Audit Report on the Financial and Operating Practices of the 125th Street Business Improvement District

AUDIT REPORT IN BRIEF

This auditdetermined whether the 125^th Street Business Improvement District (BID) provided services called for in its District Plan and complied with provisions of its Department of Business Services (DBS) contract. The audit also evaluated the adequacy of the BID’s internal controls over its funds and operations.

The BID has provided services and has introduced a variety of programs and projects, as required in its District Plan. The BID is also in compliance with its DBS contract provisions on insurance coverage, submission of reports, and the bidding process in the selection of outside vendors. In addition, the transactions we reviewed appeared to be ordinary and reasonable.

However, the BID has been operating at a loss for four of the last five years and is depleting its net assets. The BID needed to obtain a $100,000 revolving line of credit, at an interest rate of 7.75 percent, to help it meet expenses. Moreover, the BID has been paying bills late or only partially paying bills because of its lack of funds. In addition, we found some weaknesses in the BID’s internal controls relating to segregation of duties, handling of checks, and recording of transactions.

To address these issues, we make eight recommendations that include the following:

• BID officials should pay its bills on a timely basis.
• BID officials should monitor and control the BID’s spending patterns
• The Board of Directors should monitor the BID’s rate of spending.

• BID officials should ensure that bank reconciliations are performed on a consistent and accurate basis.

The matters covered in this report were discussed with officials from the 125^th Street BID during and at the conclusion of this audit. A preliminary draft report was sent to BID officials and discussed at an exit conference held on February 4, 2003. On February 18, 2003, we submitted a draft report to BID officials with a request for comments.We received a written response from the 125^th Street BID on March 6, 2003. Although BID officials disagreed with some of the audit’s conclusions, theyagreed to implement the report’s recommendations.