New York State Comptroller Thomas P. DiNapoli today announced that an audit of the New York Youth Jobs Program found that the state agencies overseeing the program, including the Departments of Labor and Tax and Finance, did not ensure that participating businesses hired only people who qualified for the program and that the tax credits they were given were accurate.
"The New York Youth Jobs Program’s goal is to encourage companies to hire young people in need of employment, but better oversight and verification of participants’ eligibility is needed to prevent companies getting questionable tax breaks," DiNapoli said. "These tax credits exist to benefit businesses and the young people they hire and should only go to those who meet the program’s requirements. Stronger oversight would ensure the program’s success."
The program was established in 2011 to provide tax credits to eligible employers when they hire unemployed or disadvantaged youth aged 16-24 who live in certain areas in New York state. The program is focused on hiring in the following 13 cities and towns: Albany, Brookhaven, Buffalo, Hempstead, Mount Vernon, New Rochelle, New York City, Rochester, Schenectady, Syracuse, Utica, White Plains, and Yonkers.
Applicants must meet age, residence and employment criteria to qualify for the New York Youth Jobs Program. They also must be considered low income or at-risk youth by meeting one or more of 15 criteria, such as living in public housing or being in foster care. For the period January 2014 to July 2018, DiNapoli’s auditors identified a range of problems including employees older than the age limit, employees potentially already working somewhere else when hired, and limited verification that employees lived in New York. State Department of Labor (Labor) officials were comfortable relying on self-verified information. In one instance, auditors found a 62 year-old who was certified as eligible for the program.
Based on a sample of individuals reviewed, auditors found $191,336 in questionable tax credits given to employers. In total, auditors identified problems with the eligibility for, accuracy of, or required documentation for the tax credits claimed for 58 percent of the employees whose records were examined, which were chosen from 11 sampled employers.
Auditors found that the state Department of Taxation and Finance (Tax) could use the information it receives from tax returns and from Labor more effectively to ensure both the accuracy of program tax credits granted and the eligibility of the employees claimed. For instance, during the audit, Tax personnel identified an error in which a business shareholder claimed a tax credit for the entire business rather than just the shareholder’s portion, resulting in an excess credit of $69,518. Tax officials stated that they have begun action to recover the excess credit. Auditors also found that some of the relevant form instructions lack clarity.
During the audit period, employers could claim $500 a month per full-time employee and $250 a month per part-time employee for the first six months after they were hired. The total two-year maximum limit was $5,000 for full-time employees and $2,500 for part-time employees. In April 2018, legislation passed increasing the maximum allowable tax credit for each employee to $7,500 (full-time) and $3,750 (part-time), among other program changes.
Labor is responsible for administering the program and for certifying eligibility of youth and employers, while Tax establishes procedural requirements for claiming program tax credits and determines whether credits that are claimed are allowable.
DiNapoli recommends that Labor:
- Reevaluate the employer program application to determine how to capture information such as employee advancement and benefit opportunities;
- Provide and publicize program-specific definitions for underemployment and unemployment and align them with program requirements; and
- Develop risk-based procedures to ensure that only eligible youth are certified for the program.
DiNapoli recommends that Tax:
- Improve procedures to ensure that program tax credits that are granted are accurate and for eligible employees. Steps might include, but not be limited to: Modifying form instructions to clarify how to claim tax credits in the first six months, and changing how employee work hours, factors, and personal information are captured to allow automated checks against other relevant information; and
- Take appropriate action to investigate and recover, where applicable, the $191,336 ($121,818 + $69,518) in excess tax credits allowed.
Both agencies responded to the audit. Labor disagreed with recommendations to tighten oversight of the program, saying it would deter youth from participating and citing limited resources. Tax generally agreed with the audit’s recommendations.
Read the report, or go to: https://www.osc.state.ny.us/audits/allaudits/093019/sga-2019-17s69.pdf.
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