Audits issued by the New York State Comptroller during the week ending January 15, 2021

New York State Comptroller Thomas P. DiNapoli announced the following audits of State departments and agencies and local governmental entities were issued during the week ending January 15, 2021.

Audits of State Departments and Agencies

Office for the Aging (OFA): Long-Term Care Ombudsman Program (Follow-Up) (2020-F-27) An audit issued in October 2019 found that certain system-generated office data may not have been sufficiently reliable for the agency’s use for analysis at the facility, regional program, or complaint level, which may limit its usefulness in decision making. Auditors also found that many residents of long-term care facilities lack regular access to ombudsman services, due in part to a decline in the number of volunteers combined with a lack of paid regional program staff. In a follow-up, auditors determined OFA has made significant progress in addressing the problems identified in the initial report.

Office of Children and Family Services (OCFS): Access Controls over Selected Critical Systems (Follow-Up) (2020-F-11)  An audit issued in March 2019 found that access controls over six OCFS systems containing confidential information were insufficient to prevent unnecessary or inappropriate access to those systems. In a follow-up, auditors found OCFS has made progress in correcting the problems identified in the initial report. Of the two recommendations OCFS officials implemented one and did not implement one.

Department of Civil Service: New York State Health Insurance Program: CVS Health - Accuracy of Drug Rebate Revenue Remitted to the Department of Civil Service (Follow-Up) (2020-F-23) An audit issued in January 2019 reviewed the rebate revenue generated from agreements with six drug manufacturers and found that CVS Health did not always properly invoice drug manufacturers for rebates or remit all rebate revenue it collected. As a result, New York was due $2,052,653 in rebates. In a follow-up, auditors found CVS Health has made progress in correcting the problems and collecting some of the rebates identified in the initial report.

Department of Civil Service: New York State Health Insurance Program: Empire Plan Members with Dual Family Coverage (2019-S-23)New York state does not allow two family coverages for its employees. Other public organizations that participate in the Empire Plan, including local governments and public authorities, may allow for dual family coverage, whereby each employee has family coverage. Auditors identified 696 employees and retirees of participating organizations with dual family coverage during the audit period. The total cost of premiums to the members and participating organizations for the second family coverage was $39,777,772.

Department of Health (DOH): Improper Medicaid Payments for Childhood Vaccines (Follow-Up) (2020-F-3) An audit released in December 2018 identified $32.7 million in improper Medicaid payments, which included payments for free vaccines and inaccurate payments for the administration fee. Of this amount, managed care organizations made improper payments totaling $29.8 million, and the department made improper fee-for-service payments totaling $2.9 million. In a follow-up auditors found DOH has made some progress in addressing the problems identified in the initial audit report, yet significant action is still required to prevent future Medicaid overpayments.

State Education Department (SED): The Kelberman Center Inc. – Compliance with the Reimbursable Cost Manual (2019-S-57) Kelberman is an SED-approved special education provider located in Utica. Kelberman provides preschool special education services to children with disabilities who are between three and five years of age. Kelberman is reimbursed for these services through rates set by SED. For the fiscal year ended June 30, 2017, auditors identified $23,616 in ineligible costs Kelberman reported for reimbursement. 

State Education Department (SED): Kids Unlimited, PT, OT & SLP, PLLC - Compliance with the Reimbursable Cost Manual (2020-S-33)Kids Unlimited is a New York City-based for-profit organization authorized by SED to provide special education services. The New York City Department of Education refers students to Kids Unlimited. For the three fiscal years ended June 30, 2015, auditors identified $446,835 in reported costs that did not comply with the requirements for reimbursement. 

State Education Department (SED) Mama Program LLC – Compliance with the Reimbursable Cost Manual (2019-S-73) Mama Program is a New York City-based for-profit organization authorized by SED to provide preschool special education services. The New York City Department of Education refers students to Mama Program. For the three fiscal years ended June 30, 2015, auditors identified $95,562 in reported costs that did not comply with requirements for reimbursement.

State Education Department (SED): SteppingStone Day School Inc. - Compliance with the Reimbursable Cost Manual (2020-S-23) SteppingStone is a New York City-based not-for-profit organization authorized by SED to provide special education services. The New York City Department of Education refers students to SteppingStone. For the three fiscal years ended June 30, 2018, auditors identified $562,609 in reported costs that did not comply with the requirements for reimbursement.

Department of Taxation and Finance: Personal Income Tax and Property Tax (2020-BSE08-01) Auditors found 19,049 questionable or inappropriate refunds resulting in a savings of $34.9 million and 4,331 credits resulting in a savings of over $1.1 million. In addition, auditors identified 10,142 credits totaling $4.1 million where the department potentially paid more than one credit to the same individual on multiple properties, or paid credits to multiple individuals on the same property where only one credit was due.

 

Audits of Local Governmental Entities

Village of Dering Harbor – Payroll (Suffolk County)The board did not establish adequate controls over payroll and employee benefit payments. The board also did not require formal, written employment contracts to document terms of employment; job descriptions and responsibilities; work hours; salaries or hourly rates and employee benefits. In addition, the village paid overtime payments to employees as if they were independent contractors. Auditors also found the board approved reimbursements to employees for medical benefit claims without ensuring they had adequate supporting documentation.

 

Madison County – Temporary Courthouse Lease and Renovations County officials paid more than $1.5 million to a limited liability company (LLC) to lease and renovate temporary courthouse space for a 19-month period. Auditors found county officials did not use a competitive process to lease and renovate the temporary courthouse space. Auditors determined officials paid the LLC a $500,000 deposit before any renovation work was completed or services rendered. They paid approximately $131,000 in renovation claims to the LLC without adequate supporting documentation.

 

Town of Orange – Budget Review (Schuyler County)Certain significant revenue and expenditure projections in the town’s adopted budget for the 2021 fiscal year are not reasonable. Auditors’ review took into consideration the potential impact the COVID-19 pandemic may have on the town’s finances. They determined the general and highway fund revenues are potentially overestimated by $25,000. In addition, highway fund appropriations are underestimated by at least $17,900.The general fund’s 2020 ending fund balance is estimated at $64,000, which is sufficient to balance the 2021 budget. However, additional fund balance may be needed to replace revenue shortfalls and to supplement the highway fund. The deficit in the highway fund is estimated at $27,000 as of Dec. 1, 2020. The town’s 2021 adopted budget complies with the tax cap limit.

 

Village of Remsen – Clerk-Treasurer’s Records and Reports (Oneida County) The clerk-treasurer did not maintain adequate records and reports to allow the board to properly manage village finances. Required annual financial reports were not completed or filed with the State Comptroller’s Office for any of the last four years (2015-16, 2016-17, 2017-18 and 2018-19). Fund transfers were not properly recorded and inadequate financial reports were provided to the board. In addition, the board did not annually audit the clerk-treasurer’s records and reports, as required.

 

 

 

 

Challenging administrative decisions made by educational institutions

The petitioner [Plaintiff] in CPLR Article 78 proceeding has been employed by the New York City Department of Education [DOE] as a teacher of library or as a librarian for over 20 years. Plaintiff 's performance was reviewed by her Supervising Principal at the conclusion of the relevant school year,. The Supervising Principal rated the Plaintiff's overall performance as unsatisfactory. 

Plaintiff filed an administrative appeal challenging her unsatisfactory performance rating. DOE's Deputy Chancellor for Teaching and Learning denied Plaintiff's appeal and sustained the Supervising Principal's rating of unsatisfactory.

Plaintiff initiated a CPLR Article 78 proceeding challenging the Deputy Chancellor's determination and Supreme Court, after a hearing, determined that the Deputy Chancellor's determination was arbitrary and capricious and that the rating of unsatisfactory was not rational. 

Supreme Court then granted Plaintiff's Article 78 petition, annulled the determination of the Deputy Chancellor and substituted a determination rating the Petitioner's performance as satisfactory. DOE appealed.

The Appellate Division reversed the judgment of the Supreme Court, denied Plaintiff's petition and confirmed the Deputy Chancellor's determination, explaining:

1. "Administrative decisions of educational institutions involve the exercise of highly specialized professional judgment and these institutions are, for the most part, better suited to make relatively final decisions concerning wholly internal matters"; and

2. Court should not overturn an employer's rating of an employee as unsatisfactory unless it is arbitrary and capricious, made in bad faith, or contrary to the law.

Observing the Plaintiff failed to demonstrate that the Supervising Principal's rating her unsatisfactory was arbitrary or capricious. Rather, said the Appellate Division, the evidence in the record "demonstrated that the rating of unsatisfactory was based on incidents of misconduct, unprofessionalism in interacting with other teachers, and insubordination."

Concluding that the Deputy Chancellor's determination was rational, the Appellate Division held that the lower court "should not have supplanted the judgment of the DOE with its own" and vacated the Supreme Court's decision.

The Appellate Division's decision is posted on the Internet at http://www.nycourts.gov/reporter/3dseries/2020/2020_07384.htm.

Submitting a memoranda amicus curiae in an appeal to the Commissioner of Education

§275.17 of the Regulations of the Commissioner of Education permits interested persons to file applications to submit memoranda amicus curiae.* 

In this appeal to the Commissioner of Education the aggrieved party [Petitioner] submitted a proposed amicus curiae brief prepared by “an attorney whose work has focused on human rights and immigration law.” 

In considering Petitioner's application to submit the proposed amicus curiae brief, then Interim Commissioner of Education Betty A. Rosa noted that historically the standard applied by the Court of Appeals in such situations has been followed by the Commissioner of Education.

Citing Appeal of Touré, et al., 54 Ed Dept Rep, Decision No. 16,660, the Commissioner indicated that Court of Appeals' standard requires establishing at least one of the following criteria:

(1) That the parties are not capable of a full and adequate presentation and that the amicus curiae brief could remedy this deficiency;

(2) That the amicus curiae brief could identify law or arguments that might otherwise escape the Commissioner’s consideration; or

(3) That the amicus curiaebrief offered would otherwise be of assistance to the Commissioner.

Commissioner Rosa declined to accept the proposed amicus brief into the record, explaining that she found no basis upon which to conclude that the Petitioner was not capable of a full and adequate presentation of his case requiring remedy by an attorney's "proposed amicussubmission."  

The Commissioner, after reviewing the proposed amicus submission, said that she found "it fails to identify law or arguments that might otherwise escape [her] consideration" nor that it would otherwise be of assistance in this case.

* An impartial adviser to a judicial or quasi-judicial body in a particular case, often serving pro bono.

Click here to access full text of the Commissioner's decision.

 

Court finds a probationary employee terminated without explanation presented evidence sufficient to raise a triable issue of fact concerning his alleged deficient job performance

A probationary police officer [Plaintiff] terminated by the appointing authority [Town] filed a petition pursuant to CPLR Article 78 challenging his termination. Plaintiff contended that he performed his duties as a law enforcement officer "in an exemplary manner," as reflected by the numerous community policing awards for which he had been nominated during his 18-month probationary period. Plaintiff alleged that his employment "was nevertheless terminated by the Town Board four days before the expiration of his probationary period, without explanation."*

In the course of the proceeding Plaintiff filed a motion seeking to compel the disclosure of certain "in-car video recordings." The Town opposed the motion, calling it "a fishing expedition" and argued that it was unnecessary to disclose these videos because its Chief of Police had reviewed them and "determined that the vehicular stops were not being properly made."

The Supreme Court directed the Town to produce a copy of the videotapes that Plaintiff  had requested for his in camera review.** Supreme Court, after the in camera review,  denied Plaintiff's motion to compel the disclosure of the video recordings. The court said that the videos were not "relevant" and subsequently held that the record supported the Town's assertion that Plaintiff's employment had been terminated due to poor performance. 

Supreme Court also held that Plaintiff failed to sustain his burden of raising a triable issue of fact as to whether his employment was terminated in bad faith and summarily dismissed his Article 78 petition.

Plaintiff appealed the Supreme Court's decision. The Appellate Division, reversing the lower court's ruling explained:

1. "As relevant here, a probationary employee may "be dismissed for almost any reason, or for no reason at all." This broad discretion is not unlimited, however, and "[t]he employment of a probationary employee may not be terminated "in bad faith, for a constitutionally impermissible or an illegal purpose, or in violation of statutory or decisional law."

2. In a judicial review a determination to terminate a probationary employee's employment, "[t]he burden of presenting legal and competent evidence to show a deprivation of petitioner's rights or bad faith or other arbitrary action ... must be borne by petitioner."

3. In the event the court finds that the record presents triable issues of fact as to whether the employer was acting in good faith in terminating the probationary employee's employment, a trial must be held.

The Appellate Division, noting that the Town made the positive assertion in the course of the Article 78 action that Plaintiff's employment had been terminated due to his poor performance as a police officer, observed that the Town "did not present any contemporaneous documents or other evidence" to substantiate its claim that Plaintiff had performed his duties in a substandard manner.

Further, in a verified reply to the Town's "new" assertion that Plaintiff was dismissed "for poor performance," Plaintiff said that the Chief of Police "had never advised him that his arrests were improper or illegal during the probationary period" but that the Chief had told him that "the Town Board was unhappy" with a certain arrest Plaintiff had made.

With respect to the Town's failure to produce "any contemporaneous records to support its assertion that [Plaintiff] had performed poorly as a police officer," the Appellate Division's decision notes that "the evidence in the record showed that [Plaintiff] had been given at least nine tours of overtime duty, and had been honored at a regional awards ceremony and received a commendation for his performance as a law enforcement officer during his 18-month probationary term."

The decision also noted that the single written evaluation of Plaintiff's performance signed by the Chief of Police about two months before the termination of Plaintiff stated that Plaintiff's did not need improvement in any area, and that his overall performance was "above standards." Significantly, said the court, the evaluation specifically stated that Plaintiff "[m]akes good arrests," and that he had "grasped the job well" and was "an asset to the department."

Citing Higgins v La Paglia, 281 AD2d 679, the Appellate Division concluded that on this record, Plaintiff's "evidentiary submissions were sufficient to raise a triable issue of fact as to whether his job performance was satisfactory and whether the Town's proffered explanation of poor performance was pretextual."

Under the circumstances, said the Appellate Division, Supreme Court improvidently exercised its discretion in denying Plaintiff's motion to the extent that he sought disclosure of the video recordings that are referenced in the Town's answer and remanded the matter to the lower court for "an immediate trial."

* In York v McGuire, 63 NY2d 760, the Court of Appeals held that “After completing his or her minimum period of probation and prior to completing his or her maximum period of probation, a probationary employee can be dismissed without a hearing and without a statement of reasons, as long as there is no proof that the dismissal was done for a constitutionally impermissible purpose, or in violation of statutory or decisional law, or the decision was made in bad faith.”

** A "private review" of material sought by a party by the court, typically taking place in the private chambers of the judge, with the press and public excluded.

The decision is posted on the Internet at https://law.justia.com/cases/new-york/appellate-division-second-department/2020/2017-11383.html

 

Evaluating a request to place a position in the exempt class of the classified service of the state or a political subdivision of the state

§44 of the Civil Service Law provides, in pertinent part, that "[t]he competitive class ... shall include all positions now existing or hereafter created ... except such positions as are in the exempt class, the non-competitive class or the labor class."

With respect to jurisdictionally classifying a position* as a position in the exempt class, §41.2 of the Civil Service Law provides that "No office or position shall be deemed to be in the exempt class unless it is specifically named in such class in the rules. Upon the occurrence of a vacancy in any position in the exempt class, the state or municipal civil service commission having jurisdiction shall study and evaluate such position and, within four months after the occurrence of such vacancy, shall determine whether such position, as then constituted, is properly classified in the exempt class. Pending such determination, said position shall not be filled, except on a temporary basis."

The New York State Department of Financial Services [DFS] requested that the New York State Civil Service Commission [Commission] place five new Special Assistant positions in the exempt class. The Public Employees Federation [PEF] objected to jurisdictional classification of the positions as DFS had requested.  The Commission considered the views of DFS and PEF with respect to jurisdictionally placing the five positions in the exempt class and ultimately adopted a rule placing the five positions in the exempt class. 

PEF then initiated a CPLR Article 78 proceeding seeking a court order annulling the Commission's determination. Supreme Court dismissed PEF's petition. 

The Appellate Division affirmed the lower court's ruling, explaining "[A]ppointments and promotions within the civil service system must be merit-based and, when practicable, determined by competitive examination". However, continued the court, a position for "which competitive or non-competitive examination may be found to be not practicable shall be designated as exempt."

Noting that a civil service commission's placement of a position in the exempt class is permitted when it determines that the nature of the  position is "confidential;" involves the performance of duties which require the exercise of authority or discretion at a high level; or the need for the appointee to have some expertise or personal qualities "which cannot be measured by a competitive examination," the Appellate Division said that its review of the Commission's determination "is limited to whether it was wholly arbitrary or without a rational basis".

Here, said the court, the record indicates that DFS requested exempt classification of the five positions was based, in part, upon the sensitive and confidential nature of the duties of the incumbent of the position and the ability of Special Assistants to influence policy and which appointees "were required to have a confidential relationship with DFS's superintendent and the full trust of the superintendent."

Noting that the Commission considered, among other factors, DFS summary memorandum explaining the basis for its request and the confidential character and the high-level responsibilities and duties of the incumbents of these five positions, the Appellate Division said that it could not conclude that the Commission's determination was arbitrary or without any rational basis.

* Article 1, §2.10 of the Civil Service Law defines the term "jurisdictional classification" as the assignment of positions in the classified service to the competitive, non-competitive, exempt or labor classes;" to be distinguished from "position classification" which is defined in Article 1, §2.11 of the Civil Service Law as "the grouping together, under common and descriptive titles, of positions that are substantially similar in the essential character and scope of their duties and responsibilities and in the qualification requirements..." for such positions.

Click here to access the text of the Appellate Division's decision.

 

A claimant seeking workers' compensation benefits must show a causal nexus between the accident underlying his claim and his employment

A Chief of Police [Claimant] of a Village in New York State filed for workers' compensation benefits in connection with injuries he sustained in a motor vehicle accident that occurred while he was driving a police vehicle. The Village's workers' compensation carrier controverted the claim. Ultimately the Workers' Compensation Board [Board] awarded Claimant workers' compensation benefits and the Village's workers' compensation insurance carrier [Carrier] appealed the Board's ruling.

The record indicated that Claimant was involved in the accident in the course of his taking a weekend trip, about a 4½ drive from the Village. Claimant had testified that "he carried his work cell phone, that he was on call 24 hours a day and that he drove his police vehicle to his weekend destination so that he could return to the Village if needed." Claimant also testified that:

1. He was not recalled at any point during the weekend;

2. He was not in the course of returning to work at the time of the accident; and

3. He was he attending to any other police matter at the time of the accident. 

After considering some procedural matters, the Appellate Division said that it agreed with the Workers' Compensation Board [Board] that the Carrier was precluded from submitting evidence on the issue of whether Claimant's injuries arose out of and in the course of Claimant's employment having waived such defenses.

The court, however, pointed out that the Carrier's waiver of its defenses did not relieve Claimant of his obligation to come forward with sufficient proof to establish that he suffered a compensable injury in the course of his employment. According, said the court, Claimant had the burden of demonstrating that "a sufficient causal nexus existed between his employment and the motor vehicle accident that caused his injuries" to support of his application for workers' compensation benefits.

The Appellate Division explained that the degree of control exercised by the employer over a claimant's activities at the time of the accident was a critical element "in determining whether the requisite causal nexus exists," a factual question for the Board. Further, the Board's determination regarding the required nexus will be upheld if supported by substantial evidence.

As Claimant offered no other testimony linking his weekend activities to his employment by the Village, the Appellate Division opined that the evidence offered by Claimant "falls short of demonstrating the requisite causal nexus between Claimant's accident and his employment." 

Accordingly, the court held that the Board's decision is not supported by substantial evidence and remitted the matter to the Board for further proceedings.

Click here to access the text of the Appellate Division's decision.

 

Municipal and school district audits released during the week ending January 9, 2021

New York State Comptroller Thomas P. DiNapoli announced that the following local government and school district audits were issued during the week ending January 9, 2021.

Click on the text highlighted in color to access the complete audit report

Local Government Audits

Citizens Hose Company – Board Oversight of Financial Operations (Ontario County) Auditors determined Citizens Hose Company did not have adequate controls in place to ensure that company funds were safeguarded. The company’s bylaws were insufficient because they did not provide detailed guidance for the treasurer or audit committee when collecting and depositing funds, recording cash receipts and disbursements and paying company bills. In addition, the treasurer misappropriated more than $20,000 of company funds. The company secretary also inappropriately used a company credit card for personal purchases of at least $1,100 without detection by officials. As a result of the audit, the former Citizens Hose Fire Company treasurer, pleaded guilty to felony grand larceny and was ordered to repay restitution.

City of Gloversville – City Clerk (Fulton County)Auditors found the former clerk did not properly account for fees. The former clerk waived fees for 249 certified copies of birth certificates totaling $2,490 without a valid reason. The former clerk also did not deposit all fees intact and substituted checks and money orders for cash collections. Auditors did determine that the current clerk was acting properly and accounting for fees as of Oct.1, 2017.

Ethics Oversight (Statewide Unit) This multi-unit audit included 20 individual audits including: 8 Counties: Albany, Chautauqua, Chemung, Genesee, St. Lawrence, Steuben, Suffolk and Tompkins; 8 Towns: Clay, Colonie, Greece, Oyster Bay, Ramapo, Southampton, Tonawanda and Union; and 4 Cities: New Rochelle, Rochester, Troy and Utica. Local governments must comply with New York State General Municipal Law (GML) and should do more to ensure proper ethics oversight.

Oneida-Herkimer-Madison Board of Cooperative Services (Oneida County, Herkimer County and Madison County) Oneida-Herkimer-Madison Board of Cooperative Educational Services (BOCES) officials did not regularly provide formalized information technology (IT) security awareness training. BOCES officials also did not assess computer usage to confirm IT assets were used for appropriate purposes or establish adequate controls to safeguard information contained in the network and financial system. Personal internet use was found on computers. In addition, network and application user accounts were not properly managed. Auditors also determined no disaster recovery plan was developed. Sensitive IT control weaknesses were communicated confidentially to BOCES officials.

Village of Monticello – Financial Condition (Sullivan County) The board did not adequately manage the village’s financial condition. As a result, the village is fiscally stressed. Auditors determined the village’s total fund balance will likely be fully depleted at the end of the 2019-20 fiscal year. The village also has exhausted nearly 100 percent of its constitutional tax limit. In addition, the village has significant infrastructure needs that it lacks the funds to address.

Village of Monticello – Records and Reports (Sullivan County) Auditors determined the treasurer did not maintain accurate, complete and timely accounting records or properly reconcile bank accounts in a timely manner. About $5 million of real property tax revenue was not posted to the accounting records. Bank reconciliations were generally performed two to three months after the statement date. In addition, periodic financial reports were not prepared for the board of trustees or department heads. Annual Update Documents, which are required annual financial reports, constitutional tax limit forms and adopted budgets were not filed in a timely manner, with some filed typically over 200 days late.

School DistrictAudits

Alexandria Central School District – Financial Condition Management (Jefferson County and St. Lawrence County) The district’s budgeted appropriations from 2016-17 through 2018-19 exceeded actual expenditures by $844,261, or 6.4 percent and the district did not need to use most of the appropriated fund balance for operations. The surplus fund balance in the general fund exceeded the 4 percent statutory limit for the past three fiscal years. As of June 30, 2019, surplus fund balance was $1.75 million, or 12.8 percent of the next year’s budget. In addition, district officials have not developed a long-term financial plan or a comprehensive reserve fund policy. Officials also did not implement the recommendations in a prior audit released in March 2016. This audit contains similar findings and recommendations.

Prattsburgh Central School District – Financial Management (Steuben County and Yates County) The board and district officials’ actions to manage financial condition were not transparent and more taxes were levied than necessary to fund operations. The board also appropriated fund balance totaling $1.13 million for fiscal years 2016-17 through 2018-19 but none of the money was used or needed to fund operations. For the last three fiscal years, the district reported that it exceeded the 4 percent statutory surplus fund balance limit, however when unused appropriated fund balance is added back, surplus fund balance exceeded the limit between 11 and 15 percentage points. In addition, the board did not develop written multiyear financial and capital plans.

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