Land bank chair questions ‘credibility’ of demo audit

Christine Ferretti
The Detroit News

Detroit — The chair of the city’s land bank is attacking the “credibility” of a special report issued by Detroit’s auditor general that slammed the city’s federally funded demolition activities.

Detroit Land Bank Authority Chairwoman Erica Ward Gerson said Monday that she and others were “caught off-guard” by concerns raised in the report publicly released March 22 by Auditor General Mark Lockridge because it didn’t provide land bank or Detroit Building Authority officials an opportunity to comment ahead of its release.

Gerson, in the nearly 16-page response, contends Lockridge’s office failed to interview a single employee of the land bank, its attorneys or board members, when preparing the report that questioned practices and rising administrative costs as well as highlighted debris and hazardous conditions at certain sites.

The report, she wrote, was “not just unusual,” but it failed to comply with government auditing standards, “severely undermining its accuracy, its conclusions, and ultimately, its credibility.”

The auditor, she said, failed to provide a draft of the findings for review and comment or set criteria for review. As a result, many portions of the audit lack context and others evince misunderstandings of the program’s policies and procedures — and “demonstrate a lack of understanding as to how the demolition program operates.”

“The report, in short, criticizes DBA and DLBA for missing a target it never defines,” reads the response, adding “that is not just unprofessional, it is unfair.”

Lockridge, who could not be immediately reached Monday for comment, has said the purpose of the special report was to “highlight concerns” tied to demolition activities that he felt were timely. The report, he wrote, is based on ongoing audit work of the city’s demolition activities requested by Detroit’s City Council in fall 2015.

The analysis — covering Jan. 1, 2014, through Dec. 31, 2016 — highlighted concerns tied to the city’s federal demolition program, which is under scrutiny in a federal criminal probe and is also the subject of state and local reviews after questions were raised over bidding practices and soaring costs.

Mayor Mike Duggan and the land bank, which oversees the demolition program with the city’s building authority, have defended the program and pledged cooperation in all investigations.

Lockridge, in the report, flagged the land bank’s recent dissolution of an approval committee in response to a lawsuit filed against it alleging a violation of the Open Meetings Act.

The committee was created as one of several measures to tighten controls after the temporary suspension of the city’s Hardest Hit Fund demolitions in August.

The new policies also called for pre-contract reviews in an effort to address concerns raised in an independent audit commissioned by the land bank last summer, which revealed excessive costs were hidden by spreading them over hundreds of properties to appear they didn’t exceed limits set by the state. The audit turned up inadequate record keeping, bid mistakes and about $1 million improperly billed to the state.

The three-member committee, composed of a representative from the land bank, the DBA and office of Detroit’s chief financial officer, was to meet and approve or reject the inclusion of properties with costs of $35,000 or more, and with a total price falling outside a reasonable per-property range.

Gerson on Monday wrote Lockridge’s audit suggestion that “the creation — and subsequent dissolution — was somehow improper or inappropriate, is not correct.”

The committee, she said, was one of several voluntary measures adopted by the land bank to remedy past oversight failures. It operated for several months before its procedures were challenged in a March 10 lawsuit filed by activist Robert Davis.

The land bank board, seeking not to have the program or demolitions “clouded by legal uncertainty,” voted several days later to dissolve it and issued a clarified policy regarding the award of contracts, she wrote.

Not acting quickly, Gerson wrote, could have jeopardized federal funding and the city’s ability to promptly demolish homes.

“And that, in turn, would leave standing dangerous, decrepit eyesores that are magnets for criminal activity,” she contends.

The audit also focused on a request soliciting bids for debris removal, open hole completion and site finalization at 19 properties. The sites “present a clear and present danger to the community,” concluded Lockridge’s audit, noting similar conditions elsewhere could “put all the residents of Detroit at risk.”

Gerson on Monday acknowledged a delay in filling the 19 open holes. But she wrote she didn’t regret it. It was tied to a contractor’s violation of the rules, which resulted in a “stop work” order and, ultimately, a separate competitive bid to have the final portion of the work completed, she said.

Detroit-based Rickman Enterprise Group had preliminarily been identified for the project bid last summer and immediately began work in violation of program practices before the final contract was awarded, Gerson wrote.

When the land bank discovered this, it stopped work for all Rickman projects. The company has not been paid for any of the work it performed when it lacked a contract, she said.

“The 19 properties you have identified contain open holes due to an unfortunate (but contained) series of events — namely, Rickman’s decision to proceed on demolition without a contract,” she wrote. “We are not aware of any similar issues on other properties.”

Rickman’s CEO was not immediately available Monday for comment.

Gerson further addressed references in Lockridge’s report to a pending lawsuit with another program contractor, claims of “weak financial controls,” inadequate oversight and escalating administrative costs. Each concern, she wrote, “is misplaced.”

Administrative costs, she wrote, have risen but are based on the expansion of the land bank’s programming.

In January 2014, the land bank had five full-time employees and 700 properties, and hadn’t conducted any demolitions. Today, it has 131 full-time workers and oversees a portfolio of 99,243 properties, she wrote.

Since spring 2014, Detroit has taken down about 11,000 blighted houses through its demolition efforts.