Broken home

State audit reveals mismanagement at Metro housing

When Kimberly Bunton resigned her post as head of Metro government’s housing department last August, workers were finally allowed to speak publicly about what they’d said privately for months: mismanagement, possible corruption and a general indifference to major problems had put both grant money and services in jeopardy, and left workers listless, uninspired and confused.

A report by State Auditor Crit Luallen’s office released Tuesday confirms the allegations of gross mismanagement of funds and a general lack of oversight that left one of Metro’s largest departments, Housing and Family Services, in near-total disarray.

“It’s unusual for any large government agency to have this many audit findings, and especially audit findings of this serious nature,” auditor Crit Luallen said in a phone interview. “Overall, there is a total lack of accountability on the part of the management of the department.”

Spurred last summer by the revelation that Metro had left millions of dollars in federal housing funds unspent and unaccounted for, as well as the resignation of Bunton after it was revealed she’d improperly obtained a city loan for her mother, state auditors studied eight of the 24 federal grant programs managed by HFS. The grants total about $18 million. Auditors found seven were noncompliant with federal requirements.

The audit, which only covers the 2008 fiscal year, revealed hundreds of thousands of dollars lost due to bad accounting, a failure to match finance systems within Metro government and a general inability to correspond reporting procedures to what the U.S. Department of Housing and Urban Development requires.

To wit:

• The department lost $259,040 when it overspent on a program due to an accounting error.

• It left $348,000 unspent in a city homelessness shelter program because it didn’t bill certain administrative costs to the grant.

• Half the department’s annual budget, or $17 million, was reported in accounting amendments, suggesting incompetence.

• The inability to comply with federal requirements led to a backlog of 400 homes needing repairs and a yearlong delay in a $1 million HUD grant for lead-paint hazards.

As was often the case, the city’s general fund — sacked with its own revenue shortfalls for the past three years — was tapped to cover the funding differences.

“I’m extremely disappointed by the extent of the problems that we found in the department, and that the auditor has specified,” Mayor Jerry Abramson said in an interview Tuesday.

While the scope of the audit is the 2008 fiscal year, the accounting and mismanagement issues date at least to merger, when old city and county housing departments — which used different accounting systems — were combined.

Carl Malysz was deputy director of Metro housing from late 2003 until shortly after Bunton arrived in January 2007. In an interview Tuesday, he said accounting troubles had been present for years.

“From the get go, when the books opened up, there was an inconsistency between the books of Metro government, the housing department and the [federal reporting system],” he said.

State auditors had discovered some accounting problems in routine audits as early as 2005, and Metro internal audits caught others. Malysz said the department had been making progress toward compliance when Bunton took over. After that, all hell broke loose.

Abramson appointed Bunton after combining housing with family services, once separate departments. Former co-workers say Bunton played politics with her office, shifting employees out of their areas of expertise and generally ignoring the accounting problems. The audit confirmed much of this.

Tina Heavrin, formerly the mayor’s special counsel, took over as interim director in August 2008, and will remain until the department meets recommendations laid out by state auditors. She and Abramson both said the department has already addressed some of the management concerns raised in the audit.

Meanwhile, a Metro Police investigation into Bunton’s activities is ongoing, and the city’s internal audit should be finished soon, Abramson spokesman Chad Carlton said.

Luallen’s office has given its report to police, the Kentucky Attorney General’s Office, and the federal agencies with which the department works, including HUD and the departments of Agriculture and Health and Human Services.