Audit Report on Animal Care and Control of New York City, Inc.’s Financial and Operating Practices
Executive Summary
This audit was conducted to determine whether Animal Care and Control of New York City, Inc. (“AC&C”) has adequate controls to ensure proper operational and financial accountability in key areas. Specifically, we examined whether controlled substances are adequately safeguarded and maintained in compliance with applicable laws and regulations; if AC&C complies with major non- revenue requirements of its contract with the New York City Department of Health and Mental Hygiene (“DOHMH”), specifically, the adequacy of its maintenance of its facilities, and its insurance coverage; and whether revenue and expenses are properly recorded and reported.
AC&C is a non-profit corporation that operates New York City’s municipal animal shelter system under a five-year, $51.9 million contract with DOHMH. AC&C’s contract requires it to rescue homeless and abandoned animals in New York City and to provide shelter, examine, test, treat, spay, neuter, and assure humane care and disposition of animals seized because they are deemed a threat to public health or they are accepted for care. AC&C operates five locations throughout the City: three full-service animal shelters in Manhattan, Brooklyn, and Staten Island; and two receiving centers, one in the Bronx and one in Queens.
AC&C provides shelter to approximately 30,000 animals each year. According to AC&C’s certified financial statements for Fiscal Year 2013, AC&C reported total revenue of $13.7 million and total expenses of approximately $13.3 million.
Audit Findings and Conclusions
AC&C lacks effective oversight and controls over its inventory of controlled substances and does not maintain a computerized inventory system of controlled substances as required by its contract. Our audit identified numerous irreconcilable discrepancies in AC&C’s controlled substance records which stem from these control failures. The audit also found controlled substances used after their expiration dates and vaccines improperly stored. Further, the audit found physical conditions in the shelters that needed to be addressed. With regard to fiscal management, we found that AC&C generally recorded and reported its revenue and expenses appropriately and maintained the required insurance. However, the audit found financial control weaknesses that led to a relatively small number of questionable payments. These control weaknesses need to
be strengthened and appropriate action should be taken in the case of any questionable payments that AC&C finds to have been improper.
At the exit conference on March 9, 2015, AC&C officials reported that they have taken action on several issues brought to their attention during the course of the audit and disclosed in this report. The section of the report entitled Subsequent Events provides additional information related to these issues.
Audit Recommendations
We make 18 recommendations, 15 to AC&C and three to DOHMH, including the following: AC&C should:
- Ensure that the duties of requesting, receiving, and recording controlled substances are segregated among different individuals;
- Implement a computerized inventory system to accurately account for all controlled substances and monitor expiration dates;
- Establish formal policies to ensure that all controlled substances are handled and accounted for in accordance with DEA guidelines and other applicable requirements;
- Ensure that expenses are supported by sufficient reliable documentation, for legitimate business-related purposes and that appropriate and accurate purchasing documents are provided and maintained;
- Establish policies whereby all credit card purchases by the Executive Director are required to be authorized by AC&C’s Board of Directors, President or Treasurer;
- Review the $11,715 in questionable payments identified in this audit and determine if all the payments were for appropriate AC&C purposes and if not, whether any payments should be recouped and/or other action taken;
- Ensure that all employees utilize the electronic timekeeping system;
- Conduct a cost benefit and feasibility assessment to determine the benefits and liabilities of maintaining office space in Manhattan and expand AC&C’s efforts in locating a lower cost alternative, including seeking office space in the outer boroughs.
DOHMH should:
- Incorporate into its contract a requirement for AC&C to implement a system of internal controls that includes formal policies and procedures for its operation;
- Ensure that AC&C complies with all of the recommendations in this report.
AC&C and DOHMH Responses
In its response to the draft audit report, with one exception, AC&C generally agreed with the report’s findings and recommendations. In its response, it describes the numerous actions it has taken and that it intends to take to address the findings in the audit report. In addition, DOHMH largely agreed with the recommendations directed to it in its response. The full texts of both AC&C’s and DOHMH’s responses are included as addenda to this report.