View Audit

New York City Comptroller William C. Thompson, Jr. today issued an audit finding that the Department of Education (DOE) failed to responsibly and carefully administer travel expenses by its Central Office – farming out lucrative deals by circumventing bidding rules and allowing overnight stays in the City without justifying the reasons.

“Once again, the Department of Education has failed to properly monitor its expenses,” Thompson said. “The Department lacked proper controls of its travel expenses, and failed to adhere to its own written procedures and City regulations.”

The audit – which covered Fiscal Year 2007 – evaluated the adequacy of DOE’s internal controls over the travel expenses of its Central Office and determined whether these travel expenses were necessary, reasonable, and for authorized individuals. The audit is at www.comptroller.nyc.gov.

DOE’s Central Office includes the Schools Chancellor and top education and management officials in the City’s public school system. Expenses reviewed in the audit included central management-initiated retreats, training meetings, conferences, and transportation for teachers and other DOE executives and professional staff. During the audited period, DOE’s Central Office spent approximately $4.8 million in travel expenses.

The audit uncovered a pattern of problems:

• No unit within DOE is responsible for reviewing the Central Administrative Office’s transactions for adherence to applicable procedures, such as bidding requirements, for ensuring that costs are within established limits, and for requiring adequate justification for events and travel expenses. Therefore, no such review takes place.

• DOE’s Central Offices did not always adhere to DOE’s bidding procedures. DOE’s Standard Operating Procedures Manual (SOPM) requires solicitation of bids when a fee must be paid for a planned meeting or conference, and that such solicitations should begin at least three months prior to the planned event. A review of sampled payment vouchers, however, revealed 24 instances in which bids should have been obtained; however, of those 24 instances, auditors found no evidence that bids were obtained in 8, totaling $58,472.

Further, Central Offices did not follow at least one bidding requirement for 14 of the remaining 16 instances that required bidding. Rather than beginning the bidding process at least three months prior to the planned events as required for 7 instances, Central Offices solicited bids between 20 and 85 days prior to the events and for another 7 the number of days could not be determined.

• There was no cost justification for when the DOE used one of its conference facility providers that have systemwide agreements with DOE. In three instances alone, DOE spent in total $142,596 for facilities.

However, there was no evidence that other space was sought before using these systemwide contracted facilities. Further, although the systemwide contracts include established rates for the conference facilities, the cost of the events could not always be reconciled with the contracted prices. Therefore, DOE is likely to be unaware of the actual cost of an event until the receipt of the invoice.

• The Central Office did not always list the justification for DOE-sponsored employee conferences and meetings that involved overnight travel. Therefore, auditors could not determine whether the expenses were necessary. For six, sampled DOE-sponsored employee retreats and conferences totaling $87,686 that involved overnight accommodations, there was no explanation for how the overnight travel provided any specific educational or other benefit that could not be gained within New York City and without overnight accommodations.

• DOE did not always record its purchasing documents in a timely manner. Of 45 sampled payment vouchers, DOE recorded purchasing documents for 17 instances after receipt of the invoice, including two instances in which payments made during Fiscal Year 2007 were for services provided during Fiscal Year 2006.

• DOE did not follow its procedures regarding allowable food expenses. Four payment vouchers totaling $32,399 included $25,654 in expenses that were in excess of the allowed per-person amount.

• DOE paid $11,970 for 30 employees to attend a 2-day, overnight staff retreat in the Catskills – even though only 18 employees showed up, costing the City $4,788 for the no-shows.

• Eleven vouchers, totaling $168,979 of the 45 sampled payment vouchers were charged to the incorrect object codes. In one case, DOE incorrectly charged $104,482 for an event for parents of students with disabilities at one hotel to a code required for in-City expenditures relating to general business meetings, rather than correctly charging the one for local conferences. Thompson noted the increased risk that expenses could be hidden by using incorrect object codes.

“The use of incorrect object codes can compromise management’s ability to properly plan future budgets and prevent both the agency and others from knowing the true cost of an expense,” Thompson said.

“At a time when many of us want assurances that every dollar is not being wastefully spent, and that classrooms retain sufficient funding so that students can succeed, the Department of Education is allowing this practice of poor fiscal oversight to continue,” Thompson said.

Additionally, the Comptroller questioned the payment and use of Metrocards. Two payment vouchers totaling $43,300 - issued for the payment of 10,860 Metrocards valued at $4 each - lacked a proper log for distribution.

“As a result, we could not determine whether all purchased Metrocards were used for official DOE business,” Thompson said. “Without adequate supporting documentation, we are unable to ascertain whether all cards could be accounted for or were used for legitimate purposes.”

Thompson made 14 recommendations, including that DOE:

• Authorize an appropriate unit to conduct an independent review of the Central Administrative Office’s transactions to ensure compliance with DOE written procedures and Comptroller’s Directives.

• Ensure that the Central Administrative Offices adhere to the bidding requirements of the Standard Operating Procedures Manual (SOPM) to ensure that needed goods and services are obtained at the best available price.

• Ensure that bids are solicited for conference facilities and associated services prior to using one of the contracted facility vendors. A contracted facility vendor should be used only if it is deemed to be the lowest responsible bidder.

• Ensure that its office adhere to Comptroller’s Directive #6 and provide proper written justification for an event with overnight accommodations.

• Ensure that purchasing documents are recorded prior to making its purchases to ensure that funds are available and that the estimated liabilities are recorded in the correct fiscal period.

• Ensure that its travel expenditures adhere to the established written procedures of Comptroller’s Directive #6 and the SOPM, including allowable food expenditures and approved OP-221 and OD-7 forms.

In its response, DOE generally agreed with the audit recommendations.

###