Potrero Terrace public housing in San Francisco’s Potrero Hill neighborhood March 31, 2011. (Mike Koozmin/S.F. Examiner)

Housing Authority to get $10 million bailout from HUD; blames $30 million shortfall on unqualified employees

At a San Francisco Housing Authority meeting Tuesday, the agency’s executive director announced the U.S. Department of Housing and Urban Development has agreed to give them $10 million to help cover a recently discovered $30 million shortfall.

Barbra Smith, acting executive director of the housing authority, said Tuesday the shortfall was caused by unqualified financial employees who lacked the very specific skill sets required to work in public housing financing.

The shortfall was discovered when HUD officials contacted the agency to tell them they appeared to be on track to run out of funds before the end of the year.

“We’ve actually had to let a couple people go,” Smith said. “Quite honestly, (the employees) were not able to perform some routine reporting to HUD. So our data we were reporting to HUD was not correct.”

The housing authority uses a two-year forecasting tool provided by HUD. But the tool is only as good as the data it is given, Smith said.

“This is not HUD’s fault,” she said. “The housing authority is fully responsible for projecting any potential shortfall. Those projects can be complicated with the portfolio and housing units we’ve added.”

“It wasn’t until the middle of September we realized we would have a shortfall. We suspected the tool wasn’t accurately projecting, but we had no idea it would be the magnitude it is,” she said.

The housing authority commission voted Tuesday to shift $7.1 million from a reserve fund to help cover the shortfall and to accept up to $20 million as a loan from the City and County of San Francisco.

As a condition of accepting the $10 million from HUD, The City will take over some of the agency’s administration and accounting.

“This is not a case of malfeasance or malicious intent,” said Daniel Adams, deputy director of the Mayor’s Office of Housing, the agency that will assume some functions of the housing authority. “This is an error in accounting and one that we’re defining and addressing.”

“We have quite a ways to go, quite honestly,” Smith said. “There will be a lot more discussions with The City.”

The agency has hired an accounting firm, BDO, to help identify the causes of the shortfall and to create financial projects for 2019.

“We’re likely to end up in shortfall again next year,” Smith said.

Some public housing residents attending the meeting were not satisfied with the explanations they were hearing.

“Ms. Smith has characterized the deficit as a shortfall. $30 million isn’t a shortfall, it’s a longfall,” said John Michael Kelly, a resident of Clementina Towers in the South of Market neighborhood. He called for an investigation to determine if it was caused by negligence, “or worse,” he said.

“It’s happened before – maybe not at the $30 million level, but it’s happening again, and it shouldn’t be,” he said.

Supervisor Aaron Peskin introduced a motion at Tuesday’s Board of Supervisor’s meeting directing the budget analyst to conduct an audit of the housing authority.

The audit would examine the agency’s “reported financial shortfall, including analyzing prospectively the assumption by the City of all responsibilities for SFHA’s essential functions, including the potential role of [Mayor’s Office of Housing and Community Development] in assuming responsibility and related oversight.”

S.F. Examiner staff writer Joshua Sabatini contributed to this story.

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