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Luxury Hotels, Parties, and Chevy Tahoes in Dispute
Agency Failed to Follow Reimbursement and Purchasing
Guidelines
View Audit
New York City Comptroller William C. Thompson, Jr. today released
an audit that questioned nearly 40 percent - close to $290,000 -
of Economic Development Corporation (EDC) expenses reviewed, including
everything from luxury hotel stays to a party for its president
to improper car service use. The audit further noted that the EDC
failed to comply with competitive bidding requirements, ignored
purchasing and reimbursement guidelines, and paid $124,000 to a
consultant without receiving specifics about its work.
"The Economic Development Corporation is responsible for attracting
new business and helping commercial and industrial enterprises flourish
in the city," Comptroller Thompson said. "I question whether
all of the expenses incurred by the EDC meet that mission. Quite
a few of them appear to be inappropriate for the corporation."
Thompson's audit examined whether reimbursements to EDC employees
for "travel and out-of-pocket expenses" and other charges
to its "Other General Expenses" account were in accordance
with EDC's contracts with the City." The audit reflected only
a portion of expenses, those of selected accounts within the EDC's
ledger for its "Other General Expenses" account. Most
of the audit period - July 1, 2000 to June 30, 2002 - covered the
previous City Hall administration.
Founded in 1966, the EDC is a local development corporation that
holds two contracts with the City. The EDC administers economic
development programs relating to the attraction, retention, acquisition,
rehabilitation, and improvement of industrial and commercial and
enterprises.
The audit determined that the corporation complied with some of
its policies for processing payments. However, auditors found a
number of occasions in which the EDC did not maintain appropriate
documentation to support expenses, follow its guidelines for awarding
sole source contracts, obtain bids for procurements in accordance
with its contracts with the City, and ensure that all payments to
consultants were documented.
Specifically, the questionable expenses included:
$154,451 in purchases on behalf of the Mayor's Office and the
Office of Management and Budget. These purchases included: $129,879
for three Chevy Tahoes and related accessories in March 2002; $6,000
for 100 engraved "keys to the City"; $5,200 for an alarm
installed in the Mayor's Office; and $13,372 for hotel accommodations
and meals in New York City for an official of the Office of Management
and Budget.
$11,222 paid to the 14 Wall Street Restaurant for a dinner reception
on January 23, 2002, from 6 to 8 p.m. The voucher did not receive
the proper approvals.
$6,514 for lodging costs incurred on behalf of the four individuals
for accommodations at the Hotel Giraffe from Sept. 19 to 25, 2001,
without documentation to support the need to accommodate the guests
or identify their business affiliation with the EDC.
$4,212 for mobile phones and pagers whose emergency use was not
documented. EDC policy states that "cell phones should not
be utilized except for emergency situations," although the
definition of what constitutes an "emergency" is not specified.
$1,123 paid to Mrs. Java, LLC, for coffee refills for employees.
(The audit further noted that the EDC paid Mrs. Java $27,265 during
the two-year audit period.)
In its response to the Comptroller's audit, the EDC still failed
to include much of the details to justify the expenses. However,
the corporation noted that it has "discontinued entirely"
the practice of paying for outside employee events.
Additionally, the audit found that the EDC awarded three "sole
source" contracts totaling $40,624 without showing that reasonable
efforts were made to find other vendors. These contracts were
intended for a business trip to Korea and development for a venture
capital conference. On at least four occasions, the EDC did not
comply with competitive bidding requirements for contracting goods
and services over $25,000. Further, the EDC made payments totaling
$124,082 to one consultant for expenses that did not have supporting
documentation.
"The EDC's policies were intended to make sure that all
of the expenses incurred were within its mission of promoting
economic development in the City," Thompson said. "When
reasonable efforts are not made to find other vendors and bidding
requirements are not followed, we cannot be assured that the EDC
has obtained the best value in the interest of the City and the
taxpayers."
Auditors also identified a number of car service expenses that
flouted EDC policy. The audit noted 55 instances totaling $2,281
where the EDC paid for car service use by its employees outside
the hours allowed under its policy.
Auditors made 14 recommendations to the EDC, including:
Ensure that all expenses are reasonable, necessary, and in accordance
with its contractual agreements with the City.
Sole Source agreements should be awarded in accordance with the
Master and Maritime Contracts.
Engage in a bidding process and enter into formal contracts for
purchases of goods and services exceeding $25,000.
Obtain all appropriate documentation, such as invoices, timesheets,
receipts, and canceled checks, before approving payments to consultants;
submit appropriate documentation for consulting contracts to the
Deputy Mayor for approval.
Solicit bids for all purchases that exceed $2,500.
In its response, the EDC agreed with many of the recommendations
and indicated that a number are substantially incorporated into
its policies and procedures. However, EDC officials took exception
with certain of the audit's findings and recommendations claiming
that the auditors misunderstood some of its policies and procedures.
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