Legislative Auditor report: $700,000 in improper pay at city housing authority (pdf)

The Morgan City Housing Authority paid almost $700,000 in improper bonuses and wages between 2007 and 2014, the lion’s share paid to three office workers and the former executive director, a state Legislative Auditor’s report released today stated.
The housing authority “improperly paid” employees $566,544 in bonuses between November 2007 and March 2013 based on a reward policy that was altered by Tori Johnson, the authority’s housing manager, Legislative Auditor Daryl Purpera said.
The auditor’s report said another $130,418 was improperly paid by the housing authority to three employees as raises in excess of Civil Service guidelines. The improper raises were paid in six separate increases between May 2009 and June 2014. Some employees received a 20 percent salary increase in a five-month period in 2009, according to the investigative audit.
Auditors said that state Civil Service Commission officials approved a one-time reward payment, equating to a bonus, for classified employees, not to exceed 10 percent of the worker’s annual salary. The payment was to be made to employees between July 2006 and November 2007 for work performed in removing the housing authority from its previous troubled status.
The audit said that the policy was altered to allow bonus payments to be made from July 1, 2006, to “January 1, 9999,” and in an amount not to exceed employees’ annual salaries.
The Civil Service-authorized, one-time award to the qualified employees would have totaled $16,388. However, the authority paid an additional 169 bonus checks totaling $566,544 based on the altered reward policy. The report said Johnson “acknowledged that she improperly altered the policy without the authorization of Civil Service or approval of the MCHA board.”
In total, improper rewards paid, by employee, according to the report, were:
—Johnson, housing manager, who handled all Civil Service matters, received $100,041.
—Former Executive Director Charles Spann received $111,657. His first award was issued Nov. 21, 2007, and is included in the total because Spann was not a Civil Service employee, and thus, was not allowed to receive the bonus at all.
—Diana L. Pace, accounting tech, received $137,661.
—Sandra Greene, housing manager, received $165,405.
—Five full-time maintenance employees, not named in the audit, received a total of $41,802.
—Fourteen part-time maintenance employees, also not named, received a total of $9,978.
“By creating false public records and causing funds to be improperly paid to herself and other MCHA employees, Johnson may have violated state and federal law” dealing with theft, malfeasance and filing false public records. The employees who received the funds they were not entitled to may also have violated theft and malfeasance statutes, according to the report.
Pace said she issued “all reward payments requested by Johnson based on the improperly altered policy,” the report said.
The report quotes Johnson as saying that after “numerous rewards were issued,” Spann saw that the “payments were not in line with the policy and directed her to alter it to allow for the rewards that were being disbursed.”
The report said Johnson told auditors that Spann and other employees “were primarily responsible for initiating the rewards. … According to Ms. Johnson, she knew that the rewards were improper and communicated this to Mr. Spann, but he told her to do as he said and he had things under control.”
Spann denied that and said he did not direct Johnson “to alter the policy and was never told that the reward payments or the … altered policy were improper,” according to the report.
On the finding concerning improper pay raises, the report said Greene received $61,756 in excess wages between May 2009 and September 2012; Pace received $47,965 in excess pay in the same period; and Johnson was paid $20,697 in excess wages during that period. The Civil Service regulations allowed up to a 5 percent increase, but in most cases the three workers received raises of 4 to 10 percent on each of the six occasions, according to auditors.
Johnson claims Spann or Pace directed her to make the improper pay increases, according to the report. Spann said in the report that he “was not aware of the 10 percent raises given to office employees.” Pace told auditors that Johnson “initiated all pay increases.”
The report said that for each pay raise, the authority “failed to complete performance evaluations and neglected to report the pay increases to Civil Service as required.”
The improper pay was ended June 18, 2014, a year after Spann resigned, the report said.
Morgan City Housing Authority board attorney Robert Duffy said that was the date interim director Clarence Robinson Jr. finally received information regarding the raises from Civil Service.
“By initiating unauthorized pay increases, Ms. Johnson caused public funds to be improperly paid to herself and other MCHA employees which may have violated state and federal laws,” including theft, filing false public records and malfeasance, the report states.
The state auditor said the report has been turned over to the district attorney for the 16th Judicial District and the United States Attorney for the Western District of Louisiana.
Morgan City Police Assistant Chief Mark Griffin Jr., who also sits on the housing authority board, said this morning that the U.S. Attorney’s office is leading the investigation.
Calls to the U.S. Attorney’s office were not returned this morning.
Duffy said as a result of the report, “there’s not anything hidden anymore. Everyone is going to know what’s going on.”
He said this is confirmation of what Daily Review reporter Preston Gill “figured out down to a tee” in his award-winning investigative reports on the housing authority. The report was spurred by the housing authority’s audit reports, but Duffy indicated Gill just “found the tip of the iceberg,” and that the report details all of the improper payments.
In the management response to the audit, Robinson and Duffy question how previous years’ independent audits did not uncover the alleged wrongdoing.
Kolder, Champagne, Slaven and Company of Morgan City issued audit reports for the housing authority from 2007 through 2013. The authority switched to William Daniel McCaskill of Mandeville for the report issued earlier this year that uncovered the missing funds.