Three employees at a regional nonprofit housing agency were fired last week after state investigators found they exploited a lack of oversight within the organization in order to give a half-dozen highly coveted low-income rental vouchers to friends and relatives ahead of the general public.
State Department of Housing and Community Development officials also found that in two of the cases, the families were benefiting from additional low-income housing funds even though South Shore Housing Development Corporation lacked proper documentation to determine their eligibility.
“These deficiencies are systemic, and expose the agency to a wide range of vulnerabilities,” wrote Lizbeth Heyer, associate director at the state housing department, in a memo to the agency’s executive director, Carl Nagy-Koechlin.
As a result of the irregularities uncovered during the monthlong investigation, state officials will launch a complete audit of the Kingston-based agency this month and will review and approve job descriptions and qualifications for senior managers involved in administering state-funded programs.
A freeze implemented in July on the agency’s ability to issue new rental vouchers will continue through the audit period. The regional nonprofit administers about 4,000 housing-assistance vouchers through various state and federal programs in 62 communities in Bristol and Plymouth counties. The misappropriation did not involve federally funded housing benefits.
A review of the state’s eight other regional nonprofit housing agencies launched after the allegations surfaced found no improprieties, according to state housing officials.
“We’re in a moving-forward mode,” Nagy-Koechlin said. “We learned from the incident that there are some steps we need to take to make sure we’re administering these scarce resources fairly. We fell short of that.”
The three South Shore Housing Development Corporation employees had been on paid administrative leave since late July when an agency employee tipped off Nagy-Koechlin and the state to the misappropriated vouchers that had been awarded during a two-year period. The six families had a “direct relationship” between the three employees and a senior manager, according to the state investigation.
The agency’s senior manager, who had been with the agency for more than a decade, resigned in July immediately after being confronted with the allegations. The nonprofit refused to release the names of the four former employees.
State investigators faulted the agency, which did not have a waiting list in place for rental vouchers, for failing to comply with a state directive to instead use other state housing waiting lists when issuing new vouchers. As a result, “the general public did not have equal and fair access to these program resources,” Heyer stated in the memo. She added that at the core of the problem were “systemic lapses in internal controls in the overall administration and oversight of benefits.”
Other deficiencies highlighted by investigators included the agency’s “inadequate oversight” of middle management and a lack of emphasis for employees of its conflict-of-interest policy.
Michael McGowan, president of the agency’s board of directors, said he is pleased the investigation confirmed that the incident was limited to the six families and four employees. He said the board has been meeting regularly on the matter to make sure it never happens again.
“We’re going to be focused on improved oversight,” McGowan said. “We talked about the process relating to the policy of conflict of interests and housing services and making sure that those policies that we have in place are strengthened.”
Despite their unfair advantage, the six families were found to have met the income criteria necessary to receive the rental vouchers. One of those families had yet to find housing, and voluntarily returned its voucher when informed of the allegations, Nagy-Koechlin said.
The investigation uncovered that two of the families were also receiving state transitional housing assistance funds, even though the agency lacked documentation verifying their eligibility. Nagy-Koechlin said he was caught by surprise by that finding, but he has since checked and determined that the two families are eligible for the program aimed at preventing homelessness.
Currently, the families are being allowed to keep their vouchers and benefits, but if the ongoing investigation finds that they were complicit or knew about the misappropriation, then the state would take additional action, said Matthew Sheaff, Housing and Community Development spokesman.
He added the state has a range of options, including stopping the benefits.
Since the investigation, Nagy-Koechlin said he has met with staff to review the code of conduct and ethics outlined in the employee manual, “and to hammer home the profound responsibility we have to administer these scarce resources fairly and transparently.”
“It just takes one incident like this to shake people’s confidence in the procedure,” he said. “We need to live by high standards.”