MEMORANDUM
Date: December 23, 2021
To: Nannette Beacham, RHA and Gabino Arredondo, RHA
From: Michael Tonovitz, CVR Associates, Inc.
CC: Gerard Windt, HUD; Benjamin Palmer, HUD; Shasa Curl, City of Richmond; and Anil Comelo, City Manager
Subject: Debts Owed Write Off/Repayment
Update to Report Dated February 28, 2021
On February 28, 2021, CVR Associates Inc. (CVR) submitted a report entitled “Report of Recommendations - Debts Owed Write Off/Repayment” to the U. S.
Department of Housing and Urban Development (HUD), the Richmond Housing Authority (RHA), and the City of Richmond (COR). CVR’s analysis determined that the verified amount due was $699,907, of which $307,649 should be offset by the transfer of ownership of the administrative building from RHA to the City.
As a result, the amount due and subject to a repayment agreement was determined to be $392,258. The details of the initial analyses are contained as Exhibit 2 of this memo.
One of the factors considered in the debts owned analysis was $568,631 of potential duplicate payments to Housing Choice Voucher (HCV) landlords. Due to the conditions of RHA’s accounting records, further verification of this amount was required.
HUD retained CVR in a separate engagement to verify whether the potential duplicate payments were remitted and, if so, if any funds were recovered.
CVR’s analysis determined that duplicate payments in the amount of $429,416 were remitted but not repaid. This is $139,215 less than what was initially identified as the potential duplicate payments. The difference in the amounts was attributable to checks that were voided or otherwise did not clear RHA’s bank accounts.
It was also previously determined that the duplicate payments made by the City’s Finance Department were paid with Administrative Fees, not Housing
Assistance Payment Funding. If not for these duplicate payments, there would have been additional Administrative Revenues available to RHA, reducing the amount of funds that the City would have needed to provide the program.
Thus, the debts owed would have been $429,416 less.
An updated summary of the verified debts owed is contained as Exhibit 1.
As a result, the verifiable amount due the City is calculated to be $1,268,538.
CVR recommends this amount be broken into three components as follows:
1. The debt owed should be reduced by $307,649 once the Administration Building is transferred from RHA to COR;
2. The debts owed as a result of the duplicate payments of $429,416 should be repaid with any funds that are recovered. Any uncollectable amounts should be written off; and
3. The remaining amount of $531,473 should be made subject to a repayment agreement in accordance with CVR’s original recommendations dated February 28, 2021.
Other than what is contained in this memo, none of CVR’s prior recommendations are impacted by the analysis of duplicate payments.
In a separate report dated September 24, 2021, and a follow up memo dated, December 21, 2021, CVR has recommended next steps to recover the duplicate payments. CVR is ready to proceed in assisting in recovery efforts, once authorized to proceed by RHA and/or COR.
Any duplicate payments recovered should be remitted to the City in satisfaction of debts owned, but any uncollectable amounts should be written off.
We look forward to discussing this matter during the call scheduled for January 11, 2021.
Exhibit 1 – Updated Analysis
Amount Description Recommended Action
$15,371,628
Amount Owed per City of
Richmond as of June 30,
2019
($5,704,418)
Notes & loans payable with
accrued interest due from
affiliated entities
Adjusted books and records to show
that these funds are due from
affiliated entities
($174,067)
Loan from Community and
Development Loan Programs
to Westridge paid off by sale
of property
Write off this amount as it was
erroneously booked
$45,969
Difference of direct and
indirect charges owed to the
COR by RHA as verified with
the COR’s 2019 CAFR
Post adjustment to reflect CAFR
differences
($2,096,527) Incorrect recording of
Westridge receivable
Write off this amount as it was
erroneously booked.
($4,772,363) Disallowed indirect cost
allocations
Write off this amount because the
City was not authorized to make
these charges
($1,401,684) Debt settlement per PHARS
agreement
Write off in accordance with PHARS
agreement
$1,268,538 Adjusted Amount Due
($307,649) Net Value of Administration
Building Reduce debt upon transfer of building
($429,416) Duplicate Landlord Payments Repay City with recovered payments and write off uncollectable amounts.
$531,473 Amount Subject to
Repayment Agreement
Exhibit 2 – Original Analysis
Amount Description Recommended Action
$15,371,628 Amount Owed per City of Richmond
as of June 30, 2019
($5,704,418)
Notes & loans payable with accrued
interest due from affiliated entities
Adjusted books and records to
show that these funds are due
from affiliated entities
($174,067)
Loan from Community and
Development Loan Programs to
Westridge paid off by sale of
property
Write off this amount as it was
erroneously booked
$45,969
Difference of direct and indirect
charges owed to the COR by RHA
as verified with the COR’s 2019
CAFR
Post adjustment to reflect CAFR
differences
($2,096,527) Incorrect recording of Westridge
receivable
Write off this amount as it was
erroneously booked.
($4,772,363)
Disallowed indirect cost allocations Write off this amount because the City was not authorized to
make these charges
($1,401,684) Debt settlement per PHARS
agreement
Write off in accordance with
PHARS agreement
($568,631) Duplicate landlord payments Write off pending review of duplicate payments
$699,907 Verified Amount Due
$307,649 Net Value of Administration Building Reduce debt upon transfer of building
$392,258 Amount Subject to Repayment
Agreement