Friday, November 22, 2019

Housing Authority - Part 7

When should a Board of Directors intervene in the operation of an agency it directs?

Its function is to direct the agency, not "manage" the agency. But when it is informed that the agency is not being properly managed, then the correct duty of the Board is to investigate and determine whether, in fact, the agency has been mismanaged and, if it has, then its duties is to direct corrective action.

Is that what happened when the Board of Commissioners of the McHenry County Housing Authority was informed of the errors and conduct of employees of the Authority and even of the error of a hearing officer? Did the MCHA retain an impartial, independent, unbiased, unaffiliated hearing officer? Or did it "stack the deck"?

When the Executive Director refused to consider an appeal of the hearing officer's Decision, which merely rubber-stamped the errors made by employees, I contacted the Chairman of the Board of Commissioners, Keith Leathers.

Leathers is Senior Vice President of Commercial Lending for Home State Bank. According to his bio on the Home State Bank website, he has been on the Board of Commissioners of the McHenry County Housing Authority for 18 years. With 35 years of commercial banking expertise and as a graduate of the Graduate School of Banking from the University of Wisconsin-Madison, you'd think he would immediately realize that a short-term collateralized loan was not "income". It might be reasonable to assume that he would have at least some familiarity with HUD Regulations or know where to look quickly in the Regs for a particular question.

In his October 24, 2019 response Leathers advised that MCHA staff is certified and experienced in the programs they administer. He stated that "While the use of "pawn shops" is not a usual source of income it is not excluded from HUD regulations."

What he did not say, and could not say, was the the use of pawn shops was included as income in HUD Regulations. Because it's not. Furthermore, it's not any source of income. A pawn shop loan is not income. How could a graduate of the UW-M Graduate School of Banking not know that?

The MCHA was treating the making of pawn shop loans as a business. And, even so, it was considering only the proceeds of the loan received. It disregarded the repayment of the loan. 

First of all, it wasn't a business, at all. And even if it had been, HUD Regulations call for the determination of Net Income. The MCHA Executive Director told me they use only Gross Income. I recognized that she was most likely referring to Wages, not Business Income. It also seemed that she did understand the difference between Gross Business Income and Net Business Income. Every pawn shop transaction would have resulted in a loss, not a profit.

Leathers also wrote that the MCHA is "better suited for hearing officers to have expertise in HUD income regulations, not an expert in accounting and income tax." He said later in his reply, "When using an outside hearing officer, it is important to ensure they know the rule and PHA policy related to decisions under dispute and are informed of the limits to decisions that can be made in a hearing."

Now, the last part of that sentence really bothered me. Exactly what were the "limits to decisions" that the hearing officer could make? Could she find for the Appellant? Against the MCHA?

He directed me to MCHA for the contact at HUD for an appeal. But I didn't need that. Contact information was readily available at 

On Friday, October 25, I mailed a letter to the Regional Office of HUD in Chicago. 

What was the response? Come back tomorrow. Fasten your seat belt!

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