Objective

To assess the extent of implementation of the four recommendations included in our initial audit report, Housing Trust Fund Corporation – Internal Controls Over and Maximization of Federal Funding for Various Section 8 Housing Programs and the COVID Rent Relief Program (2022-S-28).

About the Program

HCR is the State’s affordable housing agency, with a mission to build, preserve, and protect affordable housing and increase homeownership throughout the State. HCR comprises several different offices and agencies, including the Housing Trust Fund Corporation (HTFC). Through HTFC, HCR receives federal funding from the U.S. Department of Housing and Urban Development (HUD) to administer the Section 8 Housing Choice Voucher Program (HCV) and the Section 8 Performance-Based Contract Administration Program (PBCA) across the State. HCR also offers Security Deposit Assistance (SDA), which covers the cost of security deposits for tenants entering into new lease agreements. SDA was a temporary initiative started as a result of the COVID-19 pandemic but has been continued by HCR to increase utilization.

HCV enables low-income households in the State to rent or purchase decent, safe housing in the private housing market by providing rental and homeownership assistance. HCV is executed through an Annual Contributions Contract with HUD, which authorizes a certain number of housing vouchers that may be issued each year, as well as annual appropriations by Congress to fund the contract. HCR must have both the authority to issue a voucher and the funds available for each voucher. HUD monitors HCV performance by determining the percentage of voucher and budget utilization achieved.

HCR contracts with Local Administrators (LAs) to manage the HCV program at the local level. This includes administering Housing Assistance Payments (HAPs) and ensuring properties are maintained in accordance with HUD’s minimum housing quality standards (HQS). Any HAP funds that are disbursed but not spent during the calendar year are retained in an HCR-held HAP reserve called Restricted Net Position. In addition, any excess HAP funds that are obligated but not disbursed are maintained in HUD-held program reserves. HAP reserves, which include both the HCR-held Restricted Net Position reserves and the HUD-held program reserves, can be used to make HAPs on behalf of eligible program participants. In addition to funding HAPs, HUD pays HCR a monthly administrative fee to cover administrative program costs. All excess administrative fees paid by HUD that are not expended by HCR during a calendar year must be held in an administrative fee reserve and contribute to HCR’s Unrestricted Net Position (UNP). LAs must conduct physical HQS inspections of each unit under contract at least annually to determine if the unit is decent, safe, and sanitary.

HCR received over $16 billion in federal funding between April 2017 and July 2024, including about $11.9 billion PBCA funds, $4 billion standard HCV funds, and $78.9 million through the CARES Act.

The objectives of our initial audit were to determine whether HCR has established and maintains adequate internal controls to oversee and monitor the federally funded HCV, PBCA, and COVID RRP programs to ensure they meet requirements; and whether HCR is obtaining federal reimbursements on time and in a manner that recovers all eligible costs. The audit covered the period January 2017 through March 2022. We found that improvements could be made in several areas, including HCV voucher allocation, utilization and management of reserves. The initial audit found that HCR was not fully utilizing its HUD-authorized HCV vouchers or budget to help families in need of housing assistance. HCR did not meet HUD’s standard 95% HCV voucher utilization threshold during any year covered by the initial audit scope. During the same period, HCR had significant reserves available to improve utilization. This included both HAP reserves to directly fund housing subsidies and administrative reserves that could have been used to increase participation throughout the state. We also determined that HCR could not fully reconcile its HCV financial figures, including funding available, reserves, and spending. Further, we found several areas that HCR could improve to better address health and safety concerns, which could otherwise potentially result in injury to tenants and in HUD recouping excess reserves or reducing allocations for future award years. Lastly, we found the SDA initiative lacked internal controls to ensure recipients were eligible and payments were accurate.

Key Findings

HCR has made progress in addressing the issues we identified in the initial audit report. Of the report’s four recommendations, two have been implemented, one is partially implemented, and one is no longer applicable.

Key Recommendation

HCR officials are requested, but not required, to provide information about any actions planned to address the unresolved issues discussed in this follow-up within 30 days of the report’s issuance.