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Feds Slam Troubled NBHA in Audit, But Corrective Plan Still a Secret

HUD Seeks to Penalize NBHA With Funding Cuts After Questioning $1.4 Million Spent
Clarke and Cahill
NBHA's embattled Executive Director John Clarke speaking with Mayor Jim Cahill. Charlie Kratovil

NEW BRUNSWICK, NJ—The embattled New Brunswick Housing Authority (NBHA) failed to properly administer federal funds and could face funding cuts as punishment, according to a scathing audit by federal authorities.

Despite the poor optics, the NBHA has refused to release its Corrective Action Plan, a document that might respond to the "weaknesses in the Authority’s governance, management, and operations" identified in the US Department of Housing and Urban Development (HUD) audit.

HUD found $226,539 spent on "ineligible" costs, money that the federal government wants to be reimbursed, and more than $1.2 million for which it wants additional documentation to support.

The audit is yet another event in a string of embarrassments for the public agency identified by the feds as "troubled."

Four NBHA board members have left their public offices since the summer of 2015.

This newspaper also caught the agency overcharging its tenants with thousands in extrajudicial parking fines, and uncovered other deep-seated problems at the agency, many involving their unlawful degree of secrecy.

City police are now investigating the NBHA for violations of a government transparency law, the result of a complaint filed by this reporter.

The devastating audit also comes just four years after a similar report questioned $265,020 in "unsupported" costs over the NBHA's purchase of security cameras without proper board approval.

The authority administers 429 low-income public housing units and 868 "housing choice vouchers," but it also serves as the city's powerful "redevelopment agency," a very different job that sometimes conflicts with its stated mission.

The NBHA was recently  assessed as the third-worst public housing agency in the nation, according to HUD's Public Housing Assessment System.

The embattled agency "did not properly procure goods and services for 19 of 24 contracts reviewed," according to the report released on September 28.

"The Authority did not fully understand HUD's requirements and did not have adequate controls in place," wrote Kimberly Dahl, the Regional Inspector General for Audit.

As TapInto New Brunswick put it, the NBHA "limited competition by creating an excessive array of hoops for other contractors to jump through in order to enter the bidding process."

"HUD did not have assurance that the prices paid for capital improvements and professional services were reasonable, capital funds were used for eligible activities in a timely manner, operating funds were available for the operations of the Authority’s project, and it had accurate information for evaluating the Authority," the damning document reads.

Since February 21, the NBHA has quietly been engaged in a "recovery agreement" with HUD.

That agreement was signed by Cahill and then-Chairman of the NBHA Board Yirgu Wolde.  It was never before been mentioned publically--not even during the authority's board meetings--until this reporter brought it up at a recent City Council meeting.

The agreement spells out serious consequences should the authority be unable to follow their secret action plan.

The NBHA was audited "because it was classified as a troubled public housing agency, and based on our risk analysis of public housing agencies located in the State of New Jersey," wrote HUD's Office of Inspector General (OIG) in their audit report.

"The Authority was designated as a troubled public housing agency by HUD based on a failing Public Housing Assessment System score of 41 out of 100."

Clarke, the agency's Executive Director since 2001, had previously dismissed HUD's poor ratings that led to the audit, blaming them on Hurricane Sandy, a storm that struck more than three years before.

According to published reports, Clarke's response to the audit report was largely the same: blame it on the rain.

Clarke said that some 19 buildings at the Schwartz Homes and Robeson Village housing complexes were damaged in the 2012 storm, causing the authority's scores to dip.

But when their ratings kept plummeting over the next three years, Clarke was left blaming "erosion" allegedly caused by the storm for the abysmal numbers.

In reality, the poor ratings had little to do with Sandy, or any other natural occurrence.

Rebecca Escobar, a former NBHA Board Member who serves as the City Council's liason to the Housing Authority has admitted she has not seen the corrective plan, and thanked New Brunswick Today for sharing information with her.

At the Council's October 18 meeting, she said she had read the audit report but was "still digesting it."

According to the recovery agreement, the NBHA must submit to HUD "a monthly report for activities and comments until it had completed all items listed in the action plan, even if HUD had removed the Authority’s troubled-substandard designation."

But none of those reports have been made public, and it's still not clear what items might be listed in the action plan, although the audit provides some new clues.

On October 17, the NBHA officially denied a lawful request for the document, claiming it was not a public record because it was "inter-agency deliberative material."

At this point, there is no way for the public to have confidence that the NBHA's corrective plan is appropriate, or if they are following the plan at all, mostly because the authority and seven-term Mayor James Cahill haven't made it public yet.

"The issues raised in this audit have already been addressed by the Housing Authority in its Corrective Action Plan adopted earlier this year," insisted Cahill in a statement emailed through his spokesperson.

In a brief interview a few days later, Cahill declined to provide details of the corrective plan, instead indicating he would rather "ask the Housing Authority to get that [plan] over to [New Brunswick Today]."

In the two weeks that followed, Cahill's office failed to produce a copy of the plan.

On October 23, his spokesperson confirmed that the NBHA had actually "declined" Cahill's request to have the plan sent to this reporter.

"Mayor said he would ask authority to send you a copy. He did ask them to do so and they declined," Cahill spokesperson Jennifer Bradshaw wrote this reporter via text message.

"It's their document," said Bradshaw.

But when the NBHA's Board approved the Action Plan for the first time on January 25, they indicated it would become public after getting the Mayor's approval.

"This is going to be a public document after the Mayor signs it, HUD approves it, then it becomes a public document," said then-Chairman Yirgu Wolde at the meeting.

Wolde has since been replaced by Dale Caldwell, who accepted the Chairman position via telephone at the board's strange September meeting.

But, back in January, Wolde seemed to say that the document would eventually be made public.

"The procedure is for the Mayor to approve it, and then for HUD to review and approve it and then it becomes public," Wolde said under questioning, adding with condescension: "So we can't change regulations or guidelines just for the sake of providing you with that information."

Nevertheless, experts in the legal field have indicated that any document approved by resolution of the board, such as the Action Plan, would by definition be entirely public documents.

Back in January, one of the NBHA's expensive lawyers jumped to defend Wolde and keep the Action Plan a secret for the time being. 

"It's not a public document until it's approved," said NBHA lawyer Alberto Camacho, of the firm Manfredi & Pellechio,  one of the firms hired under questionable circumstances outlined in the audit report.

Still, even the Manfredi lawyer agreed the Action Plan should be made public back in January. 

"It's in draft form," Camacho said at the time.  "When a final copy is available, it will be made public for everyone."

Contracts that were improperly doled out included the one to Manfredi & Pellechio, which represents eight other housing authorities and arguably should have known what was going on was improper.

The firm has consistently stonewalled when it comes to releasing documents and other public records to this newspaper under the Open Public Records Act (OPRA).

Joseph Manfredi, a partner in the firm, lost the case this reporter brought against the Housing Authority in 2016, costing taxpayers thousands of dollars.

In a somewhat unusual arrangement, both Clarke and the law firm also work for the nearby Franklin Township Housing Authority, which is engaged with the NBHA in an "interlocal agreement."

As we reported, Manfredi & Pellechio has proven to be ethically challenged when it comes to recognizing and resolving conflicts of interest.

When Manfredi's contract was approved at the NBHA's April 26 meeting, Clarke stated that Manfredi & Pellechio was the "highest scored" bid in the hiring process, but under questioning Clarke quickly revealed it was the only bid.

"This is an annual contract for legal services, which was bid, and the successful and highest bid scored was Manfredi & Pellechio," Clarke said initially.

While all of that was playing out, HUD OIG was reviewing two dozen NBHA contracts, which in turn revealed a pattern of the NBHA avoiding "full and open competition" in the bidding processes it uses to hire most of its private contractors.

The NBHA Board's new Chairman Dale Caldwell failed to address the substance of the Corrective Action Plan in a six-minute interview with NBT on October 20.

"I'm not an attorney so I don't know what the federal requirements are but I think the Corrective Action Plan you're asking for has already been implemented largely," Caldwell said.

But when pressed on what was in it, he was unable or unwilling to say.

"I can't even comment on that because I don't really know... I'm not going to say it on camera."

Caldwell kept suggesting we reach out to the "very good law firm" of Manfredi & Pellechio to obtain a copy of the report.  Those efforts went nowhere.

The new HUD OIG audit included five major findings, including that the NBHA:

  1. did not properly procure goods and services totaling more than $1 million;
  2. did not support more than $187,000 in capital fund obligations;
  3. did not meet obligation deadlines for more than $704,000 in replacement housing factor funds and disbursed more than $139,000 after the expenditure deadline
  4. charged its project more than $87,000 in excessive management fees; and
  5. did not ensure that its budget, financial reports, and accounting data were accurate and up to date. 

Still, city officials acted as if there was nothing to see here, even though it's not the first scandal to befall the agency.

"While there may have been a technical violation related to the timely expenditure of funds... the actions of the Housing Authority will be found to have been appropriate," said Mayor Cahill, who does not attend Housing Authority or City Council meetings.

Caldwell kept saying there was only "one finding" in the audit in his interview, which is technically accurate. The finding, "The Authority Did Not Always Administer Its Operating and Capital Funds in Accordance With HUD Requirements," includes a number of divergent issues, including the one dealing with another organization he leads.

Without getting other bids, the NBHA spent more than $800,000 on vendors approved by the Educational Services Commission of NJ (ESCNJ), a co-op with the same Board Chair as the NBHA.

Caldwell also serves as President of the city's elected Board of Education, another member of the ESCNJ's co-op.

Among the other questionable contracts at issue was one that went to Joseph F. McKernan Jr. Architects, a Cherry Hill firm that was hired to install an expensive generator outside the NBHA's headquarters in 2015.

Several sources questioned the need for a generator at the building, considering it is only open four days per week and includes little more than offices, a kitchen, and a rarely-utilized community room.

The rest of the 259-unit complex would be left without electricity in a power outage situation, despite its installation at a cost of $274,021.

Delays in getting the project completed, which the NBHA blamed on Hurricane Sandy, led to the authority expending its federal "housing factor funds" from 2009 too late to be legal.

Some of those funds are among the more than $226,000 that HUD has declared ineligible expenses, and HUD did not find the NBHA's explanation plausible.

The remaining ineligible expenses came in the form of more than $87,000 in "excessive management fees" related to Pennrose Properties' demolition of a NBHA-owned building on Neilsen Street.

That building was never replaced like Pennrose had promised, and their applications for financing a replacement have failed in recent years.  But the developer remains in possession of a $274,754 "predevelopment loan," and was paid nearly $1 million to demolish the building that had housed hundreds of senior citizens over the years.

Attempts to obtain the corrective plan from Cahill's spokesperson Jennifer Bradshaw, the City Council, NBHA Chairperson Dale Caldwell, Executive Director John Clarke, and Director of Operations Mark Roedelbronn have all led nowhere.

The recommendations from HUD OIG are that HUD requires the Authority to:

  1. provide documentation to show that more than $1 million paid for goods and services was reasonable;
  2. provide procurement training to its staff;
  3. provide documentation to support more than $187,000 in 2013 and 2014 capital fund obligations;
  4. reimburse HUD $139,423 in replacement housing factor funds disbursed after the expenditure deadline;
  5. improve its controls to ensure that funds are obligated and spent in a timely manner;
  6. reimburse its project more than $87,000 for excessive management fees;
  7. submit a request to revise its budget to reflect expenditures; and
  8. improve its controls to ensure that its budget, financial reports, and accounting data are accurate and up to date.

US Congressman Frank Pallone, who has been in office since 1989, admitted on October 20 that he had not yet even seen the audit report, even though New Brunswick Today went out its way to provide a copy of it directly to his chief of staff two weeks earlier, and subsequently followed up four times with his office seeking comment.

"I'm not really prepared to respond to it.  I gotta take a look at it.  I'm not really prepared," said Pallone during a brief interview broadcast live on October 19.

Multiple attempts to follow up with his office to get a comment from the Congressman on the matter have been unsuccessful.

Even an in-person visit to NBHA headquarters that same day, accompanied by a long-time resident of the Schwartz-Robeson neighborhood, failed to secure a copy of the Action Plan as the agency's top officials were all out of the office and no one with access to the plan was present.

Like Pallone, Cahill has been in office for roughly three decades.

Just over eleven minutes into a scheduled fifteen-minute interview on October 10, we asked Cahill if he had a moment to discuss the audit.  He did not seem eager to do so, and quickly bailed out.

"No," said Cahill. "It's fifteen minutes and it's about fifteen minutes, so if you have a one-minute question, I can do that."

Knowing that the Mayor had already touted a "corrective action plan," but had not yet released it to the public or acknowledged its contents, we asked him a simple question: What are the corrective actions that are being taken?

"There's a detailed corrective action plan that the Housing Authority has filed with HUD, so rather than trying to give you a decent enough synopsis," responded the longtime Mayor. "I will ask the Housing Authority to get that over to you."

Shortly thereafter, Cahill's spokesperson wrote to say: "I am looking into [releasing the corrective action plan] today, I will be back in touch with you soon."

But nothing further came forth, and multiple visits to City Hall yielded the same result.  Subsequently, New Brunswick Today has filed an OPRA request with the City Clerk's Office, and a Freedom of Information Act (FOIA) request with HUD.

But nine months after the Action Plan was first approved, nearly a month after the audit report was released, and two weeks after Cahill initially dodged our question, the Corrective Action Plan remains a secret.