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December 6, 2007

DiNapoli: Better Controls at the Buffalo Sewer Authority
Could Have Saved $1 Million in Future Payments

Officials Did Save Ratepayers More Than $200,000
Through Other Cost-Savings Measures

With better controls in place, the Buffalo Sewer Authority could have avoided improperly providing nearly $135,000 in health benefits to board members, retirees and employees, according to two audits released today by State Comptroller Thomas P. DiNapoli. The payouts to the retirees could cost the Authority an additional $1.1 million. The State Public Authorities Law allows Buffalo Sewer Authority Board members to receive compensation in a fixed amount but not health benefits. Auditors also found that the Authority implemented cost-saving measures that reduced potential health insurance costs by approximately $218,000.

“Public authorities have the same responsibility to protect public money as state and local government,” DiNapoli said. “Public authority officials should have policies and procedures in place that will help them to avoid misspending taxpayer dollars. The Sewer Authority officials should be commended for implementing measures that have saved ratepayers nearly a quarter million dollars but they need to ensure that the other problems we’ve identified are fixed immediately.”

The audits also found that:

  • four retirees were receiving post-retirement health insurance benefits even though they did not serve for 10 consecutive years as required by the Authority;
  • three employees had not contributed to their health insurance premiums, costing the Authority nearly $11,000 in one year;
  • due to an inadequate verification system, the Authority may have paid out health benefits to retirees and or their spouses who are deceased;
  • the Authority’s billing and collection of sewer charges was incomplete, inaccurate and lacking supporting documentation;
  • the Authority provided little if any oversight of the contractor it hired to collect sewer charges and the contractor did not aggressively pursue delinquent payments and penalties;
  • the same individuals employed by the contractor are handling all phases of transactions creating the possibility of loss or misuse of Authority moneys; and
  • the contractor was collecting commissions on unpaid accounts even though these account payments were satisfied by foreclosure proceedings brought by the city.

Comptroller DiNapoli recommended that Authority officials:

  • implement monitoring procedures to identify whether management has provided benefits that exceed state law or employee agreement limits, and be sure only eligible individuals are receiving health insurance benefits;
  • document and verify the existence of individuals who are listed as receiving benefits and that these individuals are making the correct premium contribution amounts;
  • evaluate the accuracy of the Authority’s customer database and be sure to have complete access to records;
  • be sure more than one person is handling all phases of a transaction; and
  • ensure that the billing contractor is not collecting commissions on unpaid accounts that were satisfied by foreclosure proceedings initiated by the city.

Authority officials generally agreed with the audits’ findings and said they would develop a corrective action plan within 90 days.

Click here for a copy of the audit on internal controls over health insurance.

Click here for a copy of the audit on billing and collection.



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