Selected reports issued by the Office of the State Comptroller during the week ending June 11, 2016

Selected reports issued by the Office of the State Comptroller during the week ending June 11, 2016

Click on text highlighted in color to access the entire report

New YorkState Comptroller Thomas P. DiNapoli announced the following audits have been issued:

City University of New York (CUNY): Medgar Evers College: Controls Over Bank Accounts (2015-S-92)

CUNY officials provided auditors with a list of 24 bank accounts at Medgar Evers. Fourteen accounts were opened after CUNY’s bank authorization policy was established in 2008. However, CUNY did not have any of the required notification forms for these accounts. Additionally, auditors found an additional two accounts that were not on the list. These findings point to weaknesses in the monitoring of bank accounts, which increase the risk that college personnel could conduct transactions using unauthorized accounts. Of 54 payments (totaling $810,608) paid from six selected bank accounts, 26 (totaling $118,782) were either improper or were unsupported. 

Higher Education Services Corporation: Tuition Assistance Program Wagner College (2015-T-3)

Auditors determined Wagner was overpaid $97,947 because school officials incorrectly certified students as eligible for state financial aid awards. Incorrect certifications include eight students who received awards but had not met the good academic standing requirements and three students who were not enrolled at Wagner for the semesters in question. 

Higher Education Services Corporation: Tuition Assistance Program at Vaughn College (2015-T-6)

Vaughn's certification procedures for state financial aid substantially complied with the governing law and regulations. Auditors found that of the 50 awards tested, only two (totaling $3,945) were certified in error. As such, auditors concluded there is a low risk that a significant number of students certified for state financial aid were not eligible for awards. 

Office of Alcoholism and Substance Abuse Services (OASAS): Contracted Programs With Puerto Rican Organization to Motivate, Enlighten and Serve Addicts Inc. (PROMESA) (2015-S-24)

Auditors found that despite two relatively recent audits by OASAS, claims submitted by PROMESA for the two years ended June 30, 2014 continued to include costs that were not valid or consistent with state guidelines. PROMESA reported about $23 million in costs associated with contracted OASAS programs during the period. The audit examined about $9 million of these expenses and identified problems with over 90 percent – $8.2 million. 

Office of Alcoholism and Substance Abuse Services (OASAS): Drug and Alcohol Treatment Program: Provider Claiming of Depreciation Expenses (2015-S-84) 
OASAS is not effectively monitoring Drug and Alcohol Treatment program contracts to ensure provider claims do not include state reimbursement for depreciation expenses. Auditors found providers inappropriately claimed $2.7 million in depreciation expenses, of which $2.2 million was funded by OASAS. Also, OASAS could potentially use the remaining $454,238 for inappropriate increases to providers’ future program budgets. 

Office of Parks, Recreation and Historic Preservation (OPRHP): Controls Over Cash Advance Accounts (Follow-Up) (2016-F-3)

An initial audit report issued in December 2014 found OPRHP advance accounts received little scrutiny and made recommendations to improve internal controls over these accounts. In a follow-up report, auditors determined the agency made significant progress in correcting the problems identified in the initial report. Of the eight prior audit recommendations, seven have been implemented and one recommendation has not been implemented. 

State Education Department (SED): League for the Handicapped, Compliance with the Reimbursable Cost Manual (2015-S-89)

For the fiscal year ended June 30, 2014, auditors identified $4,354 in costs that were charged to the preschool special education programs that did not comply with SED’s requirements for reimbursement. The non-reimbursable costs included insufficiently documented expenses, costs for services that were not directly related to the programs, unallowable working capital interest and credit card late fees.

State University of New York (SUNY): Compliance With Payment Card Industry Standards (2015-S-65)

SUNY schools were generally knowledgeable about PCI compliance and the need to protect credit card data from unauthorized access; however, auditors identified areas where system and data controls need to be improved to meet certain compliance standards. Among a range of issues, auditors identified weaknesses in the completeness of the systems’ component inventories, network segmentation, the resolution of compliance deficiencies and the oversight of affiliated campus organizations. 

State University of New York Downstate Medical Center: Review of Collecto Inc. (2016-BSE4-02)

Auditors examined Downstate contracts with Collecto for debt collection services. Under the $2.5 million contract, Downstate pays Collecto various commission rates based on the amount collected by account type and size. Of the $29,288 examined, auditors found overpayments of $14,355 and additional potential overpayments of $2,664. The remaining $12,269 was appropriate and properly supported.

Department of Taxation and Finance: Personal Income Tax Refunds (2015-1A-001)

The department processes all New York state personal income tax returns. During the audit period, the department processed almost 7.5 million refunds totaling over $8.6 billion. From this population, auditors examined 31,978 refunds totaling almost $516.5 million. Of those, auditors identified and returned 11,469 questionable refunds totaling about $53.3 million.

New York’s Freedom of Information Law does not permit the custodian of the records to routinely charge for employee time spent searching for documents responsive to a FOIL request

New York’s Freedom of Information Law does not permit the custodian of the records to routinely charge for employee time spent searching for documents responsive to a FOIL request

Ripp v Town of Oyster Bay, 2016 NY Slip Op 04226, Appellate Division, Second Department

In a CPLR Article 78 proceeding to compel the production of certain documents pursuant to the Freedom of Information Law (Public Officers Law Article 6) [FOIL], the Town of Oyster Bay [Town], appealed that part of the Supreme Court decision that barred the Town requiring the petitioner, Robert O. Ripp, to prepay certain estimated costs as a condition of producing the requested documents for inspection.

Ripp had requested that the Town make certain documents available for inspection pursuant to FOIL. The Town conditioned the disclosure of the documents upon Ripp prepaying $1,920 to cover the estimated costs associated with producing the documents.

The Appellate Division sustained the Supreme Court’s order explaining that:

1. FOIL requires state and municipal agencies to make available for public inspection and copying all records, subject to certain exemptions;

2. Where an agency conditions disclosure upon the prepayment of costs or refuses to disclose records except upon prepayment of costs, it has the burden of "articulating a particularized and specific justification" for the imposition of those fees;

3. The agency must demonstrate that the fees to be imposed are specifically authorized by the cost provisions of FOIL; and

4. The custodian of the records must meet this burden "in more than just a plausible fashion."

In this case the Appellate Division found that the Town had failed to satisfy these requirements, noting that the only evidence in the record justifying the imposition of costs was a letter to Ripp stating that it would take a Town employee a minimum of eight weeks, at $240 per week, to review 2,500-3,000 files to identify the records available for inspection.

While an agency may charge for employee time spent extracting or segregating data from an electronic database, the court distinguished electronic “records” from “hardcopy” records and explained that FOIL does not permit an agency to charge for employee time spent searching for paper documents.*

The Appellate Division opined that the Town had failed to demonstrate that the prepayment costs it demanded were properly based upon employee time related to retrieving electronic files, rather than a manual search of hard copies for which the Town's recoupment costs are limited to 25¢ per photocopy.**

Accordingly, said the court, the Supreme Court properly directed the Town to make the paper records or documents sought available for Ripp’s inspection without the prepayment of the estimated costs.

* Weslowski v Vanderhoef, 98 AD3d 1123, provides a comprehensive review of the elements involved in the custodian of the records lawfully requiring payments attributed to complying with a FOIL request.

**The person requesting the documents may avoid this $.25 per page charge by simply inspecting the documents "on site" rather than ordering photocopies of the documents of interest.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_04226.htm

If an employee engaged in repeated acts constituting disloyalty to the employer, forfeiture of compensation and benefits is warranted under the Faithless Servant Doctrine

If an employee engaged in repeated acts constituting disloyalty to the employer, forfeiture of compensation and benefits is warranted under the Faithless Servant Doctrine

City of Binghamton v Whalen, 2016 NY Slip Op 04289, Appellate Division, Third Department

John C. Whalen had been employed by the City of Binghamton[City] as its Director of Parks and Recreation and, in that capacity, was entrusted with the collection of various fees and funds on behalf of the City. In April 2014, Whalen pleaded guilty to grand larceny in the third degree, admitting that he stole more than $50,000 from the City between January 2007 and November 2012.

The City subsequently sued Whalen seeking [1] to recover all compensation it had paid to him during the period of the theft and [2] a judicial declaration that it is under no obligation to furnish him with health insurance earned through his employment. The City moved for summary judgment in its favor.

Supreme Court granted the City’s summary judgment on the issue of liability. However Supreme Court concluded that in view of Whalen’s “otherwise ‘unblemished’ 35 years of service to [the City]" and notwithstanding his over a half a "decade of thievery," there were issues of fact raised as to whether forfeiture of compensation was warranted under the faithless servant doctrine. The City appealed.

The Appellate Division said the Supreme Court’s ruling that there were issues of fact to be considered with respect to the faithless servant doctrine was error and ruled that the City was entitled to summary judgment on the issue of damages and a declaration that it is relieved of its obligation to provide Whalen with health insurance benefits.

The court explained that New York law with respect to the disloyal or faithless performance of employment duties has developed for well over a century and, citing Western Elec. Co. v Brenner, 41 NY2d 291, said that "an employee is to be loyal to his [or her] employer and is 'prohibited from acting in any manner inconsistent with his [or her] agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his [or her] duties.'" 

In the words of the Appellate Division, “[u]nder what is commonly referred to as the faithless servant doctrine, ‘[o]ne who owes a duty of fidelity to a principal and who is faithless in the performance of his [or her] services is generally disentitled to recover his [or her] compensation, whether commissions or salary.’ Thus, where an employee ‘engage[s] in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted.’"*

Clearly there was no dispute that Whalen’s admission to stealing more than $50,000 from the City over the course of a nearly six-year period constitutes conclusive proof of such facts and established the City's entitlement to judgment as a matter of law on the issue of Whalen's liability. Further, said the Appellate Division, “[t]he Court of Appeals has made clear that forfeiture of compensation is required even when some or all of ‘the services were beneficial to the principal or [when] the principal suffered no provable damage as a result of the breach of fidelity by the agent.’"

Thus, said the Appellate Division, what Supreme Court characterized as Whalen's “exemplary performance of his duties when he was not stealing from [the City] does not insulate him from the application of the faithless servant doctrine” with respect to his  persistent pattern of disloyalty over the six-year period during which he stole from the City.

As to the damages claimed by the City, it submitted documentary evidence establishing that it paid Whalen $316,535.54 in compensation between January 2007 and November 2012, and Whalen failed to submit any competent proof to dispute that figure. Accordingly, the Appellate Division awarded the City damages in the amount of $316,535.54 and declared that the City was relieved of its obligation to provide Whalen health insurance benefits earned through his employment.

* See William Floyd Union Free School Dist. v Wright, 61 AD3d 856.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_04289.htm

An eligible list found to be invalid prior to its "expiration" had no legal existence and thus it could not have "expired," permitting the establishment of a "corrected' list"

An eligible list found to be invalid prior to its "expiration" had no legal existence and thus it could not have "expired," permitting the establishment of a "corrected' list"

Crociata v Cassano, 2016 NY Slip Op 04212, Appellate Division, Second Department

New York City Fire Commissioner Salvatore J. Cassano declining to promote Anthony L. Crociata to the rank of Fire Marshal. Crociata sued the Commissioner and Supreme Court ordered that Crociata’s name be placed “on a special eligible list for promotion to the rank of Fire Marshal” and that that he be reconsider for such promotion.

In response to Cassano’s appeal of the Supreme Court's ruling the Appellate Division vacated the lower court's order and dismissed the proceeding in its entirety.

Although noting that “[t]he only available remedy to a Civil Service examinee who is determined to have been improperly passed over for an appointment or promotion is a judicial direction for reconsideration,” the court said that in this instance the relief awarded by the Supreme Court -- directing Cassano to reconsider Crociata’s application for promotion -- was improper, as the eligible list on which his name had appeared had expired by operation of law.

The court explained that although Crociata had commenced his lawsuit before the date on which the list had expired, “he failed to adequately allege that the list itself was constitutionally invalid,” citing Pena v NYC Civil Service Commission, 27 AD3d 293. 

In the Pena case the Appellate Division found that Pena had not challenge the validity of the original eligible list, but sought to have her name placed on a "special list," pursuant to Civil Service Law §56(3).* However, said that court, “in order to be placed on a special eligible list, [Pena] was required first to successfully challenge the validity of the list itself prior to its expiration."

The Pena court, citing City of New York v New York State Div. of Human Rights, 93 NY2d 768, said that only if Pena’s challenge to the list itself was successful would she have a remedy that comports with Article V, §6 of the New York State Constitution, in that the original list would have had no legal existence and thus could not have expired, allowing for extension of a 'corrected' list.”

In Crociata’s situation the court held that Supreme Court “erred in directing [Cassano] to place [Crociata’s] name on a special eligible list for promotion to the rank of fire marshal and reconsider him for such promotion. 

* Civil Service Law §56.3 addresses situations where the individual was disqualified and such disqualification has been reversed, or the individual's rank order on an eligible list has been adjusted, as the result of an administrative or judicial action or proceeding. In contrast, Civil Service Law §56.4 is triggered where a court of competent jurisdiction has determined that an eligible list is invalid and provides that the court may order the creation of a special eligible list having a duration of not less than one nor more than four years commencing at the time the corrected list is published.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_04212.htm

Responding to a Freedom of Information Law request by neither confirming nor denying the existence of such information or data

Responding to a Freedom of Information Law request by neither confirming nor denying the existence of such information or data

Abdur-Rashid v New York City Police Dept., 2016 NY Slip Op 04318, Appellate Division, First Department 
Samir Hashmi v New York City Police Department, et al., 2016 NY Slip Op 04318, Appellate Division, First Department

A governmental agency’s response to a Freedom of Information Law [FOIL] request stating it would “neither confirm nor deny” it had information concerning focus of the FOIL request in its possession is characterized as a “Glomar response” -- the Central Intelligence Agency’s response to a FOIL request for information concerning the activities of the Glomar Explorer, a salvage vessel allegedly built at the request of the CIA in an effort to salvage a sunken submarine.

Supreme Court denied the petition brought by Talib W. Abdur-Rashid pursuant to CPLR Article 78 seeking to compel the New York City Police Department [Department] to disclose documents requested pursuant to FOIL. The Department's response to Abdur-Rashid's FOIL request was that it "would neither confirm nor deny" such records or documents existed. The Appellate Division unanimously affirmed the lower court's ruling.*

The Appellate Division explained that FOIL does not prohibit the Department from giving a Glomar response to a FOIL request where, as here, the Department "has shown that such confirmation or denial would cause harm cognizable under a FOIL exception."

Citing Hanig v State of N.Y. Dept. of Motor Vehicles., 79 NY2d 106, the court said that although Abdur-Rashid contends that a “Glomar response is impermissible in the absence of express statutory authorization," the Glomar Doctrine is "consistent with the legislative intent and with the general purpose and manifest policy underlying FOIL,” as it allows an agency to safeguard information that falls under a FOIL exemption.

Addressing the Supreme Court's ruling in Samir Hashmi v New York City Police Department,** the Appellate Division, after considering the differences between the two statutes identified by the Hashmi court,  concluded that they do not justify rejecting the Glomar doctrine in the context of FOIL.

The Appellate Division noted that while federal case law regarding FOIA is not binding on it, it is "instructive" when interpreting FOIL provisions and the application of the Glomar doctrine to FOIA requests has been widely approved by federal circuit courts. 

Further, said the court, the Department met it burden to "articulate particularized and specific justification" for declining to confirm or deny the existence of the requested records. In this instance the records sought information related to Department investigations and surveillance activities, including showing that answering the inquiries “would cause harm cognizable under the law enforcement and public safety exemptions of Public Officers Law §87(2).”

The Appellate Division, referring to Wilner et al,v NSA,*** then cautioned that by its ruling in these two actions it was not suggesting that any FOIL request for Department records would justify a Glomar response, opining that "An agency resisting disclosure of the requested records has the burden of proving the applicability of [a FOIL] exemption" and must submit "a detailed affidavit showing that the information logically falls within the claimed exemptions" and "the basis for [the agency's] claim that it can be required neither to confirm nor to deny the existence of the requested records."

* The Appellate Division unanimously reversed, on the law, the same Supreme Court’s denial of the Department’s motion to dismiss the Article 78 petition filed by Samir Hashmi seeking to compel it to disclose documents requested by Hashmi pursuant to FOIL and to submit an answer to the petition.

**See Samir Hashmi, et al v New York City Police Department, 46 Misc 3d 712, 722-724

*** USCA, Second Circuit, Docket No. 08-4726-cv, [Petition for writ of certiorari denied, US Supreme Court]

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_04318.htm