Port Hueneme is in trouble. The feds are coming to collect their money.

For at least the last three fiscal years, there are questions about whether the city of Port Hueneme has overcharged the Housing Authority, which is primarily funded by U.S. Department of Housing and Urban Development (HUD), for administration services, possibly by nearly as much as three quarter of a million dollars, $737,454, according to documents obtained by the VCReporter.

Possible excessive charges were noted when HUD officials in Los Angeles received a report, “Compliance Risk Assessment, City of Port Hueneme, Housing Authority Allocation of Costs to Various HUD Programs, Years 2011-2014,” from Chicago-based Borell Technology Inc., detailing the “cost allocation” plan by which the city charges and takes money from the Housing Authority for administration services, specific to fiscal year 2011-2012. Marcie Chavez, director of the HUD office in LA, then sent a letter in August to City Manager Cynthia Haas, directing that the city “cease and desist allocation of ineligible costs” and that it provide documentation for services rendered. In October, Haas responded, saying the assessment was neither authorized nor reviewed by city officials and that the report was never completed and had not been paid for. (The final report was submitted on Sept. 29.) She wrote further, stating, basically, that the report was wrong.

“Consequently, it contains inaccuracies and misstatements. Had this assessment been reviewed by City staff, the City believes that the concerns raised in the ‘draft’ assessment would have been refuted, addressed and or removed from a final version of the report,” Haas notes in the letter.

Nevertheless, complying with HUD’s request, the city sent a thick stack of paperwork documenting services rendered and their costs.

Upon review, HUD was not satisfied. Chavez’s response to Haas dated Nov. 18 as follows:

“In summary, we find the City’s explanations and documentation to be wholly unacceptable. Please be advised that the Los Angeles Office of Public Housing will take further necessary actions concerning this matter in the form of a referral to the appropriate Enforcement Office at HUD.”

Then-Mayor Jonathon Sharkey, then-Mayor Pro Tem Norman Griffaw, then-Councilman Ellis Green, Councilwoman Sylvia Munoz Shoop (now mayor), Director of Finance Robert Bravo, and Director of Housing and Facilities Maintenance Joseph Gately were cc’d on the letter.

On Dec. 17, Lydia Morales, director of the office of general counsel of the Departmental Enforcement Center at the Los Angeles HUD office, sent a letter to the city, stating that an enforcement team would be conducting an onsite review on Feb. 2-6 of the relationship and the allocation of funds between the Housing Authority and the city and that the enforcement team would conduct interviews with Haas, Bravo, Gately and Budget Manager Juanita Guzman. That onsite review has been postponed to Monday, Feb. 23.

Eduardo Cabrera, public affairs officer for HUD, region 9, confirmed that there was an open investigation but said he could not comment on it.

Sharkey, who was re-elected to the City Council in November but is no longer the mayor, had little to say about the issue.

“We never had a problem with [cost allocation] before. It’s under investigation. I can’t tell you anything,” he said, ending the call abruptly.

Haas, who last week asked that questions be emailed to her, responded, saying, “The City is fully cooperating with HUD in preparation of their audit, which is now scheduled to occur the last week in February.  At this time, we do not know how long the audit will take, or when HUD will make its findings known.  However, we welcome the opportunity to have HUD review our cost allocation program as it pertains to the Port Hueneme Housing Authority, so that we can ensure we are fully compliant with federal regulations.”

Then-Housing Authority Director Joseph Gately said he could not comment at this time.

The first question is, what could cause HUD to send an enforcement team to the city?

The cost of business
Housing Authority offices are a regular part of local government functions. The purpose of the Housing Authority is to address the housing needs of low-income individuals and families. HUD funds the Low Income Public Housing and Section 8 Housing Choice Voucher Programs and is the primary funding source of housing authorities. The Port Hueneme Housing Authority is a separate entity from the city of Port Hueneme but it is contracted with and pays the city to provide administrative services through allocation. HUD funds for the Port Hueneme Housing Authority and the city allocation costs are as follows:

Fiscal years    HUD funds    *H.A. funds to the city:
2011-2012    $744,900    $211,290
2012-2013    $821,200    $221,300
2013-2014    $765,800    $221,300
2014-2015**    $846,736    $193,450***

*In the city’s budget, HUD funds include late rent fees, rental income, operating subsidy, tenant fraud recoveries, tenant miscellaneous revenues and administration fee.

**2014-2015 fiscal year was not included in the compliance risk assessment.


In comparison, Oxnard, which has nearly 10 times the population of Port Hueneme, allocates $223,000 per year from the Housing Authority.

In the Nov. 18 letter from HUD, Chavez listed 21 questionable costs, from payments to the offices of the city manager and the city attorney to the cost of utilities, telephones and supplies, plus rent issues and much more. These total $245,818. The questionable costs mentioned in the letter mirror the questionable costs detailed in Borrell’s compliance risk assessment for fiscal year 2011-2012. The total amount, however, could meet or exceed three-quarters of a million dollars if the same cost allocation plans were applied in the following two years. That is, three times $245,818 if the same numbers apply in 2012-2013 and 2013-2014. Lynne Borrell, CEO of Borrell Technology Inc., said that the pattern of cost allocation appeared to apply to the following two years.


A series of letters between the City of Port Hueneme
and the Los Angeles field office of HUD.

It is known that organizations, government entities, etc., will bill for a certain number of hours, for certain services, which may or may not reflect the real market value, but they are applied and the exchange is agreed upon as a standard practice of business. Because the city of Port Hueneme has thus far not provided documentation satisfactory to HUD, and if it still can’t provide the proper documentation during the onsite review, the city may have to pay back that money to HUD. If so, it remains to be seen where the city will get that money. In addition, should HUD decide to look further back at allocation plans that don’t have proper documentation, dating back five, 10 or more years, just how much will HUD seek in reimbursement?

This situation may raise concerns about the city’s cost allocation methods in general.

The 2014-2015 budget included the value of cost allocation:

“The cost allocation charges budgeted represent $4,360,900 and 25 percent of the [city’s] General Fund’s revenues, and, as a result, the General Fund is dependent on these cost allocation charges collected. The major contributors of cost allocation charges collected are the Water, Wastewater, and Solid Waste funds, which contribute a total $2,945,500 or 67 percent of these revenues. The growth of this revenue source is dependent on the increase in General Fund operating cost from primarily salary and benefit costs. This revenue will be adjusted when the cost allocation plan is updated for FY 2014-15.”

If the HUD investigation reveals that the city was wrong in the cost allocations from the Housing Authority, the same issues may apply to other departments that the city has been charging for services.

“Wholly unacceptable”
In the compliance risk assessment, Borrell, with over 40 years’ experience in housing operations and who works with Housing Authority officials on federal regulations, detailed the risks to the city, specifically for fiscal year 2011-2012 though she does say the same assessment should apply to the following two fiscal years. Actual expenses and services provided by various city divisions are being questioned, which totals more than $100,000. See charts below:

Further, the city used HUD-owned facilities for its own purposes while charging the Housing Authority to rent space. The city charged the Housing Authority $29,600 for rent while the market-rate rental charge for the HUD-owned property is reported as $11,368; the total reimbursement in question is $40,968.

For landscape costs, the city charged $34,600. (Landscape costs were for properties owned by the Housing Authority via HUD funds, aka HUD-owned properties.) The report indicates that market-rate value is $10,800 for the same services, a difference of $23,800.

The city charged the Housing Authority for using its “fleet” of vehicles and the maintenance of that fleet. The Housing Authority has one vehicle, according to the report. It owns that vehicle and it does its own maintenance. (The Housing Authority claimed it did one oil change that year). The total amount of $4,400 is in question.


The largest cost allocation in question is for Section 8 vouchers, amounting to $59,539. The report states that the city must document that all costs were used only for the Section 8 program and direct administrative costs.

In another instance in February 2013, the city sold at auction the Housing Authority vehicle, which was owned by HUD, for $1,620 and kept the money from the sale for the general fund, according to the report.

At this point, there are many more questions than there are answers. The investigation into Port Hueneme’s finances is just beginning.