St. Paul's Section 8 program denies mishandling of federal funds

A new federal audit of the St. Paul Public Housing Agency's Section 8 program says the office hasn't properly administered U.S. Housing and Urban Development funds, but St. Paul housing officials dispute the report, and say they shouldn't have to give back more than a million dollars.

The report from HUD's Inspector General's Office concludes St Paul didn't adequately track more than $1.3 million in federal Section 8 funds. The Section 8 program provides low-income people with vouchers for private housing.

The report also said the city agency underpaid some Section 8 residents by more than $9,500 in 2007 and 2008.

The Inspector General's office - which polices the way federal housing funds are spent - isn't commenting on the report. But its audit said St. Paul should pay that money to residents, and give $1.3 million back to the federal government.

The St Paul agency's executive director, John Gutzman, said his staff gets things right most of the time. He acknowledges some residents were underpaid, but often by just a few dollars, and never more than a hundred.

"This dispute's largely about paperwork," he said.

Gutzman questioned many of the federal audit's findings.

"[The Inspector General's office] found no waste fraud and abuse. They did find some area of file management that they, in hindsight, wish we would've done better," Gutzman said. "We concur that we could've do better going forward in a few areas."

The alleged mismanagement took place as the need for Section 8 services in St. Paul increased.

In April 2007 -- the last time St. Paul accepted new requests for Section 8 housing -- the agency received nearly 11,000 applications.

St. Paul has handed out the 4,000 vouchers it has. 7,000 families are on a waiting list.

The Inspector General's audit said the agency paid some landlords who provide Section 8 housing twice.

It also said St. Paul housing officials can't produce documentation proving they inspected properties before paying landlords. The payments totaled the $1.3 million.

The paperwork is a required step for HUD funding -- and that funding makes up most of the St. Paul agency's budget. The Inspector General's report said if St. Paul doesn't have the documentation, the agency should pay HUD back with money that didn't come from federal sources.

But Gutzman said over the last few years, the federal government hasn't provided complete information about what paperwork is required.

"I guess it's the golden rule," he said. "The people with the gold make the rules. And we think they make complicated rules. It's a difficult program to administer. We should not forget the needs of the 4,000 folks in affordable housing and the over 7,000 families on the waiting list. That's what this agency's about."

Several housing advocates praise the St. Paul Public Housing Agency, saying they aren't getting complaints about underpayments. And they often see the agency conduct inspections.

Gutzman said his staff will make the administrative changes the Inspector General recommends. The agency will pay residents the money they're owed. But Gutzman doesn't think he'll have to come up with $1.3 million for the federal government.

"If we were able to have our day in court I think we'd win hands down," Gutzman said. "I think we've proven to anyone's standard that all the paperwork was done correctly and that all the federal funds were paid correctly. "

HUD's office in Minnesota would be the one to enforce the Inspector General's conclusions. Officials there say they'll make a decision once they do their own investigation. Gutzman is confident the office will side in his agency's favor.