DOB IS COSTING YOU MILLIONS

CITY FAILS TO CRACK-DOWN ON BUILDING DEPARTMENT FINE SCOFFLAWS 

New York City Comptroller William C. Thompson, Jr. today criticized the City for failing to aggressively pursue millions of dollars in unpaid fines resulting from Environmental Control Board (ECB) violations issued by the Department of Buildings (DOB), allowing businesses and owners to continue to conduct business without fully correcting violations or paying owed fines. 

In a new audit, launched in response to requests from various elected officials and housing groups, Thompson uncovered a pattern of unpaid fines and uncorrected violations, but also dismal collection efforts by the Department of Finance (DOF). 

"The fines are not acting as an incentive to correct violations because the City is not holding individuals and businesses liable," Thompson said. "The City needs to institute new measures and stop issuing new permits to entities with unpaid fines and open violations. As a result of inadequate enforcement tools, the City is losing revenue and ignoring serious public safety issues." 

"The Mayor and news media have reported the occurrence of numerous construction accidents throughout the City during the past year, some of which were fatal to workers and members of the public," Thompson added. "The site of the March 15 crane collapse that killed seven people on the East Side alone had 21 open Environmental Control Board violations as of May 2008, 12 of which had unpaid defaulted penalties totaling $39,380." 

"If someone does not pay a fine and experiences no collection efforts, there is nothing to prevent the respondent from committing future violations without suffering any consequences. The deterrent value of levying fines is thus rendered non existent."

The audit - available at www.comptroller.nyc.gov - examined the adequacy of ECB's and DOF's collection processes for ECB-imposed fines resulting from violations issued by the Department of Buildings (DOB). Because of insufficient data available to auditors, the audit was unable to estimate the overall amount of fines not collected by the City because of lax efforts by DOF.

This is the second time Thompson's auditors took DOF to ask for failing to collect ECB fines. In 2002, Thompson found that DOF made minimal collection efforts on many cases, failed to contract with an outside agency to collect penalties imposed on older ECB cases, did not update computer data sufficiently, and did not mail required notices to respondents.

ECB is an administrative tribunal that adjudicates cases involving violations of the City's quality-of-life laws and acts as an independent decision-maker. The City has about 20 agencies - including DOB - that issue Notices of Violation (NOVs) for such infractions.

DOB issues an ECB NOV when a building does not comply with the building code or the City's Zoning Resolution. Violations penalties range from $80 to $10,000 for serious violations. ECB determines the amount of monetary penalties and issues orders to correct violations when it determines the validity and severity of a violation through the adjudication process.

After providing a forum for contesting the NOVs, ECB mails request-for-payment (dunning) notices to respondents. But if those attempts to obtain payment fail, cases are filed in the New York State Supreme Court, at which point they are deemed "docketed." ECB sends a list of all docketed cases to DOF for collection.

As of October, DOF reported its caseload included 75,037 ECB violations issued by DOB with ECB fines totaling approximately $202 million. In its collection efforts, DOF does not segregate cases resulting from DOB-issued violations from those of other agencies.

Thompson's audit examined 25 sample cases: two involved respondents who owed the City the highest amount of ECB-DOB violation fines (191 violations totaling $745,370 in fines), and 23 others that owed the City a combined total of $3,749,050 resulting from 1,230 violations. The sampled cases had 1,421 violations totaling about $4.6 million in ECB fines as of October 2007.

Twenty one of the 25 sampled respondents had 394 current open violations as of May 2008 and 24 had 1,221 unpaid violations totaling about $4 million. These fines remained unpaid for an average of 1,751 days - nearly five years - and as long as 3,378 days from the dates the judgments for these cases were docketed through May 1, 2008. Among the findings: 

*DOF has made minimal efforts to collect ECB-DOB violation fines from the sampled respondents, most of which were still conducting business without fully correcting the violations or paying fines that were due.

*DOF had no formal procedures to identify those respondents that merit additional collection efforts.

*The procedures that DOF has are not always followed by DOF personnel. For instance, initial attempts to contact respondents - such as sending notification letters - are not always performed partly because of inaccurate or incomplete information from ECB. Auditors determined that letters were not sent to about a quarter of the sampled respondents and calls weren't made to nearly all of them.

 "Sending a notification letter and making a telephone do not guarantee that a respondent will pay," Thompson said. "However, in most instances, the letter and phone call are the only collection attempts that DOF makes. By failing to perform these minimal steps, DOF is practically assured that it will collect no monies from these respondents."

 Auditors even determined that DOF did not use all of its internal collection steps for all respondents. Only six cases had evidence that at least half of the stated collection steps were taken. For 15 cases, two or fewer steps were employed. 

*ECB did not forward docketed cases to DOF in a timely manner. The audit found that nearly 20,000 ECB cases were not sent to DOF for more than 19 months, a delay that significantly reduced the time available to collect from the respondents.  

*DOF has not forwarded cases to an outside collection agency since July 2005. DOF procedures require that if assets are not found or are non-executable, cases should be sent to an outside collection agency.

*DOF cannot calculate its collection rate for ECB-DOF violation fines and cannot determine the effectiveness of its collection activities because it does not track the amounts of ECB-DOF violation fines it collects compared with total cases received for the same time period.

"It appears that DOF's current procedures are not working," Thompson said. "Identifying DOF's collection rate for ECB-DOB violation fines is important and would help DOF to determine whether its current collection procedures are effective or should be reevaluated." 

Thompson issued 17 recommendations, including that DOF and ECB should consider legislative changes to permit additional enforcement capabilities to assist the agencies in their collection efforts. He said DOF and ECB officials also should consider initiating a project with DOB whereby DOB would be able to deny new permits to respondents with open and outstanding violations. 

Additionally, Thompson said DOF should establish formal procedures and criteria to identify and select cases for additional collection attempts, ensure that it adheres to its internal collection procedures and documents its efforts, contact ECB to obtain prior payment information to identify bank accounts of respondents to send execution letters to seize assets, use the contract with the collection agency to assist in fine collections, and track ECB-DOB violation fine payments that result specifically from the collection efforts to determine the collection rate so it can monitor the effectiveness of DOF collection procedures. 

"City government should find a way to get individuals and businesses to obey the law," Thompson said. "One such way would be to collect fines in hopes this would be a deterrent to individuals and businesses who would otherwise commit violations. But, DOF is lax in its collection efforts and needs significant improvement over its recordkeeping and collection process as well as in supervisory oversight." 

Thompson said the City should aggressively pursue those who are failing to pay fines and correct violations, possibly replicating a special Department of Transportation (DOT) project whereby those who seek a DOT permit first must go to DOF to prove the do not owe any fines. If fines are owed, DOT will not issue permits to the individual or business. 

"Under a new plan being considered by the Mayor's Office, a City agency that grants permits and services to a business could be used to leverage payments to another," Thompson said. "DOF would have an important role in this new plan, which would deter individuals or businesses from violating laws in the future and encourage the payment of fines. DOF should use all methods available to assist in its collection efforts."

ECB officials agreed with the three recommendations made to ECB; DOF agreed with or said it has implemented 13 of its 16 recommendations but expressed disappointment with the audit.  Thompson, however, disagreed with DOF's characterization of the audit, and harshly criticized the agency for stonewalling efforts and not providing full documentation.

"We made good faith efforts to inform DOF of our concerns and of the weaknesses identified during the audit," Thompson said. "We had numerous meetings and correspondence with DOF, but it is clear that DOF was not forthcoming with information and documentation when we requested it."

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