THE MISSISSIPPI LEGISLATURE
The Joint Committee on
Performance Evaluation and Expenditure Review
Report # 351
A Follow-Up Review of the
Mississippi Home Corporation
December 30, 1996
Introduction
In response to a legislative request, PEER conducted this review of the Mississippi Home Corporation (MHC). The first purpose of the project was to follow up on PEER's previous review of MHC (A Performance Audit of the Mississippi Home Corporation, issued April 12, 1994). Findings and recommendations of PEER's 1994 performance audit primarily focused on MHC's lack of adequate policies and procedures governing board members' travel, personal services contracts, and board members' compliance with state conflict of interest statutes.
The 1994 performance audit also recommended that MHC comply with state fiscal, personnel, budgeting, and purchasing controls. As a follow-up, PEER's current review examines in greater detail the applicability of state oversight controls to MHC operations.
Finally, this review also examines the degree to which state general funds support MHC programs.
Overview
Follow-up on 1994 Findings and Recommendations
Exhibit A, page viii, describes actions taken on recommendations made in PEER's 1994 performance audit of MHC.
Concerning conflicts of interest, PEER recommended in 1994 that:
In following up, PEER found that MHC does notinform board members in writing as to provisions of the state conflict of interest law, nor do MHC minutes record whether or how potential conflicts mentioned in board meetings have been resolved. The Legislature has not repealed MHC's conflict of interest statute.
Concerning board member travel, PEER recommended in 1994 that MHC adopt a comprehensive board member travel policy. MHC adopted such a policy at its September 1996 board meeting, approximately two and a half years after PEER's recommendation.
Concerning personal services contracts, PEER recommended in 1994 that MHC adopt comprehensive policies and procedures for contracting, with specific procedures for requesting proposals. As of October 1996, MHC had not implemented PEER's recommendation to adopt contracting policies and procedures and, as a consequence, its implementation of sound contracting practices has been inconsistent. For example, while MHC has competitively bid some personal services contracts (e.g., trustee, bond counsel, auditor, financial advisor), it has not used a competitive process to select other contractors (e.g., management consultant, general counsel, issuer counsel). PEER also recommended in 1994 that the Legislature require MHC to comply with state fiscal, personnel, budgeting, and purchasing regulations. Since then, the Legislature has not amended state laws addressing these oversight controls to include MHC.
Applicability of State Oversight Controls to MHC
In further exploration of the issue of applicability of state oversight controls to MHC and in response to a legislative request, PEER developed a list of typical oversight controls to determine which applied to MHC. Controls applying to MHC include a legislatively imposed ceiling on MHC bonded indebtedness, gubernatorial appointment and Senate confirmation of MHC board members, financial oversight by the State Auditor, and general oversight by a legislative committee. MHC is also subject to state laws governing ethics, lobbying reform, open meetings, and open records.
Because of the unique description afforded MHC by statute ("public body corporate and politic, separate and apart from the state" and "governmental instrumentality"), it is not clear whether other oversight controls which normally apply to "state agencies" also apply to MHC. As a result of this lack of clarity, many oversight bodies do not in fact currently exercise oversight control over MHC's operations. MHC does not file budget requests with the Legislature nor does the Legislature directly appropriate funds to MHC. The State Treasurer does not maintain MHC operating funds nor issue state warrants for MHC expenditures. Further, neither the State Personnel Board, the Department of Finance and Administration, nor the Department of Information and Technology Services imposes fiscal and operational controls on MHC.
While MHC claims to comply voluntarily with some state oversight controls, this compliance is discretionary on the part of current MHC management and there is no assurance that MHC uniformly adheres to these controls. Legally requiring that MHC comply with state fiscal and operational controls would enhance MHC's accountability and could help to ensure that the corporation maximizes the dollars available to offer the opportunity of a safe, decent, and affordable home to every Mississippian.
State General Fund Support of MHC While MHC receives no state appropriations for its operations, a total of $1.5 million in state general funds supported MHC-administered programs during fiscal years 1994 through 1996. The Legislature appropriated these funds to the Treasury Department for payment of debt service on state general obligation bonds creating the Mississippi Affordable Housing Development Fund. Over the life of these bonds, debt service will total $13.2 million.
Recommendations
Conflict of Interest
1. The Legislature should repeal MISS. CODE ANN. Section 43-33-751, MHC's conflict of interest provision, because it is unnecessary and misleading due to existing conflict of interest laws (§25-4-105[2]). MHC's conflict of interest provision may also be unconstitutional because it conflicts with § 109 of the MISSISSIPPI CONSTITUTION.
2. MHC's General Counsel should clearly communicate the provisions of the state conflict of interest laws, in writing, to all MHC board members and periodically stress the importance of their compliance with these provisions. MHC should revise the Mississippi Home Corporation Board of Directors Orientation Manual to include the text and an explanation of the state conflict of interest laws. Should MHC's General Counsel believe that the state's conflict of interest laws prevent board members who represent housing-related industries from serving on the board, the General Counsel should seek an opinion from the Attorney General regarding this matter.
3. MHC's General Counsel should document in the board minutes the General Counsel's decision on each possible conflict of interest by a board member, prior to that board member engaging in the questioned conduct.
Personal Services Contracts
4. MHC should develop comprehensive personal services contracting policies and procedures, as recommended by PEER in its 1994 performance audit. MHC should competitively bid all of its personal services contracts, following each of the basic steps of sound contracting identified by PEER on page 17 of this report.
State Oversight Controls
5. The Legislature should amend MISS. CODE ANN. §43-33-702 to make the Mississippi Home Corporation subject to state fiscal and operational controls. (See draft legislation, Appendix D, page 40.)
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