The Senate Regulatory Affairs & Government Efficiency Committee of Reference convened on January 15, 2025, to discuss critical findings from a recent audit of the Arizona Department of Housing. The meeting focused on the department's performance, compliance with regulations, and recommendations for improvement.

The audit revealed significant issues, including a $2 million wire transfer to fraudulent actors impersonating legitimate organizations involved in affordable housing initiatives. The department's lack of established wire transfer policies contributed to this fraud, prompting recommendations for enhanced security measures. The department acknowledged the need for improvement in this area and agreed to implement the suggested policies.

Further discussions highlighted deficiencies in the department's conflict of interest practices. The audit found that the department did not require annual conflict of interest disclosures from its staff, increasing the risk of undisclosed interests affecting official duties. The department has since revised its policies to address these concerns but disagreed with some recommendations regarding the implementation of additional measures.

The committee also examined the handling of manufactured housing complaints. The audit indicated that the department failed to assign responsibility for resolving certain complaints within the federally mandated 120-day timeframe, taking as long as 175 days in some cases. The department attributed delays to factors outside its control but did not agree to implement recommendations aimed at ensuring compliance with federal regulations.

Additionally, the audit pointed out that the department lacked processes to accurately identify costs associated with regulatory activities for manufactured housing fees. Recommendations were made to align proposed fees with actual regulatory costs, but the department's response indicated resistance to these changes.

The committee concluded with a discussion on the department's reporting practices for the federal low-income housing tax credit program. The audit suggested that the department improve its reporting by including outcome measures, which the department contested, asserting compliance with existing statutes.

The meeting wrapped up with a commitment to follow up on the audit recommendations in March 2025, as the committee seeks to ensure the department enhances its operational effectiveness and accountability. Members of the committee expressed their appreciation for the thorough presentation and engaged in a question-and-answer session to clarify the findings and next steps.