Guy Brignon, the chairman of the Dallas Housing Authority and a real-estate developer and apartment complex owner, said earlier this week he won't OK or even discuss DHA president and CEO Ann Lott's highly controversial contract extension till the DHA is audited -- after it was just audited by KPMG International at the cost of $350,000, according to several sources familiar with the audit. Indeed, the 2005 audit was turned over to DHA board members only a few weeks ago; the U.S. Department of Housing and Urban Development hasn't even signed off on the document. And the 2006 audit is scheduled to begin in a few weeks.
So what, precisely, did Brignon find so troubling in the 2005 audit? Well, in a press release Brignon sent out Sunday through his PR firm, The LeMaster Group, it was noted that the auditor found "significant material weaknesses, lack of internal controls, non-compliance and violation of state law." That was quoted verbatim in The Dallas Morning News on Monday. In fact, it was presented in the paper as though it had come from the audit, not the press release: "Guy Brignon said he decided to ask for the audit after reviewing a 2005 report by the auditing firm KPMG, which noted 'significant material weaknesses, lack of internal controls, non-compliance and violation of state law.'"
But two high-ranking DHA officials say that sentence is "nowhere in the audit." After the jump, Brignon's PR person explains where it came from, HUD sends word from D.C. and the entirety of Brignon's press release.
In the executive summary of the audit obtained by Unfair Park, auditors did take issue with how DHA complies with "requirements regarding allowable costs/cost principles and cash management" of HOPE VI and Capital Fund money. Sources say this involved the moving of money to pay for Roseland Homes, a $75 million development near downtown, before HUD funds became available to complete it, but that the money was accounted for and that this isn't uncommon. "We're paying for the audit so they can show us the good, the bad and the ugly," says a source, who insists the DHA "has nothing to hide." Another source says the auditors just wanted more documentation concerning the expenditure of money HUD had already approved.
Nonetheless, a few sentences later the auditor concludes: "In our opinion, except for the noncompliance described in the proceeding paragraph, the Authority complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2005."
When reached by Unfair Park this afternoon, Rick Ericson, the senior communications director at LeMaster Group who sent out the release containing the damning passage, initially said he did not know where it came from. When asked if he could provide the page from the audit from which the sentence came, Ericson said, "Those were [Brignon's] words." He then asked how Unfair Park got the release, which was sent only to The Dallas Morning News and the local TV stations. Then he said he would call back.
He did a few minutes later and said that the quote is indeed found in the audit -- on page 12, to be precise. He said he would try to get Unfair Park the entirety of the audit, but called back later to say he could not get permission to do so. But two high-ranking DHA officials who have read the audit -- and also didn't give us a copy -- insist it's not in there. They label it instead "a characterization of the audit by the chairman that is not accurate. It is not a verbatim statement. He tried to mischaracterize the audit." One says it's like taking a single verse out of the Bible and misinterpreting it. "It was intentially meant to leave a misleading impression," says a DHA insider.
While Unfair Park was on the phone with Ericson the first time, we got an e-mail from Donna White, who's in the HUD Office of Public Affairs. Earlier in the week, we asked White who from HUD had visited Dallas to deal with the growing turmoil concerning Lott's ouster, which came as a surprise to both Lott and some 300 supporters. She said it was HUD Assistant Secretary Orlando Cabrera. This is what White's e-mail says, in its entirety:
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"At the request of Mayor Miller, HUD Assistant Secretary Orlando Cabrera attended a meeting earlier this month with the Mayor and other local officials concerning the circumstances involving DHA's board and Executive Director Ann Lott. The Assistant Secretary's involvement, from time to time, in PHA [public housing matters] matters such as these is customary.
He was there out of concern for the institutional integrity of the housing authority, which has a long-standing history as a well-managed agency, with solid financial strengths.
While HUD is watching the developments at DHA closely, the Department does not intervene in personnel decisions at local housing authorities, provided such actions comply with federal law. We look to local officials to make appropriate decisions to continue good operations that best serve their residents and citizens.
Note: Cabrera is the AS for the Office of Public and Indian Housing -- under which housing authorities fall."
Here too is the entirety of Brignon's press release, which was sent out Sunday -- when DHA offices were closed:
DHA Board President Calls for Second Audit of DHA Operations
Brignon says thorough review needed before CEO contract is extended
(Dallas, Texas-December 18, 2006) The Chairman of the Board of the Dallas Housing Authority today said he would ask the DHA board to authorize a further KPMG review of DHA's 2005 operations and finances. Guy Brignon also said that the KPMG audit should be part of contract talks with CEO Ann Lott. The board was scheduled to begin discussions with Lott on Tuesday, but the Chairman said the board needs additional information, including certified audit results before considering a new contract for Lott, whose current contract terminates March 1, 2007.
"I know the community and the mayor want a quick decision on this contract," said Brignon, "but, right now, there are more questions than answers about some serious management concerns at the agency."
DHA's board of commissioners received a draft audit report from KPMG in early October. After examining the agency's books for the year 2005, the auditor noted "significant material weaknesses, lack of internal controls, non compliance and violation of state law."
Brignon said he would also ask for thorough audits of all Hope VI contracts which are specifically mentioned in the Draft 2005 Audit, and he will request that KPMG commence immediately with the 2006 Audit. KPMG will likely make a formal presentation on its findings to the board in January.
"The Board has had difficulty getting answers from the CEO on DHA's financial condition," said Brignon. "It is our job to protect the taxpayers' dollars as well as our residents. This is not about politics; it's about policy and protection of DHA," Brignon added. "The agency must be transparent."
Sunday, Brignon also released a transcript from the October meeting in which the board chose not to renew Ann Lott's contract. Ms. Lott and other staff have made public statements saying that a public record of that decision is not available and the vote was not official. Brignon sought the audio tape from the meeting and requested the audio tape from the meeting be transcribed.
"The vote was noticed. It was official, and the results were public," said Brignon, referring to the board's decision not to renew the contract. That needs to be clarified to the Dallas community."
For Information: Rick Ericson
Yeah, that should cover it -- at least till someone decides to send Unfair Park the entirety of the DHA audit. Maybe like, oh, a Hanukkah present? Only two more days left, y'all. --Robert Wilonsky