Audit of Department of Design And Construction Monitoring of Payments to Cultural Institutions For Pass-Through City-Funded Capital Construction Projects

Audit Report In Brief

This audit determined whether payments to cultural institutions for pass-through New York City-funded (City) capital construction projects monitored by the New York City Department of Design and Construction (DDC) were accurate, documented, and legitimate.

Audit Findings and Conclusions

Payments to cultural institutions for pass-through City capital construction projects monitored by DDC were generally accurate, documented, and legitimate. In addition:

• Payment Requisitions, Contractor Routing and Signature Sheets, and Payment Audit Reports were approved, signed, and dated by appropriate DDC officials.
• For all sampled Payment Requisition packages, DDC’s Project Manager (PM) attested that the amounts on the Payment Requisitions were legitimate and that all work had been inspected. The Payment Audit Reports for the most part did not disclose any material deductions by the Engineering Audit Office (EAO)—indicating that the PM’s signature and approval of the payments were upheld.
• Payments were made to the cultural institutions within the 30-day time period mandated by the prompt payment provisions of the Procurement Policy Board Rules.
• The review process of the Payment Requisition packages by DDC’s Pass-Through Program Unit, Engineering Audit Office, and Chief Financial Office was completed in a timely manner and according to DDC’s formal procedures.

Our examination disclosed some weaknesses. However, we note that these concerns were not of a material or monetary nature and did not affect our opinion that payments to cultural institutions for pass-through City capital construction projects monitored by DDC were generally accurate, documented, and legitimate. Specifically:

• 15 (94 percent) of the 16 Payment Requisition packages in our sample were approved by DDC officials, although they lacked one or more required documents.
• Five (31 percent) of the 16 Payment Requisition packages in our sample contained five instances, totaling $54,565, in which cultural institutions included costs in the Payment Requisitions for the use of their own personnel to perform capital construction services without DDC’s prior written approval. These costs were authorized to be paid by DDC.
• For two (13 percent) of the 16 Payment Requisition packages in our sample, the amounts requested by the cultural institutions on the Payment Requisitions for the payments to subcontractors did not match the amounts requested by the subcontractors on the Subcontractor Payment forms. The Payment Audit Reports prepared by the EAO did not indicate why the amounts differed.
• Payments, totaling approximately $38 million, were made to 46 (33 percent) of the 141 subcontractors in our sample, even though the competitive bidding process was not followed.

Audit Recommendations

To address these issues, we make the following four recommendations:

• DDC should ensure that Payment Requisition packages contain required documentation prior to authorizing payments to cultural institutions.
• DDC should ensure that cultural institutions and their construction managers do not use their own personnel to perform capital construction services without DDC’s prior written approval.
• DDC should ensure that Audit Reports are adequately filled out with detailed results of the desk audits to provide an adequate audit trail.
• DDC should ensure that cultural institutions select subcontractors according to required competitive bidding procedures.