A long-awaited federal study of the Chicago Housing Authority, to be released Thursday, is harshly critical of the emergency management team dispatched by Mayor Harold Washington to reform CHA operations.
The report, obtained Wednesday by The Tribune, criticizes CHA interim Executive Director Brenda Gaines for taking actions that were ”fiscally irresponsible.”
It blames her administration for continued cost overruns at the housing authority and specifically cites her for using a chauffeur, for accepting a high salary and for transferring top aides since becoming interim executive director on Jan. 7.
The criticism of Gaines is one of many surprises contained in the 76 findings of the management review, which was conducted over a five-month period by a team of experts from the U.S. Department of Housing and Urban Development.
Also surprising is the review`s endorsement of the CHA`s Operation Pride program, under which public-housing residents were hired for part-time, low-paying janitorial jobs. The program, which was begun immediately before the mayoral primary, has been criticized as a political tool for Washington.
The HUD review was requested last year by then-CHA Chairman Renault Robinson. Because its purpose was to study CHA operations dating back to Jan. 1, 1984, the review had been expected to focus on the administration of Robinson and former Executive Director Zirl Smith.
During meetings April 22 and 27 to discuss the findings of the review, HUD officials told top CHA managers and board members that the review covered operations through December, 1986, according to sources who were present. Those sources said federal officials made no mention of the criticisms of the Gaines administration during the meetings.
The study, conducted from Nov. 5 through April 17, was coordinated by Phyllis Griffith, a HUD specialist who colleagues say has had a long working relationship with Robinson and CHA board member Leon Finney Jr.
In recent weeks, the review`s objectivity has been questioned because of Griffith`s ties to Robinson and Finney and because many top CHA officials were not interviewed at all or were given only cursory interviews. For example, Gaines and Earl Neal, the chairman of the CHA board`s finance committee, were not interviewed, and Smith was interviewed for just over an hour.
It isn`t known what effect, if any, a running feud between Gaines and Gertrude Jordan, regional HUD administrator, may have had on the report. Over the last five months, Gaines, who worked for HUD for 13 years, has complained to Jordan about leaks from her office, and Jordan has accused Gaines of
”immaturity” and a lack of knowledge of HUD operations.
On Wednesday, Gaines and other CHA officials declined to comment on the HUD review.
In comparison with the comments about Gaines, the review`s criticism of the CHA board is somewhat muted. The board ”was ineffective in carrying out its responsibilities,” the report says.
The board is criticized for agreeing to buy out the contract of Smith, who resigned on Jan. 7. Under the buyout, Smith was paid a lump sum of $44,500 for the remaining five months of his contract, and payment and fringe benefits were continued for his executive assistant, Gaylene Domer.
”HUD does not condone this action, and HUD was not consulted prior to the agreement,” the report says. ”There is no way to justify this continuation of pay, accumulation of sick and annual leave, payments into the retirement fund, payment of insurance premiums and other fringes.”
Smith resigned in the aftermath of the CHA`s loss of $7 million in federal funding for elevator repairs because the agency failed to award the money by the end of 1986.
At first, Robinson and Washington`s chief of staff, Ernest Barefield, blamed Smith. But Neal, who negotiated the buyout with Smith, exonerated him during the board meeting at which his resignation was accepted. Letters from Jordan to Robinson, obtained later by The Tribune, indicate that Robinson was responsible for the missed deadline.
On the day Smith resigned, Gaines, Washington`s deputy chief of staff, was sent to the CHA to replace him at the same $84,000 salary. Robinson, under fire for his management of the agency, resigned nine days later.
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The HUD report criticizes the salary that Gaines is being paid. ”A contract for services between the CHA and the Interim Executive Director was executed without HUD approval, or even full Board approval,” the report says. ”The latest approved Operating Budget authorized the Authority to pay only $70,000 per year.”
The Gaines administration is blamed for continuing cost overruns in the operating budget, and, among the reasons cited for that in the report, is the use by Gaines of a driver which ”costs the Authority approximately $58,000 yearly, including fringe benefits.”
The report makes no mention of the drivers that Robinson and Smith had when they were housing authority officials. According to the CHA, Gaines`
driver is paid only $16,000 a year.
The HUD review censures Gaines for bringing in her own management team without getting rid of previous members of the old management team.
”While it is reasonable that the Interim Executive Director would prefer her own staff in key positions, it is fiscally irresponsible to pay salaries for her staff while the persons formerly in the positions have continued with no reduction in pay while assigned to newly created positions,” according to the report. However, only three examples are cited.
The review criticizes a top Gaines aide, Anthony Q. Drake, the CHA`s acting deputy executive director for finance who is on loan to the housing authority from city government. According to the review, Drake, who has been at the agency since January, acted improperly in failing to get HUD approval before hiring an audit firm to help the CHA determine its financial position. As expected from numerous news leaks over the last five months, the review is critical of many of Smith`s actions when he was CHA executive director. But in most cases, the report avoids naming Smith or even referring to him by his former position.
Nonetheless, the leaks from HUD sources have made it clear that federal housing officials believe that Smith was responsible for such questionable decisions as spending $500,000 to remodel the CHA`s administrative offices and splitting contracts to avoid the need for review by the CHA board.
The remodeling was done on the CHA offices at 22 W. Madison St. ”though the authority doesn`t own the building and the lease was about to expire,”
the report says. The report also says the housing authority should not have paid $4.5 million a year to rent those offices while it owns another building at 55 W. Cermak Rd. that is leased to the Illinois Department of Public Aid for $57,000 a year.
According to the report, the CHA could ”realize tremendous savings” by moving its offices to the Cermak Road building. For the last month, city real estate experts are helping the CHA look for less-expensive office space.
In a section on the CHA`s controversial scattered-site program, the report does criticize Smith by name in connection with findings of
mismanagement and waste in the acquisition of construction materials.
The review makes few references to Robinson.
In one of those, the review notes that Robinson moved in October, 1985, to take control of several major functions at the CHA, including
responsibility for communicating directly with HUD and for monitoring the financial and legal departments.
”According to interviews with some board members, and correspondence from CHA, this action was taken so that the board would become aware of all HUD issues and could direct the administration staff accordingly,” the report says.
”This action was too little, too late. . . . Supervision and direction of the technical staff remained the jurisdiction of the executive director. The chairman and the board of commissioners did not become the decision makers for the authority, and as a result, the situation worsened until HUD was forced to recapture certain modernization funds.”
Perhaps the only complimentary comment in the HUD report was its strong endorsement of the Operation Pride program.
”One of the areas in which the Authority has done well over the years is social/tenant services,” the report says, but adds, ”We are concerned that resident employment programs, such as Operation Pride, are being terminated.
”Not only do these programs contribute to an increased sense of self-worth for residents, a badly needed service was being performed for which the CHA will eventually be forced to pay union workers to do, unless the cleaning and light maintenance tasks are to go undone. We believe the benefits of Operation Pride far outweigh the savings to be realized from terminating the program.”
The 238 Operation Pride workers were hired on Jan. 20, just 35 days before the Democratic mayoral primary in which Washington defeated former Mayor Jane Byrne. In late April, just 14 days after Washington was re-elected, CHA officials announced that the program would be halted at the end of the month. Because of an outcry from residents, the program was expanded through May at a cost of about $100,000, but it is scheduled to expire Sunday.
The report summary listed more than a dozen specific ”causes” of the CHA`s budget deficit, many of them quite small in comparison to the agency`s $200 million budget. It criticizes the CHA for:
— Reimbursing employees for actual travel expenses ”without any limits on lodging and meals.”
— Providing Gaines with a chauffeur at a cost of ”approximately $58,000 yearly, including fringe benefits.”
— Spending $500,000 to remodel its offices at 22 W. Madison St. ”though the authority doesn`t own the building and the lease was about to expire.”
— Paying $4.5 million a year to rent its downtown offices while another building it owns at 55 W. Cermak Rd. is leased to the Department of Public Aid for $57,000 a year. The report said the CHA could ”realize tremendous savings” by moving its offices to the Cermak building.
— Paying membership fees in national housing organizations for its executives and picking up annual fees for their American Express cards.
— Buying $1.2 million in new cars and trucks without specific authorization from HUD.
— Giving money to charities, including Big Brothers, United Negro College Fund, March of Dimes, Chicago Defender Charities and the National Association for the Advancement of Colored People.
— Lending $30,000, which has not been repaid, to the National Association for Housing and Redevelopment Officials to provide entertainment for a recent conference in Chicago.
— Leasing a new telephone system for five years at a cost of $750,000.
— Adding new unbudgeted jobs, including 200 temporary positions, without HUD approval.
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— Handing out consulting contracts without HUD authorization. The report criticized the CHA for hiring the accounting firm of Ernst & Whinney to study its financial problems. ”This contract may have been necessary,” the report said, ”but it was inappropriate to proceed without HUD approval.”
— Giving a $45,000 contract to ”a former high-ranking HUD official”
earlier this year, even though HUD attorneys told the CHA that the contract
”may be inappropriate” because of the official`s former involvement in the legal case that forced the CHA to begin building scattered-site housing. The official, James Albrecht, was not named in the report.
— Giving Gaines an $84,000 contract as interim executive director
”without HUD approval, or even full board approval.”
— ”A great number” of units leased under the Section 8 low-income federal housing subsidy program were held in blind trusts, and ”100% of the units with undisclosed ownership failed our Housing Quality inspecton.”
— The CHA is criticized for using federal money to pay for ”flowers, meals for entertainment and alcoholic beverages” as well as bonuses, gift certificates and jewelry for CHA employees.
— The CHA`s procurement system ”is considered highly vulnerable to fraud, waste and abuse.”
— It is alleged that, at the end of 1984, CHA officials knowingly misrepresented the agency`s financial position.