Audit Report on the Financial and Operating Practices of the Children of Bellevue, Inc.

EXECUTIVE SUMMARY

The Children of Bellevue, Inc., is a nonprofit organization that initiates, develops, and funds special programs and acts as an advocate for children and their families within the Bellevue Hospital Center. The Children of Bellevue is subject to the rules and regulations adopted by the New York City Health and Hospitals Corporation (HHC). HHC rules governing the Children of Bellevue include Operating Procedure No. 10-20, issued in July 1987, that sets forth the procedures and regulations that must be followed by HHC "Auxiliary Organizations." For purposes of this report, we refer to the Children of Bellevue as the "Auxiliary."

Among the services sponsored by the Auxiliary are a child protection and development center, which seeks to minimize the trauma of child abuse, and an early literacy program. The Auxiliary sponsors fund-raising events and solicits donations to support its activities from individuals, corporations, foundations, and government agencies. The Auxiliary also generates income from investments and from interest received on bank deposits. In calendar year 2000, the Auxiliary had total support and revenue of $1,640,946 and expenses of $1,279,789.

The audit’s objectives were to determine whether revenues and expenses are recorded accurately, and are fairly stated in the Auxiliary’s financial statements, whether the Auxiliary incurred expenses in compliance with prescribed guidelines and bylaws, and whether such expenses were reasonable and appropriate.

Our review of the Auxiliary’s financial records for January 1, 2000, through December 31, 2000, found that the Auxiliary’s revenues and expenses were accurately recorded on its financial statements, and expenses were generally reasonable, appropriate, and complied with prescribed guidelines and bylaws.

However, there were some weaknesses in the Auxiliary’s financial and operating practices. Specifically, the Auxiliary paid New York University (NYU) $194,234 without adequate documentation. The payment was to reimburse NYU for the salaries of three NYU employees who purportedly provided services to Bellevue Hospital’s pediatric programs. The Auxiliary also paid $2,739 for questionable items, including gifts and flowers for Board members and employees, in violation of HHC Operating Procedures.

Finally, the Auxiliary was not paid by Cinemat, a concessionaire that operates the videocassette vending machine in Bellevue Hospital. As a result of our bringing this issue to the attention of Auxiliary and Bellevue officials, the Auxiliary recouped $1,136 from Cinemat for the period November 1999 to December 2001. However, we cannot be assured that Auxiliary received the correct amount due since the contract does not require that Cinemat submit gross revenue reports to the Auxiliary and the Auxiliary did not review Cinemat’s accounting records.

Consequently, our report recommended that the Auxiliary ensure that:

• All payments for reimbursing salaries of NYU employees are supported by a formal agreement with NYU. The agreement should specify the services to be provided, the hours to be worked, and the amounts to be paid. In addition, the agreement should require that NYU submit documentation, such as timesheets or timecards, showing the hours worked and services provided, to support amounts requested.
• It pays only expenses that are in accordance with HHC Operating Procedures.
• The Cinemat contract is revised to include a provision requiring that the concessionaire submit gross revenue reports to support fees due. As an alternative, given the minimal amount of fees involved, the contract should be revised to include a flat fee payment rather than a fee based on a percentage of gross revenue.

The matters covered in this report were discussed with HHC, Bellevue Hospital, and Auxiliary officials during and at the conclusion of this audit. A preliminary draft report was sent to HHC, Bellevue, and Auxiliary officials and discussed at an exit conference held on March 12, 2002. On March 25, 2002, we submitted a draft report to HHC, Bellevue, and Auxiliary officials with a request for comments. On April 8, 2002, we received a written response from HHC officials on behalf of Bellevue and Auxiliary officials. HHC officials agreed with the audit findings and recommendations, and indicated that all the recommendations will be implemented by July 15, 2002.