Audit Report on the Implementation of Croton Water Filtration Plant Park Projects by the Department of Parks and Recreation

On September 28, 2004, the City Council approved a Memorandum of Understanding (MOU) between New York City and New York State that allowed the City to move forward with the construction of a water filtration plant at the Mosholu Golf Course in Van Cortlandt Park. As compensation for the “alienation” (i.e., displacement) of City parkland that would be required for the filtration plant’s construction, the MOU provided for $200 million to be expended on improvements to Bronx parks within five years (i.e., by September 28, 2009).¹ Under the MOU, the City’s Department of Environmental Protection (DEP) was to provide to the City’s Department of Parks and Recreation (the Department) funds from water and sewer revenues of the New York City Municipal Water Finance Authority.

A Memorandum of Agreement (MOA) between DEP and the Department was subsequently executed on September 6, 2005, that consolidated the required measures set forth in the MOU and City Council Resolution No. 933. According to the MOA, DEP would provide to the Department $186.05 million in funding to undertake 67 projects.

Staff of the Department’s Capital Division Bronx Team are responsible for implementing and executing eligible projects. Each project has specific commencement and completion schedules. Contractors are required to submit schedules that must be approved by the Department. Capital Division staff holds progress meetings for each project. When a contractor is responsible for a project delay, Division staff issue a delay letter to the contractor and hold meetings to assess the reason for the delay and either ensure the project is resumed or assess the contractor for liquidated damages and/or terminate the contract.

Audit Findings and Conclusions

The Department is not always carrying out and overseeing required capital improvements related to the Croton Water Filtration Plant on time and within budgeted amounts. Our review found that by April 30, 2013, although the Department had started work on 65 of the MOA’s 67 capital improvement projects, only 46 projects totaling $107.4 million were completed. Moreover, 37 of the 46 completed projects were finished late based on the Department’s scheduled completion dates.

The Department contended that it increased the number of eligible projects from 67 to 81 by carrying out some of them under multiple contracts or phases. However, the Department’s lack of project controls led us to conclude that there was insufficient evidence to substantiate whether 26 of the 81 projects could indeed be deemed eligible. After the exit conference, the Department provided us with additional documentation by which we were able to ascertain the eligibility of 18 of the 26 questionable projects. However, eight projects, for which the Department expended over $10 million in funding, could not be substantiated as eligible. In addition, there was no evidence that the Department had obtained approvals for the eight projects.

Moreover, even if the Department did obtain the required approvals, the Department would have expended only $146.6 million as of April 30, 2013 thereby falling short of expending the $186.05 million in funding that was stipulated in the MOA by at least $39.45 million.

Additionally, of the sampled completed projects, we found that 83 percent of projects were not completed within the Department’s scheduled timeframes. In addition, 21 percent of projects were not completed within their original contract and contingency amounts. As a result, the Department expended $7.4 million in additional project costs—$560,791 in additional staffing costs for construction management and $6.8 million in additional construction costs.

Finally, only 29 eligible projects totaling $48.6 million were completed by December 31, 2009. This is approximately the date specified in the original MOU by which the citizens of the Bronx were to have benefitted from over $200 million of improvements to their parks.

Audit Recommendations

This report makes a total of seven recommendations, including that the Department should ensure that:

• All eligible projects are carried out expeditiously with the funding provided for in the MOA.
• Eligible projects are modified in accordance with the terms of the MOA.
• Eligible projects are completed within their originally scheduled timeframes and original contract and contingency amounts.
• It implements adequate measures to control delays that are specifically in the Department’s control.
• Critical documents are submitted and maintained in project files.

Department Response

In their response, DPR officials focused on issues outside the scope of our audit rather than directly address the audit issues and accompanying recommendations. Except for one recommendation, they generally did not clearly state whether they agreed or disagreed with our recommendations. Areas of direct DPR statements that we wish to refute are included below. The full text of DPR’s response is included as an addendum to this report.

The Department wrote, “The Report also states that Parks has expended up to $146.6 million of the $186 million in MOA funding. However, this summary does not provide a full accounting of the Department’s Croton program costs because it excludes improvements that have not yet been billed to the Department and it excludes the costs that will be incurred to complete additional MOA projects. Once factoring in the costs of these projects, including $34.6m in pipeline work, contingency amounts for the remaining projects and the cost of ULURP projects omitted by the Report, we believe the total cost of the Croton work will be $186 million.”

Audit Comment. We conducted our accounting of the Department’s Croton program costs by reviewing the documentation that was made available by Department staff. There was no information about the cost of “improvements that have not yet been billed to the Department” and “costs that will be incurred to complete additional MOA projects.”

The Department also wrote, “The Report also states that auditors initially believed that 26 contracts, not eight, were ineligible due to ‘the Department’s lack of controls.’ In fact, the cause of this confusion was due to a lack of communication, and not a lack of controls.”

Audit Comment. We disagree with the Department’s assertion. During the course of the audit we communicated our requests to Department staff for project and contract information on November 16, 2012, December 11, 2012, February 13, 2013, and February 15, 2013. The Department, however, was unable to adequately respond to these requests. Given the shortcomings in the documentation that was available, we concluded that the Department was beset by a lack of internal controls over the entire program.

The Department also wrote, “The auditors appear to have made certain assumptions about the status of these projects. Once we discussed this matter at the exit conference, the auditors reassessed many of their initial determinations regarding the eligibility of these contracts, and the Report now cites eight contracts for improvements as ‘ineligible’ for inclusion under the MOA. However, Parks carefully examined these projects and must strongly disagrees with this mischaracterization, as all such projects are included in the MOA’s scope were developed in consultation with the community and are valuable popular park amenities . . .”

Audit Comment. Apparently, the Department’s own documentation belies the allegation that the eight projects are included in the MOA’s scope. The Department provided a confirming e-mail on May 8, 2013, with an attached Departmental spreadsheet. According to the spreadsheet, Department personnel deemed the eligibility of four of the eight projects as “No” and the eligibility of the other four projects was deemed “Maybe.”

Finally, the Department asserted, “While the Report may attempt to raise questions with respect to whether the public derived compensation from the Croton program, it is obvious that a great deal of public good has come out of this program. However, the Report suggests that ‘. . . the City may have reduced regular capital funding for Bronx parks ’ due to Croton funding. The Report makes this misleading suggestion without presenting the Agency with any written documentation or analysis.”

Audit Comment. The audit found that the Department used at least $10 million of Croton funding for projects that were not eligible for inclusion under the MOA. As noted above, Department officials themselves questioned the eligibility of these projects. In these cases, ineligible projects should have been financed by funding from other sources.