Audit Report on the Financial and Operating Practices of the Social Service Employees Union Local 371 Welfare Fund

The Social Service Employees Union Local 371 Welfare Fund (Welfare Fund) receives its funding from the Social Service Employees Union Local 371 Administrative Fund (Administrative Fund). The Administrative Fund was created to receive the negotiated contributions from its members’ employers and to allocate and distribute the monies received to the Social Service Employees Union Local 371 Benefit Funds—Social Service Employees Union Local 371 Welfare Fund (Welfare Fund), Social Service Employees Union Local 371 Legal Services Fund (Legal Services Fund), and Social Service Employees Union Local 371 Educational Fund (Educational Fund). The Welfare Fund receives an allocation of funds from the Administrative Fund that is equivalent to its net cost of operations. The Welfare Fund is required to conform to Comptroller’s Directive #12, ‘Employee Benefit Funds—Uniform Reporting and Auditing Requirements,’ which sets forth accounting, auditing, and financial guidelines for funds and its boards of trustees.

We performed an audit on the financial and operating practices of the Welfare Fund for Fiscal Year 2008. As of June 30, 2008, the Welfare Fund had received $20,955,119 for health benefits and administrative expenses that were paid through the Administrative Fund.

Audit Findings and Conclusions

The audit found that the Welfare Fund complied with the procedures and reporting requirements of Directive #12; in addition, the Welfare Fund complied with its accounting procedures, and those procedures were adequate and proper. Although the Welfare Fund paid benefit expenses that were mostly appropriate and reasonable, we found some weaknesses in the Welfare Fund’s financial, operating, and benefit processing procedures as follows:

• Paid $100,925 for questionable expenses ($100,637 to the union for its health and safety benefit and $288 to two dental assistants to reimburse them for sneakers).
• Made improper benefit payments totaling $31,025.
• Did not maintain documentation to support its podiatry and pension-counseling benefit payments, totaling $27,930.
• Did not maintain complete and accurate records of those persons for whom it is providing Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) benefits.
• Paid claims for dependents whose eligibility was not documented.
• Did not properly authorize checks.

Audit Recommendations

The audit makes eight recommendations including:

• Discontinue its practice of subsidizing the Union’s health and safety benefit until the Welfare Fund receives timekeeping records, expense reports, or utilization reports so it can assess the reasonableness and appropriateness of this benefit.
• Ensure that all expenses incurred are reasonable and necessary for the operation of the Welfare Fund.
• Pay for benefits for eligible individuals only and make payments in accordance with their guidelines.
• Maintain all supporting documentation to substantiate City contributions, member eligibility, and benefit use. These documents should include, but not be limited to, the City contribution reports, HHC contribution reports, claim forms, and medical receipts.
• Maintain complete and accurate records for COBRA benefits. These documents should include the COBRA Election form and the ARRA Premium Reduction Request forms.
• Create and maintain procedures to record and track COBRA eligibility, coverage ranges, and premium payments.
• Ensure that benefits are provided only to eligible dependents.
• Ensure that only authorized personnel sign program checks.

Fund Response

In their response, Welfare Fund officials generally did not specifically address the audit’s findings or recommendations and did not indicate how they will implement the necessary corrective actions to remediate the findings discussed in this report.