Final Letter Report on the Queens County Public Administrator’s Selection and Compensation of Outside Vendors

Executive Summary

This Final Letter Report summarizes the findings of our audit of the Queens County Public Administrator’s (QCPA’s) Office.  The objective of the audit was to determine whether the QCPA complied with rules and regulations for the selection and compensation of outside vendors.

New York City’s five Public Administrators’ (PAs’) offices are municipal agencies, each headed by a Public Administrator appointed by the New York State Surrogate’s Court in their respective counties to administer the estates of county residents who die intestate—without wills—and without known heirs eligible and qualified to administer their estates.  In connection with those responsibilities, the QCPA makes funeral arrangements, collects debts, pays creditors, manages decedents’ assets, searches for possible heirs, and files tax returns on behalf of the decedents.

The PAs’ operations are governed by Article 11 of the New York State Surrogate’s Court Procedure Act (SCPA) and by the guidelines established by the Administrative Board for the Offices of the Public Administrators (Guidelines).  Subject to the procedures and limitations set forth in the Guidelines, the QCPA may employ outside vendors such as accountants, real estate brokers, appraisers, investigators, and others to assist the PA in the administration of the estates.   Specifically, for example, Section V (A)(3) of the Guidelines states, in part, “The PA may not employ as an outside vendor any employee of the PA’s office, or any individual related by blood or marriage to the PA . . . The PA shall establish and maintain written procedures to ensure compliance with this section.”

Among other things, the Guidelines require the PA to advertise for outside vendors and to prepare and update at least annually “a list of the providers in each category, specifying for each the provider’s usual fee.”  The Guidelines further provide that the list “shall be available for public inspection.”  In addition, when selecting an outside vendor, “the PA shall select one who is competitive with other vendors in the classification,” and “compensation paid to outside vendors by the PA shall be supported by a written agreement or invoice that sets forth a description of the work done or services performed, and shall be fair and reasonable considering the circumstances of each individual county.”

In Calendar Year 2016, the QCPA was responsible for 1,036 open estates with assets valued at more than $99 million.  We estimate that for 2016 the QCPA spent $3.68 million on 789 outside vendors to provide services to the estates.

Results

The QCPA generally, with limited exceptions, adhered to the Guidelines in the selection and compensation of outside vendors.  Specifically, we did not identify any vendors related to the QCPA or to the employees of the QCPA’s Office.  We also found that the QCPA’s Office advertised its solicitations for the services of outside vendors on its website and that payments made to outside vendors were properly supported by invoices.

However, our audit found several weaknesses that the QCPA’s Office needs to address to strengthen its procedures for the selection and compensation of outside vendors.  We found, for example, that although the QCPA’s Office maintains a list of its outside vendors, and separately maintains information concerning the vendors’ prices, it does not include the vendors’ usual fees on its list as the Guidelines require, but states that the fees are available on request.  Given that the Guidelines expressly state that the QCPA’s list of vendors must include fee information and be available for public inspection, the absence of the required fee information from the list may diminish the QCPA’s ability to ensure the requisite degree of public accountability and transparency in relation to the Office’s selection and compensation of outside vendors.

Our audit also found that the QCPA did not take sufficient steps to ensure that the compensation paid to vendors was always competitive, fair, and reasonable.  The Guidelines, at Section V (A) (6), require the PA to select a vendor who is “competitive with other vendors in the classification.”  In addition, under Section V (B), the compensation the PA pays to outside vendors must be “supported by a written agreement or invoice that sets forth a description of the work done or services performed, and shall be fair and reasonable considering the circumstances of each individual county.”  Although our audit found that the QCPA’s payments to outside vendors were properly supported by invoices and that the QCPA’s Office solicited competitive bids for certain services, we found no evidence that the Office otherwise compared its outside vendors’ prices with those of similar vendors to ensure that they were competitive, fair, and reasonable.  Without evidence of such price comparisons, it is not clear whether the QCPA always obtained outside vendors’ services at the best available prices.

Further, our audit found that the QCPA did not always document its verification of vendors’ licenses.  According to the Guidelines, “The PA shall include on the list only those outside vendors that hold all necessary licenses for their field . . . .”  Even though the QCPA checked the licenses for some of its vendors, such as real estate appraisers, it did not have documentary evidence to show that it always checked the licenses of the vendors whose services require them.  For example, our review of the QCPA’s records related to the selection of a locksmith did not find evidence that the selected vendor had the required license.  In the absence of such documentation, the QCPA’s Office cannot be assured that its selections of outside vendors always meet the standards of due diligence prescribed by the Guidelines.

Finally, our audit found that the QCPA had selected and compensated one vendor in our audit sample that was not included on the QCPA’s list of outside vendors.  According to the QCPA’s payment records, that vendor received 21 payments totaling $21,627 in 2016.  The QCPA explained that the omission of the vendor from the list was an oversight and stated that as result of our audit the vendor would be added to it.  To ensure the requisite degree of transparency required by the Guidelines, it is important that the QCPA maintain an accurate and complete list of the outside vendors that it selects and compensates with estate and public funds.

The audit made the following four recommendations to the QCPA:

• Include vendors’ fees on the outside vendor list.
• Perform and document pricing comparisons among different vendors for each classification of services needed by the QCPA to ensure that the fees paid to the selected outside vendors are competitive, fair, and reasonable.
• Ensure that outside vendors have current licenses for services that require them and keep documentation of the verifications on file.
• Ensure all vendors selected by the QCPA are included on the outside vendor list.

The QCPA agreed with all four recommendations but disagreed with the recommendation that they ensure that outside vendors have current licenses for services that require them and keep documentation of the verifications on file.  In its response, the QCPA stated that “Section V (A) (5) of the Guidelines states that, ‘The PA shall include on the list only those outside vendors that hold all necessary licenses for their field…’ …While this section directs that the PA include on the list vendors that ‘hold necessary licenses for their field,’ it does not require that the PA maintain such documentary evidence on file.”  However, the QCPA further stated that, “Appreciating your need to verify compliance with the Guidelines this office is willing to scan and maintain a copy of licenses for all vendors that are required to be licensed to do business in and for the City of New York in addition to what the Guidelines require.”