STATE OF NEW YORK
THOMAS P. DiNAPOLI OFFICE OF THE STATE COMPTROLLER STEVEN J. HANCOX
COMPTROLLER 110 STATE STREET DEPUTY COMPTROLLER
ALBANY, NEW YORK 12236 DIVISION OF LOCAL GOVERNMENT
AND SCHOOL ACCOUNTABILITY
Tel: (518) 474-4037 Fax: (518) 486-6479
May 22, 2009
Honorable Arthur H. Baer
Chairman of the Board of Supervisors
401 State Street
Hudson, NY 12534
Report Number: S9-9-03
Dear Chairman Baer:
A top priority of the Office of the State Comptroller is to help local government officials
manage government resources efficiently and effectively and, by so doing, provide
accountability for tax dollars spent to support government operations. The Comptroller
oversees the fiscal affairs of local governments statewide, as well as compliance with
relevant statutes and observance of good business practices. This fiscal oversight is
accomplished through our audits, which identify opportunities for improving operations
and County governance. Audits also can identify strategies to reduce costs and to
strengthen controls intended to safeguard local government assets.
In accordance with these goals, we conducted an audit of six municipalities throughout
New York State. The objectives of our audit were to determine if internal controls were
appropriately designed and operating effectively for separation payments and post-
employment benefits, and whether those entitlements were provided in accordance with
contracts and local policy. We included Columbia County (County) in this audit. Within
the scope of this audit, we examined payments and post-employment benefits provided to
former municipal officials and employees, reviewed employment agreements and County
policies, and interviewed County officials for the period January 1, 2004 through
December 31, 2007. Following is a report of our audit of Columbia County. This audit
was conducted pursuant to the State Comptroller’s authority as set forth in Article V,
Section 1 of the State Constitution, and Article 3 of the General Municipal Law.
This report of examination letter contains our findings and recommendations specific to
the County of Columbia. We discussed the findings and recommendations with County
officials and considered their comments in preparing this report. County officials
generally agreed with our recommendations and indicated they planned to take corrective
action. The County’s response is attached to this report in Appendix A. At the completion
of our audit of the six municipalities, we prepared a global report that summarizes the
significant issues we identified at all of the municipalities audited.
Summary of Findings
We found that Columbia County has generally implemented appropriate controls and
they are working effectively to ensure that employees are provided only with separation
payments to which they are entitled. However, we found that the internal controls over
post-employment benefits are not operating effectively; as a result, the County under
billed one retiree $3,528 for his health insurance premium contribution.
Background and Methodology
Columbia County covers approximately 1,640 square miles and has a population of
63,094 residents. The County’s operating expenditures for fiscal year 2006-07 totaled
$135 million, funded primarily through property taxes. During the period January 1, 2004
through December 31, 2007, annual payroll and health insurance expenditures averaged
$32 million and $5 million, respectively. During the same period, the County had an
average of 1,080 active employees each year, of which 704 separated1 from the County’s
employment. Some of these employees were entitled to payments for unused time
accruals and/or post-employment health insurance coverage, pursuant to the County’s
The County processes all accounting functions associated with payroll, separation
payments, and post-employment health insurance benefits in one centralized office. The
County does not have specific policies but utilizes union contracts which dictate
employee wages and terms of employment, including separation from such employment.
These contracts are prepared and signed by the Chairman of Board of Supervisors,
County Attorney, and the members of the negotiating committee. In addition, the County
has a Labor Attorney, who provides consultation services to the negotiating committee.
The Board of Supervisors formally adopts all contracts. The union contracts are
monitored and enforced by departmental heads.
To complete our objective, we interviewed staff, observed specific job functions, and
examined policies and procedures to gain an understanding of the internal controls in
place. During the audit, we examined payroll history reports, time and attendance
records, claims for payments, and health insurance invoices for the period January 1,
2004 through December 31, 2007.
We conducted this performance audit in accordance with generally accepted government
auditing standards (GAGAS). Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objective. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objective.
Separated employees include employees that retired, were terminated, etc.
A primary objective of the internal controls related to processing payments for separation
compensation is to ensure that County Officials and employees are provided only with
the compensation to which they are entitled. County-authorized contracts, employment
and collective bargaining agreements, and written policies and procedures provide
guidance regarding employee separation entitlements. Such entitlements includes
payment for unused leave time as well as post-employment health insurance coverage for
certain2 individuals. Duties related to personnel functions and payroll processing should
be segregated to mitigate risks of improper payments and entries. Further, access to
payroll and personnel functions within the computerized financial accounting system
should be limited and monitoring procedures established to ensure all activity is proper
To ensure that employees received the appropriate payments and post-employment health
insurance benefits, we examined the internal controls over time and attendance,
separation payment processing, and post-employment health insurance benefits. We
judgmentally selected 50 employees that received separation payments totaling over
$259,000, as well as post-employment health insurance coverage for detailed testing. Our
testing was to ensure that the payments and benefits provided to these individuals were
adequately supported and provided in accordance with collective bargaining agreements,
policies and employee handbooks.
Time and Attendance
A good internal control system over time and attendance management is necessary to
ensure that all separation payments are made based on accurate and complete records.
These controls include developing and implementing policies and procedures to provide
specific guidance concerning the design and maintenance of supporting documents. Since
separation payments are generally calculated using leave time records, there must be
accountability and oversight over the leave time earned and used. Timesheets for
employees serve as a basis for County officials to authorize bi-weekly salary payments
and to track accrued leave time.
For the 50 individuals tested, we traced each absence indicated on their time sheets for
the six-month period prior to their dates of separation to the centralized database of
accrued leave time, which is used as the basis for determining separation entitlements. In
addition, for the same periods, we verified that each time sheet contained the signatures
of the departmental heads attesting to the accuracy of the records. Lastly, we verified that
all time usage and accruals were consistent with the terms of the individuals’ respective
union contracts and the County’s policies to ensure that it was appropriate.
We found that leave records were maintained accordingly, time sheets were reviewed and
approved by departmental heads, and absences recorded on the time sheets coincided
with time bank entries. Furthermore, the County’s contracts and policies are clear and
Each contract varies as to the eligibility; it is generally based on years of age and service.
specific in regards to time management, unused leave time accruals, and how this unused
time is used to calculate compensation upon separation.
Separation Compensation Processing
All compensation made to the County employees and officials must be clearly defined,
documented, appropriate and authorized. It is important for the County to have clear
policies for this process from developing employment contracts and collective bargaining
agreements to verifying the accuracy of separation payments to ensure that the County
pays individuals only the compensation to which they are entitled.
We found that the County has established good controls over the processing of employee
separation payments. In addition, all collective bargaining agreements, terms and
conditions of employment agreements and individual employment contracts addressed
the specific conditions and terms of such payments.
The County processes the payroll for over 1,080 employees (including full-time and part–
time) on a bi-weekly basis. The departmental heads approve timesheets and submit it to
the main payroll department for final review and processing into the computerized
payroll system. Separation payments for unused leave time accruals are also reviewed
and processed at the main payroll department.
For the 50 individuals tested, we reviewed the payroll and vendor history reports to
ensure that we captured all possible separation compensation. We verified the accuracy
and validity of such payments by re-calculating them based on the terms of the
individuals’ respective contracts and County policies at the time of their separation. We
found no exceptions; all separation payments tested were calculated and paid
Post-employment Health Insurance Benefits
Eligibility for post-employment health insurance benefits is governed by employment
agreements or County’s policies. Each collective bargaining agreement contains its own
guidelines as to eligibility, options, and required employee contributions. In order to
ensure that benefits are provided within the terms of these policies and agreements, the
County must have procedures for verifying the initial eligibility for post-employment
health insurance benefits as well as the ongoing eligibility for such benefits.
The County’s health insurance benefits administrator reviews and approves individuals’
eligibility for post-employment health insurance benefits. Upon separation from County’s
employment, health insurance benefits are offered to retirees with ten years of service or
more3. Retirees can convert their sick leave into cash, which is used to offset their
contributions. The County contributes 50 percent towards health insurance for retirees
While not subsidized by the County, employees that either resign or are dismissed are given the option to
pay for eighteen months of continued coverage under the Consolidated Omnibus Budget Reconciliation Act
(COBRA). The County also charges 2% on top health insurance to the recipients of COBRA.
with 10 to 24 years of service and 75 percent for retirees with more than 25 years of
service. The health benefits administrator verifies eligibility and calculates retirement
benefits, which is compiled into a database. In addition, the health benefits administrator
notifies retirees’ of their sick leave balance and their monthly contribution for health
insurance on a monthly basis.
For each of the 50 former employees tested, we reviewed the original invoices from the
health insurance providers to determine whether they were properly removed from the
County’s coverage in a timely fashion when they became ineligible for such benefits. The
terms of eligibility upon separation are defined in the employment agreements, each of
which vary. For example, an employee who is retiring from County service may be
eligible for post-employment health insurance if they meet a minimum of 10 years-of-
service requirement, while an employee who is simply leaving County service for
employment elsewhere is not eligible for this benefit. We also traced a sample of
reimbursements for those that were eligible and required to reimburse the County for a
portion of the costs.
We found that for one retiree the County did not bill according to contract and thus
collected $3,528 less than was due from this individual during the period January 1, 2005
through December 31, 2007. The retiree’s service to the County was less than 25 years
and therefore should have been contributing 50 percent towards health insurance
premiums. The lack of oversight by the health benefits administrator resulted in the
retiree only contributing 25 percent. Without good oversight over health insurance, the
County may not be collecting all health insurance premium contributions that are due
from retirees and could increase the risk of paying for benefits that retirees are not
1. Key officials within the accounting office should develop a procedure to verify
employee contributions for post-employment benefits.
County Administrators have the responsibility to initiate corrective action. A written
corrective action plan (CAP) that addresses the findings and recommendations in this
report should be prepared and forwarded to our office within 90 days, pursuant to Section
35 of the General Municipal Law. For more information on preparing and filing your
CAP, please refer to our brochure, Responding to an OSC Audit Report, which you
received with the draft audit report. We encourage the Board to make this plan available
for public review in the Clerk of the Board’s office.
Steven J. Hancox
Office of the State Comptroller
and School Accountability
RESPONSE FROM COUNTY OFFICIALS
The County officials’ response to this audit can be found on the following pages.