The D.C. Housing Authority faces a major budget gap. A $52 million error could make it worse

After an especially rocky few years, the D.C. Housing Authority managed to stay out of the headlines recently. But the public housing agency is now staring down the barrel of a $62 million budget shortfall and thorny new questions about its finances, including an apparent accounting mistake that could cost it tens of millions more.

The agency’s governing board approved a new budget highlighting the shortfall earlier this month, warning it will likely need to implement cost cutting measures that would lead to major changes for the more than 20,000 residents it serves. And the city’s auditor sounded alarms at a D.C. Council roundtable Tuesday that DCHA officials may have mistakenly failed to account for an additional $52 million in expenses through what appears to be a very basic spreadsheet error. 

“It is a mess, and it's been a mess for a long time,” Ward 3 Councilmember Matt Frumin admonished DCHA officials Tuesday. “So we’ve got to be very nervous, and we’ve got to be on top of you as much as we can without detracting from your ability to get the work done.”

The issues are particularly bad news for an agency that is already digging through its finances after the city’s inspector general identified a series of “material weaknesses” in its practices in an audit released earlier this year. DCHA currently has no internal auditor of its own, after getting into a messy fight with the last chief compliance officer, who has sued the agency and claimed she was fired after raising concerns about DCHA’s financial practices. (The agency has denied her claims and hired outside consultants as auditors while the lawsuit plays out.)

The Council passed sweeping reforms to the agency’s governance structure several years ago at Mayor Muriel Bowser’s behest, with the aim of putting these sorts of dust-ups in the past. Lawmakers have generally praised the housing authority for incremental improvements since then, but the agency plainly has some issues left to address, particularly in the wake of the abrupt departure of its old executive director earlier this year.

“It’s like Groundhog Day,” says Daniel del Pielago, who advocates for public housing residents with the nonprofit Empower DC. “Every year, we’re dealing with all the same issues and not much has changed, unfortunately.”

DCHA’s new executive director, Nicole Wickliffe, assured councilmembers Tuesday that the agency’s staff is working diligently to address the financial issues. 

She said the $62 million budget gap was caused by a loss of federal funding, traditionally handed out to public housing agencies to account for inflation each year but withheld at the behest of a Trump administration that isn’t particularly interested in such programs. But Wickliffe said she’s also been in touch with officials at the U.S. Department of Housing and Urban Development who assured her the agency could count on receiving funds from a different pot of money to make up for at least some portion of the shortfall.

“I have confidence that HUD will fund some dollars,” Wickliffe said Tuesday. “How much of the $60 million? I'm not sure.”

But there are strings attached if the agency hopes to earn that money. The feds require authorities implement cost-saving measures as a gesture toward fiscal responsibility, and that could mean painful changes for residents. 

DCHA’s Board of Commissioners discussed several potential options at its meeting earlier this month, including implementing a “minimum rent” tenants must pay (a common practice in other cities that DCHA has long resisted) and limiting how often people can transfer between units. Sources close to DCHA say the agency would also likely need to consider layoffs to further tighten its belt.

“We're not in a place where there are good choices: there are only less bad choices,” DCHA board member Chris Murphy said at the meeting. “Not doing so would cause much greater disruption to the agency, and, most importantly, to our residents.”

But there are real questions about if DCHA would be able to access that money even if it does make changes. Will Singer, the city’s assistant deputy auditor for finance, testified Tuesday that he believes the authority hasn’t fulfilled some of HUD’s other preconditions, and he noted that HUD would have to use roughly one fifth of all of the money it has set aside in this particular program to fully bail out DCHA.

“I have not found in the public record evidence that the authority has engaged in contingency planning for the possibility that shortfall funding will not be forthcoming in the anticipated amount,” Singer said Tuesday. “In that event, the authority’s options may be very limited.”

Wickliffe said the agency should be able to count on other sources to fill the remaining gap, such as proceeds from the sale of the authority’s old NoMa headquarters. At-Large Councilmember Elissa Silverman — who has long been critical of that sale — asked Wickliffe how much of the $67 million is still left several years after the sale wrapped up. Wickliffe said she wasn’t sure.

But even that money may not solve all the agency’s budget woes if the auditor is correct and DCHA somehow managed not to count $52 million in expenses as it set its new spending plan. Singer believes a staffer must have made “a formula error in a spreadsheet” as the budget was formulated.

Wickliffe would only say Tuesday that she’d consult with her budget team about the matter — and sources close to the agency say officials were completely unaware of the problem until Singer raised it. 

At-Large Councilmember Robert White, who chairs the housing committee, said he found it “incredibly concerning” that no one at the agency appears to have noticed the discrepancy before DCHA sent its budget to HUD for review. The feds issued a scathing report on the agency’s conditions four years ago, finding (among other issues) that DCHA’s leadership didn’t exercise enough oversight of its finances. 

“It’s a comedy of errors,” del Pielago says. “It’s an agency that doesn’t seem to be able to do what would appear to be basic accounting.”

At Tuesday’s roundtable, Silverman, who just rejoined the Council after a four-year absence, lamented that few of the agency’s problems seem to have changed since the last time she conducted oversight hearings. Frumin similarly expressed skepticism about the agency’s assurances that it will be able to correct the issues identified in the inspector general’s audit when it has seemingly lost track of $52 million in expenses.

“The root problems are still there,” Frumin said. “Now we're on this new track of trying to put Humpty Dumpty back together again and get the numbers right from the start.”

While financial woes for the agency may feel complex or abstract, they have real consequences for the low-income tenants DCHA serves, according to Del Pielago. 

For instance, the agency unveiled an ambitious plan last year (under its previous leadership) to renovate 19 properties across the city that are in desperate need of repairs. But Wickliffe said Tuesday these budget pressures have already forced DCHA to scale back its ambitions for the plan’s first phase, which still hasn’t commenced.

“People should’ve already been relocated, work should’ve already started…and now we're looking at another half year before they even begin to get their act together around this again,” del Pielago says. “In the meantime, conditions at these places will just continue to get worse.”