February 15, 2007

WEITZMAN AUDIT FINDS CONFLICT OF INTEREST AT GREAT NECK WASTEWATER DISTRICT

Local Sewage Districts May Be Too Small to Function Effectively, Weitzman Says

The Great Neck Water Pollution Control District is overly reliant on one engineering firm, which the District has used continuously for more than 40 years, presenting an apparent conflict of interest, according to an audit released today by Nassau County Comptroller Howard S. Weitzman.

“This audit provides yet another example of the need to reform special taxing districts, too many of which operate inefficiently and with little or no governmental oversight,” Comptroller Weitzman said.

The District employs an engineering firm to advise it on maintenance projects, but also paid the firm more than $1 million over the last three and one-half years for engineering services it recommended the District undertake and for the services of several operating personnel.  The District has used the same company since 1965 with no competitive bidding for either the consulting work or the maintenance and repair contracts, Weitzman said.

“The District’s Board of Directors gave this engineering firm the dual responsibility for recommending and carrying out engineering projects, creating an apparent conflict of interest, since the company has a substantial economic interest in the advice it gives the District,” Comptroller Weitzman said.  “Our audit did not conclude that the engineering firm did anything wrong.  Rather, we are saying that the District needs to procure its engineering services competitively, and get engineering advice from a firm that has no interest in the District’s subsequent decisions whether or not to undertake projects.”

Approximately 85 percent of Nassau’s sewage treatment and disposal needs are serviced by the Nassau County Sewer District.  Wastewater collection and treatment in the remaining 15 percent of the county is managed by smaller entities, including the Great Neck Water Pollution Control District, which was established in the early 1900s.

“Sewer districts operate in a complex regulatory environment,” Comptroller Weitzman said.  “They need highly trained personnel and substantial capital resources to meet environmental standards.  This small sewer district does not appear to have the resources to recruit employees who have the engineering expertise necessary to operate the system.  Indeed, the District relies on its outside engineering firm to the point where at times the consultants perform much of the work of the District.”

In light of these factors, Comptroller Weitzman said that “it may be that the rationale for small water pollution control districts has passed.  A form of governance that worked in the early 20th century, when the population of Nassau was small and pollution was not a major public concern, may no longer be adequate 100 years later.

“Our audit findings confirm the importance of Governor Spitzer’s initiative to begin the process of reforming the thousands of taxing districts in New York State that add to our property tax burden,” Comptroller Weitzman said.  “We need to thoroughly examine the spending patterns and governance of these districts, find ways to make them operate more efficiently and transparently and, where necessary, eliminate or consolidate them.”

The District has acknowledged that in years prior to the audited period of January 2003 - June 2006, it had severe management problems, including flagrant disregard of standard operating and maintenance procedures, vandalism, theft and sabotage by employees, which District officials said led them to rely more heavily on the engineering firm, WFC Associates of Woodbury, NY, to operate the plant.

Among the audit’s other findings:

• The District has no records to show that it used a competitive process to select legal or accounting services (in addition to the engineering firm) despite the requirement of General Municipal Law that public agencies issue requests for proposals for professional services. The Districts has not changed its engineering consultant since 1965, its legal counsel since 1978, or its accountant since 1995.



• The District appeared to evade Civil Service Commission requirements in appointing a WFC employee to the position of Sewage Plant Supervisor in 2004. The Commission originally rejected the appointment, instructing the District to first offer the position to three current sewage plant operators. The District did so, but, in two out of three cases, at salaries below their current earnings. Each employee declined the promotion. After hiring the WFC employee as Supervisor, the District then raised his salary four times within 15 months, until he earned more than the operators who were originally offered the position.



• The current Sewage Plant Supervisor, who manages the day-to-day operations of the plant, does not have Grade III certification from the New York State Department of Environmental Conservation, an apparent violation of the DEC requirement that plant operations be supervised by a Grade III Wastewater Treatment Plant Operator. Although the Board appointed an employee with a Grade III license to the position of Chief Operator, District personnel stated that he does not supervise day-to-day operations of the District.



• The District’s three commissioners each billed the district approximately $17,000 per year during the audit period, reflecting an $80/day statutory rate for four days a week. A sample of the commissioners’ claim forms for payment of the per diem fee contained inaccuracies, including an instance of a duplicate submission for the same day by the same commissioner.



• The District treats its general counsel as both an employee and an independent contractor. Under a “retainer agreement,” the counsel was considered a part-time employee with a current salary of $25,000 per year, and was given family medical, dental and optical benefits at a cost to the District of $15,963 for the period November 2004 - December 2005. Yet the counsel bills separately for some hours worked on behalf of the district, at an hourly rate from $175 to $225 during the audit period. The District has notified the Comptroller’s Office that as of April the general counsel will be off the payroll and compensated exclusively as an independent contractor.

The Comptroller’s 2005 report, “Nassau County Special Districts: the Case for Reform” described how special districts often overpay their professional advisers by putting them on payroll, giving them health benefits, retirement benefits and retiree health benefits, in addition to paying them as outside consultants.  Among the recommendations in a follow-up Comptroller’s report in December 2006, “Cost-Saving Ideas for Special Districts in Nassau County,” the Comptroller proposed that special districts could improve cost controls for professional services by competitively bidding, joining together with other similar districts on joint contracts, and by using the expertise of the Town attorney.

To rein in excessive spending, Comptroller Weitzman has urged Nassau’s three Towns to review the budgets of commissioner-run districts within their jurisdiction line-by-line, just as they review the budgets of districts and departments under direct town management.  Last month the Town of Hempstead joined the Towns of North Hempstead and Oyster Bay in agreeing to exercise its authority to review such spending plans by special districts.

The Great Neck Water Pollution Control District audit, as well as the two reports on special districts and previous audits of special districts may be read or downloaded at the Comptroller’s Website.

Great Neck Water Pollution Control District Report (~270 kb .pdf file - 33 pages)