News that hundreds of low-income households in Northwest Oregon could lose their rent assistance in June hit like a flash flood.

No one was prepared for the possibility of so many people facing eviction all at once.

But the storm clouds had been gathering over the Northwest Oregon Housing Authority for at least six months before disaster struck.

NOHA owns and manages affordable housing units and operates federal housing assistance programs for Clatsop, Tillamook and Columbia counties. Unlike other local housing authorities, NOHA receives funds from the U.S. Department of Housing and Urban Development (HUD) and oversees rent subsidies for the Housing Choice Voucher Program.

In June, NOHA announced it had received $600,000 less in HUD funding than expected and, as a result, would cut 285 households from the local voucher program.

The reason for the shortage was unclear at first. However, records obtained by The Daily Astorian and sources familiar with the program indicate it was NOHA’s mismanagement of federal funds that created the deficit.

Analysis of NOHA’s actions from January through May of this year show the agency managers led the voucher program astray by:

? adding too many people to the program;

? ignoring repeated warnings that the program was over budget;

? spending unauthorized reserves to cover expenses; and

? acting too late to cut costs and fix budgeting errors.

Could crisis have been avoided?Observers on the North Coast, in Portland and Washington, D.C., say with proper management NOHA could have avoided the current crisis, which has sent local advocacy groups scrambling to help pay the rent for those affected and prevent a rash of homelessness.

Given the succession of errors and NOHA’s history of mismanagement, some leaders are questioning whether the agency is capable of upholding federal regulations and managing a program that supports more than 1,000 very low-income households throughout the tri-county area.

“I’m troubled that the minutes show the staff was aware something was wrong and there wasn’t an effort to avoid the impending disaster,” said U.S. Rep. David Wu, D-Ore., who is seeking federal funds to patch NOHA’s budget. “Both HUD and local citizens should be concerned that NOHA finds itself in this situation.”

NOHA Director Carol Snell takes partial responsibility for the budget crunch, but she offers few explanations for why things went wrong. She maintains her housing authority is fully functional and has the audits to prove it.

“Regardless of the issues we are in today, this is a well-run housing authority,” she said. “I don’t care what people think.”

Snell, who has directed NOHA for 16 years, said complex and constantly changing HUD regulations leave her unable predict her budget from one year to the next.

This year, while economic recession caused the agency’s expenses to escalate, Snell said she had no way of knowing how little money her agency would have to work with until Congress voted in April – much later than usual – to approve HUD’s budget.

But critics say if Snell understood the system she’s managing, she would have known her agency was in trouble long before the new budget numbers arrived in the mail.

By taking money from savings accounts, NOHA has been able to stay afloat through July and August without dropping anyone from the rental-assistance program. But come Aug. 31, an estimated 219 households are now in line to lose their rent vouchers, since a few have already moved. It’s not clear yet when, if ever, NOHA might have enough money to cover them all.

A balancing act gone wrongNOHA gets an annual allocation of funds from HUD to spend on rent vouchers. The agency is instructed to stick as close as possible to a target of 1,077 vouchers. Often, it goes above and below that target, but in the end, the total number of vouchers is supposed to average out.

If at the end of the year the program is “under-leased” – averaging less than the 1,077 target of vouchers – HUD adjusts the next year’s funding allocation downward to reflect less usage.

The program is not supposed to “over-lease” – give out more than 1,077 vouchers – and if it does, HUD does not cover the extra costs.

Snell said the balancing act gets complicated because her agency and HUD use different funding calendars and the rules of the game always seem to be changing.

“When they change what we have every time it’s like being on a teeter totter,”?she said. “How do you balance that teeter totter? It’s pretty hard. You’re either doing your job too well by having too many people on the program, or you’re not doing it well enough by having too few on the program.”

Tom Cusack, a retired Portland field office director for HUD who now publishes Oregon Housing Blog, said projecting costs and managing voucher levels is “Housing Authority Director 101.”

He pointed out that in exchange for managing the local voucher program, NOHA collects administrative fees from HUD that add up to at least $500,000 a year.

“I don’t think it’s terribly unreasonable to expect a half-million dollars to buy some budget expertise,” Cusack said.

Lee Jones, spokesman for HUD in Seattle, said actually the rules of the game are pretty clear, but NOHA has more trouble following them than other housing authorities. He said NOHA has had over-leasing problems three times in five years.

“They need to understand how this works,”?he said. “They’ve been down this road before.”

MiscalculationsSources and documents indicate two major miscalculations contributed to NOHA’s current financial woes.

First, the agency was under-leased in 2008 and, thus, was scheduled to receive $245,000 less funding in 2009. Second, in the process of giving out more vouchers to meet its target for 2009, NOHA went too far and spent restricted reserves to cover its overages.

For the balance of 2008, NOHA only used 96 percent of its allocated vouchers.

To bring the numbers up to an average of 1,077, the agency started giving out more vouchers in October.

But by then it was too late in the budget cycle to correct the problem and restore full funding for 2009.

“They could’ve known, they should’ve known, and almost every other housing authority in the country did know that their performance in fiscal year ’08 was going to affect their funding in calendar year ’09,” said HUD spokesman Jones.

From November 2008 through this May, the agency continued to add people to the program until it was far beyond the 1,077 target.

By January the count was 1,190. And despite multiple monthly reports from NOHA accountant Walter Beck that the agency was over-leased, more people were added to the program in March, April and May.

For months, Beck warned at NOHA Commission meetings that the agency was rapidly draining its reserves, according to minutes.

“This is too much of a downward trend,” he said in March, when the agency was leasing out 1,146 vouchers. “…to break even for the rest of the year, the number of units leased should be 1,053.”

Yet, in April, the agency added three people to the program to bring the count to 1,149.

Few explanationsOne problem Snell did not anticipate as she approved additional vouchers was the slumping economy. People weren’t dropping out of the voucher program at the rate she expected. Costs were going up as renters lost their jobs and income, and required additional subsidies from NOHA. To cover the extra vouchers and expenses, the agency spent more than $400,000 in reserve funds over the course of a year, according to meeting minutes.

Snell said she knows now she should not have continued adding people to the program. But she can’t explain why she did it.

“I honestly couldn’t tell you,”?she said. “I don’t know.”

Jones said the initial miscalculations compounded as the agency failed to cut people from the program to get back to the 1,077 target.

“They understood in October/November that they needed to put the pedal to the metal,” he said. “The problem was, the foot stayed on the pedal, and it got heavier and heavier and heavier. At some point, HUD gives out the equivalent of a speeding ticket, and unfortunately the families on the program are the ones who have to pay the fine.”

Reserves were tapped – twiceHUD officials say another error NOHA made was spending restricted reserves to pay for the extra vouchers it gave out.

The agency isn’t authorized to spend that leftover HUD money on over-leasing expenses.

So, when Congress decided via the 2009 HUD budget to tap restricted reserves nationwide and use them for program funding, NOHA got a rude awakening.

HUD notified NOHA in May that around $450,000 of its reserves would now go toward its 2009 budget.

“That was our cushion,”?Snell said. “When our funding letter came out in May, they said they were going to take back some of that reserve account. But we had already spent it.”

Together, the reduction in funding from being under-leased in 2008 and the offset in funding recaptured from reserves meant the agency would receive around $600,000 less from HUD in 2009 than managers were expecting.

Snell said she thought she could spend the reserves to cover overages.

“Exactly what the rules are for spending them I don’t have a clue because I was told we could spend them,” she said.

Jones said even if HUD had not directed the reserves toward 2009 programs, NOHA would have had to repay much of the restricted funds it spent because “that is a restricted account and it is not to be used to support over-leased vouchers.”

Fall outCorrecting for the $600,000 shortfall and balancing the 2009 budget required major spending cuts. After NOHA got the bad news, it sent letters to 285 households telling them they would lose their rent assistance on July 1. For some, that meant a loss of $400 a month or more in supplemental income.

Snell said there was no good way to resolve the problem by the time it erupted in May. In fact, she said, there’s never an easy way to cut people from the voucher program.

“It doesn’t matter what we do or the pickle we get in,”?she said, “the way we get out of it is not ever pleasing to everybody.”

Right now, 219 people are scheduled to be dropped from the program at the end of August with no promise of when they might be put back on.

The number of households NOHA can afford to put back on the program depends on a lot of different factors, Snell said.

“I think we just have to wait and see what our budget is going to be for next year.”