Final Letter Report on the Bronx County District Attorney’s Office’s Inventory Practices

Executive Summary

This Final Letter Report summarizes the findings of our audit of the Bronx County District Attorney’s Office’s (BCDA’s) inventory practices for office equipment and furniture.  The objective of the audit was to determine whether the BCDA maintains a reliable and effective internal control system over inventory as required by New York City Comptroller’s Directive #1, Principles of Internal Control and Financial Integrity Statement, Comptroller’s Directive #18, Guidelines for the Management, Protection and Control of Agency Information and Information Processing Systems, and the New York City Department of Investigation’s Standards for Inventory Control and Management (DOI Standards).

The City’s five District Attorneys (DAs) are each 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.  The operations of the DAs’ offices are primarily funded by the City Treasury.  They also receive federal and State asset forfeiture funding, as well as grants.

The BCDA purchases computers, laptops, printers, servers, and network devices using multiple funding sources, specifically but not limited to, capital funds approved by the City’s Office of Management and Budget as well as grant funds, which include funding provided by the U.S. Department of Justice and Federal Asset Forfeiture funds.  During our scope period of Fiscal Year 2017, the BCDA purchased 1,137 office equipment items for a total of $1.4 million.

The City’s oversight agencies, including the Comptroller and DOI, have established standards for inventory control that City agencies, including the BCDA, are expected to follow.  Specifically, Comptroller’s Directive #1 prescribes “periodic counting and comparison to control records” as an example of the kind of internal control an agency must establish to secure and safeguard vulnerable assets such as computers, and other equipment.   The DOI Standards also require, among other things, that City agencies maintain permanent records to track all non-consumable goods and conduct annual inventory counts of all stored goods.  Further, the DOI Standards require that agency management ensure that internal policies and procedures for inventory controls include the requirements established in the DOI Standards.

Results

The audit found several weaknesses that the BCDA should address to strengthen its controls over inventory.  For example, although the BCDA has written policies and procedures for inventory management, those policies mainly concern capital assets and follow Comptroller’s Directive #10, Charges to the Capital Projects Fund.   The BCDA’s policies and procedures do not, however, include procedures for safeguarding other, non-capital assets, as required by Comptroller’s Directive #1 and the DOI Standards.  Such assets also require strong controls, and should be covered by the BCDA’s policies and procedures accordingly.

In addition, our review of the BCDA’s policies and procedures found, and the BCDA’s staff confirmed, that when conducting annual inventory counts, the BCDA does not include items such as computers and printers held in stock in its storage room for later use.  The DOI Standards require that at a minimum, “all stored goods and all inventory locations are included in the physical inventory count . . . .”  The BCDA explained that in-stock items held for later assignment are not counted because staff does not consider them to be part of the BCDA’s “active” inventory.  However, by exempting assets located in storage areas from its annual inventory count, the BCDA cannot ensure the accuracy and completeness of its inventory list and leaves the uncounted items at risk of being lost or stolen.

Our audit also found that the BCDA did not record furniture in its inventory list or include it in the BCDA’s annual inventory count.  BCDA officials informed us that furniture is not listed in inventory because: (1) they do not believe it presents a significant risk of theft; (2) the cost of individual items is below the BCDA’s $5,000 value threshold for inventory; and (3) the items are not purchased with City capital funds.  However, those aforementioned criterion appear to exclude categories of assets, such as furniture, with a useful life of more than a year.  According to Comptroller’s Directive #1 and the DOI Standards, such assets should be safeguarded and included in inventory control procedures.   Categorically, excluding such assets from inventory controls exposes them to the risk of waste that would occur if the items were misplaced, lost, or stolen without detection.

The audit made three recommendations to the BCDA:

• Ensure that assets maintained in storage are included in its annual inventory count.
• Tag and include in inventory records all office equipment with a useful life of more than one year, including furniture, as required by the DOI Standards.
• Evaluate current policies and procedures and ensure that they are in compliance with the Comptroller’s Directive #1 and the DOI Standards.

In its response, the BCDA agreed with one of our three recommendations and partially agreed with two recommendations.  The BCDA did not dispute the report’s findings and stated that the office was “gratified by the Comptroller’s overall finding that our office maintains sound inventory controls and appreciate your recommendations of where we may be able to strengthen our procedures.”