Audit Finds DSHA Generally Complied with LIHTC Exchange Program

The Treasury Department’s Office of Inspector General recently audited the Delaware State Housing Authority (DSHA) as part of its ongoing oversight of the LIHTC exchange program authorized by Section 1602 of the American Recovery and Reinvestment Act of 2009. The Recovery Act was signed into law to provide relief to the ongoing economic crisis. Part of that relief, provided in Section 1602 of the Recovery Act, consisted of grants awarded to states for low-income housing projects in lieu of low-income housing credit allocations. The purpose of Section 1602 was to fill the gap left by the reduced demand for low-income housing tax credits that would enable low-income housing projects to continue or begin in cases where developers couldn’t obtain private investment, as well as increase the availability of affordable housing.

The audit’s objective was to assess whether the DSHA-awarded 1602 Program funds complied with the program’s requirements. The audit report found that the housing authority complied with the majority of the exchange program rules. It met the requirements for receiving program exchange funds, sub-awarding funds to low-income housing developments, creating a process for monitoring compliance and long-term viability of developments, and submitting necessary reports.

However, DSHA was unable to fully comply with a 1602 Program-specific requirement that each state housing credit agency open a new account with a financial institution for the purpose of receiving and disbursing 1602 Program funds. In November 2009, auditors asked whether separate bank accounts for the 1602 funds were established, and if not, whether DSHA would provide the necessary documents for requesting a waiver. At the time, a DSHA official responded that a new account was opened. But when auditors requested the bank statements for review, they discovered that DSHA hadn’t established a separate bank account for its 1602 Program funds nor did it request a waiver.

Upon further inquiry, a DSHA official stated that DSHA wasn’t permitted by law to establish an individual bank account for 1602 Program funds as funds were required to flow from the State of Delaware’s bank account. Furthermore, the Office of the Governor required that all “stimulus funds” flow through this bank account and be tracked through Delaware’s financial management systems. With this specific requirement, auditors verified that a separate account was established in the general ledger to track receipts and disbursements of 1602 Program funds.

DSHA said that it will request an official waiver for the bank account requirement. In the meantime, based on the auditor’s review of DSHA’s accounting records, auditors determined that DSHA met the intent of the overall financial management requirement by tracking 1602 Program fund receipts and disbursements separate from other funds as well as maintaining program, financial, and accounting records supporting the proper use of funds.