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New York City Comptroller William C. Thompson, Jr. today released an audit finding that the City’s Department of Consumer Affairs (DCA) ¬¬should have used $2.1 million in accumulated funds to pay outstanding fines owed to the City. Thompson faulted the agency for failing to adequately monitor its fiduciary accounts, specifically the Home Improvement Contractor (HIC) Fund. Contractors contribute $200 biannually to the Fund, which satisfies fines owed to the city and makes payments to customers who’ve suffered damages caused by contractors.

“We found that the Department only uses the HIC Fund to satisfy consumer awards and does not use these funds to satisfy outstanding fines owed to the City,” Thompson said. “As of June 30, 2003, the HIC Fund had a balance of approximately $2.6 million that could have been used to satisfy the $2.1 million in outstanding fines issued during Fiscal Years 2002 and 2003.”

The audit reviewed the DCA’s six fiduciary accounts, which are used to record financial resources administered in trust by the City. The principal and income of the accounts benefit individuals, private organizations and other, non-City government entities. Six accounts have been established for the DCA’s use: the HIC, Bingo Trust Fund, Tow Truck Fund, the Tow Truck Escrow, Legal Escrow, and Adjudication Escrow accounts. These accounts held $3.1 million on deposit as of June 30, 2003

The audit covered July 1, 2001 to June 30, 2002, though auditors reviewed outstanding fines issued to contractors up until June 30, 2003. The audit found that the DCA has adequate controls over the deposits and disbursements of funds for five of the six accounts. (The sixth, the Tow Truck Escrow account, has been dormant.)

Auditors found deficiencies in the Department’s administration of the accounts, noting that the agency does not have any procedures in place to allow it to identify funds deposited in the Legal Escrow and Adjudication accounts with specific violations or judgment orders.

Additionally, the DCA did not ensure that revenue transactions are posted to the correct fiduciary account in the City’s accounting system, known as the Financial Management System. Auditors noted 24 occasions when the DCA deposited funds to the wrong account.

Among his recommendations, Thompson urged the agency to transfer money from the HIC Fund to the City’s general fund to satisfy outstanding fines, establish procedures to track deposits made into the Legal Escrow and Adjudication Escrow accounts, and ensure that revenue transactions are posted to the appropriate fiduciary account.

The DCA agreed with the recommendations and noted that it will begin using excess moneys in the HIC Fund to satisfy outstanding fines.

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