The Chattanooga Housing Authority paid its 2008 expenses through inappropriate borrowings from restricted accounts and had no cash to meet upcoming obligations, according to a CPA’s report.

The report, by John Coxwell, a certified public accountant with Hazlett, Lewis & Bieter, was released days after CHA announced a $4.5 million shortfall and laid off 30 employees.

CHA officials borrowed $1.2 million from a Fannie Mae Express Term Loan that was intended for a Mayfair on Market Development project. CHA used the money for general operations. They also borrowed $166,000 from Holtzclaw, LLC and $96,000 from Greenwood Terrace, LLC which were repaid on May 2, 2008, according to records.

The total of outstanding unauthorized non-federal borrowing is $1.36 million according to Mr. Coxwell.

CHA’s financial downfall stems from its decision in 2001 to transition from a traditional public housing agency to a streamlined agency that was under private management, according to a draft report presented by CHA’s Chief Operating Officer Elizabeth A. McCright to CHA board members earlier this week.

Three years later, CHA didn’t get the results it expected and the housing agency received a substandard rating of 13 out of 30 in its Physical Public Housing Assessment System Inspection score. CHA hired more staff and used more resources to address the deficiencies. The additional staff was supposed to be temporary, but no significant cutbacks were addressed until the reduction in force that occurred when CHA officials laid off 24 people in February.

See tomorrow’s Chattanooga Times Free Press for full coverage.

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