Audit Report on the New York City Economic Development Corporation’s Contracts Related to Environmental and Other Engineering Services

The New York City Economic Development Corporation (EDC) is a not-for-profit corporation organized under §1411 of the Not-For-Profit Corporation Law of the State of New York.  Pursuant to contracts with the City of New York, EDC is obligated to administer economic development projects on behalf of the City.  In guiding these economic development projects through the necessary public approvals, EDC performs financial analyses, and coordinates planning and feasibility studies, including those where Environmental Impact Statements prepared by engineering consultants are issued.  Based on EDC’s records, from July 2007 to April 2013, EDC awarded nine environmental and other engineering consultant contracts in connection with its development projects totaling $18,821,628.  As of June 5, 2013, EDC had made payments of $8,595,731 on these contracts.

In accordance with its contracts with the City, EDC must comply with City laws, rules, and regulations when performing its services. Among other things, the City requires EDC to procure professional services from competent and qualified vendors at fair and reasonable prices, and to establish proper internal controls to monitor contract performance and payment.

Audit Findings and Conclusions

Our audit found that in connection with its contracts for environmental and other engineering services, EDC generally complied with applicable procurement rules and regulations. However, we found the following weaknesses in EDC’s contract awarding and payment processes:

• EDC did not adequately track proposal submissions or document the date and reason for rejecting proposals upon submission.
• EDC did not ensure that evaluator affidavits requiring disclosure of potential conflicts of interest were completed prior to the evaluators ranking proposals.
• EDC did not document any follow-up conducted in instances where evaluators were identified as potentially having a conflict of interest.
• EDC did not ensure that resumes of consultants and sub-consultants working on projects were properly submitted, reviewed, and approved.  As a result, there was insufficient information to allow us to determine that all of the consultants were qualified and approved to work on the projects and that the related payments of at least $466,544 were appropriate and justified.
• EDC did not properly review the consultants’ timesheets before payments were made.
• EDC did not ensure that contractors who were awarded contracts obtained Department of Investigation (DOI) clearances prior to contracts being executed.
• EDC did not ensure that the contractors maintained sufficient insurance as required by their contracts.

Audit Recommendations

To address these issues, we make the 11 recommendations summarized below, and advise EDC to:

• Create proper procedures to document time and date of all submitted proposals at the time of receipt.
• Document the date and reason for rejecting proposals at the time of submission.
• Ensure that all evaluators’ affidavits regarding potential conflicts of interest are signed and on file before ranking each proposal.
• Follow up where evaluators disclose in their affidavits potential conflicts of interest and document the justification for any decision allowing or disqualifying the evaluators from the proposal review process.
• Ensure prospective vendors submit all required resumes as part of their proposals.
• Ensure contractors submit resumes when staff who work on the project need to be replaced and update the fee schedules accordingly.[1]
• Ensure contractors only bill for staff listed on the fee schedules.
• Carefully review consultant invoices and ensure supporting documentation is sufficient to justify payments.
• Ensure that all DOI clearances are performed prior to contracts being awarded.
• Ensure that contractors maintain insurance coverage as required by the contracts.
• Ensure that all requests to change the mandated insurance requirements be in writing.

Agency Response

EDC generally disagreed with our findings and recommendations.  In its response, EDC stated that its current policies and procedures address the majority of the issues discussed in this report.