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FOR IMMEDIATE RELEASE:
July 6, 2009
Contact: Laura Rivera, (212) 669-2701,
lrivera@comptroller.nyc.gov
 
THOMPSON: DEPARTMENT OF HEALTH MUST PATCH UP HOLES IN DISTRIBUTION OF ANTI-SMOKING AIDS
 
New York City Comptroller William C. Thompson, Jr. today issued an audit finding the City Department of Health and Mental Hygiene’s tobacco control program has such
poor oversight over the distribution of its smoking cessation aids that hundreds of items went missing.
 
“While the Department of Health has prioritized reducing tobacco-related illnesses in
New York City, it has failed to properly monitor the smoking cessation aids it distributes to meet that goal,” Thompson said. “Inaccurate inventory control can allow for theft or misappropriation
of goods to go unnoticed, and can deter the Department from its goal.”
 
The mission of the Department of Health and Mental Hygiene (DOHMH) is to protect and promote the health and mental well-being of
New York residents. In addition to its programs to prevent and control chronic diseases such as heart diseases, diabetes, asthma and cancer, the DOHMH also has made reducing tobacco-related illnesses
a priority.
 
In 2002, the DOHMH launched a five point comprehensive tobacco control program, including taxation, legislation, cessation, education and evaluation. As part of its
plan to reduce tobacco use in New York City, DOHMH’s Bureau of Tobacco Control (BTC) distributes nicotine replacement therapy (NRT) aids such as gum, lozenges, and patches to help New Yorkers
who are trying to quit smoking. NRT aids deliver nicotine of varying strength and help to relieve some of the withdrawal symptoms people experience when they quit smoking.

 
BTC uses the services of a third-party vendor, Vanguard Direct, to receive, store, and distribute NRT aids. NRT aids are distributed to the public through annual large-scale
distribution campaigns held in conjunction with 311, as well as through small, targeted NRT distribution campaigns. Seventy-five City agencies and non-City partners assist BTC in NRT aids distribution. The partners are responsible for screening and determining
user eligibility for NRT and for recording data on NRT distribution. Vanguard ships NRT aids to the partners in kits or as loose items in cartons.
 
In Fiscal Year 2008, BTC made purchases and received donations of NRT aids totaling $1,063,047 and distributed $4,122,590 in NRT aids to its partners and through 311.
Vanguard was paid $428,285 in Fiscal Year 2008 for the services it provided to BTC specifically related to the NRT program.

 
Thompson’s audit, which can be viewed at

www.comptroller.nyc.gov, examined whether the BTC has adequate inventory controls over nicotine replacement therapy aids. The audit covered Fiscal Year (FY) 2008.

 
Auditors found that BTC does not have adequate inventory controls over NRT aids. BTC relies solely on the third-party vendor, Vanguard, for the monitoring and supervising
of NRT inventory. BTC does not reconcile NRT inventory balances itself, but instead relies on Vanguard to ensure that inventory records are accurate. Further, according to its contract, Vanguard is responsible for submitting detailed monthly summary reports
for all fulfillment orders. However, Vanguard is not sending the inventory spreadsheets frequently enough for BTC to be able to perform meaningful reconciliations, even if it chose to perform them.

 
“Since the Bureau of Tobacco Control is not reconciling its information with Vanguard’s records, it cannot identify instances of errors or irregularities,” Thompson
said. “Further, the Bureau’s failure to ensure that the nicotine replacement therapy aids are adequately safeguarded increases the risk that misappropriation of inventory goes undetected.”
 
Auditors also found that BTC does not monitor the physical inventory counts of NRT aids conducted by Vanguard and has never performed its own inventory count. Moreover,
DOHMH had not conducted any independent audits of Vanguard’s inventory operations. DOHMH officials indicated that they did not believe it was necessary to attend the inventory count because there had never been any large NRT inventory data discrepancies between
its records and Vanguard’s.
 
BTC also was unable to provide any evidence that it was aware of inventory variances identified by Vanguard’s count, that it knew whether the variances were adequately
investigated and the outcomes, or that it approved the inventory adjustments that may have been made by Vanguard due to the identified variances. A review of Vanguard’s March 2008 physical inventory count showed 456 fewer nicotine patches and lozenges than
its computer count indicated. The missing items totaled $9,720.
 
BTC officials also were unaware of how Vanguard accounted for returned NRT aids. Auditors found that when delivery of NRT aid kits are unsuccessful, Vanguard sends the
returned kits to new individuals and counts them as additional kits, effectively double counting the number of kits delivered. As a result of the auditor’s findings, BTC provided revised figures for the total unit price of kits shipped, after removing kits
that were double counted, which totaled $2,007,988 for a difference of $65,555.
 
Auditors also found that BTC lacked written policies and procedures that address how orders for the NRT program should be communicated to Vanguard, what types of documents
should be maintained, where the documents should be maintained and for how long, the supervisory reviews or approvals required for NRT purchases and requests for delivery, and the performance and frequency of inventory reconciliations.

 
Thompson made 11 recommendations including that DOHMH’s Bureau of Tobacco Control should:
 

• Perform regular reconciliations of NRT inventory balances it receives from Vanguard with its own records to ensure that the inventory
  is being correctly accounted for.

• Assign individuals to attend and observe Vanguard’s physical inventory count of NRT aids or periodically conduct its own unannounced physical
  inventory counts.

• Request that DOHMH conduct independent audits of Vanguard’s operational controls and of its inventory operations.

• Ensure that Vanguard provides them with the inventory variances that are identified by physical inventory counts.

• Ensure that inventory variances are adequately investigated and that the outcomes of the investigations are adequately documented.

 
In its response, DOHMH generally agreed with the audit’s findings and recommendations, and has already implemented some of Thompson’s recommendations.

###
 

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