Audit Report on the Process of the Department of Cultural Affairs for Awarding Program Grants to Cultural Organizations July 1, 2007-June 30, 2008

AUDIT REPORT IN BRIEF

The New York City Department of Cultural Affairs’ (DCA) mission is to support and strengthen New York City’s vibrant cultural life. Among its primary goals is the provision of public funding to nonprofit cultural organizations.
DCA is the largest public funder of culture in the country, providing support for nonprofit organizations representing the visual, literary, and performing arts disciplines, as well as zoos, botanical gardens, and historical and science museums. DCA awards program grants to roughly 800 cultural institutions in all five boroughs and oversees operating funds for 34 City-owned cultural institutions as well as a capital program for cultural facilities.

In January 2007, Mayor Bloomberg and Council Speaker Quinn announced an agreement that allocated $30 million toward expanding the Cultural Development Fund (CDF)—a merit-based fund for cultural organizations. Expanding the CDF was intended to increase transparency and ensure a greater level of accountability for public money funding hundreds of cultural programs through DCA. The CDF expansion was intended to replace long-standing fixed entitlements to arts organizations with a competitive review process, giving more cultural groups access to public funds allowing them to provide quality public services.

For Fiscal Year 2008, DCA awarded $35.5 million in program grants to 848 cultural institutions—$25.1 million in CDF funds, $6.2 million in Safety-Net funds, $3.1 million in City Council Member-Item funds (discretionary funds), and $1.1million in Local Arts Council funds.¹

Audit Findings and Conclusions

DCA generally complied with its requirements related to awarding CDF grants to cultural programs. Proposals that received grants were complete and submitted within the required deadline, and grants were made only to programs operating in New York City. We found no grants for fund-raising activities or receptions.

However, we found that DCA asked that organizations alter their CDF Public Service Award Proposals to increase the amount requested to justify receiving Safety-Net and Member-Item funds in addition to the CDF funds. Altering proposals after receiving signed grant agreements, is not only improper but greatly diminishes transparency and accountability for public money that funds hundreds of cultural programs through DCA. Indeed, the practice has the appearance of possible misconduct. DCA also altered unsigned grant agreements to distribute excess funds that it had set aside for the appeals process, which invites the conclusion that certain cultural institutions are more entitled than others to receive additional funding.

We also noted some instances of noncompliance with DCA policy and procedures. These weaknesses include: payment by DCA of the entire award amounts to 381 organizations at the beginning of the fiscal year in violation of its procedures, the staffing of three panels not in accordance with DCA regulations, and the failure to submit for registration by the Comptroller’s Office four agreements with cultural organizations that included Member-Item funding in excess of $25,000 as required.

Audit Recommendations

To address these issues, we recommend that DCA should:

• Discontinue its practice of instructing organizations to alter the Synopsis Page of its Public Service Award Proposal to justify any addition of Safety-Net funds and Member-Item funds to the CDF Public Service Awards, if any. Safety-Net and Member-Item funds should instead be awarded through separate contracts, not commingled with competitively awarded CDF Public Service Awards.

• Discontinue its practice of altering grant agreements to distribute excess DCA funds.

• Ensure that it follows its own procedures and guidelines when making payments to awardees.

• Ensure that all panels are staffed in accordance with DCA guidelines.

• Ensure that all grant agreements are signed by all parties and maintained by DCA.

• Ensure that all contracts funded with $5,000 or more in Member-Items (discretionary funds) be submitted for registration to the Comptroller’s Office of Contract Administration.