Audit Report on the Financial and Operating Practices of the Superior Officers Council Health & Welfare Fund of the New York City Police Department

AUDIT REPORT IN BRIEF

The Superior Officers Council Health & Welfare Fund (Active Fund) provides health and welfare benefits to New York City Police Officers with the rank of Captain and Lieutenant, and their eligible dependents. It receives contributions from the City of New York. The Active 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.

We performed an audit on the financial and operating practices of the Active Fund for Fiscal Year 2007. As of June 30, 2007, the Active Fund reported $3,739,844 in City contributions and net assets of $4,022,166.

Audit Findings and Conclusions

The Active Fund generally complied with the procedures and reporting requirements of Directive #12. In addition, except for the Prescription Drug Benefit and the Catastrophic Benefit, the Active Fund generally complied with its benefit-processing and accounting procedures, and those procedures were adequate and proper. Furthermore, the Active Fund’s administrative expenses were generally appropriate and reasonable. However, we found some weaknesses in the Active Fund’s financial and operating procedures as follows:

• Operating deficits are depleting the Active Fund’s reserves.
• Misclassified benefit and administrative expenses.
• Did not maintain documentation to support its Prescription Drug benefit and its Catastrophic benefit payments, totaling $3,123,171—71 percent of its benefit payments.
• Made questionable benefit payments totaling $3,330.
• Paid claims for dependents whose eligibility was not documented.
• Is owed $1,473 by the unions.
• Does not maintain employee attendance records.

Audit Recommendations

To address these issues, we made seven recommendations, that the Active Fund should:

• Take immediate action to eliminate the Fund’s operating deficit and thereby ensure its financial viability.
• Ensure that administrative and benefit expenses are recorded accurately on its Directive #12 filing and accurately calculate and submit its key ratios, in accordance with Comptroller’s Directive #12.
• Recoup $1,473 from the unions for their share of the telephone expense.
• Ensure that it pays for benefits only for eligible individuals, in accordance with its guidelines.
• Maintain copies of all documentation in members’ permanent files to substantiate eligibility of dependents.
• Create and implement written time-keeping procedures and maintain daily attendance records for its employees.
• 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, Pharmacy Billing Detail for Drug Mail Orders, and a complete list of participants recorded on the catastrophic premium billings that were missing during our audit period.