If a State Department’s policy memorandum constitutes a "rule or regulation" within the meaning of the State’s Constitution it must be filed with the Secretary of State before it can have the force and effect of law

If a State Department’s policy memorandum constitutes a "rule or regulation" within the meaning of the State’s Constitution it must be filed with the Secretary of State before it can  have the force and effect of law

Plainview-Old Bethpage Congress of Teachers v New York State Health Ins. Plan, 2016 NY Slip Op 04473, Appellate Division, Third Department

[See, also, 2016 NY Slip Op 04472, http://www.nycourts.gov/reporter/3dseries/2016/2016_04472.htm, granting NYSHIP’s motion to reargue the court’s decision.]

Roslyn Teachers Assn. v New York State Health Ins. Plan, 2016 NY Slip Op 04475, Appellate Division, Third Department*

[See, also, 2016 NY Slip Op 04474, http://www.nycourts.gov/reporter/3dseries/2016/2016_04474.htm, granting NYSHIP’s motion to reargue the court’s decision.]*

While the Plainview-Old Bethpage Central School District [School District], a participating employer in the New York State Health Insurance Program [NYSHIP] administered by the New York State Department of Civil Service, was negotiating the terms of new collective bargaining agreements with the Plainview-Old Bethpage Congress of Teachers and its Clerical Unit and Teachers Unit, [Association], the Department of Civil Service issued its "Policy Memorandum No. 122r3" [Memorandum], which limited the circumstances under which an employee of a participating employer such as the School District may decline NYSHIP coverage in exchange for a cash payment.

Although earlier collective bargaining agreements between the parties had included such a "buyout program," the School District took the position that the buyout program was required to conform to the new restrictions set forth in the Memorandum.

In response to the position taken by the School District, the Association commenced a combined CPLR Article 78 proceeding and action for declaratory judgment seeking, among other things, a judicial declaration that the Memorandum is null and void. NYSHIP and the Department of Civil Service [the State] moved for summary judgment.

Supreme Court denied the State’s motion, granted the Association’s petition declaring the Memorandum null and void, and remitted the matter to the State for further action. The State appealed.

In an earlier, and similar action, the Appellate Division, School Administrators Association of New York v New York State Department of Civil Service, 124 AD3d 1174, the State had argued that School Administrators' claims were barred by the four-month statute of limitations. In response to the State’s argument that the Association’s claim was similarly untimely, the Appellate Division ruled that the Association had advanced an argument regarding the timeliness of their challenge that was not before the court in School Administrators.

Here, said the Appellate Division, the Association contended the Memorandum was, in fact, a new, formal rule governing employee eligibility for the NYSHIP buyout program. Thus, argued the Association, its provisions are unenforceable because, among other things, it was not filed with the Department of State in accordance with the mandates of the State’s Constitution** and Executive Law §102[1][a]).

In the words of the Appellate Division, “… the resolution of the [Association's] challenge hinges on whether the policy memorandum is more properly characterized as a rule or regulation, or as an interpretive statement or general policy which are not subject to constitutional and statutory filing requirements.”

The court explained that a rule or regulation is "a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers." Interpretive statements and guidelines, in contrast, merely assist agency officials in exercising some aspect of their discretionary authority granted by existing statutes and regulations but do not have, in and of themselves, the force and effect of law.

The primary difference between a rule or regulation and an interpretive statement or guideline, said the court, is that the former “set standards that substantially alter or, in fact, can determine the result of future agency adjudications” while interpretive statements and guidelines simply provide additional detail and clarification as to how such standards are met by the public and upheld by the agency.”

The Appellate Division found that the Memorandum constituted a "rule or regulation" within the meaning of Article IV, §8 of the State Constitution and Executive Law §102 and thus it is “invalid and without effect” until it is filed with the Department of State.

As the State did not comply with this filing requirement, it follows that the statute of limitations never commenced to run on the Association’s claims.

Accordingly, the Appellate Division sustained Supreme Court's determination.

* In Roslyn, which the Appellate Divisions characterized as a case that is virtually indistinguishable from Matter of Plainview-Old Bethpage Congress of Teachers v New York State Health Insurance Plan, 2016 NY Slip Op 04473, [see above], the court said that the new restriction that the policy memorandum imposes on eligibility for the NYSHIP buyout program constitutes "a firm rigid, unqualified standard or policy" that effectively "carves out a course of conduct for the future.” Accordingly the policy memorandum constituted a "rule or regulation" within the meaning of Article IV, §8 New York State’s Constitution and Executive Law §102(1)(a) and, thus, is not effective until it is filed with the Department of State. The Roslyn decision is posted on the Internet at: http://www.nycourts.gov/reporter/3dseries/2016/2016_04475.htm

** Article IV, §8 of the State Constitution provides that “No rule or regulation made by any state department, board, bureau, officer, authority or commission, except such as relates to the organization or internal management of a state department, board, bureau, authority or commission shall be effective until it is filed in the office of the department of state. The legislature shall provide for the speedy publication of such rules and regulations by appropriate laws.”

The Plainview-Old Bethpage Congress of Teachers decision is posted on the Internet at: http://www.nycourts.gov/reporter/3dseries/2016/2016_04473.htm

Selected reports issued by the Office of the State Comptroller during the week ending June 18, 2016

Selected reports issued by the Office of the State Comptroller during the week ending June 18, 2016

Click on text highlighted in color to access the entire report 

New York State Comptroller Thomas P. DiNapoli’s office completed audits of the following school districts

These audits, summaries of which are set out below, are designed to assist schools improve their financial management practices and ensure proper policies and procedures are in place to protect public funds from waste, fraud and abuse. For additional background or a comment on a specific audit, contact Brian Butry, 518-474-4015 at the Office of the State Comptroller or email: bbutry@osc.state.ny.us 


Addison Central School District – Financial Condition (Steuben County)
During the last three completed fiscal years (2012-13 through 2014-15), the board and district officials overestimated general fund appropriations by $7.3 million (9 percent) resulting in combined operating surpluses totaling $6.4 million. District officials used the operating surpluses to make interfund transfers totaling approximately $4 million and increase reserves by $1.6 million. As a result, four reserves with balances totaling $2.9 million (48 percent of total reserves) are overfunded and potentially unnecessary. In addition, $570,000 in appropriated fund balance was not needed to finance operations. These practices allowed the district to report year-end unrestricted fund balance at levels that essentially complied with the statutory 4 percent fund balance limit. However, the district’s recalculated unrestricted fund balance ranged between 16 to 18 percent of the ensuing year’s appropriations. As a result, the district’s tax levy was higher than necessary to fund operations.

Cattaraugus-Little Valley Central School District – Financial Management (Cattaraugus County)
The unrestricted fund balance for the district has consistently exceeded Real Property Tax Law limits. The district’s unrestricted fund balance was approximately $3.6 million (14 percent of the ensuing year’s budget) or approximately $2.6 million over the legally allowable limit and is projected to remain at nearly the same level at the end of 2015-16. Although the board and district officials annually appropriated a portion of fund balance towards the subsequent year’s budget, the total amounts appropriated were mostly not used because district officials overestimated appropriations. In addition, district officials consistently budgeted for expenditures that could have been paid for with reserve funds. Had district officials retained the same tax levy each subsequent year as in 2012-13, residents could have realized approximately $410,000 in cumulative tax savings.

Delaware Academy Central School District at Delhi – Fund Balances (Delaware County)
Each year during the audit period (July 1, 2014 through November 9, 2015), district officials appropriated more fund balance than needed, which artificially reduced unrestricted fund balance to within the 4 percent statutory limit percentage. Instead of having operating deficits totaling $2.8 million for the period, as planned, the district’s net result of operations was a surplus of $705,000. In addition, district officials overfunded five of the six reserves as of June 30, 2015. Moreover, district officials did not use debt service funds to make payments on long-term debt. With the inclusion of the unused appropriated fund balance, the overfunded reserves and the unused debt service funds, the fund balance for the five years ranged from 26.7 percent to 29.4 percent of the ensuing year’s appropriations.

Lake Placid Central School District – Claims Auditing (Essex County)
Although claims were generally supported by adequate documentation and were for appropriate purposes, they were not always audited and approved prior to payment. The business manager, who also serves as the district’s treasurer, prints signed checks prior to the claims auditor’s audit and approval of the corresponding claims. When signed checks are generated prior to the claims auditor’s audit and approval, there is an increased risk that improper claims could be paid by the district.

North Rose-Wolcott Central School District – Financial Management (Wayne County)
The district has no written plan that details the appropriate and necessary levels for reserve funds and prescribes how the reserve fund balances are to be monitored, analyzed and maintained. As a result, four of the district’s 11 reserve funds, totaling more than $6.8 million, may be overfunded or unnecessary. Additionally, district officials have not developed formal multiyear financial or capital plans, which would greatly benefit it in meeting its current and future obligations.

Pembroke Central School District – Financial Management (Genesee County)
The board and district officials consistently overestimated appropriations. When the appropriated fund balance not needed to finance operations is included in unrestricted fund balance, the district’s recalculated unrestricted fund balance from 2012 to 2014 ranged from approximately $2 million (9 percent) to $2.2 million (11 percent), exceeding the statutory limit. This trend is projected to continue through 2015-16. The board and district officials have not properly managed four reserves that appear to be overfunded or contain funds that are improperly restricted by approximately $7.6 million, which is approximately 35 percent of 2015-16 budgeted appropriations. District officials also consistently budgeted for expenditures that could have been paid for with reserve funds. Had district officials maintained the same tax levy as in 2012-13, residents could have realized approximately $720,000 in cumulative tax savings.

Pulaski Central School District – Financial Condition (Oswego County)
The board consistently overestimated appropriations in the district’s adopted budgets. Although the district reported year-end unrestricted general fund balance at levels that essentially complied with the 4 percent statutory limit, the board adopted budgets which included appropriated fund balance and reserves that were not needed as funding sources because the board and district officials overestimated appropriations by an average of 8.8 percent over the last three fiscal years. As a result, the district experienced an operating surplus in 2011-12 and operating deficits in 2012-13 and 2014-15 that were significantly less than planned. When the unused appropriated fund balance was added back, recalculated unrestricted fund balance averaged about 8 percent of the ensuing year’s appropriations exceeding the legal limit.

Sackets Harbor Central School District – Financial Condition (Jefferson County)
The board has consistently overestimated appropriations in its adopted budgets by about 9 percent over the past three years. As a result, a significant portion of the fund balance appropriated in the general fund was not needed to finance operations and unassigned fund balance has exceeded the 4 percent legal limit from fiscal years 2012-13 through 2014-15. The district has reduced the reported level of year-end unassigned fund balance from 12 percent of the ensuing year’s budget at the end of 2012-13 to 8.6 percent at the end of 2014-15. However, when the unused appropriated fund balance was added back, the recalculated unassigned fund balance exceeded 15 percent of the next year’s appropriations in all three years.

Somers Central School District – Fixed Assets (Westchester County)
Although the district has procedures specific to the maintenance of IT inventory, the board has not adopted an asset policy establishing capitalization or tagging thresholds, control over assets, or how to maintain records for these assets. Consequently, three assets valued at $1,650 could not be located and 21 assets valued at $69,370 were either not tagged or the asset tag numbers did not agree with the asset records. Furthermore, 10 assets purchased in 2015-16 valued at $57,573 were not recorded on the asset list and nine assets valued at $45,750 were listed as disposed of, but were still in service. Auditors found that 18 of 20 assets listed as disposed of, valued at $32,920, did not have documentation indicating authorization or approval.

South Lewis Central School District – Financial Condition (Lewis County)
The district’s unassigned fund balance has exceeded the 4 percent legal limit from fiscal years 2012-13 through 2014-15. At the end of 2014-15, the district’s fund balance was approximately $2.4 million, or 9.7 percent of the ensuing year’s appropriations. Although the district’s unassigned fund balance has exceeded the statutory limit for the past three fiscal years, the board increased the tax levy from $7.8 million in 2012-13 to $8.3 million in 2015-16, an increase of about 6 percent.

Union Springs Central School District – Retiree Health Insurance Contributions (Cayuga County)
District officials ensured that retiree health insurance contributions were properly billed, collected and deposited. Although the account clerk performs most of the duties, district officials implemented proper compensating controls to ensure bills are accurate, money is collected from all retirees and money is deposited into district bank accounts.

Watertown City School District – Financial Condition (Jefferson County)
The district has overestimated appropriations in the adopted budgets by about an average of 14 percent annually over the past three years. As a result, a significant portion of the fund balance appropriated in the general fund was not needed to finance operations and unassigned fund balance has exceeded the 4 percent legal limit each of the last three fiscal years. The district reduced the reported level of year-end unassigned fund balance from 9.3 percent at the end of 2012-13 to 6.9 percent at the end of 2014-15, but when the unused appropriated fund balance is added back, the recalculated unassigned fund balance exceeds 20 percent of the next year’s appropriations for each of the three years.

Wheelerville Union Free School District – Fund Balance (Fulton County)
The district has not correctly recorded and reported the composition of its fund balance. Since the fiscal year ending June 30, 2013, the treasurer has recorded and reported the amount of unrestricted fund balance that exceeds the statutory limit at the end of each fiscal year as “other restricted fund balance” to keep the unrestricted fund balance within the limit. This accounting practice understates the true amount of the general fund’s unrestricted fund balance and circumvents the statutory limit the district is permitted to retain. As a result, over the four past fiscal years the district retained unrestricted fund balance amounts that ranged from 15 percent to 34 percent of the ensuing year’s appropriations.

Williamson Central School District – Procurement of Professional Services (Wayne County)
Although the board has developed a purchasing policy and district officials have developed corresponding regulations, they do not provide guidance for seeking competition when procuring professional services. The policy and regulations do not indicate when, or at what monetary threshold, it is appropriate to use written requests for proposals, written quotes or oral quotes. Additionally, the policy and regulations do not outline the specific documentation requirements to be used during the solicitation process.

Willsboro Central School District – Financial Condition (Essex County)
The district has accumulated unrestricted fund balance that exceeds the statutory limit by approximately $977,000 (nearly 12 percent) and has levied more taxes than were needed to fund operations during the 2013-14 through 2015-16 fiscal years. The board also overestimated appropriations in the 2012-13 through 2014-15 budgets by more than $2.3 million (10 percent). The district’s budgeting practices made it appear that they needed to both raise taxes and appropriate fund balance and reserves to close projected budget gaps, despite an operating surplus of $51,390 during the 2012-13 fiscal year and smaller-than-planned operating deficits of $24,169 in 2013-14 and $39,578 in 2014-15. 

Daughter alleged to have stolen over $148,000 of New York State Public Employees’ Retirement System funds following her failure to report her father’s death to the System

Daughter alleged to have stolen over $148,000 of New York State Public Employees’ Retirement System funds following her failure to report her father’s death to the System

Source: Office of the State Comptroller

[N.B. The charges set out in an indictment are merely accusations and the defendant is presumed innocent until proven guilty.] 

New York State Comptroller Thomas DiNapoli and Attorney General Eric T. Schneiderman reported the unsealing of an indictment charging Renee Kanas, 63, a resident of Tamarac, Florida, with Grand Larceny in the Second Degree, a Class C felony.

Kanas is alleged to have stolen over $148,000 in pension payments from the New York State and Local Employees Retirement System paid to her father, Jacob Yudenfreund, a New York State pensioner who died in March 2010.

According to the indictment and statements made by the prosecutor at the arraignment, Kanas’ father was a New York State pensioner who elected to receive reduced monthly benefits so his wife, Doris Yudenfreund, would continue to receive benefits after his death.  Mrs. Yudenfreund, however, predeceased Mr. Yudenfreund.  As such, upon Mr. Yudenfreund’s passing in March 2010, eligibility for any of his retirement allowance terminated.  

According to the Comptroller and Attorney General, Kanas failed to notify the New York State and Local Employees Retirement System of her father’s death.  Instead, from March 2010 until January 2015, pension benefits totaling over $148,000 were deposited into a bank account jointly held by Mr. Yudenfreund and Kanas.  Kanas allegedly accessed these funds after her father’s death and liquidated all but $1,207.55 in pension benefits over that time period.

The allegations concerning Renee Kanas are posted on the Internet at::

http://www.osc.state.ny.us/press/releases/june16/061716a.htm

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online at http://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Former treasurer of a volunteer fire company indicted for wire fraud and subscribing to false tax returns

Former treasurer of a volunteer fire company indicted for wire fraud and subscribing to false tax returns

Source: Office of the State Comptroller

[N.B. The charges contained in an Indictment are merely accusations and the defendant is presumed innocent until proven guilty.]

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. DiNapoli, New York State Comptroller, Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service - Criminal Investigation (“IRS-CI”), Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and George Beach, Superintendent, New York State Police reported the arrest of Michael Klein, the former treasurer of the Mahopac Volunteer Fire Department (“MVFD”), on charges of wire fraud and subscribing to false tax returns.

Klein, Fire Department’s elected treasurer, is alleged to have stolen $5.7 million of the Fire Department’s monies over a period of more than 13 years.  

Details concerning the allegations involving Michael Klein are posted on the Internet at:

http://www.osc.state.ny.us/press/releases/june16/061516.htm

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online at http://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Requiring employees to submit to a “dog-sniffing test” for illegal drugs

Requiring employees to submit to a “dog-sniffing test” for illegal drugs

Correction Officers’ Benevolent Assoc. v City of New York, USDC, Southern District of New York, 15-CV-5914

The New York City Department of Corrections established a “zero tolerance” drug policy providing for the termination of any employee, uniformed (i.e., correction officers), or civilian, who violated the policy. Its justification: the policy serves important functions by acting as a deterrent against drug traffic in its facilities and ensured that “the security of penal institutions is not breached.”

A federal judge dismissed the Correction Officers’ Benevolent Association’s [COBA] challenge to the New York City's requiring its correction officers to be searched when “drug-sniffing dogs” react positively to the individual. An officer could be suspended if he or she refused to submit to the search for contraband.

Judge Alison Nathan rejected COBA’s argument that searches aided by the drug-sniffing dogs violated its members' constitutional rights as well as New York State's Civil Service Law.

Judge Nathan ruled that COBA cannot claim its member's constitutional rights were being violated by their employer’s efforts to detect individuals attempting to transport drugs into the facility in violation of the law and the controlling Collective Bargaining Agreement. The court also rejected COBA claim that “drug-sniffing dogs” could produce “false positives.”

Other decision testing New York City’s Zero Tolerance Drug Policy include:

Roberts v New York City Office of Collective Bargaining, 113 AD3d 97, [Fire Department's determination of an appropriate penalty for illegal drug use relates to its primary mission of providing public safety];

New York City Fire Department v Armbruster, OATH Index #1350/12 [Firefighter who tested positive for cocaine in a random workplace drug test failed to demonstrate that he consumed the cocaine unknowingly];

Dept. of Corrections v Robbins, OATH 2030/99, [there are instances, particularly where a civilian employee is involved, when the “automatic penalty” under the department’s zero tolerance drug policy should not be applied].