Audit Report on the New York City Housing Authority’s Controls Over Its Inventory of Equipment and Supplies
Audit Report on the New York City Housing Authority’s Controls Over Its Inventory of Equipment and Supplies
EXECUTIVE SUMMARY
The objective of this audit was to determine whether the New York City Housing Authority (NYCHA) had adequate controls in place to manage its inventory of equipment and supplies.
NYCHA’s inventory is stored in a main warehouse located in Long Island City (LIC) and in storerooms and skilled trades’ shops located at its 334 developments throughout New York City (the City). All items maintained at the LIC warehouse are inventoried on arrival and expensed in NYCHA’s financial records at the time they are distributed to the developments. The inventory maintained at the developments also includes fixed assets. NYCHA designates all furniture, fixtures and equipment items with a purchase price greater than $1,000 as fixed assets and requires that these items be tagged and tracked.
In 2012, NYCHA completed a process of counting materials and supplies in the development storerooms. Excess inventory (defined by NYCHA as anything more than a 90-day supply) was transferred to satellite warehouses for safekeeping and eventual transfer back to the LIC warehouse to assess whether it should be returned to inventory or liquidated. While initially, there were eight satellite warehouses, as of May 2014, NYCHA had six remaining: two in the Bronx—Betances A and B—and four in Brooklyn—Armstrong A, TRAM, and Unity Plaza A and B.
During the audit’s scope period, the supplies stored at the LIC warehouse were valued at $5.3 million, the total dollar amount of the orders from LIC for 173 developments was approximately $9.4 million and the total dollar amount of drop shipment purchases[1]was approximately $49.5 million (covering 221 developments).[2]The total reported value of the inventory at the six satellites warehouses was $20.5 million. For the same period, the reported value of fixed assets at the developments was close to $33 million.
Audit Findings and Conclusion
The audit found significant deficiencies in NYCHA’s internal procedures that result from management’s failure to institute adequate controls over inventory operations. Consequently, there is limited assurance that the inventory at the satellite warehouses and the development storerooms is adequately protected against misappropriation or theft. Limited testing at the LIC warehouse did not identify the same issues.
The audit found that NYCHA staff failed to maintain accurate inventory records, properly safeguard inventory items and submit reports to NYCHA management in a timely manner, if at all. We found that NYCHA’s senior management has not established an adequate monitoring structure to enable them to determine the extent to which applicable policies and procedures are being followed. We also found that accountability for managing and correcting inventory deficiencies was limited. NYCHA’s deficient controls place at risk well over $100 million of reported inventory.
Audit Recommendation
Because the management and operational problems are so pervasive throughout the agency’s inventory control system at the satellite warehouses and developments that they cannot be readily addressed by fine-tuning the system, the audit recommends an overhaul of the entire system. Given the scope of work that needs to be done, we recommend that NYCHA create an inventory project team, reporting to the General Manager or a high-level Vice President, whose function would be to redesign NYCHA’s inventory system at the satellite warehouses and the development storerooms and shops.
Agency Response
NYCHA officials agreed with the audit’s primary recommendation that it overhaul its entire inventory system. The full text of NYCHA’s response is included as an addendum to this report.
[1] Drop shipments are supplies that go directly to the developments and not to the LIC warehouse.
[2] Some developments are consolidated and have only one delivery point.