Audit Report of the Computer Equipment Installed at the Human Resources Administration

Executive Summary

The Human Resources Administration (HRA) provides income support and social services to New York City’s needy residents. HRA administers day care programs, employment services for public assistance recipients, protective and preventive services for children and adults, Medicaid, home care for disabled and elderly persons, and social services for individuals with AIDS and HIV-related illnesses.

According to the Director of Customer Support Services (Customer Support) of HRA’s Management Information Systems (MIS), approximately 10,000 computers and computer–related equipment are installed at 133 different user locations and approximately 3,000 uninstalled computers are stored in two HRA stockrooms, and one privately owned warehouse in Brooklyn.

We originally planned to conduct one inventory audit that would encompass both new equipment in the stockrooms and installed equipment at the user locations. However, HRA tracks new equipment in stock differently from the way it tracks equipment installed at user locations. Therefore, we divided the original HRA inventory audit into two separate audits. Our first audit, entitled Audit of Computer Equipment Inventory On-Hand at the Human Resources Administration’s Stockrooms, (Audit Number 7A00-155, issued May 31, 2001) found significant weaknesses in HRA’s inventory procedures for maintaining equipment in the stockrooms and warehouse prior to installation. In this audit (Audit Number 7A01–101), we reviewed and tested procedures for tracking installed computer equipment.

The objective of our audit was to determine whether HRA maintained adequate control over computer equipment installed at its user locations.

We performed our fieldwork from June 6, 2000, to March 30, 2001. To review HRA’s controls and procedures for installed computer inventory we: (1) requested and reviewed all written inventory procedures for equipment installed at HRA locations, (2) interviewed appropriate inventory control and MIS personnel from HRA, (3) reviewed the results of HRA’s physical inventory count of installed equipment, and (4) matched the serial numbers from 11 purchase orders against serial numbers on HRA’s inventory database. We used the Department of Investigation’s (DOI) Standards for Inventory Control and Management and the HRA Microcomputer Standards and Guidelines–Microcomputer Management Manual as criteria in conducting this audit.

This audit was conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS), and included those tests of the records and other auditing procedures we considered necessary. This audit was performed in accordance with the City Comptroller’s audit responsibilities as set forth in Chapter 5, § 93 of the New York City Charter.

The audit found that HRA had not performed physical inventory counts of installed computers between 1995 and 2000; thus, HRA entered equipment information into an inventory database, but never checked to see if the equipment was actually found in the locations specified. Consequently, an inventory count conducted by HRA personnel in February 2000 showed that 796 pieces of equipment worth $931,397 were not found, even though all HRA sites had been visited. Similarly, we could not account for nearly $1.6 million in equipment purchased by HRA in calendar years 1999 and 2000. We selected 11 purchase orders processed in calendar years 1999 and 2000. These purchase orders contained 11,828 items (personal computers, monitors, laptops, and servers) with a total invoice value of $9 million. We compared the purchase order items to HRA’s inventory database as of February 14, 2001, and found only 8,700 items out of the original 11,828 items listed. Thus, 3,128 items, totaling $1.59 million worth of equipment, were not recorded.

In addition, HRA’s Inventory Database contained 650 duplicate inventory records, 1,232 items did not have proper serial numbers in the serial number (S/N) field, and approximately $536,000 in equipment purchased from Sun Microsystems is not recorded on the inventory records.

To summarize, our audits of HRA’s inventory process found that serious managerial and operational problems are prevalent throughout the agency. Further we have identified approximated $2.5 million of missing equipment. Hence, the above noted weaknesses in HRA’s computer inventory system increase the risk that computer equipment may have been stolen and that the theft will go undetected.

We recommend that HRA:

• Create an inventory project team, reporting to the Commissioner, whose ultimate goal would be to ensure that the inventory control system for installed computer equipment is: (1) accurate (i.e., all installed computer equipment is accounted for); (2) timely (i.e., records are adjusted to immediately reflect receipts, transfers and relinquishments); and (3) encompassing (i.e., the system tracks all items that are supposed to be tracked).

• Refer all significant and unresolved discrepancies to DOI for further investigation, if HRA has not done so.

• Immediately assign more data entry personnel to enter the results of the physical inventory count.

• Include all Sun Microsystems equipment on the Inventory Database.

• Follow the existing procedures to ensure that all equipment records are accurately recorded.

The matters covered in this report were discussed with HRA officials during, and at the conclusion of, this audit. A preliminary draft report was sent to HRA officials and was discussed with HRA officials at an exit conference held on May 31, 2001. On June 6, 2001, we submitted a draft report to HRA officials with a request for comments. We received a written response from HRA officials on June 20, 2001, which was accompanied by the electronic file listing specific pieces of equipment that HRA had reportedly identified and located. HRA generally agreed to implement the report’s recommendations and stated that ‘The continued attention to the improvement of workflow at MIS assists both the Agency and the City in ensuring that all expenditures are recorded and all equipment assignments are accurately reflected in the Agency inventory.’