Audit Report on the Small Procurement and Vouchering Practices of the Department of Youth and Community Development

EXECUTIVE SUMMARY

The New York City Department of Youth and Community Development (DYCD) supports youth and community services through contracts with a broad network of community-based organizations throughout New York City. DYCD supports a variety of youth activities, including structured recreation, athletics, tutoring and remedial education, leadership development, delinquency prevention, cultural enrichment, counseling, adolescent health care, substance abuse prevention, and runaway and homeless programs. In addition, DYCD provides services through the Federal Community Action Program that help the City’s low-income residents become self-sufficient. Through this program, DYCD provides training, job placement services, adult literacy, and basic education programs. DYCD also provides services to legal immigrants who are interested in becoming United States citizens.

The fiscal year 2001 Executive Budget for DYCD was $14,943,511 for Personal Services (PS) and $95,695,381 for Other Than Personal Services (OTPS). Of the OTPS amount, $11,040,700 was spent on small procurements, consisting of 437 purchase orders totaling $961,231 and 947 small purchase contracts totaling $10,079,469. In addition, DYCD issued 28 miscellaneous vouchers totaling $2,388,330.

The City’s Procurement Policy Board (PPB) Rules and specific Comptroller’s Directives govern agency procurement procedures. § 3-08 of the PPB Rules deals with small purchases; Comptroller’s Directives #6, #24, and #25, respectively, address miscellaneous agency expenses, internal controls over purchasing, and the use of miscellaneous vouchers. DYCD also has its own small procurement procedures that are based on the applicable City requirements.

Our audit objective was to determine whether DYCD’s small procurement operation complies with PPB Rules and applicable Comptroller’s Directives.

The audit covered the period July 1, 2000, to June 30, 2001. To determine whether DYCD complied with PPB Rules and the Comptroller’s Directives, we obtained and reviewed the applicable rules. To obtain an understanding of DYCD’s small procurement operation, we interviewed DYCD staff members responsible for the procurement and vouchering process.

We audited $25,000-and-under contracts, small purchase orders, and miscellaneous vouchers. For purchase orders, we used a random sample of 61, as well as a judgmental sample of 15 vouchers, to determine whether there was evidence of split purchases. The total value of the purchase order sample was $284,844. We reviewed all 28 miscellaneous vouchers issued by DYCD during fiscal year 2001, totaling $2,388,330, and a sample of 74 small purchase contracts, of which 70 were discretionary-fund contracts, and therefore not subject to competitive selection requirements.

We examined each transaction’s supporting documentation, including contracts, purchase orders, purchase requisitions, order specifications, bid invitations, and voucher payments, to determine whether purchase documents were appropriately prepared and approved; whether instances of split purchases were evident; whether bids were solicited when required; whether authorized signatures appeared on all required documents; whether purchase documents contained adequate specifications; whether purchases had been made through Requirements Contracts, when available; whether miscellaneous vouchers were used correctly; and whether correct object codes were used.

DYCD generally complied with PPB Rules and Comptroller’s Directives in that purchase orders contained adequate specifications, there was no evidence of split purchases, purchase orders had the required signatures, and in most cases, purchases were made through Requirements Contracts, when applicable.

However, we found that in some instances DYCD’s small procurement operation did not comply with certain provisions of the PPB rules and Comptroller’s Directives, or with DYCD’s own procedures, as follows:

• Proof of receipt was not always obtained before issuing payment to vendors.
• Two purchase orders were prepared after the invoices were received.
• Five files showed that only four bids, rather then the required five, were solicited.
• Purchase requisitions forms were not always prepared. Six files did not include a purchase requisition and two contained a requisition that did not include the required signature.
• 21 invoices were not marked "vouchered" as required.
• Incorrect object codes were used for 15 purchases.
• Nine miscellaneous vouchers violated provisions of Comptroller’s Directive #25.

This audit makes seven recommendations. The Department of Youth and Community Development should:

1. Ensure that proof of service for delivery of goods (i.e., receiving and inspection reports) is obtained before vendors are paid for goods and services received. These documents should be maintained in the payment files, in accordance with Comptroller’s Directive #24.
2. Ensure that it always properly encumbers funds by preparing and processing purchase orders before items are purchased.
3. Ensure that the required five vendors are always solicited for bids when purchases total $2,500 or more, and that the bids are always documented.
4. Ensure that properly authorized purchase requisition forms are used for all procurements.
5. Ensure that employees mark all invoices "vouchered" to avoid duplicate payment.
6. Ensure that its staff uses the correct object codes when recording expenses.
7. Ensure that it does not use miscellaneous vouchers in cases in which purchase orders, agency encumbrances, or Intra-City vouchers are required.

The matters covered in this report were discussed with DYCD officials during and at the conclusion of this audit. A preliminary draft report was sent to DYCD officials and discussed at an exit conference on April 17, 2002. On April 22, 2002 we submitted a draft report to DYCD officials with a request for comments. We received a written response from DYCD on May 6, 2002. The response stated in part:

"We would like to thank you for working with us to identify possible improvements to our small procurement processes. In general, we certainly agree with the audit findings . . ."

"DYCD would like to thank the Comptroller’s Office for its continuous communication with DYCD officials throughout the course of the audit. These discussions made us aware of areas for improvement and allowed us to implement corrective action plans immediately."

DYCD agreed with recommendations one through six, and did not indicate whether it agreed with recommendation seven. However, it appears that the circumstances that led to this last recommendation involved a process that may not be applicable to DYCD in the future.

DYCD’s response to this report included both its comments on the report and additional documentation (attachments) relating to specific findings. DYCD agreed that those attachments were included for the auditors’ benefit only and did not have to be appended to this report. Other than those attachments, the full text of DYCD’s comments is included as an addendum to this report.