Audit Report on the New York City Department of Finance’s Administration of the Senior Citizen Homeowners’ Exemption Program

Executive Summary

The Department of Finance (DOF) is responsible for administering the Senior Citizen Homeowners’ Exemption (SCHE) Program which provides a partial property tax exemption for senior citizens who own one, two, or three family homes, condominiums, or cooperative apartments in New York City (the City). The SCHE can reduce the assessed value of a property by five to 50% depending on the owners’ income.

Homeowners must complete an initial tax benefits application prior to receiving the exemption the first time and a renewal application every 24 months from the date the exemption was granted. A homeowner can own more than one property; however, they may only have one primary residence and receive the SCHE only on that property. For a property with four or more residential units, the SCHE must be prorated to the percentage of space being utilized as the owner’s primary residence.

Audit Findings and Conclusion

Generally, DOF followed its process to ensure that all owners and co-owners receiving the SCHE met the eligibility requirements to receive the exemption. Moreover, the audit found that DOF improved certain aspects of its controls over the exemption process identified in a prior audit which found that DOF had granted the SCHE to ineligible properties including those owned by corporations. DOF reduced the number of ineligible properties granted the SCHE by 95%.

Nevertheless, the auditors identified errors that led to a loss of property tax revenue of $3,076,362 during Fiscal Years 2019 and 2020. Specifically, DOF granted the SCHE to 107 properties after the homeowner(s) had died, resulting in property tax revenue losses of $1,522,078. DOF also incorrectly prorated the SCHE granted to 87 properties containing four or more units, resulting in a loss of $1,554,284 in property tax revenue.

Audit Recommendations

Based on the audit findings, the auditors make the following three recommendations.

DOF should:

• Ensure that it follows its procedures and removes the exemption for deceased homeowner(s), either the first day of the next quarter following the date of death or the beginning of the tax year (July 1), whichever is later.
• Collect all tax revenue that was due and owing, by:

• • Recovering the $1,522,078 in erroneous exemptions that were applied to properties after the qualifying homeowner(s) were deceased;
  • Recovering the $1,554,284 in excessive exemptions that were granted to properties containing four or more units.

• Ensure that in properties containing four or more units, the SCHE is only prorated to the owners’ unit being utilized as a primary residence.

Agency Response

In its response, DOF stated that it implemented Recommendations #1 and #3, but that it will not implement Recommendation #2.