Baltimore's public housing authority never should have been permitted to join a program to ease controls on its spending because officials failed to hold a required public hearing, a federal oversight agency has ruled in a scathing audit.
Since July, the Housing Authority of Baltimore City has been part of a federal pilot program called Moving to Work, which allows 27 city and state housing agencies to waive restrictions that dictate how millions in federal housing money must be spent.
In its audit, the U.S. Department of Housing and Urban Development's Office of Inspector General recommends voiding Baltimore's inclusion in the program because public input was not sought in advance and because the authority's application was "short and vague."
Though it is nonbinding, the audit could have implications for Baltimore's future as a Moving to Work site, damaging a years-long effort to convince the federal government the city was ready for looser regulations, which typically are extended only to high-performing agencies.
The audit also comes as Congress is considering an expansion of the program, championed by the Bush administration as a way to reduce bureaucracy. The House Financial Services Subcommittee on Housing and Community Opportunity advanced a bill last week that would expand the program to 40 cities.
For their part, officials with the Baltimore housing agency said they followed guidelines provided by HUD. A spokesman for the local authority said that officials did conduct a series of public hearings, but acknowledged that those took place after the agreement had been negotiated.
"Everything that HUD asked of us, we did," said the spokesman, David Tillman. "We delivered what they wanted, when they wanted it."
Created in 1996, Moving to Work gives local housing agencies more freedom to administer services, such as the Section 8 rent subsidy program, by eliminating rules over how money must be spent and how applications for housing assistance must be processed. The program also gives local housing officials the freedom to implement policies such as requiring tenants to obtain jobs in order to continue receiving housing assistance, but Baltimore officials have said that, despite the program's name, they do not intend to pursue work requirements here.
Under the program, money formerly earmarked only for Section 8 vouchers, for instance, can be redirected to develop new low-income housing units or to make existing housing accessible to the disabled. In all, Baltimore receives about $290 million in federal housing money each year.
The audit calls on the Baltimore housing agency to return $25 million in surplus funds generated under Section 8, money that would have to be used for housing assistance under current HUD regulations but that could have been spent more freely under Moving to Work. City housing officials said Friday that they must have approval before spending that money.
But low-income housing advocates say the audit is an indication of potentially broader problems with the program, which has been criticized as giving local authorities too much flexibility to set their own policy. In addition to funding, the program lets local housing officials change rent structures, impose time limits on assistance and work requirements.
"They didn't have a hearing and they didn't even have a process to consider comments from residents," said Linda Couch, deputy director of the Washington-based National Low Income Housing Coalition. "They apparently never even submitted a full application. ... All of these things should have been red flags."
It was also a setback for an agency within Mayor Martin O'Malley's administration, which frequently promotes itself as bringing a more open government to Baltimore's City Hall. O'Malley nominated Housing Commissioner Paul T. Graziano in 2000.
In the past, local housing officials have argued that reduced bureaucracy from the program will benefit the recipients of housing assistance. For instance, tenants would no longer have to certify their eligibility to receive benefits annually. Residents could document income once every two years, cutting paperwork.
But the program has proven controversial in cities such as Atlanta, where officials tried to established mandatory eviction for unemployed residents. Philadelphia used Moving to Work to impose a seven-year limit on Section 8 housing assistance.
Following reports in The Sun about Baltimore's Moving to Work program last September, the City Council approved a resolution calling for an investigative hearing into the program. That hearing never took place.
Local officials repeatedly sought entry into the program but were denied because the agency was considered troubled by HUD. On March 31, 2005, as the department began to look beyond high-performing housing agencies, Baltimore was permitted to enroll. In October, the city submitted a plan to HUD explaining what it hoped to accomplish in the first year.
Since then, the authority, which administers Section 8 housing vouchers to more than 13,000 families, has been removed from the federal agency's watch list and has become a "high performer."
The audit blamed former HUD assistant secretary for Public and Indian Housing Michael Liu for disregarding the department's statutory authority by signing the agreement with Baltimore last year. Liu has since resigned and was replaced in November by Orlando J. Cabrera.
In his response to the audit, Cabrera said that HUD has broad authority to choose cities for the program, but acknowledged that the department has no independent confirmation on file that a public hearing took place before the March agreement.
A spokeswoman for HUD, Donna M. White, did not answer specific questions but issued a statement saying the department is reviewing the audit and will take "appropriate action."