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Auditor General Releases Performance Audit of MSHDA
In December, the state auditor general released a performance audit of MSHDA “family housing programs.” Here's a link to a Detroit News story about the audit. (The headline of the story alone –“Audit finds state housing agency risked tenants' safety renting to violent felons” - shows that the News doesn't understand MSHDA's affordable housing role very well: MSHDA isn't a landlord.) (http://www.detnews.com/article/20110112/METRO/101120340/1409/Audit-finds-state-housing-agency-risked-tenants%E2%80%99-safety-renting-to-violent-felons)
The audit had 4 objectives:
- to assess the effectiveness of MSHDA's in monitoring compliance with program requirements for multifamily housing developments;
- to assess the effectiveness of MSHDA’s administration of its §8 voucher program;
- to assess the efficiency of using independent housing agents to oversee” the voucher program; and
- to analyze selected financial information regarding MSHDA and its programs.
For legal services low income housing advocacy the audit’s most significant finding may be that MSHDA has not “established and exercised effective criminal history screening practices for [its] housing assistance programs” To the extent this finding is accurate and identifies a shortcoming in MSHDA’s compliance with state and federal law, MSHDA’s response to the finding shows that its screening process has become more thorough. The audit, and any attention it gets, raises the fear that MSHDA may become overly aggressive (if it hasn’t already) in performing criminal background screening.
Without elaboration, the 64 page audit addressed 2 of its objectives in less than 2 pages, concluding that MSHDA was effective in its administration of the voucher program and that it was efficient to use independent housing agents to “oversee” the program. Many housing advocates would question these conclusions.
The audit’s objectives and findings are summarized below. Here is a link to the audit itself: http://audgen.michigan.gov/comprpt/docs/r641020507.pdf
1st objective - to assess the effectiveness of MSHDA's in monitoring compliance with program requirements for multifamily housing developments
The audit considered MSHDA’s activities related to its multifamily housing development bond program, its administration of Low Income Housing Tax Credits (LIHTC), and its administration of HUD project based housing contracts. The audit concluded that MSHDA's efforts were "moderately effective." It noted 2 "material conditions" and 2 "reportable conditions".
The first material condition is that MSHDA's process for allocating did not give preference to applications serving the lowest income tenants or those serving qualified tenants for the longest period, which the audit clams is contrary to state and federal law. (The audit looked at LIHTCs awarded between 2005 and 2007, when MSHDA used a lottery system to allocate tax credits to applicants meeting a minimum score. MSHDA no longer uses a lottery to award LIHTCs.)
The second material condition is MSHDA not having “established and exercised effective criminal history screening practices for housing assistance programs”. The audit says that criminal backgrounds “were not always identified or considered for applicants and tenants”. MSHDA “agrees in part” with this finding, but claims that it “substantially complies with the applicable HUD standards”. It contends that it doesn’t have the authority to require multifamily owners to conduct background checks on existing tenants or to exclude families from living in multifamily units “solely on the basis of prior criminal involvement, criminal record, or criminal history”.
About this second material condition, concerning MSHDA’s Section 8 voucher program, the audit said that MSHDA did not “conduct comprehensive criminal history screening”, in part because its criminal history review was limited to the ICHAT system and it did not conduct periodic criminal history reviews of voucher households. To this finding, MSHDA said that since 2008 it has been conducting more thorough criminal history screenings using other databases.
The first reportable condition was that MSHDA’s tenant data for its bond financed and LIHTC programs was incomplete for more than 50% of the tenants in these programs. MSHDA did not dispute this finding, saying that it was in the process of implementing new HUD data requirements.
The second reportable condition was that MSHDA did not identify and update in a timely way its records of dead tenants at HUD assisted properties, resulting in subsidy overpayment. In response, MSHDA stated that the revised Enterprise Income Verification (EIV) is flagging dead tenant files more rapidly than before.
2nd objective –to assess the effectiveness of MSHDA’s administration” of its §8 voucher program
3rd objective – to assess the efficiency of using independent housing agents to oversee” the voucher program
Besides its finding about criminal history checks, the audit, with no explanation, concluded that MSHDA was effective in its administration of the voucher program and that it was efficient to use independent housing agents to oversee the program.
4th objective – to analyze selected financial information regarding MSHDA and its programs
While significant, this section of the audit is less substantively related to MSHDA’s housing programs.
The first part of this analysis primarily considered the relationship between current and former MSHDA and the Great Lakes Capital Fund, a private non-profit housing corporation whose creation MSHDA funded, and its subsidiaries.
The audit found that while MSHDA employees former senior MSHDA managers acted as directors and officers of a GLCF subsidiary and represented MSHDA’s interests, without the knowledge and consent of the MSHDA board. MSHDA disputed this finding, saying the board knew about MSHDA employees’ involvement in the subsidiary. The audit rejected MSHDA’s response.
Also related to GLCF and its subsidiaries, the next finding was that MSHDA was not effective in preventing conflicts of interest or restricting postemployment activities of its employees. MSHDA disputed the finding that there were violations of its Code of Ethics. The Auditor General stood by his finding and said that MSHDA’s belief does not “negate a need for MSHDA to improve its effectiveness” in this area.
Another GLCF related finding was that MSHDA seek an attorney general opinion about whether MHSDA had the authority to use grants from its Housing Development Fund to create and support GLCF. MSHDA claims it had the authority and that it’s basically a moot point because the funded activities have been completed and any repayable funds have been repaid.
The 8th finding was about whether MSHDA management violated civil service commission rules and the MSHDA board’s authorization by using a Homeless Initiative grant to fill a vacant position with an employee of a grantee.
The 9th finding was that MSHDA had not established and exercised effective controls over its grants activities, including regularly failing to get board or director approval of grant awards.
The 10th finding was “that MSHDA had not established an effective control environment over the procurement of its integrated accounting and management information system”, which resulted in a lack of assurance that the contract was managed in a fiscally responsible way and that the vendors met their contractual obligations.
