HOUSTON — Tenants of the Harris County Housing Authority got $8,500 in gift cards to Walmart for Christmas in 2011, courtesy of federal taxpayers.
But that sort of unrestrained spending — on tenants, on memorabilia, on failed real estate deals, on its own salaries and especially on contracts with two firms connected to two former board members -- has dissipated the agency's fund balances from $37.9 million to $1.6 million between 2009 and 2012, according to an audit recently published by the inspector general of the Texas Department of Housing and Urban Development.
Harris County will have to repay $4.5 million in illegal expenditures, auditors determined, plus as much as $23 million more if the agency can't produce supporting documentation.
The agency doesn't even have the cash to repay HUD another $3.8 million it already owes for other improper expenditures. And it doesn't have the revenue to repay the new debts.
Between 2009 and 2012, all but $3.9 million of the agency's $165 million budget came from federal sources. The rest — mostly rent — is where the agency would have to find the money to repay the federal government.
Auditors found that the agency's management and board had "neglected their management and oversight responsibilities; wasted authority funds, at times for personal gain; circumvented existing internal controls; and manipulated accounting records."
According to the audit, the agency spent:
• $54,000 renting two apartments in the fashionable Museum District for two years for two mysteriously unnamed consultants at a time when there were no projects in development.
• $150,438 on computers and other equipment, mostly laptops and electronic tablets, that it could not locate.
• $66,000 on 1,281 polo shirts, denim shirts and dress shirts with agency logos, listing them as "office expenses."
• $1.8 million on excessive pay for managers and staff, categorized as "equalization pay, performance pay, and bonuses," which "sometimes exceeded the employee's annual base salary."
• $44,000 on a Chevrolet Avalanche for a board chairman's use.
• $18,000 for letters handwritten by Abraham Lincoln.
• $8,780 for five helicopter flights over its housing developments, booked as "office supplies."
• $6,500 for a book signed by 39 World War II veterans.
• $1,440 to enter foursomes in two golf tournaments.
• $4,326 at Dave & Buster's for staff dinner and bowling.
• $4,969 for dental expenses for a director and his daughter.
• $25,000 for "Extreme Makeover" home construction.
• $25,403 for a five-person trip to South Africa that's largely been repaid.
• $11,138 for gold-plated coins.
• $29,500 on a motivational speaker for a talk and a book project.
The HUD auditors acknowledged they were following up on a series of articles published by the Houston Chronicle in early 2012 detailing wasteful spending and conflicts of interest. Those articles led to the replacement of CEO Guy Rankin IV and four members of the agency's five-member board.
Two former chairmen of HCHA's board, Casey Wallace and Odysseus Lanier, were singled out by auditors for conflicts of interest. Lanier's consultancy got $11.3 million from HCHA, according to agency director Tom McCasland, most of it for work on some sort of multi-state disaster response survey that nobody wanted.
Harris County tried to get $7 million in reimbursement for it from the Federal Emergency Management Agency, but was denied, according to the audit.
Lanier's consultancy subcontracted with Wallace's law firm for work on the project. While serving as board chairman, Wallace "personally incurred charges against the contract, and the Authority paid the law firm for his work performed under the contract while he was still the board chairman," auditors wrote.
"According to its accounting records, the Authority paid the consulting firm a total of $920,315 for this contract, which included $773,731 charged for the subcontracted law firm's services," the auditors said.
The law firm has repaid that money, saying it was "a misunderstanding."
There also was incompetence to blame, or at least an unfamiliarity with purchase options. The agency ran up $17.8 million in non-reimbursable development expenses, including $6.5 million in 2009 for 92 acres on Lake Houston for a veteran-themed master-planned community that fell through.
"The plan was contingent upon the U.S. Department of Veterans Affairs relocating offices and other facilities to the Lake Houston site," auditors wrote. "The department did not move to the site."
Rankin, the former CEO who was bought out for $137,000 and is now embroiled in a lawsuit with the agency, did have a certain eye for design. A statue based on his sketch of a bare-chested angel was put outside one of the agency's housing developments, at a cost of $101,450.
The new management team at the authority, which has slashed administration expenses by 50 percent, responded that it notified HUD of most of the questionable expenditures. McCasland has an accountant poring over the $23 million in unsupported expenditures, and told auditors that "we will have a better sense of the CPA's findings in the coming months."
Jon Cassidy is a reporter for the Texas bureau of Watchdog.org, which is affiliated with the Franklin Center for Government and Public Integrity.