Audit Report on the New York City Department of Finance’s Oversight over the Collection of 911 Surcharges

Executive Summary

The New York City Administrative Code (NYC Administrative Code), Title 11, Chapter 23-A, requires telecommunication companies (Service Providers) to add to their charges for each telephone line within the City of New York (the City) a monthly surcharge of one dollar, known as the 911 surcharge, which the Service Providers must remit to the City’s Department of Finance (DOF), after deducting 2 percent as their administrative fee. The 911 surcharge is used to pay for the costs associated with obtaining, operating, and maintaining the telecommunication equipment and telephone services needed to provide an enhanced 911 emergency telephone system serving the City.^[1]

The NYC Administrative Code requires Service Providers to remit the net 911 surcharge to the City, through DOF, within 30 days of the last business day of the preceding month. DOF requires the Service Providers to submit Form NYC-E-911—Return of E-911 Surcharge by Telecommunication Providers (E-911 return)—on or before the 25th day of each month to report the amounts collected from their customers. DOF maintains all E-911 returns submitted by the Service Providers in its electronic Business Tax System (BTS), in individual accounts associated with the respective Service Providers (Service Provider accounts).

The objective of this audit was to determine whether DOF has controls in place to ensure that: (1) DOF can readily identify all Service Providers subject to the law’s requirement to collect the 911 surcharge; (2) Service Providers are paying the correct amount of surcharges due and paying in a timely manner; and (3) Service Providers are submitting the annual reports and monthly lists of customers who do not pay the 911 surcharge.

Audit Findings and Conclusion

Our audit found that DOF lacks adequate oversight over its collection of 911 surcharges. Specifically, we found that DOF: (1) did not establish procedures to identify all Service Providers that are required to collect the 911 surcharge from their customers; (2) did not adequately oversee the Service Provider accounts to ensure 911 surcharges were paid to the City timely and that the amounts reported in the E-911 returns were accurate; and (3) did not ensure that the Service Providers submitted the required annual reports and monthly lists of non-paying customers and amounts owed to DOF as required by Title 11, Chapter 23-A of the NYC Administrative Code. As a result, DOF has no assurance that all Service Providers collected and remitted the 911 surcharge to the City as required. Our review determined that as of August 24, 2020, Service Providers with 74 BTS accounts did not remit at least $862,310 in overdue 911 surcharges owed to the City.

Audit Recommendations

To address these issues, we make the following six recommendations that DOF should:

• Establish procedures that enable and require DOF to identify Service Providers that provide service within the City and are required to collect 911 surcharges.
• Implement procedures to collect overdue 911 surcharges from Service Providers and consider taking legal action against Service Providers that owe 911 surcharges for over one year.
• To obtain reasonable assurance that Service Providers comply with relevant legal requirements for assessing, collecting, and reporting on 911 surcharges, DOF should develop written policies and procedures and allocate sufficient resources to: (a) monitor and audit filed returns and identify non-filing by Service Providers that are covered by NYC Administrative Code, Title 11, Chapter 23-A; and (b) enforce the law’s requirements.
• Enforce the requirement that Service Providers to submit annually to DOF an accounting of 911 surcharge amounts billed and collected.
• Enforce the requirement that Service Providers to submit monthly to DOF a list of the names and addresses of customers who refused or failed to pay the surcharges imposed, including the amounts of the unpaid surcharges.
• Develop written policies and procedures for notifying all Service Providers of the 911 surcharge filing requirements and that their submissions may be subject to audit.

Agency Response

DOF agreed to implement all six audit recommendations.

[1] Telephone lines include landlines and Voice over Internet Protocol (VoIP) phone service. Section 11-2324 of the NYC Administrative Code states that “[n]o such surcharge shall be imposed upon: more than seventy-five exchange access lines per customer per location; any lifeline customers of a local telephone service supplier; a public safety agency; or any municipality, as defined in subdivision (e) of section 11-2322. The surcharge is identified as a separate charge in the bills sent to customers.”