Audit Report on the Monitoring of the Award, Transfer, and Succession of Mitchell-Lama Apartments by the Department of Housing Preservation and Development

AUDIT REPORT IN BRIEF

This audit assessed the adequacy of the monitoring and supervision of the award, transfer, and succession of apartments at Mitchell-Lama developments by the Department of Housing Preservation and Development (HPD) to ensure compliance with Mitchell-Lama program regulations. HPD is responsible for protecting the existing housing stock, expanding housing options, and improving the availability, affordability, and quality of housing in the City. HPD is also responsible for monitoring and overseeing financial and property management, waiting lists, and admission applications for City-sponsored Mitchell-Lama developments.

Audit Findings and Conclusions

HPD’s monitoring and supervision of the award, transfer, succession, and subsequent retention of apartments at Mitchell-Lama developments does not provide sufficient assurance that housing companies consistently comply with Mitchell-Lama Rules (Title 28, Chapter 3, of the Rules of the City of New York). Documentation is not retained to verify that only qualified applicants are approved and awarded apartments. In addition, available vacancy reports, rent rolls, and waiting lists are not compared or reviewed regularly as a means to detect potential irregularities or other questionable matters that may require follow-up.

HPD’s audit function is the primary mechanism it uses to assess housing companies’ compliance with Mitchell-Lama Rules after apartments are awarded and occupied by tenants. However, HPD lacks a formal, risk-based approach in developing its audit plan and does not perform application audits of housing companies on a cyclical basis or with sufficient frequency to ensure the consistent compliance of housing companies with Mitchell-Lama Rules. Also, the agency lacks a formal system to log and track complaints, which is a concern since most audits are initiated by complaints.

Audit Recommendations

To address these issues, the audit makes 15 recommendations. Among them, we recommend that HPD should:

• Require the retention of the applications review checklist used in the approval or rejection determination and any other income and occupancy eligibility documentation deemed necessary. If the lack of storage space is a matter of concern, HPD should consider electronically imaging and archiving the documentation to alleviate such difficulties.

• Require the periodic review, evaluation, and comparison of vacancy reports, waiting lists, and rent rolls as part of its routine oversight and monitoring activities to identify and address inaccuracies and deficiencies and investigate any reported discrepancies pertaining to the award, transfer, and succession of Mitchell-Lama apartments.

• Implement a formal audit cycle requiring that each housing company be audited at least once every cycle.

• Design and implement a formal risk-identification methodology and indicators to assess and manage the risk of housing companies’ noncompliance with Mitchell-Lama Rules governing the award and occupancy of apartments. These measures and indicators should be used to develop the Audit Unit’s annual audit plan.

• Implement a system to log, track, and monitor tenant complaints about Mitchell-Lama housing companies and the resolution of those complaints. The system should enable Housing Supervision to categorize complaints (application, safety, repair, heat, etc.) by type and evaluate the complaints to identify frequency of complaint types and the housing companies against which the complaints are made. This information should also be used by both the Audit Unit and the Operations Unit to supplement their monitoring and supervision activities.

HPD Response

Of the 15 recommendations made in this report, HPD generally agreed with ten, partially agreed with one, and generally disagreed with four. The full text of the HPD response is included as an addendum to this report.