Audit Report of the Richmond County Public Administrator’s Inventory Practices

Executive Summary

The offices of New York City’s (the City’s) five Public Administrators (PAs) are municipal agencies headed by PAs appointed by the New York State Surrogate’s Court and are responsible for administering the estates of decedents who died intestate, with no heirs willing or able to administer the estates.  The Richmond County Public Administrator (RCPA) carries out those responsibilities in Richmond County (which encompasses Staten Island).  The PAs’ official activities are principally governed by Article 11 of the New York State Surrogate’s Court Procedures Act (SCPA) and the Guidelines of the Administrative Board for the Offices of the Public Administrators established thereunder (SCPA Guidelines).

The RCPA’s operations are funded by the City of New York and by fees the RCPA collects from the estates it administers.  Under the SCPA Guidelines, a PA’s office is authorized to charge the estates an administrative fee of up to one percent of the gross value of the estate, which it may deposit into a suspense account to pay for office expenses not funded by the PA’s budget, including the purchase of office equipment and supplies.  The PA must maintain records of all suspense account expenditures.  As a City-funded agency, the RCPA is also subject to rules, policies, and procedures established by the City Comptroller and the Department of Investigation (DOI) that are intended to promote internal control and accountability in City agencies.

This audit focuses on evaluating the effectiveness of the RCPA’s internal controls over its office inventory and its compliance with applicable Comptroller’s Directives and DOI’s Standards for Inventory Control and Management (the DOI Standards) to ensure accurate recordkeeping and proper safeguarding of its office inventory during an audit scope period of Fiscal Years 2016 and 2017.  This audit did not evaluate the RCPA’s internal controls over its estates’ inventory.

Audit Findings and Conclusions

Our audit found that the RCPA did not maintain adequate internal controls to ensure accurate recordkeeping and proper safeguarding of its office inventory as required by both Comptroller’s Directive #1 and the DOI Standards.  Specifically, our audit found that the RCPA:

• did not have written policies and procedures to manage its inventory;
• did not maintain accurate and complete inventory records;
• did not track all of its inventory items;
• did not tag its inventory items with sequentially numbered property identification tags;
• did not conduct periodic physical inventory counts;
• did not ensure proper segregation of duties over its inventory processes;
• charged some purchases to incorrect object codes within the proper unit of appropriation; and
• omitted required “approver checks”—a form of internal control over expenditures of City funds—through its staff’s impermissible sharing of approver login credentials while processing payments in the City’s Financial Management System (FMS).

Finally, our audit also found that the RCPA had not promptly relinquished aged and damaged items (surplus inventory) in accordance with the applicable guidelines established by New York City Department of Citywide Administrative Services (DCAS).

The RCPA’s inadequate internal controls over its recordkeeping and over its safeguarding of inventory increases the risk of inventory items being misplaced, lost, or stolen without detection.  Although our audit did not identify any loss or theft, we are unable to determine whether such events may have occurred due to the deficiencies found during our audit.

Audit Recommendations

To address these issues, we make a total of nine recommendations, including that the RCPA should:

• Create and communicate to all agency staff written policies and procedures for the management and control of its office inventory.
• Promptly update and maintain accurate and complete records of all equipment in accordance with the DOI Standards.
• Sequentially tag and inventory all valuable office equipment using appropriate identification tags as required by Comptroller’s Directive #1 and the DOI Standards.
• Conduct periodic physical inventory counts of office items at least once a year, document the results, ensure that any discrepancies are promptly reported to the Public Administrator and investigated, and that appropriate corrective action is taken, and update the Inventory Master List, as warranted.
• Ensure that all key responsibilities related to office inventory such as ordering, receiving, processing, approving payments, and maintaining inventory records are adequately segregated or properly implement compensating controls.

Agency Response

In its response, the RCPA agreed with six of our nine recommendations and represented that it had already implemented or begun to implement several of them.  At the same time, the RCPA disagreed with two recommendations and did not respond to the remaining recommendation that it ensure that its actual inventory practices are accurately reflected in future internal control self-assessments that it submits to this office pursuant to Comptroller’s Directive #1, Principles of Internal Control.  The RCPA also objected to the presentation of findings in our draft report stating, “while the audit process itself was helpful to establish a baseline for this small agency’s inventory controls, the reports generated from it have proven seriously flawed and unfortunately one-sided.”  Although, the RCPA disagreed with the presentation of findings in our report, we are pleased that the agency intends to implement most of our recommendations, and we urge the RCPA to implement the remaining recommendations.