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New York City Comptroller William C. Thompson, Jr. issued an audit today finding that the New York County Public Administrator’s (NYCPA) Office did not fully comply with financial and operating rules and guidelines.

“The NYCPA did not always comply with guidelines during searches of decedents’ residences,” Comptroller Thompson said. “I am further troubled that the NYCPA has disagreed with a number of my recommendations on how it can improve its practices to better adhere to the law.”

The audit determined whether the NYCPA complied with Article 11 of the New York State Surrogate’s Court Procedures Act (SCPA), the Report and Guidelines of the Administrative Board for the Offices of the Public Administrators (Administrative Board Guidelines), and other applicable federal, State, and City laws, rules, and regulations.

The audit – which can be viewed at www.comptroller.nyc.gov – covered July 1, 2005 to June 30, 2006 (Fiscal Year 2006).

There are five Public Administrators in New York City, one for each county. Each Public Administrator is responsible for administering the estates of individuals in the county who die intestate (those who die without a will) or when no other appropriate individual is willing or qualified to administer the estate.

As of June 30, 2006, the New York County Public Administrator (NYCPA) was administering 1,011 open estates with assets valued at more than $106 million.  According to the City’s FY 2006 annual financial report, the NYCPA collected $1,470,250 in revenues and had expenditures totaling $1,085,912.

Auditors determined that the NYCPA generally adheres to procedures of the SCPA, Administrative Board Guidelines, and its own guidelines and procedures.

However, auditors identified instances of non-compliance regarding certain practices.

• The NYCPA did not always comply with the Administrative Board Guidelines during decedents’ residence searches. Investigators do not prepare an inventory listing of jewelry items retrieved during residence searches.

“Although my auditors identified no discrepancies during their jewelry inventory observation and comparison with the appraisal sheets, there is no assurance that all items retrieved were properly accounted for and included on appraisal sheets,” Thompson said. “Accurate inventory records are necessary to maintain sufficient controls over decedents’ assets and to protect them against the possibility of loss or theft.”

• There was no evidence that two investigators were present as required at two of 12 residence searches, contrary to Administrative Board Guidelines.

• The NYCPA did not always submit final accountings – which reflect the current gross estate values and distribution amounts - to the Surrogate’s Court. Final accountings were not prepared or submitted to the Surrogate’s Court for three of the five additional-asset estates with gross estate values of $24,994, $12,441 and $1,066.

“Although the funds were appropriately distributed and the commissions and costs were correctly accounted for, the NYCPA should have ensured that final accountings for these additional assets were filed with the Surrogate’s Court,” Thompson said.

• The NYCPA underreported $3,764,520 in 1099-reportable payments to the Internal Revenue Service (IRS). The NYCPA failed to issue 1099-MISC forms to 102 individuals for payments totaling that amount, which includes $2.79 million to the NYCPA’s attorneys who provided legal services for the administration of the estates.

Thompson noted that a previous audit determined that the NYCPA did not issue the required IRS forms to an estimated 100 individuals.

“By failing to issue 1099-MISC forms to all required individuals the NYCPA may be allowing individuals to understate their income to the government and avoid paying taxes on the excluded amounts,” Thompson said.

• The NYCPA did not have an independent Certified Public Accountant conduct an annual audit, as required by the SCPA.

 
Thompson made nine recommendations, including asking the NYCPA to ensure that: a complete and detailed inventory list is prepared of all items retrieved from decedents’ residences, including jewelry items, and that the list is signed by both investigators; two investigators are present during searches of decedents’ residences and investigators document their presence by signing the Investigator’s Reports; and, final accountings and amended final accountings are prepared and filed with the Surrogate’s Court.

The NYCPA generally disagreed with the audit’s findings but stated that they would take some steps to implement four of the audit’s nine recommendations. They disagreed with three recommendations, and did not respond to two of them.

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