PA Housing Agency Left 58% of Loans It Checked Unbilled

The Pennsylvania Housing Finance Agency (PHFA) -- a state-affiliated public corporation, created in 1959, that finances affordable housing across the commonwealth -- runs a loan program called PennHOMES: zero-interest, deferred-payment construction loans⧉ repayable over 40 years, meant to be paid back from a development's surplus rental income.▸ As of June 30, 2025, 176 developments carried $186,015,443 in PennHOMES balances due to PHFA. But a February 2026 audit by the Pennsylvania Auditor General⧉ -- the commonwealth's independently elected fiscal watchdog, whose findings agencies aren't legally compelled to act on but are expected to answer -- found PHFA isn't consistently doing the one thing that makes the loans work: billing developments once their books show they can pay. In the one fiscal year auditors tested, PHFA billed only 17 of 41 fully monitored properties; the other 24 -- including two sitting on cash surplus -- went unbilled.

PHFA's PennHOMES loans require half of a funded development's units to house tenants at or below 50 percent of the area's median income, and the rest at or below 60 percent -- deliberately low-margin housing, which is why the loans defer interest and repayment for decades in the first place.▸ Across the 176 developments PHFA monitored during the audit period⧉, the total balance PHFA is owed moved from $180,246,730 in fiscal 2023 to $188,333,919 in fiscal 2024 and back down to $186,015,443 in fiscal 2025 -- about a 3.2 percent net rise over two years, this outlet's own calculation from the auditor's table. PHFA awarded relatively little in new money during the audit window itself: $9,053,231 to 7 of 20 applicants in 2022 and $16,856,511 to 10 of 19 applicants in 2024 (PHFA skipped a 2023 cycle), which means the $186 million balance is overwhelmingly money already out the door in earlier years, sitting on PHFA's books waiting to come back.

PHFA's own process is supposed to catch this: a financial analyst reviews each development's audited annual financial statement, decides whether there's surplus cash to bill for repayment, and a supervisor signs off.▸ Auditors found that determination often isn't documented at all -- 36 of 41 audit checklists (87 percent) were missing the reviewing analyst's initials, and 38 of 41 (92 percent) were missing a supervisor's -- and when they traced what actually happened with billing for calendar year 2023, only 17 of the 41 fully monitored properties, 41 percent, got billed, for $465,348 combined. The other 24, 58 percent, did not. Twenty-two of those had genuine cash deficits, as much as $377,262 in the red, which at least explains why PHFA didn't bill them. Two did not: they showed small cash surpluses -- $11,796 and $15,546 -- and PHFA's own stated criterion is to bill when there's surplus to collect. It didn't.

The 24 unbilled properties weren't scattered randomly, either: 10 of them, over 41 percent, were owned or managed by just four developers.▸ Auditors did not test billing across PHFA's full 176-property portfolio, only this 41-property sample within one fiscal year -- but if the same 58 percent unbilled rate held commonwealth-wide, roughly $109 million of the $186 million PHFA is owed would sit outside active billing. That figure is this outlet's own scaled illustration, not something the auditor claims or tested; the audit itself stops at the 41-property sample.

The billing gap traces back partly to how projects get funded in the first place.▸ Of 13 award files auditors reviewed from the 2022 and 2024 cycles, one 2022-funded project carried a written objection from the PHFA staff reviewer -- a Housing Management Representative -- who flagged four similar developments already in the area, left out of the project's own market study, plus a comparable nearby project struggling to fill units. PHFA funded it anyway because it scored high enough under PHFA's point system, which treats the market-need concern as one factor among many rather than disqualifying. Auditors recommend PHFA give such staff objections "serious consideration" going forward and document its reasoning whenever it overrides one; the audit notes the project is too new to judge its long-term financial stability yet.

A separate property shows what happens once a loan is old and struggling.▸ PHFA lets developments with 11 units or less file reduced financial reports; one property PHFA reviewed actually has 16 units, but PHFA excused it from full reporting anyway because of its poor finances -- cash deficits of $272,220 in 2022 and $288,457 in 2023. That property drew $1,073,976 in PennHOMES funds and has repaid only about $5,000 of it: an outstanding balance of $1,068,976 as of June 30, 2024. Auditors' point isn't the debt itself -- PennHOMES loans are designed to sit unpaid for years -- it's that a property this far underwater got less scrutiny, not more, because of a units miscount.

PHFA also stopped project-operations monitoring -- checking tenant income and rent limits -- on five other properties still carrying outstanding PennHOMES balances of $356,167 to $811,500 apiece.▸ PHFA told auditors these properties had aged out of the federal affordability period HUD requires it to enforce. But PHFA's own internal policy, last revised in March 2022, says monitoring should continue as long as a loan balance is still outstanding, regardless of whether the federal affordability window has closed. PHFA acknowledged to auditors that its policy should probably change to match what it's actually doing -- meaning, as written today, PHFA's own rule required exactly the monitoring it skipped.

PHFA did not tell auditors it agreed or disagreed with either finding or any of the 24 recommendations, as the Auditor General's office had requested.▸ Instead it pointed to a new data system, under a vendor contract signed in August 2024, that it says will document approvals and fix the recordkeeping gaps -- but that system is not scheduled to be fully operational until the fourth quarter of 2026, and wasn't running during any part of the period reviewed. "This audit is another example of why efficient and effective recordkeeping is essential when spending public funds," Auditor General Timothy L. DeFoor said⧉.

The audit's own closing section is blunter: as a post-audit body, the Auditor General says it cannot evaluate a system that did not exist during the review, and it "reserves the right to follow up" -- meaning nothing in this report confirms the billing gap is fixed, only that PHFA says a fix is coming, on a timeline no one outside PHFA can yet check.