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May 29, 2019
  • Community Planning and Development
2019-NY-1002
2019-NY-1002.pdf

We audited the State of New York’s Community Development Block Grant Disaster Recovery-funded New York Rising Buyout and Acquisition program.  We initiated this audit based on observations related to the appraised fair market values made during a previous audit (2015-NY-1010) of the State’s program.  Our objectives were to determine whether the State ensured that (1) the appraised fair market values used to determine award amounts under its program were supported and (2) appraisal costs for its program complied with applicable requirements and were for services performed in accordance with Federal, State, and industry standards.

 The State did not ensure that (1) appraised fair market values used to determine award amounts under its program were supported and (2) appraisal costs complied with applicable requirements and were for services performed in accordance with applicable Federal, State, and industry standards.  The State also did not ensure that it had a clear and enforceable agreement with the City of New York before relying on appraisal services provided by the City’s contractor and did not ensure that the appraisal services were properly procured and performed.  These issues occurred because the State did not have adequate controls over its program.  As a result, the U.S. Department of Housing and Urban Development (HUD) and the State did not have assurance that (1) more than $367.3 million paid to purchase properties was supported; (2) more than $3.4 million disbursed for appraisal services was for costs that were reasonable, necessary, and adequately documented; and (3) appraisal services were properly procured and performed.  If the State improves controls over its program, it can ensure that up to $93.4 million not yet disbursed is put to better use.

 We recommend that HUD require the State to (1) provide documentation to support the appraised values of the properties purchased; (2) provide support to show that appraisal costs were reasonable, necessary, supported, and for services that were performed in accordance with requirements; (3) execute an agreement with the City for the use of appraisal services and show that services were properly procured; and (4) strengthen controls to ensure that Disaster Recovery funds used for appraisal services are for costs that are reasonable, necessary, supported, and for services that comply with applicable requirements.

Recommendations
Recommendation Status Date Issued Summary
2019-NY-1002-001-A Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 14 properties sampled to ensure that $5,920,097 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.
2019-NY-1002-001-B Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 942 other properties included in our sampling universe to ensure that $361,465,173 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.
2019-NY-1002-001-C Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of any other properties purchased under the program since January 2016 that relied upon appraisals conducted by the contractors discussed in this report to ensure that settlement costs for those properties were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.
2019-NY-1002-001-D Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to strengthen controls over the property valuation process for its program to ensure that up to $93,350,616 not yet disbursed is put to better use. This recommendation includes but is not limited to implementing a process to review the appraisal and quality control work to ensure that appraised fair market values are supported and that quality control reviews are performed as required by Federal, State, and industry standards and to take appropriate action for cases in which the work does not comply with requirements.
2019-NY-1002-002-A Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $3,119,209 paid for appraisals and poststorm addenda performed by its contractor was reasonable, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.
2019-NY-1002-002-B Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $156,940 paid for sales brochures, economic land analysis studies, and consultant fees was reasonable, necessary, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.
2019-NY-1002-002-C Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $75,006 used for appraisal quality control reviews was for services that complied with applicable requirements or reimburse any unsupported costs from non-Federal funds.
2019-NY-1002-002-D Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $118,800 paid to the State’s contractor for appraisals performed by its subcontractors was reasonable, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.
2019-NY-1002-002-E Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to execute an agreement with the City for the use of appraisal services and obtain documentation to show that services were procured in accordance with applicable requirements and that contracts contained all required provisions. If the State cannot provide the executed agreement and documentation, HUD should use one or more of the remedies for noncompliance in 24 CFR 570.495.
2019-NY-1002-002-F Open May 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to strengthen controls to ensure that future Disaster Recovery funds used for appraisal services and quality control reviews under the program are for costs that are reasonable, necessary, supported, and for services that comply with applicable requirements.