[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






 EVALUATING PUBLIC HOUSING IN THE U.S.: REINING IN WASTE, FRAUD, ABUSE 
                  AND MISMANAGEMENT AT PUBLIC HOUSING

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT OPERATIONS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 22, 2014

                               __________

                           Serial No. 113-113

                               __________

Printed for the use of the Committee on Oversight and Government Reform








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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

                 Subcommittee on Government Operations

                    JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan                GERALD E. CONNOLLY, Virginia 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky              MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina





















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 22, 2014.....................................     1

                               WITNESSES

Mr. David Montoya, Inspector General, U.S. Department of Housing 
  and Urban Development
    Oral Statement...............................................     8
    Written Statement............................................    10
Mr. Cecil House, General Manager, New York City Housing Authority
    Oral Statement...............................................    25
    Written Statement............................................    27
Mr. Kelvin Jeremiah, President and CEO, Philadelphia Housing 
  Authority
    Oral Statement...............................................    31
    Written Statement............................................    34

                                APPENDIX

Sanford Housing Authority Timeline and Pictures, submitted by 
  Chairman Mica..................................................    62

 
 EVALUATING PUBLIC HOUSING IN THE U.S.: REINING IN WASTE, FRAUD, ABUSE 
            AND MISMANAGEMENT AT PUBLIC HOUSING AUTHORITIES

                              ----------                              


                        Thursday, May 22, 2014,

                  House of Representatives,
             Subcommittee on Government Operations,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:04 a.m. in 
room 2154, Rayburn House Office Building, the Honorable John L. 
Mica [chairman of the subcommittee], presiding.
    Present: Representatives Mica, Connolly and Issa.
    Also present: Representative Maloney.
    Staff Present: Melissa Beaumont, Majority Assistant Clerk; 
Molly Boyl, Majority Deputy General Counsel and 
Parliamentarian; Katelyn E. Christ, Majority Professional Staff 
Member; John Cuaderes, Majority Deputy Staff Director; Mark D. 
Marin, Majority Deputy Staff Director for Oversight; Matt 
Mulder; Majority Counsel; Laura Rush, Majority Deputy Chief 
Clerk; Andrew Shult, Majority Deputy Digital Director; Aryele 
Bradford, Minority Press Secretary; Adam Koshkin, Minority 
Research Assistant; and Lucinda Lessley, Minority Policy 
Director.
    Mr. Mica. Good morning.
    I would like to call to order the Subcommittee on 
Government Operations, a subcommittee of the Government 
Oversight and Reform Committee. I welcome you to today's 
hearing.
    The title of today's hearing is Evaluating Public Housing 
in the U.S.: Reining in Waste, Fraud, Abuse and Mismanagement 
at Public Housing Authorities. Let me explain the order of 
business.
    First, members of the panel will be recognized for opening 
statements and then we will go to our witnesses. We have three 
witnesses this morning. We will hear their testimony and then 
get into questions.
    I see we are joined by our colleague from the full 
committee, Mrs. Maloney. Mr. Connolly is recognized for a 
motion.
    Mr. Connolly. Mr. Chairman, I would ask unanimous consent 
that our colleague, Mrs. Maloney, be allowed to participate as 
a member of the subcommittee.
    Mr. Mica. Without objection, so ordered. She, of course, is 
most welcome this morning.
    I will begin with my opening statement.
    Last night, I spent some time reviewing some of the 
material that been prepared for the hearing. Sometimes it makes 
it difficult to sleep at night when you read accounts of public 
funds and public endeavors to try and assist people that aren't 
working well.
    We have all been shocked by what have seen at the Veterans 
Administration. Last night, I was shocked by what I saw in 
regard to waste, fraud and abuse. Mr. Issa always starts the 
hearing with a little statement that the purpose of our 
committee is oversight and making certain the taxpayers' money 
is properly spent. This is what we are going to do with this 
hearing today. It is an important function.
    I will begin with an opening statement and yield to other 
members as we move forward this morning.
    Today, we are going to look at how we can best improve the 
administration of public housing and low cost rental assistance 
programs, particularly with the U.S. Department of Housing and 
Urban Development, commonly known as HUD.
    We will do so by examining some of the expenditures of 
taxpayer funds made by public housing authorities, also using 
the acronym PHAs.
    Unfortunately, all too often these housing authority 
executives seem to be taking advantage of the system by paying 
themselves expensive and excessive salaries and benefits, by 
not distributing funds properly, and at times, we have 
documented cases of defrauding taxpayer money.
    Today's hearing will examine how to best put a stop to some 
of these problems in mismanagement. HUD spends about $6 to $7 
billion a year in capital operating funds for about 1.2 million 
public housing units which house about 2.7 million people.
    Through its largest rental assistance program, the Section 
8 program, a voucher program that HUD uses private sector 
market rentals for some 2.2 million low income households at a 
cost of about $20 billion a year.
    According to HUD, the average annual cost per unit for the 
HUD voucher program in 2013 was $7,800, not an enormous amount 
of money but significant. Together, HUD's provision of all 
public housing and rental assistance programs accounted for 
nearly 60 percent of its total budget in 2013. In testimony 
last month, Secretary Donovan stated this figure increased over 
84 percent in HUD's 2015 budget request.
    Strengthening the integrity and soundness of the Nation's 
public housing system is absolutely critical to safeguarding 
public funds. Unfortunately, the public housing system in the 
United States also suffers from a large capital backlog, high 
vacancy rates in some places and many units are in desperate 
need of reconstruction.
    HUD released a study in mid-2011 finding the backlog of 
capital needs in public housing at that point stood at $2.7 
billion and annual needs are accruing at a rate of some $3.4 
billion a year.
    According to HUD, 478 total developments are currently 
considered failing. As of March 31, 2014, there were 10,258 
public housing units that had been approved for and awaiting 
demolition and 23,524 currently under review for removal by 
HUD.
    Nationwide, a system of approximately 4,000 quasi-
governmental housing authorities exist and have administered 
public housing and rental assistance on behalf of HUD for the 
past 80 years. Unfortunately, problems with some of the housing 
authority finances are all too common.
    As of the second quarter of fiscal year 2014, 49 housing 
authorities were designated as very high risk, 38 housing 
authorities were also designated as troubled and assigned 
additional monitoring through HUD's public housing assessment 
system. Eight housing authorities are also under some type of 
receivership or falling into default in their contracts with 
HUD.
    Unfortunately, misuse of taxpayer money by some of these 
housing authority executives is very common. Taxpayer money is 
being spent with little oversight and housing authority 
executives are oftentimes unethically dispensing funds on 
initiatives unrelated to public housing.
    Since the start of fiscal 2012, the Office of Inspector 
General of HUD has issued 75 audits related to housing 
authorities reporting about $225 million in questionable costs 
and about $24 million in funds to be put to better use, 
according to his report.
    Today, the Inspector General is here to discuss these 
audits and the substantial work that has been conducted to date 
on these issues. We will also hear testimony from officials 
from some of the Country's largest housing authorities.
    Mr. Kelvin Jeremiah has been President and CEO of the 
Philadelphia Housing Authority for little over a year, since 
March 14, 2013. The HUD IG has found some serious problems with 
the Philadelphia Housing Authority which is the fourth largest 
housing authority in the United States.
    Notably, Senator Chuck Grassley said, one of the strongest 
audits he had ever seen was released by HUD in March of 2011. 
That report found that the Philadelphia housing authority paid 
$30 million to 15 law firms from 2007 to 2010 and could not 
fully explain what the money went for.
    The Philadelphia Housing Authority also made unreasonable 
and unnecessary payments of $1.1 million to outside attorneys 
to obstruct the progress of HUD OIG audits.
    Mr. Cecil House, General Manager of the New York City 
Housing Authority, is also here to testify today. That Housing 
Authority is the largest in the Country.
    The HUD OIG recently released two audits criticizing that 
authority's administration of its Section 8 vouchers. The first 
audit questioned $1.16 billion in disbursed housing assistance 
payments. The second audit determined that 99 of the 119 units 
inspected at that housing authority did not meet HUD's housing 
quality standards; and 24 of these 99 units were in material 
noncompliance with HUD standards which could cost the New York 
Housing Authority $148 million next year alone.
    Mismanaging public housing funds is not relegated to the 
largest housing authorities. Let me tell you a quick story 
about my experience. I represent central Florida's small 
community to the north, Sanford, Florida. Ever since almost the 
day I took office, I have had nothing but problems with that 
particular housing authority.
    It actually has never been in my district. It is adjacent 
and has been very close to my district. The first experience I 
had was the housing authority director coming to my office with 
a list of charges by the State's attorney of offenses she had 
committed and asking me to help her. I tried to help her out 
the door of my office after I read what was going on.
    I have been working on that issue, that project, this is a 
very small housing authority, not like the big ones we have 
here. My goal has been to ensure that taxpayer money is being 
expended in a transparent and efficient manner and also provide 
public housing or affordable housing to people who need it.
    Unfortunately, the Sanford Housing Authority mismanagement, 
fraud and other problems go on and on like a nightmare. In 
October 2011, an OIG audit found that $1.2 million in funds 
given to the Sanford Housing Authority starting in 2007 were 
``abusive or ineligible, not reasonable or not properly 
supported.''
    Specifically, the OIG uncovered over $50,000 in credit card 
and leave abuses, including $16,000 in unofficial travel by the 
former housing authority executive, I will put his name in the 
record; ``$481,000 in public assistance funds was not budgeted 
or eligible. Mr. Toot also spent $1.1 million for services 
provided by three firms without support that he acquired 
services in compliance with HUD and SHA's procurement 
requirements.''
    As a result of this and prior mismanagement, HUD was 
obligated to spend more than $9 million to relocate tenants and 
are going to demolish 374 of 480 public housing units owned and 
managed in six developments in Sanford that might otherwise 
have been preserved.
    Unfortunately, today the mayor of Sanford was not able to 
be here so I am taking a couple minutes to go into what he 
would have told you.
    Earlier this year, the Orlando Sentinel reported that the 
Sanford Housing Authority expects to spend $1 million on 
operating expenses even though only six families are living in 
the public housing run by the authority. They had an over 
$100,000 water bill for six families probably because nobody 
turned off the water and the public is paying for it. It is 
just outrageous.
    I was quoted after I did a review saying we could put 
people up in the Ritz Carlton cheaper than the money we spent 
in this mess. In the past, I have actually written and had that 
authority taken over by HUD which you can do. I didn't know you 
could do that but they informed me after.
    Tenants brought rats they captured in a cage to my office 
and no one would do anything about it. We took over, they spent 
millions of dollars getting it back and they put this guy in 
who ran away with taxpayer supported money, money that was 
supposed to be for people who need it for low cost housing.
    HUD may argue that because public housing authorities are 
State and local government entities, there is no reason to 
conduct meaningful oversight of them at the congressional 
level. However, expenditure of all taxpayer money deserves our 
full attention and we will provide that proper oversight with 
this and other hearings as necessary.
    At this hearing, we will start the conversation into how we 
can improve public housing, reining in the corruption, fraud 
and abuse that undermine the ability of scarce public housing 
funds to reach individuals and families most in need of that 
help.
    Mr. Mica. That was a long opening statement. I want to 
thank the staff; they have done a great job in researching some 
of this.
    I had to make up a history of my housing authority. I 
calculated the millions of dollars that have been wasted, 
abused and stolen. This is the story and I want that a part of 
the record. Without objection, Mr. Connolly asked it be made a 
part of the record.
    Mr. Mica. It is just a nightmare. I apologize for taking 
more time. I have taken the time the mayor would have had.
    I recognize Mr. Connolly for his opening remarks.
    Mr. Connolly. Thank you, Mr. Chairman.
    The story you described is very sobering. Housing is a 
complex subject. The experiences vary obviously region to 
region. I am very interested in hearing more about the troubles 
and experiences in this hearing today.
    I do want to talk about my own experience, however. Until I 
came to Congress, I was the Chairman of Fairfax County, one of 
the largest counties in the United States in suburban 
Washington.
    I was chairman for five years. I started as one of my major 
priorities an affordable housing initiative, working with our 
Redevelopment and Housing Authority. The goal was to try to 
preserve, among other goals, 1,000 units for four years because 
we were rapidly losing affordable housing in our community.
    We, in fact, preserved outright, that we purchased, 2,400 
units. It is a very successful program. In fact, for 15 
consecutive years, HUD has designated us as a high performer, 
the highest designation a housing authority can get. We have 
also been designated as a moving to work agency by HUD, one of 
only 39 in the United States. There are successful models.
    Also, as part of that affordable housing initiative, we 
focused on workforce housing because our police, firefighters 
and teachers couldn't afford to live in the communities they 
served. We also focused on homeless in ten years because 
transitional housing is the key to achieving that kind of goal.
    Since I started that initiative, we are the only major 
jurisdiction in metropolitan Washington that has seen any 
decrease in its homeless population. We have consistently seen 
a decrease every year such that we have reduced our homeless 
population by over one-third. I think that is a pretty good 
accomplishment.
    We dedicated a penny in our tax rate to affordable housing. 
We had public support for it. A penny was about $22-$24 million 
a year. It was the first time in our history we had ever 
dedicated a penny on the tax rate for any purpose. We did it 
for affordable housing.
    We were trying to deal with a crisis where housing prices 
were going through the roof before the bubble burst and the 
people that served our economy could not afford to live in our 
community and created enormous congestion.
    It has actually been a kind of success story. We have had 
some bumps along the way. We have a single residency occupancy 
facility that is very successful in helping single folks in 
transitional housing get back on their feet.
    We have a very vibrant partnership with the non-profit and 
faith communities, everything from a hyperthermia program in 
the winter that actually successfully allowed us to reduce the 
number of hyperthermia deaths in the winter to zero for the 
first time in our history and get people back on their feet.
    We opened some family shelters to make sure we could keep 
families together and not disperse kids into government foster 
care that broke them up and had a discontinuous impact on their 
education.
    There are other models but you have to have a clean 
government, people committed to the mission, there had to be 
real clarity about what we wanted to accomplish, you have to 
have metrics and you have to have rigorous examination and zero 
tolerance for people who cheat. If people are gaming the 
system, they are going to be booted out of affordable housing.
    The goal here is to use those taxpayer dollars in a wise 
fashion. So there are models of success. I humbly submit my 
community as one of them, but there are also, unfortunately, as 
the Chairman pointed out, a myriad of examples where we fall 
far short.
    I think today's hearing is designed to try to better 
understand what the elements for success are, what elements 
have led to less than success and how can we, working together 
at the federal and local levels, overcome those obstacles so we 
can have more success stories.
    Thank you, Mr. Chairman, for holding this hearing.
    Mr. Mica. Thank you.
    I might also say I have in my locale, a few miles away, a 
county housing authority that operates in an exemplary way. We 
changed out in my previous district pre-World War II housing in 
Daytona Beach, in Palatka and West Augustine.
    I have always said the Federal Government should not be a 
slum lord and that we should be responsible. Unfortunately, 
today we will hear some of the examples of problems that need 
to be addressed but there are some authorities that do 
incredible work. I am glad to hear your story.
    I will yield for five minutes to the gentlelady from New 
York, Mrs. Maloney. Welcome, and you are recognized.
    Mrs. Maloney. Thank you so much for including me in this 
hearing.
    Public housing is critically important in our Nation. Mr. 
Connolly, the Ranking Member, and I share your concerns over 
waste, fraud and abuse that undermines the support of public 
housing and affordable housing that is so desperately needed in 
our Country.
    I want to compliment Mr. Connolly on your innovative story 
on housing. I guess it is Arlington, right?
    Mr. Connolly. Fairfax County.
    Mrs. Maloney. Fairfax County. To have raised the money for 
affordable housing with the penny tax code is a very innovative 
and great idea.
    I thank you for including me in today's hearing.
    I want to welcome the New York City Housing Authority 
general manager, Cecil House, who will be testifying. NYCHA 
provides vital services to my constituents and so many others 
throughout New York City. It is the largest public housing 
authority in North America. NYCHA houses so many people that if 
it were a city, it would rank 23rd in population size in the 
United States.
    More than 400,000 New Yorkers reside in NYCHA's 334 public 
housing developments around our five boroughs. It is hugely 
important to housing needs in New York City.
    Another 235,000 receive subsidized rental assistance in 
private homes through the NYCHA-administered Section 8 leased 
housing program and NYCHA public housing represents 8.2 percent 
of the city's rental apartments and is home to over 4 million 
or 4.8 percent of the city's population.
    More 76,000, roughly 20 percent, of residents are seniors 
and I thank the more than 11,000 NYCHA employees who work to 
support New York City's housing needs.
    Public housing provides a real service to our communities 
which is why it is so important that they are well run and uses 
taxpayer dollars effectively. It is in huge demand in New York. 
When I was a city council member, the waiting list was over 
900,000 people.
    I join many of my New York federal and local colleagues in 
calling for a top to bottom forensic audit of how NYCHA is 
using its dollars. I look forward to seeing that report later 
this year so that we know best how to streamline NYCHA and 
preserve our public housing lifeline.
    Affordable housing in New York is very hard to come by. Our 
new mayor has announced his plan to build and preserve 200,000 
safe and affordable housing units in New York City. I look 
forward to working with Mayor de Blasio and NYCHA to achieve 
this goal to see the city's housing needs met.
    We all know this requires critical investment. I am deeply 
committed to maintaining the quality of public housing in New 
York City and around the Country. I look forward to today's 
testimony and the way to best preserve it, in my opinion, is to 
make sure there is no waste, fraud and abuse so that the public 
support in tax dollars is there.
    I thank all of you testifying today and especially my 
colleagues.
    Thank you and I yield back.
    Mr. Mica. Thank you, Mrs. Maloney, and thank you for 
participating.
    I had some pictures of my housing authority in Sanford put 
up. I guess I should make these pictures a part of the record.
    Mr. Mica. This is where people should live and have public 
housing. You see where we have vacant lots where we have torn 
down the units. This is boarded-up public housing, and that is 
some we had rehabbed and now they are being demolished. This 
picture is where they demolished some of the units.
    Now we are having a debate as to whether to have the 
housing authority continue. I would like to see them 
consolidate with the other housing authority in town or in our 
community. The administration costs of two housing authorities 
closely aligned geographically makes no sense.
    Let me mention to the witnesses this is an investigative 
hearing. I will swear you in in a minute. There are other 
members not here today. Members may have seven days to submit 
opening statements for the record.
    I will recognize our panel composed of: David Montoya, 
Inspector General, U.S. Department of Housing and Urban 
Development; Cecil House, General Manager, New York City 
Housing Authority; and Kelvin Jeremiah, President and CEO, 
Philadelphia Housing Authority.
    I want to welcome our witnesses. As I said, this is an 
investigative hearing and we do swear in our witnesses. Please 
stand and raise your right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witnesses respond in the affirmative.]
    Mr. Mica. Thank you.
    Let the record reflect that the witnesses answered in the 
affirmative.
    Welcome to each of you. I don't know if you have testified 
before us before. We would like for you to summarize your 
testimony in five minutes so we can have questioning and 
exchange of information. If you have additional information, 
testimony or data you would like submitted to the record, just 
make that request and we will comply.
    First, let me welcome Mr. David Montoya, the Inspector 
General of the U.S. Department of Housing and Urban 
Development. You are recognized. Welcome, sir.

                       WITNESS STATEMENTS

                   STATEMENT OF DAVID MONTOYA

    Mr. Montoya. Chairman Mica, Ranking Member Connolly and 
members of the subcommittee, I am David Montoya, Inspector 
General for the Department of Housing and Urban Development.
    I thank you for the opportunity to highlight our 
perspective on waste, fraud, abuse and mismanagement in public 
housing authorities or PHAs and our work over the years.
    Public housing was established to provide decent and safe 
rental housing eligible for low income families, the elderly 
and persons with disabilities. It is the role of HUD's Office 
of Public and Indian Housing to not only safeguard is but to 
create opportunities for residents' self sufficiency, economic 
independence and to assure integrity by all program 
participants.
    There are approximately 1.1 million households living in 
public housing units which are managed by over 3,000 PHAs. 
Approximately 2,300 PHAs also locally administer HUD's Section 
8 Housing Choice Voucher Program which is the department's 
principal program for assisting eligible families obtain 
housing in the private market. This program provides rental 
assistance to approximately 2.2 million families.
    Oversight of HUD's public housing programs continues to be 
a priority for my office. Since the beginning of 2012, we have 
issued 75 audits related to PHAs, recording roughly $225 
million in questioned costs and approximately $24 million in 
funds to be put to better use. Our investigative activity also 
continues to be significant as we have completed a total of 216 
administrative and civil actions and 121 criminal actions.
    In order to better synthesize and highlight the continuing 
problems we have identified in this area, we are assessing our 
lengthy history of work for continuing patterns of practice 
that negatively affect PHAs.
    This effort is intended to focus the department's attention 
on problem areas that we and others have reported on over many 
years and to set about to develop and recommend an array of 
strategies for consideration by the department and Congress on 
ways to address and correct longstanding problems.
    We have found that PHAs often operate with little oversight 
and too often we see executive directors and PHA boards or 
commissions exercising little or no oversight of their own. Too 
often these officials have few or no qualifications to 
effectively discharge their responsibilities. Certification and 
accreditation of key personnel associated with running of a PHA 
are missing links in mitigating opportunities for mismanagement 
and poor governance.
    These vulnerabilities are magnified when one considers that 
HUD relies a great deal on electronic recording through PHAs 
for self assessments and through other self reported 
information collected in HUD's information systems as its 
primary form of oversight.
    Until HUD is able to modernize its outdated systems and 
more effectively target its resources, it will continue to be 
constrained in inadequate oversight.
    This is further exacerbated by programs designed to loosen 
oversight of funding and reporting which we believe are 
counterintuitive to the many problems we and GAO have reported 
on over the years. It is my contention that cities, counties 
and States should do more to share in the burden and 
responsibility for the management, operation and oversight of 
their public housing authorities and programs.
    While HUD is responsible for overseeing PHAs, it has 
limited resources which are easily overwhelmed by the magnitude 
of the program and requirements. In order to address recurrent 
systemic problems, we have issued several broad prevention 
materials including integrity bulletins and posted them on our 
website.
    These are designed to showcase abuses as well as to educate 
PHA staff, local and State officials and the public on better 
ways to avoid mismanagement and fraud.
    The department's role and mission has greatly increased 
over the last decade, including spearheading redevelopment in 
post-9/11 lower Manhattan, the devastated post-Katrina Gulf 
Coast, the economic crisis caused by the sub prime mortgage 
collapse and the recent Hurricane Sandy disaster response.
    Because of the limited capability of the department to 
provide direct oversight, it is critically more important than 
ever that program participants, beneficiaries and local and 
State authorities take on more responsibility for proper 
administration and oversight of PHAs.
    My office is strongly committed to working with the 
department and Congress to ensure that these important programs 
operate efficiently, effectively and as intended.
    This concludes my oral testimony and I would be pleased to 
answer your questions.
    [Prepared statement of Mr. Montoya follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Mica. Thank you for your testimony. We will go to 
questions after we have heard from the other witnesses.
    Let me now recognize Cecil House, General Manager of the 
New York Housing Authority. Welcome. You are recognized.

                    STATEMENT OF CECIL HOUSE

    Mr. House. Thank you, Chairman Mica, Ranking Member 
Connolly and members of the subcommittee.
    I am Cecil House, General Manager, New York City Housing 
Authority or NYCHA, as we call it, the largest public housing 
agency in the United States.
    NYCHA is committed to fulfilling its mandate under federal 
law to provide safe, decent and affordable housing to over 
630,000 low and moderate income Americans. To provide a sense 
of scale, as Congresswoman Maloney indicated, if the population 
of NYCHA was a city unto itself, it would be the Nation's 23rd 
largest city, comparable in size to the City of Boston.
    Our public housing program encompasses over 178,000 
apartments in over 2,600 buildings located throughout New York 
City with more than 31,000 private landlords participating in 
our Housing Choice Voucher Program. The Authority also provides 
housing assistance to an additional 225,000 individuals.
    I have been at the helm of the Authority's day to day 
operations for the past 20 months and can say our new 
administration under the leadership of Mayor Bill de Blasio and 
NYCHA Chair and CEO Shola Olatoye is determined to ensure that 
NYCHA is a successful practitioner of good management and a 
provider of quality services to the working families, elderly 
and disabled citizens and veterans who rely on our programs for 
their housing, assistance in entering the workforce, 
educational opportunities and the stability of our communities.
    We are committed to preserving every unit of public housing 
in New York City, to strengthening our Housing Choice Voucher 
Program, and to ensuring that NYCHA is a responsible guardian 
of these public assets which will play an important role in the 
Mayor's new housing plan to build or preserve over 200,000 safe 
and affordable housing units in New York City.
    We at NYCHA believe that ensuring public dollars are being 
well spent on providing housing assistance to the most 
vulnerable in our society is critical. We systematically review 
our operations to improve the quality of life of NYCHA 
residents and to increase the efficiency and productivity in 
the management of our programs.
    NYCHA is restructuring operations, reducing administrative 
overhead, modernizing our business systems and implementing 
data driven managerial controls to better monitor the 
performance of essential functions. We are working hard to 
implement cost savings in order to return the best value to the 
taxpayers for every public dollar allocated.
    At the managerial level, the Authority has implemented a 
hiring freeze and has reduced its total employee head count by 
over 16 percent since 2004. We are relying on constantly 
updated metrics to derive efficiencies from a wide spectrum of 
functions resulting in improved service levels, for apartment 
maintenance and repair rates, heat and hot water complaints, 
elevator up times, Section 8 recertification and inspection 
rates, rent collection and delinquency rates and apartment prep 
turnaround time, among other essential markers.
    Our backlog, for open maintenance and repair work tickets 
in particular has been dramatically reduced. Our public housing 
assessment system and Section 8 management assessment program 
scores are trending upward.
    Procurement is another area in which NYCHA is bringing best 
practices from the private sector to bear on our operations 
with a continued focus on reducing costs. Following a thorough 
review, NYCHA is streamlining and updating our inventory 
systems. We have consolidated 14 procurement offices into a 
single department resulting in better internal controls, 
improved reliability and greater leveraging of our 
expenditures.
    No managerial objective is more critical than the fiscal 
responsibility and transparency the Authority owes to the 
public. NYCHA has implemented a rigorous, structured and 
thoughtful finance and budgeting process designed to deliver 
the greatest value for the limited resources that we have.
    The Authority publishes our annual budget online and meets 
regularly with residents and stakeholders to discuss the 
allocation of resources. NYCHA also maintains an audit 
department to provide assessment of the efficiency of the 
Authority's operations, the adequacy of internal controls, the 
accuracy of financial data, and compliance with applicable 
laws, regulations and procedures.
    Beyond NYCHA's own efforts, the City of New York maintains 
a robust anti-fraud, waste, theft and corruption infrastructure 
in the form of its Department of Investigations. Fundamental to 
ensuring that the highest standards are provided by NYCHA in 
the expenditure of public funds is the NYCHA Office of the 
Inspector General, a 50-member unit within the Department of 
Investigations working independently of the Housing Authority's 
leadership and reporting directly to the Department of 
Investigations Commissioner.
    Specific IG teams are dedicated to monitoring the 
Authority's activities in regard to contracting, construction 
management, labor and other key areas.
    The Authority faces great challenges in attempting to meet 
the need for affordable housing in New York City which far 
exceeds supply and is seeking to maintain a large portfolio of 
aging residential buildings in an era when federal commitment 
to public housing has dramatically receded and the Authority 
burden has grown.
    Mr. Connolly. Excuse me. We are over time and with the 
Chairman's permission, I am going to ask the gentleman to 
summarize because we have votes. We probably won't be coming 
back after the votes because there will be around eight votes. 
We want to have the chance to dialogue.
    Mr. Mica. If you could begin to conclude, please.
    Mr. House. I would be pleased to respond to any questions 
you have.
    [Prepared statement of Mr. House follows:]


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    Mr. Mica. Thank you.
    Our next witness is Mr. Kelvin Jeremiah, President and CEO 
of the Philadelphia Housing Authority. Welcome and you are 
recognized.

                  STATEMENT OF KELVIN JEREMIAH

    Mr. Jeremiah. Good morning, Chairman Mica, Ranking Member 
Connolly and members of the subcommittee.
    I am Kelvin Jeremiah, the President and CEO of the 
Philadelphia Housing Authority.
    PHA was established in 1937 as a municipal corporation 
organized under the statutes of the Commonwealth of 
Pennsylvania to provide safe and decent housing to low and 
moderate income individuals in the City of Philadelphia.
    PHA is primarily funded and is accountable to the United 
States Department of Housing and Urban Development, its board 
of commissioners, the Mayor, the City Council and the citizens 
of the City of Philadelphia.
    As such, PHA employees, residents and contractors hold a 
significant position of public trust. The public therefore has 
a right to expect PHA's employees, contractors and those doing 
business with PHA to perform their responsibilities honestly 
and with integrity.
    Thank you for the opportunity to highlight my perspective 
on waste, fraud and abuse and mismanagement of housing 
authority programs and appropriations.
    PHA is the fourth largest housing authority in the United 
States and the largest landlord in Pennsylvania. PHA is also 
one of a select group of housing authorities across the Country 
that has attained movement to work status. This designation 
allows PHA to spend its $375 million annual budget in a more 
flexible manner, strategically allocating resources on housing 
and self sufficiency programs to residents that best fits the 
local environment.
    Financial support for PHA's operations and capital needs 
comes primarily from rent payments and subsidies provided by 
HUD. More specifically, approximately 93 percent of PHA's 
revenues comes from the Federal Government in the form of 
subsidies for affordable housing. Only 6 percent of our revenue 
comes from tenant rents. The balance comes from grants from the 
city, the commonwealth and other sources.
    Approximately 75 percent or three quarters of PHA's budget 
is dedicated to its core mission, funding the actual provision, 
protection, creation and maintenance of housing for low income 
individuals.
    With a staff of 1,300 full time employees, PHA provides 
housing assistance to nearly 80,000 people in its two main 
housing programs, the Public Housing Program and the Housing 
Choice Voucher Program.
    In the Public Housing Program, low income persons pay a set 
percentage below 30 percent of their income to PHA to rent PHA-
owned units. As of the close of fiscal year 2014, PHA served 
over 13,000 households while maintaining a 93 percent occupancy 
rate. PHA has a public housing wait list of nearly 28,000 
households. On average, PHA's public housing families have an 
average household income of $10,645 and pay $267 in monthly 
rent.
    In the HCV Program, formerly known as Section 8, low income 
persons receive a voucher to subsidize their rent to private 
landlords in units of their choosing. There are also variations 
of the program such as the VASH Program which exclusively 
serves homeless veterans referred to the housing authority by 
the local Veterans Administration.
    PHA is very proud of its efforts in this area and has set a 
model of efficiency in meeting the housing needs of this 
population, managing 460 VASH vouchers and is one of 25 cities 
nationally participating in the HUD, VA and U.S. Interagency 
Council on Homelessness collaborative effort to end chronic 
homelessness amongst veterans by 2018.
    As of the close of fiscal year 2014, PHA managed 19,073 
vouchers with a utilization rate of 84 percent. PHA's HCV 
waitlist is 34,000 households long. On average, PHA's families 
have an average household income of $10,061 and pay a monthly 
rent of $288.
    It is widely known, Mr. Chairman, that wasteful spending is 
present throughout government institutions, including the one I 
am privileged to head. It is my understanding that you and the 
members of this subcommittee have raised valid questions and 
concerns regarding fraud, waste and corruption in public 
housing and have been strong advocates for rigorous oversight 
that safeguard public resources from waste and mismanagement.
    I share your concerns and have spent my professional career 
bringing about positive changes in the integrity, efficiency 
and effectiveness of public housing programs. My experience 
over the past decade is one I am very proud of, Mr. Chairman. 
More importantly, I have been focused on building trust and 
restoring public confidence in public housing.
    I have seen firsthand the deleterious impact of corruption, 
fraud and waste which undermine scarce resources from reaching 
the individuals who need them most. It limits the number of 
eligible tenants' ability to access limited funding and 
increases the cost of projects which in turn increases the cost 
to the agency.
    It is for those reasons that my tenure at PHA has been 
focused on accountability, transparency and making data driven 
decisions.
    I joined PHA in 2011 as the Director of the newly 
established Office of Audit and Compliance, a robust watchdog 
office focused on eliminating waste, fraud and abuse.
    Mr. Chairman, over the last two years PHA with the Office 
of Audit and Compliance has established strong collaborative 
partnerships with several federal, State and local enforcement 
agencies in an effort to protect the integrity of PHA and to 
further hold individuals who commit fraud accountable.
    We have conducted over 700 investigations, substantiated 
299 cases and referred 32 for further criminal prosecution 
working with our OIG partners and other city, State and local 
officials.
    Mr. Chairman, it is the consistent demand for affordable 
housing as evidenced by our waitlist of over 62,000 applicants, 
many of which wait on average ten years to be housed, reaffirms 
the critical importance of our mission, this demand, coupled 
with the shrinking federal resources, which makes it critical 
that public administrators take an active role in preventing 
and deterring corruption, fraud and waste in addition to taking 
a more innovative approach to this improvement.
    Mr. Mica. If you can conclude, Mr. Jeremiah.
    Mr. Jeremiah. Change and improvement in management 
operations, accountability and transparency will ultimately 
improve the lives of the people who benefit from the programs 
we administer.
    I appreciate the opportunity to testify before the 
subcommittee today. I would be happy to answer your questions.
    [Prepared statement of Mr. Jeremiah follows:]


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    Mr. Mica. Thank you. We will get right to questions.
    First of all, Mr. Montoya, we appreciate your work. How 
many people do you have working under your Inspector General 
operation for HUD?
    Mr. Montoya. Currently our staffing is about 615, that is 
the entire office.
    Mr. Mica. Is that adequate?
    Mr. Montoya. I would be remiss if I said--it is never going 
to be adequate. We are about 100 people down over the last two 
and a half years with budget cuts.
    Mr. Mica. With budget cuts?
    Mr. Montoya. Yes.
    Mr. Mica. First, I think we need to make certain you have 
the resources to do the job to conduct the oversight. HUD gave 
us HUD by the Numbers. It says, Public Housing by the Numbers 
under the HUD publication, where the money goes, 29 percent for 
administration. That to me seems very, very high and 33 percent 
for maintenance. You have a lot of old structures. I can see 
that.
    I have been in the rental business and I never pay more 
than 10 percent to manage anything. Have you looked at these 
figures for administration within HUD? The money going out, I 
guess this is both operation of HUD and money for public 
housing authorities? Would you know if that is correct?
    Mr. Montoya. I don't know that. Is that 33 percent within 
HUD that goes to administration?
    Mr. Mica. Thirty-three percent, that is where the money 
goes overall that HUD is spending. I believe 29 percent for 
administration. Most of HUD in Washington is administration 
which is probably very high. How many people are there in HUD 
in Washington?
    Mr. Montoya. I couldn't tell you in Washington, 1,000 
total, quite a few nationwide, quite a few in D.C. I don't know 
the exact number.
    Mr. Mica. Again, it is a high number. If we could turn this 
over to private sector, I am sure management companies would 
chomp at the bit to get 29 percent of billions of dollars going 
out. That is a lot of money for administration.
    Mr. Montoya. What I would add is that yes, the 
administration portion of public housing authorities is quite 
high. The administration of public housing authorities is quite 
high. They recently established this Cost Office Center to 
manage the overall administration of these housing authorities.
    They are allowed to take a percentage of certain projects, 
so they are taking federal money, taking a certain percentage 
of that on certain projects as an administrative fee to cover 
their overhead.
    HUD gave them a blanket pass on about 10 percent of their 
capital fund. They can take 10 percent of their capital funds 
and make it administrative fees. Once these fees are earned, 
per se, they become non-federalized.
    We think de-federalizing these administrative funds doesn't 
appear to be reasonable, especially in light of the fact that 
they are fully supported by grants and subsidies, a direct 
grant to begin with.
    When these funds become de-federalized, they can virtually 
use these funds for anything they want. That then goes to the 
issue of high salaries. They can actually use de-federalized 
funds to pay some of these high salaries we have seen because 
it doesn't fall into the category of reporting what federal 
money you spent on a salary.
    Mr. Mica. They are wasted to reduce this. If I was looking 
at this from a business standpoint, first, I would pass a law 
that did away with the administrative staff, re-contract this 
out with a limit and the cost of administration. There are 
hundreds of thousands of management real estate folks who could 
properly manage this.
    We haven't talked about salaries of some of these. I know 
there are some caps put on the executive positions within the 
housing authorities. Isn't there a federal cap currently of 
$155,000?
    Mr. Montoya. It is a little over with the increase in 
salaries that the Administration approved but it is not 
$155,000.
    Mr. Mica. Mr. House, what is your salary?
    Mr. House. My salary is $195,000.
    Mr. Mica. Mr. Jeremiah, what is your salary?
    Mr. Jeremiah. My salary is $225,000.
    Mr. Mica. Sounds like you are getting screwed, Mr. House, 
but that isn't the question at hand. The question at hand is 
how do they get to that number and we have a cap? Aren't they 
subject to that cap?
    Mr. Montoya. I tell you, they both make more than I do, Mr. 
Chairman. Having said that, I would say there is a way around 
that cap.
    Mr. Mica. They both make more than we do too. They are not 
Mickey Mouse operations. Those are huge operations and maybe to 
find the right talent, you have to pay more. I have advocated 
for the Federal Government to pay to get the best expertise we 
can to operate systems and manage operations, attract them and 
reward people who do a good job.
    We have a law. How do they get around that?
    Mr. Montoya. The law says that only $155,000 of Federal 
money can be paid. We have an initiative that we will be 
talking to Congress and the department about with regards to 
the definition of salary. Salary doesn't include such things as 
bonuses, PHA vehicles, benefits like retirement, life and 
medical insurance. These things aren't covered.
    Mr. Mica. You two are relatively new in your positions, is 
that correct? Mr. House, how long?
    Mr. House. Twenty-two months and two days.
    Mr. Mica. You have been eligible for a bonus. Do you get a 
bonus?
    Mr. House. Absolutely not.
    Mr. Mica. You need to talk to some folks there. Of course 
it depends on your performance, that should be the criteria.
    Mr. Jeremiah?
    Mr. Jeremiah. I am coming up in two years.
    Mr. Mica. Have you gotten a bonus?
    Mr. Jeremiah. Yes, I have.
    Mr. Mica. How much was that?
    Mr. Jeremiah. Ten thousand dollars.
    Mr. Mica. Not a king's ransom but significant. Not to pick 
on you two, we appreciate your coming to testify because you 
have two of the largest housing authorities in the Country.
    Every time I try to get some decision made, Mr. Montoya, on 
moving forward with some alternatives, for example, I don't 
want to replace a ghetto with a ghetto, all I get is HUD will 
not permit this or HUD will not permit that.
    Have you any recommendations, for example, on replacement 
of some of these units? The worst place you would want to put 
an investment for real estate would be back into some public 
housing authority. Unfortunately, too our public housing 
authorities, where the public housing location is, if you talk 
to the sheriffs, the police chiefs and other law enforcement 
people, sort of the center of all kinds of difficult community 
crime issues.
    Do we have enough alternatives? I don't like just replacing 
units with units. Do we have enough alternatives to allow 
variations, for example, bringing in the private sector to 
produce housing, come in with replacement projects?
    I have done Hope 6, or whatever we had, projects and other 
replacement projects for public housing? Have you looked at 
this at all, Mr. Montoya?
    Mr. Montoya. No, sir, we have not. While I couldn't speak 
to that, I think from what we have seen, certainly not speaking 
with regards to the two gentlemen beside me because they seem 
to have a very good background and experience, we consistently 
see in these PHAs executive directors and boards or commissions 
who really don't have the background and experience to run 
these PHAs. Some are running multimillion dollar programs.
    We feel that accreditation, certification or something on 
that order of these directors and boards would help.
    Mr. Mica. The one we got from HUD--I did everything I could 
after we had that taken over by HUD and another Congressman 
called me and said the guy they are sending over there is 
horrible. I could not get them to not employ him. These are 
people HUD is sometimes recommending. It was so offensive. 
Within seven or eight years, he ran it into the ground and ran 
off with money.
    The other thing too is you do criminal referrals?
    Mr. Montoya. Yes, sir, we do.
    Mr. Mica. I have been trying to find out what a criminal 
referral is. If I went in with a gun and a mask and robbed 
people of a fraction of this money, I would be in the slammer. 
I have written you all. Is it public knowledge when you do a 
criminal referral or do you have to keep it confidential?
    Mr. Montoya. Generally, we don't speak to it.
    Mr. Mica. If a member of Congress asks you, I have a 
specific case?
    Mr. Montoya. Yes, sir.
    Mr. Mica. You call the Department of Justice and they won't 
say anything. I can see that because of the proceedings they 
are involved in. Do you know anything about it?
    Mr. Montoya. In your case, we had criminal referrals to the 
Department of Justice. They were declined.
    Mr. Mica. They were declined by the Department of Justice?
    Mr. Montoya. Yes, sir, they were.
    Mr. Mica. I did not know that. That just burns me. That is 
unbelievable. I want staff to look at that. I would like to see 
what the basis is or what they have to do. Do they have to use 
a gun or knife? The previous executive director stole a fortune 
and did all kinds of abusive things and got probation.
    People who do violate federal law can still be subject to 
prosecution under State law, is that right, in these cases?
    Mr. Montoya. Yes, sir.
    Mr. Mica. I may pursue that too.
    We have case after case of problems. I want to give credit 
because you have good operations. Mr. Connolly cited one. I 
have five or six great operations, but there are some 
consistently poor performers.
    Why has the East St. Louis Housing Authority been under 
government receivership for almost 30 years? Any idea what is 
going on there?
    Mr. Montoya. The last we had done with regard to that was I 
think HUD's failure to properly plan for the management of that 
program.
    Mr. Mica. In the past, I wrote a letter with one specific 
housing authority I thought should be taken over. Can a member 
of Congress request that of any of these operations?
    Mr. Montoya. I wouldn't see why not, sir.
    Mr. Mica. If I do my own review, I might be giving you a 
list. I have a lot to do. It is amazing. You can see poor 
performers one or twice. Of course, some of them, like Sanford, 
have gone on for two decades. Here we have St. Louis for 30 
years.
    Mr. Montoya. In regard to your situation, sir, I couldn't 
agree with you more that this gentleman should never have been 
allowed in your housing authority. He had previously been fired 
from one and asked to resign or face firing from two others. We 
consistently see this.
    We consistently see bad actors who either were under 
investigation or had questionable activity, moved from PHA to 
PHA and it exacerbates these problems we continue to see. When 
you say you see a lot of the same actors.
    Mr. Mica. Is there a suggestion today on a certification or 
some type of validation? Staff, let's see if we can't come up 
with something. Maybe you would join me, Mr. Connolly? We need 
to put some measures in place to bring some of this to a halt.
    I don't want to take all the time. I tried to but I can't. 
I must yield now to our Ranking Member, Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman. I would be glad to 
join with you because I think you have put your finger on 
something. I guess I am dismayed, the most mild word I could 
use to describe, at the lack of professional criteria for 
running huge enterprises in some cases.
    The fact that you have someone who is a repeatedly bad 
actor, who somehow nonetheless gets hired--I have hired a lot 
of executives in local government. You have to check 
references, you have to Google them, you have look up their 
record, and you have to check around for their reputations in 
the localities in which they worked. That is just part of your 
due diligence. It is shocking to me
    Let me ask you, Mr. Montoya, let's refer to someone as a 
bad actor or someone with a very spotty record that is clear, 
by innuendo the record is clear, does HUD have the ability to 
tell a PHA we won't reimburse you for any part of that salary 
if you hire that person?
    Mr. Montoya. HUD has quite a lot of latitude with regard to 
this, so I don't know about that specifically but I would 
imagine the latitude they have in providing funding, they could 
do that. I don't know.
    I would like to say thank you to Congress. It wasn't until 
the recent appropriations that Congress mandated HUD to work 
with my office to incorporate some training on fraud awareness 
and the problems we have consistently seen.
    It has only been recently within the last month that we 
have been contacted by the assistant secretary for a PIH and 
some of the associations for these housing authorities in order 
to do that. I don't believe it would have happened without 
Congress' support. I appreciate that. We hope to take that 
further and time will tell.
    Mr. Connolly. It seems to me, Mr. Chairman, that in 
addition to the whole certification thing, which I think is 
long overdue, there ought to be a training and certification 
program for managers and boards that oversee these enterprises. 
That is not a new concept; it is done in many other fields and 
is long overdue here.
    It seems to me we ought to also explore what authorities 
HUD has and can and should be using since it pays up to 
$150,000 per your previous question--I think you said $150,000?
    Mr. Montoya. Yes, $155,000, that is what we will pay in 
Federal funds.
    Mr. Connolly. I know but if you get a bad actor with a bad 
history, presumably you have the power to say to a local PHA, 
you can hire that person but we are not going to reimburse you. 
It is on your watch, because they are on our list and have 
three strikes and they are out.
    When was HUD founded, Mr. Montoya?
    Mr. Montoya. I couldn't tell you off the top of my head.
    Mr. Connolly. Roughly in 1965, so it is coming up to its 
50th anniversary.
    I am reading your testimony and you said in your testimony 
that the department ought to develop a physical inspection 
system for the HCV program. The HCV Program is the?
    Mr. Montoya. The Housing Choice Option Program.
    Mr. Connolly. How long has the HCV Program been in 
existence?
    Mr. Montoya. You mean the program or housing quality 
standards?
    Mr. Connolly. I am reading your testimony. You refer to the 
HCV Program. What do you mean by the HCV Program and how old is 
it?
    Mr. Montoya. The Housing Choice Option Program is really 
Section 8 housing. It has been around probably as long as HUD.
    Mr. Connolly. We are just now talking about a physical 
inspection program at HUD?
    Mr. Montoya. We are talking about a physical inspection 
program with regards to the housing quality standards. If you 
were paying housing choice vouchers for units, units that 
should be inspected for housing quality, it has been about six 
years that we recommended to HUD that they institute a better 
mechanism to do these inspections and they have yet to complete 
that.
    Mr. Connolly. When did we adopt common standards at HUD for 
Section 8--here are the standards you really ought to be 
meeting?
    Mr. Montoya. With regard to Section 8, it has been around 
as long as the program, I believe. With regard to their 
inspections of these things, not quite sure.
    Mr. Connolly. Standards first. The standards are not new is 
my point?
    Mr. Montoya. That is correct, sir.
    Mr. Connolly. We are just now talking about maybe we should 
inspect some of them after 50 years? Then when HUD has 
inspected, reading again from your testimony, of the 119 units 
inspected, 99 didn't meet the standards?
    Mr. Montoya. That is correct.
    Mr. Connolly. That is just a sample. So 99 out of 119 
sounds close to 90 percent.
    Mr. Montoya. Out of about 12,000 I think the universe is 
made up.
    Mr. Connolly. Twenty-four of the 99 that didn't meet the 
standards were in material noncompliance.
    Mr. Montoya. Those have been longstanding issues that 
should have been corrected some time before.
    Mr. Connolly. I find that astounding. We have been in 
existence for 50 years, our mission is not new, the apparatus 
is not new, the bureaucracy is not new. This isn't rocket 
science, it is housing. Standards of quality for clients who 
live in this housing, hopefully we are not in the tenements of 
the Bowery in 1900, we have higher standards in 2014 and one, 
HUD isn't even inspecting them and we are still talking about 
maybe we ought to physically inspect.
    Does HUD delegate that responsibility to local PHAs like 
Mr. House and Mr. Jeremiah?
    Mr. Montoya. Yes, sir. In the case of NYCHA, yes, it is 
delegated.
    Mr. Connolly. How good a job do they do?
    Mr. Montoya. Part of our report suggested there is no 
consistency in how those inspections are conducted.
    Mr. Connolly. That tells me HUD doesn't manage it.
    Mr. Montoya. The other concern we saw in the report was a 
requirement--I think it is a performance issue--a requirement 
that 25 be inspected a day. We think this high level of measure 
is really driving bad behavior.
    Our inspectors could, at best, get to five or six a day and 
that was doing a full inspection to include driving between the 
boroughs. I think a performance measure of 25 is driving some 
bad behavior there.
    Mr. Connolly. Good point. And it is a double standard. We 
don't hold ourselves to that but we ask them to do it.
    Mr. Montoya. Correct.
    Mr. Connolly. You are absolutely right, that is bound to 
get someone to say check because I don't want to look bad. I 
got to 18 but I couldn't get to 25, so the other 7 are roughly 
okay and maybe they are not. Yes, we have to look at that.
    I think there are some real fairly obvious, low-hanging 
fruit management improvements HUD could make itself that would 
have a positive impact on local housing authorities. After 50 
years, it is inexplicable why they haven't been adopted. To me, 
it is inexplicable.
    I have run a large government and I would never tolerate 
what you just described. That is the tip of the iceberg; there 
are all kinds of other aspects we could look at. I think HUD is 
going to have to clean up its act if we are going to have a 
positive impact on local PHAs and a whole bunch of standards.
    Mr. Jeremiah, you talked about 700-plus investigations for 
malfeasance, corruptions, mismanagement and the like, correct?
    Mr. Jeremiah. That is correct.
    Mr. Connolly. You said 299 were referred for criminal 
prosecution?
    Mr. Jeremiah. Two hundred ninety-nine cases were 
substantiated; 32 were referred for criminal prosecution.
    Mr. Connolly. By the way, why only 32?
    Mr. Jeremiah. Two hundred ninety-nine were substantiated. A 
lot of these cases, quite frankly, are cases that are under 
$50,000 and there is reluctance on the part of prosecutors to 
prosecute those cases. We often have to enter into repayment 
agreements with them.
    Mr. Connolly. How often does that happen?
    Mr. Jeremiah. Quite often.
    Mr. Connolly. That would be buried in the 299?
    Mr. Jeremiah. That would be buried in the 299.
    Mr. Connolly. Do you have any idea how many of the 299 
involves settlements, payback settlements?
    Mr. Jeremiah. I don't have that specific number with me.
    Mr. Connolly. So 32 were referred for prosecution or for 
further action by the prosecutor?
    Mr. Jeremiah. Yes, for prosecution.
    Mr. Connolly. How many of the 32 were in fact prosecuted?
    Mr. Jeremiah. Of the 32 cases that were referred, we have 
had 10 arrests thus far and 5 are pending. The rest have not 
yet been acted upon.
    Mr. Connolly. Any trials?
    Mr. Jeremiah. Generally, no; they are usually pleas.
    Mr. Connolly. The Chairman made reference to a housing 
authority in his district where we have had consecutive 
executive directors who apparently absconded with money. You 
would think having been burned once, you would be real careful 
about who you hired to replace that person.
    I guess what troubles me about these statistics is I 
understand we are always going to narrow down and we certainly 
want to be fair to everyone but if you want to deter theft and 
corruption, one good way to do it is to prosecute and 
incarcerate.
    Mr. Jeremiah. I agree with you entirely.
    Mr. Connolly. In fact, I would argue that white collar 
crime is precisely the crime you want to have jail time because 
them's the folks that will really get the message--I don't want 
to do that. They are often the ones exempted, unfortunately.
    People who may be tempted or yield to temptation are going 
to calculate, what chance have I got of: one, getting caught; 
two, anything happening even if I am; and three, ever going to 
trial or even plea bargaining with some kind of serious 
consequence. Obviously the odds are pretty good if my intent is 
not a good one.
    I think we have to ramp up--as the Chairman suggested--more 
referrals both at the local level and the federal level, get 
tough about it and get the Justice Department and our local 
prosecutors to get tough about it.
    I understand the standard of $50,000 but I am not sure that 
is a good message either. It is not okay to be pilfering even 
sort of modest amounts relative to grand larceny. That can 
create a culture that undermines the mission and the faith of 
the public in the mission of the agency--it is all corrupt, 
they are all on the take and nobody does anything about it.
    You don't want that reputation, you don't want that 
perception. I think this is a very serious part of what we are 
doing to sort of get ourselves, where we have had problems, 
back on track in trying to win back the confidence of the 
public in our mission, what we do.
    Mr. Jeremiah. Mr. Connolly, there is a perception that the 
crimes that are committed as it relates to fraud and corruption 
are sometimes victimless crime. I attend every sentencing in a 
case involving the PHA. I had the opportunity to deliver a 
victim impact statement which are often taken into account by 
the judge.
    There are those occasions when the judge does not take that 
into account. I can tell you that we have had some incredible 
successes working with our local and federal partners to hold 
people accountable but there have been a number of cases where 
folks got off on probation, where they only got six months.
    For example, one case involving the theft of construction 
materials, well over $400,000 in construction materials, one of 
the defendants got six months in jail. There are kickback cases 
where we saw a very good result where that defendant got 50 
months in jail. It does run the gamut.
    I believe that it is important in terms of deterring fraud 
and corruption that we hold those folks accountable but I will 
add that even when the system does not, PHA has taken a very 
aggressive stance in holding them accountable. We do that by 
forfeiting their pensions.
    Mr. Connolly. Good. I would just say to you, as someone who 
spent 14 years in local government, the key to success is you 
have the public with you. They have confidence in the 
organization, in the machinery, in the people and the 
leadership.
    If they don't, your mission is in trouble. The notion of 
victimless crime, fair enough, it is not someone who has been 
violent and has physically hurt someone else but if you are 
responsible for eroding confidence in such an important subject 
area, affordable housing, so the public no longer has any 
confidence at all in what you are doing, so resources decline, 
fewer families are assisted, they are victims, through no fault 
of their own, because of some venality or mendacity by an 
employee, or a contractor or whoever it may be.
    That needs to be taken into account because the erosion of 
confidence is not a trivial matter.
    Look at Mr. House of New York, you came from the Bloomberg 
administration but you are now in the de Blasio administration. 
Mayor de Blasio set a breathtaking, to me, goal of 200,000 
affordable housing units in New York City. That is astounding.
    My jurisdiction is about one-eighth the size and we 
couldn't believe we would have 2,400 units in four years. 
Multiply by eight, maybe you could do 17,000 but 200,000 is 
going to be an extraordinary feat if it can be accomplished.
    If the public has no confidence in you to begin, you are 
never going to reach it. You are not even going to get a 
fraction of it. It is critical that if we are all going to get 
behind that goal in New York, we have to have confidence in 
you, Mr. House, and in the people who run that organization 
that they can get it done.
    That is what is so insidious about corruption, even petty 
corruption. I think we have to weed it out and we need HUD to 
double down on it because it is insidious.
    Mr. House, I want to give you an opportunity to respond and 
then I am done, Mr. Chairman. Thank you for your indulgence.
    Mr. House. I think the Mayor's housing plan as you have 
recognized is a very ambitious goal but there is a very 
critical and necessary need in New York City. Housing costs 
have gone up significantly and there is a need to have this 
additional affordable housing across our city.
    If you look at the individuals that live in public housing, 
a good portion of them work with our Department of Education, 
with our health and hospital industries. Those are critical 
human resources to make our city work as we move forward. We 
need to provide housing similar to what you have done in 
Fairfax County and we need to do that in New York City.
    It is just a matter of scale. New York City is so much 
larger and the need is, as a result, so much greater.
    Mr. Mica. Thank you, Mr. Connolly.
    I didn't put this up before but I just want to show you, 
Mr. Montoya. The Sanford Housing Authority is not in my 
district and has never been in my district. It is adjacent to 
my district. This is part of my file on this little housing 
authority that has gone wild and the problems we have had.
    That brings to mind the expenditure cited by the Inspector 
General on legal costs for the Philadelphia Housing Authority. 
Thirty million over three years is ten million a year. Was some 
of this money spent going after people and if so, how much? I 
read there were 15 law firms that were employed. How do you 
incur that kind of legal bill?
    Mr. Jeremiah. Let me first say that was before Kelvin 
Jeremiah came to town, for the record. The report is about 
three years old. Since then we have cut our legal expenditures 
significantly. Last year alone, it was about $900,000 down from 
that $10-million plus a year.
    I couldn't begin to justify what was done in the past but 
why there would be such an incredible need for what I would 
consider--I do share the IG's comments that it is excessive.
    Mr. Mica. You investigated that but you couldn't get 
documentation on what justified that $10 million a year 
average?
    Mr. Montoya. We looked at a portion of it, sir. Out of the 
$30 million, we looked at a representative sample of that, a 
little over $4.5 million. You are correct, of the amount we 
looked at, there was no real justification for the expenditure.
    Mr. Mica. The problem is there is $30 million over three 
years. He has gone to $900,000 and they were spending $10 
million for 15 firms, so it is money just gone.
    Mr. Montoya. Right. We basically extrapolated the entire 
$30 million being questioned and out of all of that, $1.1 
million was specifically spent to obstruct our audits. Again, 
this was not under the purview of Mr. Jeremiah.
    They did things like having three attorneys with each of 
our folks when we did interviews. They had to look at every 
record before they turned it over to us. These are the things 
that, as the IG, we have a right and responsibility to oversee.
    Mr. Connolly. Mr. Chairman, can I interject on that?
    Mr. Mica. Yes.
    Mr. Connolly. Aren't there laws against that? Were they 
using federal money?
    Mr. Montoya. Yes, sir, it was federal money.
    Mr. Mica. They were using Federal money.
    Mr. Connolly. Don't you have some redress, both criminal 
and civil?
    Mr. Montoya. We ended up getting what we needed.
    Mr. Connolly. That is not my question. Listen, if someone 
is investigating and you even lie to the FBI, it is a crime. To 
actually spend money from legal resources to deliberately 
obstruct and IG report involving federal money--adding insult 
to injury--using Federal money to obstruct, that has to be a 
crime and prosecutable. What happened?
    Mr. Montoya. What I would say is we are not done. If I can 
just leave it at that, we are not done.
    Mr. Mica. I just discussed with staff making certain that 
you have the resources to pursue some of this. What I have read 
and what I have heard is just astounding. Again, when you come 
to obstruction of your work and using taxpayer monies to 
obstruct, we are reaching about the limits. Somehow we have to 
drill down on this and go after these folks.
    We will see what we can do to give you the resources.
    Mr. Montoya. We appreciate your support.
    Mr. Mica. Unfortunately in my community, central Florida, 
about 25 percent of the homeless are veterans. Mr. House, was 
it you who said you had 460 homeless veterans?
    Mr. Jeremiah. That was me.
    Mr. Mica. Mr. Jeremiah. How many total units do you have 
for your whole housing authority?
    Mr. Jeremiah. We have approximately 13,000.
    Mr. Mica. Thirteen thousand does not sound like a big 
number.
    Mr. Jeremiah. It does not.
    Mr. Mica. Is there a limit on the program or is that a 
limit on your effort or what?
    Mr. Jeremiah. There have been some structural issues with 
our housing authority making units available.
    Mr. Mica. Do veterans get a preference for housing when 
they are homeless?
    Mr. Jeremiah. They do.
    Mr. Mica. They would naturally come to the top of the list. 
You have a waiting list?
    Mr. Jeremiah. Yes, we do. The waiting list generally 
wouldn't apply to homeless vets.
    Mr. Mica. How big is your waiting list?
    Mr. Jeremiah. It is about 60,000.
    Mr. Mica. A good number of those would be veterans. They 
don't get a preference in being first up?
    Mr. Jeremiah. A good number of those would not be veterans.
    Mr. Mica. The ones that are identified, they apply and they 
list they are a veteran, do they do that?
    Mr. Jeremiah. They do but they would be redirected into the 
VASH Program.
    Mr. Mica. I know but 460 is small and 13,000 units?
    Mr. Jeremiah. We do.
    Mr. Mica. You have 60,000 plus. It would be my preference 
to give those who served the Country an opportunity to have the 
first show at whatever is available. Is that the way you are 
doing it?
    Mr. Jeremiah. Yes, they do. Once they have indicated they 
are a veteran, they would be removed from the 60,000 plus.
    Mr. Mica. And given first preference?
    Mr. Jeremiah. They would be given first preference.
    Mr. Mica. What is the acronym for the program?
    Mr. Jeremiah. The Veterans Administration.
    Mr. Mica. VASH?
    Mr. Jeremiah. Yes.
    Mr. Mica. Are you only assisting those to the limits of 
that program funding availability or are you going beyond that 
and prioritizing those folks so they get first up?
    Mr. Jeremiah. We are doing both.
    Mr. Mica. That was my question.
    Mr. Connolly. Just to be fair, Mr. Chairman, just real 
quick I want to get some stuff in the record.
    Mr. Mica. Go right ahead.
    Mr. Connolly. If one only heard our previous exchange, one 
might think we are still in the middle of this so I want to be 
fair. Obviously the events we were describing in terms of the 
obstruction of the IG's investigation was not on your watch, 
Mr. Jeremiah, is that correct?
    Mr. Jeremiah. That is absolutely correct. I would also 
remind the members that prior to coming to the Philadelphia 
Housing Authority, I was an IG so I understand all too well.
    Mr. Connolly. You are a recovering IG.
    It is also important to get in the record, correct me if I 
am wrong, your predecessor was debarred in part because of his 
attempts to obstruct the IG report, is that correct?
    Mr. Jeremiah. That is not quite correct. The debarment 
related to the failure to file certain lobbying disclosures.
    Mr. Montoya. That is correct. We also found they had been 
using federal money to lobby.
    Mr. Connolly. Which is illegal.
    Mr. Montoya. Right.
    Mr. Connolly. In March 2011, the entire board of the 
Philadelphia Housing Authority resigned?
    Mr. Jeremiah. That is correct.
    Mr. Connolly. So you have a new board?
    Mr. Jeremiah. We do.
    Mr. Connolly. You went into receivership at that time under 
HUD control. Are you still under receivership?
    Mr. Jeremiah. No, we are one year out of receivership.
    Mr. Connolly. Have you closed all of the recommendations 
made by the HUD IG?
    Mr. Jeremiah. We have, including a reimbursement to the 
program of about $8.2 million for the legal services that we 
collectively determined were not necessary or appropriate.
    Mr. Connolly. Thank you. I want to be fair and not leaving 
it hanging because that is not the case. There is a new guy in 
town, a new board and hopefully we can make sure we try to 
learn from the terrible mistakes of the past.
    Thank you, Mr. Chairman.
    Mr. Mica. Those are very good points. We appreciate the 
cooperation of both of you. Both of you are fairly new.
    Mr. House, after you learned how much the guy next to you 
is making and how many more units he has, you can have a little 
talk. You have a lot of important responsibilities.
    This is a very important subject. I don't know of too many 
hearings that have gone into this depth, at least from our 
investigative standpoint. We would like to follow up because 
you do have a lot of people who need housing assistance and 
affordable housing and we need to make certain we have the 
alternatives.
    We have to take a real look at the administrative costs 
overall and see what we can do to bring that down. I don't mind 
paying to help people who need housing help but 29 percent 
premium on administration seems over the top. We will look at 
that further.
    I want to thank the New York and Philadelphia directors for 
being here. I salute you, Mr. Montoya on your work and the 
information you brought to the committee and Congress today.
    We will leave the record open for a period of seven days, 
without objection. We may have additional questions we didn't 
have time to get into because votes have been called.
    We thank you so much for being with us and participating in 
this enlightening hearing. We thank Mr. Connolly and Mrs. 
Maloney who are gone. We will continue to get the facts and 
hopefully improve the expenditure of public funds. It is such 
an important area.
    There being no further business before the subcommittee, 
this hearing is adjourned.
    [Whereupon, at 10:33 a.m., the subcommittee was adjourned.]


                                APPENDIX

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