Audit Report on the Compliance of Amboy Neighborhood Center, Inc., With Its Contract With the Department of Housing Preservation and Development

EXECUTIVE SUMMARY

The Department of Housing Preservation and Development (HPD) entered into a three-year contract (January 1, 1992–December 31, 1994) with the Amboy Neighborhood Center, Inc., (Amboy) to manage, maintain, and operate the Amboy Family Center (Family Center). Under the terms of the contract, Amboy was to provide temporary emergency housing for families displaced by fires or ordered to vacate their apartments because of unsafe conditions. During our audit period–July 1, 2000, to June 30, 2001—HPD renewed Amboy’s contract, which totaled $4,148,491.

Our audit objective was to determine whether Amboy complied with its contract with HPD. Specifically, we determined whether Amboy kept the Family Center in a safe and sanitary condition; maintained complete and accurate records to support amounts billed to HPD; and maintained complete and accurate records to support its expenses, and whether those expenses were reasonable and necessary for the operation and maintenance of the Family Center. Our audit covered the period from July 1, 2000 through June 30, 2001.

Prior to beginning the audit, on May 2, 2001, and May 4, 2001, we conducted unannounced visits to the premises to determine whether the Family Center was maintained in a safe and sanitary condition. We made a follow-up visit on January 29, 2002, to determine whether conditions found during our initial visits were corrected. In addition, we reviewed reports filed by Amboy’s social workers and inspectors, which detailed problems they found in the apartments, and service call slips, which indicated that repairs had been completed. We also compared the conditions noted on the inspection reports to the conditions found during our visits.

We determined whether Amboy maintained complete and accurate records to support amounts billed to HPD by reconciling Amboy’s tenant occupancy records to HPD’s on-site occupancy records. In addition, we determined whether Amboy was billing HPD and DHS for the same tenants by comparing the residents’ names and apartments listed on occupancy verification records maintained by HPD and DHS for the months January 2001 through March 2001. We obtained and reviewed all canceled checks and corresponding invoices for the audit period, and we reviewed the payroll and employee time records for three pay periods in March 2001. We determined whether Amboy complied with other provisions of its contract by verifying whether: appropriate insurance coverage was maintained; teenage, infant care, and after school programs were provided; a security surveillance system was installed; orientation and a copy of the ‘House Rules’ were provided to new tenants; not-for-profit organizations and government agencies were provided non-residential space; and, its water and sewer bills were paid.

Our audit was conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS) and included tests of the records and other auditing procedures considered necessary. This audit was performed in accordance with the City Comptroller’s audit responsibilities as set forth in Chapter 5, § 93, of the New York City Charter.

Amboy maintained complete and accurate records to support expenses and the amounts billed to HPD, and generally spent program funds on expenses that were reasonable and necessary for the operation of the Family Center. In addition, in accordance with its contract, Amboy properly billed HPD and DHS for only those tenants for whom each agency was responsible; maintained the required insurance coverage; provided teenage, infant care, and after school programs; installed a security surveillance system; conducted orientation for new tenants and provided them with a copy of the ‘House Rules’; and provided non-residential space for not-for-profit organizations and government agencies providing social services, support, and relocation services.

However, Amboy did not comply with certain terms of its contract and had weaknesses in its operating practices. Specifically, Amboy did not maintain the facilities in a safe and sanitary condition. We found roach and fly infestation; clogged and leaking sinks and bathtubs; water damage on ceilings and walls; broken and inoperable windows; broken beds and dilapidated mattresses; and falling plaster and holes in ceilings. In addition, many of the residents complained that their apartments were infested with mice or rats. Based on our two sets of inspections, we conclude that Amboy is not performing satisfactorily in terms of providing a safe and sanitary environment for all of its tenants. We also conclude that HPD’s monitoring of Amboy is inadequate.

Amboy’s contract contains no provision requiring that it inspect apartments for items in need of repair. Rather, the contract requires only that it respond expeditiously to resolve tenant complaints. However, as previously noted, many of the Family Center’s apartments contain unsafe and unsanitary conditions. This means either that either tenants are not complaining, or that Amboy is not responding to complaints. Either way, it is obvious that Amboy is not ensuring that safe and sanitary conditions exist in the Family Center. Amboy must therefore develop and implement formal procedures for inspecting tenants’ apartments.

According to Amboy’s Assistant Director, Amboy inspectors and social workers visit every occupied apartment in the Family Center once a week. If that were true, then based on the number of occupied apartments at the Family Center, Amboy employees would have been required to make more than 18,000 inspections during the year. Amboy, however, provided us only 435 inspection reports. These reports indicated that only 153 of the Family Center’s 224 apartments were inspected during the year—71 apartments were not inspected at all. The 153 apartments were inspected an average of 2.25 times during the year. Of the 71 apartments that were not inspected, 27 had an inspection report indicating that the tenant was not at home and therefore the employee did not gain access; and one report contained only the tenant’s name and apartment number—not the conditions found. We were not given inspection reports for the remaining 43 apartments. Amboy officials stated that the 435 inspection reports it provided were the only inspection reports it had for the period under review.

Failure to correct the unsafe and unsanitary conditions was not due to a lack of funding. During the audit period, the auditors noted that Amboy had funds totaling $484,968, in a Certificate of Deposit ($299,369) and an investment account ($185,599), that it could have used to correct the deplorable conditions we found at the family center. Furthermore, as of July 3, 2001, there was an additional $1.3 million available in the reserve account maintained by HPD that could have been requested. Rather than a lack of funding, it was a lack of formal inspection procedures on Amboy’s part, combined with bureaucratic inertia on both Amboy’s and HPD’s parts with regard to making use of available funds, that led to the deplorable living conditions at Amboy.

Furthermore, Amboy’s contract with HPD includes $153,072 for ‘management fees’ for our audit period. The contract, however, does not indicate who the manager is or what services are to be provided. According to Amboy’s latest certified financial statements, the Family Center’s operations are managed by Colony South Brooklyn Houses, Inc. (CSBH). Amboy paid CSBH $135,433 during our audit period. We question the payments made to CSBH because there is no contract between Amboy and CSBH indicating what services were to be rendered by CSBH in return for the fee, and because CSBH did not bill Amboy for services rendered.

Finally, according to the City Department of Environmental Protection’s (DEP) Customer Information System, we determined that as of April 26, 2002, Amboy owed the City $417,571 for water and sewer charges at the Family Center’s 13 buildings.

The report made six recommendations, including that HPD should:

• Ensure that Amboy inspects all apartments and ensure that all unsafe and unsanitary conditions are corrected.
• Ensure that Amboy develops and implements formal procedures for inspecting tenants’ apartments.
• Ensure that Amboy pays DEP $417,571 in outstanding water and sewer charges.
• Routinely inspect the Family Center’s occupied apartments to ensure that they are safe, sanitary, and properly maintained, as required by HPD’s contract with Amboy.

The matters covered in this report were discussed with Amboy and HPD officials during and at the conclusion of this audit. A preliminary draft report was sent to Amboy and HPD officials and discussed at an exit conference on May 30, 2002, with HPD officials. Amboy declined to attend the exit conference. On May 31, 2002, we submitted a draft report to Amboy and HPD officials with a request for comments. We received written responses from Amboy on June 19, 2002, and from HPD on June 24, 2002.

In its response, Amboy did not dispute the existence of the conditions that were observed by the auditors. However, Amboy indicated that the report fails to note that the majority of the problems found were caused by a lack of sufficient funding and the ‘dysfunctional behavior of a significant number of families in the shelter system.’ In addition, Amboy claims that the $135,433 in expenses questioned by the auditors (consisting of $127,650 in management fees, $7,500 paid for a dinner dance, and $283 paid for a conference call) were appropriate expenses. Amboy agreed that overpayments were made to certain of its employees, that the hours worked by the Executive Director lacked documentation, and that Amboy owes the City $417,571 in water and sewer charges. In addition, although we were informed by HPD that Amboy declined to attend the exit conference, Amboy stated that this was not the case.

HPD agreed to implement all of the report’s recommendations.