Leaders of the Oklahoma Housing Finance Agency highlighted growing concerns about the Tulsa Housing Authority’s four-year audit backlog during a marathon meeting Nov. 19 that featured accusations of falsehoods, an analogy about Roger Staubach and broad recognition of the affordable housing crisis facing the city and state.
The contentious and complicated discussion nearly saw THA’s peculiar problems delay a major affordable housing effort in north Tulsa — 36 North, a mixed-income, 545-unit, seven-phase project led by the development company Pennrose, which has partnered with THA and one of its corporate affiliates to qualify for National Housing Trust Fund dollars.
While representatives for Pennrose and M&T Realty Capital Corporation successfully emphasized how their companies bear the project’s financial burden even if THA’s overdue audits eventually reveal additional problems, several OHFA staff members told their Board of Trustees that THA’s issues constituted “a failure to meet program threshold requirements” for two chunks of state housing tax credits sought for 36 North.
“The old adage, where there’s smoke, there’s fire?” Darrell Beavers, OHFA’s housing development program director, said of the Tulsa Housing Authority. “We saw smoke in some of their audits. We’re just afraid there’s a fire.”
Aaron Darden, THA’s president and CEO, spoke frequently and attempted to extinguish embers during the OHFA Board’s consideration of the 4 percent and 9 percent federal tax credit applications, which were ultimately approved. The almost two-hour conversation featured several speakers from a variety of viewpoints in a housing industry where prices have climbed, margins have shrunk and competition for government subsidies can make or break affordable housing developments.
“We are outstanding in the audits. We are through 2021. We are working on 2022. This year alone, we’ve completed two full audits,” Darden told the OHFA Board. “Audits typically take nine to 10 months or more to complete, so doing two full ones is already a third of a herculean effort that was done, and that was done by adding substantial capacity to our organization through third-party consultants — a company called BDO that’s been working — and by increasing our internal capacity of almost $500,000 in terms of just THA employees to work on these audits and get them caught up.”
While Darden told OHFA’s trustees that THA has “completed two full audits” this year, the statement is not true.
THA’s 2020 audit was completed and released in late 2024. It featured a material weakness identified for internal controls over financial reporting and a repeat finding for “not providing accurate data to HUD,” which included a test review of 10 tenant files that showed a 40 percent rate of “incorrectly calculated rent.”
Meanwhile, the agency’s 2021 audit has not been presented to THA’s governing board or made available for public inspection.
“So, ’21 is done. We’ve got to finalize it through our Budget and Audit Committee. Then it has to go to THA’s board, and then obviously it becomes public at that point,” Darden clarified to NonDoc in an interview after the OHFA meeting. “We are currently working on ’22, and the expectation of ’22 is that it will be finished by April of next year — ’26. And then from there right into ’23 and ’24, with ’24 being completed by October of next year, which would bring us current.”
In her own interview after the Nov. 19 meeting, OHFA executive director Deborah Jenkins confirmed her agency has yet to be provided THA’s 2021 audit and said “nothing has happened” despite Darden’s claims.
“We really don’t understand what the reasoning is that THA can’t get their audits completed timely,” Jenkins said. “They are required, because they’re administering HUD programs, to have an annual audit, and they have not had one. Our concern is, why isn’t their board pushing them to get these audits completed?”
The last three regular monthly meetings of the Tulsa Housing Authority’s Board of Commissioners have been canceled, and a special meeting Oct. 23 featured no item about the audits on its agenda.
“A year and a half ago, Aaron said the audits are coming,” Jenkins said. “We have yet to receive the 2021 audit. We don’t have it. I mean, 2021 — ’22, ’23 — 2021 is a long time ago.”
For the past year, Darden has told Jenkins, NonDoc and others that THA’s four-year audit backlog originated during the COVID-19 pandemic. With agency employees working remotely “for a year and a half,” Darden said a software transition went awry.
“We did not return back to the office here at THA in terms of all staff until August of 2021,” Darden said after the Nov. 19 meeting. “And so, during that timeframe when everyone was working remote, we went through a software conversion, and we did the software conversion completely remotely, and it was just a huge challenge for us, especially on the finance side.”
But a document on THA’s own website calls the accuracy of Darden’s explanation into question. According to the agency’s 2021 Public Housing Authority Plan — a report required annually by the U.S. Department of Housing and Urban Development — THA’s “housing software management system” transition to Tenmast/MRI “went live in May 2019,” more than nine months before the pandemic hit Oklahoma.
Asked about the incongruity between the date THA reported to HUD and his claim that the agency’s initial software transition occurred during COVID, Darden said he would need to “double check” the record.
“I don’t remember Tenmast being in May (2019),” Darden said. “I will have to double check that. I’m not certain.”
Ginny Hensley, THA’s vice president for communications and government affairs, confirmed minutes later by email that “THA converted to Tenmast/MRI in May 2019, with the accounting functions converting in June 2019.”
Underscoring the issues Darden said the agency experienced with Tenmast/MRI, Hensley said THA “converted from Tenmast/MRI to Yardi in February 2023.”
Darden said the second transition complicated the situation further, and he said not even last year’s move to bring on the global auditing firm BDO paid quick enough dividends. He said that’s why THA failed to achieve the remediation timeline he outlined last December.
“There was a bit of a challenge with BDO. We didn’t appreciate how long it would take them to come up to speed in order for them to start helping,” Darden said. “We have a lot of different programs and things that we do, and we’re not the easiest organization to stroll in and figure out things. That definitely slid back the timeline probably by eight or nine months or so for them to overcome that learning curve and get up to speed.”
Jenkins seemed unsatisfied with Darden’s explanations of THA’s audit delays.
“We’ve received the same response that you have, and our response to him has been, we are also required to have annual audits by the federal regulations, and none of those items have impacted our ability to have our annual audits,” Jenkins said. “We’ve had an audit every year on time.”
Agency heads beef as ‘another broken promise’ avoided
The frustrations between Darden and Jenkins reached a boiling point during OHFA Board of Trustees’ lengthy consideration of the 36 North tax credit applications Nov. 19.
Owing to the complicated nature of housing tax credits, how applicants are scored and the types of funds that count toward different caps, board members were weighing a peculiarity: Denying 36 North’s 9 percent tax credit would make certain separate applicants qualify for funding while others would be pushed out of consideration.
With Darden and Pennrose Regional Vice President Zach Cavender emphasizing how delays to 36 North’s fourth phase of construction would jeopardize $50 million of other federal funding, Tyler Parette stepped to the podium and addressed the board.
Parette now leads Housing Forward, a nonprofit focused on public policy discussions and “practical solutions” to the state’s housing crisis. Previously, Parette worked as outreach director for the Tulsa-based nonprofit Housing Solutions, and he noted that much of 36 North is being built at the former site of the Comanche Park Apartments, a dilapidated complex owned, operated and torn down by THA.
“As a case manager, I moved people into Comanche Park directly out of homelessness,” Parette told the OHFA Board. “Those units were torn down with a promise to deliver units to this community. This community has been used to broken promises, and I doubt there is anybody from this community represented here today. But I just wanted to mention that the impact of this [would be] another broken promise to this community.”
Parette also argued that denying 36 North’s application for tax credits and derailing its development timeline would set “a very dangerous precedent that there is an unpredictability in some of the applications.”
“The very developers that we are recruiting and asking to come and invest in our state are going to take a second look on whether or not that is viable because of the risk associated with decisions like this,” Parette said. “I am no apologist for THA, and I think we absolutely should weigh carefully the decision related to the audits and everything that has been brought up, but I want to zoom out a half step (…) and weigh whether or not the consequences of this decision are appropriate and proportionate based on the issue of audits.”
Board member Darin Dalbom bristled at the suggestion OHFA was the government body causing a problem for the industry.
“To me, OHFA has its standards. What’s been going on at THA for the last five years? Why is this going on? I don’t think this gets foisted on OHFA where we’re being the bad guy,” Dalbom said, suddenly changing his metaphorical play at the line of scrimmage. “It seems to me that THA is like Roger Staubach. ‘Hey, we’ve got Roger Staubach on our team,’ and everyone is like, ‘Yeah, we’ve got Roger Staubach.’ And then it turns out that Roger Staubach has got some improprieties or something going on, and then we’re getting blamed because Roger Staubach has got the improprieties.”
Dalbom said the THA audit backlog “is an issue.”
“But I don’t think this is an OHFA problem. If someone doesn’t want to come to Oklahoma to develop here because OHFA is the bad guy, I don’t think that is the story that is going to get written here,” Dalbom said. “I think OHFA has its standards, and I think OHFA would be willing to look at a situation where we can review this given the impropriety of somebody else or their lack of ducks in a row, but I don’t know that necessarily OHFA is going to sign for this package of someone saying that they’re not going to come to Oklahoma and develop because we’re the bad guy.”
Cavender, the Pennrose regional vice president, returned to the podium, filled the A-gap and shifted coverages.
“In your Roger Staubach analogy, I assume you are inferring that Roger Staubach would be the leader because he is the quarterback, right? I would respond that, in your analogy, we are Roger Staubach, not THA,” Cavender said.
Dalbom nodded and said: “Point taken.”
Cavender then noted that, in September, the OHFA Board had awarded $23 million of 4 percent multi-family tax credits for a THA development: the Hilltop Apartments, which are being constructed near THA headquarters on the site of the blighted and long-problematic Sunset Plaza Apartments. THA tore down those apartments after buying the property from an out-of-state developer in 2023, and the $36 million project is set to feature 106 new units, with 20 dedicated to supporting the chronically homeless. Another 150 units are planned but are not set to be tied to low-income housing tax credits.
“You awarded THA a bond deal in your last meeting and this audit issue had already been raised,” Cavender said.
Corey Bornemann, OHFA’s housing development program manager, chimed in.
“At some point, you’ve got to stop the bleeding, right?” he said.
Darden doubled down on the dynamic to claim Pennrose was being “singled out” by OHFA staff.
“OHFA staff was aware of this (audit backlog) in 2023. We’ve been awarded six times since OHFA staff has been aware of this, and we have delivered on all of them,” Darden said. “This is not a new issue. This goes back to 2023 with multiple awards since then.”
That prompted Jenkins to speak up from her seat next to board members.
“Aaron, I met with you and your leadership team, and we told you that we were going to recommend denial of Hilltop. That project was so far along in the process, we agreed during that meeting that staff would recommend funding it,” Jenkins said. “So I think that that’s unfair for you to say that we funded an application at the last meeting knowing this was an issue because you also knew it was an issue. We met. You and I spoke about that, and that was the condition: that we would move forward with Hilltop, but we would not move forward with any other application, and we would allow the board make that decision.”
Darden fired back, suggesting that Jenkins was being dishonest.
“I will disagree with you there. There were too many witnesses that were in the room at that point in that meeting,” he said. “The second part of that agreement was staff would recommend approval of all the 36 North applications if Pennrose was the lead.”
Jenkins shook her head, but Darden pressed forward with his recollection of events.
“The conversation with Corey, as he was walking us out after that meeting, he was talking to us on how to change the org docs to reflect that,” Darden said. “And then all of a sudden, a week later, Corey had amnesia in terms of what was discussed and what was agreed upon. Multiple people were there.”
The 100-person crowd at the OHFA meeting murmured before Bornemann responded.
“I think we’ll agree to disagree on those events. I’ll leave personal insults out of it,” Bornemann said. “What I will say is, back in ’23, we were aware of the issue here. They gave us a timeline that they were going to complete those audits. If we followed that timeline, the 2024 audit would have been done months ago. (…)Â And here we are. No ’21, no ’22, no ’23, no ’24. Who knows when we’ll see another one? That’s all I’m going to have to say.”
Ultimately, the OHFA Board voted to move forward with both sets of tax credits for 36 North by “forward funding” the 9 percent award to allow other developments to be approved as well.
But when the meeting ended and Darden left the room, Jenkins was blunt in her assessment of his honesty.
“Mr. Darden just flat-out lied. I have emails that we exchanged prior to the September meeting,” Jenkins said. “I was disturbed by that. I think it was very unprofessional. He was not being truthful. There was a conversation that we had prior to the board approving the Hilltop development, and the conversation in person was (that) this is so far along in the process that we will move forward, and staff will recommend approval to the board. But any developments after that, staff will recommend denial unless you provide current audits, and those were not provided, and therefore we did what we said we would do.”
Jenkins provided NonDoc her email exchange with Darden between Aug. 25 and Sept. 4, which shows both parties reiterating their different claims about what had been agreed to during their in-person meeting.
Asked about Jenkins’ statement that he was “not being truthful,” Darden said he knows what was said in the meeting and by Bornemann as they walked to the door. He also referenced a subsequent phone call in which he said Bornemann admitted he had “misheard” the agreement.
“We’re talking a very large meeting with a lot of people, which is the reason I found it so fascinating that she was so willing to say what she didn’t say because there were so many witnesses,” Darden said. “So I’m not sure what occurred with them. But they pivoted and backed off of the handshake agreement, and then that led to what you saw today.”
What Jenkins saw was her governing board become fully aware of OHFA staff members’ concerns about THA’s audit backlog and the “material weakness” underscoring its financial controls.
‘Neglect of duty’?
Title 63, Section 1079 of state law requires public housing agencies in Oklahoma to file annual audits for public review. A 1988 attorney general’s opinion notes that multiple statutes authorize a city council to remove housing authority commissioners for “neglect of duty.”
“We still have some real concerns with THA’s lack of current audits, but ultimately, my concern was full transparency to the board — that the board needed to know everything that’s going on with THA and make an informed decision,” Jenkins said. “And I think they did that, and I think they did it for the right reason, which is, there’s affordable housing needed across the state. There’s affordable housing needed specifically in Tulsa, and the decision by the board today ensures that they move forward with that.”
Michael Buhl, the OHFA Board’s chairman, echoed that sentiment after the meeting.
“What we have to look at here is, is the audit issue more important than the ramifications of denying their [tax credits],” Buhl said. “Look, we need housing, and we need it on the ground now, if not yesterday. So putting them in a situation where it could delay that by an extended period of time, I didn’t feel comfortable making that decision.”
During the meeting, Buhl asked OHFA’s contracted general counsel, James Orbison, a “hypothetical” question about THA’s incomplete audits.
“Let’s say there was mismanagement of funds that comes out later,” Buhl proposed. “I’m not saying that’s even remotely possible, but that’s hypothetical. If we approve that and then that comes up later, is there anything on OHFA where someone would come back and say, ‘You shouldn’t have done this?’ Any legal standing on that? Is OHFA exposed in any way?”
Orbison, a shareholder at the Riggs Abney law firm, responded by attempting to explain the situation faced by OHFA staff.
“When staff reviews these applications, they’re not reviewing whether we have legal liability. They’re charged with doing their job (…) as a gatekeeper, especially in dispersing these funds,” Orbison said. “So no, I don’t think they’d have legal liability, but I think they’d be in a position to have to explain to the public and the governor and to you all why they allowed this process to happen.”
