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January 4, 2007

Audit Finds Local Governments Paid $786,481 in
Insurance Premiums for Individuals Who Had Died

Following Audit, Officials are Working to Recoup Funds

Nine local governments paid $786,481 for health insurance for 65 retirees or dependent spouses of retirees who had died, some as many as 12 years ago, because they had inadequate systems for identifying when retirees pass away, according to an audit released today by the State Comptroller’s office.

After learning of the findings of the audit, five municipalities recouped $592,042 or 75 percent of these funds from insurance providers, while repayments are pending for the remaining four municipalities.

The municipalities that made these overpayments included Albany and Niagara counties; the cities of Albany, Rochester, Syracuse and Troy; the town of Oyster Bay; the Buffalo City School District and the Brentwood Union Free School District.

Auditors noted that one municipality surveyed, the Town of Islip, had appropriately designed monitors for payments to retirees, including an annual questionnaire and follow-up process to make contract with all enrollees and retirees.

The audit noted that “Good internal controls involve monitoring the eligibility status of retirees through continued communication. This monitoring would include processes to verify the eligibility status of retirees, either by personal contact or some correspondence that would determine eligibility status.”

Auditors found that internal control procedures at 19 of the 20 municipalities surveyed across the State could be improved to ensure the accuracy and appropriateness of insurance premium payments for their retirees or their spouses. These 19 municipalities indicated that they obtain notification of deceased retirees by a variety of measures, including reading the local obituaries on a daily basis, word of mouth, family notification, un-cashed Medicare reimbursement checks and other methods.

Auditors compared the 27,291 retirees and dependent spouses with the information from the Social Security Administration to determine whether individuals receiving benefits had died.

Auditors recommended that local governments design internal controls over monitoring the status of all retirees and their dependent spouses receiving municipal health insurance coverage and actively seek recoupment of insurance premiums they paid on behalf of deceased retirees and/or ineligible dependent spouses.

Municipalities audited included: the Cities of Albany, Rochester, Troy, Syracuse, Schenectady, New Rochelle; the counties of Albany, Niagara, Schenectady; the towns of Brookhaven, Islip, Oyster Bay; and the Buffalo City School District, the Brentwood Union Free School District; the Newburgh Enlarged City School District; the Kingston City School District; the Arlington City School District; the Wappingers Central School District; and the Three Village Central School District.

For the 20 municipalities, auditors tested 18,954 retirees and 8,337 dependent spouses who received insurance coverage benefits. The audit period was January 1, 2005 through June 30, 2006.

Click here for a copy of the audit.

Click here for a copy of the individual letters sent to the participants of the audit.



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