City of Ithaca

Capital Assets and Consumable Inventories - Executive Summary

The City of Ithaca (City) is located in the Finger Lakes region in Tompkins County, and has a population of approximately 29,287 according to the 2000 Census. The City is governed by its Charter and other general laws of the State of New York. The Mayor and City Common Council (Council), which consists of 10 Council members, have overall responsibility for the City’s operations. In 2004, the City’s general fund operating expenditures were approximately $36 million, which were financed primarily with the collection of real property taxes, sales and use taxes, and water and sewer rents. As of June 2006, the City had approximately 400 active employees.

The City uses an automated fuel system to maintain perpetual fuel inventory records. In 2005, the City spent more than $271,000 for approximately 158,000 gallons of fuel, including unleaded and diesel fuel, for a total average cost of $1.72 per gallon. City officials reported approximately $87 million in total non-current government assets on December 31, 2004.

The City Chamberlain is responsible for billing and receiving fees from licensees for use of City land. The City’s engineering department calculates license fees based on various factors which include square footage of the land and agreements with licensees for their use of City land. The engineering department calculated approximately $14,000 in license fee bills for the 2006 fiscal year.

Scope and Objective

The objective of this audit was to determine if City officials properly accounted for capital assets, license fee billings, fuel inventories, and other selected consumable inventories. The audit addressed the following related questions for the period January 1, 2005 to May 26, 2006:

• Are internal controls over capital assets, fuel inventories and other selected consumable inventories appropriately designed and operating effectively?
• Are charges for use of the certain real property owned by the City appropriately billed and collected?

Audit Results

City officials had not established policies and procedures to ensure that fuel cards are deactivated in a timely manner when employees retired or left City employment. Further, the City’s automated fuel inventory system did not accurately record amounts delivered to and dispensed from the City’s fuel inventories, and the system did not accurately record leak tests. As a result, City officials cannot account for 2,827 gallons of fuel due to inaccurate usage records and 2,700 gallons of fuel due to inaccurate delivery readings. In addition, because the City’s automated fuel inventory records are inaccurate, this calls into question the accuracy of the fuel inventory records that the New York State Department of Environmental Conservation (DEC) requires the City to maintain.

City officials have not established adequate internal control policies or procedures relating to the safeguarding of the City’s capital assets and consumable inventories. City officials do not perform periodic inventories or update inventory records in a timely manner. One City facility had a lack of physical controls over access to City assets located in the facility. Also, City officials did not ensure that the City had adequate insurance coverage for its capital assets.

Comments of Local Officials

The results of our audit and recommendations have been discussed with City officials and their comments, which appear in Appendix A, have been considered in preparing this report. Except as specified in Appendix A, City officials generally agreed with our recommendations and indicated they planned to take corrective action. Appendix B includes our comments on the issues raised in the City’s response letter.