Commerce Committee recommends continuing Department of Housing after audit finds inconsistent grantee oversight, lacking performance measures

The Arizona House Commerce Committee voted to continue the Arizona Department of Housing with revisions after an Auditor General sunset review found gaps in grantee monitoring, incomplete documentation for payments and a lack of systematic performance measurement across housing programs.

Auditor General staffer Cassie Deacoe told the committee ADOH “failed to provide sufficient oversight for the projects we reviewed, including not ensuring grantees used monies to provide safe and sanitary housing or needed services for individuals experiencing or at risk of homelessness.” Auditor General Mark Owen (presenting the sunset factor review) said the department committed roughly $1.26 billion in federal and state monies and tax credits in fiscal 2023 but lacked a documented performance‑management system to measure outcomes across programs.

Key findings: The Auditor General’s office reported four main oversight shortfalls in its review of selected projects: required site inspections were missing for multiple projects; 22 of 29 grantee payment requests (more than $8.1 million) were approved without adequate supporting documentation; some grantees failed to submit required reports and the department did not pursue enforcement; and annual risk assessments were not conducted for many special‑needs projects.

The audit included a case example: Old Concho Community Assistance Center, a grantee serving more than 80 people, which was the subject of a complaint alleging misuse of federal and state funds and unsafe housing conditions. The department’s monitoring review found health and safety issues, a $2,000 loan payment to an executive staff member and other concerns; the department had not conducted the grantee’s required annual monitoring review since 2019 despite paying nearly $1.9 million from 2021–2023.

Department response and corrective actions: Joan Service, director of the Arizona Department of Housing, said the department accepts the majority of the recommendations and has begun implementing changes, including developing measurable performance goals, improving grantee monitoring practices and strengthening internal controls. Service said the agency has revised its wire transfer procedures after a June 2023 incident in which $2,000,000 wired for a grant was diverted to a fraudulent account and later recovered; she said the recovered amount was reduced by an insurance deductible of $25,100 that the nonprofit partner absorbed.

On manufactured housing, the Auditor General recommended the department ensure manufactured‑home complaints are assigned to licensees within 120 days as federal regulations require; the department said some delays resulted where consumers and licensees were working together on a resolution and asserted it is meeting federal requirements. The Auditor General recommended the department either meet the 120‑day assignment requirement or work with HUD to document acceptable exceptions; the department disagreed it would implement that recommendation.

Committee action and votes: After questioning and testimony from auditors, the department and housing partners, the committee moved that ADOH be continued with revisions. The motion passed by roll call: 10 Aye, 0 Nay, 0 Present, 0 Absent.

What’s next: The Auditor General will follow up on the department’s progress on implementing recommendations in March 2025. The committee’s recommendation to continue the agency with revisions will be transmitted to the Legislature for further consideration.

Quotes in this article are taken from Auditor General staff and agency testimony during the Commerce Committee hearing recorded in the committee transcript.