Audit Report on the Financial and Operating Practices of the Queens Borough Public Library

EXECUTIVE SUMMARY

The objectives of this audit were to determine whether the Queens Borough Public Library (the QBPL or the Library) appropriately authorized and recorded the Library’s expenditures and whether those expenditures were necessary for the operation of the Library; and complied with the applicable laws, rules, and regulations governing the use of the QBPL’s funds.

The QBPL was incorporated in 1907 to establish and maintain a free public library system serving the residents of Queens.  It is governed by a board of trustees (the Board), the members of which are appointed by the New York City (the City) Mayor and the Queens Borough President.  In addition, representatives of the City Comptroller, the Mayor, the Speaker of the City Council, the Public Advocate, and the Queens Borough President sit on the Board as non-voting ex-officio members.^[1]  Currently, the QBPL is one of the largest library systems in the country, providing services to approximately 2.3 million residents in Queens through 62 branches.  In Fiscal Year 2014, the QBPL circulated approximately 15.8 million books and other materials and reported nearly 11.2 million attendees.

The QBPL is primarily funded by City tax levy funds.  The City also provides most of the Library’s buildings and City capital funds for infrastructure work.  In addition to City funds, the QBPL receives funding from New York State; federal grants; private donations; and the collection of revenues from book sales, fines, and Library fees.  For Fiscal Years 2008 to 2013, the QBPL received between $121 and $129 million per year in revenue and support.

Audit Findings and Conclusions

Our audit found that the QBPL failed to ensure that adequate financial controls were in place to properly allocate and expend its resources.  The Handbook for Library Trustees of New York State, which was incorporated in its entirety in the QBPL’s Manual for Trustees, requires that board members exercise due diligence and care to ensure that financial resources are used efficiently and effectively in furtherance of an institution’s goals.  In addition, the Board members are required to exercise fiduciary duty to safeguard over the use of public and private funds and adopt policies and rules for the Library’s governance.  We found that the Board did not ensure that key financial controls were in place and, as a result, we identified many questionable expenditures and practices engaged in by the Library’s senior management.

Among the weaknesses we found were a lack of oversight over credit card expenditures, a failure to properly account for managerial employees’ work hours, and a failure to report all compensation on certain executive employees’ federal W-2 compensation disclosure forms.  Further, we found that the QBPL failed to substantiate its bases for repeatedly allocating in its financial records the majority of the Library’s expenditures to the Library’s City Fund, which caused that fund to operate with multi-year deficits, even though other non-City unrestricted funds had surpluses during this time period that could have been used for these expenditures.  At the same time, we found that despite the availability of these unrestricted funds, QBPL executives repeatedly requested additional funding from the City to cover basic operating costs, while using non-City funds that had previously been shielded from the Comptroller’s audits to pay for many of questioned expenditures.

Finally, our audit could not substantiate the reasonableness of the QBPL management’s decision to increase management compensation while it decreased Library hours and reduced staff, all during a period when the Library reported it was experiencing severe financial difficulties.

Audit Recommendations

To address these issues, we make nine recommendations to the QBPL.  Specifically, we recommend that the QBPL should:

• Revise its policies and procedures to ensure that proper Board and managerial oversight responsibilities are established and exercised for all aspects of the Library’s operations, including but not limited to the activities of the CEO and other executive staff.
• Ensure the establishment and enforcement of proper financial controls for the effective use of the QBPL’s resources.
• Revise the timekeeping policy to ensure all employees, including managerial employees, properly account for their work hours.
• Review prior W-2s issued by the QBPL to determine the value of any income not properly stated and take appropriate action, including reissuing any W-2s, if necessary.
• Recoup the value of any improper personal expenditures from credit card users or revise the W-2 forms to include the personal charges as wages of the staff.
• Ensure going forward that all compensation is included as taxable income on employees’ W-2s.
• Establish a reasonable methodology to properly allocate costs among different funds.
• Maintain accurate records to support fund allocations and other financial and operational decisions, including raises, bonuses, staff reductions, and reductions in services.
• Review the QBPL’s policies and procedures to ensure that they adequately promote the mission of the Library and ensure the proper allocation of resources.

Library Response

The QBPL agreed with all of our findings and recommendations.  In its response, the QBPL stated that,

Overall, the audit findings were accurate in reflecting Library practices prior to the implementation of reforms and added internal controls, including new and revised policies and procedures; a process that is ongoing.  The audit findings included opinions regarding appropriate expenses and operational decisions that will be reviewed carefully by the administration and Board, including the context in which those decisions were made …

We appreciate the audit work done by the Comptroller and his staff.  Strengthening the Library’s fiscal accountability is a top priority for the Board of Trustees and management.  The recommendations provided in this report are certain to assist us in meeting that goal.