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Arizona housing department lost $2 million to fraud, Auditor General finds

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Updated  October 1, 2024 4:00pm MST
Arizona Politics
FOX 10 Phoenix

The Brief

    • The Arizona Auditor General's Office has issued a report on the state's Department of Housing.
    • The report listed a number of shortcomings the Auditor General found regarding the housing department.
    • In one incident, it was discovered that $2 million of State Housing Trust Fund money was wired to fraudsters.

PHOENIX - A new report by the Arizona Auditor General's Office listed a number of shortcomings affecting the Arizona Department of Housing, including a multimillion-dollar fraud incident.

The report, which was released on Oct. 1, states that the Arizona Department of Housing has "several statutory responsibilities" that are related to the state's housing issues. For the 2023 fiscal year, nearly $1.26 billion in federal and state funds, along with tax credits, were committed by the department to help address affordable housing issues in Arizona.

However, the Auditor General report noted that the Department of Housing lacked "a comprehensive process to track and evaluate its programs’ performance," thereby limiting its ability to make sure its programs are addressing the housing problems.

"Without developing a comprehensive performance measurement system, the Department cannot systematically assess the performance of its programs or whether its programs are effectively addressing issues the Department has identified as negatively impacting the State, such as an increase in the number of unsheltered homeless individuals, service and resource disparities in urban versus rural areas, and a lack of affordable and suitable housing, especially in rural areas," read a portion of the report.

In addition, the report accused the department of failing to develop wire transfer polices and procedures aimed at preventing and detecting fraud, which resulted in $2 million fraudulent transfer from the State Housing Trust Fund. 

"In June 2023, the Department transferred by wire $2 million in State Housing Trust Fund monies to fraudulent actors impersonating officers from a title company and nonprofit housing organization that the Department was working with to purchase property for affordable housing programs," a part of the report reads. "The Department did not become aware of the fraud until December 2023 when it was notified that the nonprofit housing organization had not received the wired monies."

The report noted that as of Sept. 2024, the housing department had worked with the Arizona Department of Administration to process an insurance claim, and has received an insurance payment to cover the loss.

Officials with the Auditor General's Office, per the report, made 12 recommendations to the housing department, including the development and implementation of policies aimed at cracking down on fraud, as well as developing a formal plan to revise its goals, targets, and review of performance measures. One recommendation was also made for the Board of Manufactured Housing.

"The Arizona Department of Housing agrees with most of the findings and plans to implement or implement in a different manner all but 4 of the 13 recommendations," read a portion of the report. "The Department indicated it would not implement 4 recommendations related to reporting outcomes to the Legislature; and manufactured housing and building fee setting and complaint handling."

Per the report, the Auditor General will follow up with the housing department in six months' time.

The Source

  • Information for this article was gathered from a report issued by the Arizona Auditor General's Office.