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Monday, October 24, 2011

WHA calls lawyer after getting draft audit

Board reviews Nere’s status, holes in records

As published in the Record Journal, Saturday October 22, 2011

By Robert Cyr
Record-Journal staff
(203) 317-2224

— Public housing officials are consulting with their attorney to determine whether a draft audit of Wallingford Housing Authority finances could warrant removal of its longtime director, Stephen Nere, according to Chairman Michael Misiti.

The authority released draft results of the forensic audit this week. The WHA operates 317 low- and moderate-income rental units and has an annual operating budget of about $1.5 million. The Housing Authority is funded by tenant rental payments, state grants, and federal assistance administered by state agencies. The state also holds mortgage debt on Housing Authority properties. Besides meeting with its attorney regarding Nere, the Housing Authority board is reviewing the audit report and deciding if further investigation will be requested from the auditing firm that was hired to look for unusual items in financial records, Misiti said. Nere was not available for comment Friday. Since the board approved conducting an audit in May, it has rejected two requests by Nere to have the authority buy out the rest of his contract, which is due to expire next year. Nere, 60, has been executive director for 26 years and makes $100,000 a year.

Misiti said he could not confirm whether Nere had recently requested another buyout.

“We’re not in negotiations with him right now, but I would think so,” he said.

The audit was formally requested by the Tenant Council earlier this year and later approved by the board to investigate allegations of mismanagement at the authority, which has been embroiled in controversy for more than a year.

Although the audit was approved in May and was expected to take several weeks, holes in financial records and problems with accounting software delayed the work by several months and ultimately made it impossible for the auditor to fully investigate the books, Misiti said.

According to the report, the authority was “not fully using the financial software general ledger function and therefore general ledger activity was not available” for 2006 and 2007. For fiscal year 2008, the auditor found ledger balance reports, but “the trial balance amounts did not reflect activity in a format that would allow the type of analysis we would normally perform.”

The report adds that “without a balanced and complete general ledger, we were unable to review the Authority’s financial activity to identify items that may be considered unusual or would be identified for further analysis.”

Misiti said the board will ask the auditor to explain the unavailability of the records needed to complete a full analysis. Because the authority is required by state housing officials to audit its finances every year, records would be needed for that purpose, he said.

“Was it not available, or was it not available in the manner that he wanted it?” he said. “There are definitely some things that look like there’s a problem. Let’s say the ledgers are not available, in electronic or paper form. That absolutely says someone’s hiding something. Without complete ledgers there’s no way you can add up the numbers.”

Mayor William W. Dickinson Jr. said the town has no direct oversight of the authority, but if criminal charges were to arise from the audit, they would begin with a criminal complaint brought to the Wallingford Police Department.

“Any inability to complete an audit is extremely unfortunate,” he said. “We all have to show details of what we’ve done and how we’ve done it as to the use of money.”

The $12,000 audit was conducted by Farmington accounting firm Kostin, Ruffkess & Co., with a $15,000 spending cap in case further work was requested. The board asked the firm to study records for three years.

While looking into money given to Housing Authority employees during that time, auditors found two instances in which an advance was given to a worker for a housing conference, but there was no documentation for the expenses or expected refund of the advance, if due. “In one instance only the hotel bill was attached to the travel voucher form and that amount was less than the advance,” according to the report. The report also finds that the authority paid employees $50 a day for meals while at conferences of the National Association of Housing and Redevelopment Officials, but could find no examples in which meals were not included at similar association events. “We recommend that the Authority revisit this practice as it relates to local conferences since the use of advances is not a common practice for municipal entities,” the report states. The report also found that there was no procedure for a bidding process for vendor services and some services were awarded without a written contract or description of work performed.

Auditor Joseph Centofanti wrote that he began with a forensic evaluation of the authority completed in November in order to avoid duplicating investigations of accounting practices. The evaluation last year made more than 50 recommendations to tighten the authority’s recordkeeping and procedures. Many of those recommendations were immediately taken up by the board, including locking up checkbooks and keeping a three-part receipt book.
Centofanti was not available for comment.

The recent audit is not the first time Nere has been linked with financial problems. For the past two years, Nere has filed his housing budget after the June 30 deadline with the state, on the last day of two 30day extensions.

According to court documents, two credit card companies won judgments against Nere personally last year, and he has been ordered to pay $78,392.84. Another company, whose case is pending, seeks $53,498.33.

In August, the U.S. Department of Housing and Urban Development completed an investigation into Nere when it found he had used, with board approval, more than $700 to pay his personal lawyer in an unspecified lawsuit. Nere was not required to return the money, but was warned not to repeat the error.

HUD’s connection to the WHA is through the state Department of Economic and Community Development, which disburses federal funds to McKenna Court, a 30-unit housing complex for senior citizens. HUD officials did not return calls.

Nere is appointed and serves at the will of the Housing Authority board of commissioners, whose five members are appointed by the Town Council. While members can be removed by the council, only the housing board can terminate the executive director for cause without violating his contract. The housing board, however, has been mired in controversy for the past year and only one current member, Thomas Mezzei, was on the board during the years investigated by the auditor. Earlier this year, two longtime Republican members who served on the board during the three years, Robert Prentice and Patrick Monahan, resigned within a day of each other.

Mezzei, the only Democrat on the board then, said he thought there was enough in the draft report to fire Nere for cause.

“We never spent much time then and our meetings didn’t even last an hour,” he said. “They just always just did what they wanted, and it was four against one. Right now, little by little, we’re trying to get to the end of the road.”

Prentice, chairman of the Republican Town Committee, had served 25 years on the board when he quit in February. He later said it was to spend more time with his family and to avoid the political infighting on the board and scrutiny from concerned town councilors. He was not available for comment. The Connecticut Housing Finance Authority, which manages mortgage debt at the WHA, has received the audit, but would not be involved in any potential action that stems from the report, said CHFA spokeswoman Lisa Kidder.

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