By The Kansas City Star Editorial Board

The Missouri Housing Development Commission should move quickly to toughen conflict-of-interest standards and other policies governing how the agency handles its affairs and spends money.

The commission — which provides low-interest loans to developers, helps find housing for the homeless and aids first-time home buyers — was severely criticized in a recent report by state Auditor Susan Montee.

The audit cited incomplete record-keeping, conflict-of-interest problems, weak rules on handling contracting and purchases, as well as low employee morale, disrespectful supervisors and unfair treatment of workers.

The agency spent $15,000 for alcohol at commission-sponsored conferences in 2006 and 2007, and spent $28,000 on redundant promotional material.

A letter from developer Sam Hamra to then-Gov. Matt Blunt, cited by the audit, highlighted the potential pitfalls inherent in an agency that distributes lucrative housing subsidies. Hamra complained in the letter that even though he had raised campaign money for Blunt, he found it tough to win MHDC approval for projects.

There may be more revelations to come. The audit reported that agency Executive Director Pete Ramsel received $18,000 to pay outside legal fees, and Director of Operations Mary Helen Murphy got $2,545 for the same purpose.

Ramsel told the auditors the money was “relative to an ongoing investigation, the specifics of which we are not at liberty to discuss.”

Ramsel has since revealed that MHDC is being investigated by the FBI.

State Treasure Clint Zweifel, who took over as commission chairman last month, said he has little information about what direction the FBI investigation is taking. But he added that Ramsel has been “questioned more than once.”

Zweifel rightly pledged to quickly strengthen MHDC’s conflict-of-interest policies. Commission members, he said, should fully disclose business relationships and refrain from voting on matters involving those relationships.

The MHDC is governed by a panel that includes Zweifel, Attorney General Chris Koster, Gov. Jay Nixon, Lt. Gov. Peter Kinder and six members appointed by the governor.

Zweifel and Koster are new to the commission. Nixon served on the panel when he was attorney general. Two of the appointed seats are empty, according to the agency’s Website.

That means the governing panel has experienced a substantial degree of turnover, which represents an opportunity to thoroughly rewrite policies and begin changing the culture of what looks like an agency with deeply embedded problems.

Zweifel, as commission chairman, should lead the effort to change the agency and ensure that housing subsidies are wisely spent.