The Dog That Didn't Bark

It’s a familiar story — an obscure public sector entity with a clueless (or worse) board of directors fails to do their job, and the executive director makes off with bags of money. Except this time, the setting is the Chelsea Public Housing Authority, not the Merrimack Valley (see here and here).

Briefly, the director of the Authority managed to pay himself $360,000 per year (far more than any other Housing Authority director in Massachusetts) while claiming that he was only making $160,000. His explanation for lying to the state and federal government: He’s a ‘rebel.’

Once he figured out his days were numbered, he got the Authority’s bookkeeper to write him checks cashing out his sick and vacation leave, then took off (with the bookkeeper in tow) to try and cash the checks.

Beyond the drama and obvious wrongdoing, the deeper question is: Who was supposed to be watching over this?

The first answer is the Board of Directors for the Authority — which has proven itself to be, at best, hopelessly ineffective and, perhaps, something much worse. They are being replaced.

Another source of accountability is the State Auditor’s office, which has regularly audited municipal housing authorities. And here’s where it gets interesting— the most recent audit of Chelsea is from January of this year! The findings:

The objectives of our audit were … to assess compliance with laws, rules, and regulations applicable to each program.

To achieve our audit objectives, we reviewed the following:

• Procedures for making payments for payroll, travel, and fringe benefits to verify compliance with established rules and regulations. 2011-0631-3A
• Authority expenditures to determine whether they were reasonable, allowable, and applicable to the Authority’s operations and were adequately documented and properly authorized in accordance with established criteria.
• DHCD-approved operating budgets for the fiscal year in comparison with actual expenditures to determine whether line-item and total amounts by housing program were within budgetary limits and whether required fiscal reports were submitted to DHCD in a complete, accurate, and timely manner
Our tests in the above-mentioned areas disclosed no material weaknesses. Based on our review we have concluded that, during the 30-month period ended June 30, 2010, the Authority maintained adequate management controls and complied with applicable laws, rules, and regulations for the areas tested.

The audit letter is signed by the current Auditor, Suzanne Bump. But her letter is explicit that “commenced and largely completed during the tenure of my predecessor, State Auditor A. Joseph DeNucci.” The transition from DeNucci to Bump has been a rocky one — she commissioned an independent analysis of the office from a national standards organization which found major issues with DeNucci’s operating practices, she laid off 27 DeNucci hires, and hold-overs from his staff have tried on at least one occasion to discredit her with leaked information.

More importantly, the clean audit again raises two issues. First, did the DeNucci-era audit fail to uncover (or, even worse, fail to disclose) major fraud (to the tune of $200k per year, at least) at one of its audit subjects. Second, if Auditor Bump had any misgivings about the quality of the audit (as the cover letter passing off responsibility might be viewed), why did she release it under her signature?

Crossposted at Pioneer Institute’s blog.