Audit Report on the Financial and Operating Practices of the Local 444 S.E.I.U. Sanitation Officers’ Association Security Benefits Fund

AUDIT REPORT IN BRIEF

We performed an audit on the financial and operating practices of the Local 444 S.E.I.U. Sanitation Officers’ Association Security Benefits Fund (Active Fund). 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 to Comptroller’s Directive 12, which set forth accounting, auditing and financial guidelines for funds and their boards of trustees. As of December 31, 2001, the Active Fund reported contributions of $1,808,848 from the City of New York and net assets of $1,223,001.

The Active Fund generally complied with the procedures and reporting requirements of Directive 12 and its benefit processing and accounting procedures. Furthermore, the Active Fund’s administrative expenses were appropriate and reasonable.

However, we found that the Active Fund paid claims for dependents whose eligibility was not documented. Despite requiring members to submit birth certificates and marriage licenses to support a dependent’s eligibility when initially enrolling or when adding or deleting dependents, such documentation was not evident in the Active Fund’s files. In addition, the Active Fund did not report an estimated liability amount for benefits on its financial statements, contrary to Generally Accepted Accounting Principles (GAAP).

To address these issues, we recommend that:

• The Active Fund should maintain copies of all documentation in members’ permanent files to substantiate eligibility of dependents.
• The Fund Trustees should ensure that the Fund reports its benefit liability on its financial statements, in accordance with Generally Accepted Accounting Principles.