Letter Audit Report on the Collection and Reporting of Revenues by the Board of Standards and Appeals
This Final Letter Report summarizes the findings of our audit of the Board of Standards and Appeals’ (the Board’s) collection and reporting of revenues from application fees. The objective of the audit was to determine whether the Board correctly accounted for, and safeguarded, the application fee revenue it receives.
The Board of Standards and Appeals is an independent board of five members appointed by the Mayor, each for a term of six years. The Board was established in 1916 in conjunction with the creation of the City’s first zoning ordinance. Its responsibilities include reviewing and deciding applications for appeals from City agency denials of property owner requests to construct or alter buildings, or to establish new uses for properties within the City. The City Charter empowers the Board to interpret the meaning and applicability of the provisions of the Building Code, Fire Code, Multiple Dwelling Law, Labor Law, and the City Zoning Resolution and to override decisions of other City agencies.
The Board holds regular public hearings to discuss and decide appeals. Prior to each public session, the Board publishes an agenda of cases scheduled to be heard. After the hearings, it publishes a bulletin summarizing the cases heard and its decisions.
The Board generates revenue from application fees for variances, appeals, and other miscellaneous fees as provided by § 25-202 of the New York City Administrative Code and the City Environmental Quality Review Regulations. The fees can range from $440 to $314,225 per application and must be paid by check or money order upon the submission of the application and prior to the application’s being placed on the docket to be heard. After Board employees receive the various fees, they are hand-delivered by a staff member from the Board’s Records Unit, along with its internally-prepared Deposit Summaries, to the Department of Citywide Administrative Services (DCAS), which is responsible for depositing the funds into the bank and recording the revenue in the City’s Financial Management System (FMS). In Fiscal Year 2017, the Board’s revenues as reported in FMS totaled $1.65 million, consisting of $1.4 million for variances, $244,070 for appeals, and $4,390 for miscellaneous fees.
Results
Overall, we found that the Board correctly accounted for the revenue it received. The Board charged and collected the appropriate fees, and then forwarded the funds it collected to DCAS, where the funds were deposited and recognized as revenue in FMS. The Board collected the fees prior to scheduling a hearing and heard appeals in accordance with its published agenda. We found that it issued sequentially numbered receipts, properly secured the fee revenue received in a safe, and prepared Deposit Summaries for the funds received.
However, we found that the Board did not comply with the daily-deposit rule established by Comptroller’s Directive #11, which states, in part that “[a]ccumulation of in-office cash receipts is not acceptable and all funds received must be deposited in the bank on at least a daily basis, except under extraordinary circumstances.” While the Board does not necessarily receive application fees on a daily basis, pursuant to Directive #11, the Board should forward all the fees it receives to DCAS for deposit within one day of receipt. However, in Fiscal Year 2017, the Board generally forwarded the fees, in accumulated amounts averaging $63,462, to DCAS for deposit every two weeks.
Specifically, we found that in Fiscal Year 2017, the Board held $1.18 million of the $1.65 million in checks and money orders it collected (which were aggregated in 19 of the 26 Deposit Summaries) for more than one week before delivering them to DCAS for deposit. Overall, the Board held on to the deposits for periods that ranged from 8 to 28 business days. Although the Board holds the checks it receives in a locked safe, the Board’s risk that the funds could be lost or stolen increases the longer they remain in its custody, a risk it can mitigate by making timely bank deposits. Further, Citywide adherence to the daily deposit rule, which applies to all City agencies, enables the City to promptly earn interest on its cash and optimize the availability of funds needed for immediate use. Conversely, delays in the City’s deposits diminish those opportunities.
The audit recommends that the Board transfer the funds it collects to DCAS for deposit within a day of receipt in accordance with Comptroller’s Directive #11.
In its response to the audit, the Board agreed with our recommendation and stated that “[t]he Board will comply with this recommendation to the greatest extent practicable given the limited size of the BSA staff and its resources. BSA will explore with DCAS alternate methods of efficient and more timely deposit of funds.”