NEWARK HOUSING AUTHORITY TO REPAY $6.4 MILLION

HUD ORDERS NEWARK HOUSING AUTHORITY TO REPAY $6.4 MILLION IN MISSPENT FUNDS , Independent auditor to re-audit fiscal year 2004 financial statements

WASHINGTON - The U.S. Department of Housing and Urban Development Assistant Secretary Michael Liu today issued a letter outlining numerous shortcomings uncovered during a recently completed review of the Housing Authority of the City of Newark (NHA). The review resulted in NHA's previously issued Public Housing Assessment System (PHAS) score declining from 87 to 33. The Section 8 Management Assessment Program score also dropped from 100 to 31.

PHAS is the assessment tool HUD uses to rate public housing authority performance. Housing authorities must score at least 60 points out of 100 to be designated standard. Scores below 60 result in the designation of troubled. Housing authorities are scored on four performance indicators - financial, management, physical condition and resident satisfaction. Scores in these areas are combined to produce an overall score.

"After a comprehensive look at NHA, HUD has determined there is a lot of room for improvement in the financial and management operations of the agency," said Liu. "We are ready to work closely with the agency to give the residents of Newark's public housing the services they deserve."

HUD's review identified $6,445,487 in questionable expenditures from the Section 8 operating reserve account. Of particular concern to HUD is the housing authority's use of $3.9 million to purchase 12 lots located in an area designated in Newark's downtown core area redevelopment plan. Phase 1 of the plan includes construction of an entertainment facility whose principal tenant would be the New Jersey Devil's National Hockey League franchise. NHA must reimburse that amount to the operating reserve account. Because of numerous other financial discrepancies, HUD will select an independent auditor to re-audit NHA's fiscal 2004 financial statements as well as auditing NHA's 2005 financial statements.

HUD also warned NHA about delays in its HOPE VI program. The Archbishop Walsh HOPE VI grant has been fraught with delays and as a result the project has missed six locked checkpoints.

HUD's comprehensive review resulted in the following rating changes:

PHAS overall score Reported 87 HUD Validated 33

Financial Reported 28 HUD Validated 0

Management Reported 29 HUD Validated 3

Physical Condition Reported 29 HUD Validated 22

Customer Satisfaction Reported 8 HUD Validated 8

SEMAP overall Reported 100 HUD Validated 31

The section eight management assessment program (SEMAP) measures the performance of the public housing agencies (PHAs) that administer the housing choice voucher program in 14 key areas including:

Proper selection of applicants from the housing choice voucher waiting list

Sound determination of reasonable rent for each unit leased

Establishment of payment standards within the required range of the HUD fair market rent

Accurate verification of family income

Timely annual reexaminations of family income

Correct calculation of the tenant share of the rent and the housing assistance payment

Maintenance of a current schedule of allowances for tenant utility costs

Ensure units comply with the housing quality standards before families enter into leases and PHAs enter into housing assistance contracts

Timely annual housing quality inspections

Performing of quality control inspections to ensure housing quality

Ensure that landlords and tenants promptly correct housing quality deficiencies

Ensure that all available housing choice vouchers are used

Expand housing choice outside areas of poverty or minority concentration

Enroll families in the family self-sufficiency (FSS) program as required and help FSS families achieve increases in employment income.

NHA has 30 days to appeal the change in score. Of the nation's approximately 3500 housing authority's, 285 are designated as troubled.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at http://www.hud.gov/ and espanol.hud.gov.

### HUD No. 05-055 Donna White (202) 708-0685 hud.gov/news/ For Release Friday April 22, 2005