Follow-up Audit Report on the Financial and Operating Practices of the Kings County Public Administrator’s Office

Follow-up Audit Report on the Financial and Operating Practices of the Kings County Public Administrator’s Office

EXECUTIVE SUMMARY

The objective of the audit was to determine whether the Office of the Kings County Public Administrator (KCPA) implemented the recommendations made in a prior audit report.

The KCPA is responsible for administering estates of Brooklyn residents who die intestate (without a will) and have no close relatives, or where there is no other person willing or qualified to administer the estate.  As an estate administrator, the KCPA has a fiduciary duty to conduct thorough investigations to identify assets; collect those assets; make and pay for funeral arrangements; pay bills and expenses; search for persons who may be entitled to inherit from the estate; and distribute estate property to those heirs as determined by the court, or to such persons named in the decedent’s will.  The Public Administrator (PA) and a Deputy PA are appointed by the two elected Brooklyn County Surrogate Court Judges.

A prior audit by this office of the KCPA, Audit Report on the Financial and Operating Practices of the Kings County Public Administrator’s Office (Audit No. FK12-079A, issued on June 28, 2013), found that KCPA failed to fulfill its fiduciary responsibilities by not acting in estates’ best interests, failing to carry out its duties prudently, and failing to comply with statutory rules and regulations.  The prior report made 18 recommendations.

Audit Findings and Conclusion

In this follow-up audit, we assessed the implementation status of our prior audit’s 18 recommendations.  We determined that two of the recommendations were implemented, one was partially implemented, and 14 were not implemented.  We could not determine the implementation status of the recommendation that formal and informal estate legal counsel fees be paid in accordance with new Guidelines, effective May 1, 2012 because there was not sufficient documentation in the files.  Of the conditions disclosed in the prior audit, this audit found that many have remained unchanged.  Among other things, we found little evidence that staff consistently performed sufficient database searches for possible estate assets; disbursements did not have all the required supporting documentation; inventory records of estate assets were inaccurate; bank reconciliations were not always performed; outstanding checks were not voided; mandatory financial and operational reports were not always submitted to appropriate oversight bodies timely, if at all; and W-9 forms were not obtained from vendors to determine their legal entity type and tax status.

We also made additional findings in the course of our follow-up audit.  In particular, we determined that the KCPA has not been vigilant in keeping track of estate monies once they have been deposited in its bank accounts and is unable to credit those funds back to the estates to which they belong.  We also found a number of closed estates where the estate assets had not been distributed.  Further, we found estates have not been closed in a timely manner.

Audit Recommendations

To address the issues from the prior audit that still exist we made 15 recommendations, including:

• The KCPA should ensure that basic databases are searched in order to identify all possible assets for the decedents.  KCPA should conduct searches for the remaining five sampled estates with possible unclaimed funds identified by the auditors and for which the KCPA had not conducted searches.
• The KCPA should strengthen its controls over disbursements made from estate accounts to ensure that they are properly reviewed and approved and ensure all supporting documentation is completed and attached to the payment package.
• The KCPA should ensure the estate property inventories it maintains are accurate, complete, and the proceeds from the sales of those properties are appropriately accounted for.
• The KCPA should examine the Outstanding Check Register from the Master Estate account to ensure that it is accurate and void and reissue outstanding checks.
• The KCPA should establish procedures to ensure that bank reconciliations are independently reviewed and documented.
• The KCPA should file and submit all reports required by SCPA on a timely basis, ensure that the status of all estates are regularly examined and correctly reported, and ensure that external audits are conducted on an annual basis.
• The KCPA should ensure that completed W-9 forms are collected from all vendors to ensure that 1099-MISC forms are issued to all vendors with 1099 reportable payments of $600 or more.

To address the new findings of this follow-up audit we made seven recommendations, including:

• The KCPA should make a determination of what should be done with the funds that are not associated with specific estates.
• The KCPA should review the estates that remain open and take all necessary steps to appropriately close them.

Agency Response

The KCPA generally agreed with 20 of the 22 recommendations made in this follow-up report.  The KCPA’s response did not specifically address the recommendations that it establish procedures for competitive vendor selection and that it conduct an investigation into an account for which over $45,000 could not be traced.

In their response, KCPA officials also cited concerns with our sample selection.  After carefully reviewing the KCPA’s concerns, however, we find no basis to alter our report or our findings.