Houston Housing Authority needs to make ‘numerous’ changes, audit finds

Citing a number of “deficiencies” in the accounting and oversight of its federal voucher program, a recent audit found that the Houston Housing Authority needed “significant adjustments.”

This isn’t the first time the real estate agency has come under fire. Mayor John Whitmire overhauled the agency’s board in February, saying it lacked leadership and financial management.

But this time, these criticisms carry the weight of independent auditors highlighting the persistence of problems for several years.

To complicate matters, the February 2024 audit was a review of 2021, as public records requests show.

The housing authority, which handles operating revenues of more than $238 million a year, has fallen behind on its financial audits. Those delays have contributed to a growing problem with its federal voucher program, which subsidizes rent for about 19,000 low-income Houston households.

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Despite its name, the housing authority is not part of the Houston city government; it is part of the U.S. Department of Housing and Urban Development. Key to this oversight and to detecting potential problems in the administration of federal programs is the submission of an audited financial statement to HUD within nine months of the end of its fiscal year.

But since late 2019, the housing authority has not filed an audited financial report within a year of the fiscal year end. The 2019, 2020 and 2021 audits were filed more than two years after the fiscal year end, meaning there was no time to address issues from one year to the next. Issues identified in the 2019 fiscal year were still present in the 2021 audit filed this year, and issues that may have arisen in 2022 and 2023 have yet to be fully reported.

Two independent audit firms have raised concerns about the housing authority’s ability to report its finances accurately and on time, partly because of problems tracking finances related to all of the housing authority’s real estate transactions. They have also expressed serious concerns about how the agency administers its voucher program.

The concerns come after the housing authority investigated several employees for voucher fraud in 2016, and the Chronicle found that paperwork issues and poor communication from the housing authority led to the eviction of former homeless voucher holders.

EVICTIONS OF HOMELESS PEOPLE: Houston got them out of homelessness and into apartments. Then, to their surprise, they were evicted.

The housing authority said in an emailed statement that the unexpected transition to remote work during the pandemic, coupled with “inadequate” accounting software and staff shortages, led to the backlog.

She added that she was currently implementing a new software system, introducing “tighter” internal controls for her accounting process, and had also expanded her accounting department.

A HUD spokesperson said, “HUD will continue to work with HHA to submit its outstanding audited financial statements.”

He did not answer questions about the potential consequences of a delay in audits or how HUD handles weaknesses found in audits over multiple consecutive years.

In the most recent audit in 2021, Berman Hopkins CPAs and Associates examined a sample of 43 voucher recipients to see whether the housing authority was managing the program in accordance with federal guidelines. The results were far from perfect.

The audit found that none of the voucher recipients in the sample had signed the release required for the agency to verify their income, a process that can involve contacting current and former employers. The lack of income verification raises questions about whether all participants were actually receiving the correct amount of government assistance.

When asked if the housing authority was conducting any sort of verification in the absence of signed waivers, the agency said that in 2021, due to COVID-19, employees were still working remotely.

“This changed work environment has created gaps in our records that have been identified by our auditors,” the agency said in an emailed statement. It said it has been working since 2023 to ensure it has all the required documentation for each voucher holder, and expects to complete the remediation in the coming weeks.

The audit also found that none of the voucher holders in the sample had been inspected during the year, a practice designed to ensure that the homes they live in are habitable. Inspectors check, among other things, that smoke detectors, appliances and electrical outlets are working properly, that windows, ceilings and walls are in good condition, and that there are no electrical hazards.

“It’s obviously concerning,” said Taylor Laredo, a community navigator with the nonprofit Texas Housers, who has worked with many voucher holders.

Administrative inadequacies, he said, sow distrust and frustration not only among voucher recipients but also among landlords who agree to work with the program. In addition, it can put people at risk of losing their homes, he added.

“Additional protective measures should be put in place,” he said.

The audit of the housing authority’s fiscal year ending Dec. 31, 2019, was not released until September 2022. In that report, auditor CohnReznick found “a deficiency in internal control over financial reporting.”

Specifically, the housing authority “was unable to provide complete and reconciled financial statements in a timely manner” for its real estate transactions, which typically involve a partnership with a company that operates an apartment complex containing affordable housing. The accounting issue means the housing authority “may produce financial statements that are materially inaccurate,” the auditor said.

The next audit, for fiscal year 2020, was not due until October 2023. The housing authority wrote to HUD that the delay was due to problems that arose during the 2019 audit.

“At the conclusion of the 2019 audit, we determined that it was in HHA’s best interest to terminate our relationship with the previous auditor and we initiated a search for a new auditor,” wrote Michael D. Rogers, the housing authority’s vice president of fiscal and business operations.

CohnReznick did not respond to a request for comment on the housing authority’s allegations.

But the new auditor, Berman Hopkins CPAs and Associates, also found problems with the authority’s recordkeeping and its ability to oversee its financial close processes. It said that in 2020, two in five bond holders failed to complete the paperwork required to extend a bond from one year to the next.

In October 2023, the housing authority promised HUD that it had implemented new procedures and would eliminate its recertification backlog by the end of calendar year 2023.

But because the 2020 problems weren’t identified until 2023, they continued in the interim. The 2021 audit, released in February 2024, showed that financial reporting problems persisted, while problems with the voucher program had grown significantly. None of the voucher holders sampled had forms that allowed the housing authority to verify their income, down from 14% the year before; none had their apartments inspected to ensure they were up to par, down from 95% the year before.

The housing authority wrote to HUD to say it had hired a firm to review the finance department and was implementing many of the recommended changes. Although it did not provide details in that letter, the housing authority told the Chronicle it had added an asset monitoring and compliance division and introduced more controls into its accounting process.

“We fully expect this finding to be present in the 2022 audit, as many improvements and changes made to the department were not made until 2023 and therefore would not have been implemented in 2022,” Rogers wrote.

The housing authority said Friday it was working to file its audit for the year ending Dec. 31, 2022, 18 months after the fiscal year ended.