JLAC adds Arizona Department of Housing sunset review and approves special audit of low‑income housing tax credit program

The Joint Legislative Audit Committee on a voice vote approved changes to its 2026–2027 performance audit and sunset review schedule and authorized a special audit of the Arizona Department of Housing that will examine state and federal low‑income housing tax credit (LIHTC) activity in fiscal years 2020 through 2025.

The committee assigned the department’s sunset review to the Office of the Auditor General and approved the special audit after Auditor General Lindsay Perry told members the office has capacity to add the work because state law repeal reduced annual reviews of the Department of Corrections and because her office is already conducting follow‑up on prior housing recommendations.

“The department is subject to the sunset review, and that is due 10/01/2026,” Lindsay Perry, Auditor General, said during the hearing. “We recommend that JLAC assign that review to my office to conduct the department sunset review.”

Why it matters: The Legislature continued the Arizona Department of Housing for two years, creating a sunset deadline less than a year away, and JLAC members said the special audit would help the committee and the public understand how the state credit is being used and whether it is achieving intended housing outcomes.

The special audit request asks the auditor general to analyze policies and procedures the department uses to manage the LIHTC program for fiscal years 2020–2025, to assess the physical outcomes of housing created, and to evaluate market effects. Perry recommended conducting the special audit in conjunction with the sunset review to create efficiencies and to issue both reports by Oct. 1, 2026.

Committee members pressed for clarity about what the audit would cover. Senator Dunn asked whether the auditor general could use existing follow‑up work to accelerate the review; Perry replied that her office is already following up on 17 prior recommendations made to the Department of Housing in October 2024 and that “the majority of those recommendations relate to the 10 sunset factor questions.”

Representatives and senators also debated the scale and pace of the LIHTC program. Representative Stahl Hamilton observed the state program was still in its infancy and noted the Legislature did not provide state LIHTC funding in the most recent budget. Perry and members discussed numbers in the department’s reports: Perry said a Sep. 30, 2025 report showed the state credit assisted with 184 units to date; Perry also summarized federal data included in prior Auditor General work, saying the federal component supported several thousand units nationally with substantial federal dollars.

Representative Gillette, who sponsored the special‑audit request, and other members said they want to understand who receives credits, how projects are monitored post‑award and whether the program’s per‑unit costs are reasonable. During discussion, a committee member cited project unit costs of about $424,000 per unit for some subsidized projects and noted the state program authorizes up to $4,000,000 in state credits per year for up to 10 years.

Actions and timing: The committee approved (1) changes to the 2026–2027 performance audit and sunset review schedule; (2) changes to committee of reference assignments for 2025–2027; and (3) the requested special audit of the Arizona Department of Housing to be conducted by the Office of the Auditor General and, if approved, begun immediately with a target issuance date of Oct. 1, 2026. The schedule and committee‑assignment votes were taken by voice; the special audit authorization was approved by voice vote with no recorded roll call in the hearing transcript.

What the audit will access: As Perry noted, state law authorizes the auditor general to access agency records for sunset reviews and special audits. She told members she anticipates reviewing both public and confidential district or agency records as needed and that the office already has follow‑up material from prior housing audits that it can incorporate.

Next steps: With JLAC’s approval, the auditor general said her office could begin work “this month” and would integrate the special audit into the department’s sunset review schedule. The report timeline the auditor proposed is issuance of both the special audit and the sunset review report by Oct. 1, 2026.

Ending: Committee members who spoke in support said the audit will provide lawmakers and the public better information about program performance and financial controls. Lindsay Perry told the committee her office would “start that audit this week” if directed and would work to limit schedule impacts on other audits by under‑promising and, where feasible, delivering earlier than the anticipated windows.