Audit Report on the New York City Fire Department’s Administration of Its Bank Accounts

AUDIT REPORT IN BRIEF

The audit determined whether the New York City Fire Department (FDNY) properly administers its private bank accounts in accordance with applicable rules and regulations.

City agencies are permitted to establish private bank accounts to maintain funds apart from the City’s general fund. In order to do so, agencies must obtain approval from the Department of Finance and comply with its procedures. In addition, agencies must register the accounts with the Comptroller’s Bureau of Accountancy and comply with Comptroller’s Office annual reporting requirements.

The (FDNY) administers the following 10 private bank accounts: Main Imprest Fund, Local Buildings Repair Program, Repairs and Transportation, Firehouse Expense Fund, OITS Travel Advance, the Commissioner’s Medal Fund (Medal Fund), Fire Prevention Fund, Health and Hospital Corporation (HHC) Capital Corporation Account, FDNY Miscellaneous Accounts, and the Life Insurance Fund. The accumulated ending balance for these ten bank accounts as of June 30, 2006, was $3,088,375.

Audit Findings and Conclusions

The FDNY generally administered its 10 bank accounts in accordance with applicable rules and regulations and Comptroller’s Directives. We did, however, identify minor exceptions in our review of the Main Imprest Fund, for which controls could be improved. Specifically, the FDNY improperly allocated to the fund $2,391 for transportation-related expenditures (e.g., $206 for out-of-service vehicle repairs, and $196 for tire replacement). These funds should be disbursed from the Repairs and Transportation account. In addition, the FDNY improperly processed a recurring monthly reimbursement of $45 (totaling $540 for Fiscal Year 2006) for internet access, which does not comply with Comptroller’s Directive #3.

Furthermore, notwithstanding the FDNY’s general compliance with applicable rules for bank accounts, we believe that it should consider establishing a fiduciary account within the City’s Financial Management System to replace its Medal Fund, so as to enhance the controls over the funds deposited in this account. Comptroller’s Directive #27 permits agencies to establish accounts in a custodial capacity, to be used for a specific purpose as prescribed by the agency or the donor. By maintaining these funds in a City fiduciary account, the FDNY can ensure that its internal control mechanisms and financial accountability are consistent with those in effect for all City agencies.

Audit Recommendations

We made three recommendations to the FDNY to address these issues. The FDNY should:

1. Classify expenditures appropriately, using the proper imprest fund account.
2. Comply with Comptroller’s Directive #3 and discontinue reimbursements for Internet access.
3. Consult with the Comptroller’s Bureau of Accountancy on the establishment of a fiduciary account, within the City’s Financial Management System, to replace the Medal Fund account.