Letter Report on the Billing and Collection of Funds for Fees Issued through New York City Department of Housing Preservation and Development’s Alternative Enforcement Program

Executive Summary

This Letter Report presents the results of the New York City Comptroller’s audit to determine whether New York City is properly billing and collecting fees, reimbursements, and any other funds due to the City for repairs made through New York City Department of Housing Preservation and Development’s (HPD’s) Alternative Enforcement Program (AEP).

In November 2007, HPD implemented the AEP, which was mandated by Local Law 29 of 2007 and codified at New York City Administrative Code §27-2153.  According to Section 1 of Local Law 29, the AEP is intended to alleviate the serious physical deterioration of the City’s most distressed multiple dwellings “by forcing the owner to make effective repairs or have city government do so in a more comprehensive fashion so that emergency conditions are alleviated and the underlying physical conditions related to housing code violations are addressed.”  As amended by Local Law 7 of 2011 and Local Law 64 of 2014, the statute currently requires HPD to identify 250 of the City’s most distressed multifamily residential buildings each year for inclusion in the AEP.  The program imposes what HPD refers to as significant fees, as well as repair charges, on the owners of those buildings when they fail to correct violations and the conditions that cause them.

Results

The audit found that HPD properly transferred AEP-related charges and fees to DOF on a monthly basis to DOF for buildings enrolled in the AEP, which DOF subsequently billed to building owners for payment.  We tested 185 (25 percent) of the 738 buildings that were included in the AEP during Calendar Year 2016 through Calendar Year 2018 (also known as “rounds” 9 through 11 of the program).   We found that repair charges, sales tax, administrative fees, and participation/inspection fees were correctly transferred to DOF for collection and posted accordingly on DOF’s Account History for each property tested.  We also found that $1,000,419 in AEP charges and AEP fees were collected by DOF; however, an outstanding balance of $778,483 in AEP charges and fees remained unpaid as of October 18, 2018 according to DOF’s records.

We also found that HPD satisfactorily collected and documented the amounts owed and discharged 15 of our sampled 16 buildings that submitted requests for dismissal from the AEP.  The one remaining building is still active in the AEP and therefore no dismissal re-inspection fee was collected for it.  HPD received the $1,000 dismissal re-inspection fee from each of the 15 building owners that completed their own repairs within the first four months of inclusion in the AEP, making them eligible to be discharged from the program.  These payments were recorded in the Financial Management System (FMS).

The audit recommends that HPD should continue to transfer all AEP-related charges and fees to DOF on a monthly basis to recoup any outstanding funds.  HPD should also continue to collect the dismissal re-inspection fees.

In its response, HPD agreed with the report’s findings and recommendations and stated, “HPD will continue to transfer all AEP related charges and fees to DOF on a monthly basis to recoup any outstanding charges or fees as well as to continue to collect the dismissal re-inspection fees.”