State Comptroller takes issue with Hempstead Sanitary District again

The Board of Commissioners of the Town of Hempstead Sanitary District No. seven made more than $810,000 in unauthorized payments during 2012 and 2013, according to a recent audit by the New York State comptroller’s office.

In it’s report the comptrollers office said the audit found four major issues where the District Board was lacking, in that it made and paid compensation agreements with sanitation supervisors when it had no legal authority to do so, did not establish a claims audit procedure, improperly delegated check-signing authority to all the Board members, without authority appointed two treasurers and split duties between them, and did not have sufficient controls over procuring professional services.

According to the audit the District Board entered into “deferred compensation” agreements with a former sanitation supervisor, identified as Supervisor A, and his successor, identified as Supervisor B, also called his son in the report, and made payments from the district’s general fund, despite having no legal authority to do so. As a result of those unauthorized agreements, the Board has improperly paid more than $391,900 to Supervisor A over the past 15 years and $421,353 to Supervisor B during the audit period.

The state report said the district officials were not able to provide a written agreement or resolution authorizing the post employment payments, which “demonstrated a clear need to improve their procedures for retaining original documents and resolutions,” but instead referred the comptroller’s office to notes on the district’s financial statements for details. The comptroller recommended the district immediately discontinue making the payments to employees or former employees, discuss recouping the payments with district legal counsel, ensure future payments are made within the law and retain documents and resolutions regarding employee benefits.

The Sanitation Board responded saying the district is not paying any post-employment payments, and said it will investigate its options with regard to recouping past payments. The board said it would continue its policy of retaining original documents and resolutions, but did not specify what that policy was.

The audit sampled various claims and found 26 totaling $723,556 that were only reviewed by two of the five board members. In addition, rather than presenting claims against the district at a meeting and authorizing payment, the board would present a list of checks that were already paid at the next board meeting. Thus, the comptroller’s office said the board had not established a thorough claims audit process, and improperly delegated check signing authority to all board members.

The audit found there were no competitive bids for a refuse truck costing $69,416. The board said the vendor used was the only source of such a truck, but there was no documentation to support that claim. The audit found another $48,296 that had no contracts, no contract numbers, nor contract rates attached. Lastly, none of the 26 sample claims reviewed had a statement of the officer or employee whose action gave rise to the claim, so it wasn’t clear who initiated the transaction.

The board said before funds are disbursed, the district makes sure the goods observances were obtained; the General Supervisor reviews the request for purchase and submits a purchase order. The Treasurer makes out that purchase order and a claim voucher, which are attached to the receipt of the goods or services. At least three of the five commissioners must approve the voucher. Once approved the treasurer cuts the checks and two Commissioners sign them.

The audit stated, according to law, a treasurer should be established as a custodian of all district monies, and it is that treasurer who is responsible for signing checks to pay claims against the district. The treasurer also prepares monthly financial reports, plus an annual report that must be filed with the Town Clerk and posted on the town’s website. That individual must hold an appropriate civil service title.

The audit found that although there was a treasurer, he preformed few duties of that office. Instead, any and all commissioners were allowed to sign checks, thus the treasurer’s signature is not on all district checks. The board also gave other duties to an individual who holds the Civil Service title of district treasurer, but is not, in fact, the actual treasurer. The comptroller’s office noted the district cannot have two treasurers. The district treasurer is more of an account clerk. Nor did the Civil Service vet that person.

Lastly, the state said itemized invoices are used to support claims by providing an explanation of services provided and billed for. The district counsel, who received 39 payments totaling $97,490, did not submit any invoices during the audit period.

The district provides garbage collection and recycling service for 950 commercial businesses and 13,000 homes in Oceanside, parts of East Rockaway and Baldwin and is funded through real property taxes.

The board has 90 days to submit a corrective action plan that addresses the findings and recommendations of the audit. The state encouraged the board to make the plan available to the public.