The Roanoke Redevelopment and Housing Authority is now a "high risk" agency because of the way it spent federal taxpayer dollars, according to the U.S. Department of Housing and Urban Development.

The federal agency now wants to see the steps the authority goes through in awarding its contracts before releasing funds, said the director of HUD's Richmond office in an Oct. 27 letter to authority Director Ellis Henry.

"The determination is based on the significance of the problems that were identified by your office and confirmed in the procurement review of the authority's activities recently conducted by representatives of the department," the letter reads.

HUD's heightened regulation will continue for the foreseeable future, until the authority puts procedures into place to avoid a repeat of its problems, said Lee Jones, spokesman in HUD's Richmond office.

The letter presents the authority with its first consequences for questioned contracting practices over the past several years, which were brought to HUD's attention by Henry, authority director since May. Henry's own review raised concerns about preferential treatment and conflicts of interest in 11 contracts valued at more than $1 million that the authority awarded to a Roanoke consulting firm, the Issues Management Group.

On Oct. 18, HUD officials met with the authority's board of commissioners and said that their review had raised serious concerns with regard to procurement practices and conflicts of interest, and that the problems went beyond the tedium of paperwork required by HUD. The final report is due by mid-November.

Henry said HUD's recent letter represents HUD's further confirmation that his concerns about procurement at the agency are valid.

At this point, HUD is only tightening oversight on one of its funding sources for the authority, the capital fund program, which is used to make improvements to public housing. But Henry expects the same to apply soon to other funding programs, including the Section 8 voucher program and the public housing program.

Authority board member Jim Allen said he thinks HUD's actions at this point are "pretty much routine stuff."

"The next logical thing for them to do ... is to have someone oversee all of your contracts and your transactions," he said.

But Allen, an accountant and financial controller with Virginia Utility Protection Services, cautioned that the letter is not HUD's final report, and that's what will tell the tale of just how serious problems at the housing authority are.

"I think all board members knew the procurement concerns were serious from the beginning," said authority board Vice Chairman Christie Meredith Wills. "I welcome HUD's assistance and oversight for our agency in these matters. It definitely eases my mind to know that going forward these issues will be closely monitored."

Wills wrote a letter to Henry on Thursday proposing the hiring of a compliance officer for the authority who would report directly to the authority board. Currently, the only authority employee who reports to the board is the executive director. Wills said the idea was not a reaction to the letter from HUD.

The officer would be responsible for keeping the authority up to date on all regulations and reviewing the procurement process. She said the need for such a position is "abundantly clear."

Henry wrote back to Wills that while her suggestion is interesting, "it is not appropriate for a single board member to give such directions to the executive director."

The director determines staffing needs, not the board, Henry wrote.

Henry added that compliance is part of his job description.

"I must also remind you that the present issues surrounding procurement violations and conflicts of interest were discovered as a result of my efforts towards 'compliance,' " Henry wrote.

Fellow board member Allen disagreed with Wills that a compliance officer is necessary. After learning of Wills' proposal, he wrote to Henry, "With your role as a compliance steward, the board's heightened awareness of its fiduciary duties and the letter we received ... stating that RRHA would be monitored closely as a 'high risk' organization, we should not have to add a compliance officer to the payroll."

Another of the seven commissioners also disagreed with Wills. "I think she's out of order," said resident commissioner Anita Powell, who works for Optical Cable Corp. She said Henry's understanding of compliance and procurement are enough.

Board Chairman Ben Fink could not be reached for comment Friday.

Asked if her proposal indicated dissatisfaction with Henry's job performance, Wills, an editor for the Episcopal Diocese of Southwestern Virginia, said Henry is qualified to "understand compliance." But she's not certain if he has the time, she said.

Previously, Wills told city council members during a joint meeting that they should wait for HUD's full report before passing judgment on the authority, but she said Friday that "that doesn't affect my opinion that we need to be as proactive as possible as a board."

She acknowledged that the board's priorities have changed since the issues being investigated by HUD have come to light.

"Clearly we have to get our house in order first, but I have an expectation that the board must soon return to an emphasis on serving the people who depend on us and the redevelopment activities that generate jobs in the community," Wills wrote.