BOSTON — Public housing authorities in Peabody, Beverly and Gloucester could be asked to return to the federal government money used to repair buildings following the May 2006 flood, according to the state auditor.
A report by the state auditor found those three housing authorities received federal disaster funds and insurance money for flood damage when they were only entitled to one of those sources.
Peabody's housing authority, according to the report, received $200,742 in insurance money to which it was not entitled. Beverly received $9,282, and Gloucester got $3,368.
Glenn Briere, a spokesman for State Auditor Joseph DeNucci, said the housing authorities may be asked by the Federal Emergency Management Agency to return federal money equal to the insurance payments.
"There was a duplication of benefits," Briere said. "Housing authorities, through no fault of their own, received the money, but that's prohibited by federal law. They consider that double-dipping."
The state auditor's report said that FEMA should be reimbursed by the state and not the housing authorities.
Housing authorities are separate from city government. So while the Peabody Housing Authority would be on the hook for the most money, Mayor Michael Bonfanti said his city's government would not be tapped for the money, although public housing residents could be affected if they are.
"The money comes out of their pocket," Bonfanti said. "They're located in Peabody, so a Peabody resident may be impacted."
The audit found the Romney administration was to blame for the foul-up. Briere said the Romney administration deposited FEMA money targeted for housing authorities into the state general fund. The state audit was triggered by questions raised by Sen. Marc Pacheco, D-Taunton, over the diversion. The audit report said the money did not go to cities and towns until January 2007, after Romney left office.
"They (housing authorities) should have received the money directly," Briere said.
As they waited for the money, local housing authorities collected from the state Department of Housing and Community Development's insurance company. Collecting on insurance and federal disaster funds violates federal law, the auditor said.
According to the report, a confusing tangle of events led to this situation.
Although the housing authorities were deemed eligible for federal assistance, FEMA ruled in August 2006 that the state and not local housing authorities would receive federal money. It was up to the state to disburse the money.
The report said Romney officials then incorrectly considered the federal money reimbursement for state costs related to the flood and deposited $559,028 of federal money in the state's general fund.
Tom Connelly, executive director of the National Association of Housing and Redevelopment Officials, called the situation "a real mess." But he said he believes there won't be a replay with the Patrick administration.
"We have faith in the current administration that this won't happen again," Connelly said. "And if there's a shortfall, the administration is so supportive of housing authorities that we'll be able to straighten it out."
