HUD auditors, nine that received a total of $67,600 were found to be ineligible for federal assistance. Auditors have recommended the city repay that amount to HUD.

Another 46 files --nearly half of those examined by auditors --lacked enough information to determine if the home buyers met federal eligibility requirements. Unless city officials can produce more information on those cases, they will be required to repay another $254,000 to HUD.

The audit report comes one year after the city reimbursed HUD for roughly $1 million in Community Development Block Grant funds following the review of a contract to rehabilitate two southwest Houston apartment complexes. In that case, auditors say city officials did not monitor the contractor, longtime Lanier friend Wayne Duddlsten, to ensure compliance with federal guidelines.