Audit Report on the Internal Controls Of the Taxi and Limousine Commission Over the Collection of Fines

AUDIT REPORT IN BRIEF

This audit of the Taxi and Limousine Commission (TLC) determined whether the TLC maintains adequate controls over the collection of fines imposed for violations. It also determined whether the TLC established and implemented procedures to track and account for unpaid fines, and to identify and write-off unpaid fines deemed uncollectible.

The TLC has adequate controls over the handling of cash at its adjudication centers. The controls and procedures followed by cashiers and cashier supervisors, from the processing of payments to the handling and reconciliation of cash, provide reasonable assurance that cash collections are properly accounted for. However, the TLC neglects its responsibility to ensure that summonses are enforced and that fines assessed against violators of TLC rules and regulations are collected. As a result, as of February 3, 2003, TLC records showed fines owed the City totaling $97.3 million that the agency allowed to remain uncollected. If the TLC made the collection of unpaid fines a priority and implemented strong collection efforts, we estimate that it could collect between $3.89 million and $7.79 million of the outstanding fines.

TLC procedures are ineffective in tracking and accounting for unpaid fines and in identifying and writing-off unpaid fines deemed uncollectible. The integrity, reliability, and completeness of the TAMIS (TLC Agency Management Information System) database are questionable because of inadequate data entry controls that result in dating problems, omission of required licensee data, and unnecessary and unused data fields. Consequently, TLC management cannot be assured that the TAMIS database reflects complete and accurate information necessary for the agency to effectively manage its accounts. In addition, the TLC does not maintain adequate controls over blank summonses distributed to the New York Police Department’s Taxi and Bus Unit and the record keeping and storage of summons files; and it lacks written policies and procedures.

As noted in this current audit and previous audits, TLC management has consistently failed to address these weaknesses and to take appropriate corrective action.Such chronic disregard and neglect of official responsibilities meet the definition of "abuse" by management, as contained in Generally Accepted Government Auditing Standards (GAGAS, § 6.35): "Abuse is distinct from illegal acts and other noncompliance. . . Rather, the conduct of a government program falls far short of societal expectations for prudent behavior." The abuse by TLC management is that its failure to institute and exercise strong internal controls results in the failure of this public agency to collect revenue expected and needed by the City and to protect against potential material error or fraudulent activity.

To address these issues, we make 18 recommendations. The major recommendations are that the TLC should:

• Improve and document controls to ensure that TLC licenses are not approved or renewed for applicants who have unpaid fines.
• Develop and implement aggressive internal collection procedures that include mailing of dunning notices to violators, placing debtors in judgment, and submitting outstanding receivables to the Sheriff’s Office and the Law Department when internal collection efforts have been exhausted.
• Consider seeking legislative approval from the City Council for assessing monetary penalties and interest on licensee accounts that have outstanding fines and for the legal authority to place judgments against TLC licensees with unpaid fines.
• Implement procedures to find and contact respondents by using resources available to the agency, such as telephone directories, the New York State Department of Motor Vehicles, the New York State Division of Corporations Web site, etc.
• Comply with Comptroller’s Directive #21 by developing procedures to report its accounts receivable balance monthly, identify or estimate and write-off fines deemed uncollectible, and report its write-off procedures, along with any write-off amounts,to the Comptroller’s Office.
• Conduct a comprehensive review of the TAMIS database with assistance from the Department of Information, Technology and Telecommunications to identify necessary data tables and data fields, remove or label unused data tables and data fields, assess and identify existing programmatic problems and errors, and develop a systematic plan and timeframe for correcting these problems.
• Periodically reconcile all summonses that are distributed to both TLC enforcement agents and NYPD Taxi and Bus Unit officers with the summonses entered on TAMIS and account for any differences.
• Meet with NYPD Taxi and Bus Unit officials to develop procedures to account for all TLC summonses distributed to the Unit. This should include an accounting of summonses distributed but not yet returned to the TLC for processing.
• Establish a filing system and record management policy that will ensure that summons files are properly organized, stored, safeguarded, and preserved.
• Develop a comprehensive policies and procedures manual that addresses all internal processes and functions throughout the agency and distribute the manual to appropriate TLC departments and personnel.

The matters covered in this report were discussed with TLC officials during and at the conclusion of this audit. A preliminary draft report was sent to TLC officials on August 13, 2003, and was discussed at an exit conference held on August 28, 2003. We submitted a draft report to TLC officials with a request for comments on September 10, 2003. We received a written response from TLC officials on September 30, 2002, in which the TLC generally agreed with 16 of the 18 recommendations made in this audit and disagreed with two.

The full text of the TLC response is included as an addendum to this report.

Despite the TLC’s general agreement with most of the audit recommendations, in its response, the TLC attempted to bolster the appearance of the effectiveness of its limited collection procedures by focusing on "current licensees" instead of on all those who were issued summonses and assessed fines. Also, in its response, the TLC addressed selected elements of the audit, and made assertions contradictory to our audit findings without providing evidence to substantiate those assertions.

Also, in its response the TLC acknowledged the challenge of collecting fines assessed against non-TLC-licensed individuals. Nevertheless, as reflected in this current audit, and in two prior audits of TLC collection practices, issued by the Comptroller’s Office in 1993 and 1996, respectively, the TLC continues to subscribe to the contention that little, if anything, can be done to collect fines from non-licensees.

Although the TLC attempts to ensure that "current licensees" comply with TLC rules and regulations, by failing to aggressively pursue collection activities and enforce fines levied against non-licensees, the TLC fails to provide an effective deterrent against unlicensed individuals and entities that continue to operate in violation of the rules and regulations the agency has established and for the industry it is mandated to regulate and improve.