Audit Report on the Financial and Operating Practices of the Queens Economic Development Corporation

Executive Summary

The Queens Economic Development Corporation (the QEDC) was established as a not-for-profit corporation in 1976 with its stated mission to promote the creation and retention of jobs in the Borough of Queens.  The QEDC also helps entrepreneurs create businesses and helps communities establish Business Improvement Districts to revitalize commercial districts in the Borough of Queens.

The QEDC’s Board of Trustees (the Board) oversees the organization as its governing body.  The QEDC’s operations are guided by internal policies and procedures, and the QEDC must also comply with the reporting and other requirements detailed in its funding agreements with New York City (City), New York State (State), and federal government organizations.

For Fiscal Year 2017, the QEDC reported revenue totaling $1,921,408, including $472,551 it received from the City through six agreements with the Department of Small Business Services and the Department of Youth and Community Development.  In addition to its City funding, the QEDC receives funding from State and federal agencies and generates additional revenue from program fees, investment income from its rental property, and interest income.

We conducted this audit to determine whether the QEDC: (1) maintained adequate controls over its fiscal operations; (2) complied with internal policies and procedures, by-laws and applicable City and State rules and regulations; and (3) expended City funds in accordance with its City contracts.

Audit Findings and Conclusions

Although the QEDC provided the required programs and deliverables as set forth in its City agreements, it did not maintain adequate controls or enforce existing controls over its timekeeping, purchasing, and fiscal activities, including the use of the corporate credit card and the issuance of checks for disbursements exceeding $1,000.  As a result, we were unable to determine whether the QEDC accurately allocated its expenses to City programs and whether the amount of the City’s reimbursement was appropriate.

In addition, the QEDC did not always adhere to its own by-laws and written policies in multiple areas of its operations.  Specifically, the QEDC did not properly document and authorize the majority of its petty cash reimbursements; did not properly renew and obtain Board’s review and approval for its contracts and multi-year engagements with independent consultants; and did not maintain adequate documentation to support its human resources (HR) activities, such as its hiring and payment of salary increases to employees.  Moreover, we found that the Board failed to maintain documentation to support its assessment of the Executive Director’s performance; failed to have its members complete and submit annual written disclosure statements identifying any conflicts and potential conflicts of interest; and failed to hold the minimum number of Board meetings that its by-laws require.

Audit Recommendations

To address these issues, we make 10 recommendations to the QEDC, including 5 addressed specifically to its Board.

Specifically, the QEDC should:

1. Strengthen the organization’s internal controls by:

• Implementing a timekeeping system that accounts for each employee’s time-in/time-out hours allocated to each City program, and total number of hours worked, and that also tracks each employee’s accrual and use of vacation, sick leave, and compensatory time, and allows management to review and approve, in a timely manner, the information recorded in the system;
• Ensuring vacation time requests are properly approved;
• Implementing written policies and procedures to govern all use of any corporate credit card, including a provision requiring independent, documented, review of all credit card charges, including those of the Executive Director, based on parameters established by the Board;
• Revising current petty cash processes and implementing written policies and procedures that clearly segregate the custodial, authorizing, and record-keeping functions and require independent review and approval, by one or more designated officials, of all expenses and reimbursements paid with QEDC funds;
• Revising the Petty Cash Reimbursement form to include the name and dated signature of the approver on the form; and
• Establishing written procurement procedures to ensure that each acquisition is reviewed and approved prior to the earlier of (1) the QEDC’s incurring any obligation to pay for a purchase, or (2) its acquisition of goods and/or services.

2. Maintain proper documentation, including the Petty Cash Reimbursement forms and original receipts, for all petty cash reimbursements.
3. Ensure that all consulting services payable with corporate funds are acquired and documented with current, written contracts and that all consultant contracts are properly and timely renewed with clear deliverables, payment terms, service periods, and other important terms.
4. Ensure that all consultant contracts that require renewal are timely submitted to the Board for review and approval.
5. Ensure that sufficient documentation is maintained in personnel files to appropriately support the QEDC’s employment decisions, including but not limited to hiring, salary increase, and termination actions as required by the HR Policy.

We also recommend that the Board take the following measures to strengthen governance of the organization:

6. Review consultant contracts annually, on a fiscal year basis, or prior to renewal whichever comes first, in accordance with the by-laws.
7. Ensure that the minimum number of Executive Committee Meetings and Regular Meetings is conducted each year.
8. Conduct formal, documented reviews of the Executive Director’s performance and ensure that any and all associated personnel activity is adequately documented and supported, including without limitation an assessment of all areas of the Executive Director’s performance, the QEDC’s determination of whether the Executive Director should remain in title, and whether any adjustment to the amount of or method for establishing or adjusting the Executive Director’s compensation is warranted.
9. Ensure that all Board members, prior to initial election and annually thereafter, complete, sign, and submit to the Board Secretary or a designated compliance officer the required written statement for the disclosure of any conflicts and potential conflicts of interest.
10. Ensure that its conflict of interest policy meets the requirements of the Not-for-Profit Corporation Law, the QEDC Board should review, with assistance of counsel, the current statute and the most recent public guidance document[s] issued by the New York State Attorney General’s Office, noting, in addition to the disclosure requirements for Board members, the requirements concerning “key persons,” “related party transactions,” and other pertinent topics, determine what if any changes should be made to its own written policies, procedures and by-laws, and designate an official or Board committee to monitor and report to the Board any future changes in the applicable law that require Board action.

The QEDC’s Response

The QEDC agreed to implement all of our recommendations.