Audit Report on the Revenue Collected for License and Permit Fees by the Department of Buildings

AUDIT REPORT IN BRIEF

This audit determined whether the Department of Buildings (DOB) maintained adequate financial controls over cash receipts collected for license and permit fees. The DOB is responsible for ensuring the safe and lawful use of more than 900,000 buildings and properties throughout New York City by enforcing the City’s Building Code, Electrical Code, Zoning Resolution, and other laws applicable to the construction and alteration of buildings in the five boroughs. The DOB imposes and collects fees for the various licenses and construction permits it processes each year. Permit-related fees consist of application fees, plan examination fees, inspection fees, and building permit fees.

The DOB collects cash at seven cash¹ collection locations that accept and process license and permit fees—one at the Executive (Central) office², one at the Bureau of Electrical Control (BEC)³ , and one in each of the five DOB Borough offices. For Fiscal Year 2005, the DOB collected $77 million in revenue from license and permit fees.

Audit Findings and Conclusions

The DOB generally maintains adequate financial controls over cash receipts collected for license and permit fees.

However, during our observation of the BEC we noted weaknesses in controls over cash receipts. Specifically, the cashiers at the BEC generally endorse checks only when they process the payment and enter it into BIS; this includes times when a walk-in customer requests a receipt. Otherwise, the BEC cashiers do not immediately endorse checks received either from walk-in customers or by mail. Moreover, the payments are not recorded in BIS as soon as they are received. The cashiers wait until the next working day to record, and subsequently endorse, the checks. Further, remittance checks and money orders that remained unprocessed were placed in a pouch that was left on the cashier’s countertop, rather than secured in a locked drawer. Also, the BEC does not maintain a mail log to record all cash payments received by mail.

We noted certain weaknesses in the Licensing Unit also. Specifically, the Licensing Unit does not deposit on a daily basis the cash it receives through the mail for license renewals. The Unit may hold those cash receipts from several days to several weeks before depositing them in the bank.

In addition, some safes used to store cash receipts remained unlocked throughout the work day. Also, during our initial visits to the Staten Island, Bronx, and Brooklyn Borough Offices we observed that lockable cash drawers were not installed at the cashier stations. As a result of our audit, DOB management installed lockable drawers in the above mentioned offices.

Finally, physical security weaknesses were identified at the cash collection locations. Particularly, at the Manhattan and Bronx Borough offices we observed that the entry doors to the office and cashier areas were unlocked, rendering the areas easily accessible to unauthorized persons.

Recommendations

To address these issues, we make nine recommendations. Among them, we recommend that the DOB should:

• Require BEC cashiers to immediately stamp all remittance checks with a restrictive endorsement stamp upon receipt.

• Require the BEC to implement and maintain a log to record and track cash receipts received by mail. In compliance with DOB procedures, the log should be used by the Fiscal Unit to monitor cash receipts processed by the BEC.

• Ensure that all cash receipts received through the mail, by the Licensing Unit or another unit, are deposited in the bank on the day that the mail is received, or at the least on the next business day, as required by Comptroller’s Directive #11.

• Ensure that the safes at all the cash collection locations are kept locked at all times and that access be limited to authorized personnel.

• Ensure that cash receipts, whether received by mail or in person, are appropriately safeguarded and secured in a locked safe or cash drawer.

• Institute effective security measures to deter and limit access to cashier and office work areas to authorized personnel. Consider installing an electronic or combination locking system to restrict access to the cash collection and office areas by authorized DOB personnel. At a minimum, DOB should ensure that the doors leading to the cashier and work areas are kept locked.

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¹Cash refers to coin, currency, checks, money orders, and credit card payments received in person or via mail.
²The total cash receipts reported by the Central Cashier include its own collections, as well as payments received by the Licensing Unit and the Alteration Repair Application (ARA)/Permit Renewal Unit.
³ At the Exit Conference held on March 16, 2006, DOB officials stated that BEC is now called the Electrical Division.