The federal government wants nearly $2 million to be repaid by what it's now calling the "troubled" Roanoke Redevelopment and Housing Authority because of conflicts of interest and improper bidding of public contracts.

The U.S. Department of Housing and Urban Development, which has been auditing the authority for several months, released its final report Friday.

The report details an assortment of problems, including a series of flawed contracts issued by the authority to some of the city's best-known businesses including: the Woods Rogers legal firm; Roanoke Gas Co.; John Lambert & Associates public relations agency; the Issues Management Group consulting firm; and the Hayes Seay Mattern & Mattern engineering firm.

The problems with the contracts range from a lack of a required competitive bidding process to arbitrary actions by the authority in awarding them.

Of the 21 contracts sampled by HUD auditors, 19 had problems, said Bob Jennings, director of public housing in HUD's Richmond office. Most of the problems requiring a payback of funds were on contracts "where it more or less looked like it was a selective process versus a competitive process," Jennings said.

The report also cited the authority's inability to provide documentation for nearly $24 million in matching funds for the $40 million overhaul of Lincoln Terrace public housing development.

Retired authority Director John Baker, who led the agency during the time when questioned contracts were awarded, did not return a phone call seeking comment Friday.

'A shame on our city'

HUD spokesman Lee Jones compared the severity of the authority's problems to a car in need of repairs. It's "something between a tune-up and an engine rebuild, but maybe approaching the engine rebuild," he said. HUD's purpose is to help the engine to run properly.

City Councilman Sherman Lea took a stronger view of the findings.

"This is a total mess and a shame on our city," he said.

The report addresses only regulatory issues and does not address the role of the contractors themselves. That's beyond the scope of HUD's review, but can be considered by HUD's independent inspector general -- a scenario Jones said is possible.

The report also cites apparent conflicts of interest under HUD regulations -- and not criminal law statutes -- involving City Councilman and former housing authority board member Bev Fitzpatrick, former housing authority board members Ben Fink and Greg Cupka, and former authority human resources director Charlotte Mason.

Fitzpatrick and Mason were affiliated with the Issues Management Group during their authority service, at a time when the consulting firm had contracts with the authority. Fink and Cupka resigned from the board last month, after learning their employment with Hayes Seay Mattern & Mattern constituted a conflict. Contacted earlier this week, Mason said she had no comment and planned to consult an attorney.

The report questions whether Fitzpatrick may continue to have a conflict of interest on authority matters as a member of city council because of his "apparent continued interests" with IMG. Fitzpatrick has said previously he no longer has a business relationship with the firm.

Fitzpatrick also resigned as council liaison to the authority in October. Lea believes Fitzpatrick should be prohibited from involvement in any council discussion involving the housing authority.

Fitzpatrick's attorney, David Paxton, said in a statement Friday that Fitzpatrick never voted on any of the questioned IMG contracts and any suggestion he benefited financially from those contracts is "completely false."

The authority's board released a statement Friday saying it "takes this report very seriously and is committed to addressing all findings and corrective actions. ... We are also confident that the RRHA will grow stronger as a result of our commitment to address the identified issues effectively."

Contracts questioned

The largest chunk of the money HUD wants recouped is for $825,000 in legal fees paid under contracts to Woods Rogers. One contract was awarded with no limit on the amount the legal firm could bill, according to the report, and was awarded based on criteria not described in the original request for proposals.

Seven of the 21 contracts HUD reviewed were with the Issues Management Group consulting firm. HUD found problems with all seven.

The problems were as minor as the authority paying $1,400 for facilitating a board retreat without adequately explaining the services being purchased.

Other problems include awarding IMG contracts for $210,000, $185,000 and $50,000 without competition and without HUD approval.

In one instance, then-authority Director Baker divided a contract for $25,000 between the Roanoke County school system and IMG. The report called the decision "unsupported" and "an arbitrary action."

Ed Natt, attorney for IMG President Rob Glenn, said he had not read the report yet and had no comment.

HUD also called for repayment of $113,500 because of problems with the authority's contract for public relations services with Roanoke firm John Lambert and Associates.

Authority Director Ellis Henry said Friday he is already in the process of terminating the authority's contracts with Woods Rogers, IMG and Lambert.

The report also noted that of the 10 findings cited, six were problems pointed out to the authority during a HUD review in 2001.

HUD officials visited the authority several times since then, but did not review procurement issues.

"It isn't like we just totally ignored it," said Jennings, the Richmond HUD administrator. "We saw what we thought were adequate steps. Obviously, they weren't quite as adequate as they needed to be."

Lincoln project reviewed

Not all of HUD's findings in the report were related to contracts.

The audit found the authority could not document how it leveraged almost $24 million toward the $40 million overhaul at Lincoln Terrace. The basis for the project was a $15 million HOPE VI grant from HUD.

As part of its plan to obtain that grant, the authority said it would finish the project with 243 housing units. HUD could find only 225.

The authority also receives a subsidy from HUD each year based on a score derived in part from occupancy rates in its public housing units. HUD found problems in how the authority scored itself. The authority improperly reported that some units were unavailable because they were under repair after the repairs were completed -- "an accepted and widely used practice of the agency."

As a result of that and other problems, the authority's score dropped from 28 out of 30 to 11. HUD now classifies the authority as a "substandard management performer."

Response coming

Now that the report is out, the authority board has 45 days to respond. Board members said in their statement they anticipate working closely with HUD to resolve their problems.

Henry, who helped prompt the audit with a report on his concerns over the authority's contracts, is already making changes aimed at setting the agency straight.

He said on Friday he's been updating policies and procedures almost since he arrived in May.

He's putting employees through procurement and ethics training. The board has also asked for ethics training -- a specific requirement of the HUD report.

Henry is also making personnel changes "that would ensure the agency from this point on is in full compliance."

The largest issue facing the authority, however, is finding the money to satisfy HUD's requirements. In addition to the $2 million, HUD may ask for another $420,000. Depending on how the authority accounts for its problems, the amount could be reduced.

The funding must come from nonfederal sources.

Authority Vice Chairman Joseph Lee said the board is willing to do whatever is necessary to make things right financially with HUD -- including filing lawsuits against contractors.

If the city is asked to get involved with any of the financial matters, said Councilman Lea, "I'm going to ask them to hold those companies accountable. ... The taxpayers should not have to foot this bill."