Selected reports issued by the New York State Comptroller during the week ending October 5, 2016: Completed audits of State Departments and Agencies; Municipalities and School Districts and BOCES
Source: Office of the State Comptroller
[Internet links highlighted in color]
New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued and the full text of each are posted on the Internet:
State Departments and Agencies
State Education Department (SED): Selected Aspects of the Migrant Education Program (Follow-Up) (2016-F-9)
An audit report issued in May 2015 determined that the Migrant Education Program did not meet certain program outcomes and overarching program goals. SED did not complete federally required documents in a timely manner; and a significant portion of the Migrant Education Tutorial Services faced challenges obtaining migrant student performance data. In a follow-up report, auditors found SED has made significant progress in correcting the problems identified in the initial report. Several of the strategies the program plans to implement are scheduled to begin with the 2016-2017 school year.
State Education Department: Kidz Therapy Services, PLLC, Compliance with the Reimbursable Cost Manual (2015-S-63)
For the three fiscal years ended June 30, 2014, auditors identified $249,850 in reported costs that did not comply with the state requirements for reimbursement and recommend such costs be disallowed. These ineligible costs included $240,553 in personal service costs and $9,297 in other than personal service costs.
An audit report issued in May 2015 determined that the Migrant Education Program did not meet certain program outcomes and overarching program goals. SED did not complete federally required documents in a timely manner; and a significant portion of the Migrant Education Tutorial Services faced challenges obtaining migrant student performance data. In a follow-up report, auditors found SED has made significant progress in correcting the problems identified in the initial report. Several of the strategies the program plans to implement are scheduled to begin with the 2016-2017 school year.
State Education Department: Kidz Therapy Services, PLLC, Compliance with the Reimbursable Cost Manual (2015-S-63)
For the three fiscal years ended June 30, 2014, auditors identified $249,850 in reported costs that did not comply with the state requirements for reimbursement and recommend such costs be disallowed. These ineligible costs included $240,553 in personal service costs and $9,297 in other than personal service costs.
Department of Health (DOH): Improper Fee-for-Service Payments for Pharmacy Services Covered by Managed Care (Follow-Up) (2016-F-5)
An audit issued in January 2015 determined that, for the 27-month period of Oct. 1, 2011 through Dec. 31, 2013, Medicaid inappropriately paid 29,289 fee-for-services pharmacy claims totaling $978,251 on behalf of 18,010 Medicaid recipients whose pharmacy benefits were covered by managed care. In a follow-up report, auditors determined DOH has made some progress in addressing the problems identified in the initial audit report. However, further actions are still needed.
An audit issued in January 2015 determined that, for the 27-month period of Oct. 1, 2011 through Dec. 31, 2013, Medicaid inappropriately paid 29,289 fee-for-services pharmacy claims totaling $978,251 on behalf of 18,010 Medicaid recipients whose pharmacy benefits were covered by managed care. In a follow-up report, auditors determined DOH has made some progress in addressing the problems identified in the initial audit report. However, further actions are still needed.
Department of Health: Improper Payments for Controlled Substances That Exceed Allowed Dispensing Limits (Follow-Up) (2016-F-6)
An audit report issued in February 2015, determined that, for the period Jan. 1, 2009 through Dec. 31, 2013, Medicaid overpaid pharmacies $1,183,601 for 13,705 fee-for-service claims in which quantities of controlled substances exceeded the supply limits allowed. Auditors further identified 3,323 managed care claims for controlled substances in which the quantities dispensed exceeded the limits set by law. In a follow-up report, auditors found DOH has made progress in addressing the problems identified in the initial audit report. This included implementing controls to prevent the payment of pharmacy claims for quantities of controlled substances that exceeded supply limits. These actions resulted in the denial of approximately $3.3 million in claims through July 2016.
An audit report issued in February 2015, determined that, for the period Jan. 1, 2009 through Dec. 31, 2013, Medicaid overpaid pharmacies $1,183,601 for 13,705 fee-for-service claims in which quantities of controlled substances exceeded the supply limits allowed. Auditors further identified 3,323 managed care claims for controlled substances in which the quantities dispensed exceeded the limits set by law. In a follow-up report, auditors found DOH has made progress in addressing the problems identified in the initial audit report. This included implementing controls to prevent the payment of pharmacy claims for quantities of controlled substances that exceeded supply limits. These actions resulted in the denial of approximately $3.3 million in claims through July 2016.
Department of Labor (DOL): Examination of Unemployment Insurance (UI) Benefits 2015 Year End Report (2016-BSE4-01)
Auditors identified 11,306 UI overpayments totaling more than $3.6 million. This includes $93,760 in current payment requests stopped, $280,276 in future payments that would have been made over the life of the claim and $3,311,848 in erroneous payments made. Based on the errors identified, DOL assessed $471,458 in monetary penalties to 344 claimants. Auditors also identified 588 underpayments totaling $105,744. DOL has recovered $253,968 in forfeited UI benefits from claimants who made false statements or representations to obtain benefits they were not eligible to receive and $488,138 from New York state employees who owed DOL for UI overpayments made in prior years.
Auditors identified 11,306 UI overpayments totaling more than $3.6 million. This includes $93,760 in current payment requests stopped, $280,276 in future payments that would have been made over the life of the claim and $3,311,848 in erroneous payments made. Based on the errors identified, DOL assessed $471,458 in monetary penalties to 344 claimants. Auditors also identified 588 underpayments totaling $105,744. DOL has recovered $253,968 in forfeited UI benefits from claimants who made false statements or representations to obtain benefits they were not eligible to receive and $488,138 from New York state employees who owed DOL for UI overpayments made in prior years.
Municipalities
Altona Volunteer Fire Company, Inc. – Financial Operations (Clinton County)
Company officials did not establish adequate controls or provide sufficient oversight of financial activities. Consequently, the company’s accounting records were not properly maintained, bank reconciliations were not prepared and crucial financial reports were inaccurate or not prepared and submitted to company officials or to the comptroller’s office.
City of Gloversville – Parking Violation Operations (Fulton County)
City officials have not established sufficient procedures for pursuing the collection of unpaid parking violations or set a benchmark for collection rates. The city collected $110,000 in revenues for 4,367 violations from January 2011 through April 2016, which represents 61 percent of total parking violations. The city could have collected an additional 1,757 parking violations totaling approximately $44,000 if it collected fines for 85 percent of the parking violation tickets issued. If the city collects the additional 24 percent of parking violations that are still outstanding, dating back to January 2011, the city could receive approximately $83,000 in additional revenue.
Company officials did not establish adequate controls or provide sufficient oversight of financial activities. Consequently, the company’s accounting records were not properly maintained, bank reconciliations were not prepared and crucial financial reports were inaccurate or not prepared and submitted to company officials or to the comptroller’s office.
City of Gloversville – Parking Violation Operations (Fulton County)
City officials have not established sufficient procedures for pursuing the collection of unpaid parking violations or set a benchmark for collection rates. The city collected $110,000 in revenues for 4,367 violations from January 2011 through April 2016, which represents 61 percent of total parking violations. The city could have collected an additional 1,757 parking violations totaling approximately $44,000 if it collected fines for 85 percent of the parking violation tickets issued. If the city collects the additional 24 percent of parking violations that are still outstanding, dating back to January 2011, the city could receive approximately $83,000 in additional revenue.
City of Jamestown – Financial Condition (Chautauqua County)
The city incurred operating deficits in fiscal years 2012 through 2015 totaling $2.8 million. As a result, general fund balance decreased by approximately 58 percent, from $4.8 million to $2 million. The city’s financial condition will continue to decline during 2016 because the adopted budget is again not structurally balanced. The city will likely incur an operating deficit of at least $400,000 unless significant and immediate spending changes are implemented.
The city incurred operating deficits in fiscal years 2012 through 2015 totaling $2.8 million. As a result, general fund balance decreased by approximately 58 percent, from $4.8 million to $2 million. The city’s financial condition will continue to decline during 2016 because the adopted budget is again not structurally balanced. The city will likely incur an operating deficit of at least $400,000 unless significant and immediate spending changes are implemented.
Town of Warwarsing – Napanoch Water District Rents and Assessments (Ulster County)
The board needs to improve its internal controls over water rents to ensure that they are accurately billed and collected and assessments are properly levied. Auditors found that internal controls over water rents and assessments were inadequate and oversight is lacking. Because town officials were uncertain of district boundaries, assessments were not levied on all properties in the district. As a result, assessments charged to district property owners were higher than necessary.
The board needs to improve its internal controls over water rents to ensure that they are accurately billed and collected and assessments are properly levied. Auditors found that internal controls over water rents and assessments were inadequate and oversight is lacking. Because town officials were uncertain of district boundaries, assessments were not levied on all properties in the district. As a result, assessments charged to district property owners were higher than necessary.
School Districts and BOCES
Frankfort-Schuyler Central School District – Financial Management (Herkimer County)
District officials did not adopt budgets based on historical or known trends but instead overestimated expenditures by almost $2.7 million from 2011-12 through 2014-15. The district appropriated $2.4 million in fund balance as a financing source in the annual budgets for 2012-13 through 2015-16. However, the district’s budgeting practices resulted in operating surpluses in three of these years and will also likely end 2015-16 with an operating surplus. As a result, none of the appropriated fund balance will be needed to finance operations. The district also retained an average of approximately $342,000 of unrestricted funds in the debt service fund, $1.1 million in the agency fund’s group health insurance account and $429,000 in excessive reserves over these years. When adding back unused appropriated fund balance, excess money retained in the debt service, agency funds and reserves, the district’s recalculated unrestricted fund balance exceeded the statutory limit, averaging more than 18 percent of the ensuing year’s appropriations, or more than four times the statutory limit.
District officials did not adopt budgets based on historical or known trends but instead overestimated expenditures by almost $2.7 million from 2011-12 through 2014-15. The district appropriated $2.4 million in fund balance as a financing source in the annual budgets for 2012-13 through 2015-16. However, the district’s budgeting practices resulted in operating surpluses in three of these years and will also likely end 2015-16 with an operating surplus. As a result, none of the appropriated fund balance will be needed to finance operations. The district also retained an average of approximately $342,000 of unrestricted funds in the debt service fund, $1.1 million in the agency fund’s group health insurance account and $429,000 in excessive reserves over these years. When adding back unused appropriated fund balance, excess money retained in the debt service, agency funds and reserves, the district’s recalculated unrestricted fund balance exceeded the statutory limit, averaging more than 18 percent of the ensuing year’s appropriations, or more than four times the statutory limit.
Hammondsport Central School District – Nonresident Tuition (Steuben County)
District officials should improve their billing process for nonresident students by determining actual attendance dates. Auditors reviewed 10 tuition invoices for seven nonresident students placed at the district totaling $219,941 from the 2012-13 through 2014-15 years. While district officials effectively identified nonresident students who were placed at the district, the treasurer ,a href="used incorrect attendance dates when calculating bills for three students. As a result, two home districts were underbilled by $5,078 and one home district was overbilled by $638.
District officials should improve their billing process for nonresident students by determining actual attendance dates. Auditors reviewed 10 tuition invoices for seven nonresident students placed at the district totaling $219,941 from the 2012-13 through 2014-15 years. While district officials effectively identified nonresident students who were placed at the district, the treasurer ,a href="used incorrect attendance dates when calculating bills for three students. As a result, two home districts were underbilled by $5,078 and one home district was overbilled by $638.
Putnam Northern Westchester Board of Cooperative Educational Services (BOCES) – Information Technology and Claims Auditing (2016M-205)
BOCES officials need to improve controls to adequately secure and protect IT systems. The rooms housing the servers and IT infrastructure did not have safeguards to track access and protect IT assets, and BOCES officials have not developed a disaster recovery plan to guide action in the event of a disaster. Additionally, the board appointed a claims auditor but needs to improve its oversight of the claims auditing function. There was no evidence that 33 claims totaling $100,873 were checked to ensure they did not exceed their related purchase orders or that 13 claims totaling $42,526 agreed with approval contracts or agreements.
BOCES officials need to improve controls to adequately secure and protect IT systems. The rooms housing the servers and IT infrastructure did not have safeguards to track access and protect IT assets, and BOCES officials have not developed a disaster recovery plan to guide action in the event of a disaster. Additionally, the board appointed a claims auditor but needs to improve its oversight of the claims auditing function. There was no evidence that 33 claims totaling $100,873 were checked to ensure they did not exceed their related purchase orders or that 13 claims totaling $42,526 agreed with approval contracts or agreements.
Raquette Lake Union Free School District – Monitoring Financial Condition (Hamilton County)
The board did not ensure that adequate accounting records and reports were maintained and did not effectively monitor the district’s financial operations. The clerk did not maintain accurate and complete accounting records and the treasurer did not provide the board with adequate periodic reports. Furthermore, auditors recalculated the district’s assets, liabilities and fund balance and found unrestricted fund balance deficits for the 2013-14 and 2014-15 fiscal years and budgetary deficits for the 2013-14, 2014-15 and 2015-16 fiscal years. Additionally, the district incurred a cash flow shortage that precluded employees from cashing their paychecks from July 2013 to September 2013.
The board did not ensure that adequate accounting records and reports were maintained and did not effectively monitor the district’s financial operations. The clerk did not maintain accurate and complete accounting records and the treasurer did not provide the board with adequate periodic reports. Furthermore, auditors recalculated the district’s assets, liabilities and fund balance and found unrestricted fund balance deficits for the 2013-14 and 2014-15 fiscal years and budgetary deficits for the 2013-14, 2014-15 and 2015-16 fiscal years. Additionally, the district incurred a cash flow shortage that precluded employees from cashing their paychecks from July 2013 to September 2013.
Western Suffolk Board of Cooperative Educational Services – Budget Transfers and Confirming Purchase Orders (2016M-218)
The board did not always enforce its policies and procedures. Auditors reviewed 30 budget transfers totaling $9.2 million and found that 24 totaling $7.8 million were not presented to the board for approval. The board approved the remaining six budget transfers totaling $1.4 million between 18 and 70 days after the transfer was processed. The board’s ability to monitor the budget and ensure that account codes are not overspent is compromised when it does not approve budget transfers.
The board did not always enforce its policies and procedures. Auditors reviewed 30 budget transfers totaling $9.2 million and found that 24 totaling $7.8 million were not presented to the board for approval. The board approved the remaining six budget transfers totaling $1.4 million between 18 and 70 days after the transfer was processed. The board’s ability to monitor the budget and ensure that account codes are not overspent is compromised when it does not approve budget transfers.