October 3, 2007

COMPTROLLER WEITZMAN: WESTBURY WATER DISTRICT SPENDING MONEY LIKE WATER

Numerous Violations of State Law Found

Water commissioners in Westbury violated state laws while overcharging taxpayers, holding over $2.4 million in accumulated surpluses and pocketing thousands of dollars for themselves for undocumented work, according to an audit of the Westbury Water District issued today by Nassau County Comptroller Howard Weitzman.  The surplus represented more than the district’s entire 2005 tax levy of $2.1 million.

“The Westbury Water District is the most mismanaged water district we have audited,” Comptroller Weitzman said at a Mineola press conference today.  “Our audit uncovered several clear violations of state law and found that the district’s taxpayers have been overtaxed by millions of dollars, with water commissioners lining their own pockets.”  The Westbury Water District did not respond to most of the audit findings.

The report is the latest in a series of audits of water and other special taxing districts in Nassau County issued by Comptroller Weitzman.

“Westbury’s water district is swimming in cash as a result of years of inflated budgets,”

Comptroller Weitzman said.  “Its general fund balance rose from about $600,000 in 2001 to a staggering $2.4 million in 2005, more than the entire 2005 tax levy of $2.1 million.  I’m sure taxpayers have better use for their money than paying taxes only to have them sit in the district’s bank accounts.

“District commissioners exercised virtually no financial oversight over this multi-million-dollar operation.  In just the two years covered by this audit, they took over $800,000 from taxpayers that they didn’t need,” he said.

The audit found that the commissioners essentially allowed the superintendent free rein to spend as he saw fit, including granting himself unusually large raises, a new $45,000 car and no less than three life insurance policies.

“The only thing I can say the commissioners were vigilant about,” Comptroller Weitzman said, “was requesting payment for hundreds of purported meetings, ostensibly to discuss water district issues, so they could earn payments of $80 per meeting.  This is absolutely unacceptable.”

During the two-year period studied (2004-2005), Westbury’s three commissioners collected 1,101 per diem payments of $80 each, adding up to $88,080.  During the same period records indicate there were only 101 water district meetings with 287 related per diems, meaning that fewer than one-third of the payments were associated with documented water district work.  The commissioners also paid themselves $18,000 in lieu of taking health insurance coverage from the district.

Westbury’s water commissioners also serve as fire commissioners, who by law are not allowed to receive any compensation for their service.  “Considering that the district claimed to the state pension system that two of its commissioners worked on water matters six hours a day, just shy of four days a week, and that the same two commissioners also ran their own businesses, when did they find the time to do the unpaid fire district work?  It appears that they were circumventing state law and paying themselves for fire district business.” Weitzman said.  “In one of the few responses offered to our audit findings, the commissioners assert that all 1,101 claims for compensation pertained to water district business, but this is simply not credible.”

In another finding in violation of state law, auditors discovered that one of the commissioners acted as insurance agent of record on three employee life insurance policies sold to the district.  Auditors were told that following the audit, the commissioner sold his insurance business and moved to California.

“It is an especially outrageous violation of state law for a commissioner to sell goods or services to his district for his own benefit,” Weitzman said. 

The district purchased individual whole life insurance policies for all the commissioners and every employee except one, despite a 1993 warning from the State Comptroller that the district did not have the authority to purchase such policies. (Special districts are permitted to buy group life policies.)  The district also churned policies by replacing three existing whole life policies for higher priced policies, without any increase in benefit.  The superintendent was found to have three separate life insurance policies, totaling $150,000 worth of coverage, while the district’s stated rule was one $50,000 policy per employee.  

The district’s guidelines required that the district be named the beneficiary on the life insurance policies.  Nevertheless, family members of two commissioners, the superintendent, and an employee who is the son of a former commissioner were beneficiaries on four of the policies.  The district’s policies cost taxpayers $42,299 during the audit period. 

Other apparent violations of law found in the audit included improper reporting of employee time to the state pension system and allowing charge-backs between the water and fire districts.

Among the other major audit findings: 

• Over a six-month period, the superintendent drove over 11,000 miles in a vehicle given to him by the district.  The district is only five square miles, and the superintendent lives less than a mile from the district headquarters.
  
• The district could not account for almost $290,000 of overtime paid out due to the failure to maintain overtime records.
  
• Salary increases were not approved by the board or awarded in accordance with the district’s salary progression schedule.  The superintendent received 12.72% and 8.76% raises in 2004 and 2005, respectively, and a few other employees received outsized percentage raises, while the rest received 3.5% to 4% yearly raises.
  
• The district required residents making new connections to its water system to use supplies purchased from the district and billed a contractor $10,000 for engineering services without a contract. 
  
• The district invested in time clock equipment but used manual records made by the superintendent to pay employees.  Auditors tested timecards for a four-week period in February 2006 because timecards for the audit period had been destroyed by the district.  They found that three of the district’s 18 employees did not use timecards, and the other 15 employees’ timecard use was haphazard; for example, employees sometimes punched in, but did not punch out.  Of 68 time cards reviewed for the test period, 50 had deficiencies. In at least eight instances examined, the employees were paid for more time than the time cards showed.

Similar types of taxpayer abuse were found in the Nassau Comptroller’s recent audits of the Franklin Square and Hicksville water districts, and in the office’s other audits of special taxing districts over the last two years.  Previous audits reviewed garbage districts in Hempstead, North Hempstead and Oyster Bay towns and the Great Neck Water Pollution Control District. 

“Our audits of special districts in Nassau County have found serious financial mismanagement, a lack of oversight, overspending, non-competitive contracting, and highly questionable employment and benefit practices,” Comptroller Weitzman said.

“These findings show how important it is to study targeted consolidation of non-public safety services.  That is why I have proposed that the three towns take over responsibility for collecting garbage in all of their unincorporated areas.  Our study of this issue showed that 60,000 homeowners who live in Hempstead’s special garbage districts would save an average of $200 a year under this proposal.

“Special district commissioners’ pay must be reined in.  The best way to avoid this pattern of commissioners rewarding themselves at public expense is to eliminate pay and benefits for special district commissioners.  Just as school board members serve without pay and benefits, so should special district commissioners serve for the privilege of helping their communities.”

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 Westbury Water District in 2006 provided 1.03 billion gallons of water to a population of 20,500.  Homeowners pay a combination of taxes and usage charges; a homeowner who used 100,000 gallons per year, paid an average total charge of $329.  The district’s cost of operations in 2005 was $3.7 million, and it employed three elected commissioners, six administrative and nine operations staff members.

Audit report for the Westbury Water District (.pdf)

Westbury Water District Chart 1

Westbury Water District Chart 2

Westbury Water District Chart 3

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