Objective

To determine the extent of implementation of the recommendations in our initial audit report Purchasing Practices at the Linden Plaza Mitchell-Lama Housing Development (Report 2017-N-5).

About the Program

Our initial report, issued September 6, 2018, examined whether Linden Plaza was procuring goods, supplies, and services at competitive prices and in accordance with applicable requirements. The audit period was January 1, 2016 through August 31, 2017.

The Mitchell-Lama Housing Program was created in 1955 to provide affordable rental and cooperative housing to middle-income families. The New York City Department of Housing Preservation and Development (HPD) is the nation’s largest municipal housing preservation and development agency. Its mission is to promote the quality and affordability of New York City’s housing and the strength and diversity of its many neighborhoods. HPD works to achieve this mission by preserving affordable housing and protecting tenants, developing new affordable housing, enforcing the Housing Maintenance Code, and engaging neighborhoods in planning. In New York City, there are 93 HPD-supervised Mitchell-Lama rental and limited-equity cooperative developments with approximately 47,000 total units (apartments).

Linden Plaza, a Mitchell-Lama rental development in Brooklyn, is owned by Linden Plaza Preservation, LP and managed by RY Management. It was built in 1971 and has 1,525 apartments. Between January 1, 2016 and August 31, 2017, Linden Plaza made total vendor payments of approximately $33 million; $22.3 million was for services such as mortgage payments, insurance, and utilities. Our audit focused on the remaining $10.7 million, consisting of approximately $6.1 million in contract payments to 11 vendors and $4.6 million in non-contract payments to 163 vendors.

The initial audit found that the Rules of the City of New York (Rules) were limited in scope and did not encourage Linden Plaza officials to make purchases at competitive prices. The Rules did not require competitive bidding for contracts less than $100,000 or for purchases made without a contract, regardless of dollar amount. None of the $10.7 million in purchases made by Linden Plaza were subject to the Rules requiring competitive bidding. With limited exception, there was no documentation indicating that Linden Plaza had conducted price analyses or taken other steps to determine the reasonableness of the prices related to sampled non-contract purchases. Consequently, there was no assurance that these goods and services were procured at competitive prices.

Key Finding

We found that HPD officials made some progress in addressing the problems we identified in the initial audit. Of the initial audit report’s six recommendations, four were partially implemented and two were not implemented.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.