With one possible exception, MHC records do not show that board members have received improper benefits from the corporation or have been involved in activities which conflict with their service on the corporation's board. One board member contracted with the Mississippi Home Corporation for a total of $2,800 to run advertisements in a monthly nonprofit newsletter.
During the review, PEER found that MHC's conflict of interest statute creates the impression, if taken out of context with general ethics statutes and the Mississippi Constitution, that board members can enter into contracts with the state.
PEER found no evidence that board members traveled for personal benefit, although two board trips could potentially conflict with service on the board. Board policies do not address the potential for conflict created when board members travel to conferences which are related to industries in which they work.
During its review of specific travel expenditures, PEER staff found that the MHC board had not set comprehensive travel policies to help ensure internal controls for the agency during a period of rising travel costs. Travel increased 73% from $37,800 in fiscal year 1991 to $65,351 in fiscal year 1993. MHC's board has, in effect, conveyed to MHC staff a lack of concern for good internal control of travel expenditures, as shown in the following examples:
- The board has not adopted policies for board travel even though it adopted specific travel procedures for its employees.
- The board does not authorize travel for individual board members. Instead, board members decide individually whether to travel for such purposes as out-of-state housing conferences.
- The board has not enforced its January 21, 1993, policy of reporting on a quarterly basis to the full board all trips taken by board members during the quarter.
Because MHC acted in accordance with enabling legislation for establishing a wide range of housing initiatives rather than concentrating solely on loan programs, MHC's expenditures will not directly relate to numbers of loans generated. Only six of fifteen MHC employees engage in servicing, production, and monitoring of loan and financing incentive programs. MHC's remaining nine employees are involved in management, accounting, or capacity building. Capacity building consists of technical assistance and training of nonprofit housing organizations, research and development of new programs, grant writing, promotion of MHC programs, and staffing a hotline for individuals with housing problems.
MHC used objective criteria in August 1993 to select an investment banker for a proposed original mortgage bond issue. However, the board's lack of procedures for the request for proposal process contributed to dissension among the board, executive director, and outside advisors. MHC currently follows different policies for various types of personal services regarding such items as requests for proposals, requirement of written contracts, and contract monitoring. The MHC board should have comprehensive, consistent policies and procedures for procurement and monitoring of all personal and professional services.
Recommendations
Conflict of Interest
1. MHC's legal counsel should take immediate steps to insure that each board member fully understands the conflict of interest laws found in the Mississippi Code and the Mississippi Constitution. In particular, each board member should be made aware that the duty to avoid conflicts of interest is a continuing obligation, not a one-time responsibility. MHC's legal counsel should also notify each new board member in writing and make announcements concerning possible conflicts on a regular basis.
2. MHC board members should take a greater degree of personal responsibility for avoiding conflicts of interest in the future.
3. MHC should document in its minutes each instance of potential conflict of interest and the board's or legal counsel's resolution of the matter, even when the situation is not deemed to be a conflict. If the board or legal counsel determines that a member has a conflict, the board should require the member to take steps to remove the conflict.
4. Since the MHC conflict of interest statute (CODE Section 43-33-751) duplicates much of the general statutory language of the general ethics laws (CODE Section 25-4-105), the Legislature should consider repealing MHC's ethics statute. General ethical issues as they arise would be adequately addressed by CODE Section 25-4-105 or Section 109 of the MISSISSIPPI CONSTITUTION.
Travel
5. The MHC Board should adopt a comprehensive travel policy to ensure adequate internal control over the board's travel expenses. The board should:
- set board policies similar to travel policies for MHC employees, including specific procedures such as timely filing of travel expense reports and rules for appropriate car rental reimbursement;
- approve board travel in advance; and,
- document the purpose and benefit of board travel.
Personal and Professional Services
6. The MHC Board should adopt consistent comprehensive policies and procedures for personal services, including bond issuance and professional and consulting services. The board may choose to consider more stringent procedures, requiring board approval, for contracts over a certain dollar amount. (Comprehensive policies for services contracting should include the elements outlined on pages 38 through 40 of the report.) These formal guidelines are intended to assure that the contracting entity will receive a service that will be in the best interest of the state at a cost that is fair and equitable.
7. The MHC Board should adopt specific procedures for requesting proposals, expecially for bond issues, including the following:
- methods of considering price and quality in proposals;
- minimum number of proposals selected;
- characteristics of acceptable firms, including any limitations placed on firms such as geographical location;
- how exceptions to the proposal process should be handled by staff and the board;
- who should be in charge of the proposal solicitation process (i.e., executive director, financial advisor, general counsel);
- whether the RFP process should be open and advertised; and,
- how long the submission process should remain open.
8. The Legislature should consider passing legislation requiring MHC to comply with state fiscal, personnel, budgeting, and purchasing regulations established for state agencies in the Mississippi Code.