A.M. Sheehan | Advertiser Democrat

Plaster bits fall and mold appears to be building up where a ceiling collapsed outside the bathroom in a first-floor apartment at 15 Cottage Street in Norway owned by Madeline Pratt. The ceiling fell in almost a year ago and had yet to be repaired when the Advertiser Democrat took this photo in October 2011.

AUGUSTA, Maine — The Maine State Housing Authority failed to provide adequate oversight of its Section 8 housing program, resulting in dozens of Maine families living in substandard housing conditions, according to a U.S. Department of Housing and Urban Development audit report released Monday.

The audit, undertaken by HUD’s office of inspector general, inspected 61 housing units throughout Maine that are part of the Section 8 housing program and found that 53 of them, or 87 percent of those inspected, did not meet HUD’s housing quality standards. In addition, 28 of the units, or 46 percent, had “emergency or life-threatening violations requiring correction within 24 hours,” according to the audit.

The Maine State Housing Authority, or MaineHousing, was lax in its oversight of third-party organizations that were contracted to oversee the Section 8 housing program in certain parts of the state, and had an “ineffective quality control system for their own inspectors,” the audit found. As a result, MaineHousing made at least $194,956 in federal housing assistance payments for units that should not have qualified. HUD’s office of inspector general is requesting that MaineHousing repay those funds.

MaineHousing administers 3,199 Section 8 housing units in Maine, of which 2,329 were overseen by third-party organizations around the state, including Avesta Housing Corp., Aroostook County Action Program, Penquis and Washington-Hancock Community Agency, according to the federal audit.

As part of those 61 housing inspections, HUD reviewed 19 units administered by Avesta, 18 of which failed inspection; 12 units administered by the Washington-Hancock Community Agency, 11 of which failed; 11 administered by Penquis, 10 of which failed; 10 administered by Aroostook County Action Program, six of which failed; and nine administered by MaineHousing directly, eight of which failed.

The controversy over MaineHousing’s oversight of the Section 8 housing program began in October 2011, when the Norway Advertiser Democrat published a story that exposed Section 8 housing units that did not meet federal standards. That article led to MaineHousing conducting its own internal audit of 125 units in Oxford County, the majority of which were found not to meet federal standards, according to the audit.

As a result of growing criticism for mismanaging the agency, including pressure from MaineHousing’s board and State Treasurer Bruce Poliquin, Dale McCormick resigned in March 2012 as the agency’s executive director.

In May, Maine’s Office of Program Evaluation and Government Accountability reviewed MaineHousing’s operations and found no indication of fraud or wrongdoing, but did question some expenditures that had no clear connection to the authority’s mission.

MaineHousing’s internal audit, issued in January 2012, found “systemic deficiencies in the administration and delivery” of the Section 8 housing program, and prompted the organization to phase out its use of the third-party contractors by Sept. 31, 2012, according to a Sept. 21 letter from Peter Merrill, who was MaineHousing’s acting director at the time, to Edgar Moore, the regional inspector general for audit.

In his letter, Merrill wrote that MaineHousing “substantially agrees” with the report, though he did question the $194,956 the audit determined MaineHousing is liable to repay, suggesting instead that $109,601 is the proper calculated repayment.

As of Monday, MaineHousing directly manages all of the Section 8 vouchers in the $25.5 million program, according to a statement from the agency released late Monday night.

John Gallagher assumed MaineHousing’s executive director position on Monday. “Since last fall, MaineHousing has taken strong, far-reaching steps to ensure that its [Section 8] program provides quality service to tenants living in apartments subsidized by Section 8 vouchers,” Gallagher said in a statement. “Be assured that MaineHousing is working hard to create a model delivery system that will ensure quality housing and excellent service for Maine’s voucher holders.”

Following the exposure last year of lax management of the Section 8 housing program in Oxford County, Sen. Susan Collins asked HUD to review MaineHousing’s management of the program.

“Unfortunately, this final report is only further proof that, under its previous leadership, Maine State Housing Authority failed to live up to its own mission — to help Maine people obtain and maintain decent, safe and affordable housing,” Collins said in a statement. “No one should ever be living in federally subsidized housing that fails to meet basic safety and health standards, and certainly taxpayers should not be footing the bill.”

Collins said she hoped the housing authority’s new management would rectify the unacceptable conditions found during the audit. “Going forward, it is absolutely essential that Maine State Housing not only be steadfastly committed to ensuring safe and healthy housing for qualified residents, but that it also uses taxpayer dollars prudently,” the senator said.

The federal audit also concluded MaineHousing did not follow proper procurement policy when it paid an information technology consultant $848,096, of which $111,742 was charged to the Homeless Management Information Systems program. HUD is requesting MaineHousing perform an independent audit to “determine whether costs were eligible, reasonable and supported,” the audit says.

As for the failure to comply with HUD’s procurement policy, Merrill agreed MaineHousing could not demonstrate compliance for the $111,742 it paid an information technology consultant. Merrill said the organization would enlist an independent audit to determine that the funds were used reasonably. He also said MaineHousing’s commissioners had on Sept. 18, 2012, adopted a new procurement policy with “more stringent procurement procedures.”