Many of the revenues and savings identified in the audits completed during my tenure could produce benefits that recur in subsequent fiscal years. The 235 audits and special reports completed by my auditors during Fiscal Years 2002 and 2003 found approximately $88.4 million in actual and potential revenue and savings. In fact, approximately $50 million in revenues and savings could be realized in each fiscal year beginning in Fiscal Year 2004 based on the continuation of changes made as a result of my audits and on the implementation of my recommendations. Moreover, the average actual and potential revenue and savings per audit has increased dramatically in Fiscal Years 2002 and 2003, when compared to Fiscal Years 2001 and 2000, as shown in the following chart:

In Fiscal Year 2003, my audits covered a myriad of topics, including financial reporting, revenue identification and collection, cost savings, program performance, asset management, internal controls, and information technology. Synopses of the most prominent audits in some of these areas are included below.

The audits that generated the most actual revenue were audits of: lease payments by the New York Mets, fiduciary accounts of the Department of Sanitation, and the compliance of the Neighborhood Youth and Family Services organization with its City contracts. Brief discussions of these audits follow:

• The Mets paid the City approximately $4 million in additional rent as a result of two audits of its City lease agreement. The audits revealed that the Mets understated revenue and overstated deductions against gross revenue used to determine rental revenue due the City. Under its lease agreement with the Department of Parks and Recreation, the New York Mets are obligated to pay the City the greater of either an annual minimum rent of $300,000 or certain percentages of revenues less allowable deductions.
• As a result of an audit of the Department of Sanitation’s fiduciary accounts, the Department transferred nearly $1.8 million in its Special Events Clean-Up account to the City’s General Fund. The amount transferred represented deposits for events for which the City provided the services. The Special Events Clean-Up account was established to deposit money received from event organizers to be used either as a deposit to ensure that organizers clean up after events or to reimburse the City for the Department’s personnel costs when providing the service.
• An audit of Neighborhood Youth and Family Services (NYFS), a Bronx community-based not-for-profit organization contracted by the City, found that it was overreimbursed a total of $411,345. Accordingly, the City recovered these funds from NYFS. NYFS provides various social services, including counseling, drug treatment, housing assistance, and legal services.

Audits of civilianization opportunities at the Departments of Sanitation and Correction, Medicaid billings for autistic students by the Department of Education, and oversight of private ferry operators by the Department of Transportation generated the most potential revenue and savings. Brief discussions of these audits follow:

• An audit of the Department of Sanitation determined that it could save $5.8 million by hiring civilians to fill 313 administrative positions currently held by uniformed workers. A similar audit of the Department of Correction determined that it could save $4.7 million by civilianizing 167 positions.
• An audit of the Department of Education (DOE) found that it did not bill Medicaid for $2.9 million in services provided to autistic students in Fiscal Year 2001. Of that amount, the City would have been entitled to 25 percent, or $735,258. Moreover, the audit estimated that DOE did not bill Medicaid $19.5 million for services provided to other eligible special education students. The City would have been entitled to $4.9 million of that amount.
• An audit of the Department of Transportation disclosed that it did not bill private ferry operators for an estimated $1.3 million in landing fees. The audit also noted that landing fees had not been increased in more than 20 years; increasing landing fees to levels suggested in the audit would generate as much as $1.1 million in additional annual revenue.

Audits of the monitoring of day care centers by the Administration for Children’s Services, of the Human Resources Administration program for housing HIV/AIDS clients, and of the conditions of stations maintained by the Metro-North and Long Island railroads disclosed significant service delivery issues, as follows:

• An audit of the Administration for Children’s Services (ACS) revealed that it did not effectively monitor the 493 day care centers under contract with the City. Consequently, potentially hazardous conditions at the centers went uncorrected for extended periods of time.
• An audit of the Human Resources Administration (HRA) disclosed that it did not meet the needs of its HIV/AIDS clients. The audit determined that the HIV/AIDS Service Administration, a division of HRA, did not process clients’ applications for permanent housing and financial assistance in a timely manner.
• Audits of Metro-North and Long Island railroad stations within the City found unsafe conditions at four stations operated by the Metropolitan Transportation Authority (MTA) in Queens and the Bronx. These conditions included uneven, cracked, and crumbling cement, peeling paint, damaged staircases, and loose metal plates. Many of these same conditions had been found in an audit performed the previous year and had not been remedied. In addition, auditors reported that Metro-North station conditions were worse and the quality of repair work was inferior at City stations when compared with those in Westchester County.

Audits of inventory controls at Kings County Hospital and at the Department of Homeless Services identified significant deficiencies in asset management, as follows:

• An audit of Kings County Hospital disclosed that it did not have adequate controls over its inventory of non-narcotic drugs and medical and surgical supplies. The audit found that when the amounts in the computerized inventory system were compared to supplies on hand, there was a discrepancy of 71 percent in drugs on hand and a discrepancy of 91 percent in medical and surgical supplies on hand. Moreover, Kings County officials made adjustments totaling $8.6 million to its Fiscal Year 2002 year-end inventory count of non-narcotic drugs and medical and surgical supplies without ever investigating the cause of the discrepancies.
• An audit of the Department of Homeless Services revealed that it did not have adequate controls over its computer equipment inventory. Consequently, the Department could not account for $1,640,180, or 40 percent, of the $4.1 million in computer equipment purchased in Fiscal Years 2000, 2001, and 2002.

Given the significant taxpayer dollars spent on information technology and the increased reliance of City agencies on computer systems, I have continued to dedicate a portion of the bureaus’ resources to audits of system-development projects at various City agencies. Many of these audits identified excessive cost overruns, missed deadlines, and systems that simply did not meet agency needs. My audits of the Person Registry Information Management Environment (PRIME) system, the Electronic Death Registration System (EDRS) and the Auto Time System were the most noteworthy system-development audits performed. Brief descriptions of these audits follow:

• Audits of two computer systems of the Department of Health and Mental Hygiene found that the Department failed to follow a formal systems development methodology; follow City procurement guidelines; and employ an independent quality assurance consultant when developing PRIME and EDRS. These factors contributed to the Department’s failure to develop and implement PRIME and EDRS despite the payment of more than $7.8 million to the vendor contracted to develop the systems. The PRIME system was to automate the collection, tracking and analysis of disease reports in the City, and EDRS was to automate the functions of the Department’s death registration unit.
• An audit of the Human Resources Administration’s (HRA) development of the Auto Time System found that the system was incomplete and cost $24.8 million—$15.2 million more than the initial contract amount. In addition, HRA claimed that implementation of the system would save the City $15.7 million. However, based on the costs of developing and maintaining the system, the audit concluded that the City would not realize any of the envisioned savings.

In the coming years, I will continue to deliver on my commitment to finding ways to enhance revenue, uncover waste and abuse, and improve agency operations. Hence, my auditors will continue their efforts to identify ways to maximize City revenue, strengthen the internal controls of agencies over their operations, and reduce City costs through more efficient service delivery.

Very truly yours,

William C. Thompson, Jr.