Audit Report on the Conflicts of Interest Board’s Oversight over Collection and Reporting of Enforcement Fines

EXECUTIVE SUMMARY

The Conflicts of Interest Board (COIB) is responsible for administering, enforcing, and interpreting Chapter 68 of the New York City Charter, the City’s Conflicts of Interest Law.  The Conflicts of Interest Law prohibits certain types of holdings, employment positions, and conduct by the City’s public servants to prevent conflicts between their public duties and private interests and covers such topics as gifts, outside employment, business-ownership interests, volunteering, political activities, and misuse of position.  The Charter authorizes the COIB to receive complaints; direct the New York City Department of Investigation to conduct investigations; impose fines of up to $25,000 for violations of the Conflicts of Interest Law; and order payment to the City for the value of any gain or benefit obtained as a result of the violation.  The COIB also publishes advisory opinions on issues that may arise regarding the application of the Conflicts of Interest Law and collects and reviews the annual financial disclosures submitted by City employees.

The COIB collects cash receipts related to enforcement fines, annual disclosure fines, and fees for copying COIB documents.[1]  This audit examined only the COIB’s controls over the collection and reporting of enforcement fines.  In its 2016 Annual Report, the COIB reported that it closed 429 enforcement cases.  Of those cases, the COIB determined that the Conflicts of Interest Law had been violated in 56 cases, and imposed fines in 54 cases.  Further, the COIB reported that it collected $110,150 in fines from violators.

Audit Findings and Conclusions

We found that the COIB did not adequately safeguard enforcement fines that were collected, in that it did not deposit cash receipts, consisting of checks and money orders, in a timely manner and did not properly secure these items pending their deposit.  Consequently, enforcement fines were susceptible to risk of misappropriation or loss.  In addition, the COIB did not collect enforcement fines in a timely manner and this increased the risk that these sums could potentially remain uncollected.

Audit Recommendations

To address these issues, we make six recommendations, including that the COIB should:

• Deposit all cash receipts in the bank on at least a daily basis.
• Accurately represent its internal control structure in its Directive #1 Checklist.
• Place restrictive endorsements on incoming checks and money orders as soon as they are received.
• Secure checks and money orders awaiting deposit in a locked safe which has a combination that is changed periodically and known to few individuals.
• Ensure that all fines are collected in accordance with the Enforcement Dispositions.
• Document its efforts to collect fines that are not paid in accordance with the Enforcement Dispositions.

Auditee Response

In its response, the COIB agreed with the three recommendations related to the accuracy of its Directive #1 Checklist and the security of cash receipts awaiting deposit.  In addition, the COIB contended that it is already in compliance with the recommendation that it document its collection efforts.  However, since the COIB did not provide us with documentation of its collection efforts, we cannot determine the validity of its claim.  The COIB did not agree to ensure that all fines are collected in accordance with the Enforcement Dispositions and deposit them upon receipt.

[1] Comptroller’s Directive #11, Section  4, provides, in part, “Cash receipts, for the purposes of this Directive, encompass all payments and deposits received in the form of cash or cash equivalents, including currency, coins, checks, money orders, credit card payments, and electronic fund transfers.”  The COIB’s cash receipts for enforcement fines during the audit scope period consisted of checks and money orders.  Cash currency is not accepted.