Audit Report on the Coney Island Development Corporation’s Financial and Operating Practices and Its Compliance with Its EDC Funding Agreement

The Coney Island Development Corporation (CIDC) is a not-for-profit local development corporation which was established in September 2003 to build on the City’s efforts to revitalize and enhance the Coney Island section of Brooklyn so that it can become a year-round, world-class recreational oceanfront destination. Beginning in December 2006, CIDC has carried out its responsibilities through a funding agreement with the New York City Economic Development Corporation (EDC). Under the agreement for Fiscal Year 2010, EDC provided $357,120 for CIDC’s general operating expenses to CIDC. Because CIDC does not have its own staff or office space, it also contracts with EDC, through a separate service agreement, to provide personnel, office space, and equipment to perform the day-to-day operations of CIDC. In Fiscal Year 2010, EDC charged CIDC $208,317 for these contracted services. Of the $357,120, CIDC spent $349,175 during Fiscal Year 2010.

The audit determined whether CIDC accurately accounted for program funds and conducted its economic activities in accordance with the funding agreement.

Audit Findings and Conclusions

EDC properly accounted for CIDC’s revenues and expenses and conducted economic activities in accordance with the funding agreement. However, we found that EDC paid $20,856 in inappropriate or questionable expenditures (approximately 6 percent of the total expenditures) and could enhance the controls over CIDC’s operations to ensure that all transactions are properly authorized and processed in accordance with procedures.

Audit Recommendations

We recommend that EDC, on behalf of CIDC, should:

• Ensure all payments processed have sufficient documentation to justify that the expenses are necessary and business-related.
• Pay credit card charges on time to avoid unnecessary finance and late charges.
• Ensure segregation of duties is in place when approving expenses of all CIDC representatives.
• Adhere to its accounting policies and procedures by ensuring that all expenses are supported by original receipts and/or invoices before processing payments.

EDC should also:

• Reimburse CIDC $17,180 for inappropriate and unnecessary expenses disbursed (i.e., web camera rental, printing and mailing expenses, finance and late charges, a parking violation ticket, and payment towards a farewell party for an EDC employee).

Agency Response

In its response received on October 4, 2011, CIDC strongly disagreed with the Comptroller’s findings of $20,856 in inappropriate or questionable expenses and internal control weaknesses. CIDC stated that that all of these expenses were incurred in the regular course of business, were in furtherance of CIDC’s adopted mission statement, and were in full compliance with the policies and procedures of CIDC and EDC. CIDC’s response did not cause us to change our opinion or reported findings.