Audit Report on Funds Raised by the New York City Department of Parks and Recreation And Maintained in Custodial And Restricted Accounts By the City Parks Foundation
Executive Summary
The New York City Department of Parks and Recreation (Parks) maintains 28,000 acres of City parkland and provides the public with a variety of recreational opportunities through its ball fields, tennis courts, beaches, swimming pools, recreation centers, etc. Parks is also responsible for 500,000 street trees and two million park trees. Parks activities are funded through the City’s General Operating Fund.
In addition to City funds, Parks raises “private” funds from individuals and organizations that are instructed to make their checks payable to the City Parks Foundation (Foundation). Those funds are deposited in several custodial accounts maintained by the Foundation or deposited in restricted accounts with the Foundations own funds. They are spent at Park’s direction.
Besides the custodial accounts, Parks deposited “private” funds in several restricted accounts with the Foundation. Three audit reports have already been issued covering restricted accounts for Park’s Urban Park Service Division, its Tree Trust Program, and its Marketing Division. Furthermore, Parks deposited funds into 28 other restricted accounts that were not covered in our first three audits. During Fiscal Year 1999, Parks deposited a total of $574,094 in these accounts, which were examined during this audit.
This is the fourth and final report that will be issued covering the private funds raised by Parks and maintained by the Foundation. This report discusses the methods used by Parks to solicit private funds, as well as the results of our examination of funds deposited with the Foundation in the custodial accounts and in the 28 other restricted accounts.
Our audit objectives were to review Parks’s fund-raising practices and its internal controls governing the receipt and expenditure of funds raised for its custodial and restricted accounts, including: the propriety of Division employees raising private funds that are deposited with the Foundation; the adequacy of the internal controls over the processing, recording, reporting, and expending of these funds; and the accuracy of the accounting for and the recording and reporting of these funds.
Our audit covered the period from July 1, 1998, through June 30, 1999. To review internal controls, we interviewed Foundation and Division officials to gain an understanding of the procedures for recording, reporting, and expending “private” funds. Based on our interviews, we determined that the Foundation and the Division did not have sufficient controls in place to ensure that all funds raised are properly safeguarded and that the funds are expended in accordance with Parks guidelines. Therefore, we conducted substantive testing on the Custodial and Restricted accounts, as discussed in the body of this report.
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.
Parks inappropriately bypassed the City Treasury by depositing $3,511,779 in private funds it raised by soliciting donations at City recreation centers, by selling goods and services, by issuing permits, and by soliciting grants and donations in fiscal year 1999. In addition, Parks inappropriately instructed individuals seeking membership at City recreation centers, and production companies and individuals seeking permits, to label their payments as “donations” so that the amounts collected could be deposited with the Foundation.
Parks spent the bulk of the funds it raised on park-related programs; however it spent $22,322 on trips to colleges for on-campus recruitment, and on office furniture, postage, and parties that were not in compliance with its guidelines. Parks also made $8,182 in duplicate payments, and it did not obtain bids for 28 of 115 purchases costing more than $1,000, as required by its guidelines.
Finally, we noted that the Foundation did not properly post all revenue and expense transactions on its books and records. Consequently, there was a $1,193,404 difference between the custodial bank statements and the Foundation’s accounting records.
This report makes the following recommendations:
Parks should:
- Require that all proceeds for the custodial and restricted accounts be deposited in the City Treasury. In addition, funds for these accounts on deposit with the Foundation should be transferred to the City Treasury. Until the transfer of these funds is made, Parks should ensure that these funds are reconciled and spent in accordance with Parks’s guidelines.
- Cease the practice of instructing individuals and companies to label payments as donations.
- Ensure that all recreation personnel are adequately trained in and follow Parks policies regarding the collection of fees and donations until membership fees are mandated by the City Administrative Code.
The Foundation should:
- Cease accepting moneys for Parks custodial and restricted accounts and forward all balances it manages on behalf of Parks custodial and restricted accounts to the Parks Budget Office.
The matters covered in this report were discussed with Parks and Foundation officials during and at the conclusion of this audit. A preliminary draft was sent to Parks and Foundation officials and was discussed with Parks officials at an exit conference held on May 23, 2002. On May 28, 2002, we submitted a draft report to Parks and Foundation officials with a request for comments. We received written responses from Parks on June 6, 2002, and from the Foundation on June 18, 2002.
In its response, Parks stated that it agreed with most of the findings and stated that two of the three recommendations have or will be implemented. Parks did not agree to transfer remaining funds on deposit with the Foundation to the City Treasury. Parks stated that the Funds would instead remain with the Foundation until they are spent.
However, the Foundation responded that it intends to comply with the report’s recommendations that it cease accepting moneys for Parks custodial and restricted accounts and that it forward all the balances it manages regarding these accounts to the Parks Budget Office.