A government-funded organization that was created to provide housing for low-income familes in the Fourth Ward failed to complete even one affordable home, according to a compliance audit released today by City Controller Sylvia R. Garcia. The audit revealed that Houston Renaissance, Inc. (HRI), orginally charged with building 350 homes, build nothing and demonstrated a severe lack of accountability and evidence of financial mismanagement throughout the two-year period in which the organization used City taxpayer dollars.

According to the Controller, the findings in the report, prepared by the auditing firm of Deloitte and Touche, provide a textbook example of why independent audits are necessary. "The HRI audit reveals the worst sort of misuse of taxpayers' dollars," she said. "This whole episode makes it obvious that open and honest government can only occur with independent oversight."

Auditors found several areas of non-compliance, including:

• Failure to complete even a single affordable home
• Potential conflicts of interest involving up to three board members. For instance, payments for insurance, legal services, consulting and real estate services of nearly half a million dollars were made to various HRI board members and their companies.
• Failure to file quarterly reports with the City's Director of Housing as mandated by the contract. No reports were provided for October, 1997 and January, April and July 1998 as required by the contract.
• Annual audited financial statements not completed in a timely fashion. For example, the December 31, 1996 and 1997 financial statements were not completed until June 30, 1998.

The State Attorney General's Office has been actively investigating HRI, with the assistance and cooperation of the City Controller. The Controller's contract compliance audit will be referred to Attorney General Cornyn and to the City of Houston's Inspector General and Legal Department.

HRI was a private, non-profit corporation formed in 1995. It contracted with the City of Houston in August, 1997 in order to develop affordable housing in the Fourth Ward. The City gave $3.4 million in taxpayer funds to subsidize 350 units of low-income housint. Later, City Council approved reducing this commitment by 200 units. HRI also spent several million dollars in loans provided by the Houston Housing Finance Corporation (HHFC), q quasi-public City entity.

Although HRI acquired some property during its existence, not a single unit of housing was ever built. In mid-1999, HRI was dismantled and its properties turned over to HHFC for disposal.

Based on the findings of the HRI audit, the City Controller will begin an audit of HHFC regarding its activities associated with the Fourth Ward redevelopment project.