New York State Comptroller DiNapoli releases municipal and school audits

On March 20, 2024, New York State Comptroller Thomas P. DiNapoli announced the following local government and school audits were issued.

Click on the text highlighted in color to access both the summary and the full audit.

New York State Comptroller Thomas P. DiNapoli today announced the following local government and school audits were issued.

City of Salamanca – Collections (Cattaraugus County)

The city comptroller’s collections were not always accurately recorded and because adequate collection records were not always maintained, auditors could not determine whether deposits were generally made in a timely manner. Auditors reviewed 29 deposits totaling nearly $2 million that consisted of 1,835 entries made during the audit period and determined: 1,759 entries lacked a duplicate press-numbered receipt which precluded them from determining whether deposits were made in a timely manner. Another 34 entries totaling approximately $50,000 did not have the correct form of payment (cash or check) listed in the collection records and 26 entries totaling approximately $18,000 did not have either the correct check number included on the collection records, or no check number was listed at all. Auditors found no collections were lost, misused or misappropriated, but because complete and reliable collections were not always maintained, there is an increased risk of city collections being lost, misused or misappropriated.

 

Piseco Common School District – Authorized Investments (Hamilton County)

District officials did not invest in accordance with statutory requirements. As a result, district investments were at an increased risk of loss. District officials did not adhere to the district’s investment policy and invested $35,000 in an investment account that is not statutorily authorized. The board re-adopted its investment policy annually but did not ensure the district’s investments complied with the policy’s list of eligible investments. In addition, the board did not develop procedures to address investment requirements.

 

Village of Afton – Claims Auditing and Disbursements (Chenango County)

The board did not properly audit claims, and as a result, payments were made prior to audit, for unsupported claims and for inappropriate purposes. Of the 98 claims totaling $155,528 reviewed: 53 claims totaling $13,356 were paid prior to audit and one claim totaling $793 did not include adequate supporting documentation, such as itemized receipts. The village reimbursed the former mayor for two payments totaling $1,500 for the village’s accounting software that she paid for with her personal credit card. The village should not reimburse anyone other than current village officials or employees. In addition, auditors reviewed 50 disbursements totaling $11,480 and determined that the board did not properly monitor non-payroll disbursements. As a result, there is an increased risk that errors or inappropriate transactions could occur and remain undetected.

 

Beacon Central School District – Information Technology (IT) (Dutchess County)

District officials did not ensure network user accounts were adequately managed. Unnecessary enabled network user accounts are additional entry points into a network and, if accessed by attackers, could potentially be compromised or used for malicious purposes. In addition to sensitive IT control weaknesses that were communicated confidentially to district officials, auditors found that officials did not disable 281 unneeded network user accounts of the 1,280 accounts reviewed. The accounts included 153 student accounts, 89 nonstudent accounts, and 39 shared and service accounts.

 

Copiague Union Free School District – Information Technology (Suffolk County)

District officials did not properly manage nonstudent network user accounts and financial software access controls. As a result, data and personal, private and sensitive information accessible by those accounts were at a greater risk for unauthorized access, misuse or loss. Auditors found that officials did not disable 316 nonstudent network user accounts (24%) that were not needed, including two user accounts assigned to employees that left the district more than 17 years ago. In addition, the district did not ensure that employees had the appropriate access to the financial software necessary to perform their job functions or provide IT security awareness and data privacy training annually to all officials and employees with access to financial and other sensitive data.

 

OnTECH Charter High School – Information Technology (Onondaga County)

School officials did not ensure IT systems were adequately secured and protected against unauthorized use, access and loss. In addition to sensitive IT control weaknesses that were communicated confidentially to officials, the board and officials did not adequately manage user accounts and permissions. As a result, the six computers tested had unneeded user accounts and unnecessary administrative permissions. Officials also did not monitor Internet usage for compliance with the school’s acceptable use policy. As a result, there is an increased risk of school computers being exposed to malicious software. In addition, officials did not develop and adopt an IT contingency plan and provide staff with IT security awareness training.

###

Judicial review of the cancellation of an offer of promotion alleged to have been the result of unlawful discrimination because of race

A federal district court for the Northern District of New York summarily dismissed Petitioner's claims for race discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”) and the New York State Human Rights Law (“NYSHRL”), as well as his claims for disability discrimination under the Americans with Disabilities Act of 1990 (“ADA”) and the NYSHRL.

Petitioner had been an employee of the Albany Fire Department [AFD] since 1993, serving as a firefighter in a number of capacities until his promotion captain in 2010 when he was offered a provisional promotion to battalion chief, the third highest-ranking position at the AFD. The promotion was to take effect after a swearing-in ceremony.

Shortly before the ceremony, Petitioner was drinking, while off-duty, and became so intoxicated that first responders found him “incoherent". AFD subsequently rescinded the promotion offer it had made to Petitioner. Petitioner challenged AFD's action but a federal district court’s summary judgment dismissed his complaint. 

Petitioner appealed the district court's ruling, contending that he sufficiently established his claims for race discrimination. The United States Court of Appeals, Second Circuit, rejected Petitioner's appeal and, affirming the district court's decision, said:

1. "Here, the record supports the district court’s determination that the AFD was entitled to summary judgment on Plaintiff’s race discrimination claims";

2. "While Plaintiff purports to challenge the district court’s dismissal of his disability-related claims under the ADA and the NYSHRL, his briefing on appeal does not address either of those claims. Therefore, [Plaintiff] has abandoned any challenge to the dismissal of these claims";

3. Based on its independent review of the record, the Circuit Court concluded that "[Plaintiff] established a prima facie case of race discrimination ... as an African-American employee, is a member of a protected class; met his 'minimal' burden of presenting evidence that he 'possesses the basic skills necessary for performance of the' battalion chief position";

4. "[The] rescission of [Plaintiff's] promotion offer constitutes an adverse employment action ... [i]n addition to terminations of employment and demotions, failure to promote ... may also qualify as [an] adverse action";

5. Plaintiff "produced evidence from which a reasonable jury could find that his base pay and benefits would have been greater as battalion chief than as captain"; and

6. Plaintiff's allegation that he was “replace[d] ... with an individual outside [his] protected class” is sufficient to raise an inference of discrimination at the initial prima facie stage."

Turning to the arguments advanced by ADF in its defense, the Circuit Court opined that ADF "has articulated a legitimate, non-discriminatory rationale for rescinding [Plaintiff's] promotion offer. Before he was slated to become battalion chief, [Plaintiff] consumed at least seven pints of beer ... and proceeded to 'expos[e] himself' outside of a [public establishment], ... prompting first responders to call an ambulance for 'a very old male who [was] highly intoxicated and ... pooped on himself,' ... and who was 'incoherent with his pants down around his ankles'....”

Following that incident, said the court, "AFD determined that [Plaintiff’s] promotion to battalion chief would undermine the AFD’s internal morale and its public perception, as well as [Plaintiff’s] effectiveness as a leader."

In these circumstances, opined the Circuit Court of Appeals, "the AFD has stated a sufficient, non-discriminatory rationale for the adverse employment action" and "[Plaintiff] on the other hand, has failed to produce sufficient evidence showing either that the AFD’s proffered reason was false, or more generally, that discrimination was the real reason for the rescission."

Noting that Plaintiff contended that the AFD’s promotion of "a Caucasian employee, constitutes disparate treatment," the Circuit Court said it agreed with the district court that Plaintiff and his Caucasian employee were not similarly situated." The Caucasian employee "was promoted to captain in April 2020, years after he was arrested and charged with an aggravated DWI in 2017." Plaintiff, in contrast, "engaged in misconduct days before he was slated to become battalion chief. Only in [Plaintiff's] case, then, was the AFD faced with the prospect of promoting an employee who had just publicly humiliated himself and the AFD. Moreover, [Plaintiff] was slated for promotion to a more senior position (battalion chief), which involved being a shift commander in charge of several field companies and members of the AFD." 

Thus, opined the Circuit Court, "[Plaintiff] has not established that the circumstances of [the Caucasian employee's] promotion were so similar so as to give 'at least minimal support to [Plaintiff’s] claims that the [rescission] may have been based on race' ... discrimination.”

Finally, the Circuit Court said Plaintiff fails to establish a genuine issue of material fact as to whether he was treated less favorably than [the Caucasian employee] and even assuming they were similarly situated, [Plaintiff] "points only to the fact that the person ultimately selected to be battalion chief ... scored second on the civil service exam after [Plaintiff]".

In the words of the Circuit Court of Appeals, "No reasonable jury could discern from this record, taken as a whole, that the AFD rescinded [Plaintiff's] promotion offer due to his race. Accordingly, the district court properly dismissed [Plaintiff's] race discrimination claims."

Click HERE to access the Circuit Court of Appeals decision posted on the Internet.

 

Challenging being medically disqualified for employment in a position

The New York City Department of Sanitation [DSNY] terminated an employee [Plaintiff] after he was found to be "medically disqualified" for his position. Plaintiff  challenged DSNY's action but Supreme Court granted DSNY's motion to dismiss Plaintiff's Article 78 petition. The Appellate Division unanimously affirmed the Supreme Court's decision.

The Appellate Division said that DSNY had demonstrated that their finding that Plaintiff was medically disqualified for the position of sanitation worker due to his medical condition was not discriminatory under the New York State and City Human Rights Laws [HRLs] "because no reasonable accommodation would enable [Plaintiff] to perform the duties of the position safely and effectively".

The Appellate Division noted that although Plaintiff did not request any specific accommodation of his disability until commencing this litigation, both the State and City HRLs required an employer "to engage in an interactive dialogue regarding possible accommodations once they became aware of [an employee's disability], citing Executive Law §296[3][a]; 9 NYCRR 466.11[j][4]; Administrative Code of City of NY § 8-107[15][a]; and Estate of Benitez v City of New York, 193 AD3d 42, leave to appeal denied 37 NY3d 906. The Appellate Division also noted the DSNY engaged a dialogue with the Plaintiff during the internal appeals process.

Following an individualized examination of plaintiff, DSNY's medical director considered and rejected a possible accommodation, the use of gloves, explaining that the "use of gloves will only exacerbate [Plaintiff's] condition" and Plaintiff's condition would prohibit him from performing the duties of a sanitation worker even with continued treatment, due to the nature of his disability, which was a chronic condition, because the duties of a sanitation worker, which involve exposure to germs and chemicals, would "render treatment ineffective" and make Plaintiff vulnerable to infection.

Citing Matter of Altieri v City of N.Y. Civ. Serv. Commn., 57 AD3d 248, [leave to appeal denied, 12 NY3d 711], the Appellate Division opined that Plaintiff's submissions "from his treating physician did not create an issue of fact rebutting these findings, and DSNY was entitled to rely on the opinion of its medical director even in the presence of [Plaintiff's] physician's conflicting opinion".

Click HERE to access the decision of the Appellate Division posted on the Internet.

 

New York City and New York State Human Rights Laws each protect nonresidents who are not yet employed in the city or state but who proactively seek an actual city- or state-based job opportunity

Plaintiff, a South Asian-American woman, filed this suit against the Defendant asserting employment discrimination claims. She alleged that she was subjected to discrimination on account of her sex and race while working as a reporter in Defendant's Washington, D.C. bureau. 

In 2018, concluding that she could no longer advance her career in the Washington, D.C. bureau, she "appl[ied] for various positions" at Defendant's New York bureau and expressed interest in an open United Nations reporter position that was ultimately was filled by a man who allegedly had less practical experience than Plaintiff and less formal education. After her managing editor in Washington, D.C. told Plaintiff that Defendant decided not to convert the U.N. job to a " 'diversity slot,' " she understood that she would only be considered for promotions to positions identified as such. 

In June 2018, claiming that she was constructively discharged, Plaintiff informed her team leader and managing editor that she could no longer work for Defendant because of the discrimination that she had encountered and left Defendant's employ. Two years later, Plaintiff, then a California resident, commenced "this class action in New York State court." 

She asserted, among other causes of action, individual claims under the State and City Human Rights Laws, contending that Defendant discriminated against her on the basis of sex and race by denying her promotions.

Defendant removed the case to federal court and a United States District Court for the Southern District of New York granted Defendant's motion to dismiss all of Plaintiff's claims under both Human Rights Laws. Acknowledging that other cases from the Southern District had reached the opposite conclusion in analogous circumstances, the Second Circuit reserved decision on Plaintiff's appeal and certified the following question to the New York State Court of Appeals:

"Whether a nonresident plaintiff not yet employed in New York City or State satisfies the impact requirement of the New York City Human Rights Law or the New York State Human Rights Law if the plaintiff pleads and later proves that an employer deprived the plaintiff of a New York City- or State-based job opportunity on discriminatory grounds".*  

Given the policy implications involved and the lack of controlling authority, the Second Circuit determined that certification was appropriate,New York State's Court of Appeals accepted the certified question (see 39 NY3d 1061 [2023]), and answered it in the affirmative, noting that the New York City Council and the New York State Legislature have enacted laws banning discrimination, including employment discrimination, from within their geographic boundaries and held "that the New York City and New York State Human Rights Laws each protect nonresidents who are not yet employed in the city or state but who proactively sought an actual city- or state-based job opportunity."

The State Court of Appeals explained that for the purposes of the impact test, a failure to hire or promote case is distinct from a discriminatory termination case.  The plaintiff in Hoffman** was not a New York inhabitant and did not seek to become one. In contrast, a nonresident who engaged in affirmative conduct to obtain an actual job opportunity based in New York City or State sought to become an inhabitant or person within those geographical boundaries "has satisfied the requirement that the alleged discriminatory act had an impact within the boundaries of New York City". In the words of the Court of Appeals, Plaintiff's "rejection from the position denied her the opportunity to work in New York City," thus providing the necessary New York City workplace nexus for her claim of a City Human Rights Law covered injury.

The Court of Appeals opined that the Second Circuit "recognized that a ruling for [Defendant] 'would serve to immunize employers from liability' under the Human Rights Laws 'for discriminatory conduct pertaining to New York City- or State-based jobs' even when the discriminatory conduct has an impact in New York (58 F4th at 71). We cannot conclude that the legislature and city council intended to give New York employers a license to discriminate against nonresident prospective employees and, thus, we may not adopt such a narrow construction of the statutes. Accordingly, the certified question should be answered in the affirmative."

Opinion by Judge Singas. Chief Judge Wilson and Judges Rivera, Garcia, Cannataro, Troutman and Halligan concur.

* 58 F4th 64, 71 [2d Cir 2023].

** Hoffman v Parade Publs, 15 NY3d 285.

 

Click HERE to access the decision of the New York Court of Appeals posted on the Internet.

2023 Form 1099-R: Reporting of disability annuity payments to first responders and other disabled taxpayers

The IRS made changes to the 2023 Instructions for Forms 1099-R and 5498 to help clarify how to report disability annuity payments to first responders or other taxpayers on the Form 1099-R.

Revenue Ruling 85-105, 1985-2 C.B. 53 states that disability retirement payments made to a taxpayer - under a workmen’s compensation act or under a statute in the nature of a workmen’s compensation act - as compensation for personal injuries or sickness incurred during the course of employment may not be subject to federal income tax.

A new paragraph was added to the 2023 Instructions: Box 2a, Taxable Amount, now references Rev. Rul. 85-105 to help you determine the taxable and/or non-taxable amount of the disability payments. If the annuity payments are fully non-taxable, there should be a zero in box 2a.

A reference to Rev. Rul. 85-105 was added to the Guide to Distribution Codes: Code 3 – Disability, is used to report the non-taxable part of the disability distribution on the Form 1099-R.