In early November 2014, Sanford Mayor Chet Mann read a proclamation honoring Ken Armstrong, the outgoing executive director of the Sanford Housing Authority for his “exemplary service.”
“There is a general feeling that the Sanford Housing Authority has performed flawlessly,” Mann went on, according to town council minutes.
But a federal investigation released this week alleges that Armstrong, who had lead the housing authority for 12 years, violated HUD regulations and improperly used $418,000 in funds. The report, issued by the Housing and Urban Development’s Office of the Inspector General, specifically states these financial irregularities are the “fault of the former executive director and former accounting managers.”
The report recommends not only that the money be reimbursed to HUD, but also that the agency “take appropriate enforcement action against the former Authority officials responsible for the noncompliance with Federal regulations.”
Enforcement could range from civil action, including fines, or even criminal penalties, according to HUD.
Armstrong is now the executive director of the Alachua County Housing Authority in Gainesville, Florida. NCPW called that office to speak with Armstrong, but received only a recording.
However, Armstrong “felt very confident in his accounting knowledge and skills” according to a letter from Armstrong to the housing authority board. HUD quoted Armstrong’s letter in which he said he “checked all financials every month and made all final decisions.”
Yet those decisions led the Sanford Housing Authority, which has an annual budget of $8 million, to lose “adequate control over its financial records,” the investigation found. Armstrong didn’t maintain a ledger for the housing authority’s general funds. And the housing authority’s former fee accountant used a personal financial system, not official software, to track funds, which included transfers from different bank accounts to the general fund.
While the lack of transparency made it difficult to trace how some monies were spent, investigators did find that more than $400,000 in contracts were at issue — many of them weren’t put out for bid and had little documentation — including $118,000 for door replacements and $88,000 in lawn maintenance.
Armstrong also used more than $7,000 in federal funds for improper expenses and spent another $3,000 on housing authority credit cards or its line of credit. In addition, the housing authority paid its IT contractor $180 to retrieve text messages from a personal cell phone and gave another $200 to a housing authority resident to pick up the trash each month.
Armstrong also allegedly used housing authority money to pay for two flights for a “traveling companion.” Two employees also spent $1,000 on a trip to Myrtle Beach, S.C., with housing authority residents, the report said.
Armstrong also arranged for part of a housing authority maintenance shop to be renovated into an apartment to house one homeless person, in violation of HUD rules. Federal funds were illegally used to install a shower and pay for utilities in that unit. Armstrong told the board in a letter “that getting families out of cold cars and saving lives was the bottom line,” and that “it was appropriate to focus on performance over compliance for accountability.”
The Sanford Housing Authority manages 450 public housing units and 756 Section 8 vouchers in Lee and Harnett counties, and has built 151 affordable units. HUD launched its investigation two months after the housing authority board hired a new housing authority director, Shannon McClean. She alerted HUD to 35 issues she uncovered, and asked the agency for help.
McClean was out of town Friday and couldn’t be reached for comment.
On Friday, Sanford Mayor Chet Mann distanced himself from Armstrong. He told NCPW that the city “doesn’t have a role in the housing authority” other than to appoint members to the board. Mann did appoint a new board in 2015, after Armstrong resigned.
“I had no knowledge of any irregularities,” said Mann, who added he had heard about the HUD report, but not yet read it. “The Sanford Housing Authority got awards for its program. Armstrong’s performance was really good, but his compliance was not.”