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

AUDIT REPORT IN BRIEF

The Comptroller’s Office performed an audit on the financial and operating practices of the Local 300 S.E.I.U. Civil Service Forum Retired Employee Welfare Fund (Retiree Fund) for Fiscal 1999. The Retiree 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 Retiree 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 Retiree Fund reported $807,410 in contributions from the City of New York and net assets of $255,329.

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

• Did not maintain an adequate level of reserves.
• Made improper payments to its trustees.
• Made improper benefit payments totaling $3,033.
• Paid 63 claims for dependents whose eligibility was not documented.
• Did not accurately report its benefit and administrative expenses for Fiscal Year 1999. Specifically, benefit expenses were overstated and administrative expenses were understated by $18,931.
• Did not include $45,023 of the expenses paid during the audit period in its cash disbursements journal.

To address these issues we recommend that the Retiree Fund should:

• Take immediate action to increase the Fund’s level of reserves and thereby ensure its ability to pay benefits.
• Discontinue making payments to its Trustees
• Ensure that benefits are paid only to eligible individuals and are made in accordance with the Retiree Fund’s guidelines.
• Maintain copies of all documentation in members’ permanent files that shows the eligibility of dependents.
• Ensure that administrative fees are properly reported on its financial statements and Directive 12 filings.
• Ensure that the Retiree Fund’s cash disbursements journal is complete and accurate.