Oregon agency unable to verify if millions in rental assistance went to those who needed it most

Oregon Housing and Community Services failed to implement “critical controls” while racing to get $426 million in emergency rental assistance to Oregonians facing eviction from May 2021 through June 2023 due to the pandemic, according to an audit released Thursday by the Oregon Audits Division.

“The agency has no way of knowing how much of the $426 million went to eligible Oregon recipients and how much was sent to landlords, renters and non-eligible recipients in error,” the auditors wrote.

The lack of internal controls led to the Audits Division's first “adverse opinion” issued in 25 years due to "pervasive" weaknesses that would not prevent or detect significant noncompliance, auditors said.

"It’s extremely concerning that OHCS is unable to verify whether millions of dollars went to the Oregonians who needed and deserved this money the most,” Audits Director Kip Memmott said in a statement.

“There is no doubt OHCS, like all of Oregon government, was working under unprecedented emergency conditions during the pandemic,” Memmott said. “As auditors, it’s our job to ensure public monies are being spent in accordance with program guidelines and properly accounted for."

The Oregon Audits Division said OCHS was tasked with setting up and administering the Oregon Emergency Rental Assistance Program under “immense scrutiny” and with pressure to do it as quickly as possible with a looming U.S Treasury deadline.

OHCS was allocated $204 million in the first Emergency Rental Assistance Program from U.S Congress. It was allocated an additional $161 million in a second wave of emergency rental assistance when Congress passed the American Rescue Plan Act in 2021. In December 2022, state legislators appropriated another $105 million of federal American Rescue Plan Act funds.

In total, OHCS received nearly $500 million in federal aid for renters and landlords and distributed $426 million.

According to auditors, shifting federal ERA program requirements and two bills from the Oregon Legislature that changed the program’s delivery made it difficult for the agency to plan and administer relief.

Lack of oversight for federal Emergency Rental Assistance Program funds

Oregon Housing and Community Services relied on its local partners and Public Partnerships as fraud controls. Public Partnerships was a Massachusetts-based company contracted in August 2021 to manage and assist community action agencies through a backlog of applications. It then became the sole entity to process state ERA payments.

Auditors found OHCS “did little” to monitor Public Partnerships or local partners to ensure their compliance and that OHCS did not comply with federal reporting requirements, submitting inaccurate reports to the U.S Treasury and inaccurately tracking money that went to administrative costs.

OHCS reviewed expenditures from five of the 18 community agencies from July 2020 to June 2021 and did not perform compliance reviews beyond following up during fiscal year 2022, according to the report. Inefficient periodic spreadsheets were used to track administrative costs, the audit said. Under federal rules, the agency was supposed to limit administrative costs to 10% of the first wave of ERA dollars and 15% of the second wave of funding.

OHCS also made several inaccurate reports to the U.S Treasury, the auditors said. In May 2022, three different numbers of applications received were reported: 104,278; 118,124; and 49,289. And data from OHCS’s data dashboard reported an ERA payment made in May 2021 that was not included in its report to the Treasury.

It has outsourced financial compliance reviews for fiscal year 2023.

Oregon Housing and Community Services' internal application monitoring also found to be lacking

OHCS emphasized an equity-centered approach to prioritize funding for people who may have been historically or systemically excluded from housing opportunities. But the auditors said the lack of proper monitoring or verification undermined the agency's efforts.

The agency has reported paying 56,320; 65,020; or more than 67,500 applications since January 2023 and assisting 51,320 or 51,744 households, the audit found. When OHCS was asked in November, the auditors were told that exact final numbers had not been calculated.

Auditors also noted that Public Partnership was paid more to process applications for renters who were qualified for assistance than denials, creating a financial incentive for the company to approve as many applications as possible and adding another risk for approval of ineligible renters.

Additionally, procedures to detect fraud weren’t in place until after funds had been disbursed. Auditors estimated $11 million of a total $381 million payments made in fiscal year 2022 could have been made in error.

Auditors said they reviewed 62 paid applications at 16 community action agencies. One agency did not respond to requests and another could not obtain documentation to support a lease agreement, the audit said. From Public Partnerships, auditors tested 61 payments and identified 17 payments with errors.

OHCS contracted with a private company to review applications from Aug. 1, 2022, to Sept. 1 2022, more than a year after the program launched. The company reviewed 850 denied applications out of more than 120,000 received, which auditors characterized as “no systemic review” of applications deemed eligible.

Auditors pointed to unstable management and inadequate staff at OHCS as contributing factors. Its director Margaret Salazar departed in January of 2022 when she was appointed Housing and Urban Development Regional Administrator for Region 10 by the Joe Biden administration serving Alaska, Idaho, Oregon, and Washington. She has since become CEO of a Portland nonprofit named Reach Community Development.

Andrea Bell was appointed the new agency director in April of 2022. Other key leaders also changed from 2020 to 2022.

There also was a rushed implementation of a new software program to manage Oregon’s ERA named Allita, which had several glitches and which OHCS ultimately decided to stop using.

Auditors also blamed an existing lack of planning for emergencies at OHCS.

“OHCS leadership has told us on multiple occasions they view the program and any challenges it had as a one-time emergency-only related occurrence. We disagree with this perspective. The Governor’s plans to address homelessness continue to add pressure on OHCS to ensure outcomes in a short amount of time,” auditors warned. New state programs and initiatives continue to be implemented, they added.

The audit issued several recommendations to the agency, including developing and implementing real-time contract monitoring processes, and improving their internal controls for detecting and preventing fraud. The audit also recommends the agency better prepare for future emergencies by conducting an after-action review of Oregon ERA with its local partners.

Oregon Secretary of State LaVonne Griffin-Valade called the agency's urgency to distribute rental assistance during the pandemic "laudable" but repeated auditors' responsibility to properly account for how they spend public money.

"I encourage OHCS to work speedily to implement the recommendations in this report in preparation for future emergencies," she said.

In a statement, OHCS thanked the Secretary of State for the review and said the $426 million in rental assistance to 67,522 households over two years was more than had been dispersed in the previous decade.

"These are not numbers and abstracts. These are the real lives of our neighbors and beloved communities. The mission was to steward resources effectively, transparently, and equitably," the statement said.

To meet the crushing economic impacts of the COVID-19 global pandemic, the federal mandate was to establish “low barrier” criteria, remove as many pre-conditions to apply as possible and achieve the goal of keeping as many people housed during the global pandemic," the agency added.

OHCS has started implementing "the applicable learnings" in partnership with the SOS, they said.

"OHCS remains focused on improving ways to advance solutions that keep Oregonians stably housed," OHCS said.

Dianne Lugo covers the Oregon Legislature and equity issues. Reach her at dlugo@statesmanjournal.com or on Twitter @DianneLugo

This article originally appeared on Salem Statesman Journal: Oregon auditors critical of emergency rental assistance program