View Audit Annual FY 2008 Report

New York City Comptroller William C. Thompson, Jr. today announced that 80 audits and special reports conducted by his office during Fiscal Year 2008 generated $16.5 million in actual revenues and savings.

During Fiscal Years 2002 through 2008, the Comptroller’s Office released 658 audits and special reports that have generated a total of $260.2 million in actual and potential revenues and savings, and called into question $119.6 million associated with claims filed against the City.

The report also noted that if all of the audit and special report recommendations were implemented the potential cost avoidance, savings and revenues identified in Fiscal Year 2008 would total $59.1 million in addition to the $16.5 million in actual revenues and savings.

The Fiscal Year 2008 City Charter-mandated report on the Comptroller's Audit Operations details the findings and recommendations of audits over the last fiscal year.

Thompson posts all audits on his web site - www.comptroller.nyc.gov - upon their release. A copy of the new annual report also is available online.

The City Charter requires that every City agency be audited at least once every four years. In addition, the Comptroller’s Office performs audits and studies of City agencies, public authorities, and private entities that receive funding from or generated revenue for the City.

“I entered office determined to be an activist Comptroller by aggressively using the powers of my office to find, new creative ways to save the taxpayer money and to put our resources to work for all New Yorkers,” Comptroller Thompson said in the report. “I instructed the staff of the audit bureau to focus their efforts on examining programs with the greatest potential risk of revenue loss, cost overruns, mismanagement, inefficiency, waste and abuse.”

During Fiscal Year 2008, the Comptroller issued audits covering a wide range of subjects in program performance, asset management, internal controls, and information technology that involved revenue identification and collection, cost efficiency and effectiveness. Audits that generated the most actual and potential revenue and savings include:

• An audit of the Department of Environmental Protection’s (DEP) billing and collecting of water and sewer charges from private hospitals determined that there were significant internal weaknesses in DEP’s collection practices that resulted in $10.6 million in outstanding charges. The auditors noted that DEP could not readily identify all hospital accounts, could not aggregate charges common to a single customer, and had no written collection policies and procedures for its staff to follow when billing and pursuing collections from hospitals. As a result of the weaknesses, DEP did not make timely and appropriate collection efforts. As of June 30, 2007, 32 of 58 private hospitals had outstanding charges totaling $12.6 million and had made payments totaling only $2 million by July 31, 2007.
  
• An audit of the United Nations Development Corporation (UNDC) lease agreement with the City disclosed that the UNDC should remit to the City a total of $12 million in additional rent. UNDC was established to provide office and residential space and other facilities for United Nations personnel and foreign missions as well as for other members of the international community. The lease requires UNDC to pay three separate rents to the City. One is paid annually; the other two are paid quarterly. The annual payment, termed additional rent, is calculated based on 90 percent of UNDC’s consolidation surplus. The audit found that UNDC owed the City $12 million in additional rent resulting from UNDC’s retention of its consolidated surplus in connection with the suspended UN Consolidation Building Project. After the auditors disclosed their findings to management of UNDC and the City, UNDC promptly paid the City $6 million of the total audit assessment.
  
  
• An audit of the compliance of New York Skyports, Inc. (Skyports) with its lease agreement found that Skyports violated the terms of several provisions of its lease and may owe the City approximately $6.1 million. Skyport’s lease permits the use of property along the East River between East 18th street and East 23rd Street in Manhattan for a marina, a seaplane base, parking, mooring, fueling, and the servicing of motor vehicles, seaplanes and watercraft. It also permits the sale of merchandise usually sold in connection with those services. The Department of Small Business Services (DSBS) manages the property on the City’s behalf, and the EDC administers the terms of the agreement on behalf of DSBS.
  
  
• The auditors determined that the general disregard of Skyports for maintaining the premises endangered public safety and may cost the City in excess of $5.5 million of the $6.1 million the City expended to rectify conditions. The auditors also noted that Skyports owes the City $548,135 resulting from $464,000 for emergency repairs performed by EDC, a minimum of $46,614 for not paying 50 percent of the revenue derived from the sale of goods, merchandise, and advertising on the premises, and $37,521 in water and sewer charges. In addition, EDC did not effectively oversee the operation of the lessee to ensure that Skyports complied with the terms and conditions of the lease.

The report also describes audits that disclosed service delivery and program performance issues. Among the most significant:

• An audit of the adherence of the Department of Education (DOE) and the Department of Health and Mental Hygiene (DOHMH) to student vision and hearing screening program regulations disclosed that the agencies did not provide the screenings in accordance with applicable regulations. Chancellor’s Regulation A-701 requires vision and hearing screenings to be conducted for students in pre-kindergarten through grade 3, in grades 5, 7, 10, and for new entrants. The Office of School Health (OSH) is a joint program consisting of DOE and DOHMH employees that provides health services to public school students, including vision and hearing screenings. Regardless of whether DOE or DOHMH conducts the screenings, DOE is ultimately responsible for the vision and hearing screening program and ensuring that all students are screened in compliance with Chancellor’s Regulation A-701.
  
  For the period reviewed, the agencies conducted only 66 percent of the required vision screenings, with 42 percent of the required DOE screenings conducted and 94 percent of the required DOHMH screenings conducted. The agencies conducted only 54 percent of the required hearing screenings, with 20 percent of the required DOE screenings conducted and 94 percent of the required DOHMH screenings conducted. The auditors concluded that the results were attributable to a lack of oversight and monitoring of the vision and hearing screening program by DOE, which had no central unit responsible for reviewing screening data during the audited period.
  
  
• An audit of the monitoring of the physical conditions of senior centers by the Department for the Aging (DFTA) found that DFTA’s monitoring needs to improve in the follow-up of identified problems and in the provision of assistance to the centers in correcting those problems. DFTA contracts with 329 senior citizen centers throughout the City to provide services to the elderly.
  
  Certain conditions at the centers noted by the auditors were also cited by DFTA in its own 2007 and its 2008 assessments. However, there was limited evidence that DFTA followed up on its findings or worked with senior citizen center officials to ensure that conditions were corrected. Some of these conditions still existed at the time the auditors visited the centers. There were fire and personal safety problems at many of those centers as well as improper conditions related to cleanliness and physical concerns in the bathrooms, kitchens, and throughout the centers.
  
  
• An audit of DOE’s reporting of violent, disruptive, and other incidents at New York City public high schools found that DOE did not have effective controls to ensure that incidents were reported in accordance with the requirements of State Education Department (SED). All school districts, including New York City, are required to report annually to SED violent and disruptive incidents, as defined by SED, that occur in their schools. SED then posts the data on its Web site in its annual “Violent and Disruptive Incident Report” (VADIR). DOE developed and implemented a computer system, the On-line Occurrence Reporting System (OORS), to record incidents reported by the schools. DOE reports to SED only those incidents that are recorded in OORS.
  
  For the 10 schools sampled by the auditors for the 2004-2005 school year, 414 (21%) of the 1,996 sampled incidents identified by the auditors were not entered in OORS. Of the 1,996 incidents, 1,247 (62%) were serious, and therefore were required by SED regulations to be included in VADIR. Of these serious incidents, 174 (14%) were not entered in OORS. The auditors concluded that without more effective central controls, DOE could not ensure that incidents were in fact entered in OORS by its schools. The ineffective controls also prevented DOE from ensuring that those incidents determined to be violent and disruptive were reported consistently among schools, so that DOE could report them in accordance with SED requirements.

Audits at a number of other agencies identified significant deficiencies in internal controls, asset management, and information technology. Among them:

• An audit of Department of Parks and Recreation (Parks) oversight of capital improvements made by Ferry Point Partners, LLC (Ferry Point) to develop, operate, and manage the Ferry Point Golf Course in the Bronx found that Parks did not effectively oversee the improvement and remediation work of Ferry Point. As a result, the City overpaid Ferry Point almost $6 million in remediation costs and lost more than $3 million in forgone license fees. The terms of a May 31, 2000 license agreement required Ferry Point to complete by January 1, 2003, at least $22,470,000 in capital improvements and pay the City the greater of a $1.25 million annual fee or a percentage of gross receipts. After excessive levels of methane gas—a hazardous substance—were detected in 1999, Ferry Point undertook remediation of the site.
  
  The auditors concluded that because of ineffective oversight and poor controls by Parks over remediation work, $6 million in costs submitted by Ferry Point and paid by Parks could not be substantiated and were not reasonable or necessary. Parks also permitted Ferry Point’s contractor to collect fees that could have been remitted to the City, thereby defraying the cost of the remediation. Moreover, the lack of oversight by Parks led to scheduled capital improvement work either being substantially delayed or not being completed in accordance with the license agreement and modification, resulting in $3 million in forgone license fees.

“Given the City’s current fiscal difficulties, my audit staff will continue to look for ways to weed out waste and abuse, and look for additional measures that will save the City money,” Thompson said.

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