Audit Report on the Financial and Operating Practices of the Municipal Employees Welfare Fund of the International Union of Operating Engineers, Local Union 15, 15A and 15C

AUDIT REPORT IN BRIEF

We performed an audit on the financial and operating practices of the Municipal Employees Welfare Fund of the International Union of Operating Engineers, Local Union 15, 15A, and 15C (the Fund) for Calendar Year 2003. The Fund, which was established to receive contributions from the City of New York , provides health and welfare benefits to eligible active and retired City members and their dependents. The Fund is required to conform to Comptroller’s Directive 12, which sets forth accounting, auditing, and financial guidelines for City welfare funds and their boards of trustees. As of December 31, 2003, the Fund reported a fund balance of $4,625,763.

Audit Findings and Conclusions

The audit disclosed that the Fund: complied with applicable procedures and reporting requirements set forth in Comptroller’s Directive 12; generally complied with its benefit-processing and accounting procedures, and those procedures were adequate and proper; and paid administrative expenses that were appropriate and reasonable. In addition, the Fund had adequate and effective internal controls related to the processing and reporting of benefits and administrative expenses paid; and the Fund generally adhered to its benefit-payment guidelines.

However, we noted several weaknesses in the Fund’s financial and operating practices. Specifically, benefit and administrative expenses were misstated on the Fund’s financial statements and its Directive 12 filing; claim files did not always contain required documentation to substantiate the amounts paid to members; responsibilities for receiving, depositing, and accounting for City contributions were not segregated to ensure appropriate checks and balances and accountability for these funds; and employee attendance records were not maintained.

The audit also noted that in comparison to other, similarly-sized funds, the Fund maintained a high level of reserves relative to its annual City contributions and spent a high percentage of City contributions on administrative costs. These issues need to be addressed in light of the Fund’s mission, which is to provide benefits to members.

Audit Recommendations

The Fund should:

• Ensure that administrative and benefit expenses and key ratios are recorded accurately on its financial statements, in accordance with Comptroller’s Directive 12.

• Maintain copies of all documentation in members’ permanent files to substantiate eligibility of dependents.

• Ensure that benefits are paid in accordance with Fund guidelines.

• Ensure proper checks and balances over City contributions by segregating responsibilities for receiving, depositing, and accounting for these funds.

• Improve its controls over cash by segregating responsibilities for receiving, depositing, and accounting for City contributions.

• Maintain daily attendance records for its employees.

• Review its benefits package and its financial position and determine whether it is providing the maximum amount of benefits to its members.

Strive to accomplish its mission in an efficient and economical manner by bringing administrative costs more in line with those of other funds of a similar size.