Audit Report on the New York City Department of Consumer Affairs’ Compliance Inspections

Executive Summary

The objective of this audit was to determine whether the New York City (City) Department of Consumer Affairs (DCA) carries out its annual and biennial inspections in an equitable and timely manner to ensure adequate coverage of business locations throughout the City and in accordance with applicable regulations and the agency’s internal protocols.   DCA is charged with promoting a fair and vibrant marketplace in the City.  It seeks to accomplish this by licensing and regulating nearly 80,000 businesses in 55 different industries and by enforcing the New York City Consumer Protection Law (CPL)¹, along with other consumer protection and business regulations.  The CPL prohibits unfair trade practices when dealing in consumer goods or services.

DCA’s Division of Enforcement performs on-site inspections of businesses to ensure compliance with the CPL, as well as with City and New York State (State) regulations governing licensing and weights and measures².   Businesses may be inspected based on a request from consumers or other DCA units or as part of a “patrol inspection,” which occur as part of an inspector’s regularly scheduled route.

Certain business types, such as electronics stores, second hand auto dealers and garages are required to have licenses in order to maintain or operate businesses.  DCA is mandated to inspect these businesses at least once every two years to determine whether the businesses comply with various regulatory requirements (e.g., refund policies are posted, per unit pricing for items are displayed and cash register receipts for transactions are provided).  Further, the City and State weights and measures regulations require commercial scales (weighing and/or measuring devices and accessories) to be inspected and tested for accuracy at least once a year.

In addition to these regulatory requirements, in an effort to ensure that businesses comply with the CPL, DCA has established a number of internal inspection thresholds for certain business categories.  This audit focused only on business categories that have annual (within 365 days) and biennial (within 730 days) inspection thresholds.  Businesses in those categories that have not been inspected within the annual and biennial thresholds are categorized as “high priority.”  In addition, business establishments that receive a violation for non-compliance with the CPL are also categorized as “high priority” and DCA sets expedited timeframes for them to be re-inspected—nine months for businesses inspected on an annual basis and 18 months for businesses inspected biennially.

Audit Findings and Conclusion

Our audit found that DCA’s protocols for scheduling business locations for inspections helped ensure that DCA’s inspections of businesses were fairly distributed throughout each of the City’s 59 community districts.  The audit also found that DCA’s supervisory staff generally completed the required periodic follow-up checks of field inspectors under their supervision.

However, we found that DCA did not consistently conduct timely inspections of licensed businesses and of businesses with scales.  DCA met its statutorily mandated timeframes to conduct inspections of DCA-licensed businesses only 86 percent of the time and met its mandated timeframes to conduct annual scale inspections only 36 percent of the time.  For inspections DCA categorized as high priority because the businesses previously had been cited for violations, DCA conducted only 25 percent within its internal expedited thresholds.  For inspections DCA categorized as high priority because the business locations were not inspected within its annual and biennial threshold, 75 percent of them were still outstanding 90 days after the threshold dates had passed.

One factor that may have contributed to these deficiencies is insufficient staffing resources.  We also found that the agency’s tracking methods hinder its ability to ensure the timeliness of inspections.  Because DCA has not programmed its database to assign each business a unique identifier, its ability to identify the specific businesses that require inspections is limited.

The degree to which DCA is able to conduct these re-inspections has a direct impact on the risk that consumers may be subjected to deceptive business practices, such as dishonest advertising practices, false or misleading representations concerning the reason for price reductions, and unacceptable sale of expired food.  In addition, the degree to which DCA is able to inspect high priority businesses in a timely manner has a direct impact on the risk that certain business owners may commit consumer fraud and such instances go undetected.

Audit Recommendations

Based on the audit, we make seven recommendations, including:

• DCA should reallocate its resources as needed to ensure that licensed businesses are inspected at least once every two years as mandated by Title 6 §1-16 of the Rules of the City of New York (RCNY).
• DCA should reallocate its resources as needed to ensure that commercial scale devices are inspected and tested for accuracy at least once a year as mandated by the City and State weights and measures regulations.
• If a reallocation of resources is not feasible or sufficient, DCA should consider seeking additional funding from the City’s Office of Management and Budget to enable it to hire additional inspectors to help achieve its mandated inspections.
• DCA should ensure that inspections deemed high priority due to violations on prior inspections are conducted in a timely manner to help ensure that conditions leading to those violations have been adequately addressed.
• DCA should explore options in its database that would permit each business it must inspect to receive a unique identifier that would facilitate tracking.

Agency Response

In its response, DCA generally agreed with the audit’s recommendations.  However, it disagreed with some of the audit’s findings, stating that it “believes the City Comptroller’s report misconstrues DCA’s enforcement efforts in 2014 and 2015. . . [and] contends that key aspects of the analysis reflected in this report are inaccurate and mischaracterize DCA’s internal control mechanisms.”  After carefully reviewing DCA’s arguments, we find no basis to alter any of our audit’s findings or the report’s overall conclusion.

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