MEMORANDUM
Date: April 1, 2022
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
Revision to Memo Dated December 23, 2022
On February 4, 2022, CVR submitted an updated memo with the final results of its analysis of duplicate payments. CVR’s analysis determined that duplicate payments in the amount of $306,497 had been remitted.
Since that date, RHA mailed collection notices and has received some repayments. In addition, 7 disputes were received. CVR assisted RHA with the review and determined that 2 disputes, affecting $5,080 of HAP that was paid, were valid. As a result, the final amount of the duplicate payments was revised again to $301,417. The final ledger of duplicate payments is attached.
It was 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 for its operational costs. Thus, the debts owed would have been $301,417 less.
On February 2, 2022, HUD’s Office of General Counsel advised that it might not be permissible to use the value of the Administrative Building and due consideration for the settlement of a portion of the debts owed. This building is scheduled to be transferred to the City for $1.00 as part of the planned disposition of certain RHA properties.
An updated summary of the verified debts owed is contained as Exhibit 1.
The verifiable amount due to the City was previously 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 only if HUD determines this to be permissible;
2. The debts owed as a result of the duplicate payments of $301,417 should be repaid with any funds that are recovered. Any uncollectable amounts should be written off; and
3. The remaining amount of $659,472 ($967,121) if the Administrative Building transfer cannot be used to settle the debt) should be made subject to a repayment agreement in accordance with CVR’s original recommendations dated February 28, 2021.
In addition, if RHA receives any additional disputes that are determined to be valid, debts owed should be written off in a corresponding amount.
Other than what is contained in this memo, none of CVR’s prior recommendations are impacted by the analysis of duplicate payments.
We look forward to discussing this matter during our next regularly scheduled team call.
Exhibit 1 – Updated Analysis Revised
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
Confirm with HUD that COR can
reduce debt upon transfer of building
($301,417) Duplicate landlord payments Repay City with recovered payments and write off uncollectable amounts.
$659,472 Amount Subject to
Repayment Agreement
$967,121
Amount Subject to
Repayment Agreement if HUD
does not allow transfer of
Administrative Building to be
used to settle debt