September 18, 2007

WEITZMAN AUDITS FINDS WATER COMMISSIONERS IN
TWO DISTRICTS WERE PAID THOUSANDS WITHOUT PROPER JUSTIFICATION

$80 per Day, But Little Evidence of Hours Worked or Business Purpose;
In One District, 7 Out of 15 Employees are Related

Two Nassau County water districts rewarded commissioners with thousands of dollars in per diem payments based on little or no evidence of their hours or work performed, according to audits of the Franklin Square and Hicksville Water Districts released today by Nassau County Comptroller Howard Weitzman at a press conference in Mineola..

“Although water bills are probably not homeowners’ largest monthly payments,” Comptroller Weitzman said, “Long Island water districts are multi-million dollar operations run with public tax dollars, and they should be operated efficiently and with proper oversight. These audits provide further evidence that some special districts in Nassau County are being operated as local government fiefdoms where unchecked spending is often for the benefit of the commissioners and other insiders.”

During the two-year period audited (2004-2005), New York State law permitted commissioners of such districts to receive payments of up to $80 per day (since raised to $100 per day), but only for services that are shown not to be “nominal, unsubstantial, trivial or inappreciable.”  The commissioners of both of the audited water districts were paid at the maximum rate, despite a general lack of documentation as to hours worked or district business performed.

Auditors found that the Franklin Square district paid commissioners approximately $76,400 during the audit period; $54,720 of that amount, however, constituted per diem payments made on days when no Board or outside meetings were held and was paid without adequate explanation of a business purpose.

In Hicksville, auditors determined the number of professional organization meetings attended by commissioners appeared to be “unreasonable and excessive,” in addition to $7,280 in questionable payments for days when there were no board or other meetings (see charts at end).

The excessive compensation was in addition to benefits totaling $78,600 in Franklin Square and $59,400 in Hicksville over the audit period.  The commissioners receive full benefits including medical, dental, and vision insurance, despite their part-time status.  Franklin Square also offered excess medical coverage and life insurance.

Among the major findings:

• In Franklin Square, 7 of 15 individuals on the payroll were found to be related to other employees, and the Superintendent is the son of one of the commissioners.  Among the relationships:
  
• a commissioner’s son is the district superintendent.
• a district superintendent’s nephew is a water plant attendant.
• a commissioner’s daughter is an account clerk.
• the business manager’s son is a water plant attendant.
  

• Auditors also found that the Hicksville district provided Costco memberships to the commissioners and the superintendent, along with free membership cards for their spouses.  When asked about the reason for the memberships, the district said they were to facilitate the purchase of bottled water.
  
• The Hicksville district had $3.5 million in cash on hand, as of year-end 2005.  Internal controls over these large balances were inadequate.  Investment decisions were made by an account clerk without any analysis of competitive rates or prior approval by the Board.  The district had no formal, supervised process for reconciling its bank accounts.
  
• Franklin Square hired two attorneys as part-time employees during the audit period.  One was the Town of Hempstead’s full-time Town Attorney, Joseph Ra, who also worked as a part-time attorney for the town’s Sanitary District No. 6.  (Mr. Ra resigned the Franklin Square post at the end of 2005).  Had the district treated the attorneys as consultants, taxpayers would have saved the cost of their health benefits, social security and Medicare.  Mr. Ra was paid $12,600 annually and a second attorney was paid $3,500.  The district paid $13,600 in total for the two health policies during the audit period.  Both attorneys’ work hours were reported to the New York State retirement system, even though the Town Attorney had a full time job with the Town of Hempstead.
  
• In Hicksville, three commissioners attended the annual American Water Works Conference held in Orlando, Florida in 2004 and San Francisco, California in 2005 at a cost of $8,778 in 2004 and $10, 412 in 2005, for registration fees, travel, lodging and meal expenses. The report questions the business need for all three commissioners to attend the conference each year, and notes that commissioners were reimbursed for meals at rates that were sometimes nearly double the amount allowed by the federal government for those cities.
  
• Hicksville has used the same engineering firm for over 25 years without engaging in a competitive procurement process to evaluate whether other firms would provide better or more cost-effective services.
  
• Both Franklin Square and Hicksville flouted their own policies regarding competitive procurement.  Reviews of purchases in both districts found multiple examples of contracts bid or supplies purchased with no evidence of an attempt to secure competitive bids.  In Hicksville, for example, auditors reviewed 18 purchases of a value between $3500 and $10,000, which should have been subject to competitive bids.  No evidence of verbal or written quotations was found in six of the cases (33 percent).
  
• Lax business practices were found in both districts, including: employees who were not required to fill out time sheets; weak controls over the authorization and reporting of overtime; and inadequate segregation of duties over payroll and financial transactions.
  
• Franklin Square provides cell phones to two commissioners, the superintendent and business manager but has no policy regarding cell phone use. The audit concludes that since commissioners have no operational responsibility they do not require cell phones.
  

In order to address the impact of special districts on local property taxes, Comptroller Weitzman has conducted a series of audits of special districts in Nassau’s three towns.  Previous audits have reviewed garbage districts in Hempstead, North Hempstead and Oyster Bay towns and the Great Neck Water Pollution Control District.  In June 2006, Weitzman organized the first-ever summit on Nassau’s special taxing districts at Hofstra University, attracting more than 400 officials, tax experts and interested citizens.  County Executive Tom Suozzi has retained consultants to study how to make special district government in Nassau County more efficient.

Earlier this year Governor Spitzer created the New York State Commission on Local Government Efficiency to address the problem on a statewide basis.  Comptroller Weitzman serves as a member of the Commission.  There are about 6,900 town special districts throughout New York State, in addition to the state’s 4,200 other local governments, all of which contribute to the state having the highest tax burden in the U.S.  The multiplicity of special districts adds hundreds of dollars to local property taxes throughout the state.

The Franklin Square Water District in 2006 provided 754 million gallons of water to a population of approximately 20,000.  Homeowners pay a combination of taxes and usage charges to the District; a homeowner who used 100,000 gallons per year paid an average total charge of $308.  The district’s cost of operations in 2005 was $2,028,788 and it employed three elected commissioners, a Superintendent, two part time attorneys, two administrative and seven operations staff members.

The Hicksville Water District in 2006 provided 2.46 billion gallons of water to a population of 47,810.  As in Franklin Square, homeowners pay a combination of taxes and usage charges; a homeowner who used 100,000 gallons per year, paid an average total charge of $231.  The district’s cost of operations in 2005 was $7,155,144 and it employed three elected commissioners, a superintendent, four administrative and 13 operations staff members.

The complete audit reports for the Franklin Square and Hicksville Water Districts may be read or downloaded from the Comptroller’s Web site at  http://www.nassaucountyny.gov/agencies/Comptroller/index.html.

(See charts)

Hicksville Water District:
Per Dien Payments to Commissioners
(2004-2005)

Franklin Square Water District:
Per Diem Payments to Commissioners
(2004-2005)

September 18, 2007 - Franklin Square Water District Limited Financial Review
September 18, 2007 - Hicksville Water District Limited Financial Review