Selected reports and information published by New York State's Comptroller Thomas P. DiNapoli during the week ending June 17, 2017

Selected reports and information published by New York State's Comptroller Thomas P. DiNapoli during the week ending June 17, 2017

Click on text highlighted in color  to access the full report

Audits of State Departments and Agencies

Department of Health: Fiscal Oversight and Monitoring of AIDS Institute Service Provider Contracts (2016-S-30)

The AIDS Institute has taken several steps to update its procedures to address problems with contractor cost claims that were identified prior to this audit. However, the institute needs to further improve its internal controls to provide effective oversight and monitoring, and ensure that claimed contractor expenses are program appropriate and consistent with contract requirements.

Department of Health (DOH): Criminal History Background Checks of Unlicensed Healthcare Employees (2016-S-65)

DOH is generally meeting its obligations for conducting background checks on unlicensed employees of nursing homes, adult care facilities (ACF), and home health care (HHC) providers, according to state requirements. However, auditors identified 24 criminal history record check applicants whose determination letters were not completed on time. As a result, the individuals could have been allowed to work for periods ranging from 2 months to as long as 28 months. Of these, auditors found only eight applicants (who were ultimately denied eligibility) actually worked on a provisional basis, for periods between 3 and 14 months while their background checks were pending.

Housing Finance Agency and Homes and Community Renewal: The 80/20 Housing Program (2015-S-83)

The 80/20 program provides low-interest financing to multifamily rental developers who commit to designating at least 20 percent of a development's units to low-income households. Based on the rents charged and the regulatory agreements for our four sampled developments, auditors concluded that the proper numbers of affordable apartment units were made available to low-income tenants. However, auditors found higher earners with apartments and several areas that could use improvement.

New York State Health Insurance Program: United HealthCare (UHC): Insurance Company of New York Empire Plan Drug Rebates (Follow-Up) (2017-F-6)

An initial audit report issued in December 2015, identified $710,284 in rebate revenues from agreements with 114 drug manufacturers that were not credited to the state Department of Civil Service from Jan. 1, 2011 through Dec. 31, 2013. In a follow-up report, auditors found UHC officials made progress in addressing the issues identified in the initial audit. This included the remittance of $338,649 in drug rebate revenue to Civil Service. In addition, UHC officials agreed to remit another $67,386 in rebate revenues.

New York State Health Insurance Program: UnitedHealthcare: Empire Plan Drug Rebate Revenue (Follow-Up) (2017-F-5)

An initial audit report issued in November 2016, found that UHC did not remit $1,498,719 in drug rebate revenue to the Department of Civil Service as it was required to do during from Jan, 1, 2010 through Dec. 31, 2013. In a follow-up, auditors found UHC officials had remitted the rebate revenue to Civil Service.

Port Authority of New York and New Jersey: New York City Airport Lease (2014-S-28)

Based on testing, auditors found the Port Authority complied with the terms related to base rent payments to the city. However, the Port Authority had not fully complied with the terms of the ancillary agreements, which included an obligation to provide information and support to the Airport Board.

State Education Department: Elmcrest Children's Center Inc., Compliance with the Reimbursable Cost Manual (2016-S-62)

For the fiscal year ended June 30, 2014, Elmcrest claimed $54,250 in ineligible costs for the rate-based preschool special education program that it operated. The ineligible costs included: $18,264 in personal service costs, including bonuses and employee fringe benefits; $16,578 in overstated expenses; $12,911 in improperly allocated costs; and $6,497 in other than personal service costs, including undocumented vehicle costs, ineligible consulting services costs and non-reimbursable auditing fees. Elmcrest did not disclose related-party transactions with two vendors as required.

New York City Department of Probation: Oversight of Persons Convicted of Driving While Intoxicated (Follow-Up) (2016-F-30)

An initial audit report issued in October 2015 found that for the period from January 1, 2015 to December 31, 2016, the courts ordered the installation of 1,084 Ignition Interlock Devices (IIDs) for offenders under the Probation Department's supervision. Auditors found only a small percentage of the IIDs were installed in the cars of persons cited for alcohol-related motor vehicle violations and that probation officers often did not provide sufficient oversight of DWI offenders. Auditors also found that referral of probation violators were not made to the appropriate courts and district attorneys as required. In a follow-up, auditors found that probation officials made considerable progress in correcting the problems that were identified. However, additional improvements are still needed.

State Education Department: Variety Child Learning Center, Compliance with the Reimbursable Cost Manual (2016-S-77)

Variety, a not-for-profit organization located in Syosset, is a provider of special education services. Variety offers a range of special education services and programs to children with disabilities from birth to eight years of age. For the fiscal year ended June 30, 2014, auditors identified $6,719 in other-than-personal-service costs that did not comply with the requirements for state reimbursement.

Department of Taxation and Finance: Personal Income Tax Refunds (2016-1A-001)

During 2016, the tax department processed almost 7.6 million refunds totaling over $9.6 billion. After the tax department processes refunds, DiNapoli's office is charged with serving as a second set of eyes to ensure that only proper refunds are paid. Auditors returned 12,335 refunds totaling almost $43.9 million to the department that it had approved for payments. DiNapoli's auditors found red flags and other questionable information that led them to determine that the refunds were fraudulent or inappropriate.

Worker's Compensation Board: Annual Audit

Auditors identified $1,224,077 in inappropriate claims. They also identified two high-dollar outlier claims that resulted in $2,633,204 in total savings. For these claims in particular, board staff members entered incorrect data in fields used to calculate the payment amount resulting in artificially higher amounts to be paid. Auditors also reviewed claims processed by the board on a post payment basis to identify potential duplicate payments. For calendar year 2016, they identified 210 potential duplicate payments totaling $344,000.

Municipal Audits

Bethpage Fire District – Credit Card and Travel Expenditures (Nassau County)

The board needs to improve its policies and procedures over credit card use and travel related expenditures to ensure that all such expenditures are adequately supported and for necessary district purposes. Credit card charges totaling $32,860 were either not adequately supported or did not comply with the district's purchasing policy. In addition, credit card charges for conferences totaling $6,185 were not supported by proof of attendance and district officials paid travel credit card charges for meals for individuals who were not authorized by the board to travel.

Town of Bombay – Justice Court Operations (Franklin County)

A total of $5,681 in documented collections received during the audit period had not been deposited into a court bank account. The justices did not provide adequate oversight of the clerks responsible for receiving, recording and reporting cash receipts, and did not compare manual cash receipt records to the bank deposits. Accurate and complete bail records were not maintained and bank reconciliations and accountability analyses were not performed. The justices did not establish policies and procedures for enforcing unresolved traffic tickets.

Town of Hempstead Sanitary District Number 14 – Board Oversight (Nassau County)

The board has not established an internal control environment that fosters compliance and transparency due to its lack of policies, guidelines and monitoring. For example, claims to be paid were not presented on an abstract, and board minutes did not indicate that the board authorized, via resolution, the payment of claims audited and reviewed. In addition, the district has not submitted its statutorily required financial statements to the Office of the State Comptroller.

Village of Morris – Fund Balance (Otsego County)

The village accumulated significant fund balances without clear plans to use this money. Over the last three years, the general fund balance increased by 42 percent to $338,000, or 159 percent of actual expenditures, and the water fund balance increased by 58 percent to $238,700, or 240 percent of actual expenditures.

For access to state and local government spending, public authority financial data and information on 130,000 state contracts, visit Open Book New York. The easy-to-use website was created to promote transparency in government and provide taxpayers with better access to financial data.

The Plausibility Standard

The Plausibility Standard

Irrera v Humpherys, USCA, Second Circuit, Docket #16-2004

The Plausibility Standard was addressed the United States Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662, and essentially attempts to establish the "bright line" between speculative allegations and those of sufficient plausibility to survive a motion to dismiss the action. In Irrera the Second Circuit explained that "... Iqbal instructs [that] courts are to determine whether a complaint contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”

Dr. Joseph Irrera [Plaintiff] filed Title VII against Dr. Douglas Humpherys and the University of Rochester [Defendants] alleging that he had suffered unlawful retaliation as a result of his filing a complaint of sexual harassment. The district court granted Defendants' motion to dismiss.

The Second Circuit applied the Plausibility Standard to Plaintiff's retaliation claim and held that it was plausible that he was denied a teaching position after he declined sexual approaches from the man who was his teacher and the department chair.

Accordingly, the Second Circuit Court of Appeals vacated in the District Court's ruling part and remanded the matter for its further consideration of Plaintiff's retaliation claims.

The decision is posted on the Internet at:

http://www.ca2.uscourts.gov/decisions/isysquery/c4770246-7542-444d-8f84-5183ce69bf2f/1/doc/16-2004_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/c4770246-7542-444d-8f84-5183ce69bf2f/1/hilite/

Including the phrase "notwithstanding any other provision of law" in a bill is typically viewed as a legislature's intent to preempt all potentially conflicting statutes

Including the phrase "notwithstanding any other provision of law" in a bill is typically viewed as a legislature's intent to preempt all potentially conflicting statutes

Lawrence Teachers' Assn., NYSUT, AFT, NEA, AFL-CIO v New York State Pub. Relations Bd., 2017 NY Slip Op 04944, Appellate Division, Third Department

The Lawrence Union Free School District [District)] implemented a universal prekindergarten program pursuant to Education Law §3602-e. Initially program tasks were performed by employees working in a collective bargaining unit exclusively represented by the Lawrence Teachers' Association's [Association] but in 2012 the District unilaterally contracted with an outside eligible agency to staff and operate the program. The Association filed an improper practice charge with the Public Employment Relations Board [PERB] contending that the District had violated Civil Service Law §§204[2] and 209-a[1][d] of the Public Employees' Fair Employment Act, commonly referred to as the "Taylor Law," by outsourcing the work without first negotiating the matter in good faith with the Association.

A PERB Administrative Law Judge [ALJ] concluded that the provisions of Education Law §3602-e vitiated the District's duty to negotiate in good faith and dismissed the charge. PERB affirmed the ALJ's ruling and the Association initiated a CPLR Article 78 proceeding challenging PERB's decision. Supreme Court annulled PERB's determination and remitted for further proceedings, holding that nothing in Education Law §3602-e "defeat[ed] the District's bargaining obligations . . . under the Taylor Law." The District appealed.

Although the outsourcing of work performed exclusively by represented employees is a mandatory subject of bargaining under the Taylor Law, rendering a failure to bargain an improper employer practice under Civil Service Law §209-a(1)(d), PERB had concluded that the outsourcing in this instance was not a mandatory subject of bargaining in view of the provisions set out in Education Law §3602-e(5)(d). That provision authorizes a school district "to enter any contractual or other arrangements necessary to implement" a prekindergarten program plan "[n]otwithstanding any other provision of law."*

The Appellate Division said that its review of the statutory landscape "nevertheless leads us to agree with PERB's interpretation." The court explained that the main goal in statutory construction is to discern the will of the Legislature and, in this instance, the statute provides for a universal prekindergarten program "designed to effectively serve eligible children directly through the school district or through collaborative efforts between the school district and an eligible agency or agencies." Thus, said the court, a school district is free to avoid collaborative efforts in crafting a prekindergarten program plan as regardless of the precise plan devised, a school district is empowered to "enter any contractual or other arrangements necessary to implement" it "[n]otwithstanding any other provision of law."

Significantly, the Appellate Division noted that §3602(5)(d) grants a school district the power to make necessary arrangements "[n]otwithstanding any other provision of law," which, said the court, is the "verbal formulation frequently employed for legislative directives intended to preempt any other potentially conflicting statute, wherever found in the [s]tate's laws."

The court held that the addition of that language "signals the intent of the Legislature to override any statutory conflicts to the exercise of the school district's contracting power, including the Taylor Law bar to outsourcing work absent bargaining beforehand."

The Appellate Division opined that "[t]here is no absolute bar to collective bargaining over" the outsourcing of prekindergarten work to an outside agency and an agreement reached after collective bargaining on the subject is enforceable. However, the court observed that the clear language of Education Law §3602-e compels the conclusion that negotiation is not required to begin with and thus PERB was correct when it determined that the absence of negotiation in this instance did not constitute an improper practice under the Taylor Law.

In contrast, the Appellate Division noted that PERB's decision with respect to the Association's allegations concerning an improper practice within the meaning of the Taylor Law does not preclude Association from demanding "impact negotiations" concerning the program in the future.

* The Appellate Division's decision noted that "[a]s PERB itself recognizes, the interplay between the Taylor Law and Education Law §3602-e presents a question of pure 'statutory construction [that] is a function for the courts[, and PERB] is accorded no special deference in [its] interpretation of statutes'."

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2017/2017_04944.htm