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Arizona Department of Housing

Lawmakers Push for Stricter Oversight of Arizona Housing Department

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Lawmakers seek more oversight over AZ Housing Department

Lawmakers in Arizona are contemplating a reduction in the number of years the Department of Housing can function without legislative scrutiny. This discussion follows a recent state audit that revealed significant issues within the agency, including inadequate fraud prevention measures that resulted in $2 million being fraudulently wired to impersonators of a housing nonprofit.

On Tuesday, the House Commerce Committee voted unanimously to approve the continued existence of the state housing department. This decision is part of a “sunset review,” a process where the legislature evaluates an agency’s performance to determine whether its authorization should be renewed for a period of up to ten years. However, Republican members indicated that their support for the department will be contingent upon implementing new restrictions.

Chairman Jeff Weninger emphasized the importance of the Department of Housing’s function as a link between federal resources and state housing initiatives. Yet, he stressed the need for heightened regulatory oversight due to the agency’s recent failures. “The question is how long it continues and what can we put in there to ensure safeguards?” he stated.

A report from the Arizona Auditor General’s Office in October 2024 highlighted that, despite allocating nearly $1.26 billion for affordable housing projects, the department lacks a solid evaluation process to assess the effectiveness of these initiatives. The audit also reviewed twelve housing projects funded by the department, revealing that oversight responsibilities were frequently neglected, creating risks for residents living in unsanitary conditions.

The audit uncovered that the $2 million fraud incident stemmed from the housing department’s inability to implement effective wire transfer protocols. Weninger noted that these deficiencies reflect systemic problems, rather than isolated incidents. “It wasn’t just, ‘Hey, you had one slip through the cracks,’” he remarked, indicating deeper operational issues.

Joan Serviss, who leads the housing department, informed the committee that the agency has largely accepted the audit’s recommendations and has begun to improve its policies. To mitigate future fraud risks, the department now employs verbal verification and small transfers before issuing full grants. She also pointed out that much of the reported inadequacies stem from protocols inherited from previous leadership, underscoring her administration’s commitment to reform.

While lawmakers expressed understanding of Serviss’ challenges, they maintained expectations for substantial policy changes. Echoing this sentiment, Tucson Democrat Betty Villegas commended Serviss while insisting on accountability for the issues identified in the audit. “There’s no excuse for some of the items on these lists, and they have to be corrected,” she asserted.

As lawmakers continue to deliberate, the final outcome of the reauthorization process remains uncertain. Although they can grant an agency reauthorization for up to ten years, it has become common practice to limit such extensions to eight years in alignment with legislative term limits. The department’s future could emerge as a pivotal issue this session, particularly in light of Serviss’ contentious appointment, which faced opposition from the state Senate’s Committee on Director Nominations. Following a legal dispute, Governor Hobbs has agreed to revisit the nomination process, requiring Serviss to appear before the entire Senate.