Follow-up Audit Report on the Compliance of the Human Resources Administration with Purchasing Directives

This follow-up audit determined whether the Human Resources Administration (HRA) implemented the five recommendations made in a previous audit, Audit Report on the Compliance of the Human Resources Administration with Purchasing Directives (FP08-122A), issued June 30, 2009.

The prior audit examined whether HRA is complying with certain purchasing procedures as set forth in the New York City Charter, applicable Procurement Policy Board rules, and the New York City Comptroller’s Internal Control and Accountability Directive #24, “Agency Purchasing Procedures and Controls.”

The prior audit found that HRA purchase documentation was properly approved, authorized, and maintained. There were no instances in which the HRA’s Other Than Personal Services monies were improperly used. However, HRA generally did not adhere to Comptroller’s Directive #24, the City Charter, and applicable Procurement Policy Board rules in two major areas. HRA did not enter into contracts for purchases of services when required, which violated the City Charter, Procurement Policy Board (PPB) rules, and Comptroller’s Directive #24. Instead, HRA inappropriately used Purchase Orders to process payments for a total of $145,809,224 through the City’s Financial Management System (FMS) for these services. Furthermore, HRA did not register a Memorandum of Understanding (MOU) with the New York City Comptroller’s Office, which violated the City Charter and PPB rules. HRA paid a total of $35,734,637 to the New York City Housing Authority (NYCHA) for providing the Job Opportunity Program, community center programs, and summer employment programs without having registered the MOU with the Comptroller’s Office. In the previous audit, HRA disagreed with all five recommendations and responded that “…these payments are not City procurements and thus do not require registered contracts.”

Audit Findings and Conclusions

The current follow-up audit disclosed that of five recommendations made in the previous audit, HRA did not implement four and one was no longer applicable to the current audit period because the New York City Office of Management and Budget (OMB) had removed funds from HRA’s budget for the Supportive Service Programs and placed them directly in NYCHA’s budget. This eliminated the need for HRA to register any MOU related to these services with the Comptroller’s Office.

We found that HRA processed a total of $176,875,057 from 159 vendors as Purchase Orders (POs) rather than formal contracts.

Our test of the non-contracted vendors indicated that HRA acquired services from State-licensed and approved facilities for victims of domestic violence; however, we were unable to ascertain the quality of services provided to these victims because performance evaluations were not required as they would be with a formal contract.

HRA procured some of the currently reviewed services via contracts. Based on our review of a sample of these contracts, we found that HRA generally performed a review of vendors’ performance histories in VENDEX ¹ to determine the responsibility of a bidder prior to awarding the contract.

Finally, HRA informed us on December 17, 2010, that it had never intended to implement our prior recommendations.

Audit Recommendations

To address the outstanding issues from the previous audit that still exist, we recommend that HRA should:

• Ensure that it follows the City Charter and PPB rules when purchasing services by entering into formal contracts with these vendors as applicable.
• Discontinue using POs to procure services in situations where contracts should have been executed.
• Ensure that it adheres to provisions of Comptroller’s Directive #24 by using the correct purchase document when processing payments through FMS.

Agency Response

HRA disagreed with two of the three recommendations contained in the report and partially agreed with the third. The full text of the HRA response dated June 15, 2011, is included as an addendum to this report.