By JACOB GERSHMAN, WSJ
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President Clinton nominated Andrew Cuomo to head HUD in 1996.
During the gubernatorial debate on Monday, Mr. Cuomo touted his four-year record at HUD, saying he "shrunk government" and promising to do the same in Albany if elected governor. "The question in this race is who can actually do it. Who can get it done," he said.
While the number of full-time employees at HUD declined under his watch, Mr. Cuomo also added hundreds of high-paid positions as part of his "Community Builders" program, which came under withering criticism from HUD's veteran field staffs, federal auditors, and Republican lawmakers in Washington.
"The concept was not unreasonable. But it was very poorly implemented and the consequences were pretty near disastrous," said Robert Paquin, a former regional director of Community Planning and Development in HUD's Boston office.
The idea behind the program was to split enforcement and customer relations into separate ranks of employees. Between 1997 and 1999, Mr. Cuomo recruited nearly 800 Community Builders, including hundreds of high-paid "fellows" who underwent training sessions at Harvard.
The Community Builders acted as liaisons to city officials and community groups and reported directly to HUD's headquarters in Washington.
"What the Peace Corps is to global development, what Americorps is to local empowerment, we hope Community Builders will be to urban renewal," Mr. Cuomo said when he announced the initiative.
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In 1999, the program was the subject of a scathing audit report by the HUD Inspector General's office, which recommended that it be terminated.
Congress eliminated its funding that year, over the objections of several Democratic lawmakers, including Sen. John Kerry and now-Vice President Joe Biden.
The audit report said the hiring of the Community Builders skirted federal protocols, siphoned funds away from grant-monitoring activities and caused "significant morale problems" among some career civil servants, who bristled at the higher pay grades awarded to the new employees.
"HUD chose an overly expensive and controversial solution that exacerbated any existing problem," the audit said.
Mr. Cuomo and former aides at HUD said the allegations were unfounded, and fiercely defended the program. "The attacks on the Community Builders program were partisan in nature and wholly without merit," Howard Glaser, deputy general counsel under Mr. Cuomo at HUD, said Friday.
Mr. Glaser pointed to positive reviews of the program by consulting firms hired by HUD. Officials at the Inspector General's office said the other reviews did not contradict the office's claims, and noted that they relied on case studies pre-selected by HUD's senior management.
The Inspector General's audit report also claimed that senior officials under Mr. Cuomo sought to impede investigators examining the program and took the unusual step of asking the Inspector General's office for the names of HUD employees who spoke with auditors.
Several HUD employees "feared reprisal" and urged investigators to keep their communications confidential, according to the audit report.
Mr. Paquin, who was transferred to a lower-level position in 1999, returned to his old job years later after filing a complaint with the U.S. Office of Special Counsel alleging that his transfer was prompted by testimony he gave to the U.S. Government Accountability Office, which conducted a separate review of HUD's overall monitoring activities.
The Inspector General's report said HUD could not adequately justify the number of Community Builders hired nor their salaries, which in many cases were tens of thousands of dollars higher than the pay given to veteran civil servants who monitored HUD's grantees.
"HUD allocated a large amount of its resources to outreach and customer relations in the form of higher grades, travel and training funding, and personnel," the report stated.
More than half of the Community Builders interviewed by the auditors said they spent most of their time on public-relations activities.
"Considering that 228 Community Builders came from HUD's monitoring side, there is an appearance HUD favors the outreach and public relations over the monitoring and compliance function," the report said.
The Community Builders interviewed by the auditors lacked knowledge of HUD's grant programs, the report said, and in some cases improperly interfered with housing transactions between local officials and nonprofit groups, resulting in the loss of millions of taxpayer dollars.
HUD, in its response to the 1999 audit, said the report was "misleading" and denied that the agency had violated hiring protocol.
It noted that the program was widely praised by local officials and others interviewed by Ernst & Young, which was under contract with HUD to conduct an interim review.
The audit report faulted HUD for using the Community Builders to carry out a public-relations campaign on behalf of HUD when Congress threatened to slash the agency's budget. Senior officials directed the employees to reach out to local media and "arrange press conferences, conference calls, and telephone interviews," the audit said.
The Inspector General's report also said Mr. Cuomo's staff took unusual steps to hinder its review, stating that HUD senior management "told employees not to talk to us during our planning stage" and "circulated 'questions and answers' for employees to use when we interviewed them."
Investigators said senior HUD officials also asked the Inspector General's office to identify the HUD employees interviewed by auditors.
"When the request came in, everyone wondered why the department needed it. Why do they need to know who spoke with the auditors?" said a person who was with the Inspector General's office at the time.
Saul Ramirez, a deputy secretary under Mr. Cuomo, said the request for the names was "standard procedure" and intended to help headquarters organize the schedules of field staffers involved in the auditing process.
Write to Jacob Gershman at jacob.gershman@wsj.com
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