BRADENTON -- The Bradenton Housing Authority is freezing salaries and bonuses as it faces a deficit of more than $400,000, at the same time it is under the scrutiny of federal investigators.
The federal investigation led to the ouster of executive director Wenston DeSue and projects manager Stephany West -- but not before DeSue got a 10 percent annual bonus and took his entire annual raise in a lump sum payment, factors that led to the impending deficit, the Bradenton Herald has learned.
The authority's board of commissioners met Thursday morning and unanimously approved a revision to the current budget, putting a freeze on all employee bonuses, raises and cashing out of sick time. The changes prepared by acting Executive Director Darcy Branch will also leave DeSue's and West's jobs vacant.
"As acting executive interim director, this budget revision will help move the housing authority forward to a better fiscal standing for this year," Branch said. "The remaining employees of the housing authority are doing their best to serve the residents and help make their lives better."
Branch said she has not had any more communication with federal investigators about potential action or charges from the housing authority investigation.
Housing authority commissioners at last week's meeting were Chairman Napoleon Mills, Charles Grace, Rigo Rivera and Lois Gerber. Board member Jahna Leinhauser was not in attendance, citing work conflicts. Rivera directed all questions to Branch, while the remaining board members did not return the Herald's calls seeking comment. DeSue and West also did not return calls for comment.
The changes made will remain in effect through
next fiscal year as well, and will reflect a savings of more than $525,000 for the housing authority's annual operating costs, according to a budget revision document Branch provided to the board. The estimated operating budget for this fiscal year ending March 31, 2014, is nearly $1.9 million.
Housing authority documents reveal that the cause of the deficit were major expenditures approved by DeSue during the first part of the fiscal year including bonuses, sick-time cash-out for all employees and cost-of-living raises provided to all employees. DeSue took his raise in one lump sum. Any employee who received a bonus was paid in June, while up to 160 hours of sick time could be cashed out twice a year and at any time in the year.
Federal investigators seized records showing the total amount of sick time employees cashed out. Investigators also took all payroll records.
Even with the changes approved Thursday, the housing authority is still running toward a deficit of more than $302,000. Branch said she and her staff will try to cut costs wherever possible without affecting operations.
DeSue restructured benefits
The housing authority's benefits package was updated during DeSue's tenure -- a time during the Great Recession when many employees across the country saw fewer benefits and even pay cuts or layoffs.
The housing authority's board of commissioners must approve revisions to bonuses and the personnel manual. Revisions to the manual were drafted by DeSue with no known guidance from HUD, the board or an attorney, according to Branch.
As part of the housing authority's bonus policy that was updated Feb. 20, the executive director is allowed to determine the percentage for bonus amounts as long as it's between zero and 10 percent of the base salary, and to pay those bonuses to employees in the first paycheck in June. All full-time employees who worked at least one full year are eligible for bonuses, according to the policy. DeSue recommended 10-percent bonuses to all employees this year. DeSue himself received a $17,000-plus bonus.
According to e-mail records obtained by the Herald, then-board commissioner Scott Rudacille raised questions in 2012 when DeSue wanted to provide performance-based bonuses. Board members were not presented with any draft bonus policy to approve at a July 2012 meeting, but instead received a resolution to approve a bonus policy.
The bonus policy was pitched as a performance-based bonus structure required by HUD, DeSue wrote in the e-mails. But Branch said that to her knowledge, board members were not presented with any HUD documentation discussing bonuses.
Rudacille, a Bradenton attorney, also asked via e-mail about the legality of the bonuses and requested DeSue to produce documentation from HUD explaining that the bonuses were OK to give out for a quasi-governmental agency in Florida. DeSue assured Rudacille in a response the day before the July 18, 2012, meeting that the bonus structure was OK.
But the board decided to table the request until the September meeting, waiting for more research and documentation from HUD, and also recommended keeping the tiered bonus structure in place, e-mails show.
DeSue then issued a memo Sept. 12, 2012, explaining that HUD and the authority's New Jersey-based auditor Fallon & Larsen recommended that the authority should have performance-based bonuses instead of its existing discretionary tiered structure.
Rudacille resigned in January, and the housing authority board in February approved the new bonus policy, which still lacks performance language, housing authority records show.
Rudacille, reached by the Herald, declined to comment.
Bonuses, sick time added up
The annual bonuses approved by the Bradenton board are in addition to longevity bonuses, paying between $100 to up to a month's pay depending on length of service. Longevity bonuses now are also frozen, Branch said. DeSue and West would have been eligible for one week of extra pay, according to the policy.
A pro-rated awards clause shows that if a housing authority employee works five or more years and decides to take an extended leave for the year, the employee will receive a pro-rated bonus. The new bonus policy did not define extended leave, though the previous policy defined extended leave as maternity or sick time. All full-time employees are expected to work four 10-hour days from 7 a.m. to 5 p.m. each week, according to the authority's personnel manual.
Employees who voluntarily resign or retire also receive pro-rated bonus pay, according to the policy.
The housing authority's sick time policy was updated in 2010. Full-time permanent employees get 15 hours of sick leave each month and are allowed to roll over up to 480 hours of sick time to the following year; workers still had to have at least 40 hours of sick time available after the withdrawal. Within that, employees can cash out between 40 hours and 160 hours of sick time twice a calendar year, according to the personnel manual.
Based on DeSue's salary, he could have cashed out between $7,127.50 and $28,510 at a time. A budget shortfall would not allow such cash withdrawals, according to the personnel manual.
Additionally, a lump sum of unused sick leave can be paid out to employees who either resigned, died or were fired, according to the manual.
The authority also allowed employees to transfer vacation hours to be used for sick leave draws. Employees would also receive a bonus vacation day for every five years of service.
DeSue, who started as executive director in 2006 without any housing authority experience, made $171,060 before he was fired, while West made $68,349, according to authority's documents.
DeSue's most recent employment contract, approved Feb. 15, 2012, gave him a seven-year deal that started his base pay at $162,926.40, with a 3 percent annual raise starting Jan. 1, 2013. That was the minimum amount for his raises, according to the contract, regardless of what his annual evaluation reflected.
An additional 3 percent of DeSue's salary would be placed in a deferred compensation program, providing him with a $50,000 whole life insurance policy, a take-home car and health insurance, according to his contract.
Terminating DeSue with cause, as the authority did, should negate any further benefits from the contract. If DeSue were to have resigned while in good standing or died, DeSue or his heirs would receive three years' worth of severance, according to the contract.
HUD: DeSue salary excessive
In 2011, HUD found through a national audit that the highest-paid housing authority managers were receiving "a significant share of their compensation through bonuses," according to a HUD briefing. HUD reached out to public housing authorities in August 2011 requesting the compensation of the top five compensated employees for the audit.
HUD found that a federal salary cap created by Congress left a loophole that allowed excessive pay through bonuses, so it decided to form its own cap to prevent the excessive pay, according to the briefing. HUD stated that it would work with Congress to create a permanent fix, but enacted a cap in fiscal 2013 through executive action, to remain indefinitely. The congressional cap only counted salary and not bonuses, leaving wiggle room for executives to pad their salary.
HUD's salary cap is based on the number of housing units an authority manages. It also includes a cost-of-living adjustment based on the housing authority's geographic location and average salaries in the region. Bradenton Housing Authority serves fewer than 250 units, and the executive director's salary would fall in a range of $74,628 to $88,349, according to the HUD briefing.
DeSue's base salary was more than triple the median salary, which included bonuses, of the highest-paid housing authority employees in an eight-state region that includes Florida, plus Puerto Rico and the Virgin Islands. For agencies with fewer than 250 federal public housing units, the median salary was $47,898, according to HUD's 2010 data.
Even the average for the highest-paid executives at the largest agencies in the country averaged less than what DeSue made when he left the housing authority, according to HUD data. The highest paid executives in California, Arizona, Hawaii or Nevada overseeing more than 1,250 HUD units averaged $167,545, according to HUD.
HUD then began requiring more detailed annual disclosures from housing authorities to see what percentage of staff's salaries are federally funded, according to the briefing.
Mayor, council appoint board
The Bradenton Housing Authority commission members are appointed by the mayor and confirmed by the city council.
But Mayor Wayne Poston and Gene Brown, city council liaison for the housing authority, said they had no idea what was going on at the housing authority and were limited in the power they had to act.
"We never had reason to do that. We elected the board and it was our power to do that," said Poston, who also said his schedule did not permit him to attend board meetings and that it was not mandatory for him to do so.
Brown, who was appointed as liaison in January, said he was told it was not in his duties to attend board meetings, but he also had scheduling conflicts that prevented him from attending.
"I didn't know about the meetings. We weren't noticed of those meetings," said Brown.
According to state statute 421.07, a mayor and his governing body can remove housing authority commissioners or board members for inefficiency or neglect or misconduct in office.
-- Herald reporter Janey Tate contributed to this report.