DOH found to have poor financial and accounting practices by APA

Yesterday afternoon, the State’s Auditors of Public Accounts (APA) released a report on the state’s Department of Housing (DOH), evaluating the agency’s performance from fiscal years 2021 through 2023. The auditors found several areas of concern, including a lack of proper monitoring and contractual controls over several programs, a total absence of complaint logging, and numerous accounting errors.

“Our audit identified internal control deficiencies; instances of noncompliance with laws, regulations, or policies; and a need for improvement in practices and procedures that warrant management’s attention,” wrote the auditors.

The auditors found numerous programs administered by DOH, such as Crumbling Foundations, Small Cities Community Development Block Grant, Home Investment Partnerships, Affordable Housing and Housing Trust Fund programs to have all been mismanaged by DOH officials to various degrees. 

For the DOH’s Crumbling Foundations program, which is meant to assist owners of residential buildings with the repair or replacement of faulty foundations, auditors found the department having failed to file required reports evaluating the efficiency of the state’s captive insurance company. Per the report, DOH transferred over $88 million to this company during the audited period.

The auditors also evaluated five projects associated with DOH’s Small Cities Community Development Block Grant, three Home Investment Partnerships, 12 Affordable Housing and two Trust Fund projects, which altogether accounted for $32.57 million in DOH expenditure throughout the auditing period. The auditors also evaluated four Homeless Prevention and Response Fund payments to the tune of $7.6 million.

The auditors found DOH to have failed in completing a laundry list of tasks throughout its administration of these programs; they were frequently found to have failed to perform onsite projects monitoring visits, issue projects’ certificates of completion, obtain proper progress or monitoring reports, or perform financial close outs. For the Homeless Prevention payments, DOH officials failed to procure necessary reports from contractors, paid $4,520,000 to a contractor before they lived up to their end of the contract, and paid another $1,000,000 to a contractor for a project that fell through, without receiving any refund.

“There is increased risk that the department made improper payments and funded ineligible project costs,” read the report. “In addition, the department may not identify excess disbursements and ensure their prompt return.”

Per the report, these reporting, monitoring and financial discrepancies can be attributed to a reduction in staffing from 2018-2023, as well as a lack of policy stipulating deadlines for necessary monitoring and reporting actions. DOH told the auditors that it is currently hiring additional staff to rectify the issue.

Another program in which the DOH was found to have questionable control over its finances was the Rental Assistance Program, which helps to subsidize housing for low-income families. The program works by directly paying participating landlords a portion of the rent and utility bills of low-income families. The auditors found the DOH to have failed to verify the validity of landlords’ claims, did not ask for refunds after paying out excess funds, did not verify the accuracy of landlords’ fraud claims and hasn’t updated its utility allowance schedule since 2012.

“DOH has reduced accountability over program funds,” read the report. “There is increased risk that the department’s utility payments do not reflect current rates.”

DOH replied that it agreed “with this finding in part,” and asserted that its failure to update its allowance schedule was a conscious decision, “as increasing the utility allowance would have the effect of decreasing the allowable rent that a tenant utilizes.”

Another administrative deficiency uncovered by the audit was the fact that DOH maintains no records of its complaints, nor does it keep any documentation relating to complaint investigation. This was a repeat finding, having been previously reported in the DOH’s 2018-2020 audit. DOH said it would “work closely with upper management to establish a policy and procedures and put a system in place to track and monitor internal and external complaints.”

Additional DOH accounting and financial errors found in the report include the DOH’s failure to properly account for and return unused bond allocations, latency in reporting bank deposits, inaccurate financial reports, and several calculation and accounting errors made in regard to loan interest and loan balances. The report also noted that the DOH’s Predevelopment Loan Program does not contain a deadline for cost certifications, that the DOH does not maintain a records retention schedule, fails to complete employee performance evaluations, and has inadequate controls over employee compensatory time and asset management.