Audit Report on the Financial Practices and Procedures of the Pomonok Neighborhood Center

AUDIT REPORT IN BRIEF

We performed this audit to determine whether Pomonok Neighborhood Center, Inc., (Pomonok) expended the funds it received through its City contracts in accordance with the terms of those contracts. Pomonok is a not-for-profit organization whose services include after-school programs, senior activities, summer camp, crime victim assistance, domestic violence counseling, and housing assistance.

During the audit period, Pomonok received funds through New York State contracts, including one with the New York State Office of Children and Family Services (NYSOCFS), a grant from the New York City Housing Authority (NYCHA), and five contracts totaling $597,165 awarded by the City of New York through the Department of Youth and Community Development (DYCD), the Department for the Aging (DFTA), and the Department of Housing Preservation and Development (HPD).

Audit Findings and Conclusions

Pomonok did not expend the funds it received through its City contracts in accordance with the contract terms. Pomonok may have made improper payments, totaling $83,037, to four employees—the Youth Program Director, his daughter, his live-in girlfriend, and his girlfriend’s son—during Fiscal Year 2004. It appears that the youth program director attempted to systematically exhaust the personal service funds allocated for the youth programs by manipulating his own timesheets as well as timesheets for his daughter, his live-in girlfriend, and his girlfriend’s son. It should be noted that the youth program director hired these individuals in direct violation of Pomonok’s agreement with DYCD; they reported directly to him, and he approved their timesheets.
Pomonok also made questionable salary payments totaling $95,493 to other employees; questionable payments totaling $24,469 to its vendors; received $2,250 in questionable payments from DYCD; did not properly authorize checks for City-funded programs; and may not have conducted the required number of Board of Directors meetings. In addition Pomonok misrepresented its financial status by overstating its liabilities by more than $700,000 on its Statement of Financial Position.

Audit Recommendations

We recommend that Pomonok reissue financial statements for the year ended June 30, 2004 that include the necessary adjustments to the liability accounts, which were overstated by more than $700,000. Theses financial statements should be certified by a new CPA that was not previously involved.

To address the issues found during the audit, we make the following recommendations to the Forest Hills Community House (Forest Hills) since they are currently operating the facility at Pomonok Houses.

Forest Hills should:

• Ensure that employees are paid only for hours that are legitimate and payments are supported by timesheets that are approved by authorized personnel.
• Ensure that it hires only qualified personnel and prevent nepotism.
• Ensure that it is paying for only those items or services that it receives, and payments to vendors are supported by bills and invoices.
• Maintain bills and invoices that support payments to vendors.
• Ensure that only authorized personnel are signing program checks.
• Maintain minutes of all Board of Director’s meetings and ensure it holds the minimum number of meetings per year as required by its bylaws.

Finally, we recommend that DYCD, DFTA, HPD, NYSOCFS, and NYCHA:

• Immediately investigate the reimbursements made to Pomonok under their respective contracts and grant to determine whether they should pursue legal action against the youth program director, his live-in girlfriend, his daughter and her son to recoup the possible improper payments made to them.

• Should coordinate their monitoring efforts to prevent the recurrence of the issues that were cited in this report.