Letter Report on the Department of Finance’s Bail Fund Management
Executive Summary
This Letter Report concerns the New York City (City) Comptroller’s audit of the City Department of Finance (DOF) and its management of bail funds. The objective of this audit was to determine whether DOF properly manages its bail fund responsibilities.
DOF has a broad range of responsibilities, including administering the tax and revenue laws of the City and maintaining public property records. DOF’s Treasury Division administers the City’s network of bank accounts and manages the City’s cash flow. In addition, the Treasury Division holds all cash bail and court-ordered funds in trust until the courts direct that the funds be released. The Court Assets Unit within the Treasury Division is the fiduciary of the cash bail and court-ordered funds.
The Court Assets Unit manages the bail funds posted by sureties—persons who pay the cash bail for defendants. The bail amount is set by the court and serves as collateral to allow the discharge of a defendant on the condition that the defendant complies with the orders of the court.
Department of Correction (DOC) detention facilities and the courts collect cash bail and remit bail funds, along with copies of the bail receipts given to the sureties, to DOF’s designated cash bail deposit lockbox account with the Wells Fargo Bank via either a manual or virtual lockbox process. Funds in the cash bail account are then swept into DOF’s common trust account with Wells Fargo. Wells Fargo submits a data file that contains all the information pertaining to the cash bail receipts received, including the Treasury Receipt numbers, sureties’ names and addresses, and bail amounts, to DOF’s Information Technology Division, where the file is uploaded to DOF’s bail tracking system—the Court Assets Tracking System (CATS). This process is performed on a daily basis.
DOF holds cash bail in the agency’s account until it receives either a court refund order to return the money to the surety or a court forfeiture order, which leads DOF to transfer the bail funds to the City Comptroller’s Office, or until three years have elapsed since the receipt of the bail funds, at which time they must be processed for abandonment to the New York State Comptroller, as required by Article VI of the New York Abandoned Property Law.
Prior to February 2018, there was a 2 percent administrative fee and a 1 percent Alternatives to Incarceration fee for all refund orders where the court found the defendant guilty. The fees in those cases would be deducted from the full bail amount prior to refunding the cash bail to the surety. If the defendant was found not guilty, DOF would refund 100 percent of the cash bail to the surety. Effective February 17, 2018, DOF waived these bail fees regardless of the case disposition.
From January 1, 2018 through June 30, 2018 (the scope period for this audit), Wells Fargo processed 6,317 bail receipts, totaling $15,436,524.
Audit Findings and Conclusions
Our audit found that DOF maintained adequate controls over its management of cash bail funds. To ensure that bail funds are properly accounted for, the Reconciliation Unit in DOF’s Citywide Payment Standards and Services (CPSS) Division performs daily and monthly reconciliations of bail deposits and disbursements. To track bail fund management, DOF uses CATS to record the activities related to each case, including the following: the bail deposit; research to confirm the surety’s address; correspondence among DOF, the surety and the court; and bail disbursement. Our review of the reliability of CATS data revealed that key information in CATS accurately reflected the information on the bail receipts regarding the bail receipt date, Treasury Receipt number, surety name and address, and bail amount.
DOF’s bail disbursement process requires multiple reviews before a court-ordered refund check is issued to a surety or before funds are transferred to the City’s Comptroller’s Office in response to a court forfeiture order. Our review of 25 randomly selected refund cases found that all of them had a court refund order attached to the case, that there was evidence that the surety information and bail amounts on the court refund order had been reviewed by DOF staff and compared to the bail receipt, and that the correct bail fund amount had been refunded to the surety. Furthermore, we found that during our scope period, DOF generally processed the refunds within the agency’s targeted time frame of two weeks from the date of the receipt of the refund order.
Our review of the 24 forfeiture cases in our scope period found that all of them had a court forfeiture order attached to the case and that DOF had sent a 45-day letter to the sureties for these cases to notify them that the cash bail was determined by the courts to have been forfeited and that if they did not contact the court within 45 days, their bail funds would be forfeited to the City’s Comptroller’s Office. Since DOF did not receive a subsequent refund order or a forfeiture vacate order from the courts for any of these cases, DOF properly transferred these forfeited bail funds to the City’s Comptroller’s Office.
In order to meet the various time requirements imposed by the State Abandoned Property Law, DOF created an abandonment schedule for its staff and management to follow. Of the 30 cases that were still open as of March 7, 2019 and had bail receipt dates of December 31, 2014 or earlier, we sampled 14 cases and determined that there were legitimate reasons for DOF’s not having processed these bail fund cases as abandoned funds in 2018. For three of these cases, the bank’s vendor (Klik) or DOC had provided incorrect bail receipt dates when they deposited the bail funds with Wells Fargo. The remaining 11 cases had an active claim status during the 2018 abandonment cycle (i.e., refund checks had been issued, but they had neither cleared nor expired). Therefore, the 14 cases had not been subject to abandonment in 2018. In addition, there was evidence that DOF had endeavored to locate the sureties for the 11 cases.
Agency Response
In their response, DOF officials stated that they were “pleased with the audit’s findings that DOF has adequate controls in place to ensure that the bail fund management operation is appropriate.”