Audits of municipalities issued by the New York State Comptroller Thomas P. DiNapoli during the week ending July 5, 20114

Audits of municipalities issued by the New York State Comptroller Thomas P. DiNapoli during the week ending July 5, 20114

Source: Office of the State Comptroller

Town of Colonie – Justice Court Operations (Albany County)

Auditors commended the town justices for establishing strong internal controls over court operations. The justices implemented specific controls to ensure court money collected was properly recorded in the court records, deposited in a timely manner and accurately reported to the Justice Court Fund.

Village of Frankfort – User Charges (Herkimer County)

Village officials need to improve internal controls to ensure water, sewer and electric user charges are properly billed, collected, recorded and deposited. The duties for billing, collecting and recording payments are not segregated. Also, customer account adjustments are not independently approved and the computerized billing system does not provide an audit log to show adjustments that have been made.

Gloversville Public Library – Claims Processing (Fulton County)

Internal controls over the claims audit process were not appropriately designed to protect and account for library assets. Although one board member reviewed claims as a part of the check-signing process, they were not reviewed by other members. Additionally, the board member who reviewed the claims did not document his review and approval by signing the claims.

Town of Great Valley – Town Clerk (Cattaraugus County)

The town clerk remitted tax collections to the town and the county up to two months late and returned duplicate payments eight months after the payment was made. The clerk did not routinely indicate the form or date of payment on tax stubs/receipts and made deposits on average nine days late. In addition, the town board has not performed an annual audit of the clerk’s records.

Town of Le Roy – Purchasing (Genesee County)

The board reviewed each claim presented for audit and approval, however, they did not ensure that claims included the necessary documentation. Paid claims lacked proper itemization and documentation to indicate they represented actual and necessary town expenses.

Village of Monticello – Budget Review (Sullivan County)

Auditors found that most of the significant revenue and expenditure projections in the tentative budget for the general, sanitation, water and sewer funds are reasonable. The tentative budget did not include a tax overlay or provisions for potential salary increases from contract settlements. These issues could cause the village to become fiscally stressed or require an increase in taxes.

Newstead Fire Company – Internal Controls Over Financial Activities (Erie County)
The treasurer maintained appropriate financial records, performed monthly bank reconciliations, and submitted monthly financial reports to the board. However, the board did not oversee fundraising activities, properly authorize disbursements or review the treasurer’s reconciled bank statements.

City of Peekskill – Financial Condition (Westchester County)

Reliance on appropriated fund balance as a financing source in the 2011 and 2012 fiscal years resulted in a significant reduction in the city’s general fund balance and unassigned fund balance. Beginning in the 2013 fiscal year, city officials took steps to replace fund balance. Based on the city’s revenue increases and cost-saving measures adopted in 2013, it appears that officials are properly managing the city’s financial condition.

Town of Warrensburg – Procurement (Warren County)

The town’s procurement process was generally effective for obtaining goods and public works contracts subject to the policy’s bidding thresholds. In most instances the town purchased equipment and commodities through state or county contracts or by competitively bidding. However, officials did not develop and follow formal procedures for obtaining professional services.
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New York State Comptroller Thomas P. DiNapoli issues audits of certain State agencies

New York State Comptroller Thomas P. DiNapoli issues audits of certain State agencies

Source: Office of the State Comptroller 

On July 2, 2014 New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued:

Dormitory Authority of the State of New York, Mission Statement and Performance Measures (2013-S-13)

Auditors found the authority did not meet its targeted performance level for customer satisfaction for 20 percent of its customers, particularly in the areas of project design and construction. Also, construction clients expressed concerns about the timeliness and cost of projects. With respect to debt issuances, 43 percent of survey respondents indicated they were less than satisfied with the cost of debt issuance, and 12 percent rated timeliness less than acceptable.

Metropolitan Transportation Authority, New York City Transit Authority - Procurement and Payroll-Related Matters Pertaining to the Use of Certain Federal Funds (2012-S-105)

New York City Transit Authority (Transit) used the American Recovery and Reinvestment Act (Recovery Act) funds for 23 projects estimated to cost $441.4 million. Auditors visited 15 of the 23 projects' sites and did a more detailed review of one project, the Induction Loop project (estimated to cost $13.4 million), finding the prime contractor allowed unauthorized subcontractors to work on the project. One of those subcontractors was Petrocelli Electrical Company, whose former chairman and owner was indicted (and later convicted) on charges of making illegal payments to a labor union representative. Auditors also found two Transit supervisors were paid excessive and questionable overtime totaling $31,783 for administrative duties. In visits to work sites, auditors noted an excessive number of Transit employees present and receiving overtime pay.

New York State Homes and Community Renewal, Selected Employee Travel Expenses (2012-S-99)
Travel expenses totaling $112,233 for three of the five employees selected for review were appropriate and adhered to state travel rules and regulations. However, auditors identified unnecessary and questionable travel expenses totaling $12,446 for two employees. The travel reimbursements for these two employees may have potential tax implications.

New York State Thruway Authority, Inspecting Highway Bridges and Repairing Defects (2014-F-9) (Follow-Up)

In an initial audit report issued in April 2013, auditors found the New York State Thruway Authority (NYSTA) found that NYSTA repairs defects identified during inspections. However, highway bridges were not always inspected timely, including three with flagged conditions, and DOT was not always notified of red flags within one week, as required.  In a follow-up report, auditors found NYSTA implemented the three recommendations made in our initial report.

Workers' Compensation Board, Controls Over Cash Advance Accounts (2014-S-12)

The Workers’ Compensation Board (WCB) designed effective internal controls over certain accounts to ensure that payments were for appropriate business purposes and were properly accounted for. Auditors found the controls have generally operated as intended. However, auditors noted a few isolated issues related to certain checks that were not properly accounted for or documented in WCB records

Pension "double-dipping" stopped

Pension "double-dipping" stopped

Source: Office of the State Comptroller

On June 1, 2014, New York State Comptroller Thomas P. DiNapoli and Nassau County District Attorney Kathleen Rice announced the guilty plea of a retired police officer charged with receiving pension payments from the New York State and Local Police and Fire Retirement System in violation of law.

The investigation was made possible by a 2012 law, proposed by DiNapoli, which gave the State Comptroller access to the Sate Department of Taxation and Finance's wage reporting system to identify state retirement system retirees working for local governments whose earnings exceed post-retirement earnings limitations.

The retired officer pleaded guilty to permitting falsification of records of the retirement system, a Class D felony. As part of his guilty plea, he must repay the almost half-a-million dollars that he acquired illegally. 

Although the officer was repeatedly notified of the earnings limitations on post-retirement public employment and the requirement to report his public employment income, he chose not to do so, pocketing $465,647 in unlawful pension payments while earning a final full-time salary of $112,000 in pubic employment following his retirement from his police officer position.

The Comptroller noted that following his retirement the officer took a job at a SUNY community college without notifying his office of his return to public employment, failed to comply with the earnings limitations that apply to public retirees collecting a public pension, didn’t obtain a waiver allowing him to earn above the legal limit; and joined the State University’s Optional Retirement Program, all while continuing to receive his full retirement allowance.*

Essentially, except with respect to post-retirement payments for service while on jury duty or serving in the office of inspector of election, or as poll clerk or ballot clerk under the election law, or as a notary public or commissioner of deeds, or as a retiree elected to public office, §150 of the Civil Service Law requires the suspension of a retired public employee’s pension or annuity payments during any post-retirement public employment by a New York State agency or a political subdivision of the State. 

However, relevant provisions of the Retirement and Social Security Law, the Education Law and local law or charter permits limited earnings by a retired employee returning to public service, including such employment as a consultant, without forfeiting his or her pension payments during such employment. §211 of the Retirement and Social Security Law sets out the earning limitations with respect to the employment of retired persons without diminution of his or her pension payments while §212 of the Retirement and Social Security Law provides that there are no limitations on the amount a retired public employee returning to public service may earn on or after the calendar year in which he or she attains age sixty-five.

The case was investigated by Comptroller DiNapoli’s Division of Investigations and Division of Retirement Services jointly with Nassau District Attorney personnel.

Reports of allegations of fraud involving taxpayer money may be submitted to the State Comptroller by calling the toll-free Fraud Hotline at 1-888-672-4555, by filing a complaint online at investigations@osc.state.ny.usor by mailing a complaint to: Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

* The Comptroller said that State law, the so-called Axelrod amendment, bars a retiree's collecting a public pension from a public retirement of this State from enrolling in SUNY's Optional Retirement Program upon his or her returning to public employment..

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The First Amendment prohibits a State’s collecting an agency shop fee from an individual on behalf of an employee organization that the individual does not wish to join or support

The First Amendment prohibits a State’s collecting an agency shop fee from an individual on behalf of an employee organization that the individual does not wish to join or support

Harris v Quinn, USSC #11-681, decided June 30, 2014

The U.S. Supreme Court held that the First Amendment prohibits the collection of an agency shop fee that is used subsidize speech on matters of public concern by an employee organization that the employee does not wish to join or support.

Illinois' Home Services Program allows Medicaid recipients who would normally need institutional care to hire a "personal assistant" (PA)* to provide home-care services. Although the recipient or his or her representative [Customer] exercise predominant control over the employment relationship with the PA, Illinois, subsidized by the federal Medicaid program, pays the PA’s salary.

The Supreme Court’s decision sets out the following events leading to this litigation:

[1] The Illinois State Labor Relations Board, in 1985, stated that “[t]here is no typical employment arrangement here, public or otherwise; rather, there simply exists an arrangement whereby the State of Illinois pays [RAs] . . . to work under the direction and control of private third parties."

[2] The Board, responding to a petition submitted by Service Employees International Union (SEIU) seeking to represent PAs, held that “it is clear . . . that [Illinois] does not exercise the type of control over the petitioned-for employees necessary to be considered in the collective bargaining context envisioned by  [Section 6 of the Illinois Public Labor Relations Act], their 'employer' or, at least, their sole employer."

[3] In 2003 then Governor Rod Blagojevich “circumvented” the Board’s rulings when he issued an Executive Order, which Order was later codified by the Legislature,** solely, in the words of the court, to permit PAs to join a labor union and engage in collective bargaining under Illinois' Public Labor Relations Act (PLRA).

Also, noted the Supreme Court, employee organizations had entered into collective-bargaining agreements with the State that contain an agency-fee provision. This provision requires all bargaining unit members who do not wish to join the union to pay the union a fee for the cost of certain activities, including those tied to the collective-bargaining process.

The Supreme Court distinguished PAs from “State employees” as follows:

In the case of full-fledged public employees, the State establishes all of the duties imposed on each employee, as well as all of the qualifications needed for each position, vets applicants and chooses the employees to be hired, provides or arranges for whatever training is needed, and it supervises and evaluates the employees' job performance and imposes corrective measures if appropriate. 

In contrast, said the court, insofar as the PAs involved in this case are concerned, their job duties as personal assistants are specified in their individualized Service Plans, which plans must be approved by the Customer and the Customer's physician and “Customers have complete discretion to hire any personal assistant who meets the meager basic qualifications that the State prescribes” and the Customer "is responsible for controlling all aspects of the employment relationship between the Customer and PA without limitation. Further, noted the Supreme Court,  PAs  “also appear to be ineligible for a host of benefits under a variety of other state laws” that are available to employees of the State as the employer.

As to the relationship of the PA’s to the employee organization is concerned, the court said that where the employee organization is recognized or certified as the exclusive representative for Rehabilitation Program employees for the purposes of collective bargaining, the First Amendment prohibits the collection of an agency fee from Rehabilitation Program PAs who do not wish to [1] join or [2] support the employee organization because the First Amendment does not permit a State to compel personal care providers to subsidize speech on matters of public concern by an employee organization that they do not wish to join or support. In particular, the court said “[The PAs bring this action do not “challenge the authority of the SEIU-HII to serve as the exclusive representative of all the personal assistants in bargaining with the State. All they seek is the right not to be forced to contribute to the union, with which they broadly disagree.”

The bottom line: The Supreme Court said “If we accepted Illinois' argument, we would approve an unprecedented violation of the bedrock principle that, except perhaps in the rarest of circumstances, no person in this country may be compelled to subsidize speech by a third party that he or she does not wish to support. The First Amendment prohibits the collection of an agency fee from personal assistants in the Rehabilitation Program who do not want to join or support the union.”

Insofar as “speech” is concerned, this decision would not appear to impact on the State as the employer or political subdivisions of the State as the employer of individuals in the Classified Service or the Unclassified Service in contrast to the type of "employer-employee relationship" between Illinois’ PAs and the State of Illinois.

New York State's Civil Service Law  §208.3(a), with respect to the State as the employer, and §208.3(b), with respect to political subdivisions of the State as the employer, provide that an employee organization that is the exclusive representative of employees for the purposes of the Article 14 of the Civil Service Law, the Taylor Law, shall be entitled to have   deducted from the wage or salary of the employees in such negotiating   units who are not  members  of  said  employee  organization  the  amount   equivalent  to  the  dues  levied by such employee organization, and the   state comptroller shall make such deductions and  transmit  the  sum  so   deducted  to  such  employee  organization proved that the employee organization has established and maintained  a   procedure  providing for the refund to any employee demanding the return   any part of an agency shop fee deduction which represents the employee's   pro rata share of expenditures by the organization in aid of  activities   or causes of a political or ideological nature only incidentally related   to terms and conditions of employment. As to the “joining an employee organization” aspect of the Supreme Court’s ruling addressing “freedom of association,” the Taylor Law provides that an employee is not required to become a member of the employee organization and those electing not to become a member of the employee organization pays an agency shop fee in lieu of dues, typically a lesser amount.

*Illinois law establishes an employer-employee relationship between the person receiving the care and the person providing it, providing that that the person receiving home care--the "customer"--"shall be the employer of the [personal assistant]." 89 Ill. Admin. Code §676.30(b). The decision notes that “Many of these personal assistants are relatives of the person receiving care, and some of them provide care in their own homes.”

** Ill. Comp. Stat., Chapter 20, §2405/3(f ), declaring personal assistants to be "public employees" of the State of Illinois--but "[s]olely for the purposes of coverage under the Illinois Public Labor Relations Act."

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Whether a timely demand for arbitration has been made is for the court to determine

Whether a timely demand for arbitration has been made is for the court to determine

Village of Chester v Local 445, Intl. Bhd. of Teamsters, 2014 NY Slip Op 04775, Appellate Division, Second Department

In this CPLR Article 75 proceeding the Village of Chester asked Supreme Court to permanently stay the arbitration of a disciplinary grievance. Supreme Court denied the Village’s petition, which ruling was affirmed by the Appellate Division.

The Village and the Village of Chester Police Benevolent Association (PBA) entered into a collective bargaining agreement (CBA). Article 12 of the CBA provided for a “contract disciplinary procedure” in lieu of any statutory disciplinary procedure. In the event disciplinary charges were filed against a member in the collective bargaining unit, Article 12 required the PBA or the individual charged to file a grievance with the Chief of Police within 15 days of the receipt of the notice of charges.

Citing Matter of County of Rockland, 51 NY2d 1, the Appellate Division explained that in this instance the threshold determinations to be made concerned [1] was there a condition precedent to arbitration, and if so, [2] had it been timely met is for the court to determine.

Supreme Court found that a letter sent to the Chief of Police constituted the filing of the grievance and that it was timely filed. Accordingly, said the Appellate Division, Supreme Court “properly denied the petition to permanently stay arbitration” and correctly granted PBA’s the cross petition to compel arbitration.

Arbitration, said the Appellate Division, “is essentially a creature of contract in which the parties themselves charter a private tribunal for the resolution of their disputes and are free to enlarge, restrict, modify, amend or terminate their agreement to arbitrate."

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