Audit Report on the New York County Public Administrator’s Compliance With Financial Reporting Requirements

Executive Summary

New York City (the City) has one Public Administrator (PA) in each of the counties that make up the City. Each of these PAs is appointed by the judge or judges of the Surrogate’s Court of their respective counties. The PAs are responsible for administering the estates of individuals who die intestate (i.e., without a will) or when no other appropriate individual is willing or qualified to administer the estate. The Office of the New York County Public Administrator (NYCPA) administers such estates in New York County. As the estate administrator, the NYCPA has a fiduciary duty to the estate that requires the NYCPA, among other things, to conduct thorough investigations to discover all assets and safeguard them; pay decedents’ bills and taxes; account for and maintain documentation to support estate activities and transactions; and distribute estate proceeds to decedents’ heirs and distributees. Article 11 of the New York State Surrogate’s Court Procedure Act (SCPA) and the Guidelines for the Operations of the Public Administrators of New York State (PA Guidelines) govern the NYCPA’s estate-administration process.

The NYCPA is managed by a Public Administrator and a Deputy Public Administrator who were appointed in September 2015 and May 2020, respectively. The Public Administrator’s and Deputy Public Administrator’s salaries are included annually in the expense budget of the City pursuant to SCPA §1105(3). The Public Administrator is also authorized to appoint other employees “as may be allowed annually in the budget of the [C]ity” pursuant to SCPA §1108(1). In addition, the PA Guidelines authorize the Public Administrator to maintain a “suspense account” which contains, among other things, fees allowed by the court for PA expenses, and to “use the suspense account to pay office expenses not funded by the PA’s budget.”

The NYCPA reported that it made suspense account disbursements totaling $1,258,363 during Calendar Year 2019.

The objective of the audit was to determine whether the NYCPA complied with the financial reporting requirements of the United States Code, Title 26 – Internal Revenue Code. The scope of this audit covered Calendar Year 2019.

Results

The NYCPA did not comply with Internal Revenue Service (IRS) requirements for collecting and validating vendors’ tax information.

Based on the findings, the audit made the following three recommendations to the NYCPA:

• The NYCPA should collect W-8s or W-9s from all vendors.
• The NYCPA should use the IRS TIN matching service to validate vendor name and TIN combinations.
• The NYCPA should appropriately report vendor payments to the IRS based on federal tax classification as reported by vendors on W-8s and W-9s.

In its response, the NYCPA disagreed with the report’s findings regarding its compliance with IRS requirements for collecting vendors’ tax information and reporting vendors’ income. In response to the recommendations, the NYCPA maintained that it “collects Form W-8s and W-9s for the purpose of collecting information needed to report on a Form 1099” and that it “complied with IRS rules with respect to the reporting of vendor income.” However, as detailed in the report, the NYCPA did not comply with applicable IRS requirements for collecting, and IRS guidance for validating, vendors’ tax information.

With regard to the recommendation that it use the IRS TIN matching service to validate vendor name and TIN combinations, the NYCPA stated, “Although the TIN matching system is free, it is very difficult to access. Additionally, the online matching system requires personal information from the user to create an account. The NYCPA will continue to make all efforts to reach a party to verify the TIN combinations.”