New York City Department of Housing, Preservation and Development

Oversight of Mitchell-Lama Housing Developments Needs to Be Strengthened to Ensure That Reserve Accounts Meet Future Needs

HPD is responsible for overseeing the operations of City-assisted Mitchell-Lama housing developments. There are 58 developments, with 30,855 apartments, under HPD's supervision. The developments are required to set aside reserve funds based on formulas prescribed by HPD to ensure that money is available for future repairs and capital improvements. HPD requires that each development be audited every year by a certified public accountant and that the statements include information regarding funding of reserve accounts. We found that HPD has a long-standing policy of allowing the developments having insufficient reserves to meet future repair and capital needs. As of June 1993 only 60 percent of the required $52 million in reserves had been funded. The underfunding for 1993 alone was $5.2 million. We found no evidence that HPD had determined the impact of allowing these developments' adherence to the funding requirements, but relies instead on information in the financial statements. We found that the statements for ten of the developments did not contain reserve fund information. A report issued by our Division of Management Audit found that Mitchell-Lama companies supervised by DHCR will also be unable to fund future large repair bills unless they properly fund reserve accounts.

For a complete copy of A-9-94 click here.
For a copy of the associated follow-up report click here.