Audit Report on the Susan E. Wagner Day Care Center and Its Use of City Funds under Its Contract with the Administration for Children’s Services

AUDIT REPORT IN BRIEF

This audit determined whether the Susan E. Wagner Day Care Center (Center), appropriately managed the City revenues it received and expended under its Administration for Children’s Services (ACS) contract, maintained safe and sanitary premises for the children under its care, and conducted appropriate background investigations of its employees.

Our review of Center operations revealed that the classrooms, play areas, storage, and kitchen areas were generally safe and sanitary. In addition, the files for Center employees contained most of the required documentation, such as evidence of an annual medical exam, reviews of criminal background investigations, and training in recognizing abuse and maltreatment of children.

However, our examination found that the Center did not appropriately manage the City revenues received or expended. Specifically:

• There was a lack of oversight by the Board of Directors.
• There was a lack of control over personnel expenditures.
• There were weaknesses in Center internal controls over other than personal services expenditures.
• There was a lack of controls over revenues received from the City.

Based on our findings, we make 27 recommendations, including the following:

• The Board members should vote on salary increases for its employees. The discussion pertaining to salary increases should be documented in the Board minutes.
• The Board of Directors should be informed about all Center activities and about investigations of Center activities by government agencies. All Board discussions pertaining to Center activities and investigations should be documented in the Board minutes.
• The Board should ensure that it repays ACS the disallowed portion of the Executive Director’s salary.
• The Board should ensure that the Executive Director, as well as other employees, documents the hours worked on each program to properly allocate the salaries to the individual programs.
• The Center should ensure that employees are paid only for hours worked.
• ACS officials should review the salaries of the employees noted in this report and disallow any portion of their salaries that they feel is not attributable to the Center.
• Center officials should ensure that checks are recorded in the general ledger at the time that they are issued.
• Center officials should ensure that they review their bank statements and place a stop order on checks that are outstanding for more than six months.
• Center officials should maintain a separate ACS account to provide a clear audit trail for the receipt of day care funds and parent funds.
• Center officials should ensure that funds for other than Center programs are transferred in their entirety into the appropriate program account and transferred on a timely basis.

The matters covered in this report were discussed with Center and ACS officials during and at the conclusion of this audit. A preliminary draft report was sent to Center and ACS officials and discussed at an exit conference held on May 10, 2004. On May 13, 2004, we submitted a draft report to Center and ACS officials with a request for comments. On June 3, 2004, we received a written response from ACS officials, who responded also on behalf of the Center. ACS officials generally agreed with our recommendations and stated that they have taken steps to implement them.