Mission Housing Development Corporation : a complex organization that needs to improve its controls over housing and service provision and requires City monitoring to preserve the City's investment

2005·4.8 MB·English

by  San Francisco (Calif.). Office of the Controller. City Services Auditor Division

SAN FRANCISCO PUBLIC LIBRARY
3 1223 07513 5088
City and County of San Francisco
OFFICE OF THE CONTROLLER
CITY SERVICES AUDITOR
Mission Housing Development Corporation:
A
Complex Organization That Needs to Improve Its
Controls Over Housing and Service Provision and
Requires City Monitoring to Preserve the City's
Investment
DOCUMENTS DEPT.
DEC 1 9 2005
SAN FRANCISCO
PUBLIC LIBRARY
D
imber 04043 December 16, 2005
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CITY AND COUNTY OF SAN FRANCISCO
OFFICE OF THE CONTROLLER Ed Harrington
Controller
Monique Zmuda
Deputy Controller
December 16, 2005 Report Number 04043
Larry Del Carlo
President, Mission Housing Development Corporation
474 Valencia Street Suite 280
San Francisco, CA 94103
Dear Mr. Del Carlo,
The Controller's Office, City Services Auditor presents its audit report concerning the
Mission Housing Development Corporation (MHDC). In summary, the audit objectives
MHDC MHDC
were to detail the structure of and the City's relationship with and its
affiliates, determine the extent ofrecent changes in the organization and their effects on the
MHDC
agency's provision of services and housing, and determine whether effectively
manages its housing assets. The major audit findings include:
• Mission Housing is a large and highly complex affordable housing organization
with multiple ownership structures, funding streams and compliance requirements
for its 36 properties (including 34 existing and 2 under development). It provides
approximately 1,000 units ofhousing to over 1,900 tenants with units ranging from
single-room occupancy hotels to family housing. Many types oftenant services are
MHDC MHDC
provided by or by organizations operating in sites (Chapter 1).
• The City has invested approximately $19 million in bonds, $17 million in loans, and
MHDC
$4 million in contracts and grants with in the last five years alone and has a
significant investment in the organization and in ensuring that it protects its tenants
and assets appropriately (Chapter 1).
MHDC
• Although it has made recent hires ofnew staff, lacks enough appropriate
financial expertise internally and relies heavily on outside consultants, on its
property management subsidiary and on its external auditors to perform basic
financial, accounting and asset management functions. As a result, the organization
has had difficulty with financial compliance and budgeting, and its ability to
perform critical asset management functions such as long-term maintenance and
liability management is weak (Finding 2-A).
MHDC
• Critical health, education and other human services are provided in housing
units through several nonprofit organizations and by MHDC's own staff. Such
services are part of an affordable housing model that helps tenants retain and
MHDC
stabilize their housing, employment and family lives. receives funding that
MHDC
is predicated on providing this type of service model. However, does not
CityHall • 1 Dr.CarltonB.GoodlettPlace •Room316• SanFranciscoCA94102-4694 FAX[phone]
December 16, 2005
Mission Housing Development Corporation Audit
Page 2
have comprehensive knowledge ofthe services provided at its own sites and as a
result, there are both gaps and overlaps in services to tenants. In addition, the
organization is at risk for failing to comply with financing terms that require direct
service provision (Finding 3-A).
• MHDC's role has changed in the last five years from providing tenant services
directly to coordinating for services through other organizations. Since 2000,
MHDC
withdrew from two City service contracts, failed to win the bidding
processes on another, failed to successfully negotiate the terms oftwo contracts,
and has also reduced the number of services coordinators that it employs directly.
The organization has experienced conflict over this situation and there are differing
ideas expressed in its grant applications, mission statements and other documents.
MHDC
To reduce this conflict and better manage operations, needs to clarify its
approach to providing services and reflect it in relevant documents (Finding 3-B).
MHDC
The overall audit conclusions are that needs to strengthen its financial and asset
management capacity by hiring and/or retaining enough skilled staffto manage, report on
and plan for all ofits operations and by setting and improving asset management policies
MHDC
and procedures for itself and its subsidiary. To provide tenant services effectively,
should build a comprehensive knowledge of the services and providers on its sites and
better track the loan and regulatory requirements of its funding with respect to services.
MHDC
Finally, should clarify the mission and purpose ofthe organization and ensure that
these are consistently used and expressed in grant, contract and loan agreements. Taken
together, the audit recommendations are good management practices for affordable housing
providers and for City contractors specifically-the Controller's Office will work with City
MHDC
departments that have financial and contractual relationships with and with the
organization itselfto follow-up on these recommendations.
Mission Housing Development Corporation's response to the audit is attached as Appendix
X We
ofthis report. acknowledge the assistance and cooperation provided to the audit
staffby MHDC, its consultants and auditors, by City department staff, and by staffof other
nonprofit service providers.
Respectfully Submitted,
TABLE OF CONTENTS
Executive Summary
1
Introduction 5
Chapter 1 9
MHDC is a Complex Organization With Many
Affordable Housing Properties With Distinct
Ownership Types and an Array ofTenant Services
Chapter 2 15
MHDC
Needs to Increase Its Internal Capacity
To Effectively Monitor Its Housing Assets
Chapter 3 23
MHDC
Needs to Improve its Controls Over
Services to Ensure Compliance With Loan and
Regulatory Agreements and Also Needs to Establish
a Clear and Consistent Purpose
Appendix A A-l
MHDC
Services Available at Sites
Appendix B B-l
MHDC
Schedule of Properties and Ownership Information
Appendix C
C-l
City Contracts and Grants
Appendix X
Mission Housing Development Corporation's
Response to the Audit X-1
Digitized by the Internet Archive
2014
in
https://archive.org/details/missionhousingde1620sanf
EXECUTIVE SUMMARY
FINDINGS AND RECOMMENDATIONS
CHAPTER MHDC A COMPLEX ORGANIZATION WITH MANY
1. IS
AFFORDABLE HOUSING PROPERTIES WITH DISTINCT OWNERSHIP
TYPES AND AN ARRAY OF TENANT SERVICES
Mission Housing Development Corporation (MHDC)
The chapter details the
is a large and complex nonprofit affordable housing
properties, the types of
development organization that provides an array of
ownership, funding
housing opportunities and services to low-income San
arrangements, property
MHDC
Francisco residents. owns or actively
profiles and tenant services
MHDC manages 34 properties and has two additional
provided by to
properties under development. The organization has
demonstrate the complexity
approximately 1,000 affordable housing units that
ofthe organization and its
house more than 1,900 tenants. Properties range from
relationships with the City
two-or three-unit buildings to single-room occupancy
and other parties.
(SRO) hotels with dozens of units. Tenants include
families with children, seniors, single adults and
persons with disabilities. In the last five years alone, the City of San Francisco has
MHDC
invested in with approximately $17 million in loan funding, $19 million in
redevelopment bonds, and over $4 million in grants and contracts for affordable housing
development, housing rehabilitation, and tenant services.
CHAPTER 2. MHDC NEEDS TO INCREASE ITS INTERNAL CAPACITY TO
EFFECTIVELY MONITOR ITS HOUSING ASSETS
Finding 2-A. MHDC does The audit found that MHDC relies on its external
not effectively monitor its auditors and otherprofessional consultants to perform
housing assets due to its critical asset accounting and financial reporting
over-dependence on functions because it has lacked sufficient skilled
external parties, insufficient accounting and asset-management staff within its
information about the organization and also within its wholly-owned
condition ofits properties, property management company Caritas Management
and a consequently weak Corporation (Caritas) to adequately monitor loan
MHDC
ability to do strategic asset balances or loan compliance. As a result, did
planning and management. not make loan payments for nearly one million
dollars in 2004 to the San Francisco Redevelopment
MHDC
Agency as required in its partnership agreement for one of s affiliate properties.
Its lack of comprehensive and timely loan balance, cash flow, and other financial
information affects MHDC's ability to make sound planning and operational decisions.
Further hampering MHDC's ability to monitor its assets is the lack of complete and
MHDC
adequate information in monthly reports that are prepared for by Caritas.
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Without complete information, the organization cannot adequately monitor its assets or
plan strategically for cost overruns, maintenance and repairs, or mitigate safety and
security concerns. MHDC has not taken an active role to improve this situation by
making changes to the agreements with its property management subsidiary that would
MHDC
better suit its needs as property owner and also lacks policies and procedures for
the way it monitors and manages its housing assets.
The audit recommends that MHDC hire and/or retain enough skilled finance and asset
MHDC
management staff to track, analyze, and report on all of its properties. should
complete the implementation of recommendations from its external auditors in its 2003
management letter (these recommendations also pertain to strengthening MHDC's
financial management staffand its internal controls). MHDC should develop its own set
ofpolices and procedures pertaining to asset management and implement changes to the
contents of monthly reports from Caritas in a manner that reflects its needs as the asset
manager. These improvements could involve changing management agreements for the
properties and/or the master agreement between Caritas and MHDC.
CHAPTER MHDC NEEDS TO IMPROVE ITS CONTROLS OVER
3.
SERVICES TO ENSURE COMPLIANCE WITH LOAN AND REGULATORY
AGREEMENTS AND ALSO NEEDS TO ESTABLISH A CLEAR AND
CONSISTENT PURPOSE
Finding 3-A. MHDC lacks The audit found that MHDC does not have
clear and comprehensive comprehensive information that would allow it to
knowledge ofall tenant adequately manage the tenant services that are
services available at its sites provided at its sites. The service listing attached as
and the service Appendix A was constructed by audit staff and
requirements outlined in required multiple interviews with MHDC staff and
loan and regulatory review of a wide variety of sources that conflicted in
agreements. The some cases. There is a lack of clarity about services
organization is at risk of on site and between staffs and management's
noncompliance with understanding of the roles and responsibilities of
financing terms and services coordinators. Where services are provided
program regulations. through another community-based organization rather
than its own staff, MHDC was similarly unclear about
all of the services that are being provided, and in some cases does not have a contract,
memorandum ofunderstanding, or other appropriate agreement with the service provider,
exposing the organization to unnecessary liability should any incident occur. In addition
MHDC
to the lack of information regarding services, does not have a comprehensive
understanding ofthe service requirements outlined in its regulatory agreements for each
of its properties. As a result of these information gaps, some tenant services are not
available consistently, and the organization is at risk of not complying with service
requirements that are outlined in loan and regulatory agreements.
The audit recommends that MHDC create a listing or use the listing developed during
the audit process to maintain a centralized database of services that are available at all
MHDC A
properties. written and centralized listing would facilitate staff and
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MHDC
management's understanding of services provided at its sites, allow to better
manage resources, allow services coordinators to collaborate more closely and find ways
MHDC
ofmaking services available to tenants, and close any gaps in service. also needs
to develop a listing ofthe loan and regulatory requirements for service provision for each
of its properties. Used in conjunction with the previously mentioned listing of services
MHDC
available at its properties, would be able to affirmatively ensure compliance with
MHDC
the service mandates ofregulatory and loan agreements. also needs to updatejob
descriptions or other written documentation for services coordinators so that each
MHDC MOUs
coordinator is clear as to their roles and responsibilities. should enter into
or other appropriate agreements with all entities that provide services at their sites.
MHDC
Finally, should explore the possibility of establishing a nonprofit affiliate that
MHDC
would manage supportive services at sites in the same structural capacity that
Caritas manages MHDC properties. This structure would clarify MHDC's purpose of
MHDC
being a housing developer, while allowing to continue to provide services at the
sites that are required to have those services under its loan terms.
MHDC The audit found that MHDC's role as a direct service
Finding 3-B.
Tenants have provider has decreased in recent years because it pulled
still
out oftwo City contracts and was not awarded four other
services available to
them although funding service contracts that it sought to renew. This has meant
MHDC
for services has a reduction of on-site staff at sites and the
MHDC discontinuation of some services, including the SF Food
decreased. lacks
a clear and consistent Bank at Rich Sorro Commons (multifamily site). Despite
MHDC
approach to tenant these changes, eight staffare still employed by as
services coordinators and provide a wide array of
services.
services, including coordination of service provision by
MHDC
outside service providers. Despite this fact, has struggled organizationally with
its role as a service provider and with other issues, such as whether or not it includes
—
moderate-income projects in its purpose grant applications, mission statements, and
other documentary sources are not consistent on these issues.
The audit recommends that MHDC's Board of Directors and management clarify the
mission and purpose of the organization and ensure that all internal reports and
documents; the articles ofincorporation; grant, contract, and loan agreements; as well as
MHDC
external information such as the website, have a consistent purpose and mission.
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