Audit Report on the Department of Cultural Affairs’ Controls over Its Inventory of Computers and Related Equipment

EXECUTIVE SUMMARY

The objective of this audit was to determine whether the New York City (City) Department of Cultural Affairs (DCLA) has adequate controls over its inventory of computers and related equipment in compliance with applicable rules and regulations.

DCLA is responsible for supporting and strengthening the City’s vibrant cultural life. One of its primary missions is to ensure adequate, public funding for non-profit cultural organizations, both large and small, throughout the five boroughs. In doing so, DCLA helps to support non-profit cultural organizations involved in the visual, literary and performing arts; public-oriented science and humanities institutions, including zoos, botanical gardens, and historic and preservation societies; and creative artists at all skill levels who live and work within the City’s five boroughs. Through its Materials for the Arts (MFTA) Program, DCLA provides free supplies for use in arts programs offered by non-profit groups and City public schools.

DCLA utilizes and maintains an inventory of computers and related equipment at two locations: its main offices in Manhattan and the MFTA warehouse located in Queens. A master inventory list of these items is maintained in a Microsoft Excel file, in which DCLA had recorded a total of 194 computers and related equipment items in inventory as of October 13, 2017[1].

During Fiscal Year 2017, DCLA expended $6,815,645 for its Office of the Commissioner, consisting of $4,872,115 for personal services and $1,943,530 for other than personal services (supplies, materials and services necessary to support agency operations).[2]   According to DCLA officials, the agency purchased 133 computers and related items, totaling $137,420, in Calendar Years 2013 through 2015.

Audit Findings and Conclusion

DCLA has not instituted adequate controls over the agency’s inventory of computers and related equipment. Preliminarily, we found that DCLA did not have a comprehensive written procedures manual and only provided limited policies and procedures for the management of its computer-related inventory, which could have contributed to the issues identified in this report. Specifically, we found that DCLA did not have adequate segregation of duties over the management of its computers and related inventory; insufficient evidence that the agency performed the required periodic inventory counts; a failure to affix sequentially numbered property identification tags on its computers and related equipment as required; and a lack of adequate physical safeguards of computer inventory at one of its storage locations. As a possible consequence of the inadequate safeguards, DCLA discovered an apparent theft of three computers during the course of the audit that might have been prevented if appropriate controls had been in place.

Further, we found that DCLA’s inventory records were incomplete and inaccurate. The inventory records we reviewed included equipment that auditors could not find in the agency’s possession and excluded other equipment that we found was in the agency’s possession. Additionally, the records did not include the purchase dates of the computers and related items, which could be used by DCLA as part of a determination of whether those items need to be relinquished. Moreover, DCLA does not have a consistent process for salvaging and relinquishing its inventory and did not maintain adequate documentation supporting its relinquishment of its computers and related equipment..

DCLA’s failure to institute adequate controls over its inventory operations significantly increases the risk of waste, fraud and mismanagement.

Audit Recommendations

Based on the audit, we make 12 recommendations, including that:

• DCLA should create a comprehensive, written manual of its inventory-management policies and procedures that delineate its staff’s responsibilities for computers, computer-related equipment and other assets in conformity with applicable standards, and the specific needs and operations of the agency.
• DCLA should ensure that key responsibilities for the management of the agency’s inventory of computers and related equipment are adequately segregated or that compensating controls are implemented.
• DCLA should perform and document annual inventory counts of its entire inventory and ensure that all discrepancies are independently investigated and any adjustments to its inventory records are reviewed and approved by management.
• DCLA should ensure that it utilizes appropriate identification tags, that include sequential internal control numbers, and that the identification tag numbers are assigned sequentially and affixed on all computers and related equipment.
• DCLA should ensure that its inventory of computers and related equipment are stored in secure areas with restricted access to only authorized personnel.
• DCLA should maintain complete and accurate inventory records of all equipment which includes immediately updating its inventory records when changes occur.
• DCLA should comply with the City’s inventory relinquishment policy and ensure that it adopts a consistent process and formalizes its procedures for relinquishing its computers and related items.

Agency Response

In its response, DCLA generally agreed with the audit’s 12 recommendations.

[1] Computer-related equipment includes items that connect to or involve the use of a computer, such as monitors, printers (including multi-function printers), scanners, and external drives.

[2] The budget information provided in this audit is for the DCLA Office of the Commissioner only. It does not include funds provided directly to cultural institutions in the form of grants.