Letter Report on the Audit of the Department of Finance’s Administration of the Real Property Income and Expense Statement Filing Process

LETTER REPORT IN BRIEF

The Department of Finance (DOF) is responsible for the administration of the real property income and expense (RPIE) statement filing process. According to Title 19 of the Rules of the City of New York (Section 33-03) and the New York City Administrative Code (Section 11-208.1), owners of income-producing properties who fail to file an RPIE statement shall be subject to a penalty not to exceed 3 percent of the property’s final assessed value.  The law provides for an increased penalty, not to exceed 5 percent of the property’s assessed value, if the owner does not file the RPIE statement the following year (i.e., did not file for two consecutive years).

Our audit objective was to determine whether DOF properly assesses penalties on improperly or untimely filed RPIE statements.

Results

In our opinion, DOF should improve its process for assessing penalties on RPIE statements that were filed improperly or untimely. The audit found that although the filing requirement and penalty provision have been in the law for over 25 years, DOF did not actively pursue or impose any monetary penalty against property owners who failed to file the required RPIE statement until 2010.  In October 2010, DOF began notifying non-filers that they would be assessed a penalty if they didn’t comply with the filing requirements.  However, DOF decided to impose a sliding scale penalty schedule, which is substantially less than the 3 percent prescribed under the law.  Furthermore, we believe that DOF’s list of property owners who potentially had to file an RPIE was not all inclusive. Lastly, it appears that DOF is not adequately monitoring the administration of the RPIE filing process.

Audit Recommendations

We recommend that DOF consider imposing the full 3 to 5 percent penalty allowed under the law against property owners who failed to file the required RPIE statement for 2011. In addition, DOF should  review existing procedures to ensure that all property owners who potentially have to file an RPIE statement are included on DOF’s RPIE list and that all future lists be maintained so that their completeness can be reviewed and used for subsequent years’ analysis.  Lastly, DOF should maintain at least  basic statistics to be used by management for effective monitoring and tracking of property owner compliance. 

DOF officials agreed or partially agreed with three of the four recommendations.