    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                        HUD OFFICE OF INSPECTOR GENERAL
                         REPORT: HUD'S OVERSIGHT OF THE
                    ALEXANDER COUNTY (IL) HOUSING AUTHORITY

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

                                     HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             HOUSING AND INSURANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 25, 2018

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 115-117

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                    __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    32-368 PDF                  WASHINGTON : 2018

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
    BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
    BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
    BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
    SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
    STEVE STIVERS, Ohio                  AL GREEN, Texas
    RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
    DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
    ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
    ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
    ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
    KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
    LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
    SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
    ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
    BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
    MIA LOVE, Utah                       DENNY HECK, Washington
    FRENCH HILL, Arkansas                JUAN VARGAS, California
    TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
    LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
    DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
    BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
    ALEXANDER X. MOONEY, West Virginia
    THOMAS MacARTHUR, New Jersey
    WARREN DAVIDSON, Ohio
    TED BUDD, North Carolina
    DAVID KUSTOFF, Tennessee
    CLAUDIA TENNEY, New York
    TREY HOLLINGSWORTH, Indiana

                         Shannon McGahn, Staff Director
                     Subcommittee on Housing and Insurance

                       SEAN P. DUFFY, Wisconsin, Chairman

    DENNIS A. ROSS, Florida, Vice        EMANUEL CLEAVER, Missouri, Ranking
        Chairman                             Member
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    STEVAN PEARCE, New Mexico            MICHAEL E. CAPUANO, Massachusetts
    BILL POSEY, Florida                  WM. LACY CLAY, Missouri
    BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
    STEVE STIVERS, Ohio                  STEPHEN F. LYNCH, Massachusetts
    RANDY HULTGREN, Illinois             JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DANIEL T. KILDEE, Michigan
    LEE M. ZELDIN, New York              JOHN K. DELANEY, Maryland
    DAVID A. TROTT, Michigan             RUBEN KIHUEN, Nevada
    THOMAS MacARTHUR, New Jersey
    TED BUDD, North Carolina

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        September 25, 2018...........................................     1
    Appendix:
        September 25, 2018...........................................    17

                                   WITNESSES
                          Tuesday, September 25, 2018

     Bost, Hon. Mike, U.S. House of Representatives..................     4
     Duckworth, Hon. Tammy, U.S. Senate..............................     5
     Kirkland, Jeremy, Acting Deputy Inspector General, Office of
      Inspector General, U.S. Department of Housing and Urban
      Development....................................................     6

                                    APPENDIX

    Prepared statements:
        Bost, Hon. Mike..............................................    18
        Duckworth, Hon. Tammy........................................    20
        Kirkland, Jeremy.............................................    22

                  Additional Material Submitted for the Record

    Duckworth, Hon. Tammy:
        Letter to the Department of Housing and Urban Development....    50
        Letter from the Department of Housing and Urban Development..    51
        Letter to the Office of Inspector General....................    53

                            HUD OFFICE OF INSPECTOR
                             GENERAL REPORT: HUD'S
                           OVERSIGHT OF THE ALEXANDER
                         COUNTY (IL) HOUSING AUTHORITY

                                  ----------

                          Tuesday, September 25, 2018

                         U.S. House of Representatives,
                                        Subcommittee on Housing
                                                 and Insurance,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 4:05 p.m., in
    room 2128, Rayburn House Office Building, Hon. Sean P. Duffy
    [chairman of the subcommittee] presiding.
        Present: Representatives Duffy, Ross, Rothfus, Zeldin,
    Cleaver, and Beatty.
        Also present: Representative Green.
        Chairman Duffy. The Subcommittee on Housing and Insurance
    will come to order.
        Today's hearing is entitled, ``HUD Office of Inspector
    General Report: HUD's Oversight of the Alexander County,
    Illinois, Housing Authority.''
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time. Without objection, all
    Members will have 5 legislative days within which to submit
    extraneous materials to the Chair for inclusion in the record.
    Without objection, Members of the full committee who are not
    Members of this subcommittee may participate in today's hearing
    for the purpose of making an opening statement and questioning
    our witnesses.
        The Chair now recognizes himself for 5 minutes for an
    opening statement.
        Now, I first want to thank our first panel of witnesses who
    are here today that are going to be introduced in just a
    moment, but Congressman Bost and Senator Duckworth, welcome
    back to the House side. It is good to have you. We appreciate
    your testimony and appreciate the testimony of our IG.
        Today we will be examining issues related to the Alexander
    County Housing Authority, ACHA, and their role in allowing
    living conditions in both the Elmwood and McBride housing
    developments deteriorate to such that HUD (U.S. Department of
    Housing and Urban Development) had to demolish both of them and
    has taken over possession of the ACHA.
        Due to the actions of the ACHA, nearly 200 families will
    have to uproot their lives and move from Cairo, Illinois, to
    another city, hopefully in Illinois, but somewhere else. In
    addition to Elmwood and McBride, now we have come to find out
    that two additional ACHA housing developments will be closed
    due to the cost of rehabilitation. And so more families might
    have to leave Cairo for another community.
        Having served as Chairman of this subcommittee for the
    115th Congress, the conclusion of the HUD IG's report on the
    ACHA is disgusting, at a minimum, and possibly criminal with
    those who were involved in the ACHA. What is even more
    frightening is this could just be the tip of the iceberg around
    the country.
        Fifty other PHAs, public housing authorities, have been
    designated as troubled, according to the HUD IG report. The
    ACHA's activities are a prime example of abuse of government
    funds by a PHA.
        Now, it is my understanding that the IG will be limited in
    his questions, that he will be answering to some of the
    specifics in regard to individuals involved in fraud and
    potential abuse at the ACHA. We are going to do our best to
    respect that as there is an ongoing investigation.
        I will try to be respectful, again, if the IG feels like he
    can't answer specific questions from me or the panel. We do
    support the rule of law and the presumption of innocence.
        To be candid, though, I think the recommendations made by
    the IG are what should be done, at a minimum. This is a floor
    of recommendation, and we very well may need to do more.
        I don't want to get into much of Mr. Kirkland's testimony
    for him. We want to hear from him himself, so I don't want to
    say too much about that. But the disarray of the ACHA, and
    these units in particular, were first discovered in 2010.
    Incredibly problematic, incredibly disturbing. And to think
    that these are the families that we are here to help who are
    living in these kinds of conditions, again, I think every
    American would be outraged that this is how we house people or
    help house people and how we spend the Federal taxpayers'
    money.
        Based on the IG's report and my assessment of it, maybe
    PHAs should be under more scrutiny, and provisions of funds
    should be conditional once a PHA has been identified as having
    negative findings. I believe HUD is working to address some of
    the issues identified by the IG report, but we might need to
    look further at HUD's recovery and sustainability protocols
    when it comes to PHA. We have to scratch and dig, I think,
    deeper.
        The fact that these families, again, lived in deplorable
    conditions for 6 years before HUD finally took over the ACHA is
    just fundamentally inexcusable. To add on top of that, the ACHA
    clearly misused Federal funds and violated the Civil Rights Act
    via racial segregation and employment discrimination. What?
    This is unbelievable that in 2018 this is actually happening.
        Right now, about 1.2 million reside in public housing
    developments that are operated by around 3,300 PHAs. HUD
    provides about $4 billion in operating subsidies and awards
    about another $2 billion to PHAs to maintain those public
    housing properties. I believe we have good PHAs out there, but
    come to find out that there is abuse in at least one and
    possibly more. We have an opportunity to make sure all 3,300
    PHAs comply with HUD's policies and address health and safety
    hazards before another situation like Cairo pops up.
        I just want to note that if you watch this committee, and I
    say this often, and it is a testament to Mr. Cleaver, we always
    don't agree. We always don't get along. But in this space you
    find bipartisan support. You don't see light between either
    side of the aisle and either party on these issues. This is
    about families. This is about dignity. And this is about
    America standing together to make sure people have a safe,
    livable home in which to reside.
        My time has expired. And now I will recognize the Ranking
    Member, the gentleman from Missouri, Mr. Cleaver, for 5
    minutes.
        Mr. Cleaver. Thank you, Mr. Chairman.
        My opening comments will be brief primarily because you
    have stated very clearly and eloquently what I wish to express.
    I think that originally there was interest by Senator Durbin
    and Senator Duckworth, the Senators from Illinois. And the
    troublesome thing for me, and I will move on and wait until the
    questioning, I actually grew up in the projects, and we had the
    Black public housing developments, there were two, and then we
    had the White. There was no pretense of trying to say that they
    were the same, that it was everybody in town knew it, and there
    was nothing ever done about it.
        I thought that those days had ended a long time ago. And to
    imagine that, after all these years, we are still experiencing
    that same kind of stupid conduct on the part of people who are
    really being paid by the United States Federal Government, by
    the taxpayers. And that makes it even worse.
        And so, Mr. Chairman, I appreciate the hearing. I don't
    want anybody to come to the conclusion that other people are
    not interested. This is a fly-in day, as the Congressman knows,
    and so a lot of people are still trying to get to Washington
    for 6:30 votes. And then we have some other weather-related
    problems.
        But this is, nonetheless, an extremely important issue. And
    I worked on myself before I came in here so that I would not
    become emotional or loud, because this is very, very personal
    to me. And when I get off--when we get through with the
    committee, I am calling my dad to talk to him about this. At
    age 96, he will be stunned. He probably thought that 30 years
    ago this was over. So I want to talk with him about today's
    hearing. And then I know he will also calm me down.
        Right now, the calmtivity--there is no such word, but I
    feel like I can make up some words for this. The calmtivity is
    not as strong as I need. But I will restrain myself just to
    make sure. I am extremely angry, and it is personal.
        Thank you very kindly.
        Chairman Duffy. The gentleman yields back.
        I now want to welcome our witnesses. Our first witness,
    Congressman Mike Bost, from the 12th District of Illinois,
    approached me on the floor a year ago, wanted a hearing. I told
    him we can't. We wanted to wait for the IG report to come out.
    Pushed us to have a hearing, and we wanted to make sure we got
    it in as quickly as possible.
        Congressman Bost, welcome. And thank you for your advocacy
    on this issue.
        I want to thank Senator Duckworth for being here. We sprung
    this at her, and she has a busy schedule and was able to move
    her schedule around to be here as the Senator from Illinois. I
    know that Senator Durbin wanted to be here as well, and he was
    not able to move his schedule. But I thank the both of you as
    representatives of Illinois and of this location for being here
    and willing to testify.
        In a moment, both witnesses will be recognized for 5
    minutes for an oral presentation of their written testimony.
    Without objection, their written statements will be made part
    of the record following their oral remarks.
        Representative Bost, you are now recognized for 5 minutes.

                     STATEMENT OF THE HON. MIKE BOST

        Mr. Bost. Thank you, Chairman Duffy, and thank you, Ranking
    Member Cleaver. I appreciate the opportunity to appear before
    you and the subcommittee.
        Today's hearing is about government's failure to protect
    its most vulnerable of us. Most of you have never heard of
    Cairo, Illinois. Matter of fact, if you saw it, you would say
    Cairo. And unless you are from this district, you would
    actually--that is when you pronounce it as Cairo. But it is
    time that you have heard about it, time you should hear about
    it.
        Cairo is a small town in my district that was once a
    roaring city on the banks of the Mississippi and Ohio Rivers.
    It shares a story that is similar to many across the country,
    perhaps similar to those in your districts.
        As the 20th century rolled on, Cairo's population dwindled
    due to changes in transportation, community strife, a lack of
    service, and downright neglect. But many families stayed, proud
    of their city, honoring their heritage. Most of these families
    live in public housing units under the control of Alexander
    County Housing Authority.
        Many of us first learned the extent of the problems in
    Cairo through reports in The Southern Illinoisan newspaper. The
    paper exposed unsafe living conditions that included units
    infested with mold, insects, and other vermin. Many had no
    appliances, heating, or air conditioning. One mother was forced
    to spray insect killer around her young son's bed each night
    due to infestation in her unit.
        After my Illinois colleagues and I requested a Federal
    investigation, HUD placed the housing authority in
    receivership. The buildings were beyond repair. 185 families
    were forced to leave a city they called home for generations.
        The cause of this tragedy comes down to two words: Greed
    and neglect. Over many years, the local housing authority used
    Federal funds as their personal piggybank. Funding intended for
    maintenance was used for personal travel and other perks. The
    executive director at the time admitted to fraud. He said: We
    lived it up too good, and we didn't even see this coming, and
    we thought it would last forever.
        Then there is the issue of neglect, which I believe should
    be the main focus of this hearing. Issues with Cairo Housing
    Authority were known to HUD for years, but little was done. It
    is my belief that had HUD taken these issues more seriously, we
    may not be here today. The Federal Government must do a better
    job of conducting oversight, especially when it involves the
    health and safety of people in need.
        Where was the ball dropped on Cairo? How did things fall
    through the cracks? And where is it happening in other public
    housing around America? And how do we prevent this from
    happening again?
        While I may not be a Member of this committee, I want to
    work with you, Republicans and Democrats, to ensure that reform
    is implemented. I also want those who created this crisis to be
    held accountable. It is frustrating to me and the people of my
    district that these officials have not been charged for their
    alleged crimes.
        The people of Cairo and surrounding areas deserve justice.
    I hope today is a big step in making that happen. And, once
    again, I thank you for holding this hearing.
        With that, I yield back.
        [The prepared statement of Mr. Bost can be found on page 18
    of the Appendix.]
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentlelady, the Senator from
    Illinois, Senator Duckworth, for 5 minutes.
        And, again, welcome back, Senator. Nice of you to come over
    to our side of the Capitol.

                  STATEMENT OF THE HON. TAMMY DUCKWORTH

        Senator Duckworth. Yes. Yes. And I used to be just down the
    hall in OIG, so not too far away.
        It is good to be back. And I do miss my colleague
    Representative Cleaver's daily affirmations and thoughts that
    he would give us every day as we proceeded to do the people's
    business here in the House of Representatives.
        Chairman Duffy, Ranking Member Cleaver, thank you for
    holding this important meeting.
        In February 2016, as the continued instances of
    mismanagement, willful neglect of resident safety, and both
    improper and illegal policies at the local level, I stress
    illegal policies at the local level, HUD took into receivership
    the Alexander County Housing Authority, ACHA.
        By this report's own conclusion, HUD was aware of these
    problems as early as 2010, but hesitated to exercise its
    authority to bring ACHA into compliance. In fact, the ACHA has
    failed HUD's physical assessment tool used to determine if a
    unit is habitable since 2012.
        Senator Durbin and I solely requested this HUD OIG report
    to get to the bottom of how HUD failed these residents. And
    following the reports released in July, we wrote to Secretary
    Carson urging quick implementation of the IG's recommendations.
    Yesterday, we finally received the response to our letter in
    which HUD agreed to implement these recommendations and provide
    timelines for that implementation.
        With the permission of the Chairman and Ranking Member, I
    would like to submit for the record the letter Senator Durbin
    and I sent, as well as the response we received from HUD. I am
    also submitting written testimony from both Senator Durbin and
    myself regarding today's hearing.
        Chairman Duffy. Without objection.
        Senator Duckworth. Thank you.
        I have seen firsthand the conditions these residents live
    in. I visited the facilities. I talked to the residents. And,
    in fact, I continue to speak with the residents, telephoning
    key community leaders from time to time.
        They face mismanagement, and they continue to have to
    recover from this mismanagement. Many families are now split
    apart, living in separate counties, without support of their
    loved ones. And so we must continue to listen to these
    residents and hold accountable the officials who failed them
    and created this crisis in Cairo.
        In addition, I hope we can all work together to provide
    these residents and similar communities with the resources they
    need to restore their public housing stock and guarantee safe,
    healthy, and affordable housing.
        I appreciate the opportunity to join this committee and
    raise awareness for the people of Cairo. I am here on behalf of
    both Senator Durbin and myself. He is on the Judiciary
    Committee on the Senate side, so he is a little bit busy this
    week.
        Thank you again, Chairman Duffy and Ranking Member Cleaver,
    for having this. And from both Senator Durbin and I, thank you
    for bringing this to your attention.
        Thank you. I yield back.
        [The prepared statement of Senator Duckworth can be found
    on page 20 of the Appendix.]
        Chairman Duffy. Thank you, Senator.
        And I just want to thank the both of you for your testimony
    and for your bipartisan effort to improve the conditions.
        And it is common practice, for Members of Congress and
    Senators, that the panel does not ask you questions. So at this
    point, you are excused. And I want to thank you for your
    testimony.
        If you all would just wait one moment as we do a transition
    to our second panel, we will switch out over the next minute or
    two.
        Chairman Duffy. And now for our second panel, a witness of
    one, I want to welcome Mr. Jeremy Kirkland, the Acting Deputy
    Inspector General for HUD. We appreciate you being here.
        Without objection, the witness' written statement will be
    made part of the record following his oral remarks. Once the
    witness has finished presenting his testimony, each Member of
    the subcommittee will have 5 minutes within which to ask him
    questions on the report and his statement.
        I would just note that on your table you have three lights.
    Green means go, yellow means you have 1 minute left, and red
    means that your time is up. It is pretty obvious. The
    microphone is sensitive, so please make sure you turn it on and
    speak directly into it.
        Mr. Kirkland, you are now recognized for 5 minutes.

                      STATEMENT OF JEREMY KIRKLAND

        Mr. Kirkland. Chairman Duffy, Ranking Member Cleaver, and
    Members of the subcommittee, I am Jeremy Kirkland, and I am the
    Acting Deputy Inspector General for HUD's Office of the
    Inspector General. Thank you for the opportunity to share with
    you today the results of our evaluation and HUD's oversight of
    the Alexander County Housing Authority, or ACHA.
        HUD OIG examined the allegations of misuse of Federal funds
    following a referral from HUD. My testimony will focus on the
    evaluation of HUD's oversight of ACHA following multiple
    congressional requests. The evaluation identified what could be
    systemic issues which plague many similarly situated public
    housing agencies. The Office of Public and Indian Housing (PIH)
    operates HUD's public housing program and is responsible for
    monitoring PHAs and ensuring effective controls are in place to
    prevent problems.
        HUD provides approximately $4 billion in operating
    subsidies to assist PHAs annually and approximately $2 billion
    to PHAs annually to develop, modernize, and maintain public
    housing properties. PHAs are entities authorized by the State
    to be caretakers of public housing funds and must ensure that
    the funds are properly managed.
        In the past, HUD OIG identified that a significant cause of
    the deficiencies included that executive directors and boards
    of commissioners at PHAs either ignored requirements or lacked
    sufficient knowledge to properly administer the program. ACHA
    is a moderate-sized PHA with nearly 500 units in its inventory.
        As part of our evaluation, we conducted 24 interviews with
    current and former HUD officials and collected documentation
    addressing HUD's actions to oversee ACHA. A combination of poor
    local management and ineffective oversight resulted in
    approximately 200 children, along with their families, living
    in units with pest infestations, including roaches, rodents,
    and bedbugs; inoperable appliances and electrical breakers;
    obstructed accessibility routes, among other health and safety
    issues.
        We found that HUD knew about the negative conditions at
    ACHA since at least 2010. We found that HUD identified
    weaknesses in ACHA's financial condition as early as Fiscal
    Year 2013. And we found that HUD identified issues with ACHA's
    governance, including misuse of funds, conflicts of interest,
    and failure to comply with HUD policies and Federal civil
    rights laws.
        While HUD has the authority to determine that financial,
    physical, management, and ethical problems cannot be remedied
    through the PHA recovery and sustainability, or the PHARS
    protocol and, therefore, HUD could rule the PHA and substantial
    default without requiring a 2-year cure period, our report
    identified that HUD officials did not understand that
    flexibility existed.
        On February 19, 2016, HUD finally did declare ACHA in
    substantial default of its contract with HUD, removed its
    board, and took possession of the housing authority in a
    process called receivership. We also found that HUD initially
    hesitated to exercise its authority to place ACHA into
    receivership.
        A key takeaway for me is HUD officials used policy
    infrequently and incorrect understanding or interpretation of
    policy to justify inaction. As such, it appears that PIH may
    have failed to use some tools available.
        Our recommendations to HUD were to look to identify early
    when cross-programmatic reviews and enforcement actions against
    PHAs are required; that HUD train PIH officials on the
    authorities and processes for identifying, declaring, and
    managing PHAs in substantial default; that PIH update and
    strengthen the training program for HUD receivers of PHAs; and
    that PIH update procedures for receiverships.
        HUD OIG remains concerned that without additional
    oversight, engagement, and outreach by PIH, there remains
    increased risk of fraud, waste, abuse, and gross mismanagement
    within these PHAs.
        At this time, I am open to any questions you might have
    about the report and the work on ACHA.
        [The prepared statement of Mr. Kirkland can be found on
    page 22 of the Appendix.]
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes himself for 5 minutes for
    questioning.
        I think anybody who hears about the conditions are
    outraged. And I want to thank you, Mr. Kirkland, for your
    report and your investigation in helping bring this to light in
    the Congress.
        It is fair to say that HUD knew there were problems in the
    ACHA. Fair enough?
        Mr. Kirkland. That is correct.
        Chairman Duffy. And they knew back in 2010, but that is--we
    only use 2010 because that is as far as we asked you to look
    back, But they probably knew before 2010. Is that a fair
    assessment?
        Mr. Kirkland. We did not look past 2010, but the conditions
    seem obvious that they didn't start overnight.
        Chairman Duffy. Right. So it is fair to say that 2010 was
    not a magic year that things started to deteriorate. It has
    probably been happening for some time.
        Mr. Kirkland. That is likely the case.
        Chairman Duffy. And where does the buck stop? How high do
    these things go? Who is responsible? Who do we look to say, you
    know what, there is mismanagement underneath you, but the buck
    stops with you? Who do we look to say whoa, whoa, whoa, whoa?
    It is--
        Mr. Kirkland. Ultimately, as has been pointed out, I think
    this has been an absolute failure at every level. But every
    level failed the residents in Alexander County miserably.
        Chairman Duffy. Does it go to the HUD Secretary?
        Mr. Kirkland. Ultimately--
        Chairman Duffy. Does it go that high?
        Mr. Kirkland. Ultimately, we all have a responsibility to
    ensure these residents have safe--
        Chairman Duffy. I am going to be--and I am not asking--I
    don't care about politics. I am not trying to--I am not trying
    to point fingers at anybody. This is a really bipartisan
    effort. I just want to know--and by the way, I would just note
    that there are a lot of problems in HUD, and there are hearings
    that we can throw barbs at both sides of the political aisle. I
    am not asking you for that reason. I want to know how high does
    it go? Should the HUD Secretary know about this and give
    demands or recommendations to fix it? Is that fair? Or is it
    someone below the Secretary?
        Mr. Kirkland. Ultimately, this should have gone to the HUD
    Secretary's attention, and ultimately the HUD Secretary should
    have acted.
        Chairman Duffy. Should have acted.
        And in 2010, HUD's PIH identified issues at the ACHA. You
    mentioned that during a review. But nothing was done, right?
        Mr. Kirkland. That is correct.
        Chairman Duffy. So what do we do? What does this committee
    do? Because, again, these are not partisan issues. We have
    bipartisan failures within HUD that affect people's lives. What
    does this committee do? What does this Congress do to makes
    things actually work and improve people's lives and make sure
    our taxpayers' money is spent well to improve people's lives
    and living conditions?
        Mr. Kirkland. I think the circumstances of beginning to
    address this problem start with the recommendations in our
    evaluation. I do believe those fundamental flaws that reared
    their head in Alexander County are not going to go away unless
    we begin to collectively figure out a path forward on these
    types of issues. And it is not going to take one individual
    stepping in. It is not going to take one group stepping in. It
    is ultimately going to take a fundamental change in the
    approach that we take to public housing.
        Chairman Duffy. Should we review the structure of the PIH
    in terms--should it be reorganized?
        Mr. Kirkland. While we have not looked at that issue,
    obviously, that is a question that I think HUD should answer
    and can answer.
        Chairman Duffy. OK. So quickly, this was not an issue of
    money, though. Did we not send enough money to make sure people
    don't live in these conditions? And if we did, what was--
        Mr. Kirkland. There was obviously a lot of money sent to
    Alexander County to--
        Chairman Duffy. And money didn't solve the problem, did it?
        Mr. Kirkland. And money didn't solve the problem.
        Chairman Duffy. It is mismanagement.
        And I don't want to ask you about specifics of liability.
    But if we look at this as a whole, and if this is not the only
    scenario that is out there in our PHAs, should there be other
    kind of liability for boards that run these PHAs?
        Mr. Kirkland. I absolutely believe--
        Chairman Duffy. Criminal?
        Mr. Kirkland. Boards should be held accountable. Executive
    directors should be held accountable.
        Chairman Duffy. Civilly and criminally?
        Mr. Kirkland. Civilly and criminally.
        Chairman Duffy. And I bet if we held people criminally
    liable for their work on these boards, one, you would get good
    people who know what they are doing, and they would make sure
    they do their job, because they don't want to go to jail or
    prison because of mismanagement. And, frankly--and I am not--I
    look at--people should be held accountable for the money that
    was spent and the conditions that people are living in.
    Unacceptable.
        I look forward to continuing to work with you on what this
    committee should do on how we should evaluate, do further
    hearings, potentially legislate changes to make sure this
    doesn't happen again.
        With that, my time is expired.
        I yield to the Ranking Member, Mr. Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman.
        Let me first of all say I have been on the committee for 14
    years, so I have been through a lot and heard a lot and
    participated in a lot. The only time I have been more upset is
    in the aftermath of the 2008 economic crisis. Greed brought the
    world to the very brink of an economic cataclysm. And as of
    today--I will check when I go back to the office, as of today,
    nobody has been indicted. And it was as clear as day. I think
    most of the people up here are attorneys except for me and Mrs.
    Beatty, but for even a layperson, it was as clear as day that
    some people broke laws and did just about everything
    conceivably possible, and nobody, as of today, went to jail.
        My son saw that movie they did, with my wife and me. We
    walked out of the movie theater. He wouldn't even speak to me.
    He is a young kid. He is just angry. He said, nobody's been
    charged with anything?
        And that is how I feel about this issue. If some of the
    kids who lived in public housing had broken into the PHA office
    and stolen a computer, they would be in jail. A $500 computer,
    they would be in jail. These greedy people--is your report
    going to be sent to the Justice Department?
        Mr. Kirkland. I can confirm that we have referred this
    matter to the U.S. Attorney in the southern district of
    Illinois. And that matter has been accepted for criminal and
    civil prosecution.
        Mr. Cleaver. OK. I feel better. Not a lot, because people
    are still hurting.
        But that brings me to the other point. I think you
    requested the emails in November and you received them in June,
    something like--I may have that turned around a little.
        In your report, you said that depending on what you find,
    you would have--might have additional information. I am
    wondering if you have any idea when the analysis of those 50
    gigabytes of emails you have received will be available?
        Mr. Kirkland. We have received almost 16,000 emails. So
    far, we have reviewed about 6,000 of those emails. We do have--
    the team that completed this report is a fairly small but
    nimble team. They are working very, very hard to work through
    those emails, and we do intend to produce them as quickly as
    possible. We do recognize the importance of those issues.
        I will say, to date, the emails have confirmed and actually
    enhanced or bolstered our assessment of that.
        My bad. We got 600,000 emails, and only 16,000--
        Mr. Cleaver. Oh, jeez.
        Mr. Kirkland. --have been reviewed.
        And I will say that one of the concerns--and obviously
    there was a lot of time from our request for these emails and
    the actual production of those emails. And recognizing that we
    have raised concerns on the process in which HUD produces those
    emails, there is a fundamental concern that we at the OIG have
    with the fact that we don't have immediate access to this type
    of information.
        Mr. Cleaver. Yes, 7 months.
        Mr. Kirkland. IG should have immediate access to that type
    of information.
        Mr. Cleaver. Yes, I agree. Seven months. When I saw that, I
    thought, what in the world. What could they have possibly done
    in a 7-month period?
        My other question is whether or not there is some kind of
    interest being given to those individuals who were moved out of
    those housing units? Is there any follow up--do you know if
    there has been any follow up to make sure that all of the
    individuals who have been moved are, in fact, in a decent
    housing unit someplace in Cairo?
        Mr. Kirkland. I do not know the answer to that. That would
    be a question that I would think HUD should and could answer
    and should be able to answer.
        Mr. Cleaver. In 7 months.
        Mr. Kirkland. Yes.
        Mr. Cleaver. They should be able to answer in 7 months. OK.
    I will ask the question.
        Thank you, Mr. Chairman.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentleman from Pennsylvania,
    Mr. Rothfus, for 5 minutes.
        Mr. Rothfus. Thank you, Mr. Chairman.
        Mr. Kirkland, what should be the process to prevent the
    type of deplorable conditions that were witnessed by HUD
    officials out at the ACHA?
        Mr. Kirkland. I think it is a cascading effect. But I do
    think, when HUD finally engaged in a cross-programmatic review
    of what was going on at ACHA, you finally saw action by HUD. I
    think it took a collective effort on HUD's part to ensure that
    action could be taken. I think the recommendations within our
    report, specifically the one for HUD to view that more cross-
    programmatically, allows it more tools in the toolbox.
        Mr. Rothfus. Can you tell me what ultimately caused HUD to
    place the ACHA in administrative receivership? What was the
    final straw?
        Mr. Kirkland. I think there were no alternatives. I do
    think, as the report revealed, when the FHEO forced the hand of
    PIH, that that ultimately caused the steps to be taken.
        Mr. Rothfus. Going back to 2010, when HUD's Public and
    Indian Housing identified issues at ACHA during a review but
    closed the findings, why did PIH close out its findings after
    identifying possible issues within the housing authority in its
    governance?
        Mr. Kirkland. They said that the responses were acceptable
    and--but we did not find any documentation or really any one
    that could support that they determined ACHA's responses in
    2013 were acceptable.
        Mr. Rothfus. Could several of the violations outlined in
    your July 2018 report have been avoided if HUD had followed
    through on its findings in 2010?
        Mr. Kirkland. We really didn't look specifically at the
    timeframe of that. But I will say, obviously, the earlier HUD
    would have engaged in a process, I do think these families
    would have been able to find a better situation sooner if HUD
    had engaged earlier.
        Mr. Rothfus. Let's see. The HUD OIG mentioned in its report
    that, although it may be too late to save the ACHA as of June
    2018, 50 other PHAs were designated as troubled.
        What procedures does PIH have in place to prevent housing
    authorities from becoming troubled?
        Mr. Kirkland. So PIH has identified that they go through
    this PHARS (Public Housing Authority Recovery and
    Sustainability) protocol, which is the protocol that we
    highlighted. We do think PIH has more flexibility than always
    sending a troubled housing authority through this PHARS
    protocol. I will say we have also, at HUD OIG, noted that we
    are willing to engage in a process where we are going to put
    boots on the ground at some of these troubled housing
    authorities. We are going to send resources to address some of
    these troubled housing authorities.
        Mr. Rothfus. Can you cite examples where HUD has been
    successful in pulling back an agency that has been troubled?
        Mr. Kirkland. I do not know any off the top of my head.
        Mr. Rothfus. But we currently have 50 that are out there
    right now.
        Mr. Kirkland. And there are currently four PHAs in
    administrative receivership. Obviously, three others on top of
    Alexander County.
        With the 50, I can say that there is one that has been
    troubled since 2003. As was indicated, many of these troubled
    housing authorities are supposed to only be allowed, even in
    the PHARS protocol, a 2-year cure period. And that is not even
    required under PIH requirements, but--
        Mr. Rothfus. With any of these troubled housing agencies,
    how confident are you that there are not facilities there that
    would be in the same condition as Elmwood and McBride?
        Mr. Kirkland. I am absolutely sure there are other
    facilities out there like Elmwood and McBride.
        Mr. Rothfus. And what is the Department doing about that?
        Mr. Kirkland. I do believe the recommendations that we made
    are a start. But, once again, it is only a start. It is going
    to take a more collective effort on the part of all of us. And
    as I indicated, HUD OIG is prepared to be an independent voice
    and I think a necessary independent voice in that process.
        Mr. Rothfus. I yield back.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentlelady from Ohio, Mrs.
    Beatty, for 5 minutes.
        Mrs. Beatty. Thank you to Chairman Duffy and to Ranking
    Member Cleaver and to you, Mr. Kirkland.
        I echo all the comments of my colleagues. And certainly the
    Chairman is correct; there is enough blame to go around. As I
    sat here and thought about going back beyond 2010 and 2000, we
    probably had an equal number of Democrat and Republican HUD
    directors, because we know this doesn't happen overnight.
        This is very troublesome for me. I spent 20 years of my
    life as a relocation consultant with PHAs. And I have been in
    facilities that look like that. So I am sure you are correct
    that there are more than the surface four or five that you
    mentioned, because as great as my State and my district is, I
    can remember walking in a facility and thinking, someone's
    mother and grandmother lives in this facility, and no one would
    want to have someone here with mold and rodents. And the story
    ends well. We moved all of those individuals out, tore down
    that public housing and rebuilt it, and moved many of them back
    into Jenkins Terrace, or 1100, in Columbus, Ohio.
        This is very disturbing to me as I sit here, and I--I think
    about, not the bricks and mortar, but the people. What was the
    process? Can you explain to the committee the level or mode of
    communication with the tenants through this process? Was HUD
    keeping them--updating or informing them what was occurring
    with their housing authority?
        Mr. Kirkland. I do think as far as looking back on the
    effort to address the tenants and the tenants' concerns, I do
    think that was a huge overlooked process in all of this. And I
    don't know what all contributed to it. Obviously, there was
    engagement with the tenants. There was an opportunity to hear
    the tenants. But, obviously, something didn't register, because
    the concerns that were being raised, the concerns that were
    brought forward by the tenants--to have tenants who are having
    to spray bug spray on their children so they can sleep at
    night, that is something that should register a problem.
        Mrs. Beatty. Sure. Let me ask you what you think about
    this. I have been on both sides. I started early in my
    professional career being a housing inspector in public
    housing, and that is what led me later to make it part of my
    company when I became a consultant.
        Earlier this year, Congress passed legislation that would
    reduce the frequency of public housing inspections at small
    rural agencies to every 3 years. I oppose that legislation. So
    I guess my question to you is, if these buildings are inspected
    less frequently, would that increase the risk that HUD would
    fail to identify some of these deteriorating conditions until
    it is too late?
        If I start having a leak in my kitchen, or any of our
    kitchens or in our basement and you catch it in the first year.
    But if we have now changed it--and that did not sit well with
    me because of the many years that I have spent working and
    involved in public housing authorities.
        So can you address that when we talk about that? That is
    something we did right here. And I just couldn't support it,
    because I think we needed to be in there more often doing this.
        Mr. Kirkland. I believe--
        Mrs. Beatty. Do you believe that we should go 3 years, or
    should we go back to inspecting it every year?
        Mr. Kirkland. I believe our report highlighted the
    importance of the inspection process. The inspection process is
    important to this overall process to ensure--
        Mrs. Beatty. But inspection 3 years or 1 year? Now seeing
    what you have seen and what you have written, we have heard
    Democrats and Republicans both talking about this just didn't
    start in 1 year, but would you think, if you are seeing
    something in the first year or you wait until the third year
    and you have these conditions--
        Mr. Kirkland. I will say our overall body of work has
    identified a concern overall with the inspection process. It is
    not consistently applied, to begin with. And that was
    indicated, even in Alexander County, just to have a score go
    from, I think, 42 to 82 and then back down to an even lower
    number than the 2012 number, I think the inspection process is
    a valuable process. We haven't looked at specifically what is
    the right amount of time. But it has got to be a necessary
    process to include.
        Mrs. Beatty. Thank you, Mr. Chairman. I yield back.
        Chairman Duffy. The gentlelady yields back.
        The Chair now recognizes the gentleman from Texas, Mr.
    Green, for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I thank the witness for
    appearing as well.
        Please allow me to ask a few questions about some of the
    circumstances that caused this condition to manifest itself.
        Is it true that between 2010 and 2016 the Budget Control
    Act caused cuts of about $1.6 billion in funding to housing?
        Mr. Kirkland. I would have to check those numbers, but I
    know there were substantial cuts.
        Mr. Green. Does substantial mean more than a billion
    dollars?
        Mr. Kirkland. Yes.
        Mr. Green. OK. Thank you.
        And is it true that, as a result of this, we are losing
    about 10,000 public housing units per year due to disrepair?
        Mr. Kirkland. I am not exactly sure of the number, but we
    are losing a good number of public housing units.
        Mr. Green. Is it fair to say that we are losing a good
    number because of disrepair?
        Mr. Kirkland. That would--we have not looked at what has
    been the cause of that, but I think that is a big cause.
        Mr. Green. That is a big cause?
        Mr. Kirkland. Yes.
        Mr. Green. I will accept that terminology.
        And is it true that, notwithstanding the lack of
    maintenance at these projects, that this level of disrepair,
    some of it associated with the big cuts, is something that we
    are seeing in many other housing projects across the country?
        Mr. Kirkland. I am not sure that we--we have looked at the
    connection there, but--
        Mr. Green. Is that a fair inference?
        Mr. Kirkland. That could certainly be a fair inference.
        Mr. Green. The reason I brought this up is because I agree
    with what was said earlier and I would even add more to it. And
    I am going to circle around and come back to where I am now.
        But I agree that based on what was said about the
    employment discrimination, civil rights violations, management
    was uncooperative, mismanagement, $400,000 in misuse of funds,
    misadministration of contracts, properties beyond
    rehabilitation, $720,000 in civil penalties, $188,000 in
    assessments based on false claims, and nepotism, all that is
    bad. So we have that now to put aside.
        But circling back to where I was, I mention this because my
    dear friend made the comment that money wasn't the problem. And
    money is a problem. Let's move this--all these issues aside.
    Money is still a problem, is it not?
        Mr. Kirkland. I would say there are many contributing
    factors. Obviously--
        Mr. Green. Wouldn't you say that money is one of the
    contributing factors?
        Mr. Kirkland. There are resource issues and--
        Mr. Green. Can we define resource as money?
        Mr. Kirkland. Money would be one of the resource issues,
    but there are many contributing problems to the problem.
        Mr. Green. There are many. But what we don't want to do is
    minimize the impact of over a billion dollars in cuts. We don't
    want to minimize the impact that that billion dollars can have
    as resources on these projects. Is that a fair statement?
        Mr. Kirkland. Money can definitely have an impact on the
    resources--on these projects.
        Mr. Green. OK. All right. Well, listen, I do appreciate
    your appearing today. And I just want us to think about, not
    only this laundry list that I have called to your attention,
    but also about what are we going to do to preserve housing for
    people who really need it in this country.
        And I see that you want to respond. I will yield to you to
    respond, and then I will take about 15 seconds to wrap up.
        Go ahead, sir.
        Mr. Kirkland. I will note as well that, in the process of
    all of this time that ACHA has been on this downward spiral, a
    substantial amount of money has been spent and wastefully
    spent, unfortunately, because the oversight was not there to
    do--
        Mr. Green. All right. I accept that, but before I lose my
    time, is it also true that there are other circumstances where
    properties are in disrepair due to a lack of funds?
        Mr. Kirkland. Absolutely.
        Mr. Green. OK. So we want to take care of this. And, by the
    way, I think somebody should go to jail as well. But I also
    think that we have to look at these problems in a sober fashion
    when we are talking about the remedy.
        And I thank you for your testimony.
        I yield back.
        Chairman Duffy. The gentleman yields back.
        I want to thank Mr. Kirkland for his testimony. And you may
    get some follow up questions. I would ask you to answer those
    in a prompt fashion, whether, in this situation, it is a money
    problem versus a waste of money problem, to be clear.
        I don't want to do a second round. We do have votes
    tonight; otherwise I would go into that. But, again, I want to
    thank you for your testimony.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        Thank you for your testimony. And this hearing is
    adjourned.
        [Whereupon, at 4:57 p.m., the subcommittee was adjourned.]

                                A P P E N D I X

                               September 25, 2018

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