Loading...
HomeMy WebLinkAboutSPECIAL AUDIT - Affordable Files - PDHA PropertiesX D REQUEST: SUBMITTED BY: DATE: CONTENTS: Recommendation: PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT THE INTERIM SPECIAL AUDIT OF THE AFFORDABLE FILES AT THE PALM DESERT HOUSING AUTHORITY PROPERTIES JANET M. MOORE, HOUSING AUTHORITY ADMINSITRATOR OCTOBER 27, 2005 AUDIT REPORT Informational Item: Receive and File Report Executive Summary: After review of 644 Housing Authority tenant files whose incomes are below 65% of the County Median, the Agency found that there was less than a 1 % margin of error in the calculation of rent and ask that you receive and file this report. Discussion: In March of 2005, the Redevelopment Agency engaged the firm of Lance, Soll & Lunghard for an interim special audit to insure that rents were correctly calculated for those tenants whose rents are below the maximum rent. This audit resulted in an overall favorable response from the Agency's auditors. The Agency's main objective in performing this special audit was to determine whether or not the Agency was experiencing in a loss of revenue due to incorrectly calculated rents for tenants leasing units at subsidized rental rates . This audit indicated that out of 644 files one rental rate was calculated incorrectly, file documents were missing or incomplete from a small number of files, and that several leases at two complexes were expired. RPM ,our contracted management company, has responded to the rent calculation error and has indicated that it was an error and that they are taking steps to obtain manager approvals on all calculations to ensure minimal errors. With respect to the missing or incomplete documents, while several documents were located after the audit, it appears that these documents were not required in order to properly calculate the rents. They were found to be more of an internal nature and informational to the operations but not required for the permanent affordable file. Agency staff will be identifying the documents that are to be included in the files to ensure that we are complying with the Health and Safety Code and Title 25 of the California Code of Regulations as it relates to the calculation of affordable rents. We will provide a "required document list" to the auditors for future audits. G UiDA\Patty LeontWpdocsUN1Nf\staff repon\Audit HA Properties 102705 wyd STAFF REPORT AUDIT REPORT OCTOBER 27, 2005 PAGE 2OF2 The expired leases came from two complexes managed by the same property manager who has since been replaced, however, Agency staff has requested that all residents re- certify their income which will require a new lease. In the event a resident refuses to provide this information, the manager will follow our current policy and the tenant will be served a notice to vacate. Staff feels that this interim audit indicates that procedures that we have put in place over the last three to four years have been successful in reducing the number of errors in calculations. Staff recommends you receive and file this report. Sub tted by: Department Head: J ne . Moore Dave Yn en Housing Authority Administrator Director f Redevelopment/Housing Approval: J McCarthy, ACM/R o Paul Gibson, Director of Finance ment Carlos rtega xecutive Director G \PDA\Patty Leon\WpdocsVM. N11staiTreportWudit HA Properties 102705 wpd Lance Brandon W. Burrows Soil & Donald L. Parke Michael K. Chu r Lunghard S.'=Richard David E. Hale A Vmrsarlone! Covpaletlon L L P Donald G. slater K. Kikuchi Certified Public Accountants Retired Robert C.C. LaLance 1914-1991 Richard C. Soil Fred J. Lunghard, Jr. 19za-1999 March 18, 2005 INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, California We have performed the procedures enumerated below which were agreed to by the management of the City of Palm Desert, California (City), solely to assist the City in evaluating RPM Company's (RPM) compliance with guidelines established by the City as it relates to the provisions of affordable housing programs at various RPM managed apartment properties. This agreed -upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below, either for the purpose for which this report has been requested, or for any other purpose. Scope of the Procedures Performed and Related Findings The procedures performed and the results obtained from the performance thereof were as follows: Procedure Performed: We obtained a copy of the rent roll details for all properties as of March 7, 2004. We identified 644 tenants whose income levels were between 20% and 65%. We reviewed their tenant files and verified that proper documentation was present to determine both appropriate affordable rent calculations and to meet procedural requirements. Findings: Based on our procedures, we found 22 documents to be missing or incomplete. Additionally, while reviewing the contract documents in the tenant files for the Neighbors and Laguna Palms complexes, we noted that the contract dates for the majority of the tenants tested expired between December 2004 and March 2005. A recertification should have been performed for these tenants; but as of March 7, 2005 there was no record of one. For these tenants we tested the most recent information available. RPM Response: A. Attached are 5 of the 22 missing or incomplete documents which were located in the resident's files therefore leaving 17 forms missing or incomplete. Eight of the incomplete were the utility list forms, missing the resident's account numbers. Residents have ignored management's second and third requests to provide this information. The utility list account number request is designed for management convenience and to ensure utilities are transferred into the resident's name. This form is not legal grounds to deny an applicant or interrupt the move -in process. All residents are currently paying for their own utilities. This is monitored monthly with our utility bills and account payable process. The remaining nine missing forms consist of the utility account number form and the application verification form of which in most cases were in fact completed, but the request itself was not filed back into the residents file after faxing to employers and/or previous landlords. The 75 Years majority of these files with the above mentioned forms date back to 1999 and 2000 move -in dates. 1929 2004 of Excellence 203 N. Brea Blvd., Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 ' www.lsfcpas.com LL SLF rd LLP CE977VEO PUSUC ACCOUNTANYS To the Honorable Mayor and Members of the City Council City of Palm Desert, California Page 2 B. Laguna Palms and Neighbors, the majority of tenants with expired leases. The decision for Laguna Palms to allow residents to roll to a month -to -month lease was an approved decision between RPM and the Palm Desert Housing Authority due to the fact Laguna Palms is undergoing interior and exterior renovations with the intent of transferring current residents as well as certifying residents to the affordable program upon transferring. Additionally, residents who did not qualify for the program were rolled to a month -to -month tenancy. It was the decision of the Authority to not serve the resident with a 60 day notice to vacate. 2. Procedure Performed: We verified that the category of affordable housing that the tenant qualified for and the amount of monthly rent charged was proper. Finding: One tenant occupies a two bedroom unit at One Quail Place with four other family members. While reviewing his 2004 recertification, we noted that the amount of monthly rent charged was based on four occupants rather than five. We reviewed the supporting documents and found that the family had recently had a baby and this change was not reflected on the subsidized rent worksheet. This tenant is currently being charged $680, but should be paying $739, an undercharge of $59 per month. RPM Response: The tenant moved in to a two bedroom at One Quail with a family of four in 2003. During the 2004 re -certification process an ex -employee of RPM, leasing agent failed to notice a new baby born a couple of months prior to the re -certification. Yes, the resident's re -certification was calculated for a family of four not five occupants, undercharging the residents $59 per month for six months, in total, an error of $354. The residents have moved out and are no longer with the affordable housing program. We were not engaged to, and did not, perform an audit on RPM Company's compliance with guidelines established by the City, the objective of which would be the expression of an opinion on RPM Company's compliance with guidelines established by the City. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of these procedures. However, this report is a matter of public record and its distribution will not be limited. / , z // ...Z