Audit Report on the Financial Controls of the Queens Borough Public Library

AUDIT REPORT IN BRIEF

On This audit determined whether the Queens Borough Public Library (Library) expenditures funded by City appropriations were valid and accurate. The Library uses funds from City appropriations for general operating expenditures such as payroll, fringe benefits, book purchases, supplies, and equipment. For Fiscal Year 2004, Library expenditures from City appropriations were $48,943,000 for Personal Services (PS) and $27,330,000 for Other Than Personal Services (OTPS).

Audit Findings and Conclusions

In general, the Queens Borough Public Library expenditures funded by City appropriations were valid and accurate. Specifically,

• OTPS expenditures were reasonable and necessary for Library operations.
• Bidding procedures were followed.
• Vendor invoices were in the system to substantiate payments, and payments were valid and accurate.
• Fines and fees collected at the Library branches were accurately reported to the Finance Department and deposited in the bank.

Further, the Library maintained adequate personnel files that contained all required and appropriate documentation of employees’ work history. The Library also implemented most of the recommendations made in the previous audit.

However, the audit disclosed some internal control deficiencies in the Library purchasing practices, processing of book sales revenue, and record-keeping of computer equipment. Specifically, the Director of the Purchasing Department did not properly approve the purchase orders issued by his department. In addition, there was a lack of segregation of duties in the processing of book sales revenue submitted by the branches. We also found noncompliance with banking procedures, a lack of controls over inventory of new computer equipment, and inadequate controls for payroll check distribution.

The deficiencies found by the audit were mainly caused by the lack of or inadequacy of procedures and by weaknesses in internal controls.

Audit Recommendations

To address these issues, we make nine recommendations. The major recommendations are that the Library should:

• Ensure that there are proper controls over the Director of the Purchasing Department’s signature in the SAP computer system so that purchase orders are properly authorized personally, either by the Director or, in his absence, a designated official.
• Ensure that adequate segregation of duties is implemented in the Purchasing Department so that the buyer who creates purchase orders and selects vendors based on solicited bids and quotations does not also approve purchase orders.
• Segregate the functions of recording receivables and making bank deposits for moneys collected for book sales.
• Establish written procedures for the inventory of all equipment. The procedures should ensure that all equipment, installed and uninstalled, is accounted for in the Library’s inventory records.
• Regularly update its inventory records: verify that equipment is properly tagged, ensure that the equipment is in the reported location, and ensure that additions and deletions of inventory are properly recorded.

Require that the persons picking up checks and stubs for distribution to Library employees as well as the Library employees receiving checks or stubs sign an official document as proof of receipt.