Final Letter Report On Queens County District Attorney’s Office’s Inventory Practices

EXECUTIVE SUMMARY

This Final Letter Report summarizes the findings of our audit of the Queens County District Attorney’s Office’s (QCDA’s) inventory practices.  The objective of this audit was to determine whether the QCDA maintained a reliable and effective internal control system over inventory in accordance with Comptroller’s Directive #1, Principles of Internal Control, Comptroller’s Directive #18, Guidelines for the Management, Protection and Control of Agency Information and Information Processing Systems, and the Department of Investigation’s (DOI’s) Standards for Inventory Control and Management (DOI Standards).

New York City’s five District Attorneys (DAs), including the Queens County DA, are each publicly elected to terms of four years and are responsible for investigating and prosecuting crimes, assisting victims, and implementing crime prevention strategies in their respective boroughs.  DA office operations are primarily funded by the City Treasury, but they also receive federal and State asset forfeiture funds as well as grants.

The QCDA operates out of three main office locations in Queens using equipment purchased centrally by its Purchasing Department.  Based on information extracted from the City’s Financial Management System (FMS) and the QCDA’s financial records, we determined that the QCDA expended $918,176 and $290,004 for the purchase of office equipment and motor vehicles during Fiscal Years 2016 and 2017, respectively.

Results

The audit found that the QCDA generally adhered to applicable policies and standards for safeguarding assets that the agency considers of material value.   However, the audit identified several weaknesses within the QCDA’s inventory practices that the QCDA should address to strengthen its controls.

In particular, certain types of asset-identifying information called for by the QCDA’s inventory policy and the DOI Standards, such as asset tag number, item description, model, serial number, and location, were missing from some of the QCDA’s inventory records.  Specifically, our review of the QCDA’s 2017 inventory records found that 385 of 5,075 listed items (7.6 percent) lacked at least one of the abovementioned types of information.  Of those 385 inventory records, 230 were associated with the QCDA’s active cellular phones, which had not been tagged as prescribed by the QCDA’s policy and the DOI Standards.  The two principal purposes of tagging an item are to facilitate the agency’s internal tracking of the item and to deter theft.  In the absence of such tagging, the QCDA’s ability to readily determine whether its listed assets are in their assigned locations or with their assigned users may be impeded, and the unmarked devices may be more susceptible to theft and loss.

We also found that the QCDA failed to maintain inventory records for some of its assets.  Specifically, during our physical inspection of the QCDA’s inventory, we observed 96 inactive cellular phones, consisting of both new and used phones, in a storage cabinet, that were not listed in the 2017 inventory records.  The DOI Standards require that agencies maintain complete inventory records through a perpetual inventory system with timely recording of incoming and outgoing items from receipt and storage through distribution and relinquishment; accordingly, all items, including those in storage and those assigned to individuals should be listed.

Additionally, our comparison of the QCDA’s 2015, 2016, and 2017 inventory records identified 95 pieces of equipment that were removed from the inventory lists.  However, for 37 of those items the QCDA did not provide documentation to show that the items were properly disposed of and/or correctly removed from its records.

Lastly, in its Comptroller’s Directive #1 Financial Integrity Statement filing for 2016, the QCDA indicated that its physical inventories were conducted and supervised by individuals independent of the departments responsible for maintaining the assets.  However, during the audit, QCDA officials stated that the agency’s annual physical inventories were conducted and supervised by the same staff who were also responsible for receiving, tagging, and recording the equipment in the inventory records.  Those overlapping responsibilities might compromise the assigned staff’s ability to perform and supervise the inventory counts and report discrepancies to management objectively and impartially, in that their work in connection with the inventory counts would involve reviewing their own work in receiving, tagging, and recording the assets.  Moreover, the QCDA did not maintain worksheets or other documentation that would identify the individuals who performed and supervised its inventory counts.  Finally, we found that the QCDA’s inventory policy did not provide detailed guidance on the corrective actions that should be taken when an inventory count reveals a discrepancy.  These conditions present a risk that such discrepancies and related issues might not be properly identified, communicated to management, and addressed with corrective action through the QCDA’s inventory counts.

The audit made six recommendations to the QCDA:

• Ensure that its inventory records are updated to include all essential asset-identifying information.
• Include specific inventory guidelines for cellular phones and determine whether the requirement of tagging them remains practical or whether alternative controls should be developed and ensure that its policy, once determined, is followed and enforced.
• Require inactive cellular phones to be recorded in its inventory record and update its current inventory records to include the inactive cellular phones and all other equipment not previously included.
• Ensure that all items removed from inventory have been properly relinquished and that appropriate documentation supporting the removal of the items from the inventory records is maintained.
• Ensure that the annual physical inventory counts are conducted and supervised by staff who are not involved in managing the inventory on a day-to-day basis.
• Include guidelines of detailed corrective actions that should be taken when issues are identified during inventory counts.

In its response, the QCDA stated,[w]e are pleased with your overall positive findings that this office adheres to applicable policies and standards for the safeguarding and disposing of assets.  We take our responsibilities in this area seriously and are committed to both maintaining strong internal controls and inventory practices and to enhancing policies and practices, where needed.