Audit Report on Capital Improvements at Day Care Centers Required by Landlords’ Lease Agreement with the Administration for Children’s Services

Audit Report In Brief

This audit of the Administration for Children’s Services (ACS) reviewed the timeliness of the design phases for lease renewal upgrades at City-leased day care centers. ACS has oversight and regulatory responsibilities to ensure that all publicly funded programs for children meet federal, state, and City standards. ACS administers a total of 493 day care centers, including 133 in privately owned facilities. The Department of Citywide Administrative Services (DCAS) enters into lease agreements on behalf of ACS with landlords of these privately owned facilities. The lease agreements require that the landlords make upgrades and improvements to their properties. Although upgrades are the responsibility of the landlord, the ACS Lease Renewal Upgrade (LRU) unit approves the design and monitors the construction of the upgrades.

ACS oversight of the design phases for lease renewal upgrades at City-leased day care centers needs improvement. The design phase begins at the receipt of the lease agreement from DCAS and continues to the beginning of construction. None of the 20 upgrades in our sample were completed in accordance with the time frames indicated in the standard lease agreement. While ACS officials told us that the time frames in the lease agreement may be unrealistic, ACS has not developed its own timeliness criteria. Neither has it developed an effective tracking system to monitor the progress of lease renewal upgrades during the design phase. The audit found that:

• ACS lacks documentation of critical events during the design phase, such as its approvals of the architect, the upgrade design, and the general contractor for the upgrade work.
• DCAS’s lease agreements with landlords of privately owned facilities have not provided ACS with sufficient control to ensure that the landlords complete the LRUs in a timely manner.
• ACS provided inadequate oversight, which permitted extensive delays in various stages of the LRU design phase. These delays related, among other things, to delays by landlords in submitting asbestos abatement plans, delays by ACS in assigning engineers to review design documents, and inadequate communication between responsible ACS units.

To address these issues we make seven recommendations. Among them, we recommend that the Administration for Children’s Services:

• Establish a standardized method to organize the case files and to document the completion of each step of the LRU process.
• Continue working with DCAS to improve the lease agreements in order to give ACS more leverage to have the LRU completed in a timely fashion.
• Develop criteria to track the timeliness of landlords’ design-phase actions, ACS’s reviews of design documents, and landlords’ responses to ACS review comments.
• Continue its efforts to ensure that engineers are assigned to the LRU unit to promptly review landlords’ construction design documents.
• Establish better communication between the LRU and Program Operations units in obtaining temporary space for the day care centers to use during the construction phase of the lease renewal upgrades.

The matters covered in this report were discussed with ACS officials during and at the conclusion of this Audit. A preliminary draft report was sent to ACS officials on December 9, 2003, and was discussed at an exit conference on December 17 2003. We submitted a draft report to ACS officials on January 5, 2004 with a request for comments. We received a written response from ACS officials on January 20, 2004. In its response, ACS agreed with all of the audit’s recommendations. The full text of the ACS response is included as an addendum to this report.