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A tenant-run organization of the Lackawanna Municipal Housing Authority used an ATM card in 2012 and 2013 to make dozens of “suspicious” cash withdrawals and purchases with federal tax dollars, an internal audit of the group has found.

Among the purchases was a $100 ticket to a National Basketball Association playoff game May 21, 2013, between the Spurs and the Memphis Grizzlies in San Antonio.

The Buffalo News obtained a copy of the audit from a Housing Authority resident who filed a Freedom of Information request with the authority.

While board members of the Baker Homes Tenant Council had access in 2012 and 2013 to a relatively small amount of money through the U.S. Department of Housing and Urban Development’s “tenant participation funds” program, HUD recently awarded the tenant council a grant of $211,080 to hire two part-time service coordinators who will help residents with education, job training, job placement, and computer and financial literacy.

“How can you give these individuals $211,000 with a record like this?” said John Ingram, the tenant who sought the audit records under the federal Freedom of Information Act. “This is ridiculous. This is theft. You’re stealing money from the residents.”

The tenant council recently was one of three entities in New York and 114 nationwide to gain the competitive Resident Opportunity for Self Sufficiency grants.

David Hardy, president of tenant council, acknowledged that he purchased the ticket to a Spurs-Grizzlies game with the council debit card but said that neither he nor the council did anything wrong.

“It wasn’t that we took money and pocketed it. That’s not the case at all,” he said.

He said he bought the ticket with the prior approval of the tenant council board to spend up to $100 with the card during his time at the annual Convention & Exhibition of the Public Housing Authorities Directors Association, which was being held last May in the Grand Hyatt Hotel in San Antonio.

Hardy said he only recently learned that the basketball game was not an eligible expense under HUD regulations for the tenant-participation funds and he said he will reimburse the money.

The Housing Authority gave the tenant council $7,588 in federal money in 2012 and 2013, with the intent that the money was to be used to improve the quality of life for residents of Baker Homes, one of three housing developments within the authority.

But the audit identified at least 42 unexplained cash withdrawals from the Citizens Bank checking account of the Baker Homes Tenant Council, and dozens more ATM withdrawals that were described by the council’s president as being used to pay a cleaner in cash, instead of by check.

An accounting firm that reviewed the audit expressed concern about “apparent abuse and lack of documentation of expenses.”

“We are puzzled by the need for numerous ATM withdrawals during the year and multiple withdrawals on a daily basis of small denominations; these are signs of fraudulent activities,” Roger J. Lis Jr., a certified public accountant, wrote in a letter to Housing Authority officials.

Hardy, who is a tenant-elected member of the Lackawanna Municipal Housing Authority’s board of commissioners, said he attended the annual convention of public housing authority directors with other commissioners. The Lackawanna authority paid for the trip.

As president, Hardy said, he is entitled to as much as $200 per month in stipends and has taken less than that amount for his work.

Hardy described all of the other expenses of the tenant council as allowable under HUD’s guidelines.

“What we did was spend money taking care of our residents,” he said.

But according to the audit, the tenant council made more than $4,000 in cash withdrawals with no accounting of how the money was spent.

In addition, 36 ATM cash withdrawals – ranging from $15 to $60 and totaling $1,225 – were made between Dec. 3, 2012, and Feb. 21, 2013.

The tenant council then created four invoices Aug. 26, 2013 – after the Housing Authority started its preliminary audit – to account for cash paid to Jamie Hernandez for cleaning services.

Hernandez, who had served as treasurer of the tenant council, was hired to clean out the council’s offices on Steelawanna Avenue, after the Housing Authority director refused to assign staff to do it, Hardy said.

Hernandez did not have a checking account, so the tenant council paid him cash, he said.

It appears that Hernandez never filled out a 1099-MISC form, as required by the Internal Revenue Service.

The tenant council also paid $330 in cash to Diamond Tooles, who was hired to distribute fliers for the council.

“There’s a lot of things that are unusual there,” said Norman L. Polanski Jr., executive director of Housing Authority. “Their books are so bad that it’s mind-boggling; that’s all I can say to you.”

Accountant Lis recommended that the Housing Authority suspend the transfer of any additional funds to the tenant council until “proper internal controls” are in place and that it share its audit with the Buffalo office of HUD.

Instead of using a debit card, tenant council leaders should access funds from the council checking account “on a reimbursement basis for only documented expenditures with approval of the Tenant Council Board,” Lis wrote.

Polanski said he sent a copy of the audit to HUD in late September and has not heard back from the federal agency.

The Housing Authority also audited the tenant councils of two other complexes, Glover Gardens and Parkview Towers.

Jose Gonzalez, president of Glover Gardens Tenant Council, submitted an operating budget and a handwritten list of various expenses but did not provide the Housing Authority with bank statements.

Polanski said Glover Gardens will not receive any more funds until a full audit is done.

The audit of Parkview Towers Tenant Council found only a minor problem, he said.

Hardy contended that the Baker Homes Tenant Council was being targeted because Hardy has been openly critical of Polanski and the Housing Authority.

“I press the issue with them on stuff they should be doing for residents, and I press them hard,” Hardy said.

“Here, we did nothing wrong. We employed our own residents. We got something done that they wouldn’t do for us.”

Polanski, who was mayor of Lackawanna from 2004 to 2011, was appointed executive director of the Housing Authority over the protests of some tenants.

HUD has a policy that prohibits housing authorities from hiring elected officials until at least a year after the official’s term in office is finished.

In 2011, as Polanski’s mayoral term was winding down, the seven-member board of commissioners – which consisted of five people who had been appointed by Polanski – sought a waiver from HUD to be able to hire him immediately, as had been the case with other Lackawanna mayors who moved into the post.

Hardy was among a group of tenants who objected, and they were able to delay Polanski’s hiring by a year.

But Polanski said there was no retaliation.

“It’s my responsibility to make sure things are done right,” he said.

email: jtokasz@buffnews.com