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

AUDIT REPORT IN BRIEF

The Superior Officers Council Retiree Health & Welfare Fund (Retiree Fund) provides health and welfare benefits to New York City Police Officers who retired with the rank of Captain and Lieutenant, and their eligible dependents. It receives contributions from the City of New York. The Retiree 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 Retiree Fund for Fiscal Year 2007. As of June 30, 2007, the Retiree Fund reported $6,785,884 in City contributions and negative net assets of $707,150.

Audit Findings and Conclusions

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

• Substantial operating deficits have exhausted the Retiree Fund’s reserves.
• Misclassified benefit and administrative expenses.
• Did not maintain documentation to support its Hospitalization and Catastrophic Benefit payments, totaling $123,904—two percent of its benefit payments.
• Made questionable benefit payments totaling $80,613.
• Paid claims for dependents whose eligibility was not documented.
• Owed $1,473 by the unions.
• Does not maintain employee attendance records.

Audit Recommendations

To address these issues, we make seven recommendations, that the Retiree Fund should:

• Take immediate action to reduce expenses to eliminate the Fund’s operating deficit, thereby increasing fund reserves to 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 expenses.
• 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 member eligibility and benefit coverage. These documents should include, but not be limited to, complete lists of all participants recorded on hospitalization and catastrophic premium billings that were missing during our audit period.