City Agency Audit Reports
Audit Report on the Department of Finance’s Administration of the Senior Citizen Rent Increase Exemption Program
Audit Number: MG11-053A
Release Date: September 23, 2011
AUDIT REPORT IN BRIEF
The Department of Finance (DOF) administers a broad range of programs that offer tax credits, one of which is the Senior Citizen Rent Increase Exemption program (SCRIE). This program provides an exemption to eligible tenants from future rent increases and offers the landlords an equivalent credit on their property taxes. In return for the exemptions, the City pays property owners an amount equal to the difference between the last amount of rent paid by the tenant prior to applying for SCRIE and the current legal regulated rent. This amount is paid in the form of a property tax abatement credit (TAC) issued on behalf of the tenant to the landlord against the landlord’s real estate taxes six months in advance.
Prior to September 18, 2009, SCRIE applications were processed by the Department for the Aging (DFTA) and TACs were issued by DOF. As of September 18, 2009, DOF also began processing initial applications and by January 2010, DOF was responsible for the entire SCRIE program. For the period July 1, 2009, through November 30, 2010, DOF issued $171.2 million in TACs on behalf of 47,282 tenants. During this period, DOF also recouped $8.9 million in previously issued TACs.
This audit determined whether DOF has adequate controls in place to ensure that TACs are appropriately issued to landlords.
Audit Findings and Conclusions
Our review found that DOF has inadequate controls in place to ensure that all TACs are appropriately issued to landlords. A major contributing factor is the absence of defined policies and procedures governing the process to help ensure that all TACs to landlords are made on behalf of eligible tenants. In fact, as a result of these inadequate controls, we cannot determine how much of the $171.2 million in TACs issued during our 17-month scope period was made on behalf of eligible tenants. A portion of these benefits may be attributable to incomplete benefit transfers to eligible household members, thereby directly affecting the accuracy of DOF’s database.
Since assuming responsibility for SCRIE, DOF has made some efforts to improve its controls. However, DOF has no controls in place that would allow it to identify when circumstances change (e.g., a tenant dies or moves out) and SCRIE benefits should be discontinued or transferred to another household member. We found during our review period (July 1, 2009 – November 30, 2010) that DOF issued more than $11.8 million in TACs on behalf of 3,801 tenants who were reported as deceased as early as January 2000 and had TACs issued on their behalf 1 . DOF recouped only $3.3 million of the TACs, leaving $8.5 million that still needs to be investigated.
To address these issues, we make seven recommendations, including that DOF should:
- Develop comprehensive policies and procedures for issuing TACs and for supervisory reviews of applications processed by staff. These policies and procedures should be enforced and communicated during periodic training sessions.
- Periodically match recipients listed in its databases with individuals listed as deceased in the Social Security Administration’s Death Master File to ensure that benefits are not issued on behalf of deceased tenants and to identify TACs that may need to be recovered.
- Develop controls to ensure that when it does identify deceased tenants with eligible household members, that its records are accurately updated and that benefit transfers are correctly performed, listing the new tenant’s date of birth and social security number.
DOF officials generally agreed to implement six of the seven recommendations in the report and disagreed with our recommendation to disable the SCRIE accounts of employees no longer associated with the program, contending that DOF has an existing process for automatically terminating access all of DOF’s computer systems when employees leave. Regarding TACs that were issued inappropriately on behalf of tenants who were deceased, DOF identified $9.9 million to be recouped. DOF officials contended that $4.5 million of this amount was identified prior to receipt of the Comptroller’s report and data, after they received notification about tenants who had moved or had died.
1 We obtained this information using the Social Security Administration Death Master file as of March 2011. This file is electronic, updated monthly, and contains death records reported to SSA by family members, funeral homes, etc.