Letter Report on the Department of Finance’s Administration of the Senior Citizen Rent Increase Exemption Program

Executive Summary

This Letter Report concerns the New York City Comptroller’s audit of the Department of Finance (DOF) and its administration of the Senior Citizen Rent Increase Exemption (SCRIE) program.  The objective of this audit was to determine whether DOF has adequate controls in place to ensure that property tax abatement credits (TACs) are issued to only those landlords whose tenants meet SCRIE eligibility requirements.

DOF administers a broad range of programs that offer tax credits, one of which is the SCRIE program.  This program provides an exemption to eligible tenants from future rent increases by keeping the rent at either the applicants’ prior rent amount, or one-third of their monthly income, whichever is greater.  At the same time, the program offers landlords an equivalent credit on their property taxes.  This amount, issued on behalf of eligible tenants, is applied quarterly to the landlord’s property tax bill in the form of a TAC, to offset any taxes due in the next tax period.   Tenants who apply and are determined to be eligible are legally entitled to SCRIE benefits.  Landlords do not have the authority to refuse participation or to prevent a tenant from participating in the SCRIE program.  To become eligible for the SCRIE program, one must meet the following eligibility criteria:

• Be at least 62 years of age;
• Have no more than $50,000 per year in household income;
• Be listed as the Head of Household or the primary tenant on the lease/rent order or have been granted succession rights to the apartment;
• Spend more than one-third of the monthly household income on rent; and
• Reside in a rent-controlled, rent-stabilized, or hotel-stabilized apartment in New York City (City).

Landlords, tenants, and family of tenants are required to notify DOF within 30 days when there is a change in the tenant’s circumstances, such as a death or a permanent move from the apartment.  In such instances, DOF is to determine whether another household member is eligible for the exemption and, if so, approve a benefit transfer.  If there is no other eligible household member, DOF is required to revoke the benefits and  retrieve previously issued TACs—in the form of a debit adjustment—going back to the first day of the month following the change in circumstances.

A prior audit conducted by our office found that DOF had inadequate controls in place to ensure that all TACs issued to landlords were appropriate.   As a result, the audit found that during the period of review (July 1, 2009 through November 30, 2010), DOF issued more than $11.8 million in TACs on behalf of 3,801 deceased tenants.  A follow-up audit found that DOF had improved its administration of the SCRIE program—that audit found that as of May 31, 2012, DOF had retrieved a total of $9.8 million in inappropriately issued TACs.

For our scope period of July 1, 2016 through February 28, 2018, DOF issued $239,749,768.67 in new TACs on behalf of 58,279 tenants.

Audit Findings and Conclusions

We found that DOF has adequate controls in place to ensure that TACs issued to landlords are appropriate.  Specifically, the controls established by DOF include the following:

• Development of clearly defined policies and procedures for its staff, including those pertaining to the roles, functions, and responsibilities of personnel who administer the SCRIE program to help ensure that staff are aware of their responsibilities.
• Segregation of responsibilities for various stages of the program—including the receipt and processing of applications, the issuance of TACs, and the review of appeals—among different units and individuals to ensure that overlapping responsibilities are not under the control of any one unit or individuals in a unit.
• Matching the names of recipients listed in its SCRIE databases with the names of individuals listed as deceased in the Social Security Administration Death Master File (SSADMF) index on a monthly basis to ascertain whether any TACs were issued on behalf of deceased tenants and need to be recovered. As of February 2018, DOF retained the services of the National Association of Public Health Statistics (NAPHSIS) to perform a similar match on a quarterly basis.

Based on our review of DOF’s electronic database of TAC expenditures posted from July 1, 2016 through February 28, 2018, we found that DOF: correctly determined the eligibility of tenants to participate in the SCRIE program, with a few exceptions (discussed below); appropriately issued TACs to landlords on behalf of those tenants; did not issue TACs for tenants whose applications were still in pending status; and appropriately revoked the benefits of ineligible tenants.  DOF also correctly issued prior period TACs to landlords within the current audit scope period.   Additionally, we found that DOF revoked tenants’ benefits or retrieved TACs from landlords when tenants passed away or moved subsequent to the issuance of TACs to landlords.   Finally, we found that for those tenants in our sample where DOF transferred SCRIE benefits from the primary tenants to other household members, such transfers occurred as a result of the death of the primary tenants.

However, when we examined the entire population of SCRIE tenants—58,279  at the time of our review—for the purpose of determining whether any of the tenants’ annual household incomes exceeded the maximum allowed income of $50,000, we found that DOF erroneously paid $13,944 in TAC benefits on behalf of six tenants whose incomes exceeded the required $50,000 threshold.  After we notified DOF of the errors, DOF retrieved $5,267 and was unable to retrieve the remaining $8,677 in TAC payments that had resulted from DOF’s error in approving the applications.   DOF has since added an edit check to its integrated electronic Rent Increase Exemption (RIE) processing system intended to identify when an applicant’s income exceeds the allowed threshold and prevent the approval of ineligible applications.

Audit Recommendations

The audit recommended that DOF should continue to monitor the controls put in place to ensure that TACs are appropriately issued to landlords.

Agency Response

In its response, DOF agreed with the report’s findings and recommendation.  Regarding the finding that DOF erroneously paid TAC benefits on behalf of six tenants whose incomes exceeded the required $50,000 threshold, DOF responded, “we bring such errors to the attention of the reviewers and use them as a coaching and staff development opportunity”.