Comptrollers Report on Parks

8/6/2019 Comptrollers Report on Parks

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O f f i c e O f t h e N e w Y O r k S t a t e c O m p t r O l l e r

thomas p. DiNapoli

DiviSiONOf State GOverNmeNt accOuNtabilitY

New York City Department of

Parks and Recreation

Contracts for Personal and Miscellaneous Services

Report 2009-N-13


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Division of State Government Accountability 3

Table of Contents

Page

Authority Letter ......................................................................................................................... 5

Executive Summary ................................................................................................................... 7

Introduction ............................................................................................................................... 9

Background .......................................................................................................................... 9

Audit Scope and Methodology ......................................................................................... 10

Authority ............................................................................................................................. 11

Reporting Requirements ................................................................................................... 12

Contributors to the Report ............................................................................................... 12

Audit Findings and Recommendations ................................................................................. 13

Justication of Service Contracts..................................................................................... 13

Reassessment of Service Contracts .................................................................................. 14

Recommendations ............................................................................................................. 15

Agency Comments ................................................................................................................... 17

State Comptrollers Comments .............................................................................................. 25


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Division of State Government Accountability

State of New York

Ofce of the State Comptroller

July 29, 2010

Adrian BenepeCommissionerNew York City Department of Parks and Recreation

Te Arsenal, Central Park830 Fifth AvenueNew York, NY 10021

Dear Mr. Benepe:

Te Oce of the State Comptroller is committed to helping State agencies, public authoritiesand local government agencies manage government resources eciently and eectively, and,by so doing, providing accountability for tax dollars spent to support government operations.Te Comptroller oversees the scal aairs of State agencies, public authorities, and localgovernment agencies, as well as their compliance with relevant statutes and their observanceof good business practices. Tis scal oversight is accomplished, in part, through our audits,which identify opportunities for improving operations. Audits can also identify strategies forreducing costs and strengthening controls that are intended to safeguard assets.

Following is a report of our audit of the New York City Department of Parks and RecreationsContracts for Personal and Miscellaneous Services. Tis audit was performed pursuant to theState Comptrollers authority as set forth in Article V, Section 1 of the State Constitution andArticle III of the General Municipal Law.

Tis audits results and recommendations are resources for you to use in eectively managing

your operations and in meeting the expectations of taxpayers. If you have any questions aboutthis report, please feel free to contact us.

Respectfully submitted,

Oce of the State Comptroller

Division of State Government Accountability

Authority Letter


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State of New York

Ofce of the State Comptroller

EXECUTIVE SUMMARY

Audit Objectives

One objective of our audit was to determine whether the New York City Department of Parksand Recreation (Department) justied the need to contract for personal and miscellaneousservices. Another objective was to determine whether the Department periodically reassessedpersonal and miscellaneous services contracts to identify what work could be deferred,eliminated, or reduced in an eort to deal with the current scal crisis.

Audit Results - Summary

Te City Charter, Procurement Policy Board Rules, and City Comptroller Directives establishcertain expectations for City agencies regarding decisions to contract out for personal andmiscellaneous service contracts (Service Contracts). Tese guidelines have added signicancegiven the Citys increasing scal diculties. In his January 2009 State of the City Address, theMayor outlined the need to nd new eciencies throughout City government while protectingcore City services. For the period July 1, 2008 through November 30, 2009, the Department had471 open Service Contracts with award values totaling $235.7 million; 128 (about 25 percent)of these contracts were awarded for more than $100,000. Many were multi-year contracts -some providing services over several years both before and after our audit scope period.

We examined ten of these Service Contracts valued at $10.1 million and reviewed relateddocuments to determine whether the decision to contract for services was in writing andwhether there was documentation supporting that decision. We found that all ten contract lescontained a standardized form, prepared by a Department contracting ocer, that identiedthe reason for contracting out the service. Te reason most often cited was that contractingout for the service was cost-eective. However, Department ocials could not provide anywritten analyses or other relevant documentation used to support their decisions.

Department ocials told us they believe the standardized form suciently documents theneed to procure a service and that the decisions are made by ocials who are most familiarwith the skills and resources available to complete projects and assignments, as well as theworkload of their sta, and that they generally do not maintain additional documentation.Tey add that the City Charter expectations are not applicable, since they only apply whenan employee is displaced - and none were; and that Procurement Policy Board Rules are notapplicable for most of the contracts in our sample for various reasons.

Executive Summary


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Introduction

Te New York City Department of Parks and Recreation (Department)

operates one of the largest municipal park systems in the country. Itsprincipal mission is to ensure that the approximately 29,000 acres of parks,beaches, playgrounds, and recreational facilities in New York City (City)are clean, safe, accessible, and attractive for the health and enjoymentof the people and that they provide a wide variety of recreationalopportunities. For the scal year ended June 30, 2009, the Departmenthad 7,395 full-time equivalent employees and total expenditures of$853.5 million, including $643 million for goods and services.

o help achieve its mission, the Department often enters into personaland miscellaneous service contracts (Service Contracts) to provide

services for park design, construction supervision, forestry (such astree pruning), maintenance, and recreation activates. According toDepartment records, it had 471 open Service Contracts during theperiod July 1,2008 through November 30, 2009. Te total award valueof these contracts was $235.7 million. (Tis amount is the full, awardedamount and includes contracts of widely varying term lengths and atmany dierent stages of implementation). More than 25 percent (128)of these contracts were awarded for more than $100,000, and many weremulti-year contracts - some providing services over several years. Te471 contracts are categorized in the following chart:

Background

59%

12%

10%

9%

6% 4%

TypesofContractsDesignServices $140million

ForestryServices $28million

ConstructionSupervisionServices $23million

MaintenanceandRepair $21million

VehicleServices $14.5million

Other $9million

Introduction


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Ofce of the New York State Comptroller

Te following guidelines set forth expectations for City contracts:

Section 312 of the City Charter requires that a cost-benet analysis beprepared before a City agency enters into any contracts for technical,consultant or personal services valued at more than $100,000 when

such contract would result in the displacement of a City employee. Section 2-01 of the Procurement Policy Board Rules (PPB Rules)

requires that the decision to procure technical, consultant andpersonal services that cost more than $100,000 be in writing. PPBRules further require agencies to consider several factors in makingthat decision, such as cost-eectiveness, special expertise and theduration of the needed service.

New York City Comptroller Directive 24 states that agencies shouldretain documentation used for purchasing decisions, such as materialfrom vendor presentations, agency discussions and memoranda, andany other paper and/or electronic records supporting the purchasedecision.

Tese guidelines have added signicance given the Citys increasingscal diculties. In the Mayors January 2009 State of the City Address,the Mayor outlined the need to nd new eciencies throughout Citygovernment while protecting core City services. Further, in November2009, the Citys Oce of Management and Budget (OMB) issued a memoto all agency heads calling for targeted savings of 8 percent of expendituresfor most agencies.

One objective of our audit was to determine whether the Department justied the need to contract for personal and miscellaneous services(Service Contracts). Another objective was to determine whether theDepartment periodically reassessed Service Contracts to identify whatwork could be deferred, eliminated, or reduced in an eort to dealwith the Citys scal diculties. For the purposes of our audit, ServiceContracts are those in which the majority of costs associated with thecontracts are for services and labor. We did not include contracts forcommodities or capital construction. Our audit period was July 1, 2008

through November 30, 2009.

o accomplish our audit objectives, we reviewed relevant City guidelines,interviewed Department and City personnel, and reviewed contracts andother supporting documentation provided by the Department. We testedthe completeness of the Department-provided contract list by comparingit with contracts registered with the New York City Comptroller. Weselected a judgmental sample of 10 Service Contracts totaling $10.1

Audit Scope and

Methodology


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million, each awarded for more than $100,000, from the 471 contractsopen during our audit period.

We conducted our performance audit in accordance with generallyaccepted government auditing standards. Tose standards require that

we plan and perform the audit to obtain sucient, appropriate evidenceto provide a reasonable basis for our ndings and conclusions based onour audit objectives. We believe that the evidence obtained providesa reasonable basis for our ndings and conclusions based on our auditobjectives.

As is our practice, we notify agency ocials at the outset of each audit thatwe will be requesting a representation letter in which agency managementprovides assurances, to the best of their knowledge, concerning therelevance, accuracy and competence of the evidence provided to theauditors during the course of the audit. Te representation letter is

intended to conrm oral representations made to the auditors and toreduce the likelihood of misunderstandings. Agency ocials normallyuse the representation letter to assert that, to the best of their knowledge,all relevant nancial and programmatic records and related data havebeen provided to the auditors. Tey further arm either that theagency has complied with all laws, rules, and regulations applicable to itsoperations that would have a signicant eect on the operating practicesbeing audited, or that any exceptions have been disclosed to the auditors.However, ocials at the New York City Mayors Oce of Operations haveinformed us that, as a matter of policy, mayoral agency ocials do notprovide representation letters in connection with our audits. As a result,we lack assurance from Department ocials that all relevant informationwas provided to us during the audit.

In addition to being the State Auditor, the Comptroller performs certainother constitutionally and statutorily mandated duties as the chief scalocer of New York State. Tese include operating the States accountingsystem; preparing the States nancial statements; and approving Statecontracts, refunds, and other payments. In addition, the Comptrollerappoints members to certain boards, commissions and publicauthorities, some of whom have minority voting rights. Tese duties

may be considered management functions for purposes of evaluatingorganizational independence under generally accepted governmentauditing standards. In our opinion, these functions do not aect ourability to conduct independent audits of program performance.

Tis audit was performed pursuant to the State Comptrollers authorityas set forth in Article V, Section 1 of the State Constitution and Article IIIof the General Municipal Law.

Authority


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A draft copy of this report was provided to Department ocials for theirreview and comment. Teir comments were considered in preparing thisreport, and are included at the end of the report as Agency Comments.Our rejoinders to the Departments comments are presented thereafteras State Comptrollers Comments.

Within 90 days of the nal release of this report, we request thatthe Commissioner of the New York City Department of Parks andRecreation report to the State Comptroller advising what steps weretaken to implement the recommendations contained herein, and whererecommendations were not implemented, the reasons why.

Major contributors to this report included Frank Houston, Cindi Frieder,Gene Brenenson, Ryan Wendolowski, Farhan Ahmad and ElizabethNorniella.

Reporting

Requirements

Contributors to

the Report


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Audit Findings and Recommendations

We selected a sample of ten Service Contracts and reviewed available

documentation to determine whether the decision to contract for serviceswas in writing and whether there was documentation supporting thatdecision. We found that all ten contract les contained a standardizedform, prepared by a Department contracting ocer, which identied thereason for contracting out the service - using a check-o box to selectamong various options, such as cost-eectiveness, special expertise, orlack of personnel. Te reason most often selected was cost-eectiveness.However, Department ocials could not provide any written analyses orother written documentation that would support their determinations.For example, one contract included in our sample was a two-year $3.7million contract for tree stump removals. According to the standardized

contract form, the contract was awarded because it was cost-eective;however, Department ocials could not provide details or calculationsindicating how this determination was made. A second contract inour sample was awarded for $186,000 for janitorial services. Similarly,Department ocials provided no written calculation substantiatingthat it was cost-eective to contract out these services, as stated on itsstandardized form.

Department ocials told us that completing the checked-o box onthe standardized form is sucient support. Tey contended that thedecision to contract out services is determined by ocials who are mostfamiliar with the skills and resources available to complete projects andassignments, as well as the workload of their sta, and thus a formaldocumented analysis is not necessary. Tey add that such documentationmay have existed at the time the decision was being made, but it is nolonger available. Tey further added that using contractor employeesto perform certain services is cost-eective, as it gives the Departmentthe exibility to use them only when needed. Furthermore, Departmentocials point out that Section 312 of the City Charter requires a writtenanalysis only when an employee is displaced. As the Department neverdisplaces any employee, a written cost analysis is not required.

Department ocials further indicated that many of the contractsreviewed are not subject to Section 2-01 of the PPB Rules. Terefore,written documentation does not have to be maintained to support theirdecisions to contract out these services. Tey added that Section 2-01applies only to contracts where a vendor is selected based upon theexpertise or skill of particular contractor employees and only one of theten contracts t this criteria. Department ocials indicated that they do

Justication of

Service Contracts

Audit Findings and Recommendations


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not have any supplementary internal policies or procedures; they adhereto the PPB Rules.

We acknowledge that there are times when outside service contracts shouldbe used. However, given the substantial amounts of money involved, it

is good business practice that ocials involved in these decisions obtainand review documentation supporting the rationale for contracting outservices. Te absence of documentation showing that alternatives wereconsidered and cost benets were analyzed leaves taxpayers withoutadequate assurance that all relevant factors were considered in makingthe decision to contract out work - and that an economical and eectivechoice was selected. Furthermore, maintaining written support for thesedecisions will improve the Departments transparency.

In light of the current scal crisis, Department ocials need to ensurethat expenditures are necessary and cost-eective. o achieve that goal,

we believe the Department should perform a comprehensive review ofeach Service Contract to determine what can be delayed, suspended,postponed or performed in-house.

While we found that the Department has not performed this type ofcomprehensive review, Department ocials explain that they do activelyreview, prioritize and make adjustments to contracts depending onbudget constraints as well as service needs. Tey explain that they aregiven an already-downsized budget, which they work within to prioritizeprojects and procure necessary services to accomplish their projects.Tey cite, for example, their recent achievements in reducing vehiclepurchase costs by $1 million and tree pruning contract expenses by$2.5 million. Tey also explain that the full contract award value for allcontracts may not be used, as some contracts are used as needed or foremergency service and their use is therefore subject to constant reviewand assessment.

We believe a more comprehensive review of each Service Contract mayreveal additional opportunities for savings, especially in light of OMBscall to reduce expenditures by 8 percent. As of November 30, 2009,$57.2 million remained on the Service Contracts open during our scope

period. If the Department could achieve an 8-percent reduction on theremaining balances of these contracts, approximately $4.5 million in costsavings could be achieved.

Reassessment of

Service Contracts


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1. Communicate to appropriate sta the need to develop and retainwritten analyses to justify the need for contracted services.

2. Instruct managers to reassess all Service Contracts periodically,identifying opportunities to delay, suspend, postpone or bring themin-house, and to document these determinations.

Recommendations


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Agency Comments

Agency Comments


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Comment

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Comment

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Comment

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Comment

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* See State Comptrollers Comments, page 25.


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Comment4

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State Comptrollers Comments

1. Te report cites a number of guidelines that set forth expectations for City contracts.Te report clearly states the Departments position that not all contracts are subject to

Section 2-01 of the PPB Rules. Te report also cites the New York City ComptrollerDirective 24, which requires that documentation used for purchasing decisions beretained. Moreover, it is good business practice to retain documentation to support therationale for contracting out services of this magnitude.

2. Te points made by the Mayors Oce of Contract Services in a March 31, 2010 letter inresponse to the preliminary audit ndings for our audit of the New York City Departmentof Youth and Community Development: Contracts for Personal and MiscellaneousServices (Report 2009-N-12) was taken into consideration in preparing this report.

3. Te citation from our report is incomplete; it deletes the bracketed words: Te absenceof documentation showing that alternatives were considered [and cost benets wereanalyzed] leaves taxpayers without adequate assurance that all relevant factors wereconsidered in making the decision to contract out work - and that an economical andeective choice was selected. As stated in the report, Department ocials could notprovide any written analyses or other written documentation that it was cost-eective tocontract out for these services. We stand by our recommendation that the Departmentdevelop and retain such documentation.

4. Te report acknowledges Department action to review, prioritize and make adjustmentsto contracts, depending on budget constraints and service needs. However, Departmentocials did not provide documentation supporting that a comprehensive assessment ofService Contracts was performed.

5. We modied the report to reect that the $235.7 million is the full-awarded amountand includes contracts of widely varying term lengths and at many dierent stages ofimplementation.

State Comptrollers Comments

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Comptrollers Report on Parks

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