Final Letter Report on the Independent Budget Office’s Inventory Practices

This audit was conducted to determine whether the Independent Budget Office (IBO) maintains a reliable and effective internal control system over inventory as required by Comptroller’s Directive #1, Principles of Internal Control and Financial Integrity Statement, and the New York City Department of Investigation’s Standards for Inventory Control and Management.

IBO provides nonpartisan information about the City’s budget to the public and elected officials.  It presents budgetary reviews, economic forecasts, and policy analyses in the form of reports, testimony, memos, letters, and presentations.  In addition, IBO produces guides to understanding the budget and provides online access to key revenue and spending data from past years.  In the Comptroller’s Comprehensive Annual Financial Reports for Fiscal Year 2015 and Fiscal Year 2016, IBO reported expenditures totaling $3,944,381 and $3,991,457; of those amounts, $618,612 (15.7 percent) and $631,175 (15.8 percent), respectively, were for other than personal service expenditures.  Based on our review of purchasing records, we estimate that IBO purchased office equipment items with a total value of $49,406 during Fiscal Year 2015 and Fiscal Year 2016.

Results

The audit found that, with some exceptions, IBO generally adhered to applicable procedures related to the safeguarding of assets.  However, the audit found several weaknesses, which IBO should address to strengthen its controls over inventory.  In particular, the audit found that IBO did not tag all office equipment and include all equipment on its inventory of assets as required by the Department of Investigation’s (DOI’s) Standards for Inventory Control and Management.  DOI’s standards require that “[p]ermanent records are maintained, centrally, to track all non-consumable goodsissued to each agency unit, including type of equipment, manufacturer, serial number, agency control number, condition, location, date issued, and the person(s) responsible for maintenance . . . .  Readable, sturdy property identification tags (reading ‘Property of the City of New York’) with a sequential internal control number are [to be] assigned and affixed to valuable items.”

In addition, IBO did not document that it conducted periodic inventory counts of its main office and off-site location or the count results.  Further, IBO did not fully update its inventory list to ensure that it was accurate and complete.

Lastly, IBO did not maintain written policies and procedures for controls over the safeguarding of assets as required by DOI’s Standards for Inventory Control and Management, which states, “[a]gency management is responsible for ensuring that there are policies and procedures and that these are updated to include the requirements established in these Standards.”

To address these issues, the audit makes four recommendations, including that IBO should:

• Tag and inventory all office equipment with a useful life of more than one year as required by DOI’s Standards for Inventory Control and Management.
• Document the date and results of periodic inventory counts performed for its main office and off-site location.
• Ensure that it updates its inventory list after periodic inventory counts are performed.
• Develop and implement written policies and procedures as required by DOI’s Standards for Inventory Control and Management.

In its response, IBO stated that it was “pleased that you found our agency ‘generally adhered to applicable procedures related to the safeguarding of assets’” and agreed to implement three of the audit’s four recommendations.

IBO did not agree to tag and inventory all office equipment with a useful life of more than one year as required by DOI’s Standards for Inventory Control and Management.  In its response signed by its Director, IBO stated that “[b]ased on the ultimate finding that every item sought by your audit team was accounted for, I believe that we have implemented a process that works well for an agency of our size.”