Report on the Financial and Operating Practices of the Bronx County Public Administrator’s Office

Audit Report In Brief

The objective of this audit was to determine whether the Office of the Bronx County Public Administrator (Bronx PA) complied with Article 11 of the New York State Surrogate’s Court Procedures Act (SCPA), the Report and Guidelines of the Administrative Board for the Offices of the Public Administrators (Administrative Board Guidelines), and other applicable federal, State, and City laws, rules, and regulations.

There are five Public Administrators in New York City, each of whom serves one of the City’s five counties and reports to the county Surrogate’s Court.  Each Public Administrator is responsible for administering the estates of individuals in the county who die intestate (those who die without a will) or when no other appropriate individual is willing or qualified to administer the estate.

As of June 28, 2007, the Bronx PA was administering 1,071 open estates with a total balance of approximately $69.5 million.  According to the City’s Fiscal Year 2007 annual financial report, the Bronx PA collected $431,950 in revenues and had expenditures totaling $428,671, consisting of $413,181 for Personal Service expenditures and $15,490 for Other Than Personal Service expenditures.

Audit Findings and Conclusions

We concluded that the Bronx PA did not adequately comply with Article 11 of the SCPA, the Administrative Board Guidelines, and other applicable Federal, State, and City laws, rules, and regulations largely because of inefficient management of the office’s operations.  We identified inconsistent and inaccurate reporting of the status of estates, inadequate monitoring of the progress of estate administration, lack of supporting documentation in estate folders, miscalculation and incorrect payment of fees and commissions, unreported and underreported payments in 1099-reportable payments to the IRS, and inadequate controls over personal property.  As a result, there is an increased risk that decedents’ estates are not being properly monitored and that funds are not being adequately safeguarded and distributed.

These conditions could be improved—if not fully corrected—by using the CompuTrust computerized case management system to its fullest capacity and by establishing and adhering to a comprehensive, written manual of policies and procedures that addresses all aspects of administering the estates that are the responsibility of the Bronx PA.

Areas in which the Bronx PA complied with the applicable rules and regulations included accounting for and maintaining a separate file for each estate valued at more than $500, hiring an independent CPA to conduct an annual audit, maintaining segregation of duties among employees, using two investigators for its residence searches, keeping personal property in a secure safe, and maintaining a mail log for all correspondence that comes into the office.

Subsequent to the completion of fieldwork, additional areas of concern were identified.  Based on our review of these issues, we found incomplete and untimely submission of the Report of Open Estates to the New York State Comptroller’s Office, questionable investments of estate funds in auction-rate securities, and a significant number of open estates with negative balances.

Based on our findings, we make 15 recommendations, 9 of which are listed below.  The Bronx PA should:

• Correctly use status codes in CompuTrust to designate estates as open, closed, reopened, and closed, enabling the office to correctly report closed estates for a given period.
• Use CompuTrust to monitor cases adequately, include a “tickler” function to inform the staff of any unusual delays in estate administration, and promptly take action to rectify the source of any delay.
• Develop a comprehensive policies and procedures manual.
• Issue 1099-MISC forms for the 24 individuals identified in the report as not having been correctly issued these forms for calendar year 2006.
• Ensure that investigators prepare a complete and detailed inventory list of all items retrieved from the decedent’s residence during the search or immediately upon returning to the office.
• Comply with the Administrative Board Guidelines and require that all bidders submit sealed bids for each lot of personal property being auctioned and maintain these bids in the files.
• Comply with Title 2 of the New York Codes, Rules and Regulations, §72.1, regarding the timeliness, completeness, and proper format of the Report of Open Estate.
• Immediately cease its practice of investing estate funds in auction-rate securities and refrain from doing so in the future.
• Consult with relevant City agencies, such as OMB, to determine how to pay the initial costs of administering estates that appear to have assets without borrowing the funds from the pooled estate trust account.

Bronx PA Response

The previous Bronx Public Administrator generally agreed with the audit’s 12 initial recommendations, but stated that the office lacked the resources necessary to implement two of them.  The current Bronx Public Administrator generally agreed with the three additional recommendations in the “Subsequent Events” section of this report.