Objective

To assess the extent of implementation of the three recommendations included in our initial audit report, Physical and Financial Conditions at Selected Mitchell-Lama Developments Located Outside New York City – Sunnyside Manor: Unauthorized Bank Account (Report 2024-S-12).

About the Program

The Mitchell-Lama Housing program (Program) was created to provide affordable rental and cooperative (co-op) housing to middle-income families. A total of 269 State-supervised developments with over 105,000 apartments were built under the Program. Mitchell-Lama housing is owned by private companies and supervised by Homes and Community Renewal’s (HCR) Division of Housing and Community Renewal (DHCR).

Often, owners employ a managing agent, a person or entity responsible for managing the developments. It is the responsibility of the owners to provide safe and habitable housing and maintain the financial and physical integrity of the development. It is the function of the managing agents to effectively and efficiently manage the development to ensure that the owners' responsibilities are carried out. Both the owner and managing agent must agree to manage the development in accordance with local codes and State rules and regulations. Each development has an assigned DHCR management representative who is responsible for monitoring and evaluating the development’s management, as outlined in Title 9 of the New York Codes, Rules and Regulations. Management representatives are required to conduct yearly on-site assessments of the development’s physical condition as well as fiscal reviews (site and office visits). They must provide the results, including recommendations, in a written report—the DHCR Management Field and Office Visit Report—to the development. DHCR requires the development’s board of directors or managing agent to respond to this report within 30 days, describing the plan for corrective action.

The objective of the initial audit, issued on July 3, 2024, was to determine whether residents of Mitchell-Lama developments, supervised by DHCR, are provided safe and clean living conditions, and whether funds are properly accounted for and used for intended purposes. The report solely addressed the existence and use of an unauthorized bank account by Sunnyside Manor’s Board of Directors (Board). The audit found that Sunnyside Manor’s Board held a checking account separate from the development’s operating account—with a balance of $14,888 as of March 31, 2022—that, according to the property manager, included deposits of community room rental income. In addition to these deposits, we identified transactions, totaling $51,048, paid from Sunnyside Manor’s operating account to the Board-held account. Bank statements for the Board-held account showed numerous questionable debit card transactions. This Board-held account was not included on Sunnyside Manor’s general ledger and audited financial statements and appears to have received limited oversight.

Key Findings

DHCR officials have made progress in addressing the issues identified in the initial audit report. Of the initial report’s three audit recommendations, two were implemented and one was partially implemented.

Key Recommendation

Officials are requested, but not required, to provide information about any actions planned to address the unresolved issues discussed in the follow-up report within 30 days of the report’s issuance.