Public Administrator/public Guardian:

As the Public Guardian or conservator of the estate for individuals the Probate Court has determined are no longer able to manage personal and financial affairs and who do not have anyone to assume the role; 2. As the Public Administrator for estates that do not have a private sector individual who can assume the role. As a result of Court action, either “Letters of Conservatorship” or “Letters of Administration” are issued by the Court that authorize the transfer of the assets and liabilities of a person or estate to the Public Administrator/Public Guardian. Individual cases are assigned to Deputy Administrators and Guardians who are responsible for management of assets and payment of financial obligations while ensuring that the person receives the care he/she needs. The case the Grand Jury examined was that of an individual who, at the time of the referral to the Public Administrator/Public Guardian (PA/PG) Office in March 2000, lived alone in his home and required medical care in a skilled nursing facility (SNF). There was no one who would assume responsibility for his medical care and financial affairs. After an investigation, the PA/PG made arrangements for his transfer to a SNF and petitioned the Court to be designated the Guardian/Conservator over the person’s estate. “Letters of Conservatorship” were issued to the PA/PG for this case in March 2000. The Conservatorship continued until his death in October 2002. In October 2002, a Petition for Probate was filed by a private sector administrator in Probate Court, who was officially appointed administrator for the estate in December 2002. In April 2003, the Final Accounting for the Conservatorship was filed by the PA/PG in Probate Court. In August 2003 a hearing was held in Probate Court regarding the final accounting of the estate and the distribution of assets to heirs. Possession of the real property by the heirs, however, could not be taken until October 2003. FOCUS OF THE COMPLAINT While the estate of the case we examined included both financial holdings and real property, the focus of the complaint was only on the PA/PG’s obligations and performance in managing the property that had been occupied by the conservatee until he was transferred to a SNF for medical care. 2 – 2004(filed May 19, 2004) Report 2003/4-06 The complaint was filed by an heir who alleged that the Public Administrator/Public Guardian breached a fiduciary duty and failed to protect the assets of the estate entrusted to them by Probate Court. It described in detail the problems that existed as they attempted to take possession of the north coastal property located in the City of San Diego: • A house that had not been maintained properly and required extensive maintenance in order to make it habitable. • A tenant occupying the property was more than $11,000 in arrears in rent. • There was no longer a $2,000 security deposit to apply towards costs incurred from the tenancy because it was transferred by PA/PG to the Private Administrator in May 2003 with the distribution of assets from the estate and was reported to the Court as rental income. • The need to hire a private attorney to assist them in evicting the tenant. • A prolonged eviction process because the tenant successfully used the fact that the house was uninhabitable or unfit to live in due to prolonged poor maintenance of the house, to relieve the tenant’s obligation to pay rent. In addition to the lost income for the estate during the 3-year tenancy, the complaint stated that the heirs had to make personal expenditures of $40,000 to $50,000 for legal fees and for extensive repairs to the house. These were expenditures that they believed they should not have incurred and would not have incurred had the Public Administrator/Public Guardian’s office properly managed and preserved the assets of the estate. INITIAL ACTION TO PROTECT AND PRESERVE PROPERTY ASSETS When a case comes into the Public Administrator/Public Guardian’s Office, responsibility for the care and management of real and personal property is delegated by the Deputy Administrator or Guardian to the Property Management Division. If the real property is vacant, as in the case the Grand Jury examined, and there are sufficient assets to cover the expenses for the care of the conservatee without selling the property, the property is rented in order to generate income for the estate. Verification and documentation of the physical condition and any problems that existed in the real property when the estate was entrusted to PA/PG, proved to be problematic. The complaint included a list of problems. It was prepared in 2003 by the tenant who had occupied the house for nearly 2½ years. It was used as a defense for relieving her from an obligation to pay rent on the house when the heirs sought to evict her. – 2004 (filed May 19, 2004) 3 Report 2003/4-06 The Grand Jury’s first inquiry asked for either a written professional assessment of the property by Property Management officials when the property first became their responsibility or for a scope of work for the handyman to follow when making improvements to the property so it could be rented. Neither was available. Nor could information about conditions when the tenant moved into the property, be learned from a “tenant entrance checklist.” After reviewing records and interviewing staff, it became clear that when a property goes into management, the division does not develop a written assessment of the needs and conditions for each property and an accompanying plan for responding to those needs. Instead, what was described is an informal process. The Property Manager meets on-site with two contractors, one a rental agent and one a general handyman, to define improvements and repairs. The Grand Jury found only one written document that described the initial conditions and problems at the real property. It was a handwritten list of work the handyman used to invoice payment of $4,000. The 4-page summary did not itemize costs for individual tasks. Other submissions from the handyman were for reimbursement of $2,000 for supplies purchased at a number of stores. These two expenditures and one for $99.99 for carpet repairs and another for $2,137 of new carpeting were the only evidence of problems that staff identified or the repairs that were made to the home between March and August of 2000, when the tenant occupied the property. Because a number of problems noted by the heirs who took possession of the property 2½ years later were related to water damage in the bathrooms and throughout the house and to extensive mold and carpet damage, we paid particular attention to action or inaction surrounding those matters. There are no records or evidence of a request for a professional to assess the condition of the roof. While the handyman’s list of work identified roof and bathroom repairs, there was no way to ascertain if anything was done. The oversight and accountability of the outside contractor when he did this initial work appeared to be minimal. When asked regarding the method used to ensure the adequacy and sufficiency of the contractor’s work performance on-site, we were told by staff that they “took a look at it and it was all right.” When we probed further to determine if the work done was sufficient, given what was described as “deferred maintenance,” we were advised that when Property Management was authorized by case management to rent the house, there was agreement that PA/PG should attempt to set rent at $2,500 a month. A walk-through was done in order for them to identify minimal improvements and repairs that would be necessary so that the rental agent could obtain that level of rent per month. Consistently, we heard the theme that the goal is not to make the property “glorious” but “tenable.” Fact: The Public Administrator/Public Guardian’s Property Management Division did not do a full and complete property assessment or evaluation of the physical condition and problems that existed in the property when the estate was entrusted to them. 4 – 2004(filed May 19, 2004) Report 2003/4-06 Finding: We found that instead of utilizing professional assessments to develop evaluations and the scope of work to be done, the PA/PG Property Manager relied on and utilized informal working relationships with contractors as if they were direct employees. Fact: Expenditures of $8,237 were made from the estate for services and supplies for the handyman and for carpet replacement and repair so the property could be prepared for tenant occupancy. Finding: Because of the informal working relationship between the PA/PG Property Management officials and the contract handyman, we were unable to determine with any specificity either the scope of work or the quality of work that was done at the real property. Finding: Oversight and verification of work performed by the handyman at the property was minimal. This prevented verification of what precise work was done to respond to specific problems that needed repair before tenant occupancy. Finding: The predominant focus of PA/PG Property Management was not on “what needed to be done” but on “what minimum needed to be done” to get the desired rent and to make the property “tenable.” RECOMMENDATION The Grand Jury recommends that the San Diego County Board of Supervisors take action to ensure that the Public Administrator/Public Guardian Office: 04-06-1 Enact and implement policies and procedures that require the procurement and utilization of independent professional assessments and evaluations regarding the condition of real property including roofs, plumbing, structural integrity and overall maintenance whenever possible when initially entrusted to the care of the PA/PG. 04-06-2 Enact and implement policies and procedures that require the development of a clearly defined scope of work to be performed on real property projects over $500, prior to the solicitation of bids from authorized providers. 04-06-3 Enact and implement policies and procedures that require accountability and verification of work performed under service contracts on real property entrusted to the PA/PG. ADEQUACY OF MAINTENANCE DURING TENANT OCCUPANCY After not finding useful documentation regarding the early condition of the real property, the Grand Jury turned its attention to the information that revealed expenditures for maintenance of the property when it was entrusted to the PA/PG Property Management Division. – 2004 (filed May 19, 2004) 5 Report 2003/4-06 Many of the problems identified on the tenant’s list to the heirs were related to water damage – roof leaks in more than 5 areas of the house, mold throughout house, clogged sinks, water damaged carpeting and electrical problems. The expenditures for maintenance by the PA/PG handyman after the initial renovation in preparation for tenancy totaled only $1,955. Between August 2000, when the tenant first occupied the house, and June 2003, two months before distribution of the estate to heirs, there were only 8 visits by the handyman to the house. Seven of the eight visits were to alleviate plumbing problems in the home. Only two of the visits had notations for roof-repairs. In August 2001 a roof repair was one of four tasks that totaled $250. A second roof repair charge was for $95 in June 2003, when the estate was entrusted to the Private Administrator. Fact: In a 34-month period, only $1,955 was paid for service and maintenance at the property; 7 of the 8 visits were to alleviate plumbing problems. Finding: In 2003 the tenant reported problems in the house that revealed extensive water and mold damage throughout the house. Yet only two minor expenditures were made in 2001 and 2003 to repair the roof. OVERSIGHT OF THE RENTAL AGENT’S MANAGEMENT OF PROPERTY The Public Administrator/Public Guardian’s Office uses a rental agent to rent and assist in the management of property that is tenant occupied. Records reveal that the PA/PG has utilized the same rental agent for more than 10 years. For a fee of 10% of collected rents, the agent screens applicants, collects rents, takes calls concerning the properties and makes arrangements for repairs that have been authorized by the PA/PG Property Manager. The Grand Jury’s inquiry concerning the arrangement with the rental agent focused on the following areas. Screening and Selection of Tenants And Collection Of Rents Most of the details concerning the tenancy of the property and the rents collected came from Court records. The tenant occupied the property in August 2000 after entering a rental agreement with the rental agent. In February 2001, only 6 months into the tenancy, the tenant began to fall behind on rent. In March, it was reported that the tenant paid a $35 late rent fee for the February rent. Even though the tenant remained in arrears for the next 27 months, this penalty appeared to be assessed only this one time. This fee was not incorporated into the lost rent calculations. Cumulatively, it represented $945 in lost revenue to the estate. By July 2001, the tenant had been delinquent each month and still had $1,800 owing in back rent. While Court records revealed that notice was served the previous month, it appears no action was taken to demand payment of rent or relinquishment of possession. By December 2001, the tenant was $10,000 in arrears. The deficit showed signs of improvement in 2002. When the private administrator filed the petition to probate in 6 – 2004(filed May 19, 2004) Report 2003/4-06 October of that year, the tenant was $7,000 in arrears. The amount over due increased to $13,000 by the time the heirs took possession when it is taken into consideration that the $2,000 security deposit was improperly applied towards rent. The PA/PG Property Manager reported that the rental agent did screen and do a credit check on the prospective tenant. We were told that even though the credit check was “marginal,” the decision was made to go ahead with the tenancy because the house had been vacant for so long and they expected difficulty in finding another person who would rent the house. Noting that court records revealed that a three-day notice to pay was issued in June 2001, we asked for clarification regarding procedures normally used when tenants are delinquent in rent. We did not receive a direct answer or explanation. We were told it was better to be four months down in rent than to have a vacant home that requires extensive repairs and improvements in order to re-rent it. We were also advised that the decision was made to use labor-intensive strategies to nurse the tenant along. Communication about and Documentation of Problems During the investigation we could not find documentation regarding the condition of the home when the tenant first occupied the property. While the rental agreement with the tenant was found in the PA/PG files, there was not a completed detailed “tenant entrance checklist” attached to the agreement similar to ones used in previous years by the same rental agent. Instead we found one page from what should have been a multi- page checklist. Because there were no procedural requirements, there was no record of any itemization of the problems through tenant reports about required maintenance or the deteriorating condition of the home to the contract property manager. Nor was there documentation reflecting the transmission of that information to PA/PG Property Management. The Grand Jury asked whether the PA/PG Property Manager receives reports from the rental agent concerning tenant reports of problems. We were advised that PA/PG receives calls when problems need to be solved at any of the properties under their care. Monthly written reports for each property are not required. Nor is the rental agent required to conduct periodic on-site inspections for each property so that problems can be identified and reported to PA/PG. Adequacy of Accountability and Oversight of Rental Agent Performance When asked regarding other procedural safeguards that are in place for evaluating and monitoring the performance of the rental agent, the PA/PG Property Manager responded that he receives monthly reports regarding the rents that are collected at each property by the agent. We noted that pursuant to established Department Policy and Procedures, payments are automatically made to the rental agent without PA/PG Property Management staff authorization. – 2004 (filed May 19, 2004) 7 Report 2003/4-06 Fact: Rent was fully paid on time for only 6 of the 34 months of the tenant’s occupancy of the real property. Finding: In addition to what ultimately became $13,000 in lost rental revenue, the contract rental agent and PA/PG Property Management officials did not assess $35 late payment fees for the remaining 27 months that the tenant’s rent was late. Finding: There are no written procedures in place to guide the decision-making and actions by PA/PG staff and especially by their contract rental agent when there is prolonged non-payment of rent. Finding: There appeared to be more concern about the work that would need to be done and the cost if the tenant vacated the property than on the department’s obligation to protect and enhance the largest asset of the estate. Fact: There are no provisions in the contract between PA/PG and the rental agent that require documentation and reporting regarding calls from tenants, reporting of maintenance problems and periodic on site inspections of properties. Finding: The PA/PG has not instituted sufficient safeguards and reporting mechanisms for their monitoring and evaluation of performance of the rental agent. Finding: It does not appear that the PA/PG Property Management Division has a goal to “seek to know and respond to” problems; instead they appeared to do and spend as little as possible on problems.