Auditor-In-Chief: Has Thompson Effected Change?

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Although he is a rival now, for most of his seven and a half years in office Comptroller William Thompson has not been a ferocious antagonist to Mayor Michael Bloomberg. Instead, he has mostly praised the mayor’s budgets, smiled on his economic policies and hailed Bloomberg’s accomplishments with the city’s schools. When Thompson endorsed Bloomberg’s re-election opponent Fernando Ferrer in 2005, he was asked to name three areas where the Democrat would perform better than the mayor. “You’d have to ask Freddy the question,” was Thompson’s response.

But while they have avoided open warfare, Thompson’s office and the Bloomberg administration have engaged in hundreds of low-level skirmishes over the comptroller’s audits of city agencies and programs.

Since he took office in January 2002, Thompson’s office has issued some 650 audits. While some were obscure or perfunctory and generated little disagreement between the comptroller’s and mayor’s staffs, several audit reports lodged major criticisms of the administration’s performance, called for significant changes in how the city did business and spurred strong reactions from Bloomberg appointees.

And some have concerned the city’s most vulnerable populations. Over the years, his audits contended that the Department of Aging needed to do a better job checking the physical condition of its senior centers, that the Human Resources Administration was not serving HIV/AIDS clients well enough, and that HRA’s fair hearing process for welfare applicants was at odds with state regulations, to cite just a few examples. Advocates for low-income New Yorkers recently convinced the comptroller to issue a statement addressing concerns with the city’s Back to Work program.

Thompson has not, however, audited the mayor’s office and agencies as often as did his predecessor, Alan Hevesi, under Mayor Rudolph Giuliani. The jury is still out on what impact Thompson’s audits have had on city services—and whether his record as an auditor will matter in the comptroller’s current run for mayor.

A painstaking process

The city charter gives the comptroller broad audit authority, specifically the “power to audit and investigate all matters relating to or affecting the finances of the city” as well as examine “city programs to determine whether funds are being expended or utilized efficiently.” Every agency has to be audited at least once every four years. To accomplish all these tasks, the comptroller has the power to take testimony under oath and to “obtain access to agency records required by law to be kept confidential.”

At present, the comptroller has around 150 auditors, with skills ranging from accounting to engineering. The starting salary is $40,000 and the division has a budget of roughly $8 million. Under the direction of Deputy Comptroller for Audits, Accountancy and Contracts John Graham—a 29-year veteran of the comptroller’s office—the audit bureau selects audit targets using a “risk analysis” that looks for programs with big budgets (where waste or potential savings are most likely), dealing with important issue areas (say, education), and possibly with a history of audits that detected problems. “Choosing what and who to audit is part art, part science and part risk assessment,” Graham says. “Often, an audit is the result of media attention, whistleblower complaints, or our own research.”

Once an audit is launched, it can involve a single auditor and last a month in the simplest case, and in the most complex instance has a team of five working for up to a year. Auditors collect documents and interview agency personnel, contact state agencies, talk with contractors and vendors and in some cases prepare alternative cost estimates of construction projects. Field work also plays a part. If the auditors are looking at concessions on city property, they eat at the restaurant, looking to see if the concessionaires take cash, give receipts—whether they handle money properly or stuff it in a cigar box.

Once the audit is largely finished, a preliminary version is sent to the target agency to see if there are disagreements on the basic facts. Then a draft audit is given to the agency, to which it makes a formal reply.

During his time in office, Thompson’s auditors have audited Department of Parks and Recreation 78 times—more than any other agency—primarily, the comptroller’s office says, because the agency’s many concession arrangements offer the chance for the cash-strapped city to recoup extra money. The school system has been audited 33 times. Thompson’s auditors have issued 31 reports on the Administration for Children’s Services, 22 on the pension funds and 19 concerning the Department of Finance.

Assessing the impact

According to its annual reports, the comptroller’s audit bureau has saved the city as much as $77 million during Thompson’s tenure and identified another $183 million in potential savings.

So far in 2009, the comptroller has issued audits on topics like spending by the Brooklyn district attorney, retirees who double-dip by working for the city while collecting pension benefits, case management at the Civilian Complaint Review Board and the use of department credit cards by the Department of Parks and Recreation. None of those have generated much controversy. But some of Thompson’s earlier audits touched on—or touched off—major debate.

When comptroller auditors in the fall of 2003 looked into the Department of Homeless Services’ contracts with hotels and landlords to provide temporary shelter, they found that DHS had failed to comply with city contracting rules in awarding some $96 million in business to property owners. What’s more, 30 of the 56 apartments that auditors visited had “unsafe or unsanitary conditions.” Those concerns resurfaced this past spring, with the department facing questions over placing multiple homeless families in particular apartment buildings.

In September of 2003, the city announced that Snapple had won the exclusive rights to sell products in city schools, control vending machines in all other city buildings and market the city’s name—a deal that was supposed to bring in more than $166 million to the city’s coffers. A March, 2004 comptroller’s audit found that the process through which Snapple won the school vending rights was “fundamentally flawed” because it failed to solicit a range of bids and offered the marketing agent “exorbitant compensation for its services.” Thompson ended up suing the city to try to stop the citywide marketing deal. The state Court of Appeals in 2006 upheld a lower court ruling that Thompson was right to consider the city’s marketing potential as city “property.” But the court ruled that the comptroller’s objections were not sufficient to stop the deal. The city abandoned the marketing arrangement in 2009 anyway, after it failed to generate anywhere near the anticipated revenue.

In 2007, auditors delved deep into the technical details of the Parks Department’s concession deal with Ferry Point Partners (which originated in 2000 under Giuliani), a company that was supposed to build and operate a new public golf course and amenities in the Bronx. Auditors found that the city had overpaid the company for environmental remediation to the tune of almost $6 million and failed to collect late fees of $3 million when the project was delayed. The contract was cancelled in the midst of the audit.

Some audits concern non-city agencies, like the New York City Transit Authority, which Thompson’s office targeted after the 2003 fare hike. The report found that the authority hadn’t presented “complete, clear and accurate” information on its budget, and that city bus and subway riders received less subsidy money than other transit customers in the region.

Agencies’ responses to the audits vary. During the auditing process itself, some departments are more cooperative than others, Graham says. Once the audit is done, agencies are sometimes very forceful in their reactions.

“The audit report suffers from [a] fundamental misconception,” wrote the DOE when presented with the Snapple audit. “This misconception permeates the draft and thus leads to manifestly inaccurate conclusions.” DOE accused the comptroller’s staff of a “biased, pre-determined approach.”

Replying to the audit on the Ferry Point project, the Parks Department wrote that the audit “reflects numerous errors in both fact and law and a fundamental misunderstanding of a highly complex project and its associated regulatory permitting process.”

An exception was the Department of Homeless Services. While maintaining that it didn’t really have to follow procurement rules that apply to contracts for services (because city lawyers had decided that renting a hotel room for a homeless family didn’t constitute a “service”), the department pledged to do so.

Indeed, even in contentious audits, the target agencies often accept many of the comptroller’s recommendations. The recent audit of purchasing card usage at the Parks Department determined that of the 13 recommendations in a 2006 audit, 11 had been partially or totally implemented. A comptroller’s assessment of the Giuliani years indicates that some 80 percent of the office’s recommendations were accepted. (Though the city charter contains no clear requirement that any must be.)

Thompson’s office is now compiling an assessment of how many the Bloomberg administration has adopted. Each year, the office writes to each agency to see how many items have been implemented, but sometimes there is a significant delay between audit and action. In the case of the DHS, Thompson’s office complained last summer that the temporary shelter deals were still not occurring according to city rules. A follow-up audit is under way.

Looking less

According to Graham, he makes the final decision on what to audit. But he adds: “The Comptroller plays a large role in this process. He is briefed on the audit plan. He makes numerous suggestions and recommendations to us and because he has the ear of the people, he will often hear of things at a different level than we will.”

As a politician whose designs on higher office have long been known, Thompson’s choice of audit targets could be seen as politicized. Opposing a fare hike, for example, is an obvious winner with the voters. Graham insists he and the auditors decide what gets reviewed.

It is unclear whether Thompson, who leads Councilman Tony Avella in surveys for the Democratic mayoral nomination but trails Bloomberg in general election polls, will use any audit findings as lines of attack against the mayor. Of the last six city comptrollers, Thompson is the fifth to seek the mayoralty. Only one, Abraham Beame, has been successful so far. In his campaign biography, Thompson only generally alludes to his role as chief auditor, calling himself, “A proven leader who has worked aggressively to strengthen the city’s finances, uncover waste and abuse, and safeguard the city’s finances.”

But Bloomberg’s team, at least, has noted Thompson’s record as an auditor. When Thompson convened a press conference in May to criticize the city’s decision to begin charging rent at homeless shelters, Bloomberg press secretary Stu Loeser maneuvered into the press pack to plant a question with NY1 reporter Josh Robin. The city began enforcing the shelter fees after a state audit found that the administration was not complying with state law requiring it to charge rent. So why should the city pay attention to Thompson’s audits, and not the state’s? The comptroller brushed off the question.

In a June Quinnipiac poll, 50 percent of respondents said they were satisfied with how Thompson is performing as comptroller, while 10 percent did not approve. But 40 percent did not answer or said they did not know. The comptroller operates in relative obscurity compared to the mayor. And while individual audits often receive press coverage, the comptroller’s role as auditor doesn’t get as much attention as his other duties, which also include registering contracts, selling city bonds and overseeing one of the largest pension funds in the world.

At a recent City Hall newspaper forum for the Democratic candidates seeking to replace Thompson, only David Weprin specifically mentioned audits. “If I had to expand on something that [Thompson] has done, I would do it in the audit area,” the Queens councilman said. He and John Liu, also a councilman from Queens, specifically mentioned the DOE as a potential target for more investigation.

Joining Liu and Weprin in the primary race are Council members Melinda Katz of Queens and David Yassky of Brooklyn. Salim Ejaz, an accountant, is a long-shot for the Democratic slot. Attorney Joseph Mendola is running as a Republican.

Thompson has issued fewer audits in recent years than he did early in his tenure. In fiscal year 2003, he first full year as comptroller, Thompson released 109 audits. From 2005 through 2008, he issued around 80 a year. Only 40 audits from fiscal 2009, which ended in June, have been released publicly. But Thompson’s office says some audits of law enforcement programs are not publicly released, and that other audits are being delayed by extensive comments from the target agencies.

Alan Hevesi, the comptroller during the Giuliani administration, averaged 135 audits a year and compiled at least 1,030 during his eight-year term.

Thompson’s office blames its reduced production on budget cuts. Staffing for the audit bureau hovered around 200 people from 1993 on but dropped to about 150 staffers in the 2006 fiscal year. Overall the comptroller has about 720 people working for him. “The audit process is extremely intensive,” says Graham. “Budgets cuts have resulted in our working harder, and coming up with innovative ways to streamline the process.”

The latest city budget has the audit bureau shrinking by another four positions, but several slots are already vacant because auditors have left for better salaries in the private sector, Thompson’s office says. The comptroller is trying to avoid making layoffs, but one way or another that budget reduction could mean fewer audits and more delays in those audits that are completed.

Along with the complexity of the financial issues involved, staffing shortages are one explanation that the comptroller’s office offers for the lag-time seen in an audit released this spring that uncovered flaws in the J-51 tax incentive program for landlords, which could cost the city $31 million in uncollected taxes over time. Finance Commissioner Martha Stark responded to the draft in mid-November, but the audit did not come out until six months later, in mid-May—just over two weeks after Stark resigned amid scandal.

– Jarrett Murphy

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