THe City oF New York Orrice of THE Mayor New York, N.Y, 10007 EDWARD SKYLER Deputy Mavor For OpeRartows |ORANDUM. To: Mayor Michael R. Bloomberg From: Edward Skye Subject: Oversight of Discretionary Funding Date September 23, 2008 Ina memorandum to you dated May 13, 2008 (attached), I described the process through. which the Mayor's Office made discretionary funding available for members of the City Council and Borough Presidents and how contractors were designated to receive such funding when necessary. Over the past three months, we have reviewed designations made in prior fiscal years to confirm that that they followed the process that was used for FY 2008. This memorandum provides the results of that review Attached are breakdowns of discretionary designations for fiscal years 2003 through 2008. (As you know, the Mayor's Office did not make any such funding available for the fiscal year 2009 budget.) The schedules note the sponsoring Council Member or Borough President, the name of the designated vendor or a brief program description as applicable, the dollars allocated, and the City agency responsible for administering the funding. For each item where a sponsoring Council Member or Borough President is indicated, the process described in my earlier memo to you on this subject was followed. Also, there are additional funding requests included in these schedules which may be implemented through mechanisms that do not require competitive procurements regardless of who requests them. They are covered by the following five categories: (1) Allocations to City agencies without any designation of an outside vendor (for example, an allocation to the Department of Citywide Administrative Services for the Office of Energy Conservation); (2) Funding for other government agencies (for example, CUNY, NYCHA, and HHC) that are authorized pursuant to State and City law and may be implemented either through direct transfers of budgeted funds or as contracts between governments;(3) Designations of vendors who received contracts from EDC (for example, Big Apple Greeter) where EDC’s funding was provided by the City’s Department of Small Business Services (SBS) through the City’s properly registered agreement with EDC; (4) Designations of cultural institutions (for example, American Museum of Natural History, Staten Island Zoo, etc.), that receive grants from the City that are not subject to the City’s procurement rules; and (5) Sole source contracts permitted by the Parks Foundation)? ity’s procurement rules (for example, City As the attached schedules indicate, these categories are represented in certain allocations designated by Council Members and Borough Presidents. They are also included in allocations requested by the Mayor’s Office and appear in the “Miscellaneous” sections of the schedules, We have included these allocations, which were properly made at the Administration's request, as part of this review because they were included as part of the adopted budget. While the purposes and recipients are similar to some of the discretionary items also requested by elected officials, they are within the Administration’ s authority to allocate without a request from an elected official, for one of the five reasons listed above. We are continuing to work with the Department of Investigation to make sure that none of the funds listed in the attached schedules were misappropriated. The breakdown by fiscal year of the designations by Council Members and Borough Presidents is as follows: [Year [Designations | Amount FY 2003 84 $1,720,500, FY 2004 7 $1,594,999, FY 2005 125 $1,805,500, FY 2006 | ___205 $5,614,000) IFY 2007 120 $4,408,500 IFY 2008 73 $4,520,000 In May, I also reported that the Mayor's Office of Contract Services (MOCS) and City agencies that process discretionary-funding contracts would enhance their oversight of the " In FY 2008, Big Apple Greeter was allocated funding that was not designated by an elected official. This contract should have been processed as a contract with EDC, as occurred with allocations to Big Apple Greeter in FYs 2007 ‘and 2006, but was mistakenly processed by the Department of Small Business Services (SBS) as a grant. MOCS. and the Law Department are reviewing the contract-processing requirements with SBS to ensure that, going forward, items like this are handled appropriately. * As noted in the May 13 memo, the FY 2008 budget also included a $150,000 allocation to the City Parks Foundation (CPF) that was added at budget adoption and was entered into the City’s Financial Management System asa discretionary item but was not identified with an elected official. This appears to have occurred when the ‘administration proposed increasing the City’s allocation to CPF by $150,000 after learning that the City Couneil was allocating an additional $161,500 to the foundation. If the additional $150,000 allocation was an administration initiative, it should have been processed as a sole source contract, which is how the Parks Department usually provides funding to CPF, and which is how the FY 2007 allocation was processedprocess, including verifying that not-for-profit entities have satisfied New York State registration requirements, requiring organizations to disclose and reconcile conflicts of interest, and inereasing controls on fiscal conduit contracts. We have implemented each of these controls and taken additional steps to strengthen oversight of this process, specifically: Since May, all City agencies have verified the compliance status of all vendors receiving discretionary funds—as well as all other not-for-profit organizations that enter Specifically, agencies are verifying that vendors have met all registration and annual filing requirements applicable to charities in New York State. If an organization is not in compliance, MOCS works directly with the agency and the organization to address the issue before a contract is registered. All discretionary award recipients in fiscal years 2008 and 2009 are required to sign certifications disclosing any potential conflicts of interest; the disclosures are vetted by MOCS, so that any issues that arise may be referred to the Conflicts of Interest Board for resolution. Regarding fiscal conduit contracts, the budget adoption resolution for fiscal year 2009 disclosed all fiscal agent/conduit arrangements planned to be used to process discretionary fund awards, and agencies are continuing to follow instructions issued last year by MOCS, in consultation with the Law Department, to ensure that all of the ultimate fund awardees are recorded in the City’s subcontractor database. In addition to these measures, MOCS has re-trained all agency chief procurement officers on the responsibility determination process, and City agencies with a high volume of discretionary contracts (for example, DYCD and DFTA) have been hiring additional staff to handle the not-for-profit vetting workload. MOCS has also coordinated the new prequalification process for discretionary award recipients, which was instituted by the City Council Speaker beginning in Fiscal Year 2009. In order to receive more than $10,000 in discretionary funds in FY 2009, organizations are required to demonstrate that they are qualified based on an assessment by the contracting agency and successful completion of a detailed background vetting process. To date, some 1,600 groups have applied for prequalification, and more than 1,000 have completed the process. No FY 2009 discretionary contract can be processed for any group slated to receive more than $10,000 until the prequalification process is successfully completed We will continue to monitor the diseretionary-funding process carefully, and I will keep ‘you up-to-date on any additional measures we may take to further strengthen oversight of this area, c: Hon. Christine C. Quinn, Speaker of the City Council Hon. William C. Thompson, Jr., Comptroller Rose Gill Heam, Commissioner, Department of Investigation Michael A. Cardozo, Corporation Counsel Mark Page, Director, Office of Management and Budget Marla G. Simpson, Director, Mayor’s Office of Contract Services