Comptroller Stringer Audit Finds Widespread Misuse of Funds at 47th Street BID

Comptroller Stringer Audit Finds Widespread Misuse of Funds at 47th Street BID

Audit revealed the 47th Street Business Improvement District (BID) improperly spent hundreds of thousands of dollars on security services outside the district and did not adequately monitor expenses

BID’s former Executive Director collected a salary $25-38K higher than heads of similarly sized BIDs and used BID funds totaling $87k for unauthorized payments and personal expenses

Comptroller Stringer recommends the 47th Street BID maintain and monitor detailed documentation on salaries, contracts, invoices, and purchases

 New York City Comptroller Scott M. Stringer released a new audit of the 47th Street Business Improvement District (BID), also known as the “Diamond District,” which found that the not-for-profit organization engaged in gross financial mismanagement by improperly spending BID funds and potentially misreporting its financial activities. Since 1997, the City, under the purview of the New York City Department of Small Business Services (SBS), has contracted with the 47th Street BID to deliver services for the area of 47th Street between Fifth and Sixth avenues (the District) including security, marketing, maintenance, and administration funded by property assessments levied on property owners within the BID, which the City collects and disburses to the BID.

Comptroller Stringer’s audit found that the BID Board and management improperly used BID funds, contrary to its contractual obligations with SBS, including, most notably by spending $210,835 on security services in Fiscal Year 2017 (FY17) for a building located outside of the District, and paying between $25,242 and $38,664 more for the salary of its former Executive Director than other similarly sized BIDs in New York City. The audit also revealed that the BID’s former Executive Director processed unauthorized raises, commissions, and benefits payments for himself and the former Executive Assistant, totaling $68,318, and paid for nearly $19,000 in personal expenses in FY17 with BID funds.

“New York City’s Business Improvement Districts are charged with bolstering our commercial corridors, beautifying our streets and connecting residents and visitors with the small local businesses that fuel our economy,” said New York City Comptroller Scott M. Stringer. “Instead, this audit of the 47th Street BID revealed blatant misuse of funds, and potentially a violation of the public trust. I urge the 47th Street BID to heed the recommendations in the report and implement best practices for greater oversight, accountability, and transparency New Yorkers deserve.”

Comptroller Stringer’s audit of the 47th Street BID found that the BID grossly misspent BID funds in the following ways during Fiscal Year 2017 (FY17):

• The BID’s former Executive Director processed unauthorized raises, commissions, and benefits payments for himself and the former Executive Assistant, totaling $68,318, and paid for personal expenses totaling $18,686 with BID funds, including for taxis ($10,127), cell phone service ($6,390), and meals ($2,169) onto the BID’s debit card.

• The former Executive Director also made inadequately supported payments totaling $70,500 to an outside consultant—his son—who was also married to the former Executive Assistant.

• The BID improperly spent $210,835 on security services that did not principally benefit properties located within the BID.

• The BID failed to document that it had conducted a competitive procurement process for purchases of goods and services that totaled $263,970; nor did it justify and obtain approval from the BID Board for procuring those goods and services on a non-competitive basis, as its own procedures require.

• The BID did not execute written contracts or obtain invoices adequately detailing the scope of services provided to the businesses in the District for expenditures totaling at least $133,237.

Comptroller Stringer’s audit further found deficiencies in governance and contract performance at the 47th Street BID, such as the following:

• The BID had no written conflict of interest policy and failed to comply with its own by-laws regarding Board composition and meeting minutes.

• The BID did not post required information on its website about its Board, management, finances, programs, and services, and the businesses served in the District.

• The BID Board improperly included members who do not own or lease and occupy space in the District.

Comptroller Stringer’s audit included a series of recommendations to the 47th Street BID to ensure the not-for-profit organization maintained adequate financial records and engaged in ethical practices. The recommendations included:

• The BID should stop providing security services that do not principally benefit properties within the 47th Street BID as required by its contract with SBS.

• The BID should seek reimbursement for the cost of security services it improperly incurred, including but not limited to the $210,835 it spent in FY17 to provide security services through the New York City Police Department (NYPD) paid detail program to a building located outside the BID.

• The BID should monitor and review salaries, bonuses, and other financial transactions to ensure they are approved before being paid out.

• The BID should maintain copies of vendor contracts and invoices documenting services, payment terms, and authorization.

To read Comptroller Stringer’s audit of the 47th Street BID, click here.