Final Audit Letter Report on the New York City Employees’ Retirement System’s (NYCERS) Other Than Personal Services (OTPS) Expenditures

By Electronic Mail
Elizabeth Reyes
Interim Executive Director
New York City Employees’ Retirement System
335 Adams Street, Suite 2300
Brooklyn, NY 11201

Re: Final Audit Letter Report on the New York City Employees’ Retirement System’s (NYCERS) Other Than Personal Services (OTPS) Expenditures (FN24-076A)

Dear Ms. Reyes:

This Final Audit Letter Report concerns the New York City Comptroller’s audit of NYCERS’ OTPS expenditures and compliance with relevant laws and regulations that govern them.

Background

NYCERS is one of the five New York City retirement systems charged with administering the statutory pension benefits of more than 350,000 active members, retirees, and beneficiaries. NYCERS’ members include civilian employees (such as clerical workers, accountants, and social workers) and uniformed employees (such as corrections officers and sanitation workers). NYCERS members may also be employed by certain public benefit corporations, such as the New York City Transit Authority and New York City Health and Hospitals Corporation.

NYCERS is governed by a Board of Trustees (the Board), which consists of 11 members. The Board is responsible for investing the assets of the retirement system, establishing administrative budgets, and implementing the rules and regulations necessary to ensure compliance with applicable laws and policy, which include the New York City Procurement Policy Board Rules (PPB Rules) and Comptroller’s Office Directives. NYCERS is a fiduciary of the funds it manages.

For Fiscal Year 2024 (which ended June 30, 2024), NYCERS reported approximately $101 billion in assets and expended $130 million in administrative expenses. Of this amount, $70 million (53.8%) was classified as OTPS expenditures, which are expenses that are not related to employee salaries, wages, or fringe benefits. Examples of OTPS expenditures include, but are not limited to, office supplies, equipment, utilities, travel costs, and payments for contractual services with outside vendors.

The objectives of the audit were to determine whether NYCERS’ OTPS expenditures were spent in accordance with NYCERS policies and procedures and other relevant rules and regulations, and whether those expenditures were necessary, reasonable, and well supported by documentation.

Findings

The auditors found that NYCERS’ OTPS expenditures were, for the most part, spent in accordance with internal policies and procedures and other relevant rules and regulations, and that those expenditures were necessary and reasonable. However, the audit also found that NYCERS should improve its procedures for approving and documenting OTPS expenditures.

The auditors reviewed a sample of 77 OTPS expenditures incurred during FY2023 and FY2024.  The results of these reviews show that:

• NYCERS did not provide purchase orders or contracts for two consultants whose payments totaled $52,250. NYCERS could not find documentation to substantiate that it properly issued purchase orders or that these purchases were approved in compliance with Section 3-08 of the PPB Rules (governing small or micro-purchases).[1] In response to this finding, NYCERS stated that it improved its compliance in FY2025 and is cross-training staff to ensure that this will not happen going forward.
• NYCERS did not always process payments to vendors in a timely manner. Per Section 4-06 of the PPB Rules, payments to vendors shall be made within 30 days of receiving or accepting the invoice to prevent the incurring of interest on such payments. The auditors found that 33 (43%) of the 77 sampled OTPS invoices were paid more than 30 days after the invoice dates, without justification. In response to this finding, NYCERS stated that vendors were paid late for several reasons, pointing to disputes with vendors, contract amendments, and delays related to COVID, when invoices were not received or partially received, resulting in a backlog. However, NYCERS did not provide documentation to support the occurrences.
• NYCERS processed a payment of $2,000 using an incorrect purchase order and account number in September 2023; in January 2024, NYCERS paid the same invoice again with the correct purchase order and account information. In response to this finding, NYCERS officials acknowledged that this was a duplicate payment and stated that, going forward, it will ensure that the invoice number is entered into the system before a payment is processed. NYCERS stated that it would reach out to the vendor to determine whether it could obtain a refund or whether the overpayment can be applied to another invoice.

The auditors also found that NYCERS did not consistently comply with Comptroller’s Directive #6, which governs expenditures for employee travel, agency-provided meals, and refreshments when conducting official City business. Directive #6 requires employees who attend out-of-town conferences to submit justification for travel, obtain approval, and/or submit post-conference attendance reports (or brief synopses). Of the 30 out-of-town trips (totaling $54,906) that the auditors reviewed, NYCERS did not provide justification for four employees who attended out-of-town conferences. NYCERS also did not provide justification for expenses that appeared to be unnecessary, such as payments for seats with extra legroom, lodging costs that exceeded the GSA rate, and plane tickets to Washington D.C., instead of Amtrak tickets. Certain expenses for airfare, meals, and transportation also lacked itemized receipts.

In addition, NYCERS appeared not to enforce Directive #6 requirements for trustees who attended conferences. NYCERS stated that four trustees who attended six conferences are not required to abide by requirements to obtain approval for travel or provide post-conference synopses.

Recommendations

To prevent potential vendor disputes and unnecessary interest payments due to late payments, the auditors recommend that NYCERS should:

1. Ensure a purchase order or contract is created for all small or micro-purchases.
   NYCERS Response: NYCERS agreed with this recommendation.

2. Process payments to vendors within 30 days of receiving the invoices.
   NYCERS Response: NYCERS agreed with this recommendation.

3. Ensure the $2,000 overpayment is recouped from the vendor or otherwise credited to NYCERS’ account.
   NYCERS Response: NYCERS agreed with this recommendation.

To demonstrate the benefits of attending out-of-town conferences and to increase transparency and accountability, the auditors recommend that NYCERS should:

4. Ensure that all out-of-town travel costs (including but not limited to lodging that exceeds GSA rates and additional legroom charges) are approved.
   NYCERS Response: NYCERS agreed with this recommendation.

5. Request and obtain all necessary documents before processing payments and reimbursement to avoid paying unnecessary expenses.
   NYCERS Response: NYCERS agreed with this recommendation.

6. Obtain post-travel attendance reports from each person who attended out-of-town conferences to demonstrate how the information learned can be implemented to benefit NYCERS.
   NYCERS Response: NYCERS disagreed with this recommendation, stating trustees are not NYCERS employees and do not require formal approval or post-travel reports.
   Auditor Comment: The auditors maintain that although NYCERS’ trustees are not considered employees, NYCERS should obtain post-travel attendance reports from each person who attended out-of-town conferences.

Scope and Methodology

We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards (GAGAS). GAGAS requires that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions within the context of our audit objectives. This audit also complied with the audit responsibilities of the City Comptroller as set forth in Chapter 5, §93, of the New York City Charter.

• The scope of this audit was July 1, 2022 through June 30, 2024. The auditors took the following steps during the audit: Obtained and reviewed NYCERS’ Annual Comprehensive Financial Reports (ACFR) for FYs 2023 and 2024; bylaws for the conduct of business of the Board of Trustees; the presentation for the onboarding of trustees; and board meeting minutes related to the conduct of business, audit, and Special & Investment meetings.
• Interviewed NYCERS officials to obtain a detailed understanding of the fiscal review processes, including the preparation of purchase orders, the vendor payment process, and the recording and reporting of OTPS expenditures.
• Obtained an understanding of Sage 300 (the computer-based system used for the procurement, recording, and reporting of OTPS expenditures) by reviewing the system manuals and observing a demonstration of how expenditures are recorded, approved, paid, reported, and summarized.
• Reviewed supporting documents of 50 payments that were randomly selected and 27 high-value payments that were judgmentally selected.
• Reviewed the general ledger transactions for FYs 2023 and 2024 and tested for duplicate payments based on invoice numbers, vendor information, date, and amount.
• Determined the length of time that NYCERS took to make payments based on invoice dates.
• Obtained a list of all out-of-town travel and related expenses for FYs 2023 and 2024 and randomly selected 30 samples for review. The documents reviewed included but were not limited to: (a) approved expense requests; (b) approved out-of-pocket reimbursement requests; (c) itemized receipts, invoices, or folios that support the travel expenses; (d) justification for taking the trip; and (e) program information or brochures.

The results of the above tests provided a reasonable basis for the auditors to support the findings and conclusions in this Final Audit Letter Report.

Preliminary results of this audit were discussed with NYCERS officials during the course of the audit. NYCERS agreed to waive the Exit Conference. On April 18, 2025, a Draft Audit Letter Report was submitted to NYCERS with a request for written comments. Our office received a written response from NYCERS dated May 7, 2025. In its response, NYCERS agreed with five of the audit‘s findings and recommendations and disagreed with one. The full response is attached to this report as an addendum.

Sincerely,

Maura Hayes-Chaffe

c: Ms. Chun Gong, Director of Finance, NYCERS

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[1] Small purchases are purchases less than $100,000 and micro-purchases are purchases less than $20,000. PPB Rules require the Contracting Officer to issue a purchase order or contract to the successful bidder or offeror for all small or micro-purchases.