Federal auditors are investigating the Roanoke Redevelopment and Housing Authority's relationship with a Roanoke-based charitable foundation to which the authority committed thousands of dollars in federal drug-elimination grant funds.

Some of the anti-drug money was used to buy sound equipment and hire a playwright for Mill Mountain Theatre.

The U.S. Department of Housing and Urban Development last month launched a review of several major authority spending programs, and that includes $1 million in contracts between the authority and The Issues Management Group, a private consulting firm connected to the same charitable foundation. That organization, the Foundation for Regional Excellence, is managed by IMG.

IMG's founder, Rob Glenn, is also the foundation's president as well as a former housing authority board chairman.

Housing authority Executive Director Ellis Henry drew attention to the use of the drug-elimination grant funds and to the authority's relationship with the foundation, in a report he's provided to HUD. The federal agency provides the authority's funding and sets the spending rules the authority must follow. HUD auditors visited Roanoke for three days in September.

Lee Jones, a HUD spokesman in Virginia, said the review of the Roanoke authority does encompass issues raised by Henry.

"We want to make sure that taxpayer money was spent appropriately," he said. "That's what we do."

In a 400-page report sent in late August to the authority board and to HUD, Henry, who started his job in May, raised questions about possible preferential treatment and conflicts of interest in 11 contracts valued at more than $1 million awarded to IMG over the past nine years. Glenn has counted City Councilman Bev Fitzpatrick, also a former authority board member, among his business partners, and Glenn is also close friends with John Baker, who retired in May after nine years at the helm of the authority.

Ed Natt, Glenn's lawyer, said, "We just have no comment to make about any of these matters."

Fitzpatrick, in a Sept. 29 letter to The Roanoke Times, said he is unaware of any "improper or illegal activities" regarding the drug elimination grant.

Baker declined comment for this story.

Henry's questions extend beyond contracts with IMG to a relationship with the nonprofit Foundation for Regional Excellence. The authority committed $185,000 to the foundation to distribute, documents show. It also intended to commit $198,000 more that Glenn planned to use to hire a data consultant for Roanoke City Public Schools in a process also being questioned by Henry, according to authority files.

The charitable foundation was managed by IMG at the same time IMG had other contracts with the authority. Glenn, the IMG president, and Fitzpatrick, a partner at IMG at the time, are both foundation board members. Fitzpatrick served simultaneously on the foundation board and on the authority's board of commissioners.

The commitment of HUD funds to the foundation, Henry wrote in his report, "raises significant concerns."

'Wick's Fund'

In 2002, the housing authority committed $185,000 from a federal drug-elimination grant to the Foundation for Regional Excellence -- an agreement on which the foundation ultimately defaulted, in the opinion of the authority's procurement officer.

E-mails show Baker and Glenn negotiated the deal. Documents obtained by The Roanoke Times, including minutes of meetings, include no evidence that the authority's seven-member board of commissioners formally approved the fiscal arrangement, though Baker did brief the board in July 2002 about the possible use of the drug grant money.

Board Chairman Ben Fink said last week that the council-appointed board was aware the drug grant funds were involved. He said the Foundation for Regional Excellence "was mentioned."

"We weren't real clear on what the arrangements were," Fink said.

The housing authority board is supposed to approve financial transactions of more than $50,000, Henry said. Federal procurement policy that governs local housing authorities also has strict requirements on how grant money can be spent. E-mails between Baker and Glenn show Baker considered the transaction a transfer of funds for management purposes, and not a procurement.

In a later e-mail, Glenn explained that one "big reason that we chose the Foundation for Regional Excellence was to somewhat mask the HUD funds from the national grantors -- not many of them will choose to match federal dollars."

Using one donation to garner a matching donation from another donor is a common fundraising practice, but it's unclear if Glenn approached any national grantors.

The foundation was incorporated as a nonprofit in 1996 as the fundraising arm of the now defunct New Century Council. The council, a group of regional business and community leaders working on strategies to improve the area economy, ceased operations in 1999. The foundation carries on as a volunteer effort of its board members to raise money to fund community projects. It has assets of about $350,000, according to a financial report that Glenn sent to the foundation board.

In a July e-mail to foundation board members, Glenn described the foundation as working "quietly, effectively, behind-the-scenes -- just as I like it. Plenty of cash. More to come. Lots of promise."

Glenn sent an e-mail to Baker in early May 2002 with an idea to start a fund, through the Foundation for Regional Excellence, in memory of Willis M. "Wick" Anderson, a late authority board chairman and former Roanoke mayor.

Both Glenn and Fitzpatrick, who had just been appointed to the authority board, were on the foundation board, and IMG managed the foundation, Glenn explained in the e-mail. IMG would take no fee from the drug grant for managing it, and the firm's fee would come from other funds raised by the foundation, Glenn wrote in later correspondence.

Days later, the authority board approved the creation of the Wick's Fund to pay for programs that would enhance the quality of life of authority clients. The resolution contains no mention of IMG or the Foundation for Regional Excellence.

A week after Wick's Fund was approved, Glenn e-mailed Baker saying he and an IMG partner, Katheryn Keene, had an idea that the fund support a program that would "involve our kids and the arts via Mill Mountain Theatre." According to her biographical information on the IMG Web site, Keene chaired the theater's volunteer corps and was involved in developing the theater's strategic plan.

Glenn asked in the e-mail if money was available from the authority's drug elimination grant of more than $350,000 to use as seed funding. The main purpose of the grants, according to HUD regulations, is to eliminate drug-related and violent crime in and around public housing.

Glenn and Baker e-mailed each other often about the potential for projects at the theater.

"We may even want to think about making youth from more affluent families able to participate," Baker wrote on May 30, 2002. "It can be about bringing people together in a common appreciation of the arts. We can emphasize diversity in order to achieve a better understanding of others."

Glenn saw a natural link to the theater because of Anderson's affection for the theater and his devotion to exposing disadvantaged children to the arts.

Baker became chairman of the Wick's Fund advisory board. "This may be the most rewarding thing I can do in life," he wrote Glenn about the appointment. Keene was listed on meeting agendas as the fund's project manager.

Figuring out how to move the $185,000 in anti-drug funds to the foundation, however, took some time. Baker learned the authority couldn't draw down the entire $185,000 at once, but that it had to be done in increments to fund individual projects, e-mails show.

In a June 2002 e-mail to Baker, with the funds still pending, Glenn wrote: "This is probably going to be another one of those issues where we proceed unless we are told no -- even if we are not told yes. Correct?"

On Oct. 1, 2002, Baker and Glenn signed a memorandum of understanding regarding the drug grant between the authority and the foundation.

The first $29,268 went to Mill Mountain Theatre: $8,918 for sound equipment for the theater's traveling performances, $2,000 for drama camp and $18,350 for a playwright to draft a play about contemporary issues to reach inner-city youth, an August 2002 memo shows.

In an Oct. 20, 2002, letter to Baker, Glenn wrote that the theater projects "will directly benefit inner city kids -- and kids from the housing authority in particular -- in a very 'out of the box' way."

Later, Glenn proposed spending $2,500 to fund three performances of a play about Jackie Robinson, the first black player in Major League Baseball, titled "Most Valuable Player." The idea was to bring in youth and community leaders to spark discussion about racial issues.

An invoice shows the actual amount for the play came to $3,189.

Baker was concerned about the Mill Mountain proposals, one e-mail shows. "I think that we will have to more directly relate services to public housing residents ... we need to say specifically how public housing residents will benefit."

Henry, the authority director, now questions not only how the money was spent but also whether the relationship between the authority and the foundation was legitimate under federal and local procurement regulations.

Such a relationship must be approved by HUD after an application by the authority, Henry said.

No application or approval from HUD could be found in authority files, he said. E-mails from Baker and a memo from an authority staffer say that HUD officials in Richmond were aware of the arrangement.

In his 400-page report, Henry notes that putting Glenn, a contractor to the authority, in a position to make decisions about spending the drug grant appears to create a conflict of interest prohibited by HUD regulations.

The foundation and the Wick's Fund advisory board chose projects and cut checks for them, and then filed invoices to the authority for reimbursement, authority documents show. By contract, the authority could refuse to pay the invoices.

Henry noted that decisions regarding what projects would be funded occurred before invoices were submitted to the authority for approval.

Moreover, the agreement made the foundation an agent of the authority acting on its behalf, Henry said. Therefore, when the foundation made a decision to fund a certain project, the authority was obligated to fund it, he said, based on his interpretation of federal law.

Authority files lack enough detailed information to indicate how the rest of the $185,000 was spent, according to Henry's report. The agreement on Wick's Fund gave the foundation until January 2004 to spend the $185,000, which apparently didn't happen.

That failure to spend the funds within the agreed-upon time period constituted a default on the agreement, the authority's procurement officer, Krista Crowder, wrote in a recent memo to authority management.

"I still wish we could pull a rabbit out of the hat on the Wick's Fund initiative," Glenn wrote to Baker and then-deputy authority director Earl Reynolds in January 2004. "If we just had the time and money, could source a bunch of national grantors, write grants, and use Wick's Fund money as match." Reynolds, who left the authority in July, declined to comment for this report.

Two months later, Glenn wrote to Baker that their agreement had lapsed and suggested ways to spend what they could of the remaining drug grant: $50,000 for Ferrum College scholarships, $75,000 for a youth leadership development program at Apple Ridge Farm and $10,000 for elementary school field trip scholarships.

"Inform the Board that there will be no foundation [Wick's Fund], and thank the Advisory Board for their services," Glenn wrote.

But the authority's relationship with the Foundation for Regional Excellence didn't end there.

'The Data Warehouse'

In fall 2005, Baker and Glenn revived the connection between the authority and the foundation, but not without objection from the authority's procurement officer.

Authority files contain two different unsigned versions of a proposed agreement to commit to the foundation $198,000 more in authority funds -- a HUD award for the success of the authority's programs to teach public housing residents to become more self-sufficient.

In her memo, Crowder said she refused to be involved in the second deal with the foundation.

"I stated to my supervisor that I did not want to participate or sign off on this because the foundation defaulted on their prior agreement," Crowder wrote. "I was subsequently asked for and gave input on preparing the contract modification document, but I was not requested to put any compliance approval in writing."

Correspondence shows Glenn had in mind using the funds to support initiatives by a consortium of Roanoke social service agencies he was organizing under a separate $210,000 contract with the authority. The idea was to get agencies that often serve the same clients to work together and share information. One specific idea was a shared database.

Fink, the authority board chairman, said the board was "totally supportive" of the database plan, a project he said is still moving toward implementation.

The database idea was initially connected to the Roanoke City Public Schools.

School Superintendent Marvin Thompson said Glenn approached him with the idea of acquiring a data warehouse for the schools after hearing about Thompson's data-driven approach to management.

As a result, Thompson introduced Glenn to a consultant friend named Gayle Wood, with whom Thompson had worked before, Thompson said in a recent interview.

In an October 2005 e-mail, Glenn asked Wood: "Would you please send me whatever you have on previous sole-source justification?" In government procurement, sole source refers to a public contract with one vendor, as compared with a competitive process open to multiple bidders.

Glenn explained to Wood that the funding for the data warehouse would come from HUD via the authority, so their procurement policy had to be followed.

Several other e-mails over the following two months mention getting Wood's help on drafting a scope of work for the procurement of the data warehouse.

That potential relationship has raised a red flag with Henry, the authority director, who in his report wrote: "The discussions seem to run counter to the HUD recommendations of April 2001, 'If a vendor is instrumental in developing a spec [bid specification], this vendor can't bid/offer on this job. They have an unfair competitive advantage. It is an organizational conflict of interest.' "

In an interview last month, Wood said she became involved in the proposed project because of her friendship with Thompson and her input was requested to "bring people together to work for the common good."

She said Glenn, too, was very much focused on "new and dynamic" conversations.

Wood said she doesn't know if she would have bid on the project, because she never received any such notice that such a window was open.

Thompson said in a recent interview that his understanding was that Wood was helping to prepare the request for proposals for free because she was a friend, but did not intend to bid on a contract.

By January, the project had been expanded beyond a data warehouse to include facilitation of meetings of a proposed consortium of area social service agencies Glenn had organized on behalf of the authority.

In February, Wood submitted four draft proposals with associated cost estimates totaling more than $70,000, which Glenn forwarded by e-mail to Thompson and Baker.

At the time, no request for proposals had been advertised.

In March, Glenn wrote to Baker and Thompson, "We need to get an RFP [request for proposals] on the street for Gayle and/or others so we can begin the various phases of our data project."

That same month, Wood asked to meet with the three men. Glenn said no.

"Let me get the scope of work nailed down before we pull you into any meetings. I do not want to risk the accusation of a pre-arranged deal," he wrote to Wood.

In a subsequent e-mail to Glenn, Baker said he agreed with Glenn's handling of the matter. "We also don't want to take a chance on messing up the procurement process."

Ultimately, no request for proposals for the data project was ever advertised, and none of the $198,000 was ever transferred to the foundation.

In July, two months after Baker's retirement from the authority, Glenn e-mailed his fellow Foundation for Regional Excellence board members proposing that Baker join the board.

"He has stepped up to the plate with nearly $200,000 of HUD funding," Glenn wrote.

Several foundation board members chose not to comment for this story, so it is unclear if Baker formally joined the foundation board.