New York State municipal and school district audits posted

On August 16, 2024, New York State Comptroller Thomas P. DiNapoli announced the following local government and school audits were issued.

Click on the text highlighted in BLUE to access the complete audit report.

 

Dutchess County – Contract Monitoring (2023M-142)
County officials did not obtain reasonable assurance that certain services with vendors were provided in accordance with contract terms, and payments were appropriate and supported. As a result, various department officials responsible for overseeing the contracts approved claims totaling approximately $4.5 million without ensuring that required contract progress, outcome and budget reports were provided. The comptroller approved claims totaling approximately $10.5 million without supporting documentation from county departments. Expenditures for one contract exceeded the agreed upon contract amount by $215,395.

Long Beach City School District – Financial Management (Nassau County)
The board and district officials did not effectively manage the district’s fund balance and did not present the district’s spending plans in a transparent and meaningful manner. While real property tax levies remained the same since 2020-21, the district’s budgeting practices resulted in tax levies being higher than necessary. The board and officials reported surplus fund balance that exceeded the statutory 4% limit in three of the four years reviewed by as much as 5 percentage points. The district transferred a total of $17.3 million of the general fund’s excess fund balance at the end of two of the four fiscal years reviewed to the capital projects fund. Prior to the fiscal year-end transfers that totaled about $13.4 million, the surplus fund balance exceeded the statutory limit by as much as 9 percentage points and overestimated appropriations by an average of approximately $2.5 million annually and underestimated revenues by an average of $1.6 million annually for a three-year period.

Delaware Academy Central School District @ Delhi – Financial Management (Delaware County)
The board and district officials failed to properly manage fund balance and reserves. The board and officials’ appropriated fund balance that was not needed and maintained unreasonable reserve balances that circumvented the statutory limit on surplus fund balance and resulted in a real property tax levy that was higher than needed to fund operations. From the 2020-21 through 2022-23 fiscal years, the board and district officials overestimated budgetary appropriations by a total of $5 million (8.6%) and developed budgets that appropriated fund balance to address planned budget gaps totaling approximately $2.5 million. However, the district had operating surpluses totaling approximately $3.2 million and the planned budget gaps were not realized and it reported a surplus fund balance that exceeded the statutory limit by $2.2 million, or 10.4 percentage points, as of June 30, 2023.

Falconer Central School District – Financial Management (Chautauqua County)
Although 2009 and 2016 audits identified that the board and district officials did not properly manage fund balance and reserves, a new audit found officials did not implement corrective action. The board and district officials allowed surplus fund balance to exceed the statutory limit as of June 30, 2023 by 20 percentage points, or $6.1 million and consistently overestimated budgetary appropriations by an annual average of $3.7 million (17%). Officials could not demonstrate that three reserves with balances totaling more than $4 million were properly maintained or reasonably funded.

Southern Westchester Board of Cooperative Educational Service (Westchester County)
BOCES officials did not adequately secure nonstudent network user accounts, maintain complete and accurate information technology (IT) inventory records and develop an IT contingency plan. As a result, BOCES officials cannot ensure that IT systems, which contain personal, private and sensitive information (PPSI), along with physical IT assets, are properly safeguarded from inappropriate use and access. In addition, auditors determined that 101 enabled nonstudent network accounts were no longer needed and, if accessed by attackers, could be used to inappropriately access and view personal, private and sensitive information or disable the network. 16 IT assets could not be traced to or from BOCES’ inventory system and 40 IT assets were not properly recorded in the system.

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New York City employee fined $10,000 after being found guilty of working at a second job during his "City Work Hours" and receiving compensation from the City that he did not earn

The Conflicts of Interest Board adopted New York City Office of Administrative Trials and Hearings Administrative Law Judge Julia H. Lee’s recommendation to impose a $10,000 fine for a New York City Housing Administration [NYCHA] building maintenance supervisor [Employee] who worked a second job during city work hours.

Employee worked at NYCHA’s Long Island City office in Queens from 8 a.m. to 4 p.m. or alternatively 8:30 a.m. to 4:30 a.m., but had a second job at Mount Sinai Hospital in Manhattan from 4 p.m. to 12 a.m.

Employee claimed he maintained the two jobs with overlapping work hours by taking his lunch hour at his city job at the end of the workday and using this time to commute to his second job. However, a comparison of his NYCHA city timesheet and Mount Sinai access card swipe history showed overlapping periods of time during which Employee was working at Mount Sinai during his NYCHA’s work hours.

Judge Lee rejected Employee’s argument that he had a flexible schedule at his city job, which permitted him to start and end his NYCHA work early and take his lunch hour at the end of the day. The Administrative Law Judge found that Employee used his managerial flextime erroneously and liberally without supervisory approval on a regular basis. The ALJ determined Employee spent 109 hours working at Mount Sinai during his NYCHA city work hours, thus receiving $6,014.93 from NYCHA that he did not earn. 

Click HERE to access Judge Julia H. Lee’s decision and recommendation posted on the Internet

Grieving an out-of-title work assignment

An out-of-title work grievance proceeded through review as provided by the relevant collective bargaining agreement [CBA] and eventually was considered by an arbitrator

The arbitrator determined that, because the title in question, a County position allocated to Grade 18 had been abolished, the CBA barred arbitrating whether the County violated the CBA by assigning Petitioner the duties of the Grade 18 title without paying her for those duties.

The Petitioner appealed the arbitrator's decision.

The Appellate Division held that the arbitrator's findings with respect to changes in Petitioner's job responsibilities are not entitled to estoppel effect in connection with a  Civil Service Law §61(2) challenge, citing  Tydings v Greenfield, Stein & Senior, LLP, 11 NY3d 195 and Malloy v Trombley, 50 NY2d 46, and concluded that Supreme Court erred in granting the County's motion to dismiss.

Remitting the matter to Supreme Court for further action, the Appellate Division's decision is set out below.

 

Matter of Theopheles v County of Rensselaer

2024 NY Slip Op 03915

Decided on July 25, 2024

Appellate Division, Third Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided and Entered:July 25, 2024

CV-23-1086

In the Matter of Lisa Theopheles, Appellant,

v

County of Rensselaer et al., Respondents.

Calendar Date:May 30, 2024
Before:Clark, J.P., Aarons, Reynolds Fitzgerald, McShan and Powers, JJ.

Gleason, Dunn, Walsh & O'Shea, Albany (Mark T. Walsh of counsel), for appellant.

BolaÑos Lowe PLLC, Pittsford (Kyle W. Sturgess of counsel), for respondents.

Aarons, J.

Appeal from a judgment of the Supreme Court (Richard J. McNally Jr., J.), entered May 23, 2023 in Rensselaer County, which, in a proceeding pursuant to CPLR article 78, granted respondents' motion to dismiss the petition.

Petitioner is a supervising support investigator (hereinafter the grade 15 title) in the child support unit of respondent Rensselaer County Department of Social Services (hereinafter DSS). In September 2019, petitioner filed a grievance pursuant to the collective bargaining agreement (hereinafter CBA) between respondent County of Rensselaer and the United Public Service Employees Union, alleging that, after the abrupt resignation of Matthew Breig, a supervisor of investigations and support (hereinafter the grade 20 title) and petitioner's supervisor, she began supervising the entire child support unit in the capacity of support collection supervisor (hereinafter the grade 18 title), the title held by the head of the child support unit before Breig was hired. The grievance proceeded through review as dictated by the CBA and eventually landed before an arbitrator in 2021. The arbitrator determined that, because the grade 18 title had been eliminated, the CBA barred her from deciding whether the County violated the CBA by assigning petitioner the duties of the grade 18 title without paying her for those duties. Instead, the arbitrator evaluated whether petitioner had fulfilled the duties of Breig's vacant grade 20 title, which oversaw the child support unit and the fraud unit. There was, of course, no evidence that petitioner had been assigned to oversee the fraud unit before or after Breig's resignation. Because the arbitrator concluded that the CBA only required the County to increase an employee's pay when the employee was temporarily assigned the "full duties" of an existing higher-grade position, the arbitrator found in favor of the County.

Petitioner commenced this CPLR article 78 proceeding asserting that respondents violated Civil Service Law § 61 (2), which "provides that in cases other than a temporary emergency, 'no person shall be assigned to perform the duties of any position unless he [or she] has been duly appointed, promoted, transferred or reinstated to such position in accordance with the provisions of this chapter and the rules prescribed thereunder' " (Matter of Collins v Governor's Off. of Empl. Relations, 211 AD2d 1001, 1002 [3d Dept 1995], quoting Civil Service Law § 61 [2]). Petitioner alleged that she was required to perform the out-of-title duty of supervising the entire child support unit without a concomitant increase in pay (see Matter of New York State Corr. Officers & Police Benevolent Assn., Inc. v Governor's Off. of Empl. Relations, 126 AD3d 1267, 1268 [3d Dept 2015], affd 27 NY3d 936 [2016]; Matter of City of Saratoga Springs v City of Saratoga Springs Civ. Serv. Commn., 90 AD3d 1398, 1400 [3d Dept 2011]). Respondents moved, pre-answer, to dismiss the petition, arguing, as relevant here, that petitioner's [*2]claim was precluded by the arbitration award. Supreme Court agreed, finding that res judicata attached because the parties are the same, both matters involve the same facts, the arbitrator found that "there was no evidence that [petitioner's] job changed in any way after . . . Breig's resignation," petitioner requested the same relief and the "Civil Service Law violation claim could have been raised in the underlying arbitration." Petitioner appeals. We reverse.

"The doctrines of res judicata and collateral estoppel apply to arbitration awards. Res judicata bars not only those claims that were actually litigated previously, but also those which might have been raised in the former action or arbitration" (Piller v Princeton Realty Assoc. LLC, 173 AD3d 1298, 1303 [3d Dept 2019] [internal quotation marks, brackets and citations omitted]; see Matter of Anonymous v New York State Justice Ctr. for the Protection of People with Special Needs, 195 AD3d 1137, 1138-1139 [3d Dept 2021]). "However, where an issue not determined by an arbitrator is the subject of a subsequent action, the arbitration award is not a bar to that action or the claims raised therein" (Hagopian v Karabatsos, 157 AD3d 1020, 1022 [3d Dept 2018] [citations omitted]).

Most of the requirements of res judicata are met and not meaningfully disputed. Respondents assert, and we agree, that the parties here are the same or in privity with one another, and petitioner's claim that she was assigned out-of-title work arises out of the same transactions or series of transactions as the CBA violation decided by the arbitrator (see Simmons v Trans Express Inc., 37 NY3d 107, 111 [2021]; Jeda Capital-56, LLC v Potsdam Assoc., LLC, 225 AD3d 988, 989-990 [3d Dept 2024]). There is also no question that the alleged Civil Service Law violation claimed in the petition was not raised in arbitration (see Jeda Capital-56, LLC v Potsdam Assoc., LLC, 225 AD3d at 989-990).

Res judicata did not attach, however, because petitioner's statutory claim was not subject to arbitration under the CBA (see Cheslowitz v Board of Trustees of the Knox Sch., 156 AD3d 753, 756 [2d Dept 2017]). The CBA denies the arbitrator the "power to add to, subtract from or modify the provisions of the [CBA] in arriving at a decision of the issue presented and [requires the arbitrator to] confine [the] decision solely to the application and interpretation of the [CBA]." Here, the arbitrator found she could only decide if the County violated the CBA by forcing petitioner to do all of the grade 20 duties without a pay adjustment as contractually required. As there is a bright-line rule limiting the arbitrator to contractual disputes, petitioner's Civil Service Law § 61 (2) claim is not one that might have been arbitrated (see Matter of Melber v New York State Educ. Dept., 71 AD3d 1216, 1217 [3d Dept 2010]).

Furthermore, collateral estoppel does not bar petitioner from litigating under Civil Service Law § 61 (2) the issue of whether she was[*3]"assigned to perform the duties of a higher grade, without a concomitant increase in pay, frequently, recurrently and for long periods of time" based on her alleged performance of out-of-title supervision of the whole child support unit rather than its investigative functions (Matter of City of Saratoga Springs v City of Saratoga Springs Civ. Serv. Commn., 90 AD3d at 1400 [internal quotation marks and citations omitted]). "The party seeking the benefit of collateral estoppel has the burden of demonstrating the identity of the issues in the present litigation and the prior determination, whereas the party attempting to defeat its application has the burden of establishing the absence of a full and fair opportunity to litigate the issue in the prior action" (Abele v City of Albany, N.Y., 214 AD3d 1107, 1109 [3d Dept 2023] [internal quotation marks and citations omitted]). "More fundamentally, preclusive effect is limited to only those 'issues that were actually litigated, squarely addressed and specifically decided' " (Church v New York State Thruway Auth., 16 AD3d 808, 810 [3d Dept 2005], quoting Ross v Medical Liab. Mut. Ins. Co., 75 NY2d 825, 826 [1990]).

The record does not show that there is an identity of issues or that there was a full and fair opportunity to litigate the matter petitioner actually sought to resolve — in essence, that she was impermissibly assigned to supervise the entirety of the child support unit as if promoted to the former grade 18 title without a pay increase (see Matter of Terry v County of Schoharie, 162 AD3d 1344, 1346 [3d Dept 2018]; compare Holloway v City of Albany, 169 AD3d 1133, 1134 [3d Dept 2019], lv denied 34 NY3d 901 [2019]). Instead, the arbitrator constrained the issue before her to whether petitioner fulfilled all of the duties of the grade 20 position — an issue that petitioner never injected into her grievances in the first place. Notwithstanding the parties' undisputed representation by counsel at an evidentiary hearing, the record does not show careful deliberation in support of the arbitrator's conclusion that petitioner's job responsibilities did not change "in any way." For example, there is no specific finding as to whether petitioner took on allegedly out-of-title responsibilities for supervising child support unit clerical staff, as opposed to the investigative staff on which she held a senior position. Indeed, there was no reason to consider the extent of petitioner's alleged supervisory role in the child support unit given that there was no evidence that petitioner ever supervised the fraud unit, and the issue before the arbitrator could be resolved on that basis alone. We therefore conclude that the arbitrator's findings with respect to changes in petitioner's job responsibilities are not entitled to estoppel effect in connection with this Civil Service Law § 61 (2) challenge (see Tydings v Greenfield, Stein & Senior, LLP, 11 NY3d 195, 200 [2008]; Malloy v Trombley, 50 NY2d 46, 52 [1980]). Accordingly[*4], Supreme Court erred in granting respondents' motion to dismiss and we remit the matter for respondents to file an answer pursuant to CPLR 7804 (f).

Petitioner's remaining points are academic.

Clark, J.P., Reynolds Fitzgerald, McShan and Powers, JJ., concur.

ORDERED that the judgment is reversed, on the law, with costs, motion denied, and matter remitted to the Supreme Court to permit respondents to file and serve an answer within 20 days of the date of this Court's decision.

Former housing authority executive director sentenced in embezzlement scheme

On August 7, 2024, New York State Comptroller Thomas P. DiNapoli, Jefferson County District Attorney Kristyna S. Mills, the U.S. Department of Housing and Urban Development, Office of the Inspector General (HUD OIG) and the New York State Police announced that on August 6, 2024, former West Carthage Housing Authority Executive Director Jan Hoffman was sentenced for a scheme that allowed her to steal over $48,000 in WCHA funds. 

Hoffman was sentenced to serve five years’ probation. The sentencing of Hoffman's mother, Katherine (Katie) Pais, who pleaded guilty to aiding in and concealing the scheme, was adjourned to June 2, 2025.

Following their June 3, 2024 guilty pleas and prior to sentencing, the pair paid back $48,930 in restitution to the West Carthage Housing Authority.

“Hoffman and Pais betrayed the public trust in their scheme to steal over $48,000 in funds meant to support seniors and people with disabilities residing in the West Carthage Housing Authority,” DiNapoli said. “I thank Jefferson County District Attorney Kristyna S. Mills, the HUD Inspector General, and the State Police for partnering with my office to hold them accountable for their crimes.”

“The defendants took advantage of their position and violated the public trust by defrauding HUD-assisted housing programs of scarce taxpayer dollars intended to provide housing to individuals and seniors with disabilities," said Special Agent-in-Charge Vicky Vazquez with the U.S. Department of Housing and Urban Development, Office of Inspector General.  “Today’s sentencing demonstrates HUD OIG’s steadfast commitment to working with our prosecutorial, law enforcement and oversight partners to aggressively pursue those who engage in activities that threaten the integrity of HUD programs.”

New York State Police Superintendent Steven G. James said, “This sentencing should serve as a reminder that those who manipulate innocent victims will be brought to justice. Our joint investigation determined that the suspects in this case violated the public trust by circumventing financial accounts intended to fund safe housing for individuals. I thank the Comptroller’s Office, Jefferson County District Attorney’s Office, U.S. Department of Housing and Urban Development and Office of the Inspector General for their partnership in this case.”

Hoffman served as the executive director of the West Carthage Housing Authority, a government-funded apartment complex for low-income senior citizens and people with disabilities, from 2016 to 2021. Pais, Hoffman’s mother, was hired as a vendor to act as an accounts payable bookkeeper at the housing authority from 2016 to 2020.

Based upon an anonymous tip, DiNapoli’s Office and the HUD OIG commenced an investigation of all monies controlled by Hoffman and found that she had been making personal purchases with housing authority funds since 2016, her entire tenure as executive director. In total, Hoffman stole over $48,000 from the authority using its financial accounts and credit lines to pay unauthorized personal expenses, including retail and grocery purchases, and to fund her and her family’s personal cell phone expenses. She also submitted over $1,000 in additional false reimbursement claims. 

Through her role as the accounts payable bookkeeper, Pais was responsible for reviewing claims and preparing checks for payment. Pais abused her position in order to facilitate her daughter’s theft by making the illicit payments and then falsifying authority records to conceal her daughter’s crimes. 

Hoffman was sentenced before Judge David Renzi in Jefferson County Court.

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Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse. New Yorkers can report allegations of fraud involving taxpayer money by calling the toll-free Fraud Hotline at 1-888-672-4555, by mailing a complaint to: Office of the State Comptroller, Division of Investigations, 8th Floor, 110 State St., Albany, NY 12236, or by filing a complaint online at https://www.osc.ny.gov/investigations.

New York State municipal and school district audits posted

On August 7, 2024, New York State Comptroller Thomas P. DiNapoli announced the following local government and school audits were issued.

Newark Central School District – Employee Benefits (Ontario County)  District officials did not always accurately calculate separation payments and did not ensure an independent review of separation payment calculations was performed. Therefore, calculation errors went undetected and resulted in erroneous and missed payments. Of the 41 employees reviewed, 14 separation payments totaling $66,036 were not calculated correctly, which resulted in errors totaling $20,157. The audit identified that four employees were not paid separation payments totaling $16,230, seven employees’ separation payments were overpaid by a total of $3,770 and three other employees’ separation payments were underpaid a total of $157.

Lindenhurst Union Free School District – Collections (Suffolk County)  District officials did not ensure that funds collected from all recreational and educational programs were properly recorded, deposited and reported. As a result, there was an increased risk of improper accounting of and potential theft of collections without detection. Auditors reviewed $311,876 collected by the business office from five district recreational and educational programs and determined that in-person collections totaling $130,568 were not recorded in a collection log. Employees made 25 deposits totaling $29,639 between 11 and 26 days after district programs recorded receipts.

City of Yonkers – Separation Payments and Health Insurance Buyouts of Yonkers City School District Employees (Westchester County)  City officials did not always ensure district employees’ separation payments and health insurance buyouts were accurate. Officials also did not establish procedures to help ensure that calculations were accurate, reviewed or authorized. As a result, certain employees did not receive separation payments and health insurance buyouts in accordance with contractual agreements. Of the 46 separation payments reviewed, totaling $451,298, nine had calculation errors totaling $1,630. One former employee, as well as the estates of three former employees, may have been entitled to separation payments totaling $23,937 that they did not receive. Of the 30 health insurance buyout payments reviewed, totaling $200,440, auditors determined 12, totaling approximately $87,300, did not have the required proof of insurance on file. Auditors also found buyout payments made to 10 employees had calculation errors totaling approximately $33,203.

Lewis County – Purchase Cards  Auditors reviewed 366 purchase card charges totaling $229,635 and determined the charges were for appropriate purposes; however, charges were not properly approved and supported and did not follow county policies. Although prior approval is required by the county’s purchase card policy, 238 online purchases totaling $189,852 did not have supporting documentation uploaded into the financial system showing the department head’s approval prior to the purchases being made. In addition, although the county’s procurement policy required verbal or written quotes, 52 charges totaling $142,684 did not have evidence of verbal or written quotes. The county could have potentially saved approximately $4,800 in travel expenses and sales tax. Additionally, the third-party purchase card vendor directly withdraws the monthly payments from the county’s bank account without the treasurer’s authorization.

City of Rensselaer – Accounting Records and Reports (Rensselaer County)  City officials did not maintain complete, accurate or timely accounting records. As a result, the reports the council received were not sufficient to allow them to effectively manage financial operations and capital projects. General ledger balances were inaccurate during each year and there were significant deficiencies with the city’s accounting records. Interfund receivables and payables did not reconcile, varying between $266,560 and $2.2 million, and transactions were not entered in a timely manner. In addition, bank reconciliations were not prepared in a timely manner or clearly documented, and discrepancies, including a variance where the reconciled bank balance for one bank account was $2.9 million less than the accounting records, were not explained. Independent audit reports were not timely and identified deficiencies in internal control.

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