Audit Report on The Processes of The Environmental Control Board and The Department of Finance to Collect Fines for Violations Issued by The Department of Buildings

AUDIT REPORT IN BRIEF

The audit examined the adequacy of the Environmental Control Board’s (ECB) and the Department of Finance’s (DOF) collection processes for ECB-imposed fines resulting from violations issued by the Department of Buildings (DOB).

According to the Mayor’s Management Report, in Fiscal Year 2008, DOB issued 63,575 ECB Notices of Violation (NOVs) for failure to comply with the building code or the City’s Zoning Resolution. DOB can also issue building code violations that are not adjudicated by ECB. ECB is an administrative tribunal that adjudicates cases involving violations of New York City’s quality-of-life laws, including those NOVs issued by DOB. ECB can impose fines on respondents (the person or business against whom the violation is issued) under two circumstances—(1) when respondents fail to appear for the scheduled hearing at ECB causing them to be in default and liable for a default penalty, and (2) when respondents attend a hearing, are found guilty (“in-violation”) by an ECB Administrative Law Judge, and receive a penalty. If ECB’s attempts to obtain payment from respondents are unsuccessful, the cases are filed, or “docketed,” in the New York State Supreme Court. ECB then is to send a list of all docketed cases electronically to DOF for collection.

DOF is the collection agency for the City and is responsible for collecting default and in-violation ECB judgments. DOF and ECB have a Memorandum of Understanding (MOU) that sets forth the agreement between the agencies for the collection of delinquent ECB violations.

As of October 2008, DOF reported that its caseload included 75,037 violations issued by DOB with ECB fines totaling approximately $202 million.

Audit Findings and Conclusions

Although ECB is properly sending notification letters to respondents and is properly docketing the judgments within its established timeline, ECB did not forward cases to DOF for a period of more than 19 months. As a result, DOF’s collection efforts were severely limited by ECB’s inaction.

Nevertheless, DOF should improve its recordkeeping and collection process for ECB fines resulting from violations issued by DOB (ECB-DOB violations). DOF has made minimal efforts to collect ECB-DOB violation fines from our sampled respondents. As a result, the sampled respondents are still conducting business without fully correcting the violations or paying the fines due. As of May 2008, the sampled respondents had 394 unresolved violations as well as unpaid fines for 1,221 violations totaling approximately $4 million. These fines remained unpaid for an average of 1,751 days from the dates the judgments for these cases were docketed (filed with the court) through May 1, 2008.

DOF also has no formal procedures, such as establishing a dollar-value threshold, to identify those respondents meriting additional collection efforts. Further, the procedures DOF does have are not always followed by DOF personnel. For example, initial attempts to contact respondents, including sending notification letters, are not always performed by DOF, partly because of inaccurate or incomplete information received from ECB’s Adjudication Information Management System (AIMS). Sending a notification letter and making a telephone call (if a number is available) do not guarantee that a respondent will pay. However, in most instances, the letter and phone call are the only collection attempts that DOF makes. Therefore, by failing to perform these minimal steps, DOF is practically assured that it will collect no monies from these respondents. Moreover, DOF failed to use its contracted collection agency to aid in its efforts. Last, as DOF does not track the amounts of ECB-DOB violation fines it collects as compared with the total cases received for the same time period, it is unable to calculate its collection rate for these fines and is unable to determine the effectiveness of its collection activities.

Audit Recommendations

Based on our findings, we make 17 recommendations, 6 of which are listed below.

DOF and ECB officials should:

• Consider legislative changes that would allow for additional enforcement capabilities to assist the agencies in their collection efforts. In addition, DOF and ECB officials should consider initiating a project with DOB whereby DOB would be able to deny new permits to respondents with open and outstanding violations.

DOF should:

• Establish formal procedures and criteria to identify and select cases for additional collection attempts.
• Ensure that it adheres to its own internal collection procedures and documents these efforts.
• Contact ECB to obtain prior payment information in an attempt to identify bank accounts of respondents in order to send execution letters to seize assets.
• Use the contract with its collection agency in order to assist in its fine collection efforts for ECB-DOB violations.
• Track ECB-DOB violation fine payments that result specifically from its collection efforts to determine the collection rate so as to monitor the effectiveness of DOF collection procedures.

Agency Response

In their response, ECB officials agreed with the three recommendations addressed to ECB. In DOF’s response, although DOF officials expressed their overall disappointment with the audit, they agreed with or have stated that they have implemented 13 of the 16 recommendations addressed to DOF. They disagreed with the remaining 3 recommendations.