Audit Report on the Financial and Operating Practices of the Sergeants Benevolent Association Health and Welfare Fund

AUDIT REPORT IN BRIEF

The Comptroller’s Office performed an audit on the financial and operating practices of the Sergeants Benevolent Association Health and Welfare Fund (the Fund) for fiscal year 2001. The Fund, which was established to receive contributions from the City of New York, provides health and welfare benefits to active and retired New York City Police Officers with the rank of sergeant and their dependents. The Fund is required to conform with the Directive 12’s provisions, which set forth accounting, auditing and financial guidelines for the funds and their boards of trustees. As of June 30, 2001, the Fund reported contributions of $12,140,547 from the City of New York and net assets of $5,012,014.

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

• Made improper benefit payments totaling $8,607.
• Does not maintain employee attendance records.Consequently, we could not determine whether employees were paid for hours they actually worked.
• Did not verify eligibility of members’ dependents.
• Paid $33,595 in undocumented administrative expenses.
• Did not report an estimated postretirement obligation amount for benefits on its financial statements in accordance with Generally Accepted Accounting Principles (GAAP).

To address these issues the report recommends that the Fund:

• Ensure that benefits are paid in accordance with its guidelines. In that regard, the Fund should maintain documentation supporting eligibility and services for which reimbursements were made.
• Maintain daily attendance records for all Fund employees.
• Ensure that Employee Leave Summary forms properly reflect all leave use by Fund employees.
• Maintain copies of all documentation in members’ permanent files to substantiate the eligibility of dependents.
• Ensure that all payments are properly supported by adequate documentation.
• Report its benefit liability on its financial statements, in accordance with Generally Accepted Accounting Principles.