Audits from the D.C. Housing Authority’s internal compliance office found more than $2 million in overpayments to a vendor, an illegal sole source contract, and alleged malfeasance on the part of Director Brenda Donald and two of her top deputies.
Petuna Cooper, vice president of the Office of Audit and Compliance, reported the findings of her staff’s review of three contracts on Thursday, Nov. 3, during a meeting with DCHA’s board of commissioners, who collectively function as Donald’s boss and oversee the agency’s spending. The commissioners went into a closed-door session during the meeting to discuss a “personnel matter,” according to the agenda. Later that day, board Chair Dionne Bussey-Reeder directed Donald to place chief operating officer Rachel Joseph and general counsel Lorry Bonds on administrative leave.
The full board was scheduled to meet the following Monday, Nov. 7, in an emergency meeting, to discuss Donald’s fate with the agency in light of the audits’ findings, as City Paper previously reported. But Bussey-Reeder, whom Mayor Muriel Bowser appointed to chair the board in late 2021, abruptly canceled that meeting.
The board met in executive session during its regular monthly meeting last Wednesday, Nov. 9. Joseph and Bonds were present during the meeting, and DCHA spokesperson Sheila Lewis tells City Paper that their administrative leave was rescinded. Donald told the Washington Post the board did not have the legal authority to direct such action.
For the past few weeks, rumors have circulated about whether Donald, a Bowser ally, would resign rather than continue in her attempt to turn around an agency long mired in scandal and dysfunction. She was pulled out of retirement to lead DCHA following a long career in the D.C. government and has been scrambling to clean up the mess left by past directors.
Taken together, the audits’ findings, the secret, closed-door meetings, and the dizzying decision reversals raise questions about whether the rot inside DCHA runs too deep. Multiple sources familiar with the recent developments are wondering whether it is time for the federal Department of Housing and Urban Development to place DCHA in administrative receivership.
Below are just some of the details from two of the internal audits. Both contracts, with the firms Verbosity and ThinkBox, were specifically called out in a scathing report from HUD, which recommended DCHA investigate its relationship with Verbosity.
Verbosity
DCHA engaged with the software firm Verbosity and paid $967,260 for various services dating back to 2019 without a competitive procurement process. The relationship started under Tyrone Garrett, Donald’s immediate predecessor. The recent audit found the sole source agreements violate DCHA’s procurement policy, noting that “competition for this type of work should have been possible.” For at least some of the work Verbosity performed, there appears to have been no contract document at all, HUD and DCHA’s internal auditor found.
Cooper focused on Verbosity’s work providing support technology for the housing authority’s police and security officers. The software helps DCHA fulfill requirements as part of a settlement with the D.C. Office of the Attorney General to improve safety around public housing properties.
Cooper’s audit found seven issues with DCHA’s agreement with Verbosity, including that “the auditor was unable to locate this contract, since apparently, no one at DCHA knows of such a contract.”
Other issues Cooper identified include an illegal sole source contract, bid splitting in an effort to avoid board of commissioners’ oversight, potential document fraud, and obstruction of an official audit. The latter two findings allege wrongdoing on the part of Donald, Joseph, and Bonds. Donald promoted Bonds to general counsel in February from her previous long-held position overseeing the office in charge of contracting and procurement.
Donald declined to comment on this story. In an email to the board of commissioners and staffers last week, she claimed the internal audit was full of “inaccuracies or leaps to conclusions” and said “I welcome further review of this issue by a qualified, objective third party.” Donald defended her actions and those of her deputies, writing that she was only trying to clean up the legal mess left by Garrett.
In the email, Donald explained that Bonds alerted her to the problematic contract, and Donald then directed her staff to work toward ending the illegal agreements or convert them to legal ones.
Donald ended up signing off on two emergency, sole-source contracts to continue some of the services Verbosity provided until DCHA could issue a competitive procurement. That’s where Cooper’s internal audit says Donald went wrong.
The audit focuses on “justification memos,” which Donald signed and that explain why DCHA needed to enter into “emergency” agreements with Verbosity and bypass the legally required competitive procurement process.
The first memo is dated May 3, 2022, but purports to provide justification for a $103,000 emergency contract with Verbosity that started three months prior, in February 2022. Donald signed the memo on May 9, 2022. The memo says it was sent from former Chief Information Officer Timothy Riley, but Riley told Cooper that he did not write it.
In a statement provided to the auditor, Riley said “the memo identified me (Timothy Riley) as the sole author and [contracting officer’s technical representative]. This COTR assignment without my acceptance and without following any process is also a misrepresentation. I was merely a contributor. Unfortunately this is just one example of the contract mismanagement and false representations that I have experienced.”
The second memo the auditor cites is also dated May 3, 2022, and is used to justify a second emergency sole-source contract. But the contract began on Oct. 1, and Donald signed the memo on Oct. 27, the same day Cooper requested materials on Verbosity to conduct her audit. The memo indicates that DCHA’s IT department budgeted $103,000 per year, and the emergency contract would increase that amount by $30,000.
Both memos have a “Decision” section where the signatory, Donald, is supposed to indicate one of three options: that she agrees with the justification, that she agrees but has recommendations for changes, or that she wants to discuss further. That section is left blank in both of the memos, so although Donald signed them, it’s unclear what her signature indicates. In her email to the board, Donald said her signature “was to authorize funding authority” for the emergency contracts.
The internal audit says all three contracts—the original agreement in 2019 and the two emergency agreements—violate procurement regulations and should have been put out for competitive bidding.
For the finding of obstruction, the audit report says that when Cooper asked for information on DCHA’s relationship with Verbosity, Joseph, the COO, said there was “little to no information to share on Verbosity.” But when Cooper searched DCHA’s internal databases on her own, she found more than 19,000 emails referencing Verbosity, including some from Joseph.
“The auditor further discovered that there were several documents that would have assisted the auditor in this review but were not shared with the auditor,” Cooper says in her report.
ThinkBox
The internal auditor also found that the agency’s lack of oversight of a $14 million contract allowed the firm ThinkBox to overcharge DCHA by about $2.1 million over the past four years.
DCHA signed a contract with ThinkBox in March 2018 to manage phase two of its Energy Capital Improvements Program. The agency had previously received a $104 million loan for the program aimed at improving energy efficiency with things like solar panels and new appliances. But the auditor’s report notes that the total funds available to actually implement the program shrank to $70.3 million due to various fees, including ThinkBox’s $14 million contract. Another $17 million was taken off the top to refinance debt from the first phase of the energy efficiency program.
The contract with ThinkBox was supposed to run until 2029. But as of August of this year, when the audit was completed, ThinkBox had burned through all but $73,231 of that $14 million, the audit found. There is still work still left to complete.
Specifically, the audit found that ThinkBox overcharged DCHA by $357,062 due to “calculation errors” on invoices.
“It was observed that this overbilling was caused by mathematical miscalculations when ThinkBox multiplied the total contract value by the contract rate,” the audit report says. ThinkBox acknowledged the mistake and claimed that they were due to “rounding up” errors. According to a spreadsheet of the individual invoices, those rounding errors resulted in overpayments ranging from $165 up to about $35,000.
The audit also identified $468,742 in payments to ThinkBox for work that DCHA staff said the firm did not do. The audit says ThinkBox provided justification for the work but could provide no tangible evidence that they actually completed it.
The biggest chunk of overpayment, to the tune of $1.3 million, according to the audit, was due to ThinkBox using the wrong formula to calculate its fees. ThinkBox co-founder Paul Orentas and director Christopher Stennett told Cooper that DCHA’s then-CFO approved their method of fee calculation. But the auditor said that approval was invalid because it did not follow the terms spelled out in the contract.
Adding another ripple to the potential issues, but left unsaid in the audit, is the relationship between a ThinkBox executive and DCHA. Stennett, ThinkBox’s current “director of building better solutions,” was previously DCHA’s director of development and modernization and the CEO of the Construction Services Administration, a subsidiary of DCHA that is responsible for the Energy Capital Improvements Program.
As a DCHA employee, Stennett oversaw ECIP until he left in 2008, according to the agency. It is unclear when Stennett joined ThinkBox. He did not reply to an email seeking comment.
ThinkBox co-founder Daron Coates originally agreed to speak with City Paper about the audit’s findings, saying in an email he was “relieved to be able to share our side of the story.” Coates later said ThinkBox could not provide information “due to confidentiality restrictions” in the contract and specifically declined to answer questions about Stennett’s employment. Instead, he provided this statement:
“ThinkBox denies the assertions in the review and is working through the dispute resolution process as required by the Contract. ThinkBox has never been accused of any problems in its 25+ year history and is confident that all assertions will be resolved in ThinkBox’s favor. ThinkBox has supported the residents of DCHA for over 20 years and has facilitated over $100M for critical energy infrastructure, green workforce development, lower climate emissions and opportunities for diverse contractors.
“ThinkBox also supported the Authority in being recognized by the Department of Energy as one of the 2022 Goal Achievers, lowering it’s [sic] energy costs by more than 20% in 10 years or less. ThinkBox takes its contractual obligations seriously and intends to vigorously defend itself and enforce its rights.”
All told, the audit says ThinkBox overcharged DCHA by about $2.1 million and recommends that the agency cancel the contract and recoup those funds. The internal auditor also notes that ThinkBox believes DCHA owes the firm $4.4 million.
Lewis says DCHA is in the process of hiring an “external accounting firm to review all invoices and advise us of any payments outstanding to either party.” She says DCHA canceled the contract with ThinkBox on Oct. 28 and will now self-manage the remaining ECIP funds with the help of engineering consultants and construction contractors.