Audit Report on the Financial and Operating Practices of the Richmond County District Attorney’s Office

EXECUTIVE SUMMARY

The City’s five District Attorneys (DAs), including the Richmond County DA, are each publicly elected to terms of four years and are responsible for investigating and prosecuting crimes, assisting victims, and implementing crime prevention strategies in their respective boroughs.  DA office operations are primarily funded by the City Treasury, but the DAs also receive federal and State asset forfeiture funds as well as grants.

The Richmond County District Attorney’s Office’s (RCDA’s) Personal Services (PS) expenditures are centrally managed through its Human Capital Unit, which is responsible for overseeing payroll, timekeeping, and personnel functions.  The RCDA’s Other Than Personal Services (OTPS) expenditures are centrally managed through its Administration Unit, which includes the Procurement and Fiscal Units.[1]   The RCDA Procurement Unit is primarily responsible for processing expenditures through the City’s Financial Management System (FMS) and maintaining all supporting documentation related to those expenditures.  The RCDA Fiscal Unit is responsible for administering the office’s six bank accounts, which includes processing payments via check or Electronic Funds Transfer (EFT) from those accounts and maintaining supporting documentation for expenditures paid through them.

The New York City Department of Investigation (DOI), the United States Attorney’s Office for the Eastern District of New York, and the Federal Bureau of Investigation (FBI) conducted a joint investigation concerning theft of funds from the RCDA after being alerted to the issue by the RCDA.  Following the investigation, on April 23, 2018, the former RCDA Procurement Director pled guilty to theft of government funds relating to his embezzlement of over $440,000 from the RCDA by using agency credit cards for personal expenditures.  As a result of the investigation, DOI made several recommendations to the RCDA, including that the RCDA ensure that an independent entity conducted an audit of agency finances within 12 months of the issuance of DOI’s report in August 2017.  This audit was initiated at the request of the RCDA.

We conducted this audit to determine whether the RCDA maintained adequate fiscal controls over PS and OTPS expenditures as required by applicable rules, regulations, and policies and procedures.

Audit Findings and Conclusions

We found that the RCDA did not maintain adequate fiscal controls over its PS expenditures to ensure that salary, overtime, and other payments made to its employees were reasonable, appropriate, adequately supported, and properly approved.  Most notably, in Fiscal Year 2017, the RCDA made “one-time payments” ranging from $4,000 to $24,000, totaling $1.4 million, to its employees, in addition to their regular salaries, without formal written policies and procedures or adequate supporting documentation, and with funds that were earmarked for another purpose.

In addition, RCDA supervisory personnel inappropriately approved employees’ overtime requests for time worked during lunchtime and requests that did not, as required, state the reason for the overtime.  Supervisors did not always ensure that employees in designated titles used a CityTime hand-scanner or web-clock to record their workday start and end times as required and did not always review and approve employees’ timesheets before their paychecks were processed.  As a result, RCDA employees may have inappropriately requested overtime and inaccurately reported their work-time, and the RCDA may have paid employees for time that they did not work.  Further, the RCDA did not adequately segregate its payroll, timekeeping, and personnel functions, which created an environment where erroneous or fraudulent transactions can be processed and go undetected.

We also found that the RCDA did not maintain adequate fiscal controls over its OTPS expenditures to ensure that they were reasonable, appropriate, adequately supported, and properly approved.  Based on our review of 121 sampled expenditures, totaling $1,156,222, made during Calendar Years 2015 through 2017, the inadequate controls resulted in 78 expenditures, totaling $590,909 (51.1 percent), that were either not reasonable, appropriate, adequately supported, or properly approved, or were affected by a combination of those issues.

Moreover, the RCDA improperly charged certain non-investigative expenditures to object code 460, which should be used only for confidential expenditures, inappropriately processed some expenditures through agency-administered bank accounts, and improperly processed certain expenditures using Miscellaneous Payment Vouchers, which can contribute to a distortion of the City’s financial records, and where used to pay for contracted services, understate its outstanding obligations.  Finally, during Calendar Years 2015 through 2017, the RCDA did not perform monthly bank reconciliations for four of its six agency-administered bank accounts as required by Comptroller’s Directive #11.

Audit Recommendations

To address these issues, we make a total of 15 recommendations, including that the RCDA should:

• Establish formal written policies and procedures for issuing any additional payments to employees that clearly define the basis and methodology used to determine the payment amounts, including consideration of employees’ performance evaluations and lengths of employment, and require supporting documentation, such as justification memos, to be maintained in employees’ personnel files;
• Ensure that employees requesting overtime and supervisory personnel responsible for reviewing and approving overtime requests comply with RCDA policies and procedures;
• Ensure that all employee timesheets are approved prior to processing payroll;
• Ensure that payroll processes are adequately segregated in accordance with Comptroller’s Directive #13;
• Ensure that requisition forms are maintained for all expenditures processed through FMS and all payments made from agency administered bank accounts and that they clearly state the need for the purchase and demonstrate that the proper authorizations were obtained prior to the office’s making the requested payment;
• Periodically review Payment Vouchers to ensure that staff adhere to Comptroller’s Directive #24 and that the correct types of vouchers are used;
• Charge purchases to the correct object code in accordance with Comptroller’s Directive #24; and
• Ensure that monthly bank reconciliations are performed for all RCDA bank accounts in accordance with Comptroller’s Directive #11.

Auditee Response

In its response, the RCDA generally agreed with the report’s 15 recommendations.  In its response the RCDA stated

Although many of the critiques in this Audit Report capture a snapshot of an agency in a state of great transition, growth, and flux, and one that for many years had little to no oversight or accountability structure in place, which left it vulnerable to attack, we are encouraged that many of the findings of this report reflect procedures and practices that predate June 2017.  We have undertaken many new procedures with our new team since that date and recognize that this transition is still a work in progress.  We welcome some of the thoughtful recommendations provided by the Comptroller in this report and have begun to incorporate those that are appropriate into our policy manuals.

[1] Personal Services (PS) expenditures are those for salaries, wages, and fringe benefits of City employees.  Other than Personal Services (OTPS) expenditures are those for expenses other than salaries and fringe benefits, such as supplies, equipment, utilities, and contractual services.  City of New York Adopted Budget, Fiscal Year 2018, Glossary of Terms, p. vi.