Audit Report on the Administration of the Employee Blood Credit Program Fiduciary Account by the Department of Citywide Administrative Services

AUDIT REPORT IN BRIEF

The audit determined whether the Department of Citywide Administrative Services (Department) accurately accounted for the revenues and expenses of the fiduciary account for the Employee Blood Credit Program and ensured that all funds were used in accordance with New York City’s Blood Credit Program (Program) rules and related guidelines.

Fiduciary accounts are used to record financial resources held and administered in trust by the City of New York. The principal and income of these accounts are intended to benefit individuals, private organizations, or other non-City government entities. The Department is responsible for administering the Program’s fiduciary account, which received deposits from City employees who joined and paid annual membership fees to the Program’s Limited Plan in order to participate. The Program was established in 1964 to cover the cost of blood supplies and certain blood-related needs to eligible participants. Funds in the account were used to pay for certain Program costs and supplementary membership benefits, such as use of blood derivatives and pharmaceuticals, and for special processing fees. As a result of changes to the blood distribution system throughout the New York City area, the Program was revised in July 1980 by eliminating the Limited Plan and its requirement to pay membership fees. Accordingly, since 1980 the fiduciary account has been funded by interest only. As of Fiscal Year 2005, the Department reported a fund balance of approximately $1.8 million.

Audit Findings and Conclusions

The Department properly accounted for the revenues and expenses of the fiduciary account and used account funds in accordance with Program rules and related guidelines. However, as a result of changes in the manner in which blood is supplied in the New York City area and the termination of the Program’s Limited Plan, the fiduciary account is no longer fulfilling the primary purpose for which it was established. Accordingly, the Department should consult the Law Department to determine the rightful owner of the fiduciary funds and whether the funds are needed to achieve the original purpose of the account. Should the Law Department advise that the funds are no longer needed, the Department should close the account and dispose of the funds in accordance with Comptroller’s Directive #27; should the funds be deemed needed, the Department should develop a plan for their use.

Further, in Fiscal Year 2003, the Department did not reimburse the General Fund approximately $119,000 in account funds to pay for salaries of Program employees as it did in Fiscal Years 2002, 2004, and 2005. Accordingly, the Department should transfer this funding from the fiduciary account to the General Fund to satisfy disbursements incurred for Program expenses in Fiscal Year 2003.

Audit Recommendations

To address these issues, we recommend that the Department should:

• Seek an opinion from the Law Department to determine the rightful owner of the fiduciary funds and whether the funds are needed to achieve the original purpose for which the account was established under Executive Order No. #89.

If the Law Department opines that the funds are no longer necessary, the Department should consult the Comptroller’s Bureau of Accountancy, closing the fiduciary account and disposing of the funds in accordance with Comptroller’s Directive #27. However, if the Law Department opines that the funds are needed to achieve the original purpose for which the account was established, the Department should develop a plan about how surplus funds should be used (e.g., to step up donor recruitment activities, allocate funds for special incentives, or obtain professional assistance on recruitment drives).

• Transfer $119,000 in funding from the fiduciary account to the General Fund to satisfy disbursements incurred for Program expenses in Fiscal Year 2003.