Inadequate credit checks and lax collection procedures at Maryland's housing agency may have cost the state more than $2.5 million, a new legislative audit concludes.
The state Department of Housing and Community Development failed to monitor some programs, kept some inadequate records and violated some of its own internal controls, the report by the legislature's Department of Fiscal Services concludes.
Housing Secretary Jacqueline H. Rogers angrily denounced the audit yesterday, calling it misleading and often inaccurate.
The audit, which covered the years 1987 to 1990, found no cases where housing funds were misspent. But it highlighted two instances in which procedures were not followed.
In one, the department has had to repay more than $2 million on a loan it insured for the developer of a $14 million housing project in Baltimore that now is in default.
The department failed to follow some of its underwriting procedures and didn't make sure that the developer was capable of managing the project once it was built, the audit concluded. In another case, auditors found that the state's emergency mortgage assistance program failed to establish repayment schedules for 59 loan recipients totaling $535,101, "even though the [Housing Department] had determined that the borrowers could repay the loans."
In both cases, housing officials acknowledged some lapses in procedure and said the problems are either corrected or will be soon. Officials said they expect to recoup some of the delinquent mortgage assistance loans.
Ms. Rogers disputed many other findings. In fact, she took the unusual step of calling a news conference to rebut the audit before it was officially released.
Ms. Rogers prepared an inch-thick pile of materials and summoned several people involved in non-profit housing ventures to discuss the department's accomplishments.
"The audit is faulty in design, contains numerous inaccuracies and is inappropriately incendiary in tone," Ms. Rogers told reporters.
She accused the legislative auditors of "harassment" and said auditors went beyond typical accounting to make inappropriate "subjective" judgments.
She said half of the audit's conclusions were either incorrect or misleading. She also criticized the audit's weighting system, which she said unfairly produced a "very poor" overall compliance rating for her department.
Ms. Rogers said she was concerned that the audit would scare private investors away from state-affiliated housing programs or could spur the General Assembly to cut her budget in its tightest budget year in recent memory.
William S. Ratchford 2nd, director of fiscal services, defended his auditors, saying the audit was no different in approach or tone than others the department has done.
The housing department administers several housing,
community development and mortgage assistance programs.
Ms. Rogers' boss, Gov. William Donald Schaefer, often has criticized Mr. Ratchford's analysts for recommending cuts in his budget.
A legislative subcommittee has scheduled a hearing on the housing audit Thursday.