Audit Report on the the Funds Raised by the Marketing Division of the New York City Department of Parks and Recreation and Maintained by the City Parks Foundation
EXECUTIVE SUMMARY
The New York City Department of Parks and Recreation (Parks) maintains 28,000 acres of City parkland and provides the public with a variety of recreational opportunities through its ball fields, tennis courts, beaches, swimming pools, recreation centers, etc. Parks is also responsible for 500,000 street trees and 2 million park trees. Parks activities are funded through the general operating fund of the City Treasury.
In addition to the funds received from the City, certain Parks divisions raise "private" funds from individuals and organizations that are instructed to make their checks payable to the City Parks Foundation (Foundation). Mainly, three units within Parks raise these funds: the Urban Park Service Division, the Tree Trust Program, and the Marketing & Special Events Division. The funds are deposited in a Foundation bank account and spent at Parks’s direction. These funds are pooled with the Foundation’s own funds and are included on its financial statements as Foundation grants and contributions. Each month, the Foundation submits a report to Parksdetailing private funds raised and expended by Parks.
Funds raised by Parks at their City recreational centers, borough offices, and other Parks facilities are forwarded to the Foundation, but are deposited into a custodial account. Like the private funds noted above, custodial account funds are spent at Parks’s direction. However, unlike the private funds above, custodial account funds are deposited into a separate Foundation bank account and are disclosed separately on the Foundation’s financial statements.
This audit report is the third of four reports covering private funds raised by Parks and maintained by the Foundation. Specifically, this report discusses our examination of funds raised by the Marketing & Special Events Division (the Division), forwarded on to the Foundation, and then spent by the Foundation as directed by the Division.
The Division promotes and oversees special events held in City parks, such as Easter and Halloween celebrations, beach volleyball tournaments, and a variety of other recreational and educational programs that are provided to the public at no charge. The Division solicits "donations" from corporate sponsors to finance these public events. In addition, the Division issues Special Event Permits to businesses, organizations, or individuals requesting permission to hold private events in City parks.
In 1999, the Division received donations totaling $1,022,816. Of this amount, $645,444 was from corporate sponsors of public events, and the remaining $377,372 was received from permitted event organizers.
Our audit objectives were to review the Division’s fund raising practices and its internal controls governing the receipt and expenditure of these funds, including: the propriety of Division employees raising private funds that are deposited with the Foundation; the adequacy of the internal controls over the processing, recording, reporting, and expending of these funds; and the accuracy of the accounting for and the recording and reporting of these funds.
Our audit covered the period from July 1, 1998, to June 30, 1999. To review internal controls, we interviewed Foundation and Division officials to obtain an understanding of the procedures for recording, reporting, and expending private funds. Based on our interviews, we determined that the Foundation and the Division did not have sufficient controls in place to ensure that all funds raised are properly safeguarded and that the funds are expended in accordance with Parks guidelines. Consequently, we examined 100 percent of the transactions, except for payroll transactions. For payroll, we reviewed transactions for the period February 14–27, 1999.
In May 2001, a standard fee structure for special event permits was incorporated in the City Administrative Code that required special event fees to be deposited in the City Treasury. Therefore, we expanded the scope of this audit. We examined fees collected by the Division during the month of July 2001 to determine whether Parks charged the appropriate fees and deposited the amounts collected in the City Treasury.
This audit was conducted in accordance with generally accepted government auditing standards (GAGAS) and included those tests of the records and other auditing procedures we considered necessary. This audit was performed in accordance with the City Comptroller’s audit responsibilities as set forth in Chapter 5, § 93 of the New York City Charter.
The Division inappropriately solicited $377,312 in "donations" by charging permit fees to businesses, organizations, and individuals in exchange for permission to hold private events in City parks. Moreover, the Division bypassed the City Treasury by depositing $645,444 in "private" funds with the Foundation during fiscal year 1999.
In addition, the Division did not reconcile its records of funds received and deposited with the Foundation to the monthly financial reports it received from the Foundation. As a result, the Division was unaware that it did not receive credit for a $250,000 payment from a corporate sponsor.
It should be noted that during this audit, the City Council held hearings regarding Parks’s practice of soliciting donations from organizations wishing to hold private events in City parks. At those hearings, the former Parks Commissioner proposed amending the City Administrative Code by adding a new section that provides for a standard fee structure for special events. Subsequently, this fee structure was published in the City Record and was incorporated in the Administrative Code in May 2001. In addition, Parks informed us that since the beginning of fiscal year 2002, funds raised from private and sponsored events have been deposited in the City Treasury. Our review of transactions for July 2001 confirmed that the City Treasury is now receiving these funds.
This report makes the following recommendations:
Parks should:
- Ensure that any remaining Division funds on deposit with the Foundation are transferred to the City Treasury.
- Monitor the Division to ensure that it adheres to the new guidelines set forth in the City Administrative Code.
The Foundation should:
- Cease accepting monies from the Division and forward all balances it manages on behalf of the Division to the Parks Budget Office.
The matters covered in this report were discussed with Parks and Foundation officials during and at the conclusion of this audit. A preliminary draft was sent to Parks and Foundation officials and discussed at an exit conference held on March 18, 2002. On March 22, 2002, we submitted a draft report to Parks and Foundation officials with a request for comments. Parks submitted a written response on March 22, 2002 in which it stated that it agreed with our findings and had implemented the recommendations. The Foundation’s written response, received on March 25, 2002, stated that it had complied with the recommendation addressed to the Foundation. The full texts of the Parks and the Foundation responses are included as addenda to this report.