Ex-DuPage housing leader cites ‘vague’ rules in buying meals, gifts

While he was executive director of the DuPage Housing Authority, John Day told federal auditors that U.S. Department of Housing and Urban Development rules regarding expenses were “vague.”

So when it came to buying meals, flowers, clothes and beverages for housing authority staffers, Day said he considered the purchases to be an appropriate use of Section 8 program funds.

His deputy, Robert Hess, added that the items “improved employee morale and, therefore, benefited the program,” the auditors later wrote.

Federal officials disagreed with Day’s judgment call.

The expenses were among a list of “unallowable” transactions mentioned in the audit released this week by the federal Office of Inspector General. That report found the housing authority improperly spent more than $5.8 million in federal money and failed to adequately document another $4.7 million.

Auditors concluded that the housing authority failed to follow HUD guidelines and its own policies while administering its Section 8 programs. As a result, HUD officials “lacked assurance that the authority’s resources were used to benefit low- and moderate-income individuals.”

Now Day and Hess no longer work at the DHA. And the Wheaton-based agency is facing the possibility of having to repay millions of dollars. The audit specifically calls for the repayment of nearly $5.1 million.

On Friday, a member of the housing authority board said she had no knowledge federal money was used on various purchases, including $6,541 spent on laptop computers for the board. According to the audit, Day justified that expense as a way to save on paper costs.

“We were told that we had nonfederal dollars to pay for those things,” said Pam Fenner, who serves as the board’s vice chairman. “We would have never authorized that out of federal funds.”

The authority spent more than $2.3 million in program funds “for transactions not related to its program” between July 2008 to June 2010, according to the audit. The spending includes $1,007 for flowers, $3,762 for meals, $2,161 for clothing and $1,037 for beverages, officials said. Another $247 was used to purchase bottles of wine that were given out as retirement gifts.

Federal officials said there are no accusations of theft or fraud related to the findings.

“The entire thing is mismanagement,” Fenner said. “When you hire someone, you expect them to know what they’re doing. You expect them to know the rules and to follow the rules. And that’s not what happened.”

Attempts to reach Day for comment Friday were unsuccessful.

Meanwhile, auditors partially blamed the housing authority board for what happened. They’re recommending “administrative action” to be taken against both Day and the board.

“The authority’s board of commissioners did not adequately exercise its responsibility to oversee the administration of the authority’s programs,” they wrote.

Fenner said that finding is unfair.

“I don’t know if anyone sitting on that board had the knowledge to have stopped this,” she said. “We just didn’t know.”

DuPage County Board Chairman Dan Cronin, who appoints DHA board members, is considering what action to take in response to the auditors’ recommendations. He could ask the six current members to resign and put new people on the housing board.

Fenner said she would “absolutely” step down if asked. “If Chairman Cronin said to me today that he wants me off that board, I would be gone.”

But she says she had been asked to stay to help “straighten out this mess.”

The latest report is recommending that HUD’s Chicago Office of Public Housing require the housing authority to repay nearly $5.1 million in program funds from “nonfederal” sources.

Most of the authority’s budget comes from the federal government. It receives about $22.6 million a year in HUD assistance, according to the audit.

Fenner concedes the agency has “limited” amounts of cash in its nonfederal accounts. “We will have to set up a payment process,” she said.