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Saturday, February 4, 2023
After Fraudsters Jailed, Auditor Discovers Affordable Housing Program Has no Administrative Rules
By News Release @ 8:15 PM :: 2821 Views :: Hawaii County , Ethics, Development, Cost of Living

Office of Housing and Community Development Affordable Housing Credits

from Hawaii County Auditor, February, 2023

Executive Summary

The goal of the Office of Housing and Community Development (OHCD) is to provide for the development of viable communities in Hawai‘i County by providing decent housing, suitable living environments, and the expansion of economic opportunities. The OHCD’s Community Development Division is responsible for the planning, development, construction, and management of assigned housing and community-related projects in Hawai‘i County. OHCD’s Planning Branch administers the affordable housing policy, Hawai‘i County Code (HCC), Chapter 11, through processing affordable housing agreements on rezoning.

Hawaiʻi County has a severe housing crisis. The lack of affordable housing often forces residents to leave the state. Chapter 11, Hawaiʻi County’s Affordable Housing Policy, mandates the inclusion of affordable housing in and throughout various market developments. The rezoning of parcels triggers Chapter 11. Zoning is administered through Chapter 25, Article 5, Zoning Districting Regulations.

Chapter 11 provides a means for developers to satisfy their affordable housing obligation through seven options: developing finished lots, selling, or renting the required units on or off-site, conveying land or infrastructure, or purchasing affordable housing credits. At approximately 44%, purchasing has become the most often used method of satisfaction. See Table 3.

In July 2022, media outlets reported a fraud scheme committed by a now-former employee of the Office of Housing and Community Development, questioning the efficacy of Chapter 11.

In September 2022, Hawai‘i County Council’s Resolution No. 467-22 requested the Office of the County Auditor conduct a performance audit. The audit sought to ensure the efficient issuance and utilization of affordable housing credits, including a comprehensive accounting of all issued, outstanding, transferred, or redeemed, and recommendations to enhance program controls, efficiency, and effectiveness. We also evaluated Chapter 11 of the Hawaiʻi County Code and OHCD’s written policies and procedures for implementing Chapter 11.

While theft and loss can and do happen, the ability to conceal and deceive for a long time is symptomatic of inadequate internal controls. Decades of neglect in monitoring the program has left the department unable to evaluate its success.

Our audit found the following:

OHCD Findings

Based on these conditions, we offer the following seven recommendations:

Clarify County Code

  1.  We recommend Hawai'i County Council and OHCD revise applicable sections of Chapter 11.

Establish Administration Rules

  2.  We recommend OHCD establish administrative rules to effectively administer the County's Affordable Housing Policy.

Update and Enforce Policies and Procedures

  3.  We recommend OHCD clarify and enforce policies and procedures to ensure consistency throughout the department and industry best practices.

Increase Monitoring and Program Oversight

  4.  We recommend OHCD perform ongoing monitoring of their internal control system's designed and operating effectiveness as part of their operations.

  5.  We recommend OHCD use software and technology as a monitoring tool to improve managing affordable housing agreements and credits.

Segregate Incompatible Duties

  6.  We recommend OHCD management separate incompatible duties.  One individual should not oversee key elements of the affordable housing process.

Provide Training

  7.  We recommend OHCD provide ongoing internal control training to employees involved in the affordable housing process.

Conclusion

When our recommendations are implemented in good faith, OHCD can expect the following benefits:

Clarify County Code

  1.  Clarifying applicable sections of Chapter 11 will make laws easier to understand and ensure compliance.

Establish Administrative Rules

  2.  Establishing administrative rules will help guide OHCD to effectively administer the County's Affordable Housing Policy.

Update and Enforce Policies and Procedures

  3. Updating and enforcing policies and procedures will ensure consistency throughout the organization and with industry best practices.

Increase Monitoring and Program Oversight

  4.  Ongoing monitoring will ensure OHCD's internal control system operates effectively and efficiently as designed.

  5.  Using technology as a monitoring tool will improve managing affordable housing agreements and credits.

Segregate Incompatible Duties

  6.  Segregating incompatible duties will ensure one individual does not oversee key steps of the affordable housing process.

Provide Training

  7.  Ongoing training will ensure employees at all levels of the organization involved in the affordable housing process are knowledgeable and will be held accountable.

We thank the Office of Housing and Community Development for their cooperation and efforts to improve internal controls over their affordable housing program.  

To improve government accountability and ensure audit recommendations are implemented or resolved, we will continuously monitor the status of pending recommendations using our remediation tracker.  To view the status, visit us at: "office-of-the-county-auditor".

read … Full Report

HTH: Audit finds flaws in management of county’s affordable housing credits program

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