Annual Audit Report Fiscal Year 2002

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Download Report Part 1 - Cover Letter  (PDF - 49KB)

Download Report Part 2 - Summary and Indices  (PDF - 30KB)

Download Report Part 3 - Government Agencies  (PDF - 640KB)

Download Report Part 4 - Non-Government Agencies  (PDF - 227KB)

Download Report Part 5 - Indices FY 1992 - 2002  (PDF - 112KB)

March 1, 2003

Mayor Bloomberg, Speaker Miller, and Members of the City Council:

I am pleased to transmit the New York City Comptroller’s Charter-mandated report on audit operations for Fiscal Year 2002. This report covers the first six months of my administration as well as the last six months of the prior administration and contains the major findings and recommendations of all audits issued by the Comptroller’s audit bureaus.

The audit bureaus issued 126 audits and special reports during the fiscal year. We issued fewer audits this year than in the prior fiscal year, but the impact of this year’s audits is far greater in savings and revenue identified and in improvements to service delivery. This was the result of a conscious effort on my part to change the way we do business by focusing on audit quality and comprehensive testing rather than on the number of audits issued. The following chart shows the actual and potential revenue and savings generated by the audit bureaus over the current and past four fiscal years.

New York City is expected to experience increasing budget shortfalls. Even after imposing property tax increases and accounting for the effects of proposed budget cuts, the City faces budget gaps ranging from about $3.4 billion in Fiscal Year 2004 to $4.5 billion in Fiscal Year 2006. Regardless of the City’s fiscal condition, the public will expect government to deliver high quality services.

In Fiscal Year 2002, my auditors identified more than $11.1 million in actual revenue and savings and approximately $45.6 million in potential revenue and savings. This represents a 164 percent increase in actual revenue and savings and a 1,163 percent increase in potential revenue and savings from the prior year. Moreover, the average actual and potential revenue and savings per audit has increased dramatically in Fiscal Year 2002, as shown in the following chart:

My audits covered a myriad of topics including revenue identification and collection, services to senior citizens and to children, transitional housing for families displaced by fires or unsafe conditions, and transportation services for the disabled, to name just a few. I have concentrated my audit resources on both financial matters and service delivery, since both play significant roles in ensuring the quality of City services.

The three audits that generated the most revenue were audits of: Time Warner Cable of New York City; the New York Yankees lease agreement; and Toto’s South Shore Country Club, Ltd. Brief discussions of these audits follow:

• The Time Warner Cable audits resulted in actual revenue of $7,677,521. Under its seven franchise agreements, Time Warner is obligated to pay the City five percent of its gross revenue. Time Warner paid the full audit assessment.
• The New York Yankees lease agreement audit determined that the Yankees underreported revenue by $1,394,110 and overstated the credits they were entitled to take against revenue by $2,502,968. This resulted in the Yankees’ owing the City $367,321, which they paid.
• The Toto’s audit disclosed that it failed to report approximately $1.8 million in revenues to the Department of Parks and Recreation. Consequently, Toto's owed the City $256,872 in fees, which it agreed to pay.

The three audits that generated the most potential revenue and savings were audits of: the Department of Finance’s collection of Environmental Control Board penalties; the Police Department’s civilianization efforts; and Shellbank Restaurant Corp. They are summarized as follows:

• The Department of Finance could have collected at least $26.2 million had efforts to collect Environmental Control Board penalties been increased. This audit led to the recommendation for an amnesty program by the Comptroller and the City Council.
• The Police Department can save $15.2 million annually by civilianizing 831 non-enforcement positions in the Department’s administrative units.
• The audit of Shellbank Restaurant Corp. revealed that it and TAM Restaurants, Inc. (TAM), its parent company, owe the City $615,586 in license fees, late charges, water and sewer fees, and commercial rent tax. The Department of Parks and Recreation, the oversight agency for the Shellbank agreement, issued a "Notice to Cure" requiring that Shellbank pay the full audit assessment, including the amount owed by TAM.

The three audits with the most significant issues pertaining to service delivery were the audits of: the Center for Animal Care and Control (CACC); the Amboy Neighborhood Center, Inc.; and the monitoring of senior centers by the Department for the Aging (DFTA), as follows:

• The CACC audit disclosed that it failed to provide humane treatment to all of its animals, and allowed dogs and cats to be accidentally and needlessly euthanized. Specifically, animals were often left in soiled cages and without water, and sick and contagious animals were housed with healthy ones. The full extent of CACC’s problems could not be determined because of CACC’s obstructive tactics and resistance to sharing its records with the auditors. The Director of CACC left the agency following the audit and the City Administration began a new program for animal adoption.
• The Amboy audit found unsafe and unsanitary conditions at the temporary housing facility that it operated. These conditions included roach and fly infestation, clogged and leaking sinks and bathtubs, and water damage to ceilings and walls. In addition, many of the residents complained that their apartments were infested with mice and rats. Moreover, Amboy owed the City $417,571 for its water and sewer use. The Department of Housing Preservation and Development, the oversight agency, did not renew Amboy’s contract.
• The DFTA audit revealed that many of the senior centers inspected by the auditors had fire safety problems, including blocked exit doors, no smoke detectors, and inadequate evacuation plans. DFTA generally agreed with the audit’s recommendations to correct the problems.

Given the significant taxpayer dollars spent on information technology and the increased reliance of City agencies on computer systems, I have dedicated a portion of my audit resources to audits of the system development projects of various City agencies. Many of these audits identified excessive cost overruns, missed deadlines, and systems that simply did not meet agency needs.

The three audits that identified the most significant system development problems were those that examined the Comprehensive Justice Information System and the Police Department’s Enhanced 911 system and its upgrade of the AutoPound system. Brief descriptions of these audits follow:

• The Comprehensive Justice Information System (CJIS) audit disclosed that: duplicate records caused by poor data conversion and insufficient testing were not eliminated; a project team was not assembled to ensure that all system requirements were identified and implemented; and the system did not have all of the data fields required to generate reports for the agencies that use the system. The system, which cost $1.3 million, was installed in October 1999 to provide the City’s juvenile justice agencies with a mechanism to track the status of juveniles who enter the court system. The City has decided to replace the system.
• The Enhanced 911 audit noted that the Computer-Aided Dispatch (CAD) support system was slated for implementation in late 1997 but is still not complete. Consequently, wireless interfaces to police car mobile data terminals, which require that the CAD system be operational, were not installed. As a result of CAD’s not being implemented, the Department is still relying on the old 911 dispatch system. The audit noted that $115 million was spent on the Enhanced 911 system as of July 2001.
• The audit of the upgrade to AutoPound disclosed that the system, which cost approximately $250,000, met user needs and that users were generally satisfied with the system. The Police Department’s Property Clerk Division uses the system to accept, catalog, safeguard, store, and produce for the court, property that is in the custody of the Department. However, the methodology used by the Department for the upgrade did not ensure that all system requirements were developed. In addition, users had problems accessing the system and entering data, and complained about the system’s slow response time. Finally, the Department did not remove inactive users from the system, and it did not have a complete, formally approved Disaster Recovery Plan for the system.

As Comptroller, I will ensure that this office continues to deliver on my commitment to be a fiscal activist dedicated to finding ways to enhance revenue, identify waste and abuse, and improve agency operations. To that end, for Fiscal Year 2003, I directed my audit staff to identify audit areas that significantly impact City finances and service delivery by performing an extensive assessment of City revenues, expenditures, and programs. This assessment provided the basis for a comprehensive audit plan that focuses on the effectiveness and efficiency of City services, the controls over City resources and expenditures, and the quality of the services provided to the public.

Very truly yours,

William C. Thompson, Jr.