Audit Report on the Financial and Operating Practices of the Local 300 S.E.I.U Civil Service Forum Employees Welfare Fund

AUDIT REPORT IN BRIEF

We performed an audit on the financial and operating practices of the Local 300 S.E.I.U. Civil Service Forum Employee Welfare Fund (Active Fund) for Fiscal Year 1999. The Active Fund, which was established to receive contributions from the City of New York, provides health and welfare benefits to eligible City employees and their dependents. The Active Fund is required to conform with Comptroller’s Internal Control and Accountability Directive 12, Employee Benefit Funds—Uniform Reporting and Auditing Requirements (Comptroller’s Directive 12), which sets forth accounting, auditing, and financial guidelines for City welfare funds and their boards of trustees. As of June 30, 1999, the Active Fund reported contributions of $992,467 from the City of New York and net assets of $1,501,910.

The Active Fund generally complied with the procedures and reporting requirements of Directive 12 and its benefit processing and accounting procedures. Also, the Active Fund’s administrative expenses were appropriate and reasonable. However, we found some weaknesses in the Active Fund’s financial and operating procedures. Specifically:

• Operating deficits are depleting the Active Fund’s reserves.
• The Active Fund paid an employee for 13 days that she did not work.
• The Active Fund made questionable payments to its employees and did not maintain Personnel/Leave Records.
• The Active Fund reimbursed trustees for $3,761 in questionable travel expenses.
• The Active Fund’s financial statements and Directive 12 filing did not accurately report benefit and administrative expenses for Fiscal Year 1999.
• The Active Fund made improper benefit payments totaling $6,022.
• The Active Fund paid 95 claims for dependents whose eligibility was not documented.
• The Active Fund’s cash disbursements journal did not include $36,851 of the expenses paid during the audit period.
• The Union owes the Active Fund $3,810. Insurance proceeds belonging to the Active Fund were inappropriately deposited into a Union account.

To address these issues, we recommend that the Active Fund should:

• Take immediate action to eliminate the Fund’s operating deficit and thereby ensure its financial viability.
• Ensure that Fund employees are paid only for days actually worked.
• Determine whether it can recoup the $910 from the overpaid employee.
• Ensure that all disbursements are adequately supported. In that regard, the Active Fund should maintain adequate personnel and leave records to support payments to its employees.
• Recoup the $3,761 it paid Trustees for questionable travel expenses.
• Ensure that all dental and prescription drug administrative fees are classified as administrative expenses rather than benefit expenses on its financial statements and Directive 12 filings.
• Ensure that benefits are paid only to eligible individuals and are made in accordance with the Active Fund’s guidelines for the service provided.
• Maintain in members’ permanent files copies of all documentation that shows the eligibility of dependents.
• Active Fund Trustees should ensure that the Active Fund’s cash disbursements journal is complete and accurate.
• Recoup the $3,810 inappropriately deposited in the Union’s bank account.