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Tip to the Fraud Hotline
A recent Fraud Hotline tip alleged that the Joint Office of Homeless Services wasted money by paying rent for a property that was in unlivable condition.
The Joint Office spent $858,762 to provide shelter to needy veterans but allowed the property to deteriorate into unsafe, unsanitary housing that ultimately left the Joint Office scrambling to find shelter for the residents. Without adequate oversight, the Joint Office risks wasting money intended to house and provide services for Portlanders without housing.
This memo explains the results of the Auditor’s Office’s investigation into the tip, as well as recommendations for addressing the issues identified.
Background
Sandy Studios was a 32-unit studio apartment complex located on Sandy Boulevard in the Hollywood neighborhood used by the Joint Office to house formerly homeless veterans.
A building inspector came to Sandy Studios in late January 2021 and found a collapsed ceiling and damaged roof that allowed water to enter the building. The property manager hired an independent inspector who found dangerous levels of mold in nearly all the apartments caused by moisture and damage. The Joint Office scrambled to find new housing for the vulnerable residents, which was made more difficult by Covid restrictions. A television news crew visited the site and found that residents had been living in squalid conditions with broken plumbing, pest infestations, and holes in ceilings and walls.
The conditions had been devolving for almost two years without action from the Joint Office, which was ultimately responsible for the property.
Several entities in contractual relationships shared responsibility for various aspects of the property’s condition and providing tenant services. Their roles were:
The results of the investigation were based on interviews, reviews of financial records, correspondence among the parties, other documents, and policies.
Investigation Findings
Joint Office did not oversee Do Good Multnomah, which hired an ineffective subcontractor
The contract between the Joint Office and Do Good Multnomah required the not-for-profit organization to repair and maintain the property. Instead, Do Good Multnomah’s subcontracted maintenance to Home First Development. Do Good Multnomah relied on Home First Development to work with the landlord, tenants, and other service providers to address maintenance issues. Records show the Joint Office was aware of but did not approve Do Good Multnomah’s subcontract with Home First or have a written commitment that Home First would comply with the Joint Office’s requirements.
Do Good Multnomah did not use a competitive process to select Home First Development, which did not have property maintenance experience and instead had a background in real estate development. Records show Home First had a previous relationship with Do Good Multnomah.
Necessary repairs were not completed. Neither Do Good Multnomah or Home First Development conducted a thorough inspection of the property once they were engaged to manage it. Do Good Multnomah didn’t come to an agreement with the landlord for specific property repairs prior to signing the lease. Do Good Multnomah and Home First Development eventually created a list of repairs for the landlord, but it was based on their own observations rather than a certified inspection. Home First staff noted problems with the building, such as “a generalized lack of maintenance and moldering of the building into the ground that makes it feel like we’re slumlords.” Home First lost track of more than half of the items on its list, and there is no record that the landlord made many repairs. Examples included malfunctioning electric wiring and tripping breakers, a hole in the basement floor, missing exhaust screens, a non-working toilet in a common area, non-compliant wheelchair ramps, and uninhabitable units.
Home First Development did not press the landlord about unsatisfactory repairs. The landlord repaired a damaged outdoor gate to address security concerns. Home First was unhappy with the result, but rather than telling the landlord, assigned its own staff to redo it. There were other examples similar to this one.
Home First Development did not act on tenants’ damage to units andallowed tenants to deny entry to maintenance staff for repairs. Home First documented instances where tenants clogged drains, damaged appliances, and dismantled plumbing. A consultant hired by Home First to assess the property for mold also identified tenant behavior as contributing to unsafe conditions at Sandy Studios. The consultant cited six units whose tenants maintained unsafe living environments and conditions that contributed to the presence of mold. Some tenants would not allow maintenance staff into their units to address the problems, and Home First Development did not assert its right to enter to ensure the repairs were made, even when they involved damaging water leaks.
Joint Office staff did not hold Do Good Multnomah accountable for lapses in property management. Joint Office officials confirmed staff did not walk the site prior to or after contracting with Do Good Multnomah to identify maintenance problems. They also did not request a copy of Home First Development’s list of needed repairs, saying they expected Do Good Multnomah to bring serious site issues to the Joint Office’s attention. More than a year of rent payments and inaction occurred before the Sandy Studios’ ceiling collapsed.
The Joint Office plays two potentially conflicting roles with service providers: it is responsible for holding them accountable and supporting them as organizations. When Joint Office employees became aware of the maintenance problems at Sandy Studios in 2019, they did not act to put pressure on the landlord to remedy maintenance problems. Instead, they continued to pay rent, began talking about transitioning tenants to another facility, and helped Do Good Multnomah get funding for a new project.
Joint Office’s monitoring did not include an assessment of building’s condition
Joint Office policies require annual risk assessments and further monitoring of properties to ensure conditions are safe and tenants are receiving services. The Joint Office did not perform risk assessments of Sandy Studios in 2019 or 2020. A January 2021 risk assessment occurred a month before the ceiling collapsed but did not note any serious problems at Sandy Studios. That assessment rated Do Good Multnomah as a low priority for further monitoring. Joint Office staff did not identify poor conditions at the property during further monitoring either, which included interviews with key staff members and a review of files. It did not include an assessment of the physical condition of the property. Joint Office staff rarely visited Sandy Studios. Covid restrictions may have contributed to limited visits in 2020, but they do not explain the lack of attention in 2019.
Joint Office took no action about Do Good Multnomah’s performance problems
Quarterly reports submitted by Do Good Multnomah documented its performance shortcoming. Do Good Multnomah met only half of its performance goals in 2020. The organization met two goals related to the percent of clients remaining in housing. It placed 7 residents who exited the program in permanent housing which did not meet their goal of 12. It also had a goal of a 90 percent occupancy rate, but the reported rate was 87 percent.
Omissions and other problems with the reports should have but did not prompt follow-up by Joint Office staff.
Reports rarely addressed the condition of the property despite a requirement that they do so along with an action plan to address problems.
Two successive reports contained identical text.
Another report mentioned insect infestations and blamed residents for it. It did not include an action plan to resolve the infestation.
The same report mentioned a lack of onsite property management, which was required in the contract.
A report submitted immediately prior to the ceiling collapse did not indicate issues that might lead to a catastrophic event.
Our Recommendations
Ensure staff are knowledgeable about contract requirements and prepared to enforce them.
To address role conflicts, separate employees charged with contract oversight and enforcement from those responsible for advocating for and supporting non-profit providers who may be subject to enforcement.
Develop compliance checklists and guidance to ensure oversight is comprehensive and includes prompts to review high-risk areas.
Follow-up on problems identified by service providers in their quarterly performance reports and monitor action plans; document when they have been resolved.
Response from the Joint Office
The Joint Office responded to the investigation with a statement generally agreeing with the recommendations but objecting to some descriptions in the report as inflammatory. Management also objected to our use of the word “roof” to describe the part of the building that collapsed. We agree that “ceiling” is the accurate term and used it in the final report where appropriate. We otherwise stand by our findings and appreciate management’s agreement to implement our recommendations.
About Portland's Fraud Hotline
The Auditor’s Office administers the Fraud Hotline to enable the public and City employees to confidentially report suspected fraud, waste and abuse of position by or against the City. The Hotline also serves to identify and prevent losses of City funds and act as a deterrent to fraud, waste and abuse of position. Hotline tips can be submitted online at www.PortlandFraudHotline.com or by phone by calling 866-342-4148.
When the Auditor’s Office finds waste, inefficiency or abuse of position via the Hotline, it is required by law to notify the Portland City Council of the findings. This report, which is delivered to the City’s mayor and commissioners, serves as that notice. It is also released publicly to inform about substantiated Hotline tips.
Investigated by: Elizabeth Pape