State and municipal audits issued on October 20, 2020

On October 20, 2020, New York State Comptroller Thomas P. DiNapoli announced the following agency and school district audits had been issued.

Click on the text in blue to access the full text of the audit. 

Agency Audits:

Office of General Services (OGS): Compliance with Executive Order 88 – Energy Efficiency of State Buildings (Follow-Up) (2020-F-18)

An audit, covering the period April 1, 2014 to May 13, 2019, found OGS generally had developed targets and plans to contribute toward EO 88 and complied with the guidelines. However, auditors found OGS had relied on one capital project to provide the majority of its energy savings. OGS also needed to develop a contingency plan to replace the project and to continue developing energy-saving capital projects to contribute toward the collective 20 percent energy reduction. In a follow-up, auditors found OGS has made significant progress in correcting the problems identified in the initial report. 

 

Department of Health (DOH): Improper Medicaid Payments for Recipients in Hospice Care (Follow-Up) (2019-F-59)

An audit released in December 2018 identified over $8 million in improper Medicaid payments for medical services provided to recipients receiving hospice care. Many of the overpayments occurred because the DOH did not have a process to identify and track Medicaid recipients receiving hospice care. In a follow-up, auditors found DOH officials did not make much progress in addressing the problems identified in the initial audit, and significant action is still required to prevent future Medicaid overpayments.

 

New York City Department of Education (DOE): Compliance with Special Education Regulations for the Provision of Services (2018-N-5)

Auditors determined that DOE did not arrange for special education services within the required 60 school days for 18 percent of the eligible students in school year 2016-17. Noncompliance ranged from 32 percent in District 9 (located in the South Bronx) to 4 percent in District 11 (Northeast Bronx). Auditors also found situations where DOE provided services without the required parental consent.

 

Metropolitan Transportation Authority (MTA): Administration of Self-Insured Workers’ Compensation Plans (2018-S-33)

There is room for improvement in how the MTA’s three self-insured agencies administer workers’ compensation plans making sure they meet the self-insurers’ obligations. Auditors found inconsistent processes and application of the law across agencies have resulted in late, inaccurate, or sometimes missed administration of benefits, placing an undue financial burden on injured employees.

 

New York City Department of Transportation: Oversight of Selected Aspects of Traffic Controls (2018-N-6)

The department monitored traffic flow at intersections, but did not address the concerns of the public and officials in a timely manner. Auditors reviewed several units that were supposed to perform monitoring and operational tasks and found that all of them need to improve their performance. 

 

New York City Department of Transportation: Controls over Revocable Consents (2010-N-1)

A revocable consent grants an individual or organization the right to construct and maintain certain structures on, over, or under New York City streets and sidewalks. To obtain this right, the property owner must file a petition for the revocable consent. The department charges an annual rate for eligible revocable consents, based on either a formula or a flat rate. Auditors found the department did not bill and collect the correct annual rates for the majority of consents reviewed. It was inconsistent in its application of the rules and did not always apply them as written when calculating the annual rate to be billed. As a result, the grantees were undercharged an estimated $1,056,242.

 

New York State Health Insurance Program: CVS Health – Temporary Holding Account Rebate Revenue (Follow-Up) (2020-F-25)

An audit issued in October 2019 found that CVS Health improperly designated a temporary holding account used to process certain prescription drug claims, as “non-rebate-eligible.” As a result, CVS Health did not seek rebates from drug manufacturers on claims in the temporary holding account that were, in fact, rebate-eligible. In a follow-up, auditors found CVS Health has made significant progress in correcting the problems identified in the initial report, having implemented both recommendations.

 

New York State Liquor Authority (SLA): Internal Controls Over Selected Financial Operations (2019-S-69)

Auditors found SLA has adequate internal controls in the areas of revenues, payroll, procurement and procurement card expenditures, asset management, and travel expenses to ensure assets and information are properly managed and safeguarded.

 

State Education Department (SED): Oversight of Pupil Transportation Services (2019-S-49)

Auditors determined SED could further enhance its efforts to monitor school districts’ compliance with its own requirements for school bus drivers, monitors and attendants. As a result, SED does not have assurance that school bus drivers, monitors, and attendants across the state are qualified and have completed the required training. 

 

School District Audit:

Dalton-Nunda Central School District – Financial Management (Allegany County, Livingston County and Wyoming County)

The board and district officials did not adopt realistic budgets and effectively manage fund balance and reserves. The board’s actions to manage fund balance were not transparent and made it appear that the district needed to both increase taxes and use appropriated fund balance to close projected budget gaps. The board circumvented the statutory limit on surplus fund balance by making $7.8 million in unbudgeted year-end transfers to reserves and appropriating $900,000 in fund balance that was not used. As of June 30, 2019, recalculated surplus fund balance exceeded the statutory limit by more than $1.3 million or 8 percentage points and two general fund reserves were overfunded.

 

Naples Central School District – Information Technology (Livingston County, Ontario County Steuben County and Yates County)

District officials did not ensure that the district’s network access controls were secure. Officials did not regularly review network user accounts and permissions to determine whether they were appropriate or needed to be disabled. The district had 63 unneeded network user accounts that had not been used in at least six months. In addition, sensitive information technology control weaknesses were communicated confidentially to officials.

 

Oneida City School District – Information Technology (Madison County and Oneida County)

The district’s network was not adequately secure to protect the student information system against unauthorized use, access and loss. District officials did not adequately manage user accounts or administrative permissions to limit access to assets and data. In addition, some district computers were used for personal activity, increasing the likelihood of the district’s network being exposed to malicious software. A written disaster recovery plan was not made available to the Comptroller’s auditors or the board of education for review and approval. Sensitive information technology control weaknesses were communicated confidentially to officials.

 

Courts apply longstanding basic rules of statutory interpretation to ascertain and give effect to the intention of the legislature

In July 1976 legislation that fundamentally reformed the state pension systems was enacted and signed into law. Included were changes providing that "any public employee hired on or after July 1, 1976 would be enrolled in the newly-created Tier 3 [a system]  characterized as one 'designed to provid[e] uniform benefits for all public employees and eliminat[e] the costly special treatment of selected groups ... inherent in the previous program.'"

An exception to this pension reform allowed all police officers and firefighters who subsequently entered or reentered a public retirement system to continue as Tier 2 members pursuant to "regular two-year extender bills" until 2009 and, as relevant here, all NYPD officers appointed between July 1, 2009 and March 31, 2012 were placed in Tier 3 of the New York City Police Pension Fund (PPF) while all officers appointed on or after April 1, 2012 were placed in revised but functionally similar Tier 3 plans of the same pension fund.

The focus in this appeal was City of New York's policy to the effect that certain Tier 3 officers were not eligible for certain benefits available to officers in Tier 2 of the PPF retirement plan, including the "credit for service" mechanism* that allows police officers to obtain credit for certain periods of absence without pay for childcare leave, while other PPF retirement plan member absent without pay for childcare leave permitted under NYPD regulations would be eligible for a limited amount of credit for that leave if certain filing and reimbursement requirements were met.

Plaintiffs in this action, among other things, sought a decision declaring that "all police officers hired by the NYPD, including those hired on or after July 1, 2009, are eligible for the benefits afforded by the second subdivision (h) of §13-218," notwithstanding the absence of any extender bill after 2009, and all members of the PPF - regardless of hire date - may purchase pension credit for time spent on unpaid childcare leave."

The City, in contrast, asserted that the relevant provisions of the RSSL "conflict with the Administrative Code and that the pension rights of Tier 3 police officers are exclusively governed by article 14 of the Retirement and Social Security Law [RSSL]." Specifically, the City argued that RSSL §513(h) [1] "addresses the issue of service credit for [childcare] leave," [2] overrides any like provision of Administrative Code §13-218, and [3] "limits the eligibility for such credit to New York City correction officers hired before April 1, 2012."

Supreme Court reasoned that Administrative Code §13-218 (h), on its face, renders any member of the PPF eligible for the childcare leave service credit benefit, and that the RSSL does not conflict with or preempt that part of the Administrative Code**. 

The Appellate Division reversed the Supreme Court's ruling, denying Plaintiffs' motion for summary judgment and granting the City's cross motion for accelerated relief. The Appellate Division reasoned that "because the RSSL expressly makes the childcare leave service credit benefit in question available to correction officers, but does not expressly confer the same benefit upon police officers, the legislature meant to nullify the part of the Administrative Code allowing the buyback to police members of the retirement system."

Referencing the longstanding, basic rules of statutory interpretation, the Court of Appeals said that in such matters a court's "primary consideration is to ascertain and give effect to the intention of the [l]egislature", citing Samiento v World Yacht Inc., 10 NY3d 70. The rule of statutory interpretation relevant here, said the court, is that the literal language of a statute controls "unless the plain intent and purpose of [the] statute would otherwise be defeated."

Noting that Administrative Code §13-218(h) "Credit for service" provides, in relevant part, that: "any member who is absent without pay for child care le[a]ve of absence pursuant to regulations of the New York city police department shall be eligible for credit for such period of child care leave provided such member files a claim for such service credit with the pension fund by December [31, 2001], or within [90] days following termination of the child care leave, whichever is later, and contributes to the pension fund an amount which such member would have contributed during the period of such child care leave, together with interest thereon", the Court of Appeals opined that "none of the pertinent parts of the statute are ambiguous and 'Any member' can mean only what it says."

In the words of the court, "The reference to 'any member' is unbounded and unfixed to employees of a particular Tier, and the absence of an exception applicable to Tier 3 employees cannot reasonably be attributed to carelessness or mistake."

Rejecting the principal contentions advance by the City in support of its position, the Court of Appeals, Judge Rivera dissenting in an opinion in which Chief Judge DiFiore concurred, held that the Appellate Division order should be reversed and, applying "longstanding, basic rules of statutory interpretation," that the relevant part of "Administrative Code §13-218 renders officers of the New York City Police Department (NYPD) who are members of the Tier 3 retirement system eligible for credit for certain periods of unpaid childcare leave, and that the grant of such benefits for those officers is consistent with the Retirement and Social Security Law."

* See Administrative Code §13-218 [h].

** See 56 Misc 3d at 442-443. 

The decision is posted on the Internet at http://www.nycourts.gov/reporter/3dseries/2020/2020_05841.htm

 

An individual may be subjected to disciplinary action for alleged off-duty misconduct having a clear nexus to his status as an employee

During an investigation by the New York City Department of Education's [DOE] Office of Special Investigations [OSI] into a complaint that confidential student information had been posted on the Internet, the plaintiff [Petitioner], a DOE employee, acknowledged that he was involved in posting the information at issue on the website of United Federation of Teachers (UFT) Solidarity, "a political caucus within the UFT."

Contending that OSI has no jurisdiction to investigate his alleged misconduct because he undertook this activity as a private citizen and education activist, not in his capacity as a DOE employee, Petitioner filed a CPLR Article 78 action asking the court to annul DOE's determination that he had violated Chancellor's Regulation A-820 and the federal Family Educational Rights and Privacy Act* [FERPA].

The Appellate Division said that Petitioner's argument that OSI has no jurisdiction in this matter "is unavailing," opining that Petitioner's misconduct has a clear nexus to his status as a DOE employee. Citing Board of Educ. City of N.Y. v Hershkowitz, 308 AD2d 334, leave to appeal dismissed 2 NY3d 759, the Appellate Division explained that OSI is charged with investigating misconduct within the City of New York school district, which is not limited to misconduct committed by a DOE employee acting within the scope of his employment.

The court noted that OSI had rationally determined that by posting the confidential student information at issue, which included transcripts, attendance records, and grade-change records, Petitioner had violated the FERPA and Chancellor's Regulation A-820, which conforms to federal regulations promulgated pursuant to FERPA.**

* See 20 USC § 1232g[b][2]. 

** See 34 CFR part 99.

The decision is posted on the Internet at http://www.nycourts.gov/reporter/3dseries/2020/2020_05703.htm