Audit Report on the Compliance of the Department of Correction with Comptroller’s Directive 10, Charges to the Capital Projects Fund, for the Purchase of Capital Equipment

AUDIT REPORT IN BRIEF

To manage its penitentiary facilities, the New York City Department of Correction (DOC) expends millions of dollars on capital projects and procurements. DOC spent a total of $11.1 million on capital equipment purchases in Fiscal Years 2002 and 2003. This audit determined whether DOC’s capital equipment purchases were made in compliance with City Comptroller’s Directive 10, Charges to the Capital Projects Fund.

In general, DOC’s purchases of capital equipment were in compliance with Directive 10. During Fiscal Years 2002 and 2003, DOC issued 319 capital purchase orders for a total of $11.1 million. The 20 projects associated with these purchases all met the requirements of Directive 10. Based on our review, we determined that items purchased with 304 (95%) of the 319 capital purchase orders met the eligibility criteria described in Directive 10.

However, during our audit, we found other matters of concern that were not related to Directive 10, namely, that DOC incorrectly coded as ‘equipment’ on its purchase orders materials and supplies used for capital construction projects. Based on our review of the purchase orders, we determined that 95 (30%) of the 319 purchases, totaling $1.4 million, were incorrectly coded as equipment. The items purchased were for materials or supplies, such as plumbing supplies, electrical supplies, tiles, lumber, drywall, compound, and paint brushes, and were incorrectly coded with the object code 2200, which is the object code for capital equipment. These purchases should have been coded with the object code 2110, which is for construction.

Furthermore, DOC does not maintain an inventory listing of capital assets as recommended by Comptroller’s Directive #1. According to this directive, agencies should ensure that accurate and complete inventory records are maintained for all assets. The only listing of capital equipment available from DOC was generated by the City Financial Management System. However, this list is incomplete and is not updated to reflect all purchases or the location of the items.

To address these issues, we make three recommendations, namely, that DOC should:

• Continue to ensure that all equipment purchased with capital funds meets the eligibility requirements of Directive 10. Questionable purchases should be referred to the Office of Management and Budget or to the Capital Unit of the Bureau of Accountancy at the Comptroller’s Office for a determination of capital-eligibility.
• Code all purchases of construction materials and supplies with the construction object code and not the equipment object code.
• Maintain a complete inventory listing of all capital assets. A physical inventory should be conducted yearly to ensure that the inventory records are accurate.