Audit Report on New York City Department of Design and Construction’s Oversight of Turner/STV Joint Venture’s Construction Management Contract for the New Police Academy

Audit Report In Brief

On August 28, 200, the New York City Department of Design and Construction (DDC) awarded a contract to Turner/STV Joint Venture (Turner/STV) to construct a new police academy in College Point, Queens, for a total cost of $656.1 million. The academy design includes instructional spaces, a library, administrative offices, fitness training facilities, a central mechanical plant, an outdoor track and multiple parking lots. Based on the contract, roughly $570 million of the total contract amount is for the direct cost of construction and $86.7 million is for the provision of construction management services. These services include inspection, supervision, management, coordination and administration of the project. Staffing expenses account for $67.7 million of the construction management cost.
The focus of this audit is the $67.7 million in construction management costs which, under the contract, are to be paid on a time and material basis.  As of July 2013, Turner/STV has been paid approximately $37.7 million of the $67.7 million for construction management services.
The objective of this audit was to determine whether DDC maintained adequate controls over the payments made to Turner/STV for construction management services.

Audit Findings and Conclusions

DDC did not have adequate internal control procedures to properly verify that construction management service invoices submitted on a time and material basis by Turner/STV were accurate. DDC’s review of Turner/STV construction management service invoices consisted of verifying only that the hourly rates charged for each employee were accurate and that hours charged for each employee were reasonable (for example, not paid in excess of 40 hours per week). DDC did not review Turner/STV’s daily construction site sign-in/out sheets to validate Turner/STV employees’ timesheets. In addition, DDC did not require Turner/STV employees to include detailed information on their timesheets. If DDC had required specific tasks to be included on employees’ timesheets, they would have been able to better validate the construction management services performed on a time and material basis.
Based on our review of the invoices for two payments, totaling $2,467,181, submitted to DDC, we determined that DDC paid Turner/STV in excess of 2,855 hours of work totaling $310,692 (12.6 percent of dollars reviewed) that were not substantiated by the daily construction site sign-in/out sheets.

Audit Recommendations

Based on our audit findings, we make the following four recommendations to DDC:

• DDC should seek reimbursement for the $310,692 in questionable hours where project documentation does not justify payment.
• DDC should reconcile all previous Turner/STV timesheets to the daily site sign-in/out sheets to identify potential overpayments.
• DDC should enhance internal controls to ensure that services billed on an hourly rate are supported and validated.
• DDC should include language in all future contracts that would require timesheets to include a detailed description of work performed and time spent on each task.

Agency Response

In their response, DDC officials did not agree with the audit’s findings and recommendations.  Furthermore, they maintained that “the basic premise of this audit is based on assumptions made by the auditors that are not supported by the facts. DDC feels that this audit report does not identify any problematic agency practices requiring corrective action.”