Valley housing agency closes

The demise of a Mesa community housing agency has punched a hole in the Valley's social-services network even as the region continues to struggle with fallout from the recession.

Housing Our Communities closed its doors last month after a 24-year run during which it helped nearly 2,900 families move into their first homes and offered homeownership counseling and other services to thousands more.

"They've been a great partner for 24 years," said Mesa City Councilman Dave Richins. Now, he said, communities face the question of "how am I going to do homeownership counseling and how am I going to move homeownership along?"

Two factors appear to have contributed to the closure:

Cash-flow problems that led to at least two court judgments for unpaid debt, the larger of which was to Wells Fargo Bank for more than $260,000.

A searing federal audit of Housing Our Communities' administration of federal funds on behalf of Avondale.

"This didn't happen overnight," said Teresa Brice, a social-services veteran who co-founded the agency, then named Housing for Mesa, in 1988.

Brice is now executive director of the Phoenix office of the Local Initiatives Support Group, which facilitates loans for projects to make communities more sustainable.

Brice said her agency had provided a consultant to help the agency in its final months but "ultimately, if you aren't covering the cost of doing business ... cash flow is going to run into some problems, and that's going to be the beginning of a (downward) cycle."

Scathing audit

Brice and John R. Smith, who served as president until retiring in January and was still deeply involved in the agency, said confusing federal rules and delays in government payments are hindering non-profits across the country as they deal with recession-bloated workloads.

Since its inception, much of the agency's lifeblood came from administering federal housing grants for Mesa. Since 2009, the agency had been involved in the Neighborhood Stabilization Program, which Congress passed during the last summer of the Bush administration to combat the wave of foreclosures sweeping U.S. cities.

Mesa received $9.7 million in the first round of the program. Avondale got $2.4 million. The money was funneled through the federal Department of Housing and Urban Development.

Both cities enlisted Housing Our Communities to help administer the program, in which cities buy and rehab foreclosed homes before selling them to income-qualified buyers.

Louis Kislin, program manager for community planning and development in HUD's Phoenix office, said federal oversight of the Neighborhood Stabilization Program has been unusually stringent because of the Obama administration's transparency policies.

That led to a HUD audit dated Feb. 8, 2011, criticizing Mesa's administration of its stabilization funds and demanding reimbursement of about $22,000 that HUD said was improperly spent. Mesa agreed to tighten up its procedures and repay the money.

During that audit, HUD became suspicious of how the agency was handling its share of the program. So in a new audit, HUD zeroed in on work in Avondale.

The report, dated Dec. 8, 2011, was scathing. It said:

Housing Our Communities used a subsidiary, HFM Builders, for the sole purpose of inflating invoices and overcharging the federal government.

HFM Builders "had a prohibited conflict of interest with both the subrecipient (Housing Our Communities) and one of its key officials."

Housing Our Communities' "construction costs appeared significantly excessive and in some cases unnecessary."

Housing Our Communities must either document $787,000 in "ineligible and unsupported costs" charged to the federal program or return the money.

"I don't know of any non-profit that could turn around and pay $750,000-plus," Richins said.

The agency disagrees

The audit did not allege criminal activity, instead recommending "civil or administrative action or both" against Housing Our Communities. It did not name agency officials it said were responsible for the violations.

Smith wrote a lengthy response, saying the agency "strongly disagrees with the findings and recommendations."

"We are quite concerned with the overall tone of the audit report, as its misleading choice of words paints a picture of corruption and greed which is simply not true," Smith wrote.

In response, HUD auditors agreed to tone down the language but stood by their overall findings.

In Avondale's response, the city agreed with some of the findings and questioned others, but it promised to comply with federal guidelines.

Gina Montes, Avondale's neighborhood- and family-services director, said the city's relationship with the agency ended about a year ago. "We haven't had any active contract with them for quite a while," Montes said.

The agency, which also had been administering programs in partnership with Phoenix and other non-profits, said on its website that clients' files have been transferred to the agencies and cities with which it had worked.

Who steps in?

Tammy Albright, Mesa's neighborhood-services director, said Housing Our Communities' closure has added to her department's workload -- not just with the Neighborhood Stabilization Program but with other grants.

"HOC did play a very important role in the administration of some of these grants," Albright said, adding that its demise "eliminated the only company that was producing a homeownership program here in Mesa."

She added, "That's not to say we're not open to somebody else coming in and playing that role."

Sara Farrar, project manager for the Phoenix Neighborhood Services Department, said, "We are very sorry to see them close," noting the agency was successful for nearly a quarter of a century.

It was managing about 100 cases for Phoenix, Farrar said. Those files have been turned back to the city and she said there has been some confusion among clients trying to find out who now will manage their cases.

Farrar said other non-profits provide services similar to Housing Our Communities, and "we're hoping those other agencies will absorb" some of the load.

The question is whom that might be.

Cynthia Dunham, a former Gilbert mayor who now leads the non-profit West Mesa Community Development Corp., said the agency's closure "does leave a big hole in a necessary piece in the city of Mesa."

Dunham said Mesa might work with agencies it already has relationships with because it is becoming increasingly difficult to administer federal grants.

Early this year, Mesa officials signaled they might abandon some of the programs altogether because of federal red tape.

During a March City Council meeting Albright said, "We are constantly getting new rules ... Administering these grants (is) becoming more and more difficult, yet we're seeing less and less money to do that."

Mayor Scott Smith asked, "Are we approaching the point where we just throw up our hands and say, 'Why do this?' "

"We've talked about it," City Manager Chris Brady replied. "It really is getting difficult."

by Gary Nelson - Jul. 2, 2012 10:49 AM The Republic | azcentral.com



Valley housing agency closes