Objectives

To determine whether residents of Mitchell-Lama developments supervised by  Division of Housing and Community Renewal are provided safe and clean living conditions, and whether funds are properly accounted for and used for intended purposes. This report solely addresses the existence and use of an unauthorized bank account by Sunnyside Manor’s Board. For findings and recommendations related to Sunnyside Manor outside of the unauthorized bank account, see the full report (2022-S-46).

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 the Division of Housing and Community Renewal (DHCR). 

Often, owners employ a managing agent, a person or entity responsible for managing the developments. Pursuant to New York Codes, Rules and Regulations (Regulations), when they do so, they are required to enter into an annual agreement with the managing agent, which must include a DHCR-approved Management Plan. It is the responsibility of the owner to provide safe and habitable housing and to maintain the financial and physical integrity of the development, and it is the function of the managing agent to effectively and efficiently manage the development to ensure that the owner's 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 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) and to 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 or managing agent to respond to this report within 30 days describing the plan for corrective action.

Key Findings

Sunnyside Manor’s Board held a checking account, separate from the development’s operating accounting—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, including Amazon purchases (such as vitamins shipped to an Arizona address, a treadmill mat, a cooking apron, and toys) totaling $2,512 and restaurant payments totaling $1,723, including a single payment of $1,149 at one restaurant. 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 Recommendations

• Review the Board-held bank account at Sunnyside Manor for compliance with Regulations, and take appropriate action, including recouping funds, for transactions that are inappropriate or unusual.
• Periodically review Sunnyside Manor’s rent receipts and miscellaneous operating income, including community room rental income.
• Issue guidance to all Mitchell-Lama developments related to the use of Board-held accounts and remind them of the Regulations for opening bank accounts and depositing rental income.