Audit Report on the Internal Controls Of the Fire Department Over Billing and Collection of Inspection Fees

AUDIT REPORT IN BRIEF

This audit determined whether the Fire Department (FDNY) has adequate controls over the billing and collection of inspection fees and whether it charges the correct fees. In Fiscal Year 2002, the FDNY billed $35.6 million in Bureau of Fire Prevention (BFP) inspection fees and collected $34.6 million.

The FDNY has adequate controls over the billing and collection of BFP inspection fees and collected more than 90 percent of the fees billed. In addition, the FDNY charged the correct fees. However, we found that the FDNY has not changed its fee schedule in more than a decade. In addition, the FDNY has a number of internal control weaknesses that could affect its billing and collection practices, including limited capabilities of its computer system (FPIMS) in handling accounts with outstanding balances; a lack of control over its manual bills and lien processes; no write-off policy for uncollectible debts; and inadequate segregation of duties related to FPIMS programmers.

To address these issues, we make 12 recommendations. The major recommendations are that the FDNY should:

• Conduct a study to determine whether the fee schedule needs to be changed.
• Modify FPIMS to correct the problems in the billing and collection processes for accounts with outstanding balances.
• Continue to convert from manual to automatic billing.
• Monitor the lien process to ensure that liens are established with the Department of Finance for past due accounts.