Audit Report on the Lincoln Medical and Mental Health Auxiliary, Inc., of the New York City Health and Hospitals Corporation

EXECUTIVE SUMMARY

The Lincoln Medical and Mental Health Center (hospital) is part of the Generations+/Northern Manhattan Network (Network), which includes six New York City Health and Hospital Corporation (HHC) medical facilities. The Lincoln Medical and Mental Health Center Auxiliary, Inc. (Auxiliary) is a nonprofit organization that manages funds designated for services and programs that enhance the quality of patient care at the hospital. Both the Auxiliary and the hospital are required to follow the operating procedures established by HHC and to follow appropriate rules, regulations, and procedures for collecting and using Auxiliary funds. In addition, the Auxiliary has its own bylaws.

The Auxiliary raises funds through donations, interest earned on Auxiliary accounts, membership dues, and other revenue sources, including contracts with concessionaires. The Auxiliary is also required to hold an annual fund-raising event. These funds may be used for purchases deemed necessary for patient-related care. According to its financial statements for the calendar year 2000, the Auxiliary earned $502,580 and expended a total of $28,193, including $26,531 for Social Services and $1,662 for General and Administrative expenses. This resulted in a surplus of $474,387, which increased the 1999 net assets balance of $507,437 to $981,824 by the end of 2000.

The objectives of this audit were to determine whether the Auxiliary’s revenues and expenses were accurately and fairly reported, its internal control structure over the collection and disbursement of funds was adequate, and expenses were in compliance with prescribed procedures, guidelines, and bylaws.

The scope of our audit was calendar year 2000. We reviewed the Auxiliary’s books, records, and supporting documents for this period. We included the last two quarters of 1999 and the first two quarters of 2001 in our review of the parking concession commissions. In addition, we reviewed the Auxiliary bylaws and Board meeting minutes for calendar years 1998 through 2001. We also interviewed the personnel responsible for the Auxiliary’s day-to-day operations as well as members of the Auxiliary Board, and members of the hospital controller’s staff.

The purpose of the Auxiliary is to engage in activities and projects that enhance the quality of patient care. The Auxiliary’s expenditures were used to fulfill this purpose. For example, the Auxiliary:

• Purchased for the hospital more than $200,000 worth of equipment for breast cancer detection during calendar 1999,
• Sponsors an annual health fair at the hospital each year, and
• Sponsors the breast cancer awareness program, "Viva Mujer."

The Auxiliary’s financial statements fairly represent its financial condition. Its incurred expenses were reasonable and were in compliance with prescribed procedures, guidelines, and bylaws. Specifically:

• The Auxiliary properly recorded contributions, concession revenue, and investment interest, and reconciled the cash receipts to the bank statements.
• Expenditures were accurately posted to the general ledger. All canceled and voided checks were properly accounted for and kept on file.
• Transactions were properly classified.
• Adjusting entries and estimates made to revenue and expense accounts were appropriate and reasonable.

Although the Auxiliary maintained adequate accountability over its funds, during our audit we found that the internal control structure over the collection and disbursement of funds could be improved. Specifically:

• Two vendors owe the Auxiliary $5,029 in commission payments for 2000: the parking garage operator owed $4,310 and the vending machine operator owed $719.
• The Auxiliary had uninsured bank deposits totaling $741,100.
• The Auxiliary had an excessive fund balance of $981,824 in 2000.

This audit makes four recommendations, which are listed below. The Auxiliary Board and Lincoln Medical and Mental Health Center should:

• Ensure that commission payments from all vendors are accurate.
• Collect the additional commission payments of $4,310 and $719 owed by the parking garage and vending machine operators, respectively, for 2000.
• Place funds in collateralized accounts.
• Reduce the Auxiliary’s funds balance by identifying more patient-care-related projects.

The matters covered in this report were discussed with officials from the Auxiliary and Lincoln Medical and Mental Health Center during and at the conclusion of this audit. A preliminary draft report was sent to HHC officials on May 7, 2002, and was discussed at an exit conference on May 23, 2002. On May 31, 2002, we submitted a draft report to HHC officials with a request for comments. We received a written response from HHC officials on June 14, 2002, which included a memorandum from Lincoln Hospital’s staff. In its response, HHC said that it agreed with and will implement all four recommendations. The President of HHC also stated, in part: